GPT : Interim Financial Report - GPT Management Holdings Limited

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 Declaration 7

Financial Statements 8

Consolidated Statement of Comprehensive Income 8

Consolidated Statement of Financial Position 9

Consolidated Statement of Changes in Equity 10

Consolidated Statement of Cash Flows 11

Notes to the Financial Statements 12

Result for the year 12

1. Segment information 12

   Operating assets and liabilities 12

2. Equity accounted investments 12

3. Intangible assets 13

4. Inventories 13

5. Property, plant and equipment 13

6. Other assets 14

   Capital structure 14

7. Equity 14

8. Earnings per share 14

9. Dividends paid and payable 15

10. Borrowings 15

    Other disclosure items 16

11. Cash flows from operating activities 16

12. Commitments 16

13. Fair value disclosures 17

14. Accounting policies 17

15. Events subsequent to reporting date 18

Directors' Declaration 19

Independent Auditor's Report 20

Half year ended 30 June 2017

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 half year ended 30 June 2017. 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

Review of operations

The Consolidated Entity's financial performance for the half year ended 30 June 2017 is summarised below.

Consolidated Entity result

The increase in net loss after tax compared with June 2016 is largely attributable to a decrease in funds management fees, higher development expenses and impairment of software.

Property management Retail

The Consolidated Entity is responsible for property management activities across the retail sector. Property management fees increased to $15.1 million

in 2017 (Jun 2016: $15.0 million) which is in line with prior period.

Office

The Consolidated Entity is responsible for property management activities across the office sector. Property management fees increased to $3.0 million in 2017 (Jun 2016: $2.9 million) which is in line with prior period.

Logistics

The Consolidated Entity is responsible for property management activities across the logistics sector. Property management fees decreased to $0.9 million in 2017 (Jun 2016: $1.5 million) as a result of the divestment of GPT Metro Office Fund (GMF).

Development management Retail

The retail development team has focused on master planning and delivery of development opportunities within its $1.9 billion development pipeline. In the first half of 2017, this includes the delivery of the $68.0 million reposition of Wollongong Central. The remix will introduce David Jones and is on track to be completed later this year. The $210.0 million Sunshine Plaza retail expansion is on track for an opening in late 2018.

Office

The team has focused on progressing a number of repositioning projects at Melbourne Central Tower, CBW and 750 Collins Street in Melbourne and MLC Centre 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 9,240sqm to the Rural Fire Service, construction has commenced on a 15,680sqm campus building on the 4 Murray Rose site at Sydney Olympic Park. Completion is expected in late 2018.

The acquisition of an office development site of 2,439sqm in the heart of Parramatta's commercial district was completed in March 2017. This site will provide the opportunity for an office building of over 28,000sqm, with the development application underway.

Logistics

In the period to June 2017, the development logistics business unit has completed construction of an 18,000sqm speculative logistics facility at Abbott Road, Seven Hills. At practical completion the asset was 50% leased to Easy Auto 123. A 26,000sqm facility is under construction at Lot 2012 Eastern Creek Drive, with completion anticipated in the second half of 2017. GPT has also successfully completed development of a facility at Metroplex Wacol, which has been leased to Loscam Australia. At the recently acquired Huntingwood site, IVE has taken a 10 year lease over the existing asset, whilst authority approvals are in place to develop an 11,000sqm warehouse on the adjoining land parcel. Planning approval is also well advanced on the Lot 21 Old Wallgrove Road site at Eastern Creek.

GPT MANAGEMENT HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES

Half year ended 30 June 2017

Funds Management

GPT Wholesale Office Fund (GWOF)

GWOF's funds under management have grown to $6.8 billion, up $0.7 billion compared to 30 June 2016. The management fee income earned from GWOF for the half year ending 30 June 2017 decreased by $11.1 million as compared to 30 June 2016, primarily due to the performance fee income of

$14.4 million recognised in 2016. This was partially offset by higher base management fee income of $3.3 million due to strong upward revaluations across the portfolio, positive net new asset acquisitions and a higher base management fee structure compared with the first half of 2016.

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. During June 2017, GPT acquired a further 16.3 million securities in GWOF for $23.2 million, increasing GPT's ownership interest from 24.53 per cent to 24.95 per cent.

GPT Wholesale Shopping Centre Fund (GWSCF)

GWSCF's funds under management of $3.9 billion has remained stable compared with 30 June 2016 owing to strong upward revaluations across the portfolio offset by the sale of Westfield Woden in December 2016 for $335.0 million. Management fee income earned from GWSCF of $8.5 million has also remained stable as compared to 30 June 2016.

During September 2016, GPT acquired an additional 164.2 million in securities in GWSCF for $157 million, increasing GPT's ownership interest from

20.22 per cent to 25.29 per cent. During May 2017, GPT acquired a further 115.6 million securities in GWSCF for $116.6 million, increasing GPT's ownership interest from 25.29 per cent to 28.86 per cent.

Fund Terms Review

On 20 February 2017, GWSCF held an Extraordinary General Meeting (EGM) in relation to changes in the terms of GWSCF. At the EGM, investors approved all seven resolutions put to the meeting.

The key changes included:

• removal of the performance fee structure from 1 April 2017;

• introduction of an Investor Representation Committee; and

• other amendments to operational policies and investor rights.

Investor Liquidity Review

On 31 March 2017, the investor liquidity review concluded which allowed GWSCF Securityholders to notify GPT Funds Management Limited (as Responsible Entity of GWSCF) whether they required liquidity. The outcome of the review was that binding requests for liquidity for a total of 78,474,213 securities, being 2.4% of securities on issue, were submitted. This equated to $79.8 million at the 31 March 2017 current unit value of $1.0174. All requests for liquidity were met within the June 2017 quarter.

Management costs recharged

Management costs recharged have decreased to $16.0 million in 2017 (Jun 2016: $16.7 million), predominantly caused by people cost savings which therefore resulted in lower recharges to assets. In the first half of 2017 GPT achieved a Management Expense Ratio (MER) of 38 basis points on an annual rolling basis (Jun 2016: 38 basis points).

Other income

Other income has increased to $14.2 million in 2017 (Jun 2016: $3.1 million) attributable to income from equity accounted investments and proceeds from the sale of inventory at Metroplex and Erskine Park.

Expenses

Expenses increased by 9% to $112.3 million (Jun 2016: $102.9 million). The balance is primarily made up of remuneration costs and revaluation of financial arrangements which can be seen on the Consolidated Statement of Comprehensive Income. The primary driver for the increase is the cost of sale of inventory, higher development expenses and impairment of software.

Total assets decreased by 5% to $367.0 million in 2017 (Dec 2016: $384.4 million) primarily due to a $30.4 million dividend receivable from BGP in 2016.

Total liabilities increased by 1% to $205.0 million in 2017 (Dec 2016: $202.6 million) due to a tax liability in 2017.

Capital management

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

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