DEXUS - Annual Report 2009 | FinancialReports.eu

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29 September 2009

The Manager Australian Securities Exchange Limited 20 Bridge Street Sydney NSW 2000

DEXUS Funds Management Limited ABN 24 060 920 783 AFSL: 238163 Level 9, 343 George Street Sydney NSW 2000 PO Box R1822 Royal Exchange NSW 1225 Telephone 02 9017 1100 Direct 03 8611 2930 Facsimile 03 8611 2910

Email: [email protected]

Dear Sir/Madam

DEXUS Property Group (ASX: DXS) Combined Financial Statements for the year ending 30 June 2009

DEXUS Funds Management Limited, as responsible entity for DEXUS Property Group (DXS), provides a copy of the DEXUS Property Group 2009 Combined Financial Statements.

For further information, please contact:

Investor Relations: Karol O’Reilly (03) 8611 2930 Media Relations: Emma Parry (02) 9017 1133

Yours sincerely

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Tanya Cox Company Secretary

2009 DEXUS Property Group Combined FinanCial StatementS

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DEXUS INDUSTRIAL TRUST
(aRSn 090 879 137)
diReCtoRS’ RepoRt	1
auditoR’S independenCe deClaRation	6
inCome StatementS	7
balanCe SheetS	8
StatementS oF ChangeS in equity	9
CaSh Flow StatementS	10
noteS to the FinanCial StatementS	11
diReCtoRS’ deClaRation	57
independent auditoR’S RepoRt	58
DEXUS OFFICE TRUST
(aRSn 090 768 531)
diReCtoRS’ RepoRt	60
auditoR’S independenCe deClaRation	65
inCome StatementS	66
balanCe SheetS	67
StatementS oF ChangeS in equity	68
CaSh Flow StatementS	69
noteS to the FinanCial StatementS	70
diReCtoRS’ deClaRation	114
independent auditoR’S RepoRt	115
DEXUS OPERATIONS TRUST
(aRSn 110 521 223)
diReCtoRS’ RepoRt	117
auditoR’S independenCe deClaRation	122
inCome StatementS	123
balanCe SheetS	124
StatementS oF ChangeS in equity	125
CaSh Flow StatementS	126
noteS to the FinanCial StatementS	127
diReCtoRS’ deClaRation	173
independent auditoR’S RepoRt	174
DIRECTORY	176

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this year we are reporting to our investors and other stakeholders in a more concise format.

this report, the deXuS property group 2009 Combined Financial Statements, provide separate financial statements of deXuS industrial trust, deXuS office trust and deXuS operation trust. to read more on the group’s operations for the year, please refer to the deXuS property group 2009 Security holder Review and the deXuS property group 2009 annual Report which contains the group’s Consolidated Financial Statements, corporate governance statement and information about deXuS’s board of directors.

the Corporate Responsibility and Sustainability (CR&S) section contained in the Security holder Review is an extract from the full CR&S Report which will be available online or as a printed report from october 2009. these reports may be viewed or downloaded online at www.dexus.com all amounts are a$ unless otherwise specified.

deXuS property group (dXS) (aSX Code: dXS), consists of deXuS diversified trust (ddF), deXuS industrial trust (dit), deXuS office trust (dot), and deXuS operations trust (dXo), (the trusts).

under australian equivalents to international Financial Reporting Standards (aiFRS), ddF has been deemed the parent entity for accounting purposes. therefore the ddF consolidated Financial Statements include all entities forming part of dXS. the ddF Consolidated Financial Statements are presented in a separate financial report. all press releases, financial reports and other information are available on our website: www.dexus.com Front cover: the Zenith, 821 pacific highway, Chatswood, nSw

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009

DEXUS INDUSTRIAL TRUST

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Industrial Trust and its consolidated entities (DIT or the Trust) present its Directors’ Report together with the consolidated Financial Statements for the year ended 30 June 2009.

The Trust together with DEXUS Diversified Trust, DEXUS Office Trust and DEXUS Operations Trust form the DEXUS Property Group stapled security.

1. Directors and Secretaries

1.1 directors

The following persons were Directors or Alternate Directors of DXFM at any time during or since the end of the year to the date of this Directors’ Report, unless otherwise stated:

Directors	Appointed	Resigned
Christopher T Beare	4 August 2004
Elizabeth A Alexander AM	1 January 2005
Barry R Brownjohn	1 January 2005
John C Conde AO	29 April 2009
Stewart F Ewen OAM	4 August 2004
Victor P Hoog Antink	1 October 2004
Charles B Leitner III	10 March 2005	29 April 2009
Brian E Scullin	1 January 2005
Peter B St George	29 April 2009
Alternate Director
Andrew J Fay for
Charles B Leitner III	30 January 2006	29 April 2009

Particulars of the qualifications, experience and special responsibilities of current Directors at the date of this Directors’ Report are set out in the Directors section of the DEXUS Property Group Annual Report and form part of this Directors’ Report.

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2009 are as follows:

Tanya L Cox MBA MAICD FCIS (Company Secretary) Appointed: 1 October 2004

Tanya is the Chief Operating Officer and Company Secretary of DXFM and is responsible for the delivery of company secretarial, operational, information technology, communications and administration services, as well as operational risk management systems and practices across the group. Prior to joining DEXUS in July 2003, Tanya held various general management positions over the past 15 years, including Director and Chief Operating Officer of NM Rothschild & Sons (Australia) Ltd and General Manager – Finance, Operations and IT for Bank of New Zealand (Australia). Tanya is Chair of the Property Council of Australia National Risk Committee and the Australian Athletes with a Disability. Tanya is a director of the Music and Opera Singers Trust and the AGSM Alumni Advisory Board. Tanya is a member of the Australian Institute of Company Directors and is a fellow of the Institute of Chartered Secretaries and Administrators (ICSA) and Chartered Secretaries Australia (CSA). Tanya has an MBA from the Australian Graduate School of Management and a Diploma in Applied Corporate Governance.

Tanya is Chief Operating Officer and Company Secretary of DXFM, DEXUS Holdings Pty Limited (DXH) and DEXUS Wholesale Property Limited (DWPL) and is a member of the Board Compliance Committee.

John C Easy B Comm LLB ACIS (Company Secretary) Appointed: 1 July 2005

John is the General Counsel and joint company secretary of DXFM. During his time with the group he has been involved in the establishment and public listing of the Deutsche Office Trust, the acquisition of the Paladin and AXA property portfolios, and subsequent stapling and creation of the DEXUS Property Group. Prior to joining DEXUS in November 1997, John was employed as a senior associate in the commercial property/funds management practices of law firms Allens Arthur Robinson and Gilbert & Tobin. John graduated from the University of New South Wales with Bachelor of Laws and Bachelor of Commerce (Major in Economics) degrees. He is a member of Chartered Secretaries Australia and holds a Graduate Diploma in Applied Corporate Governance.

John is General Counsel and Company Secretary for DXFM, DXH and DWPL and is a member of the Board Compliance Committee.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

2. Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors’ meetings held during the year and each Director’s attendance at those meetings is set out in the table below.

The Directors met 18 times during the year. Nine Board meetings were main meetings, and nine special meetings were held to consider specific business. While the Board continuously considers strategy, in March 2009 it met with the executive and senior management over two days to consider DXS’s strategic plans.

Board Meetings	Main meeting	Main meetings	Specific meetings	Specific meetings
	held	attended2	held	attended2
Directors
Christopher T Beare	9	9	9	8
Elizabeth A Alexander AM	9	9	9	9
Barry R Brownjohn	9	9	9	7
John C Conde AO1	2	2	–	–
Stewart F Ewen OAM	9	8	9	9
Victor P Hoog Antink	9	9	9	9
Charles B Leitner III3	8	8	9	9
Brian E Scullin	9	9	9	9
Peter B St George1	2	2	–	–

1 Appointed 29 April 2009.

2 Indicates where a Director attended either personally or an Alternate was in attendance.

3 Based in New York, USA and resigned 29 April 2009.

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During the year the Board reviewed its Board Committee structure and following the appointment of Messrs Conde and St George in April 2009 the Board further reviewed its committee membership effective 1 May 2009.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place at the end of the year and each Directors’ attendance at those meetings.

	Board	Audit	Board	Risk	Board	Compliance	Board	Nomination	Board	Finance
	Committee		Committee		Committee		and Remuneration		Committee
							Committee
	Held	Attended	Held	Attended	Held	Attended	Held	Attended	Held	Attended
Christopher T Beare	–	–	–	–	–	–	9	9	4	4
Elizabeth A Alexander AM	7	7	4	4	3	3	–	–	3	3
Barry R Brownjohn	7	6	4	4	–	–	–	–	4	4
John C Conde AO1	–	–	–	–	1	1	1	1	–	–
Stewart F Ewen OAM	–	–	–	–	–	–	9	9	–	–
Victor P Hoog Antink	–	–	–	–	–	–	–	–	–	–
Charles B Leitner III2	–	–	–	–	–	–	–	–	–	–
Brian E Scullin	6	6	3	3	4	4	9	9	–	–
Peter B St George1	1	1	1	1	–	–	–	–	1	1

1 Appointed 29 April 2009.
2 Resigned 29 April 2009.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

3. Directors’ interests

The Board’s policy on insider trading and trading in the Trust securities or securities in any of the funds managed by DEXUS by any Director or employee is outlined in the Corporate Governance Statement in the DEXUS Property Group Annual Report.

While the trading policy described in the Corporate Governance Statement applies to Directors and Senior Executives, the Board has determined that Directors will not trade in any security managed by DEXUS.

Directors have made this decision because the Board of DXFM has responsibility for the DEXUS Property Group itself as well as the third party business. Directors are obliged to act in the best interests of each group of investor’s independently of each other. Therefore, to minimise the appearance of conflict that may arise by being a Director of multiple funds, the Directors have determined that they will not invest in any fund managed by DEXUS including DXS. This position is periodically reviewed by the Board.

As a direct result of DEXUS’s policy regarding Directors holding DXS securities, or securities in any of the funds managed by DEXUS, as at the date of this Directors’ Report no Director directly or indirectly held:

n securities in the Trust; or
n options over, or any other contractual interest in, the Trust; or
n an interest in any other fund managed by DXFM or any other entity that forms part of the Trust.

4. Directors’ directorships in other listed entities

The following table sets out directorships of other listed entities, not including DXFM, held by the Directors at any time in the three years immediately prior to the end of the year, and the period for which each directorship was held:

Directors	Company	Date appointed	Date resigned or ceased
			being a Director of a
			listed security
Elizabeth A Alexander AM	CSL Limited	12 July 1991
	Boral Limited	15 December 1999	24 October 2008
John C Conde AO	Whitehaven Coal Limited	3 May 2007
Brian E Scullin	Deutsche Asset Management (Australia) Limited1	24 October 2000	17 October 2006
	IYS Instalment Receipt Limited1	24 October 2000	17 October 2006
	SPARK Infrastructure RE Limited2	1 November 2005	24 August 2007
	BT Investment Management Limited	17 September 2007
Peter B St George	Boart Longyear Limited	21 February 2007
	SPARK Infrastructure RE Limited2	8 November 2005	31 December 2008
	First Quantum Minerals Limited3	20 October 2003
Alternate Director
Andrew J Fay
(alternate to Charles B Leitner III)	Deutsche Asset Management (Australia) Limited1	20 October 2004	17 October 2006
	IYS Instalment Receipt Limited1	20 October 2004	17 October 2006
	SPARK Infrastructure RE Limited2	7 December 2006	12 December 2007

1 IYS Instalment Receipt Limited had until 29 November 2006 issued ASX listed instalment receipts over units in the Deutsche Retail Infrastructure Trust, a managed investment scheme that was until 17 October 2006 listed but not quoted on the ASX and whose responsible entity was Deutsche Asset Management (Australia) Limited. Deutsche Asset Management (Australia) Limited ceased to be the Responsible Entity of IYS Instalment Receipt Limited on 17 October 2006.
2 SPARK Infrastructure RE Limited has issued ASX listed stapled securities trading as SPARK Infrastructure Group (ASX: SKI).
3 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

5. Principal activities

During the year the principal activity of the Trust was investment in real estate assets. There were no significant changes in the nature of the Trust’s activities during the year.

6. Total value of Trust assets

The total value of the assets of the Trust as at 30 June 2009 was $2,092.6 million (2008: $2,349.3 million). Details of the basis of this valuation are outlined in note 1 of the Notes to the Financial Statements and form part of this Directors’ Report.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

7. Review and results of operations

A review of the results, financial position, operations including business strategies and the expected results of operations of the Trust, are set out in the Chief Executive Officer’s Report of the DEXUS Property Group 2009 Security Holder Review and forms part of this Directors’ Report.

8. Likely developments and expected results of operations

In the opinion of the Directors, disclosure of any further information regarding business strategies and the future developments or results of the Trust, other than the information already outlined in this Directors’ Report or the Financial Statements accompanying this Directors’ Report would be unreasonably prejudicial to the Trust.

9. Significant changes in the state of affairs

The Directors are not aware of any matter or circumstance, not otherwise dealt with in this Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust’s affairs in future financial years.

10. Matters subsequent to the end of the financial year

Since the end of the year, the Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust’s affairs in future financial years.

11. Distributions

Distributions paid or payable by the Trust for the year ended 30 June 2009 were outlined in note 27 of the Notes to the Financial Statements and form part of this Directors’ Report.

12. DXFM’s fees and associate interests

Details of fees paid or payable by the Trust to DXFM for the year ended 30 June 2009 are outlined in note 31 of the Notes to the Financial Statements and form part of this Directors’ Report.

The number of interests in the Trust held by DXFM or its associates as at the end of the financial year are nil (2008: nil).

13. Units on issue

The movement in units on issue during the year and the number of units on issue as at 30 June 2009 are detailed in note 25 of the Notes to the Financial Statements and form part of this Directors’ Report.

14. Environmental regulation

DEXUS Property Group senior management, through its Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any breaches of these requirements and to the best of its knowledge all activities have been undertaken in compliance with environmental requirements.

15. Indemnification and insurance

The insurance premium for a policy of insurance indemnifying Directors, officers and others (as defined in the relevant policy of insurance) is paid by DXH. The auditors are in no way indemnified out of the assets of the Trust.

16. Audit

16.1 auditor

PricewaterhouseCoopers (PwC or the Auditor) continues in office in accordance with section 327 of the Corporations Act 2001 .

16.2 non-audit services

The Trust may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditors expertise and experience with the Trust and/or DEXUS Property Group are important.

Details of the amounts paid to the Auditor, which include amounts paid for non-audit services are set out in note 7 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The reasons for the Directors being satisfied are:

n Board Audit Committee has determined that the Auditor will not provide services that have the potential to impair the independence of its audit role, including:
participating in activities that are normally undertaken by management; and
being remunerated on a “success fee” basis.
n Board Audit Committee has determined that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including:
the preparation of accounting records;
the design and implementation of information technology systems;
conducting valuation, actuarial or legal services;
promoting, dealing in or underwriting securities; or
providing internal audit services.
n Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of non-audit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of $100,000.

The above Directors’ statements are in accordance with the advice received from the Board Audit Committee.

16.3 auditor’s independence declaration

A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out in the Financial Statements and forms part of this Directors’ Report.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

17. Corporate governance

DXFM’s Corporate Governance Statement is set out in a separate section of the DEXUS Property Group Annual Report.

18. Rounding of amounts and currency

The Trust is a registered scheme of the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the “rounding off” of amounts in this Directors’ Report and the Financial Statements. Amounts in this Directors’ Report and Financial Statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise indicated. All figures in this Directors’ Report and the Financial Statements, except where otherwise stated, are expressed in Australian dollars.

19. Management representation

The Chief Executive Officer and Chief Financial Officer have reviewed the Trust’s Financial Reporting processes, policies and procedures together with its risk management, internal control and compliance policies and procedures. Following that review it is their opinion that the Trust’s financial records for the financial year have been properly maintained in accordance with the Corporations Act 2001 and the Financial Statements and their notes comply with the accounting standards and give a true and fair view.

20. Directors’ authorisation

This Directors’ Report is made in accordance with a resolution of the Directors. The Financial Report was authorised for issue by the Directors on 17 August 2009. The Directors have the power to amend and reissue the financial report.

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Christopher t beare Chair 17 August 2009

Victor p hoog antink Chief Executive Officer 17 August 2009

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

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DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Revenue from ordinary activities
Property revenue	2	155,287	138,172	75,590	73,123
Distribution revenue		–	–	59,490	56,915
Interest revenue	3	3,541	658	3,235	223
Total revenue from ordinary activities		158,828	138,830	138,315	130,261
Other income		19	653	19	524
Total income		158,847	139,483	138,334	130,785
Expenses
Property expenses		(28,328)	(25,257)	(15,363)	(13,988)
Responsible Entity fees	31	(5,598)	(7,150)	(5,598)	(7,150)
Finance costs	4	(209,660)	(64,174)	(184,645)	(45,658)
Share of net losses of associates accounted
for using the equity method	17	(245,448)	(26,488)	–	–
Net (loss)/gain on sale of investment properties		(654)	5,886	–	5,887
Net fair value (loss)/gain of investment properties		(360,663)	(15,494)	(114,371)	14,683
Net fair value loss of investments		–	(196)	(329,585)	(110,281)
Net fair value loss of derivatives		(14,763)	(1,785)	(14,763)	(1,785)
Net foreign exchange gain/(loss)		1,654	993	(112,105)	51,924
Other expenses	6	(4,315)	(4,102)	(1,520)	(1,523)
Total expenses		(867,775)	(137,767)	(777,950)	(107,891)
(Loss)/profit before tax		(708,928)	1,716	(639,616)	22,894
Tax benefit/(expense)
Income tax (expense)/benefit	5 (a)	(2,042)	556	–	–
Withholding tax benefit/(expense)		14,658	(3,171)	–	–
Total tax benefit/(expense)		12,616	(2,615)	–	–
(Loss)/profit attributable to unitholders		(696,312)	(899)	(639,616)	22,894

Earnings per unit		Cents	Cents
Basic earnings per unit on loss attributable
to equity holders of the parent entity	36	(18.79)	(0.03)
Diluted earnings per unit on loss attributable
to equity holders of the parent entity	36	(18.79)	(0.03)

The above Income Statements should be read in conjunction with the accompanying notes.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST BALANCE SHEETS AS AT 30 JUNE 2009

		Consolidated	Consolidated	Parent	entity
	Notes	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Current assets
Cash and cash equivalents	8	13,043	20,216	1,729		2,264
Receivables	9	14,036	5,085	8,874		30,892
Non-current assets classified as held for sale	10	22,254	–	–		–
Loan with related parties	11	138,948	138,948	150,675		138,948
Derivative financial instruments	12	71,087	55,941	71,087		55,941
Other	13	3,135	2,199	1,951		1,096
Total current assets		262,503	222,389	234,316		229,141
Non-current assets
Investment properties	14	1,425,178	1,695,388	733,714		800,767
Property, plant and equipment	15	94,007	115,258	94,007		115,258
Other financial assets at fair value through profit and loss	16	–	–	308,996		459,325
Investments accounted for using the equity method	17	138,276	314,989	–		–
Investments in associates	17	–	–	138,276		314,989
Deferred tax assets	18	11,177	1,030	–		–
Loans with related parties	11	159,601	–	474,081		296,899
Other	19	1,848	267	328		267
Total non-current assets		1,830,087	2,126,932	1,749,402	1,987,505
Total assets		2,092,590	2,349,321	1,983,718	2,216,646
Current liabilities
Payables	20	31,166	23,942	22,212		13,869
Loans with related parties	11	–	–	–		10,757
Current tax liabilities		955	935	–		–
Interest bearing liabilities	21	64,036	–	–		–
Provisions	22	–	17,330	–		17,330
Derivative financial instruments	12	149,161	23,990	149,161		23,990
Total current liabilities		245,318	66,197	171,373		65,946
Non-current liabilities
Interest bearing liabilities	21	–	60,273	–		–
Loans with related parties	11	1,311,960	1,113,232	1,201,113	1,019,796
Deferred tax liabilities	23	–	2,966	–		–
Other	24	1,285	856	285		267
Total non-current liabilities		1,313,245	1,177,327	1,201,398	1,020,063
Total liabilities		1,558,563	1,243,524	1,372,771	1,086,009
Net assets		534,027	1,105,797	610,947	1,130,637
Equity
Contributed equity	25	925,116	760,988	925,116		760,988
Reserves	26	4,791	175	–		–
Undistributed (losses)/income	26	(395,880)	344,634	(314,169)		369,649
Total equity		534,027	1,105,797	610,947	1,130,637

The above Balance Sheets should be read in conjunction with the accompanying notes.

8 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent	entity
	Notes	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Total equity at the beginning of the year		1,105,797	1,104,505	1,130,637	1,106,681
Exchange differences on translation of foreign operations	26	4,616	1,129	–		–
Net income recognised directly in equity		4,616	1,129	–		–
Net (loss)/profit for the year		(696,312)	(899)	(639,616)		22,894
Total recognised income and expense for the year		(691,696)	230	(639,616)		22,894
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of transaction costs	25	164,128	38,983	164,128		38,983
Distributions provided for or paid	27	(44,202)	(37,921)	(44,202)		(37,921)
Total transactions with equity holders		119,926	1,062	119,926		1,062
Total equity at the end of the year		534,027	1,105,797	610,947	1,130,637
Total recognised income and expense for the year is attributable to:
Equity holders of the parent entity		(691,696)	230	(639,616)		22,894
Total recognised income and expense for the year		(691,696)	230	(639,616)		22,894

The above Statements of Changes In Equity should be read in conjunction with the accompanying notes.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST CASH FLOW STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent	entity
	Notes	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		179,526	144,387	97,331		78,828
Payments in the course of operations (inclusive of GST)		(47,827)	(34,718)	(26,525)		(17,185)
Interest received		3,532	658	14,052		13,202
Finance costs paid to financial institutions		(49,830)	(36,763)	(35,284)		(31,642)
Distributions received		–	–	63,475		31,779
Dividends received		24,636	25,931	24,636		25,931
Income and withholding taxes (paid)/received		(396)	61	–		–
Net cash inflow from operating activities	34	109,641	99,556	137,685		100,913
Cash flows from investing activities
Proceeds from sale of investment properties		5,546	58,000	–		58,000
Payments for capital expenditure on investment properties		(25,872)	(27,128)	(15,426)		(16,916)
Payments for investment properties		–	(221,768)	–		–
Payments for acquisition of investments net of cash		–	(96)	(2,544)		(79,987)
Payments for investments accounted for using the equity method		–	(141,178)	–		(141,178)
Payments for capital expenditure on property, plant and equipment		(8,886)	(11,106)	(8,886)		(11,107)
Net cash outflow from investing activities		(29,212)	(343,276)	(26,856)	(191,188)
Cash flows from financing activities
Issue of units		148,640	–	148,640		–
Establishment expenses and unit issue cost		(4,194)	(67)	(4,194)		(67)
Borrowings provided to entities within DXS		(1,121,466)	(702,843)	(1,144,697)		(661,977)
Borrowings provided by entities within DXS		930,258	962,495	930,737		760,452
Distributions paid to unitholders		(41,850)	(8,541)	(41,850)		(8,541)
Net cash (outflow)/inflow from financing activities		(88,612)	251,044	(111,364)		89,867
Net (decrease)/increase in cash and cash equivalents		(8,183)	7,324	(536)		(408)
Cash and cash equivalents at the beginning of the year		20,216	13,105	2,264		2,672
Effects of exchange rate changes on cash and cash equivalents		1,010	(213)	–		–
Cash and cash equivalents at the end of the year	8	13,043	20,216	1,728		2,264

The above Cash Flow Statements should be read in conjunction with the accompanying notes.

10 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

Note 1. Summary of significant accounting policies

(a) basis of preparation

DEXUS Property Group stapled securities are quoted on the Australian Stock Exchange under the code “DXS” and comprise one unit in each of DDF, DIT, DOT and DXO. Each entity forming part of DXS continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with the reporting and disclosure requirements under the Corporations Act 2001 and Australian Accounting Standards.

DEXUS Funds Management Limited (DXFM) as Responsible Entity for each of the Trusts may only unstaple the Trusts if approval is obtained by special resolution of the stapled security holders.

This general purpose Financial Report for the year ended 30 June 2009 has been prepared in accordance with the requirements of the Trust’s Constitutions, the Corporations Act 2001, Australian Equivalents to International Financial Reporting Standards (AIFRS) and Interpretations. Compliance with AIFRS ensures that the consolidated and parent Financial Statements and Notes comply with International Financial Reporting Standards (IFRS).

This Financial Report is prepared on the going concern basis and in accordance with historical cost conventions and has not been adjusted to take account of either changes in the general purchasing power of the dollar or changes in the values of specific assets, except for the valuation of certain non-current assets and financial instruments (refer notes 1(e), 1(n), 1(o), and 1(u)).

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

The preparation of Financial Statements in conformity with AIFRS may require the use of certain critical accounting estimates and management to exercise its judgement in the process of applying the Trust’s accounting policies. Other than the estimations described in notes 1(e), 1(n), 1(o), and 1(u), no key assumptions concerning the future or other estimation of uncertainty at the reporting date have a significant risk of causing material adjustments to the Financial Statements in the next annual reporting period.

The current lack of comparable market evidence relating to pricing assumptions and market drivers means that there is less certainty in regard to valuations and the assumptions applied to valuation inputs. The period of time needed to negotiate a sale in this environment may also be significantly prolonged.

The fair value of investment property has been adjusted to reflect market conditions at the end of the reporting period. While this represents the best estimates of fair value as at the balance sheet date, the current market uncertainty means that if investment property is sold in future the price achieved may be higher or lower than the most recent valuation, or higher or lower than the fair value recorded in the Financial Statements.

(b) principles of consolidation

(i) Controlled entities

The Financial Statements incorporate an elimination of inter-entity transactions and balances to present the Financial Statements on a consolidated basis. Where control of an entity is obtained during a financial year, its results are included in the Income Statements from the date on which control is gained. The Financial Statements incorporate all the assets, liabilities and results of the parent and its controlled entities.

(ii) Partnerships and joint ventures

Where assets are held in a partnership or joint venture with another entity directly, the Trust’s share of the results and assets of this partnership or joint venture are consolidated into the Income Statements and Balance Sheets of the Trust. Where assets are jointly controlled via ownership of units in single purpose unlisted unit trusts or shares in companies, the Trust applies equity accounting to record the operations of these investments (refer note 1(r)).

(c) Revenue recognition

(i) Rent

Rental income is brought to account on a straight-line basis over the lease term for leases with fixed rent review clauses. In all other circumstances rental income is brought to account on an accruals basis. If not received at balance date, rental income is reflected in the Balance Sheets as a receivable. Recoverability of receivables is reviewed on an ongoing basis. Debts which are known to be not collectable are written off.

Uncertainty around property valuations

The global market for many types of real estate has been severely affected by the recent volatility in global financial markets. The lower levels of liquidity and volatility in the banking sector have translated into a general weakening of market sentiment towards real estate and the number of real estate transactions has significantly reduced.

Fair value of investment property is the price at which the property could be exchanged between knowledgeable, willing parties in an arm’s length transaction. A “willing seller” is not a forced seller prepared to sell at any price. The best evidence of fair value is given by current prices in an active market for similar property in a comparable location and condition.

(ii) Interest revenue

Interest revenue is brought to account on an accruals basis using the effective interest rate method and, if not received at balance date, is reflected in the Balance Sheets as a receivable.

(iii) Dividends and distribution revenue

Revenue from dividends and distributions are recognised when declared. Amounts not received at balance date are included as a receivable in the Balance Sheets.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 11

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(d) expenses

Expenses are brought to account on an accruals basis and, if not paid at balance date, are reflected in the Balance Sheets as a payable.

(i) Property expenses

Property expenses include rates, taxes and other property outgoings incurred in relation to investment properties and property, plant and equipment where such expenses are the responsibility of the Trust.

(ii) Borrowing costs

Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation or ancillary costs incurred in connection with arrangement of borrowings and foreign exchange losses net of hedged amounts on borrowings, including trade creditors and lease finance charges. Borrowing costs are expensed as incurred unless they relate to qualifying assets.

Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use or sale. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate.

(e) derivatives and other financial instruments

(i) Derivatives

The Trust’s activities expose it to a variety of financial risks including foreign exchange risk and interest rate risk. Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps, cross currency swaps and foreign exchange contracts to manage its exposure to certain risks. Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Trust’s exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes. Even though derivative financial instruments are entered into for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting under AASB 139: Financial Instruments: Recognition and Measurement for interest rate swaps and foreign exchange contracts. Accordingly, derivatives including interest rate swaps, interest rate component of cross currency swaps and foreign exchange contracts, are measured at fair value with any changes in fair value recognised in the Income Statements.

(ii) Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in the Income Statements.

(iii) Debt and equity instruments issued by the Trust

Financial instruments issued by the Trust are classified as either liabilities or as equity in accordance with the substance of the contractual arrangements. Accordingly, ordinary units issued by DIT are classified as equity.

Interest and distributions are classified as expenses or as distributions of profit consistent with the Balance Sheets classification of the related debt or equity instruments.

Transaction costs arising on the issue of equity instruments are recognised directly in equity (net of tax) as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

(iv) Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate.

The fair value of financial guarantees is determined as the present value of the difference in the net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

(v) Other financial assets

Loans and other receivables are measured at amortised cost using the effective interest rate method less impairment.

(f) goods and services tax/value added tax

Revenues, expenses and capital assets are recognised net of any amount of Australian/Canadian Goods and Services Tax (GST) or French and German Value Added Tax (VAT), except where the amount of GST/VAT incurred is not recoverable. In these circumstances the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense.

Cash flows are included in the Cash Flow Statements on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from or payable to the Australian Taxation Office is classified as operating cash flows.

(g) taxation

Under current Australian income tax legislation DIT, is not liable for income tax provided it satisfies certain legislative requirements. DIT may be liable for income tax in jurisdiction where foreign property is held (i.e. United States, France, Germany, Canada).

Withholding tax payable on distributions received by the Trust from DEXUS Industrial Properties Inc (US REIT) and DEXUS US Properties Inc (US REIT II) are recognised as an expense when tax is withheld.

In addition, a deferred tax liability or asset and related deferred tax expense/benefit is recognised on differences between the tax cost base of US assets and liabilities in the Trust (held by US REIT and US REIT II) and their accounting carrying values at balance date. Any deferred tax liability or asset is calculated using a blend of the current withholding tax rate applicable to income distributions and the applicable US federal and state taxes.

12 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Under current Australian income tax legislation, the unitholders will generally be entitled to receive a foreign tax credit for US withholding tax deducted from distributions paid by the US REIT and US REIT II.

DIT France Logistique SAS (DIT France), a wholly owned company of DIT, is liable for French corporation tax on its taxable income at the rate of 34.43%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the French real estate assets and their accounting carrying value at balance date.

DEXUS GLOG Trust, a wholly owned Australian sub-trust of DIT, is liable for German income tax on its German taxable income at the rate of 15.82%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the German real estate assets and their accounting carrying value at balance date.

DEXUS Canada Trust, a wholly owned Australian sub-trust of DIT, is liable for Canadian income tax on its Canadian taxable income at the rate of 25%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the Canadian real estate asset and the accounting carrying value at balance date.

(h) distributions

In accordance with the Trust’s Constitutions, the Trust distributes its distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared.

(i) Repairs and maintenance

Plant is required to be overhauled on a regular basis and is managed as part of an ongoing major cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the replaced component will be derecognised and the replacement costs capitalised in accordance with note 1(n). Other routine operating maintenance, repair costs and minor renewals are also charged as expenses as incurred.

(j) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(k) Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, which is based on the invoiced amount less provision for doubtful debts. Trade receivables are required to be settled within 30 days and are assessed on an ongoing basis for impairment. Receivables which are known to be uncollectible are written off. A provision for doubtful debts is established when there is objective evidence that the Trust will not be able to collect all amounts due according to the original terms of the receivables.

(l) non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

(m) other financial assets at fair value through profit and loss

Interests held by the Trust in controlled entities and associates are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency.

(n) property, plant and equipment

Property under development is carried at historical cost until the development is complete. All costs of development are capitalised against the property and are not depreciated. Upon completion of development, the assets are classified as investment property.

All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to its acquisition. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the trust and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income Statements during the financial period in which they are incurred.

Property under development and all other property, plant and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts exceed their recoverable amounts (refer note 1 (t)).

(o) investment properties

Investment properties consist of properties held for long-term rental yields, capital appreciation or both. Investment properties are initially recognised at cost including transaction costs. Investment properties are subsequently recognised at fair value in the Financial Statements. Each valuation firm and its signatory valuer are appointed on the basis that they are engaged for no more than three consecutive valuations.

The basis of valuations of investment properties is fair value being the amounts for which the assets could be exchanged between knowledgeable willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. In addition, an appropriate valuation method is used, which may include the discounted cash flow and the capitalisation method. Discount rates and capitalisation rates are determined based on industry expertise and knowledge, and where possible a direct comparison to third party rates for similar assets in a comparable location. Rental income from current leases and assumptions about future leases, as well as any expected operational cash outflows in relation to the property, are also reflected in fair value.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 13

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(o) investment properties (continued)

External valuations of the individual investments are carried out in accordance with the Trust’s Constitutions, or may be earlier where the Responsible Entity believes there is a potential for a material change in the fair value of the property.

Changes in fair values are recorded in the Income Statements. The gain or loss on disposal of an investment property is calculated as the difference between the carrying amount of the asset at the date of disposal and the net proceeds from disposal and is included in the Income Statements in the year of disposal.

Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property where they result in an enhancement in the future economic benefits of the property. Repairs and maintenance are accounted for in accordance with 1(i).

(p) leasing fees

Leasing fees incurred are capitalised and amortised over the lease periods to which they relate.

(q) lease incentives

Prospective lessees may be offered incentives as an inducement to enter into operating leases. These incentives may take various forms including cash payments, rent free periods, or a contribution to certain lessee costs such as fitout costs or relocation costs.

The costs of incentives are recognised as a reduction of rental income on a straight-line basis from the earlier of the date which the tenant has effective use of the premises or the lease commencement date to the end of the lease term. The carrying amount of the lease incentives is reflected in the fair value of investment properties.

(r) investments accounted for using the equity method

Some property investments are held through the ownership of units in single purpose unlisted trusts or shares in unlisted companies where the Trust exerts significant influence but does not have a controlling interest. These investments are considered to be associates and the equity method of accounting is applied in the consolidated Financial Statements.

(s) business combinations

The purchase method of accounting is used for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date. The excess of the acquisition cost over the fair value of the Trust’s share of identifiable net assets acquired is recorded as goodwill. If the cost is less than the fair value of the Trust’s share of the identifiable net assets acquired, the difference is recognised directly in the Income Statements.

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 at the entity’s incremental financing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparative terms and conditions.

(t) impairment of assets

Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Under this method, the entity’s share of the post-acquisition profits of associates is recognised in the consolidated Income Statements. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends or distributions receivable from associates are recognised in the parent entity’s Income Statements, while in the consolidated Financial Statements they reduce the carrying amount of the investment.

When the Trust’s share of losses in an associate equal or exceed its interest in the associate (including any unsecured receivables) the Trust does not recognise any further losses unless it has incurred obligations or made payments on behalf of the associate.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(u) Financial assets and liabilities

(i) Classification

DIT has classified its financial assets and liabilities as follows:

Financial Asset/Liability	Classification	Valuation Basis	Reference
Cash and cash equivalents	Fair value through profit or loss	Fair value	Refer note 1(j)
Receivables	Loans and receivables	Amortised cost	Refer note 1(k)
Other financial assets	Loans and receivables	Amortised cost	Refer note 1(e)
Other financial assets	Fair value through profit or loss	Fair value	Refer note 1(m)
Payables	Financial liability at amortised cost	Amortised cost	Refer note 1(v)
Interest bearing liabilities	Financial liability at amortised cost	Amortised cost	Refer note 1(w)
Derivatives	Fair value through profit or loss	Fair value	Refer note 1(e)

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired.

(ii) Fair value estimation of financial assets and liabilities

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

The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Trust is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques including dealer quotes for similar instruments and discounted cash flows. In particular, the fair value of interest rate swaps and cross currency swaps are calculated as the present value of the estimated future cash flows, the fair value of forward exchange rate contracts is determined using forward exchange market rates at the balance sheet date, and the fair value interest rate option contracts are calculated as the present value of the estimated future cash flows taking into account the time value and implied volatility of the underlying instrument.

(v) payables

These amounts represent liabilities for amounts owing at balance date. The amounts are unsecured and are usually paid within 30 days of recognition.

(w) interest bearing liabilities

Subsequent to initial recognition at fair value, net of transaction costs incurred, interest bearing liabilities are measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Income Statements over the period of the borrowings using the effective interest rate method. Interest bearing liabilities are classified as current liabilities unless the Trust has an unconditional right to defer the liability for at least 12 months after the reporting date.

(x) earnings per unit

Earnings per unit are determined by dividing the net profit attributable to equity holders of the parent entity by the weighted average number of ordinary units outstanding during the year.

(y) Foreign currency

Items included in the Financial Statements of the Trust are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Financial Statements are presented in Australian dollars, which is the functional and presentation currency of the Trust.

(i) Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of financial assets and liabilities denominated in foreign currencies are recognised in the Income Statements.

(ii) Foreign operations

Foreign operations are located in the United States, France, Germany and Canada. These operations have a functional currency of US Dollars, Euros and Canadian Dollars respectively, which are translated into the presentation currency.

The assets and liabilities of the foreign operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the foreign operation.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at exchange rates prevailing at the reporting date.

(z) Segment reporting

A business segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing services within a particular geographic environment and is subject to risks and returns that are different from those of segments operating in other geographic environments.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 15

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 1. Summary of significant accounting policies (continued)

(aa) Rounding of amounts

The Trust is the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investment Commission, relating to the rounding off of amounts in the Financial Report. Amounts in the Financial Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

(ab) new accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2009 reporting period. Our assessment of the impact of these new standards and interpretations is set out below:

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 are effective for annual reporting periods commencing on or after 1 January 2009.

AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a “management approach” to reporting on financial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Trust intends to apply the revised standard from 1 July 2009. Application of AASB 8 may result in different segments, segment results and different type of information being reported in the segment note of the financial report. However, it will not affect any of the amounts recognised in the Financial Statements.

(ii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 .

The revised AASB 101 that was issued in September 2007 is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the Statements of Changes in Equity but will not affect any of the amounts recognised in the Financial Statements. If an entity has made a prior period adjustment or a reclassification of items in the Financial Statements, it will also need to disclose a third balance sheet (Statement of Financial Position), this one being as at the beginning of the comparative period. The Trust intends to apply the revised standard from 1 July 2009.

(iii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12] .

The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and – when adopted – will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the Financial Report of the Trust, as the Trust already capitalise borrowing costs relating to qualifying assets.

(iv) Revised AASB 3 Business Combinations , AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 . Revised accounting standards for business combinations and Consolidated Financial Statements were issued in March 2008 and are operative for annual reporting periods beginning on or after 1 July 2009, but may apply earlier. The Trust will apply the revised standards from 1 July 2009. However, the new rules generally apply only prospectively to transactions that occur after the application date of the standard. Their impact will therefore depend on whether the Trust will enter into any business combinations or other transactions that affect the level of ownership held in the controlled entities in the year of initial application.

The revised AASB 3 continues to apply the acquisition method to business combinations, but with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs must be expensed. This is different to the Trust’s current policy which is set out in note 1(s) above. For example, under the new rules:

The revised AASB 127 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in profit or loss.

(v) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 July 2009).

In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and AASB 127 Consolidated and Separate Financial Statements. The Trust will apply the revised rules prospectively from 1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment as a result of the dividend payment. Under the entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary’s fair value.

16 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(vi) Amendments arising from the Annual Improvements Project.

In July 2008, AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project was issued. This comprised of amendments to various standards and is effective from 1 January 2009. The following are considered relevant to the Trust:

AASB 101 (Amendment) Presentation of Financial Statements .

The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with AASB 139 Financial Instruments: Recognition and Measurement are examples of current assets and liabilities respectively. The Trust will apply the AASB 139 (Amendment) from 1 July 2009. This clarification will enable the Trust to distinguish between current and non-current derivative balances.

AASB 123 (Amendment) Borrowing Costs .

The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in AASB 139 Financial Instruments: Recognition and Measurement. This eliminates the inconsistency of terms between AASB 139 and AASB 123. The Trust will apply the AASB 123 (Amendment) prospectively to the capitalisation of borrowing costs on qualifying assets from 1 July 2009. This is not expected to have any impact on the amounts recognised in the entity’s Financial Statements.

AASB 127 (Amendment) Consolidated and Separate Financial Statements (effective from 1 January 2009).

Where an investment in a subsidiary that is accounted for under AASB 139 Financial Instruments: Recognition and Measurement is classified as held for sale under AASB 5 Non-current Assets Held for Sale and Discontinued Operations , AASB 139 would continue to be applied. The amendment will not have an impact on the Trust’s operations because it is the Trust’s policy for an investment in subsidiary to be recorded at fair value through profit or loss in the standalone accounts of each entity.

AASB 128 (Amendment) Investments in Associates (and consequential amendments to AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures ) (effective from 1 January 2009).

An investment in associate is treated as a single asset for the purposes of impairment testing and any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The Trust will apply the AASB 128 (Amendment) to impairment tests related to investment in associates and any related impairment losses from 1 July 2009. Due to the prospective application this will not affect any of the amounts recognised at 30 June 2009.

AASB 140 (Amendment) Investment Property (and consequential amendments to AASB 116).

Under this amendment, property that is under construction or development for future use as investment property falls within the scope of AASB 140. Where the fair value model is applied, such property is, therefore, measured at fair value. However, where fair value of investment property under construction is not reliably measurable, the property is measured at cost until the earlier of the date construction is completed and the date at which fair value becomes reliably measurable. The Trust will apply the AASB 140 (Amendment) from 1 July 2009.

(vii) AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments (effective for annual periods beginning on or after 1 January 2009).

In April 2009, the AASB published amendments to AASB 7 Financial Instruments: Disclosure to improve the information that entities report about their liquidity risk and the fair value of their financial instruments. The amendments require fair value measurement disclosures to be classified into a new three-level hierarchy and additional disclosures for items whose fair value is determined by valuation techniques rather than observable market values. The AASB also clarified and enhanced the existing requirements for the disclosure of liquidity risk of derivatives. The Trust will apply the amendments from 1 January 2009. They will not affect any of the amounts recognised in the Financial Statements.

(viii) AASB 2009-3 Amendments to Australian Accounting Standards – Embedded Derivatives (effective for annual periods ending on or

after 30 June 2009).

The amendments made by the AASB to Interpretation 9 and AASB 139 clarify that where a financial asset is reclassified out of the “at fair value through profit or loss” category, all derivatives embedded in that asset have to be assessed and, if necessary, separately accounted for in Financial Statements. The Trust will apply the amendments retrospectively for the financial half-year ending 31 December 2009. There will be no impact on the Trust’s Financial Statements as at 31 December 2009 as it has not reclassified any financial assets out of the “at fair value through profit or loss” category.

AASB 136 (Amendment) Impairment of Assets .

Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for a value-in-use calculation should be made. The Trust will apply the AASB 136 (Amendment) and provide the required disclosure where applicable for impairment tests from 1 July 2009. This is not expected to have an impact on the amounts recognised in the Trust’s Financial Statements.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 17

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 2. Property revenue

Note 2. Property revenue
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Rent and recoverable outgoings	156,405	138,977	76,526		74,105
Incentive amortisation	(4,099)	(3,640)	(2,755)		(2,384)
Other revenue	2,981	2,835	1,819		1,402
Total property revenue	155,287	138,172	75,590		73,123

Note 3. Interest revenue

Note 3. Interest revenue	Note 3. Interest revenue
Consolidated		Parent	entity
2009	2008	2009		2008
$’000	$’000	$’000		$’000
Interest revenue from financial institutions 438	658	132		223
Interest revenue from related party 3,103	–	3,103		–
Total interest revenue 3,541	658	3,235		223

Note 4. Finance costs

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Interest paid/payable	2,641	5,953	–	–
Interest paid to related parties	75,072	58,695	52,747	46,308
Amount capitalised	(5,364)	(5,285)	(5,364)	(5,285)
Other finance costs	183	315	134	139
Net fair value loss of interest rate swaps	137,128	4,496	137,128	4,496
Total finance costs	209,660	64,174	184,645	45,658

The average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 6.90% (2008: 6.40%).

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 5. Income tax

(a) income tax expense/(benefit)

Note 5. Income tax (a) income tax expense/(benefit)
	Consolidated
	2009	2008
	$’000	$’000
Current tax	1,041	609
Deferred tax	1,001	(1,165)
Income tax expense/(benefit)	2,042	(556)
Deferred income tax expense included
in income tax expense comprises:
Decrease/(increase) in deferred tax assets	1,001	(702)
Decrease in deferred tax liabilities	–	(463)
	1,001	(1,165)

(b) Reconciliation of income tax expense/(benefit) to net (loss)/profit

	Consolidated
	2009	2008
	$’000	$’000
(Loss)/profit before tax	(708,928)	1,716
Loss/(profit) not subject to income tax (note 1(g))	674,211	(40,726)
	(34,717)	(39,010)
Prima facie tax benefit at the Australian tax rate
of 30% (2008: 30%)	(10,415)	(11,703)
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Depreciation and amortisation	(1,866)	(1,657)
Revaluation of investment properties	16,125	13,445
Previously unrecognised tax losses now recognised	(1,802)	(641)
	12,457	11,147
Income tax expense/(benefit)	2,042	(556)

Note 6. Other expenses

Note 6. Other expenses
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Audit and other fees	694	784	445		477
Custodian fees	151	94	138		93
Legal and other professional fees	477	785	75		209
Registry costs and listing fees	145	124	145		124
RREEF management fees	1,711	1,202	–		–
Other expenses	1,137	1,113	717		620
Total other expenses	4,315	4,102	1,520		1,523

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 7. Audit and advisory fees

During the year the auditor of the parent entity and its related practices and non-related audit firms earned the following remuneration:

(a) assurance services

(a) assurance services
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$	$	$		$
Audit services
PwC audit and review of financial reports and other
audit work under the_Corporations Act 2001_	318,772	325,326	317,987		321,346
PwC fees paid in relation to outgoings audit1	22,836	20,065	17,963		11,066
Remuneration for audit services to PwC	341,608	345,391	335,950		332,412
Fees paid to non-PwC audit firms	134,449	110,414	7,350		–
Total remuneration for assurance services	476,057	455,805	343,300		332,412
(b) taxation services
Fees paid to PwC Australia	221,836	166,729	100,698		155,869
Fees paid to PwC US	–	64,594	–		–
Remuneration for taxation services to PwC	221,836	231,323	100,698		155,869
Fees paid to non-PwC taxation firms	19,135	116,895	19,135		–
Total remuneration for taxation services2	240,971	348,218	119,833		155,869
Total audit and taxation fees1	717,028	804,023	463,133		488,281
(c) Fees paid to pwC for transaction services
PwC assurance services in respect of capital raisings	100,929	–	100,929		–
PwC taxation services	18,258	–	18,258		–
PwC other transaction and advisory fees	54,767	–	54,767		–
Total transaction service fees	173,954	–	173,954		–
Total audit, taxation and transaction service fees	890,982	804,023	637,087		488,281

1 Fees paid in relation to outgoing audits are included in property expenses. Therefore total audit and taxation fees included in other expenses is $694,000.

2 These services include general compliance work, one off project work and advice with respect to the management of day to day tax affairs of the Trust.

Note 8. Current assets – cash and cash equivalents

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Cash at bank	13,043	20,216	1,729	2,264
Total current assets – cash and cash equivalents	13,043	20,216	1,729	2,264

20 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 9. Current assets – receivables

Note 9. Current assets – receivables
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Rent receivable	5,084	2,118	2,121		569
Less: provision for doubtful debts	(204)	(46)	(6)		(19)
Total rental receivables	4,880	2,072	2,115		550
Distribution receivable from controlled entities	–	–	–		28,621
Interest receivable from related parties	5,370	32	5,370		1,173
Other receivables	3,786	2,981	1,389		548
Total other receivables	9,156	3,013	6,759		30,342
Total current assets – receivables	14,036	5,085	8,874		30,892

Note 10. Non-current assets classified as held for sale

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Investment properties held for sale	22,254	–	–	–
Total non-current assets classified as held for sale	22,254	–	–	–

The investment properties classified as held for sale comprise 3-7 Bessemer Street, Blacktown, NSW ($9.1 million); 68 Hasler Road, Herdsman, WA ($11.3 million) and Nordstraße 1, Löbau ($1.9 million).

Refer note 32 for further discussion regarding these forthcoming disposals.

Note 11. Loans with related parties

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Current assets – loans with related parties
Non-interest bearing loans with the Trusts1 138,948	138,948	138,948	138,948
Non-interest bearing loans with controlled entities –	–	11,727	–
Total current assets – loans with related parties 138,948	138,948	150,675	138,948
Non-current assets – loans with related parties
Interest bearing loans with controlled entities –	–	314,480	296,899
Interest bearing loans with entities within DXS 159,601	–	159,601	–
Total non-current assets – loan with related parties 159,601	–	474,081	296,899
Current liabilities – loans with related parties
Non-interest bearing loans with controlled entities –	–	–	10,757
Total current liabilities – loans with related parties –	–	–	10,757
Non-current liabilities – loans with related parties
Intercompany loans2 1,201,113	1,019,796	1,201,113	1,019,796
Interest bearing loans with entities within DXS 110,847	93,436	–	–
Total non-current liabilities – loan with related parties 1,311,960	1,113,232	1,201,113	1,019,796

1 Non-interest bearing loans with the Trusts were created to effect the stapling of the Trust, DDF, DOT and DXO. These loan balances eliminate on consolidation.

2 The intercompany loans represent interest-bearing loans with DEXUS Finance Pty Limited (DXF) to or from the Trust. These loan balances eliminate on consolidation.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 21

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 12. Derivative financial instruments

Note 12. Derivative financial instruments
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Current assets
Interest rate swap contracts	17,186	44,936	17,186		44,936
Cross currency swap contracts	52,182	6,286	52,182		6,286
Forward foreign exchange contracts	1,719	4,719	1,719		4,719
Total current assets – derivative financial instruments	71,087	55,941	71,087		55,941
Current liabilities
Interest rate swap contracts	122,010	23,405	122,010		23,405
Cross currency swap contracts	26,812	–	26,812		–
Forward foreign exchange contracts	339	585	339		585
Total current liabilities – derivative financial instruments	149,161	23,990	149,161		23,990
Net current derivative financial instruments	(78,074)	31,951	(78,074)		31,951

Refer note 28 for further discussion regarding derivative financial instruments.

Note 13. Current assets – other

Note 13. Current assets – other
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Prepayments	3,135	2,199	1,951		1,096
Total current assets – other	3,135	2,199	1,951		1,096

Note 14. Non-current assets – investment properties

Reconciliation

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Opening balance as at 1 July 2008	1,695,388	1,431,220	800,767	728,568
Additions	20,006	25,131	11,329	16,751
Acquisitions	–	220,477	–	–
Transfer from property, plant and equipment	33,118	42,020	33,118	42,020
Lease incentives	7,409	2,773	5,626	1,129
Amortisation of lease incentives	(4,099)	(3,640)	(2,755)	(2,384)
Net loss from fair value adjustments	(360,663)	(15,494)	(114,371)	14,683
Disposals	(6,200)	–	–	–
Transfer to non-current assets classified as held for sale	(22,254)	–	–	–
Foreign exchange differences on foreign currency translation	62,473	(7,099)	–	–
Closing balance as at 30 June 2009	1,425,178	1,695,388	733,714	800,767

Key valuation assumptions

Details of key valuation assumptions in relation to investment properties are outlined in note 13 of the DXS Financial Statements.

22 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 15. Non-current assets – property, plant and equipment

(a) property, plant and equipment

30 June 2009

30 June 2009
		Consolidated			Parent entity
	Construction in	Land and	Total	Construction in	Land and	Total
	progress	freehold		progress	freehold
		buildings			buildings
	$’000	$’000	$’000	$’000	$’000	$’000
Opening balance as at 1 July 2008	65,533	49,725	115,258	65,533	49,725	115,258
Additions	11,867	–	11,867	11,867	–	11,867
Transfer to investment properties	(33,118)	–	(33,118)	(33,118)	–	(33,118)
Closing balance as at 30 June 2009	44,282	49,725	94,007	44,282	49,725	94,007
Cost	44,282	49,725	94,007	44,282	49,725	94,007
Net book value as at 30 June 2009	44,282	49,725	94,007	44,282	49,725	94,007

30 June 2008

30 June 2008
		Consolidated			Parent entity
	Construction in	Land and	Total	Construction in	Land and	Total
	progress	freehold		progress	freehold
		buildings			buildings
	$’000	$’000	$’000	$’000	$’000	$’000
Opening balance as at 1 July 2007	144,774	46,623	191,397	144,774	46,623	191,397
Additions	17,941	–	17,941	17,941	–	17,941
Disposal of interest	(49,222)	(2,818)	(52,040)	(49,222)	(2,818)	(52,040)
Transfer (to)/from investment properties	(47,960)	5,920	(42,040)	(47,960)	5,920	(42,040)
Closing balance as at 30 June 2008	65,533	49,725	115,258	65,533	49,725	115,258
Cost	65,533	49,725	115,258	65,533	49,725	115,258
Net book value as at 30 June 2008	65,533	49,725	115,258	65,533	49,725	115,258

(b) non-current assets pledged as security

Refer to note 21 for information on non-current assets pledged as security by the parent entity and its controlled entities.

(c) developments

Boundary Road, North Laverton, VIC

In October 2007, DIT entered into an agreement to lease and build an office warehouse facility for Best Bar (VIC) Pty Ltd. This project was completed in August 2008. The total costs for the project is $11.9 million.

In August 2006, DIT entered into an agreement to lease and build a distribution centre for Foster’s Australia Limited. Practical completion was achieved on 6 July 2007 with a development cost of $33.1 million. This property was transferred to investment properties at 31 December 2008.

The site includes 19.3 hectares of serviced land, 24.5 hectares of unserviced land with conditional subdivision approval and 48.6 hectares of “englobo” land undergoing rezoning from rural to industrial use.

3 Brookhollow Avenue, Baulkham Hills, NSW

On 13 March 2009, subdivision approval was received for 2.1 hectare of vacant land accommodating 23,083 square metres of lettable area.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 23

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 16. Non-current assets – other financial assets at fair value through profit or loss

Investments are adjusted to their fair value through the Income Statements.

Name of entity	Principal activity	Ownership Interest	Ownership Interest	Parent
		2009	2008	2009	2008
		%	%	$’000	$’000
Controlled Entities
Foundation Macquarie Park Trust	Industrial property investment	100.0	100.0	100,195	131,444
DEXUS PID Trust	Industrial property investment	100.0	100.0	167,657	202,913
DIT Luxemburg 1 SARL	Investment trust	100.0	100.0	–	–
DEXUS GLOG Trust	Investment trust	100.0	100.0	–	39,491
DEXUS US Whirlpool Trust	Investment trust	100.0	100.0	41,144	66,742
DEXUS Canada Trust	Investment trust	100.0	100.0	–	18,735
DEXUS Finance Pty Limited	Finance services	25.0	25.0	–	–
Total non-current assets – other	financial assets at fair value through profit or loss			308,996	459,325

Reconciliation

Reconciliation
	Parent	entity
	2009		2008
	$’000		$’000
Opening balance as at 1 July 2008	459,325		393,088
Acquisitions	2,544		79,890
Fair value loss	(152,873)		(13,653)
Closing balance as at 30 June 2009	308,996		459,325

All controlled entities are wholly owned by the Trust with the exception of DEXUS Finance Pty Limited which is owned jointly by DDF, DIT, DOT and DXO. Both the parent entity and the controlled entities were formed in Australia. With the exception of DIT Luxemburg 1 SARL which was formed in Luxemburg and DEXUS Whirlpool Trust which was formed in the United States.

Note 17. Non-current assets – investments accounted for using the equity method

Investments are accounted for in the consolidated Financial Statements using the equity method of accounting (refer note 1).

Information relating to these entities is set out below.

Name of entity	Principal activity	Ownership Interest	Ownership Interest	Consolidated	Consolidated	Parent	entity
		2009	2008	2009	2008	2009	2008
		%	%	$’000	$’000	$’000	$’000
Held by parent entity
DEXUS Industrial	Industrial property
Properties, Inc.1	investment	50.0	50.0	138,276	314,989	138,276	314,989
Total				138,276	314,989	138,276	314,989

DEXUS Industrial Properties, Inc. was formed in the United States.

1 The remaining 50% of this entity is owned by DDF. As a result, this entity is classed as controlled on a DDF consolidated basis.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

	Consolidated
	2009 2008
	$’000 $’000
Movements in carrying amounts of investments accounted for using the equity method
Opening balance as at 1 July 2008	314,989 270,193
Interest acquired during the year	– 141,178
Share of net losses after tax	(245,448) (26,488)
Dividends received	(24,636) (25,931)
Foreign exchange difference on foreign currency translation	93,371 (43,963)
Closing balance as at 30 June 2009	138,276 314,989
Results attributable to associates
Operating losses before income tax	(244,382) (25,442)
Withholding tax expense	(1,066) (1,046)
Operating losses after income tax	(245,448) (26,488)
Less: Dividends received	(24,636) (25,931)
	(270,084) (52,419)
Undistributed income attributable to associates as at 1 July 2008	82,634 135,053
Undistributed (losses)/income attributable to associates as at 30 June 2009	(187,450) 82,634

Summary of the performance and financial position of investments accounted for using the equity method

The Trust’s share of aggregate profits, assets and liabilities of investments accounted for using the equity method are:

	Consolidated	Consolidated
	2009	2008
	$’000	$’000
Losses from ordinary activities after income tax expense	(245,448)	(26,488)
Assets	833,212	899,530
Liabilities	693,562	584,541
Share of associates’ expenditure commitments
Capital commitments	1,953	6,074

Note 18. Non-current assets – deferred tax assets

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
The balance comprises temporary differences attributable to:
Investment property	9,764	–	–	–
Tax losses1	1,413	1,030	–	–
Net deferred tax assets	11,177	1,030	–	–
Movements
Opening balance at 1 July 2008	1,030	314	–	–
Credited to the Income Statements	10,147	716	–	–
Closing balance at 30 June 2009	11,177	1,030	–	–

1 The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 25

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 19. Non-current assets – other

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Tenant and other bonds	1,848	267	328	267
Total non-current assets – other	1,848	267	328	267

Note 20. Current liabilities – payables

Note 20. Current liabilities – payables
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Trade creditors	8,981	8,707	4,459		2,782
Accruals	1,375	2,112	697		755
Accrued capital expenditure	2,309	4,340	1,581		3,961
Prepaid income	2,038	2,881	1,878		2,536
Responsible Entity fee payable	444	465	444		465
GST payable	1,236	1,318	279		351
Accrued interest	1,909	1,100	–		–
Other payable to related party	12,874	3,019	12,874		3,019
Total current liabilities – payables	31,166	23,942	22,212		13,869

Note 21. Interest bearing liabilities

Current

Note 21. Interest bearing liabilities Current
		Consolidated		Parent	entity
	Note	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Unsecured
Bank loans	(a)	64,337	–	–		–
Total unsecured		64,337	–	–		–
Deferred borrowing costs		(301)	–	–		–
Total current liabilities – interest bearing liabilities		64,036	–	–		–
non-current
Unsecured
Bank loans	(a)	–	60,696	–		–
Total unsecured		–	60,696	–		–
Deferred borrowing costs		–	(423)	–		–
Total non-current liabilities – interest bearing liabilities		–	60,273	–		–
Total interest bearing liabilities		64,036	60,273	–		–

26 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

The Trust’s unsecured borrowing facilities are supported by the Trust’s guarantee arrangements, and have negative pledge provisions which limit the amount and type of encumbrances that the Trusts can have over its assets and ensures that all senior unsecured debt ranks pari passu.

The current debt facilities will be refinanced as at/or prior to their maturity.

DIT France, a wholly owned subsidiary of DIT, is a legal borrower for the below unsecured bank loan.

(a) Syndicated revolving credit facility

Consists of a A$300 million facility maturing in March 2010.

Note 22. Provisions

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Current
Provision for distribution	–	17,330	–	17,330
	–	17,330	–	17,330
Movements in provision for distribution is set out below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Provision for distribution
Opening balance as at 1 July 2008	17,330	27,000	17,330	27,000
Additional provisions	44,202	37,921	44,202	37,921
Payments and reinvestment of distributions	(61,532)	(47,591)	(61,532)	(47,591)
Closing balance as at 30 June 2009	–	17,330	–	17,330

Note 23. Non-current liabilities – deferred tax liabilities

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
The balance comprises temporary differences attributable to:
Investment properties	–	2,966	–	–
Total non-current liabilities – deferred tax liabilities	–	2,966	–	–
Movements
Opening balance at 1 July 2008	2,966	422	–	–
(Debited)/credited to Income Statements	(2,966)	2,544	–	–
Closing balance at 30 June 2009	–	2,966	–	–

Note 24. Non-current liabilities – other

Note 24. Non-current liabilities – other
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Tenant bonds	1,209	793	285		267
Other	76	63	–		–
Total non-current liabilities – other	1,285	856	285		267

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 25. Contributed equity

(a) Contributed equity of equity holders

Note 25. Contributed equity (a) Contributed equity of equity holders
	Consolidated
	2009	2008
	$’000	$’000
Opening balance as at 1 July 2008	760,988	722,005
Issue of units	148,640	–
Distributions reinvested	19,682	39,050
Cost of issuing units	(4,194)	(67)
Closing balance as at 30 June 2009	925,116	760,988

(b) number of units on issue

(b) number of units on issue
	Consolidated
	2009	2008
	No. of units	No. of units
Opening balance as at 1 July 2008	3,040,019,487	2,894,600,006
Distributions reinvested	100,368,579	145,419,481
Issue of units	1,560,453,600	–
Closing balance as at 30 June 2009	4,700,841,666	3,040,019,487

Terms and conditions

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust.

Each stapled security entitles the holder to one vote, either in person or by proxy, at a meeting of the Trust.

(c) issue of securities

During the current year DXS carried out two separate security issue programs issuing a total of 1,560.5 million securities to raise $1,062.2 million excluding equity raising costs of $32.7 million. This comprised of the following:

December 2008 Institutional placement and share purchase plan

On 10 December 2008 pursuant to an institutional placement 391.7 million securities were issued at a price of 14.5 cents per unit.

On 6 February 2009 pursuant to a security purchase plan 16.4 million securities were issued at a price of 13.3 cents per unit.

May 2009 Institutional placement, institutional entitlement offer and the retail entitlement offer

On 6 May 2009 pursuant to an institutional placement, institutional entitlement offer and the retail entitlement offer for which valid applications were received, a total of 1025.1 million securities were issued at a price of 7.79 cents per unit.

On 28 May 2009 pursuant to a retail entitlement offer 127.2 million securities were issued at a price of 7.79 cents per unit.

(d) distribution reinvestment plan

Under the distribution reinvestment plan (DRP), stapled security holders may elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities, rather than being paid in cash.

On 29 August 2008, 45,087,887 units were issued at a unit price of 12.24 cents in relation to the June 2008 distribution period.

On 27 February 2009, 55,280,692 units were issued at a unit price of 25.62 cents in relation to the December 2008 distribution period.

Approval of issues of Stapled Securities to an underwriter in connection with issues under a Distribution Reinvestment Plan

At the Extraordinary General Meeting held on 6 February 2009 by DXFM, as Responsible Entity for DDF, DIT, DOT and DXO, security holders resolved to authorise DXFM, as Responsible Entity, to issue stapled securities, each comprising a unit in each of the above mentioned trusts (Stapled Securities), to an underwriter or persons procured by an underwriter within a period of 24 months from the date of the meeting in connection with any issue of Stapled Securities under the DXS distribution reinvestment plan.

Such an issue will not be counted for the purposes of the calculation of the Trusts’ annual placement limit of 15% under the ASX Listing Rules.

28 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 26. Reserves and undistributed income

(a) Reserves

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Foreign currency translation reserve	4,791	175	–	–
Total reserves	4,791	175	–	–
Movements:
Foreign currency translation reserve
Opening balance as at 1 July 2008	175	(954)	–	–
Exchange difference arising from the translation of the
financial statements of foreign operations	4,616	1,129	–	–
Total movement in foreign currency translation reserve	4,616	1,129	–	–
Closing balance as at 30 June 2009	4,791	175	–	–

(b) nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations.

(c) undistributed income

(c) undistributed income
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Undistributed income as at 1 July 2008	344,634	383,454	369,649		384,676
Net (loss)/profit attributable to unitholders	(696,312)	(899)	(639,616)		22,894
Distributions provided for or paid	(44,202)	(37,921)	(44,202)		(37,921)
Undistributed income as at 30 June 2009	(395,880)	344,634	(314,169)		369,649

Note 27. Distributions paid and payable

(a) distribution to unitholders

Note 27. Distributions paid and payable (a) distribution to unitholders
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
31 December (paid 27 February 2009)	44,202	20,591	44,202		20,591
30 June (payable 28 August 2009)	–	17,330	–		17,330
Total distributions to unitholders	44,202	37,921	44,202		37,921

(b) distribution rate

(b) distribution rate
	Consolidated		Parent	entity
	2009	2008	2009	2008
	Cents per unit	Cents per unit	Cents per unit	Cents per unit
31 December (paid 27 February 2009)	1.27	0.70	1.27	0.70
30 June (payable 28 August 2009)	–	0.57	–	0.57
Total distributions	1.27	1.27	1.27	1.27

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 28. Financial risk management

To ensure the effective and prudent management of the Trust’s capital and financial risks, DIT (as part of DXS) has a well established framework consisting of a Board Finance Committee and a Capital Markets Committee. The Board Finance Committee is accountable to and primarily acts as an advisory body to the DXFM Board and includes three Directors of the DXFM Board. Its responsibilities include reviewing and recommending financial risk management polices and funding strategies for approval.

The Capital Markets Committee is a management committee that is accountable to both the Board Finance Committee and the Executive Committee. It convenes at least quarterly and conducts a review of financial risk management exposures including liquidity, funding strategies and hedging. It is also responsible for the development of financial risk management policies and funding strategies for recommendation to the Board Finance Committee, and the approval of treasury transactions within delegated limits and powers.

Further information on the DEXUS Property Group governance structure, including terms of reference, is available at www.dexus.com

(1) Capital risk management

The Trust manages its capital to ensure that entities within the Trust will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Trust consists of debt (see note 21), cash and cash equivalents, and equity attributable to unitholders. The capital structure is monitored and managed in consideration of a range of factors including:

n the cost of capital and the financial risks associated with each class of capital;
n gearing levels and other covenants;
n potential impacts on net tangible assets and unitholder’s equity;
n potential impacts on DXS’s credit rating; and
n other market factors and circumstances.

To minimise the potential impacts of foreign exchange risk on the Trust’s capital structure, the Trust’s policy is to hedge the majority of its foreign asset and liability exposures. Consequently the size of the assets and liabilities on the Balance Sheets (translated into Australian Dollars) and gearing ratios will rise and fall as exchange rates fluctuate. This policy ensures that net tangible assets are not materially affected by currency movements (refer foreign exchange risk below).

The gearing ratio at 30 June 2009 was 67.8% (as detailed below).

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Gearing ratio
Interest bearing liabilities1	1,363,254	1,153,712	1,199,384	1,028,289
Total tangible assets2	2,010,326	2,292,350	1,912,631	2,160,705
Gearing ratio3	67.8%	50.3%	62.7%	47.6%

1 Interest bearing liabilities excludes deferred borrowing costs as reported internally to management.
2 Total tangible assets comprise total tangible assets less derivatives and deferred and current tax balances as reported internally to management.
3 Gearing is managed centrally for DXS. The gearing ratio as disclosed in the DEXUS Property Group Annual Report 2009 is 32% (refer note 30 (1) of the DXS Financial Statements).

The Trust is not rated by ratings agencies, however, DXS has been rated BBB+ by Standard and Poor’s (affirmed in April 2009). The Trust considers potential impacts upon the rating when assessing the strategy and activities of the Trust and regards those impacts as an important consideration in its management of the Trust’s capital structure.

The Responsible Entity for DIT (DXFM) has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to hold minimum net tangible assets (of $5 million), and maintaining a minimum level of surplus liquid funds. Furthermore, the Responsible Entity maintains trigger points in accordance with the requirements of the licence. These trigger points maintain a headroom value above the AFSL requirements and the entity has in place a number of processes and procedures should a trigger point be reached.

During the period, the Responsible Entity complied with the AFSL requirements.

(2) Financial risk management

The Trust’s activities expose it to a variety of financial risks: credit risk, market risk (including currency risk and interest rate risk), and liquidity risk. Financial risk management is not managed at the individual trust level, but holistically as part of DXS. DXS’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 Trust.

30 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps, cross currency interest rate swaps, and foreign exchange contracts to manage its exposure to certain risks. The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure, and conducting sensitivity analyses.

Risk management is implemented by a centralised treasury department (Group Treasury) whose members act under written policies that are endorsed by the Board Finance Committee and approved by the Board of Directors of the Responsible Entity. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Trust’s business units. The treasury policies approved by the Board of Directors cover overall treasury risk management, as well as policies and limits covering specific areas such as liquidity risk, interest rate risk, foreign exchange risk, credit risk and the use of derivatives and other financial instruments. In conjunction with its advisers, the Responsible Entity continually reviews the Trust’s exposures and (at least annually) updates its treasury policies and procedures.

(a) Liquidity risk

Liquidity risk is the risk that the Trust will not have sufficient available funds to meet financial obligations in an orderly manner when they fall due or at an acceptable cost.

The Trust identifies and manages liquidity risk across short, medium and long-term categories:

n short-term liquidity management includes continuously monitoring forecast and actual cash flows;
n medium-term liquidity management includes maintaining a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits), and may also include projects that have a very high probability of proceeding, taking into consideration risk factors such as the level of regulatory approval, tenant pre-commitments and portfolio considerations; and
n long-term liquidity risk is managed through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated, and ensuring an adequate diversification of funding sources where possible subject to market conditions.

Refinancing risk

A key liquidity risk is the Trust’s ability to refinance its current debt facilities. As the Trust’s debt facilities mature, they are usually required to be refinanced by extending the facility or replacing the facility with an alternative form of capital.

The refinancing of existing facilities may also result in margin price risk, whereby market conditions may result in an unfavourable change in credit margins on the refinanced facilities. The Trust’s key risk management strategy for margin price risk on refinancing is to spread the maturities of debt facilities over different time periods to reduce the volume of facilities to be refinanced and the exposure to market conditions in any one period.

	Consolidated 30	Consolidated 30	June 2009	June 2009	Consolidated 30 June 2008	Consolidated 30 June 2008	Consolidated 30 June 2008
	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring
	within one	between	between	after five	within one	between	between	after five
	year	one and	two and	years	year	one and	two and	years
		two years	five years			two years	five years
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Receivables	14,036	–	–	–	5,085	–	–	–
Payables	31,166	–	–	–	23,942	–	–	–
	(17,130)	–	–	–	(18,857)	–	–	–
Loans with related parties	–	–	–	1,311,960	–	–	–	1,113,232
Interest bearing liabilities
Floating interest bearing liabilities	64,337	–	–	–	–	60,696	–	–
Total interest bearing liabilities1	64,337	–	–	–	–	60,696	–	–
Derivative financial instruments
Derivative assets	324,377	161,445	248,726	13,584	62,596	106,592	–	6,789
Derivative liabilities	328,170	210,263	361,200	106,523	55,707	77,244	–	4,155
Total net derivative financial instruments2	(3,793)	(48,818)	(112,474)	(92,939)	6,889	29,348	–	2,634

1 Refer to note 21 (interest bearing liabilities). Excludes deferred borrowing costs.
2 The notional maturities on derivatives is only shown for cross currency interest rate swaps (refer foreign exchange rate risk) and forward foreign exchange contracts as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating rate interest cash flow, future cash flow have been calculated using static interest rate prevailing at 30 June 2009. Refer to note 12 Derivative Financial Instruments for fair value of derivatives.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 31

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 28. Financial risk management (continued)

(2) Financial risk management (continued)

(a) Liquidity risk (continued)

Refinancing risk (continued)

Parent entity	Parent entity	30 June 2009	30 June 2009	Parent entity 30 June 2008	Parent entity 30 June 2008	Parent entity 30 June 2008
Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring
within one	between	between	after five	within one	between	between	after five
year	one and	two and	years	year	one and	two and	years
	two years	five years			two years	five years
$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Receivables 8,874	–	–	–	30,892	–	–	–
Payables 22,212	–	–	–	13,869	–	–	–
(13,338)	–	–	–	17,023	–	–	–
Loans with related parties –	–	–	1,201,113	–	–	–	1,019,796
Derivative financial instruments
Derivative assets 324,377	161,445	248,726	13,584	62,696	106,592	–	6,789
Derivative liabilities 328,170	210,263	361,200	106,523	55,707	77,244	–	4,155
Total net derivative financial instruments1 (3,793)	(48,818)	(112,474)	(92,939)	6,989	29,348	–	2,634

1 The notional maturities on derivatives is only shown for cross currency interest rate swaps (refer foreign exchange rate risk) and forward foreign exchange contracts as they are the only instruments where a principal amount is exchanged for interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating rate interest cash flow, future cash flow have been calculated using static interest rate prevailing at 30 June 2009. Refer to note 12 Derivative Financial Instruments for fair value of derivatives.

(b) Market risk

Market risk is the risk that the fair value or future cash flows of the Trust’s financial instruments will fluctuate because of changes in market prices. The market risks that the Trust is exposed to are detailed further below.

(i) Interest rate risk

Interest rate risk is the risk that fluctuating interest rates will cause an adverse impact on interest payable (or receivable), or an adverse change on the capital value (present market value) of long-term fixed rate instruments.

Interest rate risk for the Trust arises from interest bearing financial assets and liabilities that the Trust holds. Borrowings issued at variable rates expose the Trust to cash flow interest rate risk. Borrowings issued at fixed rates expose the Trust to fair value interest rate risk.

The primary objective of the Trust’s risk management policy for interest rate risk is to minimise the effects of interest rate movements on the Trust’s portfolio of financial assets and liabilities and financial performance. The policy sets out the minimum and maximum hedging amounts for the Trust which is managed on a portfolio basis.

Cash flow interest rate risk on borrowings is managed through the use of interest rate swaps, whereby a floating interest rate exposure is converted to a fixed interest rate exposure. Fair value interest rate risk on borrowings is also managed through the use of interest rate swaps, whereby a fixed interest exposure is converted to a floating interest rate exposure. The mix of fixed and floating rate exposures is monitored regularly to ensure that the interest rate exposure on the Trust’s cash flows is managed within the parameters defined by the Group Treasury Policy.

The Trust holds borrowings in multiple currencies with both fixed and floating rate exposures and is exposed to interest rate risk related to each particular currency.

The net notional amount of fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate per currency is set out in the next table.

32 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Consolidated 30 June 2009	June 2010	June 2011	June 2012	June 2013	> June 2014
	$’000	$’000	$’000	$’000	$’000
Interest rate swaps
A$ hedged1	431,400	390,567	357,667	271,667	75,000
A$ hedge rate (%)2	6.11%	6.04%	6.02%	6.22%	6.51%
US$ hedged1	435,954	467,524	439,642	461,242	439,531
US$ hedge rate (%)2	5.00%	5.12%	5.23%	4.77%	4.89%
¤hedged1	140,000	137,500	127,500	105,000	70,000
¤hedge rate (%)2	5.20%	5.16%	5.24%	5.54%	6.27%
C$ hedged1	70,000	70,000	70,000	70,000	70,000
C$ hedge rate (%)2	4.77%	4.77%	4.77%	4.77%	4.77%
Combined fixed debt and swaps
(A$ equivalent)	1,286,757	1,280,484	1,195,834	1,097,330	755,073
Hedge rate (%)	5.40%	5.39%	5.44%	5.26%	5.06%

1 Average amounts for the period. Hedged amounts above do not include potential hedges that are cancellable at the counterparty’s option.

2 The above hedge rates do not include margins payable on borrowings.

Sensitivity on interest expense

The table below shows the impact on unhedged net interest expense (excluding non-cash items) of a 50 basis points increase or decrease in short-term and long-term market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust’s floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in markets rates to the extent that floating rate debt is not hedged.

		Consolidated	Consolidated	Parent
		2009	2008	2009	2008
		(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+/– 0.50% (50 basis points)	A$	595	1,820	595	1,820
+/– 0.50% (50 basis points)	US$	(65)	(634)	(505)	(634)
+/– 0.50% (50 basis points)	¤	13	52	417	52
+/– 0.50% (50 basis points)	C$	–	–	–	–
Total A$ equivalent		536	1,246	697	942

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

Sensitivity on fair value of interest rate swaps

The table below shows the impact on the Income Statements for changes in the fair value of interest rate swaps for a 50bps increase and decrease in short-term and long-term market interest rates. The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the interest rate swaps. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Cash flows are discounted using the forward price curve of interest rates at the end of the reporting period. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its interest rate derivatives. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements.

		Consolidated	Consolidated	Parent
		2009	2008	2009	2008
		(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+/– 0.50% (50 basis points)	A$	7,724	6,322	7,724	6,322
+/– 0.50% (50 basis points)	US$	13,108	13,808	13,108	13,808
+/– 0.50% (50 basis points)	¤	2,651	4,594	2,651	4,594
+/– 0.50% (50 basis points)	C$	2,714	2,704	2,714	2,704
Total A$ equivalent		31,382	30,984	31,382	30,984

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 28. Financial risk management (continued)

(2) Financial risk management (continued)

(b) Market risk (continued)

(ii) Foreign exchange risk (continued)

Foreign exchange risk is the risk that movements in exchange rates used to convert foreign currency revenues, expenses, assets, or liabilities to the Trust’s functional currency will have an adverse effect on the Trust.

The Trust operates internationally with investments in the United States, France, Germany and Canada. As a result of these activities, the Trust has foreign exchange risk, arising primarily from:

n translation of investments in foreign operations;
n borrowings and cross currency swaps denominated in foreign currencies; and
n earnings distributions and other transactions denominated in foreign currencies.

The objective of the Trust’s foreign exchange risk management policy is to ensure that movements in exchange rates have minimal adverse impact on the Trust’s foreign currency assets and liabilities, and net foreign currency cash flows as outlined below.

Foreign currency assets and liabilities

Exposure to foreign exchange risk is minimised by predominantly matching the currency of the Trust’s debt with the currency of its investment to form a natural hedge against movements in exchange rates. This policy reduces the risk that movements in foreign exchange rates will have an adverse impact on security holder’s equity and net tangible assets.

Where Australian dollar borrowings are used to fund the foreign currency investment, the Trust may transact cross currency swaps for the purpose of providing an alternate source of foreign currency funding whilst maintaining the natural hedge. In these instances the Trust has committed foreign currency borrowing capacity in place that can replace the foreign currency amounts that are due under the cross currency swaps.

The Trust’s net foreign currency exposures for net investments in foreign operations and hedging instruments are as follows:

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
US$ assets1 329,884	469,405	329,884	469,405
US$ net borrowings2 (359,526)	(398,126)	(359,526)	(398,126)
US$ cross currency swaps3 (30,000)	–	(30,000)	–
US$ denominated net investment (59,642)	71,279	(59,642)	71,279
% hedged 118%	93%	118%	93%
¤assets1 138,675	161,400	220,126	210,705
¤net borrowings2 (39,305)	(163,500)	(11,160)	(268,209)
¤cross currency swaps3 (100,000)	–	(100,000)	–
¤denominated net investment (630)	(2,100)	108,966	(57,504)
% hedged 100%	101%	50%	127%
C$ assets1 51,600	68,300	53,881	53,250
C$ net borrowings2 –	–	–	–
C$ cross currency swaps3 (70,000)	(70,000)	(70,000)	(70,000)
C$ denominated net investment (18,400)	(1,700)	(16,119)	(16,750)
% hedged 136%	102%	130%	131%
Total net foreign investment (A$ equivalent) (94,218)	68,854	115,969	(20,282)
Total % hedged 113%	92%	85%	102%

1 Assets exclude working capital and cash as reported internally to management. Parent entity assets comprise related party interest bearing loans and receivables.
2 Net borrowings is equal to interest bearing liabilities less cash. Parent entity debt comprises related party interest bearing liabilities.

3 Cross currency swap amounts comprise the foreign currency denominated leg of the cross currency swaps.

34 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Sensitivity on equity (foreign currency translation reserve)

The table below shows the impact on the foreign currency translation reserve for changes in the translated value of foreign currency assets and liabilities for an increase and decrease in foreign exchange rates per currency. The increase and decrease in cents per currency has been based on the historical movements of the Australian dollar relative to each currency[1] . The cents per currency has been applied to the spot rates prevailing at 30 June 2009 (see footnote below). The impact on the foreign currency translation reserve arises as the translation of the Trust’s foreign currency assets and liabilities are recorded (in Australian Dollars) directly in the foreign currency translation reserve.

			Consolidated	Consolidated	Parent
			2009	2008	2009	2008
			$’000	$’000	$’000	$’000
+	15.7 cents (19%) (2008: 9.6 cents)	US$ (A$ equivalent)	(11,917)	6,715	–	–
–	15.7 cents (19%) (2008: 9.6 cents)	US$ (A$ equivalent)	17,635	(8,203)	–	–
+	6.4 cents (11%) (2008: 6.1 cents)	¤(A$ equivalent)	(110)	(313)	–	–
–	6.4 cents (11%) (2008: 6.1 cents)	¤(A$ equivalent)	137	383	–	–
+	7.3 cents (8%) (2008: 12.6 cents)	C$ (A$ equivalent)	(1,417)	(159)	–	–
–	7.3 cents (8%) (2008: 12.6 cents)	C$ (A$ equivalent)	1,656	194	–	–

1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement.

2 Exchange rates at 30 June 2009: A$/US$ 0.8114 (2008: 0.9626), A$/¤ 0.5751 (2008: 0.6096), A$/C$ 0.9379 (2008: 0.9715).

Sensitivity on fair value of cross currency swaps

The table below shows the impact on the Income Statements for changes in the fair value of cross currency swaps for a 50 basis point increase and decrease in market rates. The sensitivity on the fair value arises from the impact that changes in short-term and long-term market rates will have on the interest rate mark-to-market valuation of the cross currency swaps[1] . The Trust has elected not to apply hedge accounting to its cross currency swaps. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements.

				Consolidated	Consolidated	Parent	entity
				2009	2008	2009	2008
				(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+	0.50% (50	basis point)	US$ (A$ Equivalent)	(3)	–	(3)	–
+	0.50% (50	basis point)	¤(A$ Equivalent)	2	–	2	–
+	0.50% (50	basis point)	C$ (A$ Equivalent)	(91)	87	(91)	87

1 Note the above sensitivity is reflective of how changes in interest rates will affect the valuation of the cross currency swaps. The effect of movements in foreign exchange rates on the valuation of cross currency swaps is reflected in the foreign currency translation reserve sensitivity.

Net foreign currency denominated cash flows

Foreign exchange risk exists in relation to net cash flows and transactions with foreign operations that are denominated in foreign currencies. This risk is managed through the use of forward foreign exchange contracts (after taking into account the natural hedging through foreign denominated interest expense).

Forward foreign exchange contracts outstanding at 30 June 2009 are as follows:

	2009	2009	2009	2008	2008	2008
	To pay	To receive	Weighted	To pay	To receive	Weighted
	US$ million	A$ million	average	US$ million	A$ million	average
			exchange rate			exchange rate
1 year or less	2.9	4.1	0.6902	4.8	6.9	0.6844
Over 1 and less than 2 years	2.8	4.0	0.7084	2.9	4.1	0.6877
More than 2 years	5.8	8.4	0.6865	8.6	12.5	0.6898

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 35

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 28. Financial risk management (continued)

(2) Financial risk management (continued)

(b) Market risk (continued)

(ii) Foreign exchange risk (continued)

Sensitivity on fair value of foreign exchange contracts

The table below shows the impact on the Income Statements for changes in the fair value of forward foreign exchange contracts for an increase and decrease in market rates. The increase and decrease in cents per currency has been based on the historical movements of the Australian dollar relative to each currency[1] . The cents per currency has been applied to the spot rates prevailing at 30 June 2009 (see footnote below). The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the forward foreign exchange contracts.

Although forward foreign exchange contracts are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its forward foreign exchange contracts. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements.

						Consolidated	Consolidated	Parent
						2009	2008	2009	2008
						$’000	$’000	$’000	$’000
+	15.7	cents (19%) (2008:	9.6	cents)	US$ (A$ equivalent)	2,177	1,387	2,177	1,387
–	15.7	cents (19%) (2008:	9.6	cents)	US$ (A$ equivalent)	(3,222)	(1,697)	(3,222)	(1,697)

1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement.

2 Exchange rates at 30 June 2009: A$/US$ 0.8114 (2008: 0.9626), A$/¤ 0.5751 (2008: 0.6096), A$/C$ 0.9379 (2008: 0.9715).

(c) Credit risk

Credit risk is the risk of loss to the Trust in the event of non-performance by the Trust’s financial instrument counterparties. Credit risk arises from cash and cash equivalents, loans and receivables, and derivative financial instruments. The Trust and parent entity have exposure to credit risk on all financial assets.

DXS manages this risk by:

n adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty’s rating;
n regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody’s and Fitch credit rating. The exposure includes the current market value of in-the-money contracts as well as potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
n entering into ISDA Master Agreements once a financial institution counterparty is approved;
n ensuring tenants, together with approved credit limits, are approved and ensuring that leases are undertaken with a large number of tenants;
n for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
n regularly monitoring loans and receivables on an ongoing basis.

A minimum S&P rating of A– (or Moody’s and Fitch equivalent) is required to become or remain an approved counterparty. As at 30 June 2009, the lowest rating of counterparties that the Trust is exposed to was A (S&P).

Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the Trust’s exposure to any one counterparty. As a result, there is no significant concentration of credit risk for financial instruments.

The maximum exposure to credit risk at 30 June 2009 is the carrying amount of financial assets recognised on the Balance Sheets of the Trust and parent entity.

As at 30 June 2009, the Trust and the parent entity have no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade debtors are consistently monitored on an ongoing basis. As a result, the Trust and parent entity’s exposure to bad debts is not significant.

For the consolidated entity, the ageing analysis of loans and receivables net of provisions at 30 June 2009 is ($’000): 12,702.0 (0-30 days), 485.9 (31-60 days), 78.1 (61-90 days), 769.9 (91+ days). The ageing analysis of loans and receivables net of provisions at 30 June 2008 is ($’000): 3,345.4 (0-30 days), 708.0 (31-60 days), 312.6 (61-90 days), 719.0 (91+ days)). Amounts over 31 days are past due, however, no receivables are impaired.

For the parent entity, the ageing analysis for loans and receivables net of provisions at 30 June 2009 is ($’000): 8,739.8 (0-30 days), 127.1 (31-60 days), 0.9 (61-90 days), 6.2 (91+ days). The ageing analysis of loans and receivables net of provisions for the parent entity at 30 June 2008 is ($’000): 30,621.3 (0-30 days), 154.9 (31-60 days), 46.9 (61-90 days), 68.9 (91+ days). Amounts over 31 days are past due, however, no receivables are impaired.

36 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

The credit quality of financial assets that are neither past due nor impaired is consistently monitored to ensure that there are no adverse changes in credit quality.

(d) Fair value of financial instruments

Fair value interest rate risk is the risk of an adverse change in the net fair (or market) value of an asset or liability due to movements in interest rates.

At 30 June 2009, the carrying amounts and fair value of financial assets and liabilities are shown as follows:

Consolidated	Consolidated	Consolidated
2009	2009	2008	2008
Carrying amount1	Fair value2	Carrying amount1	Fair value2
$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents 13,043	13,043	20,216	20,216
Loans and receivables (current) 14,036	14,036	5,085	5,085
Derivative assets 71,087	71,087	55,941	55,941
Intercompany loans 138,948	138,948	138,948	138,948
Total financial assets 237,114	237,114	220,190	220,190
Financial liabilities
Trade payables 31,166	31,166	23,942	23,942
Derivative liabilities 149,161	149,161	23,990	23,990
Interest bearing liabilities 64,036	64,036	60,273	60,273
Intercompany loans 1,311,960	1,311,960	1,113,232	1,113,232
Total financial liabilities 1,556,323	1,556,323	1,221,437	1,221,437

		Parent	entity		Parent entity
		2009	2009		2008	2008
	Carrying amount1		Fair value2	Carrying amount1		Fair value2
		$’000	$’000		$’000	$’000
Financial assets
Cash and cash equivalents		1,729	1,729		2,264	2,264
Receivables (current)		8,874	8,874		30,892	30,892
Derivative assets		71,087	71,087		55,941	55,941
Intercompany loans		150,675	150,675		138,948	138,948
Total financial assets		232,365	232,365		228,045	228,045
Financial liabilities
Trade payables		22,212	22,212		24,626	24,626
Derivative liabilities		149,161	149,161		23,990	23,990
Intercompany loans		1,201,113	1,201,113		1,019,796	1,019,796
Total financial liabilities		1,372,486	1,372,486		1,068,412	1,068,412

1 Carrying value is equal to the value of the financial instruments on the Balance Sheets.

2 Fair value is the amount for which the financial instrument could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction, however, not recognised on the Balance Sheets.

The fair value of fixed rate interest bearing liabilities has been determined by discounting the expected future cash flows by the relevant market rates. The discount rates applied range from 0.60% to 4.71% for US$ and 3.08% to 4.78% for A$. The fair value of floating rate interest bearing liabilities has been determined by adjusting for transaction costs where appropriate. Refer note 1(u) for fair value methodology for financial assets and liabilities.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 37

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 29. Contingent liabilities

The Trust together with DDF, DOT and DXO is also a guarantor of a A$300.0 million and US$210.0 million syndicated bank debt facility and a total of A$1,182.5 million and US$120.0 million (A$147.9 million) of bank bilateral facilities, a total of A$450.0 million of medium-term notes and a total of US$400.0 million (A$493.0 million) of privately placed notes, which have all been negotiated to finance the Trust and other entities within DXS. The guarantees have been given in support of debt outstanding and drawn against these facilities.

The guarantees are issued in respect of the Trust and do not constitute an additional liability to those already existing in interest bearing liabilities on the Balance Sheets.

The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Trust, other than those disclosed in the Financial Statements, which should be brought to the attention of security holders as at the date of completion of this report.

Note 30. Commitments

(a) Capital commitments

The following amounts represent capital expenditure on investment properties contracted at the reporting date but not recognised as liabilities payable:

Capital expenditure commitments in relation to development works:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Not longer than one year
DEXUS Industrial Estate, Boundary Road, Laverton North, VIC	–	6,890	–	6,890
10-16 South Street, Rydalmere, NSW	–	189	–	189
5-13 Rosebery Avenue, Rosebery, NSW	–	200	–	200
Egerton Street, Silverwater, NSW	–	475	–	–
Pound Road West, Dandenong, VIC	–	1,257	–	1,257
3 Brookhollow Avenue, Baulkham Hills, NSW	421	227	421	227
	421	9,238	421	8,763

(b) lease receivable commitments

The future minimum lease payments receivable by the Trust are:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Within one year	129,160	85,749	62,728	62,928
Later than one year but not later than five years	390,215	202,056	172,441	157,592
Later than five years	231,833	202,414	134,523	166,599
Total lease receivable commitments	751,208	490,219	369,692	387,119

Note 31. Related parties

Responsible entity

DXFM is the Responsible Entity of the Trust.

Responsible entity fees

Under the terms of the Trust’s Constitution, the Responsible Entity is entitled to receive fees in relation to the management of the Trust. DXFM’s parent entity, DXH is entitled to be reimbursed for administration expenses incurred on behalf of the Trust. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH is entitled to property management fees from the Trust.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Related party transactions

Prior to DXO’s acquisition of the remaining 50% interest in DXH on 21 February 2008, all related party transactions were conducted on normal commercial terms and conditions unless otherwise stated. Following the acquisition, Responsible Entity fees in relation to DXS assets moved to cost recovery. All agreements with third party funds remain unchanged.

investments

On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP. Deutsche Bank and RREEF ceased to be related parties on this date. As a result amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008.

deXuS Funds management limited and its related entities

There were a number of transactions and balances between the Trust and the Responsible Entity and its related entities as detailed below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Responsible Entity fees paid and payable	5,598,240	7,149,996	5,598,240	7,149,996
Property management fees to DXPS	3,147,185	2,768,792	2,610,441	2,220,905
Recovery of administration expenses paid to DXH	4,198,336	1,223,351	3,571,297	1,022,403
Aggregate amounts payable to the
Responsible Entity at reporting date	443,560	464,749	443,560	464,749
Property management fees payable at reporting date	655,401	809,868	543,279	708,260

trust within dXS

Aggregate amounts included in the determination of profit that resulted from transactions with each class of other related parties:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Interest income	3,102,815	–	3,102,815	–
Interest expense	75,071,908	61,892,681	52,746,504	46,308,332
Aggregate amounts brought to account in relation to other
transactions with each class of other related parties:
Interest bearing loans advanced to trusts within DXS	1,121,465,506	702,893,000	1,144,697,125	661,977,000
Interest bearing loans advanced from trusts within DXS	930,257,931	962,495,000	930,737,281	760,452,000

RReeF

On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP. RREEF (a subsidiary of Deutsche Bank and fund manager of DEXUS Industrial Properties, Inc.) ceased to be a related party on this date. As a result amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008.

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Investment management fee	–	1,425,990	–	–
Acquisition fee	–	1,412,823	–	–
Property management fees	–	24,961	–	–

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 39

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 31. Related parties (continued)

deutsche bank ag

Dealings with the bank include, not only transactions in its capacity as part owner of the Responsible Entity, but also in the provision of financial services. On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP, a subsidiary of Deutsche Bank. Deutsche Bank ceased to be a related party on this date. As a result amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008.

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Deutsche Bank AG in its capacity as a financier:
Interest paid on swaps for whom the counterparty
was Deutsche Bank AG	–	141,421	–	141,421
Interest received on swaps for whom the counterparty
was Deutsche Bank AG	–	295,917	–	295,917

The following persons were Directors or Alternate Directors of DXFM during the whole of the financial year and up to the date of this report, unless otherwise stated:

directors

1 Independent Director
C T Beare, BSc, BE (Hons), MBA, PhD, FAICD[1,4,5] 2 Audit Committee Member
E A Alexander AM, BComm, FCA, FAICD, CPA[1,2,6,8,9] 3 Compliance Committee Member B R Brownjohn, BComm[1,2,5,6] 4 Nomination and Remuneration Committee Member 5 Finance Committee Member
S F Ewen OAM[1,4] 6 Risk Committee Member
V P Hoog Antink, BComm, MBA, FCA, FAPI, FRICS, MAICD 7 Audit Committee Member from 1 July 2008 to 1 May 2009 8 Compliance Committee Member from 1 July 2008 to 1 May 2009
C B Leitner III, BA[17] 9 Finance Committee Member from 1 July 2008 to 1 May 2009
B E Scullin, BEc[1,3,4,7,10] 10 Risk Committee Member from 1 July 2008 to 1 May 2009 A J Fay, BAg.Ec (Hons), ASIA (Alternate to C B Leitner III)[17] 11 Audit Committee Member from 1 May 2009 to 30 June 2009 12 Compliance Committee Member from 1 May 2009 to 30 June 2009
P B St George, CA(SA), MBA[11,14,15,16] 13 Nomination and Remuneration Committee Member from 1 May 2009 to 30 June 2009 J C Conde AO, BSc, BE (Hons), MBA[12,13,16] 14 Finance Committee Member from 1 May 2009 to 30 June 2009 15 Risk Committee Member from 1 May 2009 to 30 June 2009 16 Appointed Independent Director 29 April 2009 17 Resigned 29 April 2009
12 Compliance Committee Member from 1 May 2009 to 30 June 2009
13 Nomination and Remuneration Committee Member from 1 May 2009 to 30 June 2009

No Directors held an interest in the Trust as at 30 June 2009 or at the date of this report.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

other key management personnel

In addition to the Directors listed above the following persons were deemed by the Board Nomination and Remuneration Committee to be key management personnel during all or part of the financial year and up to the date of this report:

Name	Position	Qualification date of other key management personnel
		during the 12 months ended 30 June 2009
Victor P Hoog Antink	Chief Executive Officer
Tanya L Cox	Chief Operating Officer
Patricia A Daniels	Head of Human Resources
John C Easy	General Counsel
Jane Lloyd	Head of Retail	Qualified 14 July 2008
Louise J Martin	Head of Office
Craig D Mitchell	Chief Financial Officer
Paul G Say	Head of Corporate Development
Mark F Turner	Head of Funds Management
Andrew P Whiteside	Head of Industrial

Remuneration received by key management personnel of the Trust is a cost of DXH and not the Trust. DXH does not recover any proportion of their remuneration from the Trust.

No key management personnel or their related parties held an interest in the Trust for the years ended 30 June 2008 and 30 June 2009 or at the date of this report.

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2008 and 30 June 2009 or at the date of this report.

	2009	2008
	$	$
Compensation
Short-term employee benefits	7,910,223	6,891,605
Post-employment benefits	563,665	400,153
Other long-term benefits	1,509,929	3,290,638
	9,983,817	10,582,396

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 41

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report

1. introduction

This Remuneration Report has been prepared in accordance with AASB 124 Related Party Disclosures and section 300A of the Corporations Act 2001 for the year ended 30 June 2009. The information provided in this Report has been audited in accordance with the provisions of section 308 (3C) of the Corporations Act .

Key management personnel

In this report, Key Management Personnel (“KMP”) are those people having the authority and responsibility for planning, directing and controlling the activities of DEXUS either directly or indirectly. They comprise Non-Executive Directors, the CEO and other members of the Executive Committee. Within this report the term “Executive” encompasses the CEO and other members of the Executive Committee.

KMP (including the five highest paid Executives) of DEXUS for the year ended 30 June 2009 are set out below:

Name	Title	Date of qualification as a KMP
Non-Executive Directors
Christopher T Beare	Non-Executive Chair	Appointed 4 August 2004
Elizabeth A Alexander AM	Non-Executive Director	Appointed 1 January 2005
Barry R Brownjohn	Non-Executive Director	Appointed 1 January 2005
John C Conde AO	Non-Executive Director	Appointed 29 April 2009
Stewart F Ewen OAM	Non-Executive Director	Appointed 4 August 2004
Charles B Leitner III1	Non-Executive Director	Resigned 29 April 2009
Brian E Scullin	Non-Executive Director	Appointed 1 January 2005
Peter B St George	Non-Executive Director	Appointed 29 April 2009
1 Mr Leitner was appointed on 10 March 2005. Simultaneous with Mr Leitner’s resignation, Mr Fay resigned as Mr Leitner’s alternate.
Name	Title	Date of qualification as a KMP
Executives
Victor P Hoog Antink	Chief Executive Officer	Appointed 1 October 2004
Tanya L Cox	Chief Operating Officer	Appointed 1 October 2004
Patricia A Daniels	Head of Human Resources	Appointed 14 January 2008
John C Easy	General Counsel	Appointed 1 October 2004
Jane Lloyd	Head of Retail	Appointed 14 July 2008
Louise J Martin	Head of Office	Appointed 27 March 2008
Craig D Mitchell	Chief Financial Officer	Appointed 17 September 2007
Paul G Say	Head of Corporate Development	Appointed 19 March 2007
Mark F Turner	Head of Funds Management	Appointed 1 October 2004
Andrew P Whiteside	Head of Industrial	Appointed 28 April 2008

2. board oversight of remuneration

The Board Nomination and Remuneration Committee (“Committee”) oversees the remuneration of Directors and Executives. The Committee is responsible for reviewing, and recommending to the Board, Executive remuneration policies and structures.

The Committee assesses the appropriateness of the structure and quantum of Director and Executive remuneration on an annual basis by reference to relevant regulatory and market conditions, and engages external consultants as required to provide independent advice. The role and membership of the Committee is set out in the Corporate Governance Statement, which may be found at www.dexus.com/Corporate-Governance

During the reporting period Nomination and Remuneration Committee members were Messrs Beare (Chair), Ewen, Scullin and Conde (commencing 1 May 2009). Further to his appointment to the Board in April 2009 the Board resolved that Mr Conde be appointed Chair of the Nomination and Remuneration Committee effective 31 August 2009.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

3. non-executive directors’ remuneration framework

The objectives of the Non-Executive Directors’ remuneration framework are to ensure Non-Executive Directors’ fees reflect the responsibilities of Non-Executive Directors and are market competitive. Non-Executive Directors’ fees are reviewed annually.

Non-Executive Directors, other than the Chair, receive a base fee plus additional fees for membership of Board Committees. The table below outlines the fee structure for the reporting period.

Committee	Chair	Member
	$	$
Non-Executive Director	300,000	130,000
Board Audit and Risk	30,000	15,000
Board Finance	30,000	15,000
Board Compliance	15,000	7,500
Board Nomination and Remuneration	–	7,500

Mr Leitner was an employee of RREEF America Inc., a Deutsche Bank group company, during the year ended 30 June 2009, and was not paid fees or any other remuneration by DEXUS. Mr Fay, the Alternate Director to Mr Leitner, received a consulting fee equivalent to the base fee earned by Non-Executive Directors.

During the year the Board considered the establishment of a Committee to oversee property acquisitions, disposals and developments. However, whilst the Board concluded that a formal Committee was not appropriate, it determined that Mr Ewen be paid a fixed fee of $30,000 per annum for assuming additional responsibilities involved in attending meetings and reviewing property investment proposals on its behalf.

Recognising the greater responsibility and time commitment required, the Chair receives a higher fee than other Non-Executive Directors, which is benchmarked to the market median of comparably sized ASX listed entities. The Chair receives no Board Committee fees, nor is the Chair present during any discussion relating to the determination of the Chair’s fees.

Non-Executive Directors are not eligible to receive performance based remuneration or accrue separate retirement benefits beyond statutory superannuation entitlements.

Fees paid to Non-Executive Directors are paid from a remuneration pool of $1,750,000 per annum, which was approved by DEXUS security holders at its Annual General Meeting held in October 2008. Non-Executive Directors’ fees were last adjusted in July 2007. Non-Executive Directors have received no increase in fees since that time. The next review of fees will be in respect of the year commencing 1 July 2010.

4. approach to executive remuneration

Philosophy underlying Executive remuneration

The Directors expect that superior execution and delivery of the DEXUS business model will create superior security holder value, through the delivery of consistent returns, generated with relatively moderate risk. The Directors consider that an appropriately skilled and qualified Executive team is essential to achieve this objective. DEXUS’s approach to the structure and quantum of Executive remuneration is therefore designed to attract, motivate and retain such an Executive team.

In setting the remuneration structure, the Directors are conscious that the business of DEXUS involves longer term property investments and customer relationships. In addition, property market returns have tended to be cyclical, particularly when coupled with financial structures that act to enhance returns.

Taking these considerations into account, the Executive remuneration structure and quantum is based on the following criteria:

(a) market competitiveness and reasonableness;

(b) alignment of Executive performance payments with achievement of the Group’s objectives within its risk framework, and reinforcement of DEXUS’s values-based culture; and

(c) an appropriate target mix of remuneration, including performance payments linked to security holder returns over the longer term, and the avoidance of incentives that encourage short-term decision taking.

DEXUS’s Executive remuneration structure may be summarised as follows:

n fixed remuneration, targeted at the median of fixed remuneration of entities in the comparison group, with reference to each Executive’s skills and depth of experience;
n total remuneration, targeted at the market median, and awarded on a variable scale for each Executive which could result in a total remuneration range from lower quartile to upper quartile, reflecting differing levels of experience, role structure and individual contribution; and
n a single pool of funds available to meet performance payments, which is divided between short-term and long-term elements.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 43

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

4. approach to executive remuneration (continued)

Philosophy underlying Executive remuneration (continued)

(a) Market competitiveness and reasonableness

DEXUS has determined a comparison group, for remuneration benchmarking purposes, from:

constituents of the S&P/ASX 100 index;
constituents of the listed Australian Real Estate Investment Trust (“A-REIT”) sector; and
other property industry entities.

As noted above, a single pool of funds is made available to meet all performance payments. The pool of funds available is sufficient to ensure that DEXUS can achieve its total remuneration positioning target, relative to the market. The Board exercises its discretion to vary the size of the available pool by reference to such factors as:

n three year absolute total security holder return;
n management costs and revenue of DEXUS Holdings; and
n performance against budgeted earnings per security and distribution per security, recognising capital adjustments.
(b) Alignment of Executive performance payments with achievement of the Group’s objectives

The key performance measures that determine performance payments are typically a combination of financial and non-financial objectives which reflect each Executive’s role, responsibility, accountability and delivery.

These objectives can include:

n financial performance objectives
earnings per security
distributions per security (in line with its Distribution Policy)
third party funds performance
total security holder return, relative to peers
n property performance objectives
operating earnings
percentage of vacant space per property
expenses against budget
n non-financial performance objectives
tenant satisfaction
employee engagement
executive succession and talent management
delivery of strategic projects to meet time and budget requirements
n behaviour that reinforces DEXUS’s cultural values

These objectives have been selected as the Directors consider them to be the key drivers to achieve superior security holder returns over time.

The Committee reviews and approves CEO and other Executive key performance indicators (KPIs) against Group objectives at the start of each financial year and reviews achievement against KPIs at the end of each year.

(c) Target mix of remuneration

The target remuneration mix for Executives, expressed as a percentage of total remuneration, is provided in the table below.

		2009			2008
Remuneration component	CEO	CFO	Other	CEO	Property	Other
			Executives		Executives	Executives
Total fixed	35%	40%	50%	40%	45%	50%
Short-Term Performance Payment (STPP)	30%	30%	25%	30%	30%	25%
Long-Term Performance Payment (LTPP)	35%	30%	25%	30%	25%	25%

44 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

The Directors consider that allocating performance payments evenly between immediate short-term payments and deferred long-term payments is appropriate for Executives other than the CEO, whose performance payment is weighted to the longer term to provide relatively greater alignment with long-term returns to security holders.

Executive remuneration structure

The table below outlines the structure of DEXUS’s Executive remuneration.

Component		Remuneration framework
Total Fixed Remuneration (TFR)
	Salary	consists of cash salary and salary sacrificed fringe benefits, such as motor vehicles. n
		reviewed annually by the Board. Draws on relevant external and internal comparative n
		remuneration information and advice on market practice as required.
	Superannuation	prescribed and salary sacrifice superannuation contributions, including insurance n
		premiums (if required).
Performance payments
– STPP & LTPP
		the aim of performance payments is to link the achievement of the Group’s n
		objectives with the remuneration received by the Executives responsible for
		meeting those objectives.
		the objectives consist of financial and non-financial measures of performance n
		at the Group, business unit and individual level.
		the objectives represent the key drivers for the success of the business and for n
		delivering long-term value to security holders.
		performance payments made to each Executive depend on the extent to which n
		specific KPIs, set at the beginning of the financial year, are met. Payments are only
		made for performance at or above required performance levels.
		performance payments are delivered in cash. The ratio of STPP to LTPP is set out in n
		the target remuneration mix table above.
		delivery of LTPP is deferred for three years, as described below. n

Performance payments

Annual performance payments have two elements, being immediate short-term and deferred long-term cash payments. As noted above, an award of a performance payment is dependent on the extent of achievement of objectives reflected in specific KPIs.

Should an Executive be awarded a performance payment, the payment is split between STPP and LTPP using the ratio set out in the target remuneration mix table above.

Short-Term Performance Payment (STPP)

The STPP is delivered in cash in September each year, following the end of the financial year.

Long-Term Performance Payment (LTPP)

The LTPP is delivered in cash in accordance with the vesting schedule as set out in the Long-Term Incentive Plan rules.

The actual cash payment is based upon the subsequent three year returns of a combination of the returns received by DEXUS security holders and the returns received by its unlisted funds and mandates. Returns exceeding the benchmark are recognised by a greater long-term performance payment.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 45

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

4. approach to executive remuneration (continued)

Long-Term Performance Payment (LTPP) (continued)

The Long-Term Incentive Plan operates as follows:

n following allocation into the plan, payments are subject to a three year vesting period from allocation date;
n the LTPP allocation value is notionally invested during the vesting period in DEXUS securities (50% of LTPP value) and its unlisted funds and mandates (50% of LTPP value);
n during the vesting period, LTPP allocation values fluctuate in line with changes in the “Composite Total Return” (simulating the notional investment exposure), comprising 50% of the total return of DEXUS securities and 50% of the combined asset weighted total return of its unlisted funds and mandates; and
n at the conclusion of the three year vesting period, if the Composite Total Return meets or exceeds 100% of the Composite Performance Benchmark, the Board may approve the application of a performance factor to the final LTPP allocation value:
the “Composite Performance Benchmark” is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of the Mercer Unlisted Property Fund Index over the three year vesting period;
for performance up to 100% of the Composite Performance Benchmark, executives receive an LTPP allocation reflecting the Composite Total Return of the preceding three year vesting period; and
for performance between 100% and 130% of the Composite Performance Benchmark a performance factor may be applied, ranging from 1.1 to a maximum of 1.5 times.

Provisions regarding the vesting of LTPP in the event of termination of service agreements are outlined in section 7 below.

Equity options scheme

DEXUS does not operate an equity option scheme as part of its Executive remuneration structure. The Committee has considered the introduction of such a scheme, but has determined that it would not be, at the present time, an appropriate component of the remuneration structure in light of DEXUS’s business model.

Equity and loan schemes

DEXUS does not operate a security participation plan or a loan plan for Executives or Directors.

The long-term element of DEXUS’s performance payment is designed to simulate an equity plan, but does not provide Executives with direct equity exposure.

Hedging policy

DEXUS does not permit Executives to hedge their LTPP allocation during the vesting period.

5. executive remuneration arrangements for the year ended 30 June 2009

This section outlines how the remuneration approach described above has been implemented in the 2008/09 financial year.

Changes made during the year ended 30 June 2009

Remuneration structure

As part of the Committee’s annual review of the Executive remuneration structure, a number of changes were made during the year ended 30 June 2009. These included:

(a) evaluation and revision of the target remuneration mix for Executives;
(b) allocation of performance payments between STPP and LTPP in accordance with the target remuneration mix;
(c) increased focus on the review of appropriate and challenging KPIs for CEO and other Executives by the Committee; and
(d) additional entities incorporated in the comparison group used to benchmark Executive remuneration.

Long-Term Incentive Plan review

The DEXUS Long-Term Incentive Plan was reviewed, incorporating advice from external consultants. The Committee confirmed key objectives to:

n achieve alignment with the long-term interest of security holders;
n ensure Executives are exposed to equity;
n assist in creating a competitive total remuneration package that encourages the attraction and retention of executives;
n have performance criteria consistent with DEXUS’s long-term focus;
n be simple and transparent;
n be flexible and long-term in nature;
n be valued and understood by Executives; and
n be cognisant of contemporary market practice.

The Committee reaffirmed that the design of the plan, including that LTPP allocations are notionally invested in both DEXUS securities and the securities of its unlisted funds, was consistent with the DEXUS business model and long-term strategy, although a number of operational enhancements were implemented as follows:

n eligibility restricted to Executives and senior management team;
n accelerated vesting on termination was discontinued; and
n automatic application of the performance multiplier was removed.

Termination provisions

During the year the Committee also reviewed Executive termination arrangements. The Group’s previous practice provided for uncapped termination benefits for Executives, related to years of service. The Board has now approved amended arrangements for Executives. These termination arrangements are outlined in section 7.

The Committee anticipates that potential regulatory changes, including the recommendations of the Productivity Commission’s review of executive remuneration, could necessitate further changes in the coming year.

46 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Total fixed remuneration

Executives are given the opportunity to receive their TFR as cash, superannuation or salary sacrificed fringe benefits, such as motor vehicles.

There are no guaranteed TFR increases in Executives’ contracts of employment. In the 2010 financial year, there will be no TFR increases for Executives.

Performance payments

As outlined under the Executive remuneration structure above, STPP and LTPP allocations are drawn from a single performance pool, with the size of the pool determined according to reasonableness and market competitiveness.

All Executive performance payments were dependent on the achievement of performance against agreed objectives, including performance of their business unit and the overall performance of DEXUS. The Board exercised its discretion regarding the final determination of performance payments and, reflecting DEXUS’s performance in 2008/09, performance payments to Executives were scaled down.

As outlined above, a portion of the performance payment for each Executive is delivered as a cash-based payment in September 2009, for performance to 30 June 2009. The remaining portion of the performance payment is allocated to the Long-Term Incentive Plan, to be delivered as a cash-based payment in September 2012, for performance to 30 June 2009.

6. group performance and the link to remuneration

Total return analysis

The table below sets out the DEXUS total security holder return since inception, relative to the S&P/ASX 200 Property Accumulation Index. It also sets out DEXUS’s Composite Total Return since inception, relative to the Composite Performance Benchmark. The DEXUS Composite Total Return is 50% of the total return of DEXUS securities, plus 50% of the combined asset weighted total return of its unlisted funds and mandates and the Composite Performance Benchmark is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of Mercers’ Unlisted Property Fund Index.

	1 year	2 years	3 years	Since
				1 October 20041
	(% per annum)	(% per annum)	(% per annum)	(% per annum)
Period to 30 June 2009
DEXUS Property Group	–37.3%	–31.1%	–12.1%	–2.5%
S&P/ASX 200 Property Accumulation Index	–42.3%	–39.4%	–22.7%	–10.3%
DEXUS Composite Total Return	–24.2%	–16.1%	–4.0%	3.4%
Composite Performance Benchmark	–27.3%	–19.6%	–8.2%	0.3%

1 DEXUS’s inception date is 1 October 2004.

During the year DEXUS did not buy back or cancel any of its securities.

Total return of DEXUS securities

The graph below illustrates DEXUS’s total security holder return relative to the S&P/ASX 200 Property Accumulation Index.

6/10/2004 = 100

==> picture [492 x 155] intentionally omitted <==

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

160
S&P/ASX 200 Property Accumulation Index
140 DXS
Source: IRESS/DEXUS
120
100
80
Oct 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09
Price ($)
----- End of picture text -----

6 October 2004 to 30 June 2009

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

6. group performance and the link to remuneration (continued)

Total return of DEXUS securities (continued)

DEXUS has outperformed the S&P/ASX 200 Property Accumulation Index in the most recent year and in each period since inception in October 2004. In addition, the DEXUS Composite Total Return has likewise outperformed the Composite Performance Benchmark in the most recent year and in each period since inception in October 2004.

While the Directors recognise that improvement is always possible, they consider that DEXUS’s business model, which aims to deliver consistent returns with relatively moderate risk, has been central to DEXUS’s relative out-performance, and that the approach to Executive remuneration, with a focus on consistent out-performance of objectives, is aligned with and supports the superior execution of the DEXUS business model.

7. Service agreements

The employment arrangements for the CEO and other Executives are set out below.

CEO – Victor P Hoog Antink

The current employment contract commenced on 1 October 2004. The principal terms of the employment contract are as follows:

n the CEO is employed under a rolling contract.
n
the CEO receives fixed remuneration of $1,300,000 per annum.
n the CEO may resign from his position and thus terminate this contract by giving six months written notice. On resignation any unvested LTPP will be forfeited subject to the discretion of the Board.
n the Group may terminate the CEO’s employment agreement by providing six months written notice or payment in lieu of the notice period (based on the fixed component of CEO’s remuneration). Additionally, the Group may provide a performance payment for the period of the last review date (being 1 July) until the last day of the notice period.
n in the event that the Group initiates termination for reasons outside the control of the CEO, a severance payment equal to 100% of fixed remuneration is payable.
n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board.
n the Group may terminate the contract of the CEO at any time without notice if serious misconduct has occurred. In the event of termination for cause the CEO is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited.

Executives (other than the CEO)

The principal terms of Executive employment contracts are as follows:

n
all Executives have rolling contracts.
n the Group may terminate an Executive’s employment agreement by providing three months written notice or providing payment in lieu of the notice period (based on the fixed component of the Executive’s remuneration). In the event that the Group initiates the termination for reasons outside the control of the Executive, a severance payment equal to a maximum of 75% of fixed remuneration will be made.
n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board.
n the Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination for cause occurs the Executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

8. Remuneration of key management personnel

Details of the structure and quantum of each component of remuneration for DEXUS Executives for the years ended 30 June 2008 and 30 June 2009 are set out in the following table. This table includes details of the five highest paid Directors or Executives.

	Short-term employee	Short-term employee	benefits	Post	Other	long-term benefits	long-term benefits	Total
				employment
				benefits
	Cash salary	Short-term	Other	Pension and	Long-term	Movement in	Other
	and fees	performance	short-term	super	performance	prior year	long-term
		payments	benefits	benefits	payment	long-term	benefits
					allocations6	performance
						payment
						allocation
						values7
	$	$	$	$	$	$	$	$
Name
Victor P Hoog Antink
2009	1,200,000	785,000	–	100,000	915,000	(416,600)	–	2,583,400
2008	1,100,000	900,000	–	100,000	900,000	(106,947)	–	2,893,053
Tanya L Cox
2009	352,086	150,000	–	47,914	150,000	(80,773)	–	619,227
2008	339,059	200,000	–	10,941	175,000	(16,495)	–	708,505
Patricia A Daniels1
2009	247,589	90,000	–	13,745	90,000	(24,250)	–	417,084
2008	103,470	60,000	–	5,471	100,000	–	–	268,941
John C Easy
2009	343,255	163,000	–	31,745	162,000	(57,688)	–	642,312
2008	297,871	150,000	–	37,129	120,000	(13,250)	–	591,750
Ben J Lehmann2
2009	–	–	–	–	–	–	–	–
2008	346,344	–	–	9,847	–	–	1,105,0008	1,461,191
Jane Lloyd3
2009	361,255	113,000	–	13,745	112,000	–	–	600,000
2008	–	–	–	–	–	–	–	–

1 Patricia A Daniels qualified as a KMP on 14 January 2008. Actual remuneration received is for a four day week.
2 Ben J Lehmann ceased to qualify as a KMP on 27 March 2008.
3 Jane Lloyd qualified as a KMP on 14 July 2008.

4 Louise J Martin qualified as a KMP on 27 March 2008.

5 Andrew P Whiteside qualified as a KMP on 28 April 2008.

6 This is the LTPP allocation for the current year which is deferred for three years as described on pages 46 to 47.

7 This is the notional change in value of all unvested LTPP allocations from prior year.
8 Termination payment.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 49

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel (continued)

	Short-term employee	Short-term employee	benefits	Post	Other	long-term benefits	long-term benefits	Total
				employment
				benefits
	Cash salary	Short-term	Other	Pension and	Long-term	Movement in	Other
	and fees	performance	short-term	super	performance	prior year	long-term
		payments	benefits	benefits	payment	long-term	benefits
					allocations6	performance
						payment
						allocation
						values7
	$	$	$	$	$	$	$	$
Name
Louise J Martin4
2009	405,000	175,000	–	95,000	175,000	(60,625)	–	789,375
2008	116,607	225,000	–	1,250	250,000	–	–	592,857
Craig D Mitchell
2009	500,000	325,000	–	50,000	325,000	(60,625)	–	1,139,375
2008	273,768	250,000	162,592	42,899	250,000	–	–	979,259
Paul G Say
2009	486,255	200,000	–	13,745	200,000	(60,625)	–	839,375
2008	466,871	225,000	–	13,129	250,000	–	–	955,000
Mark F Turner
2009	400,015	135,000	–	49,985	135,000	(103,635)	–	616,365
2008	377,172	200,000	–	42,828	200,000	(22,669)	–	797,331
Andrew P Whiteside5
2009	461,255	135,000	–	13,745	135,000	(24,250)	–	720,750
2008	61,228	200,000	–	3,282	100,000	–	–	364,510
Total
2009	4,756,710	2,271,000	–	429,624	2,399,000	(889,071)	–	8,967,263
2008	3,482,390	2,410,000	162,592	266,776	2,345,000	(159,362)	1,105,000	9,612,396

1 Patricia A Daniels qualified as a KMP on 14 January 2008. Actual remuneration received is for a four day week.

2 Ben J Lehmann ceased to qualify as a KMP on 27 March 2008.

3 Jane Lloyd qualified as a KMP on 14 July 2008.

4 Louise J Martin qualified as a KMP on 27 March 2008.

5 Andrew P Whiteside qualified as a KMP on 28 April 2008.

6 This is the LTPP allocation for the current year which is deferred for three years as described on pages 46 to 47.

7 This is the notional change in value of all unvested LTPP allocations from prior year.

8 Termination payment.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Long-term performance payments

The table below sets out details of previous LTPP allocations and current valuations.

==> picture [506 x 507] intentionally omitted <==

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

Year of grant LTPP Movement in Closing LTPP Movement in Vested Year that
allocation LTPP allocation LTPP allocation LTPP as at LTPP will vest
value allocation value as at value at vesting 30 June 2009
value (since 30 June 2009 date (due to
grant date) performance
multiplier)
$ $ $ $ $ $ $
Name
Victor P Hoog Antink 2009 915,000 – – – – 2012
2008 900,000 (218,250) 681,750 – – 2011
2007 650,000 (177,580) 472,420 – – 2010
2006 250,000 (23,750) 226,250 113,125 339,375 2009
Tanya L Cox 2009 150,000 – – – – 2012
2008 175,000 (42,438) 132,563 – – 2011
2007 110,000 (30,052) 79,948 – – 2010
2006 60,000 (5,700) 54,300 27,150 81,450 2009
Patricia A Daniels [1] 2009 90,000 – – – - 2012
2008 100,000 (24,250) 75,750 – – 2011
John C Easy 2009 162,000 – – – – 2012
2008 120,000 (29,100) 90,900 – – 2011
2007 75,000 (20,490) 54,510 – – 2010
2006 50,000 (4,750) 45,250 22,625 67,875 2009
Jane Lloyd [2] 2009 112,000 – – – – 2012
Louise J Martin [3] 2009 175,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Craig D Mitchell 2009 325,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Paul G Say 2009 200,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Mark F Turner 2009 135,000 – – – – 2012
2008 200,000 (48,500) 151,500 – – 2011
2007 180,000 (49,176) 130,824 – – 2010
2006 70,000 (6,650) 63,350 31,675 95,025 2009
Andrew P Whiteside [4] 2009 135,000 – – – – 2012
2008 100,000 (24,250) 75,750 – – 2011
----- End of picture text -----

1 Patricia A Daniels qualified as a KMP on 14 January 2008.
2 Jane Lloyd qualified as a KMP on 14 July 2008.
3 Louise J Martin qualified as a KMP on 27 March 2008.
4 Andrew P Whiteside qualified as a KMP on 28 April 2008.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 51

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel (continued)

Non-Executive Director board and committee fees

Board and Committee fees paid to Non-Executive Directors for the years ended 30 June 2008 and 30 June 2009 are set out in the table below.

	Directors			Committee Fees	Committee Fees	Committee Fees			Total cash
	Fees								salary and
									fees
	Board	Chair	Board	Board	Board	Board	Board	Board
		DWPL	Audit	Risk	Compliance	Nom	Treasury	Finance
						& Rem	Policy
	$	$	$	$	$	$	$	$	$
Name
Christopher T Beare
2009	300,000	–	–	–	–	–	–	–	300,000
2008	300,000	–	–	–	–	–	–	–	300,000
Elizabeth A Alexander1
2009	130,000	–	15,000	15,000	6,250	–	–	6,250	172,500
2008	130,000	–	15,000	15,000	8,125	–	–	5,625	173,750
Barry R Brownjohn2
2009	130,000	–	7,500	7,500	–	–	–	15,000	160,000
2008	130,000	–	7,500	7,500	–	–	–	15,000	160,000
John C Conde AO3
2009	22,652	–	–	–	1,250	1,250	–	–	25,152
2008	–	–	–	–	–	–	–	–	–
Stewart F Ewen
2009	130,000	–	–	–	–	7,500	–	–	137,500
2008	130,000	–	–	–	–	7,500	–		137,500
Charles B Leitner III4
2009	–	–	–	–	–	–	–	–	–
2008	–	–	–	–	–	–	–	–	–
Brian E Scullin
2009	130,000	30,000	6,250	6,250	15,000	7,500	–	–	195,000
2008	130,000	30,000	7,500	7,500	16,250	7,500	–	–	198,750
Peter B St George5
2009	22,652	–	1,250	1,250	–	–	–	1,250	26,402
2008	–	–	–	–	–	–	–	–	–
Total
2009	865,304	30,000	30,000	30,000	22,500	16,250	–	22,500	1,016,554
2008	820,000	30,000	30,000	30,000	24,375	15,000	–	20,625	970,000

1 Elizabeth A Alexander ceased to be a member of the Board Compliance Committee and a member of the Board Finance Committee on 30 April 2009.
2 Barry R Brownjohn ceased to be the chair of the Board Finance Committee on 30 April 2009 and became chair of the Board Compliance Committee on 1 May 2009.
3 John C Conde became a Non-Executive Director on 29 April 2009. He was appointed to the Board Compliance Committee and the Board Nomination and Remuneration Committee on 1 May 2009.

4 As an employee of the Deutsche Bank group, Mr Leitner waived his right to receive Director’s fees. Accordingly, Mr Leitner’s Alternate Director, Mr Fay did not receive Director’s fees when acting as his alternate. Mr Leitner ceased to be a Non-Executive Director on 29 April 2009. Accordingly, Mr Fay ceased to be Mr Leitner’s Alternate Director on 29 April 2009.

5 Peter B St George became a Non-Executive Director on 29 April 2009. He was appointed to the Board Audit and Risk Committee and the Board Finance Committee on 1 May 2009.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

All Non-Executive and Alternate Directors also receive reimbursement for reasonable travel, accommodation and other expenses incurred whilst undertaking DEXUS business.

During the year ended 30 June 2009, Charles B Leitner, Non-Executive Director, was an employee of RREEF America Inc., a Deutsche Bank group company, and was not paid fees or any other remuneration by DEXUS or any of its subsidiaries.

The Chief Executive Officer, Victor P Hoog Antink, does not receive fees in respect of his role as a Director, but does receive remuneration as a Senior Executive of DXFM.

Commencing 1 April 2009 Mr Ewen earned a fee equivalent to a Committee Chair fee, in addition to his Director’s fee, as compensation for the added responsibilities assumed in attending meetings and reviewing property investment proposals on behalf of the Board.

During the year, Mr Fay received a consulting fee of $108,300 from 1 July 2008 to 29 April 2009.

Non-Executive Director Remuneration

Details of the structure and quantum of each component of remuneration for each Non-Executive Director for the years ended 30 June 2008 and 30 June 2009 are set out in the following table.

	Short-term employee	Post employment	Other long-term	Total
	benefits	benefits1	benefits
	$	$	$	$
Name
Christopher T Beare
2009	286,255	13,745	–	300,000
2008	286,871	13,129	–	300,000
Elizabeth A Alexander
2009	157,844	14,656	–	172,500
2008	160,621	13,129	–	173,750
Barry R Brownjohn
2009	146,789	13,211	–	160,000
2008	123,379	36,621	–	160,000
John C Conde AO
2009	23,075	2,077	–	25,152
2008	–	–	–	–
Stewart F Ewen OAM
2009	63,073	74,427	–	137,500
2008	126,147	11,353	–	137,500
Brian E Scullin
2009	181,255	13,745	–	195,000
2008	139,605	59,145	–	198,750
Peter B St George
2009	24,222	2,180	–	26,402
2008	–	–	–	–
Total
2009	882,513	134,041	–	1,016,554
2008	836,623	133,377	–	970,000

1 Post-employment benefits represent compulsory and salary sacrificed superannuation benefits.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 53

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 32. Events occurring after reporting date

On 8 July 2009, 68 Hasler Road, Herdsman was settled for consideration of $11.3 million.

On 23 July 2009, 3-7 Bessemer Street, Blacktown was settled for consideration of $9.1 million.

On 3 July 2009, DIT US Whirlpool Trust acquired 6241 Shook Road, Columbus, Ohio for a consideration of US$64.5 million (A$79.5 million).

On 27 July 2009, DIT GLOG Trust disposed of Nordstrasse 102708, Löbau, Germany for a consideration of ¤1.0 million (A$1.7 million).

Since the end of the year, the Directors of the Responsible Entity are not aware of any matter or circumstance not otherwise dealt with in their Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or state of the Trust’s affairs in future financial periods.

Note 33. Segment information

business segments

The Trust operates within the industrial and office property sectors.

geographical segments

The Trust’s investments are located in Australia, the United States, France, Germany and Canada.

	Australia	United States	France	Germany	Canada	Consolidated
	$’000	$’000	$’000	$’000	$’000	$’000
2009
Property revenue	106,223	14,032	8,093	21,586	5,353	155,287
Interest revenue	218	3,116	(5)	138	74	3,541
	106,441	17,148	8,088	21,724	5,427	158,828
Other income	19	–	–	–	–	19
Total segment revenue/income	106,460	17,148	8,088	21,724	5,427	158,847
Segment result	(267,103)	(240,262)	(48,677)	(124,173)	(16,097)	(696,312)
Segment assets	1,671,174	111,301	60,035	192,525	57,555	2,092,590
Segment liabilities	1,060,253	111,418	129,136	200,119	57,637	1,558,563
Investments accounted
for using the equity method	–	138,276	–	–	–	138,276
Additions to property, plant and equipment	11,867	–	–	–	–	11,867
Amortisation expense	4,099	–	–	–	–	4,099

	Australia	United States	France	Germany	Canada	Consolidated
	$’000	$’000	$’000	$’000	$’000	$’000
2008
Property revenue	102,135	6,156	9,396	17,887	2,598	138,172
Interest revenue	344	50	118	84	62	658
	102,479	6,206	9,514	17,971	2,660	138,830
Other income	524	–	–	129	–	653
Total segment revenue/income	103,003	6,206	9,514	18,100	2,660	139,483
Segment result	87,220	(53,295)	(11,783)	(24,883)	1,842	(899)
Segment assets	1,780,368	163,856	99,179	231,065	74,853	2,349,321
Segment liabilities	775,344	97,114	123,374	191,574	56,118	1,243,524
Investments accounted for
using the equity method	–	314,989	–	–	–	314,989
Acquisition of investment properties	–	–	–	143,887	76,590	220,477
Additions to property, plant and equipment	17,941	–	–	–	–	17,941
Amortisation expense	3,640	–	–	–	–	3,640

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 34. Reconciliation of net (loss)/profit to net cash inflow from operating activities Reconciliation

Reconciliation	Reconciliation
Consolidated		Parent	entity
2009	2008	2009		2008
$’000	$’000	$’000		$’000
Net (loss)/profit (696,312)	(899)	(639,616)		22,894
Capitalised interest (5,364)	(5,285)	(5,364)		(5,285)
Net decrement on revaluation of investments 360,663	15,690	443,956		95,598
Share of net losses of associates accounted for using the equity method 245,448	26,488	–		–
Net fair value loss of derivatives 14,763	1,785	14,763		1,785
Net loss/(gain) on sale of investment properties 654	(5,886)	–		(5,887)
Net foreign exchange (gain)/loss (1,654)	(333)	158,215		–
Change in operating assets and liabilities
Decrease in receivables 10,159	2,339	10,724		2,208
Decrease/(increase) in prepaid expenses (1,109)	194	(855)		225
Decrease/(increase) in other current assets (15,146)	3,851	(15,146)		–
Decrease in other non-current assets – investments –	84,574	–		1,068
(Increase) in other non-current assets (10,215)	(1,054)	(61)		(85)
Increase/(decrease) in payables 15,859	(23)	8,485		5,947
Increase/(decrease) in current liabilities 125,171	(21,885)	125,171		3,575
Increase/(decrease) in other non-current liabilities 66,724	–	37,413		(21,130)
Net cash inflow from operating activities 109,641	99,556	137,685		100,913

Note 35. Non-cash financing and investing activities

	Note	Consolidated	Consolidated	Parent
		2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Distributions reinvested	25	19,682	39,050	19,682	39,050

Note 36. Earnings per unit

(a) basic earnings per unit on loss attributable to equity holders of the parent entity

Note 36. Earnings per unit (a) basic earnings per unit on loss attributable to equity holders of the parent entity	Note 36. Earnings per unit (a) basic earnings per unit on loss attributable to equity holders of the parent entity
Consolidated
2009	2008
cents	restated cents
(18.79)	(0.03)

(b) diluted earnings per unit on loss attributable to equity holders of the parent entity

(b) diluted earnings per unit on loss attributable to equity holders of the parent entity	(b) diluted earnings per unit on loss attributable to equity holders of the parent entity
Consolidated
2009	2008
cents	restated cents
(18.79)	(0.03)

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 36. Earnings per unit (continued)

	Consolidated	Consolidated
	2009	2008
	$’000	$’000
Net loss	(696,312)	(899)
Net loss attributable to the unitholders of the Trust used
in calculating basic and diluted earnings per unit	(696,312)	(899)
(d) weighted average number of units used as a	denominator
	Consolidated
	2009	2008
	units	restated units
Weighted average number of units outstanding used
in calculation of basic and diluted earnings per unit	3,705,637,381	3,156,757,941

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

The Directors of DEXUS Funds Management Limited as Responsible Entity DEXUS Industrial Trust (the Trust) declare that the Financial Statements and notes set out on pages 7 to 56:

(i) comply with applicable Australian Equivalents to International Financial Reporting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the consolidated entity’s financial position as at 30 June 2009 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date.

In the Directors’ opinion:

(a) the Financial Statements and notes are in accordance with the Corporations Act 2001 ;
(b) there are reasonable grounds to believe that the Trust and its consolidated entities will be able to pay their debts as and when they become due and payable; and
(c) the Trust has operated in accordance with the provisions of the Constitution dated 1 August 1997 (as amended) during the year ended 30 June 2009.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the Directors.

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Christopher t beare

Chair 17 August 2009

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS INDUSTRIAL TRUST INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2009

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58 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

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DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 59

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009

DEXUS OFFICE TRUST

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Office Trust and its consolidated entities (DOT or the Trust) present their Directors’ Report together with the consolidated Financial Statements for the year ended 30 June 2009.

The Trust together with DEXUS Diversified Trust, DEXUS Industrial Trust and DEXUS Operations Trust form the DEXUS Property Group stapled security.

1. Directors and Secretaries

1.1 directors

The following persons were Directors or Alternate Directors of DXFM at any time during or since the end of the year to the date of this Directors’ Report, unless otherwise stated:

Directors	Appointed	Resigned
Christopher T Beare	4 August 2004
Elizabeth A Alexander AM	1 January 2005
Barry R Brownjohn	1 January 2005
John C Conde AO	29 April 2009
Stewart F Ewen OAM	4 August 2004
Victor P Hoog Antink	1 October 2004
Charles B Leitner III	10 March 2005	29 April 2009
Brian E Scullin	1 January 2005
Peter B St George	29 April 2009
Alternate Director
Andrew J Fay for	30 January 2006	29 April 2009
Charles B Leitner III

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2009 are as follows:

Tanya L Cox MBA MAICD FCIS (Company Secretary) Appointed: 1 October 2004

Tanya is Chief Operating Officer and Company Secretary of DXFM, DEXUS Holdings Pty Limited (DXH) and DEXUS Wholesale Property Limited (DWPL) and is a member of the Board Compliance Committee.

John C Easy B Comm LLB ACIS (Company Secretary) Appointed: 1 July 2005

John is General Counsel and Company Secretary for DXFM, DXH and DWPL and is a member of the Board Compliance Committee.

60 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

2. Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors’ meetings held during the year and each Director’s attendance at those meetings is set out in the table below.

Board Meetings	Main meetings	Main meetings	Specific meetings	Specific meetings
	held	attended2	held	attended2
Directors
Christopher T Beare	9	9	9	8
Elizabeth A Alexander AM	9	9	9	9
Barry R Brownjohn	9	9	9	7
John C Conde AO1	2	2	–	–
Stewart F Ewen OAM	9	8	9	9
Victor P Hoog Antink	9	9	9	9
Charles B Leitner III3	8	8	9	9
Brian E Scullin	9	9	9	9
Peter B St George1	2	2	–	–

1 Appointed 29 April 2009.

2 Indicates where a Director attended either personally or an Alternate was in attendance.

3 Based in New York, USA.

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During the year the Board reviewed its Board Committee structure and following the appointment of Messrs Conde and St George in April 2009 amended its Committee membership effective 1 May 2009.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place at the end of the year and each Directors’ attendance at those meetings.

	Board	Audit	Board	Risk	Board	Compliance	Board	Nomination	Board	Finance
	Committee		Committee		Committee		and Remuneration		Committee
							Committee
	Held	Attended	Held	Attended	Held	Attended	Held	Attended	Held	Attended
Christopher T Beare	–	–	–	–	–	–	9	9	4	4
Elizabeth A Alexander AM	7	7	4	4	3	3	–	–	3	3
Barry R Brownjohn	7	6	4	4	–	–	–	–	4	4
John C Conde AO1	–	–	–	–	1	1	1	1	–	–
Stewart F Ewen OAM	–	–	–	–	–	–	9	9	–	–
Victor P Hoog Antink	–	–	–	–	–	–	–	–	–	–
Charles B Leitner III2	–	–	–	–	–	–	–	–	–	–
Brian E Scullin	6	6	3	3	4	4	9	9	–	–
Peter B St George1	1	1	1	1	–	–	–	–	1	1

1 Appointed 29 April 2009.

2 Resigned 29 April 2009.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 61

DEXUS OFFICE TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

3. Directors’ interests

The Board’s policy on insider trading and trading in DXS securities or securities in any of the funds managed by DEXUS by any Directors or employee is outlined in the Corporate Governance Statement.

n DXS securities; or
n options over, or any other contractual interest in, DXS securities; or
n an interest in any other fund managed by DXFM or any other entity that forms part of DEXUS Property Group.

4. Directors’ directorships in other listed entities

Directors	Company	Date appointed	Date resigned or ceased
			being a Director of a
			listed security
Elizabeth A Alexander AM	CSL Limited	12 July 1991
	Boral Limited	15 December 1999	24 October 2008
John C Conde AO	Whitehaven Coal Limited	3 May 2007
Brian E Scullin	Deutsche Asset Management (Australia) Limited1	24 October 2000	17 October 2006
	IYS Instalment Receipt Limited1	24 October 2000	17 October 2006
	SPARK Infrastructure RE Limited2	1 November 2005	24 August 2007
	BT Investment Management Limited	17 September 2007
Peter B St George	Boart Longyear Limited	21 February 2007
	SPARK Infrastructure RE Limited2	8 November 2005	31 December 2008
	First Quantum Minerals Limited3	20 October 2003
Alternate Director
Andrew J Fay
(alternate to Charles B Leitner III)	Deutsche Asset Management (Australia) Limited1	20 October 2004	17 October 2006
	IYS Instalment Receipt Limited1	20 October 2004	17 October 2006
	SPARK Infrastructure RE Limited2	7 December 2006	12 December 2007

1 IYS Instalment Receipt Limited had until 29 November 2006 issued ASX listed instalment receipts over units in the Deutsche Retail Infrastructure Trust, a managed investment scheme that was until 17 October 2006 listed but not quoted on the ASX and whose Responsible Entity was Deutsche Asset Management (Australia) Limited. Deutsche Asset Management (Australia) Limited ceased to be the Responsible Entity of IYS Instalment Receipt Limited on 17 October 2006.
2 SPARK Infrastructure RE Limited has issued ASX listed stapled securities trading as SPARK Infrastructure Group (ASX: SKI).
3 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

5. Principal activities

During the year the principal activity of the Trust was investment in real estate assets. There were no significant changes in the nature of the Trust’s activities during the year.

6. Total value of Trust assets

The total value of the assets of the Trust as at 30 June 2009 was $3,066.8 million (2008: $3,545.8 million). Details of the basis of this valuation are outlined in note 1 of the Notes to the Financial Statements and form part of this Directors’ Report.

62 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

7. Review and results of operations

8. Likely developments and expected results of operations

9. Significant changes in the state of affairs

10. Matters subsequent to the end of the financial year

Since the end of the year the Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust’s affairs in future financial years.

11. Distributions

Distributions paid or payable by the Trust for the year ended 30 June 2009 were outlined in note 24 of the Notes to the Financial Statements.

12. DXFM’s fees and associate interests

Details of fees paid or payable by the Trust to DXFM for the year ended 30 June 2009 are outlined in note 28 of the Notes to the Financial Statements and form part of this Directors’ Report.

The number of interests in the Trust held by DXFM or its associates as at the end of the financial year are nil (2008: nil).

13. Units on issue

The movement in units on issue during the year and the number of units on issue as at 30 June 2009 are detailed in note 21 of the Notes to the Financial Statements and form part of this Directors’ Report.

14. Environmental regulation

DEXUS Property Group senior management, through its Board Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any breaches of these requirements and to the best of its knowledge all activities have been undertaken in compliance with environmental requirements.

15. Indemnification and insurance

16. Audit

16.1 auditor

PricewaterhouseCoopers (PwC or the Auditor) continues in office in accordance with section 327 of the Corporations Act 2001 .

16.2 non-audit services

Details of the amounts paid or payable to the Auditor, for audit and non-audit services provided during the year are set out in note 6 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor’s behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001 . The reasons for the Directors being satisfied are:

n Board Audit Committee has determined that the Auditor will not provide services that have the potential to impair the independence of its audit role, including:
participating in activities that are normally undertaken by management; and
being remunerated on a “success fee” basis.
n Board Audit Committee has determined that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including:
the preparation of accounting records;
the design and implementation of information technology systems;
conducting valuation, actuarial or legal services;
promoting, dealing in or underwriting securities; or
providing internal audit services.
n Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of non-audit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of $100,000.

The above Directors’ statements are in accordance with the advice received from the Board Audit Committee.

16.3 auditor’s independence declaration

A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out in the Financial Statements and forms part of this Directors’ Report.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

17. Corporate governance

DXFM’s Corporate Governance Statement is set out in the DEXUS Property Group Annual Report.

18. Rounding of amounts and currency

19. Management representation

The Chief Executive Officer and Chief Financial Officer have reviewed the Trust’s financial reporting processes, policies and procedures together with its risk management and internal control and compliance policies and procedures. Following that review it is their opinion that the Trust’s financial records for the financial year have been properly maintained in accordance with the Corporations Act 2001 and the Financial Statements and their notes comply with the accounting standards and give a true and fair view.

20. Directors’ authorisation

The Directors’ Report is made in accordance with a resolution of the Directors. The Financial Report was authorised for issue by the Directors on 17 August 2009. The Directors have the power to amend and reissue the financial report.

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Christopher t beare Chair 17 August 2009

Victor p hoog antink Chief Executive Officer 17 August 2009

64 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

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DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Revenue from ordinary activities
Property revenue	2	241,389	233,308	151,465	144,965
Distribution revenue		–	–	53,999	61,394
Interest revenue	3	631	2,232	8,737	9,683
Total revenue from ordinary activities		242,020	235,540	214,201	216,042
Share of net profits/(losses) of associates accounted
for using the equity method	15	31	(4,013)	–	–
Net fair value gain of investment properties		–	234,248	–	205,808
Net foreign exchange gain		354	311	410	610
Other income		82	105	82	105
Total income		242,487	466,191	214,693	422,565
Expenses
Property expenses		(63,642)	(59,569)	(38,342)	(34,823)
Responsible Entity fees	28	(10,167)	(13,228)	(7,118)	(9,158)
Finance costs	4	(98,516)	(35,110)	(104,670)	(37,704)
Net loss on sale of investment		(534)	–	–	–
Net fair value loss of investment properties		(449,463)	–	(323,528)	–
Net fair value loss of investment		–	(96)	(144,697)	(27,434)
Net fair value (loss)/gain of derivatives		(693)	485	(693)	485
Impairment		(11,413)	–	–	–
Other expenses	5	(1,813)	(1,610)	(1,587)	(1,358)
Total expenses		(636,241)	(109,128)	(620,635)	(109,992)
(Loss)/profit before tax		(393,754)	357,063	(405,942)	312,573
(Loss)/profit attributable to:
Equity holders of DEXUS Office Trust		(397,449)	353,382	(405,942)	312,573
Equity holders of DEXUS Office Trust		(397,449)	353,382	(405,942)	312,573
Net profit attributable to minority interests		3,695	3,681	–	–
Net (loss)/profit		(393,754)	357,063	(405,942)	312,573

Earnings per unit		Cents	Cents
Basic earnings per unit on (loss)/profit
attributable to unitholders	33	(10.73)	11.19
Diluted earnings per unit on (loss)/profit
attributable to unitholders	33	(10.73)	11.19

The above Income Statements should be read in conjunction with the accompanying notes.

66 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST BALANCE SHEETS AS AT 30 JUNE 2009

		Consolidated	Consolidated	Parent	entity
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Current assets
Cash and cash equivalents	7	8,289	12,532	3,728	4,194
Receivables	8	6,714	4,549	5,090	3,192
Loans with related parties	9	–	–	262,153	278,926
Derivative financial instruments	10	13,785	60,422	13,785	60,422
Other	11	2,702	1,867	1,851	1,299
Total current assets		31,490	79,370	286,607	348,033
Non-current assets
Investment properties	12	2,891,603	3,325,300	1,992,000	2,305,243
Property, plant and equipment	13	18,150	28,527	–	–
Other financial assets at fair value through profit and loss	14	–	–	510,910	655,607
Investments accounted for using the equity method	15	84,165	111,946	–	–
Loans with related parties	9	41,049	–	41,049	–
Other	16	385	691	363	561
Total non-current assets		3,035,352	3,466,464	2,544,322	2,961,411
Total assets		3,066,842	3,545,834	2,830,929	3,309,444
Current liabilities
Payables	17	27,690	34,649	18,541	24,626
Interest bearing liabilities	18	–	499,790	–	–
Loans with related parties	9	55,684	55,684	55,684	555,684
Provisions	19	74,141	57,847	74,141	57,847
Derivative financial instruments	10	24,025	4,759	24,025	4,759
Total current liabilities		181,540	652,729	172,391	642,916
Non-current liabilities
Interest bearing liabilities	18	248,038	–	–	–
Loans with related parties	9	–	244,894	248,038	244,684
Other	20	96	404	74	271
Total non-current liabilities		248,134	245,298	248,112	244,955
Total liabilities		429,674	898,027	420,503	887,871
Net assets		2,637,168	2,647,807	2,410,426	2,421,573
Equity
Contributed equity	21	2,015,192	1,506,188	2,015,192	1,506,188
Reserves	22	(11,718)	(13,787)	–	–
Undistributed income	22	429,669	951,335	395,234	915,385
		2,433,143	2,443,736	2,410,426	2,421,573
Minority interests	23	204,025	204,071	–	–
Total equity		2,637,168	2,647,807	2,410,426	2,421,573

The above Balance Sheets should be read in conjunction with the accompanying notes.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 67

DEXUS OFFICE TRUST STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent	entity
	Notes	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Total equity at the beginning of the year		2,647,807	2,362,539	2,421,573	2,145,884
Exchange differences on translation of foreign operations	22	2,069	(17,795)	–		–
Net income recognised directly in equity		2,069	(17,795)	–		–
Net (loss)/profit for the year		(393,754)	357,063	(405,942)		312,573
Total recognised income and expense for the year		(391,685)	339,268	(405,942)		312,573
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of transaction costs	21	509,004	52,208	509,004		52,208
Distributions provided for or paid	24	(114,209)	(89,092)	(114,209)		(89,092)
Transactions with minority interests:
Distributions provided for or paid	24	(13,749)	(17,116)	–		–
Total transactions with equity holders		381,046	(54,000)	394,795		(36,884)
Total equity at the end of the year		2,637,168	2,647,807	2,410,426	2,421,573
Total recognised income and expense for the year
is attributable to:
Equity holders of DEXUS Office Trust		(395,379)	335,587	(405,942)		312,573
Equity holders of DEXUS Office Trust		(395,379)	335,587	(405,942)		312,573
Minority interests		3,695	3,681	–		–
Total recognised income and expense for the year		(391,684)	339,268	(405,942)		312,573

The above Statements of Changes In Equity should be read in conjunction with the accompanying notes.

68 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST CASH FLOW STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		286,357	278,801	182,649	178,570
Payments in the course of operations (inclusive of GST)		(106,180)	(94,404)	(67,074)	(58,261)
Interest received		629	1,021	8,738	8,400
Finance costs paid to financial institutions		(36,186)	(37,768)	(35,421)	(37,829)
Distributions received		–	5,483	4,263	2,740
Net cash inflow from operating activities	31	144,620	153,133	93,155	93,620
Cash flows from investing activities
Payments for capital expenditure on investment properties		(29,441)	(51,479)	(23,674)	(31,582)
Proceeds from sale of investments		60,178	–	–	–
Payments for acquisition of investments net of cash		–	(96)	–	(96)
Payments for investments accounted for using the equity method		(25,995)	(18,630)	–	–
Payments for capital expenditure on property, plant and equipment		(1,035)	(997)	–	–
Wind up of investments		–	68	–	–
Net cash inflow/(outflow) from investing activities		3,707	(71,134)	(23,674)	(31,678)
Cash flows from financing activities
Establishment expenses and unit issue cost		(17,075)	(83)	(17,075)	(83)
Issue of units		494,818	–	494,818	–
Borrowings provided to the Trusts		(671,023)	(518,687)	(671,023)	(518,687)
Borrowings provided by the Trusts		373,477	840,299	373,477	840,299
Proceeds from borrowings		250,000	–	250,000	–
Repayment of borrowings		(500,000)	(344,500)	(500,000)	(344,500)
Borrowings provided to related parties		–	–	66,509	4,704
Distributions paid to unitholders		(66,653)	(42,899)	(66,653)	(42,899)
Distributions paid to minority interests		(16,136)	(16,463)	–	–
Net cash outflow from financing activities		(152,592)	(82,333)	(69,947)	(61,166)
Net (decrease)/increase in cash and cash equivalents		(4,265)	(334)	(466)	776
Cash and cash equivalents at the beginning of the year		12,532	13,113	4,194	3,418
Effects of exchange rate changes on cash and cash equivalents		22	(247)	–	–
Cash and cash equivalents at the end of the year	7	8,289	12,532	3,728	4,194

The above Cash Flow Statements should be read in conjunction with the accompanying notes.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 69

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

Note 1. Summary of significant accounting policies

(a) basis of preparation

DEXUS Property Group stapled securities are quoted on the Australian Stock Exchange under code ‘DXS’ and comprise one unit in each of DDF, DIT, DOT and DXO. Each entity forming part of DXS continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with reporting and disclosure requirements under the Corporations Act 2001 and the Australian Accounting Standards.

DEXUS Funds Management Limited as Responsible Entity for each entity within DXS may only unstaple if approval is obtained by a special resolution of the stapled security holders.

This general purpose Financial Report for the year ended 30 June 2009 has been prepared in accordance with the requirements of the Trust’s Constitution, the Corporations Act 2001 , Australian Equivalents to International Financial Reporting Standards (AIFRS) and Interpretations. Compliance with AIFRS ensures that the consolidated and parent Financial Statements and Notes comply with International Financial Reporting Standards (IFRS).

As at 30 June 2009, the Trust had a net current assets deficiency of $150.1 million. The accounts have been prepared on a going concern basis due to the existence of cross guarantee arrangements with other entities within the DXS group. Gearing is managed centrally for DXS. The gearing ratio as disclosed in the DEXUS Property Group Annual Report 2009 is 32% (refer note 30 (1) of the DXS Financial Statements).

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

The preparation of Financial Statements in conformity with AIFRS may require the use of certain critical accounting estimates and management to exercise its judgement in the process of applying the Trust’s accounting policies. Other than the estimation described in notes 1(e), 1(m), 1(n), and 1(t), no key assumptions concerning the future or other estimation of uncertainty at the reporting date have a significant risk of causing material adjustments to the Financial Statements in the next annual reporting period.

Uncertainty around property valuations

(b) principles of consolidation

(i) Controlled entities

The Financial Statements incorporate an elimination of inter-entity transactions and balances to present the Financial Statements on a consolidated basis. Net profit and equity in controlled entities, which is attributable to the unitholdings of minority interests, are shown separately in the Income Statements and Balance Sheets respectively. Where control of an entity is obtained during a financial year, its results are included in the Income Statements from the date on which control is gained. The Financial Statements incorporate all the assets, liabilities and results of the parent and its controlled entities.

(ii) Partnerships and joint ventures

Where assets are held in a partnership or joint venture with another entity directly, the Trust’s share of the results and assets of this partnership or joint venture are consolidated into the Income Statements and Balance Sheets of the Trusts. Where assets are jointly controlled via ownership of units in single purpose unlisted unit trusts or shares in companies, the Trusts apply equity accounting to record the operations of these investments (refer note 1(q)).

(c) Revenue recognition

(i) Rent

(ii) Interest revenue

Interest revenue is brought to account on an accruals basis using the effective interest rate method and, if not received at balance date, is reflected in the Balance Sheets as a receivable.

(iii) Distribution revenue

Revenue from distributions is recognised when declared. Amounts not received at balance date are included as a receivable in the Balance Sheets.

70 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(d) expenses

Expenses are brought to account on an accruals basis and, if not paid at balance date, are reflected in the Balance Sheets as a payable.

(i) Property expenses

(ii) Borrowing costs

(e) derivatives and other financial instruments

(i) Derivatives

The Trust’s activities expose it to a variety of financial risks including foreign exchange risk and interest rate risk. Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps and foreign exchange contracts to manage its exposure to certain risks. Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Trust’s exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes. Even though derivative financial instruments are entered into for the purpose of providing the Trust with an economic hedge, the Trusts have elected not to apply hedge accounting under AASB 139: Financial Instruments: Recognition and Measurement . Accordingly, derivatives including interest rate swaps and foreign exchange contracts, are measured at fair value with any changes in fair value recognised in the Income Statements.

(ii) Embedded derivatives

(iii) Debt and equity instruments issued by the Trust

Interest and distributions are classified as expenses or as distributions of profit consistent with the Balance Sheets classification of the related debt or equity instruments.

(iv) Financial guarantee contracts

(v) Other financial assets

Loans and other receivables are measured at amortised cost using the effective interest rate method less impairment.

(f) goods and services tax/value added tax

Revenues, expenses and capital assets are recognised net of any amount of Australian/New Zealand Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

(g) taxation

Under current Australian income tax legislation, DOT is not liable for income tax provided they satisfy certain legislative requirements. DOT may be liable for income tax in jurisdictions where foreign property is held (i.e. New Zealand).

DOT NZ Sub-Trust No. 1, a wholly owned Australian sub-trust of DOT, is liable for New Zealand corporate tax on its New Zealand taxable income at the rate of 30%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the New Zealand real estate asset and the accounting carrying value at balance date.

(h) distributions

In accordance with the Trust’s Constitution, the Trust distributes its distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 71

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(i) Repairs and maintenance

(j) Cash and cash equivalents

(k) Receivables

(l) other financial assets at fair value through profit and loss

Interests held by the Trust in controlled entities and associates are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency.

(m) property, plant and equipment

All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to its acquisition. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Trust and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income Statements during the financial period in which they are incurred.

(n) investment properties

External valuations of the individual investments are carried out in accordance with the Trust’s Constitution, or may be earlier where the Responsible Entity believes there is a potential for a material change in the fair value of the property.

(o) leasing fees

Leasing fees incurred are capitalised and amortised over the lease periods to which they relate.

(p) lease incentives

72 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(q) investments accounted for using the equity method

(r) business combinations

published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

(s) impairment of assets

(t) Financial assets and liabilities

(i) Classification

DOT has classified its financial assets and liabilities as follows:

Financial Asset/Liability	Classification	Valuation Basis	Reference
Cash and cash equivalents	Fair value through profit or loss	Fair value	Refer note 1(j)
Receivables	Loans and receivables	Amortised cost	Refer note 1(k)
Other financial assets	Loans and receivables	Amortised cost	Refer note 1(e)
Other financial assets	Fair value through profit or loss	Fair value	Refer note 1(l)
Payables	Financial liability at amortised cost	Amortised cost	Refer note 1(u)
Interest bearing liabilities	Financial liability at amortised cost	Amortised cost	Refer note 1(v)
Derivatives	Fair value through profit or loss	Fair value	Refer note 1(e)

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired.

(ii) Fair value estimation of financial assets and liabilities

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

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques including dealer quotes for similar instruments and discounted cash flows. In particular, the fair value of interest rate swaps are calculated as the present value of the estimated future cash flows, the fair value of forward exchange rate contracts is determined using forward exchange market rates at the balance sheet date, and the fair value of interest rate option contracts are calculated as the present value of the estimated future cash flows taking into account the time value and implied volatility of the underlying instrument.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(u) payables

These amounts represent liabilities for amounts owing at balance date. The amounts are unsecured and are usually paid within 30 days of recognition.

(v) interest bearing liabilities

(w) earnings per unit

Earnings per unit are determined by dividing the net profit attributable to equity holders of the parent entity by the weighted average number of ordinary units outstanding during the year.

(x) Foreign currency

(i) Foreign currency transactions

(ii) Foreign operations

Foreign operations are located in New Zealand. These operations have a functional currency of NZ Dollars, which is translated into the presentation currency.

(y) Segment reporting

(z) Rounding of amounts

(aa) new accounting standards and interpretations

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 are effective for annual reporting periods commencing on or after 1 January 2009.

(ii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 .

(iii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12] .

(iv) Revised AASB 3 Business Combinations , AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 .

Revised accounting standards for business combinations and Consolidated Financial Statements were issued in March 2008 and are operative for annual reporting periods beginning on or after 1 July 2009, but may apply earlier. The Trust will apply the revised standards from 1 July 2009. However, the new rules generally apply

74 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

only prospectively to transactions that occur after the application date of the standard. Their impact will therefore depend on whether the Trust will enter into any business combinations or other transactions that affect the level of ownership held in the controlled entities in the year of initial application.

The revised AASB 3 continues to apply the acquisition method to business combinations, but with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the Income Statements. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs must be expensed. This is different to the Trust’s current policy which is set out in note 1(s) above. For example, under the new rules:

(v) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 July 2009).

In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and AASB 127 Consolidated and Separate Financial Statements. The Trust will apply the revised rules prospectively from 1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment as a result of the dividend payment. Under the entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary’s fair value.

(vi) AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project.

In July 2008, AASB 2008-5 was issued comprising amendments to various standards arising from the annual improvements project. The amendments are effective for reporting periods beginning on or after 1 January 2009. The following amendments are considered relevant to the Trust:

AASB 101 (Amendment) Presentation of Financial Statements.

AASB 123 (Amendment) Borrowing Costs .

AASB 127 (Amendment) Consolidated and Separate Financial Statements (effective from 1 January 2009).

AASB 128 (Amendment) Investments in Associates

(and consequential amendments to AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures ) (effective from 1 January 2009).

AASB 131 (Amendment) Interests in Joint Ventures

(and consequential amendments to AASB 132 and AASB 7) (effective from 1 January 2009).

Where an investment in a joint venture is accounted for in accordance with AASB 139, only certain, rather than all, disclosure requirements in AASB 131 need to be made in addition to disclosures required by AASB 132 and AASB 7. This amendment will not have an impact on the Trust’s operations.

AASB 136 (Amendment) Impairment of Assets.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 75

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(aa) new accounting standards and interpretations (continued)

AASB 140 (Amendment) Investment Property (and consequential amendments to AASB 116).

(vii) AASB 2009-2 Amendments to Australian Accounting Standards

– Improving Disclosures about Financial Instruments (effective for annual periods beginning on or after 1 January 2009).

In April 2009, the AASB published amendments to AASB 7 Financial Instruments: Disclosure to improve the information that entities report

about their liquidity risk and the fair value of their financial instruments. The amendments require fair value measurement disclosures to be classified into a new three-level hierarchy and additional disclosures for items whose fair value is determined by valuation techniques rather than observable market values. The AASB also clarified and enhanced the existing requirements for the disclosure of liquidity risk of derivatives. The Trust will apply the amendments from 1 January 2009. They will not affect any of the amounts recognised in the Financial Statements.

(viii) AASB 2009-3 Amendments to Australian Accounting Standards – Embedded Derivatives (effective for annual periods ending on or after 30 June 2009).

Note 2. Property revenue

Note 2. Property revenue
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Rent and recoverable outgoings	257,807	246,945	165,168		153,635
Incentive amortisation	(25,468)	(24,863)	(17,940)		(17,384)
Other revenue	9,050	11,226	4,237		8,714
Total property revenue	241,389	233,308	151,465		144,965

Note 3. Interest revenue

Note 3. Interest revenue	Note 3. Interest revenue
Consolidated		Parent	entity
2009	2008	2009		2008
$’000	$’000	$’000		$’000
Interest income from financial institutions 631	1,261	382		587
Interest income from related parties –	971	8,355		9,096
Total interest revenue 631	2,232	8,737		9,683

Note 4. Finance costs

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Interest paid/payable	29,242	38,415	29,242	42,635
Interest paid to related parties	12,270	14,390	12,270	14,390
Amount capitalised	(8,311)	(584)	(1,390)	(584)
Other finance costs	2,083	1,551	1,316	(75)
Net fair value loss/(gain) of interest rate swaps	63,232	(18,662)	63,232	(18,662)
Total finance costs	98,516	35,110	104,670	37,704

The average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 6.90% (2008: 6.40%).

76 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 5. Other expenses

Note 5. Other expenses
		Consolidated		Parent	entity
	Note	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Audit and other fees	6	465	475	397		344
Custodian fees		242	248	215		223
Legal and other professional fees		284	7	284		7
Registry costs and listing fees		338	210	258		145
Other expenses		484	670	433		639
Total other expenses		1,813	1,610	1,587		1,358

Note 6. Audit and advisory fees

During the year the auditor of the parent entity and its related practices and non-related audit firms earned the following remuneration:

(a) assurance services

(a) assurance services	(a) assurance services
Consolidated		Parent	entity
2009	2008	2009		2008
$	$	$		$
Audit services
PwC audit and review of financial reports and other audit work under the_Corporations Act 2001_ 328,580	346,293	306,095		317,453
PwC fees paid in relation to outgoings audit1 60,193	60,797	31,425		28,218
Remuneration for audit services to PwC 388,773	407,090	337,520		345,671
Total remuneration for assurance services 388,773	407,090	337,520		345,671
(b) taxation services
Fees paid to PwC Australia 136,270	128,238	90,848		26,130
Total remuneration for taxation services2 136,270	128,238	90,848		26,130
Total audit and taxation fees1 525,043	535,328	428,368		371,801
(c) Fees paid to pwC for transaction services
PwC assurance services in respect of capital raisings 254,594	–	254,594		–
PwC taxation services 101,444	–	54,314		–
PwC other transaction and advisory fees 96,421	–	57,821		–
Total transaction service fees 452,459	–	366,729		–
Total audit, taxation and transaction service fees 977,502	535,328	795,097		371,801

1 Fees paid in relation to outgoing audits are included in property expenses. Therefore total audit and taxation fees included in other expenses is $465,000.

2 These services include general compliance work, one off project work and advice with respect to the management of day to day tax affairs of the Trust.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 77

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 7. Current assets – cash and cash equivalents

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Cash at bank	8,289	12,532	3,728	4,194
Total current assets – cash and cash equivalents	8,289	12,532	3,728	4,194

Note 8. Current assets – receivables

Note 8. Current assets – receivables
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Rent receivable	1,748	1,757	762		1,547
Less: provision for doubtful debts	(165)	(5)	(165)		(5)
Total rental receivables	1,583	1,752	597		1,542
Receivables from related parties	16	241	–		–
Other receivables	5,115	2,556	4,493		1,650
Total other receivables	5,131	2,797	4,493		1,650
Total current assets – receivables	6,714	4,549	5,090		3,192

Note 9. Loans with related parties

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Current assets – loans with related parties
Non-interest bearing loans with controlled entities	–	–	115,033	158,610
Interest bearing loans with controlled entities	–	–	147,120	120,316
Total current assets – loans with related parties	–	–	262,153	278,926
Non-current assets – loans with related parties
Intercompany loan1	41,049	–	41,049	–
Total non-current assets – loans with related parties	41,049	–	41,049	–
Current liabilities – loans with related parties
Non-interest bearing loans with the Trusts2	55,684	55,684	55,684	55,684
Interest bearing loans with controlled entities	–	–	–	500,000
Total current liabilities – loans with related parties	55,684	55,684	55,684	555,684
Non-current liabilities – loans with related parties
Intercompany loan1	–	244,894	–	244,684
Interest bearing loans with controlled entities	–	–	248,038	–
Total non-current liabilities – loans with related parties	–	244,894	248,038	244,684

1 The intercompany loans represent interest-bearing loans with DEXUS Finance Pty Limited (DXF) to or from the Trust. These loan balances eliminate on consolidation.

2 Non-interest bearing loans with the Trusts were created to effect the stapling of the Trust, DIT, DDF and DXO. These loan balances eliminate on consolidation.

78 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 10. Derivative financial instruments

Note 10. Derivative financial instruments
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Current assets
Interest rate swap contracts	13,558	59,501	13,558		59,501
Forward foreign exchange contracts	227	921	227		921
Total current assets – derivative financial instruments	13,785	60,422	13,785		60,422
Current liabilities
Interest rate swap contracts	24,025	4,759	24,025		4,759
Total current liabilities – derivative financial instruments	24,025	4,759	24,025		4,759
Net current derivative financial instruments	(10,240)	55,663	(10,240)		55,663

Refer note 25 for further discussion regarding derivative financial instruments.

Note 11. Current assets – other

Note 11. Current assets – other
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Prepayments	2,702	1,867	1,851		1,299
Total current assets – other	2,702	1,867	1,851		1,299

Note 12. Non-current assets – investment properties

(a) Reconciliation

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Opening balance as at 1 July 2009	3,325,300	3,129,783	2,305,243	2,079,811
Additions	21,635	23,862	17,008	16,368
Lease incentives	14,000	30,707	8,473	16,779
Amortisation of lease incentives	(25,468)	(24,863)	(17,940)	(17,384)
Rent straightlining	3,666	3,536	2,744	3,861
Transfer to equity accounted investment1	–	(54,478)	–	–
Net (loss)/gain from fair value adjustments	(449,463)	234,248	(323,528)	205,808
Foreign exchange differences on foreign currency translation	1,933	(17,495)	–	–
Closing balance as at 30 June 2009	2,891,603	3,325,300	1,992,000	2,305,243

1 On 15 October 2007, the Bent Street Trust was transferred to equity accounted investments due to the sale of 31.8% to DEXUS Wholesale Property Fund (DWPF).

Key valuation assumptions

Details of key valuation assumptions in relation to investment properties are outlined in note 13 of the DXS Financial Statements.

(b) developments

60 Miller Street, North Sydney, NSW

The development of a new 4,532 square metres annex building at 60 Miller Street, North Sydney achieved practical completion on 31 March 2009, with 100% pre-committed office area. Total construction costs are approximately $26.1 million.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 79

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 13. Non-current assets – property, plant and equipment

(a) property, plant and equipment

30 June 2009

(a) property, plant and equipment 30 June 2009
	Consolidated			Parent entity
Construction in	Land and	Total	Construction	Land and	Total
progress	freehold		in progress	freehold
	buildings			buildings
$’000	$’000	$’000	$’000	$’000	$’000
Opening balance as at 1 July 2008 997	27,530	28,527	–	–	–
Additions 1,036	–	1,036	–	–	–
Impairment –	(11,413)	(11,413)	–	–	–
Closing balance as at 30 June 2009 2,033	16,117	18,150	–	–	–
Cost 2,033	27,530	29,563	–	–	–
Impairment –	(11,413)	(11,413)	–	–	–
Net book value as at 30 June 2009 2,033	16,117	18,150	–	–	–

30 June 2008

30 June 2008
		Consolidated			Parent entity
	Construction in	Land and	Total	Construction	Land and	Total
	progress	freehold		in progress	freehold
		buildings			buildings
	$’000	$’000	$’000	$’000	$’000	$’000
Opening balance as at 1 July 2007	–	27,530	27,530	–	–	–
Additions	997	–	997	–	–	–
Closing balance as at 30 June 2008	997	27,530	28,527	–	–	–
Cost	997	27,530	28,527	–	–	–
Net book value as at 30 June 2008	997	27,530	28,527	–	–	–

(b) non-current assets pledged as security

Refer to note 18 for information on non-current assets pledged as security by the parent entity and its controlled entities.

(c) impairment

During the period, DOT carried out a review of the recoverable amount of its properties. This resulted in the recognition of an impairment loss of $11.4 million for 144 Wicks Road, North Ryde, NSW, which has been recognised in the Income Statements.

The value in use has been determined using management forecasts in a 10 year discounted cash flow model. Forecasts were based on projected returns of the project in light of current market conditions which include estimates of operating cash flows, sales values and total project costs. Year 10 earnings have been used to determine terminal value. The cash flows have been discounted at the cost of capital for each project.

(d) acquisitions and developments

144 Wicks Road, North Ryde, NSW

In November 2006, DOT (through its sub-trust Wicks Road Trust), acquired a 50% ownership interest in the former Peter Board High School site, 144 Wicks Road, North Ryde, NSW for a consideration of $25.9 million. The DA for stage 1 (estimated 26,000 square metres net lettable area) is expected to be approved by October 2009. Demolition of the former high school building was completed by December 2008.

80 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 14. Non-current assets – other financial assets at fair value through profit or loss

Investments are adjusted to their fair value through the Income Statements.

Name of entity	Principal activity	Ownership Interest	Ownership Interest	Parent
		2009	2008	2009	2008
		%	%	$’000	$’000
Controlled Entities
DOT Commercial Trust	Commercial property investment	100.0	100.0	485,701	610,870
DOT NZ Sub-trust No 1	Commercial property investment	100.0	100.0	25,154	44,682
DOT NZ Sub-trust No 2	Commercial property investment	100.0	100.0	55	55
Total non-current assets – other financial assets at fair value through profit or loss				510,910	655,607

Reconciliation

	Parent
	2009	2008
	$’000	$’000
Opening balance as at 1 July 2008	655,607	682,945
Acquisitions	–	96
Fair value loss	(144,697)	(27,434)
Closing balance as at 30 June 2009	510,910	655,607

All controlled entities are wholly owned by the Trust. Both the parent entity and the controlled entities were formed in Australia.

Note 15. Non-current assets – investments accounted for using the equity method

Investments are accounted for in the consolidated Financial Statements using the equity method of accounting (refer note 1). Information relating to these entities is set out below.

Name of entity	Principal activity	Ownership Interest	Ownership Interest	Consolidated	Consolidated	Parent
		2009	2008	2009	2008	2009	2008
		%	%	$’000	$’000	$’000	$’000
Held by controlled entities
Bent Street Trust1	Commercial property	34.9	68.2	84,165	111,946	–	–
	investment
Total				84,165	111,946	–	–

This entity was formed in Australia.

1 On 15 October 2007, the Bent Street Trust was transferred from investment properties due to the sale of 31.8% to DWPF. On 5 February 2009, a further 33.3% of the Bent Street Trust was sold to CBUS Property.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 15. Non-current assets – investments accounted for using the equity method (continued)

	Consolidated
	2009	2008
	$’000	$’000
Movements in carrying amounts of investments accounted for using the equity method
Opening balance as at 1 July 2008	111,946	40,750
Interest acquired and additions	32,916	67,077
Interest sold during the year	(60,712)	–
Transfer from investment properties	–	54,478
Share of net profits after tax	31	(4,013)
Distributions received	(16)	(5,483)
Wind up of investment	–	(40,863)
Closing balance as at 30 June 2009	84,165	111,946
Results attributable to associates
Operating profits before income tax	31	(4,013)
Operating profits after income tax	31	(4,013)
Less: Distributions/Dividends received	(16)	(5,483)
	15	(9,496)
Undistributed income attributable to associates as at 1 July 2008	(6,367)	3,129
Undistributed income attributable to associates as at 30 June 2009	(6,352)	(6,367)

Summary of the performance and financial position of investments accounted for using the equity method

The Trust’s share of aggregate profits, assets and liabilities of investments accounted for using the equity method are:

	Consolidated
	2009	2008
	$’000	$’000
Profits from ordinary activities after income tax expense	31	(4,013)
Assets	86,075	121,242
Liabilities	1,910	9,296
Share of associates’ expenditure commitments
Capital commitments	96,318	191,742

Note 16. Non-current assets – other

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Tenant and other bonds 96	402	74	272
Other 289	289	289	289
Total non-current assets – other 385	691	363	561

82 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 17. Current liabilities – payables

Note 17. Current liabilities – payables
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Trade creditors	9,013	15,883	5,586		10,870
Accruals	2,529	1,615	2,281		1,493
Amount payable to other minority interest	2,244	4,631	–		–
Accrued capital expenditure	2,274	799	341		246
Prepaid income	5,705	1,735	4,237		2,716
Responsible Entity fee payable	827	876	1,696		608
GST payable	1,385	978	687		561
Accrued interest	3,713	8,132	3,713		8,132
Total current liabilities – payables	27,690	34,649	18,541		24,626

Note 18. Interest bearing liabilities

Current

Note 18. Interest bearing liabilities Current
		Consolidated		Parent	entity
	Note	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Secured
Commercial mortgage backed securities	(a)	–	500,000	–		–
Total secured		–	500,000	–		–
Deferred borrowing costs		–	(210)	–		–
Total current liabilities – interest bearing liabilities		–	499,790	–		–

non-current
Secured
Bank loans	(b)	250,000 – –	–
Total secured		250,000 – –	–
Deferred borrowing costs		(1,962) – –	–
Total non-current liabilities – interest bearing liabilities		248,038 – –	–
Total interest bearing liabilities		248,038 499,790 –	–

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 83

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 18. Interest bearing liabilities (continued)

Financing arrangements

Financing arrangements
					Consolidated
					2009	2009
					$’000	$’000
Type of Facility	Note	Currency	Security	Maturity Date	Utilised	Facility Limit
Bank debt – secured	(b)	A$	Secured	Jul 11–Oct 11	250,000	500,000
Total					250,000	500,000
Bank guarantee utilised					–	–
Unused at balance date					250,000	–

Each of the Trusts’ unsecured borrowing facilities are supported by the Trusts’ guarantee arrangements, and have negative pledge provisions which limit the amount and type of encumbrances that the Trust can have over their assets and ensures that all senior unsecured debt ranks pari passu.

The current debt facilities will be refinanced as at/or prior to their maturity.

(a) Commercial mortgage backed securities and commercial paper

During the period, $500 million of commercial mortgage backed securities (CMBS) was repaid and associated mortgages discharged.

(b) bank loans – secured

This includes two facilities of $250 million each comprising an:

(i) A$250 million secured bank loan maturing in October 2011. The loan is secured by mortgages over one DDF investment property and two DOT investment properties totalling A$825 million as at 30 June 2009.
(ii) A$250 million secured facility maturing in July 2011. When utilised, the facility will be secured over investment properties to the value no more than A$625 million, to be finalised prior to first utilisation. The facility ceases to be available if it is not drawn by February 2010.

Note 19. Provisions

Note 19. Provisions
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Current
Provision for distribution	74,141	57,847	74,141		57,847
	74,141	57,847	74,141		57,847

Movements in provision for distribution is set out below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Provision for distribution
Opening balance as at 1 July 2008	57,847	63,946	57,847	63,946
Additional provisions	114,209	89,092	114,209	89,092
Payments and reinvestment of distributions	(97,915)	(95,191)	(97,915)	(95,191)
Closing balance as at 30 June 2009	74,141	57,847	74,141	57,847

provision for distribution

Provision is made for distributions to be paid for the period ended 30 June 2009 payable on 28 August 2009.

84 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 20. Non-current liabilities – other

Note 20. Non-current liabilities – other
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Tenant bonds	96	401	74		271
Other	–	3	–		–
Total non-current liabilities – other	96	404	74		271

Note 21. Contributed equity

(a) Contributed equity of equity holders

Note 21. Contributed equity (a) Contributed equity of equity holders
	Consolidated
	2009	2008
	$’000	$’000
Opening balance as at 1 July 2008	1,506,188	1,453,980
Distributions reinvested	31,262	52,291
Issue of units	494,817	–
Cost of issuing units	(17,075)	(83)
Closing balance as at 30 June 2009	2,015,192	1,506,188

(b) number of securities on issue

	Consolidated	Consolidated
	2009	2008
	No. of units	No. of units
Opening balance as at 1 July 2008	3,040,019,487	2,894,600,006
Distributions reinvested	100,368,579	145,419,481
Issue of units	1,560,453,600	–
Closing balance as at 30 June 2009	4,700,841,666	3,040,019,487

Terms and conditions

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust.

Each stapled security entitles the holder to one vote, either in person or by proxy, at a meeting of each of the Trusts.

(c) issue of securities

December 2008 Institutional placement and share purchase plan

On 10 December 2008 pursuant to an institutional placement 391.7 million securities were issued at a price of 33.5 cents per unit.

On 6 February 2009 pursuant to a security purchase plan 16.4 million securities were issued at a price of 30.7 cents per unit.

May 2009 Institutional placement, institutional entitlement offer and the retail entitlement offer

On 28 May 2009 pursuant to a retail entitlement offer 127.2 million securities were issued at a price of 31.1 cents per unit.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 21. Contributed equity (continued)

(d) distribution reinvestment plan

On 29 August 2008, 45,087,887 units were issued at a unit price of $0.4086 in relation to the June 2008 distribution period.

On 27 February 2009, 55,280,692 units were issued at a unit price of $0.2322 in relation to the December 2008 distribution period.

Approval of issues of Stapled Securities to an underwriter in connection with issues under a Distribution Reinvestment Plan

Such an issue will not be counted for the purposes of the calculation of DXS’ annual placement limit of 15% under the ASX Listing Rules.

Note 22. Reserves and undistributed income

(a) Reserves

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Foreign currency translation reserve	(11,718)	(13,787)	–	–
Total reserves	(11,718)	(13,787)	–	–
Movements:
Foreign currency translation reserve
Opening balance as at 1 July 2008	(13,787)	4,008	–	–
Exchange difference arising from the translation of the
financial statements of foreign operations	2,069	(17,795)	–	–
Total movement in foreign currency translation reserve	2,069	(17,795)	–	–
Closing balance as at 30 June 2009	(11,718)	(13,787)	–	–

(b) nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations.

(c) undistributed income

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Undistributed income as at 1 July 2008	951,335	700,392	915,385	691,904
Net (loss)/profit attributable to unitholders	(397,449)	353,382	(405,942)	312,573
Transfer of capital reserve of minority interest	(10,008)	(13,347)	–	–
Distributions provided for or paid	(114,209)	(89,092)	(114,209)	(89,092)
Undistributed income as at 30 June 2009	429,669	951,335	395,234	915,385

86 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 23. Minority interests

Note 23. Minority interests
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Interest in
Contributed equity	197,705	197,705	–		–
Reserves	51,721	41,713	–		–
Undistributed income	(45,401)	(35,347)	–		–
Total minority interests	204,025	204,071	–		–

Note 24. Distributions paid and payable

(a) distribution to unit holders

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
31 December (paid 27 February 2009)	40,068	31,245	40,068	31,245
30 June (payable 28 August 2009)	74,141	57,847	74,141	57,847
	114,209	89,092	114,209	89,092
(b) distribution to other minority interests
DEXUS RENTS Trust (paid 16 October 2008)	4,651	3,978	–	–
DEXUS RENTS Trust (paid 16 January 2009)	4,243	4,202	–	–
DEXUS RENTS Trust (paid 17 April 2009)	2,611	4,304	–	–
DEXUS RENTS Trust (payable 15 July 2009)	2,244	4,632	–	–
	13,749	17,116	–	–
Total distributions	127,958	106,208	114,209	89,092

(c) distribution rate

(c) distribution rate
	Consolidated		Parent	entity
	2009	2008	2009	2008
	Cents per unit	Cents per unit	Cents per unit	Cents per unit
31 December (paid 27 February 2009)	1.15	1.07	1.15	1.07
30 June (payable 28 August 2009)	1.57	1.90	1.57	1.90
Total distributions	2.72	2.97	2.72	2.97

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 87

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 25. Financial risk management

To ensure the effective and prudent management of the Trust’s capital and financial risks, DOT (as part of DXS) has a well established framework consisting of a Board Finance Committee and a Capital Markets Committee. The Board Finance Committee is accountable to and primarily acts as an advisory body to the DXFM Board and includes three Directors of the DXFM Board. Its responsibilities include reviewing and recommending financial risk management polices and funding strategies for approval.

Further information on the DXS’ governance structure, including terms of reference, is available at www.dexus.com

(1) Capital risk management

The capital structure of the Trust consists of debt (see note 18), cash and cash equivalents, and equity attributable to unitholders (including hybrid securities). The capital structure is monitored and managed in consideration of a range of factors including:

n the cost of capital and the financial risks associated with each class of capital;
n gearing levels and other covenants;
n potential impacts on net tangible assets and unitholders equity; and
n other market factors and circumstances.

The gearing ratio at 30 June 2009 was 8.2% (as detailed below).

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Gearing ratio
Interest bearing liabilities1 250,000	744,894	250,000	744,684
Total tangible assets2 3,053,057	3,485,412	2,817,144	3,249,022
Gearing ratio3 8.2%	21.4%	8.9%	22.9%

1 Interest bearing liabilities excludes deferred borrowing costs as reported internally to management.
2 Total tangible assets comprise total tangible assets less derivatives and deferred and current tax balances as reported internally to management.
3 Gearing is managed centrally for DXS. The gearing ratio as disclosed in the DEXUS Property Group Annual Report 2009 is 32% (refer note 30 (1) of the DXS Financial Statements).

The Responsible Entity for DOT (DXFM) has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to hold minimum net tangible assets (of $5 million), and maintaining a minimum level of surplus liquid funds. Furthermore, the Responsible Entity maintains trigger points in accordance with the requirements of the licence. These trigger points maintain a headroom value above the AFSL requirements and the entity has in place a number of processes and procedures should a trigger point be reached.

During the period, the Responsible Entity complied with the AFSL requirements.

(2) Financial risk management

The Trust’s activities expose it to a variety of financial risks: credit risk, market risk (including currency risk and interest rate risk), and liquidity risk. The Trust’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 Trust.

88 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps and foreign exchange contracts to manage its exposure to certain risks. The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure, and conducting sensitivity analyses.

(a) Liquidity risk

Liquidity risk is the risk that the Trust will not have sufficient available funds to meet financial obligations in an orderly manner when they fall due or at an acceptable cost.

The Trust identifies and manages liquidity risk across short, medium and long-term categories:

n
short-term liquidity management includes continuously monitoring forecast and actual cash flows;
n medium-term liquidity management includes maintaining a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits), and may also include projects that have a very high probability of proceeding, taking into consideration risk factors such as the level of regulatory approval, tenant pre-commitments and portfolio considerations; and
n long-term liquidity risk is managed through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated, and ensuring an adequate diversification of funding sources where possible subject to market conditions.

Refinancing risk

An analysis of the contractual maturities of the Trust’s interest bearing liabilities and derivative financial instruments are shown in the table below. The amounts in the table represent undiscounted cash flows.

	Consolidated 30	Consolidated 30	June 2009	June 2009	Consolidated 30 June 2008	Consolidated 30 June 2008	Consolidated 30 June 2008
	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring
	within one	between	between	after five	within one	between	between	after five
	year	one and	two and	years	year	one and	two and	years
		two years	five years			two years	five years
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Receivables	6,714	–	–	–	4,549	–	–	–
Payables	27,690	–	–	–	34,649	–	–	–
	(20,976)	–	–	–	(30,100)	–	–	–
Loans with related parties	–	–	–	41,049	–	–	–	(244,894)
Interest bearing liabilities
Fixed interest rate liabilities	–	–	–	–	155,000	–	–	–
Floating interest bearing liabilities	–	–	250,000	–	345,000	–	–	–
Total interest bearing liabilities1	–	–	250,000	–	500,000	–	–	–
Derivative financial instruments
Derivative assets	5,723	6,528	9,232	–	20,896	17,012	35,813	3,497
Derivative liabilities	23,298	22,697	52,660	25,064	9,203	3,556	5,325	632
Total net derivative financial instruments2	(17,575)	(16,169)	(43,428)	(25,064)	11,693	13,456	30,488	2,865

1 Refer to note 18 (interest bearing liabilities). Excludes deferred borrowing costs and preference shares.
2 The notional maturities on derivatives are only shown for forward foreign exchange contracts as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating rate interest cash flows, future cash flows have been calculated using static interest rates prevailing at 30 June 2009. Refer to note 10 Derivative Financial Instruments for fair value of derivatives.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 25. Financial risk management (continued)

(2) Financial risk management (continued)

(a) Liquidity risk (continued)

Refinancing risk (continued)

	Parent entity 30 June 2009	Parent entity 30 June 2009	Parent entity 30 June 2009	Parent entity 30 June 2009	Parent entity	Parent entity	30 June 2008	30 June 2008
	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring
	within one	between	between	after	within	between	between	after
	year	one and	two and	five years	one year	one and	two and	five years
		two years	five years			two years	five years
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Receivables	267,243	–	–	–	282,118	–	–	–
Payables	18,541	–	–	–	24,626	–	–	–
	248,702	–	–	–	257,492	–	–	–
Loans with related parties	–	–	–	248,038	–	–	–	744,684
Derivative financial instruments
Derivative assets	5,723	6,528	9,232	–	20,896	17,012	35,813	3,497
Derivative liabilities	23,298	22,697	52,660	25,064	9,203	3,556	5,325	632
Total net derivative financial instruments1	(17,575)	(16,169)	(43,428)	(25,064)	11,693	13,456	30,488	2,865

1 The notional maturities on derivatives are only shown for forward foreign exchange contracts as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating rate interest cash flows, future cash flows have been calculated using static interest rates prevailing at 30 June 2009. Refer to note 10 Derivative Financial Instruments for fair value of derivatives.

(b) Market risk

(i) Interest rate risk

The net notional amount of fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate is set out in the next table.

Consolidated 30 June 2009	June 2010	June 2011	June 2012	June 2013	> June 2014
	$’000	$’000	$’000	$’000	$’000
Interest rate swaps
A$ hedged1	726,333	694,167	593,333	555,000	271,333
A$ hedge rate (%)2	5.49%	5.49%	5.47%	5.81%	6.14%

1 Average amounts for the period. Hedged amounts above do not include potential hedges that are cancellable at the counterparty’s option.

2 The above hedge rates do not include margins payable on borrowings.

90 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Sensitivity on interest expense

The table below shows the impact on unhedged net interest expense (excluding non-cash items) of a 50 basis points increase or decrease in short-term and long-term market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust’s floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in market rates to the extent that floating rate debt is not hedged.

				Consolidated	Consolidated	Parent
				2009	2008	2009	2008
				(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+/–	0.50% (50	basis points)	A$	(1,525)	(336)	(1,525)	(336)

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

Sensitivity on fair value of interest rate swaps

The table below shows the impact on the Income Statements for changes in the fair value of interest rate swaps for a 50 basis points increase and decrease in short-term and long-term market interest rates. The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the interest rate swaps. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Cash flows are discounted using the forward price curve of interest rates at the end of the reporting period. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its interest rate derivatives. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements.

				Consolidated	Consolidated	Parent
				2009	2008	2009	2008
				(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+/–	0.50% (50	basis points)	A$	16,366	14,368	16,366	14,368

(ii) Foreign exchange risk

The Trust operates internationally with investments in New Zealand. As a result of these activities, the Trust has foreign exchange risk, arising primarily from:

n translation of investments in foreign operations; and
n earnings distributions and other transactions denominated in foreign currencies.

Foreign currency assets and liabilities

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 91

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 25. Financial risk management (continued)

(2) Financial risk management (continued)

(b) Market risk (continued)

(ii) Foreign exchange risk (continued)

Foreign currency assets and liabilities (continued)

The Trust’s net foreign currency exposures for net investments in foreign operations and hedging instruments are as follows:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
NZ$ assets1	130,000	157,509	–	–
NZ$ net borrowings2	–	–	–	–
NZ$ cross currency swaps3	–	–	–	–
NZ$ denominated net investment	130,000	157,509	–	–
% hedged	0%	0%	–	–

1 Assets excludes working capital and cash as reported internally to management.

2 Net borrowings is equal to interest bearing liabilities less cash.

3 Cross currency swap amounts comprise the foreign currency denominated leg of the cross currency swaps.

Sensitivity on equity (foreign currency translation reserve)

The table below shows the impact on the foreign currency translation reserve for changes in the translated value of foreign currency assets and liabilities for an increase and decrease in foreign exchange rates. The increase and decrease in cents has been based on the historical movements of the Australian dollar relative to the New Zealand dollar[1] . The increase and decrease has been applied to the spot rate prevailing at 30 June 2009 (see footnote below). The impact on the foreign currency translation reserve arises as the translation of the Trust’s foreign currency assets and liabilities are recorded (in Australian Dollars) directly in the foreign currency translation reserve.

						Consolidated	Consolidated	Parent
						2009	2008	2009		2008
						(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+	10.0	cents (8%) (2008:	12.6	cents)	NZ$ (A$ equivalent)	18,636	4,895	–		–
–	10.0	cents (8%) (2008:	12.6	cents)	NZ$ (A$ equivalent)	(27,577)	(5,980)	–		–

1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement. 2 Exchange rates at 30 June 2009: A$/NZ$ 1.2428 (2008: 1.2609).

Net foreign currency denominated cash flows

Forward foreign exchange contracts outstanding at 30 June 2009 are as follows:

	2009	2009	2009	2008	2008	2008
	To pay NZ$	To receive A$	Weighted	To pay NZ$	To receive A$	Weighted
	million	million	average	million	million	average
			exchange rate			exchange rate
1 year or less	4.0	3.4	1.1780	7.5	6.6	1.1311
Over 1 and less than 2 years	2.0	1.7	1.1847	4.0	3.4	1.1780
More than 2 years	–	–	–	2.0	1.7	1.1847

92 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Sensitivity on fair value of foreign exchange contracts

The table below shows the impact on the Income Statements for changes in the fair value of forward foreign exchange contracts for an increase and decrease in market rates. The increase and decrease in cents has been based on the historical movements of the Australian dollar relative to the New Zealand dollar[1] . The increase and decrease in cents has been applied to the spot rate prevailing at 30 June 2009 (see footnote below). The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the forward foreign exchange contracts.

						Consolidated	Consolidated	Parent
						2009	2008	2009	2008
						(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+	10.0	cents (8%) (2008:	12.6	cents)	NZ$ (A$ equivalent)	347	959	–	–
–	10.0	cents (8%) (2008:	12.6	cents)	NZ$ (A$ equivalent)	(408)	(959)	–	–

1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement. 2 Exchange rates at 30 June 2009: A$/NZ$ 1.2428 (2008: 1.2609).

(c) Credit risk

The Trust manages this risk by:

n adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty’s rating;
n regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody’s and Fitch credit rating. The exposure includes the current market value of in-the-money contracts as well as potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
n
entering into ISDA Master Agreements once a financial institution counterparty is approved;
n ensuring tenants, together with approved credit limits, are approved and ensuring that leases are undertaken with a large number of tenants;
n for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
n regularly monitoring loans and receivables on an ongoing basis.

The maximum exposure to credit risk at 30 June 2009 is the carrying amount of financial assets recognised on the Balance Sheets of the Trust and parent entity.

For the consolidated entity, the ageing analysis of loans and receivables net of provisions at 30 June 2009 is ($’000): 6,339.7 (0-30 days), 320.6 (31-60 days), 84.0 (61-90 days), 29.5 (91+ days). The ageing analysis of loans and receivables net of provisions at 30 June 2008 is ($’000): 8,746.3 (0-30 days), 46.8 (31-60 days), 35.4 (61-90 days), 10.3 (91+ days). Amounts over 31 days are past due, however, no receivables are impaired.

For the parent entity, the ageing analysis for loans and receivables net of provisions at 30 June 2009 is ($’000): 5,124.6 (0-30 days), 22.4 (31-60 days), (4.4) (61-90 days), (52.5) (91+ days). The ageing analysis of loans and receivables net of provisions for the parent entity at 30 June 2008 is ($’000): 3,214.1 (0-30 days), 22.1 (31-60 days), (36.5) (61-90 days), (7.7) (91+ days). Amounts over 31 days are past due, however, no receivables are impaired.

The credit quality of financial assets that are neither past due nor impaired is consistently monitored to ensure that there are no adverse changes in credit quality.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 93

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 25. Financial risk management (continued)

(2) Financial risk management (continued)

(d) Fair value of financial instruments

Fair value interest rate risk is the risk of an adverse change in the net fair (or market) value of an asset or liability due to movements in interest rates.

At 30 June 2009, the carrying amounts and fair value of financial assets and liabilities are shown as follows:

	Consolidated	Consolidated	Consolidated
	2009	2009	2008	2008
	Carrying amount1	Fair value2	Carrying amount1	Fair value2
	$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	8,289	8,289	12,532	12,532
Loans and receivables (current)	6,714	6,714	4,549	4,549
Derivative assets	13,785	13,785	60,422	60,422
Interest bearing assets
Intercompany loans	41,049	41,049	–	–
Total financial assets	69,837	69,837	77,503	77,503
Financial liabilities
Trade payables	27,690	27,690	34,649	34,649
Derivative liabilities	24,025	24,025	4,759	4,759
Loans with related parties	55,684	55,684	55,684	55,684
Interest bearing liabilities
Commercial mortgage backed securities	–	–	500,000	494,108
Bank loans	250,000	250,000	–	–
Intercompany loans	–	–	244,894	244,894
Total financial liabilities	357,399	357,399	839,986	834,094

	Parent	entity	Parent entity
	2009	2009	2008	2008
	Carrying amount1	Fair value2	Carrying amount1	Fair value2
	$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	3,728	3,728	4,194	4,194
Loans and receivables (current)	267,243	267,243	282,118	282,118
Derivative assets	13,785	13,785	60,422	60,422
Interest bearing assets
Intercompany loans	41,049	41,049	–	–
Total financial assets	325,805	325,805	346,734	346,734
Financial liabilities
Trade payables	18,541	18,541	24,626	24,626
Derivative liabilities	24,025	24,025	4,759	4,759
Loans with related parties	55,684	55,684	55,684	55,684
Interest bearing liabilities
Intercompany loans	248,038	248,038	744,684	738,792
Total financial liabilities	346,288	346,288	829,753	823,861

1 Carrying value is equal to the value of the financial instruments on the Balance Sheets.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 26. Contingent liabilities

Details and estimates of maximum amounts of contingent liabilities are as follows:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Bank guarantees by the Trusts in respect of variations and
other financial risks associated with the development of:
60 Miller Street, North Sydney, NSW	497	496	497	496
Bligh Street, Sydney, NSW1	3,820	3,820	–	–
Total contingent liabilities	4,317	4,316	497	496

1 Bank guarantee held in relation to an equity accounted investment (refer note 15).

The Trust together with DDF, DIT and DXO is also a guarantor of a A$300.0 million and US$210.0 million syndicated bank debt facility and a total of A$1,182.5 million and US$120.0 million (A$147.9 million) of bank bilateral facilities, a total of A$450.0 million of medium-term notes and a total of US$400.0 million (A$493.0 million) of privately placed notes, which have all been negotiated to finance the Trust and other entities within DXS. The guarantees have been given in support of debt outstanding and drawn against these facilities.

The guarantees are issued in respect of the Trust and do not constitute an additional liability to those already existing in interest bearing liabilities on the Balance Sheets.

Note 27. Commitments

(a) Capital commitments

The following amounts represent capital expenditure on investment properties contracted at the reporting date but not recognised as liabilities payable:

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Capital expenditure commitments in relation to development works:
Not longer than one year
Governor Phillip Tower & Governor Macquarie Tower, 1 Farrer Place, Sydney, NSW 3,310	39	3,310	39
309–321 Kent Street, Sydney, NSW –	163	–	163
Southgate Complex, 3 Southgate Avenue, Southgate, VIC 74	203	–	–
The Zenith, 821–843 Pacific Highway, Chatswood, NSW 197	1,191	197	1,191
Australia Square Complex, 264–278 George Street, Sydney, NSW 68	–	–	–
60 Miller Street, North Sydney, NSW 195	10,921	195	10,921
144 Wicks Road, Macquarie Park, NSW –	325	–	–
3,844	12,842	3,702	12,314
Later than one year but no later than five years
Southgate Complex, 3 Southgate Avenue, Southgate, VIC 1,066	–	–	–
Governor Phillip Tower & Governor Macquarie Tower, 1 Farrer Place, Sydney, NSW 1,532	7,664	1,532	7,664
2,598	7,664	1,532	7,664
Total capital commitments 6,442	20,506	5,234	19,978

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 27. Commitments (continued)

(b) lease receivable commitments

The future minimum lease payments receivable by the Trusts are:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Within one year	186,048	178,103	121,991	114,519
Later than one year but not later than five years	741,982	720,253	480,071	506,470
Later than five years	259,637	198,811	128,041	149,739
Total lease receivable commitments	1,187,667	1,097,167	730,103	770,728

Note 28. Related parties

Responsible entity

DXFM is the Responsible Entity of the Trust.

Responsible entity fees

Related party transactions

investments

On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP. Deutsche Bank and RREEF ceased to be related parties on this date. As a result, amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008.

deXuS Funds management limited and its related entities

There were a number of transactions and balances between the Trust and the Responsible Entity and its related entities as detailed below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Responsible Entity fees paid and payable	10,167,291	13,227,928	7,118,211	9,158,500
Property management fees paid and payable to DXPS	4,708,897	4,477,260	4,047,165	4,477,260
Recovery of administration expenses paid to DXH	7,927,266	2,409,193	7,046,500	2,244,519
Aggregate amounts payable to the Responsible Entity at
reporting date	826,897	875,638	580,462	608,238
Property management fees payable at reporting date	1,057,054	621,359	498,038	621,359

96 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

trusts within dXS

Aggregate amounts included in the determination of profit that resulted from transactions with each class of other related parties:

	Consolidated	Consolidated	Parent	entity
	2009	2008	2009	2008
	$	$	$	$
Interest income	–	971,033	–	971,033
Interest expense	12,270,083	14,390,284	12,270,083	14,390,284
Aggregate amounts brought to account in relation to other
transactions with each class of other related parties:
Interest bearing loans advanced to Trusts within DXS	671,022,708	518,687,152	671,022,708	518,687,152
Interest bearing loans from Trusts within DXS	373,477,247	840,299,343	373,477,247	840,299,343

deutsche bank ag

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Deutsche Bank AG in its capacity as a financier:
Interest paid on swaps for whom the counterparty
was Deutsche Bank AG	–	5,545,602	–	5,545,602
Interest received on swaps for whom the counterparty
was Deutsche Bank AG	–	3,515,145	–	3,515,145

The following persons were Directors or Alternate Directors of DXFM during the whole of the financial year and up to the date of this report, unless otherwise stated:

directors

C T Beare, BSc, BE (Hons), MBA, PhD, FAICD[1,4,5]

E A Alexander AM, BComm, FCA, FAICD, CPA[1,2,6,8,9]

B R Brownjohn, BComm[1,2,5,6]

S F Ewen OAM[1,4]

V P Hoog Antink, BComm, MBA, FCA, FAPI, FRICS, MAICD

C B Leitner III, BA[17]

B E Scullin, BEc[1,3,4,7,10]

A J Fay, BAg.Ec (Hons), ASIA (Alternate to C B Leitner III)[17]

P B St George, CA(SA), MBA[11,14,15,16]

J C Conde AO, BSc, BE (Hons), MBA[12,13,16]

1 Independent Director
2 Audit Committee Member
3 Compliance Committee Member
4 Nomination and Remuneration Committee Member

5 Finance Committee Member

6 Risk Committee Member
7 Audit Committee Member from 1 July 2008 to 1 May 2009
8 Compliance Committee Member from 1 July 2008 to 1 May 2009
9 Finance Committee Member from 1 July 2008 to 1 May 2009
10 Risk Committee Member from 1 July 2008 to 1 May 2009
11 Audit Committee Member from 1 May 2009 to 30 June 2009
12 Compliance Committee Member from 1 May 2009 to 30 June 2009
13 Nomination and Remuneration Committee Member from 1 May 2009 to 30 June 2009
14 Finance Committee Member from 1 May 2009 to 30 June 2009
15 Risk Committee Member from 1 May 2009 to 30 June 2009
16 Appointed Independent Director 29 April 2009
17 Resigned 29 April 2009

No Directors held an interest in the Trust as at 30 June 2009 or at the date of this report.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 97

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 28. Related parties (continued)

other key management personnel

Name	Position	Qualification date of other key management personnel
		during the 12 months ended 30 June 2009
Victor P Hoog Antink	Chief Executive Officer
Tanya L Cox	Chief Operating Officer
Patricia A Daniels	Head of Human Resources
John C Easy	General Counsel
Jane LIoyd	Head of Retail	Appointed 14 July 2008
Louise J Martin	Head of Office
Craig D Mitchell	Chief Financial Officer
Paul G Say	Head of Corporate Development
Mark F Turner	Head of Funds Management
Andrew P Whiteside	Head of Industrial

No key management personnel or their related parties held an interest in the Trust for the years ended 30 June 2008 and 30 June 2009 or at the date of this report.

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2008 and 30 June 2009 or at the date of this report.

	2009	2008
	$	$
Compensation
Short-term employee benefits	7,910,223	6,891,605
Post-employment benefits	563,665	400,153
Other long-term benefits	1,509,929	3,290,638
	9,983,817	10,582,396

98 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Remuneration Report

1. introduction

Key management personnel

In this report, Key Management Personnel (“KMP”) are those people having the authority and responsibility for planning, directing and controlling the activities of DEXUS either directly or indirectly. They comprise Non-Executive Directors, the CEO and other members of the Executive Committee. Within this report the term ‘Executive’ encompasses the CEO and other members of the Executive Committee.

KMP (including the five highest paid Executives) of DEXUS for the year ended 30 June 2009 are set out below:

Name	Title	Date of qualification as a KMP
Non-Executive Directors
Christopher T Beare	Non-Executive Chair	Appointed 4 August 2004
Elizabeth A Alexander AM	Non-Executive Director	Appointed 1 January 2005
Barry R Brownjohn	Non-Executive Director	Appointed 1 January 2005
John C Conde AO	Non-Executive Director	Appointed 29 April 2009
Stewart F Ewen OAM	Non-Executive Director	Appointed 4 August 2004
Charles B Leitner III1	Non-Executive Director	Resigned 29 April 2009
Brian E Scullin	Non-Executive Director	Appointed 1 January 2005
Peter B St George	Non-Executive Director	Appointed 29 April 2009
1 Mr Leitner was appointed on 10 March 2005. Simultaneous with Mr Leitner’s resignation, Mr Fay resigned as Mr Leitner’s alternate.
Name	Title	Date of qualification as a KMP
Executives
Victor P Hoog Antink	Chief Executive Officer	Appointed 1 October 2004
Tanya L Cox	Chief Operating Officer	Appointed 1 October 2004
Patricia A Daniels	Head of Human Resources	Appointed 14 January 2008
John C Easy	General Counsel	Appointed 1 October 2004
Jane Lloyd	Head of Retail	Appointed 14 July 2008
Louise J Martin	Head of Office	Appointed 27 March 2008
Craig D Mitchell	Chief Financial Officer	Appointed 17 September 2007
Paul G Say	Head of Corporate Development	Appointed 19 March 2007
Mark F Turner	Head of Funds Management	Appointed 1 October 2004
Andrew P Whiteside	Head of Industrial	Appointed 28 April 2008

2. board oversight of remuneration

The role and membership of the Committee is set out in the Corporate Governance Statement, which may be found at www.dexus.com/Corporate-Governance

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Remuneration Report (continued)

3. non-executive directors’ remuneration framework

Non-Executive Directors, other than the Chair, receive a base fee plus additional fees for membership of Board Committees. The table below outlines the fee structure for the reporting period.

Committee	Chair	Member
	$	$
Non-Executive Director	300,000	130,000
Board Audit and Risk	30,000	15,000
Board Finance	30,000	15,000
Board Compliance	15,000	7,500
Board Nomination and Remuneration	–	7,500

Non-Executive Directors are not eligible to receive performance based remuneration or accrue separate retirement benefits beyond statutory superannuation entitlements.

4. approach to executive remuneration

Philosophy underlying Executive remuneration

Taking these considerations into account, the Executive remuneration structure and quantum is based on the following criteria:

(a) market competitiveness and reasonableness;

(b) alignment of Executive performance payments with achievement of the Group’s objectives within its risk framework, and reinforcement of DEXUS’s values-based culture; and

DEXUS’s Executive remuneration structure may be summarised as follows:

n fixed remuneration, targeted at the median of fixed remuneration of entities in the comparison group, with reference to each Executive’s skills and depth of experience;

n total remuneration, targeted at the market median, and awarded on a variable scale for each Executive which could result in a total remuneration range from lower quartile to upper quartile, reflecting differing levels of experience, role structure and individual contribution; and

n a single pool of funds available to meet performance payments, which is divided between short-term and long-term elements.

100 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(a) Market competitiveness and reasonableness

DEXUS has determined a comparison group, for remuneration benchmarking purposes, from:

constituents of the S&P/ASX 100 index;
constituents of the listed Australian Real Estate Investment Trust (“A-REIT”) sector; and

3. other property industry entities.

n three year absolute total security holder return;
n management costs and revenue of DEXUS Holdings; and
n performance against budgeted earnings per security and distribution per security, recognising capital adjustments.

(b) Alignment of Executive performance payments with achievement of the Group’s objectives

These objectives can include:

n financial performance objectives
earnings per security
distributions per security (in line with its Distribution Policy)
third party funds performance
total security holder return, relative to peers
n property performance objectives
operating earnings
percentage of vacant space per property
expenses against budget
n non-financial performance objectives
tenant satisfaction
employee engagement
executive succession and talent management
delivery of strategic projects to meet time and budget requirements
n behaviour that reinforces DEXUS’s cultural values

These objectives have been selected as the Directors consider them to be the key drivers to achieve superior security holder returns over time.

(c) Target mix of remuneration

The target remuneration mix for Executives, expressed as a percentage of total remuneration, is provided in the table below.

		2009			2008
Remuneration component	CEO	CFO	Other	CEO	Property	Other
			Executives		Executives	Executives
Total fixed	35%	40%	50%	40%	45%	50%
Short-Term Performance Payment (STPP)	30%	30%	25%	30%	30%	25%
Long-Term Performance Payment (LTPP)	35%	30%	25%	30%	25%	25%

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 101

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Remuneration Report (continued)

4. approach to executive remuneration (continued)

Executive remuneration structure

The table below outlines the structure of DEXUS’s Executive remuneration.

Component		Remuneration framework
Total Fixed Remuneration (TFR)
	Salary	consists of cash salary and salary sacrificed fringe benefits, such as motor vehicles. n
		reviewed annually by the Board. Draws on relevant external and internal comparative n
		remuneration information and advice on market practice as required.
	Superannuation	prescribed and salary sacrifice superannuation contributions, including insurance n
		premiums (if required).
Performance payments
– STPP & LTPP
		the aim of performance payments is to link the achievement of the Group’s n
		objectives with the remuneration received by the Executives responsible for
		meeting those objectives.
		the objectives consist of financial and non-financial measures of performance at the n
		Group, business unit and individual level.
		the objectives represent the key drivers for the success of the business and for n
		delivering long-term value to security holders.
		performance payments made to each Executive depend on the extent to which n
		specific KPIs, set at the beginning of the financial year, are met. Payments are only
		made for performance at or above required performance levels.
		performance payments are delivered in cash. The ratio of STPP to LTPP is set out in n
		the target remuneration mix table above.
		delivery of LTPP is deferred for three years, as described below. n

Performance payments

Should an Executive be awarded a performance payment, the payment is split between STPP and LTPP using the ratio set out in the target remuneration mix table above.

Short-Term Performance Payment (STPP)

The STPP is delivered in cash in September each year, following the end of the financial year.

Long-Term Performance Payment (LTPP)

The LTPP is delivered in cash in accordance with the vesting schedule as set out in the Long-Term Incentive Plan rules.

102 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

The Long-Term Incentive Plan operates as follows:

n following allocation into the plan, payments are subject to a three year vesting period from allocation date;
n the LTPP allocation value is notionally invested during the vesting period in DEXUS securities (50% of LTPP value) and its unlisted funds and mandates (50% of LTPP value);
n during the vesting period, LTPP allocation values fluctuate in line with changes in the “Composite Total Return” (simulating the notional investment exposure), comprising 50% of the total return of DEXUS securities and 50% of the combined asset weighted total return of its unlisted funds and mandates; and
n at the conclusion of the three year vesting period, if the Composite Total Return meets or exceeds 100% of the Composite Performance Benchmark, the Board may approve the application of a performance factor to the final LTPP allocation value:
the “Composite Performance Benchmark” is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of the Mercer Unlisted Property Fund Index over the three year vesting period;
for performance up to 100% of the Composite Performance Benchmark, executives receive an LTPP allocation reflecting the Composite Total Return of the preceding three year vesting period; and
for performance between 100% and 130% of the Composite Performance Benchmark a performance factor may be applied, ranging from 1.1 to a maximum of 1.5 times.

Provisions regarding the vesting of LTPP in the event of termination of service agreements are outlined in section 7 below.

Equity options scheme

Equity and loan schemes

DEXUS does not operate a security participation plan or a loan plan for Executives or Directors.

The long-term element of DEXUS’s performance payment is designed to simulate an equity plan, but does not provide Executives with direct equity exposure.

Hedging policy

DEXUS does not permit Executives to hedge their LTPP allocation during the vesting period.

5. executive remuneration arrangements for the year ended 30 June 2009

This section outlines how the remuneration approach described above has been implemented in the 2008/09 financial year.

Changes made during the year ended 30 June 2009

Remuneration structure

As part of the Committee’s annual review of the Executive remuneration structure, a number of changes were made during the year ended 30 June 2009. These included:

(a) evaluation and revision of the target remuneration mix for Executives;
(b) allocation of performance payments between STPP and LTPP in accordance with the target remuneration mix;
(c) increased focus on the review of appropriate and challenging KPIs for CEO and other Executives by the Committee; and
(d) additional entities incorporated in the comparison group used to benchmark Executive remuneration.

Long-Term Incentive Plan review

The DEXUS Long-Term Incentive Plan was reviewed, incorporating advice from external consultants. The Committee confirmed key objectives to:

n achieve alignment with the long-term interest of security holders;
n ensure Executives are exposed to equity;
n assist in creating a competitive total remuneration package that encourages the attraction and retention of executives;
n have performance criteria consistent with DEXUS’s long-term focus;
n be simple and transparent;
n be flexible and long-term in nature;
n be valued and understood by Executives; and
n be cognisant of contemporary market practice.

n eligibility restricted to Executives and senior management team;

n accelerated vesting on termination was discontinued; and

n automatic application of the performance multiplier was removed.

Termination provisions

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 103

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Remuneration Report (continued)

5. executive remuneration arrangements for the year ended 30 June 2009 (continued)

Total fixed remuneration

Executives are given the opportunity to receive their TFR as cash, superannuation or salary sacrificed fringe benefits, such as motor vehicles.

There are no guaranteed TFR increases in Executives’ contracts of employment. In the 2010 financial year, there will be no TFR increases for Executives.

Performance payments

6. group performance and the link to remuneration

Total return analysis

	1 year	2 years	3 years	Since
				1 October 20041
	(% per annum)	(% per annum)	(% per annum)	(% per annum)
Period to 30 June 2009
DEXUS Property Group	–37.3%	–31.1%	–12.1%	–2.5%
S&P/ASX 200 Property Accumulation Index	–42.3%	–39.4%	–22.7%	–10.3%
DEXUS Composite Total Return	–24.2%	–16.1%	–4.0%	3.4%
Composite Performance Benchmark	–27.3%	–19.6%	–8.2%	0.3%

1 DEXUS’s inception date is 1 October 2004.

During the year DEXUS did not buy back or cancel any of its securities.

Total return of DEXUS securities

The graph below illustrates DEXUS’s total security holder return relative to the S&P/ASX 200 Property Accumulation Index.

==> picture [492 x 170] intentionally omitted <==

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

6/10/2004 = 100
160
S&P/ASX 200 Property Accumulation Index
140 DXS
Source: IRESS/DEXUS
120
100
80
Oct 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09
Price ($)
----- End of picture text -----

6 October 2004 to 30 June 2009

104 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

7. Service agreements

The employment arrangements for the CEO and other Executives are set out below.

CEO – Victor P Hoog Antink

The current employment contract commenced on 1 October 2004. The principal terms of the employment contract are as follows:

n
n
the CEO is employed under a rolling contract.
the CEO receives fixed remuneration of $1,300,000 per annum.
n the CEO may resign from his position and thus terminate this contract by giving six months written notice. On resignation any unvested LTPP will be forfeited subject to the discretion of the Board.
n the Group may terminate the CEO’s employment agreement by providing six months written notice or payment in lieu of the notice period (based on the fixed component of CEO’s remuneration). Additionally, the Group may provide a performance payment for the period of the last review date (being 1 July) until the last day of the notice period.
n in the event that the Group initiates termination for reasons outside the control of the CEO, a severance payment equal to 100% of fixed remuneration is payable.
n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board.
n the Group may terminate the contract of the CEO at any time without notice if serious misconduct has occurred. In the event of termination for cause the CEO is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited.

Executives (other than the CEO)

The principal terms of Executive employment contracts are as follows:

n
all Executives have rolling contracts.
n the Group may terminate an Executive’s employment agreement by providing three months written notice or providing payment in lieu of the notice period (based on the fixed component of the Executive’s remuneration). In the event that the Group initiates the termination for reasons outside the control of the Executive, a severance payment equal to a maximum of 75% of fixed remuneration will be made.
n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board.
n the Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination for cause occurs the Executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 105

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel

	Short-term employee	Short-term employee	benefits	Post	Other	long-term benefits	long-term benefits	Total
				employment
				benefits
	Cash salary	Short-term	Other	Pension and	Long-term	Movement in	Other
	and fees	performance	short-term	super	performance	prior year	long-term
		payments	benefits	benefits	payment	long-term	benefits
					allocations6	performance
						payment
						allocation
						values7
	$	$	$	$	$	$	$	$
Name
Victor P Hoog Antink
2009	1,200,000	785,000	–	100,000	915,000	(416,600)	–	2,583,400
2008	1,100,000	900,000	–	100,000	900,000	(106,947)	–	2,893,053
Tanya L Cox
2009	352,086	150,000	–	47,914	150,000	(80,773)	–	619,227
2008	339,059	200,000	–	10,941	175,000	(16,495)	–	708,505
Patricia A Daniels1
2009	247,589	90,000	–	13,745	90,000	(24,250)	–	417,084
2008	103,470	60,000	–	5,471	100,000	–	–	268,941
John C Easy
2009	343,255	163,000	–	31,745	162,000	(57,688)	–	642,312
2008	297,871	150,000	–	37,129	120,000	(13,250)	–	591,750
Ben J Lehmann2
2009	–	–	–	–	–	–	–	–
2008	346,344	–	–	9,847	–	–	1,105,0008	1,461,191
Jane Lloyd3
2009	361,255	113,000	–	13,745	112,000	–	–	600,000
2008	–	–	–	–	–	–	–	–

106 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

	Short-term employee	Short-term employee	benefits	Post	Other	long-term benefits	long-term benefits	Total
				employment
				benefits
	Cash salary	Short-term	Other	Pension and	Long-term	Movement in	Other
	and fees	performance	short-term	super	performance	prior year	long-term
		payments	benefits	benefits	payment	long-term	benefits
					allocations6	performance
						payment
						allocation
						values7
	$	$	$	$	$	$	$	$
Name
Louise J Martin4
2009	405,000	175,000	–	95,000	175,000	(60,625)	–	789,375
2008	116,607	225,000	–	1,250	250,000	–	–	592,857
Craig D Mitchell
2009	500,000	325,000	–	50,000	325,000	(60,625)	–	1,139,375
2008	273,768	250,000	162,592	42,899	250,000	–	–	979,259
Paul G Say
2009	486,255	200,000	–	13,745	200,000	(60,625)	–	839,375
2008	466,871	225,000	–	13,129	250,000	–	–	955,000
Mark F Turner
2009	400,015	135,000	–	49,985	135,000	(103,635)	–	616,365
2008	377,172	200,000	–	42,828	200,000	(22,669)	–	797,331
Andrew P Whiteside5
2009	461,255	135,000	–	13,745	135,000	(24,250)	–	720,750
2008	61,228	200,000	–	3,282	100,000	–	–	364,510
Total
2009	4,756,710	2,271,000	–	429,624	2,399,000	(889,071)	–	8,967,263
2008	3,482,390	2,410,000	162,592	266,776	2,345,000	(159,362)	1,105,000	9,612,396

1 Patricia A Daniels qualified as a KMP on 14 January 2008. Actual remuneration received is for a four day week.

2 Ben J Lehmann ceased to qualify as a KMP on 27 March 2008.

3 Jane Lloyd qualified as a KMP on 14 July 2008.

4 Louise J Martin qualified as a KMP on 27 March 2008.

5 Andrew P Whiteside qualified as a KMP on 28 April 2008.

6 This is the LTPP allocation for the current year which is deferred for three years as described on pages 102 to 103.

7 This is the notional change in value of all unvested LTPP allocations from prior year.

8 Termination payment.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 107

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel (continued)

Long-term performance payments

The table below sets out details of previous LTPP allocations and current valuations.

==> picture [506 x 507] intentionally omitted <==

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

Year of grant LTPP Movement in Closing LTPP Movement in Vested Year that
allocation LTPP allocation LTPP allocation LTPP as at LTPP will vest
value allocation value as at value at vesting 30 June 2009
value (since 30 June 2009 date (due to
grant date) performance
multiplier)
$ $ $ $ $ $ $
Name
Victor P Hoog Antink 2009 915,000 – – – – 2012
2008 900,000 (218,250) 681,750 – – 2011
2007 650,000 (177,580) 472,420 – – 2010
2006 250,000 (23,750) 226,250 113,125 339,375 2009
Tanya L Cox 2009 150,000 – – – – 2012
2008 175,000 (42,438) 132,563 – – 2011
2007 110,000 (30,052) 79,948 – – 2010
2006 60,000 (5,700) 54,300 27,150 81,450 2009
Patricia A Daniels [1] 2009 90,000 – – – – 2012
2008 100,000 (24,250) 75,750 – – 2011
John C Easy 2009 162,000 – – – – 2012
2008 120,000 (29,100) 90,900 – – 2011
2007 75,000 (20,490) 54,510 – – 2010
2006 50,000 (4,750) 45,250 22,625 67,875 2009
Jane Lloyd [2] 2009 112,000 – – – – 2012
Louise J Martin [3] 2009 175,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Craig D Mitchell 2009 325,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Paul G Say 2009 200,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Mark F Turner 2009 135,000 – – – – 2012
2008 200,000 (48,500) 151,500 – – 2011
2007 180,000 (49,176) 130,824 – – 2010
2006 70,000 (6,650) 63,350 31,675 95,025 2009
Andrew P Whiteside [4] 2009 135,000 – – – – 2012
2008 100,000 (24,250) 75,750 – – 2011
----- End of picture text -----

1 Patricia A Daniels qualified as a KMP on 14 January 2008.
2 Jane Lloyd qualified as a KMP on 14 July 2008.
3 Louise J Martin qualified as a KMP on 27 March 2008.
4 Andrew P Whiteside qualified as a KMP on 28 April 2008.

108 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Non-Executive Director board and committee fees

Board and Committee fees paid to Non-Executive Directors for the years ended 30 June 2008 and 30 June 2009 are set out in the table below.

	Directors			Committee Fees	Committee Fees	Committee Fees			Total cash
	Fees								salary and
									fees
	Board	Chair	Board	Board	Board	Board	Board	Board
		DWPL	Audit	Risk	Compliance	Nom	Treasury	Finance
						& Rem	Policy
	$	$	$	$	$	$	$	$	$
Name
Christopher T Beare
2009	300,000	–	–	–	–	–	–	–	300,000
2008	300,000	–	–	–	–	–	–	–	300,000
Elizabeth A Alexander1
2009	130,000	–	15,000	15,000	6,250	–	–	6,250	172,500
2008	130,000	–	15,000	15,000	8,125	–	–	5,625	173,750
Barry R Brownjohn2
2009	130,000	–	7,500	7,500	–	–	–	15,000	160,000
2008	130,000	–	7,500	7,500	–	–	–	15,000	160,000
John C Conde AO3
2009	22,652	–	–	–	1,250	1,250	–	–	25,152
2008	–	–	–	–	–	–	–	–	–
Stewart F Ewen
2009	130,000	–	–	–	–	7,500	–	–	137,500
2008	130,000	–	–	–	–	7,500	–	–	137,500
Charles B Leitner III4
2009	–	–	–	–	–	–	–	–	–
2008	–	–	–	–	–	–	–	–	–
Brian E Scullin
2009	130,000	30,000	6,250	6,250	15,000	7,500	–	–	195,000
2008	130,000	30,000	7,500	7,500	16,250	7,500	–	–	198,750
Peter B St George5
2009	22,652	–	1,250	1,250	–	–	–	1,250	26,402
2008	–	–	–	–	–	–	–	–	–
Total
2009	865,304	30,000	30,000	30,000	22,500	16,250	–	22,500	1,016,554
2008	820,000	30,000	30,000	30,000	24,375	15,000	–	20,625	970,000

1 Elizabeth A Alexander ceased to be a member of the Board Compliance Committee and a member of the Board Finance Committee on 30 April 2009.
2 Barry R Brownjohn ceased to be the chair of the Board Finance Committee on 30 April 2009 and became chair of the Board Compliance Committee on 1 May 2009.
3 John C Conde became a Non-Executive Director on 29 April 2009. He was appointed to the Board Compliance Committee and the Board Nomination and Remuneration Committee on 1 May 2009.
4 As an employee of the Deutsche Bank group, Mr Leitner waived his right to receive Director’s fees. Accordingly, Mr Leitner’s Alternate Director, Mr Fay did not receive Director’s fees when acting as his alternate. Mr Leitner ceased to be a Non-Executive Director on 29 April 2009. Accordingly, Mr Fay ceased to be Mr Leitner’s Alternate Director on 29 April 2009.
5 Peter B St George became a Non-Executive Director on 29 April 2009. He was appointed to the Board Audit and Risk Committee and the Board Finance Committee on 1 May 2009.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 109

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel (continued)

Non-Executive Director board and committee fees (continued)

All Non-Executive and Alternate Directors also receive reimbursement for reasonable travel, accommodation and other expenses incurred whilst undertaking DEXUS business.

The Chief Executive Officer, Victor P Hoog Antink, does not receive fees in respect of his role as a Director, but does receive remuneration as a Senior Executive of DXFM.

During the year, Mr Fay received a consulting fee of $108,300 from 1 July 2008 to 29 April 2009.

Non-Executive Director Remuneration

Details of the structure and quantum of each component of remuneration for each Non-Executive Director for the years ended 30 June 2008 and 30 June 2009 are set out in the following table.

Short-term employee	Post employment	Other long-term	Total
benefits	benefits1	benefits
$	$	$	$
Name
Christopher T Beare
2009 286,255	13,745	–	300,000
2008 286,871	13,129	–	300,000
Elizabeth A Alexander
2009 157,844	14,656	–	172,500
2008 160,621	13,129	–	173,750
Barry R Brownjohn
2009 146,789	13,211	–	160,000
2008 123,379	36,621	–	160,000
John C Conde AO
2009 23,075	2,077	–	25,152
2008 –	–	–	–
Stewart F Ewen OAM
2009 63,073	74,427	–	137,500
2008 126,147	11,353	–	137,500
Brian E Scullin
2009 181,255	13,745	–	195,000
2008 139,605	59,145	–	198,750
Peter B St George
2009 24,222	2,180	–	26,402
2008 –	–	–	–
Total
2009 882,513	134,041	–	1,016,554
2008 836,623	133,377	–	970,000

1 Post-employment benefits represent compulsory and salary sacrificed superannuation benefits.

110 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 29. Events occurring after reporting date

On 31 July 2009, DWPF purchased a further 1.5% of Bent Street Trust from DCT for $3.3 million.

Since the end of the year, other than the matter discussed above, the Directors are not aware of any matter or circumstance not otherwise dealt with in their Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or state of the Trust’s affairs in future financial periods.

Note 30. Segment information

business segments

The Trust operates solely within the office property sector.

geographical segments

The Trust’s investments are located in Australia and New Zealand.

Australia	New Zealand	Consolidated
$’000	$’000	$’000
2009
Property revenue 231,342	10,047	241,389
Interest revenue 525	106	631
Share of net profits of associates accounted for using the equity method 31	–	31
231,898	10,153	242,051
Net foreign exchange gain 354	–	354
Other income 82	–	82
Total segment revenue/income 232,334	10,153	242,487
Segment result (381,257)	(16,192)	(397,449)
Segment assets 2,961,281	105,561	3,066,842
Segment liabilities 349,321	80,353	429,674
Investments accounted for using the equity method 84,165	–	84,165
Acquisitions of property, plant and equipment 1,036	–	1,036
Amortisation expense 25,468	–	25,468

	Australia	New Zealand	Consolidated
	$’000	$’000	$’000
2008
Property revenue	223,501	9,807	233,308
Interest revenue	1,988	244	2,232
Share of net losses of associates accounted for using the equity method	(4,013)	–	(4,013)
	221,476	10,051	231,527
Net fair value gain of investment properties	225,366	8,882	234,248
Net foreign exchange gain	311	–	311
Other income	105	–	105
Total segment revenue/income	447,258	18,933	466,191
Segment result	352,082	1,300	353,382
Segment assets	3,421,350	124,484	3,545,834
Segment liabilities	818,280	79,747	898,027
Investments accounted for using the equity method	111,946	–	111,946
Acquisitions of property, plant and equipment	997	–	997
Amortisation expense	24,863	–	24,863

111

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 31. Reconciliation of net profit to net cash inflow from operating activities

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Net (loss)/profit	(393,754)	357,063	(405,942)	312,573
Capitalised interest	(8,311)	(584)	(1,390)	(584)
Net loss/(gain) on revaluation of investments	460,876	(234,152)	323,528	(178,374)
Share of net profits of associates accounted for using the
equity method	(31)	4,013	–	–
Net fair value (loss)/gain of derivatives	63,925	(485)	63,925	(485)
Net foreign exchange loss/(gain)	115	(55)	–	–
Change in operating assets and liabilities
(Increase) in receivables	(2,150)	(4,065)	(1,898)	(1,112)
Decrease/(increase) in other non-current assets – investments	19,007	24,083	109,837	(46,192)
(Increase) in other current assets	(835)	(35)	(553)	(64)
Decrease in other non-current assets	12,580	608	12,472	2,864
(Decrease)/increase in payables	(6,048)	5,317	(6,180)	3,573
Increase/(decrease) in other current liabilities	1,306	(8,800)	1,306	(8,800)
(Decrease)/increase in other non-current liabilities	(2,060)	10,225	(1,950)	10,221
Net cash inflow from operating activities	144,620	153,133	93,155	93,620

Note 32. Non-cash financing and investing activities

	Note	Consolidated	Consolidated	Parent
		2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Distributions reinvested	21	31,262	52,291	31,262	52,291

Note 33. Earnings per unit

(a) basic earnings per unit on (loss)/profit attributable to equity holders of the parent entity

Consolidated
2009	2008
	restated
cents	cents
(10.73)	11.19

(b) diluted earnings per unit on (loss)/profit attributable to equity holders of the parent entity

Consolidated
2009	2008
	restated
cents	cents
(10.73)	11.19

112 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

	Consolidated
	2009	2008
	$’000	$’000
Net (loss)/profit	(393,754)	357,063
Net (profit) attributable to minority interests	(3,695)	(3,681)
Net (loss)/profit attributable to the unitholders of the Trust
used in calculating basic and diluted earnings per unit	(397,449)	353,382

(d) weighted average number of units used as a denominator

	Consolidated	Consolidated
	2009	2008
		restated
	units	units
Weighted average number of units outstanding used in
calculation of basic and diluted earnings per unit	3,705,637,381	3,156,757,941

113

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

The Directors of DEXUS Funds Management Limited as Responsible Entity DEXUS Office Trust (the Trust) declare that the Financial Statements and notes set out on pages 66 to 113:

(i) comply with applicable Australian Equivalents to International Financial Reporting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the consolidated entity’s financial position as at 30 June 2009 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date.

In the Directors’ opinion:

(a) the Financial Statements and notes are in accordance with the Corporations Act 2001 ;
(b) there are reasonable grounds to believe that the Trust and its consolidated entities will be able to pay their debts as and when they become due and payable; and
(c) the Trust has operated in accordance with the provisions of the Constitution dated 17 June 1998 (as amended) during the year ended 30 June 2009.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the Directors.

==> picture [98 x 46] intentionally omitted <==

Christopher t beare

Chair

17 August 2009

114 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2009

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115

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OFFICE TRUST INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

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116 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009

DEXUS OPERATIONS TRUST

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Operations Trust (DXO or the Trust) and its consolidated entities present their Directors’ Report together with the consolidated Financial Statements for the year ended 30 June 2009.

The Trust together with DEXUS Diversified Trust, DEXUS Industrial Trust and DEXUS Office Trust form the DEXUS Property Group stapled security.

1. Directors and Secretaries

1.1 directors

The following persons were Directors or Alternate Directors of DXFM at any time during or since the end of the year to the date of this Directors’ Report, unless otherwise stated:

Directors	Appointed	Resigned
Christopher T Beare	4 August 2004
Elizabeth A Alexander AM	1 January 2005
Barry R Brownjohn	1 January 2005
John C Conde AO	29 April 2009
Stewart F Ewen OAM	4 August 2004
Victor P Hoog Antink	1 October 2004
Charles B Leitner III	10 March 2005	29 April 2009
Brian E Scullin	1 January 2005
Peter B St George	29 April 2009
Alternate Director
Andrew J Fay for	30 January 2006	29 April 2009
Charles B Leitner III

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2009 are as follows:

Tanya L Cox MBA MAICD FCIS (Company Secretary) Appointed: 1 October 2004

Tanya is Chief Operating Officer and Company Secretary of DXFM, DEXUS Holdings Pty Limited (DXH) and DEXUS Wholesale Property Limited (DWPL) and is a member of the Board Compliance Committee.

John C Easy B Comm LLB ACIS (Company Secretary) Appointed: 1 July 2005

John is General Counsel and Company Secretary for DXFM, DXH and DWPL and is a member of the Board Compliance Committee.

117

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

2. Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors’ meetings held during the year and each Director’s attendance at those meetings is set out in the table below.

Board Meetings	Main meetings	Main meetings	Specific meetings	Specific meetings
	held	attended2	held	attended2
Directors
Christopher T Beare	9	9	9	8
Elizabeth A Alexander AM	9	9	9	9
Barry R Brownjohn	9	9	9	7
John C Conde AO1	2	2	–	–
Stewart F Ewen OAM	9	8	9	9
Victor P Hoog Antink	9	9	9	9
Charles B Leitner III3	8	8	9	9
Brian E Scullin	9	9	9	9
Peter B St George1	2	2	–	–

1 Appointed 29 April 2009.

2 Indicates where a Director attended either personally or an Alternative was in attendance.

3 Based in New York, USA and resigned 29 April 2009.

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During the year the Board reviewed its Board Committee structure and following the appointment of Messrs Conde and St George in April 2009, amended its Committee membership effective 1 May 2009.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place at the end of the year and each Directors’ attendance at those meetings.

	Board	Audit	Board	Risk	Board	Compliance	Board	Nomination	Board	Finance
	Committee		Committee		Committee		and Remuneration		Committee
							Committee
	Held	Attended	Held	Attended	Held	Attended	Held	Attended	Held	Attended
Christopher T Beare	–	–	–	–	–	–	9	9	4	4
Elizabeth A Alexander AM	7	7	4	4	3	3	–	–	3	3
Barry R Brownjohn	7	6	4	4	–	–	–	–	4	4
John C Conde AO1	–	–	–	–	1	1	1	1	–	–
Stewart F Ewen OAM	–	–	–	–	–	–	9	9	–	–
Victor P Hoog Antink	–	–	–	–	–	–	–	–	–	–
Charles B Leitner III2	–	–	–	–	–	–	–	–	–	–
Brian E Scullin	6	6	3	3	4	4	9	9	–	–
Peter B St George1	1	1	1	1	–	–	–	–	1	1

1 Appointed 29 April 2009.

2 Resigned 29 April 2009.

118 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

3. Directors’ interests

n securities in the Trust; or
n options over, or any other contractual interest in, the Trust; or
n an interest in any other fund managed by DXFM or any other entity that forms part of the Trust.

4. Directors’ directorships in other listed entities

Directors	Company	Date appointed	Date resigned or ceased
			being a Director of a
			listed security
Elizabeth A Alexander AM	CSL Limited	12 July 1991
	Boral Limited	15 December 1999	24 October 2008
John C Conde AO	Whitehaven Coal Limited	3 May 2007
Brian E Scullin	Deutsche Asset Management (Australia) Limited1	24 October 2000	17 October 2006
	IYS Instalment Receipt Limited1	24 October 2000	17 October 2006
	SPARK Infrastructure RE Limited2	1 November 2005	24 August 2007
	BT Investment Management Limited	17 September 2007
Peter B St George	Boart Longyear Limited	21 February 2007
	SPARK Infrastructure RE Limited2	8 November 2005	31 December 2008
	First Quantum Minerals Limited3	20 October 2003
Alternate Director
Andrew J Fay
(alternate to Charles B Leitner III)	Deutsche Asset Management (Australia) Limited1	20 October 2004	17 October 2006
	IYS Instalment Receipt Limited1	20 October 2004	17 October 2006
	SPARK Infrastructure RE Limited2	7 December 2006	12 December 2007

1 IYS Instalment Receipt Limited had until 29 November 2006 issued ASX listed instalment receipts over units in the Deutsche Retail Infrastructure Trust, a managed investment scheme that was until 17 October 2006 listed but not quoted on the ASX and whose responsible entity was Deutsche Asset Management (Australia) Limited. Deutsche Asset Management (Australia) Limited ceased to be the Responsible Entity of IYS Instalment Receipt Limited on 17 October 2006.
2 SPARK Infrastructure RE Limited has issued ASX listed stapled securities trading as SPARK Infrastructure Group (ASX: SKI).
3 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

5. Principal activities

During the year the principal activity of the Trust was to be a trading Trust. There were no significant changes in the nature of the Trust’s activities during the year.

6. Total value of Trust assets

The total value of the assets of Trust as at 30 June 2009 was $438.6 million (2008: $439.1 million). Details of the basis of this valuation are outlined in note 1 of the Notes to the Financial Statements and form part of this Directors’ Report.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 119

DEXUS OPERATIONS TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

7. Review and results of operations

8. Likely developments and expected results of operations

9. Significant changes in the state of affairs

10. Matters subsequent to the end of the financial year

Since the end of the year the Directors of DXFM are not aware of any matter or circumstance not otherwise dealt with in this Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust’s affairs in future financial years.

11. Dividends

Dividends paid or payable by the Trust for the year ended 30 June 2009 were nil (2008: $9.2 million).

12. DXFM’s fees and associate interests

Details of fees paid or payable by the Trust to DXFM for the year ended 30 June 2009 are outlined in note 31 of the Notes to the Financial Statements and form part of this Directors’ Report.

The number of interests in the Trust held by DXFM or its associates as at the end of the financial year are nil (2008: nil).

15. Indemnification and insurance

16. Audit

16.1 auditor

PricewaterhouseCoopers (PwC or the Auditor) continues in office in accordance with section 327 of the Corporations Act 2001 .

16.2 non-audit services

Details of the amounts paid or payable to the Auditor, for audit and non-audit services provided during the year are set out in note 8 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor’s behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001 . The reasons for the Directors being satisfied are:

n Board Audit Committee has determined that the Auditor will not provide services that have the potential to impair the independence of its audit role, including:
participating in activities that are normally undertaken by management; and
being remunerated on a “success fee” basis.
n Board Audit Committee has determined that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including:
the preparation of accounting records;
the design and implementation of information technology systems;
conducting valuation, actuarial or legal services;
promoting, dealing in or underwriting securities; or

13. Units on issue

14. Environmental regulation

providing internal audit services.
n Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of nonaudit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of $100,000.

The above Directors’ statements are in accordance with the advice received from the Board Audit Committee.

16.3 auditor’s independence declaration

A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out in the Financial Statements and forms part of this Directors’ Report.

120 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

17. Corporate governance

DXFM’s Corporate Governance Statement is set out in a separate section of the DEXUS Property Group Annual Report.

18. Rounding of amounts and currency

19. Management representation

The Chief Executive Officer and Chief Financial Officer have reviewed the Trust’s Financial Reporting processes, policies and procedures together with its risk management and internal control and compliance policies and procedures. Following that review it is their opinion that the Trust’s financial records for the financial year have been properly maintained in accordance with the Corporations Act 2001 and the Financial Statements and their notes comply with the accounting standards and give a true and fair view.

20. Directors’ authorisation

==> picture [98 x 45] intentionally omitted <==

Christopher t beare Chair 17 August 2009

Victor p hoog antink Chief Executive Officer 17 August 2009

121

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

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122 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Revenue from ordinary activities
Property revenue	2	2,734	3,790	–	–
Dividend revenue		–	–	–	5,224
Interest revenue	3	874	4,557	12,738	12,515
Interest revenue from the Trusts		–	79,917	–	–
Recoverables from the Trusts		–	2,419	–	356
Management fee revenue	4	93,869	37,080	–	–
Total revenue from ordinary activities		97,477	127,763	12,738	18,095
Share of net profits of associates accounted
for using the equity method	18	–	2,892	–	–
Other income		121	–	470	–
Total income		97,598	130,655	13,208	18,095
Expenses
Property expenses		(1,424)	(1,403)	–	–
Responsible Entity fees	31	–	(282)	(581)	–
Finance costs	5	(24,288)	(97,543)	(24,270)	(8,928)
Depreciation and amortisation		(4,742)	(3,001)	(1)	(1)
Impairment		(75,161)	(61)	(33,463)	–
Employee benefits expense		(59,283)	(23,342)	–	–
Other expenses	7	(10,124)	(5,801)	(624)	(846)
Total expenses		(175,022)	(131,433)	(58,939)	(9,775)
(Loss)/profit before tax		(77,424)	(778)	(45,731)	8,320
Tax (expense)/benefit
Income tax (expense)/benefit	6 (a)	(2,682)	987	3,701	(890)
Total tax (expense)/benefit		(2,682)	987	3,701	(890)
(Loss)/profit after tax		(80,106)	209	(42,030)	7,430

Earnings per unit		Cents	Cents
Basic earnings per unit on (loss)/profit	37	(2.16)	0.01
attributable to equity holders of the parent entity
Diluted earnings per unit on (loss)/profit	37	(2.16)	0.01
attributable to equity holders of the parent entity

The above Income Statements should be read in conjunction with the accompanying notes.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 123

DEXUS OPERATIONS TRUST BALANCE SHEETS AS AT 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Current assets
Cash and cash equivalents	9	13,765	14,892	259	298
Receivables	10	16,195	21,743	1,158	1,522
Non-current assets classified as held for sale	11	55,000	–	–	–
Loans with related parties	12	–	–	10,062	9,196
Derivative financial instruments	13	–	1,173	–	1,173
Other financial assets	14	–	–	51,936	51,936
Current tax assets		1,422	124	802	702
Other	15	649	373	–	–
Total current assets		87,031	38,305	64,217	64,827
Non-current assets
Property, plant and equipment	16	123,078	135,911	116,348	73,499
Other financial assets	17	–	–	98,752	98,752
Loans with related parties	12	–	–	97,592	114,953
Deferred tax assets	19	15,152	9,749	5,796	139
Intangible assets	20	213,267	255,113	–	–
Other	21	66	67	61	62
Total non-current assets		351,563	400,840	318,549	287,405
Total assets		438,594	439,145	382,766	352,232
Current liabilities
Payables	22	5,284	3,577	565	785
Loans with related parties	12	48,932	48,932	48,932	48,932
Provisions	23	13,089	16,836	–	4,910
Derivative financial instruments	13	9,520	–	9,520	–
Total current liabilities		76,825	69,345	59,017	54,627
Non-current liabilities
Loans with related parties	12	325,867	273,108	325,867	273,108
Deferred tax liabilities	24	6,360	4,218	2,670	714
Provisions	23	13,533	9,818	–	–
Total non-current liabilities		345,760	287,144	328,537	273,822
Total liabilities		422,585	356,489	387,554	328,449
Net assets		16,009	82,656	(4,788)	23,783
Equity
Contributed equity	25	26,335	12,876	26,335	12,876
Reserves	26	42,738	63,293	–	–
Undistributed income	26	(53,064)	6,487	(31,123)	10,907
Total equity		16,009	82,656	(4,788)	23,783

The above Balance Sheets should be read in conjunction with the accompanying notes.

124 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Total equity at the beginning of the year		82,656	12,994	23,783	19,517
Asset revaluation reserve		–	63,293	–	–
Net income recognised directly in equity		–	63,293	–	–
Net (loss)/profit for the year		(80,106)	209	(42,030)	7,430
Total recognised income and expense for the year		(80,106)	63,502	(42,030)	7,430
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of transaction costs	25	13,459	6,028	13,459	6,028
Dividends provided for or paid	27	–	(9,192)	–	(9,192)
Undistributed income acquired		–	402	–	–
Deconsolidation of investment		–	8,922	–	–
Total transactions with equity holders		13,459	6,160	13,459	(3,164)
Total equity at the end of the year		16,009	82,656	(4,788)	23,783
Total recognised income and expense for the year is attributable to:
Equity holders of the parent		(80,106)	63,502	(42,030)	7,430
Total recognised income and expense for the year		(80,106)	63,502	(42,030)	7,430

The above Statements of Changes In Equity should be read in conjunction with the accompanying notes.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 125

DEXUS OPERATIONS TRUST CASH FLOW STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

		Consolidated	Consolidated	Parent
	Notes	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		113,338	48,781	10	1,234
Payments in the course of operations (inclusive of GST)		(76,540)	(23,261)	(2,157)	(1,871)
Interest received		882	3,942	5,794	5,935
Finance costs paid to financial institutions		(1,930)	(54,229)	(1,913)	(25)
Dividends received		–	3,250	–	11,724
Income and withholding taxes paid		(7,241)	(4,650)	(98)	(2,543)
Net cash inflow/(outflow) from operating activities	35	28,509	(26,167)	1,636	14,454
Cash flows from investing activities
Payments for acquisition of investments net of cash		–	(68,012)	(27,165)	(81,675)
Payments for property, plant and equipment		(27,165)	(72,300)	(41,711)	(72,300)
Payments for capital expenditure on property, plant and
equipment		(44,906)	(3,663)	–	–
Deconsolidation of investment		–	(1,832)	–	–
Net cash outflow from investing activities		(72,071)	(145,807)	(68,876)	(153,975)
Cash flows from financing activities
Establishment expenses and unit issue cost		(380)	(4)	(380)	(4)
Borrowings provided to entities within DXS		(74,884)	(856,327)	(14,668)	(158,864)
Borrowings provided by entities within DXS		108,770	1,189,670	73,320	302,366
Issue of units		12,275	289	12,275	–
Proceeds from borrowings		–	807,446	–	–
Repayment of borrowings		–	(893,500)	–	–
Repayment of loan notes		–	(51,936)	–	–
Dividends paid to unitholders		(3,346)	(3,827)	(3,346)	(3,827)
Dividends paid to related parties		–	(5,974)	–	–
Net cash inflow from financing activities		42,435	185,837	67,201	139,671
Net increase/(decrease) in cash and cash equivalents		(1,127)	13,863	(39)	150
Cash and cash equivalents at the beginning of the year		14,892	1,029	298	148
Cash and cash equivalents at the end of the year	9	13,765	14,892	259	298

The above Cash Flow Statements should be read in conjunction with the accompanying notes.

126 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

Note 1. Summary of significant accounting policies

(a) basis of preparation

DEXUS Funds Management Limited as Responsible Entity for each entity within DXS may only unstaple if approval is obtained by a special resolution of the stapled security holders.

As at 30 June 2009, the parent entity had a net assets deficiency of $4.8 million. The accounts have been prepared on a going concern basis due to the existence of cross guarantee arrangements with other entities within the DXS group. Gearing is managed centrally for DXS. The gearing ratio as disclosed in the DEXUS Property Group Annual Report 2009 is 32% (refer note 30 (1) of the DXS Financial Statements).

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

The preparation of Financial Statements in conformity with AIFRS may require the use of certain critical accounting estimates and management to exercise its judgement in the process of applying the Trust’s accounting policies. Other than the estimation described in notes 1(e), 1 (m), 1(u) and 1(v), no key assumptions concerning the future or other estimation of uncertainty at the reporting date have a significant risk of causing material adjustments to the Financial Statements in the next annual reporting period.

(c) Revenue recognition

(i) Rent

(ii) Management Fee Revenue

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

(iii) Interest revenue

Interest revenue is brought to account on an accruals basis using the effective interest rate method and, if not received at balance date, is reflected in the Balance Sheets as a receivable.

(iv) Dividends and distribution revenue

Revenue from dividends and distributions are recognised when declared. Amounts not received at balance date are included as a receivable in the Balance Sheets.

(d) expenses

Expenses are brought to account on an accruals basis and, if not paid at balance date, are reflected in the Balance Sheets as a payable.

(i) Property expenses

(ii) Borrowing costs

(b) principles of consolidation

(i) Controlled entities

127

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(e) derivatives and other financial instruments

(i) Derivatives

The Trust’s activities expose it to a variety of financial risks including foreign exchange risk and interest rate risk. Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps to manage its exposure to certain risks. Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Trust’s exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes. Even though derivative financial instruments are entered into for the purpose of providing the Trust with an economic hedge, the Trusts have elected not to apply hedge accounting under AASB 139: Financial Instruments: Recognition and Measurement . Accordingly, derivatives including interest rate swaps are measured at fair value with any changes in fair value recognised in the Income Statements.

(ii) Embedded derivatives

(iii) Debt and equity instruments issued by the Trust

Interest and distributions are classified as expenses or as distributions of profit consistent with the Balance Sheets classification of the related debt or equity instruments.

(iv) Financial guarantee contracts

(v) Other financial assets

Loans and other receivables are measured at amortised cost using the effective interest rate method less impairment.

(f) goods and services tax/value added tax

Revenues, expenses and capital assets are recognised net of the amount of Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

(g) taxation

The Trust is liable for income tax and applies the following policy in determining the tax expense, assets and liabilities:

n The income tax expense for the year is the tax payable on the current year’s taxable income based on a tax rate of 30% adjusted for changes in deferred tax assets and liabilities and unused tax losses;
n Deferred tax assets and liabilities are recognised for temporary differences arising from differences between the carrying amount of assets and liabilities and the corresponding tax base of those items. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax assets or liabilities. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. 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;
n Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses;
n Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future; and
n Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

128 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Tax consolidation

DXH is the head entity in the DXH tax consolidated group comprising DEXUS Funds Management Limited, DEXUS Property Services Pty Limited, DEXUS Financial Services Pty Limited and DEXUS Wholesale Property Limited. The implementation date for the tax consolidated group was 1 October 2004. During the year DEXUS CMBS Issuer Pty Limited was formed and joined the tax consolidated group.

The entities in the DXH tax consolidated group entered into a Tax Sharing Deed on 29 June 2007 (effective 1 July 2006). In the opinion of the Directors, this limits the joint and several liability of the whollyowned entities in the case of a default by the head entity, DXH.

DXH and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These notional tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right pursuant to the Tax Funding Deed entered into on 29 June 2007 (effective 1 July 2006).

Under the Tax Funding Deed, the wholly owned entities fully compensate DXH for any current tax payable assumed and are compensated by DXH for any current tax receivable. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ Financial Statements and are recognised as current intercompany receivables or payables.

(h) dividends

In accordance with the Trust’s Constitution, the Trust distributes its distributable income to unitholders by cash or reinvestment. Dividends are provided for when they are approved by the Board of Directors and declared.

(i) Repairs and maintenance

Plant is required to be overhauled on a regular basis and is managed as part of an ongoing major cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the replaced component will be derecognised and the replacement costs capitalised. Other routine operating maintenance, repair costs and minor renewals are also charged as expenses as incurred.

(j) Cash and cash equivalents

(k) Receivables

(l) non-current assets (or disposal groups) held for sale and discontinued operations

(m) other financial assets

Interests held by the Trust in controlled entities are measured at cost. The carrying amount of these investments is reviewed annually to ensure they are not in excess of the recoverable amount of the investments.

(n) property, plant and equipment

All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to its acquisition. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Trust and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income Statements during the financial period in which they are incurred.

(o) depreciation of property, plant and equipment

Land is not depreciated. Depreciation on buildings (including fit-out) is calculated on a straight-line basis so as to write off the net cost of each non-current asset over its expected useful life. Estimates for remaining useful lives are reviewed on a regular basis for all assets and are as follows:

	Buildings (including fit-out)	5-50 years
	IT equipment	3-5 years

(p) leasing fees

Leasing fees incurred are capitalised and amortised over the lease periods to which they relate.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 129

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(q) lease incentives

(r) investments accounted for using the equity method

(s) business combinations

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date. The excess of the acquisition cost over the fair value of the Trust’s share of identifiable net assets acquired is recorded as goodwill (refer note 1(t)). If the cost is less than the fair value of the Trust’s share of the identifiable net assets acquired, the difference is recognised directly in the Income Statements.

(t) impairment of assets

Other assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(u) intangible assets

(i) Goodwill

As part of a business combination, the identifiable net assets acquired are measured at fair value. The excess of the acquisition costs over the fair value of the identifiable net assets is brought to account as goodwill in the Balance Sheets. The carrying value of the goodwill is tested for impairment at each reporting date with any decrement in value taken to the Income Statements as an expense.

(ii) Management rights

Management rights represent the asset management rights owned by the Trust which entitle it to management fee revenue from both finite and indefinite life trusts. Those rights that are deemed to have a finite useful life, are measured at cost and amortised using the straight-line method over their estimated useful lives which vary from six to 22 years.

130 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(v) Financial assets and liabilities

(i) Classification

The Trust has classified its financial assets and liabilities as follows:

Financial Asset/Liability	Classification	Valuation Basis	Reference
Cash and cash equivalents	Fair value through profit or loss	Fair value	Refer note 1(j)
Receivables	Loans and receivables	Amortised cost	Refer note 1(k)
Other financial assets	Loans and receivables	Amortised cost	Refer note 1(e)
Payables	Financial liability at amortised cost	Amortised cost	Refer note 1(w)
Interest bearing liabilities	Financial liability at amortised cost	Amortised cost	Refer note 1(x)
Derivatives	Fair value through profit or loss	Fair value	Refer note 1(e)

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired.

(ii) Fair value estimation of financial assets and liabilities

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

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques including dealer quotes for similar instruments and discounted cash flows. In particular, the fair value of interest rate swaps and cross currency swaps are calculated as the present value of the estimated future cash flows, the fair value of forward exchange rate contracts is determined using forward exchange market rates at the balance sheet date, and the fair value of interest rate option contracts are calculated as the present value of the estimated future cash flows taking into account the time value and implied volatility of the underlying instrument.

(w) payables

These amounts represent liabilities for amounts owing at balance date. The amounts are unsecured and are usually paid within 30 days of recognition.

(x) interest bearing liabilities

(y) employee benefits

(i) Wages, salaries and annual leave

Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Trust expects to pay at reporting date including related on-costs, such as workers compensation, insurance and payroll tax.

(ii) Long service leave

The provision for employee benefits for long service leave represents the present value of the estimated future cash outflows, to be made resulting from employees’ services provided to reporting date.

The provision is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attaching to national government bonds at reporting date which most closely match the term of the maturity of the related liabilities. The unwinding of the discount is treated as long service leave expense.

(z) earnings per unit

Earnings per unit are determined by dividing the net profit attributable to equity holders of the parent entity by the weighted average number of ordinary units outstanding during the year.

(aa) Segment reporting

(ab) Rounding of amounts

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 131

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(ac) new accounting standards and interpretations

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 are effective for annual reporting periods commencing on or after 1 January 2009.

(ii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 .

(iv) Revised AASB 3 Business Combinations , AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 . Revised accounting standards for business combinations and consolidated Financial Statements were issued in March 2008

(v) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 July 2009).

In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and AASB 127 Consolidated and Separate Financial Statements . The Trust will apply the revised rules prospectively from 1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment as a result of the dividend payment. Under the entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary’s fair value.

(vi) AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project .

AASB 101 (Amendment) Presentation of Financial Statements .

and are operative for annual reporting periods beginning on or after 1 July 2009, but may apply earlier. The Trust will apply the revised standards from 1 July 2009. However, the new rules generally apply only prospectively to transactions that occur after the application date of the standard. Their impact will therefore depend on whether the Trust will enter into any business combinations or other transactions that affect the level of ownership held in the controlled entities in the year of initial application.

132 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

AASB 119 (Amendment) Employee Benefits (effective from 1 January 2009).

The amendments relevant to the Trust includes:

n The distinction between short-term and long-term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered.
n AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires contingent liabilities to be disclosed, not recognised. AASB 119 has been amended to be consistent.

The Trust will apply the AASB 119 (Amendment) from 1 July 2009. There will be no impact on the amounts recognised in the Financial Statements.

AASB 123 (Amendment) Borrowing Costs .

The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in AASB 139 Financial Instruments: Recognition and Measurement . This eliminates the inconsistency of terms between AASB 139 and AASB 123. The Trust will apply the AASB 123 (Amendment) prospectively to the capitalisation of borrowing costs on qualifying assets from 1 July 2009. This is not expected to have any impact on the amounts recognised in the entity’s Financial Statements.

AASB 127 (Amendment) Consolidated and Separate Financial Statements (effective from 1 January 2009).

AASB 128 (Amendment) Investments in Associates (and consequential amendments to AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures ) (effective from 1 January 2009).

AASB 136 (Amendment) Impairment of Assets .

AASB 138 (Amendment) Intangible Assets (effective from 1 January 2009).

A prepayment may only be recognised in the event that payment has been made in advance of obtaining a right of access to goods or a receipt of services. Therefore to the extent that the expenditure is incurred to provide future economic benefits to an entity, but no intangible asset or other asset is acquired or created that can be recognised, the entity recognises such expenditure as an expense when it has a right to access the goods or when it receives the services. The Trust will apply the AASB 138 (Amendment) from 1 July 2009; however this is not expected to have an impact on the amounts recognised in the Trust’s Financial Statements.

AASB 140 (Amendment) Investment Property (and consequential amendments to AASB 116).

(vii) AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments (effective for annual periods beginning on or after 1 January 2009).

(viii) AASB 2009-3 Amendments to Australian Accounting Standards – Embedded Derivatives (effective for annual periods ending on or after 30 June 2009).

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 133

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 2. Property revenue

Note 2. Property revenue	Note 2. Property revenue
Consolidated		Parent	entity
2009	2008	2009		2008
$’000	$’000	$’000		$’000
Rent and recoverable outgoings 2,442	3,732	–		–
Other revenue 292	58	–		–
Total property revenue 2,734	3,790	–		–

Note 3. Interest revenue

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Interest revenue from financial institutions 874	863	81	204
Interest revenue from related parties –	3,694	12,657	12,311
Total interest revenue 874	4,557	12,738	12,515

Note 4. Management fee revenue

Note 4. Management fee revenue
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Responsible Entity fees	40,012	14,638	–		–
Asset management fees	11,209	4,467	–		–
Property management fees	19,985	4,986	–		–
Capital works and development fees	9,851	11,075	–		–
Wages recovery and other fees	12,812	1,914	–		–
Total management fee revenue	93,869	37,080	–		–

Note 5. Finance costs

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Interest paid/payable	–	90,597	–	–
Interest paid to related parties	18,868	–	18,868	11,275
Amount capitalised	(7,203)	(1,198)	(7,203)	(1,198)
Other finance costs	19	2,775	1	24
Net fair value loss/(gain) of interest rate swaps	12,604	5,369	12,604	(1,173)
Total finance costs	24,288	97,543	24,270	8,928

The average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 6.90% (2008: 6.40%).

134 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 6. Income tax

(a) income tax benefit/(expense)

Note 6. Income tax (a) income tax benefit/(expense)
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Current tax	5,943	3,647	–		317
Deferred tax	(3,261)	(4,634)	(3,701)		573
Income tax expense/(benefit)	2,682	(987)	(3,701)		890
Deferred income tax expense/(benefit) included
in income tax benefit/(expense) comprises:
(Increase) in deferred tax assets	(5,403)	(5,434)	(5,657)		(139)
Increase in deferred tax liabilities	2,142	800	1,956		712
	(3,261)	(4,634)	(3,701)		573

(b) Reconciliation of income tax benefit/(expense) to net profit

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Profit before tax (77,424)	(778)	(45,731)	8,320
Profit not subject to income tax (note 1(g)) –	–	–	–
(77,424)	(778)	(45,731)	8,320
Prima facie tax (benefit)/expense at the Australian tax rate of 30% (2008: 30%) (23,227)	(234)	(13,719)	2,496
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Depreciation and amortisation 51	17	–	–
Share of net profits of associates –	700	–	–
Tax offsets from franked dividends –	(1,567)	–	(1,567)
Sundry items 17	25	(21)	–
Unused tax losses 3,470	–	–	–
Impairment 22,371	–	10,039	–
25,909	(825)	10,018	(1,567)
Under/(over) provision in prior year –	72	–	(39)
Income tax expense/(benefit) 2,682	(987)	(3,701)	890

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 135

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 7. Other expenses

Note 7. Other expenses
		Consolidated		Parent	entity
	Note	2009	2008	2009		2008
		$’000	$’000	$’000		$’000
Audit and other fees	8	709	655	233		220
Custodian fees		15	12	15		12
Legal and other professional fees		1,115	806	66		27
Consultancy fees		1,003	505	–		3
Registry costs and listing fees		65	26	65		26
Occupancy expenses		267	461	–		–
Administration expenses		3,987	1,180	–		–
Other staff expenses		2,417	1,171	–		5
Other expenses		546	985	245		553
Total other expenses		10,124	5,801	624		846

Note 8. Audit and advisory fees

During the year the auditor of the parent entity and its related practices and non-related audit firms earned the following remuneration:

(a) assurance services

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Audit services
PwC audit and review of financial reports and
other audit work under the_Corporations Act 2001_	204,094	205,387	131,121	152,370
PwC fees paid in relation to outgoings audit1	–	23,200	–	–
Remuneration for audit services to PwC	204,094	228,587	131,121	152,370
Fees paid to non-PwC audit firms	180,455	312,776	–	–
Total remuneration for assurance services	384,549	541,363	131,121	152,370
(b) taxation services
Fees paid to PwC Australia	242,760	105,744	88,855	60,260
Remuneration for taxation services to PwC	242,760	105,744	88,855	60,260
Fees paid to non-PwC taxation firms	81,962	31,161	13,119	6,898
Total remuneration for taxation services2	324,722	136,905	101,974	67,158
Total audit and taxation fees1	709,271	678,268	233,095	219,528
(c) Fees paid to pwC for transaction services
PwC assurance services in respect of capital raisings	7,563	–	7,563	–
PwC taxation services	1,449	–	1,449	–
PwC other transaction and advisory fees	53,841	–	53,841	–
Total transaction service fees	62,853	–	62,853	–
Total audit, taxation and transaction service fees	772,124	678,268	295,948	219,528

1 Fees paid in relation to outgoing audits are included in property expenses. Therefore, total audit and taxation fees included in other expenses is $709,000.

2 These services include general compliance work, one off project work and advice with respect to the management of day to day tax affairs of the Trust.

136 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 9. Current assets – cash and cash equivalents

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Cash at bank	3,079	4,194	259	298
Short-term deposits	10,686	10,698	–	–
Total current assets – cash and cash equivalents	13,765	14,892	259	298

Note 10. Current assets – receivables

Note 10. Current assets – receivables
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Fees receivable	11,895	15,175	–		–
GST receivable	616	903	1,158		1,522
Receivables from related entities	3,386	5,218	–		–
Interest receivable	31	40	–		–
Other receivables	267	407	–		–
Total current assets – receivables	16,195	21,743	1,158		1,522

Note 11. Non-current assets classified as held for sale

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Property, plant and equipment held for sale	55,000	–	–	–
Total non-current assets classified as held for sale	55,000	–	–	–

The property, plant and equipment held for sale comprises of 343 George Street, Sydney ($55 million).

Refer note 33 for further discussion regarding these forthcoming disposals.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 137

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 12. Loan with related parties

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Current assets – loan with related parties
Non-interest bearing loans with controlled entities	–	–	10,062	9,196
Total current-assets – loans with related parties	–	–	10,062	9,196
Non-current assets – loan with related parties
Interest bearing loans with controlled entities	–	–	97,592	114,953
Total non-current assets – loan with related parties	–	–	97,592	114,953
Current liabilities – loan with related parties
Non-interest bearing loans with the Trusts1	48,932	48,932	48,932	48,932
Total current liabilities – loan with related parties	48,932	48,932	48,932	48,932
Non-current liabilities – loan with related parties
Intercompany loan2	325,867	273,108	325,867	273,108
Total non-current liabilities – loan with related parties	325,867	273,108	325,867	273,108

1 Non-interest bearing loans with the Trusts were created to effect the stapling of the Trust, DIT, DOT and DDF. These loan balances eliminate on consolidation.

2 The intercompany loans represent interest-bearing loans with DEXUS Finance Pty Limited (DXF) to or from the Trust. These loan balances eliminate on consolidation.

Note 13. Derivative financial instruments

Note 13. Derivative financial instruments
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Current assets
Interest rate swap contracts	–	1,173	–		1,173
Total current assets – derivative financial instruments	–	1,173	–		1,173
Current liabilities
Interest rate swap contracts	9,520	–	9,520		–
Total current liabilities – derivative financial instruments	9,520	–	9,520		–
Net current derivative financial instruments	(9,520)	1,173	(9,520)		1,173

Refer note 28 for further discussion regarding derivative financial instruments.

Note 14. Other financial assets

Note 14. Other financial assets
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Loan notes receivable from DEXUS Holdings Pty Limited	–	–	51,936		51,936
Total current assets – other financial assets	–	–	51,936		51,936

On 27 September 2004, DEXUS Holdings Pty Limited (DXH) issued an equal amount of loan notes to its two owners – First Australian Property Group Holdings Pty Limited (FAP) and DEXUS Operations Trust (DXO), in order to fund its 100% acquisition of DEXUS Funds Management Limited (DXFM). On 31 October 2006, DXH issued further loan notes of equal amounts to its two owners to fund the acquisition of DEXUS Wholesale Property Limited (DWPL) (the Responsible Entity of DEXUS Wholesale Property Fund). These loan notes pay a coupon of 11% per annum, mature on 1 October 2024. On 21 February 2008 DXH redeemed the loan notes on issue to FAP.

138 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 15. Current assets – other

Note 15. Current assets – other
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Prepayments	649	373	–		–
Total current assets – other	649	373	–		–

Note 16. Non-current assets – property, plant and equipment

(a) property, plant and equipment 30 June 2009

30 June 2009
		Consolidated				Parent entity
	Construction	Land and	IT and	Total	Construction	Land and	IT and	Total
	in progress	freehold	office		in progress	freehold	office
		buildings				buildings
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Opening balance as at
1 July 2008	31,999	97,873	6,039	135,911	31,999	41,500	–	73,499
Additions	49,088	29,617	1,521	80,226	49,088	27,224	–	76,312
Depreciation charge	–	(2,375)	(1,801)	(4,176)	–	–	–	–
Transfer to non-current assets
classified as held for sale	–	(55,000)	–	(55,000)	–	–	–	–
Impairment	(33,463)	(420)	–	(33,883)	(33,463)	–	–	(33,463)
Closing balance as at
30 June 2009	47,624	69,695	5,759	123,078	47,624	68,724	–	116,348
Cost	81,087	78,211	8,145	167,443	81,087	68,724	–	149,811
Accumulated depreciation	–	(8,096)	(2,386)	(10,482)	–	–	–	–
Impairment	(33,463)	(420)	–	(33,883)	(33,463)	–	–	(33,463)
Net book value as at
30 June 2009	47,624	69,695	5,759	123,078	47,624	68,724	–	116,348

30 June 2008

30 June 2008
		Consolidated				Parent entity
	Construction	Land and	IT and	Total	Construction	Land and	IT and	Total
	in progress	freehold	office		in progress	freehold	office
		buildings				buildings
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Opening balance as at
1 July 2007	–	56,906	–	56,906	–	–	–	–
Additions	31,999	43,177	6,624	81,800	31,999	41,500	–	73,499
Depreciation charge	–	(2,210)	(585)	(2,795)	–	–	–	–
Closing balance as at
30 June 2008	31,999	97,873	6,039	135,911	31,999	41,500	–	73,499
Cost	31,999	103,594	6,624	142,217	31,999	41,500	–	73,499
Accumulated depreciation	–	(5,721)	(585)	(6,306)	–	–	–	–
Net book value as at
30 June 2008	31,999	97,873	6,039	135,911	31,999	41,500	–	73,499

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 139

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 16. Non-current assets – property, plant and equipment (continued)

(b) impairment

During the year, DXO carried out a review of the recoverable amount of its development properties resulting in the recognition of an impairment loss of $33.9 million that has been recognised in the Income Statements.

The total impairment comprises $33.5 million for Greystanes and $0.4 million in relation to 343 George Street.

(c) acquisitions and developments

Southern Employment Lands, Greystanes Estate, NSW

The Greystanes site has a gross land area of 47.62 hectares acquired from Boral in 4 stages. Acquisition of Stage 2 and 3 occurred during the year with a total cost of $27.2 million. The final stage is expected to be acquired in the second half of 2009/10. Total development costs excluding land acquisition to 30 June 2009 are $81.1 million.

Note 17. Non-current assets – other financial assets

Name of entity	Principal activity	Ownership Interest	Ownership Interest	Parent
		2009	2008	2009	2008
		%	%	$’000	$’000
Held by parent entity
Barrack Street Trust	Commercial property investment	100.0	100.0	99	99
DEXUS Holdings Pty Limited1	Financial services	100.0	100.0	98,652	98,652
DEXUS Finance Pty Limited2	Financial services	25.0	25.0	1	1
Total non-current assets – other financial assets				98,752	98,752

1 On 21 February 2008, DXO purchased the remaining 50% interest in DXH from First Australian Property Group Holdings Pty Limited. From this date DXH became a wholly owned subsidiary of DXO and is therefore consolidated.
2 On 27 June 2008, DEXUS Finance Pty Limited issued 3 additional units to DDF, DIT and DOT for $96,400 each. Prior to this date, the entity was wholly owned and therefore consolidated by DXO.

Both the parent entity and the subsidiary entities were formed in Australia.

Reconciliation

Reconciliation
	Parent	entity
	2009		2008
	$’000		$’000
Opening balance as at 1 July 2008	98,752		100
Amount transferred as equity accounted investments	–		18,054
Acquisitions	–		80,598
Closing balance as at 30 June 2009	98,752		98,752

140 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 18. Non-current assets – investments accounted for using the equity method

Investments are accounted for in the consolidated Financial Statements using the equity method of accounting (refer note 1). Information relating to these entities is set out below.

Name of entity	Principal activity	Ownership Interest	Ownership Interest	Consolidated	Consolidated	Parent	entity
		2009	2008	2009	2008	2009	2008
		%	%	$’000	$’000	$’000	$’000
Held by parent entity
DEXUS Holdings Pty Limited1	Asset, property and funds management	100.0	100.0	–	–	–	–
Total				–	–	–	–

Both the parent entity and the consolidated entities were formed in Australia.

1 On 21 February 2008, DXO purchased the remaining 50% interest in DXH from First Australian Property Group Holdings Pty Limited. From this date DXH became a wholly owned subsidiary of DXO and is therefore consolidated.

	Consolidated
	2009	2008
	$’000	$’000
Movements in carrying amounts of investments accounted for using the equity method
Opening balance as at 1 July 2008	–	17,886
Share of net profits after tax	–	2,892
Dividends received	–	(2,724)
Transfer to other financial assets	–	(18,054)
Closing balance as at 30 June 2009	–	–
Results attributable to associates
Operating profits before income tax	–	4,168
Income tax expense	–	(1,276)
Operating profits after income tax	–	2,892
Less: Dividends received	–	(2,724)
	–	168
Undistributed income attributable to associates as at 1 July 2008	–	35
Undistributed income attributable to associates as at 30 June 2009	–	203

Summary of the performance and financial position of investments accounted for using the equity method

The Trust’s share of aggregate profits, assets and liabilities of investments accounted for using the equity method are:

	Consolidated
	2009	2008
	$’000	$’000
Profits from ordinary activities after income tax expense	–	2,892
Assets	–	–
Liabilities	–	–
Share of associates’ expenditure commitments
Capital commitments	–	–

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 141

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 19. Non-current assets – deferred tax assets

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
The balance comprises temporary differences attributable to:
Derivative financial instruments	2,650	–	2,650	–
Tax losses	3,081	2,552	3,081	–
Employee provision	8,390	6,849	–	–
Other	1,031	348	65	139
Net deferred tax assets	15,152	9,749	5,796	139
Movements
Opening balance at 1 July 2008	9,749	3,607	139	–
Acquisition	–	4,810	–	–
Deconsolidation	–	(4,102)	–	–
Credited to the Income Statements	5,403	5,434	5,657	139
Closing balance at 30 June 2009	15,152	9,749	5,796	139

Note 20. Intangible assets

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Management rights
Opening balance as at 1 July 2008	252,176	–	–	–
Additions	–	252,382	–	–
Amortisation charge	(566)	(206)	–	–
Impairment	(41,110)	–	–	–
Closing balance as at 30 June 2009	210,500	252,176	–	–
Cost	252,382	252,382	–	–
Accumulated amortisation	(772)	(206)	–	–
Impairment	(41,110)	–	–
Total management rights	210,500	252,176	–	–

Management rights represent the asset management rights owned by DXH which entitle it to management fee revenue from both finite life trusts ($9,223,164) and indefinite life trusts ($201,276,836). Those rights that are deemed to have a finite useful life are measured at cost and amortised using the straight-line method over their estimated useful lives which vary from six to 22 years.

142 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

impairment of management Rights

During the period, DXS carried out a review of the recoverable amount of its intangible assets resulting in the recognition through the Income Statements of an impairment loss of $41.1 million in relation to management rights.

The value in use has been determined using management forecasts in a five year discounted cash flow model. Forecasts were based on projected returns of the business in light of current market conditions. The performance in year five has been used as a terminal value. The cash flows have been discounted at 8.2%.

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Goodwill
Opening balance as at 1 July 2008	2,937	–	–	–
Additions	–	2,998	–	–
Impairment	(170)	(61)	–	–
Closing balance as at 30 June 2009	2,767	2,937	–	–
Cost	2,998	2,998	–	–
Accumulated impairment	(231)	(61)	–	–
Total goodwill	2,767	2,937	–	–
Total intangibles	213,267	255,113	–	–

Note 21. Non-current assets – other

Note 21. Non-current assets – other
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Tenant and other bonds	5	5	–		–
Other	61	62	61		62
Total non-current assets – other	66	67	61		62

Note 22. Current liabilities – payables

Note 22. Current liabilities – payables
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Trade creditors	297	75	19		12
Accruals	1,904	1,704	267		773
Accrued capital expenditure	1,048	98	233		–
Prepaid income	374	244	–		–
Responsible Entity fee payable	–	–	46		–
Employee related expenses	1,661	1,456	–		–
Total current liabilities – payables	5,284	3,577	565		785

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 143

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 23. Provisions

Note 23. Provisions	Note 23. Provisions
Consolidated		Parent	entity
2009	2008	2009		2008
$’000	$’000	$’000		$’000
Current
Provision for distribution –	4,910	–		4,910
Provision for employee benefits 13,089	11,926	–		–
13,089	16,836	–		4,910

Movements in each class of provision during the financial year, other than employee benefits, are set out below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Provision for distribution
Opening balance as at 1 July 2008	4,910	5,576	4,910	5,576
Additional provisions	–	9,192	–	9,192
Payments and reinvestment of distributions	(4,910)	(9,858)	(4,910)	(9,858)
Closing balance as at 30 June 2009	–	4,910	–	4,910

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Non-current
Provision for employee benefits	13,533	9,818	–	–
	13,533	9,818	–	–

Note 24. Non-current liabilities – deferred tax liabilities

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
The balance comprises temporary differences attributable to:
Derivative financial instruments	–	352	–	352
Goodwill	2,767	2,937	–	–
Property, plant and equipment	2,670	–	2,670	–
Other	923	929	–	362
Total non-current liabilities – deferred tax liabilities	6,360	4,218	2,670	714
Movements
Opening balance at 1 July 2008	4,218	27	714	1
Acquisition	–	3,391	–	–
(Debited)/credited to Income Statements	2,142	800	1,956	713
Closing balance at 30 June 2009	6,360	4,218	2,670	714

144 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 25. Contributed equity

(a) Contributed equity of equity holders

Note 25. Contributed equity (a) Contributed equity of equity holders
	Consolidated
	2009	2008
	$’000	$’000
Opening balance as at 1 July 2008	12,876	6,848
Distributions reinvested	1,564	6,032
Issue of units	12,275	–
Cost of issuing units	(380)	(4)
Closing balance as at 30 June 2009	26,335	12,876

(b) number of units on issue

(b) number of units on issue
	Consolidated
	2009	2008
	No. of units	No. of units
Opening balance as at 1 July 2008	3,040,019,487	2,894,600,006
Distributions reinvested	100,368,579	145,419,481
Issue of units	1,560,453,600	–
Closing balance as at 30 June 2009	4,700,841,666	3,040,019,487

Terms and conditions

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust.

Each stapled security entitles the holder to one vote, either in person or by proxy, at a meeting of each of the Trusts.

(c) issue of securities

December 2008 Institutional placement and share purchase plan

On 10 December 2008 pursuant to an institutional placement 391.7 million securities were issued at a price of 1.1 cents per unit.

On 6 February 2009 pursuant to a security purchase plan 16.4 million securities were issued at a price of 1.0 cents per unit.

May 2009 Institutional placement, institutional entitlement offer and the retail entitlement offer

On 6 May 2009 pursuant to an institutional placement, institutional entitlement offer and the retail entitlement offer for which valid applications were received, a total of 1025.1 million units were issued at a price of 0.7 cents per unit.

On 28 May 2009 pursuant to a retail entitlement offer 127.2 million units were issued at a price of 0.7 cents per unit.

(d) distribution reinvestment plan

On 29 August 2008, 45,087,887 units were issued at a unit price of $0.0346 in relation to the June 2008 distribution period.

On 27 February 2009, 55,280,692 units were issued at a unit price of nil in relation to the December 2008 distribution period.

Approval of issues of Stapled Securities to an underwriter in connection with issues under a Distribution Reinvestment Plan

Such an issue will not be counted for the purposes of the calculation of the Trust’s annual placement limit of 15% under the ASX Listing Rules.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 145

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 26. Reserves and undistributed income

(a) Reserves

Note 26. Reserves and undistributed income (a) Reserves
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Asset revaluation reserve	42,738	63,293	–		–
Total reserves	42,738	63,293	–		–
Movements:
Asset revaluation reserve
Opening balance as at 1 July 2008	63,293	–	–		–
Revaluation increment on investment	–	63,293	–		–
Transfer to undistributed income	(20,555)	–	–		–
Total movement in asset revaluation reserve	(20,555)	63,293	–		–
Closing balance as at 30 June 2009	42,738	63,293	–		–

(b) nature and purpose of reserves

Asset revaluation reserve

The asset revaluation reserve is used to record the fair value adjustment arising on a business combination (refer note 32).

(c) undistributed income

(c) undistributed income
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Undistributed income as at 1 July 2008	6,487	6,146	10,907		12,669
Net (loss)/profit attributable to unit holders	(80,106)	209	(42,030)		7,430
Acquisition of investment	–	402	–		–
Deconsolidation of investment	–	8,922	–		–
Distributions provided for or paid	–	(9,192)	–		(9,192)
Transfer from revaluation reserve	20,555	–	–		–
Undistributed income as at 30 June 2009	(53,064)	6,487	(31,123)		10,907

Note 27. Dividends paid and payable

(a) dividends paid/payable to unit holders

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
31	December (paid 27 February 2009) –	4,282	–	4,282
30	June (payable 28 August 2009) –	4,910	–	4,910
	–	9,192	–	9,192

146 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(b) dividend rate

(b) dividend rate
	Consolidated		Parent	entity
	2009	2008	2009	2008
	Cents per unit	Cents per unit	Cents per unit	Cents per unit
31 December (paid 27 February 2009)	–	0.15	–	0.15
30 June (payable 28 August 2009)	–	0.16	–	0.16
Total dividends	–	0.31	–	0.31

(c) Franked dividends

The franked portions of the final dividends recommended after 30 June 2009 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2009.

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Franking credits
Opening balance as at 1 July 2008	14,139	3,512	6,855	3,512
Franking credits arising during the year on payment of tax at 30%	7,241	4,694	98	2,543
Franking debits arising from payment of interim dividend	–	(5,297)	–	(4,225)
Franking credits arising on receipt of dividend	–	5,025	–	5,025
Franking credits on acquisition	–	6,205	–	–
Closing balance as at 30 June 2009	21,380	14,139	6,953	6,855

Note 28. Financial risk management

To ensure the effective and prudent management of the Trust’s capital and financial risks, DXO (as part of DXS) has a well established framework consisting of a Board Finance Committee and a Capital Markets Committee. The Board Finance Committee is accountable to and primarily acts as an advisory body to the DXFM Board and includes three Directors of the DXFM Board. Its responsibilities include reviewing and recommending financial risk management polices and funding strategies for approval.

Further information on the Trust’s governance structure, including terms of reference, is available at www.dexus.com

(1) Capital risk management

The capital structure of the Trust consists of debt (see note 12), cash and cash equivalents, and equity attributable to security holders. The capital structure is monitored and managed in consideration of a range of factors including:

n the cost of capital and the financial risks associated with each class of capital;
n gearing levels and other covenants;
n potential impacts on net tangible assets and security holder’s equity; and
n other market factors and circumstances.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 147

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 28. Financial risk management (continued)

(1) Capital risk management (continued)

The gearing ratio at 30 June 2009 was 156.1% (as detailed below).

Consolidated	Consolidated	Parent
2009	2008	2009	2008
$’000	$’000	$’000	$’000
Gearing ratio
Interest bearing liabilities1 325,867	273,108	325,867	273,108
Total tangible assets2 208,753	172,986	256,951	350,218
Gearing ratio3 156.1%	157.9%	126.8%	78.0%

1 Interest bearing liabilities excludes deferred borrowing costs as reported internally to management.
2 Total tangible assets comprise total tangible assets less derivatives and deferred and current tax balances as reported internally to management.
3 Gearing is managed centrally for DXS. The gearing ratio as disclosed in the DEXUS Property Group Annual Report 2009 is 32% (refer note 30 (1) of the DXS Financial Statements).

The Trust is not rated by ratings agencies, however, DXS is rated BBB+ by Standard and Poor’s (affirmed in April 2009). The Trust considers potential impacts upon the rating when assessing the strategy and activities of the Trust and regards those impacts as an important consideration in its management of the Trust’s capital structure.

The Responsible Entity for DXO, DXFM (a wholly owned entity) has been issued with an Australian Financial Services License (AFSL). The license is subject to certain capital requirements including the requirement to hold minimum net tangible assets (of $5 million), and maintaining a minimum level of surplus liquid funds. Furthermore, the Responsible Entity maintains trigger points in accordance with the requirements of the license. These trigger points maintain a headroom value above the AFSL requirements and the entity has in place a number of processes and procedures should a trigger point be reached.

DWPL, a wholly owned entity, has also been issued with an AFSL as it is the Responsible Entity for DEXUS Wholesale Property Fund. It is subject to the same requirements.

During the period, the Responsible Entities complied with the AFSL requirements.

(2) Financial risk management

The Trust’s activities expose it to a variety of financial risks: credit risk, market risk (interest rate risk), and liquidity risk. The Trust’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 Trust.

Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps, to manage its exposure to certain risks. The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure, and conducting sensitivity analyses.

(a) Liquidity risk

Liquidity risk is the risk that the Trust will not have sufficient available funds to meet financial obligations in an orderly manner when they fall due or at an acceptable cost.

The Trust identifies and manages liquidity risk across short, medium and long-term categories:

n
short-term liquidity management includes continuously monitoring forecast and actual cash flows;
n medium-term liquidity management includes maintaining a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits), and may also include projects that have a very high probability of proceeding, taking into consideration risk factors such as the level of regulatory approval, tenant pre-commitments and portfolio considerations; and
n long-term liquidity risk is managed through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated, and ensuring an adequate diversification of funding sources where possible subject to market conditions.

148 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Refinancing risk

	Consolidated 30	Consolidated 30	June 2009	June 2009	Consolidated 30 June 2008	Consolidated 30 June 2008	Consolidated 30 June 2008
	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring
	within one	between	between	after five	within one	between	between	after five
	year	one and	two and	years	year	one and	two and	years
		two years	five years			two years	five years
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Receivables	16,195	–	–	–	21,743	–	–	–
Payables	5,284	–	–	374,799	3,577	–	–	–
	10,911	–	–	(374,799)	18,166	–	–	–
Derivative financial instruments
Derivative assets	3,591	1,234	–	–	391	457	80	–
Derivative liabilities	4,841	5,975	5,860	49	–	–	–	–
Total net derivative financial instruments1	(1,250)	(4,741)	(5,860)	(49)	391	457	80	–

1 For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating interest cash flows, future cash flows have been calculated using static interest rates prevailing at 30 June 2009. Refer to note 13 Derivative Financial Instruments for fair value of derivatives.

	Parent entity 30	Parent entity 30	June 2009	June 2009	Parent entity 30 June 2008	Parent entity 30 June 2008	Parent entity 30 June 2008
	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring	Expiring
	within one	between	between	after five	within one	between	between	after five
	year	one and	two and	years	year	one and	two and	years
		two years	five years			two years	five years
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Receivables	11,220	–	–	–	10,718	–	–	–
Payables	565	–	–	374,799	785	–	–	–
	10,655	–	–	(374,799)	9,933	–	–	–
Derivative financial instruments
Derivative assets	3,591	1,234	–	–	391	457	80	–
Derivative liabilities	4,841	5,975	5,860	49	–	–	–	–
Total net derivative financial instruments1	(1,250)	(4,741)	(5,860)	(49)	391	457	80	–

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 149

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 28. Financial risk management (continued)

(2) Financial risk management (continued)

(b) Market risk

(i) Interest rate risk

The net notional amount of fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate is set out in the next table.

Consolidated 30 June 2009	June 2010	June 2011	June 2012	June 2013	> June 2014
	$’000	$’000	$’000	$’000	$’000
Fixed rate debt
A$ fixed rate debt1	–	–	–	–	–
Interest rate swaps
A$ hedged1	110,000	143,333	59,167	50,000	10,000
A$ hedge rate (%)2	7.61%	7.42%	7.03%	6.75%	6.81%

1 Average amounts for the period. Hedged amounts above do not include potential hedges that are cancellable at the counterparty’s option.

2 The above hedge rates do not include margins payable on borrowings.

Sensitivity on interest expense

The table below shows the impact on unhedged net interest expense (excluding non-cash items) of a 50 basis point increase or decrease in shortterm and long-term market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust’s floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in markets rates to the extent that floating rate debt is not hedged.

				Consolidated	Consolidated	Parent
				2009	2008	2009	2008
				(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+/–	0.50% (50	basis points)	A$	1,079	1,366	1,079	1,366

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

150 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Sensitivity on fair value of interest rate swaps

The table below shows the impact on the Income Statements for changes in the fair value of interest rate swaps for a 50 basis point increase and decrease in short-term and long-term market interest rates. The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the interest rate swaps. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Cash flows are discounted using the forward price curve of interest rates at the end of the reporting period. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its interest rate derivatives. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements.

				Consolidated	Consolidated	Parent
				2009	2008	2009	2008
				(+/–) $’000	(+/–) $’000	(+/–) $’000	(+/–) $’000
+/–	0.50% (50	basis points)	A$	1,736	1,698	1,736	1,698

(c) Credit risk

The Trust manages this risk by:

n adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty’s rating;
n regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody’s and Fitch credit rating. The exposure includes the current market value of in-the-money contracts as well as potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
n entering into ISDA Master Agreements once a financial institution counterparty is approved;
n ensuring tenants, together with approved credit limits, are approved and ensuring that leases are undertaken with a large number of tenants;
n for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
n
regularly monitoring loans and receivables on an ongoing basis.

The maximum exposure to credit risk at 30 June 2009 is the carrying amount of financial assets recognised on the Balance Sheets of the Trust and parent entity.

For the consolidated entity, the ageing analysis of loans and receivables net of provisions at 30 June 2009 is ($’000): 16,189 (0-30 days), 6 (31-60 days), nil (61-90 days), nil (91+ days). The ageing analysis of loans and receivables net of provisions at 30 June 2008 is ($’000): 11,252 (0-30 days), 8,315 (31-60 days), 1,216 (61-90 days), 960 (91+ days). Amounts over 31 days are past due, however, no receivables are impaired.

For the parent entity, the ageing analysis for loans and receivables net of provisions at 30 June 2009 is ($’000): 11,220 (0-30 days), nil (31-60 days), nil (61-90 days), nil (91+ days). The ageing analysis of loans and receivables net of provisions for the parent entity at 30 June 2008 is ($’000): 10,718 (0-30 days), nil (31-60 days), nil (61-90 days), nil (91+ days). Amounts over 31 days are past due, however, no receivables are impaired.

The credit quality of financial assets that are neither past due nor impaired is consistently monitored to ensure that there are no adverse changes in credit quality.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 151

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 28. Financial risk management (continued)

(2) Financial risk management (continued)

(d) Fair value of financial instruments

Fair value interest rate risk is the risk of an adverse change in the net fair (or market) value of an asset or liability due to movements in interest rates.

At 30 June 2009, the carrying amounts and fair value of financial assets and liabilities are shown as follows:

	Consolidated	Consolidated	Consolidated
	2009	2009	2008	2008
	Carrying amount1	Fair value2	Carrying amount1	Fair value2
	$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	13,765	13,765	14,892	14,892
Loans and receivables (current)	16,195	16,195	21,743	21,743
Derivative assets	–	–	1,173	1,173
Total financial assets	29,960	29,960	37,808	37,808
Financial liabilities
Trade payables	5,284	5,284	3,577	3,577
Derivative liabilities	9,520	9,520	–	–
Loans with related parties	48,932	48,932	48,932	48,932
Intercompany loans	325,867	325,867	273,108	273,108
Total financial liabilities	389,603	389,603	325,617	325,617

	Parent	entity	Parent
	2009	2009	2008	2008
	Carrying amount1	Fair value2	Carrying amount1	Fair value2
	$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	259	259	298	298
Loans and receivables (current)	63,156	88,846	62,654	81,346
Loans and receivables (non-current)	97,592	97,592	114,953	114,953
Derivative assets	–	–	1,173	1,173
Total financial assets	161,007	186,697	179,078	197,770
Financial liabilities
Trade payables	565	565	785	785
Loans with related parties	48,932	48,932	48,932	48,932
Intercompany loans	325,867	325,867	273,108	273,108
Total financial liabilities	375,364	375,364	322,825	322,825

1 Carrying value is equal to the value of the financial instruments on the Balance Sheets.

The fair value of fixed rate interest bearing liabilities have been determined by discounting the expected future cash flows by the relevant market rates. The discount rates applied range from 3.11% to 4.60% for US$ and 7.81% to 7.93% for A$. The fair value of floating rate interest bearing liabilities have been determined by adjusting for transaction costs where appropriate. Refer note 1(u) for fair value methodology for financial assets and liabilities.

152 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 29. Contingent liabilities

The Trust together with DDF, DIT and DOT is also a guarantor of a A$300.0 million and US$210.0 million syndicated bank debt facility and a total of A$1,182.5 million and US$120.0 million (A$147.9 million) of bank bilateral facilities, a total of A$450.0 million of medium-term notes and a total of US$400.0 million (A$493.0 million) of privately placed notes, which have all been negotiated to finance the Trust and other entities within DXS. The guarantees have been given in support of debt outstanding and drawn against these facilities.

The guarantees are issued in respect of the Trust and do not constitute an additional liability to those already existing in interest bearing liabilities on the Balance Sheets.

Note 30. Commitments

(a) Capital commitments

The following amounts represent capital expenditure on investment properties contracted at the reporting date but not recognised as liabilities payable:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Capital expenditure commitments in relation to development works:
Not longer than one year
Southern Employment Lands, Greystanes	27,174	63,848	27,174	63,848
	27,174	63,848	27,174	63,848
Later than one year but not later than five years
Southern Employment Lands, Greystanes	–	27,174	–	27,174
	–	27,174	–	27,174
Total capital commitments	27,174	91,022	27,174	91,022

(b) lease receivable commitments

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
The future minimum lease payments receivable by the Trust are:
Within one year	4,790	4,310	–	–
Later than one year but not later than five years	10,116	9,951	–	–
Total lease receivable commitments	14,906	14,261	–	–

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 153

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 31. Related parties

Responsible entity

DXFM is the Responsible Entity of the Trust.

DXFM is also the Responsible Entity of Abbotsford Property Trust, Abbotsford Property Investment Trust, Gordon Property Trust, Gordon Property Investment Trust, Northgate Property Trust and Northgate Property Investment Trust (collectively known as “the Syndicates”). On 29 June 2008, Abbotsford Property Trust and Abbotsford Property Investment Trust were wound up.

DXH is the parent entity of DEXUS Wholesale Property Limited (DWPL), the Responsible Entity for DWPF.

Responsible entity fees

Under the terms of the Trust’s Constitutions, the Responsible Entities are entitled to receive fees in relation to the management of the Trust. DXFM’s parent entity, DXH, is entitled to be reimbursed for administration expenses incurred on behalf of the Trust. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH is entitled to property management fees from the Trusts.

Related party transactions

investments

On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP. Deutsche Bank and RREEF ceased to be a related party on this date.

deXuS Funds management limited and its related entities

There were a number of transactions and balances between the Trust and the Responsible Entity and its related entities as detailed below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Responsible Entity fees paid and payable	–	–	580,797	–
Loan note interest earned from DXH	–	3,693,880	5,712,993	5,728,645
Property management fees to DXPS	–	350,584	946,667	350,584
Recovery of administration expenses paid to DXH	–	129,129	715,755	115,071
Aggregate amounts payable to the
Responsible Entity at reporting date	–	–	45,889	–
Property management fees payable at reporting date	–	–	232,910	–
Administration expenses payable at reporting date	–	–	4,937	–
Loan notes receivable	–	–	51,936,300	51,936,300

deXuS wholesale property Fund[1]

deXuS wholesale property Fund1
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$	$	$		$
Responsible Entity fee income	16,164,383	6,200,512	–		–
Property management fee income	5,800,897	993,255	–		–
Recovery of administration expenses	674,901	797,068	–		–
Aggregate amount receivable at reporting date	2,043,432	1,853,954	–		–

1 Amounts in 2008 reflect transactions between 21 February 2008 and 30 June 2008.

154 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

the Syndicates[1]

the Syndicates1
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$	$	$		$
Responsible Entity fee income	1,722,262	742,994	–		–
Property management fee income	1,830,193	235,080	–		–
Recovery of administration expenses	196,542	300,100	–		–
Aggregate amount receivable at reporting date	759,443	329,230	–		–

bent Street trust[1]

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Property management fee income	5,418,913	6,400,740	–	–
Recovery of administration expenses	17,928	18,286	–	–
Aggregate amount receivable at reporting date	–	3,446,957	–	–

deutsche bank ag[2]

Dealings with the bank include, not only transactions in its capacity as part owner of the Responsible Entity, but also in the provision of financial services.

There were a number of transactions and balances between the Trust and the Responsible Entity and related entities as detailed below:

	Consolidated	Consolidated	Parent
	2009	2008	2009	2008
	$	$	$	$
Deutsche Bank AG in its capacity as a financier:
Interest paid on swaps for whom the counterparty was
Deutsche Bank AG	–	6,406	–	–
Interest received on swaps for whom the counterparty was
Deutsche Bank AG	–	7,329	–	–
Other transactions with Deutsche Bank AG:				–
Interest paid and payable to FAP	–	–	–	–
Purchase of DXH shares	–	79,829,700	–	–
Redemption of loan notes	–	51,936,300	–	–
Dividends paid	–	5,974,000	–	–

1 Amounts in 2008 reflect transactions between 21 February 2008 and 30 June 2008.

2 Amounts in 2008 reflect transactions between 1 July 2007 and 20 February 2008.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 155

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 31. Related parties (continued)

The following persons were Directors or Alternate Directors of DXFM during the whole of the financial year and up to the date of this report, unless otherwise stated:

directors

1 Independent Director C T Beare, BSc, BE (Hons), MBA, PhD, FAICD[1,4,5] 2 Audit Committee Member E A Alexander AM, BComm, FCA, FAICD, CPA[1,2,6,8,9] 3 Compliance Committee Member B R Brownjohn, BComm[1,2,5,6] 4 Nomination and Remuneration Committee Member 5 Finance Committee Member S F Ewen OAM[1,4] 6 Risk Committee Member V P Hoog Antink, BComm, MBA, FCA, FAPI, FRICS, MAICD 7 Audit Committee Member from 1 July 2008 to 1 May 2009 8 Compliance Committee Member from 1 July 2008 to 1 May 2009 C B Leitner III, BA[17] 9 Finance Committee Member from 1 July 2008 to 1 May 2009 B E Scullin, BEc[1,3,4,7,10] 10 Risk Committee Member from 1 July 2008 to 1 May 2009 A J Fay, BAg.Ec (Hons), ASIA (Alternate to C B Leitner III)[17] 11 Audit Committee Member from 1 May 2009 to 30 June 2009 12 Compliance Committee Member from 1 May 2009 to 30 June 2009 P B St George, CA(SA), MBA[11,14,15,16] 13 Nomination and Remuneration Committee Member from 1 May 2009 to 30 June 2009 J C Conde AO, BSc, BE (Hons), MBA[12,13,16] 14 Finance Committee Member from 1 May 2009 to 30 June 2009 15 Risk Committee Member from 1 May 2009 to 30 June 2009 16 Appointed Independent Director 29 April 2009 17 Resigned 29 April 2009

No Directors held an interest in the Trust as at 30 June 2009 or at the date of this report.

other key management personnel

Name	Position	Qualification date of other key management personnel
		during the 12 months ended 30 June 2009
Victor P Hoog Antink	Chief Executive Officer
Tanya L Cox	Chief Operating Officer
Patricia A Daniels	Head of Human Resources
John C Easy	General Counsel
Jane LIoyd	Head of Retail	Appointed 14 July 2008
Louise J Martin	Head of Office
Craig D Mitchell	Chief Financial Officer
Paul G Say	Head of Corporate Development
Mark F Turner	Head of Funds Management
Andrew P Whiteside	Head of Industrial

No key management personnel or their related parties held an interest in the Trust for the years ended 30 June 2008 and 30 June 2009 or at the date of this report.

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2008 and 30 June 2009 or at the date of this report.

	2009	2008
	$	$
Compensation
Short-term employee benefits	7,910,223	6,891,605
Post-employment benefits	563,665	400,153
Other long-term benefits	1,509,929	3,290,638
	9,983,817	10,582,396

156 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Remuneration Report

1. introduction

Key management personnel

In this report, Key Management Personnel (“KMP”) are those people having the authority and responsibility for planning, directing and controlling the activities of DEXUS either directly or indirectly. They comprise Non-Executive Directors, the CEO and other members of the Executive Committee. Within this report the term ‘Executive’ encompasses the CEO and other members of the Executive Committee.

KMP (including the five highest paid Executives) of DEXUS for the year ended 30 June 2009 are set out below:

Name	Title	Date of qualification as a KMP
Non-Executive Directors
Christopher T Beare	Non-Executive Chair	Appointed 4 August 2004
Elizabeth A Alexander AM	Non-Executive Director	Appointed 1 January 2005
Barry R Brownjohn	Non-Executive Director	Appointed 1 January 2005
John C Conde AO	Non-Executive Director	Appointed 29 April 2009
Stewart F Ewen OAM	Non-Executive Director	Appointed 4 August 2004
Charles B Leitner III1	Non-Executive Director	Resigned 29 April 2009
Brian E Scullin	Non-Executive Director	Appointed 1 January 2005
Peter B St George	Non-Executive Director	Appointed 29 April 2009
1 Mr Leitner was appointed on 10 March 2005. Simultaneous with Mr Leitner’s resignation, Mr Fay resigned as Mr Leitner’s alternate.
Name	Title	Date of qualification as a KMP
Executives
Victor P Hoog Antink	Chief Executive Officer	Appointed 1 October 2004
Tanya L Cox	Chief Operating Officer	Appointed 1 October 2004
Patricia A Daniels	Head of Human Resources	Appointed 14 January 2008
John C Easy	General Counsel	Appointed 1 October 2004
Jane Lloyd	Head of Retail	Appointed 14 July 2008
Louise J Martin	Head of Office	Appointed 27 March 2008
Craig D Mitchell	Chief Financial Officer	Appointed 17 September 2007
Paul G Say	Head of Corporate Development	Appointed 19 March 2007
Mark F Turner	Head of Funds Management	Appointed 1 October 2004
Andrew P Whiteside	Head of Industrial	Appointed 28 April 2008

2. board oversight of remuneration

The role and membership of the Committee is set out in the Corporate Governance Statement, which may be found at www.dexus.com/Corporate-Governance

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 157

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Remuneration Report (continued)

3. non-executive directors’ remuneration framework

Non-Executive Directors, other than the Chair, receive a base fee plus additional fees for membership of Board Committees. The table below outlines the fee structure for the reporting period.

Committee	Chair	Member
	$	$
Non-Executive Director	300,000	130,000
Board Audit and Risk	30,000	15,000
Board Finance	30,000	15,000
Board Compliance	15,000	7,500
Board Nomination and Remuneration	–	7,500

Non-Executive Directors are not eligible to receive performance based remuneration or accrue separate retirement benefits beyond statutory superannuation entitlements.

4. approach to executive remuneration

Philosophy underlying Executive remuneration

Taking these considerations into account, the Executive remuneration structure and quantum is based on the following criteria:

(a) market competitiveness and reasonableness;

(b) alignment of Executive performance payments with achievement of the Group’s objectives within its risk framework, and reinforcement of DEXUS’s values-based culture; and

DEXUS’s Executive remuneration structure may be summarised as follows:

n fixed remuneration, targeted at the median of fixed remuneration of entities in the comparison group, with reference to each Executive’s skills and depth of experience;
n total remuneration, targeted at the market median, and awarded on a variable scale for each Executive which could result in a total remuneration range from lower quartile to upper quartile, reflecting differing levels of experience, role structure and individual contribution; and
n a single pool of funds available to meet performance payments, which is divided between short-term and long-term elements.

158 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

(a) Market competitiveness and reasonableness

DEXUS has determined a comparison group, for remuneration benchmarking purposes, from:

constituents of the S&P/ASX 100 index;
constituents of the listed Australian Real Estate Investment Trust (“A-REIT”) sector; and

3. other property industry entities.

n three year absolute total security holder return;
n management costs and revenue of DEXUS Holdings; and
n performance against budgeted earnings per security and distribution per security, recognising capital adjustments.

(b) Alignment of Executive performance payments with achievement of the Group’s objectives

These objectives can include:

n financial performance objectives
earnings per security
distributions per security (in line with its Distribution Policy)
third party funds performance
total security holder return, relative to peers
n property performance objectives
operating earnings
percentage of vacant space per property
expenses against budget
n non-financial performance objectives
tenant satisfaction
employee engagement
executive succession and talent management
delivery of strategic projects to meet time and budget requirements
n behaviour that reinforces DEXUS’s cultural values

These objectives have been selected as the Directors consider them to be the key drivers to achieve superior security holder returns over time.

(c) Target mix of remuneration

The target remuneration mix for Executives, expressed as a percentage of total remuneration, is provided in the table below.

		2009			2008
Remuneration component	CEO	CFO	Other	CEO	Property	Other
			Executives		Executives	Executives
Total fixed	35%	40%	50%	40%	45%	50%
Short-Term Performance Payment (STPP)	30%	30%	25%	30%	30%	25%
Long-Term Performance Payment (LTPP)	35%	30%	25%	30%	25%	25%

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 159

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

4. approach to executive remuneration (continued)

Executive remuneration structure

The table below outlines the structure of DEXUS’s Executive remuneration.

Component		Remuneration framework
Total Fixed Remuneration (TFR)
	Salary	consists of cash salary and salary sacrificed fringe benefits, such as motor vehicles. n
		reviewed annually by the Board. Draws on relevant external and internal comparative n
		remuneration information and advice on market practice as required.
	Superannuation	prescribed and salary sacrifice superannuation contributions, including insurance n
		premiums (if required).
Performance payments
– STPP & LTPP
		the aim of performance payments is to link the achievement of the Group’s n
		objectives with the remuneration received by the Executives responsible for meeting
		those objectives.
		the objectives consist of financial and non-financial measures of performance at the n
		Group, business unit and individual level.
		the objectives represent the key drivers for the success of the business and for n
		delivering long-term value to security holders.
		performance payments made to each Executive depend on the extent to which n
		specific KPIs, set at the beginning of the financial year, are met. Payments are only
		made for performance at or above required performance levels.
		performance payments are delivered in cash. The ratio of STPP to LTPP is set out in n
		the target remuneration mix table above.
		delivery of LTPP is deferred for three years, as described below. n

Performance payments

Should an Executive be awarded a performance payment, the payment is split between STPP and LTPP using the ratio set out in the target remuneration mix table above.

Short-Term Performance Payment (STPP)

The STPP is delivered in cash in September each year, following the end of the financial year.

Long-Term Performance Payment (LTPP)

The LTPP is delivered in cash in accordance with the vesting schedule as set out in the Long-Term Incentive Plan rules.

160 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

The Long-Term Incentive Plan operates as follows:

n following allocation into the plan, payments are subject to a three year vesting period from allocation date;
n the LTPP allocation value is notionally invested during the vesting period in DEXUS securities (50% of LTPP value) and its unlisted funds and mandates (50% of LTPP value);
n during the vesting period, LTPP allocation values fluctuate in line with changes in the “Composite Total Return” (simulating the notional investment exposure), comprising 50% of the total return of DEXUS securities and 50% of the combined assets weighted total return of its unlisted funds and mandates; and
n at the conclusion of the three year vesting period, if the Composite Total Return meets or exceeds 100% of the Composite Performance Benchmark, the Board may approve the application of a performance factor to the final LTPP allocation value:
the “Composite Performance Benchmark” is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of the Mercer Unlisted Property Fund Index over the three year vesting period;
for performance up to 100% of the Composite Performance Benchmark, executives receive an LTPP allocation reflecting the Composite Total Return of the preceding three year vesting period; and
for performance between 100% and 130% of the Composite Performance Benchmark a performance factor may be applied, ranging from 1.1 to a maximum of 1.5 times.

Provisions regarding the vesting of LTPP in the event of termination of service agreements are outlined in section 7 below.

Equity options scheme

Equity and loan schemes

DEXUS does not operate a security participation plan or a loan plan for Executives or Directors.

The long-term element of DEXUS’s performance payment is designed to simulate an equity plan, but does not provide Executives with direct equity exposure.

Hedging policy

DEXUS does not permit Executives to hedge their LTPP allocation during the vesting period.

5. executive remuneration arrangements for the year ended 30 June 2009

This section outlines how the remuneration approach described above has been implemented in the 2008/09 financial year.

Changes made during the year ended 30 June 2009

Remuneration structure

As part of the Committee’s annual review of the Executive remuneration structure, a number of changes were made during the year ended 30 June 2009. These included:

(a) evaluation and revision of the target remuneration mix for Executives;
(b) allocation of performance payments between STPP and LTPP in accordance with the target remuneration mix;
(c) increased focus on the review of appropriate and challenging KPIs for CEO and other Executives by the Committee; and
(d) additional entities incorporated in the comparison group used to benchmark Executive remuneration.

Long-Term Incentive Plan review

The DEXUS Long-Term Incentive Plan was reviewed, incorporating advice from external consultants. The Committee confirmed key objectives to:

n achieve alignment with the long-term interest of security holders;
n ensure Executives are exposed to equity;
n assist in creating a competitive total remuneration package that encourages the attraction and retention of executives;
n have performance criteria consistent with DEXUS’s long-term focus;
n be simple and transparent;
n be flexible and long-term in nature;

n be valued and understood by Executives; and

n be cognisant of contemporary market practice.

n eligibility restricted to Executives and senior management team;

n accelerated vesting on termination was discontinued; and
n automatic application of the performance multiplier was removed.

Termination provisions

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 161

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Remuneration Report (continued)

5. executive remuneration arrangements for the year ended 30 June 2009 (continued)

Total fixed remuneration

Executives are given the opportunity to receive their TFR as cash, superannuation or salary sacrificed fringe benefits, such as motor vehicles.

There are no guaranteed TFR increases in Executives’ contracts of employment. In the 2010 financial year, there will be no TFR increases for Executives.

Performance payments

6. group performance and the link to remuneration

Total return analysis

The table below sets out the DEXUS total security holder return since inception, relative to the S&P/ASX 200 Property Accumulation Index. It also sets out DEXUS’s Composite Total Return since inception, relative to the Composite Performance Benchmark. The DEXUS Composite Total Return is 50% of the total return of DEXUS securities, plus 50% of the combined assets weighted total return of its unlisted funds and mandates and the Composite Performance Benchmark is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of Mercers’ Unlisted Property Fund Index.

	1 year	2 years	3 years	Since
				1 October 20041
	(% per annum)	(% per annum)	(% per annum)	(% per annum)
Period to 30 June 2009
DEXUS Property Group	–37.3%	–31.1%	–12.1%	–2.5%
S&P/ASX 200 Property Accumulation Index	–42.3%	–39.4%	–22.7%	–10.3%
DEXUS Composite Total Return	–24.2%	–16.1%	–4.0%	3.4%
Composite Performance Benchmark	–27.3%	–19.6%	–8.2%	0.3%

1 DEXUS’s inception date is 1 October 2004.

During the year DEXUS did not buy back or cancel any of its securities.

Total return of DEXUS securities

The graph below illustrates DEXUS’s total security holder return relative to the S&P/ASX 200 Property Accumulation Index.

==> picture [492 x 170] intentionally omitted <==

6 October 2004 to 30 June 2009

162 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

7. Service agreements

The employment arrangements for the CEO and other Executives are set out below.

CEO – Victor P Hoog Antink

The current employment contract commenced on 1 October 2004. The principal terms of the employment contract are as follows:

n
n
the CEO is employed under a rolling contract.
the CEO receives fixed remuneration of $1,300,000 per annum.
n the CEO may resign from his position and thus terminate this contract by giving six months written notice. On resignation any unvested LTPP will be forfeited subject to the discretion of the Board.
n the Group may terminate the CEO’s employment agreement by providing six months written notice or payment in lieu of the notice period (based on the fixed component of CEO’s remuneration). Additionally, the Group may provide a performance payment for the period of the last review date (being 1 July) until the last day of the notice period.
n in the event that the Group initiates termination for reasons outside the control of the CEO, a severance payment equal to 100% of fixed remuneration is payable.
n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board.
n the Group may terminate the contract of the CEO at any time without notice if serious misconduct has occurred. In the event of termination for cause the CEO is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited.

Executives (other than the CEO)

The principal terms of Executive employment contracts are as follows:

n
all Executives have rolling contracts.
n the Group may terminate an Executive’s employment agreement by providing three months written notice or providing payment in lieu of the notice period (based on the fixed component of the Executive’s remuneration). In the event that the Group initiates the termination for reasons outside the control of the Executive, a severance payment equal to a maximum of 75% of fixed remuneration will be made.
n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board.
n the Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination for cause occurs the Executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 163

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel

	Short-term employee	Short-term employee	benefits	Post	Other	long-term benefits	long-term benefits	Total
				employment
				benefits
	Cash salary	Short-term	Other	Pension and	Long-term	Movement in	Other
	and fees	performance	short-term	super	performance	prior year	long-term
		payments	benefits	benefits	payment	long-term	benefits
					allocations6	performance
						payment
						allocation
						values7
	$	$	$	$	$	$	$	$
Name
Victor P Hoog Antink
2009	1,200,000	785,000	–	100,000	915,000	(416,600)	–	2,583,400
2008	1,100,000	900,000	–	100,000	900,000	(106,947)	–	2,893,053
Tanya L Cox
2009	352,086	150,000	–	47,914	150,000	(80,773)	–	619,227
2008	339,059	200,000	–	10,941	175,000	(16,495)	–	708,505
Patricia A Daniels1
2009	247,589	90,000	–	13,745	90,000	(24,250)	–	417,084
2008	103,470	60,000	–	5,471	100,000	–	–	268,941
John C Easy
2009	343,255	163,000	–	31,745	162,000	(57,688)	–	642,312
2008	297,871	150,000	–	37,129	120,000	(13,250)	–	591,750
Ben J Lehmann2
2009	–	–	–	–	–	–	–	–
2008	346,344	–	–	9,847	–	–	1,105,0008	1,461,191
Jane Lloyd3
2009	361,255	113,000	–	13,745	112,000	–	–	600,000
2008	–	–	–	–	–	–	–	–

164 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

	Short-term employee	Short-term employee	benefits	Post	Other	long-term benefits	long-term benefits	Total
				employment
				benefits
	Cash salary	Short-term	Other	Pension and	Long-term	Movement in	Other
	and fees	performance	short-term	super	performance	prior year	long-term
		payments	benefits	benefits	payment	long-term	benefits
					allocations6	performance
						payment
						allocation
						values7
	$	$	$	$	$	$	$	$
Name
Louise J Martin4
2009	405,000	175,000	–	95,000	175,000	(60,625)	–	789,375
2008	116,607	225,000	–	1,250	250,000	–	–	592,857
Craig D Mitchell
2009	500,000	325,000	–	50,000	325,000	(60,625)	–	1,139,375
2008	273,768	250,000	162,592	42,899	250,000	–	–	979,259
Paul G Say
2009	486,255	200,000	–	13,745	200,000	(60,625)	–	839,375
2008	466,871	225,000	–	13,129	250,000	–	–	955,000
Mark F Turner
2009	400,015	135,000	–	49,985	135,000	(103,635)	–	616,365
2008	377,172	200,000	–	42,828	200,000	(22,669)	–	797,331
Andrew P Whiteside5
2009	461,255	135,000	–	13,745	135,000	(24,250)	–	720,750
2008	61,228	200,000	–	3,282	100,000	–	–	364,510
Total
2009	4,756,710	2,271,000	–	429,624	2,399,000	(889,071)	–	8,967,263
2008	3,482,390	2,410,000	162,592	266,776	2,345,000	(159,362)	1,105,000	9,612,396

1 Patricia A Daniels qualified as a KMP on 14 January 2008. Actual remuneration received is for a four day week.

2 Ben J Lehmann ceased to qualify as a KMP on 27 March 2008.

3 Jane Lloyd qualified as a KMP on 14 July 2008.

4 Louise J Martin qualified as a KMP on 27 March 2008.

5 Andrew P Whiteside qualified as a KMP on 28 April 2008.

6 This is the LTPP allocation for the current year which is deferred for three years as described on pages 160 to 161.

7 This is the notional change in value of all unvested LTPP allocations from prior year.

8 Termination payment.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 165

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel (continued)

Long-term performance payments

The table below sets out details of previous LTPP allocations and current valuations.

==> picture [506 x 507] intentionally omitted <==

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

Year of grant LTPP Movement in Closing LTPP Movement in Vested Year that
allocation LTPP allocation LTPP allocation LTPP as at LTPP will vest
value allocation value as at value at vesting 30 June 2009
value (since 30 June 2009 date (due to
grant date) performance
multiplier)
$ $ $ $ $ $ $
Name
Victor P Hoog Antink 2009 915,000 – – – – 2012
2008 900,000 (218,250) 681,750 – – 2011
2007 650,000 (177,580) 472,420 – – 2010
2006 250,000 (23,750) 226,250 113,125 339,375 2009
Tanya L Cox 2009 150,000 – – – – 2012
2008 175,000 (42,438) 132,563 – – 2011
2007 110,000 (30,052) 79,948 – – 2010
2006 60,000 (5,700) 54,300 27,150 81,450 2009
Patricia A Daniels [1] 2009 90,000 – – – – 2012
2008 100,000 (24,250) 75,750 – – 2011
John C Easy 2009 162,000 – – – – 2012
2008 120,000 (29,100) 90,900 – – 2011
2007 75,000 (20,490) 54,510 – – 2010
2006 50,000 (4,750) 45,250 22,625 67,875 2009
Jane Lloyd [2] 2009 112,000 – – – – 2012
Louise J Martin [3] 2009 175,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Craig D Mitchell 2009 325,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Paul G Say 2009 200,000 – – – – 2012
2008 250,000 (60,625) 189,375 – – 2011
Mark F Turner 2009 135,000 – – – – 2012
2008 200,000 (48,500) 151,500 – – 2011
2007 180,000 (49,176) 130,824 – – 2010
2006 70,000 (6,650) 63,350 31,675 95,025 2009
Andrew P Whiteside [4] 2009 135,000 – – – – 2012
2008 100,000 (24,250) 75,750 – – 2011
----- End of picture text -----

1 Patricia A Daniels qualified as a KMP on 14 January 2008.
2 Jane Lloyd qualified as a KMP on 14 July 2008.
3 Louise J Martin qualified as a KMP on 27 March 2008.
4 Andrew P Whiteside qualified as a KMP on 28 April 2008.

166 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Non-Executive Director board and committee fees

Board and Committee fees paid to Non-Executive Directors for the years ended 30 June 2008 and 30 June 2009 are set out in the table below.

	Directors			Committee Fees	Committee Fees	Committee Fees			Total cash
	Fees								salary
									and fees
	Board	Chair	Board	Board	Board	Board	Board	Board
		DWPL	Audit	Risk	Compliance	Nom	Treasury	Finance
						& Rem	Policy
	$	$	$	$	$	$	$	$	$
Name
Christopher T Beare
2009	300,000	–	–	–	–	–	–	–	300,000
2008	300,000	–	–	–	–	–	–	–	300,000
Elizabeth A Alexander1
2009	130,000	–	15,000	15,000	6,250	–	–	6,250	172,500
2008	130,000	–	15,000	15,000	8,125	–	–	5,625	173,750
Barry R Brownjohn2
2009	130,000	–	7,500	7,500	–	–	–	15,000	160,000
2008	130,000	–	7,500	7,500	–	–	–	15,000	160,000
John C Conde AO3
2009	22,652	–	–	–	1,250	1,250	–	–	25,152
2008	–	–	–	–	–	–	–	–	–
Stewart F Ewen
2009	130,000	–	–	–	–	7,500	–	–	137,500
2008	130,000	–	–	–	–	7,500	–	–	137,500
Charles B Leitner III4
2009	–	–	–	–	–	–	–	–	–
2008	–	–	–	–	–	–	–	–	–
Brian E Scullin
2009	130,000	30,000	6,250	6,250	15,000	7,500	–	–	195,000
2008	130,000	30,000	7,500	7,500	16,250	7,500	–	–	198,750
Peter B St George5
2009	22,652	–	1,250	1,250	–	–	–	1,250	26,402
2008	–	–	–	–	–	–	–	–	–
Total
2009	865,304	30,000	30,000	30,000	22,500	16,250	–	22,500	1,016,554
2008	820,000	30,000	30,000	30,000	24,375	15,000	–	20,625	970,000

1 Elizabeth A Alexander ceased to be a member of the Board Compliance Committee and a member of the Board Finance Committee on 30 April 2009.
2 Barry R Brownjohn ceased to be the chair of the Board Finance Committee on 30 April 2009 and became chair of the Board Compliance Committee on 1 May 2009.
3 John C Conde became a Non-Executive Director on 29 April 2009. He was appointed to the Board Compliance Committee and the Board Nomination and Remuneration Committee on 1 May 2009.
4 As an employee of the Deutsche Bank group, Mr Leitner waived his right to receive Director’s fees. Accordingly, Mr Leitner’s Alternate Director, Mr Fay did not receive Director’s fees when acting as his alternate. Mr Leitner ceased to be a Non-Executive Director on 29 April 2009. Accordingly, Mr Fay ceased to be Mr Leitner’s Alternate Director on 29 April 2009.
5 Peter B St George became a Non-Executive Director on 29 April 2009. He was appointed to the Board Audit and Risk Committee and the Board Finance Committee on 1 May 2009.

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 167

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Remuneration Report (continued)

8. Remuneration of key management personnel (continued)

Non-Executive Director board and committee fees (continued)

All Non-Executive and Alternate Directors also receive reimbursement for reasonable travel, accommodation and other expenses incurred whilst undertaking DEXUS business.

The Chief Executive Officer, Victor P Hoog Antink, does not receive fees in respect of his role as a Director, but does receive remuneration as a Senior Executive of DXFM.

During the year, Mr Fay received a consulting fee of $108,300 from 1 July 2008 to 29 April 2009.

Non-Executive Director Remuneration

Details of the structure and quantum of each component of remuneration for each Non-Executive Director for the years ended 30 June 2008 and 30 June 2009 are set out in the following table.

	Short-term employee	Post employment	Other long-term	Total
	benefits	benefits1	benefits
	$	$	$	$
Name
Christopher T Beare
2009	286,255	13,745	–	300,000
2008	286,871	13,129	–	300,000
Elizabeth A Alexander
2009	157,844	14,656	–	172,500
2008	160,621	13,129	–	173,750
Barry R Brownjohn
2009	146,789	13,211	–	160,000
2008	123,379	36,621	–	160,000
John C Conde
2009	23,075	2,077	–	25,152
2008	–	–	–	–
Stewart F Ewen OAM
2009	63,073	74,427	–	137,500
2008	126,147	11,353	–	137,500
Brian E Scullin
2009	181,255	13,745	–	195,000
2008	139,605	59,145	–	198,750
Peter B St George
2009	24,222	2,180	–	26,402
2008	–	–	–	–
Total
2009	882,513	134,041	–	1,016,554
2008	836,623	133,377	–	970,000

1 Post-employment benefits represent compulsory and salary sacrificed superannuation benefits.

168 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 32. Business Combinations

(a) Summary of acquisition

There were no transactions or events resulting in a business combination in the current period to 30 June 2009.

During the prior period, on 21 February 2008, DXO acquired the remaining 50% interest in DXH.

Prior to this acquisition DXO held a 50% share in DXH and accounted for DXH on an equity accounting basis. The acquisition of the remaining 50% has resulted in DXO effectively controlling DXH and thus this acquisition was accounted for as a ‘business combination achieved in stages’ as described in AASB 3 Business Combinations . The acquisition resulted in goodwill of $2.998 million.

The acquired business contributed revenues of $37.428 million and net profit of $2.278 million to the Trusts for the period from 21 February 2008 to 30 June 2008. If the acquisition had occurred on 1 July 2007, consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been $943.197 million and $441.169 million respectively. These amounts have been calculated using the Trust’s accounting policies.

	2008
	$’000
Purchase consideration (refer to (b) below):
Cash paid1	79,830
Direct costs related to acquisition	768
Total purchase price	80,598
Fair value of net identifiable assets acquired (refer below)	77,600
Goodwill	2,998

1 Represents consideration for the remaining 50% of DXH shares. In addition to this $51,936,300 of loan notes were repaid resulting in total cash outlay of $131,766,000.

(b) purchase consideration

(b) purchase consideration
	Consolidated		Parent	entity
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration	–	79,830	–		79,830
Less: Cash balances acquired	–	12,486	–		12,486
Outflow of cash	–	67,344	–		67,344

(c) assets and liabilities acquired

The assets and liabilities arising from the acquisition are as follows:

	Acquiree’s	Fair value
	carrying amount
	$’000	$’000
Property, plant and equipment	4,529	4,529
Deferred tax assets	1,467	1,467
Intangible assets – management rights	125,796	252,382
Other non-current assets	40	40
Cash and cash equivalents	12,486	12,486
Receivables	22,688	22,688
Other current assets	877	877
Provisions	(14,556)	(14,556)
Payables	(13,360)	(13,360)
Interest bearing liabilities	(111,353)	(111,353)
Net assets	28,614	155,200
Identifiable net assets acquired	–	77,600

169

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 33. Events occurring after reporting date

In July 2009, DXO entered into an unconditional contract to sell 343 George Street, Sydney for $55.0 million. Settlement is to occur in October 2009. The property has been reclassified as held for sale at 30 June 2009.

Note 34. Segment information

business segments

The Trust’s associate and wholly owned entities are involved in property development and provide funds management to trusts within DXS, and to other clients.

geographical segments

The Trust operates solely in Australia.

	Financial	Property	Investments in	Eliminations/	Consolidated
	Services	Development	Funds Management	unallocated
			Company
	$’000	$’000	$’000	$’000	$’000
2009
Property revenue	–	5,117	–	(2,383)	2,734
Interest revenue	–	25	768	81	874
Management fee revenue	–	–	94,599	(730)	93,869
Other income	–	–	112	9	121
Total segment revenue/income	–	5,142	95,479	(3,023)	97,598
Segment result	–	(5,786)	8,827	(83,147)	(80,106)
Segment assets	–	174,708	257,311	6,575	438,594
Segment liabilities	–	70,061	127,463	225,061	422,585
Additions of property, plant and
equipment	–	78,705	1,521	–	80,226
Depreciation and amortisation expense	–	2,374	2,368	–	4,742
Impairment	–	33,883	41,278	–	75,161

	Financial	Property	Investments in	Eliminations/	Consolidated
	Services	Development	Funds Management	unallocated
			Company
	$’000	$’000	$’000	$’000	$’000
2008
Property revenue	–	4,819	–	(1,029)	3,790
Interest revenue	246	35	377	3,899	4,557
Interest revenue from the Trust	90,600	–	–	(10,683)	79,917
Recoverables from the Trust	2,992	–	4	(577)	2,419
Management fee revenue	–	–	37,043	37	37,080
Share of net profits/(losses) of associates
accounted for using the equity method	–	–	–	2,892	2,892
Total segment revenue/income	93,838	4,854	37,424	(5,461)	130,655
Segment result	(4,386)	(2,777)	2,280	5,092	209
Segment assets	–	134,919	302,248	1,978	439,145
Segment liabilities	–	65,481	140,118	150,890	356,489
Additions of property, plant and equipment	–	73,498	6,624	1,678	81,800
Depreciation and amortisation expense	–	2,211	789	1	3,001

170 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

Note 35. Reconciliation of net (loss)/profit to net cash inflow from operating activities Reconciliation

Reconciliation	Reconciliation
Consolidated		Parent	entity
2009	2008	2009		2008
$’000	$’000	$’000		$’000
Net (loss)/profit (80,106)	209	(42,030)		7,430
Capitalised interest (7,203)	(1,198)	(7,203)		(1,198)
Depreciation and amortisation 4,742	3,001	1		1
Impairments 75,161	61	33,463		–
Share of net profits of associates accounted for using the equity method –	(2,892)	–		–
Net fair value (loss)/gain of derivatives 10,007	–	10,007		–
Change in operating assets and liabilities
Decrease/(increase) in receivables 5,553	2,490	(498)		4,980
(Increase)/decrease in prepaid expenses (276)	(2,154)	–		–
(Increase) in other current assets –	(2,491)	–		(702)
(Increase) in current tax assets (1,298)	–	(100)		–
(Increase)/decrease in other non-current assets –	(34,138)	–		1,110
(Increase) in deferred tax assets (4,872)	–	(5,657)		–
Increase/(decrease) in payables 757	(6,221)	(454)		497
Increase/(decrease) in current liabilities 1,850	2,496	687		(2,727)
Increase in other non-current liabilities 22,583	13,958	11,464		4,351
Increase in deferred tax liabilities 1,611	712	1,956		712
Net cash inflow/(outflow) from operating activities 28,509	(26,167)	1,636		14,454

Note 36. Non-cash financing and investing activities

		Consolidated	Consolidated	Parent
	Note	2009	2008	2009	2008
		$’000	$’000	$’000	$’000
Distributions reinvested	25	1,564	6,032	1,564	6,032

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 171

DEXUS OPERATIONS TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

CONTINUED

Note 37. Earnings per unit

(a) basic earnings per unit on (loss)/profit attributable to equity holders of the parent entity

Consolidated
2009	2008
	restated
cents	cents
(2.16)	0.01

(b) diluted earnings per unit on (loss)/profit attributable to equity holders of the parent entity

Consolidated
2009	2008
	restated
cents	cents
(2.16)	0.01

	Consolidated
	2009	2008
	$’000	$’000
Net (loss)/profit	(80,106)	209
Net (loss)/profit attributable to the unitholders of the Trust
used in calculating basic and diluted earnings per unit	(80,106)	209

(d) weighted average number of units used as a denominator

	Consolidated	Consolidated
	2009	2008
		restated
	Units	Units
Weighted average number of units outstanding used in
calculation of basic and diluted earnings per unit	3,705,637,381	3,156,757,941

172 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

DEXUS OPERATIONS TRUST DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2009

The Directors of DEXUS Funds Management Limited as Responsible Entity of DEXUS Operations Trust (the Trust) declare that the Financial Statements and notes set out on pages 123 to 172:

(i) comply with applicable Australian Equivalents to International Financial Reporting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the consolidated entity’s financial position as at 30 June 2009 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date.

In the Directors’ opinion:

(a) the Financial Statements and notes are in accordance with the Corporations Act 2001 ;
(b) there are reasonable grounds to believe that the Trust and its consolidated entities will be able to pay their debts as and when they become due and payable; and
(c) the Trust has operated in accordance with the provisions of the Constitution dated 11 August 2004 (as amended) during the year ended 30 June 2009.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the Directors.

==> picture [98 x 46] intentionally omitted <==

Christopher t beare

Chair 17 August 2009

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 173

DEXUS OPERATIONS TRUST INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2009

==> picture [457 x 639] intentionally omitted <==

174 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

==> picture [457 x 639] intentionally omitted <==

DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009 175

Responsible entity

DEXUS Funds Management Limited ABN 24 060 920 783

Registered office of Responsible entity

Level 9, 343 George Street Sydney NSW 2000

PO Box R1822 Royal Exchange Sydney NSW 1225 Phone: +61 2 9017 1100 Fax: +61 2 9017 1101 Email: [email protected] Website: www.dexus.com

directors of the

Responsible entity

Christopher T Beare, Chair Elizabeth A Alexander AM Barry R Brownjohn John C Conde AO Stewart F Ewen OAM Victor P Hoog Antink Brian E Scullin Peter B St George

Secretaries of the Responsible entity

Tanya L Cox John C Easy

auditors

PricewaterhouseCoopers Chartered Accountants 201 Sussex Street Sydney NSW 2000

investor enquiries

Infoline: 1800 819 675 or +61 2 8280 7126 Investor Relations: +61 2 9017 1330 Email: [email protected] Website: www.dexus.com

Security registry

Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000

Locked Bag A14 Sydney South NSW 1235 Registry Infoline: 1800 819 675 or +61 2 8280 7126 Fax: +61 2 9287 0303 Email: [email protected] Website: www.linkmarketservices.com.au

Monday to Friday between 8.30am and 5.30pm (Sydney time).

For enquiries regarding your holding you can either contact the Security Registry, or access your holding details via the Investor Centre on our website www.dexus.com and look for the Login box.

australian Stock exchange

ASX Code: DXS

176 DEXUS PROPERTY GROUP COMBINED FINANCIAL STATEMENTS 2009

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Consistent with DEXUS’s commitment to sustainability, this report is printed on an FSC Mixed Sources Certified paper, which ensures that all virgin pulp is derived from well-managed forests and controlled sources. It contains elemental chlorine free (ECF) bleached pulp and is manufactured by an ISO 14001 certified mill. The mill operates a three step, waste water and recycling treatment system. These steps involve chemical treatment; micro-organism treatment; and penton treatment. The mill utilises steam for energy sourced from its own cogeneration plant and has recently concluded a Voluntary Agreement for energy conservation. The printer of this report has Forest Stewardship Council (FSC), Chain of Custody Certification.

www.dexus.com

AI assistant

DEXUS — Annual Report 2009

64807_rns_2009-09-28_1f4a4dbd-be40-4702-b062-2267109d397b.pdf

DEXUS Property Group (ASX: DXS) Combined Financial Statements for the year ending 30 June 2009

DEXUS INDUSTRIAL TRUST

1. Directors and Secretaries

1.1 directors

1.2 Company Secretaries

Tanya L Cox MBA MAICD FCIS (Company Secretary) Appointed: 1 October 2004

John C Easy B Comm LLB ACIS (Company Secretary) Appointed: 1 July 2005

2. Attendance of Directors at Board meetings and Board Committee meetings

3. Directors’ interests

4. Directors’ directorships in other listed entities

5. Principal activities

6. Total value of Trust assets

7. Review and results of operations

8. Likely developments and expected results of operations

9. Significant changes in the state of affairs

10. Matters subsequent to the end of the financial year

11. Distributions

12. DXFM’s fees and associate interests

13. Units on issue

14. Environmental regulation

15. Indemnification and insurance

16. Audit

16.1 auditor

16.2 non-audit services

16.3 auditor’s independence declaration

17. Corporate governance

18. Rounding of amounts and currency

19. Management representation

20. Directors’ authorisation

Note 1. Summary of significant accounting policies

(a) basis of preparation

Critical accounting estimates

(b) principles of consolidation

(i) Controlled entities

(ii) Partnerships and joint ventures

(c) Revenue recognition

(i) Rent

Uncertainty around property valuations

(ii) Interest revenue

(iii) Dividends and distribution revenue

DEXUS INDUSTRIAL TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED

Note 1. Summary of significant accounting policies (continued)

(d) expenses

(i) Property expenses

(ii) Borrowing costs

(e) derivatives and other financial instruments

(i) Derivatives

(ii) Embedded derivatives

(iii) Debt and equity instruments issued by the Trust

(iv) Financial guarantee contracts

(v) Other financial assets

(f) goods and services tax/value added tax

(g) taxation

(h) distributions

(i) Repairs and maintenance

(j) Cash and cash equivalents

(k) Receivables

(l) non-current assets (or disposal groups) held for sale and discontinued operations

(m) other financial assets at fair value through profit and loss

(n) property, plant and equipment

(o) investment properties

Note 1. Summary of significant accounting policies (continued)

(o) investment properties (continued)

(p) leasing fees

(q) lease incentives

(r) investments accounted for using the equity method

(s) business combinations

(t) impairment of assets

(u) Financial assets and liabilities

(i) Classification

(ii) Fair value estimation of financial assets and liabilities

(v) payables

(w) interest bearing liabilities

(x) earnings per unit

(y) Foreign currency

(i) Foreign currency transactions

(ii) Foreign operations

DEXUS Annual Report 2009