DEXUS — Annual Report 2015

Aug 11, 2015

Results for announcement to the market

DEXUS Property Group ARSN 089 324 541

Financial reporting for the year ended 30 June 2015

DEXUS Diversified Trust1
	30 June 2015	30 June 2014	%
	\$m	\$m	Change
Revenue from ordinary activities	858.9	699.8	22.7%
Net profit attributable to security holders after tax	618.7	406.6	52.2%
Funds from operations (FFO)2	544.5	446.6	21.9%
Distribution to security holders	385.6	315.4	22.3%
	CPS	CPS
Funds from operations per security2,3	59.5	54.4	9.3%
Distributions per security for the period ending:
31 December 2014	19.68	18.42	6.8%
30 June 2015	21.36	19.14	11.6%
Total distributions3,4	41.04	37.56	9.3%
Payout ratio (distributions as a % of FFO)	69.0%	69.0%	-
Basic and diluted earnings per security	67.58	49.57	36.3%
Franked distribution amount per security	-	-	-
	\$m	\$m
Total assets	10,090.0	9,750.9	3.5%
Total borrowings	2,774.0	2,931.6	-5.4%
Security holders equity	6,777.3	6,053.3	12.0%
Market capitalisation	7,086.9	6,030.8	17.5%
	\$ per security	\$ per security
Net tangible assets3	6.68	6.36	5.0%
Securities price3	7.30	6.66	9.6%
Securities on issue3	970,806,349	905,531,797
Record date	30 Jun 2015	30 Jun 2014
Payment date	31 Aug 2015	29 Aug 2014

Results for announcement to the market

Results commentary

Refer to the attached ASX release for a commentary on the results of DEXUS Property Group.

Details of joint ventures and associates

	Ownership Interest		Share of net profit after tax
	30 June 2015	30 June 2014	12 months ended 30 June 2015	12 months ended 30 June 2014
Name of entity	%	%	\$m	\$m
Bent Street Trust	33.3	33.3	29.2	13.7
DEXUS Creek Street Trust	50.0	50.0	1.7	7.3
DEXUS Martin Place Trust	50.0	50.0	13.4	5.1
Grosvenor Place Holding Trust	50.0	50.0	14.7	18.2
Site 6 Homebush Bay Trust	50.0	50.0	2.5	2.7
Site 7 Homebush Bay Trust	50.0	50.0	2.8	3.7
DEXUS 480 Q Holding Trust	50.0	50.0	7.0	3.3
DEXUS Kings Square Trust	50.0	50.0	2.4	13.5
DEXUS Office Trust Australia	50.0	50.0	182.6	(9.0)
DEXUS Industrial Trust Australia	50.0	50.0	(4.2)	(0.2)
DEXUS Eagle Street Pier Trust	50.0	50.0	-	-

Distribution Reinvestment Plan (DRP)

As announced on 13 December 2010, the DRP has been suspended until further notice. As a consequence, the DRP will not operate for this distribution payment.

• 1. For the purposes of statutory reporting, the stapled entity, known as DXS, must be accounted for as a consolidated group. Accordingly, one of the stapled entities must be the "deemed acquirer" of all other entities in the group. DEXUS Diversified Trust has been chosen as the deemed acquirer of the balance of the DXS stapled entities, comprising DEXUS Industrial Trust, DEXUS Office Trust and DEXUS Operations Trust.
• 1. On 1 July 2014, the Group adopted the Property Council of Australia definition of FFO. Comparative information has been adjusted to reflect this change. The Directors consider FFO to be a measure that reflects the underlying performance of the Group. FFO comprises net profit/loss after tax attributable to stapled security holders calculated in accordance with Australian Accounting Standards and adjusted for: property revaluations, impairments, derivative and FX mark to market impacts, fair value movements of interest bearing liabilities, amortisation of tenant incentives, gain/loss on sale of certain assets, straight line rent adjustments, deferred tax expense/benefit, rental guarantees, coupon income and distribution income net of funding costs.
• 1. On 29 October 2014, the Group announced a one-for-six consolidation of DEXUS Property Group stapled securities. The consolidation was completed on 14 November 2014. Where the number of securities held by a security holder following the consolidation resulted in a fraction of a security, the fraction was rounded up to the nearest whole number. Comparative information has been restated to reflect the one-for-six consolidation.
• 1. The distribution for the period 1 July 2014 to 30 June 2015 is the aggregate of the distributions from DEXUS Diversified Trust and DEXUS Office Trust (DEXUS Operations Trust and DEXUS Industrial Trust did not pay a distribution during the period). The Annual Tax Statement will provide details of the components of DXS's distributions.

DEXUS Property Group

(ARSN 089 324 541)

Financial Report 30 June 2015

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Contents Page

Directors' Report1
Auditor's Independence Declaration 42
Consolidated Statement of Comprehensive Income 43
Consolidated Statement of Financial Position 44
Consolidated Statement of Changes in Equity 45
Consolidated Statement of Cash Flows 46
About this Report 47
Notes to the Financial Statements 50
Directors' Declaration 97
Independent Auditor's Report 98

DEXUS Property Group (DXS) (ASX Code: DXS) consists of DEXUS Diversified Trust (DDF) (ARSN 089 324 541), DEXUS Industrial Trust (DIT), DEXUS Office Trust (DOT) and DEXUS Operations Trust (DXO), collectively known as DXS or the Group.

The registered office of the Group is Level 25, Australia Square, 264-278 George Street, Sydney, NSW 2000.

Under Australian Accounting Standards, DDF has been deemed the parent entity for accounting purposes. Therefore the DDF consolidated Financial Statements include all entities forming part of DXS.

All ASX and media releases, Financial Statements and other information are available on our website: www.dexus.com

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Diversified Trust (DDF or the Trust) present their Directors' Report together with the consolidated Financial Statements for the year ended 30 June 2015. The consolidated Financial Statements represents DDF and its consolidated entities, DEXUS Property Group (DXS or the Group).

The Trust together with DEXUS Industrial Trust (DIT), DEXUS Office Trust (DOT) and DEXUS Operations Trust (DXO) form the DEXUS Property Group stapled security.

1 Directors and Secretaries

1.1 Directors

The following persons were Directors of DXFM at all times during the year and to the date of this Directors' Report, unless otherwise stated:

Directors	Appointed
Christopher T Beare	4 August 2004
Elizabeth A Alexander, AM	1 January 2005
Penny Bingham-Hall	10 June 2014
John C Conde, AO	29 April 2009
Tonianne Dwyer	24 August 2011
Craig D Mitchell	12 February 2013
W Richard Sheppard	1 January 2012
Darren J Steinberg	1 March 2012
Peter B St George	29 April 2009

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2015 are as follows:

Brett D Cameron LLB/BA (Science & Technology), GAICD Appointed: 31 October 2014

Brett is the General Counsel and Company Secretary of DEXUS Property Group companies and is responsible for the legal function, company secretarial services and compliance, risk and governance systems and practices across the Group.

Prior to joining DEXUS, Brett was Head of Legal for Macquarie Real Estate (Asia) and has held senior legal positions at Macquarie Capital Funds in Hong Kong and Minter Ellison in Sydney and Hong Kong. Brett has 19 years' experience as in-house counsel and in private practice in Australia and in Asia, where he worked on real estate structuring and operations, funds management, mergers and acquisitions, private equity and corporate finance across a number of industries.

Brett graduated from The University of New South Wales and holds a Bachelor of Laws and a Bachelor of Arts (Science and Technology) and is a member of the Law Societies of New South Wales and Hong Kong. Brett is also a graduate of the Australian Institute of Company Directors.

Scott D Mahony B Bus (Acc) MBA (e-commerce) Grad Dip (Applied Corporate Governance) AGIA, RMIA Appointed: 1 April 2014

Scott is the General Manager, Compliance, Risk and Governance and is responsible for the development, implementation and oversight of DEXUS's compliance, property & corporate risk management and corporate governance programs.

Scott joined DEXUS in October 2005 after two years with Commonwealth Bank of Australia as a Senior Compliance Manager. Prior to this, Scott worked for over 11 years for Assure Services & Technology (part of AXA Asia Pacific) where he held various management roles.

Scott graduated from Charles Sturt University with a Bachelor of Business (Accountancy), a Graduate Diploma in Business Administration and an MBA. He has completed a Graduate Diploma in Applied Corporate Governance through the Governance Institute of Australia, and is a member of both the Risk Management Institution of Australasia and the Governance Institute of Australia.

2 Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors' meetings held during the year and each Director's attendance at those meetings is set out in the table below. The Directors met 11 times during the year. Ten Board meetings were main meetings and one meeting was held to consider specific business.

	Main meetings held	Main meetings attended	Specific meetings held	Specific meetings attended
Christopher T Beare	10	10	1	1
Elizabeth A Alexander, AM	10	10	1	1
Penny Bingham-Hall	10	10	1	1
John C Conde, AO	10	10	1	1
Tonianne Dwyer	10	10	1	1
Craig D Mitchell	10	10	1	1
W Richard Sheppard	10	10	1	1
Darren J Steinberg	10	10	1	1
Peter B St George	10	10	1	1

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During 2014, the Group undertook a detailed review of its Board Committee structure which resulted in the implementation of a streamlined Board Committee structure from 1 September 2014.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 September 2014 and 30 June 2015 and each Director's attendance at those meetings.

		Board Audit Committee		Board Risk Committee		Board Nomination Committee		Board People & Remuneration Committee
	held	attended	held	attended	held	attended	held	attended
Christopher T Beare	-	-	-	-	3	3	4	4
Elizabeth A Alexander, AM	3	3	-	-	-	-	-	-
Penny Bingham-Hall	-	-	4	4	-	-	4	4
John C Conde, AO	-	-	-	-	3	3	4	4
Tonianne Dwyer	3	3	4	4	-	-	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	3	3	4	4	3	3	-	-
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	3	3	4	4	-	-	-	-

Craig D Mitchell and Darren J Steinberg were not members of any Board Committees during the year ended 30 June 2015.

Elizabeth A Alexander and Tonianne Dwyer were also Directors of DWPL and attended Board meetings during the year ended 30 June 2015 (refer note 22).

2 Attendance of Directors at Board meetings and Board Committee meetings (continued)

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 July 2014 and 31 August 2014 and each Director's attendance at those meetings.

						Board Nomination,
		Board Audit, Risk &		Board		Remuneration
	Sustainability Committee			Compliance Committee		& Governance Committee		Board Finance Committee
	held	attended	held	attended		held attended	held	attended
Christopher T Beare	1	1	-	-	1	1	1	1
Elizabeth A Alexander, AM	1	1	-	-	-	-	-	-
Penny Bingham-Hall	-	-	-	-	-	-	-	-
John C Conde, AO	-	-	-	-	1	1	-	-
Tonianne Dwyer	-	-	1	1	1	1	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	1	1	-	-	-	-	1	1
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	-	-	-	-	-	-	1	1

3 Remuneration report

Overview

The Remuneration Report has been prepared in accordance with the Corporations Act and relevant accounting standards. Whilst the Group is not statutorily required to prepare such a report, the Board continues to believe that the disclosure of the Group's remuneration practices is in the best interests of all security holders.

The Board believes that the Group's remuneration framework encourages Executives to perform in the best interests of security holders. Short term financial and operational objectives are approved annually for each Executive, promoting alignment between investor returns and the rewards an Executive can receive under the STI plan. In addition, the Board has determined a set of financial performance hurdles within the LTI plan which provide the Executive with a performance and retention incentive which is strongly linked to security holder returns over the longer-term.

The Board notes that the senior management team at DEXUS is small and focussed. Consequently, an understanding of the individual roles and accountabilities is relevant in making remuneration judgments compared to other organisations in the sector. In some cases, revised job titles reflect the broader accountabilities.

Below are the principal Key Management Personnel (KMP) remuneration-related changes during the year ended 30 June 2015, which were approved by the Board and prospectively disclosed in the 2014 Remuneration Report:

• Fixed remuneration for the Executive Director & Chief Executive Officer increased to \$1,500,000 (+\$100,000) effective 1 July 2014. This was the first fixed remuneration increase for Mr Steinberg since his commencement in March 2012 and was informed by market remuneration data and independent advice.
• Fixed remuneration for the Executive Director Finance & Chief Operating Officer increased to \$900,000 (+\$125,000) effective 1 July 2014. Mr Mitchell's increase was based on peer comparison within the property industry and financial services industries, noting his increased responsibilities following a reduction in the size of the senior executive team.
• The Board Chair's base fee increased to \$375,000 (+\$25,000) effective 1 July 2014, with Board Members' base fees increasing to \$160,000 (+\$10,000). This was the first increase in Directors' fees since 2010.
• Following security holder approval at the 2014 Annual General Meeting, the aggregate Directors' fee pool was increased from \$1,750,000 to \$2,200,000. The fee pool had remained unchanged since the 2008 Annual General Meeting.

Overview (continued)

The number of securities required to be held by each Director increased from 50,000 to 100,000 (this was adjusted to 16,500 post the security consolidation undertaken in October 2014). Securities are to be purchased on-market with personal funds and are to be acquired within three years of the 2014 Annual General Meeting. Newly appointed Directors need to acquire the relevant number of securities within three years of their appointment.

Remuneration-related decisions effective 1 July 2015 approved by the Board are:

• No fixed remuneration increase for the Executive Director & Chief Executive Officer.
• No fixed remuneration increase for the Executive Director Finance & Chief Operating Officer
• Modest increases for other Executives, averaging just over 2%
• Positively amending the Long Term Incentive (LTI) plan, with Adjusted Funds From Operations (AFFO) Growth replacing Funds From Operation (FFO) Growth as a performance measure to reflect management's performance in managing maintenance capital expenditure, leasing incentives, derivative close-out costs and other one-off items.
• The intent to introduce a minimum security holding requirement for Executive KMP once an appropriate vested equity position has been achieved through the Deferred STI and LTI plans which were first introduced in 2012.

This Remuneration Report has been prepared in accordance with AASB 124 Related Party Disclosures and section 300A of the Corporations Act 2001. The information provided in this Report has been audited in accordance with the provisions of section 308 (3C) of the Corporations Act 2001.

Key Management Personnel

In this report, Key Management Personnel (KMP) are those individuals having the authority and responsibility for planning, directing and controlling the activities of the Group, either directly or indirectly. They comprise:

• Non-Executive Directors
• Executive Directors
• Key Executives considered KMP under the Corporations Act 2001 (Executive KMP)

Below are the individuals determined to be KMP of the Group, classified between Non-Executive Directors, Executive Directors and Executive KMP:

Non-Executive Directors

Non-Executive Director	Title	KMP FY14	KMP FY15
Christopher T Beare	Chair		
Elizabeth A Alexander AM	Director		
Penelope Bingham-Hall	Director	Part-year	
John C Conde AO	Director		
Tonianne Dwyer	Director		
W Richard Sheppard	Director		
Peter B St George	Director		
Barry R Brownjohn	Director	Part-year	-
Stewart F Ewen OAM	Director	Part-year	-

Key Management Personnel (continued)

Executive Directors

Executive Directors	Position	KMP FY14	KMP FY15
Darren J Steinberg	Executive Director and Chief Executive Officer		
Craig D Mitchell	Executive Director Finance and Chief Operating Officer		

Executive KMP

Executive KMP	Position	KMP FY14	KMP FY15
Kevin L George	Executive General Manager, Office & Industrial		
Ross G Du Vernet	Executive General Manager, Strategy, Transactions & Research		

Board People & Remuneration Committee

The objective of the Committee is to assist the Board in fulfilling its responsibilities to oversee all aspects of Director and Executive remuneration and also oversee aspects of Human Resources management. The primary accountabilities of the Committee are to review and recommend to the Board:

• CEO & Executive succession plans
• Remuneration structures, including design and operation of employee incentive plans
• CEO & Executive performance objectives, evaluation and remuneration outcomes
• Non-Executive Directors' base and committee fees
• Talent management and learning & development strategies
• Diversity principles and general people & culture practices

The Committee comprises three independent Non-Executive Directors. For the years ended 30 June 2014 and 2015 Committee members were:

Non-Executive Director	Title	2014	2015
John C Conde AO	Committee Chair		
Christopher T Beare	Committee Member		
Penelope Bingham-Hall	Committee Member	-	Part-year
Tonianne Dwyer	Committee Member	Part-year	Part-year
Stewart F Ewen OAM	Committee Member	Part-year	-

Mr Conde continued in his role as Committee Chair, drawing upon his extensive experience from a diverse range of appointments, including his role as President of the Commonwealth Remuneration Tribunal. The Committee's capabilities are further enhanced through the membership of Mr Beare and Ms Bingham-Hall, each of whom has significant management experience in the property and financial services sectors.

Following Mr Ewen's standing down from the Board in October 2013, Ms Dwyer joined the Committee for the remainder of FY14. She was subsequently replaced by Ms Bingham-Hall when the new Board Committee structure was implemented on 1 September 2014.

The Committee operates independently from management, and may at its discretion appoint external advisors or instruct management to compile information for its consideration. The CEO attends certain Committee meetings by invitation but is not present during discussions related to his own remuneration arrangements.

Board People & Remuneration Committee (continued)

During the year the Committee appointed Egan Associates to provide remuneration advisory services. Egan Associates was paid a total of \$27,200 for general advisory services to the Committee. The Committee is satisfied the information and general advice received from Egan Associates is free from undue influence from the KMP to whom it relates.

The 2014 Remuneration Report received positive security holder support at the 2014 Annual General Meeting with a vote of 87.1% in favour.

Executive Remuneration

Context

The Board believes that Executives should be rewarded at levels consistent with the complexity and risks involved in their positions. Incentive awards should be scaled according to the relative performance of the Group, as well as business unit performance and individual effectiveness.

The Group's remuneration principles and target remuneration structure are:

The Group requires, and needs to retain, an Executive team with significant experience in:

• the office, industrial and retail property sectors
• property management, including securing new tenancies under contemporary lease arrangements, asset valuation and related financial structuring and property development in its widest context
• capital markets, funds management, fund raising, joint venture negotiations and the provision of advice and support to independent investment partners
• treasury, tax and compliance

In this context the Committee reviews trends in employee reward structures and strategies embraced across these sectors, including:

• comparable international funds and asset managers which have an active presence in Australia;
• ASX listed entities
• salary benchmarking information from reputable industry sources such as Aon Hewitt and FIRG
• boutique property asset managers and consultants
• where relevant, information from private equity and hedge funds will be considered.

At the Executive level, the Committee reviews feedback and information from remuneration advisers, proxy advisers and institutional investors, and considers stakeholder interests at each stage of the remuneration review process.

Remuneration Structure

Remuneration Mix

The remuneration structure for Executive Directors and Executive KMP (collectively referred to as 'Executives' in this report) comprises fixed remuneration, a short term incentive and a long term incentive. The mix between these components varies according to the individual's position and is determined based on the Group's remuneration principles.

The chart below displays the remuneration structure for Executive KMPs expressed as a percentage of Fixed Remuneration at both target and outperformance (stretch) levels.

STI Plan

Purpose	The STI plan is designed to motivate and reward Executives for their annual contribution to the financial and non-financial performance of the Group.
Participation	At Target, each Executive can earn 100% of fixed remuneration under the STI plan and up to a maximum of 125% of fixed remuneration for Outperformance. 25% of the STI award is then deferred at further risk as Rights to DXS securities, subject to clawback and potential forfeiture.
Performance	The amount each Executive can earn is guided by how he/she performs against a personalised balanced scorecard of key performance indicators (KPIs) that are set at the beginning of each year. The balanced scorecard is arranged in categories and each category is weighted differently depending on the specific accountabilities of each Executive. If an Executive does not meet Threshold performance in a category, the incentive benefit under that category will be zero.
	KPIs at the Target level are set with an element of stretch against Threshold performance, which ensures that it is difficult for an Executive to achieve 100% in any category. Following the same theme, KPIs at the Outperformance level have a significant amount of stretch, and would require exceptional outcomes to be achieved. KPIs at both the Target and Outperformance levels incorporate year-on-year performance improvement.
	Aggregate performance below predetermined thresholds would result in no award being made under the STI plan.
Payment	STI payments are made in August, following the sign-off of statutory accounts and announcement of Group's annual results for the period to which the performance relates.

Remuneration Structure (continued)

STI Plan (continued)

Deferral	25% of any award under the STI plan is deferred in the form of Rights to DXS securities.
	The Rights vest ordinarily in two equal tranches, 12 and 24 months after being awarded. However, they are subject to clawback and continued employment, and are based on a deferral period commencing 1 July after the relevant performance period.
	The number of Rights awarded is based on 25% of the STI value awarded to the Executive divided by the volume weighted average price (VWAP) of securities 10 trading days either side of the first trading day of the new financial year.
Distributions	Executives will be entitled to the benefit of distributions paid on the underlying DXS securities prior to vesting, through the issue of additional Rights.
Forfeiture	Forfeiture will occur should the Executive's employment terminate within 6 months of the grant date for any reason, or if the Executive voluntarily resigns or is terminated for cause prior to the vesting date.
	Notwithstanding the above, if an Executive's employment is terminated for reasons such as retirement, redundancy, reorganisation, change in control or other unforeseen circumstances, the Board may decide that the Executive should remain in the plan as a 'good leaver'.
Alignment	The STI plan is aligned to security holder interests in the following ways:
	 as an immediate reward opportunity to attract, motivate and retain talented Executives who can influence the future performance of the Group
	 through a 25% mandatory STI deferral for Executives, allowing for future clawback of STI awards
Oversight	The CEO monitors and assesses performance of Executives as part of the Group's annual performance management cycle. The CEO makes STI recommendations to the Board People and Remuneration Committee, who subsequently make recommendations to the Board for approval.
	The CEO's own performance is assessed in a similar manner, with the Chair of the Board making recommendations to the Committee for the Board's ultimate approval.
	The Board retains the right to amend, suspend or cancel the STI plan at any time.

LTI Plan

Purpose	The LTI plan is designed to motivate and reward Executives for sustained earnings and security holder returns and is delivered in the form of Performance Rights to DXS securities.
Participation	The CEO receives an LTI grant equal to 100% of his fixed remuneration. The Executive Director Finance & Chief Operating Officer receives an LTI grant equal to 75% of his fixed remuneration and other Executive KMP 50%.
Allocation	Executives receive a grant of Performance Rights to DXS securities which are at risk and subject to performance conditions set by the Board. The number of Performance Rights granted is based on the Executive's grant value (% of fixed remuneration) divided by the volume weighted average price (VWAP) of securities ten trading days either side of the first trading day of the new financial year.
Tranches	Each grant is split into two equal tranches, with a vesting period of three and four years respectively after the grant date.

Remuneration Structure (continued)

LTI Plan (continued)

Performance Conditions	The Board sets the performance conditions for the LTI plan on an annual basis. The four performance conditions for the 2015 LTI plan remain the same as last year but with a change to one of the Internal performance conditions as explained below:
	External Performance Conditions (50%)
	 25% is based on the Group's relative performance against a Total Shareholder Return (Relative TSR) performance hurdle measured against listed peers within the A-REIT sector
	TSR represents an investor's return, calculated as the percentage difference between the initial amount invested and the final value of DXS securities at the end of the relevant period, assuming distributions were reinvested.
	 25% is based on the Group's relative performance against a Return On Equity (Relative ROE) performance hurdle measured against unlisted peers
	ROE represents the annualised composite rate of return to security holders, calculated as a percentage, comprising the change in net tangible asset value per security together with the distributions paid to security holders per security, divided by the net tangible asset value per security at the beginning on the period.
	Internal Performance Conditions (50%)
	 25% is based on the Group's performance against a predetermined Adjusted Funds From Operations (AFFO) per security growth hurdle
	Based on an internal review and cognisant of investor feedback, the Board has elected to make the change to AFFO from FFO (as used in previous year's plans) in order to reflect the impact of maintenance capex, leasing incentives, derivative close-out costs and other one-off items.
	For the purposes of these performance hurdles, AFFO is defined as per the definition adopted by the Property Council of Australia.
	 25% is based on the Group's performance against a predetermined Return on Equity (ROE) performance hurdle
	ROE represents the annualised composite rate of return to security holders, calculated as a percentage, comprising the change in net tangible asset value per security together with the distributions paid to security holders per security, divided by the net tangible asset value per security at the beginning on the period.

Remuneration Structure (continued)

LTI Plan (continued)

Vesting	Relative TSR & Relative ROE
	Vesting under both the Relative TSR & Relative ROE conditions will be on a sliding scale reflecting relative performance against a comparator group of entities.
	 Nil vesting for performance below the median of the comparator group
	 50% vesting for performance at the median of the comparator group
	Straight line vesting for performance between the 50th and 75th percentile 
	100% vesting for performance at or above the 75th percentile 
	The listed and unlisted comparator groups remain unchanged ahead of the 2015 grant. Specifically:
	 Listed: all members of the S&P/ASX 200's A-REIT Index
	 Unlisted: all members of the Mercer IPD Core Wholesale Property Fund Index
	The Board reserves the right to review the comparator groups annually, with relative performance monitored by an independent external advisor at 30 June each year.
	AFFO Growth & ROE
	Vesting under both the AFFO Growth & ROE measures will be on a sliding scale reflecting performance against predetermined performance conditions set by the Board.
	 Nil vesting for below Target performance
	 50% vesting for Target performance
	 Straight line vesting between Target and Outperformance
	 100% vesting for Outperformance
	AFFO Growth is the implied compound annual growth rate (CAGR) of the aggregate AFFO earnings per security in the three and four year vesting periods. ROE is measured as the per annum average at the conclusion of each vesting period.
	Following a review of the Group's strategy and having completed extensive internal forecasting, the Board has set the internal performance conditions for the 2015 LTI grant. Due to their commercially sensitive nature, LTI performance conditions will only be disclosed at the conclusion of the vesting period in line with contemporary market practice.
Distributions	Executives are not entitled to distributions paid on underlying DXS securities prior to Performance Rights vesting.
Forfeiture	If the pre-determined performance conditions are not met then the Performance Rights relating to that tranche will be forfeited. There is no re-testing of forfeited Rights.
	Additionally, forfeiture will occur should the Executive's employment terminate within 12months of the grant date for any reason, or if the Executive voluntarily resigns or is terminated for cause prior to the vesting date.
	Notwithstanding the above, if an Executive's employment is terminated for reasons such as retirement, redundancy, re-organisation, change in control or other unforeseen circumstances, the Committee may recommend that the Executive should remain in the plan as a 'good leaver', for decision by the Board.

Remuneration Structure (continued)

LTI Plan (continued)

Alignment	The LTI plan is aligned to security holders interests in the following ways:
	 As a reward to Executive's when the Group's overall performance exceeds specific pre determined earnings and security holder return benchmarks
	 As a reward mechanism which encourages Executive retention and at the same time allows for future forfeiture of LTI grants for financial underperformance, deliberate misrepresentation or fraud
	 By aligning the financial interests of Executives to security holders through exposure to DXS securities and Group performance
	 By encouraging and incentivising Executives to make sustainable business decisions within the Board-approved strategy of the Group
Oversight	The administration of the LTI plan is supported by the LTI plan guidelines which provide Executives with the rules of the plan and guidance as to how it is to be administered.
	Executive are prevented from hedging their exposure to unvested DXS securities. Trading in DXS securities or related products is only permitted with the permission of the CEO.
	The Group also has Conflict of Interest and Insider Trading policies in place to support the integrity of the LTI plan, which extends to family members and associates of the Executive.
	The Board has appointed Link Market Services as Trustee and Administrators of the DEXUS Performance Rights Plan Trust, which is the vehicle into which unvested units are purchased and held in trust for the Executive pending performance assessment.
	The Board retains the right to amend, suspend or cancel the LTI plan at any time.

Service Agreements

Executive service agreements detail the individual terms and conditions of employment applying to the CEO and Executives of the Group. The quantum and structure of remuneration arrangements are detailed elsewhere in this report, with the termination scenarios and other key employment terms detailed below:

CEO – Mr Steinberg

	Terms
Employment agreement	An ongoing Executive Service Agreement.
Termination by the CEO	Termination by Mr Steinberg requires a 6 month notice period. The Group may choose to place Mr Steinberg on 'leave' or make a payment in lieu of notice at the Board's discretion.
	All unvested STI and LTI awards are forfeited in this circumstance.
Termination by the Group without cause	If the Group terminates Mr Steinberg without cause, Mr Steinberg is entitled to a payment of 12 months Fixed Remuneration. The Board may (in its absolute discretion) also approve a pro-rata STI or LTI award based on part-year performance. Depending on the circumstances, the Board has the ability to treat Mr Steinberg as a 'good leaver', which may result in Mr Steinberg retaining some or all of his unvested
	STI and LTI.
Termination by the Group with cause	No notice or severance is payable in this circumstance.
Other contractual provisions and restrictions	Mr Steinberg's Executive Service Agreement includes standard clauses covering intellectual property, confidentiality, moral rights and disclosure obligations.

Executives – Messrs Mitchell, George & Du Vernet

	Terms
Employment agreement	An ongoing Executive Service Agreement.
Termination by the Executive	Termination by the Executive requires a 3 month notice period. The Group may choose to place the Executive on 'leave' or make a payment in lieu of notice at the Board's discretion.
	All unvested STI and LTI awards are forfeited in this circumstance.
Termination by the Group without cause	If the Group terminates the Executive without cause, the Executive is entitled to a combined notice and severance payment of 12 months Fixed Remuneration. The Board may (in its absolute discretion) also approve a pro-rata STI or LTI award based on part-year performance.
	Depending on the circumstances, the Board has the ability to treat the Executive as a 'good leaver', which may result in the Executive retaining some or all of his unvested STI and LTI.
Termination by the Group with cause	No notice or severance is payable in this circumstance.
Other contractual provisions and restrictions	The Executive Service Agreement includes standard clauses covering intellectual property, confidentiality, moral rights and disclosure obligations.

Performance Pay

Group Performance

FY15 Highlights

Group	Property Portfolio	Third Party Funds Management	Trading	Capital Management
Delivered a 9.3% increase in FFO and distribution per security. Increased AFFO by 19.0% to \$369.8 million	Leased 394,133 square metres of space across the total portfolio	Increased third party funds under management by 10% to \$9.6 billion	Generated trading profits of \$42.6 million	Maintained a strong balance sheet, with gearing of 28.5%, below the target range
Achieved a 15.8% one-year total security holder return and 11.5% return on equity	Maintained high occupancy 95.3% across the DEXUS office portfolio	Involved in \$863 million of transactions on behalf of third party clients	More than 60% of FY15 trading profits realised from the active repositioning of office properties	Continued to diversify and increase duration of debt, securing \$250 million of US Private Placement debt

Total Return of DXS Securities

The chart below illustrates DXS's performance against the S&P/ASX200 Property Accumulation index since listing in 2004.

Performance Pay (continued)

Group Performance (continued)

Total Return Analysis

The table below sets out DXS's total security holder return over a one, three and five year time horizon, relative to the S&P/ASX200 Property Accumulation Index:

	1 Year	3 Years	5 years
Year Ended 30 June 2015	(% per annum)	(% per annum)	(% per annum)
DEXUS Property Group	15.8%	15.8%	16.2%
S&P/ASX200 Property Accumulation Index	20.3%	18.4%	14.3%
Median - Relative TSR Comparator Group	18.9%	21.0%	17.2%

DXS achieved a 15.8% per annum return over a rolling three year basis, underperforming the S&P/ASX200 Property Accumulation index by 2.6% and the median return of the benchmark peer group by 5.2%.

Individual Performance Assessment – Balanced Scorecards

Prior to the commencement of each financial year, the Board approves the Group's strategic and operational objectives which are then translated into a series of weighted financial and non-financial Key Performance Indicators (KPIs) for management. Each Executive's Balanced Scorecard is agreed based on these indicators.

The Scorecard is divided into five major components – 'Group Financial Performance', 'Business & Portfolio Management', 'Funds Management & Transactions', 'Stakeholder Engagement' and 'People & Culture'. These components are differentially weighted to reflect the responsibilities of each Executive. For each of the components the Executive has objectives and specific initiatives set for that year. The Scorecards are agreed with the KMP Executive at the beginning of the year, reviewed at the half year and assessed for performance awards at the end of the year.

Performance Pay (continued)

Individual Performance Assessment – Balanced Scorecards (continued)

Below is a table which summarises the CEO's Balanced Scorecard for the year ending 30 June 2015.

Category & Principal KPIs	Weighting	Result	Performance Detail
Group Financial Performance Funds from operation (FFO), Return on equity (ROE), Development trading profits, like for like property net operating income (NOI) growth	30%	Above target	On balance, the Board has determined that Group Financial Performance is above target, due to FFO, ROE, and trading profits exceeding targets and market guidance, and property NOI growth in line with expectations.
Business & Portfolio Management Rent at risk, deliver divisional business plans, debt duration, operating costs, development delivery, leasing transactions	20%	At target	Consistently strong capital management and corporate disciplines have underpinned sound performance across property portfolios. Highlights include maintenance of strong credit ratings, debt WALE profile, solid occupancy rates and the delivery of business unit objectives around operational efficiency and continuous improvement.
Funds Management & Transactions Funds investment performance, funds under management (FUM) growth, strategy development, transactions effectiveness	30%	Above target	Unlisted funds growth through new and existing partners and fund investment performance exceeding expectations and continuing to outperform benchmarks.
Stakeholder Engagement Investor engagement and feedback, media and community profile, sustainability, tenant relationships, internal and external service standards	10%	Above target	Senior Executives increasing engagement with investors and new capital partners, whilst developing existing relationships. Investors and the broader market gained an increased understanding of key areas of the business through the inaugural Investor Day and the sustainability approach was enhanced. Continuing focus on improving customer relationships and community profile through innovation and service based businesses.
People & Culture Leadership effectiveness, employee engagement and culture, talent attraction and retention, succession planning, employee development	10%	Above target	Increased focus on leadership, culture and diversity to sustain a performance oriented culture was noted by the Board. Improvements in recruitment and succession processes have enabled talent strategies to be deployed through moderate growth in employee population.

The scorecards for other Executive KMP are similar to that of the CEO, but with different weightings and with KPIs tailored to their individual roles.

Performance Pay (continued)

STI Awards

Application of the KPIs against the Balanced Scorecards resulted in no executive achieving their target STI or the maximum possible STI. The following table summarises the final awards made to each Executive KMP with respect to their performance during the year ended 30 June 2015.

Executive	STI Award (\$)	% of Maximum Possible STI Earned	% of Maximum STI Forfeited	% of STI to be Deferred
Darren J Steinberg	1,425,000	76%	24%	25%
Craig D Mitchell	810,000	72%	28%	25%
Kevin L George	575,000	72%	28%	25%
Ross G Du Vernet	500,000	73%	27%	25%

Deferred STI Grants

25% of the value of the STI awarded to each Executive will be deferred as Rights to DXS securities, subject to service and clawback conditions, and vesting in two equal tranches after 12 and 24 months.

The table below shows the number of Rights to be granted to Executives under the 2015 Deferred STI plan (details of which are provided earlier in this report).

Executive	Number of Rights	st Vesting Date 1 50%	nd Vesting Date 2 50%
Darren J Steinberg	48,302	1 July 2016	1 July 2017
Craig D Mitchell	27,456	1 July 2016	1 July 2017
Kevin L George	19,490	1 July 2016	1 July 2017
Ross G Du Vernet	16,948	1 July 2016	1 July 2017

The number of Rights granted to each Executive is based on 25% of the dollar value of STI approved by the Board in its discretion and with reference to the remuneration framework, divided by the Volume Weighted Average Price (VWAP) of DXS securities ten trading days either side of 1 July 2015, which was confirmed as \$7.3754.

DXS securities relating to Deferred STI grants are purchased on-market in accordance with ASX Listing Rule 10.15B and are held by the DEXUS Performance Rights Plan Trust until the scheduled vesting date.

Performance Pay (continued)

LTI Grants

The table below shows the number of Performance Rights to be granted to Executives under the 2015 LTI plan (details of which are provided earlier in this report).

Executive	Number of Performance Rights	st Vesting Date 1 50%	nd Vesting Date 2 50%
Darren J Steinberg	203,379	1 July 2018	1 July 2019
Craig D Mitchell	91,520	1 July 2018	1 July 2019
Kevin L George	43,387	1 July 2018	1 July 2019
Ross G Du Vernet	37,286	1 July 2018	1 July 2019

The number of Performance Rights granted to each Executive is based on the dollar value of LTI approved by the Board in its discretion and with reference to the remuneration framework, divided by the Volume Weighted Average Price (VWAP) of DXS securities ten trading days either side of 1 July 2015, which was confirmed as \$7.3754.

DXS securities relating to LTI grants are purchased on-market in accordance with ASX Listing Rule 10.15B and are held by the DEXUS Performance Rights Plan Trust until the scheduled vesting date.

Executive Remuneration Actual Cash Received

In line with best-practice recommendations, the amounts shown in the table below provide a summary of actual remuneration received during the year ended 30 June 2015. The STI and DDPP cash payments were received for performance in the 2014 and 2011 financial years respectively.

				Earned in Prior Financial Years
	Cash Salary	Pension & Super Benefits 1	Other Short Term Benefits	STI Cash Payment 2	DDPP Cash Payment 3	Total
Executive	(\$)	(\$)	(\$)	(\$)	(\$)	(\$)
Darren J Steinberg	1,481,217	18,783	-	1,312,500	-	2,812,500
Craig D Mitchell	866,997	33,003	-	727,500	625,005	2,252,505
Kevin L George	616,417	23,583	-	337,500	-	977,500
Ross G Du Vernet	531,217	18,783	-	562,500	-	1,112,500

1 Includes employer contributions to superannuation under the superannuation guarantee legislation and salary sacrifice amounts.

2 Cash payment made in August 2014 with respect to the 2014 STI Plan (i.e. annual performance payment for the prior financial year).

3 Cash payment made in August 2014 with respect to the 2011 DDPP award that vested on 1 July 2014 (i.e. realisation of 3 year deferred performance payment).

Executive Remuneration Statutory Accounting Method

The amounts shown in this table are prepared in accordance with AASB 124 Related Party Disclosures and do not represent actual cash payments received by Executives for the year ended 30 June 2015. Amounts shown under Share Based & Long Term Benefits reflect the accounting expenses recorded during the year with respect to prior year deferred remuneration and awards that have or are yet to vest. For performance payments and awards made with respect to the year ended 30 June 2015, refer to the Performance Pay Outcomes section of this report.

		Short Term Benefits		Post Employme nt Benefits	Share Based & Long Term Benefits
Executive	Year	Cash Salary (\$)	STI Cash Award 1 (\$)	Other Short Term Benefits (\$)	Pension & Super Benefits 2 (\$)	Deferred STI Plan Accrual 3 (\$)	DDPP Plan Accrual 4 (\$)	Transition Plan Accrual 5 (\$)	LTI Plan Accrual 6 (\$)	Total (\$)
	2015	1,481,217	1,068,750	-	18,783	430,168	-	104,853	748,595	3,852,366
Darren J Steinberg	2014	1,382,225	1,312,500	-	17,775	360,799	-	105,000	434,572	3,612,871
Craig D Mitchell	2015	866,997	607,500	-	33,003	231,836	-	124,825	295,273	2,159,434
	2014	751,300	727,500	-	23,700	177,281	57,105	125,000	159,995	2,012,476
	2015	616,417	431,250	-	23,583	131,628	-	-	180,568	1,383,446
Kevin L George	2014	602,425	337,500	-	22,575	271,020	-	-	110,452	1,343,972
	2015	531,217	375,000	-	18,783	155,454	-	49,930	142,487	1,272,871
Ross G Du Vernet	2014	482,225	562,500	-	17,775	116,960	-	50,000	84,037	1,313,497
	2015	3,495,848	2,482,500	- -	94,152	949,086	- -	279,608	1,366,923	8,668,117
Total	2014	3,218,175	2,940,000	-	81,825	926,060	57,105	280,000	789,056	8,292,221

1 FY15 annual cash STI performance award, payable in August 2015.

2 Includes employer contributions to superannuation under the superannuation guarantee legislation and salary sacrifice amounts .

3 Reflects the accounting expense accrued during the financial year for Deferred STI awards made with respect to FY13, FY14 and FY15 performance. Refer to note 21 of the DXS Financial Statements. Mr George's accrual for FY14 also included accounting for Performance Rights detailed in the 2014 Remuneration Report as Special Terms.

4 Reflects the accounting expense accrued during the financial year. The DDPP was closed to new members as of 1 July 2013 and Mr Mitchell is the only KMP beneficiary of this legacy plan. The amount presented includes a \$9,405 adjustment to the 2014 disclosure which did not include June 2014 distributions as required by the plan. Mr Mitchell has no further residual entitlements under this plan.

5 FY12 Transitional plan applicable to all Executives, excluding Mr George. Reflects the accounting expense accrued during the financial year.

6 Reflects the accounting expense accrued during the financial year for LTI grants made with respect to FY13, FY14 and FY15 plans. Refer to note 21 of the DXS Financial Statements.

Deferred Remuneration Plans

Rights Plan – Vesting Deferred STI

The table below shows the number of rights that vested to executives under the Deferred STI during the yearending 30 June 2015.

Participant	Award Date	Tranche	Number of Rights1	Number of Additional Rights 2	Vesting Date
Darren J Steinberg	1 July 2013	1	34,565	1,898	1 July 2014
Craig D Mitchell	1 July 2013	1	14,813	813	1 July 2014
Kevin L George	1 July 2013	1	6,518	358	1 July 2014
Ross G Du Vernet	1 July 2013	1	7,604	418	1 July 2014

1 Amounts have been re-stated to reflect the one-for-six security consolidation in October 2014.

2 Additional Rights are provided for under the terms of the STI Plan to reflect the distributions the participant would have received had they held the securities personally during the vesting period.

Rights Plan – Unvested Deferred STI

The table below shows the number of unvested rights held by Executives as at 30 June 2015 under the Deferred STI plan.

Participant	Award Date	Tranche	Number of Rights1	Fair Value (\$)	Vesting Date
	1 July 2013	2	34,565	6.27	1 July 2015
Darren J Steinberg	1 July 2014	1	32,179	6.72	1 July 2015
		2	32,179	6.72	1 July 2016
	1 July 2013	2	14,813	6.27	1 July 2015
Craig D Mitchell	1 July 2014	1	17,836	6.72	1 July 2015
		2	17,836	6.72	1 July 2016
	1 July 2013	2	6,518	6.27	1 July 2015
Kevin L George	1 July 2014	1	8,274	6.72	1 July 2015
		2	8,274	6.72	1 July 2016
Ross G Du Vernet	1 July 2013	2	7,604	6.27	1 July 2015
	1 July 2014	1	13,791	6.72	1 July 2015
		2	13,791	6.72	1 July 2016

1 Amounts have been re-stated to reflect the one-for-six security consolidation in October 2014.

Deferred Remuneration Plans (continued)

Performance Rights Plan – Unvested LTI

The table below shows the number of unvested Performance Rights held by Executives as at 30 June 2015 under the LTI plan.

	Award		Number of Performance	Fair Value	Vesting
Participant	Date	Tranche	Rights1	(\$)	Date
	1 July 2013	1	94,015	5.79	1 July 2016
		2	94,015	5.63	1 July 2017
Darren J Steinberg		1	102,971	5.66	1 July 2017
	1 July 2014	2	102,971	5.43	1 July 2018
		1	29,626	5.79	1 July 2016
	1 July 2013	2	29,626	5.63	1 July 2017
Craig D Mitchell	1 July 2014	1	42,752	5.66	1 July 2017
		2	42,752	5.43	1 July 2018
	1 July 2013	1	27,177	5.79	1 July 2016
		2	27,177	5.63	1 July 2017
Kevin L George	1 July 2014	1	22,985	5.66	1 July 2017
		2	22,985	5.43	1 July 2018
		1	19,751	5.79	1 July 2016
	1 July 2013	2	19,751	5.63	1 July 2017
Ross G Du Vernet		1	18,388	5.66	1 July 2017
	1 July 2014	2	18,388	5.43	1 July 2018

1 Amounts have been re-stated to reflect the one-for-six security consolidation in October 2014.

Legacy Plan - Unvested Transitional Rights

The table below shows the number of unvested Rights held by Executives under the Transitional Rights plan, which received security holder approval at the 2012 Annual General Meeting. The Board granted these once-off Rights to Executives, with respect to performance during the year ended 30 June 2012, as a transitional measure towards the adoption of the Group's new remuneration framework which came into effect 1 July 2012.

Participant	Award Date	Number of Rights1	Vesting Date
Darren J Steinberg	1 Jul 2012	75,570	1 Jul 2015
Craig D Mitchell	1 Jul 2012	89,964	1 Jul 2015
Ross G Du Vernet	1 Jul 2012	35,985	1 Jul 2015

1 Amounts have been re-stated to reflect the one-for-six security consolidation in October 2014.

At the Board's instruction, Rights were purchased on-market and the plan is subject to both service and clawback conditions. For more information on the Transitional Performance Rights plan, refer to the 2012 Annual Report.

Non-Executive Directors

Board Fee Structure

Non-Executive Directors' fees are reviewed annually by the Committee to ensure they reflect the responsibilities of directors and are market competitive. The Committee reviews information from a variety of sources to inform their recommendation regarding Non-Executive Directors fees to the Board. Information considered included:

• Publicly available remuneration reports from ASX listed companies with similar market capitalisation and complexity
• Publicly available remuneration reports from A-REIT competitors
• Information supplied by external remuneration advisors, including Egan Associates

Other than the Chair who receives a single fee, Non-Executive Directors receive a base fee plus additional fees for membership of Board Committees. The table below outlines the Board fee structure (inclusive of statutory superannuation contributions) for the year ended 30 June 2015:

	Chair	Member
Committee	(\$)	(\$)
Director's Base Fee (DXFM)	375,0001	160,000
Board Risk Committee	30,000	15,000
Board Audit Committee	30,000	15,500
Board Nomination Committee	15,000	7,500
Board People & Remuneration Committee	30,000	15,000
DWPL Board	45,000	22,500

1 The Chairman receives a single fee for his entire engagement, including service on Committees of the Board.

As mentioned in the overview section of this report, fees for Non-Executive Directors were increased effective 1 July 2014. The Board Chair's base fee increased to \$375,000 (+25,000), with Board Members' base fees increasing to \$160,000 (+\$10,000). These were the first increase in Directors' fees since 2010.

Total fees paid to Non-Executive Directors for the year remained within the aggregate fee pool of \$2,200,000 per annum approved by security holders at the AGM in October 2014.

Minimum Security Holding

The minimum security holding requirement for Non-Executive Directors was increased to 100,000 (+50,000) DXS securities at the AGM in October 2014. This was then adjusted to 16,500 securities following the DXS security consolidation, with the requisite holding to be acquired by 29 October 2017. Newly appointed Directors are required to acquire the minimum security holding within three years of their appointment, noting that the minimum requirement is not dissimilar to one year's base directors' fees.

Securities held by Directors are subject to the Group's existing trading and insider information policies. No additional remuneration is provided to Directors to purchase these securities. As at 30 June 2015, all Directors met this requirement, with the exception of Penelope Bingham-Hall who was appointed to the Board on 10 June 2014. Details of Directors' holdings are included in the Directors' Report.

Non-Executive Directors (continued)

Non-Executive Directors' Statutory Accounting Table

The amounts shown in this table are prepared in accordance with AASB 124 Related Party Disclosures. The table is a summary of the actual cash and benefits received by each Non-Executive Director for the year ended 30 June 2015.

		Short Term Benefits	Post Employment Benefits	Other Long Term Benefits	Total
Non-Executive Director	Year	(\$)	(\$)	(\$)	(\$)
Christopher T Beare	2015	356,217	18,783	-	375,000
	2014	332,225	17,775	-	350,000
Elizabeth A Alexander AM	2015	201,683	18,317	-	220,000
	2014	178,490	16,510	-	195,000
Penelope Bingham-Hall1	2015	168,950	18,147	-	187,097
	2014	7,921	733	-	8,654
Barry R Brownjohn2	2015	-	-	-	-
	2014	54,920	5,080	-	60,000
John C Conde AO	2015	179,224	17,026	-	196,250
	2014	164,760	15,240	-	180,000
Tonianne Dwyer	2015	205,596	18,764	-	224,360
	2014	165,798	15,337	-	181,135
Stewart F Ewen OAM3	2015	-	-	-	-
	2014	47,644	7,356	-	55,000
W Richard Sheppard	2015	191,781	18,219	-	210,000
	2014	167,206	15,467	-	182,673
Peter B St George	2015	171,233	16,267	-	187,500
	2014	151,030	13,970	-	165,000
	2015	1,474,684	125,523	- -	1,600,207
Total	2014	1,269,994	107,468	-	1,377,462

1 Ms Bingham-Hall was appointed on 10 June 2014.

2 Mr Brownjohn stood down from the Board on 29 October 2013 and is included for comparative purposes only.

3 Mr Ewen stood down from the Board on 29 October 2013 and is included for comparative purposes only.

4 Directors' relevant interests

The relevant interests of each Director in DXS stapled securities as at the date of this Directors' Report are shown below:

Directors	No. of securities
Christopher T Beare	16,667
Elizabeth A Alexander, AM	16,667
Penny Bingham-Hall	8,334
John C Conde, AO	16,667
Tonianne Dwyer	16,667
Craig D Mitchell	1 300,834
W Richard Sheppard	70,090
Darren J Steinberg	1 604,928
Peter B St George	17,333

1 Includes interests held directly and through performance rights (refer note 21).

5 Review of results and operations

The Group's financial performance for the year ended 30 June 2015 is summarised in the following section. In order to fully understand the results, the full Financial Statements included in this Financial Report should be referred to.

DEXUS OVERVIEW

DEXUS Property Group (DEXUS or the Group) is an Australian Real Estate Investment Trust (A-REIT) listed on the Australian Securities Exchange (ASX) that invests in, develops, manages and trades Australian office and industrial property. On behalf of third party clients, which are mainly domestic and international pension funds, DEXUS also transacts, develops, and manages Australian office, industrial and retail property.

The owned portfolio consists primarily of high quality central business district (CBD) office properties, held long term and leased to derive stable and secure ongoing income streams. Developments, acquisitions and divestments are undertaken to enhance the quality and value of the portfolio.

DEXUS generates both rental income from its own properties and fees for undertaking leasing, property management and development on behalf of third party clients. In addition, DEXUS has a trading trust that enables the development and repositioning of properties to enhance value and sell for a profit.

The total property portfolio of \$19.1 billion as at 30 June 2015 includes:

• \$9.5 billion of owned property, with an additional \$1.2 billion development pipeline; and
• \$9.6 billion of property managed for third party clients, with an additional \$2.3 billion development pipeline

DEXUS PORTFOLIO	THIRD PARTY FUNDS PORTFOLIO	TOTAL GROUP PORTFOLIO
\$9.5bn	\$9.6bn	\$19.1bn
DEXUS owned and managed portfolio of Australian office and industrial properties	Management of a diverse portfolio of office, industrial and retail properties on behalf of third party partners and funds
OFFICE: \$7.8bn	OFFICE: \$4.6bn	OFFICE: \$12.4bn
INDUSTRIAL: \$1.7bn	INDUSTRIAL: \$1.2bn	INDUSTRIAL: \$2.9bn
	RETAIL: \$3.8bn	RETAIL: \$3.8bn
DEVELOPMENT PIPELINE (future growth )
DEVELOPMENT: \$1.2bn	DEVELOPMENT: \$2.3bn	DEVELOPMENT: \$3.5bn

DEXUS employs more than 350 property professionals with offices in Sydney, Melbourne, Brisbane and Perth. The team manages approximately 1.7 million square metres of office space, 2.2 million square metres of industrial space and 0.8 million square metres of retail space, making DEXUS the largest office manager and second largest industrial manager in Australia.

STRATEGY

DEXUS's vision is to be globally recognised as Australia's leading real estate company. This will be achieved by delivering superior risk adjusted returns from Australian real estate by investing primarily in CBD office properties. DEXUS sets measurable targets across its key stakeholder groups in line with its strategy and drives ethical and responsible performance in all areas of its operations.

DEXUS's strategy has several key elements:

1. Investing in and developing properties and spaces that DEXUS customers (tenants) want to occupy

DEXUS understands what drives demand from its customers and focuses on high quality properties in prime locations. This enables access to facilities and amenities which are sought after by DEXUS's customers.

2. Constantly improving the levels of service and amenity provided to customers

DEXUS utilises its core capabilities to continually improve the amenity of its real estate through property enhancements, and develops new products and services to enhance the customer experience. This focus increases the market appeal of DEXUS's properties and assists in building meaningful relationships to attract and retain customers.

3. Partnering with third parties to grow in core markets and attract expertise

DEXUS partners with third parties to increase its access to properties and grow in core markets. The third party funds management platform enables DEXUS to invest in the best people, systems and processes, and ultimately minimise the costs of running the portfolio.

4. Maintaining a conservative approach to financial and operational risk

DEXUS has a strong "A-" Standard & Poor's credit rating and "A3" investment grade rating from Moody's. These ratings are the result of measuring, pricing and managing risk in a prudent manner. The success DEXUS has had in attracting significant amounts of capital from third parties is an endorsement of its approach to investing and managing risk. Since 2012 DEXUS has raised more than \$4 billion from some of the world's largest and most sophisticated investors in unlisted property.

DEXUS considers corporate responsibility and sustainability an integral part of its daily business operations. Committed to understanding, monitoring and managing social, environmental and economic impact, DEXUS delivers these responsibilities through measurable actions and within corporate policies. DEXUS's sustainability approach supports its strategy through its overarching goal of delivering sustained value.

STRATEGY (continued)

Reflecting DEXUS's strategy of delivering superior risk adjusted returns for investors, DEXUS has identified three long term measures for success:

• FFO growth of 3-5% through the cycle
• Return on Equity of 9-10% through the cycle
• Top quartile total security holder return

DEXUS draws on the core capabilities of its people to achieve its long term and short term targets.

Key earnings drivers - FY15 result

DEXUS sets short term targets against its earnings drivers across three areas of its business: the property portfolio, funds management and property services, and trading. The following chart summarises the FY15 result against the targets set for each of the earnings drivers.

DEXUS achieved its FY15 targets against each of its earnings drivers. Funds from Operations⁴ (FFO) from the owned property portfolio delivered \$645.6 million, within the 80-90% target range. Funds management and property services delivered \$37.9 million and the trading business achieved \$42.6 million in profits (post tax). ¹

1 FFO contribution is calculated before Finance costs and Group corporate costs.

² Trading profits generated less FFO tax expense that is being recognised for Rosebery in the year.

³ Like-for-like income growth is calculated on an effective basis.

⁴ FFO is in line with the Property Council of Australia definition and comprises net profit/loss after tax attributable to stapled security holders calculated in accordance with

Australian Accounting Standards and adjusted for: property revaluations, impairments, derivative and FX mark to market impacts, fair value movements of interest bearing liabilities, amortisation of tenant incentives, gain/loss on sale of certain assets, straight line rent adjustments, deferred tax expense/benefit, rental guarantees, coupon income and distribution income net of funding costs.

STRATEGY (continued)

FY15 Achievements

The successful achievement of the FY15 targets against the key earnings drivers is underpinned by activities relating to DEXUS's four strategic objectives. The table below details achievements for FY15 for each of the strategic objectives.

STRATEGIC OBJECTIVE	FY15 ACHIEVEMENTS
	Leveraged property expertise to improve the DEXUS office portfolio occupancy rate to 95.3%.
	Developed and implemented a "fitted suites" offering of customised office space for customers with needs of less than a whole floor, enabling DEXUS to attract and retain more tenants.
LEADERSHIP IN OFFICE	Developed and introduced "DEXUS Place" in Sydney, providing state of the art meeting room and conference facilities for DEXUS customers, enabling DEXUS to attract and retain more customers through enhanced customer offering.
	Launched multiple new services for DEXUS customers including on-site secure Australian Post parcel locker facilities, DEXUS Diners Club charge card for payment of rent and accruing reward points, and insurance based "security bond" facilities. These services assist in increasing customer satisfaction and improve the willingness to enter or renew leases.
	Leveraged the capabilities of the business to deliver trading profits of \$42.6 million (after tax).
	Continued to attract and retain the best people in key positions to enhance expertise and leadership across the Group including a new leadership role of Deputy Chief Financial Officer.
CORE CAPABILITIES	Through ongoing investment in people and processes, continued to develop a culture of efficiency and continuous improvement to achieve high performance.
	Leveraged industrial expertise to acquire and develop new industrial product.
	Leveraged retail expertise to reposition the quality and income earning capacity of city retail spaces in the office portfolio and the shopping centres managed on behalf of third party partners.
	Delivered a 12.7% unlevered total return for the DEXUS Office Partnership portfolio in the 12 months to 30 June 2015, exceeding original performance assumptions.
THIRD PARTY	Involved in \$863 million of transactions on behalf of third party clients across the office, industrial and retail markets.
PARTNERSHIPS	Grew the third party development pipeline from \$2.0 billion to \$2.3 billion.
	Achieved continued outperformance to benchmark for DEXUS Wholesale Property Fund (DWPF) over three and five year periods.
CAPITAL AND RISK MANAGEMENT	Maintained a prudent balance sheet, with gearing of 28.5% (debt as a percent of total assets) below DEXUS's 30-40% target range.
	Maintained a competitive cost of capital with a debt cost of 5.2% and maintained hedging of greater than 65% of total debt.
	Improved access and diversity of funding sources, including acquiring properties in joint partnership with existing partners (DEXUS Industrial Partnership and DWPF).
	Recycled properties through divestment and acquisition consistent with the return on investment objectives of creating security holder value over individual property life cycles.

REVIEW OF OPERATIONS

DEXUS has adopted FFO as its underlying earnings measure which has been defined in accordance with the guidelines established by the Property Council of Australia for its reporting with effect from 1 July 2014.

In accordance with Australian Accounting Standards, net profit includes a number of non-cash adjustments including fair value movements in asset and liability values. FFO is a global financial measure of real estate operating performance and is determined by adjusting net profit after finance costs and taxes, and is adjusted for certain items which are non-cash, unrealised or capital in nature.

The Directors consider FFO to be a measure that reflects the underlying performance of the Group.

The following table reconciles between profit attributable to stapled security holders, FFO and distributions paid to stapled security holders.

	30 June 2015	30 June 2014
	(\$m)	(\$m)
Net profit for the year attributable to stapled security holders	618.7	406.6
Net fair value gain of investment properties1	(241.0)	(165.5)
Net fair value loss of derivatives and interest bearing liabilities	47.0	40.6
Net loss on sale of investment properties	3.1	8.3
CPA transaction costs	-	76.7
Finance break costs attributable to sales transactions	-	4.5
Foreign currency translation reserve transfer on disposal of foreign operations	2.1	(0.8)
Incentive amortisation and rent straight-line1,2	79.9	58.4
Reversal of impairment of management rights	-	(7.3)
Coupon income	15.5	13.1
Deferred tax	19.2	12.0
Funds from Operations (FFO)	544.5	446.6
Retained earnings3	158.9	131.2
Distributions	385.6	315.4
FFO per security4 (cents)	59.5	54.4
Distribution per security4 (cents)	41.04	37.56
Net tangible asset backing per security4 (\$)	6.68	6.36

1 Including DEXUS's share of equity accounted investments.

² Including cash, rent free and fit out incentives amortisation.

³ Based on DEXUS's distribution policy to payout in line with free cash flow. The payout ratio equated to 69% of FFO in both FY15 and FY14.

⁴ All FY14 per security figures in this report are restated to reflect the one-for-six security consolidation completed on 14 November 2014.

REVIEW OF OPERATIONS (continued)

Operating result

GROUP

DEXUS's net profit after tax was \$618.7 million or 67.6 cents per security, an increase of \$212.1 million from the prior year (FY14: \$406.6 million). The key drivers of this movement included:

• Funds from Operations, or FFO, increased by \$97.9 million resulting in FFO per security of 59.5 cents, an increase of 9.3%.
• Net revaluation gains of investment properties of \$241.0 million, representing a 2.6% uplift across the portfolio, were \$75.5 million higher than the FY14 gains. This was driven primarily by value uplifts across the office portfolio.
• The FY14 statutory net profit was reduced by costs of \$76.7 million relating to the CPA transaction which completed in April 2014.

Revaluation gains achieved across DEXUS's office portfolio primarily drove the 32 cent increase in NTA per security to \$6.68, reflecting the contribution of leasing success on capital values and capitalisation rate compression at properties with strong tenant covenants.

The following table provides a summary of the key components of FFO and AFFO based on the information provided in the Group Performance and Property Portfolio assets sections included in this Financial Report.

	30 June 2015	30 June 2014
	\$m	\$m
Office Property FFO	533.3	455.4
Industrial Property FFO	112.3	122.8
Total Property FFO	645.6	578.2
Management operations	37.9	27.9
Group corporate	(30.4)	(27.5)
Net finance costs	(150.8)	(139.4)
Other1	(0.4)	3.1
Underlying FFO	501.9	442.3
Trading profits (net of tax)	42.6	4.3
FFO	544.5	446.6
Maintenance capex, lease incentives and leasing costs paid	(174.7)	(135.9)
AFFO2	369.8	310.7

1 'Other' income includes development management fees.

² AFFO is calculated in line with the Property Council of Australia definition and comprises PCA FFO and adjusted for: maintenance capex, incentives (including rent free incentives) given to tenants during the period and other items which have not been adjusted in determining FFO

REVIEW OF OPERATIONS (continued)

Operating result (continued)

GROUP (continued)

Operationally, FFO increased 21.9% to \$544.5 million (FY14: \$446.6 million)

The key drivers of the \$97.9 million increase included:

• Office Property FFO increased by \$77.9 million to \$533.3 million, driven by additional income from the DEXUS Office Partnership properties. This was partially offset by a \$10.5 million reduction in Industrial Property FFO to \$112.3 million as a result of divestments and lower occupancy at Auburn, Gladesville and Rosebery
• Management operations income increased by \$10.0 million to \$37.9 million, driven by the DEXUS Office Partnership and growth in other third party Funds Under Management (FUM)
• Group corporate costs increased by \$2.9 million (up 10.5% compared to FY14) despite the significant increase in revenues and FUM, demonstrating the scalability of DEXUS's business
• Finance costs net of interest revenue increased by \$11.4 million to \$150.8 million, due to an increase in debt to fund the CPA transaction, partially offset by lower interest costs
• Trading profits (net of tax) increased by \$38.3 million to \$42.6 million after tax

On a per security basis, FFO increased 9.3% to 59.5 cents. The per security result takes into account the scrip issued in April 2014 as part of the CPA transaction, explaining the difference in growth rates between the aggregate total dollar value of FFO and FFO per security. The underlying business excluding trading profits delivered FFO per security of 54.8 cents, and grew by 1.7% on the prior year.

Distributions

Distributions per security for the year ended 30 June 2015 were 41.04 cents per security, up 9.3% on the previous year (FY14: 37.56 cents). The distribution payout for the year was in line with free cash flow, in accordance with DEXUS's distribution policy.

Return on equity

DEXUS delivered Return on Equity of 11.5%¹ in FY15, above the 9–10% per annum target through the cycle and above the 6.7% delivered in the prior year which was impacted by the CPA transaction.

Management expense ratio

	30 June 2015	30 June 2014
	\$m	\$m
Group corporate costs	30.4	27.5
Asset management costs	9.1	10.8
Total corporate and asset management costs	39.5	38.3
Closing funds under management (balance sheet only)	9,533	7,8202
Group management expense ratio (MER)	41bps	49bps

While Group corporate costs increased to \$30.4 million as a result of business growth, DEXUS has been able to maintain these corporate costs enough to reduce the overall Management expense ratio³ (MER) from 49 basis points in FY14 to 41 basis points.

1 Return on Equity is calculated as the growth of NTA per security plus the distribution paid/payable per security divided by the opening NTA per security.

² FY14 listed FUM uses an average rather than closing to account for the purchase of the CPA portfolio in April 2014.

³ DEXUS's MER is calculated as unallocated Group corporate and asset management expenses divided by on-balance sheet FUM.

REVIEW OF OPERATIONS (continued)

Operating result (continued)

The following sections review the FY15 performance of the Group's key financial drivers: Property Portfolio, Funds Management & Property Services, and Trading.

PROPERTY PORTFOLIO

DEXUS remains focused on maximising the performance of its property portfolio through leasing and asset management activities, with the property portfolio contributing to 89% of FFO in FY15.

DEXUS increased the size of its direct portfolio to \$9.5 billion at 30 June 2015 from \$9.1 billion at FY14. This movement was driven by the acquisition of Lakes Business Park, Botany for \$153.5 million and three industrial properties through the DEXUS Industrial Partnership for \$55.1 million in aggregate, the positive contribution of developments and investment property revaluations, which were partially offset by \$433 million of divestments including DEXUS's remaining offshore property in New Zealand as well as three trading properties.

Office portfolio

Portfolio value:	\$7.8 billion
Total area:	1,403,255 square metres
Area leased during the year:	211,071 square metres1

Key metrics	30 June 2015	30 June 2014
Occupancy by income	95.3%	94.6%
Occupancy by area	95.5%	94.3%
WALE by income	4.3 years	4.7 years
Average incentive	15.0%	18.6%2
Average rental increase/(decrease)3	0.1%	3.1%2
Retention rate	61%	61%2
Total return – 1 year	9.6%	9.2%2

DEXUS improved occupancy and maximised cash flows across its office portfolio by capturing demand from diverse tenant groups and increasing the number of effective leasing deals (with no incentives). Continued positive momentum for space in core A-grade properties in Sydney and Melbourne has driven leasing volumes across the office portfolio, resulting in occupancy increasing to 95.3% and delivering on the 'above 95%' target set at the start of the year.

DEXUS signed 275 leases across 98,340 square metres for spaces less than 1,500 square metres, representing 47% of all leasing undertaken by area.

The combination of improved tenant demand and increased acceptance of effective deal structures allowed DEXUS to maintain a focus on reducing incentives, resulting in average incentives of 15.0% across all office leasing, an improvement from 18.6% at 30 June 2014.

During the year, DEXUS leased 211,071 square metres¹ of office space across 303 transactions on average lease terms of 5.5 years. Office portfolio occupancy by income improved from 94.6% at 30 June 2014 to 95.3% and portfolio WALE reduced to 4.3 years. Despite tenant retention of 61%, DEXUS successfully leased 51% of the vacated area during the year with average downtime of only four months.

1 Including Heads of Agreement.

² Excluding the DEXUS Office Partnership properties.

³ Average change in face rents for leasing undertaken during the year.

REVIEW OF OPERATIONS (continued)

Operating result (continued)

Office portfolio (continued)

The DEXUS office portfolio delivered a one-year total return of 9.6% (FY14: 9.2%) driven by a strong revaluation uplift across the DEXUS Office Partnership properties, partially offset by a reduction in the valuation of 240 St Georges Terrace in Perth. Office property FFO increased by \$77.9 million to \$533.3 million underpinned by the additional income from the DEXUS Office Partnership properties, with office like-for-like income growth of 0.2%.

In June 2015, DEXUS and DWPF announced that they had reached a conditional agreement to jointly (50/50) acquire Waterfront Place and Eagle Street Pier located within the prime commercial precinct of the Brisbane CBD known as the "Golden Triangle" for \$635 million¹ , reflecting a capitalisation rate of 6.9%. The property is an excellent long term core investment, and Eagle Street Pier offers one of the best future development sites in the Brisbane CBD. The acquisition is expected to settle on or around 1 October 2015 and increases DEXUS's weighting to the Brisbane CBD office market from 12.2% to 15.6%.

In FY16 DEXUS will continue to proactively manage and drive the performance of the office portfolio while enhancing the value of newly acquired properties. DEXUS will focus on maintaining occupancy of >95%; reducing FY17 office lease expiries to 10%; continuing to reduce incentives and undertaking effective leasing deals. DEXUS expects flat like-for-like income growth across the DEXUS combined portfolio.

Industrial portfolio

Portfolio value:	\$1.7 billion
Total area:	1,294,735 square metres
Area leased during the year:	183,062 square metres2

Key metrics	30 June 2015	30 June 2014
Occupancy by income	92.4%	93.0%
Occupancy by area	91.7%	93.1%
WALE by income	4.0 years	4.0 years
Average incentive	10.8%	11.0%
Average rental increase/(decrease)3	(4.6)%	(8.6)%
Retention rate	53%	41%
Total return – 1 year	11.3%	9.0%

Low interest rates are boosting business supported by housing construction and infrastructure projects which is translating into demand for industrial facilities aligned to key transport corridors. With the increasing conversion of South Sydney and Inner West industrial sites into residential and mixed uses, the central and outer western Sydney markets are benefiting from increased demand from a wide user category seeking to be centrally located and in proximity to major arterial roads.

During the year, DEXUS leased 183,062 square metres² of industrial space across 75 transactions including 44 leases with new tenants. Tenant retention improved to 53% from 41% during FY14. DEXUS's industrial portfolio occupancy by income reduced from 93.0% at 30 June 2014 to 92.4%, driven by an increase in vacancy at large scale facilities including Matraville, Flemington and Dandenong. DEXUS expects industrial occupancy to improve over the next six months driven by further leasing at properties such as Dandenong which secured a new 10,612 square metre tenant in FY15 and now has 10,920 square metres remaining to lease.

1 Excluding acquisition costs.

² Including Heads of Agreement.

³ Average change in face rents for leasing undertaken during the year.

REVIEW OF OPERATIONS (continued)

Operating result (continued)

Industrial portfolio (continued)

Industrial portfolio WALE remained steady at 4.0 years. New rents reduced 4.6% on average compared with prior rents, driven by reversions on renewals and new leases, as the industrial portfolio remains 6.9% over-rented. Average incentives decreased slightly to 10.8% (FY14: 11.0%).

DEXUS's industrial portfolio delivered a one-year total return of 11.3% (FY14: 9.0%) driven by improved property values. Industrial property FFO of \$112.3 million was down 8.6% on FY14, primarily as a result of divestments and lower occupancy at properties such as Rosebery. Like-for-like income growth was 0.7%, driven by fixed increases across our portfolio, leasing at 15-23 Whicker Road, Gillman and 30 Bellrick St, Accacia Ridge, offset by vacancy at Pound Road West, Dandenong.

DEXUS acquired Lakes Business Park, Botany, NSW for \$153.5 million¹ in January 2015, investing in one of DEXUS's core industrial markets. The property has the potential for superior rental growth in the medium term due to the lack of greenfield land options, combined with strong momentum with competing land use opportunities in the area.

In FY16 DEXUS will focus on active asset management of the industrial portfolio to deliver attractive income returns; pursuing non-core divestments and/or change of use repositioning opportunities within the existing portfolio; developing core new industrial product and pursuing core plus acquisition opportunities for DEXUS and its third party partners.

Development

DEXUS continued to enhance future investor returns through progressing its \$1.2 billion development pipeline, with key office projects nearing completion.

DEXUS utilises its development expertise and leverages its portfolio scale to deliver best-in-class office buildings and prime industrial facilities, improving portfolio quality and enhancing investor returns. Development provides DEXUS with access to stock and leads to improved portfolio quality and diversification, attracts revenues through development management fees and delivers on capital partner strategies.

DEXUS allocates up to 15% of Funds Under Management (FUM) across its direct portfolio to development and trading/value-add activities. Currently representing 6.5% of FUM, these activities are focused on providing earnings accretion and enhancing total return.

The first stage of the 5 Martin Place, Sydney development reached practical completion on 30 June 2015, with Ashurst moving into levels 5 to 11 across 12,644 square metres in July 2015. The entire project is due for completion in September 2015. The office space is currently 82% committed from 42% at acquisition and the retail space is 73% committed.

Two of the three towers at Kings Square, Perth were completed, with Shell to fully occupy one of the towers as its new corporate headquarters. The remaining tower is expected to be completed in August 2015. A rental guarantee secured at time of acquisition ensures full income on the properties for a further five years from practical completion with the office space currently 55% committed.

The Premium grade 480 Queen Street, Brisbane development topped out on 16 July 2015 with the office space 81% committed prior to the development's scheduled completion in early 2016.

The three-year program for the Quarrywest at Greystanes development is underway, with a pre-commitment secured for a warehouse facility.

Over the year, the Group development pipeline grew to \$3.5 billion (DEXUS portfolio of \$1.2 billion; Third Party Funds portfolio of \$2.3 billion).

In FY16 DEXUS will deliver key office developments in Sydney, Perth and Brisbane; progress the DEXUS Industrial Partnership developments at Quarrywest, Hemmant and Larapinta; and progress the Australian Industrial Partnership development at Laverton North.

1 Excluding acquisition costs.

REVIEW OF OPERATIONS (continued)

Operating result (continued)

FUNDS MANAGEMENT & PROPERTY SERVICES

DEXUS's Third Party Funds Management business represents over half of the Group's \$19.1 billion funds under management and its \$2.3 billion development pipeline will drive organic growth across the platform. Third party funds under management increased to \$9.6 billion, up 10% from 30 June 2014, achieved through acquisitions, developments and revaluations.

The activities undertaken by the Third Party Funds Management business include managing office, industrial and retail investments on behalf of third party partners and funds. These activities result in DEXUS earning fees for its funds management, property management, leasing and development management services.

Over the past three years, DEXUS has established partnerships with three major investors and the DEXUS Wholesale Property Fund has raised approximately \$1.5 billion of capital. These results reflect third party partner recognition of DEXUS's transactional capabilities, strategic asset and development management expertise, as well as its bestpractice corporate governance principles.

In FY16 DEXUS will continue to drive performance across third party portfolios through active leasing; successfully deliver third party office, industrial and retail developments; and deliver on third party clients' transactional requirements.

TRADING

Trading is a capability that involves the identification of opportunities, repositioning or developing to enhance value with the intention to sell.

Trading properties are either acquired with the direct purpose of repositioning or development, or they are identified in DEXUS's existing portfolio as having value-add potential and acquired by DXO to be repositioned or developed, then sold.

Since 2010, DEXUS has been undertaking trading activities and recognising trading profits in its FFO. Over the past three years DEXUS has established a robust trading portfolio that DEXUS believes will drive consistent delivery of profits from this area of the business.

Trading profits of \$42.6 million¹ were realised in FY15, with more than 60% of trading profits realised from the active repositioning of office properties at 50 Carrington Street, Sydney and 40 Market Street, Melbourne.

The initial payment for Rosebery, net of tax, contributed to FY15 trading profits and the remaining proceeds will be realised in FY16.

In July 2015, DEXUS settled on the sale of 5-13 Rothschild Avenue and 22-55 Rosebery Avenue, Rosebery and 154 O'Riordan Street, Mascot. These properties will deliver FY16 trading profits of approximately \$60 million (post tax).

DEXUS continued to grow its trading pipeline, identifying a number of properties as potential opportunities for repositioning or development and trading in future years including 32 Flinders Street, Melbourne and the southern site of Lakes Business Park, Botany. In FY16, DEXUS will continue to progress these opportunities along with others in the trading pipeline.

1 Trading profits generated less FFO tax expense recognised for Rosebery in the year.

FINANCIAL POSITION (look-through)

	30 June 2015	30 June 2014
	\$m	\$m
Office properties1	7,822	7,659
Industrial properties1	1,711	1,470
Other assets2	838	933
Total assets	10,371	10,062
Borrowings3	2,957	3,117
Other liabilities	637	892
Net assets	6,777	6,053
Less: Intangibles	(292)	(292)
Net tangible assets	6,485	5,761
Total securities on issue	970,806,349	905,531,797
NTA per security (\$)	6.68	6.36

Total look-through assets increased by \$309 million primarily due to \$181.1 million of acquisitions, development capital expenditures and \$241.0 million of property valuation increases, partially offset by \$405.9 million of divestments.

Total look-through borrowings reduced by \$160 million as debt was paid down with proceeds from the equity raising (including Security Purchase Plan) and property divestments mentioned above, partially offset by funding required for the acquisitions and development capital expenditures mentioned above.

CAPITAL MANAGEMENT

• Cost of debt 5.2%
• Duration of debt 5.7 years
• Gearing (look through)⁴ 28.5%
• S&P/Moody's credit rating: A-/A3

DEXUS maintained the strength of its balance sheet with gearing⁴ at 28.5%, securing new debt at competitive margins and extending the duration of its debt to 5.7 years. DEXUS has minimal short term refinancing requirements and will continue to take advantage of its improved credit ratings to secure new debt funding.

DEXUS remains within all of its debt covenant limits and target ranges.

Equity raising

DEXUS completed an equity raising comprising a \$400 million Institutional Placement in April 2015 followed by a \$77.8 million Security Purchase Plan (SPP) which completed in June 2015. The equity raising was undertaken to enable DEXUS to pursue compelling acquisition opportunities, including the acquisition of Waterfront Place which was announced on 22 June 2015, while ensuring DEXUS remained lowly geared.

¹ Includes DEXUS's share of investment properties in equity accounted investments.

² Including intangibles.

³ Includes DEXUS's share of borrowings in equity accounted investments.

⁴ Adjusted for cash and for debt in equity accounted investments. Pro-forma gearing is 29.3% post the receipt of proceeds from the divestment of the Rosebery and Mascot trading properties and the acquisition of the Waterfront Place Complex which is expected to settle in October 2015.

FINANCIAL POSITION (look-through)

Security consolidation

DEXUS implemented a one-for-six security consolidation in November 2014 which reduced the total number of securities on issue.

On market securities buy-back

On 14 October 2014, DEXUS announced a new on-market securities buy-back of up to 5% of DEXUS securities on issue. The buy-back provided DEXUS with the flexibility to acquire securities on market should conditions permit, with a focus on enhancing returns for investors. The buy-back is yet to be utilised and was suspended on 21 April 2015 as a consequence of the announcement of an equity raising.

OUTLOOK

GROUP

The majority (80-90%) of DEXUS's FFO is derived through rental income from its direct property portfolio, with the remainder derived from the funds management & property services and trading businesses. Key lead indicators and factors affecting the outlook of each of these areas of the business are outlined below.

PROPERTY PORTFOLIO

Office: The performance of office markets is influenced by the strength of the broader economy and business confidence, the supply and demand characteristics of particular CBD markets and the leasing characteristics of individual properties.

Lead indicators such as ANZ job advertisements continue to suggest an improvement in hiring intentions which would have a flow on effect to white collar employment growth and low interest rates are having a positive impact on business growth. With continued improvement in enquiry levels in Sydney and Melbourne, the steady economic recovery is expected to translate into increased demand for space in these markets with rental growth remaining subdued as supply comes online in the short to medium term. Brisbane and in particular Perth are expected to lag the other CBD markets in the short-term.

DEXUS is in a strong position to benefit from an improvement in office markets with its high quality office portfolio 86% weighted to Prime grade properties, with 61% located in Sydney and 14% located in Melbourne. DEXUS's key office developments at 5 Martin Place in Sydney and Kings Square in Perth are 82% and 55% committed respectively, with 480 Queen Street in Brisbane 81% leased. DEXUS has a five-year and two-year rental guarantee in place at Kings Square, Perth and 480 Queen Street, Brisbane respectively.

Industrial: Industrial markets are expected to benefit from low interest rates, which are boosting small to medium business activity in particular. The lower Australian dollar is expected to continue to drive Sydney port volumes and translate to demand from general merchandise retail for industrial space.

With the increasing conversion of South Sydney and Inner West industrial sites into residential and mixed uses, central and outer western Sydney markets will benefit from increased enquiry levels. The Melbourne industrial markets will continue to suffer from supply coming online and elevated incentives.

DEXUS's industrial portfolio in Sydney will benefit from tenant demand as a result of the stimulatory economic environment and stock withdrawals, and will remain challenged in Melbourne in the short-term. DEXUS will undertake industrial developments on both a pre-commitment and speculative basis utilising its development capabilities to produce new product to attract quality tenants in Sydney, Melbourne and Brisbane.

OUTLOOK (continued)

FUNDS MANAGEMENT & PROPERTY SERVICES

DEXUS's third party funds management platform is currently 47% weighted to office, 13% to industrial and 40% to retail properties. Its office and industrial property performance will be impacted by the key lead indicators discussed above. For retail properties, sales growth is expected to improve further in FY16 in response to low interest rates, lower petrol prices, strengthening employment and the depreciation of the Australian dollar which is expected to boost domestic tourism and constrain online spending.

The weight of capital searching for Australian real estate is expected to remain strong in FY16, supported by low interest rates globally and the high yields offered by Australian property relative to global peers.

DEXUS will continue to satisfy the investment objectives of its third party clients and funds through growing existing funds via acquisitions and progressing the \$2.3 billion third party development pipeline. DEXUS will maximise the performance of properties managed on their behalf to continue its recognition as a wholesale partner of choice.

TRADING

The trading business is an ongoing revenue stream, with the recognition of trading profits included in FFO. DEXUS will continue to identify potential trading opportunities within its existing portfolio and seek new trading opportunities in core markets in order to replenish the future trading pipeline. DEXUS has already exchanged on the properties that comprise FY16 trading profit guidance and is progressing the high priority opportunities in the trading pipeline.

FY16 GUIDANCE

Barring unforeseen changes to operating conditions, DEXUS's guidance¹ for the 12 months ending 30 June 2016 is for 5.5-6.0% growth in FFO per security, with FFO from the underlying business (excluding trading profits) expected to grow by 3.0-3.5%.

Distributions will be paid in line with free cash flow, which is expected to deliver growth in distribution per security of 5.5-6.0% for the 12 months ending 30 June 2016.

¹ Barring unforeseen circumstances guidance is supported by the following assumptions: Flat like-for-like income growth across the DEXUS combined portfolios, weighted average cost of debt of circa 4.9%, trading profits of approximately \$60 million, Management Operations revenue of approximately \$45-50 million (including third party development management fees), \$150 million of non-core property divestments, excluding any buy-back of DEXUS securities and excluding any further transactions.

RISKS

There are various risks that could impact DEXUS's strategy and outlook. The nature and potential impact of these risks can change over time. Further information relating to DEXUS's risk management framework is detailed in the Corporate Governance Statement. DEXUS actively reviews and manages the risks it faces over the short, medium and long term, overseen by the Board Risk Committee. A number of the important strategic risks, their potential impact and how DEXUS manages and monitors these risks are outlined in the table below.

Risk	Description	Potential impact	How DEXUS is equipped to manage and monitor this risk
Market volatility - general	Volatility in equity or debt markets and GDP growth (domestically or globally) has a material adverse effect on leasing, investment demand, or financing costs	 Reduction in business confidence and leasing activity  Reduction in ability to attract and retain tenants  Increased cost of borrowing	 DEXUS has a high quality, diversified portfolio which is less sensitive to changes in investment demand  DEXUS has a low level of gearing, with a stated target range of 30- 40%  Further information relating to Financial risk management is detailed in note 12 of the financial statements  DEXUS has a diversified source of income with rental income being derived from 102 properties with 970 tenants. In addition, DEXUS derives income from funds management and trading activities  A high proportion of DEXUS's near term income is secured via lease(contract)  DEXUS adopts a conservative approach to interest rate hedging, with 69% of debt currently hedged  DEXUS tracks and reports performance through monthly monitoring of budgets and expenditures  DEXUS tracks economic conditions and forecasts real estate market performance
Property valuations decline	Depreciation in the value of DEXUS's property investments. This can be caused by changes in investment demand for commercial property and/or changes to the property fundamentals (e.g. property income) and/or changes to global bond rates	 Reduction in Net Tangible Asset backing per security  Deterioration of key credit metrics  Increased cost of financing and/or need to refinance  Reduction in market price of DXS securities	 DEXUS has a high quality, diversified portfolio which is less sensitive to changes in investment demand  DEXUS has a low level of gearing, with a stated target range of 30- 40%  Further information relating to Financial risk management is detailed in Note 12 of the financial statements
Funds from Operations (FFO) decline	FFO is lower than that assumed in management forecasts	 Reduction in distributions to investors  Reduction in market price of DXS securities	 DEXUS has a diversified source of income with rental income being derived from 102 properties with 970 tenants. In addition, DEXUS derives income from funds management and trading activities  A high proportion of DEXUS's near term income is secured via lease/contract  DEXUS adopts a conservative approach to interest rate hedging, with 69% of debt currently hedged  DEXUS tracks and reports performance through monthly monitoring of budgets and expenditures
Workplace health and safety	Financial or physical impact arising from an accident or event at an asset owned or managed by DEXUS	 Death or serious injury  Financial loss arising from an event claim  Reputational damage  Legal proceedings	 DEXUS maintains comprehensive work health and safety programs  Ensures compliance by site contractors and employees  Maintains ongoing independent certification by British Standards International
Talent retention	Inability to attract and retain the talent required to execute the strategy	 Loss of property and platform expertise  Increased operating costs via staff churn and wage impacts	 DEXUS monitors and acts upon employee opinions received through the Employee Opinion Surveys and Culture Surveys  Annually reviews remuneration framework to benchmark against market rates  Maintains succession plans for senior management  Implements awareness programs covering diversity, gender and health in the workplace, ensuring diversity and equality are understood and valued

6 Directors' directorships in other listed entities

The following table sets out directorships of other ASX listed entities (unless otherwise stated), not including DXFM, held by the Directors at any time in the three years immediately prior to the end of the year, and the period for which each directorship was held:

Director	Company	Date appointed	Date resigned
Christopher T Beare	Mnemon Group Limited	6 November 2009	27 May 2013
	Flexigroup Limited	1 July 2014
Elizabeth A Alexander, AM	Medibank Private Limited2	31 October 2008
Penny Bingham-Hall	Bluescope Steel Limited	29 March 2011
John C Conde, AO	Whitehaven Coal Limited	3 May 2007
	Cooper Energy Limited	25 February 2013
Tonianne Dwyer	Cardno Limited	25 June 2012
	Metcash Limited	24 June 2014
W Richard Sheppard	Echo Entertainment Group	21 November 2012
Peter B St George	Boart Longyear Limited	21 February 2007	21 May 2013
	First Quantum Minerals Limited1	20 October 2003

1 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

2 Listed for trading on the Australian Securities Exchange since 24 November 2014.

7 Principal activities

During the year the principal activity of the Group was to own, manage and develop high quality real estate assets and manage real estate funds on behalf of third party investors. There were no significant changes in the nature of the Group's activities during the year.

8 Total value of Trust assets

The total value of the assets of the Group as at 30 June 2015 was \$10,099.1 million (2014: \$9,750.9 million). Details of the basis of this valuation are outlined in the Notes to the Financial Statements and form part of this Directors' Report.

9 Likely developments and expected results of operations

In the opinion of the Directors, disclosure of any further information regarding business strategies and future developments or results of the Group, other than the information already outlined in this Directors' Report or the Financial Statements accompanying this Directors' Report would be unreasonably prejudicial to the Group.

10 Significant changes in the state of affairs

The Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Group, the results of those operations, or the state of the Group's affairs in future financial years.

11 Matters subsequent to the end of the financial year

Since the end of the financial year the Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Group, the results of those operations, or the state of the Group's affairs in future financial years.

12 Distributions

Distributions paid or payable by the Group for the year ended 30 June 2015 were 41.04 cents per security (2014: 37.56 cents per security¹ ) as outlined in note 7 of the Notes to the Financial Statements.

¹ All FY14 per security figures in this Report are restated to reflect the one-for-six security consolidation completed on 14 November 2014.

13 DXFM fees

Details of fees paid or payable by the Group to DXFM for the year ended 30 June 2015 are outlined in note 22 of the Notes to the Financial Statements and form part of this Directors' Report.

14 Interests in DXS securities

The movement in securities on issue in the Group during the year and the number of securities on issue as at 30 June 2015 are detailed in note 15 of the Notes to the Financial Statements and form part of this Directors' Report.

Details of the number of interests in the Group held by DXFM or its associates as at the end of the financial year are outlined in note 22 of the Notes to the Financial Statements and form part of this Directors' Report.

The Group did not have any options on issue as at 30 June 2015 (2014: nil).

15 Environmental regulation

The Group's senior management, through its Board Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any material breaches of these requirements.

16 Indemnification and insurance

The insurance premium for a policy of insurance indemnifying Directors, officers and others (as defined in the relevant policy of insurance) is paid by DEXUS Holdings Pty Limited (DXH).

PricewaterhouseCoopers (PwC or the Auditor), is indemnified out of the assets of the Group pursuant to the DEXUS Specific Terms of Business agreed for all engagements with PwC, to the extent that the Group inappropriately uses or discloses a report prepared by PwC. The Auditor, PwC, is not indemnified for the provision of services where such an indemnification is prohibited by the Corporations Act 2001.

17 Audit

17.1 Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.

17.2 Non-audit services

The Group may decide to employ the Auditor on assignments, in addition to their statutory audit duties, where the Auditor's expertise and experience with the Group are important.

Details of the amounts paid or payable to the Auditor for audit and non-audit services provided during the year are set out in note 19 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor's behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001.

The reasons for the Directors being satisfied are:

a Charter of Audit Independence provides guidelines under which the Auditor may be engaged to provide nonaudit services without impairing the Auditor's objectivity or independence.

17 Audit (continued)

17.2 Non-audit services (continued)

• the Charter states that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including:
• the preparation of tax provisions, accounting records and financial statements;
• the design, implementation and operation of information technology systems;
• the design and implementation of internal accounting and risk management controls;
• conducting valuation, actuarial or legal services;
• consultancy services that include direct involvement in management decision making functions;
• investment banking, borrowing, dealing or advisory services;
• acting as trustee, executor or administrator of trust or estate;
• prospectus independent expert reports and being a member of the due diligence committee; and
• providing internal audit services.
• the Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of non-audit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of \$100,000.

The above Directors' statements are in accordance with the advice received from the Board Audit Committee.

17.3 Auditor's Independence Declaration

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 42 and forms part of this Directors' Report.

18 Corporate governance

DXFM's Corporate Governance Statement is set out in a separate section of the DEXUS Property Group Annual Report.

19 Rounding of amounts and currency

The Group is a registered scheme of the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the rounding off of amounts in this Directors' Report and the Financial Statements. Amounts in this Directors' Report and the Financial Statements have been rounded off in accordance with that Class Order to the nearest tenth of a million dollars, unless otherwise indicated. All figures in this Directors' Report and the Financial Statements, except where otherwise stated, are expressed in Australian dollars.

DEXUS Diversified Trust

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

		2015	2014
	Note	\$m	\$m
Revenue from ordinary activities
Property revenue	2	548.8	572.3
Proceeds from sale of inventory	10	220.1	69.3
Interest revenue		0.4	0.2
Management fee revenue		89.6	58.0
Total revenue from ordinary activities		858.9	699.8
Net fair value gain of investment properties		130.4	145.7
Share of net profit of investments accounted for using the equity method	9	252.1	58.3
Net fair value gain of interest bearing liabilities		-	12.3
Reversal of previous impairment of management rights	18	-	7.3
Net fair value gain of derivatives		17.4	-
Total income		1,258.8	923.4
Expenses
Property expenses	2	(142.8)	(141.4)
Cost of sale of inventory	10	(172.2)	(65.3)
Finance costs	4	(192.4)	(190.0)
Impairment of goodwill	18	(0.1)	(0.1)
Net fair value loss of derivatives		-	(2.1)
Net loss on sale of investment properties		(3.0)	(7.7)
Net fair value loss of interest bearing liabilities		(15.9)	-
Impairment of investments accounted for using the equity method	9	-	(3.3)
Transaction costs		-	(23.9)
Management operations, corporate and administration expenses	3	(86.3)	(71.3)
Total expenses		(612.7)	(505.1)
Foreign currency translation reserve transfer on disposal of foreign operations		(2.1)	0.8
Profit/(loss) before tax		644.0	419.1
Tax expense	5(a)	(25.3)	(12.5)
Profit/(loss) for the year		618.7	406.6
Other comprehensive income/(loss):
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations	16(a)	(0.3)	5.3
Foreign currency translation reserve transfer on disposal of foreign operations	16(a)	2.1	(0.8)
Changes in the fair value of cash flow hedges Total comprehensive income/(loss) for the year	16(a)	17.9 638.4	(9.3) 401.8
Profit/(loss) for the year attributable to:
Unitholders of the parent entity		174.7	141.4
Unitholders of other stapled entities (non-controlling interests)		444.0	265.2
Profit/(loss) for the year		618.7	406.6
Total comprehensive income/(loss) for the year attributable to:
Unitholders of the parent entity		192.6	132.1
Unitholders of other stapled entities (non-controlling interests)		445.8	269.7
		638.4	401.8
Total comprehensive income/(loss) for the year		Cents	Cents 1
Earnings per unit on profit/(loss) attributable to unitholders of the parent entity
Basic earnings per unit	6	19.08	17.24
Diluted earnings per unit	6	19.08	17.24
Earnings per stapled security on profit/(loss) attributable to stapled security holders
Basic earnings per security	6	67.58	49.57
Diluted earnings per security	6	67.58	49.57

1 Restated to reflect the one-for-six security consolidation.

DEXUS Diversified Trust Consolidated Statement of Financial Position

As at 30 June 2015

		2015	2014
	Note	\$m	\$m
Current assets
Cash and cash equivalents	17(a)	13.0	14.1
Receivables	17(b)	55.5	111.6
Non-current assets classified as held for sale	11	5.5	139.6
Inventories	10	110.3	80.3
Derivative financial instruments	12(c)	17.7	8.7
Other	17(c)	27.3	8.1
Total current assets		229.3	362.4
Non-current assets
Investment properties	8	6,207.3	5,926.5
Plant and equipment		20.5	10.8
Inventories	10	164.5	235.9
Investments accounted for using the equity method	9	2,795.9	2,813.9
Derivative financial instruments	12(c)	367.2	71.5
Deferred tax assets	5(c)	10.8	35.9
Intangible assets	18	292.2	292.6
Other		2.3	1.4
Total non-current assets		9,860.7	9,388.5
Total assets		10,090.0	9,750.9
Current liabilities
Payables	17(d)	110.7	111.1
Current tax liabilities	5	4.2	1.3
Interest bearing liabilities	13	150.0	149.5
Provisions	17(e)	231.1	197.2
Derivative financial instruments	12(c)	10.8	2.4
Total current liabilities		506.8	461.5
Non-current liabilities
Interest bearing liabilities	13	2,624.0	2,782.1
Loans with related parties	22	-	338.4
Derivative financial instruments	12(c)	159.2	85.7
Deferred tax liabilities	5(d)	17.2	21.1
Provisions		2.1	4.9
Other		3.4 2,805.9	3.9 3,236.1
Total non-current liabilities Total liabilities		3,312.7	3,697.6
Net assets		6,777.3	6,053.3
Equity
Equity attributable to unitholders of the parent entity
Contributed equity	15(a)	1,990.6	1,833.4
Reserves	16(a)	8.6	(9.3)
Retained profits/(accumulated losses)	16(c)	190.3	193.0
Parent entity unitholders' interest		2,189.5	2,017.1
Equity attributable to unitholders of other stapled entities
Contributed equity	15(b)	3,939.9	3,625.7
Reserves	16(a)	42.8	41.2
Retained profits/(accumulated losses)	16(c)	605.1	369.3
Other stapled unitholders' interest		4,587.8	4,036.2
Total equity Consoli dated State ment o f Fi nanci al P osition		6,777.3	6,053.3

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

DEXUS Diversified Trust Consolidated Statement of Changes in Equity For the year ended 30 June 2015

			Attributable to unitholders of the parent entity				Attributable to unitholders of other stapled entities
		Contributed				Contributed
		equity		Reserves Retained profits	Total	equity	Reserves Retained profits		Total	Total equity
	Note	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Opening balance as at 1 July 2013		1,577.7	-	181.2	1,758.9	3,106.3	36.6	289.9	3,432.8	5,191.7
Net profit/(loss) for the year		-	-	141.4	141.4	-	-	265.2	265.2	406.6
Other comprehensive income/(loss) for the year		-	(9.3)	-	(9.3)	-	4.5	-	4.5	(4.8)
Total comprehensive income for the year		-	(9.3)	141.4	132.1	-	4.5	265.2	269.7	401.8
Transactions with owners in their capacity as owners
Issue of additional equity	15	281.2	-	-	281.2	569.2	-	-	569.2	850.4
Buy-back of contributed equity, net of transaction costs	15	(25.5)	-	-	(25.5)	(49.8)	-	-	(49.8)	(75.3)
Purchase of securities, net of transaction costs	16	-	-	-	-	-	(3.1)	-	(3.1)	(3.1)
Security-based payments expense	16	-	-	-	-	-	3.2	-	3.2	3.2
Distributions paid or provided for	7	-	-	(129.6)	(129.6)	-	-	(185.8)	(185.8)	(315.4)
Total transactions with owners in their capacity as owners		255.7	-	(129.6)	126.1	519.4	0.1	(185.8)	333.7	459.8
Closing balance as at 30 June 2014		1,833.4	(9.3)	193.0	2,017.1	3,625.7	41.2	369.3	4,036.2	6,053.3
Opening balance as at 1 July 2014		1,833.4	(9.3)	193.0	2,017.1	3,625.7	41.2	369.3	4,036.2	6,053.3
Net profit for the year		-	-	174.7	174.7	-	-	444.0	444.0	618.7
Other comprehensive income for the year		-	17.9	-	17.9	-	1.8	-	1.8	19.7
Total comprehensive income for the year		-	17.9	174.7	192.6	-	1.8	444.0	445.8	638.4
Transactions with owners in their capacity as owners
Issue of additional equity	15	157.2	-	-	157.2	314.2	-	-	314.2	471.4
Purchase of securities, net of transaction costs	16	-	-	-	-	-	(4.0)	-	(4.0)	(4.0)
Security-based payments expense	16	-	-	-	-	-	3.8	-	3.8	3.8
Distributions paid or provided for	7	-	-	(177.4)	(177.4)	-	-	(208.2)	(208.2)	(385.6)
Total transactions with owners in their capacity as owners		157.2	-	(177.4)	(20.2)	314.2	(0.2)	(208.2)	105.8	85.6
Closing balance as at 30 June 2015		1,990.6	8.6	190.3	2,189.5	3,939.9	42.8	605.1	4,587.8	6,777.3

DEXUS Diversified Trust Consolidated Statement of Cash Flows

For the year ended 30 June 2015

		2015	2014
	Note	\$m	\$m
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		706.5	703.0
Payments in the course of operations (inclusive of GST)		(286.4)	(275.6)
Interest received		0.4	0.2
Finance costs paid to financial institutions		(144.2)	(134.6)
Distributions received from investments accounted for using the equity method		217.6	79.0
Income and withholding taxes paid		(1.0)	0.1
Proceeds from sale of property classified as inventory		221.8	69.3
Payments for property classified as inventory		(53.3)	(23.1)
Net cash inflow/(outflow) from operating activities	20(a)	661.4	418.3
Cash flows from investing activities
Proceeds from sale of investment properties		144.1	172.9
Payments for capital expenditure on investment properties		(93.9)	(110.0)
Payments for acquisition of investment properties		(14.8)	-
Payments for acquisition of subsidiaries		(160.0)	-
Payments for investments accounted for using the equity method		(263.9)	(1,103.4)
Transaction costs paid		(7.5)	(14.0)
Return of capital from investments accounted for using the equity method		372.6	-
Payments for management rights		-	(42.0)
Payments for plant and equipment		(12.1)	(4.0)
Net cash inflow/(outflow) from investing activities		(35.5)	(1,100.5)
Cash flows from financing activities
Proceeds from borrowings		3,003.5	4,557.8
Repayment of borrowings		(3,408.0)	(3,848.3)
Repayment of loan with related party		(338.4)	-
Proceeds from loan with related party		-	338.4
Payments for buy-back of contributed equity		-	(75.3)
Proceeds from issue of additional equity		471.4	-
Purchase of securities for security-based payments plans		(4.0)	(3.1)
Distributions paid to security holders		(351.5)	(288.3)
Net cash inflow/(outflow) from financing activities		(627.0)	681.2
Net increase/(decrease) in cash and cash equivalents		(1.1)	(1.0)
Cash and cash equivalents at the beginning of the year		14.1	14.9
Effects of exchange rate changes on cash and cash equivalents		-	0.2
Cash and cash equivalents at the end of the year		13.0	14.1

About this Report

In this section

This section sets out the basis upon which the Group's Financial Statements are prepared.

Specific accounting policies are described in their respective notes to the Financial Statements. This section also shows information on new or amended accounting standards and their impact on the financial position and performance of the Group.

(a) Basis of preparation

DEXUS Property Group stapled securities are quoted on the Australian Securities Exchange under the "DXS" code and comprise one unit in each of DDF, DIT, DOT and DXO. In accordance with Australian Accounting Standards, the entities within the Group must be consolidated for financial reporting purposes. The parent entity and deemed acquirer of DIT, DOT and DXO is DDF. These Financial Statements therefore represent the consolidated results of DDF, and include DDF and its controlled entities, DIT and its controlled entities, DOT and its controlled entities, and DXO and its controlled entities.

Equity attributable to other trusts stapled to DDF is a form of non-controlling interest and represents the equity of DIT, DOT and DXO. The amount of non-controlling interest attributable to stapled security holders is disclosed in the Statement of Financial Position. DDF is a for-profit entity for the purpose of preparing Financial Statements.

Each entity forming part of the Group continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with the reporting and disclosure requirements under the Corporations Act 2001 and Australian Accounting Standards. DEXUS Funds Management Limited (DXFM) as Responsible Entity for DDF, DIT, DOT and DXO may only unstaple the Group if approval is obtained by a special resolution of the stapled security holders.

These general purpose Financial Statements have been prepared in accordance with the requirements of the Constitution of the entities within the Group, the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements and interpretations of the Australia Accounting Standards Board. Compliance with Australian Accounting Standards ensures that the Financial Statements and notes also comply with International Financial Reporting Standards (IFRS).

Amounts in these Financial Statements have been presented in Australian dollars and rounded off in accordance with ASIC Class Order 98/100 to the nearest tenth of a million dollars, unless otherwise indicated.

These Financial Statements are prepared on a going concern basis, using historical cost conventions except for investment properties, investment properties within equity accounted investments, security-based payments, derivative financial instruments and other financial liabilities which are stated at their fair value. Refer to the specific accounting policies within the notes to the Financial Statements for the basis of valuation of assets and liabilities measured at fair value.

The Group has unutilised facilities of \$758.1 million (2014: \$462.3 million) (refer to note 13) and sufficient working capital and cash flows in order to fund all requirements arising from the net current asset deficiency as at 30 June 2015 of \$277.5 million (2014: \$99.1 million).

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

In the process of applying the Group's accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are discussed in the following notes:

Note 8	Investment properties	Page 62
Note 10	Inventories	Page 67
Note 12(b)	Interest bearing liabilities	Page 76
Note 12(c)	Derivative financial instruments	Page 78
Note 18	Intangible assets	Page 89
Note 21	Security-based payments	Page 91

(b) Principles of consolidation

These consolidated Financial Statements incorporate the assets, liabilities and results of all subsidiaries as at 30 June 2015.

(i) Controlled entities

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

(ii) Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement.

Joint operations

Where assets are held directly as tenants in common, the Group's proportionate share of revenues, expenses, assets and liabilities are included in their respective items of the Statement of Financial Position and Statement of Comprehensive Income.

Joint ventures

Investments in joint ventures are accounted for using the equity method. Under this method, the Group's share of the joint ventures' post-acquisition profits or losses is recognised in the Statement of Comprehensive Income and distributions received from joint ventures are recognised as a reduction of the carrying amount of the investment.

(iii) Employee share trust

The Group has formed a trust to administer the Group's securities-based employee benefits. The employee share trust is consolidated as the substance of the relationship is that the trust is controlled by the Group.

(c) Foreign currency

The Financial Statements are presented in Australian dollars.

Foreign currency transactions are translated into the Australian dollars functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of financial assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.

On 18 November 2014, settlement occurred on the sale of Lumley Centre in New Zealand. The cumulative historical exchange differences recognised in the foreign currency translation reserve were recycled to the Statement of Comprehensive Income on disposal of this foreign operation.

As at 30 June 2015, the Group has no investments in foreign operations.

(d) Goods and services tax

Revenues, expenses and capital assets are recognised net of any amount of Australian Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST component of cash flows arising from investing and financing activities that is recoverable from or payable to the Australian Taxation Office is classified as cash flows from operating activities.

(e) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2015 reporting period. The Group's assessment of the impact of these new standards and interpretations is set out below:

AASB 9 Financial Instruments (effective 1 July 2018).

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It also sets out new rules for hedge accounting and impairment of financial assets. The Group intends to apply the standard from 1 July 2018. Application of this standard will not affect any of the amounts recognised in the Financial Statements but will require the disclosure of additional information.

AASB 15 Revenue from Contracts with Customers (effective 1 July 2018).

AASB 15 Revenue from Contracts with Customers clarifies the principles for recognising revenue from contracts with customers. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The Group intends to apply the standard from 1 July 2018 and does not expect any significant impacts.

(f) Notes to the Financial Statements

The notes include information which is required to understand the Financial Statements and is material and relevant to the operations, financial position and performance of the Group. Information is considered material and relevant if, for example:

• the amount in question is significant because of its size or nature;
• it is important in understanding the results of the Group;
• it helps to explain the impact of significant changes in the Group's business;
• it relates to an aspect of the Group's operations that is important to its future performance.

The notes to the Financial Statements have been reordered and rewritten in order to provide more meaningful information to the readers of the Financial Statements. The notes are organised into the following sections:

Group performance	Property portfolio assets	Capital and financial risk management and working capital	Other disclosures
1. Operating segments	8. Investment properties	12. Capital and financial risk management	18. Intangible assets
2. Property revenue and expenses	9. Investments accounted for using the equity method	13. Interest bearing liabilities	19. Audit, taxation and transaction services fees
3. Management operations, corporate and administration expenses	10. Inventories	14. Commitments and contingencies	20. Reconciliation of net profit to net cash flows from operating activities
4. Finance costs	11. Non-current assets classified as held for sale	15. Contributed equity	21. Security-based payments
5. Taxation		16. Reserves and retained profits	22. Related parties
6. Earnings per unit		17. Working capital	23. Parent entity disclosures
7. Distributions paid and payable			24. Subsequent events

Group performance

In this section

This section explains the results and performance of the Group.

It provides additional information about those individual line items in the Financial Statements that the Directors consider most relevant in the context of the operations of the Group, including: results by operating segment, property revenue and expenses, management operations, corporate and administration expenses, finance costs, taxation, earnings per unit and distributions paid and payable.

The key indicators of the Group performance are detailed in the following table:

	2015	2014	2013	2012	2011
Statutory net profit (\$m)	618.7	406.6	514.5	182.9	555.1
FFO1 (\$m)	544.5	446.6	388.0	395.2	386.6
AFFO1 (\$m)	369.8	310.7	290.1	269.3	234.1
Distribution (\$m)	385.6	315.4	282.1	257.4	250.7
NTA2 (\$m)	6,485	5,761	4,948	4,784	4,878
FFO1 per security3 (cents)	59.5	54.4	49.4	49.0	48.0
AFFO1 per security3 (cents)	40.4	37.9	36.9	33.4	29.0
Distribution per security3 (cents)	41.04	37.56	36.00	32.10	31.08
NTA2 per security3 (\$)	6.68	6.36	6.31	6.00	6.05
Return on equity4	11.5%	6.7%	11.2%	4.5%	11.8%
Gearing (look-through)5	28.5%	33.7%	29.0%	27.2%	28.4%

1 Funds From Operations (FFO) is defined in note 1.

FFO and AFFo have been restated for previous periods to reflect the PCA definition.

2 Net Tangible Assets (NTA) is calculated as total assets less intangible assets.

3 Restated to reflect the one-for-six security consolidation.

4 Change in NTA per security plus distribution per security divided by previous year's NTA per security.

5 Gearing calculation is detailed in note 12(a) and is adjusted for cash and for debt in equity accounted investments.

Operating segments

(a) Description of segments

The Chief Operating Decision Maker (CODM) has been identified as the Board of Directors as they are responsible for the strategic decision making within the Group. DXS management has identified the Group's operating segments based on the sectors analysed within the management reports reviewed by the CODM in order to monitor performance across the Group and to appropriately allocate resources. Refer to the table below for a brief description of the Group's operating segments.

Segment	Description
Office	Office space with any associated retail space; as well as car parks and office developments in Australia and New Zealand.
Industrial	Domestic industrial properties, industrial estates and industrial developments.
Property management	Property management services for third party clients and owned assets.
Funds management	Funds management of third party client assets.
Development and trading	Revenue earned and costs incurred by the Group on developments and inventory.
All other segments	Corporate expenses associated with maintaining and operating the Group. This segment also includes the centralised treasury function.

DEXUS Diversified Trust

Notes to the Financial Statements – Group performance (continued) For the year ended 30 June 2015

Note 1

Operating segments (continued)

(b) Segment information provided to the CODM (continued)

	Office	Industrial	Property management	Funds management	Development and trading	All other segments	Eliminations	Total
30 June 2015	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Segment performance measures
Property revenue and property management fees	607.4	133.1	17.2	-	-	-	(0.8)	756.9
Proceeds from sale of inventory	-	-	-	-	220.1	-	-	220.1
Management fee revenue	-	-	32.5	40.5	6.4	-	-	79.4
Total operating segment revenue	607.4	133.1	49.7	40.5	226.5	-	(0.8)	1,056.4
Property expenses and property management salaries	(156.0)	(25.1)	(12.2)	-	-	-	-	(193.3)
Management operations expenses	-	-	(24.3)	(15.8)	(6.2)	-	-	(46.3)
Corporate and administration expenses	(7.4)	(1.7)	-	-	-	(30.4)	0.8	(38.7)
Cost of sale of inventory	-	-	-	-	(172.2)	-	-	(172.2)
Interest revenue	-	-	-	-	-	1.0	-	1.0
Finance costs	-	-	-	-	-	(151.8)	-	(151.8)
Incentive amortisation and rent straight-line	73.9	6.0	-	-	-	-	-	79.9
Tax expense	-	-	-	-	(5.3)	(0.8)	-	(6.1)
Coupon income and other	15.4	-	-	-	-	0.2	-	15.6
Funds From Operations (FFO)	533.3	112.3	13.2	24.7	42.8	(181.8)	-	544.5
Net fair value gain/(loss) of investment properties	213.5	27.5	-	-	-	-	-	241.0
Net fair value gain/(loss) of derivatives	-	-	-	-	-	(31.1)	-	(31.1)
Foreign currency translation reserve transfer	-	-	-	-	-	(2.1)	-	(2.1)
Net gain/(loss) on sale of investment properties	(2.4)	(0.7)	-	-	-	-	-	(3.1)
Net fair value gain/(loss) of interest bearing liabilities	-	-	-	-	-	(15.9)	-	(15.9)
Incentive amortisation and rent straight-line	(73.9)	(6.0)	-	-	-	-	-	(79.9)
Deferred tax (expense)/ benefit	-	-	-	-	-	(19.2)	-	(19.2)
Coupon income	(15.5)	-	-	-	-	-	-	(15.5)
Net profit/(loss) attributable to stapled security holders	655.0	133.1	13.2	24.7	42.8	(250.1)	-	618.7
Segment asset measures
Investment properties	4,795.5	1,411.8	-	-	-	-	-	6,207.3
Non-current assets held for sale Inventories	- -	5.5 -	- -	- -	- 274.8	- -	- -	5.5 274.8
	2,983.9	61.9
Equity accounted investment properties			-	-	-	-	-	3,045.8
Direct property portfolio	7,779.4	1,479.2	-	-	274.8	-	-	9,533.4

DEXUS Diversified Trust

Notes to the Financial Statements – Group performance (continued) For the year ended 30 June 2015

Note 1

Operating segments (continued)

(b) Segment information provided to the CODM (continued)

	Office	Industrial	Property management	Funds management	Development and trading	All other segments	Eliminations	Total
30 June 2014	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Segment performance measures
Property revenue and property management fees	540.4	146.3	13.6	-	-	-	(0.6)	699.7
Proceeds from sale of inventory	-	-	-	-	69.3	-	-	69.3
Management fee revenue	-	-	22.5	32.0	1.4	-	-	55.9
Total operating segment revenue	540.4	146.3	36.1	32.0	70.7	-	(0.6)	824.9
Property expenses & property management salaries	(137.9)	(25.8)	(8.9)	-	-	-	-	(172.6)
Management operations expenses	-	-	(17.4)	(13.9)	(3.0)	-	-	(34.3)
Corporate and administration expenses	(7.6)	(3.2)	-	-	-	(27.5)	0.6	(37.7)
Cost of sale of inventory	-	-	-	-	(65.3)	-	-	(65.3)
Interest revenue	-	-	-	-	-	0.7	-	0.7
Finance costs	-	-	-	-	-	(140.1)	-	(140.1)
Incentive amortisation and rent straight-line	52.6	5.5	-	-	0.3	-	-	58.4
Tax expense	-	-	-	-	-	(0.5)	-	(0.5)
Coupon income and net CPA distribution income	7.9	-	-	-	-	5.2	-	13.1
Funds From Operations (FFO)	455.4	122.8	9.8	18.1	2.7	(162.2)	-	446.6
Net fair value gain of investment properties	155.3	10.2	-	-	-	-	-	165.5
Net fair value loss of derivatives	-	-	-	-	-	(52.9)	-	(52.9)
Finance costs attributable to sales transactions	-	-	-	-	-	(4.5)	-	(4.5)
CPA transaction costs	-	-	-	-	-	(76.7)	-	(76.7)
Foreign currency translation reserve transfer	-	-	-	-	-	0.8	-	0.8
Net loss on sale of investment properties	(4.2)	(4.1)	-	-	-	-	-	(8.3)
Net fair value gain of interest bearing liabilities	-	-	-	-	-	12.3	-	12.3
Incentive amortisation and rent straight-line	(52.6)	(5.5)	-	-	(0.3)	-	-	(58.4)
Reversal of impairment of management rights	-	-	-	-	-	7.3	-	7.3
Deferred tax expense	-	-	-	-	-	(12.0)	-	(12.0)
Coupon income and net CPA distribution income	(7.9)	-	-	-	-	(5.2)	-	(13.1)
Net profit/(loss) attributable to stapled security holders	546.0	123.4	9.8	18.1	2.4	(293.1)	-	406.6
Segment asset measures
Investment properties	4,673.6	1,252.9	-	-	-	-	-	5,926.5
Non-current assets held for sale	130.1	9.5	-	-	-	-	-	139.6
Inventories	-	-	-	-	316.2	-	-	316.2
Equity accounted investment properties	2,717.8	29.3	-	-	-	-	-	2,747.1
Direct property portfolio	7,521.5	1,291.7	-	-	316.2	-	-	9,129.4

Operating segments (continued)

• (c) Other segment information
• (i) Funds From Operations (FFO)

On 1 July 2014, the Group adopted the Property Council of Australia definition of FFO. Comparative information has been adjusted to reflect this change. The Directors consider FFO to be a measure that reflects the underlying performance of the Group. FFO is calculated as net profit for the year adjusted for: property revaluations, impairments, derivative and FX mark-to-market impacts, fair value movements of interest bearing liabilities, amortisation of tenant incentives, gain/loss on sale of certain assets, straight line rent adjustments, deferred tax expense/benefit, rental guarantees, coupon income and distribution income net of funding costs.

(ii) Reconciliation of segment revenue to the Statement of Comprehensive Income

	2015	2014
	\$m	\$m
Gross operating segment revenue	1,056.4	824.9
Share of property revenue from joint ventures	(208.1)	(127.4)
Share of management fees charged to joint ventures	10.2	2.1
Interest revenue	0.4	0.2
Total revenue from ordinary activities	858.9	699.8

(iii) Reconciliation of segment assets to the Statement of Financial Position

The amounts provided to the CODM as a measure of segment assets is the direct property portfolio. The direct property portfolio values are allocated based on the operations of the segment and physical location of the asset and are measured in a manner consistent with the Statement of Financial Position. The reconciliation below reconciles the total direct property portfolio balance to total assets in the Statement of Financial Position.

	2015	2014
	\$m	\$m
Direct property portfolio1	9,533.4	9,129.4
Cash and cash equivalents	13.0	14.1
Receivables	55.5	111.6
Intangible assets	292.2	292.6
Derivative financial instruments	384.9	80.2
Deferred tax assets	10.8	35.9
Plant and equipment	20.5	10.8
Prepayments and other assets2	(220.3)	76.3
Total assets	10,090.0	9,750.9

1 Includes the Group's portion of investment properties accounted for using the equity method.

2 Other assets include the Group's share of total net assets of its investments accounted for using the equity method less the Group's share of the investment property value which is included in the direct property portfolio.

Property revenue and expenses

Rental revenue is recognised on a straight-line basis over the lease term for leases with fixed rent review clauses.

Prospective tenants may be offered incentives as an inducement to enter into operating leases. These incentives may take various forms including cash payments, rent free periods, or a contribution to certain lessee costs such as fit-out costs or relocation costs. The costs of incentives are recognised as a reduction of rental revenue on a straight-line basis from the lease commencement date to the end of the lease term. The carrying amount of the lease incentives is reflected in the fair value of investment properties.

	2015	2014
	\$m	\$m
Rent and recoverable outgoings	549.3	568.6
Incentive amortisation	(61.9)	(59.5)
Other revenue	61.4	63.2
Total property revenue	548.8	572.3

Property expenses of \$142.8 million (2014: \$141.4 million) include rates, taxes and other property outgoings incurred in relation to investment properties.

Note 3

Management operations, corporate and administration expenses

	2015	2014
	\$m	\$m
Audit, taxation, legal and other professional fees	6.6	3.7
Depreciation and amortisation	2.8	2.3
Employee benefits expense and other staff expenses	69.2	56.9
Administration and other expenses	7.7	8.4
Management operations, corporate and administration expenses	86.3	71.3

Note 4

Finance costs

Borrowing costs include interest, amortisation or ancillary costs incurred in connection with arrangement of borrowings and net fair value movements of interest rate swaps. Borrowing costs are expensed as incurred unless they relate to qualifying assets.

Qualifying assets include investment properties and inventories which take more than 12 months to develop for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset during the period of time that is required to complete and develop the asset for its intended use or sale. To the extent that funds are borrowed generally to fund development, the amount of borrowing costs to be capitalised to qualifying assets must be determined by using a weighted average capitalisation rate.

	2015	2014
	\$m	\$m
Interest paid/payable	135.8	135.5
Net fair value loss of interest rate swaps	57.7	51.3
Amount capitalised	(6.0)	(6.1)
Other finance costs	4.9	4.8
Finance costs attributable to sales transactions	-	4.5
Total finance costs	192.4	190.0

The average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 7.00% (2014: 7.00%).

Note 5 Taxation

Under current Australian income tax legislation, DDF, DIT and DOT are not liable for income tax provided they satisfy certain legislative requirements, which were met in the current and previous financial years. DXO is liable for income tax and has formed a tax consolidated group with its wholly owned and controlled Australian entities. As a consequence, these entities are taxed as a single entity.

Income tax expense is comprised of current and deferred tax expense. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly in equity, respectively.

Current tax expense represents the expense relating to the expected taxable income at the applicable rate of the financial year.

Deferred tax expense represents the tax expense in respect of the future tax consequences of recovering or settling the carrying amount of an asset or liability. Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses, to the extent it is probable that future taxable profit will be available to utilise them.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred income tax assets is reviewed at balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to utilise them.

DOT NZ Sub-Trust No.1, a wholly owned Australian sub-trust of DOT, is liable for New Zealand corporate tax on its New Zealand taxable income at the rate of 28%. In addition, until November 2014 when the Group disposed of its property in New Zealand, a deferred tax liability and its related deferred tax expense was recognised on differences between the tax cost base and the accounting carrying value of the New Zealand property.

(a) Income tax (expense)/benefit

		2015	2014
	Note	\$m	\$m
Current tax (expense)/benefit		(0.8)	(0.5)
Deferred tax (expense)/benefit		(24.5)	(12.0)
Total tax (expense)/benefit		(25.3)	(12.5)
Deferred income tax expense included in income tax (expense)/benefit comprises:
(Decrease)/increase in deferred tax assets	5(c)	(25.1)	(3.5)
(Increase)/decrease in deferred tax liabilities	5(d)	0.6	(8.5)
Total deferred tax expense		(24.5)	(12.0)

Taxation (continued)

(b) Reconciliation of income tax (expense)/benefit to net profit

	2015	2014
	\$m	\$m
Profit/(loss) before tax	644.0	419.1
Less amounts not subject to income tax	(551.7)	(357.7)
	92.3	61.4
Prima facie tax (expense)/benefit at the Australian tax rate of 30% (2014: 30%)	(27.7)	(18.4)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Depreciation and amortisation	2.1	2.3
Reversal of previous impairment	-	2.2
Movements in the carrying value and tax cost base of properties	7.7	0.2
Accounting loss on sale of assets	(7.2)	(0.1)
Reversal of prior year income tax liability	-	1.0
Other timing differences	(0.2)	0.3
	2.4	5.9
Tax (expense)/benefit	(25.3)	(12.5)

(c) Deferred tax assets

	2015	2014
	\$m	\$m
The balance comprises temporary differences attributable to:
Derivative financial instruments	-	0.1
Tax losses	1.0	25.2
Employee provisions	8.3	9.6
Other	1.5	1.0
Total non-current assets - deferred tax assets	10.8	35.9
Movements:
Opening balance at the beginning of the year	35.9	39.4
(Utilisation)/recognition of tax losses	(24.3)	(2.3)
Movement in deferred tax asset arising from temporary differences	(0.8)	(1.2)
(Charged)/credited to the Statement of Comprehensive Income	(25.1)	(3.5)
Closing balance at the end of the year	10.8	35.9

The tax losses are expected to be fully utilised by 30 June 2016.

Taxation (continued)

(d) Deferred tax liabilities

	2015	2014
	\$m	\$m
The balance comprises temporary differences attributable to:
Derivatives financial instruments	2.2	2.8
Intangible assets	1.9	2.0
Investment properties	12.7	16.0
Other	0.4	0.3
Total non-current liabilities - deferred tax liabilities	17.2	21.1
Movements
Opening balance at the beginning of the year	21.1	12.1
Movement in deferred tax liability arising from temporary differences	(0.6)	8.5
Transfer to current tax liability	(3.3)	-
Foreign currency translation	-	0.5
Charged/(credited) to the Statement of Comprehensive Income	(3.9)	9.0
Closing balance at the end of the year	17.2	21.1

Note 6

Earnings per unit

Earnings per unit are determined by dividing the net profit attributable to unitholders by the weighted average number of ordinary units outstanding during the year. Diluted earnings per unit are adjusted from the basic earnings per unit by taking into account the impact of dilutive potential units.

The weighted average number of units has been adjusted to reflect the one-for-six security consolidation.

(a) Net profit used in calculating basic and diluted earnings per unit

	2015	2014
	\$m	\$m
Profit attributable to unitholders of the parent entity	174.7	141.4
Profit attributable to stapled security holders	618.7	406.6

(b) Weighted average number of units used as a denominator

	2015	2014
	No. of securities	No. of securities1
Weighted average number of units outstanding used in calculation of basic
and diluted earnings per unit	915,462,824	820,257,691

1 Restated to reflect the one-for-six security consolidation.

Distributions paid and payable

Distributions are recognised when declared.

(a) Distribution to security holders

	2015	2014
	\$m	\$m
31 December (paid 27 February 2015)	178.2	142.1
30 June (payable 31 August 2015)	207.4	173.3
Total distributions to security holders	385.6	315.4

(b) Distribution rate

	2015	2014
	Cents per	Cents per
	security	security1
31 December (paid 27 February 2015)	19.68	18.42
30 June (payable 31 August 2015)	21.36	19.14
Total distributions	41.04	37.56
1 Restated to reflect the one-for-six security consolidation.
(c) Franked dividends
	2015	2014
	\$m	\$m
Opening balance at the beginning of the year	9.8	16.2
Franking credits utilised for payment of distribution	-	(6.4)
Closing balance at the end of the year	9.8	9.8

Property portfolio assets

In this section

The following table summarises the property portfolio assets detailed in this section:

		Office	Industrial	Total
30 June 2015	Note	\$m	\$m	\$m
Investment properties	8	4,795.5	1,411.8	6,207.3
Equity accounted investments	9	2,983.9	61.9	3,045.8
Inventories	10	42.9	231.9	274.8
Assets held for sale	11	-	5.5	5.5
Total		7,822.3	1,711.1	9,533.4

These assets are used to generate the Group's performance and are considered to be the most relevant to the operations of the Group. The assets are detailed in the following notes:

• Investment properties: relates to investment properties, both stabilised and under development.

• Investments accounted for using the equity method: provides summarised financial information on the material joint ventures and other joint ventures. The Group's joint ventures comprise interests in property portfolio assets held through investments in trusts.

• Inventories: relates to the Group's ownership of industrial and office assets or land held for repositioning, development and sale;

• Non-current assets classified as held for sale: relates to investment properties which are expected to be sold within 12 months of the balance sheet date and are currently being marketed for sale.

The list of property portfolio assets is detailed in the Property Synopsis, available at www.dexus.com/investor-centre/dxs/announcements/asx.

Note 8

Investment properties

The Group's investment properties consist of properties held for long-term rental yields and/or capital appreciation and property that is being constructed or developed for future use as investment property. Investment properties are initially recognised at cost including transaction costs. Investment properties are subsequently recognised at fair value in the Financial Statements.

The basis of valuations of investment properties is fair value, being the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date.

Changes in fair values are recorded in the Statement of Comprehensive Income. The gain or loss on disposal of an investment property 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 the Statement of Comprehensive Income in the year of disposal.

Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property where they result in an enhancement in the future economic benefits of the property.

Leasing fees incurred and incentives provided are capitalised and amortised over the lease periods to which they relate.

Investment properties (continued)

(a) Reconciliation

		Office	Industrial	Development	2015	2014
	Note	\$m	\$m	\$m	\$m	\$m
Opening balance at the beginning of the year		4,673.6	1,213.9	39.0	5,926.5	6,085.0
Additions		42.4	8.3	11.2	61.9	71.9
Acquisitions		-	114.4	-	114.4	-
Lease incentives		62.4	14.9	-	77.3	75.4
Amortisation of lease incentives		(53.4)	(7.0)	-	(60.4)	(57.4)
Rent straightlining		2.5	1.0	-	3.5	8.4
Disposals		(0.2)	(1.6)	(6.9)	(8.7)	(172.5)
Transfers to non-current assets classified as held for sale	11	-	(5.5)	-	(5.5)	(139.6)
Transfers to inventories	10	(30.4)	-	(1.6)	(32.0)	(101.4)
Net fair value gain/(loss) of investment properties		98.6	32.3	(0.6)	130.3	145.7
Foreign exchange differences		-	-	-	-	11.0
Closing balance at the end of the year		4,795.5	1,370.7	41.1	6,207.3	5,926.5

Acquisitions

On 16 January 2015, settlement occurred on the acquisition of Lakes Business Park, 2-13 Lord Street, Botany, for \$153.5 million excluding acquisition costs. This comprises \$109.8 million (\$114.4 million including acquisition costs) classified as investment property and \$43.7 million (\$45.6 million including acquisition costs) classified as inventory. Refer note 10.

Disposals

• On 23 January 2015, 79A Egerton Street, Silverwater, NSW, was disposed of for gross proceeds of \$1.7 million (carrying value of \$1.6 million).
• During the year, three land parcels of Quarry Greystanes, NSW, were disposed of for gross proceeds of \$6.3 million (carrying value of \$6.9 million).

(b) Valuation process

Independent valuations are carried out for each individual property at least once every three years by a member of the Australian Property Institute of Valuers. Each valuation firm and its signatory valuer are appointed on the basis that they are engaged for no more than three consecutive valuations. Independent valuations may be undertaken earlier where the Responsible Entity believes there is potential for a material change in the fair value of the property being the greatest of 5% of the asset value, or \$5 million.

The Group's investment properties are required to be internally valued at least every six months unless they have been independently valued during the current reporting period. Internal valuations are compared to the carrying value of investment properties at the reporting date. Where the Directors determine the internal valuations present a more reliable estimate of fair value the internal valuation is adopted as book value. Internal valuations are performed by the Group's internal valuers who hold recognised relevant professional qualifications and have previous experience as property valuers from major real estate valuation firms.

An appropriate valuation methodology is utilised according to asset class. In relation to office and industrial assets this includes the capitalisation approach (market approach) and the discounted cash flow approach (income approach). The valuation is also compared to, and supported by, direct comparison to recent market transactions. The adopted capitalisation rates and discount rates are determined based on industry expertise and knowledge and, where possible, a direct comparison to third party rates for similar assets in a comparable location. Rental revenue from current leases and assumptions about future leases, as well as any expected operational cash outflows in relation to the property, are also built into each asset assessment of fair value.

In relation to development properties under construction for future use as investment property, where reliably measurable, fair value is determined based on the market value of the property on the assumption it had already been completed at the valuation date (using the methodology as outlined above) less costs still required to complete the project, including an appropriate adjustment for industry benchmarked profit and development risk.

Investment properties (continued)

(c) Fair value measurement, valuation techniques and inputs

The following table represents the level of the fair value hierarchy and the associated unobservable inputs utilised in the fair value measurement for each class of investment property.

			Fair value			Range of
Class of	Fair value	2015	2014		unobservable inputs
property	hierarchy	\$'000		\$'000 Inputs used to measure fair value	2015	2014
Office1	Level 3	4,795.5		4,673.6 Adopted capitalisation rate	5.83% - 8.25%	6.05% - 8.50%
				Adopted discount rate	7.76% - 9.50%	8.09% - 9.50%
				Adopted terminal yield	5.87% - 8.50%	6.05% - 12.65%
				Current net market rental (per sqm)	\$338 - \$1,141	\$334 - \$1,065
				10 year average market rental growth	2.14% - 3.84%	2.10% - 3.87%
Industrial	Level 3	1,370.7		1,213.9 Adopted capitalisation rate	6.75% - 11.00%	7.13% - 11.00%
				Adopted discount rate	8.25% - 11.50%	9.00% - 11.50%
				Adopted terminal yield	7.00% - 11.00%	7.63% - 11.00%
				Current net market rental (per sqm)	\$40 - \$305	\$43 - \$300
				10 year average market rental growth	2.45% - 3.52%	2.52% - 3.26%
Development	Level 3	41.1		39.0 Adopted capitalisation rate	6.50%	7.13%
				Land rate (per sqm)	\$35 - \$418	\$50 - \$418
Total		6,207.3	5,926.5

1 Excludes car parks.

Key estimates: inputs used to measure fair value of investment properties

Judgement is required in determining the following key assumptions:

• Adopted capitalisation rate: The rate at which net market rental revenue is capitalised to determine the value of a property. The rate is determined with regard to market evidence and the prior external valuation.
• Adopted discount rate: The rate of return used to convert cash flows, payable or receivable in the future, into present value. It reflects the opportunity cost of capital, that is, the rate of return the cash can earn if put to other uses having similar risk. The rate is determined with regard to market evidence and the prior external valuation.
• Adopted terminal yield: The capitalisation rate used to convert the future net market rental revenue into an indication of the anticipated value of the property at the end of the holding period when carrying out a discounted cash flow calculation. The rate is determined with regard to market evidence and the prior external valuation.
• Net market rental (per sqm): The net market rent is the estimated amount for which a property should lease between a lessor and a lessee on appropriate lease terms in an arm's length transaction.
• 10 year average market rental growth: The expected annual rate of change in market rent over a 10 year forecast period in alignment with expected market movements. The rate is determined with reference to forecast market movements.
• Land rate (per sqm): The land rate is the market land value per sqm.

Investment properties (continued)

(d) Sensitivity information

Significant movement in any one of the inputs listed in the table above may result in a change in the fair value of the Group's investment properties as shown below:

Significant inputs	Fair value measurement sensitivity to significant increase in input	Fair value measurement sensitivity to significant decrease in input
Adopted capitalisation rate Adopted discount rate Adopted terminal yield	Decrease	Increase
Net market rental (per sqm) 10 year average market rental growth Land rate (per sqm)	Increase	Decrease

Generally, a change in the assumption made for the adopted capitalisation rate is often accompanied by a directionally similar change in the adopted terminal yield. The adopted capitalisation rate forms part of the capitalisation approach whilst the adopted terminal yield forms part of the discounted cash flow approach.

Under the capitalisation approach, the net market rental has a strong interrelationship with the adopted capitalisation rate as the fair value of the investment property is derived by capitalising, in perpetuity, the total net market rent receivable. An increase (softening) in the adopted capitalisation rate may offset the impact to fair value of an increase in the total net market rent. A decrease (tightening) in the adopted capitalisation rate may also offset the impact to fair value of a decrease in the total net market rent. A directionally opposite change in the total net market rent and the adopted capitalisation rate may increase the impact to fair value.

The discounted cash flow is primarily made up of the discounted cash flow of net income over the cash flow period and the discounted terminal value (which is largely based upon market rents grown at forecast market rental growth rates capitalised at an adopted terminal yield). An increase (softening) in the adopted discount rate may offset the impact to fair value of a decrease (tightening) in the adopted terminal yield. A decrease (tightening) in the discount rate may offset the impact to fair value of an increase (softening) in the adopted terminal yield. A directionally similar change in the adopted discount rate and the adopted terminal yield may increase the impact to fair value.

A decrease (softening) in the forecast rental growth rate may result in a negative impact on the discounted cash flow approach value whilst a strengthening may have a positive impact on the value under the same approach.

(e) Investment properties pledged as security

Refer to note 13 for information on investment properties pledged as security.

Investments accounted for using the equity method

Investments are accounted for in the Financial Statements using the equity method of accounting (refer to the 'About this Report' section).

Information relating to these entities is set out below:

	Ownership interest
	2015	2014	2015	2014
Name of entity	%	%	\$m	\$m
Bent Street Trust	33.3	33.3	264.2	250.2
DEXUS Creek Street Trust	50.0	50.0	131.5	131.8
DEXUS Martin Place Trust	50.0	50.0	89.7	81.5
Grosvenor Place Holding Trust1,2	50.0	50.0	303.3	293.5
Site 6 Homebush Bay Trust1	50.0	50.0	37.2	37.5
Site 7 Homebush Bay Trust1	50.0	50.0	49.8	50.8
DEXUS 480 Q Holding Trust	50.0	50.0	149.7	82.9
DEXUS Kings Square Trust	50.0	50.0	165.7	88.8
DEXUS Office Trust Australia	50.0	50.0	1,546.3	1,777.8
DEXUS Industrial Trust Australia	50.0	50.0	57.4	19.1
DEXUS Eagle Street Pier Trust	50.0	-	1.1	-
Total investments accounted for using the equity method			2,795.9	2,813.9

1 These entities are 50% owned by DEXUS Office Trust Australia. The Group's economic interest is therefore 75% when combined with the interest held by DEXUS Office Trust Australia. These entities are classified as joint ventures and are accounted for using the equity method as a result of contractual arrangements required unanimous decisions on all relevant matters.

2 Grosvenor Place Holding Trust owns 50% of Grosvenor Place, 225 George Street, Sydney, NSW. The Group's economic interest in this property is therefore 37.5%.

The above entities were formed in Australia and their principal activity is property investment in Australia.

Notes to the Financial Statements – property portfolio assets (continued) For the year ended 30 June 2015

Note 9

Investments accounted for using the equity method (continued)

The table below provides summarised financial information for the Group's share of joint ventures that are material, as well as other individually immaterial joint ventures.

	DEXUS Office Trust Australia			Grosvenor Place Holding Trust		Bent Street Trust		Other joint ventures		Total
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Summarised Statement of Financial Position	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Current assets
Cash and cash equivalents	6.6	21.7	0.8	0.4	1.3	0.8	3.4	3.2	12.1	26.1
Other current assets	3.9	6.7	0.6	0.7	0.4	2.9	5.0	4.4	9.9	14.7
Total current assets	10.5	28.4	1.4	1.1	1.7	3.7	8.4	7.6	22.0	40.8
Non-current assets
Investment properties	1,567.9	1,506.9	304.6	295.5	265.6	250.3	711.9	505.3	2,850.0	2,558.0
Investments accounted for using the equity method	195.2	188.2	-	-	-	-	-	-	195.2	188.2
Loan to related party1	-	338.4	-	-	-	-	-	-	-	338.4
Other non-current assets	0.4	-	-	-	-	-	0.1	-	0.5	-
Total non-current assets	1,763.5	2,033.5	304.6	295.5	265.6	250.3	712.0	505.3	3,045.7	3,084.6
Current liabilities
Provision for distribution	11.0	63.7	-	1.8	1.8	2.3	0.2	1.0	13.0	68.8
Interest bearing liabilities	172.0	73.5	-	-	-	-	-	-	172.0	73.5
Other current liabilities	33.6	34.7	2.7	1.3	1.4	1.5	38.0	19.5	75.7	57.0
Total current liabilities	216.6	171.9	2.7	3.1	3.2	3.8	38.2	20.5	260.7	199.3
Non-current liabilities
Borrowings	11.1	112.2	-	-	-	-	-	-	11.1	112.2
Total non-current liabilities	11.1	112.2	-	-	-	-	-	-	11.1	112.2
Net assets	1,546.3	1,777.8	303.3	293.5	264.1	250.2	682.2	492.4	2,795.9	2,813.9
Reconciliation of carrying amounts:
Opening balance at the beginning of the year	1,777.8	-	293.5	289.1	250.2	248.3	492.4	369.4	2,813.9	906.8
Additions	56.2	1,878.7	8.8	2.4	-	3.1	199.3	113.1	264.3	1,997.3
Share of net profit/(loss) after tax	182.6	(9.0)	14.7	18.2	29.2	13.7	25.6	35.4	252.1	58.3
Impairment	-	(3.3)	-	-	-	-	-	-	-	(3.3)
Distributions received/receivable	(97.7)	(88.6)	(13.7)	(16.2)	(15.3)	(14.9)	(35.1)	(25.5)	(161.8)	(145.2)
Return of capital	(372.6)	-	-	-	-	-	-	-	(372.6)	-
Closing balance at the end of the year	1,546.3	1,777.8	303.3	293.5	264.1	250.2	682.2	492.4	2,795.9	2,813.9

1 Refer to note 12(b)(iv). Represents the Group's share of proceeds from the sale of four properties by DEXUS Office Trust Australia.

Investments accounted for using the equity method (continued)

The table below provides summarised financial information for the Group's share of joint ventures that are material, as well as other individually immaterial joint ventures.

	DEXUS Office Trust Australia		Grosvenor Place Holding Trust		Trust	Bent Street		Other joint ventures		Total
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Summarised Statement of Comprehensive Income	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Property revenue	143.8	63.7	20.3	22.6	16.3	17.0	27.7	24.1	208.1	127.4
Property revaluations	91.2	3.0	(0.7)	-	16.3	-	3.8	16.8	110.6	19.8
Interest income	0.4	0.3	-	-	-	0.1	0.2	0.1	0.6	0.5
Finance costs	(8.0)	(5.4)	-	-	-	-	-	-	(8.0)	(5.4)
Other expenses	(44.8)	(70.6)	(4.9)	(4.4)	(3.4)	(3.4)	(6.1)	(5.6)	(59.2)	(84.0)
Net profit/(loss) for the year	182.6	(9.0)	14.7	18.2	29.2	13.7	25.6	35.4	252.1	58.3
Total comprehensive income/(loss) for the year	182.6	(9.0)	14.7	18.2	29.2	13.7	25.6	35.4	252.1	58.3

Inventories

Land and properties held for repositioning, development and sale are recorded at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost of acquisition, and development and holding costs such as borrowing costs, rates and taxes. Holding costs incurred after completion of development are expensed.

Key estimate: net realisable value (NRV) of inventories

NRV is determined using the estimated selling price in the ordinary course of business less estimated costs to bring inventories to their finished condition, including marketing and selling expenses. NRV is based on the most reliable evidence available at the time and the amount the inventories are expected to be realised. These key assumptions are reviewed annually or more frequently if indicators of impairment exist. Key estimates have been reviewed and no impairment provisions have been recognised.

(a) Inventories - land and properties held for resale

	2015	2014
	\$m	\$m
Current assets
Land and properties held for resale	110.3	80.3
Total current assets - inventories	110.3	80.3
Non-current assets
Land and properties held for resale	164.5	235.9
Total non-current assets - inventories	164.5	235.9
Total assets - inventories	274.8	316.2

(b) Reconciliation

		2015	2014
	Note	\$m	\$m
Opening balance at the beginning of the year		316.2	252.9
Transfer from investment properties	8	32.0	101.4
Disposals		(172.2)	(65.3)
Acquisitions and additions		98.8	27.2
Closing balance at the end of the year		274.8	316.2

Acquisitions

On 16 January 2015, settlement occurred on the acquisition of Lakes Business Park, 2-13 Lord Street, Botany, for \$153.5 million excluding acquisition costs. This comprises \$109.8 million (\$114.4 million including acquisition costs) classified as investment property and \$43.7 million (\$45.6 million including acquisition costs) classified as inventory. Refer note 8.

Disposals

• On 1 July 2014, 30 Distribution Drive, Laverton, VIC was disposed of for gross proceeds of \$19.0 million. 50% of this property was classified as non-current assets classified as held for sale at 30 June 2014 (carrying value of \$8.5 million in inventory). Refer note 11.
• On 1 December 2014, 50 Carrington Street, Sydney, NSW was disposed of for gross proceeds of \$88.0 million (carrying value of \$75.8 million).
• On 22 May 2015, 40 Market Street, Melbourne, VIC was disposed of for gross proceeds of \$105.3 million (carrying value of \$87.9 million).
• On 13 August 2014, the Group exchanged contracts for the sale of 5-13 Rosebery Avenue and 25-55 Rothschild Avenue, Rosebery, NSW for \$190.0 million, represented by a \$19.0 million option fee and \$171.0 million settlement payment. The Group will recognise the option fee over the term of the option and has therefore recognised \$17.3 million during the year ended 30 June 2015. The balance of \$1.7 million and the settlement amount of \$171.0 million will be recognised in the year ended 30 June 2016.

Non-current assets classified as held for sale

Non-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.

Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.

Non-current assets classified as held for sale relate to investment properties and are measured at fair value. As at 30 June 2015, the balance related to Units 10/11, 108 Silverwater Road, Silverwater, NSW. Refer note 24.

Disposals

• On 1 July 2014, 30 Distribution Drive, Laverton, VIC was disposed of for gross proceeds of \$19.0 million. 50% of this property was classified as inventory at 30 June 2014. Refer note 10.
• On 18 November 2014, Lumley Centre, 88 Shortland Street, Auckland, New Zealand, was disposed of for gross proceeds of NZ\$146.0 million.

Capital and financial risk management and working capital

In this section

The Group's overall risk management program focuses on reducing volatility from impacts in movements of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Note 12 Capital and financial risk management outlines how the Group manages its exposure to a variety of financial risks (interest rate risk, foreign currency risk, liquidity risk and credit risk) and details the various derivative financial instruments entered into by the Group.

The Board determines the appropriate capital structure of the Group, how much is borrowed from financial institutions and capital markets (debt), and how much is raised from shareholders (equity) in order to finance the Group's activities both now and in the future. This capital structure is detailed in the following notes:

• Debt: Interest bearing liabilities in note 13 and Commitments and contingencies in note 14;
• Equity: Contributed equity in note 15 and Reserves and retained profits in note 16.

Note 17 provides a breakdown of the working capital balances held in the Statement of Financial Position.

Note 12

Capital and financial risk management

Capital and financial risk management is carried out through a centralised treasury function which is governed by a Board approved Treasury Policy. The Group has an established governance structure which consists of the Group Management Committee and Capital Markets Committee.

The Board has appointed a Group Management Committee responsible for achieving DEXUS's goals and objectives, including the prudent financial and risk management of the Group. The Group Management Committee generally meets weekly. A Capital Markets Committee has been established to advise the Group Management Committee.

The Capital Markets Committee is a management committee that is accountable to the Board. It convenes at least quarterly and conducts a review of financial risk management exposures including liquidity, funding strategies and hedging. It is also responsible for the development of financial risk management policies and funding strategies for recommendation to the Board, and the approval of treasury transactions within delegated limits and powers.

(a) Capital risk management

The Group manages its capital to ensure that entities within the Group will be able to continue as a going concern while maximising the return to owners through the optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to security holders. The Group continuously monitors its capital structure and it is managed in consideration of the following factors:

• the cost of capital and the financial risks associated with each class of capital;
• gearing levels and other debt covenants;
• potential impacts on net tangible assets and security holders' equity;
• potential impacts on the Group's credit rating; and
• other market factors.

Capital and financial risk management (continued)

(a) Capital risk management (continued)

The Group has a stated target gearing level of 30% to 40%. The table below details the calculation of the gearing ratio in accordance with our primary financial covenant requirements:

	2015	2014
	\$m	\$m
Total interest bearing liabilities1	2,556.3	2,919.3
Total tangible assets2	9,402.1	9,342.2
Gearing ratio	27.2%	31.2%
Gearing ratio (look-through)3	28.5%	33.7%

1 Total interest bearing liabilities excludes deferred borrowing costs and includes the impact of foreign currency fluctuations of cross currency swaps.

2 Total tangible assets comprise total assets less intangible assets, derivatives and deferred tax balances.

3 The look-through gearing ratio is adjusted for cash and debt in equity accounted investments and is not a financial covenant.

The Group is rated A- by Standard & Poor's (S&P) and A3 by Moody's. The Group is required to comply with certain financial covenants in respect of its interest bearing liabilities. During the 2014 and 2015 reporting periods, the Group was in compliance with all of its financial covenants.

DXFM is the Responsible Entity for the managed investment schemes (DDF, DOT, DIT and DXO) that are stapled to form the Group. DXFM has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to maintain liquidity above specified limits. DXFM must also prepare rolling cash projections over at least the next 12 months and demonstrate it will have access to sufficient financial resources to meet its liabilities that are expected to be payable over that period. Cash projections and assumptions are approved, at least quarterly, by the Board of the Responsible Entity.

DWPL, a wholly owned entity, has been issued with an AFSL as it is the Responsible Entity for DEXUS Wholesale Property Fund (DWPF). DEXUS Wholesale Management Limited (DWML), a wholly owned entity, has been issued with an AFSL as it is the trustee of third party managed funds. These entities are subject to the capital requirements described above.

(b) Financial risk management

The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group's principal financial instruments, other than derivatives, comprise cash, bank loans and capital markets issuance. The main purpose of financial instruments is to manage liquidity and hedge the Group's exposure to financial risks namely:

• interest rate risk;
• foreign currency risk;
• liquidity risk; and
• credit risk.

The Group uses derivatives to reduce the Group's exposure to fluctuations in interest rates and foreign exchange rates. These derivatives create an obligation or a right that effectively transfers one or more of the risks associated with an underlying financial instrument, asset or obligation. Derivative financial instruments that the Group may use to hedge its risks include:

• interest rate swaps;
• cross currency interest rate swaps;
• foreign exchange contracts; and
• option contracts (interest rate).

The Group does not trade in derivative instruments for speculative purposes. The Group uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure and conducting sensitivity analysis.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk
• Interest rate risk

Interest rate risk arises from interest bearing financial assets and liabilities that the Group utilises. Non-derivative interest bearing financial instruments are predominantly short term liquid assets and long term debt issued at fixed rates which expose the Group to fair value interest rate risk as the Group may pay higher interest costs than if it were at variable rates. The Group's borrowings which have a variable interest rate give rise to cash flow interest rate risk as variable interest rates may increase.

The Group's risk management policy for interest rate risk seeks to minimise the effects of interest rate movements on its asset and liability portfolio through active management of the exposures. The policy prescribes minimum and maximum hedging amounts for the Group, which is managed on a portfolio basis.

The Group maintains a mix of offshore and local currency fixed rate and variable rate debt, as well as a mix of long term and short term debt. The Group primarily enters into interest rate swaps and cross currency interest rate swap agreements to manage the associated interest rate risk. The Group hedges the interest rate and currency risk on the majority of its foreign currency borrowings by entering into cross currency swaps, which have the economic effect of converting foreign currency borrowings to local currency borrowings at contracted rates. The derivative contracts are recorded at fair value in the Statement of Financial Position, being the market value as quoted in an active market.

As at 30 June 2015, 95% (2014: 62%) of the interest bearing liabilities of the Group were hedged. The average hedged percentage for the financial year was 76% (2014: 60%).

Interest rate swaps require settlement of net interest receivable or payable each 90 or 180 days. The settlement dates coincide with the dates on which the interest is payable on the underlying debt. The receivable and payable legs on interest rate swap contracts are settled on a net basis. The net notional amount of average fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate is set out below:

	June 2016	June 2017	June 2018	June 2019		June 2020 > June 2021
	\$m	\$m	\$m	\$m	\$m	\$m
Fixed rate debt1
A\$ fixed rate debt	515.0	462.5	275.8	84.2	45.8	-
Interest rate swaps
A\$ hedged1	1,700.4	1,687.5	1,569.6	1,298.3	600.8	12.1
Combined fixed debt and swaps (A\$ equivalent)	2,215.4	2,150.0	1,845.4	1,382.5	646.7	12.1
Hedge rate (%)	3.86%	3.79%	3.97%	4.21%	3.96%	2.69%

1 Amounts do not include fixed rate debt that has been swapped to floating rate debt through cross currency swaps.

Sensitivity analysis on interest expense

The table below shows the impact on the Group's net interest expense of a 50 basis point increase or decrease in market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Group's floating rate debt and derivative cash flows on average during the financial year. Net interest expense is only sensitive to movements in market rates to the extent that floating rate debt is not hedged.

		2015	2014
		(+/-) \$m	(+/-) \$m
+/- 0.50% (50 basis points)	A\$	3.6	5.0
+/- 0.50% (50 basis points)	NZ\$	-	0.6
Total A\$ equivalent		3.6	5.6

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk (continued)

Interest rate risk (continued)

Sensitivity analysis on fair value of interest rate swaps

The sensitivity analysis on interest rate swaps below shows the effect on net profit or loss for changes in the fair value of interest rate swaps for a 50 basis point increase or decrease in short-term and long-term market interest rates. The sensitivity on fair value arises from the impact that changes in market rates will have on the valuation of the interest rate swaps.

The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Although interest rate swaps are transacted for the purpose of providing the Group with an economic hedge, the Group has elected not to apply hedge accounting to these instruments. Accordingly, gains or losses arising from changes in the fair value are reflected in the profit or loss.

2014
(+/-) \$m
38.0
(0.7)
37.3

Sensitivity analysis on fair value of cross currency swaps

The sensitivity analysis on cross currency interest rates swaps below shows the effect on net profit or loss for changes in the fair value for a 50 basis points increase and decrease in market rates. The sensitivity on fair value arises from the impact that changes in short-term and long-term market rates will have on the valuation of the cross currency swaps.

		2015	2014
		(+/-) \$m	(+/-) \$m
+/- 0.50% (50 basis points)	US\$ (A\$ equivalent)	9.7	8.9
Total A\$ equivalent		9.7	8.9

Foreign currency risk

Foreign currency risk refers to the risk that the value or the cash flows arising from a financial commitment, or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Group's foreign currency risk arises primarily from:

• highly probable forecast transactions denominated in foreign currency; and
• borrowings denominated in foreign currency.

The objective of the Group's foreign exchange risk management policy is to ensure that movements in exchange rates have minimal adverse impact on the Group's foreign currency assets and liabilities. Refer to note 13 for the USD foreign currency exposures and management thereof via cross currency interest rate swaps.

Foreign currency assets and liabilities

Where foreign currency borrowings are used to fund Australian investments, the Group transacts cross currency swaps to reduce the risk that movements in foreign exchange rates will have an impact on security holder's equity and net tangible assets.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (ii) Liquidity risk

Liquidity risk is associated with ensuring that there are sufficient funds available to meet the Group's financial commitments as and when they fall due and planning for any unforeseen events which may curtail cash flows. The Group identifies and manages liquidity risk across the following categories:

• short-term liquidity management covering the month ahead on a rolling basis with continuous monitoring of forecast and actual cash flows;
• medium-term liquidity management of liquid assets, working capital and standby facilities to cover Group cash requirements over the next 1-24 month period. The Group maintains a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits); and
• long-term liquidity management through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated in certain time periods, and ensuring an adequate diversification of funding sources where possible, subject to market conditions.

Refinancing risk

Refinancing risk is the risk that the Group:

• will be unable to refinance its debt facilities as they mature; and/or
• will only be able to refinance its debt facilities at unfavourable interest rates and credit market conditions (margin price risk).

The Group's key risk management strategy for margin price risk on refinancing is to spread the maturities of debt facilities over different time periods to reduce the volume of facilities to be refinanced and the exposure to market conditions in any one period. An analysis of the contractual maturities of the Group's interest bearing liabilities and derivative financial instruments is shown in the table below. The amounts in the table represent undiscounted cash flows.

		2015				2014
	Within one year	Between one and two years	Between two and five years	After five years	Total	Within one year	Between one and two years	Between two and five years	After five years	Total
	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Cash	13.0	-	-	-	13.0	14.1	-	-	-	14.1
Receivables	55.5	-	-	-	55.5	111.6	-	-	-	111.6
Payables	(110.7)	-	-	-	(110.7)	(111.1)	-	-	-	(111.1)
	(42.2)	-	-	-	(42.2)	14.6	-	-	-	14.6
Interest bearing liabilities & interest
Fixed interest rate liabilities	(95.1)	(355.4)		(500.2) (1,550.7)	(2,501.4)	(168.3)	(71.2)	(667.1)		(970.7) (1,877.3)
Floating interest rate liabilities	(163.0)	(203.1)	(579.7)	-	(945.8)	(114.7)	(156.6)	(1,370.5)		(117.0) (1,758.8)
Total interest bearing liabilities & interest1	(258.1)	(558.5)		(1,079.9) (1,550.7)	(3,447.2)	(283.0)		(227.8) (2,037.6) (1,087.7) (3,636.1)
Derivative financial instruments
Derivative assets	82.5	117.3	142.9	1,466.9	1,809.6	131.3	31.3	119.8	772.5	1,054.9
Derivative liabilities	(66.8)	(88.0)		(103.7) (1,043.3)	(1,301.8)	(139.6)	(51.2)	(167.9)		(661.9) (1,020.6)
Total net derivative financial instruments2	15.7	29.3	39.2	423.6	507.8	(8.3)	(19.9)	(48.1)	110.6	34.3

1 Refer to note 13. Excludes deferred borrowing costs but includes estimated fees and interest.

2 The notional maturities on derivatives are shown for cross currency interest rate swaps (refer to interest rate risk) as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. Refer to note 12(c) for fair value of derivatives. Refer to note 14(b) for financial guarantees.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iii) Credit risk

Credit risk is the risk that the counterparty will not fulfil its obligations under the terms of a financial instrument and will cause financial loss to the Group. The Group has exposure to credit risk on all financial assets included in the Group's Statement of Financial Position.

The Group manages this risk by:

• adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty's credit rating;
• regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody's and Fitch credit rating. The exposure includes the current market value of in-the-money contracts and the potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
• entering into ISDA Master Agreements once a financial institution counterparty is approved;
• monitoring tenants exposure within approved credit limits;
• for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
• regularly monitoring loans and receivables on an ongoing basis.

A minimum S&P rating of A– (or Moody's or Fitch equivalent) is required to become or remain an approved counterparty unless otherwise approved by the DEXUS Board.

The Group is exposed to credit risk on cash balances and on derivative financial instruments with financial institutions. The Group has a policy that sets limits as to the amount of credit exposure to each financial institution. New derivatives and cash transactions are limited to financial institutions that meet minimum credit rating criteria in accordance with the Group's policy requirements.

Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the Group's exposure to any one counterparty. As a result, there is no significant concentration of credit risk for financial instruments. The maximum exposure to credit risk at 30 June 2015 is the carrying amounts of financial assets recognised on the Statement of Financial Position.

As at 30 June 2015, there were no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade debtors are monitored on an ongoing basis. The tables below show the ageing analysis of loans and receivables net of provisions of the Group.

	2015	2014
	\$m	\$m
0-30 days	47.6	106.4
31-60 days	3.5	3.1
61-90 days	0.3	0.6
Over 91 days	4.1	1.5
Total receivables net of provisions	55.5	111.6

Amounts over 31 days are past due; however, no receivables are impaired. The credit quality of financial assets that are neither past due nor impaired is monitored to make sure there are no adverse changes in credit quality.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value

The Group has classified its financial assets and liabilities as follows:

Financial asset/liability	Classification	Valuation basis	Reference
Receivables1	Loans and receivables	Amortised cost	Refer to note 17(b)
Payables1	Financial liability at amortised cost	Amortised cost	Refer to note 17(d)
Interest bearing liabilities	Financial liability at amortised cost	Amortised cost	Refer to note 13
Non-interest bearing loans	Loans and receivables	Amortised cost	Refer to note 22
from related party
Derivatives	Fair value through profit or loss	Fair value	Refer to note 12(c)

1 The face value of these is approximately equal to their fair value; these amounts are unsecured and are usually paid within 30 days of recognition.

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired. As noted in section (c) below, derivative financial instruments are initially recognised in the Statement of Financial Position at fair value on the date on which the derivative contract is entered into and subsequently remeasured to fair value.

The valuation techniques applied by the Group are consistent with those applied in prior year financial reports. The valuation technique used to measure the various financial instruments, namely foreign currency contracts and interest rate contracts, is based on market observable spot exchange rates and interest rate yield curves. This method records any change in fair value of a derivative in the Financial Statements.

The carrying amounts and estimated fair value of all the Group's financial assets and liabilities recognised in the Financial Statements are as follows:

	2015	2015	2014	2014
	Carrying		Carrying
	amount1	Fair value2	amount1	Fair value2
	\$m	\$m	\$m	\$m
Financial assets
Cash and cash equivalents	13.0	13.0	14.1	14.1
Loans and receivables (current)	55.5	55.5	111.6	111.6
Derivative assets	384.9	384.9	80.2	80.2
Total financial assets	453.4	453.4	205.9	205.9
Financial liabilities
Trade payables	110.7	110.7	111.1	111.1
Non-interest bearing loan from related party3	-	-	338.4	338.4
Derivative liabilities	170.0	170.0	88.1	88.1
Interest bearing liabilities
Fixed interest bearing liabilities	1,877.1	1,984.7	1,402.4	1,491.0
Floating interest bearing liabilities	911.0	911.0	1,555.7	1,550.7
Total financial liabilities	3,068.8	3,176.4	3,495.7	3,579.3

1 Carrying value is equal to the value of the financial instruments on the Statement of Financial Position.

2 Fair value is the price that would be received to transfer the asset or liability in an orderly transaction between market participants at the measurement date. Where there is a difference between the carrying amount and fair value, the difference is not recognised in the Statement of Financial Position.

3 Relates to the loan from DEXUS Office Trust Australia.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value (continued)

Key assumptions: fair value of borrowings

The fair value of interest bearing liabilities has been determined based on a discounted cash flow analysis using observable market inputs (interest rates, exchange rates and currency basis) and applying a credit or debit value adjustment based on the current credit worthiness of counterparties and the Group.

The Group uses the following methods in the determination and disclosure of the fair value of financial instruments:

Level 1: the fair value is calculated using quoted prices in active markets.

Level 2: the fair value is determined using inputs other than quoted prices included in 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: the fair value is estimated using inputs for the asset or liability that are not based on observable data.

All financial instruments were measured at Level 2 for the periods presented in this report. During the year, there were no transfers between Level 1, 2 and 3 fair value measurements.

(v) Offsetting financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position where there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The Group has entered into arrangements that do not meet the criteria for offsetting except in certain circumstances, such as bankruptcy or the termination of the underlying contract.

The following table presents the gross amounts of recognised financial instruments in the Statement of Financial Position as the Group does not apply the right of set-off that exists in master netting arrangements. The column 'net amount' shows the impact on the Group's Statement of Financial Position if all legal rights of set-off available under the applicable master netting arrangements were exercised at 30 June 2015 and 30 June 2014.

		Gross amounts	Net amounts
		offset in the	presented in	Amounts
		Statement of	the Statement	subject to	Financial
		Financial	of Financial	master netting	instrument
	Gross amounts	Position	Position	arrangements	collateral	Net amount
2015	\$m	\$m	\$m	\$m	\$m	\$m
Financial assets
Derivative financial instruments	384.9	-	384.9	(46.0)	-	338.9
Total	384.9	-	384.9	(46.0)	-	338.9
Financial liabilities
Derivative financial instruments	170.0	-	170.0	(46.0)	-	124.0
Total	170.0	-	170.0	(46.0)	-	124.0
2014
Financial assets
Derivative financial instruments	80.2	-	80.2	(6.5)	-	73.7
Total	80.2	-	80.2	(6.5)	-	73.7
Financial liabilities
Derivative financial instruments	88.1	-	88.1	(6.5)	-	81.6
Total	88.1	-	88.1	(6.5)	-	81.6

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (v) Offsetting financial assets and financial liabilities (continued)

Master netting arrangements – not currently enforceable

Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, where certain credit events occur (such as default), the net position owing/receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Group does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Statement of Financial Position, but have been presented separately in the table above.

(c) Derivative financial instruments

A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over time in response to underlying variables including interest rates or exchange rates and is entered into for a fixed period. A hedge is where a derivative is used to manage an underlying exposure and the Group uses derivatives to manage its exposure to interest rates and foreign exchange risk accordingly.

Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Group's exposures and updates its treasury policies and procedures. The Group does not trade in derivative instruments for speculative purposes.

Derivatives including interest rate swaps, the interest rate component of cross currency swaps, and foreign exchange contracts, are measured at fair value with any changes in fair value recognised in the Statement of Comprehensive Income.

At inception the Group can elect to formally designate and document the relationship between certain hedge derivative instruments (cross currency interest rate swaps only) and the associated hedged items (foreign currency bonds only). The 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 fair values or cash flows of hedged items.

Fair value hedge

A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability that is attributable to a particular risk and could affect the Statement of Comprehensive Income. Changes in the fair value of derivatives (hedging instruments) that are designated as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (hedged item).

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to maturity using a recalculated effective interest rate.

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk to a highly probable forecast transaction pertaining to an asset or liability. The effective portion of changes in the fair value of derivatives that are designated as cash flow hedges is recognised in other comprehensive income in equity via the cash flow hedge reserve. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. Any gain or loss related to ineffectiveness is recognised in profit or loss immediately.

Hedge accounting is discontinued when the hedging instrument expires, is terminated, is no longer in an effective hedge relationship, is de-designated, or the forecast transaction is no longer expected to occur. The fair value gain or loss of derivatives recorded in equity is recognised in profit or loss over the period that the forecast transaction is recorded in profit or loss. If the forecast transaction is no longer expected to occur, the cumulative gain or loss in equity is recognised in profit or loss immediately.

Capital and financial risk management (continued)

(c) Derivative financial instruments (continued)

	2015	2014
	\$m	\$m
Current assets
Interest rate swap contracts	2.6	2.3
Cross currency swap contracts	15.1	6.4
Total current assets - derivative financial instruments	17.7	8.7
Non-current assets
Interest rate swap contracts	17.5	22.5
Cross currency swap contracts	349.7	45.1
Other	-	3.9
Total non-current assets - derivative financial instruments	367.2	71.5
Current liabilities
Interest rate swap contracts	8.3	2.4
Cross currency swap contracts	2.5	-
Total current liabilities - derivative financial instruments	10.8	2.4
Non-current liabilities
Interest rate swap contracts	108.1	79.3
Cross currency swap contracts	51.1	6.4
Total non-current liabilities - derivative financial instruments	159.2	85.7
Net derivative financial instruments	214.9	(7.9)

Key assumptions: fair value of derivatives

The fair value of derivative financial instruments has been determined based on a discounted cash flow analysis using observable market inputs (interest rates, exchange rates and currency basis) and applying a credit or debit valuation adjustment based on the current credit worthiness of counterparties and the Group. Refer to note 12(b)(iv) Capital and financial risk management for further detail.

Interest bearing liabilities

Borrowings are initially recognised at fair value net of transaction costs and subsequently measured at amortised cost using the effective interest rate method. Under the effective interest rate method, any transaction fees, costs, discounts and premiums directly related to the borrowings are capitalised to borrowings and amortised in profit or loss over the expected life of the borrowings.

If there is an effective fair value hedge of borrowings, a fair value adjustment will be applied based on the mark to market movement in the benchmark component of the borrowings. This movement is recognised in the profit or loss. Refer note 12(b)(iv) Capital and financial risk management for further detail.

All borrowings with contractual maturities greater than 12 months after reporting date are classified as noncurrent liabilities.

		2015	2014
	Note	\$m	\$m
Current
Unsecured
US senior notes	(b)	-	94.5
Bank loans	(c)	150.0	-
Medium term notes	(e)	-	55.0
Total unsecured		150.0	149.5
Total current liabilities - interest bearing liabilities		150.0	149.5
Non-current
Unsecured
US senior notes	(a), (b)	1,359.4	827.8
Bank loans	(c)	761.0	1,450.7
Commercial paper	(d)	100.0	100.0
Medium term notes	(e)	417.7	418.9
Total unsecured		2,638.1	2,797.4
Deferred borrowing costs		(14.1)	(15.3)
Total non-current liabilities - interest bearing liabilities		2,624.0	2,782.1
Total interest bearing liabilities		2,774.0	2,931.6

Interest bearing liabilities (continued)

Financing arrangements

The following table summarises the maturity profile of the Group's financing arrangements:

					2015	2015
					\$m	\$m
						Facility
Type of facility	Notes	Currency	Security	Maturity Date	Utilised1	Limit
US senior notes (144A)	(a)	US\$	Unsecured	Mar-21	324.8	324.8
US Senior notes (USPP)	(b)	US\$	Unsecured	Dec-16 to Jul-28	1,029.9	1,029.9
Medium term notes	(e)	A\$	Unsecured	Apr-17 to Sept-18	417.7	417.7
Commercial paper	(d)	A\$	Unsecured	Aug-16	100.0	100.0
Multi-option revolving credit facilities	(c)	Multi Currency	Unsecured	Mar-16 to Jun-20	911.0	1,700.0
Total					2,783.4	3,572.4
Bank guarantee in place					30.9
Unused at balance date					758.1

1 Includes drawn amounts and excludes fair value adjustments recorded in interest bearing liabilities in relation to effective fair value hedges.

Each of the Group's unsecured borrowing facilities are supported by guarantee arrangements, and have negative pledge provisions which limit the amount and type of encumbrances that the Group can have over their assets and ensures that all senior unsecured debt ranks pari passu.

(a) US senior notes (144A)

This includes a total of US\$250.0 million (A\$324.8 million) of US senior notes with a maturity of March 2021. The USD exposure is economically hedged using cross currency interest rate swaps with a notional value of US\$250.0 million.

(b) US senior notes (USPP)

This includes a total of US\$791.0 million (A\$1,029.9 million) of US senior notes with a weighted average maturity of December 2025. The majority of the USD balance is designated as an accounting hedge using cross currency interest rate swaps with a notional value of US\$750 million. The remaining US\$41 million is economically hedged using cross currency interest rate swaps with the same notional value.

(c) Multi-option revolving credit facilities

This includes 18 facilities maturing between March 2016 and June 2020 with a weighted average maturity of February 2018. A\$30.9 million is utilised as bank guarantees for developments and AFSL requirements.

(d) Commercial Paper

This includes a total of A\$100.0 million of Commercial Paper which is supported by a standby facility of A\$100.0 million with a maturity of August 2016. The standby facility has same day availability.

(e) Medium Term Notes

This includes a total of A\$415.0 million of Medium Term Notes with a weighted average maturity of December 2017.

Additional information

The Group also has a committed facility totalling A\$100.0 million that is available for three months out of every six months.

Commitments and contingencies

(a) Commitments

(i) Capital commitments

The following amounts represent remaining capital expenditure on investment properties and inventories contracted at the end of each reporting period but not recognised as liabilities payable:

	2015	2014
	\$m	\$m
Investment properties	59.2	58.2
Inventories	17.8	0.8
Investments accounted for using the equity method	183.9	284.8
Total capital commitments	260.9	343.8

(ii) Lease payable commitments

The future minimum lease payments payable by the Group are:

	2015	2014
	\$m	\$m
Within one year	4.0	3.6
Later than one year but not later than five years	11.6	12.7
Later than five years	5.9	6.5
Total lease payable commitments	21.5	22.8

Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property.

No provisions have been recognised in respect of non-cancellable operating leases.

(iii) Lease receivable commitments

The future minimum lease payments receivable by the Group are:

	2015	2014
	\$m	\$m
Within one year	387.5	383.4
Later than one year but not later than five years	996.0	992.9
Later than five years	391.9	353.4
Total lease receivable commitments	1,775.4	1,729.7

Commitments and contingencies (continued)

(b) Contingencies

DDF, together with DIT, DOT and DXO, is a guarantor of A\$3,572.4 million of interest bearing liabilities (refer note 13). The guarantees have been given in support of debt outstanding and drawn against these facilities, and may be called upon in the event that a borrowing entity has not complied with certain requirements such as failure to pay interest or repay a borrowing, whichever is earlier. During the period no guarantees were called.

The Group has bank guarantees of \$30.9 million, comprising \$30.2 million held to comply with the terms of the Australian Financial Services Licenses (AFSL) and \$0.7 million in respect of developments.

The above guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in interest bearing liabilities on the Statement of Financial Position.

The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Group, other than those disclosed in the Financial Statements, which should be brought to the attention of security holders as at the date of completion of this report.

Note 15

Contributed equity

(a) Contributed equity of unitholders of the parent entity

	2015	2014
	\$m	\$m
Opening balance at the beginning of the year	1,833.4	1,577.7
Issue of additional equity, net of transaction costs	157.2	281.2
Buy-back of contributed equity, net of transaction costs	-	(25.5)
Closing balance at the end of the year	1,990.6	1,833.4

(b) Contributed equity of unitholders of other stapled entities

	2015	2014
	\$m	\$m
Opening balance at the beginning of the year	3,625.7	3,106.3
Issue of additional equity, net of transaction costs	314.2	569.2
Buy-back of contributed equity, net of transaction costs	-	(49.8)
Closing balance at the end of the year	3,939.9	3,625.7

Contributed equity (continued)

(c) Number of securities on issue

	2015	2014
	No. of securities	No. of securities
Opening balance at the beginning of the year	5,433,110,810	4,701,957,390
Issue of additional equity	65,274,552	804,882,384
One-for-six security consolidation	(4,527,579,013)	-
Buy-back of contributed equity	-	(73,728,964)
Closing balance at the end of the year	970,806,349	5,433,110,810

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Group.

Each stapled security entitles the holder to vote in accordance with the provisions of the Constitutions and the Corporations Act 2001.

Transaction costs arising on the issue of equity instruments are recognised directly in equity (net of tax) as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

On 29 October 2014, the Group announced a one-for-six consolidation of DEXUS Property Group stapled securities. The consolidation was completed on 14 November 2014. Where the number of securities held by a security holder following the consolidation resulted in a fraction of a security, the fraction was rounded up to the nearest whole number.

Reserves and retained profits

(a) Reserves

	2015	2014
	\$m	\$m
Foreign currency translation reserve	-	(1.8)
Asset revaluation reserve	42.7	42.7
Cash flow hedge reserve	8.6	(9.3)
Security-based payments reserve	8.1	5.6
Treasury securities reserve	(8.0)	(5.3)
Total reserves	51.4	31.9
Foreign currency translation reserve
Opening balance at the beginning of the year	(1.8)	(6.3)
Exchange differences on translating foreign operations	(0.3)	5.3
Foreign currency translation reserve transfer on disposal of foreign operations	2.1	(0.8)
Closing balance at the end of the year	-	(1.8)
Asset revaluation reserve
Opening balance at the beginning of the year	42.7	42.7
Closing balance at the end of the year	42.7	42.7
Cash flow hedge reserve
Opening balance at the beginning of the year	(9.3)	-
Changes in the fair value of cash flow hedges	17.9	(9.3)
Closing balance at the end of the year	8.6	(9.3)
Security-based payments reserve
Opening balance at the beginning of the year	5.6	2.4
Issue of securities to employees	(1.3)	-
Security-based payments expense	3.8	3.2
Closing balance at the end of the year	8.1	5.6
Treasury securities reserve
Opening balance at the beginning of the year	(5.3)	(2.2)
Issue of securities to employees	1.3	-
Purchase of securities	(4.0)	(3.1)
Closing balance at the end of the year	(8.0)	(5.3)

(b) Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations.

Asset revaluation reserve

The asset revaluation reserve is used to record the fair value adjustment arising on a business combination.

Cash flow hedge reserve

The cash flow hedge reserve is used to record the effective portion of changes in the fair value of derivatives that are designated as cash flow hedges.

Reserves and retained profits (continued)

(b) Nature and purpose of reserves (continued)

Security-based payments reserve

The security-based payments reserve is used to recognise the fair value of performance rights to be issued under the 2012 Transitional Performance Rights Plan, the Deferred Short Term Incentive Plans (DSTI) and the Long Term Incentive Plans (LTI). Refer to note 21 for further details.

Treasury securities reserve

The treasury securities reserve is used to record the acquisition of securities purchased to fulfil the obligations of the 2012 Transitional Performance Rights Plan, the Deferred Short Term Incentive Plans (DSTI) and the Long Term Incentive Plans (LTI). As at 30 June 2015, DXS held 1,170,525 stapled securities (2014: 847,825, restated to reflect the one-for-six security consolidation).

(c) Retained profits

	2015	2014
	\$m	\$m
Opening balance at the beginning of the year	562.3	471.1
Net profit/(loss) attributable to security holders	618.7	406.6
Distributions provided for or paid	(385.6)	(315.4)
Closing balance at the end of the year	795.4	562.3

Note 17

Working capital

(a) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(b) Receivables

Rental, management fees and interest revenue are brought to account on an accruals basis. Dividends and distributions are recognised when declared and, if not received at the end of the reporting period, reflected in the Statement of Financial Position as a receivable.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for doubtful debts. Trade receivables are required to be settled within 30 days and are assessed on an ongoing basis for impairment. Receivables which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

	2015	2014
	\$m	\$m
Rent receivable	13.9	13.5
Less: provision for doubtful debts	(0.2)	(0.1)
Total rental receivables	13.7	13.4
Distributions receivable	12.9	68.8
Fee receivable	18.9	13.9
Other receivables	10.0	15.5
Total other receivables	41.8	98.2
Total receivables	55.5	111.6

Working capital (continued)

(c) Other current assets

	2015	2014
	\$m	\$m
Prepayments	12.5	8.1
Deposit for the acquisition of investment property	14.8	-
Total other current assets	27.3	8.1

(d) Payables

Expenses are brought to account on an accruals basis and, if not paid at the end of the reporting period, are reflected in the Statement of Financial Position as a payable.

These amounts represent liabilities for amounts owing at the end of the reporting period. The amounts are unsecured and are usually paid within 30 days of recognition.

	2015	2014
	\$m	\$m
Trade creditors	36.7	37.2
Accruals	15.7	15.0
Accrued capital expenditure	15.6	10.7
Prepaid income	10.8	17.9
Accrued interest	28.5	25.6
Other payables	3.4	4.7
Total payables	110.7	111.1

(e) Provisions

A provision is recognised when an obligation exists as a result of a past event and it is probable that a future outflow of cash or other benefit will be required to settle the obligation.

In accordance with the Trust's Constitution, the Group distributes its distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared.

Provision for employee benefits relates to the liabilities for wages, salaries, annual leave and long service leave.

Liabilities for employee benefits for wages, salaries and annual leave expected to be settled within 12 months represent present obligations resulting from employees' services provided to the end of the reporting period. They are measured based on remuneration wage and salary rates that the Group expects to pay at the end of the reporting period including related on-costs, such as workers compensation, insurance and payroll tax.

The provision for employee benefits for long service leave represents the present value of the estimated future cash outflows, to be made resulting from employees' services provided to the end of the reporting period.

The provision is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the Australian Corporate Bond Index rates at the end of the reporting period that most closely matches the term of the maturity of the related liabilities. The provision for employee benefits also includes the employee incentives schemes which are shown separately in note 21.

	2015	2014
	\$m	\$m
Provision for distribution	207.4	173.3
Provision for employee benefits	23.7	23.9
Total current provisions	231.1	197.2

Working capital (continued)

(e) Provisions (continued)

Movements in each class of provision during the financial year, other than employee benefits, are set out below:

	2015	2014
	\$m	\$m
Provision for distribution
Opening balance at the beginning of the year	173.3	146.2
Additional provisions	385.6	315.4
Payment of distributions	(351.5)	(288.3)
Closing balance at the end of the year	207.4	173.3

A provision for distribution has been raised for the period ended 30 June 2015. This distribution is to be paid on 31 August 2015.

Other disclosures

In this section

This section includes other information that must be disclosed to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations, but which are not considered critical in understanding the financial performance or position of the Group.

Note 18

Intangible assets

Management rights represent the asset management rights owned by DEXUS Holdings Pty Limited, a wholly owned subsidiary of DXO, which entitle it to management fee revenue from both finite life trusts and indefinite life trusts. Those rights that are deemed to have a finite useful life (held at a value of \$4.8 million (2014: \$5.1 million)) are measured at cost and amortised using the straight-line method over their estimated remaining useful lives of 17 years. Management rights that are deemed to have an indefinite life are held at a value of \$286.0 million (2014: \$286.0 million).

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill and management rights with 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. An impairment loss is recognised in the Statement of Comprehensive Income 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).

	2015	2014
	\$m	\$m
Management rights
Opening balance at the beginning of the year	291.1	242.1
Acquisition of management rights	-	42.0
Amortisation charge	(0.3)	(0.3)
Reversal of previous impairment of management rights	-	7.3
Closing balance at the end of the year	290.8	291.1
Cost	294.4	294.4
Accumulated amortisation	(3.6)	(3.3)
Total management rights	290.8	291.1
Goodwill
Opening balance at the beginning of the year	1.5	1.6
Impairment	(0.1)	(0.1)
Closing balance at the end of the year	1.4	1.5
Cost	3.0	3.0
Accumulated impairment	(1.6)	(1.5)
Total goodwill	1.4	1.5
Total intangible assets	292.2	292.6

Intangible assets (continued)

During the current year, management carried out a review of the recoverable amount of its management rights. There was no change in the carrying value of the management rights in the current year. In the prior year there was a recognition of a reversal of previous impairments of \$7.3 million in the Statement of Comprehensive Income.

The value in use has been determined using Board approved long-term forecasts in a five year discounted cash flow model. Forecasts were based on projected returns of the business in light of current market conditions. The performance in year five has been used as a terminal value.

Key assumptions: value in use of management rights

Judgement is required in determining the following key assumptions used to calculate the value in use:

• Terminal capitalisation rate range between 10.0% 16.7% (2014: 12.5% 16.7%) was used incorporating an appropriate risk premium for a management business.
• Cash flows have been discounted at 9.0% (2014: 9.5%) based on externally published weighted average cost of capital for an appropriate peer group plus an appropriate premium for risk. A 1.0% (2014: 1.0%) decrease in the discount rate would increase the valuation by \$17.1 million (2014: \$18.7 million).

Note 19

Audit, taxation and transaction services fees

During the year, the Auditor and its related practices earned the following remuneration:

	2015	2014
	\$'000	\$'000
Audit fees
PwC Australia - audit and review of Financial Statements	1,370	1,150
PwC fees paid in relation to outgoings audits	111	145
PwC Australia - regulatory audit and compliance services	216	211
PwC Australia - audit of DOTA	95	213
PwC Australia - sustainability assurance	97	75
Audit fees paid to PwC	1,889	1,794
Taxation fees
Fees paid to PwC Australia and New Zealand	147	33
Fees paid to PwC Australia in respect of the CPA acquisition	-	200
Taxation fees paid to PwC	147	233
Total audit and taxation fees paid to PwC	2,036	2,027
Transaction and other services fees
Fees paid to PwC Australia in respect of the CPA acquisition	-	225
Fees paid to PwC Australia - other	67	-
Total transaction and other services fees paid to PwC	67	225
Total audit, taxation, transaction and other services fees paid to PwC	2,103	2,252

Reconciliation of net profit to net cash flows from operating activities

(a) Reconciliation

	2015	2014
	\$m	\$m
Net profit/(loss) for the year	618.7	406.6
Capitalised interest	(6.0)	(6.1)
Depreciation and amortisation	2.8	2.3
Impairment of goodwill	0.1	0.1
Net fair value (gain)/loss of investment properties	(130.4)	(145.7)
Share of net (profit)/loss of investments accounted for using the equity method	(252.1)	(58.3)
Net fair value (gain)/loss of derivatives	(17.4)	2.1
Net fair value (gain)/loss of interest rate swaps	48.5	50.8
Amortisation of deferred borrowing costs	3.6	3.7
Net (gain)/loss on sale of investment properties	3.0	7.7
Net fair value (gain)/loss of interest bearing liabilities	15.9	(12.3)
Foreign currency translation reserve transfer on disposal of foreign operations	2.1	(0.8)
Reversal of previous impairment of management rights	-	(7.3)
Impairment of investments accounted for using the equity method	-	3.3
Transaction costs	-	23.9
Provision for doubtful debts	0.1	(0.5)
Distributions from investments accounted for using the equity method	217.6	79.0
Change in operating assets and liabilities
(Increase)/decrease in receivables	-	(70.9)
(Increase)/decrease in prepaid expenses	(4.5)	2.8
(Increase)/decrease in inventories	118.9	42.2
(Increase)/decrease in other current assets	(0.9)	(5.6)
(Increase)/decrease in other non-current assets	15.8	58.6
Increase/(decrease) in payables	5.9	12.8
Increase/(decrease) in current liabilities	(0.2)	0.6
Increase/(decrease) in other non-current liabilities	(1.3)	16.8
(Increase)/decrease in deferred tax assets	21.2	12.5
Net cash inflow/(outflow) from operating activities	661.4	418.3

(b) Capital expenditure on investment properties

Payments for capital expenditure on investment properties include \$118.3 million (2014: \$94.8 million) of maintenance and incentive capital expenditure.

Security-based payments

The DXFM Board has approved a grant of performance rights to DXS stapled securities to eligible participants. Awards, via the 2012 Transitional Performance Rights Plan, Deferred Short Term Incentive Plans (DSTI) and Long Term Incentive Plans (LTI), will be in the form of performance rights awarded to eligible participants which convert to DXS stapled securities for nil consideration subject to satisfying specific service and performance conditions.

For each Plan, the eligible participants will be granted performance rights, based on performance against agreed key performance indicators, as a percentage of their remuneration mix. Participants must remain in employment for the vesting period in order for the performance rights to vest. Non-market vesting conditions, including Funds from Operations (FFO), Return on Equity (ROE) and employment status at vesting, are included in assumptions about the number of performance rights that are expected to vest. When performance rights vest, the Group will arrange for the allocation and delivery of the appropriate number of securities to the participant.

The fair value of performance rights granted is recognised as an employee benefit expense with a corresponding increase in the security-based payments reserve in equity. The total amount to be expensed is determined by reference to the fair value of the performance rights granted.

Key assumptions: fair value of performance rights granted

Judgement is required in determining the fair value of performance rights granted. In accordance with AASB 2 Share-based Payments, fair value is determined independently using Black-Scholes and Monte Carlo pricing models with reference to :

• the expected life of the rights;
• the security price at grant date;
• the expected price volatility of the underlying security;
• the expected distribution yield; and
• the risk free interest rate for the term of the rights and expected total security-holder returns (where applicable).

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Group revises its estimates of the number of performance rights that are expected to vest based on the non-market vesting conditions. The impact of the revised estimates, if any, is recognised in profit or loss with a corresponding adjustment to equity.

(a) 2012 Transitional Performance Rights Plan

Subject to satisfying employment service conditions, the award has vested over a four year period ending 30 June 2015. No performance rights were granted in respect of the year ended 30 June 2015 (2014: nil). The fair value of the 2012 performance rights is \$nil per performance right and the total security-based payment expense recognised during the year ended 30 June 2015 was \$243,033 (2014: \$457,863).

(b) Deferred Short Term Incentive Plan

25% of any award under the Short Term Incentive Plan (STI) for certain participants will be deferred and awarded in the form of performance rights to DXS securities.

50% of the performance rights awards will vest one year after grant and 50% of the awards will vest two years after grant, subject to participants satisfying employment service conditions. In accordance with AASB 2 Share-based Payments, the year of employment in which participants become eligible for the DSTI, the year preceding the grant, is included in the vesting period over which the fair value of the performance rights is amortised. Consequently, 50% of the fair value of the performance rights is amortised over two years and 50% of the award is amortised over three years.

The number of performance rights granted in respect of the year ended 30 June 2015 was 356,412 (2014: 374,448¹ ) and the fair value of these performance rights is \$7.30 (2014: \$6.66¹ ) per performance right. The total securitybased payment expense recognised during the year ended 30 June 2015 was \$1,974,287 (2014: \$1,727,708).

1 Restated to reflect the one-for-six security consolidation.

Security-based payments (continued)

(c) Long Term Incentive Plan

50% of the awards will vest three years after grant and 50% of the awards will vest four years after grant, subject to participants satisfying employment service conditions and performance hurdles. In accordance with AASB 2 Share-based Payments, the year of employment in which participants become eligible for the LTI, the year preceding the grant, is included in the vesting period over which the fair value of the performance rights is amortised. Consequently, 50% of the fair value of the performance rights is amortised over four years and 50% of the award is amortised over five years.

The number of performance rights granted in respect of the year ended 30 June 2015 was 533,328 (2014: 473,374¹ ). The fair value of these performance rights is \$5.43 (2014: \$4.98¹ ) per performance right. The total security-based payment expense recognised during the year ended 30 June 2015 was \$1,302,660 (2014: \$726,312).

Note 22

Related parties

Responsible Entity and Investment Manager

DXH is the parent entity of DXFM, the Responsible Entity of DDF, DIT, DOT and DXO and the Trustee of DOTA.

DXH is also the parent entity of DWPL, the Responsible Entity of DWPF.

DXH is the Investment Manager of DOTA.

Management fees

Under the terms of the Constitutions of the entities within the Group, the Responsible Entity and Investment Manager are entitled to receive fees in relation to the management of the Group. DXFM's parent entity, DXH, is entitled to be reimbursed for administration expenses incurred on behalf of the Group. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH, is entitled to property management fees from the Group.

Related party transactions

Responsible Entity fees in relation to Group assets are on a cost recovery basis. All agreements with third party funds are conducted on normal commercial terms and conditions.

A loan of \$338.4 million from DOTA was repaid during the year.

DEXUS Wholesale Property Fund

	2015	2014
	\$'000	\$'000
Responsible Entity fee income	28,050	24,115
Property management fee income	12,405	7,397
Rent paid	63	7
Responsible Entity fees receivable at the end of each reporting period (included above)	2,453	2,150
Property management fees receivable at the end of each reporting period (included above)	1,742	817
Administration expenses receivable at the end of each reporting period (included above)	89	125

1 Restated to reflect the one-for-six security consolidation.

Related parties (continued)

Investments accounted for using the equity method

	2015	2014
	\$'000	\$'000
Asset management fee income	10,214	2,331
Property management fee income	15,156	2,004
Rent paid	1,235	-
Responsible Entity fees receivable at the end of each reporting period (included above)	2,594	2,558
Property management fees receivable at the end of each reporting period (included above)	2,915	906
Administration expenses receivable at the end of each reporting period (included above)	511	63

Directors

The following persons were Directors of DXFM at all times during the year and to the date of this report, unless otherwise stated:

C T Beare, BSc, BE (Hons), MBA, PhD, FAICD 1,2,3,5,6,7
E A Alexander, AM, BComm, FCA, FAICD, FCPA 1,3,8
P Bingham-Hall, BA (Industrial Design), FAICD, SF (Fin) 1,7,9
J C Conde, AO, BSc, BE (Hons), MBA 1,2,6,7
T Dwyer, BJuris (Hons), LLB (Hons) 1,2,4,8,9
C D Mitchell, BComm, MBA (Exec), FCPA , HBS (AMP)
W R Sheppard, BEc (Hons) 1,3,5,6,8,9
D J Steinberg, BEc, FRICS, FAPI
P B St George, CA(SA), MBA 1,5,8,9

1 Independent Director.

• 2 Board Nomination, Remuneration & Governance Committee Member until 31 August 2014.
• 3 Board Audit, Risk & Sustainability Committee Member until 31 August 2014.
• 4 Board Compliance Committee Member until 31 August 2014.
• 5 Board Finance Committee Member until 31 August 2014.
• 6 Board Nomination Committee Member from 1 September 2014.
• 7 Board People & Remuneration Committee Member from 1 September 2014.
• 8 Board Audit Committee Member from 1 September 2014.
• 9 Board Risk Committee Member from 1 September 2014.

Other key management personnel

In addition to the Directors listed above, the following persons were deemed by the Board Nomination Committee to be key management personnel during all or part of the financial year:

Name	Title
Ross Du Vernet	Executive General Manager, Strategy, Transactions & Research
Kevin George	Executive General Manager, Office & Industrial

Related parties (continued)

Key management personnel compensation

	2015	2014
	\$'000	\$'000
Compensation
Short-term employee benefits	7,453	7,428
Post employment benefits	220	189
Other long-term benefits	-	48
Security-based payments	2,595	1,995
	10,268	9,660

Equity instrument disclosures relating to key management personnel

The relevant interest in DXS stapled securities held during the financial year by each key management personnel, including their personally related parties, are set out below:

	Opening Balance 1 July 2014	One-for-six security consolidation	Purchases	Performance rights granted	Other change	Closing Balance 30 June 2015
Directors	3,993,960	(3,328,298)	8,334	394,191	-	1,068,187
Other key management personnel	1,324,458	(1,103,715)	-	127,653	-	348,396
Total	5,318,418	(4,432,013)	8,334	521,844	-	1,416,583

The DXFM Board has approved a grant of performance rights to DXS stapled securities to eligible participants (refer to note 21). Details of the number of performance rights issued to each of the key management personnel are set out in section 3 of the Directors' Report.

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2015 and 30 June 2014.

Parent entity disclosures

The financial information for the parent entity of DEXUS Diversified Trust has been prepared on the same basis as the consolidated Financial Statements except as set out below:

Distributions received from associates are recognised in the parent entity's Statement of Comprehensive Income, rather than being deducted from the carrying amount of these investments.

Interests held by the parent entity in controlled entities are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency.

(a) Summary financial information

The individual Financial Statements for the parent entity show the following aggregate amounts:

	2015	2014
	\$m	\$m
Total current assets	105.6	950.1
Total assets	3,724.6	2,581.9
Total current liabilities	183.4	982.8
Total liabilities	1,535.0	564.8
Equity
Contributed equity	1,990.6	1,833.4
Reserves	8.6	(9.4)
Retained profits	190.4	193.1
Total equity	2,189.6	2,017.1
Net profit/(loss) for the year	174.7	141.4
Total comprehensive income/(loss) for the year	192.6	132.1

(b) Guarantees entered into by the parent entity

Refer to note 14(b) for details of guarantees entered into by the parent entity.

(c) Contingent liabilities

The parent entity had no contingent liabilities as at 30 June 2015 (2014: nil).

(d) Capital commitments

The following amounts represent capital expenditure of the parent entity on investment properties contracted at the end of the reporting period but not recognised as liabilities payable:

	2015	2014
	\$m	\$m
Investment properties	3.0	6.5
Total capital commitments	3.0	6.5

Subsequent events

On 1 July 2015, the Group and DWPF exchanged contracts to jointly acquire Waterfront Place at 1 Eagle Street and Eagle Street Pier at 45 Eagle Street Brisbane, QLD, for \$635.0 million excluding acquisition costs.

On 31 July 2015, settlement occurred on the sale of 154 O'Riordan Street, Mascot, NSW for gross proceeds of \$32.0 million.

On 21 July 2015, settlement occurred on the sale of 5-13 Rosebery Avenue and 25-55 Rothschild Avenue, Rosebery, NSW for gross proceeds of \$171.0 million.

On 4 August 2015, settlement occurred on the sale of Units 10/11, 108 Silverwater Road, Silverwater, NSW for gross proceeds of \$5.5 million.

Since the end of the year, other than the matters disclosed above, the Directors are not aware of any matter or circumstance not otherwise dealt with in their Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Group, the results of those operations, or state of the Group's affairs in future financial periods.

DEXUS Industrial Trust

(ARSN 090 879 137)

Financial Report 30 June 2015

Contents Page

Directors' Report1
Auditor's Independence Declaration7
Consolidated Statement of Comprehensive Income8
Consolidated Statement of Financial Position9
Consolidated Statement of Changes in Equity 10
Consolidated Statement of Cash Flows 11
About this Report 12
Notes to the Financial Statements 15
Directors' Declaration 41
Independent Auditor's Report 42

DEXUS Property Group (DXS) (ASX Code: DXS) consists of DEXUS Diversified Trust (DDF) (ARSN 089 324 541), DEXUS Industrial Trust (DIT), DEXUS Office Trust (DOT) and DEXUS Operations Trust (DXO), collectively known as DXS or the Group.

The registered office of the Group is Level 25, Australia Square, 264-278 George Street, Sydney, NSW 2000.

Under Australian Accounting Standards, DDF has been deemed the parent entity for accounting purposes. Therefore the DDF consolidated Financial Statements include all entities forming part of DXS.

All ASX and media releases, Financial Statements and other information are available on our website: www.dexus.com

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Industrial Trust present their Directors' Report together with the consolidated Financial Statements for the year ended 30 June 2015. The consolidated Financial Statements represents DEXUS Industrial Trust and its consolidated entities (DIT or the Trust).

The Trust together with DEXUS Diversified Trust (DDF), DEXUS Office Trust (DOT) and DEXUS Operations Trust (DXO) form the DEXUS Property Group (DXS or the Group) stapled security.

1 Directors and Secretaries

1.1 Directors

The following persons were Directors of DXFM at all times during the year and to the date of this Directors' Report, unless otherwise stated:

Directors	Appointed
Christopher T Beare	4 August 2004
Elizabeth A Alexander, AM	1 January 2005
Penny Bingham-Hall	10 June 2014
John C Conde, AO	29 April 2009
Tonianne Dwyer	24 August 2011
Craig D Mitchell	12 February 2013
W Richard Sheppard	1 January 2012
Darren J Steinberg	1 March 2012
Peter B St George	29 April 2009

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2015 are as follows:

Brett D Cameron LLB/BA (Science & Technology), GAICD Appointed: 31 October 2014

Brett is the General Counsel and Company Secretary of DEXUS Property Group companies and is responsible for the legal function, company secretarial services and compliance, risk and governance systems and practices across the Group.

Prior to joining DEXUS, Brett was Head of Legal for Macquarie Real Estate (Asia) and has held senior legal positions at Macquarie Capital Funds in Hong Kong and Minter Ellison in Sydney and Hong Kong. Brett has 19 years' experience as in-house counsel and in private practice in Australia and in Asia, where he worked on real estate structuring and operations, funds management, mergers and acquisitions, private equity and corporate finance across a number of industries.

Brett graduated from The University of New South Wales and holds a Bachelor of Laws and a Bachelor of Arts (Science and Technology) and is a member of the Law Societies of New South Wales and Hong Kong. Brett is also a graduate of the Australian Institute of Company Directors.

Scott D Mahony B Bus (Acc) MBA (e-commerce) Grad Dip (Applied Corporate Governance) AGIA, RMIA Appointed: 1 April 2014

Scott is the General Manager, Compliance, Risk and Governance and is responsible for the development, implementation and oversight of DEXUS's compliance, property & corporate risk management and corporate governance programs.

Scott joined DEXUS in October 2005 after two years with Commonwealth Bank of Australia as a Senior Compliance Manager. Prior to this, Scott worked for over 11 years for Assure Services & Technology (part of AXA Asia Pacific) where he held various management roles.

Scott graduated from Charles Sturt University with a Bachelor of Business (Accountancy), a Graduate Diploma in Business Administration and an MBA. He has completed a Graduate Diploma in Applied Corporate Governance through the Governance Institute of Australia, and is a member of both the Risk Management Institution of Australasia and the Governance Institute of Australia.

2 Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors' meetings held during the year and each Director's attendance at those meetings is set out in the table below. The Directors met 11 times during the year. Ten Board meetings were main meetings and one meeting was held to consider specific business.

	Main meetings held	Main meetings attended	Specific meetings held	Specific meetings attended
Christopher T Beare	10	10	1	1
Elizabeth A Alexander, AM	10	10	1	1
Penny Bingham-Hall	10	10	1	1
John C Conde, AO	10	10	1	1
Tonianne Dwyer	10	10	1	1
Craig D Mitchell	10	10	1	1
W Richard Sheppard	10	10	1	1
Darren J Steinberg	10	10	1	1
Peter B St George	10	10	1	1

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During 2014, the Group undertook a detailed review of its Board Committee structure which resulted in the implementation of a streamlined Board Committee structure from 1 September 2014.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 September 2014 and 30 June 2015 and each Director's attendance at those meetings.

	Board Audit Committee			Board Risk Committee		Board Nomination Committee		Board People & Remuneration Committee
	held	attended	held	attended	held	attended	held	attended
Christopher T Beare	-	-	-	-	3	3	4	4
Elizabeth A Alexander, AM	3	3	-	-	-	-	-	-
Penny Bingham-Hall	-	-	4	4	-	-	4	4
John C Conde, AO	-	-	-	-	3	3	4	4
Tonianne Dwyer	3	3	4	4	-	-	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	3	3	4	4	3	3	-	-
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	3	3	4	4	-	-	-	-

Craig D Mitchell and Darren J Steinberg were not members of any Board Committees during the year ended 30 June 2015.

2 Attendance of Directors at Board meetings and Board Committee meetings (continued)

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 July 2014 and 31 August 2014 and each Director's attendance at those meetings.

						Board Nomination,
		Board Audit, Risk &		Board		Remuneration
		Sustainability		Compliance		& Governance		Board Finance
		Committee		Committee		Committee		Committee
	held	attended	held	attended		held attended	held	attended
Christopher T Beare	1	1	-	-	1	1	1	1
Elizabeth A Alexander, AM	1	1	-	-	-	-	-	-
Penny Bingham-Hall	-	-	-	-	-	-	-	-
John C Conde, AO	-	-	-	-	1	1	-	-
Tonianne Dwyer	-	-	1	1	1	1	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	1	1	-	-	-	-	1	1
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	-	-	-	-	-	-	1	1

3 Directors' relevant interests

The relevant interests of each Director in DXS stapled securities as at the date of this Directors' Report are shown below:

Directors	No. of securities
Christopher T Beare	16,667
Elizabeth A Alexander, AM	16,667
Penny Bingham-Hall	8,334
John C Conde, AO	16,667
Tonianne Dwyer	16,667
Craig D Mitchell	300,8341
W Richard Sheppard	70,090
Darren J Steinberg	604,9281
Peter B St George	17,333

1 Includes interests held directly and through performance rights.

4 Review and results of operations

The results for the year ended 30 June 2015 were:

• profit attributable to unitholders was \$56.6 million (2014: \$40.0 million profit);
• total assets were \$1,082.4 million (2014: \$944.3 million); and
• net assets were \$924.9 million (2014: \$868.0 million).

A review of the results, financial position and operations of the Group, of which the Trust forms part thereof, is set out in the Operating and Financial Review of the DEXUS Property Group Financial Report and forms part of this Directors' Report.

5 Directors' directorships in other listed entities

The following table sets out directorships of other ASX listed entities (unless otherwise stated), not including DXFM, held by the Directors at any time in the three years immediately prior to the end of the year, and the period for which each directorship was held:

Director	Company	Date appointed	Date resigned
Christopher T Beare	Mnemon Group Limited	6 November 2009	27 May 2013
	Flexigroup Limited	1 July 2014
Elizabeth A Alexander, AM	Medibank Private Limited2	31 October 2008
Penny Bingham-Hall	Bluescope Steel Limited	29 March 2011
John C Conde, AO	Whitehaven Coal Limited	3 May 2007
	Cooper Energy Limited	25 February 2013
Tonianne Dwyer	Cardno Limited	25 June 2012
	Metcash Limited	24 June 2014
W Richard Sheppard	Echo Entertainment Group	21 November 2012
Peter B St George	Boart Longyear Limited	21 February 2007	21 May 2013
	First Quantum Minerals Limited1	20 October 2003

1 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

2 Listed for trading on the Australian Securities Exchange since 24 November 2014.

6 Principal activities

During the year the principal activity of the Trust was investment in real estate assets. There were no significant changes in the nature of the Trust's activities during the year.

7 Total value of Trust assets

The total value of the assets of the Trust as at 30 June 2015 was \$1,082.4 million (2014: \$944.3 million). Details of the basis of this valuation are outlined in the Notes to the Financial Statements and form part of this Directors' Report.

8 Likely developments and expected results of operations

In the opinion of the Directors, disclosure of any further information regarding business strategies and future developments or results of the Trust, other than the information already outlined in this Directors' Report or the Financial Statements accompanying this Directors' Report would be unreasonably prejudicial to the Trust.

9 Significant changes in the state of affairs

The Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust's affairs in future financial years.

10 Matters subsequent to the end of the financial year

Since the end of the financial year the Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust's affairs in future financial years.

11 Distributions

Distributions paid or payable by the Trust for the year ended 30 June 2015 are outlined in note 7 of the Notes to the Financial Statements and form part of the Directors' Report.

12 DXFM fees

Details of fees paid or payable by the Trust to DXFM for the year ended 30 June 2015 are outlined in note 17 of the Notes to the Financial Statements and form part of this Directors' Report.

13 Units on issue

The movement in units on issue in the Trust during the year and the number of units on issue as at 30 June 2015 are detailed in note 12 of the Notes to the Financial Statements and form part of this Directors' report.

Details of the number of interests in the Trust held by DXFM or its associates as at the end of the financial year are outlined in note 17 of the Notes to the Financial Statements and form part of this Directors' report.

The trust did not have any options on issue as at 30 June 2015 (2014: nil).

14 Environmental regulation

The Group's senior management, through its Board Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any material breaches of these requirements.

15 Indemnification and insurance

The insurance premium for a policy of insurance indemnifying Directors, officers and others (as defined in the relevant policy of insurance) is paid by DEXUS Holdings Pty Limited (DXH).

PricewaterhouseCoopers (PwC or the Auditor), is indemnified out of the assets of the Trust pursuant to the DEXUS Specific Terms of Business agreed for all engagements with PwC, to the extent that the Trust inappropriately uses or discloses a report prepared by PwC. The Auditor, PwC, is not indemnified for the provision of services where such an indemnification is prohibited by the Corporations Act 2001.

16 Audit

16.1 Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.

16.2 Non-audit services

The Trust may decide to employ the Auditor on assignments, in addition to their statutory audit duties, where the Auditor's expertise and experience with the Trust and/or DXS are important.

Details of the amounts paid or payable to the Auditor for audit and non-audit services provided during the year are set out in note 15 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor's behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001.

DEXUS Industrial Trust Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

		2015	2014
	Note	\$'000	\$'000
Revenue from ordinary activities
Property revenue	2	66,737	87,069
Interest revenue	3	3,850	19
Total revenue from ordinary activities		70,587	87,088
Net fair value gain of investment properties		20,405	-
Net gain on sale of investment properties		62	-
Net fair value gain of derivatives		38	-
Net foreign exchange gain		-	596
Other income		-	26
Total income		91,092	87,710
Expenses
Property expenses	2	(14,608)	(19,529)
Management fee expense		(2,183)	(2,567)
Finance costs	4	(7,325)	(20,731)
Net fair value loss of derivatives		-	(252)
Net fair value loss of investment properties		-	(683)
Net loss on sale of investment properties		-	(4,892)
Net foreign exchange loss		(9,596)	-
Corporate and administration expenses		(775)	(813)
Total expenses		(34,487)	(49,467)
Profit/(loss) before tax		56,605	38,243
Income tax benefit	5	-	973
Profit after tax from continuing operations		56,605	39,216
Profit/(loss) from discontinued operations		-	812
Profit/(loss) for the year		56,605	40,028
Other comprehensive income/(loss):
Foreign currency translation reserve transfer on disposal of foreign operations	13(a)	-	(812)
Exchange differences on translating foreign operations	13(a)	-	132
Total other comprehensive income/(loss)		-	(680)
Total comprehensive income/(loss) for the year		56,605	39,348
		Cents	Cents 1
Earnings per unit on profit/(loss) attributable to unitholders of the parent entity
Basic earnings per unit	6	6.20	5.02
Diluted earnings per unit	6	6.20	5.02

1 Restated to reflect the one-for-six security consolidation

		2015	2014
	Note	\$'000	\$'000
Current assets
Cash and cash equivalents	14(a)	1,979	2,197
Receivables	14(b)	4,293	5,758
Non-current assets classified as held for sale	9	102,200	-
Loans with related parties	10(b)(iv)	138,948	138,948
Derivative financial instruments	10(c)	742	4,375
Other		1,447	1,095
Total current assets		249,609	152,373
Non-current assets
Investment properties	8	655,646	726,391
Loans with related parties	10(b)(iv)	168,299	59,962
Derivative financial instruments	10(c)	8,834	5,566
Total non-current assets		832,779	791,919
Total assets		1,082,388	944,292
Current liabilities
Payables	14(c)	68,258	54,679
Provisions	14(d)	67,356	-
Derivative financial instruments	10(c)	3,961	-
Total current liabilities		139,575	54,679
Non-current liabilities
Derivative financial instruments	10(c)	17,931	21,401
Other		4	201
Total non-current liabilities		17,935	21,602
Total liabilities		157,510	76,281
Net assets		924,878	868,011
Equity
Contributed equity	12	1,258,587	1,190,969
Retained profits/(accumulated losses)	13	(333,709)	(322,958)
Total equity		924,878	868,011

DEXUS Industrial Trust Consolidated Statement of Changes in Equity

For the year ended 30 June 2015

		Contributed equity	Retained profits/ (losses)	Reserves	Total equity
	Note	\$'000	\$'000	\$'000	\$'000
Opening balance as at 1 July 2013		1,082,464	(362,986)	680	720,158
Profit/(loss) for the year		-	40,028	-	40,028
Other comprehensive income/(loss) for the year		-	-	(680)	(680)
Total comprehensive income for the year		-	40,028	(680)	39,348
Transactions with owners in their capacity as unitholders:
Issue of additional equity, net of transaction costs	12	118,969	-	-	118,969
Buy-back of contributed equity, net of transaction costs	12	(10,464)	-	-	(10,464)
Total transactions with owners in their capacity as owners		108,505	-	-	108,505
Closing balance as at 30 June 2014		1,190,969	(322,958)	-	868,011
Opening balance as at 1 July 2014		1,190,969	(322,958)	-	868,011
Profit/(loss) for the year		-	56,605	-	56,605
Other comprehensive income/(loss) for the year		-	-	-	-
Total comprehensive income for the year		-	56,605	-	56,605
Transactions with owners in their capacity as unitholders:
Issue of additional equity, net of transaction costs	12	67,618	-	-	67,618
Distributions paid or provided for		-	(67,356)	-	(67,356)
Total transactions with owners in their capacity as owners		67,618	(67,356)	-	262
Closing balance as at 30 June 2015		1,258,587	(333,709)	-	924,878

DEXUS Industrial Trust Consolidated Statement of Cash Flows For the year ended 30 June 2015

2015 2014 Note \$'000 \$'000 Cash flows from operating activities Receipts in the course of operations (inclusive of GST) 72,536 98,192 Payments in the course of operations (inclusive of GST) (21,495) (31,791) Interest received 20 19 Finance costs paid to financial institutions (7,371) (8,739) Income and withholding taxes received/(paid) - 276 Net cash inflow/(outflow) from operating activities 16 43,690 57,957 Cash flows from investing activities Proceeds from sale of investment properties 1,345 210,263 Payments for capital expenditure on investment properties (8,866) (11,648) Net cash inflow/(outflow) from investing activities (7,521) 198,615 Cash flows from financing activities Borrowings provided to related parties (192,430) (421,693) Borrowings received from related parties 88,391 65,954 Payments for buy-back of contributed equity - (10,464) Proceeds from issue of additional equity 67,618 118,969 Distributions paid to unitholders - (10,000) Net cash inflow/(outflow) from financing activities (36,421) (257,234) Net increase/(decrease) in cash and cash equivalents (252) (662) Cash and cash equivalents at the beginning of the year 2,197 2,836 Effects of exchange rate changes on cash and cash equivalents 34 23 Cash and cash equivalents at the end of the year 1,979 2,197

About this Report

In this section

This section sets out the basis upon which the Trust's Financial Statements are prepared.

Specific accounting policies are described in their respective notes to the Financial Statements. This section also shows information on new or amended accounting standards and their impact on the financial position and performance of the Trust.

(a) Basis of preparation

DEXUS Property Group stapled securities are quoted on the Australian Securities Exchange under the "DXS" code and comprise one unit in each of DDF, DIT, DOT and DXO.

Each entity forming part of the Group continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with the reporting and disclosure requirements under the Corporations Act 2001 and Australian Accounting Standards. DEXUS Funds Management Limited (DXFM) as Responsible Entity for DDF, DIT, DOT and DXO may only unstaple the Group if approval is obtained by a special resolution of the stapled security holders.

These general purpose Financial Statements have been prepared in accordance with the requirements of the Constitution of the entities within the Group, the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements and interpretations of the Australia Accounting Standards Board. Compliance with Australian Accounting Standards ensures that the Financial Statements and notes also comply with International Financial Reporting Standards (IFRS). The Trust is a for-profit entity for the purpose of preparing Financial Statements.

Amounts in these Financial Statements have been presented in Australian dollars and rounded off in accordance with ASIC Class Order 98/100 to the nearest thousand dollars, unless otherwise indicated.

These Financial Statements are prepared on a going concern basis, using historical cost conventions except for investment properties and derivative financial instruments which are stated at their fair value. Refer to the specific accounting policies within the notes to the Financial Statements for the basis of valuation of assets and liabilities measured at fair value.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

In the process of applying the Group's accounting policies, management have made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are discussed in the following notes:

Note 8	Investment properties	Page 18
Note 10(c)	Derivative financial instruments	Page 30

(b) Principles of consolidation

These consolidated Financial Statements incorporate the assets, liabilities and results of all subsidiaries as at 30 June 2015.

(i) Controlled entities

Subsidiaries are all entities over which the Trust has control. The Trust controls an entity when the Trust is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Trust. They are deconsolidated from the date that control ceases.

(b) Principles of consolidation (continued)

(ii) Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement.

Joint operations

Where assets are held directly as tenants in common, the Trust's proportionate share of revenues, expenses, assets and liabilities are included in their respective items of the Statement of Financial Position and Statement of Comprehensive Income.

Joint ventures

Investments in joint ventures are accounted for using the equity method. Under this method, the Trust's share of the joint ventures' post-acquisition profits or losses is recognised in the Statement of Comprehensive Income and distributions received from joint ventures are recognised as a reduction of the carrying amount of the investment.

(c) Foreign currency

The Financial Statements are presented in Australian dollars.

Foreign currency transactions are translated into the Australian dollars functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of financial assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.

(d) Goods and services tax

Revenues, expenses and capital assets are recognised net of any amount of Australian Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST component of cash flows arising from investing and financing activities that is recoverable from or payable to the Australian Taxation Office is classified as cash flows from operating activities.

(e) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2015 reporting period. The Trust's assessment of the impact of these new standards and interpretations is set out below:

AASB 9 Financial Instruments (effective 1 July 2018).

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It also sets out new rules for hedge accounting and impairment of financial assets. The Trust intends to apply the standard from 1 July 2018. Application of this standard will not affect any of the amounts recognised in the Financial Statements but will require the disclosure of additional information.

AASB 15 Revenue from Contracts with Customers (effective 1 July 2018).

AASB 15 Revenue from Contracts with Customers clarifies the principles for recognising revenue from contracts with customers. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The Trust intends to apply the standard from 1 July 2018 and does not expect any significant impacts.

(f) Notes to the Financial Statements

The notes include information which is required to understand the Financial Statements and is material and relevant to the operations, financial position and performance of the Trust. Information is considered material and relevant if, for example:

• the amount in question is significant because of its size or nature;
• it is important in understanding the results of the Trust;
• it helps to explain the impact of significant changes in the Trust's business;
• it relates to an aspect of the Trust's operations that is important to its future performance.

The notes to the Financial Statements have been re-ordered and re-written in order to provide more meaningful information to the readers of the Financial Statements. The notes are organised into the following sections:

Trust performance page [x]	Property portfolio assets page [x]	Capital and financial risk management and working capital page [x]	Other disclosures page [x]
1. Operating segments	8. Investment properties	10. Capital and financial risk management	15. Audit, taxation and transaction services fees
2. Property revenue and expenses	9. Non-current assets classified as held for sale	11. Commitments and contingencies	16. Reconciliation of net profit to net cash flows from operating activities
3. Interest revenue		12. Contributed equity	17. Related parties
4. Finance costs		13. Reserves and retained profits	18. Parent entity disclosures
5. Taxation		14. Working capital	19. Subsequent events
6. Earnings per unit
7. Distributions paid and payable

Trust performance

In this section

This section explains the results and performance of the Trust.

It provides additional information about those individual line items in the Financial Statements that the Directors consider most relevant in the context of the operations of the Trust, including: operating segments, property revenue and expenses, interest revenue, finance costs, taxation and earnings per unit.

Note 1

Operating segments

The Chief Operating Decision Maker (CODM) has been identified as the Board of Directors as they are responsible for the strategic decision making within the Group. DXS management has identified DXS's operating segments based on the sectors analysed within the management reports reviewed by the CODM in order to monitor performance across the Group and to appropriately allocate resources. Refer to the table below for a brief description of the Group's operating segments.

Office	Office space with any associated retail space; as well as car parks and office developments in Australia and New Zealand.
Industrial	Domestic industrial properties, industrial estates and industrial developments.
Property management	Property management services for third party clients and owned assets.
Funds management	Funds management of third party client assets.
Development and trading	Revenue earned and costs incurred by the Group on developments and inventory.
All other segments	Corporate expenses associated with maintaining and operating the Group. This segment also includes the centralised treasury function.

Consistent with how the CODM manages the business, the operating segments within DXS are reviewed on a consolidated basis and are not monitored at an individual trust level. The results of the individual trusts are not limited to any one of the segments described above.

Disclosures concerning DXS's operating segments, as well as the operating segments' key financial information provided to the CODM, are presented in the DEXUS Property Group Financial Report.

Property revenue and expenses

Rental revenue is recognised on a straight-line basis over the lease term for leases with fixed rent review clauses.

Prospective tenants may be offered incentives as an inducement to enter into operating leases. These incentives may take various forms including cash payments, rent free periods, or a contribution to certain lessee costs such as fit-out costs or relocation costs. The costs of incentives are recognised as a reduction of rental revenue on a straight-line basis from the lease commencement date to the end of the lease term. The carrying amount of the lease incentives is reflected in the fair value of investment properties.

	2015	2014
	\$'000	\$'000
Rent and recoverable outgoings	64,358	86,406
Incentive amortisation	(6,653)	(7,050)
Other revenue	9,032	7,713
Total property revenue	66,737	87,069

Property expenses include rates, taxes and other property outgoings incurred in relation to investment properties.

Note 3

Interest revenue

Interest revenue is brought to account on an accruals basis using the effective interest rate method and, if not received at the end of the reporting period, is reflected in the Statement of Financial Position as a receivable.

	2015	2014
	\$'000	\$'000
Interest revenue from financial insititutions	20	19
Interest revenue from related parties	3,830	-
Total interest revenue	3,850	19

Note 4

Finance costs

Borrowing costs include interest, amortisation or ancillary costs incurred in connection with arrangement of borrowings and net fair value movements of interest rate swaps. Borrowing costs are expensed as incurred unless they relate to qualifying assets.

Qualifying assets include investment properties which take more than 12 months to develop for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset during the period of time that is required to complete and develop the asset for its intended use or sale. To the extent that funds are borrowed generally to fund development, the amount of borrowing costs to be capitalised to qualifying assets must be determined by using a weighted average capitalisation rate.

	2015	2014
	\$'000	\$'000
Interest paid/payable	1,042	2,297
Interest paid to related parties	-	11,287
Net fair value loss of interest rate swaps	5,975	6,900
Other finance costs	308	247
Total finance costs	7,325	20,731

Taxation

Under current Australian income tax legislation, DIT is not liable for income tax provided it satisfies certain legislative requirements, which were met in the current and previous financial years.

No tax expense was recognised during the year ended 30 June 2015. A reversal of a prior year tax liability during the year ended 30 June 2014 resulted in an income tax benefit of \$973,000.

Note 6

Earnings per unit

Earnings per unit are determined by dividing the net profit attributable to unitholders by the weighted average number of ordinary units outstanding during the year. Diluted earnings per unit are adjusted from the basic earnings per unit by taking into account the impact of dilutive potential units.

The weighted average number of units has been adjusted to reflect the one-for-six security consolidation.

(a) Net profit used in calculating basic and diluted earnings per unit

	2015		2014
	\$'000		\$'000
Profit attributable to unitholders of the parent entity	56,750		41,157
(b) Weighted average number of units used as a denominator
	2015		2014
	No. of units		No. of units
Weighted average number of units outstanding used in calculation of basic and diluted earnings per unit	915,462,824		820,257,691
Note 7 Distributions paid and payable
Distributions are recognised when declared.
(a) Distribution to unitholders
		2015	2014
		\$'000	\$'000
30 June (payable 31 August 2015)		67,356	-
Total distributions to unitholders		67,356	-
(b) Distribution rate
		2015	2014
		Cents per	Cents per
		security	security
30 June (payable 31 August 2015)		6.94	-
Total distributions		6.94	-

Property portfolio assets

In this section

Property portfolio assets are used to generate the Trust's performance and are considered to be the most relevant to the operations of the Trust. The assets are detailed in the following notes:

• Investment properties: relates to investment properties, both stabilised and under development.
• Non-current assets classified as held for sale: relates to investment properties which are expected to be sold within 12 months of the balance sheet date and are currently being marketed for sale.

The list of property portfolio assets is detailed in the Property Synopsis, available at www.dexus.com/investor-centre/dxs/announcements/asx.

Note 8

Investment properties

The Trust's investment properties consist of properties held for long-term rental yields and/or capital appreciation and property that is being constructed or developed for future use as investment property. Investment properties are initially recognised at cost including transaction costs. Investment properties are subsequently recognised at fair value in the Financial Statements.

The basis of valuations of investment properties is fair value, being the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date.

Changes in fair values are recorded in the Statement of Comprehensive Income. The gain or loss on disposal of an investment property 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 the Statement of Comprehensive Income in the year of disposal.

Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property where they result in an enhancement in the future economic benefits of the property.

Leasing fees incurred and incentives provided are capitalised and amortised over the lease periods to which they relate.

	Office	Industrial	Development	2015	2014
	\$'000	\$'000	\$'000	\$'000	\$'000
Opening balance at the beginning of the year	150,764	565,424	10,203	726,391	925,526
Additions	1,380	3,700	470	5,550	7,578
Lease incentives	3,318	9,120	-	12,438	8,820
Amortisation of lease incentives	(3,168)	(3,485)	-	(6,653)	(7,050)
Rent straightlining	188	1,176	-	1,364	552
Disposals	-	(1,649)	-	(1,649)	(208,352)
Transfer to non-current assets classified as held for sale1	-	(102,200)	-	(102,200)	-
Net fair value gain/(loss) of investment properties	3,168	17,910	(673)	20,405	(683)
Closing balance at the end of the year	155,650	489,996	10,000	655,646	726,391

(a) Reconciliation

1 As at 30 June 2015, certain properties have been contracted to transfer within the DXS Group. These transfers eliminate on consolidation in the DXS Group Financial Statements.

Disposals

On 23 January 2015, 79A Egerton Street, Silverwater, NSW, was disposed of for gross proceeds of \$1.7 million (carrying value of \$1.6 million).

Investment properties (continued)

(b) Valuation process

Independent valuations are carried out for each individual property at least once every three years by a member of the Australian Property Institute of Valuers. Each valuation firm and its signatory valuer are appointed on the basis that they are engaged for no more than three consecutive valuations. Independent valuations may be undertaken earlier where the Responsible Entity believes there is potential for a material change in the fair value of the property being the greatest of 5% of the asset value, or \$5 million.

The Trust's investment properties are required to be internally valued at least every six months unless they have been independently valued during the current reporting period. Internal valuations are compared to the carrying value of investment properties at the reporting date. Where the Directors determine the internal valuations present a more reliable estimate of fair value the internal valuation is adopted as book value. Internal valuations are performed by the Trust's internal valuers who hold recognised relevant professional qualifications and have previous experience as property valuers from major real estate valuation firms.

An appropriate valuation methodology is utilised according to asset class. In relation to office and industrial assets this includes the capitalisation approach (market approach) and the discounted cash flow approach (income approach). The valuation is also compared to, and supported by, direct comparison to recent market transactions. The adopted capitalisation rates and discount rates are determined based on industry expertise and knowledge and, where possible, a direct comparison to third party rates for similar assets in a comparable location. Rental revenue from current leases and assumptions about future leases, as well as any expected operational cash outflows in relation to the property, are also built into each asset assessment of fair value.

In relation to development properties under construction for future use as investment property, where reliably measurable, fair value is determined based on the market value of the property on the assumption it had already been completed at the valuation date (using the methodology as outlined above) less costs still required to complete the project, including an appropriate adjustment for industry benchmarked profit and development risk.

(c) Fair value measurement, valuation techniques and inputs

The following table represents the level of the fair value hierarchy and the associated unobservable inputs utilised in the fair value measurement for each class of investment property.

			Fair value			Range of
Class of	Fair value	2015	2014			unobservable inputs
property	hierarchy	\$'000		\$'000 Inputs used to measure fair value	2015	2014
Office1	Level 3	155,650		150,764 Adopted capitalisation rate	8.25%	8.50%
				Adopted discount rate	9.00%	9.25%
				Adopted terminal yield	8.25%	8.50%
				Current net market rental (per sqm)	\$378	\$370
				10 year average market rental growth	2.84%	3.05%
Industrial	Level 3	489,996		565,424 Adopted capitalisation rate	7.00% - 11.00%	7.25% - 11.00%
				Adopted discount rate	8.25% - 11.50%	9.00% - 11.50%
				Adopted terminal yield	7.50% - 11.00%	7.75% - 11.00%
				Current net market rental (per sqm)	\$40 - \$305	\$43 - \$300
				10 year average market rental growth	2.45% - 3.25%	2.52% - 3.26%
Development	Level 3	10,000		10,203 Land rate (per sqm)	\$418	\$418
Total		655,646	726,391

1 Excludes car parks.

Investment properties (continued)

Key estimates: inputs used to measure fair value of investment properties
Judgement is required in determining the following key assumptions:
- Adopted capitalisation rate: The rate at which net market rental revenue is capitalised to determine the value of a property. The rate is determined with regards to market evidence and the prior external valuation.
- Adopted discount rate: The rate of return used to convert cash flows, payable or receivable in the future, into present value. It reflects the opportunity cost of capital, that is, the rate of return the cash can earn if put to other uses having similar risk. The rate is determined with regards to market evidence and the prior external valuation.
- Adopted terminal yield: The capitalisation rate used to convert the future net market rental revenue into an indication of the anticipated value of the property at the end of the holding period when carrying out a discounted cash flow calculation. The rate is determined with regards to market evidence and the prior external valuation.
- Net market rental (per sqm): The net market rent is the estimated amount for which a property should lease between a lessor and a lessee on appropriate lease terms in an arm's length transaction.
- 10 year average market rental growth: The expected annual rate of change in market rent over a 10 year forecast period in alignment with expected market movements. The rate is determined with reference to forecast market movements.
- Land rate (per sqm): The land rate is the market land value per sqm.
(d) Sensitivity information

Significant movement in any one of the inputs listed in the table above may result in a change in the fair value of the Trust's investment properties as shown below:

Significant inputs	Fair value measurement sensitivity to significant increase in input	Fair value measurement sensitivity to significant decrease in input
Adopted capitalisation rate Adopted discount rate Adopted terminal yield	Decrease	Increase
Net market rental (per sqm) 10 year average market rental growth Land rate (per sqm)	Increase	Decrease

Generally, a change in the assumption made for the adopted capitalisation rate is often accompanied by a directionally similar change in the adopted terminal yield. The adopted capitalisation rate forms part of the capitalisation approach whilst the adopted terminal yield forms part of the discounted cash flow approach.

Under the capitalisation approach, the net market rental has a strong interrelationship with the adopted capitalisation rate as the fair value of the investment property is derived by capitalising, in perpetuity, the total net market rent receivable. An increase (softening) in the adopted capitalisation rate may offset the impact to fair value of an increase in the total net market rent. A decrease (tightening) in the adopted capitalisation rate may also offset the impact to fair value of a decrease in the total net market rent. A directionally opposite change in the total net market rent and the adopted capitalisation rate may increase the impact to fair value.

The discounted cash flow is primarily made up of the discounted cash flow of net income over the cashflow period and the discounted terminal value (which is largely based upon market rents grown at forecast market rental growth rates capitalised at an adopted terminal yield). An increase (softening) in the adopted discount rate may offset the impact to fair value of a decrease (tightening) in the adopted terminal yield. A decrease (tightening) in the discount rate may offset the impact to fair value of an increase (softening) in the adopted terminal yield. A directionally similar change in the adopted discount rate and the adopted terminal yield may increase the impact to fair value.

Investment properties (continued)

(d) Sensitivity information (continued)

A decrease (softening) in the forecast rental growth rate may result in a negative impact on the discounted cash flow approach value whilst a strengthening may have a positive impact on the value under the same approach.

Note 9

Non-current assets classified as held for sale

Non-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.

Assets classified as held for sale relate to investment properties and are measured at fair value.

Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.

Capital and financial risk management and working capital

In this section

The Trust's overall risk management program focuses on reducing volatility from impacts in movements of financial markets and seeks to minimise potential adverse effects on the financial performance of the Trust. Note 10 Capital and financial risk management outlines how the Trust manages its exposure to a variety of financial risks (interest rate risk, foreign currency risk, liquidity risk and credit risk) and details the various derivative financial instruments entered into by the Trust.

The Board determines the appropriate capital structure of the Trust, how much is borrowed from financial institutions and capital markets (debt), and how much is raised from shareholders (equity) in order to finance the Trust's activities both now and in the future. This capital structure is detailed in the following notes:

• Debt: Commitments and contingencies in note 11;
• Equity: Contributed equity in note 12 and Reserves and retained profits in note 13.

Note 14 provides a breakdown of the working capital balances held in the Statement of Financial Position.

Note 10

Capital and financial risk management

Capital and financial risk management is carried out through a centralised treasury function which is governed by a Board approved Treasury Policy. The Trust (as part of DXS) has an established governance structure which consists of the Group Management Committee and Capital Markets Committee.

The Board has appointed a Group Management Committee responsible for achieving DEXUS's goals and objectives, including the prudent financial and risk management of the Trust. The Group Management Committee generally meets weekly. A Capital Markets Committee has been established to advise the Group Management Committee.

The Capital Markets Committee is a management committee that is accountable to the Board. It convenes at least quarterly and conducts a review of financial risk management exposures including liquidity, funding strategies and hedging. It is also responsible for the development of financial risk management policies and funding strategies for recommendation to the Board, and the approval of treasury transactions within delegated limits and powers.

(a) Capital risk management

The Trust manages its capital to ensure that entities within the Trust will be able to continue as a going concern while maximising the return to owners through the optimisation of the debt and equity balance.

The capital structure of the Trust consists of debt, cash and cash equivalents, and equity attributable to security holders. The Trust continuously monitors its capital structure and it is managed in consideration of the following factors:

• the cost of capital and the financial risks associated with each class of capital;
• gearing levels and other debt covenants;
• potential impacts on net tangible assets and security holders' equity;
• potential impacts on the DXS Group's credit rating; and
• other market factors.

The trust is not rated by rating agencies, however, DXS is rated A- by Standard and Poor's (S&P) and A3 by Moody's. Gearing levels and bank debt covenants are managed holistically as part of the DXS Group.

DXFM, the Responsible Entity for the Trust, has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to maintain liquidity above specified limits. DXFM must also prepare rolling cash projections over at least the next 12 months and demonstrate it will have access to sufficient financial resources to meet its liabilities that are expected to be payable over that period. Cash projections and assumptions are approved, at least quarterly, by the Board of the Responsible Entity.

Capital and financial risk management (continued)

(b) Financial risk management

The Trust's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Trust. The Trust's principal financial instruments, other than derivatives, comprise cash and related party loans. The main purpose of financial instruments is to manage liquidity and hedge the Trust's exposure to financial risks namely:

• interest rate risk;
• foreign currency risk;
• liquidity risk; and
• credit risk.

The Trust uses derivatives to reduce the Trust's exposure to fluctuations in interest rates and foreign exchange rates. These derivatives create an obligation or a right that effectively transfers one or more of the risks associated with an underlying financial instrument, asset or obligation. Derivative financial instruments that the Trust may use to hedge its risks include:

• interest rate swaps;
• cross currency interest rate swaps;
• foreign exchange contracts; and
• option contracts (interest rate).

The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure and conducting sensitivity analysis.

(i) Market risk

Interest rate risk

Interest rate risk arises from interest bearing financial assets and liabilities that the Trust utilises. Non-derivative interest bearing financial instruments are predominately short term liquid assets and long term debt issued at fixed rates which expose the Trust to fair value interest rate risk as the Trust may pay higher interest costs than if it were at variable rates. The Trust's borrowings which have a variable interest rate give rise to cash flow interest rate risk as variable interest rates may increase.

The Trust's risk management policy for interest rate risk seeks to minimise the effects of interest rate movements on its asset and liability portfolio through active management of the exposures. The policy prescribes minimum and maximum hedging amounts for the Trust, which is managed on a portfolio basis.

The Trust maintains a mix of offshore and local currency fixed rate and variable rate debt, as well as a mix of long term and short term debt. The Trust primarily enters into interest rate swaps and cross currency interest rate swap agreements to manage the associated interest rate risk. The Trust hedges the interest rate and currency risk on the majority of its foreign currency borrowings by entering into cross currency swaps, which have the economic effect of converting foreign currency borrowings to local currency borrowings at contracted rates. The derivative contracts are recorded at fair value in the Statement of Financial Position, being the market value as quoted in an active market.

Interest rate swaps require settlement of net interest receivable or payable each 90 or 180 days. The settlement dates coincide with the dates on which the interest is payable on the underlying debt. The receivable and payable legs on interest rate swap contracts are settled on a net basis. The net notional amount of average fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate is set out below.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk (continued)

Interest rate risk (continued)

	June 2016	June 2017	June 2018	June 2019	June 2020	> June 2021
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Interest rate swaps
A\$ hedged1	261,667	220,000	150,833	170,000	40,000	-
A\$ hedge rate (%)	4.64%	4.20%	5.62%	6.03%	2.04%	0.00%
Combined fixed debt and swaps (A\$ equivalent)	261,667	220,000	150,833	170,000	40,000	-
Hedge rate (%)	4.64%	4.20%	5.62%	6.03%	2.04%	0.00%

1 Amounts do not include fixed rate debt that has been swapped to floating rate debt through cross currency swaps.

Sensitivity analysis on interest expense

The table below shows the impact on the Trust's net interest expense of a 50 basis point increase or decrease in market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust's floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in market rates to the extent that floating rate debt is not hedged.

		2015	2014
		(+/-) \$'000	(+/-) \$'000
+/- 0.50% (50 basis points)	A\$	652	432
Total A\$ equivalent		652	432

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

Sensitivity analysis on fair value of interest rate swaps

The sensitivity analysis on interest rate swaps below shows the effect on net profit or loss for changes in the fair value of interest rate swaps for a 50 basis point increase or decrease in short-term and long-term market interest rates. The sensitivity on fair value arises from the impact that changes in market rates will have on the valuation of the interest rate swaps.

The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to these instruments. Accordingly, gains or losses arising from changes in the fair value are reflected in the profit or loss.

(+/-) \$'000 (+/-) \$'000 +/- 0.50% (50 basis points) A\$ 3,538 4,217 +/- 0.50% (50 basis points) US\$ (150) (328)		2015	2014
Total A\$ equivalent 3,388 3,889

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk (continued)

Interest rate risk (continued)

Sensitivity on fair value of cross currency swaps

The sensitivity analysis on cross currency interest rates swaps below shows the effect on net profit or loss for changes in the fair value for a 50 basis points increase and decrease in market rates. The sensitivity on fair value arises from the impact that changes in short-term and long-term market rates will have on the valuation of the cross currency swaps.

	2015	2014
	(+/-) \$'000	(+/-) \$'000
+/- 0.50% (50 basis points)	17	77
Total A\$ equivalent	17	77

1 The above analysis does not include sensitivity to movements in BILLS LIBOR

Foreign currency risk

Foreign currency risk refers to the risk that the value or the cash flows arising from a financial commitment, or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Trust's foreign currency risk arises primarily from:

• highly probable forecast transactions denominated in foreign currency; and
• borrowings denominated in foreign currency.

The objective of the Trust's foreign exchange risk management policy is to ensure that movements in exchange rates have minimal adverse impact on the Trust's foreign currency assets and liabilities.

Foreign currency assets and liabilities

Where foreign currency borrowings are used to fund Australian investments, the Trust transacts cross currency swaps to reduce the risk that movements in foreign exchange rates will have an impact on security holder's equity and net tangible assets.

(ii) Liquidity risk

Liquidity risk is associated with ensuring that there are sufficient funds available to meet the Trust's financial commitments as and when they fall due and planning for any unforeseen events which may curtail cash flows. The Trust identifies and manages liquidity risk across the following categories:

• short-term liquidity management covering the month ahead on a rolling basis with continuous monitoring of forecast and actual cash flows;
• medium-term liquidity management of liquid assets, working capital and standby facilities to cover Trust cash requirements over the next 1-24 month period. The Trust maintains a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits); and
• long-term liquidity management through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated in certain time periods, and ensuring an adequate diversification of funding sources where possible, subject to market conditions.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (ii) Liquidity risk (continued)

Refinancing risk

Refinancing risk is the risk that the Trust:

• will be unable to refinance its debt facilities as they mature; and/or
• will only be able to refinance its debt facilities at unfavourable interest rates and credit market conditions (margin price risk).

The Group's key risk management strategy for margin price risk on refinancing is to spread the maturities of debt facilities over different time periods to reduce the volume of facilities to be refinanced and the exposure to market conditions in any one period.

An analysis of the contractual maturities of the Trust's interest bearing liabilities and derivative financial instruments is shown in the table below. The amounts in the table represent undiscounted cash flows.

		2015						2014
	Within one	Between one and	Between two and	After five		Within one	Between one and	Between two and	After five
	year	two years	five years	years	Total	year	two years	five years	years	Total
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Cash	1,979	-	-	-	1,979	2,197	-	-	-	2,197
Receivables	4,293	-	-	-	4,293	5,758	-	-	-	5,758
Payables	(68,258)	-	-	-		(68,258) (54,679)	-	-	-	(54,679)
	(61,986)	-	-	-		(61,986) (46,724)	-	-	-	(46,724)
Interest bearing liabilities & interest Loans receivable/(payable) with related parties and interest1	(8,270)		(8,270) (176,569)	-	(193,108)	2,898	2,898	65,758	-	71,554
Derivative financial instruments
Derivative assets	2,165	27,458	-	-	29,623	49,929	1,222	22,384	-	73,535
Derivative liabilities			(7,212) (22,558) (20,660)	-		(50,430) (51,319)		(6,149) (26,812)		(1,652) (85,932)
Total net derivative financial instruments2	(5,047)	4,900	(20,660)	-	(20,807)	(1,390)	(4,927)	(4,428)		(1,652) (12,397)

1 Includes estimated interest.

2 The notional maturities on derivatives are shown for cross currency interest rate swaps (refer to foreign exchange rate risk) as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. Refer to note 10(c) for fair value of derivatives. Refer to note 11(b) for financial guarantees.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iii) Credit risk

Credit risk is the risk that counterparty will not fulfil its obligations under the terms of a financial instrument and will cause financial loss to the Trust. The Trust has exposure to credit risk on all financial assets included in the Trust's Statement of Financial Position.

The Trust manages this risk by:

• adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty's credit rating;
• regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody's and Fitch credit rating. The exposure includes the current market value of in-the-money contracts as well as potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
• entering into ISDA Master Agreements once a financial institution counterparty is approved;
• monitoring tenant exposure within approved credit limits;
• for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
• regularly monitoring loans and receivables on an ongoing basis.

A minimum S&P rating of A– (or Moody's or Fitch equivalent) is required to become or remain an approved counterparty unless otherwise approved by the DEXUS board.

The Trust is exposed to credit risk on cash balances and on derivative financial instruments with financial institutions. The Trust has a policy that sets limits as to the amount of credit exposure to each financial institution. New derivatives and cash transactions are limited to financial institutions that meet minimum credit rating criteria in accordance with the Trust's policy requirements.

Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the Trust's exposure to any one counterparty. As a result, there is no significant concentration of credit risk for financial instruments.

The maximum exposure to credit risk at 30 June 2015 is the carrying amounts of financial assets recognised on the Statement of Financial Position.

As at 30 June 2015, there were no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade debtors are monitored on an ongoing basis. The tables below show the ageing analysis of loans and receivables net of provisions of the Trust.

	2015	2014
	\$'000	\$'000
0-30 days	2,343	5,393
31-60 days	146	133
61-90 days	64	54
Over 91 days	1,740	178
Total receivables net of provisions	4,293	5,758

Amounts over 31 days are past due, however, no receivables are impaired. The credit quality of financial assets that are neither past due nor impaired is monitored to make sure there are no adverse changes in credit quality.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value

The Trust has classified its financial assets and liabilities as follows:

Financial asset/liability	Classification	Valuation basis	Reference
Receivables1	Loans and receivables	Amortised cost	Refer to note 14(b)
Payables1	Financial liability at amortised cost	Amortised cost	Refer to note 14(c)
Non-interest bearing loan from Loans and receivables related party		Amortised cost	Refer to note 17
Derivatives	Fair value through profit or loss	Fair value	Refer to note 10(c)

1 The face value of these is approximately equal to their fair value; these amounts are unsecured and are usually paid within 30 days of recognition.

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired. As noted in section (c) below, derivative financial instruments are initially recognised in the Statement of Financial Position at fair value on the date on which the derivative contract is entered into and subsequently remeasured to fair value.

The valuation techniques applied by the Trust are consistent with those applied in prior year financial reports. The valuation technique used to measure the various financial instruments namely foreign currency contracts and interest rate contracts is based on market observable spot exchange rates and interest rate yield curves. This method records any change in fair value of a derivative in the Financial Statements.

The carrying amounts and estimated fair value of all the Group's financial assets and liabilities recognised in the Financial Statements are as follows:

	2015	2015	2014	2014
	Carrying		Carrying
	amount1	Fair value2	amount1	Fair value2
	\$'000	\$'000	\$'000	\$'000
Financial assets
Cash and cash equivalents	1,979	1,979	2,197	2,197
Loans and receivables (current)	4,293	4,293	5,758	5,758
Derivative assets	9,576	9,576	9,941	9,941
Non-interest bearing loans with related parties3	138,948	138,948	138,948	138,948
Interest bearing loans with related parties4	168,299	168,299	59,962	59,962
Total financial assets	323,095	323,095	216,806	216,806
Financial liabilities
Trade payables	68,258	68,258	54,679	54,679
Derivative liabilities	21,892	21,892	21,401	21,401
Total financial liabilities	90,150	90,150	76,080	76,080

1 Carrying value is equal to the value of the financial instruments on the Statement of Financial Position.

2 Fair value is the price that would be received to transfer the asset or liability in an orderly transaction between market participants at the measurement date. Where there is a difference between the carrying amount and fair value, the difference is not recognised in the Statement of Financial Position.

3 Non-interest bearing loans with entities within DXS were created to effect the stapling of the Trust, DDF, DOT and DXO. These loan balances eliminate on consolidation within DXS.

4 Interest bearing loans with DEXUS Finance Pty Limited (DXF). These loan balances eliminate on consolidation within DXS.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value (continued)

The Trust uses the following methods in the determination and disclosure of the fair value of financial instruments:

Level 1: the fair value is calculated using quoted prices in active markets.

Level 2: the fair value is determined using inputs other than quoted prices included in 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: the fair value is estimated using inputs for the asset or liability that are not based on observable data.

All financial instruments were measured at Level 2 for the periods presented in this report. During the year, there were no transfers between Level 1, 2 and 3 fair value measurements.

(v) Offsetting financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position where the Trust currently has a legally enforceable right to set-off the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Trust has also entered into arrangements that do not meet the criteria for offsetting except in certain circumstances such as bankruptcy or the termination of the underlying contract.

The Trust does not have any agreements in place with derivative counterparties that allow for offsetting financial assets and financial liabilities.

Master netting arrangements – not currently enforceable

Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, where certain credit events occur (such as default), the net position owing/receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Trust does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Statement of Financial Position.

(c) Derivative financial instruments

A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over time in response to underlying variables including interest rates or exchange rates and is entered into for a fixed period. A hedge is where a derivative is used to manage an underlying exposure and the Trust uses derivatives to manage its exposure to interest rates and foreign exchange risk accordingly.

Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Trust's exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes.

Derivatives including interest rate swaps, the interest rate component of cross currency swaps, and foreign exchange contracts, are measured at fair value with any changes in fair value recognised in the Statement of Comprehensive Income.

At inception the Trust can elect to formally designate and document the relationship between certain hedge derivative instruments (cross currency interest rate swaps only) and the associated hedged items (foreign currency bonds only). The Trust 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 fair values or cash flows of hedged items.

Capital and financial risk management (continued)

(c) Derivative financial instruments (continued)

	2015	2014
	\$'000	\$'000
Current assets
Interest rate swap contracts	742	1,174
Cross currency swap contracts	-	3,201
Total current assets - derivative financial instruments	742	4,375
Non-current assets
Interest rate swap contracts	1,766	3,479
Cross currency swap contracts	7,068	2,087
Total non-current assets - derivative financial instruments	8,834	5,566
Current liabilities
Interest rate swap contracts	3,953	-
Cross currency swap contracts	8	-
Total current liabilities - derivative financial instruments	3,961	-
Non-current liabilities
Interest rate swap contracts	17,931	21,401
Total non-current liabilities - derivative financial instruments	17,931	21,401
Net derivative financial instruments	(12,316)	(11,460)

Key assumptions: fair value of derivatives

The fair value of derivative financial instruments has been determined based on a discounted cash flow analysis using observable market inputs (interest rates, exchange rates and currency basis) and applying a credit or debit valuation adjustment based on the current credit worthiness of counterparties and the Group. Refer to note 10(b)(iv) Capital and financial Risk Management for further detail.

Commitments and contingencies

(a) Commitments

(i) Capital commitments

The following amounts represent remaining capital expenditure on investment properties and inventories contracted at the end of each reporting period but not recognised as liabilities payable:

	2015	2014
	\$'000	\$'000
Investment properties	1,196	539
Total capital commitments	1,196	539

(ii) Lease receivable commitments

The future minimum lease payments receivable by the Trust are:

	2015	2014
	\$'000	\$'000
Within one year	42,095	41,352
Later than one year but not later than five years	117,016	114,438
Later than five years	71,716	70,521
Total lease receivable commitments	230,827	226,311

(b) Contingencies

The Trust, together with DDF, DOT and DXO, is a guarantor of a total of A\$3,572.4 million of interest bearing liabilities (refer note 13 of the DEXUS Property Group Financial Report). The guarantees have been given in support of debt outstanding and drawn against these facilities, and may be called upon in the event that a borrowing entity has not complied with certain requirements such as failure to pay interest or repay a borrowing, whichever is earlier. During the period no guarantees were called.

The above guarantees are issued in respect of the Trust and do not constitute an additional liability to those already existing in interest bearing liabilities on the Statement of Financial Position.

The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Trust, other than those disclosed in the Financial Statements, which should be brought to the attention of unitholders as at the date of completion of this report.

Contributed equity

(a) Contributed equity

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	1,190,969	1,082,464
Issue of additional equity, net of transaction costs	67,618	118,969
Buy-back of contributed equity, net of transaction costs	-	(10,464)
Closing balance at the end of the year	1,258,587	1,190,969

(b) Number of units on issue

	2015	2014
	No. of units	No. of units
Opening balance at the beginning of the year	5,433,110,810	4,701,957,390
Issue of additional equity	65,274,552	804,882,384
One-for-six security consolidation	(4,527,579,013)	-
Buy-back of contributed equity	-	(73,728,964)
Closing balance at the end of the year	970,806,349	5,433,110,810

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust.

Each stapled security entitles the holder to vote in accordance with the provisions of the Constitutions and the Corporations Act 2001.

Transaction costs arising on the issue of equity instruments are recognised directly in equity (net of tax) as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

On 29 October 2014, the Group announced a one-for-six consolidation of DEXUS Property Group stapled securities. The consolidation was completed on 14 November 2014. Where the number of securities held by a security holder following the consolidation resulted in a fraction of a security, the fraction was rounded up to the nearest whole number.

Note 13

Reserves and retained profits

(a) Reserves

	2015	2014
	\$'000	\$'000
Foreign currency translation reserve	-	-
Total reserves	-	-
Movements:
Opening balance at the beginning of the year	-	680
Exchange differences on translating foreign operations	-	132
Foreign currency translation reserve transfer on disposal of foreign operations	-	(812)
Closing balance at the end of the year	-	-

Reserves and retained profits (continued)

(b) Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations.

(c) Retained profits/(accumulated losses)

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	(322,958)	(362,986)
Net profit/(loss) attributable to security holders	56,606	40,028
Distributions provided for or paid	(67,356)	-
Closing balance at the end of the year	(333,708)	(322,958)

Note 14

Working capital

(a) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(b) Receivables

Rental and interest revenue are brought to account on an accruals basis. Dividends and distributions are recognised when declared and, if not received at the end of the reporting period, reflected in the Statement of Financial Position as a receivable.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for doubtful debts. Trade receivables are required to be settled within 30 days and are assessed on an ongoing basis for impairment. Receivables which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for doubtful debts is established when there is objective evidence that the Trust will not be able to collect all amounts due according to the original terms of the receivables.

	2015	2014
	\$'000	\$'000
Rent receivable	1,966	2,458
Total rental receivables	1,966	2,458
Interest receivable	489	-
Other receivables	1,838	3,300
Total other receivables	2,327	3,300
Total receivables	4,293	5,758

Working capital (continued)

(c) Payables

Expenses are brought to account on an accruals basis and, if not paid at the end of the reporting period, are reflected in the Statement of Financial Position as a payable.

These amounts represent liabilities for amounts owing at the end of the reporting period. The amounts are unsecured and are usually paid within 30 days of recognition.

	2015	2014
	\$'000	\$'000
Trade creditors	4,248	5,110
Accruals	2,455	2,821
Accrued capital expenditure	2,417	909
Prepaid income	1,121	1,746
Management fee payable	185	392
Accrued interest	-	1,409
Other payable to related parties	52,279	40,944
Other payables	5,553	1,348
Total payables	68,258	54,679

(d) Provisions

A provision is recognised when an obligation exists as a result of a past event and it is probable that a future outflow of cash or other benefit will be required to settle the obligation.

In accordance with the Trust's Constitution, the Trust distributes its distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared.

	2015	2014
	\$'000	\$'000
Provision for distribution	67,356	-
Total current provisions	67,356	-
Movements in the provision for distribution during the financial year are set out below:
	2015	2014
	\$'000	\$'000
Provision for distribution
Opening balance at the beginning of the year	-	10,000
Additional provisions	67,356	-
Payment of distributions	-	(10,000)
Closing balance at the end of the year	67,356	-

A provision for distribution has been raise for the period ended 30 June 2015. This distribution is to be paid on 31 August 2015.

Other disclosures

In this section

This section includes other information that must be disclosed to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations, but which are not considered critical in understanding the financial performance or position of the Trust.

Note 15

Audit, taxation and transaction services fees

During the year, the Auditor and its related practices earned the following remuneration:

	2015	2014
	\$	\$
Audit fees
PwC Australia - audit and review of Financial Statements	300,000	285,214
PwC fees paid in relation to outgoings audits	3,200	9,000
PwC Australia - regulatory audit and compliance services	8,500	7,240
Audit fees paid to PwC	311,700	301,454
Taxation fees
Fees paid to PwC Australia	-	5,000
Taxation fees paid to PwC	-	5,000
Total audit and taxation fees paid to PwC	311,700	306,454
Total audit, taxation and transaction services fees paid to PwC	311,700	306,454

Reconciliation of net profit to net cash flows from operating activities

(a) Reconciliation

	2015	2014
	\$'000	\$'000
Net profit/(loss) for the year	56,605	40,028
Net fair value (gain)/loss of investment properties	(20,405)	683
Net fair value (gain)/loss of derivatives	(38)	252
Net fair value (gain)/loss of interest rate swaps	4,549	6,619
Net (gain)/loss on sale of investment properties	(62)	4,892
Net foreign exchange (gain)/loss	9,596	(596)
Foreign currency translation reserve transfer on disposal of foreign operations	-	(812)
Change in operating assets and liabilities
(Increase)/decrease in receivables	184	(317)
(Increase)/decrease in prepaid expenses	(352)	1,055
(Increase)/decrease in other non-current assets	(676)	2,927
Increase/(decrease) in payables	(5,514)	(2,244)
Increase/(decrease) in other non-current liabilities	(197)	5,470
Net cash inflow/(outflow) from operating activities	43,690	57,957

Note 17

Related parties

Responsible Entity and Investment Manager

DXFM is the Responsible Entity of the Trust.

Management fees

Under the terms of the Trust's Constitutions, the Responsible Entity is entitled to receive fees in relation to the management of the Trust. DXFM's parent entity, DXH, is entitled to be reimbursed for administration expenses incurred on behalf of the Trust. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH, is entitled to property management fees from the Trust.

Related party transactions

Responsible Entity fees in relation to the Trust assets are on a cost recovery basis.

Related parties (continued)

There were a number of transactions and balances between the Trust and the Responsible Entity and its related entities, as detailed below:

DEXUS Funds Management Limited and its related entities

	2015	2014
	\$	\$
Responsible Entity fees paid and payable	2,229,262	2,566,697
Property management fees paid and payable to DXPS	1,710,226	1,869,777
Responsible Entity fees payable at the end of each reporting period (included above)	184,866	193,384
Property management fees payable at the end of each reporting period (included above)	1,174,176	244,950
Administration expenses payable at the end of each reporting period (included above)	50,667	50,879
Sale of 1-55 Rothchild Ave, Rosebery, NSW to DXO	-	34,514,275
Sale of 5-13 Rosebery Ave, Rosebery, NSW to DXO	-	58,887,127

Entities within DXS

Aggregate amounts included in the determination of profit that resulted from transactions with each class of other related parties:

	2015	2014
	\$	\$
Interest revenue	3,829,655	-
Interest expense	-	11,287,303
Interest bearing loans advanced from entities within DXS	88,391,440	65,954,000
Interest bearing loans advanced to entities within DXS	192,429,525	421,693,000

Directors

The following persons were Directors of DXFM at all times during the year and to the date of this report, unless otherwise stated:

C T Beare, BSc, BE (Hons), MBA, PhD, FAICD 1,2,3,5,6,7
E A Alexander, AM, BComm, FCA, FAICD, FCPA 1,3,8
P Bingham-Hall, BA (Industrial Design), FAICD, SF (Fin) 1,7,9
J C Conde, AO, BSc, BE (Hons), MBA 1,2,6,7
T Dwyer, BJuris (Hons), LLB (Hons) 1,2,4,8,9
C D Mitchell, BComm, MBA (Exec), FCPA , HBS (AMP)
W R Sheppard, BEc (Hons) 1,3,5,6,8,9
D J Steinberg, BEc, FRICS, FAPI
P B St George, CA(SA), MBA 1,5,8,9

¹ Independent Director.

• 2 Board Nomination, Remuneration & Governance Committee Member until 31 August 2014.
• 3 Board Audit, Risk & Sustainability Committee Member until 31 August 2014.
• 4 Board Compliance Committee Member until 31 August 2014.
• 5 Board Finance Committee Member until 31 August 2014.
• 6 Board Nomination Committee Member from 1 September 2014.
• 7 Board People & Remuneration Committee Member from 1 September 2014.
• 8 Board Audit Committee Member from 1 September 2014.
• 9 Board Risk Committee Member from 1 September 2014.

Related parties (continued)

Other key management personnel

In addition to the Directors listed above, the following persons were deemed by the Board People & Remuneration Committee to be key management personnel during all or part of the financial year:

Name	Title
Ross Du Vernet	Executive General Manager, Strategy, Transactions & Research
Kevin George	Executive General Manager, Office & Industrial

Key management personnel compensation

	2015	2014
	\$	\$
Compensation
Short-term employee benefits	7,453,029	7,428,170
Post employment benefits	219,677	189,291
Other long-term benefits	-	47,700
Security-based payments	2,595,615	1,995,116
	10,268,321	9,660,277

Equity instrument disclosures relating to key management personnel

The relevant interest in DXS stapled securities held during the financial year by each key management personnel, including their personally related parties, are set out below:

	Opening Balance 1 July 2014	One-for-six security consolidation	Purchases	Performance rights granted	Other change	Opening Balance 30 June 2015
Directors	3,993,960	(3,328,298)	8,334	394,191	-	1,068,187
Other key management personnel	1,324,458	(1,103,715)	-	127,653	-	348,396
Total	5,318,418	(4,432,013)	8,334	521,844	-	1,416,583

The DXFM Board has approved a grant of performance rights to DXS stapled securities to eligible participants (refer to note 21 of the DEXUS Property Group Financial Report).

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2015 and 30 June 2014.

Parent entity disclosures

The financial information for the parent entity, DEXUS Diversified Trust has been prepared on the same basis as the consolidated Financial Statements except as set out below:

Distributions received from associates are recognised in the parent entity's Statement of Comprehensive Income, rather than being deducted from the carrying amount of these investments.

Interests held by the parent entity in controlled entities are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency.

(a) Summary financial information

The individual Financial Statements for the parent entity show the following aggregate amounts:

	2015	2014
	\$'000	\$'000
Total current assets	246,634	164,251
Total assets	1,075,781	940,322
Total current liabilities	135,262	53,145
Total liabilities	153,194	74,747
Equity
Contributed equity	1,258,587	1,190,969
Retained profits	(336,000)	(325,394)
Total equity	922,587	865,575
Profit/(loss) for the year	56,750	41,157
Total comprehensive income/(loss) for the year	56,750	41,157

(b) Investments in controlled entities

The parent entity has the following investments:

		Ownership interest
		2015	2014
Name of entity	Principal activity	%	%
Foundation Macquarie Park Trust	Industrial property investment	100.0	100.0
DEXUS PID Trust	Industrial property investment	100.0	100.0
DIT Subtrust No. 1	Industrial property investment	100.0	100.0

(c) Guarantees entered into by the parent entity

Refer to note 11 for details of guarantees entered into by the parent entity.

(c) Contingent liabilities

The parent entity had no contingent liabilities as at 30 June 2015 (2014: nil).

(d) Capital commitments

The following amounts represent capital expenditure of the parent entity on investment properties contracted at the end of the reporting period but not recognised as liabilities payable:

	2015	2014
	\$'000	\$'000
Investment properties	907	136
Total capital commitments	907	136

Subsequent events

Since the end of the year, the Directors are not aware of any matter or circumstance not otherwise dealt with in their Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or state of the Trust's affairs in future financial periods.

DEXUS Office Trust

(ARSN 090 768 531)

Financial Report 30 June 2015

Contents Page

Directors' Report 1
Auditor's Independence Declaration 8
Consolidated Statement of Comprehensive Income 9
Consolidated Statement of Financial Position	10
Consolidated Statement of Changes in Equity	11
Consolidated Statement of Cash Flows	12
About this Report	13
Notes to the Financial Statements	16
Directors' Declaration	48
Independent Auditor's Report	49

DEXUS Property Group (DXS) (ASX Code: DXS) consists of DEXUS Diversified Trust (DDF) (ARSN 089 324 541), DEXUS Industrial Trust (DIT), DEXUS Office Trust (DOT) and DEXUS Operations Trust (DXO), collectively known as DXS or the Group.

The registered office of the Group is Level 25, Australia Square, 264-278 George Street, Sydney, NSW 2000.

Under Australian Accounting Standards, DDF has been deemed the parent entity for accounting purposes. Therefore the DDF consolidated Financial Statements include all entities forming part of DXS. The DDF consolidated Financial Statements are presented in separate Financial Statements.

All ASX and media releases, Financial Statements and other information are available on our website: www.dexus.com

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Office Trust present their Directors' Report together with the consolidated Financial Statements for the year ended 30 June 2015. The consolidated Financial Statements represents DEXUS Office Trust and its consolidated entities (DOT or the Trust).

The Trust together with DEXUS Diversified Trust (DDF), DEXUS Industrial Trust (DIT) and DEXUS Operations Trust (DXO) form the DEXUS Property Group (DXS or the Group) stapled security.

1 Directors and Secretaries

1.1 Directors

The following persons were Directors of DXFM at all times during the year and to the date of this Directors' Report, unless otherwise stated:

Directors	Appointed
Christopher T Beare	4 August 2004
Elizabeth A Alexander, AM	1 January 2005
Penny Bingham-Hall	10 June 2014
John C Conde, AO	29 April 2009
Tonianne Dwyer	24 August 2011
Craig D Mitchell	12 February 2013
W Richard Sheppard	1 January 2012
Darren J Steinberg	1 March 2012
Peter B St George	29 April 2009

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2015 are as follows:

Brett D Cameron LLB/BA (Science & Technology), GAICD Appointed: 31 October 2014

Brett is the General Counsel and Company Secretary of DEXUS Property Group companies and is responsible for the legal function, company secretarial services and compliance, risk and governance systems and practices across the Group.

Prior to joining DEXUS, Brett was Head of Legal for Macquarie Real Estate (Asia) and has held senior legal positions at Macquarie Capital Funds in Hong Kong and Minter Ellison in Sydney and Hong Kong. Brett has 19 years' experience as in-house counsel and in private practice in Australia and in Asia, where he worked on real estate structuring and operations, funds management, mergers and acquisitions, private equity and corporate finance across a number of industries.

Brett graduated from The University of New South Wales and holds a Bachelor of Laws and a Bachelor of Arts (Science and Technology) and is a member of the Law Societies of New South Wales and Hong Kong. Brett is also a graduate of the Australian Institute of Company Directors.

Scott D Mahony B Bus (Acc) MBA (e-commerce) Grad Dip (Applied Corporate Governance) AGIA, RMIA Appointed: 1 April 2014

Scott is the General Manager, Compliance, Risk and Governance and is responsible for the development, implementation and oversight of DEXUS's compliance, property & corporate risk management and corporate governance programs.

Scott joined DEXUS in October 2005 after two years with Commonwealth Bank of Australia as a Senior Compliance Manager. Prior to this, Scott worked for over 11 years for Assure Services & Technology (part of AXA Asia Pacific) where he held various management roles.

Scott graduated from Charles Sturt University with a Bachelor of Business (Accountancy), a Graduate Diploma in Business Administration and an MBA. He has completed a Graduate Diploma in Applied Corporate Governance through the Governance Institute of Australia, and is a member of both the Risk Management Institution of Australasia and the Governance Institute of Australia.

2 Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors' meetings held during the year and each Director's attendance at those meetings is set out in the table below. The Directors met 11 times during the year. Ten Board meetings were main meetings and one meeting was held to consider specific business.

	Main meetings held	Main meetings attended	Specific meetings held	Specific meetings attended
Christopher T Beare	10	10	1	1
Elizabeth A Alexander, AM	10	10	1	1
Penny Bingham-Hall	10	10	1	1
John C Conde, AO	10	10	1	1
Tonianne Dwyer	10	10	1	1
Craig D Mitchell	10	10	1	1
W Richard Sheppard	10	10	1	1
Darren J Steinberg	10	10	1	1
Peter B St George	10	10	1	1

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During 2014, the Group undertook a detailed review of its Board Committee structure which resulted in the implementation of a streamlined Board Committee structure from 1 September 2014.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 September 2014 and 30 June 2015 and each Director's attendance at those meetings.

								Board People &
		Board Audit		Board Risk		Board Nomination		Remuneration
		Committee		Committee		Committee	Committee
	held	attended	held	attended		held attended	held	attended
Christopher T Beare	-	-	-	-	3	3	4	4
Elizabeth A Alexander, AM	3	3	-	-	-	-	-	-
Penny Bingham-Hall	-	-	4	4	-	-	4	4
John C Conde, AO	-	-	-	-	3	3	4	4
Tonianne Dwyer	3	3	4	4	-	-	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	3	3	4	4	3	3	-	-
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	3	3	4	4	-	-	-	-

Craig D Mitchell and Darren J Steinberg were not members of any Board Committees during the year ended 30 June 2015.

2 Attendance of Directors at Board meetings and Board Committee meetings (continued)

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 July 2014 and 31 August 2014 and each Director's attendance at those meetings.

						Board Nomination,
		Board Audit, Risk &		Board		Remuneration &
		Sustainability		Compliance		Governance		Board Finance
		Committee		Committee		Committee		Committee
	held	attended	held	attended		held attended	held	attended
Christopher T Beare	1	1	-	-	1	1	1	1
Elizabeth A Alexander, AM	1	1	-	-	-	-	-	-
Penny Bingham-Hall	-	-	-	-	-	-	-	-
John C Conde, AO	-	-	-	-	1	1	-	-
Tonianne Dwyer	-	-	1	1	1	1	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	1	1	-	-	-	-	1	1
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	-	-	-	-	-	-	1	1

3 Directors' relevant interests

The relevant interests of each Director in DXS stapled securities as at the date of this Directors' Report are shown below:

Directors	No. of securities
Christopher T Beare	16,667
Elizabeth A Alexander, AM	16,667
Penny Bingham-Hall	8,334
John C Conde, AO	16,667
Tonianne Dwyer	16,667
Craig D Mitchell	300,8321
W Richard Sheppard	70,090
Darren J Steinberg	604,9261
Peter B St George	17,334

1 Includes interests held directly and through performance rights.

4 Review of results and operations

The results for the year ended 30 June 2015 were:

• profit attributable to unitholders was \$318.8 million (2014: \$192.8 million);
• total assets were \$6,202.0 million (2014: \$6,326.0 million); and
• net assets were \$3,378.6 million (2014: \$2,968.9 million).

A review of the results, financial position and operations of the Group, of which the Trust forms part thereof, is set out in the Operating and Financial Review of the DEXUS Property Group Financial Report and forms part of this Directors' Report.

5 Directors' directorships in other listed entities

The following table sets out directorships of other ASX listed entities, (unless otherwise stated) not including DXFM, held by the Directors at any time in the three years immediately prior to the end of the year, and the period for which each directorship was held:

Director	Company	Date appointed	Date resigned
Christopher T Beare	Mnemon Group Limited	6 November 2009	27 May 2013
	Flexigroup Limited	1 July 2014
Elizabeth A Alexander, AM	Medibank Private Limited2	31 October 2008
Penny Bingham-Hall	Bluescope Steel Limited	29 March 2011
John C Conde, AO	Whitehaven Coal Limited	3 May 2007
	Cooper Energy Limited	25 February 2013
Tonianne Dwyer	Cardno Limited	25 June 2012
	Metcash Limited	24 June 2014
W Richard Sheppard	Echo Entertainment Group	21 November 2012
Peter B St George	Boart Longyear Limited	21 February 2007	21 May 2013
	First Quantum Minerals Limited1	20 October 2003

1 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

2 Listed for trading on the Australian Securities Exchange since 24 November 2014.

6 Principal activities

During the year the principal activity of the Trust was investment in real estate assets. There were no significant changes in the nature of the Trust's activities during the year.

7 Total value of Trust assets

The total value of the assets of the Trust as at 30 June 2015 was \$6,202.0 million (2014: \$6,326.0 million). Details of the basis of this valuation are outlined in the Notes to the Financial Statements and form part of this Directors' Report.

8 Likely developments and expected results of operations

In the opinion of the Directors, disclosure of any further information regarding business strategies and future developments or results of the Trust, other than the information already outlined in this Directors' Report or the Financial Statements accompanying this Directors' Report would be unreasonably prejudicial to the Trust.

9 Significant changes in the state of affairs

The Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust's affairs in future financial years.

10 Matters subsequent to the end of the financial year

Since the end of the financial year the Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust's affairs in future financial years.

11 Distributions

Distributions paid or payable by the Trust for the year ended 30 June 2015 are outlined in note 6 of the Notes to the Financial Statements and form part of this Directors' Report.

12 DXFM fees

Details of fees paid or payable by the Trust to DXFM for the year ended 30 June 2015 are outlined in note 17 of the Notes to the Financial Statements and form part of this Directors' Report.

13 Units on issue

The movement in units on issue in the Trust during the year and the number of units on issue as at 30 June 2015 are detailed in note 12 of the Notes to the Financial Statements and form part of this Directors' Report.

Details of the number of interests in the Trust held by DXFM or its associates as at the end of the financial year are outlined in note 17 of the Notes to the Financial Statements and form part of this Directors' Report.

The Trust did not have any options on issue as at 30 June 2015 (2014: nil).

14 Environmental regulation

The Group's senior management, through its Board Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any material breaches of these requirements.

15 Indemnification and insurance

The insurance premium for a policy of insurance indemnifying Directors, officers and others (as defined in the relevant policy of insurance) is paid by DEXUS Holdings Pty Limited (DXH).

PricewaterhouseCoopers (PwC or the Auditor), is indemnified out of the assets of the Trust pursuant to the DEXUS Specific Terms of Business agreed for all engagements with PwC, to the extent that the Trust inappropriately uses or discloses a report prepared by PwC. The Auditor, PwC, is not indemnified for the provision of services where such an indemnification is prohibited by the Corporations Act 2001.

16 Audit

16.1 Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.

16.2 Non-audit services

The Trust may decide to employ the Auditor on assignments, in addition to their statutory audit duties, where the Auditor's expertise and experience with the Trust and/or DXS are important.

Details of the amounts paid or payable to the Auditor, for audit and non-audit services provided during the year are set out in note 15 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor's behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001.

The reasons for the Directors being satisfied are:

a Charter of Audit Independence provides guidelines under which the Auditor may be engaged to provide non-audit services without impairing the Auditor's objectivity or independence.

16 Audit (continued)

16.2 Non-audit services (continued)

• the Charter states that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including:
• the preparation of tax provisions, accounting records and financial statements;
• the design, implementation and operation of information technology systems;
• the design and implementation of internal accounting and risk management controls;
• conducting valuation, actuarial or legal services;
• consultancy services that include direct involvement in management decision making functions;
• investment banking, borrowing, dealing or advisory services;
• acting as trustee, executor or administrator of trust or estate;
• prospectus independent expert reports and being a member of the due diligence committee; and
• providing internal audit services.
• the Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of nonaudit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of \$100,000.

The above Directors' statements are in accordance with the advice received from the Board Audit Committee.

16.3 Auditor's Independence Declaration

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 8 and forms part of this Directors' Report.

17 Corporate governance

DXFM's Corporate Governance Statement is set out in a separate section of the DEXUS Property Group Annual Report.

18 Rounding of amounts and currency

The Trust is a registered scheme of the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the rounding off of amounts in this Directors' Report and the Financial Statements. Amounts in this Directors' Report and the Financial Statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise indicated. All figures in this Directors' Report and the Financial Statements, except where otherwise stated, are expressed in Australian dollars.

DEXUS Office Trust Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

		2015	2014
	Note	\$'000	\$'000
Revenue from ordinary activities
Property revenue	2	277,210	283,858
Interest revenue		159	92
Total revenue from ordinary activities		277,369	283,950
Net fair value gain of investment properties		63,639	111,565
Share of net profit of investments accounted for using the equity method	8	256,349	58,442
Net fair value gain of derivatives		-	17,125
Total income		597,357	471,082
Expenses
Property expenses	2	(77,579)	(77,442)
Management fee expense		(13,484)	(12,960)
Finance costs	3	(184,417)	(157,525)
Net loss on sale of investment properties		(2,116)	-
Impairment of investments accounted for using the equity method	8	-	(3,295)
Transaction costs		-	(23,918)
Net foreign exchange loss		(137)	(79)
Corporate and administration expenses		(1,689)	(1,178)
Total expenses		(279,422)	(276,397)
Foreign currency translation reserve transfer on disposal of foreign operations	13(a)	(2,050)	-
Profit/(loss) before tax		315,885	194,685
Income tax benefit/(expense)	4(a)	2,943	(1,904)
Profit/(loss) for the year		318,828	192,781
Other comprehensive income/(loss):
Exchange differences on translating foreign operations	13(a)	(257)	5,204
Foreign currency translation reserve transfer on disposal of foreign operations	13(a)	2,050	-
Other comprehensive income/(loss)		1,793	5,204
Total comprehensive income/(loss) for the year		320,621	197,985
		Cents	Cents 1
Earnings per unit on profit/(loss) attributable to unitholders of the parent entity
Basic earnings per unit	5	35.02	24.14
Diluted earnings per unit	5	35.02	24.14

1 Restated to reflect the one-for-six security consolidation

		2015	2014
	Note	\$'000	\$'000
Current assets
Cash and cash equivalents	14(a)	7,073	8,739
Receivables	14(b)	18,124	76,069
Non-current assets classified as held for sale	9	-	130,071
Derivative financial instruments	10(c)	292	-
Other	14(c)	18,446	2,855
Total current assets		43,935	217,734
Non-current assets
Investment properties	7	3,417,475	3,310,615
Investments accounted for using the equity method	8	2,738,474	2,794,740
Derivative financial instruments	10(c)	1,601	2,003
Other		523	944
Total non-current assets		6,158,073	6,108,302
Total assets		6,202,008	6,326,036
Current liabilities
Payables	14(d)	43,287	63,258
Current tax liabilities		4,292	1,327
Loans with related parties	10(b)(iv)	55,684	55,684
Provisions	14(e)	29,503	91,666
Derivative financial instruments	10(c)	3,776	-
Total current liabilities		136,542	211,935
Non-current liabilities
Loans with related parties	10(b)(iv)	2,596,928	3,082,732
Derivative financial instruments	10(c)	89,788	54,948
Deferred tax liabilities	4(c)	-	6,766
Other		156	766
Total non-current liabilities		2,686,872	3,145,212
Total liabilities		2,823,414	3,357,147
Net assets		3,378,594	2,968,889
Equity
Contributed equity	12	2,442,563	2,212,662
Reserves	13	-	(1,793)
Retained profits/(accumulated losses)	13	936,031	758,020
Total equity		3,378,594	2,968,889

DEXUS Office Trust Consolidated Statement of Changes in Equity For the year ended 30 June 2015

		Contributed equity	Retained profits/ (losses)	Reserves	Total equity
	Note	\$'000	\$'000	\$'000	\$'000
Opening balance as at 1 July 2013		1,825,984	735,948	(6,997)	2,554,935
Profit/(loss) for the year		-	192,781	-	192,781
Other comprehensive income/(loss) for the year		-	-	5,204	5,204
Total comprehensive income for the year		-	192,781	5,204	197,985
Transactions with owners in their capacity as unitholders:
Issue of additional equity, net of transaction costs	12	423,749	-	-	423,749
Buy-back of contributed equity, net of transaction costs	12	(37,071)	-	-	(37,071)
Distributions paid or provided for	6	-	(170,709)	-	(170,709)
Total transactions with owners in their capacity as owners		386,678	(170,709)	-	215,969
Closing balance as at 30 June 2014		2,212,662	758,020	(1,793)	2,968,889
Opening balance as at 1 July 2014		2,212,662	758,020	(1,793)	2,968,889
Profit/(loss) for the year		-	318,828	-	318,828
Other comprehensive income/(loss) for the year		-	-	1,793	1,793
Total comprehensive income for the year		-	318,828	1,793	320,621
Transactions with owners in their capacity as unitholders:
Issue of additional equity, net of transaction costs	12	229,901	-	-	229,901
Distributions paid or provided for	6	-	(140,817)	-	(140,817)
Total transactions with owners in their capacity as owners		229,901	(140,817)	-	89,084
Closing balance as at 30 June 2015		2,442,563	936,031	-	3,378,594

DEXUS Office Trust Consolidated Statement of Cash Flows For the year ended 30 June 2015

2015 2014 Note \$'000 \$'000 Cash flows from operating activities Receipts in the course of operations (inclusive of GST) 315,398 334,655 Payments in the course of operations (inclusive of GST) (119,195) (124,292) Interest received 159 92 Finance costs paid to financial institutions (14,384) (21,652) Distributions received from investments accounted for using the equity method 217,754 79,000 Income and withholding taxes paid (858) - Net cash inflow/(outflow) from operating activities 16 398,874 267,803 Cash flows from investing activities Proceeds from sale of investment properties 126,887 - Payments for capital expenditure on investment properties (55,528) (54,208) Payments for acquisition of investment properties (14,800) - Payments for investments accounted for using the equity method (224,149) (1,080,904) Return of capital from investments accounted for using the equity method 372,555 - Transaction costs paid (13,629) (7,879) Net cash inflow/(outflow) from investing activities 191,336 (1,142,991) Cash flows from financing activities Borrowings provided to related parties (973,762) (850,205) Borrowings received from related parties 693,276 1,611,670 Repayment of borrowings - (26,252) Repayment of loan with related party (338,359) - Proceeds from loan with related party - 338,359 Payments for buy-back of contributed equity - (37,071) Proceeds from issue of additional equity 229,901 - Distributions paid to security holders (202,980) (157,590) Net cash inflow/(outflow) from financing activities (591,924) 878,911 Net increase/(decrease) in cash and cash equivalents (1,714) 3,723 Cash and cash equivalents at the beginning of the year 8,739 5,007 Effects of exchange rate changes on cash and cash equivalents 48 9 Cash and cash equivalents at the end of the year 7,073 8,739

About this Report

In this section

This section sets out the basis upon which the Trust's Financial Statements are prepared.

Specific accounting policies are described in their respective notes to the Financial Statements. This section also shows information on new or amended accounting standards and their impact on the financial position and performance of the Trust.

(a) Basis of preparation

DEXUS Property Group stapled securities are quoted on the Australian Securities Exchange under the "DXS" code and comprise one unit in each of DDF, DIT, DOT and DXO.

Each entity forming part of the Group continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with the reporting and disclosure requirements under the Corporations Act 2001 and the Australian Accounting Standards.

DEXUS Funds Management Limited (DXFM) as Responsible Entity for DDF, DIT, DOT and DXO may only unstaple the Group if approval is obtained by a special resolution of the stapled security holders.

These general purpose Financial Statements have been prepared in accordance with the requirements of the Constitution of the entities within the Group, the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements and interpretations of the Australia Accounting Standards Board. Compliance with Australian Accounting Standards ensures that the Financial Statements and notes also comply with International Financial Reporting Standards (IFRS). The Trust is a for-profit entity for the purpose of preparing Financial Statements.

Amounts in these Financial Statements have been presented in Australian dollars and rounded off in accordance with ASIC Class Order 98/100 to the nearest thousand dollars, unless otherwise indicated.

These Financial Statements are prepared on a going concern basis, using historical cost conventions except for investment properties, investment properties within equity accounted investments and derivative financial instruments which are stated at their fair value. Refer to the specific accounting policies within the notes to the Financial Statements for the basis of valuation of assets and liabilities measured at fair value.

As at 30 June 2015, the Trust had a net current asset deficiency of \$92.6 million (2014: surplus of \$5.8 million). The DXS Group has in place both external and internal funding arrangements to support the cashflow requirements of the Trust. The Trust is a going concern and the Financial Statements have been prepared on that basis.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

In the process of applying the Trust's accounting policies, management have made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are discussed in the following notes:

Note 7	Investment properties	Page 21
Note 10(c)	Derivative financial instruments	Page 36

(b) Principles of consolidation

These consolidated Financial Statements incorporate the assets, liabilities and results of all subsidiaries as at 30 June 2015.

(i) Controlled entities

Subsidiaries are all entities over which the Trust has control. The Trust controls an entity when the Trust is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Trust. They are deconsolidated from the date that control ceases.

(b) Principles of consolidation (continued)

(ii) Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement.

Joint operations

Where assets are held directly as tenants in common, the Trust's proportionate share of revenues, expenses, assets and liabilities are included in their respective items of the Statement of Financial Position and Statement of Comprehensive Income.

Joint ventures

Investments in joint ventures are accounted for using the equity method. Under this method, the Trust's share of the joint ventures' post-acquisition profits or losses is recognised in the Statement of Comprehensive Income and distributions received from joint ventures are recognised as a reduction of the carrying amount of the investment.

(c) Foreign currency

The Financial Statements are presented in Australian dollars.

Foreign currency transactions are translated into the Australian dollars functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of financial assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.

On 18 November 2014, settlement occurred on the sale of Lumley Centre in New Zealand. The cumulative historical exchange differences recognised in the foreign currency translation reserve were recycled to the Statement of Comprehensive Income on disposal of this foreign operation.

As at 30 June 2015, the Trust has no investments in foreign operations.

(d) Goods and services tax

Revenues, expenses and capital assets are recognised net of any amount of Australian Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST component of cash flows arising from investing and financing activities that is recoverable from or payable to the Australian Taxation Office is classified as cash flows from operating activities.

(e) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2015 reporting period. The Trust's assessment of the impact of these new standards and interpretations is set out below:

AASB 9 Financial Instruments (effective 1 July 2018).

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It also sets out new rules for hedge accounting and impairment of financial assets. The Trust intends to apply the standards from 1 July 2018. Application of this standard will not affect any of the amounts recognised in the Financial Statements but will require the disclosure of additional information.

AASB 15 Revenue from Contracts with Customers (effective 1 July 2018).

AASB 15 Revenue from Contracts with Customers clarifies the principles for recognising revenue from contracts with customers. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The Trust intends to apply the standard from 1 July 2018 and does not expect any significant impacts.

(f) Notes to the Financial Statements

The notes include information which is required to understand the Financial Statements and is material and relevant to the operations, financial position and performance of the Trust. Information is considered material and relevant if, for example:

• the amount in question is significant because of its size or nature;
• it is important in understanding the results of the Trust;
• it helps to explain the impact of significant changes in the Trust's business;
• it relates to an aspect of the Trust's operations that is important to its future performance.

The notes to the Financial Statements have been re-ordered and re-written in order to provide more meaningful information to the readers of the Financial Statements. The notes are organised into the following sections:

Trust performance	Property portfolio assets	Capital and financial risk management and working capital	Other disclosures
1. Operating segments	7. Investment properties	10. Capital and financial risk management	15. Audit, taxation and transaction services fees
2. Property revenue and expenses	8. Investments accounted for using the equity method	11. Commitments and contingencies	16. Reconciliation of net profit to net cash flows from operating activities
3. Finance costs	9. Non-current assets classified as held for sale	12. Contributed equity	17. Related parties
4. Taxation		13. Reserves and retained profits	18. Parent entity disclosures
5. Earnings per unit		14. Working capital	19. Subsequent events
6. Distributions paid and payable

Trust performance

In this section

This section explains the results and performance of the Trust.

It provides additional information about those individual line items in the Financial Statements that the Directors consider most relevant in the context of the operations of the Trust, including: operating segments, property revenue and expenses, finance costs, taxation, earnings per unit and distributions paid and payable.

Note 1

Operating segments

The Chief Operating Decision Maker (CODM) has been identified as the Board of Directors as they are responsible for the strategic decision making within the Group. DXS management has identified DXS's operating segments based on the sectors analysed within the management reports reviewed by the CODM in order to monitor performance across the Group and to appropriately allocate resources. Refer to the table below for a brief description of the Group's operating segments.

Office	Office space with any associated retail space; as well as car parks and office developments in Australia and New Zealand.
Industrial	Domestic industrial properties, industrial estates and industrial developments.
Property management	Property management services for third party clients and owned assets.
Funds management	Funds management of third party client assets.
Development and trading	Revenue earned and costs incurred by the Group on developments and inventory.
All other segments	Corporate expenses associated with maintaining and operating the Group. This segment also includes the centralised treasury function.

Consistent with how the CODM manages the business, the operating segments within DXS are reviewed on a consolidated basis and are not monitored at an individual trust level. The results of the individual trusts are not limited to any one of the segments described above.

Disclosures concerning DXS's operating segments, as well as the operating segments' key financial information provided to the CODM, are presented in the DEXUS Property Group Financial Report.

Property revenue and expenses

Rental revenue is recognised on a straight-line basis over the lease term for leases with fixed rent review clauses.

Prospective tenants may be offered incentives as an inducement to enter into operating leases. These incentives may take various forms including cash payments, rent free periods, or a contribution to certain lessee costs such as fit-out costs or relocation costs. The costs of incentives are recognised as a reduction of rental revenue on a straight-line basis from the lease commencement date to the end of the lease term. The carrying amount of the lease incentives is reflected in the fair value of investment properties.

	2015	2014
	\$'000	\$'000
Rent and recoverable outgoings	282,040	290,816
Incentive amortisation	(38,072)	(34,990)
Other revenue	33,242	28,032
Total property revenue	277,210	283,858

Property expenses include rates, taxes and other property outgoings incurred in relation to investment properties.

Note 3

Finance costs

Borrowing costs include interest, amortisation or ancillary costs incurred in connection with arrangement of borrowings and net fair value movements of interest rate swaps. Borrowing costs are expensed as incurred unless they relate to qualifying assets.

Qualifying assets include investment properties which take more than 12 months to develop for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset during the period of time that is required to complete and develop the asset for its intended use or sale. To the extent that funds are borrowed generally to fund development, the amount of borrowing costs to be capitalised to qualifying assets must be determined by using a weighted average capitalisation rate.

	2015	2014
	\$'000	\$'000
Interest paid to related parties	129,915	110,398
Net fair value loss of interest rate swaps	54,502	47,127
Total finance costs	184,417	157,525

Taxation

Under current Australian income tax legislation, DOT is not liable for income tax provided it satisfies certain legislative requirements, which were met in the current and previous financial years. The Trust may be liable for income tax in jurisdictions where foreign property is held.

DOT NZ Sub-Trust No.1, a wholly owned Australian sub-trust of DOT, is liable for New Zealand corporate tax on its New Zealand taxable income at the rate of 28%. In addition, until November 2014 when the Trust disposed of its property in New Zealand, a deferred tax liability and its related deferred tax expense was recognised on differences between the tax cost base and the accounting carrying value of the New Zealand property.

(a) Income tax expense

		2015	2014
	Note	\$'000	\$'000
Current income tax (expense)/benefit		(542)	(1,319)
Deferred income tax (expense)/benefit		3,485	(585)
Total income tax (expense)/benefit	4(b)	2,943	(1,904)
Profit from continuing operations		2,943	(1,904)
Deferred income tax expense included in income tax (expense)/benefit comprises:
(Increase)/decrease in deferred tax liabilities	4(c)	3,485	(585)
Total deferred tax expense		3,485	(585)
(b) Reconciliation of income tax expense to net profit Profit/(loss) before income tax Less amounts not subject to income tax		\$'000 315,885 (320,388)	\$'000 194,685 (173,659)
		(4,503)	21,026
Prima facie tax (expense)/benefit at the New Zealand tax rate of 28% (2014: 28%)		1,261	(5,887)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Depreciation and amortisation		-	468
Movements in the carrying value and tax cost base of properties		2,810	1,695
Non-deductible interest expense		-	(133)
Other timing differences		(1,128)	1,953
		1,682	3,983
Income tax (expense)/benefit		2,943	(1,904)

Taxation (continued)

(c) Deferred tax liabilities

	2015	2014
	\$'000	\$'000
The balance comprises temporary differences attributable to:
Investment properties	-	6,766
Total deferred tax liabilities	-	6,766
Movements:
Opening balance at the beginning of the year	6,766	5,599
Movement in deferred tax liability arising from temporary differences	(3,436)	585
Foreign currency translation	(49)	582
Transfer to current tax liability	(3,281)	-
Charged/(credited) to the Statement of Comprehensive Income	(6,766)	1,167
Closing balance at the end of the year	-	6,766

Note 5

Earnings per unit

Earnings per unit are determined by dividing the net profit attributable to unitholders by the weighted average number of ordinary units outstanding during the year. Diluted earnings per unit are adjusted from the basic earnings per unit by taking into account the impact of dilutive potential units.

The weighted average number of units has been adjusted to reflect the one-for-six security consolidation.

(a) Net profit used in calculating basic and diluted earnings per unit

	2015	2014
	\$'000	\$'000
Profit attributable to unitholders of the parent entity	320,622	197,984
(b) Weighted average number of units used as a denominator
	2015	2014
	No. of units	No. of units
Weighted average number of units outstanding used in calculation of basic and
diluted earnings per unit	915,462,824	820,257,691

Distributions paid and payable

Distributions are recognised when declared.

(a) Distribution to unitholders

	2015	2014
	\$'000	\$'000
31 December (paid 27 February 2015)	111,314	79,043
30 June (payable 31 August 2015)	29,503	91,666
Total distributions to unitholders	140,817	170,709

(b) Distribution rate

	2015	2014
	Cents per unit	Cents per unit1
31 December (paid 27 February 2015)	12.29	8.70
30 June (payable 31 August 2015)	3.04	10.14
Total distributions	15.33	18.84

1 Restated to reflect the one-for-six security consolidation

Property portfolio assets

In this section

Property portfolio assets are used to generate the Trust's performance and are considered to be the most relevant to the operations of the Trust. The assets are detailed in the following notes:

• Investment properties: relates to investment properties, both stabilised and under development.
• Note 7 - Investments accounted for using the equity method: provides summarised financial information on the material joint ventures and other joint ventures. The Trust's joint ventures primarily comprise interests in property portfolio assets held through investments in trusts.
• Non-current assets classified as held for sale: relates to investment properties which are expected to be sold within 12 months of the balance sheet date and are currently being marketed for sale.

The list of property portfolio assets is detailed in the Property Synopsis, available at www.dexus.com/investorcentre/dxs/announcements/asx.

Note 7

Investment properties

The Trust's investment properties consist of properties held for long-term rental yields and/or capital appreciation and property that is being constructed or developed for future use as investment property. Investment properties are initially recognised at cost including transaction costs. Investment properties are subsequently recognised at fair value in the Financial Statements.

The basis of valuations of investment properties is fair value, being the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date.

Changes in fair values are recorded in the Statement of Comprehensive Income. The gain or loss on disposal of an investment property 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 the Statement of Comprehensive Income in the year of disposal.

Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property where they result in an enhancement in the future economic benefits of the property.

Leasing fees incurred and incentives provided are capitalised and amortised over the lease periods to which they relate.

(a) Reconciliation

	2015	2014
Note	\$'000	\$'000
Opening balance at the beginning of the year	3,310,615	3,279,378
Additions	32,791	29,246
Lease incentives	49,351	43,174
Amortisation of lease incentives	(37,936)	(34,990)
Rent straightlining	(854)	1,237
Transfer to non-current assets classified as held for sale 9	-	(130,071)
Net fair value gain/(loss) of investment properties	63,508	111,565
Foreign exchange differences	-	11,076
Closing balance at the end of the year	3,417,475	3,310,615

Investment properties (continued)

(b) Valuation process

Independent valuations are carried out for each individual property at least once every three years by a member of the Australian Property Institute of Valuers. Each valuation firm and its signatory valuer are appointed on the basis that they are engaged for no more than three consecutive valuations. Independent valuations may be undertaken earlier where the Responsible Entity believes there is potential for a material change in the fair value of the property being the greatest of 5% of the asset value, or \$5 million.

The Trust's investment properties are required to be internally valued at least every six months unless they have been independently valued during the current reporting period. Internal valuations are compared to the carrying value of investment properties at the reporting date. Where the Directors determine the internal valuations present a more reliable estimate of fair value the internal valuation is adopted as book value. Internal valuations are performed by the Trust's internal valuers who hold recognised relevant professional qualifications and have previous experience as property valuers from major real estate valuation firms.

The valuation methodology utilised by the Trust includes the capitalisation approach (market approach) and the discounted cash flow approach (income approach). The valuation is also compared to, and supported by, direct comparison to recent market transactions. The adopted capitalisation rates and discount rates are determined based on industry expertise and knowledge and, where possible, a direct comparison to third party rates for similar assets in a comparable location. Rental revenue from current leases and assumptions about future leases, as well as any expected operational cash outflows in relation to the property, are also built into each asset assessment of fair value.

(c) Fair value measurement, valuation techniques and inputs

The following table represents the level of the fair value hierarchy and the associated unobservable inputs utilised in the fair value measurement for each class of investment property.

			Fair value			Range of
Class of	Fair value	2015	2014			unobservable inputs
property	hierarchy	\$'000		\$'000 Inputs used to measure fair value	2015	2014
Office	Level 3	3,417,475		3,310,615 Adopted capitalisation rate	5.83% - 7.75%	6.05% - 8.25%
				Adopted discount rate	7.76% - 8.75%	8.09% - 9.00%
				Adopted terminal yield	5.87% - 7.75%	6.05% - 8.25%
				Current net market rental (per sqm)	\$356 - \$1,141	\$359 - \$1,065
				10 year average market rental growth	2.14% - 3.84%	2.10% - 3.79%

Investment properties (continued)

Key estimates: inputs used to measure fair value of investment properties

Judgement is required in determining the following key assumptions:

• Adopted capitalisation rate: The rate at which net market income is capitalised to determine the value of a property. The rate is determined with regards to market evidence and the prior external valuation.
• Adopted discount rate: The rate of return used to convert cash flows, payable or receivable in the future, into present value. It reflects the opportunity cost of capital, that is, the rate of return the cash can earn if put to other uses having similar risk. The rate is determined with regards to market evidence and the prior external valuation.
• Adopted terminal yield: The capitalisation rate used to convert the future net market income into an indication of the anticipated value of the property at the end of the holding period when carrying out a discounted cash flow calculation. The rate is determined with regards to market evidence and the prior external valuation.
• Net market rental (per sqm) The net market rent is the estimated amount for which a property should lease between a lessor and a lessee on appropriate lease terms in an arm's length transaction.
• 10 year average market rental growth: The expected annual rate of change in market rent over a 10 year forecast period in alignment with expected market movements. The rate is determined with reference to forecast market movements.
• Land rate (per sqm): The land rate is the market land value per sqm.

(d) Sensitivity information

Significant movement in any one of the inputs listed in the table above may result in a change in the fair value of the Trust's investment properties as shown below:

Significant inputs	Fair value measurement sensitivity to significant increase in input	Fair value measurement sensitivity to significant decrease in input
Adopted capitalisation rate Adopted discount rate Adopted terminal yield	Decrease	Increase
Net market rental (per sqm) 10 year average market rental growth Land rate (per sqm)	Increase	Decrease

Generally, a change in the assumption made for the adopted capitalisation rate is often accompanied by a directionally similar change in the adopted terminal yield. The adopted capitalisation rate forms part of the capitalisation approach whilst the adopted terminal yield forms part of the discounted cash flow approach.

Investment properties (continued)

(d) Sensitivity information (continued)

Under the capitalisation approach, the net market rental has a strong interrelationship with the adopted capitalisation rate as the fair value of the investment property is derived by capitalising, in perpetuity, the total net market rent receivable. An increase (softening) in the adopted capitalisation rate may offset the impact to fair value of an increase in the total net market rent. A decrease (tightening) in the adopted capitalisation rate may also offset the impact to fair value of a decrease in the total net market rent. A directionally opposite change in the total net market rent and the adopted capitalisation rate may increase the impact to fair value.

The discounted cash flow is primarily made up of the discounted cash flow of net income over the cashflow period and the discounted terminal value (which is largely based upon market rents grown at forecast market rental growth rates capitalised at an adopted terminal yield). An increase (softening) in the adopted discount rate may offset the impact to fair value of a decrease (tightening) in the adopted terminal yield. A decrease (tightening) in the discount rate may offset the impact to fair value of an increase (softening) in the adopted terminal yield. A directionally similar change in the adopted discount rate and the adopted terminal yield may increase the impact to fair value.

A decrease (softening) in the forecast rental growth rate may result in a negative impact on the discounted cash flow approach value whilst a strengthening may have a positive impact on the value under the same approach.

Note 8

Investments accounted for using the equity method

Investments are accounted for in the Financial Statements using the equity method of accounting (refer to the 'About this Report' section).

Information relating to these entities is set out below:

	Ownership interest
	2015	2014	2015	2014
Name of entity	%	%	\$'000	\$'000
Bent Street Trust	33.3	33.3	264,164	250,183
DEXUS Creek Street Trust	50.0	50.0	131,542	131,839
DEXUS Martin Place Trust	50.0	50.0	89,751	81,472
Grosvenor Place Holding Trust1,2	50.0	50.0	303,279	293,487
Site 6 Homebush Bay Trust1	50.0	50.0	37,236	37,549
Site 7 Homebush Bay Trust1	50.0	50.0	49,786	50,812
DEXUS 480 Q Holding Trust	50.0	50.0	149,651	82,853
DEXUS Kings Square Trust	50.0	50.0	165,688	88,781
DEXUS Office Trust Australia	50.0	50.0	1,546,301	1,777,764
DEXUS Eagle Street Pier Trust	50.0	-	1,076	-
Total investments accounted for using the equity method			2,738,474	2,794,740

1 These entities are 50% owned by DEXUS Office Trust Australia. The Trust's economic interest is therefore 75% when combined with the interest held by DEXUS Office Trust Australia. These entities are classified as joint ventures and are accounted for using the equity method as a result of contractual arrangements required unanimous decisions on all relevant matters.

2 Grosvenor Place Holding Trust owns 50% of Grosvenor Place, 225 George Street, Sydney, NSW. The Trust's economic interest in this property is therefore 37.5%.

The above entities were formed in Australia and their principal activity is property investment in Australia.

Investments accounted for using the equity method (continued)

The table below provides summarised financial information for the Trust's share of joint ventures that are material, as well as other individually immaterial joint ventures.

		DEXUS Office Trust Australia		Grosvenor Place Holding Trust	Bent Street Trust		Other joint ventures			Total
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Summarised Statement of Financial Position	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Current assets
Cash and cash equivalents	6,579	21,721	844	372	1,306	777	2,334	3,034	11,063	25,904
Other current assets	3,948	6,716	647	464	367	2,832	4,832	1,443	9,794	11,455
Total current assets	10,527	28,437	1,491	836	1,673	3,609	7,166	4,477	20,857	37,359
Non-current assets
Investment properties	1,567,866	1,506,906	304,611	295,504	265,643	250,260	650,073	475,982	2,788,193	2,528,652
Investments accounted for using the equity method	195,151	188,204	-	-	-	-	-	-	195,151	188,204
Loan to related party1	-	338,359	-	-	-	-	-	-	-	338,359
Other non-current assets	426	-	-	-	2	-	102	65	530	65
Total non-current assets	1,763,443	2,033,469	304,611	295,504	265,645	250,260	650,175	476,047	2,983,874	3,055,280
Current liabilities
Provision for distribution	10,958	63,744	-	1,814	1,773	2,268	125	945	12,856	68,771
Borrowings	172,050	73,534	-	-	-	-	-	-	172,050	73,534
Other current liabilities	33,596	34,721	2,804	1,030	1,381	1,410	32,463	6,249	70,244	43,410
Total current liabilities	216,604	171,999	2,804	2,844	3,154	3,678	32,588	7,194	255,150	185,715
Non-current liabilities
Borrowings	11,054	112,143	-	-	-	-	-	-	11,054	112,143
Other non-current liabilities	11	-	19	9	-	8	23	24	53	41
Total non-current liabilities	11,065	112,143	19	9	-	8	23	24	11,107	112,184
Net assets	1,546,301	1,777,764	303,279	293,487	264,164	250,183	624,730	473,306	2,738,474	2,794,740
Reconciliation of carrying amounts:
Opening balance at the beginning of the year	1,777,764	-	293,487	289,086	250,183	248,291	473,306	369,391	2,794,740	906,768
Additions	56,205	1,878,647	8,823	2,421	-	3,129	156,752	93,778	221,780	1,977,975
Share of net profit/(loss) after tax	182,633	(8,998)	14,678	18,167	29,248	13,703	29,790	35,570	256,349	58,442
Impairment	-	(3,295)	-	-	-	-	-	-	-	(3,295)
Distributions received/receivable	(97,746)	(88,590)	(13,709)	(16,187)	(15,267)	(14,940)	(35,118)		(25,433) (161,840) (145,150)
Return of capital	(372,555)	-	-	-	-	-	-	-	(372,555)	-
Closing balance at the end of the year	1,546,301	1,777,764	303,279	293,487	264,164	250,183	624,730	473,306	2,738,474	2,794,740

1 Refer to note 10(b)(iv). Represents the Trust's share of proceeds from the sale of four properties by DEXUS Office Trust Australia.

DEXUS Office Trust Notes to the Financial Statements – property portfolio assets (continued) For the year ended 30 June 2015

Note 8

Investments accounted for using the equity method (continued)

The table below provides summarised financial information for the Trust's share of joint ventures that are material, as well as other individually immaterial joint ventures.

	DEXUS Office		Grosvenor Place			Bent Street		Other joint
		Trust Australia Holding Trust			Trust		ventures		Total
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Summarised Statement of Comprehensive Income	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Property revenue	143,781	63,686	20,288	22,600	16,318	17,036	27,363	24,065	207,750	127,387
Property revaluations	91,183	2,977	(660)	-	16,326	-	8,059	16,768	114,909	19,745
Interest income	449	319	36	16	37	56	78	52	601	443
Finance costs	(7,957)	(5,421)	-	-	-	-	-	-	(7,957)	(5,421)
Other expenses	(44,824)	(70,559)	(4,986)	(4,449)	(3,433)	(3,389)	(5,710)	(5,315)	(58,954)	(83,712)
Net profit/(loss) for the year	182,633	(8,998)	14,678	18,167	29,248	13,703	29,790	35,570	256,349	58,442
Total comprehensive income/(loss) for the year	182,633	(8,998)	14,678	18,167	29,248	13,703	29,790	35,570	256,349	58,442

Non-current assets classified as held for sale

Non-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.

Assets classified as held for sale relate to investment properties and are measured at fair value.

Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.

Disposals

On 18 November 2014, Lumley Centre, 88 Shortland Street, Auckland, New Zealand, was disposed of for gross proceeds of NZ\$146 million.

Capital and financial risk management and working capital

In this section

The Trusts's overall risk management program focuses on reducing volatility from impacts in movements of financial markets and seeks to minimise potential adverse effects on the financial performance of the Trust. Note 10 Capital and financial risk management outlines how the Trust manages its exposure to a variety of financial risks (interest rate risk, foreign currency risk, liquidity risk and credit risk) and details the various derivative financial instruments entered into by the Trust.

The Board determines the appropriate capital structure of the Trust, how much is borrowed from financial institutions and capital markets (debt), and how much is raised from shareholders (equity) in order to finance the Trust's activities both now and in the future. This capital structure is detailed in the following notes:

• Debt: Commitments and contingencies in note 11;
• Equity: Contributed equity in note 12 and Reserves and retained profits in note 13.

Note 14 provides a breakdown of the working capital balances held in the Statement of Financial Position.

Note 10

Capital and financial risk management

Capital and risk management is carried out through a centralised treasury function which is governed by a Board approved Treasury Policy. The Trust (as part of DXS) has an established governance structure which consists of the Group Management Committee and Capital Markets Committee.

The Board has appointed a Group Management Committee responsible for achieving DEXUS's goals and objectives, including the prudent financial and risk management of the Trust. The Group Management Committee generally meets weekly. A Capital Markets Committee has been established to advise the Group Management Committee.

The Capital Markets Committee is a management committee that is accountable to the Board. It convenes at least quarterly and conducts a review of financial risk management exposures including liquidity, funding strategies and hedging. It is also responsible for the development of financial risk management policies and funding strategies for recommendation to the Board, and the approval of treasury transactions within delegated limits and powers.

(a) Capital risk management

The Trust manages its capital to ensure that entities within the Trust will be able to continue as a going concern while maximising the return to owners through the optimisation of the debt and equity balance.

The capital structure of the Trust consists of debt, cash and cash equivalents, and equity attributable to security holders. The Trust continuously monitors its capital structure and it is managed in consideration of the following factors:

• the cost of capital and the financial risks associated with each class of capital;
• gearing levels and other debt covenants;
• potential impacts on net tangible assets and security holders' equity;
• potential impacts on the DXS Group's credit rating; and
• other market factors.

The Trust is not rated by ratings agencies, however, DXS has been rated A- by Standard and Poor's (S&P) and A3 by Moody's. General levels and bank debt covenants are managed holistically as part of the DXS Group.

Capital and financial risk management (continued)

(a) Capital risk management (continued)

DXFM, the Responsible Entity for the Trust, has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to maintain liquidity above specified limits. DXFM must also prepare rolling cash projections over at least the next 12 months and demonstrate it will have access to sufficient financial resources to meet its liabilities that are expected to be payable over that period. Cash projections and assumptions are approved, at least quarterly, by the Board of the Responsible Entity.

(b) Financial risk management

The Trust's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Trust. The Trust's principal financial instruments, other than derivatives, comprise cash and related party loans. The main purpose of financial instruments is to manage liquidity and hedge the Trust's exposure to financial risks namely:

• interest rate risk;
• foreign currency risk;
• liquidity risk; and
• credit risk.

The Trust uses derivatives to reduce the Group's exposure to fluctuations in interest rates and foreign exchange rates. These derivatives create an obligation or a right that effectively transfers one or more of the risks associated with an underlying financial instrument, asset or obligation. Derivative financial instruments that the Group may use to hedge its risks include:

• interest rate swaps;
• cross currency interest rate swaps;
• foreign exchange contracts; and
• option contracts (interest rate).

The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure and conducting sensitivity analysis.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk
• Interest rate risk

Interest rate risk arises from interest bearing financial assets and liabilities that the Trust utilises. Non-derivative interest bearing financial instruments are predominately short term liquid assets and long term debt issued at fixed rates which expose the Trust to fair value interest rate risk as the Trust may pay higher interest costs than if it were at variable rates. The Trust's borrowings which have a variable interest rate give rise to cash flow interest rate risk as variable interest rates may increase.

The Trust's risk management policy for interest rate risk seeks to minimise the effects of interest rate movements on its asset and liability portfolio through active management of the exposures. The policy prescribes minimum and maximum hedging amounts for the Trust, which is managed on a portfolio basis.

The Trust maintains a mix of offshore and local currency fixed rate and variable rate debt, as well as a mix of long term and short term debt. The Trust primarily enters into interest rate swaps and cross currency interest rate swap agreements to manage the associated interest rate risks. The Trust hedges the interest rate and currency risk on the majority of its foreign currency borrowings by entering into cross currency swaps, which have the economic effect of converting foreign currency borrowings to local currency borrowings at contracted rates. The derivative contracts are recorded at fair value in the Statement of Financial Position, being the market value as quote in an active market.

Interest rate swaps require settlement of net interest receivable or payable each 90 or 180 days. The settlement dates coincide with the dates on which the interest is payable on the underlying debt. The receivable and payable legs on interest rate swap contracts are settled on a net basis. The net notional amount of average fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate is set out below.

	June 2016	June 2017	June 2018	June 2019	June 2020	> June 2021
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Interest rate swaps
A\$ hedged1	1,540,417	1,602,500	1,418,750	1,128,333	560,833	12,083
A\$ hedge rate (%)	3.88%	3.80%	3.88%	3.96%	3.86%	2.69%

1 Amounts do not include fixed rate debt that has been swapped to floating rate debt through cross currency swaps.

Sensitivity analysis on interest expense

The table below shows the impact on the Trust's net interest expense of a 50 basis point increase or decrease in market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust's floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in market rates to the extent that floating rate debt is not hedged.

		2015	2014
		(+/-) \$'000	(+/-) \$'000
+/- 0.50% (50 basis points)	A\$	6,035	8,091
+/- 0.50% (50 basis points)	NZ\$	-	625
Total A\$ equivalent		6,035	8,631

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk (continued)

Interest rate risk (continued)

Sensitivity analysis on fair value of interest rate swaps

The sensitivity analysis on interest rate swaps below shows the effect on net profit or loss for changes in the fair value of interest rate swaps for a 50 basis point increase or decrease in short-term and long-term market interest rates. The sensitivity on fair value arises from the impact that changes in market rates will have on the valuation of the interest rate swaps.

The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its interest rate derivatives. Accordingly, gains or losses arising from changes in the fair value are reflected in the profit or loss.

		2015	2014
		(+/-) \$'000	(+/-) \$'000
+/- 0.50% (50 basis points)	A\$	31,381	34,772

Foreign currency risk

Foreign currency risk refers to the risk that the value or the cash flows arising from a financial commitment, or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Trust's foreign currency risk arises primarily from:

• highly probable forecast transactions denominated in foreign currency; and
• borrowings denominated in foreign currency.

The objective of the Trust's foreign exchange risk management policy is to ensure that movements in exchange rates have minimal adverse impact on the Trust's foreign currency assets and liabilities.

Foreign currency assets and liabilities

Where foreign currency borrowings are used to fund Australian investments, the Trust transacts cross currency swaps to reduce the risk that movements in foreign exchange rates will have an impact on security holder's equity and net tangible assets.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (ii) Liquidity risk

Liquidity risk is associated with ensuring that there are sufficient funds available to meet the Trust's financial commitments as and when they fall due and planning for any unforeseen events which may curtail cash flows. The Trust identifies and manages liquidity risk across the following categories:

• short-term liquidity management covering the month ahead on a rolling basis with continuous monitoring of forecast and actual cash flows;
• medium-term liquidity management of liquid assets, working capital and standby facilities to cover Trust cash requirements over the next 1- 24 month period. The Trust maintains a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits); and
• long-term liquidity management through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated in certain time periods, and ensuring an adequate diversification of funding sources where possible, subject to market conditions.

Refinancing risk

Refinancing risk is the risk that the Trust:

• will be unable to refinance its debt facilities as they mature; and/or
• will only be able to refinance its debt facilities at unfavourable interest rates and credit market conditions (margin price risk).

The Group's key risk management strategy for margin price risk on refinancing is to spread the maturities of debt facilities over different time periods to reduce the volume of facilities to be refinanced and the exposure to market conditions in any one period.

An analysis of the contractual maturities of the Trust's interest bearing liabilities and derivative financial instruments is shown in the table below. The amounts in the table represent undiscounted cash flows.

	2015			2014
	Within one year	Between one and two years	Between two and five years	After five years	Within one year	Between one and two years	Between two and five years	After five years
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Cash	7,073	-	-	-	8,739	-	-	-
Receivables	18,124	-	-	-	76,069	-	-	-
Payables	(43,287)	-	-	-	(63,258)	-	-	-
	(18,090)	-	-	-	21,550	-	-	-
Loans with related parties and interest1	130,106	130,106	2,727,034	-	141,469	141,469	3,027,311	-
Derivative financial instruments
Derivative assets	12,902	138	-	-	897	897	34	-
Derivative liabilities	(47,577)	(35,539)	(69,236)	-	(16,370)	(21,324)	(52,680)	(7,686)
Total net derivative financial instruments2	(34,675)	(35,401)	(69,236)	-	(15,473)	(20,427)	(52,646)	(7,686)

1 Includes estimated interest.

2 The notional maturities on derivatives are shown for cross currency interest rate swaps (refer to foreign exchange rate risk) as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. Refer to note 10(c) for fair value of derivatives. Refer to note 11(b) for financial guarantees.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iii) Credit risk

Credit risk is the risk that counterparty will not fulfil its obligations under the terms of a financial instrument and will cause financial loss to the Trust. The Trust has exposure to credit risk on all financial assets included in the Trust's Statement of financial position.

The Trust manages this risk by:

• adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty's credit rating;
• regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody's and Fitch credit rating. The exposure includes the current market value of in-the-money contracts as well as potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
• entering into ISDA Master Agreements once a financial institution counterparty is approved;
• monitoring tenant exposure within approved credit limits;
• for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
• regularly monitoring loans and receivables on an ongoing basis.

A minimum S&P rating of A– (or Moody's or Fitch equivalent) is required to become or remain an approved counterparty unless otherwise approved by the DEXUS Board.

The Trust is exposed to credit risk on cash balances and on derivative financial instruments with financial institutions. The Trust has a policy that sets limits as to the amount of credit exposure to each financial institution. New derivatives and cash transactions are limited to financial institutions that meet minimum credit rating criteria in accordance with the Trust's policy requirements.

Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the Trust's exposure to any one counterparty. As a result, there is no significant concentration of credit risk for financial instruments.

The maximum exposure to credit risk at 30 June 2015 is the carrying amounts of financial assets recognised on the Statement of Financial Position.

As at 30 June 2015, there were no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade debtors are monitored on an ongoing basis. The tables below show the ageing analysis of loans and receivables net of provisions of the Trust.

	2015	2014
	\$'000	\$'000
0-30 days	17,346	75,249
31-60 days	149	275
61-90 days	102	103
Over 91 days	527	442
Total receivables net of provisions	18,124	76,069

Amounts over 31 days are past due, however, no receivables are impaired. The credit quality of financial assets that are neither past due nor impaired are monitored to make sure there are no adverse changes in credit quality.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value

The Trust has classified its financial assets and liabilities as follows:

Financial asset/liability	Classification	Valuation basis	Reference
Receivables1	Loans and receivables	Amortised cost	Refer to note 14(b)
Payables1	Financial liability at amortised cost	Amortised cost	Refer to note 14(d)
Non-interest bearing loan from related party	Loans and receivables	Amortised cost	Refer to note 18
Derivatives	Fair value through profit or loss	Fair value	Refer to note 10(c)

1 The face value of these is approximately equal to their fair value; these amounts are unsecured and are usually paid within 30 days of recognition.

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired. As noted in section (c) below, derivative financial instruments are initially recognised in the Statement of Financial Position at fair value on the date on which the derivative contract is entered into and subsequently remeasured to fair value.

The valuation techniques applied by the Trust are consistent with those applied in prior year financial reports. The valuation technique used to measure the various financial instruments namely foreign currency contracts and interest rate contracts is based on market observable spot exchange rates and interest rate yield curves. This method records any change in fair value of a derivative in the financial statements.

The carrying amounts and estimated fair value of all the Trust's financial assets and liabilities recognised in the Financial Statements are as follows:

	2015	2015	2014	2014
	Carrying		Carrying
	amount1	Fair value2	amount1	Fair value2
	\$'000	\$'000	\$'000	\$'000
Financial assets
Cash and cash equivalents	7,073	7,073	8,739	8,739
Loans and receivables (current)	18,124	18,124	76,069	76,069
Derivative assets	1,893	1,893	2,003	2,003
Total financial assets	27,090	27,090	86,811	86,811
Financial liabilities
Trade payables	43,287	43,287	63,258	63,258
Non-interest bearing loans with related parties3	55,684	55,684	55,684	55,684
Interest bearing loans with related parties4	2,596,928	2,596,928	3,082,732	3,082,732
Derivative liabilities	93,564	93,564	54,948	54,948
Total financial liabilities	2,789,463	2,789,463	3,256,622	3,256,622

1 Carrying value is equal to the value of the financial instruments on the Statement of Financial Position.

2 Fair value is the price that would be received to transfer the asset or liability in an orderly transaction between market participants at the measurement date. Where there is a difference between the carrying amount and fair value, the difference is not recognised in the Statement of Financial Position.

3 Non-interest bearing loans with entities within DXS were created to effect the stapling of the Trust, DIT, DDF and DXO. These loan balances eliminate on consolidation within DXS.

4 Interest bearing loans with DEXUS Finance Pty Limited (DXF). These loan balances eliminate on consolidation within DXS. This also includes a loan of \$338.4m from DEXUS Office Australia which was repaid during the year.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value (continued)

The Trust uses the following methods in the determination and disclosure of the fair value of financial instruments:

Level 1: the fair value is calculated using quoted prices in active markets.

Level 2: the fair value is determined using inputs other than quoted prices included in 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: the fair value is estimated using inputs for the asset or liability that are not based on observable data.

All financial instruments were measured at Level 2 for the periods presented in this report.During the year, there were no transfers between Level 1, 2 and 3 fair value measurements.

(v) Offsetting financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position where the Trust currently has a legally enforceable right to set-off the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Trust has also entered into arrangements that do not meet the criteria for offsetting except in certain circumstances, such as bankruptcy or the termination of the underlying contract.

The Trust does not have any agreements in place with derivative counterparties that allow for offsetting financial assets and financial liabilities.

Master netting arrangements – not currently enforceable

Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, where certain credit events occur (such as default), the net position owing/receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Trust does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Statement of Financial Position.

(c) Derivative financial instruments

A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over time in response to underlying variables including interest rates or exchange rates and is entered into for a fixed period. A hedge is where a derivative is used to manage an underlying exposure and the Trust uses derivatives to manage its exposure to interest rates and foreign exchange risk accordingly.

Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Trust's exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes.

Derivatives including interest rate swaps, the interest rate component of cross currency swaps, and foreign exchange contracts, are measured at fair value with any changes in fair value recognised in the Statement of Comprehensive Income.

At inception the Trust can elect to formally designate and document the relationship between the hedge derivative instruments (cross currency interest rate swaps only) and the associated hedged items (foreign currency bonds only). The Trust 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 fair values or cash flows of hedged items.

Capital and financial risk management (continued)

(c) Derivative financial instruments (continued)

	2015	2014
	\$'000	\$'000
Current assets
Interest rate swap contracts	292	-
Total current assets - derivative financial instruments	292	-
Non-current assets
Interest rate swap contracts	1,601	2,003
Total non-current assets - derivative financial instruments	1,601	2,003
Current liabilities
Interest rate swap contracts	3,776	-
Total current liabilities - derivative financial instruments	3,776	-
Non-current liabilities
Interest rate swap contracts	89,788	54,948
Total non-current liabilities - derivative financial instruments	89,788	54,948
Net derivative financial instruments	(91,671)	(52,945)

Key assumptions: fair value of derivatives

The fair value of derivative financial instruments has been determined based on a discounted cash flow analysis using observable market inputs (interest rates, exchange rates and currency basis) and applying a credit or debit valuation adjustment based on the current credit worthiness of counterparties and the Trust. Refer to note 10(b)(iv) Capital and Financial Risk Management for further detail.

Commitments and contingencies

• (a) Commitments
• (i) Capital commitments

The following amounts represent remaining capital expenditure on investment properties contracted at the end of each reporting period but not recognised as liabilities payable:

	2015	2014
	\$'000	\$'000
Investment properties	41,134	51,018
Investments accounted for using the equity method	176,684	284,797
Total capital commitments	217,818	335,815

(ii) Lease receivable commitments

The future minimum lease payments receivable by the Trust are:

	2015	2014
	\$'000	\$'000
Within one year	167,044	172,909
Later than one year but not later than five years	395,200	401,251
Later than five years	153,121	146,968
Total lease receivable commitments	715,365	721,128

(b) Contingencies

The Trust, together with DDF, DIT and DXO, is a guarantor of a total of A\$3,572.4 million of interest bearing liabilities (refer note 13 of the DEXUS Property Group Financial Report). The guarantees have been given in support of debt outstanding and drawn against these facilities, and may be called upon in the event that a borrowing entity has not complied with certain requirements such as failure to pay interest or repay a borrowing, whichever is earlier. During the period no guarantees were called.

The above guarantees are issued in respect of the Trust and do not constitute an additional liability to those already existing in interest bearing liabilities on the Statement of Financial Position.

The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Trust, other than those disclosed in the Financial Statements, which should be brought to the attention of unitholders as at the date of completion of this report.

Contributed equity

(a) Contributed equity

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	2,212,662	1,825,984
Issue of additional equity, net of transaction costs	229,901	423,749
Buy-back of contributed equity, net of transaction costs	-	(37,071)
Closing balance at the end of the year	2,442,563	2,212,662

(b) Number of units on issue

	2015	2014
	No. of units	No. of units
Opening balance at the beginning of the year	5,433,110,810	4,701,957,390
Issue of additional equity	65,274,552	804,882,384
One-for-six security consolidation	(4,527,579,013)
Buy-back of contributed equity	-	(73,728,964)
Closing balance at the end of the year	970,806,349	5,433,110,810

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust.

Each stapled security entitles the holder to vote in accordance with the provisions of the Constitution and the Corporations Act 2001.

Transaction costs arising on the issue of equity instruments are recognised directly in equity (net of tax) as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

On 29 October 2014, the Group announced a one-for-six consolidation of DEXUS Property Group stapled securities. The consolidation was completed on 14 November 2014. Where the number of securities held by a security holder following the consolidation resulted in a fraction of a security, the fraction was rounded up to the nearest whole number.

Reserves and retained profits

(a) Reserves

	2015	2014
	\$'000	\$'000
Foreign currency translation reserve	-	(1,793)
Total reserves	-	(1,793)
Movements:
Foreign currency translation reserve
Opening balance at the beginning of the year	(1,793)	(6,997)
Exchange differences on translating foreign operations	(257)	5,204
Foreign currency translation reserve transfer on disposal of foreign operations	2,050	-
Closing balance at the end of the year	-	(1,793)

(b) Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations.

(c) Retained profits

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	758,020	735,948
Net profit/(loss) attributable to security holders	318,828	192,781
Distributions provided for or paid	(140,817)	(170,709)
Closing balance at the end of the year	936,031	758,020

Note 14

Working capital

(a) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(b) Receivables

Rental and interest revenue are brought to account on an accruals basis. Dividends and distributions are recognised when declared and, if not received at the end of the reporting period, reflected in the Statement of Financial Position as a receivable.

Working capital (continued)

(b) Receivables (continued)

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for doubtful debts. Trade receivables are required to be settled within 30 days and are assessed on an ongoing basis for impairment. Receivables which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for doubtful debts is established when there is objective evidence that the Trust will not be able to collect all amounts due according to the original terms of the receivables.

	2015	2014
	\$'000	\$'000
Rent receivable	5,177	3,934
Less: provision for doubtful debts	(222)	(94)
Total rental receivables	4,955	3,840
Distributions receivable	12,857	68,770
Other receivables	312	3,459
Total other receivables	13,169	72,229
Total receivables	18,124	76,069

(c) Other current assets

	2015	2014
	\$'000	\$'000
Prepayments	3,646	2,855
Deposit for the acquisition of investment property	14,800	-
Total other current assets	18,446	2,855

(d) Payables

Expenses are brought to account on an accruals basis and, if not paid at the end of the reporting period, are reflected in the Statement of Financial Position as a payable.

These amounts represent liabilities for amounts owing at the end of the reporting period. The amounts are unsecured and are usually paid within 30 days of recognition.

	2015	2014
	\$'000	\$'000
Trade creditors	13,475	28,230
Accruals	1,796	1,659
Accrued capital expenditure	10,050	5,913
Prepaid income	6,146	10,249
Accrued interest	10,135	14,252
Other payables	1,685	2,955
Total payables	43,287	63,258

Working capital (continued)

(e) Provisions

A provision is recognised when an obligation exists as a result of a past event and it is probable that a future outflow of cash or other benefit will be required to settle the obligation.

In accordance with the Trust's Constitution, the Trust distributes its distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared.

	2015	2014
	\$'000	\$'000
Provision for distribution	29,503	91,666
Total current provisions	29,503	91,666
Movements in the provision for distribution during the financial year are set out below:
	2015	2014
	\$'000	\$'000

Opening balance at the beginning of the year	91,666	78,547
Additional provisions	140,817	170,709
Payment of distributions	(202,980)	(157,590)
Closing balance at the end of the year	29,503	91,666

A provision for distribution has been raised for the period ended 30 June 2015. This distribution is to be paid on 31 August 2015.

Other disclosures

In this section

This section includes other information that must be disclosed to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations, but which are not considered critical in understanding the financial performance or position of the Trust.

Note 15

Audit, taxation and transaction services fees

During the year, the Auditor and its related practices earned the following remuneration:

	2015	2014
	\$	\$
Audit fees
PwC Australia - audit and review of Financial Statements	289,300	302,616
PwC fees paid in relation to outgoings audits	59,825	99,250
PwC Australia - regulatory audit and compliance services	4,250	3,620
PwC Australia - audit of DOTA	95,275	212,500
Audit fees paid to PwC	448,650	617,986
Taxation fees
Fees paid to PwC Australia and New Zealand	21,147	17,894
Fees paid to PwC Australia in respect of the CPA acquisition	-	200,000
Taxation fees paid to PwC	21,147	217,894
Total audit and taxation fees paid to PwC	469,797	835,880
Transaction services fees
Fees paid to PwC Australia in respect of the CPA acquisition	-	225,000
Total transaction services fees paid to PwC	-	225,000
Total audit, taxation and transaction services fees paid to PwC	469,797	1,060,880

Reconciliation of net profit to net cash flows from operating activities

(a) Reconciliation

	2015	2014
	\$'000	\$'000
Net profit/(loss) for the year	318,828	192,781
Net fair value (gain)/loss of investment properties	(63,639)	(111,565)
Share of net (profit)/loss of investments accounted for using the equity method	(256,349)	(58,442)
Net fair value (gain)/loss of interest rate swaps	40,790	18,931
Net (gain)/loss on sale of investment properties	2,116	-
Net foreign exchange (gain)/loss	137	(849)
Foreign currency translation reserve transfer on disposal of foreign operations	2,050	-
Impairment of investments accounted for using the equity method	-	3,295
Transaction costs	-	23,918
Provision for doubtful debts	128	-
Change in operating assets and liabilities
(Increase)/decrease in receivables	57,818	(64,185)
(Increase)/decrease in prepaid expenses	(791)	853
(Increase)/decrease in other non-current assets - investments	176,710	160,618
(Increase)/decrease in other non-current assets	420	(49)
Increase/(decrease) in payables	(4,175)	(8)
Increase/(decrease) in current liabilities	2,965	1,327
Increase/(decrease) in other non-current liabilities	128,632	100,011
Increase/(decrease) in deferred tax liabilities	(6,766)	1,167
Net cash inflow/(outflow) from operating activities	398,874	267,803

Note 17

Related parties

Responsible Entity

DXFM is the Responsible Entity of the Trust.

Responsible Entity fees

Under the terms of the Trust's Constitution, the Responsible Entity is entitled to receive fees in relation to the management of the Trust. DXFM's parent entity, DXH, is entitled to be reimbursed for administration expenses incurred on behalf of the Trust. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH, is entitled to property management fees from the Trust.

Related party transactions

Responsible Entity fees in relation to the Trust assets are on a cost recovery basis.

A loan of \$338.4m from DEXUS Office Trust Australia was repaid during the year.

Related parties (continued)

There were a number of transactions and balances between the Trust and the Responsible Entity and its related entities, as detailed below:

DEXUS Funds Management Limited and its related entities

	2015	2014
	\$	\$
Responsible Entity fees paid and payable	13,483,677	12,960,239
Property management fees paid and payable to DXPS	12,286,117	11,066,146
Responsible Entity fees payable at the end of each reporting period (included above)	1,134,334	301,853
Property management fees payable at the end of each reporting period (included above)	4,474,715	1,443,769
Administration expenses payable at the end of each reporting period (included above)	88,035	-
Capex contribution payable at the end of each reporting period	59,764	-
Rent paid	1,025,976	-

Entities within DXS

Aggregate amounts included in the determination of profit that resulted from transactions with each class of other related parties:

	2015	2014
	\$	\$
Interest expense	131,579,910	115,986,659
Interest bearing loans advanced from entities within DXS	828,674,881	2,038,309,586
Interest bearing loans advanced to entities within DXS	976,120,381	850,205,456

Related parties (continued)

Directors

The following persons were Directors of DXFM at all times during the year and to the date of this report, unless otherwise stated:

C T Beare, BSc, BE (Hons), MBA, PhD, FAICD 1,2,3,5,6,7 E A Alexander, AM, BComm, FCA, FAICD, FCPA 1,3,8 P Bingham-Hall, BA, (Industrial Design), FAICD, SF (Fin) 1,7,9 J C Conde, AO, BSc, BE (Hons), MBA 1,2,6,7 T Dwyer, BJuris (Hons), LLB (Hons) 1,2,4,8,9 C D Mitchell, BComm, MBA (Exec), FCPA, HBS (AMP) W R Sheppard, BEc (Hons) 1,3,5,6,8,9 D J Steinberg, BEc, FRICS, FAPI P B St George, CA(SA), MBA 1,5,8,9

• 1 Independent Director
• 2 Board Nomination, Remuneration & Governance Committee Member until 31 August 2014.
• 3 Board Audit, Risk & Sustainability Committee Member until 31 August 2014.
• 4 Board Compliance Committee Member until 31 August 2014.
• 5 Board Finance Committee Member until 31 August 2014.
• 6 Board Nomination Committee Member from 1 September 2014.
• 7 Board People & Remuneration Committee Member from 1 September 2014.
• 8 Board Audit Committee Member from 1 September 2014.
• 9 Board Risk Committee Member from 1 September 2014.

Other key management personnel

In addition to the Directors listed above, the following persons were deemed by the Board People & Remuneration Committee to be key management personnel during all or part of the financial year:

Name	Title
Ross Du Vernet Kevin George	Executive General Manager, Strategy, Transactions & Research Executive General Manager, Office & Industrial

Key management personnel compensation

\$	\$
Compensation
Short-term employee benefits 7,453,029 7,428,170
Post employment benefits 219,677 189,291
Other long-term benefits - 47,700
Security-based payments 2,595,615 1,995,116
10,268,321 9,660,277

Related parties (continued)

Equity instrument disclosures relating to key management personnel

The relevant interests in DXS stapled securities held during the financial year by each key management personnel, including their personally related parties, are set out below:

		One-for-six
	Opening Balance	security		Performance		Closing Balance
	1 July 2014	consolidation	Purchases	rights granted	Other change	30 June 2015
Directors	3,993,960	(3,328,298)	8,334	394,191	-	1,068,187
Other key management personnel	1,324,458	(1,103,715)	-	127,653	-	348,396
Total	5,318,418	(4,432,013)	8,334	521,844	-	1,416,583

The DXFM Board has approved a grant of performance rights to DXS stapled securities to eligible participants (refer note 21 of the DEXUS Property Group Financial Report).

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2015 and 30 June 2014.

Note 18

Parent entity disclosures

The financial information for the parent entity has been prepared on the same basis as the consolidated Financial Statements except as set out below:

Distributions received from associates are recognised in the parent entity's Statement of Comprehensive Income, rather than being deducted from the carrying amount of these investments.

Interests held by the parent entity in controlled entities are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency.

(a) Summary financial information

The individual Financial Statements for the parent entity show the following aggregate amounts:

	2015	2014
	\$'000	\$'000
Total current assets	1,343,551	1,628,932
Total assets	6,171,004	5,941,809
Total current liabilities	127,490	187,617
Total liabilities	2,814,352	2,994,864
Equity
Contributed equity	2,442,563	2,212,662
Retained profits	914,089	734,283
Total equity	3,356,652	2,946,945
Net profit/(loss) for the year	320,622	197,984
Total comprehensive income/(loss) for the year	320,622	197,984

Parent entity disclosures (continued)

(b) Investments in controlled entities

The parent entity has the following investments:

		Ownership interest
		2015	2014
Name of entity	Principal activity	%	%
DOT Commercial Trust	Office property investment	100.0	100.0
DOT NZ Sub-Trust No 1	Office property investment	100.0	100.0
DOT NZ Sub-Trust No 2	Office property investment	100.0	100.0
DOT Subtrust No. 2	Office property investment	100.0	100.0

(c) Guarantees entered into by the parent entity

Refer to note 11 for details of guarantees entered into by the parent entity.

(d) Contingent liabilities

The parent entity had no contingent liabilities as at 30 June 2015 (2014: nil).

(e) Capital commitments

The following amounts represent capital expenditure of the parent entity on investment properties contracted at the end of the reporting period but not recognised as liabilities payable:

	2015	2014
	\$'000	\$'000
Investment properties	34,364	38,548
Total capital commitments	34,364	38,548

Note 19

Subsequent events

On 1 July, the Group and DWPF exchanged contracts to jointly acquire Waterfront Place at 1 Eagle Street and Eagle Street Pier at 45 Eagle Street Brisbane, QLD, for \$635.0 million excluding acquisition costs.

Since the end of the year, other than the matter disclosed above, the Directors are not aware of any matter or circumstance not otherwise dealt with in their Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or state of the Trust's affairs in future financial periods.

DEXUS Operations Trust

(ARSN 110 521 223)

Financial Report 30 June 2015

Contents Page

Directors' Report1
Auditor's Independence Declaration8
Consolidated Statement of Comprehensive Income9
Consolidated Statement of Financial Position 10
Consolidated Statement of Changes in Equity 11
Consolidated Statement of Cash Flows 12
About this Report 13
Notes to the Financial Statements 16
Directors' Declaration 54
Independent Auditor's Report 55

DEXUS Property Group (DXS) (ASX Code: DXS) consists of DEXUS Diversified Trust (DDF) (ARSN 089 324 541), DEXUS Industrial Trust (DIT), DEXUS Office Trust (DOT) and DEXUS Operations Trust (DXO), collectively known as DXS or the Group.

The registered office of the Group is Level 25, Australia Square, 264-278 George Street, Sydney, NSW 2000.

Under Australian Accounting Standards, DDF has been deemed the parent entity for accounting purposes. Therefore the DDF consolidated Financial Statements include all entities forming part of DXS. The DDF consolidated financial statements are presented in separate Financial Statements.

All ASX and media releases, Financial Statements and other information are available on our website: www.dexus.com

The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Operations Trust present their Directors' Report together with the consolidated Financial Statements for the year ended 30 June 2015. The consolidated Financial Statements represents DEXUS Operations Trust and its consolidated entities (DXO or the Trust).

The Trust together with DEXUS Diversified Trust (DDF), DEXUS Industrial Trust (DIT) and DEXUS Office Trust (DOT) form the DEXUS Property Group (DXS or the Group) stapled security.

1 Directors and Secretaries

1.1 Directors

The following persons were Directors of DXFM at all times during the year and to the date of this Directors' Report, unless otherwise stated:

Directors	Appointed
Christopher T Beare	4 August 2004
Elizabeth A Alexander, AM	1 January 2005
Penny Bingham-Hall	10 June 2014
John C Conde, AO	29 April 2009
Tonianne Dwyer	24 August 2011
Craig D Mitchell	12 February 2013
W Richard Sheppard	1 January 2012
Darren J Steinberg	1 March 2012
Peter B St George	29 April 2009

1.2 Company Secretaries

The names and details of the Company Secretaries of DXFM as at 30 June 2015 are as follows:

Brett D Cameron LLB/BA (Science & Technology), GAICD Appointed: 31 October 2014

Brett is the General Counsel and Company Secretary of DEXUS Property Group companies and is responsible for the legal function, company secretarial services and compliance, risk and governance systems and practices across the Group.

Prior to joining DEXUS, Brett was Head of Legal for Macquarie Real Estate (Asia) and has held senior legal positions at Macquarie Capital Funds in Hong Kong and Minter Ellison in Sydney and Hong Kong. Brett has 19 years' experience as in-house counsel and in private practice in Australia and in Asia, where he worked on real estate structuring and operations, funds management, mergers and acquisitions, private equity and corporate finance across a number of industries.

Brett graduated from The University of New South Wales and holds a Bachelor of Laws and a Bachelor of Arts (Science and Technology) and is a member of the Law Societies of New South Wales and Hong Kong. Brett is also a graduate of the Australian Institute of Company Directors.

Scott D Mahony B Bus (Acc) MBA (e-commerce) Grad Dip (Applied Corporate Governance) AGIA, RMIA Appointed: 1 April 2014

Scott is the General Manager, Compliance, Risk and Governance and is responsible for the development, implementation and oversight of DEXUS's compliance, property & corporate risk management and corporate governance programs.

Scott joined DEXUS in October 2005 after two years with Commonwealth Bank of Australia as a Senior Compliance Manager. Prior to this, Scott worked for over 11 years for Assure Services & Technology (part of AXA Asia Pacific) where he held various management roles.

Scott graduated from Charles Sturt University with a Bachelor of Business (Accountancy), a Graduate Diploma in Business Administration and an MBA. He has completed a Graduate Diploma in Applied Corporate Governance through the Governance Institute of Australia, and is a member of both the Risk Management Institution of Australasia and the Governance Institute of Australia.

2 Attendance of Directors at Board meetings and Board Committee meetings

The number of Directors' meetings held during the year and each Director's attendance at those meetings is set out in the table below. The Directors met 11 times during the year. Ten Board meetings were main meetings and one meeting was held to consider specific business.

	Main meetings held	Main meetings attended	Specific meetings held	Specific meetings attended
Christopher T Beare	10	10	1	1
Elizabeth A Alexander, AM	10	10	1	1
Penny Bingham-Hall	10	10	1	1
John C Conde, AO	10	10	1	1
Tonianne Dwyer	10	10	1	1
Craig D Mitchell	10	10	1	1
W Richard Sheppard	10	10	1	1
Darren J Steinberg	10	10	1	1
Peter B St George	10	10	1	1

Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting.

During 2014, the Group undertook a detailed review of its Board Committee structure which resulted in the implementation of a streamlined Board Committee structure from 1 September 2014.

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 September 2014 and 30 June 2015 and each Director's attendance at those meetings.

	Board Audit Board Risk Committee Committee		Board Nomination Committee		Board People & Remuneration Committee
	held	attended	held	attended	held	attended	held	attended
Christopher T Beare	-	-	-	-	3	3	4	4
Elizabeth A Alexander, AM	3	3	-	-	-	-	-	-
Penny Bingham-Hall	-	-	4	4	-	-	4	4
John C Conde, AO	-	-	-	-	3	3	4	4
Tonianne Dwyer	3	3	4	4	-	-	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	3	3	4	4	3	3	-	-
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	3	3	4	4	-	-	-	-

Craig D Mitchell and Darren J Steinberg were not members of any Board Committees during the year ended 30 June 2015.

Elizabeth A Alexander and Tonianne Dwyer were also Directors of DWPL (refer Note 23 Related parties) and attended Board Meetings during the year ended 30 June 2015.

2 Attendance of Directors at Board meetings and Board Committee meetings (continued)

The table below sets out the number of Board Committee meetings held during the year for the Committees in place between 1 July 2014 and 31 August 2014 and each Director's attendance at those meetings.

						Board Nomination,
	Board Audit, Risk & Sustainability Committee			Board Remuneration Compliance & Governance Board Finance Committee Committee				Committee
	held	attended	held	attended	held	attended	held	attended
Christopher T Beare	1	1	-	-	1	1	1	1
Elizabeth A Alexander, AM	1	1	-	-	-	-	-	-
Penny Bingham-Hall	-	-	-	-	-	-	-	-
John C Conde, AO	-	-	-	-	1	1	-	-
Tonianne Dwyer	-	-	1	1	1	1	-	-
Craig D Mitchell	-	-	-	-	-	-	-	-
W Richard Sheppard	1	1	-	-	-	-	1	1
Darren J Steinberg	-	-	-	-	-	-	-	-
Peter B St George	-	-	-	-	-	-	1	1

3 Directors' relevant interests

The relevant interests of each Director in DXS stapled securities as at the date of this Directors' Report are shown below:

Directors	No. of securities
Christopher T Beare	16,667
Elizabeth A Alexander, AM	16,667
Penny Bingham-Hall	8,334
John C Conde, AO	16,667
Tonianne Dwyer	16,667
Craig D Mitchell	300,8321
W Richard Sheppard	70,090
Darren J Steinberg	604,9261
Peter B St George	17,334

1 Includes interests held directly and through performance rights (refer note 22).

Directors' directorships in other listed entities

The following table sets out directorships of other ASX listed entities (unless otherwise stated), not including DXFM, held by the Directors at any time in the three years immediately prior to the end of the year, and the period for which each directorship was held:

Director	Company	Date appointed	Date resigned
Christopher T Beare	Mnemon Group Limited	6 November 2009	27 May 2013
	Flexigroup Limited	1 July 2014
Elizabeth A Alexander, AM	Medibank Private Limited2	31 October 2008
Penny Bingham-Hall	Bluescope Steel Limited	29 March 2011
John C Conde, AO	Whitehaven Coal Limited	3 May 2007
	Cooper Energy Limited	25 February 2013
Tonianne Dwyer	Cardno Limited	25 June 2012
	Metcash Limited	24 June 2014
W Richard Sheppard	Echo Entertainment Group	21 November 2012
Peter B St George	Boart Longyear Limited	21 February 2007	21 May 2013
	First Quantum Minerals Limited1	20 October 2003

1 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom.

2 Listed for trading on the Australian Securities Exchange since 24 November 2014.

4 Principal activities

During the year the principal activity of the Trust was to own, manage and develop high quality real estate assets and manage real estate funds on behalf of third party investors. There were no significant changes in the nature of the Trust's activities during the year.

5 Review of results and operations

The results for the year ended 30 June 2015 were:

• profit attributable to unitholders was \$68.9 million (2014: \$31.9 million);
• total assets were \$1,058.4 million (2014: \$990.1 million); and
• net assets were \$278.9million (2014: \$192.9 million).

A review of the results, financial position and operations of the Group, of which the Trust forms part thereof, is set out in the Operating and Financial Review of the DEXUS Property Group Financial Report and forms part of this Directors' Report.

6 Likely developments and expected results of operations

In the opinion of the Directors, disclosure of any further information regarding business strategies and future developments or results of the Trust, other than the information already outlined in this Directors' Report or the Financial Statements accompanying this Directors' Report would be unreasonably prejudicial to the Trust.

7 Significant changes in the state of affairs

The Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust's affairs in future financial years.

8 Matters subsequent to the end of the financial year

Since the end of the financial year the Directors are not aware of any matter or circumstance not otherwise dealt with in this Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or the state of the Trust's affairs in future financial years.

9 Distributions

Distributions paid or payable by the Trust for the year ended 30 June 2015 are outlined in note 8 of the Notes to the Financial Statements and form part of this Director's report.

10 DXFM fees

Details of fees paid or payable by the Trust to DXFM for the year ended 30 June 2015 are outlined in note 23 of the Notes to the Financial Statements and form part of this Directors' Report.

11 Units on Issue

The movement in units on issue in the Trust during the year and the number of units on issue as at 30 June 2015 are detailed in note 14 of the Notes to the Financial Statements and form part of this Directors' Report.

Details of the number of interests in the Trust held by DXFM or its associates as at the end of the financial year are outlined in note 23 of the Notes to the Financial Statements and form part of this Directors' Report.

The Trust did not have any options on issue as at 30 June 2015 (2014: nil).

12 Environmental regulation

DXS senior management, through its Board Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any material breaches of these requirements.

13 Indemnification and insurance

The insurance premium for a policy of insurance indemnifying Directors, officers and others (as defined in the relevant policy of insurance) is paid by DEXUS Holdings Pty Limited (DXH).

PricewaterhouseCoopers (PwC or the Auditor), is indemnified out of the assets of the Trust pursuant to the DEXUS Specific Terms of Business agreed for all engagements with PwC, to the extent that the Trust inappropriately uses or discloses a report prepared by PwC. The Auditor, PwC, is not indemnified for the provision of services where such an indemnification is prohibited by the Corporations Act 2001.

14 Audit

14.1 Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.

14.2 Non-audit services

The Trust may decide to employ the Auditor on assignments, in addition to their statutory audit duties, where the Auditor's expertise and experience with the Group and/or DXS are important.

Details of the amounts paid or payable to the Auditor for audit and non-audit services provided during the year are set out in note 20 of the Notes to the Financial Statements.

The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor's behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001.

The reasons for the Directors being satisfied are:

• a Charter of Audit Independence provides guidelines under which the Auditor may be engaged to provide nonaudit services without impairing the Auditor's objectivity or independence.
• the Charter states that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including:
• the preparation of tax provisions, accounting records and financial statements;
• the design, implementation and operation of information technology systems;
• the design and implementation of internal accounting and risk management controls;
• conducting valuation, actuarial or legal services;
• consultancy services that include direct involvement in management decision making functions;
• investment banking, borrowing, dealing or advisory services;
• acting as trustee, executor or administrator of trust or estate;
• prospectus independent expert reports and being a member of the due diligence committee; and
• providing internal audit services.
• the Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of non-audit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of \$100,000.

The above Directors' statements are in accordance with the advice received from the Board Audit Committee.

14.3 Auditor's Independence Declaration

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 8 and forms part of this Directors' Report.

15 Corporate governance

DXFM's Corporate Governance Statement is set out in a separate section of the DEXUS Property Group Annual Report.

16 Rounding of amounts and currency

The Trust is a registered scheme of the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the rounding off of amounts in this Directors' Report and the Financial Statements. Amounts in this Directors' Report and the Financial Statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise indicated. All figures in this Directors' Report and the Financial Statements, except where otherwise stated, are expressed in Australian dollars.

DEXUS Operations Trust Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

		2015	2014
	Note	\$'000	\$'000
Revenue from ordinary activities
Property revenue	3	55,979	47,923
Proceeds from sale of inventory		220,125	69,326
Distribution revenue		480	305
Interest revenue		118	46
Management fee revenue	2	126,226	91,836
Total revenue from ordinary activities		402,928	209,436
Net fair value gain of investment properties	9(a)	10,807	11,201
Net gain on sale of investment properties		-	775
Reversal of previous impairment of management rights	18	-	7,309
Net foreign exchange gain		316	-
Other income		-	4
Total income		414,051	228,725
Expenses
Property expenses	3	(15,236)	(9,575)
Cost of sale of inventory	10	(172,156)	(65,307)
Finance costs	5	(30,065)	(30,117)
Impairment of goodwill	18	(99)	(99)
Net loss on sale of investment properties		(727)	-
Management operations, corporate and administration expenses	4	(98,299)	(79,835)
Total expenses		(316,582)	(184,933)
Profit/(loss) before tax		97,469	43,792
Income tax expense	6(a)	(28,575)	(11,908)
Profit/(loss) for the year		68,894	31,884
Other comprehensive income/(loss):
Fair value gain of available-for-sale financial assets	15	341	321
Total comprehensive income/(loss) for the year		69,235	32,205
		Cents	Cents 1
Earnings per unit on profit/(loss) attributable to unitholders of the parent entity
Basic earnings per unit	7	1.15	2.58
Diluted earnings per unit	7	1.15	2.58

1 Restated to reflect the one-for-six security consolidation

		2015	2014
	Note	\$'000	\$'000
Current assets
Cash and cash equivalents	16(a)	1,389	1,269
Receivables	16(b)	38,037	40,633
Non-current assets classified as held for sale	11	-	9,500
Inventories	10	118,495	80,346
Other		3,209	2,268
Total current assets		161,130	134,016
Non-current assets
Investment properties	9	407,731	275,397
Plant and equipment	17	20,494	10,797
Inventories	10	156,297	235,931
Deferred tax assets	6(c)	10,800	35,836
Intangible assets	18	292,157	292,586
Available-for-sale financial assets	19	8,994	5,470
Other		832	90
Total non-current assets		897,305	856,107
Total assets		1,058,435	990,123
Current liabilities
Payables	16(c)	28,342	16,610
Loans with related parties	12(b)	48,932	48,932
Provisions	16(d)	27,269	39,411
Derivative financial instruments	12(c)	148	166
Total current liabilities		104,691	105,119
Non-current liabilities
Loans with related parties	12(b)	650,201	668,052
Derivative financial instruments	12(c)	-	297
Deferred tax liabilities	6(d)	15,066	11,527
Provisions	16(d)	6,450	9,543
Other		3,147	2,672
Total non-current liabilities		674,864	692,091
Total liabilities		779,555	797,210
Net assets		278,880	192,913
Equity
Contributed equity	14	238,829	222,086
Reserves	15	43,394	43,064
Retained profits/(accumulated losses)	15	(3,343)	(72,237)
Total equity		278,880	192,913

DEXUS Operations Trust Consolidated Statement of Changes in Equity For the year ended 30 June 2015

		Contributed equity	Asset revaluation reserve	Treasury securities reserve	Security-based payments reserve	Available-for sale financial assets	Retained profits/ (losses)	Total equity
	Note	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Opening balance as at 1 July 2013		197,775	42,738	(56)	37	13	(89,121)	151,386
Profit/(loss) for the year		-	-	-	-	-	31,884	31,884
Other comprehensive income/(loss) for the year		-	-	-	-	321	-	321
Transactions with owners in their capacity as unitholders:
Issue of additional equity, net of transaction costs	14	26,532	-	-	-	-	-	26,532
Buy-back of contributed equity, net of transaction costs	14	(2,221)	-	-	-	-	-	(2,221)
Purchase of securities, net of transaction costs	15	-	-	(109)	-	-	-	(109)
Security-based payments expense	15	-	-	-	120	-	-	120
Distributions paid or provided for	8	-	-	-	-	-	(15,000)	(15,000)
Closing balance as at 30 June 2014		222,086	42,738	(165)	157	334	(72,237)	192,913
Opening balance as at 1 July 2014		222,086	42,738	(165)	157	334	(72,237)	192,913
Profit/(loss) for the year		-	-	-	-	-	68,894	68,894
Other comprehensive income/(loss) for the year		-	-	-	-	341	-	341
Transactions with owners in their capacity as unitholders:
Issue of additional equity, net of transaction costs	14	16,743	-	-	-	-	-	16,743
Purchase of securities, net of transaction costs	15	-	-	(184)	-	-	-	(184)
Security-based payments expense	15	-	-	-	173	-	-	173
Closing balance as at 30 June 2015		238,829	42,738	(349)	330	675	(3,343)	278,880

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

		2015	2014
	Note	\$'000	\$'000
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		184,356	137,333
Payments in the course of operations (inclusive of GST)		(105,624)	(101,105)
Interest received		118	46
Finance costs paid to financial institutions		(503)	(2,355)
Income and withholding taxes paid		-	(18)
Proceeds from sale of property classified as inventory		221,852	69,326
Payments for property classified as inventory		(83,722)	(124,094)
Net cash inflow/(outflow) from operating activities	21	216,477	(20,867)
Cash flows from investing activities
Proceeds from sale of investment properties		15,624	5,147
Payments for capital expenditure on investment properties		(6,285)	(18,640)
Payments for acquisition of investment properties		-	(77,173)
Payments for acquisition of subsidiaries		(160,001)	-
Payments for management rights		-	(42,000)
Payments for plant and equipment		(12,175)	(4,000)
Net cash inflow/(outflow) from investing activities		(162,837)	(136,666)
Cash flows from financing activities
Borrowings provided to related parties		(843,697)	(358,566)
Borrowings received from related parties		792,041	491,148
Payments for buy-back of contributed equity		-	(2,221)
Proceeds from issue of additional equity		16,743	26,532
Purchase of securities for security-based payments plans		(3,985)	(3,059)
Distributions received		378	220
Distributions paid to security holders		(15,000)	-
Net cash inflow/(outflow) from financing activities		(53,520)	154,054
Net increase/(decrease) in cash and cash equivalents		120	(3,479)
Cash and cash equivalents at the beginning of the year		1,269	4,748
Cash and cash equivalents at the end of the year		1,389	1,269

About this Report

In this section

This section sets out the basis upon which the Trust's Financial Statements are prepared.

Specific accounting policies are described in their respective notes to the Financial Statements. This section also shows information on new or amended accounting standards and their impact on the financial position and performance of the Trust.

(a) Basis of preparation

DEXUS Property Group stapled securities are quoted on the Australian Securities Exchange under the "DXS" code and comprise one unit in each of DDF, DIT, DOT and DXO. Each entity forming part of DXS continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with reporting and disclosure requirements under the Corporations Act 2001 and Australian Accounting Standards.

DEXUS Funds Management Limited (DXFM) as Responsible Entity for DDF, DIT, DOT and DXO may only unstaple the Group if approval is obtained by a special resolution of the stapled security holders.

These general purpose Financial Statements have been prepared in accordance with the requirements of the Trust's Constitutions, the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements and interpretations of the Australia Accounting Standards Board. Compliance with Australian Accounting Standards ensures that the Financial Statements and notes also comply with International Financial Reporting Standards (IFRS). The Trust is a for-profit entity for the purpose of preparing Financial Statements.

Amounts in these Financial Statements have been presented in Australian dollars and rounded off in accordance with ASIC Class Order 98/100 to the nearest thousand dollars, unless otherwise indicated.

These Financial Statements are prepared on a going concern basis, using historical cost conventions except for investment properties, security-based payments, derivative financial instruments and other financial liabilities which are stated at their fair value. Refer to the specific accounting policies within the notes to the Financial Statements for the basis of valuation of assets and liabilities measured at fair value.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

Critical accounting estimates

In the process of applying the Trust's accounting policies, management have made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are discussed in the following notes:

Note 9	Investment properties	Page 22
Note 10	Inventories	Page 25
Note 12(c)	Derivative financial instruments	Page 35
Note 18	Intangible assets	Page 44
Note 22	Security-based payments	Page 47

(b) Principles of consolidation

These consolidated Financial Statements incorporate the assets, liabilities and results of all subsidiaries as at 30 June 2015.

(i) Controlled entities

Subsidiaries are all entities over which the Trust has control. The Trust controls an entity when the Trust is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Trust. They are deconsolidated from the date that control ceases.

(ii) Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement.

Joint operations

Where assets are held directly as tenants in common, the Trust's proportionate share of revenues, expenses, assets and liabilities are included in their respective items of the Statement of Financial Position and Statement of Comprehensive Income.

Joint ventures

Investments in joint ventures are accounted for using the equity method. Under this method, the Trust's share of the joint ventures' post-acquisition profits or losses is recognised in the Statement of Comprehensive Income and distributions received from joint ventures are recognised as a reduction of the carrying amount of the investment.

(iii) Employee share trust

DXO has formed a trust to administer the DXO's securities-based employee benefits. The employee share trust is consolidated as the substance of the relationship is that the trust is controlled by the DXO.

(c) Foreign currency

Items included in the Financial Statements of the Trust are measured using the currency of the primary economic environment in which the entity operates. The Financial Statements are presented in Australian dollars.

(d) Goods and services tax

Revenues, expenses and capital assets are recognised net of any amount of Australian Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST component of cash flows arising from investing and financing activities that is recoverable from or payable to the Australian Taxation Office is classified as cash flows from operating activities.

(e) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2015 reporting period. The Trust's assessment of the impact of these new standards and interpretations is set out below:

AASB 9 Financial Instruments (effective 1 July 2018).

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It also sets out new rules for hedge accounting and impairment of financial assets. The Trust intends to apply the standard from 1 July 2018. Application of this standard will not affect any of the amounts recognised in the Financial Statements but will require the disclosure of additional information.

AASB 15 Revenue from Contracts with Customers (effective 1 July 2018).

AASB 15 Revenue from Contracts with Customers clarifies the principles for recognising revenue from contracts with customers. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The Trust intends to apply the standard from 1 July 2018 and does not expect any significant impacts.

(f) Notes to the Financial Statements

The notes include information which is required to understand the Financial Statements and is material and relevant to the operations, financial position and performance of the Trust. Information is considered material and relevant if, for example:

– the amount in question is significant because of its size or nature;

• it is important in understanding the results of the Trust;
• it helps to explain the impact of significant changes in the Trust's business;
• it relates to an aspect of the Trust's operations that is important to its future performance.

The notes to the Financial Statements have been re-ordered and re-written in order to provide more meaningful information to the readers of the Financial Statements. The notes are organised into the following sections:

Trust performance	Property portfolio assets	Capital and financial risk management and working capital	Other disclosures
1. Operating segments	9. Investment properties	12. Capital and financial risk management	17. Plant and equipment
2. Management fee revenue	10. Inventories	13. Commitments and contingencies	18. Intangible assets
3. Property revenue and expenses	11. Non-current assets classified as held for sale	14. Contributed equity	19. Available-for-sale financial assets
4. Management operations, corporate and administration expenses		15. Reserves and accumulated losses	20. Audit, taxation and transaction services fees
5. Finance costs		16. Working capital	21. Reconciliation of net profit to net cash flows from operating activities
6. Taxation			22. Security-based payments
7. Earnings per unit			23. Related parties
8. Distributions paid and payable			24. Parent entity disclosures
			25. Subsequent events

Trust performance

In this section

This section explains the results and performance of the Trust.

It provides additional information about those individual line items in the Financial Statements that the Directors consider most relevant in the context of the operations of the Trust, including: operating segments, management fee revenue, property revenue and expenses, management operations, corporate and administration expenses, finance costs, taxation, earnings per unit and distributions paid and payable.

Note 1

Operating segments

(a) Description of segments

The Chief Operating Decision Maker (CODM) has been identified as the Board of Directors as they are responsible for the strategic decision making within the Group. DXS management has identified the Group's operating segments based on the sectors analysed within the management reports reviewed by the CODM in order to monitor performance across the Group and to appropriately allocate resources. Refer to the table below for a brief description of the Group's operating segments.

Segment	Description
Office	Office space with any associated retail space; as well as car parks and office developments in Australia and New Zealand.
Industrial	Domestic industrial properties, industrial estates and industrial developments.
Property management	Property management services for third party clients and owned assets.
Funds management	Funds management of third party client assets.
Development and trading	Revenue earned and costs incurred by the Trust on developments and inventory.
All other segments	Corporate expenses associated with maintaining and operating the Trust. This segment also includes the centralised treasury function.

Consistent with how the CODM manages the business, the operating segments within DXS are reviewed on a consolidated basis and are not monitored at an individual trust level. The results of the individual trusts are not limited to any one of the segments described above.

Disclosures concerning DXS's operating segments as well as the operating segments' key financial information provided to the CODM, are presented in the DEXUS Property Group Financial Report.

Management fee revenue

Management fees are brought to account on an accruals basis.

	2015	2014
	\$'000	\$'000
Investment management & responsible entity fees	65,944	53,705
Rent and lease renewal fees	9,918	3,534
Property management fees	30,896	24,982
Capital works and development fees	8,333	1,736
Wages recovery and other fees	11,135	7,879
Total management fee revenue	126,226	91,836

Note 3

Property revenue and expenses

Rental revenue is recognised on a straight-line basis over the lease term for leases with fixed rent review clauses.

Prospective tenants may be offered incentives as an inducement to enter into operating leases. These incentives may take various forms including cash payments, rent free periods, or a contribution to certain lessee costs such as fit-out costs or relocation costs. The costs of incentives are recognised as a reduction of rental revenue on a straight-line basis from the lease commencement date to the end of the lease term. The carrying amount of the lease incentives is reflected in the fair value of investment properties.

Property expenses include rates, taxes and other property outgoings incurred in relation to investment properties.

Note 4

Management operations, corporate and administration expenses

	2015	2014
	\$'000	\$'000
Audit, taxation, legal and other professional fees	4,637	3,972
Depreciation and amortisation	2,808	2,315
Employee benefits expense and other staff expenses	83,517	66,769
Administration and other expenses	7,337	6,779
Management operations, corporate and administration expenses	98,299	79,835

Note 5

Finance costs

Borrowing costs include interest, amortisation or ancillary costs incurred in connection with arrangement of borrowings, and net fair value movements of interest rate swaps. Borrowing costs are expensed as incurred unless they relate to qualifying assets.

Qualifying assets include investment properties and inventories which take more than 12 months to develop for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset during the period of time that is required to complete and develop the asset for its intended use or sale. To the extent that funds are borrowed generally to fund development, the amount of borrowing costs to be capitalised to qualifying assets must be determined by using a weighted average capitalisation rate.

Finance costs (continued)

	2015	2014
	\$'000	\$'000
Interest paid to related parties	32,842	35,864
Net fair value loss of interest rate swaps	129	343
Amount capitalised	(2,966)	(6,125)
Other finance costs	60	35
Total finance costs	30,065	30,117

The average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 7.00% (2014: 7.00%).

Note 6

Taxation

DXO is liable for income tax and has formed a tax consolidated group with its wholly owned and controlled Australian entities. As a consequence, these entities are taxed as a single entity.

Income tax expense is comprised of current and deferred tax expense. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly in equity, respectively.

Current tax expense represents the expense relating to the expected taxable income at the applicable rate of the financial year.

Deferred tax expense represents the tax expense in respect of the future tax consequences of recovering or settling the carrying amount of an asset or liability. Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets are recognised for all deductible temporary differences, and unused tax losses, to the extent it is probable that future taxable profit will be available to utilise them.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The carrying amount of deferred income tax assets is reviewed at balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to utilise them.

(a) Income tax (expense)/benefit

	2015	2014
	\$'000	\$'000
Current income tax (expense)/benefit	-	(18)
Deferred income tax (expense)/benefit	(28,575)	(11,890)
Total income tax (expense)/benefit	(28,575)	(11,908)
Total income tax (expense)/benefit attributable to:
Profit/(loss) from continuing operations	(28,575)	(11,908)
Total income tax (expense)/benefit	(28,575)	(11,908)
Deferred income tax expense included in income tax (expense)/benefit comprises:
(Decrease)/increase in deferred tax assets	(25,036)	(3,578)
(Increase)/decrease in deferred tax liabilities	(3,539)	(8,312)
Total deferred tax expense	(28,575)	(11,890)

Taxation (continued)

(b) Reconciliation of income tax (expense)/benefit to net profit

	2015	2014
	\$'000	\$'000
Profit/(loss) before income tax	97,469	43,792
Prima facie tax (expense)/benefit at the Australian tax rate of 30% (2014: 30%)	(29,241)	(13,138)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Depreciation and amortisation	2,088	1,739
Reversal of previous impairment	-	2,192
Movements in the carrying value and tax cost base of properties	4,863	1,180
Accounting loss on sale of assets	(7,153)	(1,421)
Other timing differences	868	(2,460)
	666	1,230
Income tax (expense)/benefit	(28,575)	(11,908)

(c) Deferred tax assets

	2015	2014
	\$'000	\$'000
The balance comprises temporary differences attributable to:
Derivative financial instruments	37	104
Tax losses	951	25,199
Employee provisions	8,318	9,589
Other	1,494	944
Total non-current assets - deferred tax assets	10,800	35,836
Movements:
Opening balance at the beginning of the year	35,836	39,414
(Utilisation)/recognition of tax losses	(24,226)	(2,296)
Movement in deferred tax asset arising from temporary differences	(810)	(1,282)
(Charged)/credited to the Statement of Comprehensive Income	(25,036)	(3,578)
Closing balance at the end of the year	10,800	35,836

The tax losses are expected to be fully utilised by 30 June 2016.

Taxation (continued)

(d) Deferred tax liabilities

	2015	2014
	\$'000	\$'000
The balance comprises temporary differences attributable to:
Intangible assets	1,909	2,008
Investment properties	12,729	-
Inventories	-	9,169
Other	428	350
Total non-current liabilities - deferred tax liabilities	15,066	11,527
Movements
Opening balance at the beginning of the year	11,527	3,215
Charged/(credited) to the Statement of Comprehensive Income	3,539	8,312
Closing balance at the end of the year	15,066	11,527

Note 7

Earnings per unit

Earnings per unit are determined by dividing the net profit attributable to unitholders by the weighted average number of ordinary units outstanding during the year. Diluted earnings per unit are adjusted from the basic earnings per unit by taking into account the impact of dilutive potential units.

The weighted average number of units has been adjusted to reflect the one-for-six security consolidation.

(a) Net profit used in calculating basic and diluted earnings per unit

	2015	2014
	\$'000	\$'000
Profit attributable to unitholders of the parent entity	10,484	21,145
(b) Weighted average number of units used as a denominator	2015	2014
	No. of units	No. of units1
Weighted average number of units outstanding used in calculation of basic
and diluted earnings per unit	915,462,824	820,257,691

1 Restated to reflect the one-for-six security consolidation.

Distributions paid and payable

Distributions are recognised when declared.

(a) Distribution to unitholders

	2015	2014
	\$'000	\$'000
30 June	-	15,000
Total distribution to unitholders	-	15,000

(b) Distribution rate

	2015	2014
	Cents per	Cents per
	unit	unit1
30 June	-	1.66
Total distributions	-	1.66
1 Restated to reflect the one-for-six security consolidation.
(c) Franked dividends
	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	9,752	16,181
Franking credits utilised for payment of distribution	-	(6,429)

Closing balance at the end of the year 9,752 9,752

Property portfolio assets

In this section

The following table summarises the property portfolio assets detailed in this section:

30 June 2015	Note	Office	Industrial	Development	Total
		\$'000	\$'000	\$'000	\$'000
Investment properties	9	83,799	292,809	31,123	407,731
Inventories	10	42,886	231,906	-	274,792
Assets held for sale	11	-	-	-	-
Total		126,685	524,715	31,123	682,523

These assets are used to generate the Trust's performance and are considered to be the most relevant to the operations of the Trust. The assets are detailed in the following notes:

• Investment properties: relates to investment properties, both stabilised and under development.

• Inventories: relates to the Trust's ownership of industrial and office assets or land held for repositioning, development and sale;

• Non-current assets classified as held for sale: relates to Office and Industrial investment properties which are expected to be sold within 12 months of the balance sheet date and are currently being marketed for sale.

The list of property portfolio assets is detailed in the Property Synopsis, available at www.dexus.com/investor-centre/dxs/announcements/asx.

Note 9

Investment properties

The Trust's investment properties consist of properties held for long-term rental yields and/or capital appreciation and property that is being constructed or developed for future use as investment property. Investment properties are initially recognised at cost including transaction costs. Investment properties are subsequently recognised at fair value in the Financial Statements.

The basis of valuations of investment properties is fair value, being the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date.

Changes in fair values are recorded in the Statement of Comprehensive Income. The gain or loss on disposal of an investment property 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 the Statement of Comprehensive Income in the year of disposal.

Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property where they result in an enhancement in the future economic benefits of the property.

Leasing fees incurred and incentives provided are capitalised and amortised over the lease periods to which they relate.

Investment properties (continued)

(a) Reconciliation

`	Office	Industrial	Development	2015	2014
	\$'000	\$'000	\$'000	\$'000	\$'000
Opening balance at the beginning of the year	78,500	168,087	28,810	275,397	176,279
Additions	1,933	113	10,740	12,786	22,613
Acquisitions	-	114,428	-	114,428	77,173
Lease incentives	302	2,673	-	2,975	1,793
Amortisation of lease incentives	(21)	(1,392)	-	(1,413)	(1,110)
Rent straightlining	42	1,181	-	1,223	1,320
Disposals	-	-	(6,851)	(6,851)	(4,372)
Transfer to inventory	-	-	(1,621)	(1,621)	-
Transfers to non-current assets classified as held for sale	-	-	-	-	(9,500)
Net fair value gain/(loss) of investment properties	3,043	7,719	45	10,807	11,201
Closing balance at the end of the year	83,799	292,809	31,123	407,731	275,397

Acquisitions

On 16 January 2015, settlement occurred on the acquisition of Lakes Business Park, 2-13 Lord Street, Botany, for \$153.5 million excluding acquisition costs. This comprises \$109.8 million (\$114.4 million including acquisition costs) classified as investment property and \$43.7million (\$45.6 million including acquisition costs) classified as inventory classified as inventory. Refer note 10.

Disposals

During the year, three land parcels of Quarry Greystanes, NSW, were disposed of for gross proceeds of \$6.3 million (carrying value of \$6.9 million).

(b) Valuation process

Independent valuations are carried out for each individual property at least once every three years by a member of the Australian Property Institute of Valuers. Each valuation firm and its signatory valuer are appointed on the basis that they are engaged for no more than three consecutive valuations. Independent valuations may be undertaken earlier where the Responsible Entity believes there is potential for a material change in the fair value of the property being the greatest of 5% of the asset value, or \$5 million.

The Trust's investment properties are required to be internally valued at least every six months unless they have been independently valued during the current reporting period. Internal valuations are compared to the carrying value of investment properties at the reporting date. Where the Directors determine the internal valuations present a more reliable estimate of fair value the internal valuation is adopted as book value. Internal valuations are performed by the Trust's internal valuers who hold recognised relevant professional qualifications and have previous experience as property valuers from major real estate valuation firms.

An appropriate valuation methodology is utilised according to asset class. In relation to Office and Industrial assets this includes the capitalisation approach (market approach) and the discounted cash flow approach (income approach). The valuation is also compared to, and supported by, direct comparison to recent market transactions. The adopted capitalisation rates and discount rates are determined based on industry expertise and knowledge and, where possible, a direct comparison to third party rates for similar assets in a comparable location. Rental revenue from current leases and assumptions about future leases, as well as any expected operational cash outflows in relation to the property, are also built into each asset assessment of fair value.

Investment properties (continued)

In relation to development properties under construction for future use as investment property, where reliably measurable, fair value is determined based on the market value of the property on the assumption it had already been completed at the valuation date (using the methodology as outlined above) less costs still required to complete the project, including an appropriate adjustment for industry benchmarked profit and development risk.

(c) Fair value measurement, valuation techniques and inputs

The following table represents the level of the fair value hierarchy and the associated unobservable inputs utilised in the fair value measurement for each class of investment property.

		Fair value			Range of
Class of	Fair value	2015	2014		unobservable inputs
property	hierarchy	\$'000		\$'000 Inputs used to measure fair value	2015	2014
Office	Level 3	83,799	78,500	Adopted capitalisation rate	8.25%	8.25%
				Adopted discount rate	9.50%	9.50%
				Adopted terminal yield	8.50%	8.50%
				Current net market rental (per sqm)	\$405	\$407
				10 year average market rental growth	3.02%	3.60%
Industrial	Level 3	292,809	168,087	Adopted capitalisation rate	6.75% - 7.75%	7.13% - 8.25%
				Adopted discount rate	8.25% - 8.75%	9.00% - 9.50 %
				Adopted terminal yield	7.00% - 8.00%	7.63% - 8.25%
				Current net market rental (per sqm)	\$71 - \$272	\$75 - \$199
				10 year average market rental growth	2.96% - 3.10%	3.20% - 3.26%
Development	Level 3	31,123	28,810	Adopted capitalisation rate	6.50% - 6.50%	7.13%
				Land rate (per sqm)	\$35 - \$350	\$50 - \$250
Total		407,731	275,397

Key estimates: inputs used to measure fair value of investment properties

Judgement is required in determining the following key assumptions:

• Adopted capitalisation rate: The rate at which net market rental revenue is capitalised to determine the value of a property. The rate is determined with regards to market evidence and the prior external valuation.
• Adopted discount rate: The rate of return used to convert cash flows, payable or receivable in the future, into present value. It reflects the opportunity cost of capital, that is, the rate of return the cash can earn if put to other uses having similar risk. The rate is determined with regards to market evidence and the prior external valuation.
• Adopted terminal yield: The capitalisation rate used to convert the future net market rental revenue into an indication of the anticipated value of the property at the end of the holding period when carrying out a discounted cash flow calculation. The rate is determined with regards to market evidence and the prior external valuation.
• Net market rental (per sqm): The net market rent is the estimated amount for which a property should lease between a lessor and a lessee on appropriate lease terms in an arm's length transaction.
• 10 year average market rental growth: The expected annual rate of change in market rent over a 10 year forecast period in alignment with expected market movements. The rate is determined with reference to forecast market movements.
• Land rate (per sqm): The land rate is the market land value per sqm.

Investment properties (continued)

(d) Sensitivity information

Significant movement in any one of the inputs listed in the table above may result in a change in the fair value of the Trust's investment properties as shown below:

Significant inputs	Fair value measurement sensitivity to significant increase in input	Fair value measurement sensitivity to significant decrease in input
Adopted capitalisation rate Adopted discount rate Adopted terminal yield	Decrease	Increase
Net market rental (per sqm) 10 year average market rental growth Land rate (per sqm)	Increase	Decrease

Generally, a change in the assumption made for the adopted capitalisation rate is often accompanied by a directionally similar change in the adopted terminal yield. The adopted capitalisation rate forms part of the capitalisation approach whilst the adopted terminal yield forms part of the discounted cash flow approach.

Under the capitalisation approach, the net market rental has a strong interrelationship with the adopted capitalisation rate as the fair value of the investment property is derived by capitalising, in perpetuity, the total net market rent receivable. An increase (softening) in the adopted capitalisation rate may offset the impact to fair value of an increase in the total net market rent. A decrease (tightening) in the adopted capitalisation rate may also offset the impact to fair value of a decrease in the total net market rent. A directionally opposite change in the total net market rent and the adopted capitalisation rate may increase the impact to fair value.

The discounted cash flow is primarily made up of the discounted cash flow of net income over the cashflow period and the discounted terminal value (which is largely based upon market rents grown at forecast market rental growth rates capitalised at an adopted terminal yield). An increase (softening) in the adopted discount rate may offset the impact to fair value of a decrease (tightening) in the adopted terminal yield. A decrease (tightening) in the discount rate may offset the impact to fair value of an increase (softening) in the adopted terminal yield. A directionally similar change in the adopted discount rate and the adopted terminal yield may increase the impact to fair value.

A decrease (softening) in the forecast rental growth rate may result in a negative impact on the discounted cash flow approach value whilst a strengthening may have a positive impact on the value under the same approach.

Note 10

Inventories

Land and properties held for repositioning, development and sale are recorded at the lower of cost and net realisable value. Cost is assigned by specific identification and includes the cost of acquisition, and development and holding costs such as borrowing costs, rates and taxes. Holding costs incurred after completion of development are expensed.

Key estimate: net realisable value (NRV) of inventories

NRV is determined using the estimated selling price in the ordinary course of business less estimated costs to bring inventories to their finished condition, including marketing and selling expenses. NRV is based on the most reliable evidence available at the time and the amount the inventories are expected to be realised. These key assumptions are reviewed annually or more frequently if indicators of impairment exist. Key estimates have been reviewed and no impairment provisions have been recognised.

Inventories (continued)

(a) Land and properties held for resale

	2015	2014
	\$'000	\$'000
Current assets
Land and properties held for resale	118,495	80,346
Total current assets - inventories	118,495	80,346
Non-current assets
Land and properties held for resale	156,297	235,931
Total non-current assets - inventories	156,297	235,931
Total assets - inventories	274,792	316,277
(b) Reconciliation

Opening balance at the beginning of the year	316,277	252,910
Transfer from investment property	1,621	-
Disposals	(172,156)	(65,307)
Acquisitions and additions	129,050	128,674
Closing balance at the end of the year	274,792	316,277

Acquisitions

• On 16 January 2015, settlement occurred on the acquisition of Lakes Business Park, 2-13 Lord Street, Botany, for \$153.5 million excluding acquisition costs. This comprises \$109.8 million (\$114.4 million including acquisition costs) classified as investment property and \$43.7 million (\$45.6 million including acquisition costs) classified as inventory. Refer note 9.
• On 30 November 2014, HWT Car Park, 32-44 Flinders Street, Melbourne, was acquired from DDF for \$30.4 million excluding acquisition costs.

Disposals

• On 1 July 2014, 30 Distribution Drive, Laverton, VIC was disposed of for gross proceeds of \$19.0 million. 50% of this property was classified as investment property at 30 June 2014 (carrying value of \$8.5 million in inventory). Refer note 9.
• On 13 August 2014, the Trust exchanged contracts for the sale of 5-13 Rosebery Avenue and 25-55 Rothschild Avenue, Rosebery, NSW for \$190.0 million, represented by a \$19.0 million option fee and \$171.0 million settlement payment. The Trust will recognise the option fee over the term of the option and has therefore recognised \$17.3 million during the year ended 30 June 2015. The balance of \$1.7 million and the settlement amount of \$171.0 million will be recognised in the year ended 30 June 2016.
• On 1 December 2014, 50 Carrington Street, Sydney, NSW was disposed of for gross proceeds of \$88.0 million (carrying value of \$75.8 million).
• On 22 May 2015, 40 Market Street, Melbourne, VIC was disposed of for gross proceeds of \$105.3 million (carrying value of \$87.9 million).

Note 11

Assets classified as held for sale

Non-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.

Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.

Non-current assets classified as held for sale relate to investment properties and are measured at fair value. As at 30 June 2015, the balance related to Units 10/11, 108 Silverwater Road, Silverwater, NSW. Refer note 24.

Disposals

On 1 July 2014, 30 Distribution Drive, Laverton, VIC was disposed of for gross proceeds of \$19.0 million. 50% of this property was classified as inventory at 30 June 2014. Refer note 10.

Capital and financial risk management and working capital

In this section

The Trust's overall risk management program focuses on reducing volatility from impacts in movements of financial markets and seeks to minimise potential adverse effects on the financial performance of the Trust. Note 12 Capital and financial risk management outlines how the Trust manages its exposure to a variety of financial risks (interest rate risk, foreign currency risk, liquidity risk and credit risk) and details the various derivative financial instruments entered into by the Trust.

The Board determines the appropriate capital structure of the Trust, how much is borrowed from financial institutions and capital markets (debt), and how much is raised from shareholders (equity) in order to finance the Trust's activities both now and in the future. This capital structure is detailed in the following notes:

• Debt: Commitments and contingencies in note 13;
• Equity: Contributed equity in note 14 and Reserves and accumulated losses in note 15.

Note 16 provides a breakdown of the working capital balances held in the Statement of Financial Position.

Note 12

Capital and financial risk management

Capital and financial risk management is carried out through a centralised treasury function which is governed by a Board approved Treasury Policy. The Trust (as part of DXS) has an established governance structure which consists of the Group Management Committee and Capital Markets Committee.

The Board has appointed a Group Management Committee responsible for achieving DEXUS's goals and objectives, including the prudent financial and risk management of the Group. The Group Management Committee generally meets weekly. A Capital Markets Committee has been established to advise the Group Management Committee.

The Capital Markets Committee is a management committee that is accountable to the Board. It convenes at least quarterly and conducts a review of financial risk management exposures including liquidity, funding strategies and hedging. It is also responsible for the development of financial risk management policies and funding strategies for recommendation to the Board, and the approval of treasury transactions within delegated limits and powers.

(a) Capital risk management

The Trust manages its capital to ensure that entities within the Trust will be able to continue as a going concern while maximising the return to owners through the optimisation of the debt and equity balance.

The capital structure of the Trust consists of debt, cash and cash equivalents and equity attributable to unit holders. The Trust continuously monitors its capital structure and it is managed in consideration of the following factors:

• the cost of capital and the financial risks associated with each class of capital;
• gearing levels and other debt covenants;
• potential impacts on net tangible assets and security holders' equity;
• potential impacts on the DXS's credit rating; and
• other market factors.

Capital and financial risk management (continued)

(a) Capital risk management (continued)

The Trust is not rated by ratings agencies, however, DXS is rated A- by Standard and Poor's (S&P) and A3 by Moody's. Gearing levels and bank debt covenants are managed holistically as part of the DXS Group.

The Responsible Entity for the Trust, DXFM (a wholly owned entity), has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to maintain liquidity above specified limits. DXFM must also prepare rolling cash projections over at least the next 12 months and demonstrate it will have access to sufficient financial resources to meet its liabilities that are expected to be payable over that period. Cash projections and assumptions are approved, at least quarterly, by the Board of the Responsible Entity.

DWPL, a wholly owned entity, has been issued with an AFSL as it is the Responsible Entity for DEXUS Wholesale Property Fund (DWPF). DEXUS Wholesale Management Limited (DWML), a wholly owned entity, has been issued with an AFSL as it is the trustee of third party managed funds. These entities are subject to the capital requirements described above.

(b) Financial risk management

The Trust's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Trust. The Trust's principal financial instruments, other than derivatives, comprise cash, bank loans and capital markets issuance. The main purpose of financial instruments is to manage liquidity and hedge the Trust's exposure to financial risks namely:

• interest rate risk;
• foreign currency risk;
• liquidity risk; and
• credit risk.

The Trust uses derivatives to reduce the Trust's exposure to fluctuations in interest rates and foreign exchange rates. These derivatives create an obligation or a right that effectively transfers one or more of the risks associated with an underlying financial instrument, asset or obligation. Derivative financial instruments that the Trust may use to hedge its risks include:

• interest rate swaps;
• cross currency interest rate swaps;
• foreign exchange contracts; and
• option contracts (interest rates).

The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure and conducting sensitivity analysis.

(i) Market risk

Interest rate risk

Interest rate risk arises from interest bearing financial assets and liabilities that the Trust utilises. Non-derivative interest bearing financial instruments are predominately short term liquid assets and long term debt issued at fixed rates which expose the Trust to fair value interest rate risk as the Trust may pay higher interest costs than if it were at variable rates. The Trust's borrowings which have a variable interest rate give rise to cash flow interest rate risk as variable interest rates may increase.

The Trust's risk management policy for interest rate risk seeks to minimise the effects of interest rate movements on its asset and liability portfolio through active management of the exposures. The policy prescribes minimum and maximum hedging amounts for the Trust, which is managed on a portfolio basis.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk (continued)

Interest rate risk (continued)

The Trust maintains a mix of offshore and local currency fixed rate and variable rate debt, as well as a mix of long term and short term debt. The Trust primarily enters into interest rate swaps and cross currency interest rate swap agreements to manage the associated interest rate risk. The Trust hedges the interest rate and currency risk on the majority of its foreign currency borrowings by entering into cross currency swaps, which have the economic effect of converting foreign currency borrowings to local currency borrowings at contracted rates. The derivative contracts are recorded at fair value in the Statement of Financial Position, being the market value as quoted in an active market.

Interest rate swaps require settlement of net interest receivable or payable each 90 or 180 days. The settlement dates coincide with the dates on which the interest is payable on the underlying debt. The receivable and payable legs on interest rate swap contracts are settled on a net basis. The net notional amount of average fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate is set out below:

	June 2016	June 2017	June 2018	June 2019	June 2020	> June 2021
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Interest rate swaps
A\$ hedged1	5,000	-	-	-	-	-
A\$ hedge rate (%)2	0.27%	-	-	-	-	-

1 Amounts do not include fixed rate debt that has been swapped to floating rate debt through cross currency swaps.

Sensitivity analysis on interest expense

The table below shows the impact on the Trust's net interest expense of a 50 basis point increase or decrease in market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust's floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in market rates to the extent that floating rate debt is not hedged.

2015	2014
(+/-) \$'000	(+/-) \$'000
+/- 0.50% (50 basis points) A\$ 2,951	3,090

The increase or decrease in interest expense is proportional to the increase or decrease in interest rates.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (i) Market risk (continued)

Interest rate risk (continued)

Sensitivity analysis on fair value of interest rate swaps

The sensitivity analysis on interest rate swaps below shows the effect on net profit or loss for changes in the fair value of interest rate swaps for a 50 basis point increase or decrease in short-term and long-term market interest rates. The sensitivity on fair value arises from the impact that changes in market rates will have on the valuation of the interest rate swaps.

The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its interest rate derivatives. Accordingly, gains or losses arising from changes in the fair value are reflected in the profit or loss.

2015	2014
(+/-) \$'000	(+/-) \$'000
+/- 0.50% (50 basis points) A\$ -	297

Equity price risk

Equity price risk is the risk that the fair value of investments in listed entities fluctuates due to changes in the underlying unit price. The Trust's equity price risk arises from investments in DXS securities purchased in order to fulfil the future requirements of the security-based payments plans. These investments are classified as available for-sale assets, with any resultant fair value movement recognised in other comprehensive income.

Sensitivity analysis on equity price risk

The following sensitivity analysis shows the effect on the Statement of Comprehensive Income if the market price of the underlying equity securities/units at balance date had been 10% higher/lower with all other variables held constant.

2015	2014
(+/-) \$'000	(+/-) \$'000
+/- 10% 817	547

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (ii) Liquidity risk

Liquidity risk is associated with ensuring that there are sufficient funds available to meet the Trust's financial commitments as and when they fall due and planning for any unforeseen events which may curtail cash flows. The Trust identifies and manages liquidity risk across the following categories:

• short-term liquidity management covering the month ahead on a rolling basis with continuous monitoring of forecast and actual cash flows;
• medium-term liquidity management of liquid assets, working capital and standby facilities to cover Trust cash requirements over the next 1-24 month period. The Trust maintains a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits); and
• long-term liquidity management through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated in certain time periods, and ensuring an adequate diversification of funding sources where possible, subject to market conditions.

Refinancing risk

Refinancing risk is the risk that the Trust:

• will be unable to refinance its debt facilities as they mature; and/or
• will only be able to refinance its debt facilities at unfavourable interest rates and credit market conditions (margin price risk).

The Group's key risk management strategy for margin price risk on refinancing is to spread the maturities of debt facilities over different time periods to reduce the volume of facilities to be refinanced and the exposure to market conditions in any one period.

An analysis of the contractual maturities of the Trust's interest bearing liabilities and derivative financial instruments is shown in the table below. The amounts in the table represent undiscounted cash flows.

		2015				2014
	Within one year \$'000	Between one and two years \$'000	Between two and five years \$'000	After five years \$'000	Within one year \$'000	Between one and two years \$'000	Between two and five years \$'000	After five years \$'000
Cash	1,389	-	-	-	1,269	-	-	-
Receivables	38,037	-	-	-	40,633	-	-	-
Payables	28,342	-	-	-	16,610	-	-	-
	11,084	-	-	-	25,292	-	-	-
Interest bearing loans with related parties and interest1 Derivative financial instruments	-	7,121	7,121	-	34,672	34,672	737,396	-
Derivative assets	-	-	-	-	50	-	-	-
Derivative liabilities	-	-	-	-	226	33	-	-
Total net derivative financial instruments2	-	-	-	-	(176)	(33)	-	-

1 Includes estimated interest.

2 For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating interest cash flows, future cash flows have been calculated using static interest and exchange rates prevailing at the end of each reporting period. Refer to note 12(c) for fair value of derivatives. Refer to note 13 for financial guarantees.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iii) Credit risk

Credit risk is the risk that the counterparty will not fulfil its obligations under the terms of a financial instrument and will cause financial loss to the Trust. The Trust has exposure to credit risk on all financial assets included in the Trust's Statement of Financial Position.

The Trust manages this risk by:

• adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty's credit rating;
• regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody's and Fitch credit rating. The exposure includes the current market value of in-the-money contracts and the potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines;
• entering into ISDA Master Agreements once a financial institution counterparty is approved;
• monitoring tenant exposure within approved credit limits;
• for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and
• regularly monitoring loans and receivables on an ongoing basis.

A minimum S&P rating of A– (or Moody's or Fitch equivalent) is required to become or remain an approved counterparty, unless otherwise approved by the DEXUS Board.

The Trust is exposed to credit risk on cash balances and on derivative financial instruments with financial institutions. The Trust has a policy that sets limits as to the amount of credit exposure to each financial institution. New derivatives and cash transactions are limited to financial institutions that meet minimum credit rating criteria in accordance with the Trust's policy requirements.

Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the Trust's exposure to any one counterparty. As a result, there is no significant concentration of credit risk for financial instruments. The maximum exposure to credit risk at 30 June 2015 is the carrying amounts of financial assets recognised on the Statement of Financial Position.

As at 30 June 2015, there were no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade debtors are monitored on an ongoing basis. The tables below show the ageing analysis of loans and receivables net of provisions of the Trust.

	2015	2014
	\$'000	\$'000
0-30 days	32,716	36,805
31-60 days	3,130	2,626
61-90 days	283	478
Over 91 days	1,908	724
Total receivables net of provisions	38,037	40,633

Amounts over 31 days are past due, however, no receivables are impaired. The credit quality of financial assets that are neither past due nor impaired is monitored to make sure there are no adverse changes in credit quality.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value

The Trust has classified its financial assets and liabilities as follows:

Financial asset/liability	Classification	Valuation basis	Reference
Receivables1	Loans and receivables	Amortised cost	Refer to note [16(b)]
Other financial assets	Available-for-sale	Fair value	Refer to note [19]
Payables1	Financial liability at amortised cost	Amortised cost	Refer to note [16(c)]
Interest bearing liabilities loan from related party	Financial liability at amortised cost	Amortised cost	Refer to note [12(b)]
Non-interest bearing loans from related party	Loans and receivables	Amortised cost	Refer to note [12(b)]
Derivatives	Fair value through profit or loss	Fair value	Refer to note 12(c)

1 The face value of these is approximately equal to their fair value; these amounts are unsecured and are usually paid within 30 days of recognition.

Financial assets and liabilities are classified in accordance with the purpose for which they were acquired. As noted in section (c) below, derivative financial instruments are initially recognised in the Statement of Financial Position at fair value on the date on which the derivative contract is entered into and subsequently remeasured to fair value.

The valuation techniques applied by the Trust are consistent with those applied in prior year financial reports. The valuation technique used to measure the various financial instruments namely foreign currency contracts and interest rate contracts is based on market observable spot exchange rates and interest rate yield curves. This method records any change in fair value of a derivative in the Financial Statements.

The carrying amounts and estimated fair value of all the Trust's financial assets and liabilities recognised in the Financial Statements are as follows:

	2015 Carrying amount1	2015 Fair value2	2014 Carrying amount1	2014 Fair value2
	\$'000	\$'000	\$'000	\$'000
Financial assets
Cash and cash equivalents	1,389	1,389	1,269	1,269
Loans and receivables (current)	38,037	38,037	40,633	40,633
Available-for-sale financial assets	8,994	8,994	5,470	5,470
Total financial assets	48,420	48,420	47,372	47,372
Financial liabilities
Trade payables	28,342	28,342	16,610	16,610
Non-interest bearing loans with related parties3	48,932	48,932	48,932	48,932
Interest bearing loans with related parties4	650,201	650,201	668,052	668,052
Derivative liabilities	148	148	463	463
Total financial liabilities	727,623	727,623	734,057	734,057

1 Carrying value is equal to the value of the financial instruments on the Statement of Financial Position.

2 Fair value is the price that would be received to transfer the asset or liability in an orderly transaction between market participants at the measurement date. Where there is a difference between the carrying amount and fair value, the difference is not recognised in the Statement of Financial Position.

3 Non-interest bearing loans with entities within DXS were created to effect the stapling of the Trust, DIT, DOT and DDF. These loan balances eliminate on consolidation within DXS.

4 Interest bearing loans with DEXUS Finance Pty Limited (DXF). These loan balances eliminate on consolidation within DXS.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (iv) Fair value (continued)

The Trust uses the following methods in the determination and disclosure of the fair value of financial instruments:

Level 1: the fair value is calculated using quoted prices in active markets.

Level 2: the fair value is determined using inputs other than quoted prices included in 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: the fair value is estimated using inputs for the asset or liability that are not based on observable data.

The following table presents the assets and liabilities measured and recognised as at fair value 30 June 2015 and 30 June 2014.

	Level 1	Level 2	Level 3	Total
2015	\$'000	\$'000	\$'000	\$'000
Financial assets
Available-for-sale financial assets	8,994	-	-	8,994
Financial liabilities
Derivative liabilities
Interest rate derivatives	-	148	-	148
	Level 1	Level 2	Level 3	Total
2014	\$'000	\$'000	\$'000	\$'000
Financial assets
Available-for-sale financial assets	5,470	-	-	5,470
Financial liabilities
Derivative liabilities

(v) Offsetting financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position where the Trust currently has a legally enforceable right of set-off, the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Trust has also entered into arrangements that do not meet the criteria for offsetting except in certain circumstances, such as bankruptcy or the termination of the underlying contract.

All derivatives held by the Trust are in a liability position and therefore disclosure of the offsetting arrangements is consistent with the amounts disclosed in the Statement of Financial Position.

Capital and financial risk management (continued)

• (b) Financial risk management (continued)
• (v) Offsetting financial assets and financial liabilities (continued)

Master netting arrangements – not currently enforceable

Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, where certain credit events occur (such as default), the net position owing/receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Trust does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Statement of Financial Position.

(c) Derivative financial instruments

A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over time in response to underlying variables including interest rates or exchange rates and is entered into for a fixed period. A hedge is where a derivative is used to manage an underlying exposure and the Trust uses derivatives to manage its exposure to interest rates and foreign exchange risk accordingly.

Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. The Responsible Entity continually reviews the Trust's exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes.

Even though derivative financial instruments are entered into for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting under AASB 139 Financial Instruments: Recognition and Measurement. Accordingly, derivatives including interest rate swaps are measured at fair value with any changes in fair value recognised in the Statement of Comprehensive Income

	2015	2014
	\$'000	\$'000
Current liabilities
Interest rate swap contracts	148	166
Total current liabilities - derivative financial instruments	148	166
Non-current liabilities
Interest rate swap contracts	-	297
Total non-current liabilities - derivative financial instruments	-	297
Total liabilities - derivative financial instruments	148	463

Key assumptions: fair value of derivatives

The fair value of derivative financial instruments has been determined based on a discounted cash flow analysis using observable market inputs (interest rates, exchange rates and currency basis) and applying a credit or debit valuation adjustment based on the current credit worthiness of counterparties and the Group. Refer to note 12(b)(iv) Capital and financial Risk Management for further detail.

Commitments and contingencies

(a) Commitments

(i) Capital commitments

The following amounts represent remaining capital expenditure on investment properties and inventories contracted at the end of each reporting period but not recognised as liabilities payable:

	2015	2014
	\$'000	\$'000
Investment properties	13,936	118
Inventories	17,788	790
Total capital commitments	31,724	908

(ii) Lease payable commitments

The future minimum lease payments payable by the Trust are:

	2015	2014
	\$'000	\$'000
Within one year	3,678	3,294
Later than one year but not later than five years	10,441	11,452
Later than five years	982	1,264
Total lease payable commitments	15,101	16,010

Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property.

No provisions have been recognised in respect of non-cancellable operating leases.

(iii) Lease receivable commitments

The future minimum lease payments receivable by the Trust are:

	2015	2014
	\$'000	\$'000
Within one year	45,812	34,158
Later than one year but not later than five years	133,198	99,720
Later than five years	85,017	40,529
Total lease receivable commitments	264,027	174,407

Commitments and contingencies (continued)

(b) Contingencies

The Trust, together with DDF, DIT and DOT, is a guarantor of a total of A\$3,572.4 million of interest bearing liabilities (refer note 13 of the DEXUS Property Group Financial Report). The guarantees have been given in support of debt outstanding and drawn against these facilities, and may be called upon in the event that a borrowing entity has not complied with certain requirements such as failure to pay interest or repay a borrowing, whichever is earlier. During the period no guarantees were called.

The Group has bank guarantees of \$30.9 million, comprising \$30.2 million held to comply with the terms of the Australian Financial Services Licenses (AFSL) and \$0.7 million in respect of developments.

The above guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in interest bearing liabilities on the Statement of Financial Position.

The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Group, other than those disclosed in the Financial Statements, which should be brought to the attention of security holders as at the date of completion of this report.

Contributed equity

(a) Contributed equity

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	222,086	197,775
Issue of additional equity, net of transaction costs	16,743	26,532
Buy-back of contributed equity, net of transaction costs	-	(2,221)
Closing balance at the end of the year	238,829	222,086

(b) Number of units on issue

	2015	2014
	No. of units	No. of units
Opening balance at the beginning of the year	5,433,110,810	4,701,957,390
Issue of additional equity	65,274,552	804,882,384
One-for-six security consolidation	(4,527,579,013)	-
Buy-back of contributed equity	-	(73,728,964)
Closing balance at the end of the year	970,806,349	5,433,110,810

Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust.

Each stapled security entitles the holder to vote in accordance with the provisions of the Constitutions and the Corporations Act 2001.

Transaction costs arising on the issue of equity instruments are recognised directly in equity (net of tax) as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

On 29 October 2014, the Trust announced a one-for-six consolidation of DEXUS Property Trust stapled securities. The consolidation was completed on 14 November 2014. Where the number of securities held by a security holder following the consolidation resulted in a fraction of a security, the fraction was rounded up to the nearest whole number.

Reserves and accumulated losses

(a) Reserves

	2015	2014
	\$'000	\$'000
Asset revaluation reserve	42,738	42,738
Security-based payments reserve	330	157
Available-for-sale financial assets	675	334
Treasury securities reserve	(349)	(165)
Total reserves	43,394	43,064
Movements:
Asset revaluation reserve
Opening balance at the beginning of the year	42,738	42,738
Closing balance at the end of the year	42,738	42,738
Security-based payments reserve
Opening balance at the beginning of the year	157	37
Security-based payments expense	173	120
Closing balance at the end of the year	330	157
Available-for-sale financial assets
Opening balance at the beginning of the year	334	13
Fair value gain of securities	341	321
Closing balance at the end of the year	675	334
Treasury securities reserve
Opening balance at the beginning of the year	(165)	(56)
Purchase of securities	(184)	(109)
Closing balance at the end of the year	(349)	(165)

(b) Nature and purpose of reserves

Asset revaluation reserve

The asset revaluation reserve is used to record the fair value adjustment arising on a business combination.

Security-based payments reserve

The security-based payments reserve is used to recognise the fair value of performance rights to be issued under the 2012 Transitional Performance Rights Plan, the Deferred Short Term Incentive Plans (DSTI) and the Long Term Incentive Plans (LTI). Refer to note 22 for further details.

Reserves and accumulated losses (continued)

(b) Nature and purpose of reserves (continued)

Available-for-sale financial assets

Changes in the fair value arising on valuation of investments, classified as available-for-sale financial assets, are recognised in other comprehensive income and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold, transferred or impaired.

Treasury securities reserve

The treasury securities reserve is used to record the acquisition of securities purchased to fulfil the obligations of the 2012 Transitional Performance Rights Plan, the Deferred Short Term Incentive Plans (DSTI) and the Long Term Incentive Plans (LTI). As at 30 June 2015, DXS held 1,170,525 stapled securities (2014: 847,825, restated to reflect the one-for-six security consolidation).

(c) Accumulated losses

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	(72,237)	(89,121)
Net profit/(loss) attributable to security holders	68,894	31,884
Distributions provided for or paid	-	(15,000)
Closing balance at the end of the year	(3,343)	(72,237)

Note 16

Working capital

(a) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(b) Receivables

Rental, management fees and interest revenue are brought to account on an accruals basis. Dividends and distributions are recognised when declared and, if not received at the end of the reporting period, reflected in the Statement of Financial Position as a receivable.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for doubtful debts. Trade receivables are required to be settled within 30 days and are assessed on an ongoing basis for impairment. Receivables which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for doubtful debts is established when there is objective evidence that the Trust will not be able to collect all amounts due according to the original terms of the receivables.

Working capital (continued)

(b) Receivables (continued)

	2015	2014
	\$'000	\$'000
Rent receivable	2,347	2,949
Total rental receivables	2,347	2,949
Distributions receivable	250	148
Fee Receivable	28,051	20,147
Receivables from related entities	2,768	13,482
Other receivables	4,621	3,907
Total other receivables	35,690	37,684
Total current assets - receivables	38,037	40,633

(c) Payables

Expenses are brought to account on an accruals basis and, if not paid at the end of the reporting period, are reflected in the Statement of Financial Position as a payable.

These amounts represent liabilities for amounts owing at the end of the reporting period. The amounts are unsecured and are usually paid within 30 days of recognition.

	2015	2014
	\$'000	\$'000
Trade creditors	18,421	6,680
Accruals	3,433	1,905
Accrued capital expenditure	667	274
GST payable	766	1,114
Other payable to related parties	2,569	3,531
Other payables	2,486	3,106
Total current liabilities – payables	28,342	16,610

Working capital (continued)

(d) Provisions

A provision is recognised when an obligation exists as a result of a past event and it is probable that a future outflow of cash or other benefit will be required to settle the obligation.

In accordance with the Trust's Constitution, the Trust distributes its distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared.

Provision for employee benefits relates to the liabilities for wages, salaries, annual leave and long service leave.

Liabilities for employee benefits for wages, salaries and annual leave expected to be settled within 12 months represent present obligations resulting from employees' services provided to the end of the reporting period. They are measured based on remuneration wage and salary rates that the Trust expects to pay at the end of the reporting period including related on-costs, such as workers compensation, insurance and payroll tax.

The provision for employee benefits for long service leave represents the present value of the estimated future cash outflows, to be made resulting from employees' services provided to the end of the reporting period.

The provision is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the Australian Corporate Bond Index rates at the end of the reporting period that most closely matches the term of the maturity of the related liabilities.

The provision for employee benefits also includes the employee incentive schemes whish are shown separately in note 22.

	2015	2014
	\$'000	\$'000
Provision for distribution	-	15,000
Provision for employee benefits	27,269	24,411
Total current provisions	27,269	39,411

Non-current provisions relate to employee benefits.

Other disclosures

In this section

This section includes other information that must be disclosed to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations, but which are not considered critical in understanding the financial performance or position of the Trust.

Note 17

Plant and equipment

Plant and equipment is stated at historical cost less depreciation and accumulated impairment. Historical cost includes expenditure that is directly attributable to its acquisition. 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 Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the reporting period in which they are incurred.

Plant and equipment is tested for impairment whenever events or changes in circumstances indicate that the carrying amounts exceed their recoverable amounts.

Depreciation is calculated using the straight-line method so as to allocate their cost, net of their residual values, over their expected useful lives as follows:

• Furniture and fittings 10-20 years
• IT and office equipment 3-5 years

	2015	2014
	\$'000	\$'000
Opening balance at the beginning of the year	10,797	8,781
Additions	12,175	4,000
Depreciation charge	(2,478)	(1,984)
Closing balance at the end of the year	20,494	10,797
	2015	2014
	\$'000	\$'000
Cost	38,800	26,626
Accumulated depreciation	(18,306)	(15,829)
Net book value as at the end of the year	20,494	10,797

Note 18 Intangible assets

Management rights represent the asset management rights owned by DXH, which entitle it to management fee revenue from both finite life trusts and indefinite life trusts. Those rights that are deemed to have a finite useful life (held at a value of \$4,725,145 (2014: \$5,054,806)) are measured at cost and amortised using the straight-line method over their estimated remaining useful lives of 17 years. Management rights that are deemed to have an indefinite life are held at a value of \$286,022,841 million (2014: \$286,022,841 million).

Goodwill represents the excess of the cost of an acquisition over the fair value of the Trust's share of the net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill and management rights with 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. An impairment loss is recognised in the Statement of Comprehensive Income 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).

	2015	2014
	\$'000	\$'000
Management rights
Opening balance at the beginning of the year	291,078	242,100
Acquisition of management rights	-	42,000
Amortisation charge	(330)	(331)
Reversal of previous impairment of management rights	-	7,309
Closing balance at the end of the year	290,748	291,078
Cost	294,382	294,382
Accumulated amortisation	(3,634)	(3,304)
Total management rights	290,748	291,078
Goodwill
Opening balance at the beginning of the year	1,508	1,607
Impairment	(99)	(99)
Closing balance at the end of the year	1,409	1,508
Cost	2,998	2,998
Accumulated impairment	(1,589)	(1,490)
Total goodwill	1,409	1,508
Total non-current assets - intangible assets	292,157	292,586

Intangible assets (continued)

During the current year, management carried out a review of the recoverable amount of its management rights. There was no change in the carrying value of the management rights in the current year. In the prior year there was a recognition of a reversal of previous impairments of \$7,309,000 in the Statement of Comprehensive Income.

The value in use has been determined using Board approved long-term forecasts in a five year discounted cash flow model. Forecasts were based on projected returns of the business in light of current market conditions. The performance in year five has been used as a terminal value.

Key assumptions: value in use of management rights

Judgement is required in determining the following key assumptions used to calculate the value in use:

• Terminal capitalisation rate range between 10.0% 16.7% (2014: 12.5% 16.7%) was used incorporating an appropriate risk premium for a management business.
• Cash flows have been discounted at 9.0% (2014: 9.5%) based on externally published weighted average cost of capital for an appropriate peer group plus an appropriate premium for risk. A 1.0% (2014: 1.0%) decrease in the discount rate would increase the valuation by \$17.1 million (2014: \$18.7 million).

Note 19

Available-for-sale financial assets

Available-for-sale financial assets comprise DXS securities acquired on-market in order to fulfil the future requirements of the security-based payments plans.

They are included in non-current assets except for those securities that will be used to fulfil security based payment plans that vest within 12 months, which are classified as current assets. Changes in fair value arising on valuation of investments are recognised in other comprehensive income net of tax, in a separate reserve in equity. Amounts are reclassified to profit or loss when the associated assets are sold, transferred or impaired.

Audit, taxation and transaction services fees

During the year, the Auditor and its related practices earned the following remuneration:

	2015	2014
	\$	\$
Audit fees
PwC Australia - audit and review of Financial Statements	250,159	189,353
PwC fees paid in relation to outgoings audits	20,600	4,500
PwC Australia - regulatory audit and compliance services	198,690	192,078
Audit fees paid to PwC	469,449	385,931
Taxation fees
Fees paid to PwC Australia	125,470	5,000
Taxation fees paid to PwC	125,470	5,000
Total audit and taxation fees paid to PwC	594,919	390,931

Note 21

Reconciliation of net profit to net cash flows from operating activities

(a) Reconciliation

	2015	2014
	\$'000	\$'000
Net profit/(loss) for the year	68,894	31,884
Capitalised interest	(1,976)	(6,125)
Depreciation and amortisation	2,808	2,315
Impairment of goodwill	99	99
Net fair value (gain)/loss of investment properties	(10,807)	(11,201)
Net (gain)/loss on sale of investment properties	727	(775)
Lease incentives	(5,110)	(2,811)
Reversal of previous impairment of management rights	-	(7,309)
Distribution revenue	(480)	(305)
Change in operating assets and liabilities
(Increase)/decrease in receivables	2,698	(10,171)
(Increase)/decrease in inventories	87,058	(63,367)
(Increase)/decrease in other current assets	(941)	(801)
(Increase)/decrease in other non-current assets	(124)	-
Increase/(decrease) in payables	12,116	3,137
Increase/(decrease) in current liabilities	2,840	1,577
Increase/(decrease) in other non-current liabilities	30,100	31,096
(Increase)/decrease in deferred tax assets	25,036	3,578
(Increase)/decrease in deferred tax liabilities	3,539	8,312
Net cash inflow/(outflow) from operating activities	216,477	(20,867)

Security-based payments

The DXFM Board has approved a grant of performance rights to DXS stapled securities to eligible participants. Awards, via the 2012 Transitional Performance Rights Plan, Deferred Short Term Incentive Plans (DSTI) and Long Term Incentive Plans (LTI), will be in the form of performance rights awarded to eligible participants which convert to DXS stapled securities for nil consideration subject to satisfying specific service and performance conditions.

For each Plan, the eligible participants will be granted performance rights, based on performance against agreed key performance indicators, as a percentage of their remuneration mix. Participants must remain in employment for the vesting period in order for the performance rights to vest. Non-market vesting conditions, including Funds from Operations (FFO), Return on Equity (ROE) and employment status at vesting, are included in assumptions about the number of performance rights that are expected to vest. When performance rights vest, the Trust will arrange for the allocation and delivery of the appropriate number of securities to the participant.

The fair value of performance rights granted is recognised as an employee benefit expense with a corresponding increase in the security-based payments reserve in equity. The total amount to be expensed is determined by reference to the fair value of the performance rights granted.

Key assumptions: fair value of performance rights granted

Judgement is required in determining the fair value of performance rights granted. In accordance with AASB 2 Share-based Payments, fair value is determined independently using Black-Scholes and Monte Carlo pricing models with reference to :

• the expected life of the rights;
• the security price at grant date;
• the expected price volatility of the underlying security;
• the expected distribution yield; and
• the risk free interest rate for the term of the rights and expected total security-holder returns (where applicable).

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Trust revises its estimates of the number of performance rights that are expected to vest based on the non-market vesting conditions. The impact of the revised estimates, if any, is recognised in profit or loss with a corresponding adjustment to equity.

(a) 2012 Transitional Performance Rights Plan

Subject to satisfying employment service conditions, the award has vested over a four year period ending 30 June 2015. No performance rights were granted in respect of the year ended 30 June 2015 (2014: nil).The total security-based payment expense recognised during the year ended 30 June 2015 was \$435,970 (2014: \$547,595).

(b) Deferred Short Term Incentive Plan

25% of any award under the Short Term Incentive Plan (STI) for certain participants will be deferred and awarded in the form of performance rights to DXS securities.

50% of the performance rights awards will vest one year after grant and 50% of the awards will vest two years after grant, subject to participants satisfying employment service conditions. In accordance with AASB 2 Share-based Payments, the year of employment in which participants become eligible for the DSTI, the year preceding the grant, is included in the vesting period over which the fair value of the performance rights is amortised. Consequently, 50% of the fair value of the performance rights is amortised over two years and 50% of the award is amortised over three years.

The number of performance rights granted in respect of the year ended 30 June 2015 was 356,412 (2014: 374,448¹ ) and the fair value of these performance rights is \$7.30 (2014: \$6.66¹ ) per performance right. The total securitybased payment expense recognised during the year ended 30 June 2015 was \$2,230,210 (2014: \$1,896,231).

¹ Restated to reflect the one-for-six security consolidation.

Security-based payments (continued)

(c) Long Term Incentive Plan

50% of the awards will vest three years after grant and 50% of the awards will vest four years after grant, subject to participants satisfying employment service conditions and performance hurdles. In accordance with AASB 2 Share-based Payments, the year of employment in which participants become eligible for the LTI, the year preceding the grant, is included in the vesting period over which the fair value of the performance rights is amortised. Consequently, 50% of the fair value of the performance rights is amortised over four years and 50% of the award is amortised over five years.

The number of performance rights granted in respect of the year ended 30 June 2015 was 533,328 (2014: 473,375¹ ). The fair value of these performance rights is \$5.43 (2014: \$4.98¹ ) per performance right. The total security-based payment expense recognised during the year ended 30 June 2015 was \$1,550,694 (2014: \$808,565).

Note 23

Related parties

Responsible Entity and Investment Manager

DXH is the parent entity of DXFM, the Responsible Entity of DDF, DIT, DOT and DXO, the trustee of DOTA and the investment manager of DITA.

DXH is the parent entity of DWPL, the Responsible Entity for DWPF.

DXH is the parent entity of DWML, the trustee of DITA.

DXH is the investment manager of DOTA.

Management fees

Under the terms of the Constitutions of the entities within the Trust, the Responsible Entity and Investment Manager are entitled to receive fees in relation to the management of the Trust. DXFM's parent entity, DXH, is entitled to be reimbursed for administration expenses incurred on behalf of the Trust. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH, is entitled to property management fees from the Trust.

Related party transactions

Responsible entity fees in relation to DXS assets are on a cost recovery basis. DXPS has a contractual agreement to pay rent on one component of an investment property owned by DEXUS Office Trust (DOT). The agreement is conducted on normal commercial terms and conditions. Agreements with third party funds are conducted under normal commercial terms and conditions.

DEXUS Funds Management Limited and its related entities

There were a number of transactions and balances between the Trust and the Responsible Entity and its related entities as detailed below:

	2015	2014
	\$	\$
Transactions with DEXUS Diversified Trust
Responsible Entity fee income	4,819,380	4,956,471
Property management fee income	4,595,419	4,798,073
Purchase of investment properties	30,400,000	85,172,889
Responsible Entity fees receivable at the end of each reporting period (included above)	402,194	1,067,071
Property management fees receivable at the end of each reporting period (included
above)	2,250,332	1,390,130
Rent paid	23,271	145,814
1

Restated to reflect the one-for-six security consolidation.

Related parties (continued)

	2015	2014
	\$	\$
Transactions with DEXUS Industrial Trust
Responsible Entity fee income	2,229,262	2,566,201
Property management fee income	1,710,226	1,902,373
Purchase of investment properties	-	93,404,272
Responsible Entity fees receivable at the end of each reporting period (included above)	184,866	585,838
Property management fees receivable at the end of each reporting period (included above)	1,174,176	772,935
Transactions with DEXUS Office Trust
Responsible Entity fee income	13,483,677	12,960,239
Property management fee income	12,286,117	11,066,146
Responsible Entity fees receivable at the end of each reporting period (included above)	1,134,334	4,995,108
Property management fees receivable at the end of each reporting period (included
above)	4,474,715	2,293,308
Rent paid	1,025,976	845,025
Transactions with DEXUS Finance Pty Limited
Management fee revenue	1,078,120	1,084,131
Interest bearing loan receivable at the end of each reporting period	650,200,633	668,052,043
Transactions with DEXUS Wholesale Property Fund
Responsible Entity fee income	28,049,813	24,114,535
Property management fee income	12,405,145	7,397,251
Property management fees receivable at the end of each reporting period (included
above)	1,742,245	817,161
Rent paid	62,692	7,246
Transactions with Bent Street Trust
Property management fee income	434,330	334,706
Transactions with Kent Street Joint Venture
Asset management fee income	590,250	573,938
Property management fee income	433,905	440,803
Transactions with DEXUS Office Trust Australia
Asset management fee income	9,840,422	2,330,849
Property management fee income	13,731,521	1,669,642
Responsible Entity fees receivable at the end of each reporting period (included above)	2,493,892	2,557,818
Property management fees receivable at the end of each reporting period (included above)	2,775,758	873,676
Rent paid	1,235,319	-
Transactions with DEXUS Industrial Trust Australia
Responsible Entity fee income	373,973	-
Property management fee income	989,794	-
Responsible Entity fees receivable at the end of each reporting period (included above) Property management fees receivable at the end of each reporting period (included	99,611	-
above)	13,481	-

Related parties (continued)

Entities within DXS

Aggregate amounts included in the determination of profit that resulted from transactions with each class of other related parties:

	2015	2014
	\$	\$
Interest expense	32,841,993	35,863,570

Directors

The following persons were Directors of DXFM at all times during the year and to the date of this report, unless otherwise stated:

C T Beare, BSc, BE (Hons), MBA, PhD, FAICD 1,2,3,5,6,7
--------------------------------------------------------	--

E A Alexander, AM, BComm, FCA, FAICD, FCPA 1,3,8

P Bingham-Hall, BA (Industrial Design), FAICD, SF (Fin) 1,7,9

J C Conde, AO, BSc, BE (Hons), MBA 1,2,6,7

T Dwyer, BJuris (Hons), LLB (Hons) 1,2,4,8,9

C D Mitchell, BComm, MBA (Exec), FCPA , HBS (AMP)

W R Sheppard, BEc (Hons) 1,3,5,6,8,9

D J Steinberg, BEc, FRICS, FAPI

P B St George, CA(SA), MBA 1,5,8,9

1 Independent Director.

• 2 Board Nomination, Remuneration & Governance Committee Member until 31 August 2014.
• 3 Board Audit, Risk & Sustainability Committee Member until 31 August 2014.
• 4 Board Compliance Committee Member until 31 August 2014.
• 5 Board Finance Committee Member until 31 August 2014.
• 6 Board Nomination Committee Member from 1 September 2014.
• 7 Board People & Remuneration Committee Member from 1 September 2014.
• 8 Board Audit Committee Member from 1 September 2014.
• 9 Board Risk Committee Member from 1 September 2014.

Other key management personnel

In addition to the Directors listed above, the following persons were deemed by the Board Nomination Committee to be key management personnel during all or part of the financial year:

Name	Title
Ross Du Vernet	Executive General Manager, Strategy, Transactions & Research
Kevin George	Executive General Manager, Office & Industrial

Related parties (continued)

Key management personnel compensation

	2015	2014
	\$	\$
Compensation
Short-term employee benefits	7,453,029	7,428,170
Post employment benefits	219,677	189,291
Other long-term benefits	-	47,700
Security-based payments	2,595,615	1,995,116
	10,268,321	9,660,277

Equity instrument disclosures relating to key management personnel

The relevant interest in DXS stapled securities held during the financial year by each key management personnel, including their personally related parties, are set out below:

	Opening Balance 1 July 2014	One-for-six security consolidation	Purchases	Performance rights granted	Other change	Opening Balance 30 June 2015
Directors	3,993,960	(3,328,298)	8,334	394,191	-	1,068,187
Other key management personnel	1,324,458	(1,103,715)	-	127,653	-	348,396
Total	5,318,418	(4,432,013)	8,334	521,844	-	1,416,583

The DXFM Board has approved a grant of performance rights to DXS stapled securities to eligible participants (refer to note 22).

There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2015 and 30 June 2014.

Parent entity disclosures

The financial information for the parent entity, DEXUS Operations Trust has been prepared on the same basis as the consolidated Financial Statements except as set out below:

Distributions received from associates are recognised in the parent entity's Statement of Comprehensive Income, rather than being deducted from the carrying amount of these investments.

Interests held by the parent entity in controlled entities are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency.

(a) Summary financial information

The individual Financial Statements for the parent entity show the following aggregate amounts:

	2015	2014
	\$'000	\$'000
Total current assets	126,398	55,147
Total assets	769,517	400,669
Total current liabilities	446,098	68,419
Total liabilities	595,417	253,797
Equity
Contributed equity	238,829	222,086
Retained profits	(64,729)	(75,214)
Total equity	174,100	146,872
Net profit/(loss) for the year	10,484	21,145
Total comprehensive income/(loss) for the year	10,484	21,145

(b) Investments in controlled entities

The parent entity has the following investments:

		Ownership interest
		2015	2014
Name of entity	Principal activity	%	%
Barrack Street Trust	Office property investment	100.0	100.0
DEXUS Holdings Pty Limited	Management services	100.0	100.0
DEXUS Projects Pty Limited	Industrial property development	100.0	100.0
DEXUS Office Projects Pty Limited	Office property development	100.0	100.0
DXO Subtrust No. 1	Holding Company	100.0	100.0
DEXUS US Holdings Pty Limited	Industrial property investment	100.0	100.0
LBP Holdings Pty Limited	Industrial property development	100.0	-

(c) Guarantees entered into by the parent entity

Refer to note 13 for details of guarantees entered into by the parent entity.

(d) Contingent liabilities

The parent entity had no contingent liabilities as at 30 June 2015 (2014: nil).

Parent entity disclosures (continued)

(e) Capital commitments

The following amounts represent capital expenditure of the parent entity on investment properties contracted at the end of the reporting period but not recognised as liabilities payable:

	2015	2014
	\$'000	\$'000
Investment properties	4,148	-
Total capital commitments	4,148	-

Note 25

Subsequent events

On 31 July 2015, settlement occurred on the sale of 154 O'Riordan Street, Mascot, NSW for gross proceeds of \$32.0 million.

On 21 July 2015, settlement occurred on the sale of 5-13 Rosebery Avenue and 25-55 Rothschild Avenue, Rosebery, NSW for gross proceeds of \$171.0 million.

Since the end of the year, other than the matters disclosed above, the Directors are not aware of any matter or circumstance not otherwise dealt with in their Directors' Report or the Financial Statements that has significantly or may significantly affect the operations of the Trust, the results of those operations, or state of the Trust's affairs in future financial periods.