General Property Trust ABN: 58 071 755 609 Annual Financial Report 31 December 2009 The GPT Group (GPT) comprises General Property Trust (Trust) and its controlled entities and GPT Management Holdings Limited (Company) and its controlled entities. General Property Trust is a registered scheme, registered and domiciled in Australia. GPT RE Limited is the Responsible Entity of General Property Trust. GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in Australia. GPT RE Limited is a wholly owned controlled entity of GPT Management Holdings Limited. Through our internet site, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Trust. All press releases, financial reports and other information are available on our website: www.gpt.com.au. 1 CONTENTS Page 3 Directors’ Report Auditors’ Independence Declaration 31 Financial Report Consolidated Statements of Comprehensive Income 32 Consolidated Statements of Financial Position 33 Consolidated Statements of Changes in Equity 34 Consolidated Statements of Cash Flow 35 Notes to the Financial Statements 1. Summary of significant accounting policies 36 2. Segment reporting 46 3. Distributions paid and payable 56 4. Earnings per stapled security 57 5. Expenses 58 6. Tax 59 7. Non-current assets held for sale, discontinued operations and other disposals 60 8. Loans and receivables 66 9. Inventories 67 10. Derivative financial instruments 67 11. Investment properties 68 12. Investments in associates and joint ventures 71 13. Other assets 73 14. Property, plant & equipment 74 15. Intangible assets 75 16. Payables 76 17. Borrowings 76 18. Provisions 79 19. Contributed equity 79 20. Reserves 81 21. Retained profits 82 22. Controlled entities 83 23. Key management personnel disclosures 85 24. Share based payments 87 25. Related party transactions 90 26. Notes to the Statements of Cashflow 91 27. Contingent assets and liabilities 91 28. Commitments 92 29. Capital and financial risk management disclosures 93 30. Auditors’ remuneration 103 31. Net tangible asset backing 103 32. Events subsequent to reporting date 103 Directors’ Declaration 104 Independent Audit Report 105 2 THE GPT GROUP DIRECTORS’ REPORT For the year ended 31 December 2009 The Directors of GPT RE Limited, the Responsible Entity of General Property Trust, present their report together with the financial statements of General Property Trust (the Trust) and its controlled entities (Consolidated entity) for the financial year ended 31 December 2009. The Consolidated entity together with GPT Management Holdings Limited and its controlled entities form the stapled entity, the GPT Group (GPT or the Group). During the financial year, GPT RE Limited acted as the Responsible Entity of the Trust. GPT RE Limited is a company limited by shares, incorporated and domiciled in Australia. The registered office and principal place of business is MLC Centre, Level 52, 19 Martin Place, Sydney NSW 2000. 1. OPERATIONS AND ACTIVITIES 1.1 Principal Activities During the financial year, GPT announced its strategy to simplify the business and focus on high quality Australian retail, office and industrial/business park assets. As a result, GPT has divested the majority of its offshore positions with the exception of US Senior Housing, and continues its program to divest non-core Australian assets. GPT activities have changed significantly since 2008 with major changes being: • the separation of the European component of the Group’s global joint venture via a dividend inspecie of shares in BGP Holdings Limited to GPT Securityholders; • the sale of the European funds management operation, GPTHalverton; and • the sale of the majority of GPT’s hotel/tourism portfolio. As a result of the above, the principal activities during the year were: • investment in income producing retail, office, industrial & business parks and senior housing properties; • development of retail, office, industrial and business park properties; • property funds management; and • property management. GPT operates predominantly in Australia but also in the United States of America through the US Senior Housing Portfolio. 3 THE GPT GROUP DIRECTORS’ REPORT For the year ended 31 December 2009 1.2 Review of Operations To provide information that reflects the Directors’ assessment of the net profit/(loss) attributable to stapled securityholders calculated in accordance with Australian Accounting Standards, certain significant items that are relevant to an understanding of GPT’s result have been identified. The effect of these items is set out below: Consolidated entity 2009 2008 $M $M Core operations 532.2 568.9 Non-core operations 49.9 154.8 Financing and corporate overheads (206.3) (254.9) Realised Operating Income 375.8 468.8 Change in fair value of assets (non-cash): Valuation decreases Core Domestic Portfolio and Funds Management (Australia) (774.5) (400.6) Hotel/Tourism Portfolio (85.9) (219.2) European warehoused assets and goodwill (79.3) (293.4) US Senior Housing (37.8) (162.6) Joint Venture (1,092.9) (1,188.5) (Loss) / Profit on disposals (18.5) 5.3 Financial Instruments marked to period end market value 695.1 (1,451.0) Other items (52.6) (12.3) Net loss after tax (1,070.6) (3,253.5) Financial results • Realised operating income decreased by 19.8% to $375.8 million (2008: $468.8 million) • Total assets decreased by 29.7% to $9,163.4 million (2008: $13,029.8 million) • Total borrowings decreased by 56.4% to $2,183.7 million (2008: $5,013.3 million). Of the total borrowings, $1,699.9 million have been classified as a current liability in the Statement of Financial Position as the borrowings were drawn from 2 tranches of the Euro multi-option syndicated facility which mature on 26 October 2010. However, GPT can draw on Tranche C of the Euro multi-option syndicated facility to refinance these borrowings. If it had done so, at 31 December 2009 it would have resulted in these borrowings being classified as non-current liabilities given Tranche C matures on 26 October 2012. GPT has drawn from Tranche A & B to save interest expense due to lower credit margins. • Gearing ratio has significantly reduced following the $1.7 billion capital raising in June 2009: 2009 2008 Headline gearing (net debt basis) 23.5% 33.7% Look through gearing (net debt basis) 31.6% 46.6% • Distribution per stapled security decreased by 74.6% to 4.5 cents* (2008: 17.7 cents) • Net tangible assets per stapled security decreased by 51.7% to $0.69* (2008: $1.43) • Non-core asset sales achieved in 2009 totalled $1.1 billion and included: • The Group’s resort assets (excluding Ayers Rock Resort); • The Group’s 80% interest in the Hamburg Trust business; • Homemaker City Windsor, Cannon Hill & Mt Gravatt; • Floreat Forum Shopping Centre; • European warehoused assets – SAF and H20; • Four Points by Sheraton Hotel in Sydney; • GPTHalverton business; • B&B European Joint Venture; and • US Retail assets held in the Joint Venture. * Includes the impact of an additional 4,810 million stapled securities issued in 2009 and 321.9 million potential securities assuming the conversion of the exchangeable securities at an exchange price of $0.7766 (2008: $0.9628). 4 THE GPT GROUP DIRECTORS’ REPORT For the year ended 31 December 2009 1.2 Review of Operations (continued) Financial results – portfolio/operational highlights The financial performance and total assets by portfolio are summarised below along with commentary on each portfolio’s operational performance. Realised Realised Total Total Operating Operating Assets Assets Income Income Portfolio/Segment 2009 2008 2009 2008 $M $M $M $M Core Retail 1.2 (a) 266.5 260.6 4,455.3 4,595.1 Office 1.2 (b) 120.2 148.5 1,824.8 1,968.6 Industrial 1.2 (c) 49.9 50.8 780.6 818.9 Funds Management - Australia 1.2 (f) 95.6 109.0 1,346.0 1,688.1 Non-core US Senior Housing 1.2 (e) 18.6 12.6 152.4 202.8 Discontinued operation - Funds Management - Europe 1.2 (f) (21.0) (28.8) 67.5 567.5 Discontinued operation - Joint Venture 1.2 (g) (1.0) 108.7 - 1,159.3 Discontinued operation - Hotel / Tourism 1.2 (d) 53.3 62.3 346.2 686.7 Financing and corporate overheads Corporate (206.3) (254.9) 190.6 1,342.8 Total 375.8 468.8 9,163.4 13,029.8 A description of each segment along with further detail on the types of segment income and expense is set out in note 2 of the financial statements. (a) Retail Portfolio The Retail Portfolio continued its solid performance during the year, with comparable income growth of 4.8% across the GPT owned shopping centres. Retail sales growth across the GPT owned shopping centres was positive at 2.9% (total centre). In August, the Portfolio was grown with the acquisition of a 16.67% interest in Highpoint Shopping Centre. During the year, the non-core asset sale program progressed well with the sale of Floreat Forum and Homemaker City Cannon Hill, Mt Gravatt, and Windsor. Management will continue to actively pursue the divestment of the remaining four Homemaker centres in 2010. The Group’s major expansion of Charlestown Square Shopping Centre is progressing well. The $470 million development is anticipated to be completed at the end of 2010. Revaluations across the GPT owned assets and GPT's interest in jointly owned assets resulted in a net devaluation of $391.2 million (7.4%). (b) Office Portfolio The Managed Office Portfolio delivered an increase in income (on a comparable basis) for the year of 2.6%. The GPT managed Portfolio was expanded with the completion of workplace6 in Sydney, which was developed by GPT and sold to the GPT Wholesale Office Fund (GWOF).