2007 Annual Report About Babcock & Brown Japan Property Trust
The Babcock & Brown Japan Property Trust (“BJT”) was the first Australian listed property trust with the strategy of investing solely in the real estate market of Japan.
BJT was established on 31 January 2005, became a The Responsible Entity of BJT is Babcock & Brown registered scheme under the Corporations Act 2001 Japan Property Management Limited (“BBJPM”) on 17 February 2005 and listed on the Australian (a subsidiary of Babcock & Brown Limited). Asset Securities Exchange on 4 April 2005. management services in Japan are generally Initial equity of A$280 million was raised and undertaken by Babcock & Brown Co., Ltd. (also a interests in a diversified portfolio of 12 office subsidiary of Babcock & Brown Limited). and retail properties located in the central and The Board of BBJPM is responsible for protecting greater Tokyo area were acquired for ¥47 billion the rights and interests of all BJT Unitholders and is (approximately A$600 million). accountable to investors for the overall governance At 31 August 2007 BJT held interests in a portfolio and management of BJT. At 31 August 2007, BJT comprising 39 office, retail and residential properties had 3,699 Unitholders and a market capitalisation of with a book value of ¥120.6 billion (approximately approximately A$888 million. A$1.3 billion).
Contents
1 Highlights 71 Corporate Governance Statement 4 Chairman’s Report 79 Financial Statements 6 Managing Director’s Report 114 Directors’ Declaration 10 Performance Overview 115 Independent Audit Report 11 Review of Results & Operations 117 ASX Additional Information 14 Portfolio Overview 119 Appendix – Ownership Structure 22 Property Information 61 Directors’ Report Highlights for year ended 30 June 2007
Strong leasing results Sustained growth in distributions per unit • Portfolio occupancy by area increased to 98.5% (97.2% at • Distribution per unit of 11.9¢ for the 30 June 2006) year, 22% higher than previous year • Renewed all 105 leases which expired • Distribution per unit of 6.15¢ for during the year six months ended 30 June 2007 • Achieved solid rental growth across the portfolio
Further strengthening of Improved asset values management team • 12 properties revalued, increasing • Growth in Tokyo-based the value of these properties by 2007 Annual Report Trust Property Japan & BROWN 2007 BABCOCK BJT Annual Report Babcock & Brown Asset Management ¥2.3 billion (approximately 1 team to 25 professionals (12 at IPO) A$23 million), or 7% Highlights Prudent capital Strong acquisition profile management strategy • Acquired interests in nine properties, • Raised new equity of A$114.5 million with a combined value of ¥24.7 billion via a significantly oversubscribed (approximately A$266 million) institutional placement • Strong weighted average yield of • Gearing ratio increased only 6.1% on purchase price marginally from 50.9% to 51.1%, • Improved diversity of the portfolio despite substantial portfolio growth both geographically and by and increased distributions tenant mix • Average duration of interest rate hedging on debt increased to 4.6 years from 3.6 years at 30 June 2006 Timeline
Relative performance since IPO
250 200 FY 150
100
Indexed Returns Indexed 2006 50
0 Nov 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Raised equity of BJT S&P Accumulation Index A$226 million via ASX/S&P 200 Property Accumulation Index entitlements offer Acquired Mukomachi Saty retail property for ¥5 billion (A$57 million) 2 Dec 05 Acquired OS Tsukiji office property for ¥1.6 billion (approximately A$18 million)
Acquired additional 18% interests in Kawasaki Dice FY retail property Jan 06 Acquired portfolio of 15 properties with value 2005 of ¥26.8 billion (A$230 million) Feb 05 Announced intention to Feb 06 list BJT Acquired Asakusa office property for ¥1.2 billion Mar 05 (A$14.5 million) Completed Konan Home Centre on schedule Mar 06 Acquired Takadanobaba Apr 05 office property for Listed on ASX, raising ¥1.6 billion (A$20 million) equity of A$280 million
Acquired portfolio of four retail and eight office properties with value of ¥47 billion (A$600 million)
Forest Kita Aoyama – purchased March 2005 FY 2007
Aug 06 Raised A$114.5 million of equity via institutional placement
Acquired four retail properties (Ginowan, Sapporo Nishioka, Sapporo Co-op and Shibuya Konami) for ¥12.8 billion (A$144 million)
Oct 06 Acquired Matsudo Nitori retail property for ¥2.2 billion (A$24.4 million)
Jan 07 Acquired Susono retail property for ¥$2.6 billion (A$27.0 million)
Apr 07 Restructure of 2007 BJT Annual Report Kawasaki Dice ownership 3
Acquired Tsudanuma retail property for ¥2.0 billion (A$19.8 million) Timeline May 07 Acquired Yamashitacho office property for ¥2.8 billion (A$28.6 million)
Jun 07 Acquired Yoshikawa retail property for ¥2.3 billion (A$22.5 million) Kuroshio Shijo sold for ¥2.0 billion (A$19.5 million)
OS Tsukiji – purchased December 2005 Yamashitacho – purchased May 2007 Chairman’s Report
Dear fellow Unitholder,
As Chairman of Babcock & Brown Japan Property Management Limited, the Responsible Entity (“Responsible Entity”) of the Babcock & Brown Japan Property Trust (“BJT”), I am extremely pleased to report that BJT has delivered a strong operating result for the second consecutive year since listing. The Managing Director’s Report and Review of Results and Operations provide a detailed outline of the key initiatives which have underpinned this result.
STRATEGY In April 2005, BJT became the first Australian listed property trust with a strategy to invest solely in the real estate market of Japan, the world’s second largest economy. BJT has continued to take advantage of this head start by expanding its footprint in that market. Babcock & Brown now has 25 professionals in Tokyo, representing a significant increase from the original team of 12 at the time of the IPO just over two years ago. The Board remains comfortable with BJT’s ability to deliver on its core strategy, of generating sustainable earnings growth for Unitholders through accretive property acquisitions and effective asset management. The Japanese market is attractive not only due to the favourable margin which persists between property yields and the cost of debt, exceeding that of the US, UK, Australian and major 4 European markets, but also because clear signs of growth in rents and land values have emerged. Furthermore, although it is estimated that Japan has almost eight times the level of investment grade property of Australia1, the market capitalisation of the listed property trust sector in Japan (J-REITs) is less than half that of the Australian Listed Property Trust (LPT) sector. This should provide Unitholders with an indication of the scale of acquisition opportunities within the Japanese property market.
INVESTMENT BJT has made nine accretive acquisitions this year, in accordance with its investment policy and growth expectations. This year also saw the first sale of a BJT property, Kuroshio Shijo. Following advice from the asset manager that a sale would generate more value for Unitholders than holding the property, it was sold for ¥2.0 billion (A$19.5 million), which was the book value at the date of sale.
TREASURY POLICIES The Board of the Responsible Entity reviews all BJT policies from time to time to ensure that they remain beneficial to Unitholders and are appropriate given current market conditions within which BJT is operating. The latest review of BJT’s treasury policies identified certain changes which will provide management with more flexibility to manage exchange rate and interest rate exposures. These policy amendments, as approved by the Board, are explored in more detail in the Managing Director’s Report. The implementation of the amendments to these policies will be a gradual process which we expect will generate a positive outcome for Unitholders.
CORPORATE GOVERNANCE The Board recognises that it is accountable to Unitholders for the performance of BJT and, to that end, has implemented a system of corporate governance that operates in the best interests of Unitholders while also addressing the interests of other key stakeholders. The Board firmly believes that strong corporate governance can contribute to the performance of a business, creating Unitholder value and fostering the confidence of the investment community. The Corporate Governance Statement on pages 71 to 78 sets out the framework by which the Responsible Entity endeavours to conform with the Australian Securities Exchange Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations.
1 Source – UBS As has been the case since listing, the Chairman of the Board and all of the members of the Audit, Risk and Compliance Committee (“ARCC”) are Independent Non-Executive Directors. During the period, Ms Paula Dwyer replaced Mr John Pettigrew as Chair of the ARCC while the Committee membership remains the same.
A POSITIVE OUTLOOK FOR 2008 AND BEYOND The strong operating result for this financial year has further strengthened BJT’s platform for delivering solid returns to Unitholders. The Board remains committed to BJT’s core strategy of generating sustainable earnings growth through accretive property acquisitions and effective asset management. Portfolio diversity by geography (across Japan), asset class and lease type will remain a key element of this strategy, improving the stability of income and reducing the risks associated with property investment. The Japanese property market continues to show signs of recovery and we are confident that BJT remains well placed to take advantage of future opportunities as they arise.
Thank you for your continued support. 2007 BJT Annual Report 5
ALLAN MCDONALD Chairman Report Chairman’s
Kawasaki Dice Managing Director’s Report
Dear fellow Unitholder,
I am very pleased to reiterate that the 2007 financial year has produced a strong operating result for BJT Unitholders. The distribution for the year ended 30 June 2007 of 11.9¢ per unit was approximately 22% higher than the distribution for the previous financial year and represented a yield of 6.7% on the 30 June 2007 closing unit price. This was higher than the average yield for the S&P/ASX 200 Property Trust index for the year. It is important to note that the strong earnings growth which has given rise to the increased distribution has been achieved with only a marginal increase in BJT’s gearing level.
TRUST PERFORMANCE HIGHLIGHTS BJT achieved a net operating profit after tax of $56.2 million for the year to 30 June 2007. This was 43% ahead of the net operating profit after tax for the previous financial year. As a result of this strong performance, a final distribution per unit (“DPU”) of 6.15¢ was declared, taking the full year DPU to 11.9¢ (2006: 9.76¢). 12 of BJT’s properties were revalued during the year, increasing the value of these properties by ¥2.3 billion (approximately A$23 million), or 7%. Despite a 23% decline in the value of the Japanese Yen (“Yen”) relative to the Australian Dollar (“AUD”) during the year, the net tangible asset backing (“NTA”) per Unit decreased only marginally to $1.21 at 6 30 June 2007, from $1.23 at 30 June 2006. The NTA was positively impacted by the property revaluations during the year and the fair valuation of derivatives used for hedging purposes. BJT Units closed at $1.77 on 30 June 2007, up from its $1.68 close a year earlier.
BUILDING AND DIVERSIFYING THE PORTFOLIO During the year the Tokyo based Babcock & Brown acquisition team was successful in sourcing nine accretive acquisitions for BJT. This reflects the experience and extensive network of contacts that this team has developed whilst operating in this market for over eight years and in individual careers prior to joining Babcock & Brown. These newly acquired properties (eight retail; one office) had a combined purchase price of ¥24.7 billion (approximately A$266 million), and, importantly, a strong weighted average net operating income (“NOI”) yield on acquisition of 6.1%. The acquisition of these properties has further improved the geographic and tenant diversity of the portfolio. As the Chairman has mentioned in his report, this year we had the first sale of a property from the BJT portfolio, Kuroshio Shijo. This was an opportunistic sale of an asset which was not material to the portfolio. It is quite possible we will see similar sales going forward where this is of benefit. Following the nine acquisitions and disposal of Kuroshio Shijo, the total value of BJT’s portfolio was ¥120.6 billion (approximately A$1.1 billion) at 30 June 2007. The portfolio comprised interests in 39 properties, comprising 16 retail, 20 office and 3 residential properties, spread across central and greater Tokyo (82%), Sapporo, Kyoto, Okinawa, Nagoya, Greater Sapporo and Shizuoka.
¥28 BILLION OF NEW ACQUISITIONS ANNOUNCED SINCE 30 JUNE 2007 On 27 August 2007, BJT announced plans to acquire ¥28 billion (approximately A$295 million) of properties over an eight week period. Included in these acquisitions were interests in two key strategic office buildings (Osaka Ekimae No. 4 and No. 3) in the CBD of Osaka which have now been settled. The acquisitions will be predominantly debt-funded, taking BJT’s gearing to 57.5%. The balance of funding will come from an institutional placement of 30 million units (finalised on 3 September 2007) which raised A$51.8 million, activation of a Distribution Reinvestment Program and a Unit Purchase Plan. The placement was substantially oversubscribed with the support from existing Unitholders and new investors demonstrating a high level of confidence in BJT’s investment platform and ongoing strategy. Also pleasing for BJT was the support from lenders for this transaction, proving that debt remains very accessible, even in current turbulent markets. SOUND ACQUISITION STRATEGY As the chart on page 10 demonstrates, BJT continues its significant growth. The acquisition of 27 properties since IPO, along with property revaluations, has increased the original value of the portfolio by more than 150%. In light of this growth, it is worth reiterating BJT’s acquisition strategy. BJT applies a bottom-up investment approach whereby each potential property acquisition is viewed on its individual merits. The key prerequisites we seek are a strong, sustainable yield and fundamental underlying value in the land - which typically represents the majority of overall value in densely populated Japan - and building. While we have no predetermined targets for asset classes or geographic locations within Japan, we have historically found the best value and liquidity in mainstream asset classes and markets. Consequently, approximately 80% of the current portfolio comprises retail and office assets located in central and greater Tokyo. To achieve further diversification in the portfolio, a number of recent acquisitions, including those announced on 27 August 2007, have been in regional markets. The significant economic recovery, very evident in Tokyo to date, has been spreading to some large regional cities. We believe this recovery has not always been fully factored into property prices for certain assets in those areas and this has 2007 BJT Annual Report created what we believe are good buying opportunities. The portfolio also of course benefits from this 7 additional geographic diversity and exposure to different regional economies.
STRONG PORTFOLIO PERFORMANCE Portfolio occupancy by area increased to 98.5% at 30 June 2007, from 97.2% a year earlier. Tenant retention has been high at 90% for the 2007 financial year. We view this as an outstanding achievement as 57% of net property income for the year was generated from standard leases, which typically have only two year terms and six month cancellation notice periods. We are also pleased to report that all 105 leases that expired during the year were renewed by those tenants (as was also the case for all expiring leases in the previous financial year). Perhaps even more importantly, 35 tenants who vacated their space after giving notice during the lease term were replaced by 49 tenants on new leases, resulting in a net gain of over 1,000 square metres of leased Report Managing Director’s space. The remaining 43% of net property income from the portfolio is generated from non-cancellable leases, with an average remaining duration at 30 June 2007 of 8.8 years. These leases, whilst admittedly offering less opportunity for rental growth upside, provide excellent stability to the income profile of BJT.
RENTAL GROWTH ACHIEVEMENTS Having achieved improved portfolio occupancy over the past 18 months, the asset management team has intensified its focus on achieving sustainable rental growth from the portfolio through a process of rental negotiations with tenants. Consistent with Japanese market practice and in the interests of optimising tenant retention rates and portfolio occupancy, emphasis has been placed on staged rental increases for current tenants that are more likely to be sustained over a longer period of time. This process is now well underway and we are able to report that rental growth is being generated and we expect more to come.
PRUDENT CAPITAL MANAGEMENT BJT continues to maintain a strong balance sheet. In addition to the August 2007 placement described above, equity of $114.5 million was raised through an institutional placement of 64.3 million Units allotted on 23 August 2006. This placement, like the more recent one, was significantly oversubscribed. BJT’s gearing ratio (interest-bearing debt / property value) increased only marginally to 51.1% at 30 June 2007 from 50.9% a year earlier, remaining near the bottom of our preferred range of 50%-60%. With the most recent acquisitions gearing will increase to the middle of the target range at 57.5%. The strength of the underlying cash flows in the business is demonstrated by BJT’s interest cover ratio which is above the average for the LPT sector. We also maintain cost-effective debt with the weighted average interest rate of BJT’s debt being 1.8% at 30 June 2007. The Board approved an interest rate hedging policy for BJT in August 2007, which recommends fixing interest rates for between 50% to 100% of debt. This policy serves to formalise an existing practice and introduce a minimum level of hedging to be maintained. These changes should ensure that a balance is achieved between certainty and flexibility to take advantage of any periods of lower interest rates which may arise in the future. We have also increased the average remaining duration of interest rate hedging on BJT’s debt up to 4.6 years at 30 June 2007, from 3.6 years a year earlier.
PROTECTION THROUGH EXCHANGE RATE HEDGING In August 2007 the Board approved some refinements to BJT’s existing capital and distribution hedging policies. We maintain the original BJT philosophy of seeking to minimise the impact that changes in the exchange rate between the Australian and Japanese currencies will have on the distributions of BJT in the medium term. The policy refinements, detailed on page 13 of this Annual Report, provide BJT with additional flexibility to proactively manage this exposure.
8
Osaka Ekimae No. 4 & No. 3 Capital hedging At 30 June 2007 cross-currency swaps extending to 2014 were in place, to hedge approximately 25% of BJT’s net investment in Japanese assets. The purpose of these capital hedges is to “lock-in” the spread between Australian and Japanese interest rates and to protect against adverse currency fluctuations over a period of time. Based on current market rates, the hedges have a positive mark-to-market value. The Board believes it is prudent to provide management with the flexibility to increase the level of these hedges up to 40% from the previous maximum limit of 30%, and to lengthen the tenor for individual hedges from a maximum of five years to eight years. Distribution hedging BJT’s distribution hedging policy has been amended such that forward sales of Yen for AUD will be put in place to hedge varying levels of BJT’s estimated distributions for years one through to ten (between 60% and 100% for years one to three). During periods of weakness of the Yen, we believe it is not in the best interest of Unitholders to hedge 100% of estimated distributions for years one to three. The policy amendment introduces the flexibility required by the treasury team to better manage a fluctuating exchange rate environment in a proactive manner. Fortunately, because of the existing distribution hedges put in place some time ago, we are currently exchanging Japanese income from our portfolio to Australian dollars at rates which are significantly superior to the current spot rate.
CONTINUED STRENGTHENING OF MANAGEMENT TEAM BJT management is vertically integrated: trust and asset management are all handled within the Babcock & Brown Group. Whilst property management is, consistent with industry practice, outsourced to several service providers, we believe the 100% Babcock & Brown Group model contrasts favourably 2007 BJT Annual Report with other structures for investment in Japan under which the Japan asset manager is a third party 9 unrelated to the investment entity. BJT relies on an experienced team, the quality of which has been further boosted this year by the appointment of two senior management executives in Tokyo and a Chief Financial Officer in Australia. Profiles of these new team members are included in the Senior Management section on page 64. We are very pleased to welcome them to the team and appreciate the contribution they have made to date.
OUTLOOK The Japanese property market continues to strengthen. We have certainly come a long way from the dark days of the distressed banking system and flattened Japanese economy of the late 1990s when
Babcock & Brown first started investing in Japanese property and we are excited by the opportunities Report Managing Director’s which lie ahead. We are confident that BJT’s strategy and the depth and calibre of our management team will enable us to deliver on our key challenges, being the sourcing of accretive acquisitions which will contribute to earnings growth in both the short and medium terms, and maximizing the performance of our assets. Thank you once again for your support.
ERIC LUCAS Managing Director 60% Target gearing 52.9% 50.9% 51.1% 50% range 50%-60%
40%
30%
20%
10%
0% PerformanceIPO Jun 2006 Jun 2007 140
120 120.6 110.6 100 94.7 Overview80 63.0 60 47.1 40
Property Value (¥ Billion) Value Property 20 Strong0 track record to date Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007
Continued growth in distributions
7.00 +7% 6.15 6.00 +7% 60% 5.75 5.38 5.00 +23% Target gearing 52.9% 50.9% 51.1% 50% range 50%-60% 4.00 4.38 40% 3.00 2.25 Cents per Unit Cents 30%2.00
20%1.00
0.00 10% Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 (from IPO) 0% IPO Jun 2006 Jun 2007 10 Portfolio value increased by 150%
140
120 120.6 110.6 100 94.7
80 63.0 60 47.1 40
Property Value (¥ Billion) Value Property 20
0 Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007
Gearing maintained at bottom end of preferred range 7.00 +7% 6.15 6.00 +7% 5.75 60% 5.38 5.00 +23% Target gearing 52.9% 50.9% 51.1% 50% range 50%-60% 4.00 4.38 40%3.00 2.25 Cents per Unit Cents 30%2.00
1.00 20% 0.00 10% Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 (from IPO) 0% IPO Jun 2006 Jun 2007
140
120 120.6 110.6 100 94.7
80 63.0 60 47.1 40
Property Value (¥ Billion) Value Property 20
0 Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007
7.00 +7% 6.15 6.00 +7% 5.75 5.38 5.00 +23%
4.00 4.38 3.00 2.25 Cents per Unit Cents 2.00
1.00
0.00 Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 (from IPO) Review of Results and Operations
The following review of results and operations is based on comparison between actual results for the year ended 30 June 2007 and the previous financial year.
Year ended 30 June 2007 30 June 2006 Variance
Net property income $75.8 m $50.3 m +$25.5 m Net operating profit $56.2 m $39.3 m +$16.9 m Distribution 11.90 cpu 9.76 cpu +2.14 cpu NTA per Unit $1.21 $1.23 –$0.02
Net property income of $75.8 million for the year ended 30 June 2007 was higher than net property income for the prior year primarily due to improved occupancy, rental growth and nine accretive property acquisitions. The net operating profit of $56.2 million for the year ended 30 June 2007 was higher than the prior year profit of $39.3 million due to higher net property income from the portfolio. BJT Annual Report 2007 BJT Annual Report RECONCILIATION BETWEEN ACCOUNTING PROFIT, OPERATING PROFIT AND CASH DISTRIBUTION 11 The difference between net AIFRS accounting profit and the operating profit is due to a large number of property and non-property related items which are detailed below: Year ended Year ended 30 June 2007 30 June 2006 $’000 $’000
Accounting net profit 129,775 59,513 Distribution hedge contribution: Additional cash from distribution hedge 7,719 2,525
Adjustments – non-operating items included in accounting profit Performance fees – 31,176
Fair value adjustments to investment properties and Operations Results of Review (including associate) (20,626) (62,667) Deferred tax expenses 4,669 15,327 Fair value derivatives (70,795) (6,362) Net foreign exchange loss 1,039 (1,080) (Gain)/loss on disposal of investment 4,432 Other – 866 Net operating profit 56,213 39,297 Review of Results and Operations
Year ended Year ended 30 June 2007 30 June 2006 $’000 $’000
Adjustments – other items Amortisation of upfront acquisition/borrowing costs 2,120 423 TMK accounting versus cash difference (949) (1,966) Fixed asset tax expense (cash expense capitalised for accounting purposes for initial portfolio) 617 (1,207) Other – additional cash to rank units equally 1,048 – Other (115) (1,197) Cash distribution 58,934 35,350
Cash distribution 1H 28,609 12,268 Cash distribution (CPU) 1H 5.75 4.38 Cash distribution 2H 30,325 23,083 Cash distribution (CPU) 2H 6.15 5.38 12 LEASING ACTIVITY and rental growth Total portfolio occupancy by area increased to 98.5% from 97.2% at 30 June 2006, with the total occupied area increasing by 1,105 sqm, or just over 0.4% of the total portfolio. The following table summarises the leasing activity during the year ended 30 June 2007. Number of Leasing activity leases Sqm % OF NRA
Existing/scheduled leasing activity Expired leases (105) (21,110) (8.4)% Renewed leases 105 21,110 8.4% Net change due to renewals 0 0 0.0%
New/unscheduled leasing activity Cancelled leases (35) (5,481) (2.2)% New leases 49 6,586 2.6% Net change due to new leases 14 1,105 0.4%
Net increase in occupied area 14 1,105 0.4%
The following table summarises the rental growth that has been generated across the portfolio during the year ended 30 June 2007. Number of % of portfolio % increase Timing of rental negotiation leases income in rent
On renewal of lease 7 1.9% 9.7% New leases 28 4.1% 16.5% During lease term 9 7.8% 7.9%1 Currently in progress 16 6.5% Under negotiation
1 Half of increase has taken effect, with the remainder to take effect between November 2007 and April 2008. REVALUATIONS BJT’s interests in 12 properties were revalued during the year. The revaluations produced a portfolio revaluation of ¥2.3 billion (A$22.8 million), representing an increase of 7% on those properties.
ACQUISITIONS AND DISPOSALS During the year BJT acquired interests in nine properties with a combined value of ¥24.7 billion (A$266 million). These acquisitions have improved the diversity of the portfolio both geographically and by tenant mix. One property, Kuroshio Shijo, was sold in June 2007, for the then current book value of ¥2.0 billion (A$19.5 million). At 30 June 2007, BJT held interests in 39 properties in Japan comprising 16 retail, 20 office and 3 residential properties, located primarily in the central and greater Tokyo area. The total value of BJT’s portfolio was ¥120.6 billion (approximately A$1.1 billion).
BORROWINGS BJT’s share of total borrowings at 30 June 2007 was ¥62.1 billion (A$0.59 billion), with a weighted
average cost of 1.8% and maturity of 3.6 years. 2007 BJT Annual Report
REFINEMENTS TO HEDGING POLICY 13 In August 2007 the Board approved some refinements to BJT’s existing capital, distribution and interest rate hedging policies. A summary of the changes is as follows: Previous policy1 New policy Capital hedge policy 10% - 30% of net investment in 20% - 40% of net investment in Japanese assets with average Japanese assets with average between 4 - 6 years between 5 - 8 years Distribution hedge 100% for years 1 to 3 60% - 100% for years 1 to 3 90% for years 4 and 5 50% - 90% for years 4 and 5 0% - 75% for years 6 to 10 Interest rate risk No specific policy Fix interest rates for between 50% - 100% of debt and Operations Results of Review
1 As disclosed in the BJT IPO PDS BJT had in place cross-currency AUD/Yen swaps for approximately 24.8% of the net investment in Japanese assets at 30 June 2007. During the period of these swaps BJT receives a net payment equal to the difference between the respective AUD: Yen interest rates applicable to each hedged amount. Portfolio Overview at 30 June 2007
Retail Portfolio · 16 properties · Occupancy by: Area 99.8% · NRA – 186,962 sqm* Income 98.7% · 75% of total portfolio by area · 104 leases: 66 cancellable · 54% of total portfolio by income 38 non-cancellable
Office Portfolio · 20 properties · Occupancy by: Area 94.1% · NRA – 58,054 sqm* Income 95.7% · 23% of total portfolio by area · 218 leases: 216 cancellable · 43% of total portfolio by income 2 non-cancellable
14 Residential Portfolio · 3 properties · Occupancy by: Area 100% · NRA – 6,026 sqm Income 100% · 2% of total portfolio by area · 73 leases: 71 cancellable · 3% of total portfolio by income 2 non-cancellable
Total Portfolio • 39 properties • NRA – 251,042 sqm* • Occupancy by: • 395 leases: Area 98.5% 353 cancellable Income 97.4% 42 non-cancellable
* Reflects BJT’s percentage interests in Kawasaki Dice and Shinjuku Sanei. Portfolio Overview at 30 June 2007
Asset class diversification Geographic diversification (by value) (by value)
Retail – 54% Central Tokyo – 45% Office – 43% Greater Tokyo – 37% Residential – 3% Kyoto – 4% Sapporo – 5% Okinawa – 3% Nagoya – 2% Retail – 54% Central Tokyo – 45% Greater Sapporo – 2% Office – 43% Greater Tokyo – 37% Shizuoka – 2% 2007 BJT Annual Report Residential – 3% Kyoto – 4% Sapporo – 5% 15 Okinawa – 3% Nagoya – 2% Greater Sapporo – 2% Shizuoka – 2%
Asset class diversification Lease diversification Overview Portfolio (by income) (by income)
Retail – 54% Cancellable – 57% Office – 43% Non-Cancellable – 43% Residential – 3%
Retail – 54% Cancellable – 57% Office – 43% Non-Cancellable – 43% Residential – 3% Portfolio Overview
Carrying value Trust share Trust share Occupancy by area Occupancy by income of net of net Jun 2007 % of rentable rentable Jun Jun Jun Jun Location Completed ¥ billion portfolio area (sqm) area (tsubo) 2006 2007 2006 2007 RETAIL 1 Kawasaki Dice Kanagawa prefecture – Kawasaki Aug 2003 14.2 11.8% 12,084 3,655 100.0% 99.2% 100.0% 98.9% 2 Konan Home Centre Chiba prefecture – Ichikawa Mar 2005 10.8 9.0% 48,819 14,768 100.0% 100.0% 100.0% 100.0% 3 Mukomachi Saty Kyoto prefecture – Muko Sep 1970/Nov 1981/ 5.0 4.1% 22,528 6,815 100.0% 100.0% 100.0% 100.0% Apr 1997 4 Shinjuku Fuji Central Tokyo – Shinjuku ward, Nishi Shinjuku Jun 1964 4.8 3.9% 1,476 447 100.0% 100.0% 100.0% 100.0% 5 Sapporo Nishioka Hokkaido prefecture – Sapporo Nov 1992 3.9 3.3% 30,151 9,121 n/a 100.0% n/a 100.0% 6 Ginowan Okinawa prefecture – Ginowan Jan 2001 3.8 3.2% 10,843 3,280 n/a 100.0% n/a 100.0% 7 Shibuya Konami Central Tokyo – Shibuya ward, Shinsencho May 1990 2.7 2.2% 4,993 1,510 n/a 100.0% n/a 100.0% 8 Susono Shizuoka prefecture – Susono Jun 1994 2.6 2.2% 12,127 3,668 n/a 100.0% n/a 100.0% 9 Sapporo Co-op Hokkaido prefecture – Kitahiroshima Apr 1992 2.5 2.1% 12,208 3,693 n/a 100.0% n/a 100.0% 10 Matsudo Nitori Chiba prefecture – Matsudo Sep 2004 2.4 2.0% 8,946 2,706 n/a 100.0% n/a 100.0% 11 Harajuku Bell Pier Central Tokyo – Shibuya ward, Jingumae Jan 2004 2.4 2.0% 766 232 86.9% 100.0% 84.9% 100.0% 12 Yoshikawa Saitama prefecture – Yoshikawa Oct 1992 2.3 1.9% 11,504 3,480 n/a 100.0% n/a 100.0% 13 Motomachi Kanagawa prefecture – Yokohama Jun 1992 2.3 1.9% 1,585 480 94.7% 100.0% 97.5% 100.0% 14 Tsudanuma Chiba prefecture – Narashino Feb 1976 2.3 1.9% 1,885 570 n/a 81.8% n/a 68.5% 15 Sapporo Toys ‘R’ Us Hokkaido prefecture – Sapporo Oct 1993/Jan 1996 1.8 1.5% 6,163 1,865 100.0% 100.0% 100.0% 100.0% 16 Kajicho Ekimae Central Tokyo – Chiyoda ward, Kajicho Nov 2002 1.1 0.9% 884 267 100.0% 100.0% 100.0% 100.0% Retail sub total / average May 1995 64.9 53.8% 186,962 56,557 99.8% 99.8% 99.2% 98.7% 16 OFFICE 17 Shinjuku Sanei Central Tokyo – Shinjuku ward, Nishi Shinjuku Dec 1979 10.9 9.0% 8,141 2,463 96.6% 99.3% 95.8% 99.8% 18 Ginza Dowa Central Tokyo – Chuo ward, Ginza Sep 1974 9.1 7.6% 6,350 1,921 100.0% 98.1% 100.0% 96.4% 19 Kokusai Nihombashi Central Tokyo – Chuo ward, Nihombashi Kayabacho Jul 1987 6.5 5.4% 4,398 1,331 100.0% 100.0% 100.0% 100.0% 20 Sun Central Tokyo – Chuo ward, Ginza Nov 1974 3.6 3.0% 3,673 1,111 100.0% 100.0% 100.0% 100.0% 21 Yamashitacho Kanagawa prefecture – Yokohama Oct 1991 3.0 2.5% 5,498 1,664 n/a 100.0% n/a 100.0% 22 Higashi Totsuka Kanagawa prefecture – Yokohama Feb 1993 2.7 2.2% 5,671 1,716 90.4% 90.5% 91.2% 91.2% 23 Sun Ace Tokugawa Aichi prefecture – Nagoya Mar 1990 2.3 1.9% 6,235 1,886 64.3% 77.1% 66.4% 78.4% 24 Takadanobaba Central Tokyo – Shinjuku ward, Takadanobaba Mar 1986 1.8 1.5% 2,553 772 86.1% 100.0% 90.2% 100.0% 25 Forest Kita Aoyama Central Tokyo – Minato ward, Kita Aoyama Apr 1991 1.8 1.5% 862 260 100.0% 100.0% 100.0% 100.0% 26 OS Tsukiji Central Tokyo – Chuo ward, Tsukiji Jul 1982 1.7 1.4% 2,169 656 100.0% 90.9% 100.0% 90.9% 27 Prime Kanda Central Tokyo – Chiyoda ward, Kanda Sudacho Aug 1990 1.5 1.2% 1,680 508 100.0% 100.0% 100.0% 100.0% 28 Asakusa Central Tokyo – Taito ward, Komagata Sep 2004 1.3 1.1% 2,047 619 100.0% 100.0% 100.0% 100.0% 29 Shiba Daimon Central Tokyo – Minato ward, Shiba Daimon Mar 1994 1.0 0.8% 969 293 100.0% 100.0% 100.0% 100.0% 30 Prime Tsukiji Central Tokyo – Chuo ward, Tsukiji Aug 1992 1.0 0.8% 1,330 402 100.0% 100.0% 100.0% 100.0% 31 Yotsuya KD Central Tokyo – Shinjuku ward, Yotsuya Feb 1990 0.8 0.7% 1,200 363 83.1% 86.8% 85.8% 86.4% 32 Akabane Tokyo – Kita ward, Akabane Jun 1993 0.8 0.7% 1,084 328 87.3% 87.3% 88.7% 87.8% 33 Daikanyama Takara Tokyo – Meguro ward, Kami Meguro Apr 1991 0.8 0.7% 965 292 100.0% 100.0% 100.0% 100.0% 34 Showa Yakubo Central Tokyo – Chuo ward, Nihombashi Honcho Jul 1983 0.7 0.6% 1,241 375 78.2% 51.7% 79.5% 50.3% 35 FT Nihombashi Central Tokyo – Chuo ward, Nihombashi Hisamatsucho Oct 1988 0.6 0.5% 1,182 358 100.0% 83.3% 100.0% 82.0% 36 Sun No. 5 Central Tokyo – Chuo ward, Nihombashi Muromachi May 1983 0.5 0.4% 805 244 87.1% 100.0% 88.4% 100.0% Office sub total / average Apr 1984 52.3 43.4% 58,054 17,562 92.2% 94.1% 95.0% 95.7% RESIDENTIAL 37 G-Clef Kamata Tokyo – Ota ward, Nishi Kamata Jan 1992 1.9 1.6% 3,310 1,001 100.0% 100.0% 100.0% 100.0% 38 Prime Stay Tsukiji Central Tokyo – Chuo ward, Tsukiji Jun 1986 0.8 0.7% 1,226 370 100.0% 100.0% 100.0% 100.0% 39 Nishi Kasai Tokyo – Edogawa ward, Nishi Kasai Nov 1990 0.7 0.6% 1,490 451 100.0% 100.0% 100.0% 100.0% Residential sub total / average Jul 1990 3.4 2.8% 6,026 1,822 100.0% 100.0% 100.0% 100.0% Total / average1 Jun 1990 120.6 100% 251,042 75,942 97.2% 98.5% 97.0% 97.4%
1 Some columns do not add due to rounding Carrying value Trust share Trust share Occupancy by area Occupancy by income of net of net Jun 2007 % of rentable rentable Jun Jun Jun Jun Location Completed ¥ billion portfolio area (sqm) area (tsubo) 2006 2007 2006 2007 RETAIL 1 Kawasaki Dice Kanagawa prefecture – Kawasaki Aug 2003 14.2 11.8% 12,084 3,655 100.0% 99.2% 100.0% 98.9% 2 Konan Home Centre Chiba prefecture – Ichikawa Mar 2005 10.8 9.0% 48,819 14,768 100.0% 100.0% 100.0% 100.0% 3 Mukomachi Saty Kyoto prefecture – Muko Sep 1970/Nov 1981/ 5.0 4.1% 22,528 6,815 100.0% 100.0% 100.0% 100.0% Apr 1997 4 Shinjuku Fuji Central Tokyo – Shinjuku ward, Nishi Shinjuku Jun 1964 4.8 3.9% 1,476 447 100.0% 100.0% 100.0% 100.0% 5 Sapporo Nishioka Hokkaido prefecture – Sapporo Nov 1992 3.9 3.3% 30,151 9,121 n/a 100.0% n/a 100.0% 6 Ginowan Okinawa prefecture – Ginowan Jan 2001 3.8 3.2% 10,843 3,280 n/a 100.0% n/a 100.0% 7 Shibuya Konami Central Tokyo – Shibuya ward, Shinsencho May 1990 2.7 2.2% 4,993 1,510 n/a 100.0% n/a 100.0% 8 Susono Shizuoka prefecture – Susono Jun 1994 2.6 2.2% 12,127 3,668 n/a 100.0% n/a 100.0% 9 Sapporo Co-op Hokkaido prefecture – Kitahiroshima Apr 1992 2.5 2.1% 12,208 3,693 n/a 100.0% n/a 100.0% 10 Matsudo Nitori Chiba prefecture – Matsudo Sep 2004 2.4 2.0% 8,946 2,706 n/a 100.0% n/a 100.0% 11 Harajuku Bell Pier Central Tokyo – Shibuya ward, Jingumae Jan 2004 2.4 2.0% 766 232 86.9% 100.0% 84.9% 100.0% 12 Yoshikawa Saitama prefecture – Yoshikawa Oct 1992 2.3 1.9% 11,504 3,480 n/a 100.0% n/a 100.0% 13 Motomachi Kanagawa prefecture – Yokohama Jun 1992 2.3 1.9% 1,585 480 94.7% 100.0% 97.5% 100.0% 14 Tsudanuma Chiba prefecture – Narashino Feb 1976 2.3 1.9% 1,885 570 n/a 81.8% n/a 68.5% 15 Sapporo Toys ‘R’ Us Hokkaido prefecture – Sapporo Oct 1993/Jan 1996 1.8 1.5% 6,163 1,865 100.0% 100.0% 100.0% 100.0% 16 Kajicho Ekimae Central Tokyo – Chiyoda ward, Kajicho Nov 2002 1.1 0.9% 884 267 100.0% 100.0% 100.0% 100.0%
Retail sub total / average May 1995 64.9 53.8% 186,962 56,557 99.8% 99.8% 99.2% 98.7% 2007 BJT Annual Report OFFICE 17 17 Shinjuku Sanei Central Tokyo – Shinjuku ward, Nishi Shinjuku Dec 1979 10.9 9.0% 8,141 2,463 96.6% 99.3% 95.8% 99.8% 18 Ginza Dowa Central Tokyo – Chuo ward, Ginza Sep 1974 9.1 7.6% 6,350 1,921 100.0% 98.1% 100.0% 96.4% 19 Kokusai Nihombashi Central Tokyo – Chuo ward, Nihombashi Kayabacho Jul 1987 6.5 5.4% 4,398 1,331 100.0% 100.0% 100.0% 100.0% 20 Sun Central Tokyo – Chuo ward, Ginza Nov 1974 3.6 3.0% 3,673 1,111 100.0% 100.0% 100.0% 100.0% 21 Yamashitacho Kanagawa prefecture – Yokohama Oct 1991 3.0 2.5% 5,498 1,664 n/a 100.0% n/a 100.0% 22 Higashi Totsuka Kanagawa prefecture – Yokohama Feb 1993 2.7 2.2% 5,671 1,716 90.4% 90.5% 91.2% 91.2% Overview Portfolio 23 Sun Ace Tokugawa Aichi prefecture – Nagoya Mar 1990 2.3 1.9% 6,235 1,886 64.3% 77.1% 66.4% 78.4% 24 Takadanobaba Central Tokyo – Shinjuku ward, Takadanobaba Mar 1986 1.8 1.5% 2,553 772 86.1% 100.0% 90.2% 100.0% 25 Forest Kita Aoyama Central Tokyo – Minato ward, Kita Aoyama Apr 1991 1.8 1.5% 862 260 100.0% 100.0% 100.0% 100.0% 26 OS Tsukiji Central Tokyo – Chuo ward, Tsukiji Jul 1982 1.7 1.4% 2,169 656 100.0% 90.9% 100.0% 90.9% 27 Prime Kanda Central Tokyo – Chiyoda ward, Kanda Sudacho Aug 1990 1.5 1.2% 1,680 508 100.0% 100.0% 100.0% 100.0% 28 Asakusa Central Tokyo – Taito ward, Komagata Sep 2004 1.3 1.1% 2,047 619 100.0% 100.0% 100.0% 100.0% 29 Shiba Daimon Central Tokyo – Minato ward, Shiba Daimon Mar 1994 1.0 0.8% 969 293 100.0% 100.0% 100.0% 100.0% 30 Prime Tsukiji Central Tokyo – Chuo ward, Tsukiji Aug 1992 1.0 0.8% 1,330 402 100.0% 100.0% 100.0% 100.0% 31 Yotsuya KD Central Tokyo – Shinjuku ward, Yotsuya Feb 1990 0.8 0.7% 1,200 363 83.1% 86.8% 85.8% 86.4% 32 Akabane Tokyo – Kita ward, Akabane Jun 1993 0.8 0.7% 1,084 328 87.3% 87.3% 88.7% 87.8% 33 Daikanyama Takara Tokyo – Meguro ward, Kami Meguro Apr 1991 0.8 0.7% 965 292 100.0% 100.0% 100.0% 100.0% 34 Showa Yakubo Central Tokyo – Chuo ward, Nihombashi Honcho Jul 1983 0.7 0.6% 1,241 375 78.2% 51.7% 79.5% 50.3% 35 FT Nihombashi Central Tokyo – Chuo ward, Nihombashi Hisamatsucho Oct 1988 0.6 0.5% 1,182 358 100.0% 83.3% 100.0% 82.0% 36 Sun No. 5 Central Tokyo – Chuo ward, Nihombashi Muromachi May 1983 0.5 0.4% 805 244 87.1% 100.0% 88.4% 100.0% Office sub total / average Apr 1984 52.3 43.4% 58,054 17,562 92.2% 94.1% 95.0% 95.7% RESIDENTIAL 37 G-Clef Kamata Tokyo – Ota ward, Nishi Kamata Jan 1992 1.9 1.6% 3,310 1,001 100.0% 100.0% 100.0% 100.0% 38 Prime Stay Tsukiji Central Tokyo – Chuo ward, Tsukiji Jun 1986 0.8 0.7% 1,226 370 100.0% 100.0% 100.0% 100.0% 39 Nishi Kasai Tokyo – Edogawa ward, Nishi Kasai Nov 1990 0.7 0.6% 1,490 451 100.0% 100.0% 100.0% 100.0% Residential sub total / average Jul 1990 3.4 2.8% 6,026 1,822 100.0% 100.0% 100.0% 100.0% Total / average1 Jun 1990 120.6 100% 251,042 75,942 97.2% 98.5% 97.0% 97.4%
1 Some columns do not add due to rounding Top 20 Tenant Profile
KonanHomeCentreKokusaiNihombashiMukomachiSaty SapporoNishiokaKawasakiDiceShinjukuFuijiGinzaDowa SapporoCo-opHigashiTotsukaShibuyaKonami MatsudoNitoriSusonoGinowanSapporoToys‘R’Us G-ClefKamataMotomachiShinjukuSaneiForestKitaAoyama
18 % of BJT total gross passing Lease Remaining Tenant name Property Industry Lease type rent plus CAM expiry date term (years)12
1 Toyota Tsusho Corporation/Konan Shoji Konan Home Centre Trading/retail Fixed non-cancellable1 7.6% March 2025 17.8 2 Japan Securities Agents Kokusai Nihombashi Securities Administration Standard 4.7% March 2009 – 3 Mycal Mukomachi Saty Retail Standard non-cancellable 2 4.4% June 2020 12.9 4 Posful Sapporo Nishioka Retail Standard non-cancellable 3 3.8% October 2022 15.3 5 Sakuraya Kawasaki Dice Retail Standard non-cancellable 4 3.1% August 2013 6.2 6 Matahari Kawasaki Dice Entertainment Standard non-cancellable 5 2.6% August 2023 16.2 7 Gaia Shinjuku Fuji Entertainment Fixed non-cancellable 6 2.5% July 2020 13.0 8 Kyodo PR Ginza Dowa Advertising Standard 2.5% April 2008 – 9 Co-op Sapporo Sapporo Co-op Retail Standard non-cancellable 7 2.4% November 2012 5.4 10 NTT Advanced Technology Higashi Totsuka Systems Solutions Standard 2.2% January 2008 – 11 Konami Sports & Life Shibuya Konami Fitness Club Standard 2.1% February 2009 – 12 Nitori Matsudo Nitori Retail Standard non-cancellable 8 1.9% September 2024 17. 3 13 Gourmet City Kanto Susono Retail Standard non-cancellable 9 1.9% June 2014 7.0 14 Kanehide Shoji Ginowan Retail Standard 1.6% January 2016 – 15 Daiwa Jitsugyo Ginza Dowa Entertainment Standard 1.4% January 2008 – 16 Toys ‘R’ Us Japan Sapporo Toys ‘R’ Us Retail Standard 1.4% November 2013 – 17 Kobe Steel G-Clef Kamata Manufacturer Fixed non-cancellable 10 1.3% September 2007 0.2 18 Louis Vuitton Motomachi Retail Fixed non-cancellable 11 1.3% September 2011 4.3 19 Adecco Shinjuku Sanei Agency Standard 1.3% January 2008 – 20 Telecom Staff Forest Kita Aoyama Other Standard 1.2% April 2009 – Total 51.4% KonanHomeCentreKokusaiNihombashiMukomachiSaty SapporoNishiokaKawasakiDiceShinjukuFuijiGinzaDowa
Retail – 57.3% SapporoCo-opHigashiTotsukaShibuyaKonami Securities – 9.2% Entertainment – 12.9% Advertising – 4.8% Systems Solutions – 4.2% MatsudoNitoriSusonoGinowanSapporoToys‘R’Us Fitness Club – 4.0% Manufacturer – 2.6% Agency – 2.5% G-ClefKamataMotomachiShinjukuSaneiForestKitaAoyama Other – 2.4% BJT Annual Report 2007 BJT Annual Report 19 % of BJT total gross passing Lease Remaining Tenant name Property Industry Lease type rent plus CAM expiry date term (years)12 1 The property is 100% leased to Konan Shoji on a 20 year lease. For the first 12 years 1 1 Toyota Tsusho Corporation/Konan Shoji Konan Home Centre Trading/retail Fixed non-cancellable 7.6% March 2025 17.8 (until March 2017) the master lessee under a non-cancellable Fixed Term Lease is Toyota 2 Japan Securities Agents Kokusai Nihombashi Securities Administration Standard 4.7% March 2009 – Tsusho Corporation pursuant to which 2 Toyota Tsusho subleases to Konan Shoji. 3 Mycal Mukomachi Saty Retail Standard non-cancellable 4.4% June 2020 12.9 From the end of the 12 year master lease 4 Posful Sapporo Nishioka Retail Standard non-cancellable 3 3.8% October 2022 15.3 term, the lease is directly with Konan Shoji. 2 A 16 year lease. The lease is non-cancellable Profile Tenant 20 Top 5 Sakuraya Kawasaki Dice Retail Standard non-cancellable 4 3.1% August 2013 6.2 for the initial four years (until June 2008). 3 A 20 year lease. The lease is non-cancellable 6 Matahari Kawasaki Dice Entertainment Standard non-cancellable 5 2.6% August 2023 16.2 during the term (until October 2022). 4 A 10 year lease. The lease is non-cancellable 7 Gaia Shinjuku Fuji Entertainment Fixed non-cancellable 6 2.5% July 2020 13.0 during the term (until August 2013). 5 A 20 year lease. The lease is non-cancellable 8 Kyodo PR Ginza Dowa Advertising Standard 2.5% April 2008 – for the initial 10 years (until August 2013) 9 Co-op Sapporo Sapporo Co-op Retail Standard non-cancellable 7 2.4% November 2012 5.4 6 A 15 year lease. The lease is non-cancellable for the initial seven years (until July 2012). 10 NTT Advanced Technology Higashi Totsuka Systems Solutions Standard 2.2% January 2008 – 7 A 10 year lease. The lease is non-cancellable during the term (until November 2012). 11 Konami Sports & Life Shibuya Konami Fitness Club Standard 2.1% February 2009 – 8 A 20 year lease. The lease is non-cancellable during the term (until September 2024). 8 12 Nitori Matsudo Nitori Retail Standard non-cancellable 1.9% September 2024 17. 3 9 A 20 year lease. The lease is non-cancellable during the term (until June 2014). 9 13 Gourmet City Kanto Susono Retail Standard non-cancellable 1.9% June 2014 7.0 10 A 2 year lease. The lease is non-cancellable 14 Kanehide Shoji Ginowan Retail Standard 1.6% January 2016 – during the term (until September 2007). 11 A 10 year lease. The lease is non-cancellable 15 Daiwa Jitsugyo Ginza Dowa Entertainment Standard 1.4% January 2008 – during the term (until September 2011). 12 The remaining term has not been included 16 Toys ‘R’ Us Japan Sapporo Toys ‘R’ Us Retail Standard 1.4% November 2013 – for standard leases as the tenants usually have the right to cancel their lease with six 17 Kobe Steel G-Clef Kamata Manufacturer Fixed non-cancellable 10 1.3% September 2007 0.2 months notice. 18 Louis Vuitton Motomachi Retail Fixed non-cancellable 11 1.3% September 2011 4.3 19 Adecco Shinjuku Sanei Agency Standard 1.3% January 2008 – 20 Telecom Staff Forest Kita Aoyama Other Standard 1.2% April 2009 – Total 51.4%
Property Locations Key central tokyo greater Tokyo
4 Shinjuku Fuji 27 Prime Kanda 1 Kawasaki Dice 11 Harajuku Bell Pier 28 Asakusa 2 Konan Home Centre 16 Kajicho Ekimae 29 Shiba Daimon 13 Motomachi 7 Shibuya Konami 30 Prime Tsukiji 14 Tsudanuma 17 Shinjuku Sanei 31 Yotsuya KD 10 Matsudo Nitori 18 Ginza Dowa 33 Daikanyama Takara 12 Yoshikawa 19 Kokusai Nihombashi 34 Showa Yakubo 22 Higashi Totsuka 20 Sun 35 FT Nihombashi 32 Akabane 24 Takadanobaba 36 Sun No. 5 21 Yamashitacho 25 Forest Kita Aoyama 38 Prime Stay Tsukiji 37 G-Clef Kamata 26 OS Tsukiji 39 Nishi Kasai
Japan
3 Mukomachi Saty 5 Sapporo Nishioka Retail Property Main Road 15 8 Express Way Sapporo Toys‘R’Us Susono Office Property JR Line 6 Ginowan 23 Sun Ace Tokugawa Residential Property Subway 9 Sapporo Co-op
20
TOSHIMA-KU
BUNKYO-KU
Ueno TAITO-KU 24 28 SHINJUKU-KU SUMIDA-KU CHIYODA-KU SHINJUKU 27 4 31 16 17 36 35 Yotsuya Otemachi 34 TOKYO 19 KOTO-KU
30 SHIBUYA-KU 38 11 Shimbashi 18 20 CHUO-KU 25 26 SHIBUYA Roppongi
SETAGAYA-KU 7 29 MINATO-KU Hamamatsucho
33 MEGURO-KU Tokyo Bay Central Tokyo Shinagawa
SHINAGAWA-KU
HOKKAIDO 15 5 9
Japan Sea
8 TOKYO 23 3 NAGOYA KYOTO
Pacific Ocean
6 Japan BJT Annual Report 2007 BJT Annual Report 21 12 SAITAMA
TOKYO Locations Property 32 10 MATSUDO-SHI
MUSASHINO-SHI Kitasenju CHIBA
Shinjuku Akihabara 2 14 20km CHÔFU-SHI To kyo
39 Shibuya CENTRAL TOKYO CHIBA-SHI
Shinagawa Chiba
Tokyo Bay 37
Kawasaki 1 KANAGAWA Tokyowan Aqua Line KAWASAKI-SHI
YOKOHAMA-SHI
Yokohama
21 22 13 Greater Tokyo Kawasaki Dice Kawasaki Dice is a large scale (11 floors above ground plus two basement levels) multi-tenant retail, cinema, restaurant and entertainment complex. ADDRESS 8, Ekimaehoncho, Kawasaki-ku Kawasaki-shi, Kanagawa Approximately 250 metres (a three minute walk) from Kawasaki JR station. SUB-MARKET Kawasaki PROPERTY TYPE Multi-tenant retail / cinema / restaurant / entertainment building IN REVIEW (2006/2007) Occupancy Occupancy by area has decreased by 0.8% (209 sqm) since 30 June 2006. Lease Expirations No leases expired during the period. New Leases One new lease (10.87 sqm) representing 0.04% of NRA. Cancelled Leases One cancelled lease (209 sqm) representing 0.8% of NRA.
RETAIL
Konan Home Centre The Konan Home Centre is a large scale retail complex comprising a home centre with additional speciality shops (consumer electronics, supermarket, variety goods and a gas station). It is leased to a single tenant through to March 2025. ADDRESS 2526-6, Baraki, Ichikawa-Shi, Chiba
Property Information Property Located close to the expressway, approximately 720 metres (a nine minute walk) form Futamata Shinmachi station on the JR Keiyo Line and 20 minutes by car from the centre of Tokyo. SUB-MARKET Ichikawa PROPERTY TYPE Single-tenant retail home centre and specialty stores IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest1 48% Land area (square metres) 4,475 Purchase date Mar 2005/Dec 2005 Trust’s share NRA (tsubo) 3,655 Carrying value (billion) ¥14.2 Trust’s share NRA (square metres) 12,084 Completed Aug 2003 Occupancy by area 99.2% PML 8.0% Occupancy by income 98.9%
1 The Trust holds a 48% interest in “Kawasaki Dice”, which is a condominium interest equivalent to 89.6% of the building and 87% of the land.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Sakuraya Retail Standard non- – August 2013 6.2 cancellable1 Matahari Entertainment Standard non- – August 2023 16.2 cancellable2 TOHO Cinemas Entertainment Fixed non- – August 2023 16.2 cancellable3 Aoi Shoten Retail Fixed non- – August 2013 6.2 cancellable4 Tokyu Hands Retail Standard – August 2013 Other Other tenants - 16 12.8% Total/Average 100% January 2017
1 A 10 year lease. The lease is non-cancellable during the term (until August 2013). 2 A 20 year lease. The lease is non-cancellable for the initial 10 years (until August 2013). 3 A 20 year lease. The lease is non-cancellable during the term (until August 2023). 4 A 10 year lease. The lease is non-cancellable during the term (until August 2013).
RETAIL 2007 BJT Annual Report 23
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 83,401 Purchase date Mar 2005 Trust’s share NRA (tsubo) 14,768 Carrying value (billion) ¥10.8 Trust’s share NRA (square metres) 48,819 Completed Mar 2005 Occupancy by area 100%
PML 5.3% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Toyota Tsusho Trading / Retail Fixed non- 100% March 2025 17.8 Corporation / Konan cancellable1 Shoji Total/Average 100% March 2025
1 The property is 100% leased to Konan Shoji on a 20 year lease. For the first 12 years (until March 2017) the master lessee under a non-cancellable Fixed Term Lease is Toyota Tsusho Corporation pursuant to which Toyota Tsusho subleases to Konan Shoji. From the end of the 12 year master lease term the lease is directly with Konan Shoji.
RETAIL Mukomachi Saty Mukomachi Saty is a single-tenant, six-level shopping centre with car parking located in Muko, six kilometres southwest of central Kyoto. ADDRESS 15 Kotsukuda, Teradocho, Muko-shi, Kyoto Approximately 170 metres (a three minute walk) from Higashi Muko station on Hankyu Kyoto line and 630 metres (an eight minute walk) from JR Mukomachi station. SUB-MARKET Kyoto PROPERTY TYPE Single-tenant retail building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL 24 Shinjuku Fuji Shinjuku Fuji is located in a prime position in the Nishi (west) Shinjuku district of central Tokyo adjacent to the Shinjuku station, the busiest commuter train station in Japan. The building, which is fully leased, comprises six floors above ground and two basement levels. ADDRESS 1-16-4, Nishi Shinjuku, Shinjuku-ku, Tokyo Approximately 270 metres (a four minute walk) from JR Shinjuku station. SUB-MARKET Shinjuku ward PROPERTY TYPE Multi-tenant retail building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations Two leases (489 sqm) representing 33.1% of NRA expired during the period. All were renewed with rental levels increasing by 2.2%. New Leases One new lease (86 sqm) representing 5.8% of NRA. Cancelled Leases One lease was cancelled (86 sqm) representing 5.8% of NRA.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 11,690 Purchase date Nov 2005 Trust’s share NRA (tsubo) 6,815 Carrying value (billion) ¥5.0 Trust’s share NRA (square metres) 22,528 Completed Sep 1970/Nov 1981/Apr 1997 Occupancy by area 100% PML 11.7% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Mycal Retail Standard non- 100% June 2020 12.9 cancellable1 Total 100% June 2020
1 A 16 year lease. The lease in non-cancellable for the initial four years (until June 2008).
RETAIL 2007 BJT Annual Report 25
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 271 Purchase date Jan 2006 Trust’s share NRA (tsubo) 447 Carrying value (billion) ¥4.7 Trust’s share NRA (square metres) 1,476 Completed Jun 1964 Occupancy by area 100%
PML 19.8% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Gaia Entertainment Fixed non- 71.5% July 2020 13.0 cancellable1 Watami Food and Beverage Standard 13.0% July 2008 – Saizeria Food and Beverage Fixed 11.4% June 2012 5.0 non-cancellable2 Wonder Beauty Salon Standard 2.5% December 2009 – MI Foods System Food and Beverage Standard 1.6% October 2008 – Total/Average 100% August 2017
1 A 15 year lease. The lease is non-cancellable for the initial seven years (until July 2012). 2 A 10 year lease. The lease is non-cancellable during the term (until June 2012).
RETAIL Sapporo Nishioka Sapporo Nishioka is a large scale single tenant retail complex with car parking. It is located in Nishioka, four kilometres southeast of central Sapporo. ADDRESS 3-4-1, Nishioka 3-jo, Toyohira-ku, Sapporo-shi, Hokkaido The property sits adjacent to Hitsujigaoka-dori, a major street heading southeast out of Sapporo. SUB-MARKET Sapporo PROPERTY TYPE Single-tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL 26 Ginowan Ginowan is a roadside shopping centre comprising four buildings (each of one or two storeys) located in Ginowan, Okinawa. It is anchored by a Home Centre and has a variety of specialty retailers. ADDRESS 7-6-1, Oyama, Ginowan-shi, Okinawa SUB-MARKET Ginowan PROPERTY TYPE Multi-tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 21,097 Purchase date Aug 2006 Trust’s share NRA (tsubo) 9,121 Carrying value (billion) ¥3.9 Trust’s share NRA (square metres) 30,1511 Completed Nov 1992 Occupancy by area 100% PML 7.0% Occupancy by income 100%
1 Includes 9,227 sqm of car park structure.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Posful Retail Standard non- 100% October 2022 15.3 cancellable1 Total/Average 100% October 2022
1 A 20 year lease. The lease is non-cancellable during the term (until October 2022).
RETAIL 2007 BJT Annual Report 27
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 22,300 Purchase date Aug 2006 Trust’s share NRA (tsubo) 3,280 Carrying value (billion) ¥3.8 Trust’s share NRA (square metres) 10,843 Completed Jan 2001 Occupancy by area 100%
PML 1.9% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Kanehide Shoji Retail Standard 45.4% January 2016 – Fun Field Entertainment Standard non- 24.9% January 2016 8.6 cancellable1 Daiso Sangyo Retail Standard 10.9% January 2011 – Fast Retailing Retail Standard 8.5% January 2016 – Chiyoda Retail Standard 6.8% January 2011 3.6 non-cancellable2 Other Other tenants - 2 3.6% Total/Average 100% February 2015
1 A 15 year lease. The lease is non-cancellable for the initial 10 years (until January 2011). 2 A 10 year lease. The lease is non-cancellable during the term (until January 2011).
RETAIL Shibuya Konami Shibuya Konami is a nine-storey, single tenant fitness club with two basement/parking floors. Located within walking distance from central Shibuya, one of the busiest retail districts in Tokyo. ADDRESS 18-11, Shinsencho, Shibuya-ku, Tokyo Approximately 350 metres (a five minute walk) from Shinsen Station on the Keio Inokashira line. The property is facing Yamate dori. SUB-MARKET Shibuya ward PROPERTY TYPE Single-tenant fitness club IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL 28 Susono Susono is a four-storey retail building located close to the railway station in Susono, Shizuoka. ADDRESS 891-1 aza, Nakahata, Sano, Susono-shi, Shizuoka Approximately 400 metres (a five minute walk) from Susono station on the JR Gotemba line. SUB-MARKET Susono PROPERTY TYPE Multi-tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 756 Purchase date Aug 2006 Trust’s share NRA (tsubo) 1,510 Carrying value (billion) ¥2.7 Trust’s share NRA (square metres) 4,993 Completed May 1990 Occupancy by area 100% PML 6.2% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Konami Sports & Life Fitness Club Standard 100% February 2009 Total 100% February 2009
RETAIL 2007 BJT Annual Report 29
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 16,135 Purchase date Jan 2007 Trust’s share NRA (tsubo) 3,668 Carrying value (billion) ¥2.6 Trust’s share NRA (square metres) 12,127 Completed Jun 1994 Occupancy by area 100%
PML 11.2% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Gourmet City Kanto Retail Standard non- 60.9% June 2014 7.0 cancellable1 CFS Corporation Retail Standard non- 39.1% June 2014 7.0 cancellable1 Total/Average 100% June 2014
1 A 20 year lease. The lease is non-cancellable during the term (until June 2014).
RETAIL Sapporo Co-op Sapporo Co-op is a large scale retail complex comprising a general merchandise store, amusement arcade and furniture store. It is located in Kitahiroshima, a suburb of greater Sapporo. ADDRESS 1-4-1, Sakaecho, Kitahiroshima-shi, Hokkaido Approximately 500 metres (a seven minute walk) from Kitahiroshima station on JR Chitose line. SUB-MARKET Kitahiroshima PROPERTY TYPE Multi-tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL 30 Matsudo Nitori Matsudo Nitori is a five-storey retail building completed in September 2004 and occupied by a single tenant. It is located in a densely populated area, Matsudo in Chiba, east of Central Tokyo. ADDRESS 2301-7, Matsudo, Matsudo-shi, Chiba Approximately 1.2 kilometres (a 15 minute walk) from Matsudo station on the JR Joban line. The property is facing Route 6. SUB-MARKET Matsudo PROPERTY TYPE Single tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 15,153 Purchase date Aug 2006 Trust’s share NRA (tsubo) 3,693 Carrying value (billion) ¥2.5 Trust’s share NRA (square metres) 12,208 Completed Apr 1992 Occupancy by area 100% PML 6.9% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Co-op Sapporo Retail Standard non- 70.1% November 2012 5.4 cancellable1 Pandora Entertainment Standard 26.3% September 2008 Fun Field Entertainment Standard 3.4% September 2008 Shichifuku Shoji Retail Standard 0.2% November 2009 Total/Average 100% August 2011
1 A 10 year lease. The lease is non-cancellable during the term (until November 2012).
RETAIL 2007 BJT Annual Report 31
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 3,573 Purchase date Oct 2006 Trust’s share NRA (tsubo) 2,706 Carrying value (billion) ¥2.4 Trust’s share NRA (square metres) 8,946 Completed Sep 2004 Occupancy by area 100%
PML 3.3% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Nitori Retail Standard non- 100% September 2024 17.3 cancellable1 Total/Average 100% September 2024
1 A 20 year lease. The lease is non-cancellable during the term (until September 2024).
RETAIL Harajuku Bell Pier Harajuku Bell Pier is a multi-tenant retail building completed in 2004. It is located in the Harajuku / Omotesando retail area of central Tokyo, the heart of youth and design culture in Tokyo. ADDRESS 6-6-2, Jingumae, Shibuya-ku, Tokyo Located approximately 200 metres (a three minute walk) from Meiji-Jingumae station on the Tokyo Metro Chiyoda line. SUB-MARKET Shibuya ward PROPERTY TYPE Multi-tenant retail building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 13.1% (100 sqm) since 30 June 2006. Lease Expirations Six leases (432 sqm) representing 56.4% of NRA expired during the period. All were renewed with rental levels increasing by 1.5%. New Leases Four new leases (283 sqm) representing 36.9% of NRA. Cancelled Leases Two leases were cancelled (183 sqm) representing 23.9% of NRA.
RETAIL 32 Yoshikawa The property is a local neighbourhood shopping centre located in Yoshikawa in Saitama, approximately 30 kilometres north of Tokyo. The property was renovated in June 2006. ADDRESS 1518-1, Sakae-cho, Yoshikawa-shi, Saitama Approximately 4 kilometres from Yoshikawa station on the JR Musashino line. SUB-MARKET Yoshikawa PROPERTY TYPE Multi-tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 372 Purchase date Mar 2005 Trust’s share NRA (tsubo) 232 Carrying value (billion) ¥2.4 Trust’s share NRA (square metres) 766 Completed Jan 2004 Occupancy by area 100% PML 3.3% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry M & T Consul Food and Beverage Standard 20.8% February 2010 Darwin Food and Beverage Standard 15.9% January 2010 Ryu Suzuki Beauty Salon Standard 14.8% September 2009 ARROWS, INC Retail Standard 11.6% January 2010 Carmine Food and Beverage Standard 9.3% August 2008 Other Other tenants – 5 27.6% Total/Average 100% September 2009
RETAIL 2007 BJT Annual Report 33
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 9,136 Purchase date Jun 2007 Trust’s share NRA (tsubo) 3,480 Carrying value (billion) ¥2.3 Trust’s share NRA (square metres) 11,504 Completed Oct 1992 Occupancy by area 100%
PML 5.4% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Kasumi Retail Fixed 27.2% August 2016 9.1 non-cancellable1 Daiso Retail Fixed 11.1% October 2016 9.3 cancellable Kitz Wellness Fitness Club Fixed 9.5% May 2017 9.9 non-cancellable2 Aprecio Internet Cafe Fixed 7.6% November 2016 9.4 non-cancellable3 Senkin World Retail Fixed 7.1% October 2009 2.3 cancellable Other Other tenants – 27 37.5% Total/Average 100% May 2015
1 A 10 year lease. The lease is non-cancellable during the term (until August 2016). 2 A 10 year lease. The lease is non-cancellable during the term (until May 2017). 3 A 10 year lease. The lease is non-cancellable during the term (until November 2016).
RETAIL Motomachi The Motomachi property is a prime retail building anchored by Louis Vuitton, located in the centre of Yokohama’s leading upmarket specialty retail street, Motomachi. ADDRESS 4-168, Motomachi, Naka-ku, Yokohama-shi, Kanagawa Approximately 350 metres (a five minute walk) from Ishikawacho station on the JR Negishi line and Motomachi-Chukagai station on the Minatomirai line. SUB-MARKET Yokohama PROPERTY TYPE Multi-tenant retail building with some office tenants IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 5.3% (84 sqm) since 30 June 2006. Lease Expirations No leases expired during the period. New Leases One new lease (84 sqm) representing 5.3% of net rentable area. Cancelled Leases No cancelled leases during the period.
RETAIL 34 Tsudanuma A six-storey retail building located in the middle of a busy retail area in the Chiba prefecture, east of Tokyo. ADDRESS 1-11-4, Tsudanuma, Narashino-shi, Chiba Approximately 50 metres (a one minute walk) from JR Tsudanuma station on the JR Sobu line. SUB-MARKET Narashino PROPERTY TYPE Multi-tenant retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations One lease (412 sqm) representing 21.9% of NRA expired during the period. It was renewed at the same rental levels. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 387 Purchase date Mar 2005 Trust’s share NRA (tsubo) 480 Carrying value (billion) ¥2.3 Trust’s share NRA (square metres) 1,585 Completed Jun 1992 Occupancy by area 100% PML 14.7% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Louis Vuitton Retail Fixed 69.1% September 2011 4.3 Non-cancellable1 Joyful Maruyama Retail Standard 8.9% July 2007 – DC Entertainment Standard 8.8% March 2009 – Mr Inoue Medical Clinic Standard 4.0% January 2008 – Mr Ohwan Medical Clinic Standard 3.3% May 2008 – Other Other tenants – 2 5.9% Total/Average 100% October 2010
1 A 10 year lease. The lease is non-cancellable during the term (until September 2011).
RETAIL 2007 BJT Annual Report 35
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 584 Purchase date Apr 2007 Trust’s share NRA (tsubo) 570 Carrying value (billion) ¥2.3 Trust’s share NRA (square metres) 1,885 Completed Feb 1976 Occupancy by area 81.8%
PML 16.7% Occupancy by income 68.5% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Jonathan’s Food and Beverage Standard 27.6% June 2013 Chiba Red Cross Blood Contribution Standard 25.3% May 2010 Blood Centre Centre Morishita Building Internet Cafe Standard 25.3% February 2010 (Manboo) Monteroza Food and Beverage Standard 21.8% –1 Total/Average 100% June 2010
1 Under negotiation with lessee.
RETAIL Sapporo Toys ‘R’ Us Sapporo Toys ’R’ Us comprises a two-building retail complex. It is located in Sapporo, the prefectural capital of Hokkaido, the northern-most main island of Japan. ADDRESS 3-3-11, Hassamu 14-jo, Nishi-ku, Sapporo-shi, Hokkaido Approximately 1.2 kilometres (a 15 minute walk) from JR Hassamu Chuo station, approximately nine kilometres from central Sapporo, Hokkaido. SUB-MARKET Sapporo PROPERTY TYPE Two retail buildings IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006 Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL 36 Kajicho Ekimae Kajicho Ekimae is a five-level multi-tenant property which is fully leased. The ground floor is leased to a convenience store operator and the upper levels and basement are occupied by restaurants. ADDRESS 2-9-3 Kajicho, Chiyoda-ku, Tokyo Approximately 100 metres (a two minute walk) from Kanda station on the JR and Ginza subway lines. SUB-MARKET Chiyoda ward PROPERTY TYPE Multi-tenant retail building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RETAIL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 13,223 Purchase date Jan 2006 Trust’s share NRA (tsubo) 1,865 Carrying value (billion) ¥1.8 Trust’s share NRA (square metres) 6,163 Completed Oct 1993/Jan 1996 Occupancy by area 100% PML 2.7%/4.3% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Toys ‘R’ Us Japan Retail Standard 78.0% November 2013 Daiya Shobo Retail Standard 22.0% January 2014 Total/Average 100% December 2013
RETAIL 2007 BJT Annual Report 37
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 266 Purchase date Jan 2006 Trust’s share NRA (tsubo) 267 Carrying value (billion) ¥1.1 Trust’s share NRA (square metres) 884 Completed Nov 2002 Occupancy by area 100%
PML 3.3% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Watami Food and Beverage Standard 34.7% November 2012 5.4 non-cancellable1 Mini Stop Retail Standard 28.0% November 2017 – Reins Food and Beverage Standard 19.9% November 2012 5.4 non-cancellable2 Alpha System Food and Beverage Standard 17.4% November 2012 5.4 non-cancellable2 Total/Average 100% April 2014
1 A 10 year lease. The lease is non-cancellable for the initial eight years (until November 2010). 2 A 10 year lease. The lease is non-cancellable for the initial five years (until November 2007).
RETAIL Shinjuku Sanei Shinjuku Sanei is a large (15 storeys with two basements and two penthouses) multi-tenant office building located in Nishi Shinjuku, the original high-rise office precinct of Tokyo and still one of its major office areas. ADDRESS 1-22-2, Nishi Shinjuku, Shinjuku-ku, Tokyo Approximately 400 metres (a five minute walk) from JR Shinjuku station and approximately 200 metres (a three minute walk) from Shinjuku station on the Tokyo Metro Shinjuku / Oedo lines and the Keio-shinsen line. SUB-MARKET Shinjuku ward PROPERTY TYPE Multi-tenant office building with some retail tenants IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 2.7% (2,879 sqm) since 30 June 2006. Lease Expirations 25 leases (2,188 sqm) representing 10.5% of NRA expired during the period. All were renewed at the same rental levels. New Leases 12 new leases (4,359 sqm) representing 20.9% of NRA. Cancelled Leases Eight cancelled leases (1,480 sqm) representing 7.1% of NRA. OFFICE 38 Ginza Dowa The Ginza Dowa property is a nine-storey plus basement level office building located in Ginza. It has a corner location facing Ginza Corridor Street, one of the better known Ginza streets. ADDRESS 7-2-22, Ginza, Chuo-ku, Tokyo Approximately 240 metres (a three minute walk) from Ginza station on the Tokyo Metro Marunouchi, Ginza and Hibiya lines. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office building with some retail tenants IN REVIEW (2006/2007) Occupancy Occupancy by area has decreased by 3.1% (197 sqm) since 30 June 2006. Lease Expirations 23 leases (4,297 sqm) representing 67.7% of NRA expired during the period. All were renewed at the same rental levels. New Leases Four new leases (1,209 sqm) representing 19.0% of NRA. Cancelled Leases Three cancelled leases (1,012 sqm) representing 15.9% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 39% Land area (square metres) 3,063 Purchase date Mar 2005 Trust’s share NRA (tsubo) 2,463 Carrying value (billion) ¥10.9 Trust’s share NRA (square metres) 8,141 Completed Dec 1979 Occupancy by area 99.3% PML 6.4% Occupancy by income 99.8%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Adecco Agency Standard 14.0% January 2008 Shokokumiai Chuo Finance Standard 7.9% September 2007 Kinko Central Finance Finance Standard 5.6% October 2008 Mizuho Investors Finance Standard 4.6% August 2008 Securities Hitachi Manufacturer Standard 4.4% October 2008 Other Other tenants - 37 63.5% Total/Average 100% May 2008
OFFICE 2007 BJT Annual Report 39
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,162 Purchase date Mar 2005 Trust’s share NRA (tsubo) 1,921 Carrying value (billion) ¥9.1 Trust’s share NRA (square metres) 6,350 Completed Sep 1974 Occupancy by area 98.1%
PML 13.1% Occupancy by income 96.4% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Kyodo PR Advertising Standard 35.1% April 2008 – Daiwa Jitsugyo Entertainment Standard 20.4% January 2008 – Recruit HR Service Fixed 12.5% February 2008 0.7 Management Non-cancellable1 Sun M Project Food and Beverage Standard 4.0% January 2008 – Starbucks Coffee Food and Beverage Standard 3.2% February 2008 – Japan Other Other tenants - 16 24.8% – Total/Average 100% February 2008
1 A one year lease. The lease is non-cancellable until August 2007.
OFFICE Kokusai Nihombashi Kokusai Nihombashi is located in the Kabutocho district, the centre for securities firms in Tokyo and home of the Tokyo Stock Exchange, which is about 200 metres from the property. ADDRESS 1-3-12, Nihombashi Kayabacho, Chuo-ku, Tokyo Approximately 100 metres (a one minute walk) from Kayabacho station on the Tozai and Hibiya subway lines. SUB-MARKET Chuo ward PROPERTY TYPE Single-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations One lease (4,398 sqm) representing 100% of NRA expired during the period. This was renewed with a 3.9% increase in rental levels. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE 40 Sun The Sun property is a 10-storey office (ground floor retail) building, with two basement floors. It is located on a highly visible corner site on Showa dori, one of the three arterial roads in the Ginza area of Tokyo and close to the massive new Shiodome office and mixed-use development. ADDRESS 5-13-12, Ginza, Chuo-ku Tokyo Approximately 100 metres (a one minute walk) from Higashi-Ginza station on the Tokyo Metro Hibiya line. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office building with some retail tenants IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations Five leases (926 sqm) representing 25.2% of NRA expired during the period. All were renewed at the same rental levels. New Leases One new lease (364 sqm) representing 9.9% of NRA. Cancelled Leases One cancelled lease (364 sqm) representing 9.9% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,036 Purchase date Jan 2006 Trust’s share NRA (tsubo) 1,331 Carrying value (billion) ¥6.5 Trust’s share NRA (square metres) 4,398 Completed Jul 1987 Occupancy by area 100% PML 5.8% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Japan Securities Securities Standard 100% March 2009 Agents Administration Total 100% March 2009
OFFICE 2007 BJT Annual Report 41
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 469 Purchase date Mar 2005 Trust’s share NRA (tsubo) 1,111 Carrying value (billion) ¥3.6 Trust’s share NRA (square metres) 3,673 Completed Nov 1974 Occupancy by area 100%
PML 12.8% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry United Corporation Housing Standard 19.8% May 2008 Aflo Photo Studio Standard 11.4% September 2008 D Flawless Service Standard 10.4% August 2007 Information Task Telecommunications Standard 10.2% September 2008 Force Tokyo Kanefuku Manufacturer Standard 9.9% September 2007 Other Other tenants - 6 38.4% Total/Average 100% October 2008
OFFICE Yamashitacho Yamashitacho is located in Yokohama City in the Kanagawa prefecture, approximately 30 kilometres south of Tokyo. The property is close to the Kanagawa prefectural government offices, China Town, Yokohama Stadium and Motomachi shopping street. ADDRESS 253, Yamashitacho, Naka-ku, Yokohama-shi, Kanagawa Approximately a five minute walk from Ishikawacho station on the JR Negishi line. SUB-MARKET Yokohama PROPERTY TYPE Multi-tenant office / retail building IN REVIEW (SINCE ACQUISITION) Occupancy Occupancy by area remained stable since acquisition. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE 42 Higashi Totsuka The Higashi Totsuka property is an 11-storey office building with 38 parking lots at basement level. The property is adjacent to the Higashi Totsuka JR station, which is the second station eight kilometres south from Yokohama station on the Yokosuka line and 37 kilometres from central Tokyo. ADDRESS 90-6, Kawakamicho, Totsuka-ku, Yokohama-shi, Kanagawa Approximately 80 metres (a one minute walk) from Higashi Totsuka station. SUB-MARKET Yokohama PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 0.1% (four sqm) since 30 June 2006. Lease Expirations Two leases (824 sqm) representing 14.5% of NRA expired during the period. Both were renewed at the same rental levels. New Leases One new lease (182 sqm) representing 3.2% of NRA. Cancelled Leases One cancelled lease (178 sqm) representing 3.1% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,131 Purchase date May 2007 Trust’s share NRA (tsubo) 1,664 Carrying value (billion) ¥3.0 Trust’s share NRA (square metres) 5,498 Completed Oct 1991 Occupancy by area 100% PML 14.6% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Fuji Soft Systems Solutions Fixed 23.9% October 2007 0.3 non-cancellable1 Nihon Chouzai Pharmacy Standard 17.4% March 2008 – Denny’s Japan Food and Beverage Standard 12.6% November 2011 – Yokohama Grace Church Standard 12.3% July 2008 – Bible Church Cornes and Co. Ltd Insurance Standard 11.2% November 2007 –
Other tenants Other tenants - 3 22.6% – Total/Average 100%
1 A 0.5 year lease. The lease is non-cancellable during the term (until October 2007).
OFFICE 2007 BJT Annual Report 43
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,582 Purchase date Mar 2005 Trust’s share NRA (tsubo) 1,716 Carrying value (billion) ¥2.7 Trust’s share NRA (square metres) 5,671 Completed Feb 1993 Occupancy by area 90.5%
PML 11.2% Occupancy by income 91.2% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry NTT Advanced Systems Solutions Standard 70.7% January 2008 Technology Misawa Homes Tokyo Housing Standard 15.6% May 2009 KDDI Telecommunications Standard 3.7% July 2007 Daio Paper Manufacturer Standard 3.5% August 2007 Home Town Housing Standard 3.4% November 2008 Yokohama Other Other tenants – 1 3.1% Total/Average 100% November 2007
OFFICE Sun Ace Tokugawa Sun Ace Tokugawa is located in Nagoya, the fourth largest city in Japan, with a population of approximately 2.2 million. Nagoya is a major industrial centre located in central Japan. ADDRESS 1-901, Tokugawa, Higashi-ku, Nagoya-shi, Aichi SUB-MARKET Nagoya PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 12.9% (801 sqm) since 30 June 2006. Lease Expirations Seven leases (1,530 sqm) representing 24.5% of NRA expired during the period. All were renewed at the same rental levels. New Leases Four new leases (878 sqm) representing 14.1% of NRA. Cancelled Leases One cancelled lease (77 sqm) representing 1.2% of NRA.
OFFICE 44 Takadanobaba Takadanobaba is a four-storey building with two basement levels located close to the Takadanobaba station, a busy rail hub in central Tokyo approximately seven kilometres from Tokyo station. ADDRESS 3-12-2, Takadanobaba, Shinjuku-ku, Tokyo SUB-MARKET Shinjuku ward PROPERTY TYPE Multi-tenant office / retail building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 13.9% (355 sqm) since 30 June 2006. Lease Expirations Two leases (723 sqm) representing 28.3% of NRA expired during the period. All were renewed at the same rental levels. New Leases One new lease (355 sqm) representing 13.9% of NRA. Cancelled Leases No cancelled leases during the period.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,953 Purchase date Jan 2006 Trust’s share NRA (tsubo) 1,886 Carrying value (billion) ¥2.3 Trust’s share NRA (square metres) 6,235 Completed Mar 1990 Occupancy by area 77.1% PML 12.2% Occupancy by income 78.4%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Sanyo Consumer Service Standard 19.2% November 2007 Marketing Ezaki Glico Manufacturer Standard 16.2% August 2008 Nagoya Mosaic Tile Wholesale Standard 9.6% January 2008 Toyo Ink Mfg Manufacturer Standard 9.6% September 2008 Hokusho Manufacturer Standard 7.7% March 2008 Other Other tenants - 11 37.7% Total/Average 100% July 2008
OFFICE 2007 BJT Annual Report 45
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,211 Purchase date Mar 2006 Trust’s share NRA (tsubo) 772 Carrying value (billion) ¥1.8 Trust’s share NRA (square metres) 2,553 Completed Mar 1986 Occupancy by area 100%
PML 7.5% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Uchida Unicom Systems solutions Standard 27.0% April 2009 Nichinoken Education Standard 22.4% November 2007 Royal Holdings Food and Beverage Standard 22.5% March 2011 New Deal Beauty Salon Standard 16.6% February 2008 Chino Rental Studio Standard 11.5% February 2010 Total/Average 100% April 2009
OFFICE Forest Kita Aoyama The Forest Kita Aoyama property is located in the heart of the fashion and design area of Kita Aoyama in the Minato ward of central Tokyo. The building is a modern three-storey (plus basement and attic) office building with five car parking spaces. ADDRESS 3-10-3, Kita Aoyama, Minato-ku, Tokyo Approximately 50 metres (a one minute walk) from Omotesando station served by Tokyo Metro Ginza, Chiyoda and Hanzomon lines. SUB-MARKET Minato ward PROPERTY TYPE Office building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations Two leases (862 sqm) representing 100.0% of NRA expired during the period. Both were renewed with rental levels increasing by 10.0%. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE 46 OS Tsukiji OS Tsukiji is an eight-floor office building located in the Tsukiji area of central Tokyo, immediately to the east of the Ginza area. The property is located close to three subway stations, Higashi Ginza station on the Hibiya line, Tsukiji station on the Hibiya line and Tsukiji Shijo station on the Toei Oedo line. The Tsukiji Shijo, one of the major wholesale markets in metropolitan Tokyo, is located three minutes from the property. ADDRESS 4-4-12, Tsukiji, Chuo-ku, Tokyo SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office / retail building IN REVIEW (2006/2007) Occupancy Occupancy by area has decreased by 9.1% (198 sqm) since 30 June 2006. Lease Expirations Four leases (1,449 sqm) representing 66.8% of NRA expired during the period. All were renewed with rental levels increasing by 4.2%. New Leases No new leases during the period. Cancelled Leases One cancelled lease (198 sqm) representing 9.1% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 706 Purchase date Mar 2005 Trust’s share NRA (tsubo) 260 Carrying value (billion) ¥1.8 Trust’s share NRA (square metres) 862 Completed Apr 1991 Occupancy by area 100% PML 5.9% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Telecom Staff Other Standard 99.8% April 2009 Pacific Kikaku Research Standard 0.2% February 2009 Total/Average 100% April 2009
OFFICE 2007 BJT Annual Report 47
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 455 Purchase date Dec 2005 Trust’s share NRA (tsubo) 656 Carrying value (billion) ¥1.7 Trust’s share NRA (square metres) 2,169 Completed Jul 1982 Occupancy by area 90.9%
PML 7.9% Occupancy by income 90.9% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Japan News Agency Publishing Standard 22.2% May 2009 Sadamatsu Wholesale Standard 15.8% September 2007 Tokyo Rokuon Entertainment Standard 13.2% February 2009 Shinto Corporation Wholesale Standard 12.7% March 2009 Nikkan Sports Agency Advertising Standard 12.6% March 2009 Other Other tenants - 3 23.5% Total/Average 100% October 2008
OFFICE Prime Kanda Prime Kanda, constructed in 1990, is a medium-sized, multi-tenant office building comprising 10 levels with basement. It is located in central Tokyo in the Kanda district, an area with a mix of small to medium-sized office and mixed-use buildings. ADDRESS 2-8-2, Kanda Sudacho, Chiyoda-ku, Tokyo Approximately 50 metres (a one minute walk) from Iwamotocho station on the Shinjuku subway line SUB-MARKET Chiyoda ward PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations Two leases (480 sqm) representing 28.6% of NRA expired during the period. Both were renewed at the same rental levels. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE 48 Asakusa Asakusa is an eight-floor office property with one basement level, and is leased to a single tenant on a fixed non-cancellable lease for 10 years. ADDRESS 1-3-8, Komagata, Taito-ku, Tokyo SUB-MARKET Taito ward PROPERTY TYPE Single-tenant office / retail building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest1 100% Land area (square metres) 302 Purchase date Jan 2006 Trust’s share NRA (tsubo) 508 Carrying value (billion) ¥1.5 Trust’s share NRA (square metres) 1,680 Completed Aug 1990 Occupancy by area 100% PML 14.5% Occupancy by income 100%
1 This is a condominium property (which is substantially similar to a strata title property). The 1,680 square metres of NRA represents 100% of the Trust’s interest in Levels B1, 1F and 4F to 10F.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Diesel United Manufacturer Standard 15.7% March 2009 Japan Business Consultant Standard 14.8% February 2008 Centre Tokai Optical Manufacturer Standard 14.4% October 2007 Brion Technologies Manufacturer Standard 14.0% November 2007 Nippon Telecommunication Standard 14.0% June 2007 Telecommunication Other Other tenants – 2 Standard 27.1% Total/Average 100% April 2008
OFFICE 2007 BJT Annual Report 49
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 397 Purchase date Feb 2006 Trust’s share NRA (tsubo) 619 Carrying value (billion) ¥1.3 Trust’s share NRA (square metres) 2047 Completed Sept 2004 Occupancy by area 100%
PML 4.46% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Bekkoame Internet Telecommunication Fixed 100% February 2016 8.7 non-cancellable1 Total/Average 100% February 2016
1 A 10 year lease. The lease is non-cancellable during the term (until February 2016).
OFFICE Shiba Daimon The Shiba Daimon property is located on a major arterial road – route 15 – in the Minato ward of central Tokyo, with a significant concentration of modern office accommodation. The property is in close proximity to a number of rail and subway links and food and beverage stores. ADDRESS 1-16-3, Shiba Daimon, Minato-ku, Tokyo Approximately 100 metres (a two minute walk) from Daimon station on the Tokyo Metro Asakusa line. SUB-MARKET Minato ward PROPERTY TYPE Multi-tenant office / retail / residential building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE 50 Prime Tsukiji Prime Tsukiji is located in the Tsukiji area of central Tokyo, which is immediately to the east of the Ginza district. It is a multi-tenant office building over nine levels. The property benefits from an open outlook and is close to the Ginza Capital Hotel. ADDRESS 2-1-2, Tsukiji, Chuo-ku, Tokyo Approximately 100 metres (a two minute walk) from Shintomicho station on the Yurakucho subway line. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations Five leases (1,140 sqm) representing 85.8% of NRA expired during the period. All of these were renewed at the same rental levels. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest1 100% Land area (square metres) 517 Purchase date Mar 2005 Trust’s share NRA (tsubo) 293 Carrying value (billion) ¥1.0 Trust’s share NRA (square metres) 969 Completed Mar 1994 Occupancy by area 100% PML 9.8% Occupancy by income 100%
1 This is a condominium property. The 969 square metres of NRA represents 100% of the Trust’s interest in Levels B1, 1F, 4F and 5F.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Daitoku Arts & Printing Standard 33.9% July 2007 Printing Niigata Seimitsu Manufacturer Standard 33.4% October 2007 Ichirokudo Food and Beverage Standard 32.7% October 2007 Total/Average 100% September 2007
OFFICE 2007 BJT Annual Report 51
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 246 Purchase date Jan 2006 Trust’s share NRA (tsubo) 402 Carrying value (billion) ¥1.0 Trust’s share NRA (square metres) 1,330 Completed Aug 1992 Occupancy by area 100%
PML 8.1% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Laterra Network Printing Standard 28.6% June 2008 Triple S Consultant Standard 28.6% March 2009 Solos Advertising Standard 14.3% June 2008 Kousai Transport Transportation Standard 14.3% July 2008 TTC Corporation Custom Broker Standard 14.3% August 2008 Total/Average 100% September 2008
OFFICE Yotsuya KD Yotsuya KD is a small multi-tenant office building comprised of nine floors and a basement. The ground floor to the seventh floor is leased as offices and the top two floors comprise two residential units. ADDRESS 4-25-5, Yotsuya, Shinjuku-ku, Tokyo Approximately 470 metres (a six minute walk) from Shinjuku Gyoenmae station on the Tokyo Metro Marunouchi line. SUB-MARKET Shinjuku ward PROPERTY TYPE Multi-tenant office and residential building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 3.7% (45 sqm) since 30 June 2006. Lease Expirations One lease (62 sqm) representing 5.2% of NRA expired during the period. It was renewed at the same rental level. New Leases Two new leases (203 sqm) representing 16.9% of NRA. Cancelled Leases One cancelled lease (159 sqm) representing 13.2% of NRA.
OFFICE 52 Akabane Akabane is an eight-level office building, well located in the Akabane commercial centre, very close to the railway station. The property has a convenience store on the ground level and office tenants on the upper levels. ADDRESS 1-6-7, Akabane, kita-ku, Tokyo Approximately 130 metres (a two minute walk) from Akabane station on the JR Keihin Tohoku line and other JR lines. SUB-MARKET Kita ward PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases Three new leases (413 sqm) representing 38.1% of NRA. Cancelled Leases Two cancelled leases (413 sqm) representing 38.1% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 228 Purchase date Mar 2005 Trust’s share NRA (tsubo) 363 Carrying value (billion) ¥0.8 Trust’s share NRA (square metres) 1,200 Completed Feb 1990 Occupancy by area 86.8% PML 6.7% Occupancy by income 86.4%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry 1 LUX Manufacturer Standard 23.3% June 2008 Supply Telecommunication Standard 16.3% January 2008 Ito Fujita Patent Office Consultant Standard 15.7% February 2008 Equal Design Manufacturer Standard 15.1% August 2007 Nippon Unitech Telecommunication Standard 13.0% July 2007 Other Other tenants – 2 16.6% Total/Average 100% February 2008
OFFICE 2007 BJT Annual Report 53
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 202 Purchase date Jan 2006 Trust’s share NRA (tsubo) 328 Carrying value (billion) ¥0.8 Trust’s share NRA (square metres) 1,084 Completed Jun 1993 Occupancy by area 87.3%
PML 6.7% Occupancy by income 87.8% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Yamataku Housing Standard 27.4% May 2008 Eikoh Inc. Education Standard 26.4% May 2008 Mini Stop Retail Standard 19.4% July 2008 Shimizu Sangyo Wholesale Standard 13.9% April 2009 Health Life Food and Beverage Standard 12.9% March 2009 Corporation Total/Average 100% August 2008
OFFICE Daikanyama Takara Daikanyama Takara is a multi-tenant office building comprising four levels. It is in a prime location between two busy stations. Daikanyama is a vibrant, fashionable area, one train stop from the major hub of Shibuya in central Tokyo. ADDRESS 1-3-2, Kami-Meguro, Meguro-ku, Tokyo Approximately 250 metres (a four minute walk) from Naka Meguro station on the Hibiya subway line and 450 metres (a six minute walk) from Daikanyama station on the Tokyu Toyoko line. SUB-MARKET Meguro ward PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations Three leases (733 sqm) representing 76% of NRA expired during the period. All of these were renewed at the same rental levels. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
OFFICE 54 Showa Yakubo Showa Yakubo is a six level multi-tenant office building. Nihombashi is a major office district in central Tokyo. It is the location of a number of large companies and financial institutions, including the Bank of Japan. ADDRESS 3-4-18, Nihombashi Honcho, Chuo-ku, Tokyo Approximately 50 metres (a one minute walk) from Shin Nihombashi station on the JR Sobu line and 250 metres (a three minute walk) from Mitsukoshimae station on the Ginza subway line. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area has decreased by 26.4% (328 sqm) since 30 June 2006. Lease Expirations No leases expired during the period. New Leases One new lease (271 sqm) representing 21.9% of NRA. Cancelled Leases One cancelled lease (599 sqm) representing 48.3% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 413 Purchase date Jan 2006 Trust’s share NRA (tsubo) 292 Carrying value (billion) ¥0.8 Trust’s share NRA (square metres) 965 Completed Apr 1991 Occupancy by area 100% PML 4.2% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Mother Enterprise Entertainment Standard 47.4% January 2009 C’s Lab Education Standard 27.2% January 2009 Lover Soul Entertainment Standard 25.4% July 2007 Total/Average 100% August 2008
OFFICE 2007 BJT Annual Report 55
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100%1 Land area (square metres) 403 Purchase date Jan 2006 Trust’s share NRA (tsubo) 375 Carrying value (billion) ¥0.7 Trust’s share NRA (square metres) 1,241 Completed July 1983 Occupancy by area 51.7%
PML 8.1% Occupancy by income 50.3% Information Property
1 This is a condominium property. The 1,241 square metres of NRA represents 100% of the Trust’s interest in part of 1F and 3F, and the whole of 4F to 6F.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Kubota Construction Housing Standard 40.7% June 2008 Jiho Pharmaceutical Standard 21.3% May 2008 Kingsum Manufacturer Standard 15.6% January 2008 Chosei Yakuhin Pharmaceutical Standard 14.8% February 2008 Iida Koji Consultant Standard 7.7% May 2008 Total/Average 100% May 2008
OFFICE FT Nihombashi FT Nihombashi is a multi-tenant office building with nine levels. It is located in the Nihombashi district in central Tokyo, in an area dominated by small to medium-sized businesses. ADDRESS 10-6, Nihombashi Hisamatsucho, Chuo-ku, Tokyo Approximately 250 metres (a three minute walk) from Higashi Nihombashi station on the Asakusa subway line. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office building IN REVIEW (2006/2007) Occupancy Occupancy by area has decreased by 16.6% (197 sqm) since 30 June 2006. Lease Expirations No leases expired during the period. New Leases One new lease (197 sqm) representing 16.6% of NRA. Cancelled Leases Two cancelled leases (394 sqm) representing 33.3% of NRA.
OFFICE 56 Sun No. 5 The Sun No. 5 property is a small, multi-tenant office / retail building. The property is adjacent to the Muromachi / Honcho office areas, where the head office of the Bank of Japan and the main store of the Mitsukoshi department store chain are located. ADDRESS 4-2-17, Nihombashi Muromachi, Chuo-ku, Tokyo Approximately 250 metres (a three minute walk) from Kanda station on the JR line. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant office / retail building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 12.9% (104 sqm) since 30 June 2006. Lease Expirations Two leases (208 sqm) representing 25.8% of NRA expired during the period. Both were renewed at the same rental levels. New Leases Two new leases (187 sqm) representing 23.2% of NRA. Cancelled Leases One cancelled lease (83 sqm) representing 10.2% of NRA.
OFFICE KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest1 100% Land area (square metres) 256 Purchase date Jan 2006 Trust’s share NRA (tsubo) 358 Carrying value (billion) ¥0.6 Trust’s share NRA (square metres) 1,182 Completed Oct 1988 Occupancy by area 83.3% PML 5.6% Occupancy by income 82.0%
1 This is a condominium property. The 1,182 square metres of NRA represents 100% of the Trust’s interest in Levels 3F to 8F.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Oriental Bio Service Standard 40.2% May 2008 Yoshizawa Architect Standard 21.4% September 2008 Architecture Maki Tanaka Medical Clinic Standard 20.1% June 2007 Libero Publishing Standard 18.3% May 2008 Total/Average 100% April 2008
OFFICE 2007 BJT Annual Report 57
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 157 Purchase date Mar 2005 Trust’s share NRA (tsubo) 244 Carrying value (billion) ¥0.5 Trust’s share NRA (square metres) 805 Completed May 1983 Occupancy by area 100%
PML 14.4% Occupancy by income 100% Information Property
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Meioh Food and Beverage Standard 14.5% August 2009 Chris Land Retail Standard 13.0% April 2009 Ramura Food and Beverage Standard 12.6% October 2010 Nakamura Kosha Advertising Standard 12.4% November 2008 Ohta Oil Mill Wholesale Standard 12.1% May 2009 Other Other tenants - 4 35.4% Total/Average 100% January 2009
OFFICE G-Clef Kamata G-Clef Kamata, in the Kamata area south of central Tokyo, comprises 84 one-room residential units (small studio type rooms of approximately 24 square metres). Kamata, between Tokyo and Kawasaki, is part of a major industrial centre so there are many apartment complexes for industrial workers in the area. ADDRESS 4-15-11, Nishi-kamata, Ota-ku, Tokyo Approximately 15 kilometres south of Tokyo station and 730 metres (a ten minute walk) from Kamata station on JR Keihin Tohoku line. SUB-MARKET Ota ward PROPERTY TYPE Residential building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RESIDENTIAL 58 Prime Stay Tsukiji Prime Stay Tsukiji is an 11-storey multi-tenant residential property. It is located in a quiet street, adjacent to the Tsukiji Honganji Temple. ADDRESS 3-13-11, Tsukiji, Chuo-ku, Tokyo Approximately 190 metres (a three minute walk) from Tsukiji station on the Hibiya subway line. SUB-MARKET Chuo ward PROPERTY TYPE Multi-tenant residential building IN REVIEW (2006/2007) Occupancy Occupancy by area has increased by 1.4% (17 sqm) since 30 June 2006. Lease Expirations 13 leases (225 sqm) representing 18.4% of NRA expired during the period. All were renewed at the same rental levels. New Leases 10 new leases (173 sqm) representing 14.1% of NRA. Cancelled Leases Nine cancelled leases (156 sqm) representing 12.8% of NRA.
RESIDENTIAL KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 1,255 Purchase date Jan 2006 Trust’s share NRA (tsubo) 1,001 Carrying value (billion) ¥1.9 Trust’s share NRA (square metres) 3,310 Completed Jan 1992 Occupancy by area 100% PML 13.0% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Kobe Steel Manufacturer Fixed 100% September 2007 0.2 non-cancellable1 Total/Average 100% September 2007
1 A two year lease. The lease is non-cancellable during the term (until September 2007).
RESIDENTIAL 2007 BJT Annual Report 59
KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest1 100% Land area (square metres) 414 Purchase date Jan 2006 Trust’s share NRA (tsubo) 370 Carrying value (billion) ¥0.8 Trust’s share NRA (square metres) 1,226 Completed Jun 1986 Occupancy by area 100%
PML 11.2% Occupancy by income 100% Information Property
1 Prime Stay Tsukiji is a condominium property. The 1,226 square metres of NRA represents 100% of the Trust’s interest in Levels 3F to 11F.
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Tenant Name Industry Lease Type Total Rent Lease Expiry Towa Fudosan Ryutsu Brokerage Standard 43.5% November 2007 Service Little Okinawa Other Standard 12.4% September 2008 Overseas Y.K. Corporation Other Standard 4.2% January 2008 ILC Other Standard 2.7% June 2009 Integration Other Standard 2.6% July 2007 Other Other tenants – 29 34.6% Total/Average 100% April 2008
RESIDENTIAL Nishi Kasai Nishi Kasai is a five-storey residential building. It comprises 65 one-room apartment units. Nishi Kasai is mainly a residential and light industrial area, located less than eight kilometres east of Tokyo station. ADDRESS 2-8-13, Nishi kasai, Edogaw-ku, Tokyo Approximately 930 metres (a 12 minute walk) from Nishi Kasai station on the Tozai subway line. SUB-MARKET Edogawa ward PROPERTY TYPE Residential building IN REVIEW (2006/2007) Occupancy Occupancy by area remained stable since 30 June 2006. Lease Expirations No leases expired during the period. New Leases No new leases during the period. Cancelled Leases No cancelled leases during the period.
RESIDENTIAL
60 KEY PROPERTY STATISTICS (30 JUNE 2007) Summary Property Statistics Ownership interest 100% Land area (square metres) 499 Purchase date Jan 2006 Trust’s share NRA (tsubo) 451 Carrying value (billion) ¥0.7 Trust’s share NRA (square metres) 1,490 Completed Nov 1990 Occupancy by area 100% PML 3.0% Occupancy by income 100%
MAJOR TENANT SUMMARY (30 JUNE 2007) % of Remaining Tenant Name Industry Lease Type Total Rent Lease Expiry Term (years) Arealink Housing Standard 100% June 2014 6.9 Non-cancellable1 Total/Average 100% June 2014
1 A 10 year lease. The lease is non-cancellable for the initial five years (until June 2009). Directors’ Report BJT Annual Report 2007 BJT Annual Report 61
The Directors of Babcock & Brown Japan Property Management Limited (“the Responsible Entity”), the Responsible Entity of Babcock & Brown Japan Property Trust (“the Trust”), present their report together with the financial report of the Trust and of the Group, being the Trust and its controlled Report Directors’ entities, for the year ended 30 June 2007 and the Auditor’s Report thereon. Trust information The Trust was established, with Babcock & Brown Japan Property Management Limited as its Responsible Entity, on 31 January 2005. The Trust became a registered scheme under the Corporations Act 2001 on 17 February 2005. The Trust was listed on the Australian Securities Exchange on 4 April 2005. The Trust, registered and domiciled in Australia, is a registered managed investment scheme. The life of the Trust is not limited by a term of years but may terminate on the happening of certain events such as the Trust being removed from listing quotation by ASX Limited. The registered office and principal place of business of the Responsible Entity and the Trust is Level 23, Chifley Tower, 2 Chifley Square, Sydney NSW 2000. The Responsible Entity had three employees at the end of the period, being the Independent Non-Executive Directors. The Responsible Entity The Directors of the Responsible Entity at any time during or since the period end are on pages 62 and 63. Directors
62 From far left: Allan McDonald, Eric Lucas, Phil Green, Paula Dwyer, John Pettigrew
Allan McDonald Independent Non-Executive Chairman (Member of the Audit, Risk & Compliance Committee) Allan was appointed as a Director on 19 February 2005. Allan holds a Bachelor of Economics degree from the University of Sydney and is a Fellow of the Australian Society of Certified Practising Accountants, a Fellow of Chartered Secretaries Australia, a Fellow of the Australian Institute of Management and a Fellow of the Australian Institute of Company Directors. Allan has extensive experience in the investment and commercial banking fields and is presently associated with a number of companies as a consultant and company director. Allan is Chairman of Ross Human Directions Limited, Multiplex Limited and of the responsible entity of the Multiplex Property Trust and the Multiplex SITES Trust. Allan is also a director of Billabong International Limited.
Eric Lucas Managing Director Eric was appointed as a Director on 19 November 2004. Eric joined Babcock & Brown in 1987 and was appointed the Global Head of Real Estate in July 2006. Prior to joining Babcock & Brown, Eric worked in Tokyo at the international law firm of Anderson Mori and Rabinowitz. In 1987, he joined Babcock & Brown at its Japanese joint venture, Nomura Babcock & Brown, where he worked as its representative until 1992. After several years in the San Francisco office of Babcock & Brown, in 1998 Eric returned to Tokyo to establish Babcock & Brown’s Japanese office. Eric received his law degree from the University of Melbourne in Australia.
Phil Green Director Phil was appointed as a Director on 31 January 2005. Phil joined Babcock & Brown in 1984 and is Managing Director and Chief Executive Officer of Babcock & Brown Limited. Prior to joining Babcock & Brown, Phil worked as a Senior Manager with Arthur Andersen where he specialised in taxation. Phil is also Chairman of Babcock & Brown Infrastructure, Babcock & Brown Environmental Investments Limited and of the responsible entity of the MTM Entertainment Trust, and is a Director of Babcock & Brown Capital Limited and Everest Babcock & Brown Alternative Investments. Phil is a Trustee of the Sydney Cricket Ground. BJT Annual Report 2007 BJT Annual Report 63
Phil holds Bachelor of Commerce and Bachelor of Law degrees from the University of New South Wales. He qualified as a Chartered Accountant in 1981 and was admitted as a Solicitor in New South Wales in 1978. Directors Paula Dwyer Independent Non-Executive Director (Chairman of the Audit, Risk & Compliance Committee) Paula was appointed as a Director on 19 February 2005. Paula has extensive experience in the securities, investment management and investment banking sectors. In particular, Paula specialised in the provision of corporate financial advice to companies operating in regulated industries, including financial institutions and utilities. Paula is a Non-Executive Director of Suncorp Metway Limited. She is also a Non-Executive Director and Chairman of the Audit Committee of Tabcorp Holdings Limited. She was formerly a Director of David Jones Limited until December 2006. Paula holds a Bachelor of Commerce degree from the University of Melbourne. Paula is on the ASIC Business Consultative Panel (Melbourne Chapter) and is Vice President of the Baker Heart Research Institute. Paula is a Fellow of the Australian Institute of Chartered Accountants, a Fellow of the Australian Institute of Company Directors and a Fellow of the Financial Services Institute of Australia.
John Pettigrew Independent Non-Executive Director (Member of the Audit, Risk & Compliance Committee) John was appointed as a Director on 19 February 2005. John has extensive financial and commercial experience with a number of major corporations and 30 years involvement in the property industry. John is a Fellow of the Australian Society of Certified Practicing Accountants, a Fellow of Chartered Secretaries Australia, a Fellow of the Australian Institute of Management and a Member of the Australian Institute of Company Directors. John was Chief Financial Officer and Company Secretary of the Stockland Group from 1977 and Finance Director from 1982 until his retirement in March 2004 and is a Director of Rubicor Group Limited. He has had a significant role in structuring and managing listed property trusts since 1980. Senior Management
Left to right: Naoto Ichiki, Ayten Saridas, Shinya Sato, Naoto Yabu
NAOTO ICHIKI Chief Operating Officer 64 Mr Ichiki joined Babcock & Brown in 2006. Prior to joining Babcock & Brown, Mr Ichiki was a Managing Director of JPMorgan, where he was responsible for Real Estate Structured Finance Asia, Real Estate Investment Banking Japan, and Structured Products Japan. Before this he was a management consultant at McKinsey & Company. Mr Ichiki holds a Bachelor of Law degree from Hitotsubashi University and is a licensed real estate broker.
AYTEN SARIDAS Chief Financial Officer Ms Ayten Saridas joined Babcock & Brown in August 2007. Ms Saridas has extensive treasury and corporate finance experience developed across a range of ASX listed companies and investment banks. Her most recent roles were Group Treasurer for Woolworths Ltd and then Lion Nathan where she was responsible for capital management, funding and risk management of the group. Ms Saridas holds a Master of Applied Finance and a Bachelor of Commerce.
SHINYA SATO Head of Acquisitions Mr Sato joined Babcock & Brown in 1999. He holds a Bachelor of Law degree from the University of Hokkaido. Prior to joining Babcock & Brown, Mr Sato was a Managing Director of Jones Lang LaSalle K.K. in Japan, providing a wide variety real estate of services to clients in Japan and throughout the world. Mr Sato is a licensed real estate broker and a registered real estate consultant in Japan.
NA0TO YABU Head of Asset Management Mr Yabu joined Babcock & Brown in 2006. Prior to joining Babcock & Brown, Mr Yabu was a managing director of Orix Asset Management Corporation, a licensed manager of ORIX JREIT, leading its IPO. Following this, he was a Managing Director of two private funds management companies heading up their real estate asset management groups in Japan. Mr Yabu holds a Bachelor of Science degree from Kobe University and is a licensed real estate broker. BJT has a vertically integrated structure with the Trust management, asset management and acquisitions functions all performed by Babcock & Brown. This is unique amongst the Japanese focused Listed Property Trusts in Australia. The Tokyo-based team has grown substantially from 12 at the time of the IPO to the current 25 professionals. BJT Annual Report 2007 BJT Annual Report 65 Babcock & Brown Group
Babcock & Brown Responsible Entity Japan Manager Japan Property Trust Report Directors’
Corporate Acquisitions Asset Management
Ayten Saridas Naoto Ichiki Chief Financial Officer Chief Operating Officer
Asset Management Finance Acquisitions Team of Six Accounting and Team of eight Legal Counsel nine professionals Administration Staff professionals headed Investor Relations headed by Shinya Sato headed by Sachi Ogino by Naoto Yabu
The above chart is prepared based on the internal organisation structure of the Babcock & Brown Group (including BBCL) as of 31 August 2007 Melanie Hedges Company Secretary Melanie was appointed Company Secretary on 21 December 2005. Melanie joined Babcock & Brown in October 2005 as Company Secretary for a number of the Group’s listed and unlisted specialised funds and is responsible for the company secretarial function and corporate governance for the boards and committees of these Group entities. Prior to joining Babcock & Brown, Melanie was Joint Company Secretary from July 2005 and Assistant Company Secretary from 2002 of the Mirvac Group. Melanie is an Affiliate of Chartered Secretaries Australia.
Meetings of Directors The number of Directors’ meetings (including meetings of the committee) and the number of meetings attended by each of the Directors of the Responsible Entity during the year were:
Audit, Risk & Compliance Board Meetings Committee Director A B A B
Paula Dwyer 11 11 5 5 Eric Lucas 11 11 – – Phil Green 7 11 – – Allan McDonald 11 11 5 5 John Pettigrew 11 11 5 5
A - Number of meetings attended. B - Number of meetings held during the time the Director held office during the year.
66 Principal activities The principal activities of the Trust during the financial period were investments in interests in properties in Japan, with any surplus Australian funds being invested in short-term deposits. There were no significant changes in the nature of the Trust’s activities during the financial period.
Review and results of operations The profit attributable to Unitholders for the year amounted to $129,195,000 (30 June 2006: $59,026,000). The Trust raised $114 million through an institutional placement in August 2006 to partially fund the acquisition of five retail properties in Japan. Further interests in four properties were acquired during the year, largely debt funded. The Trust’s gearing ratio increased from 50.9% to 51.1% at 30 June 2007. The Trust sold a retail asset in June 2007. The Trust had interests in 39 properties at 30 June 2007 (30 June 2006: 31). Net property income from interests in investment properties is set out below.
Consolidated Year ended Year ended 30/06/07 30/06/06 $’000 $’000 Retail 28,113 14,878 Office 27,969 23,977 Residential 2,081 1,121 58,163 39,976 Associate 3,928 6,461 Total net property income from interests in investment properties 62,091 46,437 In accordance with the Trust’s investment property accounting policy the Trust assessed the fair value of investment properties during the year upwards by $20,626,000 (year ended June 2006: $50,664,000). Distributions Distributions declared and/or paid during the year ended 30 June 2007 were: Year ended Year ended 30/06/07 30/06/06
Final distribution • Distribution cents per Unit 6.15¢ 5.38¢ On or about • Payment date 31/08/07 31/08/06
Interim distribution • Distribution cents per Unit 5.75¢ 4.38¢ • Payment date 28/02/07 28/02/06
Distributions of 11.90 cents per Unit for the year ended 30 June 2007 were 22% higher than the 9.76 cents per Unit for the year ended 30 June 2006.
Significant changes in the state of affairs In the opinion of the Directors of the Responsible Entity, there were no significant changes in the state of affairs of the Group that occurred during the financial period under review.
Environmental regulation To the best of their knowledge and belief after making due enquiry, the Directors have determined that the Trust has complied with all significant environmental regulations applicable to its operations in the 2007 BJT Annual Report jurisdictions it operates in. 67 Significant events after the balance date There has not arisen in the interval between the end of the financial year and the date of this report any item, a transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Responsible Entity, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
Future developments and results Report Directors’ In the opinion of the Directors, disclosure of any further information on future developments and results other than is already disclosed in this report or the Financial Statements would be unreasonably prejudicial to the interest of the Group.
Interests of the Responsible Entity The Responsible Entity holds 4,000,000 Units (0.8%) directly in the Trust. As at 30 June 2007, the Babcock & Brown Group and its associates held 20,774,694 Units (4.2%) in the Trust, which includes the Responsible Entity’s holding as above. Responsible Entity’s remuneration The basis of fees paid to the Responsible Entity is set out in Note 32 to the Financial Statements. Set out below are the fees paid or payable by the Trust to the Responsible Entity and its associates during the year:
Consolidated Year ended Year ended 30/06/07 30/06/06 $’000 $’000
Trust base fee – payable to Responsible Entity 1,180 1,401 Asset base fee – payable to Japan Asset Manager 4,499 2,615 TK distributions – payable to TK Operator 131 246 Total base fees 5,810 4,262
Asset performance fee 2,101 8,993 Asset performance fee rebate – receivable from Responsible Entity (2,101) – Trust performance fee – 22,183 Total performance fees – 31,176
Total Asset Management Fees paid or payable to Responsible Entity and related parties including the net effect of GST 5,810 35,438
Consolidated 30/06/07 30/06/06 $’000 $’000
The following amounts are included in accounts payable as owed to the 68 Responsible Entity or related parties at balance date relating to the Asset Management Fees (including the net effect of GST or Japanese consumption tax) 29,995 38,712
Directors’ interests The relevant interests of each Director of the Responsible Entity in Units of the Trust at the date of this report are set out below:
Director Type of Unit Number held
Allan McDonald Ordinary 240,000 Eric Lucas Ordinary 6,123,706 Phil Green Ordinary 1,530,927 Paula Dwyer Ordinary 250,000 John Pettigrew Ordinary 150,000
Units on issue 493,096,223 Units of the Trust were on issue as at 30 June 2007 (428,796,223 as at 30 June 2006). During the period, 64,300,000 Units were issued by the Trust as part of institutional placement.
Trust assets At 30 June 2007 the Trust held assets to a total value of $1,327,233,000 (30 June 2006: $1,142,054,000). The basis for valuation of the assets is disclosed in Note 1 to the Financial Statements. Auditor’s independence declaration The Group’s lead Auditor has provided a written declaration under section 307C of the Corporations Act 2001 that to the best of his knowledge and belief, there have been no contraventions of: • The Auditor independence requirements of the Corporations Act 2001 in relation to the audit; and • The applicable Australian code of professional conduct in relation to the audit. The declaration is provided on page 70 and forms part of this Directors’ Report.
Indemnification and insurance of officers and Auditors Indemnification Under the Trust Constitution the Responsible Entity, including its officers and employees, is indemnified out of the Trust’s assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Trust. Since the date of commencement, the Trust has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an Auditor of the Trust.
Insurance premiums As part of its insurance arrangements, the Responsible Entity pays insurance premiums in respect of Directors’ and Officers’ Liability insurance contracts covering Directors and officers of the Responsible Entity. It is not possible to separately identify the proportion of the premiums that are paid by the Responsible Entity on behalf of current and former Directors and Officers of the Responsible Entity.
Rounding The Trust is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and, in accordance with that Class Order, amounts in the financial report and the Directors’ Report have been rounded to the nearest thousand dollars unless otherwise stated. BJT Annual Report 2007 BJT Annual Report 69 Dated at Sydney this 16 August 2007.
Signed in accordance with a resolution of the Directors: Report Directors’
F A MCDONALD Director Babcock and Brown Japan Property Management Limited PricewaterhouseCoopers ABN 52 780 433 757
Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia www.pwc.com/au Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999
Auditor’s Independence Declaration As lead Auditor for the audit of the Babcock & Brown Japan Property Trust for the year ended 30 June 2007, I declare that, to the best of my knowledge and belief, there have been: a) no contraventions of the Auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of the Babcock & Brown Japan Property Trust and the entities it controlled during the period.
70 AJ WILSON Partner PricewaterhouseCoopers Sydney, 16 August 2007 Corporate Governance
INTRODUCTION The Board of Directors of the Responsible Entity of the Trust is responsible for establishing a sound framework of corporate governance and implementing the corresponding governance culture and processes for the Trust. The Board recognises that corporate governance and good governance procedures can add to the performance of the Trust, increase Unitholder value and engender the confidence of the investment community. The ASX Corporate Governance Council has developed a set of guidelines entitled Principles of Good Corporate Governance and Best Practice Recommendations. These guidelines articulate 10 core principles (“the ASX Principles”) that the Council believes underlie good corporate governance, together with 28 recommendations (“the ASX Recommendations”) for implementing effective corporate governance. In addition, the Babcock & Brown Group, as parent entity of the Responsible Entity, recognises that effective and transparent governance practices within the funds which it manages is essential to the preservation of securityholders’ and stakeholders’ interests and the continued success of those funds. To this end, Babcock & Brown Limited has established a robust corporate governance framework for the management of the Babcock & Brown specialised funds. This framework includes a number of key principles for the governance of those funds with a view to protecting the interests of each fund’s
securityholders and other stakeholders. A summary of the corporate governance framework adopted 2007 BJT Annual Report by Babcock & Brown can be found on pages 81 to 82 of the Babcock & Brown Limited 2006 Annual 71 Report.
Compliance with the ASX Recommendations The Board advises that its practices were consistent with those of the ASX guidelines, except where specifically noted in this Corporate Governance Statement.
ASX Principle 1: Lay solid foundations for management and oversight Role of the Board and Management ASX Recommendation 1.1: Formalise and disclose the functions reserved to the board and those
delegated to management Governance Corporate The Directors of the Responsible Entity have adopted a formal Board Charter which details the functions and responsibilities of the Board and distinguishes such functions and responsibilities from those which have been delegated to management. As outlined in the Board Charter, the Board is responsible for the management of the affairs of the Responsible Entity in relation to the Trust, including: • approving and monitoring the corporate strategy, financial plans and objectives of the Trust; • evaluating, approving and monitoring the annual budgets and business plans; • determining the Trust’s distribution policy and evaluating, approving and monitoring major capital expenditure, capital management and all major investments, divestitures and other transactions of the Trust, including the issue of securities; • approving all accounting policies, financial reports and material reporting by the Trust; • reviewing and evaluating the performance of the Board, each Board Committee, and each individual Director against the relevant charters, corporate governance policies and agreed goals and objectives; • in consultation with Babcock & Brown, appointing the Chairman and Company Secretary of the Responsible Entity; • ensuring that effective audit, risk management and regulatory compliance programs are in place to protect the Trust’s assets and Unitholder value and approving and monitoring the Trust’s risk and audit framework; • reviewing the performance and effectiveness of the Trust’s corporate governance policies and procedures; and • setting the goals and objectives for the Board and its Committees each year. The Board Charter also establishes the specific powers and responsibilities of the Chairman and Managing Director. Those delegated powers are subject to the specific powers and authorities delegated to the Board Committees and the following powers which are retained by the Board: • contracts, commitments and capital expenditure above specified thresholds and limits determined by the Board from time to time; • expenditure outside the ordinary course of business in excess of thresholds or limits specified by the Board for this purpose; • major strategic decisions; • adoption of the Trust’s annual budget; • approval of financial reports and accounts of the Trust and the Responsible Entity which are to be lodged with any regulator, including the ASX; • the issue of any equity securities by the Trust, except under a programme previously approved by the Board, and • commencing or taking a significant step in major litigation. The Board Charter also includes a summary of the responsibilities of each Director. To assist Directors to understand the Responsible Entity’s expectations of them in relation to the Trust, all Independent Non-Executive Directors have been issued with formal letters of appointment and Directors have formal letters governing their employment through the Babcock & Brown Group. A summary of the Board Charter is available on the Trust website: http\\www.bbjapanpropertytrust.com.
ASX Principle 2: Structure of the Board to add value Structure of the Board ASX Recommendation 2.1: A majority of the board should be independent directors The size and composition of the Board is determined in accordance with the Constitution of the Responsible Entity. In accordance with the Board Charter it is intended that the Board will comprise of Directors with a broad range of skills, expertise and experience, with a majority of Independent Non Executive Directors. 72 As at the date of this statement the Board comprises three independent non-executive Directors and two Directors. The Board is currently comprised of the following five members: Name Position Appointed
Allan McDonald Independent Non-Executive Chairman 2005 Eric Lucas Managing Director 2004 Paula Dwyer Independent Non-Executive Director 2005 Phillip Green Director 2002 John Pettigrew Independent Non-Executive Director 2005
Details of the experience and expertise of the Directors are set out on pages 62 to 63 of the Directors’ Report. The Board has adopted a definition of independent director which is consistent with that set out in ASX Recommendation 2.1, and with the definition set out in section 601JA of the Corporations Act in relation to registered managed investment schemes. In accordance with the Board Charter, a Director of the Responsible Entity is entitled to seek independent professional advice, including, but not limited to, legal, accounting and financial advice, at the Responsible Entity’s expense on any matter connected with the discharge of his or her responsibilities. The cost, nature and details of such advice must first be approved by the Chairman of the Board or the relevant Committee Chairman. The Chairman or Committee Chairman may determine that any advice received by an individual Director will be circulated to the remainder of the Board or the relevant Committee.
ASX Recommendation 2.2: The chairperson should be an independent director The Chairman of the Responsible Entity, Mr Allan McDonald, is independent in terms of the Council’s definition of independent Director. ASX Recommendation 2.3: The roles of chairperson and chief executive officer should not be exercised by the same individual The Board Charter provides that the roles of the Chairman and Chief Executive Officer (in this case the Managing Director) are not to be exercised by the same person. The respective roles and responsibilities of the Chairman and the Managing Director are described in the Board Charter. The roles of Chairman and Managing Director are not fulfilled by the same individual for the Responsible Entity.
ASX Recommendation 2.4: The board should establish a nomination committee Given the small size of the Board, the Directors have decided not to establish a Nomination Committee. This is inconsistent with Recommendation 2.4, although the recommendation itself recognises that a Nomination Committee does not provide the same efficiencies for smaller boards. As the Responsible Entity is a wholly-owned subsidiary of Babcock & Brown, the selection and appointment of new Directors to the Board may be made by the Directors or by Babcock & Brown in accordance with the Constitution of the Responsible Entity. In practice, Babcock & Brown and the Board will consult with each other and assess the appropriate mix of skills, experience and expertise required on the Board at the time of making any future appointment of Directors. The composition of the Committees of the Board is determined by the Board.
ASX Principle 3: Promote ethical and responsible decision-making ASX Recommendation 3.1: Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to: 3.1.1 the practices necessary to maintain confidence in the Trust’s integrity 3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices Code of Conduct The Responsible Entity is committed to delivering strong returns and Unitholder value whilst also promoting Unitholder and general market confidence in the Trust. As a wholly owned subsidiary of Babcock & Brown, the Responsible Entity, its Directors and staff are subject to the Code of Conduct of
Babcock & Brown Group. The Code of Conduct, as it applies to the Trust, is designed to ensure that; 2007 BJT Annual Report • high standards of corporate and individual behaviour are observed by all Directors and staff in the 73 context of their roles; and • staff are aware of their responsibilities to the Trust and always act in an ethical and professional manner. The Code of Conduct requires Directors and staff to avoid conflicts of interest, not to take advantage of opportunities arising from their position for personal gain and to comply with the Trust’s Securities Trading Policy and other policies of the Babcock & Brown Group. The Code of Conduct requires Directors and staff to report any actual or potential breach of the law, the Code of Conduct or other policies. The Responsible Entity promotes and encourages ethical Governance Corporate behaviour and provides protection for those who report violations. A summary of the Code of Conduct is available on the website of Babcock & Brown Limited. In addition to the Code of Conduct, the Board Charter requires that all Directors conduct their duties with the highest level of honesty and integrity, observe the rule and spirit of the law and comply with any relevant ethical and technical standards, not make improper use of information, and set a high standard of fairness, diligence and competency in their position as Director.
ASX Recommendation 3.2: Disclose the policy concerning trading in Trust securities by directors, officers and employees Securities Trading Policy The Responsible Entity has in place a formal Securities Trading Policy which regulates the manner in which Directors and staff can buy or sell Units in the Trust, and requires that they conduct their personal investment activities in a manner that is lawful and avoids conflicts between their own interests and those of the Responsible Entity and the Trust. The policy is specifically designed to raise awareness and minimise any potential for breach of regulations relating to insider trading contained in the Corporations Act. The policy is also designed to minimise the chance that misunderstandings or suspicions arise regarding employees trading while in possession of non-public price sensitive information. The policy is applicable to all Directors and staff of the Responsible Entity. The policy specifies trading windows as the periods during which trading Units of the Trust by Directors and staff may occur. These trading windows will generally be the eight week period following the release of the Trust’s full-year or half-year results and Annual Report, and during an offer period under any publicly available offer document or product disclosure document issued by the Responsible Entity offering Units in the Trust. Trading is prohibited despite a window being open if the relevant person is in possession of non-public price-sensitive information regarding the Trust. The Board may authorise the opening of trading windows at other times. A summary of the Securities Trading Policy is available on the Trust’s website.
ASX Principle 4: Safeguard Integrity in Financial Reporting ASX Recommendation 4.1: Require the chief executive officer (or equivalent) and the chief financial officer (or equivalent) to state in writing to the board that the Trust’s financial reports present a true and fair view, in all material respects of the Trust’s financial condition and operational results and are in accordance with the relevant accounting standards Chief Executive Officer and Chief Financial Officer Sign-off The Chief Executive Officer (in this case the Managing Director) and Chief Financial Officer (in this case the Financial Controller) of the Responsible Entity each report in writing to the Board that in their opinion the Trust’s financial statements for each half and full financial year present a true and fair view, in all material respects, of the Trust’s financial condition and that operational results are in accordance with the relevant accounting standards. The letter describes the process and evidence that the Managing Director and Financial Controller have adopted to satisfy themselves on these matters. In respect of the year ended 30 June 2007, the Managing Director and Financial Controller provided such a letter to the Board and the Audit, Risk & Compliance Committee (refer to the Directors’ Declaration).
ASX Recommendation 4.2: The board should establish an audit committee Audit, Risk & Compliance Committee The Board has established an Audit, Risk & Compliance Committee to assist the Board in fulfilling its corporate governance and oversight responsibilities relating to financial accounting practices, risk management and internal control systems, external reporting, monitoring compliance, the external 74 audit function and the Responsible Entity’s processes for monitoring compliance with laws and regulations. The Committee assists the Board to discharge its responsibilities under the Compliance Plan adopted by the Responsible Entity of the Trust. The Committee provides advice to the Board and reports on the status of the business risks to the Trust through its risk management processes, aimed at ensuring risks are identified, assessed and properly managed. The Committee works on behalf of the Board with the external auditors and reviews non- audit services provided by the external auditor to confirm that they are consistent with maintaining external audit independence.
ASX Recommendation 4.3: Structure the audit committee so that is consists of: • only non-executive directors • a majority of independent directors • an independent chairperson, who is not chairperson of the board • at least three members At the date of this statement, the Committee is comprised wholly of Independent Non-Executive Directors, namely Ms Paula Dwyer (Chairman), Mr Allan McDonald and Mr John Pettigrew. All members have comprehensive financial expertise. The Committee generally meets as required but normally not less than four times per year and reports to the full Board following each meeting, including any recommendations from the Committee that require Board approval or action. The Committee met four times to 30 June 2007 and all Committee members attended all meetings.
ASX Recommendation 4.4: The audit committee should have a formal charter The Committee has adopted a Charter, a summary of which is available on the Trust’s website. The primary duties and responsibilities of the Committee are set out in the Charter and include: • review the financial statements of the Trust for the half-year and full-year, and consider whether they are complete, consistent with information known to Committee members, and reflect appropriate accounting policies and principles; • review with the external auditors the results of the audit. This review may involve management; • review the effectiveness of the Responsible Entity’s internal controls regarding all matters affecting the Trust’s financial performance, financial reporting and regulatory compliance, including information technology security and control; • meeting separately from management with the external auditor at least once a year to discuss any matters that the Committee or auditor believe should be discussed privately; • review the external auditor’s proposed audit plan and approach; • review and confirm the independence of the external auditor by obtaining statements from the auditor on relationships between the auditor and the Trust, including non-audit services; • consider the overall risk management framework for the Trust and review its effectiveness in meeting sound corporate governance principles in identifying, managing and monitoring key risks of the Trust; • monitor the extent to which the Responsible Entity complies with the Trust’s Compliance Plan, the Corporations Act and the Trust’s Constitution and reviewing the effectiveness of the system for monitoring compliance with laws and regulations affecting the Trust and the Responsible Entity; and • providing an open avenue of communication between the external financial auditor, and the Compliance Plan auditor and the Board. ASX Principle 5: Make Timely and Balanced Disclosure ASX Recommendation 5.1: Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance Continuous Disclosure Policy The Responsible Entity is committed to complying with its continuous disclosure obligations pursuant to the ASX Listing Rules and the Corporations Act, and the Responsible Entity has in place well developed procedures for ensuring compliance. In this regard the Responsible Entity has a Continuous Disclosure Policy consistent with the continuous disclosure obligations of the ASX and the Corporations Act which sets out the standards, protocols and requirements expected of all Directors and staff of the Responsible Entity. The Policy is designed with the intention of ensuring that all investors have equal and timely access to information concerning the Trust, and to ensure that price-sensitive information is immediately notified to the ASX in a complete, balanced and timely manner. The Company Secretary of the Responsible Entity, in conjunction with the Chairman and the Managing Director, is responsible for overseeing the implementation and operation of the policy. The Company
Secretary is responsible for reviewing information reported by the Directors or staff and which is 2007 BJT Annual Report or may be material, determining with the Chairman and the Managing Director whether any such 75 information is required to be disclosed to the ASX, and making ASX announcements and issuing media releases and other written public statements on behalf of the Trust. Staff of the Responsible Entity are required to ensure that they are familiar with the policy, report material information to the Company Secretary and provide sufficient details to the Company Secretary to allow a view to be formed as to whether the information requires disclosure. The Board is actively and regularly involved in discussing disclosure obligations in respect of all relevant matters that come before it. The Company Secretary is primarily responsible for communications with the ASX. A summary of the Continuous Disclosure Policy is available on the Trust’s website. Governance Corporate
ASX Principle 6: Respect the Rights of Unitholders ASX Recommendation 6.1: Design and disclose a communications strategy to promote effective communication with Unitholders and encourage effective participation at general meetings The Responsible Entity is committed to communicating with its Unitholders in an effective and timely manner to provide them with ready access to information relating to the Trust. In this regard and in addition to the Continuous Disclosure Policy, the Trust maintains a website (www.bbjapanpropertytrust. com) which provides access to the following information of interest to Unitholders: • information regarding the Board, executive management and activities of the Trust; • access to all Trust announcements and media releases, which are posted to the website promptly following release; • copies of full-year, half-year and interim financial reports; • summaries of Board and Committee Charters and relevant corporate governance policies; • copies of Product Disclosure Statements relating to the Trust’s capital raisings; and • access to the website of the Trust’s Unit Registry, including a facility for Unitholders to review and amend their particulars. The Responsible Entity encourages Unitholders to utilise the Trust’s website as their primary tool to access Unitholder information and disclosures. The Annual Report facilitates the provision to Unitholders by the Trust on a yearly basis of detailed information in respect of the major achievements, financial results and strategic direction of the Trust. The Responsible Entity has a practice that information to be passed by the Responsible Entity at analyst briefings is first released to the ASX to ensure that the market operates on an equal basis. The Responsible Entity is not required to hold annual general meetings for the Trust, however it may convene general meetings from time to time. Where the Responsible Entity convenes a general meeting for the Trust, Unitholders are strongly encouraged to attend and participate in such meetings. The Responsible Entity will provide Unitholders with details of any proposed meetings well in advance of the relevant dates.
ASX Recommendation 6.2: Request the external auditor to attend the annual general meeting and be available to answer Unitholder questions about the conduct of the audit and the preparation and content of the auditor’s report In the even that a general meeting is convened at which the Trust’s accounts will be considered, the Trust’s external auditor will be requested to attend and be available to answer Unitholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
ASX Principle 7: Recognise and Manage Risk ASX Recommendation 7.1: The board or appropriate board committee should establish policies on risk oversight and management The Board is ultimately responsible for overseeing and managing the material risks of the Trust. To assist it in this role, the Board has established the Audit, Risk & Compliance Committee. In accordance with its Charter, the role of the Committee includes reviewing and managing the system for identifying, managing and monitoring the key risks of the Trust and obtaining reports from management on the status of any key risk exposures or incidents. The Responsible Entity has undertaken a review of its risk management framework and has adopted a Risk Management Policy consistent with Australia/New Zealand Standard 4360, which clearly defines responsibilities for managing risk under the Trust’s risk management process. The principle risks of the Trust’s business, including operational, financial, market and regulatory compliance risks have been identified and are required to be regularly managed, monitored and reported. Methods for treating and mitigating risks include transferring, reducing, accepting or passing on risk following assessment using a variety of methods. The Risk Manager of the Responsible Entity adminsters the risk management 76 policy and reports to the Audit, Risk & Compliance Committee on these matters. The Risk Manager also liaises with the Group Risk Manager of the Babcock & Brown Group in relation to the management of the Trust’s key risks. The Audit, Risk & Compliance Committee includes amongst its responsibilities: • consideration of the overall risk management framework of the Trust and the review of its effectiveness in meeting sound corporate governance principles; • keeping the Board informed of all significant business risks; • reviewing with management the system for identifying, managing and monitoring the key risks of the Trust; and • obtaining reports from management on the status of any key risk exposures or incidents. In accordance with the requirements of the Corporations Act, the Responsible Entity has also put in place a Compliance Plan in relation to the Trust. The Compliance Plan sets out the measures that the Responsible Entity applies in operating the Trust to ensure compliance with the Corporations Act, the Constitution of the Trust, the Responsible Entity’s licence obligations and other regulatory parameters. The discharge by the Responsible Entity and its staff of their obligations under the Compliance Plan is monitored by the Audit, Risk & Compliance Committee. This provides the primary tool by which the Responsible Entity manages the legal and regulatory risks associated with the Trust. The Compliance Manager of the Responsible Entity administers the Compliance Plan for the Trust and reports to the Audit, Risk & Compliance Committee on these matters. An audit of the manner in which the Responsible Entity has discharged its obligations under the Compliance Plan is undertaken by the Compliance Plan auditor on an annual basis, and reviews such compliance on a half yearly basis. The Responsible Entity did not have an internal audit function during the 12 month period to 30 June 2007 as contemplated in the commentary to Recommendation 7.1. The Babcock & Brown Group established an internal audit function in 2005, and this function has also engaged an independent external provider of internal audit services, to review the internal audit framework as it relates to Babcock & Brown and the Trust. ASX Recommendation 7.2: The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the board in writing that: 7.2.1 the statement given in accordance with Best Practice Recommendation 4.1 is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board 7.2.2 the Responsible Entity’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects The Responsible Entity’s Managing Director and Financial Controller are each required to report in writing to the Board whether in their opinion: • the statement given in accordance with the Council’s Best Practice Recommendation 4.1 is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and • the Responsible Entity’s risk management and internal compliance and control framework is operating efficiently and effectively in all material respects. The Responsible Entity is committed to ensuring that its system of risk oversight, management and internal control complies with the ASX Principles and that its culture, processes and structures facilitate realisation of the Trust’s business objectives, including potential opportunities, while managing adverse effects and preserving capital.
ASX Principle 8: Encourage Enhanced Performance ASX Recommendation 8.1: Disclose the process for performance evaluation of the board, its committees and individual directors and key executives The Board is responsible for reviewing and monitoring of the performance of the Chairman, the Managing Director and other individual members of the Board, and for establishing key performance criteria against which such performance can be evaluated. In addition, the Board Charter requires the Board, at least once a year, to review and evaluate the performance of the Board, its Committees and each individual Director against relevant charters, corporate governance policies and agreed goals and objectives. This review and evaluation is scheduled to occur in November of each year. Following each review and evaluation, the Board considers how to 2007 BJT Annual Report improve its performance. 77 The Board also sets the goals and objectives for itself and its Committees each year and, if necessary, amends the relevant charters and policies to better reflect these goals and objectives. Given the small size of the Board and the fact that it has not established a Nomination Committee (refer to Principle 2 above), the above functions are reserved for the Board. This does not accord with the ASX’s suggested approach in relation to Principle 8. The review of the performance of key executives of the Responsible Entity is undertaken by the Managing Director in conjunction with senior management of Babcock & Brown. Governance Corporate ASX Principle 9: Remunerate Fairly and Responsibly ASX Recommendation 9.1: provide disclosure in relation to the Trust’s remuneration policies to enable investors to understand (i) the costs and benefits of those policies and (ii) the link between remuneration paid to directors and key executives and corporate performance Mr Green and Mr Lucas are employees of the Babcock & Brown Group. Similarly, the staff of the Responsible Entity are employees of the Babcock & Brown Group who have been seconded to the Responsible Entity and as such are remunerated by the Babcock & Brown Group. The remuneration practices of the Babcock & Brown Group apply to the remuneration of the above Directors and staff. For details regarding the remuneration practices of the Babcock & Brown Group, please refer to the Remuneration Report in the Annual Report of Babcock & Brown Limited. Total remuneration of such Directors and staff by the Babcock & Brown Group is delivered through base salary, annual performance bonus, and for some executives, through an equity incentive plan of Babcock & Brown Limited. Babcock & Brown are currently reviewing the remuneration philosophy and framework as it applies to the Trust and intends that this framework should further align their interests with the Unitholders of the Trust. The Board acknowledges that the remuneration of the Directors and staff by the Babcock & Brown Group is also partly determined by reference to the performance of that group and their individual performance in connection with that Group. This may also be the case in respect of some senior staff of the Responsible Entity from time to time. In this regard, the Board recognises that there is scope for potential conflicts of interest to arise, both in terms of the Babcock & Brown Group’s dealings with the Trust and in terms of the dual roles of the Directors and certain staff. For instance, the Babcock & Brown Group is expected to earn fees and other income from its dealings with the Trust, and the remuneration of the Directors by the Babcock & Brown Group may be partly determined by reference to the level of such fees and income. The most important mechanism to deal with such potential conflicts of interest is that the Board is comprised of a majority of Independent Non-Executive Directors, who thus control the decisions. In addition, the Board implements steps to ensure that the conflicts are declared, managed and, where practicable, removed. Such steps include ensuring that Directors declare a conflict in the circumstances where there are material dealings between the Babcock & Brown Group and the Trust and that, in most cases, Directors abstain from voting on all such matters. Other steps may include seeking independent third party advice or verification, engaging an alternative person to provide the relevant service, or having matters considered by a Committee of the Board comprised solely of Independent Non-Executive Directors. These measures are designed to ensure that, in the event of any conflict of interest, the interests of the Unitholders are given priority over the interests of the Responsible Entity, the Babcock & Brown Group and the Directors. The equity incentive plan described above relates only to Babcock & Brown Limited securities, and does not involve the issuance of Units, options or other securities of the Trust.
ASX Recommendation 9.2: The board should establish a remuneration committee Given the relatively simple nature of the above remuneration practices and the fact that they do not impact on the financial performance of the Trust, the Board has not established a Remuneration Committee. This does not accord with ASX Recommendation 9.2, although such recommendation again notes that a Remuneration Committee is more appropriate for larger companies.
ASX Recommendation 9.3: Clearly distringuish the structure of non-executive directors’ remuneration from that of executives Independent Non-Executive Directors are paid an annual fee for their service on the Board and all Committees of the Board. Independent Non-Executive Directors are not provided with retirement benefits other than statutory superannuation and do not receive options or bonus payments. All Independent Non-Executive Director remuneration is paid by the Responsible Entity and is not an 78 expense of the Trust. ASX Recommendation 9.4: Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by Unitholders Executives do not receive equity based remuneration from the Trust.
ASX Principle 10: Recognise the Legitimate Interests of Stakeholders ASX Recommendation 10.1: Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders The Responsible Entity recognises that it has a number of legal and other obligations to the Trust’s non-Unitholder stakeholders, including staff, clients and the wider community. As outlined above, the Responsible Entity is subject to the Babcock & Brown Code of Conduct, some requiring Directors and staff to observe high standards of corporate and individual behaviour. The objectives of the Code include ensuring that staff, suppliers, clients and competitors can be assured that the Responsible Entity will conduct its affairs in relation to the Trust in accordance with ethical values and practices. Staff are required to comply with both the spirit as well as the letter of the ASX Listing Rules and all laws which govern the operations of the Trust. The Code of Conduct specifically requires all staff to always deal with Unitholders, clients, customers, suppliers, competitors and other staff in a manner that is lawful, diligent and fair and with honesty, integrity and respect. In accordance with the Code of Conduct, the Responsible Entity aims to provide a work environment in which all staff can excel regardless of race, religion, age, disability, gender, sexual preference or marital status. In this regard, the Responsible Entity maintains various policies relating to the workplace, including in respect of occupational health and safety issues. In accordance with the Code of Conduct and the Continuous Disclosure Policy described above, the Responsible Entity is committed to delivering to the market accurate, timely and up-to-date information so that, in relation to the Trust’s Units, the entire investment community operates on an informed and equal basis. These principles of fairness, honesty and propriety are essential elements of the various policies which have been adopted by the Trust. Financial Statements
Directors’ Report 61 Auditor’s Independence Declaration 70 Income Statements 80 Statements of Changes in Equity 81 Balance Sheets 82 Cash Flows Statements 83 Notes to the Financial Statements 84 1 Statement of significant accounting policies 84 2 Net financing costs 91 3 Distributions received 91 4 Gains on derivatives 91 5 Other operating expenses 91 6 Income tax expense 91 7 Auditor’s remuneration 92 8 Earnings per unit 92
9 Cash and cash equivalents 92 2007 BJT Annual Report 10 Trade and other receivables 93 79 11 Derivative financial instruments 93 12 Other assets 93 13 Other financial assets 93 14 Deferred tax asset 94 15 Investments in associates accounted for using the equity method 94 16 Investment properties 96 17 Leasing arrangements 97 Financial Statements 18 Payables 97 19 Distributions paid and payable 97 20 Current tax liabilities 97 21 Interest bearing loans and borrowings 98 22 Deferred tax liabilities 98 23 Contributed equity 99 24 Reserves 99 25 Undistributed income 100 26 Minority interests 100 27 Financial risk management 101 28 Contingencies 104 29 Consolidated entities 104 30 Segment reporting 105 31 Notes to the statements of cash flows 108 32 Related parties 108 33 Key management personnel disclosures 111 34 Contingent liabilities 113 35 Events subsequent to balance date 113 36 Economic dependency 113 Directors’ Declaration 114 Independent Auditor’s Report 115 Income Statements for the year ended 30 June 2007
Note Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
Revenue Property rental income 76,581 50,454 - - Financing income 2 1,189 1,397 1,171 1,345 Distributions received 3 - - 37,833 27,346 77,770 51,851 39,004 28,691
Other income Fair value adjustments to investment property 16(a) 20,626 50,664 - - Share of net profit of associate 15 3,928 17,178 - - Gain on derivatives 4 78,124 11,911 78,124 11,911 Net foreign exchange gain - 155 - 155 Gain on disposal of associate - - 4,142 - Asset performance fee rebate 32 2,101 - 2,101 - 104,779 79,908 84,367 12,066
Total revenue and other income 182,549 131,759 123,371 40,757
Expenses Property expense (18,418) (10,478) - - Asset management fee 32 (7,780) (35,192) (1,180) (24,032) 80 Financing costs 2 (9,957) (4,989) (236) - Loss on disposal of associate 15 (4,240) - - - Loss on disposal of investment property (192) - - - Net foreign exchange loss (1,039) - (1,039) - Other operating expenses 5 (1,948) (2,669) (852) (1,413) Total expenses (43,574) (53,328) (3,307) (25,445)
Profit before tax 138,975 78,431 120,064 15,312
Income tax expense 6 (9,200) (18,672) (4,728) (3,346)
Profit for the period 129,775 59,759 115,336 11,966
Profit is attributable to: Unitholders of Babcock & Brown Japan Property Trust 25 129,195 59,026 115,336 11,966 Minority interest 26 580 733 - - 129,775 59,759 115,336 11,966
Basic and diluted earnings per ordinary Unit 8 26.71¢ 16.13¢
The Income Statements are to be read in conjunction with the Notes to the Financial Statements set out on pages 84 to 113 Statements of Changes in Equity for the year ended 30 June 2007
Note Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
Total equity at the beginning of the year 511,399 262,246 465,805 267,749
Foreign exchange translation differences 24 (119,779) 852 - - Fair value movements on hedge instruments, net of tax 24 (1,155) 3,570 - -
Net income / (loss) recognised directly in equity (120,934) 4,422 - -
Profit for the year 129,775 59,759 115,336 11,966 Distributions paid/payable to minority interest 26 (131) (246) - -
Total recognised income and expense for the year 8,710 63,935 115,336 11,966
Transactions with Unitholders in their capacity as Unitholders: Contributions of equity, net of transaction costs and tax 23 112,612 220,555 112,695 221,427 Distributions paid or provided for 19 (58,678) (35,337) (58,678) (35,337) 53,934 185,218 54,017 186,090 2007 BJT Annual Report 81 Total equity at the end of the financial year 574,043 511,399 635,158 465,805
The Statements of Changes in Equity are to be read in conjunction with the Notes to the Financial Statements set out on pages 84 to 113 Financial Statements Balance Sheets as at 30 June 2007
Note Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
Current assets Cash and cash equivalents 9 82,524 72,723 5,942 5,977 Trade and other receivables 10 10,322 9,502 27,238 21,913 Derivative financial instruments 11 79,346 13,912 79,346 13,912 Other assets 12 967 975 - - Total current assets 173,159 97,112 112,526 41,802
Non-current assets Derivative financial instruments 11 2,990 4,483 - - Other financial assets 13 109 118 581,135 477,394 Investments in associates accounted for using the equity method 15 - 94,214 - - Investment properties 16 1,148,945 944,629 - - Deferred tax asset 14 906 613 - - Other assets 12 1,124 885 - - Total non-current assets 1,154,074 1,044,942 581,135 477,394
Total assets 1,327,233 1,142,054 693,661 519,196
Current liabilities Payables 18 18,059 21,213 3,629 940 82 Derivative financial instruments 11 - 583 - 562 Tenant deposits 56,122 45,033 - - Distribution payable 19 30,325 23,069 30,325 23,069 Current tax liabilities 20 1,884 906 1,871 906 Total current liabilities 106,390 90,804 35,825 25,477
Non-current liabilities Payables 18 22,673 29,568 22,678 27,914 Derivative financial instruments 11 419 - - - Tenant deposits 15,096 7,425 - - Interest bearing debt 21 587,547 486,225 - - Deferred tax liabilities 22 21,065 16,633 - - Total non-current liabilities 646,800 539,851 22,678 27,914
Total liabilities 753,190 630,655 58,503 53,391
Net assets 574,043 511,399 635,158 465,805
Equity Unitholders’ funds Contributed equity 23 576,367 463,755 578,500 465,805 Reserves 24 (122,688) (1,754) - - Undistributed income 25 119,418 48,901 56,658 - Unitholders’ interest 573,097 510,902 635,158 465,805 Minority interest 26 946 497 - - Total equity 574,043 511,399 635,158 465,805
The Balance Sheets are to be read in conjunction with the Notes to the Financial Statements set out on pages 84 to 113 Cash Flow Statements for the year ended 30 June 2007
Note Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
Cash flows from operating activities Property rental income received 76,492 52,905 - - Property expenses paid (18,733) (10,102) - - Trust net property income received 57,759 42,803 - -
Realised foreign exchange gains 4,254 817 8,390 2,777 Other non property expenses paid (15,828) (8,682) (2,923) (8,573) Financing costs (8,125) (3,638) - - Financing income 1,189 1,551 1,171 1,499 Japanese withholding tax paid (3,750) (3,483) (3,711) (3,483) GST/consumption tax received 11,115 8,013 - - GST/consumption tax paid (12,092) (8,649) - -
Net cash inflows / (outflows) from operating activities 31 34,522 28,732 2,927 (7,780)
Cash from investing activities Acquisition of investments (15) (33,397) (134,138) (223,328) Capital expenditure (1,746) - - -
Acquisition of investment properties, 2007 BJT Annual Report including acquisition costs (371,531) (404,787) - - 83 Proceeds from the sale of associate 78,060 - - - Distributions received 3,181 3,208 63,440 27,146 Change in tenant deposits 1,230 359 - -
Net cash outflows from investing activities (290,821) (434,617) (70,698) (196,182)
Cash from financing activities Financial Statements Proceeds from issue of Units 114,454 226,036 114,454 226,036 Payment of transaction costs (1,795) (5,679) (1,758) (4,609) Proceeds from borrowings 347,392 239,766 21,944 - Borrowing establishment costs (2,900) - - - Repayment of borrowings (133,704) - (21,605) - Distributions paid (51,422) (18,570) (51,422) (18,570) Interest received on cross currency swaps 6,497 3,383 6,497 3,383 Net cash inflows from financing activities 278,522 444,936 68,110 206,240
Net increase in cash and cash equivalents 22,223 39,051 339 2,278
Cash and cash equivalents at the beginning of the financial year 72,723 33,967 5,977 3,432 Effect on exchange rate fluctuations on cash held (12,422) (295) (374) 267
Cash and cash equivalents at the end of the financial year 9 82,524 72,723 5,942 5,977
The Cash Flow Statements are to be read in conjunction with the Notes to the Financial Statements set out on pages 84 to 113 Notes to the Financial Statements for the year ended 30 June 2007
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Babcock & Brown Japan Property Trust (the “Trust”) is a Trust domiciled in Australia. The consolidated financial report of the Trust for the year ended 30 June 2007 comprises the Trust and its subsidiaries (together referred to as the “consolidated entity”) and the consolidated entity’s interest in associates. The financial report was authorised for issue by the Directors on 16 August 2007. The Responsible Entity has the power to amend and reissue this financial report. The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial report includes separate Financial Statements for the Trust as an individual entity and the consolidated entity consisting of the Trust and its subsidiaries.
(a) Basis of preparation The financial report is a general purpose financial report which has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRSs). Compliance with AIFRS ensures that the consolidated financial statements and notes comply with International Financial Reporting Standards (IFRS). The parent entity financial statements and notes also comply with IFRS except that it has elected to apply the relief provided to parent entities in respect of certain disclosure requirements contained in AASB132 Financial Instruments: Disclosure and Presentation. The financial report is presented in Australian dollars. The financial report is prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments and investment property at fair value through the Income Statement. The preparation of Financial Statements in conformity with AIFRS requires the use of certain critical 84 accounting estimates. It also requires management to exercise judgement in the process of applying the Group’s accounting policies. The area involving higher degree of judgement or complexity, or area where assumptions and estimates are significant to the Financial Statements relates to deferred Japanese withholding tax and is disclosed in note 1K(iii). The Trust is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.
(b) Principles of consolidation (i) The tokumei kumiai (TK) The consolidated financial information of the Trust incorporates the beneficial interest in 100% of the assets and liabilities arising from the contractual relationships with JPT Co., Ltd., JPT Scarlett Co., Ltd., JPT Direct Co., Ltd and JPT Corporate Co., Ltd all Japanese companies (TK Operators). These contractual relationships are known under Japanese commercial law as TKs. Under the contractual relationships the Trust is entitled to 99% of the profits and losses of the businesses of the TKs. Under Japanese commercial law a TK is not a legal entity but a contractual relationship or contractual relationships between one or more investors and the TK Operator. The 1% of TK profit to which the TK Operator is entitled is shown as minority interest in the Income Statement. The 1% of TK retained earnings to which the TK Operator is entitled is shown as minority interests in the Balance Sheets. The consolidated financial information of the Trust incorporates the results of its interests in the TKs from the date on which the TK agreements were signed. (ii) Associates Associates are those entities in which the consolidated entity has significant influence, but not control, over the financial and operating policies. Investments in associates are accounted for in the Trust’s Financial Statements using the cost method and in the consolidated Financial Statements using the equity method of accounting, after initially being recorded at cost. The consolidated Financial Statements include the consolidated entity’s share of its associates’ post- acquisition movements in reserves, recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the Trust’s Income Statement, while in the consolidated Financial Statements they reduce the carrying amount of the investment. Notes to the Financial Statements for the year ended 30 June 2007
Where the consolidated entity’s share of losses in an associate equals or exceeds its interest in an associate, the consolidated entity’s carrying amount is reduced to nil and does not recognise further losses unless it has incurred legal or constructive obligations or made payments on behalf of an associate. Investments accounted for under the equity method comprise the 48% interest in Kawasaki Dice Tokutei Mokuteki Kaisha (KDTMK) which is held through a nominee.
(iii) Transactions eliminated on consolidation Intra-group balances and transactions are eliminated in preparing the consolidated Financial Statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the consolidated entity’s interest in the entity with adjustments made to the “Investment in associates” and “Share of associates net profit” accounts. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are sold by the associates or, if not sold by the associate, when the consolidated entity’s interest in such entities is disposed of.
(c) Segment reporting A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services with in a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
(d) Foreign currency (i) Functional and presentation currency Items included in the Financial Statements of each of the consolidated entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated Financial Statements are presented in Australian dollars, which is the Trust’s functional and presentation currency. 2007 BJT Annual Report (ii) Transactions and balances 85 Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation of monetary items are recognised in the Income Statement as other income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined. Refer to Note 27(B) for details of the Trust’s foreign exchange hedging policy.
(iii) Foreign interest The beneficial interests in the assets and liabilities arising from the TKs and the TMK are translated into Australian currency at rates of exchange current at balance date, while their income and expenditures Notes to the Financial Statements to Notes are translated at the average of rates ruling during the financial period. Exchange differences arising on translation are taken to the foreign currency translation reserve.
(e) Derivative financial instruments The consolidated entity uses derivative financial instruments to economically hedge its exposure to foreign exchange risk and interest rate risk arising from operational, financing and investment activities. Derivative financial instruments are recognised at fair value on the date the derivative contract is entered into and subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The consolidated entity has designated certain interest rate swap derivatives as hedges of highly probable forecast transactions (cash flow hedges). The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement. Notes to the Financial Statements for the year ended 30 June 2007
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The consolidated entity documents at inception of the hedging transaction the relationship between hedging instruments and hedged items as well as its risk management objectives and strategy for undertaking various hedge transactions. The consolidated entity also documents its assessment, both at hedge inception and on an ongoing basis of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in cash flows of hedged items. Fair value of various derivatives financial instruments used for hedging purposes are disclosed in Note 27. Amounts accumulated in equity are recycled in the Income Statements in the periods when the hedged item will affect profit or loss (for instance when the forecast interest payment that is hedged takes place). When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised in the Income Statement when the forecast transaction is ultimately recognised in the Income Statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Income Statement. The cross currency derivative instruments (capital hedge and distribution hedge) do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the Income Statement. The fair value of financial instruments that are not traded in an active market is determined using standard market valuation techniques. The consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the Balance Sheet date. 86 (f) Investment property Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value. An external, independent valuation company, having an appropriate recognised professional qualification and recent experience in the location and category of property being valued, values each property in the portfolio every three years unless the Board’s periodic review of fair value indicates a change in fair value. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The valuations are prepared by considering the aggregate of the net annual rents receivable from the properties and where relevant, associated costs. A yield which reflects the specific risks inherent in the net cash flows is then applied to the net annual rentals to arrive at the property valuation. Valuations reflect, amongst other things; the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and where appropriate counter notices have been served validly and within the appropriate time. Any gain or loss arising from a change in fair value is recognised in the Income Statements.
(g) Cash and cash equivalents Cash and cash equivalents comprise cash at bank, call deposits and cash in Trust. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows. Cash in Trust relates to cash required to be reserved under debt covenants or by Trust Banks for tenant deposits, capital expenditure or interest payments.
(h) Transaction costs on issue of Units in the Trust Transaction costs arising on the issue of Units in the Trust are recognised directly in Unitholders’ funds as a reduction of the proceeds of Units to which the costs relate. Notes to the Financial Statements for the year ended 30 June 2007
(i) Revenue Revenues are recognised at fair value of the consideration received net of the amount of recoverable goods and services tax (GST) or Japanese consumption tax payable to the taxation authority. Refer Note K(iii).
(i) Property rental income Rental income from investment property is recognised in the Income Statement on a straight line basis over the term of the lease. Lease incentives granted are recognised as a reduction in total rental income. Recovery of outgoings as specified in lease agreements are accrued on an estimated basis and adjusted when the actual amounts are invoiced to the respective tenants.
(ii) Distribution income Distribution income is recognised in the Income Statement on the date the entity’s right to receive payment is established.
(iii) Financing income Interest income is recognised in the Income Statement on a time proportionate basis, using the effective interest method.
(j) Expenses (i) Financing costs Financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested.
(ii) Asset management fees Asset management fees payable to the Responsible Entity are recognised as an expense as the services
are received and for the performance fee component in accordance with the Trust Constitution when 2007 BJT Annual Report performance criteria for the fee are met. Refer to Note 32 for further information. 87 (k) Tax (i) Australian income tax Under current Australian income tax legislation, the Trust is not liable to income tax provided Unitholders are presently entitled to all of the Trust’s taxable income at 30 June each year and any taxable gain derived from the sale of an asset acquired after 19 September 1985 is fully distributed to Unitholders. Tax allowances for building, plant and equipment depreciation are distributed to Unitholders in the form of tax deferred components of distributions.
(ii) Japanese withholding tax Effective as of 1 April 2002, all foreign corporations and non-resident individuals that do not have permanent establishments in Japan are subject to 20% withholding tax on the distribution of profits under TK contracts. The 20% withholding tax is the final Japanese tax on such distributed TK profits and such profits are not subject to any other Japanese taxes (assuming that such investor is not a Notes to the Financial Statements to Notes resident of/does not have permanent establishment in Japan). The amount of profit that is allocated to TK investors under a TK agreement is immediately deductible from the TK Operator’s taxable income regardless of whether a distribution to any TK investor is actually made at that time. The 20% withholding tax described above however, is only imposed on an actual distribution of profit to investors. On a six monthly basis, once interest bearing debt service and required lender reserve payments have been made, the TK Operator and the nominee of the Trust’s indirect interest in KDTMK will make cash distributions to the Trust. For the most part these distributions can be expected to be of income for Japanese tax purposes, and thus subject to withholding tax at a rate of either 20% (if from the TK) or up to 20% (if from KDTMK), however, the cash available for distribution from the TK may exceed taxable profit for Japanese tax purposes and may therefore be made in part free from Japanese withholding tax as either a return of capital or (if capital has already been fully returned) as a loan from the TK to the Trust. Notes to the Financial Statements for the year ended 30 June 2007
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (iii) Deferred Japanese tax Deferred tax assets and liabilities are recognised for timing differences at the tax rates expected to apply when assets are recovered or liabilities are settled based on those rates which are enacted or substantially enacted in Japan. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. The relevant rates currently are: • Deferred tax in relation to revaluation of TK investment properties – 20% • Deferred tax in relation to revaluation of interest in KDTMK – 30% Deferred tax assets are recognised for deductible temporary differences only if it is probable that future taxable amounts will be available to utilise those temporary differences. Deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Critical accounting estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Trust and that are believed to be reasonable under the circumstances. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the deferred tax provisions in the period in which the determination is made.
(l) Distributions Distributions are paid within three months of each half year end. The half year ends are 30 June and 31 December.
(m) Goods and services tax and Japanese consumption tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) or Japanese consumption tax (consumption tax), except where the amount of GST or consumption tax incurred is not recoverable from the Australian Tax Office (ATO) or Japanese tax authority (“tax 88 authorities”). In these latter circumstances the GST or consumption tax is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated with the amount of GST or consumption tax included. The net amount of GST or consumption tax recoverable from, or payable to, the tax authorities is included as a current asset or liability in the Balance Sheets. Cash flows are included in the Statements of Cash Flows on a gross basis. The GST or consumption tax components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the tax authorities are classified as operating cash flows.
(n) Trade and other payables Trade and other payables are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Trust and are stated at cost. Trade accounts payable are normally settled within 60 days.
(o) Provisions A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain. If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, most closely matching the expected future payments. The unwinding of the discount is treated as part of the expense related to the particular provision.
(p) Interest bearing debt Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing debt is stated at amortised cost with any difference between proceeds and redemption value being recognised in the Income Statements over the period of the debt on an effective interest basis. Notes to the Financial Statements for the year ended 30 June 2007
(q) Receivables Trade and other receivables are stated at their cost less any impairment losses. Impairment losses are booked when there is objective evidence that the Trust will not be able to collect all amounts due according to the original terms of the receivables. An impairment loss is recognised for the amount by which the asset carrying amount exceeds its recoverable amount based on the present value of estimated future cashflows.
(r) Tenant deposits Tenant deposit liabilities are recognised at fair value based on the obligation to return the deposit to tenants.
(s) Earnings per Unit Basic earnings per Unit is determined by dividing net profit attributable to the Trust by the weighted average number of Units on issue during the period. Diluted earnings per Unit is determined by dividing net profit attributable to the Trust by the weighted average number of ordinary Units and dilutive potential ordinary Units on issue during the period.
(t) Responsible Entity’s remuneration In accordance with the Trust Constitution, Babcock & Brown Japan Property Management Limited is entitled to receive an Asset Management Fee. The Asset Management Fee is made up of: • A Base Fee component which is based on an Asset Base Fee paid to the Japan Manager and a Trust Base Fee paid to the Responsible Entity. • A Performance Fee component which comprises a performance fee in relation to the returns of the Japanese Investments (Asset Performance Fee) and a performance fee in relation to the returns of the Trust (Trust Performance Fee). BJT Annual Report 2007 BJT Annual Report The Asset Management Fee is subject to a payment cap whereby the Asset Management Fee (being the 89 aggregate of the Base Fee and the Performance Fee) paid in any one year must not exceed 1% of the value of the Trust’s direct and indirect proportionate interest in properties and other assets at the end of the year. Any excess will be carried forward into future years and will be payable to the extent to which the Asset Management Fee payable in any year is less than the 1% cap. Any excess which has been carried forward for at least three years is then payable and this payment of outstanding fees will not be capped. Accordingly, it is possible that the payment of the Asset Management Fee within a year could exceed 1.0% of the Trust’s assets, particularly after periods where there has been three years of cumulative out-performance.
(i) Base fee • Asset Base Fee equal to 0.40% per annum of the gross market values of the properties calculated on the half year values of the properties and other assets subject to the TK Asset Management Agreement, and payable quarterly in arrears. the Financial Statements to Notes • Trust Base Fee of 0.50% (limited to 0.45% per annum until 30 June 2007) per annum of the Trust’s direct or indirect proportionate interest in properties and other assets. The fee is calculated on half year values and payable in arrears. For so long as the Responsible Entity is a related entity of Babcock & Brown Limited, the Trust Base Fee is reduced by the Asset Base Fee paid to the asset manager which is a related body corporate of Babcock & Brown Limited and the TK Operator’s share of profits of the TK. Notes to the Financial Statements for the year ended 30 June 2007
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (ii) Performance fee • Asset Performance Fee is calculated in two tiers as follows: i. Tier 1 – 5% of the amount (denominated in Japanese Yen) equivalent to the amount the internal rate of return of the Japanese Investments exceeds the Asset Benchmark (which is 10%) up to 1% out performance; and ii. Tier 2 – 15% of the amount (denominated in Japanese Yen) equivalent to the amount the internal rate of return of the Japanese Investments exceeds the Asset Benchmark in excess of 1% out performance. • Trust Performance Fee is calculated in two tiers as follows: i. Tier 1 – 5% of out performance of the ASX 200 Property Accumulation Index return (Benchmark) (up to 2%) multiplied by total equity of the Trust; and ii. Tier 2 – 15% of out performance of the Benchmark greater than 2% multiplied by total equity of the Trust. The Trust performance fee is reduced by the sum of Tier 1 and Tier 2 Asset Performance Fee and if as a result of this reduction the Trust Performance Fee is less than zero, the Trust Performance fee will be taken to be zero.
(u) New accounting standards and UIG interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2007 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below. AASB 7 Financial Instruments: Disclosures and AASB 2005-10 Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]. AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning on or after 1 January 90 2007. The Group has not adopted the standards early. Application of the standards will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Group’s and the parent entity’s financial instruments. AASB-I 10 Interim Financial Reporting and Impairment AASB-I 10 is applicable to reporting periods commencing on or after 1 November 2006. The Group has not recognised an impairment loss in relation to goodwill, investments in equity instruments or financial assets carried at cost in an interim reporting period but subsequently reversed the impairment loss in the annual report. Application of the interpretation will therefore have no impact on the Group’s or the parent entity’s financial statements. (v) Correction of prior period error in recording of distribution income in PARENT entity accounts In previous financial years the cash distribution received by the parent entity has been recorded by reference to the Japanese GAAP financial statements of the TKs. The accounting in the parent entity should have been based on the financial statements of the TKs prepared in accordance with AIFRS, consistent with the consolidated accounts. The impact on the parent entity standalone financial statements was to understate distribution income by $9,737,000 for the comparative year. Opening contributed equity as at 1 July 2005 was understated by $942,000. Contributed equity and the investment in the TKs in the parent entity financial statements at 30 June 2006 were both understated by $10,679,000. The error has been corrected by restating each of the affected financial statement line items for the prior year. There is no impact of this error on the consolidated financial statements or basic or diluted earnings per share for the prior year. Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
2. NET FINANCING COSTS Financing income Interest income 1,133 1,050 1,115 998 Interest compensation – Related Party 56 347 56 347 1,189 1,397 1,171 1,345
Financing costs Interest on borrowings 9,780 4,989 59 - Arrangement fee 177 - 177 - 9,957 4,989 236 -
3. DISTRIBUTIONS RECEIVED Distributions from TKs – Related Party - - 36,112 24,138 Distributions from associate (KDTMK) - - 1,721 3,208 - - 37,833 27,346
4. GAINS ON DERIVATIVES Net interest income on cross currency swaps 7,329 4,624 7,329 4,624 Gain on derivatives 70,795 7,287 70,795 7,287
78,124 11,911 78,124 11,911 2007 BJT Annual Report 91 5. OTHER OPERATING EXPENSES Other operating expenses includes the following: Accounting fees 367 224 - - Audit fees 487 426 209 163 Custody fees – paid to Related Party 162 115 162 115 Professional fees 478 705 118 400
6. INCOME TAX EXPENSE (a) Income tax exPENSE Current Japanese withholding tax 4,728 3,522 4,728 3,522 Deferred Japanese tax 4,472 15,150 - (176) 9,200 18,672 4,728 3,346 Notes to the Financial Statements to Notes
(b) Reconciliation of tax exPENSE Profit for the period 138,975 78,431 120,064 15,312 Tax at the Australian tax rate of 30% 41,693 23,529 36,019 4,594 Tax effect of amounts that are not assessable (41,693) (23,529) (36,019) (4,594) Japanese withholding tax on distributions from Japanese investments 4,728 3,522 4,728 3,522 Deferred Japanese tax on investment properties and associate 4,472 15,150 - (176) Japanese tax expense 9,200 18,672 4,728 3,346 Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
6. INCOME TAX EXPENSE (CONTINUED) (C) Amounts recognised directly in equity Net deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited to equity (332) 693 - -
7. AUDITOR’S REMUNERATION Audit services Auditors of the Group PricewaterhouseCoopers Australia: Audit and review of financial reports 208,795 162,847 208,795 162,847 PricewaterhouseCoopers Japan: Audit and review of financial reports 278,356 250,232 - - 487,151 413,079 208,795 162,847
Other services: Auditors of the Group PricewaterhouseCoopers related practices: Tax advisory services 71,232 548,959 - 548,959 Taxation compliance services 119,208 144,688 15,161 121,349 190,440 693,647 15,161 670,308 92 Consolidated Year ended Year ended 30/06/07 30/06/06
8. EARNINGS PER UNIT Basic and diluted earnings per ordinary Unit 26.71¢ 16.13¢ Profit attributable to Unitholders used in calculating basic and diluted earnings per share ($’000) 129,195 59,026 Weighted average number of Units used as denominator in calculating basic and diluted earnings per Unit 483,759,511 365,870,251
The weighted average number of Units used as denominator in calculating basic and diluted earnings per Unit shown above is based on the number of Units on issue during the period.
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
9. CASH AND CASH EQUIVALENTS Cash at bank 23,438 27,242 245 4,148 Deposits at call 5,697 1,829 5,697 1,829 Cash in Trust 53,389 43,652 - - Cash and cash equivalents in the Statements of Cash Flows and Balance Sheets 82,524 72,723 5,942 5,977 Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
10. TRADE AND OTHER RECEIVABLES Current Rent receivable 1,459 1,453 - - Consumption tax and GST receivable 8,084 8,011 - 1,951 Distribution receivable – Related Party - - 27,238 19,962 Other receivables 779 38 - - 10,322 9,502 27,238 21,913
11. DERIVATIVE FINANCIAL INSTRUMENTS Current assets Net interest receivable on cross currency swaps 2,868 2,037 2,868 2,037 Cross currency swaps at fair value 76,478 11,875 76,478 11,875 79,346 13,912 79,346 13,912
Non-current asset Interest rate swaps at fair value 2,990 4,483 - -
Current liability Cross currency swaps at fair value - 583 - 562
Non-current liability
Interest rate swaps at fair value 419 - - - 2007 BJT Annual Report 93 Refer to 27 Financial Risk Management for further details of derivative financial instruments.
12. OTHER ASSETS Current Prepayments 967 975 - -
Non-current Prepayments 1,124 885 - -
13. OTHER FINANCIAL ASSETS Non-current Investments in associates - - - 80,442 Investment in TK - - 581,135 396,952 Notes to the Financial Statements to Notes Other investments 109 118 - - 109 118 581,135 477,394 Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
14. DEFERRED TAX ASSET The balance comprises temporary differences attributable to: Share issue expense 153 200 - - Cash flow hedges 84 4 - - Deferred Japanese withholding tax on the difference between Japanese tax written down value and fair value of investment properties 669 409 - -
Net deferred tax assets 906 613 - -
Movements: Opening balance at beginning of year 613 - - - Credited to equity 33 204 - - Credited to the Income Statement 260 409 - - Closing balance at the end of the year 906 613 - -
Deferred tax to be recovered after more than 12 months 906 613 - -
15. INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD Ownership Interest Consolidated 2007 2006 30/06/07 30/06/06 94 $’000 $’000
(a) Carrying amounts Name of company Principal activity Kawasaki Dice Tokutei Mokuteki Kaisha (“KDTMK”) Property investment - 48% - 94,214
The consolidated entity disposed of its 48% interest in KDTMK on 12 April 2007. KDTMK, owned 87.07% of the Kawasaki Dice building. KDTMK is incorporated in Japan and has a 31 March reporting date. Adjustments have been made at the reporting date to reflect any material transactions or events occurring in the 3 months to the Trust’s reporting date.
Consolidated Year ended Year ended 30/06/07 30/06/06 $’000 $’000
(b) Movements in carrying amounts Carrying amount at the beginning of the financial period 94,214 46,853 Purchase of additional 18% investment in associate - 33,397 Dividends received (3,181) (3,208) Share of net profit of associate 3,928 17,178 Effect of changes in exchange rates (12,660) (6) Disposal of interest in KDTMK (82,301) - - 94,214 Notes to the Financial Statements for the year ended 30 June 2007
15. INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) Consolidated Year ended Year ended 30/06/07 30/06/06 $’000 $’000
(c) Share of associate’s profits Property income 9,371 11,053 Property expenses (4,123) (4,592) Net property income 5,248 6,461
Financing expenses (936) (1,085) Other expenses (384) (201) Share of net operating income 3,928 5,175
Fair value adjustments to investment property - 10,895 Share of associates net profit recognised 3,928 16,070
Discount on acquisition of 18% interest in associate - 1,108 3,928 17,178
(d) Loss on disposal of associate Loss on disposal of interest in KDTMK (4,240) -
The Trust’s interest in the Kawasaki Dice property was restructured in April 2007. On 12 April 2007 2007 BJT Annual Report the consolidated entity disposed of its interest in the KDTMK to an unrelated third party. On the same 95 day an interest in the Kawasaki Dice property was acquired and subsequently held and accounted for as an investment property by a TK (JPT Corporate Co., Ltd). The consolidated entity loss on the sale of the associate of $4,240,000 is partially offset by the revaluation of the investment property when acquired by the TK of $2,421,000.
(e) Summarised financial position of associates Current assets - 13,766 Non-current investment properties - 166,562 Other non-current assets - 1,371 Total assets - 181,699
Current liabilities - 1,985
Non-current interest bearing debt - 78,942 the Financial Statements to Notes Other non-current liabilities - 6,558 Total liabilities - 87,485
Share of net assets as reported by associates - 94,214 Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
16. INVESTMENT PROPERTIES Investment properties at fair value 1,148,945 944,629 - -
(a) Reconciliation Reconciliation of the carrying amount of investment properties is set out below:
Carrying amount at the beginning of the period 944,629 466,092 - - Acquisitions including acquisition costs 422,2151 425,395 - - Capital expenditure 1,746 - - - Disposals (19,368) - - - Change in fair value of investment properties 20,626 50,664 - - Foreign currency translation differences (220,903) 2,478 - - Carrying amount at the end of the period 1,148,945 944,629 - -
1 Includes the acquisition and revaluation of interest in Kawasaki Dice property which was previously held by an associate. Refer Note 15(d) for further details.
(b) Amounts recognised in net profit for investment property Property rental income 76,581 50,454 - - Property expenses (18,418) (10,478) - - 58,163 39,976 - -
96 (c) Valuation basis The basis of valuation of investment properties is fair value being amounts for which the properties could be exchanged between willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. The Directors’ assessment of fair value was based upon independent assessments made by a Japanese Licensed Real Estate Appraiser.
(d) Assets pledged as security Refer to Note 21(A) for information on assets pledged as security.
(e) Beneficial interest The Trust holds interests in the investment properties arising from the contractual relationship between the Trust and the TK Operator. The beneficial legal ownership of the investment properties is held in the name of the TK Operator. Notes to the Financial Statements for the year ended 30 June 2007
17. LEASING ARRANGEMENTS The investment properties are leased to tenants under two main types of leases in Japan, standard leases and fixed term leases. Standard leases are usually for two years. The tenant has the right of renewal on the lease and the contractually agreed cancellation notice period by the tenant is usually six months. Fixed term leases may be cancellable or non-cancellable and lease terms vary between tenants. Subsequent renewals are negotiated with the lessee. Property interests held under operating leases are classified as investment properties. No contingent rents are charged.
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
The minimum lease payments receivable on fixed term non-cancellable leases of investment properties not recognised in the Financial Statements as receivables are as follows:
Within one year 14,772 20,068 - - Later than one year but not later than 5 years 56,872 54,750 - - Later than 5 years 109,270 47,737 - - 180,914 122,555 - -
18. PAYABLES Current Rent received in advance 4,984 5,670 - - BJT Annual Report 2007 BJT Annual Report Interest payable 1,472 1,692 - - 97 Fees payable to related parties (Note 32) 7,284 10,199 3,271 337 Other payables 4,319 3,652 358 603 18,059 21,213 3,629 940
Non-current Fees payable to related parties (Note 32) 22,673 28,554 22,678 27,914 Other payables - 1,014 - - 22,673 29,568 22,678 27,914
19. DISTRIBUTIONS PAID AND PAYABLE Interim distribution paid 28,353 12,268 28,353 12,268 Final distribution payable at year end 30,325 23,069 30,325 23,069 Notes to the Financial Statements to Notes 58,678 35,337 58,678 35,337
(a) Ordinary Units Final distribution for the year ended 30 June 2007 of 6.15 cents per Unit (2006 – 5.38 cents) payable in August 2007 (2006 – 25/8/06). Interim distribution for the year ended 30 June 2007 of 5.75 cents per Unit (2006 – 4.38) paid in February 2007.
20. CURRENT TAX LIABILITIES Japanese withholding tax 1,884 906 1,871 906
Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
21. INTEREST BEARING LOANS AND BORROWINGS Non current Secured bank loans 587,547 486,225 - -
Bank loans are denominated in Yen and are interest only loans with principal repayable on maturity. The weighted average terms of the loans are 4.8 years, with a weighted average term to expiry is 3.6 years. After interest rate swaps, 77% of the loans are fixed at a rate of 1.86% p.a., with the remaining 23% floating debt with a current rate of 1.54% p.a.
(a) Assets pledged as security The bank loans are secured by pledge over the investment properties.
The carrying amount of assets pledged as security for non-current interest bearing debt are:
Investment properties at fair value 1,148,945 944,629 - -
(b) Financing facilities The consolidated entity has access to the following lines of credit:
Secured bank loans 587,307 489,282 - - Secured bank loan facility - 22,303 - - Total facilities available 587,307 511,585 - -
Facilities utilised at reporting date 587,307 489,282 - - 98 Facilities not utilised at reporting date - 22,303 - -
22. DEFERRED TAX LIABILITIES The balance comprises temporary differences attributable to:
Investment properties 20,467 12,117 - - Carrying value of investment in associate - 3,619 - - Cash flow hedge 598 897 - - Net deferred tax liability 21,065 16,633 - -
Movements: Opening balance at beginning of year 16,633 176 - 176 (Credited)/charged to equity (299) 897 - - (Credited)/charged to the Income Statement 4,731 15,560 - (176) Closing balance at the end of the year 21,065 16,633 - -
Deferred tax to be recovered after more than 12 months 21,065 16,633 - - Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
23. CONTRIBUTED EQUITY 493,096,223 Units on issue (2006 – 428,796,223) 576,367 463,755 578,500 465,805
Movements in contributed equity Balance at beginning of financial period 463,755 266,570 465,805 267,748 Units issued 114,454 226,036 114,454 226,036 Transaction costs (1,842) (5,680) (1,759) (4,608) Deferred tax recognised directly in equity - 200 - - Transfer to undistributed income - (23,371) - (23,371) Balance at end of financial period 576,367 463,755 578,500 465,805
Movements in number of Units Number at beginning of financial period 428,796,223 280,088,640 428,796,223 280,088,640 November 2005 entitlement offer Units issued 17/11/05 - 102,542,374 - 102,542,374 Units issued 19/12/05 - 46,165,209 - 46,165,209 Placements issued 23/8/06 64,300,000 - 64,300,000 - Number at end of financial period 493,096,223 428,796,223 493,096,223 428,796,223
Under the terms of the Trust’s Constitution Units are classified as equity. Issue costs are recognised as 2007 BJT Annual Report a reduction of the proceeds of issues. 99 In accordance with the Trust Constitution each ordinary Unitholder is entitled to receive distributions as declared from time to time and is entitled to one vote per Unit at Unitholder meetings. In accordance with the Trust Constitution, each Unit represents a right to an individual share in the Trust and does not extend to a right to the underlying assets of the Trust. There are no restricted Units on issue at the date of the Directors’ Report nor during the year.
24. RESERVES Foreign currency translation reserve (125,102) (5,323) - - Hedging reserve – cash flow hedge 2,414 3,569 - - (122,688) (1,754) - -
Foreign currency translation reserve
Balance at beginning of financial period (5,323) (6,175) - - the Financial Statements to Notes Currency translation differences arising during the period (119,779) 856 - - Share of associates currency translation differences arising during the period - (4) - - Balance at the end of the financial period (125,102) (5,323) - -
The translation reserve comprises all foreign exchange differences arising from the transaction of the interests in foreign operations, where their functional currency is different to the presentation currency of the reporting entity. Notes to the Financial Statements for the year ended 30 June 2007
24. RESERVES (CONTINUED) Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
Hedging reserve Balance at beginning of financial period 3,569 - - - Revaluation (1,533) 4,462 - - Deferred tax recognised directly in equity 378 (893) - - Balance at the end of the financial period 2,414 3,569 - -
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity. Amounts are recognised in profit and loss when the associated hedge transaction effects profit and loss.
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
25. UNDISTRIBUTED INCOME Undistributed income at the beginning of the financial period 48,901 1,841 - - Net profit attributable to Unitholders 129,195 59,026 115,336 11,966 Distributions paid and payable (58,678) (35,337) (58,678) (35,337) Transfer from contributed equity - 23,371 - 23,371 Undistributed income at the end of the 100 financial period 119,418 48,901 56,658 -
26. MINORITY INTERESTS Balance at the beginning of the financial period 497 10 - - Net profit attributable to minority interest 580 733 - - Distributions payable (131) (246) - - Balance at the end of the financial period 946 497 - - Notes to the Financial Statements for the year ended 30 June 2007
27. FINANCIAL RISK MANAGEMENT The consolidated entity’s activities expose it to a variety of financial risks: credit risk, currency risk, and cash flow interest rate risk. The consolidated entity’s risk management framework seeks to minimise potential adverse effects on the financial performance of the consolidated entity. Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates and interest rates.
(A) Credit risk exposures Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit risk on financial assets of the Trust which have been recognised on the Balance Sheet is the carrying amount, net of any provision for doubtful debts relating to rental debtors. The Trust has a credit policy for all tenants and rents are payable monthly in advance. At balance date 78% of receivables were due from Australian and Japanese tax authorities in respect of GST and consumption tax. At balance date there were no other significant concentrations of credit risk.
(B) Currency RISK (i) Distribution hedges The consolidated entity is exposed to foreign currency risk on revenue, expenses and borrowings that are denominated in Japanese Yen. The consolidated entity adopts a policy of arranging foreign exchange forward hedges on a rolling basis equivalent to:
• 100% of the Trust’s estimated distributions for the next three years; and • 90% of the Trust’s estimated distributions for years four and five. At balance date the details of outstanding balances are:
Trust sells Average 2007 BJT Annual Report Japanese Exchange 101 Buy Australian Dollars Yen ‘000 rate Maturity 2007 Less than 1 year 3,997,551 76.0 1 – 5 years 15,206,147 70.0
Maturity 2006 Less than 1 year 3,326,753 78.6 1 – 5 years 14,196,946 70.4
These distribution hedging arrangements are economic hedges and do not qualify for hedge accounting. The fair value of the distribution hedging arrangements at 30 June 2007 is $52,973,000 the Financial Statements to Notes current asset (30 June 2006 $9,128,000 current asset). Notes to the Financial Statements for the year ended 30 June 2007
27. FINANCIAL RISK MANAGEMENT (CONTINUED) (ii) Capital hedges With respect to the equity capital of the Trust, the policy is to arrange cross currency interest rate swap hedges equivalent to between 10%-30% of its net investment in Japanese assets, over periods of between four and six years. At balance date the Trust had cross currency interest rate swap hedges of A$146.5 million with staggered settlement dates between August 2009 and August 2014. Interest is paid at six monthly intervals.
Trust sells Average Australian Japanese Japanese Exchange interest interest Buy Australian Dollars Yen ‘000 rate rate rate
Maturity 2007 1 – 5 years 9,014,865 84.6 6.00% 0.84% Greater than 5 years 3,586,400 89.7 6.15% 1.11%
Maturity 2006 1 – 5 years 6,527,625 85.3 5.95% 0.78% Greater than 5 years 2,487,240 82.9 6.13% 0.98%
These capital hedging arrangements are economic hedges and do not qualify for hedge accounting. The fair value of the capital hedging arrangements at 30 June 2007 is $23,505,000 current asset (30 June 2006 $2,747,000 current asset) and nil current liability (30 June 2006 $562,000).
(C) Interest rate risk 102 The consolidated entity’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the consolidated entity to cash flow interest rate risk. The consolidated entity’s policy is to fix the rates for a portion of its borrowings, including its share of borrowings from associates. The consolidated entity manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Under the interest rate swaps the consolidated entity agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to agreed notional principal amounts. Swaps are currently in place over approximately 67% of the TK’s floating rate borrowings, excluding its share of borrowings from associates, and have an average term to expiry of 6.4 years. The fixed interest rates range between 1.527% and 3.365% (2006: between 1.527% and 2.095%) and the variable rates are between 1.27% to 1.85% (2006: 0.71% - 1.01%). At 30 June 2007, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:
2007 2006 $’000 $’000
3 – 4 years 170,011 - 4 – 5 years - 209,485 Greater than 5 years 107,979 -
The contracts require settlement of net interest payables quarterly. The settlement dates coincide with the dates on which interest is payable on the underlying debt. The contracts are settled on a net basis. The fair value of the interest rate swaps at 30 June 2007 is $2,990,000 non-current asset (30 June 2006 $4,483,000), nil current liability (30 June 2006 $21,000) and $419,000 non current liability (30 June 2006 nil). The gain or loss from re-measuring the instruments at fair value is deferred in equity in the hedging reserve, to the extent the hedge is effective, and re-classified into profit and loss when the hedged interest expense is recognised. There is no ineffective portion to these hedges recognised in the Income Statements. Notes to the Financial Statements for the year ended 30 June 2007
27. FINANCIAL RISK MANAGEMENT (CONTINUED) (D) Liquidity risk Prudent liquidity risk management is carried out by maintaining sufficient cash including working capital and other reserves.
(E) Fair values of financial assets and liabilities (i) Fair values The Trust’s financial assets and liabilities included in current and non-current assets and liabilities on the Balance Sheets are carried at amounts that approximate fair value.
(ii) Valuation approach The fair value of financial assets and liabilities are determined by the Trust on the following basis:
Monetary financial assets and financial liabilities not readily traded in an organised financial market are valued at the present value of contractual future cash flows on amounts due from customers (reduced for expected credit losses) or due to suppliers. Cash flows are discounted using standard valuation techniques at the applicable market yield having regard to the timing of the cash flows. The carrying amounts of bank deposits, receivables, other debtors, accounts payable, bank loans and distributions payable approximate net fair value. Forward exchange contracts, cross currency swaps and interest rate swaps, are marked to market by discounting the contractual forward price and deducting the current spot rate. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate for a similar instrument at balance date. Where other pricing models are used, inputs are based on market related data at the Balance Sheet date.
Fixed interest Weighted Floating 3 to 4 Over 5 Non-interest average interest rate years years bearing Total BJT Annual Report 2007 BJT Annual Report interest $’000 $’000 $’000 $’000 $’000 103
2007 Financial assets Cash and cash equivalents Balances held in Australia 5.75% 5,875 - - 67 5,942 Balances held in Japan 0.13% 76,649 - - - 76,649 Receivables - - - - 10,364 10,364 Other financial assets - - - - 109 109 82,524 - - 10,540 93,064
Financial liabilities
Payables - - - - 42,874 42,874 the Financial Statements to Notes Tenant deposits - - - - 71,218 71,218 Distribution payable - - - - 30,325 30,325 Interest bearing debt 1.45% 411,365 176,182 - - 587,547 Interest rate swaps 1.18% (277,990) 170,011 107,979 - - 133,375 346,193 107,979 144,417 731,964 Notes to the Financial Statements for the year ended 30 June 2007
27. FINANCIAL RISK MANAGEMENT (CONTINUED) Fixed interest Weighted Floating Over 1 to 5 Non-interest average interest rate years bearing Total interest $’000 $’000 $’000 $’000
2006 Financial assets Cash and cash equivalents 5.7% 2,027 - 70,696 72,723 Receivables - - - 9,502 9,502 Other financial assets - - - 118 118 2,027 - 80,316 82,343
Financial liabilities Payables - - - 50,781 50,781 Tenant deposits - - - 52,458 52,458 Distribution payable - - - 23,069 23,069 Interest bearing debt 1.0% 268,241 217,984 - 486,225 Interest rate swaps 0.9% (209,485) 209,485 - - 58,756 427,469 126,308 612,533
28. CONTINGENCIES In the opinion of the Directors of the Responsible Entity there were no contingent assets or liabilities at balance date.
29. CONSOLIDATED ENTITIES 104 Country of incorporation Ownership interest
Parent entity Babcock & Brown Japan Property Trust Australia 30/6/07 30/6/06
Significant investments Tokumei Kumiais (TKs) established under the Tokumei Kumiai Agreements dated: 24 March 2005 with JPT Co., Ltd. Japan 100% 100% 29 November 2005 with JPT Scarlett Co., Ltd. Japan 100% 100% 28 August 2006 with JPT Direct Co., Ltd Japan 100% - 29 September 2006 with JPT Corporate Co., Ltd Japan 100% -
The Trust is a party to four separate Tokumei Kumiai Agreements with the respective TK Operators above, pursuant to which, in exchange for the Trust’s contribution of all the equity required for the TK Businesses, the Trust is entitled to 100% of the investor capital account of the TK and 99% of the profits and losses of the TK Businesses. Notes to the Financial Statements for the year ended 30 June 2007
30. SEGMENT REPORTING The Group’s primary reporting format is business segments, retail and office property and corporate and the secondary format is geographical.
Business segments The following table presents revenue and profit information and certain assets and liability information regarding business segments for the year ended 30 June 2007.
Total Retail Office Residential Corporate Operations $’000 $’000 $’000 $’000 $’000
2007 Revenue Property rental income 34,984 39,132 2,465 - 76,581 Financing income - - - 1,189 1,189 Total segment revenue 34,984 39,132 2,465 1,189 77,770
Fair value adjustments to investment property (5,247) 25,873 - - 20,626 Share of net profits of associates 3,928 - - - 3,928 Other income - - - 80,225 80,225 Total segment revenue and other income 33,665 65,005 2,465 81,414 182,549
Results Segment result 22,297 53,842 2,081 60,755 138,975 BJT Annual Report 2007 BJT Annual Report Profit before income tax and 105 minority interest 22,297 53,842 2,081 60,755 138,975 Income tax expense (4,684) (4,264) (252) - (9,200) Profit for the period 17,613 49,578 1,829 60,755 129,775
Assets and liabilities Investment properties 619,715 496,571 32,659 - 1,148,945 Investments in associates - - - - - Other segment assets 28,895 22,304 717 126,372 178,288 Total segment assets 648,610 518,875 33,376 126,372 1,327,233
Interest bearing liabilities - - - 587,547 587,547 Other segment liabilities 49,894 29,102 805 85,842 165,643 Notes to the Financial Statements to Notes Total segment liabilities 49,894 29,102 805 673,389 753,190 Notes to the Financial Statements for the year ended 30 June 2007
30. SEGMENT REPORTING (CONTINUED) Geographical SEGMENTS The following table presents revenue and profit information and certain assets and liability information regarding geographical segments for the year ended 30 June 2007.
Total Japan Australia Eliminations Operations $’000 $’000 $’000 $’000
2007 Revenue Property rental income 76,581 - - 76,581 Financing income 18 1,171 - 1,189 Distributions received - 36,112 (36,112) - Total segment revenue 76,599 37,283 (36,112) 77,770
Fair value adjustments to investment property 20,626 - - 20,626 Share of net profits of associates 3,928 - - 3,928 Other income - 80,225 - 80,225 Total segment revenue and other income 101,153 117,508 (36,112) 182,549
Results Segment result 60,886 104,259 (26,170) 138,975 Profit before income tax and minority interest 60,886 104,259 (26,170) 138,975
Income tax expense (9,200) - - (9,200) Net profit for the period 51,686 104,259 (26,170) 129,775 106 Assets and liabilities Investment properties 1,148,945 - - 1,148,945 Investments in associates - - - - Other segment assets 93,001 668,897 (583,610) 178,288 Total segment assets 1,241,946 668,897 (583,610) 1,327,233
Interest bearing liabilities 587,547 - - 587,547 Other segment liabilities 134,378 58,504 (27,239) 165,643 Total segment liabilities 721,925 58,504 (27,239) 753,190
Business segments Total Retail Office Residential Corporate Operations $’000 $’000 $’000 $’000 $’000
2006 Revenue Property rental income 16,646 32,467 1,341 - 50,454 Financing income - - - 1,397 1,397 Total segment revenue 16,646 32,467 1,341 1,397 51,851
Fair value adjustments to investment property 10,196 40,695 (227) - 50,664 Share of net profits of associates 17,178 - - - 17,178 Other income - - - 12,066 12,066 Total segment revenue and other income 44,020 73,162 1,114 13,463 131,759 Notes to the Financial Statements for the year ended 30 June 2007
Total Retail Office Residential Corporate Operations $’000 $’000 $’000 $’000 $’000
Results Segment result 42,252 64,672 894 (29,387) 78,431 Profit before income tax and minority interest 42,252 64,672 894 (29,387) 78,431 Income tax expense (4,293) (14,292) (87) - (18,672) Profit for the period 37,959 50,380 807 (29,387) 59,759
Assets and liabilities Investment properties 361,561 542,850 40,218 - 944,629 Investments in associates 94,214 - - - 94,214 Other segment assets 15,729 23,029 804 63,649 103,211 Total segment assets 471,504 565,879 41,022 63,649 1,142,054
Interest bearing liabilities - - - 486,225 486,225 Other segment liabilities 43,588 33,784 1,050 66,008 144,430 Total segment liabilities 43,588 33,784 1,050 552,233 630,655
Geographical segments Total Japan Australia Eliminations Operations $’000 $’000 $’000 $’000 BJT Annual Report 2007 BJT Annual Report 2006 107 Revenue Property rental income 50,454 - - 50,454 Financing income 52 1,345 - 1,397 Distributions received - 24,138 (24,138) - Total segment revenue 50,506 25,483 (24,138) 51,851
Fair value adjustments to investment property 50,664 - - 50,664 Share of net profits of associates 17,178 - - 17,178 Other income - 12,066 - 12,066 Total segment revenue and other income 118,348 37,549 (24,138) 131,759
Results the Financial Statements to Notes Segment result 90,466 12,103 (24,138) 78,431 Profit before income tax and minority interest 90,466 12,103 (24,138) 78,431
Income tax expense (18,672) - - (18,672) Net profit for the period 71,794 12,103 (24,138) 59,759
Assets and liabilities Investment properties 944,629 - - 944,629 Investments in associates 94,214 - - 94,214 Other segment assets 81,372 428,047 (406,208) 103,211 Total segment assets 1,120,215 428,047 (406,208) 1,142,054
Interest bearing liabilities 486,225 - - 486,225 Other segment liabilities 111,908 52,484 (19,962) 144,430 Total segment liabilities 598,133 52,484 (19,962) 630,655 Notes to the Financial Statements for the year ended 30 June 2007
Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
31. NOTES TO THE STATEMENTS OF CASH FLOWS Reconciliation of profit after income tax to net cash flows from operating activities Profit for the period 129,775 59,759 115,336 11,966
Adjustments for non cash items and items classified as investing or financing activities
Realised foreign exchange gain 1,570 (267) 1,636 373 Unrealised fair value of derivatives (65,164) (6,362) (65,164) (6,362) Equity accounting for investment in associates 314 (17,178) - - Fair value adjustments to investment property (20,626) (50,664) - - Distributions received - - (37,833) (27,346) Interest received on cross currency swaps (7,329) (4,624) (7,329) (4,624) Gain on sale of associate - - (4,142) -
Net cash provided by operating activities before changes in asset and liabilities 38,540 (19,336) 2,504 (25,993)
Change in assets and liabilities during the financial period
108 Increase/(decrease) in Japanese withholding tax payable 5,450 15,189 1,018 (137) Increase/(decrease) in trade and other receivables (1,450) (1,355) 1,950 (807) Increase/(decrease) in other assets (1,506) 216 - - Increase/(decrease) in payables (6,512) 34,018 (2,545) 19,157
Net cash from operating activities 34,522 28,732 2,927 (7,780)
32. RELATED PARTIES (a) Responsible Entity The responsible entity of Babcock & Brown Japan Property Trust is Babcock & Brown Japan Property Management Limited (ACN 111 874 563) (“the Responsible Entity”) whose immediate and ultimate holding company is Babcock & Brown Australia Pty Limited (ABN 49 002 348 521) and Babcock & Brown Limited (ABN 53 108 614 955) respectively.
(b) Responsible Entity’s holdings of Units Babcock & Brown Japan Property Management Limited holds 4,000,000 Units, 0.81% (30 June 2006 4,000,000 Units, 0.93%) directly in Babcock & Brown Japan Property Trust. Notes to the Financial Statements for the year ended 30 June 2007
32. RELATED PARTIES (CONTINUED) Consolidated Trust Year ended Year ended Year ended Year ended 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
(c) Transactions with related parties The following transactions occurred with related parties:
Asset management fees Trust base fee – payable to Responsible Entity 1,180 1,401 1,180 1,401 Asset base fee – payable to Japan Asset Manager 4,499 2,615 - - TK distribution – payable to TK Operator 131 246 - - Total base fees 5,810 4,262 1,180 1,401
Asset performance fee - payable to Japan Asset Manager 2,101 8,993 - 449 Asset performance fee rebate – receivable from the Responsible Entity (2,101) - (2,101) - Trust performance fee – payable to Responsible Entity - 22,183 - 22,183 Total performance fees - 31,176 (2,101) 22,632
Total Asset Management Fees paid or payable to the Responsible Entity and related parties 5,810 35,438 (921) 24,033 BJT Annual Report 2007 BJT Annual Report Transaction fees paid to the Responsible Entity 288 - 288 - 109 Reimbursement of Trust expenses 43 71 43 71 Custody fees 162 115 162 115 Distributions from TKs - - 36,112 24,138 Distributions from associate KDTMK 3,181 3,208 1,721 3,208 Interest compensation revenue 56 347 56 347 Interest expense paid to Babcock & Brown 59 - 59 - Arrangement fee paid to Babcock & Brown 177 - 177 - Transactions fees paid to Japan Asset Manager 3,368 3,998 - - Notes to the Financial Statements to Notes Notes to the Financial Statements for the year ended 30 June 2007
32. RELATED PARTIES (CONTINUED) In the year to June 2006, properties in which the Trust acquired an interest through the TKs were acquired from entities which were managed by the Babcock & Brown Group or to which the Babcock & Brown Group provided investment management services and the ultimate investors which included the Babcock & Brown Group or parties related to it and its clients. All transactions were on an arm’s length basis and purchase prices were determined using independent valuations.
The entities from which interests were acquired and the purchase prices paid are outlined below.
Evol Co., Ltd. - 8,949 - - Pliba Co., Ltd. - 27,821 - - Bacchus & Alkes Co., Ltd. - 274,023 - -
Consolidated Trust 30/06/07 30/06/06 30/06/07 30/06/06 $’000 $’000 $’000 $’000
(d) Outstanding balances The following balances are outstanding at the reporting date in relation to transactions with related parties:
Asset management fees Trust base fee – payable to Responsible Entity 302 562 302 562 Asset base fee – payable to Japan Asset Manager 1,229 1,021 - - TK distribution – payable to TK Operator 94 277 - - Total base fees 1,625 1,860 302 562
110 Performance fees – payable to Responsible Entity 25,602 27,914 25,602 27,914 Asset performance fees – payable to Japan Asset Manager 2,685 8,938 - - Total performance fees 28,287 36,852 25,602 27,914
Asset management fees payable to the Responsible Entity and related parties (including the net effect of GST or Japanese consumption tax) 29,912 38,712 25,904 28,476
Custody fees payable to Related Party 45 41 45 41 Transaction fees payable to Japan Asset Manager 241 - - - Reimbursement of trust expenses 9 71 9 71 Distributions receivable from TKs - - 27,238 19,962 Notes to the Financial Statements for the year ended 30 June 2007
33. KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Directors The names of each person holding the position of Director of the Responsible Entity during the financial period were Mr F A McDonald, Mr E Lucas, Mr P Green, Ms P Dwyer and Mr J Pettigrew.
(b) Other key management personnel The following person had authority and responsibility for planning, directing and controlling activities of the consolidated entity, directly or indirectly, during the financial year:
Name Position Employer M A Calcarao Financial Controller Babcock & Brown Australia
(c) Unit holdings The number of Units in the Trust held during the financial year by each Director of Babcock & Brown Japan Property Management Limited and other key management personnel, including their personally related parties, in the issued capital of the Trust at the date of this report are set out below. There were no Units issued during the year as compensation.
Balance at start Change during Balance at end of year the year of year
Name Allan McDonald 240,000 - 240,000 Eric Lucas 6,123,706 - 6,123,706 Phil Green 1,530,927 - 1,530,927 Paula Dwyer 250,000 - 250,000 John Pettigrew 150,000 - 150,000 BJT Annual Report 2007 BJT Annual Report Michelle Calcarao 15,155 - 15,155 111 (D) Remuneration of Directors and other key management personnel (i) Executive Directors and other key management personnel The Executive Directors of the Responsible Entity and other key management personnel are employed by the Babcock & Brown Group (“Babcock & Brown”). The Remuneration Committee of Babcock & Brown is responsible for ensuring that the executive Directors and other key management personnel are remunerated fairly and for overseeing remuneration and human resources policies and practices of the Babcock & Brown Group. The Babcock & Brown remuneration Committee consists of at least three Directors, a majority of which must be independent non-executive Directors. Babcock & Brown remuneration practices have been structured to be competitive and to ensure that Babcock & Brown can attract and retain the talent needed to achieve both short and long term success, while maintaining a strong focus on teamwork, individual performance and the interest of Babcock & Brown shareholders. Babcock & Brown total remuneration is delivered through base salary, an annual performance bonus and, for executives, through the equity incentive plan. The Babcock & Brown Group the Financial Statements to Notes and individual performance will be the key drivers of total remuneration. Consequently, for more senior executives, base salary will continue to be positioned to provide a small proportion of their total remuneration opportunity. The combination of annual performance bonus and equity incentives will deliver the majority of Babcock & Brown executive’s potential total remuneration opportunity.
(ii) Independent Directors Non-executive Directors are employees of the Responsible Entity and are paid an annual fee for their services on the Board and Audit, Risk & Compliance Committee of the Board. The total remuneration paid to Non-executive Directors during the period is set out in the remuneration table below. The amount paid to non-executive Directors is reviewed from time to time and approved by the Board. Non- executive Directors are not provided with retirement benefits other than statutory superannuation and do not receive options or bonus payments. Notes to the Financial Statements for the year ended 30 June 2007
33. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (iii) Details of remuneration
Cash 1Bonus Non salary relating to monetary Super- and fees current period benefits annuation Options4 Total $ $ $ $ $ $
2007 Director A McDonald2 110,000 - - 9,900 - 119,900 E Lucas3 350,624 11,069,062 4,178 - 2,289,172 13,713,036 P Green2 70,000 - - 6,300 - 76,300 P Dwyer2 70,000 - - 6,300 - 76,300 J Pettigrew2 70,000 - - 6,300 - 76,300 M Calcarao2 142,750 200,000 - 12,686 52,130 407,566 Total remuneration 813,374 11,269,062 4,178 41,486 2,341,302 14,393,042
1 Bonuses paid to Executive Directors and key management personnel are determined by the Babcock & Brown Group on a calendar year basis. It is not possible to determine the amount of bonus relating to the period to 30 June 2007 until the end of the 2007 calendar year. 2 Remuneration paid to Independent Directors, P Green and key management personnel is not paid by the Trust. 3 Remuneration paid to Executive Director E Lucas is not paid by the Trust. The remuneration is 100% of the remuneration paid to E Lucas by Babcock & Brown. This remuneration is paid to E Lucas in respect of his wider responsibilities relating to the Babcock & Brown Group, of which the executive Directorship of the Responsible Entity is a part. It is not practicable or meaningful to apportion the remuneration to the time spent directly on the executive Directorship of the Responsible Entity. 4 Options granted relate to Babcock & Brown Limited and are valued in accordance with the relevant accounting standards.
Cash 1Bonus Non salary relating to monetary Super- 112 and fees current period benefits annuation Options4 Total $ $ $ $ $ $
2006 Director A McDonald2 110,000 - - 9,900 - 119,900 E Lucas3 350,442 7,782,500 3,001 - 815,278 8,951,222 P Green4 ------P Dwyer2 70,000 - - 6,300 - 76,300 J Pettigrew2 70,000 - - 6,300 - 76,300 M Calcarao2 135,000 200,000 - 12,139 13,983 361,122 Total remuneration 735,442 7,982,500 3,001 34,639 829,261 9,584,844
1 Bonuses paid to Executive Directors and key management personnel are determined by the Babcock & Brown Group on a calendar year basis. It is not possible to determine the amount of bonus relating to the period to 30 June 2006 until the end of the 2006 calendar year. 2 Remuneration paid to Independent Directors and key management personnel is not paid by the Trust. Options granted relate to Babcock & Brown Limited. 3 Remuneration paid to Executive Director E Lucas is not paid by the Trust. The remuneration is 100% of the remuneration paid to E Lucas by Babcock & Brown. Options granted relate to Babcock & Brown Limited. This remuneration is paid to E Lucas in respect of his wider responsibilities relating to the Babcock & Brown Group, of which the executive directorship of the Responsible Entity is a part. It is not practicable or meaningful to apportion the remuneration to the time spent directly on the executive directorship of the Responsible Entity. 4 Remuneration paid to Executive Director P Green is not paid by the Trust. Remuneration paid to P Green was $11,265,948 including options of $902,779. This remuneration is 100% of the remuneration paid to P Green by Babcock & Brown. Options granted relate to Babcock & Brown Limited. This remuneration is paid to the executive Directors in respect of his wider responsibile relating to the Babcock & Brown Group, of which the executive directorship of the Responsible Entity is a part. It is not practicable or meaningful to apportion the remuneration to the time spent directly on the executive directorship of the Responsible Entity. Notes to the Financial Statements for the year ended 30 June 2007
33. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (E) Options and loans There were no loans or Babcock & Brown Japan Property Trust options granted as part of key management personnel remuneration in respect to their position as key management personnel.
(F) Other transactions with the Trust The terms and conditions of the transactions with key management personnel and their related entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.
34. CONTINGENT LIABILITIES (A) Contingent Capital CONTRIBUTIONS The Trust has a TK Agreement with JPT Direct Co., Ltd. (“JPTD”). Under the TK Agreement JPTD may request the Trust to contribute additional capital up to ¥2,500,000,000 ($23,818,598 at 30/6/07 JPY/AUD exchange rate of 104.96) (Additional Capital Contribution) in the event that JPTD has not met its monetary obligations under certain Transaction Documents. The Transaction Documents include the ISDA master agreement (the “ISDA Agreement”) and made between JPTD and DBAG. No liability was recognised by the Trust in relation to the guarantee as the fair value of the guarantee is nil. JPTD entered into a pledge agreement under which it granted a pledge over its rights to call for the Additional Capital Contribution in favour of DBAG as security for its obligations under the ISDA Agreement. Following the enforcement of such security, DBAG will be able to call for payment of the Additional Capital Contribution to the extent required to satisfy and discharge JPTD’s obligations under the ISDA Agreement. Babcock & Brown Japan Property Management Limited as responsible entity for the Trust has consented to such security being granted. At 30 June 2007 JPTD had met all its monetary obligations under the ISDA Agreement. BJT Annual Report 2007 BJT Annual Report In the opinion of the Directors of the Responsible Entity there were no other contingent assets or liabilities at balance date. 113
35. EVENTS OCCURING AFTER THE BALANCE SHEET DATE There has not arisen in the interval between the end of the financial period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Trust, to affect significantly the operations of the Trust, the results of those operations, or the state of affairs of the Trust, in future financial years.
36. ECONOMIC DEPENDENCY The Trust is not significantly dependent on any specific entity for its revenue or financial requirements. Notes to the Financial Statements to Notes Directors’ Declaration
1. In the opinion of the Directors of Babcock & Brown Japan Property Management Limited, the Responsible Entity of Babcock & Brown Japan Property Trust: a) the Financial Statements and Notes, set out on pages 80 to 113 are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the financial position of the Trust and the Consolidated Entity as at 30 June 2007 and of its performance, as represented by the results of its operations and its cash flows, for the year ended 30 June 2007; and ii) complying with Accounting Standards and the Corporations Regulations 2001; and b) there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable.
2. The Trust has operated during the year in accordance with the provisions of the Trust Constitution dated 31 January 2005. 3. The Register of Unitholders has, during the year ended 30 June 2007, been properly drawn up and maintained so as to give a true account of the Unitholders of the Trust. 4. The Directors of the Responsible Entity have been given the declarations by the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2007 pursuant to section 295A of the Corporations Act 2001.
Dated at Sydney this 16 August 2007.
Signed in accordance with a resolution of the Directors:
114
F A McDONALD Chairman PricewaterhouseCoopers ABN 52 780 433 757
Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia www.pwc.com/au Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999
Independent audit report to the unitholders of Babcock & Brown Japan Property Trust Report on the financial report We have audited the accompanying financial report of Babcock & Brown Japan Property Trust, which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Babcock & Brown Japan Property Trust and the Babcock & Brown Japan Property Trust Group (the consolidated entity). The consolidated entity comprises the registered scheme and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report The directors of Babcock & Brown Japan Property Management Limited (the responsible entity) are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; 2007 BJT Annual Report and making accounting estimates that are reasonable in the circumstances. 115 Auditor’s responsibility Our responsibility is to express an opinion of the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are Report Audit Independent appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report. For further explanation of an audit, visit our website: http://www.pwc.com/au/financialstatementaudit. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Liability limited by a scheme approved under Professional Standards Legislation PricewaterhouseCoopers ABN 52 780 433 757
Darling Park Tower 2 Auditor’s opinion 201 Sussex Street GPO BOX 2650 In our opinion: SYDNEY NSW 1171 DX 77 Sydney (a) the financial report of Babcock & Brown Japan Property Trust is in accordance withAustralia the Corporation Act 2001, including: www.pwc.com/au (i) giving a true and fair view of the registered scheme’s and consolidated entity’sTelephone financial +61 position 2 8266 0000 Facsimile +61 2 8266 9999 as at 30 June 2007 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the consolidated financial report and notes comply with International Financial Reporting Standards as disclosed in Note 1.
Pricewaterhousecoopers
A J Wilson Partner Sydney, 16 August 2007 116
Liability limited by a scheme approved under Professional Standards Legislation ASX Additional Information
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as at 31 August 2007.
Substantial Unitholders The names of substantial Unitholders who have notified the trust in accordance with section 671B of the Corporations Act 2001 are:
Date notice Unitholder Number of Units Percentage % received UBS Nominees Pty Limited 56,930,246 11.55 24/07/07 Suncorp Metway Investment Management Limited 32,868,289 6.67 2/07/07 Macquarie Bank Limited 32,207,739 6.53 31/08/07 FMR Corp and Fidelity Investment Limited 35,919,282 7.28 23/02/07 AMP Limited 30,935,806 6.27 4/06/07
Distribution of Units Category Holders Ordinary Units 1 – 1,000 319 217,395 1,001 – 5,000 1,137 3,557,977 5,001 – 10,000 758 5,864,723 10,001 – 100,000 1,346 38,101,726 100,001 – and over 139 445,354,402 Total 3,699 493,096,223
The number of Unitholders holding less than a marketable parcel is 19. 2007 BJT Annual Report
Voting Rights 117 At meetings of Unitholders of the Trust, on a show of hands, each Unitholder will have one vote. On a poll, each Unitholder has one vote for each dollar of the value of the total interests that they have in the Trust (determined by reference to the closing price on the trading immediately before the day on which the poll is taken).
On-Market Buy-Backs The Trust has no on-market buy-back currently in place.
Number and Class of Units that are Restricted or Subject to Voluntary Escrow
There are no ordinary Units in the Trust which are subject to voluntary escrow. Information Additional ASX ASX Additional Information
Twenty Largest unitholders Percentage of Number Ordinary Units Holder of Units held HSBC Custody Nominees (Australia) Limited 85,011,114 17.24 J P Morgan Nominees Australia Limited 67,227,995 13.63 Citicorp Nominees Pty Limited 49,755,540 10.09 ANZ Nominees Limited 46,259,198 9.38 National Nominees Limited 35,910,109 7.28 Suncorp Custodian Services Pty Ltd
Use of Cash The Trust has used cash and assets in a form readily convertible to cash that it had at the time of admission to the Official List of the Australian Securities Exchange in a way consistent with its business objectives. Ownership Structure
The Trust’s interest in the properties in Japan is achieved via an investment structure (“Japanese Investments”), as follows: The TK (“tokumei kumiai”) Structure Under Japanese commercial law a TK is not a legal entity but a contractual relationship or a series of contractual relationships between one or more investors and a TK operator. In a TK arrangement, the investors provide capital to a business which is defined by the contractual agreement and is to be conducted by the TK operator, which carries on the TK business entirely in its own name and under its sole control in accordance with the terms of the TK agreement. The investors have no right to make any business decisions with respect to the TK business. Investors in a TK do not own any equity in the TK operator and have no voting rights in relation to a TK operator or the TK business, rather there is only a contractual relationship between a TK operator and the investors. The investors are entitled to a proportional share (based on their equity contribution to the TK) of the profits and losses of the TK business. Depending on the terms of the TK agreement, liability of the investors can be limited to the amount of their initial investment or the investors can be subject to additional capital calls. The net effect of these contractual arrangements under Japanese tax law is that the investors are taxed in Japan on their share of TK income (by the TK operator withholding Japanese tax from TK distributions to the investors) even though the business is conducted and relevant assets are held in the name of the TK operator. A TK operator reports the amount of profits to which the investors are entitled as a deduction in respect of its taxable income.
The Trust’s TK Investment All the Trust’s interests in properties are held through TK structures. The Responsible Entity has TK Agreements with JPT Co., Ltd., JPT Scarlett Co., Ltd., JPT Direct Co., Ltd., and JPT Corporate Co., Ltd.,
(“TK Operators”) pursuant to which, in exchange for the Trust’s contribution of all of the equity in the 2007 BJT Annual Report TK, the Trust is entitled to 100% of the investor capital account of each TK and 99% of the profits and 119 losses of the TK business. The TK Operators are entitled to the remaining 1% of the profits and losses of the TK business. Each TK’s defined business is to obtain profits from purchasing, holding and selling the properties held by the respective TK Operator in accordance with the provisions of the respective TK Agreement (each, a “TK Business”). The TK Operators have a TK Asset Management Agreement with Babcock & Brown Co., Ltd. (“the Japan Manager”). The asset management services provided by the Japan Manager to the TK Operators are to assist the TK Operators to conduct the TK Businesses. The Trust does not own any of the equity of the TK Operators and does not have any voting rights in Ownership Structure Ownership relation to the TK Operators or the TK Businesses, rather the Trust has a contractual claim against the TK Operators. The TK Operators are Japanese limited liability companies established specifically for the purpose of operating the respective TK Businesses. In order for the TK Operators to be bankruptcy remote, their voting stock is held by Cayman Islands companies established specifically for that purpose as nominees for Babcock & Brown Co., Ltd. and, in turn, the voting stock of the Cayman Islands companies are held by Cayman Islands charitable trusts.
Trust Bank(s) and Trust Beneficiary Interests The TK Operators hold the beneficial interest in the properties in the TKs under a trust beneficiary certificate issued by a trust bank licensed in Japan which holds legal title to the properties. It is common practice in Japan for a TK operator to hold its investment in property through Trust Beneficiary Interests (TBIs). Certain transaction levies are substantially reduced or eliminated in the case of the acquisition of a Trust Beneficiary Interest rather than the acquisition of real property. The TK Operator in the case where the TK Operator holds TBIs rather than direct legal interest, effectively has the same economic rights and obligations as if it were the legal owner of the property the subject of the TBI. Ownership Structure
The Financial Instruments and Exchange Law is expected to be introduced in Japan shortly which will require the Trust’s TK Operators who buy and sell TBIs and the Japan Manager, to obtain certain registrations that they have not previously been required to obtain. The following diagram sets out the structure of the Trust’s interest in its Japanese Investments and the management arrangements for the Trust and the Japanese Investments.
Babcock & Brown Unitholders Group
Babcock & Brown Japan Property Responsible Entity Trust
TKs Japan Manager
Trust Beneficiary Interest(s) 120
Trust Bank(s)
Properties Corporate Directory
Principal Registered Office Level 23, The Chifley Tower 2 Chifley Square Sydney NSW 2000 Australia Responsible Entity Babcock & Brown Japan Property Management Limited Level 23, The Chifley Tower 2 Chifley Square Sydney NSW 2000 Australia Telephone: +61 2 9229 1800 Facsimile: +61 2 9223 2907 Custodian Babcock & Brown Asset Holdings Pty Limited Level 23, The Chifley Tower 2 Chifley Square Sydney NSW 2000 Australia Directors of Responsible Entity Babcock & Brown Japan Property Management Limited Allan McDonald (Chairman) (“Responsible Entity”) (ABN 94 111 874 563) is the Responsible Entity of Babcock & Brown Japan Property Trust (“The Trust”) Eric Lucas (Managing Director) (ARSN 112 799 854). The Responsible Entity is a subsidiary of Phil Green Babcock & Brown Limited (“B&B”) (ACN 108 614 955). Paula Dwyer Investments in the Trust are not liabilities of B&B or any John Pettigrew entity in the Babcock & Brown Group, and are subject to investment risk including possible loss of income and capital Company Secretary of invested. Neither the Responsible Entity nor any member of Responsible entity the Babcock & Brown Group guarantees the performance of Melanie Hedges the Trust or the payment of a particular rate of return on the Trustís units. Unit Register This report is not an offer or invitation for subscription or LINK MARKET SERVICES LIMITED purchase of or a recommendation of units in the Trust. It does Level 12, 680 George Street not take into account the investment objectives, financial Sydney NSW 2000 Australia situation and particular needs of an investor. Before making an investment in the Trust, an investor should consider Telephone: 1800 881 098 (within Australia) whether such an investment is appropriate to their particular Telephone: +61 2 8280 7699 (outside Australia) investment needs, objectives and financial circumstances and Facsimile: (02) 9287 0303 consult an investment adviser if necessary. ASX Code: BJT The Responsible Entity, as the Responsible Entity of the Trust, Email: [email protected] is entitled to fees for so acting. The Trust and its related Website: www.linkmarketservices.com.au corporations, together with their officers and directors and officers and directors of the Trust, may hold units in the Trust Auditors from time to time. PRICEWATERHOUSECOOPERS The Annual Report for the Trust has been prepared to comply 201 Sussex Street with its obligations under the Corporations Act, to ensure compliance with the ASX Listing Rules and to satisfy the Sydney NSW 1171 requirements of the Australian accounting standards. The Australia responsibility for preparation of the Annual Report and any financial information contained in this Annual Report rests Internet Address solely with the directors of the Responsible Entity as the www.bbjapanpropertytrust.com Responsible Entity of the Trust. www.bbjapanpropertytrust.com