BWP GROUP — Annual Report 2011

Aug 10, 2011

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Annual Report 2011

Contents

Core purpose	1
Our investment approach	2
Highlights	3
Letter from the Chairman	4
Financial summary	5
Manager’s report	6
Outlook	8
Our property portfolio	9
Sustainability	13
Directors and senior management	18
Corporate governance	20
Financial statements	25
Investor information	63
Directory	65

BWP Trust ARSN 088 581 097

Responsible Entity BWP Management Limited ABN 26 082 856 424

Australian Financial Services Licence No. 247830

www.bwptrust.com.au

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Cover photo: Broadmeadows, VIC
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Core purpose

BWP Trust aims to provide a premium commercial real estate investment product, delivering unitholders a secure and growing income stream and long-term capital growth.

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Pakenham, VIC
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Our investment approach

The Trust’s investments comprise commercial real estate - predominantly warehouse retailing properties and, in particular, Bunnings Warehouse properties. Investments are made on behalf of the Trust by the responsible entity, according to the following strategies and investment criteria:

Strategies

• Drive better returns from existing assets through focused and pro-active asset management

• Generate growth by acquiring quality commercial properties that meet the Trust’s investment criteria

• Deliver efficiency, sustainability and value through effective management of the Trust and its capital

Investment criteria

• Ample land area (average 3 hectares)

• Visible and accessible from a major road, highway or freeway

• Ready vehicle access and ample on-site parking

• Significant catchment area

• Offers geographic diversity

• Financially substantial tenant in an economically, socially and environmentally sustainable business

• Includes sustainability measures or prospects

Bunnings Warehouse, Port Melbourne, VIC (centre foreground)

Highlights

• Income of $85.3 million for the year – up 8.6 per cent on the previous year

• Distributable profit of $56.6 million for the year – up 12.2 per cent on the previous year

• Full-year distribution of 11.98 cents per unit – down 0.8 per cent on the previous year

• Market rent reviews on 5 properties completed during the year – average 13.7 per cent increase in annual rent

• Full-year net revaluation gain of $25.3 million in the fair value of investment properties

• Acquisition of 11 Bunnings Warehouse properties and agreement to acquire an additional 3

• Net Tangible Assets of $1.90 per unit at 30 June 2011 (2010: $1.88 per unit)

• Weighted average lease expiry of 8.6 years at 30 June 2011 (2010: 9.3 years)

• Gearing (debt/total assets) 17.0 per cent at 30 June 2011 (2010: 18.8 per cent) Covenant gearing (debt + non-current liabilities/total assets) 17.1 per cent (2010: 19.3 per cent)

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% BWP total returns compared to market - periods ended 30 June 2011
15
BWP
BWP
10
BWP
BWP
5
0
-5
-10
-15
One Year Three Years Five Years Ten Years
Total returns include distributions and movement in price (assumes BWP Trust (BWP)
distributions are reinvested). Source: UBS
ASX All Ordinaries Accumulation Index
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ASX All Ordinaries Accumulation Index UBS Retail 200 S&P/ASX 200 Property Accumulation Index S&P/ASX 300 Property Accumulation Index

Letter from the Chairman

Dear unitholder

On behalf of the board of directors of BWP Management Limited, the responsible entity for BWP Trust, it is my pleasure to present the Trust’s 2011 annual report.

It has been an eventful and productive year for the Trust, with many of the outcomes expected to deliver short-tomedium term or longer term benefits to unitholders. An obvious change during the year is that we have renamed the Trust, reflecting the board’s view that the Trust has established its own position as a premium property investment product and should have its own brand.

While the new name provides a more distinctive and contemporary look and feel, it does not signal a change in direction for the Trust. Bunnings Warehouses are, and will likely remain, the core component of the Trust’s investment portfolio and during the year the Trust has added significantly to its holding of Bunnings Warehouse properties, with the acquisition of eleven Bunnings Warehouse properties and agreement to acquire a further three.

During the year we continued to improve our approach to sustainability, and in particular climate change, by building our understanding of sustainability issues relevant to the Trust and its operations, undertaking a number of practical measures to improve our sustainability and improving our reporting of sustainability. An improvement in reporting we have achieved during the year was to participate for the first time in the Carbon Disclosure Project, a global initiative to collect and disseminate information about organisations’ greenhouse gas emissions, water management and climate change strategies. The separate sustainability section in this annual report provides more detail of our endeavours.

In closing, I would like to express my appreciation to my fellow directors and management for their efforts during the year and thank our unitholders for their continued support of the Trust.

In addition, upgrades for several of the Trust’s existing Bunnings Warehouses were completed or agreed to during the year and will improve the contribution to earnings from these properties.

The Trust’s unit price ended the year at $1.83, slightly below last year, but a pleasing result having regard to the additional units issued during the year in the entitlement offer, which raised $150 million to help fund the acquisition of a portfolio of Bunnings Warehouse properties. I would like to thank unitholders for supporting this significant transaction.

J A Austin Chairman BWP Management Limited

Total returns for the year (distributions and movement in unit price) of 4.8 per cent were below the benchmark S&P/ASX 200 A-REIT accumulation index return of 5.8 per cent. Over the longer term, however, the Trust continues to outperform the market, as the chart on the previous page shows. It is worth noting that over three, five and ten years BWP Trust has ranked either first or second in the benchmark index for total returns. In our view, it is this longer-term outperformance that measures our achievement of the Trust’s core purpose of providing unitholders with a secure and growing income stream and long-term capital growth.

Financial summary

Financial performance

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Year ended 30 June	2011 2010 2009 2008 2007
Total income	$m 85.3 78.5 73.2 65.9 59.8
Net proft/(loss)	$m 81.5 92.2 (11.7) 0.7 207.0
Unrealised (gain)/loss in fair value of investment properties	$m (25.3) (41.8) 52.1 39.3 (167.9)
Distributable proft	$m 56.61 50.4 40.52 40.0 39.1
Distribution per ordinary unit Tax advantaged component	interim cents 6.18 6.10 6.70 6.55 6.42 fnal cents 5.80 5.98 4.87 6.72 6.56
	total cents 11.98 12.08 11.57 13.27 12.98
	% 22.60 23.93 28.07 23.55 23.62
Total assets Borrowings Unitholders’ equity Gearing (debt to total assets) Number of units on issue Number of unitholders Net tangible asset backing per unit	$m 1,242.1 1,026.4 999.9 979.9 963.4 $m 210.8 193.5 225.9 308.5 258.6 $m 986.3 792.8 733.0 638.8 675.4 % 17.0 18.8 22.6 31.5 26.8 m 520 421 410 301 301 13,958 12,507 12,583 12,471 12,840 $ 1.90 1.88 1.79 2.12 2.24
Unit price at 30 June	$ 1.83 1.863 1.613 1.633 2.213
Management expense ratio (annualised)	% 0.72 0.69 0.69 0.66 0.70

1 includes $0.4 million captial distribution from the sale of the Trust’s Canning Vale industrial property

2 adjusted for rounding

3 prior years adjusted to reflect effect of $150 million capital raising in March 2011 (Source: Reuters)

BWP unit price vs market indices

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%
20
ALL ORDINARIES
15
10
7.75
5
S&P/ASX 200 A-REIT
0 -0.08
-1.81
-5
BWP
-10
-15
Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011
Source: Reuters
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Distribution Unitholders’
per unit equity
(cents per unit) ($ million)
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986.3
11
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13.27
08
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12.98
07
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12.08
10
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11.98
11
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11.57
09
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792.8
10
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733.0
09
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675.4
07
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638.8
08
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Manager’s report

Acquisitions, improvements to an existing investment property and rent reviews have contributed to an 8.6 per cent growth in revenue and a 12.2 per cent increase in distributable profit. Distributions per unit of 11.98 cents were 0.8 per cent lower than last year, due to the increase in the number of units on issue following the $150 million entitlement offer to help fund the acquisition of a portfolio of 13 Bunnings Warehouse properties.

Financial results

Total income for the full-year to 30 June 2011 was $85.3 million, up by 8.6 per cent from last year. The increase in income was due predominantly to increases in rental and other property income. Rental income increased as a result of acquisitions and developments completed during the year (contributing an additional $3.4 million, approximately) and from rent reviews and other property income (adding approximately $2.7 million during the year). Interest income increased by approximately $0.6 million.

Finance costs of $19.1 million were in line with last year. While the average level of debt was 2.0 per cent lower at $194.2 million compared with $198.2 million for 2010, bank fees and margins were approximately 5.2 per cent higher as a result of repricing taking effect during or since the previous year. The weighted average cost of net borrowings (finance costs less finance income/average borrowings) was 9.23 per cent, compared with 9.40 per cent for the previous year.

Distributable profit for the year was $56.6 million, an increase of 12.2 per cent on the distributable profit last year. Distributable profit for the year ended 30 June 2011 excludes the unrealised net gain of $25.3 million on the revaluations of the fair value of the portfolio at 30 June 2011, but includes a capital distribution of $0.4 million on the sale of one of the Trust’s industrial properties (see revaluations section in “Our property portfolio”).

The management expense ratio for the year ended 30 June 2011 (expenses other than property outgoings and borrowing costs as a percentage of average total assets) was 0.72 per cent, slightly higher than the previous year’s (2010: 0.69 per cent) due to one-off costs associated with the acquisition of a portfolio of properties announced in February 2011.

As at 30 June 2011 the Trust’s total assets were $1,242.1 million (2010: $1,026.4 million), with unitholders’ equity of $986.3 million and total liabilities of $255.8 million. Investment properties made up the majority of total assets, comprising $1,225.9 million (2010: $1,000.1 million). Details of investment properties are contained in the “Our property portfolio” section at pages 9 to 12.

The underlying net tangible asset backing of the Trust’s units (“NTA”) at 30 June 2011 was $1.90 per unit, a decrease of 3.1 per cent from $1.96 per unit at 31 December 2010 (30 June 2010: $1.88). The decrease in NTA over the six months to 30 June 2011 is mainly due to the increase in the number of units on issue in March 2011, following the $150 million entitlement offer.

The Trust’s gearing ratio (debt to total assets) at 30 June 2011 was 17.0 per cent (2010: 18.8 per cent), slightly below the board’s preferred range of 20 to 30 per cent. Covenant gearing (debt and non-current liabilities to total assets) was 17.1 per cent (2010: 19.3 per cent). The interest cover ratio (earnings before interest and tax/ interest expense) was 4.1 times (2010: 3.7 times).

Distribution to unitholders

The Trust maintains its policy of paying out 100 per cent of distributable profit each period. A final distribution of 5.80 cents per ordinary unit has been declared and will be made on 26 August 2011 to unitholders on the Trust’s register at 5.00 pm on 30 June 2011.

The final distribution takes the total distribution for the year to 11.98 cents per unit, a 0.8 per cent decrease on last year. The tax advantaged component of the distribution is 22.60 per cent.

In view of the uncertainty and volatility being experienced in the Australian equity markets and the prevailing market price of BWP Trust units, the board resolved in August 2011 to suspend the Trust’s Distribution Reinvestment Plan (“DRP”) in respect of the final distribution for the year ended 30 June 2011. Unitholders who had elected to participate in the DRP for the final distribution will receive a cash distribution instead.

Capital management

The proceeds of the $150 million entitlement offer raised in March 2011 were used to fund the first tranche of Bunnings Warehouse properties acquired by the Trust as part of a portfolio of 13 properties that the Trust has agreed to acquire from and lease back to Bunnings Group Limited.

The balance of the portfolio acquisition (comprising three properties and development work to be completed, totalling approximately $80.2 million) will be funded from debt facilities. Details of the Trust’s current debt facilities are provided below.

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BWP TRuST Annual Report 2011 7
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Amount
Bank facilities as at Limit drawn 1
30 June 2011 $m $m Expiry date
Australia and New Zealand
Banking Group Limited 100.0 36.9 31 July 2013
Commonwealth Bank of
Australia 100.0 49.9 14 January 2014
Westpac Banking
Corporation 80.0 75.0 2 November 2013
National Australia Bank
Limited 50.0 50.0 31 March 2014
330.0 211.8
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1 amount drawn includes accrued interest and borrowing costs of $1.0 million as at 30 June 2011

During the year, the Trust extended or agreed to extend three of the four bank facilities, with combined limits of $230 million, taking the weighted average duration from 30 June 2011 to expiry to 2.4 years.

During the year, 11,062,561 new units were issued under the DRP in respect of the interim distribution for the year ended 30 June 2011 and the final distribution for the previous year.

At 30 June 2011, the Trust’s hedging cover was 85.0 per cent of borrowings, with $180.0 million interest rate swaps against interest bearing debt of $211.8 million. The weighted average term to maturity of hedging was 3.34 years, including delayed start swaps.

Operations

Further information regarding the operations of the Trust is included in the Outlook, Our property portfolio and Sustainability sections on pages 8 to 17.

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Grant Gernhoefer General Manager BWP Management Limited

Outlook

Revenue growth from acquisitions, upgrades and rent reviews and improvements in borrowing costs will help the Trust to continue to deliver a secure and growing income stream to unitholders. The Trust also remains well positioned to take advantage of selective acquisition opportunities arising from softer commercial property markets.

The Trust’s rental income has increased substantially following the acquisition of 11 Bunnings Warehouse properties during the year. Rent reviews of the Trust’s existing properties are also expected to bolster earnings, with seven Bunnings Warehouses scheduled for five-yearly market reviews, one non-Bunnings tenancy due for a market review in the year ending 30 June 2012 and the balance of the portfolio being subject to fixed rate or consumer price index increases. Upgrades of existing properties will also contribute to earnings growth, with capital commitments to upgrade three Bunnings Warehouses, totalling approximately $25 million over the next 12 to 18 months.

Following the capital raising during the year to fund the initial properties acquired as part of a portfolio of Bunnings Warehouse properties, the Trust’s gearing remains relatively low, providing capacity to debt fund the approximate $80.2 million in committed capital expenditure to complete the balance of the portfolio acquisition, as well as the upgrades of existing properties over the next 12 to 18 months. Further acquisitions of appropriately priced quality assets, including non-Bunnings Warehouse properties offering accretive yields, will be considered selectively.

The cost of borrowings is expected to improve as a result of lower bank margins and fees following refinancing and the effect of higher levels of borrowings over the next 12 to 18 months. The increase in borrowings allows for more efficient use of existing bank facilities by utilising more of the undrawn capacity. Increased borrowings will also provide a larger component of floating rate interest, which is currently at lower rates than the Trust’s current average fixed interest rates under hedging arrangements. The fixed rate of interest under hedging will also reduce over the short-to-medium term.

As a result of the improvements in the Trust’s borrowings referred to above, based on current estimates and assumptions the weighted average cost of net borrowings is expected to reduce from 9.2 per cent for the year ended 30 June 2011 to approximately 8.3 – 8.4 per cent for the year ending 30 June 2012. The responsible entity continues to assess options for further improving the efficiency, diversity and duration of debt funding.

Based on current estimates and assumptions, including committed capital expenditure, the responsible entity maintains the guidance provided in February 2011 of a forecast distribution of 13.3 cents per unit for the year ending 30 June 2012.

Belmont, WA

Our property portfolio

The Trust comprises predominantly warehouse retailing properties, particularly Bunnings Warehouse properties tenanted by Bunnings Group Limited (“Bunnings”), a wholly owned subsidiary of Wesfarmers Limited (“Wesfarmers”). As at 30 June 2011 the Trust owned 70 investment properties, all within Australia, with a total value of $1,225.9 million and a weighted average lease expiry of 8.6 years (compared with 9.3 years at 30 June 2010).

Property acquisitions/divestments

Portfolio acquisition of 10 properties from Bunnings

In March 2011, unitholders approved a proposal to acquire from Bunnings and lease back a portfolio of ten operational Bunnings Warehouses and three properties on which Bunnings will develop Bunnings Warehouses.

As at 30 June 2011, the Trust had settled 10 of the 13 properties. The Dubbo property settled on 5 August 2011 and the Craigieburn Bunnings Warehouse in Victoria is expected to settle in October 2011, following subdivision approval. The acquisition of one of the development sites, at Wallsend, New South Wales, is conditional on Bunnings exercising its option to acquire the land from a third party, consequent on the issue of appropriate planning approval.

Bunnings Warehouse, Port Melbourne, Victoria

In December 2010, the Trust purchased an established Bunnings Warehouse in the Melbourne suburb of Port Melbourne, Victoria. The property was acquired from an institutional owner for $25.4 million (including acquisition costs). The 3.0 hectare property is situated on the corner of Williamstown Road and Bertie and Bridge Streets in Port Melbourne, approximately 2.5 kilometres south-west of the Melbourne central business district. The building comprises a total retail and office area of 13,846 square metres with approximately 327 car parking spaces.

The property is leased to Bunnings, with an initial term expiring in March 2020 and four options, exercisable by the tenant, for a further five years each. The rent is reviewed annually to the consumer price index (“CPI”) and subject to a market review in March 2013 and at the exercise of each option. Market reviews are subject to a 10 per cent cap and 5 per cent collar; ensuring that the revised rent may be no greater than 110 per cent, nor less than 95 per cent, of the rent in the preceding year.

Land adjoining Bunnings Warehouse, Minchinbury, New South Wales

In May 2011, the Trust acquired a vacant site adjoining the Trust’s Bunnings Warehouse in the suburb of Minchinbury, approximately 35 kilometres west of the Sydney central business district.

The 0.5 hectare vacant site was purchased for $4.3 million (including acquisition costs) and allows for future expansion of the adjoining Bunnings Warehouse. Bunnings pays the Trust an access fee of eight per cent per annum on the Trust’s total capital outlay until the adjoining

Bunnings Warehouse is expanded over the vacant site. The acquisition increases the Trust’s land holding at the location from 3.1 to 3.6 hectares. Details of the proposed expansion of the Bunnings Warehouse are yet to be finalised.

Portfolio at aglance	2011 2010	2009	2008	2007
Bunnings Warehouses	60 52	52	50	49
Bunnings Warehouse with other showrooms	2 1	1	1	1
Bunnings Warehouse development sites	3 1	1	2	2
Bunnings Distribution Centre	1 1	1	2	2
Bulky goods showrooms	1 1	1	1	-
Industrial properties	3 4	4	4	3
Annual capital expenditure	$207.9 m $2.7 m	$45.4 m	$51.4 m	$62.0 m

Our property portfolio (continued)

Industrial property, Canning Vale, Western Australia

In October 2010, the Trust sold its Canning Vale industrial facility, vacated by J Blackwood and Son Pty Ltd in February 2010. Selling the property was considered a better outcome for the Trust than re-leasing and the sale price of $7.5 million realised a modest capital appreciation, resulting in a distribution to unitholders of 0.09 of a cent per unit as part of the interim distribution for the half-year ended 31 December 2010.

Developments and upgrades

Completion of upgrade of Bunnings Warehouse, Broadmeadows, Victoria

In December 2010, a $5.9 million upgrade of the Trust’s Broadmeadows Bunnings Warehouse was completed by Bunnings for the Trust. The upgrade extended the fullyenclosed covered area by 3,824 square metres. The annual rental increased by approximately $472,000 to $1,627,000 per annum.

Following completion of the upgrade, the parties entered into a new ten year lease of the Bunnings Warehouse with one ten year option, exercisable by the tenant. The rent will be reviewed to market every five years and by the CPI in all other years. All other terms and conditions of the existing lease will remain the same.

Commencement of upgrade of Bunnings Warehouse, Scoresby, Victoria

In May 2011, Bunnings, on behalf of the Trust, commenced an upgrade of the Trust’s existing Bunnings Warehouse in Scoresby, Victoria. The upgrade, utilising the existing yard and nursery area, will increase the fully-enclosed covered area by 2,080 square metres and is estimated to cost $6.3 million.

The existing annual rental of $1,190,000 will increase to $1,784,000 per annum following completion of the upgrade, expected in January 2012, which incorporates a CPI based adjustment that would have occurred at the September 2011 rent review.

On completion of the upgrade, the parties will enter into a new ten year lease of the Bunnings Warehouse with two five year options, exercisable by the tenant. The rent will be reviewed to market every five years and by the CPI in all other years. The rent at each market rent review is to be no less than the rent in the preceding year. All other terms and conditions of the existing lease will remain the same.

Commitment to upgrade Bunnings Warehouse, Rocklea, Queensland

In February 2011, the Trust committed to upgrade its Bunnings Warehouse at Rocklea, Queensland, with an estimated cost of $3.8 million. The upgrade, utilising the existing yard and nursery area, will increase the fullyenclosed covered area by 3,531 square metres. The existing annual rental of $1,477,000 will increase to

$1,865,000 per annum following completion of the upgrade, expected in June 2012, which incorporates a CPI based adjustment that would have occurred at the October 2011 rent review.

On completion of the upgrade, the parties will enter into a new ten year lease of the Bunnings Warehouse with one ten year option, exercisable by the tenant. The rent will be reviewed to market every five years and by the CPI in all other years. There are no caps or collars restricting the outcome of each market rent review, other than the first market rent review, where the rent is to be no less than the rent in the preceding year. All other terms and conditions of the existing lease will remain the same.

Capital expenditure during 2010/11

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|||
|---|---|
|$m|
|Acquisitions|
|Bunnings Warehouses|
|Port Melbourne|25.4|
|Wagga Wagga|15.9|
|Greenacre development site|14.1|
|Fairfield Waters|17.9|
|Smithfield|16.1|
|Caroline Springs|20.2|
|Pakenham (including showrooms)|21.4|
|Cockburn|19.7|
|Belmont|17.6|
|Port Kennedy|17.4|
|Harrisdale development site|10.6|
|Land|
|Minchinbury - 0.5ha adjoining|
|4.3|
|Bunnings Warehouse|
|200.6|
|Developments|
|Broadmeadows Bunnings Warehouse|5.9|
|5.9|
|Other expenditure|
|Blackburn tenancy reconfiguration|0.2|
|Miscellaneous non-income producing|1.2|
|1.4|
|Subtotal|207.9|
|Divestments|
|Canning Vale industrial facility|(7.5)|
|Total|200.4|

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Commitment to upgrade Bunnings Warehouse, Fyshwick, Australian Capital Territory

During the year, the Trust committed to upgrade its Bunnings Warehouse at Fyshwick,

Australian Capital Territory, with an estimated cost of $15.0 million. The upgrade, utilising the 1.0 hectare site adjoining the Bunnings Warehouse acquired by the Trust in December 2005, will increase the fully-enclosed covered area by 4,642 square metres and is expected to be completed in the latter half of the 2012 calendar year.

On completion of the upgrade, the parties will enter into a new 12 year lease of the Bunnings Warehouse with four, five year options, exercisable by the tenant.

Leases extended at multi-tenanted industrial property, Blackburn, Victoria

During the year, Sleepmaster Pty Ltd (“Sleepmaster”) surrendered approximately 2,559 square metres of its 12,640 square metre tenancy at the Blackburn multi-tenanted industrial property. The adjoining tenant, Gainsborough Hardware Industries Limited (“Gainsborough”) leased the area surrendered by Sleepmaster and now occupies an area of 9,068 square metres. The works required to reconfigure the tenancies were completed in March 2011 at a cost of approximately $0.2 million.

Following the completion of the works, Sleepmaster exercised its five year option commencing on 1 April 2012 for its reduced tenancy of 10,081 square metres. The Trust and Gainsborough entered into a new lease commencing in March 2011 for a term of eight years with one five year option, exercisable by the tenant. As at 30 June 2011, the property has a weighted average lease expiry of 6.5 years (1.7 years at 30 June 2010).

Other improvements

Approximately $1.2 million was spent on various other non-income producing improvements to the portfolio during the year.

Work in progress of approximately $1.4 million relating to roof access and safety improvements to 34 properties was incurred during the year. We expect to complete these improvements in the 2011 calendar year.

Rent reviews

The rent payable for each leased property is increased annually, either by a fixed percentage or by the CPI, except when a property is due for a market review. Market reviews occur for most of the Trust’s Bunnings Warehouses every five years from the commencement date of the lease. The market rental is determined according to generally accepted rent review criteria, based on rents paid at comparable properties in the market.

During the year, 60 leases in the portfolio had annual fixed or CPI increases, resulting in an average increase of 2.9 per cent in the annual rent for these properties.

Market rent reviews were completed on five properties during the year. The results of these market rent reviews are shown in the table below.

Revaluations

The entire Trust portfolio was revalued at 31 December 2010 and again at 30 June 2011, including 15 property revaluations performed by independent valuers (six at 31 December 2010 and nine at 30 June 2011). Properties not independently revalued at each balance date are subject to internal valuations, with an independent valuer reviewing the methodology adopted.

The value of the portfolio increased by $225.8 million to $1,225.9 million during the year following: capital expenditure of $207.9 million; the sale of the Canning Vale industrial property for net sale proceeds of $7.4 million; and a net revaluation gain of $25.3 million during the year.

The net revaluation gain was due to rental growth from rent reviews and incorporates the write-off of acquisition costs from all property acquisitions during the year. The Trust’s weighted average capitalisation rate for the portfolio at 30 June 2011 was 7.65 per cent (December 2010: 7.62 per cent and June 2010: 7.65 per cent). Details of the fair value of investment properties are disclosed in Note 9 of the notes to the financial statements.

Market rent reviews results summary

Property location	Passing rent	Market review2	Uplift	Effective date
	($pa)	($pa)	(%)
Mile End, SA1	1,411,052	1,845,000	+30.8	22 Mar 10
Morley, WA	1,015,777	1,168,142	+15.0	3 Jul 10
Northland, Vic	1,452,546	1,628,000	+12.1	19 Aug10
Rockingham, WA	1,261,993	1,475,000	+16.9	16 Aug10
Vermont South, Vic	1,959,187	1,959,187	-	15 Aug10
Weighted Average (%)			+13.7

1 excludes amortised rent not subject to review. 2

Morley, Rockingham and Vermont South were negotiated between the Trust and the tenant; Mile End and Northland were determined by independent valuers.

Our property portfolio (continued)

Portfolio rental summary

As at 30 June 2011	Land	Gross lettable	Annual
	area	area1	rental2
	ha	sq.m	$000
Western Australia
Albany	2.0	13,660	768
Balcatta	4.3	25,439	1,757
Belmont	2.2	10,381	1,250
Bibra Lake	3.2	13,977	1,535
Cockburn	2.6	12,839	1,400
Geraldton	3.3	17,809	924
Geraldton Showrooms	1.2	1,511	217
Harrisdale3	3.7	-	-
Joondalup	2.5	13,358	1,255
Mandurah	2.5	12,097	1,298
Midland	2.4	13,694	1,377
Mindarie	3.1	14,479	1,333
Morley	1.8	9,852	1,168
Port Kennedy	2.8	11,675	1,315
Rockingham	3.3	17,179	1,475
	Total 40.9	187,950	17,072
Victoria Altona4 Bayswater Bayswater Showrooms Blackburn (Industrial) Broadmeadows Caroline Springs Croydon Dandenong Epping Fountain Gate Frankston Hawthorn Hoppers Crossing Maribyrnong5 Mentone Mornington Northland Nunawading6 Oakleigh South Pakenham Port Melbourne Sandown Scoresby Sunshine Vermont South7	3.4 4.9 4.1 1.8 3.0 3.8 3.1 3.1 3.2 3.7 0.8 2.7 3.4 2.5 4.0 3.3 3.4 4.4 4.4 3.0 3.1 3.4 2.0 5.2	9,254 15,193 2,484 20,361 12,765 14,212 13,292 12,313 12,027 12,624 13,843 7,462 11,170 - 11,814 13,324 12,027 14,766 16,949 14,867 13,846 12,180 11,938 9,958 16,634	1,040 1,574 414 1,630 1,627 1,450 1,562 1,300 1,122 1,362 1,888 2,863 1,193 - 1,432 1,490 1,628 2,123 1,807 1,622 1,701 1,056 1,226 946 1,959
	Total 79.7	305,303	36,016

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As at 30 June 2011 Land Gross lettable Annual
area area [1] rental [2]
ha sq.m $000
Australian Capital Territory
Fyshwick [8] 2.8 6,648 1,106
Tuggeranong 2.8 11,857 1,447
Total 5.6 18,505 2,552
South Australia
Mile End 3.3 14,786 2,129
Noarlunga 2.6 15,054 1,341
Regency Park (Blackwoods) 1.1 4,682 414
Total 7.0 34,522 3,884
New South Wales
Artarmon 0.7 5,746 1,523
Belmont North 4.0 12,640 864
Belrose 2.5 8,888 1,925
Blacktown (Blackwoods) 1.3 8,346 783
Coffs Harbour 2.5 8,657 820
Greenacre [9] 2.2 - -
Lismore 2.1 10,076 880
Maitland 3.7 12,797 1,193
Minchinbury [10] 3.6 12,048 1,587
Port Macquarie 2.0 8,801 837
Thornleigh 1.2 5,301 1,224
Villawood 2.6 10,886 1,456
Wagga Wagga 3.6 13,774 1,200
Wollongong 2.7 10,811 1,312
Total 34.7 128,771 15,606
Queensland
Burleigh Heads 3.3 12,428 1,468
Cairns 2.4 12,917 1,226
Cannon Hill 3.6 16,470 1,994
Fairfield Waters 2.9 13,645 1,390
Hemmant (Distribution Centre) 3.5 21,523 2,124
Hervey Bay 3.0 11,824 1,093
Morayfield 3.1 12,507 1,597
Mount Gravatt 2.7 11,824 1,033
Rocklea 3.1 12,671 1,477
Smithfield 3.1 13,182 1,300
Southport 3.5 12,431 1,445
Underwood 2.9 12,245 1,358
Total 37.1 163,667 17,504
Grand Total 205.0 838,718 92,634
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Note: Totals and Grand Total adjusted for rounding

• 1 total retail area of the Bunnings Warehouse

• 2 annual rental figures do not include access fees detailed below

• 3 development site for which Bunnings pays the Trust an access fee of $800,000 per annum

• 4 includes additional land (1.0 hectares) for which Bunnings pays the Trust an access fee of $221,636 per annum

• 5 development site for which Bunnings pays the Trust an access fee of $602,482 per annum

• 6 includes adjoining properties (0.1 hectares) for which Bunnings pays the Trust an access fee of $126,935 per annum

• 7 includes land (0.4 hectares) for which Bunnings pays the Trust an access fee of $68,000 per annum

• 8 includes adjoining property (1.0 hectares) for which Bunnings pays the Trust an access fee of $301,020 per annum

• 9 development site for which Bunnings pays the Trust an access fee of $1,060,000 per annum

Number of properties

	Western Australia 15 Victoria 24 Australian Capital Territory 2 South Australia 3 New South Wales 14 Queensland 12
	Total 70

• 10 includes adjoining property (0.5 hectares) for which Bunnings pays the Trust an access fee of $340,551 per annum

Sustainability

During the year our focus on sustainability continued to be primarily directed towards addressing climate change. As well as continuing to improve our data collection, measurement and reporting, we have also undertaken a number of practical measures to improve our sustainability.

Our commitment

In 2008/09 the board adopted a set of Sustainability Principles, shown in the accompanying table, for incorporating environmental, social and governance (“ESG”) issues into the Trust’s policies, practices and processes. These principles are based on the United Nations Principles for Responsible Investment and reflect the Trust’s commitment to sustainability and represent the benchmark against which the Trust will report on its activities and achievements.

Context and content of our sustainability reporting

The scale, domestic scope and relatively passive nature of our operations (refer to the next section) mean that our impacts on the environment and society are relatively minor in local, national and global contexts. We recognise, however, the interest in sustainability by investors, tenants, suppliers, regulators and the broader community and their right to understanding how and to what extent our business affects them, directly and indirectly, positively and negatively. We also recognise that even modest impacts, taken collectively and over time, can have a meaningful effect on the environment and society. We can also help to promote a focus on sustainability and contribute to developing better ways to measure and monitor sustainability performance.

With stakeholders’ interest in disclosure in mind, and our own commitment to provide a premium investment product to investors, we aim to disclose information relating to key aspects of ESG in order to demonstrate the Trust’s ESG impacts and risks and our performance in managing these impacts and risks. We consider that key aspects are those areas where ESG impacts and risks are material to our operations or are significantly important to stakeholders in their decision making processes to warrant disclosure.

The scale, scope and nature of our operations also mean that it may not be relevant, economic, or statistically accurate to collect and present data relating to ESG impacts and risks. Accordingly, much of the information presented is not quantified in terms that may be readily compiled or compared by stakeholders. Where possible we will attempt

Our Sustainability Principles

We are committed to acting responsibly and ethically and operating our business in a manner that is sustainable.

We have developed the following principles for incorporating environmental, social and governance (“ESG”) issues into our policies, practices and processes.

1. We will consider ESG issues in our investment analysis and decision-making processes.

2. We will address ESG issues in policies and practices regarding our ownership of our assets and our use of resources.

3. We will engage with suppliers and tenants on ESG issues.

4. We will report on the progress of our ESG activities and initiatives.

5. We will continue to build on our knowledge and understanding of ESG and ways of addressing ESG issues in order that we can assess opportunities for improved ESG performance.

to use estimates or otherwise indicate some measure of relativity as a guide to materiality and performance. The operations of both the Trust and the responsible entity are considered collectively and disclosed separately to the extent that it is relevant.

Given the range and breadth of ESG topics, we have given priority to those aspects that we consider to be most relevant to our operations and that provide the most opportunity for improved performance. On this basis our primary focus remains on the environment, more particularly climate change. We will endeavour to report more comprehensively on other relevant and material topics as we progress.

The scale, scope and nature of our operations

The Trust’s property business is relatively small on the global and national scales. It owns 70 properties, all in Australia, comprising land and warehouse-style improvements leased to other entities for use primarily as

Sustainability (continued)

bulky goods or warehouse retailing. The total area of land owned by the Trust is approximately 205 hectares, with gross lettable area of approximately 839,000 square metres. The total fair value of the Trust’s investment properties is approximately $1,226 million.

Most properties are subject to whole-of-site leases and the Trust has no operational control over the properties or the businesses operated at them. Some multi-tenanted properties have common areas for which the Trust is responsible for maintaining, typically car parks and other common access areas.

The responsible entity’s management team occupies a Perth based office of 127 square metres and the business is managed with a team of less than six employees.

1 ESG in investment analysis and decisions

Sustainability has been expressly incorporated into the Trust’s strategies, objectives and investment criteria. As part of the strategic planning process during the year ESG initiatives were included in proposed actions in the annual business plan.

During the year a comprehensive review of risks for the Trust was undertaken, and a specific detailed review was performed in relation to climate change risks and opportunities to help understand potential impacts and opportunities. ESG issues were also expressly considered in all 16 investment proposals and other business decisions considered by the board to ensure a continued focus on BWP’s commitment to consider and address ESG issues. A summary of the types of matters considered follows.

Acquisitions

As part of the assessment to acquire each property we considered what sustainability measures were included. Given the nature and use of the premises, sustainability measures generally comprised water recycling systems and energy efficient lighting. Under the leases, energy and water costs are borne by the tenant; therefore these measures do not have a direct financial benefit to the Trust. However, by helping to reduce tenants’ operating costs and improving the sustainability profile of properties, any sustainability measures are considered to enhance the quality and appeal of properties.

Property upgrades

In assessing proposals for upgrading three of the Trust’s Bunnings Warehouses we considered what features were to be incorporated to enhance the sustainability and lessen the environmental impact of the improvements and the properties overall. Sustainability measures in the upgrades included tri-level lighting within the expanded warehouse area (allowing light intensity to be varied according to the level of natural light available at different times), low energy Light Emitting Diode (“LED”) lighting in the nursery and car park and water recycling systems.

In addition to considering active sustainability measures offered by upgrades and other capital expenditure, we also considered broader environmental, social and governance issues, for example, the impacts of the upgrades on the tenant’s employees, customers, and local communities.

Roof safety and access

During the year, the Trust tendered roof access and safety works for a further 34 properties in the portfolio, following the completion of similar works at 21 properties in the portfolio in previous years. Works were completed during the year at 12 of these properties and the remaining 22 properties will be completed by 31 December 2011. We addressed sustainability issues in the design and construction of the roof safety works, through the choice of materials used in construction and requirements for packaging and handling. We chose fibre glass as the material for use in walkways rather than aluminium, based on our assessment that using fibre glass walkways would save approximately 800.9 tonnes CO2-e for the 34 properties up to the point of installation.

In addition to the estimated emissions savings from the choice of material, the suppliers have prefabricated the majority of the handrail and ladder systems off site to minimise installation time on site and consequently travel time and noise. Suppliers have also addressed waste management by reducing or eliminating the need for some packaging material and reusing or recycling other material (for example, wooden pallets are used over 10 times prior to recycling as waste timber).

Change in transactional banking

The Trust has historically had relatively modest transactional banking needs and has relied on traditional cheque-based payments. During the year the Trust tendered its transactional banking in order to move to an electronic payments system, for improved efficiency and to reduce resource use required to process, issue and deliver paper-based payments and receipts. A requirement of the request for proposals from each bank was that they identify their organisation’s commitment to sustainability and describe how the platform they proposed enhanced sustainability. While the shift to an electronic payments system in itself is not unusual or significant, making environmental criteria part of the selection process reinforces with our main suppliers our commitment to the environment and the importance of sustainability in the products and services they offer to customers.

2 Addressing ESG issues in our ownership of assets and use of resources

Roof safety and access

The roof access and safety improvements to a further 20 of the 34 Trust properties (refer to the immediately preceding section) commenced during the year were

undertaken to improve the safety and amenity of people having to access the roof areas of the Trust’s properties and to help maintain the longer-term condition of the properties.

CO Emissions 2

The Trust retains operational control over “common areas” at its multi-tenanted properties, being those areas not for exclusive use by the respective tenants, such as common parking areas and road and pedestrian access ways. During the year, lighting and energy usage audits were conducted on all of these common areas and a database of the energy use and emissions of these common areas was recorded. The table below provides details of the carbon emissions.

	Annual CO2-e
	Emissions	Reduction from
Property	(Tonnes)	previous year
Blackburn
industrial property	21.07	9.7%
Bayswater
showrooms	47.71	Not available
Geraldton
showrooms	9.12	Not available

Note: the Pakenham bulky goods property acquired by the Trust in April 2011 has common areas for which the Trust retains operational control. Due to the late inclusion of this property into the Trust’s portfolio and a lack of reliable information regarding energy use and emissions, this property has been excluded from this year’s reporting

The carbon emissions were calculated from data provided by electricity suppliers or estimates where no separate energy use data is available. Details of each property follow.

The electricity consumption of the common areas at the Blackburn property (office foyer and car park) is separately metered. Carbon emissions from common areas have been calculated from the electricity invoices for the period using the National Australia Built Environment Rating System (“NABERS”) calculation tool.

There are common areas for which the Trust retains operational control at both showrooms complexes adjoining the Trust’s Bunnings Warehouses at Bayswater, Victoria, and Geraldton, Western Australia. The common areas are car park and external paved areas. The common areas are not separately metered for electricity consumption and therefore direct consumption data for these areas is not available from the electricity provider. We engaged electricians to complete audits of the lighting and provide information about the lamp wattages and estimate the hours the lamps would operate. In addition, at the Bayswater showrooms; which shares car parking with the adjoining Bunnings Warehouse; we allocated a proportion of the estimated energy used in the common area car

park lighting to the showrooms. The allocation was made proportionately based on the respective retail areas. Our consultants used the electricians’ estimates and car park lighting allocations to estimate the carbon emissions using the NABERS calculation tool.

Our estimate of total carbon emissions from all three properties for the year is approximately 77.9 tonnes. The Blackburn property is the only property for which baseline data is available, which shows that emissions reduced by approximately 2.3 tonnes CO2-e, representing a 9.7 per cent reduction from the previous year. We attribute the reduction in energy consumption to the installation of light sensing lighting controls, which prevent the operation of the external lighting during daylight hours. Due to the lack of reliable baseline data and the early stage of our collection and understanding of data, we have not set any reduction targets.

Blackburn building improvements

The Building Energy Efficiency Disclosure Act 2010 requires offices with greater than 2,000 square metres of lettable area to disclose its energy efficiency at the time of sale or re-leasing. Although not mandatory for Bunnings Warehouses or industrial buildings, we installed electricity metering at the Blackburn industrial property to allow the Trust or tenants to monitor the electricity consumption in the various components (office/warehouse) of the building and make changes where appropriate to reduce energy consumption.

The existing fire sprinkler room at Blackburn was not fire rated, but complied with the building codes that applied when it was constructed. Current day Building Code of Australia requires the fire sprinkler room to be fire rated for a minimum of 60 minutes. While it was not mandatory to upgrade the room to current day standards, we upgraded the fire rating to the minimum standard to improve safety and protection of the building and its occupants. We also upgraded the early warning intercommunications system to allow more efficient communication in the event of a fire, providing a safer environment for occupants.

Air conditioning improvements

During the year, we replaced 13 air conditioning units that used R22 refrigerant, with units that use a refrigerant (R410A), which is not ozone depleting and non-carcinogenic. The R22 gas is being phased out of the refrigeration industry as it is carcinogenic and mildly ozone depleting if it leaks from the system.

Sustainability (continued)

3 Engaging with our suppliers and tenants on ESG issues

Bunnings, the Trust’s main tenant, is committed to materially reducing its environmental impact through a range of actions including energy efficiency measures, water conservation, waste reduction and ethical sourcing. More detailed information on Bunnings’ ongoing commitment to sustainability is available in the Wesfarmers Sustainability Report which can be viewed online at www.bunnings.com.au.

The Trust aims to support Bunnings in its initiatives where it is able to. During the year this included consenting to lodgement of development applications for the installation of rain water harvesting systems to many of the Trust’s Bunnings Warehouses. Bunnings has now installed rain water harvesting systems to 57 of the Trust’s 62 operating Bunnings Warehouses.

The Trust has consulted with Bunnings in relation to other potential initiatives as well as in regard to the required scope of design and installation of roof safety and access systems that the Trust has initiated on the majority of the Trust’s Bunnings Warehouses.

Also during the year, in the process of tendering the roof safety and access works for 34 of the Trust’s properties, the Trust engaged with one of the selected suppliers to ensure it adequately addressed waste management in its use of packaging materials.

4 Reporting on our ESG activities and initiatives

The sustainability principles provide a framework for the Trust to address and benchmark sustainability issues and performance by providing a structured approach to ESG activities, initiatives and disclosure. In addition to adopting these principles we have researched the Sustainability Reporting Guidelines (version 3) issued by the Global Reporting Initiative (“GRI”) as a guide to reporting content and format. We will consider the application of the GRI reporting framework and other formats that we consider are appropriate to our operations and stakeholder requirements to improve our disclosure as we progress.

In Australia, corporations with greenhouse gas emissions or energy consumption or production above specified thresholds, must report emissions and energy to the Australian Government under the National Greenhouse and Energy Reporting Act 2007 (“NGER”). The Trust is not required to report under the NGER, as its greenhouse gas emissions and energy consumption or production are below the specified thresholds. However, during the year, the Trust contributed for the first time to the

Carbon Disclosure Project, an independent, global notfor-profit organisation. The Carbon Disclosure Project aims to accelerate solutions to climate change and water management through collecting, standardising and making available relevant information from organisations about their greenhouse gas emissions, water management and climate change strategies. The information is made available for use by a wide audience, including institutional investors, corporations, policymakers and their advisors, public sector organizations, government bodies, academics and the public.

We have also included information on sustainability initiatives in our presentations to investors, for information and as the basis for discussion.

A summary of our performance during the year and future priorities, based on each of the Trust’s sustainability principles, is included in the table on page 17.

5 Building our ESG knowledge and understanding

The responsible entity completed a comprehensive, enterprise-wide risk review of the Trust’s operations during the year, covering all risks that may impact on the Trust’s and the responsible entity’s objectives and activities, including: financial, operational, regulatory, political/ social and environmental risks. A specific review of risks and opportunities presented by climate change was also undertaken. All risks relating to the effects of climate change are considered to be dealt with or manageable within established practices and controls.

During the year, our facilities manager attended the two day Green Cities 2011 sustainability conference held in Melbourne, Victoria; a course on the Building Energy Efficiency Act 2010 conducted by the Property Council of Australia; and a seminar on the National Australian Built Environment System. These training forums have provided a better understanding of green building practices that will assist in our approach to managing the Trust’s properties.

At the Blackburn multi-tenanted industrial property we are investigating options to reduce energy consumption such as generation of the site’s energy requirements from renewable or lower emission sources such as solar panels, wind turbines and gas. These investigations will provide a knowledge bank for improvements in the Trust’s ESG activities at other properties in the portfolio.

Summary of performance and future priorities

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Sustainability principle Performance during the year Future priorities
1 ESG in investment Comprehensive and Continue to refine and expand
analysis and decisions detailed risk assessment to ESG assessment criteria for
understand ESG impacts and investment analysis and decision
opportunities making [#]
2 ESG in asset Completed lighting and Review and update current
ownership and energy use audits of common Roof access and safety policies, procedures and systems
resource use areas to obtain preliminary improvements tendered to incorporate ESG principles and
usage data and measured for 34 properties and concepts where relevant [#]
improvements at Blackburn commenced on
of 9.7% reduction in CO2-e 20 properties. Choice of Assess the benefit of improving electricity and water metering
component material and
Electricity metering at multi-tenanted properties to
packaging and handling
improvements at Blackburn allow for more accurate capture of
requirements were based
industrial property to allow usage data
on reducing embodied
closer monitoring of energy
carbon, energy use and
Continue phase out programme
use by tenants
waste. Engagement
for ozone depleting air
with suppliers helped
A further 13 air conditioning conditioning [#]
ensure improved
units replaced as part of a
waste management. Continue final stage of roof access
joint initiative with tenant to
Consultation with tenant and safety improvements to
phase out ozone depleting
models to establish appropriate remaining properties [#]
design to meet tenant’s
3 Tenant and supplier Continued dialogue with operations Continue to engage with tenants
engagement Bunnings regarding its for a co-operative approach to
sustainability initiatives sustainability initiatives [#]
Develop ESG related supplier
selection and performance
criteria [#]
4 ESG reporting Improved level of qualitative disclosure in Trust’s reports Broaden scope of ESG disclosure
and presentations to other relevant and material
topics [#]
Commenced quantitative disclosure of carbon emissions
Improve scope and level of
Debut participation in Carbon Disclosure Project quantitative disclosure (e.g.
carbon emissions intensity, water
usage) [#]
5 Build knowledge and Risk review of climate related risks and opportunities Continue to improve technical
understanding was undertaken and confirmed that relevant risks were knowledge for application to
adequately covered by existing practices and controls operations and decision making [#]
Facilities Manager attendance at green building conference Improve understanding of user
and course and NABERS seminar requirements [#]
Investigation of alternative, lower emission electricity
sources for piloting at Blackburn industrial property
----- End of picture text -----*

• denotes achievement or progress towards future priorities from previous year(s)

denotes priorities carried over from or based on previous year(s)

Directors and senior management

John A Austin

Assoc Dip Val, FAPI (Val&Econ), Age: 65

Chairman, Non-executive external director

Joined the board in 2004 and was appointed Chairman in December 2007. John has been actively involved in professional property investment markets for over 40 years, during which he has been a proprietor of Jones Lang Wootton and an advisor in institutional property markets. He was the Managing Director of GRW Property Ltd, the sponsor and manager of the National Industrial Property Trust that listed in 1993 and was on a number of industry boards and committees. Currently he is Executive Chairman of Ringmer Pacific Pty Ltd, a private property investment company, Chairman of Leighton Properties Pty Ltd and is a non-executive director of the MREEF series of unlisted private property funds, managed by Macquarie Bank.

Peter J Mansell

BComm, LLB, HDip Tax, Age: 64

Non-executive external director

Joined the board in 1998. Peter practised as a commercial lawyer for over 35 years until he retired as a partner in Freehills in February 2004. Over the years as a solicitor, he has advised extensively on a number of wide-ranging corporate transactions. He was President of the Council of the Australian Institute of Company Directors, Western Australian Division, having sat on the national board of the Australian Institute of Company Directors Ltd in 2002 and 2003. During the past three years he has served as a director of the following companies:

Current directorships include:

• Ampella Mining Ltd

• Hanlong Mining Investments Pty Ltd

• Nystar NV (Belgium)

• Ferngrove Vineyards Ltd

• Foodbank Australia Ltd and Foodbank of Western Australia Incorporated

• Cancer Research Trust

Past Australian listed company directorships:

• OZ Minerals Limited (June 2008 to April 2010)

• ThinkSmart Ltd (April 2007 to May 2010)

• Great Southern Limited (November 2005 to September 2009)

• West Australian Newspapers Holdings Ltd (September 2001 to December 2008) (Chairman 2007-08)

Peter J Johnston

FCIS, FCPA, Age: 68

Non-executive external director

Joined the board September 2005. Peter previously held the position of Company Secretary of Wesfarmers between 1994 and 2001 and during that time was also an inaugural director of BWP Management Limited from 1998 until his retirement in 2001. He was a director of Kresta Holdings Limited and a number of Kresta group subsidiaries until 23 June 2010.

Rick D Higgins

FAPI, Age: 65

Non-executive external director

==> picture [103 x 558] intentionally omitted <==

Joined the board in December 2007. Rick is a property professional with over 40 years experience, having provided valuations and consultancy advice to a range of large institutional clients relating to a broad range of properties, including homemaker and bulky goods centres. Before joining the board, Rick was the National Director, Business Development for Colliers International Consultancy & Valuation and prior to this, he was employed by Jones Lang Wootton for 30 years as a National Director (formally proprietor) responsible for the national valuation and consultancy division. Rick provides ongoing consulting services to Colliers’ Retail Client Development Team. He is also a non-executive director of Charter Hall Direct Property Management Limited, a subsidiary of Charter Hall Group, and the responsible entity for a number of unlisted retail funds that invest in office, industrial and retail properties.

18 BWP TRuST Annual Report 2011

Bryce J H Denison

FCA, FCPA, Age: 63

Non-executive director (non-external)

Joined the board in October 2009. Bryce is a qualified accountant who previously held the position of General Manager, Group Accounting with Wesfarmers from 1986 to 2004. He has previously been the National President of the Group of 100 and has been a member of the Australian Accounting Standards Board. Prior to joining Wesfarmers, Mr Denison held various positions with accounting firm Ernst & Young over a 19 year period. He is a Fellow Member of the Institute of Chartered Accountants in Australia and CPA Australia.

Prior to joining the board, Mr Denison had been providing a consultancy service to the BWP Management Limited’s board on finance and accounting matters since 2005.

Grant W Gernhoefer

BComm, LLB, Age: 48

General Manager

Manager since January 2006. For the 12 years prior to becoming General Manager, Grant worked for Wesfarmers, initially as an in-house legal counsel and then in managing the group’s risk management and insurance program. Prior to joining Wesfarmers, Grant worked in the building industry in Australia and overseas.

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----- Start of picture text -----

1. Grant W Gernhoefer 1 2 3 4 5 6
2. Peter J Johnston
3. Bryce J H Denison
4. John A Austin
5. Peter J Mansell
6. Rick D Higgins
BWP TRuST Annual Report 2011 19
----- End of picture text -----

Corporate governance

The responsible entity is committed to fostering a strong governance culture and framework based on the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (“ASX Principles”).

The governance framework is embedded in the Trust’s compliance plan (referred to under the heading “Risk control and compliance” on page 22) to ensure ethical behaviour and transparency and to protect unitholders’ interests.

This statement outlines the main corporate governance practices of the responsible entity, which were in place throughout the year and at the date of this report. In accordance with the ASX Principles, the responsible entity has posted copies of its corporate governance practices on its website: www.bwptrust.com.au.

The ASX Principles have been drafted primarily for listed companies, and not all of the recommendations are readily applicable for a registered managed investment scheme and its responsible entity. However, the responsible entity seeks to comply with the majority of the ASX Principles. Where it does not, it is largely in respect of obligations to disclose material or matters where the nature of regulation of listed trusts or of the Trust’s business is such that the board of the responsible entity considers that there has been no detriment to the unitholders of the Trust from noncompliance. Areas of non-compliance and the reasons for non-compliance are noted in this statement.

Relationship between the responsible entity and Wesfarmers

The responsible entity is a wholly owned subsidiary of Wesfarmers . A majority of the property income of the Trust is received from wholly owned subsidiaries of Wesfarmers. The Trust has purchased property from Wesfarmers subsidiaries, and utilised a Wesfarmers subsidiary, Bunnings, as project manager on property developments. Wesfarmers is a substantial unitholder in the Trust, and details of Wesfarmers’ unitholding can be found on page 51 of this report. Further information regarding the relationship and transactions with Wesfarmers is detailed in Note 18(d) in the notes to the financial statements. Details of transactions with Wesfarmers are also provided in announcements released to ASX and published on the Trust’s website.

ASX Waiver

The Trust holds a waiver from ASX (“waiver”), which allows the responsible entity to enter into certain leasing transactions on behalf of the Trust with Bunnings, a related party, without the need to obtain unitholder approval under Listing Rule 10.1.

The waiver is subject to certain conditions including disclosure of new leases, that lease agreements are substantially on the same terms and conditions established by the parties for leases of Bunnings Warehouse properties, and appropriate rent review provisions are in place.

The waiver was renewed on 16 September 2010 and applies for six years.

Roles of the board and management

The respective roles and responsibilities of the board and management are set out in the compliance plan.

The role of the board of the responsible entity is to ensure that the Trust is managed in a manner that protects and enhances the interests of its unitholders and takes into account the interests of officers of the responsible entity, customers, suppliers, lenders and the wider community.

The board has overall responsibility for corporate governance, including setting the strategic direction for the Trust, establishing goals for management and monitoring the achievement of these goals. The board’s responsibilities and duties include:

• adopting annual operating budgets for the Trust and monitoring progress against budgets;

• monitoring and overseeing the Trust’s financial position;

• determining that satisfactory arrangements are in place for auditing the Trust’s financial affairs;

• ensuring that all transactions with Wesfarmers and other related parties are carried out at arm’s length, including obtaining independent valuation support for property related transactions;

• reviewing the level and adequacy of services provided by external service providers including services provided by Wesfarmers;

• ensuring that appropriate policies and compliance systems are in place, and that the responsible entity and its officers act legally, ethically and responsibly on all matters; and

• complying with the statutory duties and obligations as imposed by law.

The board has delegated responsibility for the day to day management of the Trust to the General Manager.

The separation of responsibilities between the board and management is clearly understood and respected.

Board meetings

As provided for in the Trust’s compliance plan, the board holds at least six scheduled meetings each year, although additional meetings may be called as and when required.

During the year the board held 13 meetings.

Board structure

The board is currently comprised of five non-executive directors including the Chairman. The board is satisfied that the composition of the board is appropriate and accords with the requirements in the Trust’s compliance plan to maintain an appropriate range of backgrounds, skills and experience.

Details of directors in office at the date of this report, including their status as executive, non-executive or “external” directors are set out on pages 18 to 19 of this report.

Director independence

Directors of the responsible entity are expected to bring an independent view to the board’s deliberations.

It is the responsible entity’s policy that the board composition will comprise a majority of non-executive directors who are considered to be “independent”. Under the regulations applicable to managed investment schemes, “independence” is determined according to the definition of “external directors” in section 601JA of the Corporations Act (“the Act”).

Under section 601JA of the Act, a director of the responsible entity is an external director if they:

• a) are not, and have not been in the previous two years, an employee of the responsible entity or a related body corporate; and

• b) are not, and have not been in the previous two years, a senior manager of a related body corporate; and

• c) are not, and have not been in the previous two years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

• d) are not a member of a partnership that is, or has been in the previous two years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

• f) are not a relative of a person who has a material interest in the responsible entity or a related body corporate.

Four directors of the responsible entity, including the Chairman, are external directors as defined by section 601JA of the Corporations Act.

This definition against which their independent status is assessed differs from that applied by the ASX Principles to directors of listed companies.

The board’s assessment of the independence of each of the directors is included as part of the directors’ details on pages 18 to 19 of this report.

Mr Bryce Denison was a consultant to the responsible entity in the previous two years and is therefore not an external director as defined by section 601JA of the Corporations Act.

The board is satisfied that all directors bring an independent judgement to bear on board decisions in relation to the affairs of the Trust and its unitholders.

Selection and appointment of directors

The responsible entity has recognised the importance of having a balanced board comprised of directors with an appropriate range of backgrounds, skills and experience. In considering potential candidates for appointment to the board, the board considers the following factors:

• the skills, knowledge and experience of the person which are relevant to the role of director of the responsible entity;

• the extent to which the skills, knowledge and experience of the person complement the qualifications, expertise and experience of incumbent directors;

• the professional and personal reputation of the person; and

• any person nominated as an executive director must be of sufficient stature and security of employment to express independent views on any matter.

All non-executive directors are expected to voluntarily review their membership of the board from time to time taking into account length of service, age, qualifications and expertise relevant to the responsible entity’s then current policy and programme, together with the other criteria considered desirable for composition of a balanced board and the overall interests of the responsible entity and the Trust.

In addition, each quarter, all non-executive directors are required to review the number of directorships that they hold and confirm that they are able to devote sufficient

• e) do not have a material interest in the responsible entity or a related body corporate; and

Corporate governance (continued)

time and attention to properly fulfil their duties and responsibilities to the board of the responsible entity.

The board considers that the establishment of a nomination committee is unnecessary given that:

• the board consists of only five directors and is not of a size sufficient to justify the formation of a board committee for this task;

• the board complies with the independence standards applicable to registered managed investment schemes as set out above; and

• when considering new candidates for nomination or appointment as directors, the board assesses the skills, knowledge and experience of its existing members, and based on that evaluation is able to select from those candidates who bring a complementary range of skills and expertise to the responsible entity’s board.

Given that there is not a nomination committee, the responsible entity does not comply with Recommendation 2.4 of the ASX Principles.

Independent professional advice

Subject to prior approval of the Chairman, directors may obtain independent professional advice at the expense of the responsible entity on matters arising in the course of their board duties.

Trading in units

Trading in the Trust’s securities by directors, employees and contractors of the responsible entity is restricted under the responsible entity’s Securities Dealing Policy and applicable statutory regulations.

The policy is published on the Trust’s website at www.bwptrust.com.au.

Audit and risk committee

The compliance plan entrenches processes for reporting and audit purposes.

The board has a formally constituted audit and risk committee. A copy of the Audit and Risk Committee Charter is available on the Trust’s website.

The committee consists of the entire board and is chaired by an external director, who is not the chairman of the board. Four of the committee’s five members are external directors. All are non-executive directors. During the year the committee held two meetings attended by all directors.

Risk control and compliance

As a registered managed investment scheme, the responsible entity has a compliance plan that has been lodged with the Australian Securities and Investments Commission (ASIC) and a copy of the compliance plan can be obtained from ASIC.

The compliance plan is reviewed comprehensively every year to ensure that the way in which the responsible entity operates protects the rights and interests of unitholders and that business risks are identified and properly managed.

In particular, the compliance plan establishes processes for:

• identifying and reporting breaches of, or noncompliance with, the Corporations Act, the compliance plan, the constitution of the Trust and the responsible entity’s Australian Financial Services Licence;

• complying with the ASX Listing Rules;

• protecting Trust property;

• ensuring proper acquisition and disposal practices are followed in regard to Trust property;

• ensuring the timely collection of Trust income;

Financial reporting

General Manager declaration

In accordance with section 295A of the Corporations Act 2001, the Trust’s financial report preparation and approval process for the financial year ended 30 June 2011, involved the General Manager of the responsible entity providing a written statement to the board that, to the best of his knowledge and belief:

• the Trust’s financial report presents a true and fair view of the Trust’s financial condition and operating results and is in accordance with applicable accounting standards; and

• the Trust’s financial records for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001.

• completing regular valuations of Trust property;

• the maintenance of financial and other records to facilitate preparation of audited/reviewed financial reports;

• ensuring proper and timely distributions to unitholders;

• complying with the Trust’s investment objectives;

• managing investment risk;

• managing potential conflicts of interest with the various related parties of the Trust;

• holding and maintaining adequate insurance cover;

• ensuring that borrowing occurs only within permitted limits and ensuring that borrowing terms are complied with; and

• handling complaints relating to the Trust.

KPMG, the external auditor of the compliance plan, has completed its annual audit for the year ended 30 June 2011. No material breaches of the plan were identified as a result of this audit.

The audit and risk committee is also responsible for assisting the board in overseeing the Trust’s risk management systems. The committee is responsible for reviewing the effectiveness of those systems and recommending improvements to them.

In addition to the compliance plan, the responsible entity has in place a number of risk management controls which include the following:

• guidelines and limits for the approval of capital and operating expenditure;

• policies and procedures for the management of financial risk, including exposure to financial instruments and movement in interests rates; and

• an insurance and risk management programme.

As the majority of members of the board are “external directors” (as defined in section 601JA of the Corporations Act), the board does not consider it is currently necessary to form a separate compliance committee in addition to the board of the responsible entity.

General Manager’s statement

In accordance with ASX Principle 7, the General Manager has provided the board with a written statement that:

• the statement given with respect to the integrity of the financial statements (referred to under the heading “Financial Reporting” above) was founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board of the responsible entity; and

• the Trust’s risk management and internal compliance and control system was operating effectively in all material respects in relation to financial reporting risks.

Review of board and committee performance

The board and the audit and risk committee participate in performance evaluations on average every two years. The next evaluation is scheduled for the second half of 2011.

Remuneration policies

The right of the responsible entity to be remunerated and indemnified by the Trust is set out in the constitution of the Trust and disclosed in Note 4 to the financial statements in this report. The constitution is available from ASIC and is available to unitholders on request.

Remuneration of directors and executives

Remuneration expenses of the responsible entity are not borne by the Trust. Directors are remunerated by the responsible entity, and management services are provided to the responsible entity by Wesfarmers.

For the financial year ended 30 June 2011, each director was entitled to a director’s fee. Directors do not receive options or bonus payments, nor do they receive retirement benefits in connection with their directorships other than statutory superannuation. There are no equity incentive schemes in relation to the Trust.

Details of the remuneration policy for directors are disclosed in Note 18 to the financial statements.

Remuneration committee

The board previously considered that the establishment of a remuneration committee was not necessary given that:

• the board consists of only five directors and is therefore not of a size sufficient to justify the formation of a separate remuneration committee;

• the responsible entity’s fee is prescribed in the constitution of the Trust and any change to that fee would require the approval of unitholders; and

• as directors and officers of the responsible entity are not remunerated by the Trust, unitholders have no direct exposure to those remuneration expenses.

Given that there was not a remuneration committee in place during the year, the responsible entity did not comply with Recommendations 8.1 and 8.2 of the ASX Principles.

A remuneration committee has been established subsequently to comply with new listing rules introduced on 1 July 2011.

Diversity

The board of the responsible entity will consider over the next year what diversity policies and measures can practically be implemented for the responsible entity. The responsible entity has five employees and one contractor (including two women). With such a small and stable workforce, the introduction of targets and statistical analysis of performance against targets is not considered to be practical or meaningful. There is no expectation that the responsible entity’s workforce will increase by any notable extent in the foreseeable future.

Corporate governance (continued)

The responsible entity is an unlisted subsidiary of Wesfarmers with a small board. Its board members are appointed by its sole shareholder. There are presently no women on the board.

Consideration will be given over the next year as to what diversity strategies and measurable objectives can practically be developed for this entity.

Conflicts management policy

The Trust’s compliance plan sets out the conflicts management policy, including the procedure for managing conflicts of interest. The policy applies to all directors and officers of the responsible entity.

The policy identifies circumstances where conflicts of interest may arise and outlines the requirement to evaluate conflicts, control or avoid conflicts and disclose relevant conflicts of interest. The policy also sets out who is responsible for managing conflicts and addresses the requirement to monitor, review and have appropriate approval of the conflicts management policy.

Ethics and conduct

The responsible entity has adopted a code of conduct that sets out minimum acceptable standards of behaviour to ensure that dealings are conducted with integrity and honesty, and that the highest standards of corporate behaviour and accountability are maintained.

In addition, the board has adopted the Code of Conduct for directors recommended by the Australian Institute of Company Directors.

Sustainability

The responsible entity is committed to acting responsibly and ethically and operating its business in a manner that is sustainable. Further information on the Trust’s sustainability principles and practices are provided on pages 13 to 17 of the Manager’s Report.

The board has also adopted a Directors’ Conflict of Interests Policy that governs the disclosure of directors’ interests and procedures for managing conflicts.

Continuous disclosure and communications with unitholders

The responsible entity has systems in place to ensure timely disclosure of price sensitive information to the market. Officers of the Trust receive training on their continuous disclosure obligations and all announcements made to the market, including information provided to analysts, are posted to the Trust’s website.

The Continuous Disclosure and Market Communications Policy is available on the website.

To enhance communication with unitholders, important information including details of the Trust’s properties, financial performance, ASX announcements, governance practices, distribution history and the Trust’s complaints handling procedure can be found on the Trust’s website.

The responsible entity provides advance notification of teleconferenced investor briefings following results announcements and makes these accessible for all investors.

24 BWP TRuST Annual Report 2011

Financial statements

Statement of Comprehensive Income	26
Distribution Reconciliation and Statement	27
Statement of Financial Position	28
Statement of Cash Flows	29
Statement of Changes in Equity	30
Notes to the Financial Statements	3 1
Directors’ Report	53
Directors’ Declaration	57
Auditor’s Independence Declaration	58
Independent Auditor’s Report	59
unitholder Information	6 1

BWP TRuST Annual Report 2011 25

Statement of Comprehensive Income

For the year ended 30 June 2011

Rental income Other property income Finance income Total revenue Finance costs Responsible entity’s fees Other operating expenses Net proft before unrealised gain in fair value of investment properties Unrealised gain in fair value of investment properties Net proft attributable to unitholders of BWP Trust Other comprehensive income/(loss) Effective portion of changes in fair value of cash fow hedges Total comprehensive income for the period attributable to the unitholders of BWP Trust Basic and diluted earnings (cents per unit) resulting from net proft	Note	June 2011 $000 June 2010 $000
	3 3 4 9 3 6	81,875 76,619 2,236 1,406 1,162 513
		85,273 78,538
		(19,094) (19,144) (6,048) (5,543) (3,962) (3,441)
		56,169 50,410 25,328 41,772
		81,497 92,182
		2,638 (81)
		84,135 92,101
		17.97 22.18

The statement of comprehensive income should be read in conjunction with the accompanying notes

26 BWP TRuST Annual Report 2011

Distribution Reconciliation and Statement

For the year ended 30 June 2011

DISTRIBUTION RECONCILIATION Net proft attributable to unitholders of BWP Trust Net realised proft on sale of investment property1 Net unrealised proft in fair value of investment properties Distributable proft for the year Opening undistributed proft Closing undistributed proft Distributable amount Distribution (cents per unit) DISTRIBUTION STATEMENT Net proft attributable to unitholders of BWP Trust Undistributed income at the beginning of the fnancial year Distributions paid or payable Undistributed income at the end of the fnancial year		June 2011 $000 June 2010 $000
		81,497 92,182 376 - (25,328) (41,772)
		56,545 50,410 16 33 (9) (16)
		56,552 50,427
		11.98 12.08 81,497 92,182 289,371 247,616 (56,552) (50,427)
		314,316 289,371

1 Net sale proceeds less original purchase price and capital expenditure since acquisition

BWP TRuST Annual Report 2011 27

Statement of Financial Position

As at 30 June 2011

ASSETS Current assets Cash Receivables and prepayments Total current assets Non-current assets Other receivables Investment properties Derivative fnancial instruments Total non-current assets Total assets LIABILITIES Current liabilities Payables and deferred income Derivative fnancial instruments Distribution payable Total current liabilities Non-current liabilities Interest-bearing loans and borrowings Derivative fnancial instruments Total non-current liabilities Total liabilities Net assets Unitholders’ equity Issued capital Reserves Undistributed income Total unitholders’ equity Net tangible asset backing per unit1	Note	June 2011 $000 June 2010 $000
	7 8 8 9 10 5 11 12 13	8,942 21,687 5,623 3,259
		14,565 24,946
		850 850 1,225,881 1,000,111 833 487
		1,227,564 1,001,448
		1,242,129 1,026,394
		12,664 10,531 378 203 30,161 25,159
		43,203 35,893
		210,844 193,474 1,763 4,230
		212,607 197,704
		255,810 233,597
		986,319 792,797
		673,311 507,372 (1,308) (3,946) 314,316 289,371
		986,319 792,797
		$1.90 $1.88

1 Total net assets divided by the number of units on issue as at 30 June

The statement of financial position should be read in conjunction with the accompanying notes

28 BWP TRuST Annual Report 2011

Statement of Cash Flows

For the year ended 30 June 2011

Cash fows from operating activities Rent received Payments to suppliers Payments to the responsible entity Finance income Finance costs Net cash fows from operating activities Cash fows from investing activities Proceeds from the sale of an investment property Payments for purchase of, and additions to, investment properties Net cash fows used in investing activities Cash fows from fnancing activities Proceeds/(repayments) of borrowings Proceeds from issue of units via pro-rata entitlement offer Expenses incurred in pro-rata entitlement offer Distributions paid Net cash fows from/(used in) fnancing activities Net decrease in cash Cash at the beginning of the fnancial year Cash at the end of the fnancial year	Note	June 2011 $000 June 2010 $000
	14 7	96,964 86,781 (14,011) (14,197) (5,887) (5,515) 1,162 513 (19,118) (19,254)
		59,110 48,328
		7,408 - (211,005) (5,780)
		(203,597) (5,780)
		17,370 (32,463) 150,005 - (3,647) 67 (31,986) (27,186)
		131,742 (59,582)
		(12,745) (17,034) 21,687 38,721
		8,942 21,687

The statement of cash flows should be read in conjunction with the accompanying notes

BWP TRuST Annual Report 2011 29

Statement of Changes in Equity

For the year ended 30 June 2011

Balance at 1 July 2009 Total comprehensive income for the year attributable to the unitholders of BWP Trust Net proft attributable to unitholders of BWP Trust Other comprehensive loss: effective portion of changes in fair value of cashfow hedges Transactions with unitholders recorded directly in equity Distributions to unitholders Equity issued during the year: Distribution Reinvestment Plan Expenses incurred in pro-rata entitlement offer Balance at 30 June 2010 Balance at 1 July 2010 Total comprehensive income for the year attributable to the unitholders of BWP Trust Net proft attributable to unitholders of BWP Trust Other comprehensive income: effective portion of changes in fair value of cashfow hedges Transactions with unitholders recorded directly in equity Distributions to unitholders Equity issued during the year: Pro-rata entitlement offer Distribution Reinvestment Plan Expenses incurred in pro-rata entitlement offer Balance at 30 June 2011	Issued capital $000 Undistributed income $000 Hedge reserve $000 Total $000
	489,273 247,616 (3,865) 733,024 - 92,182 - 92,182 - - (81) (81) - (50,427) - (50,427) 18,032 - - 18,032 67 - - 67
	507,372 289,371 (3,946) 792,797
	507,372 289,371 (3,946) 792,797 - 81,497 - 81,497 - - 2,638 2,638 - (56,552) - (56,552) 150,005 - - 150,005 19,581 - - 19,581 (3,647) - - (3,647)
	673,311 314,316 (1,308) 986,319

The statement of changes in equity should be read in conjunction with the accompanying notes

30 BWP TRuST Annual Report 2011

Notes to the Financial Statements

For the year ended 30 June 2011

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial statements have been prepared in accordance with the requirements of the Constitution of BWP Trust (the Trust) and Australian Accounting Standards. The financial statements have been prepared on an historical cost basis, except for investment properties and derivative financial instruments, which have been measured at their fair value.

The financial statements are presented in Australian dollars, which is the Trust’s functional currency and all values are rounded to the nearest thousand dollars ($000) under the option available to the Trust under ASIC Class Order 98/100, unless otherwise stated.

(b) Statement of compliance

The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board and the Corporations Act 2001. The financial statements of the Trust comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The Trust has adopted all of the new and revised standards and interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for financial reporting periods beginning on or before 1 July 2010. The adoption of these standards has given rise to additional disclosure but did not have a material effect on the financial statements of the Trust.

A number of new standards, amendments to standards and interpretations are available for early adoption but have not been applied in preparing these financial statements. The potential impact of the new standards, amendments to standards and interpretations has been considered and they are not expected to have a significant effect on the financial statements.

(c) Significant judgements and estimates

In applying the Trust’s accounting policies management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations about future events that may have an impact on the Trust. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below.

Investment properties – operating leases

The Trust has entered into commercial property leases on its investment portfolio.

The Trust has determined that it retains all the significant risks and rewards of ownership of these properties and has thus classified the leases as operating leases (see Notes 1(e), 1(n), and 9(c)).

Investment properties – valuations

Investment properties are revalued each balance date to reflect their fair value according to the Trust’s policy on valuing assets and applying generally accepted valuation criteria, methodology and assumptions (see Notes 1(e) and 9(a)).

Financial instruments - valuations

The fair value of interest rate swap contracts is determined by reference to market values for similar instruments (see Note 1(m)).

BWP TRuST Annual Report 2011 31

For the year ended 30 June 2011

Notes to the Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Finance costs

Finance costs are recognised as an expense when incurred, with the exception of interest charges on funds invested in properties with substantial development and construction phases, which are capitalised to the property until such times as the construction work is complete.

The capitalisation rate used to determine the amount of finance costs to be capitalised is the weighted average interest rate applicable to the Trust’s outstanding borrowings during the year.

(e) Investment properties

Initially, investment properties are measured at cost including transaction costs. Expenditure capitalised to properties includes the cost of acquisition, capital and refurbishment additions, and during development includes rates, taxes, financing charges and related professional fees incurred, net of sundry income. Subsequent to initial recognition investment properties are measured at fair value. Gains or losses arising from changes in the fair values of investment properties are included in the statement of comprehensive income in the year in which they arise.

Where assets have been revalued, the potential effect of the capital gains tax (CGT) on disposal has not been taken into account in the determination of the revalued carrying amount. The Trust does not expect to be ultimately liable for CGT in respect of the sale of assets as all realised gains would be distributed to unitholders.

(f) Cash

Cash in the statement of financial position, and for the purposes of the statement of cash flows, comprises cash at bank and short term deposits.

(g) Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities that are interest-bearing are included as part of the carrying amount of loans and borrowings.

Borrowings are classified as non-current liabilities if the Trust has an unconditional right to defer settlement of the liability for at least 12 months after the balance date.

(h) Impairment

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are included in the statement of comprehensive income.

(i) Payables

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not these have been billed to the Trust. These liabilities are normally settled on 30 day terms except for the responsible entity’s fees payable, which are settled quarterly in arrears, and retention monies withheld on construction projects which are settled according to the terms of the construction contracts.

(j) Distribution payable

Each reporting period the directors of the responsible entity are required to determine the distribution entitlement of the unitholders in respect of the period. Any amounts so determined but not paid by the end of the period, are recorded as a liability.

32 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

(k) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured.

The following specific measurement criteria must also be met before revenue is recognised:

Rental and other property income

Rental and other property income is recognised on a straight-line basis over the lease term.

Interest income

Revenue is recognised as the interest accrues, using the effective interest method.

(l) Taxation

Income Tax

Under current Australian income tax legislation, the Trust is not liable for income tax, provided that its taxable income (including any realised capital gains) is fully distributed to unitholders each year.

Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(m) Derivative financial instruments

The Trust enters into derivative financial instruments in the form of interest rate swap agreements, which are used to convert the variable interest rate of its borrowings to fixed interest rates. For the purpose of hedge accounting, these hedges are classified as cash flow hedges. The swaps are entered into with the objective of reducing the risk associated with interest rate fluctuations.

Derivative financial instruments are stated at fair value. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and any ineffective portion is considered a finance cost and is recognised in net profit or loss in the statement of comprehensive income. The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss, at which point it is transferred to net profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively.

The Trust manages its financial derivatives (interest rate swaps) to ensure they meet the requirements of a cash flow hedge.

(n) Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreements so as to reflect the risks and benefits incidental to ownership.

BWP TRuST Annual Report 2011 33

For the year ended 30 June 2011

Notes to the Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(n) Leases (continued)

Operating leases

The minimum rental revenues of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased items, are included in the determination of the net profit in equal instalments over the lease term.

Leasing fees incurred in relation to the on-going renewal of major tenancies are deferred and amortised over the lease period to which they relate.

Lease incentives, which may take the form of up-front payments, contributions to certain lessees’ costs, relocation costs and fit-outs and improvements, are recognised on a straight-line basis over the lease term as a reduction of rental income.

(o) Units on issue

Units on issue are recognised at the fair value of the consideration received by the Trust. Any transaction costs arising on the issue of ordinary units are recognised directly in equity as a reduction of the unit proceeds received.

The Trust operates a Distribution Reinvestment Plan (DRP). An issue of units under the DRP results in an increase in issued capital.

(p) Earnings per unit

Basic earnings per unit is calculated as net profit attributable to unitholders divided by the weighted average number of units.

The diluted earnings per unit is equal to the basic earnings per unit.

(q) Segment Reporting

The Trust determines and presents operating segments based on the internal information that is provided to the General Manager, who is the Trust’s chief operating decision maker.

The Trust operates wholly within Australia and derives rental income from investments in commercial property of which 95.3 per cent of this income is derived from one tenant and as such this is considered to be the only segment in which the Trust is engaged. Refer to notes 16 and 18 for further information.

The operating results are regularly reviewed by the General Manager to make decisions about resources to be allocated and to assess performance. There are no reconciling items that exist between the discrete financial information reviewed by the General Manager and the financial statements relating to revenue, profit or loss, assets and liabilities or other material items.

2. AUDITOR’S REMUNERATION Auditing and review of the fnancial statements KPMG Australia Other services KPMG Australia - taxation services	June 2011 $ June 2010 $
	69,107 60,115 22,800 17,850
	91,907 77,965

34 BWP TRuST Annual Report 2011

Notes to the Financial Statements

For the year ended 30 June 2011

3. FINANCE INCOME AND ExPENSE Recognised directly in proft and loss Finance income - interest income on bank deposits Finance expense - interest expense on fnancial liabilities measured at amortised cost Net fnance income and expense Recognised in other comprehensive income/(loss) Net change in fair value of cash fow hedges transferred to net proft - ineffective portion of changes in fair value of cash fow hedges Net gains/(losses) on cash fow hedges for the year Finance expense recognised in other comprehensive income 4. RESPONSIBLE ENTITY’S FEES

June 2011 $000 June 2010 $000 1,162 513 (19,094) (19,144) (17,932) (18,631) - (2) 2,638 (79) 2,638 (81)

The responsible entity, BWP Management Limited, is entitled to a management fee payable quarterly in arrears of 0.55 per cent per annum of the gross asset value of the Trust.

The responsible entity is also entitled to a fee calculated at the rate of 0.05 per cent per annum of the gross asset value of the Trust up to $200 million and 0.035 per cent per annum of the amount by which the gross asset value of the Trust exceeds $200 million.

The responsible entity may waive the whole or any part of the remuneration to which it would otherwise be entitled. (See Note 18(d)(ii)e).

5. DISTRIBUTIONS PAID OR PAYABLE 6.18 cents (2010: 6.10 cents) per unit, interim distribution paid on 25 February 2011 5.80 cents (2010: 5.98 cents) per unit, fnal distribution provided	June 2011 $000 June 2010 $000
	26,391 25,268 30,161 25,159
	56,552 50,427

BWP TRuST Annual Report 2011 35

Notes to the Financial Statements

For the year ended 30 June 2011

		June 2011	June 2010
6.	EARNINGS PER UNIT
	Net earnings used in calculating basic and diluted earnings per unit	$81,497,000	$92,182,000
	Basic and diluted earnings per unit	17.97 cents	22.18 cents
	Basic and diluted earnings per unit excluding unrealised gain in fair value of
	investment properties	12.38 cents	12.13 cents
	Weighted average number of units on issue used in the calculation of basic and diluted
	earnings per unit	453,588,624	415,684,457
		June 2011	June 2010
		$000	$000
7.	CASH
	Cash at bank	8,942	6,075
	Short term deposits	-	15,612
		8,942	21,687
	Weighted average effective interest rates	4.59%	3.17%
	The Trust’s exposure to interest rate risk and a sensitivity analysis for fnancial assets and	liabilities are set out	in Note 16.
		June 2011	June 2010
		$000	$000
8.	RECEIVABLES AND PREPAYMENTS
	Current
	Receivables from Wesfarmers Limited subsidiaries	130	793
	Other receivables	117	152
	Prepayments	5,376	2,314
		5,623	3,259
	Non-current
	Loan to Bunnings Group Limited	850	850

Wesfarmers Limited is a related party (see Note 18(d)(i)).

Bunnings Group Limited is a controlled entity of Wesfarmers Limited. The terms and conditions of the loan are disclosed in Note 18(d)(ii)f).

36 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

9. INVESTMENT PROPERTIES (NON-CURRENT)

(a) Cost and fair value of investments

				Capital	Fair value
				improvements	adjustment	Fair value	Fair value
		Purchase	Acquisition	since	since	30 June	30 June	Last
	Acquisition	price	costs	acquisition	acquisition	2011	2010	independent
Property	date	$000	$000	$000	$000	$000	$000	valuation
Albany, WA	01.11.99	4,100	206	3	5,591	9,900	9,600	31.12.10
Altona, VIC	24.09.98	6,800	566	2,781	6,010	16,157	15,757	31.12.09
Artarmon, NSW	10.02.03	14,033	864	47	6,856	21,800	21,200	31.12.08
Balcatta, WA	24.09.98	11,200	555	20	12,425	24,200	23,500	30.06.09
Bayswater, VIC	11.02.03	7,335	796	13,523	2,946	24,600	24,600	30.06.09
Belmont, WA	01.04.11	16,670	920	-	(890)	16,700	-	15.01.11
Belmont North, NSW	04.12.06	10,850	634	290	(974)	10,800	10,600	31.12.09
Belrose, NSW	10.02.03	17,150	1,054	256	7,240	25,700	25,000	31.12.08
Bibra Lake, WA	29.12.98	1,899	95	6,357	11,449	19,800	19,200	31.12.10
Blackburn, VIC	15.01.08	19,000	1,123	1,052	(3,675)	17,500	16,600	31.12.10
Blacktown, NSW	24.01.07	8,235	540	259	(2,634)	6,400	6,000	31.12.09
Broadmeadows, VIC	24.09.98	7,200	431	6,475	6,894	21,000	13,900	30.06.10
Burleigh Heads, QLD	22.10.98	9,700	195	264	5,441	15,600	15,500	30.06.09
Cairns, QLD	10.02.03	10,000	453	1,922	1,825	14,200	13,900	31.12.08
Canning Vale, WA	-	-	-	-	-	-	7,500	31.12.09
Cannon Hill, QLD	24.12.98	5,600	313	7,824	9,663	23,400	21,700	30.06.10
Caroline Springs, VIC	23.05.11	19,080	1,081	-	(1,061)	19,100	-	15.01.11
Cockburn, WA	01.04.11	18,670	1,025	-	(995)	18,700	-	15.01.11
Coffs Harbour, NSW	05.09.01	1,900	112	4,500	3,688	10,200	9,900	30.06.10
Croydon, VIC	24.09.98	7,800	518	5,619	7,563	21,500	20,900	31.12.09
Dandenong, VIC	19.04.02	4,000	255	6,667	5,878	16,800	16,300	31.12.10
Epping, VIC	12.03.99	7,800	463	-	6,237	14,500	14,000	30.06.10
Fairfeld Waters, QLD	01.04.11	16,950	977	-	(627)	17,300	-	15.01.11
Fountain Gate, VIC	24.09.98	8,300	505	1,580	7,815	18,200	17,700	31.12.08
Frankston, VIC	26.06.01	7,300	301	9,406	8,993	26,000	25,000	30.06.10
Fyshwick, ACT	23.12.02	10,000	942	3,538	2,291	16,771	17,305	31.12.08
Geraldton, WA	10.12.01	1,250	351	5,228	5,071	11,900	11,600	30.06.10
Geraldton Showrooms, WA	11.09.07	2,897	190	812	(1,399)	2,500	2,500	30.06.10
Greenacre, NSW	01.04.11	13,250	828	-	-	14,078	-	15.01.11
Harrisdale, WA	01.04.11	10,000	571	-	-	10,571	-	15.01.11
Hawthorn, VIC	18.04.07	19,337	1,217	24,497	(4,151)	40,900	39,700	31.12.08
Hemmant, QLD	07.05.03	3,000	143	10,557	8,600	22,300	21,800	30.06.09
Hervey Bay, QLD	12.07.02	2,053	122	6,426	3,899	12,500	12,300	30.06.11
Hoppers Crossing, VIC	11.01.99	2,075	134	5,928	7,263	15,400	15,000	30.06.11
Joondalup, WA	24.09.98	8,100	593	21	7,486	16,200	15,700	30.06.09
Lismore, NSW	21.04.04	7,750	447	928	1,475	10,600	10,700	30.06.09
Maitland, NSW	20.08.03	898	489	9,936	3,577	14,900	14,500	31.12.09
Mandurah, WA	24.09.98	3,050	160	5,496	8,594	17,300	16,800	31.12.09
Maribyrnong, (land) VIC	28.06.01	7,100	462	-	-	7,562	7,562	N/A
Mentone, VIC	24.09.98	9,400	542	104	10,354	20,400	18,500	30.06.09
Midland, WA	06.03.01	4,600	255	4,940	8,605	18,400	17,800	31.12.09
Mile End, SA	22.03.00	11,250	624	3,024	12,702	27,600	24,500	30.06.11
Minchinbury, NSW	31.12.98	9,200	503	4,258	11,494	25,455	20,600	30.06.11
Mindarie, WA	03.03.00	4,184	209	5,606	7,801	17,800	17,200	31.12.08

BWP TRuST Annual Report 2011 37

Notes to the Financial Statements

For the year ended 30 June 2011

9. INVESTMENT PROPERTIES (NON-CURRENT) (continued)

(a) Cost and fair value of investments (continued)

Property Acquisition date

Purchase price $000 Acquisition costs $000 Capital improvements since acquisition $000 Fair value adjustment since acquisition $000 Fair value 30 June 2011 $000 Fair value 30 June 2010 $000 Last independent valuation

Morayfeld, QLD 22.03.00 Morley, WA 04.07.05 Mornington, VIC 29.12.98 Mt Gravatt, QLD 18.12.08 Noarlunga, SA 13.04.99 Northland, VIC 24.09.98 Nunawading, VIC 24.09.98 Oakleigh South, VIC 05.04.01 Pakenham, VIC 01.04.11 Port Kennedy, WA 19.05.11 Port Macquarie, NSW 15.11.02 Port Melbourne, VIC 10.12.10 Regency Park, SA 24.01.07 Rockingham, WA 30.06.00 Rocklea, QLD 29.10.02 Sandown, VIC 24.09.98 Scoresby, VIC 24.09.98 Smithfeld, QLD 19.05.11 Southport, QLD 09.11.98 Sunshine, VIC 24.09.98 Thornleigh, NSW 07.09.04 Tuggeranong, ACT 01.12.98 Underwood, QLD 22.10.98 Vermont South, VIC 14.05.03 Villawood, NSW 14.05.08 Wagga Wagga, NSW 01.04.11 Wollongong, NSW 10.02.03

8,000 334 3,624 6,642 18,600 19,300 30.06.11 11,100 642 460 2,798 15,000 12,700 30.06.11 3,400 204 6,499 9,697 19,800 19,300 31.12.10 11,215 659 - (74) 11,800 11,700 16.12.08 2,305 124 7,392 7,479 17,300 16,800 30.06.11 8,600 489 2,920 9,691 21,700 19,400 31.12.08 13,700 786 3,100 14,301 31,887 31,087 31.12.08 6,650 374 9,146 6,430 22,600 22,000 30.06.10 20,250 1,187 - (1,137) 20,300 - 15.01.11 16,440 915 - (955) 16,400 - 15.01.11 2,100 141 5,403 2,856 10,500 10,500 30.06.11 24,000 1,391 - (1,091) 24,300 - 31.12.10 4,656 350 218 (624) 4,600 4,500 31.12.09 3,320 166 5,830 10,384 19,700 16,800 31.12.08 6,225 296 7,477 4,302 18,300 17,400 31.12.08 7,800 446 5 4,949 13,200 12,800 30.06.09 8,300 473 3 7,624 16,400 15,900 31.12.09 15,250 889 - (639) 15,500 - 15.01.11 2,800 188 6,832 5,980 15,800 16,300 30.06.09 7,000 407 117 4,276 11,800 11,500 30.06.10 13,333 782 360 1,325 15,800 15,300 30.06.10 7,900 431 760 10,209 19,300 18,800 31.12.09 3,000 178 6,066 6,056 15,300 14,800 30.06.09 9,150 635 14,362 1,953 26,100 26,100 31.12.10 18,400 861 48 (509) 18,800 18,200 30.06.11 15,000 932 - (932) 15,000 - 15.01.11 12,000 628 276 3,996 16,900 16,500 31.12.08 632,860 37,672 241,042 314,307 1,225,881 1,000,111

(i) Valuation policy

Investment properties are carried at fair value.

Fair value is determined by a full independent valuation completed at least every three years by an independent valuer who holds a relevant professional qualification and has recent experience in the location and category of the investment property.

Properties that have not been independently valued as at balance date are carried at fair value by way of directors’ valuation.

Initially, each investment property is measured at cost including transaction costs (see Note 1(e)). Subsequent revaluations to fair value according to the Trust’s revaluations policy may result in transaction costs appearing as a negative adjustment (loss) in fair value.

38 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

(ii) Methodology and significant assumptions

Independent valuations

The independent valuer determines the most appropriate valuation method for each property. Methods used for valuations during the year were the discounted cash flow and capitalisation of income valuation methods. Details of the independent valuations conducted as at 30 June 2011 are provided at Note 9(b).

Directors’ valuations

The directors adopt the capitalisation of income valuation method for all remaining properties including those under development. The capitalisation rate used varies across properties. The methodology of the directors’ valuations is subject to an independent review process by Jones Lang LaSalle.

Discounted cash flow method

The discounted cash flow method calculates a property’s value by using projections of reliable estimates of future cashflows, derived from the term of any existing leases, and from external evidence such as current market rents for similar properties in the same area and condition, and using discount rates that reflect the current market assessments of the uncertainty in the amount and timing of cash flows specific to the asset.

Capitalisation of income valuation method

The capitalisation of income valuation method capitalises the current rent received, at a rate analysed from the most recent transactions of comparable property investments, adjusted to take into consideration a number of factors including:

• lease term remaining;

• the relationship of current rent to the market rent;

• the location;

• for Bunnings Warehouses, distribution of competing hardware stores;

• prevailing investment market conditions; and

• other property specific conditions.

In completing the valuations, reliance was placed on market evidence of broadly comparable Bunnings Warehouses sold within the past 12 months, with capitalisation rates ranging between 6.88 per cent to 8.20 per cent (compared with the Trust’s weighted average rate of 7.65 per cent).

(b) Independent valuations and valuers

Property	Valuation date	Valuer
Hervey Bay, QLD	30.06.11	CB Richard Ellis, Tom Irving AAPI
Hoppers Crossing, VIC	30.06.11	CB Richard Ellis, Stephen Thomas AAPI
Mile End, SA	30.06.11	CB Richard Ellis, Cameron Olson AAPI
Minchinbury, NSW	30.06.11	Jones Lang LaSalle, Bernard Sweeney FAPI
Morayfeld, QLD	30.06.11	CB Richard Ellis, Tom Irving AAPI
Morley, WA	30.06.11	Quantia, Mark Christie AAPI
Noarlunga, SA	30.06.11	CB Richard Ellis, Cameron Olson AAPI
Port Macquarie, NSW	30.06.11	Colliers International, Peter Macadam AAPI
Villawood, NSW	30.06.11	CB Richard Ellis, Kane Sweetman AAPI

BWP TRuST Annual Report 2011 39

For the year ended 30 June 2011

Notes to the Financial Statements

9. INVESTMENT PROPERTIES (NON-CURRENT) (continued)

(c) Operating leases

• (i) All of the properties listed in Note 9(a) are leased by Bunnings Group Limited except Trust properties at Blackburn, Greenacre, Harrisdale, Maribyrnong, Blacktown, Regency Park, 1.0 hectare of surplus land adjoining Altona, 0.4 hectares of surplus land adjoining Vermont South, 0.5 hectares of surplus land adjoining Minchinbury property, 0.1 hectares of land adjoining Nunawading, 1.0 hectare of land adjoining Fyshwick, Geraldton Showrooms and the showrooms on the Bayswater and Pakenham properties.

• (ii) General information regarding the duration of leases is as follows:

• Bunnings Warehouse leases generally commit the tenant to an initial term of ten or fifteen years, followed by a number of optional terms of five years each exercisable by the tenant.

• Leases to J Blackwood and Son Pty Limited at Blacktown and Regency Park have an initial term of seven years, followed by two optional terms of five years each exercisable by the tenant. The Blacktown lease allows the tenant to terminate the lease any time after three years, subject to providing 12 months’ prior notice.

• Leases of the Bayswater showrooms commit the tenant to an initial term of seven years, followed by one optional term of seven years for Richard Ventures Pty Ltd and two optional terms of five years for BCF Australia Pty Limited, exercisable by the tenant.

• The lease to BCF Australia Pty Limited at the Geraldton Showrooms is for an initial term of eight years, followed by two optional terms of five years each exercisable by the tenant. The lease to Ultra Tune Properties (WA) No 2 Pty Limited at the Geraldton Showrooms is for an initial term of five years, followed by two optional terms of five years each exercisable by the tenant.

• The lease to Gainsborough Hardware Industries Limited at the Blackburn industrial property is for an initial term of eight years, followed by one optional term of five years exercisable by the tenant. Sleepmaster Pty Ltd has exercised its last five year option at the Blackburn industrial property expiring in March 2017. The lease to Pacific Laboratory Products Pty Ltd at the Blackburn industrial property is for an initial term of five years, followed by one optional term of three years exercisable by the tenant.

• Two leases of the Pakenham showrooms commit the tenant to an initial term of five years, followed by one optional term of five years for Clarkmore Pty Ltd and two optional terms of five years for Dollar Curtains and Blinds Pty Ltd, exercisable by the tenant. The lease to Officeworks Superstores Pty Ltd at the Pakenham property is for an initial term of seven years, followed by four optional terms of five years each exercisable by the tenant.

• At 30 June 2011, the minimum lease expiry (being the duration until which the tenants’ committed terms expire) for the Trust’s investment properties is 1.3 years (2010: 1.7 years) and the maximum lease expiry is 15.4 years (2010: 16.4 years), with a weighted average lease expiry for the portfolio of 8.6 years (2010: 9.3 years).

• (iii) Generally, rents are reviewed annually in line with movements in Consumer Price Indices compiled by the Australian Bureau of Statistics or a fixed percentage increase except when a market rent review is due. Market rent reviews for most Bunnings Warehouses are due each fifth anniversary of the commencement date and for other leases at the exercise of each option by the tenant. Generally, market rents are agreed by the landlord and tenant or if not agreed, determined in accordance with generally accepted rent review criteria.

• (iv) The tenant is responsible for payment of most outgoings, which include all normal rates, taxes and assessments (other than land tax in some instances). The tenant is responsible for payment of all utilities utilised by it at the premises.

40 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

• (v) Some of the leases of Bunnings Warehouses allow for the tenant to repurchase the properties in specified circumstances:

• a) at Bayswater, Morley, Thornleigh and Vermont South properties, the tenant may repurchase the property from the landlord in the event that:

  • (i) the tenant proposes a redevelopment of the relevant property for which the tenant and landlord cannot agree commercial terms and at the time the tenant and landlord are not related bodies corporate; or

  • (ii) the landlord and tenant cease to be related bodies corporate. In respect to the Bunnings Warehouses at Bayswater and Vermont South properties, in the event that the tenant and landlord cease to be related bodies corporate, the tenant may only exercise the right to repurchase at the end of the initial lease term and at the end of each further option term.

• b) If the right to repurchase is exercised in respect of any of these properties, the purchase price for the property will be a price to be agreed between the parties and failing agreement, a price determined by an appointed valuer based on the market value assuming vacant possession for the relevant property.

• (vi) There are no lease commitments receivable as at the reporting date.

• (vii) There were no contingent rentals recognised as revenues in the financial year.

• (viii) The future minimum non-cancellable rental revenues are:

Not later than one year Later than one year not later than fve years Later than fve years ciliation of movement in investment properties Opening balance at the beginning of the fnancial year Acquisitions during the year Divestments during the year Capital improvements Net gain from fair value adjustments Closing balance at the end of the fnancial year	June 2011 $000 June 2010 $000
	92,613 76,334 349,524 286,707 357,435 342,481
	799,572 705,522
	1,000,111 955,562 196,276 335 (7,500) - 11,666 2,442 25,328 41,772
	1,225,881 1,000,111

(d) Reconciliation of movement in investment properties

BWP TRuST Annual Report 2011 41

Notes to the Financial Statements

For the year ended 30 June 2011

10. PAYABLES AND DEFERRED INCOME

PAYABLES AND DEFERRED INCOME
Current Trade creditors and accruals Responsible entity’s fees payable Rent received in advance	June 2011 $000 June 2010 $000
	3,034 2,741 1,706 1,545 7,924 6,245
	12,664 10,531

The Trust’s exposure to liquidity risk in respect of payables is disclosed in Note 16.

11. INTEREST-BEARING LOANS AND BORROWINGS

Australia and New Zealand Banking Group Limited Commonwealth Bank of Australia Westpac Banking Corporation National Australia Bank Limited Less: accrued interest and borrowing costs Bank loans: non current	June 2011 June 2010 Expiry date Limit $000 Amount drawn $000 Limit $000 Amount drawn $000	June 2011 June 2010
	31 July 2013 100,000 36,900 100,000 48,800 14 January 2014 100,000 49,900 100,000 49,900 2 November 2013 80,000 75,000 80,000 45,500 31 March 2014 50,000 50,000 50,000 50,000 (956) (726) 330,000 210,844 330,000 193,474
		330,000 210,844 330,000 193,474

At 30 June 2011 the minimum duration of the facilities was 25 months (2010: 19 months) and the maximum was 33 months (2010: 37 months) with a weighted average duration of 29.2 months (2010: 26.6 months). The borrowings under the facilities are not secured by assets of the Trust, but are subject to reporting and financial undertakings by the Trust to the banks under negative pledge agreements with each bank.

Refer to Note 16 for information on interest rate and liquidity risk.

42 BWP TRuST Annual Report 2011

Notes to the Financial Statements

For the year ended 30 June 2011

12. ISSUED CAPITAL

(a) Book value of units on issue

Book value at the beginning of the fnancial year Equity issued during the year - DRP: - August 2010, 6,330,873 units @ $1.8028 per unit - February 2011, 4,731,688 units @ $1.7261 per unit Equity issued during the year - pro-rata entitlement offer: - March 2011, 88,238,459 units @ $1.70 per unit Expenses incurred in pro-rata entitlement offer Book value at the end of the fnancial year	June 2011 $000 June 2010 $000 507,372 489,273 11,413 6,733 8,168 11,299 150,005 - (3,647) 67 673,311 507,372

(b) Number of ordinary units on issue

Number of ordinary units on issue
Number of fully paid units on issue at the beginning of the fnancial year Issue of units during the year – DRP Issue of units during the year – Pro-rata entitlement offer Number of fully paid units on issue at the end of the fnancial year	June 2011 June 2010
	420,711,773 410,001,055 11,062,561 10,710,718 88,238,459 -
	520,012,793 420,711,773

(c) Rights

The Trust is a unit trust of no fixed duration and the units in the Trust have no right of redemption.

Each unit entitles the unitholder to receive distributions as declared and, in the event of winding up the Trust, to participate in all net cash proceeds from the realisation of assets of the Trust in proportion to the number of and amounts paid up on units held.

(d) Distribution Reinvestment Plan

The DRP was in place for the interim distribution for the year ended 30 June 2011 and for the preceding year.

During August 2011 the board resolved to suspend the DRP in respect of the final distribution for the year ended 30 June 2011 in view of the uncertainty and volatility being experienced in the Australian equity markets and the prevailing market price of BWP Trust units.

BWP TRuST Annual Report 2011 43

Notes to the Financial Statements

For the year ended 30 June 2011

13. RESERVES

This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Opening balance at the beginning of the fnancial year Amounts recognised in net proft for the year Net gain/(loss) on cash fow hedges for the year Closing balance at the end of the fnancial year CASH FLOW (a) Reconciliation of operating proft to the net cash fows from operation Net proft Net fair value change on investment properties Decrease/(increase) in receivables and prepayments Increase/(decrease) in payables and deferred income Net cash fows from operating activities (b) Reconciliation of cash Cash balance comprises: Cash (see Note 7) Short term deposits (see Note 7)	June 2011 $000 June 2010 $000
	(3,946) (3,865) - (2) 2,638 (79)
	(1,308) (3,946)
	81,497 92,182 (25,328) (41,772) 1,110 (1,412) 1,831 (670)
	59,110 48,328
	8,942 6,075 - 15,612
	8,942 21,687

14. CASH FLOW

15. FINANCIAL RISk MANAGEMENT OBJECTIVES AND POLICIES

The Trust has exposure to the following risks from its use of financial instruments:

• credit risk;

• liquidity risk; and

• interest rate risk.

This Note and Note 16 present information about the Trust’s exposure to each of these risks, and the Trust’s objectives, policies and processes for measuring and managing risk, and managing capital. Further quantitative disclosures are included throughout these financial statements.

The board of directors of the responsible entity has overall responsibility for the establishment and oversight of the Trust’s risk management framework.

Risk management policies are established to identify and analyse all risks faced by the Trust, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems contained in the Trust’s compliance plan are reviewed regularly to reflect changes in internal operations and market conditions.

44 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

The Trust’s principal financial instruments are bank loans. The main purpose of the bank loans is to raise finance for the Trust’s operations. To assist in minimising the risk associated with maintaining adequate finance for the Trust’s operations, the Trust sources borrowings from a range of reputable financial institutions under facilities with differing maturity dates.

The Trust has various other financial assets and liabilities such as other receivables and payables, which arise directly from its operations. The Trust also enters into derivative transactions (interest rate swaps) to manage the interest rate risks arising from the Trust’s operations. The main risk arising from the Trust’s financial instruments is interest rate risk. The board of directors of the responsible entity reviews and agrees policies for managing this risk and this is summarised in Note 16.

16. FINANCIAL INSTRUMENTS

The Trust has recognised certain financial instruments in the accounts. These financial instruments are disclosed in Notes 7, 8, 10 and 11. The main risks associated with the Trust’s financial instruments and the means by which these risks are managed, the measurement of financial instruments and how capital is managed are outlined below:

(a) Concentration of credit risk

Credit risk is the risk of financial loss to the Trust if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Trust’s receivables from customers and payments due to the Trust under interest rate swaps.

Receivables

The credit risk associated with 96.8 per cent (2010: 96.9 per cent) of the rental income is with three tenants, Bunnings Group Limited 95.3 per cent (2010: 94.7 per cent), J Blackwood and Son Pty Limited 1.4 per cent (2010: 2.2 per cent) and Officeworks Superstores Pty Ltd 0.1 per cent (2010: nil), wholly owned subsidiaries of Wesfarmers Limited. Bunnings Group Limited, J Blackwood and Son Pty Limited, Officeworks Superstores Pty Ltd and Wesfarmers Limited are currently subject to a Deed of Cross Guarantee under which they covenant with a trustee for the benefit of each creditor that they guarantee to each creditor payment in full of any debt in the event of any entity that is included in the Deed of Cross Guarantee being wound up. Wesfarmers Limited has been assigned a credit rating of A-(stable)/A2 by Standard & Poor’s (Baa1(positive)/P2 – Moody’s).

Cash

The Trust limits its exposure to credit risk associated with its cash by maintaining limited cash balances and having cash deposited with reputable, major financial institutions subject to regulation in Australia.

Derivative financial instruments

The Trust limits its exposure to credit risk associated with future payments from its interest rate swaps by contracting with reputable major financial institutions subject to regulation in Australia.

BWP TRuST Annual Report 2011 45

For the year ended 30 June 2011

Notes to the Financial Statements

16. FINANCIAL INSTRUMENTS (continued)

(a) Concentration of credit risk (continued)

Exposure to credit risk

The carrying amount of the Trust’s financial assets represents the maximum credit exposure. The Trust’s maximum exposure to credit risk at the reporting date was:

Cash and short term deposits Loans and receivables Interest rate swaps assets	Note	Carrying amount June 2011 $000 June 2010 $000
	7 8	8,942 21,687 1,097 1,795 833 487 10,872 23,969

The Trust’s maximum exposure to credit risk for loans and receivables at the reporting date by type of customer was:

Tenants Wesfarmers Limited subsidiaries Other tenants Loans Bunnings Group Limited – (See Note 18(d)(ii)f).	Carrying amount June 2011 $000 June 2010 $000
	130 793 117 152 850 850
	1,097 1,795

Impairment losses

Rental receivables of approximately $1,995 were overdue at 30 June 2011 (2010: $1,000 overdue).

There was no allowance for impairment in respect of receivables during the current year or the previous year.

Based on historic default rates, the Trust believes that no impairment allowance is necessary in respect of receivables.

(b) Liquidity risk

Liquidity risk is the risk that the Trust will not be able to meet its financial obligations as they fall due. The Trust’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Trust’s reputation. The Trust regularly updates and reviews its cashflow forecasts to assist in managing its liquidity.

46 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

The following are the contractual maturities of financial liabilities (including estimated interest payments) and receipts of interest rate swap. The amounts disclosed in the table below are the contractual undiscounted cashflows and hence will not necessarily reconcile with the amount disclosed in the statement of financial position:

30 June 2011 Non-derivative fnancial liabilities Bank loans - principal Bank loans – future interest Payables and deferred income Derivative fnancial liabilities Interest rate swaps 30 June 2010 Non-derivative fnancial liabilities Bank loans - principal Bank loans – future interest Payables and deferred income Derivative fnancial liabilities Interest rate swaps	Carrying amount $000 Contractual cash fows $000 1 year $000 1-2 years $000 2-5 years $000 More than 5 years $000
	(210,844) (211,800) - - (211,800) - - (34,331) (13,254) (13,484) (7,593) - (12,664) (12,664) (12,664) - - - (1,308) 255 (1,167) (553) 1,421 554
	(224,816) (258,540) (27,085) (14,037) (217,972) 554
	(193,474) (194,200) - (99,900) (94,300) - - (25,112) (11,143) (9,882) (4,087) - (10,531) (10,531) (10,531) - - - (3,946) (3,040) (2,529) (1,231) 316 404
	(207,951) (232,883) (24,203) (111,013) (98,071) 404

(c) Interest rate risk

Interest rate risk is the risk that the Trust’s finances will be adversely affected by fluctuations in interest rates. To help reduce this risk in relation to bank loans, the Trust has employed the use of interest rate swaps whereby, the Trust agrees with various banks to exchange at specified intervals, the difference between fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount. Any amounts paid or received relating to interest rate swaps are recognised as adjustments to interest expense over the life of each contract swap, thereby effectively fixing the interest rate on the underlying obligations. At 30 June 2011 the fixed rates varied from 5.15 per cent to 7.72 per cent (2010: 5.15 per cent to 7.85 per cent) and the floating rates were at bank bill rates plus a bank margin.

The Trust has a policy of hedging the majority of its borrowings against interest rate movements to ensure stability of distributions. At 30 June 2011, the Trust’s hedging cover was 85.0 per cent of borrowings. Hedging levels are currently higher than the board’s preferred 50 per cent to 75 per cent range as a result of reducing borrowings following the Trust’s $150 million capital raising in May 2009. Hedging levels are expected to return within the board’s preferred range in the next financial year as a result of borrowings to pay for capital commitments (see Note 17).

The Trust’s exposure to interest rate risk for classes of financial assets and financial liabilities is set out below.

Variable rate instruments Cash on short term deposits Bank loans	Carrying amount June 2011 $000 June 2010 $000
	8,942 21,687 (210,844 ) (193,474)

Fair value sensitivity analysis for fixed rate instruments

The Trust does not have any fixed rate financial assets and liabilities, other than a loan to Bunnings Group Limited, see Note 18(d)(ii)f), which will be held to maturity, and held at amortised cost.

BWP TRuST Annual Report 2011 47

For the year ended 30 June 2011

Notes to the Financial Statements

16. FINANCIAL INSTRUMENTS (continued)

(c) Interest rate risk (continued)

Cash flow sensitivity analysis for variable rate instruments

The analysis below considers the impact on equity and net profit or loss due to a reasonably possible increase or decrease in interest rates. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2010.

30 June 2011 Variable rate instruments Interest rate swaps Net impact on net proft and equity	Net proft 100 basis points increase $000 50 basis points decrease $000 (2,118) 1,059 1,800 (900) (318) 159	Equity 100 basis points increase $000 50 basis points decrease $000
		- - 7,503 (3,901)
		7,503 (3,901)

30 June 2010 Variable rate instruments Interest rate swaps Net impact on net proft and equity	Net proft 100 basis points increase $000 50 basis points decrease $000 (1,942) 971 1,920 (960)	Equity 100 basis points increase $000 50 basis points decrease $000
		- - 7,032 (3,123)
	(22) 11	7,032 (3,123)

(d) Net fair values

The carrying amounts of financial assets and financial liabilities recorded in the financial statements have been determined in accordance with the accounting policies disclosed in Note 1 of the financial statements and are as follows:

Assets and liabilities held at amortised costs Loans and receivables Cash on short term deposit Bank loans Payables and deferred income Liabilities held at fair value Interest rate swaps	June 2011 $000 June 2010 $000 Book value and fair value Book value and fair value
	1,097 1,795 8,942 21,687 (210,844) (193,474) (12,664) (10,531) (1,308) (3,946)
	(214,777) (184,469)

48 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Notes to the Financial Statements

Interest rate swaps are measured at fair value by valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Interest rates used for determining fair value

The interest rates used to discount estimated cash flows, where applicable, are based on current market rates for similar instruments and were as follows:

Interest rate swaps	2011 2010
	4.98% to 6.22% 4.85% to 6.01%

(e) Capital management

Capital requirements are assessed based on budgeted cash flows, capital expenditure commitments and potential growth opportunities and are monitored on an ongoing basis. Information on capital and equity markets is reviewed on an ongoing basis to ascertain availability and cost of various funding sources.

In order to maintain a manageable level of debt, the responsible entity has established a preferred range of 20 to 30 per cent for the Trust’s gearing ratio (debt to total assets), which is monitored on a monthly basis. At 30 June 2011, the gearing level was 17.0 per cent (2010: 18.8 per cent).

The Trust’s DRP was in place for the interim distribution for the year ended 30 June 2011, but was suspended in respect of the final distribution.

17. CAPITAL ExPENDITURE COMMITMENTS

Estimated capital expenditure contracted for at balance date, but not provided for, as being payable was:

Estimated capital expenditure contracted for at balance date, but not provided for in the fnancial statements, which is payable: Not later than one year Unrelated Parties Related Parties Later than one year and not later than fve years Related Parties	June 2011 $000 June 2010 $000
	1,312 713 71,513 5,410 33,790 -
	106,615 6,123

Capital Commitments to unrelated parties

During the year, the Trust committed to fund $1.3 million (2010: $0.7 million) of expenditure relating to capital improvement works at various properties.

Capital Commitments to related parties

Fyshwick

In December 2010, the Trust committed to upgrade works at the Fyshwick property with an estimated cost of $15.0 million. On completion of the upgrade, the parties will enter into a new twelve-year lease of the Bunnings Warehouse with four five-year options exercisable by the tenant.

BWP TRuST Annual Report 2011 49

Notes to the Financial Statements

For the year ended 30 June 2011

17. CAPITAL ExPENDITURE COMMITMENTS (continued)

Portfolio acquisition

Following approval by unitholders in March 2011, the Trust is in the process of acquiring a property portfolio, comprising 13 Bunnings Warehouse properties, from Bunnings Group Limited, a controlled entity of Wesfarmers Limited. The total purchase price of the portfolio is $241,710,000, of which $161,560,000 was paid during the year ended 30 June 2011 following the settlement of 10 of the 13 properties. Subject to the achievement of conditions precedent in respect to the remaining 3 properties and on completion of the development of Bunnings Warehouses on 3 of the properties, a further $61,360,000 is expected to be payable in the year ending 30 June 2012 and the remaining $18,790,000 is expected to be payable in the year ending 30 June 2013.

Rocklea

In February 2011, the Trust committed to upgrade works at the Rocklea property with an estimated cost of $3.8 million. On completion of the upgrade, the parties will enter into a new ten-year lease of the Bunnings Warehouse with one ten-year option, exercisable by the tenant.

Scoresby

In May 2011, the Trust committed to upgrade works at the Scoresby property with an estimated cost of $6.3 million. On completion of the upgrade, the parties will enter into a new ten-year lease of the Bunnings Warehouse with one ten-year option, exercisable by the tenant.

18. DIRECTOR AND ExECUTIVE DISCLOSURES AND RELATED PARTY DISCLOSURES

(a) Details of key management personnel

The following persons were key management personnel of the responsible entity, BWP Management Limited, during the financial year:

Chairman – non-executive

J A Austin

Non-executive directors

B J H Denison R D Higgins P J Johnston P J Mansell

General Manager

G W Gernhoefer

(b) Remuneration policy

Remuneration expenses of the directors and executives of the responsible entity are not borne by the Trust. Directors are remunerated by the responsible entity and management services are provided to the responsible entity by Wesfarmers Limited.

The right of the responsible entity to be remunerated and indemnified by the Trust is set out in the Constitution of the Trust and summarised in Note 4. The Constitution is lodged with ASIC and is available to unitholders on request.

For the financial year ended 30 June 2011, each director was entitled to director’s fees and/or superannuation for their services and the reimbursement of reasonable expenses. The fees paid reflect the demands on, and the responsibilities of, those directors. The advice of independent remuneration consultants is taken to establish that the fees are in line with market standards. Directors do not receive option or bonus payments, nor do they receive retirement benefits in connection with their directorships. There are no equity incentive schemes in relation to the Trust.

50 BWP TRuST Annual Report 2011

Notes to the Financial Statements

For the year ended 30 June 2011

(c) Unit holdings

	Balance at the
	beginning	Acquired	Sold during	Balance at the
Directors	of the year	during the year	the year	end of the year
J A Austin	230,571	65,396	-	295,967
B J H Denison	9,286	1,919	-	11,205
P J Johnston	65,000	13,431	-	78,431
P J Mansell	155,303	44,048	-	199,351
Total	460,160	124,794	-	584,954

No directors have other rights or options over interests in the Trust or contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver an interest in the Trust.

(d) Transactions with related parties

• (i) Relationship with the Wesfarmers Group

• Wesfarmers Investments Pty Limited, a controlled entity of Wesfarmers Limited, holds 121,112,668 (2010: 97,151,617) units in the Trust, representing 23.29 per cent of the units on issue at 30 June 2011 (2010: 23.09 per cent);

• (ii) Transactions with the Wesfarmers Group

• During the year ended 30 June 2011, the Trust had the following transactions with Wesfarmers Limited’s subsidiaries:

• a) Following approval by unitholders in March 2011, the Trust is in the process of acquiring a property portfolio, comprising 13 Bunnings Warehouse properties, from Bunnings Group Limited, a controlled entity of Wesfarmers Limited. The total purchase price of the portfolio is $241,710,000 (excluding acquisition costs), of which $161,560,000 was paid during the year ended 30 June 2011 following the settlement of 10 of the 13 properties. Subject to the achievement of conditions precedent in respect to the remaining 3 properties and on completion of the development of Bunnings Warehouses on 3 of the properties, a further $61,360,000 is expected to be payable in the year ending 30 June 2012 and the remaining $18,790,000 is expected to be payable in the year ending 30 June 2013.

• b) Rent and other property income of $81,725,715 (2010: $73,777,165) was received from Bunnings Group Limited. The amount includes an amount received in advance of $7,713,509 (2010: $6,133,784). As at 30 June 2011 there was also a rent receivable of $655 (2010: $685,016).

• c) Rent of $1,179,984 (2010: $1,537,193) was received from J Blackwood and Son Pty Limited, a controlled entity of Wesfarmers Limited. As at 30 June 2011 there was also a rent receivable of $94,908 (2010: $108,341).

• d) Rent of $83,532 (2010: nil) was received from Officeworks Superstores Pty Ltd, a controlled entity of Wesfarmers Limited. As at 30 June 2011 there was also a rent receivable of $34,423 (2010: nil).

• e) The responsible entity’s fee of $6,047,659 (2010: $5,543,253) is paid/payable to the responsible entity. During the year the responsible entity waived its entitlement to fees in respect of properties at: Greenacre and Wagga Wagga in New South Wales; Fairfield Waters and Smithfield in Queensland; Hawthorn, Caroline Springs and Pakenham in Victoria; Belmont, Cockburn, Harrisdale and Port Kennedy in Western Australia. For the year ended 30 June 2011 the amount of fees the responsible entity had waived was $344,586 (2010: $228,695).

BWP TRuST Annual Report 2011 51

For the year ended 30 June 2011

Notes to the Financial Statements

18. DIRECTOR AND ExECUTIVE DISCLOSURES AND RELATED PARTY DISCLOSURES

(continued)

(d) Transactions with related parties (continued)

• f) The Trust continued to provide a loan of $850,000 to Bunnings Group Limited. The loan was first provided during the year ended 30 June 2006 to fund the purchase of a parcel of land adjacent to the Vermont South Bunnings Warehouse. The land was exchanged at fair value and the terms of the agreement include charging Bunnings Group Limited an access fee of eight per cent annually until such time as the parcel of land is sold to an external party, at which time Bunnings Group Limited will repay the loan.

• g) The Trust reimbursed Bunnings Group Limited $5.9 million for the completion of an upgrade to the Trust’s Broadmeadows Bunnings Warehouse.

• h) The Trust reimbursed Bunnings Group Limited for minor capital works incurred to the Trust’s properties for which the Trust had a contractual obligation to incur.

• i) The Trust paid $105,084 (2010: $97,936) to Wesfarmers Risk Management Limited, a subsidiary of Wesfarmers Limited, for insurance premiums on a number of the Trust’s properties.

19. ADDITIONAL INFORMATION

(a) Principal activities and investment policy of the Trust

To invest in well located, geographically diversified properties with long-term leases to substantial tenants, predominantly in the bulky goods retail sector with the purpose of providing unitholders with a secure, growing income stream and capital growth.

(b) Commencement and life of the Trust

The Trust is a unit trust of no fixed duration and was constituted under a Trust Deed dated 18 June 1998 as amended. The Trust is managed by BWP Management Limited (formerly known as Bunnings Property Management Limited until a name change in April 2011). Both the Trust and the responsible entity are domiciled in Australia.

(c) Economic dependency

96.8 per cent (2010: 96.9 per cent) of the Trust’s rental income received during the year was from Bunnings Group Limited, J Blackwood and Son Pty Limited and Officeworks Superstores Pty Ltd, all controlled entities of Wesfarmers Limited.

(d) Corporate information

The financial report of the Trust for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the directors on 11 August 2011.

52 BWP TRuST Annual Report 2011

Directors’ Report For the year ended 30 June 2011

In accordance with the Corporations Act 2001, BWP Management Limited (ABN 26 082 856 424), the responsible entity of BWP Trust, provides this report for the financial year ended 30 June 2011. The information on pages 4 to 8 forms part of this directors’ report and is to be read in conjunction with the following information:

Results and distributions

Net proft attributable to unitholders Net realised proft on sale of investment property1 Net unrealised gain in fair value of investment properties Distributable proft for the year Opening undistributed proft Closing undistributed proft Distributable amount	June 2011 $000 June 2010 $000
	81,497 92,182 376 - (25,328) (41,772)
	56,545 50,410 16 33 (9) (16)
	56,552 50,427

1 Net sale proceeds less original purchase price and capital expenditure since acquisition.

Distributions

The following distributions have been paid by the Trust or declared by the directors of the responsible entity since the commencement of the financial year ended 30 June 2011.

(a) Out of the profts for the year ended 30 June 2010 on ordinary units as disclosed in last year’s directors’ report Final distribution of 5.98 cents per ordinary unit paid on 27 August 2010. (b) Out of the profts for the year ended 30 June 2011 (see Note 5 of the notes to the fnancial statements): (i) Interim distribution of 6.18 cents per ordinary unit paid on 25 February 2011. (ii) Final distribution of 5.80 cents per ordinary unit declared by the directors for payment on 26 August 2011.

June 2011 $000 June 2010 $000

25,159 19,967 26,391 25,268 30,161 25,159

Units on issue

At 30 June 2011, 520,012,793 units of BWP Trust were on issue (2010: 420,711,773).

Principal activity

The principal activity is property investment.

There has been no significant change in the nature of this activity during the financial year.

Trust assets

At 30 June 2011, BWP Trust held assets to a total value of $1,242.1 million (2010: $1,026.4 million). The basis for valuation of the assets is disclosed in Note 1 of the notes to and forming part of the financial statements.

BWP TRuST Annual Report 2011 53

Directors’ Report

For the year ended 30 June 2011

Fee paid to the responsible entity and associates

Management fees totalling $6,047,659 (2010: $5,543,253) were paid or payable to the responsible entity out of Trust property during the financial year.

Trust information

BWP Trust is a Managed Investment Scheme registered in Australia. BWP Management Limited, the responsible entity of the Trust, is incorporated and domiciled in Australia and holds an Australian Financial Services Licence. The responsible entity’s parent company and ultimate parent company is Wesfarmers Limited. During the year the Trust changed its name from Bunnings Warehouse Property Trust to BWP Trust.

The registered office of the responsible entity is Level 11, 40 The Esplanade, Perth, Western Australia, 6000. The principal administrative office of the responsible entity is Level 6, 40 The Esplanade, Perth, Western Australia, 6000.

The Trust had no employees during the financial year (2010: Nil).

Directors

Information on directors

J A Austin B J H Denison R D Higgins P J Johnston P J Mansell

Details of the directors appear on pages 18 and 19.

No director is a former partner or director of the current auditor of the Trust.

Company secretary

Karen A Lange, FCIS, FCPA

Ms K A Lange has been the company secretary since 9 April 2008. Ms Lange has more than 25 years’ company secretarial experience including company secretary of Woodside Petroleum Limited and Wesfarmers Limited.

Directors’ unitholdings

Units in the Trust or shares in a related body corporate in which directors had a relevant interest at the date of this report were:

were:
J A Austin P J Johnston P J Mansell	Units in the Trust
	295,967 78,431 199,351

No directors have other rights or options over interests in the Trust or contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver an interest in the Trust.

54 BWP TRuST Annual Report 2011

Directors’ Report For the year ended 30 June 2011

Insurance and indemnity of directors and officers

During and since the end of the financial year insurance has been maintained covering the entity’s directors and officers against liability incurred in that capacity. Disclosure of the nature of the liability covered by the insurance and premiums paid is subject to confidentiality requirements under the contract of insurance.

Directors and officers are indemnified by the responsible entity against the costs and expenses of defending civil or criminal proceedings in their capacity as directors and officers in which judgement is given in favour of, or acquittal is granted to, a director or officer.

Review and results of operations

The operations of the Trust during the financial year and the results of those operations are reviewed on pages 4 to 8 of this report and in the accompanying financial statements. This includes information on the financial position of the Trust and its business strategies and prospects for future financial years.

Significant changes in the state of affairs

During the financial year, the value of the Trust’s investment properties increased by $225,770,000 (2010: $44,549,000 increase) to $1,225,881,000 (2010: $1,000,111,000), and the number of investment properties increased from 60 to 70 properties at financial year end.

In March 2011, the Trust raised $150 million (2010: nil) through a non-renounceable pro-rata entitlement offer with 88,238,459 new units being issued. The majority of the net proceeds of the pro-rata entitlement offer was used to fund a property portfolio acquisition of 13 properties from Bunnings Group Limited, of which payment for 10 properties was settled prior to the year end.

There were no other significant changes in the state of affairs of the Trust during the financial year.

Significant events after the balance date

No matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operations, results of operations or state of affairs of the Trust in subsequent financial years.

Likely developments and expected results

Likely developments in and expected results of the operations of the Trust in subsequent years are referred to elsewhere in this report, particularly on pages 4 to 8. In the opinion of the directors, further information on those matters could prejudice the interests of the Trust and has therefore not been included in this report.

Corporate governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of BWP Management Limited support and comply with the majority of the ASX Corporate Governance Principles and Recommendations. The responsible entity’s corporate governance statement is contained on pages 20 to 24 of this annual report.

Environmental regulation and performance

The Trust’s operations are not subject to any particular significant environmental regulations under either Commonwealth or State legislation. The Trust is not aware of any breach of environmental regulations.

BWP TRuST Annual Report 2011 55

Directors’ Report

For the year ended 30 June 2011

Board committees

As at the date of this report, the responsible entity had an Audit and Risk Committee and Remuneration Committee. Each committee is comprised of all of the board members of the responsible entity.

There were two Audit and Risk Committee meetings held during the year.

Rounding

The amounts contained in this report and in the financial statements have been rounded to the nearest thousand dollars under the option available to the Trust under ASIC Class Order 98/100, unless otherwise stated. The Trust is an entity to which the Class Order applies.

Auditor independence

The lead auditor’s independence declaration is set out on page 58 and forms part of the Directors’ Report for the year ended 30 June 2011.

Non-audit services

KPMG provided the following non-audit services to the Trust during the year ended 30 June 2011 and received, or is due to receive, the following amount for the provision of these services:

receive, the following amount for the provision of these services:
Taxation services Total	$22,800
	$22,800

The Audit and Risk Committee has, following the passing of a resolution, provided the board with written advice in relation to the provision of non-audit services by KPMG.

The board has considered the Audit and Risk Committee’s advice, and the non-audit services provided by KPMG, and is satisfied that the provision of these services during the year by the auditor is compatible with, and did not compromise, the general standard of auditor independence imposed by the Corporations Act 2001. The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work or acting in a management or decision making capacity for the Trust.

Signed in accordance with a resolution of the directors of BWP Management Limited.

==> picture [130 x 109] intentionally omitted <==

J A Austin Chairman

BWP Management Limited Perth, 11 August 2011

56 BWP TRuST Annual Report 2011

For the year ended 30 June 2011

Directors’ Declaration

In accordance with a resolution of the directors of BWP Management Limited, responsible entity for the BWP Trust (the Trust), I state that:

1. In the opinion of the directors:

2. a) the financial statements and notes of the Trust are in accordance with the Corporations Act 2001, including:

   • (i) giving a true and fair view of the Trust’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and

   • (ii) complying with Accounting Standards and Corporations Regulations 2001; and

3. b) there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable; and

4. c) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1(b).

5. This declaration has been made after receiving the declaration required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial period ended 30 June 2011.

For and on behalf of the board of BWP Management Limited.

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J A Austin Chairman

BWP Management Limited Perth, 11 August 2011

BWP TRuST Annual Report 2011 57

Auditor’s Independence Declaration

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of BWP Management Limited, the responsible entity of BWP Trust

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2011 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

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kPMG D P McComish Perth, 11 August 2011 Partner

58 BWP TRuST Annual Report 2011

Independent Auditor’s Report to the unitholders of BWP Trust

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Report on the financial report

We have audited the accompanying financial report of BWP Trust (the Trust) which comprises the statement of financial position as at 30 June 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, notes 1 to 19 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration.

Directors’ responsibility for the financial report

The directors of BWP Management Limited (the Responsible Entity) are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 1(b), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Responsible Entity, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Trust’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

BWP TRuST Annual Report 2011 59

Independent Auditor’s Report to the unitholders of BWP Trust (continued)

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Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

• (a) the financial report of BWP Trust is in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the Trust’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1(b).

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kPMG D P McComish Perth, 11 August 2011 Partner

60 BWP TRuST Annual Report 2011

unitholder Information

Substantial unitholders

The number of units held by the Trust’s substantial unitholders and the date on which the last notice was lodged with the Trust, were as follows:

Wesfarmers Limited, its subsidiaries and their associates Commonwealth Bank of Australia and its subsidiaries ING Group and its related body corporates	Date of notice Units
	24 March 2011 121,112,668 27 April 2011 26,763,188 9 December 2010 22,189,645

Distribution of unitholders

As at 31 July 2011

Range of holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 101,000 - over Total holding less than a marketable parcel (290 units)	Holders Units %
	1,654 837,027 0.16 4,056 11,935,415 2.30 3,101 22,896,518 4.40 5,116 123,689,979 23.79 189 360,653,854 69.35
	14,116 520,012,793 100.00
	483 52,527

Unitholders holding less than a marketable parcel (290 units)

Voting rights

Each fully paid ordinary unit carries voting rights at one vote per unit.

BWP TRuST Annual Report 2011 61

unitholder Information

Twenty largest unitholders

The twenty largest holders of ordinary units in the Trust as at 31 July 2011 were:

Wesfarmers Investments Pty Ltd HSBC Custody Nominees (Australia) Limited JP Morgan Nominees Australia Limited RBC Dexia Investor Services Citicorp Nominees Pty Limited National Nominees Limited Citicorp Nominees Pty Limited AMP Life Limited Kowloon Nominees Pty Limited Cogent Nominees Pty Limited Bond Street Custodians Limited Sandhurst Trustees Ltd Queensland Investment Corporation Milton Corporation Limited RE GL CM & JE Adshead Pty Ltd Australian Executor Trustees Netwealth Investments Limited Cantala Pty Ltd Suncorp Custodian Services Pty Limited JP Morgan Nominees Australia Limited (Cash Income A/C) Total	Number of units Percentage of capital held
	121,112,668 23.29 66,280,125 12.75 45,721,510 8.79 28,784,609 5.54 23,958,743 4.61 15,494,245 2.98 5,717,500 1.10 4,531,746 0.87 2,500,000 0.48 2,461,057 0.47 2,308,641 0.44 1,499,293 0.29 1,496,321 0.29 1,363,394 0.26 1,228,660 0.24 1,018,086 0.20 947,385 0.18 913,069 0.18 899,641 0.17 880,257 0.17
	329,116,950 63.29

62 BWP TRuST Annual Report 2011

Investor information

Stock exchange listing

The BWP Trust is listed on the ASX and reported in the “Industrial” section in daily newspapers – code BWP.

Distribution reinvestment plan

The directors resolved in August 2011 to suspend the Distribution Reinvestment Plan, to take effect for the final distribution for the financial year ended 30 June 2011.

Electronic payment of distributions

Unitholders may nominate a bank, building society or credit union account for the payment of distributions by direct credit. Payments are electronically credited on the distribution date and confirmed by mailed payment advice.

Unitholders wishing to take advantage of payment by direct credit should contact the Registry Manager for more details and to obtain an application form.

Publications

The annual report is the main source of information for unitholders. In addition, a half-year report is published in February each year, which reviews performance for the six months to December.

Unitholder meetings

A unitholder meeting was held on 30 March 2011, details of which are available on the Trust’s website.

Unitholder enquiries

Please contact the Registry Manager if you have any questions about your unitholding or distributions:

Computershare Investor Services Pty Limited

Level 2, 45 St Georges Terrace PERTH WA 6000

Mail: GPO Box 242 MELBOURNE VIC 3001 Australia Telephone: 1300 136 972 (within Australia) Telephone: (+61 3) 9415 4323 (outside Australia) Facsimile: 1800 783 447 (within Australia) Facsimile: (+61 3) 9473 2555 (outside Australia) www.computershare.com.au

Periodically, the Trust may also send releases to the ASX covering matters of relevance to investors.

Website

The Trust’s website, www.bwptrust.com.au, is a useful source of information for unitholders. It includes details of the Trust’s property portfolio, current activities and future prospects. The site also provides access to annual and half year reports and releases made to the ASX.

Annual tax statements

Accompanying the final distribution payment in August or September each year will be an annual tax statement which details tax advantaged components of the year’s distribution.

Profit distributions

Profit distributions are paid twice yearly, normally in February and August.

BWP TRuST Annual Report 2011 63

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64 BWP TRuST Annual Report 2011

Directory

Responsible entity

BWP Management Limited

ABN 26 082 856 424

Level 11, Wesfarmers House 40 The Esplanade PERTH WA 6000 Telephone: (08) 9327 4356 Facsimile: (08) 9327 4344 www.bwptrust.com.au

Registry manager

Computershare Investor Services Pty Limited

Level 2 45 St Georges Terrace PERTH WA 6000

Telephone: 1300 136 972 (within Australia) Telephone: (+61 3) 9415 4323 (outside Australia) Facsimile: 1800 783 447 (within Australia) Facsimile: (+61 3) 9473 2555 (outside Australia) www.computershare.com.au

Directors and senior management

J A Austin (Chairman) B J H Denison (Director)

R D Higgins (Director)

P J Johnston (Director)

Auditor

KPMG 235 St Georges Terrace PERTH WA 6000

P J Mansell (Director) G W Gernhoefer (General Manager) K A Lange (Secretary)

BWP TRuST Annual Report 2011 65

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Annual Report 2011

Printed on 55% recycled and FSC certified virgin fibre. ISO 14001 Environmental Accreditation.

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www.bwptrust.com.au