GDI PROPERTY GROUP

GDI Property Group (ASX: GDI) GDI Property Group Limited ACN 166 479 189 GDI Property Trust ARSN 166 598 161

Appendix 4E Results for announcement to the market Period ended 30 June 2017

Rule 4.3A

Appendix 4E Results for announcement to the market GDI PROPERTY GROUP

The Appendix 4E should be read in conjunction with the annual financial report of GDI Property Group for the year ended 30 June 2017.

1. GDI Property Group

This report is for GDI Property Group, comprising the stapled entities GDI Property Group Limited (ACN 166 479 189) (“the Company”) and GDI Property Trust (ARSN 166 598 161) (“the Trust”).

GDI Property Group was formed on 16 December 2013 by the stapling of shares in the Company to units in the Trust. Each stapled security consists of one share in the Company and one unit in the Trust, which pursuant to a Co‐operation Deed dated 25 November 2013, cannot be dealt with or traded separately.

The responsible entity of the Trust is GDI Funds Management Limited (ACN 107 354 003, AFSL 253 142), a wholly owned subsidiary of the Company.

For the purposes of statutory reporting, the stapled entity, GDI Property Group, is accounted for as a consolidated group. Accordingly, one of the stapled entities must be the ‘deemed acquirer’ of the other, with the Company being chosen as the deemed acquirer of the Trust.

2. Reporting period

The financial information contained in this report is for the year ended 30 June 2017.

3. Highlights of the results

The financial information contained in this report is for the year ended 3. Highlights of the results	30 June 2017.
	2017	2016	Change
	$m	$m	%
Revenue from ordinary activities	72.1	80.8	(11%)
Comprehensive net profit attributable to securityholders after tax	98.8	51.7	91%
Funds from operations (FFO1)	46.7	49.1	(5%)
Distribution to security holders	(41.7)	(41.8)	‐
	Cents	Cents
Funds from operations per security	8.67	9.11	(5%)
Distributions per security	7.75	7.75	‐
Payout ratio
‐ Distributions as a % of FFO	89.3%	85.0%
‐ Distributions as a % of AFFO2	112.2%	104.5%
Basic earnings per security3	18.34	9.59	91%
Diluted earnings per security3	18.20	9.53	91%
	$m	$m
Total assets	770.0	952.9	(19%)
Total borrowings	79.9	320.1	(75%)
Securityholders equity	620.9	564.5	10%
Market capitalisation	551.2	476.9	16%
	$	$
Net tangible assets per security	1.119	1.012	11%
Security price	1.025	0.885	16%
Securities on issue	537,746,463	538,819,098	‐
Weighted average securities on issue	538,498,642	539,536,668	‐

GDI Property Group (ASX: GDI) GDI Property Group Limited ACN 166 479 189 GDI Property Trust ARSN 166 598 161

Appendix 4E Results for announcement to the market Period ended 30 June 2017

Commentary on the results

Refer to the Directors’ Report of the 2017 annual financial report for a commentary on the results of the Group.

5. Dividends/distributions declared and paid and dividend/distribution reinvestment plan

Distributions/dividends declared or paid in respect of the reporting period were:

				Franked
		Amount per	Total	amount per
		security	distribution	security
		Cents	$’000	cents
2016	final – paid 31 August 2016	3.875	20,879	‐
2017	interim – paid 28 February 2017	3.875	20,879	‐
2017	final – declared 15 June 2017	3.875	20,838	‐

No distribution reinvestment plan was operated by GDI Property Group.

6. Changes in control over group entities

There were no acquisitions or disposals of controlled entities during the period.

Compliance statement

This Appendix 4E has been prepared in accordance with AASB Standards (including Australian interpretations) and other standards acceptable to ASX. This Appendix 4E and the financial reports upon which it is based use the same accounting policies. The information contained in this Appendix 4E is based on the attached audited financial report for the financial year ended 30 June 2017, which together with the auditors opinion, has been lodged with the ASX.

1 FFO is a Property Council of Australia definition which adjusts AIFRS net profit for non‐cash changes in investment properties, non‐cash impairment of goodwill, non‐cash fair value adjustments to financial instruments, amortisation of incentives, straight‐line adjustments and other unrealised one‐off items. GDI Property Group also adjusts funds management performance fees charged that remain unpaid from its calculation of FFO. A reconciliation of total comprehensive income for the period to FFO is provided at page 4, section 1.3 of the Directors’ Report.
2 AFFO adjusts FFO for incentives paid during the year, maintenance capex and other adjustments.
3 This calculation is based on the comprehensive profit attributable to stapled security holders of GDI Property Group.

GDI Property Group Limited ACN 166 479 189

Annual Financial Report 30 June 2017

GDI Property Group comprises GDI Property Group Limited ACN 166 479 189 (the Company) and its subsidiaries and GDI Property Trust ARSN 166 598 161 (the Trust) and its subsidiaries. The responsible entity of the Trust is GDI Funds Management Limited ACN 107 354 003, AFSL 253 142, a wholly owned subsidiary of the Company.

GDI PROPERTY GROUP

Directors’ Report ......................................................................................................................................................................... 2 Auditors’ Independence Declaration ....................................................................................................................................... 29 Financial Report ........................................................................................................................................................................ 30 Consolidated Statement of Profit or Loss and Other Comprehensive Income ..................................................................... 30 Consolidated Statement of Financial Position ...................................................................................................................... 31 Consolidated Statement of Changes in Equity ...................................................................................................................... 32 Consolidated Statement of Cash Flows ................................................................................................................................. 34 Notes to the Financial Statements ........................................................................................................................................ 35 1. Summary of significant accounting policies .............................................................................................................. 35 2. Property revenue ....................................................................................................................................................... 46 3. Finance costs ............................................................................................................................................................. 46 4. Corporate and administration expenses ................................................................................................................... 46 5. Income tax expense/benefit ...................................................................................................................................... 47 6. Cash and cash equivalents ......................................................................................................................................... 47 7. Trade and other receivables ...................................................................................................................................... 47 8. Other assets ............................................................................................................................................................... 48 9. Non‐current asset held for sale ................................................................................................................................. 48 10. Investment properties ............................................................................................................................................... 48 11. Plant and equipment ................................................................................................................................................. 52 12. Derivative financial instruments ................................................................................................................................ 52 13. Deferred tax assets .................................................................................................................................................... 52 14. Intangible assets ........................................................................................................................................................ 53 15. Trade and other payables .......................................................................................................................................... 55 16. Provisions .................................................................................................................................................................. 55 17. Borrowings ................................................................................................................................................................ 55 18. Contributed equity .................................................................................................................................................... 56 19. Reserves and retained earnings ................................................................................................................................ 57 20. Dividends/Distributions paid/payable ....................................................................................................................... 58 21. Earnings per security/unit ......................................................................................................................................... 59 22. Parent entity disclosures ........................................................................................................................................... 59 23. Segment reporting ..................................................................................................................................................... 60 24. Commitments ............................................................................................................................................................ 63 25. Reconciliation of net profit to cash inflow from operating activities ........................................................................ 63 26. Key management personnel compensation .............................................................................................................. 64 27. Related party transactions ........................................................................................................................................ 65 28. Capital and financial risk management ..................................................................................................................... 67 29. Fair value measurements .......................................................................................................................................... 70 30. Security‐based payments .......................................................................................................................................... 72 31. Controlled entities ..................................................................................................................................................... 75 32. Auditors’ remuneration ............................................................................................................................................. 76 33. Business combinations .............................................................................................................................................. 76 34. Non‐controlling interests ........................................................................................................................................... 76 35. Contingent liabilities .................................................................................................................................................. 77 36. Events after the reporting date ................................................................................................................................. 77 Directors’ Declaration ................................................................................................................................................. 79 Independent Auditors’ Report .................................................................................................................................... 80

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

The Directors of GDI Property Group Limited ACN 166 479 189 (“the Company”) present their report together with the financial report of the Company and its controlled entities and GDI Property Trust ARSN 166 598 161 (“the Trust”) and its controlled entities for the financial year ended 30 June 2017. Shares in the Company are stapled to units in the Trust to form GDI Property Group.

The Financial Reports of the Company and its subsidiaries and the Trust and its subsidiaries have been presented jointly in accordance with ASIC Class Order 13/1050 relating to combining or consolidating accounts under stapling and for the purpose of fulfilling the requirements of the Australian Securities Exchange (“ASX”). The Responsible Entity of the Trust is GDI Funds Management Limited ACN 107 354 003, AFSL 253 142. GDI Funds Management Limited is a wholly owned subsidiary of the Company and shares a common board.

The Company was incorporated on 5 November 2013 and the Trust established on 4 November 2013, becoming registered as a managed investment scheme on 18 November 2013. The Company and the Trust remained dormant until shares in the Company were stapled to units in the Trust on 16 December 2013 as part of an Initial Public Offer (“IPO”) of stapled securities, forming GDI Property Group. GDI Property Group commenced trading on the ASX on 17 December 2013.

The registered office and principal place of business of the Company and its subsidiaries and the Trust and its subsidiaries is Level 23, 56 Pitt Street, Sydney NSW 2000.

1. Operating and financial review

1.1 About GDI Property Group

GDI Property Group is an integrated, internally managed property and funds management group with capabilities in ownership, management, refurbishment, leasing and syndication of office and industrial properties.

The Trust is internally managed and owns a portfolio of office properties across Australia (“Portfolio”). As at 30 June 2017, the Portfolio comprised three wholly owned properties in CBD locations with a combined value of $620.6 million:

Mill Green Complex, which comprises three Buildings: 197 St Georges Terrace, 5 Mill Street and 1 Mill Street, Perth;
66 Goulburn Street, Sydney; and
50 Cavill Avenue, Surfers Paradise.

The Company owns an established funds business (“Funds Business”) which, in addition to managing the Trust, manages unlisted and unregistered managed investment schemes with Assets Under Management (“AUM”) of approximately $323.4 million.

In addition to its wholly owned Portfolio, the Trust may also hold stakes in the unlisted and unregistered managed investment schemes managed by the Funds Business. As at 30 June 2017, GDI Property Trust owns 43.68% of GDI No. 42 Office Trust. GDI No. 42 Office Trust owns two assets with a combined book value of $99.0 million.

GDI Property Group has a disciplined value based investment approach and a philosophy of acquiring properties that offer an opportunity for GDI Property Group to create value through active asset management, including leasing and selective capital improvements.

1.2 Strategy

GDI Property Group has two operating segments, property and funds management. All property assets owned are held by the Trust via wholly owned subsidiaries. The Company operates the Funds Business.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

GDI Property Group’s strategy is to generate high risk adjusted total returns (distributions plus net tangible asset growth) by:

maximising the income and capital potential in the existing Portfolio by continuing the asset management strategies adopted for each property;
acquiring well located properties at below replacement cost that offer an opportunity to create value through active asset management, including leasing and selective capital improvements;
optimising the outcome for investors in the existing unlisted property funds and therefore generating performance fees; and
continuing to grow the AUM in the Funds Business by establishing new unlisted property funds.

GDI Property Group believes that this active strategy is unique in the Australian REIT market.

Property

GDI Property Group is an owner of well‐located CBD office properties diversified by geography, tenant and lease terms. Properties are intended to be acquired below management’s opinion of value, having regard to replacement cost, with multiple exit options and which have typically been under managed or undercapitalised.

Over time, it is the intention to increase net rental income and/or capital values via asset management strategies including:

improved leasing and tenant diversity;
selective capital improvements;
focusing on improving a property’s sustainability credentials;
management of outgoings;
incremental revenue initiatives including signage rent, additional car park income, storage, communications and other means; and
pursuing adaptive re‐use options.

It is expected the investment in Australian office properties on balance sheet will result in a reliable source of rental income for securityholders. Over time, GDI Property Group may divest some properties, if in the opinion of management, the value has been maximised or it no longer meets the investment objectives of GDI Property Group.

GDI Property Group also intends to acquire properties, funded by either recycling capital or utilising headroom within the gearing policy of a loan to value ratio (LVR) of less than 40%. The investment mandate of the Trust is to acquire well‐located CBD office properties, which are typically at least $100.0 million in value.

Funds management

The Company, through wholly owned subsidiaries, manages six unlisted, unregistered managed investment schemes with total AUM of $323.4 million. The Company has an investor base of over a 1,000 high net worth investors, many of whom have a history of repeat investment.

The Funds Business generates income by way of:

due diligence and acquisition fees;
asset management fees;
performance fees;
disposal fees;
other fees including leasing, project management and financing; and
where a stake in a fund is held, distributions and capital gains.

The Company intends to continue to establish unlisted, unregistered managed investment schemes and as a consequence grow its funds management fee income.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

1.3 Review of operations

GDI Property Group results summary

The Board monitors a range of financial information and operating performance indicators to measure performance over time. The Board uses several measures to monitor the success of GDI Property Group’s overall strategy, most importantly Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”) performance versus budgets and the Group’s total return, calculated as the movement in NTA plus distributions. FFO is a Property Council of Australia definition which adjusts statutory AIFRS net profit for non‐cash changes in investment properties, non‐cash impairment of goodwill, non‐cash fair value adjustments to financial instruments, amortisation of incentives, straight‐line adjustments and other unrealised one‐off items. GDI Property Group measures its absolute total return by the movement in net tangible asset backing per security plus distributions.

The reconciliation between GDI Property Group’s FFO and its statutory profit is as follows:

backing per security plus distributions. The reconciliation between GDI Property Group’s FFO and its statutory profit is as follows:
	Group
	2017 2016 $'000 $'000
Total comprehensive income for the year Portfolio acquisition and other transaction costs Contribution resulting from consolidation of GDI No. 42 Office Trust Distributions / funds management fees received from GDI No. 42 Office Trust Cash received from guarantees Straight lining adjustments Amortisation and depreciation Net fair value gain on investment property Net fair value gain on interest rate swaps Gain on termination of interest rate swaps Loss on non‐current asset held for sale Other FFO adjustments	107,316 47,701 407 8,988 (5,864) (149) 2,862 892 4,091 2,171 (1,510) (1,390) 8,561 6,113 (69,647) (16,539) (1,885) (390) (35) ‐ 12 1,233 1,229 520
Funds From Operation	45,536 49,147

Operating segment results

Individual operating segment results are provided below:

Operating segment results Individual operating segment results are provided below:
Property Division FFO1 Funds Management FFO1 Other	FY17 FY16 $’000 $’000
	53,715 60,309 6,438 4,280 59 52
FFOpre corporate,administration and net interest	60,212 64,641
Less: Net interest expense Corporate and administration expenses Income tax(expense) /benefit	(7,816) (8,892) (7,205) (6,354) 345 (248)
Total FFO	45,536 49,147

Property FFO and Funds management FFO only refers to the revenue related items included / excluded from FFO. See Segment reporting, Note 23 of the Financial Report for a detailed breakdown of all items included in the Property and Funds management segment results.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Property

During the financial year, GDI Property Group sold two of its five wholly owned properties, 25 Grenfell Street, Adelaide (on 5[th] January 2017) and 307 Queen Street, Brisbane (on 31[st] January 2017). 25 Grenfell Street, Adelaide, was sold for $125.1 million, netting approximately $124.0 million after selling and other costs, a $10.0 million premium to its last independent valuation of $114.0 million. 25 Grenfell Street, Adelaide, was purchased in 2009 by the then private GDI group for $76.0 million. The Property was one of four that was owned by GDI Property Group on listing in December 2013, with a then valuation of $109.0 million.

307 Queen Street, Brisbane, was sold for $142.2 million, netting approximately $141.0 million after selling and other costs, compared to the property’s last independent valuation of $126.5 million. GDI Property Group purchased 307 Queen Street, Brisbane, in December 2013 for $113.8 million on a like for like basis. At the time the property had occupancy of approximately 60% of net lettable area (NLA) and following an extensive refurbishment since taking control GDI Property Group was able to increase occupancy to over 85% of NLA.

Primarily as a result of these two sales, the Property Division delivered lower FFO of $53.7 million (FY16: $60.3 million) (pre corporate, administration and interest expenses and interest income), from the previous year. The impact of these asset sales was partially offset by the full year contribution from 50 Cavill Avenue, Surfers Paradise, which was acquired in February 2016. Importantly GDI Property Group does not include any profit or loss on sale of a property in its FFO or AFFO.

GDI Property Group’s portfolio had a number of material lease expiries in FY17, most notably 14,300sqm at 66 Goulburn Street, Sydney (August 2016), which together with existing vacancies at 1 Mill Street, Perth, and the recently acquired 50 Cavill Avenue, Surfers Paradise, meant that the focus of FY17 was leasing, with GDI Property Group achieving some outstanding results. At 66 Goulburn Street, Sydney, three of the tenants with FY17 expiries renewed (3,900sqm), while Consolidated Media Holdings Limited vacated its 10,432sqm in August 2016. GDI Property Group has had excellent success at releasing this space, with all but 483sqm[1] leased or subject to agreed terms. At 50 Cavill Avenue, Surfers Paradise, occupancy has increased to 90%[1] , up from 62%[1] at 30 June 2016. This leasing success at 50 Cavill Avenue, Surfers Paradise, has been a result of the capital expenditure program with the aim of recreating the Gold Coast’s preeminent office building.

At Mill Green, Perth, due to a 1,670sqm expiry in May in 197 St Georges Terrace, occupancy has decreased slightly to 79%[1] across the three properties, down from 81% at 30 June 2016. Pleasingly, occupancy in 5 Mill Street, Perth, the ‘middle’ asset in the three asset complex, has increased to 98% with only one suite remaining vacant. 1 Mill Street, Perth, the smallest of the three assets in the complex, remains vacant.

GDI Property Group also owns 43.68% of the units on issue of GDI No. 42 Office Trust, which owns 223 – 237 Liverpool Road, Ashfield and 235 Stanley Street, Townsville. Although 235 Stanley Street, Townsville, benefits from a two year rent guarantee, underlying occupancy increased during the year to 88% from 76% at 30 June 2016, with continued interest in the balance of the space. 223 – 237 Liverpool Road, Ashfield, continues to be fully occupied by the New South Wales government.

GDI Property Group’s property portfolio, including these two assets held by GDI No. 42 Office Trust, is valued at $719.6 million. During the year, all assets were independently revalued at least once either as at 31 December 2016, as at 30 June 2017, or both, resulting in an increase in the valuations over the year of $62.6 million. The significant revaluations of 66 Goulburn Street, Sydney (+$35.5 million) and 50 Cavill Avenue, Surfers Paradise (+$22.6 million), was partly offset by a decrease in the value of Mill Green, Perth (‐$6.0 million). Both assets in GDI No. 42 Office Trust were revalued to a combined total of $99.0 million, an increase of $10.5 million from the combined acquisition price of $88.5 million.

GDI PROPERTY GROUP DIRECTORS’ REPORT

For the financial year ended 30 June 2017

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financialyear ended 30 June 2017
	Group
	As at 30 June 2017 As at 30 June 2016 Variance $'000 $'000 %
Occupancy1,2,3 Weighted average lease expiry1,2,3 Weighted average capitalisation rate2,4	88.2% 79.3% 9% 3.6 years 4.7 years 1.7 years 7.32% 7.55% (0.11%)

As at 1 August 2017, including signed Heads of Agreement
Includes the assets held by GDI No. 42 Office Trust
Based on NLA
Weighted average by property valuation.

Funds management

GDI Property Group’s funds management business has a 24 year track record of successfully managing unlisted, unregistered managed investment schemes. Over that time period GDI Property Group has established nearly 40 unlisted, unregistered managed investment schemes, with over 30 of those now having been terminated. To date, no unlisted, unregistered managed investment scheme has returned a negative Internal Rate of Return (‘IRR’). GDI Property Group’s successful track record is partly a result of its disciplined approach to acquisition opportunities and given where capital markets are pricing assets, GDI Property Group did not acquire any assets for its funds management business in FY17, nor did it establish any new funds.

The highlight of the year was the sale of 80 George Street, Parramatta for $51.88 million, with settlement occurring in January 2017. 80 George Street, Parramatta was acquired in June 2015 and the sale price reflected a 34% gross premium to the acquisition price of $38.70 million. Investors in GDI No. 40 Office Trust received an IRR on their equity invested of over 19%, with GDI Property Group also generating $1.6 million of disposal and performance fees.

When GDI Property Group acquired 80 George Street, Parramatta, it immediately commenced a refurbishment program, including upgrading the foyer and painting the exterior. Lift lobbies were also upgraded as they became available. On the back of this refurbishment program, GDI Property Group was able to drive net rents between $50 and $95 per sqm higher, thereby significantly increasing both the passing income and the adopted market rent of the property. GDI Property Group also successfully negotiated an extension of Westpac Banking Corporation’s lease through to 30 September 2020, increasing the weighted average lease expiry to over 4 years as at 30 June 2016 from 2.9 years at acquisition.

The Funds Business segment delivered FFO of $6.4 million, significantly higher than the $4.3 million delivered in FY16. A large contributor to this is GDI No. 42 Office Trust, which is consolidated for statutory accounting purposes, but for FFO purposes GDI Property Group recognises the funds management fees generated on the 56.32% of the units it doesn’t own ($0.3 million) and the quarterly distributions on the 43.68% it does own ($2.5 million).

During FY17 GDI Investment Management Pty Limited fully impaired the recoverability of $449,000 of performance fees charged to GDI No. 29 GDI Office Fund that remained unpaid at 30 June 2017. As it had not been paid, this performance fee had never been included in GDI Property Group’s FFO, and accordingly, the impairment has been written back for FFO purposes.

Net interest expense

GDI Property Group’s net interest expense decreased significantly from FY16 primarily due to the lower amount of drawn debt following the settlements of 307 Queen Street, Brisbane and 25 Grenfell Street, Adelaide. As at 30 June 2017, GDI Property Group’s principal facility was drawn to $49.4 million, secured by a security pool independently valued at $620.6 million, a loan to value ratio (LVR) of 8%.

Although the interest expense of GDI No. 42 Office Trust is included in the statutory accounts, it is not included in GDI Property Group’s FFO.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Unallocated corporate administration expenses

GDI Property Group’s operating expenses increased by approximately $0.9 million from the previous financial year, principally due to the issuance of performance rights to employees. As the performance rights are expensed over a four year vesting period (the year of the performance period and the three vesting years), until such time as previous full year issues of performance rights vest or lapse (FY18), the employee benefits expense will increase with each new grant. Other corporate administration expenses remained largely unchanged from FY16.

Capital management

GDI Property Group’s balance sheet is in a strong position with a LVR on the principal facility of 8%, below the Board’s maximum LVR of 40% and the banks covenant of 50%. Following the settlements in January 2017 of 25 Grenfell Street, Adelaide and 307 Queen Street, Brisbane, GDI Property Group reduced the size of its principal facility by $210.0 million and reduced the amount outstanding on the facility by $240.5 million. GDI Property Group’s principal facility is now $115.0 million, with drawn debt of $49.4 million and undrawn debt of $65.6 million.

As GDI No. 42 Office Trust is consolidated in to GDI Property Group’s accounts, its loan, secured by the two assets in GDI No. 42 Office Trust only, is also shown in the accounts of GDI Property Group. GDI No. 42 Office Trust has drawn debt of $31.0 million, 31% of the independent value of the assets held by GDI No. 42 Office Trust, and undrawn debt of $4.4 million.

This strong financial position enabled GDI Property Group to implement an on‐market buyback of its securities which was announced with the release of the half year results in February 2017. During FY17, GDI Property Group bought and cancelled 1,072,635 securities. Securities on issue now total 537,746,463, down from 538,819,098 at 30 June 2016.

GDI Property Group’s policy is to hedge at least 50% of its drawn debt. Following the repayment of $240.5 million from the principal facility, GDI Property Group terminated $80.0 million of interest rate swaps at a cost of $1.2 million, leaving $40.0 million hedged until December 2018 (81% hedged). As at 30 June 2017, all the drawn debt of GDI No. 42 Office Trust was subject to floating interest rates.

Dividends/distributions declared and paid and dividend/distribution reinvestment plan

Distributions/dividends declared or paid in respect of the reporting period were:

				Franked
		Amount per	Total	amount per
		security	distribution	security
		cents	$’000	cents
2016	final – paid 31 August 2016	3.875	20,879	‐
2017	interim – paid 28 February 2017	3.875	20,879	‐
2017	final – declared 15 June 2017	3.875	20,838	‐

No distribution reinvestment plan was operated by GDI Property Group.

Significant changes in GDI Property Group’s state of affairs

During the year there were no significant changes in GDI Property Group’s state of affairs.

1.4 Future prospects

Property – existing

GDI Property Group’s Portfolio comprises well located properties, with four sides of natural light and floor plates that are easily divisible. Each property in the Portfolio has leasing opportunities, either through current vacancy or impending expiry, with the largest of these now at Mill Green, Perth. GDI Property Group believes that leasing up the current vacancy and addressing the impending expiries will significantly increase the value of the Portfolio.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

The strategy for FY18 for each of the properties in the Portfolio is summarised below:

Asset	Strategy
Mill Green Complex, Perth	 Address the existing vacancy and impending expiries in 197 St Georges
	Terrace, Perth
	 Finalise and execute lease agreements for remaining space in 5 Mill Street
	 Continue to explore leasing opportunities and alternate uses for 1 Mill
	Street,Perth
66 Goulburn Street, Sydney	 Complete the leasing up of the space vacated by Consolidated Media
	Holdings Limited
	 Continue to monitor exit opportunities
50 Cavill Avenue,Surfers Paradise	Complete the refurbishment works and increase occupancyto +/‐ 95%
235 Stanley Street, Townsville	Complete the leasing up of the vacant space
	Commence negotiations with current occupiers about lease extensions
223 – 237 Liverpool Road,Ashfield	Commence negotiations with the existingtenant about lease extension options

GDI Property Group has significant capacity to acquire and fund acquisitions by increasing the size of its principal facility. However, particularly in the Eastern states, GDI Property Group considers that the current environment of low interest rates fuelling very tight capitalisation rates is unsustainable, and that in the not too distant future rising capitalisation rates and increasing supply will result in a greater number of acquisition opportunities at more realistic pricing. GDI Property Group continues to see opportunities in both regional locations and in Perth, and continues to monitor these markets closely.

Funds management

GDI Property Group intends to continue to manage the six unlisted, unregistered managed investment schemes. GDI Property Group also intends to establish at least one new unlisted, unregistered managed investment scheme in FY18. Like GDI No. 42 Office Trust, GDI Property Group may hold a co‐investment position in any new unlisted, unregistered managed investment schemes it establishes. However, the commentary with regards to asset pricing in the Property segment above also holds true for funds management, and GDI Property Group will not acquire assets for the Funds Business that do not offer what GDI Property Group considers to be an appropriate return for the risks involved.

Guidance

GDI Property Group has a constantly evolving property portfolio, capital structure and funds management business. Given the likelihood of asset disposals and acquisitions, both for GDI Property Trust and the Funds Business, GDI Property Group chooses not to provide earnings guidance. However, GDI Property Group remains committed to at least maintaining its current level of distribution of 7.75 cents per security. As this is likely to be higher than GDI Property Group’s FFO and AFFO in FY18, the ability to maintain this is predicated on asset sales and capital recycling.

GDI Property Group will also continue to monitor opportunities to buy back its stock, pursuant to the on market buyback of up to 5% of securities on issue announced at the time of release of its 31 December 2016 results.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

1.5 Risks

1.5 Risks
Risk	Description	Risk mitigation
Property values	There is a risk that the value of GDI Property	 GDI Property Group has a policy of obtaining
	Group’s Portfolio, or individual assets in the	independent valuations for each of its properties
	Portfolio, may fall.	at least annually.
		 GDI Property Group’s Portfolio comprises well
		located properties, has limited exposure to multi
		floor tenants and has floor plates that are easily
		divisible, somewhat insulating the Portfolio from
		adverse influences onpropertyvaluations.
Re‐leasing and	There is a risk that GDI Property Group may not	 GDI Property Group’s Portfolio has only 8% of
vacancy	be able to negotiate suitable lease extensions	NLA subject to leases expiring in FY18.
	with existing tenants or replace outgoing	 GDI Property Group’s Portfolio comprises well
	tenants with new tenants on the same terms (if	located properties and has floor plates that are
	at all) or be able to find new tenants to take	easily divisible, enabling it to meet the demands
	over space that is currently unoccupied.	of both larger and smaller space users
Funding	GDI Property Group’s ability to raise capital on	 GDI Property Group does not intend to raise any
	favourable terms is dependent upon the	additional equity capital during FY18.
	general economic climate, the state of the	 GDI Property Group’s principal facility is drawn
	capital markets and the performance,	to only $49.4 million, with an LVR of 8% against
	reputation and financial strength of GDI	the value of the principal facility’s security pool
	Property Group.	 GDI Property Group has no debt expiring until
		October 2018
		 GDI Property Group would not seek to acquire a
		new property unless it was able to obtain
		fundingon favourable terms.
Income from	 There is a risk that GDI Property Group might	 GDI Property Group has a track record of
Funds Business	not be able to establish new unlisted funds	establishing new unlisted funds based on the
	due to limited investment opportunities,	past performance of its unlisted funds
	and/or limited availability of investor capital.	 GDI Property Group’s investor base consists of
	 GDI Property Group’s ability to raise new	approximately 1,000 high net worth investors
	equity for future unlisted funds may be	who have historically had a high level of repeat
	dependent on our performance managing all	investment.
	the unlisted funds.	 GDI Property Group will only risk option fees and
	 In the circumstances where GDI Property	due diligence costs when it has a high degree of
	Group funds the payment of costs associated	confidence in the eventual success of an unlisted
	with the proposed acquisition of a property	fund.
	by a unlisted fund, and the fund does not
	successfully complete the acquisition of that
	property, there is a risk that the monies will
	not be repaid to GDI PropertyGroup.
Loss of key	The loss of key management personnel could	 GDI Property Group has a competitive
management	cause material disruption to GDI Property	remuneration structure to retain key talent.
personnel	Group’s activities in the short to medium term	 Steve Gillard has a significant interest (+5.5%) in
	and could result in the loss of key relationships	GDI Property Group.
	and expertise which could have a material
	adverse impact on current and future earnings.
Capital	While GDI Property Group will undertake	 GDI Property Group and its executives have a
expenditure	reasonable due diligence investigations prior to	long track record of acquiring properties and
requirements	acquiring properties, there can be no assurance	undertaking due diligence investigations.
	that properties will not have defects or
	deficiencies, or that unforeseen capital

GDI PROPERTY GROUP DIRECTORS’ REPORT

For the financial year ended 30 June 2017

	expenditure or other costs will not arise.
Gearing and	 GDI Property Group’s gearing could exceed	 GDI Property Group remains well within both its
breach of	the maximum level of 40% under the Board’s	own gearing policy of less than 40% LVR and the
covenants	gearing policy from time to time (for example	covenants imposed on it under its debt facility.
	where GDI Property Group uses debt to	 As at 30 June 2017, GDI Property Group has also
	acquire new properties or the valuation of	hedged approximately 81% of its interest rate
	properties in GDI Property Group falls).	exposure on its principal facility, mitigating the
	 The Debt Facility contains undertakings to	risks of movements in interest rates.
	maintain certain Covenant LVR and Covenant
	ICR, and an event of default would occur if
	GDI Property Group fails to maintain these
	financial levels.

2. Events subsequent to balance date

On 17 August 2017, GDI Property Group announced that it had exchanged contracts to sell 66 Goulburn Street, Sydney, for $252.0 million, which after settlement adjustments and other selling costs will net GDI Property Group approximately $228.0 million, a $92.0 million premium over the July 2014 acquisition price of $136.0 million and a $5.0 million premium to the 30 June 2017 independent valuation of $223.0 million. Settlement is expected to occur on or around 19 October 2017 and is conditional on Foreign Investment Review Board approval.

On 18 August 2017, GDI Property Group announced that it had exchanged conditional contracts to acquire 6 Sunray Drive, Innaloo, Perth, for $143.5 million. 6 Sunray Drive comprises over 30,000sqm of NLA and is home to Perth’s only IKEA store, with the property also containing four peripheral sites leased to other retailers. On satisfaction of the conditions, GDI Property Group intends to establish GDI No. 43 Property Trust and seek to raise approximately $96.0 million.

3. Environmental regulation

GDI Property Group’s senior management, with oversight from the Board, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of GDI Property Group’s environmental risk management practices. It is the opinion of the Board that adequate systems are in place for the management of GDI Property Group’s environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Board is not aware of any breaches of these requirements.

4. Directors and Company Secretary

Directors

Independent Chairman Mr Graham Kelly

Managing Director Mr Steve Gillard

Independent Non‐executive Directors

Ms Gina Anderson Mr Les Towell Mr John Tuxworth

Mr John Tuxworth was appointed to the Board on 20 February 2017.

Mr Tony Veale retired from the Board on 20 February 2017.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Information on Directors

Mr Graham Kelly

Chairman, Independent Non‐Executive Director

Mr Kelly is a professional non‐executive director with over 40 years’ experience in academic life, government service, the diplomatic service, private legal practice, and business management. He has had extensive board experience with numerous listed entities. He was appointed as chairman in November 2013.

Mr Steven Gillard

Managing Director

Mr Gillard has had over 30 years of experience in property related industries including 11 years’ experience in property management and sales and seven years’ experience as a senior analyst and advisor for international stockbroking firms, particularly in the property and tourism sectors. Mr Gillard was managing director of GDI Property Group’s predecessor companies (“GDI group”) from 2005 on joining, became a director of the Company in November 2013 and Managing Director on 16 December 2013.

Ms Gina Anderson

Independent Non‐Executive Director

Ms Anderson is a senior professional with diverse experience in an ASX Top 10 public company (Westpac), large private company (St Hilliers) and non‐profit organisation (Philanthropy Australia), having held chief executive, corporate affairs, stakeholder engagement, communications, project management and human resources roles. Ms Anderson was appointed as a director in November 2013.

Mr Les Towell

Independent Non‐Executive Director

Mr Towell has been a director of GDI Funds Management Limited since 2003, and has been a director of GDI group since 1998. He has over 45 years’ experience in the financial services industry specialising in compliance, trustee services and private company directorships. He was appointed as a director of the Company in November 2013.

Mr John Tuxworth

Independent Non‐Executive Director

Mr Tuxworth has nearly 40 years’ experience in senior executive and non‐executive roles in financial services and management consulting businesses, including over nine years with Rothschild Australia Asset Management as an Executive Director and most recently as a founder and the Managing Director of PeopleFirst & Associates, a management consultancy specialising in financial services. He was appointed as a director of the Company in February 2017.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Number of meetings attended

The number of Board meetings, including Committees, held during the period and the number of those meetings attended by each director is set out below:

by each director is set out below:
Board Audit Risk and Compliance Committee	Nomination and Remuneration Committee
Number of meetings eligible to attend Number of meetings attended Number of meetings eligible to attend Number of meetings attended	Number of meetings eligible to attend Number of meetings attended
Chair Graham Kelly Les Towell	Gina Anderson
Graham Kelly 8 7 4 4
Steve Gillard 8 8
Gina Anderson 8 8	3 3
Les Towell 8 8 4 4	3 3
John Tuxworth1 2 2 1 1	1 1
TonyVeale2 6 5 3 3	2 1

Mr John Tuxworth was appointed to the Board on 20 February 2017.
Mr Tony Veale retired from the Board on 20 February 2017.

Other directorships

Details of other directorships of listed entities held by existing directors in the last three years are set out below:

Director	Other directorships
Graham Kelly	‐
Steve Gillard	‐
Gina Anderson	‐
Les Towell	‐
John Tuxworth	‐

Company secretary

GDI Property Group has joint company secretaries, with their details provided below:

Mr David Williams

Chief Financial Officer and Joint Company Secretary

Mr Williams has over 20 years’ experience in the accounting and financial services industry with major accounting firms, commercial banks and international investment banks. Mr Williams joined GDI group in early 2013 as a consultant, and from the time GDI Property Group listed was formally appointed as Chief Financial Officer and joint Company Secretary.

Mr Paul Malek

Asset Management and Joint Company Secretary

Mr Malek joined GDI group in 2011. Mr Malek has over 26 years’ experience in the financial services industry both with bank and non‐bank financial institutions specialising in funding of commercial real estate with both private and institutional clients.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

5. Remuneration report

5.1 Basis of preparation

The Remuneration Report is designed to provide securityholders with an understanding of GDI Property Group’s remuneration policies and the link between our remuneration approach and GDI Property Group’s performance, in particular regarding Key Management Personnel (“ KMP ”) as defined under the Corporations Act 2001. Individual outcomes are provided for GDI Property Group’s non‐executive Directors (“ NEDs ”), the Managing Director (“ MD ”) and Disclosed Executives. Disclosed Executives are defined as those direct reports to the MD with responsibility for the strategic direction of GDI Property Group and includes all members of the executive management team.

The Remuneration Report for GDI Property Group has been prepared in accordance with section 300A of the Corporations Act and has been audited as required by section 308(3C) of the Corporations Act 2001 and forms part of the Directors’ Report.

5.2 Key Management Personnel

The KMP disclosed in this years’ Remuneration Report are detailed in the table below.

Key Management Personnel

*Non‐Executive Directors*		*Appointed*	*Term as a KMPforyear*
Graham Kelly	Independent Chairman	5 November 2013	Full year
Les Towell	Independent Director	5 November 2013	Full year
Gina Anderson	Independent Director	5 November 2013	Full year
John Tuxworth1	Independent Director	20 February 2017	4 months
Tony Veale2	Non independent Director	5 November 2013	8 months
*Managing Director*
Steve Gillard3		5 November 2013	Full year
*Disclosed Executives*
David Williams	Chief Financial Officer, Joint Company Secretary		Full year
John Garland	Head of Property		Fullyear
Paul Malek	Asset Management,Joint CompanySecretary		Fullyear
GregMarr	Head of Unlisted Funds		Fullyear

Mr John Tuxworth was appointed to the Board on 20 February 2017
Mr Tony Veale retired from the Board 20 February 2017.
Mr Gillard was appointed as a Director of GDI Property Group Limited on 5 November 2013 and as Managing Director on Completion of the IPO and related transactions on 16 December 2013.

5.3 Role of the Board in relation to remuneration

The Board has established a Nomination and Remuneration Committee (N&RC). The N&RC is responsible for:

reviewing and making recommendations to the Board on remuneration and succession matters related to the MD and other Disclosed Executives;
reviewing and making recommendations to the Board on remuneration relating to Non‐Executive Directors;
overseeing a Board performance evaluation program, which addresses the performance of individual directors;
designing incentive plans; and
determining remuneration structures for the Managing Director and Disclosed Executives.

The N&RC did not receive any recommendations from remuneration consultants during the period in relation to the remuneration arrangements of KMP.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financ i al year ende d 30 June 201 7

5.4 Remuneration objectives

T he following principles sh a pe GDI Prop e rty Group’s r e muneration strategy:

creating and enhancin g value for all GDI Property Group stake h olders;
emphasis i ng the ‘at ris k ’ componen t of total remuneration to increase alig n ment with s e curity holde r s and encou r age behaviou r that suppor t s both entre p reneurism a n d long term financial sou n dness withi n the confine s of GDI Prop e rty Group’s risk managem e nt framework;
rewardin g outperform a nce; and
providing a competitiv e remunerati o n propositio n to attract, m otivate and retain the hi g hest quality individuals wi t hin a framew o rk of ethical standards of behaviour.

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5.5 The composition of remuneration at GDI Property Group

T he Board ai m s to find a balance between:

fixed and at‐risk remu n eration;
short and long term in c entives;
amounts p aid in cash and performa n ce rights.

T he below ch a rt provides a n overview of the targe t remunerati o n mix for th e MD and D i sclosed Exec u tives. The M D’s t a rget remun e ration mix is weighted su c h that a hig h er compone n t is at‐risk (60%), with an equal weigh t ing of the at ‐ risk

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financ i al year ende d 30 June 201 7

component b e tween STIs a nd LTIs. T h e STI can b e granted as either cash o r performan c e rights wh e re the prin c iple p erformance c ondition is t h e employee remaining in employment at the vesti n g date, thre e years after t he conclusio n of the performa n ce year.

Remuneration mix for the Managing Director and Disclosed Executives

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PR LTI
PR LTI
25% 25%
30% 30%
At risk
50% STI
Cash /
Cash / STI PR 25% 25%
PR 30% 30%
Fixed Fixed
Cash 40% Fixed 50% Cash 50% 50%
40%
MD Disclosed Executives
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At risk
60%
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Fixed
40%
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T he Disclosed Executives target remuneration mix is w eighted equ a lly between f ixed and at‐r i sk compone n ts, with an e q ual w eighting of t he at‐risk co m ponent bet w een STIs an d LTIs. The S TI can be gr a nted as eith e r cash or performance ri g hts w here the pri n ciple perfor m ance condition is the em p loyee remai n ing in emplo y ment at the v esting date, three years after the conclusio n of the perfo r mance year.

Fixed remuneration

G DI Property G roup positions fixed rem u neration for t he MD and D isclosed Exe c utives agains t relevant A‐ R EIT compara b les t a king in to c o nsideration t he role, res p onsibilities, p erformance, qualifications and experi e nce. A‐REIT comparables are considered th e most releva n t as this is t h e main pool f or sourcing t a lent and wh e re key talent may be lost.

Fixed remune r ation is expr e ssed as a to t al dollar am o unt which c a n be taken a s cash salary, superannuat i on contribut i ons and other no m inated bene f its. M r Paul Mal e k received a $25,000 in c rease in his fixed remu n eration for t he financial year. All o t her KMP’s f i xed r e muneration remains at t h e level it was at the time o f the Initial P u blic Offer of securities in 2 013.

At risk remuneration

T he at risk co m ponent for m s a significan t part of the M D and Discl o sed Executiv e s target rem u neration.

S hort term in c entives (STI)

T he STI provides an annual opportunity f or an incenti v e award. In d ividuals are a ssessed on a balanced sc o recard base d on m easures relating to longer term perfo r mance outc o mes aligned to GDI Prop e rty Group’s s trategic objectives, as we l l as annual goals a nd workplac e behaviours, including le a dership and commitment. For the MD and Disclose d Executives, the w eighting of t hese measures will vary to reflect t h e responsibi l ities of each role and th e ir individual KPIs set at the

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

commencement of each year. Notwithstanding any individual meeting or exceeding their performance measures, or some thereof, the N&RC may determine to reduce (but not increase) their STI entitlement at its absolute discretion.

Long term incentives (LTI)

The LTI provides an annual opportunity for an equity award deferred for three years that aligns a significant portion of overall remuneration to security value over the longer term. LTI awards will remain at risk until vesting and must meet or exceed a relative Total Securityholder Return (50% of performance rights issued) and /or an Absolute Total Return (the other 50% of performance rights issued). The below table summarises the conditions that will apply to the performance rights granted for to the year ended 30 June 2017. These conditions are identical to those granted relating to the periods ended 30 June 2014, 30 June 2015 and 30 June 2016. Details of the offers of performance rights are disclosed in Section 5.6 and 5.7 of this Remuneration Report.

Arrangements for the year ended 30 June 2017

Type of award	Performance right, being a right to acquire a stapled security at nil cost, subject to meeting time and performance hurdles. Upon exercise, each performance right entitles the MD and Disclosed Executives to one stapled security. The future value of the grant may range from zero to an undefined amount depending on performance against the hurdles and the security price at the time of exercise. Grants may be satisfied by a cash equivalent payment rather than stapled securities at the Board’s discretion.
Time restriction	Performance rights will be tested against the performance hurdles at the end of three years. Performance rights that do not vest will be forfeited.
Vesting conditions	Performance rights will be subject to two tests, with half the performance rights subject to one test and the other half subject to the other test. 50% ‐ Total Securityholder Return(TSR) Vesting percentage (for TSR measure)
	Does not reach the 50thpercentile of the TSR of the Comparator Group 0%
	Reaches or exceeds the 50thpercentile of the TSR of the Comparator Group but does not reach the 75th percentile 50%, plus 2% for every one percentile increase above the 50th percentile
	Reaches or exceeds the 75thpercentile of the TSR Comparator Group 100%
	50% ‐ Absolute Total Return(ATR) Vesting percentage (for ATR measure)
	Does not achieve an ATR of 10% 0%
	Achieves or exceeds an ATR of 10% but does not achieve an ATR of 12% 50% up to 100% (at 12% ATR) on a straight line basis
	Achieves or exceeds an ATR of 12% 100%
	Definitions
	TSR Movement in security price and distributions. For the year ended 30 June 2017, the commencing security price is based on the 30 June 2017 closingsecurity price of GDI PropertyGroupand its Comparator Group
	ATR Movement in NTA and distributions For the year ended 30 June 2017, the commencing NTA is based on the 30 June 2017 NTA.
	Comparator Group Dexus Property Group, GPT Group, Cromwell Property Group, Abacus Property Group, Investa Office Fund, Growthpoint Properties Australia, Australian Unity Office Fund, Centuria Metropolitan REIT, 360 Capital Group, PropertyLink, Charter Hall Group, Centuria Capital
Valuation	The dollar value of the LTI grant is converted into a number of performance rights based on a valuation, taking into account factors including the performance conditions, security price volatility, term, distributionyield,and the security price atgrant date.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Other remuneration elements

Clawback

The Board will have on‐going and absolute discretion to adjust performance‐based components of remuneration downwards, or to zero, at any time, including after the grant of such remuneration, where the Board considers such an adjustment is necessary to protect the financial soundness of GDI Property Group, or if the Board subsequently considers that having regard to information which has come to light after the grant of performance rights, the granting of performance rights was not justified.

Hedging and margin lending prohibition

As specified in GDI Property Group’s Security Trading Policy and in accordance with the Corporations Act, equity allocated under a GDI Property Group incentive scheme must remain at risk until exercisable. As such, it will be a condition of grant that no schemes are entered into, either by an individual or their associated persons, which specifically protects the unvested value of performance rights. Doing so would constitute a breach of the grant conditions and would result in the forfeiture of the relevant performance rights.

5.6 Performance and outcomes

5.6.1 GDI Property Group’s performance and securityholder wealth

		Opening	Movement
		security	in security	Opening	Movement			TSR		ATR
	Years	price	price	NTA	in NTA	Distribution	TSR	p.a.	ATR	p.a.
		$	$	$	$	$	%	%	%	%
Since listing	3.54	1.0000	0.0250	0.9100	0.2100	0.2650	29.00%	8.19%	52.20%	14.75%
Since 1 July 2014	3	0.9100	0.1150	0.9300	0.1900	0.2300	37.91%	12.64%	45.16%	15.05%
Since 1 July2016	1	0.8850	0.1400	1.0100	0.1100	0.0775	24.58%	24.58%	18.56%	18.56%
30 June 2017		1.0250		1.1200

GDI Property Group considers that the financial measure that most accurately reflects its performance on an annual basis is the ATR test, rather than the often adopted FFO or AFFO test by GDI Property Group’s Comparator Group. The nature of GDI Property Group’s business means that FFO and AFFO will be volatile, particularly where for example GDI Property Group buys properties that are 46% vacant (50 Cavill Avenue, Surfers Paradise), or sells assets where management believe the value has been maximised (25 Grenfell Street, Adelaide, 307 Queen Street, Brisbane) and uses the proceeds to reduce gearing. Regardless of the capital structure of GDI Property Group, the assets it holds, or the time of the property cycle, GDI Property Group’s intention is to deliver an ATR of at least 10%p.a. This measure forms the basis of the financial measure in the balanced scorecard (see 5.6.4.2) and one half of the test for LTIs. GDI Property Group has been consistent with this measure and the hurdle rates since IPO in 2013.

However, GDI Property Group also acknowledges that securityholders get rewarded through movements in the security price and distributions. Accordingly, the other half of GDI Property Group’s LTIs is tested against a peer group. Security price performance does not influence the balanced scorecard approach GDI Property Group utilises to determine KMP STIs.

5.6.2 Performance rights issued as part of the IPO (retention rights)

As disclosed in the Prospectus and Product Disclosure Statement for the initial public offer (IPO) of securities in GDI Property Group dated 25 November 2013 (Offer Document), GDI Property Group granted 1.5 million performance rights to employees who were employed at the time the performance rights plan was established and vested three years from the IPO. The principle performance condition was to remain being employed by GDI Property Group at the time the performance rights vested. As all employees that were granted these performance rights remained in employment at the time of vesting, all performance rights (1.5 million) vested. These performance rights were satisfied by GDI Property Group acquiring and transferring 1.5 million securities to employees. These securities are not subject to any escrow or other trading restrictions.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

5.6.3 Past issues of LTI

543,124 performance rights were granted as part of GDI Property Group’s FY14 LTI plan. These performance rights were tested three years from issue, at which time they either vested or lapsed. As with the FY17 performance rights, the performance rights are subject to either a TSR test (for 50% of the rights granted) or an ATR test (for 50% of the rights granted).

5.6.3.1 TSR test

As at 30 June 2017, GDI Property Group’s Comparator Group comprised 13 entities (14 including GDI Property Group). Although GDI Property Group’s TSR for the three year period ended 30 June 2017 was 37.91%, it ranked 11[th] out of 14 in the Comparator Group. As GDI Property Group’s TSR did not reach the 50[th] percentile of the TSR of the Comparator Group, all performance rights subject to this test (271,562) lapsed.

5.6.3.2 ATR test

The ATR is determined by the movement in NTA over the vesting period plus distributions, divided by the commencing NTA. This is then divided by the vesting period (in this case three years) to determine the ATR per year.

Movement in NTAper security		Distributionsper security	Distributionsper security	ATRper security	ATR %	ATR %p.a.
30 June 2014 NTA	$0.93	FY15	$0.0750
30 June 2017 NTA	$1.12	FY16	$0.0775
		FY17	$0.0775
Total movement	$0.19	Total distributions	$0.2300	$0.42	45.16%	15.05%

As the ATR exceeded the 12% maximum threshold, all performance rights subject to this test (271,562) vested on the signing of this financial report. These performance rights will be satisfied by GDI Property Group acquiring on market 271,562 securities and transferring them to the relevant employees. These securities will not be subject to any escrow or other trading restrictions.

5.6.4 STI outcomes

5.6.4.1 KMP balanced scorecard

Detailed in the table below is a summary of the performance measures and outcomes of the balanced scorecard for the MD and Disclosed Executives.

	Financial	Financial	Operational	Operational	People and	culture	Total
	%
	weighting	% of total	% weighting	% of total	% weighting	% of total	Total STI
	of total STI	STIgranted	of total STI	STIgranted	of total STI	STIgranted	granted %
Steve Gillard	40%	40%	30%	30%	30%	30%	100%
David Williams	30%	30%	50%	50%	20%	20%	100%
John Garland	20%	20%	60%	60%	20%	20%	100%
Paul Malek	20%	20%	70%	70%	10%	10%	100%
GregMarr	20%	20%	70%	70%	10%	10%	100%

The following provides an explanation of the performance measures and outcomes.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Financial

For FY17, the financial measures are split equally between GDI Property Group’s minimum ATR target and meeting or exceeding FFO guidance, as updated from time to time.

Minimum FY17			FFO guidance /
ATR target	FY17 ATR	Achieved(Y/N)	security	FFO/security	Achieved(Y/N)
10%	18.56%	Y	8.20 cents	8.46 cents	Y

Operational

Operational measures for the MD and Disclosed Executives reflect the responsibilities of each role. For example, the Head of Property’s performance is weighted towards asset management and sustainability, whilst the CFO and Joint Company Secretary’s are weighted towards capital management and reporting, risk management and compliance.

During FY17 all KMP exceeded their operational objectives, with particular highlights being:

the leasing successes at 66 Goulburn Street, Sydney, and 5 Mill Street, Perth;
the sales of 307 Queen Street, Brisbane and 25 Grenfell Street, Adelaide;
the sale of 80 George Street Parramatta (GDI No. 40 Office Trust) and the consequential 19% IRR to investors; and
reducing the principal facility’s gearing to 8%

People and culture

The MD and Disclosed Executives are expected to demonstrate exceptional leadership and commitment, with those that have direct reports also measured by their people management and people development skills. The biggest compliment to the MD and Disclosed Executives is that since IPO no employee has resigned from GDI Property Group. This stable workforce has created a unique culture and the Board has determined to reward those responsible for creating it.

Specific objectives achieved by KMP during the year included

progressing the development of staff through both ‘on the job’ and formal training;
varying GDI Funds Management’s AFSL to have removed the Key Person requirement, then ensuring that the existing responsible managers were sufficiently qualified to oversee GDI Funds Management’s AFSL authorisations to enable the retirement of Mr Tony Veale as a responsible manager; and
the seamless transition of the Mr John Tuxworth on to and Mr Tony Veale from the Board.

Securityholder alignment

To enhance the alignment with securityholders, the N&RC determined that any STI granted to the MD and Disclosed Executives would be split 50% cash, 50% performance rights where the principle performance condition is continued employment (or a good leaver) for three years from the conclusion of the performance year. The expense of these performance rights is incurred over four years, the year to which the performance period relates (FY17) and the three vesting years (FY18, FY19 and FY20). As these performance rights had not been issued by 30 June 2017, GDI Property Group has recognised the fair value of them as an accrual with the cost recognised as an employee benefit expense. Once the rights are issued, the accrual will be reversed with a corresponding increase in the security‐based payments reserve in equity.

Further details of the STI outcomes for the MD and Disclosed Executives are provided in Section 5.7 of this Remuneration Report. The issue of performance rights to the MD is subject to securityholder approval at the Annual General Meeting to be held 16 November 2017.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

5.6.5 LTI outcomes

The Board of GDI Property Group considers it is important to both align executive remuneration with securityholders outcomes and to encourage behaviour that supports both entrepreneurism and long term financial soundness within the confines of GDI Property Group’s risk management framework. As a result, GDI Property Group has advised that it will grant performance rights to the MD and Disclosed Executives as part of their annual remuneration package. The issue of performance rights to the MD is subject to securityholder approval at the Annual General Meeting to be held 16 November 2017. The expense of the performance rights relating to the year ended 30 June 2017 is incurred over four years, the year to which the performance period relates (FY17) and the three vesting years (FY18, FY19 and FY20). As the performance rights had not been issued by 30 June 2017, the Group has recognised the fair value of them as an accrual with the cost recognised as an employee benefit expense. Once the rights are issued, the accrual will be reversed with a corresponding increase in the security‐based payments reserve in equity.

Further details of the LTI performance rights granted for the MD (subject to approval) and Disclosed Executives are provided in Section 5.7 of this Remuneration Report.

5.7 Remuneration outcomes

Non‐Executive Directors

Principles underpinning the remuneration policy for Non‐Executive Directors (NEDs) are as provided below:

Principle	Comment
Aggregate Board fees are within the maximum disclosed to securityholders in the Offer Document	The aggregate fee pool for NED’s as disclosed in the Offer Document is $3 million. The annual total of NEDs’ fees, including superannuation contributions, is within this limit.
Fees are set by reference to key considerations	Board fees are set by reference to a number of relevant considerations including:  general industry practice and best principles of corporate governance;  the responsibilities and risks attached to the role of NEDs;  the expected time commitments; and  reference to feespaid to NEDs of comparable companies.
The remuneration structure preserves independence	NED fees are not linked to the performance of GDI Property Group and NEDs are not eligible toparticipate in anyof GDI PropertyGroup’s incentive arrangements.
Annual Board fees (inclusive of superannuation)	Chairman Other NED
	$150,000 $75,000

Details of non‐executive Directors statutory remuneration are disclosed in the remuneration table in section 5.8 below.

Managing Director contract terms

The following sets out details of the contract terms relating to the MD. The contract terms are in line with industry practice and ASX Corporate Governance Principles.

Fixed remuneration	$765,000,inclusive of superannuation.
Participation in	Subject to stapled securityholder approvals, Mr Gillard is entitled to participate in the
performance rightsplan	performance rightsplan.
Length of contract	Mr Gillard commenced as Managing Director on 16 December 2013 and is on a permanent
	contract,which is an ongoingemployment contract until notice isgiven.
Notice periods	 Mr Gillard may terminate the employment contract at any time by giving six months’
	notice in writing.
	 GDI Property Group may terminate the employment contract for any reason by giving
	12 months’ notice,or alternatively, payment in lieu of notice.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

		In the event of wilful negligence or serious misconduct, GDI Property Group may
		terminate Mr Gillard’s employment contract immediately by notice in writing and
		withoutpayment.
Restraint of trade	Mr	Gillard will be subject to a restraintperiod of six months from termination.

Managing Director’s remuneration outcome

Actual remuneration provided to the MD for the period ended 30 June 2017 is provided below, with the expense relating to the MD’s remuneration disclosed in section 5.8 below.

Fixed remuneration	The MD received $765,000 of fixed remuneration for the year ended 30 June 2017,
	inclusive of superannuation.
STI	The MD received an STI award of $573,750, 100% of his potential entitlement, based on
	the Balanced Scorecard approach discussed above.
	Subject to securityholder approval, the STI will be paid 50% in cash and 50% in
	performance rights where the principle performance condition is remaining employed by
	a GDI Property Group entity for three years after the conclusion of the performance year.
	Further details of the actual STI awarded to the MD are provided in the table below on
	page 23 of this Remuneration Report.
LTI	The MD received an LTI award of $573,750 value, being 765,460 performance rights. Fifty
	percent of these are subject to a Total Securityholder Return test (versus a peer group)
	and the other fifty percent are subject to an Absolute Total Return test (NTA growth plus
	distributions). Each performance right is tested once three years after the conclusion of
	the performance year. Details of the actual LTI awarded to the MD are provided in the
	table below onpage 23 of this Remuneration Report.

Disclosed Executive contract terms

Fixed remuneration	David Williams John Garland Paul Malek GregMarr
	$375,000 $350,000 $325,000 $300,000
Participation in performance rights plan	Disclosed Executives are entitled to participate in the performance rights plan.
Length of contract	Disclosed Executives are subject to an ongoingemployment contract until notice isgiven.
Notice periods	 Disclosed Executives may terminate the employment contract at any time by giving three months’ notice in writing.  GDI Property Group may terminate the employment contract for any reason by giving three months’ notice, or alternatively, payment in lieu of notice.  In the event of wilful negligence or serious misconduct, GDI Property Group may terminate a Disclosed Executive’s employment contract immediately by notice in writing and without payment.
Restraint of trade	Disclosed Executives will be subject to a restraintperiod of three months from termination.

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

Disclosed Executives remuneration outcomes

Actual remuneration provided to Disclosed Executives for the period ended 30 June 2017 is provided below, with the remuneration table disclosed in section 5.8 below.

Fixed remuneration	The Disclosed Executives received the fixed remuneration shown above, inclusive of
	superannuation.
STI	The Disclosed Executives received an STI as shown in the table on page 23 of this
	Remuneration Report. The STI has been paid 50% in cash and 50% in performance rights
	where the principle performance condition is remaining employed by a GDI Property
	Group entity for three years after the conclusion of the performance year.
LTI	The Disclosed Executives received an LTI as shown in the table on page 23 of this
	Remuneration Report. Fifty percent of these are subject to a Total Securityholder Return
	test (versus a peer group) and the other fifty percent are subject to an Absolute Total
	Return test (NTA growth plus distributions). Each performance right is tested once three
	years after the conclusion of the performance year.

GDI PROPERTY GROUP

DIRECTORS’ REPORT

For the financial year ended 30 June 2017

MD and Disclosed Executive STI outcomes

Steve Gillard2 David Williams John Garland Paul Malek Greg Marr	Potential STI STI STI STI Cash PR1 PR1 FY16 PR1 Total STI granted forgone granted forgone component component granted expense expense
	$ $ $ % % $ $ $ $
	573,750 573,750 ‐ 100% ‐ 286,875 286,875 279,878 71,719 358,594 187,500 187,500 ‐ 100% ‐ 93,750 93,750 91,463 23,438 117,188 175,000 175,000 ‐ 100% ‐ 87,500 87,500 85,366 21,875 109,375 162,500 162,500 ‐ 100% ‐ 81,250 81,250 79,268 20,313 101,563 150,000 150,000 ‐ 100% ‐ 75,000 75,000 73,171 18,750 93,750
	1,248,750 1,248,750 ‐ 100% ‐ 624,375 624,375 609,146 156,094 780,469

Performance rights.
The issue of performance rights to Steve Gillard is subject to securityholder approval at the AGM to be held on 16 November 2017.

MD and Disclosed Executive LTI outcome

	LTI PR1 FY16 PR1 granted granted expense $ $
Steve Gillard2 David Williams John Garland Paul Malek GregMarr	573,750 765,460 143,438 187,500 250,152 46,875 175,000 233,474 43,750 162,500 216,798 40,625 150,000 200,122 37,500
Total	1,248,750 1,666,006 312,188

Performance rights.
The issue of performance rights to Steve Gillard is subject to securityholder approval at the AGM to be held on 16 November 2017.

GDI PROPERTY GROUP

DIRECTORS’ REPORT

For the financial year ended 30 June 2017

MD and Disclosed Executive summary of performance rights issued

Vesting date Steve Gillard David Williams John Garland Paul Malek Greg Marr	Primary performance condition employment FY15 LTI FY16 LTI FY17 LTI Total LTI FY15 FY16 FY17 Total STI STI STI Total TSR2 ATR3 TSR2 ATR3 TSR2,4 ATR3,4 TSR2 ATR3 PR1 30‐Jun‐18 30‐Jun‐19 30‐Jun‐20 30‐Jun‐18 30‐Jun‐18 30‐Jun‐19 30‐Jun‐19 30‐Jun‐20 30‐Jun‐20 393,429 259,322 279,878 932,629 455,357 455,357 454,636 454,636 382,730 382,730 1,292,723 1,292,723 3,518,075 142,857 90,042 91,463 324,362 148,810 148,810 148,574 148,574 125,076 125,076 422,460 422,460 1,169,282 114,286 79,096 85,366 278,748 138,889 138,889 138,669 138,669 116,737 116,737 394,295 394,295 1,067,338 114,286 72,034 79,268 265,588 119,048 119,048 118,859 118,859 108,399 108,399 346,306 346,306 958,200 45,714 50,847 73,171 169,732 119,048 119,048 118,859 118,859 100,061 100,061 337,968 337,968 845,668
	810,572 551,341 609,146 1,971,059 981,152 981,152 979,597 979,597 833,003 833,003 2,793,752 2,793,752 7,558,563

Vesting date
Steve Gillard
David Williams
John Garland
Paul Malek
Greg Marr

Primary performance condition employment
FY15 LTI
FY16 LTI
FY17 LTI
Total LTI
FY15
FY16
FY17
Total
STI
STI
STI
Total
TSR2
ATR3
TSR2
ATR3
TSR2,4
ATR3,4
TSR2
ATR3
PR1
30‐Jun‐18 30‐Jun‐19 30‐Jun‐20
30‐Jun‐18
30‐Jun‐18
30‐Jun‐19 30‐Jun‐19
30‐Jun‐20
30‐Jun‐20
393,429 259,322 279,878
932,629
455,357
455,357
454,636
454,636
382,730
382,730 1,292,723 1,292,723 3,518,075
142,857 90,042 91,463
324,362
148,810
148,810
148,574
148,574
125,076
125,076
422,460
422,460 1,169,282
114,286 79,096 85,366
278,748
138,889
138,889
138,669
138,669
116,737
116,737
394,295
394,295 1,067,338
114,286 72,034 79,268
265,588
119,048
119,048
118,859
118,859
108,399
108,399
346,306
346,306
958,200
45,714 50,847 73,171
169,732
119,048
119,048
118,859
118,859
100,061
100,061
337,968
337,968
845,668

810,572 551,341 609,146 1,971,059
981,152
981,152
979,597
979,597
833,003
833,003 2,793,752 2,793,752 7,558,563

Performance rights.
Total shareholder return, being movement in the security price and distributions.
Absolute total return, being movement in NTA/security and distributions.
The issue of performance rights to Steve Gillard is subject to securityholders approval at the AGM to be held on 16 November 2017.

GDI PROPERTY GROUP

DIRECTORS’ REPORT

For the financial year ended 30 June 2017

5.8 KMP remuneration table

5.8.1 KMP remuneration table for the period ended 30 June 2017

Short term benefits Post employment Long term benefits Salary & fees Accrued leave3 Other4 Cash bonus Super contributions Long service leave3 $ $ $ $ $ $ Non‐executive directors G Kelly 136,986 ‐ ‐ ‐ 13,014 ‐ G Anderson 58,293 ‐ ‐ ‐ 16,707 ‐ L Towell 68,493 ‐ ‐ ‐ 6,507 ‐ J Tuxworth1 24,829 ‐ ‐ ‐ 2,359 ‐ T Veale2 43,950 ‐ ‐ ‐ 4,175 ‐ Managing Director S Gillard 730,000 (29,629) ‐ 286,875 35,000 7,878 Disclosed executives D Williams 350,000 0 1,141 93,750 25,000 3,862 J Garland 330,384 (7,135) 719 87,500 19,616 13,048 P Malek 305,384 8,980 1,539 81,250 19,616 5,793 G Marr 265,000 3,669 602 75,000 35,000 225 Total 2,313,319 (24,114) 4,001 624,375 176,994 30,807	Short term benefits Post employment Long term benefits	Securitybasedpayments Relatingtopriorperiods Relating to current period Total remuneration6
	Salary & fees Accrued leave3 Other4 Cash bonus Super contributions Long service leave3 $ $ $ $ $ $	Performance rights for retention5 FY14 Performance rights5 FY15 Performance rights5 FY16 Performance rights5 STI Performance rights5 LTI Performance rights5 Total remuneration Performance related Performance rights $ $ $ $ $ $ % %
		‐ ‐ ‐ ‐ ‐ ‐ 150,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 75,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 75,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 27,188 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 48,125 ‐ ‐ ‐ 46,079 229,500 200,813 71,719 143,438 1,721,672 57% 40% 74,013 15,059 78,125 66,797 23,438 46,875 778,058 51% 39% 74,013 14,055 68,750 61,250 21,875 43,750 727,825 51% 39% 42,293 12,047 62,500 53,438 20,313 40,625 653,778 48% 35% 21,146 ‐ 47,500 48,750 18,750 37,500 553,142 45% 31% 211,464 87,239 486,375 431,047 156,094 312,188 4,809,789

Mr John Tuxworth was appointed to the Board on 20 February 2017
Mr Tony Veale retired from the Board on 20 February 2017
Annual and long term service leave are accounted on an accruals basis. The amounts represent the change in accrued leave during the period.
Other includes the cost of an annual gym membership and other items incurred by GDI Property Group as part of its employee health and wellbeing program.
The amount shown is the fair value of performance rights under the various STI, LTI and retention plans included in the relevant financial period and does not represent actual STI or LTI awards made.
Amounts disclosed as total remuneration excludes insurance premiums paid by GDI Property Group in respect of Directors’ and Officers’ liability insurance contracts.

GDI PROPERTY GROUP

DIRECTORS’ REPORT

For the financial year ended 30 June 2017

5.8.2 KMP remuneration table for the period ended 30 June 2016

Short term benefits Post employment Long term benefits Salary & fees Accrued leave1 Other2 Non monetary benefits Cash bonus Super contributions Long service leave1 $ $ $ $ $ $ $ Non‐executive directors G Kelly 136,986 ‐ ‐ ‐ ‐ 13,014 ‐ G Anderson 58,293 ‐ ‐ ‐ ‐ 16,707 ‐ L Towell 68,493 ‐ ‐ ‐ ‐ 6,507 ‐ T Veale 68,493 ‐ ‐ ‐ ‐ 6,507 ‐ Managing Director S Gillard 730,000 9,263 1,209 ‐ 229,500 35,000 5,524 Disclosed executives D Williams5 339,583 (10,748) 1,170 ‐ 79,688 25,000 2,708 J Garland 330,692 4,238 719 ‐ 70,000 19,308 6,870 P Malek 280,692 3,633 973 ‐ 63,750 19,308 3,948 G Marr5 260,986 (9,821) ‐ ‐ 45,000 35,000 233 Total 2,274,219 (3,436) 4,072 ‐ 487,938 176,350 19,283	Short term benefits Post employment Long term benefits	Securitybasedpayments Relating to prior periods Relating to current period Total remuneration4
	Salary & fees Accrued leave1 Other2 Non monetary benefits Cash bonus Super contributions Long service leave1 $ $ $ $ $ $ $	Performance rights for retention3 FY14 Performance rights3 FY15 Performance rights3 STI Performance rights3 LTI Performance rights3 Total remuneration Performance related Performance rights $ $ $ $ $ $ % %
		‐ ‐ ‐ ‐ ‐ 150,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 75,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 75,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 75,000 ‐ ‐ ‐ 46,079 229,500 57,375 143,438 1,486,888 47% 32% 103,438 15,059 78,125 19,922 46,875 700,820 49% 38% 103,438 14,055 68,750 17,500 43,750 679,320 47% 36% 59,108 12,047 62,500 15,938 37,500 559,396 45% 33% 29,554 ‐ 47,500 11,250 37,500 457,201 37% 28% 295,538 87,239 486,375 121,984 309,063 4,258,626

Annual and long term service leave are accounted on an accruals basis. The amounts represent the change in accrued leave during the period.
Other includes the cost of an annual gym membership and other items incurred by GDI Property Group as part of its employee health and wellbeing program.
The amount shown is the fair value of performance rights under the various STI, LTI and retention plans included in the relevant financial period and does not represent actual STI or LTI awards made.
Amounts disclosed as total remuneration excludes insurance premiums paid by GDI Property Group in respect of Directors’ and Officers’ liability insurance contracts.
D Williams and G Marr both took additional days annual leave during the period as leave without pay.

GDI PROPERTY GROUP DIRECTORS’ REPORT

For the financial year ended 30 June 2017

5.9 Transactions with KMP

5.9.1 Equity instrument disclosure relating to KMP

		Securities
	Securities held at	transferred in		Securities held at
	the beginning of the	satisfaction of	Securities bought /	the end of the
	period	performance rights	(sold)	period
Directors
Graham Kelly	200,000	‐	50,000	250,000
Steve Gillard	30,300,000	‐	‐	30,300,000
Tony Veale1	30,252,440	‐	‐	30,252,440
Gina Anderson	70,000	‐	‐	70,000
Les Towell	1,061,595	‐	‐	1,061,595
John Tuxworth2	55,200	‐	‐	55,200
Other key management	personnel
David Williams	200,000	350,000	‐	550,000
John Garland	22,500	350,000	(85,000)	287,500
Paul Malek	25,000	200,000	‐	225,000
Greg Marr	5,326	100,000	‐	105,326

Tony Veale retired as a Director on 20 February 2017 and held 30,252,440 securities at that time
John Tuxworth was appointed a Director on 20 February 2017 and held 55,200 at the time.

There were no other transactions with KMP in the year ended 30 June 2017.

6. Other Disclosures

6.1 Indemnification and Insurance of Directors and Officers

GDI Property Group provides a Deed of Indemnity and Access (Deed) in favour of each Director of GDI Property Group and its controlled entities. The Deed indemnifies the Directors on a full indemnity basis to the extent permitted by law for losses, liabilities, costs and charges incurred as a Director of GDI Property Group, its controlled entities or such other entities.

Subject to specified exclusions, the liabilities insured are for costs that may be incurred in defending civil or criminal proceedings that may be brought against directors and officers in their capacity as Directors, its controlled entities or such other entities, and other payments arising from liabilities incurred by the Directors in connection with such proceedings. GDI Property Group has agreed to indemnify the auditors out of the assets of GDI Property Group if GDI Property Group has breached the agreement under which the auditors are appointed.

During the financial year, GDI Property Group paid insurance premiums to insure the Directors of GDI Property Group and its controlled entities. The terms of the contract prohibit disclosure of the premiums paid.

6.2 Rounding of Amounts

GDI Property Group is of a kind referred to in ASIC Class Order 98/100. Accordingly, amounts in the financial report have been rounded to the nearest thousand in accordance with that Class Order, unless stated otherwise.

6.3 Auditor

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

GDI PROPERTY GROUP DIRECTORS’ REPORT

For the financ i al year ende d 30 June 201 7

6.4 Non‐Audit Services

T he following fees were p a id or payabl e to Hall Cha d wick for non‐audit servic e s provided during the ye a r ended 30 June 2 017:

Provision of tax advice

	$
128,1	34

T he Directors have consid e red the non‐audit servic e s and other assurance s e rvices provi d ed by the a u ditor during the f i nancial peri o d. In accord a nce with ad v ice received from the Au d it and Risk M anagement Committee, t he Directors are satisfied that t he provision of non‐audit services by t he auditor is compatible w ith, and did not compro m ise, the au d itor i n dependence requirements of the Corp o rations Act 2 001 for the f o llowing reas o ns:

the Audit & Risk Mana g ement Com m ittee revie w ed the non‐audit services a nd other as s urance servi c es at the tim e of appointm e nt to ensur e that they di d not impact u pon the inte g rity and objectivity of the a uditor;
the Board’s own revie w conducted in conjunctio n with the Au d it & Risk Ma n agement Committee, ha v ing regard to the Board’s p o licy with res p ect to the e n gagement of GDI Propert y Group’s auditor; and
the fact t h at none of t h e non‐audit s ervices provided by Hall Chadwick duri n g the financ i al year had t h e characteri s tics of manag e ment, decisi o n‐making, s e lf‐review, ad v ocacy or joi n t sharing or r i sks.

6.5 Auditor’s independence declaration

A copy of the a uditor’s ind e pendence declaration as r e quired under section 307 C of the Corp o rations Act 2 001 is set ou t on the following p age. S igned in accordance with a resolution o f the director s of GDI Prop e rty Group Li m ited and GD I Funds Management Limited.

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_ _ _ _ _ __ G raham Kelly C hairman

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_ _ _ _ _ __ S teve Gillard M anaging Dir e ctor

S ydney D ated this 21[s] [t] day of Augu s t 2017

GDI PROPERTY GROUP AUDITORS INDEPENDENCE DECLARATION

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AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF GDI PROPERTY GROUP LIMITED AND GDI FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR GDI PROPERTY TRUST

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I declare that, to the b est of my k n owledge an d belief, duri n g the year e n ded 30 Jun e 2017 there ha v e been no c o ntravention o f:

(a) the auditor independenc e requireme n ts as set out in the Corp o rations Act 2 001 in relation to t h e review, an d
(b) any applica b le code of p r ofessional c o nduct in rel a tion to the review

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Hall Ch a dwick Level 40, 2 Park Str e et Sydney, NSW 2000

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Sandeep Kumar Partner Dated: 2 1 August 2017

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GDI PROPERTY GROUP FINANCIAL REPORT

For the financial year ended 30 June 2017

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes	Group Trust	Group Trust
	2017 2016 2017 2016 $'000 $'000 $'000 $'000
Revenue from ordinary activities Property income 2 Funds management income Interest revenue Other income	68,448 74,558 68,448 74,558 3,285 3,709 ‐ ‐ 345 2,508 218 2,491 7 16 7 ‐
Total revenue from ordinary activities	72,086 80,791	68,673 77,049
Net fair value gain on interest rate swaps Gain on termination of interest rate swaps Net fair valuegain on investmentproperty	1,885 390 1,885 390 35 ‐ 35 ‐ 69,647 16,539 69,647 16,539
Total income	143,653 97,721	140,240 93,979
Expenses Property expenses Finance costs 3 Corporate and administration expenses 4 Other Loss on sale of non‐current asset Acquisition expenses Initialpublic offer costs	20,438 20,451 20,438 20,451 8,461 12,425 8,458 12,425 7,205 6,354 2,444 1,798 159 321 ‐ ‐ 12 1,233 12 1,233 91 8,541 58 10,311 316 447 303 424
Total expenses	36,682 49,772	31,713 46,642
Profit before tax Income tax benefit/(expense) 5	106,970 47,949 108,527 47,337 345 (248) ‐ ‐
Netprofit from continuing operations	107,316 47,701	108,527 47,337
Other comprehensive income	‐ ‐ ‐ ‐
Total comprehensive income for theyear	107,316 47,701	108,527 47,337

Profit and total comprehensive income attributable to: Company shareholders Trust unitholders	(1,211) 363 ‐ ‐ 99,983 51,360 99,983 51,360
Profit and total comprehensive income attributable to stapled securityholders External non‐controllinginterests	98,772 51,723 99,983 51,360 8,544 (4,022) 8,544 (4,022)
Profit after tax from continuing operations	107,316 47,701	108,527 47,337
	Cents Cents Cents Cents
Basic earnings per stapled security/trust unit Diluted earningsper stapled security/trust unit	18.34 9.59 18.57 9.52 18.20 9.53 18.43 9.47

The accompanying notes form part of these financial statements.

GDI PROPERTY GROUP FINANCIAL REPORT

As at 30 June 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note	Group 2017 2016 $'000 $'000 23,113 28,394 3,122 3,144 223,000 ‐ 1,705 1,705	Trust
		2017 2016 $'000 $'000
Current assets Cash and cash equivalents 6 Trade and other receivables 7 Non‐current assets held for sale 9 Other assets 8		21,620 25,469 1,933 2,105 223,000 ‐ 3,219 2,641
Total current assets	250,940 33,243	249,772 30,215
Non‐current assets Investment properties 10 Plant and equipment 11 Deferred tax asset 13 Intangible assets 14	499,628 900,478 100 121 1,258 913 18,110 18,110	499,628 900,478 ‐ ‐ ‐ ‐ ‐ ‐
Total non‐current assets	519,097 919,622	499,628 900,478
Total assets	770,037 952,865	749,401 930,693
Current liabilities Derivative financial instruments 12 Trade and other payables 15 Provisions 16	‐ 223 29,605 30,699 184 346	‐ 223 28,400 29,408 ‐ ‐
Total current liabilities	29,789 31,268	28,400 29,631
Non‐current liabilities Borrowings 17 Derivative financial instruments 12 Provisions 16 Other liabilities	79,899 320,116 1,195 4,065 118 80 ‐ 18	79,757 319,974 1,195 4,065 ‐ ‐ 70 ‐
Total non‐current liabilities	81,212 324,279	81,022 324,039
Total liabilities	111,001 355,547	109,422 353,670
Net assets	659,036 597,318	639,979 577,023
Equity Contributed equity 18 Reserves 19a Retainedprofits 19b	22,264 22,310 125 105 (3,332) (2,120)	501,448 502,469 2,752 2,329 97,623 39,356
Equity attributable to equity holders of the Company/Trust	19,057 20,295	601,823 544,155
Non‐controlling interests Unitholders of the Trust Contributed equity 18 Reserves 19a Retainedprofits 19b	501,448 502,469 2,752 2,329 97,623 39,356	‐ ‐ ‐ ‐ ‐ ‐
Total equity attributable to trust unitholders	601,823 544,155	‐ ‐
Equity attributed to holders of stapled securities	620,880 564,450	‐ ‐
External non‐controlling interest Contributed equity Retainedprofits 19b	36,890 36,890 1,266 (4,022)	36,890 36,890 1,266 (4,022)
Total equity attributable to external non‐controlling interest	38,156 32,868	38,156 32,868
Total equity	659,036 597,318	639,979 577,023

The accompanying notes form part of these financial statements.

GDI PROPERTY GROUP FINANCIAL REPORT

For the financial year ended 30 June 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Group

Equity attributable to securityholders of the Group

						Non‐
					Non‐	controlling
					controlling	interest
	Contributed		Retained		interest	(GDI No. 42	Total
	equity	Reserves	earnings	Total	(Trust)	Office Trust)	equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Balance as at 30 June 2015	22,550	(58)	(2,484)	20,009	536,247	‐	544,162
Comprehensive income
(Loss)/profit for the period	‐	‐	363	363	51,360	(4,022)	47,701
Other comprehensive income	‐	‐	‐	‐	‐	‐	‐
Total comprehensive income for
theperiod	‐	‐	363	363	51,360	(4,022)	47,701
Transactions with securityholders in their capacity as securityholders
Initial contribution of equity	‐	‐	‐	‐	‐	36,890	36,890
Security‐based payments
expense	‐	68	‐	68	1,512	‐	1,581
On‐market securities buy‐
back	(145)	‐	‐	(145)	(3,206)	‐	(3,351)
Transfer from treasury
security reserve to equity	(95)	95	‐	‐	‐	‐	‐
Distributionspaid/payable	‐	‐	‐	‐	(41,758)	‐	41,758
Total transactions with
securityholders in their capacity
as securityholders	(240)	163	‐	(77)	(43,452)	36,890	(6,638)

Balance as at 30 June 2016	22,310	105	(2,120)	20,295	544,155	32,868	597,318

Balance as at 1 July 2016	22,310	105	(2,120)	20,295	544,155	32,868	597,318
Comprehensive income
Profit for the period	‐	‐	(1,211)	(1,211)	99,983	8,544	107,316
Other comprehensive income	‐	‐	‐	‐	‐	‐	‐
Total comprehensive income for
theperiod	‐	‐	(1,211)	(1,211)	99,983	8,544	107,316
Transactions with securityholders in their capacity as securityholders
Initial contribution of equity	‐	‐	‐	‐	‐	‐	‐
Security‐based payments
expense	‐	77	‐	77	1,693	‐	1,770
Cash settlement transaction		(58)		(58)	(1,270)	‐	(1,328)
On‐market securities buy‐
back	(46)	‐	‐	(46)	(1,021)	‐	(1,067)
Distributionspaid/payable	‐	‐	‐	‐	(41,717)	(3,256)	(44,973)
Total transactions with
securityholders in their capacity
as securityholders	(46)	20	‐	(27)	(42,315)	(3,256)	(45,598)

Balance as at 30 June 2017	22,264	125	(3,332)	19,057	601,823	38,156	659,036

The accompanying notes form part of these financial statements.

GDI PROPERTY GROUP FINANCIAL REPORT

For the financial year ended 30 June 2017

Trust

Trust
	Equityattributable to unitholders of the Trust Contributed equity Reserves Retained earnings Total equity attributable to unitholders of the Trust External non‐ controlling interest (GDI No. 42 Office Trust) Total equity $'000 $'000 $'000 $'000 $'000 $'000
Balance as at 1 July 2015	507,769 (1,277) 29,755 536,247 ‐ 536,247
Comprehensive income Profit for the period Other comprehensive income	‐ ‐ 51,360 51,360 (4,022) 47,337 ‐ ‐ ‐ ‐ ‐ ‐
Total comprehensive income for the period	‐ ‐ 81,115 51,361 (4,022) 47,337
Transactions with unitholders in their Initial contribution of equity Security‐based payments expense On‐market securities buy‐back Transfer from treasury security reserve to equity Distributionspaid/payable	capacity as unitholders ‐ ‐ ‐ ‐ 36,890 36,890 ‐ 1,512 ‐ 1,512 ‐ 1,512 (3,206) ‐ ‐ (3,206) ‐ (3,206) (2,094) 2,094 ‐ ‐ ‐ ‐ ‐ ‐ (41,758) (41,758) ‐ (41,758)
Total transactions with unitholders in their capacity as unitholders	(5,300) 3,606 (41,758) (43,452) 36,890 6,561

Balance as at 30 June 2016	502,469 2,329 39,357 544,155 32,868 577,023

Balance as at 1 July 2016	502,470 2,329 39,357 544,155 32,868 577,023
Comprehensive income Profit for the period Other comprehensive income	‐ ‐ 99,983 99,983 8,544 108,527 ‐ ‐ ‐ ‐ ‐ ‐
Total comprehensive income for the period	‐ ‐ 99,983 99,983 8,544 108,527
Transactions with unitholders in their Initial contribution of equity Security‐based payments expense Cash settlement transaction On‐market securities buy‐back Distributionspaid/payable	capacity as unitholders ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1,693 ‐ 1,693 ‐ 1,693 (1,270) (1,270) (1,270) (1,021) ‐ ‐ (1,021) ‐ (1,021) ‐ ‐ (41,717) (41,717) (3,256) (44,973)
Total transactions with unitholders in their capacity as unitholders	(1,021) 423 (41,717) (42,315) (3,256) (45,571)

Balance as at 30 June 2017	501,448 2,752 97,624 601,823 38,156 639,979

The accompanying notes form part of these financial statements.

GDI PROPERTY GROUP FINANCIAL REPORT

For the financial year ended 30 June 2017

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CASH FLOWS
Notes	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Cash flows from operating activities Receipts in the course of operations Payments in the course of operations Interest received Interestpaid	71,732 81,582 (29,319) (35,609) 345 2,508 (7,672) (12,210)	75,415 77,168 (22,878) (32,419) 218 2,491 (7,779) (13,233)
Net cash inflow from operating activities 25	43,085 36,271	44,975 34,007
Cash flows from investing activities Payments for investment properties Proceeds from sale of investment properties Payments for capital expenditure Payments for plant and equipment Payments of incentives Loan to associated companies Payments for deposit of investment Proceeds from rentguarantee	(1,178) (134,639) 265,651 153,593 (14,327) (14,336) (48) (32) (14,937) (9,471) (284) ‐ ‐ (62) 4,091 2,171	(1,178) (134,639) 265,651 153,593 (14,327) (14,336) ‐ ‐ (14,937) (9,471) (839) ‐ ‐ (62) 4,091 2,171
Net cash used in investing activities	238,967 (2,776)	238,461 (2,744)
Cash flows from financing activities Payments for the on‐market buy‐back of securities Payments for derivative transaction costs Payment of loan transaction costs Payment of dividends/distributions Transaction with non‐controlling interest ‐ GDI No.42 Office Trust Proceeds from borrowings Repayment of borrowings	(1,067) (3,351) (1,173) ‐ (21) ‐ (44,573) (41,317) ‐ 36,890 ‐ 129,261 (240,500) (131,408)	(1,021) (3,206) (1,173) ‐ (51) ‐ (44,573) (41,317) ‐ 36,890 ‐ 129,261 (240,466) (131,408)
Net cash from financing activities	(287,334) (9,925)	(287,284) (9,781)
Net increase in cash and cash equivalents	(5,281) 23,570	(3,849) 21,482
Cash and cash equivalents at beginningofyear	28,394 4,824	25,469 3,986
Cash and cash equivalents at the end of theyear 6	23,113 28,394	21,620 25,469

The accompanying notes form part of these financial statements.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GDI Property Group (the “Group”) was formed by the stapling of GDI Property Group Limited (the “Company”) and GDI Property Trust (the “Trust”). The Responsible Entity of the Trust is GDI Funds Management Limited, a wholly owned subsidiary of the Company. GDI Property Group was established for the purpose of facilitating a joint quotation of the Company and the Trust on the ASX. The constitutions of the Company and the Trust, together with a Co‐operation Deed dated 25 November 2013, ensure that for so long as the two entities remain jointly quoted, the number of units in the Trust and shares in the Company shall be equal and the unitholders and the shareholders be identical. Both the Responsible Entity of the Trust and the Company must at all times act in the best interests of GDI Property Group. The Company was incorporated on 5 November 2013 and the Trust established on 4 November 2013 and registered as a management investment scheme on 18 November 2013.

The Company has been deemed the parent entity of the Trust. The consolidated financial statements and notes represent those of the Company and its controlled entities, including the Trust and its controlled entities as the deemed acquiree. The financial report includes separate financial statements for:

the Group, consisting of the Company, the Trust and their controlled entities; and
the Trust, consisting of GDI Property Trust and its controlled entities.

The financial statements are authorised for issue on 21 August 2017 by the directors of the Company and the Responsible Entity of the Trust.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with the Corporations Act 2001 , Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for‐profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise.

Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non‐current assets, financial assets and financial liabilities.

(b) Consolidated financial statements

The shares of the Company and the units in the Trust are stapled and issued as stapled securities of the Group. Whilst the shares and units are stapled, they cannot be traded separately and can only be traded as stapled securities. The stapling occurred on 16 December 2013, with trading on the ASX commencing on 17 December 2013.

The stapling has been accounted for pursuant to AASB 3: Business Combinations. The Company has been identified as the acquirer of the Trust whereby the Trust’s net assets are attributed to the trust unitholders. In this regard, the unitholders are treated as the non‐controlling interest in the post‐stapled financial statements of the Group, despite the fact that such owners also have an equal interest in the Company.

(c) Principles of consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of all controlled entities for the year ended 30 June 2017, that is the Company and its subsidiaries and the Trust and its subsidiaries, collectively referred to as the Group.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Subsidiaries are entities the Group controls. The Group controls an entity when it 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 over the entity. A list of the controlled entities is provided in Note 31.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of GDI Property Group from the date on which control is obtained. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

(d) Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions).

When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in profit or loss when incurred.

The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.

(e) Goodwill

Goodwill is carried at cost less any accumulated impairment losses.

Goodwill is calculated as the excess of the sum of:

the consideration transferred;
any non‐controlling interest (determined under either the full goodwill or proportionate interest method); and
the acquisition date fair value of any previously held equity interest;

over the acquisition date fair value of net identifiable assets acquired.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements.

Fair value re‐measurements in any pre‐existing equity holdings are recognised in profit or loss in the period in which they arise. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss.

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates.

Goodwill is tested for impairment annually and is allocated to GDI Property Group's cash‐generating unit or groups of cash‐ generating units, representing the lowest level at which goodwill is monitored being not larger than an operating segment.

Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill.

(f) Income Tax

(i) Trust

Under current income tax legislation the Trust is not liable to pay tax provided its taxable income and taxable realised capital gains are distributed to unitholders. The liability for capital gains tax that may arise if the properties were sold is not accounted for in this Financial Report.

(ii) Company and other taxable entities

The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/(income).

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set‐off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where:

a legally enforceable right of set‐off exists; and
the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

(iii) Tax consolidation

The Company and its wholly owned subsidiaries (excluding the Trust and its wholly owned subsidiaries) have formed a tax‐ consolidated group with effect from 16 December 2013 and are therefore taxed as a single entity from that date. The head entity of the tax‐consolidated group is GDI Property Group Limited.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax‐consolidated group are recognised in the separate financial statements of the members of the tax‐ consolidated group, using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of the assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.

Any current tax liabilities or assets and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity in the tax‐consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax‐consolidated group in conjunction with any funding arrangement amounts referred to below. Any difference in these amounts is recognised by the Company as an equity contribution or distribution.

The Company recognises deferred tax assets arising from unused tax losses of the tax‐consolidated group to the extent that it is probable that the future taxable profits of the tax‐consolidated group will be available against which the asset can be utilised. Any subsequent period adjustment to deferred tax assets arising from unused tax losses, as a result of revised assessments of the probability of recoverability, is recognised by the head entity only.

(iv) Nature of tax funding arrangements and tax sharing arrangements

The Company, in conjunction with other members of the tax‐consolidated group, has entered in to a tax funding arrangement, which sets out the funding obligations of the members of the tax‐consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the Company equal to the current tax liability (asset) assumed by the Company and any tax‐loss/deferred tax asset assumed by the Company, resulting in the Company recognising an inter‐entity receivable (payable) equal in amount to the liability (asset) assumed. The inter‐entity receivable (payable) are at call.

Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the Company’s obligation to make payments for tax liabilities to the relevant tax authorities.

The Company, in conjunction with other members of the tax‐consolidated group, has also entered in to a tax sharing arrangement. The tax sharing arrangement provides for the determination of the allocation of income tax liabilities between the entities should the Company default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement, as payment of any amounts under the tax sharing agreement is considered remote.

(g) Plant and equipment

Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probably that future economic benefits associated with the item will flow to GDI Property Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation is calculated using both the straight line and diminishing values method to allocate costs of assets, net of their residual values, over their estimated useful lives, as follows:

Depreciation is calculated using both the straight line and diminishi residual values, over their estimated useful lives, as follows:	ng values method to allocate costs of assets, net o	f their
Class		Rate
Furniture and fittings	2% ‐	67%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds to the carrying amount. Any gain or loss is included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

(h) Impairment of assets

Goodwill and tangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

At each reporting date, and whenever events or changes in circumstances occur, the Group assesses whether there is any indication that any other asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate and an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Assets other than goodwill that suffer an impairment are viewed for possible reversal of the impairment at each reporting date.

(i) Investment property

Investment property is property which is held either to earn income or for capital appreciation or both. Investment property also includes properties that are under construction for future use as investment properties. Investment property is measured at fair value, with acquisition and other related costs written off through the profit and loss. As part of the process of determining fair value, an external, independent valuer, having an appropriate recognised professional qualification and recent experience in the location and category of property being valued, values individual properties annually on a rotation basis or on a more regular basis if considered appropriate and as determined by management and the Board in accordance with the valuation policy of GDI Property Group.

These valuation processes are taken into consideration when determining the fair value of the investment properties. The fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms‐length transaction after property marketing wherein the parties had each acted knowledgably, prudently and without compulsion.

The valuations are prepared by considering the capitalisation of net income and the discounting of future cash flows to their present value. These methods incorporate assumptions of future rental income and costs, appropriate capitalisation and discount rates and also consider market evidence of transaction prices of similar investment properties.

Valuations reflect, where appropriate:

the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit‐worthiness;
the allocation of maintenance and other operating cost responsibilities between lessor and lessee; and
the remaining economic life of the property.

Further information on assumptions underlying the assessment of fair value is contained below at Note 1 (bb) Critical accounting estimates and judgements and in Note 10, Investment property.

Changes in fair values are recorded in the Consolidated Statement of Profit or Loss and Other 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 Consolidated Statement of Profit or Loss and Other Comprehensive Income in the year of disposal.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Repairs and maintenance costs and minor renewals are charged as expenses when incurred.

Subsequent 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.

(j) Cash and cash equivalents

Cash and cash equivalents includes cash on hand and cash at bank.

(k) Leases

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of an asset remain with the lessee, but not the legal ownership, are classified as finance leases.

Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the lease property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred.

Lessees may be offered incentives as an inducement to enter into non‐cancellable leases. These incentives may take various forms including up‐front cash payments, rent free periods, or a contribution to certain lessee costs such as fit out costs or relocation costs. They are recognised as an asset in the statement of financial position as a component of the carrying amount of investment property and amortised over the lease period as a reduction in rental income.

Initial direct leasing costs incurred in negotiating and arranging operating leases are recognised as an asset in the statement of financial position as a component of the carrying amount of investment property and are amortised as an expense on a straight line basis over the lease term.

(l) Fair value of assets and liabilities

The Group measures some of its assets and liabilities at fair value on either a recurring or non‐recurring basis, depending on the requirements of the applicable Accounting Standards.

Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.

As fair value is a market‐based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.

To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs).

For non‐financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.

The fair value of liabilities and the entity’s own equity instruments (excluding those related to share‐based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements.

(m) Financial Instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost.

Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments.

(i) Loans and receivables

Loans and receivables are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

(ii) Financial liabilities

Non‐derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

(n) Derivative financial instruments

The Group is exposed to changes in interest rates and uses interest rate derivatives to hedge these risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re‐measured to fair value at balance date. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

The Group enters into interest rate swap agreements that are used to convert certain variable interest rate borrowings to fixed interest rates. The derivatives are entered into with the objective of hedging the risk of adverse interest rate fluctuations. While the Group has determined that these arrangements are economically effective, they have not satisfied the documentation, designation and effectiveness tests required by accounting standards. As a result, they do not qualify for hedge accounting and gains or losses arising from changes in fair value are recognised immediately in profit or loss.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

(o) Employee benefits

(i) Short‐term employee benefits

Provision is made for the Group’s obligation for short‐term employee benefits. Short‐term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short‐term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled.

The Group’s obligations for short‐term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position.

(ii) Other long‐term employee benefits

Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long‐term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any re‐measurements for changes in assumptions of obligations for other long‐term employee benefits are recognised in profit or loss in the periods in which the changes occur.

The Group’s obligations for long‐term employee benefits are presented as non‐current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions.

(iii) Performance rights plan

The Group has established a performance rights plan and has issued performance rights to employees. Under the performance rights plan, employees will be granted performance rights which will vest into the Group securities at no cost, if vesting conditions are satisfied.

The cost of the issues of performance rights are recognised as an employee benefit expense (for performance rights issued in relation to executive remuneration for the period ended 30 June 2014, and the years ended 30 June 2015, 30 June 2016 and 30 June 2017) or initial public offer costs (for performance rights issued to employees as disclosed in the Prospectus and Product Disclosure Statement dated 25 November 2013 in relation to the Initial Public Offer of GDI Property Group securities). The fair value of the performance rights is recognised in the security‐based payments reserve in equity, or, if the performance rights are yet to be granted, accrued in the Consolidated Statement of Financial Position and reversed with a corresponding increase in the security‐based payments reserve in equity once the performance rights are granted.

Fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the rights. For relative market performance based vesting conditions, fair value is determined using binomial option pricing to model the performance of GDI Property Group to the selected peer group taking into account individual volatilities and correlations.

For non‐market based vesting conditions, the fair value is determined based on the likelihood of achieving the conditions having reference to budgets and management plans. For non‐market based vesting conditions, at each reporting date the Group revises its estimate of the number of performance rights that are expected to be exercisable and the employee benefit expense recognised each reporting period takes into account the most recent estimate. The impact of any revision to original estimates is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income with a corresponding adjustment to equity.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

(p) Revenue and other income

(i) Rental revenue

Rental revenue from investment property is recognised on a straight line basis over the lease term or until the first contingency (market or CPI review) occurs. Rental revenue not received at reporting date is reflected in the statement of financial position as a receivable or if paid in advance, as rent in advance (unearned income). Lease incentives granted are considered an integral part of the total rental revenue and are recognised as a reduction in rental income over the term of the lease, on a straight line basis. Contingent rents based on the future amount of a factor that changes other than with the passage of time, including turnover rents and CPI or market linked rental increases, are only recognised when contractually due.

(ii) Funds management revenue

Acquisition and capital raising fee revenue is recognised at settlement of the relevant property or proportionately as the equity interests are issued/sold to external investors as appropriate. Management fee revenue is recognised on a proportional basis over this time as services are performed.

(iii) Interest

Interest revenue is recognised as it accrues using the effective interest method.

Where an asset has been held for syndication with funding provided by GDI Property Trust by way of an at call loan, and the asset is subsequently syndicated, the interest income earned by GDI Property Trust whilst the asset is held for syndication is recognised in both the accounts of GDI Property Trust and the Group.

(q) Property expenses

Property expenses and outgoings include rates, taxes and other property outgoings incurred in relation to investment properties were such expenses are the responsibility of GDI Property Trust and are recognised on an accruals basis.

(r) Trade and other receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non‐current assets.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

(s) Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

(t) Borrowing and borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest rate method. Under this method fees, costs, discounts and premiums directly related to the financial liability are spread over its expected life. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the period in which they are incurred.

(u) Provisions

Provisions are recognised when:

the Group has a present legal or constructive obligation as a result of past events; and
it is probable that an outflow of resources will be required to settle the obligation; and
the amount has been reliably estimated.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

Provisions are not recognised for future operating losses.

(v) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

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

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.

(w) Rounding of amounts

The parent entity has applied the relief available to it under ASIC Class Order 98/100. Accordingly, amounts in the financial statements and directors’ report have been rounded off to the nearest $1,000.

(x) Segment reporting

An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other segments. Each segment is reviewed by the entities chief operating decision maker (CODM) to make decisions about resources to be allocated to the segment and assess the performance and for which discrete financial information is available.

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, investment properties and goodwill. Due to the small size of the management team, corporate overhead expenses and property, plant and equipment are not allocated in reporting to the CODM and therefore for the purpose of segment reporting are unallocated.

(y) Contributed equity

Ordinary shares and units are classified as equity and recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary stapled securities are recognised directly in equity as a reduction, net of tax, of the proceeds of the issue.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

(z) Distributions and dividends

Distributions are paid to GDI Property Group stapled securityholders half yearly. A provision for distributions is made for the amount of any distribution declared on or before the end of the reporting period but not paid to securityholders at the reporting date.

(aa) Earnings per stapled security

Basic earnings per stapled security is calculated as net profit attributable to ordinary securityholders of the Group divided by the weighted average number of ordinary securities outstanding during the financial year. Diluted earnings per stapled security is calculated as net profit attributable to ordinary securityholders of the Group divided by the weighted average number of ordinary stapled securities and dilutive potential ordinary securities. Where there is no difference between basic and diluted earnings per stapled security, the term basic and diluted earnings per stapled security is used.

(ab) Critical accounting estimates and assumptions

The preparation of the financial reports requires management to make judgements, estimates and assumptions that effect the reported amounts in the financial reports. Management bases its judgements and estimates on historical experience and other various factors it believes to be reasonable under the circumstances, but which are inherently uncertain and unpredictable, the results of which form the basis of the carrying values of assets and liabilities. The resulting accounting estimates may differ from the actual results under difference assumptions and conditions.

The key estimates and assumptions that have a risk of causing adjustment with the next financial year to the carrying amounts of asset and liabilities recognised in these financial reports are:

(i) Valuation of investment property

Critical judgements are made by the Group in respect of the fair values of investment properties. The fair value of these investments are reviewed regularly by management with reference to external independent property valuations, recent offers and market conditions existing at reporting date, using generally accepted market practices. Then critical assumptions underlying management’s estimates of fair values are those relating to the passing rent, market rent, occupancy, capitalisation rate, terminal yield and discount rate. If there is any change in these assumptions or regional, national or international economic conditions, the fair value of the property investments may differ. Major assumptions used in valuation of the property investments are disclosed in Note 10.

(ii) Valuation of financial instruments

The fair value of derivative assets and liabilities are based on assumptions of future events and involve significant estimates. The basis of valuation for the Group’s derivatives are set out in Note 1(n), however the fair values of derivatives reported at 30 June 2017 may differ if there is volatility in market rates in future periods. The valuation techniques are discussed in detail at Note 10 and have been developed in compliance with requirements of AASB 139 Financial Instruments: Recognition and Measurement.

(iii) Impairment of loans and receivables

Assets are assessed for impairment each reporting date by evaluating whether any impairment triggers exist. Where impairment triggers exist, management reviews the allocation of cash flows to those assets and estimates a fair value for the assets. Critical judgements are made by the Group in setting appropriate impairment triggers for its assets and the assumptions used when determining fair values for assets where triggers exist.

(iv) Security‐based payments

The Group measures the cost of performance rights allocated to employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of performance rights is determined using Black‐Scholes option pricing model and Binomial option pricing models. The related assumptions are detailed in Note 30. The accounting

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

estimates and the assumptions relating to performance rights will have no impact on the carrying amounts of assets and liabilities within the next reporting period, but may impact the security based payment expense and equity.

(v) Recoverability of deferred tax assets

Deferred tax assets are recognised for deductible temporary difference and unused tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences and unused tax losses. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits which may lead to impairment of the deferred tax asset.

(vi) Consolidation of entities in which the Group holds less than 50%

Management consider that the Group has de facto control of GDI No. 42 Office Trust even though it has less than 50% of the interests. The Group is the majority unitholder of GDI No. 42 Office Trust with 43.68% interest, while all other unitholders indirectly hold less than 10% of its units. There is no history of other unitholders forming a group to exercise their votes collectively. Entities controlled by the Group also act as Trustee and Investment Manager.

NOTE 2 – PROPERTY REVENUE

Property revenue	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Rent and recoverable outgoings Lease costs and incentive amortisation	76,674 79,611 (8,226) (5,053)	76,674 79,611 (8,226) (5,053)
Totalproperty revenue	68,448 74,558	68,448 74,558

NOTE 3 – FINANCE COSTS

Finance costs	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Interestpaid/ payable	8,461 12,425	8,458 12,425
Total finance costs	8,461 12,425	8,458 12,425

NOTE 4 – CORPORATE AND ADMINISTRATION EXPENSES

Total finance costs NOTE 4 – CORPORATE AND ADMINISTRATION EXPENSES	8,461 12,425	8,458 12,425
Corporate and administration expenses	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Audit and taxation fees Custodian fees Occupancy expenses Employee benefits expense Others	278 231 95 64 304 298 5,937 5,128 592 633	95 72 95 64 ‐ ‐ 1,514 1,041 740 621
Total corporate and administration expenses	7,205 6,354	2,444 1,798

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

NOTE 5 – INCOME TAX EXPENSE/BENEFIT

Income tax benefit	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
The components of tax expense/(benefit) comprise: Current tax Deferred tax	‐ ‐ (345) 248	‐ ‐ ‐ ‐
Income tax expense/(benefit)	(345) 248	‐ ‐
Reconciliation of income tax expense/(benefit) to prima facie tax payable: Prima facie tax payable on profit from ordinary activities before income tax at 27.5% 29,417 14,385		‐ ‐
Add tax effect of: Tax effect of reduction in tax rate 76 ‐ Other non‐allowable items 1 21 Share option expensed 23 ‐ Less tax effect of: Share options paid (17) ‐ Non‐taxable trust income (29,845) 14,158		‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Income tax expense/(benefit) attributable to Group/ Trust (345) 248		‐ ‐

NOTE 6 – CASH AND CASH EQUIVALENTS

Cash and cash equivalents	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Cash at bank	23,113 28,394	21,620 25,469
Total cash and cash equivalents	23,113 28,394	21,620 25,469

NOTE 7 – TRADE AND OTHER RECEIVABLES

Trade and other receivables	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Trade receivable Others Provision for impairment	3,451 2,849 340 717 (670) (422)	1,794 1,498 328 706 (190) (100)
Total trade and other receivables	3,122 3,144	1,933 2,105

The movement in the provision for impairment of trade and other receivables is as follows:

Provision for impairment Balance at beginning of year Charge for theyear	Group Trust $'000 $'000	Group Trust $'000 $'000
	422 100 248 90
Balance as at 30 June 2017	670	190

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Trade receivables

Included in trade and other receivables of the Group is $73,375 (2016: $511,000) of fees charged to managed funds that have subsequently been paid and $1,528,322 (2016: $815,000) that remains unpaid. Of this, $480,199 (2016: $321,000) has been provisioned for impairment. The Group also had $871,913 (2016: $625,000) of rent receivable which was past due but not impaired. Of this, $89,525 (2016: $100,000) has been provisioned for impairment and the remainder relates to a number of tenants for whom there is no recent history of default and in most cases security is held for greater than the amount outstanding, there has been no impairment of receivables.

NOTE 8 – OTHER ASSETS

NOTE 8 – OTHER ASSETS
Other assets	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Interest paid in advance Prepayment Others	‐ 378 657 633 1,048 694	‐ 378 620 573 2,599 1,691
Total other	1,705 1,705	3,219 2,641

NOTE 9 – NON‐CURRENT ASSETS HELD FOR SALE

During the year, GDI Property Group engaged the services of real estate agents to market for sale 66 Goulburn Street, Sydney. On 17 August 2017, GDI Property Group entered in to a contract to sell 66 Goulburn Street, Sydney, for $252.0 million, a net sales price of approximately $228.0 million after adjustments and selling costs. Accordingly, the asset has been classified as a Non‐current asset held for sale, but as the contract is conditional on Foreign Investment Review Board approval, it is carried at its independent valuation of $223.0 million. See note 36, Post balance sheet events for further information.

NOTE 10 – INVESTMENT PROPERTIES

Investmentproperties at fair value	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Movement in investment properties Balance at beginning of the year Additions ‐ Investment property Assets transferred to non‐current assets held for sale Disposal Amortisation of rental guarantee Capital works ‐ Property improvements ‐ Maintenance capital Straight‐lining of rental income Incentives paid Capitalised outstanding lease incentives Lease costs Amortisation of incentives Amortisation of lease costs Netgain/(loss)from fair value adjustments	900,478 730,334 1,240 134,639 (223,000) ‐ (265,664) ‐ (4,091) (2,171) 12,445 13,875 532 459 1,528 1,888 11,745 7,385 915 1,073 2,119 1,371 (7,635) (4,559) (632) (356) 69,647 16,539	900,478 730,334 1,240 134,639 (223,000) ‐ (265,664) ‐ (4,091) (2,171) 12,445 13,875 532 459 1,528 1,888 11,745 8,458 915 1,073 2,119 1,371 (7,635) (4,559) (632) (356) 69,647 16,539
Balance as at 30 June	499,628 900,478	499,628 900,478

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

b) Rental guarantee and incentive

GDI Property Group obtained various guarantees over properties that it acquired. In relation to 66 Goulburn Street, Sydney, GDI Property Group could draw on a $6.0 million rental guarantee to satisfy outgoings, market rent, incentives, leasing costs or any other costs relating to the property that it elected for a period of up to 60 months (5 years) from settlement. During the period GDI Property Group drew down the remaining balance of this guarantee ($2.4 million). In relation to 307 Queen Street, Brisbane, GDI Property Group obtained a two year guarantee over vacant space (which expired in December 2015) and the payment of tenant incentives (rebates) on terms consistent with the leases in place at the time of the acquisition. During the period GDI Property Group also drew down the balance of this component of the guarantee.

Carrying value of rental guarantee and incentive

	Opening	Amortised	Fair value	Closing
	balance	during year	adjustment	balance
Property	$'000	$'000	$'000	$'000
307 Queen St, Brisbane	1,706	(1,706)	‐	‐
66 Goulburn St,Sydney	2,384	(2,384)	‐	‐
Total	4,091	(4,091)	‐	‐

Valuation basis

The basis of valuation of investment properties is fair value, being the amounts for which the assets could be exchanged between knowledgeable willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. All properties have been independently valued in the last twelve months based on independent assessments by a member of the Australian Property Institute of Valuers.

The table below illustrates the key valuation assumptions used in the determination of the investment properties fair value.

Valuation basis	2017	2016
Weighted average capitalisation rate (%)	7.32%	7.55%
Weighted average lease expiry by area (years)	3.6 years	4.7 years
Occupancy	88.2%	79.3%

Ten year discounted cash flows and capitalisation valuation methods are used together with active market evidence. In addition to the key assumptions set out in the table above, assumed portfolio downtime ranges from six to 18 months and tenant retention ranges from 50% to 75%.

c) Assets pledged as security

Borrowings (refer Note 17) are secured by fixed and floating charges over each investment property plus charges over any building document, lease document, performance bond and bank guarantee in addition to a real property mortgage over each property.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

d) Leases as a lessor

The Group and the Trust lease out investment properties under operating leases. The future minimum lease payments receivable under non‐cancellable leases are as follows:

receivable under non‐cancellable leases are as follows:
Lease receivable commitments	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Within one year Later than one year but not later than five years Later than fiveyears	54,453 58,706 201,612 145,283 73,550 34,374	54,453 58,706 201,612 145,283 73,550 34,374
Total other	329,615 238,363	329,615 238,363

GDI PROPERTY GROUP

NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

e) Details of investment properties

The following table presents individual properties owned by GDI Property Group and the Trust:

Title Acquisition date Acquisition price Independent valuation date Independent valuation Carrying amount Fair value adjustment Investmentproperties $'000 $'000 $'000 $'000	Title Acquisition date Acquisition price Independent valuation date Independent valuation Carrying amount Fair value adjustment Investmentproperties $'000 $'000 $'000 $'000
Mill Green Complex, Perth1 Freehold 16 December 2013 332,656 31 December 2016 320,000 321,788 (8,807) 50 Cavill Avenue, Surfers Paradise Freehold 1 February 2016 46,139 30 June 2017 77,600 77,600 17,164 38 / 46 Cavill Avenue, Surfers Paradise Strata 12 August 2016 1,240 12 August 2016 ‐ 1,240 ‐ 223 ‐ 237 Liverpool Rd, Ashfield Freehold 17 December 2015 35,000 30 June 2017 43,000 43,000 6,801 235 StanleySt,Townsville Freehold 16 June 2016 53,500 30 June 2017 56,000 56,000 2,166
Investmentproperties 468,535 496,600 499,628 17,324
Assets transferred to non‐current assets held for sale
66 Goulburn St,Sydney	Leasehold 15 July2014 136,000 30 June 2017 223,000 223,000 32,232
Total Investmentproperties	604,535 719,600 722,628 49,556

The acquisition date and acquisition price are based on the completion date of the restructure and IPO of stapled securities to create GDI Property Group and the independent valuations ascribed to the assets as part of the restructure. The acquisition prices includes capital expenditure incurred between the valuation date for the restructure and the IPO (1st October 2013) and the acquisition date (16th December 2013).

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

NOTE 11 – PLANT AND EQUIPMENT

a) Plant and equipment	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Furniture and fittings at cost Accumulated depreciation	135 200 (35) (79)	‐ ‐ ‐ ‐
Total other	100 121	‐ ‐

Movement in plant and equipment

Reconciliations of the carrying amounts of each class of plant and equipment are set out below:

Movement in plant and equipment Reconciliations of the carrying amounts of each class of plant and equipment are set out below:	Movement in plant and equipment Reconciliations of the carrying amounts of each class of plant and equipment are set out below:
b) Furniture and fittings Total $'000 $'000
Balance at beginning of year 123 123 Additions 33 33 Depreciation (34) (34)
Balance as at 30 June 2016 121	121
Balance at beginning of year 121 121 Additions 14 14 Depreciation (35) (35)
Balance as at 30 June 2017 100	100

NOTE 12 – DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 12 – DERIVATIVE FINANCIAL INSTRUMENTS
	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Current interest rate swaps Non‐Currant interest rate swaps	233 1,195 4,065	233 1,195 4,065
Total derivative financial instruments	1,195 4,288	1,195 4,288

Details of principal amounts, expiry dates and interest ranges of interest rate derivative contracts are set out in Note 28.

NOTE 13 – DEFERRED TAX ASSETS

			(Charged)/
		(Charged)/	Credited
	Opening	Credited to	Directly to	Closing
	Balance	Profit or Loss	Equity	Balance
30 June 2017	$'000	$'000	$'000	$'000
Deferred tax asset on:
Provisions	215	31	‐	246
Transaction costs on equity issue	298	(147)	‐	151
Tax losses carried forward	400	462	‐	861
Net amount	913	345	‐	1,258

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017
			(Charged)/
		(Charged)/	Credited
	Opening	Credited to	Directly to	Closing
	Balance	Profit or Loss	Equity	Balance
30 June 2016	$'000	$'000	$'000	$'000
Deferred tax asset on:
Provisions	100	115	‐	215
Transaction costs on equity issue	431	(133)	‐	298
Tax losses carried forward	630	(230)	‐	400
Net amount	1,161	(248)	‐	912

The amounts of deductible temporary differences and unused tax losses for which no deferred tax assets have been brought to account:

Group 2017 2016 $'000 $'000 Losses for which no deferred tax assets have been brought to account: ‐ deductible temporary differences ‐ ‐ ‐ tax losses – operatingin nature 105 260	Group 2017 2016 $'000 $'000 Losses for which no deferred tax assets have been brought to account: ‐ deductible temporary differences ‐ ‐ ‐ tax losses – operatingin nature 105 260	Trust 2017 2016 $'000 $'000
		‐ ‐ ‐ ‐
105 260		‐ ‐

The benefits of the above temporary differences and unused tax losses will be realised when the conditions for deductibility set out in Note 1(b) occur. These amounts have no expiry date.

NOTE 14 – INTANGIBLE ASSETS

NOTE 14 – INTANGIBLE ASSETS
Intangible assets	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Goodwill ‐ at cost and at net carryingamount	18,110 18,110	‐ ‐
Total trade and other receivables	18,110 18,110	‐ ‐

a) Impairment test for goodwill

The Group acquired from the privately owned GDI group of companies the rights, title and interest in the funds management business, and the shares of the operating companies, for total consideration of $18.5 million. The value of the shares acquired was determined by the net asset value of the relevant company, with the balance ($18.11 million) of the total consideration recognised as goodwill. The acquisition price was supported by an Independent Experts Report.

For subsequent measurement, goodwill is allocated to cash‐generating units which are based on the Group’s reporting segments. The Group has determined that the cash‐generating unit is the funds management business and as per reporting to the Chief Operating Decision Maker (CODM), no fee has been assumed to be charged to the Trust by the funds management business. The recoverable amount of the cash generating unit is determined based on value‐in‐use calculations. Value‐in‐use is calculated based on the present value of the forecast profit after tax from funds established since the acquisition of the funds management business and new funds to be established over a five year term, with a terminal value applied to the forecast sixth year profit after tax. The cash flows are discounted at a 17.5% discount rate.

Management has based the value‐in‐use calculations on the historical performance and future prospects of the Funds Management business as reported to the CODM, taking into consideration the historical rate at which funds are established.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

As a result of the value‐in‐use calculation, no impairment of goodwill has been recorded in the Financial Statements.

b) Key assumptions used in valuation assumptions

The following key assumptions were used in the value‐in‐use calculations:

			Terminal value
30 June 2017	New funds(p.a.)	Fee income	growth rate	Discount rate
Funds management segment	FY18: $143.5	Management fee – 0.65%	2.0%	17.5%
	million, thereafter	and 1.00%
	$51.7 million	Acquisition fee – 2%
		Disposal fee – 2%
			Terminal value
30 June 2016	New funds(p.a.)	Fee income	growth rate	Discount rate
Funds management segment	$51.7 million	Management fee – 0.65%	2.0%	17.5%
		and 1.00%
		Acquisition fee – 2%
		Disposal fee – 2%

The calculation of value‐in‐use is most sensitive to the following assumptions:

the rate at which new funds are established and the size of these funds (property values);
fee income;
terminal growth rate; and
discount rate.

Rate at which new funds are established – based on management’s expectations on the pace and size of new fund establishments, having regard to GDI Property Group’s track record and future prospects. GDI Property Group’s business plan includes launching new unlisted funds with total new AUM of $100 million in each year. However, for the purpose of the value in use calculations, GDI Property Group has used in FY18 $143.5 million, given GDI No. 43 Pty Limited ATF GDI No. 43 Property Trust has exchanged contracts to acquire 6 Sunray Drive, Innaloo, and for FY19 onwards the average amount of AUM raised in FY14, FY15 and FY16.

Fee income – fee income is based on due diligence, management (non‐active fee rate) and disposal fees only, and does not include performance fees, debt arranging fees or any project management fees.

Terminal growth rate – terminal growth rate was determined based on management’s estimate of the long‐term compound annual EBITDA growth rate, consistent with the assumption that a market participant would make.

Discount rate – discount rates reflect management’s estimate of the risks specific to each cash generating unit, in particular in relation to establishing new funds.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

NOTE 15 – TRADE AND OTHER PAYABLES

NOTE 15 – TRADE AND OTHER PAYABLES
Trade and otherpayables	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Trade payables and accruals Lease incentive payable Distribution payable Otherpayables	7,439 7,967 915 1,073 20,838 20,879 413 780	6,383 7,016 915 1,073 20,838 20,879 264 440
Total trade and otherpayables	29,605 30,699	28,400 29,408

Trade and other payables are generally unsecured, non‐interest bearing and settled within 30‐60 days terms.

Lease incentives payable are generally unsecured, non‐interest bearing and are normally settled in cash.

Distribution payable relates to the distribution for the period from 1 January 2017 to 30 June 2017, declared in June and payable in August 2017.

NOTE 16 – PROVISIONS

Provisions	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Current Employee benefits	184 346	‐ ‐
Non‐current Employee benefits	118 80	‐ ‐
Totalprovisions	302 426	‐ ‐

Provision for employee benefits

Provision for employee benefits represents amounts accrued for annual leave and long service leave.

The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. However, these amounts must be classified as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement.

The non‐current portion for this provision includes amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service.

In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been discussed in Note 1(o).

NOTE 17 – BORROWINGS

Borrowings shown above are net of transaction costs which are amortised over the term of the loan.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

a) Interest bearing liabilities

Borrowings Non current	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Secured liabilities: Loans ‐ financial institutions Transaction costs	80,354 320,854 (455) (738)	80,354 320,854 (597) (880)
Total borrowings	79,899 320,116	79,757 319,974

b) Borrowing details

Borrowings of the Group and the Trust are the same and details at balance date are set out below:

			Facility	Utilised	Unutilised
Facility	Secured	Maturitydate	$'000	$'000	$'000
Facility Tranche B1	Yes	October 2018	60,000	10,879	49,121
Facility Tranche C1	Yes	October 2018	55,000	38,500	16,500
Term Loan2	Yes	June 2019	30,975	30,975	‐
Commercial EquityFacility2	Yes	June 2019	4,425	‐	4,425
			150,400	80,354	70,046
FacilityTranche D3	Yes	October 2018	5,000
Total facility			155,400	80,354	70,046

Facility Tranche B, C and D is secured by first registered mortgage over the wholly owned investment properties held by the Group and a registered fixed and floating charge over the assets of the Group. Interest is payable quarterly in arrears at variable rates based on the 90 day BBSY. Line fees are payable quarterly in advance.
The Term Loan and Commercial Equity Facility relate to GDI No. 42 Office Trust and are secured against the assets of that trust. Interest and line fees are payable quarterly in arrears at variable rates based on the 90 day BBSY.
The Group also has a $5 million bank guarantee supporting the financial requirements of GDI Funds Management Limited’s AFS Licence. This is undrawn and cannot be used for general working capital purposes.

c) Maturity profile

The maturity profile of the principal amounts of non‐current borrowings, together with estimated interest thereon, is provided in the table below:

provided in the table below:
Maturity profile	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Due within one year Due between one and five years Due after fiveyears	1,014 12,933 81,326 338,746 ‐ ‐	1,014 12,933 81,326 338,746 ‐ ‐
	82,340 351,679	82,340 351,679

NOTE 18 – CONTRIBUTED EQUITY

Contributed equity	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'001
Contributed equity	523,712 530,319	501,448 507,769
Total contributed equity	523,712 530,319	501,448 507,769

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

a) Movements in ordinary securities/units

a) Movements in ordinary securities/units
	Group No(000) $'000	Trust
		No(000) $'000
Securities on issue at beginning of the year Transfer from treasury security reserve On‐market buyback	545,022 530,319 (2,500) (2,189) (3,703) (3,351)	545,022 507,769 (2,500) (2,094) (3,703) (3,206)
Contributed equity attributable to shareholders/unitholders
as at 30 June 2016	538,819 524,780	538,819 502,469
Securities on issue at beginning of the year On‐market buyback	538,819 524,780 (1,073) (1,067)	538,819 502,469 (1,073) (1,021)
Contributed equity attributable to shareholders/unitholders
as at 30 June 2017	537,746 523,712	537,746 501,448

b) Stapled securities

The ordinary shares on the Company are stapled to the units of the Trust. Each stapled security entitles the holder to participate in dividends and distributions as declared from time to time and the proceeds on winding up. Each stapled security entitles the holder to vote in accordance with the provisions of the Constitution, Trust Deed and the Corporations Act 2001.

NOTE 19 – RESERVES AND RETAINED EARNINGS

a) Security‐based payment reserve

a) Security‐based payment reserve
	Group	Trust
	$'000	$'000
Balance at the beginning of the year	854	817
Security‐basedpayments expense	1,581	1,512
Balance as at 30 June 2016	2,435	2,329
Balance at the beginning of the year	2,435	2,329
Security‐based payments expense	1,770	1,693
Cash settlement transaction	(1,328)	(1,270)
Balance as at 30 June 2017	2,877	2,752

The security‐based payment reserve is used to recognise the fair value of performance rights issued under the performance rights plan. Refer to Note 30 for further details.

b) Retained earnings

b) Retained earnings
	Group	Trust
	$'000	$'000
Balance at the beginning of the year	27,272	29,755
Net profit for the financial period	47,701	47,337
Less: Dividends/distributionspaid/payable	(41,758)	(41,758)
Balance as at 30 June 2016	33,214	35,334
Balance at the beginning of the year	33,214	35,334
Net profit for the financial period	107,316	108,527
Less: Dividends/distributionspaid/payable	(44,973)	(44,973)
Balance as at 30 June 2017	95,557	98,888

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

c) Treasury security reserve

c) Treasury security reserve
	Note	Group	Trust
		$'000	$'000
Balance at the beginning of the year		(2,189)	(2,094)
On‐market buyback		2,189	2,094
Balance as at 30 June 2016		‐	‐
Balance at the beginning of the year		‐	‐
On‐market buyback		(1,067)	(1,021)
Cancellation of treasurysecurities	18a	1,067	1,021
Balance as at 30 June 2017		‐	‐

The treasury securities reserve is used to recognise stapled securities that have been repurchased by the Group and not cancelled but held in treasury.

NOTE 20 – DIVIDENDS/DISTRIBUTIONS PAID/PAYABLE

a) Dividends paid/payable by the Company

There were no dividends paid or payable by the Company in respect of the 2017 and 2016 financial year/period.

b) Distributions paid/payable by the Group/Trust

Distributionspaid/ payable by the Group / Trust	Group 2017 2016 cents/ security cents/ security	Trust
		2017 2016 cents/unit cents/unit
29 February 2016 29 August 2016 28 February 2017 31 August 2017	3.875 3.875 3.875 3.875	3.875 3.875 3.875 3.875
Total distributionspaid/ payable by the Group / Trust	7.750 7.750	7.750 7.750

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

NOTE 21 – EARNINGS PER SECURITY/UNIT

	Group 2017 2016 cents cents	Trust
		2017 2016 cents cents
Basic earnings per security/unit Diluted earningsper security/unit	18.34 9.59 18.20 9.53	18.57 9.52 18.43 9.47
	$'000 $'000	$'000 $'000
Earnings used to calculate basic and diluted earnings per security/unit: Profit for theperiod 98,772 51,723		99,983 51,360
Profit attributable to ordinary securityholders/equityholders of the Group/Trust used in calculating basic and diluted earnings per security/unit 98,772 51,723		99,983 51,360
No.(000) No.(000)		No.(000) No.(000)
Weighted average number of ordinary securities/units used in calculatingbasic earningsper security/unit 538,499 539,537		539,537 539,537
Weighted average number of ordinary securities/units used in calculating diluted earnings per security/unit 542,644 542,486		542,486 542,486

NOTE 22 – PARENT ENTITY DISCLOSURES

a) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

Results	Company
	2017 2016 $'000 $'000
Loss for theperiod	(235) (154)
Total comprehensive loss for theperiod	(235) (154)
Financialposition
Current assets Total assets Current liabilities Total liabilities	17 49 21,859 21,986 137 116 1,402 1,266
Net assets	20,457 20,720
Contributed equity Reserves Accumulated losses	22,264 22,310 125 105 (1,931) (1,696)
Total equity	20,457 20,720

b) Guarantees entered in to by the parent entity

During the years ended 30 June 2017 and 30 June 2016 the parent entity did not provide any guarantee to entities it controlled.

c) Contingent liabilities

The parent entity had no contingent liabilities at year end.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

d) Contractual commitments

As at 30 June 2017 and as at 30 June 2016, the Company had no commitments in relation to capital expenditure contracted for but not provided as liabilities.

NOTE 23 – SEGMENT REPORTING

a) Identification of reportable segments

Group

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. The following summary describes the operations in each of the GDI Property Group’s operating segments:

Operatingsegments	Products/Services
Property investment	Investment and management income producing properties
Funds management	Establishment and management of property investment vehicles

The Board assesses the performance of each operating sector based on FFO and AFFO. FFO is a global financial measure of the real estate operating performance after finance costs and taxes, adjusted for certain non‐cash items. AFFO adjusts FFO for incentives paid during the year and maintenance capital expenditure. The Directors consider FFO to be a measure that reflects the underlying performance of the Group. GDI Property Group’s FFO comprises net profit/loss after tax calculated in accordance with the Australian Accounting Standards and adjusts for property revaluations, impairments, derivative mark to market impacts, amortisation of tenant incentives, straight line rent adjustments, gain/loss on sale of assets, rental guarantees and performance fees charged that remain unpaid.

Trust

The Trust operates in predominately one operating segment being property investment.

b) Basis of accounting for purposes of reporting by operating segments

(i) Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group.

(ii) Intersegment transactions

Corporate and administration costs other than direct expenses are not allocated to divisions for segment reporting purposes; and
There is no revenue recorded by the funds management business from managing the Trust for segment reporting purposes.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

c) Segment information

c) Segment information	c) Segment information	c) Segment information	c) Segment information
Property Funds management Reviewed but unallocated Total 30 June 2017 $'000 $'000 $'000 $'000
Operating earnings Net property income 48,011 ‐ ‐ 48,011 Funds Management income ‐ 3,126 ‐ 3,126 Other income ‐ ‐ 7 7
Total operating earnings 48,011	3,126	7	51,144
FFO adjustments Straight‐lining rental income (1,528) ‐ 18 (1,511) Other FFO adjustments 780 449 ‐ 1,229 Amortisation and depreciation 8,226 ‐ 35 8,260 Movement in rental guarantees 4,091 ‐ ‐ 4,091 Adjustment for GDI 42 (5,864) 2,862 ‐ (3,002)
FFO pre corporate, administration and interest
expenses/ income 53,714	6,438	59	60,212
+/‐ corporate, administration and interest expense / income Interest paid (8,157) (3) ‐ (8,161) Interest income 218 127 ‐ 345 Corporate and administration expenses (2,444) ‐ (4,761) (7,205) Income tax(expense)/benefit ‐ 345 ‐ 345
Total FFO 43,331	6,907	(4,702)	45,536
+/‐ AIFRS adjustments from FFO to profit after tax from ordinary activities Net fair value gain on interest rate swaps 1,920 ‐ ‐ 1,920 Net fair value gain of investment properties 69,647 ‐ ‐ 69,647 Straight‐lining rental income 1,528 ‐ (18) 1,510 Amortisation of leasing fees and incentives (8,226) ‐ ‐ (8,226) Amortisation of loan establishment costs (301) ‐ ‐ (301) Depreciation ‐ ‐ (35) (35) Loss on sale of non‐current assets (12) ‐ ‐ (12) Movement in rental guarantees (4,091) ‐ ‐ (4,091) Initial public offer costs (303) (13) ‐ (316) Other FFO adjustments (780) (449) ‐ (1,229) Adjustment re GDI 42 5,864 (2,862) ‐ 3,002 Acquisition Costs (91) ‐ ‐ (91)
Profit after tax from ordinary activities 108,487	3,583	(4,754)	107,316
Segment assets and liabilities Total assets 706,158 63,879 ‐ 770,037 Total liabilities (95,919) (15,082) ‐ (111,001)
Net assets 610,239	48,797	‐	659,036

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017	GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017	GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017	GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017
Property Funds management Reviewed but unallocated Total 30 June 2016 $'000 $'000 $'000 $'000
Operating earnings Net property income 54,107 ‐ ‐ 54,107 Funds management income ‐ 3,388 ‐ 3,388 Other income ‐ ‐ 16 16
Total operating earnings 54,107	3,388	16	57,511
FFO adjustments Straight‐lining rental income (1,392) ‐ 2 (1,390) Other FFO adjustments 520 ‐ ‐ 520 Amortisation and depreciation 5,053 ‐ 34 5,087 Movement in rental guarantees 2,171 ‐ ‐ 2,171 Adjustment for GDI 42 (149) 892 ‐ 743
FFO pre corporate, administration and interest
expenses/ income 60,309	4,280	52	64,641
+/‐ corporate, administration and interest expense / income Interest paid (11,400) ‐ ‐ (11,400) Interest income 2,491 17 ‐ 2,508 Corporate and administration expenses (1,798) ‐ (4,556) (6,354) Income tax(expense)/benefit ‐ (248) ‐ (248)
Total FFO 49,603	4,048	(4,504)	49,147
+/‐ AIFRS adjustments from FFO to profit after tax from ordinary activities Net fair value gain on interest rate swaps 390 ‐ ‐ 390 Net fair value gain of investment properties 16,539 ‐ ‐ 16,539 Straight‐lining rental income 1,392 ‐ (2) 1,390 Amortisation of leasing fees and incentives (5,053) ‐ ‐ (5,053) Amortisation of loan establishment costs (1,025) ‐ ‐ (1,025) Depreciation ‐ ‐ (34) (34) Loss on sale of non‐current assets (1,233) ‐ ‐ (1,233) Movement in rental guarantees (2,171) ‐ ‐ (2,171) Initial public offer costs (424) (23) ‐ (447) Other FFO adjustments (520) ‐ ‐ (520) Adjustment for GDI No. 42 Office Trust 149 (892) ‐ (743) Acquisition expenses (8,541) ‐ ‐ (8,541)
Profit after tax from ordinary activities 49,107	3,133	(4,540)	47,701
Segment assets and liabilities Total assets 892,036 60,829 ‐ 952,865 Total liabilities (340,196) (15,350) ‐ (355,547)
Net assets 551,839	45,479	‐	597,318

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

NOTE 24 – COMMITMENTS

Commitments	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Capital commitments Capital expenditure	61 5,356	61 5,356
Total capital commitments	61 5,356	61 5,356
Lease payable commitments Within one year Later than one year but not later than five years Later than fiveyears	296 350 637 1 ‐ ‐	‐ ‐ ‐ ‐ ‐ ‐
Total leasepayable commitments	933 351	‐ ‐

NOTE 25 – RECONCILIATION OF NET PROFIT TO CASH INFLOW FROM OPERATING ACTIVITIES

a) Reconciliation of cash from operations with profit after tax

	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Netprofit	107,316 47,701	108,527 47,337
Non cash movements Amortisation and depreciation Amortisation of lease incentives and lease costs Straight‐lining rental income Fair value adjustments to : ‐ Investment properties ‐ Interest rate swaps Gain on termination of swap Loss on sale of non‐current asset Impairment of receivables Non‐cash employee benefits expense Settlement of performance rights (Increase)/decrease in Trade and other receivables Other assets Trade and other payables Provisions Other liabilities Deferred tax	339 142 8,267 5,053 (1,510) (1,888) (69,647) (16,539) (1,885) (390) (35) ‐ 12 1,233 200 422 1,769 1,532 (1,327) ‐ (178) 283 291 (436) (56) (1,051) (124) (29) ‐ (10) (345) 248	301 ‐ 8,267 5,053 (1,528) (1,888) (69,647) (16,539) (1,885) (390) (35) ‐ 12 1,233 (90) 100 1,693 1,465 (1,270) ‐ 261 (417) 268 (519) 100 (1,428) ‐ ‐ ‐ ‐ ‐ ‐
Net cashprovided by operating activities	43,085 36,271	44,975 34,007

b) Credit standby facilities with bank

Refer to Note 17 for details of unused finance facilities.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

NOTE 26 – KEY MANAGEMENT PERSONNEL COMPENSATION

Refer to the remuneration report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2017 and 30 June 2016.

The totals of remuneration paid to KMP of the company and the Group and Trust during the period are as follows.

a) Key management personnel compensation

a) Key management personnel compensation
KMP compensation	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Short term employee benefits Post employment benefits Other long term benefits Security‐basedpayments	2,918 2,763 177 176 31 19 1,684 1,300	‐ ‐ ‐ ‐ ‐ ‐ 1,684 1,244
Total KMP compensation	4,810 4,259	1,684 1,244

Short term employee benefits

These amounts include fees and benefits paid to the non‐executive Chair and non‐executive directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to executive directors and other KMP.

Post‐employment benefits

These amounts are the current year’s cost of superannuation contributions made during the period.

Other long term benefits

These amounts represent long service leave benefits accrued during the period.

Security‐based payments

These amounts represent the expense accrued for the participation of KMP in the performance rights plan as disclosed in Note 30 and the issue of performance rights for the year ended 30 June 2017 and 30 June 2016.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

b) Equity instrument disclosure relating to key management personnel

				Securities
		Securities		granted as	Securities
	Securities	acquired	Securities	part of a	acquired /	Securities
	held at	during the	held at	performance	(sold) during	held at
	30 June 2015	year	30 June 2016	rightsplan	theyear	30 June 2017
Directors
Graham Kelly	100,000	100,000	200,000	‐	50,000	250,000
Steve Gillard	30,300,000	‐	30,300,000	‐	‐	30,300,000
Gina Anderson	60,000	10,000	70,000	‐	‐	70,000
Les Towell	1,061,595	‐	1,061,595	‐	‐	1,061,595
John Tuxworth1	‐	‐	55,200	‐	‐	55,200
Other key management	personnel
David Williams2	200,000	‐	200,000	350,000	‐	550,000
John Garland2	22,500	‐	22,500	350,000	(85,000)	287,500
Paul Malek2	25,000	10,000	35,000	200,000	‐	235,000
GregMarr2	5,326	‐	5,326	100,000	‐	105,326

John Tuxworth was appointed as a Director on 20th February 2017 and held 55,200 securities at the time
Securities granted were in satisfaction of performance rights that were issued as part of the Initial Public Offer and vested three years following the Initial Public Offer, the principle condition of which was to remain in employment or be a ‘good leaver’

NOTE 27 – RELATED PARTY TRANSACTIONS

Related parties for GDI Property Group

a) Identification of related parties

(i) Key management personnel:

Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including and director (whether executive or otherwise) of that entity, are considered key management personnel. For details of disclosures relating to key management personnel, refer to Note 26 and the Remuneration Report contained in the Directors’ Report.

(ii) Entities exercising control over the Group:

The ultimate parent entity that exercises control over GDI Property Group is GDI Property Group Limited, which is incorporated in Australia.

b) Transactions with related parties

Transactions with related parties in the year ended 30 June 2017

a) Consultancy Deed

Mr Veale entered into a Consultancy Deed with GDI Funds Management Limited to act as a responsible manager and key person under GDI Funds Management Limited’s AFS Licence. During the year, GDI Funds Management Limited varied its AFSL to have the key person requirement removed, and subsequently, Mr Veale retired as a responsible manager. Mr Veale did not receive any fees for providing this service. As at 30 June 2017, Mr Veale is no longer a related party.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

b) External Funds

GDI Investment Management Pty Limited provided administrative services in relation to assets owned by associates of Mr Veale. GDI Investment Management Pty Limited was paid $36,656 for these services, equivalent to an annual fee of 0.65% of gross assets and a disposal fee of 1%. As at 30 June 2017, Mr Veale is no longer a related party.

There are no other transactions with KMP in the year ended 30 June 2017.

Transactions with related parties in the year ended 30 June 2016

c) Consultancy Deed

Mr Veale has entered into a Consultancy Deed with GDI Funds Management Limited to act as a responsible manager and key person under GDI Funds Management Limited’s AFS Licence. Mr Veale did not receive any fees for providing this service.

d) External Funds

GDI Income Property Fund No. 28 is jointly owned by associates of Mr Gillard and Mr Veale. GDI Investment Management Limited, pursuant to an administration services agreement, provided administration services to the trustee of GDI Income Property Fund No. 28. GDI Investment Management Pty Limited was paid $68,750 for the period to 30 June 2016. The administration services agreement terminated on the sale of the asset in May 2016.

GDI Investment Management Pty Limited also provided administrative services in relation to three assets owned by associates of Mr Veale. GDI Investment Management Pty Limited was paid $98,943 for these services, equivalent to an annual fee of 0.65% of gross assets and a disposal fee of 1.00%.

There are no other transactions with KMP in the year ended 30 June 2016.

Related parties for GDI Property Trust

a) Identification of related parties

(i) Responsible Entity, Investment Manager and Custodian

The Responsible Entity of GDI Property Trust is GDI Funds Management Limited (ACN 107 354 003), a wholly owned subsidiary of GDI Property Group Limited. GDI Funds Management Limited has appointed The Trust Company (Australia) Limited as Custodian for all the assets of the Trust.

(ii) Key management personnel

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

Graham Kelly
Gina Anderson
Les Towell
John Tuxworth (appointed 20 February 2017)
Steve Gillard
Tony Veale (retired 20 February 2017)

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

b) Transactions with related parties

The Responsible Entity is entitled to a fee calculated on a cost recovery basis only. During the year ended 30 June 2017 the Responsible Entity charged $120,000 (2016: $620,000), with no balance owing as at 30 June 2017.

No compensation is paid to the key management personnel of the Responsible Entity directly by the Trust.

All transactions with related parties are conducted on normal commercial terms and conditions. From time to time the key management personnel of the Responsible Entity, or their related entities, may invest in or sell units (stapled securities) of the Trust on the same terms and conditions as those of other Trust investors and are trivial and domestic in nature.

NOTE 28 – CAPITAL AND FINANCIAL RISK MANAGEMENT

Capital risk management

GDI Property Group’s capital management strategy is to maximise securityholders returns through active capital management whilst mitigating the inherent risks associated with both debt and equity.

In determining the appropriate mix of debt and equity, GDI Property Group reviews both commercial and regulatory considerations:

management whilst mitigating the inherent risks associate In determining the appropriate mix of debt and equity, considerations:	management whilst mitigating the inherent risks associate In determining the appropriate mix of debt and equity, considerations:	d with both debt and equity. GDI Property Group reviews both commercial and regulatory	d with both debt and equity. GDI Property Group reviews both commercial and regulatory
Commercial		Regulatory
	The underlying real estate fundamentals		Need to comply with the capital and distribution
	The relative cost and availability of debt and equity		requirements of GDI Property Trust’s trust deed
	Forecast cash flows and capital expenditure		Need to comply with the capital requirements of
	requirements		relevant regulatory authorities and licences.
	Current and future debt covenants

Financial risk management

GDI Property Group’s Gearing Policy is to target a Loan to Value ratio of less than 40%. GDI Property Group is able to manage its capital through a number of means, including but not limited to:

asset recycling;
new debt financing;
issuing new stapled securities;
adjusting the level of distributions paid to securityholders; and
active management of interest rate exposures.

Capital and interest expense risk management is monitored in two main ways, having reference to the covenants on the principal facility:

	Boardpolicy	2017	2016	Bank covenant	2017	2016
LVR1	< 40%	8%	32%	< 50%	8%	36%
ICR2	> 2.5X	5.4X	4.6X	> 2X	5.4X	4.6X

Bank covenant LVR is total debt (including net derivative exposures) divided by the value of the properties as determined by the last independent valuation.
Bank covenant ICR is EBIT/Interest expense and for the year ended 30 June 2017, Initial Public Offer costs and acquisition expenses have been reversed from the EBIT calculation.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

GDI Property Group also protects its equity in its assets by taking out insurance.

The gearing ratio as at 30 June 2017 of the Group and Trust was 8% (2016: 32%) and 8% (2016: 33%) respectively (as detailed below).

detailed below).
Net debt and adjusted assets Note	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Total borrowings Less: cash and cash equivalents	79,899 320,116 (23,113) (28,394)	79,757 319,974 (21,620) (25,469)
Net debt	56,786 291,722	58,137 294,505
Total assets Less: intangible assets and deferred tax assets Less: cash and cash equivalents	770,037 952,865 (19,368) (19,023) (23,113) (28,394)	749,401 930,693 ‐ ‐ (21,620) (25,469)
Adjusted assets	727,556 905,448	727,781 905,224
Gearing ratio	8% 32%	8% 33%

Financial risk management

The financial risks that result from GDI Property Group’s activities are credit risk, liquidity risk, refinancing risk and market risks (interest rates). GDI Property Group manages it exposure to these key financial risks in accordance with its risk management policy and focuses on mitigating the impact of volatility in financial markets.

GDI Property Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, borrowings and interest rate hedge derivatives. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:

See Note 1(m) for how GDI Property Group classifies financial assets and liabilities.

a) Credit risk

Exposure to credit risk relating to financial assets arises from the potential non‐performance by counterparties of contract obligations that could lead to a financial loss to the Group or Trust.

Credit risk arises principally from GDI Property Group’s and the Trust’s receivables from customers and amounts due from the leasing of premises in accordance with lease agreements with property tenants. The Group and the Trust have a diverse range of customers and tenants and therefore there is no significant concentration of credit risk with any single counterparty or group of counterparties.

The Board has established a credit policy under which each new customer is analysed individually for creditworthiness before GDI Property Group does business with them. The Group and the Trust request security deposits or bank guarantees from new tenants in order to secure the premises and tenants are invoiced monthly in advance. Ongoing checks are performed by management to ensure settlement terms detailed in individual contracts are adhered to.

The maximum exposure to credit risk at the end of the reporting period is equivalent to the carrying amount of the financial assets (net of any provisions) as presented in the Consolidated Statement of Financial Position. The Group and the Trust typically hold bank guarantees or cash from tenants equivalent to six month rent as security. There are no significant financial assets that have had renegotiated terms that would otherwise have been past due or impaired.

Risk is also minimised through investing surplus funds in Australian financial institutions. Interest rate derivative counterparties are also Australian financial institutions.

Trade and other receivables that are neither past due nor impaired are considered to be of high credit quality. Aggregates of such amounts are detailed in Note 7.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

The aging analysis of receivables past due balance but not impaired is shown below:

	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
One ‐ three months Three ‐ six months Over six months	374 467 339 ‐ ‐ ‐	374 467 339 ‐ ‐ ‐
	713 467	713 467

b) Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial instruments.

GDI Property Group believes that prudent risk management requires maintaining sufficient cash reserves and finance facilities to meet the ongoing operational requirements of the business. It is GDI Property Group’s policy to maintain sufficient funds in cash and undrawn finance facilities to meet the expected near term operational requirements.

GDI Property Group also monitors the maturity profile of borrowings and puts in place strategies designed to ensure that all maturing borrowings are refinanced within required timeframes.

The weighted average debt maturity of GDI Property Group is 1.41 years (2016: 2.03 years).

Contractual maturity of financial liabilities (borrowings and payables) of GDI Property Group, including interest, is as follows:

follows:
	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Due within one year Due between one and five years Due after fiveyears	30,619 43,632 81,326 338,746 ‐ ‐	29,414 42,341 81,326 338,746 ‐ ‐
	111,945 382,378	110,740 381,087

c) Market risk

i. Interest rate risk

GDI Property Group’s interest rate risk primarily arises from borrowings. Borrowings issued at variable rates expose GDI Property Group to cash flow interest rate risk. Borrowing issued at fixed rates expose GDI Property Group to fair value interest rate risk. GDI Property Group’s policy is to maintain hedging arrangements on not less than 50% of drawn borrowings through the use of derivative contracts and/or other arrangements and to diversify the maturity dates of those fixed rate arrangements. At balance date, 81% (2016: 47%) of GDI Property Group’s primary facility’s borrowings were effectively hedged. None of the debt of GDI No. 42 Office Trust is hedged.

GDI Property Group manages its cash flows interest rate risk by using interest rate derivatives. Such interest rate derivatives have the economic effect of converting borrowings from floating interest rates to fixed interest rates. Generally, GDI Property Group raises long term borrowings at floating rates and hedges a portion of them into fixed or capped rates. Under the interest rate derivatives, GDI Property Group agrees with other counter parties to exchange, at specified intervals the difference between contract rates and floating rates interest amounts calculated by reference to the agreed notional principal amounts.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

GDI Property Group’s and GDI Property Trust’s borrowings are the same.

At balance date, the expiry profile of GDI Property Group’s interest rate derivatives is shown below:

		Effective
	Notional	average
	Principal	fixed rate
	$'000	%
ExpiryDecember 2018(FY19)	40,000	3.84%
Average	40,000	3.84%

Because GDI Property Group’s interest rate derivatives do not meet the accounting requirements to qualify for hedge accounting treatment, gains or losses arising from changes in fair value have been reflected in the profit or loss.

Information on borrowings and the maturity profile of borrowings (including interest) is provided in Note 17.

Sensitivity

At balance date, if interest rates for all relevant time periods had changed by +/‐ 100 basis points (1%) from the year/period ended 30 June 2015 and 30 June 2014 rates with all other variables held constant, profit would have been higher/(lower) as shown below:

Sensitivity to interest rates	+1% Group Trust 2017 2017 $'000 $'000	‐1% Group Trust 2017 2017 $'000 $'000	+1% Group Trust 2016 2016 $'000 $'000	‐1%
				Group Trust 2016 2016 $'000 $'000
Impact on interest income Impact on interest expense Impact of valuation of interest rate derivatives	(95) (95) (1,461) (1,461) 488 488	129 112 1,073 1,073 (1,519) (1,519)	(56) (67) (1,985) (1,985) 2,246 2,246	78 67 1,991 1,991 (2,295) (2,295)
	(1,068) (1,068)	(318) (335)	205 194	(225) (237)

NOTE 29 – FAIR VALUE MEASUREMENTS

a) Valuation techniques

The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches:

Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities.
Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value.
Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.

Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable.

b) Financial instruments

The following table represents a comparison between the carrying amounts and fair values of financial assets and liabilities:

	30 June 2017 Carrying Amount Fair Value $'000 $'000	30 June 2016
		Carrying Amount Fair Value $'000 $'000
Financial assets Cash and cash equivalents Trade and other receivables	23,113 23,113 3,122 3,122	28,394 28,394 3,144 3,144
Total financial assets	26,234 26,234	31,538 31,538
Financial liabilities Trade and other payables Provisions Borrowings Derivative financial instruments	29,605 29,605 302 302 79,899 79,899 1,195 1,195	30,699 30,699 426 426 320,116 320,116 4,288 4,288
Total financial liabilities	111,001 111,001	355,529 355,529

c) Fair value hierarchy

The Group and Trust measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition:

Derivative financial instruments; and
Investment properties.

The Group and Trust do not subsequently measure any other liabilities (other than derivative financial instruments) at fair value on a non‐recurring basis.

AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows:

significant to the measurement can be c	ategorised into as follows:
Level 1	Level 2	Level 3
Measurements based on quoted	Measurements based on inputs other	Measurements based on
prices (unadjusted) in active markets	than quoted prices included in Level 1	unobservable inputs for the asset or
for identical assets or liabilities that	that are observable for the asset or	liability.
the entity can access at the	liability, either directly or indirectly.
measurement date.

The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3.

The following tables provide the fair values of the Group and Trust’s assets and liabilities measured and recognised on a recurring basis after initial recognition and their categorisation within the fair value hierarchy:

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

	As at 30 June 2017 Level 1 Level 2 Level 3 $'000 $'000 $'000 ‐ 499,628 ‐	As at 30 June 2016
		Level 1 Level 2 Level 3 $'000 $'000 $'000
Recurring fair value measurements Non‐financial assets ‐ Investmentproperties		‐ 900,478 ‐
Total non‐financial assets recognised at fair value on a recurring basis	‐ 499,628 ‐	‐ 900,478 ‐
Financial liabilities ‐ Interest rate swaps	‐ 1,195 ‐	‐ 4,288 ‐
Total financial liabilities recognised at fair value on a recurring basis	‐ 1,195 ‐	‐ 4,288 ‐

d) Valuation techniques and inputs used to measure Level 2 Fair Values

	30 June 2017	30 June 2016	Valuation	Inputs
	$’000	$’000	technique	Used
Financial assets/liabilities
			Income approach
			using discounted
			cash flow
Interest rate swaps	(1,195)	(4,288)	methodology	BBSY swap rate
Non‐financial assets
			Market approach
			using discounted	Comparable
			cash flow, rent	discount rates,
			capitalisation and	capitalisation
			recent observable	rates and price
			market data	per square
Investmentproperties1	499,628	900,478	methodologies	metres of NLA

The fair value of Investment properties is determined annually based on valuations by an independent valuer who has recognised and appropriate professional qualifications and recent experience in the location and category of investment property being valued.

e) 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 follows:

	Fair value measurement sensitivity to:
Inputs	Significant increase in input	Significant decrease in input
Discount rate	Decrease	Increase
Capitalisation rate	Decrease	Increase
Price per square metre of NLA	Increase	Decrease

NOTE 30 – SECURITY‐BASED PAYMENTS

GDI Property Group has established a performance rights plan under which employees (including the Managing Director) of GDI Property Group may be offered performance rights representing an entitlement to acquire stapled securities, subject to meeting certain performance conditions as determined by the Board and, in the case of the Managing Director, subject to receipt of stapled securityholder approval. The performance rights and stapled securities allocated under the performance rights plan are intended to be allocated free of charge provided that the relevant performance conditions are met.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

a) Retention performance rights

GDI Property Group offered 1.5 million performance rights to people who are employed by a member of GDI Property at the time the performance rights plan was established. The sole performance condition attaching to these performance rights is that the employee remains employed by a member of GDI Property Group for three years from completion of the IPO (16 December 2016). The Managing Director did not participate in this issue of performance rights. During the period, all 1.5 million performance rights vested.

b) STI performance rights

For the year ended 30 June 2017, the Board determined that 50% of any STI granted to a KMP would be by way of performance rights where the sole performance condition is that the employee remains employed by a member of GDI Property Group for three years from the conclusion of the performance period (30 June 2020). As these performance rights had not been issued at 30 June 2017, the Group has recognised in the financial statements the fair value of the performance rights as an accrual with the cost expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. The total number of STI performance rights to be issued for 30 June 2017 will be 609,146, with 279,878 granted to the Managing Director subject to securityholder approval.

c) LTI performance rights

For the year ended 30 June 2017, GDI Property Group intends to offer 1,806,094 performance rights to all staff, with 765,460 offered to the Managing Director subject to securityholder approval. As these performance rights had not been issued at 30 June 2017, the Group has recognised in the financial statements the fair value of the performance rights as an accrual with the cost expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

The performance conditions that relate to the LTI performance rights for previous years and the year ended 30 June 2017are identical and are summarised below:

Number of LTI	performance rights	Performance condition
Relatingtopreviousyears	Relatingto FY17year
		Relative performance (stapled security price
2,497,958	903,047	movement + distributions)versus apeergroup
		Total return (NTA growth + distributions) vs internal
2,497,958	903,047	benchmark

GDI PROPERTY GROUP

NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 30 June 2017

d) Valuation of performance rights

The assessed fair value of the intended issue of performance rights was determined using the Black‐Scholes option pricing model and the Binomial option pricing model using the inputs as disclosed below:

the inputs as disclosed below:
	Relatingtoprioryears Relatingto theyear ended 30 June 2017
	STI PR(Retention) Relative return PR Total return PR STI PR(Retention) Relative return PR Total return PR
Issue size Exercise price Life Initial valuation methodology Cost apportioned over (years) Expected volatility Risk‐free interest rate Valuation	1,361,914 2,497,958 2,497,958 609,146 903,047 903,047 $nil $nil $nil $nil $nil $nil 3 years 3 years 3 years 3 years 3 years 3 years Black‐Scholes option pricing Binomial option pricing Black‐Scholes Option pricing Black‐Scholes option pricing Binomial option pricing Black‐Scholes Option pricing 4 – Year to which the grant relates + vesting period 4 – Year to which the grant relates + vesting period 4 – Year to which the grant relates + vesting period 4 – Year to which the grant relates + vesting period 4 – Year to which the grant relates + vesting period 4 – Year to which the grant relates + vesting period N/A 17% ‐ 20% N/A N/A 16% N/A N/A 2% ‐ 3% N/A N/A 2% N/A $1,197,188 $964,963 $2,206,319 $624,375 $428,135 $925,623

The expected security price volatility is based on the historic volatility adjusted for any expected changes to future volatility due to publicly available information.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

e) Expense arising from issued and intended issue of performance rights

Total expense arising from the issued and intended issue of security based payments transactions recognised during the year/period are as follows:

Amount expensed in year/period

	Retention
	PR	FY14 LTI	FY15 STI/LTI	FY16 STI/LTI	FY17 STI	FY17 LTI	Total
30 June 2017	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Group	317	87	525	476	156	338	1,900
Trust	303	83	502	455	149	324	1,818
		Retention
		PR	FY14 LTI	FY15 STI/LTI	FY16 STI	FY16 LTI	Total
30 June 2016		$'000	$'000	$'000	$'000	$'000	$'000
Group		443	87	525	122	354	1,532
Trust		424	83	502	117	339	1,465

The retention performance rights have been classified as an Initial public offer costs, with all other performance rights recognised as corporate and administration expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

NOTE 31 – CONTROLLED ENTITIES

NOTE 31 – CONTROLLED ENTITIES
	Principal place of
The Company’s investment in controlled entities is shown below:	business	2017	2016
Entities controlled by the Company (Parent Entity)
GDI Funds Management Limited	Sydney, Australia	100%	100%
GDI Investment Management Pty Limited	Sydney, Australia	100%	100%
GDI Investor Pty Limited	Sydney, Australia	100%	100%
GDI No. 27 Pty Limited	Sydney, Australia	100%	100%
GDI No. 28 Pty Limited	Sydney, Australia	100%	100%
GDI No. 29 Pty Limited	Sydney, Australia	100%	100%
GDI No. 35 Pty Limited	Sydney, Australia	100%	100%
GDI No. 37 Pty Limited	Sydney, Australia	100%	100%
GDI No. 38 Pty Limited	Sydney, Australia	100%	100%
GDI No. 38 Asset Pty Limited	Sydney, Australia	100%	100%
GDI No. 39 Pty Limited	Sydney, Australia	100%	100%
GDI No. 40 Pty Limited	Sydney, Australia	100%	100%
GDI No. 41 Pty Limited	Sydney, Australia	100%	100%
GDI No. 42 Pty Limited	Sydney, Australia	100%	100%
GDI No. 43 Pty Limited	Sydney, Australia	100%	‐

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financialyear ended 30 June 2017
	Principal place of
The Trust’s investment in controlled entities is shown below:	business	2017	2016
Entities controlled by GDI Property Trust (Head Entity with the Trust)1
GDI Premium Office Trust	Sydney, Australia	‐	100%
GDI No. 35 Perth Prime CBD Office Trust	Sydney, Australia	100%	100%
GDI No. 37 Trust	Sydney, Australia	100%	100%
GDI No. 39 Trust	Sydney, Australia	100%	100%
GDI No. 41 Trust	Sydney, Australia	100%	100%
GDI No. 42 Office Trust	Sydney, Australia	44%	44%

Units in GDI Property Trust are stapled to the shares of the Parent Entity. The Trust and its controlled entities listed above are consolidated as part of the Group as required under accounting standards, refer to Note 1(b). Controlled entity financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s and the Trust’s financial statements.

NOTE 32 – AUDITORS’ REMUNERATION

During the year/period the following fees where paid or payable for services provided by the auditor of GDI Property Group (Hall Chadwick) and its related entities

	Group 2017 2016 $'000 $'000	Trust
		2017 2016 $'000 $'000
Audit services Auditing or reviewing financial reports Auditing of controlled entity’s AFS Licence Auditingof controlled entity’s complianceplan	133 129 4 3 14 14	97 128 4 ‐ ‐ 14
	150 146	94 142
Other services Provision of tax advice	128 82	1 72
Total	128 228	95 214

NOTE 33 – BUSINESS COMBINATIONS

30 June 2017

Neither the Group or the Trust undertook any business combinations during the year ended 30 June 2017.

30 June 2016

Neither the Group or the Trust undertook any business combinations during the year ended 30 June 2016.

NOTE 34 – NON‐CONTROLLING INTERESTS

a) Non‐controlling interest – Trust

To account for the stapling, Australian Accounting Standards require an acquirer (the Company) to be identified and an acquisition to be recognised. The net assets of the acquiree (the Trust) are recognised as non‐controlling interests as they are not owned by the acquirer in the stapling arrangement.

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

Movements in non‐controlling interest

	Group
	2017 2016 $'000 $'000
Opening balance Profit for the period Initial contribution of equity Security‐based payments expense Cash settlement transaction On‐market securities buy‐back Distributionspaid/payable	577,023 536,247 108,527 47,338 ‐ 36,890 1,693 1,512 (1,270) ‐ (1,021) (3,206) (44,973) (41,758)
Balance as atyear end	639,979 577,023

The Group and the Trust has a $5 million bank guarantee supporting the financial requirements of GDI Funds Management Limited’s AFS Licence.

b) Non‐controlling interest – GDI No. 42 Office Trust

On 17 December 2015, GDI No. 42 Office Trust had two $1.00 units on issue, both owned by GDI Investor Pty Limited, a wholly owned subsidiary of GDI Investment Management Pty Limited. On 16 June 2016, GDI Funds Management Limited arranged an issue of 65.5 million units of GDI No. 42 Office Trust to fund the acquisition of 235 Stanley Street, Townsville and settle an inter‐company loan with GDI Property Trust that was used to fund the acquisition of 223‐237 Liverpool Road, Ashfield. Following the arrangement, GDI Property Trust effectively holds 43.68% of units on issue in GDI No. 42 Office Trust. The 56.32% units on issue are held by unrelated parties and shown separately in the financial statements as non‐ controlling interests – GDI No. 42 Office Trust.

Trust. The 56.32% units on issue are held by unrelated parties and shown separately in the f controlling interests – GDI No. 42 Office Trust.	inancial statements as non‐
Results	GDI No. 42 Office Trust
	2017 2016 $'000 $'000
Profit/ (loss)for theperiod	15,170 (7,142)
Total comprehensiveprofit/ (loss) for theperiod	15,170 (7,142)
Financialposition
Current assets Total assets Current liabilities Total liabilities	466 770 99,466 89,270 876 223 31,719 30,912
Net assets	67,747 58,358
Contributed equity Retained earnings	65,500 65,500 2,247 (7,142)
Total equity	67,747 58,358

NOTE 35 – CONTINGENT LIABILITIES

Other than the above, the Group and Trust had no contingent liabilities as at 30 June 2017 and as at 30 June 2016.

NOTE 36 – EVENTS AFTER THE REPORTING DATE

GDI PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2017

the 30 June 2017 independent valuation of $223.0 million. Settlement is expected to occur on or around 19 October 2017 and is conditional on Foreign Investment Review Board approval.

DIRECTORS’ DECLARATION

GDI Property Group Limited and GDI Funds Management Limited as Responsible Entity for GDI Property Trust

Directors’ Declaration For the period ended 30 June 2017

The directors of GDI Property Group Limited and GDI Funds Management Limited as Responsible Entity for GDI Property Trust, declare that:

(a) the financial statements and notes that are set out on pages 35 to 78 are in accordance with the Corporations Act 2001, including:
(i) complying with Australian Accounting Standards which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and
(ii) giving a true and fair view of the financial position as at 30 June 2016 and of the performance for the period ended on that date;
(b) there are reasonable grounds to believe that GDI Property Group will be able to pay its debts as and when they become due and payable; and
(c) The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Officer.

This declaration is made in accordance with a resolution of the directors of GDI Property Group and GDI Funds Management Limited.

==> picture [112 x 50] intentionally omitted <==

Graham Kelly Chairman

Dated this 21[st] day of August 2017

INDEPENDENT AUDITORS’ REPORT

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INDEPENDENT AUDITORS’ REPORT

AI assistant

GDI PROPERTY GROUP — Annual Report 2017

64974_rns_2017-08-20_bfa4a55b-1dc1-436d-a031-5287269ffb09.pdf

Appendix 4E Results for announcement to the market GDI PROPERTY GROUP

1. GDI Property Group

2. Reporting period

3. Highlights of the results

5. Dividends/distributions declared and paid and dividend/distribution reinvestment plan

6. Changes in control over group entities

GDI Property Group

Contents

1. Operating and financial review

1.1 About GDI Property Group

1.2 Strategy

Property

Funds management

1.3 Review of operations

GDI Property Group results summary

Operating segment results

Property

GDI PROPERTY GROUP DIRECTORS’ REPORT

Funds management

Net interest expense

Unallocated corporate administration expenses

Capital management

Dividends/distributions declared and paid and dividend/distribution reinvestment plan

Significant changes in GDI Property Group’s state of affairs

1.4 Future prospects

Property – existing

Funds management

Guidance

GDI PROPERTY GROUP DIRECTORS’ REPORT For the financial year ended 30 June 2017

1.5 Risks

2. Events subsequent to balance date

3. Environmental regulation

4. Directors and Company Secretary

Directors

Information on Directors

Mr Graham Kelly

Chairman, Independent Non‐Executive Director

Mr Steven Gillard

Managing Director

Ms Gina Anderson

Independent Non‐Executive Director

Mr Les Towell

Independent Non‐Executive Director

Mr John Tuxworth

Independent Non‐Executive Director

Number of meetings attended

Other directorships

Company secretary

Mr David Williams

Chief Financial Officer and Joint Company Secretary

Mr Paul Malek

Asset Management and Joint Company Secretary

5. Remuneration report

5.1 Basis of preparation

5.2 Key Management Personnel

Key Management Personnel

5.3 Role of the Board in relation to remuneration

5.4 Remuneration objectives

5.5 The composition of remuneration at GDI Property Group

Remuneration mix for the Managing Director and Disclosed Executives

Fixed remuneration

At risk remuneration

S hort term in c entives (STI)

Long term incentives (LTI)

Arrangements for the year ended 30 June 2017

Other remuneration elements

Clawback

Hedging and margin lending prohibition

5.6 Performance and outcomes

5.6.1 GDI Property Group’s performance and securityholder wealth

5.6.2 Performance rights issued as part of the IPO (retention rights)

5.6.3 Past issues of LTI

5.6.3.1 TSR test

5.6.3.2 ATR test

5.6.4 STI outcomes

5.6.4.1 KMP balanced scorecard

Financial

GDI PROPERTY GROUP Annual Report 2017