GPT GROUP - Annual Report 2018 | FinancialReports.eu

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2018 ANNUAL FINANCIAL REPORT

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Contents
Annual Financial Report of The GPT Group	1
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities	79
Supplementary Information	139
Corporate Directory	Inside back cover

Corporate Governance

The GPT Group (GPT or the Group) comprises GPT Management Holdings Limited (ACN 113 510 188) (GPTMHL) and General Property Trust (Trust). GPT RE Limited (ACN 107 426 504) (GPTRE) AFSL (286511) is the Responsible Entity of the Trust. GPT’s stapled securities are listed on the Australian Securities Exchange (ASX).

The third edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (Principles) provides a framework for good corporate governance for listed entities. GPT’s Corporate Governance Statement sets out how the Group has complied with the Principles.

The Group’s Corporate Governance Statement is available on GPT’s website at:

www.gpt.com.au/About-GPT/Corporate-Governance/Principles-and-Policies . GPT has also lodged an Appendix 4G (Key to Disclosures – Corporate Governance Principles and Recommendations) with the ASX.

Annual Financial Report of The GPT Group

Year ended 31 December 2018

Directors’ Report ............................................................................................................................................................................ 2 Auditor’s Independence Declaration ............................................................................................................................................ 23 Financial Statements .................................................................................................................................................................... 24 Consolidated Statement of Comprehensive Income ............................................................................................................ 24 Consolidated Statement of Financial Position ..................................................................................................................... 25 Consolidated Statement of Changes in Equity ..................................................................................................................... 26 Consolidated Statement of Cash Flows ............................................................................................................................... 27 Notes to the Financial Statements ....................................................................................................................................... 28 Result for the year ....................................................................................................................................................... 28 1. Segment information .............................................................................................................................................. 28 Operating assets and liabilities .................................................................................................................................. 34 2. Investment properties ............................................................................................................................................ 34 3. Equity accounted investments ................................................................................................................................ 37 4. Trade and other receivables ................................................................................................................................... 39 5. Intangible assets ..................................................................................................................................................... 40 6. Inventories .............................................................................................................................................................. 41 7. Payables .................................................................................................................................................................. 41 8. Provisions ............................................................................................................................................................... 42 9. Taxation ................................................................................................................................................................... 43 Capital structure .......................................................................................................................................................... 45 10. Equity and reserves ................................................................................................................................................ 45 11. Earnings per stapled security ................................................................................................................................ 47 12. Distributions paid and payable ............................................................................................................................... 48 13. Borrowings ............................................................................................................................................................. 48 14. Financial risk management ................................................................................................................................... 49 Other disclosure items ................................................................................................................................................ 55 15. Cash flow information ............................................................................................................................................ 55 16. Commitments ......................................................................................................................................................... 56 17. Contingent liabilities .............................................................................................................................................. 56 18. Security based payments ....................................................................................................................................... 56 19. Related party transactions .................................................................................................................................... 58 20. Auditor’s remuneration .......................................................................................................................................... 59 21. Parent entity financial information......................................................................................................................... 59 22. Fair value disclosures ............................................................................................................................................ 60 23. Accounting policies ................................................................................................................................................. 63 24. Adoption of new accounting standards .................................................................................................................. 69 25. Events subsequent to reporting date ..................................................................................................................... 70 Directors’ Declaration ................................................................................................................................................................... 71 Independent Auditor’s Report ...................................................................................................................................................... 72

The GPT Group (GPT) comprises General Property Trust (Trust) and its controlled entities and GPT Management Holdings Limited (Company) and its controlled entities.

General Property Trust is a registered scheme, registered and domiciled in Australia. GPT RE Limited is the Responsible Entity of General Property Trust. GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in Australia. GPT RE Limited is a wholly owned controlled entity of GPT Management Holdings Limited.

Through GPT’s internet site, GPT has ensured that its corporate reporting is timely, complete and available globally at minimum cost to the Trust. All press releases, financial reports and other information are available on GPT’s website: www.gpt.com.au.

Annual Financial Report of The GPT Group

Directors’ Report

Year ended 31 December 2018

The Directors of GPT RE Limited, the Responsible Entity of General Property Trust, present their report together with the financial statements of the General Property Trust (the Trust) and its controlled entities (the consolidated entity) for the financial year ended 31 December 2018. The consolidated entity together with GPT Management Holdings Limited and its controlled entities form the stapled entity, The GPT Group (GPT).

General Property Trust is a registered scheme, GPT Management Holdings Limited is a company limited by shares, and GPT RE Limited is a company limited by shares, each of which is incorporated and domiciled in Australia. The registered office and principal place of business is the MLC Centre, Level 51, 19 Martin Place, Sydney NSW 2000.

1. Operating and financial review

About GPT

GPT is an owner and manager of a $14.0 billion diversified portfolio of high quality Australian retail, office and logistics property assets and together with GPT’s funds management platform the Group has $24.0 billion of property assets under management (AUM).

GPT owns some of Australia’s most prominent real estate assets, including the Melbourne Central and Highpoint Shopping Centre in Melbourne, Australia Square, 1 Farrer Place and Citigroup Centre in Sydney and One One One Eagle Street in Brisbane.

Listed on the Australian Securities Exchange (ASX) since 1971, GPT is today one of Australia’s largest diversified listed property groups with a market capitalisation of approximately $9.6 billion. GPT is one of the top 50 listed stocks on the ASX by market capitalisation as at 31 December 2018.

GPT’s strategy is focused on leveraging its extensive real estate experience to deliver strong returns through disciplined investment, asset management and development. The development capability has a focus on creating value for securityholders through the enhancement of the core investment portfolio and in the creation of new investment assets.

A key performance measure for GPT is Total Return. Total Return is calculated as the change in Net Tangible Assets (NTA) per security plus distributions per security declared over the year, divided by the NTA per security at the beginning of the year. This focus on Total Return is aligned with securityholders’ long term investment aspirations. In 2018 GPT achieved a Total Return of 15.8 per cent.

GPT targets a Management Expense Ratio (MER) of less than 45 basis points. MER is calculated as management expenses as a percentage of assets under management. In 2018 GPT achieved an MER of 30 basis points.

GPT focuses on maintaining a strong balance sheet. GPT’s gearing as at 31 December 2018 was 26.3 per cent and it has maintained a weighted average debt expiry of greater than 6 years. The average cost of debt for 2018 was 4.2 per cent.

GPT Portfolio

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Retail 44%
Office 42%
Logistics 14%
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Retail Portfolio

13 shopping centres
940,000 sqm GLA*
3,200 + tenants
$6.2b portfolio
$10.0b AUM
Gross lettable area
** Net lettable area

Office Portfolio

25 assets
1,150,000 sqm NLA**
550 + tenants
$5.9b portfolio
$12.1b AUM

Logistics Portfolio

28 assets
870,000 sqm GLA*
80 + tenants
$1.9b portfolio
$1.9b AUM

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Review of operations

Funds from Operations (FFO) represents GPT’s underlying and recurring earnings from its operations. This is determined by adjusting statutory net profit after tax under Australian Accounting Standards for certain items which are non-cash, unrealised or capital in nature. GPT’s distribution policy is a payout ratio of approximately 95-105 per cent of Adjusted Funds from Operations (AFFO) which is broadly defined as FFO less maintenance capex and lease incentives. FFO and AFFO have been determined in accordance with the guidelines issued by the Property Council of Australia.

The reconciliation of FFO to net profit after tax is set out below:

The reconciliation of FFO to net profit after tax is set out below:
For the year ended	31 Dec 18 $M 31 Dec 171 $M Change %
Retail – Operations net income – Development net income Office – Operations net income – Development net income Logistics – Operations net income – Development net income Funds management net income Corporate management expenses Net finance costs Income tax expense Funds from Operations (FFO) Other non-FFO items: Valuation increase Financial instruments mark to market and net foreign exchange loss Other items2 Net profit for the year after tax FFO per ordinary stapled security (cents) Funds from Operations (FFO) Maintenance capex Lease incentives Adjusted Funds from Operations (AFFO) Distribution paid and payable Distribution per ordinary stapled security (cents)	318.6 313.1 1.8% 7.6 5.3 43.4%
	326.2 318.4 2.4% 267.7 247.8 8.0% 1.0 1.1 (9.1%)
	268.7 248.9 8.0% 104.8 93.3 12.3% 5.1 0.7 628.6%
	109.9 94.0 16.9% 42.6 37.0 15.1% (34.2) (30.6) (11.8%) (124.4) (102.4) (21.5%) (14.2) (11.1) (27.9%)
	574.6 554.2 3.7%
	910.7 717.7 26.9% (39.6) (2.9) (1,265.5%) 6.0 (1.0) 700.0%
	1,451.7 1,268.0 14.5%
	31.84 30.77 3.5% 574.6 554.2 3.7% (53.2) (54.4) 2.2% (60.9) (53.5) (13.8%)
	460.5 446.3 3.2%
	459.5 443.2 3.7% 25.46 24.60 3.5%

1 The 31 December 2017 net profit for the year after tax has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

2 Other items include impairment expenses, amortisation of intangibles, profit on disposal of assets and related tax impact.

Operating result

GPT delivered FFO of $574.6 million for the 2018 financial year, an increase of 3.7 per cent on the prior year. This translated into FFO per security of 31.84 cents, up 3.5 per cent. The result was driven by strong contributions from the investment portfolio of high quality Australian retail, office and logistics properties.

GPT’s statutory net profit after tax is $1,451.7 million, an increase of 14.5 per cent on the prior year, driven by $910.7 million in property valuation increases offset by higher negative mark to market and net foreign exchange movement of financial instruments.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Distribution

For the financial year ended 31 December 2018, distributions paid and payable to stapled securityholders totalled $459.5 million (2017: $443.2 million), representing an annual distribution of 25.46 cents, up 3.5 per cent on 2017 (2017: 24.60 cents). This includes 12.85 cents ($231.9 million) in respect of the second half of 2018, which was declared on 19 December 2018 and is expected to be paid on 28 February 2019. The payout ratio for the year ended 31 December 2018 is 99.8 per cent of AFFO (2017: 99.3 per cent).

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16.9%
15.2%
12.5%
Total Return at the direct investment
8.2%
portfolio level was 12.5 per cent for 2018
with the split between portfolios detailed
in the chart on the left.
Retail Office Logistics Total Portfolio
(inc GPT Wholesale (inc GPT Wholesale (inc Equity
Shopping Centre Office Interests)
Fund Interest) Fund Interest)
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GPT has maintained strong metrics across its core portfolios:

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Overall Portfolios Retail Portfolio Office Portfolio Logistics Portfolio
Value of Portfolio $6.20 billion portfolio $5.93 billion portfolio $1.89 billion portfolio
including GPT’s equity including GPT’s equity (2017: $1.55 billion)
interest in the GPT interest in the GPT
Wholesale Shopping Wholesale Office Fund
Centre Fund (2017: $4.90 billion)
(2017: $5.85 billion)
Occupancy 97.8% 99.6% 97.1% 97.2%
(2017: 96.8%) (2017: 99.6%) (2017: 95.2%) (2017: 96.1%)
Weighted average lease 4.9 years 4.0 years 5.2 years 7.1 years
expiry (WALE) (2017: 5.2 years) (2017: 4.1 years) (2017: 5.6 years) (2017: 7.6 years)
Structured rental reviews 74% of specialty income 85% of income subject to 91% of income subject to
subject to average average increases of 3.9% average increases of 3.3%
increases of 4.8% (2017: 91% subject to (2017: 91% subject to
(2017: 74% subject to average increases of 3.9%) average increases of 3.3%)
average increases of 4.7%)
Comparable income 3.8% 2.2% 5.8% 2.8%
growth (2017: 4.4%) (2017: 3.8%) (2017: 5.0%) (2017: 4.0%)
Weighted average 5.02% 4.88% 4.95% 5.78%
capitalisation rate (2017: 5.27%) (2017: 5.10%) (2017: 5.18%) (2017: 6.31%)
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Retail

(i) Operations net income

The retail portfolio achieved a net revaluation uplift of $161.0 million in 2018, including GPT’s equity interest in the GPT Wholesale Shopping Centre Fund (GWSCF). The positive revaluation has been driven by a combination of net income growth and firming in valuation metrics, with favourable valuations achieved on Melbourne Central, Westfield Penrith and Charlestown Square.

Like for like income growth of 2.2 per cent was driven by underlying structured rent increases and ongoing active remixing of the portfolio. Retail sales have improved over the 12 month period to December 2018, with annual weighted total centre sales up 2.4 per cent and total specialty sales up 3.6 per cent. The portfolio remains well leased with occupancy at 99.6 per cent.

(ii) Development net income

During 2018, the focus has been on the delivery of the $432.0 million Sunshine Plaza retail expansion (GPT share: $216.0 million). The development has been delayed due to inclement weather resulting in a staged opening in November 2018 and the major launch scheduled for March 2019.

During 2018, the business unit contributed $7.6 million to FFO (2017: $5.3 million).

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Office

Operations net income

The office portfolio achieved a net revaluation uplift of $598.5 million in 2018, including GPT’s equity interest in the GPT Wholesale Office Fund (GWOF), as a result of high occupancy, strong market rental growth and continued firming of investment metrics. The positive revaluation has been primarily driven by the Group’s Sydney assets, in particular MLC Centre, 2 Park St, Australia Square and Farrer Place.

Like for like income growth of 5.8 per cent was achieved as a result of leasing success leading to strong rental growth and continued high levels of occupancy at 97.1 per cent (including signed leases). The assets which were the main contributors to income growth were Melbourne Central Tower, Australia Square, Farrer Place and MLC Centre. Also, the September 2018 acquisition of 60 Station Street, Parramatta has had a positive contribution to headline income growth.

Development net income

During the year the 15,800sqm 4 Murray Rose development was successfully completed at Sydney Olympic Park. The asset was delivered on time and within budget and is 81% leased at the year end with the Rural Fire Service taking 59% of the building. The development has delivered a development yield on cost over 7.5%.

Logistics

Operations net income

The logistics portfolio achieved a net revaluation uplift of $151.2 million in 2018. This uplift is attributed to continued investor demand for quality logistics assets which led to a firming of investment metrics combined with positive leasing outcomes. The weighted average lease expiry has been maintained at a long duration of 7.1 years and like for like income growth is strong at 2.8 per cent.

Development net income

During the year the Group continued to successfully develop high quality logistics facilities to increase the portfolio quality and scale. At Huntingwood, the 11,000sqm warehouse reached practical completion in August 2018. The building was leased to Cahill Transport Group. Also, at 50 Old Wallgrove Road in Eastern Creek construction of a 30,000sqm facility was completed in January 2019. By the time of signing this financial report, 100% of the asset has been leased to ACR Supply Partners.

Work continues to develop out and replenish the logistics land bank. This includes the November 2018 acquisition of 8.9 hectares of land in Melbourne which provides the opportunity to develop 48,000sqm of new logistics facilities.

Construction has commenced on the new 26,000sqm tower at 32 Smith Street, Parramatta following the acquisition of the site in 2017. The pre-committed tenant for the new tower is QBE, who will occupy approximately 50% of the building. Practical completion is due in late 2020.

The team is well progressed with a number of repositioning projects in Melbourne at 100 Queen Street, Melbourne Central Tower, CBW and 530 Collins Street.

Funds Management

Funds Management
As at and for the year ended 31 December 2018	GWOF	GWSCF	Total
Funds under management	$7.8b	$4.8b	$12.6b
Number of Assets	18	8	26
GPT Interest	23.83%	28.57%	N/A
GPT Investment	$1,524.0m	$1,013.7m	$2,537.7m
One year Equity IRR (post-fees)	12.7%	4.8%	N/A
Share of profit – FFO	$69.8m	$46.3m	$116.1m
Funds Management fee income	$36.3m	$21.9m	$58.2m

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

GWOF

GWOF’s portfolio value increased to $7.8 billion, up $0.7 billion from 2017 and the fund delivered a one year equity IRR of 12.7 per cent. The management fee income earned from GWOF for 2018 increased by $2.9 million as compared to 2017 due to strong upward revaluations across the portfolio.

As a result of GPT not participating in the Fund’s Distribution Reinvestment Plan (DRP) and equity raising in December 2018, GPT’s ownership reduced to 23.83 per cent (2017: 24.95 per cent).

GWSCF

The fund delivered a one year equity IRR of 4.8 per cent. GWSCF’s portfolio value decreased to $4.8 billion, down $0.1 billion from 2017, primarily driven by the sale of GWSCF’s 83.33 per cent share in Homemaker City, Maribyrnong in December 2018 offset by upward revaluations. Management fee income earned from GWSCF of $21.9 million has increased by $4.6 million as compared to 2017. This was due to the acquisition of an additional 25 per cent interest in Highpoint Shopping Centre for $660.0 million and Homemaker City, Maribyrnong for $20.0 million in September 2017.

As a result of GPT not participating in the Fund’s DRP, GPT’s ownership is now 28.57 per cent (2017: 28.80 per cent).

Management expenses

Corporate overheads increased to $34.2 million (2017: $30.6 million) during the year due to increases in regulatory fees and Directors and Officers insurance and higher unallocated technology costs for automation. Total management and administration expenses across all segments slightly reduced to $73.0 million (2017: $73.4 million) resulting in a lower MER of 30 basis points for 2018 (2017: 34 basis points).

Financial position

Financial position
	Net Assets 31 Dec 18 $M Net Assets 31 Dec 171 $M Change %
Core Retail Office Logistics Total core assets Financing and corporate assets Total assets Borrowings Other liabilities Total liabilities Net assets Total number of ordinary stapled securities (million) NTA ($)	6,299.2 5,938.4 6.1% 5,921.9 4,884.4 21.2% 1,958.8 1,639.3 19.5%
	14,179.9 12,462.1 13.8% 598.1 495.2 20.8%
	14,778.0 12,957.3 14.1%
	4,114.9 3,300.6 24.7% 562.5 550.8 2.1%
	4,677.4 3,851.4 21.4%
	10,100.6 9,105.9 10.9%
	1,804.9 1,801.6 0.2% 5.58 5.04 10.7%

Balance sheet

Total Return of 15.8 per cent (2017: 15.2 per cent) being the growth of NTA per stapled security of 54 cents to $5.58 plus the distribution paid/payable per stapled security of 25.46 cents, divided by the opening NTA per stapled security.
Total core assets increased by 13.8 per cent primarily due to acquisitions, development capital expenditure and positive property revaluations.
Total borrowings increased by 24.7 per cent due to acquisitions, development capital expenditure and fair value adjustments of $116.1 million to the carrying value of foreign currency debt.

Capital management

Capital management
	31 Dec 18	31 Dec 17	Change
Cost of debt	4.2%	4.2%	Unchanged
Net gearing	26.3%	24.4%	Up by 190bps
Weighted average	6.3 years	7.1 years	Down 0.8
debt maturity			years
Hedging	83.0%	76.0%	Up 7%
S&P/Moody’s credit rating	A stable/	A stable/	Unchanged
	A2 stable	A2 stable

GPT continues to maintain a strong focus on capital management.

Key highlights for the year include:

weighted average cost of debt for the year is 4.2 per cent, unchanged from the previous year;
net gearing[2] increased to 26.3 per cent (2017: 24.4 per cent), which is in line with the lower end of GPT’s target gearing range of 25 to 35 per cent. This was a result of debt funding acquisitions and development capital expenditure during the period offset by strong revaluation gains;
available liquidity through cash and undrawn facilities (inclusive of forward starting facilities available to GPT) is $1,059.5 million (2017: $1,095.1 million); and
net tangible assets reduced by a $32.0 million loss on net mark to market movements on derivatives and borrowings.

1 The 31 December 2017 net assets have been restated as a result of the adoption of new accounting standards. Refer to note 24(a). 2 Calculated net of cash and excludes any fair value adjustment on foreign bonds and their associated cross currency derivative asset positions.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Cash flows

The cash balance as at December 2018 increased to $58.7 million (2017: $49.9 million).

Operating activities

The following table shows the reconciliation from FFO to the cash flow from operating activities:

For the year ended	31 Dec 18 $M 31 Dec 17 $M Change %
FFO (Less): non-cash items included in FFO Less: interest capitalised on developments Add/(less): net movement in inventory Timing difference in receivables and payables Net cash inflows from operating activities Add: interest capitalised on developments (Less)/add: net movement in inventory Less: dividend income from available for sale investment Less: maintenance capex Less: lease incentives (excluding rent free) Free cash flow	574.6 554.2 3.7% (25.5) (17.2) (48.3%) (13.7) (8.6) (59.3%) 5.8 (19.0) 130.5% (7.2) 26.1 (127.6%)
	534.0 535.5 (0.3%)
	13.7 8.6 59.3% (5.8) 19.0 (130.5%) – (30.4) 100.0% (53.2) (54.4) 2.2% (39.7) (27.0) (47.0%)
	449.0 451.3 (0.5%)

The Non-IFRS information included above has not been audited in accordance with Australian Auditing Standards, but has been derived from note 1 and note 15 of the accompanying financial statements.

Prospects

Group

GPT retains a portfolio of high quality assets with high occupancy levels and structured rental growth. As at 31 December 2018, the Group’s balance sheet is in a strong position, with a smooth, long debt expiry profile and net gearing at the lower end of the Group’s target range of 25 to 35 per cent.

Retail

GPT’s portfolio delivered total centre sales growth 2.4 per cent whilst specialties sales per square metre grew 2.5 per cent for the 12 months to 31 December 2018. The retail portfolio is well positioned with 85 per cent located in NSW and VIC and in markets with strong population growth. GPT is planning on capturing this growth by investing in assets to offer engaging places for its customers aimed at driving sales productivity, stimulating retailer demand and delivering long term investment returns. Progress continues to be made with mixed use developments at Melbourne Central and Rouse Hill which will be opportunities for GPT to deliver leading examples on how retail assets need to evolve and adapt to meet the changing needs of today’s retail consumer.

Office

GPT is progressing its future development pipeline in Sydney and Melbourne. Engagement continues with authorities for a proposed new office tower and retail precinct of up to 70,000sqm at Darling Park in Sydney. In Melbourne, the Group is seeking a pre-commitment tenant for a proposed 20,000sqm office tower at Melbourne Central.

The Sydney and Melbourne CBD office markets in Australia experienced solid conditions in 2018, with demand being above long-term averages, low levels of net supply and tightening vacancy rates. Sydney and Melbourne reached vacancy rates of 4.1 per cent and 3.75 per cent respectively. These markets should experience ongoing tight vacancy conditions in 2019 with little new supply to come online and ongoing healthy levels of demand.

Logistics

An improving industrial economy driven by the growth in e-commerce, continues to fuel the demand for warehousing. New entrants and existing retailers seeking to expand into key locations is adding further pressure on the availability of land resulting in double digit increases of land values in prime locations. The investment market remains strong with assets transacting at yields firmer than previous market peaks. The medium term outlook is for Sydney and Melbourne to continue to benefit as preferred locations, given population nodes and strong and improving infrastructure. GPT will seek to increase exposure to the sector through development opportunities and acquisitions.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Funds management

GPT has a large funds management platform which has experienced significant growth in the value of assets under management over the past five years. The funds management team will continue to actively manage the existing portfolios, with new acquisitions, divestments and developments in line with the relevant investment objectives of each fund.

Guidance for 2019

In 2019 GPT expects to deliver 4 per cent growth in FFO per ordinary security and 4 per cent growth in distribution per ordinary security. Achieving this target is subject to risks detailed in the following section.

Risks

The Board is ultimately accountable for corporate governance and the appropriate management of risk. The Board determines the risk appetite and oversees the risk profile to ensure activities are consistent with GPT’s strategy and values. The Sustainability and Risk Committee and the Audit Committee support the Board and are responsible for overseeing and reviewing the effectiveness of the risk management framework. The Sustainability and Risk Committee, the Audit Committee and through them, the Board, receive reports on GPT’s risk management practices and control systems including the effectiveness of GPT’s management of its material business risks.

GPT has an active enterprise-wide risk management framework. Within this framework the Board has adopted a policy setting out the principles, objectives and approach established to maintain GPT’s commitment to integrated risk management. GPT requires effective risk management as a core capability and consequently all employees are expected to be managers of risk. GPT’s risk management approach incorporates culture, people, processes and systems to enable the organisation to realise potential opportunities whilst managing adverse effects. The approach is consistent with AS/NZS ISO 31000:2018: Risk Management.

The key components of the approach include the following:

the GPT Board, Leadership Team, employees and contractors all understand their risk management accountabilities, promote the risk awareness and risk management culture and apply risk processes to achieve the organisation’s objectives;
specialist risk management expertise is developed and maintained internally and provides coaching, guidance and advice;
risks are identified and assessed in a timely and consistent manner;
controls are effectively designed, embedded and assessed;
material operational risks and critical controls are monitored and reported to provide transparency and assurance that the risk profile is aligned with GPT’s risk appetite, strategy and values; and
macro-economic factors that may impact the business are considered and monitored.

The risk appetite set by the Board considers the most significant, material risks to which GPT is exposed and provides the Board with ongoing monitoring of risk exposures which may arise over the short, medium and long term. The following table sets out material operational risks and issues, the potential impact to GPT and the ways in which they may be mitigated:

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Risk Category Risk/Issue Potential Strategic Impact Mitigation
Investment Investments do not perform in • Lower distributions • Robust investment approval process
mandate line with forecast • Lower NTA • Formal due diligence process
• Credit ratings downgrade • Active asset management
• Experienced internal management capability
• Diversified multi-asset portfolio
• Limit single asset exposure
Adverse changes in market • Lower distributions • Robust capital allocation process
conditions • Lower NTA • Diversified multi-asset portfolio
• Credit ratings downgrade • Limit single asset exposure
Development Developments do not perform • Lower distributions • Robust investment approval process
in line with forecast • Lower NTA • Oversight by Project Control Group (PCG)
• Credit ratings downgrade • Experienced internal management capability
• Limit exposure to assets under development
• Limit exposure to individual contractors
• Minimum leasing pre-commitments prior to
construction commencement
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Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

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Risk Category Risk/Issue Potential Strategic Impact Mitigation
Leasing Inability to lease assets in line • Lower distributions • Large and diversified tenant base
with forecast • Lower NTA • Ongoing investment to maintain quality of
• Credit ratings downgrade property portfolio
• Experienced leasing team
• Limit single tenant exposure
Capital Re-financing and liquidity risk • Ability to meet debt maturities • Diversity of funding sources and spreading of
management, • Limits ability to execute strategy debt maturities with a long weighted average
including • Credit ratings downgrade debt term
macro-economic • Failure to continue as a going concern • Maintaining a minimum liquidity buffer in
cash and surplus committed credit facilities
factors
for the forward rolling twelve-month period
Interest rate risk – higher • Lower distributions • Interest rate exposures are actively hedged
interest rate cost than forecast
Health and Incidents causing injury • Harm to the tenants, visitors to • Formalised Health and Safety management
safety to tenants, visitors to the GPT’s properties, employees and/or system including policies and procedures for
properties, employees and/or contractors managing safety
contractors • Criminal/civil proceedings and resultant • Training and education of employees and
reputation damage contractors
• Financial impact of remediation
and restoration
People and Inability to attract, retain and • Failure to provide an environment that • Background and reference checks on
culture develop talented people and enables employees to excel commencement
provide an inclusive workplace • Failure to provide a safe working • Whistleblower officer
Inability to maintain a high environment free of harassment, • Annual Performance management process
performing, ethical, and values bullying and discrimination setting objectives to promote clarity and
based workplace • Limits the ability to achieve business accountability
This includes the consideration objectives in line with GPT’s values • Remedial performance management and
disciplinary action
of risk culture and specifically
conduct risk • Monitoring of risk culture and conduct risk
• Discretionary incentive system and
Clawback Policy
• Benchmarking and setting competitive
remuneration
• Development planning
• Succession planning
• Talent management processes
• Promotion of GPT Values
• Code of conduct
• Conflicts of interest register
• Compliance training
• Grievance resolution process
• Diversity & Inclusion policies, guidelines
and training
Environmental Inability to operate in a manner • Negative impact to the communities, • Formalised Environment and Sustainability
and social that does not compromise the environment and the ecosystems management system including policies and
sustainability the health of ecosystems and that GPT operates in procedures for managing environmental and
meets accepted social norms • Limits the ability to deliver the business social sustainability risks
This includes consideration objectives and strategy • Climate related risks and potential
of climate change, energy • Criminal/civil proceedings and resultant financial impacts are assessed
intensity, community wellbeing reputation damage within GPT’s enterprise-wide risk
and supply chain integrity • Financial impact of remediation management framework
and restoration
Information Risk of loss of data, breach • Limits the ability to deliver the business • Technology risk management framework
security of confidentiality, regulatory objectives and strategy • Privacy policy, guidelines and procedures
breach (privacy) and/or • Criminal/civil proceedings and resultant
reputational impact including reputation damage
as a result from a cyber attack
• Financial impact of remediation
and restoration
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Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

2. Environmental regulation

GPT has policies and procedures in place that are designed to ensure that where operations are subject to any particular and significant environmental regulation under a law of Australia (for example property development and property management), those obligations are identified and appropriately addressed. This includes obtaining and complying with conditions of relevant authority consents and approvals and obtaining necessary licences. GPT is not aware of any significant breaches of any environmental regulations under the laws of the Commonwealth of Australia or of a State or Territory of Australia and has not incurred any significant liabilities under any such environmental legislation.

In managing the portfolio, GPT monitors and assesses physical and transitional risks arising from climate change. These risks are considered in GPT’s investment and portfolio management decisions, as well as decisions to upgrade buildings in anticipation of a low carbon future. GPT discloses emissions data and climate strategy on its website. GPT continues to take an active leadership role in transitioning towards a low carbon future, participating in climate change public policy development through involvement in:

the Property Council of Australia;
the Green Building Council of Australia;
the City of Sydney Better Building Partnership; and
demonstration projects partnering with the Australian Renewable Energy Agency.

GPT has achieved a Group-wide reduction of 42% in energy intensity, and a 56% reduction in emissions intensity since 2005. GPT is currently developing its Energy Master Plan which will continue the implementation of energy efficiency programs. GPT will seek to further decouple emissions from its energy requirements through renewable energy purchases, electrification of gas infrastructure and implementation of demand response programs. GPT’s comprehensive Climate Change and Energy Policy is available on GPT’s website.

GPT is subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007 (“NGER Act”). The NGER Act requires GPT to report its annual greenhouse gas emissions and energy use. The measurement period for GPT is 1 July to 30 June each year. GPT has implemented systems and processes for the collection and calculation of the data required which enables submission of its report to the Department of Climate Change and Energy Efficiency within the legislative deadline of 31 October each year. GPT has submitted its report to the Department of Climate Change and Energy Efficiency for the period ended 30 June 2018 within the required timeframe.

More information about GPT’s participation in the NGER program is available at www.gpt.com.au .

3. Events subsequent to reporting date

On 16 January 2019, the Group announced the proposed sale of its 50 per cent share of the MLC Centre. Proceeds from the planned sale will initially repay debt prior to be being reinvested into the development pipeline.

Other than the above, the Directors are not aware of any matter or circumstances occurring since 31 December 2018 that has significantly or may significantly affect the operations of GPT, the results of those operations or the state of affairs of GPT in the subsequent financial years.

4. Directors and secretary

Information on directors

Vickki McFadden – Chairman (appointed as a NonExecutive Director 1 March 2018 and Chairman from 2 May 2018)

Vickki was appointed to the Board on 1 March 2018 and is also a member of the Nomination and Remuneration Committee. She brings a broad range of skills and experience to the Group gained during an 18 year career spanning investment banking, corporate finance and corporate law, and through her current and previous board-level positions.

Vickki currently holds Non-Executive directorships in the following listed entities and other entities:

Tabcorp Holdings Limited (since 2017);
Newcrest Mining Limited (since 2016); and
Myer Family Investments Pty Limited (since 2011).

She is also President of the Takeovers Panel, a Member of Chief Executive Women and a Member of the Advisory Board and Executive Committee of the UNSW Business School.

Vickki was previously Chairman of Eftpos Payments Australia Limited, Chairman of Skilled Group Limited (prior to its acquisition by Programmed Maintenance Services Limited) (Director from 2005 to 2015 and Chairman from 2010 to 2015), a non-executive director of Leighton Holdings Limited, and a Managing Director of Investment Banking at Merrill Lynch Australia.

As at the date of this report she holds 50,000 GPT stapled securities.

Rob Ferguson – Chairman (retired 2 May 2018)

Rob joined the Board in May 2009 and was also a member of the Nomination and Remuneration Committee. He brings a wealth of knowledge and experience in finance, investment management and property as well as corporate governance.

Rob currently holds Non-Executive directorships in the following listed and other entities:

Watermark Market Neutral Fund Limited (since 2013); and
Smartward Limited (since 2012).

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

He was also a Non-Executive Chairman of IMF Bentham Limited from 2004 to January 2015, Chairman of Primary Health Care Limited from 2009 to July 2018, and a Director of Tyro Payments Limited from 2005 to July 2018.

As at the date of his retirement he held 207,628 GPT stapled securities.

Robert Johnston – Chief Executive Officer and Managing Director

Bob was appointed to the Board as Chief Executive Officer and Managing Director in September 2015. He has 30 years’ experience in the property sector including investment, development, project management and construction in Australia, Asia, the US and UK. Prior to joining GPT, Bob was the Managing Director of listed Australand Property Group which became Frasers Australand in September 2014.

As at the date of this report he holds 821,765 GPT stapled securities.

Brendan Crotty (retired on 9 November 2018)

Brendan was appointed to the Board in December 2009 and was also a member of the Audit Committee and the Sustainability and Risk Committee. He brings extensive property industry experience to the Board, including 17 years as Managing Director of Australand until his retirement in 2007.

Brendan is currently the Chairman of the National Housing Finance and Investment Corporation (since 2018), a director of Brickworks Limited (since 2008) and Chairman of Cloud FX Pte Ltd. Brendan was previously Chairman of Western Sydney Parklands Trust.

As at the date of this retirement he held 67,092 GPT stapled securities.

Swe Guan Lim

Swe Guan was appointed to the Board in March 2015 and is also a member of the Audit Committee and the Sustainability and Risk Committee. Swe Guan brings significant Australian real estate skills and experience and capital markets knowledge to the Board, having spent most of his executive career as a Managing Director in the Government Investment Corporation (GIC) in Singapore.

Swe Guan is currently Chairman of Cromwell European REIT in Singapore (since 2017) and a Director of Sunway Berhad in Malaysia (since 2011). Swe Guan is also a member of the Investment Committee of CIMB Trust Cap Advisors and was formerly a Director of Global Logistics Property in Singapore until January 2018.

As at the date of this report, he holds 39,000 GPT stapled securities.

Michelle Somerville

Michelle was appointed to the Board in December 2015 and is also the Chairman of the Audit Committee and a member of the Sustainability and Risk Committee. She was previously a partner of KPMG for nearly 14 years specialising in external audit and advising Australian and international clients both listed and unlisted primarily in the financial services market in relation to business, finance risk and governance issues.

Michelle currently holds the position of Non-Executive Director in the following entities:

Bank Australia Limited (since 2014);
Challenger Retirement and Investment Services Ltd (since 2014);
Save the Children (Australia) (since 2012); and
Down Syndrome Australia (since 2011).

Eileen Doyle

Eileen was appointed to the Board in March 2010. She is also the Chairman of the Sustainability and Risk Committee and a member of the Audit Committee and Nomination and Remuneration Committee (retired as a member in November 2018). She has diverse and substantial business experience having held senior executive roles and directorships in a wide range of industries, including research, financial services, building and construction, steel, mining, logistics and export. Eileen is also a Fellow of the Australian Academy of Technological Sciences and Engineering.

Eileen currently holds the position of Non-Executive Director in the following listed and other entities:

Boral Limited (since 2010); and
Oil Search Limited (since 2016).

Eileen was also previously a director of Bradken Limited from 2011 to November 2015.

As at the date of this report she holds 45,462 GPT stapled securities.

Michelle is also an independent consultant to the UniSuper Ltd Audit, Risk and Compliance Committee since 2015.

As at the date of this report she holds 36,663 GPT stapled securities.

Gene Tilbrook

Gene was appointed to the Board in May 2010 and is also the Chairman of the Nomination and Remuneration Committee. He brings extensive experience in finance, corporate strategy, investments and capital management.

Gene currently holds the position of Non-Executive Director in the following listed entities:

Orica Limited (since 2013); and
Woodside Petroleum Limited (since 2014).

Gene was also a Director of listed entities Transpacific Industries Group Limited from 2009 to 2013, Fletcher Building Limited from 2009 to April 2015, and Aurizon Holdings Limited from 2010 to February 2016.

As at the date of this report he holds 48,546 GPT stapled securities.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Angus McNaughton (appointed 1 November 2018)

Angus was appointed to the Board in November 2018 and is also a member of the Nomination and Remuneration Committee and the Audit Committee. He brings extensive experience in property investment.

Angus was previously the CEO and Managing Director of Vicinity Centres from August 2015 until December 2017. Prior to that time, Angus served as the Managing Director Property for Colonial First State Global Asset Management from 2011, before becoming the CEO and Managing Director of ASX-listed Novion Property Group in 2014. Angus led Novion through to the completion of the merger between Novion and Federation Centres, renamed as Vicinity Centres, in June 2015.

Angus does not currently hold any Non-Executive Director roles in other listed entities.

James Coyne – General Counsel and Company Secretary

James is responsible for the legal, compliance and company secretarial activities of GPT. He was appointed as the General Counsel and Company Secretary of GPT in 2004. His previous experience includes company secretarial and legal roles in construction, infrastructure, and the real estate funds management industry (listed and unlisted).

Lisa Bau – Senior Legal Counsel and Company Secretary

Lisa was appointed as a Company Secretary of GPT in September 2015. Her previous experience includes legal roles in mergers and acquisitions, capital markets, funds management and corporate advisory.

He was also previously Director, Real Estate of First State Investments in Singapore and Chief Executive Officer of Kiwi Income Property Trust in New Zealand.

As at the date of this report he does not hold GPT stapled securities.

Attendance of directors at meetings

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

	Board	Board	Audit Committee	Audit Committee	Nomination and Remuneration Committee	Nomination and Remuneration Committee	Sustainability and Risk Committee	Sustainability and Risk 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	Number of meetings eligible to attend	Number of meetings attended
Vickki McFadden1	10 10 - - 4 4 - -
Rob Ferguson	3 3 - - 2 2 - -
Robert Johnston1	11 11 - - - - - -
Brendan Crotty	9 9 4 3 - - 3 3
Eileen Doyle	11 11 5 3 5 5 4 4
Swe Guan Lim	11 11 5 5 - - 4 4
Angus McNaughton	3 3 1 1 2 2 - -
Michelle Somerville	11 11 5 5 - - 4 4
Gene Tilbrook	11 10 - - 6 6 - -

1 Vickki McFadden and Bob Johnston also attended meetings of the Committees as non-members.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

5. Other disclosures

Indemnification and insurance of directors, officers and auditor

GPT provides a Deed of Indemnity and Access (Deed) in favour of each of the Directors and Officers of GPT and its subsidiary companies and each person who acts or has acted as a representative of GPT serving as an officer of another entity at the request of GPT. The Deed indemnifies these persons on a full indemnity basis to the extent permitted by law for losses, liabilities, costs and charges incurred as a Director or Officer of GPT, its subsidiaries 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 and Officers of GPT, its subsidiary companies or such other entities, and other payments arising from liabilities incurred by the Directors and Officers in connection with such proceedings. GPT has agreed to indemnify the auditors out of the assets of GPT if GPT has breached the agreement under which the auditors are appointed.

During the financial year, GPT paid insurance premiums to insure the Directors and Officers of GPT and its subsidiary companies. The terms of the contract prohibit the disclosure of the premiums paid.

Non-audit services

During the year PricewaterhouseCoopers, GPT’s auditor, has performed other services in addition to their statutory duties. Details of the amounts paid to the auditor, which includes amounts paid for non-audit services and other assurance services, are set out in note 20 to the financial statements.

The Directors have considered the non-audit services and other assurance services provided by the auditor during the financial year. In accordance with advice received from the Audit Committee, the Directors are satisfied that the provision of non-audit services by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

the Audit Committee reviewed the non-audit services and other assurance services at the time of appointment to ensure that they did not impact upon the integrity and objectivity of the auditor;
the Board’s own review conducted in conjunction with the Audit Committee concluded that the auditor independence was not compromised, having regard to the Board’s policy with respect to the engagement of GPT’s auditors; and
the fact that none of the non-audit services provided by PricewaterhouseCoopers during the financial year had the characteristics of management, decision-making, self-review, advocacy or joint sharing of risks.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 23 and forms part of the Directors’ Report.

Rounding of amounts

The amounts contained in this report and in the financial statements have been rounded to the nearest hundred thousand dollars unless otherwise stated (where rounding is applicable) under the option available to GPT under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. GPT is an entity to which the Instrument applies.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

6. Remuneration report

The Nomination and Remuneration Committee (the Committee) of the Board presents the Remuneration Report (Report) for the GPT Group. This Report has been audited in accordance with section 308(3C) of the Corporations Act 2001.

The Board aims to ensure that the GPT Group’s remuneration platform is both market competitive and fair to all stakeholders; aligns performance measures to the achievement of GPT’s strategic objectives; and communicates the remuneration outcomes clearly and transparently.

Governance

Who are the	The Committee consists of the following three Non-Executive Directors:
members of the	•Gene Tilbrook (Committee Chairman);
Committee?	•Vickki McFadden; and
	•Angus McNaughton.
	2018 saw renewal and change on the Committee in line with changes to the Board:
	•Rob Ferguson retired at the GPT AGM on 2 May 2018;
	•Vickki McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018;
	•Angus McNaughton joined GPT on 1 November 2018; and
	•Eileen Doyle stepped down from the Committee on 8 November 2018.
What is the scope	In 2018 the Committee undertook the following activities on behalf of the Board:
of work of the	•oversee the management of culture;
Committee?	•implement, monitor, evaluate and oversee GPT’s remuneration framework;
	•review and approve remuneration levels for the Board, Chief Executive Officer and key management personnel;
	•review and approve key performance indicators for the Chief Executive Officer and assess the Chief Executive
	Officer’s performance against those key performance indicators;
	•review compliance with legal and regulatory requirements associated with the activities of the Committee;
	•oversee the succession planning process for the Board, CEO and Leadership Team;
	•implement procedures for the evaluation of the performance of the Board and Board committees;
	•approve and oversee the implementation of GPT’s diversity & inclusion strategy, initiatives and policies;
	•approve and oversee initiatives around talent development and employee engagement; and
	•any other related matters regarding executives or the Board.
	Effective 1 January 2019 a Human Resources and Remuneration Committee (HRRC) was formed with the same
	membershipas noted above. In addition, a Nomination Committee was formed consistingof the full Board1.
Who is included in	GPT’s Key Management Personnel (KMP) are the individuals responsible for planning, controlling and managing
the Remuneration	the GPT Group (being the Non-Executive Directors, CEO, Chief Financial Officer (CFO), and the Chief Operating
Report?	Officer (COO)).

Committee key decisions and remuneration outcomes in 2018

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Platform component Key decisions and outcomes
Base Pay (Fixed) • Implemented the annual review of employee base pay effective 1 January 2018, with an average increase of 2.57%.
• Following benchmarking, implemented an annual review of Non-Executive Director base and committee fees effective
1 January 2018, with an average increase of 3.12% to bring Non-Executive Directors remuneration closer to market.
Short Term Incentive • Maintained Funds from Operations (FFO) growth per security as the primary measure of Group financial performance.
Compensation (STIC) • The Group achieved an FFO growth per security outcome of 3.5% which generated a STIC pool maximum of
$15.4 million.
• Maintained a deferred equity component of STIC vesting in one tranche at the end of the year following the conclusion
of the performance period.
Long Term Incentive • Achieved a compound annual Total Return [2] for the 2016-18 period of 15.50%, exceeding the benchmark of 9.75%
(LTI) Compensation for maximum award, and delivered a Total Securityholder Return (TSR) [3] of 32.76% which exceeded the ASX 200
AREIT Accumulation Index (the Index) performance of 26.60%.
• As a result, the vesting outcome for the 2016-18 LTI plan was 82.71% of the performance rights for each of the
24 participants in the LTI plan.
• Launched the 2018-2020 LTI with two performance measures, Total Return and Relative TSR.
• Maintained the same performance hurdles and ranges as the prior year’s LTI plan.
• Aligned the vesting schedule for both performance measures such that 10% of the performance rights for each
measure vest at Threshold performance, with straightline pro-rata vesting through to 100% at the maximum
performance level.
Other employee • Continued the General Employee Security Ownership Plan (GESOP) for 105 STIC eligible employees not in the LTI.
ownership plans Under GESOP each participant receives an amount equal to 10% of their STIC (less tax) delivered in GPT securities,
which must be held for at least 1 year.
• Continued the Broad Based Employee Security Ownership Plan (BBESOP) for 264 employees ineligible for GESOP.
Under BBESOP, subject to GPT achieving the annual FFO growth per security target, participants receive $1,000
worth of GPT securities that cannot be transferred or sold until the earlier of 3 years from the allocation date or
cessation of employment (or $1,000 cash (less tax) at the election of the individual).
Policy and • Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and governance
governance standards, and drafting of incentive plan documentation from EY and Conari Partners [4] .
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1 Further information about the role and responsibility of both the HRRC and the Nomination Committees is set out in their respective Charters, which are available on GPT’s website (www.gpt.com.au). No additional fees are paid for membership of the Nomination Committee.

2 Total Return is defined as the sum of the change in Net Tangible Assets (NTA) and distributions over the performance period, divided by the NTA at the beginning of the performance period.

3 TSR represents an investor’s return, calculated as the percentage difference between an initial amount invested in stapled securities and the final value of those stapled securities at the end of the relevant period, assuming distributions were reinvested.

4 During 2018, no remuneration recommendations in relation to Key Management Personnel, as defined by Division 1 of Part 1.2 of Chapter 1 of the Corporations Act 2001, were made by these or other consultants.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

GPT’s vision and financial goals linked to remuneration structures

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GPT’s vision and financial goals
To be the most respected
property company in Australia
Generate competitive Relative Generate competitive FFO
in the eyes of our Investors, Total Return > 8.5%
Total Securityholder Return growth per security
People, Customers and
Communities
Total remuneration components
Base pay (Fixed) STIC (variable) LTI (variable) Other employee ownership plans
• Base level of reward. • Discretionary, at risk, and • Discretionary, at risk, and (variable)
• Set around Australian market with aggregate STIC funding aligned to overall Group GESOP
median using external aligned to overall Group financial outcomes. • For STIC eligible individuals
benchmark data (including financial outcomes. • Set around market median who are ineligible for LTI.
AON Hewitt and the Financial • Set around market median for target performance with • Equal to 10% of their STIC
Institutions Remuneration for target performance with potential to achieve top (less tax) delivered in GPT
Group (FIRG)). potential to achieve top quartile for stretch outcomes. securities, which must be
• Reviewed based on quartile for stretch outcomes. • Vesting determined by GPT held for at least 1 year.
employee’s responsibilities, • Determined by GPT and performance against Total
BBESOP
experience, skill and individual performance Return and Relative TSR
performance. against a mix of balanced financial performance. • For individuals ineligible for
• External and internal scorecard measures which • Relative TSR is measured STIC or LTI.
relativities considered. include financial and non- against ASX200 AREIT • GPT must achieve at least
financial measures. Accumulation Index Target outcome on annual
• Financial measures include (including GPT). FFO growth per security.
FFO growth per security, • Assessed over a 3 year • A grant of $1,000 worth of
and earnings at portfolio, performance period, no GPT securities which must
fund and/or property level as re-testing. be held until the earlier of 3
relevant. • No value derived unless GPT years from the allocation date
• Non-financial objectives focus meets or exceeds defined or cessation of employment
on execution of strategy, performance measures. (or $1,000 cash (less tax) at
delivery of key projects and the election of the individual).
• Delivered in GPT securities
developments, and people and
to align executive and
culture objectives.
securityholder interests.
• Delivered in cash, or
(for senior executives), a
combination of 50% cash
and 50% equity with deferred
vesting for 1 year.
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Attract, retain, motivate and reward high calibre executives to deliver	Align executive rewards to GPT’s performance and securityholder
superior performance by providing:	interests by:

Competitive rewards.
Competitive rewards. • Assessing incentives against financial and non-financial business
• Opportunity to achieve incentives beyond base pay based measures that are aligned with GPT strategy. on performance. • Delivering a meaningful component of executive remuneration in the form of equity subject to performance hurdles being achieved.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Employment Terms

1. Employment terms – Chief Executive Officer and Managing Director

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Term Conditions
Contract duration Open ended.
Termination by Executive 6 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package Bob Johnston’s 2018 remuneration arrangements were as follows:
Base pay: $1,460,000.
STIC: $0 to $1,825,000 (i.e. 0% to 125% of base pay) based on performance, paid in equal proportions
of cash and deferred GPT securities, with the securities component vesting one year after the
conclusion of the performance year.
LTI: A grant of performance rights with the face value at time of grant of $2,190,000 (i.e. 150% of
base pay) with vesting outcomes dependent on performance and continued service, and delivered in
restricted GPT securities.
Termination by Company for cause No notice requirement or termination benefits (other than accrued entitlements).
Termination by Company (other) 12 months’ notice. Treatment of unvested STIC and LTI will be at the Board’s discretion under the terms of
the relevant plans and GPT policy.
Post-employment restraints 6 months non-compete, and 12 months non-solicitation of GPT employees.
External Directorships Bob Johnston is a Director on the Boards of the Property Industry Foundation (PIF) and the Property
Council of Australia (PCA). He does not receive remuneration for these roles.
Clawback Policy All GPT employees who participate in STIC and LTI are subject to remuneration being clawed back if
the recipient has acted fraudulently, dishonestly, or where there has been a material misstatement or
omission in the Group’s financial statements leading to the receipt of an unfair benefit.
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2. Employment terms – Executive KMP

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Term Conditions
Contract duration Open ended.
Termination by Executive 3 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package Component Mark Fookes Anastasia Clarke
Base pay $820,000 $800,000
STIC [5] $0 to $820,000 $0 to $800,000
LTI $0 to $820,000 $0 to $800,000
Termination by Company for cause No notice requirement or termination benefits (other than accrued entitlements).
Termination by Company (other) 3 months’ notice. Severance payments may be made subject to GPT policy and capped at the three year
average of the executive’s annual base (fixed) pay. Treatment of unvested STIC and LTI will be at the Board’s
discretion under the terms of the relevant plans and GPT policy.
Post-employment restraints 12 months non-solicitation of GPT employees.
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3. Compensation mix at maximum STIC and LTI outcomes

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Fixed remuneration Variable or “at risk” remuneration [6]
Executive KMP Position Base pay STI LTI
Bob Johnston Chief Executive Officer and Managing Director 26.7% 33.3% 40.0%
Anastasia Clarke Chief Financial Officer 33.4% 33.3% 33.3%
Mark Fookes Chief Operating Officer 33.4% 33.3% 33.3%
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5 The STIC is paid in an equal mix of cash and deferred GPT securities, with the securities component vesting 1 year after the conclusion of the performance year. 6 The percentage of each component of total remuneration is calculated with reference to maximum or stretch potential outcomes as set out under Remuneration Package in Tables 1 and 2 above.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Group Financial Performance and Incentive Outcomes

1. Five year Group financial performance

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2018 2017 2016 2015 2014
Total Securityholder Return (TSR) (%) 7.0 6.6 10.1 15.4 34.5
Total Return (%) 15.8 15.2 15.5 11.5 9.6
NTA (per security) ($) 5.58 5.04 4.59 4.17 3.94
FFO (per security) (cents) 31.8 30.8 29.9 28.3 26.8
Security price at end of calendar year ($) 5.34 5.11 5.03 4.78 4.35
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2. Summary of CEO objectives and performance outcomes

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Performance measure Reason chosen Weighting Performance outcomes
Financial FFO growth per security FFO growth per 70% The Group delivered FFO growth per security of 3.5% in 2018.
targets. security is a key This was in excess of the Group’s target of 3% growth but
financial measure of below the stretch objective set by the Board.
GPT’s performance.
Strategy Strategy objectives Developing, 10% Management continued to execute on strategies approved
focused on exploring communicating and by the Board. This included securing new acquisitions in
growth opportunities implementing GPT’s the Office and Logistics sector and advancing plans for
for GPT group, as strategy will underpin development opportunities at Melbourne Central.
well as development GPT’s medium term Management did not achieve a successful outcome of the
and implementation activities. sale of Wollongong Central and progress on unlocking
of strategic plans for opportunities at Sydney Olympic Park and Camellia was
each division. behind target.
Performance Operational objectives Focus on delivery 15% GPT’s Total Shareholder Return was 7.03% versus 3.95%
focused on driving of investment and for the ASX AREIT 200 Accumulation Index.
performance of the fund performance, Occupancy remains high across the Group’s portfolio and
investment portfolio, conversion of the like for like Net Operating Income (NOI) growth of 3.8% was
key milestones in the development pipeline achieved, however the like for like NOI growth for the retail
development pipeline, and operational portfolio was below target.
and other projects. efficiency to optimise
Office lease expiries in 2020 and 2021 continued to be a
GPT’s performance.
focus for management however stretch target objectives
were not achieved.
Established the Operational Excellence PCG and delivered
business efficiencies through the use of technology,
streamlined decision making, and enhanced asset
management support to the funds management platform.
Pre-commitment for the 32 Smith Street development was
achieved and Development Approval conditions satisfied
allowing the commencement of the project, with the
development on plan to deliver targeted returns.
Progress was made on the Sunshine Plaza development but
final completion has been delayed to the end of Q1 2019.
People People objectives Maintaining a high 5% Achieved Workplace Gender Equality Agency (WGEA)
centred on increasing performing executive Employer of Choice for Gender Equality citation in
employee engagement, team and achieving February 2018 recognising GPT’s performance as among
driving GPT’s diversity engagement and the best employers.
and inclusion agenda, diversity goals is key Increased the percentage of females in the top 50% of
and operational to GPT’s performance. the business (measured by remuneration) from 42.24%
excellence. at the end of 2017 to 45.65%.
Launched GPT’s second Reconciliation Action Plan
(RAP), maintained participation of First Nations
employees in the permanent workforce at 1%, and
signed a 10 year agreement with Career Trackers to
expand its internship program.
Increased GPT’s score in the Australian Workplace
Equality Index (AWEI) survey from 42 to 79, 16 points
higher than the property sector average.
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Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

3. STIC Framework

The CEO objectives are cascaded (in full or in part) to KMP and all STIC participants where applicable. Performance measures and weightings may vary according to areas of responsibility for each STIC participant. Group and segment financial KPI’s and performance KPI’s in relation to occupancy, leasing, progress on developments, investment performance and operational efficiency are included. Performance objectives are then measured to determine performance outcomes and generate STIC recommendations.

The 2018 STIC outcomes for the KMP are in Table 4 below, while STIC determination for the balance of the eligible employees[7] is to occur in March 2019, which is post the issue of the 2018 Remuneration Report. For the Group, FFO growth per security performance hurdles are set for the year. For 2017, the Group delivered an FFO growth per security outcome of 3.0 per cent and generated a maximum amount of $13.8 million for the STIC pool, representing 64 per cent of the aggregate of STIC participants' maximum STIC potential, of which $13.4 million was ultimately distributed to employees based on the performance of the individual and their business unit/team against Group and individual KPI’s.

The following table shows the distribution of the 2017 STIC outcomes as a percentage of the individuals maximum STIC opportunity.

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2017 STIC Received as a % of Maximum STIC potential 0-50% 50-60% 60-70% 70-80% 80-90% 90-100%
Percentage of STIC participants 3.79% 11.36% 71.97% 8.33% 4.55% 0.0%
4. 2018 STIC outcomes by Executive KMP [8]
Actual STIC % of maximum Equity component
Actual STIC awarded as a % of STIC award Cash (# of GPT
Executive KMP Position awarded maximum STIC forfeited component securities) [9]
Bob Johnston Chief Executive Officer and $1,227,000 67.23% 32.77% $613,500 117,788
Managing Director
Anastasia Clarke Chief Financial Officer $575,000 71.88% 28.12% $287,500 55,198
Mark Fookes Chief Operating Officer $575,000 70.12% 29.88% $287,500 55,198
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5. Group performance measures for LTI Plans currently relevant

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LTI performance Vesting % by Overall Plan
measurement Performance measure performance Vesting
LTI period Performance measure hurdle Weighting Results measure Outcome (%)
2016 2016–18 Relative TSR versus 10% of rights vest at Index 50% GPT’s TSR 65.41%
ASX200 AREIT performance, up to 100% performance
Accumulation Index at Index plus 10% (pro exceeded the
(including GPT) (the Index) rata vesting in between) Index by 6.16%
82.71%
Total Return 0% of rights vest at 8% 50% 15.50% 100.00%
Total Return, up to 100%
at 9.5% Total Return (pro-
rata vesting in between)
2017 2017–19 Relative TSR versus 10% of rights vest at Index 50% N/A N/A
ASX200 AREIT performance, up to 100%
Accumulation Index at Index plus 10% (pro
(including GPT) rata vesting in between)
Total Return 0% of rights vest at 8.5% 50% N/A N/A N/A
Total Return, up to 100%
at 10.0% Total Return
(pro-rata vesting in
between)
2018 2018–20 Relative TSR versus 10% of rights vest at Index 50% N/A N/A
ASX200 AREIT performance, up to 100%
Accumulation Index at Index plus 10% (pro
(including GPT) rata vesting in between)
Total Return 10% of rights vest at 50% N/A N/A N/A
8.5% Total Return, up
to 100% at 10.0% Total
Return (pro-rata vesting
in between)
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7 i.e. excluding the KMP.

8 Excluding the impact of movements in the GPT security price on deferred STIC value received. 9 The number of deferred GPT securities granted are calculated by dividing 50% of the Actual STIC awarded by GPT’s Q4 2017 Volume Weighted Average Security Price (VWAP) of $5.2085. The deferred GPT securities will vest subject to service on 31 December 2019.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

6. 2016-2018 LTI outcomes by Executive KMP

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Senior Executive Position Performance rights granted Performance rights vested Performance rights lapsed
Bob Johnston Chief Executive Officer and 450,257 372,385 77,872
Managing Director
Anastasia Clarke Chief Financial Officer 139,365 115,262 24,103
Mark Fookes Chief Operating Officer 171,527 141,862 29,665
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7. LTI outcomes – fair value and maximum value recognised in future years[10]

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Performance Maximum value to
Fair value per rights granted as be recognised in
Executive KMP Year Grant date performance right at 31 Dec 18 Vesting date future years
Bob Johnston 2018 10 May 2018 $2.62 420,467 31 Dec 20 $1,222,712
Chief Executive Officer and
2017 22 May 2017 $2.66 452,206 31 Dec 19 $955,709
Managing Director
Anastasia Clarke 2018 29 March 2018 $2.62 153,595 31 Dec 20 $438,169
Chief Financial Officer 2017 21 February 2017 $2.66 157,563 31 Dec 19 $293,563
Mark Fookes 2018 29 March 2018 $2.62 157,435 31 Dec 20 $459,154
Chief Operating Officer 2017 21 February 2017 $2.66 172,269 31 Dec 19 $320,962
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8. Reported remuneration – Executive KMP – Actual Amounts Received[11]

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Fixed pay Variable or “at risk” [12]
Executive KMP Year Base pay Superannuation Other [13] STIC LTI Total
Bob Johnston 2018 $1,439,710 $20,290 $8,354 $1,237,259 $1,972,002 $4,677,615
Chief Executive Officer and
2017 $1,415,168 $19,832 $3,299 $1,195,801 $1,867,471 $4,501,571
Managing Director
Anastasia Clarke 2018 $779,710 $20,290 $5,275 $579,807 $610,381 $1,995,463
Chief Financial Officer 2017 $730,168 $19,832 $2,480 $523,556 $455,426 $1,731,462
Mark Fookes 2018 $799,710 $20,290 $10,585 $579,807 $751,244 $2,161,636
Chief Operating Officer 2017 $800,168 $19,832 $4,326 $565,442 $844,845 $2,234,613
Total 2018 $3,019,130 $60,870 $24,214 $2,396,873 $3,333,627 $8,834,714
2017 $2,945,504 $59,496 $10,105 $2,284,799 $3,167,742 $8,467,646
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9. Reported remuneration – Executive KMP – AIFRS Accounting[14]

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Fixed pay Variable or “at risk”
STIC (cash LTI award
Executive KMP Year Base pay Superannuation Other plus accrual) accrual [15] Total
Bob Johnston 2018 $1,520,636 $20,290 $8,354 $1,210,570 $1,168,869 $3,928,719
Chief Executive Officer and
Managing Director 2017 $1,376,680 $19,832 $3,299 $1,219,543 $1,166,796 $3,786,150
Anastasia Clarke 2018 $794,923 $20,290 $5,275 $548,232 $414,417 $1,783,137
Chief Financial Officer 2017 $775,348 $19,832 $2,480 $569,961 $382,324 $1,749,945
Mark Fookes 2018 $825,109 $20,290 $10,585 $559,068 $467,160 $1,882,212
Chief Operating Officer 2017 $840,325 $19,832 $4,326 $669,971 $515,208 $2,049,662
Total 2018 $3,140,668 $60,870 $24,214 $2,317,870 $2,050,446 $7,594,068
2017 $2,992,353 $59,496 $10,105 $2,459,475 $2,064,328 $7,585,757
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10 For the avoidance of doubt, the GPT incentive plans (i.e. STIC and LTI) use face value grants of performance rights based on the VWAP of GPT securities for specified periods; reference to fair value per performance right is included in this table to comply with accounting standards.

11 This table discloses the cash and other benefit amounts actually received by GPT’s executive KMP, as distinct from the accounting expense. As a result, it does not align to Australian Accounting Standards.

12 Gross dollar values for the equity components have been calculated by multiplying the number of securities by GPT’s fourth quarter VWAP for the applicable year; 2018: $5.2956 (2017: $5.2085).

13 Other may include death and total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, professional memberships, subscriptions and/or other benefits.

14 This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian accounting standards.

15 This column records the amount of the fair value of performance rights under the various LTI plans expensed in the relevant financial years, and does not represent actual LTI awards made to executives or the face value grant method.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

10. GPT security ownership – Executive KMP as at 31 December 2018

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GPT Employee Security Schemes (ESS) Purchase GPT
Holdings /(Sales) Holdings Gross Value
(start of 2016–18 TOTAL ESS during (end of of GPT MSHR
Executive KMP period) [16] 2018 DSTIC LTI for 2018 period [17] period) [18] Holdings [19] Guideline [20]
Bob Johnston 821,765 117,788 372,385 490,173 – 1,311,938 $6,947,499 $2,190,000
Chief Executive Officer and
Managing Director
Anastasia Clarke 462,585 55,198 115,262 170,460 (223,839) 409,206 $2,166,991 $800,000
Chief Financial Officer
Mark Fookes 1,118,268 55,198 141,862 197,060 (156,013) 1,159,315 $6,139,269 $820,000
Chief Operating Officer
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11. GPT performance rights – Executive KMP

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Performance rights
Performance rights that lapsed in 2018 [21] Performance rights still on foot at 31/12/18 [22]
Executive KMP (# of rights) (# of rights)
Bob Johnston 135,278 872,673
Chief Executive Officer and Managing Director
Anastasia Clarke 45,702 311,158
Chief Financial Officer
Mark Fookes 53,184 329,704
Chief Operating Officer
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16 GPT Holdings (start of period) include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2017, LTI plans up to and including the 2015-17 LTI plan, and private holdings.

17 Movement in GPT security holdings as a result of the sale of vested, unrestricted security holdings and/or the sale or purchase of additional private holdings on the individuals own account during the 2018 calendar year.

18 GPT Holdings (end of period) is the sum of GPT Holdings (start of the period) plus DSTIC and LTI securities obtained under ESS and adjusted for any purchases or sales during the period. Note that some of the securities do not become actual holdings for the individual until after the conclusion of the performance year when Group results are known which allow the conversion of performance rights under the various plan terms.

19 The GPT Holdings (end of period) multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 to derive a dollar value.

20 GPT’s Minimum Security Holding Requirement (MSHR) guideline requires the CEO to acquire and maintain a holding equal to 150% of base salary. For other KMP and Leadership Team members the holding requirement is equal to 100% of base salary. Individuals have four years from commencement of employment to achieve the MSHR before it is assessed for the first time.

21 The sum of performance rights that were awarded to a participant in the 2016-2018 LTI that did not vest at the end of the 2016-2018 performance period, and as a result, lapsed and/or performance rights granted under the 2018 DSTIC that also lapsed.

22 The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2018. This represents the current maximum number of additional GPT securities to which the individual may become entitled subject to satisfying the applicable performance measures in the 2017-19 and 2018-20 LTI plans on foot; as such, these performance rights represent the incentive opportunity over multiple future years, are subject to performance and hence “at risk”, and as a result may never vest.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

Remuneration – Non-Executive Directors

What are the key	•The Board determines the remuneration structure for Non-Executive Directors based on recommendations from
elements of the Non-	the Committee.
Executive Director Remuneration Policy?	•Non-Executive Directors are paid one fee for participation as a Director in all GPT related companies (principally GPT RE Limited, the Responsible Entity of General Property Trust and GPT Management Holdings Limited).
	•Non-Executive Director remuneration is composed of three main elements:
	– Main Board fees;
	– Committee fees; and
	– Superannuation contributions at the statutory superannuation guarantee contribution rate.
	•Non-Executive Directors do not participate in any short or long term incentive arrangements and are not entitled to
	any retirement benefits other than compulsory superannuation.
	•Non-Executive Director remuneration is set by reference to comparable entities listed on the ASX (having regard to
	GPT’s industry sector and market capitalisation).
	•External independent advice on remuneration levels for Non-Executive Directors is sought annually. In the event
	that a review results in changes, the new Board and Committee fees are effective from the 1st of January in the
	applicable year and advised in the ensuing Remuneration Report.
	•Fees (including superannuation) paid to Non-Executive Directors are subject to an aggregate limit of $1,800,000 per
	annum, which was approved by GPT securityholders at the Annual General Meeting on 5 May 2015. As an executive
	director, Mr Johnston does not receive fees from this pool as he is remunerated as one of GPT’s senior executives.

1. Board and committee fees[23,24]

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Sustainability and Risk Nomination and
Year Board Base Fee Audit Committee Committee Remuneration Committee
Chairman 2018 $400,000 $37,000 $31,000 $31,000
2017 $380,000 $36,000 $30,000 $30,000
Members 2018 $152,000 $18,500 $15,500 $15,500
2017 $148,000 $18,000 $15,000 $15,000
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2. Reported remuneration – Non-Executive Directors – AIFRS accounting[25,26]

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Fixed pay
Non-Executive Director – Current Year Salary and fees Superannuation Other [27] Total
Vickki McFadden [28] 2018 $289,851 $16,481 – $306,332
Chairman 2017 – – – –
Eileen Doyle 2018 $214,596 $20,094 – $234,690
2017 $203,500 $19,333 – $222,833
Swe Guan Lim 2018 $186,000 $17,670 $908 $204,578
2017 $181,000 $17,195 $287 $198,482
Angus McNaughton [29] 2018 $27,917 $2,652 – $30,569
2017 – – – –
Michelle Somerville 2018 $204,500 $19,428 – $223,928
2017 $192,750 $18,311 – $211,061
Gene Tilbrook 2018 $183,000 $17,385 $1,103 $201,488
2017 $178,000 $16,910 $380 $195,290
Non-Executive Director – Former
Rob Ferguson [30] 2018 $137,949 $8,617 – $146,566
2017 $380,000 $19,832 – $399,832
Brendan Crotty [31] 2018 $159,292 $15,133 – $174,425
2017 $181,000 $17,195 – $198,195
Total 2018 $1,403,105 $117,460 $2,011 $1,522,576
2017 $1,316,250 $108,776 $667 $1,425,693
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23 ‘Chairman’ used in this sense may refer to the chairperson of the board or a particular committee.

24 In addition to the fees noted in the table, all non-executive directors receive reimbursement for reasonable travel, accommodation and other expenses incurred while undertaking GPT business.

25 This table provides a breakdown of remuneration for Non-Executive Directors in accordance with statutory requirements and Australian accounting standards.

26 No termination benefits were paid during the financial year.

27 Other may include death and total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.

28 Ms McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018.

29 Mr McNaughton joined GPT on 1 November 2018.

30 Mr Ferguson retired from the GPT Board on 2 May 2018.

31 Mr Crotty retired from the GPT Board on 8 November 2018.

Annual Financial Report of The GPT Group

Directors’ Report – Year ended 31 December 2018

3. Non-Executive Director – GPT security holdings

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Private holdings (# of securities) Minimum security holding requirement (MSHR)
Non-Executive Director Balance 31/12/17 Purchase/(Sale) Balance 31/12/18 Gross value [32] MSHR guideline [33]
Vickki McFadden – 50,000 50,000 $264,780 $400,000
–
Eileen Doyle 45,462 45,462 $240,749 $152,000
Swe Guan Lim 15,800 23,200 39,000 $206,528 $152,000
– – – –
Angus McNaughton $152,000
Michelle Somerville 16,157 20,506 36,663 $194,153 $152,000
Gene Tilbrook 48,546 – 48,546 $257,080 $152,000
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32 Non-Executive Directors holdings multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 to derive a dollar value.

33 The MSHR for Non-Executive Directors is equal to 100% of base fees. Individuals have four years from commencement of employment to achieve the MSHR before it is assessed for the first time.

The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors of the GPT Group.

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Vickki McFadden Chairman

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Bob Johnston Chief Executive Officer and Managing Director

Sydney 11 February 2019

Annual Financial Report of The GPT Group

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Auditor’s Independence Declaration

As lead auditor for the audit of General Property Trust for the year ended 31 December 2018, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of General Property Trust and the entities it controlled during the period.

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Susan Horlin Partner PricewaterhouseCoopers

Sydney 11 February 2019

PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Annual Financial Report of The GPT Group

Financial Statements

Consolidated Statement of Comprehensive Income

Year ended 31 December 2018

Note	31 Dec 18 $M 31 Dec 171 $M
Revenue Rent from investment properties Property and fund management fees Development revenue Development management fees Other income Fair value gain on investment properties Share of after tax profit of equity accounted investments Interest revenue Derecognition of available for sale financial asset Net gain on disposal of assets Gain on financial liability at amortised cost Net foreign exchange gain Total revenue and other income Expenses Property expenses and outgoings Management and other administration costs Development costs Depreciation expense Amortisation expense Impairment expense Finance costs Net loss on fair value movements of derivatives Net impact of foreign currency borrowings and associated hedging loss Total expenses Profit before income tax expense Income tax expense 9(a) Profit after income tax expense Profit from discontinued operations Net profit for the year Other comprehensive income Items that may be reclassified to profit or loss, net of tax Movement in hedging reserve 10(b) Movement in fair value of cash flow hedges 10(b) Revaluation of available for sale financial asset 10(b) Movement in net foreign exchange translation reserve 10(b) Total other comprehensive income Total comprehensive income for the year Total comprehensive income for the year from continuing operations Total comprehensive income for the year from discontinued operations Net profit attributable to: - Securityholders of the Trust - Securityholders of other entities stapled to the Trust Total comprehensive income attributable to: - Securityholders of the Trust - Securityholders of other entities stapled to the Trust Basic earnings per unit attributable to ordinary securityholders of the Trust Earnings per unit (cents per unit) – profit from continuing operations 11(a) Earnings per unit (cents per unit) – profit from discontinued operations 11(a) Earnings per unit (cents per unit) – Total 11(a) Basic earnings per stapled security attributable to ordinary stapled securityholders of the GPT Group Earnings per stapled security (cents per stapled security) – profit from continuing operations 11(b) Earnings per security (cents per security) – profit from discontinued operations 11(b) Earnings per security (cents per security) – Total 11(b)	634.1 610.6 79.2 70.2 34.4 15.0 4.8 10.8
	752.5 706.6
	637.2 481.0 497.8 442.8 1.4 1.3 – 10.7 1.3 – 2.4 2.2 0.1 –
	1,140.2 938.0
	1,892.7 1,644.6
	163.2 158.3 71.5 71.7 27.4 14.4 2.0 1.7 5.2 6.0 11.3 5.4 125.8 103.7 40.0 5.7 1.5 0.2
	447.9 367.1
	1,444.8 1,277.5
	9.5 10.3
	1,435.3 1,267.2 16.4 0.8
	1,451.7 1,268.0
	10.9 (2.5) (3.8) (6.9) – (7.1) (16.8) –
	(9.7) (16.5)
	1,442.0 1,251.5
	1,442.4 1,250.7 (0.4) 0.8 1,417.7 1,248.2 34.0 19.8 1,424.8 1,238.8 17.2 12.7 77.7 69.3 0.9 –
	78.6 69.3
	79.5 70.4 0.9 –
	80.4 70.4

1 The 31 December 2017 Consolidated Statement of Comprehensive Income has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Annual Financial Report of The GPT Group

Consolidated Statement of Financial Position

As at 31 December 2018

Note	31 Dec 18 $M 31 Dec 171 $M
ASSETS Current assets Cash and cash equivalents Trade receivables 4(a) Other receivables 4(b) Inventories 6 Derivative assets 14(b) Prepayments Other assets Current tax assets 9(b) Total current assets Non-current assets Investment properties 2 Equity accounted investments 3 Intangible assets 5 Inventories 6 Property, plant and equipment Derivative assets 14(b) Deferred tax assets 9(c) Other assets Total non-current assets Total assets LIABILITIES Current liabilities Payables 7 Current tax liabilities 9(b) Borrowings 13 Derivative liabilities 14(b) Provisions 8 Total current liabilities Non-current liabilities Borrowings 13 Derivative liabilities 14(b) Provisions 8 Total non-current liabilities Total liabilities Net assets EQUITY Securityholders of the Trust (parent entity) Contributed equity 10(a) Reserves 10(b) Retained earnings 10(c) Total equity of the Trust securityholders Securityholders of other entities stapled to the Trust Contributed equity 10(a) Reserves 10(b) Accumulated losses 10(c) Total equity of other stapled securityholders Total equity	58.7 49.9 51.4 48.4 52.5 47.5 31.0 11.8 1.5 3.4 12.8 7.0 22.8 23.0 0.8 –
	231.5 191.0
	10,128.8 8,745.7 3,905.9 3,561.8 26.8 30.9 113.3 140.4 12.7 9.9 338.9 257.7 20.1 16.9 – 3.0
	14,546.5 12,766.3
	14,778.0 12,957.3
	411.0 384.7 – 8.6 516.0 19.9 4.0 9.1 26.2 28.1
	957.2 450.4
	3,598.9 3,280.7 120.2 118.0 1.1 2.3
	3,720.2 3,401.0
	4,677.4 3,851.4
	10,100.6 9,105.9
	7,825.7 7,814.8 (33.5) (40.6) 2,790.0 1,828.4
	10,582.2 9,602.6
	325.9 325.7 37.9 57.0 (845.4) (879.4)
	(481.6) (496.7)
	10,100.6 9,105.9

1 The 31 December 2017 Consolidated Statement of Financial Position has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

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

Note	General Property Trust Other entities stapled to the General Property Trust Contributed equity $M Reserves $M Retained earnings $M Total $M Contributed equity $M Reserves $M Accumulated losses $M Total $M Total equity $M
Equity attributable to Securityholders At 1 January 2017 Revaluation of available for sale financial asset net of tax 10(b) Movement in hedging reserve 10(b) Movement in fair value of cash flow hedges 10(b) Other comprehensive income for the year Profit for the year Total comprehensive income for the year Transactions with Securityholders in their capacity as Securityholders Issue of stapled securities 10(a) Movement in employee incentive scheme reserve net of tax 10(b) Reclassification of employee incentive security scheme reserve to retained earnings/accumulated losses 10(c) Distributions paid and payable 12 At 31 December 20171 Equity attributable to Securityholders At 1 January 20181 Movement in foreign exchange translation reserve 10(b) Movement in hedging reserve 10(b) Movement in fair value of cash flow hedges 10(b) Other comprehensive income for the year Profit for the year Total comprehensive income for the year Transactions with Securityholders in their capacity as Securityholders Issue of stapled securities 10(a) Movement in employee incentive scheme reserve net of tax 10(b) Reclassification of employee incentive security scheme reserve to retained earnings/accumulated losses 10(c) Distributions paid and payable 12 At 31 December 2018	7,804.3 (31.2) 1,022.8 8,795.9 325.5 59.5 (898.7) (513.7) 8,282.2
	– – – – – (7.1) – (7.1) (7.1) – (2.5) – (2.5) – – – – (2.5) – (6.9) – (6.9) – – – – (6.9)
	– (9.4) – (9.4) – (7.1) – (7.1) (16.5) – – 1,248.2 1,248.2 – – 19.8 19.8 1,268.0
	– (9.4) 1,248.2 1,238.8 – (7.1) 19.8 12.7 1,251.5
	10.5 – – 10.5 0.2 – – 0.2 10.7 – – – – – 4.6 – 4.6 4.6 – – 0.6 0.6 – – (0.5) (0.5) 0.1 – – (443.2) (443.2) – – – – (443.2)
	7,814.8 (40.6) 1,828.4 9,602.6 325.7 57.0 (879.4) (496.7) 9,105.9
	7,814.8 (40.6) 1,828.4 9,602.6 325.7 57.0 (879.4) (496.7) 9,105.9
	– – – – – (16.8) – (16.8) (16.8) – 10.9 – 10.9 – – – – 10.9 – (3.8) – (3.8) – – – – (3.8)
	– 7.1 – 7.1 – (16.8) – (16.8) (9.7) – – 1,417.7 1,417.7 – – 34.0 34.0 1,451.7
	– 7.1 1,417.7 1,424.8 – (16.8) 34.0 17.2 1,442.0
	10.9 – – 10.9 0.2 – – 0.2 11.1 – – – – – (2.3) – (2.3) (2.3) – – 3.4 3.4 – – – – 3.4 – – (459.5) (459.5) – – – – (459.5)
	7,825.7 (33.5) 2,790.0 10,582.2 325.9 37.9 (845.4) (481.6) 10,100.6

1 The 31 December 2017 Consolidated Statement of Changes in Equity have been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Annual Financial Report of The GPT Group

Consolidated Statement of Cash Flows

Year ended 31 December 2018

Note	31 Dec 18 $M 31 Dec 17 $M
Cash flows from operating activities Receipts in the course of operations (inclusive of GST) Payments in the course of operations (inclusive of GST) Proceeds from sale of inventories Payments for inventories Distributions received from equity accounted investments Dividend received from available for sale investment Interest received Income taxes paid Finance costs paid Net cash inflows from operating activities 15(a) Cash flows from investing activities Payments for acquisition of investment properties Payments for operating capital expenditure on investment properties Payments for development capital expenditure on investment properties Proceeds from disposal of assets Payments for property, plant and equipment Payments for intangibles Investment in equity accounted investments Capital return from available for sale asset Capital return from joint venture Net cash outflows from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Payment for termination of derivatives Distributions paid to securityholders Net cash outflows from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year	809.4 733.8 (286.8) (267.3) 28.9 7.6 (21.4) (25.1) 161.3 171.7 – 30.4 1.4 1.3 (20.9) (6.9) (137.9) (110.0)
	534.0 535.5
	(419.5) (33.0) (81.8) (84.1) (270.5) (205.3) 13.3 5.5 (2.9) (1.1) (3.4) (4.8) (10.8) (158.3) – 10.7 1.9 –
	(773.7) (470.4)
	2,862.1 1,434.1 (2,164.4) (1,066.9) – (3.1) (449.2) (435.6)
	248.5 (71.5)
	8.8 (6.4) 49.9 56.3
	58.7 49.9

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

Annual Financial Report of The GPT Group

Notes to the Financial Statements Year ended 31 December 2018

These are the consolidated financial statements of the consolidated entity, GPT Group (GPT), which consists of General Property Trust (the Trust), GPT Management Holdings Limited (the Company) and their controlled entities.

The notes to these financial statements have been organised into sections to help users find and understand the information they need to know. Additional information has also been provided where it is helpful to understand GPT’s performance.

The notes to the financial statements are organised into the following sections:

Note 1 – Result for the year: focuses on results and performance of GPT.

Notes 2 to 9 – Operating assets and liabilities: provides information on the assets and liabilities used to generate GPT’s trading performance.

Notes 10 to 14 – Capital structure: outlines how GPT manages its capital structure and various financial risks.

Notes 15 to 25 – Other disclosure items: provides information on other items that must be disclosed to comply with Australian Accounting Standards and other regulatory pronouncements.

Key judgements, estimates and assumptions

In applying GPT’s accounting policies, management has made a number of judgements, estimates and assumptions regarding future events.

The following judgements and estimates have the potential to have a material impact on the financial statements:

Result for the year

1. Segment information

GPT’s operating segments are described in the following table. The chief operating decision makers monitor the performance of the business on the basis of Funds from Operations (FFO) for each segment. FFO represents GPT’s underlying and recurring earnings from its operations, and is determined by adjusting the statutory net profit after tax for items which are non-cash, unrealised or capital in nature. FFO has been determined in accordance with guidelines issued by the Property Council of Australia.

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Types of products and services which generate
Segment the segment result
Retail Ownership, development (including mixed use)
and management of predominantly regional and
sub-regional shopping centres as well as GPT’s
equity investment in GPT Wholesale Shopping
Centre Fund.
Office Ownership, development (including mixed use)
and management of prime CBD office properties
with some associated retail space as well as GPT’s
equity investment in GPT Wholesale Office Fund.
Logistics Ownership, development (including mixed use)
and management of logistics assets.
Funds Management of two Australian wholesale property
Management funds in the retail and office sectors.
Corporate Cash and other assets and borrowings and
associated hedges plus resulting net finance
costs, management operating costs and income
tax expense.
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Area of judgements and
estimates Assumptions underlying Note
Management rights with Impairment trigger and 5
indefinite life recoverable amounts
IT development and software Impairment trigger and 5
recoverable amounts
Inventories Lower of cost and net 6
realisable value
Deferred tax assets Recoverability 9
Security based payments Fair value 18
Investment properties Fair value 22
Derivatives Fair value 22
Investment in equity Assessment of control 23(b)
accounted investments versus disclosure
guidance
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Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(a) Segment financial information

31 December 2018

The segment financial information provided to the chief operating decision maker for the year ended 31 December 2018 is set out below:

Financial performance by segment

Financial performance by segment
Note	Retail $M Office $M Logistics $M Funds Management $M Corporate $M Total $M
Rent from investment properties b(ii) Property expenses and outgoings b(iii) Income from Funds b(iv) Fee income Management & administrative expenses b(v) Operations Net Income Development management fees Development revenue b(vi) Development costs b(vii) Development management expenses b(v) Development Net Income Interest income Finance costs Net Finance Costs Segment Result Before Tax Income tax expense b(viii) Funds from Operations (FFO) b(i)	370.5 253.3 127.4 – – 751.2 (103.0) (53.1) (21.0) – – (177.1) 46.3 69.8 – – – 116.1 15.0 5.8 0.2 58.2 – 79.2 (10.2) (8.1) (1.8) (15.6) (34.2) (69.9)
	318.6 267.7 104.8 42.6 (34.2) 699.5
	2.6 1.7 0.5 – – 4.8 6.6 – 38.5 – – 45.1 – – (33.1) – – (33.1) (1.6) (0.7) (0.8) – – (3.1)
	7.6 1.0 5.1 – – 13.7
	– – – – 1.4 1.4 – – – – (125.8) (125.8)
	– – – – (124.4) (124.4)
	326.2 268.7 109.9 42.6 (158.6) 588.8 – – – – (14.2) (14.2)
	326.2 268.7 109.9 42.6 (172.8) 574.6

Reconciliation of segment assets and liabilities to the Consolidated Statement of Financial Position

Current Assets Current assets Total Current Assets Non-Current Assets Investment properties Equity accounted investments Inventories Other non-current assets Total Non-Current Assets Total Assets Current and non-current liabilities Total Liabilities Net Assets	16.9 – 14.1 – 200.5 231.5
	16.9 – 14.1 – 200.5 231.5
	5,154.9 3,080.5 1,893.4 – – 10,128.8 1,055.1 2,840.8 – – 10.0 3,905.9 62.1 – 51.2 – – 113.3 10.2 0.6 0.1 – 387.6 398.5
	6,282.3 5,921.9 1,944.7 – 397.6 14,546.5
	6,299.2 5,921.9 1,958.8 – 598.1 14,778.0
	– – – – 4,677.4 4,677.4
	– – – – 4,677.4 4,677.4
	6,299.2 5,921.9 1,958.8 – (4,079.3) 10,100.6

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

31 December 2017

The segment financial information provided to the chief operating decision maker for the year ended 31 December 2017 is set out below:

Financial performance by segment

Financial performance by segment
Note	Retail $M Office $M Logistics $M Funds Management $M Corporate $M Total $M
Rent from investment properties b(ii) Property expenses and outgoings b(iii) Income from Funds b(iv) Fee income Management & administrative expenses b(v) Operations Net Income Development fees Development revenue b(vi) Development costs b(vii) Development management expenses b(v) Development Net Income Interest income Finance costs Net Finance Costs Segment Result Before Tax Income tax expense b(viii) Funds from Operations (FFO) b(i)	360.1 239.2 112.5 – – 711.8 (98.8) (57.6) (17.4) – – (173.8) 46.5 68.8 – – – 115.3 15.0 4.4 0.1 50.7 – 70.2 (9.7) (7.0) (1.9) (13.7) (30.6) (62.9)
	313.1 247.8 93.3 37.0 (30.6) 660.6
	9.0 1.6 0.2 – – 10.8 10.8 – 10.4 – – 21.2 (5.2) – (9.2) – – (14.4) (9.3) (0.5) (0.7) – – (10.5)
	5.3 1.1 0.7 – – 7.1
	– – – – 1.3 1.3 – – – – (103.7) (103.7)
	– – – – (102.4) (102.4)
	318.4 248.9 94.0 37.0 (133.0) 565.3 – – – – (11.1) (11.1)
	318.4 248.9 94.0 37.0 (144.1) 554.2

Reconciliation of segment assets and liabilities to the Consolidated Statement of Financial Position

Current Assets Current assets Total Current Assets Non-Current Assets Investment properties Equity accounted investments1 Inventories Other non-current assets Total Non-Current Assets Total Assets Current and non-current liabilities Total Liabilities Net Assets	– – 11.8 – 179.2 191.0
	– – 11.8 – 179.2 191.0
	4,818.7 2,379.4 1,547.6 – – 8,745.7 1,047.1 2,504.7 – – 10.0 3,561.8 62.4 – 78.0 – – 140.4 10.2 0.3 1.9 – 306.0 318.4
	5,938.4 4,884.4 1,627.5 – 316.0 12,766.3
	5,938.4 4,884.4 1,639.3 – 495.2 12,957.3
	– – – – 3,851.4 3,851.4
	– – – – 3,851.4 3,851.4
	5,938.4 4,884.4 1,639.3 – (3,356.2) 9,105.9

1 The 31 December 2017 equity accounted investments balance has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(b) Reconciliation of segment result to the Consolidated Statement of Comprehensive Income

	31 Dec 18 $M 31 Dec 171 $M
(i) FFO to Net profit for the year Segment result FFO Adjustments Fair value gain on investment properties Fair value gain and other adjustments to equity accounted investments Amortisation of lease incentives and costs Straightlining of rental income Valuation increase Net loss on fair value movement of derivatives Net impact of foreign currency borrowings and associated hedging loss Net foreign exchange (loss)/gain Gain on financial liability at amortised cost Financial instruments mark to market and net foreign exchange loss Net gain on disposal of assets Impairment expense Other items Total other items Consolidated Statement of Comprehensive Income Net profit for the year (ii) Rent from investment properties Segment result Rent from investment properties Less: share of rent from investment properties in equity accounted investments Adjustments Amortisation of lease incentives and costs Straightlining of rental income Consolidated Statement of Comprehensive Income Rent from investment properties (iii) Property expenses and outgoings Segment result Property expenses and outgoings Less: share of property expenses and outgoings in equity accounted investments Consolidated Statement of Comprehensive Income Property expenses and outgoings	574.6 554.2 637.2 481.0 314.1 263.9 (46.1) (38.9) 5.5 11.7
	910.7 717.7 (40.0) (5.7) (1.5) (0.2) (0.5) 0.8 2.4 2.2
	(39.6) (2.9) 18.3 10.7 (11.4) (5.4) (0.9) (6.3)
	6.0 (1.0) 1,451.7 1,268.0
	751.2 711.8 (76.5) (74.0) (46.1) (38.9) 5.5 11.7
	634.1 610.6
	(177.1) (173.8) 13.9 15.5
	(163.2) (158.3)

1 The 31 December 2017 reconciliation of segment result to the statement of comprehensive income has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

	31 Dec 18 $M 31 Dec 171 $M
(iv) Share of after tax profit of equity accounted investments Segment result Income from Funds Share of rent from investment properties in equity accounted investments Share of property expenses and outgoings in equity accounted investments Development revenue – equity accounted investments Development costs – equity accounted investments Development revenue Adjustments Fair value gain and other adjustments to equity accounted investments Transition to AASB 9 Consolidated Statement of Comprehensive Income Share of after tax profit of equity accounted investments (v) Management and administration expenses Segment result Operations Development Less: depreciation expense Adjustment Other Consolidated Statement of Comprehensive Income Management and administration expenses (vi) Development revenue Segment result Development revenue Share of after tax profit of equity accounted investments Consolidated Statement of Comprehensive Income Development revenue (vii) Development costs Segment result Development costs Development costs – equity accounted investments Consolidated Statement of Comprehensive Income Development costs (viii) Income tax expense Segment result Income tax expense Adjustment Tax impact of reconciling items from segment result to net profit for the year Consolidated Statement of Comprehensive Income Income tax expense	116.1 115.3 76.5 74.0 (13.9) (15.5) 10.7 – (5.7) – – 6.2 314.1 263.9 – (1.1)
	497.8 442.8
	(69.9) (62.9) (3.1) (10.5) 2.0 1.7 (0.5) –
	(71.5) (71.7)
	45.1 21.2 (10.7) (6.2)
	34.4 15.0
	(33.1) (14.4) 5.7 –
	(27.4) (14.4)
	(14.2) (11.1) 4.7 0.8
	(9.5) (10.3)

1 The 31 December 2017 reconciliation of segment result to the statement of comprehensive income has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(c) Net profit on disposal and derecognition of assets

(c) Net profit on disposal and derecognition of assets
	31 Dec 18 $M 31 Dec 17 $M
Details of disposals/capital returns during the year: Cash consideration Less: transaction costs Net consideration Carrying amount of net assets sold/derecognised Foreign exchange gain realised on disposal/derecognition Transfer from reserves Profit on sale and derecognition before income tax The carrying amounts of assets and liabilities as at the date of disposal/derecognition were: Investment properties Other assets Net assets	13.4 10.7 (0.1) –
	13.3 10.7 (12.0) (10.7) 17.0 – – 10.7
	18.3 10.7
	12.0 – – 10.7
	12.0 10.7

Revenue

Rental revenue from investment properties is recognised on a straight line basis over the lease term. An asset is also recognised as a component of investment properties relating to fixed increases in operating lease rentals in future periods. When GPT provides lease incentives to tenants, any costs are recognised on a straight line basis over the lease term. Contingent rental income is recognised as revenue in the period in which it is earned.

Revenue from dividends and distributions is recognised when they are declared.

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

Refer to note 23(e)(iv) for further information relating to revenue policies adopted under AASB 15 Revenue from Contracts with Customers .

Expenses

Property expenses and outgoings which include rates, taxes and other property outgoings, are recognised on an accruals basis.

Finance costs

Finance costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with the arrangement of borrowings. Finance costs are expensed as incurred unless they relate to a qualifying asset.

A qualifying asset is an asset under development which generally takes a substantial period of time to bring to its intended use or sale. Finance costs incurred for the acquisition and construction of a qualifying asset are capitalised to the cost of the asset for the period of time that is required to complete the asset. Where funds are borrowed specifically for a development project, finance costs associated with the development facility are capitalised. Where funds are used from group borrowings, finance costs are capitalised using the relevant capitalisation rate taking into account the group’s weighted average cost of debt.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Operating assets and liabilities

2. Investment properties

2. Investment properties
Note	31 Dec 18 $M 31 Dec 17 $M
Retail (a) Office (b) Logistics (c) Properties under development (d) Total investment properties (e)	5,154.9 4,818.7 3,018.5 2,306.8 1,773.6 1,498.6 181.8 121.6
	10,128.8 8,745.7

			Latest
	Ownership		independent		Fair value		Fair value
	interest1	Acquisition	valuation			31 Dec 18	31 Dec 17
	%	date	date	Valuer		$M	$M
(a) Retail
Casuarina Square, NT	50.0	Oct 1973	Dec 2018	Savills Australia		300.8	322.6
Charlestown Square, NSW	100.0	Dec 1977	Jun 2018	Knight Frank Valuations		969.3	924.8
Pacific Highway, Charlestown, NSW	100.0	Oct 2002/Jul 2003	Jun 2018	Knight Frank Valuations		8.0	6.6
Highpoint Shopping Centre, VIC	16.7	Aug 2009	Dec 2018	CB Richard Ellis Pty Ltd		435.0	434.2
Homemaker City, Maribyrnong, VIC2	16.7	Aug 2009	Jun 2018	CB Richard Ellis Pty Ltd		–	11.7
Westfield Penrith, NSW	50.0	Jun 1971	Jun 2018	M3 Property		716.3	669.5
Sunshine Plaza, QLD	**50.0	Dec 1992/Sep 2004	Dec 2018	CB Richard Ellis Pty Ltd		564.0	449.3
Plaza Parade, QLD	50.0	Jun 1999	Dec 2018	CB Richard Ellis Pty Ltd		13.3	10.0
Rouse Hill Town Centre, NSW	100.0	Dec 2005	Dec 2018	CB Richard Ellis Pty Ltd		635.2	606.8
Melbourne Central, VIC – retail portion3	100.0	May 1999/May 2001	Dec 2018	Savills Australia		1,513.0	1,383.2
Total Retail						5,154.9	4,818.7
(b) Office
Australia Square, Sydney, NSW	50.0	Sep 1981	Dec 2018	Colliers International		557.5	444.2
MLC Centre, Sydney, NSW	50.0	Apr 1987	Dec 2018	Jones Lang LaSalle		775.0	662.2
One One One Eagle Street, Brisbane, QLD	33.3	Apr 1984	Dec 2018	CB Richard Ellis Pty Ltd		300.0	293.7
Melbourne Central, VIC – office portion3	100.0	May 1999/May 2001	Dec 2018	CB Richard Ellis Pty Ltd		603.0	546.7
Corner of Bourke and William, VIC	50.0	Oct 2014	Dec 2018	Savills Australia		380.0	360.0
60 Station Street, Parramatta, NSW4	100.0	Sep 2018	Dec 2018	Colliers International		278.0	–
4 Murray Rose Avenue, Sydney Olympic Park, NSW5*100.0		May 2002	Dec 2018	Cushman & Wakefield		125.0	–
Total Office						3,018.5	2,306.8

1 Freehold, unless otherwise marked with an * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.

2 On 12 December 2018 GPT sold its 16.67% interest in Homemaker City, Maribyrnong, for consideration of $13.4 million.

3 Melbourne Central: 71.5% Retail and 28.5% Office (31 Dec 2017: 71.7% Retail and 28.3% Office). Melbourne Central – Retail Includes 100% of Melbourne Central car park and 100% of 202 Little Lonsdale Street.

4 On 6 September 2018 GPT acquired a 100% interest in 60 Station Street, Parramatta for total consideration of $292.9 million (including transaction costs of $15.3 million).

5 Following practical completion in October 2018, 4 Murray Rose Avenue, Olympic Park has been reclassified from properties under development to investment property in the Office portfolio.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

			Latest
	Ownership		independent		Fair value		Fair value
	interest1	Acquisition	valuation			31 Dec 18	31 Dec 17
	%	date	date	Valuer		$M	$M
(c) Logistics
Citiwest Industrial Estate, Altona North, VIC	100.0	Aug 1994	Dec 2018	Savills Australia		90.0	81.6
Quad 1, Sydney Olympic Park, NSW	*100.0	Jun 2001	Dec 2018	M3 Property		28.0	24.0
Quad 4, Sydney Olympic Park, NSW	*100.0	Jun 2004	Dec 2018	M3 Property		58.0	51.5
Sydney Olympic Park Town Centre, NSW	*100.0	Jun 2001–Apr 2013	Dec 2018	Jones Lang LaSalle		121.5	90.2
Rosehill Business Park, Camellia, NSW	100.0	May 1998	Dec 2018	Savills Australia		86.0	81.4
16-34 Templar Road, Erskine Park, NSW	100.0	Jun 2008	Dec 2018	Colliers International		65.0	58.3
67-75 Templar Road, Erskine Park, NSW	100.0	Jun 2008	Dec 2018	CB Richard Ellis Pty Ltd		26.0	24.2
Austrak Business Park, Somerton, VIC	50.0	Oct 2003	Dec 2018	Jones Lang LaSalle		182.4	170.5
4 Holker Street, Newington, NSW	100.0	Mar 2006	Dec 2018	Jones Lang LaSalle		35.5	33.0
372-374 Victoria Street, Wetherill Park, NSW	100.0	Jul 2006	Dec 2018	M3 Property		26.5	24.8
18-24 Abbott Road, Seven Hills, NSW	100.0	Oct 2006	Dec 2018	Savills Australia		39.3	34.6
Citiport Business Park, Port Melbourne, VIC	100.0	Mar 2012	Dec 2018	Jones Lang LaSalle		82.5	75.8
83 Derby Street, Silverwater, NSW	100.0	Aug 2012	Dec 2018	Savills Australia		40.0	34.8
10 Interchange Drive, Eastern Creek, NSW	100.0	Aug 2012	Dec 2018	Jones Lang LaSalle		33.3	33.2
407 Pembroke Road, Minto, NSW	50.0	Oct 2008	Dec 2018	CB Richard Ellis Pty Ltd		30.5	25.5
38 Pine Road, Yennora, NSW	100.0	Nov 2013	Dec 2018	Colliers International		61.0	52.9
16-28 Quarry Road, Yatala, QLD	100.0	Nov 2013	Dec 2018	Savills Australia		44.8	44.3
59 Forest Way, Karawatha, QLD	100.0	Dec 2012	Dec 2018	Savills Australia		114.0	108.0
29-55 Lockwood Road, Erskine Park, NSW	100.0	Jun 2008	Dec 2018	Savills Australia		104.5	98.1
36-52 Templar Road, Erskine Park, NSW	100.0	Jun 2008	Dec 2018	Jones Lang LaSalle		107.0	98.3
54-70 Templar Road, Erskine Park, NSW	100.0	Jun 2008	Dec 2018	M3 Property		152.0	145.0
1A Huntingwood Drive, Huntingwood, NSW	100.0	Oct 2016	Dec 2018	CB Richard Ellis Pty Ltd		46.0	41.3
1B Huntingwood Drive, Huntingwood, NSW	100.0	Oct 2016	Dec 2018	CB Richard Ellis Pty Ltd		25.5	9.6
55 Whitelaw Place, Wacol, QLD	100.0	Dec 2016	Dec 2018	Savills Australia		16.5	15.0
54 Eastern Creek Drive, Eastern Creek, NSW	100.0	Apr 2016	Dec 2018	CB Richard Ellis Pty Ltd		51.8	42.7
Sunshine Business Estate, Sunshine, VIC2	100.0	Jan 2018	Dec 2018	CB Richard Ellis Pty Ltd		78.0	–
396 Mount Derrimut Road, Derrimut, VIC3	100.0	Nov 2018	Nov 2018	Savills Australia		12.4	–
399 Boundary Road, Truganina, VIC4	100.0	Dec 2018	Nov 2018	Savills Australia		15.6	–
Total Logistics						1,773.6	1,498.6
(d) Property under development
407 Pembroke Rd, Minto, NSW	50.0	Oct 2008	Dec 2018	CB Richard Ellis Pty Ltd		5.8	5.6
Austrak Business Park, Somerton, VIC	50.0	Oct 2003	Dec 2018	Jones Lang LaSalle		32.8	21.7
50 Old Wallgrove Road, Eastern Creek, NSW	100.0	Jun 2016	Dec 2018	Savills Australia		60.2	21.7
4 Murray Rose Avenue, Sydney Olympic Park, NSW5*100.0		May 2002	–	–		–	33.0
32 Smith, Parramatta, NSW	100.0	Mar 2017	Dec 2018	CB Richard Ellis Pty Ltd		62.0	39.6
21 Shiny Dr & 2, 6 & 10 Prosperity St, Truganina, VIC6100.0		Nov 2018	Nov 2018	Jones Lang LaSalle		21.0	–
Total Properties under development						181.8	121.6

1 Freehold, unless otherwise marked with an * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.

2 On 24 January 2018 GPT acquired a 100% interest in four logistics assets in Sunshine, Victoria for total consideration of $78.3 million (including transaction costs of $4.3 million).

3 On 1 November 2018 GPT acquired a 100% interest in 396 Mount Derrimut Road, Derrimut for total consideration of $13.1 million (including transaction costs of $0.7 million).

4 On 20 December 2018 GPT acquired a 100% interest in 399 Boundary Road, Truganina for total consideration of $16.7 million (including transaction costs of $1.1 million).

5 Following practical completion in October 2018, 4 Murray Rose Avenue, Olympic Park has been reclassified from properties under development to investment property in the Office portfolio.

6 On 16 November 2018 GPT acquired a 100% interest in 21 Shiny Drive and 2, 6 & 10 Prosperity Street, Truganina for total consideration of $22.3 million (including transaction costs of $1.3 million).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(e) Reconciliation

(e) Reconciliation
	Retail $M Office $M Logistics $M Properties under development $M 31 Dec 18 $M 31 Dec 17 $M
Carrying amount at the beginning of the year Additions – operating capital expenditure Additions – development capital expenditure Additions – interest capitalised1 Asset acquisitions Transfers from properties under development Transfer to inventory Transfers from inventory Disposals Fair value adjustments Lease incentives (includes rent free) Leasing costs Amortisation of lease incentives and costs Straightlining of leases Carrying amount at the end of the year	4,818.7 2,306.8 1,498.6 121.6 8,745.7 7,944.9 26.5 15.8 5.6 – 47.9 50.9 148.8 13.6 24.6 86.1 273.1 215.8 7.1 0.3 0.4 5.9 13.7 8.6 – 292.9 108.1 22.3 423.3 33.0 – 125.0 – (125.0) – – (9.0) – – – (9.0) – – – – – – 2.8 (12.0) – – – (12.0) (5.5) 168.6 264.5 133.2 70.9 637.2 481.0 14.0 21.7 5.9 – 41.6 36.3 3.7 3.1 1.1 – 7.9 5.1 (12.8) (24.5) (8.8) – (46.1) (38.9) 1.3 (0.7) 4.9 – 5.5 11.7
	5,154.9 3,018.5 1,773.6 181.8 10,128.8 8,745.7

1 A capitalisation interest rate of 4.2% (2017: 5.4%) has been applied when capitalising interest on qualifying assets.

Land and buildings which are held to earn rental income or for capital appreciation or for both, and which are not wholly occupied by GPT, are classified as investment properties.

Investment properties are initially recognised at cost and subsequently stated at fair value at each balance date. Fair value is based on the latest independent valuation adjusting for capital expenditure and capitalisation and amortisation of lease incentives since the date of the independent valuation report. Any change in fair value is recognised in the Consolidated Statement of Comprehensive Income in the period.

Properties under development are stated at fair value at each balance date. Fair value is assessed with reference to reliable estimates of future cash flows, status of the development and the associated risk profile. Finance costs incurred on properties undergoing development are included in the cost of the development.

Lease incentives provided by GPT to lessees are included in the measurement of fair value of investment property and are amortised over the lease term using a straightline basis.

Critical judgements are made by GPT in respect of the fair values of investment properties. Fair values are reviewed regularly by management with reference to independent property valuations, recent offers and market conditions, using generally accepted market practices. The valuation process, critical assumptions underlying the valuations and information on sensitivity are disclosed in note 22.

(f) Lease receivables

Lease amounts to be received not recognised in the financial statements at balance date are as follows:

	31 Dec 18 $M 31 Dec 17 $M
Due within one year Due between one and five years Due after five years Total operating lease receivables	523.9 467.5 1,417.8 1,285.6 989.0 979.9
	2,930.7 2,733.0

Lease amounts to be received includes future amounts to be received on non-cancellable operating leases, not recognised in the financial statements at balance date. A proportion of this balance includes amounts receivable for recovery of operating costs on gross and semi-gross leases which will be accounted for as revenue from contracts with customers as this income is earned. The remainder will be accounted for as lease income as it is earned. Amounts receivable under non-cancellable operating leases where GPT’s right to consideration for a service directly corresponds with the value of the service provided to the customer have not been included (for example, variable amounts payable by tenants for their share of the operating costs of the asset).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

3. Equity accounted investments

3. Equity accounted investments
Note	31 Dec 18 $M 31 Dec 17 $M
Investments in joint ventures (a)(i) Investments in associates1 (a)(ii) Total equity accounted investments	1,358.2 1,135.0 2,547.7 2,426.8
	3,905.9 3,561.8

(a) Details of equity accounted investments

(a) Details of equity accounted investments
Name Principal Activity	Ownership Interest	31 Dec 18 $M 31 Dec 17 $M
	31 Dec 18 % 31 Dec 17 %
(i) Joint ventures 2 Park Street Trust2 Investment property 1 Farrer Place Trust2 Investment property Horton Trust Investment property Lendlease GPT (Rouse Hill) Pty Limited2,3 Property development Erskine Park Joint Venture Property development DPT Operator Pty Limited Management Total investment in joint venture entities (ii) Associates GPT Wholesale Office Fund1,2,4 Investment property GPT Wholesale Shopping Centre Fund2,5 Investment property GPT Funds Management Limited Funds management Total investments in associates	50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 23.83 24.95 28.57 28.80 100.00 100.00	763.1 630.1 553.6 465.9 30.1 27.0 11.3 11.9 – – 0.1 0.1
		1,358.2 1,135.0
		1,524.0 1,408.6 1,013.7 1,008.2 10.0 10.0
		2,547.7 2,426.8

1 The 31 December 2017 balance of investments in associates has been restated as a result of the adoption of new accounting standards. Refer to note 24(a). 2 The entity has a 30 June balance date.

3 GPT has a 50% interest in Lendlease GPT (Rouse Hill) Pty Limited, a joint venture developing residential and commercial land at Rouse Hill, in partnership with Urban Growth and the NSW Department of Planning.

4 Ownership has decreased as a result of GPT not participating in the subsequent Distribution Reinvestment Plan (DRP) during the year and the equity raising in December 2018.

5 Ownership has decreased as a result of GPT not participating in the subsequent Distribution Reinvestment Plan (DRP) during the year.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(b) Summarised financial information for associates and joint ventures

The information disclosed reflects the amounts presented in the 31 December 2018 financial results of the relevant associates and joint ventures and not GPT’s share of those amounts. They have been amended to reflect adjustments made by GPT when using the equity method, including fair value adjustments and modifications for differences in accounting policies.

(i) Joint ventures

(i) Joint ventures
	2 Park Street Trust 1 Farrer Place Trust Others Total
	31 Dec 18 $M 31 Dec 17 $M 31 Dec 18 $M 31 Dec 17 $M 31 Dec 18 $M 31 Dec 17 $M 31 Dec 18 $M 31 Dec 17 $M
Current assets Cash and cash equivalents 13.7 9.8 12.1 10.9 12.3 17.6 38.1 38.3 Other current assets 2.0 1.8 5.8 7.1 0.1 8.2 7.9 17.1 Total current assets 15.7 11.6 17.9 18.0 12.4 25.8 46.0 55.4 Total non-current assets 1,525.0 1,260.0 1,129.1 953.5 72.5 63.9 2,726.6 2,277.4 Current liabilities Financial liabilities (excluding trade payables, other payables and provisions) 14.4 9.4 32.0 33.0 1.9 2.8 48.3 45.2 Other current liabilities 0.1 2.0 7.8 6.7 – 0.1 7.9 8.8 Total current liabilities 14.5 11.4 39.8 39.7 1.9 2.9 56.2 54.0 Non-current liabilities Financial liabilities (excluding trade payables, other payables and provisions) – – – – – 8.8 – 8.8 Total non-current liabilities – – – – – 8.8 – 8.8 Net assets 1,526.2 1,260.2 1,107.2 931.8 83.0 78.0 2,716.4 2,270.0 Reconciliation to carrying amounts: Opening net assets 1 January 1,260.2 1,095.8 931.8 848.2 78.0 64.8 2,270.0 2,008.8 Profit for the year 323.1 197.6 202.7 109.6 19.1 16.0 544.9 323.2 Capital injection – – – – 1.6 – 1.6 – Capital reduction – – – – (3.7) – (3.7) – Issue of equity 4.3 24.6 15.7 11.4 – – 20.0 36.0 Distributions paid/payable (61.4) (57.8) (43.0) (37.4) (12.0) (2.8) (116.4) (98.0) Closing net assets 1,526.2 1,260.2 1,107.2 931.8 83.0 78.0 2,716.4 2,270.0 GPT’s share 763.1 630.1 553.6 465.9 41.5 39.0 1,358.2 1,135.0 Summarised statement of comprehensive income Revenue 67.2 73.0 58.0 62.4 21.6 4.6 146.8 140.0 Profit for the year 323.1 197.6 202.7 109.6 19.1 16.0 544.9 323.2 Total comprehensive income 323.1 197.6 202.7 109.6 19.1 16.0 544.9 323.2	13.7 9.8 12.1 10.9 12.3 17.6 38.1 38.3 2.0 1.8 5.8 7.1 0.1 8.2 7.9 17.1
	15.7 11.6 17.9 18.0 12.4 25.8 46.0 55.4 1,525.0 1,260.0 1,129.1 953.5 72.5 63.9 2,726.6 2,277.4 14.4 9.4 32.0 33.0 1.9 2.8 48.3 45.2 0.1 2.0 7.8 6.7 – 0.1 7.9 8.8
	14.5 11.4 39.8 39.7 1.9 2.9 56.2 54.0 – – – – – 8.8 – 8.8
	– – – – – 8.8 – 8.8 1,526.2 1,260.2 1,107.2 931.8 83.0 78.0 2,716.4 2,270.0
	1,260.2 1,095.8 931.8 848.2 78.0 64.8 2,270.0 2,008.8 323.1 197.6 202.7 109.6 19.1 16.0 544.9 323.2 – – – – 1.6 – 1.6 – – – – – (3.7) – (3.7) – 4.3 24.6 15.7 11.4 – – 20.0 36.0 (61.4) (57.8) (43.0) (37.4) (12.0) (2.8) (116.4) (98.0)
	1,526.2 1,260.2 1,107.2 931.8 83.0 78.0 2,716.4 2,270.0
	763.1 630.1 553.6 465.9 41.5 39.0 1,358.2 1,135.0

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(ii) Associates

(ii) Associates
	GPT Wholesale Office Fund GPT Wholesale Shopping Centre Fund GPT Funds Management Limited Total
	31 Dec 18 $M 31 Dec 171 $M 31 Dec 18 $M 31 Dec 17 $M 31 Dec 18 $M 31 Dec 17 $M 31 Dec 18 $M 31 Dec 17 $M
Total current assets 83.0 68.1 34.5 51.8 10.0 10.0 127.5 129.9 Total non-current assets 7,734.5 7,032.8 4,809.3 4,799.6 – – 12,543.8 11,832.4 Total current liabilities 148.4 156.5 98.1 129.4 – – 246.5 285.9 Total non-current liabilities 1,273.4 1,299.1 1,197.3 1,221.5 – – 2,470.7 2,520.6 Net assets 6,395.7 5,645.3 3,548.4 3,500.5 10.0 10.0 9,954.1 9,155.8 Reconciliation to carrying amounts: Opening net assets 1 January 5,645.3 5,230.7 3,500.5 3,253.0 10.0 10.0 9,155.8 8,493.7 Profit for the year 715.1 684.1 164.7 400.6 – – 879.8 1,084.7 Issue of equity 284.6 – 28.6 7.2 – – 313.2 7.2 Distributions paid/payable (249.3) (269.5) (145.4) (160.3) – – (394.7) (429.8) Closing net assets 6,395.7 5,645.3 3,548.4 3,500.5 10.0 10.0 9,954.1 9,155.8 GPT’s share 1,524.0 1,408.6 1,013.7 1,008.2 10.0 10.0 2,547.7 2,426.8 Summarised statement of comprehensive income Revenue 465.7 500.3 325.0 294.9 – – 790.7 795.2 Profit for the year 715.1 684.1 164.7 400.6 – – 879.8 1,084.7 Total comprehensive income 715.1 684.1 164.7 400.6 – – 879.8 1,084.7 Distributions received/receivable from their associates 37.2 39.5 – – – – 37.2 39.5	83.0 68.1 34.5 51.8 10.0 10.0 127.5 129.9 7,734.5 7,032.8 4,809.3 4,799.6 – – 12,543.8 11,832.4 148.4 156.5 98.1 129.4 – – 246.5 285.9 1,273.4 1,299.1 1,197.3 1,221.5 – – 2,470.7 2,520.6
	6,395.7 5,645.3 3,548.4 3,500.5 10.0 10.0 9,954.1 9,155.8
	5,645.3 5,230.7 3,500.5 3,253.0 10.0 10.0 9,155.8 8,493.7 715.1 684.1 164.7 400.6 – – 879.8 1,084.7 284.6 – 28.6 7.2 – – 313.2 7.2 (249.3) (269.5) (145.4) (160.3) – – (394.7) (429.8)
	6,395.7 5,645.3 3,548.4 3,500.5 10.0 10.0 9,954.1 9,155.8
	1,524.0 1,408.6 1,013.7 1,008.2 10.0 10.0 2,547.7 2,426.8

1 The 31 December 2017 balance of investments in associates has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

4. Trade and other receivables

(a) Trade receivables

	31 Dec 18 $M 31 Dec 17 $M
Current assets Trade receivables1 Accrued income Related party receivables2 Less: impairment of trade receivables Total current trade receivables	15.9 10.6 12.6 17.4 25.1 21.3 (2.2) (0.9)
	51.4 48.4

1 This includes trade receivables relating to revenue from contracts with customers. Refer to note 24(b) for the methodology of apportionment between trade receivables relating to AASB 15 revenue and other trade receivables balances.

2 The related party receivables are on commercial terms and conditions.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

The following table shows the ageing analysis of GPT’s trade receivables.

Retail Office Logistics Corporate Less: impairment of trade receivables Total loans and receivables	31 Dec 18 0-30 days $M 31-60 days $M 61-90 days $M 90+ days $M Total $M 3.6 0.2 (0.1) 2.0 5.7 15.2 0.3 2.0 0.7 18.2 1.6 0.3 – – 1.9 27.1 0.2 0.2 0.3 27.8 – – – (2.2) (2.2) 47.5 1.0 2.1 0.8 51.4	31 Dec 17
		0-30 days $M 31-60 days $M 61-90 days $M 90+ days $M Total $M
		6.9 0.7 – 2.1 9.7 13.2 0.2 0.1 0.5 14.0 2.5 – – 0.1 2.6 23.0 – – – 23.0 – – – (0.9) (0.9)
		45.6 0.9 0.1 1.8 48.4

(b) Other receivables

(b) Other receivables
	31 Dec 18 $M 31 Dec 17 $M
Current assets Distributions receivable from associates Distributions receivable from joint ventures Other receivables Total current other receivables	26.7 26.3 13.7 12.9 12.1 8.3
	52.5 47.5

Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method less any allowance.

All loans and receivables with maturities greater than 12 months after the balance date are classified as non-current assets.

Refer to note 23(e) (iv) for the accounting policies for trade and other receivables and other information relating to the adoption of AASB 9 Financial Instruments .

5. Intangible assets

	Management rights $M IT development and software $M Total $M
Costs Balance as at 31 December 2016 Additions Disposals Transfer to other assets Balance as at 31 December 2017 Additions Balance as at 31 December 2018 Accumulated amortisation and impairment Balance as at 31 December 2016 Amortisation Impairment Disposals Balance as at 31 December 2017 Amortisation Balance as at 31 December 2018 Carrying amounts Balance as at 31 December 2017 Balance as at 31 December 2018	55.8 67.1 122.9 – 4.7 4.7 – (11.4) (11.4) – 2.8 2.8
	55.8 63.2 119.0 – 1.1 1.1
	55.8 64.3 120.1 (45.1) (42.5) (87.6) (0.3) (5.7) (6.0) – (5.9) (5.9) – 11.4 11.4
	(45.4) (42.7) (88.1) (0.1) (5.1) (5.2)
	(45.5) (47.8) (93.3) 10.4 20.5 30.9 10.3 16.5 26.8

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Management rights

Management rights include property management and development management rights. Rights are initially measured at cost and subsequently amortised over their useful life, which ranges from 5 to 10 years.

For the management rights of Highpoint Shopping Centre, management considers the useful life as indefinite as there is no fixed term included in the management agreement. Therefore, GPT tests for impairment at balance date. Assets are impaired if the carrying value exceeds their recoverable amount. The recoverable amount is determined using a multiples approach. A range of multiples from 10-15x have been used in the calculation.

IT development and software

Costs incurred in developing systems and acquiring software and licenses that will contribute future financial benefits are capitalised. These include external direct costs of materials and services and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straightline basis over the length of time over which the benefits are expected to be received, generally ranging from 3 to 10 years.

IT development and software are assessed for impairment at each reporting date by evaluating if any impairment triggers exist. Where impairment triggers exist, management calculate the recoverable amount. The asset will be impaired if the carrying value exceeds the recoverable amount. Critical judgements are made by GPT in setting appropriate impairment triggers and assumptions used to determine the recoverable amount.

6. Inventories

6. Inventories
	31 Dec 18 $M 31 Dec 17 $M
Development properties Current inventories Development properties Non-current inventories Total inventories	31.0 11.8
	31.0 11.8 113.3 140.4
	113.3 140.4
	144.3 152.2

Development properties held as inventory to be sold are stated at the lower of cost and net realisable value.

Cost

Cost includes the cost of acquisition, development, finance costs and all other costs directly related to specific projects including an allocation of direct overhead expenses. Post completion of the development, finance costs and other holding charges are expensed as incurred.

Net realisable value (NRV)

The NRV is the estimated selling price in the ordinary course of business less estimated costs to sell. At each reporting date, management reviews these estimates by taking into consideration:

the most reliable evidence; and
any events which confirm conditions existing at the year end and cause any fluctuations of selling price and costs to sell.

The amount of any write down is recognised as an impairment expense in the Consolidated Statement of Comprehensive Income. An impairment expense of $11.4 million has been recognised for the year ended 31 December 2018 (2017: Impairment expense reversal of $0.4 million).

7. Payables

7. Payables
	31 Dec 18 $M 31 Dec 17 $M
Trade payables and accruals GST payables Distribution payable to stapled securityholders Interest payable Levies payable Other payables Total payables	128.0 124.5 2.5 1.1 231.9 221.6 16.0 17.6 17.6 15.1 15.0 4.8
	411.0 384.7

Trade payables and accruals represent liabilities for goods and services provided to GPT prior to the end of the financial year which are unpaid. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

8. Provisions

8. Provisions
	31 Dec 18 $M 31 Dec 17 $M
Current provisions Employee benefits Other Total current provisions Non-current provisions Employee benefits Total non-current provisions	12.2 10.1 14.0 18.0
	26.2 28.1
	1.1 2.3
	1.1 2.3

Provisions are recognised when:

GPT has a present obligation (legal or constructive) as a result of a past event;
it is probable that resources will be expended to settle the obligation; and
a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the obligation.

Provision for employee benefits

The provision for employee benefits represents annual leave and long service leave entitlements accrued for employees. The employee benefit liability expected to be settled within twelve months after the end of the reporting period is recognised in current liabilities.

Employee benefits expenses in the Consolidated Statement of Comprehensive Income

	31	Dec 18	31 Dec 17
		$M	$M
Employee benefits expenses		115.6	114.5

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

9. Taxation

	31 Dec 18 $M 31 Dec 17 $M
(a) Income tax expense Current income tax expense 13.2 20.0 Deferred income tax credit (3.7) (9.7) Income tax expense in the Statement of Comprehensive Income 9.5 10.3 Income tax expense attributable to: Profit from continuing operations 9.5 10.3 Aggregate income tax expense 9.5 10.3 (b) Reconciliation of accounting profit to income tax expense and current tax (asset)/liability1 Net profit for the year excluding income tax expense 1,461.2 1,278.3 Less: Trust profit not subject to tax (1,488.4) (1,273.4) Profit which is subject to taxation (27.2) 4.9 Prima facie income tax at 30% tax rate (2017: 30%) (8.2) 1.5 Tax effect of amounts not deductible/assessable in calculating income tax expense: Adjustments for income tax for prior years – 0.2 Previously unrecognised tax losses – (0.4) Non-deductible revaluation items in the Company 22.5 10.0 Non-assessable income (5.3) (6.1) Other tax adjustments 0.5 5.1 Income tax expense 9.5 10.3 Add/(less) amounts to reconcile to current tax (asset)/liability: Temporary differences: Employee benefits 0.5 0.7 Provisions and accruals – (0.3) Dividends received – 9.1 Other deferred tax asset charged to income 2.7 1.9 Movement in reserves 0.5 (1.7) Opening balance: Tax losses transferred from deferred tax asset 8.6 (2.0) Tax adjustments: Movement in reserves (1.7) (2.5) Tax payments made to tax authorities (20.9) (6.9) Current tax (asset)/liability (0.8) 8.6 (c) Deferred tax assets Employee benefits 15.9 15.4 Provisions and accruals 2.9 2.9 Other 1.3 (1.4) Net deferred tax asset 20.1 16.9 Movement in temporary differences during the year Opening balance at beginning of the year 16.9 7.5 Credited to the Statement of Comprehensive Income 3.7 9.7 Movement in reserves (0.5) 1.7 Utilisation of tax losses – (2.0) Closing balance at end of the year 20.1 16.9	13.2 20.0 (3.7) (9.7)
	9.5 10.3
	9.5 10.3
	9.5 10.3
	(27.2) 4.9
	(8.2) 1.5 – 0.2 – (0.4) 22.5 10.0 (5.3) (6.1) 0.5 5.1
	9.5 10.3
	0.5 0.7 – (0.3) – 9.1 2.7 1.9 0.5 (1.7) 8.6 (2.0) (1.7) (2.5) (20.9) (6.9)
	(0.8) 8.6
	15.9 15.4 2.9 2.9 1.3 (1.4)
	20.1 16.9
	16.9 7.5 3.7 9.7 (0.5) 1.7 – (2.0)
	20.1 16.9

1 The 31 December 2017 accounting profit has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(d) Effective tax rate

Adoption of Voluntary Tax Transparency Code

The Board of Taxation has released a voluntary Tax Transparency Code (TTC). The TTC sets out a recommended set of principles and minimum standards regarding the disclosure of tax information for businesses. GPT is committed to the TTC. The non-IFRS income tax disclosures below and in note 9(b) include the recommended additional disclosures.

The Australian Accounting Standards Board have issued a Draft Appendix to the TTC outlining the method to calculate the effective tax rate as shown in the following table, using:

accounting profit before tax adjusted to exclude transactions which are not reflected in the calculation of income tax expense, including;
trust taxable income which is attributed in full to its securityholders; and
non tax related material items in the Company; and
tax expense adjusted to exclude carry forward tax losses that have been recognised and prior year under/overstatements.

	31 Dec 18 $M 31 Dec 171 $M
Net profit for the year before income tax expense Exclude: Trust profit not subject to tax Non-deductible revaluation items in the Company Amounts released from foreign currency translation reserve Equity accounted profits from joint ventures in the Company Distribution received from joint ventures taxable to the Company Profit used to calculate effective tax rate Income tax expense Exclude: Carry forward tax losses recognised Prior year (under)/overstatements Income tax expense used to calculate effective tax rate Effective tax rate	1,461.2 1,278.3 (1,488.4) (1,273.4) 75.1 34.1 (17.0) – (5.9) (6.2) 4.8 –
	29.8 32.8 9.5 10.3 – 0.4 – (0.2)
	9.5 10.5
	32% 32%

1 The 31 December 2017 Net profit for the year excluding income tax expense and Trust profit not subject to tax have been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

Trusts

Property investments are held by the Trust for the purposes of earning rental income. Under current tax legislation, the Trust is not liable for income tax provided the taxable income of the Trust including realised capital gains is attributed in full to its securityholders each financial year. Securityholders are subject to income tax at their own marginal tax rates on amounts attributable to them.

Company and other taxable entities

Income tax expense for the financial year is the tax payable on the current year’s taxable income. This is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and for unused tax losses.

Deferred income tax liabilities and assets – recognition

Deferred income tax liabilities are recognised for all taxable temporary differences.

Deferred income tax assets are recognised for all deductible temporary differences, carried forward unused tax assets and unused tax losses, to the extent it is probable that taxable profit will be available to utilise them. The carrying amount of deferred income tax assets is reviewed and reduced to the extent that it is no longer probable that sufficient taxable profit will be available.

Deferred income tax liabilities and assets – measurement

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

Deferred income tax is provided on temporary differences at the reporting date between accounting carrying amounts and the tax cost bases of assets and liabilities, other than for the following:

Where taxable temporary differences relate to investments in subsidiaries, associates and interests in joint ventures:
deferred tax liabilities are not recognised if the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
deferred tax assets are not recognised if it is not probable that the temporary differences will reverse in the foreseeable future and taxable profit will not be available to utilise the temporary differences.

Tax relating to equity items

Income taxes relating to items recognised directly in equity are recognised in equity and not in the Consolidated Statement of Comprehensive Income.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Capital structure

Capital is defined as the combination of securityholders’ equity, reserves and net debt (borrowings less cash). The Board is responsible for monitoring and approving the capital management framework within which management operates. The purpose of the framework is to safeguard GPT’s ability to continue as a going concern while optimising its debt and equity structure. GPT aims to maintain a capital structure which includes net gearing levels within a range of 25 to 35 per cent (based on net debt, less fair value adjustment on foreign bonds to total tangible assets, less cash and cross currency derivative assets) that is consistent with a stable investment grade credit rating in the “A category”.

At 31 December 2018, GPT is credit rated A (stable)/A2 (stable) by Standard and Poor’s (S&P) and Moody’s Investor Services (Moody’s) respectively. The ratings are important as they reflect the investment grade credit rating of GPT which allows access to global capital markets to fund its development pipeline and future acquisition investment opportunities. The stronger ratings improve both the availability of capital, in terms of amount and tenor, and reduce the cost at which it can be obtained.

GPT is able to vary the capital mix by:

issuing stapled securities;
buying back stapled securities;
activating the distribution reinvestment plan;
adjusting the amount of distributions paid to stapled securityholders;
selling assets to reduce borrowings; or
increasing borrowings.

10. Equity and reserves

(a) Contributed equity

	Number Trust $M Other entities stapled to the Trust $M Total $M
Ordinary stapled securities Opening securities on issue at 1 January 2017 Securities issued – Long Term Incentive Plan Securities issued – Deferred Short Term Incentive Plan Securities issued – Broad Based Employee Security Ownership Plan Securities issued – Employee Incentive Plan Closing securities on issue and contributed equity at 31 December 2017 Opening securities on issue at 1 January 2018 Securities issued – Long Term Incentive Plan Securities issued – Deferred Short Term Incentive Plan Securities issued – Broad Based Employee Security Ownership Plan Closing securities on issue and contributed equity at 31 December 2018	1,797,955,568 7,804.3 325.5 8,129.8 2,763,052 6.0 0.1 6.1 855,355 4.2 0.1 4.3 54,338 0.2 – 0.2 12,569 0.1 – 0.1
	1,801,640,882 7,814.8 325.7 8,140.5
	1,801,640,882 7,814.8 325.7 8,140.5 2,332,026 6.6 0.1 6.7 875,344 4.1 0.1 4.2 42,174 0.2 – 0.2
	1,804,890,426 7,825.7 325.9 8,151.6

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

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(b) Reserves

	Foreign currency translation reserve Cash flow hedge reserve Cost of hedging reserve Employee incentive scheme reserve Available for sale reserve Total reserve
	Trust $M Other entities stapled to GPT $M Trust $M Other entities stapled to GPT $M Trust $M Other entities stapled to GPT $M Trust $M Other entities stapled to GPT $M Trust $M Other entities stapled to GPT $M Trust $M Other entities stapled to GPT $M
Balance at 1 January 2017 Revaluation of available for sale financial asset, net of tax Derecognition of available for sale financial asset, net of tax Movement in hedging reserve Movement in fair value of cash flow hedges Security-based payment transactions, net of tax Balance at 31 December 2017 Balance at 1 January 2018 Net foreign exchange translation adjustments Movement in hedging reserve Movement in fair value of cash flow hedges Security-based payment transactions, net of tax Balance at 31 December 2018	(26.4) 35.1 (7.8) – 3.0 – – 17.3 – 7.1 (31.2) 59.5 – – – – – – – – – 1.0 – 1.0 – – – – – – – – – (8.1) – (8.1) – – – – (2.5) – – – – – (2.5) – – – (6.9) – – – – – – – (6.9) – – – – – – – – 4.6 – – – 4.6
	(26.4) 35.1 (14.7) – 0.5 – – 21.9 – – (40.6) 57.0
	(26.4) 35.1 (14.7) – 0.5 – – 21.9 – – (40.6) 57.0 – (16.8) – – – – – – – – – (16.8) – – – – 10.9 – – – – – 10.9 – – – (3.8) – – – – – – – (3.8) – – – – – – – – (2.3) – – – (2.3)
	(26.4) 18.3 (18.5) – 11.4 – – 19.6 – – (33.5) 37.9

Nature and purpose of reserves

Foreign currency translation reserve

The reserve is used to record exchange differences arising on translation of foreign controlled entities and associated funding of foreign controlled entities. The movement in the reserve is recognised in the net profit when the investment in the foreign controlled entity is disposed.

Cash flow hedge reserve

The reserve records the portion of the unrealised gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge relationship inclusive of share of cash flow hedge reserve of equity accounted investments.

Cost of hedging reserve

The reserve records the changes in the fair value of the currency basis spread that is part of cross currency swaps used to hedge foreign denominated borrowings, but is excluded from the hedge designations. This reserve is inclusive of share of cost of hedging reserve of equity accounted investments. Refer to note 23(e)(iv) for further details.

Employee incentive scheme reserve

The reserve is used to recognise the fair value of equity-settled security based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 18 for further details of the security based payments.

Available for sale reserve

The reserve is used to recognise the changes in the fair value of the available for sale financial assets.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(c) Retained earnings/accumulated losses

Note	Trust $M Other entities stapled to GPT $M Total $M
Consolidated entity Balance at 1 January 2017 Net profit for the financial year Less: Distributions paid/payable to ordinary stapled securityholders 12 Reclassification of employee incentive security scheme reserve to retained earnings/accumulated losses Balance at 31 December 20171 Balance at 1 January 2018 Net profit for the financial year Less: Distributions paid/payable to ordinary stapled securityholders 12 Reclassification of employee incentive security scheme reserve to retained earnings/accumulated losses Balance at 31 December 2018	1,022.8 (898.7) 124.1 1,248.2 19.8 1,268.0 (443.2) – (443.2) 0.6 (0.5) 0.1
	1,828.4 (879.4) 949.0
	1,828.4 (879.4) 949.0 1,417.7 34.0 1,451.7 (459.5) – (459.5) 3.4 – 3.4
	2,790.0 (845.4) 1,944.6

1 The 31 December 2017 retained earnings/accumulated losses balance has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

11. Earnings per stapled security

	31 Dec 18 Cents	31 Dec 18 Cents 31 Dec 17 Cents 31 Dec 17 Cents	31 Dec 18 Cents 31 Dec 17 Cents 31 Dec 17 Cents
(a) Attributable to ordinary securityholders of the Trust Basic Basic and diluted earnings per security – profit from continuing operations 77.7 Basic and diluted earnings per security – profit from discontinued operations 0.9 Total basic and diluted earnings per security attributable to ordinary securityholders of the Trust 78.6 (b) Attributable to ordinary stapled securityholders of the GPT Group Basic and diluted earnings per security – profit from continuing operations 79.5 Basic and diluted earnings per security – profit from discontinued operations 0.9 Total basic and diluted earnings per security attributable to stapled securityholders of The GPT Group 80.4 The earnings and weighted average number of ordinary securities (WANOS) used in the calculations of basic stapled security are as follows: (c) Reconciliation of earnings used in calculating earnings per ordinary stapled security $M Net profit from continuing operations attributable to the securityholders of the Trust 1,401.3 Net profit from discontinued operations attributable to the securityholders of the Trust 16.4 Basic and diluted earnings of the Trust 1,417.7 Add: Net profit from continuing operations attributable to the securityholders of other stapled entities 34.0 Basic and diluted earnings of the Company 34.0 Basic and diluted earnings of The GPT Group 1,451.7 (d) WANOS Millions WANOS used as the denominator in calculating basic earnings per ordinary stapled security 1,804.4 Performance security rights at weighted average basis1 WANOS used as the denominator in calculating diluted earnings per ordinary stapled security	Basic 77.7 0.9	Diluted Basic Diluted 77.5 69.3 69.2 0.9 – –
	78.6	78.4 69.3 69.2
	79.5 0.9	79.4 70.4 70.3 0.9 – –
	80.4	80.3 70.4 70.3
		and diluted earnings per ordinary $M $M $M
	1,401.3 16.4	1,401.3 1,247.4 16.4 0.8	1,247.4 0.8
	1,417.7 34.0	1,417.7 1,248.2 34.0 19.8	1,248.2 19.8
	34.0	34.0 19.8	19.8
	1,451.7	1,451.7 1,268.0	1,268.0
	Millions	Millions Millions	Millions
	1,804.4	1,804.4 1,801.1 2.7 1,807.1	1,801.1 2.4
			1,803.5

1 Performance security rights granted under the employee incentive schemes are only included in dilutive earnings per ordinary stapled security where the performance hurdles are met as at the year end.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Calculation of earnings per stapled security

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

12. Distributions paid and payable

Distributions are paid to GPT stapled securityholders half yearly.

	Cents per stapled security Total amount $M
Distributions paid/payable 2018 6 month period ended 30 June 2018 6 month period ended 31 December 20181 Total distributions paid/payable for the year 2017 6 month period ended 30 June 2017 6 month period ended 31 December 2017 Total distributions paid/payable for the year	12.61 227.6 12.85 231.9
	25.46 459.5
	12.30 221.6 12.30 221.6
	24.60 443.2

1 The December 2018 half yearly distribution of 12.85 cents per stapled security has been declared on 19 December 2018 and is expected to be paid on 28 February 2019 based on the record date of 31 December 2018.

13. Borrowings

13. Borrowings
	31 Dec 18 $M 31 Dec 17 $M
Current borrowings at amortised cost – unsecured Current borrowings at amortised cost – secured Current borrowings Non-current borrowings at amortised cost – unsecured Non-current borrowings at fair value through profit and loss – unsecured1 Non-current borrowings at amortised cost – secured Non-current borrowings Total borrowings2 – carrying amount Total borrowings3 – fair value	427.5 – 88.5 19.9
	516.0 19.9
	2,101.4 1,911.9 1,484.9 1,280.5 12.6 88.3
	3,598.9 3,280.7
	4,114.9 3,300.6
	4,170.0 3,347.8

1 Cumulative fair value adjustments are shown in the table on the next page.

2 Including unamortised establishment costs, fair value and other adjustments.

3 For the majority of the borrowings, the carrying amount is a reasonable approximation of fair value. Where material difference arises, the fair value is calculated using market observable inputs (level 2) and unobservable inputs (level 3). This excludes unamortised establishment costs.

All borrowings with maturities greater than 12 months after reporting date are classified as non-current liabilities.

When the terms of a financial liability are modified, AASB 9 Financial Instruments requires an entity to perform an assessment to determine whether the modified terms are substantially different from the existing financial liability. Where a modification is substantial, it will be accounted for as an extinguishment of the original financial liability and a recognition of a new financial liability. Where the modification does not result in extinguishment, the difference between the existing carrying amount of the financial liability and the modified cash flows discounted at the original effective interest rate is recognised in the Statement of Comprehensive Income as gain/loss on modification of financial liability. GPT management have assessed the modification of terms requirements within AASB 9 Financial Instruments and have concluded that these will not have a material impact for the Group.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

The following table outlines the cumulative amount of fair value hedge adjustments that are included in the carrying amount of borrowings in the statement of financial position.

of borrowings in the statement of financial position.
	31 Dec 18 $M 31 Dec 17 $M
Nominal amount Unamortised borrowing costs Amortised cost Cumulative fair value hedge adjustments Carrying amount	1,221.8 1,131.8 (4.3) (2.5)
	1,217.5 1,129.3 267.4 151.2
	1,484.9 1,280.5

The maturity profile of borrowings as at 31 December 2018 is as follows:

The maturity profile of borrowings as at 31 December 2018 is as follows:
	Total facility1,2,3 $M Used facility1 $M	Unused facility2,3 $M
Due within one year Due between one and five years Due after five years Cash and cash equivalents Total financing resources available at the end of the year Less: commercial paper4 Total financing resources available at the end of the year	516.0 516.0 2,692.0 1,513.7 1,796.8 1,796.8	– 1,178.3 –
	5,004.8 3,826.5	1,178.3 58.7
		1,237.0 (177.5)
		1,059.5

1 Excluding unamortised establishment costs, and fair value and other adjustments. This reflects the contractual cashflows payable on maturity of the borrowings taking into account historical exchange rates under cross currency swaps entered into to hedge the foreign currency denominated borrowings.

2 Drawings on GPT’s uncommitted commercial paper program are in addition to GPT’s committed facilities and are classified as current borrowings. These drawings may be refinanced by non-current unsecured undrawn bank loan facilities.
3 Including $200 million of forward starting facilities available to GPT.
4 GPT’s commercial paper program is an uncommitted line with a maturity period of generally three months or less and is therefore excluded from available liquidity.

Cash and cash equivalents includes cash on hand, cash at bank and short term money market deposits.

Debt covenants

GPT’s borrowings are subject to a range of covenants, according to the specific purpose and nature of the loans. Most bank facilities include one or more of the following covenants:

Gearing: total debt must not exceed 50 per cent of total tangible assets; and
Interest coverage: the ratio of earnings before interest and taxes (EBIT) to finance costs is not to be less than 2 times.

A breach of these covenants may trigger consequences ranging from rectifying and/or repricing to repayment of outstanding amounts. GPT performed a review of debt covenants as at 31 December 2018 and no breaches were identified.

14. Financial risk management

The GPT Board approve GPT’s treasury policy which:

establishes a framework for the management of risks inherent to the capital structure;
defines the role of GPT’s treasury; and
sets out the policies, limits, monitoring and reporting requirements for cash, borrowings, liquidity, credit risk, foreign exchange, interest rate and other derivative instruments.

(a) Derivatives

GPT enters into derivative transactions to manage exposure to market risks and volatility of financial outcomes that arise as part of normal business operations. GPT’s treasury policy requires hedging 100% of its foreign currency exposure in respect to foreign currency borrowings and therefore applies a hedge ratio of 1:1. GPT’s policy is for the critical terms of the cross currency swaps to align with the hedged item. GPT determines the existence of an economic relationship between the hedging instrument and the hedged item based on notional amounts, currency, reference interest rates, tenors, maturities and timing of cashflows. GPT assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cashflows of the hedged item using the hypothetical derivative method.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

In these hedge relationships, the main sources of ineffectiveness are:

the effect of the counterparty and GPT’s own credit risk on the fair value of the swaps, which is not reflected in the fair value of the hedged item; and
changes in swap rates will impact the fair value of the Australian dollar margin and implied foreign currency margin respectively.

In order to qualify for hedge accounting, prospective hedge effectiveness testing must meet all of the following criteria:

an economic relationship exists between the hedged item and hedging instrument;
the effect of credit risk does not dominate the value changes resulting from the economic relationship; and
the hedge ratio is the same as that resulting from actual amounts of hedged items and hedging instruments for risk management.

Derivatives are carried in the Consolidated Statement of Financial Position at fair value and classified according to their contractual maturities. If they do not qualify for hedge accounting, changes in fair value are recognised in the Consolidated Statement of Comprehensive Income including gains or losses on maturity or close-out. Where derivatives qualify for hedge accounting and are designated in hedge relationships, the recognition of any gain or loss depends on the nature of the item being hedged. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. For cash flow hedges, the effective portion of changes in the fair value of derivatives is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

GPT applies hedge accounting to borrowings denominated in foreign currencies only. Foreign exchange risk arising from borrowings denominated in foreign currency is managed with cross currency interest rate swaps which convert foreign currency exposures into Australian dollar exposures. GPT designates and documents the relationship between hedging instruments and hedged items and the proposed effectiveness of the risk management objective the hedge relationship addresses. On an ongoing basis, GPT documents its assessment of prospective hedge effectiveness. Foreign currency basis spreads have been excluded from GPT’s designated fair value and cash flow hedge relationships.

Hedge accounting is discontinued when the hedging instrument expires, is terminated, or is no longer in an effective hedge relationship.

The following table shows the carrying amount and nominal amount of each component of borrowings and derivative financial instruments categorised by hedge type.

			31 Dec 17
	Nominal amount $M	Nominal amount $M	Net Assets $M Net Liabilities1 $M Movement $M
Borrowings by hedge designation Fair value hedges Derivatives by hedge designation Fair value hedges Cash flow hedges	(1,221.8) 1,221.8 1,221.8	(1,131.8) 1,131.8 1,131.8	– (1,283.0) (340.2) 17.4 (14.9) (2.0) 140.0 (0.2) (70.2)
			157.4 (15.1) (72.2)

1 Excludes unamortised establishment costs.

The following table shows the nominal amount of derivatives designated in cash flow and fair value hedge relationships in time bands based on the maturity of the derivatives.

	31 Dec 18 0 to 12 months $M 1 to 5 years $M Over 5 years $M Total $M – – 1,221.8 1,221.8 – – 3.7% N/A	31 Dec 17
		0 to 12 months $M 1 to 5 years $M Over 5 years $M Total $M
Cross currency interest rate swaps Nominal amount Average receive fixed interest rate		– – 1,131.8 1,131.8 – – 3.7% N/A

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(i) Fair value hedges

All changes in the fair value of the underlying item relating to the hedged risk (movements in benchmark interest rates) are recognised in the income statement together with the changes in the fair value of derivatives. The net difference is recorded in the income statement as ineffectiveness. The carrying value of borrowings in effective fair value hedge relationships is adjusted for gains or losses attributable to the risk(s) being hedged.

The following table shows the gain/(loss) recognised in net impact of foreign currency borrowings and associated hedging loss in the Consolidated Statement of Comprehensive Income related to hedge ineffectiveness from fair value hedges.

	31 Dec 18 Gain/(loss) $M 31 Dec 17 Gain/(loss) $M
Change in value of hedged item used to measure ineffectiveness Change in value of hedging instrument to measure ineffectiveness Net gain/(loss) from ineffectiveness	(116.1) 63.2 114.6 (63.4)
	(1.5) (0.2)

(ii) Cash flow hedges

The portion of the gain or loss on the hedging instrument that is effective (offsets the movement on the hedged item attributable to interest rates and foreign exchange movements) is recognised directly in the cash flow hedge reserve in equity and any ineffective portion is recognised as net impact of foreign currency borrowings and associated hedging loss directly in the income statement.

No hedge relationships have been discontinued during the year. Therefore there is no balance in the cash flow hedge reserve from any hedge relationship for which hedge accounting is no longer applied. There were no amounts transferred from the cash flow hedge reserve to profit or loss during the year (2017: $nil).

During the current and prior financial years, there was no material impact on profit or loss resulting from ineffectiveness of cash flow hedges.

(b) Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. GPT’s primary interest rate risk arises from borrowings. The following table provides a summary of GPT’s gross interest rate risk exposure as at 31 December 2018 on interest bearing borrowings as well as the net effect of interest rate risk management transactions. This excludes unamortised establishment costs and fair value and other adjustments.

	Gross exposure Net exposure
	31 Dec 18 $M 31 Dec 17 $M 31 Dec 18 $M 31 Dec 17 $M
Fixed rate interest-bearing borrowings Floating rate interest-bearing borrowings	2,346.8 2,056.8 3,190.0 2,370.0 1,479.7 1,065.5 636.5 752.3
	3,826.5 3,122.3 3,826.5 3,122.3

Interest rate risk – sensitivity analysis

The impact on interest expense and interest revenue of a 1 per cent increase or decrease in market interest rates is shown below. Interest expense is sensitive to movements in market interest rates on floating rate debt (net of any derivatives).

A 1 per cent increase or decrease is used for consistency of reporting interest rate risk across GPT and represents management’s assessment of the potential change in interest rates.

	31 Dec 18	31 Dec 18	31 Dec 17	31 Dec 17
	(+1%)	(-1%)	(+1%)	(-1%)
	$M	$M	$M	$M
Impact on statement of comprehensive income
Impact on interest revenue increase/(decrease)	0.6	(0.6)	0.5	(0.5)
Impact on interest expense (increase)/decrease	(6.4)	6.4	(7.5)	7.5

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Hedging interest rate risk

Interest rate risk inherent on borrowings issued at floating rates is managed by entering into interest rate swaps that are used to convert a portion of floating interest rate borrowings to fixed interest rates, which reduces GPT’s exposure to interest rate volatility.

The derivative financial instruments used to hedge interest rate risk which are presented in the Consolidated Statement of Financial Position comprise the following:

Financial Position comprise the following:
	31 Dec 18 $M 31 Dec 17 $M
Current derivative assets Non-current derivative assets Total derivative assets Subject to master netting but not offset Net derivative assets post offset Current derivative liabilities Non-current derivative liabilities Total derivative liabilities Subject to master netting but not offset Net derivative liabilities post offset	1.5 3.4 338.9 257.7
	340.4 261.1 108.2 95.9
	232.2 165.2
	4.0 9.1 120.2 118.0
	124.2 127.1 108.2 95.9
	16.0 31.2

All of GPT’s derivatives were valued using market observable inputs (level 2) with the exception of a year on year inflation swap as at 31 December 2017. For additional fair value disclosures refer to note 22.

Derivative financial assets and liabilities are not offset in the Consolidated Statement of Financial Position. Agreements with derivative counterparties are based on the ISDA (International Swap Derivatives Association) Master Agreement, which in certain circumstances (such as default) confers a right to set-off the position owing/receivable to a single counterparty to a net position as long as all outstanding derivatives with that counterparty are terminated. As GPT does not presently have a legally enforceable right to set-off, these amounts have not been offset in the Consolidated Statement of Financial Position, but have been presented separately.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(c) Liquidity risk

Liquidity risk is the risk that GPT, as a result of its operations:

will not have sufficient funds to settle a transaction on the due date;
will be forced to sell financial assets at a value which is less than what they are worth; or
may be unable to settle or recover a financial asset at all.

GPT manages liquidity risk by:

maintaining sufficient cash;
maintaining an adequate amount of committed credit facilities;
maintaining a minimum liquidity buffer in cash and surplus committed facilities for the forward rolling twelve month period;
minimising debt maturity concentration risk by diversifying sources and spreading maturity dates of committed credit facilities and maintaining a minimum weighted average debt maturity of 4 years; and
maintaining the ability to close out market positions.

The following table provides an analysis of the undiscounted contractual maturities of liabilities which forms part of GPT’s assessment of liquidity risk:

assessment of liquidity risk:
			31 Dec 18					31 Dec 17
		Over 1	Over 2				Over 1		Over 2
	1 year	year to	years to	Over 5		1 year	year to		years to	Over 5
	or less	2 years	5 years	years	Total	or less	2 years		5 years	years	Total
	$M	$M	$M	$M	$M	$M	$M		$M	$M	$M
Liabilities
Non-derivatives
Payables	411.0	–	–	–	411.0	384.7	–		–	–	384.7
Current tax liabilities	–	–	–	–	–	8.6	–		–	–	8.6
Borrowings	516.0	312.7	1,201.0	1,796.8	3,826.5	20.0	513.5		982.0	1,606.8	3,122.3
Projected finance cost on borrowings1	136.3	132.2	299.4	392.3	960.2	128.2	114.2		279.1	433.6	955.1
Derivatives
Projected finance cost on derivative liabilities1,2	23.3	22.2	54.6	11.5	111.6	23.8	21.7		36.5	6.8	88.8
Total liabilities	1,086.6	467.1	1,555.0	2,200.6	5,309.3	565.3	649.4		1,297.6	2,047.2	4,559.5
Less cash and cash equivalents	58.7	–	–	–	58.7	49.9	–		–	–	49.9
Total liquidity exposure	1,027.9	467.1	1,555.0	2,200.6	5,250.6	515.4	649.4		1,297.6	2,047.2	4,509.6
Projected interest income on derivative assets2	19.9	12.5	16.2	33.1	81.7	34.3	31.6		59.5	64.4	189.8
Net liquidity exposure	1,008.0	454.6	1,538.8	2,167.5	5,168.9	481.1	617.8		1,238.1	1,982.8	4,319.8

1 Projection is based on the likely outcome of contracts given the interest rates, margins, forecast exchange rates and interest rate forward curves as at 31 December 2018 and 31 December 2017 up until the contractual maturity of the contract. The projection is based on future non-discounted cash flows and does not ascribe any value to optionality on any instrument which may be included in the current market values. Projected interest on foreign currency borrowings is shown after the impact of associated hedging.

2 In accordance with AASB 7, the future value of contractual cash flows of non-derivative and derivative liabilities only is to be included in liquidity risk disclosures. As derivatives are exchanges of cash flows, the positive cash flows from derivative assets have been disclosed separately to provide a more meaningful analysis of GPT’s net liquidity exposure. The methodology used in calculating projected interest income on derivative assets is consistent with the above liquidity risk disclosures.

(d) Refinancing risk

Refinancing risk is the risk that credit is unavailable or available at unfavourable interest rates and credit market conditions resulting in an unacceptable increase in GPT’s interest cost. Refinancing risk arises when GPT is required to obtain debt to fund existing and new debt positions. GPT manages this risk by spreading sources, counterparties and maturities of borrowings in order to minimise debt concentration risk, allow averaging of credit margins over time and reducing refinance amounts.

As at 31 December 2018, GPT’s exposure to refinancing risk can be monitored by the spreading of its contractual maturities on borrowings in the liquidity risk table above or with the information in note 13.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(e) Foreign exchange risk

Foreign exchange risk refers to the risk that the value of a financial commitment, asset or liability will fluctuate due to changes in foreign exchange rates. GPT’s foreign exchange risk arises primarily from:

firm commitments of highly probable forecast transactions for receipts and payments settled in foreign currencies or with prices dependent on foreign currencies; and
investments in foreign assets.

The foreign exchange risk arising from borrowings denominated in foreign currency is managed with cross currency interest rate swaps which convert foreign currency exposures into Australian dollar exposures. Sensitivity to foreign exchange is deemed insignificant.

Foreign currency assets and liabilities

The following table shows the Australian dollar equivalents of amounts within the Consolidated Statement of Financial Position which are denominated in foreign currencies.

	Euros 31 Dec 18 $M 31 Dec 17 $M – 1.2 – – – 1.2 – 0.3 – – – 0.3	United States Dollars 31 Dec 18 $M 31 Dec 17 $M – 0.1 211.0 118.2 211.0 118.3 – – 1,182.2 1,096.1 1,182.2 1,096.1	Hong Kong Dollars
			31 Dec 18 $M 31 Dec 17 $M
Assets Cash and cash equivalents Derivative financial instruments Liabilities Other liabilities Borrowings1			– – 53.6 24.1
			53.6 24.1
			– – 307.0 186.9
			307.0 186.9

1 Excluding unamortised establishment costs

(f) Credit risk

Credit risk is the risk that a contracting entity will not complete its obligations under a contractual agreement, resulting in a financial loss to GPT. GPT has exposure to credit risk on all financial assets included on the Consolidated Statement of Financial Position.

GPT manages this risk by:

establishing credit limits for financial institutions and monitoring credit exposures for customers to ensure that GPT only trades and invests with approved counterparties;
investing and transacting derivatives with multiple counterparties that have a minimum long term credit rating of A- from S&P, or equivalent if an S&P rating is not available, minimising exposure to any one counterparty;
providing loans into joint ventures, associates and third parties, only where GPT is comfortable with the underlying property exposure within that entity;
regularly monitoring loans and receivables balances;
regularly monitoring the performance of its associates, joint ventures and third parties; and
obtaining collateral as security (where appropriate).

Receivables are reviewed regularly throughout the year. A provision for doubtful debts is recognised at an amount equal to lifetime ECL. Refer to 23(e)(iv) for the calculation of lifetime ECL. GPT’s policy is to hold collateral as security over tenants via bank guarantees (or less frequently collateral such as bond deposits or cash).

The maximum exposure to credit risk as at 31 December 2018 is the carrying amounts of financial assets recognised on GPT’s Consolidated Statement of Financial Position. For more information refer to note 4.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Other disclosure items

15. Cash flow information

(a) Cash flows from operating activities

Reconciliation of net profit after tax to net cash inflows from operating activities:

31 Dec 18
$M
31 Dec 171
$M

Net profit for the year
Fair value gain on investment properties
Fair value loss on derivatives
Net impact of foreign currency borrowings and associated hedging loss
Gain on financial liability at amortised cost
Impairment expense
Share of after tax profit of equity accounted investments (net of distributions)
Profit on disposal of assets
Decrecognition of available for sale financial asset
Depreciation and amortisation
Non-cash employee benefits – security based payments
Non-cash revenue adjustments
Interest capitalised
Profit on sale of inventories
Proceeds from sale of inventories
Payment for inventories
(Increase)/decrease in operating assets
(Decrease)/increase in operating liabilities
Net foreign exchange loss/(gain)
Other
Net cash inflows from operating activities

1,451.7
1,268.0
(637.2)
(481.0)
40.0
5.7
1.5
0.2
(2.4)
(2.2)
11.3
5.4
(335.2)
(283.9)
(18.3)
–
–
(10.7)
7.2
7.7
10.7
13.2
24.1
8.5
(13.7)
(8.6)
(1.7)
(1.5)
28.9
7.6
(21.4)
(25.1)
(12.0)
21.3
(6.0)
5.6
0.5
(0.8)
6.0
6.1

534.0
535.5

1 The 31 December 2017 cash flow reconciliation has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

(b) Net debt reconciliation

Reconciliation of net debt movements during the financial year:

	Cash $M Borrowings due within 1 year $M Borrowings due after 1 year $M Total $M
Net debt as at 1 January 2017 Cash flows Foreign exchange adjustments Other non-cash movements Net debt as at 31 December 2017 Net debt as at 1 January 2018 Cash flows Foreign exchange adjustments Other non-cash movements Net debt as at 31 December 2018	56.3 (48.8) (2,947.8) (2,940.3) (6.4) 28.8 (396.0) (373.6) – – 63.2 63.2 – 0.1 (0.1) –
	49.9 (19.9) (3,280.7) (3,250.7)
	49.9 (19.9) (3,280.7) (3,250.7) 8.8 (157.5) (540.2) (688.9) – – (116.1) (116.1) – (338.6) 338.1 (0.5)
	58.7 (516.0) (3,598.9) (4,056.2)

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

16. Commitments

(a) Capital expenditure commitments

Commitments arising from contracts principally relating to the purchase and development of investment properties contracted for at balance date but not recognised on the Consolidated Statement of Financial Position.

	31 Dec 18 $M 31 Dec 17 $M
Retail Office Logistics Properties under development Corporate Total capital expenditure commitments	52.7 101.2 44.9 23.1 14.6 6.1 177.7 48.3 4.9 1.4
	294.8 180.1

(b) Operating lease commitments

Operating lease commitments are contracted non-cancellable future minimum lease payments expected to be payable but not recognised on the Consolidated Statement of Financial Position.

not recognised on the Consolidated Statement of Financial Position.
	31 Dec 18 $M 31 Dec 17 $M
Due within one year Due between one and five years Over five years Total operating lease commitments	5.7 3.2 18.0 6.2 14.3 –
	38.0 9.4

(c) Commitments relating to equity accounted investments

GPT’s share of equity accounted investments’ commitments at balance date are set out below:

	31 Dec 18 $M 31 Dec 17 $M
Capital expenditure Total joint ventures and associates’ commitments	108.2 31.8
	108.2 31.8

17. Contingent liabilities

A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may exist regarding the outcome of future events.

As at the end of 2018, GPT has no material contingent liabilities which need to be disclosed.

18. Security based payments

GPT currently has four employee security schemes – the General Employee Security Ownership Plan (GESOP), the Broad Based Employee Security Ownership Plan (BBESOP), the Deferred Short Term Incentive Plan (DSTI) and the Long Term Incentive (LTI) Scheme.

(a) GESOP

The Board believes in creating ways for employees to build an ownership stake in the business. As a result, the Board introduced the GESOP in March 2010 for individuals who do not participate in the LTI.

Under the plan individuals who participate receive an additional benefit equivalent to 10 per cent of their short term incentives (STIC) which is (after the deduction of income tax) invested in GPT securities to be held for a minimum of 1 year.

(b) BBESOP

Under the plan individuals who are not eligible to participate in any other employee security scheme may receive $1,000 worth of GPT securities or $1,000 cash if GPT achieves at least target level performance. Securities must be held for the earlier of 3 years or the end of employment.

(c) DSTI

Since 2014, STIC is delivered to the senior executives as 50 per cent in cash and 50 per cent in GPT stapled securities (a deferred component). The deferred component is initially awarded in the form of performance rights, with the rights converting to restricted GPT stapled securities to the extent the performance conditions are met. For the 2014 and 2015 plans, half of the awarded stapled securities will vest one year after conversion with the remaining half vesting two years after conversion, subject to continued employment up to the vesting dates. For the 2016 and any subsequent plans, all the awarded stapled securities will vest one year after conversion, subject to continued employment up to the vesting date.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(d) LTI

At the 2009 AGM, GPT securityholders approved the introduction of a LTI plan based on performance rights. Any subsequent amendments to the LTI plan have been approved by GPT securityholders.

The LTI plan covers each 3 year period. Awards under the LTI to eligible participants are in the form of performance rights which convert to GPT stapled securities for nil consideration if specified performance conditions for the applicable 3 year period are satisfied. Please refer to the Remuneration Report for detail on the performance conditions.

The Board determines those executives eligible to participate in the plan and, for each participating executive, grants a number of performance rights calculated as a percentage of their base salary divided by GPT’s volume weighted average price (VWAP) for the final quarter of the year preceding the plan launch.

Fair value of performance rights issued under DSTI and LTI

The fair value of the performance rights is recognised as an employee benefit expense with a corresponding increase in the employee security scheme reserve in equity. Fair value is measured at grant date, recognised over the period during which the employees become unconditionally entitled to the rights and is adjusted to reflect market vesting conditions. Non-market vesting conditions are included in assumptions about the number of rights that are expected to be vested. At each reporting date, GPT 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 the revision to original estimates, if any, is recognised in the Consolidated Statement of Comprehensive Income with a corresponding adjustment to equity.

Fair value of the performance rights issued under LTI is determined using the Monte Carlo simulation and the Black Scholes methodologies. Fair value of the performance rights issued under DSTI is determined using the security price. The following key inputs are taken into account:

key inputs are taken into account:
	2018 LTI	2018 DSTI
Fair value of rights	$2.62	$5.34
Security price at valuation date	$4.74	$5.34
Total Securityholder Return	7.0%	N/A
Grant dates	29 March 2018	29 March 2018
Expected vesting dates	31 December 2020	31 December 2019
Security price at the grant date	$4.74	$4.74
Expected life	3 years (2 years remaining)	2 years (1 year remaining)
Distribution yield	5.4%	4.8%
Risk free interest rate	2.1%	N/A
Volatilty1	18.0%	N/A

1 The volatility is based on the historic volatility of the security.

(e) Summary table of all employee security schemes

(e) Summary table of all employee security schemes
	Number of rights
	DSTI LTI Total
Rights outstanding at 1 January 2017 Rights granted during 2017 Rights forfeited during 2017 Rights converted to GPT stapled securities during 20171 Rights outstanding at 31 December 2017 Rights outstanding at 1 January 2018 Rights granted during 2018 Rights forfeited during 2018 Rights converted to GPT stapled securities during 20182 Rights outstanding at 31 December 2018	1,212,639 8,607,534 9,820,173 1,338,498 2,854,675 4,193,173 (357,284) (323,771) (681,055) (855,355) (2,792,225) (3,647,580)
	1,338,498 8,346,213 9,684,711
	1,338,498 8,346,213 9,684,711 1,308,548 2,712,482 4,021,030 (550,030) (879,580) (1,429,610) (875,344) (2,332,026) (3,207,370)
	1,221,672 7,847,089 9,068,761

1 Rights under the 2016 DSTI plan were converted to GPT stapled securities on 20 March 2017 and rights under the 2014 LTI Plan were converted to GPT stapled securities on 14 February 2017.

2 Rights under the 2017 DSTI plan were converted to GPT stapled securities on 19 March 2018 and rights under the 2015 LTI Plan were converted to GPT stapled securities on 13 February 2018.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

	Number of stapled securities GESOP BBESOP Total
Securities outstanding at 1 January 2017 Securities granted during 2017 Securities vested during 2017 Securities outstanding at 31 December 2017 Securities outstanding at 1 January 2018 Securities granted during 2018 Securities vested during 2018 Securities outstanding at 31 December 2018	60,756 92,761 153,517 53,982 48,480 102,462 (60,756) (17,688) (78,444)
	53,982 123,553 177,535
	53,982 123,553 177,535 62,609 37,488 100,097 (53,982) (46,277) (100,259)
	62,609 114,764 177,373

19. Related party transactions

General Property Trust is the ultimate parent entity.

Equity interests in joint ventures and associates are set out in note 3. Loans provided to joint ventures and associates as part of the funding of those arrangements are set out in note 4.

Key management personnel

Key management personnel compensation was as follows:

	31 Dec 18 $’000 31 Dec 17 $’000
Short term employee benefits Post employment benefits Long term incentive award accrual Total key management personnel compensation	6,943.4 6,778.9 178.3 168.3 2,050.4 2,064.3
	9,172.1 9,011.5

Information regarding individual Directors’ and Senior Executives’ remuneration is provided in the Remuneration Report.

There have been no other transactions with key management personnel during the year.

Transactions with related parties

	31 Dec 18	31 Dec 17
	$’000	$’000
Transactions with related parties other than associates and joint ventures
Expenses
Contributions to superannuation funds on behalf of employees	(6,172.5)	(5,704.0)
Transactions with associates and joint ventures
Revenue and expenses
Responsible Entity fees from associates	58,233.0	50,744.1
Property management fees	17,654.2	15,660.8
Development management fees from associates	5,196.5	6,963.9
Rent expense	1,406.0	(597.3)
Management fees from associates	6,356.4	6,441.7
Distributions received/receivable from joint ventures	58,183.6	48,783.5
Distributions received/receivable from associates	104,331.3	110,030.9
Payroll costs recharged to associates	9,519.9	9,396.8
Other transactions
Loans (advanced to)/repaid from joint ventures	1,839.1	146.0
Increase in units in joint ventures	(10,926.9)	(17,915.2)
Increase in units in associates	–	(139,818.3)

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

20. Auditor’s remuneration

	31 Dec 18 $’000 31 Dec 17 $’000
Audit services PricewaterhouseCoopers Australia Statutory audit and review of financial reports Total remuneration for audit services Other assurance services PricewaterhouseCoopers Australia Regulatory and contractually required audits Total remuneration for other assurance services Total remuneration for audit and assurance services Non-audit related services PricewaterhouseCoopers Australia Other services Taxation services Total remuneration for non audit related services Total auditor’s remuneration	1,266.2 1,245.2
	1,266.2 1,245.2
	197.7 208.5
	197.7 208.5
	1,463.9 1,453.7
	170.3 58.0 – 3.5
	170.3 61.5
	1,634.2 1,515.2

21. Parent entity financial information

	Parent entity
	31 Dec 18 $M 31 Dec 171 $M
Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Equity attributable to secutityholders of the parent entity Contributed equity Reserves Retained earnings Total equity Profit attributable to members of the parent entity Total comprehensive income for the year, net of tax, attributable to members of the parent entity Capital expenditure commitments Retail Office Logistics Properties under development Total capital expenditure commitments	102.3 148.2 15,431.9 12,964.2
	15,534.2 13,112.4
	313.1 383.8 4,533.2 3,424.6
	4,846.3 3,808.4
	10,687.9 9,304.0
	7,849.1 7,833.9 (5.9) (13.5) 2,844.7 1,483.6
	10,687.9 9,304.0
	1,815.9 1,258.3 1,815.9 1,258.3 32.7 92.4 32.4 11.8 3.9 3.9 177.7 48.3
	246.7 156.4

1 The 31 December 2017 parent entity information has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Inter-co loan receivables are considered to be low risk, and therefore the impairment provision is determined as 12 months expected credit losses. Applying the expected credit risk model does not result in any loss allowance being recognised in 2018.

The parent entity had a deficiency of current net assets of $210.8 million (2017: $235.6 million) arising as a result of the inclusion of the provision for distribution payable to stapled securityholders. The parent has access to cash and undrawn financing facilities of $1,059.5 million as set out in note 13.

22. Fair value disclosures

The most significant categories of assets for which fair values are used are investment properties and financial instruments. Information about how those values are calculated, including the valuation process, critical assumptions underlying the valuations, information on sensitivity and other information required by the accounting standards, is provided in this note.

(i) Fair value measurement, valuation techniques and inputs

A description of the valuation techniques and key inputs are included in the following table:

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Unobservable Unobservable
Class of Fair value Valuation Inputs used to inputs inputs
assets/liabilities hierarchy [1] technique measure fair value 31 Dec 2018 31 Dec 2017
Retail Level 3 Discounted 10 year average specialty market 3.1% – 3.6% 3.0% – 3.7%
cash flow (DCF) rental growth
and income
Gross market rent (per sqm p.a.) $1,279 – $2,306 $1,280 – $2,252
capitalisation
method Adopted capitalisation rate 4.1% – 5.5% 4.3% – 5.5%
Adopted terminal yield 4.4% – 5.8% 4.5% – 5.8%
Adopted discount rate 6.3% – 7.0% 6.3% – 7.3%
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	and income capitalisation method Gross market rent (per sqm p.a.) $1,279 – $2,306 $1,280 – $2,252 Adopted capitalisation rate 4.1% – 5.5% 4.3% – 5.5% Adopted terminal yield 4.4% – 5.8% 4.5% – 5.8% Adopted discount rate 6.3% – 7.0% 6.3% – 7.3%
Office	Level 3 DCF and income capitalisation method Net market rent (per sqm p.a.) $410 – $1,605 $420 – $1,450 10 year average market rental growth 3.1% – 4.2% 3.1% – 4.0% Adopted capitalisation rate 4.6% – 5.5% 5.0% – 5.5% Adopted terminal yield 5.0% – 5.8% 5.3% – 5.8% Adopted discount rate 6.4% – 6.8% 6.6% – 7.0% Lease incentives (gross) 17.5% – 35.0% 23.3% – 35.0%
Logistics	Level 3 DCF and income capitalisation method Net market rent (per sqm p.a.) $56 – $490 $68 – $385 10 year average market rental growth 2.8% – 3.1% 2.8% – 3.4% Adopted capitalisation rate 5.25% – 7.25% 5.5% – 8.0% Adopted terminal yield 5.50% – 7.50% 6.0% – 8.3% Adopted discount rate 6.75% – 7.75% 7.0% – 8.5% Lease incentives (gross) 10.0% – 25.0% 10.0% – 25.0%
Properties under development	Level 3 Income capitalisation method, or land rate Net market rent (per sqm p.a.) $118 – $635 $115 – $410 Adopted capitalisation rate 5.1% – 5.5% 5.8% – 6.8% Land rate (per sqm) $1,122 – $25,425 $122 – $945
Derivative financial instruments	Level 2 DCF (adjusted for counterparty credit worthiness) Interest rates Not applicable – all inputs are market observable inputs Basis CPI Volatility Foreign exchange rates
	Level 3 Interest rates Not applicable – market observable input CPI volatility N/A 0.91%
Foreign currency borrowings	Level 2 DCF Interest rates Not applicable – all inputs are market observable inputs Foreign exchange rates

1 Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

DCF method	Under the DCF method, the fair value is estimated using explicit assumptions regarding the benefits and
	liabilities of ownership over the assets’ or liabilities’ life including an exit or terminal value. The DCF method
	involves the projection of a series of cash flows from the assets or liabilities. To this projected cash flow series,
	an appropriate, market-derived discount rate is applied to establish the present value of the cash flow stream
	associated with the assets or liabilities.
Income capitalisation	This method involves assessing the total net market income receivable from the property and capitalising this in
method	perpetuity to derive a capital value, with allowances for capital expenditure and reversions.
Gross market rent	A gross market rent is the estimated amount of rent for which a property or space within a property should lease
	between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper
	marketing and wherein the parties have each acted knowledgeably, prudently and without compulsion. The gross
	market rent is all inclusive and takes into account outgoings and potential turnover rent.
Net market rent	A net market rent is the estimated amount for which a property or space within a property should lease between a
	willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing
	and wherein the parties have each acted knowledgeably, prudently and without compulsion. In a net rent, the owner
	recovers outgoings from the tenant on a pro-rata basis (where applicable).
10 year average	An average of a 10 year period of forecast annual percentage growth rates in Retail specialty tenancy rents. Specialty
specialty market rental growth	tenants are those tenancies with a gross lettable area of less than 400 square metres (excludes ATMs and kiosks).
10 year average market rental growth	The expected annual rate of change in market rent over a 10 year forecast period.
Adopted capitalisation	The rate at which net market income is capitalised to determine the value of a property. The rate is determined with
rate	regards to market evidence and the prior external valuation.
Adopted terminal yield	The capitalisation rate used to convert income into an indication of the anticipated value of the property at the end
	of the holding period when carrying out a discounted cash flow calculation. The rate is determined with regards to
	market evidence and the prior external valuation.
Adopted discount rate	The rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Theoretically
	it should reflect the opportunity cost of capital, that is, the rate of return the capital can earn if put to other uses having
	similar risk. The rate is determined with regards to market evidence and the prior external valuation.
Land rate (per sqm)	The land rate is the market land value per sqm.
Lease incentives	A lease incentive is often provided to a lessee upon the commencement of a lease. Incentives can be a combination of,
	or, one of the following: a rent free period, a fit-out contribution, a cash contribution or rental abatement.
Counterparty credit	Credit value adjustments are applied to derivatives assets based on that counterparty’s credit risk using the
worthiness	observable credit default swaps curve as a benchmark for credit risk.
	Debit value adjustments are applied to derivatives liabilities based on GPT’s credit risk using GPT’s credit default
	swaps curve as a benchmark for credit risk.

(ii) Valuation process – investment properties

GPT manages the semi-annual valuation process to ensure that investment properties are held at fair value in GPT’s accounts and that GPT is compliant with applicable regulations (for example the Corporations Act 2001 and ASIC regulations), the GPT RE Constitution and Compliance Plan.

GPT has a Valuation Committee (committee) which is comprised of the Chief Operating Officer, Chief Financial Officer, Head of Funds Management and Head of Capital Transactions.

The purpose of the committee is to:

approve the panel of independent valuers;
review valuation inputs and assumptions;
provide an escalation process where there are differences of opinion from various team members responsible for the valuation;
oversee the finalisation of the valuations; and
review the external valuation sign-off and any comments that have been noted.

All external valuations and internal tolerance checks are reviewed by the valuation committee prior to these being presented to the Board for approval.

External valuations

GPT’s external valuations are performed by independent professionally qualified valuers who hold recognised relevant professional qualifications and have specialised expertise in the investment properties being valued. Selected independent valuation firms form part of a panel approved by the committee. Each valuation firm is limited to undertaking consecutive valuations of a property for a maximum period of two years.

The Valuation Policy requires an external valuation at least annually for all completed investment properties. Properties under development with value of $100 million or greater are externally valued at least every six months. Unimproved land is externally valued at least every three years.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Internal tolerance checks

Every six months, with the exception of properties externally valued, an internal tolerance check is prepared. The internal tolerance check involves the preparation of a DCF and income capitalisation valuation for each investment property. These are produced using a capitalisation rate, terminal yield and discount rates based on comparable market evidence and recent external valuation parameters. The tolerance measurement will typically be a mid-point of these two approaches.

These internal tolerance checks are used to determine whether the book value is in line with the fair value or whether an external valuation is required.

The valuation of the properties under development is determined by a development feasibility analysis for each parcel of land within each asset. The development feasibility is prepared on an “as if complete” basis and is a combination of the income capitalisation method and where appropriate, the discounted cash flow method. The cost to complete the development includes development costs, finance costs and an appropriate profit and risk margin. These costs are deducted from the “as if complete” valuation to determine the “as is” basis or “current fair value.”

Fair value of vacant land parcels is based on the market land value per square metre.

Highest and best use

Fair value for investment properties is calculated for the highest and best use whether or not current use reflects highest and best use. For all GPT investment properties current use equates to the highest and best use, with the exception of Sydney Olympic Park Town Centre.

The masterplan for Sydney Olympic Park provides long term opportunities for the Town Centre to significantly increase the floor space developed within the precinct, subject to development and planning approvals. The assets are currently leased and any future redevelopment is also subject to the expiration of these leases.

(iii) Sensitivity information – investment properties

	Fair value measurement sensitivity to	Fair value measurement sensitivity to
Significant inputs	significant increase in input	significant decrease in input
Net market rent
10 year average specialty market rental growth	Increase	Decrease
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield	Decrease	Increase
Adopted discount rate
Lease incentives

Generally, if the assumption made for the adopted capitalisation rate changes, the adopted terminal yield will change in the same direction. The adopted capitalisation rate forms part of the income capitalisation approach and the adopted terminal yield forms part of the discounted cash flow approach. The mid-point of the two valuations is then typically adopted.

Discounted cash flow approach

When assessing a discounted cash flow, the adopted discount rate and adopted terminal yield have a strong interrelationship because the discount rate will determine the rate at which the terminal value is discounted to the present value. In theory, an increase (softening) in the adopted discount rate and a decrease (tightening) in the adopted terminal yield could potentially offset the impact on fair value, and vice versa. If both the discount rate and terminal yield moved in the same direction, the impact on fair value would be magnified.

Income capitalisation approach

When calculating income capitalisation, the net market rent has a strong interrelationship with the adopted capitalisation rate. This is because the methodology involves assessing the total net market income receivable from the property and capitalising this in perpetuity to derive a capital value. In theory, an increase in the net market rent and an increase (softening) in the adopted capitalisation rate could potentially offset the impact to the fair value, and vice versa. If the net market rent increases but the capitalisation rate goes down (or vice versa), this may magnify the impact on fair value.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(iv) Financial instruments

The following table presents the changes in level 3 instruments for recurring fair value measurements. GPT’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

	Financial assets at fair value through profit and loss $M Derivative liabilities $M Total $M
Opening balance 1 January 2017 Fair value movements in profit or loss Transfers from level 3 to level 2 Closing balance 31 December 2017 Opening balance 1 January 2018 Fair value movements in profit or loss Closing balance 31 December 2018	9.3 (12.3) (3.0) – 7.2 7.2 (9.3) – (9.3)
	– (5.1) (5.1) – (5.1) (5.1) – 5.1 5.1
	– – –

Sensitivities

The following table summarises the impact from the change of significant inputs on GPT’s profit and on equity for the year.

	31 Dec 18	31 Dec 17
Change of significant input	$M	$M
Fair value of level 3 derivatives 1% increase in interest rates – gain 1% decrease in interest rates – loss	– – –	(5.1) 1.4 (1.5)

23. Accounting policies

(a) Basis of preparation

The financial report has been prepared:

in accordance with the requirements of the Trust’s Constitution, Corporations Act 2001, Australian Accounting Standards (AAS) and other authoritative pronouncements of the Australian Accounting Standards Board and International Financial Reporting Standards;
on a going concern basis in the belief that GPT will realise its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial statements. The net deficiency of current assets over current liabilities at 31 December 2018 of $725.7 million arises as a result of the inclusion of the provision for distribution payable to stapled securityholders and an increase in current borrowings. GPT has access to cash and undrawn financing facilities of $1,059.5 million as set out in note 13;
under the historical cost convention, as modified by the revaluation for financial assets and liabilities and investment properties at fair value through the Consolidated Statement of Comprehensive Income;
using consistent accounting policies with adjustments to bring into line any dissimilar accounting policies being adopted by the controlled entities, associates or joint ventures; and
in Australian dollars with all values rounded in the nearest hundred thousand dollars in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, unless otherwise stated.

In accordance with Australian Accounting Standards, the stapled entity reflects the consolidated entity. Equity attributable to other stapled entities is a form of non-controlling interest and, in the consolidated entity column, represents the contributed equity of the Company.

Comparatives in the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and notes to the financial statements have been restated to the current year presentation. There was no effect on the profit for the year.

As a result of the stapling, investors in GPT will receive payments from each component of the stapled security comprising distributions from the Trust and dividends from the Company.

The financial report was approved by the Board of Directors on 11 February 2019.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(b) Basis of consolidation

Controlled entities

The consolidated financial statements of GPT report the assets, liabilities and results of all controlled entities for the financial year.

Controlled entities are all entities over which GPT has control. GPT 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 to direct the activities of the entity.

Controlled entities are consolidated from the date on which control is obtained to the date on which control is disposed. The acquisition of controlled entities is accounted for using the acquisition method of accounting. All intercompany balances and transactions, income and expenses and profits and losses resulting from intra-group transactions have been eliminated.

Associates

Associates are entities over which GPT has significant influence but not control, generally accompanying a shareholding of between 10% and 50% of the voting rights. Management considered if GPT controls its associates (GPT Wholesale Shopping Centre Fund and GPT Wholesale Office Fund) and concluded that it does not based on the following considerations.

GPT has a 23.83 per cent equity interest in GPT Wholesale Office Fund (GWOF) and 28.57 per cent equity interest in GPT Wholesale Shopping Centre Fund (GWSCF) as at 31 December 2018. GPT Funds Management Limited (GPTFM), which is wholly owned by the GPT Group is the Responsible Entity (RE) of the Funds. The Board of GPT FM comprises six Directors, of which GPT can only appoint two. As a result, the Group has significant influence over GPT FM and accordingly accounts for it as an associate using the equity method. The Group also has significant influence over the Funds’ and accounts for its interests in them using the equity method.

Investments in associates are accounted for using the equity method. Under this method, GPT’s investment in associates is carried in the Consolidated Statement of Financial Position at cost plus post acquisition changes in GPT’s share of net assets. GPT’s share of the associates’ result is reflected in the Consolidated Statement of Comprehensive Income. Where GPT’s share of losses in associates equals or exceeds its interest in the associate, including any other unsecured long term receivables, GPT does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the associate.

Joint arrangements

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

Joint operations

GPT has significant co-ownership interests in a number of properties through unincorporated joint ventures. These interests are held directly and jointly as tenants in common. GPT recognises its direct share of jointly held assets, liabilities, revenues and expenses in the consolidated financial statements under the appropriate headings. The investment properties that are directly owned as tenants in common are disclosed in note 2.

Joint ventures

Investments in joint ventures are accounted for in the Consolidated Statement of Financial Position using the equity method which is the same method adopted for associates.

(c) Other accounting policies

Significant accounting policies that summarise the recognition and measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements.

Other accounting policies include:

(i) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the GPT entities are measured using the currency of the primary economic environment in which they operate (‘the functional currency’).

Transactions and balances

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

Foreign operations

Non-monetary items that are measured in terms of historical cost are converted using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences of non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss.

Exchange differences arising on monetary items that form part of the net investment in a foreign operation are taken against a foreign currency translation reserve on consolidation.

Where forward foreign exchange contracts are entered into to cover any anticipated excesses of revenue less expenses within foreign joint ventures, they are converted at the ruling rates of exchange at the reporting period. The resulting foreign exchange gains and losses are taken to the Consolidated Statement of Comprehensive Income.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(ii) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST (or equivalent tax in overseas locations) except where the GST incurred on purchase of goods and services is not recoverable from the tax authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. Receivables and payables are stated inclusive of the amount of GST. The net amount of GST receivable from, or payable to, the taxation authority is included with other receivables or payables in the Consolidated Statement of Financial Position.

Cash flows are presented on a gross basis in the Statement of Cash Flows. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(d) New and amended accounting standards and interpretations adopted from 1 January 2018

GPT has adopted AASB 9 and AASB 15 at 1 January 2018. AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities. AASB 15 contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time.

There have been no significant changes to GPT’s financial performance and position as a result of the adoption of the new and amended accounting standards and interpretations effective for annual reporting periods beginning on or after 1 January 2018, with the exception of the adoption of AASB 9. The impact of AASB 9 is a $1.1 million reduction in the value of equity accounted investments and retained earnings in equity. Refer to note 24(a). There has been no financial impact as a result of adopting AASB 15 and new disclosures have been included where required.

(e) Changes in accounting policies

AASB 9 Financial Instruments

The requirements of AASB 9 represent a significant change from AASB 139 Financial Instruments: Recognition and Measurement . The nature and effects of the key changes to GPT’s accounting policies resulting from the adoption of AASB 9 are summarised below.

(i) Classification and measurement of financial assets and financial liabilities

On 1 January 2018 (the date of initial application of AASB 9), GPT’s management has assessed which business models apply to the financial assets held by the group and has classified its financial instruments into the appropriate AASB 9 categories. The adoption of AASB 9 has not impacted the carrying value of financial assets but has resulted in classification changes on initial application at 1 January 2018 which is shown in the following table:

			Original carrying amount	New carrying amount
			under AASB 139	under AASB 9
	Original classification under	New classification under	31 Dec 17	31 Dec 17
	AASB 139	AASB 9	$M	$M
Financial Assets
Trade receivables	Loans and receivables	Financial assets at	48.4	48.4
		amortised cost
Other receivables	Loans and receivables	Financial assets at	47.5	47.5
		amortised cost
Other assets	Loans and receivables	Financial assets at	23.0	23.0
		amortised cost
Available for sale	Available for sale	Financial assets at fair	–	–
financial asset	financial asset	value through profit
		and loss

Loans and receivables are classified and measured at amortised cost. GPT holds these financial assets in order to collect the contractual cash flows, and the contractual terms are solely payments of outstanding principal and interest on the principal amount outstanding. Available for sale financial assets are classified and measured at fair value through profit and loss.

AASB 9 requires that all financial liabilities be subsequently classified at amortised cost, except in certain circumstances. None of these circumstances apply to GPT and accordingly there is no change to the classification of GPT’s payables and borrowings on adoption of AASB 9.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(ii) Impairment of financial assets

AASB 9 replaces the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at fair value through other comprehensive income (FVOCI), but not to investments in equity instruments. Under AASB 9, credit losses are recognised earlier than under AASB 139. GPT has assessed the impact of the adoption of an ECL model under AASB 9 and an adjustment to the opening balance has been recognised (see note 24(a)).

(iii) Derivatives and hedge accounting

On 1 January 2018 (the date of initial application of AASB 9), GPT has elected to adopt the new general hedge accounting model in AASB 9. There has been no impact with the adoption of AASB 9 on GPT’s derivatives and hedge accounting. GPT’s risk management strategies and hedge documentation are aligned with the requirements of AASB 9 and therefore hedging relationships are treated as continuing.

(iv) Accounting policies

Policy applicable from 1 January 2018

AASB 9 contains three principal classification categories for financial assets:

measured at amortised cost;
fair value through other comprehensive income (FVOCI); and
fair value through profit and loss (FVTPL).

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

Financial assets at amortised cost

Loans and receivables

Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method less any allowance under the ECL model.

All loans and receivables with maturities greater than 12 months after the balance date are classified as noncurrent assets.

Recoverability of receivables

At each reporting date, GPT assesses whether financial assets carried at amortised cost are ‘credit-impaired’. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

GPT recognises loss allowances at an amount equal to lifetime ECL on trade and other receivables. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of the trade receivable and are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to GPT in accordance with the contract and the cash flows that GPT expects to receive). A default on trade receivables is when the counterparty fails to make contractual payments

when they fall due and management determines that collection of the debt should no longer be pursued.

GPT analyses the age of outstanding receivable balances and applies historical default percentages adjusted for other current observable data as a means to estimate lifetime ECL. Other current observable data may include:

forecasts of economic conditions such as unemployment, interest rates, gross domestic product and inflation;
financial difficulties of a counterparty or probability that a counterparty will enter bankruptcy; and
conditions specific to the asset to which the receivable relates.

Debts that are known to be uncollectable are written off when identified.

Derivatives and hedge accounting

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. For cash flow hedges, the effective portion of changes in the fair value of derivatives is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

When cross currency interest rate swaps are used to hedge the market risks of borrowings denominated in foreign currencies, GPT does not designate the currency basis spread as part of the hedging instrument within the hedge relationship.

Currency basis spread is a liquidity premium that is charged for exchanging different currencies, and changes over time impacting the fair value of cross currency swaps. The changes in the fair value of currency basis spread are recognised in other comprehensive income in the hedging reserve in equity. Until 31 December 2017, GPT recognised these changes in the cash flow hedge reserve.

(v) Transition

Changes in accounting policies resulting from the adoption of AASB 9 have been applied retrospectively.

The impact on GPT’s previously reported financial position at 31 December 2017, as a result of the adoption AASB 9 and its application retrospectively, is detailed in note 24(a).

AASB 15 Revenue from Contracts with Customers

The requirements of AASB 15 replace AASB 118 Revenue and AASB 111 Construction Contracts . AASB 15 is based on the principle that revenue is recognised when control of a good or service is transferred to a customer. It contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. It applies to all contracts with customers except leases, financial instruments and insurance contracts. It requires reporting entities to provide users of financial statements with more informative and relevant disclosures.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

(vi) Classification and measurement of revenue

Revenue is recognised over time if:

the customer simultaneously receives and consumes the benefits as the entity performs;
the customer controls the asset as the entity creates or enhances it; or
the seller’s performance does not create an asset for which the seller has an alternative use and there is a right to payment for performance to date.

Where the above criteria is not met, revenue is recognised at a point in time.

The following table summarises the changes in terminology with respect to the timing of revenue recognition between AASB 111 and AASB 118 compared to AASB 15 and the new revenue recognition policies under AASB 15. From GPT’s assessment of when performance obligations are satisfied, there is no change in the timing of revenue recognition when comparing the previous accounting policies to those now under AASB 15.

		Revenue recognition	Revenue recognition
		policy under AASB 111,	policy under
Type of revenue	Description	AASB 17 and AASB 118	AASB 15
Recoveries revenue	The Group recovers the costs associated with general building	Recognised on an	Over time
	and tenancy operation from lessees in accordance with specific	accruals basis based on
	clauses within lease agreements. These are invoiced monthly	the contract terms
	based on an annual estimate. The consideration for the current
	month is due on the first day of the month. Revenue is recognised
	as the estimated costs are consumed by the tenant. Should any
	adjustment be required based on actual costs incurred, this is
	recognised in the statement of financial performance within the
	same reporting period and billed annually.
Recharge revenue	The Group recovers costs for any additional specific services	Revenue recognised	Over time
	requested by the lessee under the lease agreement. These costs	when costs are incurred
	are recovered in accordance with specific clauses within the
	lease agreements. Revenue from recharges is recognised as the
	services are provided. The lessee is invoiced on a monthly basis,
	where applicable. The consideration for the current month is due
	on the first day of the month.
Fund management	The Company provides fund management services to GPT	Recognised on an	Over time
fees	Wholesale Office Fund (GWOF) and GPT Wholesale Shopping	accruals basis based on
	Centre Fund (GWSCF) (the Funds) in accordance with the Funds	the contract terms.
	constitutions. The services are utilised on an ongoing basis and
	revenue is calculated and recognised in accordance with the
	relevant constitution. The fees are invoiced on a quarterly basis
	and consideration is payable within 21 days of the quarter end.
Fee income – property	The Company provides property management services to the	Recognised on an	Over time
management fees	owners of property assets in accordance with property services	accruals basis based on
	agreements. The services are utilised on an ongoing basis and	the contract terms.
	revenue is calculated and recognised in accordance with the
	specific agreement. The fees are invoiced monthly with variable
	payment terms depending on the individual agreements.
	Should an adjustment, as calculated in accordance with the
	property services agreement be required, this is recognised
	in the statement of financial performance within the same
	reporting period.
Fee income – property	Under some property management agreements, the Company	Recognised on an	Over time
management leasing	provides a lease management service to the owners. These	accruals basis based on
fees – over time	services are delivered on an ongoing basis and revenue is	the contract terms.
	recognised monthly, calculated in accordance with the property
	management agreement. The fees are invoiced monthly with
	variable payment terms depending on the individual agreements.
Fee income – property	Under some property management agreements, the Company	Recognised in the period	Point in time
management leasing	provides a lease management service to the owners. The revenue	in which the services are
fees – point in time	is recognised when the specific service is delivered (e.g. on lease	rendered.
	execution) and consideration is due 30 days from invoice date.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

Type of revenue Description	Revenue recognition policy under AASB 111, AASB 17 and AASB 118 Revenue recognition policy under AASB 15
Development management fees The Company provides development management services to the owners of property assets in accordance with development management agreements. Revenue is calculated and recognised in accordance with the specific agreement. The fees are invoiced on a monthly basis, in arrears, and consideration is due 30 days from invoice date.	If the agreement includes an hourly fee, the revenue is recognised in the period in which the services are rendered. Over time
	If the agreement includes a fixed price, the revenue is recognised in proportion to the value of the works as a percentage of the total project cost delivered until the completion of the associated development works. Over time
Development revenue The Company provides development management services to the owners of property assets in accordance with development management agreements. Revenue is calculated in accordance with the specific agreement and invoiced in accordance with the contract terms. Consideration is due from the customer based on the specific terms agreed in the contract and is recognised when the Company has control of the benefit.	Recognised in the period in which the services are rendered. Point in time
Sale of inventory Proceeds from the sale of inventory are recognised by the Company in accordance with a specific contract entered into with another party for the delivery of inventory. Revenue is calculated in accordance with the contract. Consideration is payable in accordance with the contract. Revenue is recognised when control has been transferred to the buyer.	When significant risk and rewards are transferred. Point in time

(vii) Transition

Changes in accounting policies resulting from the adoption of AASB 15 have been applied retrospectively. There has been no impact on GPT’s previously reported financial position as a result of the adoption AASB 15.

(f) New accounting standards and interpretations issued but not yet adopted

The following standards and amendments to standards are relevant to GPT.

Reference	Description	Application of Standard
AASB 16_Leases_	AASB 16 sets out the principles for the recognition, measurement, presentation	1 January 2019
	and disclosure of leases. It will change the way lessees account for leases by
	eliminating the current dual accounting model which distinguishes between
	on-balance sheet finance leases and off-balance sheet operating leases. Instead,
	there will be a single, on-balance sheet accounting model that is similar to the
	current finance lease accounting. Where GPT is the lessee, this new treatment will
	result in recognition of a right of use asset along with the associated lease liability
	in the Consolidated Statement of Financial Position and both a depreciation and
	interest charge in the Consolidated Statement of Comprehensive Income. In
	contrast, lessor accounting for lease income is not expected to change with the
	adoption of the new standard other than the separation of service income from
	lease income for disclosure purposes as a result of the adoption of AASB 15.
	The new leasing model requires the recognition of operating leases on the
	Consolidated Statement of Financial Position. In relation to these operating
	leases, if GPT had adopted the new standard from 1 January 2018, management
	estimates that net profit before tax for the year ended 31 December 2018
	would increase by approximately $0.1 million. Assets at 31 December 2018
	would increase by approximately $18.9 million and liabilities would increase by
	approximately $19.9 million.
	In addition, lease liabilities arising from leasehold arrangements which are
	currently recognised as a component of Investment Properties will be separately
	disclosed in the Statement of Financial Position.

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

24. Adoption of new accounting standards

(a) AASB 9 Financial Instruments – impact of adoption

As set out in note 23, GPT has adopted AASB 9. The impact on GPT’s 31 December 2018 Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Changes in Equity as a result of applying AASB 9 retrospectively is as follows:

result of applying AASB 9 retrospectively is as follows:
	31 Dec 17 Prior year $M Decrease $M 31 Dec 17 Restated $M
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Extract)
Other income Share of after tax profit of equity accounted investments Total other income Total revenue and other income Profit before income tax expense Profit after income tax expense Net profit for the year Total comprehensive income for the year Total comprehensive income for the year from continuing operations Net profit attributable to: - Securityholders of the Trust Total comprehensive income attributable to: - Securityholders of the Trust CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Extract)	443.9 (1.1) 442.8 939.1 (1.1) 938.0 1,645.7 (1.1) 1,644.6
	1,278.6 (1.1) 1,277.5 1,268.3 (1.1) 1,267.2 1,269.1 (1.1) 1,268.0
	1,252.6 (1.1) 1,251.5
	1,251.8 (1.1) 1,250.7 1,249.3 (1.1) 1,248.2 1,239.9 (1.1) 1,238.8
ASSETS Non-current assets Equity accounted investments Total non-current assets Total assets EQUITY Securityholders of the Trust (parent entity) Retained earnings Total equity of the Trust securityholders Total equity	3,562.9 (1.1) 3,561.8 12,767.4 (1.1) 12,766.3 12,958.4 (1.1) 12,957.3
	1,829.5 (1.1) 1,828.4 9,603.7 (1.1) 9,602.6 9,107.0 (1.1) 9,105.9

Annual Financial Report of The GPT Group

Notes to the Financial Statements – Year ended 31 December 2018

	General Property Trust Consolidated
	Retained earnings $M Total equity $M Total equity $M
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Extract)
Year ended 31 Dec 2017 Equity attributable to Securityholders Profit for the year Decrease Profit for the year – restated Total comprehensive income for the year Decrease Total comprehensive income for the year – restated Equity attributable to Securityholders at 31 Dec 2017 Decrease Equity attributable to Securityholders at 31 Dec 2017 – restated	1,249.3 1,249.3 1,269.1 (1.1) (1.1) (1.1)
	1,248.2 1,248.2 1,268.0 1,249.3 1,239.9 1,252.6 (1.1) (1.1) (1.1)
	1,248.2 1,238.8 1,251.5
	1,829.5 9,603.7 9,107.0 (1.1) (1.1) (1.1)
	1,828.4 9,602.6 9,105.9

(b) AASB 15 Revenue from Contracts with Customers – impact of adoption

As set out in note 23, GPT has adopted AASB 15. There have been no changes to GPT’s financial performance and position as a result of the adoption of this standard.

Lease Revenue

Lease Revenue
	31 Dec 18	Total $M 550.3 124.3 76.6 751.2 (76.5) (46.1) 5.5 634.1	31 Dec 17
	Retail $M Office $M Logistics $M		Retail $M Office $M Logistics $M	Total $M
Segment Result Lease revenue Recoveries and recharge revenue Share of rent from investment properties in equity accounted investments Less: Share of rent from investment properties in equity accounted investments Amortisation of lease incentives and costs Straightlining of leases Consolidated Statement of Comprehensive Income Rent from investment properties	286.7 145.7 117.9 81.9 32.9 9.5 1.9 74.7 -		279.0 136.5 105.1 79.3 30.3 7.4 1.8 72.4 -	520.6 117.0 74.2
	370.5 253.3 127.4		360.1 239.2 112.5	711.8 (74.0) (38.9) 11.7
				610.6

Rent from investment properties

Rent from investment properties is recognised and measured in accordance with AASB 16 Leases . In addition to revenue generated directly from the lease, rent from investment properties includes non-lease revenue earned from tenants, predominantly in relation to recovery of asset operating costs, which is recognised and measured under AASB 15 Revenue from Contracts with Customers . Details on the classification and measurement of this non-lease revenue is disclosed in note 23(e)(iv).

25. Events subsequent to reporting date

Other than the above, the Directors are not aware of any matter or circumstance occurring since 31 December 2018 that has significantly or may significantly affect the operations of GPT, the results of those operations or the state of affairs of GPT in subsequent financial years.

Annual Financial Report of The GPT Group

Directors’ Declaration

Year ended 31 December 2018

In the Directors of the Responsible Entity’s opinion:

(a) The consolidated financial statements and notes set out on pages 24 to 70 are in accordance with the Corporations Act 2001, including:
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
giving a true and fair view of GPT’s financial position as at 31 December 2018 and of its performance for the financial year ended on that date; and
(b) the consolidated financial statements and notes comply with International Financial Reporting Standards as disclosed in note 23 to the financial statements.
(c) There are reasonable grounds to believe that GPT will be able to pay its debts as and when they become due and payable. The net deficiency of current assets over current liabilities at 31 December 2018 of $725.7 million arises as a result of the inclusion of the provision for distribution payable to stapled securityholders and an increase in current borrowings. GPT has access to cash and undrawn financing facilities of $1,059.5 million as set out in note 13 to the financial statements.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as required by Section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

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Vickki McFadden Chairman

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Bob Johnston Chief Executive Officer and Managing Director

GPT RE Limited Sydney 11 February 2019

Annual Financial Report of The GPT Group

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Independent auditor’s report

To the stapled security holders of The GPT Group

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of General Property Trust (GPT) (the Registered Scheme) and its controlled entities (together, the Group or The GPT Group) is in accordance with the Corporations Act 2001 , including:

(a) giving a true and fair view of the Group's financial position as at 31 December 2018 and of its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

What we have audited

The Group financial report comprises:

the consolidated statement of financial position as at 31 December 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report.

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

Independence

We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

PricewaterhouseCoopers, ABN 52 780 433 757

One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

Annual Financial Report of The GPT Group

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Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates.

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	*Materiality*		*Audit scope*		*Key audit matters*
●	For the purpose of our audit	●	The structure of the Group is	●	Amongst other relevant
	we used overall Group		commonly referred to as a		topics, we communicated the
	materiality of $28.7 million,		'stapled group'. In a stapled		following key audit matters to
	which represents		group, the securities of two or		the Audit Committee:
●	approximately 5% of the Group’s Funds from Operations (FFO). We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the		more entities are 'stapled' together and cannot be traded separately. In the case of the Group, the units in GPT have been stapled to the shares in GPT Management Holdings Limited (GPT MH). For the purposes of consolidation accounting, GPT is the 'deemed' parent and the financial report reflects the consolidation of GPT and its	●	− Valuation of investment properties (including those under development) − Carrying value of inventories − Valuation of derivatives These are further described in the_Key audit matters_section of our report.
	financial report as a whole.		controlled entities and GPT
●	We chose FFO because, in our		MH and its controlled entities.
	view, it is the key	●	Our audit focused on where the
	performance indicator used by security holders to measure the performance of the Group. An explanation of what is included in FFO is located in Note 1, Segment		Group made subjective judgements; for example significant accounting estimates involving assumptions and inherently uncertain future events.
	information.
●	We selected 5% based on our	●	The Group holds equity accounted investments in two

Annual Financial Report of The GPT Group

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professional judgement noting it is also within the range of commonly accepted profit related thresholds.

wholesale real estate investment funds. The auditors of these funds (“component auditors”) assisted in performing procedures on behalf of the Group engagement team.

● We determined the level of involvement we needed to have in the audit work performed by the component auditors to be able to conclude whether sufficient appropriate audit evidence had been obtained. This included written instructions and active dialogue throughout the year.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context.

Key audit matter How our audit addressed the key audit matter Valuation of investment properties We obtained the latest independent property market (including those under development) reports to develop an understanding of the prevailing $10,128.8 million (2017: $8,745.7 million) Refer to market conditions in which the Group invests. note 2

The Group’s investment property portfolio is comprised of office, retail and logistics properties including properties under development in those categories.

Investment properties are valued at fair value at reporting date using either the income capitalisation approach or the discounted cash flow approach. The value of investment properties is dependent on the valuation methodology adopted and the inputs into the valuation model. Factors such as prevailing market conditions, the individual nature, condition and location of each property and the expected future income for each property directly impact fair values. Amongst others, the following assumptions are key in establishing fair value:

We discussed the specifics of the portfolio of properties with management including new leases entered into during the year, lease expiries, capital expenditure, vacancy rates and other specific risk factors to identify specific properties for further testing.

For a sample of leases, we compared the rental income used in the external valuation and internal tolerance check models to the tenancy schedule.

We compared the Group’s market capitalisation rates and discount rates by location and asset grade to a range we determined reasonable based on benchmark market data. Where capitalisation rates and discount rates fell outside of our anticipated ranges, we considered the rationale for the adopted metric.

In addition to the above, for selected properties under

Annual Financial Report of The GPT Group

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Capitalisation rate
Discount rate.

In accordance with the Group’s valuation policy, all investment properties must be externally valued by an independent valuation expert at least once every 12 months. If a property is not externally valued at balance date, an internal tolerance check is performed to determine whether the book value (most recent valuation plus capital expenditure) is in line with management’s estimate of fair value or whether an external valuation is required.

We considered this a key audit matter because of the:

• Relative size of the investment property balance in the consolidated statement of financial position.

• Quantum of revaluation gains that directly impact the consolidated statement of comprehensive income through the fair value gain on investment properties.

• Inherently subjective nature of investment property valuations due to the use of assumptions in the valuation methodology.

• Sensitivity of valuations to key input assumptions, specifically capitalisation and discount rates.

development we:

• Compared key inputs in the ‘as if complete’ valuation to underlying support; and

• On a sample basis, compared key assumptions used within the development’s ‘cost to complete’ schedule to underlying support, for example, expected future costs to subcontractor agreements.

External valuations

For all properties externally valued, we agreed the fair value per the final valuation reports to the Group’s accounting records.

For a sample of external valuations we:

• Assessed the competency and capabilities of management’s expert, i.e. the external valuer and confirmed that the Group followed its policy of rotating valuation firms at least every two years.

• Read a sample of the valuers’ terms of engagement to identify any clauses that might affect their objectivity or impose limitations on their work.

Internal tolerance check

We confirmed with management that the capitalisation and discounted cash flow models utilised for the internal tolerance checks were consistent with the prior period. For a sample of internal tolerance checks, we compared key inputs to supporting documentation, compared key assumptions to market benchmarking data and performed recalculations over the internal tolerance check models.

Carrying value of inventories $144.3 million (2017: $152.2 million) Refer to note 6

The Group develops a portfolio of sites for future sale which is classified as inventory. The Group’s inventories are held at the lower of the cost and net realisable value for each inventory project.

The cost of the inventory includes the cost of acquisition, development, finance costs and all other costs directly related to specific projects including an allocation of direct overhead expenses.

We considered the carrying value of inventories a key audit matter given the significant judgement required

For each project we obtained the Group’s latest feasibility models and discussed with management matters such as the overall project strategy, cost movements and claims (where applicable).

Using the information gained from these discussions and our prior year knowledge of the business, we used a risk based approach to select a sample of projects to perform net realisable value testing. For the sample of selected projects we:

• Further discussed with management the life cycle of the project, key project risks, changes to project strategy, current and future estimated sales prices,

Annual Financial Report of The GPT Group

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by the Group in estimating future selling prices, costs to complete projects and selling costs. These judgments may have a material impact on the calculation of net realisable value and therefore in determining whether the value of a project should be written down (impaired). During the year ended 31 December 2018 an impairment of $11.4m was recognised.

construction progress and costs and any new and previous impairments.

• Compared the estimated selling prices to market sales data in similar locations or to recent sales in the project.

• Compared the forecasted costs to complete for the project to the relevant construction contracts (if available) or to construction cost estimates.

• Compared the carrying value to the net realisable value (NRV) to identify projects with potential impairments.

• Obtained the transfer agreement for the development site transferred from investment property to inventory during the year and agreed the transfer price in the agreement to the external valuation.

• Traced a sample of capital expenditure additions to supporting documentation and tested whether they were valid costs that could be capitalised in accordance with the requirements of Australian Accounting Standards.

Valuation of derivatives $216.2 million ($134.0 million) (net valuation including current assets, non-current assets, current liabilities and non-current liabilities) Refer to note 14

The Group issues debt denominated in both foreign and domestic currencies as part of its funding strategy and enters into derivative transactions to manage the associated foreign exchange and interest rate risk. The Group holds a portfolio of derivative instruments including Cross Currency Interest Rate Swaps (CCIRS), Interest Rate Swaps (IRS) and other derivatives.

The Group only applies hedge accounting to the borrowings denominated in foreign currencies. Risk arising from borrowings denominated in foreign currencies is managed with CCIRS. The CCIRS are in hedge accounting relationships with the HKD and USD bonds disclosed in the consolidated statement of financial position. Other derivatives are not in hedge accounting relationships.

The Group has transitioned to the hedge accounting

We developed an understanding of the movements in the derivative balances during the year. We obtained independent counterparty confirmations to confirm the existence of each derivative at year end.

We selected a sample of derivative balances to test based on material instrument type. For each sample:

• We agreed the key terms of the derivatives back to the individual counterparty contracts.

• Together with PwC treasury specialists, we independently calculated the fair value of the derivatives, independently sourcing market data inputs used in the valuation calculations.

Through inquiry with management and inspection of a sample of hedge documentation, we identified the application of hedge accounting on new and existing derivative instruments.

To test the application of hedge accounting in accordance with Australian Accounting Standards, we performed the following procedures in conjunction

Annual Financial Report of The GPT Group

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requirements under AASB 9 Financial Instruments during the period.

with PwC treasury specialists for a sample of hedge relationships:

We considered the valuation of derivatives to be a key audit matter because of the:

Nature and complexity involved in valuing derivative instruments.

• Relative size of the derivative balances and potential for variability in the size of these balances year on year.

• Complexity involved in the application of hedge accounting in accordance with Australian Accounting Standards.

• Assessed whether the Group’s hedge documentation, designation and effectiveness testing approach was in accordance with the hedge accounting requirements of Australian Accounting Standards.

• Inspected the hedge documentation for new hedge relationships to assess whether hedge accounting criteria were met.

Assessed whether the hedge effectiveness criteria continued to be met.

• Assessed the appropriateness of hedge accounting journals across the relevant accounts (cash flow hedge reserve, cost of hedging reserve, fair value adjustment of the borrowings and profit or loss) based on changes in fair value of the hedge accounted derivatives and underlying hedged items. The recognition and presentation of gains and losses was agreed to the consolidated statement of comprehensive income.

Other information

The directors of the responsible entity of GPT, GPT RE limited (the directors) are responsible for the other information. The other information comprises the information included in the Group’s Annual Financial Report for the year ended 31 December 2018, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the financial report

The directors are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Annual Financial Report of The GPT Group

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In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf

This description forms part of our auditor's report.

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 14 to 22 of the Directors Report for the year ended 31 December 2018.

In our opinion, the remuneration report of The GPT Group for the year ended 31 December 2018 complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

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PricewaterhouseCoopers

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Susan Horlin Partner

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Bianca Buckman Partner

Sydney 11 February 2019

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Year ended 31 December 2018

Directors’ Report .......................................................................................................................................................................... 80 Auditor’s independence declaration ............................................................................................................................................. 98 Financial Statements .................................................................................................................................................................... 99 Consolidated Statement of Comprehensive Income ............................................................................................................ 99 Consolidated Statement of Financial Position ................................................................................................................... 100 Consolidated Statement of Changes in Equity ................................................................................................................... 101 Consolidated Statement of Cash Flows ............................................................................................................................ 102 Notes to the Financial Statements ..................................................................................................................................... 103 Result for the year ..................................................................................................................................................... 103 1. Segment information ............................................................................................................................................ 103 Operating assets and liabilities ................................................................................................................................ 104 2. Equity accounted investments .............................................................................................................................. 104 3. Trade receivables .................................................................................................................................................. 105 4. Intangible assets ................................................................................................................................................... 106 5. Inventories ............................................................................................................................................................ 107 6. Property, plant and equipment............................................................................................................................. 107 7. Other assets ......................................................................................................................................................... 108 8. Payables ................................................................................................................................................................ 109 9. Provisions ............................................................................................................................................................. 109 10. Taxation ................................................................................................................................................................. 110 Capital structure ........................................................................................................................................................ 112 11. Equity and reserves .............................................................................................................................................. 112 12. Earnings per share ............................................................................................................................................... 113 13. Dividends paid and payable .................................................................................................................................. 114 14. Borrowings ........................................................................................................................................................... 114 15. Financial risk management ................................................................................................................................. 115 Other disclosure items .............................................................................................................................................. 118 16. Cash flow information .......................................................................................................................................... 118 17. Commitments ....................................................................................................................................................... 119 18. Contingent liabilities ............................................................................................................................................ 119 19. Security based payments ..................................................................................................................................... 119 20. Related party transactions .................................................................................................................................. 121 21. Auditors remuneration ......................................................................................................................................... 123 22. Parent entity financial information ....................................................................................................................... 123 23. Fair value disclosures .......................................................................................................................................... 124 24. Discontinued operations and available for sale financial assets ......................................................................... 124 25. Accounting policies ............................................................................................................................................... 125 26. Events subsequent to reporting date ................................................................................................................... 129 Directors’ Declaration ................................................................................................................................................................. 130 Independent Auditor’s Report .................................................................................................................................................... 131 Supplementary information ........................................................................................................................................................ 139

This financial report covers both GPT Management Holdings Limited (the Company) as an individual entity and the Consolidated Entity consisting of GPT Management Holdings Limited and its controlled entities.

GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in Australia.

Through GPT’s internet site, GPT has ensured that its corporate reporting is timely, complete and available globally at minimum cost to the Company. All press releases, financial reports and other information is available on GPT’s website: www.gpt.com.au .

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report

Year ended 31 December 2018

The Directors of GPT Management Holdings Limited (the Company), present their report together with the financial statements of GPT Management Holdings Limited and its controlled entities (the Consolidated Entity) for the financial year ended 31 December 2018. The Consolidated Entity is stapled to the General Property Trust (GPT Trust) and the GPT Group (GPT or the Group) financial statements include the results of the stapled entity as a whole.

GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in Australia. The registered office and principal place of business is MLC Centre, Level 51, 19 Martin Place, Sydney NSW 2000.

1. Operating and financial review

About GPT

GPT owns some of Australia’s most prominent real estate assets, including Melbourne Central and Highpoint Shopping Centre in Melbourne, Australia Square, 1 Farrer Place and Citigroup Centre in Sydney and One One One Eagle Street in Brisbane.

Review of operations

The Consolidated Entity’s financial performance for the year ended 31 December 2018 is summarised below. The net loss after tax for the year ended 31 December 2018 is $40,962,000 (2017: $14,222,000).

	31 Dec 18 $’000 31 Dec 17 $’000 Change %
Property management fees Development management fees and revenue Fund management fees Management costs recharged Proceeds from sale of inventory Other income Expenses (Loss)/profit from continuing operations before income tax expense Income tax expense Loss after income tax for continuing operations Loss from discontinued operations Net loss for the year	43,511 38,863 12% 21,634 32,039 (32%) 84,619 77,206 10% 32,059 32,334 (1%) 28,883 10,358 179% 5,688 18,368 (69%) (234,159) (203,315) 15%
	(17,765) 5,853 (404%) (7,670) (6,406) 20%
	(25,435) (553) 4,499% (15,527) (13,669) 14%
	(40,962) (14,222) 188%

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Consolidated Entity result

The increase in the net loss compared with 2017 is mainly attributable to a decrease in development management revenue, the derecognition of available for sale financial assets in 2017, an increase in expenses due to revaluations of financial arrangements and a higher loss from discontinued operations. This is partially offset by an increase in proceeds from the sale of inventory, property management fees and funds management fees.

Property management

Retail

The Consolidated Entity is responsible for property management activities across the retail sector. Property management fees increased to $29,025,000 in 2018 as a result of higher base and turnover rent and growth from redevelopments, offset by lower energy income.

Office

The Consolidated Entity is responsible for property management activities across the office sector. Property management fees increased to $12,208,000 in 2018 as a result of higher leasing fees and membership income from Space & Co.

Logistics

The Consolidated Entity is responsible for property management activities across the logistics sector. Property management fees increased to $2,278,000 in 2018 as a result of property acquisitions and development completions.

Development management

Retail

During 2018, the business unit contributed $7.6 million to GPT’s Funds from Operations (FFO) (2017: $5.3 million).

Office

During the year the 15,800sqm 4 Murray Rose development was successfully completed at Sydney Olympic Park. The asset was delivered on time and within budget and is 81 per cent leased at the year end with the Rural Fire Service taking 59 per cent of the building. The development has delivered a development yield on cost over 7.5 per cent.

Construction has commenced on the new 26,000sqm tower at 32 Smith Street, Parramatta following the acquisition of the site last year. The pre-committed tenant for the new tower is QBE, who will occupy approximately 50 per cent of the building. Practical completion is due in late 2020.

Logistics

During the year the Group continued to successfully develop high quality logistics facilities to increase the portfolio quality and scale. At Huntingwood, the 11,000sqm warehouse reached practical completion in August 2018. The building was leased to Cahill Transport Group. Also, at 50 Old Wallgrove Road in Eastern Creek construction of a 30,000sqm facility was completed in January 2019. By the time of signing this financial report, 100 per cent of the asset has been leased to ACR Supply Partners.

Funds Management

GPT Wholesale Office Fund (GWOF)

As a result of GPT not participating in the Fund’s Distribution Reinvestment Plan (DRP) and equity raising in December 2018, GPT’s ownership reduced to 23.83 per cent (2017: 24.95 per cent).

GPT Wholesale Shopping Centre Fund (GWSCF)

The fund delivered a one year equity IRR of 4.8 per cent. GWSCF’s portfolio value decreased to $4.8 billion, down $0.1 billion from 2017. This was primarily driven by the sale of GWSCF’s 83.33 per cent share in Homemaker City, Maribyrnong in December 2018 offset by upward revaluations. Management fee income earned from GWSCF of $21.9 million has increased by $4.6 million as compared to 2017. This was due to the acquisition of an additional 25 per cent interest in Highpoint Shopping Centre for $660.0 million and Homemaker City, Maribyrnong for $20.0 million in September 2017.

As a result of GPT not participating in the Fund’s DRP, GPT’s ownership is now 28.57 per cent (2017: 28.80 per cent).

Management costs recharged

Management costs recharged are in line with prior year. During the year GPT’s MER (Management Expense Ratio) decreased to 30 basis points (2017: 34 basis points).

Expenses

Expenses increased to $234,159,000 in 2018 (2017: $203,315,000) as a result of revaluations of financial arrangements, impairment expense and higher costs related to the sale of inventory.

The team is well progressed with a number of repositioning projects in Melbourne at 100 Queen St, Melbourne Central Tower, CBW and 530 Collins Street.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Financial position

Financial position
	31 Dec 18 $’000 31 Dec 17 $’000 Change %
Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets	107,299 133,715 (20%) 239,101 266,955 (10%)
	346,400 400,670 (14%) 70,751 129,304 (45%) 175,759 115,471 52%
	246,510 244,775 1%
	99,890 155,895 (36%)

Total assets decreased by 14 per cent to $346,400,000 in 2018 (2017: $400,670,000) due to reduced trade receivables and loan receivables.

Total liabilities increased by 1 per cent and remains in line with prior year at $246,510,000 in 2018 (2017: $244,775,000).

Capital management

Financing activities

Net cash outflows from financing activities have increased to $83,316,000 in 2018 (2017: $35,432,000) due to repayment of related party borrowings and the purchase of securities for the employee incentive scheme.

Dividends

The Directors have not declared any dividends for the year ended 31 December 2018 (2017: nil).

Prospects

Group

Retail

The Consolidated Entity has an external loan relating to the Metroplex joint venture.

The Consolidated Entity has non-current, related party borrowings from GPT Trust and its subsidiaries. Under Australian Accounting Standards, the loans are revalued to fair value each reporting period.

Cash flows

The cash balance as at 31 December 2018 decreased to $19,259,000 (2017: $20,033,000).

Operating activities

Net cash inflows from operating activities have increased in 2018 to $87,913,000 (2017: $31,458,000) due to proceeds from related party receivables, offset by income taxes paid in 2018 and dividends received from available for sale financial assets in 2017.

The following table shows the reconciliation from net loss to the cash flow from operating activities:

	31 Dec 18 $’000 31 Dec 17 $’000 Change %
Net loss for the year Non-cash items included in net loss Capital return from available for sale financial asset Timing difference Net cash flows from operating activities	(40,962) (14,222) 188% 94,419 62,207 52% – (10,699) (100%) 34,456 (5,828) (691%)
	87,913 31,458 179%

Investing activities

Net cash flows from investing activities have decreased to outflows of $5,371,000 in 2018 (2017: inflows of $6,165,000) due to the capital return from available for sale financial asset in 2017.

GPT’s portfolio delivered total centre sales growth of 2.4 per cent whilst specialties sales per square metre grew 2.5 per cent for the 12 months to 31 December 2018. The retail portfolio is well positioned with 85 per cent located in NSW and VIC and in markets with strong population growth. GPT is planning on capturing this growth by investing in assets to offer engaging places for its customers aimed at driving sales productivity, stimulating retailer demand and delivering long term investment returns. Progress continues to be made with mixed use developments at Melbourne Central and Rouse Hill which will be opportunities for GPT to deliver leading examples on how retail assets need to evolve and adapt to meet the changing needs of today’s retail consumer.

Office

Logistics

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

The medium term outlook is for Sydney and Melbourne to continue to benefit as preferred locations, given population nodes and strong and improving infrastructure. GPT will seek to increase exposure to the sector through development opportunities and acquisitions.

Funds management

Guidance for 2019

Risks

The key components of the approach include the following:

the GPT Board, Leadership Team, employees and contractors all understand their risk management accountabilities, promote the risk awareness and risk management culture and apply risk processes to achieve the organisation’s objectives;
specialist risk management expertise is developed and maintained internally and provides coaching, guidance and advice;
risks are identified and assessed in a timely and consistent manner;
controls are effectively designed, embedded and assessed;
material operational risks and critical controls are monitored and reported to provide transparency and assurance that the risk profile is aligned with GPT’s risk appetite, strategy and values; and
Macro-economic factors that may impact the business are considered and monitored.

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Risk Category Risk/Issue Potential Strategic Impact Mitigation
Investment Investments do • Lower distributions • Robust investment approval process
mandate not perform in line • Lower NTA • Formal due diligence process
with forecast
• Credit ratings downgrade • Active asset management
• Experienced internal management capability
• Diversified multi-asset portfolio
• Limit single asset exposure
Adverse changes in • Lower distributions • Robust capital allocation process
market conditions • Lower NTA • Diversified multi-asset portfolio
• Credit ratings downgrade • Limit single asset exposure
Development Developments do • Lower distributions • Robust investment approval process
not perform in line • Lower NTA • Oversight by Project Control Group (PCG)
with forecast
• Credit ratings downgrade • Experienced internal management capability
• Limit exposure to assets under development
• Limit exposure to individual contractors
• Minimum leasing pre-commitments prior to
construction commencement
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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

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Risk Category Risk/Issue Potential Strategic Impact Mitigation
Leasing Inability to lease assets in • Lower distributions • Large and diversified tenant base
line with forecast • Lower NTA • Ongoing investment to maintain quality of
• Credit ratings downgrade property portfolio
• Experienced leasing team
• Limit single tenant exposure
Capital Re-financing and • Ability to meet debt maturities • Diversity of funding sources and spreading of debt
management, liquidity risk • Limits ability to execute strategy maturities with a long weighted average debt term
including macro- • Credit ratings • Maintaining a minimum liquidity buffer in cash
economic factors • Failure to continue as a going and surplus committed credit facilities for the
concern forward rolling twelve-month period
Interest rate risk – • Lower distributions • Interest rate exposures are actively hedged
higher interest rate cost
than forecast
Health and safety Incidents causing injury • Harm to the tenants, visitors to • Formalised Health and Safety management
to tenants, visitors to the GPT’s properties, employees and/ system including policies and procedures for
properties, employees or contractors managing safety
and/or contractors • Criminal/civic proceedings and • Training and education of employees and
resultant reputation damage contractors
• Financial impact of remediation
and restoration
People and culture Inability to attract, retain • Failure to provide an environment • Background and reference checks on
and develop talented that enables people to excel commencement
people and provide an • Failure to provide a safe working • Whistleblower officer
inclusive workplace environment free of harassment, • Annual performance management process setting
Inability to maintain a bullying and discrimination objectives to promote clarity and accountability
high performing, ethical, • Limits the ability to achieve • Remedial performance management and
and values based business objectives in line with disciplinary action
workplace GPT’s values • Monitoring of risk culture and conduct risk
This includes the
consideration of risk • Discretionary incentive system and
Clawback Policy
culture and specifically
conduct risk • Benchmarking and setting competitive
remuneration
• Development planning
• Succession planning
• Talent management processes
• Promotion of GPT Values
• Code of conduct
• Conflicts of interest register
• Compliance training
• Grievance resolution process
• Diversity & Inclusion policies, guidelines
and training
Environmental Inability to operate in a • Negative impact to the communities, • Formalised Environment and Sustainability
and social manner that does not the environment and the ecosystems management system including policies and
sustainability compromise the health that GPT operates in procedures for managing environmental and
of ecosystems and meets • Limits the ability to deliver the social sustainability risks
accepted social norms business objectives and strategy • Climate related risks and potential financial
This includes • Criminal/civic proceedings and impacts are assessed within GPT’s enterprise-
consideration of climate resultant reputation damage wide risk management framework
change, energy intensity,
• Financial impact of remediation
community wellbeing and
and restoration
supply chain integrity
Information Risk of loss of data, • Limits the ability to deliver the • Technology risk management framework
security breach of confidentiality, business objectives and strategy • Privacy policy, guidelines and procedures
regulatory breach • Criminal/civic proceedings and
(privacy) and/or resultant reputation damage
reputational impact
• Financial impact of remediation
including as a result from
and restoration
a cyber attack
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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

2. Environmental regulation

the Property Council of Australia;
the Green Building Council of Australia;
the City of Sydney Better Building Partnership; and
demonstration projects partnering with the Australian Renewable Energy Agency.

GPT has achieved a Group-wide reduction of 42 per cent in energy intensity, and a 56 per cent reduction in emissions intensity since 2005. GPT is currently developing its Energy Master Plan which will continue the implementation of energy efficiency programs. GPT will seek to further decouple emissions from its energy requirements through renewable energy purchases, electrification of gas infrastructure and implementation of demand response programs. GPT’s comprehensive Climate Change and Energy Policy is available on GPT’s website.

More information about GPT’s participation in the NGER program is available at www.gpt.com.au .

3. Events subsequent to reporting date

The Directors are not aware of any matter or circumstances occurring since 31 December 2018 that has significantly or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state of affairs of the Consolidated Entity in the subsequent financial years.

4. Directors and secretary

Information on Directors

Vickki McFadden – Chairman (appointed as a Non-Executive Director 1 March 2018 and Chairman from 2 May 2018)

Vickki currently holds Non-Executive directorships in the following listed entities and other entities:

Tabcorp Holdings Limited (since 2017);
Newcrest Mining Limited (since 2016); and
Myer Family Investments Pty Limited (since 2011).

She is also President of the Takeovers Panel, a Member of Chief Executive Women and a Member of the Advisory Board and Executive Committee of the UNSW Business School.

Vickki was previously Chairman of Eftpos Payments Australia Limited, Chairman of Skilled Group Limited (prior to its acquisition by Programmed Maintenance Services Limited) (Director from 2005 to 2015 and Chairman from 2010 to 2015), a non-executive Director of Leighton Holdings Limited, and a Managing Director of Investment Banking at Merrill Lynch Australia.

As at the date of this report she holds 50,000 GPT stapled securities.

Rob Ferguson – Chairman (retired 2 May 2018)

Rob currently holds Non-Executive directorships in the following listed and other entities:

Watermark Market Neutral Fund Limited (since 2013); and
Smartward Limited (since 2012).

As at the date of his retirement he held 207,628 GPT stapled securities.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Robert Johnston – Chief Executive Officer and Managing Director

As at the date of this report he holds 821,765 GPT stapled securities.

Brendan Crotty (retired on 9 November 2018)

Brendan is currently the Chairman of the National Housing Finance and Investment Corporation (since 2018), a Director of Brickworks Limited (since 2008) and Chairman of Cloud FX Pte Ltd. Brendan was previously Chairman of Western Sydney Parklands Trust.

As at the date of this retirement he held 67,092 GPT stapled securities.

Eileen Doyle

Eileen currently holds the position of Non-Executive Director in the following listed and other entities:

Boral Limited (since 2010); and
Oil Search Limited (since 2016).

Eileen was also previously a Director of Bradken Limited from 2011 to November 2015.

As at the date of this report she holds 45,462 GPT stapled securities.

Swe Guan Lim

Swe Guan is currently Chairman of Cromwell European REIT in Singapore (since 2017), and a Director of Sunway Berhad in Malaysia (since 2011). Swe Guan is also a member of the Investment Committee of CIMB Trust Cap Advisors and was formerly a Director of Global Logistics Property in Singapore until January 2018.

As at the date of this report, he holds 39,000 GPT stapled securities.

Michelle Somerville

Michelle currently holds the position of Non-Executive Director in the following entities:

Bank Australia Limited (since 2014);
Challenger Retirement and Investment Services Ltd (since 2014);
Save the Children (Australia) (since 2012); and
Down Syndrome Australia (since 2011).

Michelle is also an independent consultant to the UniSuper Ltd Audit, Risk and Compliance Committee since 2015.

As at the date of this report she holds 36,663 GPT stapled securities.

Gene Tilbrook

Gene currently holds the position of Non-Executive Director in the following listed entities:

Orica Limited (since 2013); and
Woodside Petroleum Limited (since 2014).

As at the date of this report he holds 48,546 GPT stapled securities.

Angus McNaughton (appointed 1 November 2018)

Angus was appointed to the Board in November 2018 and is also a member of the Nomination and Remuneration Committee and the Audit Committee. He brings extensive experience in property investment.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

the completion of the merger between Novion and Federation Centres, renamed as Vicinity Centres, in June 2015.

Angus does not currently hold any Non-Executive Director roles in other listed entities.

He was also previously Director, Real Estate of First State Investments in Singapore and Chief Executive Officer of Kiwi Income Property Trust in New Zealand.

As at the date of this report he does not hold GPT stapled securities.

James Coyne – General Counsel and Company Secretary

Lisa Bau – Senior Legal Counsel and Company Secretary

Lisa was appointed as a Company Secretary of GPT in September 2015. Her previous experience includes legal roles in mergers and acquisitions, capital markets, funds management and corporate advisory.

Attendance of directors at meetings

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

	Board	Board	Audit Committee	Audit Committee	Nomination and Remuneration Committee	Nomination and Remuneration Committee	Sustainability and Risk Committee	Sustainability and Risk 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	Number of meetings eligible to attend	Number of meetings attended
Vickki McFadden1	10 10 – – 4 4 – –
Rob Ferguson	3 3 – – 2 2 – –
Robert Johnston1	11 11 – – – – – –
Brendan Crotty	9 9 4 3 – – 3 3
Eileen Doyle	11 11 5 3 5 5 4 4
Swe Guan Lim	11 11 5 5 – – 4 4
Angus McNaughton	3 3 1 1 2 2 – –
Michelle Somerville	11 11 5 5 – – 4 4
Gene Tilbrook	11 10 – – 6 6 – –

Vickki McFadden and Bob Johnston also attended meetings of the Committees as non-members.

5. Other disclosures

Indemnification and insurance of directors, officers and auditor

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Non-audit services

the Audit Committee reviewed the non-audit services and other assurance services at the time of appointment to ensure that they did not impact upon the integrity and objectivity of the auditor
the fact that none of the non-audit services provided by PricewaterhouseCoopers during the financial year had the characteristics of management, decision-making, self-review, advocacy or joint sharing of risks.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 98 and forms part of the Directors’ Report.

Rounding of amounts

The amounts contained in this report and in the financial statements have been rounded to the nearest thousand dollars unless otherwise stated (where rounding is applicable) under the option available to the Consolidated Entity under ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191. The Consolidated Entity is an entity to which the Instrument applies.

the Board’s own review conducted in conjunction with the Audit Committee concluded that the auditor independence was not compromised, having regard to the Board’s policy with respect to the engagement of GPT’s auditor, and

6. Remuneration report

Governance

Governance
Who are the	The Committee consists of the following three Non-Executive Directors:
members of the	•Gene Tilbrook (Committee Chairman);
Committee?	•Vickki McFadden; and
	•Angus McNaughton.
	2018 saw renewal and change on the Committee in line with changes to the Board:
	•Rob Ferguson retired at the GPT AGM on 2 May 2018;
	•Vickki McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018;
	•Angus McNaughton joined GPT on 1 November 2018; and
	•Eileen Doyle stepped down from the Committee on 8 November 2018.
What is the scope	In 2018 the Committee undertook the following activities on behalf of the Board:
of work of the Committee?	•oversee the management of culture; •implement, monitor, evaluate and oversee GPT’s remuneration framework;
	•review and approve remuneration levels for the Board, Chief Executive Officer and key management personnel;
	•review and approve key performance indicators for the Chief Executive Officer and assess the Chief Executive
	Officer’s performance against those key performance indicators;
	•review compliance with legal and regulatory requirements associated with the activities of the Committee;
	•oversee the succession planning process for the Board, CEO and Leadership Team;
	•implement procedures for the evaluation of the performance of the Board and Board committees;
	•approve and oversee the implementation of GPT’s diversity & inclusion strategy, initiatives and policies;
	•approve and oversee initiatives around talent development and employee engagement;
	•any other related matters regarding executives or the Board; and
	Effective 1 January 2019 a Human Resources and Remuneration Committee (HRRC) was formed with the same
	membership as noted above. In addition, a Nomination Committee was formed consisting of the full Board1.
Who is included in	GPT’s Key Management Personnel (KMP) are the individuals responsible for planning, controlling and managing
the Remuneration	the GPT Group (being the Non-Executive Directors, CEO, Chief Financial Officer (CFO), and the Chief Operating
Report?	Officer (COO)).

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Committee key decisions and remuneration outcomes in 2018

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Platform component Key decisions and outcomes
Base Pay (Fixed) • Implemented the annual review of employee base pay effective 1 January 2018, with an average increase of
2.57%.
• Following benchmarking, implemented an annual review of Non-Executive Director base and committee fees
effective 1 January 2018, with an average increase of 3.12% to bring the Non-Executive Directors’ remuneration
closer to market.
Short Term Incentive • Maintained Funds from Operations (FFO) growth per security as the primary measure of Group
Compensation (STIC) financial performance.
• The Group achieved an FFO growth per security outcome of 3.5% which generated a STIC pool maximum of
$15.4 million.
• Maintained a deferred equity component of STIC vesting in one tranche at the end of the year following the
conclusion of the performance period.
Long Term Incentive • Achieved a compound annual Total Return [2] for the 2016-18 period of 15.50%, exceeding the benchmark of 9.75%
(LTI) Compensation for maximum award, and delivered a Total Securityholder Return (TSR) [3] of 32.76% which exceeded the ASX 200
AREIT Accumulation Index (the Index) performance of 26.60%.
• As a result, the vesting outcome for the 2016-18 LTI plan was 82.71% of the performance rights for each of the
24 participants in the LTI plan.
• Launched the 2018-2020 LTI with two performance measures, Total Return and Relative TSR.
• Maintained the same performance hurdles and ranges as the prior year’s LTI plan.
• Aligned the vesting schedule for both performance measures such that 10% of the performance rights for each
measure vest at Threshold performance, with straight line pro-rata vesting through to 100% at the maximum
performance level.
Other employee • Continued the General Employee Security Ownership Plan (GESOP) for 105 STIC eligible employees not in the
ownership plans LTI. Under GESOP each participant receives an amount equal to 10% of their STIC (less tax) delivered in GPT
securities, which must be held for at least 1 year.
• Continued the Broad Based Employee Security Ownership Plan (BBESOP) for 264 employees ineligible for
GESOP. Under BBESOP, subject to GPT achieving the annual FFO growth per security target, participants receive
$1,000 worth of GPT securities that cannot be transferred or sold until the earlier of 3 years from the allocation
date or cessation of employment (or $1,000 cash (less tax) at the election of the individual).
Policy and • Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and
governance governance standards, and drafting of incentive plan documentation from EY and Conari Partners [4] .
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2 Total Return is defined as the sum of the change in Net Tangible Assets (NTA) and distributions over the performance period, divided by the NTA at the beginning of the performance period.

3 TSR represents an investor’s return, calculated as the percentage difference between an initial amount invested in stapled securities and the final value of those stapled securities at the end of the relevant period, assuming distributions were reinvested.

4 During 2018, no remuneration recommendations in relation to Key Management Personnel, as defined by Division 1 of Part 1.2 of Chapter 1 of the Corporations Act 2001 , were made by these or other consultants.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

GPT’s vision and financial goals linked to remuneration structures

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GPT’s vision and financial goals
To be the most respected
property company in Australia
Generate competitive Relative Generate competitive FFO
in the eyes of our Investors, Total Return > 8.5%
Total Securityholder Return growth per security
People, Customers and
Communities
Total remuneration components
Base pay (Fixed) STIC (variable) LTI (variable) Other employee ownership
• Base level of reward. • Discretionary, at risk, and • Discretionary, at risk, and plans (variable)
• Set around Australian market with aggregate STIC funding aligned to overall Group GESOP
median using external aligned to overall Group financial outcomes. • For STIC eligible individuals
benchmark data (including financial outcomes. • Set around market median who are ineligible for LTI.
AON Hewitt and the Financial • Set around market median for target performance with • Equal to 10% of their STIC
Institutions Remuneration for target performance with potential to achieve top
(less tax) delivered in GPT
Group (FIRG)). potential to achieve top quartile for stretch outcomes.
securities, which must be
• Reviewed based on quartile for stretch outcomes. • Vesting determined by GPT held for at least 1 year.
employee’s responsibilities, • Determined by GPT and performance against Total
experience, skill and individual performance Return and Relative TSR BBESOP
performance. against a mix of balanced financial performance. • For individuals ineligible for
• External and internal scorecard measures which • Relative TSR is measured STIC or LTI.
relativities considered. include financial and non- against ASX200 AREIT • GPT must achieve at least
financial measures. Accumulation Index Target outcome on annual
• Financial measures include (including GPT). FFO growth per security.
FFO growth per security, • Assessed over a 3 year • A grant of $1,000 worth of
and earnings at portfolio, performance period, no re- GPT securities which must
fund and/or property level as testing. be held until the earlier of
relevant.
• No value derived unless GPT 3 years from the allocation
• Non-financial objectives focus meets or exceeds defined date or cessation of
on execution of strategy, performance measures. employment (or $1,000 cash
delivery of key projects and (less tax) at the election of the
• Delivered in GPT securities
developments, and people and individual).
to align executive and
culture objectives.
securityholder interests.
• Delivered in cash, or (for senior
executives), a combination of
50% cash and 50% equity with
deferred vesting for 1 year.
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Attract, retain, motivate and reward high calibre executives to deliver Align executive rewards to GPT’s performance and securityholder superior performance by providing: interests by:

competitive rewards
opportunity to achieve incentives beyond base pay based on performance.
assessing incentives against financial and non-financial business measures that are aligned with GPT strategy
delivering a meaningful component of executive remuneration in the form of equity subject to performance hurdles being achieved.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Employment Terms

1. Employment terms – Chief Executive Officer and Managing Director

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Term Conditions
Contract duration Open ended.
Termination by Executive 6 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package Bob Johnston’s 2018 remuneration arrangements were as follows:
• Base pay: $1,460,000
• STIC: $0 to $1,825,000 (ie 0% to 125% of base pay) based on performance, paid in equal proportions of
cash and deferred GPT securities, with the securities component vesting one year after the conclusion
of the performance year
• LTI: A grant of performance rights with the face value at time of grant of $2,190,000 (ie 150% of
base pay) with vesting outcomes dependent on performance and continued service, and delivered in
restricted GPT securities.
Termination by Company for No notice requirement or termination benefits (other than accrued entitlements).
cause
Termination by Company 12 months’ notice. Treatment of unvested STIC and LTI will be at the Board’s discretion under the terms of the
(other) relevant plans and GPT policy.
Post-employment restraints 6 months non-compete, and 12 months non-solicitation of GPT employees.
External Directorships Bob Johnston is a Director on the Boards of the Property Industry Foundation (PIF) and the Property Council of
Australia (PCA). He does not receive remuneration for these roles.
Clawback Policy All GPT employees who participate in STIC and LTI are subject to remuneration being clawed back if the
recipient has acted fraudulently, dishonestly, or where there has been a material misstatement or omission in
the Group’s financial statements leading to the receipt of an unfair benefit.
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2. Employment terms – Executive KMP

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Term Conditions
Contract duration Open ended.
Termination by Executive 3 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package Component Mark Fookes Anastasia Clarke
Base pay $820,000 $800,000
STIC [5] $0 to $820,000 $0 to $800,000
LTI $0 to $820,000 $0 to $800,000
Termination by Company No notice requirement or termination benefits (other than accrued entitlements).
for cause
Termination by Company 3 months’ notice. Severance payments may be made subject to GPT policy and capped at the three year average
(other) of the executive’s annual base (fixed) pay. Treatment of unvested STIC and LTI will be at the Board’s discretion
under the terms of the relevant plans and GPT policy.
Post-employment restraints 12 months non-solicitation of GPT employees.
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3. Compensation mix at maximum STIC and LTI outcomes

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5 The STIC is paid in an equal mix of cash and deferred GPT securities, with the securities component vesting 1 year after the conclusion of the performance year.

6 The percentage of each component of total remuneration is calculated with reference to maximum or stretch potential outcomes as set out under Remuneration Package in Tables 1 and 2 above.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Group Financial Performance and Incentive Outcomes

1. Five year Group financial performance

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2. Summary of CEO Objectives and Performance Outcomes

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Performance measure Reason chosen Weighting Performance outcomes
Financial FFO growth per FFO growth 70% The Group delivered FFO growth per security of 3.5% in 2018. This
security targets. per security is was in excess of the Group’s target of 3% growth but below the
a key financial stretch objective set by the Board.
measure of GPT’s
performance.
Strategy Strategy objectives Developing, 10% Management continued to execute on strategies approved by
focused on exploring communicating the Board. This included securing new acquisitions in the Office
growth opportunities and implementing and Logistics sector and advancing plans for development
for GPT group, as GPT’s strategy will opportunities at Melbourne Central.
well as development underpin GPT’s Management did not achieve a successful outcome of the sale
and implementation medium term of Wollongong Central and progress on unlocking opportunities
of strategic plans for activities. at Sydney Olympic Park and Camellia was behind target.
each division.
Performance Operational objectives Focus on delivery 15% GPT’s Total Shareholder Return was 7.03% versus 3.95% for
focused on driving of investment and the ASX AREIT 200 Accumulation Index.
performance of the fund performance, Occupancy remains high across the Group’s portfolio and
investment portfolio, conversion of like for like Net Operating Income (NOI) growth of 3.8% was
key milestones in the the development achieved, however the like for like NOI growth for the retail
development pipeline, pipeline and portfolio was below target.
and other projects. operational
Office lease expiries in 2020 and 2021 continued to be a focus for
efficiency to
management however stretch target objectives were not achieved.
optimise GPT’s
performance. Established the Operational Excellence PCG and delivered
business efficiencies through the use of technology,
streamlined decision making, and enhanced asset
management support to the funds management platform.
Pre-commitment for the 32 Smith Street development was
achieved and Development Approval conditions satisfied
allowing the commencement of the project, with the
development on plan to deliver targeted returns.
Progress was made on the Sunshine Plaza development but final
completion has been delayed to the end of Q1 2019.
People People objectives Maintaining a 5% Achieved Workplace Gender Equality Agency (WGEA) Employer
centred on increasing high performing of Choice for Gender Equality citation in February 2018
employee engagement, executive team recognising GPT’s performance as among the best employers.
driving GPT’s diversity and achieving Increased the percentage of females in the top 50% of the
and inclusion agenda, engagement and business (measured by remuneration) from 42.24% at the end
and operational diversity goals of 2017 to 45.65%.
excellence. is key to GPT’s
Launched GPT’s second Reconciliation Action Plan (RAP),
performance.
maintained participation of First Nations employees in the
permanent workforce at 1%, and signed a 10 year agreement with
Career Trackers to expand its internship program.
Increased GPT’s score in the Australian Workplace Equality
Index (AWEI) survey from 42 to 79, 16 points higher than the
property sector average.
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3. STIC Framework

The CEO objectives are cascaded (in full or in part) to KMP and all STIC participants where applicable. Performance measures and weightings may vary according to areas of responsibility for each STIC participant. GPT Group and segment financial KPI’s and performance KPI’s in relation to occupancy, leasing, progress on developments, investment performance and operational efficiency are included. Performance objectives are then measured to determine performance outcomes and generate STIC recommendations.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

The 2018 STIC outcomes for the KMP are in Table 4, below, while STIC determination for the balance of the eligible employees[7] is to occur in March 2019, which is post the issue of the 2018 Remuneration Report. For the Group, FFO growth per security performance hurdles are set for the year. For 2017, the Group delivered an FFO growth per security outcome of 3.0 per cent and generated a maximum amount of $13.8 million for the STIC pool, representing 64 per cent of the aggregate of STIC participants’ maximum STIC potential, of which $13.4 million was ultimately distributed to employees based on the performance of the individual and their business unit/team against Group and individual KPI’s.

For the Group, FFO growth per security performance hurdles are set for the year. For 2017, the Group delivered an FFO growth per security outcome of 3.0 per cent and generated a maximum amount of $13.8 million for the STIC pool, representing 64 per cent of the aggregate of STIC participants’ maximum STIC potential, of which $13.4 million was ultimately distributed to employees based on the performance of the individual and their business unit/team against Group and individual KPI’s.

The following table shows the distribution of the 2017 STIC outcomes as a percentage of the individual’s maximum STIC opportunity.

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2017 STIC Received as a % of Maximum STIC potential 0–50% 50–60% 60–70% 70–80% 80–90% 90–100%
Percentage of STIC participants 3.79% 11.36% 71.97% 8.33% 4.55% 0.0%
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4. 2018 STIC outcomes by Executive KMP[8]

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Actual STIC % of maximum Equity component
Actual STIC awarded as a % of STIC award Cash (# of GPT
Executive KMP Position awarded maximum STIC forfeited component securities) [9]
Bob Johnston Chief Executive Officer
and Managing Director $1,227,000 67.23% 32.77% $613,500 117,788
Anastasia Clarke Chief Financial Officer $575,000 71.88% 28.12% $287,500 55,198
Mark Fookes Chief Operating Officer $575,000 70.12% 29.88% $287,500 55,198
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5. Group performance measures for LTI Plans currently relevant

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LTI
performance Vesting % by Overall Plan
measurement Performance Performance measure performance Vesting
LTI period measure hurdle Weighting Results measure Outcome (%)
2016 2016-18 Relative TSR versus 10% of rights vest at Index 50% GPT’s TSR 65.41%
ASX200 AREIT performance, up to 100% performance
Accumulation Index at Index plus 10% (pro rata exceeded the
(including GPT) (the vesting in between) Index by 6.16%
Index) 82.71%
Total Return 0% of rights vest at 8% 50% 15.50% 100.00%
Total Return, up to 100%
at 9.5% Total Return (pro-
rata vesting in between)
2017 2017-19 Relative TSR versus 10% of rights vest at Index 50% N/A N/A
ASX200 AREIT performance, up to 100%
Accumulation Index at Index plus 10% (pro rata
(including GPT) vesting in between)
Total Return 0% of rights vest at 8.5% 50% N/A N/A N/A
Total Return, up to 100%
at 10.0% Total Return
(pro-rata vesting in
between)
2018 2018-20 Relative TSR versus 10% of rights vest at Index 50% N/A N/A
ASX200 AREIT performance, up to 100%
Accumulation Index at Index plus 10% (pro rata
(including GPT) vesting in between)
Total Return 10% of rights vest at 50% N/A N/A N/A
8.5% Total Return, up
to 100% at 10.0% Total
Return (pro-rata vesting in
between)
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7 i.e. excluding the KMP.

8 Excluding the impact of movements in the GPT security price on deferred STIC value received. 9 The number of deferred GPT securities granted are calculated by dividing 50% of the Actual STIC awarded by GPT’s fourth quarter 2017 Volume Weighted Average Security Price (VWAP) of $5.2085. The deferred GPT securities will vest subject to service on 31 December 2019.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

6. 2016–2018 LTI outcomes by Executive KMP

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Performance rights Performance rights Performance rights
Senior Executive Position granted vested lapsed
Bob Johnston Chief Executive Officer and Managing Director 450,257 372,385 77,872
Anastasia Clarke Chief Financial Officer 139,365 115,262 24,103
Mark Fookes Chief Operating Officer 171,527 141,862 29,665
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7. LTI outcomes – fair value and maximum value recognised in future years[10]

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Performance Maximum value to
Fair value per rights granted as be recognised in
Executive KMP Year Grant date performance right at 31 Dec 18 Vesting date future years
Bob Johnston 2018 10 May 2018 $2.62 420,467 31 Dec 20 $1,222,712
Chief Executive Officer
2017 22 May 2017 $2.66 452,206 31 Dec 19 $955,709
and Managing Director
Anastasia Clarke 2018 29 March 2018 $2.62 153,595 31 Dec 20 $438,169
Chief Financial Officer
2017 21 February 2017 $2.66 157,563 31 Dec 19 $293,563
Mark Fookes 2018 29 March 2018 $2.62 157,435 31 Dec 20 $459,154
Chief Operating Officer 2017 21 February 2017 $2.66 172,269 31 Dec 19 $320,962
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8. Reported remuneration – Executive KMP – Actual Amounts Received[11]

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Fixed pay Variable or “at risk” [12]
Executive KMP Year Base pay Superannuation Other [13] STIC LTI Total
Bob Johnston 2018 $1,439,710 $20,290 $8,354 $1,237,259 $1,972,002 $4,677,615
Chief Executive Officer and
2017 $1,415,168 $19,832 $3,299 $1,195,801 $1,867,471 $4,501,571
Managing Director
Anastasia Clarke 2018 $779,710 $20,290 $5,275 $579,807 $610,381 $1,995,463
Chief Financial Officer
2017 $730,168 $19,832 $2,480 $523,556 $455,426 $1,731,462
Mark Fookes 2018 $799,710 $20,290 $10,585 $579,807 $751,244 $2,161,636
Chief Operating Officer 2017 $800,168 $19,832 $4,326 $565,442 $844,845 $2,234,613
Total 2018 $3,019,130 $60,870 $24,214 $2,396,873 $3,333,627 $8,834,714
2017 $2,945,504 $59,496 $10,105 $2,284,799 $3,167,742 $8,467,646
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10 For the avoidance of doubt, the GPT incentive plans (ie STIC and LTI) use face value grants of performance rights based on the VWAP of GPT securities for specified periods; reference to fair value per performance right is included in this table to comply with accounting standards.

11 This table discloses the cash and other benefit amounts actually received by GPT’s executive KMP, as distinct from the accounting expense. As a result, it does not align to Australian Accounting Standards.

12 Gross dollar values for the equity components have been calculated by multiplying the number of securities by GPT’s fourth quarter VWAP for the applicable year; 2018: $5.2956 (2017: $5.2085).

13 Other may include death and total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, professional memberships, subscriptions and/or other benefits.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

9. Reported remuneration – Executive KMP – AIFRS Accounting[14]

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Fixed pay Variable or “at risk”
STIC (cash plus LTI award
Executive KMP Year Base pay Superannuation Other accrual) accrual [15] Total
Bob Johnston 2018 $1,520,636 $20,290 $8,354 $1,210,570 $1,168,869 $3,928,719
Chief Executive Officer and
2017 $1,376,680 $19,832 $3,299 $1,219,543 $1,166,796 $3,786,150
Managing Director
Anastasia Clarke 2018 $794,923 $20,290 $5,275 $548,232 $414,417 $1,783,137
Chief Financial Officer
2017 $775,348 $19,832 $2,480 $569,961 $382,324 $1,749,945
Mark Fookes 2018 $825,109 $20,290 $10,585 $559,068 $467,160 $1,882,212
Chief Operating Officer 2017 $840,325 $19,832 $4,326 $669,971 $515,208 $2,049,662
Total 2018 $3,140,668 $60,870 $24,214 $2,317,870 $2,050,446 $7,594,068
2017 $2,992,353 $59,496 $10,105 $2,459,475 $2,064,328 $7,585,757
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10. GPT security ownership – Executive KMP as at 31 December 2018

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GPT Employee Security Schemes (ESS) Purchase GPT
Holdings /(Sales) Holdings Gross Value
(start of TOTAL ESS during (end of of GPT MSHR
Executive KMP period) [16] 2018 DSTIC 2016-18 LTI for 2018 period [17] period) [18] Holdings [19] Guideline [20]
Bob Johnston 821,765 117,788 372,385 490,173 – 1,311,938 $6,947,499 $2,190,000
Chief Executive Officer
and Managing Director
Anastasia Clarke 462,585 55,198 115,262 170,460 (223,839) 409,206 $2,166,991 $800,000
Chief Financial Officer
Mark Fookes 1,118,268 55,198 141,862 197,060 (156,013) 1,159,315 $6,139,269 $820,000
Chief Operating Officer
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11. GPT performance rights – Executive KMP

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Performance rights
Performance rights Performance rights
that lapsed in 2018 [21] still on foot at 31/12/18 [22]
Executive KMP (# of rights) (# of rights)
Bob Johnston Chief Executive Officer and Managing Director 135,278 872,673
Anastasia Clarke Chief Financial Officer 45,702 311,158
Mark Fookes Chief Operating Officer 53,184 329,704
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14 This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian accounting standards.

15 This column records the amount of the fair value of performance rights under the various LTI plans expensed in the relevant financial years, and does not represent actual LTI awards made to executives or the face value grant method.

16 GPT Holdings (start of period) include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2017, LTI plans up to and including the 2015-17 LTI plan, and private holdings.

17 Movement in GPT security holdings as a result of the sale of vested, unrestricted security holdings and/or the sale or purchase of additional private holdings on the individuals own account during the 2018 calendar year.

18 GPT Holdings (end of period) is the sum of GPT Holdings (start of the period) plus DSTIC and LTI securities obtained under ESS and adjusted for any purchases or sales during the period. Note that some of the securities do not become actual holdings for the individual until after the conclusion of the performance year when Group results are known which allow the conversion of performance rights under the various plan terms.

19 The GPT Holdings (end of period) multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 to derive a dollar value.

20 GPT’s Minimum Security Holding Requirement (MSHR) guideline requires the CEO to acquire and maintain a holding equal to 150% of base salary. For other KMP and Leadership Team members the holding requirement is equal to 100% of base salary. Individuals have four years from commencement of employment to achieve the MSHR before it is assessed for the first time.

21 The sum of performance rights that were awarded to a participant in the 2016-2018 LTI that did not vest at the end of the 2016-2018 performance period, and as a result, lapsed and/or performance rights granted under the 2018 DSTIC that also lapsed.

22 The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2018. This represents the current maximum number of additional GPT securities to which the individual may become entitled subject to satisfying the applicable performance measures in the 2017-19 and 2018-20 LTI plans on foot; as such, these performance rights represent the incentive opportunity over multiple future years, are subject to performance and hence “at risk”, and as a result may never vest.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

Remuneration – Non-Executive Directors

Remuneration –	Non-Executive Directors
What are the key	•The Board determines the remuneration structure for Non-Executive Directors based on recommendations
elements of the Non-	from the Committee.
Executive Director Remuneration Policy?	•Non-Executive Directors are paid one fee for participation as a Director in all GPT related companies (principally GPT RE Limited, the Responsible Entity of GPT Trust and GPT Management Holdings Limited).
	•Non-Executive Director remuneration is composed of three main elements:
	– Main Board fees
	– Committee fees, and
	– Superannuation contributions at the statutory superannuation guarantee contribution rate.
	•Non-Executive Directors do not participate in any short or long term incentive arrangements and are not
	entitled to any retirement benefits other than compulsory superannuation.
	•Non-Executive Director remuneration is set by reference to comparable entities listed on the ASX (having
	regard to GPT’s industry sector and market capitalisation).
	•External independent advice on remuneration levels for Non-Executive Directors is sought annually. In
	the event that a review results in changes, the new Board and Committee fees are effective from the 1st of
	January in the applicable year and advised in the ensuing Remuneration Report.
	•Fees (including superannuation) paid to Non-Executive Directors are subject to an aggregate limit of
	$1,800,000 per annum, which was approved by GPT securityholders at the Annual General Meeting on
	5 May 2015. As an Executive Director, Mr Johnston does not receive fees from this pool as he is remunerated
	as one of GPT’s senior executives.

1. Board and committee fees[23,24]

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Sustainability and Nomination and
Year Board Base Fee Audit Committee Risk Committee Remuneration Committee
Chairman 2018 $400,000 $37,000 $31,000 $31,000
2017 $380,000 $36,000 $30,000 $30,000
Members 2018 $152,000 $18,500 $15,500 $15,500
2017 $148,000 $18,000 $15,000 $15,000
2. Reported remuneration – Non-Executive Directors – AIFRS accounting [25,26]
Fixed pay
Non-Executive Director Year Salary and fees Superannuation Other [27] Total
Current
Vickki McFadden [28] 2018 $289,851 $16,481 – $306,332
Chairman 2017 – – – –
Eileen Doyle 2018 $214,596 $20,094 – $234,690
2017 $203,500 $19,333 – $222,833
Swe Guan Lim 2018 $186,000 $17,670 $908 $204,578
2017 $181,000 $17,195 $287 $198,482
Angus McNaughton [29] 2018 $27,917 $2,652 – $30,569
2017 – – – –
Michelle Somerville 2018 $204,500 $19,428 – $223,928
2017 $192,750 $18,311 – $211,061
Gene Tilbrook 2018 $183,000 $17,385 $1,103 $201,488
2017 $178,000 $16,910 $380 $195,290
Former
Rob Ferguson [30] 2018 $137,949 $8,617 – $146,566
2017 $380,000 $19,832 – $399,832
Brendan Crotty [31] 2018 $159,292 $15,133 – $174,425
2017 $181,000 $17,195 – $198,195
Total 2018 $1,403,105 $117,460 $2,011 $1,522,576
2017 $1,316,250 $108,776 $667 $1,425,693
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23 ‘Chairman’ used in this sense may refer to the chairperson of the board or a particular committee.

24 In addition to the fees noted in the table, all non-executive directors receive reimbursement for reasonable travel, accommodation and other expenses incurred while undertaking GPT business.

25 This table provides a breakdown of remuneration for Non-Executive Directors in accordance with statutory requirements and Australian accounting standards. 26 No termination benefits were paid during the financial year.

27 Other may include death and total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.

28 Ms McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018.

29 Mr McNaughton joined GPT on 1 November 2018.

30 Mr Ferguson retired from the GPT Board on 2 May 2018.

31 Mr Crotty retired from the GPT Board on 8 November 2018.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Report – Year ended 31 December 2018

3. Non-Executive Director – GPT security holdings

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Private holdings (# of securities) Minimum security holding requirement (MSHR)
Balance Balance
Non-Executive Director 31/12/17 Purchase/(Sale) 31/12/18 Gross value [32] MSHR guideline [33]
Vickki McFadden - 50,000 50,000 $264,780 $400,000
-
Eileen Doyle 45,462 45,462 $240,749 $152,000
Swe Guan Lim 15,800 23,200 39,000 $206,528 $152,000
- - - -
Angus McNaughton $152,000
Michelle Somerville 16,157 20,506 36,663 $194,153 $152,000
Gene Tilbrook 48,546 - 48,546 $257,080 $152,000
----- End of picture text -----

The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors of GPT Management Holdings Limited.

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Vickki McFadden Chairman

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Bob Johnston Chief Executive Officer and Managing Director

Sydney 11 February 2019

32 Non-Executive Directors holdings multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 to derive a dollar value.

33 The MSHR for Non-Executive Directors is equal to 100% of base fees. Individuals have four years from commencement of employment to achieve the MSHR before it is assessed for the first time.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

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Auditor’s Independence Declaration

As lead auditor for the audit of GPT Management Holdings Limited for the year ended 31 December 2018, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of GPT Management Holdings Limited and the entities it controlled during the period.

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Susan Horlin Partner PricewaterhouseCoopers

Sydney 11 February 2019

PricewaterhouseCoopers, ABN 52 780 433 757

One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Financial Statements

Consolidated Statement of Comprehensive Income

Year ended 31 December 2018

Note	31 Dec 18 $’000 31 Dec 17 $’000
Revenue Fund management fees Property management fees Development management fees Development revenue Other revenue Management costs recharged Other income Share of after tax profit of equity accounted investments 2(c) Interest revenue Profit on the sale of other assets Proceeds from sale of inventory Derecognition of available for sale financial asset Total revenue and other income Expenses Remuneration expenses Cost of sale of inventory Property expenses and outgoings Development expenses Repairs and maintenance Professional fees Depreciation Amortisation Revaluation of financial arrangements Impairment expense Finance costs Other expenses Total expenses (Loss)/profit before income tax Income tax expense 10(a) Loss after income tax from continuing operations Loss from discontinued operations 24(b) Net loss for the year Other comprehensive income from discontinued operations Items that may be reclassified to profit and loss Net foreign exchange translation adjustments 11(b) Revaluation of available for sale financial asset 11(b) Total comprehensive loss for the year Net (loss)/profit attributable to: - Members of the Company - Non-controlling interest Total comprehensive (loss)/income attributable to: - Members of the Company - Non-controlling interest Earnings per share attributable to the ordinary equity holders of the Company Basic and diluted earnings per share (cents per share) from continuing operations 12(a) Basic and diluted earnings per share (cents per share) – Total 12(a)	84,619 77,206 43,511 38,863 21,634 24,601 – 7,438 – 331 32,059 32,334
	181,823 180,773
	5,003 6,237 685 572 – 4 28,883 10,358 – 10,699
	34,571 27,870
	216,394 208,643
	121,435 123,124 27,214 8,976 9,014 8,879 – 8,237 4,762 4,597 5,766 5,098 2,014 1,867 5,205 6,041 42,018 20,164 11,256 5,334 1,263 2,332 4,212 8,141
	234,159 202,790
	(17,765) 5,853
	7,670 6,406
	(25,435) (553) (15,527) (13,669)
	(40,962) (14,222)
	(16,770) 30 – (7,125)
	(57,732) (21,317)
	(41,524) (18,776) 562 4,554 (58,294) (25,871) 562 4,554 (1.44) (0.28) (2.30) (1.04)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Consolidated Statement of Financial Position

At 31 December 2018

Note	31 Dec 18 $’000 31 Dec 17 $’000
ASSETS Current assets Cash and cash equivalents Trade receivables 3 Other receivables Loan receivables 20 Current tax asset 10(b) Inventories 5 Prepayments Total current assets Non-current assets Intangible assets 4 Property, plant and equipment 6 Inventories 5 Equity accounted investments 2 Deferred tax asset 10(c) Deferred acquisition costs Other assets 7 Total non-current assets Total assets LIABILITIES Current liabilities Payables 8 Current tax liability 10(b) Provisions 9 Borrowings 14 Total current liabilities Non-current liabilities Borrowings 14 Provisions 9 Other liabilities Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity 11(a) Reserves 11(b) Accumulated losses 11(c) Total equity attributable to Company members Non-controlling interests Total equity	19,259 20,033 45,476 62,895 4,507 630 – 37,032 763 – 34,654 11,808 2,640 1,317
	107,299 133,715
	26,799 30,901 12,661 9,910 143,618 177,410 21,423 21,988 21,091 17,763 545 1,198 12,964 7,785
	239,101 266,955
	346,400 400,670
	36,889 62,109 – 8,559 33,862 38,715 – 19,921
	70,751 129,304
	154,618 99,146 13,602 10,250 7,539 6,075
	175,759 115,471
	246,510 244,775
	99,890 155,895
	325,855 325,703 19,794 37,803 (261,799) (220,275)
	83,850 143,231
	16,040 12,664
	99,890 155,895

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

100

Equity attributable to Company Members At 1 January 2017 Revaluation of available for sale financial asset net of tax Derecognition of available for sale financial asset Foreign currency translation reserve Other comprehensive income for the year (Loss)/profit for the year Total comprehensive income for the year Transactions with Members in their capacity as Members Issue of securities Movement in employee incentive security scheme reserve net of tax Reclassification of employee incentive security scheme reserve to accumulated losses Distributions At 31 December 2017 Equity attributable to Company Members At 1 January 2018 Foreign currency translation reserve Other comprehensive income for the year (Loss)/profit for the year Total comprehensive income for the year Transactions with Members in their capacity as Members Return of capital Issue of securities Movement in employee incentive security scheme reserve net of tax Distributions At 31 December 2018	Note	Company Non-controlling interests
		Contributed equity $’000 Reserves $’000 Accumulated losses $’000 Total $’000 Contributed equity $’000 Reserves $’000 Accumulated losses $’000 Total $’000 Total equity $’000
	11(b) 11(b) 11(b) 11(c) 11(a) 11(b) 11(b) 11(c) 11(b) 11(c) 11(a) 11(b) 11(c)	325,512 44,683 (201,041) 169,154 22,060 – (9,396) 12,664 181,818 – 983 – 983 – – – – 983 – (8,108) – (8,108) – – – – (8,108) – 30 – 30 – – – – 30
		– (7,095) – (7,095) – – – – (7,095) – – (18,776) (18,776) – – 4,554 4,554 (14,222)
		– (7,095) (18,776) (25,871) – – 4,554 4,554 (21,317) 191 – – 191 – – – – 191 – (243) – (243) – – – – (243) – 458 (458) – – – – – – – – – – – – (4,554) (4,554) (4,554)
		325,703 37,803 (220,275) 143,231 22,060 – (9,396) 12,664 155,895
		325,703 37,803 (220,275) 143,231 22,060 – (9,396) 12,664 155,895 – (16,770) – (16,770) – – – – (16,770)
		– (16,770) – (16,770) – – – – (16,770) – – (41,524) (41,524) – – 562 562 (40,962)
		– (16,770) (41,524) (58,294) – – 562 562 (57,732) – – – – (888) – – (888) (888) 152 – – 152 – – – – 152 – (1,239) – (1,239) – – – – (1,239) – – – – – – 3,702 3,702 3,702
		325,855 19,794 (261,799) 83,850 21,172 – (5,132) 16,040 99,890

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Consolidated Statement of Cash Flows

Year ended 31 December 2018

Note	31 Dec 18 $’000 31 Dec 17 $’000
Cash flows from operating activities	264,045 149,423 (164,193) (137,730) 28,883 10,358 (24,502) (51,951) – 41,686 – (3,904) 4,770 – 685 572 (899) (991) – 30,437 20,876 (6,442)
Receipts in the course of operations (inclusive of GST)
Payments in the course of operations (inclusive of GST)
Proceeds from the sale of inventories
Payments for inventories
Receipts from development activities
Payments for development activities
Distributions received from equity accounted investments
Interest received
Finance costs paid
Dividend received from available for sale financial asset
Income taxes paid
Net cash inflows from operating activities 16(a)	87,913 31,458
	– 1,279 (3,007) (1,119) (3,326) (4,694) 962 – – 10,699
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for intangibles
Return of capital from equity accounted investment
Capital return from available for sale financial asset
Net cash (outflows)/inflows from investing activities	(5,371) 6,165
	(206,305) (35,181) 145,668 16,256 (28,404) (14,681) 20,932 15,705 (15,207) (17,531)
Cash flows from financing activities
Repayment of related party borrowings
Proceeds from related party borrowings
Repayments of borrowings
Proceeds from borrowings
Purchase of securities for the employee incentive scheme
Net cash outflows from financing activities	(83,316) (35,432)

Net cash (decrease)/increase in cash and cash equivalents	(774) 2,191
Cash and cash equivalents at the beginning of the year	20,033 17,842
Cash and cash equivalents at the end of the year	19,259 20,033

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

102

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements Year ended 31 December 2018

These are the consolidated financial statements of GPT Management Holdings Limited and its controlled entities (the Consolidated Entity).

The notes to the financial statements are organised into the following sections:

Note 1 – Result for the year: focuses on results and performance of the Consolidated Entity.

Notes 2 to 10 – Operating assets and liabilities: provides information on the assets and liabilities used to generate the Consolidated Entity’s trading performance.

Notes 11 to 15 – Capital structure: outlines how the Consolidated Entity manages its capital structure and various financial risks.

Notes 16 to 26 – Other disclosure items: provides information on other items that must be disclosed to comply with Australian Accounting Standards and other regulatory pronouncements.

Key judgements, estimates and assumptions

In applying the Consolidated Entity’s accounting policies, management has made a number of judgements, estimates and assumptions regarding future events.

The following judgements and estimates have the potential to have a material impact on the financial statements:

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Area of judgements and
estimates Assumptions underlying Note
Management rights with Impairment trigger and 4
indefinite life recoverable amounts
IT development and software Impairment trigger and 4
recoverable amounts
Inventories Lower of cost and net 5
realisable value
Deferred tax assets Recoverability 10
Security based payments Fair value 19
Investment in financial Fair value 23
assets
Investment in equity Assessment of control 25(b)
accounted investments versus disclosure guidance
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Result for the year

1. Segment information

The chief operating decision makers monitor the performance of the business in a manner consistent with that of the financial report. Refer to the Consolidated Statement of Comprehensive Income for the segment financial performance and the Consolidated Statement of Financial Position for the total assets and liabilities.

Revenue

Rental revenue is recognised on a straightline basis over the lease term. When the consolidated entity provides lease incentives to tenants, any costs are recognised on a straightline basis over the lease term.

Revenue from dividends and distributions are recognised when they are declared.

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

Refer to note 25(e) for information relating to revenue policies adopted under AASB 15 Revenue from Contracts with Customers.

Expenses

Property expenses and outgoings which include rates, taxes and other property outgoings, are recognised on an accruals basis.

Finance costs

103

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Operating assets and liabilities

2. Equity accounted investments

2. Equity accounted investments
Note	31 Dec 18 $’000 31 Dec 17 $’000
Investments in joint ventures (a)(i) Investments in associates (a)(ii) Total equity accounted investments	11,423 11,988 10,000 10,000
	21,423 21,988

(a) Details of equity accounted investments

Name Principal activity	Ownership interest	31 Dec 18 $’000 31 Dec 17 $’000
	31 Dec 18 % 31 Dec 17 %
(i) Joint ventures DPT Operator Pty Limited Management Lendlease GPT (Rouse Hill) Pty Limited1 Property development Erskine Park Trust Property development Total investment in joint ventures (ii) Associates GPT Funds Management Limited Funds management Total investment in associates	50.00 50.00 50.00 50.00 50.00 50.00 100.00 100.00	90 89 11,324 11,896 9 3
		11,423 11,988
		10,000 10,000
		10,000 10,000

1 The entity has a 30 June balance date. The Consolidated Entity has a 50 per cent interest in Lendlease GPT (Rouse Hill) Pty Limited, a joint venture developing residential and commercial land at Rouse Hill, in partnership with Urban Growth and the NSW Department of Planning. The Consolidated Entity’s interest is held through a subsidiary that is 52 per cent owned by the Consolidated Entity and 48 per cent owned by GPT Trust.

(b) Summarised financial information for joint ventures and associates

The information disclosed reflects the amounts presented in the financial results of the relevant joint ventures and associates and not the Consolidated Entity’s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments and modifications for differences in accounting policy.

	31 Dec 18 $’000 31 Dec 17 $’000
Cash and cash equivalents Other assets Property investments and loans Total assets Liabilities Total liabilities Net assets Consolidated entity’s share of net assets Additional ownership costs Total equity accounted investment	21,817 25,966 18,464 18,488 11,812 17,408
	52,093 61,862
	19,755 28,180
	19,755 28,180
	32,338 33,682
	21,169 21,841
	254 147
	21,423 21,988

104

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

(c) Share of after tax profit of equity accounted investments

(c) Share of after tax profit of equity accounted investments
	31 Dec 18 $’000 31 Dec 17 $’000
Revenue Expenses Profit before income tax expense Income tax expense Profit after income tax expense Share of after tax profit of joint ventures and associates Additional ownership costs Share of after tax profit of equity accounted investments	24,052 12,478 (12,201) (3)
	11,851 12,475 (1) (1)
	11,850 12,474
	5,925 6,237
	(922) –
	5,003 6,237

(d) Reconciliation of the carrying amount of investments in joint ventures and associates

	31 Dec 18 $’000 31 Dec 17 $’000
Carrying value at 1 January 2018 Return of capital Share of after tax profit of joint ventures and associates Distributions received/receivable Carrying value at 31 December 2018 Additional ownership costs Carrying amount of equity accounted investments	21,988 15,752 (1,850) – 5,925 6,237 (4,747) (1)
	21,316 21,988
	107 –
	21,423 21,988

3. Trade receivables

	31 Dec 18 $’000 31 Dec 17 $’000
Trade receivables1 Less: impairment of trade receivables Accrued income Related party receivables2 Trade receivables	30,948 23,950 (622) (12)
	30,326 23,938 188 1,474 14,962 37,483
	45,476 62,895

1 The trade receivables balance includes amounts receivable from GWOF and GWSCF. See note 20 for more details on related party transactions.

2 The related party receivables are from GPT Trust and have been agreed on commercial terms and conditions.

The table below shows the ageing analysis of the Consolidated Entity’s receivables.

	31 Dec 18 31 Dec 17
	Not Due $’000 0-30 days $’000 31-60 days $’000 61-90 days $’000 90+ days $’000 Total $’000 Not Due $’000 0-30 days $’000 31-60 days $’000 61-90 days $’000 90+ days $’000 Total $’000
Trade receivables Impairment of trade receivables Total trade receivables	188 39,259 1,122 3,434 2,095 46,098 1,474 57,675 504 – 3,254 62,907 – – – – (622) (622) – – – – (12) (12)
	188 39,259 1,122 3,434 1,473 45,476 1,474 57,675 504 – 3,242 62,895

Refer to note 25(e) for the accounting policies for Trade Receivables and other information relating to the adoption of AASB 9 Financial Instruments .

105

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

4. Intangible assets

4. Intangible assets
	Management rights $’000 IT development and software $’000 Total $’000
Cost At 1 January 2017 Additions Transfers Disposals At 31 December 2017 Additions Transfers At 31 December 2018 Accumulated amortisation and impairment At 1 January 2017 Amortisation Disposal Impairment At 31 December 2017 Amortisation At 31 December 2018 Carrying amounts At 31 December 2017 At 31 December 2018	55,825 67,157 122,982 – 4,702 4,702 – 2,843 2,843 – (11,467) (11,467)
	55,825 63,235 119,060 – 3,498 3,498 – (2,395) (2,395)
	55,825 64,338 120,163 (45,094) (42,632) (87,726) (326) (5,715) (6,041) – 11,467 11,467 – (5,859) (5,859)
	(45,420) (42,739) (88,159) (138) (5,067) (5,205)
	(45,558) (47,806) (93,364) 10,405 20,496 30,901
	10,267 16,532 26,799

Management rights

Management rights include property management and development management rights. Rights are initially measured at cost and rights with a definite life are subsequently amortised over their useful life, which has been assessed at 10 years.

For the management rights of Highpoint Shopping Centre, management considers the useful life as indefinite as there is no fixed term included in the management agreement. Therefore, the Consolidated Entity tests for impairment at balance date. Assets are impaired if the carrying value exceeds their recoverable amount. The recoverable amount is determined using a multiples approach. A range of multiples from 10 – 15x have been used in the calculation.

IT development and software

IT development and software are assessed for impairment at each reporting date by evaluating if any impairment triggers exist. Where impairment triggers exist, management calculate the recoverable amount. The asset will be impaired if the carrying amount exceeds the recoverable amount. Critical judgements are made by management in setting appropriate impairment triggers and assumptions used to determine the recoverable amount.

106

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

5. Inventories

5. Inventories
	31 Dec 18 $’000 31 Dec 17 $’000
Development properties Current inventories Development properties Non-current inventories Total inventories	34,654 11,808
	34,654 11,808
	143,618 177,410
	143,618 177,410
	178,272 189,218

An impairment expense has been recognised for the year ended 31 December 2018 of $11,391,000 in relation to Metroplex.

Development properties held as inventory to be sold are stated at the lower of cost and net realisable value.

Cost

Net realisable value (NRV)

The NRV is the estimated selling price in the ordinary course of business less estimated costs to sell. At each reporting date, management reviews these estimates by taking into consideration:

the most reliable evidence; and

• any events which confirm conditions existing at the year end and cause any fluctuations of selling price and costs to sell. The amount of any inventories write down is recognised as an impairment expense in the Consolidated Statement of Comprehensive Income.

6. Property, plant and equipment

6. Property, plant and equipment
	31 Dec 18 $’000 31 Dec 17 $’000
Computers At cost Less: accumulated depreciation and impairment Total computers Office fixtures and fittings At cost Less: accumulated depreciation and impairment Total office fixtures and fittings Total property, plant and equipment	15,008 15,092 (12,314) (11,077)
	2,694 4,015
	17,532 12,683 (7,565) (6,788)
	9,967 5,895
	12,661 9,910

107

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Reconciliations of the carrying amount of property, plant and equipment at the beginning and end of the financial year are set out below:

set out below:
	Computers $’000 Office fixtures & fittings $’000 Total $’000
At 1 January 2017 Opening carrying value Additions Disposals Transfers Depreciation At 31 December 2017 At 1 January 2018 Opening carrying value Additions Transfers Depreciation At 31 December 2018	5,007 9,893 14,900 980 81 1,061 (1,341) – (1,341) 383 (3,226) (2,843) (1,014) (853) (1,867)
	4,015 5,895 9,910
	4,015 5,895 9,910 – 2,578 2,578 (84) 2,271 2,187 (1,237) (777) (2,014)
	2,694 9,967 12,661

The value of property, plant and equipment is measured as the cost of the asset less depreciation and impairment. The cost of the asset includes acquisition costs and any costs directly attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Consolidated Statement of Comprehensive Income during the financial period in which they are incurred.

Depreciation

Items of property, plant and equipment are depreciated on a straightline basis over their useful lives. The estimated useful life is between 3 and 40 years.

Impairment

The Consolidated Entity tests property, plant and equipment for impairment where there is an indicator that the asset may be impaired. 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.

Disposals

Gains and losses on disposals are determined by comparing proceeds from disposals with the carrying amount of the property, plant and equipment and are included in the Consolidated Statement of Comprehensive Income in the year of disposal.

7. Other assets

	31 Dec 18 $’000 31 Dec 17 $’000
Lease incentive asset Investment in financial asset Other financial asset Total other assets	5,338 3,493 4,576 4,292 3,050 –
	12,964 7,785

108

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

8. Payables

8. Payables
	31 Dec 18 $’000 31 Dec 17 $’000
Trade payables1 Accruals Other payables Total payables	1,932 27,813 24,813 27,689 10,144 6,607
	36,889 62,109

1 2017 includes a $10,461,283 distribution payable to GPT Trust for GPT Trust’s 48 per cent ownership of GPT Residential (Rouse Hill) Trust of which the Consolidated Entity has control.

Trade payables and accruals represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year which are unpaid. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

9. Provisions

		31 Dec 18 $’000 31 Dec 17 $’000
Current provisions Employee benefits Other Total current provisions Non-current provisions Employee benefits Other Total non-current provisions Total provisions	Employee benefits $’000	29,623 29,159 4,239 9,556
		33,862 38,715
		11,942 9,553 1,660 697
		13,602 10,250
		47,464 48,965
		Other $’000 Total $’000
As at 1 January 2017 Arising during the year Utilised during the year As at 31 December 2017 As at 1 January 2018 Arising during the year Utilised during the year As at 31 December 2018	34,223 29,337 (24,848)	3,684 37,907 7,143 36,480 (574) (25,422)
	38,712	10,253 48,965
	38,712 21,368 (18,515)	10,253 48,965 1,641 23,009 (5,995) (24,510)
	41,565	5,899 47,464

Provisions are recognised when:

the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event;
it is probable that resources will be expended to settle the obligation; and
a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the obligation.

Provision for employee benefits

The provision for employee benefits represents annual leave, long service leave and parental leave entitlements accrued for employees. The employee benefit liability expected to be settled within twelve months after the end of the reporting period is recognised in current liabilities. The non-current provision relates to entitlements, including long service leave, which are due to be payable after more than twelve months from the balance sheet date. It is measured as the present value of expected future payments for the service provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at balance date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Employee benefit on-costs are recognised together with the employee benefits and included in employee benefit liabilities.

109

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

10. Taxation

(a) Income tax expense

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31 Dec 18 31 Dec 17
$’000 $’000
Current income tax expense 11,554 17,012
Deferred income tax credit (3,884) (10,606)
Income tax expense in the Consolidated Statement of Comprehensive Income 7,670 6,406
Income tax expense attributable to:
Loss from continuing operations 7,670 6,406
Aggregate income tax expense 7,670 6,406
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(b) Reconciliation of income tax expense to prima facie tax payable

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31 Dec 18 31 Dec 17
$’000 $’000
Loss from continuing operations before income tax expense (17,765) 5,853
Loss from discontinued operations before income tax expense (15,527) (13,669)
Net loss before income tax expense (33,292) (7,816)
Prima facie income tax credit at 30% tax rate (2017: 30%) (9,988) (2,345)
Tax effect of amounts not deductible/assessable in calculating income tax expense:
Prior year adjustments – 175
Previously unrecognised tax losses – (421)
Non-deductible revaluation items 22,525 10,028
Non assessable income:
Derecognition of available for sale financial asset – (3,210)
Other non-assessable income (222) (2,865)
Other tax adjustments:
–
Release of amounts from foreign currency translation reserve (5,086)
Release of gain from available for sale reserve – 2,592
Other income – 1,480
Permanent differences arising from non-deductible amounts 441 972
Income tax expense 7,670 6,406
Add/(less) amounts to reconcile to current tax (asset)/liability:
Temporary differences:
Employee benefits 457 713
Provisions and accruals (84) (236)
Dividends received – 9,131
Other deferred tax asset charged to income 2,955 2,616
Movement in reserves 556 (1,618)
Opening balance:
Balance transferred from prior period 8,559 (2,011)
Tax adjustments:
Tax payments made to tax authorities (20,876) (6,442)
Current tax (asset)/liability (763) 8,559
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110

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

(c) Deferred tax asset

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31 Dec 18 31 Dec 17
$’000 $’000
Employee credits 15,906 15,449
Provisions and accruals 2,863 2,947
Other 2,322 (633)
Net deferred tax asset 21,091 17,763
Movement in temporary differences during the year
Opening balance at the beginning of the year 17,763 7,550
Credited to the Consolidated Statement of Comprehensive Income 3,884 10,606
Movement in reserves (556) 1,618
Other/utilisation of tax losses – (2,011)
Closing balance at the end of the year 21,091 17,763
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(d) Effective tax rate

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31 Dec 18 31 Dec 17
$’000 $’000
Net loss for the year excluding income tax expense (33,292) (7,816)
Add: non-deductible revaluation items 75,082 33,657
–
Less: amounts released from foreign currency translation reserve (16,953)
Less: equity accounted profits from joint ventures (5,925) (6,237)
–
Add: distribution received from joint ventures taxable to the Company 4,770
Profit used to calculate effective tax rate 23,682 19,604
Income tax expense 7,670 6,406
Add: carry forward tax losses recognised – 421
Less: prior year under/overstatements – (175)
Income tax expense used to calculate effective tax rate 7,670 6,652
Effective tax rate 32% 34%
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Adoption of Voluntary Tax Transparency Code

The Board of Taxation has released a voluntary Tax Transparency Code (TTC). The TTC sets out a recommended set of principles and minimum standards regarding the disclosure of tax information for businesses. The Consolidated Entity is committed to the TTC. The non-IFRS income tax disclosures above and in note 10(b) include the recommended additional disclosures.

The Australian Accounting Standards Board have issued a Draft Appendix to the TTC outlining the method to calculate the effective tax rate as shown in the table above, using:

accounting profit before tax adjusted to exclude transactions which are not reflected in the calculation of income tax expense; and
tax expense adjusted to exclude carry forward tax losses that have been recognised and prior year under/overstatements.

Income tax expense

Deferred income tax liabilities and assets – recognition

Deferred income tax liabilities are recognised for all taxable temporary differences.

Deferred income tax assets and liabilities – measurement

111

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Deferred income tax is provided on temporary differences at the reporting date between accounting carrying amounts and the tax cost bases of assets and liabilities, other than for the following:

Where taxable temporary differences relate to investments in subsidiaries, associates and interests in joint ventures: – deferred tax liabilities are not recognised if the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
deferred tax assets are not recognised if it is not probable that the temporary differences will reverse in the foreseeable future and taxable profit will not be available to utilise the temporary differences.

Tax relating to equity items

Income taxes relating to items recognised directly in equity are recognised in equity and not in the Consolidated Statement of Comprehensive Income.

Capital structure

11. Equity and reserves

(a) Contributed equity

	Number $’000
Ordinary stapled securities Opening securities on issue at 1 January 2017 Securities issued – Long Term Incentive Plan Securities issued – Deferred Short Term Incentive Plan Securities issued – Broad Based Employee Security Ownership Plan Securities issued – Employee Incentive Plan Closing securities on issue at 31 December 2017 Opening securities on issue at 1 January 2018 Securities issued – Long Term Incentive Plan Securities issued – Deferred Short Term Incentive Plan Securities issued – Broad Based Employee Security Ownership Plan Closing securities on issue at 31 December 2018	1,797,955,568 325,512 2,763,052 109 855,355 76 54,338 5 12,569 1
	1,801,640,882 325,703
	1,801,640,882 325,703 2,332,026 92 875,344 57 42,174 3
	1,804,890,426 325,855

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

(b) Reserves

	Foreign Currency Translation Reserve $’000 Employee Incentive Scheme Reserve $’000 Fair Value Reserve $’000 Total Reserve $’000
Balance at 1 January 2017 Net foreign exchange translation adjustments Reclassification to accumulated losses Employee incentive schemes expense, net of tax Tax on incentives valued at reporting date Purchase of securities Issue of securities Revaluation of available for sale financial asset, net of tax Derecognition of available for sale financial asset, net of tax Balance at 31 December 2017 Balance at 1 January 2018 Net foreign exchange translation adjustments Employee incentive schemes expense, net of tax Tax on incentives valued at reporting date Issue of securities Balance at 31 December 2018	34,913 2,645 7,125 44,683 30 – – 30 – 458 – 458 – 624 – 624 – (552) – (552) – (131) – (131) – (184) – (184) – – 983 983 – – (8,108) (8,108)
	34,943 2,860 – 37,803
	34,943 2,860 – 37,803 (16,770) – – (16,770) – (531) – (531) – (556) – (556) – (152) – (152)
	18,173 1,621 – 19,794

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Nature and purpose of reserves

Foreign currency translation reserve

Employee incentive scheme reserve

The reserve is used to recognise the fair value of equity-settled security-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 19 for further details of security based payments.

Fair value reserve

The fair value reserve comprises the cumulative net change in available for sale financial assets until the assets are derecognised or impaired.

(c) Accumulated losses

	Company $’000 Non-controlling interest $’000 Total $’000
Balance at 1 January 2017 Net (loss)/profit for the year Reclassification from employee incentive security scheme Distributions Balance at 31 December 2017 Balance at 1 January 2018 Net (loss)/profit for the year Distributions Balance at 31 December 2018	(201,041) (9,396) (210,437) (18,776) 4,554 (14,222) (458) – (458) – (4,554) (4,554)
	(220,275) (9,396) (229,671)
	(220,275) (9,396) (229,671) (41,524) 562 (40,962) – 3,702 3,702
	(261,799) (5,132) (266,931)

12. Earnings per share

(a) Basic and diluted earnings per share

	31 Dec 18 Cents 31 Dec 17 Cents
Basic and diluted earnings per share – loss from continuing operations Basic and diluted loss per share – loss from discontinued operations Total basic and diluted earnings per share	(1.44) (0.28) (0.86) (0.76)
	(2.30) (1.04)

(b) The profit used in the calculation of the basic and diluted earnings per share is as follows:

(Loss)/profit reconciliation – basic and diluted	31 Dec 18 $’000 31 Dec 17 $’000
Loss from continuing operations Loss from discontinued operations Profit attributed to external non-controlling interest	(25,997) (5,107) (15,527) (13,669) 562 4,554
	(40,962) (14,222)

(c) WANOS

The earnings and weighted average number of ordinary shares (WANOS) used in the calculations of basic and diluted earnings per ordinary share are as follows:

(c) WANOS The earnings and weighted average number of ordinary shares (WANOS) used in the earnings per ordinary share are as follows:	calculations of basic and diluted
	31 Dec 18 Number of shares ‘000s 31 Dec 17 Number of shares ‘000s
WANOS used as denominator in calculating basic earnings per ordinary share Performance security rights (weighted average basis)1 WANOS used as denominator in calculating diluted earnings per ordinary share	1,804,400 1,801,095 2,654 2,410
	1,807,054 1,803,505

1 Performance security rights granted under the Long Term Incentive plan are only included in dilutive earnings per ordinary share where the performance hurdles are met as at the year end.

113

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Calculation of earnings per share

Basic earnings per share is calculated as net profit or loss attributable to ordinary shareholders of the Company, divided by the weighted average number of ordinary shares outstanding during the financial year which is adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share is calculated as net profit or loss attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares and dilutive potential ordinary securities. Where there is no difference between basic earnings per share and diluted earnings per share, the term basic and diluted earnings per ordinary share is used.

13. Dividends paid and payable

No dividends have been paid or declared for the 2018 financial year (2017: nil).

14. Borrowings

14. Borrowings
	31 Dec 18 31 Dec 17
	Carrying amount1 $’000 Fair value2 $’000 Carrying amount1 $’000 Fair value2 $’000
Current borrowings at amortised cost – secured Current borrowings Non-current borrowings at amortised cost – secured Related party borrowings from GPT Trust at amortised cost Non-current borrowings Total borrowings	- - 19,921 19,980
	- - 19,921 19,980
	12,587 12,636 - - 142,031 142,031 99,146 99,625
	154,618 154,667 99,146 99,625
	154,618 154,667 119,067 119,605

1 Including unamortised establishment costs.

2 For the majority of borrowings, the carrying amount approximates its fair value. The fair value of fixed rate interest-bearing borrowings is estimated by discounting the future contractual cash flows at the current market interest rate curve. Excluding unamortised establishment costs.

The unsecured borrowings are provided by GPT Trust and its subsidiaries and have been revalued based on an adjusted working capital calculation at 31 December 2018, in accordance with the loan agreement. As a result, a revaluation loss of $75,000,000 (2017: $34,097,679) for both continuing ($42,461,499) and discontinued ($32,538,501) operations has been recognised in the Consolidated Statement of Comprehensive Income. The following borrowings were revalued to nil at 31 December 2018 (Dec 2017: nil):

the amount outstanding on the loan facility to GPT Management Holdings Limited at 31 December 2018 is $332,527,776 (Dec 2017: $348,797,027). $16,269,251 was repaid during the period. This facility expires on 31 December 2030
the amount outstanding on the loan facility to GPT International Pty Limited at 31 December 2018 is $59,359,269 (Dec 2017: $75,628,519). $16,269,250 was repaid during the period. This facility expires on 12 June 2032
the amount outstanding on the loan facility to Voyages Hotels & Resorts (Loan 1) at 31 December 2018 is $16,347,082 (Dec 2017: $32,616,333). $16,269,251 was repaid during the period. This facility expires on 30 June 2032
the amount outstanding on the loan facility to Voyages Hotels & Resorts (Loan 2) at 31 December 2018 is $31,683,609 (Dec 2017: $47,952,859). $16,269,250 was repaid during the period. This facility expires on 3 January 2035
the amount outstanding on the loan facility to GPT Property Management Ltd was fully repaid during the year, totalling $9,922,998.

No interest is payable in connection with the above loans from 3 September 2015. The loans are non-revolving interest free borrowings that are revalued each reporting date in accordance with accounting standards.

Borrowings are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. Under this method, any transaction fees, costs, discounts and premiums directly related to the borrowings are recognised in the Consolidated Statement of Comprehensive Income over the expected life of the borrowings.

All borrowings with maturities greater than 12 months after reporting date are classified as non-current liabilities.

When the terms of a financial liability are modified, AASB 9 requires an entity to perform an assessment to determine whether the modified terms are substantially different from the existing financial liability. Where a modification is substantial, it will be accounted for as an extinguishment of the original financial liability and a recognition of a new financial liability. Where the modification does not result in extinguishment, the difference between the existing carrying amount of the financial liability and the modified cash flows discounted at the original effective interest rate is recognised in the Consolidated Statement of Comprehensive Income as gain/loss on modification of financial liability. The Consolidated Entity has assessed the modification of terms requirements within AASB 9 and have concluded that for intercompany loans with modifications these were deemed to be substantial resulting in extinguishment. Accordingly there has been no gain/loss recognised in the Consolidated Statement of Comprehensive Income.

114

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

The maturity profile of borrowings is provided below:

The maturity profile of borrowings is provided below:
	Total facility1 $’000 Used facility1 $’000	Unused facility $’000
Due within one year Due between one and five years Due after five years Cash and cash equivalents Total financing resources available at the end of the year	– – 36,154 31,860 668,618 562,724 704,772 594,584	– 4,294 105,894
		110,188 19,259
		129,447

1 Excludes unamortised establishment costs.

Cash and cash equivalents includes cash on hand, cash at bank and short term money market deposits.

15. Financial risk management

The Board approve the Consolidated Entity’s treasury policy which:

establishes a framework for the management of risks inherent to the capital structure;
defines the role of the Consolidated Entity’s treasury; and
sets out the policies, limits, monitoring and reporting requirements for cash, borrowings, liquidity, credit risk, foreign exchange and interest rate instruments.

(a) Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Consolidated Entity’s primary interest rate risk arises from interest bearing borrowings. The table below provides a summary of the Consolidated Entity’s gross interest rate risk exposure as at 31 December 2018 on interest bearing borrowings together with the net effect of interest rate risk management transactions. This excludes unamortised establishment costs.

	Gross exposure Net exposure
	2018 $’000 2017 $’000 2018 $’000 2017 $’000
Fixed rate interest-bearing borrowings Floating rate interest-bearing borrowings	– 48,353 – 48,353 154,618 70,714 154,618 70,714
	154,618 119,067 154,618 119,067

The impact on interest expense and interest revenue of a 1 per cent increase or decrease in market interest rates is shown below.

A 1 per cent increase or decrease is used for consistency of reporting interest rate risk across the Consolidated Entity and represents management’s assessment of the potential change in interest rates.

	2018 (+1%) $’000 2018 (-1%) $’000 2017 (+1%) $’000 2017 (-1%) $’000
Impact on Statement of Comprehensive Income Impact on interest revenue increase/(decrease) Impact on interest expense (increase)/decrease	193 (193) 200 (200) (1,547) 1,547 (708) 708
	(1,354) 1,354 (508) 508

115

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

(b) Liquidity risk

Liquidity risk is the risk that the Consolidated Entity, as a result of its operations:

will not have sufficient funds to settle a transaction on the due date;
will be forced to sell financial assets at a value which is less than what they are worth; or
may be unable to settle or recover a financial asset at all.

The Consolidated Entity manages liquidity risk by:

maintaining sufficient cash;
maintaining an adequate amount of committed credit facilities;
maintaining a minimum liquidity buffer in cash and surplus committed facilities for the forward rolling twelve month period; and
maintaining the ability to close out market positions.

The table below shows an analysis of the undiscounted contractual maturities of liabilities which forms part of the Consolidated Entity’s assessment of liquidity risk.

	31 Dec 18 31 Dec 17
	1 year or less $’000 Over 1 year to 2 years $’000 Over 2 years to 5 years $’000 Over 5 years $’000 Total $’000 1 year or less $’000 Over 1 year to 2 years $’000 Over 2 years to 5 years $’000 Over 5 years $’000 Total $’000
Liabilities Non-derivatives Payables Current tax liability Borrowings1 Projected interest cost on borrowings Total liabilities Less cash and equivalents Total liquidity exposure	36,889 – – – 36,889 62,109 – – – 62,109 – – – – – 8,559 – – – 8,559 – 31,860 – 562,724 594,584 19,980 28,353 39,224 546,487 634,044 10,429 9,569 27,097 5,993 53,088 7,646 4,804 5,928 5,669 24,047
	47,318 41,429 27,097 568,717 684,561 98,294 33,157 45,152 552,156 728,759
	19,259 – – – 19,259 20,033 – – – 20,033
	28,059 41,429 27,097 568,717 665,302 78,261 33,157 45,152 552,156 708,726

1 Excluding unamortised establishment costs and fair value adjustments. Includes unsecured borrowings provided by GPT Trust and its subsidiaries which have been revalued to nil as per note 14.

(c) Refinancing risk

Refinancing risk is the risk that credit is unavailable or available at unfavourable interest rates and credit market conditions result in an unacceptable increase in the Consolidated Entity’s interest cost. Refinancing risk arises when the Consolidated Entity is required to obtain debt to fund existing and new debt positions. The Consolidated Entity manages this risk by spreading sources, counterparties and maturities of borrowings in order to minimise debt concentration risk, allow averaging of credit margins over time and reducing refinance amounts.

As at 31 December 2018, the Consolidated Entity’s exposure to refinancing risk can be monitored by the spreading of its contractual maturities on borrowings in the liquidity risk table above or with the information in note 14.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

(d) Foreign exchange risk

Foreign exchange risk refers to the risk that the value of a financial commitment, asset or liability will fluctuate due to changes in foreign exchange rates. The Consolidated Entity’s foreign exchange risk arises primarily from:

firm commitments of highly probable forecast transactions for receipts and payments settled in foreign currencies or with prices dependent on foreign currencies; and
investments in foreign assets.

Sensitivity to foreign exchange is deemed insignificant.

Foreign currency assets and liabilities

The following table shows the Australian dollar equivalents of amounts within the Consolidated Statement of Financial Position which are denominated in foreign currencies.

Position which are denominated in foreign currencies.
	Euros United States Dollars
	31 Dec 18 $’000 31 Dec 17 $’000 31 Dec 18 $’000 31 Dec 17 $’000
Assets Cash and cash equivalents Liabilities Other liabilities	– 1,151 – 133
	– 1,151 – 133
	– 304 – –
	– 304 – –

(e) Credit risk

Credit risk is the risk that a contracting entity will not complete its obligations under a contractual agreement, resulting in a financial loss to the Consolidated Entity. The Consolidated Entity has exposure to credit risk on all financial assets included on their Consolidated Statement of Financial Position.

The Consolidated Entity manages this risk by:

establishing credit limits for financial institutions and monitoring credit exposures for customers to ensure that the Consolidated Entity only trades and invests with approved counterparties;
providing loans to joint ventures, associates and third parties, only where the Consolidated Entity is comfortable with the underlying property exposure within that entity;
regularly monitoring loans and receivables balances;
regularly monitoring the performance of its associates, joint ventures and third parties; and
obtaining collateral as security (where appropriate).

Receivables are reviewed regularly throughout the year.

The maximum exposure to credit risk as at 31 December 2018 is the carrying amounts of financial assets recognised on the Consolidated Statement of Financial Position. For more information, refer to note 3.

117

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Other disclosure items

16. Cash flow information

(a) Cash flows from operating activities

Reconciliation of net loss after tax to net cash inflows from operating activities:

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31 Dec 18 31 Dec 17
$’000 $’000
Net loss for the year (40,962) (14,222)
Share of after tax profit of equity accounted investments (net of distributions) (233) (6,237)
Loss on disposal of assets – 62
Capital return from available for sale financial asset – (10,699)
Impairment expense 11,256 5,334
–
Profit on transfer from foreign cash translation reserve (16,954)
Non-cash employee benefits – security based payments 16,608 21,781
Fair value movement of investment in GPT Trust (443) (295)
Interest capitalised (5,910) (10,486)
Deferred interest – (3,252)
Amortisation of rental abatement 392 476
Depreciation expense 2,014 1,867
Amortisation expense 5,205 6,041
Amortisation of deferred acquisition costs 653 654
Finance costs 5,260 11,394
Revaluation of financial arrangements 75,000 34,098
Profit on sale of inventory (1,669) (1,382)
Payments for inventories (24,502) (51,951)
Proceeds from inventories 28,883 10,358
Decrease in operating assets 47,589 18,534
(Increase)/decrease in operating liabilities (15,401) 18,615
Other 1,127 768
Net cash inflows from operating activities 87,913 31,458
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(b) Net debt reconciliation

Reconciliation of net debt movements during the financial year:

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Borrowings Borrowings
due within due after
Cash 1 year 1 year Total
$’000 $’000 $’000 $’000
Net debt as at 31 December 2017 20,033 (19,921) (99,146) (99,034)
Cash flows (774) 19,980 (26,872) (7,666)
Other non-cash movements – (59) (28,600) (28,659)
Net debt as at 31 December 2018 19,259 – (154,618) (135,359)
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118

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

17. Commitments

(a) Capital expenditure commitments

Capital expenditure commitments at 31 December 2018 were $10,019,000 (2017: $1,401,000).

Commitments arise from the purchase of plant and equipment and intangibles, which have been contracted for at balance date but not recognised on the Consolidated Statement of Financial Position.

(b) Operating lease commitments

(b) Operating lease commitments
	31 Dec 18 $’000 31 Dec 17 $’000
Due within one year Due between one and five years Over five years Total operating lease commitments	9,191 6,430 24,917 15,049 18,882 5,495
	52,990 26,974

Operating lease commitments are contracted non-cancellable future minimum lease payments expected to be payable but not recognised on the Consolidated Statement of Financial Position.

(c) Commitments relating to equity accounted investments

(c) Commitments relating to equity accounted investments
	31 Dec 18 $’000 31 Dec 17 $’000
Capital expenditure commitments Total joint venture and associates commitments	40 168
	40 168

The capital expenditure commitments in the Consolidated Entity’s equity accounted investments at 31 December 2018 relate to Lendlease GPT (Rouse Hill) Pty Limited (2017: Lendlease GPT (Rouse Hill) Pty Limited).

18. Contingent liabilities

A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may exist regarding the outcome of future events.

GPT Management Holdings Ltd has provided guarantees over GPT RE Limited as responsible entity of GPT Trust’s obligations under the note purchase and guarantee agreements in relation to US Private Placement issuances totalling US$850,000,000 until December 2032.

Apart from the matter referred to above, there are no other material contingent liabilities at reporting date.

19. Security based payments

(a) GESOP

(b) BBESOP

(c) DSTI

119

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

(d) LTI

At the 2009 Annual General Meeting (AGM), GPT securityholders approved the introduction of a LTI plan based on performance rights. Any subsequent amendments to the LTI plan have been approved by GPT securityholders.

Fair value of performance rights issued under DSTI and LTI

key inputs are taken into account:
	2018 LTI	2018 DSTI
Fair value of rights	$3.64	$5.34
Security price at valuation date	$5.34	$5.34
Total Securityholder Return	7.0%	N/A
Grant dates	29 March 2018	29 March 2018
Expected vesting dates	31 December 2020	31 December 2019
Security Price at the grant date	$4.74	$4.74
Expected life	3 years (2 years remaining)	2 years (1 year remaining)
Distribution yield	4.8%	4.8%
Risk free interest rate	1.9%	N/A
Volatilty1	15.8%	N/A

1 The volatility is based on the historic volatility of the security.

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Notes to the Financial Statements – Year ended 31 December 2018

(e) Summary table of all employee security schemes

(e) Summary table of all employee security schemes
	Number of rights
	DSTI LTI Total
Rights outstanding at 1 January 2017 Rights granted during 2017 Rights forfeited during 2017 Rights converted to GPT stapled securities during 20171 Rights outstanding at 31 December 2017 Rights outstanding at 1 January 2018 Rights granted during 2018 Rights forfeited during 2018 Rights converted to GPT stapled securities during 20182 Rights outstanding at 31 December 2018	1,212,639 8,607,534 9,820,173 1,338,498 2,854,675 4,193,173 (357,284) (323,771) (681,055) (855,355) (2,792,225) (3,647,580)
	1,338,498 8,346,213 9,684,711
	1,338,498 8,346,213 9,684,711 1,308,548 2,712,482 4,021,030 (550,030) (879,580) (1,429,610) (875,344) (2,332,026) (3,207,370)
	1,221,672 7,847,089 9,068,761

1 Rights under the 2016 DSTI plan were converted to GPT stapled securities on 20 March 2017 and rights under the 2014 LTI Plan were converted to GPT stapled securities on 14 February 2017.

2 Rights under the 2017 DSTI plan were converted to GPT stapled securities on 19 March 2018 and rights under the 2015 LTI Plan were converted to GPT stapled securities on 13 February 2018.

	Number of stapled securities
	GESOP BBESOP Total
Securities outstanding at 1 January 2017 Securities granted during 2017 Securities vested during 2017 Securities outstanding at 31 December 2017 Securities outstanding at 1 January 2018 Securities granted during 2018 Securities vested during 2018 Securities outstanding at 31 December 2018	60,756 92,761 153,517 53,982 48,480 102,462 (60,756) (17,688) (78,444)
	53,982 123,553 177,535
	53,982 123,553 177,535 62,609 37,488 100,097 (53,982) (46,277) (100,259)
	62,609 114,764 177,373

20. Related party transactions

GPT Management Holdings Limited is the ultimate parent entity. The Consolidated Entity is stapled to GPT Trust and the Group financial statements include the results of the stapled entity as a whole.

Equity interests in joint ventures and associates are set out in note 2. Payables and loans with GPT Trust are set out in note 8 and note 14 respectively.

Key management personnel

Key management personnel compensation was as follows:

	31 Dec 18 $ 31 Dec 17 $
Short term employee benefits Post employment benefits Long term incentive award accrual Total key management personnel compensation	6,943,395 6,778,850 178,330 168,272 2,050,446 2,064,328
	9,172,171 9,011,450

Information regarding individual Directors’ and Senior Executives’ remuneration is provided in the Remuneration Report.

There have been no other transactions with key management personnel during the year.

121

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Transactions with related parties

Transactions with related parties
	31 Dec 18	31 Dec 17
	$	$
Transactions with related parties other than associates and joint ventures
Transactions with GPT Trust:
Revenue and expenses
Fund management fees from GPT Trust	25,087,668	25,282,904
Property management fees from GPT Trust	14,160,874	14,469,095
Development management fees from GPT Trust	20,472,495	15,650,457
Option fees received from GPT Trust	538,500	–
Management costs recharged from GPT Trust	7,516,215	7,095,234
Property rent and outgoings paid to GPT Trust	(3,774,934)	(3,661,067)
Interest paid to GPT Trust	(5,725,395)	(11,309,992)
Receivables
Current receivables	14,961,590	37,483,052
Loan receivable	–	37,032,383
Other non-current financial asset receivable	3,050,000	-
Other transactions
Revaluation of arrangements with GPT Trust – continued and discontinued operations	75,000,000	34,097,679
Purchase of inventory from GPT Trust	5,925,000	2,799,125
Transactions with employees
Contributions to superannuation funds on behalf of employees	(6,172,487)	(5,703,954)
Transactions with GWOF and GWSCF:
Revenue
Responsible Entity fees	58,232,953	50,744,061
Asset management fees	17,654,198	15,660,782
Development management fees	5,196,484	6,963,854
Directors fees recharged	657,717	653,208
Management costs recharged	5,698,709	5,788,457
Payroll costs recharged	9,519,877	9,396,803
Expense
Rent expenses	(1,406,006)	(597,294)
Receivables and payables
Current receivable outstanding	7,200,079	9,089,187
Current fund management fee receivable	14,934,895	12,926,671

122

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

21. Auditors remuneration

	31 Dec 18 $ 31 Dec 17 $
Audit services PricewaterhouseCoopers Australia Statutory audit and review of financial reports Total remuneration for audit services Other assurance services PricewaterhouseCoopers Australia Regulatory and contractually required audits Total remuneration for other assurance service Total remuneration for audit and assurance service Non-audit related services PricewaterhouseCoopers Australia Other services Taxation services Total remuneration for non-audit related services Total auditor’s remuneration	278,996 345,846
	278,996 345,846
	257,813 99,818
	257,813 99,818
	536,809 445,664
	15,300 – – 3,500
	15,300 3,500
	552,109 449,164

22. Parent entity financial information

	Parent entity
	31 Dec 18 $’000 31 Dec 17 $’000
Assets Total current assets Total non-current assets Total assets Liabilities Total current liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity Profit attributable to members of the parent entity Total comprehensive income for the year attributable to members of the parent entity Operating lease commitments Due within one year Due between one and five years Over five years Total operating lease commitments	387,757 288,431
	116,561 117,756
	504,318 406,187
	208,364 176,788
	21,139 99,146
	229,503 275,934
	274,815 130,253
	325,855 325,703 4,426 5,667 (55,466) (201,117)
	274,815 130,253
	145,651 5,190 145,651 5,190 9,191 6,430 24,917 15,049 18,882 5,495
	52,990 26,974

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Notes to the Financial Statements – Year ended 31 December 2018

Capital expenditure commitments

The parent entity has $7,893,000 capital expenditure commitments at 31 December 2018 (2017: $807,000).

Parent entity financial information

The financial information for the parent entity of the Consolidated Entity, GPT Management Holdings Limited, has been prepared on the same basis as the consolidated financial statements, except where set out below.

Investments in subsidiaries, associates and joint ventures

Investments in subsidiaries, associates and joint ventures are accounted for at cost in the financial statements of the parent entity. Distributions received from subsidiaries, associates and joint ventures are recognised in the parent entity’s profit or loss rather than being deducted from the carrying amount of these investments.

23. Fair value disclosures

Information about how the fair value of financial instruments is calculated and other information required by the accounting standards, including the valuation process and critical assumptions underlying the valuations are disclosed below.

(a) Fair value measurement, valuation techniques and inputs

(a) Fair value measurement, valuation techniques and inputs
Class of assets Fair value hierarchy Valuation technique Inputs used to measure fair value	Range of unobservable inputs
	31 Dec 18 31 Dec 17
Investment in financial assets Level 2 Market price Market price	Not applicable – observable input

The different levels of the fair value hierarchy have been defined as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

24. Discontinued operations and available for sale financial assets

(a) Discontinued operations

At 31 December 2018, there are two discontinued operations: Hotel/Tourism portfolio and Funds Management – Europe portfolio.

Hotel/Tourism

The Consolidated Entity has substantially completed its exit from the Hotel/Tourism portfolio.

Funds Management – Europe

Relates to equity investments in small closed-end funds (a legacy of GPT’s ownership of GPT Halverton) managed by The Citco Group Limited.

(b) Details of financial performance and cash flow information relating to discontinued operations

The table below sets out the financial performance and cash flow information for the discontinued operations that continue to be owned by the Consolidated Entity at reporting date.

to be owned by the Consolidated Entity at reporting date.
	31 Dec 18 $’000 31 Dec 17 $’000
Revenue Expenses Loss before income tax Income tax Loss after income tax of discontinued operations Net cash outflow from operating activities Net decrease in cash from discontinued operations	17,015 – (32,542) (13,669)
	(15,527) (13,669)
	– –
	(15,527) (13,669)
	– 13
	– 13

During the year, GPT Europe 2 Sarl in Luxembourg and Hamburg Trust HTG USA 3 GmbH & Co KG, a foreign entity which held Series D Preferred Units in Babcock & Brown Residential Operating Partnership LP, were wound-up. This resulted in the recognition of a $16,770,000 foreign exchange gain in discontinued operations.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Discontinued operation

A discontinued operation is a part of the Consolidated Entity’s business that:

it has disposed of or has classified as held for sale and that represents a major line of its business or geographical area of operations; or
is part of a single co-ordinated plan to dispose of such a line of business or area of operations.

The results of discontinued operations are presented separately on the face of the Consolidated Statement of Comprehensive Income and the assets and liabilities are presented separately on the face of the Consolidated Statement of Financial Position.

(c) Derecognition of available for sale financial assets

In October 2017, the Consolidated Entity received a return of capital of $10,699,000 in respect of its 5.3 per cent interest in BGP Holding Plc (BGP). BGP was classified as an available for sale financial asset with a carrying value of $9,296,000 at 31 December 2016. In 2017, following the return of capital the asset was derecognised in the Consolidated Statement of Financial Position and $10,699,000 was recognised in the Consolidated Statement of Comprehensive Income as profit on derecognition of the available for sale financial asset.

Assets held for sale

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

25. Accounting policies

(a) Basis of preparation

The financial report has been prepared:

in accordance with the requirements of the Company’s constitution, Corporations Act 2001 , Australian Accounting Standards (AAS) and other authoritative pronouncements of the Australian Accounting Standards Board and International Financial Reporting Standards;
on a going concern basis in the belief that the Consolidated Entity will realise its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial statements. The Consolidated Entity has access to undrawn financing facilities of $110,188,000 as set out in note 14;
under the historical cost convention, as modified by the revaluation for financial assets and liabilities at fair value through the Consolidated Statement of Comprehensive Income;
using consistent accounting policies and adjustments to bring into line any dissimilar accounting policies being adopted by the controlled entities, associates or joint ventures; and
in Australian dollars with all values rounded to the nearest thousand dollars, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, unless otherwise stated.

The financial report was approved by the Board of Directors on 11 February 2019.

(b) Basis of consolidation

Controlled entities

The consolidated financial statements of the Consolidated Entity report the assets, liabilities and results of all controlled entities for the financial year.

Controlled entities are all entities over which the Consolidated Entity has control. The Consolidated Entity controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Controlled entities are consolidated from the date on which control is obtained to the date on which control is disposed. The acquisition of controlled entities is accounted for using the acquisition method of accounting. All intercompany balances and transactions, income, expenses, profits and losses resulting from intra-group transactions have been eliminated.

Associates

Associates are entities over which the Consolidated Entity has significant influence but not control, generally accompanying a shareholding of between 10 per cent and 50 per cent of the voting rights.

GPT Funds Management Limited (GPTFM), which is wholly owned by the Company is the Responsible Entity (RE) of the Funds. The Board of GPTFM comprises six Directors, of which GPT can only appoint two. As a result, the Company has significant influence over GPTFM and accordingly accounts for it as an associate using the equity method.

Investments in associates are accounted for using the equity method. Under this method, the Consolidated Entity’s investment in associates is carried in the Consolidated Statement of Financial Position at cost plus post acquisition changes in the Consolidated Entity’s share of net assets. The Consolidated Entity’s share of the associates’ result is reflected in the Consolidated Statement of Comprehensive Income. Where the Consolidated Entity’s share of losses in associates equals or exceeds its interest in the associate, including any other unsecured long term receivables, the Consolidated Entity does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the associate.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement. The Consolidated Entity has assessed the nature of its joint arrangements and determined it has joint ventures only.

Joint ventures

Investments in joint ventures are accounted for in the Consolidated Statement of Financial Position using the equity method which is the same method adopted for associates.

(c) Other accounting policies

Other accounting policies include:

(i) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the GPT entities are measured using the currency of the primary economic environment in which they operate (‘the functional currency’).

Transactions and balances

Foreign operations

Exchange differences arising on monetary items that form part of the net investment in a foreign operation are taken against a foreign currency translation reserve on consolidation.

(ii) Goods and Services Tax (GST)

Cash flows are presented on a gross basis in the Consolidated Statement of Cash Flows. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(iii) Deferred acquisition costs

Deferred acquisition costs associated with the property management business are costs that are directly related to and incremental to earning property management fee income. These costs are recorded as an asset and are amortised in the income statement on the same basis as the recognition of property management fee revenue.

(d) New and amended accounting standards and interpretations adopted from 1 January 2018

The Consolidated Entity has adopted AASB 9 and AASB 15 at 1 January 2018. AASB 9 addresses the classification, measurement and de-recognition of financial assets and financial liabilities. AASB 15 contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time.

There have been no significant changes to the Consolidated Entity’s financial performance and position as a result of the adoption of new and amended accounting standards and interpretations effective for annual reporting periods beginning on or after 1 January 2018. New disclosures have been included as required.

(e) Changes in accounting policies

AASB 9 Financial Instruments

The requirements of AASB 9 represent a significant change from AASB 139 Financial Instruments . The nature and effects of the key changes to the Consolidated Entity’s accounting policies resulting from the adoption of AASB 9 are summarised below.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

(i) Classification and measurement of financial assets and financial liabilities

On 1 January 2018 (the date of initial application of AASB 9), the Consolidated Entity’s management assessed which business models apply to the financial assets held and has classified its financial instruments into the appropriate AASB 9 categories. The adoption of AASB 9 has not impacted the carrying value of financial assets but has resulted in classification changes on initial application at 1 January 2018 which is shown in the following table:

			Original carrying amount	New carrying amount
			under AASB 139	under AASB 9
	Original classification	New classification under	31 Dec 17	31 Dec 17
	under AASB 139	AASB 9	$’000	$’000
Financial assets
Trade receivables	Loans and receivables	Financial assets at amortised cost	62,895	62,895
Other receivables	Loans and receivables	Financial assets at amortised cost	630	630
Loan receivables	Loans and receivables	Financial assets at amortised cost	37,032	37,032

Loans and receivables are classified and measured at amortised cost. The Consolidated Entity holds these financial assets in order to collect the contractual cash flows and the contractual terms are solely payments of outstanding principal and interest on the principal amount outstanding.

AASB 9 requires that all financial liabilities be subsequently classified at amortised costs, except in certain circumstances. None of these circumstances apply to the Consolidated Entity and accordingly there is no change to the classification and measurement of the Consolidated Entity’s payables and borrowings on adoption of AASB 9.

(ii) Impairment of financial assets

The Consolidated Entity has assessed the impact of the adoption of an ECL model under AASB 9 and identified that the impairment loss was immaterial. See ‘Recoverability of loans and receivables’ section below for details on how ECL amounts are determined.

(iii) Accounting policies

Policy applicable from 1 January 2018

AASB 9 contains three principal classification categories for financial assets:

measured at amortised cost;
fair value through other comprehensive income; and
fair value through profit and loss (FVTPL).

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

Financial assets at amortised costs

Loans and receivables

All loans and receivables with maturities greater than 12 months after the balance date are classified as noncurrent assets.

Recoverability of loans and receivables

At each reporting date, the Consolidated Entity assesses whether financial assets carried at amortised cost are ‘creditimpaired’. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

The Consolidated Entity recognises loss allowances at an amount equal to lifetime ECL on trade and other receivables. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of the trade receivable and are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (ie the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Consolidated Entity expects to receive).

The Consolidated Entity analyses the age of outstanding receivable balances and applies historical default percentages adjusted for other current observable data as a means to estimate lifetime ECL. Other current observable data may include:

forecasts of economic conditions such as unemployment, interest rates, gross domestic product and inflation; and
financial difficulties of a counterparty or probability that a counterparty will enter bankruptcy.

Debts that are known to be uncollectable are written off when identified.

(iv) Transition

The impact on the Consolidated Entity’s previously reported financial position as at 31 December 2017 as a result of the adoption AASB 9 and its application retrospectively is immaterial to the Consolidated Entity.

Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method less any allowance under the ECL model.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Notes to the Financial Statements – Year ended 31 December 2018

AASB 15 Revenue from Contracts with Customers

The requirements of AASB 15 replace AASB 118 Revenue and AASB 111 Construction Contracts . AASB 15 is based on the principle that revenue is recognised when control of a good or service is transferred to a customer. It contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract–based five-step analysis of transactions to determine whether, how much and when revenue is recognised. It applies to all contracts with customers except leases, financial instruments and insurance contracts. It requires reporting entities to provide users of financial statements with more informative and relevant disclosures.

(v) Classification and measurement of revenue

Revenue is recognised over time if:

the customer simultaneously receives and consumes the benefits as the entity performs;
the customer controls the asset as the entity creates or enhances it; or
the seller’s performance does not create an asset for which the seller has an alternative use and there is a right to payment for performance to date.

Where the above criteria is not met, revenue is recognised at a point in time.

The table below summarises the changes in terminology with respect to the timing of revenue recognition between AASB 111 and AASB 118 compared to AASB 15 and the new revenue recognition policies under AASB 15. From the Consolidated Entity’s assessment of when performance obligations are satisfied, there is no change in the timing of revenue recognition when comparing the previous accounting policies to those now under AASB 15.

comparing the previous accounting policies to those now under AASB 15.
Type of revenue Description	Revenue recognition policy under AASB 111 and AASB 118 Revenue recognition policy under AASB 15
Fund management fees The Consolidated Entity provides fund management services to GWOF and GWSCF (the Funds) in accordance with the Funds constitutions. The services are utilised on an ongoing basis and revenue is calculated and recognised in accordance with the relevant constitution. The fees are invoiced on a quarterly basis and consideration is payable within 21 days of the quarter end.	Recognised on an accruals basis based on the contract terms. Over time
Fee income – property management fees The Consolidated Entity provides property management services to the owners of property assets in accordance with property services agreements. The services are utilised on an ongoing basis and revenue is calculated and recognised in accordance with the specific agreement. The fees are invoiced monthly with variable payment terms depending on the individual agreements. Should an adjustment, as calculated in accordance with the property services agreement be required, this is recognised in the Consolidated Statement of Comprehensive Income within the same reporting period.	Recognised on an accruals basis based on the contract terms. Over time
Fee income – property management leasing fees – over time Under some property management agreements, the Consolidated Entity provides a lease management service to the owners. These services are delivered on an ongoing basis and revenue is recognised monthly, calculated in accordance with the property management agreement. The fees are invoiced monthly with variable payment terms depending on the individual agreements.	Recognised on an accruals basis based on the contract terms. Over time
Fee income – property management leasing fees – point in time Under some property management agreements, the Consolidated Entity provides leasing management services to the owners. The revenue is recognised when the specific service is delivered (e.g. on lease execution) and consideration is due 30 days from invoice date.	Recognised in the period in which the services are rendered. Point in time
Development management fees The Consolidated Entity provides development management services to the owners of property assets in accordance with development management agreements. Revenue is calculated and recognised in accordance with the specific agreement. The fees are invoiced on a monthly basis, in arrears, and consideration is due 30 days from invoice date.	If the agreement includes an hourly fee, the revenue is recognised in the period in which the services are rendered. Over time
	If the agreement includes a fixed price, the revenue is recognised in proportion to the value of the works as a percentage of the total project cost delivered until the completion of the associated development works. Over time

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Notes to the Financial Statements – Year ended 31 December 2018

			Revenue
		Revenue recognition policy	recognition policy
Type of revenue	Description	under AASB 111 and AASB 118	under AASB 15
Development	The Consolidated Entity provides development management	Recognised in the period in	Point in time
revenue	services to the owners of property assets in accordance with	which the title of the asset is
	development management agreements. Revenue is calculated	transferred.
	in accordance with the specific agreement and invoiced in
	accordance with the contract terms. Consideration is due from the
	customer based on the specific terms agreed in the contract and is
	recognised when the Consolidated Entity has control of the benefit.
Sale of inventory	Proceeds from the sale of inventory are recognised by the	When significant risks and	Point in time
	Consolidated Entity in accordance with a specific contract entered	rewards are transferred.
	into with another party for the delivery of inventory. Revenue
	is calculated in accordance with the contract. Consideration is
	payable in accordance with the contract. Revenue is recognised
	when control has been transferred to the buyer.
Sale of assets	Proceeds from the sale of assets are recognised by the	When significant risks and	Point in time
	Consolidated Entity in accordance with a specific contract entered	rewards are transferred.
	into with another party for the delivery of the asset. Revenue
	is calculated in accordance with the contract. Consideration is
	payable in accordance with the contract. Revenue is recognised
	when control has been transferred to the buyer.

(f) New accounting standards and interpretations issued but not yet adopted

The following standards and amendments to standards are relevant to the Consolidated Entity.

		Application of
Reference	Description	Standard
AASB 16 Leases	AASB 16 sets out the principles for the recognition, measurement, presentation and	1 January 2019
	disclosure of leases. It will change the way lessees account for leases by eliminating
	the current dual accounting model which distinguishes between on-balance sheet
	finance leases and off-balance sheet operating leases. Instead, there will be a single,
	on-balance sheet accounting model that is similar to the current finance lease
	accounting. Where the Consolidated Entity is the lessee, this new treatment will result
	in recognition of a right of use asset along with the associated lease liability in the
	Consolidated Statement of Financial Position and both a depreciation and interest
	charge in the Consolidated Statement of Comprehensive Income. In contrast, lessor
	accounting for lease income is not expected to change with the adoption of the new
	standard other than the separation of service income from lease income for disclosure
	purposes as a result of the application of AASB 15.
	The new leasing model requires the recognition of operating leases on the
	Consolidated Statement of Financial Position. If the Consolidated Entity had adopted
	the new standard from 1 January 2018, management estimates that the net loss before
	tax for the year ended 31 December 2018 would decrease by approximately $224,000.
	Assets at 31 December 2018 would increase by approximately $28,504,000 and
	liabilities increase by $30,616,000.

26. Events subsequent to reporting date

The Directors are not aware of any matter or circumstance occurring since 31 December 2018 that has significantly or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state of affairs of the Consolidated Entity in subsequent financial years.

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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

Directors’ Declaration

Year ended 31 December 2018

In the directors of GPT Management Holdings Limited’s opinion:

(a) the consolidated financial statements and notes set out on pages 99 to 129 are in accordance with the Corporations Act 2001 , including:
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2018 and of its performance for the financial year ended on that date; and
(b) the consolidated financial statements and notes comply with International Financial Reporting Standards as disclosed in note 25 to the financial statements
(c) there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as required by Section 295A of the Corporations Act 2001 .

This declaration is made in accordance with the resolution of the directors.

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Vickki McFadden Chairman

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Bob Johnston Chief Executive Officer and Managing Director

GPT Management Holdings Limited Sydney 11 February 2019

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Independent auditor’s report

To the members of GPT Management Holdings Limited

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of GPT Management Holdings Limited (the Company) and its controlled entities (together, the Group) is in accordance with the Corporations Act 2001 , including:

(a) giving a true and fair view of the Group's financial position as at 31 December 2018 and of its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

What we have audited

The Group financial report comprises:

the consolidated statement of financial position as at 31 December 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.

Basis for opinion

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

Independence

PricewaterhouseCoopers, ABN 52 780 433 757

One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

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Our audit approach

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Materiality Audit scope Key audit matters
● For the purpose of our audit ● The audit scope covered the ● Amongst other relevant we used overall Group consolidated Group which topics, we communicated the materiality of $2.2 million, includes GPT Management following key audit matters to which represents Holdings Limited and its the Group’s Audit Committee: approximately 1% of the controlled entities. − Carrying value of
Group total revenue and other ● Our audit focused on where the Inventories
income. Group made subjective − Revenue recognition
● We applied this threshold, judgements; for example, − Remuneration expense
together with qualitative significant accounting considerations, to determine estimates involving ● These are further described in the scope of our audit and the assumptions and inherently the Key audit matters section nature, timing and extent of uncertain future events. of our report.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.
We chose Group total revenue and other income as the Group generates income from funds management, property management and development management fees, whilst expenses within the Group are recharged to GPT Trust which can be altered based on the recharge model utilised.
We selected a 1% threshold based on our professional judgement, noting it is also within the range of commonly acceptable revenue related thresholds.

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Key audit matters

Key audit matter How our audit addressed the key audit matter Carrying value of Inventories For each project we obtained the Group’s latest $178.3 million (2017: $189.2 million) Refer to note 5 feasibility models and discussed with management matters such as the overall project strategy, cost movements and claims (where applicable).

The cost of the inventory includes the cost of acquisition, development, finance costs and all other costs directly related to specific projects including an allocation of direct overhead expenses.

Further discussed with management the life cycle of the project, key project risks, changes to project strategy, current and future estimated sales prices, construction progress and costs and any new and previous impairments.
• Compared the estimated selling prices to market sales data in similar locations or to recent sales in the project.

We considered the carrying value of inventories a key audit matter given the relative size of the balance in the Consolidated Statement of Financial Position and the significant judgement required by the Group in estimating future selling prices, costs to complete and selling costs. These judgments may have a material impact on the calculation of net realisable value and therefore in determining whether the value of a project should be written down (impaired). During the year ended 31 December 2018 an impairment of $11.4m was recognised.

Compared the forecasted costs to complete the project to the relevant construction contracts (if available) or to construction cost estimates.
• Compared the carrying value to the net realisable value (NRV) to identify projects with potential impairments.
Obtained the purchase agreement for the development site acquired during the year and agreed this to the acquisition price recorded. We tested the payment to cash.
Traced a sample of capital expenditure additions to supporting documentation and tested they were valid costs that could be capitalised in accordance with the requirements of Australian Accounting Standards.

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Revenue recognition

$181.8 million (2017: $180.8 million)

The Group earns revenue through its role as a fund and property manager, and through development revenue earned through the development of property, either for third parties, or directly on its own account for ultimate sale. Total revenue for the year ended 31 December 2018 was comprised of the following four streams:

Fund management fees ($84.6 million).
Property management fees ($43.5 million).
Management costs recharged ($32.1 million).
Development management fees ($21.6 million).

For all of the above revenue streams, a portion is earned from other entities in The GPT Group.

We considered this a key audit matter due to the size and magnitude of revenue, and due to there being multiple revenue streams increasing the complexity of recognition.

We developed an understanding of each revenue stream and the processes for calculating and recording revenue. We also developed an understanding of the process by which funds in relation to revenue are received into the Group’s bank accounts, and identified the key controls including bank account reconciliations.

Fund management fees

We tested a sample of fund management fees and performed the following procedures, amongst others:

• Inspected the relevant fund constitutions to develop an understanding of the basis upon which fund management fee revenue is earned.

• Recalculated the management fees by applying the fee percentage per the fund’s constitution to the fund’s net assets and tracing the amount to cash receipts.

• Agreed fund management fee corporate overhead recharges to board approved budgets.

Property management fees

For property and leasing management fees and other property management fees we performed the following procedures, amongst others:

• Inspected a sample of agreements to develop an understanding of the basis upon which revenue is earned.

• Recalculated a sample of property and leasing management fees and traced relevant inputs to source documentation.

• Traced a sample of other property management fees to relevant invoices and cash receipts.

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Management costs recharged

For management costs recharged during the year, we discussed with management the terms under which costs are recharged by the Group to entities in The GPT Group. Recharge arrangements are budgeted by the Group and reviewed annually. In relation to recharges:

• We developed an understanding of the budgeting process and obtained evidence of management review of the 2018 budget.

• We reconciled the approved management cost recharge budget to the general ledger.

• We agreed payroll recharge amounts to the audit procedures performed over the Group remuneration expense.

Development management fees

• We developed an understanding of the Group’s calculation methodology for charging development management fees. This is based on an approved daily rate and actual time spent, or management approved project fees.

• We inspected the Board minute to obtain the approved development management day rates.

• We recalculated a sample of development management fees and agreed relevant inputs to the calculation back to source data, for example timesheet extracts.

We considered management's AASB 15 Revenue Recognition assessment by selecting a sample of contracts for each material revenue stream and assessed whether they had been appropriately recognised under the new standard.

Remuneration expense $121.4 million (2017: $123.1 million)

The Group is the employer of all employees who provide services to The GPT Group. The payroll process is administered by a third party under the oversight and approval of the Group. The third party provider is responsible for the processing of all salaries and wages, including overtime, allowances

Our procedures over the remuneration expense included:

• Developing an understanding of the payroll processes and relevant key controls.

• Testing these key controls to determine whether they were operating effectively.

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and superannuation and cash bonuses, but not share based payments. Each month a detailed payroll journal is provided electronically by the third party provider and uploaded into the general ledger.

Management bonuses are accrued throughout the year based on potential bonus pools approved by the Board Nomination and Remuneration Committee at the start of the year. Bonuses are subject to performance hurdles and final bonus amounts are subject to approval by the Board Nomination and Remuneration Committee prior to payment.

In addition to salaries, wages and bonuses, there are equity incentive schemes available to eligible employees. These schemes are a mix of short term and long term incentive plans. Each scheme has a number of vesting conditions, including employee tenure, personal performance metrics, and Group wide performance metrics, that need to be satisfied in order for the shares to vest.

Two of the schemes are in the form of performance rights which convert to GPT Group stapled securities. The Group uses fair value techniques and models to calculate the fair value of the rights, which requires a level of judgement and estimation.

We considered remuneration expense as a key audit matter due to the magnitude of this balance and the multiple streams of employee costs included in this balance.

• Reconciling the year to date payroll cost from the payroll system to the general ledger.

• Comparing the total payroll expense and employee benefit provisions for the current year to the prior year and obtaining explanations for material movements.

• Using data analysis tools to examine payroll payments made during the year, we considered unusual trends and payments that fell outside of our expected ranges. For payments we deemed higher risk, we traced them back to source documentation and other evidence to investigate explanations provided by management.

• Obtaining the Board Nomination and Remuneration Committee approval for the 2018 bonus pool and developing an understanding of the key performance metrics influencing the quantum of management bonuses.

For equity incentive scheme expenses, together with PwC valuation experts, we reviewed the valuation methodology adopted by management in valuing the share rights subject to market and non-market hurdles. We also:

• Assessed the reasonableness of the valuation inputs underlying the valuation of the share rights.

• Performed parallel calculations of the share rights that are subject to the market performance hurdle.

• Agreed inputs to the equity incentive scheme accounting model to supporting documentation and assessed the model for mathematical accuracy.

• Agreed a sample of new rights grants to the relevant invitation letters.

Other information

The directors of the Group (the directors) are responsible for the other information. The other information comprises the information included in the Annual Financial report for the year ended 31 December 2018, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

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136

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

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Responsibilities of the directors for the financial report

Auditor’s responsibilities for the audit of the financial report

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 88 to 97 of the directors’ report for the year ended 31 December 2018.

In our opinion, the remuneration report of GPT Management Holdings Limited for the year ended 31 December 2018 complies with section 300A of the Corporations Act 2001.

137

Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities

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Responsibilities

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PricewaterhouseCoopers

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Susan Horlin Partner

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Bianca Buckman Partner Sydney 11 February 2019

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138

Annual Financial Report

Supplementary information

Securityholder information

Supplementary information Securityholder information	Annual Financial Report
Substantial Securityholders	Number of Securities
UniSuper	233,746,431
Vanguard Investments Australia	183,628,450
BlackRock Group	163,118,343
State Street Corporation	106,158,896

Voting Rights

Securityholders in the GPT Group are entitled to one vote for each dollar of the value of the total securities they hold in the Group.

	Number of	Percentage of Total
Distribution of Securityholders	Securityholders	Issued Securities
1 to 1,000	13,543	0.35
1,001 to 5,000	13,168	1.78
5,001 to 10,000	3,511	1.39
10,001 to 100,000	2,291	2.63
100,001 and Over	101	93.85
Total Number of Securityholders	32,614	100.00%

There were 938 securityholders holding less than a marketable parcel of 94 securities, based on a close price of $5.34 as at 31 December 2018, and they hold 20,209 securities.

31 December 2018, and they hold 20,209 securities.
		Percentage of Total
Twenty Largest Securityholders	Number of Securities	Issued Securities
HSBC Custody Nominees (Australia) Limited	713,568,212	39.54
J P Morgan Nominees Australia Pty Limited	349,555,681	19.37
BNP Paribas Nominees Pty Ltd	272,717,751	15.11
Citicorp Nominees Pty Limited	157,303,685	8.72
National Nominees Limited	61,888,098	3.43
BNP Paribas Noms Pty Ltd	23,063,660	1.28
Citicorp Nominees Pty Limited	18,325,383	1.02
National Nominees Limited	13,500,000	0.75
HSBC Custody Nominees (Australia) Limited	12,403,082	0.69
AMP Life Limited	11,400,048	0.63
Bond Street Custodians Limited	4,457,851	0.25
Argo Investments Limited	3,480,667	0.19
HSBC Custody Nominees (Australia) Limited	3,022,536	0.17
HSBC Custody Nominees (Australia) Limited Limited-GSCO ECA	2,632,473	0.15
UBS Nominees Pty Ltd	2,364,633	0.13
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP	2,307,436	0.13
HSBC Custody Nominees (Australia) Limited - A/C 2	2,006,802	0.11
BNP Paribas Noms (Nz) Ltd	1,915,713	0.11
Netwealth Investments Limited	1,728,350	0.10
IOOF Investment Management Limited	1,476,655	0.08
Total	1,659,118,716	91.92
Total Securities on Issue	1,804,890,426	100.00%

139

Annual Financial Report

Supplementary information – Year ended 31 December 2018

Issue of Securities

The following table lists the issue of GPT securities during the period from 1 January 2018 to 31 December 2018. A complete list of all securities issued since GPT’s inception in 1971 can be obtained from the Group’s website (www.gpt.com.au) or by calling the GPT Securityholder Service Centre on 1800 025 095 (freecall within Australia).

Date	Description	Number of Securities	Price ($)	Amount ($)
13.02.18	Issue of Securities	2,332,026	4.83	11,263,686
19.03.18	Issue of Securities	875,344	4.79	4,192,898
21.03.18	Issue of Securities	42,174	4.77	201,170

Investor information

Securityholder Services

You can access your investment online at

www.linkmarketservices.com.au , signing in using your SRN/HIN, Surname and Postcode. Functions available include updating your address details, downloading a PDF of your Annual Tax Statement and collecting FATCA/CRS self certification.

Also online at www.linkmarketservices.com.au are regularly requested forms relating to payment instructions, name corrections and changes and deceased estate packs.

For assistance with altering any of your investment details, please phone the GPT Registry on 1800 025 095 (free call within Australia) or +61 1800 025 095 (outside Australia).

Receive Your Report Electronically

Sustainability is core to GPT’s vision and values. As part of our sustainability initiatives we would like to offer you the opportunity to receive notification of GPT’s investor communications electronically, including the 2018 Annual Financial Report and the Annual Review. We encourage securityholders to visit www.gpt.com.au to view the online versions of these reports.

As an investor opting to receive your securityholder updates electronically, you will benefit by receiving prompt information and have the convenience and security associated with electronic delivery. There are also significant cost savings associated with this method of communication and above all this is a responsible and environmentally friendly option.

To receive your investor communications electronically, please go to www.linkmarketservices.com.au and register for online services.

AGM Information

GPT’s Annual General Meeting (AGM) will be held at the Swissotel Sydney, 68 Market Street, Sydney, New South Wales on Wednesday, 15 May 2019, commencing at 10.00am (Sydney time).

GPT encourages securityholders to attend the AGM. The AGM will also be webcast live via GPT’s website ( www.gpt.com.au ) for those securityholders who are unable to attend in person. Additionally, the Chairman’s address will be immediately announced to the ASX on the day.

Investor Calendar

Investor Calendar
28 February 2019	December 2018 Half Year Distribution Payment
	and Annual Tax Statement
15 May 2019	Annual General Meeting
June 2019	June 2019 Half Year Distribution Announcement
12 August 2019	2019 Interim Result Announcement
August 2019	June 2019 Half Year Distribution Payment

An investor calendar is also available on GPT’s website at www.gpt.com.au/events

Distribution Policy and Payments

GPT has a distribution policy in place that effectively aligns the Group’s capital management framework with its business strategy, which reflects a sustainable distribution level to ensure a prudent approach to managing the Group’s gearing through market and economic cycles.

GPT makes distribution payments to securityholders two times a year, for the six months ended 30 June and the six months ended 31 December. GPT declares and pays its distribution in Australian dollars.

140

Corporate directory

The GPT Group

Comprising:

GPT Management Holdings Limited ACN 113 510 188 and

GPT RE Limited ACN 107 426 504 AFSL 286511

Registered Office

Level 51 MLC Centre 19 Martin Place Sydney NSW 2000

Telephone: +61 2 8239 3555 Facsimile: +61 2 9225 9318

As Responsible Entity for General Property Trust ARSN 090 110 357

Board of Directors

Vickki McFadden (Chairman) Bob Johnston Eileen Doyle Gene Tilbrook Lim Swe Guan Michelle Somerville Angus McNaughton

Company Secretaries

James Coyne Lisa Bau Telephone: +61 2 8239 3555 Facsimile: +61 2 9225 9318

Audit Committee

Michelle Somerville (Chairman) Lim Swe Guan Eileen Doyle Angus McNaughton

Nomination and Remuneration Committee[1]

Gene Tilbrook (Chairman) Vickki McFadden Angus McNaughton

Auditors

PricewaterhouseCoopers One International Towers Sydney, Watermans Quay, Barangaroo Sydney NSW 2000

Principal Registry

Link Market Services GPT Security Registrar Locked Bag A14 Sydney South NSW 1235

Within Australia: 1800 025 095 (free call) Outside Australia: +61 1800 025 095 Fax: +61 2 9287 0303 Email: [email protected] Website: www.linkmarketservices.com.au

Stock Exchange Quotation

GPT is listed on Australian Securities Exchange under ASX Listing Code GPT.

Sustainability and Risk Committee

Eileen Doyle (Chairman) Lim Swe Guan Michelle Somerville

1 From 1 January 2019 a Human Resources and Remuneration Committee was formed with the same membership as noted above, and a Nomination Committee was formed consisting of the full Board.

AI assistant

GPT GROUP — Annual Report 2018

65009_rns_2019-03-28_6a13654c-c6fc-4316-84ea-c0158596d0e0.pdf

Contents

Corporate Governance

Annual Financial Report of The GPT Group

Year ended 31 December 2018

Contents

Directors’ Report

Year ended 31 December 2018

1. Operating and financial review

About GPT

GPT Portfolio

Retail Portfolio

Office Portfolio

Logistics Portfolio

Review of operations

Operating result

Distribution

Retail

(i) Operations net income

(ii) Development net income

Office

Operations net income

Development net income

Logistics

Operations net income

Development net income

Funds Management

Directors’ Report – Year ended 31 December 2018

GWOF

GWSCF

Management expenses

Financial position

Balance sheet

Capital management

Cash flows

Operating activities

Prospects

Group

Retail

Office

Logistics

Funds management

Guidance for 2019

Risks

Directors’ Report – Year ended 31 December 2018

2. Environmental regulation

3. Events subsequent to reporting date

4. Directors and secretary

Information on directors

Robert Johnston – Chief Executive Officer and Managing Director

Brendan Crotty (retired on 9 November 2018)

Swe Guan Lim

Michelle Somerville

Eileen Doyle

Gene Tilbrook

Angus McNaughton (appointed 1 November 2018)

James Coyne – General Counsel and Company Secretary

Lisa Bau – Senior Legal Counsel and Company Secretary

Attendance of directors at meetings

5. Other disclosures

Indemnification and insurance of directors, officers and auditor

Non-audit services

Auditor’s independence declaration

Rounding of amounts

6. Remuneration report

Governance

Committee key decisions and remuneration outcomes in 2018

GPT’s vision and financial goals linked to remuneration structures

Employment Terms

1. Employment terms – Chief Executive Officer and Managing Director

2. Employment terms – Executive KMP

3. Compensation mix at maximum STIC and LTI outcomes

Group Financial Performance and Incentive Outcomes

1. Five year Group financial performance

2. Summary of CEO objectives and performance outcomes

3. STIC Framework

5. Group performance measures for LTI Plans currently relevant

6. 2016-2018 LTI outcomes by Executive KMP

GPT GROUP Annual Report 2018