GARDA Property Group
Annual Report 2020

Plain-text annual report

GARDA Property Group Annual Financial Report 2020 GARDA Property Group Comprising the consolidated financial reports of GARDA Holdings Limited (ABN 92 636 329 774) and GARDA Diversified Property Fund (ARSN 104 391 273) GARDA Property Group Annual Financial Report 30 June 2020 CONTENTS Directors' Report........................................................................................................................................................................................................................................................... 1  Remuneration Report (Audited) .............................................................................................................................................................................................................. 13  Auditor's Independence Declaration ................................................................................................................................................................................................ 22  Financial Report ........................................................................................................................................................................................................................................................ 23  Independent Auditor's Report .................................................................................................................................................................................................................. 70  Corporate Governance Statement ..................................................................................................................................................................................................... 76  Securityholder Information ......................................................................................................................................................................................................................... 77  Corporate Directory ............................................................................................................................................................................................................................................ 79  GARDA Property Group Annual Financial Report 30 June 2020 Comprising the combined consolidated financial reports of GARDA Holdings Limited ABN 92 636 329 774 Level 21, 12 Creek Street Brisbane QLD 4000 and GARDA Diversified Property Fund ARSN 104 391 273   GARDA Property Group Annual Financial Report 30 June 2020 DIRECTORS' REPORT GARDA Property Group (GARDA or the Group) is an ASX-listed stapled entity whereby shares in GARDA Holdings Limited (GHL or the Company) are stapled to units in GARDA Diversified Property Fund (GDF or the Fund) on a one-for-one basis. Shares of the Company and units of the Fund cannot be traded separately and may only be traded together as stapled securities. The Directors of the Company and of GARDA Capital Limited as responsible entity for the Fund present their report and the consolidated financial statements for the year ended 30 June 2020 for both:   the Group - comprising the Company, the Fund and their controlled entities; and the Company - comprising only the Company and its controlled entities. The parent entity of the Group is GDF and, other than where noted in the Remuneration Report, comparative information for the 2019 financial year is for GDF. DIRECTORS The Directors of the Company and GARDA Capital Limited at any time during the financial year and up to the date of this report are listed below. The Directors are also directors of all Group subsidiaries. Matthew Madsen Executive Chairman Appointed September 2011 Matthew has more than 20 years’ experience in the funds management industry, predominantly in director and management roles. He has significant property and property finance experience, acting (including in his role for the GARDA Capital Group) as a finance intermediary focused on larger construction and property investment funding. Matthew is Chair of the Advisory Board for residential land developer, Trask Development Corporation. Matthew holds a Diploma in Financial Services, a Diploma in Financial Markets and is an affiliate member of the Securities Institute of Australia. Interests in securities: Ordinary securities – 8,108,755 ESP securities – 5,960,000 Page 1 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Paul Leitch Independent Director Appointed March 2020 Member of the Audit and Risk Committee Chair of the Nomination and Remuneration Committee Paul is an experienced senior executive, board member and advisor with public and private sector organisations. He is the past Chief Operating Officer for QIC, the Queensland based institutional fund manager. Most recently, he was Leader of the Brisbane Office of the Nous Group, Australia’s largest privately-owned management consultancy firm. Paul has a special interest in family-owned and operated companies and is a director of Charles Porter and Sons and advisor to the Hewitt Group. He is also Chair of Pathways to Resilience, a Queensland charitable organisation. Paul holds a Bachelor of Arts (Music) and post graduate qualifications in education. He is a member of the Australian Institute of Company Directors and the Australian Human Resources Institute. Interests in securities: Ordinary securities – 24,411 Morgan Parker Independent Director Appointed December 2018 Member of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Morgan has 25 years’ experience as a real estate investor, developer and banker. Morgan is currently a non-executive director of SunCentral Maroochydore Pty Ltd, the government-owned company responsible for development of Maroochydore City Centre on Queensland’s Sunshine Coast, Newcastle Airport and Saudi Entertainment Ventures. He has previously worked for Morgan Stanley, Lendlease and Macquarie Group, and his most recent executive role was as Chief Operating Officer at Dubai Holding. Interests in securities: Nil Philip Lee Non-Executive Director Appointed May 2015 Chair of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Philip has over 33 years’ experience in stockbroking, equities research and corporate finance. He joined Morgans in 1986 and has served as a Director of Morgans and Joint Head of Corporate Finance. Philip currently holds the position of Executive Director Corporate Advisory, primarily focused on raising capital for growing companies, and chairs Morgans Risk and Underwriting Committees. Philip holds a Bachelor of Commerce from the University of Canterbury and is a Member of the Australian Institute of Company Directors, a Senior Fellow of Finsia and a Master Practitioner Member of the Stockbrokers and Financial Advisers Association. Interests in securities: Ordinary securities – 216,828 Page 2 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Andrew Thornton Non-Executive Director Appointed March 2020 Member of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Andrew is Joint Managing Director and major shareholder of Great Western Corporation, a private group with industrial property, general manufacturing, agricultural equipment and investments. in commercial and interests He joined Great Western Corporation in 1995 gaining experience in accounting, finance, investment and management before becoming Joint Managing Director in 2010. Andrew previously served as Treasurer of both the Volvo Truck & Bus Dealer Council and the Daimler Truck Dealer Council.  He is currently Company Secretary of HGT Investments Pty Ltd, GARDA Property Group’s largest securityholder. Andrew holds a Bachelor of Business and is a member of the Australian Institute of Company Directors Interests in securities: Ordinary securities – 1,013,505 Mr Mark Hallett Executive Director Appointed January 2011 (Executive Director from February 2020) Mark has more than 30 years’ industry and legal experience. A qualified solicitor, he has a range of diverse industry experiences across all aspects of corporate litigation, restructuring and commercial property. Mark was legal practice director of Hallett Legal and is now a consultant at Macpherson Kelley. Mark has managed successful property syndicates for business associates and continues to advise participants in the industry on property investment, legal and corporate restructuring. Interests in securities: Ordinary securities – 1,302,469 ESP securities – 1,000,000 Page 3 of 80 GARDA Property Group Annual Financial Report 30 June 2020 COMPANY SECRETARY Mr Lachlan Davidson Company Secretary Appointed July 2016 Lachlan joined GARDA in 2014 and is a member of the senior leadership team. He is responsible for the legal, company secretarial and compliance monitoring activities of the Group. Lachlan has over 20 years’ experience in corporate law, fundraising and managed investments. He has worked for Minter Ellison, and both Linklaters and McDermott Will & Emery in London. Lachlan was General Counsel at Golding Contractors, one of Australia’s largest private civil and mining contractors. Before that, he was General Counsel of the largest independent investment bank in the Middle East and was involved in multi- jurisdiction fundraisings of over $US5 billion across IPOs and managed private equity funds. Lachlan holds a Law degree, a BSc in Genetics and Biochemistry, and an MBA. He is a JP (Qualified), and a Graduate of the AICD Directors Course. Interests in securities: Ordinary securities – 213,330 ESP securities – 560,000 MEETINGS OF DIRECTORS Meetings of the Directors of the Company held since internalisation were as follows1: Board of Directors Nomination and Remuneration Committee Audit and Risk Committee Meetings attended Meetings eligible to attend Meetings attended 8 8 4 4 8 8 8 8 4 4 8 8 2 2 1 1 2 2 Meetings eligible to attend invited 2 1 1 2 invited Meetings attended 2 2 1 1 2 2 Meetings eligible to attend invited 2 1 1 2 invited Matthew Madsen2 Morgan Parker Paul Leitch Andrew Thornton Philip Lee Mark Hallett PRINCIPAL ACTIVITIES GARDA is an internally managed real estate investment, development and funds management group. The Fund invests in, owns, manages and develops commercial and industrial real estate in accordance with the provisions of the Fund’s constitution. The Company, through its subsidiaries, acts as the responsible entity of the Fund. 1 Pursuant to the internalisation transaction, the Company was incorporated on 20 September 2019 and GARDA Capital Limited was acquired by the Group on 29 November 2019. 2 Matthew Madsen and Mark Hallett were not members of the Nomination and Remuneration Committee or the Audit and Risk Committee however attended meetings by invitation. Page 4 of 80 GARDA Property Group Annual Financial Report 30 June 2020 SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Changes in the state of affairs of GARDA during the financial year are set out within the financial report. There were no significant changes in the operating activities of the Group (including controlled entities) during the year but, as discussed below, there was a fundamental change in corporate structure. On 29 November 2019, GARDA was constituted in its current form when two ASX listed entities, GARDA Diversified Property Fund (previously defined as GDF or the Fund) (ASX: GDF) and GARDA Capital Group (ASX: GCM), were combined pursuant to the internalisation. Prior to the internalisation: 1. GDF was an externally managed real estate investment trust; and 2. GARDA Capital Group was a stapled entity comprising:  GARDA Capital Limited, the responsible entity for GDF; and  GARDA Capital Trust, a unit trust whose primary asset was an 11.8% equity interest in GDF. The internalisation transaction involved two concurrent events: 1. the establishment of the Group through the stapling of GDF units to shares in the newly created GHL on a one for one basis; and 2. the acquisition by the Group of 100% of GARDA Capital Group. GARDA is now an ASX-listed, internally managed, stapled, real estate group that trades under the ASX ticker “GDF”. GARDA continues to undertake the operations that were performed by its predecessor entities prior to the internalisation. DIVIDENDS AND DISTRIBUTIONS The table below provides details of dividend and distributions paid by GARDA and the Fund in respect of the financial year: Dividend per security Distribution per security Total per security Total $000 Franked amount Record date Payment date 2020 Interim Interim Interim3 Interim3 Final3 2019 Interim Interim Interim Final - - - - - - - - - - - 2.25c 1.50c 0.75c 2.25c 1.80c 8.55c 2.25c 2.25c 2.25c 2.25c 9.00c 2.25c 1.50c 0.75c 2.25c 1.80c 8.55c 2.25c 2.25c 2.25c 2.25c 9.00c 3,664 2,782 1,517 4,704 3,763 16,430 3,115 3,565 3,565 3,565 13,810 26 Sep 19 16 Oct 19 19 Nov 19 4 Dec 19 31 Dec 19 22 Jan 20 23 Mar 20 16 Apr 20 30 Jun 20 15 Jul 20 28 Sep 18 23 Oct 18 31 Dec 18 21 Jan 19 29 Mar 19 16 Apr 19 28 Jun 19 20 Aug 19 - - - - - - - - - - - 3 Total distributions exclude distributions paid to treasury securities held by the Group. Page 5 of 80 GARDA Property Group Annual Financial Report 30 June 2020 REVIEW OF OPERATIONS AND RESULTS The following discussion is in respect of the operations and results of the Group for the year ended 30 June 2020. Strategy GARDA’s objective is to deliver enduring value to our stakeholders through our expertise in real estate. GARDA currently has a particular strategic focus on equity investment into the industrial and commercial office sectors and debt investment into residential developments. GARDA’s size provides it with the scale necessary to compete in its target markets but also the agility to adjust its investment focus in anticipation of, or in response to, changing market conditions. Recent active decisions taken by the Group in support of its strategy include:     acquisitions in the Brisbane industrial market; buying and developing prime industrial and commercial sites rather than acquiring completed buildings on unattractive pricing and leasing metrics; deploying debt capital into residential developments; and optimally managing its corporate and capital structure to enhance returns per security. Operational Highlights Throughout the financial year, GARDA continued to execute its strategy:  $31,345,000 (plus costs) was spent to acquire four industrial properties in Acacia Ridge and Archerfield adjacent to the Acacia Ridge Intermodal Rail Terminal;  $41,000,000 (plus costs) secured two industrial and warehousing distribution assets in Morningside;    a new 5,702m2 whole-of-building lease was executed at Box Hill for a seven-year term commencing in December 2020; favourable leasing outcomes were achieved in Cairns and Morningside with positive engagement with prospective tenants occurring at other buildings; development works commenced at the Berrinba and Wacol industrial sites with completion expected early in the 2021 financial year;  $5,155,000 in capital expenditure was invested pursuant to the Group’s capital improvements program, with the majority spent on 7-19 Lake Street, Cairns;  $37,500,0000 of new equity was raised; and  $200,000,000 new syndicated debt facility structure, $100,000,000 of interest rate swap protection was secured and the internalisation transaction was successfully completed. Financial Performance Statutory Profit and FFO GARDA recorded statutory net profit after tax for the year of $5,567,000 (2019: $28,780,000). The profit for the year includes items which are non-cash in nature, incur infrequently and/or relate to realised or unrealised changes in the values of assets and liabilities. Accordingly, in the opinion of the Directors, statutory Page 6 of 80 GARDA Property Group Annual Financial Report 30 June 2020 profit should be adjusted to allow securityholders to gain a better understanding of GARDA’s operating profit or funds from operations (FFO) 4. The following table provides a reconciliation of GARDA’s statutory profit and FFO: FFO5 Fair value movement in investment properties Increase in independent valuations6 Acquisition costs7 Capital additions and capitalised costs8 Other9 $000 4,110 (4,494) (5,614) (998) 2020 $000 16,622 (6,996) 2019 $000 13,192 17,100 (786) (6,380) (940) Fair value movement of derivative financial instrument (1,425) (1,951) Gain on sale of investment properties Lease cost and incentives amortisation Rent free income Straight-lining of rental income Depreciation – Property, plant and equipment Movements in right to use assets and lease liabilities Capitalisation of interest of development properties10 Non-underlying and non-recurring revenue11 Non-underlying and non-recurring expenses12 Distributions on treasury stock and unvested GARDA ESP securities5 Profit after tax for the year Income tax benefit Profit before income tax13 Distributions paid Distribution payout ratio – FFO - (864) 222 1,372 (22) 36 (724) - (1,712) (942) 5,567 (93) 5,474 17,372 104.5% 1,550 (981) 279 1,077 - - - 8,000 (1,380) - 28,780 - 28,780 13,810 104.7% 4 FFO is the Group’s underlying and recurring earnings from its operations. It is determined by adjusting statutory net profit (under AIFRS) for certain non-cash and other items. FFO has been determined based on guidelines established by the Property Council of Australia and is intended as a supplementary measure of operating performance. FFO is not calculated in accordance with Australian Accounting Standards and has not been audited or reviewed by the auditor of the Group. 5 FFO has been adjusted to present on a fully diluted basis and adjusts for the distributions paid and received for treasury stock and GARDA ESP securities. Adjustments to reflect FFO on a diluted basis, together with adjustments for Botanicca 9 interest expense (refer footnote 10 below) and corporate expense allocations for segments as per AASB, result in FFO differing from segment profit in note 3. FFO has been reconciled to statutory profit as per table above and segment profit has been reconciled to statutory profit in note 3. 6 Relates to gross movement in independent valuations between 30 June 2019 and those performed in December 2019 and June 2020. 7 Relates to due diligence costs and stamp duty for Acacia Ridge and Morningside properties acquired during the year. 8 Relates to capital expenditure and other capitalised costs on properties prior to independent valuation. 9 Refer note 10. The net amount relates to leasing costs, rent free income and straight-lining of rent. 10 Bot 9 borrowing costs expensed in statutory profit but added back for FFO purposes. The accounting standards require borrowing cost capitalisation to cease on substantial completion of projects with no allowance for a period of time for leasing up of property. The expense added to FFO represents borrowings cost capitalisation benefit for the leasing up period which is a critical component for project completion. 11 Prior year amount relates to cash of $8,000,000 from settlement of litigation matter. 12 Relates to security-based payment expense of $444,000 and internalisation expense of $1,268,000. Prior year amounts relate to litigation costs of $680,000 in relation settlement of a litigation matter and $700,000 for internalisation expenses. 13 Refer note 3 for segment profit reconciliation to net profit before income tax. Page 7 of 80 GARDA Property Group Annual Financial Report 30 June 2020 COVID-19 COVID-19 had minimal impact on GARDA’s revenue in the financial year with insignificant amount of rent waived and less than $330,000 deferred but still expected to be received. Since the end of the financial year, this favourable rental collection profile has continued. Financial Position Key Metrics Total assets ($000) Net assets ($000) Net tangible assets ($000) Net debt ($000)14 Gearing15 Stapled securities issued16 (000) NAV per stapled security NTA per stapled security Issued Capital GDF units at 1 July 2019 Acquisition – Acacia Ridge and Archerfield ($1.36 per security) Placement ($1.40 per security) Internalisation ($1.40 per security) GARDA stapled securities 2020 2019 477,269 356,334 280,558 246,972 217,096 217,096 167,627 108,300 36.7% 32.2% 208,571 158,445 1.35 1.18 1.37 1.37 2020 158,444,594 4,411,765 22,500,000 42,288,002 227,644,361 At the commencement of the financial year, GDF had 158,444,594 issued units. As a result of the Acacia Ridge and Archerfield acquisitions, a $31,500,000 placement and the subsequent internalisation transaction, the Group had 227,644,361 stapled securities on issue at 30 June 2020. Included in GARDA’s 227,644,361 issued securities at 30 June 2020 are 9,233,693 stapled securities (treasury securities) held by the Group itself. Immediately following the internalisation there were 21,900,363 treasury securities but 6,666,670 were used to extinguish a loan facility and another 6,000,000 were transferred under the GARDA employee security plan (with securityholder approval). Pursuant to Australian Accounting Standards, treasury securities have been deducted from equity in GARDA’s Statement of Financial Position, as detailed in note 18. Further, distributions received by the Group from treasury securities have been eliminated from income in GARDA’s Statement of Profit or Loss and Other Comprehensive Income. Also included in GARDA’s 227,644,361 issued securities are 9,840,000 securities issued under the GARDA employee security plan. Further details are provided in the Remuneration Report. 14 Calculated as total debt less cash. 15 Calculated as (total debt less cash) / (total assets less cash). 16 Refer Contributed Equity note 18 – issued capital excludes 9,233,693 treasury securities and 9,840,000 securities issued under the GARDA ESP (including ESP securities that have vested). Page 8 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Investment Properties As at 30 June 2020, the Group held 1817 industrial and commercial investment properties along the eastern seaboard of Australia. Five of these properties were externally valued at June 2020, representing 27.8% of the property portfolio by value. The balance of the portfolio was at Directors’ valuation having regard to previous external valuations (the most recent being in December 2019), value-accretive capital expenditure and comparable sales evidence. Established properties Acacia Ridge 38 Peterkin Street Archerfield 839 Beaudesert Rd Box Hill 436 Elgar Road Cairns 9-19 Lake Street Cairns 26-30 Grafton Street Heathwood 67 Noosa Street Lytton 142-150 Benjamin Place Mackay 69-79 Diesel Drive Morningside 326 & 340 Thynne Road Pinkenba 70-82 Main Beach Road Richmond 572-576 Swan Street Richmond 588A Swan Street Varsity Lakes 154 Varsity Parade Wacol 41 Bivouac Place Projects Acacia Ridge 56 Peterkin Street Acacia Ridge 69 Peterkin Street Berrinba 1-9 Kellar St Wacol 498 Progress Road Value Accretive Additions GHL properties Townsville 30 Palmer Street Total investment properties Industrial Industrial Office Office Land Industrial Industrial Industrial Industrial Industrial Office Office Office Industrial Industrial Industrial Industrial Industrial 2020 $000 2019 $000 6,000 6,000 33,250 58,563 2,000 11,250 8,725 30,100 41,625 20,500 53,688 59,042 12,000 39,000 - - 31,500 55,000 2,000 10,500 9,500 30,000 - 20,000 53,000 62,800 12,750 35,250 381,743 322,300 2020 $000 6,808 11,079 7,346 9,221 34,454 - 2019 $000 - - 3,000 6,500 9,500 1,006 1,250 - 417,447 332,806 The weighted average capitalisation rate (WACR) was 6.60% across the portfolio at June 2020, compared with 6.79% at June 2019. 17 The Group also owns a block of land in Townsville, independently valued at $1,250,000 that was acquired as part of the internalisation transaction. Page 9 of 80 GARDA Property Group Annual Financial Report 30 June 2020 The total value of GARDA’s investment properties increased by $84,641,000 during the financial year to $417,447,000 (2019: $332,806,000). This 25 % increase is primarily attributed to:    acquisition of four industrial properties in Acacia Ridge and Archerfield for $31,000,000 plus costs; acquisition of two industrial warehousing and distribution assets in Morningside for $41,000,000 plus costs; and development works at Berrinba and Wacol for $6,770,000. Borrowings The Group’s total borrowings at 30 June 2020 were $188,115,000 (2019: $128,517,000) leaving headroom of $11,885,000 on existing $200,000,000 debt facilities with ANZ Banking Group and St.George Bank. The debt facilities with ANZ and St.George were secured in March 2020 providing GARDA with additional borrowing capacity under a common terms structure. The tenor of the facilities is three years (expiring March 2023). Two debt facilities totaling $11,970,000 were assumed by the Group as a result of the internalisation. These facilities were repaid during the financial year: 1. a $10,000,000 facility was repaid through the transfer of 6,666,670 stapled securities out of treasury stock and a cash repayment of $1,000,000; and 2. a $1,970,000 facility was repaid with cash, after receiving approval from ASIC. As at 30 June 2020, GARDA’s all in cost of debt was approximately 2.40% (2019: 3.75%) and its gearing18 was 36.7% (2019: 32.5%). Derivatives On 4 March 2020, GARDA replaced its existing $60,000,000, 2.68%, July 2022 interest rate swap with a new $100,000,000 hedge comprising:   a $70,000,000 interest rate swap for a term of seven years at a rate of 0.81%; and a $30,000,000 interest rate swap for as term of 10 years at a rate of 0.98%. Outlook The Group will continue to execute its strategy in the 2021 financial year with key objectives including:      leasing the 7,109m² Botanicca 9 commercial office building in Richmond; completing the development and leasing the balance of the new 5,660m² industrial property at Berrinba; completion of the development of the new 6,000m² industrial property at Wacol; commencing development of the Acacia Ridge industrial property; deploying additional capital into the Group’s residential development debt financing operations;  managing ongoing capital requirements and gearing levels; and  being vigilant for strategically consistent, value accretive, acquisition opportunities. 18 Calculated as (total debt less cash) / (total assets less cash) Page 10 of 80 GARDA Property Group Annual Financial Report 30 June 2020 SUBSEQUENT EVENTS The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has a minimal impact to the Group up to 30 June 2020, it is not practicable to estimate the full potential of any impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any further economic stimulus that may be provided. USG Boral has committed to a five year lease for approximately half of the building (2,925m²) currently under construction at 1-9 Kellar Street, Berrinba. The lease will commence in November 2020 following anticipated construction completion in September 2020. YHI Corporation has committed to a 10 year lease for the building (6,000 m²) currently under construction at 498 Progress Road, Wacol. The lease will commence upon completion of construction which is expected to be in the first half of 2021. Austrans, an existing tenant at 38 Peterkin Street, Acacia Ridge, has committed to a new seven year lease for approximately half of Stage 1 of Acacia Ridge to be built at 69 Peterkin Street. The Queensland Department of Transport and Main Roads has been a tenant in Cairns Corporate Tower since 2002 and has recently committed to a new 10 year lease across 3,456m² representing 24% of Cairns Net Lettable Area. Otherwise, there are no matters or circumstances that have arisen since the end of the financial year that have significantly affected, or may significantly affect:  GARDA’s operations in future financial years;   the results of those operations in future years; or the state of affairs of GARDA in future years. ENVIRONMENTAL ISSUES The Group’s operations were not subject to any significant environmental regulations under either Commonwealth or State legislation. However, the Directors believe GARDA has adequate systems in place for the management of its environmental requirements and are not aware of any breach of those environmental requirements. INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITOR GARDA has agreed to indemnify current and former directors and certain key officers against all liabilities to another person (other than the Group or a related entity) that may arise from their position as director or employee of the Group, except where the liability arises out of conduct involving lack of good faith. The agreement stipulates that the Group will meet the full amount of any such liabilities, including costs and expenses. The indemnities were limited as required under the Corporations Act 2001. The Group has paid insurance premiums on behalf of its officers for liability and legal expenses for the year ended 30 June 2020. The relevant insurance contracts insure against certain liability (subject to specified exclusions) for persons who are or have been directors or officers of the Group. Details of the nature of the liabilities covered or the amount of the premium paid have not been included, as such disclosure is prohibited under the terms of the relevant contracts. The Group has not indemnified its auditor. Page 11 of 80 GARDA Property Group Annual Financial Report 30 June 2020 PROCEEDINGS ON BEHALF OF THE GROUP No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purposes of taking responsibility on behalf of the Group for all or any part of those proceedings. ROUNDING The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest $1,000, or in certain cases, to the nearest dollar. AUDIT AND NON-AUDIT SERVICES The Group’s auditor is Pitcher Partners. Prior to their appointment as auditors in December 2019, Pitcher Partners provided an Independent Limited Assurance Report in relation to the internalisation transaction. Non-audit services in the form of regulatory services and business advisory services were provided by the Group’s auditor, Pitcher Partners, during the year (refer to note 21 for details). The Directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:   all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and none of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Standards). AUDITOR'S INDEPENDENCE DECLARATION The Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 may be found following the Remuneration Report. Page 12 of 80 GARDA Property Group Annual Financial Report 30 June 2020 REMUNERATION REPORT (Audited) NOMINATION AND REMUNERATION COMMITTEE The Board has appointed a Nomination and Remuneration Committee (NRC). The NRC oversees GARDA’s remuneration framework and monitors remuneration outcomes. In doing so, it takes into account the interests of securityholders and the behaviours the Group wishes to promote. The Board approves and reviews the remuneration of GARDA’s Key Management Personnel (KMP) on the recommendation of the NRC. During the financial year the members of the NRC were: Director Paul Leitch Morgan Parker Philip Lee Andrew Thornton Mark Hallett Role Independent Director, Chair of NRC Appointed March 2020 Independent Director, Member of NRC Non-executive Director, Member of NRC Non-executive Director, Member of NRC Executive Director, Member of NRC Appointed March 2020 Resigned February 202019 The NRC operates independently of GARDA management and may engage remuneration advisers directly. Management makes recommendations to the NRC in relation to the development and implementation of reward strategy and structure. REMUNERATION POLICY Objective The objective of the Group’s remuneration framework is to ensure rewards for performance are competitive and appropriate for the results delivered. The framework aligns individual remuneration and rewards with achievement of strategic objectives and creation of value for securityholders and conforms with market practice. The Directors ensure that executive remuneration and rewards satisfy the following key criteria:      competitive and reasonable; acceptable to securityholders; alignment of performance and compensation; transparency; and capital management. GARDA strives to create a remuneration framework that drives a performance culture, ensuring there is a strong link between executive pay and the achievement of Group strategies and value to securityholders. 19 Mr Hallett resigned from the NRC on his status changing from Non-executive to Executive Director. Page 13 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Relationship to Securityholder Wealth The short and long-term components, including financial and non-financial measure, of KMP remuneration are designed to create long-term, sustained securityholder value. When setting performance targets, potential quantum of remuneration and the split between fixed and variable remuneration, the Board has regard to factors including the following:      specific role and responsibilities of the KMP; execution of Group strategy; value of investment portfolio, net asset value (NAV) and NTA; funds from operations; and total securityholder returns. Group Performance in 2020 The overall level of KMP compensation considers the performance of the Group20 and takes into consideration: 2020 2019 2018 2017 2016 Assets under management $’000 477,269 356,334 290,609 200,644 156,371 NTA per security NAV per security FFO Distributions Distributions per security21 $ $ $’000 $’000 cents 1.18 1.35 16,622 16,430 8.55 1.37 1.37 13,192 13,810 9.00 1.28 1.28 11,210 11,284 9.00 1.21 1.21 10,730 10,124 9.40 1.13 1.13 9,076 8,497 9.00 For the financial year ended 30 June 2020, the NRC has taken into consideration that GARDA completed significant, strategic transactions and undertakings including:  $72,000,000 of real estate acquisitions with the total value of the portfolio increasing from $332,806,000 to $417,447,000;  $37,500,000 of new equity being raised via placement;      the internalisation transaction; strong leasing outcomes in Box Hill, Cairns and Morningside; commencement of development works at Berrinba and Wacol totalling $6,770,000 and capital improvement expenditure of $5,155,000; structuring of debt facilities into a single, $200,000,000 syndicated loan facility; and securing $100,000,000 of interest rate swap protection at historically low rates. While GARDA’s security price has, like most other REITs, been negatively impacted by COVID-19 sentiment, GARDA’s FFO and distributions have been minimally impacted. Securityholders have received distributions of 8.55 cents per security for the financial year representing a payout ratio of 104.5% based on the FFO for the year. 20 Since internalisation on 29 November 2019. Date for prior periods is in respect of the former standalone entities, GDF and GARDA Capital Group. 21 Actual distribution rate per security assuming holding of security from 1 July 2019 to 30 June 2020. Page 14 of 80 GARDA Property Group Annual Financial Report 30 June 2020 ELEMENTS OF REMUNERATION – NON-EXECUTIVE DIRECTORS Fees and payments to Non-executive Directors (including Independent Directors) reflect the market in line with the demands that are made on, and the responsibilities of, the Directors. The Board determines remuneration of Non-executive Directors within the maximum amount approved by securityholders from time to time. This maximum currently stands at $600,000 per annum in total for fees to be divided among the Non-executive Directors in such a proportion and manner as they agree. Fees are set so that:  GARDA Non-executive Directors are remunerated fairly for their services, recognising the workload and levels of skills and experience required for the role;  GARDA can attract and retain talented Non-executive Directors; and  Fees are in line with market practice. Non-executive Directors are paid a fixed remuneration comprising base fees and superannuation. Non- executive Directors do not receive bonus payments or participate in security-based compensation plans and are not provided with retirement benefits other than statutory superannuation. ELEMENTS OF REMUNERATION – EXECUTIVES Fixed Remuneration All employees receive a remuneration package that includes a fixed pay component. The fixed remuneration comprises, cash salary, superannuation and other salary sacrificed benefits. The fixed pay is a set amount to reflect the role complexity, responsibilities and skill levels required, with cognisance to the market. Short Term Incentives Short term incentives are cash payments, without forfeiture provisions, that may be made at the discretion of the Board. The purpose of short term incentives is to reward individuals for assisting with the achievement of GARDA’s strategic objectives. No short term incentives are based on profit measures only. Long Term Incentives The establishment of the GARDA Employee Security Plan (GARDA ESP) was approved by securityholders at the Group’s 2019 annual general meeting on 6 March 2020. It replaces the former GARDA Capital Group employee security plan. The GARDA ESP is designed to:  assist with the attraction and retention of Executive Directors, senior managers and employees;  motivate and drive performance at both the individual and Group level; and  strengthen alignment between participants and securityholder interests. All Executive Directors and employees of GARDA are considered for participation in the GARDA ESP. Grants to Executive Directors are subject to securityholder approval. Participation in the GARDA ESP is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. The vesting of securities occurs over a two to three-year period, subject to the participant remaining an employee of the Group. Page 15 of 80 GARDA Property Group Annual Financial Report 30 June 2020 The KMP who participated in the issue of securities under the ESP were provided limited recourse loans on the grant date of an amount equal to the application price of the securities (market price per security on grant date). Interest on the limited recourse loans for any particular year is equal to the Australian Tax Office FBT benchmark interest rate. Interest is serviced through distributions and dividends payments with any excess applied to reduce the principal of the loan. KEY MANAGEMENT PERSONNEL - 2020 The Remuneration Report outlines remuneration for those people considered to be KMP of the Group during the year ended 30 June 2020. KMP are employees with the authority and responsibility for planning, directing and controlling the activities of GARDA and include:  Independent Directors  Non-executive Directors;   Executive Directors, including the Executive Chairman; and Senior executives. Details of the KMP who held office with GARDA during the reporting period are summarised below: KMP Title Appointment Date Independent Directors and Non-executive Directors Paul Leitch Morgan Parker Philip Lee Andrew Thornton Executive Directors Matthew Madsen Mark Hallett22 Senior Executives Lachlan Davidson David Addis Mark Scammells Independent Director Independent Director Non-executive Director Non-executive Director Executive Chairman Managing Director Executive Director 20 March 2020 13 December 2018 21 May 2015 20 March 2020 23 January 2017 22 September 2011 31 January 2011 General Counsel Company Secretary Chief Operating Officer 13 January 2014 28 July 2016 18 March 2019 Director, Projects and Acquisitions 30 September 2019 Remuneration balances disclosed in the Remuneration Report are effective from 29 November 2019, representing the internalisation transaction occurring on 29 November 2019. For the period from 1 July 2019 to the internalisation date, GDF was externally managed by GARDA Capital Limited and KMP were employed and remunerated by GARDA Capital Limited. 22 Mr Hallett’s status changed from Non-executive Director to Executive Director in February 2020. Page 16 of 80 GARDA Property Group Annual Financial Report 30 June 2020 REMUNERATION OF KMP Summary The table below outlines the total remuneration received by KMP as employees of GARDA Holdings Limited in the year ended 30 June 2020. The Remuneration Report is effective from 29 November 2019 (date of internalisation) to 30 June 2020. GARDA ESP Total Perform. Related 2020 Non-executive Directors P Leitch24 2020 M Parker25 P Lee A Thornton24 Executive Directors M Madsen 2020 2020 2020 M Hallett Executives D Addis L Davidson26 M Scammells 2020 2020 2020 2020 Salary & Fees23 Non-Cash Benefits Short Term Incentive 20,899 36,881 36,881 20,899 435,342 43,750 184,981 135,682 144,231 - - - - 3,945 - 3,945 - 3,945 - - - - - - 40,000 40,000 - Super 1,985 3,504 3,504 1,985 10,501 - 14,894 12,675 14,786 Long Service Leave - - - - - - - - 22,884 40,385 40,385 22,884 358 349,609 799,756 - 3,240 46,990 379 5,373 166 30,460 274,660 6,491 16,577 200,221 179,705 Total 1,059,546 11,835 80,000 63,834 6,276 406,377 1,627,870 Equity Interests As at the date of this report, the equity interests of each KMP in the Group were as follows: Ordinary Securities ESP Securities27 Non-executive Directors P Leitch M Parker P Lee A Thornton Executive Directors M Madsen M Hallett Executives D Addis L Davidson M Scammells Total 24,411 - 216,828 1,013,505 8,108,755 1,302,469 - 213,330 - 10,879,298 - - - - 5,960,000 1,000,000 800,000 560,000 800,000 9,120,000 - - - - 43.7% 6.9% 25.7% 23.2% 9.2% Total 24,411 - 216,828 1,013,505 14,068,755 2,302,469 800,000 773,330 800,000 19,999,298 23 Includes any change in accruals for annual leave. 24 Mr Leitch and Mr Thornton were appointed to the Board on 20 March 2020. 25 Mr Parker was appointed to the Board on 13 December 2018. 26 100,000 GARDA Capital Group ESP securities issued to Mr Davidson on 13 November 2017 vested on the second anniversary of their issue 13 November 2019. The fair value for these securities were $0.11. Another 100,000 GARDA Capital ESP securities issued to Mr Davidson on 13 November 2017 with a vesting date of 13 November 2020 vested concurrently with the internalisation transaction, in accordance with the terms of the ESP. The fair value of these securities was $0.13. All vesting securities participated in the internalisation transaction resulting in 320,000 vested securities. 27 Under Australian Accounting Standards, securities issued under the GARDA Property Group Employee Security Plan (ESP) are required to be accounted for as options in the financial statements until such time as they vest. Refer note 20 for further details. Page 17 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Movement in Equity Interests Movement during 2020 The table below shows the movement in number of securities held by KMP during the financial year. Ordinary securities P Lee P Leitch M Parker A Thornton28 M Madsen M Hallett29 D Addis L Davidson30 M Scammells GARDA ESP securities P Lee P Leitch M Parker A Thornton33 M Madsen M Hallett34 D Addis L Davidson35 M Scammells 1 July 61,628 - - - 146,401 48,698 - - - Internalisation Consideration 155,200 - - - 7,883,006 1,045,858 - 213,330 - On Joining Board - - - 1,013,505 - - - - - Net Purchases - 24,411 - - 79,348 207,913 - - - 30 June 216,828 24,411 - 1,013,505 8,108,755 1,302,469 - 213,330 - 256,727 9,297,394 1,013,505 311,672 10,879,298 1 July - - - - - - - - - - Internalisation Consideration31 - - - - 960,000 - 800,000 560,000 800,000 New ESP Grants32 - - - - 5,000,000 1,000,000 - - - 30 June - - - - 5,960,000 1,000,000 800,000 560,000 800,000 3,120,000 6,000,000 9,120,000 Internalisation Transaction The GARDA ESP replaced the former GARDA Capital Group employee security plan at the time of the internalisation transaction. 3,840,000 new GARDA stapled securities were issued to replace the GARDA Capital group securities that had issued under the former employee security plan. Further, the limited recourse loans previously provided by GARDA Capital Group were replaced with loans on equivalent terms. 480,000 GARDA ESP securities in total vested concurrently with the internalisation while 3,360,000 remained unvested. 28 Mr Thornton is also Company Secretary of HGT Investments Pty Ltd which holds 35,893,918 securities in GARDA. 29 Mr Hallett is also a director of M3SIT Pty Ltd which currently holds 180,000 securities which are not included in his holding of 2,302,469. 30 100,000 GARDA Capital Group ESP securities issued to Mr Davidson on 13 November 2017 vested on the second anniversary of their issue 13 November 2019. Another 100,000 GARDA Capital ESP securities issued to Mr Davidson on 13 November 2017 with a vesting date of 13 November 2020 vested concurrently with the internalisation transaction, in accordance with the terms of the ESP. All vesting securities participated in the internalisation transaction resulting in 320,000 vested securities. 31 The GARDA ESP replaced the former GARDA Capital Group employee security plan at the time of the internalisation transaction. All but 480,000 ESP securities remain unvested. 32 All new ESP securities remain unvested. 33 Mr Thornton is also Company Secretary of HGT Investments Pty Ltd which holds 35,893,918 securities in GARDA. 34 Mr Hallett is also a director of M3SIT Pty Ltd which currently holds 180,000 securities which are not included in his total holding of 2,302,469. 35 100,000 GARDA Capital Group ESP securities issued to Mr Davidson on 13 November 2017 vested on the second anniversary of their issue 13 November 2019. Another 100,000 GARDA Capital ESP securities issued to Mr Davidson on 13 November 2017 with a vesting date of 13 November 2020 vested concurrently with the internalisation transaction, in accordance with the terms of the ESP. All vesting securities participated in the internalisation transaction resulting in 320,000 vested securities. Page 18 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Subsequent GARDA ESP Grants On 16 April 2020, 6,000,000 GARDA ESP securities were granted to the Executive Chairman and Executive Director following securityholder approval at the Annual General Meeting on 6 March 2020, taking the total number of unvested securities to 9,360,000, of which 8,800,000 are held by KMP: Grant date 13 Nov 2017 3 Jun 2019 23 Aug 2019 16 Apr 2020 Securities 960,000 480,000 1,920,000 6,000,000 9,360,000 Price36 $0.63 $1.08 $1.22 $1.00 Limited recourse loan balance $538,052 $516,195 $2,332,181 $6,060,159 $9,446,587 Vesting date 13 Nov 2020 3 Jun 2021 23 Aug 2021 16 Apr 2023 Details of the KMP participants37 in the GARDA ESP are set out in the following table: Participant Issue date Securities granted Exercise Price Fair value at grant date Matthew Madsen 13 Nov 2017 960,000 16 Apr 2020 5,000,000 David Addis 3 Jun 2019 320,000 23 Aug 2019 23 Aug 2019 240,000 240,000 Lachlan Davidson 23 Aug 2019 240,000 Mark Scammells 23 Aug 2019 400,000 23 Aug 2019 400,000 Mark Hallett 16 Apr 2020 1,000,000 $0.63 $1.00 $1.08 $1.22 $1.22 $1.22 $1.22 $1.22 $1.00 $0.70 $0.06 $0.24 $0.11 $0.10 $0.11 $0.11 $0.10 $0.06 Loan value 30 June 20 Vesting date $538,052 13 Nov 2020 $5,050,132 16 Apr 2023 $349,727 3 Jun 2021 $291,827 23 Aug 2021 $291,827 23 Aug 2022 $290,914 23 Aug 2021 $486,378 23 Aug 2021 $486,378 23 Aug 2022 $1,010,026 16 Apr 2023 Total 8,800,000 $8,795,261 EMPLOYMENT CONTRACTS AND TERMINATION PROVISIONS Executive Chairman The Executive Chairman, Matthew Madsen, entered into an executive services agreement effective 1 January 2020 whereby he became a full-time employee of GARDA. Prior to 1 January 2020, Mr Madsen provided services to GARDA through a contract with Madsen Advisory Pty Ltd. Mr Madsen’s executive services agreement may be terminated by the Group with one year’s notice (or immediately for fraud, gross negligence, misconduct or criminal offence), or by Mr Madsen providing one year’s notice. There is a restraint on Mr Madsen competing with the Group or interfering with the relationship between the Group and its staff, customers, suppliers or contractors for one year following termination. Other major provisions of the executive services agreement include:     term of agreement: commencing 1 January 2020 with no fixed termination date; base salary, exclusive of superannuation, of $695,000, to be reviewed annually by the NRC; entitlement to participate in short term incentives, expected to be in the form of cash bonus, and subject to achievement of strategic, operational and financial hurdles set by the Board; and entitlement to participate in the GARDA ESP, at the discretion of the Board. 36 The number and exercise price of employee security plan securities issued under the former GARDA Capital Group plan (ie before 29 November 2019) have been adjusted for the internalisation exchange ratio of 1.6x. 37 560,000 unvested GARDA ESP securities are held by non-KMP employees. Page 19 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Directors The contracts with GARDA’s Non-executive Directors, Messrs Lee, Leitch, Parker and Thornton, provide the following key terms:    Term: ongoing with no fixed termination date; Remuneration: $70,000 per annum (including superannuation) as at 30 June 2020, to be reviewed annually; and Termination: 90 days’ notice period. The contract with Mr Hallett, Executive Director, is largely identical to the contracts of the Non-executive Directors with two exceptions:   Remuneration: $75,000 per annum plus GST, reviewed annually; and Entitlement to participate in the GARDA ESP, at the discretion of the Board. Executives Remuneration and other terms of employment for other KMP executives are contained under standard employment contracts. It is Group policy that service contracts for salaried KMP are unlimited in term but capable of termination, with notice, by either party. The Group retains the right to terminate a service contract immediately and without notice if the KMP is at any time guilty of serious, willful or persistent misconduct. On termination, salaried KMP are entitled to receive their statutory entitlements of accrued annual and long service leave, together with any superannuation benefits. Other than the Executive Chairman, the notice period for termination of a service contract by a KMP is three months. TRANSACTIONS WITH KMP AND THEIR RELATED PARTIES KMP or their related parties hold positions in other entities that result in them having control or joint control over the financial and operating policies of those entities. A number of these entities transacted with the Group during the year. The terms and conditions of the transactions with Directors and their related parties as disclosed below were no more favorable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis. A $1,970,000 loan facility advanced to the Company by a securityholder, M3SIT Pty Ltd as trustee for the M3 Solutions Investment Trust, was repaid on 5 of May 2020 following consent by ASIC. Mr Hallett is a director of the trustee. Interest of $132,556 was paid during the year. A $10,000,000 loan facility advanced to the GARDA Capital Trust by syndicate lenders, some of whom were related parties, was repaid on 24 February 2020 through transfer of 6,666,670 treasury securities valued at $9,000,000 (at $1.35 per security) and a cash payment of $1,000,000. The recipient of the cash payment of $1,000,000 was M3SIT Pty Ltd as trustee for M3 Solutions Investment Trust (Mr Hallett is a director of the trustee). Interest paid during the year was $46,219. A related party of Mr Thornton, Non-executive Director, participated with GARDA as prior ranking lender in a number of syndicated senior loans provided to third party borrowers. These loans were provided prior to Mr Thornton becoming a Non-executive Director.  The participation of Mr Thornton’s related party was in its capacity as a provider of finance to third-party borrowers on arm’s length terms and did not involve the receipt of any consideration from GARDA or the provision of any consideration to GARDA. Page 20 of 80 GARDA Property Group Annual Financial Report 30 June 2020 Payments of $71,000 (GST exclusive) were made to an entity related to Mr Scammells, Director, Acquisitions and Projects, in relation to project management services provided by a relative of Mr Scammells. The relevant contract was assessed as being arm’s length and on usual commercial terms and conditions. AUDIT The Remuneration Report for the Group for the year ended 30 June 2020 has been audited in accordance with section 300A of the Corporations Act 2001. END OF REMUNERATION REPORT The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors. Matthew Madsen Executive Chairman 20 August 2020 Page 21 of 80 GARDA Property Group Annual Financial Report 30 June 2020 AUDITOR'S INDEPENDENCE DECLARATION Page 22 of 80 GARDA Property Group Annual Financial Report 30 June 2020 FINANCIAL REPORT CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME GARDA Property Group GARDA Holdings Limited Notes 2020 $000 2019 $000 20201 $000 2019 $000 Year ended 30 June Revenue and other income Revenue from operations Other income Gain on bargain purchase on acquisition Total revenue and other income Expenses Property expenses Finance costs Employee benefits expense Corporate and trust administration expenses Depreciation Internalisation expenses Security based payments expense Net loss on financial instrument held at fair value through profit and loss Fair value movement in investment properties Gain on sale of investment property Total expenses Profit before income tax Income tax benefit (expense) Profit after income tax Other comprehensive income, net of tax 5 5 26 6 6 6 6 26 20 9 9 7 - (2,066) 29,116 1,172 - 25,361 8,101 - 30,288 33,462 (6,368) (3,801) (1,520) (2,836) (155) (1,269) (444) (5,940) (2,934) (3,701) - (700) - (1,425) (1,951) (6,996) - (24,814) 5,474 93 5,567 - 8,994 1,550 (4,682) 28,780 - 28,780 - 2,575 20 6,187 8,782 - (79) (656) (155) - (444) - - - (3,400) 5,382 93 5,475 - Total comprehensive income for the period 5,567 28,780 5,475 Total profit and total comprehensive income for the period attributable to: Securityholders of GARDA Property Group Shareholders of GARDA Holdings Limited Profit and total comprehensive income Earnings per stapled security: 6,279 (712) 5,567 - - 28,780 - 5,475 5,475 Basic earnings per stapled security / share (cents) Diluted earnings per stapled security / share (cents) 15 15 2.90 2.85 18.9 18.9 2.41 2.41 - - - - - - - - - - - - - - - - - - - - - - - - - The above consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 1 Result reflects the Company performance from 29 November 2019 to 30 June 2020. Page 23 GARDA Property Group Annual Financial Report 30 June 2020 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 30 June ASSETS Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Investment properties Deposits on investment properties Property, plant and equipment Right-of-use assets Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Distribution payable Borrowings Lease liabilities Current tax liability Total current liabilities Non-current liabilities Tenant security deposits Borrowings Derivative financial instrument Provisions Lease liabilities Deferred tax liability Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Security based payment reserve Retained earnings/ (accumulated losses) Total equity GARDA Property Group GARDA Holdings Limited Notes 2020 $000 2019 $000 2020 $000 2019 $000 8 20,488 5,291 25,779 20,213 1,441 21,654 3,952 2,343 6,295 9 417,447 332,806 1,250 23 11 10 14 12 24 12 13 24 7 - 54 403 33,586 1,874 - - - 451,490 334,680 477,269 356,334 3,944 3,763 - 115 2 4,236 3,565 15,417 - - - 54 403 - 1,707 8,002 2,048 - - 115 2 7,824 23,218 2,165 350 186,653 1,536 48 252 49 323 112,872 2,825 - - - 188,887 196,712 116,020 139,238 280,558 217,096 354,993 281,112 444 - (74,879) (64,016) 280,558 217,096 13 - - 48 252 49 362 2,527 5,475 - - 5,475 5,475 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The above consolidated Statements of Financial Position should be read in conjunction with the accompanying notes. Page 24 GARDA Property Group Annual Financial Report 30 June 2020 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Total transaction with owners in their capacity as owners 24,242 Balance at 30 June 2019 281,112 (64,016) 217,096 Contributed Equity Security Based Payments Reserve Retained Earnings $000 $000 $000 Total Equity $000 GARDA Property Group consolidated Year ended 30 June 2019 Balance at 1 July 2018 Profit for the year Transaction with owners in their capacity as owners Security issue Security issue transaction costs Distributions paid or provided for GARDA Property Group consolidated Year ended 30 June 2020 Balance at 1 July 2019 Profit for the year Transaction with owners in their capacity as owners Security issue in relation to entitlement and placement offer Security issue in relation to acquisition of properties Securities issued as consideration for internalisation Vested securities under ESP Security issue transaction costs for internalisation Security issue transaction costs Share based payment expense Contributed Equity Security Based Payments Reserve Accumulated Losses $000 $000 $000 Total Equity $000 256,870 - 256,870 25,000 (758) - 281,112 - 281,112 31,500 6,000 58,992 (273) (58) (619) - (78,986) 28,780 177,884 28,780 (50,206) 206,664 - - (13,810) (13,810) 25,000 (758) (13,810) 10,432 - - - - - - - - - 444 - - - (64,016) 217,096 5,567 5,567 (58,449) 222,663 - - - - - - - - - 31,500 6,000 58,992 (273) (58) (619) 444 (15,661) (6,000) (16,430) (16,430) Cancellation of treasury securities on consolidation (15,661) Cancellation of securities issued under GARDA ESP from treasury securities on consolidation Distributions paid and payable (6,000) - Total transaction with owners in their capacity as owners 73,881 444 (16,430) 57,895 Balance at 30 June 2020 354,993 444 (74,879) 280,558 The above consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements. Page 25 GARDA Property Group Annual Financial Report 30 June 2020 Consolidated Statements of Changes in Equity (continued) GARDA Holdings Limited Year ended 30 June 2019 Balance at 29 November 2019 Profit for the period Balance at 30 June 2020 Contributed Equity Retained Earnings $000 $000 Total Equity $000 - - - - 5,475 - 5,475 5,475 5,475 The above consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements. Page 26 GARDA Property Group Annual Financial Report 30 June 2020 CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended 30 June Cash flows from operating activities Receipts from customers (includes GST) Receipts from rental guarantees Litigation Proceeds GARDA Property Group GARDA Holdings Limited Notes 2020 $000 2019 $000 202038 $000 2019 $000 32,128 2,000 100 27,903 - 8,000 2,361 - - Payments in the course of operations (includes GST) (14,141) (15,282) (2,618) Interest received Finance costs Income tax paid Net GST (paid)/ refund Net cash provided by / (used in) operating activities 25 Cash flows from investing activities Cash acquired at internalisation 26 Acquisition costs relating to internalisation Payments for property, plant and equipment Payments for investment properties Due diligence costs and deposits Payment of commission on sale of property Proceeds on disposal of investment properties Payments for leasing fees Net cash (used in) / provided by provided by investing activities Cash flows from financing activities Proceeds of intra-stapled loans from parent entity Repayment of intra-stapled loan receivable by a subsidiary of a parent Repayment of loan receivable from external parties Loan advances to external parties Proceeds of borrowings Repayment of borrowings Repayment of lease liabilities Payments for borrowing transaction costs Payments for interest rate swap costs Repayment of related party loans 19 Proceeds from issue of additional equity Equity transaction costs Dividends paid (declared pre-internalisation) Distributions paid Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at end of financial year 25 40 (5,109) (544) (482) 13,992 4,375 (1,718) (28) 101 (4,088) - 3,960 20,594 - - - (81,133) (52,583) (115) (259) - (247) (1,874) - 16,416 (557) 20 (79) (544) (218) (1,078) 4,318 (80) (28) - - - - - (79,125) (38,598) 4,210 - - 838 (1,491) 75,020 - - - - 57,561 (15,418) (34,749) (169) (1,641) (2,714) (2,970) 31,500 (619) (697) (16,231) 65,408 275 20,213 20,488 - - - - 25,000 (758) - (13,360) 33,694 15,690 4,523 20,213 1,005 1,813 838 - - - (169) - - (1,970) - - (697) - 820 3,952 - 3,952 The above consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes. 38 Cash flows reflect the Company’s operations from internalisation on 29 November 2019 to 30 June 2020. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Page 27 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 1 GENERAL INFORMATION Basis of preparation The consolidated annual financial statements for GARDA Property Group (GARDA or the Group), comprising GARDA Diversified Property Fund (GDF or the Fund) and GARDA Holdings Limited (GHL or the Company), have been jointly presented in accordance with ASIC Corporations (Stapled Group Reports) Instrument 2015/838 and the requirements of the Australian Securities Exchange. These financial statements have also been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Pursuant to Australian Accounting Standards, GDF is the deemed parent entity of GHL. Supplementary information about the parent entity is disclosed in note 27. Compliance with IFRS The financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of investment properties and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Internalisation and stapling On 29 November 2019, GARDA was constituted in its current form when two ASX listed entities, GARDA Diversified Property Fund (previously defined as GDF or the Fund) (ASX: GDF) and GARDA Capital Group (ASX: GCM), were combined pursuant to the internalisation. Prior to the internalisation: 1. GDF was an externally managed real estate investment trust; and 2. GARDA Capital Group was a stapled entity comprising:   GARDA Capital Limited (previously defined as Fund RE), the responsible entity for GDF; and GARDA Capital Trust, a unit trust whose primary asset was an 11.8% equity interest in GDF. The internalisation transaction involved two concurrent events: 1. the establishment of GARDA through the stapling of GDF units to shares in the newly created GHL on a one for one basis; and 2. the acquisition by GARDA of 100% of GCM. GARDA is now an ASX-listed, internally managed, stapled, real estate group that trades under the ASX ticker “GDF”. GARDA continues to undertake the operations that were performed by its predecessor entities prior to the internalisation. Page 28 GARDA Property Group Annual Financial Report 30 June 2020 Comparative information For GARDA, the comparative information provided is from GDF’s prior period financial statements. For GHL, comparative information has not been provided due to the Company only forming part of GARDA for the nine-month period from incorporation on 20 September 2019 and 30 June 2020. Operations and principal activities GARDA is an internally managed real estate investment, development and funds management group. The Fund invests in, owns, manages and develops commercial and industrial real estate in accordance with the provisions of the Fund’s constitution. The Fund through its subsidiaries also invests into real estate via debt positions in conjunction with third parties. The Company, through its subsidiaries, acts as the responsible entity of the Fund. Registered office The registered office and principal place of business of the Group is situated at Level 21, 12 Creek Street, Brisbane QLD 4000. Authorisation of financial report This financial report was authorised for issue on 20 August 2020 in accordance with a resolution of the Directors. The following is a summary of the material accounting policies adopted by the Group in the preparation of these financial statements. The accounting policies have been consistently applied, unless otherwise stated. Page 29 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Group: AASB 16 Leases GHL has an operating lease for the registered office of the Group at Level 21, 12 Creek Street, Brisbane QLD 4000. The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of- use assets and corresponding lease liabilities are now recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of a lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments is separately disclosed in financing activities. For lessor accounting, as applicable to GDF, the standard does not substantially change how a lessor accounts for leases. Impact of adoption AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. When adopting AASB 16 from 1 July 2019, the consolidated entity has applied the following practical expedients:     to recognise the right-of use asset at the initial application at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to the lease recognised in the statement of financial position immediately before the date of initial application; to not recognise a right-of-use asset and a lease liability for leases for which the underlying asset is of low value; excluding any initial direct costs from the measurement of right-of-use assets; and using hindsight in determining the lease term when the contract contains options to extend or terminate the lease. The application of AASB 16 resulted in the recognition of a right-of-use asset with an aggregate carrying amount of $536,000 and a corresponding lease liability with an aggregate carrying amount of $547,000. The incremental borrowing rate applied in the calculation of the initial carrying amount of lease liabilities was 2.5%. The net impact on retained earnings was nil. The impact on the consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020 in relation to the adoption of AASB 16 is summarised as follows: Depreciation expense Finance costs Operating expenses The impact on the consolidated Statements of Financial Position is disclosed in notes 23 and 24. Increase/ (decrease) $000 133 12 (181) Page 30 GARDA Property Group Annual Financial Report 30 June 2020 Accounting policies Principles of consolidation and business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred for an acquisition comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by GARDA. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. GARDA recognises any non-controlling interest in an acquired entity on an acquisition-by acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred, with the exception of incremental costs incurred in relation to the issue of additional equity which are deducted against equity. The excess of the consideration transferred, the amount of any non-controlling interest in the acquired entity and the acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of GARDA’s share of the net identifiable assets acquired are recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and recognises additional assets or liabilities during the measurement period based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on the earlier of: (i) 12 months from the date of the acquisition; or (ii) when the acquirer receives all the information possible to determine fair value. Goodwill Goodwill arising from acquisitions is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of annual impairment testing. The allocation is made to those cash-generating units, or groups of cash-generating units, that are expected to benefit from the business combination from which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments. Income tax Income tax for Trusts Under the current income tax legislation, the Fund is not liable for Australian income tax, provided its taxable income and taxable realised gains are fully distributed to security holders each financial year. The Fund distributes its distributable income, calculated in accordance with its Constitution and the applicable taxation legislation, to security holders who are presently entitled to the income under the Constitution. Income tax for GHL Income tax is payable at the applicable income tax rate on the current period’s taxable income adjusted for changes in deferred tax assets and liabilities attributable to temporary differences and for unused tax losses. The current income tax charge is calculated by reference to the tax laws enacted or substantively enacted at the end of the reporting period. Page 31 GARDA Property Group Annual Financial Report 30 June 2020 Deferred income tax is provided in full, using the liability method, on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this situation, the tax is also recognised in other comprehensive income or directly in equity, respectively. Tax consolidation legislation for GHL GHL and its wholly owned subsidiaries have implemented the tax consolidation legislation. The head entity, GHL, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continued to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, GHL also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The entities have entered into a tax funding agreement under which wholly-owned subsidiaries compensate GHL for any current tax liability assumed and are compensated by GHL for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to GHL under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned subsidiaries’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Revenue recognition The summary below presents information about the disaggregation of key revenue items from the Group’s revenue contracts or other activities with customers. Lease revenue The Group’s main revenue stream is property rental revenue and is derived from holding investment properties over time. Rental revenue is recognised on a straight-line basis over the lease term for leases with fixed rent review clauses. Rental revenue not received at reporting date is reflected in the Statement of Financial Position as a receivable or, if paid in advance, as rent in advance (unearned income). Contingent rents based on the future amount of a factor that changes other than with the passage of time, including turnover rents and CPI linked rental increases, are only recognised when contractually due. Prospective tenants may be offered incentives to enter operating leases. The cost of incentives is recognised as a reduction of rental revenue on a straight-line basis from the lease commencement date to the end of the lease term. Recoverable outgoings Revenue from outgoings and other related services is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract, the Group; identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price, taking into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Page 32 GARDA Property Group Annual Financial Report 30 June 2020 Debt advisory services revenue Contracts with customers in relation to debt advisory services are specialised in nature and the customer does not benefit from the process undertaken, but rather the outcome. The Group is only entitled to payment for services upon the successful completion of the contract. Hence, revenue is recognised upon completion of the service at a point in time. Lending business income Revenue from lending contracts with customers is recognised over-time using the effective interest method. Non-lending Interest income Interest income is recognised using the effective interest method. Investment properties Investment properties comprise properties held for long-term rental yields and/ or capital appreciation and properties being constructed or developed for future use as investment properties. Investment properties are initially recognised at cost, including transaction costs. Subsequently to initial recognition, investment properties are carried at fair value which is measured using the capitalisation approach and discounted cash flows as primary valuation methodologies. Gains and losses arising from changes in fair values of investment properties are included in profit or loss in the year in which they arise. Subsequent development and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property when they result in an enhancement in the future economic benefits of the property. Investment properties under construction are carried at fair value, or at cost where fair value cannot be reliably determined and the construction is incomplete. Fair values Fair values may be used for financial and non-financial asset and liability measurement as well as sundry disclosures. Fair value is the price that would be received on sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. It is based on the presumption that the transaction takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market. The principal or most advantageous market must be accessible to, or by, the Group. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they are acting in their best economic interest. The fair value measurement of a non-financial asset takes into account the market participant's ability to generate economic benefits by using the asset at its highest and best use, or by selling it to another market participant that would use the asset at its highest and best use. In measuring fair value, the Group uses valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, including verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Derivative financial instruments The Group used derivative financial instruments (interest rate swaps) during the year to hedge risks associated with interest rate fluctuations on its bank loans. Page 33 GARDA Property Group Annual Financial Report 30 June 2020 Interest rate swaps are initially measured at fair value on the date of contract and are subsequently measured at fair value at each reporting date. The net fair value of derivative financial instruments outstanding at the reporting date is recognised in the statement of financial position as either a financial asset or liability. Changes in the fair value of the interest rate swaps are recognised immediately in profit or loss. Impairment of non-financial assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets may have been impaired. If such indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and its value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Trade receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which remain unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is due more than 12 months after the reporting date. Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption amounts are recognised in profit or loss over the period of the loans and borrowings using the effective interest method. Fees paid for establishing loan facilities are recognised as transaction costs and amortised over the period to which the facility relates. Lease liabilities A lease liability is recognised at the commencement of a lease. The lease liability is initially recognised as the present value of lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Page 34 GARDA Property Group Annual Financial Report 30 June 2020 Lease payments comprise fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise prices of purchase options when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. Variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; or certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. A qualifying asset is an asset under development or construction where such development or construction takes a substantial period of time. To the extent that funds are borrowed generally to fund development, the amount of borrowing costs to be capitalised to qualifying assets is determined by using an appropriate capitalisation rate. Interest payments in respect of financial instruments classified as liabilities are included in finance costs. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of reporting date are measured at the amounts expected to be paid when the liabilities are settled. At 30 June 2020, all Group annual leave liabilities are expected to settled wholly within 12 months and therefore were recognised as current liabilities. Long-term employee benefits Liabilities for annual leave and long service leave not expected to be settled within 12 months of reporting date are measured at the present value of expected future payments using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. At 30 June 2020, all long service leave liabilities were recognised as non-current liabilities. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Security based payments expense The costs of equity-settled transactions, including loan funded security issues, are determined by their fair values at grant date using the Black Scholes option pricing model and are recognised as security-based payment expenses proportionately over the vesting period with a corresponding increase in share based payments reserve. No expense is recognised for securities that do not ultimately vest other than for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. Such securities are treated as vesting irrespective of whether the market or non-vesting conditions are satisfied, provided that all other performance and/or service conditions are satisfied. Should the terms of equity-settled securities be modified, the minimum expense recognised is the expense that would have been recognised had the terms not been modified. An additional expense is recognised for any modification that increases the total fair value of the security-based payment transaction or is otherwise beneficial to the employee as measured at the date of modification. When an equity-settled security is cancelled, it is treated as if it vested on the date of cancellation and any unrecognised expense recognised immediately. This includes any security where non-vesting conditions within the control of either the entity or the employee are not met. Dividends and distributions to securityholders Provision is made for any dividend or distribution declared, being appropriately authorised and no longer at the discretion of the Board of Directors, on or before the end of the financial year but not distributed as at balance date. Page 35 GARDA Property Group Annual Financial Report 30 June 2020 Earnings per security Basic earnings per security is calculated by dividing the profit attributable to securityholders, by the weighted average number of ordinary securities outstanding during the financial year, adjusted for bonus elements in ordinary securities issued during the year. Diluted earnings per security adjusts the figures used in the determination of basic earnings per unit to take into account the weighted average number of additional ordinary securities that would have been outstanding assuming the conversion of all dilutive potential ordinary securities. Treasury Securities Treasury securities are deducted against equity or eliminated on consolidation. Any distributions related to treasury securities are also eliminated on consolidation. Goods and Services Tax (GST) Revenues and expenses are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the Australian Taxation Office. If it is not recoverable, it is recognised in the cost of acquisition of the asset or as an expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included in other receivables or other payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the Australian Taxation Office, are presented as operating cash flows. Net GST paid or refunded to/from Australian Tax Office is shown separately in the operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the Australian Taxation Office. Rounding of amounts GARDA is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191. Accordingly, amounts contained in this report and in the interim financial statements have been rounded to the nearest $1000, or in certain cases, to the nearest dollar. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect reported amounts. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events that management believes to be reasonable in the circumstances. The resulting accounting judgements and estimates will seldom equal actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may unfavourably impact the consolidated entity as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. Goodwill The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill has suffered any impairment (refer note 1). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 11 for further information. Investment property valuation The Group makes key assumptions in determining the fair value of its investment property portfolio as at reporting date. The assumptions thought to bear the most significant impact on the adopted fair value of each of the Group’s investment properties are disclose in note 9, together with the carrying amount of each investment property asset measured at fair value. Page 36 GARDA Property Group Annual Financial Report 30 June 2020 Shared-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to the equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated entity’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant lease hold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise and extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Page 37 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 3 OPERATING SEGMENTS As a result of the change in internal reporting structure due to the internalisation transaction, the Group has identified three core operating segments. These segments are regularly reviewed by the Executive Chairman, who is the Chief Operating Decision Maker, in order to make decisions about resource allocation and to assess performance. The three operating segments are: direct property investment, debt investments and external funds management. The business activities of each of these operating segments are as follows: Core Operating Segments Business Activity Direct property investment Investment in Australian commercial and industrial property Debt investments Debt investment (loans) into residential real estate External funds management Establishment and management of investment funds for external investors In the prior year, GDF operated as one operating segment, being investment in Australian commercial and industrial property. The financial results from the segment are equivalent to the prior year financial statements and therefore no comparative segment results are disclosed. Reportable Segment Results for the year ended 30 June 2020 The external revenue and net profit contribution of the debt investment and funds management operating segment did not meet the necessary quantitative threshold to be considered separate reportable segments and therefore have been combined and disclosed in the “other segments” category. Segment revenue and other income Lease revenue Recoverable outgoings Fund and real estate management Lending business income Debt advisory services Litigation proceeds Other revenue Total segment revenue Total segment expense Segment profit Direct property investment $000 Other segments $000 23,103 4,762 - - - 475 657 28,997 (12,161) 16,836 - - 7 228 287 - - 522 (183) 339 Total $000 23,103 4,762 7 228 287 475 657 29,519 (12,344) 17,175 Segment results include items directly attributable to the segment as well as those that may be allocated on a reasonable basis. They exclude non-segment specific non-cash expenses including fair value adjustments, security-based payments expense and depreciation. Corporate expenses pertaining to Group level functions such as finance and tax, legal, risk and compliance, company secretarial, marketing and other corporate services are also not allocated to core operation segments. These expenses form part of unallocated revenue and expenses in the reconciliation of segment profit to profit before income tax. Segment results are also net of all internal revenue and expenses incurred post-internalisation. Page 38 GARDA Property Group Annual Financial Report 30 June 2020 Reconciliation of reportable segment revenues and profit become income tax Total revenue for reportable segments Unallocated amounts Lease straight-lining revenue Lease costs and incentive amortisation Rent free income Non-operating interest income Total revenue Reconciliation of reportable segment profit before income tax to profit before tax Reportable segment profit before income tax Unallocated amounts Lease straight-lining revenue Lease costs and incentive amortisation Rent free income Non-operating interest income Finance costs Employee benefit expense Corporate and trust administration expenses Depreciation Internalisation expenses Security based payments expense Net loss on financial instrument held at fair value through profit and loss Fair value movement in investment properties Profit before income tax Reportable segment assets and liabilities as at 30 June 2020 Segment Assets Segment Liabilities Net Assets Segment assets and liabilities are net of all internal loan balances. Note 2020 $000 29,519 1,372 (865) 222 40 5 30,288 2020 $000 17,175 1,372 (864) 222 40 (84) (1,403) (695) (155) (1,269) (444) (1,425) (6,996) 5,474 Direct Property Investment $000 Other Segments $000 Total $000 468,732 (194,071) 274,661 6,584 475,316 - (194,071) 6,584 281,245 Page 39 GARDA Property Group Annual Financial Report 30 June 2020 Reconciliation of reportable segment assets Reportable segment assets Unallocated amounts Other receivables Investment properties39 Corporate fixed assets Right-of-use assets Total assets Reconciliation of reportable segment liabilities Reportable segment liabilities Unallocated amounts Trade and other payables Tenant security deposits Provisions Derivative financial instrument Lease liability Deferred tax liabilities Total liabilities 2020 $000 475,316 246 1,250 54 403 477,269 2020 $000 194,071 627 14 48 1,536 367 49 196,712 NOTE 4 DISTRIBUTIONS Distributions provided for and/or paid during the financial year were as follows: Year ended 30 June September distribution 2.25 cents per security (2019: 2.25 cents) November distribution 1.50 cents per security (2019: nil) December distribution 0.75 cents per security (2019: 2.25 cents) March distribution 2.25 cents per security (2019: 2.25 cents) June distribution 1.80 cents per security (2019: 2.25 cents)41 Distribution on treasury securities post internalisation Net distributions GARDA Property Group GARDA Holdings Limited40 2020 $000 3,664 2,782 1,682 5,046 3,929 17,103 (673) 16,430 2019 $000 3,115 - 3,565 3,565 3,565 13,810 - 13,810 2020 $000 2019 $000 - - - - - - - - - - - - - - - - Distributions declared for the quarter ended 30 June 2020 of $3,763,000 (net of treasury security distribution) but not paid until after year end have been provided for. 39 Relates to land held by the GHL consolidated group. 40 No dividends have been declared or paid by GHL since the implementation of internalisation on 29 November 2019. 41 June distribution declared includes amounts for treasury securities. As a result, the distribution payable per the consolidated Statement of Financial Position excludes the amount for treasury securities. Page 40 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 5 REVENUE Year ended 30 June Revenue recognised under AASB 16 Leases Lease revenue Lease costs and incentive amortisation Fund and real estate management Recoveries and other fees Debt advisory services Lending business income Other income Non-operating interest income Litigation proceeds Sundry income Revenue recognised under AASB 15 Revenue from contracts with customers Recoverable outgoings - non-lease component 4,762 4,164 GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 24,696 (864) 23,832 22,178 (981) 21,197 25 - 25 - 1,532 568 287 163 7 - 287 228 - - - - 5,284 4,164 2,550 40 475 657 1,172 101 8,000 - 8,101 20 - - 20 - - - - - - - - - - - - - - Total revenue and other income 30,288 33,462 2,595 Disaggregation of revenue from contracts with customers GARDA Property Group Recoverable outgoings – non-lease component Fund and real estate management Lending business income Debt advisory services Total GARDA Holdings Limited Recoveries and other fees Fund and real estate management Lending business income Debt advisory services Total 2020 2019 Point in Time Over Time Total Point in Time Over Time Total $000 $000 $000 $000 $000 $000 - - - 287 287 - - - 287 450 4,762 4,762 7 228 - 7 228 287 4,997 5,284 568 568 1,532 1,532 163 - 163 287 2,100 2,550 - - - - - - - - - - 4,164 4,164 - - - - - - 4,164 4,164 - - - - - - - - - - Page 41 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 6 EXPENSES Year ended 30 June Corporate and trust administration expenses Management fees Professional fees and other administration expenses Property expenses Recoverable expenses Direct expenses Non-recoverable expenses Finance costs Interest expense Borrowing cost amortisation Interest expense on lease liabilities Interest capitalised to properties under construction42 Depreciation IT equipment and fittings Buildings right-of-use assets GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 1,099 1,737 2,836 5,513 581 274 6,368 5,074 414 12 (1,699) 3,801 22 133 155 2,067 2,334 4,401 5,038 658 244 5,940 4,123 175 - (1,364) 2,934 - - - 2020 $000 - 656 656 - - - - 67 - 12 - 79 22 133 155 2019 $000 - - - - - - - - - - - - - - - 42 The capitalisation rate used to determine the amount of borrowing costs capitalised during the financial year was the weighted average interest rate applicable to the Group’s general borrowings. The weighted average rate during the year ranged from 2.40% - 3.20% (2019: 3.50%- 3.80%). Page 42 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 7 INCOME TAX Year ended 30 June GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 The components of income tax expense/benefit comprise: Current income tax benefit Deferred income tax benefit Income tax benefit Deferred income tax expense included in income tax benefit (Decrease)/ increase in deferred tax assets (Increase)/ decrease in deferred tax liabilities Total deferred tax benefit - 93 93 243 (150) 93 - - - - - - The prima facie tax on profit before income tax is reconciled to income tax as follows: Profit before income tax Less profit attributed to Trusts not subject to tax 5,474 28,780 (6,278) (28,780) Profit/(loss) subject to income tax Prima facie tax at 27.5% Tax effect of amounts which are not deductible/ (assessable) in calculating taxable income: Share based payment expense Gain on bargain purchase Other non-deductible (income)/ expense Restate income tax benefit to 26% Income tax expense/ (benefit) (804) (221) 122 - 1 5 (93) - - - - - - - - 93 93 243 (150) 93 5,382 - 5,382 1,480 122 (1,701) 1 5 (93) - - - - - - - - - - - - - - - Page 43 GARDA Property Group Annual Financial Report 30 June 2020 Year ended 30 June Composition of deferred tax assets Provision for employee benefits Accrued expenses Lease incentive liability Capital raising and transaction costs Tax losses Lease liabilities Other Deferred tax asset Movements Balance acquired at business combination Movement in deferred tax asset from temporary differences (Charged) / credited to profit and loss (Charged) / credited to equity Closing balance at the end of the year Composition of deferred tax liabilities Right to use asset Investment property Other Deferred tax liabilities Movements Balance acquired at business combination Movement in deferred tax liabilities - temporary differences (Charged) / credited to profit and loss (Charged) / credited to equity Closing balance at the end of the year Net deferred tax liabilities Deferred tax assets Deferred tax liabilities Net deferred tax liabilities Franking credits Franking credits available GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 55 57 10 115 86 95 49 467 225 242 - 467 105 325 86 516 367 149 - 516 467 516 49 4,208 - - - - - - - - - - - - - - - - - - - - - - - - 55 57 10 115 86 95 49 467 225 242 - 467 105 325 86 516 367 149 - 516 467 516 49 4,208 - - - - - - - - - - - - - - - - - - - - - - - - The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: a) b) c) franking credits that will arise from the payment of the amount of the provision for income tax; franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. Page 44 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 8 TRADE AND OTHER RECEIVABLES Year ended 30 June Current Fund management fees receivable Rent and outgoings receivable Litigation proceed receivable Other receivables Prepayments Rental guarantees/incentives receivable GST receivable Provision for expected credit loss Commercial loans to external third parties Analysis of provision for doubtful receivables Opening balance Provision/ (reversal) for doubtful receivables Closing balance GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 - 756 375 129 697 - - - 3,334 5,291 382 (382) - - 604 - - 593 517 109 (382) - 1,441 382 - 382 245 - - 205 117 - - - 1,776 2,343 - - - - - - - - - - - - - - - The loans to external parties are each secured by a first registered mortgage and a general security agreement. All other receivables are non-interest bearing. Refer to note 16 for details on credit risk exposure. Page 45 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 9 INVESTMENT PROPERTIES Year ended 30 June GARDA Property Group Investment properties at independent valuation Investment properties acquired at directors’ valuation Investment properties at directors’ valuation Investment properties under construction at directors’ valuation Investment properties under construction at independent valuation Movements during the year: Balance at 1 July Acquisition of investment properties via business combination Acquisition of tenanted investment properties Purchase price adjustment for rental guarantee Capital expenditure on tenanted investment properties Acquisition and capital expenditure of properties under construction Disposal of property Straight-lining of rental income Net movement in leasing fees and incentives Movements in fair value comprised of: Increase in independent valuations43 Acquisition costs44 Capital additions and capitalised costs45 Leasing costs Rent free income Straight-lining of rental income Balance at the end of the year GARDA Holdings Limited Land at Palmer Street, Townsville Movements during the year Balance at the date of internalisation Movements in fair value Balance at end of the year 2020 $000 2019 $000 116,100 322,300 1,250 265,643 34,454 - 1,006 - - 9,500 417,447 332,806 332,806 283,932 1,250 56,591 (2,000) 5,155 29,643 - 10,292 - 8,550 34,851 - (14,753) 1,372 (374) 4,110 (4,494) (5,614) 596 (222) (1,372) 1,077 (137) 17,100 (786) (6,380) 416 (279) (1,077) 417,447 332,806 1,250 1,250 - 1,250 - - - - The registered titles to all GDF and GARDA Capital Trust assets are held by The Trust Company (Australia) Limited, as custodian. This is an ASIC regulatory requirement. 43 Relates to gross movement in independent valuations between FY19 and FY20, plus the $2,000,000 Acacia Ridge rental guarantee. 44 Relates to due diligence costs and stamp duty for Acacia Ridge and Morningside properties acquired during the year. 45 Relates to capital expenditure and other capitalised costs on properties prior to independent valuation. Page 46 GARDA Property Group Annual Financial Report 30 June 2020 Valuations For the year ended 30 June 2020, the adopted values for five of the Group’s properties are based on independent external valuations, with the balance of the portfolio subject to Directors’ valuation. Independent external valuations are undertaken by qualified and suitably experienced certified practicing external valuers using capitalisation and discounted cash flow valuation methodologies. The results of these primary valuation methodologies are checked by the direct comparison approach and analysed on a rate per square metre of total lettable area. Land is valued using the direct comparison approach using data of recent sales and analysed on a rate per square metre. Directors’ valuations are based on the most recent independent valuations, and take into account all capital expenditure incurred since the last independent valuation which is deemed by Directors to be capital accretive. Valuation Basis at 30 June 2020 Date of last Independent Valuation Capitalisation Rate Independent Valuation 2020 Carrying Value 2019 Carrying Value $000 $000 $000 Established properties Acacia Ridge, 38 Peterkin St Directors’ Dec 2019 Archerfield, 839 Beaudesert Rd Directors’ Dec 2019 Box Hill, 436 Elgar Rd Independent Jun 2020 Cairns, 7-19 Lake Street Directors’ Dec 2019 Cairns, Land at 26-30 Grafton Street Directors’ Dec 2019 Heathwood, 67 Noosa Street Directors’ Dec 2019 Lytton, 142-150 Benjamin Place Independent Jun 2020 Mackay, 69-79 Diesel Drive Directors’ Dec 2019 Morningside, 326&340 Thynne Rd Independent Jun 2020 Pinkenba, 70-82 Main Beach Rd Independent Jun 2020 Richmond, 572-576 Swan Street Directors’ Dec 2019 Richmond, 588 Swan Street Directors’ Dec 2019 Varsity Lakes, 154 Varsity Parade Independent Jun 2020 Wacol, 41 Bivouac Place Directors’ Dec 2019 Properties under construction Acacia Ridge, 56 Peterkin St Directors’ Dec 2019 Acacia Ridge, 69 Peterkin Street Directors’ Dec 2019 Berrinba, 1-9 Kellar Street Directors’ Dec 2019 Wacol, 498 Progress Road Directors’ Dec 2019 7.50% 7.50% 6.00% 8.25% n/a 6.75% 7.25% 7.50% 5.75% 6.75% 5.75% 5.75% 8.50% 5.75% 6,000 6,000 33,250 56,000 2,000 11,250 8,725 6,000 6,000 33,250 58,563 2,000 11,250 8,725 - - 31,500 55,000 2,000 10,500 9,500 30,000 30,100 30,000 41,625 41,625 - 20,500 20,500 20,000 53,500 53,688 53,000 59,000 59,042 62,800 12,000 12,000 12,750 39,000 39,000 35,250 378,850 381,743 322,300 7.25% 7.25% n/a n/a 6,700 10,900 3,130 6,330 6,808 11,079 7,346 9,221 27,060 34,454 - - 3,000 6,500 9,500 Value accretive additions Value accretive additions Directors’ n/a GHL properties Townsville, 30 Palmer Street Directors’ Dec 2019 n/a - - - - 1,006 1,006 1,250 1,250 1,250 1,250 - - Total investment properties 407,160 417,447 332,806 Page 47 GARDA Property Group Annual Financial Report 30 June 2020 Contractual obligations Contractual obligations to develop or construct investment properties at 30 June 2020 are as follows: Properties Berrinba, 1-9 Kellar Road Wacol, 498 Progress Road Total Leasing arrangements $000 3,965 2,128 6,093 Investment properties listed above (excluding land at 26-30 Grafton Street, Cairns, land at 30 Palmer Street, Townsville and properties under construction) are typically leased to tenants under long-term operating leases with rentals payable monthly. Minimum lease payments receivable on leases of investment properties are disclosed in note 22. Any impacts on tenant credit risk due to COVID-19 have been disclosed in note 16. Amount recognised in profit or loss for investment properties Revenue and direct expenses relating to investment properties are disclosed in note 5 and note 6. NOTE 10 TRADE AND OTHER PAYABLES Year ended 30 June Current Trade and other payables Loan payable to parent entity Rental guarantees/incentives payable Contract liabilities (recoverable outgoings received in advance) GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 3,339 2,972 - - 605 3,944 - 517 747 615 1,433 - - 4,236 2,048 - - - - - Page 48 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 11 INTANGIBLE ASSETS Year ended 30 June Goodwill GARDA Property Group GARDA Holdings Limited 2020 $000 33,586 2019 $000 - 2020 $000 - 2019 $000 - Intangible assets comprise goodwill on the acquisition of GARDA Capital Group in the internalisation transaction. The acquisition of GARDA Capital Limited by GHL resulted in a gain on bargain purchase amount of $6,187,000 which has been recognised as income in GHL’s Statement of Profit or Loss and Other Comprehensive Income. On consolidation, GHL’s gain on bargain purchase amount has been offset against the goodwill arising on the acquisition of GARDA Capital Trust by GDF, resulting in GARDA’s net goodwill on acquisition of $33,586,000. Further details of the internalisation transaction and acquisition accounting are disclosed in note 26. Impairment testing Goodwill has an indefinite useful life and must be tested annually for impairment, or when there are indicators of impairment. Goodwill shall be considered to be impaired if its recoverable amount is less than the carrying amount. No impairment expense was recognised in relation to goodwill for the year ended 30 June 2020. The recoverable amount of goodwill has been determined using the value-in-use approach and valued by discounting estimated future cash flows. Cash flow projections were based on financial budgets including the board approved budget for the year ending 30 June 2021. Cash flows beyond the projected period are extrapolated using estimated growth rates. Key assumptions adopted in the discounted cash flow valuation are as follows:    cash flows projections being for 5 years; terminal growth rate of 2.50%; and discount rate of 6.75% applied to cash flow projections. These assumptions are considered by the Directors to be reasonable in the context of GARDA’s future prospects, the discount rates adopted in the valuation of its Investment Properties, its weighted average cost of capital, and prevailing market and economic conditions. The recoverable amount of goodwill would equal its carrying amount if the terminal growth rate decreased from 2.50% to 1.88%, or the discount rate increased from 6.75% to 7.28%. A significant change in the timing of the proposed development and leasing outcomes of GARDA’s properties may reduce forecast cash inflows and result in a lower recoverable amount in future years. In addition, assuming no changes to forecast cashflows, if the discount rates adopted in the valuation of Investment Properties are reduced from the current range of 6.75% - 9.00% (as set out in note 17), then there is a risk of goodwill impairment in the absence of a corresponding reduction in GARDA’s overall discount rate. Page 49 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 12 BORROWINGS Current Bank Loans (secured) Non-Current Bank Loans (secured) Less: amortised transaction costs Syndicated Debt Facility Amount and Tenor GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 - 15,417 188,115 (1,462) 113,096 (224) 186,653 128,289 - - - - - - - - On 4 March 2020, the Group achieved financial close on the restructuring of a new syndicated bank debt facility, increasing borrowing capacity by $19,300,000 to $200,000,000. At 30 June 2020, GARDA had $11,886,000 of borrowing capacity available: Facility St.George Bank ANZ Banking Group Facility Limit $000 Amount Drawn $000 Amount Available $000 2020 100,000 100,000 2019 138,073 30,650 2020 94,057 94,057 188,114 2019 97,863 30,650 128,513 2020 5,943 5,943 11,886 2019 40,210 - 40,210 Total facilities 200,000 168,723 The tenor of the new revolving cash advance facility is three years, expiring on 3 March 2023. Loan repayments are interest only with a lump sum payment of all amounts outstanding due at maturity. There is a fixed line fee on the facilities and interest is based on the applicable BBSY rate plus margin. At 30 June 2020, GARDA’s gearing was 36.7%46 (2019: 32.5%). Security The syndicated bank debt facility is secured by: a) b) c) a first registered general security deed in respect of all assets and undertakings of GARDA; a first registered real property mortgage in respect of each property in the GDF portfolio; a first registered general security deed in respect of all assets and undertakings of GHL and its secured subsidiaries; and d) a specific security agreement over restricted cash accounts of GARDA. Notwithstanding the terms of the facility, the registered title to all the assets of GCT and GDF, including the properties, are held by The Trust Company (Australia) Limited, as custodian, who holds title for the relevant fund. This is an ASIC regulatory requirement. 46 Gearing ratio is calculated as group bank debt less cash divided by total assets less cash. Page 50 GARDA Property Group Annual Financial Report 30 June 2020 Covenants Key financial covenants and other metrics under the syndicated bank debt facility include: a) b) c) interest cover ratio is to remain above 2.50 times; loan to value ratio (LVR) must remain under 50%; and adjusted gearing ratio47 is to remain under 1.20 times. The Group complied with these financial covenants during the financial year. Financial undertakings Financial undertakings under the syndicated bank facility include the following: a) the aggregate earnings before interest taxes depreciation and amortisation (EBITDA) of the obligors represents at least 90% of the aggregate EBITDA of the Group; and b) the aggregate total assets of the obligors represent at least 90% of the aggregate total assets of the Group. NOTE 13 DERIVATIVE FINANCIAL INSTRUMENTS Year ended 30 June Non-Current Interest rate swap contracts Interest rate Swaps GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 1,536 2,825 - - On 26 February 2020, the Group cash settled the exit from its existing $60,000,000, 2.68%, July 2020 expiry interest swap. Concurrently, it entered into new interest rate swap agreements on 4 March 2020 totaling $100,000,000, including $70,000,000 for a term of 7 years at a rate of 0.81% and $30,000,000 for a term of 10 years at a rate of 0.98%. NOTE 14 DISTRIBUTIONS PAYABLE Year ended 30 June Current Provision for distribution Movement in provisions: Opening balance at beginning of year Distributions provided for Distributions paid Balance at end of year GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 3,763 3,565 3,565 16,430 3,115 13,810 (16,232) (13,360) 3,763 3,565 - - - - - - - - - - 47 Adjusted gearing ratio is calculated as adjusted total liabilities divided by adjusted total assets. Adjustments made to the total liabilities and total assets include certain non-cash items and goodwill in accordance with GARDA’s syndicated facility agreement. Page 51 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 15 EARNINGS PER STAPLED SECURITY Year ended 30 June GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 Earnings used in calculating earnings per stapled security Net profit after tax attributable to security holders Basic earnings per stapled security (cents) Diluted earnings per stapled security (cents) 5,567 2.90 2.85 28,780 18.90 18.90 5.475 2.41 2.41 WANOS 48- basic earnings per stapled security 191,658,317 152,406,238 227,644,361 WANOS - diluted earnings per stapled security 195,142,591 152,406,238 227,644,361 - - - - - NOTE 16 FINANCIAL RISK MANAGEMENT Financial Risk Management Policies The Directors’ overall risk management strategy seeks to assist the Group in meeting its financial targets, while minimising potential adverse effects on financial performance. Risk management policies are approved and reviewed by the Board on a regular basis. Specific Financial Risk Exposures and Management The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk relating to interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure the different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk and maturity analysis for liquidity risk. The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. There have been no substantive changes in the types of risks to which the Group is exposed, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period. Further details regarding these policies are set out below: Credit Risk Credit risk is the risk that the counterparty to a financial instrument will fail to discharge its obligations, resulting in the Group incurring a financial loss. The maximum exposure to credit risk, excluding the value of any collateral or other security, are recognised as financial assets net of provisions for impairment of those assets in the statement of financial position and notes to the financial statements. The Group also holds security deposits of $349,000 (2019: $300,000) and also has bank guarantees in the Group’s favour of $9,695,000 (2019: $9,200,000) not recorded in the statement of financial position, which may be drawn upon in the event of default (subject to federal government guidelines due to COVID-19 pandemic). Credit risk is managed through procedures designed to ensure, to the extent possible, customers and counterparties to transactions are of sound credit worthiness and includes monitoring of the financial stability of significant customers and counterparties. Such monitoring is used in assessing receivables for impairment. Credit risk is also minimised by investing surplus funds in financial institutions that maintain a high credit rating. Where the Group is unable to ascertain a satisfactory credit risk profile in relation to a customer or counterparty, the risk may be further managed through obtaining security by way of personal or commercial guarantees over assets of sufficient value. The credit quality of cash and cash equivalents held by the Group is considered strong. Credit risk related to balances with banks is managed in accordance with approved Board policy. Such policy requires that surplus funds are only invested with counterparties which are large financial institutions with strong credit ratings. 48 Weighted average number of securities. Page 52 GARDA Property Group Annual Financial Report 30 June 2020 Credit risk exposures The Group applies the AASB 9 simplified approach to measuring expected credit losses. This approach uses a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix with fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and available forward-looking information. To measure the expected credit losses, trade receivables and contract assets are grouped based on shared credit risk characteristics and the days past due. Amounts are considered as ‘past due’ when the debt has not been settled within the terms and conditions agreed between the Group and the customer or counterparty to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group. Additionally, at each reporting date, the Group assesses whether financial assets carried at amortised cost are “credit- impaired”. A financial asset is “credit-impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Due to the COVID-19 pandemic, the Group has a tenant credit risk exposure of $330,649 as at 30 June 2020. The balance owed is within pre-agreed rental deferral terms. Management closely monitors the receivable balance on a monthly basis and is in regular contact with the tenant. At the date of report, there were no loss recognised as result of tenants not paying as per pre-agreed rental deferral terms. All of the Group’s fully secured debt investments are considered to have low credit risk. Financial assets are considered to be low credit risk when they have a low risk of default and the customer has a strong capacity to meet its contractual cash flow obligations in the near term. Generally, receivables are written off by management when there is no reasonable expectation of recovery. Indicators include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than one year. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: preparing forward-looking cash flow analyses in relation to its operational, investing and financing activities;   monitoring undrawn credit facilities;  maintaining a reputable credit profile;  managing credit risk related to financial assets;   only investing surplus cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets. The table below reflects the contractual maturity of fixed and floating rate financial liabilities. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at 30 June 2020. The amounts disclosed represent undiscounted cash flows. The remaining contractual maturities of the financial liabilities are set out in the following table. Page 53 GARDA Property Group Annual Financial Report 30 June 2020 Less than one year Trade and other payables49 Loan to parent entity Distribution payable Interest on loans Between one and five years Bank loans Interest on loans Derivative financial instruments Market (or Interest Rate) Risk GARDA Property Group GARDA Holdings Limited Note 2020 $000 2019 $000 2020 $000 2019 $000 10 10 14 12 13 3,901 - 3,763 4,524 12,188 4,236 - 3,565 3,786 11,587 188,115 7,557 1,536 128,513 4,289 2,825 197,208 135,627 615 1,433 - - 2,048 - - - - - - - - - - - - - Interest rate risk is the risk that the fair value of the cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Group’s main interest rate risk arises from borrowings with variable interest rates. The Group manages interest rate risk by using interest rate swaps which have the effect of converting a portion of borrowings from variable to fixed rates. On 26 February 2020, the Group cash settled the exit from its existing $60,000,000, 2.68%, July 2020 expiry interest swap. Concurrently, it entered into new interest rate swap agreements on 4 March 2020 totaling $100,000,000, including $70,000,000 for a term of 7 years at a rate of 0.81% and $30,000,000 for a term of 10 years at a rate of 0.98%. Interest rate risk sensitivity The net interest rate exposure of the Group is $100,000,000 being the Group debt facility of $200,000,000 less the notional principal of amount of the interest rate swap of $100,000,000. The impact of 0.5% increase/decrease in market interest rates at balance date would be result in a $500,000 decrease/increase in profit or loss per annum. NOTE 17 FAIR VALUE MOVEMENT The following assets and liabilities are recognised and measured at fair value on a recurring basis:   Financial assets: Derivative financial instruments at fair value through profit and loss Non-financial assets: Investment properties There are various methods used in estimating the fair value of a financial instrument: Level 1: fair value is calculated using quoted prices in active markets. Level 2: fair value is estimated using inputs that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3: fair value is estimated using inputs for the asset or liability that are not based on observable market data. The following table sets out GARDA’s assets and liabilities that are measured and recognised at fair value in the financial statements. 49 These amounts exclude GST payable balances at year end in accordance with AASB 132. Page 54 GARDA Property Group Annual Financial Report 30 June 2020 30 June 2020 Assets Investment properties Liabilities Derivative financial instruments 30 June 2019 Assets Investment properties Liabilities Derivative financial instruments Level 1 $000 Level 2 $000 Level 3 $000 Total $000 - - - - - - - - - - 417,447 417,447 417,447 417,447 1,536 1,536 - - 1,536 1,536 - - 332,806 332,806 332,806 332,806 2,825 2,825 - - 2,825 2,825 There were no transfers during the year between Level 1 and Level 2 for recurring fair value measurements. GARDA’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred. Disclosed fair values The carrying amounts of financial assets and liabilities approximate their net fair value, unless otherwise stated. The carrying amounts of financial assets and liabilities are disclosed in the Statement of Financial Position and in the notes to the financial statements. The following table sets out the valuation techniques used to measure fair value within Level 3, including details of the significant unobservable inputs used and the relationship between unobservable inputs and fair value. Investment properties Investment properties are valued using the Income approach based on estimated rental value of the property. Discount rates, terminal yields, expected vacancy rates and rental growth rates are estimated by an external valuer (or in the case of directors’ valuations, directors) based on comparable transactions and industry data. Unobservable inputs Range of inputs 2020 2019 Discount rate 6.75% - 9.00% 6.50% - 9.00% Relationship between unobservable inputs and fair value Capitalisation rate 5.75% - 8.50% 5.75% - 8.25% Terminal yield 6.00% - 8.50% 6.00% - 8.75% The higher the discount rate, terminal yield and expected vacancy rate, the lower the fair value. Expected vacancy rate 0 - 5% 0% Rental growth rate 2.26% - 3.04% 2.26% - 2.80% The higher the rental growth, the higher the fair value. Based on Gross Face Rental growth 10 year CAGR. The Board considers the valuations of each property half-yearly and either ensures an external independent valuer has been instructed or adopts a Directors’ valuation. For derivative financial instruments (interest rate swap), fair value was determined by St.George Bank. The valuation models used by banks are industry standard and mostly employ a Black-Scholes framework to calculate the expected future value of derivative payments which are then discounted back to present value. Interest rate inputs into the models are benchmark rates and as such input parameters into the models are deemed observable, thus these derivatives are categorised Level 2 instruments. There were no significant inter-relationships between unobservable inputs that materially affect fair values. Page 55 GARDA Property Group Annual Financial Report 30 June 2020 Reconciliation of Level 3 fair value movements Refer to note 9 for the reconciliation of movements in investment properties. There have been no transfers to or from Level 1 or 2. There were no unrecognised gains/(losses) recognised in profit or loss for investment properties. NOTE 18 CONTRIBUTED EQUITY Year ended 30 June GARDA Property Group GARDA Holdings Limited 2020 2019 Securities Securities 2020 Shares 2019 Shares Ordinary securities/ shares 227,644,361 158,444,594 227,644,361 Movements during the year Balance at beginning of year 158,444,594 138,444,594 Acquisition consideration investment properties50 4,411,765 - Placement51 22,500,000 20,000,000 - - - Securities issued at incorporation and on initial capitalisation - Securities issued as consideration for internalisation (note 26) 42,288,002 - - 185,356,359 42,288,002 Total issued securities as per ASX 227,644,361 158,444,594 227,644,361 Treasury Securities (refer below) (9,233,693) Unvested securities on issue under GARDA ESP (refer below) (9,360,000) Vested securities under GARDA ESP (refer below) (480,000) - - - (9,233,693) (9,360,000) (480,000) Total issued securities for financial statements 208,570,668 158,444,594 208,570,668 - - - - - - - - - - - Treasury Securities The internalisation resulted in GDF owning 100% of GARDA Capital Trust which, in turn, owned 21,900,363 stapled securities in GARDA Property Group. In accordance with Australian Accounting Standards, these securities are designated as treasury securities and have been deducted from equity and excluded from total issued securities of 227,644,361. Since the internalisation, 12,666,670 Treasury Securities have been transferred in settlement of loans or in conjunction with the GARDA ESP. The 6,666,670 securities that were issued to extinguish a loan are now included in equity and the number of issued securities for reporting purposes. Employee security plan securities At internalisation, included in GARDA’s issued securities were 3,840,000 stapled securities issued to executive Directors and employees. These securities replaced securities in GARDA Capital Group that had previously been issued as part of GARDA Capital Group’s employee security plan (ESP). 480,000 GARDA ESP securities vested concurrently with the internalisation on 13 November 2019 while 3,360,000 remain unvested. In accordance with Australian Accounting Standards, unvested ESP securities are accounted for as security-based payment expenses until such time as the securities vest. The Executive Directors and employees who participated in the GARDA Capital Group ESP had been provided with limited recourse loans to finance the acquisition of their ESP securities. Following the internalisation and replacement of GARDA Capital Group ESP securities with GARDA securities, participating executive Directors and employees have been provided with equivalent loan terms. Since internalisation, 6,000,000 GARDA ESP securities have been transferred to GARDA employees. These securities were transferred from Treasury Stock and have attaching limited recourse loans. Refer to note 20 for further details. 50 Securities issued to acquire the Acacia Ridge and Archerfield properties. Refer Directors’ Report. 51 Securities issued to fund the acquisition of the Morningside property. Refer Directors’ Report. Page 56 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 19 RELATED PARTIES AND KEY MANAGEMENT PERSONNEL Transactions between related parties occurred on standard commercial terms and conditions, unless otherwise stated. KMP compensation KMP receive compensation in the form of short-term benefits, post-employment benefits, long-term benefits, termination benefits and security-based payments. The aggregate remuneration paid to KMP of the Group is set out below: Year ended 30 June Short-term benefits Post-employment benefits Long-term benefits Security based payments Total remuneration paid Pre internalisation GARDA Property Group GARDA Holdings Limited 2020 2019 2020 2019 1,151,383 63,834 6,276 406,377 1,627,870 - - - - - 1,151,383 63,834 6,276 406,377 1,627,870 - - - - - GDF and GARDA Capital Group were related parties immediately prior to the internalisation transaction. As the responsible entity and manager of GDF, GARDA Capital Limited and its controlled entities were entitled to receive the following fees pursuant to GDF’s constitution:   a management fee of 0.65% per annum of gross asset value (GAV); and a capital works fee amounting to 5% of the total capital costs incurred in relation to the investment properties. Management and capital works fees paid by GDF to GARDA Capital Group up to the date of the internalisation were as follows: Responsible Entity’s Fees Management fee Capital works fees Procurement fees Other transactions with the responsible entity Recovery of professional expenses Distributions paid or payable by GDF to GARDA Capital Trust Administration costs reimbursed in accordance with the Fund’s Constitution Period to 29 November 2019 30 June 2019 1,092,074 2,067,496 90,207 1,916,109 - 146,725 1,182,281 4,130,330 292,298 515,178 821,263 1,899,032 - 2,921 1,113,561 2,417,131 In addition, GARDA Capital Limited subsidiaries, GARDA Real Estate Services Pty Ltd, GARDA Facilities Management Pty Ltd, GARDA Services Pty Ltd, and GARDA Finance Pty Ltd, provided property and facilities management services for GDF properties and other services on behalf of the Responsible Entity. The fees paid for those services and administration costs reimbursed for the period up the internalisation were as follows: Page 57 GARDA Property Group Annual Financial Report 30 June 2020 GARDA Real Estate Services Pty Ltd GARDA Facilities Management Pty Ltd GARDA Services Pty Ltd GARDA Finance Pty Ltd 29 November 2019 $000 30 June 2019 $000 496,201 1,526,020 82,857 69,245 500,000 194,757 174,667 146,725 1,148,303 2,042,169 The following balances were payable by GDF to GARDA Capital Group as at the date of the internalisation: GARDA Capital Limited GARDA Real Estate Services Pty Ltd GARDA Services Pty Ltd GARDA Finance Pty Ltd 29 November 2019 $000 30 June 2019 $000 61,751 417,655 - 326,505 14,784 - 76,535 12,757 161,397 918,314 Amounts receivable from or payable to related entities as detailed above are all on standard 30-day credit terms. All amounts are unsecured and are expected to be cash settled. Post internalisation Effective from the date of the internalisation, responsible entity, management and other fees paid by GDF to GARDA Capital Group are internal charges between wholly-owned GARDA entities and are therefore not disclosed as related party payments. Transactions with KMP and their related parties A $1,970,000 loan facility advanced to the Group by a securityholder, M3SIT Pty Ltd as trustee for the M3 Solutions Investment Trust, was repaid in cash on 5 of May 2020. A $10,000,000 loan facility advanced to the Trust by syndicate lenders, some of whom were related parties of GCM, was repaid on 24 February 2020. The loan was repaid through the transfer of 6,666,670 Treasury Securities valued at $9,000,000 (at $1.35 per security) and a cash payment of $1,000,000. The recipient of the cash payment of $1,000,000 was M3SIT Pty Ltd as trustee for M3 Solutions Investment Trust (Mr Hallett is a director of the trustee). Interest paid during the year was $46,219. A related party of Mr Thornton, Non-executive Director, participated with GARDA as prior ranking lender in a number of syndicated senior loans provided to third party borrowers. These loans were provided prior to Mr Thornton becoming a Non- executive Director.  The participation of Mr Thornton’s related party was in its capacity as a provider of finance to third-party borrowers on arm’s length terms and did not involve the receipt of any consideration from GARDA or the provision of any consideration to GARDA. Payments of $71,000 (GST exclusive) were made to an entity related to Mr Scammells, Director, Acquisitions and Projects, in relation to project management services provided by a relative of Mr Scammells. The relevant contract was assessed as being arm’s length and on usual commercial terms and conditions. Page 58 GARDA Property Group Annual Financial Report 30 June 2020 Employee security plan Details of the current KMP participants in the GARDA ESP are set out in the following table: Participant Issue date Securities granted Exercise Price Fair value at grant date Loan value 30 June 20 Vesting date Matthew Madsen 16 Apr 2020 5,000,000 13 Nov 2017 960,000 3 Jun 2019 23 Aug 2019 23 Aug 2019 David Addis Lachlan Davidson 23 Aug 2019 23 Aug 2019 Mark Scammells 23 Aug 2019 320,000 240,000 240,000 240,000 400,000 400,000 Mark Hallett 16 Apr 2020 1,000,000 $0.63 $1.00 $1.08 $1.22 $1.22 $1.22 $1.22 $1.22 $1.00 $0.70 $0.06 $0.24 $0.11 $0.10 $0.11 $0.11 $0.10 $538,052 13 Nov 2020 $5,050,132 16 Apr 2020 $349,727 3 Jun 2021 $291,827 23 Aug 2021 $291,827 23 Aug 2022 $290,914 23 Aug 2021 $486,378 23 Aug 2021 $486,378 23 Aug 2022 $0.06 $1,010,026 16 Apr 2020 Total 8,800,000 $8,795,261 The GARDA ESP limited recourse loan balances are not accounted for in the statement of financial position. NOTE 20 SECURITY BASED PAYMENTS EXPENSE The establishment of the GARDA Capital Group ESP was approved by GARDA Capital Group securityholders at the 2017 annual general meeting. This ESP was replaced with the GARDA ESP on completion of the internalisation transaction with the 2,400,000 GARDA Capital Group ESP securities being replaced with 3,840,000 GARDA ESP securities. The GARDA ESP securities are subject to equivalent loan terms, vesting conditions, transfer restrictions and other terms that existed under the GARDA Capital Group ESP, as approved at the Annual General Meeting of the GARDA Property Group on 6 March 2020, except that 300,000 outstanding GARDA Capital Group ESP securities, which were exchanged for 480,000 GARDA ESP securities, vested at the date of the internalisation. The GARDA ESP is designed to:     incentivise employees to deliver long-term securityholder value; align the interests of employees and securityholders; recognise individual performance; and ensure the Group has a competitive remuneration structure. Participation in the GARDA ESP is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. The vesting of securities occurs over a two to three-year period, and subject to the participant remaining an employee of the Group. The employees who participated in the issue of securities under the GARDA ESP were provided limited recourse loans on the grant date of an amount equal to the application price of the securities (market price per security on grant date). Interest on the limited recourse loan for any particular year is equal to the Australian Tax Office fringe benefits tax benchmark interest rate. The limited recourse loan for the participants has a term of eight years. The securities issued under the GARDA ESP are subject to employee tenure conditions, however the overall ESP terms and conditions are at the discretion of the Board. The total non-cash expense arising from security-based payment transactions for the period was as follows: Year ended 30 June GARDA Property Group GARDA Holdings Limited 2020 2019 2020 2019 Securities issued under employee security plan 444 - 444 - Page 59 GARDA Property Group Annual Financial Report 30 June 2020 Fair value of securities granted The fair value at grant date is determined using the Black and Scholes option pricing model, taking into account the exercise price, term of the security, security price at grant date and expected price volatility of the underlying security, expected dividend yield, risk-free interest rate for the term of the security and certain probability assumptions. The expected price volatility is based on the historic average volatility of peer group entities or similar entities compared to GARDA Property Group, adjusted for any expected changes to future volatility due to publicly available information. Details of securities under the limited recourse loan funded GARDA ESP including securities issues during the post- internalisation period and the Black and Scholes option pricing model input for securities granted are set out in the following table: Grant date Vesting date Share price at effective grant date Exercise price Fair value at grant date Number of securities Limited recourse loan Expected volatility Dist’n yield 13/11/2017 13/11/2020 $1.395 $0.63 $0.70 960,000 $538,053 3/6/2019 3/6/2021 $1.395 $1.08 $0.24 480,000 $516,194 23/8/2019 23/8/2021 $1.395 $1.22 $0.11 1,520,000 $1,845,803 23/8/2019 23/8/2022 $1.395 $1.22 $0.10 400,000 $486,378 10% 10% 10% 10% 16/4/2020 16/4/2023 $0.87 $1.00 $0.06 6,000,000 $6,060,159 30% 6% 6% 6% 6% 9% Risk free rate 2% 2% 2% 2% 1% 9,360,000 $9,446,587 The weighted average exercise price of securities granted during the year was $1.01. The weighted average remaining contractual life of options outstanding at the end of period was 2.50 years. The expected price volatility is based on the historic average volatility of GDF adjusted for any expected changes for future volatility due to publicly available information. No securities were bought back and cancelled during the year. NOTE 21 AUDITOR’S REMUNERATION Year ended 30 June Remuneration of the auditor for: GARDA Property Group GARDA Holdings Limited 2020 $ 2019 $ 2020 $ 2019 $ Audit and review of the financial report (Pitcher Partners) 131,500 - 54,000 Audit and review of the financial report (BDO) Total remuneration for audit service - 131,500 57,000 57,000 - 54,000 Remuneration of the auditor for: Independent Limited Assurance Report – internalisation transaction (Pitcher Partners) Business advisory services (BDO) Review and audit of compliance plan (BDO) 109,560 - - Review and audit of compliance plan (Pitcher Partners) 19,000 75,000 99,684 13,400 - Total remuneration for non-audit service 128,560 188,084 - - - - - - - - - - - - Page 60 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 22 COMMITMENTS Year ended 30 June Future minimum lease payments receivable: Within 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years Later than 5 years NOTE 23 RIGHT-OF-USE ASSETS Year ended 30 June Non-current Reconciliation Opening balance Additions Depreciation Carrying value GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 18,410 16,556 14,401 12,584 11,608 42,079 115,638 17,576 15,780 14,778 12,144 10,614 41,850 112,742 - - - - - - - - - - - - - - GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 403 403 - 536 (133) 403 - - - - - - 403 403 - 536 (133) 403 - - - - - - The consolidated group leases land and buildings for its office under agreement which commenced in July 2014 and continues for three years from reporting date. On renewal, the terms of the leases are renegotiated. NOTE 24 LEASE LIABILITY Year ended 30 June Current Non-current GARDA Property Group GARDA Holdings Limited 2020 $000 115 252 367 2019 $000 - - - 2020 $000 115 252 367 2019 $000 - - - Page 61 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 25 CASH FLOW INFORMATION Year ended 30 June 2020 Reconciliation of cash flow from operations with profit GARDA Property Group GARDA Holdings Limited 2020 $000 2019 $000 2020 $000 2019 $000 Profit Adjustment for items in profit or loss Share based payment expense Gain on bargain purchase on acquisition Depreciation Capitalisation of interest and other fees Change in fair value of investment properties Change in fair value of derivative Amortisation of borrowing costs Gain on sale of investment properties Capitalised interest expense Movements in assets and liabilities Trade and other receivables Contract liabilities Trade and other payables Provisions Current tax liability Deferred tax balances Lease incentives 5,567 28,780 5,474 444 - 155 (328) 6,996 1,425 414 - (1,699) 1,947 (142) 485 17 (544) (101) (644) - - - - (8,994) 1,951 175 (1,550) (1,343) (306) 537 1,772 - - - (428) 444 (6,187) 155 (264) - - - - - (117) - 45 17 (544) (101) - Cash flow from operations 13,992 20,594 (1,078) - - - - - - - - - - - - - - - - - - Non-Cash Movements Non-cash financing and investing activities during the year related to the following:  On 5 July 2019, GDF settled the acquisitions of three adjacent transport orientated warehouse properties bordering the Acadia Ridge Intermodal Rail Terminal and a nearby warehouse property in Archerfield. Total consideration of $31,000,000 plus costs was funded through $17,300,000 of sale proceeds from the sale of a commercial building in Murarrie, existing debt facilities and a placement to the vendors of 4,400,000 fully paid units at a price of $1.36 per unit.  On 26 September 2019, GDF successfully completed an institutional placement of 22,500,000 new units at an issue price of $1.40, a 4.1% discount to the distribution adjusted closing price of $1.46 per unit on 19 September 2019. The proceeds of the placement and existing debt facilities were utilised for the $41,000,000 (plus costs) acquisition of two industrial warehousing and distribution assets in Morningside.  A total of 42,288,002 GARDA stapled securities were issued as consideration to acquire GARDA Capital Group (see further details in note 26); and  GARDA Capital Trust repaying $9,000,000 (at $1.35 per security) of syndicate loan through conversion of 6,666,670 treasury securities valued at $9,000,000. There were no non-cash financing and investing activities in the prior year. Page 62 GARDA Property Group Annual Financial Report 30 June 2020 Reconciliation of liabilities arising from financing activities Liabilities arising from financing activities are liabilities for which cash flows are, or will be, classified as ‘cash flows from financing activities’ in the statement of cash flows. Changes in the carrying amount of such liabilities, which comprise bank borrowings, are summarised below. Year ended 30 June Balance at the beginning of the year Cashflows Non-cash changes capitalisation of interest and amortisation Balance at the end of the year GARDA Property Group GARDA Holdings Limited 2020 $ 2019 $ 2020 $ 2019 $ 128,289 105,449 57,961 403 22,812 28 186,653 128,289 - - - - - - - - NOTE 26 BUSINESS COMBINATION Internalisation Transaction On 29 November 2019, GARDA was constituted in its current form when two ASX listed entities, GARDA Diversified Property Fund (previously defined as GDF or the Fund) (ASX: GDF) and GARDA Capital Group (ASX: GCM), were combined pursuant to the internalisation transaction. Prior to the internalisation: 1. GDF was an externally managed real estate investment trust; and 2. GARDA Capital Group was a stapled entity comprising:  GARDA Capital Limited (previously defined as Fund RE), the responsible entity for GDF; and  GARDA Capital Trust, a unit trust whose primary asset was an 11.8% equity interest in GDF. The internalisation transaction involved two concurrent events: 1. the establishment of GARDA through the stapling of GDF units to shares in the newly created GHL on a one for one basis; and 2. the acquisition by GARDA of 100% of GCM. GARDA is now an ASX-listed, internally managed, stapled, real estate group that trades under the ASX ticker “GDF”. GARDA continues to undertake the operations that were performed by its predecessor entities prior to the internalisation. GARDA Property Group Consolidation Accounting For consolidation accounting purposes, 29 November 2019 is the deemed acquisition date and GDF is the deemed acquiror. Purchase Consideration A total of 42,288,002 GARDA stapled securities were issued as consideration to acquire GARDA Capital Group:    GDF issued 42,288,002 units to acquire GARDA Capital Trust; GHL issued 42,288,002 units to acquire GARDA Capital Limited; and then All outstanding GDF units and GHL shares were stapled on a one-for-one basis. The value of the purchase consideration was $58,991,763 based on a GDF unit price of $1.395 and an exchange ratio of 1.6x. Page 63 GARDA Property Group Annual Financial Report 30 June 2020 Goodwill The fair values of the identifiable net assets acquired under the internalisation, and the resulting goodwill, are set out below: Purchase Price Assets Cash and cash equivalent Trade and other receivables Investment property Plant and equipment Financial assets at fair value through profit or loss Employee security plan loan receivables Liabilities Trade and other payables Distribution and dividend payable Current tax liabilities Tenant security deposits Borrowings Provisions Deferred tax liabilities Total identifiable net assets at fair value acquired Goodwill $000 58,992 4,375 3,137 1,250 47 30,661 291 39,761 (764) (889) (546) (13) (11,970) (31) (142) (14,355) 25,406 33,586 Goodwill of $33,586,000 represents the incremental value created in relation to GARDA’s investment properties by replacing external management fees with an internalised cost structure. In GARDA’s interim financial report for the period ended 31 December 2019, fair values (excluding cash) and goodwill were reported based on provisional asset and liability values. Those provisional values have now been confirmed with no movement in the value of goodwill since 31 December 2019. Revenue and profit contributions From the date of internalisation to 30 June 2020, the acquired businesses contributed external revenues of $522,227. The internalisation resulted in the retention for security holders of various fees (both profit and capital related), and also retention of trust distributions (which were not expensed pre internalisation for accounting purposes) paid to the former manager.  These retained amounts, however, were offset by employment and other costs (which are expensed post internalisation), and as such disclosure of the net profit impact of the acquisition is not considered relevant nor practicable for security holders.  If the internalisation had taken place on 1 July 2019, the acquired businesses would have contributed additional external revenues of $357,929. The Internalisation costs Internalisation costs of $1,269,000 (2019: $700,000) are included in the Statement of Profit and Loss and Other Comprehensive Income and other Internalisation costs of $58,000 are included in the Statement of Financial Position as a deduction against equity. Page 64 GARDA Property Group Annual Financial Report 30 June 2020 GARDA Holdings Limited Bargain Purchase A total of 42,288,002 GHL shares were issued as consideration to acquire GARDA Capital Limited. As a newly created company, the value of GHL’s shares was nil resulting in a gain on bargain purchase: Purchase Price Assets Cash and cash equivalent Trade and other receivables Loan receivable from GARDA Capital Trust Investment property Plant and equipment Liabilities Trade and other payables Distribution and dividend payable Current tax liabilities Tenant security deposits Borrowings Provisions Deferred tax liabilities Total identifiable net assets at fair value acquired Gain on Bargain Purchase $000 - 4,318 2,809 1,805 1,250 47 10,229 (643) (697) (546) (13) (1,970) (31) (142) (4,042) 6,187 (6,187) In GARDA’s interim financial report for the period ended 31 December 2019, fair values (excluding cash) and gain on bargain purchase were reported based on provisional asset and liability values. Those provisional values have now been confirmed with no movement in the value of gain on bargain purchase since 31 December 2019. The gain on bargain purchase amount has been recognised as income in GHL’s Statement of Profit or Loss and Other Comprehensive Income. On consolidation, GHL’s gain on bargain purchase amount offsets the goodwill arising on the acquisition of GARDA Capital Trust by GDF, resulting in GARDA’s goodwill on acquisition of $33,586,000. The GARDA Property Group Statement of Financial Position reflects GDF as the acquirer and deemed parent and therefore consolidates GHL and its subsidiaries. Page 65 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 27 PARENT ENTITY INFORMATION Parent Entity The Parent Entity of the Group is GARDA Diversified Property Fund. GARDA Diversified Property Fund ASSETS Current assets Non-current assets1 Total assets LIABILITIES Current liabilities Non-current liabilities Total liabilities Net assets EQUITY Contributed equity52 Reserve Retained earnings Total equity Profit Other comprehensive income Total comprehensive income 2020 $000 2019 $000 20,532 21,654 475,189 334,680 495,721 356,334 7,853 188,525 196,378 23,218 116,020 139,238 299,343 217,096 370,945 281,112 444 - (71,596) (64,016) 299,343 217,096 9,073 28,780 - - 9,073 28,780 The financial information for GDF has been prepared on the same basis as the consolidated financial statements. 52 Includes fair value of the securities issued as consideration for the internalisation transaction of $58,992,000. Page 66 GARDA Property Group Annual Financial Report 30 June 2020 Controlled Entities of the Parent Entity The below controlled entities were acquired as part of the internalisation on 29 November 2019. The parent entity did not have any controlled entities in the prior year. GARDA Diversified Property Fund Ownership Interest Country of Incorporation GARDA Capital Trust GARDA Holdings Limited GARDA SUBCO Pty Ltd GARDA Capital Limited GARDA Property Services Pty Ltd GARDA Real Estate Services Pty Ltd GARDA Facilities Management Pty Ltd GARDA Services Pty Ltd GARDA Funds Management Limited ATF GARDA Capital Trust GARDA Finance Pty Ltd GARDA TSV Pty Ltd ATF GARDA TSV Unit Trust GARDA TSV Unit Trust GARDA Property Finance Pty Ltd GARDA REIT Holdings Pty Ltd ATF GARDA REIT Holdings Unit Trust GARDA REIT Holdings Unit Trust GARDA Capital RE Limited GARDA Property Funds Limited 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia NOTE 28 CONTINGENT ASSETS AND LIABILITIES Contingent assets GARDA Capital Limited as responsible entity for GDF is continuing its claim under warranties and indemnities given by various parties involved in the construction of the building Botanicca 7, at 572-576 Swan St, Richmond with respect to defects in the building. The builder is defending and has joined additional third parties as defendants. The matter is proceeding through disclosure and witness statement steps, and a trial date has been set down for 3 February 2021. As at 30 June 2020, it is not practicable to estimate the financial effect of the matter therefore no amount has been disclosed. GARDA Capital Limited as responsible entity for GDF filed a writ in the Victorian Supreme Court against two entities which developed the Botanicca 7 building in July 2019 and served that writ on 15 July 2020. Under this new writ, GARDA Capital Limited claims from the developer any shortfall not obtained in the existing claim described above. The proceeding is dependent on and will be stayed until the primary matter is heard and it is therefore not practicable to estimate the financial effect of the matter, so no amount has been disclosed. Contingent liabilities The Group did not have any material liabilities as at 30 June 2020 or 30 June 2019. Page 67 GARDA Property Group Annual Financial Report 30 June 2020 NOTE 29 EVENTS SUBSEQUENT TO THE END OF THE PERIOD The impact of the COVID-19 pandemic is ongoing and while it had a minimal impact on the Group up to 30 June 2020, it is not practicable to estimate the full potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any further economic stimulus that may be provided. USG Boral has committed to a five year lease for approximately half of the building (2,925m²) currently under construction at 1-9 Kellar Street, Berrinba. The lease will commence in November 2020 following anticipated completion of construction in September 2020. YHI Corporation has committed to a 10 year lease for the full building (6,000 m²) currently under construction at 498 Progress Road, Wacol. The lease will commence upon completion of construction which is expected to be in the first half of 2021. Austrans, an existing tenant at 38 Peterkin Street, Acacia Ridge, has committed to a new seven year lease for approximately half of Stage 1 of Acacia Ridge to be built at 69 Peterkin Street. The Queensland Department of Transport and Main Road has been a tenant in Cairns Corporate Tower since 2002 and has committed to a new 10 year lease across 3,456m² representing 24% of Cairns Net Lettable Area. Otherwise, there are no matters or circumstances that have arisen since the end of the financial year that have significantly affected, or may significantly affect:    GARDA’s operations in future financial years; the results of those operations in future years; or the state of affairs of GARDA in future years. Page 68 GARDA Property Group Annual Financial Report 30 June 2020 DIRECTORS’ DECLARATION In the opinion of the Directors of GARDA Property Group: (a) the attached financial statements and notes are in accordance with the Corporations Act 2001, including: (i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001; and giving a true and fair view of GARDA Property Group’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date, and (ii) (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable, and The Directors have been given the declarations by the Chief Executive Officer and Chief Operating Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors Matthew Madsen Executive Chairman 20 August 2020 Page 69 GARDA Property Group Annual Financial Report 30 June 2020 INDEPENDENT AUDITOR'S REPORT Page 70 GARDA Property Group Annual Financial Report 30 June 2020 Page 71 GARDA Property Group Annual Financial Report 30 June 2020 Page 72 GARDA Property Group Annual Financial Report 30 June 2020 Page 73 GARDA Property Group Annual Financial Report 30 June 2020 Page 74 GARDA Property Group Annual Financial Report 30 June 2020 Page 75 GARDA Property Group Annual Financial Report 30 June 2020 CORPORATE GOVERNANCE STATEMENT Year Ended 30 June 2020 The Board and management of GARDA Property Group consider it is crucial for the long term performance and sustainability of the Group, and to protect and enhance the interests of its securityholders and other stakeholders, that it adopts an appropriate corporate governance framework pursuant to which it will conduct its operations with integrity, accountability and in a transparent and open manner. GARDA Property Group regularly reviews its governance arrangements as well as developments in market practice, expectations and regulation. The governance arrangements were reviewed and updated twice in the reporting period - in August 2019, and again in November 2019 upon internalisation. The Corporate Governance Statement has been approved by the Boards of Garda Holdings Limited and GARDA Capital Limited (as responsible entity) , and explain how the GARDA Property Group addresses the requirements of the Corporations Act 2001, the ASX Listing Rules and the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations - 3rd Edition’ (the ‘ASX Principles and Recommendations’). It is current as at 30 June 2020. The GARDA Property Group’s ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant disclosures in this statement, the 2020 Annual Report of the GARDA Property Group and other relevance governance documents and materials on the GARDA Property Group’s website (together the ‘ASX Appendix 4G’), is provided in the corporate governance section of our website at: https://gardaproperty.com.au/who-we-are/corporate-governance/  The Corporate Governance Statement together with the ASX Appendix 4G and this Annual Report, were lodged with the ASX on the same date. The Board strives to meet the highest standards of corporate governance but recognises that it is also crucial that the governance framework of the GARDA Property Group reflects the current size, operations and industry in which GDF and its related entities operate. GARDA Property Group has complied with the majority of recommendations of the ASX Principles and Recommendations. The Board believes the areas of non-conformance, which are explained in the Corporate Governance Statement and the ASX Appendix 4G, will not materially impact the ability of the Group to achieve the highest standards of corporate governance nor its ability to meet the expectations of its securityholders and other stakeholders. Page 76 GARDA Property Group Annual Financial Report 30 June 2020 SECURITYHOLDER INFORMATION The securityholder information set out below was applicable as at 18 August 2020. Distribution of Equity Securities Range 1 to 1,000 1,001 to 5,000 10,001 to 100,000 100,001 and Over 5,001 to 10,000 Total Securities No. of holders 128,684 3,348,290 50,009,498 169,064,818 5,093,071 227,644,361 229 1,173 1,599 167 679 3,847 % 0.06 1.47 21.97 74.27 2.24 100.00 The number of securityholdings held in less than marketable parcels of 500 is 0. Equity Securityholders The names of the twenty largest holders of quoted equity securities are listed below: Name HGT INVESTMENTS PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED LONGHURST MANAGEMENT SERVICES PTY LTD THE TRUST COMPANY (AUSTRALIA) LIMITED MADSEN NOMINEES PTY LTD MADSEN NOMINEES PTY LTD MR PETER ZINN AUSTRALIAN EXECUTOR TRUSTEES LIMITED GLENELG-PARK NOMINEES PTY LTD EXTRA LARGE PTY LTD MR PETER JOHN ZINN ASIA UNION INVESTMENTS PTY LIMITED CITICORP NOMINEES PTY LIMITED JJG EQUITIES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED PINE FACTORY SF PTY LTD ARDNAW PTY LTD MR RICHARD EATON-WELLS & MS FRANCES CATHERINE ECONOMIDIS PERRINS RAP PTY LTD NATIONAL NOMINEES LIMITED Number Held 35,893,918 13,499,263 11,742,833 9,233,693 7,354,958 5,960,000 4,989,674 4,002,838 3,860,415 3,052,074 3,000,000 3,000,000 2,668,526 2,594,378 2,122,099 2,100,152 2,053,525 2,015,438 1,889,592 1,867,672 Percentage of issued securities (%) 15.77 5.93 5.16 4.06 3.23 2.62 2.19 1.76 1.70 1.34 1.32 1.32 1.17 1.14 0.93 0.92 0.90 0.89 0.83 0.82 122,901,048 53.99 Page 77 GARDA Property Group Annual Financial Report 30 June 2020 Substantial Holders The names of the substantial securityholders listed in the holding register are: Name HGT INVESTMENTS PTY LTD MADSEN NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED LONGHURST MANAGEMENT SERVICES PTY LTD Number Held 35,893,918 14,068,755 13,499,263 11,742,833 75,204,769 Percentage of issued securities (%) 15.77 6.18 5.93 5.16 33.04 Voting Rights Each securityholder confers the right to vote at meeting of Securityholders, subject to any voting restrictions imposed on a Securityholder under the Corporations Act and the ASX Listing Rules. On a show of hands, each Securityholder has one vote. On a poll, each Securityholder has one vote for each dollar value of securities held. The Group will follow the ASX recommendation that all significant resolutions will be conducted by poll. Page 78 GARDA Property Group Annual Financial Report 30 June 2020 CORPORATE DIRECTORY DIRECTORS Matthew Madsen Executive Chairman and Managing Director Paul Leitch Independent Director Morgan Parker Independent Director Philip Lee Non-executive Director Andrew Thornton Non-executive Director Mark Hallett Executive Director COMPANY SECRETARY Lachlan Davidson General Counsel and Company Secretary REGISTERED OFFICE Level 21, 12 Creek Street Brisbane QLD 4000 Ph: +61 7 3002 5300 Fax: +61 7 3002 5311 Web: www.gardaproperty.com.au AUDITOR Pitcher Partners Level 38, 345 Queen St Brisbane QLD 4000 Ph: +61 7 3222 8444 SHARE REGISTRY Link Market Services Level 12, 680 George Street Sydney NSW 2000 Ph: +61 1300 554 474 F: +61 2 9287 0303 STOCK EXCHANGE LISTING GARDA Property Group is listed as a stapled security on the Australian Securities Exchange Limited (ASX: GDF) Page 79 gardaproperty.com.au 

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