astro japan property group (asx: aja) advises that the ...sep 24, 2010 · about astro japan...

ASX/Media Release

24 September 2010

AJA ANNUAL REPORT 2010 Astro Japan Property Group (ASX: AJA) advises that the attached 2010 Annual Report is being despatched to Securityholders today. The 2010 Annual Report is also available on AJA’s website at www.astrojapanproperty.com.

ENDS

Investor & Media Enquiries: Eric Lucas Ian Hay Senior Advisor Chief Financial Officer Phone: +61 2 8987 3900 (Australia) Phone: +61 2 8987 3902 +81 3 3238 1671 (Japan)

About Astro Japan Property Group (AJA) Astro Japan Property Group is a listed property group which invests in the Japan real estate market. It currently holds interests in a portfolio comprising 43 retail, office and residential properties. Asset management services in Japan are generally undertaken by Spring Investment Co., Ltd. AJA is a stapled entity comprising Astro Japan Property Trust (ARSN 112 799 854) and Astro Japan Property Group Limited (ABN 25 135 381 663). For further information please visit our website: www.astrojapanproperty.com.

http://www.astrojapanproperty.com/

http://www.astrojapanproperty.com/

Annual Report 2010

Contents

1 Key Financial Information

2 Chairman’s Report

4 Senior Advisor’s Report

8 Review of Results & Operations

10 Senior Management

12 Japan Asset Manager

15 Portfolio Overview

18 Top 20 Tenant Profile

20 Property Locations

22 Key Properties

34 Ownership Structure

36 Corporate Governance Statement 2010

48 Directors’ Report

58 Auditor’s Independence Declaration

59 Financial Statements

108 Directors’ Declaration

109 Independent Auditor’s Report

111 ASX Additional Information

IBC Corporate Directory

About Astro Japan Property GroupThe Astro Japan Property Group (“Astro Group” or “the Group”) is a listed property fund and has a strategy of investing solely in the real estate market of Japan.The Astro Group comprises the Astro Japan Property Trust (“AJT”) and Astro Japan Property Group Limited (“AJCo”), with the units in AJT being stapled to shares in AJCo. The stapled securities are quoted on the ASX under the code ‘AJA’. The Responsible Entity of AJT is Astro Japan Property Management Limited.

AJT was initially established on 31 January 2005, became a registered scheme under the Corporations Act 2001 (Cth) on 17 February 2005, and listed on the ASX on 4 April 2005. The subsequent formation of the Astro Group occurred on 12 November 2009, at which time the units in AJT were stapled to the shares in AJCo.

At the time of its listing in 2005, AJT raised A$280 million and acquired interests in a diversified portfolio of 12 office and retail properties located in the central and greater Tokyo area for ¥47 billion (approximately A$600 million). At 30 June 2010, the Astro Group held interests in a portfolio comprising 43 office, retail and residential properties with a book value of ¥113.9 billion (approximately A$1.5 billion).

At 1 September 2010, the Astro Group had 3,584 securityholders and a market capitalisation of approximately A$150 million.

Asset management services in Japan are generally undertaken by the Japan Asset Manager, Spring Investment Co., Ltd., in which the Astro Group has an economic interest.

Astro Japan Property Group (ASX Code: AJA)Astro Japan Property Trust (Astro Japan Property Management Limited as Responsible Entity) and Astro Japan Property Group Limited

Suite 1, Level 14 50 Pitt Street Sydney NSW 2000 Australia T: +61 2 8987 3900 F: +61 2 8987 3999

Directors of the Responsible Entity and Astro Japan Property Group LimitedAllan McDonald (Chairman) Paula Dwyer John Pettigrew

Company Secretary of the Responsible Entity and Astro Japan Property Group LimitedRohan Purdy Ian Hay (alternate)

Senior Advisor to the Astro Japan Property GroupEric Lucas

Security RegistryLink Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Australia T: 1800 881 098 (within Australia) T: +61 2 8280 7699 F: +61 2 9287 0303

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

AuditorsPricewaterhouseCoopers Darling Park Tower 2 201 Sussex Street Sydney NSW 1171 Australia T: +61 2 8266 0000 F: +61 2 8266 9999

CustodianPerpetual Corporate Trust Limited Angel Place 123 Pitt Street GPO Box 4172 Sydney NSW 2001 Australia T: +61 2 9229 9000 F: +61 2 8256 1473

Websitewww.astrojapanproperty.com

DisclaimerThis report is issued by Astro Japan Property Group Limited (ABN 25 135 381 663) and Astro Japan Property Management Limited (ABN 94 111 874 563, AFSL 283142) (“Responsible Entity”) as responsible entity of the Astro Japan Property Trust (ARSN 112 799 854) (together defined as the “Astro Group”).

The information contained in this report does not constitute an offer of, or invitation to invest in or subscribe for, or a recommendation of, stapled securities in the Astro Group (“AJA securities”).

The information contained in this report constitutes general information only. The Responsible Entity is not licensed to provide financial product advice (including personal financial product advice), and the information contained in this report does not constitute financial product advice.

In providing this report, the Astro Group has not considered the investment objectives, financial situation and particular needs of an investor. Before making any investment decision with respect to AJA securities, an investor should consider its own investment objectives, financial circumstances and needs, and if necessary consult its investment, financial, taxation or other professional adviser.

This report may include information forecasting or projecting future outcomes. Such outcomes may be affected by a wide range of influences outside of the Astro Group’s control. In respect of such forward-looking information, no representation or warranty is made by or on behalf of the Astro Group that any projection, forecast, forward-looking statement, assumption or estimate contained in this report should or will be achieved.

The Astro Group specifically prohibits the redistribution or reproduction of this material in whole or in part without the written permission of the Astro Group and the Astro Group accepts no liability whatsoever for the actions of third parties in this respect.

Corporate Directory

This report has been printed on Monza Satin Recycled. Monza Recycled contains 55% recycled fibre (25% post consumer and 30% pre consumer) and 45% elemental chlorine free pulp. All virgin pulp is derived from well-managed forests and controlled sources. It is manufactured by an ISO 14001 certified mill.

Designed and produced by walterwakefield.com.au

Key Financial Informationfor the year ended 30 June 2010

Distributions

Portfolio Value

NTA

Net Property Income

Distributions NTA

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

0

20

40

60

80

100

120

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jun-06 Jun-06IPOJun-07 Jun-07Jun-08 Jun-08Jun-09 Jun-09Jun-10 Jun-101

9.76

11.90

13.05

9.00

7.00

Cen

ts p

er s

ecur

ity

A$ p

er s

ecur

ityA$

mill

ion

Portfolio Value

0

20

40

60

80

100

120

140

160

180

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

94.7

120.6

165.6

125.5

46.4

62.1

77.4

112.0

82.4113.9

¥ b

illio

n

1.23 1.21

1.39

0.93

0.71

0.96

Distributions NTA

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

0

20

40

60

80

100

120

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jun-06 Jun-06IPOJun-07 Jun-07Jun-08 Jun-08Jun-09 Jun-09Jun-10 Jun-101

9.76

11.90

13.05

9.00

7.00

Cen

ts p

er s

ecur

ity

A$ p

er s

ecur

ityA$

mill

ion

Portfolio Value

0

20

40

60

80

100

120

140

160

180

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

94.7

120.6

165.6

125.5

46.4

62.1

77.4

112.0

82.4113.9

¥ b

illio

n

1.23 1.21

1.39

0.93

0.71

0.96

1. NTA of A$0.71 per security at 30 June 2010 reflects an economic calculation based on the fact that, due to the non-recourse nature of the asset-specific debt in each of the five subsidiary investment vehicles (TKs) which are consolidated by the Group, the effective NTA of any TK cannot be less than zero as a result of a TK’s debt liabilities being greater than the value of its assets. Calculated under International Financial Reporting Standards (IFRS), NTA at 30 June 2010 is A$0.64 per security.

Annual Report 1

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Chairman’s Report

Dear Securityholders,

The 2010 financial year was a pivotal year for the Astro Group. The Group completed its transition to a new independent platform following the removal of the final impediments to full separation from the Babcock & Brown Group. Securityholders of the Astro Group approved the implementation of the stapled security proposal at the Extraordinary General Meeting in November 2009, with normal trading in Astro Group stapled securities commencing on 19 November 2009. Additionally, full legal separation of the Responsible Entity of the Astro Japan Property Trust from the Babcock & Brown Group was completed in April 2010.

While the unprecedented challenges of the 2009 economic backdrop have continued to impact the operating environment in Japan this financial year, the Astro Group’s property portfolio has delivered a solid operational performance reflecting the resilience of the asset portfolio, depth of experience of the Japan Asset Manager and management’s core focus on generating sustainable through-the-cycle earnings. The Senior Advisor’s Report and Review of Results and Operations provide an overview of the factors which have contributed to this result.

Completion of separation from Babcock & BrownFrom 16 April 2009, economic separation of the Astro Group from Babcock & Brown took effect. The Responsible Entity’s management rights were internalised and securityholders acquired a 30% economic interest in the Japan Asset Manager. Full legal separation of the Responsible Entity of the Astro Group from the Babcock & Brown Group was completed on 7 April 2010 following the

maturity of one of the loans funding the Astro Group’s interests in Japanese property, which was the final impediment to legal separation. The Responsible Entity was renamed Astro Japan Property Management Limited on completion of legal separation.

Completion of the internalisation process provides many benefits to Astro Group securityholders. Responsible Entity base fees have been reduced to a cost recovery basis and the net effect of changes to the Trust Performance Fee is a reduction of approximately 70% from previous levels. Ongoing asset transaction fees paid to the Japan Asset Manager have also been reduced. In March 2010, the constitution of the Astro Japan Property Trust was amended to reflect certain of these revised fee arrangements.

Additionally, the Astro Group’s economic interest in the Japan Asset Manager strengthens the alignment between the Astro Group and the Japan Asset Manager as well as providing the Group’s securityholders with upside potential in relation to new non-Astro Group business and revenue streams generated by the Japan Asset Manager.

Distribution policyThe Astro Group paid a final distribution of 3.50 cents per security (cps), bringing total distributions for the year to 7.00 cps.

The Directors remain aware of the significant value the Astro Group securityholders place on distributions and accordingly endeavour to deliver an attractive level of distributions within the bounds of a responsible capital management programme.

“ The Board firmly believes the Astro Group’s new independent platform provides securityholders with the clarity and opportunity to maximise returns from the Group’s core property portfolio.”

While the Astro Group’s FY10 operating cash flow (after capex, Japan withholding tax, hedging and Australian costs) was 9.61 cps, the Directors of the Astro Group determined it appropriate to retain and use some operating cash flow during the year for capital management purposes.

Net Tangible Asset (NTA) backingEconomic NTA per security at 30 June 2010 was A$0.71 and NTA per security calculated under IFRS at 30 June 2010 was A$0.64 per security. This compared to A$0.93 at 30 June 2009. The decline was principally due to the reduction in property valuations over the last twelve months.

Board and managementI would like to thank my Board colleagues as well as the management team for their hard work during the 2010 financial year in successfully implementing and completing the internalisation process for the Astro Group. In addition, the management team has remained focused on delivering a solid operational performance despite the ongoing macroeconomic challenges as well as the distractions associated with the Astro Group’s structural changes, and I would like to acknowledge the team’s commitment and efforts in this regard.

OutlookThe Board firmly believes the Astro Group’s new independent platform provides securityholders with the clarity and opportunity to maximise returns from the Group’s core property portfolio. While the Group’s security price still does not reflect the robustness and stability of the underlying property portfolio, we anticipate the ongoing systematic execution of our strategy of generating long-term, sustainable earnings, coupled with an improvement in the macroeconomic environment and global market sentiment, will provide positive momentum for the security price moving forward.

I wish to thank our securityholders for their continued support and assure you of the ongoing efforts of the Board and management to maximise the performance of the Astro Group’s core portfolio of stable, income-producing properties to provide securityholders with consistent, attractive returns.

ALLAN MCDONALD

Chairman

Annual Report 3

4 Annual Report

Dear Securityholders,

While the 2010 financial year continued to see macroeconomic challenges from which the Astro Group was not immune, we are pleased to have been able to successfully undertake a number of initiatives to consolidate the Group’s financial position and strengthen the Astro Group platform.

Our 2010 results show an impact from deteriorating property values combined with tough operating conditions, however the continuing strong cash flows from our diverse portfolio and carefully negotiated debt terms enabled us to continue to pay a substantial distribution. In my report, I’d like to provide you, firstly, with the background behind our financial and operational performance for 2010; secondly, I’d like to highlight some of the aspects of Astro Group’s structure that have stood us in good stead as we navigated the extremely difficult market conditions of the past two and a half years; and finally, I will discuss some key developments during the year which I believe have strengthened Astro Group, both strategically and financially, for the future.

Group performance

Financial resultsAstro Group reported net operating profit after tax of A$47.7 million for the financial year ended 30 June 2010, approximately 26.5% below the prior year, due to a decline in net property income and an appreciation in the A$:¥ exchange rate. Net property income declined 17.5% on the prior year in constant currency terms, of which approximately 6.6% represents the impact of the sale of the major office asset, Shinjuku Sanei, in May 2009. Excluding Shinjuku Sanei, net property income declined by 10.9% on the prior year, mainly due to a fall in office

occupancy and rental levels. The vacancy of Kokusai Nihombashi represented 3.0% of the 10.9% decline.

Funds from operations (FFO)1 of ¥3.7 billion (A$46.0 million, approx.) were down ¥1.0 billion (A$12.4 million, approx.) relative to the prior year of which approximately ¥0.5 billion (A$6.5 million, approx.) reflects the absence of Shinjuku Sanei.

Astro Group generated operating cash flow (after capex, Japan withholding tax, hedging and Australian costs) of 9.61 cps. The distribution for the year ended 30 June 2010 was 7.00 cps, with the distribution being less than the total cash flow generated as the balance was retained and used for capital management purposes.

Portfolio performanceFollowing the independent assessment of all investment properties during the 2010 financial year, the fair value of the portfolio declined by 9.2% to ¥113.9 billion (A$1.5 billion, approx.). Valuations of retail assets – the largest segment of Astro Group’s portfolio – were only marginally reduced and this segment is showing signs of stabilisation. Office assets, however, showed continued weakness, with downward revaluations for this segment accounting for just under 80% of the overall downward portfolio revaluation for the second half of the year. In particular, sharp downward revaluations occurred for two office assets located in the Osaka market, which is currently considerably weaker than Tokyo.

For the twelve months ended 30 June 2010, the total downward revaluation of ¥11.6 billion (9.2%) compared to the total downward revaluation of ¥25.9 billion (17.1%) for the twelve months ended 30 June 2009, after accounting for the sale of Shinjuku Sanei. Additionally, the weighted average

“ Despite the macroeconomic pressures of recent years, the diverse cashflows of Astro Group’s Tokyo-area focused portfolio of office, retail and residential property has continued to support distributions.”

1 FFO consists of operating cash flow excluding foreign exchange hedge income and Japan withholding tax.

Senior Advisor’s Report

capitalisation rate used by valuers for the portfolio moved to 5.6% as at 30 June 2010, compared to 5.5% as at 30 June 2009. Positively, the rate of increase in capitalisation rates appears to have slowed significantly over the 2010 financial year, suggesting the cyclical expansion in capitalisation rates is beginning to conclude.

Despite the difficult operating environment in Japan during 2010, the Astro Group portfolio occupancy by area remained high at 93%, compared to 94% at 30 June 2009, reflecting a focus on keeping or finding tenants even if at the expense of rental levels in the short term. The decline in occupancy was primarily driven by a sole tenanted office asset, Kokusai Nihombashi, becoming vacant during the financial year.

Whilst our occupancy by area remained high, the weak economic background affected our net property income, which fell by approximately 17.5% over the full year period, mainly due to lower office occupancy and rental levels.

Structural features of the Astro Group

Diversity of property cash flowsAt the end of this financial year, Astro Group’s portfolio had over 400 leases, with the top 10 tenants accounting for approximately 33% of revenues. Furthermore, around 48% of total portfolio net property income is derived from non-cancellable leases, mainly in our retail assets. Key to the performance of the portfolio is the diversity of the property cash flows provided by a balance between retail and office with a small residential component, a predominance of assets located within the Tokyo area, and a combination of longer-term, non-cancellable leases and ‘standard’ leases which are cancellable usually on several months’ notice. This has been a key part of the relatively predictable revenue performance of the portfolio since its inception in 2005.

Debt structureAstro Group’s debt level is higher than that for most of its peers, with a debt-to-property assets ratio of 75.5% at the end of the financial year. Significantly mitigating the potential risks of this high debt level is the fact that all the debt is owed not by Astro Group itself, but by five separate property-owning special purpose companies (SPCs) in Japan into which the Astro Group invests equity. None of the debt owed by one SPC is related to the debt owed by the others and the liability to repay the debt of each SPC rests with that SPC alone. Similarly, with the exception of one of the five SPCs only, there are no provisions in the debt terms which enable the lenders to call in their loans based on falls in property values. Finally, on any default by any of the SPCs the lender generally may only look to the assets of that SPC and not to assets elsewhere in the Astro Group.

This combination of factors in our debt structure has enabled us, even despite severe macroeconomic operating conditions and a write-down of the property portfolio’s value by more than 26% from the peak, to continue to pay significant distributions to securityholders.

Similarly, the fact that our debt has been divided into ‘silos’ in this way, with staggered maturities, has meant that we were not forced, even in the depths of the market in early 2009, into emergency equity raisings on unfavourable terms.

Key developments through the year

RefinancingA number of initiatives were successfully undertaken in relation to the Group’s debt facilities during the 2010 financial year.

Most significantly, in March 2010, the refinancing of a maturing five-year, senior loan to JPT Co. Ltd. (JPT), a Japanese SPC which holds about 24% of the

Annual Report 5

6 Annual Report

Group’s property interests, was completed with the closing of a new, five-year, senior loan of ¥13.4 billion (A$160 million, approx.). The new loan includes a favourable interest margin payable of 1.95% and an all-in cost of approximately 2.37%. Consistent with all but one of the Group’s four other asset-specific loans, the new loan does not include a Loan to Value (LTV) covenant. A debt service coverage ratio (DSCR) test is the primary covenant.

As part of the refinancing, the Astro Group contributed additional equity of ¥900 million (A$11 million, approx.) to JPT from its existing cash reserves to reduce leverage.

Also in March 2010, a positive revision to the LTV covenant threshold contained in the loan specific to JPT Corporate Co., Ltd. (JPTC), a Japanese SPC which holds only three assets but approximately 23% of the Group’s property interests, was successfully negotiated with the lender. The LTV threshold was increased from 78% to 80% following the one-time partial repayment of ¥720 million (A$9 million, approx.) and, from October 2010, the quarterly repayment of loan principal of ¥125 million (A$1.5 million, approx.).

Astro Group contributed additional equity of ¥720 million (A$9 million, approx.) into JPTC from existing cash reserves in order to enable JPTC to make the partial loan repayment, following which the LTV of the JPTC loan was reduced from 77.8% to 75.2% (based on book values as at 31 December 2009). The current LTV of the JPTC loan as at 30 June 2010 is 78.4%.

Management remains focused on evaluating and dealing with each of the five Japanese entities through which the Astro Group invests in property in Japan, and their respective debt arrangements, on their individual merits.

Foreign exchange hedgingOver the course of the 2010 financial year, management once again took an active approach to managing the Group’s capital and distribution hedging position. A number of changes to the terms of the Group’s foreign exchange hedging contracts were successfully negotiated with the counterparty. Additionally, the A$:¥ capital hedge book was partially terminated.

Key developments in relation to foreign exchange hedging over the last twelve months included:

(i) Securing a waiver of the counterparty’s August 2009 and August 2010 options to terminate;

(ii) Negotiating the permanent removal of the LTV ratio covenant contained in the hedging contracts as well as the permanent reduction of the minimum securityholders’ equity covenant threshold from A$458 million to A$250 million;

(iii) Cash collateralising the Group’s hedging position by posting ¥2.4 billion with the counterparty. The collateral will remain with the counterparty to the extent that any hedging obligations on behalf of the Astro Group remain outstanding;

(iv) Partially terminating the A$:¥ capital hedge book, reducing the capital amount hedged by approximately 22%. The total amount of the Group’s investments into Yen denominated assets which are hedged back to A$ is now A$89 million or approximately 18.4% of their book value. At its peak, in mid-2008, this hedging amounted to A$246 million or approximately 37.4% of then book value; and

(v) Using previously posted cash collateral to fund the partial termination of the capital hedge book leaving a balance of ¥2.0 billion (A$26.1 million, approx.) to collateralise the remaining position.

The capital hedge terminated was to mature in 2015 and had a principal amount of ¥2.5 billion (approx. A$28.5 million at A$=¥87.6, the rate at which it was terminated). While termination of the hedge resulted in a net cash loss of approximately A$4.8 million, this is only the second time since the Group’s inception five years ago that any A$:¥ hedges have been terminated. The previous termination resulted in a net cash profit to the Astro Group of A$18.8 million.

Astro Group’s investment in the business of its Japan Asset Manager, Spring Investment Co. Ltd (Spring Investment)As securityholders will be aware, since April 2009, Astro Group has held a 30% economic interest in Spring Investment. In February 2010, Spring Investment announced the acquisition of the management company of a Tokyo Stock Exchange (TSE) listed J-REIT in joint venture with Sekisui House, one of Japan’s leading residential developers, with annual sales of over ¥1.5 trillion (A$20 billion, approx.). Sekisui House holds a 75% interest in the asset management JV while Spring Investment holds a 25% interest.

The management company acquired was Joint Capital Partners (JCP), the manager of Joint REIT Investment Corporation (Joint REIT). Joint REIT owns 53, mainly residential, assets with a book value of approximately ¥100 billion (A$1.25 billion, approx.). Joint REIT has now been renamed Sekisui House SI Investment Corporation and JCP has been renamed Sekisui House SI Asset Management.

The Astro Group contributed 30% of the capital required for Spring Investment to take its stake in Sekisui House SI Asset Management, with a minimal impact on existing Astro Group cash resources. The Group’s involvement, through its economic interest in Spring, marks the first time an Australian real estate company has held an interest in J-REIT management.

Senior Advisor’s Report

Although the Astro Group’s interest in Spring Investment is still a very small part of its overall business, this positive expansion of Spring Investment’s business is indicative of the value to securityholders of the economic interest the Group now holds in its Japan Asset Manager. Furthermore, the Astro Group’s association with Sekisui House, by extension through its interest in Spring, is beneficial to the Astro Group, further raising the profile of the Group’s current and future activities in the Japan market, particularly with lenders, investors and other industry participants.

Separation from Babcock & BrownAs the Chairman has noted, final separation from the Babcock & Brown Group was achieved during the financial year. Astro Group’s independence, a milestone in its development, was achieved in very difficult circumstances and I would like to add my acknowledgement and gratitude to the efforts of all team members who worked hard to secure this outcome for securityholders.

OutlookWith Japan and global markets showing signs of improvement during the 2010 financial year, we are encouraged to hope the year ahead will see a stabilisation – and even in places perhaps an improvement – in cap rates in Japan and also that the cyclical pressures of declining rent levels may begin to ease. Despite the macroeconomic pressures of recent years, the diverse cash flows of Astro Group’s Tokyo-area focused portfolio of office, retail and residential property has continued to support distributions.

As always, the management team remains focused on:

prudent capital management which •seeks to maximise equity returns and ensure, as far as possible consistent with that prudence, continuation of distributions to securityholders;

continuing to optimise the operational •performance of the property portfolio; and

through the Group’s economic interest •in Spring Investment, providing securityholders with a stable profile in the Japanese market.

Thank you once again for your ongoing support.

ERIC LUCAS

Senior Advisor

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Review of Results & Operations

Net property income of ¥6.6 billion declined 17.5% on the prior year in constant currency terms, of which approximately 6.6% represents the impact of the sale of major office asset, Shinjuku Sanei, in May 2009. Excluding Shinjuku Sanei, net property income declined by 10.9% on the prior year, mainly due to a fall in office occupancy and rental levels. The vacancy of Kokusai Nihombashi represented 3.0% of the 10.9% decline.

Net operating profit of A$47.7 million for the year ended 30 June 2010 was lower than the prior year profit of A$64.9 million reflecting the decline in net property income and an appreciation in the A$:¥ exchange rate.

A statutory net loss after tax of A$111.9 million, reflected non-cash adjustments of A$159.6 million of which A$150.7 million were downward property revaluations. The statutory loss was reduced from A$366.8 million in the prior year, largely due to a much smaller contraction in property valuations.

The distribution for the full year was 7.00 cps after use of 2.61 cps for capital management purposes.

NTA at 30 June 2010 was A$0.71 per security compared to A$0.93 at 30 June 2009. This decline was principally due to the reduction in property valuations over the last twelve months.

NTA at 30 June 2010 reflects an economic calculation based on the fact that, due to the non-recourse nature of the asset-specific debt in each of the five subsidiary investment vehicles (TKs) which are consolidated by the Group, the effective NTA of any TK cannot be less than zero as a result of a TK’s debt liabilities being greater than the value of its assets. Calculated under IFRS, NTA at 30 June 2010 is A$0.64 per security.

Reconciliation between statutory profit and operating profitThe difference between net AIFRS statutory loss and operating profit is due to a number of property and non-property related items which are detailed below:

Year ended 30 Jun 2010(A$’000)

Year ended 30 Jun 2009(A$’000)

Net operating profit after income tax 47,705 64,906

Adjustments – non-operating items included in statutory profit

Fair value adjustments to investment properties (150,662) (372,184)

Net gain/(loss) on derivatives (excluding capital hedge income) 2,061 (71,529)

Net foreign currency gain (105) 3,451

Unrealised loss on financial assets - (1,890)

(Gain)/loss on disposal of investment properties - (32,565)

Withholding tax on disposal of investment properties - (6,066)

Deferred withholding tax expense/(benefit) (3,921) 42,116

Impairment of goodwill (7,000) -

Performance fee expense/(discount) - 6,965

Net profit/(loss) after income tax (111,922) (366,796)

The following review of results and operations is based on comparison between actual results for the year ended 30 June 2010 and the previous financial year.

Year ended 30 Jun 2010 30 Jun 2009 Variance

Net property income (¥) ¥6.6 bn ¥8.0 bn (17.5%)

Net property income (A$) $82.4 m $112.0 m (26.4%)

Net operating profit after income tax $47.7 m $64.9 m (26.5%)

Net statutory profit/(loss) after income tax $(111.9) m $(366.8) m nm

Distribution 7.00 cps 9.00 cps (22.2%)

NTA per security $0.71 $0.93 (23.7%)

Portfolio performancePortfolio occupancy by area remained strong at 93.0% (30 June 2009: 94.0%) despite difficult operating conditions, however, rental levels declined especially in office assets.

The asset management team has historically maintained its focus on achieving sustainable rental levels from the portfolio through a process of rental negotiations with tenants. The asset management team has sought to offset rental decreases by moving tenants to longer-term leases to the extent possible.

Property PortfolioAt 30 June 2010, the total value of the Astro Group’s portfolio was ¥113.9 billion (A$1.5 billion). The Astro Group held interests in 43 properties in Japan: 20 office, 18 retail and five residential, of which approximately 69.0% are located primarily in the Central and Greater Tokyo area.

The Group’s interests in properties in Japan were revalued during the 2010 financial year, resulting in a portfolio decrease of 9.2% of portfolio value. All properties undergo an independent valuation review semi-annually and only those properties for which fair value has moved significantly are revalued.

BorrowingsThe Astro Group’s share of total borrowings at 30 June 2010 was ¥86.0 billion (A$1.1 billion). The only debt to mature within the next 12 months is a ¥18.0 billion non-recourse facility (20.9% of total debt) in December 2010. Constructive discussions are progressing regarding the refinancing of this loan.

Portfolio gearing (interest-bearing debt/investment property) was 75.5% at 30 June 2010 (30 June 2009: 69.4%).

Interest rate risk is managed through fixed debt or interest rate swaps. Interest rate swaps hedging loans of approximately ¥10.0 billion matured on 31 July 2010, resulting in a reduction in the overall proportion of debt hedged to fixed interest rates to 45.6%. The Astro Group’s weighted average cost of debt is 2.03% with an interest cover of 3.2 times, which continues to support the Group’s gearing levels (30 June 2009: 1.97% and 3.7 times, respectively).

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Senior Management

Senior Management of the Japan Asset Manager (Spring Investment Co., Ltd.)

Eric Lucas

President and Chief Executive OfficerEric established the Japan Asset Manager in Japan in 1998 and has developed it into an institutionally recognised investment and asset management company.

Eric first lived in Japan from 1985, working at the major Japanese law firm of Anderson Mori and Rabinowitz. In 1987, Eric was hired by Babcock & Brown in the U.S. and continued living in Japan on secondment representing Babcock & Brown in its Japanese joint venture, Nomura Babcock & Brown, until 1992 where he specialised in structured finance.

After several years at Babcock & Brown’s San Francisco then global head office from 1993, Eric returned to Tokyo in 1998. In July 2006, Eric was appointed Global Head of Real Estate at Babcock & Brown.

Eric holds a law degree from the University of Melbourne in Australia.

Eric resigned as Managing Director of AJT on 16 April 2009 at which time he was appointed Senior Advisor to the Board of AJT.

Naoto Ichiki

Representative Director and Chief Operating OfficerMr Ichiki joined the Japan Asset Manager in 2006.

Mr Ichiki was formerly Managing Director of JPMorgan, where Mr Ichiki was head of Real Estate Structured Finance Asia, Real Estate Investment Banking Japan, and Structured Products Japan. Mr Ichiki spent 16 years at JPMorgan where he was responsible for various real estate finance/acquisition transactions, including Japan’s first non-recourse loan and CMBS arrangements. Prior to joining JPMorgan, he was a management consultant at McKinsey & Company for nearly eight years. Mr Ichiki holds a Bachelor of Law degree from Hitotsubashi University and is a licensed real estate broker.

Naoto YabuHead of Asset Management

Mr Yabu joined the Japan Asset Manager in 2006.

Mr Yabu was formerly with ORIX Corporation in the overseas real estate division, including seven years in an asset management role in the U.S. He was also an Executive Director of ORIX Asset Management Corporation, an asset management subsidiary for ORIX JREIT, at its listing on the Tokyo Stock Exchange in 2002. Mr Yabu holds a Bachelor of Science degree from Kobe University and is a licensed real estate broker.

Shinya Sato

Head of AcquisitionMr Sato joined the Japan Asset Manager in 1999.

Prior to joining the Japan Asset Manager, Mr Sato was a Managing Director of Jones Lang LaSalle K.K. in Japan, providing a wide variety of real estate 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. Mr Sato holds a Bachelor of Law degree from the University of Hokkaido.

Takeo Okada

Director, Business DevelopmentMr Okada joined the Japan Asset Manager in 2008.

Prior to joining the Japan Asset Manager in 2008, Mr Okada was ex-president of Prospect Co., Ltd., a real estate asset and fund manager with its own J-REIT, and before that CFO of Goldcrest, a TSE-listed property developer. From 1992 to 1999, he worked for Goldman Sachs, most recently in the NPL groups. Mr Okada is a licensed real estate broker and a registered real estate consultant in Japan. He holds a Bachelor of Science and Technology degree from Keio University.

Hitoshi Kamikubo

Chief Compliance OfficerMr Kamikubo joined the Japan Asset Manager in 2007.

Prior to joining the Japan Asset Manager, Mr Kamikubo had a 14-year career at the Export-Import Bank of Japan (now Japan Bank for International Cooperation). After working three years in the non-recourse loan division of Bayerische Hypo-und Vereinsbank AG Tokyo Branch and Hypo Real Estate Capital Japan Corporation, Mr Kamikubo assumed a managing director position overseeing compliance and company secretary issues. He graduated from Hitotsubashi University with a Bachelor of Economics degree.

Appearing from left to right:

Eric Lucas, Naoto Ichiki, Naoto Yabu, Shinya Sato, Takeo Okada, Hitoshi Kamikubo

Senior Management of the Astro Group

Ian Hay

Chief Financial Officer, Manager – AustraliaIan has extensive experience with a number of major international financial institutions and has over 20 years’ involvement within the finance industry. Ian is a Member of the Institute of Chartered Accountants of England & Wales and obtained his qualification with Coopers and Lybrand, London.

Rohan Purdy

General Counsel and Company SecretaryRohan has over 13 years’ experience as a corporate lawyer and company secretary. Rohan formerly held positions as a senior lawyer at both Babcock & Brown and the Australian Securities Exchange (ASX). Prior to this, Rohan specialised in commercial and corporations law, practising as a senior lawyer with a number of leading law firms in Australia. Rohan holds a Master of Laws from the University of Sydney and a Bachelor of Laws degree and Bachelor of Commerce degree from the Australian National University.

Appearing from left to right:

Ian Hay, Rohan Purdy

Annual Report 11

12 Annual Report

Japan Asset ManagerSpring Investment Co., Ltd. (“Spring” or the “Japan Asset Manager”) has provided asset management services to the Japanese special-purpose investment companies which hold the Astro Group’s property interests in Japan since the Group’s inception in 2005. The Astro Group currently holds a 30% economic interest in the Japan Asset Manager.Spring holds all necessary licenses under the Financial Instruments and Exchange Law in Japan for the purposes of conducting the asset management services with respect to the property portfolio in which the Astro Group maintains its interest.

Spring has a strong team of 26 professionals and staff from many disciplines including real estate appraisal, structuring and financial modelling with experience across all asset classes to provide a high level of service to the Astro Group.

Acquisitions/Business Development TeamThe Acquisitions/Business Development team comprises five real estate investment professionals with expertise in identifying accretive acquisition opportunities through in-depth market knowledge and analysis. After identifying potential outstanding projects, the Acquisitions team focuses on creative investment solutions and undertakes thorough due diligence and risk management analysis. The Acquisitions team provides support and assistance to the Asset Management team, leveraging its strong market knowledge and access. Together with the CEO and COO of Spring, the team also focuses on non-traditional investments including investments in recapitalisations, non-performing loans and corporate buy-outs, as well as acquiring asset management mandates to turn around distressed situations.

Asset Management TeamThe Asset Management team is made up of eight professionals and is responsible for managing assets after acquisition, sale and refinancing. One team member is dedicated to refinancing non-recourse debts. Spring continues to maintain positive relationships with lenders in Japan as demonstrated by the successful refinancing of the senior loan which matured in March 2010 as well as securing positive revisions to existing loan terms to other senior loans during the financial year.

The Asset Management team constantly assesses hold versus sale opportunities for properties in the portfolio to bring optimal results to the Astro Group’s investors. The Asset Management team also focuses on strategic issues such as ensuring properties are positioned to suit the needs of tenants, targeting rental adjustments to optimise the balance between tenant retention and protection of income and managing capital expenditures which will improve the value of properties and attract/retain tenants. Rigorous monitoring of legal compliance of properties by the team also facilitates the refinancing and sale of properties amidst a very challenging market environment.

Other Spring InvestmentsIn February 2010, Spring announced the acquisition of the management company of a Tokyo Stock Exchange listed J-REIT in joint venture (JV) with Sekisui House, one of Japan’s leading residential developers with AA- rating by R&I. Sekisui House holds a 75% interest in the asset management JV while Spring holds a 25% interest.

The management company acquired was Joint Capital Partners (JCP), the manager of Joint REIT Investment Corporation (Joint REIT). Joint REIT owns 53, mainly residential, assets with a book value of approximately ¥100 billion (A$1.3 billion, approx.). JCP’s parent company, real estate developer Joint Corporation (Joint), had suffered severe financial difficulties and had been under court administration since June 2009. The transaction was negotiated with the court administrator. Joint REIT has now been renamed Sekisui House SI Investment Corporation and JCP has been renamed Sekisui House SI Asset Management.

The essence of the asset management JV is that Sekisui House will take the lead in relation to finance and sourcing of assets, including from its own pipeline, whilst Spring’s input to JCP will be focused on its significant experience in asset and funds management, the latter in particular in relation to non-Japanese investors. Sekisui House and Spring have announced the intention to double the size of assets held by Sekisui House SI Investment Corporation.

The Astro Group contributed 30% of the capital to Spring’s investment in Sekisui House SI Asset Management with a minimal impact on existing cash resources. The Group’s involvement, through its economic interest in Spring, marks the first time an Australian real estate company has held an interest in J-REIT management.

Subsequent to the end of the 2010 financial year, Spring signed an agreement to take over asset management of a third party portfolio originally invested in by Rubicon Japan Trust. The portfolio has a value of approximately ¥16 billion (A$211 million, approx.).

Annual Report 13

Retail Office Residential Portfolio

Number of properties 18 20 5 43

Carrying value (¥bn) 55.2 48.6 10.1 113.9

Net rentable area (sqm) 170,449 77,202 28,330 275,981

Occupancy by area 98.0% 79.7% 99.2% 93.0%

Number of leases – Total 109 231 62 402

Cancellable 69 223 59 351

Non-cancellable 40 8 3 51

Greater Tokyo - 42%

Greater Osaka - 20%

Central Tokyo - 27%

Hokkaido - 4%

Shizuoka - 2%

Okinawa - 2%

Aichi - 1%

Fukuoka - 2%

Retail - 48%

Residential - 9%

Office - 43%

Asset class diversification

(by value)

Greater Tokyo - 42%

Greater Osaka - 20%

Central Tokyo - 27%

Hokkaido - 4%

Shizuoka - 2%

Okinawa - 2%

Aichi - 1%

Fukuoka - 2%

Retail - 48%

Residential - 9%

Office - 43%

Geographic diversification

(by value)

Portfolio Overview

Annual Report 15

16 Annual Report

Carrying value Occupancy by area

Property Location CompletedJun 2010

¥ billion% of

portfolio

Trust share of net rentable area

(sqm)


(tsubo) Jun 2009 Jun 2010

Retail1 Kawasaki Dice Kanagawa prefecture–Kawasaki Aug 2003 12.3 10.8% 12,061 3,649 98.2% 99.3%

2 Konan Home Centre Chiba prefecture–Ichikawa Mar 2005 10.5 9.2% 48,819 14,768 100.0% 100.0%

3 Shinjuku Fuji Central Tokyo–Shinjuku ward, Nishi Shinjuku Jun 1964 4.5 4.0% 1,476 447 100.0% 100.0%

4 Mukomachi Saty Kyoto prefecture–Muko Sep 1970/Nov 1981/Apr 1997 4.2 3.7% 22,528 6,815 100.0% 100.0%

5 Motomachi Kanagawa prefecture–Yokohama Jun 1992 2.3 2.0% 1,585 480 100.0% 100.0%

6 Shibuya Konami Central Tokyo–Shibuya ward, Shinsencho May 1990 2.3 2.0% 4,993 1,510 100.0% 100.0%

7 Susono Shizuoka prefecture-Susono Jun 1994 2.3 2.0% 12,127 3,668 100.0% 100.0%

8 Matsudo Nitori Chiba prefecture–Matsudo Sep 2004 2.2 1.9% 8,946 2,706 100.0% 100.0%

9 Tsudanuma Chiba prefecture–Narashino Feb 1976 2.0 1.7% 1,840 557 100.0% 100.0%

10 Sapporo Co-op Hokkaido prefecture–Kitahiroshima Apr 1992 1.9 1.7% 12,208 3,693 100.0% 100.0%

11 Ginowan Okinawa prefecture–Ginowan Jan 2001 1.9 1.6% 10,843 3,280 45.1% 74.0%

12 Sapporo Ai Hokkaido prefecture–Sapporo Oct 1989 1.7 1.5% 3,209 971 100.0% 97.0%

13 Harajuku Bell Pier Central Tokyo–Shibuya ward, Jingumae Jan 2004 1.6 1.4% 774 235 79.3% 81.2%

14 Sapporo Toys 'R' Us Hokkaido prefecture–Sapporo Oct 1993/Jan 1996 1.6 1.4% 6,163 1,865 100.0% 100.0%

15 Round One Amagasaki Hyogo prefecture–Amagasaki Sep 1998 1.3 1.2% 5,256 1,590 100.0% 100.0%

16 Round One Nara Nara prefecture–Nara Jul 1998 1.0 0.9% 5,157 1,560 100.0% 100.0%

17 Yoshikawa Saitama prefecture–Yoshikawa Oct 1992 0.9 0.8% 11,582 3,504 86.0% 99.0%

18 Kajicho Ekimae Central Tokyo–Chiyoda ward, Kajicho Nov 2002 0.8 0.7% 881 267 79.2% 79.2%

Retail sub-total/average 55.2 48.5% 170,449 51,564 95.2% 98.0%

Office19 JN Kanagawa prefecture–Yokohama Sep 2007 8.9 7.8% 10,081 3,049 100.0% 96.5%

20 Osaka No.4 Osaka prefecture–Osaka Aug 1981 7.7 6.8% 13,625 4,121 97.0% 95.7%

21 Ginza Dowa Central Tokyo–Chuo ward, Ginza Sep 1974 7.5 6.6% 6,350 1,921 84.9% 68.5%

22 Kokusai Nihombashi Central Tokyo–Chuo ward, Nihombashi Kayabacho Jul 1987 3.5 3.0% 4,398 1,331 100.0% 0.0%

23 Osaka No.3 Osaka prefecture–Osaka Sep 1979 3.2 2.8% 8,387 2,537 86.0% 81.3%

24 Yamashitacho Kanagawa prefecture–Yokohama Oct 1991 2.5 2.2% 5,506 1,666 87.9% 76.9%

25 Higashi Totsuka Kanagawa prefecture–Yokohama Feb 1993 2.0 1.7% 5,671 1,716 87.3% 93.7%

26 Takadanobaba Central Tokyo–Shinjuku ward, Takadanobaba Mar 1986 1.7 1.5% 2,553 772 79.4% 51.1%

27 Forest Kita Aoyama Central Tokyo–Minato ward, Kita Aoyama Apr 1991 1.6 1.4% 998 302 100.0% 100.0%

28 OS Tsukiji Central Tokyo–Chuo ward, Tsukiji Jul 1982 1.4 1.2% 2,148 650 100.0% 86.5%

29 Sun Ace Tokugawa Aichi prefecture–Nagoya Mar 1990 1.4 1.2% 6,235 1,886 58.5% 49.6%

30 Prime Kanda Central Tokyo–Chiyoda ward, Kanda Sudacho Aug 1990 1.2 1.1% 1,680 508 85.7% 100.0%

31 Asakusa Tokyo–Taito ward, Komagata Sep 2004 1.2 1.1% 2,047 619 100.0% 100.0%

32 Shiba Daimon Central Tokyo–Minato ward, Shiba Daimon Mar 1994 0.9 0.8% 969 293 62.9% 100.0%

33 Prime Tsukiji Central Tokyo–Chuo ward, Tsukiji Aug 1992 0.8 0.7% 1,330 402 71.4% 100.0%

34 Daikanyama Takara Tokyo–Meguro ward, Kami Meguro Apr 1991 0.7 0.6% 959 290 100.0% 75.8%

35 Akabane Tokyo–Kita ward, Akabane Jun 1993 0.7 0.6% 1,084 328 100.0% 100.0%

36 Yotsuya KD Central Tokyo–Shinjuku ward, Yotsuya Feb 1990 0.7 0.6% 1,195 361 79.1% 100.0%

37 FT Nihombashi Central Tokyo–Chuo ward, Nihombashi Hisamatsucho Oct 1988 0.6 0.5% 1,182 358 83.3% 83.3%

38 Sun No.5 Central Tokyo–Chuo ward, Nihombashi Muromachi May 1983 0.4 0.4% 805 244 100.0% 100.0%

Office sub-total/average 48.6 42.6% 77,202 23,355 89.0% 79.7%

Residential39 Tosabori Osaka prefecture–Osaka Sep 2007 4.7 4.1% 11,549 3,494 100.0% 100.0%

40 Sekijomachi Fukuoka prefecture–Fukuoka Mar 2007 2.7 2.3% 10,755 3,253 100.0% 100.0%

41 G-Clef Kamata Tokyo–Ota ward, Nishi Kamata Jan 1992 1.6 1.4% 3,310 1,001 100.0% 100.0%

42 Prime Stay Tsukiji Central Tokyo–Chuo ward, Tsukiji Jun 1986 0.7 0.6% 1,226 370 97.2% 81.7%

43 Nishi Kasai Tokyo–Edogawa ward, Nishi Kasai Nov 1990 0.5 0.4% 1,490 451 100.0% 100.0%

Residential sub-total/average 10.1 8.9% 28,330 8,569 99.9% 99.2%

Total Properties sub-total/average 113.9 100.0% 275,981 83,488 94.0% 93.0%

Portfolio Overview

Carrying value Occupancy by area

Property Location CompletedJun 2010

¥ billion% of

portfolio


(sqm)


(tsubo) Jun 2009 Jun 2010

Retail1 Kawasaki Dice Kanagawa prefecture–Kawasaki Aug 2003 12.3 10.8% 12,061 3,649 98.2% 99.3%

2 Konan Home Centre Chiba prefecture–Ichikawa Mar 2005 10.5 9.2% 48,819 14,768 100.0% 100.0%

3 Shinjuku Fuji Central Tokyo–Shinjuku ward, Nishi Shinjuku Jun 1964 4.5 4.0% 1,476 447 100.0% 100.0%

4 Mukomachi Saty Kyoto prefecture–Muko Sep 1970/Nov 1981/Apr 1997 4.2 3.7% 22,528 6,815 100.0% 100.0%

5 Motomachi Kanagawa prefecture–Yokohama Jun 1992 2.3 2.0% 1,585 480 100.0% 100.0%

6 Shibuya Konami Central Tokyo–Shibuya ward, Shinsencho May 1990 2.3 2.0% 4,993 1,510 100.0% 100.0%

7 Susono Shizuoka prefecture-Susono Jun 1994 2.3 2.0% 12,127 3,668 100.0% 100.0%

8 Matsudo Nitori Chiba prefecture–Matsudo Sep 2004 2.2 1.9% 8,946 2,706 100.0% 100.0%

9 Tsudanuma Chiba prefecture–Narashino Feb 1976 2.0 1.7% 1,840 557 100.0% 100.0%

10 Sapporo Co-op Hokkaido prefecture–Kitahiroshima Apr 1992 1.9 1.7% 12,208 3,693 100.0% 100.0%

11 Ginowan Okinawa prefecture–Ginowan Jan 2001 1.9 1.6% 10,843 3,280 45.1% 74.0%

12 Sapporo Ai Hokkaido prefecture–Sapporo Oct 1989 1.7 1.5% 3,209 971 100.0% 97.0%

13 Harajuku Bell Pier Central Tokyo–Shibuya ward, Jingumae Jan 2004 1.6 1.4% 774 235 79.3% 81.2%

14 Sapporo Toys 'R' Us Hokkaido prefecture–Sapporo Oct 1993/Jan 1996 1.6 1.4% 6,163 1,865 100.0% 100.0%

15 Round One Amagasaki Hyogo prefecture–Amagasaki Sep 1998 1.3 1.2% 5,256 1,590 100.0% 100.0%

16 Round One Nara Nara prefecture–Nara Jul 1998 1.0 0.9% 5,157 1,560 100.0% 100.0%

17 Yoshikawa Saitama prefecture–Yoshikawa Oct 1992 0.9 0.8% 11,582 3,504 86.0% 99.0%

18 Kajicho Ekimae Central Tokyo–Chiyoda ward, Kajicho Nov 2002 0.8 0.7% 881 267 79.2% 79.2%

Retail sub-total/average 55.2 48.5% 170,449 51,564 95.2% 98.0%

Office19 JN Kanagawa prefecture–Yokohama Sep 2007 8.9 7.8% 10,081 3,049 100.0% 96.5%

20 Osaka No.4 Osaka prefecture–Osaka Aug 1981 7.7 6.8% 13,625 4,121 97.0% 95.7%

21 Ginza Dowa Central Tokyo–Chuo ward, Ginza Sep 1974 7.5 6.6% 6,350 1,921 84.9% 68.5%

22 Kokusai Nihombashi Central Tokyo–Chuo ward, Nihombashi Kayabacho Jul 1987 3.5 3.0% 4,398 1,331 100.0% 0.0%

23 Osaka No.3 Osaka prefecture–Osaka Sep 1979 3.2 2.8% 8,387 2,537 86.0% 81.3%

24 Yamashitacho Kanagawa prefecture–Yokohama Oct 1991 2.5 2.2% 5,506 1,666 87.9% 76.9%

25 Higashi Totsuka Kanagawa prefecture–Yokohama Feb 1993 2.0 1.7% 5,671 1,716 87.3% 93.7%

26 Takadanobaba Central Tokyo–Shinjuku ward, Takadanobaba Mar 1986 1.7 1.5% 2,553 772 79.4% 51.1%

27 Forest Kita Aoyama Central Tokyo–Minato ward, Kita Aoyama Apr 1991 1.6 1.4% 998 302 100.0% 100.0%

28 OS Tsukiji Central Tokyo–Chuo ward, Tsukiji Jul 1982 1.4 1.2% 2,148 650 100.0% 86.5%

29 Sun Ace Tokugawa Aichi prefecture–Nagoya Mar 1990 1.4 1.2% 6,235 1,886 58.5% 49.6%

30 Prime Kanda Central Tokyo–Chiyoda ward, Kanda Sudacho Aug 1990 1.2 1.1% 1,680 508 85.7% 100.0%

31 Asakusa Tokyo–Taito ward, Komagata Sep 2004 1.2 1.1% 2,047 619 100.0% 100.0%

32 Shiba Daimon Central Tokyo–Minato ward, Shiba Daimon Mar 1994 0.9 0.8% 969 293 62.9% 100.0%

33 Prime Tsukiji Central Tokyo–Chuo ward, Tsukiji Aug 1992 0.8 0.7% 1,330 402 71.4% 100.0%

34 Daikanyama Takara Tokyo–Meguro ward, Kami Meguro Apr 1991 0.7 0.6% 959 290 100.0% 75.8%

35 Akabane Tokyo–Kita ward, Akabane Jun 1993 0.7 0.6% 1,084 328 100.0% 100.0%

36 Yotsuya KD Central Tokyo–Shinjuku ward, Yotsuya Feb 1990 0.7 0.6% 1,195 361 79.1% 100.0%

37 FT Nihombashi Central Tokyo–Chuo ward, Nihombashi Hisamatsucho Oct 1988 0.6 0.5% 1,182 358 83.3% 83.3%

38 Sun No.5 Central Tokyo–Chuo ward, Nihombashi Muromachi May 1983 0.4 0.4% 805 244 100.0% 100.0%

Office sub-total/average 48.6 42.6% 77,202 23,355 89.0% 79.7%

Residential39 Tosabori Osaka prefecture–Osaka Sep 2007 4.7 4.1% 11,549 3,494 100.0% 100.0%

40 Sekijomachi Fukuoka prefecture–Fukuoka Mar 2007 2.7 2.3% 10,755 3,253 100.0% 100.0%

41 G-Clef Kamata Tokyo–Ota ward, Nishi Kamata Jan 1992 1.6 1.4% 3,310 1,001 100.0% 100.0%

42 Prime Stay Tsukiji Central Tokyo–Chuo ward, Tsukiji Jun 1986 0.7 0.6% 1,226 370 97.2% 81.7%

43 Nishi Kasai Tokyo–Edogawa ward, Nishi Kasai Nov 1990 0.5 0.4% 1,490 451 100.0% 100.0%

Residential sub-total/average 10.1 8.9% 28,330 8,569 99.9% 99.2%

Total Properties sub-total/average 113.9 100.0% 275,981 83,488 94.0% 93.0%

Annual Report 17

18 Annual Report

Top 20 Tenants (by income) 30 Jun 2010 Tenant name Property Industry Lease type

% of Trust’s Total Gross Passing Rent plus CAM Lease expiry date

Remaining term (years)

1 Toyota Tsusho Corporation/Konan Shoji Konan Home Centre Trading/Retail Fixed non-cancellable 1 7.2% March-2025 14.8

2 Aki* Tosabori Real Estate Fixed non-cancellable 2 5.0% December-2014 4.5

3 Mycal Mukomachi Saty Retail Standard non-cancellable 3 4.2% June-2020 9.9

4 Best Denki** Kawasaki Dice Retail Standard non-cancellable 4 2.9% August-2013 3.2

5 Matahari Kawasaki Dice Game Centre Standard non-cancellable 5 2.5% August-2023 13.2

6 Kyodo PR Ginza Dowa Advertising Standard 2.5% December-2010 –

7 Gaia Shinjuku Fuji Game Centre Fixed non-cancellable 6 2.4% July-2020 10.0

8 Jikei Space Sekijomachi School (Standard) cancellable 7 2.3% March-2022 11.8

9 Konami Sports & Life Shibuya Konami Fitness Club Standard non-cancellable 8 2.0% March-2019 8.8

10 City of Yokohama JN Government Standard 1.9% March-2011 –

11 Co-op Sapporo Sapporo Co-op Retail Standard non-cancellable 9 1.9% November-2012 2.4

12 Nitori Matsudo Nitori Retail Standard non-cancellable 10 1.8% September-2024 14.3

13 Gourmet City Kanto Susono Retail Standard non-cancellable 11 1.8% June-2014 4.0

14 NHK Culture Centre Osaka No.4 Education Standard 1.6% March-2012 –

15 NTT Advanced Technology Higashi Totsuka Systems Solutions Standard non-cancellable 12 1.6% March-2012 1.8

16 Toys 'R' Us Japan Sapporo Toys ‘R’ Us Retail Standard 1.4% November-2013 –

17 Bab Hitachi JN Manufacture Standard 1.3% December-2011 –

18 Kobe Steel G-Clef Kamata Manufacture Fixed non-cancellable 13 1.3% September-2012 2.2

19 Telecom Staff Forest Kita Aoyama Program Production Standard 1.3% April-2011 –

20 Louis Vuitton Japan Motomachi Retail Fixed non-cancellable 14 1.3% September-2011 1.3

Total 48.2%

Trust total

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.

2 A 7-year lease. The lease is non-cancellable during the term (until December 2014).3 A 16-year lease. The lease is non-cancellable for the initial seven years (until June 2011).4 A 10-year lease. The lease is non-cancellable during the term (until August 2013).5 A 20-year lease. The lease is non-cancellable for the initial ten years (until August 2013)6 A 15-year lease. The lease is non-cancellable for the initial seven years (until July 2012).* Tenant has since period-end changed to Takuto Kanri, a master lessee which subleases to approximately 210 residents on a pass-through basis.** Tenant name has changed from Sakuraya due to merger.

Top 20 Tenant Profile

7 Cancellable only when the lessor agrees and lessee forfeits the tenant deposits.8 A 10-year lease. The lease is non-cancellable for the initial five years (until March 2014).9 A 10-year lease. The lease is non-cancellable during the term (until November 2012).10 A 20-year lease. The lease is non-cancellable during the term (until September 2024).11 A 20-year lease. The lease is non-cancellable during the term (until June 2014).12 A 2-year lease (automatically renewed). The leases for 924 tsubo out of 1,087 are non-cancellable until March 2012.13 A 5-year lease. The lease is non-cancellable during the term (until September 2012).14 A 10-year lease. The lease is non-cancellable during the term (until September 2011).

Top 20 Tenants (by income) 30 Jun 2010 Tenant name Property Industry Lease type

% of Trust’s Total Gross Passing Rent plus CAM Lease expiry date

Remaining term (years)

1 Toyota Tsusho Corporation/Konan Shoji Konan Home Centre Trading/Retail Fixed non-cancellable 1 7.2% March-2025 14.8

2 Aki* Tosabori Real Estate Fixed non-cancellable 2 5.0% December-2014 4.5

3 Mycal Mukomachi Saty Retail Standard non-cancellable 3 4.2% June-2020 9.9

4 Best Denki** Kawasaki Dice Retail Standard non-cancellable 4 2.9% August-2013 3.2

5 Matahari Kawasaki Dice Game Centre Standard non-cancellable 5 2.5% August-2023 13.2

6 Kyodo PR Ginza Dowa Advertising Standard 2.5% December-2010 –

7 Gaia Shinjuku Fuji Game Centre Fixed non-cancellable 6 2.4% July-2020 10.0

8 Jikei Space Sekijomachi School (Standard) cancellable 7 2.3% March-2022 11.8

9 Konami Sports & Life Shibuya Konami Fitness Club Standard non-cancellable 8 2.0% March-2019 8.8

10 City of Yokohama JN Government Standard 1.9% March-2011 –

11 Co-op Sapporo Sapporo Co-op Retail Standard non-cancellable 9 1.9% November-2012 2.4

12 Nitori Matsudo Nitori Retail Standard non-cancellable 10 1.8% September-2024 14.3

13 Gourmet City Kanto Susono Retail Standard non-cancellable 11 1.8% June-2014 4.0

14 NHK Culture Centre Osaka No.4 Education Standard 1.6% March-2012 –

15 NTT Advanced Technology Higashi Totsuka Systems Solutions Standard non-cancellable 12 1.6% March-2012 1.8

16 Toys 'R' Us Japan Sapporo Toys ‘R’ Us Retail Standard 1.4% November-2013 –

17 Bab Hitachi JN Manufacture Standard 1.3% December-2011 –

18 Kobe Steel G-Clef Kamata Manufacture Fixed non-cancellable 13 1.3% September-2012 2.2

19 Telecom Staff Forest Kita Aoyama Program Production Standard 1.3% April-2011 –

20 Louis Vuitton Japan Motomachi Retail Fixed non-cancellable 14 1.3% September-2011 1.3

Total 48.2%

Trust total

Annual Report 19

20 Annual Report

18

38

21

32

30

33

3

42

35

29

37

22

28

10

6

26

Tokyo Bay

SHINJUKU

SHIBUYA

TOKYO

Roppongi

Ueno

Shimbashi

Hamamatsucho

Shinagawa

Yotsuya

MINATO-KU

SHIBUYA-KU

CHIYODA-KU

SHINJUKU-KU

CHUO-KU

KeyCENTRAL TOKYO GREATER TOKYO

CEN

TRAL

TO

KYO

3 Shinjuku Fuji6 Shibuya Konami 10 Harajuku Bell Pier18 Kajicho Ekimae21 Ginza Dowa22 Kokusai Nihombashi26 Forest Kita Aoyama28 Takadanobaba

29 Prime Kanda30 OS Tsukiji32 Shiba Daimon33 Prime Tsukiji35 Yotsuya KD37 FT Nihombashi38 Sun No. 542 Prime Stay Tsukiji

1 Kawasaki Dice2 Konan Home Centre7 Motomachi9 Matsudo Nitori

11 Yoshikawa12 Tsudanuma20 JN24 Higashi Totsuka

25 Yamashitacho31 Asakusa34 Daikanyama Takara36 Akabane41 G-Clef Kamata43 Nishi Kasai

GREATER OSAKA AND OTHER AREAS IN JAPAN

Retail Property

Office Property

Residential Property

Express Way

Main Road

JR Line

Subway

Shinkansen

17 Round One Nara

19 Osaka No. 4

23 Osaka No. 3

27 Sun Ace Tokugawa

39 Tosabori

40 Sekijomachi

4 Mukomachi Saty5 Ginowan8 Susono

13 Sapporo Co-op14 Sapporo Ai15 Sapporo Toys ‘R’ Us

16 Round One Amagasaki

Property Locations

27

40

8

5

131514

Japan Sea

Pacific Ocean

TOKYO

HOKKAIDO

AICHIOSAKA

FUKUOKA

OKINAWA

17

16

4

1923

39

KYOTO

NARA

OSAKA

KOBE

TAKASAGO

WAKAYAMA

TOKUSHIMA

20 km

TOTTORI

NAGOYA

Proposed Shinkansen Line

Shinkansen

WAKAYAMA

NARA

SHIGA

KYOTO

HYOGO

OSAKA

20km

20km

Tokyo Bay

Tokyowan Aqua Line

Tokyo

Shinjuku

Shinagawa

Kawasaki

Yokohama

Shibuya

Chiba

Akihabara

Ikebukuro

KANAGAWA

TOKYO

SAITAMA

CHIBA

2

9

11

12

43

36

41

1

24 725

20

31

34

Annual Report 21

Key Properties

24 Annual Report

Key Properties

Kawasaki DiceProperty TypeMulti-tenant (retail, cinema, restaurant, entertainment) building

Sub-MarketKawasaki

Address8, Ekimaehoncho, Kawasaki-ku Kawasaki-shi, Kanagawa

Approximately 250 metres (a three minute walk) from Kawasaki JR station and approximately 80 metres (a one minute walk) from Keikyu-Kawasaki station of Keikyu line.

Kawasaki Dice is a large scale (11 floors above ground plus two basement levels) multi-tenant retail, cinema, restaurant and entertainment complex.

Summary

Ownership interest1 48%

Purchase date Mar 05 & Dec 05

Carrying value (billion) ¥12.3

Completed Aug 2003

PML 5.22%

Property Statistics (June 2010)

Land area (square metres)1 4,475

Trust’s share NRA (tsubo) 3,649

Trust’s share NRA (square metres) 12,061

Occupancy by area 99.3%

Tenancy Profile

Tenant name Type of lease % of total rent

Best Denki* Standard non-cancellable2 15.5%

Matahari Standard non-cancellable3 13.2%

TOHO Cinemas Fixed non-cancellable4 4.9%

Aoi Shoten Fixed non-cancellable5 4.7%

Tokyu Hands Standard 3.7%

Other – 15 tenants 58.0%

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.2 A 10-year lease. The lease is non-cancellable during the term (until August 2013).3 A 20-year lease. The lease is non-cancellable for the initial 10-years (until August 2013).4 A 20-year lease. The lease is non-cancellable during the term (until August 2023).5 A 10-year lease. The lease is non-cancellable during the term (until August 2013).* Tenant name has changed from Sakuraya due to merger.

Konan Home CentreProperty Type

Single-tenant retail home centre and speciality stores

Sub-MarketIchikawa

Address2526-6, Baraki Ichikawa-shi, Chiba

Located close to the expressway, approximately 720 metres (a nine minute walk) from Futamata Shinmachi station on the JR Keiyo line and 20 minutes by car from the centre of Tokyo.

The Konan Home Centre is a large scale retail complex comprising a home centre with additional speciality shops (consumer electronics, supermarket, shoe store, variety goods and a gas station). It is leased to a single tenant through to March 2025.

Summary

Ownership interest 100%

Purchase date Apr 2005


Completed Mar 2005

PML 8.02%


Land area (square metres) 83,401




Tenancy Profile


Toyota Tsusho Corporation / Konan Shoji Fixed non-cancellable1 100.0%

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.

Annual Report 25

26 Annual Report

Key Properties

JNProperty TypeMulti-tenant office building

Sub-MarketYokohama

Address3, Otamachi, Naka-ku Yokohama-shi, Kanagawa

Approximately 400 metres (a five minute walk) from Kannai station on the JR Keihin Tohoku lines.

The JN property is a 14-storey office property completed in September 2007. It faces a major road (Kannai Odori) in the central business district of Yokohama, which is approximately 30 minutes by train from central Tokyo.

Summary


Purchase date Dec 2007


Completed Sep 2007

PML 7.54%






Tenancy Profile


City of Yokohama Standard 29.4%

Bab-Hitachi Standard 20.5%

HSBC Standard 17.5%

Toppan Forms Standard 8.0%

Usen Standard 7.8%


Osaka No. 4Property TypeMulti-tenant office building

Sub-MarketOsaka CBD

Address1-11, Umeda, Kita-ku Osaka-shi, Osaka

Approximately 80 metres (a one minute walk) from Higashi-Umeda station on Tanimachi line and approximately 400 metres (a five minute walk) from JR Osaka station.

The Property is a 25-storey building located in the centre of Osaka near JR Osaka station. It is connected to JR Osaka and other subway stations via a recently renovated underground shopping arcade which contains a number of retail stores and restaurants.

Summary

Ownership interest 1 100%

Purchase date Sep 2007


Completed Aug 1981

PML 5.47%






Tenancy Profile


NHK Culture Centre Standard 16.7%

Xymax Axis Standard 6.9%

Sumitomo Life Insurance Standard 6.8%

Green Innovation Standard 4.2%

Dimple Standard 4.1%


1 Astro Group’s interest in this property comprises a condominium interest in eight floors (7, 8, 18 and 21 to 25). Astro Group’s interest is the largest individual lot in the condominium association. The Trust holds ownership equivalent to 14.7% of 8,439 sqm of the land.

Annual Report 27

28 Annual Report

Ginza DowaProperty TypeMulti-tenant office building with some retail tenants

Sub-MarketChuo Ward

Address7-2-22, Ginza Chuo-ku, Tokyo

Approximately 240 metres (a three minute walk) from Ginza station on the Tokyo Metro Marunouchi, Ginza and Hibiya lines.

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.

Summary


Purchase date Apr 2005


Completed Sep 1974

PML 10.72%






Tenancy Profile


Kyodo PR Standard 55.1%

Seven-Eleven Fixed cancellable 6.7%

Sun M Creation Standard 5.8%

Starbucks Coffee Japan Standard 4.7%

Kygnus Liruified Gas Standard 4.0%


Key Properties

TosaboriProperty TypeResidential building

Sub-MarketOsaka CBD

Address3-3-2, Tosabori, Nishi-ku Osaka-shi, Osaka

A 15-storey residential building, completed in September 2007 and master-leased to a single tenant. It is located in a predominantly residential area known as Tosabori within central Osaka and comprises 18 studio, 159 one-bedroom, 24 two-bedroom, 11 three-bedroom and 2 four-bedroom apartments.

Summary


Purchase date Dec 2007


Completed Sep 2007

PML 8.93%






Tenancy Profile


Aki* Fixed non-cancellable1 100.0%

1 A 7-year lease. The lease in non-cancellable during the term (until December 2014). * Tenant has since period-end changed to Takuto Kanri, a master lessee which subleases to approximately 210 residents on a pass-through basis.

Annual Report 29

30 Annual Report

Key Properties

Shinjuku FujiProperty TypeMulti-tenant retail building

Sub-MarketShinjuku

Address1-16-4, Nishi Shinjuku Shinjuku-ku, Tokyo

Approximately 270 metres (a four minute walk) from JR Shinjuku station.

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 comprises six floors above ground and two basement levels.

Summary


Purchase date Jan 2006


Completed Jun 1964

PML 16.37%


Land area (square metres) 271

Trust’s share NRA (tsubo) 447



Tenancy Profile


Gaia Fixed non-cancellable1 70.9%

Watami Standard 12.9%

Saizeriya Fixed non-cancellable2 11.3%

Interbrains Standard 3.3%

MI Foods System Standard 1.5%

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).

Mukomachi SatyProperty TypeSingle-tenant retail building

Sub-MarketKyoto

Address15 Kotsukuda, Teradocho Muko-shi, Kyoto

Approximately 170 metres (a 3 minute walk) from Higashi Muko station on Hankyu Kyoto line and 630 metres (an 8 minute walk) from JR Mukomachi station.

Mukomachi Saty is a single-tenant, six-level shopping centre, including machinery room on 5th and 6th floor, with car parking located in Muko, six kilometres southwest of central Kyoto.

Summary


Purchase date Nov 2005


Completed Sep 70/Nov 81/Apr 97

PML 13.11%






Tenancy Profile


Mycal Standard non-cancellable1 100.0%

1 A 16-year lease. The lease in non-cancellable for the initial seven years (until June 2011).

Annual Report 31

32 Annual Report

Key Properties

Osaka No. 3Property TypeMulti-tenant office building

Sub-MarketOsaka CBD

Address1-1, Umeda, Kita-ku Osaka-shi, Osaka

Approximately 80 metres (a one minute walk) from Kita-Shinchi station on JR Tozai line and approximately 400 metres (a five minute walk) from JR Osaka station.

The Property is a 34 storey building located immediately adjacent to Osaka Ekimae No. 4 in the centre of Osaka near JR Osaka station. It is connected to JR Osaka and other subway stations via a recently renovated underground shopping arcade which contains a number of retail stores and restaurants.

Summary

Ownership interest1 100%



Completed Sep 1979

PML 3.48%






Tenancy Profile


Nihon Jutaku Ryutsu Standard 14.5 %

Sumitomo Life Insurance Standard 7.0%

Novac Standard 6.4%

Sumitomo Real Estate Sales Standard 5.2%

Plamatels Standard 4.3%


1 Astro Group’s interest in this property comprises a condominium interest in five floors (7, 8, 28, 30 and 31). Astro Group’s interest is the largest individual lot in the condominium association. The Trust holds ownership equivalent to 6.7% of 10,342 sqm of the land.

Summary




Completed Mar 2007

PML 4.74%






Tenancy Profile


Jikei Space Standard (cancellable)1 100.0%

1 Cancellable only when the lessor agrees and lessee forfeits the tenant deposit.

SekijomachiProperty TypeResidential building

Sub-MarketFukuoka

Address21 Sekijomachi, Hakata-ku Fukuoka-shi, Fukuoka

Sekijomachi is a seven storey building comprising 302 one-bedroom apartments designed for student accommodation. It is located in Fukuoka, the largest city in Kyushu (the southern-most main island of Japan) with a population of 1.4 million (Japan’s 8th largest city).

Annual Report 33

34 Annual Report

Ownership Structure

The Tokumei Kumiai (“TK”) StructureUnder 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 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.

TK InvestmentAll of the Astro Group’s interests in properties are held through TK structures. The Responsible Entity has entered into TK Agreements with JPT Co., Ltd., JPT Scarlett Co., Ltd., JPT Direct Co., Ltd., JPT Corporate Co., Ltd. and JPT August Co., Ltd (“TK Operators”) pursuant to which, in exchange for the Astro Group’s contribution of all of the equity in the TK, the Astro Group is entitled to 100% of the investor capital account of each TK and 99% of the profits and 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 the Japan Asset Manager. The asset management services provided by the Japan Asset Manager to the TK Operators are to assist the TK Operators to conduct the TK Businesses.

The Astro Group does not own any of the equity of the TK Operators and does not have any voting rights in relation to the TK Operators or the TK Businesses, rather the Astro Group 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. The voting stock of the TK Operators is held by Cayman Islands companies established specifically for that purpose as nominees for the Japan Asset Manager. The voting stock of the Cayman Islands companies is held by a Cayman Islands charitable trust except in the case of JPT August. The person performing the duties of representative partner for JPT August is a neutral certified public accountant who provided a non-petition letter regarding bankruptcy. These arrangements are designed to assist in achieving bankruptcy remoteness for the TK Operators.

Trust Bank(s) and Trust Beneficiary InterestsThe TK Operators primarily 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 these trust beneficiary interests (“TBIs”). Certain transaction levies are substantially reduced or eliminated in the case of the acquisition of a TBI rather than the acquisition of real property.

In the case where the TK Operator holds TBIs rather than direct legal interest, the TK Operator effectively has the same economic rights and obligations as if it were the legal owner of the property the subject of the TBI.

The Financial Instruments and Exchange Law (“FIEL”) was introduced in Japan on 30 September 2007. Under the FIEL, the Japan Asset Manager is required to have certain licences for the purposes of conducting discretionary asset management business, providing advice on the value of securities or financial instruments, and trading/brokering of trade of securities with low liquidity such as trust beneficial interests over real estate and interests in TK investments. On 19 August 2008, the Kanto Local Finance Bureau granted the Japan Asset Manager the following licences: “Investment Management Business”; “Investment Advisory and Agency Business”; and “Second Type Financial Instruments and Exchange Business”. The Japan Asset Manager is registered as a financial instruments firm which is fully compliant with the FIEL in respect of its business activities, and the TK Operators are also in compliance with the FIEL.

The Astro Group’s interest in the properties in Japan is achieved via an investment structure (“Japanese Investments”), as follows:

The following diagram sets out the structure of the Astro Group’s interests in its Japanese Investments and the management arrangements for the Astro Group and the Japanese Investments.

Astro JapanProperty Trust

TKs

Trust BeneficiaryInterest(s)

Trust Bank(s)

Properties

Astro JapanProperty GroupLimited

Stapled Securityholdersof Astro Japan Property Group

Astro Japan PropertyManagement Limited(Responsible Entity)

Spring InvestmentCo. Limited(Japan Asset Manager)

Stapled Securities

Units

EconomicInterest

100%Shareholding

30%EconomicInterest

Australia

Japan

Shares

Annual Report 35

36 Annual Report

Corporate Governance Statement 2010

The Astro Japan Property Group (Astro Group) comprises the Astro Japan Property Trust (ARSN 112 799 854) (AJT) and Astro Japan Property Group Limited (ABN 25 135 381 663) (AJCo). Astro Japan Property Management Limited (ABN 94 111 874 563) (Responsible Entity) is the Responsible Entity of AJT. The Astro Group’s stapled securities are listed on the Australian Securities Exchange.

As a result of the stapling of AJT and AJCo, both entities operate as a co-ordinated group. For example, the Board of the Responsible Entity and the Board of AJCo have the same composition and have adopted a common Board Charter. References to the “Board” in this Statement are references to the Board of the Responsible Entity (as responsible entity of AJT) and AJCo.

The ASX Corporate Governance Council has issued a set of guidelines entitled Corporate Governance Principles and Recommendations (2nd Edition) that are ‘designed to produce an outcome that is effective and of high quality and integrity’. The guidelines articulate 8 core principles that the Council believes underlie good corporate governance, together with 27 recommendations for implementing effective corporate governance.

The ASX Listing Rules require listed entities such as AJT and AJCo to include a statement in their Annual Report disclosing the extent to which they have followed the ASX Principles and Recommendations during the reporting period, identifying any ASX Recommendations that have not been followed and giving reasons for that variance.

This Statement is dated 1 September 2010 and outlines the Astro Group’s corporate governance policies and practices and the extent of its compliance with the ASX Recommendations. This Statement reflects the corporate governance policies and practices of AJT for the reporting period 1 July 2009 to 30 June 2010, and of AJCo for the period from its listing on 12 November 2009 to 30 June 2010. These policies and practices remain under constant review and are revised from time to time.

As at 30 June 2010 the Astro Group achieved substantial compliance with the ASX Principles and Recommendations. A table summarising the Astro Group’s compliance is provided at the end of this Statement. The Astro Group’s website (www.astrojapanproperty.com) contains further information in the Corporate Governance section on its governance practices including, copies and summaries of charters, codes and policies referred to in this Statement.

The establishment of a sound framework of corporate governance and the implementation of the corresponding governance culture and processes throughout the Astro Group is one of the primary responsibilities of the Board. The Board recognises that it is accountable to securityholders for the performance of the Astro Group and, to that end, is responsible for instituting and ensuring the Astro Group maintains a system of corporate governance that operates in the best interests of securityholders whilst also addressing the interests of other key stakeholders. A comprehensive corporate governance framework and good governance policies and procedures can add to the performance of the Astro Group, the creation of securityholder value and engender the confidence of the investment community.

ASX Principle 1: Lay Solid Foundations for Management and Oversight

1.1 Functions of Board and Senior ExecutivesThe Board has 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. A copy of the Board Charter is in the Corporate Governance section at www.astrojapanproperty.com

As outlined in the Board Charter, the Board is responsible for the management, or overseeing the management, of the affairs of the Astro Group including:

approving and monitoring the corporate strategy, financial •plans and objectives of the Astro Group;

evaluating, approving and monitoring the annual budgets and •business plans;

determining the Astro Group’s distribution policy, the •operations of the Astro Group’s distribution reinvestment plan and evaluating, approving and monitoring major capital expenditure, capital management and all major investments, divestitures and other transactions of the Astro Group, including the issue of securities;

approving all accounting policies, financial reports and •material reporting by the Astro Group;

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;

appointing the Chairman and Company Secretary of •each Board;

ensuring that effective audit, risk management and regulatory •compliance programmes are in place to protect the Astro Group’s assets and securityholder value and approving and monitoring the Astro Group’s risk and audit framework;

reviewing the performance and effectiveness of the Astro •Group’s corporate governance policies and procedures; and

setting the goals and objectives for the Board and its •Committees each year.

The Board Charter also sets out specific powers and responsibilities of the Senior Executive including:

develop with the Board, implement and monitor the strategic •and financial plans;

develop, implement and monitor the annual budgets and •business plans;

plan, implement and monitor all major capital expenditure, •capital management and all acquisitions, divestitures, and other major transactions of the Astro Group, including the issue of any securities of the Astro Group;

advise the Board on accounting policies, and develop all •financial reports, and all other material reporting and external communications by or on behalf of the Astro Group, including material announcements and disclosures;

undertake succession planning for the key management •positions which may be identified from time to time;

develop, implement and monitor the Astro Group’s risk and •audit management and regulatory compliance framework in accordance with the framework and policies defined by the Audit, Risk & Compliance Committee;

consider and approve all major disclosures of information to •the ASX in accordance with the Continuous Disclosure Policy of the Astro Group;

be the primary channel of communication and point of •contact between the executive management and the Board (and the Directors);

ensure that the Astro Group has regard to the interests of •employees and clients of the Astro Group and the community and regulatory environment in which the Astro Group operates; and

otherwise carry out the day to day management of the •Astro Group.

The delegated powers to the Senior Executive are subject to the specific powers and authorities delegated to the Chairman and 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 Astro Group’s annual budget;•

approval of financial reports and accounts of the Astro Group •which are to be lodged with any regulator, including the ASX;

the issue of any equity securities by the Astro Group, except •under a programme previously approved by the Board; and

commencing or taking a significant step in major litigation.•

The Board has delegated a number of its responsibilities to the Audit, Risk & Compliance Committee as outlined in section 4 and the Remuneration Committee as outlined in section 8.

1.2 Process for Evaluating the Performance of Senior ExecutivesThe Board has delegated the process for evaluating the performance of Senior Executives to the Remuneration Committee. The Remuneration Committee assesses the

performance of each Senior Executive in the context of the annual remuneration review, which is conducted in June. The Remuneration Committee conducts an assessment of each Executive based on the individual’s performance and achievements during the financial year and taking into account the overall performance and achievements of the Astro Group. This assessment is made in conjunction with advice from the Astro Group’s Senior Advisor, Mr Eric Lucas.

A performance evaluation of the Senior Executives was conducted on 17 June 2010 in accordance with the above process. You should refer to section 8 of this Statement and the Remuneration Report in the 2010 Annual Report for further information regarding the role of the Remuneration Committee and the 2010 performance evaluation.

ASX Principle 2: Structure the Board to Add Value

2.1 Independent DirectorsThe Board Charter provides that the Board should be of a size and composition that is conducive to effective decision making, with the benefit of a variety of perspectives and skills and in the interests of the Astro Group.

The Board currently comprises three Independent Non-Executive Directors as set out in the below table. All three directors have been Independent Directors since appointment. The Board has determined the independent status of each Director utilising the criteria set out in ASX Recommendation 2.1. None of the Directors have any of the relationships outlined in ASX Recommendation 2.1 that affect ‘independent status’.

The Board considers that collectively, the Directors have the range of skills, experience and expertise necessary to appropriately govern the Astro Group. Biographies of Directors and details regarding term in office and attendance at Board and/or Committee meetings are set out in the Directors’ Report in the 2010 Annual Report.

The Board Charter also provides that a Director is entitled to seek independent professional advice (including, but not limited to, legal, accounting and financial advice) at the Astro Group’s expense on any matter connected with the discharge of his or her responsibilities. A Director must obtain the approval of the Chairman prior to seeking the advice.

Name Position heldIndependent Y/N

Date appointed to Responsible Entity Board

Date appointed to AJCo Board

Length of tenure as at 01/09/101

Allan McDonald Non-Executive Chairman

Y 19/02/05 20/03/09 5.5 years

Paula Dwyer Non-Executive Director

Y 19/02/05 20/03/09 5.5 years

John Pettigrew Non-Executive Director

Y 19/02/05 20/03/09 5.5 years

1. Length of tenure calculated from year of first appointment to the Responsible Entity.

Annual Report 37

38 Annual Report

Corporate Governance Statement

2.2 Chairperson and IndependenceAs noted in section 2.1, the Chairman of the Board, Mr Allan McDonald, is an Independent Non-Executive Director.

2.3 Roles of the Chairman and the Senior ExecutiveThe roles of Chairman and Senior Executive are not exercised by the same individual in the Astro Group. The fact that the Chairman is an Independent Non-Executive Director ensures that there is a clear division of responsibility between the Chairman and the executive functions of the Astro Group. The Board Charter provides that the roles of the Chairman and the Senior Executive must not be exercised by the same person. The independent roles and responsibilities of the Chairman and the Senior Executive are described in the Board Charter.

The Senior Executive function of the Astro Group is currently fulfilled by Mr Ian Hay, Chief Financial Officer, Manager – Australia.

2.4 Nomination CommitteeGiven the small size of the Board, the Directors have decided not to establish a Nomination Committee. This is inconsistent with ASX Recommendation 2.4, although the recommendation itself recognises that a Nomination Committee does not provide the same efficiencies for smaller boards.

The Board itself takes responsibility for matters that would normally be delegated to a Nomination Committee and has processes in place to consider issues that would otherwise be considered by a Nomination Committee. As part of its annual corporate governance and self evaluation assessment as discussed in section 2.5, the Board considers issues such as whether the Board is the appropriate size and composition, whether it is performing its functions effectively and whether the Board comprises Directors with an appropriate range of skills and expertise. In addition, the Board has implemented a process for the annual evaluation of the performance of each Director and also the performance of its two committees; the Audit, Risk & Compliance Committee and the Remuneration Committee.

The Board will determine the selection of any candidates for election as Director taking into consideration the size and composition of the Board and the range of skills and expertise on the Board. Since listing on the ASX in 2005, there have not been any new Board appointments. The Board will also assess any proposed reappointment of a Director to the Board. The Board Charter provides that ‘the Board should be of a size and composition that is conducive to effective decision making, with the benefit of a variety of perspectives and skills and in the interests of the Astro Group’. The Board will ensure that securityholders are provided with the necessary information to enable them to make a fully informed decision regarding the appointment or re-appointment of a Director.

2.5 Process for Evaluating the Performance of the Board, its Committees and Individual Directors

Given the small size of the Board and the fact that it has not established a Nomination Committee, the Board itself is responsible for reviewing and monitoring its performance and the performance of its committees and the individual Directors.

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. During each review and evaluation, the Board considers how to improve its

performance and sets the goals and objectives for itself and its committees for the following year.

During the Financial Year:

the Board conducted a self evaluation of its performance •against its Charter, goals and objectives and also reviewed its corporate governance practices. The results of the evaluation were positive and identified that no changes were required to the Charter or its corporate governance practices;

the Audit, Risk & Compliance Committee conducted a self •evaluation of its performance against its Charter, goals and objectives. The report of the evaluation, which was reviewed by the Board, identified that the Committee had achieved its requirements under the Charter and met its goals and objectives and that no changes were required to the Charter; and

the Remuneration Committee conducted a self evaluation of •its performance against its Charter, goals and objectives. The report of the evaluation, which was reviewed by the Board, identified that the Committee had achieved its requirements under the Charter and met its goals and objectives and that no changes were required to the Charter.

ASX Principle 3: Promote Ethical and Responsible Decision Making

3.1 Code of ConductThe Board is committed to delivering strong returns and securityholder value whilst also promoting securityholder and general market confidence in the Astro Group and to fostering an ethical and transparent culture within the Astro Group.

The Directors and the Astro Group management team are subject to a Code of Conduct which is designed to ensure that:

high standards of corporate and individual behaviour are •observed by all Directors and employees in the context of their employment and in relation to all of the Astro Group’s activities;

employees are aware of their responsibilities to the Astro Group •under their contract of employment and always act in an ethical and professional manner and in the best interests of the Astro Group’s securityholders; and

all persons dealing with the Astro Group, whether it be •employees, securityholders, suppliers, clients or competitors, can be guided by the stated values and practices of the Astro Group.

The Code of Conduct requires Directors and employees amongst other things, to:

act honestly and in good faith at all times and in a manner that •is in the best interests of the Astro Group;

avoid conflicts of interest between their personal interests and •those of the Astro Group and its clients;

not take advantage of opportunities arising from their position •for personal gain or in competition with the Astro Group;

comply with the Astro Group’s Securities Trading Policy and •other policies;

always deal with securityholders, clients, customers, •suppliers, competitors and other employees in a manner that is lawful, diligent and fair and with honesty, integrity and respect; and

always act in a manner that is in compliance with all laws •and regulations.

The Code of Conduct also requires Directors and employees to report any actual or potential breach of the law, the Code or other policies. The Astro Group will ensure that employees are not disadvantaged in any way for reporting violations of the Code or other unlawful or unethical conduct and that matters are dealt with promptly and fairly.

In accordance with the Code of Conduct, the Astro Group aims to provide a work environment in which all employees can excel regardless of race, religion, age, disability, gender, sexual preference or marital status.

The Compliance & Risk Manager has responsibility for monitoring and ensuring ongoing compliance with the Code. A copy of the Code of Conduct is in the Corporate Governance section at www.astrojapanproperty.com

3.2 Securities Trading PolicyThe Astro Group has implemented a Securities Trading Policy which regulates the manner in which Directors, Key Management Personnel, employees and contractors of the Astro Group (the Employees) can buy or sell Astro Group securities, 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 Astro Group. The Policy also extends to an Employee’s domestic partner or spouse, any minor children and other members of the Employee’s household, and any person (including body corporate) over which the Employee has the ability to influence or make investment decisions or otherwise exercise control over investment decisions.

The Policy is specifically designed to raise awareness and minimise any potential for breach of laws relating to insider trading contained in the Corporations Act. The Policy is also designed to minimise the chance that misunderstandings or suspicions arise regarding trading while in possession of non-public, price-sensitive information.

The Policy specifies trading windows as the periods during which Employees can trade in Astro Group securities. Subject to limited exceptions outlined below, Employees may only deal in Astro Group securities during a trading window. Employees are notified when the trading window is opened or closed. Employees must give prior notification of any proposed dealing to the Chairman, copying the Company Secretary, and must not deal in the securities until the Chairman has given prior approval. The Chairman must obtain the prior approval of the Chairman of the Audit, Risk & Compliance Committee prior to dealing in Astro Group securities.

Directors and Senior Executives must immediately report the details of any trades in securities to the Company Secretary to enable compliance with Astro Group’s reporting obligations.

Generally, the trading window will be open at all times except during the following prohibited periods:

the trading window will be closed one week prior to the Board •meeting to consider the half year (31 December) distribution and will be opened on the second trading day following the public release of the half year results to the ASX; and

the trading window will be closed one week prior to the Board •meeting to consider the full year (30 June) distribution and will be opened on the second trading day following the public release of the annual results to the ASX.

Trading is prohibited despite the trading window being open if the relevant person is in possession of non-public, price sensitive

information regarding the Astro Group. All trading windows are at the discretion of the Board and can be opened or closed at any time by the Board or its delegate for such period as considered appropriate. Determination of any restrictions on trading windows is at the discretion of the Board.

Certain activities regarding Astro Group securities may occur when the trading window is closed. These are as follows:

electing to participate in, opting out of or amending the level •of participation in a Distribution Reinvestment Plan or an Equity Incentive Plan of the Astro Group;

electing to participate in a Security Purchase Plan of the •Astro Group;

delivering or receiving Astro Group financial products when •assigned under a contract, including derivatives, which was entered into during a trading window (i.e. the assignee is meeting a contractual obligation and is not making an investment decision); and

changing margin loan providers provided that the economic •and/or beneficial interest of the borrower/participant remains the same.

In addition to the above exceptions, the Chairman (or his or her nominated delegate) may grant exemptions or waivers from this Policy on such terms as the Chairman sees fit. Any application for an exemption or waiver must be made directly to the Chairman. Generally, an exemption or waiver will only be granted where the Employee is not aware of inside information and is in severe financial difficulty or there are other exceptional circumstances.

Unless approval is given by the Chairman, Employees also must not deal in financial products issued or created over Astro Group securities that:

operate to limit the economic risk of an Employee’s holdings •of Astro Group securities that are subject to unvested entitlements; or

otherwise enable an Employee to profit from any decrease in •the market price of Astro Group securities.

A copy of the Securities Trading Policy is in the Corporate Governance section at www.astrojapanproperty.com

ASX Principle 4: Safeguard Integrity in Financial Reporting

4.1 Audit, Risk & Compliance CommitteeThe Board has established an Audit, Risk & Compliance Committee for the purposes of:

assisting the Board in fulfilling its oversight responsibilities for •the financial reporting process, the system of internal control relating to all matters affecting the Astro Group’s financial performance and the audit process relating to the Astro Group;

implementing and supervising the Astro Group’s risk •management framework;

assisting the Board to discharge its responsibilities under the •AJT Compliance Plan adopted by the Responsible Entity; and

monitoring compliance with laws and regulations applicable •to the Astro Group.

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40 Annual Report

4.2 Structure of the Audit, Risk & Compliance CommitteeThe structure of the Audit, Risk & Compliance Committee is consistent with ASX Recommendation 4.2 in that the Committee is comprised only of independent non-executive Directors, has an Independent Non-Executive Chairman who is not the Chairman of the Board and has three members.

During the Financial Year, the Committee comprised Ms Paula Dwyer (Independent Non-Executive Committee Chairman), Mr Allan McDonald and Mr John Pettigrew. All members possess the requisite financial expertise. Biographies of Committee members are set out in the Directors’ Report in the 2010 Annual Report.

The Committee meets as required but generally not less than four times per year. The Committee reports to the Board following each Committee meeting and makes recommendations that require Board approval or action. The Committee met six times during the Financial Year, and all of the members attended all of the meetings.

4.3 Charter of the Audit, Risk & Compliance CommitteeThe Audit, Risk & Compliance Committee has adopted a formal Charter. A copy of the ARCC Charter is in the Corporate Governance section at www.astrojapanproperty.com

The Charter sets out details of the responsibilities of the Committee which include:

Financial reports for the half year and full year

review and consider the financial reports 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

consider in connection with the half year and full year financial •reports the CFO letter of representation to the Board

review the financial sections of the Annual Report and related •regulatory filings before release

review with management and the external auditors the results •of the audit

Internal control

review the effectiveness of the Astro Group’s internal controls •regarding all matters affecting the Astro Group’s financial performance and financial reporting, including information technology security and control

review the scope of external auditors’ review of internal control, •review reports on significant findings and recommendations, together with management’s responses, and recommend changes from time to time as appropriate

External financial audit

recommend to the Board the appointment and removal of the •external financial auditors of the Astro Group and review the terms of engagement

review the external auditors’ proposed audit scope and •approach

meet with the external auditors to review reports, and meet •separately, at least once a year, to discuss any matters that the Committee or auditors believe should be discussed privately without the presence of management

review and confirm the independence of the external auditors •by obtaining statements from the auditors on relationships between the auditors and any member of the Astro Group,

including non-audit services, and discussing the relationships with the external auditors

review the performance of the external auditors, and consider •the reappointment and proposed fees of the external auditors and, if appropriate, conduct a tender of the audit services. Any subsequent recommendation following the tender for the appointment of an external auditor will be put to the Board and then if a change is approved it will be put to the Astro Group’s securityholders for their approval (if required)

Risk management

consider the Astro Group’s overall risk management •framework and review its effectiveness in meeting sound corporate governance principles and keep the Board informed of all significant business risks

review with management the system for identifying, managing •and monitoring the key risks of the Astro Group

obtain reports from management on the status of any key risk •exposures or incidents

Compliance

monitor compliance with the AJT Compliance Plan and report •on its findings to the Board

report to the Board:•

– any breach of the Corporations Act involving the Astro Group; and

– any breach of the Constitution of any member of the Astro Group,

of which the Committee becomes aware or that it suspects.

report to Board if the Committee is of the view that appropriate •action has not been taken to deal with a breach of the Corporations Act or the Constitution of a member of the Astro Group

assess at regular intervals whether the AJT Compliance Plan •is adequate, report to the Board on the assessment and make recommendations to the Board about any changes that the Committee considers should be made to the AJT Compliance Plan

obtain regular updates from the Astro Group’s Compliance & •Risk Manager regarding compliance matters

review the effectiveness of the system for monitoring •compliance with laws and regulations affecting the Astro Group and the results of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance

review the findings of any examinations by regulatory •agencies

review the process for communicating the Code of Conduct to •employees, and for monitoring compliance with the Code

Reporting responsibilities

regularly report to the Board about Committee activities, •issues and related recommendations

provide an open avenue of communication between the •external auditors, the Compliance Plan auditors and the Board. For the purpose of supporting the independence of their function, the external auditors and the Compliance Plan auditors have a direct line of reporting access to the Committee


report annually to the securityholders describing the •Committee’s composition, responsibilities and how they were discharged, and any other information required by law or the ASX Listing Rules

review any other reports prepared by the Astro Group which •relate to Committee responsibilities

The Committee will annually report to the Board on its performance against its Charter, goals and objectives, and provide details of its proposed goals and objectives for the coming year, and any recommended changes or improvements to its Charter (if necessary).

To assist the Board and the Audit, Risk & Compliance Committee to discharge their respective responsibilities, the Senior Executive is required to provide the Board with a letter of representation in connection with the half-year and full-year financial statements of the Astro Group. The letter of representation confirms to the Board that the Astro Group’s financial statements present a true and fair view of the financial position of the Astro Group and of its performance for the relevant period, and that the financial statements and associated notes comply in all material respects with the accounting standards.

ASX Principle 5: Make Timely and Balanced Disclosure

5.1 Continuous Disclosure PolicyThe Astro Group is committed to complying with its continuous disclosure obligations pursuant to the ASX Listing Rules. The Astro Group’s Continuous Disclosure Policy is designed to ensure that all securityholders have equal and timely access to material information concerning the Astro Group. The Astro Group has, at all times during the Financial Year, been in compliance with its continuous disclosure obligations under the ASX Listing Rules.

The Company Secretary plays an important role in the Astro Group’s disclosure compliance programme. The Company Secretary is the person principally responsible for maintaining the Continuous Disclosure Policy and is the liaison between the Board and the ASX.

The Policy is designed to ensure that materially price sensitive information arising from any part of the Astro Group is immediately notified to the ASX in a complete, balanced and timely manner, unless it falls within the scope of the limited exemptions contained in Listing Rule 3.1A.

The Company Secretary, in conjunction with the Chairman and the Senior Executive, are responsible for overseeing the implementation and operation of the Policy. This includes:

reviewing information reported by the Astro Group •management team, which is or may be material;

determining, in consultation with the Directors and other •senior staff, whether any such information is required to be disclosed to the ASX; and

if disclosure is required, preparing, in consultation with the •Directors and other senior staff, the actual form of disclosure.

The Astro Group management team are required to be familiar with the Policy and must immediately report material information to the Company Secretary that may require disclosure.

A copy of the Continuous Disclosure Policy is in the Corporate Governance section at www.astrojapanproperty.com

ASX Principle 6: Respect the Rights of Securityholders

6.1 Communications with SecurityholdersThe Astro Group’s policy on communications is contained within its Continuous Disclosure Policy. The Astro Group is committed to communicating with its securityholders in an effective and timely manner to provide them with ready access to information relating to the Astro Group.

The communications policy consists of the following elements:

the maintenance of a website at • www.astrojapanproperty.com. The Astro Group encourages securityholders to utilise its website as their primary tool to access securityholder information and disclosures. The website provides access to the following information of interest to the Astro Group securityholders that is contained in the Investor Information section:

– detailed information regarding the Board, executive management and the business and activities of the Astro Group;

– all ASX announcements and media releases since listing on the ASX in 2005, which are posted on the website promptly following release;

– copies of full-year and half-year financial reports;

– copies of charters and relevant corporate governance policies;

– copies of the Astro Group’s Annual Reports;

– copies of disclosure documents relating to the Astro Group’s capital raisings; and

– the details of the Astro Group’s Security Registry, Link Market Services, including a link to its website which includes a facility for securityholders to amend their particulars.

the Company Secretary is appointed as the person •responsible for communications with the ASX, and is the person principally responsible for maintaining the Continuous Disclosure Policy;

communication with the media, analysts and the market •generally in relation to the Astro Group activities will normally be undertaken by the Chairman, the Senior Executive and any person who is expressly authorised by the Chairman;

no media release of a material nature will be issued unless it •has first been disclosed to the ASX; and

the Astro Group recognises the importance of the relationship •between the Astro Group, securityholders and analysts. From time to time the Astro Group conducts analyst and securityholder briefings and in these situations the following protocols apply:

– no price-sensitive information will be disclosed at these briefings unless it has been previously, or is simultaneously, released to the market;

– in order to preserve transparency and confidence in the Astro Group’s disclosure practices all information given to analysts at a briefing, such as presentation slides, will also be provided to the Company Secretary for immediate release to the ASX and posted on the Astro Group’s website; and

– all dealings with analysts will be carefully monitored by those employees participating in such dealings to ensure

Annual Report 41

42 Annual Report

that material non-public information is not inadvertently disclosed and if it is, to immediately disclose that information to the ASX.

In addition, the Annual Report facilitates the provision to securityholders on a yearly basis of detailed information in respect of the major achievements, financial results and strategic direction of the Astro Group. Astro Group securityholders are encouraged to receive the Annual Report online for environmental reasons and to reduce cost. A printed copy of the Annual Report is only sent to those securityholders who elect to receive it. A majority of securityholders have elected to receive the Annual Report electronically.

The Astro Group encourages securityholders to attend general meetings and to use these opportunities to ask questions. The Astro Group encourages securityholders to elect to receive electronic distribution of meeting documentation and places the full text of notices of meeting and explanatory memorandum on its website.

ASX Principle 7: Recognise and Manage Risk

7.1 Risk Management Compliance FrameworkManagement of risk continues to be a primary objective of the Astro Group in all its business activities. The Astro Group is committed to ensuring that its system of risk oversight, management and internal control complies with the ASX Principle 7.

The Astro Group has adopted a Risk Management Policy which is intended to:

communicate the roles and accountabilities of participants in •the risk management system;

provide a framework for identifying, assessing, monitoring and •managing risk; and

highlight the status of risks to which the Astro Group •is exposed.

The Policy sets out the Astro Group’s risk management system that has been established to identify risks that could have a material impact on the Astro Group business. The Policy is consistent with guidance on risk management in AS/NZS ISO 31000:2009 (Risk management – principles and guidelines). In addition to the Policy, a Risk Register is maintained that sets out a list of potential sources of material business risks that could impact the Astro Group which is used by management to identify and manage risks to the Astro Group business.

The Board is ultimately responsible for overseeing and managing the material risks of the Astro Group. The Audit, Risk & Compliance Committee assists the Board in this role. In accordance with its Charter, the role of the Committee includes consideration of the overall risk management framework of the Astro Group and the review of its effectiveness in meeting sound corporate governance principles, reviewing and managing the system for identifying, managing and monitoring the key risks of the Astro Group and obtaining reports from management on the status of any key risk exposures or incidents. In undertaking these responsibilities, the Committee principally relies on the resources and expertise of management to implement and report upon the risk management systems and procedures, which enables the Committee to keep the Board informed of all material business risks.

7.2 Risk Management and Internal Control SystemThe Compliance & Risk Manager and the Senior Executive play a key role in designing and implementing the Astro Group’s risk management and internal control system. The system is reviewed and approved by the Audit, Risk & Compliance Committee and ultimately adopted by the Board upon recommendation by the Committee. The system is documented in the Risk Management Policy and also includes the Risk Register as outlined above.

As part of the risk management system, the Compliance & Risk Manager and the Senior Executive provide a quarterly report to the Committee that identifies material business risks and the actions being taken to manage those risks. Management of any material business risks occurs on a daily basis. The implementation of action plans to address material business risks are monitored via regular meetings with key management. As part of the quarterly report, confirmation is provided to the Committee as to the effectiveness of the Astro Group’s management of any material business risks in accordance with the risk management and internal control system during the period. The Committee reports any significant risk issues to the Board.

The Astro Group’s compliance function also has an important role in risk management. The compliance function operates to ensure that the Astro Group complies with regulatory and legal requirements across its businesses, divisions and functions. In accordance with the requirements of the Corporations Act, the Responsible Entity has established a Compliance Plan which sets out procedures adopted by the Responsible Entity in operating AJT to ensure compliance with the Corporations Act, the Constitution of AJT, the Responsible Entity’s licence obligations and other regulatory parameters. The discharge by the Responsible Entity of its obligations under the Compliance Plan is also 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 AJT.

The Compliance & Risk Manager administers the Compliance Plan for the Astro Group and reports to the Committee. An audit of the manner in which the Responsible Entity has discharged its obligations under the Compliance Plan is undertaken by an independent third party auditor on an annual basis, with interim reviews on a half yearly basis.

Due to the size of the Australian operations of the Astro Group, there was no internal audit function during the Financial Year. Consequently, the Audit, Risk & Compliance Committee places greater reliance on the external auditors with respect to these matters.


7.3 Chief Financial Officer Assurance

The Chief Financial Officer has stated to the Board in writing that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system was operating effectively in all material respects in relation to financial reporting risks during the 12-month period to 30 June 2010.

ASX Principle 8: Remunerate Fairly and Responsibly

8.1 Remuneration CommitteeThe Board has established a Remuneration Committee. The Remuneration Committee meets annually for the purposes of reviewing and making recommendations to the Board on the level of remuneration of the Senior Executives and the Directors. The Remuneration Committee endeavours to ensure that the remuneration outcomes strike an appropriate balance between the interests of the Astro Group securityholders, and rewarding, retaining and motivating the Senior Executives and the Directors.

The Remuneration Committee has adopted a formal Charter which sets out, amongst other things, the role and responsibilities of the Committee. The Charter provides that the Committee’s function is to support and advise the Board in fulfilling its responsibilities to securityholders, employees and other stakeholders by endeavouring to ensure that:

the Directors and senior management are remunerated fairly •and appropriately;

the remuneration policies and outcomes strike an appropriate •balance between the interests of the Astro Group’s securityholders and rewarding and motivating the Astro Group’s executives and employees in order to secure the long-term benefits of their energy and loyalty; and

the human resources policies and practices are consistent •with and complementary to the strategic direction and objectives of the Astro Group as determined by the Board.

The structure of the Committee is consistent with ASX Recommendation 8.1 in that the Committee consists of a majority of Independent Directors, is chaired by an Independent Director and has at least three members. During the Financial Year, the Committee comprised Mr John Pettigrew (Independent Non-Executive Committee Chairman), Ms Paula Dwyer and Mr Allan McDonald. The Committee met twice during the Financial Year, and all of the members attended all of the meetings.

The Committee conducts an annual remuneration review of each Senior Executive and the Non-Executive Directors and provides a report to the Board which includes its recommendation. Further details on the role of the Committee and the 2010 remuneration review are set out in the Remuneration Report in the 2010 Annual Report.

A copy of the Remuneration Committee Charter is in the Corporate Governance section at www.astrojapanproperty.com

8.2 Companies Should Clearly Distinguish the Structure of Non-Executive Directors’ Remuneration from that of Executive Directors and Senior ExecutivesThe Board determines the remuneration structure of both Non-Executive Directors and senior executives based on the recommendation of the Remuneration Committee. There were no Executive Directors on the Board during the financial year.

The Non-Executive Directors are paid an annual fee for their services on the Board and all Committees of the Board. The Non-Executive Directors do not receive any performance based remuneration or any retirement benefits other than statutory superannuation and do not receive options or bonus payments. The Non-Executive Directors’ fees, including committee fees, are annually reviewed by the Remuneration Committee, taking into consideration the level of fees paid to Non-Executive Directors by companies of a similar size and stature. Fees paid to Non-Executive Directors must fall within the aggregate fee pool approved by securityholders.

Senior Executive remuneration consists of two components: base pay and benefits, including superannuation; and short- term incentives. Base pay is determined by reference to appropriate benchmark information, taking into account an individual’s responsibilities, performance, qualifications and experience. Any short-term incentive entitlement is entirely at the discretion of the Committee and any discretionary STI is determined based on the results of the Committee’s annual assessment of each Senior Executive. Any STI entitlement is paid in cash and is paid in July each year. The senior executives’ remuneration is annually reviewed by the Remuneration Committee.

The remuneration of Directors and Senior Executives does not include any equity-based remuneration schemes.

Current fees and emoluments are fully disclosed in the Remuneration Report in the 2010 Annual Report.

ASX Principle

Reference

Comply (Y/N)

Principle 1: Lay Solid Foundations for Management and Oversight

1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions

Section 1.1 of Corporate Governance Statement

Y

1.2 Companies should disclose the process for evaluating the performance of senior executives

Section 1.2 Y

ASX Corporate Governance Council Corporate Governance Principles and Recommendations

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44 Annual Report

ASX Principle

Reference

Comply (Y/N)

1.3 Companies should provide the following information:

– An explanation of any departure from Recommendations 1.1, 1.2 or 1.3;

N/A -

– Whether a performance evaluation for senior executives has taken place in the reporting period and whether it was in accordance with the process disclosed.

Section 1.2 Y

A statement of matters reserved for the board, or the board charter or the statement of areas of delegated authority to senior executives should be made publicly available, ideally by posting it to the company’s website in a clearly marked corporate governance section.

Section 1.1 and the Board Charter can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

Principle 2: Structure the Board to Add Value

2.1 A majority of the board should be independent directors Section 2.1 Y

2.2 The chair should be an independent director Section 2.2 Y

2.3 The roles of chair and chief executive officer should not be exercised by the same individual

Section 2.3 Y

2.4 The board should establish a nomination committee. The nomination committee should be structured so that it:

– Consists of a majority of independent directors;

– Is chaired by an independent director;

– has at least three members

Refer to section 2.4 for explanation of non-compliance

N

2.5 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.

Section 2.5 Y

2.6 Companies should provide the following information in the corporate governance statement of the annual report:

– The skills, experience and expertise relevant to the position of director held by each director in the office at the date of the annual report;

Section 2.1 – cross reference to Directors’ biographies

Y

– The names of the directors considered by the board to constitute independent directors and the company’s materiality thresholds;

Section 2.1 Y

– The existence of any of the relationships listed in Box 2.1 and an explanation of why the board considers a director to be independent, notwithstanding the existence of those relationships;

Section 2.1 Y

– A statement as to whether there is a procedure agreed by the board for directors to take independent professional advice at the expense of the company;

Section 2.1 Y

– The period of office held by each director in office at the date of the annual report;

Section 2.1 Y

– The names of members of the nomination committee and their attendance at meetings of the committee;

Refer to section 2.4 for explanation of non-compliance

N

– Whether a performance evaluation for the board, its committee and directors has taken place in the reporting period and whether it was in accordance with the process disclosed;

Section 2.5 Y

– An explanation of any departures from Recommendations 2.1, 2.2, 2.3, 2.4, 2.5 or 2.6

Section 2.4 Y

The following material should be made publicly available, ideally by posting it to the company’s website in a clearly marked corporate governance section:


ASX Principle

Reference

Comply (Y/N)

– A description of the procedure for the selection and appointment of new directors and the re-election of incumbent directors;

Section 2.4 Y

– The charter of the nomination committee or a summary of the role, rights, responsibilities and membership requirement for that committee;

N/A – refer to section 2.4 -

– The board’s policy for the nomination and appointment of directors.

Section 2.4 Y

Principle 3: Promote Ethical and Responsible Decision Making

3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:

- the practices necessary to maintain confidence in the company’s integrity;

- the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders;

- the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Section 3.1 and the Code of Conduct can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

3.2 Companies should establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy or a summary of that policy.

Section 3.2 and the Securities Trading Policy can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y


– An explanation of any departures from Recommendations 3.1, 3.2 or 3.3.

The following material should be made publicly available, ideally by posting it to the Company’s website in a clearly marked corporate governance section:

N/A

– any applicable code of conduct or a summary; Section 3.1 and the Code of Conduct can be found at www.astrojapanproperty.com (refer to corporate governance section)

– The trading policy or a summary. Section 3.2 and the Securities Trading Policy can be found at www.astrojapanproperty.com (refer to corporate governance section)

Principle 4: Safeguard Integrity in Financial Reporting

4.1 The board should establish an audit committee Section 4.1 Y

4.2 The audit committee should be structured so that it:

– Consists only of non-executive directors;

– Consists of a majority of independent directors;

– Is chaired by an independent chair, who is not chair of the board;

– Has at least three members.

Section 4.1 Y

4.3 The audit committee should have a formal charter Section 4.3 Y


– The names and qualifications of those appointed to the audit committee and their attendance at meetings of the committee;

Section 4.2 – cross reference to biographies

Y

– The number of meetings of the audit committee; Section 4.2 Y

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ASX Principle

Reference

Comply (Y/N)

– Explanation of any departures from Recommendations 4.1, 4.2, 4.3 or 4.4


N/A -

– The audit committee charter;

– Information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners.

Section 4.3 and the ARCC Charter can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

Principle 5: Make Timely and Balanced Disclosure

5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at senior executive level for that compliance and disclose those policies or a summary of those policies.

Section 5.1 and the Continuous Disclosure Policy can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

5.2 An explanation of any departures from Recommendations 5.1 or 5.2 should be included in the corporate governance statement in the annual report.

N/A -

The policies or a summary of those policies designed to guide compliance with Listing Rule disclosure requirements should be made publicly available, ideally by posting them to the company’s website in a clearly marked corporate governance section.

Section 5.1 and the Continuous Disclosure Policy can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

Principle 6: Respect the Rights of Shareholders

6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

Section 6.1 Y

6.2 An explanation of any departure from Recommendations 6.1 or 6.2 should be included in the corporate governance statement in the annual report.

N/A -

The company should describe how it will communicate with its shareholders publicly, ideally by posting this information on the company’s website in a clearly market corporate governance section.

Section 6.1 and the Continuous Disclosure Policy which includes the communications policy can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

Principle 7: Recognise and Manage Risk

7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

Section 7.1 Y

7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.

Section 7.2 Y

7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system or risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Section 7.3 Y


ASX Principle

Reference

Comply (Y/N)

7.4 The following material should be included in the corporate governance statement in the annual report:

– An explanation of any departures from Recommendations 7.1, 7.2, 7.3 or 7.4;

N/A -

– Whether the board has received the report from management under Recommendation 7.2;

Section 7.2 Y

– Whether the board has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) under Recommendation 7.3.


Section 7.3 Y

– A summary of the company’s policies on risk oversight and management of material business risks.

Section 7.1 and a summary of the policy can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

Principle 8: Remunerate Fairly and Responsibly

8.1 The board should establish a remuneration committee. Section 8.1 Y

8.2 Companies should clearly distinguish the structure of non-executive director’s remuneration from that of executive directors and senior executives.

Section 8.2 Y

8.3 The following material or a clear cross reference to the location of the material should be included in the corporate governance statement in the annual report:

– The names of the members of the remuneration committee and their attendance at meetings of the committee;

Section 8.1 Y

– The existence and terms of any schemes for retirement benefits, other than superannuation, for non-executive directors;

Section 8.2 Y

– An explanation of any departures from Recommendations 8.1, 8.2, or 8.3


N/A -

– The charter of the remuneration committee or a summary of the role, rights, responsibilities and membership requirements for that committee;

Section 8.1 and the REMC Charter can be found at www.astrojapanproperty.com (refer to corporate governance section)

Y

– A summary of the company’s policy on prohibiting entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes.

N/A refer to section 8.2 -

Annual Report 47

48 Annual Report

Directors’ Report

The Directors of Astro Japan Property Management Limited (ABN 94 111 874 563) (Responsible Entity), as the Responsible Entity of Astro Japan Property Trust (ARSN 112 799 854) (AJT), present their report together with the consolidated financial statements of the Astro Japan Property Group (Astro Group), for the year ended 30 June 2010. The Astro Japan Property Group (Astro Group) comprises Astro Japan Property Trust (ARSN 112 799 854) and its controlled entities, and Astro Japan Property Group Limited (ABN 25 135 381 663) (AJCo).

The Astro Japan Property GroupThe stapled securities of the Astro Group are quoted on the Australian Securities Exchange under the code AJA and each stapled security comprises one unit in AJT and one share in AJCo. Each entity forming part of the Astro Group is a separate legal entity in its own right under the Corporations Act 2001 (Cth) and is therefore required to comply with the reporting and disclosure requirements under the Corporations Act 2001 (Cth), Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Interpretations.

The registered office and principal place of business of the Responsible Entity, AJT and AJCo is Suite 1 Level 14, 50 Pitt Street, Sydney NSW 2000.

Principal activitiesThe principal activities of the Astro Group were investments in interests in properties, and a 30% economic interest in Spring Investment Co. Ltd, the manager of the Astro Group’s property interests (Japan Asset Manager). At 30 June 2009 the BBJPML Holding Trust held a convertible note issued by the Responsible Entity which was acquired by AJCo on 12 November 2009. The convertible note was exercised on 7 April 2010. Following conversion, AJCo became the holder of 100% of the issued share capital of the Responsible Entity.

Review and results of operationsThe Astro Group made a loss before income tax of $105,316,000 (30 June 2009: loss $396,304,000).

After adjusting for the following non‑cash and one‑off transactions; unrealised losses from a devaluation of the property portfolio of $150,662,000 (30 June 2009: $372,184,000), loss on disposal of investment property $nil (30 June 2009: $32,565,000), unrealised loss on financial assets $nil (30 June 2009: $1,890,000), profit from a discount on performance fee of $nil (30 June 2009: $6,965,000), impairment of goodwill of $7,000,000 (30 June 2009: $nil) and net gains on derivative financial instruments $7,642,000 (30 June 2009: net losses of $64,965,000), the Astro Group had an adjusted profit figure before tax of $44,704,000 (30 June 2009: $68,335,000).

The Astro Group had interests in 43 properties at 30 June 2010 (30 June 2009: 43).

Net property income from interests in investment properties is set out below:

Consolidated

Year ended Year ended 30/06/10 30/06/09 $’000 $’000

Retail 41,461 48,522

Office 32,975 52,709

Residential 7,990 10,790

Total net property income from interests in investment properties 82,426 112,021

On 31 July 2009, the Astro Group concluded negotiations with its foreign exchange hedge counterparty (the counterparty) regarding its hedging contract. The key outcomes were the permanent removal of the gearing ratio covenant (required to be no greater than 65%), waiver of the counterparty’s August 2009 option to terminate, and reduction of the securityholders’ equity covenant to a minimum of $250 million. As part of the revised terms, on 12 August 2009 the Astro Group posted ¥2,389 million in cash as collateral with the counterparty, matching the currency of the underlying obligation. The collateral will remain with the counterparty to the extent that any hedging obligations on behalf of the Astro Group remain outstanding. On 30 April 2010 the Astro Group partially terminated its capital hedge portfolio, reducing the capital amount hedged by approximately 22%, resulting in a net cash loss of approximately $4.8 million, which was funded from cash previously posted as collateral with the foreign exchange hedge counterparty. The counterparty also waived its August 2010 option to terminate the remaining hedge portfolio.

Annual Report 49

Due to the volatility of financial markets, the Astro Group replaced its Treasury Policy in relation to capital and distribution hedging with the following Treasury Guidelines:

•capitalhedgingistobeundertakenforamaximumindividualtermof10yearswithnominimumproportionoftheAstro Group’s net investment in JPY denominated assets (previously minimum of 20%); and

•distributionhedgingistobearrangedonarollingbasisequivalenttothefollowingpercentagesofforecastdistributable income from the TKs; Year 1: 25% to 100%, Years 2‑3: 25% to 75%, Years 4‑10: 0% to 50% (previously; Year 1: 80% to 100%, Year 2: 70% to 100%, Year 3: 60% to 100%, Years 4‑5: 30% to 70%, Years 6‑10: 0% to 50%).

On 22 February 2010, the Japan Asset Manager in which the Astro Group has a 30% economic interest, acquired ownership of the management company Joint Capital Partners, the manager of Tokyo Stock Exchange listed Joint REIT Investment Corporation, which owns 53, mainly residential, assets with a book value of approximately ¥100 billion (approx. A$1.25 billion). The acquisition was made in joint venture with Sekisui House Ltd, one of Japan’s largest home builders. Sekisui House Ltd has a 75% interest in the joint venture and Spring Investment Co., Ltd has a 25% interest.

On 22 March 2010 the Astro Group reached an agreement with the lender of one of its asset‑specific loans to revise the Loan to Value covenant threshold from 78% to 80% following the one‑time partial repayment of ¥720 million (approx. A$9 million), and from October 2010, the quarterly principal repayments of ¥125 million (approx. A$1.5 million). At 30 June 2010 the Loan to Value ratio on this loan was 78.4%.

On 29 March 2010 the Astro Group completed the refinancing of a senior loan due to mature in March 2010, with the closing of a new, five year, senior loan of ¥13.4 billion (approx. A$160 million).

Fair value of investment propertiesIn accordance with the Astro Group’s investment property accounting policy, the Astro Group assessed the fair value of investment properties during the year which resulted in a revaluation downward of $150,662,000 to $1,504,995,000 (year ended 30 June 2009: $372,184,000 net downward movement).

DistributionsDistributions declared and/or paid during the year ended 30 June 2010 were: Year ended Year ended Distribution 30/06/10 30/06/09

Final distribution •Distributioncentspersecurity 3.50¢ 5.00¢ •Paymentdate 30/08/10 28/08/09

Interim distribution •Distributioncentspersecurity 3.50¢ 4.00¢•Paymentdate 26/02/10 27/02/09

Distributions per security for the year ended 30 June 2010 were 7.00 cents (year ended 30 June 2009: 9.00 cents).

The total distribution for the year ended 30 June 2010 takes into account one‑off payments related to the implementation of the internalisation of the Astro Group’s management rights (see “Significant changes in the state of affairs”) and the outcome of negotiations with the Astro Group’s foreign exchange hedge counterparty (refer to “Events occurring after the reporting period”).

There was no Distribution Reinvestment Plan (DRP) in operation for the distribution for the 12 months ending 30 June 2010.

Significant changes in the state of affairs

Independent stapled security structureOn 12 November 2009, the units in AJT were stapled to the shares in AJCo (stapled securities) forming the Astro Group. The stapled securities are quoted on the Australian Securities Exchange under the code AJA. It is not possible to trade or deal separately in either the shares or units which comprise the stapled securities.

Responsible EntityFinal and full legal separation of the Responsible Entity from Babcock & Brown occurred on 7 April 2010 following maturity of a Japanese loan funding a portion of the Astro Group’s property interests in March 2010, which was the final impediment to full legal separation. The Responsible Entity is now held by the Astro Group through AJCo.

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Directors’ Report

Environmental regulationTo the best of their knowledge and belief after making due enquiry, the Directors have determined that the Astro Group has complied with all significant environmental regulations applicable to its operations in the jurisdictions it operates.

Matters subsequent to the end of the financial yearThe Directors are not aware of any matter or circumstance occurring since 30 June 2010 not otherwise dealt with in the financial report that has significantly or may significantly affect the operations of the Astro Group, the results of those operations, or the state of affairs of the Astro Group in subsequent financial years.

Future developments and expected results of operationsIn the opinion of the Directors, disclosure of any further information on future developments and results other than as already disclosed in this report or the financial report would be unreasonably prejudicial to the interests of the Astro Group.

Interests of the Responsible EntityAt 30 June 2010, the Responsible Entity did not hold any securities in the Astro Group.

Responsible Entity’s feesThe basis of fees paid to the Responsible Entity is set out in Note 32 to the Consolidated Financial Statements. Set out below are the fees paid or payable by the Astro Group to the Responsible Entity and Japan Asset Manager during the year:

Consolidated

Year ended Year ended 30/06/10 30/06/09 $’000 $’000

AJT base fee – paid to Responsible Entity¹ 1,570 2,428

Asset base fee – Japan Asset Manager 7,662 9,046

TK distributions – TK Operator 70 510

Total base fees 9,302 11,984

AJT performance fee discount – received from Responsible Entity – (6,965)

Total performance fees – (6,965)

Total Asset Management Fees paid or payable to Responsible Entity and Japan Asset Manager 9,302 5,019

The following amounts are included in accounts payable as owed to the Japan Asset Manager at balance date relating to Asset Management Fees 1,907 2,880

1. Relates to payments made prior to the Responsible Entity becoming part of the Astro Group on 7 April 2010.

Stapled securities on issueThere were 508,212,161 stapled securities on issue as at 30 June 2010. Each stapled security comprises one unit in AJT and one share in AJCo. No stapled securities were issued during the period other than the issue of 508,212,161 shares in AJCo as part of the stapling transaction on 12 November 2009. No buybacks of securities in AJT were conducted during the period.

Astro Group assetsAt 30 June 2010 the Astro Group held assets with a total value of $1,660,529,000 (30 June 2009: $1,820,427,000). The basis for valuation of the assets is disclosed in Note 1 to the Consolidated Financial Statements.

Annual Report 51

DirectorsThe Directors of the Responsible Entity and AJCo (Directors) at any time during or since the period end are:

Name, independence status and special responsibilities

Qualifications and experience

Allan McDonaldIndependent Non‑Executive Chairman

Member of the Audit, Risk & Compliance Committee

Member of the Remuneration Committee

Allan was appointed as a Director of the Responsible Entity on 19 February 2005 and as a Director of AJCo on 20 March 2009.

Allan holds a Bachelor of Economics Degree from the University of Sydney and 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 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.

Paula Dwyer

Independent Non‑Executive Director

Chairman of the Audit, Risk & Compliance Committee

Member of the Remuneration Committee

Paula was appointed as a Director of the Responsible Entity on 19 February 2005 and as a Director of AJCo on 20 March 2009.

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 holds a Bachelor of Commerce degree from the University of Melbourne. Paula is a Member of the Takeovers Panel and Vice President of the Baker IDI Heart and Diabetes 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

Chairman of the Remuneration Committee

John was appointed as a Director of the Responsible Entity on 19 February 2005 and as a Director of AJCo on 20 March 2009.

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. He has had a significant role in structuring and managing listed property trusts since 1980.

Directorships of other listed entities held by Directors during the three years preceding the end of the financial year are listed below:Director Listed Entity Date appointed Date ceased

Allan McDonald Ross Human Directions Limited 3 April 2000 Continuing

Billabong International Limited 4 July 2000 Continuing

Multiplex Property Trust and Multiplex SITES Trust¹ 22 October 2003 Continuing

Multiplex Acumen Property Fund; Multiplex European Property Fund; and Multiplex Prime Property Fund² 1 January 2010 Continuing

Multiplex Limited 22 October 2003 31 October 2007

Paula Dwyer Tabcorp Holdings Limited 30 August 2005 Continuing

Suncorp Metway Limited 26 April 2007 Continuing

Healthscope Limited 10 March 2010 Continuing

John Pettigrew Rubicor Group Limited 2 March 2007 Continuing

1. Director of the responsible entity, Brookfield Multiplex Funds Management Limited.2. Director of the responsible entity, Brookfield Multiplex Capital Management Limited.

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Directors’ Report

Directors’ meetingsThe number of Directors’ meetings (including meetings of the Committees of Directors) held during the year ended 30 June 2010, and the number of meetings attended by each Director, are as follows: Audit, Risk & Remuneration Director Responsible Entity Board AJCo Board Compliance Committee Committee H A H A H A H A

Allan McDonald 15 15 13 13 6 6 2 2

Paula Dwyer 15 15 13 13 6 6 2 2

John Pettigrew 15 15 13 13 6 6 2 2

H – Indicates the number of meetings held while the relevant Director was a member of the Board/Committee.A – Indicates the number of those meetings attended by that Director.

Directors’ relevant interestsThe names of the Directors in office and the relevant interests of each Director in stapled securities of the Astro Group as at the date of this report are shown below:Director Number of stapled securities

Allan McDonald 400,000

Paula Dwyer 200,000

John Pettigrew 150,000

SecretariesThe Company Secretaries of the Responsible Entity and AJCo at any time during or since the year end are:

Rohan Purdy

General Counsel and Company Secretary

Rohan was appointed as Company Secretary of the Responsible Entity on 16 April 2009 and as Company Secretary of AJCo on 20 March 2009.

Rohan has more than 13 years’ experience as a corporate lawyer and company secretary. Rohan formerly held positions as a senior lawyer at both Babcock & Brown and the Australian Securities Exchange (ASX). Prior to this, Rohan specialised in commercial and corporations law, practising as a senior lawyer with a number of leading law firms in Australia. Rohan holds a Master of Laws from the University of Sydney and a Bachelor of Laws degree and Bachelor of Commerce degree from the Australian National University.

Ian Hay

Chief Financial Officer, Manager – Australia and Company Secretary (alternate)

Ian was appointed as Company Secretary (alternate) of the Responsible Entity on 16 April 2009 and as Company Secretary (alternate) of AJCo on 4 May 2009.

Ian has extensive experience with a number of major international financial institutions and has over 20 years’ involvement within the finance industry. Ian was formerly an Associate Director with Macquarie Bank working in the Specialised Funds Division. Ian is a Member of the Institute of Chartered Accountants of England & Wales and obtained his qualification with Coopers and Lybrand, London.

Indemnification and insurance of officers and auditors

Indemnities and Insurance PremiumsExcept as set out below, no indemnity was given or insurance premium paid during or since the end of the financial year for a person who is or has been an officer or auditor of the Astro Group.

IndemnitiesUnder the Responsible Entity’s Constitution, and by separate agreement with each current and former Director, the Responsible Entity indemnifies each person who is or has been a Director or Secretary of the Responsible Entity or of a wholly owned subsidiary of the Responsible Entity against any liability incurred by the person to another person in the discharge of their duties as an officer of the Responsible Entity or such other entity (as the case may be), except:

•wheretheliabilityarisesoutofconductinvolvingalackofgoodfaith;

•wheretheliabilityisowedtotheResponsibleEntityorarelatedbodycorporate;and

•totheextentthattheResponsibleEntityisprecludedbylawfromindemnifyingtheofficer.

Annual Report 53

The Responsible Entity has agreed with each current and former Director to indemnify each such Director, to the extent permitted by law, for legal costs incurred by the Director in obtaining advice for, or conducting or defending an action, or appearing or preparing to appear in that action. This indemnity is also subject to the above exceptions.

The Responsible Entity’s Constitution also provides that, to the extent permitted by law, the Responsible Entity indemnifies each person who is or has been a Director or Secretary of the Responsible Entity or of a wholly owned subsidiary of the Responsible Entity against any liability for costs and expenses incurred by that person in defending any proceedings in which judgement is given in that person’s favour, or in which the person is acquitted or in connection with an application in relation to any proceedings in which the court grants relief to the person under the law.

AJCo’s Constitution provides that AJCo indemnifies each person who is or has been a Director or Secretary on a full indemnity basis and to the full extent permitted by law against all losses, liabilities, costs, charges and expenses incurred by the person as an officer of AJCo or of a related body corporate.

No liability has arisen under these indemnities as at the date of this report.

Insurance premiumsAs part of its insurance arrangements, the Astro Group pays insurance premiums in respect of a Directors and Officers Liability insurance contract covering Directors and Officers of the Astro Group. Under the terms of the Directors and Officers insurance contract, the Astro Group is prohibited from disclosing the nature of the liabilities indemnified and the amount of the insurance premium paid.

Remuneration ReportUnder the Corporations Act 2001 (Cth) only disclosing entities that are listed companies are required to prepare a Remuneration Report. Accordingly, this report is only required to address remuneration disclosures applicable to AJCo, as AJT is not a listed company. Notwithstanding, this report addresses the remuneration disclosures of the Astro Group, not just AJCo.

This report outlines the remuneration philosophy and framework currently applicable to the Astro Group, in particular how this relates to the Astro Group’s senior executives and Directors.

This report relates to the period from 12 November 2009, being the listing date of AJCo, to 30 June 2010. The remuneration disclosures however only relate to the period 7 April 2010 to 30 June 2010 because the Responsible Entity, which remunerates the Astro Group’s executives and Directors, only became a wholly owned subsidiary of AJCo and a part of the Astro Group on 7 April 2010. Prior to that date, the Responsible Entity was a subsidiary within the Babcock & Brown Group.

The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001 (Cth).

Remuneration policy and approachThe Astro Group aims to attract, retain and motivate highly skilled people to operate the Astro Group in the best interests of its securityholders.

The Astro Group has a formally constituted Remuneration Committee which is currently comprised of the Astro Group’s three Directors, who are Independent Non‑Executive Directors. Its members during the financial year were Mr J Pettigrew (Chair), Ms P Dwyer and Mr A McDonald. The Remuneration Committee meets annually for the purposes of reviewing and making recommendations to the Astro Group Board on the level of remuneration of the senior executives and the Directors.

The Remuneration Committee endeavours to ensure that the remuneration outcomes strike an appropriate balance between the interests of the Astro Group securityholders, and rewarding, retaining and motivating the Astro Group’s executives and the Directors.

Executive remunerationThe executive pay and reward framework has two components:

•Basepayandbenefits,includingsuperannuation;and

•Shorttermincentives.

To determine the total annual remuneration for the executives, the Remuneration Committee conducts an assessment of each executive based on the individual’s performance and achievements during the financial year and taking into account the overall performance and achievements of the Astro Group and prevailing remuneration

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Directors’ Report

rates of executives in similar positions. This assessment is made in conjunction with advice from the Astro Group’s Senior Advisor, Mr Eric Lucas, and is the basis for determining the total annual remuneration for that financial year.

Although the performance of the Astro Group is taken into consideration in the assessment of each executive, the remuneration policy of the Astro Group is more focused on achievement of the Astro Group’s internal financial and operational objectives. The Astro Group regards achievement of these objectives as the appropriate criteria for determining remuneration rather than simply measuring relative performance against a market index or an external comparator group.

The following table sets out summary information about the Astro Group’s earnings and movements in securityholder wealth for the five years to June 2010: 2010 2009 2008 2007 2006

Net profit attributable to equityholders ($’000) (111,922) (365,642) 121,627 129,195 59,026

Earnings per security (cents) (22.02) (71.94) 23.65 26.71 16.13

Distributions per security (cents) 7.00 9.00 13.05 11.90 9.76

Share price ($) as at 30 June 0.32 0.37 0.87 1.77 1.68

– Base payBase pay is determined by reference to appropriate benchmark information, taking into account an individual’s responsibilities, performance, qualifications and experience. There are no guaranteed base pay increases in any executive’s contracts.

Based on the Remuneration Committee’s assessment of the factors outlined above, the executives were granted an increase in base pay of 5% to 10% with effect from 1 July 2010.

– Short term incentiveAny short term incentive (STI) entitlement is entirely at the discretion of the Remuneration Committee and any discretionary STI is determined based on the results of the Remuneration Committee’s assessment of each executive as outlined above. Any STI entitlement is paid in cash and is paid in July each year. The maximum STI bonus in any year is 30% of base salary. An executive is not entitled to receive an STI bonus if they cease employment with the Astro Group prior to the payment date or provide or receive notice of termination of employment on or prior to the payment date.

Based on the Remuneration Committee’s assessment of each executive for the 12‑month period ended 30 June 2010, and having regard to the overall performance of the Astro Group over that period, on 17 June 2010 executives were granted an STI cash bonus as set out in Table 1. The STI cash bonus was paid on 15 July 2010.

Key Management PersonnelKey Management Personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether executive or otherwise) of that entity. The KMP of the Astro Group for the year ended 30 June 2010 were:

Executives

Mr I Hay Chief Financial Officer

Non‑Executive Directors

Mr F A McDonald Independent Chairman and Non‑Executive Director

Ms P Dwyer Independent Non‑Executive Director

Mr J Pettigrew Independent Non‑Executive Director

The Senior Advisor to the Astro Group, Mr Eric Lucas, is a contractor to the Astro Group and is paid a monthly fee of ¥100,000. Separately, the Japan Asset Manager employs Mr Lucas as its Chief Executive Officer and employs the other executives who conduct the asset management activities in Japan. The Japan Asset Manager is not a member of the Astro Group, and as such the remuneration relating to those individuals is not borne by the Astro Group or its Securityholders. Mr Lucas and the other executives of the Japan Asset Manager are not considered KMP of the Astro Group.

Annual Report 55

Details of the remuneration of the executives and the Non‑Executive Directors are set out below. Mr Rohan Purdy does not meet the criteria of a KMP however his remuneration is disclosed below in accordance with the Corporations Act 2001 (Cth) as he is one of the two executives in the Astro Group.

Remuneration of executives

Table 1: Remuneration of executives for the period ended 30 June 2010 STI cash Non‑monetary Salary bonus2 benefits3 Superannuation Total Executives Year1 $ $ $ $ $

Mr I Hay 2010 51,606 15,000 340 4,645 71,591

Mr R Purdy 2010 48,165 30,000 342 4,335 82,842

Total remuneration 2010 99,771 45,000 682 8,980 154,433

1. For the period 7 April 2010 to 30 June 2010. No executives’ remuneration was incurred by the Astro Group before the Responsible Entity became part of the Astro Group on 7 April 2010. No prior year comparative information provided as the period ending 30 June 2010 represents AJCo’s first financial year and first period of remuneration reporting.

2. STI relates to the 12‑month period ended 30 June 2010 and was granted on 17 June 2010 and paid on 15 July 2010.

3. All Astro Group employees receive salary continuance insurance.

Table 2: Remuneration components as a proportion of total remuneration on an annualised basis Fixed STI cash remuneration1 bonus Executives % % Total

Mr I Hay 93.78 6.22 100.00

Mr R Purdy 87.57 12.43 100.00

1. Fixed remuneration consists of salary, non‑monetary benefits and superannuation and for the purposes of this table is based on a 12‑month period to 30 June 2010.

Executive employment contractsThe base salaries for executives as at 30 June 2010, in accordance with their employment contracts are shown below:Executives Base remuneration per employment contract

Mr I Hay $225,000

Mr R Purdy $210,000

The employment contracts for Mr Hay and Mr Purdy contain the following conditions:

Length of contract •Open‑ended

Frequency of base remuneration review •Annual

Benefits •EntitledtoparticipateinAstroGroupbenefitplansthataremade available

Incentive remuneration •Eligibleforanawardofshorttermincentiveremuneration(if any) as described above

Termination of employment •ForMrHay,employmentcanbeterminatedbyeitherpartyproviding three months’ written notice and the Astro Group may elect to pay Mr Hay three months’ salary in lieu of notice

•ForMrPurdy,employmentcanbeterminatedbyeitherpartyproviding two months’ written notice and the Astro Group may elect to pay Mr Purdy two months’ salary in lieu of notice

Remuneration of the Non‑Executive DirectorsThe following persons were Directors of each of the Responsible Entity and AJCo during the financial year:




56 Annual Report

Directors’ Report

The Astro Group Boards determine the remuneration structure for Non‑Executive Directors based on recommendations from the Remuneration Committee. The Non‑Executive Directors’ individual fees, including committee fees, are annually reviewed by the Remuneration Committee taking into consideration the level of fees paid to non‑executive directors by companies of a similar size and stature. Fees paid to Non‑Executive Directors must fall within the aggregate fee pool approved by Securityholders. The current aggregate maximum amount which may be paid to all Non‑Executive Directors is $600,000 per annum, and the aggregate fees currently payable to the Non‑Executive Directors per annum is $342,500. Based on the Remuneration Committee’s annual review of Non‑Executive Director fees conducted on 17 June 2010, there will be no change to the fees for the 12‑month period commencing 1 July 2010.

The Non‑Executive Directors receive a cash fee for service. They do not receive any performance‑based remuneration or any retirement benefits other than statutory superannuation (which is included within total fees noted below).

Fees paid to the Non‑Executive Directors are in respect of their services provided to the Responsible Entity and AJCo.

Fees payable to Non‑Executive Directors are set out below:Board/Committee Role Fee per annum

Board Independent Chair $136,500

Director $96,500

Audit, Risk & Compliance Committee Chair $6,500

Remuneration Committee Chair $6,500

Table 3: Remuneration of Directors for the period ended 30 June 2010 Short term Post‑ – salary employment – and fees superannuation Total Directors Year1 $ $ $

Mr F A McDonald 2010 31,307 2,818 34,125

Ms P Dwyer 2010 23,624 2,126 25,750

Mr J Pettigrew 2010 22,133 1,992 24,125

Total remuneration 2010 77,064 6,936 84,000

1. For the period 7 April 2010 to 30 June 2010. No Directors’ remuneration was incurred by the Astro Group before the Responsible Entity became part of the Astro Group on 7 April 2010. No prior year comparative information provided as the period ending 30 June 2010 represents AJCo’s first financial year and first period of remuneration reporting.

In addition to the above fees, all Non‑Executive Directors receive reimbursement for reasonable travel, accommodation and other expenses incurred while undertaking Astro Group business.

Proceedings on behalf of AJCoNo person has applied to the Court under section 237 of the Corporations Act 2001 (Cth) for leave to bring proceedings on behalf of AJCo, or to intervene in any proceedings to which AJCo is a party, for the purpose of taking responsibility on behalf of AJCo for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of AJCo with leave of the Court under section 237 of the Corporations Act 2001 (Cth).

Auditor’s independence declarationThe Astro 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:

•TheAuditorindependencerequirementsoftheCorporations Act 2001 in relation to the audit; and

•TheAustraliancodeofprofessionalconductinrelationtotheaudit.

The declaration is provided on page 58 and forms part of this Directors’ Report.

Annual Report 57

Non‑audit servicesThe Astro Group may decide to employ the Auditor, PricewaterhouseCoopers, on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the Astro Group are important.

The Directors have considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non‑audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non‑audit services by the Auditor, as set out below, did not compromise the Auditor independence requirements of the Corporations Act 2001 for the following reasons:

•Allnon‑auditserviceshavebeenreviewedbytheAuditCommitteetoensuretheydonotimpacttheimpartialityand objectivity of the auditor; and

•NoneoftheservicesunderminethegeneralprinciplesrelatingtoauditorindependenceassetoutinAPES110Code of Ethics for Professional Accountants.

During the year the following fees were paid or payable for non‑audit services provided by the Auditor, PricewaterhouseCoopers, of the Astro Group, its related practices and non‑related audit firms:

Consolidated

Year ended Year ended 30/06/10 30/06/09 $ $

Tax advisory services 83,746 934,158

Taxation compliance services 253,144 186,606

Transaction services – 128,125

Total non‑audit fees 336,890 1,248,889

RoundingThe Astro Group 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.

Basis of preparationThe financial report for the Astro Group as at 30 June 2010 has been prepared on a going concern basis as the Directors, after reviewing the Astro Group’s going concern status, have concluded that the Astro Group has reasonable grounds to expect to be able to pay its debts as and when they become due and payable. However, additional disclosure has been added to Note 1(a) as to the ongoing risks associated with refinancing of debt due within 12 months of the date of this report.

Dated 25 August 2010.

Signed in accordance with a resolution of the Directors.

F A McDonald Director

Astro Japan Property Management Limited in its capacity as Responsible Entity of the Astro Japan Property Trust

58 Annual Report

Auditor’s Independence Declaration

Liability limited by a scheme approved under Professional Standards Legislation

PricewaterhouseCoopersABN 52 780 433 757

Darling Park Tower 2201 Sussex StreetGPO BOX 2650SYDNEY NSW 1171DX 77 SydneyAustraliaTelephone +61 2 8266 0000Facsimile +61 2 8266 9999www.pwc.com/au


As lead auditor for the audit of Astro Japan Property Trust for the year ended 30 June 2010, Ideclare 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 inrelation 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 Astro Japan Property Trust and the entities it controlled during theperiod.

AJ Wilson SydneyPartner 25 August 2010PricewaterhouseCoopers





As lead auditor for the audit of Astro Japan Property Trust for the year ended 30 June 2010, Ideclare 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 inrelation 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 Astro Japan Property Trust and the entities it controlled during theperiod.

AJ Wilson SydneyPartner 25 August 2010PricewaterhouseCoopers

Annual Report 59

Consolidated Statements of Comprehensive Income 60

Consolidated Statements of Financial Position 61

Consolidated Statements of Cash Flows 63

Consolidated Statements of Changes in Equity 64

Notes to the Financial Statements 65

1 Statement of Significant Accounting Policies 65

2 Net financing costs 76

3 Gain/(loss) on derivatives 76

4 Other operating expenses 77

5 Income tax benefit/(expense) 77

6 Auditor’s remuneration 78

7 Earnings/(losses) per stapled security 78

8 Cash and cash equivalents 79

9 Trade and other receivables 79

10 Derivative financial instruments 79

11 Other assets 79

12 Other financial assets 80

13 Deferred taxes 80

14 Investments in Associate accounted for using the equity method 81

15 Investment properties 82

16 Property, plant and equipment 83

17 Intangible assets 83

18 Payables 84

19 Provisions 84

20 Deferred lease incentive 84

21 Distribution paid and payable 85

22 Current tax liabilities 85

23 Interest‑bearing loans and borrowings 85

24 Contributed equity 86

25 Reserves 87

26 Retained profits/(losses) 88

27 Financial risk management 88

28 Contingencies 95

29 Segment reporting 95

30 Notes to the Consolidated Statements of Cash Flows 98

31 Director and executive disclosures 99

32 Related parties 103

33 Leasing arrangements note 105

34 Commitments 105

35 Business combinations 105

36 Parent Entity financial information 107

37 Events occurring after the reporting period 107

Directors’ Declaration 108

Independent Auditor’s Report 109

Financial Statements

59

60 Annual Report

Consolidated Statements of Comprehensive Incomefor the year ended 30 June 2010

Consolidated

Year ended Year ended 30 Jun 10 30 Jun 09 Note $’000 $’000

RevenueProperty rental income 15 117,725 156,063Financing income 2 285 2,076

118,010 158,139

Other incomeShare of net profit of associates 14 (578) 878Gain on derivatives 3 7,642 70Net foreign exchange gain – 3,451Discount on performance fee 32 – 6,965Other income 14 198

7,078 11,562

Total revenue and other income 125,088 169,701

ExpensesProperty expenses 15 (35,299) (44,042)Asset management fees 32 (9,232) (11,474)Financing costs 2 (23,889) (30,424)Loss on derivatives 3 – (65,035)Loss on disposal of investment property – (32,565)Fair value adjustments to investment property 15 (150,662) (372,184)Impairment of goodwill 17 (7,000) –Net foreign exchange loss (105) –Unrealised loss on financial assets – (1,890)Professional fees (1,657) (5,950)Other operating expenses 4 (2,560) (2,441)

Total expenses (230,404) (566,005)Profit/(loss) before income tax (105,316) (396,304)Income tax benefit/(expense) 5 (6,606) 29,508

Profit/(loss) for the year (111,922) (366,796)

Other comprehensive incomeForeign exchange translation differences 25 9,056 235,719Fair value movements on hedge instruments, net of tax 25 (4,437) (14,622)

Total comprehensive income/(expense) for the year (107,303) (145,699)

Profit/(loss) is attributable to:Securityholders of AJT (104,983) (365,642)Securityholders of other entities stapled to AJT (non‑controlling interest) (6,939) –External non‑controlling interest – (1,154)

Profit/(loss) for the year (111,922) (366,796)

Total comprehensive income for the year is attributable to:Securityholders of AJT (99,714) (144,545)Securityholders of other entities stapled to AJT (non‑controlling interest) (7,545) –External non‑controlling interest (44) (1,154)

(107,303) (145,699)Basic and diluted earnings/(losses) per ordinary security available to securityholdersofAJT 7 (20.66)¢ (71.94)¢

The Consolidated Statements of Comprehensive Income are to be read in conjunction with the Notes to the Financial Statements set out on pages 65 to 107.

Annual Report 61

Consolidated Statements of Financial Positionas at 30 June 2010

Consolidated


Current assetsCash and cash equivalents 8 65,009 120,617

Restricted cash 8 55,479 40,428

Trade and other receivables 9 4,330 4,037

Derivative financial instruments 10 2,374 6,093

Investment in convertible note 12 – 12,900

Investment property held for sale 15(a) 45,568 56,780

Other assets 11 1,431 1,022

Total current assets 174,191 241,877

Non‑current assetsInvestment in associate accounted for using the equity method 14 6,094 6,566

Investment properties 15(a) 1,459,427 1,551,177

Deferred tax asset 13(a) 11,055 19,062

Property, plant and equipment 16 91 –

Intangible assets 17 8,046 –

Other assets 11 1,625 1,745

Total non‑current assets 1,486,338 1,578,550

Total assets 1,660,529 1,820,427

Current liabilitiesPayables 18 21,984 24,132

Provisions 19 31 –

Deferred lease incentive 20 3 –


Tenant deposits 37,405 45,699

Distribution payable 21 17,787 25,411

Interest bearing debt 23 246,177 226,725

Current tax liabilities 22 1,456 7,239

Total current liabilities 356,626 364,208

Non‑current liabilitiesDeferred lease incentive 20 18 –


Tenant deposits 58,424 58,720

Interest bearing debt 23 881,089 889,439

Deferred tax liabilities 13(b) 6,796 8,829

Total non‑current liabilities 964,971 974,283

Total liabilities 1,321,597 1,338,491

Net assets 338,932 481,936

62 Annual Report

Consolidated Statements of Financial Positionas at 30 June 2010 (continued)

Consolidated


EquityEquity attributable to securityholders of AJT

Contributed equity 24 588,509 614,950

Reserves 25 111,322 106,097

Retained profits/(losses) 26 (379,624) (239,111)

Total equity of securityholders 320,207 481,936

Equity attributable to other stapled securityholdersContributed equity 24 26,441 –

Reserves 25 (606) –

Retained profits/(losses) 26 (6,939) –

Total equity of other stapled securityholders 18,896 –

Equity attributable to external non‑controlling interestRetained profits/(losses) 26 (171) –

Total equity of external non‑controlling interest (171) –

Total Equity 338,932 481,936

The Consolidated Statements of Financial Position are to be read in conjunction with the Notes to the Financial Statements set out on pages 65 to 107.

Annual Report 63

Consolidated Statements of Cash Flowsfor the year ended 30 June 2010

Consolidated


Cash flows from operating activitiesProperty rental income received 117,795 168,327

Property expenses paid (34,420) (61,714)

Net property income received 83,375 106,613

Realised foreign exchange gains 4,279 4,115

Other non‑property expenses paid (16,080) (38,025)

Financing costs (26,164) (27,495)

Financing income 285 2,076

Japanese withholding tax paid (8,427) (4,137)

GST/consumption tax received 502 5,382

GST/consumption tax paid (2,133) (3,909)

Net cash inflows/(outflows) from operating activities 30 35,637 44,620

Cash flows from investing activitiesInvestment in convertible note (7,807) (12,900)

Investment in associate – (5,598)

Investment in Spring Investment Co. Ltd (1,350) –

Capital expenditure (5,500) (4,149)

Purchase of plant, property and equipment (6) –

Payment for development costs (31) –

Proceeds from the sale of investment properties – 146,615

Investment income from Spring Investment Co. Ltd 271 –

Return of capital from Spring Investment Co. Ltd 413 –

Release of tenant deposits (11,103) (11,999)

Net cash inflows/(outflows) from investing activities (25,113) 111,969

Cash flows from financing activitiesUnits bought back on‑market – (2,283)

Repayment of borrowings (18,525) (121,258)

Distributions paid (43,198) (54,744)

Interest received on capital hedges 6,041 9,409

Monetisation of capital hedges (4,808) 18,819

Net cash inflows/(outflows) from financing activities (60,490) (150,057)

Net (decrease)/increase in cash and cash equivalents (49,966) 6,532

Cash and cash equivalents at the beginning of the reporting period 161,045 135,939

Cash acquired on acquisition 35 5,514 –

Effect on exchange rate fluctuations on cash held 3,895 18,574

Cash and cash equivalents at the end of the reporting period 8 120,488 161,045

The Consolidated Statements of Cash Flows are to be read in conjunction with the Notes of the Financial Statements set out on pages 65 to 107.

64 Annual Report

Consolidated Statements of Changes in Equityfor the year ended 30 June 2010

Eq

uity

att

ribut

able

to e

xter

nal

Eq

uity

att

ribut

able

to

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ty a

ttrib

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le t

o no

n‑co

ntro

lling

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ders

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AJT

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ders

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d

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d

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d

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eser

ves

earn

ings

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tal

equi

ty

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erve

s ea

rnin

gs

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rnin

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l eq

uity

Not

e $

’00

0

$’0

00

$

’00

0

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00

$

’00

0

$’0

00

$

’00

0

$’0

00

$

’00

0

$’0

00

$

’00

0

Bal

ance

at

1 J

uly

20

08

61

5,2

76 (

11

5,0

00

) 17

2,1

24

672

,40

0

– –

– –

1,8

10

1

,81

0

674

,21

0

Fore

ign

exch

ange

tra

nsla

tion

diff

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ces

25

– 23

5,7

19

– 23

5,7

19

– –

– –

– –

23

5,7

19

Fair

valu

e m

ovem

ents

on

hedg

e

inst

rum

ents

, ne

t of

tax

25

– (1

4,6

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) 14

6

(14,4

76)

– –

– –

(14

6)

(14

6)

(14,6

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)

Net

pro

fit/(

loss

) re

cogn

ised

dir

ectly

in

equ

ity

–

221

,097

1

46

2

21

,24

3

– –

– –

(14

6)

(14

6)

221

,097

Pro

fit/(

loss

) fo

r th

e ye

ar

–

– (3

65

,64

2) (

36

5,6

42

) –

– –

– (1

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4)

(1,1

54

) (3

66

,79

6)

Tota

l com

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ve in

com

e/(e

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se)

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r th

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ar

–

221

,097

(3

65

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6) (1

44

,39

9)

– –

– –

(1,3

00

) (1

,30

0)

(14

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)

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sact

ions

wit

h S

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rs in

the

ir c

apac

ity

as S

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rs:

On‑

mar

ket

buy‑

back

24

(3

26

) –

– (3

26

) –

– –

– –

– (3

26

)

Dis

trib

utio

ns p

aid

or p

rovi

ded

for

21

– –

(45,7

39

) (4

5,7

39

) –

– –

– –

– (4

5,7

39

)

Dis

trib

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ns p

aid/

paya

ble

to e

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nal

non‑

cont

rolli

ng in

tere

st h

olde

rs

26

– –

– –

– –

– –

(510

) (5

10)

(510

)

Bal

ance

at

30

Jun

e 2

00

9

61

4,9

50

1

06

,097

(2

39,1

11)

48

1,9

36

–

– –

– –

– 4

81

,93

6

Bal

ance

at

1 J

uly

20

09

61

4,9

50

1

06

,097

(2

39,1

11)

48

1,9

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–

– –

– –

– 4

81

,93

6

Fore

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tra

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tion

diff

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ces

25

– 9,

66

2

– 9,

66

2

– (6

06

) –

(60

6)

– –

9,0

56

Fair

valu

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ovem

ents

on

hedg

e

inst

rum

ents

, ne

t of

tax

25

– (4

,437

) 4

4

(4,3

93

) –

– –

– (4

4)

(44

) (4

,437

)

Net

pro

fit/(

loss

) re

cogn

ised

dir

ectly

in

equ

ity

–

5,2

25

4

4

5,2

69

–

(60

6)

– (6

06

) (4

4)

(44

) 4

,61

9

Pro

fit/(

loss

) fo

r th

e ye

ar

–

– (1

04

,98

3) (

10

4,9

83

) –

– (6

,93

9)

(6,9

39

) –

– (1

11

,92

2)

Tota

l com

preh

ensi

ve in

com

e/(e

xpen

se)

for

the

year

–

5,2

25

(1

04

,93

9)

(99,7

14

) –

(60

6)

(6,9

39

) (7

,54

5)

(44

) (4

4)

(107,

30

3)

Tran

sact

ions

wit

h S

ecur

ityh

olde

rs in

the

ir c

apac

ity

as S

ecur

ityh

olde

rs:

AJT

Cap

ital

red

uctio

n 24

(2

6,4

41)

– –

(26,4

41)

– –

– –

– –

(26,4

41)

Sha

res

in A

JCo

issu

ed d

urin

g st

aplin

g 24

–

– –

– 2

6,4

41

– –

26,4

41

– –

26,4

41

Dis

trib

utio

ns p

aid

or p

rovi

ded

for

21

– –

(35,5

74)

(35,5

74)

– –

– –

– –

(35,5

74)

Dis

trib

utio

ns p

aid/

paya

ble

to e

xter

nal

non‑

cont

rolli

ng in

tere

st h

olde

rs

26

– –

– –

– –

– –

(127

) (1

27)

(127

)

Bal

ance

at

30

Jun

e 2

01

0

5

88

,50

9

11

1,3

22

(3

79,6

24

) 3

20

,207

2

6,4

41

(60

6)

(6,9

39

) 1

8,8

96

(1

71)

(171

) 3

38

,93

2

The

Con

solid

ated

Sta

tem

ents

of C

hang

es in

Equ

ity

are

to r

ead

in c

onju

nctio

n w

ith

the

Not

es t

o th

e Fi

nanc

ial S

tate

men

ts s

et o

ut o

n pa

ges

65

to

107.

Annual Report 65

Notes to the Financial Statementsfor the year ended 30 June 2010

1. Statement of Significant Accounting PoliciesOn 12 November 2009, the units in AJT were stapled to the shares of AJCo (stapled securities) forming the Astro Japan Property Group (Astro Group). It is not possible to trade or deal separately in either the shares or units which comprise the stapled securities.

The entities forming the Astro Group are domiciled in Australia.

AJT has been deemed the Parent Entity of the Astro Group although it is not the legal parent or legal acquirer of AJCo. AJT has been deemed the Parent Entity of the Astro Group on the basis that it was in existence prior to AJCo and has greater net assets than AJCo.

The consolidated financial report of the Astro Group for the year ended 30 June 2010 comprises AJT and its controlled entities, and AJCo (together referred to as the “Astro Group”). The two entities comprising the stapled group remain separate legal entities in accordance with the Corporations Act 2001 and each is required to comply with the reporting and disclosure requirements of Accounting Standards and the Corporations Regulations.

The financial report was authorised for issue by the Directors on 25 August 2010. The Responsible Entity has the power to amend and reissue this financial report.

The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of AJT and its controlled entities, and AJCo.

(a) Basis of preparationThe consolidated financial report for the Astro Group as at 30 June 2010 has been prepared on a going concern basis as the Directors of the Responsible Entity, after reviewing the Astro Group’s going concern status, have concluded that the Astro Group has reasonable grounds to expect to be able to pay its debts as and when they become due and payable.

Ability to refinance debt facilitiesIn the financial report for the Astro Group as at 30 June 2010 current liabilities exceed current assets resulting in a net current liability of $182 million. This is due to the Astro Group’s $237 million of debt which is due to be refinanced by 22 December 2010. This debt relates to the JPT Scarlett Co, Ltd TK and is non‑recourse. AJT (Parent Entity) is therefore only liable up to the realisable value of the investment properties pledged as security, therefore failure to refinance by the due date would not impact the Astro Group’s going concern status. As at the signing of the consolidated financial statements there is no certainty that the refinancing of the $237 million JPT Scarlett Co, Ltd TK debt can be arranged. The Directors nevertheless believe that there are reasonable grounds to expect that the Astro Group will be able to pay its debts as and when they become due and payable because of the potential to refinance existing facilities with new lenders, extend existing loan facilities, or sell investment properties out of the JPT Scarlett Co, Ltd TK portfolio.

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The financial report is presented in Australian dollars.

The financial report is prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative financial instruments) at fair value through profit or loss, other financial instruments, and investment property.

The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Astro Group’s accounting policies. Areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are set out in Note 1(af).

The Astro Group is of a kind referred to in ASIC Class Order 98/100 (as amended) and in accordance with that Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.


66 Annual Report

1. Statement of Significant Accounting Policies (continued)

(b) Business combinationsThe acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Astro Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre‑existing equity interest in the subsidiary. Acquisition‑related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition‑by‑acquisition basis, the Astro Group recognises any non‑controlling interest in the acquiree either at fair value or at the non‑controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non‑controlling interest in the acquiree and the acquisition‑date fair value of any previous equity interest in the acquiree over the fair value of the Astro Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Stapling arrangementOn implementation of the stapling, the acquisition method of accounting was applied to account for the “deemed acquisition” of AJCo by AJT (refer Note 35). AJT recognised goodwill as the difference between (i) the sum of the consideration transferred and any non‑controlling interest and (ii) the acquisition value of the identifiable net assets acquired. Since the Astro Group measures its non‑controlling interest (AJCo) at the proportionate share of AJCo’s identifiable net assets, no goodwill arose. Goodwill arose on the acquisition of the Responsible Entity by AJCo.

The consolidated financial information of the Astro Group incorporates the assets and liabilities of AJT and AJCo from the date of implementation of the stapling. The results of AJCo will be included in the consolidated statements of comprehensive income of the Astro Group from the date of implementation of the stapling. The effects of all transactions between AJCo and other entities within the Astro Group are eliminated in full. The results and equity of AJCo are disclosed separately as a non‑controlling interest in the consolidated statements of comprehensive income and consolidated statements of financial position respectively.

(c) Changes in accounting policyThe accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, apart from the adoption of the following standards, mandatory for annual reporting periods beginning on or after 1 July 2009:

•Segments–newAASB8OperatingSegments

•FinancialStatements–revisedAASB101Presentationoffinancialstatements

•BusinessCombinations–revisedAASB3BusinessCombinations

•FinancialInstruments–revisedAASB7FinancialInstruments:Disclosures

No significant changes to the Astro Group’s financial performance, position or accounting principles have occurred as a result of the application of the new and amended standards above, however the disclosure in the Consolidated Financial Statements has changed. The most significant impacts which have arisen from the application of these standards are as follows:

•AASB8Operating Segments – Operating segments are now reported in a manner consistent with the internal reporting to the chief operating decision‑maker. The chief operating decision‑maker has been identified as the Board of Directors of Astro Japan Property Management Limited as Responsible Entity of AJT.

•AASB101Presentation of financial statements – This standard requires the presentation of a Consolidated Statements of Comprehensive Income and makes changes to the Consolidated Statements of Changes in Equity, but will not affect any of the amounts recognised in the financial statements.

•AASB3Business Combinations (revised) – AJT continues to apply the acquisition method to business combinations with some significant changes including requiring all payments to purchase a business to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the Consolidated Statements of Comprehensive Income. Acquisition‑related costs are

Annual Report 67

expensed as incurred. Non‑controlling interests in an acquiree are recognised either at fair value or at the non‑controlling interest’s proportionate share of the acquiree’s net assets.

•AASB7FinancialInstruments:Additionaldisclosureisrequiredonfairvaluemeasurementsofallfinancialinstruments carried at fair value including disclosure within a three‑level hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and

(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). Enhanced disclosure on liquidity risk is also required, primarily a separate liquidity analysis for derivative and non‑derivative financial liabilities.

(d) Principles of consolidation

(i) The Tokumei Kumiai (TK)The financial information of the Astro Group incorporates the 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, JPT Corporate Co, Ltd, and JPT August Co, Ltd, all Japanese companies (“TK Operators”). These contractual relationships are known under Japanese commercial law as TKs. Under the contractual relationships the Astro Group 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 non‑controlling interests in the consolidated statements of comprehensive income. The 1% of TK retained earnings to which the TK Operator is entitled is shown as non‑controlling interests in the consolidated statements of financial position.

The financial information of the Astro Group incorporates the results of its interests in the TKs from the date on which the TK agreements were signed.

(ii) Transactions eliminated on consolidationIntra‑group balances and transactions are eliminated in preparing the Consolidated Financial Statements.

(e) Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision‑maker. The chief operating decision‑maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Strategic Steering Committee.

(f) Foreign currency(i) Functional and presentation currencyItems 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 AJT’s functional and presentation currency.

(ii) Transactions and balancesTransactions 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 end of the reporting period 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 profit or loss. 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 27a(ii) for details of the Astro Group’s foreign exchange hedging policy.

(iii) Foreign interestThe beneficial interests in the assets and liabilities arising from the TKs and the Associate are translated into Australian currency at rates of exchange current at the end of the reporting period (A$1 = ¥75.71 (2009:A$1 = ¥78.01)), while their income and expenditures are translated at the average of rates ruling during the reporting period (A$1 = ¥80.51 (2009:A$1 = ¥74.04)). Exchange differences arising on translation are taken to the foreign currency translation reserve.


68 Annual Report


(g) Investments in associates accounted for using the equity methodAssociates are all entities over which the Astro Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The Astro Group’s 30% interest in an associate is accounted for in the Consolidated Financial Statements using the equity method of accounting, after initially being recognised at cost. The Astro Group’s investment in Associate includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Astro Group’s share of its Associate’s post‑acquisition profits or losses is recognised in the consolidated statements of comprehensive income, and its share of post‑acquisition movements in reserves is recognised in reserves. The cumulative post‑acquisition movements are adjusted against the carrying amount of the investment.

Dividends receivable from Associate reduce the Astro Group’s carrying amount of the investment.

When the Astro Group’s share of losses in an Associate equals or exceeds its interest in the Associate, including any other unsecured long‑term receivables, the Astro Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the Associate.

Unrealised gains on transactions between the Astro Group and its Associate are eliminated to the extent of the Astro Group’s interest in the Associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the Associate have been changed where necessary to ensure consistency with the policies adopted by the Astro Group.

(h) Derivative financial instrumentsThe Astro Group uses derivative financial instruments to economically hedge its exposure to foreign exchange risk and interest rate risk arising from operating, financing and investing activities.

Derivative financial instruments are recognised at fair value on the date the derivative contract is entered into and subsequently re‑measured 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 Astro Group has designated all 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 profit or loss.

The Astro Group 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 Astro Group 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 is disclosed in Note 27a(ii).

Amounts accumulated in equity are recycled in the Consolidated Statements of Comprehensive Income 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 profit or loss when the forecast transaction is ultimately recognised in the Consolidated Statements of Comprehensive Income. 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 profit or loss.

The cross currency derivative instruments (capital hedge, liability 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 profit or loss.

The fair value of financial instruments that are not traded in an active market is determined using standard market valuation techniques. The Astro Group 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 end of the reporting period.

Annual Report 69

(i) Non‑current assets held for saleNon‑current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use, and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets and investment property that are carried at fair value.

(j) Property, plant and equipmentProperty, plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Astro Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation is calculated using the straight‑line method to allocate their cost over estimated useful lives as follows:

Computer equipment 4 years

Office equipment 1 – 10 years

Fixtures and fittings 1 – 20 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

(k) Investment propertyInvestment properties are properties which are held either to earn rental income or for capital appreciation or for both. Subsequent to the initial recognition of investment properties at cost including transaction costs, 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, which takes place at least at the end of each reporting period, 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 profit or loss.

(l) Intangible assets

(i) GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Astro Group’s share of the net identifiable assets of the acquired subsidiary/Associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.


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(l) Intangible assets (continued)

(ii) IT development and softwareCosts incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll‑related costs of employees’ time spent on the project. Amortisation is calculated on a straight‑line basis over four years.

IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset.

(m) Impairment of assetsGoodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash‑generating units). Non‑financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(n) Cash and cash equivalentsCash and cash equivalents comprise cash at bank, cash on deposit, and cash in trust. Bank overdrafts that are repayable on demand and form an integral part of the Astro Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Consolidated Statements 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.

(o) Contributed equityStapled securities are classified as equity.

Incremental costs directly attributable to the issue of new stapled securities or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new stapled securities or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

If the entity reacquires its own equity instruments, for example, as the result of a security buy‑back, those instruments are deducted from equity and the associated securities are cancelled. No gain or loss is recognised in profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

(p) RevenueRevenues 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 to Note 1(r) for further information.

The Astro Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Astro Group’s activities as described below. The Astro Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

(i) Property rental incomeRental income from investment property is recognised in profit or loss on a straight‑line basis over the term of the lease. Lease incentives granted are recognised as an asset within investment property and amortised over the term of the lease. The amortisation is recorded against property income.

Annual Report 71

Recovery of outgoings as specified in lease agreements is accrued on an estimated basis and adjusted when the actual amounts are invoiced to the respective tenants.

(ii) Disposal of assetsGain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the date of disposal and the net proceeds from disposal and is included in profit or loss in the reporting period of disposal. Revenue obtained from the sale of properties is recognised when the significant risks and rewards have transferred to the buyer on exchange of unconditional contracts.

(iii) Distribution incomeDistribution income is recognised in profit or loss on the date the entity’s right to receive payment is established.

(iv) Financing incomeInterest income is recognised in profit or loss on a time proportionate basis, using the effective interest rate method.

All other revenue is recognised on an accruals basis.

(q) Expenses

(i) Financing costsFinancing costs comprise interest payable on borrowings calculated using the effective interest rate method.

(ii) Responsible Entity’s and Japan Asset Manager’s remunerationIn accordance with AJT’s Constitution, the Responsible Entity and the Japan Asset Manager are entitled to receive an Asset Management Fee. The Asset Management Fee is made up of:

•ABaseFeecomponentwhichisbasedonanAssetBaseFeepaidtotheJapanAssetManagerequalto0.40%per annum of the adjusted gross asset value of the TKs and an AJT Base Fee paid to the Responsible Entity equal to cost recovery. Responsible Entity Base Fees were recognised in profit or loss by the Astro Group up to 7 April 2010, on that date the Astro Group acquired control of the Responsible Entity, refer to Note 35, Responsible Entity Base Fees after that date were eliminated on consolidation.

•APerformanceFeecomponentwhichcomprisesapotentialfeeinrelationtothereturnsofAJT(AJTPerformance Fee), and a potential fee in relation to the returns of AJT’s assets (Asset Management Performance Fee).

The Asset Management Fee payable to the Japan Asset Manager is subject to a payment cap whereby the Asset Management Fee (being the aggregate of the Base Fee and the Performance Fee) paid in any one year must not exceed 0.8% of the adjusted gross asset value of the TKs (includes investment properties at cost). 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 subsequent year to the Japan Asset Manager is less than the 0.8% 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 to the Japan Asset Manager within any year could exceed 0.8% of the adjusted gross asset value of the TKs, particularly after periods where there have been three years of cumulative outperformance.

•AssetManagementPerformanceFeepayabletotheJapanAssetManageriscalculatedintwotiersasfollows:

(a) 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% outperformance; and

(b) 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% outperformance.

•FollowingthestaplinganAJTPerformanceFeeisnolongerpayabletotheResponsibleEntity.HoweveranAJTPerformance Fee is still payable to the Japan Asset Manager. The fee is calculated based on 40% of the performance fee which existed prior to the stapling and is calculated in two tiers as follows:

(a) Tier 1 – 5% of outperformance of the ASX 200 Property Accumulation Index return (Benchmark) (up to 2%) multiplied by total equity of AJT; and

(b) Tier 2 – 15% of outperformance of the Benchmark greater than 2% multiplied by total equity of AJT.


72 Annual Report


(r) Tax

(i) Australian income taxUnder current Australian income tax legislation, the Astro Group is not liable to income tax provided Securityholders are presently entitled to all of the Astro Group’s taxable income at 30 June each year and any taxable gain derived from the sale of an asset is fully distributed to Securityholders. Tax allowances for building, plant and equipment depreciation are distributed to Securityholders in the form of tax deferred components of distributions.

(ii) Japanese withholding taxEffective 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 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 has been made, the TK Operator will make cash distributions to the Astro Group. 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 20%, 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 Astro Group.

(iii) Deferred Japanese taxDeferred 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 the rate which is enacted or substantially enacted in Japan. The relevant tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. The relevant rate currently is 20% (2009: 20%).

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 Astro Group 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.

(s) LeasesThe determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Astro Group as lessee are classified as operating leases (see Note 33). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight‑line basis over the period of the lease.

(t) DistributionsDistributions are paid within three months of each half year end. The half year ends are 30 June and 31 December. Distributions are accrued for when they are declared and no longer at the discretion of the entity.

(u) Goods and services tax and Japanese consumption taxRevenues, 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 Taxation Office (ATO) or Japanese tax authority (tax 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.

Annual Report 73

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 Consolidated Statements of Financial Position.

Cash flows are included in the Consolidated 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.

(v) Trade and other payablesTrade and other payables are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Astro Group, and are stated at cost. Trade accounts payable are normally settled within 60 days.

(w) ProvisionsA provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

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. The increase in the provision due to the passage of time is recognised as interest expense.

(x) Employee benefits

(i) Salaries, sick leave and annual leaveLiabilities for salaries, including non‑monetary benefits, and annual leave expected to be settled within 12 months after the end of the reporting period are provided for in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. Expenses for non‑accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

(ii) Long service leaveThe liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Defined contribution planEmployees’ defined contribution funds receive fixed contributions from Astro Group companies and Astro Group’s legal or constructive obligation is limited to these contributions. Contributions to defined contribution funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payments is available.

(y) Interest bearing debtInterest bearing borrowings are recognised initially at fair value of the consideration received 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 profit or loss over the period of the debt on an effective interest basis.


74 Annual Report


(z) ReceivablesTrade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Astro Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short‑term receivables are not discounted if the effect of discounting is immaterial.

Provision for impairment is booked when there is objective evidence that the Astro Group 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 assets carrying amount exceeds its recoverable amount based on the present value of estimated future cash flows.

The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

(aa) Tenant depositsTenant deposit liabilities are recognised at fair value and classified as current or non‑current based on the obligation to return the deposit to tenants.

(ab) Earnings per stapled securityBasic earnings per stapled security is determined by dividing net profit attributable to the securityholders of the Astro Group by the weighted average number of stapled securities on issue during the reporting period.

Diluted earnings per stapled security is determined by dividing net profit attributable to the securityholders of the Astro Group by the weighted average number of ordinary stapled securities and dilutive potential ordinary stapled securities on issue during the financial year.

(ac) Deferred lease incentiveThe Astro Group, as lessee, recognises the aggregate benefit of incentives as a reduction of rental expense over the lease term, on a straight‑line basis unless another systematic basis is representative of the time pattern of the lessee’s benefit from the use of the leased asset.

(ad) Parent Entity financial informationThe financial information for the Parent Entity, AJT, disclosed in Note 36 has been prepared on the same basis as the Consolidated Financial Statements, except as set out below.

(i) Investments in subsidiaries, associates and joint venture entitiesInvestments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of AJT. Dividends received from associates are recognised in the Parent Entity’s profit or loss, rather than being deducted from the carrying amount of these investments.

(ae) New accounting standards and UIG interpretationsCertain new accounting standards and interpretations have been published that are not mandatory for 30 June 2010 reporting periods. The Astro Group’s assessment of the impact of these new standards and interpretations is set out below.

AASB 9 Financial Instruments and AASB 2009‑11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the Astro Group’s accounting for its financial assets. The standard is not applicable until 1 January 2013

Annual Report 75

but is available for early adoption. The Astro Group is yet to assess its full impact. However, initial indications are that it is unlikely to have a material impact on the Astro Group.

Revised AASB 124 Related Party Disclosures and AASB 2009‑12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment simplifies the definition of a related party. The Astro Group will apply the amended standard from 1 July 2011. When the amendments are applied, the Astro Group will need to disclose any transactions between its subsidiaries and its Associates.

In addition to the above, further amendments to accounting standards have been proposed as a result of the revision of related standards and the Annual Improvement Projects (for non‑urgent changes). These amendments are set out below:

AASB 2009‑5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective for annual periods beginning on or after 1 January 2010);

AASB 2010‑3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB 2010‑4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective for annual periods beginning on or after 1 July 2010/1 January 2011);

AASB 2009‑11 Amendments to Australian Accounting Standards arising from AASB 9 (effective for annual reporting periods beginning on or after 1 January 2013); and

AASB 2009‑12 Amendments to Australian Accounting Standards (effective for annual reporting periods beginning on or after 1 January 2011).

These recently issued or amended standards are not expected to have a significant impact on the amounts recognised in these financial statements when they are restated on application of these new accounting standards.

(af) Use of significant estimates and assumptionsThe Astro Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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 entity and that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Property valuationsThe fair value of investment property has been updated to reflect market conditions at the end of the reporting period. While this represents best estimates as at the end of the reporting period, if investment property is sold in future the price achieved may be higher or lower than the most recent valuation, or higher or lower than the fair value recorded in the consolidated financial statements. Refer to Note 15 for details of key assumptions used by the Astro Group in determining the fair value of its interest in investment properties.

(ii) Deferred Japanese withholding taxAt 30 June 2010, the Astro Group has an unrecognised deferred tax asset relating to investment properties, and, to a lesser extent, interest rate swaps. These balances have not been recognised since they do not meet the recognition criteria under AASB 112 Income Taxes. Astro Group will assess the unrecognised deferred tax asset at future reporting dates, which may result in the deferred tax asset being subsequently recognised.

In recognising the deferred tax asset, management have undertaken an exercise of assessing future Japanese taxable profit. Based on this exercise, management believe it probable that taxable profit will be available against which the deductible temporary difference can be utilised, and in doing so meets the recognition criteria under the relevant accounting standards.

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.


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(af) Use of significant estimates and assumptions(continued)

(iii) Fair value of derivative financial instrumentsThe fair value of derivative assets and liabilities are based on assumptions of future events and involve significant estimates. The basis of valuation for the Astro Group’s derivatives are set out in Note 1(h) of the 30 June 2010 Consolidated Annual Financial Statements. The future fair values of derivatives reported at 30 June 2010 may differ in future reporting periods if there is volatility in market rates, indexes, equity prices or foreign exchanges rates.

(iv) Estimated impairment of goodwillThe Astro Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 1(l)(i). The recoverable amount of goodwill has been determined based on fair value less cost to sell calculations. These calculations require the use of assumptions. Refer to Note 17(a) for details of these assumptions and the potential impact of changes to the assumptions.

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 Astro Group and that are believed to be reasonable under the circumstances.

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

2. Net financing costsFinancing incomeInterest income 285 2,076

Financing costsInterest on borrowings including amortisation of upfront borrowing costs 23,889 30,424

3. Gain/(loss) on derivativesGainNet gain on capital hedges 5,660 –

Net gain on distribution hedges 1,982 –

Net realised gain on foreign exchange derivatives – 70

7,642 70

LossNet loss on capital hedges – (28,434)

Net loss on distribution hedges – (35,538)

Net loss on liability hedge – (1,063)

– (65,035)

Net Gain/(loss) 7,642 (64,965)

The Astro Group is a party to two types of foreign exchange derivatives: cross‑currency swaps (capital hedges) and forward foreign exchange contracts (distribution hedges). At 30 June 2010 the net unrealised fair value loss position of the foreign exchange derivatives is A$28.2 million (30 June 2009: A$28.9 million unrealised fair value loss position).

At the end of the reporting period, the foreign exchange derivative contract contains an early termination and repayment option that can be exercised by either party (i.e. the Astro Group or the external counterparty), a common feature for derivative contracts. The early termination date in those contracts was 15 August 2010 and every year thereafter up to but excluding the actual termination date. The notice period to exercise the early termination option being 5 or 10 business days preceding the early termination date, depending on the particular derivative contract.

Annual Report 77

During April 2010, the Astro Group concluded negotiations with its foreign exchange hedge counterparty regarding its hedging contracts. The key outcome of the negotiations was the waiver of the counterparty’s August 2010 option to terminate in exchange for the early monetisation of the capital hedge instrument due to mature in 2015, significantly de‑risking the group’s hedge book due to the large magnitude and long‑dated nature of that particular instrument. The loss of A$4.8 million realised on this monetisation was cash‑settled from the ¥2,389 million posted as collateral with the counterparty on 12 August 2009. The residual collateral will remain with the counterparty to the extent that any hedging obligations on behalf of the Astro Group remain outstanding.

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

4. Other operating expensesOther operating expenses includes the following:Accounting fees 565 639

Audit fees (refer Note 6) 667 927

Regulatory and registrar costs 250 165

Employee expenses and Directors’ fees 338 –

Defined contribution plan 18 –

Insurance 100 –

Miscellaneous expenses 139 710

Internalisation expenses 226 –

Investor and public relations 121 –

Rent and premises expenses 76 –

Travel and accommodation 60 –

2,560 2,441

5. Income tax benefit/(expense)(a) Income tax expenseCurrent Japanese withholding tax 2,685 12,608

Deferred Japanese withholding tax 3,921 (42,116)

6,606 (29,508)

(b) Reconciliation of tax expenseProfit/(Loss) for the period (105,316) (396,304)

Tax expense/(benefit) at the prima facie Australian tax rate of 30% (31,595) (118,891)

Tax effect of amounts that are not assessable 31,595 118,891

Japanese withholding tax on distributions from TKs 2,685 12,608

Deferred Japanese tax liability on investment properties (2,168) (29,795)

Deferred Japanese tax asset on investment properties 6,089 (12,321)

6,606 (29,508)

Japanese tax expense/(benefit) 6,606 (29,508)

(c) Amounts recognised directly in equityNet deferred tax arising in the reporting period and not recognised in net profit or loss but directly credited to equity 2,219 (2,126)


78 Annual Report

Consolidated

30 Jun 10 30 Jun 09 $ $

6. Auditor’s remunerationAudit services:Auditors of the Astro Group

PricewaterhouseCoopers Australia: – Audit and review of financial reports 418,604 461,942

PricewaterhouseCoopers Japan: – Audit and review of financial reports 247,992 465,497

666,596 927,439

Other services:Auditors of the Astro Group

PricewaterhouseCoopers: – Tax advisory services 83,746 934,158

– Taxation compliance services 253,144 186,606

– Transaction services – 128,125

336,890 1,248,889

Non‑PricewaterhouseCoopers audit firms

Ernst & Young Australia: – Compliance plan audit 20,000 –

– Administration fee 240 –

20,240 –

Total 1,023,726 2,176,328

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

7. Earnings/(losses) per stapled securityBasicanddiluted (20.66¢) (71.94¢)

Profit/(loss) attributable to securityholders of AJT used in calculating basic and diluted earnings per security ($’000) (104,983) (365,642)

Weighted average number of securities used as denominator in calculating basic and diluted earnings per security 508,212,161 508,228,980

The weighted average number of securities used as denominator in calculating basic and diluted earnings/(losses) per securities shown above is based on the number of securities on issue during the period.

The alternative earnings/(losses) per stapled security measure shown below is based upon the profit/(loss) attributable to securityholders of AJT and securityholders of other entities stapling to AJT (non‑controlling interest):

Basicanddiluted (22.02¢) (71.94¢)

Profit/(loss) attributable to securityholders of AJT and securityholders of other entities stapled to AJT used in calculating basic and diluted earnings per security ($’000) (111,922) (365,642)

Weighted average number of securities used as denominator in calculating basic and diluted earnings per security 508,212,161 508,228,980

The weighted average number of securities used as denominator in calculating basic and diluted earnings/(losses) per securities shown above is based on the number of securities on issue during the period.

Annual Report 79

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

8. Cash and cash equivalentsCash at bank1 65,009 120,617

Restricted cash2 55,479 40,428

Cash and cash equivalents in the Consolidated Statements of Cash Flows and the Consolidated Statements of Financial Position 120,488 161,045

1. Cash at bank includes a balance of $42,897,000 retained within the TKs for operational purposes (30 June 2009: $25,634,000).2. Restricted cash includes cash in trust (e.g. tenant security deposits), lender reserves (e.g. cash required under loan agreements for

items such as capital expenditure and repairs) and $26,053,000 (30 June 2009: $nil) of cash posted as collateral with the foreign exchange hedging counterparty.

9. Trade and other receivablesCurrentRent receivable 2,383 2,879

Consumption tax and GST receivable 348 263

Other receivables 1,599 895

4,330 4,037

10. Derivative financial instrumentsCurrent assetsDistribution hedges at fair value 2,374 6,093

2,374 6,093

Current liabilitiesCapital hedges at fair value 30,573 35,002

Interest rate swaps at fair value 1,210 –

31,783 35,002

Non‑current liabilityInterest rate swaps at fair value 18,644 17,295

Refer to Note 27 Financial Risk Management for further details of the risk exposures relating to derivative financial instruments.

11. Other assetsCurrentPrepayments 1,431 1,022

Non‑currentPrepayments 1,427 1,745

Other non‑current assets 198 –

1,625 1,745


80 Annual Report

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

12. Other financial assetsCurrentInvestment in convertible note – related party – 12,900

Total other financial assets – 12,900

At 30 June 2009 the BBJPML Holding Trust, which was a consolidated related party entity beneficially owned by the securityholders of AJT, held a convertible note issued by the Responsible Entity which was acquired by AJCo on 12 November 2009. The value of the convertible note increased to $20,707,000 as a result of a finalisation adjustment of $307,000 and an additional subscription of $7,500,000 prior to the convertible note being exercised on 7 April 2010. Following the conversion, AJCo became the holder of 100% of the issued share capital of the Responsible Entity.

13. Deferred taxes(a) Deferred tax assetsThe balance comprises temporary differences attributable to:

Interest rate swaps 163 2,513

Investment properties 10,892 16,549

11,055 19,062

Movements:

Opening balance at beginning of year 19,062 4,983

(Debited)/Credited to equity (1,918) 1,758

(Debited)/Credited to the Consolidated Statements of Comprehensive Income (6,089) 12,321

Closing balance at the end of the year 11,055 19,062

Deferred tax expected to be recovered within 12 months 3,907 –

Deferred tax expected to be recovered after more than 12 months 7,148 19,062

(b) Deferred tax liabilitiesThe balance comprises temporary differences attributable to:

Investment properties 6,796 8,829

Interest rate swaps – –

6,796 8,829

Movements:

Opening balance at beginning of year 8,829 38,992

Debited/(Credited) to equity 135 (368)

(Credited) to the Consolidated Statements of Comprehensive Income (2,168) (29,795)

Closing balance at the end of the year 6,796 8,829

Deferred tax expected to be settled within 12 months – –

Deferred tax to be settled after more than 12 months 6,796 8,829

At 30 June 2010, the Astro Group has an unrecognised deferred tax asset of $54,927,000 relating to investment properties and interest rate swaps. These balances have not been recognised since they do not meet the recognition criteria under AASB 112 Income Taxes. The Astro Group will assess the unrecognised deferred tax asset at future reporting dates, which may result in the deferred tax asset being subsequently recognised.

In recognising the $11,055,000 of deferred tax asset, management have undertaken an exercise of assessing future Japanese taxable profit. Based on this exercise, management believe it probable that taxable profit will be available against which the deductible temporary difference can be utilised, and in doing so meets the recognition criteria under the relevant accounting standards.

Annual Report 81

Consolidated

Principal Ownership 30 Jun 10 30 Jun 09 Name of company Activity interest $’000 $’000

14. Investments in Associate accounted for using the equity methodCarrying amountsSpring Investment Co, Ltd. Asset Management 30% 6,094 6,566

On 16 April 2009, as part of the implementation of the internalisation of AJT’s management rights, BBJPML Holding Trust, which was a consolidated related party entity beneficially owned by the securityholders of AJT, entered into a TK Agreement with, and made a subsequent TK investment in, the Japan Asset Manager and thereby obtained an initial 30% economic interest in the Japan Asset Manager. AJCo subsequently acquired the economic interest from the BBJPML Holding Trust at the time of the stapling on 12 November 2009. The initial interest is 30%, reducing to 25% over time as the preferred entitlement is paid down. Preferred entitlement refers to a preferred distribution commencing 1 January 2012 from the Japan Asset Manager, capped at $1,154,000 (¥90 million at the reporting date exchange rate) per year, payable until a total of $4,025,000 (¥314 million at the reporting date exchange rate) has been paid. The Group’s economic interest in the Japan Asset Manager may also vary to the extent to which it participates in any future capital raising by the Japan Asset Manager.

The Japan Asset Manager is incorporated in Japan and has a 31 December reporting date.

The share of the Associate’s profit recognised is calculated as the lower of the 100% of the net profit of the TK or 30% of the adjusted net profit of the TK (calculated by adding back the bonus expense for the period).

Movements in carrying amountsCarrying amount at the beginning of the financial period 6,566 –

Acquisition of investment – 5,733

Share of net profit of Associate (578) 878

Effect of changes in exchange rates (560) (45)

Distribution received (271) –

Return of capital – preferred entitlement paid down (413) –

Additional investment 1,350 –

6,094 6,566

Share of Associate’s profits¹Income 12,929 1,199

Expenses (13,507) (321)

Share of Associate’s net profit recognised (578) 878

1. The above summary of financial performance represents 100% of the Associate’s income and expenses.

Summarised financial position of Associate²Current assets 434 5,065

Non‑current assets 9,827 9,005

Total assets 10,261 14,070

Current liabilities 227 1,778

Non‑current liabilities – –

Total liabilities 227 1,778

Net assets as reported by Associate 10,034 12,292

2. The above summary of financial position of Associate represents 100% of the Associate’s assets and liabilities.


82 Annual Report

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

15. Investment propertiesInvestment properties at fair value 1,504,995 1,607,957

(a) ReconciliationReconciliation of the carrying amount of investment properties is set out below:

Carrying amount at the beginning of the year 1,551,177 1,630,911

Transfer to non‑current asset held for sale – (56,780)

Capital expenditure 5,500 4,149

Disposals – (179,200)

Change in fair value of investment properties (139,450) (372,184)

Foreign currency translation differences 42,200 524,281

Carrying amount of non‑current investment property at the end of the year 1,459,427 1,551,177

Investment property held for sale at the beginning of the year 56,780 –

Transferred from non‑current investment property – 56,780

Change in fair value of investment properties (11,212) –

Investment property held for sale at the end of the year 45,568 56,780

Total investment properties at fair value 1,504,995 1,607,957

Since 30 June 2009 an active programme of marketing the Kokusai Nihombashi building for sale has been underway. At 25 August 2010 the programme was still active. To reflect this, the carrying value of this property has been reclassified to a current asset in the Consolidated Statements of Financial Position.

(b) Amounts recognised in net profit for investment propertyProperty rental income 117,725 156,063

Property expenses (35,299) (44,042)

82,426 112,021

(c) Valuation basisThe 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 Japanese Licensed Real Estate Appraisers. Further detail is provided in Note 1 “Statement of Significant Accounting Policies”.

At the reporting date the key assumptions used by the Astro Group in determining fair value were in the following ranges for the Astro Group’s portfolio of properties: 2010 2009

Discount rate 4.70% – 6.80% 4.50% – 6.90%

Terminal yield 4.90% – 7.50% 4.90% – 7.30%

Capitalisation rate 4.70% – 7.50% 4.70% – 7.10%

Vacancy rate 0.00% – 32.00% 0.00% – 15.00%

The above assumptions have been taken from the independent valuation reports for the relevant period.

(d) Assets pledged as securityRefer to Note 23 for information on assets pledged as security.

(e) Beneficial interestThe Astro Group holds interests in the investment properties arising from the contractual relationship between AJT and the TK Operator. The beneficial legal ownership of the investment properties is held in the name of the TK Operator.

Annual Report 83

Computer Office Fixtures equipment equipment and fittings Total $’000 $’000 $’000 $’000

16. Property, plant and equipment

ConsolidatedThe Astro Group held no PP&E at 30 June 2008, nor at any time in the year ended 30 June 2009.

Period ended 30 June 2010Opening net book amount – – – –

PP&E acquired in business combinations 61 16 13 90

Additions 6 – – 6

Disposals – – – –

Depreciation (4) (1) – (5)

Closing net book amount 63 15 13 91

At 30 June 2010Cost 67 16 13 96

Accumulated depreciation (4) (1) – (5)

Net book amount 63 15 13 91

Software Goodwill Total $’000 $’000 $’000

17. Intangible assets

ConsolidatedThe Astro Group held no intangible assets at 30 June 2008, nor at any time in the year ended 30 June 2009.

Year ended 30 June 2010Opening balance – – –

Goodwill resulting from business combinations – 15,000 15,000

Internal development costs acquired through business combinations 17 – 17

Additions – internal development 31 – 31

Impairment charge – (7,000) (7,000)

Amortisation charge (2) – (2)

Closing net book amount 46 8,000 8,046

At 30 June 2010Cost 48 15,000 15,048

Accumulated amortisation and impairment (2) (7,000) (7,002)

Net book amount 46 8,000 8,046

Refer to Note 35 Business Combinations for further explanation of how the goodwill arose.

(a) Impairment test for goodwillGoodwill is the value attributed by the Board for the value of AJT’s Australian management rights acquired from the Babcock & Brown Group. All of the $15,000,000 goodwill is attributable to the Astro Group’s investment in AJPML.

Management have deemed it appropriate to impair goodwill by $7,000,000 to a carrying value of $8,000,000 to reflect a decrease in the calculated fair value of the goodwill, driven by the value of the Astro Group’s investment properties falling over 9.5% during the period, reducing the adjusted gross asset value and uncertainty over the ability to refinance certain asset‑specific loans due to mature in August 2012.


84 Annual Report

17. Intangible assets (continued)The recoverable amount of the goodwill is based on fair value less costs to sell calculated on a net present value basis. AJPML operates on a cost recovery basis and is forecast to make $nil profit for the foreseeable future. To calculate the net present value of goodwill the management of the Astro Group has adopted a methodology which assumes a “market” level of base fee income to arrive at a theoretical recurring profit after tax level and then calculates the net present value based on a discount rate of 12%. This rate is based upon the 10‑year risk‑free rate plus an equity risk premium. The theoretical “market” value of base fees (27.5bps) to calculate the value of goodwill is based upon a reasonable market rate for Responsible Entity fees as evidenced in the market. Budgeted cash flows are projected over a 10‑year period as management fees are assumed to be receivable for at least that time period. The valuation also assumes a further 5% drop in the gross asset value in financial year 2011, followed by growth in the adjusted gross asset value of 5% per annum based on a long‑term growth trend adjusted for future divestments and an increase in AJPML’s overheads of 2.5% per annum based upon budgeted figures.

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

18. PayablesCurrentProperty rental income received in advance 9,942 8,830

Interest payable 4,290 3,784

Fees payable to related parties (refer to Note 32) 70 2,880

Accruals and accounts payable 7,682 7,045

Net consumption tax payable – 1,593

21,984 24,132

19. ProvisionsAnnual leave accrual 31 –

The entire annual leave obligation is presented as current as the Astro Group does not have an unconditional right to defer settlement. However, based on past experience, the Astro Group does not expect all employees to take the full amount of accrued leave within the next 12 months.

20. Deferred lease incentiveCurrent 3 –

Non‑current 18 –

21 –

The Astro Group received the benefit of an initial rent‑free period upon signing the lease for the office premises in Sydney. This lease incentive benefit has been deferred and is being recognised over the term of the 5‑year lease. The aggregate benefit of the lease incentive is recognised as a reduction of rental expense over the term of the lease.

Movements in the deferred lease incentive during the financial period are set out below: Deferred lease incentive 30 Jun 10 $’000

Carrying amount at start of year –

Acquired in business combinations 27

Charged/(credited) to profit or loss:

Amounts used during the period (6)

Carrying amount at end of year 21

Annual Report 85

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

21. Distribution paid and payableInterim distribution paid 17,787 20,328

Final distribution payable at year end 17,787 25,411

35,574 45,739

Ordinary unitsFinal distribution for the year ended 30 June 2010 of 3.50 cents per security (2009: 5.00 cents) payable on or around 30 August 2010 (2009: 28 August 2009).

Interim distribution for the year ended 30 June 2010 of 3.50 cents per security (2009: 4.00 cents) paid on 26 February 2010 (2009: 27 February 2009).

22. Current tax liabilitiesJapanese withholding tax 1,456 7,239

23. Interest‑bearing loans and borrowingsCurrentSecured bank loans 246,177 226,725

Non‑currentSecured bank loans 881,089 889,439

Secured bank loans are denominated in JPY and are interest‑only loans with principal repayable on maturity and a weighted average term to expiry of 2.2 years (2009: 2.5 years). After interest rate swaps, 57.16% (2009: 72.41%) of the loans are fixed at a rate of 2.40% p.a. (2009: 2.15% p.a.), with the remaining 42.84% (2009: 27.59%) floating debt with a current rate of 1.54% p.a. (2009: 1.50% p.a.), refer to Note 27 for analysis of bank loan maturities.

On 22 March 2010 the Astro Group reached an agreement with the lender of one of its asset‑specific loans to revise the Loan to Value covenant threshold from 78% to 80% following the one‑time partial repayment of ¥720 million (approx. A$9 million), and from October 2010, the quarterly principal repayments of ¥125 million (approx. A$1.5 million). At 30 June 2010 the Loan to Value ratio on this loan was 78.4%.

On 29 March 2010 the Astro Group completed the refinancing of a senior loan due to mature in March 2010, with the closing of a new, five year, senior loan of ¥13.4 billion (approx. A$160 million).

(a) Assets pledged as securityThe bank loans are secured by pledge over the investment properties. The bank loans are non‑recourse and the Astro Group is not liable to make up the deficit between net liabilities and the loan amount.

The carrying amount of assets pledged as security for non‑current interest bearing debt are:

Investment properties at fair value 1,504,995 1,607,957

(b) Financing facilitiesThe Astro Group has access to the following lines of credit:

Secured bank loans 1,127,266 1,116,164

Total facilities available 1,127,266 1,116,164

Facilities utilised at reporting date 1,127,266 1,116,164


86 Annual Report

Consolidated

30 Jun 10 30 Jun 09 No. of Units No. of Units

24. Contributed equity508,212,161 securities on issue (2009 – 508,212,161) 508,212,161 508,212,161

Movements in number of securitiesNumber at beginning of financial year 508,212,161 508,672,564

Securities bought back on‑market and cancelled – Jun 08 – 21 Nov 08 – (460,403)

Number at end of financial year 508,212,161 508,212,161

30 Jun 10 30 Jun 10 30 Jun 10 30 Jun 09 $’000 $’000 $’000 $’000

Stapled securityholders’ AJT interest Total Total

Movements in contributed equityBalance at beginning of financial year 614,950 – 614,950 615,276

AJT capital reduction (26,441) – (26,441) –

Shares in AJCo issued during stapling – 26,441 26,441 –

On‑market buy‑back – – – (326)

Balance at end of financial year 588,509 26,441 614,950 614,950

The Astro Group’s securities are classified as equity and issue costs are recognised as a reduction of the proceeds of issues.

In accordance with the Constitution of each of AJT and AJCo each securityholder is entitled to receive distributions as declared from time to time. In accordance with AJT’s Constitution, each security in AJT represents a right to an individual security in AJT and does not extend to a right to the underlying assets of the AJT.

It is generally expected that General Meetings of securityholders of AJT and General Meetings of securityholders of AJCo will be held concurrently where proposed resolutions relate to the two entities. Voting rights of securityholders at General Meetings are outlined below.

At General Meetings of securityholders of AJT:

•onashowofhandseachsecurityholderwhoispresentinpersonandeachotherpersonwhoispresentasa proxy, attorney or duly appointed corporate representative of a securityholder has one vote; and

•onapoll,eachsecurityholderwhoispresentinpersonhasonevoteforeachdollarofthevalueofsecuritiesin AJT held by the securityholder. Also, each person present as proxy, attorney or duly appointed corporate representative of a securityholder has one vote for each dollar of value of the securities in AJT held by the securityholder that the person represents.

At General Meetings of securityholders of AJCo:

•onashowofhandseachsecurityholderwhoispresentinpersonandeachotherpersonwhoispresentas a proxy, attorney or duly appointed corporate representative of a securityholder has one vote; and

•onapoll,eachsecurityholderwhoispresentinpersonhasonevoteforeachsecuritytheyhold.Also,eachperson present as a proxy, attorney or duly appointed corporate representative of a securityholder has one vote for each security held by the securityholder that the person represents.

Annual Report 87

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

25. ReservesForeign currency translation reserve 130,555 121,499

Hedging reserve – cash flow hedges (19,839) (15,402)

110,716 106,097

Consolidated

Stapled External securityholders’ non‑controlling AJT interest interests Total Note $’000 $’000 $’000 $’000

Foreign currency translation reserveBalance at 1 July 2008 (114,220) – – (114,220)

Net foreign exchange translation adjustments, net of tax 235,719 – – 235,719

Balance at 30 June 2009 121,499 – – 121,499

Balance at 1 July 2009 121,499 – – 121,499

Net foreign exchange translation adjustments, net of tax 9,662 (606) – 9,056

Balance at 30 June 2010 131,161 (606) – 130,555

The translation reserve comprises all foreign exchange differences arising from the translation of the interests in foreign operations, where their functional currency is different to the presentation currency of the reporting entity.

Hedging reserveBalance at 1 July 2008 (780) – – (780)

Revaluation (16,748) – – (16,748)

Deferred tax recognised directly in equity 2,126 – – 2,126

Balance at 30 June 2009 (15,402) – – (15,402)

Balance at 1 July 2009 (15,402) – – (15,402)

Revaluation (2,218) – – (2,218)

Deferred tax recognised directly in equity (2,219) – – (2,219)

Balance at 30 June 2010 (19,839) – – (19,839)

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 affects profit and loss.

Total Balance at 30 June 2009 106,097 – – 106,097

Balance at 30 June 2010 111,322 (606) – 110,716


88 Annual Report

Consolidated

Stapled External securityholders’ non‑controlling AJT interest interests Total Note $’000 $’000 $’000 $’000

26. Retained profits/(losses)Balance at 1 July 2008 172,124 – 1,810 173,934

Net profit/(loss) for the year (365,642) – (1,154) (366,796)

Adjustment for non‑controlling interest of movement in reserves 146 – (146) –

Distributions paid and payable to stapled securityholders (45,739) – – (45,739)

Distributions paid and payable to non‑controlling interests – – (510) (510)

Balance at 30 June 2009 (239,111) – – (239,111)

Balance at 1 July 2009 (239,111) – – (239,111)

Net profit/(loss) for the year (104,983) (6,939) – (111,922)

Adjustment for non‑controlling interest of movement in reserves 44 – (44) –

Distributions paid and payable to stapled securityholders (35,574) – – (35,574)

Distributions paid and payable to non‑controlling interests – – (127) (127)

Balance at 30 June 2010 (379,624) (6,939) (171) (386,734)

27. Financial risk managementThe Astro Group’s principal financial instruments comprise cash, receivables, derivative financial instruments, convertible note, payables, tenant deposits, distributions payable and interest bearing debt.

The Astro Group’s activities are exposed to a variety of financial risks: market risk (including currency risk, interest rate risk, and equity price risk), credit risk and liquidity risk.

This note presents information about the Astro Group’s exposure to each of the above risks, the Astro Group’s objectives, policies and processes for measuring and managing risk and the Astro Group’s management of capital. Further quantitative disclosures are included through these Consolidated Financial Statements.

The Astro Group Boards have overall responsibility for the establishment and oversight of the Astro Group’s risk management framework. The Boards have established an Audit, Risk & Compliance Committee (ARCC), which is responsible for monitoring the identification and management of key risks to the business. The ARCC meets regularly and reports to the Boards on its activities.

The Board has established Treasury Guidelines outlining principles for overall risk management and policies covering specific areas, such as mitigating foreign exchange, interest rate and liquidity risks.

The Astro Group’s Treasury Guidelines provides a framework for managing the financial risks of the Astro Group with a key philosophy of risk mitigation. Derivatives are exclusively used for hedging purposes, not as trading or other speculative instruments. The Astro Group uses derivative financial instruments such as foreign exchange contracts, cross‑currency swaps and interest rate swaps to hedge certain risk exposures.

The Astro Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange risks, ageing analysis for credit risk and cash flow forecasting for liquidity risk.

Until recently the Astro Group has had a policy of hedging substantially all anticipated JPY distributions back to AUD, however the Board views the benefits of this policy – providing medium‑term predictability as to the AUD level of distributions despite short‑term exchange rate movements – to have been outweighed by market uncertainty as to potential hedge terminations. The Board continues to review the hedging policy to achieve a balance between these considerations. The Astro Group retains a guideline of hedging substantially all anticipated JPY distributions back to AUD – providing short‑to‑medium‑term predictability of the AUD level of distributions regardless of short‑term

Annual Report 89

exchange rate movements, The Board continues to review the hedging guidelines to serve this objective despite the difficulties associated with managing potential hedge terminations on unfavourable terms.

On 12 August 2009 the Astro Group posted ¥2,389,000,000 in cash as collateral with the hedging counterparty. The collateral will remain with the counterparty to the extent that any hedging obligations on behalf of the Astro Group remain outstanding. On 30 April 2010 the Astro Group partially terminated its capital hedge portfolio, reducing the capital amount hedged by approximately 22%, resulting in a net cash loss of approximately $4.8 million, which was funded from cash previously posted as collateral with the foreign exchange hedge counterparty, with ¥1,972,000,000 remaining as collateral. The counterparty also waived its August 2010 option to terminate the remaining capital hedge portfolio.

There have been no other significant changes in the types of financial risks or the Astro Group’s risk management programme (including methods used to measure the risks) since the prior year.

(a) Market riskMarket risk refers to the potential for changes in the value of the Astro Group’s financial instruments or revenue streams from changes in market prices. There are various types of market risks to which the Astro Group is exposed including those associated with interest rates, currency rates and equity market price.

(i) Interest rate riskInterest rate risk refers to the potential fluctuations in the fair value or future cash flows of a financial instrument because of changes in market interest rates.

As at reporting date, the Astro Group had the following interest bearing assets and liabilities:

30 June 2010 30 June 2009

Weighted avg Weighted avg interest rate Balance interest rate Balance % $’000 % $’000

AssetsCash and cash equivalents

– Balances held in Australia 0.92% 32,130 2.93% 4,476

– Balances held in Japan 0.04% 88,358 0.04% 156,569

Total cash and cash equivalents 120,488 161,045

LiabilitiesInterest bearing debt

– fixed – – 1.30% 182,812

– floating 1.40% 1,135,769 1.57% 939,627

Total interest bearing debt 1.40% 1,135,769 1.53% 1,122,439

Interest rate risk managed by:

– Fixed debt – – 1.30% (182,812)

– Interest rate swaps (notional principal amount) 1.56% (649,176) 1.57% (629,958)

Total interest rate risk management 1.56% (649,176) 1.51% (812,770)

Total exposure to cash flow interest rate risk 1.19% 486,593 1.50% 309,669

An analysis of maturities is provided in Note 27(c).

The Astro Group’s interest rate risk primarily arises from external borrowings. The Astro Group’s guidelines are to fix interest rates for between 50% to 100% of its borrowings.

The Astro Group manages its interest rate risk by using fixed rate debt, or interest rate swaps to fix interest rates. Interest rate swaps have the economic effect of converting variable rate borrowings to fixed rates. Under the interest rate swaps the Astro Group 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. The Astro Group is willing to forgo the potential economic benefit that could result in a falling interest rate environment to protect its downside risks and improve the predictability of cash flows generated from assets by fixing rates.


90 Annual Report

27. Financial risk management (continued)

(a) Market risk (continued)Swaps are currently in place over approximately 57% (2009: 67%) of the TKs floating rate borrowings and have an average term to expiry of 2.3 years (2009: 3.3 years). The fixed interest rates are between 1.21% and 2.17% (2009: between 1.53% and 3.37%) and the variable rates are between 0.84% and 2.26% (2009: 1.15% to 1.95%).

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 2010 is $19,853,000 non‑current liability (30 June 2009: $17,295,000).

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 profit or loss.

Interest rate sensitivity

Astro Group SensitivityAt reporting date, if Australian interest rates had been 50bps higher/lower and all other variables were held constant, the impact on the Astro Group would be:

Increase by 50bps Decrease by 50bps

2010 2009 2010 2009 $’000 $’000 $’000 $’000

Net profit/(loss)Capital hedge (1,346) (2,388) (1,374) 2,452

Impact on total net profit/(loss) (1,346) (2,388) (1,374) 2,452

Impact on other components of equity – – – –

At reporting date, if Japanese interest rates had been 20bps higher/lower and all other variables were held constant, the impact on the Astro Group would be:

Increase by 20bps Decrease by 20bps

2010 2009 2010 2009 $’000 $’000 $’000 $’000

Net profit/(loss)Capital hedge 840 1,422 (847) (1,438)

Liability hedge – – – –

Interest bearing debt (973) (619) 973 619

Impact on total net profit/(loss) (133) 803 126 (819)

Interest rate swap 2,960 4,019 (2,993) (4,066)

Impact on other components of equity 2,960 4,019 (2,993) (4,066)

(ii) Currency riskThe Astro Group’s principal activity is investing in interests in Japanese real estate. As a result, the Astro Group is exposed to currency risk with respect to movements in the AUD/JPY exchange rate.

Currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Astro Group’s functional currency, AUD, and from net investments in foreign operations. The risk is measured using cash flow forecasting and sensitivity analysis.

The Astro Group seeks to mitigate the effect of currency exposure on the Consolidated Statements of Financial Position by borrowing in JPY.

Capital hedgesWith respect to the equity capital of the Astro Group, the previous Treasury policy has been to arrange cross‑currency interest rate swap hedges equivalent to between 20%‑40% of its net investment in Japanese assets (2009: 20%‑40%), over periods of between four and six years. Under the revised Treasury policy, hedging is to be undertaken for a maximum individual term of 10 years with no minimum proportion of the Astro Group’s net investment in JPY‑denominated assets.

Annual Report 91

At balance date the Astro Group had cross currency interest rate swap hedges of $89,330,000 (2009: $114,000,000) with staggered settlement dates between August 2011 and August 2016. Interest is paid at six monthly intervals. Astro Group sell Average Australian Japanese Maturity ¥’000 exchange rate interest rate interest rate

2010One – five years 7,600,000 101.9 7.34% 1.42%

Greater than five years 1,500,000 101.9 7.08% 1.69%

2009One – five years 5,300,000 101.9 7.39% 1.37%

Greater than five years 6,300,000 101.9 7.15% 1.60%

These capital hedging arrangements are economic hedges and do not qualify for hedge accounting. Their fair value at 30 June 2010 is $30,573,000 current liability (30 June 2009: $35,002,000).

Distribution hedgesThe Astro Group has adopted guidelines of arranging foreign exchange forward hedges on a rolling basis equivalent to the following percentages of forecast distributable income from the TKs:

Year 1 25% to 100% Years 2–3 25% to 75% Years 4–10 0% to 50%

At balance date the details of outstanding balances are: Average AJT sell exchange Maturity ¥’000 rate

2010Less than one year 2,433,582 68.0

One – five years – –

2009Less than one year 1,951,915 66.3

One – five years 2,678,582 68.4

These distribution hedging arrangements are economic hedges and do not qualify for hedge accounting. Their fair value at 30 June 2010 is $2,374,000 current asset (30 June 2009: $6,093,000).

At reporting date if the AUD/JPY foreign exchange rate had been 10% higher/lower and all other variables were held constant, the impact on the Astro Group would be:

Increase by 10% Decrease by 10%

2010 2009 2010 2009 Consolidated $’000 $’000 $’000 $’000

Net profit/(loss)Capital hedge 11,702 14,300 (14,281) (17,493)

Distribution hedges 3,037 5,620 (3,723) (6,924)

Impact on total net profit/(loss) 14,739 19,920 (18,004) (24,417)

Impact on other components of equity – – – –


92 Annual Report


(b) Credit riskCredit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

Exposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

Cash and other cash equivalents 120,488 161,045

Trade and other receivables 4,330 4,037

Derivative financial instruments – current 2,374 8,310

Investment in convertible note – related party – 12,900

127,192 186,292

Where entities have a right of set‑off and intend to settle on a net basis under netting arrangements, this set‑off has been recognised in the Consolidated Financial Statements on a net basis. Details of the Astro Group’s contingent liabilities are disclosed in Note 28.

Trade and other receivables consist of rent, consumption tax, GST, distributions and other receivables. At balance date 8% (2009: 5.5%) of the Astro Group’s receivables were due from Japanese and Australian tax authorities in respect of consumption tax and GST.

At balance date there were no other significant concentrations of credit risk.

The Astro Group does not have any significant credit risk exposure to a single tenant. Initial and ongoing credit evaluation is performed on the financial condition of tenants and, where appropriate, an allowance for doubtful receivables is raised. No allowance has been recognised for the consumption tax, GST and distribution receivable from the taxation authorities and related parties respectively. Based on historical experience, there is no evidence of default from these counterparties which would indicate that an allowance was necessary.

The Astro Group is also exposed to credit risk arising from transactions in cross‑currency swaps, interest rate swaps and foreign exchange contracts. The Treasury Guidelines outline the counterparty credit risk management policy, including limits per financial institution. Derivative counterparties and cash transactions are limited to financial institutions that meet minimum credit rating criteria in accordance with guidelines.

Impairment lossesThe ageing of trade and other receivables at reporting date is detailed below:

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

Not past due 3,763 2,670

Past due 0–30 days 471 899

Past due 31–60 days 28 420

Past due 61+ days 68 48

Total 4,330 4,037

Tenants pay rent in accordance with agreed payment terms, which is generally one month in advance. Trade and other receivables have been aged according to their due date in the above ageing analysis. Based on past experience, the Astro Group believes that no impairment allowance is necessary in respect of rent receivables not past due and past due. The rent receivables past due are not significant and the Astro Group holds security for the rent receivables in the form of a right of set‑off against the liability for tenant deposits in the event a tenant defaults.

Annual Report 93

(c) Liquidity riskThe Astro Group manages liquidity risk by maintaining sufficient cash including working capital and other reserves.

The following are the undiscounted contractual cash flows of derivatives and non‑derivative financial liabilities shown at their nominal amount.

Consolidated $’000 – 2010

Less than 1 to 2 2 to 5 More than Contractual Carrying 1 year years years 5 years cash flows amount

Non‑derivative financial liabilitiesPayables (21,984) – – – (21,984) (21,984)

Tenant deposits (37,405) (10,116) (19,014) (29,294) (95,829) (95,829)

Distribution payable (17,787) – – – (17,787) (17,787)

Current tax liabilities (1,456) – – – (1,456) (1,456)

(78,632) (10,116) (19,014) (29,294) (137,056) (137,056)

Interest bearing debtPrincipal (243,252) (217,034) (675,484) – (1,135,770) –

Interest (14,969) (13,760) (12,362) – (41,091) –

(258,221) (230,794) (687,846) – (1,176,861) (1,127,266)

Non‑current derivative financial instruments (assets and liabilities)Net settled (interest rate swaps) (5,494) (4,062) (10,064) (3,853) (23,473) (18,644)

Current derivative financial instruments (assets and liabilities)Gross settled

– Inflow 42,284 20,689 69,674 16,288 148,935 –

– Outflow (33,904) (1,633) (72,849) (50,694) (159,080) –

8,380 19,056 (3,175) (34,406) (10,145) (29,408)

The Astro Group has $237,519,000 of Japanese debt due to mature in December 2010, the second tranche of property level debt to do so since the inception of AJT, following the first refinance completed in March 2010. Refer Note 1(a) for detail of negotiations on the refinance of this debt.


Less than 1 to 2 2 to 5 More than Contractual Carrying 1 year years years 5 years cash flows amount

Non‑derivative financial liabilitiesPayables (24,132) – – – (24,132) (24,132)

Tenant deposits (45,699) (2,220) (25,895) (30,605) (104,419) (104,419)

Distribution payable (25,411) – – – (25,411) (25,411)

Current tax liabilities (7,239) – – – (7,239) (7,239)

(102,481) (2,220) (25,895) (30,605) (161,201) (161,201)

Interest bearing debtPrincipal (226,906) (186,394) (709,139) – (1,122,439) –

Interest (16,568) (13,413) (14,560) – (44,541) –

(243,474) (199,807) (723,699) – (1,166,980) (1,166,164)

Non‑current derivative financial instruments (assets and liabilities)Net settled (interest rate swaps) (4,901) (3,905) (8,600) (5,388) (22,794) (17,294)

Current derivative financial instruments (assets and liabilities)Gross settled

– Inflow 37,726 47,435 73,098 69,579 227,838 –

– Outflow (27,243) (36,556) (73,739) (83,042) (220,580) –

10,483 10,879 (641) (13,463) 7,258 (28,929)


94 Annual Report


(d) Capital risk managementThe Astro Group maintains its capital structure with the objective to safeguard its ability to continue as a going concern, to increase the returns for Securityholders and to maintain an optimal capital structure. The capital structure of the Astro Group consists of interest bearing debt, as listed in Note 23, and equity as listed in Note 24. The analysis of each of these categories of capital is provided in these Notes.

To achieve the optimal capital structure, the Board may use the following strategies: amend the distributions policy of the Astro Group; issue new securities through a private or public placement; introduce a Distribution Reinvestment Plan (DRP); issue securities under a Security Purchase Plan (SPP); conduct an on‑market buyback of securities; acquire debt; and dispose of investment properties.

The Astro Group targets gearing (interest bearing debt/investment properties) within a long‑term target range of 50% to 60%. At 30 June 2010 the gearing ratio is 75.5% (30 June 2009: 69.4%), the increase a result of the investment property devaluations during the year. The Board is actively seeking methods to reduce the gearing to within its preferred long‑term target range.

The weighted average interest rate of the Astro Group’s debt was 2.03% at 30 June 2010 (30 June 2009: 1.97%).

The Astro Group operates under conservative interest rate hedging guidelines, which require interest rates to be fixed for between 50% to 100% of debt. As at 30 June 2010 the average duration of interest rate hedging was 2.3 years (30 June 2009: 3.3 years).

Other than described above, there were no further changes in the Astro Group’s approach to capital management during the year.

(e) Fair values or financial assets and liabilities

Fair valuesThe carrying amount of all financial assets and liabilities recognised are not materially different from the fair values.

The following methods and assumptions are used to determine the Net Fair Values of Financial Assets and Liabilities.

Recognised financial instruments

Cash and cash equivalents, trade and other receivables and payablesThe carrying amount represents fair value because their short‑term to maturity means no discounting is required.

Interest‑bearing liabilitiesThe Astro Group’s financial assets and liabilities included in current and non‑current liabilities on the Consolidated Statements of Financial Position are carried at amounts that approximate fair value.

Investments and securitiesFor financial instruments traded in organised financial markets, fair value is the current quoted market bid price for an asset or offer price for a liability. For investments where there is no quoted market price, a reasonable estimate of the fair value is determined by reference to the current market value of another instrument which is substantially the same or is calculated based on a discounted cash flow valuation method or the underlying net asset base of the investment/security.

Derivative financial instrumentsThe fair value of interest rate swaps and cross‑currency swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward exchange market rates. This value is then discounted back to period end date. The fair value of derivative equity contracts is determined based on the current quoted market bid price.

Annual Report 95

As of 1 July 2009, the Astro Group has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The following tables present the Astro Group’s assets and liabilities measured and recognised at fair value at 30 June 2010. Comparative information has not been provided as permitted by the transitional provisions of the new standard.


Level 1 Level 2 Level 3 Total

AssetsAssets at fair value through profit or loss

Distribution hedges – 2,374 – 2,374

Total assets – 2,374 – 2,374

LiabilitiesLiabilities at fair value through profit or loss

Capital hedges – 30,573 – 30,573

Liabilities at fair value through reserves

Interest rate swaps – 19,854 – 19,854

Total liabilities – 50,427 – 50,427

28. Contingencies

Contingent AssetsIn the opinion of the Directors of the Responsible Entity there were no contingent assets at end of the reporting period.

Contingent LiabilitiesIn the opinion of the Directors of the Responsible Entity there were no contingent liabilities at end of the reporting period, other than those disclosed in the Parent Entity financial information at Note 36(c).

29. Segment reportingManagement has determined the operating segments based on the reports reviewed by the chief operating decision‑maker that are used to make strategic decisions. The chief operating decision maker has been determined to be the Board of the Responsible Entity. The chief operating decision maker considers the business from a business unit perspective and has identified six reportable segments. Each of the five TKs (which constitute the majority of the Astro Group results) are monitored on an entity‑by‑entity basis (each entity contains investment properties that are secured against specific borrowings) and the residual business unit includes the operations of AJT, AJCo, and the Responsible Entity, as well as consolidation adjustments.

The chief operating decision‑maker assesses the performance of each operating segment based on an adjusted operating cash flow basis. This measure excludes non‑operating and non‑cash items such as unrealised fair value adjustments on investment properties and unrealised derivative and foreign exchange gains/losses, but includes items such as capital expenditure on investment properties and realised hedge income. Gearing is considered within each of the business units due to the non‑recourse nature of debt contained within each TK.


96 Annual Report

29. Segment reporting (continued)The segment information provided to the chief operating decision‑maker for the reportable segments for the year ended 30 June 2010, and reconciliation to Profit Before Tax, are as follows: Australia and Consolidation JPT TK JPTS TK JPTD TK JPTC TK JPTA TK adjustments Total 30 June 2010 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Segment reporting noteNet operating cash flows from investment properties 18,668 19,822 14,154 18,316 12,415 – 83,375

Capital expenditure on investment properties (887) (1,337) (3,117) (102) (57) – (5,500)

Payment for AJT fees (1,543) (1,783) (1,238) (1,788) (1,244) (1,570) (9,166)

Debt service payments (6,346) (3,077) (5,096) (3,039) (5,911) – (23,469)

Accounting and administration (627) (400) (551) (647) (341) (4,224) (6,790)

Realised foreign exchange gains – – – – – 4,279 4,279

Adjusted operating cash flow 9,265 13,225 4,152 12,740 4,862 (1,515) 42,729

Reconciliation to PBTAdjusted operating cash flow 9,265 13,225 4,152 12,740 4,862 (1,515) 42,729

Fair value adjustment to investment properties (24,731) (17,314) (21,959) (37,606) (49,052) – (150,662)

Unrealised gain/(loss) on derivatives – – – – – 1,169 1,169

Unrealised FX gain/(loss) – – – – – 1,317 1,317

Movements in accruals and prepayments 5,315 (1,878) (930) (374) (727) 2,407 3,813

Amortisation of borrowing costs (466) (534) (534) (503) (580) – (2,617)

Depreciation – – – – – (7) (7)

Financing income – – – – – 247 247

Interest received on cross‑currency swaps – – – – – 5,581 5,581

Gain/(loss) on monetisation of capital hedges – – – – – (4,808) (4,808)

Capital expenditure on investment properties 887 1,337 3,117 102 57 – 5,500

Impairment of goodwill – – – – – (7,000) (7,000)

Share of Associate’s profit/(loss) – – – – – (578) (578)

Profit/(loss) before tax (9,730) (5,164) (16,154) (25,641) (45,440) (3,187) (105,316)

Annual Report 97

Australia and Consolidation JPT TK JPTS TK JPTD TK JPTC TK JPTA TK adjustments Total 30 June 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Segment reporting noteNet operating cash flows from investment properties 29,502 24,987 17,631 19,981 14,511 – 106,613

Capital expenditure on investment properties (803) (1,986) (807) (302) (251) – (4,149)

Payment for AJT fees (2,154) (2,023) (1,401) (2,055) (1,413) – (9,046)

Debt service payments (3,174) (3,325) (5,690) (4,649) (6,289) (1,577) (24,704)

Accounting and administration (2,768) (3,220) (2,137) (2,123) (1,893) (16,837) (28,978)

Realised foreign exchange gains – – – – – 4,115 4,115

Adjusted operating cash flow 20,603 14,433 7,596 10,852 4,665 (14,299) 43,851

Reconciliation to PBTAdjusted operating cash flow 20,603 14,433 7,596 10,852 4,665 (14,299) 43,851

Fair value adjustment to investment properties (103,273) (102,162) (51,701) (60,842) (54,206) – (372,184)

Unrealised gain/(loss) on derivatives – – – – – (91,172) (91,172)

Unrealised FX gain/(loss) – – – – – 112 112

Movements in accruals and prepayments 3,161 2,250 1,439 3,045 1,568 16,227 27,690

Amortisation of borrowing costs (248) (600) (600) (692) (651) – (2,791)

Financing income 60 36 20 38 14 1,908 2,076

Interest received on cross‑currency swaps – – – – – 6,723 6,723

Gain on monetisation of capital hedges – – – – – 18,819 18,819

Loss on financial assets – – – – – (1,890) (1,890)

Capital expenditure on investment properties 803 1,986 807 302 251 – 4,149

Loss on disposal of investment property (32,565) – – – – – (32,565)

Share of Associate’s profit/(loss) – – – – – 878 878

Profit/(loss) before tax (111,459) (84,057) (42,439) (47,297) (48,359) (62,694) (396,304)


98 Annual Report

29. Segment reporting (continued)The amounts provided to the chief operating decision‑maker with respect to the total assets and liabilities are measured in a manner consistent with that of the financial statements and as such no reconciliation is required. Australia and Consolidation JPT TK JPTS TK JPTD TK JPTC TK JPTA TK adjustments Total 30 June 2010 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Total segment assets and liabilitiesInvestment properties 363,557 357,372 230,915 342,483 210,668 – 1,504,995

Total segment assets 390,267 388,588 245,671 364,173 222,202 49,628 1,660,529

Total segment liabilities (212,378) (263,094) (253,076) (283,542) (275,031) (34,476) (1,321,597)

Australia and Consolidation JPT TK JPTS TK JPTD TK JPTC TK JPTA TK adjustments Total 30 June 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Total segment assets and liabilitiesInvestment properties 376,987 363,260 243,139 370,411 254,161 – 1,607,958

Total segment assets 482,714 392,960 261,681 390,652 262,120 30,300 1,820,427

Total segment liabilities (308,972) (260,294) (239,387) (284,259) (266,076) 20,497 (1,338,491)

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

30. Notes to the Consolidated Statements of Cash Flows

Reconciliation of profit after income tax to net cash flows from operating activitiesProfit/(Loss) for the period (111,922) (366,796)

Adjustments for non‑cash items and items classified as investing or financing activities

Unrealised foreign exchange gain (1,316) (112)

Unrealised fair value adjustment to derivatives (3,387) 91,172

Fair value adjustments to investment property 150,662 372,183

Equity accounting for investments in Associate 578 (878)

Interest received on cross‑currency swaps (5,581) (6,723)

Gain on monetisation of capital hedges 4,808 (18,819)

Depreciation expense 7 –

Impairment of goodwill 7,000 –

Loss on financial assets – 1,890

Loss on disposal of investment property – 32,565

Net cash provided by operating activities before changes in asset and liabilities 40,849 104,482

Change in assets and liabilities during the financial period

Increase/(decrease) in Japanese withholding tax payable (5,826) (33,533)

Increase/(decrease) in trade and other receivables 10,246 5,217

Increase/(decrease) in other assets (586) 1,474

Increase/(decrease) in payables (9,046) (33,020)

Net cash from operating activities after changes in assets and liabilities 35,637 44,620

Annual Report 99

31. Director and executive disclosures

(a) Key Management Personnel

(i) DirectorsThe names of each person holding the position of Director of the Responsible Entity and also AJCo during the financial year were Mr F A McDonald, Ms P Dwyer, and Mr J Pettigrew.

(ii) Other Key Management PersonnelThe following individuals had authority and responsibility for planning, directing and controlling activities of the Astro Group, directly or indirectly, during the financial year:Name Position Employer

Ian Hay Chief Financial Officer The Responsible Entity

The Senior Advisor to the Astro Group, Mr Eric Lucas, is a contractor to the Astro Group and is paid a monthly fee of ¥100,000. Separately, the Japan Asset Manager employs Mr Lucas as its Chief Executive Officer and employs the other executives who conduct the asset management activities in Japan. The Japan Asset Manager is not a member of the Astro Group, and as such the remuneration relating to those individuals is not borne by the Astro Group or its securityholders. Mr Lucas and the other executives of the Japan Asset Manager are not considered KMP of the Astro Group.

(b) Remuneration of Key Management PersonnelThe Astro Group aims to attract, retain and motivate highly skilled people to operate the Astro Group in the best interests of its securityholders.

The Astro Group has a formally constituted Remuneration Committee, which is currently comprised of the Astro Group’s three Directors, who are Independent Non‑Executive Directors. Its members during the financial year were Mr J Pettigrew (Chair), Ms P Dwyer and Mr F A McDonald. The Remuneration Committee meets annually for the purposes of reviewing and making recommendations to the Astro Group Boards on the level of remuneration of the senior executives and the Directors.

The Remuneration Committee endeavours to ensure that the remuneration outcomes strike an appropriate balance between the interests of the Astro Group securityholders, and rewarding, retaining and motivating the Astro Group’s executives and the Directors. Remuneration of Key Management Personnel is set out below: Consolidated

30 Jun 10 $’000

Short‑term employee benefits¹ 144

Post‑employment benefits¹ 12

1. For the period 7 April 2010 to 30 June 2010. No Key Management Personnel remuneration was incurred by the Astro Group before the Responsible Entity became part of the Astro Group on 7 April 2010. No prior year comparative information provided as the period ending 30 June 2010 represents AJCo’s first financial year and first period of remuneration reporting.

(c) Directors loans and other transactionsThere were no loans or other transactions made to or from the Directors of the company during the year.

(d) Key Management Personnel compensation – Remuneration ReportUnder the Corporations Act 2001 (Cth) only disclosing entities that are listed companies are required to prepare a Remuneration Report. Accordingly, this report is only required to address remuneration disclosures applicable to AJCo, as AJT is not a listed company. Notwithstanding, this report addresses the remuneration disclosures of the Astro Group, not just AJCo.

This report outlines the remuneration philosophy and framework currently applicable to the Astro Group, in particular how this relates to the Astro Group’s senior executives and Directors.

This report relates to the period from 12 November 2009, being the listing date of AJCo, to 30 June 2010. The remuneration disclosures however only relate to the period 7 April 2010 to 30 June 2010 because the Responsible Entity, which remunerates the Astro Group’s executives and Directors, only became a wholly owned subsidiary of AJCo and a part of the Astro Group on 7 April 2010. Prior to that date, the Responsible Entity was a subsidiary within the Babcock & Brown Group.

The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001 (Cth).


100 Annual Report

31. Director and executive disclosures (continued)

(d) Key Management Personnel compensation – Remuneration Report (continued)

Remuneration policy and approachThe Astro Group aims to attract, retain and motivate highly skilled people to operate the Astro Group in the best interests of its securityholders.

The Astro Group has a formally constituted Remuneration Committee, which is currently comprised of the Astro Group’s three Directors, who are Independent Non‑Executive Directors. Its members during the financial year were Mr J Pettigrew (Chair), Ms P Dwyer and Mr F A McDonald. The Remuneration Committee meets annually for the purposes of reviewing and making recommendations to the Astro Group Boards on the level of remuneration of the senior executives and the Directors.

The Remuneration Committee endeavours to ensure that the remuneration outcomes strike an appropriate balance between the interests of the Astro Group securityholders, and rewarding, retaining and motivating the Astro Group’s executives and the Directors.

Executive remunerationThe executive pay and reward framework has two components:

•Basepayandbenefits,includingsuperannuation;and

•Shorttermincentives.

To determine the total annual remuneration for the executives, the Remuneration Committee conducts an assessment of each executive based on the individual’s performance and achievements during the financial year and taking into account the overall performance and achievements of the Astro Group and prevailing remuneration rates of executives in similar positions. This assessment is made in conjunction with advice from the Astro Group’s Senior Advisor, Mr Eric Lucas, and is the basis for determining the total annual remuneration for that financial year.

Although the performance of the Astro Group is taken into consideration in the assessment of each executive, the remuneration policy of the Astro Group is more focused on achievement of the Astro Group’s internal financial and operational objectives. The Astro Group regards achievement of these objectives as the appropriate criteria for determining remuneration rather than simply measuring relative performance against a market index or an external comparator group.

The following table sets out summary information about the Astro Group’s earnings and movements in securityholder wealth for the five years to June 2010: 2010 2009 2008 2007 2006

Net profit attributable to equityholders ($’000) (111,922) (365,642) 121,627 129,195 59,026

Earnings per security (cents) (22.02) (71.94) 23.65 26.71 16.13

Distributions per security (cents) 7.00 9.00 13.05 11.90 9.76

Share price ($) as at 30 June 0.32 0.37 0.87 1.77 1.68

– Base payBase pay is determined by reference to appropriate benchmark information, taking into account an individual’s responsibilities, performance, qualifications and experience. There are no guaranteed base pay increases in any executive’s contracts.

Based on the Remuneration Committee’s assessment of the factors outlined above, the executives were granted an increase in base pay of 5% to 10% with effect from 1 July 2010.

– Short term incentiveAny short term incentive (STI) entitlement is entirely at the discretion of the Remuneration Committee and any discretionary STI is determined based on the results of the Remuneration Committee’s assessment of each executive as outlined above. Any STI entitlement is paid in cash and is paid in July each year. The maximum STI bonus in any year is 30% of base salary. An executive is not entitled to receive an STI bonus if they cease employment with the Astro Group prior to the payment date or provide or receive notice of termination of employment on or prior to the payment date.

Based on the Remuneration Committee’s assessment of each executive for the 12‑month period ended 30 June 2010, and having regard to the overall performance of the Astro Group over that period, on 17 June 2010 executives were granted an STI cash bonus as set out in Table 1. The STI cash bonus was paid on 15 July 2010.

Annual Report 101

Key Management PersonnelKey Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The Key Management Personnel of the Astro Group for the year ended 30 June 2010 were:

ExecutivesMr I Hay Chief Financial Officer

Non‑Executive DirectorsMr F A McDonald Independent Chairman and Non‑Executive Director



The Senior Advisor to the Astro Group, Mr Eric Lucas, is a contractor to the Astro Group and is paid a monthly fee of ¥100,000. Separately, the Japan Asset Manager employs Mr Lucas as its Chief Executive Officer and employs the other executives who conduct the asset management activities in Japan. The Japan Asset Manager is not a member of the Astro Group, and as such the remuneration relating to those individuals is not borne by the Astro Group or its securityholders. Mr Lucas and the other executives of the Japan Asset Manager are not considered Key Management Personnel of the Astro Group.

Details of the remuneration of the executives and the Non‑Executive Directors are set out below. Mr Rohan Purdy does not meet the criteria of a Key Management Personnel however his remuneration is disclosed below in accordance with the Corporations Act 2001 (Cth) as he is one of the two senior executives in the Astro Group.

Remuneration of executives

Table 1: Remuneration of executives for the period ended 30 June 2010 STI cash Non‑monetary Salary bonus2 benefits3 Superannuation Total Executives Year1 $ $ $ $ $

Mr I Hay 2010 51,606 15,000 340 4,645 71,591

Mr R Purdy 2010 48,165 30,000 342 4,335 82,842

Total remuneration 2010 99,771 45,000 682 8,980 154,433

1. For the period 7 April 2010 to 30 June 2010. No executives’ remuneration was incurred by the Astro Group before the Responsible Entity became part of the Astro Group on 7 April 2010. No prior year comparative information is provided as the period ending 30 June 2010 represents AJCo’s first financial year and first period of remuneration reporting.

2. STI relates to the 12 month period ended 30 June 2010 and was granted on 17 June 2010 and paid on 15 July 2010.3. All Astro Group employees receive salary continuance insurance.

Table 2: Remuneration components as a proportion of total remuneration on an annualised basis Fixed STI cash remuneration1 bonus

Executives % % Total

Mr I Hay 93.78 6.22 100.00

Mr R Purdy 87.57 12.43 100.00

1. Fixed remuneration consists of salary, non‑monetary benefits and superannuation and for the purposes of this table is based on a 12‑month period to 30 June 2010.


102 Annual Report

31. Director and executive disclosures (continued)

(d) Key Management Personnel compensation – Remuneration Report (continued)

Executive Employment ContractsThe base salaries for executives as at 30 June 2010, in accordance with their employment contracts are shown below:Executives Base remuneration per employment contract

Mr I Hay $225,000

Mr R Purdy $210,000

The employment contracts for Mr Hay and Mr Purdy contain the following conditions:

Length of contract •Open‑ended

Frequency of base remuneration review •Annual

Benefits •EntitledtoparticipateinAstroGroupbenefitplansthataremade available

Incentive remuneration •Eligibleforanawardofshorttermincentiveremuneration(if any) as described above

Termination of employment •ForMrHay,employmentcanbeterminatedbyeitherpartyproviding three months’ written notice and the Astro Group may elect to pay Mr Hay three months’ salary in lieu of notice

•ForMrPurdy,employmentcanbeterminatedbyeitherpartyproviding two months’ written notice and the Astro Group may elect to pay Mr Purdy two months’ salary in lieu of notice

Remuneration of the Non‑Executive DirectorsThe following persons were Directors of each of the Responsible Entity and AJCo during the financial year:




The Astro Group Boards determine the remuneration structure for Non‑Executive Directors based on recommendations from the Remuneration Committee. The Non‑Executive Directors’ individual fees, including committee fees, are annually reviewed by the Remuneration Committee taking into consideration the level of fees paid to non‑executive directors by companies of a similar size and stature. Fees paid to Non‑Executive Directors must fall within the aggregate fee pool approved by securityholders. The current aggregate maximum amount which may be paid to all Non‑Executive Directors is $600,000 per annum, and the aggregate fees currently payable to the Non‑Executive Directors per annum is $342,500. Based on the Remuneration Committee’s annual review of Non‑Executive Director fees conducted on 17 June 2010, there will be no change to the fees for the 12‑month period commencing 1 July 2010.

The Non‑Executive Directors receive a cash fee for service. They do not receive any performance‑based remuneration or any retirement benefits other than statutory superannuation (which is included within total fees noted below).

Fees paid to the Non‑Executive Directors are in respect of their services provided to the Responsible Entity and AJCo.

Fees payable to Non‑Executive Directors are set out below:Board/Committee Role Fee per annum

Board Independent Chair $136,500

Director $96,500

Audit, Risk & Compliance Committee Chair $6,500

Remuneration Committee Chair $6,500

Annual Report 103

Table 3: Remuneration of Directors for the period ended 30 June 2010 Post‑ Short term – employment – salary and fees superannuation Total Directors Year1 $ $ $

Mr F A McDonald 2010 31,307 2,818 34,125

Ms P Dwyer 2010 23,624 2,126 25,750

Mr J Pettigrew 2010 22,133 1,992 24,125

Total remuneration 2010 77,064 6,936 84,000

1. For the period 7 April 2010 to 30 June 2010. No Directors’ remuneration was incurred by the Astro Group before the Responsible Entity became part of the Astro Group on 7 April 2010. No prior year comparative information is provided as the period ending 30 June 2010 represents AJCo’s first financial year and first period of remuneration reporting.

In addition to the above fees, all Non‑Executive Directors receive reimbursement for reasonable travel, accommodation and other expenses incurred while undertaking Astro Group business.

32. Related parties

(a) Astro Japan Property Group Limited (AJCo)The shares in AJCo were stapled to the units in AJT on 12 November 2009 (stapled securities), forming the Astro Japan Property Group. It is not possible to trade or deal separately in either the shares or units which comprise the stapled securities. The results and equity of AJCo are disclosed separately as attributable to other stapled securityholders in the Consolidated Statements of Comprehensive Income and Consolidated Statements of Financial Position respectively.

(b) Responsible EntityThe Responsible Entity of Astro Japan Property Trust is Astro Japan Property Management Limited, formerly known as Babcock & Brown Japan Property Management Limited. The Responsible Entity is wholly owned by AJCo and consolidated within the Astro Group, the Responsible Entity was acquired by AJCo on 7 April 2010.

(c) BBJPML Holding TrustPrior to 12 November 2009 BBJPML Holding Trust was beneficially owned by the unitholders of AJT. The trustee of BBJPML Holding Trust was AJCo. AJT had a loan receivable from BBJPML Holding Trust which was used to subscribe for a convertible note issued by the Responsible Entity and to take a 30% economic interest in the Japan Asset Manager. All debts were repaid and assets of BBJPML Holding Trust were acquired by AJCo in its own capacity on 12 November 2009 funded by monies from contributed equity as part of the stapling. The BBJPML Holding Trust was terminated on 13 November 2009.

(d) The Japan Asset ManagerThe Japan Asset Manager is responsible for the management of AJT’s investment property interests. The Astro Group also has an initial 30% economic interest in the Japan Asset Manager, which will reduce to 25% over time as preferred distributions are made.

(e) Security holdingsThe number of Astro Group securities held by each Director of the Responsible Entity and other Key Management Personnel, including their personally related parties, at the date of this report are set out below. There were no securities issued during the year as compensation. Balance Change at start during Balance at Name of year the year end of year

Allan McDonald 300,000 100,000 400,000

Paula Dwyer 200,000 – 200,000

John Pettigrew 150,000 – 150,000

Ian Hay 20,000 20,000 40,000

(f) Key Management Personnel loan and option disclosuresThere were no loans or Astro Group options granted as part of Key Management Personnel remuneration in respect to their position as Key Management Personnel.


104 Annual Report

32. Related parties (continued)

(g) Other transactions with Astro GroupThere were no other transactions with Key Management Personnel and related entities.

(h) Responsible Entity and Japan Asset Manager fees and other transactionsThe following transactions occurred with related parties:

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

Asset management feesAJT base fee – paid to Responsible Entity 1,570 2,428

Asset base fee – paid and payable to Japan Asset Manager 7,662 9,046

9,232 11,474

Performance feesAJT performance fee discount – received from the Responsible Entity – (6,965)

Asset Management Fees paid or payable to the Responsible Entity and Japan Asset Manager 9,232 4,509

TK distribution – payable to TK Operator 127 510

Total Asset Management Fees paid or payable to the Responsible Entity and Japan Asset Manager 9,359 5,019

Other transactions occurring with related partiesReimbursement of administration expenses – paid to the Japan Asset Manager by TKs 61 87

Custody fees paid by AJT to Babcock & Brown1 56 281

Transaction fees paid to Japan Asset Manager 416 768

Underwriting fee to Babcock & Brown by AJT – 181

Internal Audit fees paid to Babcock & Brown by AJT – 41

Distribution paid from the Japan Asset Manager (271) –

Return of capital from the Japan Asset Manager (413) –

Additional investment in the Japan Asset Manager 1,350 –

Outstanding balancesThe following balances are outstanding at the reporting date in relation to transactions with related parties:

Asset management feesAJT base fee – payable to Responsible Entity – 393

Asset base fee – payable to Japan Asset Manager 1,837 2,121

TK distribution – payable to TK Operator 70 366

Total asset management and performance fees payable 1,907 2,880

Other outstanding balancesCustody fees payable to related party1 – 56

1. Custody fees paid for the period 1 July 2009 to 30 September 2009 at which time Babcock & Brown ceased providing custodial services to AJT.

On 16 April 2009, as part of the implementation of the internalisation of AJT’s management rights, BBJPML Holding Trust, which was a consolidated related party entity beneficially owned by the securityholders of AJT, entered into a TK Agreement with, and made a subsequent TK investment in, the Japan Asset Manager and thereby obtained an initial 30% economic interest in the Japan Asset Manager. AJCo subsequently acquired the economic interest from the BBJPML Holding Trust at the time of the stapling on 12 November 2009. The key management of the Japan Asset Manager includes Eric Lucas, Senior Advisor to the Astro Group. Further details of the interest in the Japan Asset Manager are disclosed in Note 14.

Annual Report 105

33. Leasing arrangements note

Lease commitments: Astro Group as lessorThe 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 used to derive income under operating leases are classified as investment properties. No contingent rents are charged.

The minimum lease payments receivable on fixed term non‑cancellable leases of investment properties not recognised in the Consolidated Financial Statements as receivables are as follows:

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

Within one year 25,781 25,372

Later than one year but not later than five years 74,983 84,498

Later than five years 89,609 102,998

190,373 212,868

34. Commitments

Lease commitments: Astro Group as lesseeThe Astro Group has non‑cancellable leases in respect of the office premises and office equipment. Both leases are for a duration of five years and are classified as operating leases. The minimum lease payments are as follows:

Consolidated

30 Jun 10 30 Jun 09 $’000 $’000

Within one year 112 –

Later than one year but not later than five years 374 –

Later than five years – –

486 –

In the opinion of the Directors of the Astro Group, there were no other commitments at the end of the reporting period.

35. Business combinations

Stapling of AJT to AJCoOn 12 November 2009, the units in AJT were stapled to the shares of AJCo (stapled securities) forming the Astro Japan Property Group (Astro Group) as part of the transaction involving the internalisation of the management rights of the Responsible Entity of AJT. $nil consideration was paid on stapling. Full details regarding the stapling transaction are set out in the Notice of Meeting and Explanatory Memorandum dated 9 October 2009, a copy of which can be accessed on the Astro Group website www.astrojapanproperty.com.

Details of the net assets acquired are as follows: Fair value $’000

Cash and cash equivalents 26,441

Net identifiable assets acquired 26,441

Less: non‑controlling interest (AJCo) (26,441)

Goodwill arising on acquisition –


106 Annual Report

35. Business combinations (continued)

Stapling of AJT to AJCo (continued)

Acquisition‑related costsAcquisition‑related costs of $48,000 are included in other operating expenses in the Consolidated Statements of Comprehensive Income.

Non‑controlling interestOn implementation of the stapling, the acquisition method of accounting was applied to account for the “deemed acquisition” of AJCo by AJT. AJT calculated goodwill as the difference between (i) the sum of the consideration transferred and any non‑controlling interest and (ii) the acquisition value of the identifiable net assets acquired. Since the Astro Group measures its non‑controlling interest (AJCo) at the proportionate share of AJCo’s identifiable net assets, no goodwill arose.

Revenue and profit contributionAJCo contributed revenues and net profit of $61,368. If the acquisition had occurred on 1 July 2009, the consolidated revenue and consolidated profit for the year ended 30 June 2010 would have been unchanged.

Acquisition of the Responsible EntityOn 7 April 2010 AJCo exercised the convertible note issued by the Responsible Entity and subsequently became the holder of 100% of the issued share capital in the Responsible Entity.

Details of the purchase consideration, the net assets acquired and goodwill are as follows: $’000

Initial subscription in convertible note – 16 April 09 10,400

Second subscription in convertible note – 4 May 09 2,500

Finalisation adjustment – 29 Jul 09 307

Additional subscription in convertible note – 6 April 2010 7,500

Total purchase consideration for convertible note – redeemed on 7 April 20,707

The assets and liabilities recognised as a result of the acquisition are as follows: Fair value $’000

Cash 5,514

Accounts receivable 170

Prepayments 26

Fixed assets 107

Payables (25)

Provisions (29)

Tax payable (29)

Office lease – rent free period (27)

Net identifiable assets acquired 5,707

Add: Goodwill 15,000

Net assets acquired 20,707

(i) Recognition of goodwillGoodwill of $15,000,000 has been recognised as the difference in the purchase consideration of $20,707,000 and the net assets acquired of $5,707,000. Goodwill is the value attributed by the Board for the value of AJT’s Australian management rights acquired from Babcock & Brown. AJPML was acquired to internalise the management rights of the Responsible Entity of AJT, and complete the separation of AJT from the Babcock & Brown Group. At the end of the reporting period management have tested the goodwill for impairment and have concluded that it is appropriate to impair goodwill by $7,000,000, refer to Note 17.

Annual Report 107

(ii) Acquired receivablesThe fair value equated to the carrying value of the acquired trade receivables of $170,202. All receivables are expected to be collectable.

(iii) Revenue and profit contributionThe acquired business contributed revenue from continuing operations of $nil and profit for the period of $nil to the Group for the period from 7 April 2010 to 30 June 2010.

If the acquisition had occurred on 1 July 2009, Consolidated Revenue and Consolidated Profit for the year ended 30 June 2010 would have been $nil and $nil respectively. These amounts have been calculated using AJT’s accounting policies.

36. Parent Entity financial information

(a) Summary financial informationThe individual financial statements for AJT (the Parent Entity) show the following aggregate amounts: 30 Jun 10 30 Jun 09 $’000 $’000

Statement of financial positionCurrent assets 46,464 119,972

Total assets 412,319 533,445

Current liabilities 50,163 70,010

Total liabilities 50,163 70,010

Shareholder’ equity

Issued capital 589,452 615,892

Retained earnings (227,296) (152,457)

362,156 463,435

Profit or loss for the year (39,264) (171,680)

(b) Guarantees entered into by the Parent EntityThe Parent Entity had not entered into any guarantees as at 30 June 2010 (30 June 2009: $nil).

(c) Contingent liabilities of the Parent EntityAJT had contingent liabilities at 30 June 2010, arising from obligations under the loan agreements entered into by the TK Operators, to make additional equity contributions to refund security deposits to tenants where the TK has insufficient cash to meet this obligation. The maximum potential amount of this recourse obligation to the Parent Entity at 30 June 2010 is $76.6 million.

Of the total security deposits liability of $95.8 million, $81.5 million has been released by the Trust Bank and lenders to the TKs for working capital or reinvestment. The balance of $14.3 million is held as cash on trust by the lenders to each TK and is disclosed as Cash on Trust in Note 8. In limited circumstances, including expiry of the tenant’s lease, there may be insufficient cash available within the TK to repay the tenant security deposit amounts due. In these situations the TK Operator has recourse to AJT for the unfunded security deposit amount. The recourse by the TK Operator can be taken over by the lender when the loan is in a default situation. There are no other recourse obligations to the Parent Entity in relation to the TK agreements or loans.

37. Events occurring after the reporting periodThe Directors are not aware of any matter or circumstance occurring since 30 June 2010 not otherwise dealt with in the financial report that has significantly or may significantly affect the operations of the Astro Group, the results of those operations, or the state of affairs of the Astro Group in subsequent financial years.

108 Annual Report

Directors’ Declaration

1. In the opinion of the Directors of Astro Japan Property Management Limited in its capacity as Responsible Entity of Astro Japan Property Trust (AJT):

(a) the Financial Statements and Notes set out on pages 60 to 107 are in accordance with the Corporations Act 2001 (Cth), including:

(i) giving a true and fair view of the financial position of the Astro Group as at 30 June 2010 and of its performance for the year ended 30 June 2010; and

(ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

(b) there are reasonable grounds to believe that AJT will be able to pay its debts as and when they become due and payable.

2. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

3. The Directors have been given the declarations by the Chief Financial Officer required by section 295A of the Corporations Act 2001 (Cth).

Dated 25 August 2010.

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

F A McDonald Director Astro Japan Property Management Limited in its capacity as Responsible Entity of Astro Japan Property Trust

Annual Report 109

Independent Auditor’s Report




Independent auditor’s report to the stapled security holders ofAstro Japan Property Trust

Report on the financial report

We have audited the accompanying financial report of Astro Japan Property Trust (the Trust), which comprises thestatement of financial position as at 30 June 2010, and the statement of comprehensive income, statement ofchanges in equity and statement of cash flows for the year ended on that date, a summary of significant accountingpolicies, other explanatory notes and the directors’ declaration for the Astro Japan Property Group (the consolidatedentity). The consolidated entity comprises the Trust and the entities it controlled at the year's end or from time to timeduring the financial year, including Astro Japan Property Group Limited and its controlled entity.

Directors’ responsibility for the financial report

The directors of Astro Japan Property Management Limited, as responsible entity of the Trust, are responsible for thepreparation and fair presentation of the financial report in accordance with Australian Accounting Standards (includingthe Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing andmaintaining internal controls relevant to the preparation and fair presentation of the financial report that is free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; andmaking accounting estimates that are reasonable in the circumstances. In Note 1(a), the directors also state, inaccordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statementscomply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit inaccordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethicalrequirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whetherthe financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialreport. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of materialmisstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of the financial report in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overallpresentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether it contains anymaterial inconsistencies with the financial report.

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 auditopinions.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

110 Annual Report

Independent Auditor’s Report

Independent auditor’s report to the stapled security holders ofAstro Japan Property Trust(continued)

Auditor’s opinion

In our opinion:

(a) the financial report of Astro Japan Property Trust is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of itsperformance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian AccountingInterpretations) and the Corporations Regulations 2001; and

(b) the financial report and notes also comply with International Financial Reporting Standards as disclosed inNote 1(a).

Report on the Remuneration Report

We have audited the remuneration report included in pages 5 to 8 of the directors’ report for the period ended 30 June2010. The directors of Astro Japan Property Group Limited are responsible for the preparation and presentation ofthe remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is toexpress an opinion on the remuneration report, based on our audit conducted in accordance with Australian AuditingStandards.

Auditor’s opinion

In our opinion, the remuneration report of Astro Japan Property Group Limited for the period ended 30 June 2010,complies with section 300A of the Corporations Act 2001.

Matters relating to the electronic presentation of the audited financial report

This auditor’s report relates to the financial report and remuneration report of Astro Japan Property Trust (the Trust)for the year ended 30 June 2010 included on the Astro Japan Property Group web site. The directors of Astro JapanProperty Management Limited, as responsible entity of the Trust, are responsible for the integrity of the Astro JapanProperty Group web site. We have not been engaged to report on the integrity of this web site. The auditor’s reportrefers only to the financial report and remuneration report named above. It does not provide an opinion on any otherinformation which may have been hyperlinked to/from the financial report or the remuneration report. If users of thisreport are concerned with the inherent risks arising from electronic data communications they are advised to refer tothe hard copy of the audited financial report and remuneration report to confirm the information included in the auditedfinancial report and remuneration report presented on this web site.

PricewaterhouseCoopers

AJ Wilson TJO PeelPartner Partner25 August 2010 25 August 2010

ASX Additional Information

The Astro Group is required under the ASX Listing Rules to disclose the additional information which is set out in this section. The information is current as at 1 September 2010.

Stapled securitiesEach Astro Group stapled security comprises one unit in AJT and one share in AJCo which are stapled together in accordance with each entity’s Constitution and cannot be traded or dealt with separately. The Astro Group stapled securities are traded on the ASX under the code ‘AJA’. In accordance with the ASX’s requirements for stapled securities, the ASX reserves the right (but without limiting its absolute discretion) to remove AJT or AJCo or both from the ASX Official List if any of the AJT units and the AJCo shares cease to be stapled together or any equity securities are issued by AJT or AJCo which are not stapled to equivalent securities in the other entity.

Number of stapled securities and holdersThe total number of Astro Group stapled securities on issue as at 1 September 2010 is 508,212,161 and the number of holders of these stapled securities is 3,584.

Substantial securityholdersThe names of substantial securityholders who have notified the Astro Group in accordance with section 671B of the Corporations Act 2001 (Cth) are set out below. Number of Percentage Date Securityholder securities (%) notice received

APN Funds Management Limited 46,182,983 9.09% 11/05/10

Vanguard Investments Australia Ltd/ The Vanguard Group Inc. 25,915,738 5.098% 24/05/10

UBS AG and its related bodies corporate 30,629,305 6.03% 03/08/10

Voting RightsIt is generally expected that General Meetings of securityholders of AJT and General Meetings of securityholders of AJCo will be held concurrently where proposed resolutions relate to the two entities. Voting rights of securityholders at General Meetings are outlined below.

At General Meetings of securityholders of AJT:

• on a show of hands each securityholder who is present in person and each other person who is present as a proxy, attorney or duly appointed corporate representative of a securityholder has one vote; and

• on a poll, each securityholder who is present in person has one vote for each dollar of value of securities in AJT held by the securityholder. Also, each person present as proxy, attorney or duly appointed corporate representative of a securityholder has one vote for each dollar of value of the securities in AJT held by the securityholder that the person represents.

At General Meetings of securityholders of AJCo:

• on a show of hands each securityholder who is present in person and each other person who is present as a proxy, attorney or duly appointed corporate representative of a securityholder has one vote; and

• on a poll, each securityholder who is present in person has one vote for each security they hold. Also, each person present as a proxy, attorney or duly appointed corporate representative of a securityholder has one vote for each security held by the securityholder that the person represents.

On-Market buybackThe Astro Group does not currently have an on-market buyback in place.

Stapled securities that are restricted or subject to voluntary escrowThere are no Astro Group stapled securities which are restricted or subject to voluntary escrow.

Annual Report 111

Distribution of SecuritiesThe Distribution Schedule of the number of holders of Astro Group stapled securities is shown below. Stapled Category Holders Securities

1 – 1,000 304 127,413

1,001 – 5,000 790 2,438,509

5,001 – 10,000 665 5,343,621

10,001 – 100,000 1,516 51,255,832

100,001 – and over 309 449,046,786

Total 3,584 508,212,161

The number of securityholders holding less than a marketable parcel is 445.

Twenty Largest SecurityholdersThe top 20 largest Astro Group securityholders are shown below. Astro Group stapled securities Securityholder Number Percentage (%)

1 HSBC Custody Nominees (Australia) Limited 58,285,164 11.47%

2 Citicorp Nominees Pty Limited 52,682,112 10.37%

3 J P Morgan Nominees Australia Limited 52,031,662 10.24%

4 RBC Dexia Investor Services Australia Nominees Pty Limited 47,538,636 9.35%

5 National Nominees Limited 42,003,674 8.26%

6 ANz Nominees Limited 21,264,867 4.18%

7 RBC Dexia Investor Sevices Australia Nominees Pty Limited 20,369,963 4.01%

8 Aquapeel Pty Ltd 20,000,000 3.94%

9 HSBC Custody Nominees (Australia) Limited-GSCO ECA 10,895,497 2.14%

10 Australian Reward Investment Alliance 7,213,900 1.42%

11 UBS Wealth Management Australia Nominees Pty Ltd 6,880,917 1.35%

12 Suncorp Custodian Services Pty Limited & Suncorp Custodian Services Pty Limited 6,560,835 1.29%

13 Cogent Nominees Pty Limited 6,544,109 1.29%

14 Mr Claudio Paul Marcolongo & Mrs Diane Marcolongo 3,300,000 0.65%

15 Chriswall Holdings Pty Ltd 3,100,000 0.61%

16 Merrill Lynch (Australia) Nominees Pty Limited 2,960,212 0.58%


18 Carwoola Pastoral Co Pty Limited 1,910,000 0.38%

19 Trust Company Limited 1,850,000 0.36%


Total 369,174,978 72.64%

Eric Lucas’ securityholding of 18,234,220 stapled securities (3.59%) is held through a nominee.

112 Annual Report

Contents

1 Key Financial Information

2 Chairman’s Report

4 Senior Advisor’s Report

8 Review of Results & Operations

10 Senior Management

12 Japan Asset Manager

15 Portfolio Overview

18 Top 20 Tenant Profile

20 Property Locations

22 Key Properties

34 Ownership Structure

36 Corporate Governance Statement 2010

48 Directors’ Report

58 Auditor’s Independence Declaration

59 Financial Statements

108 Directors’ Declaration

109 Independent Auditor’s Report

111 ASX Additional Information

IBC Corporate Directory

About Astro Japan Property GroupThe Astro Japan Property Group (“Astro Group” or “the Group”) is a listed property fund and has a strategy of investing solely in the real estate market of Japan.The Astro Group comprises the Astro Japan Property Trust (“AJT”) and Astro Japan Property Group Limited (“AJCo”), with the units in AJT being stapled to shares in AJCo. The stapled securities are quoted on the ASX under the code ‘AJA’. The Responsible Entity of AJT is Astro Japan Property Management Limited.

AJT was initially established on 31 January 2005, became a registered scheme under the Corporations Act 2001 (Cth) on 17 February 2005, and listed on the ASX on 4 April 2005. The subsequent formation of the Astro Group occurred on 12 November 2009, at which time the units in AJT were stapled to the shares in AJCo.

At the time of its listing in 2005, AJT raised A$280 million and acquired interests in a diversified portfolio of 12 office and retail properties located in the central and greater Tokyo area for ¥47 billion (approximately A$600 million). At 30 June 2010, the Astro Group held interests in a portfolio comprising 43 office, retail and residential properties with a book value of ¥113.9 billion (approximately A$1.5 billion).

At 1 September 2010, the Astro Group had 3,584 securityholders and a market capitalisation of approximately A$150 million.

Asset management services in Japan are generally undertaken by the Japan Asset Manager, Spring Investment Co., Ltd., in which the Astro Group has an economic interest.

Astro Japan Property Group (ASX Code: AJA)Astro Japan Property Trust (Astro Japan Property Management Limited as Responsible Entity) and Astro Japan Property Group Limited

Suite 1, Level 14 50 Pitt Street Sydney NSW 2000 Australia T: +61 2 8987 3900 F: +61 2 8987 3999

Directors of the Responsible Entity and Astro Japan Property Group LimitedAllan McDonald (Chairman) Paula Dwyer John Pettigrew

Company Secretary of the Responsible Entity and Astro Japan Property Group LimitedRohan Purdy Ian Hay (alternate)

Senior Advisor to the Astro Japan Property GroupEric Lucas

Security RegistryLink Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Australia T: 1800 881 098 (within Australia) T: +61 2 8280 7699 F: +61 2 9287 0303

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

AuditorsPricewaterhouseCoopers Darling Park Tower 2 201 Sussex Street Sydney NSW 1171 Australia T: +61 2 8266 0000 F: +61 2 8266 9999

CustodianPerpetual Corporate Trust Limited Angel Place 123 Pitt Street GPO Box 4172 Sydney NSW 2001 Australia T: +61 2 9229 9000 F: +61 2 8256 1473

Websitewww.astrojapanproperty.com

DisclaimerThis report is issued by Astro Japan Property Group Limited (ABN 25 135 381 663) and Astro Japan Property Management Limited (ABN 94 111 874 563, AFSL 283142) (“Responsible Entity”) as responsible entity of the Astro Japan Property Trust (ARSN 112 799 854) (together defined as the “Astro Group”).

The information contained in this report does not constitute an offer of, or invitation to invest in or subscribe for, or a recommendation of, stapled securities in the Astro Group (“AJA securities”).

The information contained in this report constitutes general information only. The Responsible Entity is not licensed to provide financial product advice (including personal financial product advice), and the information contained in this report does not constitute financial product advice.

In providing this report, the Astro Group has not considered the investment objectives, financial situation and particular needs of an investor. Before making any investment decision with respect to AJA securities, an investor should consider its own investment objectives, financial circumstances and needs, and if necessary consult its investment, financial, taxation or other professional adviser.

This report may include information forecasting or projecting future outcomes. Such outcomes may be affected by a wide range of influences outside of the Astro Group’s control. In respect of such forward-looking information, no representation or warranty is made by or on behalf of the Astro Group that any projection, forecast, forward-looking statement, assumption or estimate contained in this report should or will be achieved.

The Astro Group specifically prohibits the redistribution or reproduction of this material in whole or in part without the written permission of the Astro Group and the Astro Group accepts no liability whatsoever for the actions of third parties in this respect.

Corporate Directory

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