CENTURIA OFFICE REIT — Annual Report 2014

Dec 9, 2014

Centuria Diversified Property Fund

A stapled entity comprised of CDPF Stapled Fund No. 1 (ARSN: 124 364 718) and CDPF Stapled Fund No. 2 (ARSN: 124 364 656)

General Purpose Financial Report For the year ended 30 June 2014

ARSN 115 588 317

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Centuria Diversified Property Fund Table of contents

For the year ended 30 June 2014

Directors' report
Auditor's independence declaration	5
Consolidated statement of profit or loss and other comprehensive income	6
Consolidated statement of financial position	7
Consolidated statement of changes in equity	8
Consolidated statement of cash flows	9
Notes to the financial statements	10
Directors' declaration	35.
Independent auditor's report	36

Page

For the year ended 30 June 2014

The directors of Centuria Property Funds Limited, the Responsible Entity of Centuria Diversified Property Fund ('the Fund'), being a stapled scheme consisting of CDPF Stapled Fund No. 1 ('the Parent') and CDPF Stapled Fund No. 2, present their report together with the financial report of the Fund for the year ended 30 June 2014 and the independent auditor's report thereon. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Responsible Entity

The directors of Centuria Property Funds Limited during or since the end of the financial year are:

John McBain	Appointed 5 March 1999. Resigned 19 July 2013.
Jason Hullich I	Appointed 30 March 2001. Director of Centuria Capital Limited.
Peter Done	Appointed 5 December 2007. Director of Centuria Capital Limited.
Matthew Hardy	Appointed 4 July 2013.
Edward Psaltis	Appointed 4 July 2013. Resigned 2 September 2014.

The company secretaries of Centuria Property Funds Limited during or since the end of the financial year are:

Terrence Reid	Appointed in December 2007. Resigned 27 May 2014.
Matthew Coy	Appointed in October 2009.
Lucy Rowe	Appointed 27 May 2014. Resigned 29 August 2014.

Principal activities

. . . .

The Fund is a registered managed investment scheme domiciled in Australia.

The principal activity of the Fund in the course of the financial year is to invest funds in accordance with its investment objectives and guidelines as set out in the current Product Disclosure Statement, with the key asset category being investment property.

The Fund did not have any employees during the financial year.

Significant change in the state of affairs

In the opinion of the Responsible Entity there were no significant changes in the state of affairs of the Fund that occurred during the financial year.

Review of operations

Results

The results of the operations of the Fund are disclosed in the consolidated statement of profit or loss and other comprehensive income of these financial statements. The Fund's profit from continuing operations for the year ended 30 June 2014 was \$6,677,723 (2013: \$4,020,776 profit).

For the year ended 30 June 2014

Review of operations (continued)

Distributions

Distributions paid or payable in respect of the financial year were:

	30 Jun 2014		30 Jun 2013
	Cents per unit		Cents per unit	s
September quarter	0.55	459.143	0.55	459.137
December quarter	0.55	459.275	0.55	459,083
March quarter	0.54	449.291	0.54	449.156
June quarter	0.55	454.284	0.55	454.263
	2.19	1821993	2.19	1.821.639

Likely developments

Disclosure of information regarding likely developments in the operations of the Fund in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Fund. Accordingly, this information has not been disclosed in this report.

Environmental regulation

The Fund's operations are not subject to any significant environmental regulation under Commonwealth, State or Territory legislation.

Options granted

No options were granted over unissued units in the Fund during or since the end of the financial year.

No unissued units in the Fund were under option as at the date of this report.

No units were issued in the Fund during or since the end of the financial year as a result of the exercise of an option over unissued units in the Fund.

Events subsequent to balance date

On 10 September 2014, the Responsible Entity executed a short-term extension of the current debt facility to 1 December 2014 on more favourable terms and conditions. Furthermore, the Responsible Entity is currently in advanced negotiations to refinance the debt facility for an extended period and has received offers on terms and conditions for three and five year maturities. The Responsible Entity is currently reviewing all offers at hand and are confident that an offer will be accepted and the refinance will be successfully negotiated as required, prior to the expiry of the extended debt facility in December 2014.

$\sim 10$

For the year ended 30 June 2014

Indemnifying officers or auditors

Indemnification

Under the Fund's constitution the Responsible Entity, including its officers and employees, is indemnified out of the Fund's assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Fund.

The Responsible Entity has not indemnified or agreed to indemnify any auditor or other officer of the Fund, or any related body corporate.

Insurance premiums

The Responsible Entity has paid insurance premiums in respect of directors' and officers' liability and legal expense insurance contracts, for current and former directors and officers, including senior executives of the Responsible Entity.

Fund information in the directors' report

Responsible Entity interests

The following fees were paid and/or payable to the Responsible Entity and its associates during the financial year:

	30 Jun 2014	30 Jun 2013
Finance costs	132.030	303.511
Incentive fees expense	122,943
Leasing fees	250,342	20.328
Management fees	662,864	652,571
Property management fees	108,714	91.378
Other professional fees	46,086	12.100
	1.322.979	1.079.888

The Responsible Entity and/or its associates have held units in the Fund during the financial year as outlined in Note 19 to the financial statements.

Other Fund information

The number of units in the Fund issued and redeemed during the financial year, and the balance of issued units at the end of the financial year are disclosed in Note 14 to the financial statements.

The value of the Fund's assets as at the end of the financial year is disclosed in the consolidated statement of financial position as "Total assets" and the basis of valuation is included in Note 3 to the financial statements.

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For the year ended 30 June 2014

Auditor's independence declaration

The auditor's independence declaration is set out on page 5 and forms part of the directors' report for year ended 30 June 2014.

Signed in accordance with a resolution of the board of directors of Centuria Property Funds Limited made pursuant to s.298(2) of the Corporations Act 2001.

Peter Done Director

Jason/Huljich
Diregtor

$\overline{A}$

Jason
Direct
day of September 2014. Dated at Sydney this $/0^{th}$

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Centuria Property Funds Limited, the Responsible Entity of Centuria Diversified Property Fund (a stapled entity comprising CDPF Stapled Fund No. 1 and CDPF Stapled Fund No. 2)

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2014 there have been:

• $(i)$ no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
• $(ii)$ no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

$KVIII_1$

Steven Gatt Partner

Sydney

$\hat{U}$ September 2014

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Centuria Diversified Property Fund Consolidated statement of profit or loss and other comprehensive income

For the year ended 30 June 2014

Revenue 12,289,991 11,715,391 Rent and recoverable outgoings Other income 38,307 41,542 Interest income 4 8 2,689,417 1,092,285 Gain on fair value of investment property Gain on fair value of derivative financial instruments 877,023 1,502,518 Expenses (3.524, 401) (3,332,202) Rates, taxes and other property outgoings (5, 317, 882) (5,513,085) Finance costs Incentive fees 13 (122.943) 19 (662.864) (652, 571) Management fees Professional fees (127, 520) (113, 570) Trustee/custodian fees (38, 309) (38, 014) 5 (24.472) (27, 761) Auditor's remuneration (27.354) (25, 027) Other expenses 6,677,723 Profit from continuing operations for the year 4,020,776 Net profit for the year 6,677,723 4,020,776 Other comprehensive income Other comprehensive income for the year Total comprehensive income for the year 6,677,723 4,020,776 Net profit attributable to: 15 3,829,710 Unitholders of the Parent 1,831,782 16 2,848,013 2,188,994 Non-controlling interest 6,677,723 4,020,776 Total comprehensive income attributable to: 3,829,710 1,831,782 Unitholders of the Parent 2,848,013 2,188,994 Non-controlling interest 6,677,723 4,020,776	Note	30 Jun 2014 s	30 Jun 2013 S

The notes on pages 10 to 34 form an integral part of these financial statements.

Centuria Diversified Property Fund Consolidated statement of financial position

As at 30 June 2014

	Note	30 Jun 2014 S	30 Jun 2013 \$
Assets
Current assets
Cash and cash equivalents	6	2,760,329	2,667,624
Trade and other receivables	$\overline{7}$	1,135,482	1,217,410
Prepayments	9	233,656	200.965
Total current assets		4.129,467	4,085,999
Non-current assets
Trade and other receivables	7	2,962,144	3,303,275
Investment property	8	106,471,850	102,674,337
Total non-current assets		109,433,994	105,977,612
Total assets		113,563,461	110,063,611
Liabilities Current liabilities
Trade and other payables Borrowings	10	1,131,064	1 163 464
Derivative financial instruments	11	67,911,490	66,504,079
Total current liabilities	12	1,230,881
		70,273,435	67,667,543
Non-current liabilities
Borrowings	11		1,351,316
Derivative financial instruments	12		2,733,399
Provisions	13	122,943
Total non-current liabilities		122,943	4,084,715
Total liabilities		70,396,378	71,752,258
Net assets		43,167,083	38,311,353
Unitholder funds
Issued units	14	29,255,257	29,255,257
Accumulated losses	15	(6,357,569)	(9,276,282)
Non-controlling interest	16	20,269,395	18,332,378
Total unitholder funds		43,167,083	38,311,353

The notes on pages 10 to 34 form an integral part of these financial statements.

Centuria Diversified Property Fund Consolidated statement of changes in equity

For the year ended 30 June 2014

	Note	issued units	Non- controlling interest 5	Accumulated losses	Total unitholder funds
Balance at 1 July 2012		29, 255, 257	17,054,204	(10, 197, 245)	36, 112, 216
Net profit for the year Other comprehensive income			2,188,994	1,831,782	4.020,776
Total comprehensive income for the year			2,188,994	1,831,782	4.020,776
Applications	14
Redemptions	14
Distributions to unitholders	17		(910, 820)	(910, 819)	(1,821,639)
Balance at 30 June 2013		29,255,257	18,332,378	(9,276,282)	38, 311, 353
Net profit for the year			2,848,013	3,829,710	6,677,723
Other comprehensive income
Total comprehensive income for the year			2,848,013	3,829,710	6,677,723
Applications	14
Redemptions	14
Distributions to unitholders	17		(910, 996)	(910, 997)	(1,821,993)
Balance at 30 June 2014		29,255,257	20,269,395	(6, 357, 569)	43.167,083

The notes on pages 10 to 34 form an integral part of these financial statements.

8

Centuria Diversified Property Fund Consolidated statement of cash flows

For the year ended 30 June 2014

	Note	30 Jun 2014	30 Jun 2013
Cash flows from operating activities
Receipts from customers		14,179,338	13,270,925
Payments to suppliers		(5,923,371)	(5,962,432)
Interest received		41,542	38,307
Interest paid		(5,208,597)	(5,714,905)
Net cash generated by operating activities	6	3.088.912	1,631,895
Cash flows from investing activities
Payments for investment property		(1,074,296)	(396,636)
Net cash used in investing activities		(1,074,296)	(396,636)
Cash flows from financing activities
Distributions paid		(1,821,993)	(1,821,639)
Proceeds from borrowings			3 617,592
Repayment of borrowings		(69, 918)	(1,355,000)
Payments to procure borrowings		(30,000)	(100, 000)
Net cash (used in)/generated by financing activities		(1,921,911)	340,953
Net increase in cash and cash equivalents		92,705	1,576,212
Cash and cash equivalents at beginning of financial year		2,667,624	1,091,412
Cash and cash equivalents at end of financial year	6	2,760,329	2,667.624

The notes on pages 10 to 34 form an integral part of these financial statements.

For the year ended 30 June 2014

Note		Page
1.	General information	11
2.	Application of new and revised accounting standards	11
3.	Significant accounting policies	12
4.	Interest income	19
5.	Auditor's remuneration	19
6.	Cash and cash equivalents	19
7.	Trade and other receivables	19
8.	Investment property	20
9.	Prepayments	22
10.	Trade and other payables	22
11.	Borrowings	22
12.	Derivatives	23
13.	Provisions	23
14.	Issued units - unitholders of the parent	23
15.	Accumulated losses	24
16.	Non-controlling interest	24
17.	Distributions to unitholders	24
18.	Financial instruments	25
19.	Related parties	31
20.	Parent entity disclosures	33
21.	Events subsequent to reporting date	34
22.	Contingent assets, liabilities and commitments	34
23.	Additional information	34

$\label{eq:2.1} \mathcal{L}(\mathcal{L}) = \mathcal{L}(\mathcal{L}) = \mathcal{L}(\mathcal{L})$

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$10₁₀$

For the year ended 30 June 2014

$1.$ General information

Centuria Diversified Property Fund is a registered managed investment scheme under the Corporations Act 2001 and domiciled in Australia. The principal activity of the Fund is disclosed in the directors' report.

$2.$ Application of new and revised accounting standards

$(a)$ Adoption of new and revised accounting standards

In the current year, the Fund has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current reporting year. The adoption of these new and revised Standards and Interpretations has not had any significant impact on the amounts reported in these financial statements.

New standards and interpretations not yet adopted $(b)$

At the date of this report, the Standards and Interpretations listed below were in issue but not yet effective. They are available for early adoption at 30 June 2014, but have not been applied in preparing these financial statements. The potential effect of the below Standards and Interpretations on the Fund's financial statements has not yet been determined:

• AASB 9 'Financial Instruments', AASB 2009-11 and AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9'. Effective for annual reporting periods beginning on or after 1 January 2017.
• AASB 2012-3 'Amendments to Australian Accounting Standards Offsetting Financial Assets and Financial Liabilities'. Effective for annual reporting periods beginning on or after 1 January 2014.
• . AASB 2013-3 'Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets'. Effective for annual reporting periods beginning on or after 1 January 2014.
• . AASB 2013-4 'Amendments to Australian Accounting Standards Novation of Derivatives and Continuation of Hedge Accounting'. Effective for annual reporting periods beginning on or after 1 January 2014.
• . AASB 2013-5 'Amendments to Australian Accounting Standards Investment Entities'. Effective for annual reporting periods beginning on or after 1 January 2014.
• . AASB 1031 'Materiality (December 2013)'. Effective for annual reporting periods beginning on or after 1 January 2014.
• . AASB 2013-9 'Amendments to Australian Accounting Standards Conceptual Framework, Materiality and Financial Instruments Part B'. Effective for annual reporting periods beginning on or after 1 January 2014.
• . AASB 2013-9 'Amendments to Australian Accounting Standards Conceptual Framework, Materiality and Financial Instruments Part C'. Effective for annual reporting periods beginning on or after 1 January 2015.

For the year ended 30 June 2014

Significant accounting policies $3.$

Statement of compliance $(a)$

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards including Interpretations, and complies with other requirements of the law.

Accounting Standards include Australian Accounting Standards. The financial statements and notes of the Fund comply with International Financial Reporting Standards ('IFRS') issued by the International Accounting Standards Board ('IASB').

For the purposes of preparing the financial statements, the Fund is a for-profit entity.

The financial report was authorised for issue in accordance with a resolution of the board of directors of Centuria Property Funds Limited, the Responsible Entity, on 10 September 2014.

Basis of preparation $(b)$

The financial statements have been prepared on the basis of historical cost, except for certain non-current assets and financial instruments that are measured at revalued amounts or fair value, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2014.

Use of estimates and judgements

In the application of the Fund's accounting policies, the Responsible Entity is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period; or in the period of the revision and future periods if the revision affects both current and future periods. The key estimates and judgements in the financial report relate to the valuation of investment property and derivative financial instruments.

Judgements made by the Responsible Entity that have significant effects on the financial statements and estimates with significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

For the year ended 30 June 2014

$3.$ Significant accounting policies (continued)

Basis of preparation (continued) $(b)$

Going concern

The financial report has been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

At reporting date, borrowings have been classified as a current liability due to the debt facility maturing on 30 September 2014. As a result, the Fund has a net current asset deficiency of \$66,143,968.

On 10 September 2014, the Responsible Entity executed a short-term extension of the current debt facility to 1 December 2014 on more favourable terms and conditions. Furthermore, the Responsible Entity is currently in advanced negotiations to refinance the debt facility for an extended period and has received offers on terms and conditions for three and five year maturities. The Responsible Entity is currently reviewing all offers at hand and are confident that an offer will be accepted and the refinance will be successfully negotiated as required, prior to the expiry of the extended debt facility in December 2014.

After taking into account all available information, the directors have concluded that there are reasonable grounds to believe the basis of preparation of the financial report on a going concern basis is appropriate.

$(c)$ Functional and presentation currency

The financial statements are presented in Australian dollars, which is the Fund's functional currency.

For the year ended 30 June 2014

Significant accounting policies (continued) $3.$

Basis of consolidation $(d)$

The consolidated financial statements incorporate the financial statements of the Fund and entities controlled by the Fund. Control is achieved where the Fund has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the consolidated group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets attributable to unitholders of consolidated subsidiaries are identified separately from the Fund's unitholders. Non-controlling interests consist of the amount of those interests at the date of original business combination and the non-controlling share of changes in net assets attributable to unitholders since the date of the combination.

i. Stapled scheme

Centuria Diversified Property Fund was established for the purpose of facilitating a relationship between CDPF Stapled Fund No. 1 and CDPF Stapled Fund No. 2. The Fund was formed by stapling units in CDPF Stapled Fund No. 1 and CDPF Stapled Fund No. 2. Unitholders in the Fund are entitled to an equal interest in each stapled entity within the Fund.

The Fund is required to appoint a parent under the stapling arrangement. CDPF Stapled Fund No. 1 has been appointed parent of the Fund. On the basis that there is no ownership interest between the entities involved in the stapling arrangement, the net assets and profit or loss of CDPF Stapled Fund No. 2 are disclosed separately as a non-controlling interest.

The stapling arrangement will cease upon the earlier of the winding up of any of the stapled entities, or any of the entities terminating the stapling arrangement.

The purchase method of accounting is used to account for business combinations including the acquisition of controlled entities. The purchase method views a business combination from the perspective of the combining entity that is identified as the acquirer. The acquirer purchases net assets and recognises, at fair value, the assets acquired and liabilities and contingent liabilities assumed, including those previously recognised by the acquiree. As the stapling arrangement does not involve one of the combining entities obtaining an ownership interest in another combining entity, no goodwill or excess of acquirer's interest in the net fair value of an acquiree's identifiable assets, liabilities and contingent liabilities over acquisition cost is recognised in relation to the stapling arrangement.

For the year ended 30 June 2014

$3.$ Significant accounting policies (continued)

$(d)$ Basis of consolidation (continued)

ii. Subsidiaries

In addition to the stapled entities noted above, which are deemed subsidiaries, the consolidated financial statements include the assets, liabilities and results of the following subsidiaries:

	Controlling Interest (%)
	30 Jun 2014
Centuria Diversified Property Trust	-50	50

CDPF Stapled Fund No. 1 holds a 50% interest in Centuria Diversified Property Trust. The remaining 50% interest is held by CDPF Stapled Fund No. 2. As a result, 50% of the net assets and profit or loss of Centuria Diversified Property Trust are disclosed separately as a non-controlling interest.

$(e)$ Cash and cash equivalents

Cash and cash equivalents comprise of cash on hand and cash in banks, net of outstanding bank overdrafts.

$(f)$ Investments

i. Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognised at fair value plus any directly attributable transaction costs and are subsequently stated at amortised cost using the effective interest rate method, less impairment losses.

ii. Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both. Investment property is initially recorded at cost which includes acquisition costs. Subsequently, the investment property is measured at fair value with any change therein recognised in profit or loss.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.

For the year ended 30 June 2014

Significant accounting policies (continued) $3.$

Assets classified as held for sale $(g)$

Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. The Responsible Entity must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Assets held for sale are measured at the lower of their previous carrying amount and fair value.

$(h)$ Impairment

The carrying amounts of the Fund's assets, other than those recorded at fair value, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised directly in profit or loss.

$\left( i \right)$ Financial instruments

i. Derivative financial instruments

The Fund holds derivative financial instruments to hedge its interest rate exposures.

Derivatives are initially recognised at fair value and attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and the resulting gain or loss is recognised in profit or loss unless the derivative is designated and effective as a hedging instrument.

The fair value of interest rate swaps is the estimated amount that the entity would receive or pay to transfer the swap at reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

ii. Cash and fair value hedges

The Fund has not applied hedge accounting to its derivative financial instruments.

$(i)$ Payables

Trade payables and other accounts payable are recognised when the Fund becomes obliged to make future payments resulting from the purchase of goods and services.

Borrowings $(k)$

Borrowings are recorded initially at fair value, net of any attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest rate method with any difference between the initial and recognised amount and redemption value being recognised in profit or loss over the period of borrowing and are derecognised when the contractual obligations are discharged, cancelled or expire.

For the year ended 30 June 2014

$3.$ Significant accounting policies (continued)

$(1)$ Provisions

A provision is recognised if, as a result of a past event, the Fund has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

Debt and equity instruments $(m)$

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. In accordance with AASB 132, unitholders funds are classified as 'equity instruments' and are therefore classified as equity and disclosed as such in the consolidated statement of financial position.

$(n)$ Applications and redemptions

Applications received for units in the Fund are recorded net of any entry fees payable prior to the issue of units in the Fund. Redemptions from the Fund are recorded gross of any exit fees payable after cancellation of units redeemed. The application and redemption prices are determined as the net asset value of the Fund adjusted for the estimated transaction costs divided by number of units on issue on the date of the application or redemption.

$(0)$ Revenue

l. Rental income

Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease. Rental income not received at reporting date is reflected in the consolidated statement of financial position as a receivable. If rents are paid in advance these amounts are recorded as payables in the consolidated statement of financial position.

Lease incentives granted are recognised as an integral part of the net consideration agreed for the use of the leased premises, irrespective of the incentive's nature or form or the timing of payments. The aggregate cost of lease incentives are recognised as a reduction of rental income on a straight-line basis over the lease term.

Contingent rents based on the future amount of a factor that changes other than with the passage of time are only recognised when due.

ii. Recoverable outgoings

Recovery of outgoings are recognised on an accrual basis.

iii. Interest income

Interest income is recognised in profit or loss as it accrues, using the effective interest rate of the instrument calculated at the acquisition or origination date.

For the year ended 30 June 2014

Significant accounting policies (continued) $3.$

Expenses $(p)$

i. Finance costs

Finance costs include interest expense and amortised borrowing costs. Interest expense is recognised in profit or loss as it accrues. Finance costs are recognised using the effective interest rate applicable to the financial liability.

ii. Other expenses

All other expenses, including management fees, are recognised in profit or loss on an accruals basis. Other operating expenses include legal, accounting and audit fees.

$(a)$ Distribution and taxation

Under current legislation the Fund is not subject to income tax when its taxable income (including assessable realised capital gains) is distributed in full to the unitholders. The Fund ordinarily fully distributes its distributable income, calculated in accordance with the Fund constitution and applicable taxation legislation, to the unitholders who are presently entitled to the income under the constitution.

Under current legislation, and in accordance with the Fund's constitution, the Fund is subject to income tax at a rate 46.50% on the balance of taxable income not distributed to the unitholders. In the current year, the Fund did not have any taxable income to distribute.

Investments and financial instruments held at fair value may include unrealised capital gains. Should such a gain be realised that portion of the gain that is subject to capital gains tax will be distributed so that the Fund is not subject to capital gains tax.

Realised capital losses are not distributed to unitholders but are retained in the Fund to be offset against any future realised capital gains. If realised capital gains exceed realised capital losses the excess is distributed to the unitholders.

Distributions paid and payable are recognised as distributions within equity. A liability is recognised where distributions have not been paid. Distributions paid are included in cash flows from financing activities in the consolidated statement of cash flows.

Goods and services tax $(r)$

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) recoverable from the Australian Taxation Office (ATO) as an input tax credit (ITC).

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included in receivables or payables in the consolidated statement of financial position.

Cash flows are included in the consolidated statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the ATO is classified as operating cash flows.

For the year ended 30 June 2014

		30 Jun 2014 Ś	30 Jun 2013 S
4.	Interest income
	Interest income arising from:
	Cash and cash equivalents	41,542	38,307
		41,542	38,307
5.	Auditor's remuneration
	KPMG (2013: KPMG):
	Audit and review of financials	24,472
		24,472	27,761 27.761
6.	Cash and cash equivalents
	Cash and bank balances	2,760,329
		2,760,329	2,667,624 2,667,624
	Reconciliation of profit for the year to net cash flows from operating activities:
	Net profit for the year	6,677,723	4,020,776
	Adjustments for:
	Gain on fair value of investment property	(2,689,417)	(1,092,285)
	Gain on fair value of derivatives	(1,502,518)	(877, 023)
	Borrowing cost amortisation	156,013	141,487
	Changes in operating assets and liabilities:
	Decrease in receivables	423,059	518,734
	(Increase)/decrease in other assets	(32, 691)	31,763
	Decrease in payables	(66, 200)	(1, 111, 557)
	Increase in provisions	122,943
	Net cash generated by operating activities	3,088,912	1,631,895
7.	Trade and other receivables
	Current
	Trade debtors	8,809	15,889
	Deferred rent and lease incentives	1,016,006	1,172,388
	Other current receivables	110,667	29,133
		1,135,482	1,217,410
	Non-current
	Deferred rent and lease incentives	2,962,144
		2,962,144	3,303,275 3,303,275

Refer to Note 19 for amounts receivable from related parties.

Refer to Note 18 for details on fair value measurement and the Fund's exposure to risks associated with financial assets (deferred rent and lease incentives and other receivables are not considered to be financial assets). The Fund expects to recover the total carrying amount of receivables.

For the year ended 30 June 2014

		30 Jun 2014 S	30 Jun 2013 s
8.	Investment property
	Opening gross balance	107,150,000	106,200,000
	Capital improvements	1.108.096	396,636
	Change in deferred rent and lease incentives	(497.513)	(538.921)
	Gain on fair value	2,689,417	1,092,285
	Closing gross balance	110,450,000	107,150,000
	Less: Total deferred rent and lease incentives	(3,978,150)	(4, 475, 663)
	Closing net balance	106,471,850	102,674,337
				Last
		30 June 2014	30 June 2014	Independent
	Property	Fair Value	Valuer	Valuation
	3 Carlingford Road, Epping	16,500,000	Knight Frank	30 Jun 2014
	44 Hampden Road, Artarmon	7.300.000	DTZ.	30 Jun 2014
	1 Richmond Road, Keswick	25,150,000	JLL	30 Jun 2014
	9 Help Street, Chatswood	43,000,000	Colliers	30 Jun 2014
	14 Mars Road, Lane Cove	18,500,000	Colliers	30 Jun 2014
		110,450,000

At 30 June 2014, the Fund had no commitments to future capital improvements of its investment properties. All properties owned by the Fund are freehold properties other than 44 Hampden Road, Artarmon which is a leasehold property with a lease expiry of 20 March 2114.

Leases as lessor

The Fund leases out its investment properties under operating leases. The future minimum lease payments receivable under non-cancellable leases are as follows:

	30 Jun 2014	30 Jun 2013
Less than one year	12,124,747	11,689,231
Between one and five years	29.744.620	22,907,128
More than five years	9.839.272	4.737.080
	51.708.639 and a communication of the state of the communication of the communication of the communication of the communication of the communication of the communication of the communication of the communication of the communication	39,333,439

Fair value measurement

The fair value measurement of investment property has been categorised as a Level 3 fair value based on the inputs to the valuation techniques.

Reconciliation of Level 3 fair value measurement

Balance at 1 July 2013	102.674.337
Purchases	1.108.096
Total gains or losses: In profit or loss	2.689.417
Balance at 30 June 2014	106.471.850 and the construction of the construction of the construction of the construction of the con-

For the year ended 30 June 2014

8. Investment property (continued)

Valuation techniques and significant unobservable inputs

The fair value of the investment properties were determined by the directors of the Responsible Entity or by an external, independent valuation company having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Fair value is 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 willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

The valuations were prepared by considering the following valuation methodologies:

• . Capitalisation Approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property's market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the general characteristics of the property.
• . Discounted Cash Flow Approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs. The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net present value for the property.
• · Direct Comparison Approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and compares the equivalent rates to the property being valued to determine the property's market value.

The valuations reflect, when appropriate; 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 the 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.

The following table outlines the significant unobservable inputs used in the above valuation techniques and their relationship with the fair value measurement:

Significant unobservable inputs	Range of inputs	Relationship with fair value
Discount rate	$9.25\%$ to $10.00\%$	The higher/lower the rate, the
Terminal yield	9.25% to 10.00%	lower/higher the fair value. The higher/lower the rate, the
Capitalisation rate	8.5% to 10.00%	lower/higher the fair value. The higher/lower the rate, the
Vacancy period	6 to 14 months	lower/higher the fair value. The longer/shorter the period,
Rental growth rate	2.42% to 3.50%	the lower/higher the fair value. The higher/lower the rate, the higher/lower the fair value.

For the year ended 30 June 2014

		30 Jun 2014	30 Jun 2013
9.	Prepayments
	Current
	Prepaid rates, taxes and other property outgoings	233.656	200,965
		233 656	200,965
10.	Trade and other payables
	Current
	Trade creditors and expenses payable	625,953	445,715
	Interest payable	45.926	92.654
	Security deposits held	11.639	4.675
	Accrued capital expenditure	33,800
	Other current creditors and accruals	413.746	620,420
		1.131.064	1,163,464

Refer to Note 19 for amounts payable to related parties.

Refer to Note 18 for details on the Fund's exposure to risks associated with financial liabilities (other creditors and accruals are not considered to be financial liabilities).

$11.$ Borrowings

Current
Convertible note - related party	1 281 398
Secured Ioan	66.662.592	66,662,592
Borrowing costs	(32.500)	(158,513)
	67 911 490	66,504,079
Non-current
Convertible note - related party		1,351,316
		1,351,316

The related party convertible note issued to Centuria Capital Limited bears interest at 10% and is unsecured. The note matures on 30 September 2014. The noteholder may at any time on or after, but not before, the maturity date, convert the convertible note into issued units in the Fund at an issue price calculated on the conversion date in accordance with the Fund's constitution.

The secured loan is secured by first mortgages over the Fund's investment properties and a first ranking fixed and floating charge over all assets of the Fund. The interest rate on the loan (including the impact of the interest rate swaps, margin fee and line fee) is 7.56% as at 30 June 2014. The loan is due for repayment on 30 September 2014. Refer to Note 21 for details on the debt facility refinance subsequent to 30 June 2014.

At 30 June 2014, the Fund had no undrawn facilities on its secured loan.

The secured loan has covenants in relation to Loan to Value Ratio ("LVR"), Interest Coverage Ratio ("ICR"). Weighted Average Lease Expiry ("WALE") and Forward Looking Interest Coverage Ratio ("FLICR") which it has complied with during the year.

Refer to Note 18 for details on the Fund's exposure to risks associated with financial liabilities.

For the year ended 30 June 2014

$12.$ Derivatives

Interest rate swap contracts

Under interest rate swap contracts, the Fund agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Fund to mitigate the risk of changing interest rates on the cash flow exposures on the variable rate debt held. The following table details the specific instruments held at reporting date, showing the notional principal amounts and contracted fixed interest rate of each contract:

Type of contract	Expiration	Contracted fixed interest rate	Notional amount of contract	Fair value of assets 5	Fair value of liabilities
30 Jun 2014
Interest rate swap	23 Mar 15	4.63%	4.843.750		(71,060)
Interest rate swap	23 Mar 15	4.97%	13.068.750		(224, 424)
Interest rate swap	23 Mar 15	6.16%	23,875,000		(619,092)
Interest rate swap	23 Mar 15	5.90%	13.170.000		(316.305)
			54,957,500		(1, 230, 881)
30 Jun 2013
Interest rate swap	23 Mar 15	4.63%	4,843,750		(152, 632)
Interest rate swap	23 Mar 15	4.97%	13,068,750		(504, 697)
Interest rate swap	23 Mar 15	6.16%	23,875,000	$\bullet$	(1,378,520)
Interest rate swap	23 Mar 15	5.90%	13,170,000	٠	(697, 550)
			54.957.500		(2.733.399)

30 Jun 2014

`\$

30 Jun 2013

\$

Refer to Note 18 for details on the Fund's exposure to risks associated with financial liabilities.

$13.$ Provisions

Non-current Incentive fees	한 번 좋고도 122,943
	122.943
Incentive fees	16일 4
Opening balance
Provisions made during the year	122,943
Provisions used during the year
Closing balance	122.943

The Fund has entered into an arrangement whereby an incentive fee is payable to the Responsible Entity when an investment property is sold, provided certain performance benchmarks are achieved. The fee is calculated as 15.00% of the excess of the net sale price over the total acquisition cost on a property by property basis.

The provision is classified as non-current when settlement of the liability is not expected to occur in the next 12 months.

For the year ended 30 June 2014

$\mathcal{O}(\mathcal{O}_X)$ . Since $\mathcal{O}_X$ , we can consider

$\mathcal{F}_2$ , and $\mathcal{F}_2$ $\sim$

		30 Jun 2014		30 Jun 2013
		Units		Units
14.	Issued units - unitholders of the parent
	Opening balance	82.823.960	29,255,257	82,823,960	29,255,257
	Applications	$-1$		-
	Redemptions
	Closing balance	82.823.960	29,255,257	82,823,960	29,255,257

CDPF Stapled Fund No. 1 has been designated parent of the Fund. All units in the Fund are of the same class and carry equal rights to capital and income distributions.

			30 Jun 2014	30 Jun 2013 S
15.	Accumulated losses
	Opening balance		(9,276,282)	(10, 197, 245)
	Net profit attributable to unitholders of the parent		3,829,710	1,831,782
	Distributions to unitholders		(910, 997)	(910,819)
	Closing balance		(6,357,569)	(9,276,282)
		30 Jun 2014		30 Jun 2013
		Units		Units
16.	Non-controlling interest
	Opening balance	82.823.960	18,332,378	82,823,960	17,054,204
	Applications
	Redemptions
	Distributions to unitholders		(910, 996)		(910, 820)
	Other comprehensive income
	Net profit attributable to non-controlling interest		2,848,013		2,188,994
	Closing balance	82,823,960	20,269,395	82,823,960	18,332,378

On the basis that there is no ownership interest between the entities involved in the stapling arrangement, the net assets and profit or loss of CDPF Stapled Fund No. 2 are disclosed separately as a non-controlling interest. $20 \text{ km}$ $20 \, \text{km}$ 2042

		30 Jun 2014		30 Jun 2013
		Cents per unit		Cents per unit
17.	Distributions to unitholders
	September quarter	0.55	459.143	0.55	459,137
	December quarter	$0.55 -$	459.275	0.55	459.083
	March quarter	0.54 $\mathcal{R}=\mathcal{R}$ .	449.291	0.54	449.156
	June quarter and the sea	$0.55 -$	454.284	0.55	454,263
		2.19	.821.993	2.19	.821,639

For the year ended 30 June 2014

Financial instruments $18.$

A. Fair value

The fair values of financial assets and financial liabilities, together with the carrying amounts in the consolidated statement of financial position are as follows:

	Measurement	Fair Value Hierarchy	Carrying amount	Fair value
30 Jun 2014			ŝ	s
Financial assets
Cash and cash equivalents	Amortised Cost	Not applicable	2.760.329
Receivables	Amortised Cost	Not applicable	8,809	2,760,329 8.809
			2,769,138	2,769,138
Financial liabilities
Payables (excluding non-financial payables)	Amortised Cost	Not applicable	717,318	717,318
Borrowings (excluding borrowing costs)	Amortised Cost	Not applicable	67,943,990	67,943,990
Interest rate swaps	Fair Value	Level 2	1,230,881	1,230,881
			69,892,189	69.892.189
30 Jun 2013
Financial assets
Cash and cash equivalents	Amortised Cost	Not applicable	2,667,624	2,667,624
Receivables	Amortised Cost	Not applicable	15.889	15.889
			2,683.513	2,683,513
Financial liabilities
Payables (excluding non-financial payables)	Amortised Cost	Not applicable	543.044	543.044
Borrowings (excluding borrowing costs)	Amortised Cost	Not applicable	68.013.908	68,013,908
Interest rate swaps	Fair Value	Level 2	2,733.399	2,733.399
			71,290.351	71.290.351

These financial assets and liabilities are recognised in accordance with the accounting policies described in Note 3 to the financial statements.

The directors of the Responsible Entity consider that the carrying amount of the financial assets and financial liabilities recorded at amortised cost in the financial statements approximates their fair value.

For the year ended 30 June 2014

• Financial instruments (continued) 18.
• A. Fair value (continued)

Valuation techniques

The fair value of financial assets and financial liabilities are determined as follows:

• . Financial assets and financial liabilities with standard terms and conditions and are traded on active liquid markets are determined with reference to quoted market prices.
• · Other financial assets and financial liabilities (excluding derivative financial instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.
• Derivative financial instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. The fair value of interest rate swaps are determined using a discounted cash flow analysis. The future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contracted interest rates, discounted at a rate that reflects the credit risk of various counterparties.

The Fund classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• . Level 1: derived from quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund can access at the measurement date.
• . Level 2: derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• . Level 3: derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement by the Responsible Entity. The Responsible Entity considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

For the year ended 30 June 2014

1. Financial instruments (continued)

A. Fair value (continued)

Fair value hierarchy

The table below sets out the Fund's financial assets and liabilities (by class) measured at fair value according to the fair value hierarchy:

	Total	Level 1	Level 2	Level 3
30 Jun 2014
Financial liabilities held at fair value
Interest rate swaps	1.230.881		1.230.881
	1.230.881		1 230 881
30 Jun 2013
Financial liabilities held at fair value
Interest rate swaps	2,733,399		2 733 399
	2.733.399		2.733.399

There were no transfers between Level 1 and Level 2 during the period.

The Responsible Entity has an established control framework with respect to the measurement of fair values. This framework includes an internal team of experts who have been assigned the responsibility of all significant fair value measurements and who report directly to the directors on a regular basis.

The internal team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair value, then the team assesses and documents the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Accounting Standards, including the level in the fair value hierarchy that the resulting fair value estimate should be classified.

В. Capital risk management

The capital structure of the Fund consists of cash and cash equivalents and the proceeds from the issue of the units of the Fund.

The risk associated with meeting redemption requests is minimal as the Responsible Entity has discretion in approving redemptions.

The Fund has no restrictions or specific capital requirements on the application and redemption of units, other than the approval of the Responsible Entity.

The Fund's overall investment strategy remains unchanged from the prior year.

$C_-$ Financial risk management objectives

The Fund is exposed to a variety of financial risks as a result of its activities. These risks include market risk (interest rate risk), credit risk and liquidity risk. The Fund's risk management and investment policies seek to minimise the potential adverse effects of these risks on the Fund's financial performance.

$\hat{r}$

For the year ended 30 June 2014

• 1. Financial instruments (continued)
• D. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Fund's activities expose it primarily to the financial risks of changes in interest rates. The Fund enters into derivative financial instruments to manage its exposure to interest rate risk and these include interest rate swaps that the Fund has entered into to mitigate the risk of rising interest rates.

There has been no change to the Fund's exposure to market risks or the manner in which it manages and measures the risk from the previous year.

Interest rate risk management

$\mathcal{A}(\mathcal{A})=\mathcal{A}(\mathcal{A})\mathcal{A}(\mathcal{A})=\mathcal{A}(\mathcal{A})\mathcal{A}$

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at reporting date:

		30 Jun 2014		30 Jun 2013
	Note	Effective interest rate	Total 5	Effective interest rate	Total \$
Financial assets
Cash and cash equivalents	6	143%	2,760,329	1.08%	2,667,624
			2760.329		2,667,624
Financial liabilities
Borrowings (excluding
borrowing costs)	11	4.03%	67,943,990	5.36%	68.013.908
Interest rate swaps	12	568%	1 230 881	5.87%	2,733,399
			69.174,871		70.747.307

For the year ended 30 June 2014

18. Financial instruments (continued)

D. Market risk (continued)

The sensitivity analysis below has been determined based on the Fund's exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period, in the case of financial assets and financial liabilities that have variable interest rates.

At reporting date, if variable interest rates had been 100 (2013: 100) basis points higher or lower and all other variables were held constant, the impact to the Fund would have been as follows:

	Variable	Sensitivity impact Rate increase Rate decrease
	$+1-$
30 Jun 2014
Net profit/(loss)	1.00%	271,331	(275,070)
		271,331	(275,070)
30 Jun 2013
Net profit/(loss)	1.00%	695.216	713,466)
		695,216	(713, 466)

The Fund's sensitivity to interest rates has decreased during the current year mainly due to the reduction in the fair value impact of the interest rate swap. The methods and assumptions used to prepare the sensitivity analysis have not changed during the year.

Е. Credit risk

The Fund has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the financial risk of financial loss from default. The Fund's exposure and the credit ratings of its counterparties are continuously monitored by the Responsible Entity.

At 30 June 2014, the main financial assets exposed to credit risk are trade and other receivables. There were no significant concentrations of credit risk to counterparties at 30 June 2014. Refer to Note 7 for details of trade and other receivables.

The credit risk on trade and other receivables is minimal because of the proven remittance history of the counterparties. Credit risk from balances with banks and financial institutions is managed by the Responsible Entity in accordance with the Fund's investment policy. Cash investments are made only with approved counterparties.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date.

For the year ended 30 June 2014

Financial instruments (continued) 18.

Liquidity risk F.

The Fund's constitution provides for the application and redemption of units and it is therefore exposed to the liquidity risk of meeting unitholder redemptions during these periods. The risk associated with meeting unitholders redemptions is minimal as the Responsible Entity has discretion in approving redemptions.

The Fund's strategy of managing liquidity risk is in accordance with the Fund's investment strategy and remains unchanged from 2013. The Fund also manages liquidity risk by maintaining adequate banking facilities and through the continuous monitoring of forecast and actual cash flows and aligning the profiles of financial assets and liabilities.

The following tables summarise the maturity profile of the Fund's financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Fund can be required to pay. The tables include both interest and principal cash flows:

	Effective interest rate	Total principal and interest	Less than 1 vear	1 to 5 years	5+ years
30 Jun 2014
Trade and other payables	0.00%	717.318	717318
Borrowings	4.03%	67 976 288	67.976.288
Derivative financial instruments	5.68%	1 282 800	1,282,800	그는 일이 되어 있는 일이 없다.
		69,976,406	69,976,406
30 Jun 2013
Trade and other payables	$0.00\%$	543 044	543.044
Borrowings	5.36%	71.695.848	70,310,842	1,385,006
Derivative financial instruments	5.87%	3,006,928	1,739,348	1,267,580
		75,245,820	72,593,234	2.652,586

The principal amounts included in the above borrowings is \$67,943,990 (2013: \$68,013,908).

For the year ended 30 June 2014

19. Related parties

Key management personnel

The Fund does not employ personnel in its own right. However it is required to have an incorporated Responsible Entity to manage the activities of the Fund and this is considered the key management personnel. The directors of the Responsible Entity are key management personnel of that entity and their names are:

John McBain	Resigned 19 July 2013.
Jason Huljich
Peter Done
Deepak Gupta	Resigned 22 May 2013.
Matthew Hardy	Appointed 4 July 2013.
Edward Psaltis	Appointed 4 July 2013. Resigned 2 September 2014.

The Responsible Entity is entitled to a management fee which is calculated at up to 0.60% of the gross value of assets held plus GST.

The Fund has entered into an arrangement whereby an incentive fee is payable to the Responsible Entity when an investment property is sold, provided certain performance benchmarks are achieved. The fee is calculated as 15.00% of the excess of the net sale price over the total acquisition cost of an investment property on a property by property basis.

At reporting date an amount of \$72,177 (2013: \$66,435) owing to the Responsible Entity was included in trade and other payables. The payables are non-interest bearing with payment terms and conditions consistent with normal commercial practices.

No compensation is paid directly by the Fund to any of the directors or key management personnel of the Responsible Entity.

For the year ended 30 June 2014

Related parties (continued) 19.

Responsible entity fees and other transactions

	30 Jun 2014	30 Jun 2013
Finance costs	132 030	303.511
Incentive fees expense	122.943
Leasing fees	250 342	20.328
Management fees	662.864	652.571
Property management fees	108.714	91.378
Other professional fees	46,086	12,100
	1 322 979	1.079.888

All transactions with related parties are conducted on normal commercial terms and conditions. From time to time Centuria Property Funds Limited, its directors or its director-related entities may invest in or withdraw from the Fund. These investments or withdrawals are on the same terms and conditions as those entered into by other Fund investors.

Related party investments held by the Fund

The Fund has no investments in the Responsible Entity or its associates.

Units in the Fund held by related parties

At 30 June 2014, the following related parties of the Responsible Entity hold units in the Fund:

	Units held	Interest held	Distributions	Amounts payable
		%
30 Jun 2014
Centuria Growth Bond Fund	11.119.259	13.43%	244.624
CBF1 Investment Trust 1	2.636.754	3.18%	58.008
Centuria Capital Limited	80.000	0.10%	1.760
Jason Huliich	12.408	0.01%	273
	13.848.421	16.72%	304,665
30 Jun 2013
Centuria Growth Bond Fund	11.119.259	13.43%	244.624
CBF1 Investment Trust 1	2.636.754	3.18%	58.008
Centuria Capital Limited	80.000	0.10%	1.760
Jason Huljich	12 408	0.01%	274
	13,848,421	16 72%	304,666

No other related parties of the Responsible Entity held units in the Fund.

Loans with related entities

The Fund has a convertible note issued to Centuria Capital Limited of \$1,281,398 (2013: \$1,351,316 payable) which bears interest at 10% (2013: 10%) and is unsecured. The note matures on 30 September 2014. Refer to Note 11 for the terms and conditions of the note.

For the year ended 30 June 2014

19. Related parties (continued)

Key management personnel loan disclosures

The Fund has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period.

Other transactions within the Fund

No director has entered into a material contract with the Fund since the end of the previous year and there were no material contracts involving directors' interests subsisting at year end.

20.	Parent entity disclosures	30 Jun 2014	30 Jun 2013
	Financial position
	Assets
	Current assets	23,067,598	21,333,700
	Non-current assets	16,435,966	16, 157, 601
	Total assets	39,503,564	37,491,301
	Liabilities
	Current liabilities	11,500,451	11,279,299
	Non-current liabilities		456,005
	Total liabilities	11,500,451	11,735,304
	Equity
	Issued units	29,255,257	29,255,257
	Accumulated losses	(1,252,144)	(3,499,260)
	Total equity	28,003,113	25,755,997
	Financial performance
	Profit/(loss) for the year*	981,700	(357, 163)
	Other comprehensive income
	Total comprehensive income/(loss) for the year	981,700	(357,163)

At reporting date, the Parent has not entered into any guarantees or commitments to purchase property plant and equipment, and does not have any contingent liabilities.

* Net profit attributable to members of the Parent of \$3,829,710 (2013: \$1,831,782 profit), per the consolidated statement of profit or loss and other comprehensive income, includes net profit of the Parent's subsidiaries of \$2,848,010 (2013: \$2,188,945 profit).

For the year ended 30 June 2014

$21.$ Events subsequent to reporting date

On 10 September 2014, the Responsible Entity executed a short-term extension of the current debt facility to 1 December 2014 on more favourable terms and conditions. Furthermore, the Responsible Entity is currently in advanced negotiations to refinance the debt facility for an extended period and has received offers on terms and conditions for three and five year maturities. The Responsible Entity is currently reviewing all offers at hand and are confident that an offer will be accepted and the refinance will be successfully negotiated as required, prior to the expiry of the extended debt facility in December 2014.

Contingent assets, liabilities and commitments $22.$

Unless otherwise stated in this report, the Fund has no contingent assets, liabilities or commitments as at 30 June 2014.

23. Additional information

The registered office and principal place of business of the Fund and the Responsible Entity are as follows:

Registered office: Suite 39.01, Level 39, 100 Miller Street NORTH SYDNEY NSW 2060

Principal place of business: Suite 39.01, Level 39, 100 Miller Street NORTH SYDNEY NSW 2060

Centuria Diversified Property Fund Directors' declaration

For the year ended 30 June 2014

The directors of Centuria Property Funds Limited, the Responsible Entity of Centuria Diversified Property Fund ('the Fund'), declare that:

• in the directors' opinion, there are reasonable grounds to believe that the Fund will be able to pay its debts $(a)$ as and when they become due and payable; and
• the attached financial statements and notes thereto are in compliance with International Financial $(b)$ Reporting Standards, as stated in Note 3(a) to the financial statements;
• in the directors' opinion, the attached financial statements and notes thereto are in accordance with the $(c)$ Corporations Act 2001, including compliance with Australian Accounting Standards and giving a true and fair view of the Fund's financial position as at 30 June 2014 and of its performance for the financial year ended on that date.

Signed in accordance with a resolution of the board of directors of the Responsible Entity made pursuant to s.295(5) of the Corporations Act 2001.

Peter Done Director

Dated at Sydney this / 0th day of Septeme

Jasói Director

2014

Independent auditor's report to the unitholders of Centuria Diversified Property Fund (a stapled entity comprising CDPF Stapled Fund No. 1 and CDPF Stapled Fund No. 2)

We have audited the accompanying financial report of Centuria Diversified Property Fund (a stapled entity comprising CDPF Stapled Fund No. 1 and CDPF Stapled Fund No. 2) (the Stapled Entity), which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 23 comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration.

Directors' responsibility for the financial report

The directors of Centuria Property Funds Limited (the Responsible Entity) are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 3(a), the directors of the Responsible Entity also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply 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 in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Stapled Entity's financial position, and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor's opinion

In our opinion:

• (a) the financial report of Centuria Diversified Property Fund is in accordance with the Corporations Act 2001, including:
• (i) giving a true and fair view of the Stapled Entity's financial position as at 30 June 2014 and of its performance for the year ended on that date; and
• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
• (b) the financial report also complies with International Financial Reporting Standards as disclosed in note $3(a)$ .

KPMG

Steven Gatt Partner

Sydney

IO

September 2014