BWP GROUP — Annual Report 2013

Aug 7, 2013

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• 8 August 2013

The Manager Company Announcements Office Australian Securities Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2000

Dear Sir

Results for the full-year ended 30 June 2013

In accordance with ASX Listing Rule 4.3A, the following documents are attached for release to the market:

• Appendix 4E – full-year results to 30 June 2013;

• Full-year results announcement; and

• Financial statements for the year ended 30 June 2013 extracted from the annual report, which will be released separately today.

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K A Lange Company Secretary

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BWP TRUST

ARSN 088 581 097

APPENDIX 4E

Financial year ended 30 JUNE 2013

Results for announcement to the market

Results for announcement to the market
		Full-year to	Full-year to	Variance
		30 June 13	30 June 12	(%)
Revenue from ordinary activities	($000)	109,229	101,1981	7.9
Net profit before unrealised items	($000)	75,768	70,566	7.4
Unrealised items – gains/(losses) in fair value of
investment properties	($000)	34,805	(635)	-
Net profit from ordinary activities attributable to
unitholders	($000)	110,573	69,931	58.1
Net tangible assets per unit	($)	1.93	1.85	4.3

1 For consistency, revenue for the full-year has been restated to exclude recoveries of property outgoings, previously included as other property income. (Refer to Note 2 of the financial statements.)

Commentary on the results for the year

The commentary on the results for the year is contained in the ASX release dated 8 August 2013 accompanying this statement.

Audit

This report is based on accounts that have been audited.

Distributions

Distributions
Interim distribution paid	($000)	37,355	34,477		8.3
Final distribution payable	($000)	38,396	42,231		(9.1)
Interim distribution per unit	cents	7.00	6.63		5.6
Final distribution per unit	cents	7.14	8.042	(11.2)
2The final distribution for the year ended 30 June 2012 included a 1.17 cents capital profit from the sale of an investment property
Record date for determining entitlements to the final distribution				28 June	2013
Payment date for final distribution			28 August		2013

The Distribution Reinvestment Plan (“DRP”) applied for both the interim and final distributions for the year ended 30 June 2013.

This report should be read in conjunction with the annual financial report of the Trust and any announcements made in the period by or on behalf of the Trust in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the ASX Listing Rules.

8 August 2013

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FULL-YEAR RESULTS TO 30 JUNE 2013

The directors of BWP Management Limited, the responsible entity for the BWP Trust (the “Trust”), today announced the results of the Trust for the financial year to 30 June 2013.

Highlights

• Income of $109.2 million for the year – up 7.9 per cent on the previous year

• Distributable profit of $75.8 million for the year up – 7.4 per cent on the previous year (excluding distribution of capital profits in the previous year)

• Market rent reviews on eight properties completed during the year – average 7.2 per cent increase in annual rent

• Acquired a Bunnings Warehouse anchored bulky goods centre, a Bunnings Warehouse development site, and a parcel of land adjoining an existing Trust-owned Bunnings Warehouse

• Net Tangible Assets of $1.93 per unit at 30 June 2013 (2012: $1.85 per unit)

• Weighted Average Lease Expiry of 6.8 years at 30 June 2013 (2012: 7.7 years)

• Weighted average cost of debt of 7.3 per cent for the year – down from 8.0 per cent the previous year

• Capital management initiatives, including refinancing of existing bank facilities and attaining an A- S&P credit rating to provide access to a broader range of debt funding

• Gearing (debt/total assets) 21.2 per cent at 30 June 2013 (2012: 21.6 per cent)

Financial results

Income and expenses

Total income for the full-year to 30 June 2013 was $109.2 million, up by 7.9 per cent from last year. The increase in income was mainly due to growth of the property portfolio during or since last year - from acquisitions and improvements to investment properties (adding approximately $5.4 million) and rent reviews and other property income (adding approximately $2.9 million during the year). On a like-for-like basis, excluding rental income from properties acquired or upgraded during or since last year, rental income increased by approximately 2.1 per cent from last year.

Finance costs of $21.8 million were 6.2 per cent higher than last year, due to higher borrowing levels. Average borrowings of $295.4 million were $44.8 million (17.9 per cent) higher than last year. The finance costs comprised: interest payments on borrowings (including payments made under interest rate swap arrangements) totalling $13.9 million; and bank fees and margins totalling $7.9 million. (Last year, interest payments were $13.5 million, and bank fees and margins were $7.0 million).

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While finance costs were higher, the weighted average cost of debt for the year (finance costs less finance income, as a percentage of average borrowings) was lower; at 7.3 per cent, compared to 8.0 per cent for the previous year. The lower cost of debt was the result of lower floating and fixed interest rates, and reductions in the rate of bank fees and margins during or since last year. Average facility limits increased by approximately 14.5 per cent and utilisation of debt facilities (average borrowings/average facility limits) for the full-year to 30 June 2013 was slightly higher than the prior year at 68.7 per cent compared to 66.7 per cent.

Other expenses of $4.4 million for the year were 18.1 per cent higher than last year, mainly due to non-recoverable outgoings for multi tenanted properties acquired during or since last year; being: Dubbo (acquired during August 2011), Browns Plains (acquired during April 2012), and Gladstone (acquired during September 2012).

The management expense ratio for the year ended 30 June 2013 (expenses other than property outgoings and borrowing costs as a percentage of average total assets) was 0.62 per cent (2012: 0.58 per cent). The increase in the ratio was primarily due to a step-up in the management fee paid to the responsible entity in respect of a portfolio of properties acquired from Bunnings Group Limited (“Bunnings”) in 2011. The properties were subject to a waiver of the responsible entity’s entitlement to the management fees. The fee waiver reduced from 100 per cent for the year ended 30 June 2012 to 50 per cent for the year ended 30 June 2013. No fee waiver applies from 1 July 2013.

Net profit

Net profit as disclosed in the Trust’s financial statements includes unrealised gains or losses in the fair value of investment properties as a result of the revaluation of the entire property portfolio each six months (see property revaluations section below). The unrealised revaluation gains or losses are recognised as undistributed income as part of unitholders’ equity in the financial statements and do not affect the profit available for distribution to unitholders each period.

For the year ended 30 June 2013, net profit was $110.6 million, including $34.8 million in unrealised gain in the fair value of investment properties. This compares with $69.9 million last year, including an unrealised loss of $0.6 million in the fair value of investment properties.

Distributable profit for the year (excluding unrealised revaluation gains or losses) was $75.8 million. This compares with distributable profit of $76.7 million for the year ended 30 June 2012, which included the distribution of $6.2 million capital profit realised from the sale of one of the Trust’s investment properties.

Financial position

At 30 June 2013 the Trust’s total assets were $1,398.7 million (2012: $1,335.2 million) with unitholders’ equity of $1,037.2 million and total liabilities of $361.5 million. Investment properties made up the majority of total assets, comprising $1,374.4 million (2012: $1,306.6 million).

The underlying net tangible asset backing of the Trust’s units (“NTA”) at 30 June 2013 was $1.93 per unit, an increase of 3.2 per cent from $1.87 per unit at 31 December 2012 (30 June 2012: $1.85 per unit). The increase in NTA over the six months to 30 June 2013 is due to the increase in net assets through property revaluations and a decrease in interest rate swap liabilities during the period.

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Distribution to unitholders

The Trust pays out 100 per cent of distributable profit each period, in accordance with the requirements of the Trust’s constitution. Distributable profit for the six months to 30 June 2013 (being net profit excluding unrealised gains in the fair value of investment properties) was $38.4 million.

A final distribution of 7.14 cents per ordinary unit has been declared and will be made on 28 August 2013 to unitholders on the Trust’s register at 5:00 pm (AEST) on 28 June 2013. The final distribution takes the total distribution for the year to 14.14 cents per unit (2012: 14.67 cents per unit, including 1.17 cents per unit capital profit on the sale of an investment property). The tax advantaged component of the distribution is 24.26 per cent.

Units issued under the Trust’s Distribution Reinvestment Plan (“DRP”) in respect of the final distribution will be issued at $2.3387 per unit, representing the volume weighted average price of the Trust’s units for the 10 trading days following the record date, with no discount applied.

Capital Management

Debt funding

The Trust’s debt facilities as at 30 June 2013 are summarised below.

	Limit	Amount drawn1
Bank facilities as at 30 June 2013	$m	$m	Expiry date
Australia and New Zealand Banking Group Limited	150.0	56.5	23 January 2017
Commonwealth Bank of Australia	100.0	65.5	31 July 2016
Westpac Banking Corporation2	180.0	175.5	22 December 2016
	430.0	297.5

1 Amount drawn includes accrued interest and borrowing costs of $1.0 million as at 30 June 2013

2 In July 2013, the $180 million Westpac Banking Corporation facility was extended for a further year to 31 December 2017

In June and July 2013 the responsible entity finalised refinancing activities involving repricing all three of the Trust’s existing bilateral bank facilities and extending the duration of $280 million of the $430 million facilities. Following the refinancing the weighted average rate of bank fees and margins on a fully drawn basis will be approximately 55 basis points lower than those that applied to the Trust previously.

Also during the year, the Trust was assigned an A- (stable outlook) issuer credit rating by Standard and Poor’s, which was made public in July 2013. The A- rating confirms the credit quality of the Trust and positions BWP to access other debt capital funding markets as opportunities arise in order to further improve the diversity and duration of funding.

The refinancing of bank facilities and attaining an A- credit rating progresses the responsible entity’s objective of further improving the efficiency, diversity and duration of the Trust’s debt. As at 30 June 2013, the weighted average duration of the Trust’s debt facilities was 3.4 years to expiry (2012: 3.8 years). Average utilisation of debt facilities (average borrowings/average facility limits) for the year was 68.7 per cent (2012: 66.7 per cent).

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Distribution Reinvestment Plan

The DRP was in place for both the interim distribution and final distribution for the year ended 30 June 2013. The Trust has continued to maintain an active DRP as a component of longer-term capital management and to allow unitholders flexibility in receiving their distribution entitlements. The DRP provides a measured and efficient means of accessing additional equity capital from existing eligible unitholders.

Interest rate risk management

In order to reduce the volatility of borrowing costs due to changes in market interest rates, the Trust takes out interest rate swaps (hedging) to fix the interest costs of the majority of borrowings over the medium to long-term. At 30 June 2013, the Trust’s interest rate hedging cover was 70.6 per cent of borrowings, with $210.0 million interest rate swaps against interest bearing debt of $297.5 million. The weighted average term to maturity of hedging was 3.43 years, including delayed start swaps.

Due to the accounting requirement to mark the value of interest rate hedges to market, the Trust’s hedging liabilities decreased to approximately $12.5 million as at 30 June 2013 (2012: $16.0 million). The decrease in hedging liability during the year was due to new interest rate swaps entered into during the year and the reduction in average term of maturity of the hedging profile. The hedging liability assesses the potential liability if all hedges were to be terminated at 30 June 2013.

During the year, management continued to review the Trust’s hedging arrangements, including the opportunity to either; terminate the Trust’s current swap arrangements and enter into new interest rate swaps at a lower fixed interest rate, or extend existing swaps by “blending” them with new swaps. Neither of these options is considered to offer a material benefit to unitholders over time. However, management took advantage of lower forward interest rates by taking out two delayed-start swaps totalling $25 million to extend the duration of the existing hedging arrangements.

Gearing

The Trust’s gearing ratio (debt to total assets) at 30 June 2013 was 21.2 per cent (2012: 21.6 per cent), which is at the lower end of the board’s preferred range of 20 to 30 per cent. Covenant gearing (debt and non-current liabilities to total assets) was 22.1 per cent (2012: 22.8 per cent). The interest cover ratio (earnings before interest and tax/interest expense) was 4.6 times (2012: 4.5 times).

Property acquisitions

Bunnings Warehouse and bulky goods showrooms, Gladstone, Queensland

In September 2012, the Trust purchased a bulky goods centre anchored by a Bunnings Warehouse and Harvey Norman in Gladstone, Queensland. The property was acquired from an institutional owner for $28.6 million (including acquisition costs). The 5.5 hectare property is situated on the south-eastern side of the Dawson Highway in Clinton, approximately six kilometres south-west of Gladstone’s business centre. Gladstone is a major regional industrial centre, approximately 533 kilometres north of Brisbane, Queensland.

The property comprises a total lettable area of 21,511 square metres with approximately 527 car parking spaces. The annual net rental of the property at the date of acquisition was $2.4 million.

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Acquisition of a development site, Wallsend, New South Wales

In March 2011, unitholders approved a proposal to acquire from Bunnings a portfolio of 10 operational Bunnings Warehouses, for lease back to Bunnings, and three properties on which Bunnings would develop Bunnings Warehouses. In January 2013, the last of the three development properties, at Wallsend, New South Wales, settled. The 5.5 hectare vacant site was purchased for $3.0 million (including acquisition costs). Development of the Bunnings Warehouse is being undertaken on behalf of the Trust by Bunnings and is expected to be completed in November 2013.

Land adjoining Bunnings Warehouse, Albany, Western Australia

In February 2013, the Trust acquired a site adjoining the Trust’s Bunnings Warehouse in Albany, approximately 400 kilometres south of Perth, Western Australia.

The 1.2 hectare site was purchased for $2.7 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 site. The acquisition increases the Trust’s land holding at the location from 2.0 to 3.2 hectares. Details of the proposed expansion of the Bunnings Warehouse are yet to be finalised.

Developments and upgrades

Canopy extension works at Bunnings Warehouse, Northland, Victoria

During the year, canopy extension works amounting to $0.9 million were completed at the Trust-owned Bunnings Warehouse at Northland, Victoria. The Trust will receive approximately $70,000 additional annual rent as a result of the improvements.

Mechanical ventilation works to Bunnings Warehouse, Greenacre, New South Wales

During the year, additional mechanical ventilation was installed at a cost of $0.7 million at the Trust-owned Bunnings Warehouse at Greenacre, New South Wales. The Trust will receive approximately $51,000 additional annual rent as a result of the improvements.

Other improvements

During the year, the Trust incurred a cost of $0.5 million for roof access and safety improvements to a number of properties. The works generally comprised improving internal access to the roofs with better stairways, roof hatches and landings and installing or improving walkways to areas on the roof requiring regular or periodic access. These works are to improve safety and working conditions, and reduce damage to the roof. The Trust will receive no additional income from these improvements.

Approximately $0.7 million was spent on various other non-income producing improvements to the portfolio during the year.

Rent reviews

The rent payable for each leased property is increased annually, either by a fixed percentage or by the consumer price index (“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 date of the commencement 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.

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Annual escalations

During the year, 81 leases in the portfolio had annual fixed or CPI increases, resulting in an average increase of 2.0 per cent in the annual rent for these properties.

Market rent reviews

During the year, market rent reviews were concluded on four Bunnings Warehouses, two showroom tenancies at the Browns Plains bulky goods centre, one showroom tenancy at the Gladstone bulky goods centre, and an office tenancy at the Blackburn industrial property. Market rent reviews for six of the Trust’s Bunnings Warehouses due during the year are still being negotiated and remain unresolved.

The results of the completed market rent reviews are shown in the table below.

Property location Tenant	Passing rent Market review1 Uplift Effective date
	($ pa) ($ pa) (%)
Geraldton, WA2 Bunnings	923,821 1,218,750 +31.9 10 Dec 11
Oakleigh South, VIC2 Bunnings	1,807,138 1,807,138 - 8 Mar 12
Blackburn, VIC3 Pacific Laboratory Products	71,361 78,500 +10.0 1 Oct 12
Browns Plains, QLD4 Spotlight	417,442 438,314 +5.0 9 Oct 12
Hervey Bay, QLD Bunnings	1,131,148 1,165,082 +3.0 23 Dec 12
Fyshwick, ACT Bunnings	1,147,152 1,165,506 +1.6 24 Dec 12
Gladstone, QLD4,5 Eureka Street Furniture	142,479 163,240 +14.6 1 Mar 13
Browns Plains, QLD4 The Good Guys	425,984 468,852 +10.1 14 April 13
Weighted Average	+7.2

1 Geraldton and Oakleigh South were determined by independent valuers; Blackburn, Browns Plains, Hervey Bay and Fyshwick were negotiated between the Trust and the respective tenants

2 Geraldton and Oakleigh South rent reviews were due during the year ended 30 June 2012, but the outcome of the determination process was only completed during the half-year ended 31 December 2012

3 Multi-tenanted industrial property

4 Multi-tenanted bulky goods property

5 Completed by the previous owner of the property, effective from 1 March 2013

Property revaluations

The entire Trust portfolio was revalued at 31 December 2012 and again at 30 June 2013, including 21 property revaluations performed by independent valuers (10 at 31 December 2012 and 11 at 30 June 2013). Properties not independently revalued at each balance date are subject to internal valuations, with an independent valuer reviewing the methodology adopted. Factors that may affect the valuation of properties from time to time include: the supply of and competition for investment properties; leasing market conditions; the quality and condition of the particular property, including the duration of the lease; and the level of rent paid at the property compared with the broader market.

The value of the Trust’s portfolio increased by $71.9 million to $1,378.5 million during the year following: acquisitions of $34.3 million; capital expenditure of $2.8 million; and a net revaluation gain of $34.8 million during the year.

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The net revaluation gain was predominantly due to rental growth from rent reviews and a minor reduction in capitalisation rates across the portfolio, offset by 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 2013 was 7.86 per cent (December 2012: 7.91 per cent; June 2012: 7.91 per cent). Details of the revaluations are disclosed in the notes to the financial statements.

Outlook

Refer to the Outlook section of the 2013 annual report, which will be released separately today.

Further information

The BWP Trust internet site, www.bwptrust.com.au, is a useful source of information for investors and unitholders. It includes details of the Trust’s property portfolio, current activities and future prospects.

The site provides access to annual and half-year reports and also contains releases made to the Australian Securities Exchange covering matters of relevance to investors.

For further information please contact:

Grant Gernhoefer Telephone: +61 8 9327 4356 General Manager E-mail: ggernhoefer@bwptrust.com.au BWP Management Limited Website: www.bwptrust.com.au

An investor briefing and question and answer teleconference call will be held on Thursday, 8 August 2013 at 9.00am AWST (11.00am AEST).

Dial 1800 500 931 from within Australia or +613 9221 4420 from outside Australia. Ask to join the BWP Full-Year Results Investor Presentation (conference ID number 282781

(An investor briefing presentation will be released separately).

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FINANCIAL STATEMENTS

Statement of profit or loss and other comprehensive income .................................................31 Statement of financial position ....................................32 Statement of cash flows ...............................................33 Statement of changes in equity ..................................34 Notes to the financial statements ...............................35 Directors’ report ..............................................................57 Directors’ declaration .....................................................61 Auditor’s independence declaration ............................62 Independent auditor’s report ........................................63 Unitholder information ..................................................65

BWP TRUST ANNUAL REPORT 2013 30

FINANCIAL REPORT

Statement of profit or loss and other comprehensive income For the year ended 30 June 2013

Note Rental income Other property income 2 Finance income 4 Total revenue Finance costs 4 Responsible entity’s fees 5 Other operating expenses 2, 6 Net proft before unrealised gains/(losses) in fair value of investment properties Unrealised gains/(losses) in fair value of investment properties 11 Net proft attributable to unitholders of BWP Trust Other comprehensive income/(loss) Items that may be reclassifed subsequently to proft or loss: Effective portion of changes in fair value of cash fow hedges: - Realised losses transferred to proft or loss 4 - Unrealised losses on cash fow hedges 4 Total comprehensive income for the year attributable to the unitholders of BWP Trust Basic and diluted earnings (cents per unit) resulting from net proft 8	Note	June 2013 $000 June 2012 $000
		107,311 98,048 1,778 2,716 140 434
		109,229 101,198
		(21,780) (20,518) (7,255) (6,367) (4,426) (3,747)
		75,768 70,566 34,805 (635)
		110,573 69,931
		4,349 2,091 (852) (16,796)
		114,070 55,226
		20.78 13.40

The statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

31 BWP TRUST ANNUAL REPORT 2013

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Statement of financial position

As at 30 June 2013

ASSETS Current assets Cash Deposits for purchases of investment properties Receivables and prepayments Assets held for sale Total current assets Non-current assets Investment properties 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 Hedge reserve Undistributed income Total unitholders’ equity	Note	June 2013 $000 June 2012 $000
	9 10 11(d) 11 12 7 13 14 15	11,063 24,732 4,185 - 4,897 3,871 4,100 -
		24,245 28,603
		1,374,444 1,306,563
		1,374,444 1,306,563
		1,398,689 1,335,166
		14,077 14,071 99 248 38,396 42,231
		52,572 56,550
		296,492 288,890 12,417 15,765
		308,909 304,655
		361,481 361,205
		1,037,208 973,961
		707,363 682,435 (12,516) (16,013) 342,361 307,539
		1,037,208 973,961

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

BWP TRUST ANNUAL REPORT 2013 32

FINANCIAL REPORT

Statement of cash flows

For the year ended 30 June 2013

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 of deposits for purchases of investment properties Payments for purchase of, and additions to, investment properties Loans to related parties Net cash fows used in investing activities Cash fows from fnancing activities Proceeds of borrowings Distributions paid Net cash fows (used in)/from fnancing activities Net (decrease)/increase in cash Cash at the beginning of the fnancial year Cash at the end of the fnancial year	Note	June 2013 $000 June 2012 $000
	16 9	122,888 113,673 (18,527) (16,028) (7,008) (6,304) 140 434 (21,370) (20,650)
		76,123 71,125
		- 14,341 (4,185) - (38,551) (93,058) - 850
		(42,736) (77,867)
		7,602 78,046 (54,658) (55,514)
		(47,056) 22,532
		(13,669) 15,790 24,732 8,942
		11,063 24,732

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

33 BWP TRUST ANNUAL REPORT 2013

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Statement of changes in equity For the year ended 30 June 2013

Balance at 1 July 2011 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 cash fow hedges Total comprehensive income for the year Transactions with unitholders recorded directly in equity Distributions to unitholders Equity issued during the year: Distribution Reinvestment Plan Balance at 30 June 2012 Balance at 1 July 2012 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 cash fow hedges Total comprehensive income for the year Transactions with unitholders recorded directly in equity Distributions to unitholders Equity issued during the year: Distribution Reinvestment Plan Balance at 30 June 2013	Issued capital $000 Undistributed income $000 Hedge reserve $000 Total $000
	673,311 314,316 (1,308) 986,319
	- 69,931 - 69,931 - - (14,705) (14,705)
	- 69,931 (14,705) 55,226
	- (76,708) - (76,708) 9,124 - - 9,124
	9,124 (76,708) - (67,584)
	682,435 307,539 (16,013) 973,961
	682,435 307,539 (16,013) 973,961
	- 110,573 - 110,573 - - 3,497 3,497
	- 110,573 3,497 114,070
	- (75,751) - (75,751) 24,928 - - 24,928
	24,928 (75,751) - (50,823)
	707,363 342,361 (12,516) 1,037,208

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

BWP TRUST ANNUAL REPORT 2013 34

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

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 2012. 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(o), and 11(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 11(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(n)).

35 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

(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 profit or loss and other 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) Assets held for sale

Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Immediately before classification as held for sale the assets are remeasured in accordance with the Trust’s other accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount and fair value less costs to sell.

(g) 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.

(h) 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.

(i) 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.

In circumstances where impairment losses are deemed, these are included in the statement of profit or loss and other comprehensive income.

BWP TRUST ANNUAL REPORT 2013 36

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) 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.

(k) 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.

The recording of the distribution payable at each reporting date as a current liability results in the Trust’s current liabilities exceeding its current assets. This is a timing issue, as the Trust repays its interest-bearing loans and borrowings during the period from net profit and draws down its interest-bearing loans and borrowings when the distribution payments are made in August and February of each year.

(l) 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 at the amount and when due under the terms of the lease. All fixed, Consumer Price Indices-linked and market rent review increases are recognised in income from the date that these are due in accordance with the respective lease terms. This is done to ensure that rental income is matched with the associated cash flows over the term of the lease.

Interest income

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

(m) 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.

37 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

(n) 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 profit or loss in the statement of profit or loss and other 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 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.

(o) 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.

Operating leases

The 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 accordance with the revenue recognition policy at Note 1(l).

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.

(p) 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.

(q) 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.

(r) Segment Reporting

The Trust determines and presents its operating segment 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 warehouse properties and as such this is considered to be the only segment in which the Trust is engaged. Refer to notes 18 and 21 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.

BWP TRUST ANNUAL REPORT 2013 38

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

2. RECLASSIFICATION OF RECOVERABLE OUTGOINGS

Other property income and other operating expenses for the year ended 30 June 2012 have been adjusted down by $892,931 respectively due to a reclassification of recoverable outgoings adopted for the current accounting year ending 30 June 2013. For the full year to 30 June 2012 and prior years, all property outgoings paid directly by the Trust were included as other operating expenses and recoveries from the tenants, in accordance with the respective lease terms, were included as other property income. To provide greater transparency of the non-recoverable property outgoings, the recoverable outgoings expenses and recoveries made from tenants are now netted off so that only the non-recoverable outgoings are included in other operating expenses. Net profit for the prior period remains unchanged. Comparatives in the prior year have been amended accordingly.

3. AUDITOR’S REMUNERATION Auditing and review of the fnancial statements KPMG Australia Other services KPMG Australia – taxation services 4. 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 - Interest expense on interest rate swaps Total fnance expenses Net fnance income and expense Recognised in other comprehensive income/(loss) Net gains/(losses) on cash fow hedges for the year: - Realised losses transferred to proft or loss - Unrealised losses on cash fow hedges Finance expense recognised in other comprehensive income	June 2013 $ June 2012 $
	76,029 70,925
	22,300 20,430
	98,329 91,355
	June 2013 $000 June 2012 $000
	140 434
	(17,431) (18,427) (4,349) (2,091)
	(21,780) (20,518)
	(21,640) (20,084)
	4,349 2,091 (852) (16,796)
	3,497 (14,705)

39 BWP TRUST ANNUAL REPORT 2013

For the year ended 30 June 2013

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Notes to the financial statements

5. RESPONSIBLE ENTITY’S FEES

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 21(d)(ii)e).

OTHER OPERATING EXPENSES Non-recoverable property costs1 Other operating expenses	June 2013 $000 June 2012 $000
	3,923 3,331 503 416
	4,426 3,747

6. OTHER OPERATING EXPENSES

1 Included in non-recoverable property costs are amounts payable of $1,575,018 (2012: $1,507,090) for Queensland Land Tax which under the respective state legislation cannot be on-charged to tenants

7. DISTRIBUTIONS PAID OR PAYABLE

In accordance with the Trust’s constitution, the unrealised gains or losses on the revaluation of the fair value of investment properties are not included in the profit available for distribution to unitholders. A reconciliation is provided below:

7.00 cents (2012: 6.63 cents) per unit, interim distribution paid on 26 February 2013 7.14 cents (2012: 8.04 cents) per unit, fnal distribution provided Net proft attributable to unitholders of BWP Trust Net realised proft on sale of investment property1 Net unrealised (gains)/losses in fair value of investment properties Distributable proft for the year Opening undistributed proft Closing undistributed proft Distributable amount Distribution (cents per unit)	June 2013 $000 June 2012 $000
	37,355 34,477 38,396 42,231
	75,751 76,708
	110,573 69,931 - 6,150 (34,805) 635
	75,768 76,716 17 9 (34) (17)
	75,751 76,708
	14.14 14.67

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

BWP TRUST ANNUAL REPORT 2013 40

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

8. EARNINGS PER UNIT Net earnings used in calculating basic and diluted earnings per unit Basic and diluted earnings per unit Basic and diluted earnings per unit excluding unrealised gains/losses in fair value of investment properties Weighted average number of units on issue used in the calculation of basic and diluted earnings per unit 9. CASH Cash at bank Weighted average effective interest rates The Trust’s exposure to interest rate risk and a sensitivity analysis for fnancial assets and liabilities are set out in Note 18. 10. RECEIVABLES AND PREPAYMENTS Current Receivables from Wesfarmers Limited subsidiaries Other receivables Prepayments Wesfarmers Limited is a related party (see Note 21 (d)(i)).	June 2013 June 2012
	$110,573,000 $69,931,000 20.78 cents 13.40 cents 14.24 cents 13.52 cents 532,204,054 521,831,842 June 2013 $000 June 2012 $000
	11,063 24,732
	2.82% 4.00%
	572 393 309 296 4,016 3,182
	4,897 3,871

41 BWP TRUST ANNUAL REPORT 2013

For the year ended 30 June 2013

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Notes to the financial statements

11. 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	2013	2012	independent
Property	date	$000	$000	$000	$000	$000	$000	valuation
Albany, WA	01.11.99	4,100	222	2,650	5,728	12,700	9,600	31.12.10
Altona, VIC	24.09.98	6,800	566	2,781	6,210	16,357	16,257	31.12.12
Artarmon, NSW	10.02.03	14,033	864	212	6,691	21,800	21,800	31.12.11
Balcatta, WA	24.09.98	11,200	555	105	13,540	25,400	25,100	30.06.12
Bayswater, VIC	11.02.03	7,335	796	13,541	4,228	25,900	25,000	30.06.12
Belmont, WA	01.04.11	16,670	921	19	90	17,700	16,600	15.01.11
Belmont North, NSW	04.12.06	10,850	634	298	(982)	10,800	10,500	31.12.12
Belrose, NSW	10.02.03	17,150	1,054	256	8,140	26,600	26,600	31.12.11
Bibra Lake, WA	29.12.98	1,899	95	6,431	13,075	21,500	20,500	30.06.13
Blackburn, VIC	15.01.08	19,000	1,123	1,254	(2,977)	18,400	17,800	31.12.10
Blacktown, NSW	24.01.07	8,235	540	259	(2,434)	6,600	6,500	31.12.12
Broadmeadows, VIC	24.09.98	7,200	431	6,485	8,084	22,200	21,700	30.06.13
Browns Plains, QLD	05.04.12	24,000	1,402	58	540	26,000	24,000	01.04.12
Burleigh Heads, QLD	22.10.98	9,700	195	342	6,163	16,400	16,100	30.06.12
Cairns, QLD	10.02.03	10,000	453	2,536	1,211	14,200	14,300	31.12.11
Cannon Hill, QLD	24.12.98	5,600	313	7,942	11,645	25,500	24,500	30.06.13
Caroline Springs, VIC	23.05.11	19,080	1,098	14	308	20,500	19,300	15.01.11
Cockburn, WA	01.04.11	18,670	1,026	27	77	19,800	19,200	15.01.11
Coffs Harbour, NSW	05.09.01	1,900	112	4,567	221	6,800	6,800	31.12.11
Craigieburn, VIC	07.05.12	18,420	1,065	31	(316)	19,200	18,100	15.01.11
Croydon, VIC	24.09.98	7,800	518	5,736	10,046	24,100	23,000	31.12.12
Dandenong, VIC	19.04.02	4,000	255	6,746	5,799	16,800	16,800	31.12.10
Dubbo, NSW	05.08.11	15,790	1,004	28	(622)	16,200	15,700	15.01.11
Epping, VIC	12.03.99	7,800	463	88	6,449	14,800	14,000	31.12.12
Fairfeld Waters, QLD	01.04.11	16,950	977	23	450	18,400	17,800	15.01.11
Fountain Gate, VIC	24.09.98	8,300	505	1,643	8,752	19,200	18,800	31.12.11
Frankston, VIC	26.06.01	7,300	301	9,528	8,571	25,700	25,200	30.06.13
Fyshwick, ACT	23.12.02	10,000	942	3,538	3,020	17,500	17,200	31.12.11
Geraldton, WA	10.12.01	1,250	351	5,301	8,598	15,500	13,200	30.06.13
Geraldton Showrooms, WA	11.09.07	2,897	190	836	(1,223)	2,700	2,600	30.06.13
Gladstone, QLD	28.09.12	27,000	1,569	102	(371)	28,300	-	13.08.12
Greenacre, NSW	01.04.11	13,250	850	17,431	(431)	31,100	29,500	15.01.11
Harrisdale, WA	01.04.11	10,000	573	8,670	457	19,700	18,600	15.01.11
Hawthorn, VIC	18.04.07	19,337	1,217	24,851	(5,305)	40,100	39,500	31.12.11
Hemmant, QLD	07.05.03	3,000	143	10,572	7,985	21,700	21,700	30.06.12
Hervey Bay, QLD	12.07.02	2,053	122	6,509	4,316	13,000	12,500	30.06.11
Joondalup, WA	24.09.98	8,100	593	67	7,640	16,400	16,300	30.06.12
Lismore, NSW	21.04.04	7,750	447	928	1,375	10,500	10,200	30.06.12
Maitland, NSW	20.08.03	898	489	9,936	3,877	15,200	15,500	31.12.12
Mandurah, WA	24.09.98	3,050	160	5,572	8,918	17,700	17,400	30.06.12
Maribyrnong, VIC (land)	28.06.01	7,100	462	-	-	7,562	7,562	N/A

BWP TRUST ANNUAL REPORT 2013 42

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

11. 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 2013 $000 Fair value 30 June 2012 $000 Last independent valuation

Mentone, VIC 24.09.98 Midland, WA 06.03.01 Mile End, SA 22.03.00 Minchinbury, NSW 31.12.98 Mindarie, WA 03.03.00 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 Wallsend, NSW 30.01.13 Wollongong, NSW 10.02.03

9,400 542 104 9,954 20,000 20,000 30.06.12 4,600 255 5,021 10,524 20,400 20,100 31.12.12 11,250 624 3,083 12,943 27,900 27,500 30.06.11 9,200 503 4,332 12,522 26,557 25,457 30.06.11 4,184 209 5,689 10,318 20,400 19,500 31.12.11 8,000 334 3,737 8,629 20,700 19,400 30.06.11 11,100 642 479 2,979 15,200 14,800 30.06.11 3,400 204 6,573 10,823 21,000 19,900 31.12.10 11,215 659 64 (38) 11,900 11,500 31.12.11 2,305 124 7,442 7,729 17,600 17,400 30.06.11 8,600 489 3,852 10,759 23,700 22,400 31.12.11 13,700 786 3,198 14,803 32,487 31,887 31.12.11 6,650 374 9,205 6,871 23,100 21,900 30.06.13 20,250 1,187 28 (165) 21,300 20,300 15.01.11 16,440 916 22 22 17,400 16,900 15.01.11 2,100 141 5,460 2,599 10,300 10,200 30.06.11 24,000 1,391 49 (440) 25,000 25,000 31.12.10 - - - - - 4,700 30.06.13 3,320 166 5,917 11,197 20,600 19,700 31.12.11 6,225 296 7,477 3,502 17,500 17,300 31.12.11 7,800 446 51 1,703 10,000 10,000 31.12.11 8,300 473 5,493 9,434 23,700 22,700 31.12.12 15,250 890 41 419 16,600 16,100 15.01.11 2,800 188 6,927 7,185 17,100 16,500 30.06.12 7,000 407 118 5,275 12,800 11,900 30.06.13 13,333 782 360 2,125 16,600 16,400 30.06.13 7,900 431 860 11,209 20,400 20,000 31.12.12 3,000 178 6,141 6,581 15,900 15,700 30.06.12 9,150 635 14,362 2,353 26,500 26,200 31.12.10 18,400 861 48 591 19,900 19,400 30.06.11 15,000 932 39 (571) 15,400 15,500 30.06.13 2,770 211 - - 2,981 - N/A 12,000 628 301 4,071 17,000 17,000 31.12.11 714,109 42,500 274,386 343,449 1,374,444 1,306,563

43 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

(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.

(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 2013 are provided at Note 11(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 cash flows, 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 7.62 per cent to 9.50 per cent (compared with the Trust’s weighted average rate of 7.86 per cent).

BWP TRUST ANNUAL REPORT 2013 44

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

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

(b) Independent valuations and valuers

Property	Valuation date	Valuer
Thornleigh, NSW	30.06.13	Colliers International, Peter Macadam AAPI
Wagga Wagga, NSW	30.06.13	Colliers International, Peter Macadam AAPI
Cannon Hill, QLD	30.06.13	CBRE, Tom Irving AAPI
Regency Park, SA	30.06.13	m3property, Simon Hickin FAPI
Broadmeadows, VIC	30.06.13	JLL, Bernard Sweeney FAPI
Frankston, VIC	30.06.13	JLL, Bernard Sweeney FAPI
Oakleigh South, VIC	30.06.13	CBRE, Stephen Thomas AAPI
Sunshine, VIC	30.06.13	CBRE, Stephen Thomas AAPI
Bibra Lake, WA	30.06.13	CBRE, Jason Fenner AAPI
Geraldton, WA	30.06.13	Opteon, Mark Christie FAPI
Geraldton Showrooms, WA	30.06.13	Opteon, Mark Christie FAPI

(c) Operating leases

• (i) All of the properties listed in Note 11(a) are leased by Bunnings Group Limited except Trust properties at Blackburn, Maribyrnong, Blacktown, Regency Park; surplus land adjoining properties at: Albany (1.2 hectares), Altona (1.0 hectare), Minchinbury (0.5 hectares), Nunawading (0.1 hectares), Fyshwick (1.0 hectare); Geraldton Showrooms; showrooms co-located with Bunnings Warehouses at Bayswater, Browns Plains, Dubbo, Gladstone and Pakenham; and a pad site at Dubbo.

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

• Bunnings Warehouse leases generally commit the tenant to an initial term of 10 or 15 years, followed by a number of optional terms of five years each exercisable by the tenant.

• Leases to non-Bunnings tenants generally commit the tenant to an initial term of between 5 and 10 years, followed by one or a number of optional terms of five years each exercisable by the tenant.

• At 30 June 2013, the minimum lease expiry (being the duration until which the tenants’ committed terms expire) for the Trust’s investment properties is 0.2 years (2012: 0.7 years) and the maximum lease expiry is 14.3 years (2012: 14.3 years), with a weighted average lease expiry for the portfolio of 6.8 years (2012: 7.7 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 by an independent expert in accordance with generally accepted rent review criteria.

• (iv) The tenants are generally responsible for payment of most outgoings, which include all normal rates, taxes and assessments (other than land tax in some instances). At the Browns Plains and Gladstone properties, the non-Bunnings tenants do not contribute to outgoings, but each is responsible for payment of all of its respective utilities charges.

45 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

• (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 (d) Reconciliation of movement in investment properties Opening balance at the beginning of the fnancial year Acquisitions during the year Divestments during the year Reclassifcation to assets held for sale1 Capital improvements Net unrealised gains/(losses) from fair value adjustments Closing balance at the end of the fnancial year	June 2013 $000 June 2012 $000
	106,543 104,003 387,236 380,932 244,972 319,493
	738,751 804,428
	1,306,563 1,225,881 31,566 61,671 - (14,341) (4,100) - 5,610 33,987 34,805 (635)
	1,374,444 1,306,563

[1 ] During the year, a decision was made to sell the Trust’s Regency Park property, which has resulted in the property being revalued to its estimated net realisable value and being transferred from investments properties to assets held for sale

BWP TRUST ANNUAL REPORT 2013 46

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

12. PAYABLES AND DEFERRED INCOME

PAYABLES AND DEFERRED INCOME
Current Trade creditors and accruals Responsible entity’s fees payable Rent received in advance	June 2013 $000 June 2012 $000
	3,226 3,474 2,016 1,769 8,835 8,828
	14,077 14,071

The Trust’s exposure to liquidity risk in respect of payables is disclosed in Note 18.

13. INTEREST-BEARING LOANS AND BORROWINGS

Australia and New Zealand Banking Group Limited Commonwealth Bank of Australia Westpac Banking Corporation Less: accrued interest and borrowing costs Bank loans: non-current	Expiry date	June 2013 June 2012
		Limit $000 Amount drawn $000 Limit $000 Amount drawn $000
	23 January 2017 31 July 2016 22 December 2016	150,000 56,500 150,000 88,000 100,000 65,500 100,000 73,300 180,000 175,500 180,000 128,500 (1,008) (910)
		430,000 296,492 430,000 288,890

At 30 June 2013 the minimum duration of the facilities was 37 months (2012: 19 months) and the maximum was 43 months (2012: 55 months) with a weighted average duration of 41.1 months (2012: 45.6 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 18 for information on interest rate and liquidity risk.

14. ISSUED CAPITAL

(a) Book value of units on issue

(a) Book value of units on issue
Book value at the beginning of the fnancial year Equity issued during the year – DRP: >August 2012: 8,390,697 units at $1.8868 per unit >February 2013: 4,108,164 units at $2.2142 per unit Book value at the end of the fnancial year	June 2013 $000 June 2012 $000
	682,435 673,311 15,832 - 9,096 9,124
	707,363 682,435

47 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

(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 Number of fully paid units on issue at the end of the fnancial year	June 2013 June 2012
	525,255,093 520,012,793 12,498,861 5,242,300
	537,753,954 525,255,093

(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 both the interim distribution and final distribution for the year ended 30 June 2013 and the preceding year.

15. 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 Net gains/(losses) on cash fow hedges for the year Closing balance at the end of the fnancial year	June 2013 $000 June 2012 $000
	(16,013) (1,308) 3,497 (14,705)
	(12,516) (16,013)

16. CASH FLOW

(a) Reconciliation of operating profit to the net cash flows from operation

Reconciliation of operating proft to the net cash fows from operation
Net proft Net fair value change on investment properties Increase in receivables and prepayments Increase in payables and deferred income Net cash fows from operating activities Reconciliation of cash Cash balance comprises: Cash (see Note 9)	110,573 69,931 (34,805) 635 (151) (763) 506 1,322
	76,123 71,125
	11,063 24,732

(b) Reconciliation of cash

BWP TRUST ANNUAL REPORT 2013 48

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

17. 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 18 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.

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 18.

18. FINANCIAL INSTRUMENTS

The Trust has recognised certain financial instruments in the accounts. These financial instruments are disclosed in Notes 9, 10, 12 and 13. 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, cash, and payments due to the Trust under interest rate swaps.

Receivables

The credit risk associated with 95.3 per cent (2012: 97.0 per cent) of the rental income is with three tenants, Bunnings Group Limited 93.9 per cent (2012: 95.5 per cent), J Blackwood and Son Pty Limited 1.1 per cent (2012: 1.2 per cent) and Officeworks Superstores Pty Ltd 0.3 per cent (2012: 0.3 per cent), 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 (A3(Stable)/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, which are rated A- or higher by Standard and Poor’s.

49 BWP TRUST ANNUAL REPORT 2013

For the year ended 30 June 2013

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Notes to the financial statements

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, which are rated A- or higher by Standard and Poor’s.

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	Note	Carrying amount June 2013 $000 June 2012 $000
	9 10	11,063 24,732 881 689
		11,944 25,421

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	Carrying amount June 2013 $000 June 2012 $000
	572 393 309 296
	881 689

Impairment losses

Rental receivables of approximately $124,624 were overdue at 30 June 2013 (2012: $28,040).

During the year, $38,262 (2012: nil) of rental income was deemed non-recoverable and has been written off in relation to one tenancy. There were no other allowances 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.

BWP TRUST ANNUAL REPORT 2013 50

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

18. FINANCIAL INSTRUMENTS (continued)

(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 cash flow forecasts to assist in managing its liquidity.

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

	Carrying	Contractual				More than
	amount	cash fows	1 year	1-2 years	2-5 years	5 years
30 June 2013	$000	$000	$000	$000	$000	$000
Non-derivative fnancial liabilities
Bank loans - principal	(296,492)	(297,500)	-	-	(297,500)	-
Bank loans - future interest	-	(46,378)	(12,938)	(12,901)	(20,539)	-
Payables and deferred income	(14,077)	(14,077)	(14,077)	-	-	-
Derivative fnancial liabilities
Interest rate swaps	(12,516)	(12,998)	(4,490)	(4,700)	(3,811)	3
	(323,085)	(370,953)	(31,505)	(17,601)	(321,850)	3
30 June 2012
Non-derivative fnancial liabilities
Bank loans - principal	(288,890)	(289,800)	-	(73,300)	(216,500)	-
Bank loans - future interest	-	(57,109)	(14,032)	(12,904)	(30,173)	-
Payables and deferred income	(14,071)	(14,071)	(14,071)	-	-	-
Derivative fnancial liabilities
Interest rate swaps	(16,013)	(18,662)	(4,179)	(4,640)	(8,938)	(905)
	(318,974)	(379,642)	(32,282)	(90,844)	(255,611)	(905)

(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 2013 the fixed rates varied from 3.10 per cent to 5.77 per cent (2012: 4.25 per cent to 5.82 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 2013, the Trust’s hedging cover was 70.8 per cent of borrowings, which is within the board’s preferred 50 per cent to 75 per cent range.

51 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

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

Variable rate instruments Cash and short-term deposits Bank loans	Carrying amount June 2013 $000 June 2012 $000
	11,063 24,732 (296,492) (288,890)

Fair value sensitivity analysis for fixed rate instruments

The Trust does not have any fixed rate financial assets and liabilities.

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 2012.

30 June 2013 Variable rate instruments Interest rate swaps Net impact on net proft and equity 30 June 2012 Variable rate instruments Interest rate swaps Net impact on net proft and equity	Net proft 50 basis points increase $000 50 basis points decrease $000 (1,488) 1,488) 1,050 (1,050) (438) 438 (1,449) 1,449 950 (950) (499) 499	Equity
		50 basis points increase $000 50 basis points decrease $000
		- - 3,519 (4,575)
		3,519 (4,575)
		- - 4,070 (4,489)
		4,070 (4,489)

(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:

follows:
	June 2013				June 2012
	$000				$000
	Book value and				Book value and
	fair value				fair value
Assets and liabilities held at amortised costs
Loans and receivables	881				689
Cash and short-term deposits	11,063				24,732
Bank loans	(296,492)				(288,890)
Payables and deferred income	(14,077)				(14,071)
Liabilities held at fair value
Interest rate swaps	(12,516)				(16,013)

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.

BWP TRUST ANNUAL REPORT 2013 52

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

18. FINANCIAL INSTRUMENTS (continued)

(d) Net fair values (continued)

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	2013 2012
	2.67% to 4.33% 3.12% to 4.10%

(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 2013, the gearing level was 21.2 per cent (2012: 21.6 per cent).

The DRP was in place for both the interim distribution and final distribution for the year ended 30 June 2013 and the preceding year.

19. 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 2013 $000 June 2012 $000
	38,792 2,923 23,360 3,840 - 18,520
	62,152 25,283

Capital Commitments to unrelated parties

As at 30 June 2013, the Trust committed to acquire from an unrelated party, an investment property for $43.1 million, including acquisition costs, of which $4.3 million was incurred prior to June 2013. The acquisition is subject to meeting certain conditions precedent, which have yet to be fulfilled.

Capital Commitments to related parties

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.

Wallsend

Following the acquisition of the development site at Wallsend from an unrelated party, the Trust is committed to the development of a Bunnings Warehouse at a cost of $19.5 million. On completion of the development, the parties will enter into a new ten-year lease of the Bunnings Warehouse with five, five-year options, exercisable by the tenant.

53

BWP TRUST ANNUAL REPORT 2013

Notes to the financial statements

For the year ended 30 June 2013

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20. SUBSEQUENT EVENT

In July 2013, the Trust extended its $180 million facility with Westpac Banking Corporation for a further year to December 2017 and finalised the documentation in relation to its facility extension with the Commonwealth Bank of Australia for a further 30 months to July 2016.

21. 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

Mr J A Austin

Non-executive directors

Mr B J H Denison Ms F E Harris (from 1 October 2012) Mr R D Higgins Mr A J Howarth (from 1 October 2012) Mr P J Johnston (until 10 December 2012) Mr P J Mansell

General Manager

Mr 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 5. The constitution is lodged with ASIC and is available to unitholders on request.

For the financial year ended 30 June 2013, 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. There was no increase in remuneration of the directors for the year ended 30 June 2013.

Wesfarmers Limited employees seconded to the responsible entity to provide management services to the Trust are engaged in dedicated roles to act exclusively for the responsible entity on behalf of the Trust and are paid directly by Wesfarmers Limited. Short-term incentives paid by Wesfarmers Limited to employees engaged by the responsible entity are based entirely on the performance of the Trust and furthering the objectives of the Trust.

BWP TRUST ANNUAL REPORT 2013 54

FINANCIAL REPORT

Notes to the financial statements

For the year ended 30 June 2013

21. DIRECTOR AND EXECUTIVE DISCLOSURES AND RELATED PARTY DISCLOSURES (continued)

(c) Unit holdings

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
Mr J A Austin	295,967	-	-	295,967
Mr B J H Denison	11,205	-	-	11,205
Mr P J Mansell	218,000	16,475	-	234,475
Total	525,172	16,475	-	541,647

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 130,712,708 (2012: 123,419,543) units in the Trust, representing 24.31 per cent of the units on issue at 30 June 2013 (2012: 23.50 per cent).

• (ii) Transactions with the Wesfarmers Group

During the year ended 30 June 2013, the Trust had the following transactions with Wesfarmers Limited subsidiaries:

• a) Following approval by unitholders in March 2011, the Trust agreed to acquire a property portfolio, comprising 13 Bunnings Warehouse properties, from Bunnings Group Limited, a controlled entity of Wesfarmers Limited. During the year ended 30 June 2011 the Trust paid $161,560,000 following settlement of 10 of the 13 properties. A further $59,563,364 was paid during the year ended 30 June 2012 relating to the completion of developments of Bunnings Warehouses on 2 of the 10 properties acquired during 2011 and the settlement of two more properties. A further $19,520,000 relating to the development of the Wallsend Bunnings Warehouse is expected to be payable in the year ending 30 June 2014.

• b) Rent and other property income of $102,582,141 (2012: $96,474,867) was received from Bunnings Group Limited. The amount includes an amount received in advance of $8,421,676 (2012: $7,986,259). As at 30 June 2013 there was amounts receivable of $358,579 (2012: $19,909).

• c) Rent of $1,143,588 (2012: $1,316,544) was received from J Blackwood and Son Pty Limited, a controlled entity of Wesfarmers Limited. No amounts were received in advance in the current year (2012: $102,879). As at 30 June 2013 there were receivables of $114,339 (2012: nil).

• d) Rent of $349,788 (2012: $339,600) was received from Officeworks Superstores Pty Ltd, a controlled entity of Wesfarmers Limited. As at 30 June 2012 there was also a rent receivable of $35,319 (2012: $35,627).

• e) The responsible entity’s fee of $7,254,610 (2011: $6,367,371) is paid or payable to the responsible entity. During the year ended 30 June 2011, as part of the agreement to acquire 13 Bunnings Warehouse properties from Bunnings Group Limited, the responsible entity waived its entitlement to fees in respect of properties at: Greenacre, Dubbo, Wagga Wagga and Wallsend in New South Wales; Fairfield Waters and Smithfield in Queensland; Caroline Springs, Craigieburn and Pakenham in Victoria; Belmont, Cockburn, Harrisdale and Port Kennedy in Western Australia. For the year ended 30 June 2013 the amount of fees the responsible entity had waived was $666,022 (2012: $1,126,071). Under the agreement the fee waiver was for 100 per cent of the management fee payable up to the 30 June 2012 and a 50 per cent reduction in the management fee payable from 1 July 2012 to 30 June 2013.

55 BWP TRUST ANNUAL REPORT 2013

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Notes to the financial statements

For the year ended 30 June 2013

• f) The Trust reimbursed Bunnings Group Limited $875,128 for the completion of a canopy upgrade to the Trust’s Northland Bunnings Warehouse.

• g) The Trust reimbursed Bunnings Group Limited $661,670 for the completion of mechanical ventilation upgrade to the Trust’s Greenacre Bunnings Warehouse.

• h) In 2012, the Trust reimbursed Bunnings Group Limited $5.8 million for the completion of an upgrade to the Trust’s Scoresby Bunnings Warehouse, of which $310,120 is to be repaid to the Trust for works that were required to be completed by the tenant.

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

• j) The Trust paid $510,896 (2012: $146,920) to Wesfarmers Limited for insurance premiums on a number of the Trust’s properties. The amount paid represents insurance payments covering two years’ of insurance.

22. 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. Both the Trust and the responsible entity are domiciled in Australia.

(c) Economic dependency

95.3 per cent (2012: 97.0 per cent) of the Trust’s rental income received during the year was from Bunnings Group Limited, J Blackwood and Son Pty Ltd 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 2013 was authorised for issue in accordance with a resolution of the directors on 7 August 2013.

BWP TRUST ANNUAL REPORT 2013 56

FINANCIAL REPORT

Directors’ report

For the year ended 30 June 2013

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 that commenced 1 July 2012 and ended 30 June 2013. The information on pages 6 to 13 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 of BWP Trust Net realised proft on sale of investment property1 Net unrealised (gains)/losses in fair value of investment properties Distributable proft for the year Opening undistributed proft Closing undistributed proft Distributable amount 1Net sale proceeds less original purchase price and capital expenditure since acquisition	June 2013 $000 June 2012 $000
	110,573 69,931 - 6,150 (34,805) 635
	75,768 76,716 17 9 (34) (17)
	75,751 76,708

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 2013:

(a)	Out of the profts for the year ended 30 June 2012 on ordinary units as
	disclosed in last year’s directors’ report:
	(i) Final distribution of 8.04 cents per ordinary unit paid on 29 August 2012.	42,231	30,161
(b)	Out of the profts for the year ended 30 June 2013 (see Note 7 of the notes
	to the fnancial statements):
	(i) Interim distribution of 7.00 cents per ordinary unit paid on
	26 February 2013.	37,355	34,477
	(ii) Final distribution of 7.14 cents per ordinary unit declared by the
	directors for payment on 28 August 2013.	38,396	42,231

Units on issue

At 30 June 2013, 537,753,954 units of BWP Trust were on issue (2012: 525,255,093).

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 2013, BWP Trust held assets to a total value of $1,398.7 million (2012: $1,335.2 million). The basis for valuation of the assets is disclosed in Note 1 of the notes to and forming part of the financial statements.

Fee paid to the responsible entity and associates

Management fees totalling $7,254,610 (2012: $6,367,371) were paid or payable to the responsible entity out of Trust property during the financial year.

57 BWP TRUST ANNUAL REPORT 2013

Directors’ report For the year ended 30 June 2013

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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.

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 (2012: Nil). Management services are provided to the responsible entity by Wesfarmers Limited. Wesfarmers Limited employees seconded to the responsible entity to provide management services to the Trust are engaged in dedicated roles to act exclusively for the responsible entity on behalf of the Trust and are paid directly by Wesfarmers Limited. Short-term incentives paid by Wesfarmers Limited to employees engaged by the responsible entity are based entirely on the performance of the Trust and furthering the objectives of the Trust.

Directors

Information on directors

Mr J A Austin Mr B J H Denison Ms F E Harris (from 1 October 2012) Mr R D Higgins Mr A J Howarth (from 1 October 2012) Mr P J Johnston (until 10 December 2012) Mr P J Mansell

Details of the directors appear on pages 21 and 22.

No director is a former partner or director of the current auditor of the Trust, at a time when the current auditor has undertaken an audit of the Trust.

Company secretary

Ms K A Lange, FCIS, MBus

Ms K A Lange has been the company secretary since 9 April 2008. Ms Lange has more than 26 years’ company secretarial experience including company secretary of Woodside Petroleum Limited and Wesfarmers Limited.

Directors’ unitholdings

Units in the Trust in which directors had a relevant interest at the date of this report were:

Mr J A Austin Mr P J Mansell	Units in the Trust
	295,967 234,475

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.

Insurance and indemnification of directors and officers

During or since the end of the financial year insurance has been maintained covering the entity’s directors and officers against certain liabilities 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, unless the liability arises out of conduct involving a lack of good faith.

No indemnity payment has been made under any of the arrangements referred to above during or since the end of the financial year.

BWP TRUST ANNUAL REPORT 2013 58

FINANCIAL REPORT

Directors’ report

For the year ended 30 June 2013

Review and results of operations

The operations of the Trust during the financial year and the results of those operations are reviewed on pages 6 to 13 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 $67,881,000 (2012: $80,682,000 increase) to $1,374,444 (2011: $1,306,563,000), with the number of investment properties remaining the same at 73 properties at financial 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

In July 2013, the Trust extended its $180 million facility with Westpac Banking Corporation for a further year to December 2017 and finalised the documentation in relation to its facility extension with the Commonwealth Bank of Australia for a further 30 months to July 2016.

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 6 to 13. 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 24 to 29 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.

Board committees

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

There were two Audit and Risk Committee and two Remuneration and Nomination 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 62 and forms part of the Directors’ Report for the year ended 30 June 2013.

59 BWP TRUST ANNUAL REPORT 2013

For the year ended 30 June 2013

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Directors’ report

Non-audit services

KPMG provided the following non-audit services to the Trust during the year ended 30 June 2013 and received, or is due to receive, the following amount for the provision of these services:

Taxation services

Total

$22,300 $22,300

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.

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J A Austin Chairman BWP Management Limited Perth, 7 August 2013

BWP TRUST ANNUAL REPORT 2013 60

FINANCIAL REPORT

Directors’ declaration

For the year ended 30 June 2013

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 2013 and of its performance for the year ended on that date; and

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

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 2013.

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

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J A Austin Chairman BWP Management Limited Perth, 7 August 2013

61 BWP TRUST ANNUAL REPORT 2013

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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 2013 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.

KPMG Perth, 7 August 2013

Grant Robinson

Partner

BWP TRUST ANNUAL REPORT 2013 62

FINANCIAL REPORT

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 2013, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, notes 1 to 22 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.

63 BWP TRUST ANNUAL REPORT 2013

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Independent auditor’s report to the unitholders of BWP Trust

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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 2013 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 Perth, 7 August 2013

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Grant Robinson Partner

BWP TRUST ANNUAL REPORT 2013 64

FINANCIAL REPORT

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

	Date of notice	Units
26	February 2013	130,712,708

DISTRIBUTION OF UNITHOLDERS

As at 18 July 2013

2013
Range of holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - over Total s holding less than a marketable parcel (193 units)	Holders Units %
	2,693 1,324,464 0.25 5,973 17,444,460 3.24 3,933 29,227,104 5.44 5,463 130,395,554 24.25 187 359,362,372 66.83
	18,249 537,753,954 100.00
	556 24,441

Unitholders holding less than a marketable parcel (193 units)

VOTING RIGHTS

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

65 BWP TRUST ANNUAL REPORT 2013

Unitholder information

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Twenty largest unitholders

The twenty largest holders of ordinary units in the Trust as at 18 July 2013 were:

Wesfarmers Investments Pty Ltd HSBC Custody Nominees (Australia) Limited JP Morgan Nominees Australia Limited BNP Paribas Noms Pty Ltd RBC Dexia Investor Services Citicorp Nominees Pty Limited National Nominees Limited Citicorp Nominees Pty Limited UBS Nominees Pty Ltd Bond Street Custodians Limited AMP Life Limited JP Morgan Nominees Australia Limited Milton Corporation Limited RE GL CM & JE Adshead Pty Ltd CS Fourth Nominees Pty Ltd UBS Nominees Pty Ltd Cantala Pty Ltd Superlife Trustee Nominees Ltd HSBC Custody Nominees (Australia) Limited C B H Superannuation Holdings Pty Ltd	Number of units Percentage of capital held
	130,712,708 24.31 63,142,209 11.74 52,967,722 9.85 23,175,084 4.31 13,367,722 2.49 10,851,516 2.02 10,549,509 1.96 5,198,077 0.97 2,266,374 0.42 2,035,893 0.38 1,761,745 0.33 1,495,665 0.28 1,363,394 0.25 1,296,608 0.24 1,151,785 0.21 1,115,481 0.21 913,069 0.17 889,123 0.17 875,132 0.16 851,789 0.16
Total	325,980,605 60.62

BWP TRUST ANNUAL REPORT 2013 66