For personal use only · ANNUAL FINANCIAL REPORT 30 JUNE 2013 Annual Financial Report Investa...

Investa Office Fund

30 June 2013Annual Review

For

per

sona

l use

onl

y

Investa OffIce fund annual RevIew June 2013

iof2013.reportonline.com.au

this annual Review is one of three documents that form IOf’s fY13 reporting suite. for more information, or to download any of the above documents, visit www.investa.com.au/iof

Investa Office Fund

30 June 2013Annual Review

INV

ES

TA O

FF

ICE

FU

ND

AN

NU

AL FIN

AN

CIA

L RE

PO

RT 30 JU

NE

2013

Investa Office Fund

30 June 2013Annual Financial Report Investa Office Fund

30 June 2013Property Portfolio

Investa Office Fund (IOF) is managed by one of Australia’s largest office owners and managers Investa Office (‘Investa’). Investa’s integrated real estate platform incorporates asset, property, facilities and project management, sustainability, development, capital transactions, finance, treasury, research and compliance. Each function works seamlessly together to deliver financial and operational outperformance for IOF investors and market leading service to our tenants.

Investa is committed to responsible property investment and the ongoing pursuit of sustainable building ownership and management.

Leading from the front in the Australian office sector

For

per

sona

l use

onl

y

01Annual Report

Artist’s impression, 567 Collins Street, Melbourne

ContentsOverview 02Letter from 04 the Chairman Letter from the 06 Fund Manager Our Strategies 08Our Key Highlights 10Our Performance Summary 12Our Portfolio 14The Market 16Our Sustainability 18 PerformanceOur Key Milestones 20The Manager 26The Management Platform 26The Management Approach 28The Management Team 32Directories 34Investor Relations 34Glossary 36Corporate Directory 37

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

02

overview

Capitalising on opportunities to create value and deliver outperformance

1. Post acquistion of 99 Walker Street, North Sydney on 24 July 2013.2. Post settlement of US$125m US Private Placement.

financial56% increase in Net Profit to $158.7 million

11% increase in Operating Earnings per unit to 22.4 cents

3% increase to NTA to $3.23 per unit

Australian portfolioLeased over 32,000sqm of space nationally

Maintained high occupancy of 96%

External revaluation uplifts of $59 million, a 5% uplift on prior book valuations

Acquisitions outperforming expectations

Only circa 1.5% of FY14 rent is at risk

Capital ManagementWeighted average debt maturity increased to 3.22 years from 2.4 years

Maintained conservative gearing of 29.4%1

Leveraged S&P BBB+ credit rating to raise $250 million2 in debt capital markets at an average margin of 193bps and average debt maturity of 8.6 years

Refinanced $150 million of bank debt

12 months of outperformance


For

per

sona

l use

onl

y

03

The fundInvesta Office Fund (ASX:IOF) is an ASX listed Australian real estate investment trust. The Fund owns a portfolio of investment grade office buildings and receives rental income from a tenant register comprised predominantly of government departments and major corporate organisations.

The Responsible EntityInvesta Listed Funds Management Limited (ILFML) is the Responsible Entity of IOF and is responsible for the corporate governance and overall management of IOF including the performance of the manager. The Board of ILFML consists of a majority of Independent Directors.

The ManagerInvesta is Australia’s leading office owner and manager. Our integrated management platform provides the Fund with asset management and property services to support the delivery of the overarching strategy.

The StrategyTo be Australia’s best performing office fund by owning a portfolio of quality investment grade office assets that generate high risk-adjusted returns.

The MarketThe Fund is well positioned to continue to take advantage of market opportunities to acquire assets and service our tenants’ needs in a challenging operating environment. Despite recent uncertainty due to tapering mining investment, the Australian economy continues to expand at a robust pace and is well placed in a global context. We believe this environment will underpin the Fund’s future growth.

$2.8bnAssets under management

56%increase in Net Profit

11%increase in operating Earnings per Unit

94%Portfolio occupancy

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

04 Investa OffIce fund annual RevIew June 2013

Dear Unitholder

It has been a good year for IOF. In a period of continued economic and political uncertainty we’ve delivered a strong set of results that were ahead of market expectations. Our key performance metrics all improved, with Earnings per Unit up 11%, Distributions per Unit up 14%1, and Net Tangible Assets up 3%.

Portfolio repositioning well progressed

Our strategy of repositioning the portfolio to Australia and optimising portfolio performance is now starting to bear fruit. Since Investa took over management of the Fund in mid-2011, $520 million of offshore assets have been sold, over $800

million of premium and A-grade Australian assets have been acquired, and over 120,000sqm of space has been leased – the equivalent of over 25% of the lettable area of the 2011 portfolio. As a result of Investa’s execution, the portfolio is well positioned to continue to deliver strong risk-adjusted returns.

Ongoing balance sheet de-risking

The balance sheet of the Fund has also undergone significant change since 2011, as a result of Investa’s ability to gain a BBB+ credit rating from Standard & Poors. The Fund’s reliance on 100% bank debt has been removed, and IOF is now funded by a diverse mix of debt sources including bank

Deborah Page, Chairman

Letter from the ChairmanWe are pleased to report a strong set of results for 2013, which demonstrate the continued, effective delivery of iof’s stated strategy

1. The Financial Year 2012 total distribution was 17.5 cents per Unit including a normal distribution of 15.6 cents and a special distribution of 1.9 cents. The special distribution was paid following offshore asset sales.

For

per

sona

l use

onl

y

05

> see letter from the fund Manager overleaf> see Our strategies on page 8

debt (62%), domestic capital markets (19%) and the US Private Placement market (19%). As we have diversified our sources of debt we have also increased the average tenure of our funding from 2.4 years to 3.2 years. Our debt maturities are now spread over the next 12 years, reducing the risk of having to refinance large amounts of debt at unfavourable points in the cycle. These actions have de-risked the balance sheet and demonstrate our proactive approach to capital management.

underpinned by the Investa Office platform

The performance of the Fund is underpinned by Investa’s ability to deliver consistent financial, operational and environmental performance across the portfolio, notwithstanding market conditions. Their integrated platform and capability as an office manager translate to better services to tenants in IOF buildings and superior returns to unitholders.

adopting peer comparable reporting guidelines

During 2013, the Property Council of Australia (“PCA”) has been working with key property industry stakeholders to improve the non-AAS measures of operating performance amongst Australian real estate organisations. The aim is to provide investors and analysts with clear, consistent and meaningful information. This has resulted in the PCA releasing a white paper titled “Voluntary best practice guidelines for disclosing FFO and AFFO”. The white paper sets out principles for determining Property Council Funds From Operations (“Property Council FFO”). For the Financial Years ending on and after 30 June 2014 the Responsible Entity’s primary non-AAS measure of the Group’s performance will be based on Property Council FFO rather than Operating Earnings.

Property Council FFO is defined as the Fund’s underlying and recurring earnings from its operations, determined by adjusting statutory net profit (under AIFRS) for non-cash and other items such as the amortisation of tenant incentives and rent free periods, fair value gains/losses on investment property, fair value gains/losses on the mark to market of derivatives, the straight lining of rent, non-FFO deferred tax benefits and expenses, foreign currency translation reserves recognised in net profit, and any other unrealised or one-off items.

We will continue our commitment to outperformance in Financial Year 2014. We have forecasted FFO of 26.5 cents per Unit, representing 6% growth on Financial Year 2013, and our distribution is forecast to increase 4% to 18.5 cents per Unit, a distribution that reflects our conservative and sustainable approach to managing the Fund.

On behalf of the Board and Investa I would like to thank you for your ongoing support of Investa Office Fund.

Yours sincerely,

deborah Page aM Chairman, Investa Listed Funds Management Limited

FUN

DS

MA

NA

GM

EN

T

SUPPORT SERVICES

DEVELOPMENT

CAPITAL

TRANSACTIONS

REA

L ES

TATE

OPE

RAT

ION

S

INVESTA’S INTEGRATED

PL

AT

FO

RM

INVESTA’S INTEGRATE

D P

LA

TF

OR

M

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

06

Dear Unitholder

In my second year as Fund Manager of Investa Office Fund, I am pleased to report that we continue to deliver on our stated objectives of optimising performance and improving portfolio quality.

For the year ended 30 June 2013 the Fund delivered a 56% increase in Net Profit to $158.7 million, following positive revaluations across much of the portfolio. Operating Earnings, a measure of ongoing operating performance of the Fund, were ahead of guidance, growing $9.4 million to $137.5 million, or 22.4 cents per Unit, equating to growth of 11% on Financial

Toby Phelps, Fund Manager

Year 2012. The normal distribution per Unit was up 2.15 cents to 17.75 cents per Unit, an increase of 14% on Financial Year 2012 normal distribution of 15.6 cents per Unit.1

Net Tangible Assets increased 9 cents per Unit or 3% to $3.23 per Unit following revaluations of 52% of the portfolio, including strong uplifts from recent acquisitions at 242 Exhibition Street, Melbourne and 66 St Georges Terrace, Perth, reporting increases of 7.5% and 8.2% respectively. Our recent acquisitions have been a strong contributor to the growth in Operating Earnings and Net Tangible Assets, as well as improving the overall quality of our portfolio.

Letter from the fund ManagerThroughout the year we successfully delivered on our strategic objectives of improving portfolio quality, driving strong leasing outcomes and prudently managing the balance sheet.


1. The Financial Year 2012 total distribution was 17.5 cents per Unit including a normal distribution of 15.6 cents and a special distribution of 1.9 cents. The special distribution was paid following offshore asset sales.

For

per

sona

l use

onl

y

07

acquisitions driving growth and improving portfolio quality

During the year total Australian acquisitions since Investa took over management reached over $800 million, reflecting our continued focus on securing opportunities that enhance risk adjusted returns and improve portfolio quality. Financial Year 2013 acquisitions were:

> 66 St Georges Terrace, Perth was acquired in August 2012 with the objective of driving performance through increasing rents and extending lease maturities. During the year we renewed or re-leased 54% of the building, achieving rents 22% above average rent at acquisition and outperforming our business plan. As a result, the 30 June 2013 revaluation reflected an increase of 8.2% to $89.5m.

> 567 Collins Street, Melbourne was acquired in March 2013. The property is currently under construction and upon completion will be one of the few Premium grade buildings in Melbourne. The building is 47% pre-leased to Leighton Contractors, Corrs Chambers Westgarth and Virgin Active and the Fund benefits from a 4 year rental guarantee and full cost overrun guarantee from the developer, Leighton Properties, providing no leasing or cost risk until 2019. The development is progressing as expected and recent transaction evidence suggests potential for value improvement in the future.

> 99 Walker Street, North Sydney was acquired in June 2013 with settlement taking place in July 2013. This well located A-grade building has a long weighted average lease expiry of 5.2 years and is let to tenants including GE Capital Finance until 2022 and AAMI until early 2015. Multiple value-add opportunities exist for this asset through re-leasing, as was the case at 66 St Georges Terrace, Perth.

Our Australian portfolio is now well balanced with an appropriate mix of core, value-add and tactical assets, and an improved weighting of 15% Premium grade, 63% A-grade and 22% B-grade.

Over the coming years we will continue to evolve the Australian portfolio, whilst remaining focused on disposing of our remaining offshore investments – Bastion Tower and the Dutch Office Fund.

widespread leasing success underpinning future earnings and valuation growth

Investa’s focus on providing market leading service to our tenants has continued to deliver leasing success. During the period, the portfolio experienced another strong year of leasing, with over 32,000sqm leased, following the 80,000sqm completed in 2012.

Our proactive approach to leasing over the past 2 years has resulted in over 25% of the IOF portfolio being re-let. This has boosted the earnings outlook by reducing future lease expiries and, assuming all leases currently in heads of terms are completed, increases the weighted average lease expiry to 5.4 years.

The major leasing successes during the period were:

> 16-18 Mort Street, Canberra – 13,250sqm leased to Telstra for 12 years, an outstanding result for the Fund in a market plagued with double-digit vacancy and ongoing political uncertainty.

> 140 Creek Street, Brisbane – The Commonwealth Government have renewed their lease over 7,286sqm for 10 years, increasing the weighted average lease expiry from 1.7 years to 3.4 years at 30 June 2013.

> 151 Clarence Street, Sydney – 7,581sqm leased to Westpac and Telstra until 2016, providing time to progress our plans for the redevelopment of this asset and to secure appropriate pre-commitments.

capital management contributing to success

During the year we have taken advantage of the improved availability and cost of debt and refinanced over $400 million. This included extending the maturity of $150 million of bank debt until 2017, issuing a 5 year $125 million Medium Term Note, and arranging a 12 year US$125 million Private Placement. This has materially de-risked the Fund’s refinancing profile, extending the average debt maturity from 2.4 years to 3.2 years.

Outlook

Economic conditions in Australia remain challenging and this is having a significant impact on office markets with companies generally downsizing and vacancy rates increasing. Recent events including further reductions in interest rates, a 15% fall in A$ and encouraging signs of growth in the US economy are contributing to improvement in the forward indicators of office demand. Whilst we expect demand to remain weak in the short term, we are encouraged by the prospects for Australia’s office markets in the medium term, due to a controlled supply outlook. As a result, we expect a recovery to commence during 2014. As I have highlighted above, our hard work over the past 2 years has materially insulated us from the current occupancy weakness and positioned us for further growth.

As outlined in the Chairman’s letter, the Fund is adopting the PCA’s best practice reporting guidelines, moving our key operating metric from Operating Earnings to Funds From Operations. For Financial Year 2014 we are forecasting FFO per unit of 26.5 cents, a 6% increase from the 25.0 cents per Unit delivered in 2013.

Yours sincerely,

Toby Phelps Fund Manager

> see Our Performance summary on page 12> for further asset information see the 2013 Property Portfolio

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y


our strategies

iof’s four strategic priorities

Create and maintain a quality portfolio of investment grade Australian office assets in major CBD markets

Transition to being 100% Australian, through divestment of offshore assets and reinvestment of the released capital in investment grade office assets

> see our acquisitions in more detail on pages 20-21

focus on leasing and driving total returns

Leverage the strength of Investa’s integrated management platform and office sector leadership to enhance portfolio returns

> see our leasing results in more detail on pages 24-25

Portfolio repositioning

optimisation of portfolio performance

For

per

sona

l use

onl

y

09

“ Two years after Investa took over the management of IOF, the strategy of consistently optimising performance and repositioning the portfolio to be 100% Australian is starting to bear fruit.” Toby Phelps, Fund Manager

focus on diversity and efficiency of funding

Optimise investment returns through prudent capital management initiatives Focus on diversifying sources of debt funding and extending the tenure of IOF’s debt maturity profile > see our capital management

highlights on pages 22-23

focus on alignment and transparency

Maintain the highest standards of corporate governance and ethical conduct Aim to be the benchmark for best practice corporate governance for externally managed REITS

> learn more about our governance approach on page 30

Capital Management

Maintain market leading governance

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

10

our key highlights

In line with the Fund’s strategic priorities, a series of key milestones were achieved throughout FY2013. Each of these milestones reflects Investa’s ability to proactively identify opportunities, then execute effectively to create value for unitholders.

acquired 66 st Georges terrace, Perth

De-risked asset and achieved average rents on new leases 22% higher than rents at acquisition

> Go to page 20

Ranked 4th in the world in Global Real estate sustainability Benchmark

> Go to page 31

Issued a$125m Mtn

Issued into domestic capital markets with 5 Year A$125 million Medium Term Note (“MTN”) at a margin of 210 bps.

> Go to page 22

first Independent director ratified at IOf annual unitholder Meeting

Under market leading governance framework

financial Year 2012 Results Concluded an active year of repositioning and de-risking that positioned the Fund for future growth

9%increase in operating Earnings guidance for fY13

12.4%iRR since acquisition1

JulY/auGust 12 sePteMBeR/OctOBeR 12 nOveMBeR/deceMBeR 12

fY13

a$125m

1. 19.6% excluding all acquisition costs


For

per

sona

l use

onl

y

11

acquired 50% interest in 567 collins street, Melbourne

Premium Grade building acquired with no leasing risk until 2019 and accretive from day one

> Go to page 20

signed 13,250sqm lease to telstra at 16-18 Mort street, canberra

12 year lease de-risks the building, major refurishment planned

> Go to page 24

finalised over 3,000sqm across two leases at 66 st Georges terrace, Perth

> Go to page 20

Half Year fY13 result Delivered 9% growth in Australian Net property income

Maintained high Australian occupancy of 97%

completed first year of fee structure being linked to market capitalisation

Achieving clear alignment between the Manager and unitholders

us$125m usPP announced

Issued into US capital markets with a 12 year, US$125m US Private Placement (“USPP”), priced at 175 bps over BBSW

> Go to page 22

Refinanced a$150m of bank debt

10.4%upgraded operating Earnings guidance for fY13

continued improvement in environmental performance intensity metrics achieved portfolio wide

NABERS Energy increased to 4.2 Stars

13% reduction in CO2 emissions

14% reduction in water consumption

15% reduction in electricity consumption

> Go to page 18

3.7Star NABERS Water rating

4.2Star NABERS Energy rating

JanuaRY/feBRuaRY 13 MaRcH/aPRIl 13 MaY/June 13

acquired 99 walker street, north sydney

A-grade asset with 5.2 year average lease expiry in Australia’s best performing market over past 12 months

> Go to page 20

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

12

five year performance summary1

unit of Measure FY2013 FY2012 FY2011 FY2010 FY2009

financial

Revenue $m 191.0 195.1 199.6 212.0 234.1

Responsible Entity Fees $m 9.4 8.6 8.5 8.4 10.8

Net Profit/Loss (statutory) $m 158.7 101.9 143.9 42.5 (764.2)

Operating Earnings $m 137.5 128.1 135.6 151.2 146.9

Total Assets $m 2,723.8 2,502.6 2,504.8 2,553.1 2,968.9

Total Liabilities $m 737.2 575.8 488.0 506.7 1,158.5

Gearing Ratio (look-through) % 26.3 21.9 20.5 23.2 39.2

Operating Earnings per Unit cents 22.4 20.1 19.9 22.4 38.4

Net Tangible Assets per Unit $ 3.23 3.14 2.92 2.96 3.96

security holders

No of unitholders # 16,644 17,588 23,068 25,375 26,211

Units on Issue millions 614.1 614.1 682.3 682.3 451.6

Securities on issue to top 20 unitholders2

% 83.1 82.6 82.8 79.4 76.4

Market Capitalisation $bn 1.79 1.66 1.76 1.58 0.83

Total Distributions per Unit cents 17.75 17.53 15.6 15.6 38.6

our performance summary

1. Prior year balances have been recalculated where necessary for the 4:1 unit consolidation in 20122. Securities on issue to top 20 Unitholders is as at 31 August of each year3. The Financial Year 2012 normal distribution was 15.6 cents. A special distribution of 1.9 cents was paid following the sale of offshore assets.


“ Operating Earnings per Unit for FY13 were up 11% to 22.4 cents, while distributions were up 1% to 17.75 cents.”

MINg LONg EXECuTIvE DIRECTOR, ILFML FINANCE DIRECTOR, IOF

For

per

sona

l use

onl

y

13

> see more performance details overleaf

4. Includes investment in DOF

unit of Measure fY2013 fY2012 fY2011 fY2010 fY2009

Operational

Portfolio Occupancy % 94 96 93 92 93

WALE years 4.9 5.1 4.8 5.1 4.9

No. of Investment Properties4 # 23 20 23 25 29

NLA sqm 502,244 477,533 537,281 560,440 632,263

Total Book Value $bn 2.8 2.5 2.6 2.7 3.2

Australian Owned Assets % 88 87 65 59 54

No of Tenants # 312 312 336 348 368

Retention % 56 79 61 60 79

Like-for-Like NPI Growth % 3.7 0.2 (0.6) 1.0 5.8

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

14

our portfolio


IOF owns a range of quality office assets in key CBD markets across Australia and select European markets, valued at $2.8 billion. The Fund will continue to enhance and build its portfolio in the four major Australian CBD markets of Sydney, Melbourne, Perth and Brisbane. The exit from Europe is continuing with Bastion Tower, Brussels on the market for sale in line with the Fund’s stated strategy to be 100% Australian, with a mix of core, value-add and tactical assets.

Sydney, NSW

North Sydney, NSW

Melbourne ViCNEW

NEW

campus Mlc, 105-151 Miller street

Book value (a$m)

172.0Occupancy

100%

111 Pacific Highway

Book value (a$m)

123.7Occupancy

98%

99 walker street

Book value (a$m)

124.9Occupancy

97%

deutsche Bank Place, 126 Phillip street

Book value (a$m)

176.2Occupancy

91%

10-20 Bond street

Book value (a$m)

183.8Occupancy

100%

388 George street

Book value (a$m)

207.5Occupancy

100%

347 Kent street

Book value (a$m)

254.5Occupancy

100%

151 clarence street

Book value (a$m)

81.6Occupancy

83%

800 toorak Road

Book value (a$m)

62.5Occupancy

100%

567 collins street

Book value (a$m)

31.3Occupancy

n/a

QBe House, 628 Bourke street

Book value (a$m)

105.8Occupancy

81%

Royal Mint centre, 383 la trobe street

Book value (a$m)

52.0Occupancy

100%

telstra Global HQ, 242 exhibition street

Book value (a$m)

233.8Occupancy

100%

For

per

sona

l use

onl

y

15

Europe

Brisbane, QLD

“ During fY13, iof continued to take advantage of opportunities to enhance risk adjusted returns and improve portfolio quality, acquiring $438 million of property.”

alex abell, assistant fund Manager

Perth, WA Canberra, ACTNEW

> To learn more about our properties, see the 2013 Property Portfolio

239 George street

Book value (a$m)

122.5Occupancy

89%

15 adelaide street

Book value (a$m)

53.0Occupancy

84%

140 creek street

Book value (a$m)

167.9Occupancy

99%

295 ann street

Book value (a$m)

114.6Occupancy

94%

232 adelaide street

Book value (a$m)

17.5Occupancy

94%

66 st George’s terrace

Book value (a$m)

89.5Occupancy

97%

times square 16-18 Mort street

Book value (a$m)

40.9Occupancy

98%

wellington central, 836 wellington street

Book value (a$m)

77.5Occupancy

100%

dutch Office fund the netherlands

Book value (€m)

182.5Occupancy

84%

Bastion tower, Belgium

Book value (€m)

64.6Occupancy

85%

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

16

The market


Sydney, NSWA key destination for investment capital with prime yields likely to compress further

Outlook is upbeat as lower interest rates should stimulate housing and construction sectors

Increased demand for office space should flow from these improving conditions

NSW markets are well positioned to negotiate current weakness due to some of the lowest vacancy rates in Australia

State economic conditions expected to be above average over the medium-term, boosting office space demand

Brisbane, QLDNegatively impacted by a combination of State Government rationalisation and downsizing of resource companies

Market weakness is mostly contained in the secondary grade market due to a shortage of contiguous vacant space in quality buildings

The occupancy market is expected to remain competitive and increasingly two-tiered between prime and secondary

Investment demand for prime assets is expected to remain high despite occupancy fundamentals being tough

Melbourne, ViCCurrently experiencing weak demand due in part to a high weighting to currency exposed industries

Downsizing of several larger office users has seen both sub-lease space and vacancy rates rise in recent quarters

Long-term outlook is increasingly positive due to a lower Australian dollar

Low average rents will ensure Melbourne CBD will continue to be a popular choice of national tenants looking to increase their office footprint

Supply headwinds combined with increasing sub-lease space has driven current market weakness and we expect leasing conditions to remain challenging over the next 12 months

IOF owns 21 high quality office assets located in Australian CBD office markets. The Fund also has two legacy European investments which are located in Belgium and the Netherlands; both assets will be sold in due course, resulting in IOF being 100% Australian focused.

Australian MarketIn a period of continued economic and political uncertainty, office markets around the country have gone through a difficult 12 months. This has seen tenant demand struggle due to a lack of business confidence, a softening labour market and an economy in transition following the mining boom. A number of markets have also seen an increase in supply delivered which has increased vacancy rates. In contrast to the challenging occupational market, the investment market has experienced some very strong sales with lower return expectations by investors and a continued weight of money driving valuation growth, particularly for well-let core assets.

BEYONDFY18FY17FY16FY15FY14VACANT

Lease expiry profileBy income(%)

13% 13%

7%6%

12% 12%

7%7%5% 5%

4%6%

53%51%

Australia Total Portfolio

lease expiryBy income (%)

Australia Total Portfolio

For

per

sona

l use

onl

y

17

Perth, WAHistorically strong tenant demand driven by significant growth in resource investment is now shifting as the resource sector moves into production mode

Strong export volumes will support ongoing economic growth; however office space demand will moderate from the record levels seen in recent years

Future supply is contained until 2015 and as a result, we expect vacancy in Perth to remain one of the lowest nationally

Continued economic growth will support positive demand, with good quality and well located assets expected to outperform

Canberra, ACTCanberra has seen supply of approximately 40% added to the market over the last 10 years

Growth is predominately driven by pre-commitments to new buildings now occupied by government

A two-tiered market has emerged, and poorer quality buildings with inferior environmental credentials are struggling to compete

We expect demand to remain subdued until after the Federal election and an ongoing move from tenants towards higher quality buildings

EuropeThe Eurozone continues to struggle through weak economic conditions and tenant demand remains subdued

Vacancy rates remain elevated, in part due to the oversupply of secondary suburban office space while prime CBD markets are performing reasonably well

We expect the Benelux region will benefit over the next 12 months from higher levels of investment as investors will seek out value in markets that have not bounced back strongly following the financial crisis

Bastion Tower is on the market to sell in Financial Year 2014

1. Includes 567 Collins Street, Melbourne as at completion and post 30 June 2013 acquisition of 99 Walker Street, North Sydney

ReGIOn a$m

nsw 1,324.2

Qld 475.5

vIc 685.0

wa 167.0

act 40.9

europe 348.3

total 3,040.9

Geographic diversificationBy value1

23%

16% 44%

11%5%

1%

top 10 tenantsBy income (%)

fe

de

ral/

sta

te G

ove

rnm

en

t

an

Z

tels

tra

IaG

na

B

co

les

wes

tpac

wils

on

Pa

rkin

g

Ge

ca

pit

al f

ina

nc

e

QB

e

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y


our sustainability performanceOptimising value by improving environmental performance

By reducing greenhouse gas emissions, energy and water use and increasing occupant comfort, Investa can reduce the operational and management costs of IOf buildings and contribute to better tenant retention by providing optimal indoor office environments. to achieve this, we have a particular focus on the ‘people factor’, and provide our operational managers with energy data tools that enable them to actively identify and replicate good performance in their buildings.

during 2013, our environmental portfolio intensity statistics continued to demonstrate ongoing operational performance improvements across the portfolio.

environmental Performance Results1

FY13 FY12 FY11Change from FY11 to FY13

energy and emissions

Electricity metered consumption MWh 36,098 27,773 31,537

Electricity consumption intensity kWh/sqm 88 91 104 15%

Greenhouse gas emissions tonnes 35,168 26,405 30,117

Greenhouse gas emissions intensity kg.CO2-e/sqm 86 86 99 13%

Gas metered consumption GJ 31,716 25,327 24,991

Gas consumption intensity MJ/sqm 99 134 133 25%

NABERS Energy rating2 Stars 4.2 4.0 3.3 0.9

water

Water consumption kL 297,689 245,446 255,392

Water consumption intensity L/sqm 727 808 841 14%

NABERS Water rating2 Stars 3.7 3.4 2.7 1.0

waste3

Total waste tonnes 1,517 – –

Waste recycled % 34% – –

1. Intensity statistics exclude 66 St George’s Terrace, Perth, 99 Walker Street, North Sydney and buildings under construction. Please refer to page 29 for the full list of assets included in the intensity statistics.

2. Portfolio weighted average NABERS rating, is the average number of stars for buildings rated within the portfolio.3. IOF assets joined the broader Investa waste and recycling program in FY13. This transition to new contracts includes provision for ongoing reporting. Recycling performance is

now reported for the first time. There is a focus on transitioning remaining contracts in FY14.

For

per

sona

l use

onl

y

19

sustainability Reporting & assurance for IOf

Management statementInvesta took over management of IOF in July 2011. The FY13 sustainability reporting suite provides data over three consecutive reporting periods: the baseline year of FY11, and the subsequent years FY12 and FY13.

For consistency, and to aid understanding, IOF applies reporting rules to sustainability data. Intensity statistics rules relate to the reporting of energy, greenhouse emissions, water and waste statistics for IOF’s managed office portfolio. The reporting rules and schedule of assets and reporting status are available at: www.investa.com.au/funds/investa-office-fund-iof/sustainability/

Independent assuranceInvesta Listed Funds Management Limited, as trustee of IOF, has engaged KPMG to provide limited assurance on the following selected environmental performance data for the year ended 31 March 2013: Electricity – consumption intensity (kWh/sqm), Gas – consumption intensity (MJ/sqm), CO2-e (electricity and gas) (kg.CO2-e /sqm), Water – consumption intensity (L/sqm) and Net Lettable Area – floor area (NLA) of buildings in the dataset.

KPMG’s engagement is consistent with the scope of work performed against the IOF data sets in prior periods and has been conducted in accordance with the Australian Standard on Assurance Engagements ASAE3000.

KPMG’s assurance statement is available at:

www.investa.com.au/funds/investa-office-fund-iof/sustainability/

Gas Intensity trend(MJ/sqm)

water Intensity trend(l/sqm)

Greenhouse Gas emissions trend(kg cO2-e/sqm)

FY11 FY13FY11 FY13 FY11 FY13 FY11 FY13

15%decrease

25%decrease

14%decrease

13%decrease

Best performing buildings this financial Year

electricity consumption Intensity

151 Clarence Street, Sydney 24%

347 Kent Street, Sydney 18%

239 George Street and 15 Adelaide Street, Brisbane 7%

naBeRs energy rating (stars)4

140 Creek Street, Brisbane 5.5 Stars, 0.5

151 Clarence Street, Sydney 3.0 Stars, 1.5

347 Kent Street, Sydney 4.5 Stars, 0.5

naBeRs water rating (stars)5

126 Phillip Street, Sydney 3.5 Stars, 0.5

140 Creek Street, Brisbane 4.5 Stars, 0.5

151 Clarence Street, Sydney 3.0 Stars, 1.5

4. IOF weighted average NABERS Energy rating improved 0.9 Stars since FY115. IOF weighted average NABERS Water rating improved 1.0 Star since FY11

electricity Intensity trend(kwh/sqm)

140

120

100

80

60

40

20

120

100

80

60

40

20

900

800

700

600

500

400

300

200

100

120

100

80

60

40

20

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

20

our key milestones


Strategic acquisitions advance portfolio repositioning

The Milestones$438 million of strategic acquisitions in three of Australia’s key CBD office markets during FY13

66 St Georges Terrace, Perth

A grade asset acquired for $82.4 million

Increased WA portfolio weighting to 5%

Accretive to earnings

Value add opportunities through environmental performance improvements

567 Collins Street, Melbourne (under construction)

Premium asset acquired for $231.1 million

Acquired 50% interest with ICPF1

Being developed by Leighton Properties and scheduled for completion in mid-2015

47% pre-committed space at acquisition

No leasing risk until 2019

99 Walker Street, North Sydney

A grade asset acquired for $124.9 million2

Value-add opportunity through environmental performance improvements, proactive leasing and activating under-utilised space

Accretive to earnings

Located in one of Australia’s strongest performing markets in FY13

The StrategyThese assets were acquired to deliver one or more of the following:

Value-creation through proactive leasing and/or rental upside

Progress portfolio repositioning

Delivering high risk adjusted returns to our unitholders

Optimal portfolio diversification

66 St georges Terrace, Perth

Artist’s impression, 567 Collins Street, Melbourne


1. Wholesale unlisted fund Investa Commercial Property Fund 2. Subject to post settlement adjustments for capex and transaction costs

For

per

sona

l use

onl

y

21

> see the 2013 Property Portfolio for detailed property data

The ManagerThe integrated service platform provided by the Manager underpins each acquisition. Investa’s capital transactions team source and evaluate investment opportunities which meet IOF’s criteria whilst the in-house office research team assesses current and future market dynamics and related risks. Investa’s in-house finance, legal, tax and asset management functions co-ordinate extensive due diligence and risk analysis, while the development and project team assess value-add and redevelopment opportunities. In the case of 567 Collins Street, Investa’s commercial development team is able to represent the Fund’s interest throughout its construction by Leighton Contractors.

Once assets are acquired, Investa’s Real Estate Operations division, incorporating asset, property, facilities, project and environmental management, ensure each asset is actively leased and managed for optimal performance.

3. Average new rents 22% above average rents at acquisition4. 19.6% excluding all acquisition costs 5. At completion

The Impact66 St Georges Terrace, Perth

8.2%Valuation increase

22%Average rental increase3

54%Space leased since acquisition

12.4%iRR since acquisition4

567 Collins Street, Melbourne

nilLeasing risk to 2019

5 starNABERS & Green Star ratings targets

6.7%Cash on cash yield5


7.9%Yield on cost

5.2yrsWeighted Average Lease Expiry

40%income contracted beyond 2021

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

22

Bourke Street, Melbourne

our key milestonesInvesta OffIce fund annual RevIew June 2013

Extending and diversifying debt sources for optimal capital management

The MilestonesA$254 million of new debt was raised in local and offshore debt markets, and A$150 million of bank debt was refinanced

A$125m, 5 year Medium Term Note (MTN)

November 2012

A$150m bank debt refinanced

April 2013

US$125m, 12 year US Private Placement (USPP)

June 2013, settled August 2013

The StrategyExecuted shortly after IOF achieved a BBB+ credit rating from S&P in August 2012, these issuances:

Extended and diversified debt sources

Established secure and more cost effective debt

Improved IOF’s weighted average debt expiry

Enhanced risk adjusted returns

1. Post drawing of USPP in August 2013 and new $150 million bank facility

{

FY26FY18FY17FY16FY15FY14

214

363

59

150125 129

debt Maturity Profile1

($m)

Undrawn Bank Debt Drawn Bank Debt

USPP ($A)

Bastion Tower

MTN

Refinanced/issued in fY13

For

per

sona

l use

onl

y

23

> for detailed information on the fund’s debt profile see page 72 of the 2013 annual financial Report

The ManagerIOF leveraged Investa’s experience and relationships in debt capital markets to create demand and price tension from debt investors, when issuing IOF’s inaugural Medium Term Note. The platform was leveraged further when IOF undertook the US$125 million Private Placement in June 2013, diversifying the sources of the Fund’s debt into international markets.

The Impact5 year Medium Term Note

US$125m, 12 year US Private Placement

210Basis point margin over BBSW2

175Basis point margin over BBSW2

a$129m

a$125m

FY13FY12

3.2

2.4

weighted average debt Maturity(yrs)

2. Bank Bill Swap Rate

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

24

our key milestones


Creating value through active leasing and operational excellence

The MilestonesDuring FY13 IOF leased more than 32,000sqm in a challenging office market environment, resulting in 96% portfolio occupancy and contributing to an increase in the portfolio valuation1

Leased 13,250sqm at 16-18 Mort Street, Canberra

12 year lease to Telstra

Finalised within six months of the previous tenant vacating

Leased 7,286sqm at 140 Creek Street, Brisbane

10 year lease

Major Commonwealth Government Department

Continued operating efficiency being achieved resulting in a 5.5 Star NABERS Energy rating

The StrategyIn varied office markets with different dynamics, Investa is able to continue to outperform by:

Actively removing key leasing risks to preserve unitholder value

Leveraging Investa’s significant tenant relationships

Re-positioning assets

Delivering sustainable portfolio returns

16-18 Mort Street, Canberra

1. On 52% of Australian portfolio externally valued

For

per

sona

l use

onl

y

25

The ManagerTelstra’s new Canberra headquarters has been secured at IOF’s 16-18 Mort Street after Investa’s relationship and understanding of Telstra’s requirements was leveraged to complete a 12 year lease. Investa’s Projects and Technical Services team added value to the process by working collaboratively with Telstra to scope refurbishment works that will deliver state-of-the-art office accommodation and upgraded base building infrastructure to improve the efficiency of operations.

At 140 Creek Street, Brisbane, Investa’s ability to maintain operationally efficient buildings was an important consideration for the Commonwealth Government Department who renewed 7,286 square metres at the building. Through proactive maintenance and management, Investa was able to improve energy efficiency by optimising chiller performance and reducing power spikes during building start up. Together, these delivered $138,000 worth of savings in base building operational costs over FY13.

The ImpactLeased 13,250sqm at 16-18 Mort Street, Canberra


Leased 7,286sqm at 140 Creek Street, Brisbane


5.5 starNABERS Energy rating

4.5 starTarget NABERS Energy rating

22%Electricity reduction

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y


about the manager

Investa aims to be the first choice in Australian office by delivering outperformance for our investors and a second to none occupancy experience for our tenants.

We are a global leader in sustainability and maintain a robust governance framework to ensure appropriate alignment between Investa and IOF.

Investa employs more than 170 professionals across a range of disciplines who contribute to the management of IOF assets. Unlike many property companies, our platform provides property and facilities management in addition to asset management, allowing us to better control building operations and directly foster strong tenant relationships.

Campbell Hanan, CEO Investa Office

The management platforminvesta office, the Manager of iof, is Australia’s leading manager of commercial office buildings, controlling assets worth more than $7 billion in key CBD markets across Australia.

The manager

FUN

DS

MA

NA

GM

EN

TP

ort

folio

Man

agem

ent

Inve

sto

r R

elat

ions

LEG

AL &

C

OM

PLIA

NC

E

FINANCE, TAX

& TREASURY

HUMAN RESOURCES

DEVELOPMENT

MARKETING

SU

STA

INA

BILITY,

SA

FETY

&

EN

VIR

ON

ME

NT

RE

SE

AR

CH

PROJECTS

&

TECHNIC

AL

SERVICES

ASSET SERVICESAsset Management

Property ManagementFacilities Management

CAPITAL

TRANSACTIONS

RE

AL E

STATE OPERATIONS

INVESTA’S INTEGRATED

PL

AT

FO

RM

INVESTA’S INTEGRATE

D P

LA

TF

OR

M

investa’s integrated Platform

For

per

sona

l use

onl

y

27

> see Our strategies on page 8 for further information

“ investa aims to be the first choice in Australian office for investors, tenants and staff by leveraging our integrated office management platform to deliver market leading service and financial and operational outperformance.”

campbell Hanan, ceO Investa Office

the Investa platform delivers value for IOf through:

Diverse and deep experience across the funds management and real estate operations teams

Ability and experience in managing significant tenant relationships

Deal sourcing of investment opportunities

Consistent track record of performance

World leading sustainability capability and practices

Operating within a robust corporate governance framework

IOf accesses a deep pool of knowledge and resources from Investa’s integrated office management platform

tHe ResPOnsIBle entItY

investa Listed funds Management Limited

Majority independent board

Risk management and audit compliance

Strategic direction

Approval of significant transactions

tHe ManaGeR

investa office

One of Australia’s largest, most respected office managers

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

28

Meeting challenges, creating value

Investa sets out to improve the operational performance and investment returns of the portfolio. Investa’s sustainability approach provides a framework for enhancing good business practices in a responsible manner, contributing to lower building operating costs and improved social and environmental outcomes.

During FY13, Investa reviewed IOF’s ESG approach and updated its sustainability strategy to reflect the latest challenges and opportunities for the Fund. The updated strategy is centred on four key Environment, Social and Governance (ESG) priorities.


1 Optimising value by improving environmental performance

2 Harnessing human capital and meeting tenant needs

3 leadership in governance

4 adding value through research and innovation

Beck Dawson, general Manager, Corporate Sustainability

The management approachWith a long track record as a leader in the development and implementation of real estate sustainability initiatives, investa applies best practice sustainability in the management of its assets. investa has a dedicated team of in-house sustainability professionals and engaged operational employees delivering sustainable, responsible management and investment practices.

For

per

sona

l use

onl

y

29

> view the fund’s sustainability performance results on pages 18-19

1 Optimising value by improving environmental performance Buildings that are more efficient save money, are more comfortable to occupy and therefore,

generally have less vacancy, which contribute to improved financial performance. By co-ordinating the day-to-day management and operations of our buildings, Investa has better control of occupant comfort, resource use and costs.

australian portfolio environmental performance statistics

Property

emissions intensity

(kg.cO2-e/sqm)

electricity intensity

(kwh/sqm)

Gas intensity

(MJ/sqm)

water intensity (l/sqm)

naBeRs energy ratingB (stars)

naBeRs water

ratingB (stars)

Deutsche Bank Place – 126 Phillip Street, Sydney, NSW

81 96 85 852 4.5 3.5

10-20 Bond Street, Sydney, NSW 72 93 111 1078 a a

388 George Street, Sydney, NSW 86 92 68 755 4.5 4.0

347 Kent Street, Sydney, NSW 83 93 1 1180 4.5 2.0

151 Clarence Street, Sydney, NSW 118 126 104 767 3.0 3.0

99 Walker Street, North Sydney, NSW e e e e B B

Campus MLC – 105-151 Miller Street, North Sydney, NSW 76 79 115 768 4.5 3.0

111 Pacific Highway, North Sydney, NSW 95 92 261 804 3.5 3.5

239 George Street, Brisbane, QLDf

74 84 d 744 4.5 4.015 Adelaide Street, Brisbane, QLDf

140 Creek Street, Brisbane, QLDf

80 90 d 661

5.5 4.5

295 Ann Street, Brisbane, QLDf

4.5H 4.0H

232 Adelaide Street, Brisbane, QLDf

567 Collins Street, Melbourne, VIC e e e e e e

Telstra Global Headquarters – 242 Exhibition Street, Melbourne, VIC 117 92 101 453 3.5 4.5

QBE House – 628 Bourke Street, Melbourne, VIC

86 64 156 478 3.5 3.5

Royal Mint Centre – 383 La Trobe Street, Melbourne, VIC c c c c 2.5 3.0

800 Toorak Road, Melbourne, VIC c c c c c c

66 St Georges Terrace, Perth, WA e e e e G G

Wellington Central – 836 Wellington Street, Perth, WA 43 52 21 492 5.0 4.0

Times Square – 16-18 Mort Street, Canberra, ACT 58 61 75 418 a a

WEIgHTED AvERAgEe 86 88 99 727 4.2 3.7

Notes:A. Could not be rated due to insufficient occupancy immediately following building refurbishment.B. NABERS ratings are presented for all buildings under the management control of Investa Office between 1 July 2012 and 30 June 2013.C. Data is not reported as management control for the building is assigned to the tenant under the terms of the lease. D. Gas is not used on site.E. Excludes assets not owned for the duration of the reporting period including 66 St George’s Tce, 99 Walker St and buildings under construction

(with exception of NABERS ratings).F. Aggregated data is collected for this group of assets.G. New NABERS rating underway.H. Rating as at 30 June 2013 – New NABERS rating underway.

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

30

our stakeholders

InvestorsRobust, market leading governance framework

Transparency of disclosure and reporting

Leverage Investa management platform to optimise performance

tenantsTap into Investa’s national contracts and procurement management system to achieve operating savings

Optimise tenancy environmental performance through tenant-focused, green initiatives

Apply Investa’s customer centric model to deliver market leading tenant service

Leverage Investa’s stringent Work, Health and Safety platform to provide a safe environment for IOF tenants and their visitors

suppliersMonitor supply chains and align contractor processes, conduct and material use to Investa’s stringent environmental and operational standards

Our PeopleAttract and retain talented, engaged people to implement IOF’s investment strategies and manage and operate the assets

community Engage with the wider community through charities and community investment to deliver societal benefits

environmentContinual improvement across key environmental measures including greenhouse gas emissions, electricity, water and gas use and NABERS Energy and Water ratings.

Develop new tools and innovations to enable more effective and efficient building management and operation

Maintain and expand partnerships and initiatives that stimulate progress and continual improvement in responsible investment

community

Our People

tenants

environment

Investors

suppliers

3 leadership in governance a) stakeholders we serve

Investa recognises that IOF stakeholders have high expectations for how the Fund is managed and how Investa operates its business. As a result, our strategy and operational focus is designed to ensure the interests of each stakeholder group are considered.

2 Harnessing human capital and meeting tenant needs Investa provides a range of sustainability products and services to tenants that are designed to create a healthier, more productive workplace and support a better environment. By increasing awareness of the environmental performance of each tenancy, Investa is able to drive further improvements in building performance. These initiatives include:

Green lease Investa’s precedent lease is regarded as a Green Lease as in addition to standard lease terms, it

includes the environmental and social obligations that both the tenant and building owner must adhere to.

ecospace Investa’s EcoSpace is offered in newly refurbished office space and delivers to tenants improvements

in indoor environment quality and reduced operating costs through energy efficient lighting controls; low emission paints and carpet tiles; and waterless urinals.


For

per

sona

l use

onl

y

31

> see the GRI Index on page 16 of the 2013 annual financial Report

b) Partnerships, recognition and awards In September 2012, IOF was ranked 4th in the world in the Global Real Estate Sustainability Benchmark (GRESB) from 451 participants, with an overall score of 78%.

In 2012, IOF received a Carbon Disclosure Score from CDP of 76 and a Carbon Performance Band of C. This was a marked improvement on the CDP 2011 score of 56 C.

united nations Principles for Responsible Investment (unPRI)

Through Investa, IOF is a signatory member of the UNPRI and a member of the United Nations Environment Program Finance Initiative Property Working Group (UNEPFI PWG).

During FY13 Investa was recognised by Australia’s most respected environment award series:

Banksia awards:

> Finalist in Built Environment

> Finalist in Clean Technology – Sydney’s First Trigeneration Precinct

nsw Government Green Globe awards 2012:

Highly Commended – Climate Change Leadership

Other significant partnerships and achievements include:

> Investa Property Group was re-certified by the Responsible Investment Association of Australia for adherence to Sustainable Responsible Investment guidelines

> Member of the Australian Business Roundtable for Disaster Resilience and Safer Communities

> Founding member of the City of Sydney – Better Building Partnerships

c) transparency in reporting Best practice financial reporting and manager fee structure

In FY13 IOF adopted the Property Council of Australia’s best practice reporting guidelines, moving to Funds From Operations (FFO)

IOF’s differentiated fee structure (linked to market capitalisation rather than assets under management), incentivises performance and aligns the Manager with unitholders.

esG reporting and transparency

Investa remains the only Australian property company to make environmental performance data transparently available to stakeholders in the form of online Building Scorecards that are updated quarterly.

From FY13 IOF has committed to the Global Reporting Initiative (GRI), which integrates financial, environmental, social and governance performances and practices into a globally recognised reporting framework.

4 adding value through research and innovation Indoor environment Quality – BOssa

The Investa Sustainability Institute and Investa are participating as academic and industry partners with the Building Occupant Survey System Australia (BOSSA) study by Sydney University, to investigate indoor environment quality in the workplace. By better understanding the various factors that influence productivity, Investa will be positioned to deliver more effective office environments to tenants, leading to greater demand for space in the buildings that we manage.

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

Principles for Responsible Investment

Signatory of:

For

per

sona

l use

onl

y

32

Toby Phelps Fund Manager

Toby is responsible for actively driving the long-term strategy and performance of the Fund. Toby has extensive experience in global real estate investing, asset management, capital raising and corporate finance, and is an accomplished leader of successful investment management teams.

Alex Abell Assistant Fund Manager

Alex is responsible for the investment performance of the portfolio and the day-to-day activities of the Fund, in addition to managing key relationships between IOF and the investment community. Alex has over 10 years’ experience in the property industry working in the areas of treasury, corporate finance and funds management.

Nicole Quagliata Senior Fund Analyst

Nicole joined the team during FY13 and is responsible for financial modeling and analysis of the Fund and property performance. Nicole has over 8 years of experience in property and funds management and is a Chartered Financial Analyst.

Ming Long Executive Director, ILFML Finance Director, IOF

Ming oversees the Fund’s strategy and provides leadership in the areas of treasury, debt and risk management, taxation and internal and external reporting. Ming has over 15 years’ experience in the area of finance and business management and holds a Bachelor of Economics, a Bachelor of Laws, a Masters of Business Administration and is a Chartered Accountant.

The management teamThe iof management team comprises high calibre industry professionals with a diverse range of skills and experience. The team’s complementary skills and dedication to the fund enables a balanced approach to managing iof both operationally and strategically.


Alex Abell, Assistant Fund Manager

For

per

sona

l use

onl

y

33

> for further detail and bios on the Board, see page 5 of the 2013 annual financial Report

Board of Directors

The Board of the Responsible Entity of IOF comprises a majority of Independent Directors, including an Independent Chairman. Board Members have extensive experience within the industry, and their collective knowledge and commitment to IOF strengthens the efforts of the management team.

Deborah Page AM Chairman and Non Executive Independent Director

Peter Rowe Non Executive Independent Director

Peter Dodd Non Executive Independent Director

Scott MacDonald Non Executive Director

Ming Long Executive Director

Campbell Hanan Alternate Executive Director for Scott MacDonald

interaction between iof, the Board and the Manager

IOF does not employ any staff directly, instead the Board of the Responsible Entity engage the Manager, Investa, to provide the Fund with asset management and property services, which support the delivery of the Fund’s strategy. This relationship allows IOF to benefit from Investa’s integrated platform and capability as an office manager, resulting in better service to IOF tenants and contributing to superior unitholder returns.

The Responsible Entity pays Investa a fee equivalent to 0.55% of market capitalisation for providing the services required to manage the portfolio. When compared to traditional fee structures, this market leading initiative, which was in place for Financial Year 2013, provides greater alignment between the Manager and unitholders.

From left, Peter Dodd, Deborah Page and Peter Rowe

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

34

investa.com.au/iof

investor Relations

The IOF website, investa.com.au/IOF has useful information on the Fund including recent annual reports and ASX announcements, historical information about distributions paid, unit pricing and units on issue. While visiting the site, unitholders can access a link to Link Market Services, the registry provider for IOF. Link Market Services manage the IOF unit registry and can assist with investment details including holding balances and payment history.

approach to Investor Relations

The Fund’s unitholder base is made up of both institutional, which form the majority of the unitholder base, and private investors. The management team regularly engage and communicate with all investors through a specific schedule undertaken throughout the year. This includes the results presentation, immediately following the release of the financial statements to the ASX in August and February each year, which provides investors with a detailed overview of the Fund’s performance for the relevant period.

Private unitholders

Our private unitholders are a valued part of our unitholder base and are actively encouraged to provide feedback and communicate with the Directors via the Fund’s nominated Investor Relations representative.

The Annual Unitholder Meeting (“AUM”) provides all unitholders with an opportunity to engage directly with the Directors and senior management, and to question the Board and Chairman on matters relating to the business of the Fund. A detailed presentation on the performance and management of the Fund is lodged with the ASX and delivered by the Fund Manager and Chairman at the meeting. During the year private unitholders are also provided with Fund updates via the Annual Reporting Suite and the Half Year Review. Any material announcements during the year are lodged with the ASX and are available on the ASX and the IOF website www.investa.com.au/IOF

Institutional unitholders

Road shows and Investor Meetings

Undertaken after the Funds results presentation each year, management provides an opportunity for institutional investors, analysts and the media to meet one on one or in small forums directly with senior management of the Fund throughout Australia, Asia, US and Europe.

Industry conferences

Throughout the year management promotes the Fund by attending various industry conferences meeting with existing and potential investors and providing further clarification on the Fund’s operations, strategy and competitive advantage.

asX listing

Investa Office Fund is listed on the Australian Securities Exchange (ASX). The ASX code for the Fund is “IOF”.

Units in the Fund trade on the ASX in the same manner as shares in a listed company. Unitholders wishing to trade their Units will need to use the services of a stockbroker or online broking facility.

annual taxation statements

The Fund produces the annual tax statement at the end of August each year. This statement advises the taxable income for the Financial Year ended 30 June. Unitholders may view their 2012/2013 annual taxation statement by visiting www.investa.com.au/IOF and accessing “My Unitholding” on the landing page.

distribution payments

The Fund pays distributions half-yearly in August and February.

Distribution payments to unitholders with registered addresses in Australia will only be made by direct credit to their nominated bank account. Unitholders with registered addresses outside of Australia will receive payment in the same form as they have previously nominated.

You will continue to receive a distribution statement in the form nominated by you (electronic or paper) for your tax records.

Please provide details of your nominated bank account to our share registrar, Link Market Services. If your banking instructions are not received by the record date for each distribution your distribution payment will be retained by Investa Office Fund until your banking instructions are received after which the full amount will be paid into your nominated bank account.

distribution reinvestment plan

The distribution reinvestment plan (DRP) is currently switched off. Should this change, an ASX announcement will be made to the market and participation forms will be sent to unitholders.

On-market Buy Back

There is no current on-market buy back.

disposal and acquisition of stapled securities

Investa Office Fund is a stapled security consisting of units in both PCP Trust and AJO Fund. The sale (or acquisition) of Units in IOF represents the sale (or acquisition) of separate interests in each of the two entities. For capital gains tax purposes, the acquisition costs and disposal proceeds need to be apportioned to each of the two entities, using a reasonable basis of apportionment.


For

per

sona

l use

onl

y

35

One possible method of apportionment is on the basis of the relative net assets (excluding minority interest) of the individual entities comprising IOF, which is set out in the following table as at 31 December 2012 and 30 June 2013.

31 December 2012 30 June 2013

PCP Trust 55.87% 55.89%

AJO Fund 44.13% 44.11%

units on issue

The number of IOF Units on issue currently stands at 614,047,458.

unitholder meetings

The Annual Unitholder Meeting (“AUM”) for IOF is scheduled to be held on Thursday 24 October 2013. All unitholders will be sent a Notice of Meeting approximately one month in advance to advise of the agenda and venue for the meeting. Details of the location will also be made available on the IOF website.

Additional unitholder meetings may occur at other times during the year and unitholders will be advised in writing of the details.

2013/2014 Key dates1

Distribution paid for half year ended 30 June 2013

31 August 2013

FY2013 Annual Taxation Statements available

31 August 2013

Annual Unitholder Meeting 24 October 2013

Half year results for six months to 31 December 2013 released to ASX

21 February 2014

Distribution payment for half year ended 31 December 2013

28 February 2014

Annual results for year to 30 June 2014 released to ASX

21 August 2014

Distribution paid for half year ended 30 June 2014

31 August 2014

FY2014 Annual Taxation Statements available

31 August 2014

FY2014 Annual Report available September 2014

enquiries

If a unitholder wishes to advise of a change of address, altered or closed bank account to which distributions are directed, or wishes to advise a tax file number, then please contact IOF’s registry provider as follows:

Link Market Services LimitedLocked Bag A14Sydney South NSW 1235

Phone: Freecall (+61) 1300 851 394 (within Australia) Fax: +61 2 9287 0303

Email: [email protected]: www.linkmarketservices.com.au

Enquiries about IOF can be directed to the Investor Relations Representative as follows:

Investa Property Group Deutsche Bank PlaceLevel 6, 126-130 Phillip StreetSydney NSW 2000

Phone: Freecall 1300 130 231 (within Australia) or +61 2 8226 9497 (outside Australia)Fax: +61 2 9844 9341

Email: [email protected]

complaints

Any unitholder wishing to register a complaint should direct it to the Investor Relations Representative of ILFML in the first instance so that we can address your complaint.

Investor Relations RepresentativeInvesta Listed Funds Management LimitedLevel 6 Deutsche Bank Place126 Phillip StreetSydney NSW 2000AUSTRALIA

Phone: 1300 130 231 (within Australia) or +61 2 8226 9497 (outside Australia) Fax: +61 2 9844 9300


Investa Listed Funds Management Limited is a member of an independent dispute resolution scheme, the Financial Ombudsman Service (FOS). If a unitholder believes that a complaint remains unresolved or wishes that it is further investigated, the FOS can be contacted as below:

financial Ombudsman service

GPO Box 3Melbourne VIC 3001AUSTRALIA

Phone: 1300 780 808 Fax: +61 3 9613 6399


Investa Listed Funds Management Limited is committed to ensuring the confidentiality and security of personal information.

1. These timings are indicative only and subject to change.

Overview

Ou

r Strate

gies

Ou

r Hig

hlig

hts

Ou

r Perfo

rma

nce

Ou

r Milesto

nes

Th

e Ma

nag

erD

irec

tories

For

per

sona

l use

onl

y

36

GlossaryInvesta OffIce fund annual RevIew June 2013

term Meaning

affO Property Council Adjusted Funds From Operations defined as the Group’s Property Council FFO adjusted for other non-cash and other items such as maintenance capital expenditure, incentives given for the accounting period, derivative close out costs, and other one-off items which have not been adjusted in determining Property Council FFO.

aIfRs Australian equivalents to International Financial Reporting Standards

aJO Armstrong Jones Office Fund (ARSN 090 242 229)

asX ASX Limited (ABN 98 008 624 691) trading as Australian Securities Exchange, which is the main Australian marketplace for the trading of equities, government bonds and other fixed interest securities

auM Annual Unitholder Meeting – equivalent to the Annual General Meeting

Board The Board of Directors of the Responsible Entity

BOssa Building Occupant Survey System Australia, a research project led by the University of Sydney with industry partners to investigate indoor environment quality in the workplace.

cBd Central Business District refers to the business and financial area of an Australian state capital city.

cdP Carbon Disclosure Project is an independent not-for-profit organization that works with investors, businesses and governments to benchmark organisations’ greenhouse gas emissions.

directors Directors of the Responsible Entity

dOf Dutch Office Fund, is an unlisted wholesale fund that has a portfolio of Dutch office properties that are predominantly located throughout the four major markets of the Netherlands.

dPu Distributions per Unit

ePu Earnings per Unit

ffO Property Council Funds From Operations defined as the Group’s underlying and recurring earnings from its operations, determined by adjusting statutory net profit (under AIFRS) for non-cash and other items such as the amortisation of tenant incentives and rent free periods, fair value gains/losses on investment property, fair value gains / losses on the mark to market of derivatives, the straight lining of rent, non-FFO deferred tax benefits and expenses, foreign currency translation reserves recognised in net profit, and any other unrealised or one-off items.

GResB Global Real Estate Sustainability Benchmark, from the GRESB Foundation, an investor-led organization committed to assessing the sustainability performance of real estate portfolios around the globe.

GRI Global Reporting Initiative, are voluntary international reporting guidelines to ensure completeness, transparency, materiality and boundary setting of corporate reporting. A ‘GRI Index’ covers environmental, social and financial report contents.

IlfMl Investa Listed Funds Management Limited (ACN 149 175 655)

Independent directors Deborah Page, Peter Rowe and Peter Dodd, who are external directors within the meaning of sub-section 601JA(2) of the Corporations Act 2001

Investa or the Manager Investa Office, or the manager of IOF, is one of Australia’s largest office owners and managers and provides an integrated property platform incorporating property services, funds, portfolio and asset management, development and sustainability.

IOf or the fund Investa Office Fund, which comprises of the AJO Fund and the PCP Trust

naBeRs National Australian Built Environment Ratings System, is a national rating system that measures the environmental performance of Australian buildings, tenancies, homes, shopping centres and hotels

non-aas measure A financial measure not in accordance with Australian Accounting Standards

nta Net Tangible Assets

Operating earnings The Responsible Entity considers the non-AAS measure, Operating Earnings, an important indicator of underlying performance of the Group. To calculate Operating Earnings, net profit attributable to unitholders is adjusted to exclude unrealised gains or losses, certain non-cash items, fair value gains or losses on investments and other amounts that are non-recurring or capital in nature. Refer to the Statutory Accounts for the complete definition.

Pca Property Council of Australia

PcP trust Prime Credit Property Trust (ARSN 089 849 196)

Responsible entity or Re Investa Listed Funds Management Limited (ACN 149 175 655)

s&P Standard & Poor’s

unit A stapled security in IOF consisting of one Unit in AJO Fund stapled to one Unit in PCP Trust or a Unit in AJO Fund or PCP Trust, as the context requires

unPRI United Nations Principles for Responsible Investment, proclaimed by the UN Secretary-General in 2005 are put into practice through a voluntary framework for investors to incorporate ESG issues into decision-making and ownership practices.

usPP US Private Placement

wale Weighted Average Lease Expiry – Measures the weighted average lease term remaining to expire across a portfolio

wH&s Work Health & Safety previously known as Occupational Health & Safety

For

per

sona

l use

onl

y

Corporate Directory

disclaimer

This Annual Review was prepared by Investa Listed Funds Management Limited (ACN 149 175 655 and AFSL 401414) on behalf of the Investa Office Fund, which comprises the Prime Credit Property Trust (ARSN 089 849 196) and the Armstrong Jones Office Fund (ARSN 090 242 229). Information contained in this Report is current as at 30 June 2013 unless otherwise stated.

This Report is provided for general information purposes only and has been prepared without taking account of any particular reader’s financial situation, objectives or needs. Nothing contained in this Report constitutes investment, legal, tax or other advice. Accordingly, readers should conduct their own due diligence in relation to any information contained in this Report and, before acting on any information in this Report, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other licensed professional adviser before making any investment decision. This Report does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment.

Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this Report. This Report may include forward-looking statements, which are not guarantees or predictions of future performance. Any forward-looking statements contained in this Report involve known and unknown risks and uncertainties which may cause actual results to differ from those contained in this Report.

By reading this Report and to the extent permitted by law, the reader releases Investa Office and its affiliates, and any of their respective Directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage arising by negligence) arising in relation to any reader relying on anything contained in or omitted from this Report.

Investa Office fund

Armstrong Jones Office Fund ARSN 090 242 229

Prime Credit Property Trust ARSN 089 849 196

Responsible entity

Investa Listed Funds Management Limited (ILFML) ACN 149 175 655 AFSL 401414

Registered Office

Deutsche Bank Place Level 6, 126-130 Phillip Street Sydney NSW 2000 Australia

Phone: +61 2 8226 9300 Fax: +61 2 9844 9300

Email: [email protected] Website: www.investa.com.au/IOF

directors of IlfMl

Deborah Page AM (Chairman) Peter Dodd Peter Rowe Scott MacDonald Ming Long Campell Hanan (Alternate for Scott MacDonald)

IOf fund Manager

Toby Phelps

company secretaries

Dorothy Mioduszewska Jonathan Callaghan

asX code

IOF

unit Registry

Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000

Locked Bag A14 Sydney South NSW 1235 Ph: 1300 851 394 (local call cost) or: +61 2 8280 7912 (outside Australia) Fax: +61 2 9287 0303


auditors

PricewaterhouseCoopers Darling Park Tower 2 201 Sussex Street, Sydney NSW 2000

For

per

sona

l use

onl

y

The first choice in Australian office

iof2013.reportonline.com.au

if you have any questions about iof’s reporting or questions in relation to your unitholding, please call the Unitholder information line on (+61) 1300 851 394.further information about the fund can be accessed and downloaded at www.investa.com.au/iof

INvESTA LISTED FuNDS MANAgEMENT LIMITED Level 6, Deutsche Bank Place126 Phillip StreetSydney NSW 2000T +61 2 8226 9300 F +61 2 9844 9300

ACN 149 175 655 AFSL 401414

For

per

sona

l use

onl

y

For personal use only · ANNUAL FINANCIAL REPORT 30 JUNE 2013 Annual Financial Report Investa...

Documents

Transcript of For personal use only · ANNUAL FINANCIAL REPORT 30 JUNE 2013 Annual Financial Report Investa...