GPT GROUP — Regulatory Filings 2017

Feb 13, 2017

GPT Management Holdings Limited ABN: 67 113 510 188

Annual Financial Report 31 December 2016

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 our internet site, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Company. All press releases, financial reports and other information are available on our website: www.gpt.com.au.

Directors' Report 3
Auditor's Independence Declaration19
Financial Statements20
Consolidated Statement of Comprehensive Income20
Consolidated Statement of Financial Position 21
Consolidated Statement of Changes in Equity 22
Consolidated Statement of Cash Flow23
Notes to the Financial Statements 24
Result for the year24
1. Segment information24
Operating assets and liabilities25
2. Equity accounted investments25
3. Loans and receivables 26
4. Intangible assets 27
5. Inventories 27
6. Property, plant and equipment 28
7. Other assets29
8. Payables 29
9. Provisions 29
10. Taxation30
Capital structure31
11. Equity and reserves 31
12. Earnings per share32
13. Dividends paid and payable 33
14. Borrowings33
15. Financial risk management 34
Other disclosure items36
16. Cash flows from operating activities 36
17. Commitments36
18. Contingent liabilities 36
19. Security based payments 37
20. Related party transactions38
21. Auditor's remuneration 40
22. Parent entity financial information40
23. Fair value disclosures 41
24. Discontinued operations and non-current assets held for sale41
25. Revision of previously issued financial statements 42
26. Accounting policies 43
27. Events subsequent to reporting date 45
Directors' Declaration46

DIRECTORS' REPORT

Year ended 31 December 2016

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 2016. The Consolidated Entity is stapled to the General Property 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 is an owner and manager of an \$11.0 billion diversified portfolio of high quality Australian retail, office and logistics property assets and together with GPT's funds management platform the Group has \$19.2 billion of property assets under management.

GPT owns and manages some of Australia's most significant real estate assets, including the MLC Centre and Australia Square in Sydney, Melbourne Central and Highpoint Shopping Centre in Melbourne 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 \$9.0 billion. GPT is one of the top 50 listed stocks on the ASX by market capitalisation as at 31 December 2016.

GPT's strategy is focussed 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 2016 GPT achieved a Total Return of 15.5%.

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 2016 GPT achieved an MER of 37 basis points.

GPT focusses on maintaining a strong balance sheet. GPT has moderate gearing and significant investment capacity giving it the flexibility to execute on investment opportunities as they arise. In 2016 the Weighted Average Cost of Debt was 4.25% with net gearing at 23.7%.

Review of operations

The Consolidated Entity's financial performance for the year ended 31 December 2016 is summarised below.

The net profit after tax for the year ended 31 December 2016 is \$19.8 million (2015: \$32.4 million).

	31 Dec 16	31 Dec 15	Change
	\$'000	\$'000	%
Property management fees	41,227	41,131	0%
Development management fees and revenue	69,232	31,623	119%
Fund management fees	99,044	64,571	53%
Management costs recharged	33,009	35,543	(7%)
Proceeds from sale of inventory	12,532	-	100%
Other income	48,173	35,484	36%
Expenses	(231,697)	(183,413)	(26%)
Profit from continuing operations before income tax expense	71,520	24,939	187%
Income tax (expense) / credit	(22,649)	7,669	(395%)
Profit after income tax for continuing operations	48,871	32,608	50%
Loss from discontinued operations	(29,050)	(183)	15,774%
Net profit for the year	19,821	32,425	(39%)

Consolidated Entity result

The decrease in net profit after tax compared with 2015 is largely attributable to the revaluation of financial arrangements reflected in expenses. This is offset by increased fund management fees due to a performance fee in 2016.

Property management

Retail

The Consolidated Entity is responsible for property management activities across the retail sector. Property management fees decreased to \$31.8 million in 2016 (2015: \$32.8 million) as a result of the divestment of two assets.

Office

The Consolidated Entity is responsible for property management activities across the office sector. Property management fees increased to \$6.7 million in 2016 (2015: \$5.9 million) as a result of higher membership income from Space&Co.

Logistics

The Consolidated Entity is responsible for property management activities across the logistics sector. Property management fees increased to \$2.7 million in 2016 (2015: \$2.4 million) as a result of higher occupancy in the portfolio.

DIRECTORS' REPORT

Year ended 31 December 2016

Development management

Retail

The retail development team has focused on master planning and delivery of development opportunities within its \$2.0 billion development pipeline. In 2016, this has included the opening of the \$34.0 million Leisure and Entertainment precinct at Casuarina Square, the commencement of a \$400.0 million retail expansion of Sunshine Plaza and a \$68.0 million remix that will include the introduction of David Jones at Wollongong Central. Additionally, we continue to progress the master planning for the expansion of Rouse Hill Town Centre.

Office

The team has focussed on progressing a number of repositioning projects at Melbourne Central Tower, CBW and 750 Collins Street in Melbourne and 580 George Street in Sydney. Progress is also being made on the planning approval for a new tower at Darling Park.

Following the successful pre-commitment lease of 9,000sqm to the Rural Fire Service, GPT has committed to complete the construction of a 15,680sqm campus building on the 4 Murray Rose site at Sydney Olympic Park. Completion is expected in late 2018.

The team exchanged on the acquisition of an office development site of 2,439sqm in the heart of Parramatta's commercial district. This site will provide the opportunity for an office building of over 28,000sqm.

Logistics

In 2016 the development logistics business unit has commenced construction of speculative logistics facilities at Lot 2012 Eastern Creek and Abbott Road Seven Hills. Site works have been completed at Berrinba and the stage 4 subdivision at Metroplex Wacol. GPT has also acquired a 2.3 hectare site located at Metroplex for a total consideration of \$6.4 million, where a pre-commitment to a purpose built facility for Loscam Australia has been secured. The value on completion is expected to be \$14.0 million.

The development pipeline has been increased with the acquisition of three land opportunities during 2016. All three acquisitions were in key industrial estates in outer Western Sydney. Of these, two land parcels are in Eastern Creek being, Lot 2012 Eastern Creek Road and Lot 21 Old Wallgrove Road and the third is located in the industrial precinct of Huntingwood.

Funds Management

GWOF

GWOF's funds under management have grown to \$6.6 billion, up \$0.8 billion compared to 2015. The management fee income earned from GWOF increased by \$18.0 million compared to 2015, primarily due to increased performance fee income of \$14.2 million and higher base management fee income due to strong upward revaluations across the portfolio along with a change in the management fee structure.

During September 2016, GPT acquired an additional 158.1 million securities in GWOF for \$209.0 million, increasing GPT's ownership interest from 20.43 per cent to 24.53 per cent.

Fund Terms Review

On 22 June 2016, GWOF held an Extraordinary General Meeting (EGM) in relation to changes to the terms of GWOF. At the EGM, investors were asked to vote on three resolutions. All three resolutions put to the meeting were approved by the requisite majority of Securityholders.

The key changes included:

• an increase in the base management fee from 45 basis points to 50 basis points of the gross asset value of GWOF up to \$6 billion, with 45 basis points thereafter;
• removal of the performance fee structure from 1 July 2016;
• a pay-out of accrued over performance;
• pipeline rights amended to move to a rotational basis, with both GPT and GWOF sharing access to both established assets and developments;
• GPT's minimum holding requirement in GWOF amended to 15% (previously 20%), effective from 1 July 2017; and
• the introduction of an Investor Representation Committee.

Investor Liquidity Review

On 21 July 2016, the investor liquidity review concluded which allowed GWOF Securityholders to notify GPT Funds Management Limited (as Responsible Entity of GWOF) whether they required liquidity or wished to purchase additional securities. The outcome of the review was that binding requests for liquidity for a total of 92,924,217 securities, being 2.4% of securities on issue, were submitted. This equated to \$122.8 million at the 30 June 2016 current unit value of \$1.3217. Additionally, Securityholders indicated demand for \$150.0 million of additional securities. All requests for liquidity were met within the September 2016 quarter.

GWSCF

GWSCF's funds under management of \$3.8 billion and the management fee income earned from GWSCF of \$17.2 million have both remained stable as compared to 2015.

During September 2016, GPT acquired an additional 164.2 million securities in GWSCF for \$157.0 million, increasing GPT's ownership interest from 20.22 per cent to 25.29 per cent.

Fund Terms Review

It is anticipated an investor vote on new GWSCF fund terms will take place on 20 February 2017, ahead of the 31 March 2017 liquidity review.

Investor Liquidity Review

GWSCF's 10 year liquidity event occurs on 31 March 2017.

GMF

On 1 July 2016, Growthpoint Properties Australia Limited, as responsible entity of Growthpoint Properties Australia Trust (Growthpoint) announced a takeover of GMF. On 27 September 2016, GMF held an Extraordinary General Meeting at which Growthpoint was voted in as the new manager with effect on 30 September 2016. GPT earned Funds Management fee income from GMF up until 30 September 2016 of \$2.0 million, along with a facilitation fee of \$9.0 million.

DIRECTORS' REPORT

Year ended 31 December 2016

Management costs recharged

Management costs recharged have decreased to \$33.0 million in 2016 (2015: \$35.5 million) predominantly driven by active expense management. In 2016, GPT achieved an MER of 37 basis points (2015: 40 basis points).

Proceeds from sale of inventory

The proceeds from the sale of inventory were \$12.5 million and relate to the sale of Lot C1 at Erskine Park and Lots 100, 101 and 113 at Metroplex.

Other income

Other income has increased to \$48.2 million in 2016 (2015: \$35.5 million) due to dividend income in 2016.

Non-core operations

Joint venture

The European component of the joint venture with Babcock & Brown (B&B JV) was set up in 2005 to hold the equity interest in GPT's joint venture investment in Europe. On 31 July 2009, GPT announced its exit of the B&B JV by way of an in-specie dividend in BGP Holdings Plc to GPT securityholders. The dividend provided GPT stapled securityholders with a 94.7 per cent beneficial interest in BGP Holdings Plc (BGP) on a one to one basis. GPT's remaining 5.3 per cent interest in BGP was classified as an available for sale financial asset with a carrying value of \$8.6 million as at 31 December 2015.

On 23 October 2016, BGP announced the sale of 100 per cent interest in the assets held by BGP Investment S.à r.l. After the completion of the sale and the repayment of debt, the estimated funds available for distribution are expected to be up to AUD45.0 million for GPT's 5.3 per cent interest. The transaction reached financial close on 14 November 2016 and an interim dividend was declared in December 2016. As a result, the Company has recognised a dividend receivable of AUD30.4 million and restated the fair value of the 5.3 per cent interest to \$9.3 million as at 31 December 2016.

Statement of financial position

	31 Dec 16	31 Dec 15	Change
	\$'000	\$'000	%
Current assets	134,583	97,598	38%
Non-current assets	249,851	243,379	3%
Total assets	384,434	340,977	13%
Current liabilities	104,536	87,998	19%
Non-current liabilities	98,080	87,779	12%
Total liabilities	202,616	175,777	15%
Net assets	181,818	165,200	10%

Total assets increased by 13% to \$384.4 million in 2016 (2015: \$341.0 million) primarily due to the purchase of land at Rouse Hill from GPT Trust and a dividend receivable from BGP.

Total liabilities increased by 15% to \$202.6 million in 2016 (2015: \$175.8 million) due to increased borrowings to fund inventory developments.

Capital management

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 must be revalued to fair value each reporting period.

On market buy back

On 22 April 2016, GPT announced the extension of the on market buy back for an additional 12 months until May 2017.

Cash flows

The cash balance as at 31 December 2016 decreased to \$17.8 million (2015: \$30.4 million).

Operating activities:

Net cash inflows from operating activities have increased in 2016 to \$55.6 million (2015: \$18.4 million) due to proceeds from the sale of inventories.

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

	31 Dec 16 \$'000	31 Dec 15 \$'000	Change %
Net profit for the year	19,821	32,249	(39%)
Non-cash items included in net profit	64,450	93,898	(31%)
Timing difference	(28,666)	(107,722)	(73%)
Net cash flows from operating activities	55,605	18,425	202%

DIRECTORS' REPORT

Year ended 31 December 2016

Investing activities:

Net cash flows from investing activities have increased to an inflow of \$5.0 million in 2016 (2015: outflow of \$1.9 million) due to proceeds received from the sale of other assets.

Financing activities:

Net cash flows from financing activities have decreased to an outflow of \$73.2 million in 2016 (2015: \$20.3 million) due to the repayment of related party borrowings.

Dividends

The Directors have not declared any dividends for the year ended 31 December 2016 (2015: nil).

Prospects

(i) Group

GPT is well positioned with high quality assets and high levels of occupancy. As at 31 December 2016, the Group's balance sheet is in a strong position, with a smooth debt expiry profile and net gearing slightly below the Group's target range of 25% to 35%.

(ii) Funds management

GPT has a strong Funds Management platform which has experienced significant growth over the past five years. The funds management team will continue to actively manage the existing portfolios, with new acquisitions, divestments and developments reviewed based on meeting the relevant investment objectives of the respective funds.

(iii) Guidance for 2017

In 2017 GPT expects to deliver approximately 2% growth in FFO per ordinary security and approximately 5% 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 Audit and Risk Management Committee (ARMC) supports the Board and is responsible for overseeing and reviewing the effectiveness of the risk management framework. The ARMC and through it, 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 recognises the requirement for 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 31000:2009: 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 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.

The Board sets the risk framework via the organisation's risk appetite. The risk appetite considers the most significant, material risks to which GPT is exposed and provides the Board with ongoing monitoring of risk exposures, with particular regard to the following categories:

Level	Risk Description	Strategic Impact	Mitigation
Investment mandate	Investments do not perform in line with forecast	 Investments deliver lower investment performance than target  Credit downgrade	 Formal deal management process  Active asset management including regular forecasting and monitoring of performance  High quality property portfolio  Development program to enhance asset returns  Comprehensive asset insurance program
	Volatility and speed of adverse changes in market conditions	 Investments deliver lower investment returns than target	 Holistic capital management  Large multi asset portfolio  Monitoring of asset concentration
Development	Developments do not perform in line with forecast	 Developments deliver lower returns than target	 Formal development approval and management process
Leasing	Inability to lease assets in line with forecast	 Investments deliver lower investment performance than target	 Large and diversified tenant base  High quality property portfolio  Experienced leasing team  Development program to enhance asset returns

DIRECTORS' REPORT

Year ended 31 December 2016

Capital management	Re-financing and liquidity risk	 Limits ability to meet debt maturities  Constrains future growth  Limits ability to execute strategy  May impact distributions  Failure to continue as a going concern	 Diversity of funding sources and spreading of debt maturities with a long weighted average debt term  Maintaining a minimum liquidity buffer in cash and surplus committed credit facilities for the forward rolling twelve month period
	Interest rate risk – higher interest rate cost than forecast	 Detrimental impact to investment performance  Adversely affect GPT's operating results	 Interest rate exposures are actively hedged
Health and safety	Risk of incidents, causing injury to tenants, visitors to the properties, employees and contractors	 Criminal/civic proceedings and resultant reputation damage  Financial impact of remediation and restoration	 Formalised Health and Safety management system including policies and procedures for managing safety  Training and education of staff and contractors
People	Inability to attract, retain and develop talented people	 Limits the ability to deliver the business objectives	 Competitive remuneration  Structured development planning  Succession planning and talent management
Environment and sustainability	Inability to continue operating in a manner that does not compromise the health of ecosystems and meets accepted social norms	 Limits the ability to deliver the business objectives  Criminal/civic proceedings and resultant reputation damage  Financial impact of remediation and restoration	 Formalised Environment and Sustainability management system including policies and procedures for managing environmental and social sustainability risks

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 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.

GPT is also 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 2016 to 30 June 2017. GPT has implemented systems and processes for the collection and calculation of the data required which enabled submission of its report to the Department of Climate Change and Energy Efficiency within the legislative deadline of 31 October 2016. GPT has submitted its report to the Department of Climate Change and Energy Efficiency for the period ended 30 June 2016.

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

3. EVENTS SUBSEQUENT TO REPORTING DATE

Lot 110 at Metroplex settled in January 2017 for \$1.1 million. Lots 107 -109 at Metroplex settled in February 2017 for \$4.0 million.

Other than the above, the Directors are not aware of any matter or circumstances occurring since 31 December 2016 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

Rob Ferguson – Chairman

Rob joined the Board in May 2009 and is 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 entities and other entities:

• Primary Health Care Limited (since 2009) Chairman
• Watermark Market Neutral Fund Limited (since 2013)
• Tyro Payments Limited (since 2005)
• Smartward Limited (since 2012)

He was also a Non-Executive Chairman of IMF Bentham Limited from 2004 to January 2015.

As at the date of this report, he holds 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 29 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 168,543 GPT stapled securities.

DIRECTORS' REPORT

Year ended 31 December 2016

Brendan Crotty

Brendan was appointed to the Board in December 2009 and is also a member of the Audit and Risk Management Committee and the Sustainability 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 a director of Brickworks Limited (since 2008), Chairman of Cloud FX Pte Ltd, as well as being the Chairman of Western Sydney Parklands Trust. Brendan is also a member of the Investment Committee of CIMB Trust Cap Advisors.

As at the date of this report, he holds 67,092 GPT stapled securities.

Eileen Doyle

Eileen was appointed to the Board in March 2010. She is also the Chair of the Sustainability Committee and a member of the Nomination and Remuneration Committee. 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)
• Hunter Valley Research Foundation (Chairman)
• Oil Search Limited (since 2016)

Eileen was also 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 was appointed to the Board in March 2015 and is also a member of the Audit and Risk Management Committee and the Sustainability 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 a director of Sunway Berhad in Malaysia (since 2011) and Global Logistics Properties in Singapore (since 2012). Swe Guan is also a member of the Investment Committee of CIMB Trust Cap Advisors.

As at the date of this report, he holds no GPT stapled securities.

Anne McDonald (retired on 4 May 2016)

Anne was appointed to the Board in August 2006 and retired from the Board in May 2016. She was the Chair of the Audit and Risk Management Committee up until the date of her retirement as a director of GPT. She is a chartered accountant and was previously a partner of Ernst & Young for 15 years specialising as a company auditor and advising multinational and local companies on governance, risk management and accounting issues.

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

• Specialty Fashion Group Limited (since 2007)
• Spark Infrastructure Group (since 2009)
• Sydney Water Corporation (since 2013)

As at the date of her retirement as a director of GPT Group, Anne owned 23,364 GPT stapled securities.

Michelle Somerville

Michelle was appointed to the Board in December 2015 and is also the Chair of the Audit and Risk Management 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)
• 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 2,912 GPT stapled securities.

Gene Tilbrook

Gene was appointed to the Board in May 2010 and is also the Chair 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)
• 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.

DIRECTORS' REPORT

Year ended 31 December 2016

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.

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			Audit and Risk Committee		Nomination and Remuneration Committee		Sustainability Committee
	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	Number of meetings eligible to attend
Chair		Rob Ferguson		Michelle Somerville		Gene Tilbrook		Eileen Doyle
Rob Ferguson	14	14	-	-	6	6	-	-
Robert Johnston	14	14	-	-	-	-	-	-
Brendan Crotty	14	14	4	4	-	-	4	4
Eileen Doyle	14	14	-	-	6	6	4	4
Swe Guan Lim	14	14	4	4	-	-	4	4
Anne McDonald	5	5	1	1	-	-	-	-
Michelle Somerville	13	14	4	4	-	-	-	-
Gene Tilbrook	13	14	-	-	6	6	-	-

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 21 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 and Risk Management 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 & Risk Management 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 and Risk Management 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
• 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 19 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 company under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191. GPT is an entity to which the Instrument applies.

DIRECTORS' REPORT

Year ended 31 December 2016

6. REMUNERATION REPORT

The Nomination & 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 communicate the remuneration outcomes with full transparency, demonstrate that the GPT Group's remuneration platform is both market competitive and fair to all stakeholders, and has performance measures aligned to the achievement of GPT's strategic objectives.

Governance

Who are the members of the Committee?	The Committee consists of 3 Non-Executive Directors:  Gene Tilbrook (Committee Chairman)  Eileen Doyle  Rob Ferguson
What is the scope of work of the Committee?	The Committee provides advice and recommendations to the Board on:  Criteria for selection of Directors;  Nominations for appointment of Directors;  Criteria for reviewing the performance of Directors individually and the GPT Board collectively;  Remuneration policies for Directors and Committee members;  Remuneration amounts for Directors from within the overall Directors fee cap approved by security holders;  Remuneration policy for the Chief Executive Officer (CEO) and employees;  Incentive plans for the CEO and employees, including exercising discretion where appropriate in determining Short term incentive compensation (STIC) and Long term incentive compensation (LTI) outcomes; and Any other related matters regarding executives or the Board1 
Who is included in the Remuneration Report?	GPT's Key Management Personnel (KMP) are the individuals responsible for planning, controlling and managing the GPT Group (being the Non-Executive Directors, CEO, Chief Financial Officer (CFO), and the Chief Operating Officer (COO)).

Committee key decisions and remuneration outcomes in 2016

Platform component	Key decisions and outcomes
Base pay (Fixed)	 Implemented the annual review of employee base pay effective 1 January 2016, with an average increase of 2.2%.  Maintained the current level of Non-Executive Director fees which were set on 1 January 2015.
Short term incentive compensation (STIC)	 Implemented Earnings per Security (EPS) growth as the primary measure of Group financial performance.  The Group achieved an EPS growth outcome of 5.6% which generated a STIC pool of \$14.02 million.  Simplified the deferred equity component of STIC to vest in one tranche at the end of the year following the conclusion of the performance period.
Long term incentive (LTI) compensation	The Group achieved a compound annual Total Return2  for the 2014-16 period of 12.2%, exceeding the maximum target of 9.75%, and delivered a Relative Total Security holder Return (Relative TSR)3 of 59.5%, which ranked 4th against the comparator group and exceeded the threshold target for vesting.  As a result, the vesting outcome for the 2014-16 LTI plan was 94.8% of the performance rights for each of the 28 participants in the LTI plan.  Launched the 2016-2018 LTI with two performance measures, Total Return and Relative TSR.  Implemented a new benchmark in the 2016-2018 LTI to assess Relative TSR – the ASX200 AREIT Accumulation Index (including GPT) – and a revised vesting scale.
Other employee ownership plans	 Continued the General Employee Security Ownership Plan (GESOP) for 105 STIC eligible employees not in the 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 278 employees ineligible for GESOP. Under BBESOP, 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.
Policy & governance	 Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and governance standards, and drafting of incentive plan documentation from Ernst & Young and Conari Partners.
Diversity	 Increased the percentage of females in senior leadership roles slightly from 35.7% at the end of 2015 to 36.7%.  Increased the participation of First Nations employees in the permanent workforce to 1%.

¹ Further information about the role and responsibility of the Committee is set out in its Charter which is available on GPT's website (www.gpt.com.au).

² Total Return is defined as the sum of the change in Net Tangible Assets (NTA) plus 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.

DIRECTORS' REPORT

Year ended 31 December 2016

GPT's vision and financial goals linked to remuneration structures

GPT's vision & financial goals
Total Return > 8.5%	Generate competitive Relative Total Security holder Return	Generate competitive EPS growth
STIC (variable)  Discretionary, at risk, and with aggregate STIC funding aligned to overall Group financial outcomes.  Set around market median for target performance with potential to achieve top quartile for stretch outcomes.  Determined by GPT and individual performance against a mix of balanced scorecard measures which include financial & non-financial measures.  Financial measures include EPS growth, portfolio, fund and/or property level metrics.  Non-financial objectives focus on execution of strategy, delivery of key projects and developments, and people and culture objectives.  Delivered in cash, or (for senior executives), a combination of cash and equity with deferred	LTI (variable)  Discretionary, at risk, and aligned to overall Group financial outcomes.  Set around market median for target performance with potential to achieve top quartile for Stretch outcomes.  Vesting determined by GPT performance against Total Return and Relative TSR financial performance.  Relative TSR is measured against ASX200 AREIT Accumulation Index (including GPT).  Assessed over a 3 year performance period, no re testing.  No value derived unless GPT meets or exceeds defined performance measures.  Delivered in GPT securities to align executive and security holder interests.	Other employee ownership plans (variable) GESOP  For STIC eligible individuals who are ineligible for LTI.  Equal to 10% of their STIC (less tax) delivered in GPT securities, which must be held for at least 1 year. BBESOP  For individuals ineligible for STIC or LTI.  GPT must achieve at least Target outcome on annual EPS growth.  A grant of \$1,000 worth of GPT securities which must be held until the earlier of 3 years or end of employment.
Attract, retain, motivate and reward high calibre executives to deliver superior performance by providing:	interests by:
	vesting for 1 year.	Total remuneration components Align executive rewards to GPT's performance and security holder

Competitive rewards. Opportunity to achieve incentives beyond base pay based on high 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.

DIRECTORS' REPORT

Year ended 31 December 2016

Employment Terms

1. Employment terms – Chief Executive Officer and Managing Director

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 2016 remuneration arrangements were as follows:  Fixed pay: \$1,400,000.  STIC: \$0 to \$1,750,000 (i.e. 0% to 125% of base pay) based on performance and 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.  LTI: A grant of performance rights with the face value at time of grant of \$2,100,000 (i.e. 150% of base pay) with vesting outcomes based 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.

2. Employment terms – Executive KMP

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
	Fixed pay	\$800,000	\$650,000
	STIC4	\$0 to \$800,000	\$0 to \$650,000
	LTI	\$0 to \$800,000	\$0 to \$650,000
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.

3. Compensation mix at maximum STIC and LTI outcomes

Executive KMP	Fixed remuneration		Variable or "at risk" remuneration5
	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%

⁴ 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.

⁵ 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.

DIRECTORS' REPORT

Year ended 31 December 2016

Group Financial Performance & Incentive Outcomes

1. Five year Group financial performance

		2016	2015	2014	2013	2012
Total Shareholder Return (TSR)	%	10.1	15.4	34.5	4.1	26.9
Total Return	%	15.5	11.5	9.6	8.5	9.5
NTA (per security)	\$	4.59	4.17	3.94	3.79	3.73
FFO (per security)6	cents	29.9	28.3	26.8	25.7	24.2
Security price at end of calendar year	\$	5.03	4.78	4.35	3.40	3.68

2. Summary of CEO Objectives and Performance Outcomes

	Performance measure	Reason chosen	Weighting	Performance outcomes
Financial	Earnings per security (EPS) and EPS growth targets.	EPS is a key financial measure of GPT's performance.	55%	The Group delivered EPS of 29.9 cents and EPS growth of 5.6% for 2016.
Strategy	Strategy objectives focussed on exploring growth opportunities for GPT group, as well as development & implementation of strategy plans for each division.	Developing, communicating and implementing GPT's strategy will underpin GPT's medium term activities.	30%	Strategy plans have been developed and updated for each division, approved by the Board, and implementation of plans is on-track. Additional growth opportunities have also been assessed.
Operational	Operational objectives focussed on review of organisational overheads, fund term reviews, and review of development pipeline, including specific projects.	Focus on delivery of key projects, business transformation, and operational efficiency will optimise GPT's performance.	10%	Organisational overheads were reduced. Fund term reviews have been completed for GWOF and are in progress for GWSCF. The development pipeline has been reviewed and additional resourcing put in place. Progress has been made on retail mixed-use opportunities at Rouse Hill, Sydney Olympic Park and Camellia. The initial planning process is underway for Darling Park Stage 4, logistics land has been acquired in Sydney, and the Sunshine Plaza development has commenced. The Group has also maintained focus on Wollongong Central, including securing major tenants.
People	People objectives centred on establishing the new management team, driving our diversity and inclusion agenda, and assessing employee engagement.	Maintaining a high performing executive team and achieving engagement and diversity goals is key to high performance.	5%	The new leadership team has been established. Employee engagement has been independently assessed and a sustainable engagement score of 79% achieved. Gender diversity in senior leadership has improved slightly from 35.7% at the end of 2015 to 36.7%. Aboriginal and Torres Strait Islander representation in the permanent workforce has improved and is now greater than 1%.

3. 2016 STIC outcomes by Executive KMP⁷

Executive KMP	Position	Actual STIC awarded (\$)	Actual STIC awarded as a % of maximum STIC	% of maximum STIC award forfeited	Cash component (\$)	Equity component (# of GPT securities)8
Bob Johnston	Chief Executive Officer and Managing Director	\$1,131,000	65%	35%	\$565,500	121,352
Anastasia Clarke	Chief Financial Officer	\$476,000	73%	27%	\$238,000	51,073
Mark Fookes	Chief Operating Officer	\$565,169	71%	29%	\$282,585	60,640

⁶ Represents Realised Operating Income (ROI) until 2013.

⁷ Excluding the impact of movements in the GPT security price on deferred STIC value received.

⁸ The number of deferred GPT securities granted are calculated by dividing 50% of the Actual STIC awarded by GPT's Q4 2015 VWAP of \$4.66. The deferred GPT securities will vest subject to service on 31 December 2017.

DIRECTORS' REPORT

Year ended 31 December 2016

4. Group performance measures for LTI Plans

LTI	LTI performance measurement period	Performance measure	Performance measure hurdle	Weighting	Results	Vesting % by performance measure
2014	2014-16	Relative TSR versus comparator group	50% of rights vest at 51st percentile, up to 100% at the 75th percentile (pro rata vesting in between)	50%	59.5%, which ranked 4th out of 11	89.6%
		Total Return	25% of rights vest at 9% Total Return, up to 100% at 9.75% Total Return (pro-rata vesting in between)	50%	12.2%	100%
2015	2015-17	Relative TSR versus comparator group	50% of rights vest at 51st percentile, up to 100% at the 75th percentile (pro rata vesting in between)	50%	n/a	n/a
		Total Return	25% of rights vest at 9% Total Return, up to 100% at 9.75% Total Return (pro-rata vesting in between)	50%
2016	2016-18	Relative TSR versus ASX200 AREIT Accumulation Index (including GPT)	10% of rights vest at Index performance, up to 100% at Index plus 10% (pro rata vesting in between)	50%	n/a	n/a
		Total Return	0% of rights vest at 8% Total Return, up to 100% at 9.5% Total Return (pro-rata vesting in between)	50%

5. 2014-2016 LTI outcomes by Executive KMP⁹

Senior Executive	Position	Performance rights granted	Performance rights vested	Performance rights lapsed
Anastasia Clarke	Chief Financial Officer	114,706	108,730	5,976
Mark Fookes	Chief Operating Officer	217,087	205,777	11,310

6. LTI outcomes – fair value and maximum value recognised in future years¹⁰

Executive KMP	LTI Outcome	Grant date	Fair value per performance right	Performance rights granted as at 31 Dec 16	Vesting date	Maximum value to be recognised in future years
Bob Johnston	2016	16 May 16	\$2.96	450,257	31 Dec 18	\$903,120
Chief Executive Officer and Managing Director	2015	8 Sept 15	\$2.21	430,476	31 Dec 17	\$410,195
Anastasia Clarke	2016	16 May 16	\$2.96	139.365	31 Dec 18	\$314,439
Chief Financial Officer	2015	18 May 15	\$2.48	104,981	31 Dec 17	\$99,235
Mark Fookes	2016	16 May 16	\$2.96	171,527	31 Dec 18	\$387,004
Chief Operating Officer	2015	18 May 15	\$2.48	194,747	31 Dec 17	\$184,088

⁹ This excludes Mr. Johnston as he was not a participant in the 2014-16 LTI plan.

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 volume weighted average security price (VWAP) of GPT securities for specified periods; reference to fair value per performance right is included in this table to comply with accounting standards.

DIRECTORS' REPORT

Year ended 31 December 2016

7. Reported remuneration – Executive KMP – Actual Amounts Received¹¹

			Fixed pay		Variable or "at risk"12
Executive KMP		Base pay	Superannuation	Other13	STIC	LTI	Grant of non STI or LTI performance rights	Total
Bob Johnston14	2016	\$1,300,883	\$19,462	\$5,677	\$1,143,136	-	-	\$2,469,158
Chief Executive Officer and Managing Director	2015	\$419,518	\$4,827	\$634	\$361,633	-	\$608,100	\$1,394,712
Anastasia Clarke	2016	\$630,538	\$19,462	\$2,334	\$481,107	\$517,555	-	\$1,650,996
Chief Financial Officer	2015	\$562,204	\$19,046	\$2,314	\$427,076	\$361,437	-	\$1,372,077
Mark Fookes	2016	\$780,538	\$19,462	\$6,999	\$571,233	\$979,499	-	\$2,357,731
Chief Operating Officer	2015	\$780,954	\$19,046	\$9,599	\$854,148	\$803,192	-	\$2,466,939
Former KMP
Michael Cameron15	2016	-	-	-	-	-	-	-
Chief Executive Officer and Managing Director	2015	\$1,380,845	\$14,219	\$13,279	-	-	-	\$1,408,343
Carmel Hourigan16	2016	-	-	-	-	-	-	-
Chief Investment Officer	2015	\$675,400	\$19,046	\$3,521	-	-	-	\$697,967
Total	2016	\$2,711,959	\$58,386	\$15,010	\$2,195,476	\$1,497,054	-	\$6,477,885
	2015	\$3,818,921	\$76,184	\$29,347	\$1,642,857	\$1,164,629	\$608,100	\$7,340,038

¹⁴ Mr. Johnston commenced employment with GPT on 7 September 2015. ¹⁵ Mr. Cameron resigned on 2 September 2015

¹⁶ Ms. Hourigan resigned on 30 October 2015.

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; 2016: \$4.76, 2015: \$4.6645. ¹³ Other may include death & total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, and/or other benefits.

DIRECTORS' REPORT

Year ended 31 December 2016

8. Reported remuneration – Executive KMP – AIFRS Accounting¹⁷

			Fixed pay		Variable or "at risk"
Executive KMP		Base pay	Superannuation	Other	STIC (cash plus accrual)18	LTI award accrual19	Grant or vesting of non STI or LTI performance rights20	Total
Bob Johnston	2016	\$1,390,757	\$19,462	\$5,677	\$936,837	\$694,626	\$64,319	\$3,111,678
Chief Executive Officer and Managing Director	2015	\$458,781	\$4,827	\$634	\$176,500	\$128,116	\$552,086	\$1,320,944
Anastasia Clarke	2016	\$633,714	\$19,462	\$2,334	\$495,523	\$290,933	-	\$1,441,966
Chief Financial Officer	2015	\$594,237	\$19,046	\$2,314	\$348,719	\$233,384	-	\$1,197,700
Mark Fookes	2016	\$784,411	\$19,462	\$6,999	\$720,099	\$481,598	-	\$2,012,569
Chief Operating Officer	2015	\$780,626	\$19,046	\$9,599	\$679,759	\$465,467	-	\$1,954,497
Former KMP
Michael Cameron	2016	-	-	-	-	-	-	-
Chief Executive Officer and Managing Director	2015	\$1,380,845	\$14,219	\$13,279	-	-	-	\$1,408,343
Carmel Hourigan	2016	-	-	-	-	-	-	-
Chief Investment Officer	2015	\$675,400	\$19,046	\$3,521	-	-	-	\$697,967
Total	2016	\$2,808,882	\$58,386	\$15,010	\$2,152,459	\$1,467,157	\$64,319	\$6,566,213
	2015	\$3,889,889	\$76,184	\$29,347	\$1,204,978	\$826,967	\$552,086	\$6.579,451

9. GPT security ownership – Executive KMP as at 31 December 2016

	Employee Security Schemes (ESS)					Private Holdings			Minimum Security Holding Requirement (MSHR)
Executive KMP	Vested, restricted security holding21	Deferred security holding22	Total	Vested, unrestricted security holding23	Private holdings at start of period24	Purchase /(Sales)25	Total	TOTAL: ESS + Private Holdings	Gross Value (\$)26	MSHR Guideline (\$)27
Bob Johnston Chief Executive Officer and Managing Director	128,849	141,199	270,048	19,847	-	40,800	60,647	330,695	\$1,574,108	\$2,100,000
Anastasia Clarke Chief Financial Officer	309,945	75,416	385,361	124,150	3,546	(26,655)	101,041	486,402	\$2,315,274	\$650,000
Mark Fookes Chief Operating Officer	666,200	109,327	775,527	274,221	3,546	(44,863)	232,904	1,008,431	\$4,800,132	\$800,000

18 This column includes the cash value of the STIC award and an accounting valuation of the deferred equity component, with the exception of the 2015 figure for Mr. Johnston which is cash only. The accrual accounting valuation of the deferred securities from Mr. Johnston's 2015 STIC have been included in the 2016 number as the securities were only approved for issue at the 2016 AGM.

¹⁷ This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian accounting standards.

¹⁹ 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.

²⁰ Grant or vesting of one off non STI or LTI performance rights includes an accounting valuation of the sign on package for Mr. Johnston.

²¹ LTI plans that have vested and are still restricted - up to and including the 2014-16 LTI - and/or sign on grants of GPT securities (Mr. Johnston only). ²² Deferred STIC - up to and including 2016 STIC - that is still dependent on service conditions being met to vest.

²³ GPT security holdings obtained under employee security schemes (i.e. either LTI or deferred STIC) which have satisfied their vesting or deferral conditions.

²⁴ Private holdings that the individual may have obtained on their own account i.e. it does not include GPT securities obtained under any employee security scheme.

²⁵ Movement in GPT security holdings as a result of the sale of vested, unrestricted security holdings and/or the purchase of additional private holdings on the individuals own account during the 2016 calendar year.

²⁶ The total of the executives ESS and private holdings multiplied by GPT's fourth quarter 2016 VWAP of \$4.76 to derive a dollar value.

²⁷ GPT's MSHR guideline requires the CEO to acquire and maintain a holding equal to 150% of base salary. For Leadership Team members the holding requirement is equal to 100% of base salary. Individuals have three years from commencement of employment to achieve the MSHR before it is assessed for the first time.

DIRECTORS' REPORT

Year ended 31 December 2016

10. GPT performance rights – Executive KMP

	Performance rights
Executive KMP	Performance rights that lapsed in 201628 (# of rights)	Performance rights still on foot at 31/12/1629 (# of rights)
Bob Johnston Chief Executive Officer and Managing Director	66,255	893,302
Anastasia Clarke Chief Financial Officer	24,586	244,346
Mark Fookes Chief Operating Officer	36,433	366,274

Remuneration – Non-Executive Directors

What are the key elements of the Non-Executive Director Remuneration Policy?

 The Board determines the remuneration structure for Non-Executive Directors based on recommendations from the Committee.  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  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 (based on GPT's industry sector and market capitalisation).  External independent advice on remuneration levels for Non-Executive Directors is sought on an annual basis. In the event that a review is conducted, 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 security holders 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 fees³⁰,³¹

		Board	Audit and Risk Management Committee	Sustainability Committee	Nomination and Remuneration Committee	Project Control Group32
Chairman	2016	\$362,500	\$36,000	\$30,000	\$30,000	\$20,000
	2015	\$362,500	\$36,000	\$30,000	\$30,000	\$20,000
Members	2016	\$145,000	\$18,000	\$15,000	\$15,000	n/a
	2015	\$145,000	\$18,000	\$15,000	\$15,000	n/a

²⁸ The sum of performance rights that were awarded to a participant in the 2014 LTI that did not vest at the end of the 2014-2016 performance period, and as a result, lapsed and/or performance rights granted under the 2016 STIC that also lapsed.

²⁹ The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2016. It may include LTI plans and/or sign on rights (Mr. Johnston only). 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 various plans; 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.

³⁰ 'Chairman' used in this sense may refer to the chairperson of the board or a particular committee.

³¹ 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.

³² At the end of the 2016 calendar year there were no non-executive directors receiving the Project Control Group fee.

			Fixed pay		Total
Non-Executive Director - Current		Salary & fees	Superannuation	Other 35
Rob Ferguson	2016	\$362,500	\$19,462	ē,	\$381,962
Chairman	2015	\$362,500	\$19,046	٠	\$381,546
Brendan Crotty	2016	\$181,333	\$17,227	ν	\$198,560
	2015	\$198,000	\$18,797	٠ $\sim$	\$216,797
Eileen Doyle	2016	\$190,000	\$18,050	$\overline{\phantom{a}}$	\$208,050
	2015	\$190,000	\$18,050	Ξ	\$208,050
Swe Guan Lim 36	2016	\$178,000	\$16,910	\$615	\$195,525
	2015	\$129,154	\$12,270	\$551	\$141,975
Michelle Somerville 37	2016	\$174,723	\$16,599	٠	\$191,322
	2015	\$13,583	\$1,291		\$14,874
Gene Tilbrook	2016	\$175,000	\$16,625	\$767	\$192,392
	2015	\$175,000	\$16,625	\$1,446	\$193,071
Non-Executive Director - Former
Eric Goodwin 38	2016		۰
	2015	\$68,285	\$6,480		\$74,765
Anne McDonald 39	2016	\$62,422	\$5,930	\$641	\$68,993
	2015	\$181.000	\$17.195	\$3,350	\$201.545
Total	2016	\$1,323,978	\$110,803	\$2,023	\$1,436,804
	2015	\$1,317,522	\$109,754	\$5,347	\$1,432,623

		Private holdings (# of securities)	Minimum security holding requirement (MSHR)
Non-Executive Director	Balance 31/12/15	Purchase/(sale)	Balance 31/12/16	Gross value $(S)^{10}$	MSHR quideline (\$)"
Rob Ferguson	207.628	$\sim$	207,628	\$988,309	\$362,500
Brendan Crotty	67.092		67.092	\$319,358	\$145,000
Eileen Doyle	41.597	3.865	45.462	\$216,399	\$145,000
Swe Guan Lim				\$0	\$145,000
Michelle Somerville		2.912	2,912	\$13,861	\$145,000
Gene Tilbrook	48.546		48.546	\$231.079	\$145.000

Auditor's Independence Declaration

As lead auditor for the audit of GPT Management Holdings Limited for the year ended 31 December 2016, 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.

Matthew Lunn Sydney Partner 10 February 2017 PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757 Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2016

		31 Dec 16	31 Dec 15
	Note	\$'000	\$'000
Revenue
Fund management fees		99,044	64,571
Property management fees		41,227	41,131
Development management fees		15,144	15,558
Development revenue		54,088	16,065
Other revenue		1,442	336
Management costs recharged		33,009	35,543
		243,954	173,204
Other income
Share of after tax profit of equity accounted investments	2(c)	1,532	21,440
Dividend income		30,437	-
Interest revenue		1,889	1,058
Reversal of prior period impairment expense		411	12,650
Profit on the sale of other assets		12,462	-
Proceeds from sale of inventory		12,532	-
		59,263	35,148
Total revenue and other income		303,217	208,352
Expenses
Remuneration expenses		120,972	125,040
Cost of sale of inventory		10,822	-
Property expenses and outgoings		8,550	7,642
Development expenses		2,156	9,525
Repairs and maintenance		3,885	3,591
Professional fees		7,800	6,488
Depreciation		2,112	2,280
Amortisation		5,401	6,802
Revaluation of financial arrangements		52,619	(10,623)
Impairment expense		5,952	5,852
Finance costs		3,277	20,232
Other expenses		8,151	6,584
Total expenses		231,697	183,413
Profit before income tax		71,520	24,939
Income tax expense / (credit)	10(a)	22,649	(7,669)
Profit after income tax for continuing operations		48,871	32,608
Loss from discontinued operations	24(c)	(29,050)	(183)
Net profit for the year		19,821	32,425
Other comprehensive income
Items that may be reclassified to profit and loss
Net foreign exchange translation adjustments from discontinued operations	11(b)	907	51
Revaluation of available for sale financial asset from continuing operations	11(b)	458	6,667
Total comprehensive income for the year		21,186	39,143
Net profit attributable to:
- Members of the Company		15,399	24,703
- Non-controlling interest		4,422	7,722
Total comprehensive income attributable to:
- Members of the Company		16,764	31,421
- Non-controlling interest		4,422	7,722
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)	2.47	1.40
Basic and diluted earnings per share (cents per share) - Total	12(a)	0.86	1.39

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

		31 Dec 16	31 Dec 15
	Note	\$'000	\$'000
ASSETS
Current assets
Cash and cash equivalents		17,842	30,380
Loans and receivables	3	99,055	65,833
Inventories	5	7,304	-
Prepayments		1,086	1,139
Available for sale financial asset		9,296	-
		134,583	97,352
Assets classified as held for sale		-	246
Total current assets		134,583	97,598
Non-current assets
Intangible assets	4	35,256	35,542
Property, plant and equipment	6	14,900	14,135
Inventories	5	128,607	101,455
Equity accounted investments	2	15,752	14,274
Loans and receivables	3	37,033	26,047
Deferred tax assets	10(b)	7,550	30,240
Deferred acquisition costs		1,852	2,504
Available for sale financial asset		-	8,641
Other assets	7	8,901	10,541
Total non-current assets		249,851	243,379
Total assets		384,434	340,977
LIABILITIES
Current liabilities
Payables	8	49,449	52,044
Provisions	9	28,690	29,231
Borrowings	14	18,812	6,723
Deferred revenue		7,585	-
Total current liabilities		104,536	87,998
Non-current liabilities
Borrowings	14	82,426	74,805
Provisions	9	9,217	5,792
Other liabilities		6,437	7,182
Total non-current liabilities		98,080	87,779
Total liabilities		202,616	175,777
Net assets		181,818	165,200
EQUITY
Contributed equity	11(a)	325,512	325,328
Reserves	11(b)	44,683	43,742
Accumulated losses	11(c)	(201,041)	(216,440)
Total equity attributable to Company members		169,154	152,630
Non-controlling interests		12,664	12,570
Total equity		181,818	165,200

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2016

			Company members				Non-controlling interests
		Contributed equity	Reserves	Accumulated losses	Total	Contributed equity	Reserves	Accumulated losses	Total	Total equity
	Note	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Equity attributable to Company Members
At 1 January 2015		319,315	40,549	(243,948)	115,916	22,060	-	(17,212)	4,848	120,764
Revaluation of available for sale financial asset	11(b)	-	6,667	-	6,667	-	-	-	-	6,667
Foreign currency translation reserve	11(b)	-	51	-	51	-	-	-	-	51
Other comprehensive income for the year		-	6,718	-	6,718	-	-	-	-	6,718
Profit for the year	11(c)	-	-	24,703	24,703	-	-	7,722	7,722	32,425
Total comprehensive income for the year		-	6,718	24,703	31,421	-	-	7,722	7,722	39,143
Transactions with Members in their capacity as Members
Issue of securities	11(a)	6,013	-	-	6,013	-	-	-	-	6,013
Movement in employee incentive security scheme reserve net of tax	11(b)	-	(3,525)	-	(3,525)	-	-	-	-	(3,525)
Reclassification of employee incentive security scheme reserve to
accumulated losses	11(c)	-	-	2,805	2,805	-	-	-	-	2,805
At 31 December 2015		325,328	43,742	(216,440)	152,630	22,060	-	(9,490)	12,570	165,200
Equity attributable to Company Members
At 1 January 2016		325,328	43,742	(216,440)	152,630	22,060	-	(9,490)	12,570	165,200
Revaluation of available for sale financial asset	11(b)	-	458	-	458	-	-	-	-	458
Foreign currency translation reserve	11(b)	-	907	-	907	-	-	-	-	907
Other comprehensive income for the year		-	1,365	-	1,365	-	-	-	-	1,365
Profit for the year	11(c)	-	-	15,399	15,399	-	-	4,422	4,422	19,821
Total comprehensive income for the year		-	1,365	15,399	16,764	-	-	4,422	4,422	21,186
Transactions with Members in their capacity as Members
Issue of securities	11(a)	184	-	-	184	-	-	-	-	184
Movement in employee incentive security scheme reserve net of tax	11(b)	-	(424)	-	(424)	-	-	-	-	(424)
Distributions paid		-	-	-	-	-	-	(4,328)	(4,328)	(4,328)
At 31 December 2016		325,512	44,683	(201,041)	169,154	22,060	-	(9,396)	12,664	181,818

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

CONSOLIDATED STATEMENT OF CASH FLOW

Year ended 31 December 2016

		31 Dec 16	31 Dec 15
	Note	\$'000	\$'000
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		223,472	96,580
Payments in the course of operations (inclusive of GST)		(149,121)	(128,542)
Payments for inventories		(48,298)	(53,787)
Proceeds from sale of inventories		12,532	-
Receipts from development activities		16,621	32,820
Payments for development activities		-	(11,612)
Distributions and dividends received from equity accounted investments		-	83,777
Interest received		1,892	1,066
Finance costs paid		(1,493)	(1,877)
Net cash inflows from operating activities	16	55,605	18,425
Cash flows from investing activities
Payments for property, plant and equipment		(2,594)	(1,737)
Payments for intangibles		(4,786)	(5,172)
Proceeds from sale of other assets		11,177	-
Capital return from equity accounted investment		-	5,000
Proceeds on disposal of equity accounted investment		1,251	-
Net cash inflows / (outflows) from investing activities		5,048	(1,909)
Cash flows from financing activities
Loan to related parties		(29,486)	-
Proceeds from repayment of related party loans		18,697	38,181
Repayment of related party borrowings		(100,677)	(64,271)
Proceeds from related party borrowings		40,995	-
Employee incentive scheme		(1,190)	-
Proceeds from borrowings		7,177	2,458
Repayments of borrowings		(8,707)	(1,090)
Proceeds from issue of securities net of transaction costs		-	4,688
Purchase of securities for the employee incentive scheme		-	(278)
Net cash outflows from financing activities		(73,191)	(20,312)
Net decrease in cash and cash equivalents		(12,538)	(3,796)
Cash and cash equivalents at the beginning of the year		30,380	34,176
Cash and cash equivalents at the end of the year		17,842	30,380

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

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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

The notes to these financial statements have been organised into sections in order to help users find and understand the information they need to know. The Consolidated Entity has also provided additional information where it is helpful to understand the performance.

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

Note 1 - Results for the year: focuses on results and performance of the Consolidated Entity.

Note 2 to 10 - Operating assets and liabilities: provides information on the assets and liabilities used to generate the Consolidated Entity's trading performance.

Note 11 to 15 - Capital structure: outlines how the Consolidated Entity manages its capital structure and various financial risks. Note 16 to 27 - Other disclosure items: provides information on other items that must be disclosed to comply with Australian Accounting Standards and other regulatory pronouncements.

Key judgements and estimates

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.

Area of estimates	Assumptions underlying	Note
Loan receivables	Recoverability	3
Management rights with indefinite life	Impairment trigger and recoverable amounts	4
IT development and software	Impairment trigger and recoverable amounts	4
Inventories	Lower of cost and net realisable value	5
Deferred tax assets	Recoverability	10
Security based payments	Fair value	19
Available for sale financial assets	Fair value	22

RESULT FOR THE YEAR

1. SEGMENT INFORMATION

The chief operating decision maker monitors 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

Property, development and fund management fee revenue is recognised on an accruals basis, in accordance with the terms of the relevant contracts.

Development revenue is recognised as and when the Company is entitled to the benefits.

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

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

Profit or loss on disposal of assets is recognised as the difference between the carrying amount and the net proceeds from disposal. Where revenue is obtained from the sale of properties or assets, it is recognised when the significant risks and rewards have transferred to the buyer.

Expenses

Property expenses and outgoings 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 get ready for 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. Conversely, where funds are used from group borrowings, finance costs are capitalised using an appropriate capitalisation rate.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

OPERATING ASSETS AND LIABILITIES

2. EQUITY ACCOUNTED INVESTMENTS

		31 Dec 16	31 Dec 15
	Note	\$'000	\$'000
Investments in joint ventures and associates	(a)	15,752	14,274
Total equity accounted investments		15,752	14,274

(a) Details of equity accounted investments

Name	Principal Activity		Ownership Interest
		2016	2015	31 Dec 16	31 Dec 15
		%	%	\$'000	\$'000
(i) Joint ventures
DPT Operator Pty Limited (1)	Managing property	50.00	50.00	88	87
Lendlease GPT (Rouse Hill) Pty Limited (1) (2) (3)	Property development	50.00	50.00	5,660	4,183
Chullora Trust 1	Property development	50.00	50.00	2	2
Erskine Park Trust	Property development	50.00	50.00	2	2
Total investment in joint ventures				5,752	4,274
(ii) Associates
GPT Funds Management Limited	Funds management	100.00	100.00	10,000	10,000
Total investment in associates				10,000	10,000

(1) These entities have a 30 June balance date.

(2) The Consolidated Entity 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.

(3) The Group interest is held through a subsidiary that is 52% owned by GMH and 48% owned by GPT Trust.

(b) Summarised financial information for joint ventures and associates

The information disclosed reflects the amounts presented in the financial statements 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 16	31 Dec 15
	\$'000	\$'000
Cash and cash equivalents	26,538	77,905
Other assets	19,540	18,692
Property investments and loans	14,400	3,228
Total assets	60,478	99,825
Liabilities	38,974	81,277
Total liabilities	38,974	81,277
Net assets	21,504	18,548
Consolidated entity's share	15,752	14,274

(c) Share of joint ventures and associates' net profits

	31 Dec 16	31 Dec 15
	\$'000	\$'000
Revenue	23,129	104,340
Expenses	(20,068)	(55,133)
Profit before income tax expense	3,061	49,207
Income tax expense	1	7,352
	3,060	41,855
Reversal of negative net assets	-	(8,065)
Negative net assets not recognised	4	-
Total net profit	3,064	33,790
Share of net profits of joint ventures and associated interests	1,532	21,440

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

(d) Share of joint ventures and associates commitments and contingent liabilities

	31 Dec 16	31 Dec 15
	\$'000	\$'000
Capital expenditure commitments	1,084	2,419
Total joint venture commitments	1,084	2,419

The capital expenditure commitments in the Consolidated Entity's joint ventures at 31 December 2016 relate to Lendlease GPT (Rouse Hill) Pty Limited (2015: Lendlease GPT (Rouse Hill) Pty Limited).

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

	31 Dec 16	31 Dec 15
	\$'000	\$'000
Carrying amount at the beginning of the year	14,274	10,089
Reversal of negative net assets	(2)	(8,065)
Share of joint venture entities' net operating profit	1,532	12,352
Distributions received / receivable from joint ventures	(52)	(102)
Carrying amount at the end of the year	15,752	14,274
3. LOANS AND RECEIVABLES
	31 Dec 16	31 Dec 15

	\$'000	\$'000
Current assets
Trade receivables (1)	20,866	35,892
Less: impairment of trade receivables	(1)	-
	20,865	35,892
Distributions receivable from joint ventures	-	16
Dividends receivable from other investments	30,437	-
Other debtors	3,297	1,108
Related party receivables(2)	44,456	28,817
Total current loans and receivables	99,055	65,833
Non-current assets
Loan to Lendlease GPT (Rouse Hill) Pty Limited(3)	-	18,500
Loans to related parties	37,033	7,547
Total non-current loans and receivables	37,033	26,047

(1) The trade receivables balance includes amounts receivable from GWOF, GWSCF and GMF. 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.

(3) The loan was provided to Lendlease GPT (Rouse Hill) Pty Limited as part of the funding of the joint venture agreement. During 2016, the loan was repaid.

The table below shows the ageing analysis of GPT's loans and receivables.

			31 Dec 16						31 Dec 15
	Not Due	0-30 days	31-60 days	61-90 days	90+ days	Total	Not Due	0-30 days	31-60 days	61-90 days	90+ days	Total
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000		\$'000	\$'000	\$'000	\$'000
Current receivables	-	96,137	584	32	2,302	99,055	-	63,082	1,085	262	1,404	65,833
Non-current loans and receivables	37,033	-	-	-	-	37,033	26,047	-	-	-	-	26,047
Total loans and receivables	37,033	96,137	584	32	2,302	136,088	26,047	63,082	1,085	262	1,404	91,880

Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method less any allowance for impairment. All loans and receivables with maturities greater than 12 months after the balance date are classified as non-current assets.

Recoverability of trade receivables

Recoverability of trade receivables is assessed on an ongoing basis. Impairment is recognised in the Consolidated Statement of Comprehensive Income when there is objective evidence that the Consolidated Entity will not be able to collect the debts. Financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation and default or delinquency in payments are considered objective evidence of impairment. See note 15(e) for more information on management of credit risk in relation to trade receivables.

The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Debts that are known to be uncollectable are written off when identified.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

Recoverability of non-current loan receivables

At the end of each reporting period, the Consolidated Entity assesses whether there is objective evidence that a loan receivable is impaired. The amount of the impairment is measured as the difference between the loan receivable's carrying amount and the present value of estimated future cash flows discounted at the loan receivable's original effective interest rate. The carrying amount of the loan receivable is reduced and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income. In a subsequent period, if the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the Consolidated Statement of Comprehensive Income.

4. INTANGIBLE ASSETS

	Management rights	IT development	Total
		and software
	\$'000	\$'000	\$'000
Cost
At 1 January 2015	55,706	57,483	113,189
Additions	134	4,819	4,953
Transfers	(23)	(252)	(275)
At 31 December 2015	55,817	62,050	117,867
Additions	8	4,918	4,926
Transfers	-	189	189
At 31 December 2016	55,825	67,157	122,982
Accumulated amortisation and impairment
At 1 January 2015	(44,468)	(25,160)	(69,628)
Amortisation	(283)	(6,519)	(6,802)
Impairment	-	(5,895)	(5,895)
At 31 December 2015	(44,751)	(37,574)	(82,325)
Amortisation	(343)	(5,058)	(5,401)
At 31 December 2016	(45,094)	(42,632)	(87,726)
Carrying amounts
At 31 December 2015	11,066	24,476	35,542
At 31 December 2016	10,731	24,525	35,256

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 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 straight-line 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 amount exceeds the recoverable amount. Critical judgements are made by management in setting appropriate impairment triggers and assumptions used to determine the recoverable amount.

5. INVENTORIES

	31 Dec 16 \$'000	31 Dec 15 \$'000
Development properties held for resale	7,304	-
Current inventories	7,304	-
Development properties held for resale	128,607	101,455
Non-current inventories	128,607	101,455
Total inventories	135,911	101,455

In 2016, the Consolidated Entity acquired land at Rouse Hill for \$30.1m from GPT Trust in December. Lot C1 was sold at Erskine Park in December for \$5.6 million and Lots 100, 101 and 113 were sold at Metroplex in December for \$7.0 million.

Development properties held for resale are stated at the lower of cost and net realisable value.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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 inventories write-down is recognised as an impairment expense in the Consolidated Statement of Comprehensive Income.

An impairment expense has been recognised for the year ended 31 December 2016 of \$6.0 million in relation to Berrinba (2015: nil).

6. PROPERTY, PLANT AND EQUIPMENT

	31 Dec 16 \$'000	31 Dec 15 \$'000
Computers
At cost	15,069	13,653
Less: accumulated depreciation and impairment	(10,062)	(8,826)
Total computers	5,007	4,827
Office, fixtures and fittings
At cost	15,828	14,365
Less: accumulated depreciation and impairment	(5,935)	(5,057)
Total office, fixtures and fittings	9,893	9,308
Total property, plant and equipment	14,900	14,135

Reconciliations of the carrying amount of property, plant and equipment at the beginning and end of the financial year are set out below:

	Computers \$'000	Office fixtures & fittings \$'000	Total \$'000
At 1 January 2015
Opening carrying value	4,436	9,998	14,434
Additions	1,485	221	1,706
Transfers	193	82	275
Depreciation	(1,287)	(993)	(2,280)
At 31 December 2015	4,827	9,308	14,135
At 1 January 2016
Opening carrying value	4,827	9,308	14,135
Additions	1,605	1,463	3,068
Transfers	(189)	-	(189)
Depreciation	(1,236)	(878)	(2,114)
At 31 December 2016	5,007	9,893	14,900

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 straight line 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 & equipment and are included in the Consolidated Statement of Comprehensive Income in the year of disposal.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

7. OTHER ASSETS

	31 Dec 16	31 Dec 15
	\$'000	\$'000
Lease incentive asset	4,083	5,101
Investment in financial asset	4,818	5,440
Total other assets	8,901	10,541
8. PAYABLES
	31 Dec 16	31 Dec 15
	\$'000	\$'000
Trade payables	14,041	14,488
Accruals	28,029	34,829
Other payables	7,379	2,727
Total payables	49,449	52,044

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 16 \$'000	31 Dec 15 \$'000
Current provisions
Employee benefits		25,608	26,110
Other		3,082	3,121
Total current provisions		28,690	29,231
Non-current provisions
Employee benefits		8,615	5,285
Other		602	507
Total non-current provisions		9,217	5,792
	Employee benefits	Other	Total
	\$'000	\$'000	\$'000
As at 1 January 2015	30,931	3,767	34,698

Arising during the year	25,474	797	26,271
Utilised during the year	(25,010)	(936)	(25,946)
As at 31 December 2015	31,395	3,628	35,023
As at 1 January 2016	31,395	3,628	35,023
Arising during the year	30,826	772	31,598

Utilised during the year (27,998) (716) (28,714) As at 31 December 2016 34,223 3,684 37,907

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 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. 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.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

10. TAXATION

	31 Dec 16 \$'000	31 Dec 15 \$'000
(a) Income tax
Deferred income tax expense / (credit)	22,648	(7,670)
Income tax expense / (credit) in the Statement of Comprehensive Income	22,648	(7,670)
Income tax expense / (credit) attributable to:
Profit / (loss) from continuing operations	22,649	(7,669)
Loss from discontinued operations	(1)	(1)
Aggregate income tax expense / (credit)	22,648	(7,670)
Reconciliation of income tax expense / (credit) to prima facie tax payable
Profit from continuing operations before income tax expense	71,520	24,939
Loss from discontinued operations before income tax expense	(29,051)	(184)
Net profit before income tax expense	42,469	24,755
Prima facie income tax expense at 30% tax rate (2015: 30%)	12,741	7,427
Tax effect of amounts not deductible / assessable in calculating income tax credit:
Prior year adjustments	484	(5,145)
Previously unrecognised tax losses used to reduce deferred tax expense	(13,186)	(5,966)
Net profit on disposal of assets	(1,413)	-
Non-assessable income	(2,126)	-
Amortisation of intangibles	39	40
Revaluation of financial arrangements	24,532	(2,830)
Depreciation not deductible	-	18
Deferred tax asset not recognised	-	3,800
Impairment expense / (reversal of impairment expense)	1,665	(3,795)
Profit from joint ventures	(444)	(1,256)
Other	358	37
Income tax expense / (credit)	22,650	(7,670)
(b) Deferred tax assets
Employee credits	14,736	13,970
Provisions and accruals	3,183	2,874
Other	(12,380)	(4,416)
Tax losses recognised	2,011	17,812
Net deferred tax asset	7,550	30,240
Movement in temporary differences during the year
Opening balance at the beginning of the year	30,240	32,452
Credited to the Statement of Comprehensive Income	6,335	4,276
Charged to reserves	(39)	(2,533)
Tax losses utilised	(28,986)	(3,955)
Closing balance at the end of the year	7,550	30,240

Company and other taxable entities

Income tax credit for the financial year is the tax receivable on the current year's taxable income based on the income tax rate for each jurisdiction, this is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to 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 to utilise them.

Deferred income tax assets and liabilities – 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.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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

• Where they arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss.
• 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.
• 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.
• Unused tax losses for which no deferred tax asset has been recognised are nil (2015: deferred tax asset of \$13.5 million equivalent to tax losses of \$45.0 million, at a tax rate of 30%).

Tax relating to equity items

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

CAPITAL STRUCTURE

11. EQUITY AND RESERVES

(a) Contributed equity

	Number	\$'000
Ordinary stapled securities
Opening securities on issue as at 1 January 2015	1,685,460,955	319,315
Securities issued - institutional placement (1)	76,832,152	4,093
Transaction costs	-	(70)
Securities issued - Long Term Incentive Plan	2,169,649	81
Securities issued - Security Purchase Plan (1)	11,820,458	665
Securities issued - Deferred Short Term Incentive Plan	1,236,353	65
Securities issued - Broad Based Employee Security Ownership Plan	59,514	4
Distribution reinvestment plan for 6 months period ended 30 June 2015	17,237,448	1,175
Closing securities on issue as at 31 December 2015	1,794,816,529	325,328
Opening securities on issue as at 1 January 2016	1,794,816,529	325,328
Securities issued - Long Term Incentive Plan	2,102,805	100
Securities issued - Deferred Short Term Incentive Plan	978,834	79
Securities issued - Broad Based Employee Security Ownership Plan	57,400	5
Closing securities on issue as at 31 December 2016	1,797,955,568	325,512

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.

(1) Securities issued – institutional placement and stapled security purchase plan Equity raising comprised a \$325.0 million institutional placement and a \$50.0 million security purchase plan. The funding was used to fund the redemption of exchangeable securities.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

(b) Reserves

	Foreign Currency Translation Reserve	Employee Incentive Scheme Reserve	Fair Value Reserve	Total Reserve
	\$'000	\$'000	\$'000	\$'000
Balance at 1 January 2015	33,955	6,594	-	40,549
Net foreign exchange translation adjustments	51	-	-	51
Reclassification to accumulated losses	-	(2,805)	-	(2,805)
Employee incentive schemes expense, net of tax	-	265	-	265
Tax on incentives valued at reporting date	-	(558)	-	(558)
Purchase of securities	-	(278)	-	(278)
Issue of securities	-	(149)	-	(149)
Revaluation of available for sale financial asset, net of tax	-	-	6,667	6,667
Balance at 31 December 2015	34,006	3,069	6,667	43,742
Balance at 1 January 2016	34,006	3,069	6,667	43,742
Net foreign exchange translation adjustments	907	-	-	907
Employee incentive schemes expense, net of tax	-	788	-	788
Tax on incentives valued at reporting date	-	157	-	157
Purchase of securities	-	(1,190)	-	(1,190)
Issue of securities	-	(179)	-	(179)
Revaluation of available for sale financial asset, net of tax	-	-	458	458
Balance at 31 December 2016	34,913	2,645	7,125	44,683

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.

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	Non controlling interest	Total
	\$'000	\$'000	\$'000
Balance at 1 January 2015	(243,948)	(17,212)	(261,160)
Net profit for the year	24,703	7,722	32,425
Reclassification from employee incentive security scheme	2,805	-	2,805
Balance at 31 December 2015	(216,440)	(9,490)	(225,930)
Balance at 1 January 2016	(216,440)	(9,490)	(225,930)
Net profit for the year	15,399	4,422	19,821
Distributions payable	-	(4,328)	(4,328)
Balance at 31 December 2016	(201,041)	(9,396)	(210,437)

12. EARNINGS PER SHARE

(a) Basic and diluted earnings per share

	31 Dec 16	31 Dec 15
	Cents	Cents
Basic and diluted earnings per share - profit from continuing operations	2.47	1.40
Basic and diluted loss per share - loss from discontinued operations	(1.61)	(0.01)
Total basic and diluted earnings per share	0.86	1.39

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

(b) The profit used in the calculation of the basic and diluted earnings per share are as follows:

	31 Dec 16	31 Dec 15
Profit reconciliation - basic and diluted	\$'000	\$'000
Profit from continuing operations	44,449	24,886
Loss from discontinued operations	(29,050)	(183)
Profit attributed to external non-controlling interest	4,422	7,722
	19,821	32,425

(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:

	Number of shares	Number of shares
	'000s	'000s
WANOS used as denominator in calculating basic earnings per ordinary share	1,797,440	1,773,920
Performance security rights (weighted average basis) (1)	2,733	3,764
WANOS used as denominator in calculating diluted earnings per ordinary share	1,800,173	1,777,684

(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.

Calculation of earnings per share

Basic earnings per share is calculated as net profit 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 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 2016 financial year (2015: nil).

14. BORROWINGS

	31 Dec 16		31 Dec 15
	Carrying amount (1) \$'000	Fair value (2) \$'000	Carrying amount (1) \$'000	Fair value (2) \$'000
Current borrowings - secured	18,812	18,822	6,723	6,733
Current borrowings	18,812	18,822	6,723	6,733
Non-current borrowings - secured	-	-	13,580	13,619
Related party borrowings from GPT Trust	82,426	82,962	61,225	61,794
Non-current borrowings	82,426	82,962	74,805	75,413
Total borrowings	101,238	101,784	81,528	82,146

(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 2016, in accordance with the loan agreement. As a result, a revaluation loss of \$82.1 million for both continuing (\$53.0 million) and discontinued (\$29.1 million) operations has been recognised in the Consolidated Statement of Comprehensive Income (2015: gain of \$10.2 million). The following borrowings were revalued to nil at 31 December 2016 (Dec 2015: nil):

Loan facility to GPT Management Holdings Limited was drawn to \$355,616,562 (Dec 2015: \$372,860,231). This facility expires on 31 December 2030.

Loan facility to GPT Property Management Ltd was drawn to \$16,742,534 (Dec 2015: \$33,986,204). This facility expires on 31 December 2030.

Loan facility to GPT International Pty Limited was drawn to \$82,448,055 (Dec 2015: \$100,942,484). This facility expires on 12 June 2032.

Loan facility to Voyages Hotels & Resorts was drawn to \$54,772,395 (Dec 2015: \$68,697,888). This facility expires on 3 January 2035.

Loan facility to Voyages Hotels & Resorts was drawn to \$39,435,869 (Dec 2015: \$54,663,473). This facility expires on 30 June 2032.

No interest is payable in connection with the above loans from 3 September 2015. In accordance with the agreements interest is not capitalised but is included in the revaluation of the loans. The loans are non-revolving interest free borrowings that are revalued each reporting date in accordance with accounting standards.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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.

The maturity profile of borrowings is provided below:

	Total facility (1)	Used facility (1)	Unused facility
	\$'000	\$'000	\$'000
Due within one year	20,288	18,822	1,466
Due between one and five years	129,190	51,224	77,966
Due after five years	580,217	580,217	-
	729,695	650,263	79,432
Cash and cash equivalents			17,842
Total financing resources available at the end of the year			97,274

(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.

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 and risk management 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 2016 on interest bearing borrowings together with the net effect of interest rate risk management transactions. This excludes unamortised establishment costs.

		Gross exposure		Net exposure
	2016	2015	2016	2015
	\$'000	\$'000	\$'000	\$'000
Fixed rate interest-bearing borrowings	32,000	32,001	32,000	32,001
Floating rate interest-bearing borrowings	69,248	49,576	69,248	49,576
	101,248	81,577	101,248	81,577

The impact on interest expense and interest revenue of a 1% increase or decrease in market interest rates is shown below.

A 1% 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.

	2016 (+1%) \$'000	2016 (-1%) \$'000	2015 (+1%) \$'000	2015 (-1%) \$'000
Impact on Statement of Comprehensive Income
Impact on interest revenue increase / (decrease)	278	(278)	404	(404)
Impact on interest expense (increase) / decrease	(692)	692	(496)	496
	(414)	414	(92)	92

(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,
• the ability to close out market positions.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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 16					31 Dec 15
	1 year	Over 1	Over 2	Over 5	Total	1 year	Over 1	Over 2	Over 5	Total
	or less	year to	years to	years		or less	year to	years to	years
		2 years	5 years				2 years	5 years
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Liabilities
Non-derivatives
Payables	49,449	-	-	-	49,449	52,044	-	-	-	52,044
Borrowings (1)	18,822	-	51,224	580,217	650,263	6,733	13,619	51,225	641,150	712,727
Projected interest cost on borrowings	5,042	4,817	8,232	7,799	25,890	4,910	4,093	8,060	1,689	18,752
Total liabilities	73,313	4,817	59,456	588,016	725,602	63,687	17,712	59,285	642,839	783,523
Less cash and equivalents	17,842	-	-	-	17,842	30,380	-	-	-	30,380
Total liquidity exposure	55,471	4,817	59,456	588,016	707,760	33,307	17,712	59,285	642,839	753,143

(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. GPT manages this risk by spreading sources 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 2016, 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.

(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.

		Euros		United States Dollars
	31 Dec 16	31 Dec 15	31 Dec 16	31 Dec 15
	\$'000	\$'000	\$'000	\$'000
Assets
Cash and cash equivalents	1,152	1,296	145	143
Interests in equity accounted investments	-	-	-	(31)
Interests in unlisted investments	9,296	8,641	-	-
	10,448	9,937	145	112
Liabilities
Other liabilities	302	333	-	-
	302	333	-	-

(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 it is comfortable with the underlying property exposure within that entity,
• regularly monitoring loans and receivables balances on an ongoing basis,
• 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 made where collection is deemed uncertain.

The maximum exposure to credit risk as at 31 December 2016 is the carrying amounts of financial assets recognised on the Consolidated Statement of Financial Position. For more information, refer to note 3.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

OTHER DISCLOSURE ITEMS

16. CASH FLOWS FROM OPERATING ACTIVITIES

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

	31 Dec 16	31 Dec 15
	\$'000	\$'000
Net (loss) / profit for the year	19,821	32,249
Share of after tax profit of equity accounted investments (net of distributions)	(7,602)	78,994
Proceeds from the sale of other assets	(11,177)	-
Proceeds from the disposal of equity accounted investment	(1,252)	-
Profit on disposal of assets	93	-
Net foreign exchange loss	-	(3)
Impairment expense / (reversal of impairment expense)	5,773	(6,755)
Non-cash employee benefits - security based payments	16,552	8,456
Lease incentive amortisation	275	238
Interest capitalised	(2,941)	(1,974)
Amortisation of rental abatement	561	474
Depreciation expense	2,114	2,280
Amortisation expense	5,401	6,802
Amortisation of deferred acquisition costs	654	653
Finance costs	4,164	15,357
Revaluation of financial arrangements	81,772	(10,623)
Payment for inventories (1)	(48,298)	(53,787)
Proceeds from inventories	12,532	-
Dividends receivable	(30,437)	-
Bad debts	224	-
Capitalised losses	(107)	-
Rent free expense	383	-
Decrease / (increase) in operating assets	3,062	(62,585)
Increase in operating liabilities	4,038	8,649
Net cash inflows from operating activities	55,605	18,425

(1) This includes payment for land at Rouse Hill acquired from GPT Trust in December 2016 (2015: land parcels adjacent to the Rouse Hill Town Centre and two land parcels located on Wembley Road in Berrinba).

17. COMMITMENTS

(a) Capital expenditure commitments (1)

The capital expenditure commitments at 31 December 2016 were \$0.7 million (2015: \$0.1 million)

(1) Commitments arising from purchase of plant and equipment, intangibles and inventory, which have been approved but not recognised as liabilities in the Consolidated Statement of Financial Position.

(b) Operating lease commitments (1)

31 Dec 16	31 Dec 15
\$'000	\$'000
5,270	4,355
15,816	19,412
892	1,896
21,978	25,663

(1) Contracted non-cancellable future minimum lease payments on office premises and equipment expected to be payable but not recognised in the Consolidated Statement of Financial Position.

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 the General Property Trust's obligations under the note purchase and guarantee agreements in relation to US Private Placement issuances totalling US\$525 million until July 2029.

Apart from the matters referred to above, there are no other material contingent liabilities at reporting date.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

19. 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% 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 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% in cash and 50% 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 plan, all the awarded stapled securities will vest one year after conversion, subject to continued employment up to the vesting date.

(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 then applying a discount on lack of marketability. Fair value of the performance rights issued under DSTI is determined using the security price then applying a discount on lack of marketability. The following key inputs are taken into account:

	2016 LTI	2016 DSTI
Fair value of rights	\$2.82	\$4.78
Security price at valuation date	\$5.03	\$5.03
Total Securityholder Return	10.1%	N/A
Grant dates	16 May 2016	5 May 2016
Expected vesting dates	31 December 2018	31 December 2017
Security Price at the grant date	\$5.25	\$5.17
Expected life	3 years (2 years remaining)	2 years (1 year remaining)
Distribution yield	4.7%	4.7%
Risk free interest rate	2.8%	N/A
Volatilty (1)	18.4%	N/A

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

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

(e) Summary table of all employee security schemes

	Number of rights
	DSTI	LTI	Total
Rights outstanding at the beginning of the year	1,282,432	8,917,888	10,200,320
Rights granted during the year	1,313,947	3,024,264	4,338,211
Rights forfeited during the year	(345,461)	(977,775)	(1,323,236)
Rights converted to GPT stapled securities during the year (1)	(1,038,279)	(2,356,843)	(3,395,122)
Rights outstanding at the end of the year	1,212,639	8,607,534	9,820,173

(1) Rights under the 2015 DSTI plan were converted to GPT stapled securities on 21 March 2016 and rights under the 2013 LTI Plan were converted to GPT stapled securities on 18 February 2016.

Number of stapled securities
GESOP	BBESOP	Total
67,728	53,846	121,574
72,985	57,400	130,385
(79,957)	(18,485)	(98,442)
60,756	92,761	153,517

20. RELATED PARTY TRANSACTIONS

GPT Management Holdings Limited is the ultimate parent entity. The Consolidated Entity is stapled to the General Property Trust and the GPT Group (GPT or 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. Loans provided to joint ventures and associates as part of the funding of those arrangements are set out in note 3.

Key management personnel

Key management personnel compensation was as follows.

	31 Dec 16	31 Dec 15
	\$	\$
Short term employee benefits	6,302,352	6,447,083
Post employment benefits	169,189	185,938
Long term incentive award accrual	1,467,157	826,967
Other long term benefits	64,319	552,086
Total key management personnel compensation	8,003,017	8,012,074

Information regarding individual Directors' and Senior Executives' remuneration is provided in the Remuneration Report on pages 10 to 18 of the Directors' Report.

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

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

Transactions with related parties

	31 Dec 16	31 Dec 15
	\$	\$
Transactions with related parties other than associates and joint ventures
Transactions with General Property Trust (Trust):
Revenue and expenses
Fund management fees from Trust	22,110,728	29,105,728
Property management fees from Trust	13,312,704	13,606,983
Development management fees from Trust	16,046,350	14,161,862
Development revenue received from Trust	2,977,130	-
Management costs recharged from Trust	10,809,144	14,675,137
Property rent and outgoings paid to Trust	(5,013,107)	(4,601,300)
Interest paid to Trust	(4,483,075)	(12,895,994)
Receivables
Current receivables from Trust	44,455,512	28,817,030
Non-current receivables from Trust	37,033,383	7,545,748
Other transactions
Revaluation of arrangements with Trust - continued and discontinued operations	82,134,865	10,235,729
Purchase of inventory from Trust	39,243,333	4,050,000
Transactions with employees
Contributions to superannuation funds on behalf of employees	(5,766,595)	(6,110,415)
Transactions with GWOF, GWSCF & GMF:
Revenue
Responsible Entity fees	46,800,456	23,680,525
Performance fee	28,121,621	13,926,045
Asset management fees	14,622,388	15,208,517
Development management fees	6,200,389	4,520,658
Development revenue	-	16,065,059
Directors fees recharged	904,351	663,840
Management costs recharged	5,098,977	5,483,395
Payroll costs recharged	9,065,297	10,652,986
Expense
Site access fee paid	-	(785,563)
Rent expenses	(462,493)	(79,356)
Receivables and payables
Current receivable outstanding	6,056,599	6,734,411
Current performance fee receivable	-	15,318,650
Current fund management fee receivable	-	13,026,175
Current payable	-	(143,809)
Transactions with associates and joint ventures
Revenue
Responsible Entity fees Directors fees recharged	- -	20,753,249 255,609
Interest paid to Trust	-	(3,319,405)
Receivables
Loan to joint ventures	-	18,500,000

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

21. AUDITOR'S REMUNERATION

	31 Dec 16	31 Dec 15
	\$	\$
Audit services
PricewaterhouseCoopers Australia
Statutory audit and review of financial reports	241,129	242,893
Total remuneration for audit services	241,129	242,893
Other assurance services
PricewaterhouseCoopers Australia
Regulatory and contractually required audits	68,097	59,965
Total remuneration for other assurance service	68,097	59,965
Total remuneration for audit and assurance service	309,226	302,858
22. PARENT ENTITY FINANCIAL INFORMATION
	Parent entity
	31 Dec 16	31 Dec 15
	\$'000	\$'000
ASSETS
Total current assets	267,011	191,147
Total non-current assets	116,667	144,326

Total assets	383,678	335,473
LIABILITIES
Total current liabilities	241,095	237,821
Total non-current liabilities	10,346	15,285
Total liabilities	251,441	253,106
Net assets	132,237	82,367

EQUITY
Contributed equity	325,512	325,328
Reserves	12,574	13,067
Accumulated losses	(205,849)	(256,028)
Total equity	132,237	82,367
Profit attributable to members of the parent entity	50,179	82,793
Total comprehensive income for the year attributable to members of the parent entity	50,179	82,793
Operating lease commitments
Due within one year	5,270	4,355
Due between one and five years	15,816	19,412
Over five years	892	1,896
Total operating lease commitments	21,978	25,663

Capital expenditure commitments

The parent entity has \$0.4 million capital expenditure commitments at 31 December 2016 (2015: \$0.1 million).

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, excepted as 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.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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, critical assumptions underlying the valuations and information on sensitivity are disclosed below.

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 (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).

(a) Fair value measurement, valuation techniques and inputs

Class of assets	Fair value hierarchy(1)	Valuation technique	Inputs used to measure fair value	Range of unobservable inputs 31 Dec 16	31 Dec 15
Investment in financial assets	Level 2	Market price	Market price		Not applicable - observable input
			Discount for lack of marketability	0 - 5%	5 - 10%
Available for sale financial asset	Level 3	Discounted cash flow (DCF)	Discount rate	20%	30%
			Foreign currency exchange rate		Not applicable - observable input

(1) Level 3 – inputs for the asset are not based on observable market data.

The available for sale asset has moved from an \$8.6 million opening balance at 1 January 2016 to \$9.3 million at 31 December 2016 due to the movement in fair value.

DCF method

The available for sale financial asset has been valued using a discounted cash flow methodology. The expected future cash flow is converted into Australian dollars and discounted over the estimated realisation period.

(b) Sensitivities

The table below summarises the impact of a 5% increase / decrease in the discount rate, with all other variables held constant.

	31 Dec 16
	\$'000
Fair value of level 3 available for sale financial asset	9,296
5% increase in discount rate - loss	(581)
5% decrease in discount rate - gain	581

24. DISCONTINUED OPERATIONS AND NON-CURRENT ASSETS HELD FOR SALE

(a) Discontinued operations

At 31 December 2016, 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 Internos Real Investors.

US Seniors Housing

On 29 March 2011, GPT completed the sale of its US Seniors Housing portfolio to Health Care REIT Inc. Remaining balances represent working capital in B-VII Operations Holding Co LLC, whose properties were sold on 29 March 2011. The entity was liquidated during the year.

(b) Details of assets and liabilities classified as held for sale

The table below sets out the assets and liabilities that continue to be owned by the Consolidated Entity as at 31 December 2016.

	Discontinued Operations US Senior Housing
	31 Dec 16	31 Dec 15
	\$'000	\$'000
Investments in joint ventures (1)	-	246
Total assets held for sale	-	246

(1) Investments in joint ventures comprise a 95% investment in B-VII Operations Holding LLC held at \$0.2 million in 2015. This entity was liquidated during 2016.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

(c) 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.

	31 Dec 16	31 Dec 15
	\$'000	\$'000
Revenue	12	7
Expenses	(29,063)	(191)
Loss before income tax	(29,051)	(184)
Income tax credit	(1)	(1)
Loss after income tax of discontinued operations	(29,050)	(183)
Net cash outflow from operating activities	(306)	(64)
Net decrease in cash from discontinued operations	(306)	(64)

(d) Details of all disposals in the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position

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.

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. Investment property held for sale will continue to be carried at fair value. 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. REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During 2016, the Company undertook a detailed review of its relationship with GPT Funds Management Ltd (GPT FM) and concluded that the entity was incorrectly consolidated into the company as defined by AASB 10 Consolidated Financial, rather than being recognised as an equity accounted investment.

This has been corrected by restating each of the affected financial statement line items for the prior period as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	31 Dec 15 Prior year	Increase / (Decrease)	31 Dec 15 Restated
(Extract)	\$'000	\$'000	\$'000
Revenue
Fund management fees	85,580	(21,009)	64,571
Other income
Share of after tax profit of equity accounted investments	4,287	17,153	21,440
Interest revenue	1,234	(176)	1,058
Total revenue and other income	223,007	(4,032)	218,975
Expenses Finance costs	16,913	3,319	20,232
Total expenses	190,717	3,319	194,036
Profit before income tax	32,290	(7,351)	24,939
Income tax credit	(318)	(7,351)	(7,669)
Net profit for the year	32,425	-	32,425

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITION	31 Dec 15 Prior year	Increase / (Decrease)	31 Dec 15 Restated
(Extract)	\$'000	\$'000	\$'000
ASSETS
Current assets
Cash and cash equivalents Total current assets	40,380 107,598	(10,000) (10,000)	30,380 97,598
Non-Current Assets
Equity accounted investments	4,274	10,000	14,274
Total non-current assets	233,379	10,000	243,379
	31 Dec 15	Increase /	31 Dec 15
CONSOLIDATED STATEMENT OF CASH FLOWS	Prior year	(Decrease)	Restated
(Extract)	\$'000	\$'000	\$'000
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)	116,640	(20,060)	96,580
Distributions and dividends received from equity accounted investments	747	83,030	83,777
Interest received	1,241	(175)	1,066
Net cash (outflows) / inflows from operating activities	(44,370)	62,795	18,425
Cash flows from investing activities
Capital return from equity accounted investment	-	5,000	5,000
Net cash outflows from investing activities	(6,909)	5,000	(1,909)
Cash flows from financing activities
Repayment of related party borrowings Net cash inflows / (outflows) from financing activities	(2,714) 41,245	(61,557) (61,557)	(64,271) (20,312)
Net decrease increase in cash and cash equivalents	(10,034)	6,238	(3,796)
Cash and cash equivalents at the beginning of the year	50,414	(16,238)	34,176
Cash and cash equivalents at the end of the year	40,380	(10,000)	30,380

26. 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 \$79.4 million 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 in the nearest thousand dollars, unless otherwise stated, 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 10 February 2017.

(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 and expenses and 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% and 50% of the voting rights.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

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.

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

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) Available for sale financial assets

Available for sale financial assets are recognised at fair value. Gains / losses arising from changes in the fair value of the carrying amount of available for sale financial assets are recognised in other comprehensive income.

(ii) Deferred revenue

The Consolidated Entity recognises revenue when the amount of revenue can be reliably measured, it is probably that future economic benefits will flow to the entity and specific criteria have been met. The Group bases its estimates taking into consideration the type of transaction and the specifics of each arrangement. Those transactions where the revenue cannot be reliably measured and / or it is not probable that future economic benefit will flow to the entity are recorded as deferred revenue until such time as the transaction meets the recognition criteria.

(iii) 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. Nonmonetary 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.

(iv) 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.

(v) 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.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2016

(d) New and amended accounting standards and interpretations adopted from 1 January 2016

There are no significant changes to the Consolidated Entity'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 2016.

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

The following standards and amendments to standards are relevant to the Consolidated Entity.

Reference	Description	Application of Standard
AASB 9 Financial Instruments	AASB 9 addresses the classification, measurement and de-recognition of financial assets and financial liabilities, introduces expanded disclosure requirements, a new impairment model and changes in presentation. When adopted, this could change the classification and measurement of financial assets and financial liabilities. The new hedging rules align hedge accounting more closely with the reporting entity's risk management practices. As a general rule it will be easier to apply hedge accounting going forward. Changes in own credit risk in respect of liabilities designated at fair value through profit and loss must now be presented in other comprehensive income. GPT intends to apply the standard from 1 January 2018. It is not expected that the application of this standard will have a material impact on any of the amounts recognised in the financial statements but will require disclosure of additional information.	1 January 2018
AASB 15 Revenue from Contracts with Customers	AASB 15 will replace AASB 118 Revenue and AASB 111 Construction Contracts. It 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. GPT is in the process of assessing any implications of this new standard to its operation and financial results and does not expect a material impact from its application.	1 January 2018
AASB 16 Leases	AASB 16 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. This new treatment will result in both a depreciation and interest charge in the Statement of Comprehensive Income. In contrast, lessor accounting will remain similar to current practice. GPT is in the process of assessing any implications of this new standard to its operation and financial results and expects a material impact from its application.	1 January 2019

27. EVENTS SUBSEQUENT TO REPORTING DATE

Lot 110 at Metroplex settled in January 2017 for \$1.1 million. Lots 107 -109 at Metroplex settled in February 2017 for \$4.0 million.

Other than the above, the Directors are not aware of any matter or circumstances occurring since 31 December 2016 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.

Independent auditor's report

To the shareholders 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 (GPT MH) (the Company) and its controlled entities (together, the Group or the GPT MH 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 2016 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's financial report comprises:

• the consolidated statement of financial position as at 31 December 2016
• 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 director's 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 Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

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.

	Materiality	Audit scope	Key audit matters
• •	For the purpose of our audit we used overall Group materiality of \$3.0 million, which represents approximately 1% of the Group's adjusted total revenue and other income. 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.	• The audit scope covers the consolidated Group which includes the parent entity, GPT MH, and its controlled entities. Our audit focused on areas where the • directors made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events.	• Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk Committee: – Carrying value of inventory – Revenue recognition – Remuneration expense These are further described in the Key audit matters section of our report.
•	We chose adjusted Group total revenue and other income as the Group generates income from funds management, property management and development management fees. Expenses within the Group are recharged to GPT Trust which can be altered based on the recharge model utilised.
•	We adjusted Group total revenue and other income for gains arising from the revaluation of financial arrangements because this non cash movement in carrying value is generally excluded when assessing the revenue and other income performance of the

related thresholds. Key audit matters

• We selected 1% based on our professional judgement noting that it is also within the range of commonly acceptable revenue

Group.

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.

Carrying value of Inventory (Refer to note 5, pages 27 to 28)

The Group develops a portfolio of industrial sites for future sale. This portfolio is classified as inventory by the Group as outlined in Note 5 Inventories.

At 31 December 2016 the carrying value of the Group's inventory balance was \$135.9 million (2015: \$101.5 million). 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 is calculated using actual land acquisition costs, construction costs, development related costs and interest capitalisation for eligible projects.

We considered the valuation of inventory a key audit matter given the relative size of the balance in the Consolidated Statement of Financial Position and the significant judgement involved 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).

Key audit matter How our audit addressed the key audit matter

For each project we obtained the Group's latest feasibility models and discussed with management matters such as the overall project strategy, internal rate of return 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 on which 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, 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 found these to be consistent.
• Compared the forecasted costs to complete the project to the relevant construction contracts (if applicable) or the construction contract proposals. We found no material differences.
• Compared the carrying value to the net realisable value (NRV) as at 31 December 2016. We found the NRV to be higher than the tested cost on all assets.
• During our testing we noted that the Group had identified that the NRV for two land lots at Wembley Road, Berrinba was \$6.0m below the accumulated cost incurred at 1 December 2016 when the NRV test was performed by the Group. Accordingly a \$6.0m impairment was recorded. Through discussion with management and analysis of the NRV calculation, we noted that this impairment arose due to a change in key inputs in the 31 December 2016 NRV calculation from the prior period end. We obtained external evidence to support the key assumptions adopted by management and traced a sample of costs within the most recent NRV calculation to supporting documentation such as contracts and underlying calculations and considered the relevant market conditions in Brisbane to determine whether they support the assumptions used.
• We obtained the purchase agreement for the new development site purchased and recorded in inventory during the year and agreed the sale price in the agreement to the initial cost of the assets recorded by the Group.
• For expenditure recorded in relation to development projects recorded in inventory

Key audit matter How our audit addressed the key audit matter

during the year, we traced a sample of additions to invoices and determined they were costs that had been incurred in relation to the projects and could be capitalised under AASB 102 Inventories.

Revenue recognition

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 2016 was \$243.9 million (2015: \$173.2 million) and comprised of six streams including:

• Fund management fees (\$99.0 million);
• Development revenue (\$54.1 million); • Property management fees (\$41.2 million);
• Management costs recharged (\$33.0 million);
• Development management fees (\$15.1 million); and
• Other revenue (\$1.4 million).

A proportion of funds management, development revenue, property management and development management fees are earned from other entities in the GPT Group.

We focused on this matter due to the size and magnitude of revenue, and due to there being multiple revenue streams increasing the complexity of recognition.

We obtained a detailed understanding of each of the revenue streams and the processes for calculating and recording revenue. We also gained an understanding of the process for the receipt of funds relating to revenue into the Group's bank accounts, and identified the key controls over bank account reconciliations. We tested these controls and were satisfied they were adequate for the purpose of our audit.

Fund management fees

We tested a sample of fund management fees and performed the following procedures:

• Inspected the relevant fund constitutions to understand the basis upon which revenue is earned.
• Recalculated the management fees by applying the fee percentage per the fund's constitution to the fund's net assets and traced to cash receipts.

Development revenue

Through discussion with management and inspection of Board and management committee minutes we gained an understanding of the nature of the development projects the Group undertook during the year. We noted that revenue recorded in relation to these projects related to the sale of completed inventory to third parties and contractual development fees earned during development. In relation to the development revenue recognised we performed the following work:

• For revenue from the sale of completed inventory we agreed the sales revenue to sales contracts, settlement statements, and cash receipts.
• For development fee revenue we agreed the revenue recognised to the contractual terms in the relevant agreements.

Property management fees

For property and leasing management fees and other property management fees we performed the following procedures:

• Inspected a sample of agreements to understand the basis upon which revenue is earned.
• Recalculated a sample of property and

Key audit matter	How our audit addressed the key audit matter
	leasing management fees and traced relevant
	inputs to source documentation.
	Traced a sample of other property •
	management fees to relevant invoices.
	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 approved annually. In relation to recharges:
	• We gained an understanding of the budgeting process and obtained the Board minutes approving the 2016 budget.
	• On a sample basis we reconciled amounts in the management cost recharge models (these models build up to the Board approved budget) to the general ledger.
	Development management fees
	We gained 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. We inspected Board minutes 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.
Remuneration expense
The Group is the employer of all employees who provide services to the GPT Group.	We obtained a detailed understanding of the • payroll process and relevant key controls.
Remuneration expense was \$121.0 million for	We tested these key controls and determined •

the year ended 31 December 2016 (2015: \$125.0 million). The payroll process is administered by a third party under the oversight and approval of management. The third party provider is responsible for the processing of all salaries and wages, including overtime, allowances and superannuation, but not bonuses. Each month a detailed payroll journal is provided electronically by the third party provider and management

upload this into the general ledger.

approved by the Nomination and

Management bonuses are not administered by the payroll provider but are accrued throughout the year based on bonus pools

Remuneration Committee at the start of the

they were adequate for the purpose of our audit. • We reconciled the year to date payroll cost from the payroll system to the general ledger.

• We compared payroll expense and employee benefit provisions to the prior year and obtained explanations for material movements.
• We used IT data analysis tools to examine the payroll payments made during the year in order to identify unusual trends and payments outside expected ranges. We considered all unusual trends and for those we deemed higher risk, we traced the costs back to source documentation to corroborate explanations provided by management.
• We obtained the Nomination and Remuneration Committee approval for the 2016 bonuses and gained an understanding of the key performance

year. Bonuses are subject to performance hurdles and final bonus amounts are subject to approval by the Nomination and Remuneration Committee prior to payment.

In addition to salaries, wages and bonuses there are four 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 set 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 covert 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 focused on this matter due to the magnitude of this balance and the multiple streams of employee costs included in this balance.

Key audit matter How our audit addressed the key audit matter

metrics influencing the quantum of management bonuses. We tested a sample of bonus payments back to authorisation letters with no significant exceptions noted in our testing.

• For equity incentive scheme expenses, together with our valuation experts we tested the key inputs used in the Group's share based payments fair value model, and tested the model for mathematical accuracy.
• We traced a sample of new share grants back to invitation letters.
• We confirmed the inputs tested above were utilised in the calculation of the Group's share based payments expense and reconciled these balances to the general ledger.

Other information

The directors of the Company (the directors) are responsible for the other information. The other information comprises the Directors' Report included in the Group's annual report for the year ended 31 December 2016 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 identified above 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, 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.

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 has 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\_files/ar2.pdf

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 10 to 18 of the Directors' Report for the year ended 31 December 2016.

In our opinion, the remuneration report of the Group, for the year ended 31 December 2016 complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the responsible entity of GPT, the registered scheme, GPT RE Limited (the responsible entity) (the directors of the responsible entity) are responsible for the preparation and presentation of the remuneration report of the GPT Group 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.

PricewaterhouseCoopers

Matthew Lunn Partner

Sydney 10 February 2017