GARDA Property Group
Annual Report 2022

Plain-text annual report

GARDA PROPERTY GROUP (ASX: GDF) Annual Financial Report 2022 GARDA PROPERTY GROUP Comprising GARDA Holdings Limited (ACN 636 329 774) and GARDA Diversified Property Fund (ABN 17 982 396 608, ARSN 104 391 273) CONTENTS CHAIRMAN’S REPORT ................................................................................................................................ 1 FY22 HIGHLIGHTS ....................................................................................................................................... 2 OPERATIONAL REVIEW ............................................................................................................................. 3 FINANCIAL SUMMARY ................................................................................................................................ 8 SUSTAINABILITY ........................................................................................................................................ 10 BOARD OF DIRECTORS ........................................................................................................................... 11 DIRECTORS’ REPORT .............................................................................................................................. 13 REMUNERATION REPORT (AUDITED) ................................................................................................. 17 AUDITOR’S INDEPENDENCE DECLARATION ..................................................................................... 27 FINANCIAL REPORT .................................................................................................................................. 28 NOTES TO FINANCIAL REPORT ............................................................................................................ 32 DIRECTORS’ DECLARATION .................................................................................................................. 67 INDEPENDENT AUDITOR’S REPORT ................................................................................................... 68 CORPORATE GOVERNANCE STATEMENT ........................................................................................ 72 SECURITYHOLDER INFORMATION....................................................................................................... 73 GLOSSARY .................................................................................................................................................. 75 CORPORATE DIRECTORY ...................................................................................................................... 76 GARDA Property Group Annual Financial Report 30 June 2022 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 | 2022 ANNUAL FINANCIAL REPORT CHAIRMAN’S REPORT Dear Securityholders, On behalf of the Board, I am pleased to report GARDA performed well in all aspects of its business in FY22. The strategic and operational decisions made in prior years continue to deliver exceptional outcomes for the Group. Investor returns I’m pleased to advise GARDA’s return on equity for the year was 46.3%. The GARDA security price appreciated by 19% over the 12 months, delivering a total securityholder return of 25.1%. Financial result Total distributions of 7.2 cents per security were paid in respect of FY22, representing a payout ratio of 90.2%. GARDA’s total assets grew by $176.2 million or 34.0% during the year, primarily due to increased valuations. This is reflected in a 41.4% increase in NTA per security to $2.05. At year end, gearing was 35.6%, consistent with our targeted range of 30-35%. Portfolio outcomes The first stage (6,214m2 at 69 Peterkin Street) of our Acacia Ridge development was completed with the pre-committed tenant’s lease commencing on 1 February 2022. DA approvals have been obtained for the second stage of the Acacia Ridge project (38-56 Peterkin Street) as well as at North Lakes and the Pinnacle East on Progress Road, Wacol project. An industrial development site at Richlands settled in September 2021 and, with a tenant recently secured for the entire site, the DA approval process is in train. During the year, leasing totalling 24,410m2 has been achieved at the Wacol and Richlands projects, with strong tenant enquiry for the 15,000m2 at 38-56 Peterkin Street, Acacia Ridge. Our $20.1 million acquisition of an established office property in Hawthorn East is noteworthy:  the vendor of the property became a tenant of our Botanicca 9 building in Richmond;  the building has been revalued in vacant possession at $22.0 million, a 9.5% increase over purchase price;  $3.5 million of capital improvements are well- advanced; and  a tenant for 33% of the building by net property income will commence on 1 September 2022. Sustainability Sustainable business practices have always been inherent in our activities, so I am pleased to report that our formal sustainability reporting commenced in FY22. I commend our FY22 Sustainability Report, published online concurrently with this Annual Report, to you. Acknowledgements I would like to acknowledge and thank Philip Lee, who stepped down from the Board at the FY21 annual general meeting. Philip’s contributions to GARDA, particularly through its initial public offering, capital raisings and internalisation transaction, were invaluable. I would also like to thank our investors for their continuing support and the Board and our management team for their continuing endeavours. Matthew Madsen Executive Chairman 1 August 2022 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 1 FY22 HIGHLIGHTS 1 RETURNS TO INVESTORS TSR ROE 25.1% 46.3% Distributions 7.2 cps FY22 Relative Price Performance GARDA 39% S&P ASX 200 A-REIT Index 0 0 1 f o e s a B n o m m o C 140 130 120 110 100 90 80 Jul-21 Oct-21 Jan-22 Apr-22 PORTFOLIO OUTCOMES Significant changes since 30 June 2021: Portfolio value Occupancy  31.1% increase in portfolio value  WALE maintained above five years $650.7m 90.7%   24,410m² of industrial projects leased WACR WALE 29,613m² of established portfolio leased 5.05% 5.7yrs FINANCIAL OUTCOMES NTA per security Gearing Significant changes since 30 June 2021: $2.05 Tax advantaged income 35.6% Payout ratio 81.6% 90.2%     41.4% increase in NTA per security 2.8% decrease in gearing $52 million increase in debt facilities plus a further $40 million increase after year end 3.7 year term on debt facilities 1 Please refer to Glossary for definitions. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 2 OPERATIONAL REVIEW 2 STRATEGY GARDA’s objective is to deliver enduring value to securityholders through our expertise in real estate. In pursuing this objective, GARDA acts as a long- term owner of real estate, being market cycle aware and seeking out only those risks we wish to take. GARDA’s strategic focus is on equity investment into the industrial and commercial office sectors and debt investment into residential developments. GARDA’s size provides it with the scale necessary to compete in its target markets but also the agility to adjust its investment focus in anticipation of, or in response to, changing market conditions. Considered positions taken by the Group in support of its objective include:  acquiring well-located Industrial focus: industrial properties and development sites such that industrial properties now comprise more than half of the GARDA portfolio; INVESTMENT PORTFOLIO 3 Overview  Geographic selection: focusing on markets with attractive economics e.g., strong growth prospects and low tenant incentives;    Building to own: developing and holding new assets rather than acquiring established assets at an expensive time in the real estate cycle; Capital management: utilising debt facilities and recycling non-core assets to fund growth rather than issuing dilutive equity; and Commercial lending: providing debt capital to third party developers to augment Group returns and value. Execution of GARDA’s strategy is undertaken in a risk aware manner with decisions being taken in the context of geopolitical tensions, rising inflation and increasing (which are directly rates impacting borrowing costs, discount rates and capitalisation rates). interest 30 June 2022 Number of properties Independent valuation ($m) Value accretive capital expenditure ($m) Occupancy (%) WALE (years) WACR (%) Industrial Established To Develop4 5 113.1 1.2 - - - 7 241.0 0.2 100.0 6.5 4.49 Office 5 289.5 4.5 84.4 5.1 5.54 Total 17 643.6 5.9 90.7 5.7 5.05 At 30 June 2022, GARDA’s investment property portfolio was valued at $650.7 million, with approximately 55% of the portfolio comprising industrial buildings and land. GARDA seeks to acquire properties located in precincts supported by existing or planned infrastructure and where demand for industrial or office buildings is expected to be strong. The Group’s industrial properties are primarily located in Brisbane’s south-west industrial corridor, in close proximity to the Brisbane airport and port or in high growth regions such as North Lakes, Brisbane. GARDA owns four office buildings located in fringe CBD locations in Melbourne and the premier commercial office building in Cairns. 2 Please refer to Glossary for definitions. 3 Excludes a residential block of land in Townsville held through a subsidiary of the Company and valued at $1,250,000. 4 Includes 100% of Pinnacle West (approximately one-third developed). GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 3 Valuation at 30 June 2022 45% 40% 1 property 1 property 11 properties 15% Industrial and development 4 properties Industrial Industrial for development Office Office Transactions Since the beginning of the FY22 financial year, GARDA has completed the acquisitions of an industrial development site at Richlands, Queensland and a commercial office building in Hawthorn East, Victoria for a combined value of $26.9 million. The acquisitions were consistent with GARDA’s strategy of acquiring well-located commercial assets and industrial development sites, which is reflected in a 32.7% increase in their combined values to $35.7 million at 30 June 2022. Address Sector Purchase price ($m) Latest independent valuation ($m) Settlement date Land size (m2) NLA (m2) Richlands Hawthorn East 56-72 Bandara St 8-10 Cato St Industrial development 6.8 13.7 Office 20.1 22.0 September 2021 March 2022 30,351 13,000 1,124 3,654 Offsetting these acquisitions was the sale of our Lytton property in September 2021 for $11.0 million (a 26.1% premium to valuation). Subsequently to year end, our two Richmond properties, Botanicca 7 and Botanicca 9, (currently valued at $63,500,000 and $68,500,000, respectively) were identified as non-core to GARDA’s strategy and portfolio and will be offered for sale. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 4 Developments GARDA achieved practical completion on Stage 1A of its 6,214m2 industrial development at 69 Peterkin Street, Acacia Ridge in December 2021. Austrans commenced an initial lease for a seven-year term on 1 February 2022. The status of GARDA’s other industrial development projects in Brisbane is summarised in the following table: Project Acacia Ridge Stage 1B, 69 Peterkin Street 38-56 Peterkin Street Morningside North Lakes Richlands Wacol Estimated GFA m2 Status of DA approval Estimated completion date Current independent valuation $m 4,575 - - 15,000 granted Apr 2023 5,700 granted - 97,000 granted 2024-2026 13,000 pending Jun 2023 4.2 18.0 51.0 45.0 13.7 11.0 10.5 Pinnacle East (372 Progress Road) Pinnacle West (498 Progress Road excluding Bldg C) 13,745 11,410 granted granted - Feb 2023 Total 160,430 - - 153.4 Leasing In the year to 30 June 2022,16,553m2 of NLA was contracted or recontracted in the established portfolio and 24,410m² of NLA was contracted in the development pipeline. GARDA’s lease expiry profile at 29 July 2022 was as follows: 80% 70% 60% 50% 40% 30% 20% 10% 0% 71% 9% Vacant 2% FY23 2% FY24 13% 3% FY25 FY26 FY27+ GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 5 Tenant profile GARDA has a diversified base of tenants by ownership structure and industry. The high proportion of tenants being government, listed or multinational, with none being heavily exposed to the retail and consumer discretionary sectors, meant that COVID-19 has had minimal impact on GARDA to date. Top 10 Tenants (30 June 2022) J Blackwood & Son Planet Innovation Volvo Group Komatsu Golder Associates Pinkenba Operations Fujifilm Business Innovation Queensland Government (DTMR) Fulton Hogan McLardy McShane Total Top 10 Valuations Type Industrial Office Industrial Industrial Office Industrial Office Office Office Office % of Portfolio Gross Income 9.4% 9.0% 8.8% 6.4% 6.2% 5.6% 4.9% 4.9% 3.4% 3.4% 62.0% Expiry Jan 29 Nov 30 Jul 28 Jul 23 Jan 25 Aug 33 Jun 28 Nov 28 Jun 28 Feb 28 The basis of valuation of investment properties is fair value. Fair values are based on market values, being the price that would be received to sell an asset in an orderly transaction between market participants at balance date. Fifteen of GARDA’s properties were externally valued for the FY22 Annual Report, with the balance of the portfolio being carried at directors’ valuation. The valuations of GARDA’s investment properties, including value accretive capital expenditure, as at 30 June 2022 are shown in the following table. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 6 As at 30 June Company held Townsville Fund - Industrial Acacia Ridge7 Acacia Ridge8 30 Palmer Street 38-56 Peterkin Street 69 Peterkin Street Berrinba 1-9 Kellar Street Heathwood 9 67 Noosa Street Mackay 69-79 Diesel Drive Morningside 326 & 340 Thynne Road North Lakes 109 – 135 Boundary Road Pinkenba Richlands Wacol Wacol Wacol10 Wacol10 70-82 Main Beach Road 56-72 Bandara Street 41 Bivouac Place 372 Progress Road (Pinnacle East) 498 Progress Road (Pinnacle West) 498 Progress Road (Pinnacle West) Value accretive capital expenditure Value accretive capital expenditure Fund - Office Box Hill 436 Elgar Road Cairns 9-19 Lake Street Hawthorn East 8-10 Cato Street Richmond11 Richmond11 572-576 Swan Street (Botanicca 7) 588A Swan Street (Botanicca 9) Value accretive capital expenditure Total investment properties (non-current assets) Sector5 Value6 2022 $000 2021 Movement $000 $000 R D I I I I I D I D I D I D D I O O O O O O E E E E E E E E E E E E E E D D D D E E E D 1,250 1,250 - 18,000 23,000 14,000 18,250 39,200 51,000 45,000 34,000 13,660 61,500 11,000 14,900 10,550 1,263 167 13,200 11,000 11,975 11,800 35,000 43,725 20,000 26,200 - 45,400 4,410 12,500 9,826 1,722 - 4,800 12,000 2,025 6,450 4,200 7,275 25,000 7,800 13,660 16,100 6,590 2,400 724 (459) 167 355,490 246,758 108,732 45,500 90,000 22,000 63,500 68,500 4,493 293,993 650,733 39,000 86,500 - 54,000 57,000 1,062 237,562 485,570 6,500 3,500 22,000 9,500 11,500 3,431 56,431 165,163 Fund - Current Lytton 142-150 Benjamin Place I sold Total investment properties (current assets) Total investment properties - - 10,675 10,675 (10,675) (10,675) 650,733 496,245 154,488 I = established industrial. D = industrial development. O = commercial office. R = residential land. 5 6 D = Directors’ valuation. E = external, independent valuation. 7 38 Peterkin Street was valued as a $6,200,000 established asset in FY21 but joined 56 Peterkin Street as a development asset in FY22. 8 69 Peterkin Street was valued as an $11,000,000 development asset in FY21 but, upon completion of the first stage of construction in December 2021, became an established asset in FY22. The value of the remaining land for development is $4,200,000. 9 The Heathwood property was being held for sale (current asset) at 31 December 2021. However, following the decision to dispose of our two office buildings in Richmond (refer note 11 below), the Heathwood property is no longer being held for sale and has been re-classified as a non-current asset. 10 Building C at 498 Progress Road, Wacol was completed in May 2021. The remaining undeveloped land at 498 Progress Road, independently valued at $10,550,000 is reported as industrial land for development. 11 Subsequently to year end, Botanicca 7 and Botanicca 9 are to be offered for sale. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 7 FINANCIAL SUMMARY 12 FINANCIAL PERFORMANCE Key metrics Year ended 30 June FFO ($000) Distributions ($000) Payout ratio Funds from operations 2022 16,653 15,018 90.2% 2021 Change 16,167 15,017 92.9% 486 1 (2.7%) GARDA recorded statutory net profit after tax for the year of $140,519,000 (FY21: $35,689,000). This 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 profit should be adjusted to allow securityholders to gain a better understanding of GARDA’s operating profit or FFO. Year ended 30 June Net profit after tax Adjustments for non-cash items included in net profit after tax: Valuations – (deduct increases) / add back decreases: Investment properties Derivatives Goodwill impairment Asset disposals – (deduct gains) / add back losses: Investment properties Other accounting reversals – (deduct income) / add back expenses: Security based payments Net lease contract and rental items Other Adjustments for one-off items: Add rental guarantee income13 Deduct COVID-19 government grants FFO14 COVID-19 COVID-19 did not have a material impact on GARDA’s revenue in the financial year. 2022 $000 2021 $000 140,519 35,689 (111,642) (12,832) - (50,671) (3,593) 33,586 511 669 (611) 39 - - (881) 740 (644) 60 2,000 (119) 16,653 16,167 12 Please refer to Glossary for definitions. 13 GARDA’s purchases of 56 and 69 Peterkin Street, Acacia Ridge on 5 July 2019 included provision for the receipt by GARDA of $2,000,000 in rental guarantees at any time in the subsequent two years. In accordance with Australian Accounting Standards, this amount was recorded as an asset in GARDA’s FY20 financial statements. In July 2020, GARDA released the rental guarantee into general funds. The Directors considered the rental guarantee to be part of underlying FY21 earnings warranting inclusion in reported FFO in that year. 14 Pursuant to Australian Accounting Standards, treasury securities and employee security plan securities and the distributions attaching thereto are not included in statutory accounts. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 8 FINANCIAL POSITION Key Metrics NTA per stapled security Gearing LVR Net tangible assets 2022 $2.05 35.6% 40.4% 2021 $1.45 38.4% 43.2% GARDA experienced a 41.4% increase in NTA per security in FY22 driven by:  increases in independent valuations driven by leasing outcomes, development process progress and declining cap rates;   acquisitions of an industrial development site at Richlands and a commercial office building at Hawthorn East below independent valuation; and completion of development of stage 1A at 69 Peterkin Street, Acacia Ridge. Borrowings At 30 June 2022, GARDA had $20,000,000 of borrowing capacity available, a weighted average cost of debt (fully drawn) of approximately 3.00% (FY21: 2.20%) and gearing of 35.6% (FY21: 38.4%). On 29 July 2022, GARDA announced a $40 million increase in its $280 million syndicated debt facility, taking the facility to $320 million. Derivatives GARDA has in place a $100,000,000 hedge comprising:   a $30,000,000 interest rate swap expiring 4 March 2030 at a rate of 0.98%. a $70,000,000 interest rate swap expiring 4 March 2027 at a rate of 0.82%; and Issued Capital Total GARDA issued stapled securities at 30 June 2022 Less: GARDA stapled securities held as treasury stock GARDA stapled securities issued or transferred under the GARDA Employee Security Plan GARDA stapled securities in accordance with Australian Accounting Standards Securities 227,644,361 (4,223,517) (14,840,000) 208,580,844 A total of 670,285 performance rights have also been granted under GARDA’s Equity Incentive Plan, none of which had vested as at 30 June 2022. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 9 SUSTAINABILITY OVERVIEW GARDA will be releasing its inaugural Sustainability Report this year, contemporaneously with the release of the FY22 Annual Report. REPORTING Our FY22 Sustainability Report has been prepared with reference to the GRI Standards, adopting an environmental, social and governance framework. Issues pertaining to sustainability are not novel for GARDA; our objective of delivering enduring value to our partners is manifestly about operating as a However, our FY22 sustainable business. Sustainability Report is the first time we have formally captured our commitment to sustainability. A discovery process was undertaken to identify GARDA’s most significant impacts on the economy, environment and people and these impacts were prioritised and distilled into five material topics for analysis and reporting. FY22 HIGHLIGHTS 4.9 NABERS Portfolio energy rating 4.7 NABERS Portfolio water rating 0 Safety Staff health and safety incidents 0% Engagement Unplanned staff departures 100% Alignment Staff equity ownership CASE STUDIES Material topic: efficient operations Material topic: sustainable development 99.7% recycled 13,849 tonnes Waste generated 13,841 tonnes Waste recycled Development of GARDA’s industrial property at 69 Peterkin Street, Acacia Ridge was completed during FY22. Site preparation included the demolition of an existing building, generating almost 14,000 tonnes of waste (excluding 1,300 tonnes of asbestos contaminated materials). Consistent with its sustainability principles, GARDA was able to recycle 99.7% of the demolition waste generated. Material Waste Recycled Use Concrete 12,405t 100% Aggregate, road base Asphalt 1,183t 100% Aggregate, road base Construction demolition 25t 70% Mulch, roads, line bases, aggregate, Scrap steel 236t 100% Construction Since July 2017, GARDA has undertaken an extensive capital improvement program on its office building in Cairns, including replacement of the chiller plant, building management system, main electrical switchboard and lift motors and controls. Material energy efficiency gains were achieved for the benefit of GARDA and its tenants: Annual data Units 2017 2022 Delta Consumption Emissions Emissions intensity NABERS Energy Occupancy 000 MJ t CO2-e t CO2-e/m2  % 6,365 1,415 117.1 4.0 81 5,152 1,139 92.4 5.0 93 (19)% (20)% (21)% 1.0 12% GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 10 BOARD OF DIRECTORS Matthew Madsen Executive Chairman Mark Hallett Executive Director Philip Lee Non-Executive Director Appointed September 2011 Appointed January 2011 Executive Director from February 2020 Retired November 2021 Appointed May 2015 Member of the Audit and Risk Committee Member of the Nomination and Remuneration Committee Professional experience Professional experience Professional experience 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) 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. Mark has more than 30 years’ industry and legal experience. After qualifying as a solicitor, he had 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 and corporate restructuring. Philip has over 34 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. Qualifications Diploma in Financial Services, Diploma in Financial Markets, Affiliate member of the Securities Institute of Australia. Qualifications Bachelor of Laws Qualifications Bachelor of Commerce, Member of the AICD, Senior Fellow of Finsia, Master Practitioner Member of the Stockbrokers and Financial Advisers Association. Ordinary securities: 6,940,000 10,960,000 ESP securities: Ordinary securities: ESP securities: 1,609,469 1,000,000 Ordinary securities: 216,828 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 11 Paul Leitch Independent Director Morgan Parker Independent Director Andrew Thornton Non-Executive Director Appointed March 2020 Member of the Audit, Risk and Sustainability Committee Chair of the Nomination and Remuneration Committee Appointed December 2018 Chair of the Audit, Risk and Sustainability Committee Member of the Nomination and Remuneration Committee Appointed March 2020 Member of the Audit, Risk and Sustainability Committee Member of the Nomination and Remuneration Committee Professional experience Professional experience Professional experience 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 is a director of Charles Porter and Sons and Relewell Australia and is Chair of Pathways to Resilience, a Queensland charitable organisation. Morgan has more than 25 years’ experience as a real estate investor, developer and banker. Morgan is currently Chair of SunCentral Maroochydore and a director of Newcastle Airport, Qiddiya Coast Company and Saudi Entertainment Ventures. He is also a member of the advisory board for UbiPark Pty Ltd. 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. Andrew is a director of Great Western Corporation, a private group with interests in commercial and industrial property, general manufacturing, agricultural equipment and investments. He joined Great Western Corporation in 1995 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 a director of HGT Investments Pty Ltd, GARDA’s largest securityholder. Qualifications Qualifications Qualifications Bachelor of Arts (Music), post graduate qualifications in Education, Member of the AICD, Member of Australian Human Resources Institute Bachelor of Laws, Graduate of the AICD Bachelor of Business, Member of the AICD Ordinary securities: 47,411 Ordinary securities: nil Ordinary securities: 1,126,065 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 12 DIRECTORS’ REPORT 15 Introduction 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 2022 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 the Fund. 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 Mark Hallett Executive Director Philip Lee Non-executive Director (retired 25 November 2021) Paul Leitch Independent Director Morgan Parker Independent Director Andrew Thornton Non-executive Director He holds a Law degree, a BSc in Genetics and Biochemistry and an MBA. He is a Justice of the Peace (Qualified) and a Graduate of the AICD Directors Course. 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. Group strategy GARDA’s objective is to deliver enduring value to securityholders through its expertise in real estate. In pursuing this objective, GARDA acts as a long- term owner of real estate, being market cycle aware and seeking out only those risks it wishes to take. GARDA’s strategic focus is on equity investment into the industrial and commercial office sectors and debt investment into residential developments. Review of operations A detailed review of operations, including details of GARDA’s properties, is provided in the Operational Review commencing on page 3. Financial result GARDA recorded statutory net profit after tax for FY22 of $140,519,000 (FY21: $35,689,000). This 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. Company Secretary GARDA’s Company Secretary and General Counsel throughout FY22 was Lachlan Davidson. He has been Company Secretary since July 2016. After adjusting for these items, GARDA’s funds from operations (FFO) for FY22 were $16,653,000 (FY21: $16,167,000) and a reconciliation to statutory net profit after tax is provided in the Financial Summary commencing on page 8. Lachlan has over 20 years’ experience in corporate law, fund raising and managed investments. 15 Please refer to Glossary for definitions. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 13 Dividends and Distributions The table below provides details of distributions16 paid by GARDA in respect of the financial year: Dividend per security Distribution per security Total per security Total $000 Franked amount Record date Payment date 2022 Interim Interim Interim Final 2021 Interim Interim Interim Final - - - - - - - - - - 1.80c 1.80c 1.80c 1.80c 7.20c 1.80c 1.80c 1.80c 1.80c 7.20c 1.80c 1.80c 1.80c 1.80c 7.20c 1.80c 1.80c 1.80c 1.80c 7.20c 3,755 3,755 3,754 3,754 15,018 3,755 3,754 3,754 3,754 15,017 30 Sep 21 15 Oct 21 31 Dec 21 19 Jan 22 31 Mar 22 14 Apr 22 30 Jun 22 15 Jul 22 30 Sep 20 16 Oct 20 31 Dec 20 20 Jan 21 31 Mar 21 20 Apr 21 28 Jun 21 15 Jul 21 - - - - - - - - - - Outlook GARDA will continue to execute its strategy in FY23 with the key objectives including:  increasing occupancy levels through the leasing of remaining space in Botanicca 9 (until sale), and Hawthorn East;  completing industrial development work at 38- 56 Peterkin Street, Acacia Ridge, Buildings A and B at Pinnacle West and Richlands;  commencing initial bulk earth and civil works at North Lakes; and  managing ongoing capital requirements and gearing levels. Execution of our strategy will be undertaken in a risk aware manner in the context of geopolitical tensions, rising inflation and increasing interest rates (which are directly impacting borrowing costs, discount rates and capitalisation rates). Subsequent events As disclosed in the Operational Review, our two Richmond properties, Botanicca 7 and Botanicca 9are to be offered for sale. On 29 July 2022, GARDA announced a $40 million increase in its $280 million syndicated debt facility, taking the facility to $320 million. 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.  Significant changes in state of affairs Other than as set out in this Annual Report, there were no significant changes in the operating activities of the Group (including controlled entities) during the year. Corporate governance GARDA’s Corporate Governance Statement may be found on page 72 of this Annual Report. 16 Total distributions exclude distributions paid in respect of treasury securities and securities granted under the GARDA employee security plan. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 14 Meetings of Directors Attendance at meetings of Directors during the year was as follows: Board of Directors Nomination and Remuneration Committee Audit, Risk and Sustainability Committee Meetings attended Meetings eligible to attend Meetings attended 10 10 5 10 10 10 10 10 5 10 10 10 4 4 2 6 6 6 Meetings eligible to attend invited invited 2 6 6 6 Meetings attended 2 2 1 2 2 2 Meetings eligible to attend invited invited 1 2 2 2 Matthew Madsen17 Mark Hallett17 Philip Lee18 Paul Leitch Morgan Parker Andrew Thornton Directors’ remuneration Directors’ remuneration is set out in the Remuneration Report commencing on page 17. Remuneration of officers Remunerated officers of the Group other than the directors are the Chief Operating Officer and Company Secretary. Their remuneration arrangement, including equity grants, are described in the Remuneration Report on pages 17-26. Additional details about the GARDA Employee Security Plan and GARDA Equity Incentive Plan are disclosed in note 19. Unissued securities under options or performance rights Details of performance rights issued to employees during the year, including performance rights outstanding at 30 June 2022 and up to the date of this report, are disclosed in note 19. Securities issued on the exercise of options or performance rights There were no securities issued during the year and up to the date of the report as a result of the exercise of options or rights over unissued securities in GARDA. Audit, Risk and Sustainability Committee The Audit, Risk and Sustainability Committee comprising independent and non-executive directors meets regularly with the management team and auditor to consider the nature and scope of the assurance activities, the effectiveness of the risk and control systems, and monitor GARDA’s sustainability initiatives. Auditor Pitcher Partners has been appointed as auditor of the Group. Securityholder details A summary of GARDA’s substantial securityholders and 20 largest securityholders is provided on page 73. 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. 17 Matthew Madsen and Mark Hallett were not members of the Nomination and Remuneration Committee or the Audit, Risk and Sustainability Committee and attended meetings by invitation. 18 Philip Lee resigned from the Board on 25 November 2021. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 15 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 2022. Non-audit services 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, Risk and Sustainability 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 on page 27 following the Remuneration Report. 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. 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. Environmental regulation 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. 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 thousand dollars, or in certain cases, to the nearest dollar. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 16 REMUNERATION REPORT (AUDITED) 19 CHAIR OF THE NOMINATION AND REMUNERATION COMMITTEE FY22 performance and outcomes GARDA has enjoyed a particularly successful year. Acquisitions and developments have been successfully prosecuted and pleasing leasing outcomes have been achieved. These activities are reflected in a 41.4% increase in NTA per security to $2.05 during the year and a highly competitive return on equity of 46.3%. The executive team also made substantial progress on culture, risk management and sustainability, which the Board believes has underpinned our performance in FY22 and positioned GARDA for the future. With all performance and services hurdles likely to be achieved, one-third of the December 2021 tranche of performance rights is expected to vest on 31 August 2022. Conclusion This Remuneration Report has been approved by the Board and is intended to be a useful and informative document, while also complying with our statutory obligations. I commend this Remuneration Report to you. Yours sincerely, Paul Leitch Independent Director Chair of Nomination and Remuneration Committee 1 August 2022 Dear Securityholder, As Chair of the Nomination and Remuneration Committee, I am pleased to present GARDA’s Remuneration Report for the year ended 30 June 2022. Approach to remuneration Our people are critical to the pursuit, and achievement, of our corporate objective of delivering enduring value to our securityholders. The Committee has been charged by the Board with ensuring GARDA continues to attract and retain motivated individuals who have the requisite talent, expertise, experience and relationships to take the Group forward. Our remuneration practices are designed to be market competitive and to closely align the interests of our people with those of our securityholders. Changes to remuneration practices At the Annual General Meeting in November 2021, securityholders approved a new Equity Incentive Plan pursuant to which performance rights and exempt securities were awarded during FY22. Details are provided later in this report. The new Plan brought GARDA in line with the remuneration practices adopted by many of our ASX peers and, based on feedback from employees and continuing low staff turnover rates, appears to have been well-received. 19 Please refer to Glossary for definitions. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 17 1. BASIS OF PREPARATION This Remuneration Report is in respect of the financial year ended 30 June 2022. It provides information about remuneration arrangements for key management personnel (KMP), including Non-executive Directors, Executive Directors and other senior executives. The Remuneration Report has been prepared in accordance with section 300A of the Corporations Act 2001 (Cth) (Act), has been audited as required by section 308(3C) of the Act, and forms part of the Directors’ Report. 2. KEY MANAGEMENT PERSONNEL The following persons had authority and responsibility for planning, directing and controlling the activities of GARDA during the financial year: KMP Role Term Independent Directors and Non-executive Directors Non-executive Director Philip Lee Independent Director Paul Leitch Independent Director Morgan Parker Non-executive Director Andrew Thornton Part year to 25 November 2021 Full term Full term Full term Executive Directors Matthew Madsen Mark Hallett Other Senior Executives David Addis Lachlan Davidson Executive Chairman Executive Director Full term Full term Chief Operating Officer General Counsel & Company Secretary Full term Full term 3. REMUNERATION GOVERNANCE The Board has an established Nomination and Remuneration Committee (Committee) which operates under the delegated authority of the Board. The role of the Committee is captured in its Charter which is published on GARDA’s website. evaluating the performance of the Board, including committees and individual Non-executive Directors; The roles and responsibilities of the Committee pertaining to remuneration include:   making recommendations to the Board regarding the remuneration of Non-executive Directors;   assessing the performance of Executive Directors and reviewing their remuneration arrangements; reviewing the appropriateness and application of short-term and long-term incentive schemes and policies for executives and staff;   seeking to align remuneration to the values, risk appetite and performance of GARDA and the individual performance of executives; and ensuring appropriate human resources management programs, including performance assessment programs, are in place. The Committee operates independently of GARDA management and may engage remuneration advisers directly. Management may make recommendations to the Committee in relation to the development and implementation of reward strategy and structure. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 18 During FY22, the members of the Committee were: Director Paul Leitch Philip Lee Role Term Independent Director, Chair of Committee Full term Non-executive Director Part year to 25 November 2021 Morgan Parker Independent Director Andrew Thornton Non-executive Director Full term Full term 4. REMUNERATION PHILOSOPHY The Board recognises the critical role people play in the:    achievement of our corporate objectives; and the delivery of enduring value to our securityholders. execution of our strategy; Our people are also a key differentiator and source of competitive advantage relative to our peers. Accordingly, a strategic priority is to attract, motivate and retain motivated individuals who have the requisite talent, expertise, experience and relationships. In practice this means that our remuneration must not only be market competitive but must also closely align the interests of our people with those of our securityholders. 5. APPROACH TO NON-EXECUTIVE DIRECTOR REMUNERATION Non-executive Directors are paid a fixed amount of remuneration comprising base salary or fees and statutory superannuation and are not eligible to receive cash incentives, security-based compensation or other retirement benefits. the workload, skills and experience required for the role; Factors that are considered when setting fees for Non-executive Directors include:     the attributes, profile and reasonable expectations of the individuals; and fees paid to Non-executive Directors of comparable organisations; the quantum or pool formally approved by securityholders for remuneration of Non-executive Directors. The approved pool is currently $600,000 per annum of which $305,620 was utilised in FY22. 6. APPROACH TO EXECUTIVE REMUNERATION 6.1 Summary Within the context of GARDA’s financial performance and position, the Board and Committee seek to find a balance between:    amounts paid in cash and equity interests. short-term and long-term incentives; and fixed and at-risk remuneration; GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 19 The table below summarises the current executive remuneration structure. Component Fixed remuneration Primary purpose  Attract and retain talent Benchmarks and hurdles  Comparable groups  Individual employee attributes Short term incentive (STI) Long term incentive (LTI)  Align executive outcomes with annual goals for Group  Reward individual achievement  FY22 Group goals  Funds from operations  Net tangible assets  Board discretion  Align executive  Return on equity outcomes with longer term securityholder returns Delivery  Base salary  Superannuation  Employment benefits  Salary sacrifice benefits  Cash  Performance rights  Loan backed employee security plan securities (pre 2022) 6.2 Fixed remuneration Fixed remuneration for employees is reviewed annually by the Executive Chairman focusing on Group outcomes, individual performance and relevant comparative information in the market. The same process is used by the Committee when reviewing the fixed remuneration of the Executive Chairman. Employees are provided with the opportunity to receive their base salary in a variety of forms including cash and salary sacrifice items such as additional superannuation contributions. 6.3 Short term incentive The objective of the STI program is to link individual performance and the achievement of the Group’s annual goals with employee remuneration. The STI opportunity and targets have been specified for some executives, while noting STI is discretionary and determined by the Executive Chairman. Similarly, subject to behavioural, performance and financial hurdles, the Executive Chairman is eligible for an annual STI determined by the Committee. All STI are paid in cash and none is based on profit measures only. 6.4 Long term incentive GARDA currently has two long term incentive plans in place: 1. Employee Security Plan pursuant to which employees were granted LTIs in the form of stapled securities, backed by limited recourse loans; and 2. Equity Incentive Plan pursuant to which senior executives may receive offers of performance rights and all employees may receive offers of exempt securities. Securityholder approval of the Equity Incentive Plan was achieved at the FY21 Annual General Meeting. The primary objective of GARDA’s LTI plans is to strengthen alignment between GARDA executives and securityholders by incentivising executives to act like owners. Performance rights issued to executives under the new Equity Incentive Plan will only vest, and be convertible into stapled securities, if GARDA exceeds minimum return on equity hurdles. Performance rights will typically have a three-year measurement period. However, following securityholder approval of the Equity Incentive Plan in November 2021, the Committee determined that transition arrangements should apply to the first tranche of performance rights (refer section 8.3). GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 20 7. GROUP PERFORMANCE The key FY22 financial metrics considered by the Committee in determining remuneration outcomes included: NTA per security FFO Distributions per security20 Return on equity Payout ratio Gearing Security price $ $000 cents % % % $ 2022 2.05 2021 1.45 2020 1.18 2019 1.37 2018 1.28 16,653 16,167 15,680 13,192 11,210 7.20 46.3% 90.2% 35.6% 1.54 7.20 29% 92.9% 38.4% 1.29 8.55 23% 9.00 30% 9.00 40% 104.8% 104.7% 100.7% 36.4% 1.00 32.2% 1.40 35.3% 1.17 The Committee also took into consideration the following non-financial events and outcomes:          the continuing resilience of portfolio and income streams through the COVID-19 pandemic; settlement of the acquisitions of the strategically attractive Hawthorn East office building and Richlands industrial development site; completion of development and tenanting of 69 Peterkin Street, Acacia Ridge; commencement of development activities at 38-56 Peterkin Street, Acacia Ridge, Building B at Pinnacle West and North Lakes; successful leasing outcomes at Botanicca 9, Cairns, Hawthorn East, Pinnacle West and Richlands; continuing prudent management of capital; extending the term on our debt facilities to March 2026; securing competitive NABERS ratings on our operationally controlled office buildings; and initiating formal reporting of our sustainability commitments and practices. 20 Actual distribution per security assuming holding of security for the entire financial year. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 21 8. REMUNERATION OUTCOMES 8.1 Total KMP remuneration The table below summarises the total remuneration provided to KMP in FY21 and FY22, calculated in accordance with statutory obligations and accounting standards: Short-term benefits Long-term benefits Security based payments Salary or fees STI cash award 21 Annual leave Non- monetary benefits Super- annuation Long Service leave Equity Incentive Plan 22 Employee Security Plan 23 Performance related Total Non-executive Directors P Lee 24 FY22 FY21 35,827 70,566 P Leitch FY22 FY21 M Parker FY22 FY21 A Thornton FY22 FY21 82,192 72,778 82,192 72,778 83,298 70,566 - - - - - - - - - - - - - - - - - - - - - - - - 3,583 6,704 8,219 6,914 8,219 6,914 2,090 6,704 - - - - - - - - Executive Directors M Madsen FY22 FY21 695,000 1,042,500 - 695,000 17,360 10,856 2,764 1,532 23,568 21,694 2,186 628 150,000 112,500 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 39,410 77,270 90,411 79,692 90,411 79,692 85,388 77,270 243,623 2,027,001 514,720 1,244,430 18,877 19,516 168,877 132,016 342,485 331,684 52,500 20,000 262,692 246,462 30,000 40,000 1,046 3,035 3,807 4,857 2,900 1,545 23,568 21,694 2,823 981 56,935 - 12,161 82,896 494,418 461,835 - - 23,568 21,694 14,979 9,165 29,928 - 2,318 18,746 367,292 340,924 1,733,686 1,125,000 60,000 1,672,334 22,213 18,748 5,664 3,077 92,815 92,318 19,988 10,774 86,863 - 276,979 3,363,208 635,878 2,493,129 8.2 STI outcomes The Committee determined that the Group had achieved its corporate goals for FY22 and that the Executive Chairman had satisfied his behavioural, performance and financial hurdles. The Committee also determined that because the Executive Chairman had not received a cash incentive since GARDA’s initial public offering in 2015, and because he is already a substantial securityholder, it would be appropriate to grant all of his incentives for FY22 as a cash STI. An STI award equal to 150% of salary was granted and paid in FY22. 21 STIs are presented on a cash basis showing STIs actually paid during the financial year. The STI paid to the Executive Chairman was in respect of FY22 while the STIs paid to other executives were in respect of FY21. 22 Approved by securityholders on 25 November 2021. Includes fair value of performance rights and exempt securities. 23 Comprises fair value of GARDA securities granted with attaching non-recourse loans. 24 Resigned from Board on 25 November 2021. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 22 - - - - - - - - 63.4% 41.4% 11.2% 14.8% 24.6% 22.3% 16.9% 5.5% 44.3% 27.9% M Hallett FY22 FY21 Executives D Addis FY22 FY21 L Davidson FY22 FY21 Total FY22 FY21 8.3 LTI outcomes Security based payments are amortised expenses in respect of:   stapled securities issued before FY22 under the Employee Securities Plan; and performance rights granted during FY22 in respect of FY21 outcomes under the Equity Incentive Plan. Details of the first tranche (December 2021) of performance rights granted are summarised below. Tranche: December 2021 KMP participants: David Addis, Chief Operating Officer Lachlan Davidson, General Counsel and Company Secretary Grant date: Instrument: 10-15 December 2021 Performance rights. The allocation of the LTI grants is on a face value basis using the volume weighted average price of GARDA securities over the 10 days immediately following the release of GARDA’s FY21 Annual Report. Each performance right is a right to acquire one stapled security in the Group, subject to the achievement of performance and service hurdles. Measurement period: 3 years ending 30 June 2024 with 100% vesting following period end. Transition arrangements: Service hurdle: Performance hurdle: Clawback: One-third of the December 2021 tranche will vest following the end of each of FY22, FY23 and FY24. If the performance hurdles at the end of FY22 and/or FY23 are not achieved, the relevant performance rights will carry forward to the next testing period. Vesting of the performance rights is subject to the employee: a) remaining employed during the Measurement Period; b) continuing to be employed on the relevant Test Date; and c) not giving or receiving notice of termination before the Test Date, or otherwise being a good leaver. Vesting of performance rights is subject to a return on equity (ROE) hurdle. ROE means the change in NTA plus distributions over the measurement period, divided by NTA at the commencement of the measurement period. Below lower ROE hurdle Equal to lower ROE hurdle Between lower and upper hurdles At or above upper hurdle Nil 50% straight line pro rata 100% In prescribed circumstances, the Board has a discretion to ‘claw back’ securities (or the net proceeds from sale) allocated upon vesting or to cause unvested performance rights to lapse, to ensure no unfair benefit is obtained by a participant. Dividends and voting rights: Performance rights do not carry a right to vote or to distributions or, in general, a right to participate in other corporate actions such as entitlement issues. Change of control provisions: If a change of control event occurs, the Board has a discretion to determine the manner in which unvested rights and unexercised vested rights will be dealt with. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 23 9. EQUITY INTERESTS 9.1 Ordinary securities The equity interests of each KMP in the Group, and the movement in their equity interests during the year, were as follows: Acquired Disposed LTI Grants 25 Total Ordinary Securities ESP Securities 26 As at 30 June 2022 As at 1 July 2021 216,828 24,411 - 1,126,065 - 23,000 - - - - - - 19,114,958 2,902,604 - 210,000 (1,214,958) (503,135) - - - - - - 216,828 47,411 - 1,126,065 216,828 47,411 - 1,126,065 - - - - 17,900,000 2,609,469 6,940,000 1,609,469 10,960,000 1,000,000 800,000 773,330 - - - - 636 636 800,636 773,966 636 213,966 800,000 560,000 24,958,196 233,000 (1,718,093) 1,272 23,474,375 10,154,375 13,320,000 Non-executive Directors P Lee 27 P Leitch M Parker A Thornton Executive Directors M Madsen M Hallett Executives D Addis L Davidson Total number of securities 9.2 Employee Security Plan securities Details of the securities granted to KMP in years prior to FY22 under the Employee Security Plan, together with attaching non-recourse loans, are set out in the following table: KMP Matthew Madsen Mark Hallett David Addis Lachlan Davidson Total Issue date 28 13 Nov 2017 16 Apr 2020 18 Nov 2020 16 Apr 2020 3 Jun 2019 23 Aug 2019 23 Aug 2019 13 Nov 2017 13 Nov 2017 23 Aug 2019 Securities granted 960,000 5,000,000 5,000,000 1,000,000 320,000 240,000 240,000 160,000 160,000 240,000 13,320,000 Exercise Price Fair value at grant date Loan value 30 June 2022 0.63 1.00 1.16 1.00 1.08 1.22 1.22 0.63 0.63 1.22 0.70 0.06 0.10 0.06 0.24 0.11 0.10 0.11 0.13 0.11 444,847 4,782,096 5,685,931 965,679 316,570 283,742 283,742 Vesting date 13 Nov 2020 16 Apr 2023 19 Nov 2023 16 Apr 2023 3 Jun 2021 23 Aug 2021 23 Aug 2022 74,190 13 Nov 2019 74,190 282,740 29 Nov 2019 23 Aug 2021 13,193,727 A total of 14,840,000 securities have been granted under the Employee Security Plan, of which 13,320,000 are held by KMPs. As at 30 June 2022, 2,080,000 of the 13,320,000 ESP securities held by KMP had vested. A further 240,000 will vest on 23 August 2022. Following securityholder approval of the new Equity Incentive Plan at the Annual General Meeting on 25 November 2021, it is not proposed that LTIs will continue to be granted under the Employee Security Plan. 25 On 10 December 2021, all GARDA employees (other than those on the Board) were granted $1,000 of GARDA securities under an exempt security award. Based on a closing share price of $1.57 on the grant date, each employee received 636 securities. 26 Under Australian Accounting Standards, securities issued under the Employee Security Plan (ESP), which are identical to other GARDA stapled securities, are required to be accounted for as options until such time as they vest and are exercised by the recipient, after repaying the attaching loans. Refer note 20 for further details. 27 Philip Lee resigned from the Board on 25 November 2021. The ordinary securities disclosed are as at the date of resignation. 28 ESP Securities issued prior to the internalisation transaction on 29 November 2019 were issued under the former GARDA Capital Group employee security plan, with the number and exercise price of such securities being adjusted for the internalisation exchange ratio of 1.6x. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 24 9.3 Exempt securities An Exempt Securities Award was granted to all employees (other than those on the Board) in December 2021 under the Equity Incentive Plan. Each employee was granted $1,000 of securities which, based on the closing security price of $1.57 on the grant date, equated to 636 securities each. A total of 10,176 securities were granted pursuant to the exempt security award. Employees may also not sell the securities before the earlier of the third anniversary of their grant or the date their employment with GARDA ceases. 9.4 Performance rights The table below shows the LTI grants made to KMP in the form of performance rights during the financial year. Accounting standards require the valuation of the grants to be recognised over the measurement period. The minimum value of the grant to participants will be nil if the vesting conditions are not met. The fair value reported was calculated at the time of the grant and amortised in accordance with accounting standard requirements. Rights granted during the year Rights vested and exercised during the year Rights forfeited during the year Rights held at 30 June 2021 Rights held at 30 June 2022 Grant date Fair value per right at grant date Vesting date Fair value to be expensed in future years 29 - - - - - - 36,231 36,231 36,233 108,695 18,115 18,115 18,117 54,347 - - - - - - - - - - - - 36,231 10 Dec 21 36,231 10 Dec 21 36,233 10 Dec 21 $1.52 31 Aug 22 $1.46 31 Aug 23 $1.39 31 Aug 24 11,659 25,802 22,549 108,695 18,115 15 Dec 21 18,115 15 Dec 21 18,117 15 Dec 21 54,347 $1.59 31 Aug 22 $1.52 31 Aug 23 $1.46 31 Aug 24 6,207 13,584 11,836 Tranche Chief Operating Officer David Addis FY21 – 1 year FY21 – 2 years FY21 – 3 years Total General Counsel Lachlan Davidson FY21 – 1 year FY21 – 2 years FY21 – 3 years Total A total of 670,285 performance rights were granted to executives and KMPs in FY22. On 1 August 2022, the Board approved the grant of $75,000 of performance rights to the Executive Director, Mark Hallett, subject to securityholder approval at the 2022 Annual General Meeting. Details of the grant will be included in the Notice of Meeting. 10. KEY TERMS OF EMPLOYMENT 10.1 Executive Chairman The Executive Chairman, Matthew Madsen, entered into an executive services agreement effective 1 January 2020 on becoming 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; 29 The maximum value of the grants yet to vest is the fair amount at the grant date yet to be reflected in the Group’s consolidated income statement. The minimum future value is $nil as the future performance and service hurdles may not be met. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 25     base salary, exclusive of superannuation, of $695,000, to be reviewed annually by the Committee; entitlement to participate in short term incentives, expected to be in the form of cash bonus, and subject to achievement of behavioural, performance and financial hurdles determined by the Board; entitlement to participate in LTIs, at the discretion of the Board, subject to securityholder approval; and value of STIs and LTIs granted in any financial year not to exceed 150% of salary for that year. 10.2 Directors The contracts with GARDA’s Non-executive Directors, Messrs Leitch, Parker and Thornton, provide the following key terms:    term: ongoing with no fixed termination date; remuneration (to be reviewed annually): • • $85,000 per annum (including superannuation) as at 30 June 2022; plus $5,000 extra for the Chairs of each Board sub-committee; 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: $150,000 per annum plus GST, reviewed annually; and entitlement to participate in LTIs, at the discretion of the Board. 10.3 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. 11. TRANSACTIONS WITH KMP AND THEIR RELATED PARTIES Other than as disclosed in this Remuneration Report, GARDA did not participate in any transactions with KMP or related parties during the financial year. 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 1 August 2022 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 26 AUDITOR’S INDEPENDENCE DECLARATION GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 27 FINANCIAL REPORT 30 CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended 30 June Revenue and other income Revenue from ordinary activities Other income Net gain on sale of investment properties Net gain in fair value of financial instruments Net gain in fair value of investment properties Total revenue and other income Expenses Property expenses Corporate and trust administration expenses Finance costs Employee benefits expense Depreciation Goodwill impairment expense Credit loss expense Security based payments expense Net loss on sale of investment properties Total expenses Profit/ (loss) before income tax Income tax benefit Profit/ (loss) after income tax Other comprehensive income, net of tax Notes 2022 $000 GARDA 2021 $000 5 5 9 6 6 6 6 6 11 8 20 9 7 33,709 30,481 68 - 12,832 111,642 158,251 (6,926) (1,970) (4,078) (3,564) (161) - (6) (669) (511) 243 881 3,593 50,671 85,869 (6,814) (1,748) (3,753) (3,308) (175) (33,586) (369) (740) - (17,885) (50,493) 140,366 153 140,519 - 35,376 313 35,689 - 2022 $000 6,385 38 - - - Company 2021 $000 4,638 163 - - - 6,423 4,801 - - (1,143) (1,095) (5) (5,734) (161) - (6) (669) - (7,718) (1,295) 153 (1,142) - (8) (4,364) (175) - (369) (740) - (6,751) (1,950) 313 (1,637) - Total comprehensive income for the period 140,519 35,689 (1,142) (1,637) Total profit/ (loss) and total comprehensive income for the period attributable to: Securityholders of GARDA Property Group Shareholders of GARDA Holdings Limited Profit/ (loss) and total comprehensive income Earnings per stapled security: 141,661 (1,142) 140,519 37,326 (1,637) 35,689 - (1,142) (1,142) - (1,637) (1,637) Basic earnings per stapled security (cents) Diluted earnings per stapled security (cents) 15 15 67.37 62.90 17.11 16.11 (0.55) (0.55) (0.78) (0.78) The Consolidated Statements of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 30 Please refer to Glossary for definitions. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 28 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 30 June ASSETS Current assets Cash and cash equivalents Trade and other receivables Other assets – prepayments Investment properties held for sale Total current assets Non-current assets Trade and other receivables Investment properties Deposits on investment properties Property, plant and equipment Derivative financial instruments Right-of-use assets Deferred tax assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Contract liabilities Distribution payable Provisions Lease liabilities Total current liabilities Non-current liabilities Tenant security deposits Borrowings Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Security based payment reserve (Accumulated losses)/ retained earnings Total equity 2022 $000 GARDA 2021 $000 Company 2021 $000 2022 $000 Notes 8 9 8 9 13 23 7 10 14 24 12 24 19,794 7,654 1,274 - 28,722 15,534 2,629 1,094 10,675 29,932 86 - 650,733 485,570 - 13 14,889 137 417 666,275 694,997 2,773 607 3,754 42 130 7,306 713 41 2,057 270 264 488,915 518,847 3,045 472 3,754 - 122 7,393 561 246 258,898 209,030 92 - 259,551 266,857 428,140 78 130 209,484 216,877 301,970 355,009 354,993 1,837 71,294 428,140 1,184 (54,207) 301,970 6,661 1,214 168 - 8,043 - 1,250 - 13 - 137 417 1,817 9,860 7,267 1,036 165 - 8,468 - 1,250 - 41 - 270 264 1,825 10,293 6,900 6,125 - - 42 130 7,072 - - 92 - 92 7,164 2,696 - - 2,696 2,696 - - - 122 6,247 - - 78 130 208 6,455 3,838 - - 3,838 3,838 The Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 29 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY a) GARDA Contributed Other Equity Reserves Retained Earnings/ (Accumulated Losses) $000 $000 $000 Total Equity $000 354,993 1,184 (54,207) 301,970 - - - - 16 355,009 - - - 653 - 1,837 140,519 140,519 - - (15,018) (15,018) - - 653 16 71,294 428,140 354,993 444 (74,879) 280,558 30 June 2022 Balance at 1 July 2021 Comprehensive income Profit for the financial year Other comprehensive income Transactions with owners in their capacity as owners: Distributions paid or payable Securities based payment expense Sales of treasury stock Balance at 30 June 2022 30 June 2021 Balance at 1 July 2020 Comprehensive income Profit for the financial year Other comprehensive income Transactions with owners in their capacity as owners: Distributions paid or payable Securities based payment expense Balance at 30 June 2021 354,993 b) Company 30 June 2022 Balance at 1 July 2021 Comprehensive income Loss for the financial year Other comprehensive income Balance at 30 June 2022 30 June 2021 Balance at 1 July 2020 Comprehensive income Loss for the financial year Other comprehensive income Balance at 30 June 2021 - - - - - - - 740 1,184 35,689 35,689 - - (15,017) (15,017) - 740 (54,207) 301,970 Contributed Retained Equity Earnings $000 $000 Total Equity $000 - - - - - - - - 3,838 3,838 (1,142) (1,142) - 2,696 - 2,696 5,475 5,475 (1,637) (1,637) - 3,838 - 3,838 The Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 30 CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended 30 June Cash flows from operating activities Receipts from customers (incl. GST) Litigation proceeds Notes 2022 $000 37,962 105 GARDA 2021 $000 31,349 150 2022 $000 6,995 - Company 2021 $000 4,630 - Payments in the course of operations (incl. GST) (18,991) (15,417) (7,018) (5,137) Interest received Finance costs Income tax refund Net GST refund/ (paid) Net cash from / (used in) operating activities 25 Cash flows from investing activities Payments for investment properties Payments for deposits and due diligence Proceeds on sale of investment properties Commissions paid for sale of investment properties Payments for leasing fees Repayment of loans receivable from external parties Loan advances to external parties Payments for property, plant and equipment 13 16 (4,767) (4,121) - 3,620 17,942 2 (290) 11,689 (51,454) (44,326) - 11,000 (210) (686) 3,938 (10,389) - (713) 19,371 (266) (816) 11,316 (7,861) (29) Net cash (used in) / from investing activities (47,801) (23,324) Cash flows from financing activities Distributions paid Drawdowns from bank debt facilities Repayment of bank debt facilities Bank debt facility transaction costs paid Payment of lease liabilities Loan from parent entity Repayment of loan to parent entity Repayment of loan by subsidiary of parent entity (15,018) 60,728 (10,728) (725) (138) - - - (15,026) 40,764 (18,879) (56) (122) - - - 3 - - (357) (377) - - - - - 467 (573) - (106) - - - - (138) - - 15 9 (8) 2 (295) (799) - - - - - 4,813 (3,419) (29) 1,365 - - - - (122) 3,875 (1,004) - Net cash from / (used in) financing activities 34,119 6,681 (123) 2,749 Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 4,260 15,534 19,794 (4,954) 20,488 15,534 (606) 7,267 6,661 3,315 3,952 7,267 The Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 31 NOTES TO FINANCIAL REPORT NOTE 1 GENERAL INFORMATION a) 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. Pursuant to Australian Accounting Standards, the Fund is the deemed parent entity of the Group. Supplementary information about the parent entity is disclosed in note 26. b) Functional and presentation currency Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated annual financial statements are presented in Australian dollars which is the Group’s functional and presentation currency. c) Compliance with IFRS The financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. d) 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. e) 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. f) Comparative information When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. g) 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, sometimes in conjunction with third parties. The Company, through its subsidiaries, acts as the responsible entity of the Fund. h) Registered office The registered office and principal place of business of the Group is situated at Level 21, 12 Creek Street, Brisbane QLD 4000. i) Authorisation of financial report This financial report was authorised for issue on 1 August 2022 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 32 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. a) Adoption of new or amended accounting standards and Interpretations New and amended accounting standards There are no standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2021 that have a material impact on the amounts recognised in prior periods or will affect the current or future periods. New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 July 2022 and have not been early adopted in preparing these financial statements. None of these are expected to have a material effect on the financial statements of the Group and Company. b) 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. c) 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 33 d) Income tax Income tax for the Fund 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 securityholders who are presently entitled to the income under the Constitution. Income tax for the Company 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. 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 the Company 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, the Company 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 the Company for any current tax liability assumed and are compensated by the Company for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 34 e) 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 Statements of Financial Position as a receivable or, if paid in advance, as contractual liabilities. 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. 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. f) 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 35 g) Investment properties held for sale Investment properties are classified as held for sale if their carrying values are expected to be recovered principally through a sale transaction rather than continuing use, and a sale is considered highly probable. Investment properties held for sale are presented separately in the Consolidated Statements of Financial Position as current assets and measured at fair value. h) 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. i) 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 (except for goodwill which must be reviewed annually). 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 (except for goodwill that must be reviewed annually), the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. j) 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. k) Financial Assets Classification The Group classifies its financial assets in the following measurement categories:   those to be measured at amortised cost. those to be measured at fair value; and The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 36 Financial assets at fair value 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. 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. Transaction costs are expensed. The net fair value of derivative financial instruments outstanding at the reporting date is recognised in the Consolidated Statements of Financial Position as a financial asset or financial liability. Changes in the fair value of the interest rate swaps are recognised immediately in profit or loss. At 30 June 2022, a financial asset of $14,889,000 in relation to GARDA’s interest rate swaps was recognised. Financial assets at amortised cost Trade receivables and contract assets Trade receivables and contract assets 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. Commercial loans to external third parties Commercial loans receivable from external third parties are initially recognised at fair value, and subsequently at amortised cost, using the effective interest rate method less any allowance under the expected credit loss model. All loans and receivables with maturities greater than 12 months after balance date are classified as non-current assets. The Group reclassifies commercial loans receivable from external parties only when its business model for managing those assets changes. Derecognition Financial assets are de-recognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Impairment Trade receivables and contract assets 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. Recoverability of commercial loan receivable from external parties Credit losses are measured at the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). The Group analyses the current observable data as a means of estimating expected credit losses. The current observable data may include:  financial difficulties of the borrower, or probability that the borrower will default on payment or will enter bankruptcy; and  conditions specific to the underlying project or secured property to which the receivable relates which may include unfavorable loan to valuation ratios. The Group impairs commercial loans receivable from external parties when there is information indicating the borrower is in severe financial difficulty (e.g. failure by the borrower to make contractual payments on due date and subsequently failure of the borrower to engage in repayment plan), there is a breach of loan to valuation covenants and there is no realistic prospect of recovery through enforcement of sale of secured properties or other securities provided by the borrower. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 37 l) Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease where the Group are lessees. 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. m) 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. n) 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. o) Lease liabilities A lease liability is recognised at the commencement of a lease where the Group is a lessee. 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. 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. p) 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. q) 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 2022, all Group annual leave liabilities are expected to settled wholly within 12 months and therefore were recognised as current liabilities. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 38 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 2022, long service leave liabilities were recognised as current and non-current liabilities. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. r) Security based payments expense Security based payments expenses have been recognised by GARDA for the security based compensation benefits or equity grants provided to employees. 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 security 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. s) 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. t) Earnings per security Basic earnings per security is calculated by dividing the profit attributable to securityholders, by the number of ordinary securities outstanding at the end of the financial year (excluding treasury securities and GARDA Employee Security Plan securities). Diluted earnings per security adjusts the figures used in the determination of basic earnings per security 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 but excluding treasury securities. u) Treasury Securities Treasury securities are deducted against equity or eliminated on consolidation. Any distributions related to treasury securities are also eliminated on consolidation. v) 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 39 w) 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 thousand dollars, or in certain cases, to the nearest dollar. x) 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. Recoverability of deferred tax assets Judgement has been exercised in assessing the recoverability of deferred tax assets arising from operating losses made by the Company. Future taxable profits are expected to be available to the Company to utilise these operating losses. Factors taken into account in making the recoverability assessment by management included the expected future operations of the Company in the context of expected market conditions. Changes in circumstances may alter expectations and affect the carrying amount of deferred tax assets. Any resulting adjustment to the carrying value of the deferred tax asset will be recorded as a charge to income tax expense in the Consolidated Statements of Profit or Loss and Other Comprehensive Income. Investment property valuation The Group makes key assumptions in determining the fair value of its investment property portfolio as at reporting date. In the current financial year, these assumptions have been made in the context of considerable uncertainty regarding the likely ultimate impact of COVID-19, social and political events, deteriorating investment market conditions and the increasing cost of debt. The independent valuation reports received as at 30 June 2022 included caveats that the valuations were reported on the basis of “material valuation uncertainty” and, consequently, less certainty and a higher degree of caution should be attached to the valuations than would normally be the case. The assumptions thought to bear the most significant impact on the adopted fair value of each of the Group’s investment properties are disclosed in notes 9 and 17, together with the carrying amount of each investment property asset measured at fair value. Security 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 security 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, as disclosed in note 20. 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 40 NOTE 3 OPERATING SEGMENTS The Group has identified three core operating segments. These segments are regularly reviewed by the Executive Chairman, who is the Chief Operating Decision Maker, to support decisions about resource allocation and to assess performance. The three operating segments are: direct property investment, debt investment and funds management. The business activities of each of these operating segments are as follows: Core Operating Segments Business Activity Direct investment Debt investment Investment in Australian commercial and industrial property Investment in mortgages and loans into residential real estate Funds management Establishment and management of investment funds for external investors 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. a) Segment results Year ended 30 June 2022 Segment revenue: Lease revenue Recoverable outgoings Fund and real estate management Lending business income Debt advisory services Sundry income Total segment revenue Total segment expense Segment profit Year ended 30 June 2021 Segment revenue: Lease revenue Recoverable outgoings Fund and real estate management Lending business income Debt advisory services Sundry income Total segment revenue Total segment expense Segment profit Direct investment $000 Other segments $000 25,657 6,124 - - - 20 31,801 (11,826) 19,975 23,556 4,895 - - - 73 28,524 (11,180) 17,344 - - 6 534 776 - 1,316 (321) 995 - - 5 860 521 - 1,386 (718) 668 Total $000 25,657 6,124 6 534 776 20 33,117 (12,147) 20,970 23,556 4,895 5 860 521 73 29,910 (11,898) 18,012 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 41 b) Reconciliation of segment revenues to Group revenue Year ended 30 June Total revenue and other income for segments Unallocated amounts: Lease straight-lining revenue Lease costs and incentive amortisation Rent free income Sundry income Non-operating interest income Net gain on sale of investment properties Net gain in fair value of financial instruments Net gain in fair value of investment properties Total Group revenue and other income c) Reconciliation of segment profit to Group profit before tax Year ended 30 June Segment profit Unallocated amounts: Revenue: Lease straight-lining revenue Lease costs and incentive amortisation Rent free income Sundry income Non-operating interest income Net gain on sale of investment properties Net gain in fair value of financial instruments Net gain in fair value of investment properties Expenses: Finance costs Employee benefit expense Corporate and trust administration expenses Depreciation Security based payments expense Net fair value loss of investment properties Goodwill impairment expense Group profit before income tax 2022 $000 2021 $000 33,117 29,910 1,137 (890) 365 35 13 - 12,832 111,642 158,251 1,302 (795) 137 154 16 881 3,593 50,671 85,869 2022 $000 2021 $000 20,970 18,012 1,137 (890) 365 35 13 - 12,832 111,642 (5) (3,336) (1,056) (161) (669) (511) 1,302 (795) 137 154 16 881 3,593 50,671 (8) (3,083) (1,003) (175) (740) - - (33,586) 140,366 35,376 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 42 d) Segment assets and liabilities As at 30 June 2022 Segment Assets Segment Liabilities Net Assets As at 30 June 2021 Segment Assets Segment Liabilities Net Assets Segment assets and liabilities are net of all internal loan balances. e) Reconciliation of segment assets to Group assets Direct Investment $000 Other Segments $000 Total $000 660,540 (265,974) 17,492 678,032 (13) (265,987) 394,566 17,479 412,045 505,223 (215,780) 289,443 9,498 514,721 (70) (215,850) 9,428 298,871 As at 30 June Reportable segment assets Unallocated amounts: Other receivables Investment properties31 Corporate fixed assets Derivative financial instrument Right-of-use assets Deferred tax assets Total Group assets f) Reconciliation of segment liabilities to Group liabilities As at 30 June Reportable segment liabilities Unallocated amounts: Trade and other payables Provisions Lease liability Total Group liabilities 2022 $000 2021 $000 678,032 514,721 260 1,250 13 14,888 137 417 244 1,250 41 2,057 270 264 694,997 518,847 2022 $000 2021 $000 265,987 215,850 606 134 130 697 78 252 266,857 216,877 31 Represents the value of land held by a subsidiary of the Company. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 43 NOTE 4 DISTRIBUTIONS Distributions provided for and/or paid during the financial year were as follows: GARDA Company Year ended 30 June September: 1.80 cents per security (2021: 1.80 cents) December: 1.80 cents per security (2021: 1.80 cents) March: 1.80 cents per security (2021: 1.80 cents) June: 1.80 cents per security (2021: 1.80 cents) 2022 $000 3,755 3,755 3,754 3,754 2021 $000 3,755 3,754 3,754 3,754 Total distribution32 15,018 15,017 2022 $000 - - - - - 2021 $000 - - - - - 32 Net distributions exclude distributions paid in respect of treasury securities and securities granted under the GARDA employee security plan. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 44 NOTE 5 REVENUE AND OTHER INCOME Year ended 30 June Revenue recognised under AASB 16 Leases Lease revenue Lease costs and incentive amortisation Revenue recognised under AASB 9 Financial Instruments Lending business income 2022 $000 27,159 (890) 26,269 GARDA 2021 $000 24,995 (795) 24,200 534 534 860 860 Revenue recognised under AASB 15 Revenue from contracts with customers Recoverable outgoings – non-lease component 6,124 4,895 Fund and real estate management Recoveries and other fees Debt advisory services Total revenue Other income Non-operating interest income Sundry income Total other income 6 - 776 6,906 33,709 13 55 68 68 5 - 521 5,421 30,481 16 227 243 243 2022 $000 Company 2021 $000 - - - - - - 3,439 2,170 776 6,385 6,385 3 35 38 38 - - - 363 363 - 2,697 1,057 521 4,275 4,638 9 154 163 163 Disaggregation of revenue from contracts with customers GARDA Recoverable outgoings – non-lease component Fund and real estate management Debt advisory services Total Company Recoveries and other fees Fund and real estate management Debt advisory services Total Point in Time $000 2022 Over Time $000 Total $000 Point in Time $000 2021 Over Time $000 Total $000 - - 776 776 - - 776 776 6,124 6,124 6 - 6 776 6,130 6,906 2,170 3,439 - 2,170 3,439 776 5,609 6,385 - - 521 521 - - 521 521 4,895 4,895 5 - 5 521 4,900 5,421 1,057 2,697 - 3,754 1,057 2,697 521 4,275 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 45 NOTE 6 EXPENSES Year ended 30 June Property expenses Recoverable expenses Direct expenses Non-recoverable expenses Corporate and trust administration expenses Professional fees and other administration expenses Finance costs Interest on borrowings Amortisation of borrowing transaction costs Interest expense on lease liabilities Interest capitalised to properties under construction33 Employee benefits expense Superannuation expense Other employee benefits Depreciation IT equipment and fittings Buildings right-of-use assets 2022 $000 5,746 804 376 6,926 1,970 1,970 4,949 593 5 (1,469) 4,078 230 3,334 3,564 28 133 161 GARDA 2021 $000 2022 $000 Company 2021 $000 5,918 545 351 6,814 1,748 1,748 4,113 548 8 (916) 3,753 215 3,093 3,308 42 133 175 - - - - - - - - 1,143 1,143 1,095 1,095 - - 5 - 5 276 5,458 5,734 28 133 161 - - 8 - 8 255 4,109 4,364 42 133 175 33 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 2.2% - 3.4% (2021: 2.2% - 2.4%) GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 46 NOTE 7 INCOME TAX Year ended 30 June The components of income tax benefit comprise: Deferred income tax benefit Income tax benefit Deferred income tax expense included in income tax benefit: Increase in deferred tax assets (Increase)/decrease in deferred tax liabilities Total deferred tax benefit 2022 $000 153 153 177 (24) 153 GARDA 2021 $000 313 313 239 74 313 2022 $000 153 153 177 (24) 153 Company 2021 $000 313 313 239 74 313 The prima facie tax on profit before income tax is reconciled to income tax as follows: Profit/(loss) before income tax Less profit attributed to Trusts not subject to tax Loss subject to income tax benefit Prima facie tax at 25.0% (2021: 26.0%) 140,366 (139,071) (1,295) 324 35,376 (37,326) (1,950) 507 (1,295) (1,950) - - (1,295) (1,950) 324 507 Tax effect of amounts which are not deductible/(assessable): Security based payment expense Other (income)/expenses Restate deferred income tax benefit to 25% Income tax benefit Composition of deferred tax assets Provision for employee benefits Accrued expenses Capital raising and transaction costs Tax losses Lease liabilities Other Deferred tax asset Movements: Opening balance Movement in deferred tax asset - temporary differences: Credited to profit and loss Closing balance at the end of the year cont’d (167) (4) - 153 95 130 55 530 33 40 883 706 177 883 (193) 12 (13) 313 71 129 81 236 62 127 706 467 239 706 (167) (4) - 153 95 130 55 530 33 40 883 706 177 883 (193) 12 (13) 313 71 129 81 236 62 127 706 467 239 706 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 47 Year ended 30 June Composition of deferred tax liabilities Right of use asset Investment property Other Deferred tax liabilities Movements: Opening balance Movement in deferred tax liabilities - temporary differences: (Charged) / credited to profit and loss Closing balance at the end of the year Net deferred tax asset Deferred tax assets Deferred tax liabilities Net deferred tax asset Franking credits Franking credits available 2022 $000 34 313 119 466 442 24 466 883 (466) 417 GARDA 2021 $000 68 313 61 442 2022 $000 34 313 119 466 Company 2021 $000 68 313 61 442 516 442 516 (74) 442 706 (442) 264 24 466 883 (466) 417 (74) 442 706 (442) 264 4,204 4,204 4,204 4,204 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: a) b) c) d) franking credits that will arise from the payment of the amount of the provision for income tax; franking credits that will arise from the payment of the amount of the income tax refunds; 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 48 NOTE 8 TRADE AND OTHER RECEIVABLES Year ended 30 June Current Fund management fees receivable Rent and outgoings receivable Litigation proceeds receivable Other receivables GST receivable Commercial loans to external third parties Expected credit losses Non-Current Rent and outgoings receivable Analysis of expected credit loss Opening balance Expected credit losses Reversal of expected credit losses Closing balance 2022 $000 - 36 120 52 - 7,446 - 7,654 86 86 369 6 (375) - GARDA 2021 $000 - 193 225 82 1,667 831 (369) 2,629 - - - 369 - 369 2022 $000 339 - - 302 - 573 - Company 2021 $000 275 - - 299 - 831 (369) 1,214 1,036 - - 369 6 (375) - - - - 369 - 369 The loans to external parties are each secured by a first registered mortgage and a general security agreement. All other receivables are unsecured and non-interest bearing. Refer to note 16 for details on credit risk exposure. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 49 NOTE 9 INVESTMENT PROPERTIES a) Investment properties (non-current assets) Year ended 30 June GARDA Investment properties at independent valuation Investment properties at Directors’ valuation Movements during the year: Opening balance Transfer to investment properties held for sale (current assets) Sale of investment properties Acquisition of established investment properties Capital expenditure on established investment properties Acquisition and capital expenditure of properties under construction Straight-lining of rental income Net movement in leasing costs and incentives Net gain in fair value of investment properties Balance at the end of the year Company Land at 30 Palmer Street, Townsville b) Investment properties held for sale (current assets) Year ended 30 June GARDA Property at 142-150 Benjamin Place, Lytton Movements during the year: Opening balance Capital expenditure Disposal book value 2022 $000 509,310 141,423 650,733 2021 $000 329,151 156,419 485,570 485,570 417,447 - - 21,834 8,279 22,061 1,137 210 111,642 650,733 (10,675) (18,224) - 5,810 39,080 1,302 159 50,671 485,570 1,250 1,250 2022 $000 - - 10,675 548 (11,223) 2021 $000 10,675 10,675 - - - Transfer from investment properties at fair value (non-current assets) Balance at the end of the year - - 10,675 10,675 The sale of the property at 142-150 Benjamin Place, Lytton resulted in a net loss of $511,000 which is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. c) Valuations GARDA’s policy is to undertake independent valuations on a rotational basis to ensure that each property is valued at least once every 12 months by an independent external valuer. Where a property is not due for an independent valuation, it will be carried at Directors’ valuation. Directors’ valuations are based on the most recent independent valuation of a property and take into account capital accretive expenditure and comparable sales evidence since that last independent valuation. Fourteen of GARDA’s properties have been externally valued for the FY22 Annual Report, with the balance of the portfolio (including value accretive additions) being carried at Directors’ valuation. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 50 As at 30 June Company held Townsville 30 Palmer Street Fund - Industrial Acacia Ridge36 38-56 Peterkin Street Acacia Ridge37 69 Peterkin Street Berrinba 1-9 Kellar Street Heathwood 38 67 Noosa Street Mackay 69-79 Diesel Drive Morningside 326 & 340 Thynne Road North Lakes 109 – 135 Boundary Road Pinkenba Richlands Wacol Wacol Wacol39 Wacol39 70-82 Main Beach Road 56-72 Bandara Street 41 Bivouac Place 372 Progress Road (Pinnacle East) 498 Progress Road (Pinnacle West) 498 Progress Road (Pinnacle West) Value accretive capital expenditure Value accretive capital expenditure Fund - Office Box Hill 436 Elgar Road Cairns 9-19 Lake Street Hawthorn East 8-10 Cato Street Richmond40 Richmond40 572-576 Swan Street (Botanicca 7) 588A Swan Street (Botanicca 9) Value accretive capital expenditure Total investment properties (non-current assets) Sector34 Value35 2022 $000 2021 Movement $000 $000 R D I I I I I D I D I D I D D I O O O O O E E E E E E E E E E E E E E D D D D E E E 1,250 1,250 - 18,000 23,000 14,000 18,250 39,200 51,000 45,000 34,000 13,660 61,500 11,000 14,900 10,550 1,263 167 13,200 11,000 11,975 11,800 35,000 43,725 20,000 26,200 - 45,400 4,410 12,500 9,826 1,722 - 4,800 12,000 2,025 (6,450) 4,200 7,275 25,000 7,800 13,660 16,100 6,590 2,400 724 (459) 167 355,490 246,758 108,732 45,500 90,000 22,000 63,500 68,500 4,493 293,993 650,733 39,000 86,500 - 54,000 57,000 1,062 237,562 485,570 6,500 3,500 22,000 9,500 11,500 3,431 56,431 165,163 Fund - Current Lytton 142-150 Benjamin Place I sold Total investment properties (current assets) Total investment properties - - 10,675 10,675 (10,675) (10,675) 650,733 496,245 154,488 The registered titles to all assets of the Fund and GARDA Capital Trust are held by The Trust Company (Australia) Limited, as custodian. This is an ASIC regulatory requirement. I = established industrial. D = industrial development. O = commercial office. R = residential land. 34 35 D = Directors’ valuation. E = external, independent valuation. 36 38 Peterkin Street was valued as a $6,200,000 established asset in FY21 but joined 56 Peterkin Street as a development asset in FY22. 37 69 Peterkin Street was valued as an $11,000,000 development asset in FY21 but, upon completion of construction of the first stage in December 2021, became an established asset in FY22. The value of the remaining land for development is $4,200,000. 38 The Heathwood property was being held for sale (current asset) at 31 December 2021. However, following the decision to dispose of our two office buildings in Richmond (refer note 39 below), the Heathwood property is no longer being held for sale and has been re-classified as a non-current asset. 39 Building C at 498 Progress Road, Wacol was completed in May 2021. The remaining undeveloped land at 498 Progress Road, independently valued at $10,550,000 is reported as industrial land for development. 40 Subsequently to year end, Botanicca 7 and Botanicca 9 are to be offered for sale. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 51 d) Contractual commitments Contractual obligations with respect to investment properties at 30 June 2022 were as follows: Properties Acacia Ridge, 38-56 Peterkin Street Wacol, 498 Progress Road Total contractual obligations e) Leasing arrangements Nature of Obligation Development Development $000 56 9,532 9,588 Investment properties listed at c) above (excluding land in Cairns, land and 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 have been disclosed in note 16. f) Amount recognised in profit or loss for investment properties Revenue and direct expenses relating to investment properties are disclosed in notes 5 and 6. NOTE 10 TRADE AND OTHER PAYABLES Year ended 30 June Current Trade creditors Other payables Loan payable to parent entity NOTE 11 INTANGIBLE ASSETS Year ended 30 June Goodwill Accumulated impairment loss expense 2022 $000 14 2,759 - 2,773 2022 $000 - - - GARDA 2021 $000 26 3,019 - 3,045 GARDA 2021 $000 33,586 (33,586) - 2022 $000 2 1,170 5,728 6,900 2022 $000 - - - Company 2021 $000 25 1,056 5,044 6,125 Company 2021 $000 - - - Goodwill was recognised on the acquisition by GARDA of GARDA Capital Group in FY20. Goodwill has an indefinite useful life and is tested annually for impairment. Following the annual impairment assessment in FY21, goodwill was fully impaired. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 52 NOTE 12 BORROWINGS Non-current Bank loans (secured) Less: unamortised transaction costs Syndicated Debt Facility Amount and Tenor 2022 $000 GARDA 2021 $000 260,000 210,000 (1,102) (970) 258,898 209,030 Company 2021 $000 - - - 2022 $000 - - - At 30 June 2022, GARDA had $20,000,000 of borrowing capacity available: Facility Facility Limit Amount Drawn Amount Available 2022 $000 2021 $000 2022 $000 2021 $000 2022 $000 2021 $000 Total facilities 280,000 228,000 260,000 210,000 20,000 18,000 GARDA’s syndicated bank debt facility with its banks expires on 3 March 2026. 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 2022, GARDA’s gearing was 35.6% (FY21: 38.6%). On 29 July 2022, GARDA announced a $40 million increase in its $280 million syndicated debt facility, taking the facility to $320 million. 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 Fund portfolio; a first registered general security deed in respect of all assets and undertakings of the Company and its secured subsidiaries; and d) a specific security agreement over tenant security deposit accounts. Notwithstanding the terms of the facility, the registered title to all the assets of the Fund, 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. Covenants Key financial covenants and other metrics under the syndicated bank debt facility include: a) interest cover ratio is to remain above 2.50 times, decreasing to 2.00 times from 29 July 2022; b) loan to value ratio (LVR) must remain under 50%; and c) adjusted gearing ratio is to remain under 1.20 times. The Group complied with its financial covenants at all times 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 GARDA borrowers 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 53 NOTE 13 DERIVATIVE FINANCIAL INSTRUMENTS Year ended 30 June Non-Current Interest rate swap contract asset Interest rate swap contract liability Total interest rate swap asset 2022 $000 14,889 - 14,889 GARDA 2021 $000 2,057 - 2,057 2022 $000 - - - Company 2021 $000 - - - GARDA executed 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 Distribution payable Movement in provisions: Opening balance at beginning of year Distributions provided for Distributions paid Closing balance 2022 $000 GARDA 2021 $000 2022 $000 Company 2021 $000 3,754 3,754 3,754 15,018 3,763 15,017 (15,018) (15,026) 3,754 3,754 - - - - - - - - - - NOTE 15 EARNINGS PER STAPLED SECURITY Year ended 30 June 2022 Profit/ (loss) after tax attributable to securityholders ($000) 140,519 Earnings per stapled security GARDA 2021 35,689 (cents) (cents) 67.37 62.90 17.11 16.11 2022 (1,142) (0.55) (0.55) Company 2021 (1,637) (0.78) (0.78) (number) 208,580,844 208,570,668 208,580,844 208,570,668 (number) 223,415,965 221,479,161 223,415,965 221,479,161 Basic Diluted Securities Basic41 WANOS42 41 The basic number of securities is calculated as total issued securities less treasury securities and GARDA Employee Security Plan securities. See note 18 for further details. 42 The weighted average number of securities (WANOS) is determined as total issued securities less treasury securities, weighted according to the date and number of any securities issued during the financial year. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 54 NOTE 16 FINANCIAL RISK MANAGEMENT a) 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. b) 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: c) 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, is recognised as financial assets net of provisions for impairment in the Statement of Financial Position and notes to the financial statements. The Group holds security deposits of $560,750 (FY21: $246,000) and also has bank guarantees in the Group’s favour of $12,424,540 (FY21: $11,228,000) 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. Credit risk exposures Trade receivables and contract assets: 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. Commercial loan receivable from external parties All of the Group’s commercial loans receivable from external parties 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. The Group analyses the current observable data as a means of estimating expected credit losses. The current observable GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 55 data may include:  financial difficulties of the borrower, or probability that the borrower will default on payment or will enter bankruptcy; and  conditions specific to the underlying project or secured property to which the receivable relates which may include unfavourable loan to valuation ratios. The Group impairs commercial loans receivable from external parties when there is information indicting the borrower is in severe financial difficulty (e.g. failure by the borrower to make contractual payments on due date and subsequently failure of the borrower to engage in repayment plan), there is a breach of loan to valuation covenants and there is no realistic prospect of recovery through enforcement of sale of secured properties or other securities provided by the borrower. d) 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 2022. The amounts disclosed represent undiscounted cash flows. The remaining contractual maturities of the financial liabilities are set out in the following table. Less than one year Trade and other payables43 Loan payable to parent entity Distribution payable Between one and five years Bank loans (secured) Note 10 10 14 12 2022 $000 2,536 - 3,754 6,290 GARDA 2021 $000 3,045 - 3,754 6,799 260,000 260,000 210,000 210,000 Company 2021 $000 1,081 5,043 - 6,124 - - 2022 $000 955 5,728 - 6,683 - - e) Market (or Interest Rate) Risk 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. Interest rate risk sensitivity The net interest rate exposure of the Group is $180,000,000 (FY21: $128,000,000) being the Group debt facility of $280,000,000 (FY21: $228,000,000) less the notional principal amount of the interest rate swap of $100,000,000 (FY21: $100,000,000). The impact of a 0.5% increase/decrease in market interest rates at balance date would be a corresponding $900,000 (FY21: $640,000) decrease/increase in profit or loss per annum. 43 These amounts exclude GST payable balances at year end in accordance with AASB 132. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 56 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 Financial liabilities: Derivative financial instruments at fair value through profit and loss 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. Level 1 Level 2 Notes $000 $000 Level 3 $000 Total $000 30 June 2022 Assets Investment properties (non-current) Derivative financial instruments 13 Liabilities Derivative financial instruments 30 June 2021 Assets Investment properties (non-current) Investment properties held for sale (current) Derivative financial instruments 9 9 13 Liabilities Derivative financial instruments - - - - - - - - - - - 650,733 14,889 14,889 - 650,733 650,733 14,889 665,622 - - - - 2,057 2,057 - - - - - - 485,570 10,675 - 485,570 10,675 2,057 496,245 498,302 - - - - 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. a) 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 Statements 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. b) Investment properties The Directors consider the valuations of each investment property every six months and either ensure an external independent valuer is instructed or adopt a Directors’ valuation. Industrial and office assets are usually valued using the capitalisation approach (market approach) and the discounted cash flow approach (income approach). These valuations are typically compared to, and supported by, direct comparison to recent market transactions. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 57 The fair values of development properties under construction are usually based on the market values of the properties assuming they had already been completed at valuation date, provided such market values may be reliably ascertained. In relation to vacant land, or where there are no commitments for construction, fair values are assessed through direct comparison with third party sales for similar assets in a comparable location. 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 2022 2021 Discount rate 5.25%-6.75% 6.00% - 7.50% Capitalisation rate 4.00%-6.63% 5.00% - 7.25% Terminal yield 4.25%-6.88% 5.25% - 7.00% Expected vacancy rate 0% 0% Relationship between unobservable inputs and fair value The higher the discount rate, terminal yield and expected vacancy rate, the lower the fair value. Rental growth rate 2.77%-3.73% 2.60% - 3.29% The higher the rental growth, the higher the fair value. Based on Gross Face Rental growth 10 year CAGR. c) Fair value of interest rate swaps Level 2 financial assets held by the Group include interest rate swaps. The fair value of these derivatives has been determined by GARDA’s banks using pricing models based on discounted cash flow analysis incorporating assumptions supported by observable market data at balance date including market expectations of future interest rates and discount rates, adjusted for any specific features of the derivatives and counterparty or own credit risk. d) 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 58 NOTE 18 CONTRIBUTED EQUITY a) Issued securities Year ended 30 June 2022 GARDA 2021 2022 Company 2021 Securities Securities Shares Shares Issued securities as per ASX 227,644,361 227,644,361 227,644,361 227,644,361 Movements during the year Balance at beginning of year Movements 227,644,361 227,644,361 227,644,361 227,644,361 - - - - Total issued securities as per ASX 227,644,361 227,644,361 227,644,361 227,644,361 Treasury Securities (4,223,517) (4,233,693) (4,223,517) (4,233,693) Securities on issue under GARDA ESP (14,840,000) (14,840,000) (14,840,000) (14,840,000) Total issued securities for financial statements 208,580,844 208,570,668 208,580,844 208,570,668 b) Treasury securities The Fund owns 100% of GARDA Capital Trust which, in turn, owned 4,223,517 stapled securities in GARDA at 30 June 2022. 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. During the year, 10,176 treasury securities were transferred pursuant to exempt security awards under the GARDA Equity Incentive Plan, leaving the balance of 4,223,517 treasury securities at 30 June 2022. c) Employee Security Plan securities At 30 June 2022, 14,840,000 securities had been issued under the GARDA Employee Security Plan of which 3,200,000 have vested, including 1,280,000 which vested during FY22. In accordance with Australian Accounting Standards, all GARDA Employee Security Plan securities (including vested securities) are deducted from equity and excluded from total issued securities of 227,644,361 until such time as the underlying limited recourse loans are repaid. Refer to note 20 for further details. NOTE 19 RELATED PARTIES AND KEY MANAGEMENT PERSONNEL Transactions between related parties occurred on standard commercial terms and conditions, unless otherwise stated. a) 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 is set out below: Year ended 30 June Short-term benefits Post-employment benefits Long-term benefits Security based payments Total remuneration paid 2022 $ GARDA 2021 $ 2022 $ Company 2021 $ 2,886,563 1,754,159 2,886,563 1,754,159 92,815 19,988 92,318 10,774 92,815 19,988 92,318 10,774 363,842 635,878 363,842 635,878 3,363,208 2,493,129 3,363,208 2,493,129 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 59 b) Transactions with KMP and their related parties There have been no transactions with KMP and their related parties during the year. c) GARDA Employee Security Plan Securities were first issued under the loan-funded GARDA Employee Security Plan (or its predecessor plan at GARDA Capital Group) on 13 November 2017. There were no issues or transfers of GARDA Employee Security Plan securities during the reporting period and details of the current KMP participants in the GARDA Employee Security Plan are set out below: KMP Matthew Madsen Mark Hallett David Addis Lachlan Davidson Total Issue date 44 Securities granted Exercise Price Fair value at grant date Loan value 30 June 2022 Vesting date 13 Nov 2017 960,000 16 Apr 2020 5,000,000 18 Nov 2020 5,000,000 16 Apr 2020 1,000,000 3 Jun 2019 23 Aug 2019 23 Aug 2019 13 Nov 2017 13 Nov 2017 23 Aug 2019 320,000 240,000 240,000 160,000 160,000 240,000 13,320,000 0.63 1.00 1.16 1.00 1.08 1.22 1.22 0.63 0.63 1.22 0.70 0.06 0.10 0.06 0.24 0.11 0.10 0.11 0.13 0.11 444,847 13 Nov 2020 4,782,096 5,685,931 965,679 316,570 283,742 283,742 74,190 74,190 16 Apr 2023 19 Nov 2023 16 Apr 2023 3 Jun 2021 23 Aug 2021 23 Aug 2022 13 Nov 2019 29 Nov 2019 282,740 23 Aug 2021 13,193,727 The GARDA Employee Security Plan limited recourse loans are not accounted for in the Consolidated Statements of Financial Position. d) GARDA Equity Incentive Plan The GARDA Equity Incentive Plan was approved by GARDA securityholders at the 2021 Annual General Meeting on 25 November 2021. Pursuant to that Plan, incentives have been awarded to employees during the reporting period in the form of: (i) Performance Rights; and (ii) Exempt Securities. Details of Performance Rights awarded to KMP during the reporting period are set out in the following table: KMP David Addis Lachlan Davidson Total Grant date 10 Dec 2021 10 Dec 2021 10 Dec 2021 15 Dec 2021 15 Dec 2021 15 Dec 2021 Securities granted Exercise price Fair value at grant date Vesting date 36,231 36,231 36,233 18,115 18,115 18,117 163,042 - - - - - - $1.52 $1.46 $1.39 $1.59 $1.52 $1.46 31 Aug 2022 31 Aug 2023 31 Aug 2024 31 Aug 2022 31 Aug 2023 31 Aug 2024 44 Employee Security Plan Securities issued prior to the internalisation transaction on 29 November 2019 were issued under the former GARDA Capital Group employee security plan, with the number and exercise price of such securities being adjusted for the internalisation exchange ratio of 1.6x. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 60 Details of Exempt Securities awarded to KMP during the reporting period are set out in the following table: KMP David Addis Lachlan Davidson Total Grant date 10 Dec 2021 10 Dec 2021 Securities granted Value at grant date 636 636 1,272 $1.57 $1.57 NOTE 20 SECURITY BASED PAYMENTS EXPENSE The total non-cash expense arising from security based payment transactions for the period was as follows: Year ended 30 June Securities granted under GARDA ESP Securities awarded under GARDA Equity Incentive Plan 2022 301 368 669 GARDA 2021 740 - 740 2022 301 368 669 Company 2021 740 - 740 a) Fair value of securities granted The fair values at grant date for securities granted under the GARDA Employee Security Plan and incentives in the form of performance rights are 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. b) GARDA Employee Security Plan Details of securities under the limited recourse loan funded GARDA Employee Security Plan and the Black and Scholes option pricing model inputs for securities granted are set out below: Grant date Vesting date Share price at effective grant date Exercise price 13 Nov 2017 13 Nov 2020 $1.395 $0.63 3 Jun 2019 3 Jun 2021 $1.395 $1.08 23 Aug 2019 23 Aug 2021 $1.395 $1.22 23 Aug 2019 23 Aug 2022 $1.395 $1.22 16 Apr 2020 16 Apr 2023 $0.87 $1.00 18 Nov 2020 45 19 Nov 2023 $1.22 $1.16 Fair value at grant date $0.70 $0.24 $0.11 $0.10 $0.06 $0.10 Number of securities 1,260,000 480,000 Limited recourse loan 667,417 474,931 1,280,000 1,510,616 640,000 756,644 6,000,000 5,747,775 5,000,000 5,685,931 14,840,000 14,843,314 Expected volatility Dist’n yield Risk free rate 10% 10% 10% 10% 30% 18% 6% 6% 6% 6% 9% 6% 2% 2% 2% 2% 1% 1% There were no securities granted under the Employee Security Plan during the year. The weighted average remaining contractual life of options outstanding at the end of period was 1.01 years (FY21: 1.80 years). The expected price volatility is based on the historic average volatility of GARDA adjusted for any expected changes for future volatility due to publicly available information. No securities were bought back and cancelled during the year or the prior year. 45 As per AASB requirements, grant date is the AGM approval date. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 61 c) GARDA Equity Incentive Plan – Performance Rights Details of Performance Rights awarded to employees during the reporting period and the Black and Scholes option pricing model inputs for securities awarded are set out below: Grant date range Vesting date Share price at effective grant date Exercise price Fair value at grant date range 10 - 15 Dec 2022 31 Aug 2022 1.57 - 1.64 10 - 15 Dec 2022 31 Aug 2023 1.57 - 1.64 10 - 15 Dec 2022 31 Aug 2024 1.57 - 1.64 - - - $1.52 - $1.59 $1.46 - $1.52 $1.39 - $1.46 Number of securities Expected volatility Dist’n yield Risk free rate 223,425 223,425 223,435 670,285 13% 13% 13% 4.5% 4.5% 4.5% 2% 2% 2% The weighted average remaining contractual life of options outstanding at the end of period was 1.17 years. The expected price volatility is based on the historic average volatility of GARDA adjusted for any expected changes for future volatility due to publicly available information. d) GARDA Equity Incentive Plan – Exempt securities Details of Exempt Securities awarded to employees during the reporting period are set out in the following table: Grant date Securities granted Value at grant date 10 Dec 2021 10,176 $1.57 Total $15,976 Value at grant date has been determined as security price at grant date. NOTE 21 AUDITOR’S REMUNERATION Year ended 30 June Remuneration of the auditor for: Audit and review of the group financial report Audit of stand-alone financial reports of the group entities Total remuneration for audit services Remuneration of the auditor for: AFSL audit of the group entities Review and audit of compliance plan IT consulting services Tax services Total remuneration for non-audit services NOTE 22 COMMITMENTS Year ended 30 June Future minimum lease payments receivable: Within 1 year Between 1 and 5 years Later than 5 years 2022 $ 123,000 12,000 135,000 10,800 19,200 - 14,350 44,350 2022 $000 24,243 104,676 9,317 GARDA 2021 $ 140,000 11,600 151,600 10,500 19,000 10,000 3,850 43,350 GARDA 2021 $000 23,077 88,237 29,828 138,236 141,142 2022 $ 61,500 12,000 73,500 10,800 19,200 - 14,350 44,350 Company 2021 $ 70,000 11,600 81,600 10,500 19,000 10,000 3,850 43,350 2022 $000 Company 2021 $000 - - - - - - - - GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 62 NOTE 23 RIGHT-OF-USE ASSETS Year ended 30 June Non-current Right-of-use assets Reconciliation Opening balance Depreciation Closing balance 2022 $000 137 137 270 (133) 137 GARDA 2021 $000 270 270 403 (133) 270 2022 $000 137 137 270 (133) 137 Company 2021 $000 270 270 403 (133) 270 GARDA leases its head office under an agreement which commenced in July 2020 and expires in July 2023. There is an option to renew the lease for further three years. NOTE 24 LEASE LIABILITY Year ended 30 June Current Non-current GARDA Company 2022 $000 130 - 130 2021 $000 122 130 252 2022 $000 130 - 130 2021 $000 122 130 252 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 63 NOTE 25 CASH FLOW INFORMATION Year ended 30 June 2022 $000 GARDA 2021 $000 2022 $000 Company 2021 $000 Reconciliation of cash flow from operations with profit/ (loss) Profit/ (loss) after income tax 140,519 35,689 (1,142) (1,637) Adjustments for items in profit or loss: Security based payment expense Depreciation Credit loss expense Goodwill impairment expense Net gain in fair value of investment properties Net gain in fair value of derivative instruments Amortisation of borrowing transaction costs Net gain/(loss) on sale of investment properties Lease revenue abatement and rent free Lease straight-lining revenue Lease costs and incentive amortisation Interest expense on lease liabilities Capitalised interest and fee income on commercial loans Capitalised interest expense on investment properties Movements in assets and liabilities: Trade and other receivables Prepayments Contract liabilities Trade and other payables Tenant security deposits Provisions Current tax liability Deferred tax balances 669 161 6 - (111,642) (12,832) 593 511 681 740 175 369 33,586 (50,671) (3,593) 548 (881) 212 (1,137) (1,302) 890 5 (534) (1,469) 1,873 (180) 135 (525) 315 56 - (153) 795 8 (952) (916) (906) (397) (133) (293) (104) 30 (2) (313) Cash flow from / (used in) operations 17,942 11,689 a) Non-cash movements There were no non-cash financing and investing activities during the year and prior year. b) Reconciliation of liabilities arising from financing activities 669 161 6 - - - - - - - - 5 - - (67) (3) - 91 - 56 - (153) (377) 740 175 369 - - - - - - - - 8 (450) - (124) (48) - 466 (13) 30 (2) (313) (799) 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 and loan payable to parent entities, are summarised below. Year ended 30 June Bank borrowings Balance at the beginning of the year Cashflows Non-cash changes - amortisation of borrowing costs Loan from parent entity Balance at the beginning of the year Cashflows Non-cash changes – Security based payment expense 2022 $000 GARDA 2021 $000 209,030 49,275 593 186,653 21,829 548 - - - - - - Balance at the end of the year 258,898 209,030 2022 $000 - - - 5,044 15 669 5,728 Company 2021 $000 - - - 1,433 2,871 740 5,044 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 64 NOTE 26 PARENT ENTITY INFORMATION a) Parent Entity The Parent Entity of the Group is GARDA Diversified Property Fund. 30 June ASSETS Current assets Non-current assets Total assets LIABILITIES Current liabilities Non-current liabilities Total liabilities NET ASSETS EQUITY Contributed equity Reserve Retained earnings Total equity PROFIT Other comprehensive income TOTAL PROFIT AND COMPREHENSIVE INCOME 2022 $000 21,857 674,866 696,723 6,632 259,458 266,090 430,633 2021 $000 27,783 497,586 525,369 12,522 209,275 221,797 303,572 365,145 365,145 1,837 63,651 1,184 (62,757) 430,633 303,572 141,730 24,702 - - 141,730 24,702 The financial information for the Fund has been prepared on the same basis as the consolidated financial statements. b) Controlled entities of the Parent Entity As at 30 June GARDA Capital Limited GARDA Capital RE Limited GARDA Capital Trust GARDA Facilities Management Pty Ltd GARDA Finance Pty Ltd GARDA Funds Management Limited ATF GARDA Capital Trust GARDA Holdings Limited GARDA Property Finance Pty Ltd GARDA Real Estate Services Pty Ltd GARDA Services Pty Ltd GARDA TSV Pty Ltd ATF GARDA TSV Unit Trust GARDA TSV Unit Trust Ownership Interest 2022 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Country of Incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 65 NOTE 27 CONTINGENT ASSETS AND LIABILITIES a) Contingent assets The Group did not have any material contingent assets as at 30 June 2022 (FY21: The warranty and indemnity claim noted for FY21 was discontinued in December 2021). b) Contingent liabilities The Group did not have any material contingent liabilities as at 30 June 2022 (FY21: nil). NOTE 28 EVENTS SUBSEQUENT TO THE END OF THE PERIOD As disclosed in the Operational Review, two Richmond properties, Botanicca 7 and Botanicca 9, have been identified as non-core to GARDA’s strategy and portfolio and will be offered for sale. On 29 July 2022, GARDA announced a $40 million increase in its $280 million syndicated debt facility, taking the facility to $320 million. 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 state of affairs of GARDA in future years. the results of those operations in future years; or GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 66 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) (ii) 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 2022 and of its performance for the financial year ended on that date, (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and (c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations by the Chief Executive Officer and Chief 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 1 August 2022 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 67 INDEPENDENT AUDITOR’S REPORT GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 68 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 69 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 70 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 71 CORPORATE GOVERNANCE STATEMENT The Board and management of GARDA 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 regularly reviews its governance arrangements as well as developments in market practice, expectations and regulation. The governance arrangements were reviewed in June 2022. The Corporate Governance Statement has been approved by the Boards of the Company and GARDA Capital Limited (as responsible entity) and explain how the GARDA addresses the requirements of the Corporations Act 2001, the ASX Listing Rules and the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations – 4th Edition’ (the ‘ASX Principles and Recommendations’). It is current as at 30 June 2022. GARDA’s ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant disclosures in this statement, the 2022 Annual Report of the GARDA Property Group and other relevance governance documents and materials on the GARDA website (together the ‘ASX Appendix 4G’), is provided in the corporate governance section of our website at https://gardaproperty.com.au. 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 GARDA reflects the current size, operations and industry in which GARDA and its related entities operate. GARDA has complied with most of recommendations of the ASX Principles and Recommendations and has improved in many key areas during the year. 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 72 SECURITYHOLDER INFORMATION Securityholder information as at 27 July 2022. Distribution of equity securities Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Unmarketable parcels Securities No. of holders 177,411,703 41,985,807 4,984,374 3,119,481 142,996 227,644,361 2,341 165 1,385 664 1,093 287 3,594 88 % 77.93 18.44 2.19 1.37 0.06 100.00 2.46 Top 20 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 Ltd Longhurst Management Services Pty Ltd Madsen Nominees Pty Ltd Australian Executor Trustees Limited Madsen Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited Mr Peter Zinn Glenelg Park Nominees Pty Ltd JJG Equities Pty Ltd The Trust Company (Australia) Limited Citicorp Nominees Pty Limited Extra Large Pty Ltd Asia Union Investments Pty Limited Mr Peter John Zinn National Nominees Limited Pine Factory SF Pty Ltd Mr Richard Eaton-Wells & Mrs Frances Catherine Economidis Perrins RAP Pty Ltd First Samuel Ltd Total Number Held 36,400,745 13,297,822 11,742,833 10,960,000 6,613,485 6,140,000 6,053,921 4,989,674 4,873,869 4,644,831 4,223,517 3,643,608 3,052,074 3,000,000 3,000,000 2,333,912 2,100,152 2,015,438 1,889,592 1,414,812 Percentage of issued securities (%) 15.99 5.84 5.16 4.81 2.91 2.70 2.66 2.19 2.14 2.04 1.86 1.60 1.34 1.32 1.32 1.03 0.92 0.89 0.83 0.62 132,390,285 58.16 GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 73 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 Total Voting rights Number Held 36,400,745 17,900,000 13,297,822 11,742,833 79,341,400 Percentage of issued securities (%) 15.99 7.86 5.84 5.16 34.85 Each securityholder confers the right to vote at meeting of Securityholders, subject to any voting restrictions imposed on a Securityholder under the Corporations Act 2001 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. GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 74 GLOSSARY AASB Australian Accounting Standards Board Adjusted gearing ARSC CAGR Adjusted gearing ratio is calculated as adjusted total liabilities divided by adjusted total assets Audit, Risk and Sustainability Committee Compound annual growth rate Company GARDA Holdings Limited (ACN 636 329 774) DA FFO Fund GARDA GDF Gearing GHL GFA Group GST LVR NRC NLA NTA ROE TSR WACD WACR WALE Development Application Funds from operations are 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 one-off items. FFO is not recognised or covered by Australian Accounting Standards and has not been audited or reviewed by the auditor of the Group. GARDA Diversified Property Fund (ARSN 104 391 273) GARDA Property Group GARDA Diversified Property Fund (ARSN 104 391 273) (Total drawn interesting-bearing debt less cash) / (total assets less cash) GARDA Holdings Limited (ACN 636 329 774) Gross floor area GARDA Property Group Goods and Services Tax (Total drawn interest-bearing debt) / (total bank approved secured property) Nomination and Remuneration Committee Net lettable area Net tangible assets Return on equity. Calculated as (total distributions plus movement in NTA in financial year) divided by opening NTA. Total securityholder return. Calculated as (total distributions plus movement in security price in financial year) divided by opening security price. Weighted average cost of debt Weighted average capitalisation rate Weighted average lease expiry WANOS Weighted average number of securities GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 75 CORPORATE DIRECTORY DIRECTORS Matthew Madsen Executive Chairman and Managing Director Mark Hallett Executive Director Paul Leitch Independent Director Morgan Parker Independent Director Andrew Thornton Non-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) GARDA PROPERTY GROUP | 2022 ANNUAL FINANCIAL REPORT Page 76 GARDA PROPERTY GROUP (ASX: GDF) Annual Financial Report 2022 

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