DB RREEF Trust annual report 2005 contents
1 highlights 26 third party funds under management 4 key financial data and results summary 28 summary of properties 6 letter from the chair 42 directors 8 chief executive officer’s report 45 sustainability report 14 DB RREEF Trust overview 51 corporate governance statement 17 DRT portfolio review 70 directors’ report 20 commercial portfolio – australasia 82 directors’ and executive remuneration report 22 industrial portfolio – australia 87 financial statements 24 industrial portfolio – united states 146 registry information 25 retail portfolio – australia 147 investor information directory
PICTURED FRONT COVER: One Margaret Street, Sydney NSW; ABOVE: Bent Street, Sydney NSW
DB RREEF Trust (ASX: DRT) comprising DB RREEF Diversified Trust ARSN 089 324 541 (“DDF”), DB RREEF Industrial Trust ARSN 090 879 137 (“DIT”), DB RREEF Office Trust ARSN 090 768 531 (“DOT”) and DB RREEF Operations Trust ARSN 110 521 223 (“DRO”). Also referred to in this annual report as “DRT”, “the Trust”, “DB RREEF Trust” or “the Trusts”. “DAL” means Deutsche Australia Limited. All amounts are in Australian dollars unless otherwise stated. The Responsible Entity of each of the Trusts is DB RREEF Funds Management Limited ABN 24 060 920 783 (“Responsible Entity”). EM or Explanatory Memorandum means Explanatory Memorandum and Product Disclosure Statement dated 30 August 2004. highlights
new ground
■ stapled DB RREEF diversified trust, DB RREEF industrial trust, DB RREEF office trust and DB RREEF operations trust to form the DB RREEF trust
■ partially internalised management
■ acquired $1.0 billion of industrial assets in the United States
■ created $1.6 billion retail property joint venture with the Westfield Group
■ achieved EM forecast earnings of 10.5cps
■ distributions of 10.5cps
■ positive revaluations increased NTA by seven cents to $1.29
■ gearing at 39 percent
DB RREEF Trust Annual Report 2005 1 highlights (continued)
TIMELINE OF KEY DATES, 2004/2005
October 04 September 04 Acquired Unitholders approved $1.0 BILLION STAPLING US industrial portfolio August 04 proposal Announced STAPLING August 04 proposal Announced $1.6 BILLION retail joint venture with the Westfield Group
2 DB RREEF Trust Annual Report 2005 June 05 Secured Coles Myer Limited pre-commitment for April 05 $100 MILLION WESTLAKES development redevelopment completed June 05 February 05 Issued Underwrote May 05 $99 MILLION Completed creation $204 MILLION December 04 of retail of RENTS securities Secured DRP JOINT VENTURE US$200 MILLION with the Westfield Group debt private placement
DB RREEF Trust Annual Report 2005 3 key financial data and results summary
30 June 2005 Security price Highest $1.46 Low $1.23 Closing price $1.37 Number of securities on issue $2.732 billion Number of security holders 26,230 Net tangible assets per security (“NTA”) $1.29 Total assets $7.0 billion Market capitalisation $3.7 billion Distributions cents per security December 2004 5.2 cents June 2005 5.3 cents Total 10.5 cents Tax deferred percentage 41.65 percent
Net income before capital items (grouped)1 $280.8 million Distributions $281.3 million Borrowings $2.8 billion Gearing as percent of total assets (net of cash) 39 percent Management expense ratio 0.47 percent Average duration of hedges 2.9 years Number of property investments 169 Portfolio occupancy rate 93 percent Portfolio average lease duration 5.3 years Third party funds under management $3.5 billion
4 DB RREEF Trust Annual Report 2005 results and em comparison
Statutory accounts EM forecasts1 Actual – grouped 30 June 20051 30 June 20051
$241.0 Net profit before capital items ($m) 2 $278.9 $280.8
12.1 Earnings per security (cps) 10.5 10.5
10.5 Distributions per security (cps) 10.5 10.5
$219.5 Net profit attributable to security holders ($m) 3 $260.2 $261.3
10.1 Earnings per security (cps) 9.8 9.8
1 The “actual – grouped” figures reflect the aggregation of the four Trusts for the period to 30 June 2005. This accounting treatment is consistent with the disclosures outlined in the EM and represents the summation of the results for the four Trusts comprising the stapled entity. It should be noted that investors in DRT have been entitled to the returns of the underlying Trusts from 1 July 2004. For statutory reporting purposes, DB RREEF Diversified Trust (“DDF”) was deemed to be the acquiring entity. Accordingly, the other three entities, being DB RREEF Office Trust (“DOT”), DB RREEF Industrial Trust (“DIT”) and DB RREEF Operations Trust (“DRO”), are consolidated as subsidiary entities for accounting purposes. The financial statements reflect 12 months of DDF results and nine months of DOT, DIT and DRO results. The earnings per stapled security per the 30 June 2005 accounts are 10.1 cents (based on the weighted number of units on issue for DDF from 1 July 2004 to 30 June 2005). This is calculated based on the reported net profit after capital items. 2 Capital items comprise net profit from asset sales and costs associated with the restructure. 3 Net profit attributable to security holders reflects the writing-off of transaction costs and includes capital profits.
Pound Road West, Dandenong VIC
DB RREEF Trust Annual Report 2005 5 letter from the chair
dear investor
I am pleased to present the first Annual Report for DB RREEF Trust for the year ending 30 June 2005.
This year has been a year of significant change in the operation of your Trust. On 27 September 2004, unitholders met to consider, and subsequently approved, a proposal:
■ to staple DB RREEF Diversified Trust, DB RREEF Industrial Trust, DB RREEF Office Trust and DB RREEF Operations Trust units to create DB RREEF Trust; ■ to acquire a portfolio of A$1.0 billion of US industrial property; and ■ to partially internalise the management of your Trust.
Since that day a significant amount of work has been undertaken to implement the proposal, restructure the Trust’s debt and implement the management structure necessary to drive the business into the future.
While a number of implementation activities will be completed over the next few months, I am very pleased to report that the key building blocks for the future growth of DB RREEF Trust are now in place.
The final distribution for the six months to 30 June 2005 is 5.3 cents per stapled security which brings the total distribution for the year to 10.5 cents per stapled security. This is in line with our forecast outlined in the Explanatory Memorandum issued as part of the stapling process in August 2004. Total assets of the Trust as at 30 June 2005 were $7.0 billion, with security holders equity of $3.5 billion. The resultant net tangible assets per security is $1.29, which is seven cents above December 2004. The Trust’s gearing as at 30 June 2005 was 39 percent which is below the forecast gearing level outlined in the EM debt forecast.
Our Chief Executive Officer, Victor Hoog Antink, will in his report provide details of the activities and achievements that improved the quality and value of your Trust.
Over the past year we have made significant changes to your Board and the overall corporate governance of your Trust. Your Board now comprises seven members, the majority of whom are independent.
Along with the usual duties of a board, the Board has established a number of key committees that oversee various aspects of the operations of your Trust. These and other governance aspects are reviewed in the Corporate Governance Statement contained in this Annual Report.
6 DB RREEF Trust Annual Report 2005 14 Moore Street, Canberra ACT
On behalf of the Board, I wish to thank you for your continued support during this period of significant change. The Board is committed to the continuing growth and development of DB RREEF Trust and is optimistic about the Trust’s future prospects. We look forward to your continued support in the years ahead.
Yours sincerely
Christopher T Beare Chair
25 August 2005
DB RREEF Trust Annual Report 2005 7 chief executive officer’s report
TOTAL ASSETS OF DRT AS AT 30 JUNE 2005 ARE $7.0 BILLION, WITH SECURITY HOLDERS EQUITY OF $3.5 BILLION.
After a year of significant change for the Trust, I am operating results particularly pleased to advise the distribution for DRT for Total assets of DRT as at 30 June 2005 are $7.0 billion, the period to 30 June 2005 is $281.3 million. This with security holders equity of $3.5 billion. The resultant NTA represents 10.50 cents per stapled security, approximately per security is $1.29, which is an increase of seven cents per 42 percent tax advantaged, which is in line with the security (six percent) since December 2004. Gearing, net of Explanatory Memorandum. cash, at 30 June 2005 is 39 percent, an improvement on the Earnings on a grouped accounting basis for the four listed EM forecast. entities, consistent with the EM disclosure, is $280.8 million We have achieved the EM forecast while improving key before capital items. Earnings, as reported in the statutory metrics such as gearing and NTA. The result supports our accounts for the Trust, which adopts DB RREEF Diversified restructure initiatives undertaken last year, and positions Trust as the parent entity, are $241.0 million before capital items. us to continue to deliver the broader strategies as outlined Consolidated pre acquisition earnings form part of the Trust for DRT. The Board and management also remain focused distributions for the interim reporting period as security holders on continuing to build our global real estate platform as are entitled to the earnings of the Trust from 1 July 2004. envisaged in last year’s restructure. The key financial results for DRT are summarised in the table below:
Statutory accounts EM forecasts Actual – grouped 30 June 2005 30 June 2005
$241.0 Net profit before capital items ($m) $278.9 $280.8
12.1 Earnings per security (cps) 10.5 10.5
10.5 Distribution per security (cps) 10.5 10.5
$219.5 Net profit attributable to security holders ($m) $260.2 $261.3
10.1 Earnings per security (cps) 9.8 9.8
8 DB RREEF Trust Annual Report 2005 THE BOARD AND MANAGEMENT REMAIN FOCUSED ON DELIVERING OUR STATED TARGETS AND CONTINUING TO BUILD OUR GLOBAL REAL ESTATE PLATFORM AS ENVISAGED IN LAST YEAR’S MERGER.
completion of restructure commercial portfolio (office and car parks)
The twelve months to June 2005 include the first nine In the twelve months to June 2005, net income from the months of operations as DRT, following the successful commercial portfolio increased by five percent to $215.3 million restructure to reposition and expand the listed property from $205.3 million over the corresponding period to June 2004. platform in Australia to include: Comparable rental growth reflected the continued challenges in
■ the stapling of the listed property trusts, DB RREEF major office markets, and was lower by two percent. Office Trust, DB RREEF Industrial Trust and DB RREEF New leases, lease renewals and heads of agreement, Diversified Trust together with DB RREEF Operations Trust; accounting for more than 86,600 square metres ■ the partial internalisation of the management platform, (16 percent of portfolio area) were secured. through the acquisition of a 50 percent stake in Including current heads of agreement occupancy has DB RREEF Funds Management Limited (“DRFM”) increased to 93.6 percent compared to 91.4 percent as at from Deutsche Australia Limited (“DAL”); and 30 June 2004. As a result the portfolio’s average lease term ■ the delivery of a platform to access global real estate (by income) to expiry now stands at 5.9 years, in line with opportunities, expertise and partners, as demonstrated the previous year. through the acquisition of an 80 percent interest in a $US1 billion industrial portfolio, located across 18 major Construction of the Lumley Centre, a fully leased office US markets. project in Auckland, New Zealand, continues with completion expected in September 2005. DRT operational results – strong property performance
All asset classes have performed well as evidenced by the table below: 30 June 2005 30 June 2004 Vacancy1 Average lease2 Vacancy1 Average lease2 % expiry (years) % expiry (years)
Commercial 6.4 5.9 9.0 5.9
Industrial 1.6 5.1 5.0 4.3
US Industrial 11.5 3.4 13.0 3.1
Retail 0.5 6.1 0.5 n/a
1 Statistics based on net rentable area. 2 Statistics based on income.
DB RREEF Trust Annual Report 2005 9 chief executive officer’s report (continued)
industrial portfolio retail portfolio
The industrial portfolio contributed $105.4 million in net During the year DRT completed the creation of a six centre, income, an increase of eight percent over the corresponding $1.6 billion geographically diverse regional retail portfolio twelve month period to June 2004. jointly owned with, and managed by, the Westfield Group. This portfolio contributed $44.2 million in net income, an increase Leasing activity in the industrial portfolio has remained robust of 21 percent over the corresponding period to June 2004. with new leases, lease renewals and heads of agreement accounting for more than 175,000 square metres (15 The $64 million Westlakes development was completed, percent of portfolio area). achieving a yield of approximately 8.8 percent on capital expenditure. The first stage of the $60 million development As a result, portfolio occupancy remains in excellent at Mt Druitt is now complete with the balance of the condition at 98.4 percent (compared to 95.0 percent as development due for completion early in 2006. at 30 June 2004), while average lease term to expiry (by income) is 5.1 years, compared to 4.3 years previously. Total centre sales in the retail portfolio increased by 9.4 percent during the last 12 months with total specialty sales During the period, over 60,000 square metres of growth of 12.0 percent. These sales are reflective of generally development projects were completed, with a further good retail conditions and include the impact of recent 50,000 square metres under development. developments at Whitford City, Westlakes and Westfield Northlakes, whose annual sales increased by over 19 percent, 13 percent and 29 percent respectively.
Flinders Gate Complex, Melbourne VIC
10 DB RREEF Trust Annual Report 2005 US industrial portfolio treasury, debt capital management and hedging The US industrial portfolio contributed $88.0 million in net income in the period to June 2005, which represents nine Gearing as at 30 June 2005 is 39 percent, as measured months ownership. This amount is in line with the EM by interest bearing debt (net of cash) to total assets (net forecast, with allocated income support for the period, slightly of cash). Capital management initiatives undertaken during below forecast levels. the period include:
The broad based recovery in US industrial markets continues, ■ Issue of RENTS and DRT’s US industrial portfolio is benefiting from this In June 2005, DRFM raised $204 million through the improvement. In the period to June 2005, new leases and issue of 2.04 million RENTS, or Real-estate perpetual lease renewals accounted for more than 1.4 million square ExchaNgeable sTep-up Securities at an issue price of feet (seven percent of portfolio area), increasing the portfolio $100 each. RENTS offers investors a quarterly distribution occupancy to 88.5 percent. The average term to expiry of the expected to be 90 percent tax deferred at a margin of portfolio is currently 3.4 years by income. 1.3 percent above the 90 day bank bill rate. RENTS commenced trading on 16 June 2005 under the ASX sales and acquisitions code DRRPA. ■ Debt facilities The sales and acquisitions involving DRT outlined in the The underwritten $900 million syndicated bank debt EM have been completed, including the retail joint venture and bridging facilities referred to in the EM have been referred to previously. Further sales completed during the established and the proceeds used to refinance period have included Axxess Corporate Park, Seven Hills existing unsecured debt and to fund the acquisition NSW; I Chifley Square, Sydney NSW; 33 McDowell Street, of new assets. Welshpool WA; 144 Edward Street, Brisbane QLD; part of Redwood Gardens, Dingley VIC; and part of Rothschild During the period DRT agreed to issue a private placement of notes totalling US$200 million to US Avenue, Rosebery NSW. Investors. US$160 million of the notes settled in In addition, DRT acquired 343 George Street, Sydney NSW December 2004, with the balance settling in for a consideration of $44.5 million. As well as providing DRT March 2005. with a value adding opportunity it is proposed that DRFM ■ Duration and interest rate hedging occupies three floors of the building, following completion of As a result of these initiatives, the weighted average refurbishment in November 2005. duration of debt facilities stands at 3.0 years. For the year to June 2006, the hedging profile for US debt is approximately 78 percent of debt which is hedged at a blended cost, inclusive of fees and margins, of 4.53 percent. Approximately 89 percent of Australian debt is hedged at a blended cost, inclusive of fees and margins, of 6.22 percent.
DB RREEF Trust Annual Report 2005 11 chief executive officer’s report (continued)
OUR FOCUS GOING FORWARD IS TO MANAGE, AT AN OPERATIONAL AND STRATEGIC LEVEL, OUR EXISTING ASSETS TO EXTRACT GREATER RETURNS WHILE SEEKING NEW INVESTMENT OPPORTUNITIES.
■ Foreign income hedging senior management platform For the year ending 30 June 2005, over 90 percent The management platform has been restructured to better of forecast US earnings have been hedged. reflect a client orientated approach to the total funds ■ Distribution reinvestment plan (DRP) management business, comprising both listed and unlisted Take-up of the June 2005 Distribution Reinvestment funds. The platform adopts a client account management Plan was 31 percent, or $45 million, resulting in the approach whereby a range of service functions, including issue of approximately 33.7 million securities at property, capital management, financial, legal and operational $1.3477 each. services are delivered to each fund. A number of senior funds management business appointments have also been made to strengthen the revised management structure, with further appointments continuing At 30 June 2005, DRFM managed over $10.5 billion of to be made. assets, of which $3.5 billion are managed on behalf of third party funds. future direction and strategy
Our focus going forward is to manage at an operational and strategic level our existing assets to extract greater returns while seeking new investment opportunities. These opportunities will be sourced for both our third party managed funds and DRT in both Australia and overseas. Barring unforeseen circumstances, we believe DRT is on track to achieve the previously stated forecast distribution of 11.0 cents per stapled security for the full year to June 2006.
Victor P Hoog Antink Chief Executive Officer
25 August 2005
12 DB RREEF Trust Annual Report 2005 DRFM IS AUSTRALIAN BASED, WITH ACCESS TO GLOBAL REAL ESTATE INVESTMENT OPPORTUNITIES AND EXPERTISE THROUGH ITS STRATEGIC RELATIONSHIP WITH DEUTSCHE BANK.
DB RREEF Trust Annual Report 2005 13 DB RREEF Trust overview
overview
DB RREEF Trust is a major diversified listed property trust with investments in Australia, New Zealand and the United States. DB RREEF Trust is currently the sixth largest Listed Property Trust (“LPT”) and a top 60 listed corporate on ASX with a total market capitalisation of approximately $3.7 billion as at 30 June 2005.
DB RREEF Trust is an integrated real estate platform with two core operating activities:
■ a listed direct property portfolio of approximately $7.0 billion as at 30 June 2005; and
■ a 50 percent share in DRFM, a property funds management business, with the remaining 50 percent owned by a wholly owned Deutsche Bank subsidiary. DRFM is responsible for managing DB RREEF Trust’s entire direct property portfolio, as well as approximately $3.5 billion of funds under management through three property syndicates, two direct property mandates and a wholesale property fund (under delegation). These combine to give DRFM total funds under management of approximately $10.5 billion, making it one of Australia’s larger property fund managers. DRFM is Australian based, with access to global real estate investment opportunities and expertise through its strategic relationship with Deutsche Bank.
14 DB RREEF Trust Annual Report 2005 DB RREEF TRUST IS A MAJOR DIVERSIFIED LISTED PROPERTY TRUST WITH INVESTMENTS IN AUSTRALIA, NEW ZEALAND AND THE UNITED STATES. DB RREEF TRUST IS CURRENTLY THE SIXTH LARGEST LPT ON ASX.
strategic objectives
The primary objective of DB RREEF Trust is to maximise total returns to investors through active management, within appropriate risk parameters, and to provide a combination of income and capital growth over the medium to long term.
Other key strategic initiatives included:
■ expanding the Trust’s direct property portfolio;
■ reducing operating and funding costs;
■ extracting synergies through the integration of property investment, development and management functions; and
■ acquiring and developing new real estate related businesses. DRT will also seek to capitalise on the strengths of Deutsche Bank’s global real estate business, sourcing real estate investment opportunities and expertise through its global platform and integrated business model. Deutsche Bank’s real estate business platform focuses on the office and industrial markets globally, and retail assets where strong partnerships present the opportunity to add value.
DB RREEF Trust Annual Report 2005 15 DB RREEF Trust overview (continued)
operating strategy ■ improving the profitability of its funds management business through the active management of its cost DB RREEF Trust regularly considers investments in other structure; property related asset classes and countries, subject to ■ retaining financial flexibility and capacity for active capital stringent risk and return criteria. DRT’s strategy is to management; enhance value by: ■ exploring opportunities to undertake other value adding ■ acquiring new property related assets in Australia and property related businesses; and globally, with international assets comprising 35 to 50 percent of the Trust’s total direct property portfolio over ■ the disposal of selected non-core assets. the long term; DRT will achieve this operating strategy by, among other ■ redeveloping properties or undertaking new developments things, evaluating its existing portfolio on a continuing basis where value adding opportunities exist; whilst at the same time considering and pursuing international and domestic investment opportunities where appropriate. ■ optimising tenancy terms and reducing vacancies, by maintaining and developing relationships with tenants to meet their current and future needs;
DB RREEF Trust’s structure
DB RREEF TRUST ASSETS 3RD PARTY FUNDS UNDER MANAGEMENT
DB RREEF Trust 3rd party investors
RENTS investors DOT DIT DDF DRO
STC mandate DB RREEF Holdings (50 per cent interest) AXA mandate
DRFM DWPF delegation
Syndicates
16 DB RREEF Trust Annual Report 2005 DRT portfolio review
As at 30 June 2005, the Australian and New Zealand assets undertaken on both a wholly owned basis and through joint accounted for approximately 81 percent of the value of the ventures with co-owners. The Trust’s overall portfolio leases Trust’s property portfolio, with the remaining 19 percent have an average of 5.3 years (by income) to maturity with an accounted for by US assets. The Trust’s investments are average occupancy of 93 percent by area. direct property portfolio value by geography direct property portfolio value by sector as at 30 June 2005 as at 30 June 2005
NSW 53% US 19% VIC 15% Commercial WA 7% (including QLD 2% Car parks) 48% SA 2% Industrial 21% ACT 1% US industrial 19% NZ1 Retail 12%
1 New Zealand will represent approximately $100 million upon completion of Lumley Centre, Auckland in September 2005.
direct property portfolio as at 30 June 2005 Property type Book value Area occupied (%) Average lease term ($million) by income (years)
Commercial 3.1 945.9
Industrial 1.3 98 5.1
US Industrial 1.2 89 3.4
Retail 0.8 99 6.1
Total 6.4 93 5.3
DB RREEF Trust Annual Report 2005 17 DRT portfolio review (continued)
property portfolio value by sector as at 30 June 2005
Sector Location Number of Book value Net income Area leased property assets ($million) 12 months to (%) 30 June 2005 ($million) 2 Office NSW 17 2,113.1 135.3 91 VIC 3 468.3 36.9 98 WA 1 270.0 17.8 98 ACT 2 81.1 7.1 100 QLD 1 – – 1.2 NZ 3 – – 0.4 100 Sub-total 23 2,932.5 198.6 94 Car parks NSW 1 39.4 3.0 VIC 3 111.4 10.0 QLD 1 32.0 3.8 Sub-total 5 182.8 16.7 Industrial NSW 28 892.5 72.2 94 VIC 9 350.2 25.8 97 WA 1 8.4 0.9 100 QLD 3 51.1 4.6 97 SA 1 21.3 1.9 93 Sub-total 42 1,323.5 105.4 98 US industrial4 93 1,203.3 61.8 89 Retail NSW 2 387.7 12.1 100 VIC 1 20.6 0.8 100 WA 1 194.6 14.6 99 QLD 1 65.0 3.3 100 SA 1 122.9 13.4 100 Sub-total 6 790.8 44.2 100 Total 169 6,432.9 426.7 93
1 144 Edward Street was sold during 2004/05. 2 Net income includes sold properties. 3 New Zealand will represent approximately $100 million book value upon completion of Lumley Centre, Auckland in September 2005. 4 Data based on DRT ownership of 80 percent. Net income excludes rent adjustment and income support.
18 DB RREEF Trust Annual Report 2005 DRT portfolio review
45 Clarence Street, Sydney NSW
5 DRT lease expiry profile as at 30 June 2005
0 20.7%
5 14.2% 12.8% 11.8% 11.2% 11.0% 10.9% 10.9% 11.0% 10.2% 9.7% 9.4% 0 9.2% 6.7% 6.6% 6.3% 6.1% 6.0% 4.9% 5 4.6% 3.1% 2.7%
0 Available FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Area Income
DB RREEF Trust Annual Report 2005 19 commercial portfolio – australasia
AT 30 JUNE 2005, THE AUSTRALIAN PORTFOLIO COMPRISED OVER 527,500 SQUARE METRES OF LETTABLE AREA (ADJUSTED FOR OWNERSHIP) IN 24 PROPERTIES WITH OVER 580 TENANTS
The portfolio, comprising both office and car parks, The $15 million refurbishment of 321 Kent Street, Sydney contributed $215.3 million in net income to the Trust, NSW is scheduled for completion by 31 December 2005. an increase of five percent over the year to 30 June 2004 Sparke Helmore have committed to lease approximately including comparable growth of minus two percent when 10,500 square metres with the lease to commence in compared to the same period to 30 June 2004. This January 2006. contribution represents 47 percent of total Trust income The refurbishment of 32,000 square metres at 45 Clarence in the year to 30 June 2005. Street, was completed in January 2005. This refurbishment has since attracted substantial new tenants including Hudson portfolio attributes Global Resources, Citco Fund Services and Halifax Bank of Scotland (HBOS). At 30 June 2005, the Australian commercial portfolio comprised over 527,500 square metres of lettable area During the period the $20 million refurbishment of (adjusted for ownership) in 24 properties with over 580 130 George Street, Parramatta commenced and is due for tenants. Premium grade accommodation comprised 21 completion by January 2006. We anticipate this building will be fully leased on completion of the refurbishment. percent of the commercial portfolio by area with 66 percent being A grade and the remainder being B grade and leasing associated retail. In the year to 30 June 2005, new leases, lease renewals and In terms of geographical spread, 63 percent of properties by heads of agreement accounting for more than 90,500 square area were located in New South Wales, 21 percent in metres, or 17.3 percent of the total commercial portfolio area Victoria, and the remainder in Australian Capital Territory and were secured. Western Australia. As a result, portfolio occupancy has increased to 94 percent disposals at 30 June 2005, up from 91 percent the previous year, with an average lease term to expiry (by income) of 5.9 year’s. The Trust sold 144 Edward Street, Brisbane QLD for $44.7 million in November 2004 and completed the sale of 1 Chifley commercial (australia) lease expiry profile Square, Sydney NSW in April 2005. These sales represented 0 as at 30 June 2005 30.9% an overall gain of $3.4 million for the Trust. 4 developments and refurbishments 21.7%
During the year, the Trust agreed to purchase for approximately 8 NZ$110 million the Lumley Centre in Auckland, New Zealand, a premium commercial tower due to be completed in 2 11.3% 10.0% 9.8% 9.3% 9.1% 8.1% 8.0% 7.8% 7.8%
September 2005. The property will include 14 office levels, 7.5% 7.1% 6.9% 6.4% 6.3% 6.2% 6.1% 5.6% 5.3%
12 car parking levels and will provide 18,800 square metres of 6 4.8% 4.1% premium accommodation which is fully let. 0 Available FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Area Income
20 DB RREEF Trust Annual Report 2005 The commercial portfolio lease expiry profile is now well the portfolio’s income will be reviewed, with two-thirds diversified and our strategy to extend duration without of those reviews being either fixed or CPI, incorporating concentration of expiries in any given year is being minimum percentage increases. successfully implemented. revaluations rent reviews In the year to 30 June 2005, 15 commercial properties were In the year to 30 June 2005, leases covering 89 percent of revalued, increasing in value by $91 million or 4.6 percent the portfolio’s property income were subject to rent reviews, when compared to their book value. The weighted average achieving an average rental increase of four percent. In the capitalisation rate of the Australian commercial portfolio coming year to 30 June 2006, approximately 80 percent of now stands at 7.25 percent.
30 The Bond, Sydney NSW
DB RREEF Trust Annual Report 2005 21 industrial portfolio – australia
AT 30 JUNE 2005, THE AUSTRALIAN INDUSTRIAL PORTFOLIO COVERED OVER 1.1 MILLION SQUARE METRES OF LETTABLE AREA ACROSS 42 PROPERTIES, WITH A FURTHER 50,000 SQUARE METRES UNDER CONSTRUCTION.
The industrial portfolio contributed $105.4 million in net disposals income to the Trust, an increase of eight percent over the The Trust sold the following industrial properties during year to 30 June 2005 including comparable growth of five the period: percent when compared to the same period to 30 June 2004. This contribution represents 23 percent of total Trust ■ Axxess Corporate Park, Seven Hills NSW;
income in the year to 30 June 2005. ■ 33 McDowell Street, Welshpool WA;
portfolio attributes ■ Part Rothschild Avenue, Rosebery NSW; and ■ 10 of 24 units in Redwood Gardens Industrial Estate, At 30 June 2005, the Australian industrial portfolio covered Dingley VIC. over 1.1 million square metres of lettable area across 42 properties, with a further 50,000 square metres under Total consideration on these sales was $51.0 million and construction. The portfolio is diversified across business represented an overall gain of $1.6 million for the Trust. parks, industrial estates, distribution centres and office parks, with 47 percent of properties by area in New South Wales, 42 developments and pre-commitments percent in Victoria and the remainder in Queensland, South Development projects creating additional lettable area of over Australia and Western Australia. Average office content is 23 60,000 square metres were completed during the year, percent, with income coming from over 320 tenants. including facilities for Draeger at Axxess Corporate Park, Mount Waverley VIC; Westgate Logistics and Aluminium Specialties Group at Pound Road, Dandenong VIC; Visy Steel Products at DB RREEF Industrial Estate, Laverton North VIC; and Controlled Climate Logistics at 2 Alspec Place, Eastern Creek NSW.
An additional 52,000 square metres is currently under construction at Axxess Corporate Park, Mount Waverley VIC;
706 Mowbray Road, Lane Cove NSW DB RREEF Industrial Estate, Laverton North VIC and Kings Park Industrial Estate, Marayong NSW.
In June 2005, the Trust secured a 15 year lease from Coles Myer Limited that will see the construction of a 42,000 square metre distribution centre at DB RREEF Industrial Estate, Boundary Road, Laverton North in Victoria. The facility is expected to be completed by early 2007.
22 DB RREEF Trust Annual Report 2005 IN THE YEAR TO 30 JUNE 2005, 15 INDUSTRIAL ASSETS WERE REVALUED, INCREASING IN VALUE BY $108 MILLION OR 9.3 PERCENT WHEN COMPARED TO THEIR BOOK VALUE.
leasing rent reviews
In the year to 30 June 2005, new leases, lease renewals This year, income equivalent to 83 percent of the portfolio’s and heads of agreement, accounting for more than 175,000 industrial property income was subject to a rent review, square metres or 15 percent of the industrial portfolio area, achieving an average rental increase of 3.3 percent. In the were secured. coming year, approximately 72 percent of the portfolio’s income will be reviewed, with two thirds of those reviews As a result, portfolio occupancy has increased to 98 percent being either fixed or CPI, incorporating minimum percentage as at 30 June 2005 compared to 95 percent in the previous increases. year, with an average lease term to expiry as at 30 June 2005 of 5.1 years. The lease expiry profile below further indicates revaluations the excellent condition of the lease tenure across the industrial portfolio. In the year to 30 June 2005, 15 industrial assets were revalued, increasing in value by $108 million or 9.3 percent industrial (australia) lease expiry profile as at when compared to their book value. The portfolio’s weighted 30 June 2005 average capitalisation rate now stands at 8.7 percent. 27.4% 5
0
5 14.8% 13.5% 12.6% 12.0% 11.8% 11.4% 11.0% 10.0% 9.8% 9.5% 9.6% 0 9.3% 8.3% 7.4% 5.9% 5 3.5% 3.1% 3.2% 2.3% 2.2% 1.6% 0 Available FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Area Income
1 Foundation Place, Greystanes NSW
DB RREEF Trust Annual Report 2005 23 industrial portfolio – united states
The United States industrial portfolio has contributed leasing $88 million in net income to the Trust since acquisition in Since the portfolio was acquired in September 2004, the September 2004. This represents 19 percent of total Trust portfolio’s occupancy increased from 85.5 percent to 88.5 income for the year to 30 June 2005. The portfolio is a joint venture owned 80 percent by DRT and 20 percent by CalWest percent, including 34 new leases totalling 1.2 million square Industrial Properties, LLC, a subsidiary of CalPERS, the largest feet and 20 renewal leases totalling 434,203 square feet. pension fund in the United States. The average lease term to expiry is now 3.4 years. portfolio attributes revaluations
At 30 June 2005, the portfolio covered over 19.8 million As at 30 June 2005, the entire portfolio was revalued, square feet of lettable area in 93 properties throughout 18 resulting in an increase of US$92 million or eight percent metropolitan areas across the United States. The portfolio when compared to book value. The weighted average consists of approximately 58 percent warehouse/distribution capitalisation rate of the US industrial portfolio now stands and 42 percent “flex” type properties, by market value. at 7.9 percent. Average office content is 15.6 percent, with income industrial (united states) lease expiry profile generated from approximately 470 tenants. as at 30 June 2005 acquisitions and disposals 5 In June 2005 the joint venture simultaneously disposed of one property, 1855 Dornoch Court in San Diego, California, 0 20.3% and acquired three buildings within the Fort Holabird 17.9% 17.0% 15.9% Industrial Park in Baltimore, Maryland. Dornoch Court, a 15.8%
5 13.8% 220,000 square feet warehouse facility was sold for 13.4% 12.3% 12.3% US$11.6 million, representing a gain of US$2.3 million. 11.5% 9.8%
0 9.2% The Fort Holabird Industrial properties, purchased for 6.3% 5.1% US$10.1 million, consist of approximately 173,000 square 4.8% 5 4.0% 3.3% 1.9%
feet of lettable area across the three buildings, and are 94 2.0% 1.4% 1.2% 0.9% percent occupied. 0 Available FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Area Income
2055 Diplomat Drive, Dallas Texas, USA
24 DB RREEF Trust Annual Report 2005 retail portfolio – australia
The retail portfolio contributed $44.2 million in net income leasing, turnover and visitations to the Trust, an increase of 22 percent over the year to In the year to 30 June 2005, new leases, lease renewals and 30 June 2005. This represents 10 percent of total Trust heads of agreement totalling 207 leases and accounting for income for the year to 30 June 2004. 60,000 square metres, were contracted. As at 30 June 2005, total occupancy for the retail portfolio stood at 99.5 percent. portfolio attributes Moving Annual Turnover (MAT) for all the centres in the At 30 June 2005, the Australian retail portfolio covered retail portfolio was $1.4 billion and total visitation was over approximately 300,000 square metres of lettable area in 47 million people for the year. six properties. The portfolio is diversified across Australia with properties located in New South Wales, Victoria, revaluations Queensland, South Australia and Western Australia. The retail property portfolio provides a balance of secure There were no revaluations in the year to 30 June 2005 income streams and development potential. and each centre is carried at Directors’ valuation. acquisitions and disposals retail (australia) lease expiry profile as at 30 June 2005 During the year to 30 June 2005, the Trust sold a half 51.0% interest in shopping centres at Whitford WA, Westlakes SA and Plenty Valley Town Centre VIC, to Westfield resulting in a realised gain on sale of $18.1 million in the year to 30 June 2005. In addition the Trust purchased a 50 percent interest in Westfield North Lakes QLD, Westfield Mt Druitt NSW and Westfield Hurstville NSW. All the centres are now managed by the Westfield Group. 0 developments 4
During the year to 30 June 2005, the expansion of 20.2% Westfield Westlakes and Westfield Whitford, and stage 8 14.9% one of Westfield Mount Druitt were completed. Further 14.7% 13.5% development stages at Westfield Mt Druitt will open in 2 10.1% 9.9% 8.9% 8.8%
September 2005 and March 2006. 8.2% 7.6% 7.1% 6 4.5% 4.5%
The Trust is currently evaluating the further development of 3.9% 3.4% 2.9% 2.3% both Plenty Valley Town Centre and Westfield North Lakes. 1.4% 0.9% 0.7% 0.5% Plenty Valley Town Centre in VIC has 47.25 hectares available 0 Available FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 for future development and Westfield North Lakes in QLD has 23 hectares available. Area Income
DB RREEF Trust Annual Report 2005 25 third party funds under management
DRFM manages $3.5 billion of third party funds and sectoral diversification1 other assets in addition to the $7.0 billion of assets in the Trust’s portfolio. deutsche wholesale property fund Office 54% The Deutsche Wholesale Property Fund (“DWPF”) is an Retail 39% unlisted, open-ended property fund with total assets of Industrial 7% approximately $1.5 billion as at 30 June 2005. DWPF is managed by DRFM under delegated authority from DB Real Estate Australia Limited.
The Fund is designed to provide wholesale investors (predominantly superannuation funds, master trusts and non-profit groups) with a balanced return of capital growth and income over the medium to long term, derived from a diversified portfolio of “core” style assets.
DWPF’s portfolio comprises interests in 11 properties geographic diversification1 (including 50 percent interests in six properties). On a sectoral basis the portfolio is split: 54 percent office, 39 per cent retail and seven percent industrial. The portfolio is heavily weighted towards New South Wales (79 percent) NSW 79% with smaller exposures to Victoria and Queensland. VIC 15% QLD 6% In January 2005 DWPF completed its first industrial acquisition, a 50 percent interest in the Regents Park Industrial Estate, Sydney NSW, for a total consideration of approximately $99 million (including acquisition costs).
There are over 120 investors in DWPF, with the top 10 unitholders representing 74.5 percent of the register. For the year to 30 June 2005 DWPF produced a total gross return of 13.7 percent. Over a three, five and 10 year period 1 Analysis based on book values as at 30 June 2005 annualised gross returns were 12.4 percent, 11.6 percent and 11.1 percent respectively.
26 DB RREEF Trust Annual Report 2005 syndicates direct mandates
DRFM’s syndicate business consists of three unlisted trusts, DRFM’s direct mandates comprise $1.8 billion of direct representing assets valued at approximately $175 million as property as at 30 June 2005, and include the SAS at 30 June 2005. There are over 988 unitholders. Trustee Corporation (“STC”) and the AXA Group (“AXA”). As at 30 June 2005, STC owned a portfolio of direct property Gordon Property Syndicate comprising 13 properties. The market value of the STC This syndicate owns two retail assets, the Gordon Centre direct property portfolio is approximately $1.4 billion. and the Gordon Village Arcade located in Gordon, Sydney DRFM manages a portfolio of direct property for AXA’s NSW. At 30 June 2005 total assets of the syndicate were Australian and New Zealand Statutory Funds and the AXA approximately $76 million. Wholesale Australian Property Fund. The AXA mandates Northgate Property Syndicate are in respect of 15 properties that have, as at 30 June 2005, a market value of approximately $0.4 billion. This syndicate owns the Northgate Shopping Centre at Glenorchy in Hobart TAS. At 30 June 2005 total assets of the syndicate were approximately $82 million.
Abbotsford Property Syndicate This syndicate owns a commercial building at Abbotsford in Melbourne VIC. At 30 June 2005 total assets of the syndicate were approximately $17 million.
The syndicates are closed ended, fixed term products.
11 Talavera Road, Macquarie Park NSW
DB RREEF Trust Annual Report 2005 27 summary of properties
Property Location Building type Ownership at Net lettable 30 June 2005 area adjusted (%) for ownership (’000 sqm)
Australian Office Garema Court, 140–180 City Walk, Civic Canberra ACT A Grade – office 100 11.419 14 Moore Street, Civic ACT B Grade – office 100 10.894 The Zenith, 821 Pacific Highway, Chatswood NSW A Grade – office 100 44.467 Victoria Cross, 60 Miller Street, North Sydney NSW A Grade – office 100 14.747 Ferguson Centre, 130 George Street, Parramatta NSW B Grade – office 100 19.320 O’Connell House, 15–19 Bent Street, Sydney NSW B Grade – office 100 9.871 1 Bligh Street, Sydney 2 NSW B Grade – office 50 2.205 9–13 Bligh Street, Sydney 2 NSW B Grade – office 50 1.555 1 Chifley Square, Sydney (sold Apr–2005) 4 NSW 0 45 Clarence Street, Sydney NSW A Grade – office 100 32.000 201 Elizabeth Street, Sydney NSW A Grade – office 50 19.413 Governor Phillip and Macquarie Tower Complex, 1 Farrer Place, Sydney NSW Premium Grade – office 50 43.296 Australia Square Complex, 264 George Street, Sydney NSW A Grade – office 50 26.259 30 The Bond, 30–34 Hickson Road, Sydney NSW A Grade – office 100 19.797 309–321 Kent Street, Sydney NSW A Grade – office 50 23.561 383–395 Kent Street, Sydney NSW A Grade – office 100 18.051 One Margaret Street, Sydney NSW A Grade – office 100 20.915 44 Market Street, Sydney NSW A Grade – office 100 29.991 2 O’Connell Street, Sydney 2 NSW B Grade – office 50 1.973 4 O’Connell Street, Sydney 2 NSW B Grade – office 50 3.164 144 Edward Street, Brisbane (sold Nov–2004) 3 QLD 0 Flinders Gate Complex, 172 and 179 Flinders Street, Melbourne VIC B Grade – office 100 8.764 8 Nicholson Street, Melbourne VIC A Grade – office 100 23.528 Southgate Complex, 3 Southgate Avenue, Southbank VIC A Grade – office 100 76.314 Woodside Plaza, 240 Street Georges Terrace, Perth WA Premium Grade – office 100 47.152
New Zealand Office Lumley Centre, 88 Shortland Street, Auckland 5 NZ Premium Grade – office 100 18.821
Car Parks 383–395 Kent Street, Sydney (Car Park) NSW Carpark 100 – Albert and Charlotte Streets, Brisbane QLD Carpark 100 – 32–44 Flinders Street, Melbourne VIC Carpark 100 – Flinders Gate Complex, 172 Flinders Street, Melbourne VIC Carpark 100 – 34–60 Little Collins Street, Melbourne VIC Carpark 100 –
Australian Industrial 52 Holbeche Road, Arndell Park NSW Distribution Centre 100 9.814 79 St Hilliers Road, Auburn NSW Business Park 100 25.701 1 Garigal Road, Belrose NSW Business Park 100 12.583 2 Minna Close, Belrose NSW Business Park 100 13.626
28 DB RREEF Trust Annual Report 2005 100% Acquisition Book value at Independent Independent Market Leased Weighted Net income US assets date 30 June 2005 valuation date valuation cap rate by area lease term 12 months to lettable area (A$m) (A$m) (%) (%) by income 30 June 2005 (’000 sf) (years) (A$m)
Aug–00 44.9 Oct–03 44.6 8.50 100 5.7 4.0 May–02 36.3 Apr–05 36.3 8.75 100 2.4 3.1 Dec–98 223.3 Jun–04 216.0 7.75 97 3.4 17.8 Dec–98 86.3 Mar–05 86.0 7.50 91 4.0 6.2 May–97 49.6 Jun–03 43.8 9.25 43 1.4 4.0 Aug–00 56.3 Sep–04 55.5 8.00 100 2.2 3.9 Dec–03 11.0 Sep–04 10.5 7.25 100 2.0 0.9 Sep–01 5.6 Sep–04 5.5 8.00 71 1.5 0.3 2.4 3.2 Dec–98 195.0 Jun–05 195.0 7.00 84 5.7 3.8 Aug–00 117.2 Dec–04 117.0 7.25 94 3.8 7.9 Dec–98 515.1 Dec–04 512.5 6.60 99 7.7 30.7 Aug–00 184.0 Jun–05 184.0 7.13 80 4.6 11.0 May–02 123.4 Mar–04 122.0 7.25 100 8.3 8.8 Dec–98 131.4 Dec–03 128.8 7.75 98 3.7 10.9 Sep–87 104.9 Sep–03 104.0 7.50 95 5.2 6.3 Dec–98 139.0 Jun–05 139.0 7.00 100 8.0 8.8 Sep–87 148.4 Jun–03 144.0 7.75 95 3.1 9.8 Sep–01 8.0 Sep–04 7.8 8.00 91 1.7 0.6 Sep–01 12.2 Sep–04 12.0 8.00 72 1.3 0.5 1.2 Mar–99 15.5 Sep–03 15.5 8.25 87 0.8 1.2 Nov–93 91.8 Jun–05 91.8 7.25 100 8.0 7.2 Aug–00 361.0 Jun–05 361.0 7.00 99 4.5 28.5 Jan–01 270.0 Jun–05 270.0 7.00 98 11.7 17.8
Aug–04 100 10.8 0.4
Sep–87 39.4 Sep–03 40.0 8.75 100 10 3.0 Oct–84 32.0 Sep–03 32.0 9.00 100 10 3.8 Jun–98 24.6 Sep–03 24.6 8.00 100 10 3.9 Mar–99 45.3 Sep–03 45.3 8.25 100 10 4.1 Nov–84 41.5 Sep–03 41.5 8.50 100 10 2.0
Jul–98 11.1 Sep–03 11.1 8.50 100 3.1 1.0 Sep–97 41.0 Jun–05 41.0 8.00 100 2.9 3.3 Dec–98 27.4 Dec–04 27.4 8.50 100 4.9 2.3 Dec–98 33.1 Dec–04 32.4 8.50 100 3.7 2.8
DB RREEF Trust Annual Report 2005 29 summary of properties (continued)
Property Location Building type Ownership at Net lettable 30 June 2005 area adjusted (%) for ownership (’000 sqm)
Australian Industrial 3–7 Bessemer Street, Blacktown NSW Distribution Centre 100 8.033 30–32 Bessemer Street, Blacktown NSW Distribution Centre 100 14.652 114–120 Old Pittwater Road, Brookvale NSW Business Park 100 30.780 2 Alspec Place, Eastern Creek NSW Distribution Centre 100 16.875 145–151 Arthur Street, Flemington NSW Business Park 100 19.276 436–484 Victoria Road, Gladesville NSW Business Park 100 19.892 1 Foundation Place, Greystanes NSW Industrial Estate 100 30.746 27–29 Liberty Road, Huntingwood NSW Distribution Centre 100 6.829 706 Mowbray Road, Lane Cove NSW Business Park 100 17.364 11 Talavera Road, Macquarie Park NSW Office Park 100 36.257
40 Talavera Road, Macquarie Park NSW Business Park 100 12.772 Kings Park Industrial Estate, Vardys Road, Marayong NSW Industrial Estate 100 58.265 154 O’Riordan Street, Mascot NSW Industrial Estate 100 8.156 3 Brookhollow Avenue, Norwest NSW Business Park 100 13.422 Rosebery and Rothschild Avenues, Rosebery NSW Business Park 100 44.374
10–16 South Street, Rydalmere NSW Industrial Estate 100 34.650 Axxess Corporate Park, Station Road, Seven Hills (sold Jul–Nov–04) 3 NSW 0 75 Carnarvon Street, Silverwater (sold Aug–2004) 3 NSW 0 DB RREEF Industrial Estate, Silverwater NSW Business Park 100 29.335 19 Chifley Street, Smithfield NSW Industrial Estate 100 18.469 239–251 Woodpark Road, Smithfield NSW Distribution Centre 100 5.187 12 Frederick Street, St Leonards NSW Business Park 100 19.245 2a Birmingham Street, Villawood NSW Distribution Centre 100 11.401 40 Biloela Street, Villawood NSW Distribution Centre 100 7.264 27–33 Frank Street, Wetherill Park NSW Distribution Centre 100 13.828 30 Bellrick Street, Acacia Ridge QLD Distribution Centre 100 17.801 121 Evans Road, Salisbury QLD Distribution Centre 100 24.774 25 Donkin Street, West End Brisbane QLD Business Park 100 11.163 15–23 Whicker Road, Gillman SA Distribution Centre 100 72.115 Target Distribution Centre, Tarras Road, Altona North VIC Distribution Centre 100 41.447 114 Fairbank Road, Clayton VIC Distribution Centre 100 18.200 Pound Road West, Dandenong VIC Industrial Estate 100 74.281 Redwood Gardens Industrial Estate, Boundary Road, Dingley 6 VIC Industrial Estate 100 34.537 352 Macaulay Road, Kensington VIC Industrial Estate 100 6.357 Knoxfield Industrial Estate, Henderson Road, Knoxfield VIC Distribution Centre 100 48.548 250 Forest Road South, Lara VIC Distribution Centre 100 117.294 DB RREEF Industrial Estate, Laverton North VIC Industrial Estate 100 63.939 Axxess Corporate Park, Cnr Ferntree Gully and Gilby Roads, Mount Waverley VIC Industrial Estate 100 75.519 68 Hasler Road, Herdsman WA Business Park 100 4.703 33 McDowell Street, Welshpool (sold Nov–2004)3 WA 0
30 DB RREEF Trust Annual Report 2005 100% Acquisition Book value at Independent Independent Market Leased Weighted Net income US assets date 30 June 2005 valuation date valuation cap rate by area lease term 12 months to lettable area (A$m) (A$m) (%) (%) by income 30 June 2005 (’000 sf) (years) (A$m)
Jun–97 10.2 Sep–03 10.1 8.75 100 4.4 1.0 May–97 14.5 Sep–03 14.5 9.00 100 5.2 1.2 Sep–97 42.6 Sep–03 42.0 9.00 96 3.0 3.8 Mar–04 23.5 Jan–04 100 9.8 1.3 Sep–97 31.0 Jun–05 31.0 8.00 100 2.4 2.6 Sep–97 43.2 Dec–04 43.0 8.50 100 4.7 3.9 Dec–02 41.9 Dec–04 41.7 8.00 100 7.4 2.6 Jul–98 7.3 Sep–03 7.3 9.00 100 1.0 0.7 Sep–97 25.8 Sep–03 25.3 9.25 76 6.3 1.6 75% Apr–02 134.0 Jun–03 130.0 8.25 89 4.3 10.0 25% Jun–02 Oct–02 29.4 Apr–05 28.5 8.25 100 4.3 1.7 May–90 78.5 Jun–05 78.5 8.00 100 5.1 6.2 Jun–97 13.7 Jun–04 13.7 7.75 100 1.6 1.1 Dec–02 41.8 Dec–03 36.6 10.75 100 3.6 3.2 Apr–98 81.1 Jun–03 78.7 8.00 100 3.6 7.5 Oct–01 /8.75 Sep–97 42.6 Jun–04 42.0 8.75 93 2.6 4.0 0.5 0.3 May–97 39.5 Sep–03 39.4 9.00 100 4.0 3.4 Dec–98 13.5 Jun–03 13.4 9.75 100 1.5 2.3 May–97 5.8 Sep–03 5.8 8.75 100 4.6 0.5 Jul–00 31.5 Jun–05 31.5 8.50 92 2.0 2.5 Jun–97 8.8 Sep–03 8.6 9.25 100 1.0 0.8 Jul–97 7.0 Sep–03 7.0 8.75 100 2.9 0.6 Jul–98 12.7 Dec–03 12.7 9.75 100 1.5 1.4 Jun–97 11.9 Sep–03 11.9 9.50 100 2.2 1.3 Jul–97 18.5 Dec–04 18.5 8.75 100 5.0 1.6 Dec–98 20.7 Jun–05 20.7 8.25 96 2.1 1.7 Dec–02 21.3 Jun–05 21.3 9.75 100 7.0 1.9 Oct–95 35.0 Jun–05 35.0 8.00 100 6.8 3.1 Jul–97 10.9 Sep–03 10.8 9.75 100 0.4 1.2 Jan–04 56.3 Jun–05 56.3 8.20 100 5.0 3.8 Dec–94 23.0 Sep–03 29.0 9.25 92 3.6 2.7 Oct–98 7.3 Jun–03 7.3 8.72 100 2.9 0.6 Aug–96 31.9 Sep–03 31.3 8.75 100 1.5 3.1 Dec–02 34.6 Jun–05 34.6 9.75 100 7.0 3.4 Jul–02 42.0 Jun–04 23.7 7.75 100 15.8 0.6 Oct–96 109.3 Jun–03 89.0 10.00 98 4.4 8.1 Jul–98 8.4 Jun–04 8.0 8.50 100 4.3 0.7 0.2
DB RREEF Trust Annual Report 2005 31 summary of properties (continued)
Property Location Building type Ownership at Net lettable 30 June 2005 area adjusted (%) for ownership (’000 sqm)
US Industrial 3765 Atlanta Industrial Drive, Atlanta US Distribution Centre 80 12.038 7100 Highlands Parkway, Atlanta US Business Park 80 11.148 Stone Mountain, Atlanta US Industrial Estate 80 9.971 Town Park Drive, Atlanta US Business Park 80 9.022 Williams Drive, Atlanta US Distribution Centre 80 15.483 Bristol Court, Baltimore US Distribution Centre 80 9.890 Cabot Techs, Baltimore US Business Park 80 9.711 Fort Holabird Industrial, Baltimore US Distribution Centre 80 12.812 9112 Guilford Road, Baltimore US Business Park 80 4.090 MD Food Park, Baltimore US Distribution Centre 80 33.735 NE Baltimore, Baltimore US Industrial Estate 80 8.083 Patuxent Range Road, Baltimore US Business Park 80 11.287 8155 Stayton Drive, Baltimore US Industrial Estate 80 9.340 West Nursery, Baltimore US Industrial Estate 80 6.551 10 Kenwood Circle, Boston US Distribution Centre 80 11.399 9900 Brookford Street, Charlotte US Distribution Centre 80 9.067 Commerce Park, Charlotte US Distribution Centre 80 14.317 Westinghouse, Charlotte US Distribution Centre 80 42.255 Airport Exchange, Cincinnati US Distribution Centre 80 5.035 124 Commerce, Cincinnati US Distribution Centre 80 2.572 Empire Drive, Cincinnati US Distribution Centre 80 14.636 International Way, Cincinnati US Industrial Estate 80 22.297 Kentucky Drive, Cincinnati US Industrial Estate 80 25.818 Kenwood Road, Cincinnati US Distribution Centre 80 57.232 Lake Forest Drive, Cincinnati US Distribution Centre 80 30.993 Spiral Drive, Cincinnati US Business Park 80 4.575 Turfway Road, Cincinnati US Industrial Estate 80 8.320 World Park, Cincinnati US Distribution Centre 80 29.491 Equity/Westbelt/Dividend, Columbus US Industrial Estate 80 68.354 2700 International Street, Columbus US Industrial Estate 80 11.356 SE Columbus, Columbus US Distribution Centre 80 26.838 3800 Twin Creeks Drive, Columbus US Industrial Estate 80 13.081 10th Street, Dallas US Industrial Estate 80 15.380 455 Airline Drive, Dallas US Industrial Estate 80 5.574 555 Airline Drive, Dallas US Industrial Estate 80 4.202 Arlington, Dallas US Business Park 80 9.708 820–860 Avenue F, Dallas US Business Park 80 5.432 1413 Bradley Lane, Dallas US Business Park 80 4.202 Capital Ave, Dallas US Industrial Estate 80 7.472
32 DB RREEF Trust Annual Report 2005 100% Acquisition Book value at Independent Independent Market Leased Weighted Net income US assets date 30 June 2005 valuation date valuation cap rate by area lease term 12 months to lettable area (A$m) (A$m) (%) (%) by income 30 June 2005 (’000 sf) (years) (A$m)
161.965 Sep–04 5.4 Jun–05 5.4 8.25 100 1.6 0.2 150.000 Sep–04 13.8 Jun–05 13.8 8.00 100 2.0 0.8 134.163 Sep–04 5.4 Jun–05 5.4 9.00 74 1.2 0.3 121.384 Sep–04 7.0 Jun–05 7.0 8.00 95 3.1 0.3 208.320 Sep–04 8.7 Jun–05 8.7 8.25 71 1.4 0.5 133.071 Sep–04 10.8 Jun–05 10.8 8.00 49 1.1 0.6 130.656 Sep–04 25.1 Jun–05 25.1 8.00 100 3.7 1.3 172.382 Jun–05 10.8 Apr–05 10.5 8.15 97 1.9 0.0 55.032 Sep–04 9.8 Jun–05 9.8 7.50 100 9.6 0.5 453.895 Sep–04 23.7 Jun–05 23.7 8.00 100 2.3 1.4 108.754 Sep–04 8.4 Jun–05 8.4 8.25 81 2.4 0.3 151.863 Sep–04 12.5 Jun–05 12.5 8.00 100 2.2 0.4 125.666 Sep–04 7.8 Jun–05 7.8 8.00 73 3.3 0.3 88.141 Sep–04 6.8 Jun–05 6.8 8.50 77 1.2 0.3 153.369 Sep–04 10.8 Jun–05 10.8 8.00 100 2.7 0.7 122.000 Sep–04 3.9 Jun–05 3.9 9.00 100 2.1 0.2 192.640 Sep–04 6.9 Jun–05 6.9 8.75 89 1.6 0.5 568.536 Sep–04 18.0 Jun–05 18.0 8.75 77 2.6 0.9 67.749 Sep–04 3.8 Jun–05 3.8 8.75 80 2.3 0.2 34.600 Sep–04 2.1 Jun–05 2.1 8.50 100 5.6 0.5 196.932 Sep–04 6.4 Jun–05 6.4 9.50 46 1.7 0.2 300.000 Sep–04 10.5 Jun–05 10.5 8.75 100 9.3 0.6 347.377 Sep–04 11.3 Jun–05 11.3 8.75 100 0.9 0.8 770.055 Sep–04 17.9 Jun–05 17.9 9.25 95 1.8 1.3 417.009 Sep–04 11.8 Jun–05 11.8 9.00 88 3.3 0.6 61.555 Sep–04 5.2 Jun–05 5.2 9.00 94 1.0 0.3 111.946 Sep–04 5.0 Jun–05 5.0 9.25 93 1.5 0.2 396.800 Sep–04 10.4 Jun–05 10.4 8.50 52 1.8 0.4 919.690 Sep–04 39.9 Jun–05 39.9 8.00 95 4.7 2.3 152.800 Sep–04 4.2 Jun–05 4.2 8.00 62 2.7 0.1 361.109 Sep–04 11.7 Jun–05 11.7 8.00 49 0.3 1.1 176.000 Sep–04 5.0 Jun–05 5.0 8.00 100 3.7 0.3 206.939 Sep–04 9.2 Jun–05 9.2 8.00 76 2.9 0.4 75.000 Sep–04 3.7 Jun–05 3.7 7.50 100 1.3 0.2 56.531 Sep–04 6.5 Jun–05 6.5 7.50 100 2.5 0.2 130.623 Sep–04 8.7 Jun–05 8.7 8.00 100 5.8 0.3 73.086 Sep–04 7.4 Jun–05 7.4 8.00 93 2.6 0.5 56.531 Sep–04 2.8 Jun–05 2.8 8.25 100 3.2 0.2 100.540 Sep–04 5.4 Jun–05 5.4 8.00 100 3.2 0.2
DB RREEF Trust Annual Report 2005 33 summary of properties (continued)
Property Location Building type Ownership at Net lettable 30 June 2005 area adjusted (%) for ownership (’000 sqm)
US Industrial 1900 Diplomat Drive, Dallas US Business Park 80 6.151 2055 Diplomat Drive, Dallas US Business Park 80 3.967 East Collins, Dallas US Business Park 80 4.196 3601 East Plano/1000 Shiloh, Dallas US Industrial Estate 80 21.322 East Plano /2700 Summit, Dallas US Industrial Estate 80 22.788 Hillguard, Dallas US Industrial Estate 80 18.421 North Lake, Dallas US Distribution Centre 80 17.124 11011 Regency Crest Drive, Dallas US Distribution Centre 80 13.128 CTC at Valwood, Dallas US Business Park 80 3.470 Brackbill, Harrisburg US Distribution Centre 80 36.745 181 Fulling Mill Road, Harrisburg US Distribution Centre 80 13.824 Mechanicsburg, Harrisburg US Distribution Centre 80 28.079 14555 Alondra/6530 Altura, Los Angeles US Distribution Centre 80 22.627 Glendale, Los Angeles US Industrial Estate 80 33.519 14489 Industry Circle, Los Angeles US Distribution Centre 80 8.394 San Fernando Valley, Los Angeles US Industrial Estate 80 13.500 Memphis Industrial, Memphis US Distribution Centre 80 24.978 7401 Cahill Road, Minneapolis US Industrial Estate 80 3.404 2950 Lexington Avenue S, Minneapolis US Distribution Centre 80 13.707 8575 Monticello Lane, Minneapolis US Distribution Centre 80 3.005 Mounds View, Minneapolis US Distribution Centre 80 23.864 6105 Trenton Lane, Minneapolis US Distribution Centre 80 9.070 Alexandria, Northern Virginia US Industrial Estate 80 28.875 Beaumeade Telecom, Northern Virginia US Business Park 80 12.223 Calvert/Murry’s, Northern Virginia US Industrial Estate 80 6.140 CTC at Dulles, Northern Virginia US Business Park 80 7.693 Guilford, Northern Virginia US Business Park 80 13.175 Nokes Boulevard, Northern Virginia US Business Park 80 12.424 7500 Exchange Drive, Orlando US Industrial Estate 80 8.601 Orlando Central Park, Orlando US Industrial Estate 80 94.746 844 44th Avenue, Phoenix US Distribution Centre 80 10.746 1858 East Encanto Drive, Phoenix US Distribution Centre 80 6.081 3802–3922 East University Drive, Phoenix US Business Park 80 8.152 431 North 47th Avenue, Phoenix US Distribution Centre 80 12.129 220 South 9th Street, Phoenix US Distribution Centre 80 6.646 1429–1439 South 40th Avenue, Phoenix US Distribution Centre 80 18.833 105–107 South 41st Avenue, Phoenix US Distribution Centre 80 28.627 601 South 55th Avenue, Phoenix US Distribution Centre 80 7.432 1000 South Priest Drive, Phoenix US Business Park 80 4.080
34 DB RREEF Trust Annual Report 2005 100% Acquisition Book value at Independent Independent Market Leased Weighted Net income US assets date 30 June 2005 valuation date valuation cap rate by area lease term 12 months to lettable area (A$m) (A$m) (%) (%) by income 30 June 2005 (’000 sf) (years) (A$m)
82.756 Sep–04 4.5 Jun–05 4.5 8.00 100 2.0 0.3 53.375 Sep–04 3.5 Jun–05 3.5 8.50 0 0.0 0.0 56.460 Sep–04 4.1 Jun–05 4.1 8.00 75 3.5 0.1 286.880 Sep–04 14.5 Jun–05 14.5 8.25 44 2.8 0.0 306.616 Sep–04 21.6 Jun–05 21.6 8.25 96 2.6 1.5 247.852 Sep–04 8.4 Jun–05 8.4 8.25 66 2.1 0.3 230.400 Sep–04 10.9 Jun–05 10.9 8.00 100 4.0 0.7 176.635 Sep–04 6.4 Jun–05 6.4 8.25 62 1.5 0.2 46.683 Sep–04 3.8 Jun–05 3.8 8.00 100 5.0 0.1 494.400 Sep–04 24.1 Jun–05 24.1 8.00 100 2.4 1.6 186.000 Sep–04 9.5 Jun–05 9.5 8.00 62 2.2 0.4 377.800 Sep–04 19.1 Jun–05 19.1 8.00 100 2.1 1.1 304.439 Sep–04 21.8 Jun–05 21.8 7.00 100 2.9 1.2 450.991 Sep–04 58.8 Jun–05 58.8 8.00 69 2.5 2.4 112.946 Sep–04 8.7 Jun–05 8.7 7.00 100 2.5 0.4 181.635 Sep–04 18.5 Jun–05 18.5 7.00 100 3.5 1.0 336.080 Sep–04 9.9 Jun–05 9.9 9.25 100 2.8 0.7 45.803 Sep–04 2.3 Jun–05 2.3 8.25 0 0.0 0.1 184.432 Sep–04 8.9 Jun–05 8.9 8.25 100 2.4 0.6 40.437 Sep–04 2.0 Jun–05 2.0 8.25 74 3.7 0.1 321.092 Sep–04 19.8 Jun–05 19.8 8.25 94 4.1 1.1 122.032 Sep–04 7.6 Jun–05 7.6 8.25 100 3.9 0.5 388.511 Sep–04 55.4 Jun–05 55.4 8.00 88 3.4 3.3 164.453 Sep–04 35.6 Jun–05 35.6 7.50 100 10.5 1.8 82.617 Sep–04 5.4 Jun–05 5.4 8.00 92 3.3 0.3 103.502 Sep–04 27.2 Jun–05 27.2 7.25 100 8.4 1.8 177.264 Sep–04 21.8 Jun–05 21.8 7.50 96 1.4 1.1 167.160 Sep–04 28.8 Jun–05 28.8 7.00 100 3.8 1.4 115.728 Sep–04 5.8 Jun–05 5.8 8.50 66 2.2 0.3 1,274.800 Sep–04 61.0 Jun–05 61.0 7.50 97 2.7 3.3 144.592 Sep–04 7.5 Jun–05 7.5 7.25 100 6.4 0.4 81.817 Sep–04 4.3 Jun–05 4.3 8.50 100 4.6 0.2 109.684 Sep–04 10.0 Jun–05 10.0 8.75 89 1.7 0.5 163.200 Sep–04 7.2 Jun–05 7.2 7.50 100 1.4 0.4 89.423 Sep–04 7.0 Jun–05 7.0 7.50 100 3.2 0.3 253.402 Sep–04 10.9 Jun–05 10.9 7.25 100 2.1 0.6 385.174 Sep–04 15.7 Jun–05 15.7 7.50 100 1.6 0.6 100.000 Sep–04 4.9 Jun–05 4.9 7.50 100 3.9 0.3 54.900 Sep–04 5.2 Jun–05 5.2 8.50 100 2.9 0.4
DB RREEF Trust Annual Report 2005 35 summary of properties (continued)
Property Location Building type Ownership at Net lettable 30 June 2005 area adjusted (%) for ownership (’000 sqm)
US Industrial 1120–1150 W. Alameda Drive, Phoenix US Business Park 80 9.099 10397 West Van Buren Street, Phoenix US Distribution Centre 80 20.672 Chino, Riverside US Distribution Centre 80 7.774 4190 East Santa Ana Street, Riverside US Industrial Estate 80 7.342 12000 Jersey Court, Riverside US Distribution Centre 80 6.550 Mira Loma, Riverside US Distribution Centre 80 18.624 Ontario, Riverside US Industrial Estate 80 42.495 Rancho Cucamonga, Riverside US Industrial Estate 80 31.922 Airway Road, San Diego US Industrial Estate 80 9.152 1855 Dornoch Court, San Diego (sold June–05)3 US Distribution Centre 0 5823 Newton Drive, San Diego US Business Park 80 13.357 2210 Oak Ridge Way, San Diego US Business Park 80 3.959 26507 79th Avenue South, Seattle US Business Park 80 2.666 Kent West, Seattle US Industrial Estate 80 29.934 8005 S. 266th Street, Seattle US Distribution Centre 80 6.867 West Palm Beach, South Florida US Distribution Centre 80 10.957
Retail Westfield Hurstville, Hurstville NSW Major Regional 50 31.338 shopping centre Westfield Mount Druitt 2, Mount Druitt NSW Regional 50 29.671 shopping centre Westfield North Lakes, Mango Hill QLD Regional 50 12.708 shopping centre Westfield West Lakes Shopping Centre, West Lakes SA Regional 50 30.791 shopping centre Plenty Valley Town Centre, South Morang VIC Neighbourhood 50 3.107 shopping centre Westfield Whitford City Shopping Centre, Hillarys WA Regional shopping 50 38.674 centre/Bulky goods Total/average 3,289.2
1 All data is based on 30 June 2005 values including future committed acquisitions and is represented in Australian dollars. Book value and valuation conversion rates as at 30 June 2005: AUD/USD 0.764. Net income conversion rate: AUD/USD 0.7285. 2 Properties are equity accounted. 3 Asset sold prior to 30 June 2005. 4 1 Chifley Square, Sydney NSW sold. Remaining book value represents heritage floor space rights retained. 5 Future committed acquisition of 100 percent interest in the asset. DRT’s interest in the NZ property is held as an interest bearing asset in current assets until full settlement area is subject to survey. 6 Redwood Gardens disposal of vacant units between August 2004 and June 2005. 7 All public car parks are assumed to have an income expiry of 10 years. n/a = not available.
36 DB RREEF Trust Annual Report 2005 100% Acquisition Book value at Independent Independent Market Leased Weighted Net income US assets date 30 June 2005 valuation date valuation cap rate by area lease term 12 months to lettable area (A$m) (A$m) (%) (%) by income 30 June 2005 (’000 sf) (years) (A$m)
122.424 Sep–04 7.9 Jun–05 7.9 8.50 58 1.1 0.3 278.142 Sep–04 10.9 Jun–05 10.9 7.25 100 1.5 0.5 104.6 Sep–04 6.8 Jun–05 6.8 7.00 100 2.7 0.3 98.782 Sep–04 6.2 Jun–05 6.2 7.00 100 1.6 0.3 88.134 Sep–04 5.8 Jun–05 5.8 7.00 81 3.0 -0.1 250.584 Sep–04 14.3 Jun–05 14.3 7.00 100 1.9 0.7 571.765 Sep–04 37.3 Jun–05 37.3 7.00 97 2.4 1.9 429.51 Sep–04 28.5 Jun–05 28.5 7.00 93 2.3 1.1 123.136 Sep–04 11.8 Jun–05 11.8 8.00 93 4.0 0.5 Sep–04 179.721 Sep–04 20.1 Jun–05 20.1 7.75 100 4.0 1.1 53.269 Sep–04 6.3 Jun–05 6.3 7.75 100 3.7 0.4 35.872 Sep–04 2.8 Jun–05 2.8 7.50 100 2.6 0.2 402.76 Sep–04 28.4 Jun–05 28.4 7.75 61 1.0 1.6 92.4 Sep–04 7.8 Jun–05 7.8 7.50 87 3.6 0.4 147.431 Sep–04 21.5 Jun–05 21.5 7.50 100 5.1 1.3
May–05 232.7 Feb–05 232.5 6.75 100 6.2 2.4
Aug–04 155.0 Jul–04 132.6 7.25 100 6.3 9.7
Aug–04 65.0 Jun–04 60.0 7.50 100 7.3 3.3
Nov–98 122.9 Jun–03 86.0 7.50 100 5.7 13.4
Nov–99 20.6 Jun–03 16.0 8.50 100 6.1 0.8
Oct–84/ 194.6 Jun–03 161.3 7.50 99 5.6 14.6 Dec–92 19,725.2 6,432.9 93 5.3 426.7
DB RREEF Trust Annual Report 2005 37 summary of properties (continued)
AUSTRALIA AND NEW ZEALAND PROPERTY PORTFOLIO
Note: Office figures/data include car parks
Note: Office figures include car parks
38 DB RREEF Trust Annual Report 2005 Auckland
# Represents car park holding – no lettable office area. * Estimated completion value is $110 million. DB RREEF Trust Annual Report 2005 39 summary of properties (continued)
US PROPERTY PORTFOLIO
Note: All figures in US dollars
40 DB RREEF Trust Annual Report 2005 DB RREEF Trust Annual Report 2005 41 directors
Christopher T Beare Elizabeth A Alexander AM Barry R Brownjohn
BSc, BE (Hons), MBA, PhD, FAICD BComm, FCA, FAICD, CPA BComm Chair and Independent Director Age 54 Independent Director Age 62 Independent Director Age 54
Chris Beare possesses a wealth of Elizabeth Alexander was formerly a Barry Brownjohn is a senior consultant experience in technology, finance and partner with PricewaterhouseCoopers with Pacific Road Corporate Finance investment. He joined investment bank and is currently a Director of Amcor where he focuses on advising Hambros Australia in 1991, becoming Limited, Boral Limited and CSL Limited, companies on strategic acquisitions and head of corporate finance in 1994 and deputy chair of the Financial Reporting divestments in the financial services joint Chief Executive in 1995, serving Council, and a member of the and related technology sectors. until Hambros was acquired by Société Takeovers Panel. Elizabeth’s previous He was formerly the Australian Générale in 1998. During that period appointments include National Chair Managing Director for the Bank of Hambros was active in infrastructure, of the Australian Institute of Company America. While with the Bank of telecoms, media and in China. Chris Directors, National President of the America he also held a range of senior remained a director of SG Australia until Australian Society of Certified Practicing management roles in various overseas 2002. From 1998, he helped form Accountants and a member of the locations. He is currently a Director of Radiata (a technology start-up spanning Australian Accounting Standards Board. South Australia Financing Authority and Sydney and Silicon Valley). As Chair and Elizabeth is also chair of a number of Bakers’ Delight Holdings Limited. Chief Executive Officer, he then steered it board audit committees. Barry’s previous appointments include to a successful sale to Cisco Systems in Elizabeth is an Independent, Non- chair of the International Banks and 2001. For four years prior to joining Executive Director of DB RREEF Funds Securities Association and the Asia Hambros, Chris was Executive Director Management Limited and Chair of the Pacific Managed Futures Association. of the Melbourne-based Advent Board Audit Committee. Management venture capital firm. Chris Barry is an Independent, Non- has been a director of a number of Executive Director of DB RREEF companies in the finance, infrastructure Funds Management Limited and is and technology sectors. the Chair of the Board Treasury Policy Committee and a member of the Chris is both the Chair and an Board Audit Committee. Independent, Non-Executive Director of DB RREEF Funds Management Limited. He is also a member of the Board Nomination and Remuneration Committee and the Board Treasury Policy Committee.
42 DB RREEF Trust Annual Report 2005 Stewart F Ewen Brian E Scullin Victor P Hoog Antink
FILE BEc BComm, MBA, FCA, FAPI, MAICD Independent Director Age 56 Non-Executive Director Age 54 Executive Director Age 51
Stewart Ewen has extensive property Following a career in government and Victor Hoog Antink joined Deutsche experience, commencing with the politics in Canberra, Brian Scullin was Bank after almost nine years at Hooker Corporation in 1966 where he appointed the inaugural Executive Westfield Holdings where he was the worked throughout Australia and South Director of the Association of Director of Funds Management, East Asia. In 1983 he established Superannuation Funds of Australia responsible for both the Westfield Byvan Limited which, by 2000, (ASFA) in 1987. He joined Bankers Trust and the Westfield America Trust. managed $8 billion in shopping centre Trust in Australia in 1993 and held a Victor has a commerce degree from assets in Australia, Asia and North number of senior positions, becoming the University of Queensland, an MBA America. In 1999, he sold his interest President of Japan Bankers Trust in from the Harvard Business School, is in Byvan to the Savills Group in London, 1997. In 1999 he was appointed Chief a fellow of the Australian Property remaining as Chair until 2001. As the Executive Officer – Asia/Pacific for Institute, a fellow of the Institute of major partner of NavyB Pty Ltd he has Deutsche Asset Management and Chartered Accountants in Australia, completed numerous residential and retired from this position in 2002. Brian and a member of the Institute of commercial property projects. He has is a part-time member of the Federal Company Directors. Victor has over also held the position of Managing Government’s Financial Reporting 20 years experience in property and Director of Enacon Ltd, and was Council, a panel member of Financial finance and is the National President instrumental in the establishment of Industry Complaints Service Limited of the Property Council of Australia. Converting Technology Pty Ltd. Stewart and a Director of State Super Financial Victor is CEO and an Executive has also served as President of the Services Limited. Director of DB RREEF Funds Property Council of NSW and is a Brian is a Non-Executive Director Management Limited. Victor is a Director of the Cure Cancer Australia of DB RREEF Funds Management Deutsche Bank nominated Director. Foundation and Cell Bank Australia. Limited, Chair of the Board Risk and Stewart is also a Director of Compliance Committee and is a CapitaCommercial Trust Management member of the Board Nomination and Limited, Singapore. Remuneration Committee. Brian is a Stewart is an Independent, Non- Deutsche Bank nominated Director. Executive Director of DB RREEF Funds Management Limited and a member of the Board Audit Committee and the Board Nomination and Remuneration Committee.
DB RREEF Trust Annual Report 2005 43 directors (continued)
Charles B Leitner III Shaun A Mays
BA BSc (Hons), MSc, MBA Executive Director Age 46 (Alternate Director to Charles B Leitner III) Age 49 Charles Leitner is the Global Head of RREEF/DB Real Estate, Deutsche Bank’s Shaun Mays was appointed the Global real estate investment platform with over Head of RREEF Infrastructure US$56 billion under management Investments in May 2005 and is based worldwide. With 23 years experience in in New York. Prior to this appointment real estate investment, he joined RREEF Shaun joined Deutsche Asset in 1988 and became a partner in the Management (Australia) Limited as firm in 1996. In 2001 he assumed Australian Chief Executive Officer. overall responsibility for RREEF’s US Previously Shaun was Managing Director property acquisition business. RREEF of Westpac Financial Services. He was was acquired by Deutsche Bank in 2002 also Chief Investment Officer of and Charles was appointed Global Head Commonwealth Financial Services and of DB Real Estate in 2004. DB Real Managing Director and Chief Investment Estate is the real estate investment Officer of Mercury Asset Management. management arm of Deutsche Asset He has more than 18 years experience Management. Based in New York, in the funds management industry, in Charles graduated from the University both executive management and of Pennsylvania with a BA in Urban investment positions, gained in Australia, Studies/Regional Science. He is a the United Kingdom and the USA. member of The Urban Land Institute, In addition to his traditional asset The Real Estate Roundtable and The management expertise, Shaun has National Association of Office and experience in the property and private Industrial Parks. equity sectors.
Charles is an Executive Director of Shaun was Deutsche Bank’s nominated DB RREEF Funds Management Director of DB RREEF Funds Limited and is a Deutsche Bank Management Limited until March 2004 nominated Director. and is now a nominated alternate Director for Charles Leitner.
44 DB RREEF Trust Annual Report 2005 sustainability report
environment and community ■ Pollution prevention ■ Enhanced biodiversity What is sustainability? ■ Productive and healthy environments Sustainable development is defined by the Property Council ■ Transparent corporate reporting of Australia as ‘development which meets the needs of the present without compromising the ability of future generations ■ Social amenity.’ to meet their own needs. It calls for a triple-bottom-line DRFM’s sustainability platform approach to business, balancing environmental, social and economic accountability.’ DRFM’s sustainability strategy is based on its ability to identify risks and develop individual management To the Green Building Council of Australia, sustainability ‘is programs which satisfy the social, environmental and the evaluation of the environmental and social performance economic requirements of each of its properties of buildings, particularly with respect to their strategies for: throughout every stage of their life cycle – development, ■ Energy efficiency operation and refurbishment. ■ Greenhouse gas emission abatement DRFM’s commitment to sustainability is reflected in all ■ Water conservation development and refurbishment activities undertaken ■ Waste avoidance, re-use and recycling to successfully manage its property portfolio.
30 The Bond, DB RREEF Trust’s latest example of sustainability, which has received over 30 awards, including the prestigious Property Council of Australia Rider Hunt National Award
DB RREEF Trust Annual Report 2005 45 sustainability report (continued)
environmental Key achievements during 2004/2005 for existing properties: existing properties ■ each property within its portfolio was independently DRFM constantly strives to improve the environmental audited; performance of each of its properties. Since 1999, it has ■ each property’s environmental performance rating led the market in the application of comprehensive significantly improved on that for the previous year; environmental audit, assessment and action plans for the ■ by 30 June, DRFM had successfully completed a properties in its portfolio. hazardous materials audit for each property in the DRFM’s environmental management program – modelled portfolio without identifying any significant issues; and on the international standard for Environmental Management ■ DRFM introduced a program designed to facilitate Systems ISO 14001 - was developed and implemented in resource efficiency improvements (energy, water and accordance with NSW Environmental Management System waste-to-landfill) across the portfolio. This program Guidelines. The program ensures the identification, will identify each property’s current resource management and monitoring of all environmental issues consumption pattern, then implement energy associated with the physical property and any activities efficiency, water conservation and waste-to-landfill conducted at the property. Its objective is to minimise, reduce improvements to ensure that specific resource or eliminate any environmental harm being caused by the efficiency targets are achieved. property or DRFM’s associated management activities.
Each year, as part of its environmental management developments and refurbished properties program, DRFM commissions an independent audit of the DRFM pursues best practice, environmentally sustainable environmental criteria relating to each property, including: development policies in all its activities.
■ waste and stormwater management; “30 The Bond”, at 30 Hickson Road, Sydney NSW demonstrates ■ dangerous goods; DRFM’s strong commitment to delivering industry best practice in environmentally sustainable development. 30 The Bond ■ emissions including air quality management and has won over 30 property and construction awards to date, Legionella control; many of them in recognition of its innovative environmentally ■ documentation control and environmental records; sustainable development features. ■ emergency preparedness and response; DRFM aspires to incorporate environmentally sustainable ■ storage tanks (above and underground); and development principles in all of its development and ■ hazardous materials (asbestos, synthetic mineral fibres, refurbishment projects. A thorough review of the social, lead, PCB’s etc.) environmental and economic impacts of each development Each property’s environmental performance is rated against is conducted in pursuit of sustainable development the benchmark score set each year for the entire portfolio. best practice. Every rating is accompanied by an action plan which identifies and prioritises any improvements required for the property. This process enables DRFM to progressively enhance the environmental performance of each of its properties.
46 DB RREEF Trust Annual Report 2005 key achievements during 2004 and 2005 for new developments and refurbishments 30 The Bond, 30 Hickson Road, Sydney NSW
A state of the art commercial office property opened in March 2005, 30 The Bond is the first office building to be awarded a five-star energy rating under the Australian Building Greenhouse Rating Scheme.
Built to an environmentally sustainable design developed within strict commercial parameters, the building emits 30 percent less Carbon Dioxide (“CO2”) than a typical office building due to the use of natural ventilation, passive chilled beam cooling and fully operable shading on the façades.
30 The Bond has set a new benchmark for greenhouse performance for an office building. As a result, it is delivering enormous benefits to DB RREEF Trust, to the building’s tenants and to the environment. 30 The Bond roof top garden demonstrating DB RREEF Trust’s green credentials 30 The Bond is also the winner of the prestigious 2005 Property Council of Australia Rider Hunt National Award. The award recognises excellence in the efficient use of capital in property development, the provision of maximum benefits to property investors, and the delivery of maximum community benefits by a public building.
30 The Bond is also the winner of over 30 industry awards, including:
■ Australian Property Institute NSW Award 2004 for Environmental Development; ■ Master Builders Association 2004 Awards – Australia for Environmental and Energy Efficiency; and ■ Royal Australian Institute of Architects 2005 award for Sustainability and Interior Architecture. 30 The Bond is currently being accredited by the Green Building Council and is expected to be the first commercial building in Australia to receive a five-star Green Building Council rating.
DB RREEF Trust Annual Report 2005 47 sustainability report (continued)
1 Foundation Place, Greystanes NSW DRFM’s participation in industry environmental
1 Foundation Place, Greystanes NSW, is an industrial estate sustainability activities that has achieved a four-star energy rating under the ■ Resource NSW – participated in waste minimisation Australian Building Greenhouse Rating Scheme. programs with Resource NSW, including waste audits and management plans for office properties. It is an excellent example of DRFM’s ability to deliver ■ buildings which meet their social and environmental Australian Building Greenhouse Rating Parramatta responsibilities as well as their commercial objectives. The Project – participated in the identification of energy efficiency projects which reduced CO2 emissions. building was awarded its four-star rating on the basis of: ■ DRFM is a member of the Green Building Council and ■ its efficient air conditioning plant and the incorporation of has contributed towards the development of its Green natural ventilation into the car park system; Star Rating Tools. Properties within the Trust’s portfolio ■ the inclusion of automatic thermal control systems into were used to market test these tools. the warehouse space; ■ DRFM is a member of Sydney Water’s “Every Drop ■ the extensive utilisation of insulation throughout the Counts” business program, the aim of which is to building, including partitioning between office and promote and drive sustainable improvements in the warehouse, office and warehouse roof and external walls; use of water. ■ the use of high efficiency glazing with a low “e” rating; ■ the replacement of a high proportion of artificial lighting in the warehouse with natural light; and ■ the integration of solar design throughout. As part of its commitment to sustainable developments, DRFM has commenced a program to regenerate the adjoining bushland and riparian zone.
DB RREEF Trust re-establishing and maintaining bushland regeneration following a development at 1 Foundation Place, Greystanes NSW
48 DB RREEF Trust Annual Report 2005 social – occupational health safety key achievements during 2004/2005 and liability ■ the OHS&L performance of each property significantly DRFM’s Occupational Health Safety and Liability improved over the previous year. (“OHS&L”) Management Program has been developed and ■ DRFM introduced a security and terrorism threat risk implemented to ensure the identification, management and management program to assess and, where necessary, monitoring of all OHS&L issues relating to each property. improve the security arrangements in place at each of its The program’s objective is to minimise, reduce or remove properties. Its first initiative involved the development and the potential harm caused by the property and/or the rollout of a risk assessment toolkit for DRFM’s property activities undertaken therein. management teams. The toolkit facilitated an annual security risk rating and risk management assessment – Each year, as part of its management program, DRFM plus the development of individual security risk reduction commissions an independent audit of its OHS&L activities plans – for each property. with respect to each property, including: ■ DRFM introduced a pre-occupancy risk report to ensure ■ building design and management; that all construction work is delivered “fit to occupy” and ■ fire systems; free of OHS&L issues. Instigated at the completion of construction work, the report identifies any property ■ plant and equipment management; hazards which need to be rectified by the contractor or ■ claims and incident management; the developer prior to occupation by tenants. ■ first aid; and ■ DRFM is working with the Property Council of Australia ■ emergency evacuation procedures. and Building Services Contractors Association to improve the level of security screening within the Each property’s OHS&L performance is reviewed against a cleaning industry. benchmark set each year for the entire portfolio.
DB RREEF Trust Annual Report 2005 49 Australia Square, Sydney NSW
50 DB RREEF Trust Annual Report 2005 corporate governance statement
DB RREEF Trust was formed in September 2004, following a the governance framework resolution of the unitholders of DB RREEF Diversified Trust, The corporate governance framework of DRFM, and DB RREEF Industrial Trust and DB RREEF Office Trust to accordingly of each DRFM entity, is designed to support staple their units together, with units in the DB RREEF the strategic objectives of each of its Trusts by defining Operations Trust. The stapled security trades on ASX as accountability and creating control systems appropriate to DB RREEF Trust, with an ASX ticker code of DRT. mitigate the risks inherent in the day-to-day operations of At the same time DB RREEF Operations Trust acquired the Trusts. a 50 percent interest in DB RREEF Holdings Pty Limited To achieve this objective, DRFM has implemented a (“DRH”), the company that owns DB RREEF Funds corporate governance framework that embraces ASX Management Limited (“DRFM”). Principles of Good Corporate Governance and Best Practice DRFM is the Responsible Entity of each of the Stapled Trusts Recommendations (“ASX Principles”). In any circumstance mentioned above. DRFM is also the Responsible Entity of where DRFM has diverged from ASX principles, the Board three property syndicates and DB RREEF RENTS Trust, and of DRFM has considered the specific circumstance to satisfy is the fund manager for two private client property mandates. itself that its governance objectives have not been DRFM also manages the Deutsche Wholesale Property Fund compromised, and an explanation of the circumstance has (“DWPF”) on behalf of DB Real Estate Australia Limited, the been incorporated in this statement. Responsible Entity of DWPF. The above trusts, syndicates To maintain and promote investor confidence, DRFM will and client mandates are collectively referred to in this continue to review its corporate governance framework to statement as the Trusts. ensure it is at the forefront of best practice. The Board of Directors of DRFM is responsible for the A summary of DRFM compliance with ASX Principles is governance environment in which each of these Trusts outlined in Section 11 of this statement. operate, in addition to the governance environment of DRFM itself. DRFM objectives This corporate governance statement outlines the design of The objective of DRFM is to maximise returns to investors DRFM’s corporate governance activities, across each of the through active management of each Trust’s existing property Trusts, and for DRFM. Although the Board is responsible to portfolio and the acquisition of new property assets, where DRFM shareholders for the successful performance of the appropriate. The capital and resources of DRFM are company, and to effectively represent, and promote the allocated to those activities that enable it to achieve the interests of those shareholders, with a view to adding long- specific objectives of each Trust, in a manner consistent term value, this statement has been purposely drafted from with its statutory and fiduciary obligations. a unitholder or mandated client’s perspective, referred to here as investors.
DB RREEF Trust Annual Report 2005 51 corporate governance statement (continued)
website Deutsche Bank’s successful governance model within DRFM. The Deed also prescribes the composition of the Boards of In recent years the world-wide web has become an DRFM and DRH (see Principle 2) and requires the agreement increasingly important platform for information. You can of shareholders regarding the management of personnel in the access DB RREEF’s website at www.dbrreef.com. Human Resource, Internal Audit, Legal and Compliance You will find in this Corporate Governance Statement many functions. Further, the Deed prescribes a number of matters references to information and documents available on that require an ordinary resolution of shareholders, rather than www.dbrreef.com including various Terms of References, a resolution of the Board. DRFM’s Board has considered the Policies and Codes of Conduct which are available on provisions of the Shareholders’ Deed and concluded that the DB RREEF’s corporate governance web page. Deed does not compromise the ability of the Board to act You can access DB RREEF’s corporate governance web page independently and in the best interests of investors. on www.dbrreef.com/governance or by following the links 1.1 role of the board from the DB RREEF home page. The DRFM Board is responsible for ensuring that the principle 1. a solid foundation for oversight fiduciary and statutory obligations of each Trust to its and management investors are met, and that such duties have priority over all other duties including the interests of DRFM’s shareholders. The Board of DRFM is committed to maintaining, through both executive management and the Board, a balance of Having regard to these responsibilities, the Board ensures that: skills, experience and independence appropriate to the ■ compliance with its fiduciary and statutory obligations nature and extent of its operations. are met; DRFM’s governance framework enables the Board to provide ■ appropriate conflict identification and management strategic guidance, while exercising effective oversight of practices are in place; management. The framework also defines the roles and ■ each Trust’s goals are clearly established, and that responsibilities of the Board and management in order to strategies are in place for their achievement; facilitate board and management accountability and ensure a ■ business plans and budgets are approved, and balance of authority. DRFM’s Board, management committees monitoring of performance against those plans and and committee structure are detailed on www.dbrreef.com. budgets is conducted; DRFM is a wholly owned subsidiary of DRH and DRH is ■ each Trust’s financial statements are true and fair 50 percent owned by DB RREEF Operations Trust and 50 and otherwise conform with law; percent owned by First Australian Property Group Holdings ■ appropriate risk management, internal control and Pty Limited, a subsidiary of Deutsche Bank AG (“DB”) regulatory compliance policies are in place; and (a corporate structure chart is available on www.dbrreef.com). DRFM and DRH share a common Board of Directors. ■ management adheres to high standards of ethics and corporate governance. The shareholders of DRH entered into a Shareholders’ Deed on 1 October 2004. The Deed was created to protect the rights of the shareholders and to facilitate the implementation of
52 DB RREEF Trust Annual Report 2005 In addition, the Board is responsible for appointing and Management – Portfolio Review Committee removing the Chief Executive Officer (“CEO”), ratifying the Reporting to the Executive Committee, each Trust has a appointment of the Chief Financial Officer (“CFO”), Chief Portfolio Review Committee whose responsibility is to assist Operating Officer (“COO”) and Company Secretary, and management in the implementation and effective monitoring monitoring the performance of the senior management team. of the Trust’s investment strategy, including asset acquisition The Board also carries ultimate responsibility for the approval and disposal plans, developments planned and in progress, of property acquisitions, divestments and major developments. funding covenants and strategies, forecast performance, A copy of DRFM’s Board Terms of Reference is available on distributions and property budgets. The responsibilities of www.dbrreef.com. the Committee are set out in its Terms of Reference.
1.2 role of management Management – Investment Committee
The day-to-day management of each of the Trusts rests Reporting to the Executive Committee, the objective in the hands of the management team. To assist this team of the Investment Committee is to consider and make in the direction, implementation and monitoring of its plans recommendations regarding all investment proposals. and strategies a number of committees have been The responsibilities of the Committee are set out in its established and responsibilities delegated. Terms of Reference.
Management – Executive Committee Management – Capital Markets Committee
Reporting to the Board, the Executive Committee has Reporting to the Executive Committee and the Board responsibility for ensuring that the financial and human Treasury Policy Committee, the objective of the Capital resources of DRFM are effectively employed in the Markets Committee is to develop and recommend approval achievement of each Trust’s operational and strategic of financial risk management and funding strategies, objectives. The Executive Committee comprises DRFM’s monitor implementation of strategies and approve Treasury senior management team and its primary responsibilities transactions. The responsibilities of the Committee are set are set out in its Terms of Reference. out in its Terms of Reference. new products and business initiatives All new business initiatives are considered and approved by the Executive Committee, both at the point of initiation and again prior to the commencement of the new activity.
DB RREEF Trust Annual Report 2005 53 corporate governance statement (continued)
principle 2. structuring the board The members of the Board as at the date of this Annual to add value Report are as follows: Members of the Board Status 2.1 structure of the board Directors The composition of the Board reflects the duties and responsibilities it discharges as the representative of Christopher T Beare (Chair) Independent Director investors, and in setting each Trust’s strategy and Elizabeth A Alexander Independent Director overseeing its implementation. Barry R Brownjohn Independent Director Generally, the qualifications for board membership are the ability and competence to make appropriate business Stewart F Ewen Independent Director recommendations and decisions, an entrepreneurial talent Victor P Hoog Antink Executive Director and for contributing to the creation of investor value, relevant Chief Executive Officer experience in the industry sector, high ethical standards, Charles B Leitner III Executive Director, sound practical sense and a total commitment to the DB appointed Director fiduciary and statutory obligations to further the interests of investors and achieve each Trust’s objectives. Brian E Scullin Non-Executive Director, DB appointed Director The DRFM Board currently comprises seven members, four of whom are independent and three of whom are appointed by Alternate Director Deutsche Bank (“DB”), including the Chief Executive Officer Shaun A Mays DB appointed Alternate Director (“CEO”). Under the Shareholders’ Deed dated 1 October 2004 for Charles B Leitner III the Boards of DRFM and DRH may comprise up to nine members in total, five of whom would be independent and Details of the Directors, as at the date of this Report are set four of whom would be DB appointed Directors. out on pages 42 to 44 of this Report. Details of the Directors who have resigned during the year are set out in the Directors’ Report.
54 DB RREEF Trust Annual Report 2005 2.2 director independence ■ are free from any interest and any business or other relationship which could, or could reasonably be perceived Independent Directors are independent of management and to, interfere with the Director’s ability to act in the best free of any business or other relationship that could materially interests of the company; and interfere with the exercise of their unfettered and independent judgement. Independent Directors are active in areas which ■ are free from family ties or cross-directorships that may enable them to relate to the strategies of the company and to compromise director independence. make a meaningful contribution to the Board’s deliberations. For the purpose of assessing independence, the Board has The Board of DRFM regularly assesses the independence of determined that affiliation with a business which accounts for its Independent Directors, in light of interests disclosed to it. greater than 2.5 percent of DB RREEF’s, or the supplier’s revenue would be, as a category, material. Directors identified as independent:
■ are not substantial shareholders of the company, or Independent Directors hold office for three years, following an officer of, or otherwise associated directly with a their first appointment (or, if appointed by the Board substantial shareholder of the company; between annual meetings, from the date of the Annual General Meeting immediately succeeding the appointment). ■ have not been, within the last three years, employed in It is not generally expected that an Independent Director an executive capacity by the company, DB or any other would hold office for more than ten years, or be nominated group member, or been a Director after ceasing to hold for more than three consecutive terms, whichever is the such employment; longer. For a description of the procedure for the selection ■ have not been, within the last three years, a principal of and appointment of new Directors to the Board please refer a material professional adviser or a material consultant to to www.dbrreef.com. the company, DB or any other group member, or an employee associated with a service provider; Although the Board is advised by internal Legal Counsel and the Company Secretary, Independent Directors are ■ have not been a material supplier or customer of the encouraged to take independent professional advice, at company, DB or any other group member, or an officer DRFM’s expense, as required. Independent Directors also of or otherwise associated directly or indirectly with a material supplier or customer; confer regularly, outside board meetings, without the involvement of management and Executive Directors. ■ have no material contractual relationship with the company, DB or any other group member, other than as a Director of the company; ■ have not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the company;
DB RREEF Trust Annual Report 2005 55 corporate governance statement (continued)
principle 2. structuring the board The Board Nomination and Remuneration Committee to add value (continued) composition of two Independent Directors and two DB appointed members, differs from ASX guidelines that the 2.3 role of the chair Committee be comprised of a majority of Independent The DRFM Chair is an Independent Director, and is Directors, one of whom is the Chair. This departure from the responsible for the leadership of the Board, for the efficient guidelines reflects the unique shareholding of DRFM, being organisation and conduct of the Board’s functions, and for 50 percent DRT and 50 percent Deutsche Bank, and enables the briefing of Directors in relation to issues arising pertinent DB to bring to deliberations its experience as a global financial to the Board. institution, as well as recognising the materiality of its shareholding. The Board has considered this departure from The Board has also clearly defined, and the Chair monitors, ASX guidelines and has determined that the departure does the responsibilities of the CEO. not compromise the objectives of the Committee.
2.4 board nomination and remuneration committee Management – Compensation Committee A Board Nomination and Remuneration Committee has Reporting to the Executive Committee and the Board been established by the Board to assist in the fulfilment of Nomination and Remuneration Committee, the Compensation its responsibilities, by overseeing all aspects of Director and Committee oversees the development and implementation of Executive remuneration, performance evaluation and Board all human resource management systems, including nominations. It comprises two Independent Directors and compensation and recruitment, and advises the Board two DB appointed members, one of whom will be the Chair. Nomination and Remuneration Committee. The Committee The members of the Board Nomination and Remuneration comprises three members, being one DB appointed Director, Committee are as follows: one DB appointed HR Executive and one DB RREEF Executive, and its primary responsibilities are set out in its Committee member Status Terms of Reference. Shaun A Mays (Chair) Executive Member
Christopher T Beare Independent Director
Stewart F Ewen Independent Director
Brian E Scullin DB appointed Director
The Committee’s nomination and remuneration responsibilities are set out in its Terms of Reference which is available on www.dbrreef.com.
56 DB RREEF Trust Annual Report 2005 principle 3. promoting ethical The Employee Code of Conduct is available on and responsible decision-making www.dbrreef.com.
3.1 code of conduct 3.2 insider trading and trading in DRT securities To ensure the satisfaction of DRFM’s statutory and fiduciary DRFM has implemented a trading policy that sets out the obligations to each of its investor groups and to maintain requirements applying to Directors and employees of DRFM confidence in DRFM’s integrity, the Board has implemented who wish to trade or invest in any DRFM financial product a series of clearly articulated compliance policies and for their personal account or on behalf of an associate. procedures by which it requires all employees to abide. The principle objectives of the trading policy are to: Policies relating to employee conduct are summarised in the ■ avoid insider trading; DRFM Employee Code of Conduct, and assist employees in ensuring that their conduct meets the highest ethical and ■ avoid conflicts of interest with the Trusts, DRFM professional standards. or its investors; ■ ensure that the interests of the Trusts and investors take The Code of Conduct includes: priority over those of DRFM and its employees; ■ dealing with potential conflicts of interest, including gifts, ■ impose limitations on short-term trading and on highly benefits and entertainment; personal investment and staff speculative deals; trading; external business activities; personal property ■ interests; gambling; discourage staff members from engaging in periodic trading on a scale that would distract them from their ■ dealing with information and property, including responsibilities to the Trusts, DRFM and investors; and confidential information; inside information; information ■ raise awareness and minimise any potential breach of the barriers; privacy; property belonging to DRFM; prohibitions on insider trading in the Corporations Act. information retention; The policy specifies any Director or employee who wishes to ■ communications with investors and the public, including trade in any Trust must obtain written approval before all communications; anti-money laundering; know your client; client adoption; false and misleading statements entering into any trade. and conduct; anti-competitive conduct; complaints; Approval will not be given during the defined blackout media; powers of attorney; use of email; periods. These periods commence at the end of the Trusts’ ■ market conduct; half-year or full-year reporting periods and end on the day the Trusts’ results are announced. ■ dealing with legal and regulatory matters, including regulators; breaches of law; suspect transactions; other In addition, if Compliance or the Chief Executive Officer irregularities; bankruptcy or court proceedings; and consider that there is the potential that inside information may be held or the potential that a significant conflict of ■ general conduct, including authority limits; employee interest could arise, additional blackout periods may be references; drugs and alcohol; equal opportunity; no imposed on Directors and employees at any time. harassment. All employees receive regular Code of Conduct training, A summary of the Employee Trading policy is available on other compulsory training, including anti-money laundering www.dbrreef.com. and routine refresher training.
DB RREEF Trust Annual Report 2005 57 corporate governance statement (continued)
principle 4. safeguarding the integrity The membership of the Board Audit Committee is as follows: of financial reporting Committee member Status
4.1 review and authorisation Elizabeth A Alexander (Chair) Independent Director DRFM has put in place a structure of review and Barry R Brownjohn Independent Director authorisation designed to ensure the truthful and factual Stewart F Ewen Independent Director presentation of each Trust’s financial position.
This structure includes: The Board Audit Committee also has responsibility for approval of the engagement of the external auditor to ■ the establishment of a Board Audit Committee to review perform any non-audit service for a fee greater than the financial statements of each entity and review the $100,000. The external auditor will not provide services independence and competence of the external auditor; and that have the potential to impair the independence of their ■ semi-annual management representations to the Board audit role. Generally such services include those where the Audit Committee, affirming the veracity of each entity’s external auditor: financial statements. ■ participates in activities that are normally undertaken 4.2 board audit committee by management; A Board Audit Committee has been established by the Board, ■ is remunerated on a “success fee” basis; including only Directors who are financially literate and have an ■ may be required to review or audit their own work, understanding of the industry in which DRFM operates, and including: one or more of whom have financial expertise. The Board Audit ■ the preparation of accounting records; Committee currently comprises three Independent Directors. ■ the design and implementation of technology systems; The Board Audit Committee operates under formal Terms of Reference, has access to management, and internal and ■ conducting valuation, actuarial or legal services; external auditors without management present, and has the ■ promoting, dealing in or underwriting securities; or right and opportunity to seek explanations and additional ■ providing internal audit services. information. In addition, the external auditor is invited to attend all Board Audit Committee meetings. The Committee may also The Board Audit Committee’s Term of Reference, the obtain independent professional advice in the satisfaction of its Committee’s procedure for the selection and appointment duties at the cost of DRFM. The Committee meets as of the external auditor and for the rotation of external audit frequently as required to undertake its role effectively and not engagement partners are available on www.dbrreef.com. less than four times per annum.
58 DB RREEF Trust Annual Report 2005 principle 5. timely and balanced ■ The Employee Code of Conduct which includes disclosure consideration of: ■ media contact and comment; and 5.1 continuous disclosure ■ safeguarding the confidentiality of corporate To promote the timely and balanced disclosure of all material information to avoid premature disclosure. matters that impact the Trusts, the Board has put in place DRFM has also established a segregated Compliance mechanisms designed to ensure compliance with ASX Listing function to assist management in the promotion of an Rules and ASIC’s disclosure requirements such that: effective compliance culture. Compliance responsibilities ■ all investors have equal and timely access to material include the provision of compliance advice, the drafting and information, including the financial situation, performance, updating of relevant compliance policies and procedures, ownership and governance of the Trusts; and conducting compliance training and monitoring adherence ■ all announcements are factual and presented in a clear to key compliance policies and procedures. and balanced way. For a description of these Policies please refer to the To achieve this objective DRFM has the following policies Employee Code of Conduct and Continuous Disclosure in place: & Analyst Briefings – which are both available on ■ Continuous Disclosure & Analyst Briefing Policy, which www.dbrreef.com. includes consideration of: principle 6. respecting the rights ■ the type of information that requires disclosure; of unitholders ■ internal notification and decision-making concerning its disclosure obligations; 6.1 annual general meeting ■ the delegation of responsibility to ensure that DRFM DRFM respects the rights of investors and to facilitate the complies with its disclosure obligations and to identify effective exercise of those rights the Board has committed to the employee responsible for determining what will the conduct of an annual general meeting for DB RREEF Trust. be disclosed; Each annual general meeting will seek to: ■ measures designed to avoid the emergence of a false ■ market in any Trust’s units; and supplement effective communication with investors; ■ ■ external communications such as analysts briefings provide investors ready access to balanced and and responses to investor queries. understandable information about their fund; and ■ increase the opportunities for investor participation. Investors of DB RREEF Trust will also have the opportunity to elect a majority of Directors to the DRFM Board.
DB RREEF Trust Annual Report 2005 59 corporate governance statement (continued)
6.2 communications with investors principle 7. recognising and managing risk In addition to the conduct of an AGM, DRFM has designed a 7.1 risk management communication strategy to promote effective communication and encourage effective participation with each Trust’s DRFM has designed a system of risk oversight, management investors. This strategy includes: and internal control to identify, assess, monitor and manage risk, and enable DRFM to keep investors informed of material ■ the placement of all relevant announcements made to changes in each Trust’s risk profile. This system includes the investors and the market, and related information, on establishment of a Board Risk and Compliance Committee, the website; supported by a management Compliance and Internal Audit ■ the practice of teleconferencing listed analyst and media Committee and a Risk Management Committee. briefings and general meetings, and posting a transcript or presentation material on the website; 7.2 board risk and compliance committee ■ placing the full text of notices of meetings and Although not required by ASIC, due to the appointment of a explanatory material on the website; majority independent board, the Board has established a ■ providing information about historic press Board Risk and Compliance Committee to review risk and releases/announcements and historic financial data compliance matters and monitor DRFM’s conformance with on the website; and the requirements of the Managed Investments Act, as specified ■ using email to provide information updates to investors, in Section 601JC of the Corporations Act. The Committee as appropriate. includes only members who are familiar with the requirements of the Managed Investments Act and have extensive risk and 6.3 audit attendance at AGM compliance experience. The Committee is also encouraged to Further, DRFM will request the external auditor of the Trust obtain independent professional advice in the satisfaction of its to attend each annual general meeting and be available to duties at the cost of DRFM. answer investor questions about the conduct of the audits of The Committee currently comprises five members, three of both the Trust’s financial records and its Compliance Plan, whom are external members (ie. members that satisfy the and the preparation and content of the auditor’s report. requirements of Section 601JB(2) of the Corporations Act) and two of whom are executives of DRFM. The scope of the Committee includes all Trusts, including DRFM’s investment mandates. The Committee reports to the Responsible Entity any breach of the Corporations Act or breach of the provisions contained in any Trust’s Constitution, and further reports to ASIC if the Committee is of the view that the Responsible Entity has not taken appropriate action to deal with a matter reported to it.
60 DB RREEF Trust Annual Report 2005 The membership of the Board Risk and Compliance Management – Risk Management Committee Committee is as follows: Reporting to the Executive Committee and the Board Risk Committee member Status and Compliance Committee, the objective of the Risk Management Committee is to analyse the effectiveness of Brian Scullin (Chair) Independent Member DRFM’s risk management systems, and to oversee the Peter Carrigy-Ryan Independent Member establishment and implementation of policies, procedures Andy Esteban Independent Member and systems that ensure the appropriate identification, assessment, management and monitoring of risk. The Tanya Cox Executive Member and Chair of the responsibilities of the Risk Management Committee are Risk Management Committee set out in its Terms of Reference. John Easy Executive Member and Chair of the Compliance and Internal Audit 7.3 management representations Committee In addition to the operation of the above management committees, the Chief Executive Officer makes the following In addition to its responsibilities under the Act, the Board representations in relation to risk management: Risk and Compliance Committee is responsible for oversight of the DRFM risk management system, including its internal ■ at least quarterly to the Head of Compliance, regarding compliance and control environment. The Committee’s Terms conformance with compliance policies and procedures. of Reference is available on www.dbrreef.com. Any exceptions are reported by Compliance to the Board Risk and Compliance Committee quarterly; and To enable the Board Risk and Compliance Committee to ■ on a semi-annual basis to the Board Audit effectively fulfil its obligations, two management committees Committee regarding the veracity of the company’s have been established to monitor the effectiveness of DRFM’s financial statements. risk management, internal compliance and control systems. Please refer to www.dbrreef.com for a description of DRFM’s Management – Compliance and Internal Audit Committee Risk Management Policy.
Reporting to the Executive Committee and the Board Risk 7.4 board treasury policy committee and Compliance Committee, the objective of the Compliance and Internal Audit Committee is to review the effectiveness of The Board has established a Board Treasury Policy DRFM’s internal compliance and control systems. The Committee to review and recommend for approval financial Committee has the authority to request reports from and/or risk management policies and hedging and funding the attendance at its meetings of relevant management to strategies, and to monitor overall financial risk management explain any issues which are brought to its attention. The exposures. The Board Treasury Policy Committee includes responsibilities of the Compliance and Internal Audit only members who are familiar with financial risk Compliance Committee are set out in its Terms of Reference. management concepts. The scope of the Committee includes all Trusts. As the Committee was only established in June 2005, no meetings were conducted in the 2004/05 year.
DB RREEF Trust Annual Report 2005 61 corporate governance statement (continued)
principle 7. recognising and managing risk 8.1 board education and performance evaluation (continued) DRFM is subject to various regulatory and legal obligations, The membership of the Board Treasury Policy Committee arising from: is as follows: ■ the Corporations Act (including specifically the provisions Committee member Status of the Managed Investments Act); ■ the Australian Stock Exchange listing rules and Barry R Brownjohn (Chair) Independent Director governance requirements; Christopher T Beare Independent Director ■ the requirements of an Australian Financial Services Consultant Independent Member Licence holder; and
■ Victor P Hoog Antink Executive Director DB RREEF’s governance and compliance framework, created to enable DRFM, its Board and employees to Ian D Robins Executive Member and comply with those obligations. Chair of the Capital Markets Committee To ensure that Directors have the most current information to meet the above obligations, to discharge their responsibilities The Committee’s Terms of Reference is available on effectively and to allow new Directors to participate fully and www.dbrreef.com. actively in board decision-making at the earliest opportunity, Management Capital Markets Committee Board members receive:
To enable the Treasury Policy Committee to effectively fulfil its ■ a Director’s Information Pack, including corporate obligations, the Capital Markets Committee is charged with governance framework, committee structures, membership the development of financial risk management and funding and terms of reference, governing documents, Directors strategies, monitoring implementation of strategies and and Officers insurance details, current annual reports and Trust constitutions; approving Treasury transactions. ■ a Director’s induction briefing, including explanation of The Capital Markets Committee’s responsibilities are set out each Trust’s financial, strategic, operational and risk in its Terms of Reference. management position; and principle 8. encouraging enhanced ■ director training, where required, including Corporations performance Act (general duties of a Director, Managed Investment Act duties of a director), Australian Stock Exchange The Board is committed to enhancing its, and (governance and listing rules), Australian Financial management’s, effectiveness. To achieve this objective Services Licence (authorisations, financial and general DRFM has implemented a training regime, to facilitate requirements) and Governance and Compliance performance by education, for Directors and employees. Framework (compliance plan, compliance policies and DRFM has also implemented a comprehensive procedures, monitoring program). performance evaluation program for its employees, to ensure the effectiveness of its education and training programs, and the Board Nomination and Remuneration Committee has implemented an annual performance evaluation program for the Board.
62 DB RREEF Trust Annual Report 2005 Directors are also encouraged to: In addition, employees deemed “advisers” are required to have in place an annual training plan and to undertake a ■ take independent professional advice, at the company’s specified number of hours training per annum. Employees expense; who provide financial advice to retail investors are also ■ seek additional information from management; and required to become accredited pursuant to ASIC Policy ■ directly access the Company Secretary, Head of Legal Statement PS146. and Head of Compliance. Specific minimum compulsory compliance training is The Board Nomination and Remuneration Committee is also provided or co-ordinated by Compliance to all employees. responsible for ensuring the effectiveness of the induction Adherence to the above training regime is monitored by the process and overseeing the annual performance evaluation of Executive Committee. the Board, its committees and individual Directors. To foster continuous improvement and to ensure the As the first year of operation, which ended 30 June 2005, effectiveness of its education and training programs, DRFM included the appointment of a majority of new Directors and conducts an annual performance evaluation of all employees. was a period of significant change following the restructure of the DB Real Estate business, the Directors considered it 8.3 employee performance evaluation appropriate that an evaluation of the Board only would be conducted in 2005. Evaluations of the Board committees, Each year the Board ensures that the goals of DRFM are individual Directors and the Board as a whole will be clearly established and that strategies are in place for the conducted in the third calendar quarter of 2006 and each achievement of those goals. Goals are reviewed periodically subsequent year of operation. to ensure they remain consistent with DRFM’s priorities and the changing nature of the business. These goals become A description of the process for the performance evaluation the performance targets for the CEO and Executive of the Board is available on www.dbrreef.com. Committee. Performance against these goals is reviewed annually by the Board Nomination and Remuneration 8.2 employee education and performance evaluation Committee and is taken into account in the remuneration The Code of Conduct requires all employees to undertake review of Executive Committee members. and maintain a specific type and/or amount of training, Cascading goals and objectives are established for all other determined by their job function (eg. to meet DRFM’s employees and their performance is reviewed annually by license requirements, to meet the requirements of ASIC the Executive Committee. Remuneration and incentive Policy Statement PS146 and PS164 or to meet specific payments are considered by the Compensation Committee industry or professional body accreditation requirements). and recommended to the Board Nomination and Managers and supervisors also have a responsibility to Remuneration Committee, based on the achievement of ensure that employees reporting to them have undertaken approved performance objectives and market comparatives. the required training.
DB RREEF Trust Annual Report 2005 63 corporate governance statement (continued)
principle 9. remunerating fairly Alignment of employees’ interests is achieved through the and responsibly plan rewarding capability and performance. For participants, the plan: 9.1 remuneration framework ■ provides a clear structure for earning reward; The objective of DRFM’s remuneration reward framework is to ■ delivers competitive reward for contribution to the ensure reward for performance is competitive and appropriate creation of value; and for the results delivered. The framework aligns employee ■ provides recognition for contribution. reward with achievement of strategic objectives and the creation of value for investors, and conforms with market best The plan is designed to attract and retain talented practice for delivery of reward. and motivated employees, and to encourage enhanced performance. The Board Nomination and Remuneration Committee oversees the remuneration of executives to ensure that The remuneration framework provides a mix of fixed and executive reward satisfies the following key criteria for good variable pay, being base pay and short-term performance reward governance practices: incentive. As an employee gains seniority within DRFM, the balance of this mix shifts to a higher proportion of “at risk” ■ competitiveness and reasonableness; rewards. DRFM further intends to introduce a long-term ■ performance linkage/alignment; performance incentive scheme during the year ending ■ transparency; and 30 June 2006.
■ financial and non-financial resource management. To ensure that base pay is competitive, external remuneration In consultation with external remuneration consultants, consultants provide analysis and advice regarding market DRFM has structured a remuneration framework that is remuneration for comparable roles. Base pay for employees market competitive and complementary to its reward strategy. is reviewed annually. There are no guaranteed base pay Alignment to investors’ interests is achieved through increases for employees. increased focus on trust performance being a core Should DRFM achieve predetermined performance targets, a component of plan design, as well as the plan rewarding: short-term incentive pool, approved by the Board Nomination ■ delivery of a target return on assets; and and Remuneration Committee, is available for allocation to employees annually. Cash incentives are payable in ■ achievement of key non-financial value drivers. September each year. Performance targets are utilised to ensure that variable reward is only available when value has been created for investors, and when performance is consistent with each relevant Trust’s forecast. The incentive pool may be leveraged for performance above targets to provide incentive for employee out-performance.
64 DB RREEF Trust Annual Report 2005 Key performance indicators are linked to short-term principle 10. recognising the legitimate incentives based on both business and personal objectives. interests of stakeholders Performance indicators require achievement of specific targets in relation to Trust performance, as well as other key 10.1 stakeholder interests non-financial measures linked to drivers of performance in DRFM is aware that the creation of value through the better future reporting periods. Short-term incentive payments management of natural, human, social and other capital is may be adjusted up or down in line with under or over essential to the development of its reputation, and achievement against target performance levels, at the acknowledges the interests of its stakeholders including discretion of the Board Nomination and Remuneration investors, employees, tenants, bankers/financiers and the Committee. broader community, in the further pursuit of this objective.
Termination provisions for the Chief Executive Officer (“CEO”) To address these objectives DRFM has in place: are set out in the CEO’s contract of employment. In the event of early termination, DRFM may be required to give twelve A directors’ code of conduct, which addresses: months notice and may elect to payout all or part of this ■ directors duties and responsibilities; notice period. ■ conflicts of interest; There are no termination provisions extended to any other ■ use and confidentiality of information; and DRFM Executive. ■ director independence. 9.2 non-executive directors’ remuneration framework An employee code of conduct which addresses:
Fees and payments to Non-Executive Directors reflect the ■ Overriding principles, and specific issues, including: demands which are made on, and the responsibilities of ■ conflicts of interest; Directors. Non-Executive Directors’ fees and payments ■ are reviewed annually by the Board Nomination and information and property; Remuneration Committee. The Committee also obtains advice ■ client and public communication; from independent remuneration consultants to ensure Non- ■ market conduct; Executive Directors’ fees and payments are appropriate and ■ legal and regulatory matters; and in line with market. The Chair’s fee is determined independently of the fees of Non-Executive Directors, based ■ general conduct. on comparative roles in the external market. The Chair is not A description of the Directors’ Code of Conduct and the present at any discussions relating to the determination of Employee Code of Conduct is available on www.dbrreef.com. his/her own remuneration. Non-Executive Directors do not receive share options.
Non-Executive Directors who accept positions on board committees receive an additional annual fee for each committee membership. Non-Executive Directors’ fees are also recommended for approval by DB RREEF Trust investors.
DB RREEF Trust Annual Report 2005 65 corporate governance statement (continued)
principle 11. ASX corporate governance recommendations
ASX Listing Rules require listed entities to include in their annual report a statement disclosing the extent to which they have followed the 28 ASX corporate governance recommendations during the year and to identify the recommendations that have not been followed and explain why they have not been followed.
Note: Reference in the table is a cross reference to the relevant sections of this Corporate Governance Statement, and where applicable the Directors Report (“DR”) or the Remuneration Report (“RR”).
Comply Principle What Reference Yes/No
Principle 1: Lay solid foundations for management and oversight
1.1 Formalise and disclose the functions reserved to the Board 1.1 Yes and those delegated to management.
Principle 2: Structure the Board to add value
2.1 A majority of the Board should be Independent Directors. 2.1 Yes
2.2 The Chairperson should be an Independent Director. 2.3 Yes
2.3 The roles of Chairperson and Chief Executive Officer should not be exercised by the same individual. 2.1 Yes
2.4 The Board should establish a Nomination Committee. 2.4 Yes
2.5 Provide the information indicated in guide to reporting 1.1 on Principle 2. website Yes
Principle 3: Promote ethical and responsible decision making
3.1 Establish a code of conduct to guide the Directors, the Chief 3.1 Yes Executive Officer (or equivalent), the Chief Financial Officer 10.1 (or equivalent) and any other key executives as to: 3.1.1 the practices necessary to maintain confidence in the company’s integrity; and 3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
3.2 Disclose the policy concerning trading in company securities 3.2 Yes by directors, officers and employees.
66 DB RREEF Trust Annual Report 2005 Comply Principle What Reference Yes/No
Principle 4: Safeguard integrity in financial reporting
4.1 Require the Chief Executive Officer (or equivalent) and the DR Yes Chief Financial Officer (or equivalent) to state in writing to the 4.1 Board that the company’s financial reports present a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standards.
4.2 The Board should establish an Audit Committee. 4.2 Yes
4.3 Structure the Audit Committee so that it consists of: 4.2 Yes ■ only Non-Executive Directors; ■ a majority of Independent Directors; ■ an independent chairperson, who is not chairperson of the Board; and ■ at least three members.
4.4 The Audit Committee should have a formal charter. 4.2 Yes
4.5 Provide the information indicated in guide to reporting 4.2 Yes on Principle 4. Annual Report DR, 4.2, website
Principle 5: Make timely and balanced disclosure
5.1 Establish written policies and procedures to ensure 5.1 Yes compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance.
5.2 Provide the information indicated in guide to reporting on 5.14 Yes Principle 5. website
DB RREEF Trust Annual Report 2005 67 corporate governance statement (continued)
principle 11. ASX corporate governance recommendations (continued)
Comply Principle What Reference Yes/No
Principle 6: Respect the rights of shareholders
6.1 Design and disclose a communications strategy to promote 6.1 Yes effective communication with shareholders and encourage 6.2 effective participation at general meetings.
6.2 Request the external auditor to attend the annual general 6.3 Yes meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
Principle 7: Recognise and manage risk
7.1 The Board or appropriate committee should establish 7.1 Yes policies on risk oversight and management. 7.2
7.2 The Chief Executive Officer (or equivalent) and the Chief DR Yes Financial Officer (or equivalent) should state to the Board 7.3 in writing that: 7.2.1 the statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and 7.2.2 the company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
7.3 Provide the information indicated to guide to reporting on 7.1 to 7.4 Yes Principle 7. website
68 DB RREEF Trust Annual Report 2005 Comply Principle What Reference Yes/No
Principle 8: Encourage enhanced performance
8.1 Disclose the process for performance evaluation of the Board, 8.1 Yes its committees and individual Directors, and key executives. 8.2
Principle 9: Remunerate fairly and responsibly
9.1 Provide disclosure in relation to the company’s remuneration 9.1 Yes policies to enable investors to understand (i) the costs and RR benefits of those policies and (ii) in the link between remuneration paid to Directors and key executives and corporate performance.
9.2 The Board should establish a Remuneration Committee. 2.4 Yes
9.3 Clearly distinguish the structure of Non-Executive Directors’ 9.2 Yes remuneration from that of Executives. RR
9.4 Ensure that payment of equity-based executive remuneration RR Yes is made in accordance with thresholds set in plans approved by shareholders.
9.5: Provide the information indicated in guide to reporting on RR, DR Yes Principle 9. 2.4, website
Principle 10: Recognise the legitimate interests of stakeholders
10.1 Establish and disclose a code of conduct to guide compliance 10.1 Yes with legal and other obligations to legitimate stakeholders.
DB RREEF Trust Annual Report 2005 69 directors’ report
The Directors of DB RREEF Funds Management Limited (“DRFM”) as Responsible Entity of DB RREEF Diversified Trust (formerly Deutsche Diversified Trust) (“the Trust” or “DDF”) and its consolidated entities (“the Stapled Entity”) present their Directors’ Report (“Report”) together with the consolidated financial report of the Trust for the year ended 30 June 2005.
1. directors and secretaries
On 29 September 2004, DRFM replaced DB Real Estate Australia Limited as Responsible Entity of the Trust.
1.1 DB RREEF Funds Management Limited The following persons were Directors or alternate Directors of DRFM at any time during the period 29 September 2004 to the date of this Report:
Name Appointed Resigned Directors Christopher T Beare 4 August 2004 Continuing Elizabeth A Alexander AM 1 January 2005 Continuing Barry R Brownjohn 1 January 2005 Continuing Stewart F Ewen 4 August 2004 Continuing Victor P Hoog Antink 1 October 2004 Continuing Charles B Leitner III 10 March 2005 Continuing Shaun A Mays 13 May 2004 10 March 2005 Brian E Scullin 1 January 2005 Continuing Daniel S Weaver 1 October 2004 17 December 2004 Alternate Director Shaun A Mays (alternate for Charles B Leitner III) 10 March 2005 Continuing
Particulars of the qualifications, experience and special responsibilities of current Directors or alternate Directors of DRFM at the date of this Report are set out in the section titled “Directors” and form part of this Report.
Particulars of the qualifications, experience and special responsibilities of Daniel S Weaver, a director of DRFM during the period 29 September 2004 to 30 June 2005 are as follows:
Daniel S Weaver BArch, MBA, AFIRE (Executive Director)
With over 18 years of real estate experience, primarily with firms specialising in retail property, Daniel Weaver joined RREEF’s acquisition group in 1996. Daniel’s responsibilities entail overseeing RREEF’s retail property acquisitions, including expanding its target markets and serving as the retail specialist on RREEF’s Investment Committee. Prior to his current role, Daniel was most recently a portfolio manager for one of RREEF’s separate account pension fund clients. Prior to joining RREEF, Daniel was a vice president with Homart Development Co. Daniel is a member of the International Council of Shopping Centres (ICSC) and the Association of Foreign Investors in Real Estate (AFIRE). He holds an undergraduate degree in architecture and an MBA from Miami University.
70 DB RREEF Trust Annual Report 2005 1.2 DB Real Estate Australia Limited The following persons were Directors of DB Real Estate Australia Limited at any time during the period 1 July 2004 to 29 September 2004:
Name Appointed Resigned Directors Christopher T Beare, Chair1 25 March 2003 Continuing Stewart F Ewen1, 2 25 March 2003 Continuing Shaun A Mays 13 May 2004 Continuing William B Robinson1, 2, 3 25 March 2003 20 October 2004 Brian E Scullin2 20 June 2001 Continuing David C Shields 25 March 2003 20 October 2004
1 Independent Director. 2 Audit Committee Member. 3 Compliance Committee Member.
The particulars of the qualifications, experience of the current Directors and the alternate Director of DB Real Estate Australia Limited are set out in the DRT Annual Report 2005 in the section titled “Directors”.
Particulars of the qualifications, experience and special responsibilities of William B Robinson and David C Shields, Directors of DB Real Estate Australia Limited for the period 1 July 2004 to 29 September 2004 are as follows:
William B Robinson ABIA, AASA (Independent Director)
Bill Robinson was with the Reserve Bank of Australia from 1955 until 1975. Following senior appointments at the Asian Development Bank and the Rome-based International Fund for Agricultural Development, he was Financial Adviser to His Highness The Aga Khan from 1980 to 1999. In this latter role he was also a director of numerous listed and unlisted companies in Europe, Asia, Africa and the US.
David C Shields BE (Hons), MBA (Executive Director)
David Shields joined Deutsche Asset Management in 1993 and is currently the Head of DB Capital Partners, the private equity investment business within Deutsche Asset Management. He has 20 years’ experience in funds management and private equity, having previously worked for AIDC Limited, Advent Management Group and Australian Pacific Technology Limited.
DB RREEF Trust Annual Report 2005 71 directors’ report (continued)
1.3 company secretaries The names and details of the Company Secretaries of DRFM as at 30 June 2005 are as follows:
Tanya L Cox MBA MAICD (Company Secretary)
Appointed: 1 October 2004
Tanya Cox joined DB Real Estate in July 2003 as Chief Operating Officer, responsible for the efficient management of the overall real estate business in Australia. Tanya has 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 of Bank of New Zealand (Australia).
Tanya is Chief Operating Officer and Company Secretary of DRFM and DB RREEF Holdings Pty Limited.
Ian Thompson BEc (Company Secretary)
Appointed: 12 July 2000 Resigned: 1 July 2005
Ian Thompson has worked in a range of roles including: Research and Policy Officer, Senior Administration Officer and Assistant Company Secretary in the State Superannuation Board, Local Government Superannuation Board, Public Authorities Superannuation Board, State Superannuation Investment and Management Corporation and Axiom Funds Management Limited, prior to being appointed as Company Secretary to various Group companies of Deutsche Bank in 2000.
John C Easy B Comm LLB (Company Secretary)
Appointed: 1 July 2005
John Easy joined Deutsche Asset Management as a senior lawyer in 1997 and is now the Head of Legal for DB RREEF. John has been involved in the listing of Deutsche Office Trust and major acquisition, disposal and leasing transactions for the group, along with responsibility for legal issues affecting the property portfolio. John was formerly a senior associate with major law firms Allens Arthur Robinson and Gilbert & Tobin. John is currently undertaking the Graduate Diploma in Applied Corporate Governance with Chartered Secretaries Australia.
John is Head of Legal, and Company Secretary for DRFM and DB RREEF Holdings Pty Limited.
72 DB RREEF Trust Annual Report 2005 1.4 Deutsche Asset Management (Australia) Limited For the purpose of reporting on DB RREEF Industrial Trust (“DIT”) and DB RREEF Office Trust (“DOT”) the following information is provided about the Board of Deutsche Asset Management (Australia) Limited (“DeAM”), the Responsible Entity of DIT and DOT, for the period 1 July 2004 to 29 September 2004, when the Responsible Entity of each trust became DRFM, is as follows:
Name Appointed Resigned Directors Christopher T Beare, Chair1 25 March 2003 20 October 2004 Stewart F Ewen1, 2 25 March 2003 20 October 2004 Shaun A Mays 13 May 2004 4 May 2005 William B Robinson1, 2, 3 25 May 2000 20 October 2004 Brian E Scullin2 20 December 1999 Continuing David C Shields 25 March 2003 Continuing
1 Independent Director. 2 Audit Committee Member. 3 Compliance Committee Member.
For the purpose of reporting on DB RREEF Operations Trust, the Board of its Responsible Entity, DRFM is as outlined in Section 1.1 of this Report.
Particulars of the qualifications and experience of each of the Directors mentioned in this sub-section are set out in either Section 1.1 of this Report or in the DRT Annual Report 2005 in the section titled “Directors”.
DB RREEF Trust Annual Report 2005 73 directors’ report (continued)
2. attendance of directors at board meetings and board committee meetings
2.1 DB RREEF Funds Management Limited The Responsible Entity of the Trust changed from DB Real Estate Australia Limited to DRFM on 29 September 2004. Set out below are the details of Director attendance at Board and Board committee meetings:
DB RREEF Funds Management Limited for the period to 30 June 2005
Board Board Audit Board Nomination and Board Risk and Committee Remuneration Compliance Meetings Meetings Meetings Meetings Meetings Meetings Meetings Meetings held1 attended held1 attended held1 attended held1 attended Directors Christopher T Beare 9 9 1 1 Elizabeth A Alexander AM 8 7 5 5 Barry R Brownjohn 8 6 5 3 Stewart F Ewen 9 9 5 5 1 1 Victor P Hoog Antink 9 9 Charles B Leitner III 5 3 Shaun A Mays2 43 Brian E Scullin 8 8 1 1 2 2 Daniel S Weaver 1 0 Alternate Director Shaun A Mays (alternate for Charles B Leitner III) 5 4 1 1
1 Number of meetings held while a Director. 2 Shaun A Mays resigned as a Director on 10 March 2005.
Since 30 June 2005 the DRFM Board has established the Board Treasury Policy Committee.
74 DB RREEF Trust Annual Report 2005 Deutsche Real Estate Australia Limited for the period to 29 September 2004
Board Board Audit Board Risk and Committee Compliance Committee Meetings Meetings Meetings Meetings Meetings Meetings held1 attended held1 attended held1 attended Christopher T Beare 4 4 Stewart F Ewen 4 4 1 1 Shaun A Mays 4 4 William B Robinson 4 4 1 1 1 1 Brian E Scullin 4 3 1 1 1 1 David C Shields 4 4
1 Number of meetings held while a Director.
2.2 Deutsche Asset Management (Australia) Limited The following table outlines details of Director attendance at Board and Board committee meetings for the period to 29 September 2004 for Deutsche Asset Management (Australia) Limited, the then Responsible Entity of DIT and DOT.
Deutsche Asset Management (Australia) Limited for the period to 29 September 2005
Board Board Audit Board Risk and Committee Compliance Committee Meetings Meetings Meetings Meetings Meetings Meetings held1 attended held1 attended held1 attended Christopher T Beare 4 4 Stewart F Ewen 4 4 1 1 Shaun A Mays 4 4 William B Robinson 4 4 1 1 1 1 Brian E Scullin 4 3 1 1 1 1 David C Shields 4 4
1 Number of meetings held while a Director.
For the purposes of reporting on DB RREEF Operations Trust, details of Director attendance at Board meetings and Board committee meetings of its Responsible Entity, DRFM, is as outlined in Section 2.1.
DB RREEF Trust Annual Report 2005 75 directors’ report (continued)
3. directors’ and executive remuneration report
DRFM’s Directors’ and Executive Remuneration is set out in the section titled “Directors’ and Executive Remuneration Report” that follows this Report.
4. directors’ interests
4.1 interest in securities As at the date of this Report, the interests of each Director in the securities of the Stapled Entity are:
Personally Indirectly Christopher T Beare Nil Nil Elizabeth A Alexander AM Nil Nil Barry R Brownjohn Nil Nil Stewart F Ewen Nil Nil Victor P Hoog Antink Nil Nil Charles B Leitner III Nil Nil Shaun A Mays (alternate to Charles B Leitner III) Nil Nil Brian E Scullin Nil Nil
As at the date of this Report, no Director held options over securities in the Stapled Entity.
4.2 other interests As at the date of this Report, no Director held any interest in any other fund or scheme managed by the Responsible Entity or another entity that forms part of the Stapled Entity.
76 DB RREEF Trust Annual Report 2005 5. directors’ directorships in other listed companies
The following table sets out directorships that the Directors of the Responsible Entity held as at 30 June 2005 and during the three years preceding 30 June 2005 and up to the date of this Report including the period for which each directorship was held:
Directors Company Date appointed Date resigned
Christopher T Beare DB RREEF Holdings Limited1 21 Sep 2004 Continuing DB RREEF Funds Management Limited2 4 Aug 2004 Continuing
Elizabeth A Alexander AM DB RREEF Holdings Limited1 1 Jan 2005 Continuing DB RREEF Funds Management Limited2 1 Jan 2005 Continuing Amcor Limited Apr 1994 Continuing Boral Limited Sep 1994 Continuing CSL Limited Jul 1991 Continuing
Barry R Brownjohn DB RREEF Holdings Limited1 1 Jan 2005 Continuing DB RREEF Funds Management Limited2 1 Jan 2005 Continuing
Stewart F Ewen DB RREEF Holdings Limited1 21 Sep 2004 Continuing DB RREEF Funds Management Limited2 4 Aug 2004 Continuing
Victor P Hoog Antink DB RREEF Holdings Limited1 1 Oct 2004 Continuing DB RREEF Funds Management Limited2 1 Oct 2004 Continuing
Charles B Leitner III DB RREEF Holdings Limited1 10 Mar 2005 Continuing DB RREEF Funds Management Limited2 10 Mar 2005 Continuing
Brian E Scullin DB RREEF Holdings Limited1 1 Jan 2005 Continuing DB RREEF Funds Management Limited2 1 Jan 2005 Continuing IYS Instalment Receipt Limited3 24 Oct 2000 Continuing Deutsche Asset Management (Australia) Limited3 20 Dec 1999 Continuing Alternate Director Shaun A Mays DB RREEF Holdings Limited1 10 Mar 2005 Continuing (alternate to Charles B Leitner III) DB RREEF Funds Management Limited2 1 Jan 2005 Continuing IYS Instalment Receipt Limited3 13 May 2004 4 May 2005 Deutsche Asset Management (Australia) Limited3 13 May 2004 4 May 2005
1 DB RREEF Holdings Pty Limited is the holding company of DRFM. 2 DRFM is Responsible Entity for (a) the Trust, a managed investment scheme whose units are stapled to the units of DB RREEF Diversified Trust, DB RREEF Industrial Trust, DB RREEF Office Trust and DB RREEF Operations Trust and trade on ASX as DB RREEF Trust and (b) DB RREEF RENTS Trust, whose Real-estate perpetual ExchaNgeable sTep-up Securities called RENTS are listed on ASX. 3 IYS Instalment Receipt Limited has issued ASX listed instalment receipts over units in the Deutsche Retail Infrastructure Trust, a managed investment scheme that is listed but not quoted on ASX and whose Responsible Entity is Deutsche Asset Management (Australia) Limited.
DB RREEF Trust Annual Report 2005 77 directors’ report (continued)
6. principal activities constitutions, replace their respective Responsible Entities and staple their units together with a newly formed trading During the year the principal activity of the Stapled Entity trust DB RREEF Operations Trust (“DRO”) to create a consisted of investment in a diversified portfolio of real estate stapled security known as DB RREEF Trust (“DRT”) assets within Australia, New Zealand and the United States (ASX Code: DRT). Details on the proposal were outlined in and from September 2004 the activities of the Stapled Entity the Information Memorandum and Product Disclosure also included real estate funds management. Statement dated 30 August 2004. The result of these The number of employees of the Stapled Entity during the resolutions became effective on 30 September 2004. reporting period was 123 as at 30 June 2005 (2004: nil). The consolidation of the Trust and DIT, DOT and DRO, the acquisition of the US REIT, and the associated debt arranging 7. total value of trust assets and interest rate hedging, are referred to as “the Transaction”. The total value of the assets of the Trust as at 30 June 2005 For the purposes of statutory reporting, the stapled entity must was $6,997 million (2004: $1,707 million). A schedule be accounted for as a consolidated group. The parent entity detailing the basis of this valuation is outlined in note 1 and deemed acquirer of DIT, DOT and DRO is the Trust. of the financial statements. DB RREEF Funds Management is a wholly owned subsidiary of 8. review and results of operations DB RREEF Holdings Pty Limited (“DRH”). DRH is 50 percent owned by DRFM as Responsible Entity for DRO and A review of the results and operations, including the expected 50 percent owned by First Australian Property Group Holdings results of operations of the Trust, is set out in the “Chief Pty Limited, a subsidiary of the Deutsche Bank Group. Executive Officers’ Report” in the DRT Annual Report 2005. As part of the stapling process, the Trust, DIT and DOT each 9. likely developments and expected results paid a special distribution by way of a capital return that was of operations applied on behalf of each unitholder to subscribe for new issued units in each of the other Trusts, including DRO. The In the opinion of the Directors, disclosure of any further number of units issued by each Trust changed so that each information of the future developments or results of the Trust, Trust had the same number of issued units. The number of other than that information already outlined in this Report or stapled securities owned by an investor in DRT equals the the financial statements accompanying this report, would be same number of units in the Trust, DIT, DOT and DRO. unreasonably prejudicial to the Trust. Other than the matters disclosed above, the Directors of the 10. significant changes in the state of affairs Responsible Entity are not aware of any matter or circumstance not otherwise dealt with in the Report or the financial On 27 September 2004, unitholders of the Trust, DB statements that has significantly or may significantly affect the RREEF Industrial Trust (formerly Deutsche Industrial Trust) operations of the Trust, the results of those operations, or state (“DIT”) and DB RREEF Office Trust (formerly Deutsche of the Trust’s affairs in future financial years. Office Trust) (“DOT”) voted to replace their respective
78 DB RREEF Trust Annual Report 2005 11. matters subsequent to the end of the financial year
On 7 July 2005, amendments were made to the Trust’s constitution that enabled the Trust to satisfy the Australian International Financial Reporting Standards criteria for unitholders’ funds to be classified as equity. The Directors of the Responsible Entity were of the view that such amendments were not materially adverse to unitholders’ rights or interests nor did they change the nature of the Trust.
On 27 July 2005, the Responsible Entity lodged an appeal with the Supreme Court of New South Wales in relation to the interest payable on the settlement sum in respect of the sale of part of 1–55 Rothschild Avenue, Rosebery NSW.
Since the end of the year, other than the matters discussed above, the directors of the Responsible Entity are not aware of any matter or circumstance not otherwise dealt with in their report or the financial statements that has significantly or may significantly affect the operations of the Stapled Entity, the results of those operations, or state of the Stapled Entity’s affairs in future financial periods.
12. distributions
Distributions paid or payable by the Trust for the year ended 30 June 2005 are outlined in the following tables:
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Timing of distributions 30 September – 22,261 – 22,261 31 December (paid 28 February 2005) 136,503 22,261 59,357 22,261 31 March – 22,710 – 22,710 30 June (payable 29 August 2005) 144,800 23,171 67,756 23,171 Total distributions 281,303 90,403 127,1134 90,403
Consolidated Parent Entity 2005 2004 2005 2004 cents per cents per cents per cents per security security security security Timing of distributions 30 September – ordinary units – 2.325 – 2.325 31 December – stapled security 5.200 2.325 2.260 2.325 31 March – ordinary units – 2.325 – 2.325 30 June – stapled security 5.300 2.325 2.480 2.325 Total distributions 10.500 9.300 4.740 9.300
1 As outlined in the Section 10 – Significant changes in the state of affairs, the Trust became part of the Stapled Entity known as DB RREEF Trust on 30 September 2004. Consequently the financial statements of the Trust for the financial period ending 30 June 2005 have been prepared on a consolidated basis, where as for the comparative period the financial statements were prepared on a stand alone basis.
DB RREEF Trust Annual Report 2005 79 directors’ report (continued)
13. responsible entity and associate interests 17. audit
Fees totalling $21.1 million (2004: $8.7 million) were paid 17.1 auditor or are payable by the Trust to the Responsible Entity for the year ended 30 June 2005. Details of these fees are PricewaterhouseCoopers (“PwC” or “Auditor”) continues in outlined in note 33 of the financial statements and form office in accordance with section 327 of the Corporations part of this Report. Act 2001.
The number of interests in the Trust held by the Responsible 17.2 non-audit services Entity or its associates as at the end of the financial year are Details of the amounts paid to the Auditor, which include disclosed in note 33 to the financial statements and form part amounts paid for non-audit services totalling $1,955,428, are of this Report. set out in note 5 in the Notes to the Financial Statements. 14. interests in the trust The Directors are satisfied that the provision of non-audit services provided during the year by the Auditor (or by The movement in securities on issue in the Trust is detailed another person or firm on the Auditor’s behalf), is compatible in note 25 of the financial statements and forms part of with the general standard of independence for auditors this Report. imposed by the Corporations Act 2001. The Trust did not issue any options during the year. Reasons for the Directors being satisfied that the provision of those non-audit services, during the year, by the Auditor did 15. environmental regulation not compromise the Auditor’s independence are as follows:
The Directors of the Responsible Entity are satisfied that ■ Board Audit Committee has determined that the external adequate systems are in place for the management of its auditor will not provide services that have the potential to environmental responsibility and compliance with the various impair the independence of their audit role, including: licence requirements and regulations. Further, the Directors ■ participating in activities that are normally undertaken are not aware of any breaches of these requirements and to by management; the best of their knowledge, all activities have been undertaken in compliance with environmental requirements. ■ being remunerated on a “success fee” basis; ■ providing services where the Auditor may be required 16. indemnification and insurance to review or audit their own work, including:
The insurance premium for a policy of insurance indemnifying – the preparation of accounting records; directors, officers and others (as defined in the relevant policy – the design and implementation of information of insurance) is paid by the Responsible Entity. technology systems; – conducting valuation, actuarial or legal services; – promoting, dealing in or underwriting securities; or – providing internal audit services;
80 DB RREEF Trust Annual Report 2005 ■ Board Audit Committee regularly reviews the performance 20. management representation and independence of the external Auditor and whether The Chief Executive Officer and the Chief Operating Officer the independence of this function has been maintained having regard to the provision of non-audit services; and have reviewed the Stapled Entity’s financial reporting processes, policies and procedures together with the Trust’s ■ the external Auditor must provide a written declaration risk management and internal control and compliance to the Board regarding their independence each policies and procedures. Following that review it is their reporting period. opinion that the Trust’s financial records for the financial year Since 30 June 2005, Board Audit Committee approval is have been properly maintained in accordance with the required before the engagement of the external Auditor to Corporations Act 2001 and the financial statements and their perform any non-audit service for a fee greater than $100,000. notes comply with the accounting standards and give a true and fair view. 17.3 audit independence statement A copy of the Auditors’ Independence Declaration as required 21. directors’ authorisation under section 307C of the Corporations Act 2001 is set out This Report is made in accordance with a resolution of on page 88 and forms part of this Report. the Directors. 18. corporate governance
The Responsible Entity’s Corporate Governance Statement is set out in this Report. Christopher T Beare 19. rounding of amounts and currency Chair Sydney The Trust is a registered scheme of a kind referred to in 25 August 2005 Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report and financial report.
Amounts in the Directors’ Report and financial report have been rounded off in accordance with that Class Order to the Victor P Hoog Antink nearest thousand dollars, unless otherwise indicated. Chief Executive Officer Sydney All figures in this Report and the financial report, except where otherwise stated, are expressed in Australian dollars. 25 August 2005
DB RREEF Trust Annual Report 2005 81 directors’ and executive remuneration report
The Directors of DB RREEF Funds Management Limited Alignment of employees’ interests is achieved through the (“DRFM”) as Responsible Entity of DB RREEF Diversified plan rewarding capability and performance. For participants Trust (formerly Deutsche Diversified Trust) (“the Trust” or the plan: “DDF”) and its consolidated entities (“the group”) present ■ provides a clear structure for earning reward; their Remuneration Report for the year ended 30 June 2005. ■ delivers competitive reward for contribution to the 1. general remuneration framework creation of value; and ■ provides recognition for contribution. The objective of DRFM’s remuneration reward framework is to ensure reward for performance is competitive and The plan is designed to attract and retain talented appropriate for the results delivered. The framework aligns and motivated employees, and to encourage employee reward with achievement of strategic objectives enhanced performance. and the creation of value for investors, and conforms with The remuneration framework provides a mix of fixed and market best practice for delivery of reward. variable pay, being base pay and short-term performance The Board Nomination and Remuneration Committee oversee incentive. As an employee gains seniority within the group, the remuneration of executives to ensure that executive the balance of this mix shifts to a higher proportion of “at reward satisfies the following key criteria for good reward risk” rewards. DRFM is further developing a long-term governance practices: performance incentive scheme for implementation during the year ending 30 June 2006. ■ competitiveness and reasonableness; To ensure that base pay is competitive, external remuneration ■ performance linkage/alignment; consultants provide analysis and advice regarding market ■ transparency; and remuneration for comparable roles. Base pay for employees ■ financial and non-financial resource management. is reviewed annually. There are no guaranteed base pay In consultation with external remuneration consultants DRFM increases for employees. has structured a remuneration framework that is market Should DRFM achieve predetermined performance targets, competitive and complementary to its reward strategy. a short-term incentive pool, approved by the Board Alignment to investors’ interests is achieved through Nomination and Remuneration Committee, is available for increased focus on group performance being a core allocation to employees during the annual review. Cash component of plan design, as well as the plan rewarding: incentives are payable in September each year. ■ delivery of forecast returns; and Performance targets are utilised to ensure that variable reward is only available when value has been created for ■ achievement of key non-financial value drivers. investors, and when performance is consistent with forecasts. The incentive pool may be leveraged for performance above targets to provide incentive for employee out-performance.
82 DB RREEF Trust Annual Report 2005 Governor Phillip Tower, Sydney NSW
Key performance indicators are linked to short-term 2. non-executive directors’ remuneration incentives based on DRFM’s, individual business and framework and structure personal objectives. Performance indicators require Fees and payments to Non-Executive Directors reflect the achievement of specific targets in relation to trust demands which are made on, and the responsibilities of performance, as well as other key non-financial measures directors. Non-Executive Directors’ fees and payments are linked to drivers of performance in future reporting periods. reviewed annually by the Board Nomination and Short-term incentive payments may be adjusted up or down Remuneration Committee. The Committee also obtains advice in line with under or over achievement against target from independent remuneration consultants to ensure Non- performance levels, at the discretion of the Board Executive Directors’ fees and payments are appropriate and Nomination and Remuneration Committee. in line with the market. The Chair’s fee is determined Termination provisions for the Chief Executive Officer (“CEO”) independently of the fees of Non-Executive Directors, based are set out in the CEO’s contract of employment. In the event on comparative roles in the external market. The Chair is not of early termination, DRFM may be required to give twelve present at any discussions relating to the determination of months notice and may elect to payout all or part of this his/her own remuneration. Non-Executive Directors do not notice period. receive share options.
There are no termination provisions extended to any other Non-Executive Directors who accept positions on Board DRFM Executive. committees receive an additional annual fee for each committee membership. Non-Executive Directors’ fees are also recommended for approval by DB RREEF Trust investors.
DB RREEF Trust Annual Report 2005 83 directors’ and executive remuneration report (continued)
3. details of remuneration of directors
3.1 DB RREEF Funds Management Limited Details of the nature and amount of each element of remuneration for each Director of the Responsible Entity for the year ending 30 June 2005 are set out in the following tables.
Year ending 30 June 2005
Note(s) Salary Bonus Non-monetary Superannuation Total and fees benefits $$ $ $$ Non-Executive Directors Christopher T Beare 1 193,125 193,125 Elizabeth A Alexander 1 65,000 65,000 Barry R Brownjohn 1 60,000 60,000 Stewart F Ewen 1 95,625 95,625 Brian E Scullin 1 68,750 68,750 Executive Directors Victor P Hoog Antink 3 682,139 68,800 750,939 Charles B Leitner III 2 12,300 12,300 Shaun A Mays (alternate to Charles B Leitner III) 2 16,000 16,000 Daniel S Weaver 2 – –
Note 1: Non-Executive Directors’ remuneration is a cost of DB RREEF Funds Management Limited. The amount shown in this Remuneration Report is Director’s total remuneration from 1 October 2004, or the date of appointment if later than 1 October 2004, to 30 June 2005.
Note 2: These Executive Directors’ remuneration is a cost of their employer, Deutsche Bank. The amount shown in this Remuneration Report is an apportionment of each Executive’s total remuneration based on their time spent on DB RREEF Funds Management Limited’s activities during the nine months ending 30 June 2005.
Note 3: The Chief Executive Officer’s remuneration is a cost of DB RREEF Funds Management Limited. The amount shown in this report is the Chief Executive Officer’s total remuneration for the nine months ending 30 June 2005. No short term incentive payment for the period 1 October 2004 to 30 June 2005 has been allocated. Consequently, no payment is included in the above.
There were no stapled securities or options issued during the period to any Director or employee as part of their remuneration. No Director or Executive received any retirement benefit during the period.
84 DB RREEF Trust Annual Report 2005 3.2 Deutsche Asset Management (Australia) Limited and DB Real Estate Australia Limited The remuneration received by the Directors of Deutsche Asset Management (Australia) Limited and DB Real Estate Australia Limited was paid by Deutsche Bank. As the Directors of each of these Responsible Entities are common the following table details the combined amount of each element of remuneration, for the period 1 July 2004 to 30 September 2004 (being the date when each entity ceased to be the Responsible Entity of its respective trusts and DB RREEF Funds Management Limited became the Responsible Entity of DB RREEF Diversified Trust, DB RREEF Industrial Trust and DB RREEF Office Trust).
For the period 1 July 2004 to 29 September 2004
Note(s) Salary Bonus Non-monetary Superannuation Total and fees benefits $$ $ $ $ Non-Executive Directors Christopher T Beare 1 12,500 12,500 Stewart F Ewen 1 21,250 21,250 William B Robinson 1 15,000 15,000 Brian E Scullin 1 20,250 20,250 Executive Directors Shaun A Mays 2 9,000 9,000 David C Shields 2 9,811 9,811
Note 1: Non-Executive Directors’ remuneration was a cost of Deutsche Bank. The amount shown in this Remuneration Report is each Director’s total remuneration for the three months ending 29 September 2004. Note 2: Executive Directors’ remuneration is a cost of their employer, Deutsche Bank. The amount shown in this Remuneration Report is an apportionment of each Executive’s total remuneration based on their time spent on Deutsche Asset Management (Australia) Limited and DB Real Estate Australia Limited activities relating to DB RREEF Diversified Trust, DB RREEF Industrial Trust and DB RREEF Office Trust during the period ending 29 September 2004.
DB RREEF Trust Annual Report 2005 85 directors’ and executive remuneration report (continued)
4. details of remuneration of executives
Listed in the following table are the six highest paid Executives who are also the six Executives who have the greatest authority within DB RREEF Funds Management, and who became Executives of DB RREEF Holdings Limited on 1 October 2004. Prior to 1 October 2004 there were no specified Executives. The components of each Executive’s total remuneration package for the period commencing 1 October 2004 and ending 30 June 2005 is set out in the following table:
For the period commencing 1 October 2004 and ending 30 June 2005
Position Salary Bonus Non-monetary Superannuation Total benefits $$ $ $ $ Tanya L Cox Chief Operating Officer 178,811 50,000 8,689 237,500 John C Easy Head of Legal 163,811 25,000 8,689 197,500 Greg T Lee Head of Transaction Services 216,311 62,000 8,689 287,000 Ben J Lehmann Head of Portfolio Services 216,311 75,000 8,689 300,000 Ian D Robins Head of Capital Markets 272,561 175,000 8,689 456,250 Mark F Turner Head of Mandates 178,811 50,000 8,689 237,500
No short term incentive payment has been allocated for the period 1 January 2005 to 30 June 2005. Consequently, no short term incentive payment has been included for the same period.
5. other disclosures
There were no loans, stapled securities or options issued or granted during the period to any director or employee. No Director or Executive received any retirement benefit during the period.
6. directors’ authorisation
This Report is made in accordance with a resolution of the Directors.
Christopher T Beare Chair Sydney
25 August 2005
86 DB RREEF Trust Annual Report 2005 financial statements
DB RREEF Diversified Trust (formerly Deutsche Diversified Trust)
88 auditors’ independence declaration
89 statements of financial performance
90 statements of financial position
91 statements of cash flows
92 notes to the financial statements
142 directors’ declaration
143 independent auditor’s report
DB RREEF Trust Financial Statements 2005 87 auditors’ independence declaration
88 DB RREEF Trust Financial Statements 2005 statements of financial performance
DB RREEF DIVERSIFIED TRUST STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2005
Consolidated Parent Entity 2005 2004 2005 2004 Note(s) $’000 $’000 $’000 $’000
Revenue from ordinary activities Property income 3 512,709 161,814 155,728 161,814 Distribution income – – 11,202 – Interest income 5,932 437 600 437 Other revenues from ordinary activities 260 – – – Net foreign exchange gain 42 – 9,461 – Proceeds from sale of investment properties 4 504,750 51,760 463,446 51,760 Share of net profits of associates accounted for using the equity method 16 12,544 – – – Total revenue from ordinary activities 1,036,237 214,011 640,437 214,011
Expenses from ordinary activities Property expenses (127,991) (43,016) (40,500) (43,016) Responsible entity fees 33 (21,141) (8,693) (8,690) (8,693) Borrowing costs expense 6 (117,265) (17,836) (21,399) (17,836) Other expenses from ordinary activities 6 (9,206) (1,126) (1,753) (1,126) Book value of property investments sold 4 (479,043) (52,506) (441,681) (52,506) Increment/(decrement) on revaluation of investments 26 (4,934) – – – Costs associated with the Transaction 7 (42,281) – (14,795) – Total expenses from ordinary activities (801,861) (123,177) (528,818) (123,177) Profit from ordinary activities before tax 234,376 90,834 111,619 90,834
Tax expense Income tax expense 8 (990) – – – Withholding tax expense (2,072) – – –
Profit from ordinary activities after tax 231,314 90,834 111,619 90,834
Net profit attributable to outside equity interests DB RREEF RENTS Trust (619) – – – Other equity holders (11,172) – – – Net profit attributable to security holders 26 219,523 90,834 111,619 90,834 Net increase in asset revaluation reserve 26 295,702 7,698 93,062 7,698 Net decrease in foreign currency translation reserve 26 (1,259) – – –
Total revenues, expenses and valuation adjustments attributable to security holders of the Stapled Entity recognised directly in equity 294,443 7,698 93,062 7,698 Total changes in equity other than those resulting from transactions with owners 513,966 98,532 204,681 98,532 Cents Cents Cents Cents Basic earnings – cents per stapled security 38 10.12 9.39 5.15 9.39 Diluted earnings – cents per stapled security 38 10.12 9.39 5.15 9.39 Basic earnings before the Transaction – cents per stapled security 38 12.07 9.39 12.62 9.39 The above Statements of Financial Performance should be read in conjunction with the accompanying notes.
Distribution Net profit attributable to security holders 219,523 90,834 111,619 90,834 Movement in undistributed income 37,205 (1,485) 12,211 (1,485) Transfer from reserves 24,575 1,054 3,283 1,054
Distribution paid and payable 26/28 281,303 90,403 127,113 90,403
Distribution paid/payable – cents per stapled security Cents Cents Cents Cents Ordinary securities 28 10.50 9.30 4.74 9.30
DB RREEF Trust Financial Statements 2005 89 statements of financial position
DB RREEF DIVERSIFIED TRUST STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2005
Consolidated Parent Entity 2005 2004 2005 2004 Note(s) $’000 $’000 $’000 $’000
Current assets Cash assets 68,959 2,487 10,238 2,487 Receivables 9 29,986 11,352 8,883 11,352 Inventory 10 48,469 – – – Property sale proceeds receivable – 51,760 – 51,760 Loan to third party 11 5,006 – – – Other 12 13,362 4,394 2,552 4,394
Total current assets 165,782 69,993 21,673 69,993
Non-current assets Investment properties 13 6,542,062 1,635,508 1,397,062 1,635,508 Loan notes receivable from associate 14 45,092 – – – Goodwill 3,215 – – – Investments in controlled entity 15 – – 233,867 – Investments accounted for using the equity method 16 208,974 – – – Investment in associates 16 – – 347,154 – Other 17 31,852 1,524 4,942 1,524
Total non-current assets 6,831,195 1,637,032 1,983,025 1,637,032 Total assets 6,996,977 1,707,025 2,004,698 1,707,025
Current liabilities Payables 18 118,479 14,869 12,880 14,869 Interest bearing liabilities 19 369,836 474,200 – 474,200 Current tax liabilities 20 2,595 – – – Provisions 21 144,800 23,171 67,756 23,171 Other 22 8,673 – 1,121 –
Total current liabilities 644,383 512,240 81,757 512,240
Non-current liabilities Interest bearing liabilities 19 2,421,728 – 581,077 – Loan with related parties 23 – – 34,332 – Other 24 29,543 585 3,926 585
Total non-current liabilities 2,451,271 585 619,335 585 Total liabilities 3,095,654 512,825 701,092 512,825 Net assets 3,901,323 1,194,200 1,303,606 1,194,200
Equity Contributed equity 25 3,094,255 1,028,028 1,059,866 1,028,028 Reserves 26 423,829 153,961 243,740 153,961 Undistributed income 26 16,587 12,211 – 12,211 Outside equity interests in controlled entities 27 366,652 – – –
Total equity 3,901,323 1,194,200 1,303,606 1,194,200
The above Statements of Financial Position should be read in conjunction with the accompanying notes.
90 DB RREEF Trust Financial Statements 2005 statements of cash flows
DB RREEF DIVERSIFIED TRUST STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2005
Consolidated Parent Entity 2005 2004 2005 2004 Note(s) $’000 $’000 $’000 $’000
Cash flows from operating activities Receipts in the course of operations 540,713 162,103 196,488 162,103 Payments in the course of operations (174,785) (61,047) (51,492) (61,047) Interest received 3,373 437 600 437 Borrowing cost paid (135,504) (28,487) (9,509) (28,487) Distributions from unit trusts – – 2,600 – Distributions from investments accounted for using the equity method 8,212 – 6,426 – United States withholding tax paid (760) – – –
Net cash inflow from operating activities 36 241,249 73,006 145,113 73,006
Cash flows from investing activities Proceeds from sale of investment properties 505,117 – 463,446 – Payment for purchase of controlled entities, net of cash acquired 39 (485,165) – (231,290) – Payments for capital expenditure on investment properties (176,787) (72,417) (90,379) (72,417) Cash acquired on stapling 14,285 – – – Payments for investment properties (124,376) (5,266) (61,927) (5,266) Payments for investments in associates – – (290,254) – Payments for investments accounted for using the equity method (157,437) – – – Loan from controlled entities – – 3,793 –
Net cash outflow from investing activities (424,363) (77,683) (206,611) (77,683)
Cash flows from financing activities Proceeds from issue of units – 30,869 – 30,869 Proceeds from issue of RENTS units 204,000 – – – Increase in outside equity interest 64,125 – – – Establishment expenses and unit issue costs (6,566) – – – Proceeds from borrowings 1,774,507 97,385 136,000 97,385 Repayment of borrowings (1,768,391) (53,986) (165,200) (53,986) Borrowings provided to Stapled Trusts – – (162,338) – Borrowings provided by Stapled Trusts – – 276,978 – Distributions paid (16,191) (68,479) (16,191) (68,479) Distributions paid to outside equity interests (461) – – –
Net cash inflow from financing activities 251,023 5,789 69,249 5,789
Net increase in cash held 67,909 1,112 7,751 1,112 Cash at the beginning of the period 2,487 1,375 2,487 1,375 Effects of exchange rate changes on cash (1,437) – – –
Cash at the end of the period 68,959 2,487 10,238 2,487
The above Statements of Cash Flows should be read in conjunction with the accompanying notes.
DB RREEF Trust Financial Statements 2005 91 notes to the financial statements
DB RREEF DIVERSIFIED TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005
note 1. summary of significant On 30 September 2004, DDF was deemed to have acquired the other trusts and as a result, the underlying assets and liabilities of accounting policies the other trusts were adjusted to fair value as at this date. Information (a) basis of preparation from the financial statements of the subsidiaries has been included from 1 October 2004. It should be noted that investors in DRT have On 30 September 2004, DB RREEF Diversified Trust and its been entitled to the returns from the underlying Trusts from 1 July subsidiaries (“the Stapled Entity”) was formed by the stapling 2004. The accounting policies of the sub-trusts are consistent with together of DDF, DIT, DOT and DRO (“the Trusts”). For the purposes the parent. of statutory reporting, the Stapled Entity reflects a consolidated group. The parent entity and deemed acquirer of the Trusts is DDF. The consolidated financial statements incorporate an elimination The basis of this approach is consistent with current practice in of inter-entity transactions and balances to present the financial relation to the financial reporting obligations of stapled entities that statements on a consolidated basis. were formed after 1 July 2004. The consolidated results reflect the Outside equity interests in the results and equity of controlled entities performance of the parent, DDF, from 1 July 2004 and the additions are shown separately in the consolidated Statements of Financial of DIT, DOT and DRO from the date of consolidation, being 1 October Performance and Statements of Financial Position respectively. 2004 to 30 June 2005. Investors however are entitled to distributions and earnings from the underlying trusts from the period commencing Where control of an entity is obtained during a financial year, its 1 July 2004. results are included in the consolidated Statements of Financial Performance from the date on which control is gained. DB RREEF Trust stapled securities are quoted on the Australian Stock Exchange under the code DRT and comprise of one unit in Investments in associates are accounted for in the consolidated each of the Trust, DIT, DOT and DRO. Each entity forming part of financial statements using the equity method. Under this method, the DRT continues as a separate legal entity in its own right under the consolidated entity’s share of the post-acquisition profits of associates Corporations Act 2001 and is therefore required to comply with the is recognised as revenue in the consolidated Statements of Financial reporting and disclosure requirements under the Corporations Act Performance, and its share of post-acquisition movements in reserves 2001 and Australian Accounting Standards. is recognised in consolidated reserves.
DB RREEF Funds Management as Responsible Entity for the each (c) revenue recognition of the Trusts may only unstaple the Trusts if approval is obtained by special resolution of the security holders. Rent This general purpose financial report has been prepared in Rent is brought to account on an accruals basis and, if not received accordance with the requirements of the Trust Constitution, at balance date, is reflected in the Statements of Financial Position as Australian Accounting Standards, other authoritative pronouncements a receivable. Recoverability of receivables is reviewed on an ongoing of the Australian Accounting Standards Board, Urgent Issues Group basis. Debts which are known to be not collectable are written off. Consensus Views and the Corporations Act 2001 in Australia. Income support It is prepared on the basis of the going concern and historical cost conventions and has not been adjusted to take account of either Rental income support is brought to account on an accruals basis in changes in the general purchasing power of the dollar or changes in accordance with the relevant contractual arrangements. the values of specific assets, except to the extent that the Stapled Interest income Entity investments have been revalued. Interest income is brought to account on an accruals basis and, if This report is to read in conjunction with any public pronouncements not received at the balance date, is reflected in the Statements of made by the Stapled Entity during the year in accordance with the Financial Position as a receivable. continuous disclosure requirements of the Corporations Act 2001. The accounting policies adopted are consistent with those of the (d) expenses previous period unless otherwise specified. Comparative information has been reclassified where appropriate to enhance comparability. Expenses are brought to account on an accruals basis and, if not paid at the balance date, are reflected in the Statements of Financial (b) principles of consolidation Position as a payable.
The financial statements have been prepared on a consolidated basis Property expenses in recognition of the fact that while the securities issued by the Trusts are stapled into one trading security and cannot be traded separately, Property expenses include rates, taxes and other property outgoings the financial statements must be presented on a consolidated basis. incurred in relation to investment properties where such expenses The parent entity and deemed acquirer of the Trusts is DDF. are the responsibility of the Trusts.
92 DB RREEF Trust Financial Statements 2005 Borrowing costs (f) GST Borrowing costs include interest expense and other costs incurred Revenues, expenses and capital assets are recognised net of the in respect of obtaining finance. amount of goods and services tax (“GST”), except where the amount of GST incurred is not recoverable from the Australian Tax Office Borrowing costs are expensed unless they relate to qualifying assets. (“ATO”). In these circumstances the GST is recognised as part of the Qualifying assets are assets which take a substantial period of time cost of acquisition of the asset or as part of an item of the expense. to get ready for their intended use or sale. Where funds are borrowed specifically for the acquisition or construction of a qualifying asset, the (g) taxation amount of borrowing costs capitalised is those incurred in relation to that borrowing, net of any interest earned on those borrowings until Under current Australian income tax legislation DDF and its controlled the asset is ready for its intended use or sale. Where funds are entities, DIT and DOT, are not liable for income tax provided they borrowed generally, borrowing costs are capitalised using a weighted satisfy the requirements of the ATO which is to distribute its taxable average capitalisation rate. income. DRO has income tax expense arising from the activities of its funds management business. DRO’s taxable income is taxed at the Other costs incurred including loan establishment fees in respect tax rate of 30 percent. of obtaining finance are deferred and written off over the term of the respective agreement. Tax effect accounting procedures were followed whereby the income tax expense in the Statements of Financial Performance is matched (e) derivatives and other financial instruments with the accounting profit allowing for permanent differences. The Trust’s activities expose it to changes in interest rates and foreign The future tax benefit relating to tax losses is not carried forward as exchange rates. There are policies and limits approved by the Board an asset unless the benefit is virtually certain of realisation. Income of Directors of the Responsible Entity in respect of the usage of tax on cumulative timing differences is set aside to the deferred derivatives and other financial instruments to hedge those cash flows income tax or the future income tax benefit accounts at the rates and earnings which are subject to interest rate risk and foreign which are expected to apply when those timing differences reverse. currency rate risk respectively. In conjunction with its advisers, the Dividends received from DB RREEF Industrial Properties, Inc. Responsible Entity continually reviews the Trust’s exposures and (“US REIT”) will be net of US withholding taxes payable in respect updates its treasury policies and procedures. The Trust does not of those distributions. The US foreign operations themselves will trade in derivative instruments for speculative purposes. generally not be subject to US Federal or State income taxes Changes in the net market values of hedging instruments are provided they satisfy the necessary requirements of a Real Estate matched and brought to account with the carrying values and Investment Trust (“REIT”). income streams of the underlying assets or liabilities. No provision is made for additional taxes which would become The accounting policies adopted in relation to material financial payable if certain reserves of the foreign controlled entity were to be instruments are detailed below: distributed as it is not expected that any substantial amount will be distributed from those reserves in the foreseeable future. Debt instruments Under current Australian income tax legislation, the security holders Debt instruments are carried at face value. Interest is brought will be generally entitled to receive a foreign tax credit for US to account on an accruals basis. withholding tax deducted from dividends paid by the US REIT. Interest rate swaps (h) distributions The Stapled Entity enters into interest swap agreements with the In accordance with the Trust’s Constitution, the Trust distributes its objective of hedging the risk of interest rate fluctuations in respect distributable income to unitholders by cash or reinvestment. of underlying borrowings. Net receipts and payments in relation to interest rate swaps are recognised in the Statements of Financial Performance on an accruals basis over the life of the hedges (i) repairs and maintenance (refer note 29). Plant of the Trusts is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical maintenance Forward exchange contracts program. The costs of this maintenance are charged as expenses as Forward exchange contracts are entered into by the Trust to hedge incurred, except where they relate to the replacement of a component its earnings exposure in relation to foreign investments. This currency of an asset, in which case the costs are capitalised in accordance with hedge rate is used to translate items in the Statements of Financial note 1(m). Other routine operating maintenance, repair costs and Performance (refer note 1(u) and note 30). minor renewals are also charged as expenses as incurred.
The unrealised gains receivable/losses payable in respect of all currency hedges are recorded on the Statement of Financial Position.
DB RREEF Trust Financial Statements 2005 93 notes to the financial statements (continued)
(j) cash The carrying amounts of current and non-current investment properties are reviewed to determine whether they are in excess of For the purposes of the Statements of Cash Flows, cash includes their recoverable amount at balance date. If the carrying amount of deposits at call which are readily convertible to cash on hand and current and non-current investment properties exceeds the are subject to an insignificant risk of change in value. recoverable amount, the asset is written down to the lower amount. (k) receivables (n) leasing fees Debtors to be settled within 30 days are carried at amounts due. Debts are assessed at balance date and provision is made for any Leasing fees incurred in relation to the initial letting of property or doubtful accounts. following redevelopments are capitalised to the property and taken into account through periodic revaluation. Leasing fees incurred in (l) inventories relation to the ongoing renewal of major tenancies are capitalised and amortised over the lease periods to which they relate. In accordance with Accounting Standard AASB 1019: Inventories, development properties are carried at lower of cost or net realisable (o) lease incentives value. The cost of development property includes the cost of acquisition, development and financing costs up until the date of Prospective lessees may be offered incentives as an inducement to practical completion. enter into non-cancellable operating leases. These incentives may take various forms including up front cash payments, rent free (m) investment properties periods, or a contribution to certain lessee costs such as fit out costs or relocation costs. It is the policy of the Responsible Entity to review the carrying value of each property at the reporting date. External valuations of the These incentives are repaid out of future lease payments and individual investments are carried out in accordance with the Trust’s therefore are recognised as an asset in the Statements of Financial Constitutions, or earlier where the Responsible Entity believes there Position. Specifically: may be a material change in the fair value of the property. ■ rent free periods – when provided, the rent forgiven in early years The valuations are measured at fair value being the amounts for is capitalised to a deferred income account, at the earlier date which assets could be exchanged between knowledgeable willing from which the tenant has effective use of the premises or the parties in an arm’s length transaction. Revaluations are made with lease commencement date and is released to the Statements of sufficient regularity to ensure that the carrying amount of each Financial Performance in later years to ensure a constant rate of investment property does not differ materially from its fair value return over the term of the lease; at the reporting date. ■ cash contributions – where provided, the amount of contribution A revaluation increment is credited directly to the asset revaluation is capitalised as an asset in the Statements of Financial Position reserve, unless it is reversing a previous decrement charged as an and written off over the term of the lease; expense in the Statements of Financial Performance in respect of ■ tenant fit out – costs associated with fitting out a building that same class of assets, in which case the increment is credited specifically for a lessee and that are not expected to be used directly to the Statements of Financial Performance. beyond the term of the lease are capitalised in the Statements of A revaluation decrement is recognised directly as an expense in Financial Position and written off over the term of the lease; and the Statements of Financial Performance, unless it is reversing a ■ lessor owned fit out – when the fit out is an asset of the lessor revaluation increment previously credited to, and still included in and can be retained by the lessor beyond the lease term, it is the balance of the asset revaluation reserve in respect of that same considered integral to the building and is capitalised into the class of assets, in which case it is debited directly to the asset cost of the property and adjusted through the valuations. revaluation reserve. The gain or loss on disposal of revalued assets is calculated as the (p) investments accounted for using the equity method/ difference between the carrying amount of the asset at the date of investments in associates disposal and the net proceeds from disposal and is included in the Some property investments are held through the ownership of Statements of Financial Performance in the year of disposal. Any units in single purpose unlisted trusts where the Stapled Entity related balance remaining in the asset revaluation reserve at the time exerts significant influence but does not have a controlling interest. of disposal is transferred to undistributed income. The Stapled Entity has adopted the equity method of accounting Land and buildings have the function of an investment and are for these investments. regarded as a composite asset. The applicable Accounting Standards do not require that investment properties be depreciated. Interests held by the Trust are brought to account at valuation based Accordingly, the buildings and any component thereof (including on net tangible asset backing. plant and equipment) are not depreciated. At the parent level, investments in associates are carried at Directors’ Expenses capitalised to properties may include the cost of valuation being the net tangible assets of the underlying entity, and acquisition, additions, refurbishment, redevelopment, borrowing taking into consideration market movements. costs and fees incurred.
94 DB RREEF Trust Financial Statements 2005 (q) acquisition of assets (v) international financial reporting standards (“IFRS”) The purchase method of accounting is used for all acquisitions. Cost The adoption of Australian equivalents to IFRS (“AIFRS”) will be is measured as the fair value of the assets given up, shares issued or first reflected in the financial statements for the half year ended liabilities undertaken at the date of acquisition plus incidental costs 31 December 2005 and the year ended 30 June 2006. directly attributable to the acquisition. The Responsible Entity has established a project team to manage Goodwill is brought to account on the basis described in note 1(r). the transition to AIFRS, including training of staff, and systems and internal control changes necessary to gather all the required financial (r) goodwill information. In some cases choices of accounting policies are available, including elective exemptions under Accounting Standard Where an entity or operation is acquired, the identifiable net assets AASB 1: First-time Adoption of Australian Equivalents to IFRS. The acquired are measured at fair value. The excess of the fair value of project is now at a stage where material AIFRS adjustments are the identifiable net assets acquired, is brought to account as goodwill known, to enable the preparation of an opening Statement of and amortised on a straightline basis over the period in which the Financial Position as at 1 July 2005, the transition date to AIFRS. benefits are expected. Impact of transition to AIFRS (s) payables The impact of transition to including the selection and application These amounts represent liabilities for amounts owing by the Trusts of AIFRS accounting policies, is based on AIFRS standards that at year end which are unpaid. The amounts are unsecured and are management expects to be in place, or where applicable, early usually paid within 30 days of recognition. adopted, when preparing the first complete AIFRS financial report. The disclosures below reflect that the Stapled Entity has elected not (t) earnings per unit to apply the requirements of AASB 132 and AASB 139 in the first Basic and diluted earnings per stapled security is determined by comparative year under AIFRS. dividing the net profit attributable to security holders of the Stapled Although the adjustments disclosed in this note are based on Entity by the weighted average number of ordinary stapled securities management’s best knowledge of expected standards and outstanding during the financial year. interpretations, and current facts and circumstances, these may change. (u) foreign currency Revisions to the selection and application of the AIFRS accounting Foreign currency investments policies may be required as a result of:
Foreign assets and liabilities are converted to Australian Dollars ■ changes in financial reporting requirements that are relevant to (“AUD”) at the rate of exchange on the date of the transaction or at the Stapled Entity’s first complete AIFRS financial report arising hedged rates if applicable. from new or revised accounting standards or interpretations Foreign investments are in the United States of America (“US”) and issued by the Australian Accounting Standards Board subsequent New Zealand (“NZ”). to the preparation of the 30 June 2005 financial report; ■ additional guidance on the application of AIFRS in the property Translation of foreign currency operations industry; or All foreign operations are deemed self-sustaining in accordance with ■ AASB 1012: Foreign Currency Translation, as each is financially and changes to the Stapled Entity’s operations. operationally independent of the Australian operations. Therefore, until the Stapled Entity prepares its first full AIFRS The financial reports of overseas operations are translated to financial statements, the possibility cannot be excluded that the Australian dollars using the current rate method, except for earnings accompanying disclosures may have to be adjusted. which are translated at the applicable currency hedge contract rates. Major changes identified to date that will be required to the Any exchange differences are taken directly to the foreign currency consolidated entity’s existing accounting policies include the following translation reserve. (references to new AASB standards below are to the Australian equivalents to IFRS issued in July 2004): Exchange rates The following exchange rates have been used to translate financial Investment properties statements of foreign operations to Australian dollars: Under AASB 140: Investment Property, changes in the fair values of investment properties will be adjusted through the Statements of 30 June 2005 Financial Performance rather than through the asset revaluation Spot AUD/USD Statements of Financial Position 0.7640 reserve of the Statements of Financial Position. For the year ended Average AUD/USD1 Statements of Financial Performance 0.7242 30 June 2005, the impact to net profit if the standard was applicable Spot AUD/NZD Statements of Financial Position 1.0937 to the year ended 30 June 2005 would have been an increase of Average AUD/NZD1 Statements of Financial Performance 1.0804 $208,403,000.
1 The average exchange rate includes applicable hedges.
DB RREEF Trust Financial Statements 2005 95 notes to the financial statements (continued)
On transition to AIFRS, the balance of the asset revaluation reserve Rental revenue as at 1 July 2004 will be transferred to retained earnings. This will Accounting Standard AASB 117: Leases, requires rental revenues to increase the balance of retained earnings by $153,961,000. be recognised on a straightline basis over the term of the lease. This Certain real estate investments currently classified as investment applies to operating leases with fixed rent review clauses. The properties (such as properties under construction) may not meet Responsible Entity has analysed the impact of straightlining fixed the AIFRS definition of investment property. Therefore, a separate reviews and has determined that the amount of income that would class of assets may be shown on the face of the Statements of have been recognised for the year ended 30 June 2005 if the Financial Position. standard had applied for this financial year would have been $6,718,000. On transition to AIFRS, an amount of $21,187,000 will Financial instruments be recognised as lease income receivable that will form part of the All interest rate and foreign currency derivatives will be recognised at property portfolio. However, this would be offset by a notional fair fair value in the Statements of Financial Position, with changes in fair value adjustment to income and to investment properties to bring the value during the period recognised in the Statements of Financial balance of the investment properties back to fair value, resulting in Performance, or if classified as a cash flow hedge and proved to be no impact to the net profit and net assets of the Stapled Entity. effective, deferred in equity. Lease incentives
The Board has decided not to adopt hedge accounting for financial Accounting standard AASB 117: Leases, and UIG 115: Operating instruments in existence at 30 June 2005, which may result in future Leases – Incentives, requires all lease incentives to be capitalised unrealised earnings volatilities, without any associated volatility in and amortised over the period of the lease. The Responsible Entity distributions. The Board will continually review this position and may has assessed the impact of this treatment based on the current lease elect to apply hedge accounting to financial instruments entered into incentives and has estimated an additional amortisation expense and the future. accumulated amortisation of $8.14 million for the year ended 30 The Stapled Entity has elected to adopt the exemption under AASB 1 June 2005. On transition to IFRS, an amount of $83.29 million will to apply AASB 132 Financial Instruments: Disclosure and Presentation be recognised as unamortised lease incentives that will form part of and AASB 139 Financial Instruments: Recognition and Measurement the fair value of the property portfolio. However, this would be offset only from 1 July 2005. This allows the Stapled Entity to apply AGAAP to by a notional fair value adjustment to income and to investment the comparative information of financial instruments within the scope of properties to bring the balance of the investment properties back to AASB 132 and AASB 139 for the 30 June 2006 financial report. fair value, resulting in no impact to the net profit and net assets of the Stapled Entity. Income tax Revenue disclosures in relation to the sale of non-current assets Under the AASB 112: Income Taxes, deferred tax balances are determined using the balance sheet method which calculates Under AIFRS, the revenue recognised in relation to the sale of non- temporary differences based on the carrying amounts of an entity’s current assets is the net gain on the sale. This is in contrast to the assets and liabilities in the Statements of Financial Position and their current AGAAP treatment under which the gross proceeds from sale associated tax bases. In addition, current and deferred taxes are recognised as revenue and the carrying amount of the assets attributable to amounts recognised directly in equity are also sold is recognised as an expense. The net impact on the Statements recognised directly in equity. This will result in a change to the of Financial Performance is nil. current accounting policy, under which deferred tax balances are If the policy required under AIFRS had been applied during the year determined using the income statement method, items are only tax- ended 30 June 2005, the consolidated revenue from ordinary affected if they are included in the determination of pre-tax activities would have been $479,043,000 lower with a corresponding accounting profit and loss and/or taxable income or loss and current reduction in the expense for the year. and deferred taxes cannot be recognised directly in equity. Unitholders equity For the year ended 30 June 2005, the impact to net profit if the standard was applicable to the year ended 30 June 2005 would have Accounting Standard AASB 132: Financial Instruments – Disclosure been a decrease of $18,244,000. and Presentation, outlines and defines the criteria for recognising a financial instrument as either debt or equity. Under current The change in calculating the tax deferred balance will not impact on accounting standards (AGAAP) units in a fixed life trust are Australian assets that are owned by trusts classed as flow through considered equity, however under AIFRS the same instrument vehicles under Australian Taxation Law. Deferred tax liabilities will be would be classified as debt due to the fixed life of the issuance. required to be recognised for unrealised gains on properties held in Distributions paid to unitholders under this classification would be the US REIT. Management does not expect that such liabilities will reclassed as a form of finance charge. These changes would not crystallise as it would seek to buy assets within the permitted time impact on the financial or economic position of the Stapled Entity frame after the disposal of an asset to take advantage of taxation or that of the unitholder but would significantly impact on the rollover relief in the US. presentation and disclosure in the financial accounts.
96 DB RREEF Trust Financial Statements 2005 On 6 June 2005, ASIC issued class order 05/566 “Managed note 2. individually significant items Investment Schemes: Perpetuity Clauses in Scheme Constitutions”. This class order allows the Responsible Entity to amend a On 29 September 2004, DB RREEF Funds Management Limited constitution by removing a termination clause and make other replaced DB Real Estate Australia Limited as Responsible Entity amendments as required so long as the changes do not materially of the Trust, and replaced Deutsche Asset Management (Australia) change the nature of the scheme or have a materially adverse effect Limited as Responsible Entity of DIT and DOT. on the interests of members. The management fee structure was amended to reflect new fee On 7 July 2005, amendments to the Constitution were made that arrangements as follows: enable the Stapled Entity to satisfy the criteria for unitholders funds to be classified as equity. The Board was of the view that such australian assets amendments were not materially adverse to unitholders nor did they ■ Fee: 0.45 percent per annum of gross assets. change the nature of the scheme. ■ Basis: annualised average gross assets calculated on a These changes are the only material changes anticipated, but should month-end basis, in accordance with the Trusts’ Constitutions. not be regarded as the only changes in accounting policies that will ■ result from the transition to AIFRS as regulatory bodies have Calculated: monthly. significant ongoing projects that could affect the interpretation of the ■ Payment frequency: monthly. differences between Australian Generally Accepted Accounting ■ Principles and IFRS. Effective date: 1 October 2004.
While the application of IFRS may introduce volatility into forecast No fees will be payable in relation to the DB RREEF Operations Trust. financial information, this will not affect the cash flows from operations. DB RREEF Industrial Properties, Inc. (initial portfolio only) ■ Fee: 0.25 percent per annum of gross assets to DB RREEF Funds Management.
■ Fee: 0.02 percent per annum of gross assets to RREEF America LLC (“RREEF”) (the US Fund Manager).
■ Basis: annualised average gross assets calculated on a month-end basis, in accordance with the Trusts’ Constitutions.
■ Calculated: monthly.
■ Payment frequency: monthly.
■ Effective date: 1 October 2004.
■ In addition, a management fee of US$700,000 per annum (subject to annual escalation by reference to the US inflation rate) is payable by the US foreign operations to RREEF.
■ Performance fees no longer apply to the Trust. The last period for which performance fees were calculated for the Trust was the six months ending 30 June 2004. No performance fees were earned post 30 June 2004. Similarly, performance fees carried forward from previous periods are no longer available.
DB RREEF Trust Financial Statements 2005 97 notes to the financial statements (continued)
note 3. property income
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Rent and recoverable outgoings 497,790 161,065 151,866 161,065 Income support 6,719 – 1,420 – Other income 8,200 749 2,442 749
Total property income 512,709 161,814 155,728 161,814 note 4. gain/(loss) on sale of investments
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Proceeds on sale of investment properties 504,750 51,760 463,446 51,760 Book value of investment properties sold (479,043) (52,506) (441,681) (52,506)
Net gain/(loss) on sale of investment properties 25,707 (746) 21,765 (746) note 5. remuneration of auditors During the year the auditor of the parent entity and its related practices earned the following remuneration:
Consolidated Parent Entity 2005 2004 2005 2004 $$$$
PricewaterhouseCoopers Audit and review of financial reports and other audit work under the Corporations Act 2001 863,563 126,000 309,000 126,000 Fees paid in relation to outgoings 72,094 – – –
Total auditing fees 935,657 126,000 309,000 126,000
Assurance Fees paid to PwC Australia 935,657 126,000 309,000 126,000 Fees paid to non-PwC audit firms for audit of US controlled entity 394,962 – – – Taxation Services Fees paid to PwC Australia 461,670 – 39,000 – Advisory Services Fees paid to PwC Australia in relation to IFRS project 15,000 – 5,000 –
Total audit and advisory fees 1,807,289 126,000 353,000 126,000
Fees paid in relation to the establishment of the RENTS sub-trust Fees paid to PwC Australia 235,000 – – –
Total fees paid in relation to the establishment of the RENTS sub-trust 235,000 – – –
Fees paid in relation to the Transaction Fees paid to PwC Australia 889,587 – 296,529 – Fees paid to related practices of PwC Australia 354,171 – 118,057 –
Total included in costs associated with the Transaction 1,243,758 – 414,586 –
98 DB RREEF Trust Financial Statements 2005 note 6 (a). other expenses from ordinary activities
Consolidated Parent Entity 2005 2004 2005 2004 Note(s) $’000 $’000 $’000 $’000 Audit and advisory fees 5 1,807 126 353 126 Bad and doubtful debts 1,071 23 – 23 Custodian fees 415 146 180 146 Legal and other professional fees 1,667 229 515 229 Registry costs and listing fees 403 206 278 206 Other expenses 3,843 396 427 396
Total other expenses from ordinary activities 9,206 1,126 1,753 1,126 note 6 (b). borrowing costs
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Interest paid/payable 130,202 29,216 30,331 29,216 Amount capitalised (12,937) (11,380) (8,932) (11,380)
Borrowing costs expense 117,265 17,836 21,399 17,836 note 7. costs associated with the transaction The costs relate to the fees and expenses arising from the consolidation of the Trust and DIT, DOT and DRO, the acquisition of the US REIT, and the associated debt arranging and interest rate hedging, (together referred to as “theTransaction”). The costs associated with the Transaction for the Stapled Entity totalled $42.28 million and the Trust’s share of costs was $14.80 million.
DB RREEF Trust Financial Statements 2005 99 notes to the financial statements (continued)
note 8. income tax
Consolidated 2005 2004 $’000 $’000
Income tax expense The income tax expense for the financial year differs from the amount calculated on the profit. The differences are reconciled as follows: Profit from ordinary activities before income tax 234,376 – Profit from ordinary activities not subject to income tax (228,506) – Profit from ordinary activities subject to income tax 5,870 – Income tax calculated at 30 percent (2004: 30 percent) 1,761 – Tax effect of permanent differences Share of net profits of associates1 (771) – Income tax adjusted for permanent differences 990 – Under (over) provision in previous year – –
Income tax expense attributable to profit from ordinary activities 990 – Aggregate income tax expense 990 –
Aggregate income tax expense comprises Current taxation provision 1,069 – Deferred income tax liability 48 – Future income tax benefit (127) –
990 –
1 The share of net profits of associates relates to DRO’s investment in DB RREEF Holdings Pty Limited. note 9. current assets – receivables
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Rent receivable 14,039 7,741 439 7,741 Less: Provision for doubtful debts (1,116) (479) (261) (479)
Total rental receivables 12,923 7,262 178 7,262 Distribution receivable from controlled entities – – 3,100 – Interest receivable 1,241 – – – Settlement adjustments receivable 2,626 – 1,260 – Deferred tax asset 127 – – – Other receivables 13,069 4,090 4,345 4,090
Total other receivables 17,063 4,090 8,705 4,090 Total current assets – receivables 29,986 11,352 8,883 11,352
100 DB RREEF Trust Financial Statements 2005 note 10. current assets – inventory
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Building held for resale Cost of acquisition 47,037 – – – Capitalised development costs 1,432 – – –
Total current assets – inventory 48,469 – – – note 11. loan to third party On 4 August 2004, the Trust entered into a contract to purchase NRM Tower, Auckland on completion of its development for NZ$110.4 million (subject to an area survey and the leasing profile of the building). NZ$5.5 million has been lent to the developer as a contribution prior to completion. The value of this loan has been translated at the spot rate as at 30 June 2005 to AUD$5.0 million. note 12. current assets – other
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Prepayments 4,908 3,787 906 3,787 Tenant bonds 34 – – – Capitalised lease incentives 1,599 247 359 247 Capitalised leasing fees 812 360 121 360 Deferred borrowing costs 3,623 – – – Net receivable on currency hedge contracts 2,341 – 1,121 – Other 45 – 45 –
Total current assets – other 13,362 4,394 2,552 4,394
DB RREEF Trust Financial Statements 2005 101 notes to the financial statements (continued)
note 13. non-current assets – investment properties
Property Ownership Acquisition date Cost including (%) all additions $’000
Held by parent entity
Industrial Kings Park Industrial Estate, Bowmans Road, Marayong NSW 100 May 1990 70,016 Target Distribution Centre, Lot 1 Taras Avenue, Altona North VIC 100 Oct 1995 25,428 Axxess Corporate Park, 164–180 Forster Road and 11 and 21– 45 Gilby Road, 307–355 Ferntree Gully Road, Mount Waverley VIC 100 Oct 1996 107,633 Knoxfield Industrial Estate, 20 Henderson Road, Knoxfield VIC 100 Aug 1996 30,106 12 Frederick Street, St Leonards NSW 100 Jul 2000 24,933 40 Talavera Road, North Ryde NSW 100 Oct 2002 32,068 Wallgrove, Eastern Creek NSW 100 Mar 2004 23,523 Redwood Gardens Industrial Estate Stages 3,5,6 and 7 and Lot 4, Dingley VIC1 100 Dec 1994 23,062 Axxess Corporate Park, Powers and Station Road, Seven Hills NSW 0 Jul 2000 –
Total Industrial Properties 336,769
Commercial 44 Market Street, Sydney NSW 100 Sep 1987 159,566 8 Nicholson Street, Melbourne VIC 100 Nov 1993 67,995 Ferguson Centre, 130 George Street, Parramatta NSW 100 May 1997 61,854 Flinders Gate Complex, 172 Flinders Street and 189 Flinders Lane, Melbourne VIC 100 Mar 1999 13,584 383–395 Kent Street, Sydney NSW 100 Sep 1987 104,553 14 Moore Street, Canberra ACT** 100 May 2002 37,215 Sydney CBD Floor Space NSW2 100 Jul 2000 n/a 1 Chifley Square, Sydney NSW 0 Jul 2000 – 144 Edward Street, Brisbane QLD 0 Jul 2000 –
Total Commercial Properties 444,767
The title to all properties is freehold, with the exception of the properties marked ** which are leasehold. 1 The valuation reflects 76 percent of independent valuation amount as 24 percent of the property was disposed. 2 This relates to heritage floor space retained following the disposal of 1 Chifley Square, Sydney.
102 DB RREEF Trust Financial Statements 2005 Independent Independent Independent valuer Consolidated book Consolidated book valuation date valuation amount value 30 June 2005 value 30 June 2004 $’000 $’000 $’000
Jun 2005 78,500 (a) 78,500 66,294 Jun 2005 35,000 (f) 35,000 31,907
Jun 2003 89,000 (f) 109,336 91,342 Sep 2003 31,250 (e) 31,885 31,800 Jun 2005 31,500 (e) 31,500 26,046 Apr 2005 28,500 (f) 29,434 29,509 n/a – – 23,523 5,399 Jun 2003 22,040 (c) 22,962 29,478 – – – – 15,730
315,790 362,140 327,505
Jun 2003 144,000 (c) 148,409 145,078 Jun 2005 91,800 (g) 91,800 82,499 Jun 2003 43,800 (a) 49,626 44,539 Sep 2003 15,500 (g) 15,538 15,508 Sep 2003 104,000 (c) 104,874 102,649 Apr 2005 36,250 (e) 36,250 37,181 n/a – – 2,390 – – – – – 59,848 – – – – 40,529
435,350 448,887 527,831
DB RREEF Trust Financial Statements 2005 103 notes to the financial statements (continued)
note 13. non-current assets – investment properties (continued)
Property Ownership Acquisition date Cost including (%) all additions $’000
Retail and car park Whitford City Shopping Centre, Marmion and Whitfords Avenue, Hillarys WA3 50 Oct 1984 127,219 Whitfords Avenue, Lot 6 Endeavour Road, Hillarys WA3 50 Dec 1992 5,492 West Lakes Shopping Centre, West Lakes SA 50 Nov 1998 115,778 Plenty Valley Town Centre, 330–464 McDonald’s Road, South Morang VIC 3 50 Nov 1999 17,162 North Lakes Shopping Centre, Mango Hill QLD 3 50 Aug 2004 65,049 Albert and Charlotte Streets Carpark, Brisbane QLD 100 Oct 1984 13,778 34–60 Little Collins Street, Melbourne VIC** 100 Nov 1984 16,164 32–44 Flinders Street, Melbourne VIC 100 Jun 1998 21,239 Flinders Gate Complex (including air development rights), 172 Flinders Street, Melbourne VIC 100 Mar 1999 47,043 383–395 Kent Street, Sydney NSW 100 Sep 1987 30,257 John Martin’s Carpark and Retail Plaza Joint Venture 1 Sep 1994 100 West Lakes Shopping Centre, West Lakes SA 0 Nov 1998 –
Total retail and car park properties 459,281 Total parent entity 1,240,817
Held by controlled entities Westfield Hurstville, 262–264 Forest Road and 292 Forest Road, Hurstville NSW 50 May 2005 232,500 Retail properties 232,500
The title to all properties is freehold, with the exception of the properties marked ** which are leasehold. 3 The valuation reflects 50 percent of independent valuation amount.
104 DB RREEF Trust Financial Statements 2005 Independent Independent Independent valuer Consolidated book Consolidated book valuation date valuation amount value 30 June 2005 value 30 June 2004 $’000 $’000 $’000
Jun 2003 153,375 (e) 185,978 338,372 Jun 2003 7,900 (e) 8,613 15,837 Jun 2003 86,000 (e) 122,892 103,944 Jun 2003 16,000 (d) 20,576 35,152 Jun 2004 60,250 (c) 65,049 – Sep 2003 32,000 (d) 32,035 32,032 Sep 2003 41,500 (g) 41,522 41,522 Sep 2003 24,600 (g) 24,575 24,575
Sep 2003 45,275 (g) 45,275 45,275 Sep 2003 40,000 (c) 39,420 39,420 – – – 100 100 – – – – 103,943
506,900 586,035 780,172 1,258,040 1,397,062 1,635,508
Feb 2005 232,500 (d) 232,733 – 232,500 232,733 –
DB RREEF Trust Financial Statements 2005 105 notes to the financial statements (continued)
note 13. non-current assets – investment properties (continued)
Property Ownership Acquisition date Cost including (%) all additions $’000 52 Holbeche Road, Arndell Park NSW 100 Jul 1998 11,296 3–7 Bessemer Street, Blacktown NSW 100 Jun 1997 11,016 30–32 Bessemer Street, Blacktown NSW 100 May 1997 11,888 27–29 Liberty Road, Huntingwood NSW 100 Jul 1998 7,962 154 O’Riordan Street, Mascot NSW 100 Jun 1997 10,761 Egerton Industrial Estate, Silverwater NSW 100 May 1997 37,271 239–251 Woodpark Road, Smithfield NSW 100 May 1997 5,058 40 Biloela Street, Villawood NSW 100 Jul 1997 7,056 2a Birmingham Avenue, Villawood NSW 100 Jun 1997 7,753 27–33 Frank Street, Wetherill Park NSW 100 Jul 1998 15,109 11 Talavera Road, North Ryde NSW 100 Jun 2002 131,263 114–116 Fairbank Road, Clayton VIC 100 Jul 1997 10,751 30 Bellrick Street, Acacia Ridge QLD 100 Jun 1997 12,839 121 Evans Road, Salisbury QLD 100 Jul 1997 16,588 68 Hasler Road, Herdsman WA 100 Jul 1998 9,690 79–99 St Hilliers Road, Auburn NSW 100 Sep 1997 33,952 1 Garigal Road, Belrose NSW 100 Dec 1998 23,406 2 Minna Close, Belrose NSW 100 Dec 1998 33,484 114–120 Old Pittwater Road, Brookvale NSW 100 Sep 1997 32,749 145–151 Arthur Street, Flemington NSW 100 Sep 1997 22,952 436–484 Victoria Road, Gladesville NSW 100 Sep 1997 27,612 706 Mowbray Road, Lane Cove NSW 100 Sep 1997 21,798 1–15 Rosebery Avenue and 1–55 Rothschild Avenue, Rosebery NSW 100 Apr 1998 and Oct 2001 69,449 10–16 South Street, Rydalmere NSW 100 Sep 1997 35,370 19 Chifley Street, Smithfield NSW 100 Dec 1998 11,426 3 Brookhollow Avenue, Baulkham Hills NSW 100 Dec 2002 41,753 1 Foundation Place, Greystanes NSW 100 Dec 2002 39,124 352 Macaulay Road, Kensington VIC 100 Oct 1998 7,597 250 Forest Road, South Lara VIC 100 Dec 2002 33,757 Boundary Road, Laverton North VIC 100 Jul 2002 36,410 Pound Road, West Dandenong VIC 100 Jan 2004 52,713 15–23 Whicker Road, Gillman SA 100 Dec 2002 19,783 25 Donkin Street, South Brisbane QLD 100 Dec 1998 18,552 Industrial properties 868,188 Governor Phillip Tower and Governor Macquarie Tower Office Complex 1 Farrer Place, Sydney NSW 50 Dec 1998 465,556 45 Clarence Street, Sydney NSW 100 Dec 1998 197,929 309–321 Kent Street, Sydney NSW 50 Dec 1998 142,929 1 Margaret Street, Sydney NSW 100 Dec 1998 141,398 Victoria Cross, 60 Miller Street, North Sydney NSW 100 Dec 1998 83,582 Zenith Centre, 821–843 Pacific Highway, Chatswood NSW 100 Dec 1998 190,518 240 St Georges Terrace, Perth WA 100 Jan 2001 238,765 30–34 Hickson Road, Sydney NSW 100 May 2002 117,675 Southgate Complex, 3 Southgate Avenue, Southgate VIC 100 Aug 2000 346,664 O’Connell House, 15–19 Bent Street, Sydney NSW 100 Aug 2000 49,086 201 Elizabeth Street, Sydney NSW 50 Aug 2000 106,796 Garema Court, 140–180 City Walk, Civic ACT** 100 Aug 2000 43,313 Australia Square, 264 George Street, Sydney NSW 50 Aug 2000 195,399 Commercial properties 2,319,610
The title to all properties is freehold, with the exception of the properties marked ** which are leasehold.
106 DB RREEF Trust Financial Statements 2005 Independent Independent Independent valuer Consolidated book Consolidated book valuation date valuation amount value 30 June 2005 value 30 June 2004 $’000 $’000 $’000 Sep 2003 11,100 (a) 11,104 – Sep 2003 10,100 (b) 10,202 – Sep 2003 14,500 (b) 14,540 – Sep 2003 7,300 (a) 7,300 – Jun 2004 13,650 (a) 13,694 – Sep 2003 39,375 (e) 39,524 – Sep 2003 5,750 (b) 5,756 – Sep 2003 7,000 (d) 7,019 – Sep 2003 8,600 (d) 8,792 – Dec 2003 12,650 (b) 12,685 – Jun 2003 130,000 (a) 134,006 – Sep 2003 10,800 (a) 10,913 – Sep 2003 11,900 (d) 11,920 – Dec 2004 18,450 (e) 18,450 – Jun 2004 8,000 (e) 8,379 – Jun 2005 41,000 (d) 41,000 – Dec 2004 27,400 (a) 27,400 – Dec 2004 32,400 (a) 33,077 – Sep 2003 42,000 (a) 42,587 – Jun 2005 31,000 (f) 31,000 – Dec 2004 43,000 (d) 43,182 – Sep 2003 25,300 (f) 25,788 – Jun 2003 78,700 (a) 81,157 – Jun 2004 42,000 (f) 42,588 – Jun 2003 13,400 (c) 13,498 – Dec 2003 36,600 (e) 41,753 – Dec 2004 41,700 (a) 41,905 – Jun 2003 7,300 (e) 7,300 – Jun 2005 34,600 (e) 34,600 – Jun 2004 23,700 (c) 41,986 – Jun 2005 56,250 (c) 56,250 – Jun 2005 21,300 (e) 21,300 – Jun 2005 20,700 (e) 20,700 – 927,525 961,355 –
Dec 2004 512,500 (b) 515,137 – Jun 2005 195,000 (f) 195,000 – Dec 2003 128,750 (d) 131,359 – Jun 2005 139,000 (c) 139,000 – Mar 2005 86,000 (f) 86,303 – Jun 2004 216,000 (f) 223,281 – Jun 2005 270,000 (g) 270,000 – Mar 2004 122,000 (b) 123,352 – Jun 2005 361,000 (d) 361,000 – Sep 2004 55,500 (e) 56,323 – Dec 2004 117,000 (e) 117,190 – Oct 2003 44,600 (b) 44,865 – Jun 2005 184,000 (d) 184,000 – 2,431,350 2,446,810 –
DB RREEF Trust Financial Statements 2005 107 notes to the financial statements (continued)
note 13. non-current assets – investment properties (continued)
Property Ownership Acquisition date Cost including (%) all additions $’000 3765 Atlanta Industrial Drive, Atlanta 80 Sep 2004 6,031 7100 Highlands Parkway, Atlanta 80 Sep 2004 18,264 Town Park Drive, Atlanta 80 Sep 2004 8,269 Williams Drive, Atlanta 80 Sep 2004 11,834 Stone Mountain, Atlanta 80 Sep 2004 8,503 MD Food Park, Baltimore 80 Sep 2004 24,085 West Nursery, Baltimore 80 Sep 2004 9,015 Cabot Techs, Baltimore 80 Sep 2004 26,479 9112 Guildford Road, Baltimore 80 Sep 2004 10,440 8155 Stayton Drive, Baltimore 80 Sep 2004 8,677 Patuxent Range Road, Baltimore 80 Sep 2004 14,298 Bristol Court, Baltimore 80 Sep 2004 12,231 NE Baltimore, Baltimore 80 Sep 2004 9,122 1181 Portal, 1831 Portal and 6615 Tributary, Baltimore 80 Jun 2005 13,446 10 Kenwood Circle, Boston 80 Sep 2004 13,900 Commerce Park, Charlotte 80 Sep 2004 8,918 9900 Brookford Street, Charlotte 80 Sep 2004 4,915 Westinghouse, Charlotte 80 Sep 2004 24,445 Airport Exchange, Cincinnati 80 Sep 2004 4,996 Empire Drive, Cincinnati 80 Sep 2004 6,968 International Way, Cincinnati 80 Sep 2004 12,316 Kentucky Drive, Cincinnati 80 Sep 2004 14,126 Spiral Drive, Cincinnati 80 Sep 2004 6,715 Turfway Road, Cincinnati 80 Sep 2004 6,084 124 Commerce, Cincinnati 80 Sep 2004 2,892 Kenwood Road, Cincinnati 80 Sep 2004 22,714 Lake Forest Drive, Cincinnati 80 Sep 2004 15,010 World Park, Cincinnati 80 Sep 2004 14,169 Equity/Westbelt/Dividend, Columbus 80 Sep 2004 44,090 2700 International Street, Columbus 80 Sep 2004 4,458 3800 Twin Creeks Drive, Columbus 80 Sep 2004 5,897 SE Columbus, Columbus 80 Sep 2004 15,900 Arlington, Dallas 80 Sep 2004 10,466 1900 Diplomat Drive, Dallas 80 Sep 2004 5,314 2055 Diplomat Drive, Dallas 80 Sep 2004 3,210 1413 Bradley Lane, Dallas 80 Sep 2004 4,049 North Lake, Dallas 80 Sep 2004 11,311 555 Airline Drive, Dallas 80 Sep 2004 7,840 455 Airline Drive, Dallas 80 Sep 2004 3,931 Hillguard, Dallas 80 Sep 2004 9,868 11011 Regency Crest Drive, Dallas 80 Sep 2004 8,540 East Collins, Dallas 80 Sep 2004 4,281 3601 East Plano/1000 Shiloh, Dallas 80 Sep 2004 15,033 East Plano Parkway, Dallas 80 Sep 2004 26,222 820–860 Avenue F, Dallas 80 Sep 2004 8,181 10th Street, Dallas 80 Sep 2004 11,221 Capital Avenue, Dallas 80 Sep 2004 7,111 CTC at Valwood, Dallas 80 Sep 2004 4,275 Brackbill, Harrisburg 80 Sep 2004 27,502 Mechanicsburg, Harrisburg 80 Sep 2004 21,737 181 Fulling Mill Road, Harrisburg 80 Sep 2004 11,053 Balance carried forward 610,352
108 DB RREEF Trust Financial Statements 2005 Independent Independent Independent valuer Consolidated book Consolidated book valuation date valuation amount value 30 June 2005 value 30 June 2004 $’000 $’000 $’000 Jun 2005 6,702 (c) 6,702 – Jun 2005 17,277 (c) 17,277 – Jun 2005 8,701 (c) 8,701 – Jun 2005 10,842 (c) 10,842 – Jun 2005 6,711 (c) 6,711 – Jun 2005 29,581 (c) 29,581 – Jun 2005 8,538 (c) 8,538 – Jun 2005 31,414 (c) 31,414 – Jun 2005 12,304 (c) 12,304 – Jun 2005 9,734 (c) 9,734 – Jun 2005 15,576 (c) 15,576 – Jun 2005 13,481 (c) 13,481 – Jun 2005 10,509 (c) 10,509 – Apr 2005 13,222 (c) 13,447 – Jun 2005 13,482 (c) 13,482 – Jun 2005 8,672 (c) 8,672 – Jun 2005 4,843 (c) 4,843 – Jun 2005 22,548 (c) 22,548 – Jun 2005 4,748 (c) 4,748 – Jun 2005 8,026 (c) 8,026 – Jun 2005 13,089 (c) 13,089 – Jun 2005 14,071 (c) 14,071 – Jun 2005 6,468 (c) 6,468 – Jun 2005 6,235 (c) 6,235 – Jun 2005 2,683 (c) 2,683 – Jun 2005 22,423 (c) 22,423 – Jun 2005 14,763 (c) 14,763 – Jun 2005 12,958 (c) 12,958 – Jun 2005 49,921 (c) 49,921 – Jun 2005 5,199 (c) 5,199 – Jun 2005 6,283 (c) 6,283 – Jun 2005 14,673 (c) 14,673 – Jun 2005 10,864 (c) 10,864 – Jun 2005 5,628 (c) 5,628 – Jun 2005 4,429 (c) 4,429 – Jun 2005 3,534 (c) 3,534 – Jun 2005 13,613 (c) 13,613 – Jun 2005 8,115 (c) 8,115 – Jun 2005 4,581 (c) 4,581 – Jun 2005 10,521 (c) 10,521 – Jun 2005 7,997 (c) 7,997 – Jun 2005 5,090 (c) 5,090 – Jun 2005 18,158 (c) 18,158 – Jun 2005 27,016 (c) 27,016 – Jun 2005 9,234 (c) 9,234 – Jun 2005 11,453 (c) 11,453 – Jun 2005 6,741 (c) 6,741 – Jun 2005 4,712 (c) 4,712 – Jun 2005 30,105 (c) 30,105 – Jun 2005 23,822 (c) 23,822 – Jun 2005 11,822 (c) 11,822 – 643,111 643,336 –
DB RREEF Trust Financial Statements 2005 109 notes to the financial statements (continued)
note 13. non-current assets – investment properties (continued)
Property Ownership Acquisition date Cost including (%) all additions $’000 Balance brought forward 610,352 Glendale, Los Angeles 80 Sep 2004 63,172 14489 Industry Circle, Los Angeles 80 Sep 2004 8,934 14555 Alondra/6530 Altura, Los Angeles 80 Sep 2004 22,589 San Fernando Valley, Los Angeles 80 Sep 2004 18,948 Memphis Industrial, Memphis 80 Sep 2004 12,018 2950 Lexington Avenue S, Minneapolis 80 Sep 2004 11,351 Mounds View, Minneapolis 80 Sep 2004 24,811 6105 Trenton Lane, Minneapolis 80 Sep 2004 9,705 8575 Monticello Lane, Minneapolis 80 Sep 2004 2,158 7401 Cahill Road, Minneapolis 80 Sep 2004 3,487 CTC at Dulles, Northern Virginia 80 Sep 2004 32,059 Alexandria, Northern Virginia 80 Sep 2004 57,376 Nokes Boulevard, Northern Virginia 80 Sep 2004 26,128 Guildford, Northern Virginia 80 Sep 2004 20,945 Beaumeade Telecom, Northern Virginia 80 Sep 2004 40,702 Orlando Central Park, Orlando 80 Sep 2004 71,403 7500 Exchange Drive, Orlando 80 Sep 2004 6,382 105–107 South 41st Avenue, Phoenix 80 Sep 2004 17,191 1429–1439 South 40th Avenue, Phoenix 80 Sep 2004 11,433 10397 West Van Buren Street, Phoenix 80 Sep 2004 9,171 844 44th Avenue, Phoenix 80 Sep 2004 7,729 220 South 9th Street, Phoenix 80 Sep 2004 8,182 431 North 47th Avenue, Phoenix 80 Sep 2004 7,538 601 South 55th Avenue, Phoenix 80 Sep 2004 5,423 1000 South Priest Drive, Phoenix 80 Sep 2004 6,087 1120–1150 W. Alameda Drive, Phoenix 80 Sep 2004 9,034 1858 East Encanto Drive, Phoenix 80 Sep 2004 5,151 3802–3922 East University Drive, Phoenix 80 Sep 2004 11,628 Chino, Riverside 80 Sep 2004 7,517 Mira Loma, Riverside 80 Sep 2004 13,345 Ontario, Riverside 80 Sep 2004 37,125 4190 East Santa Ana Street, Riverside 80 Sep 2004 6,137 Rancho Cucamonga, Riverside 80 Sep 2004 27,512 12000 Jersey Court, Riverside 80 Sep 2004 5,291 Airway Road, San Diego 80 Sep 2004 11,474 5823 Newton Drive, San Diego 80 Sep 2004 21,487 2210 Oak Ridge Way, San Diego 80 Sep 2004 6,513 Kent West, Seattle 80 Sep 2004 32,178 26507 79th Avenue South, Seattle 80 Sep 2004 3,391 8005 S. 266th Street, Seattle 80 Sep 2004 8,910 West Palm Beach, South Florida 80 Sep 2004 27,273 Calvert/Murry’s, Northern Virginia 80 Sep 2004 6,498
US properties 1,355,738 Total controlled entities 4,776,036 Total investment properties – non-current 6,016,853
110 DB RREEF Trust Financial Statements 2005 Independent Independent Independent valuer Consolidated book Consolidated book valuation date valuation amount value 30 June 2005 value 30 June 2004 $’000 $’000 $’000 643,111 643,336 – Jun 2005 73,460 (c) 73,460 – Jun 2005 10,916 (c) 10,916 – Jun 2005 27,225 (c) 27,225 – Jun 2005 23,168 (c) 23,168 – Jun 2005 12,435 (c) 12,435 – Jun 2005 11,126 (c) 11,126 – Jun 2005 24,714 (c) 24,714 – Jun 2005 9,555 (c) 9,555 – Jun 2005 2,506 (c) 2,506 – Jun 2005 2,901 (c) 2,901 – Jun 2005 34,031 (c) 34,031 – Jun 2005 69,247 (c) 69,247 – Jun 2005 35,995 (c) 35,995 – Jun 2005 27,225 (c) 27,225 – Jun 2005 44,503 (c) 44,503 – Jun 2005 76,224 (c) 76,224 – Jun 2005 7,235 (c) 7,235 – Jun 2005 19,634 (c) 19,634 – Jun 2005 13,613 (c) 13,613 – Jun 2005 13,613 (c) 13,613 – Jun 2005 9,424 (c) 9,424 – Jun 2005 8,770 (c) 8,770 – Jun 2005 9,031 (c) 9,031 – Jun 2005 6,152 (c) 6,152 – Jun 2005 6,545 (c) 6,545 – Jun 2005 9,824 (c) 9,824 – Jun 2005 5,366 (c) 5,366 – Jun 2005 12,558 (c) 12,558 – Jun 2005 8,508 (c) 8,508 – Jun 2005 17,866 (c) 17,866 – Jun 2005 46,607 (c) 46,607 – Jun 2005 7,788 (c) 7,788 – Jun 2005 35,591 (c) 35,591 – Jun 2005 7,286 (c) 7,286 – Jun 2005 14,765 (c) 14,765 – Jun 2005 25,131 (c) 25,131 – Jun 2005 7,853 (c) 7,853 – Jun 2005 35,468 (c) 35,468 – Jun 2005 3,534 (c) 3,534 – Jun 2005 9,748 (c) 9,748 – Jun 2005 26,832 (c) 26,832 – Jun 2005 6,793 (c) 6,793 –
1,503,876 1,504,102 – 5,095,251 5,145,000 – 6,353,291 6,542,062 1,635,508
DB RREEF Trust Financial Statements 2005 111 notes to the financial statements (continued)
note 13. non-current assets – Powers Road, Seven Hills NSW In October 2004, the property was settled for consideration investment properties (continued) of $29.76 million. valuer Station Road, Seven Hills NSW (a) Colliers International In November 2004, all the eleven subdivided lots of this property were settled for $16.55 million. (b) Landmark White Redwood Gardens Industrial Estate Stages 3,5,6 and 7 and Lot 4 (c) CB Richard Ellis Dingley VIC (d) Jones Lang LaSalle During the year ten of thirty two subdivided lots of this property were sold for a consideration of $8.24 million. (e) Knight Frank Whitford City and Whitfords Avenue, Hillarys WA (f) FPD Savills On 20 August 2004, 50 percent of the properties were sold for (g) M3 Property a collective consideration of $192.5 million. Plenty Valley Town Centre, South Morang VIC valuations of investment properties On 20 August 2004, 50 percent of the property was sold for The basis of valuation of investment properties is fair value, being a consideration of $19 million. the amounts for which the assets could be exchanged between 1 Chifley Square, Sydney NSW knowledgeable willing parties in an arm’s length transaction, based On 4 April 2005, the property was settled for consideration of on current prices in an active market for similar properties in the $60 million. same location and condition and subject to similar leases. Properties independently valued in the last 12 months were based on Developments independent assessments by a member of the Australian Property Axxess Corporate Park (Mount Waverley) VIC Institute or the Appraisal Institute in the United States of America. DDF has secured an office pre commitment, to Alinta Limited for a Properties not independently valued during the last 12 months 10 year term. The market value “As if Complete” provided by an are carried at Directors’ valuation at 30 June 2005, being the independent valuer is $27.4 million. The capital expenditure spent independent valuation plus capital expenditure incurred since the to date is $11.57 million. date of valuation, and taking into consideration market movements.
DB RREEF Diversified Trust DB RREEF Industrial Trust Disposals Acquisitions McDowell Street, Welshpool WA Westfield North Lakes Shopping Centre QLD On 3 November 2004, the Trust sold 33 McDowell Street, Welshpool On 19 August 2004, DDF acquired a 50 percent interest in Westfield for $4.2 million. North Lakes Shopping Centre for $60.76 million. Rothschild Avenue, Rosebery NSW Westfield Hurstville Shopping Centre NSW In February 2005, the Trust sold part of Rothschild Avenue, Rosebery On 6 May 2005, DDF acquired a 50 percent interest in Westfield for $22 million. Hurstville Shopping Centre through the DB RREEF Hurstville Trust, a 100 percent owned sub-trust of DDF, for a consideration of Developments $232.5 million. Boundary Road, North Laverton VIC Disposals In December 2004, construction of the first building for Visy Industrial Packaging and Stage 1 infrastructure works reached West Lakes Shopping Centre, West Lakes SA practical completion. On 6 May, DDF sold a 50 percent share in West Lakes Shopping Centre for a consideration of $122.5 million. Brookhollow Avenue, Baulkham Hills NSW The approved Masterplan for the estate provides for approximately 144 Edward Street, Brisbane QLD 25,000 square metres of office and warehouse accommodation. In November 2004, DDF sold 144 Edward Street, Brisbane for a consideration of $44.65 million. Pound Road West, Dandenong VIC In December 2004, construction of the building for Aluminium Specialties Group was completed and in February 2005, construction of the building for Westgate Logistic was completed.
112 DB RREEF Trust Financial Statements 2005 DB RREEF Diversified Trust and DB RREEF Industrial Trust of the building). NZ$5.5 million has been lent to the developer as a contribution prior to completion. It is currently estimated that the Acquisitions project will reach practical completion in September 2005. DB RREEF Industrial Holdings LLC On 30 September 2004, DIT and DDF each acquired a 50 percent DB RREEF Industrial Holdings LLC interest in the US REIT. The US REIT owns an 80 percent interest in Acquisitions and disposals a joint venture with CalWest to own 93 industrial properties in the United States of America. Refer to note 39 for further details. 1181 Portal, 1831 Portal and 6615 Tributary, Baltimore, MD, (“Fort Holabird”) DB RREEF Office Trust On 3 June 2005, DB RREEF Industrial Properties, LLC purchased 1181 Portal, 1831 Portal and 6615 Tributary, Baltimore, MD, (“Fort Acquisitions Holabird”) and simultaneously sold 1855 Dornoch Court, San Diego, NRM Tower, Auckland CA, (“Dornoch Court”) in a tax-deferred exchange. Fort Holabird On 4 August 2004, the Trust entered into a contract to purchase was purchased for $13.2 million while Dornoch Court was sold for NRM Tower, Auckland on completion of its development for $15.2 million. NZ$110.4 million (subject to an area survey and the leasing profile reconciliation Consolidated Parent Entity 2005 2004 2005 2004 Note(s) $’000 $’000 $’000 $’000
Carrying amount at 1 July 2004 1,635,508 1,575,332 1,635,508 1,575,332 Properties acquired on stapling 3,280,344 – – – Additions 1,812,168 106,038 163,260 106,038 Disposals (479,043) (52,506) (441,681) (52,506) Revaluation increments 26 262,825 6,644 39,975 6,644 Foreign exchange difference on foreign currency translation 30,260 – – –
Carrying amount as at 30 June 2005 6,542,062 1,635,508 1,397,062 1,635,508 note 14. non-current assets – loan notes receivable from associate Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Loan notes receivable from DB RREEF Holdings Pty Limited 45,092 – – –
Total non-current assets – loan notes receivable from associate 45,092 – – –
DRH issued an equal amount of corporate bonds to its two owners – First Australian Property Pty Limited and DRO, in order to fund its 100 percent acquisition of DB RREEF Funds Management Limited (Responsible Entity of DRO). These bonds are 20 years in duration and yield 11 percent per annum.
DB RREEF Trust Financial Statements 2005 113 notes to the financial statements (continued)
note 15. non-current assets – investments in controlled entity
Parent Entity 2005 2004 $’000 $’000
Units in controlled entities At Directors’ valuation DB RREEF Hurstville Trust 233,867 –
Total non-current assets – investments in controlled entity 233,867 – reconciliation
Parent Entity 2005 2004 $’000 $’000
Parent Carrying amount at 1 July 2004 –– Additions 223,867 –
Carrying amount as at 30 June 2005 233,867 –
The controlled entity is a wholly owned sub-trust of the Trust. Both the parent entity and the controlled entity were formed in Australia. note 16. 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.
The Trust’s investment in Mt Druitt Shopping Centre Trust and DB RREEF Industrial Properties, Inc. are carried at Directors’ valuation being net tangible assets of the underlying entity and taking into consideration market movements.
Information relating to these entities is set out below.
Name of trust Principal activity Ownership Consolidated Parent Entity interest 2005 2005 2004 2005 2004 % $’000 $’000 $’000 $’000
Held by parent entity Mt Druitt Shopping Centre Trust Retail property investment 50 154,957 – 154,957 – DB RREEF Industrial Asset and property investment 50 – – 192,197 – Properties, Inc.1
154,957 – 347,154 –
Held by controlled entities 2 O’Connell Street Trust Commercial property investment 50 8,045 – – – 4 O’Connell Street Trust Commercial property investment 50 12,221 – – – Bligh Street Trust Commercial property investment 50 16,585 – – – DB RREEF Holdings Asset, property and funds 50 17,166 – – – Pty Limited management
54,017 – – – Total 208,974 – 347,154 –
1 The remaining 50 percent of this entity is owned by DIT. As a result, this entity is classed as controlled on a consolidated basis.
114 DB RREEF Industrial Trust Financial Statements 2005 note 16. non-current assets – investments accounted for using the equity method (continued) Consolidated 2005 2004 $’000 $’000
Movements in carrying amounts of investments accounted for using the equity method Carrying amount as at 1 July 2004 –– Interest acquired on stapling 36,965 – Interest acquired during the year 167,678 – Share of net profits after tax 12,544 – Distributions received (8,213) –
Carrying amount as at 30 June 2005 208,974 –
Results attributable to associates Operating profits before income tax 13,306 – Income tax expense (762) –
Operating profits after income tax 12,544 – Less: Distributions received (8,213) –
4,331 –
Undistributed income attributable to associates acquired on stapling 1,215 – Undistributed income attributable to associates as at 30 June 2005 5,546 –
Summary of the performance and financial position of investments accounted for using the equity method The aggregate profits, assets and liabilities of investments accounted for using the equity method are: Profits from ordinary activities after income tax expense 12,544 – Assets 292,535 – Liabilities 54,150 –
Share of associates’ expenditure commitments Capital commitments 17,557 – note 17. non-current assets – other
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Capitalised lease incentives 11,462 472 711 472 Capitalised leasing fees 4,931 469 584 469 Tenant and other bonds 2,171 583 615 583 Deferred borrowing costs 4,293 – – – Net receivable on currency hedge contracts 6,064 – 3,032 – Other 2,931 – – –
Total non-current assets – other 31,852 1,524 4,942 1,524
DB RREEF Trust Financial Statements 2005 115 notes to the financial statements (continued)
note 18. current liabilities – payables
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Trade creditors 32,183 2,822 8,379 2,822 Accruals 6,265 282 712 282 Option fee received – 6,000 – 6,000 Amount payable to outside equity interest 26,727 – – – Accrued capital expenditure 2,795 1,700 2,561 1,700 Prepaid income 28,830 509 422 509 Responsible Entity fee payable 2,142 641 682 641 GST payable 516 149 124 149 Accrued interest 19,021 2,766 – 2,766
Total current liabilities – payables 118,479 14,869 12,880 14,869 note 19. current and non-current liabilities – interest bearing liabilities current
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Secured Commercial paper 118,338 – – – Commercial mortgage backed securities 236,000 – – – Bank loans 15,498 – – –
Total secured 369,836 – – –
Unsecured Bank loans – 349,200 – 349,200 Medium term notes – 125,000 – 125,000
Total unsecured – 474,200 – 474,200 Total current liabilities – interest bearing liabilities 369,836 474,200 – 474,200
116 DB RREEF Industrial Trust Financial Statements 2005 note 19. current and non-current liabilities – interest bearing liabilities (continued) non-current
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Secured Commercial paper 452,449 – – – Commercial mortgage backed securities 705,169 – – – Bank loans 439,666 – – –
Total secured 1,597,284 – – –
Unsecured Commercial notes 261,780 – – – Medium term notes 6,836 – – – Preferred shares 121 – – – Bank loans 555,707 – – – Intercompany loan1 – – 581,077 –
Total unsecured 824,444 – 581,077 – Total non-current liabilities – interest bearing liabilities 2,421,728 – 581,077 –
1 The intercompany loan represents a loan from DB RREEF Finance Pty Limited. financing arrangements The Stapled Entity has access to the following lines of credit:
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Borrowing facilities Commercial paper 578,200 – – – Commercial mortgage backed securities 941,169 – – – Commercial notes 261,780 – – – Bank loans 1,330,033 400,000 – 400,000 Medium term notes 6,835 125,000 – 125,000
3,118,017 525,000 – 525,000 Used at balance date (2,791,443) (474,200) (474,200) Unused at balance date 326,574 50,800 – 50,800
DB RREEF Trust Financial Statements 2005 117 notes to the financial statements (continued)
note 19. current and non-current liabilities – commercial notes interest bearing liabilities (continued) US$160 million notes were issued in December 2004 to redeem US$160 million of preference units. An additional US$40 million DB RREEF Finance Pty Limited, a wholly-owned subsidiary of DRO, of notes were settled in March 2005 to redeem the remaining entered into syndicated bank debt facilities on 29 September 2004. US$40 million of preference units in May 2005, bringing the total The facilities include a $300 million three year, multi-currency commercial notes on issue to US$200 million (A$261.780 million). revolving credit facility, a $300 million 364 day revolving credit The US dollar denominated notes were privately placed with investors facility and a US$210 million (A$274.869 million) three year on terms to maturity ranging from December 2001 to March 2017. revolving credit facility. These facilities are supported by the Stapled Entity guarantee arrangements. DB RREEF Industrial Properties, commercial paper and commercial mortgage Inc may only borrow under the US$210 million facility. The $300 million 364 days facility has been extended for a further backed securities 364 days to mature in September 2006. DB RREEF Office Trust has liabilities resulting from the issuance of $452.4 million (facility limit of $453.3 million) asset backed The consolidated accounts of the Stapled Entity include the debt commercial paper (“CP”) and $500 million commercial mortgage facilities of the US joint venture. The facilities include US$123 million backed securities (“CMBS”). The CMBS has an anticipated maturity (A$160.661 million) of bank mortgages that amortise through monthly date of April 2009. DB RREEF Industrial Trust has liabilities resulting principal and interest payments with a weighted average maturity date from the issuance of $118.3 million (facility limit of $124.9 million) of September 2008 and a US$225 million (A$294.503 million) asset backed CP and $236 million CMBS. The CMBS has an secured interest only bank loan maturing in September 2009. anticipated maturity date of December 2005. The US joint venture DB RREEF Finance Pty Limited also entered into two bilateral has liabilities resulting from the US$157 million (A$205.497 million) arrangements on 29 September 2004. A $170 million 364 day CMBS issue, maturing in September 2008 (inclusive of a three by bridge facility has been repaid by asset sale proceeds and the limit one year extension option beginning September 2005). cancelled in April 2005. A US$200 million 180 day bridge facility was executed to provide funds for the repayment of the US dollar medium term notes denominated preference shares in December 2004 and May 2005. The US joint venture has liabilities resulting from US$5 million US$160 million and the balance of the bridge facility limit, US$40 (A$6.835 million) unsecured medium term notes maturing in million, was cancelled in December and March 2005 respectively, September 2010. with the issue of commercial notes (refer to following). preferred shares DB RREEF Industrial Properties, Inc has issued US$92,500 (A$121,073) of preferred shares as part of the requirement to be classified as a Real Estate Investment Trust (“REIT”) under US tax legislation. These preference shares will remain on issue until such time that the Board decides that it is no longer in the company’s interest to qualify as a REIT.
In respect of current liabilities, management is in the process of negotiating new unsecured bank loans to replace commercial paper and CMBS. This will be finalised prior to December 2005.
118 DB RREEF Trust Financial Statements 2005 note 20. current liabilities – current tax liabilities
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Withholding tax Opening balance as at 1 July 2004 – – – – Withholding tax paid on operating activities – current year (778) – – – Current year’s withholding tax expense on distributions paid 2,256 – – –
Total current liabilities – current withholding tax liabilities 1,478 – – –
Income tax Opening balance as at 1 July 2004 – – – – Deferred income tax liability 48 – – – Current year’s income tax expense on profit from ordinary activities 1,069 – – –
Total current liabilities – current income tax liabilities 1,117 – – – Total current liabilities – current tax liabilities 2,595 – – – note 21. current liabilities – provisions
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Provision for distribution Opening balance as at 1 July 2004 23,171 23,171 23,171 23,171 Additional provisions 284,657 – 127,113 – Payments and reinvestment of distributions (163,028) – (82,528) –
Provisions for distributions as at 30 June 2005 144,800 23,171 67,756 23,171 Total current liabilities – provisions 144,800 23,171 67,756 23,171 provision for distribution Provision is made for distributions to be paid for the period ending 30 June 2005, payable on 29 August 2005.
DB RREEF Trust Financial Statements 2005 119 notes to the financial statements (continued)
note 22. current liabilities – other
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Other borrowing costs 6,397 – – – Tenant bonds 34 – – – Deferred gain on currency hedge contracts 2,242 – 1,121 –
Total current liabilities – other 8,673 – 1,121 – note 23. non-current liabilities – loan with related parties
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Non-interest bearing loan – – 34,332 –
Total non-current liabilities – loan with related parties – – 34,332 – note 24. non-current liabilities – other
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Tenant bonds 8,103 585 894 585 Other borrowing costs 15,352 – – – Deferred gain on currency hedge contracts 6,064 – 3,032 – Other 24 – – –
Total non-current liabilities – other 29,543 585 3,926 585
120 DB RREEF Trust Financial Statements 2005 note 25. contributed equity
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
(a) Value of securities on issue Opening balance as at 1 July 2004 1,028,028 976,048 1,028,028 976,048 Additional equity acquired on stapling 1,868,722 – – – Issue of stapled securities 54,472 30,869 21,101 30,869 Cost of distributions reinvested (451) – (168) – Issue of units to staple – – 316,263 – Capital distribution to staple – – (362,916) – Distributions reinvested 143,484 21,111 57,558 21,111
Closing balance as at 30 June 2005 3,094,255 1,028,028 1,059,866 1,028,028
Consolidated Parent Entity 2005 2004 2005 2004 No. of securities No. of securities No. of units No. of units
(b) Number of securities on issue Opening balance as at 1 July 2004 996,612,986 951,443,626 996,612,986 951,443,626 Additional units created on stapling 1,581,311,602 – – – Issue of stapled securities 41,521,457 26,862,822 41,521,457 26,862,822 Issue of units to staple – – 1,581,311,602 – Distributions reinvested 112,636,344 18,306,538 112,636,344 18,306,538
Closing balance as at 30 June 2005 2,732,082,389 996,612,986 2,732,082,389 996,612,986 terms and conditions stapling unit change Each stapled security ranks equally with all other stapled securities On 30 September 2004, the Stapled Entity was formed by the for the purposes of distributions and on termination of the Trust. consolidation of the DDF, DIT, DOT and DRO. Each trust subscribed Each stapled security entitles the holder to one vote, either in person for units in accordance with the stapling ratios described in the or by proxy, at a meeting of each of the Trusts. Explanatory Memorandum and Product Disclosure Statement dated 30 August 2004. distribution reinvestment plan As part of the stapling process, the Trust, DIT and DOT each paid a Units were issued to existing unitholders under the old distribution capital distribution that was applied on behalf of each security holder reinvestment plan (“DRP”) in relation to distributions for the June to subscribe for new units in each of the other trusts, and DRO. As a 2004 distribution period. consequence of this activity, the number of stapled securities owned On 26 September 2004 the Trust established a new DRP under by an investor in DRT equals the same number of units in the Trust, which holders of DRT stapled securities may elect to have all or part DIT, DOT and DRO. of their distribution entitlements satisfied by the issue of new ordinary On 19 October 2004, 1,581,311,602 units were issued by the Trust units rather than by being paid in cash. at a unit price of $0.2000 (refer to the Explanatory Memorandum Securities were issued under this new DRP for the December 2004 and Product Disclosure Statement dated 30 August 2004). This was distribution and further securities will be issued for the June 2005 the price at which the Trust’s units were issued to unitholders of DIT distribution. and DOT as part of the stapling process described above. This was funded from the capital distribution that was paid by DIT and DOT. On 26 August 2004, 5,917,804 securities were issued at a unit price of $1.1795. On 4 November 2004, 41,521,457 units were issued by the Stapled Entity at a unit price of $1.3119. This issue of units was made in On 28 February 2005, 106,718,540 securities were issued at a unit consideration for the acquisition of management rights from FAP, a price of $1.2791. subsidiary of Deutsche Australia Limited. The securities were issued at $1.13119 being the volume weighted average price over the ten business days immediately following initial quotation of DRT securities on the Australian Stock Exchange.
DB RREEF Trust Financial Statements 2005 121 notes to the financial statements (continued)
note 26. reserves and undistributed income (a) reserves
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Asset revaluation reserve 425,088 153,961 243,740 153,961 Foreign currency translation reserve (1,259) – – –
Total reserves 423,829 153,961 243,740 153,961 movements
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Asset revaluation reserve Opening balance as at 1 July 2004 153,961 147,317 153,961 147,317
Increment on revaluation of investment properties 262,825 7,698 39,975 7,698 Add: decrement recognised as an expense 4,934 – – – Increment attributable to outside equity interest (56,404) – – – Asset revaluation reserve acquired on stapling 87,299 – – – Fair value adjustment for capitalised lease incentives (2,952) – (2,952) – Increment on revaluation of investments in associates – – 56,039 –
Total movement in asset revaluation reserve 295,702 7,698 93,062 7,698 Transfer to undistributed income (24,575) (1,054) (3,283) (1,054) Closing balance as at 30 June 2005 425,088 153,961 243,740 153,961
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Foreign currency translation reserve Opening balance as at 1 July 2004 – – – – Foreign currency translation reserve acquired on stapling 127 – – – Exchange difference arising from the translation of the financial statements of foreign operations (1,386) – – –
Total movement in foreign currency translation reserve (1,259) – – – Closing balance as at 30 June 2005 (1,259) – – –
(b) nature and purpose of reserves
Asset revaluation reserve The asset revaluation reserve records increments and decrements on the revaluation of assets.
Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising from the translation of the financial statements of self-sustaining foreign operations.
122 DB RREEF Trust Financial Statements 2005 note 26. reserves and undistributed income (continued)
(c) undistributed income
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Undistributed income as at 1 July 2004 12,211 10,726 12,211 10,726 Net profit attributable to security holders 219,523 90,834 111,619 90,834 Transfer from asset revaluation reserve 24,575 1,054 3,283 1,054 Undistributed income acquired on stapling 41,581 – – – Distributions provided for or paid (281,303) (90,403) (127,113) (90,403)
Undistributed income as at 30 June 2005 16,587 12,211 – 12,211 note 27. outside equity interests in controlled entities
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
DB RREEF RENTS Trust Proceeds on issue of securities 204,000 – – – Issue costs (6,114) – – –
197,886 – – – Undistributed income 619 – – –
198,505 – – –
Other equity holders Contributed equity 138,397 – – – Reserves 29,203 – – – Undistributed income 547 – – –
168,147 – – – Total outside equity interest in controlled entities 366,652 – – –
On 15 June 2005, DB RREEF Funds Management Limited in its capacity as Responsible Entity of DB RREEF RENTS Trust issued 2,040,000 preference units with a face value of $100 each on ASX. The securities, known as RENTS entitle holders to receive non-cumulative quarterly floating rate distributions at a margin 130 basis points above the 90 day bank bill rate. RENTS may exchange or cash or stapled securities on 30 June 2012 (the “Step-up Date”). For each distribution period following the Step-up Date, the margin will increase by a once only step-up of two percent per annum unless RENTS are repurchased or exchanged.
DB RREEF Trust Financial Statements 2005 123 notes to the financial statements (continued)
note 28. distribution paid and payable
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Timing of distributions The distributions were paid/payable as follows: 30 September – 22,261 – 22,261 31 December (paid 28 February 2005) 136,503 22,261 59,357 22,261 31 March – 22,710 – 22,710 30 June (payable 29 August 2005) 144,800 23,171 67,756 23,171
Total distributions 281,303 90,403 127,113 90,403
Consolidated Parent Entity 2005 2004 2005 2004 cents per cents per cents cents security security per unit per unit
Distribution paid/payable cents per stapled security 30 September paid – ordinary units – 2.325 – 2.325 31 December paid – stapled security 5.200 2.325 2.260 2.325 31 March paid – ordinary units – 2.325 – 2.325 30 June payable – stapled security 5.300 2.325 2.480 2.325
Total distributions 10.500 9.300 4.740 9.300
The number of units has increased by 1,729,551,599 for the parent entity as a result of the Transaction and the February 2005 DRP. Had these not occurred and the number of units outstanding remained at 1,002,530,790, the distribution per unit by the parent entity would have been 12.68 cents per unit.
124 DB RREEF Trust Financial Statements 2005 note 29. foreign currency and (b) net fair value of financial assets and liabilities financial instruments Market risk is the risk that the value of the Trust’s investment portfolio will fluctuate as a result of changes in valuations. This (a) credit risk risk is managed by ensuring that all activities are transacted in Credit risk is the risk that a tenant will fail to perform contractual accordance with mandates, overall investment strategy and within obligations, including honouring the term of its lease agreement approved limits. Market risk analysis is conducted regularly on a either in whole or in part, under a contract. total portfolio basis.
Concentrations of credit risk are minimised primarily by: On-balance sheet financial instruments ■ ensuring tenants, together with their respective credit limits, The net fair value of cash and non-interest bearing monetary are approved; and financial assets and liabilities approximate their carrying value.
■ ensuring that leases are undertaken with a large number As at 30 June 2005, the net fair value of contracts representing the of tenants. net unrealised gain from converting forward exchange contracts was $5,599,740, calculated using market rates, taking into account the As such, the Trust does not have a concentration of credit risk that true value of money. An amount of $8,206,995 has been recognised arises from an exposure to a single tenant. on the Statement of Financial Position using year end spot rates. Furthermore, the Trust does not have a material exposure to a group of counterparties which are expected to be affected similarly by Off-balance sheet financial instruments changes in economic or other conditions. As at 30 June 2005, the net fair value of financial (liabilities)/assets arising from interest rate swap agreements was ($9,998,293) (2004: On-balance sheet financial instruments $2,066,881) for the Stapled Entity and ($3,014,535) (2004: The credit risk on financial assets of the Trust which have $2,066,881) for the Trust. These financial instruments are currently been recognised in the Statements of Financial Position is the not required to be recognised under Australian Accounting Standards carrying amount. on the Statements of Financial Position as at 30 June 2005.
Off-balance sheet financial instruments These amounts represent the potential (liability)/asset of the Trust if existing swap agreements and forward exchange contracts as at Credit risk from entering into interest rate swap agreements and foreign 30 June 2005 were to be terminated. exchange contracts is the risk that interest rate swap and foreign exchange counterparties default on any amount due under the contract. (c) liquidity and cash flow risk Credit risk on interest rate swap agreements and foreign exchange Liquidity risk is the risk that the Trust will experience difficulty in contracts are minimised as counterparties are recognised financial either realising assets or otherwise raising sufficient funds to satisfy intermediaries with acceptable credit ratings determined by commitments. The risk management guidelines adopted are recognised rating agencies. designed to minimise liquidity risk through:
Concentration of credit risk on interest rate swap agreements and ■ ensuring that there is no significant exposure to any individual foreign exchange contracts are minimised primarily by ensuring such creditor; and agreements are undertaken with a reasonable spread of counterparties. ■ applying limits to ensure there is no concentration of liquidity risk The credit risk on interest rate swap agreements and foreign to a particular counterparty or market segment. exchange contracts are approximately equal to the net fair value or replacement value (refer note 29(b)). (d) interest rate risk exposures Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
The Stapled Entity’s exposure to interest rate risk is hedged with interest rate swaps and the weighted average effective interest rate (for each class of financial asset and financial liability, and each maturity bracket including floating rate financial assets and liabilities) is set out in the table overleaf.
DB RREEF Trust Financial Statements 2005 125 notes to the financial statements (continued)
note 29. foreign currency and financial instruments (continued)
Consolidated Fixed interest maturing in: 30 June 2005 Floating 1 year Over 1 and less More than Non-interest Total interest rate or less than 5 years 5 years bearing Note(s) $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash assets 68,959 – – – – 68,959 Receivables 9 – – – – 29,986 29,986 Other – – – – 26,410 26,410 Loan notes receivable from associate 14 – – – – 45,092 45,092 Loan to third party 5,006 – – – – 5,006
Total 73,965 – – – 101,488 175,453
Weighted average interest rate 5.09%
Financial liabilities Payables 18 – – – – 118,479 118,479 Provision for distribution 21 – – – – 144,800 144,800 Other 22/24 – – – – 38,216 38,216 Interest bearing liabilities 19 1,832,298 109,452 600,711 249,103 – 2,791,564 Interest rate swaps1 (2,896,767) 218,822 1,800,573 877,372 – –
Total (1,064,469) 328,274 2,401,284 1,126,475 301,495 3,093,059
Weighted average interest rate (including swaps) 5.74%
Net financial assets/(liabilities) 1,138,434 (328,274) (2,401,284) (1,126,475) (200,007) (2,917,606)
1 The above interest rate swaps include $1.08 billion of swaps that are forward starting. These swaps will replace existing swaps of the Stapled Entity. The existing swaps mature to maintain the hedging profile approved by management.
Consolidated Fixed interest maturing in: 30 June 2005 Floating 1 year Over 1 and less More than Non-interest Total interest rate or less than 5 years 5 years bearing Note(s) $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash assets 2,487 – – – – 2,487 Receivables – – – – 63,112 63,112 Other – – – – 5,918 5,918
Total 2,487 – – – 69,030 71,517 Weighted average interest rate 4.00%
Financial liabilities Payables 18 – – – – 14,869 14,869 Provision for distribution 21 – – – – 23,171 23,171 Other – – – – 585 585 Interest bearing liabilities 19 374,200 100,000 – – – 474,200 Interest rate swaps (280,000) (100,000) 380,000 – – –
Total 94,200 – 380,000 – 38,625 512,825 Weighted average interest rate (including swaps) 6.19%
Net financial (liabilities)/assets (91,713) – (380,000) – 30,405 (441,308)
126 DB RREEF Trust Financial Statements 2005 note 29. foreign currency and financial instruments (continued) (e) foreign exchange rate risk exposures When hedging its exposures, the Stapled Entity adopts a strategy using both physical and derivative financial instruments. In regard to derivative financial instruments, the Stapled Entity uses forward exchange contracts for hedging purposes.
Weighted average exchange rate Contracts to sell US$ at an agreed exchange rate: 30 June 2005 1 year Over 1 and More than or less less than 2 years 2 years To pay US$ million 22 16 27 To receive A$ million 31 23 40
Weighted average exchange rate 0.7079 0.6929 0.6878
Weighted average exchange rate Contracts to sell NZ$ at an agreed exchange rate: 30 June 2005 1 year Over 1 and More than or less less than 2 years 2 years To pay NZ$ million 5–– To receive A$ million 5––
Weighted average exchange rate 1.1134 – – note 30. contingent liabilities On 30 September 2004, DB RREEF Industrial Properties, LLC entered into a put/call option agreement (the “Agreement”) with CalWest providing the entity an option to buy six land parcels owned by CalWest. During the year ended 30 June 2005, DB RREEF Industrial Properties, LLC agreed to remove one parcel from the Agreement. While any of these parcels can individually or collectively be called from CalWest for purchase, the option to buy the remaining five land parcels will expire on 15 July 2006. On 15 July 2006, it is anticipated that all uncalled parcels will be put to DB RREEF Industrial Properties, LLC by CalWest, thereby requiring DB RREEF Industrial Properties, LLC to purchase all uncalled parcels. As at 30 June 2005, the purchase price for all the parcels is $24.4 million. The purchase price is increased quarterly by multiplying the previous quarter’s price by the applicable price factor specified in the Agreement, with a maximum purchase price of $25.7 million that is reached at 15 July 2006.
On June 2005, DB RREEF Industrial Properties, LLC purchased Fort Holabird for $13.2 million, and sold the Dornoch Court for $15.2 million in a tax-deferred exchange. In accordance with US tax laws, the difference between the net sales price and the purchase price (approximately $1.6 million) is currently held in an escrow account until another property is purchased that qualifies for the exchange. It is anticipated that these funds will be used by DB RREEF Industrial Properties, LLC to purchase one of the five land parcels mentioned above and therefore the tax gain on sale will not be subject to US tax.
The Directors of the Responsible Entity are not aware of any matters in relation to the Stapled Entity, 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.
Details and estimates of maximum amounts of contingent liabilities are as follows:
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Bank guarantees by the Stapled Entity in respect of: Variations and other financial risks associated with the development of 240 St Georges Terrace, Perth WA 2,200 – – – Coles Myer Limited development at Boundary Road, Laverton North VIC 5,000 – – –
Total contingent liabilities 7,200 – – –
DB RREEF Trust Financial Statements 2005 127 notes to the financial statements (continued)
note 31. commitments for expenditure Capital commitments The following amounts represent capital expenditure on investment properties contracted at the reporting date but not recognised as liabilities payable.
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Capital expenditure commitments in relation to development works:
Not longer than one year Westlakes Shopping Centre, Adelaide SA – 28,900 – 28,900 Kings Park Industrial Estate, Kings Park NSW – 1,100 – 1,100 Wallgrove Road, Eastern Creek NSW – 17,600 – 17,600 Ferguson Centre, 130 George Street, Parramatta NSW 23,821 – 23,821 – Axxess Corporate Park, Mount Waverley VIC 11,375 4,500 11,375 4,500 North Lakes Shopping Centre, Mango Hill QLD 2,276 – 2,276 – Mt Druitt Shopping Centre, Mt Druitt NSW 17,557 – 17,557 – Boundary Road, Laverton North VIC 35,266 – – – 1–15 Rosebery Avenue, Rosebery NSW 114 – – – 1 Margaret Street, Sydney NSW 402 – – – Zenith Centre, 821–843 Pacific Highway, Chatswood NSW 1,346 – – – 45 Clarence Street, Sydney NSW 9,828 – – – Governor Phillip Tower and Governor Macquarie Tower Office Complex 1 Farrer Place, Sydney NSW 4,071 – – – Australia Square, 264 George Street, Sydney NSW 3,406 – – – NRM Tower, 88 Shortland Street, Auckland 100,942 – – – World Park, Cincinnati 805 – – – Equity/Westbelt/Dividend, Columbus 794 – – – 2055 Diplomat Drive, Dallas 914 – – – Orlando Central Park, Orlando 415 – – –
213,332 52,100 55,029 52,100
Later than one year but not later than five years Governor Phillip Tower & Governor Macquarie Tower Office Complex 1 Farrer Place, Sydney NSW 22,826 – – – Boundary Road, Laverton North VIC 50,749 – – –
73,575 – – – Later than five years – – – –
Total capital commitments 286,907 52,100 55,029 52,100
128 DB RREEF Trust Financial Statements 2005 note 32. leases Leasing arrangements Payments made under operating leases are expensed on a straight line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property.
The Trust has a commitment for ground rent payable in respect of a leasehold property included in property investments. An amount of $290,356 was paid in respect of the year ended 30 June 2005 (2004: $290,356). This commitment was reviewed in 2003 and annual lease payments were increased by a CPI factor as per the lease agreement. This commitment is next subject for review in 2012 and expires in 2037.
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Non-cancellable operating lease Not longer than one year 290 290 290 290 Longer than one year but not longer than five years 1,162 1,162 1,162 1,162 Longer than five years 7,840 8,130 7,840 8,130
9,292 9,582 9,292 9,582
No provisions have been recognised in respect of non-cancellable operating leases. note 33. related parties responsible entity related party transactions On 29 September 2004, DB RREEF Funds Management Limited All related party transactions are conducted on normal commercial replaced DB Real Estate Australia Limited, a wholly owned subsidiary of terms and conditions unless otherwise stated. Deutsche Bank AG (ABN 13 064 165 162) as the Responsible Entity. unitholdings responsible entity fees Deutsche Bank AG and its related parties, schemes and portfolios Under the terms of the Trust Constitution, the Responsible Entity managed by Deutsche Bank AG and its related parties held is entitled to receive fees in relation to the management of the Trust 453,322,396 stapled securities in the Stapled Entity. In 2004, (refer note 2). 48,189,519 units were held in DB RREEF Diversified Trust.
In addition, the Responsible Entity is entitled to property investments management fees and to be reimbursed for expenses incurred on behalf of the Trust. DB RREEF Funds Management Limited, the Responsible Entity, is a wholly owned subsidiary of DRH.
DRH is 50 percent owned by DRO and 50 percent owned by FAP, a subsidiary of Deutsche Bank Group. The Trust is the parent entity and deemed acquirer of DRO.
DB RREEF Trust Financial Statements 2005 129 notes to the financial statements (continued)
note 33. related parties (continued) Deutsche Bank AG Up to 29 September 2004, Deutsche Bank AG was the ultimate parent company of the Responsible Entity, DB Real Estate Australia Limited. Deutsche Bank continued to be a related party after 29 September 2004 as it continues to own 50 percent of the Manager and new Responsible Entity, DB RREEF Funds Management. Dealings with the bank include, not only transactions in its capacity as part owner of the new 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 Parent Entity Note(s) 2005 2004 2005 2004 $’000 $’000 $’000 $’000
Transactions with DB Real Estate (Australia) Limited in its capacity as Responsible Entity of the Trust Responsible Entity fees paid and payable 2 1,894 8,693 1,894 8,693 Administration expenses incurred by the Responsible Entity which are reimbursed in accordance with the Trust’s Constitution 521 – – –
Transactions with Deutsche Bank AG in its capacity as a financier Interest paid and payable on swaps for whom the counterparty was Deutsche Bank AG 1,126 – 583 – Interest and financing fees paid and payable on borrowings to Deutsche Bank AG 772 7,633 296 7,633 Dealer fees paid and payable to Deutsche Bank AG for the co-management of medium term notes issued during the financial year 1,157 – – – Borrowings from Deutsche Bank AG 129,887 – 125,000 – Loan repayment to Deutsche Bank AG 125,000 – 125,000 – Interest and financing fees payable to Deutsche Bank AG 72 – 16 –
Other transactions with Deutsche Bank AG Underwriting fees paid and payable to Deutsche Bank AG 6,034 – 167 – Financial adviser’s fee paid and payable to Deutsche Bank AG 8,076 – 2,692 –
DB RREEF Funds Management Limited On 29 September 2004, DB RREEF Funds Management Limited replaced Deutsche Asset Management (Australia) Limited as Responsible Entity of the Trust. There were a number of transactions and balances between the Trust and Responsible Entity and related entities as detailed below:
Consolidated Parent Entity Note(s) 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Responsible Entity fees paid and payable 2 19,247 – 6,796 – Property management fees paid and payable 3,363 – – – Administration expenses incurred by the Responsible Entity which are reimbursed in accordance with the Trust’s Constitution 1,505 – 407 – Aggregate amounts payable to the Responsible Entity at reporting date 3,587 – 879 –
130 DB RREEF Trust Financial Statements 2005 note 33. related parties (continued)
RREEF (a subsidiary of Deutsche Bank AG), as fund manager of the DB RREEF Industrial Properties, Inc. is entitled to the following fees:
Consolidated Parent Entity Note(s) 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Investment management fee paid and payable 738 – – – Asset management fee paid and payable 211 – – – Acquisition fee paid and payable 71 – – – Disposal fee paid and payable 82 – – – Financing fees paid and payable 791 – – – Property management fees paid and payable 4,177 – – – Leasing fees paid 1,699 – – – Construction supervision fee paid and payable 605 – – – Marketing fees paid 17 – – –
DB RREEF Holdings Pty Limited Loan note interest earned from DB RREEF Holdings Pty Limited 3,696 – – – Loan note interest receivable from DB RREEF Holdings Pty Limited 1,237 – – – directors of the responsible entity On 29 September 2004, DB RREEF Funds Management replaced DB Real Estate Australia Limited as Responsible Entity of the Trust. The following persons were Directors of DB Real Estate Australia Limited up to 30 September 2004:
C T Beare BSc, BE (Hons), MBA, PhD, FAICD 1 S F Ewen F.I.L.E 1, 2 S A Mays BSc (Hons), MSc, MBA W B Robinson ABIA, AASA 1, 2, 3 B E Scullin BEc 2 D C Shields BE (Hons), MBA
From 29 September 2004 and up to the date of this report, the following persons were Directors of DB RREEF Funds Management, unless otherwise stated:
Name Appointed Resigned
Directors Christopher T Beare BSc, BE (Hons), MBA, PhD, FAICD1 4 August 2004 Continuing Elizabeth A Alexander AM, BComm, FCA, FAICD, CPA1,2 1 January 2005 Continuing Barry R Brownjohn BComm1,2 1 January 2005 Continuing Stewart F Ewen F.I.L.E1,2 4 August 2004 Continuing Victor P Hoog Antink BComm, MBA, FCA, FAPI, MAICD 1 October 2004 Continuing Charles B Leitner III BA 10 March 2005 Continuing Shaun A Mays BSc (Hons), MSc, MBA 13 May 2004 10 March 2005 Brian E Scullin BEc3 1 January 2005 Continuing Daniel S Weaver BArch, MBA, AFIRE 1 October 2004 17 December 2004
1 Independent Director. 2 Board Audit Committee Member. 3 Board Risk and Compliance Committee Member.
No Directors held an interest in the Trust as at 30 June 2005 or at the date of this report.
DB RREEF Trust Financial Statements 2005 131 notes to the financial statements (continued)
note 33. related parties (continued) Should DRFM achieve predetermined performance targets, a short-term incentive pool, approved by the Board Nomination and directors’ and executive remuneration Remuneration Committee, is available for allocation to employees during the annual review. Cash incentives are payable in September 1. General remuneration framework each year. Performance targets are utilised to ensure that variable The objective of DRFM’s remuneration reward framework is to ensure reward is only available when value has been created for investors, reward for performance is competitive and appropriate for the results and when performance is consistent with forecasts. The incentive delivered. The framework aligns employee reward with achievement pool may be leveraged for performance above targets to provide of strategic objectives and the creation of value for investors, and incentive for employee out-performance. conforms with market best practice for delivery of reward. Key performance indicators are linked to short-term incentives based The Board Nomination and Remuneration Committee oversee the on group, individual business and personal objectives. Performance remuneration of executives to ensure that executive reward satisfies indicators require achievement of specific targets in relation to trust the following key criteria for good reward governance practices: performance, as well as other key non-financial measures linked to drivers of performance in future reporting periods. Short-term ■ competitiveness and reasonableness; incentive payments may be adjusted up or down in line with under or ■ performance linkage/alignment; over achievement against target performance levels, at the discretion of the Board Nomination and Remuneration Committee. ■ transparency; and Termination payments for the Chief Executive Officer have been ■ financial and non-financial resource management. agreed, including detailed provisions in the case of early termination. Agreements include a clear articulation of performance expectations. In consultation with external remuneration consultants DRFM has structured a remuneration framework that is market competitive and 2. Non-Executive Directors’ remuneration framework complementary to its reward strategy. Alignment to investors’ interests and structure is achieved through increased focus on group performance being a core component of plan design, as well as the plan rewarding: Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of Directors. Non-Executive ■ delivery of forecast returns; and Directors’ fees and payments are reviewed annually by the Board Nomination and Remuneration Committee. The Committee also ■ achievement of key non-financial value drivers. obtains advice from independent remuneration consultants to ensure Alignment of employees’ interests is achieved through the plan Non-Executive Directors’ fees and payments are appropriate and in rewarding capability and performance. For participants, the plan: line with market. The Chair’s fee is determined independently of the fees of Non-Executive Directors, based on comparative roles in the ■ provides a clear structure for earning reward; external market. The Chair is not present at any discussions relating ■ delivers competitive reward for contribution to the creation of to the determination of his/her own remuneration. Non-Executive value; and Directors do not receive share options.
■ provides recognition for contribution. Non-Executive Directors who accept positions on Board committees receive an additional annual fee for each committee membership. The plan is designed to attract and retain talented and motivated Non-Executive Directors’ fees are also recommended for approval employees, and to encourage enhanced performance. by DB RREEF Trust investors. The remuneration framework provides a mix of fixed and variable pay, being base pay and short-term performance incentive. As an employee gains seniority within the group, the balance of this mix shifts to a higher proportion of “at risk” rewards. DRFM is further developing a long-term performance incentive scheme for implementation during the year ending 30 June 2006.
To ensure that base pay is competitive, external remuneration consultants provide analysis and advice regarding market remuneration for comparable roles. Base pay for employees is reviewed annually. There are no guaranteed base pay increases for employees.
132 DB RREEF Trust Financial Statements 2005 3. Details of remuneration of Directors 3.1 DB RREEF Funds Management Limited
Details of the nature and amount of each element of remuneration for each Director of the Responsible Entity for the year ending 30 June 2005 are set out in the following tables.
Year ending 30 June 2005
Note(s) Salary Bonus Non-monetary Superannuation Total and fees benefits $$ $ $$
Non-Executive Directors Christopher T Beare 1 193,125 193,125 Elizabeth A Alexander 1 65,000 65,000 Barry R Brownjohn 1 60,000 60,000 Stewart F Ewen 1 95,625 95,625 Brian E Scullin 1 68,750 68,750
Executive Directors Victor P Hoog Antink 3 682,139 68,800 750,939 Charles B Leitner III 2 12,300 12,300 Shaun A Mays (alternate to Charles B Leitner III) 2 16,000 16,000 Daniel S Weaver 2 – –
Note 1: Non-Executive Directors’ remuneration is a cost of DB RREEF Funds Management Limited. The amount shown in this Remuneration Report is Director’s total remuneration from 1 October 2004, or the date of appointment if later than 1 October 2004, to 30 June 2005. Note 2: These Executive Directors’ remuneration is a cost of their employer, Deutsche Bank. The amount shown in this Remuneration Report is an apportionment of each Executive’s total remuneration based on their time spent on DB RREEF Funds Management Limited’s activities during the nine months ending 30 June 2005. Note 3: The Chief Executive Officer’s remuneration is a cost of DB RREEF Funds Management Limited. The amount shown in this report is the Chief Executive Officer’s total remuneration for the nine months ending 30 June 2005. No short term incentive payment for the period 1 October 2004 to 30 June 2005 has been allocated. Consequently, no payment is included in the above. There were no stapled securities or options issued during the period to any Director or employee as part of their remuneration. No Director or Executive received any retirement benefit during the period.
DB RREEF Trust Financial Statements 2005 133 notes to the financial statements (continued)
note 33. related parties (continued) 3.2 Deutsche Asset Management (Australia) Limited and DB Real Estate Australia Limited
The remuneration received by the Directors of Deutsche Asset Management (Australia) Limited and DB Real Estate Australia Limited was paid by Deutsche Bank. As the Directors of each of these Responsible Entities are common the following table details the combined amount of each element of remuneration, for the period 1 July 2004 to 29 September 2004 (being the date when each entity ceased to be the Responsible Entity of its respective trusts and DB RREEF Funds Management Limited became the Responsible Entity of DB RREEF Diversified Trust, DB RREEF Industrial Trust and DB RREEF Office Trust).
For the period 1 July 2004 to 29 September 2004
Note(s) Salary Bonus Non-monetary Superannuation Total and fees benefits $$ $ $ $
Non-Executive Directors Christopher T Beare 1 12,500 12,500 Stewart F Ewen 1 21,250 21,250 William B Robinson 1 15,000 15,000 Brian E Scullin 1 20,250 20,250
Executive Directors Shaun A Mays 2 9,000 9,000 David C Shields 2 9,811 9,811
Note 1: Non-Executive Director’s remuneration was a cost of Deutsche Bank. The amount shown in this Remuneration Report is each Director’s total remuneration for the three months ending 29 September 2004. Note 2: Executive Director’s remuneration is a cost of their employer, Deutsche Bank. The amount shown in this Remuneration Report is an apportionment of each Executive’s total remuneration based on their time spent on Deutsche Asset Management (Australia) Limited and DB Real Estate Australia Limited activities relating to DB RREEF Diversified Trust, DB RREEF Industrial Trust and DB RREEF Office Trust during the period ending 29 September 2004.
4. Details of remuneration of Executives Listed in the following table are the six highest paid Executives who are also the six Executives who have the greatest authority within DB RREEF Funds Management, and who became Executives of DB RREEF Holdings Limited on 1 October 2004. Prior to 1 October 2004 there were no specified Executives. The components of each Executive’s total remuneration package for the period commencing 1 October 2004 and ending 30 June 2005 is set out in the following table:
For the period commencing 1 October 2004 and ending 30 June 2005
Position Salary Bonus Non-monetary Superannuation Total benefits $$ $ $ $
Tanya L Cox Chief Operating Officer 178,811 50,000 8,689 237,500 John C Easy Head of Legal 163,811 25,000 8,689 197,500 Greg T Lee Head of Transaction Services 216,311 62,000 8,689 287,000 Ben J Lehmann Head of Portfolio Services 216,311 75,000 8,689 300,000 Ian D Robins Head of Capital Markets 272,561 175,000 8,689 456,250 Mark F Turner Head of Mandates 178,811 50,000 8,689 237,500
No short term incentive payment has been allocated for the period 1 January 2005 to 30 June 2005. Consequently, no short term incentive payment has been included for the same period.
5. Other disclosures There were no loans, stapled securities or options issued or granted during the period to any Director or employee. No Director or Executive received any retirement benefit during the period.
134 DB RREEF Trust Financial Statements 2005 note 34. events occurring after reporting date On 7 July 2005, amendments were made to the Trust’s Constitution that enable the Trust to satisfy the AIFRS criteria for unitholders’ funds to be classified as equity. The Board of the Responsible Entity was of the view that such amendments were not materially adverse to unitholders nor did they change the nature of the scheme.
On 27 July 2005, the Responsible Entity lodged an appeal with the Supreme Court of New South Wales in relation to the interest payable on the settlement sum in respect of the sale of part of 1–55 Rothschild Avenue, Rosebery.
Since the end of the year, other than the matters discussed above, the directors of the Responsible Entity are not aware of any matter or circumstance not otherwise dealt with in their report or the financial statements that has significantly or may significantly affect the operations of the Stapled Entity, the results of those operations, or state of the Stapled Entity’s affairs in future financial periods. note 35. segment information business segments The Stapled Entity operates in the following segments:
Retail and car park – investment in the retail and car park property sector;
Office – investment in the commercial property sector; and
Industrial – investment in the industrial property sector.
2005 Retail and Commercial Industrial Eliminations/ Consolidated car park unallocated $’000 $’000 $’000 $’$’000 $’000 Rental and other property income 74,620 211,729 226,346 14 512,709 Interest Income – 1,209 904 3,819 5,932 Share of net profits of associates accounted for using the equity method 8,299 1,674 – 2,571 12,544 Net foreign exchange gain – – 42 – 42 Proceeds on sale of investment properties 334,000 104,650 66,100 – 504,750 Other revenue – 260 – – 260
Total segment revenue 416,919 319,522 293,392 6,404 1,036,237 Segment result 70,653 90,314 88,753 (30,197) 219,523 Segment assets 980,544 3,016,572 3,057,162 (57,301) 6,996,977 Segment liabilities 9,028 1,073,074 1,455,150 558,402 3,095,654 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 336,441 62,902 1,412,825 – 1,812,168
Net cash inflow/(outflow) from operating activities 58,312 99,161 135,218 (51,442) 241,249
DB RREEF Trust Financial Statements 2005 135 notes to the financial statements (continued)
note 35. segment information (continued) business segments (continued)
2004 Retail and Commercial Industrial Eliminations/ Consolidated car park unallocated $’000 $’000 $’000 $’000 $’000 Rental and other property income 74,011 51,435 36,368 – 161,814 Proceeds on sale of investment properties – – 51,760 – 51,760 Other revenue – – – 437 437
Total segment revenue 74,011 51,435 88,128 437 214,011 Segment result 52,014 38,463 27,942 (27,655) 90,764 Segment assets 784,461 529,857 382,914 9,793 1,707,025 Segment liabilities 2,739 6,329 2,664 501,093 512,825 Investments accounted for using the equity method – – – – – Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 66,586 8,894 30,558 – 106,038
Net cash inflow/(outflow) from operating activities 48,419 35,804 26,011 (8,741) 101,493 geographical segments The Trust’s investments are located in Australia, New Zealand and the United States of America.
2005 Australia New Zealand United States Consolidated of America $’000 $’000 $’000 $’000 Rental and other property income 393,932 – 118,777 512,709 Interest income 4,973 315 644 5,932 Share of net profits of associates accounted for using the equity method 12,544 – – 12,544 Net foreign exchange gain 42 – – 42 Proceeds on sale of investment properties 489,646 – 15,104 504,750 Other revenue 260 – – 260
Total segment revenue 901,397 315 134,525 1,036,237 Segment result 179,374 287 39,862 219,523 Segment assets 5,416,852 5,006 1,575,119 6,996,977 Segment liabilities 2,052,281 23 1,043,350 3,095,654 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 474,549 – 1,337,619 1,812,168
Net cash inflow/(outflow) from operating activities 217,199 – 24,050 241,249
136 DB RREEF Trust Financial Statements 2005 geographical segments (continued)
2004 Australia New Zealand United States Consolidated of America $’000 $’000 $’000 $’000 Rental and other property income 161,814 – – 161,814 Proceeds on sale of investment properties 51,760 – – 51,760 Other revenue 437 – – 437
Total segment revenue 214,011 – – 214,011 Segment result 90,764 – – 90,764 Segment assets 1,707,025 – – 1,707,025 Segment liabilities 512,825 – – 512,825 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 42,152 – – 42,152
Net cash inflow/(outflow) from operating activities 101,493 – – 101,493 note 36. reconciliation of net profit to net cash inflow from operating activities
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Net profit 231,314 90,834 111,619 90,834 Capitalised interest (12,937) (11,380) (8,932) (11,380) Capitalised expenses (1,863) – (1,863) – Revaluation decrement 4,934 – – – Share of net profit of investments accounted for using the equity method (2,458) – – – Gain on sale of investment property (25,706) – (21,765) – Unrealised foreign exchange (gain) (422) – – – Provision for doubtful debts 466 (16) (218) (16) Change in operating assets and liabilities Decrease in receivables 30,789 1,865 49,286 1,865 Decrease in prepaid expenses 6,036 – 3,710 – Increase in non-current assets – investments (3,603) – (1,442) – Increase in other current assets (1,106) (1,567) (4,747) (1,567) Decrease/(increase) in other non-current assets 31,217 – (3,418) – Increase/(decrease) in payables 6,360 (6,730) (2,849) (6,730) Increase in other current liabilities 3,359 – 1,121 – (Decrease)/increase in other non-current liabilities (25,131) – 24,611 –
Net cash inflow from operating activities 241,249 73,006 145,113 73,006
DB RREEF Trust Financial Statements 2005 137 notes to the financial statements (continued)
note 36. reconciliation of net profit to net cash inflow from operating activities (continued) components of cash Cash at the end of the year as shown in the Statements of Cash Flows is reconciled to the Statements of Financial Position as follows:
Consolidated Parent Entity 2005 2004 2005 2004 $’000 $’000 $’000 $’000 Cash assets 68,959 2,487 10,238 2,487 note 37. non-cash financing and investing activities
Consolidated Parent Entity 2005 2004 2005 2004 Note(s) $’000 $’000 $’000 $’000 Placement of units 25 54,472 30,869 21,101 30,869 Distributions reinvested 25 143,484 21,111 57,558 21,111
197,956 51,980 78,659 51,980 note 38. earnings per security
Consolidated Parent Entity 2005 2004 2005 2004 Basic and diluted earnings – cents per security 10.12 9.39 5.15 9.39 Weighted average number of securities outstanding used in the calculation of basic and diluted earnings per security 2,169,736,274 967,656,894 2,169,736,274 967,656,894
Consolidated Parent Entity 2005 2005 $’000 $’000
Basic earnings per security before the Transaction Net profit attributable to security holders 219,523 111,619 Add: Costs associated with the Transaction 42,281 14,795
261,804 126,414
Add: Book value of property investments sold 479,043 441,681 Less: Proceeds from the sale of investment properties (504,750) (463,446)
Basic earnings before the Transaction and investment sales 236,097 104,649
Weighted number of units had the Transaction and the February DRP not occurred 1,001,833,624 Basic earnings per security before the Transaction – cents per security1 12.07 12.622 Basic earnings per security before the Transaction and investment sales – cents per security 10.88 10.45
1 Basic earnings per security before the Transaction incorporates the financial impact of the acquisition of the US REIT. 2 The weighted average number of units has increased by 1,167,902,650 as a result of the Transaction and the February 2005 DRP. Had these not occurred, the weighted average number of units outstanding would be 1,001,833,624.
138 DB RREEF Trust Financial Statements 2005 note 39. acquisitions of controlled entities acquisition of DB RREEF Industrial Holdings Ltd
Name of entity Country of Class of Nature of Equity incorporation shares business holding DB RREEF Industrial Holdings LLC United States Ordinary Property 80% of America trust
On 30 September 2004, the Stapled Entity (via DDF and DIT) acquired 80 percent of DB RREEF Industrial Holdings, LLC. The operating results of this newly controlled entity have been included in the Statements of Financial Performance since the date of acquisition. Details of the acquisition are as follows:
2005 $’000 Fair value of identifiable net assets of controlled entity acquired Investment properties 1,446,780 Other assets 12,400 Cash assets 43,210 Interest bearing liabilities (1,062,279) Payables (44,636) Provisions (28,422) 367,053 Less: Outside equity interests (73,411) 293,642 Goodwill on consolidation 3,443 Cash consideration 297,085 Outflow of cash to acquire controlled entity, net of cash acquired Cash consideration 297,085 Less: Balances acquired Cash assets (43,210)
Outflow of cash 253,875
DB RREEF Trust Financial Statements 2005 139 notes to the financial statements (continued)
note 39. acquisitions of controlled entities (continued) acquisition of controlled entity
Name of entity Country of Class of Nature of Equity incorporation units business holding DB RREEF RENTS Trust Australia Ordinary Investment in 0% property trust
On 27 January 2005, the Trust acquired one unit in DB RREEF RENTS Trust (“RENTS”). All units with a beneficial interest in RENTS assets are listed on the Australian Stock Exchange. The Trust owns one unit in RENTS that does not have a beneficial interest in the RENTS assets, but holds all voting rights in relation to RENTS. The results of this newly controlled entity have been included in the Statements of Financial Performance since the date of acquisition.
Name of entity Country of Class of Nature of Equity incorporation units business holding DB RREEF Hurstville Trust Australia Ordinary Property trust 100%
On 6 May 2005, DB RREEF Trust (DB RREEF Diversified Trust) acquired 100 percent of DB RREEF Hurstville Trust. The operating results of this newly controlled entity have been included in the consolidated Statements of Financial Performance since the date of acquisition. Details of the acquisition are as follows:
2005 $’000 Fair value of identifiable net assets of controlled entity acquired Investment properties 232,500 Cash assets 1,210 Receivables 1,387 Other assets 310 Payables (1,609) Other liabilities (1,110) Provisions (188)
232,500 Goodwill on consolidation –
Cash consideration 232,500
Outflow of cash to acquire controlled entity, net of cash acquired Cash consideration 232,500 Less: Balances acquired Cash assets 1,210 1,210
Outflow of cash 231,290
140 DB RREEF Trust Financial Statements 2005 deemed acquisition of controlled entities through stapling
Name of entities Country of Class of Nature of Equity incorporation units business holding DB RREEF Industrial Trust (formerly Deutsche Industrial Trust) Australia Ordinary Property trust 0% DB RREEF Office Trust (formerly Deutsche Office Trust) Australia Ordinary Property trust 0% DB RREEF Operations Trust Australia Ordinary Public trading 0% trust
On 30 September 2004, DDF was deemed to acquire 100 percent of DB RREEF Industrial Trust, DB RREEF Office Trust and DB RREEF Operations Trust as a result of stapling the Trusts. The operating results of these newly controlled entities has been included in the Statements of Financial Performance since the date of acquisition. Details of the acquisition are as follows:
2005 $’000 Fair value of identifiable net assets of controlled entities acquired Investment properties 3,280,343 Investments accounted for using the equity method 37,106 Other assets 23,276 Cash assets 14,285 Interest bearing liabilities (1,319,600) Payables (31,704) Provisions (13,374)
Net assets acquired on stapling 1,990,332
DB RREEF Trust Financial Statements 2005 141 directors’ declaration
DB RREEF DIVERSIFIED TRUST DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2005
The Directors of DB RREEF Funds Management Limited (formerly Paladin Australia Limited) as Responsible Entity of DB RREEF Diversified Trust (formerly Deutsche Diversified Trust) (“the Trust”) a listed property trust declare that the financial statements and notes set out on pages 87 to 141:
(i) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the Trust’s and consolidated entity’s financial position as at 30 June 2005 and of their performance, as represented by the results of their operations and their cash flows, for the financial 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 15 September 1984 (as amended) during the year ended 30 June 2005.
This declaration is made in accordance with a resolution of the Directors.
Christopher T Beare Chair Sydney
25 August 2005
142 DB RREEF Trust Financial Statements 2005 independent auditor’s report
DB RREEF Trust Financial Statements 2005 143 independent auditor’s report (continued)
144 DB RREEF Trust Financial Statements 2005 registry information
top 20 stapled security holders as at 24 August 2005
Rank Investor Current balance % issued capital 1 J P Morgan Nominees Australia Limited 429,395,358 15.72 2 Westpac Custodian Nominees Limited 371,637,528 13.60 3 National Nominees Limited 296,053,107 10.84 4 Citicorp Nominees Pty Limited 169,715,925 6.21 5 ANZ Nominees Limited
Total for top 20 2,062,773,836 75.50 Total other investors 669,308,553 24.50 Grand total 2,732,082,389 100.00 substantial holders as at 2 August 2005 The names of substantial holders who, as at 2 August 2005, have notified the Responsible Entity in accordance with section 671B of the Corporations Act 2001 are:
Name Number of stapled securities Voting % AMP Limited and its related bodies corporate 147,662,502 5.40 Commonwealth Bank of Australia and nominated subsidiaries 154,356,895 5.65 Deutsche Bank AG and related bodies corporate 160,951,827 5.89 Barclays Global Investors Australia Limited on behalf of Barclays Group 139,492,385 5.10 classes of securities DB RREEF Trust has one class of stapled security trading on ASX with, as at 31 July 2005, 26,207 investors holding 2,732,082,389 stapled securities.
DB RREEF Trust Annual Report 2005 145 registry information (continued)
spread of stapled securities holders as at 24 August 2005
Ranges Investors Stapled securities % of issued capital 1 – 1,000 1,251 552,299 0.02 1,001 – 5,000 5,050 16,571,490 0.61 5,001 – 10,000 6,654 51,445,510 1.88 10,001 – 100,000 12,769 314,677,461 11.52 100,001 and over 437 2,348,835,629 85.97
Total 26,161 2,732,082,389 100.00 non marketable parcels As at 24 August 2005, the number of investors holding less than a marketable parcel of 353 securities is 576 and they hold 59,576 securities. voting rights At meetings of the security holders of the DB RREEF Diversified Trust, DB RREEF Industrial Trust, DB RREEF Office Trust and DB RREEF Operations Trust, being the Trusts that comprise DB RREEF Trust, on a show of hands, each security holder of each trust has one vote. On a poll, each security holder of each trust has one vote for each dollar of the value of the total interests they have in the Trust. the number and class of securities that are restricted or subject to voluntary escrow There are 41,521,457 stapled securities which are subject to voluntary escrow. These will be released from voluntary escrow on 20 October 2005. on-market buy-back DB RREEF Trust has no on-market buy-back currently in place.
146 DB RREEF Trust Annual Report 2005 investor information
security registry DRT cost base information upon stapling If you have administrative inquiries such as change of address or the The determination of the applicable cost base of former DDF, DIT way in which you wish your distributions paid, you can either contact or DOT units, for unitholders on 12 October 2004 whose units were ASX Perpetual Registrars Limited on 1800 819 675 or update your converted into DRT stapled securities (issued to holders on account details via the website at www.dbrreef.com. 19 October 2004) is outlined in a paper titled “Unitholders who did not participate in the Cash Sale and Exchange Facilities”. enquiries, obtaining information or making The determination of the applicable cost base of units for unitholders who participated in the exchange facility is outlined in a complaint a paper titled “Unitholders who participated in the Cash Sale and DB RREEF Funds Management Limited has processes in place to Exchange Facilities”. deal with security holder questions and complaints. If you have any These papers were sent to relevant unitholders holders on questions, complaints, or wish to obtain information regarding the 19 October 2004. Additional copies of these papers can be obtained stapled securities, please contact our client service information line by either visiting our website at www.dbrreef.com, or by contacting on 1800 819 675 or from outside Australia +61 2 8280 7126 or the InfoLine on 1800 819 675. email: [email protected].
apportionment percentages of DRT stapled website securities since stapling Our website can be accessed at www.dbrreef.com. You will be able to find information such as annual and half year reports, distribution For capital gains tax purposes investors need to apportion the cost histories, apportionment percentages, presentations about the Trust of each stapled security and the proceeds on sale of each stapled and property portfolio details. ASX announcements and press security over the four trusts that make up the stapled security. This releases are also available on the site. apportionment should be done on a reasonable basis. One basis of apportionment is to use the relative net tangible assets (NTA) of each of the trusts. stock exchange listing Using NTA as a basis, the following table outlines the apportionment The stapled security (ASX: DRT) is included in the top 200 listed percentages that will apply to any on or off market buying or selling entities in Australia in terms of market capitalisation and currently of DRT stapled securities, or the issue of new DRT stapled securities forms part of the following indices: All Ordinaries; All Industrials; between the dates specified. Listed Property Trusts; and the S&P/ASX200. Please note that the correct allocation percentage to be used depends on the relevant date of the specific transaction. Consequently, the allocation percentage relevant for the acquisition of a parcel of DRT payment of distributions stapled securities, (either on or off market, or through the issue of With respect to your distributions, you can have your distribution paid securities), may differ from their disposal percentage. directly into your nominated Australian bank, building society or DRFM will periodically release revisions to this table and it will credit union account. be published on its website. A copy of the schedule can be downloaded by visiting our website at www.dbrreef.com or by annual tax statement contacting the InfoLine on 1800 819 675. After the end of a financial year you will receive a tax statement. This statement summarises the distributions paid to you during the year and includes information required to complete your tax return.
DB RREEF Trust Annual Report 2005 147 investor information (continued)
apportionment percentages of DRT stapled securities since stapling (continued)
Dates DB RREEF DB RREEF DB RREEF DB RREEF Diversified Industrial Office Operations Trust (%) Trust (%) Trust (%) Trust (%) 6 October 2004 to 30 December 2004 38.15 20.88 40.79 0.18 31 December 2004 to 30 June 2005 37.05 21.27 41.47 0.21 1 July 2005 to the next announced NTA 36.82 21.81 41.13 0.24 distribution histories of DDF, DIT, DOT and DRO To assist in the determination of the CGT cost base of your DDF, DIT, DOT and DRO units the Responsible Entity has prepared a distribution history schedule for each of these trusts and for the distributions of DRT since stapling.
A copy of the schedules can be downloaded by visiting our website at www.dbrreef.com or by contacting the InfoLine on 1800 819 675. distribution timetable for the June 2005 distribution year The timetable below highlights anticipated distribution, banking and mailing dates for the June 2005 distribution period. Security holders should note that these dates are indicative only and may change. DRT’s distribution periods will end on 30 June and 31 December each year. Distributions will be paid no later than two months following each half year.
Distribution Announcement Ex-distribution Record Anticipated period date date date date date 1 January to 30 June 2005 21 June 2005 24 June 2005 30 June 2005 29 August 2005 1 July to 31 December 2005 19 December 2005 22 December 2005 31 December 2005 28 February 2006 1 January to 30 June 2006 21 June 2006 26 June 2006 30 June 2006 29 August 2006 complaints handling DRFM is a member of the Financial Industry Complaints Service Limited (FICS). This is an independent dispute resolution service and may be contacted through:
Financial Industry Complaints Service Limited PO Box 579 Collins Street West Melbourne VIC 8007
Phone: 1300 780 808 Fax: +61 3 9621 2291
148 DB RREEF Trust Annual Report 2005 directory
DB RREEF Diversified Trust secretaries of the responsible entity ARSN 089 324 541 Tanya L Cox DB RREEF Industrial Trust John C Easy ARSN 090 879 137 investor enquiries DB RREEF Office Trust Email: [email protected] ARSN 090 768 531 Freecall: 1800 819 675 DB RREEF Operations Trust Phone: +61 2 8280 7126 ARSN 110 521 223 Website: www.dbrreef.com.au responsible entity auditors DB RREEF Funds Management Limited ABN 24 060 920 783 PricewaterhouseCoopers Chartered Accountants registered office of responsible entity 201 Sussex Street Sydney NSW 2000 Level 21, 83 Clarence Street Sydney NSW 2000 security registry PO Box RI822 Royal Exchange ASX Perpetual Registrars Limited NSW 1225 580 George Street Sydney NSW 2000 Phone: +61 2 9249 9595/ 9500 Fax: +61 2 9249 9982 Locked Bag A14 Sydney South NSW 2000 directors of the responsible entity Phone: +61 2 8280 7126 Christopher T Beare, Chair Freecall: 1800 819 675 Elizabeth A Alexander AM Fax: +61 2 9261 8489 Barry R Brownjohn Email: [email protected] Website: www.asxperpetual.com.au Stewart F Ewen Victor P Hoog Antink Charles B Leitner III (Alternate Shaun A Mays) Brian E Scullin
For inquiries regarding your holding you can either contact the Security Registry or access your holding details via the web at www.dbrreef.com and follow the links.
Listed on the Australian Stock Exchange ASX Code: DRT
InfoLine 1800 819 675 Monday to Friday between 8.30am and 5.30pm (AEST)