GDI PROPERTY GROUP — Annual Report 2013

Dec 16, 2013

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Financial report for the year ended 30 June 2013

GDI Funds Management Limited Level 23, 56 Pitt Street Sydney, NSW 2000 ACN 107 354 003

Table of contents

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	Page
Financial statements
Statement of comprehensive income	1
Balance sheet	2
Notes to the financial statements	$3 - 6$
Trustee's declaration

Statement of comprehensive income for the year ended 30 June 2013

	2013	2012
	S	\$
Revenue and other income
Property revenue	10,226,521	10,797,891
Recovery of property expenses	2,248,008	3,376,405
Interest income	213,439	404,521
Total revenue	12,687,968	14,578,817
Expenses
Finance costs	3,833,085	3,848,191
Property expenses and outgoings	3,922,050	3,988,504
Asset management fees	695,500	695,500
Loan establishment fees amortised	227,812	378,855
Audit and accounting fees	22,900	7,600
Other trust expenses	719,821	119,553
Total expenses	9,421,168	9,038,203
Net (loss)/profit before distribution	3,266,800	5,540,614
Distributions to unitholders	5,873,750	5,873,750
Net (loss)	(2,606,950)	(333, 136)
Total comprehensive (loss) for the year	(2,606,950)	(333, 136)
(Loss) attributable to the unitholders of the trust	(2,606,950)	(333, 136)
Total comprehensive (loss) attributable to the unitholders of the trust	(2,606,950)	(333, 136)

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The statement of comprehensive income should be read in conjunction with the accompanying notes.

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Balance sheet as at 30 June 2013
	2013	2012
	\$	\$
Current assets
Cash and cash equivalents	2,813,727	5,919,784
Receivables	658,099	885,077
Prepayments	239,516	243,410
Total current assets	3,711,342	7,048,271
Non-current assets
Investment property	110,628,960	109,979,941
Total non-current assets	110,628,960	109,979,941
Total assets	114,340,302	117,028,212
Current liabilities
Payables	945,465	1,088,165
Loans and borrowings	54,922,606
Total current liabilities	55,868,071	1,088,165
Non-current liabilities
Payables	39,798	205,870
Loans and borrowings		54,694,794
Total non-current liabilities	39,798	54,900,664
Total liabilities	55,907,869	55,988,829
Net assets attributable to unitholders	58,432,433	61,039,383
Unitholders' equity
Unitholders' contribution	63,500,000	63,500,000
Unit issue costs	(2,605,313)	(2,605,313)
Accumulated losses	(2,462,254)	144,696
Total unitholders' equity	58,432,433	61,039,383

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The balance sheet should be read in conjunction with the accompanying notes.
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Note 1: Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

A. Basis of preparation

The Trustee of GDI No.34 Sydney CBD Office Trust (the "Trust") is GDI Funds Management Limited (the "Trustee"). The directors of the Trustee have prepared the financial statements of the Trust on the basis that the Trust is a non-reporting entity, because there are no users dependent on general purpose financial statements. The financial statements are therefore special purpose financial statements that have been prepared in order to meet the needs of the unitholders.

The financial statements have been prepared on an accruals basis and are based on historical costs unless otherwise stated in the notes. The accounting policies that have been adopted in the preparation of the statements are as follows:

B. Investment property

Investment property is initially recorded at cost, being the acquisition price plus the cost of acquisition. All property acquisition costs are capitalised into the value of the investment property at the time of purchase to reflect the total acquisition cost in the balance sheet. Additions and other expenditure on the investment property which are capital in nature are capitalised to the investment property as incurred. At the reporting date the investment property is carried at fair value.

At each reporting date the carrying value is assessed by the Directors and, where the carrying value differs materially from the assessed fair value, an adjustment is made to the carrying value of the investment property. Fair value is determined by independent market valuation or an assessment by the Directors. An independent valuation of the investment property is to be obtained generally at least every three years or more frequently if the Trustee believes there is a significant change in fair value within the reporting period. Where the property has not been independently re-valued during the period, the Directors may make an assessment of fair value.

In determining the fair value, the capitalisation of net market income method discounting of future cash flows to their present value has been used. These approaches require assumptions and judgement in relation to the future receipt of contractual rentals, expected future market rentals, rental void periods, maintenance requirements property capitalisation rate or estimated yield and make reference to market evidence of transaction prices for similar properties. If such prices are not available then the fair value of the investment property is determined using assumptions that are mainly based on market conditions existing at each reporting date.

The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

Gains and losses arising from the changes in fair values of the investment property are included in the statement of comprehensive income in the period in which they arise.

Note 1: Summary of significant accounting policies

C. Significant accounting judgements, estimates and assumptions

The Trust may make estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial period. Estimates are continually evaluated and based on historical examination and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant accounting judgements i.

In the process of applying the Trust's accounting policies, management has made the following judgement, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Operating lease commitments - Trust as lessor

The entity has determined that it retains all the significant risks and rewards of property ownership and has thus classified the leases as operating leases.

Significant accounting estimates and assumptions ij.

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. Other than the estimation of the fair values of investment properties described in note 1(b), there are no key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of the Trust's assets and liabilities within the next annual reporting period.

D. Revenue and receivables

Income is recognised to the extent that it is probable that the economic benefits will flow to the Trust and the income can be reliably measured. The following specific recognition criteria must also be met before income is recognised:

Rents raised are on terms in accordance with individual leases; however they are generally due on the first day of each month.

The credit risk on financial assets in the balance sheet is represented in the carrying amount of the asset, net of any provision for doubtful debts.

Interest income is recognised on an accruals basis using the effective interest rate method.

E. Expenses

All expenses including rates and taxes, and other outgoings are recognised in the statement of comprehensive income on an accruals basis.

F. Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at the amortised cost using the effective interest method less any impairment losses (bad debts). An estimate of provision for doubtful debts is made when collection is no longer probable. Bad debts are written off the statement of comprehensive income as incurred.

Note 1: Summary of significant accounting policies

G. Payables

Payables are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Trust, and include outstanding settlements on the purchase of investment property.

H. Taxation

Under current legislation, the Trust is not liable to pay income tax since, under the terms of the Trust Constitution the unitholders are presently entitled to the income of the Trust.

Distributable income $\mathbf{L}$

In accordance with the Trust constitution, the Trust fully distributes its distributable income to unitholders each tax period. Such distributions are determined by reference to the taxable income of the trust. Distributions are recognised in the statement of comprehensive income as financial costs attributable to the unitholders.

Distributable income does not include unrealised gains and losses on the net value of investments, accrued income not yet assessable, expenses provided for or accrued but not yet deductable, tax free or tax deferred income and realised capital losses which are retained to offset future realised capital gains. Distributable income may include adjustments to revenue in relation to straight lining of fixed income and landlord owned fit out contributions. Distributions are payable at the end of each quarter.

J. Terms and conditions of units on issue

Issued and paid up units are recognised at fair value of the consideration received by the Trust.

Each unit confers upon the unitholder an equal interest in the Trust (subject to income entitlements), and is of equal value. A unit does not confer an interest in any particular asset or investment of the Trust.

Unitholders have various rights under the Trust constitution, including the right to:

• Receive income distributions
• Attend and vote at meetings of unitholders
• Participate in the termination and winding up of the Trust

The rights, obligations and restrictions attached to each unitholder are identical in all respects.

K. Goods and Services Tax (GST)

All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.

Note 1: Summary of significant accounting policies

L. Finance costs

Finance costs incurred in establishing borrowing facilities are capitalised and amortised over the term of the facility.

Finance costs incurred in drawing funds under a loan are expensed as incurred.

M. Loans and borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.

Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowing using the effective interest rate method.

N. Increase/decrease in net assets attributable to unitholders

Income not distributed is included in net assets attributable to unitholders. Nondistributable income is transferred directly to net assets attributable to unitholders and may consist of unrealised changes in the fair value of investment property.

O. Cash and cash equivalents

Cash and cash equivalents include deposits held at call with a bank or financial institution with an original maturity date of three months or less. Cash and cash equivalents also include highly liquid investments which are readily convertible to cash on hand at the Trustee's option and which the day to day management of the Trusts cash requirements.

P. Going concern

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

The net loss for the Trust for the financial year ended 30 June 2013 was \$2,606,950. The deficiency in working capital at 30 June 2013 was \$52,156,729.

The Trustee nevertheless believes that it is appropriate to prepare the financial report on a going concern basis for the following reasons:

• this net working capital deficiency is as a result of investment property of \$110,628,960 being classified as a non-current asset and the related borrowing amounting to \$54,922,606 being classified as a current liabilities on the basis it is due for renew/ roll-over within the next 12 months:
• the Trust has complied with its loan covenants in accordance with the bank loan agreement dated 1 November 2010 the Trustee believes that the bank will renew the loan facilities upon its expiry and;
• the budget for the year ending 30 June 2013 demonstrates the Trust will be in a profitable position and therefore will be able to pay its debts as and when they fall due in ordinary course of business.

Trustee's declaration

The directors of the trustee company declare that the trust is not a reporting entity and that this special purpose financial report should be prepared in accordance with the accounting policies outlined in Note 1 of the financial statements.

In accordance with the Board of Directors, the directors of the trustee company declare that:

• The financial statements and notes, as set out on pages 1 to 6, present fairly the $1.$ trust's financial position as at 30 June 2013 and its performance for the year ended on that date in accordance with the accounting policies described in Note 1 to the financial statements; and
• 1. In the directors' opinion, there are reasonable grounds to believe that the trust will be able to pay its debts as and when they become due and payable.

Anthony Charles Veale

Dated this 31^st day of July 2013

Director:

Contract Contract

Charlered Accountants and Business Advisers

GDI NO. 34 SYDNEY CBD OFFICE TRUST

INDEPENDENT AUDITOR'S REPORT TO THE UNITHOLDERS OF GDI NO. 34 SYDNEY CBD OFFICE TRUST

We have audited the accompanying financial report, being a special purpose financial $GPOBox3555$ report, of GDI No. 34 Sydney CBD Office Trust (the trust), which comprises the balance Sydney NSW 2001 sheet as at 30 June 2013, the statement of comprehensive income for the year then ended, $_{\rm Ph: (612)~9263~2600}$ notes comprising a summary of significant accounting policies and other explanatory Fx: (612) 9263-2800 information, and the trustees' declaration.

Trustee's Responsibility for the Financial Report

The trustees is responsible for the preparation and fair presentation of the financial report PARRAMATIA In accordance with the accounting policies described in Note 1 to the financial statements ${\text{Ph: } {612} \, 9687\, 2100}$ and for such internal control as the trustees determines is necessary to enable the $F{X:1612}$ 9687 2900 preparation and fair presentation of a financial report that is free from material PENRITH misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We have conducted our audit in accordance with Australian Auditing Standards. Those Fx: (613) 8678 1699 standards require that we comply with relevant ethical requirements relating to audit PERTH engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and BRISBANE disclosures in the financial report. The procedures selected depend on the auditor's Ph; (617) 3211 1250 judgment, including the assessment of the risks of material misstatement of the financial Fx: (617) 3211 1249 report, whether due to fraud or error. In making those risk assessments, the auditor GOLD COAST considers internal control relevant to the company's preparation of the financial report that $_{\text{Ph: }617}$ 5538 2322 gives a true and fair view in order to design audit procedures that are appropriate in the $\frac{1}{1617}$ (617) 5526 8599 circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

In conducting our audit, we have complied with the independence requirements of the Australian professional ethical pronouncement.

SYDNEY

Level 29 St Martin's Tower 31 Market Street Sydney NSW 2000 Australia

NEWCASTLE

Ph: (612) 4969 5521 Fx: (612) 4969 6059

Ph: (612) 4721 8144 Fx: (612) 4721 8155

MELBOURNE

Ph: (613) 8678 1600

Ph: (618) 6557 6200 Fx: (618) 9218 8950

A member of AGN International Ltd. a worldwide association. of separate and independent accountino and consulting firms

www.hallchadwick.com.au

SYDNEY . NEWCASTLE . PARRAMATTA . PENRITH . MELBOURNE . PERTH . BRISBANE . GOLD COAST

Liability limited by a scheme approved under Professional Standards Legislation.

GDI NO. 34 SYDNEY CBD OFFICE TRUST

INDEPENDENT AUDITOR'S REPORT TO THE UNITHOLDERS OF GDI NO. 34 SYDNEY CBD OFFICE TRUST

Opinion

In our opinion, the financial report presents fairly, in all material respects, the financial position of GDI No. 34 Sydney CBD Office Trust as at 30 June 2013 and its financial performance for the year then ended in accordance with the accounting policies described in Note 1 to the financial statements.

Basis of Accounting

Without modifying our opinion, we draw attention to Note 1 of the financial report, which describes the basis of accounting. The financial report has been prepared for the purpose of fulfilling the directors' financial reporting responsibilities under the Trust Deed. As a result, the financial report may not be suitable for another purpose.

Hall Chadwick Level 29, St Martins Tower 31 Market Street, SYDNEY NSW 2000

Drew Townsend Partner Dated: 31 July 2013

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