BlackWall Property Trust Annual Report 2013

FY2013 Annual Report · BlackWall Property Trust

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ASX%Release%

20!August!2013!

P>REIT%(PXT)%
30%June%2013%–%Full%Year%Result%
%
Attached!to!this!release!are!the!financial!statements!for!the!full!year!to!30!June!2013!along!
with!the!Appendix!4E.!!
!
Results%
At! 30! June! 2013! PRREIT! has! gross! assets! of! $120.7! million! with! net! assets! (including!
litigation!provisions)!of!$50!million!(24!cents!per!unit).!
!
To! 30! June! 2013! PRREIT! has! generated! a! normalised! net! profit! of! $4.6! million,! that! is,!
excluding! “one–off”! litigation! costs,! unrealised! movements! in! asset! values,! and! nonRcash!
accounting! entries! such! as! depreciation,! straight! lined! lease! income! and! interest! rate!
hedges!mark!to!market.!
!
Debt%
Since!30!June!2012!bank!debt!has!reduced!by!just!over!$7!million!including!the!most!recent!
repayment!of!$1!million!in!early!August!2013.!!This!brings!bank!debt!to!$48.5!million.!The!
Trust’s!facility!is!now!within!covenant!and!it!no!longer!pays!default!interest!rates.!
!
MPS%Litigation%
As! previously! disclosed,! PRREIT! is! a! defendant! in! litigation! proceedings! commenced! by!
MacarthurCook! Property! Securities! Fund! (ASX! Code:! MPS)! relating! to! contracts! under!
which!MPS!invested!$15!million!in!the!Trust!in!late!2007,!that!is,!before!BlackWall!began!
managing!the!Trust.!BlackWall!disputed!the!claim!and!MPS!commenced!proceedings!in!the!
NSW!Supreme!Court.!The!matter!was!heard!in!March!2012!in!MPS’s!favour!with!judgment!
entered! against! PRREIT! on! 10! August! 2012! for! $15! million! plus! interest! and! costs.! As! a!
consequence! the! Trust’s! financial! statements! to! 30! June! 2012! included! a! litigation!
provision!of!$19.5!million!($19.7!million!at!30!June!2013).!!
!
PRREIT!appealed!the!decision!in!the!NSW!Court!of!Appeal.!The!appeal!was!heard!in!early!
April!2013!and!a!decision!is!expected!soon.!
!
If!PRREIT’s!appeal!is!successful!its!NTA!increases!to!34!cents!per!unit!and!it!is!intended!that!
distributions! will! recommence! in! due! course.! If! the! appeal! is! unsuccessful! the! Trust! may!
seek!leave!to!have!a!further!appeal!heard!by!the!High!Court!of!Australia.!
!
%

TFML%LIMITED%ACN!079!608!825!
Level!1,!50!Yeo!Street,!Neutral!Bay,!Sydney!NSW!2089!Australia | PO!Box!612,!Neutral!Bay,!Sydney!
NSW!2089!Australia |%Tel!+61!2!9033!8611 |%Fax!+61!2!9033!8600 |%www.blackwallfunds.com.au!
!

% %

Assets%&%Operations%
As!part!of!the!appeal!process,!PRREIT!was!granted!a!stay!of!the!judgment,!which!prevented!
MPS! from! enforcing! its! claim.! To! achieve! this! a! number! of! undertakings! were! agreed,!
limiting! the! Trust’s! investment! activities! and! suspending! distributions! pending! the!
outcome!of!the!appeal.!The!undertakings!have!limited!PRREIT’s!activities!but!have!allowed!
us!to!more!rapidly!reduce!debt.!
!
PRREIT’s! revenue! is! derived! from! a! portfolio! of! income! producing! real! estate,! Bakehouse!
Bonds!and!property!securities.!!
!
%

Carrying%Value%

Gross%Revenue%

EBITDA%

Real%Estate%

Bakehouse%Bonds%

Property%Securities%

$81.4!million!

$31.1!million!

$7.2!million!

$9.7!million!

$1.7!million!

$0.4!million!

$7.7!million!

$1.7!million!

$0.4!million!

Total%

$119.7%million%

$11.8%million%

$9.8%million%

!
Real%Estate%
The!Trust’s!real!estate!portfolio!is!summarised!below.!The!portfolio!consists!of!just!under!
33,000! sqm! of! net! lettable! area! with! one! vacancy! of! 112! sqm.! Its! weighted! average! lease!
expiry!(WALE)!is!6.4!years.!
!
We! have! commenced! discussions! with! the! expiring! tenants! in! the! office! building! on! the!
Gold! Coast! known! as! Silver! @! The! Exchange,! and! in! the! Canberra! Eye! Hospital.! Although!
leasing! activity! on! the! Gold! Coast! and! Canberra! is! subdued! our! buildings! have! good!
locations,!flexible!layout!and!are!well!presented.!!
!
Property%

Renewals*%

WALE%

NLA%

Carrying%
Value%

Implied%
Yield%

Industrial:%

Bluescope!Coolum!

APN!Yandina!

APN!Toowoomba!

Commercial:%

$4.7!million!

8.2%!

3.2!years!!

2,900!sqm!

$24.1!million!

9.6%! 13.2!years!!

9,100!sqm!

$6.0!million!
!

9.5%! 11.6!years!!
!

4,100!sqm!
!

Nil!

Nil!
!

Silver!@!The!Exchange!

$18.3!million!

10.8%!

1.0!years!

5,000!sqm!

4,800!sqm!!

Canberra!Eye!Hospital!

Retail:%

$7.9!million!
!

8.9%!
!

1.5!years!
!

2,600!sqm!
!

1,500!sqm!!
!

Chancellor!Homemaker!Centre!

$20.4!million!

9.7%!

4.7!years!

9,100!sqm!

Nil!

Total%

$81.4%million%

6.4%years%%

32,800%sqm%

6,300%sqm%%

*Square(metres(with(a(lease(expiry(of(18(months(or(less.(
!
!
!

R2-

Bakehouse%Bonds%
Bakehouse! Bonds! are! CPI! linked! debt! instruments! secured! against! a! mixedRuse! property!
known! as! the! Bakehouse! Quarter! in! North! Strathfield,! Sydney.! Bakehouse! Bonds! pay! a!
coupon! of!5.5%!per!annum!with!capital!indexed!to!CPI!annually!during!the!10!year!term!
(maturing!in!2020).!PRREIT!holds!30!million!Bonds!with!a!carrying!value!of!$31.1!million.!!
!
Bakehouse!Bonds!are!secured!against!the!Bakehouse!Quarter!by!way!of!a!registered!second!
mortgage.! The! Bakehouse! Quarter! is! managed! by! BlackWall! and! owned! by! a! wholesale!
investment! trust! known! as! the! Kirela! Development! Unit! Trust.! Kirela! is! a! substantial!
investor!in!PRREIT.!
!
The! Bakehouse! Quarter! generates! free! cash! flow! (after! first! mortgage! interest)! of! $4.7!
million!per!annum!from!over!50!tenants!leasing!over!40,000!sqm!of!commercial,!retail!and!
entertainment!space.!The!Bakehouse!Quarter’s!capital!structure!is!set!out!below:!

Bakehouse%Quarter%

Property%Value!

Senior%Debt!

Bakehouse%Bonds!

Net%Asset%Value%

$182.00!million!

($87.15)!million!

50%(LVR(

($36.27)!million!

$58.58%million%

!
Property%Securities%
PRREIT’s! property! securities! investments! came! on! to! the! balance! sheet! as! part! of! a!
restructure! undertaken! in! 2010! to! overcome! the! Trust’s! debt! issues! at! the! time.!
BlackWall’s!strategy!is!to!aggregate!or!trade!these!positions!to!either!turn!them!to!cash!or!
grow!positions!to!a!point!of!control.!In!some!cases!the!trusts!in!which!PRREIT!is!invested!
are!being!wound!up!by!their!managers.!Where!this!has!occurred!the!capital!returned!has!
been!applied!to!debt!amortisation.!!
!
BlackWall! is! working! on! a! number! of! opportunities! to! grow! PRREIT’s! assets! and! revenue!
but!are!restricted!by!the!undertakings!given!in!relation!to!the!MPS!litigation.!
!
More! information! on! the! Trust’s! financial! position! is! available! in! the! attached! financial!
statements.!
!
Stuart%Brown%
Chief%Executive%Officer%

R3-

Managed By

Consolidated Annual Financial Report
Year Ended 30 June 2013

P-REIT

CONTENTS

Financial Report

Directors’ Report

Auditor’s Independence Declaration

Corporate Governance

ASX Additional Information

Trust Details

Consolidated Statement of Profit or Loss and Other Comprehensive
Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Net Assets Attributable
to Unitholders

Consolidated Statement of Cash Flows

Notes to the Consolidated Annual Financial Report

Directors’ Declaration

Independent Auditor’s Report

Page 3

Page 11

Page 12

Page 20

Page 22

Page 23

Page 24

Page 25

Page 26

Page 27

Page 51

Page 52

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report

The Directors of TFML Limited (“the Responsible Entity” or “TFML”), the Responsible Entity of P-REIT,

present their report together with the consolidated annual financial report (“financial statements”) of

P-REIT and its controlled entity (together referred to as “the Trust”) for the year ended 30 June 2013.

Principal Activities and Review of Operations

The principal activity of the Trust during the financial year was investing in income-producing real estate

and real estate interests.

Results

At 30 June 2013 P-REIT has gross assets of $120.7 million with net assets (including litigation provisions)

of $50 million (24 cents per unit).

To 30 June 2013 P-REIT has generated a normalised net profit of $4.6 million, that is, excluding “one–off”

litigation costs, unrealised movements in asset values, and non-cash accounting entries such as

depreciation, straight-line rental income and interest rate hedges mark to market.

Since 30 June 2012 bank debt has reduced by just over $7 million including the most recent repayment of

$1 million in early August 2013. This brings bank debt to $48.5 million. The Trust’s facility is now within

covenant and it no longer pays default interest rates.

Debt

MPS Litigation

As previously disclosed, P-REIT is a defendant in litigation proceedings commenced by MacarthurCook

Property Securities Fund (ASX Code: MPS) relating to contracts under which MPS invested $15 million in

the Trust in late 2007, that is, before BlackWall began managing the Trust. BlackWall disputed the claim

and MPS commenced proceedings in the NSW Supreme Court. The matter was heard in March 2012 in

MPS’s favour with judgment (“Judgment”) entered against P-REIT on 10 August 2012 for $15 million plus

interest and costs. As a consequence the Trust’s financial statements to 30 June 2012 included a litigation

provision of $19.5 million ($19.7 million at 30 June 2013).

P-REIT appealed the decision in the NSW Court of Appeal. The appeal was heard in early April 2013 and a

decision is expected soon.

If P-REIT’s appeal is successful its NTA increases to 34 cents per unit and it is intended that distributions

will recommence in due course. If the appeal is unsuccessful the Trust may seek leave to have a further

appeal heard by the High Court of Australia.

Assets & Operations

As part of the appeal process, P-REIT was granted a stay of the Judgment, which prevented MPS from

enforcing its claim. To achieve this a number of undertakings were agreed, limiting the Trust’s investment

activities and suspending distributions pending the outcome of the appeal. The undertakings have limited

P-REIT’s activities but have allowed us to more rapidly reduce debt.

P-REIT’s revenue is derived from a portfolio of income producing real estate, Bakehouse Bonds and

property securities.

P-REIT

Directors’ Report

The Directors of TFML Limited (“the Responsible Entity” or “TFML”), the Responsible Entity of P-REIT,
present their report together with the consolidated annual financial report (“financial statements”) of
P-REIT and its controlled entity (together referred to as “the Trust”) for the year ended 30 June 2013.

Principal Activities and Review of Operations

The principal activity of the Trust during the financial year was investing in income-producing real estate
and real estate interests.

Results

At 30 June 2013 P-REIT has gross assets of $120.7 million with net assets (including litigation provisions)
of $50 million (24 cents per unit).

To 30 June 2013 P-REIT has generated a normalised net profit of $4.6 million, that is, excluding “one–off”
litigation costs, unrealised movements in asset values, and non-cash accounting entries such as
depreciation, straight-line rental income and interest rate hedges mark to market.

Debt

Since 30 June 2012 bank debt has reduced by just over $7 million including the most recent repayment of
$1 million in early August 2013. This brings bank debt to $48.5 million. The Trust’s facility is now within
covenant and it no longer pays default interest rates.

MPS Litigation

As previously disclosed, P-REIT is a defendant in litigation proceedings commenced by MacarthurCook
Property Securities Fund (ASX Code: MPS) relating to contracts under which MPS invested $15 million in
the Trust in late 2007, that is, before BlackWall began managing the Trust. BlackWall disputed the claim
and MPS commenced proceedings in the NSW Supreme Court. The matter was heard in March 2012 in
MPS’s favour with judgment (“Judgment”) entered against P-REIT on 10 August 2012 for $15 million plus
interest and costs. As a consequence the Trust’s financial statements to 30 June 2012 included a litigation
provision of $19.5 million ($19.7 million at 30 June 2013).

P-REIT appealed the decision in the NSW Court of Appeal. The appeal was heard in early April 2013 and a
decision is expected soon.

If P-REIT’s appeal is successful its NTA increases to 34 cents per unit and it is intended that distributions
will recommence in due course. If the appeal is unsuccessful the Trust may seek leave to have a further
appeal heard by the High Court of Australia.

Assets & Operations

As part of the appeal process, P-REIT was granted a stay of the Judgment, which prevented MPS from
enforcing its claim. To achieve this a number of undertakings were agreed, limiting the Trust’s investment
activities and suspending distributions pending the outcome of the appeal. The undertakings have limited
P-REIT’s activities but have allowed us to more rapidly reduce debt.

P-REIT’s revenue is derived from a portfolio of income producing real estate, Bakehouse Bonds and
property securities.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report (continued)

Assets & Operations (continued)

Real Estate

Bakehouse Bonds

Property Securities

Total

Real Estate

Carrying Value

Gross Revenue

$81.4 million

$31.1 million

$7.2 million

$9.7 million

$1.7 million

$0.4 million

EBITDA

$7.7 million

$1.7 million

$0.4 million

$119.7 million

$11.8 million

$9.8 million

The Trust’s real estate portfolio is summarised below. The portfolio consists of just under 33,000 sqm of
net lettable area with one vacancy of 112 sqm. Its weighted average lease expiry (WALE) is 6.4 years.

We have commenced discussions with the expiring tenants in the office building on the Gold Coast known
as Silver @ The Exchange, and in the Canberra Eye Hospital. Although leasing activity on the Gold Coast
and Canberra is subdued our buildings have good locations, flexible layout and are well presented.

Property

Industrial:

Bluescope Coolum

APN Yandina

APN Toowoomba

Commercial:

Carrying
Value

Implied
Yield

WALE

NLA

Renewals*

by the undertakings given in relation to the MPS litigation.

$4.7 million

8.2%

3.2 years

2,900 sqm

$24.1 million

9.6% 13.2 years

9,100 sqm

$6.0 million

9.5% 11.6 years

4,100 sqm

Nil

Silver @ The Exchange

$18.3 million

10.8%

1.0 years

5,000 sqm

4,800 sqm

Canberra Eye Hospital

$7.9 million

8.9%

1.5 years

2,600 sqm

1,500 sqm

Retail:

Chancellor Homemaker Centre

$20.4 million

9.7%

4.7 years

9,100 sqm

Nil

Total

$81.4 million

6.4 years

32,800 sqm

6,300 sqm

*Square metres with a lease expiry of 18 months or less.

Bakehouse Bonds

Bakehouse Bonds are CPI linked debt instruments secured against a mixed-use property known as the
Bakehouse Quarter in North Strathfield, Sydney. Bakehouse Bonds pay a coupon of 5.5% per annum with
capital indexed to CPI annually during the 10 year term (maturing in 2020). P-REIT holds 30 million
Bonds with a carrying value of $31.1 million.

Bakehouse Bonds are secured against the Bakehouse Quarter by way of a registered second mortgage.
The Bakehouse Quarter is managed by BlackWall and owned by a wholesale investment trust known as
the Kirela Development Unit Trust. Kirela is a substantial investor in P-REIT.

The Bakehouse Quarter generates free cash flow (after first mortgage interest) of $4.7 million per annum
from over 50 tenants leasing over 40,000 sqm of commercial, retail and entertainment space. The
Bakehouse Quarter’s capital structure is set out below:

Directors’ Report (continued)

Bakehouse Bonds (continued)

Bakehouse Quarter

Property Value

Senior Debt

Bakehouse Bonds

Net Asset Value

Property Securities

$182.00 million

($87.15) million

50% LVR

($36.27) million

$58.58 million

P-REIT’s property securities investments came on to the balance sheet as part of a restructure undertaken

in 2010 to overcome the Trust’s debt issues at the time. BlackWall’s strategy is to aggregate or trade these

positions to either turn them to cash or grow positions to a point of control. In some cases the trusts in

which P-REIT is invested are being wound up by their managers. Where this has occurred the capital

returned has been applied to debt amortisation.

BlackWall is working on a number of opportunities to grow P-REIT’s assets and revenue but are restricted

Significant Changes in Affairs

Going Concern

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

These financial statements have been prepared on a going concern basis, which contemplates continuity

of normal business activities and the realisation of assets and settlement of liabilities in the ordinary

course of business. In reaching this conclusion the Directors have considered Trust’s capacity to meet an

obligation to pay the full claim, costs and interest in relation to the litigation proceedings commenced by

MPS as explained under MPS Litigation section above. In this regard the Directors note:

1. As at the date of these financial statements the Trust has borrowings of $48.5 million and gross

2. $81.4 million of the Trust’s assets are income producing real estate for which there is a deep and

assets of $120.7 million;

active market;

3. The Trust’s legal advisers have given preliminary advice that in the event the Trust’s appeal to the

NSW Court of Appeal was unsuccessful:

a. depending on the terms of that Judgment, the Trust has reasonable prospects of being

granted leave to appeal to the High Court of Australia; and

in the event the Trust chose to seek leave to appeal to the High Court of Australia the

Trust should be successful in having the Judgment stayed pending the outcome of the

appeal process.

Notwithstanding the deficiency in current assets over current liabilities the Directors believe the bank

facilities of $49.5 million (now $48.5 million), classified as a current liability for reasons set out at Note 13,

will be renewed and extended after May 2014.

Distributions

There were no distributions paid or declared for the year ended 30 June 2013 (2012: $nil).

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report (continued)

Bakehouse Bonds (continued)

Bakehouse Quarter

Property Value

Senior Debt

Bakehouse Bonds

Net Asset Value

Property Securities

$182.00 million

($87.15) million

50% LVR

($36.27) million

$58.58 million

P-REIT’s property securities investments came on to the balance sheet as part of a restructure undertaken
in 2010 to overcome the Trust’s debt issues at the time. BlackWall’s strategy is to aggregate or trade these
positions to either turn them to cash or grow positions to a point of control. In some cases the trusts in
which P-REIT is invested are being wound up by their managers. Where this has occurred the capital
returned has been applied to debt amortisation.

BlackWall is working on a number of opportunities to grow P-REIT’s assets and revenue but are restricted
by the undertakings given in relation to the MPS litigation.

Significant Changes in Affairs

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

Going Concern

These financial statements have been prepared on a going concern basis, which contemplates continuity
of normal business activities and the realisation of assets and settlement of liabilities in the ordinary
course of business. In reaching this conclusion the Directors have considered Trust’s capacity to meet an
obligation to pay the full claim, costs and interest in relation to the litigation proceedings commenced by
MPS as explained under MPS Litigation section above. In this regard the Directors note:

1. As at the date of these financial statements the Trust has borrowings of $48.5 million and gross

assets of $120.7 million;

2. $81.4 million of the Trust’s assets are income producing real estate for which there is a deep and

active market;

3. The Trust’s legal advisers have given preliminary advice that in the event the Trust’s appeal to the

NSW Court of Appeal was unsuccessful:

a. depending on the terms of that Judgment, the Trust has reasonable prospects of being

granted leave to appeal to the High Court of Australia; and
in the event the Trust chose to seek leave to appeal to the High Court of Australia the
Trust should be successful in having the Judgment stayed pending the outcome of the
appeal process.

Notwithstanding the deficiency in current assets over current liabilities the Directors believe the bank
facilities of $49.5 million (now $48.5 million), classified as a current liability for reasons set out at Note 13,
will be renewed and extended after May 2014.

Distributions

There were no distributions paid or declared for the year ended 30 June 2013 (2012: $nil).

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report (continued)

Events Subsequent to Reporting Date and Likely Developments

Information on Directors of the Responsible Entity (continued)

In August 2013, $1 million of borrowings was repaid to the Trust’s lender (refer to Note 13).

Other than the matters referred to in these financial statements, to the best knowledge of the Directors,
there have been no other matters or circumstances that have arisen since the end of the year that have
materially affected or may materially affect the Trust’s operations in future financial years, the results of
those operations or the Trust’s state of affairs in future financial years.

Information on Directors of the Responsible Entity

The names of the Directors of the Responsible Entity in office at any time during or since the end of the
year are set out below. Unless otherwise stated, Directors have been in office since the beginning of the
financial year to the date of these financial statements.

Name

Special Experience

Joseph (Seph)

Glew

Position

Non-Executive

Director

Name
Richard Hill

Position
Non-Executive
Director and
Chairman

Special Experience
Richard Hill has extensive investment banking experience
and was the founding partner of the corporate advisory firm
Hill Young & Associates. Richard has invested in BlackWall’s
projects since the early 1990s. Prior to forming Hill Young,
Richard held a number of Senior Executive positions in Hong
Kong and New York with Hong Kong & Shanghai Banking
Corporation (HSBC). He was admitted as an attorney in New
York State and was registered by the US Securities &
Securities
and
Exchange Commission
Commission. He is the Chairman of Calliden Group Limited
and Sirtex Medical Limited Limited (both listed on the ASX)
and a Director of Biota Pharmaceuticals Inc. (listed on
NASDAQ). In addition Richard is Chairman of the Westmead
Millennium
for Medical Research. Previously,
Richard was an Independent Non-Executive Director of the
then ASX listed Pelorus Property Group Limited. He is now
the Chairman of the ASX listed BlackWall Property Funds
Limited which is the ultimate holding company of TFML
Limited (the Trust’s Responsible Entity).

the Ontario

Institute

Seph has worked in the commercial property industry in New

Zealand, the USA and Australia. Seph has driven large scale

property development and financial structuring for real

estate for over 30 years. In addition, since the early 1990s

Seph has run many “turn-around” processes in relation to

distressed properties and property structures for both

private and institutional property owners.

While working for the Housing Corporation of New Zealand

and then AMP, Seph qualified as a registered valuer and holds

a Bachelor of Commerce. In the 1980s he served as an

Executive Director with New Zealand based property group

Chase Corporation and as a Non-Executive director with a

number of other listed companies in New Zealand and

Australia. Seph is Chairman of Pelorus Private Equity Limited

(an unlisted public company), a position he held when that

entity traded on the ASX under the name Pelorus Property

Group Limited. In addition he is a Non-Executive Director of

the ASX listed BlackWall Property Funds Limited which is the

ultimate holding company of TFML Limited (the Trust’s

Responsible Entity).

since 1997. Robin is the Chairman of Vintage Capital Pty Ltd,

an investment company with interests in property, wealth

management, logistics and healthcare. He is a former member

of the ASX and has served on the boards of several

investment banks in Australia and overseas. He is a Director

of Probiotec Ltd (a pharmaceutical manufacturing company

listed on the ASX) and a Director of the retailer, Italtile

Australia Pty Ltd. Robin is also a Fellow of the Financial

Services Institute of Australasia. Robin is a Non-Executive

Director of Pelorus Private Equity Limited a position he held

when it traded on the ASX under the name Pelorus Property

Group Limited. Robin is also a Non-Executive Director of the

ASX listed BlackWall Property Funds Limited which is the

ultimate holding company of TFML Limited (the Trust’s

Responsible Entity).

Robin Tedder

Robin has 37 years’ experience in investment and financial

Non-Executive

markets. He has been an investor in BlackWall’s projects

Director

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report (continued)

Information on Directors of the Responsible Entity (continued)

Name

Joseph (Seph)
Glew

Robin Tedder

Position

Non-Executive
Director

Special Experience
Seph has worked in the commercial property industry in New
Zealand, the USA and Australia. Seph has driven large scale
property development and financial structuring for real
estate for over 30 years. In addition, since the early 1990s
Seph has run many “turn-around” processes in relation to
distressed properties and property structures for both
private and institutional property owners.

While working for the Housing Corporation of New Zealand
and then AMP, Seph qualified as a registered valuer and holds
a Bachelor of Commerce. In the 1980s he served as an
Executive Director with New Zealand based property group
Chase Corporation and as a Non-Executive director with a
number of other listed companies in New Zealand and
Australia. Seph is Chairman of Pelorus Private Equity Limited
(an unlisted public company), a position he held when that
entity traded on the ASX under the name Pelorus Property
Group Limited. In addition he is a Non-Executive Director of
the ASX listed BlackWall Property Funds Limited which is the
ultimate holding company of TFML Limited (the Trust’s
Responsible Entity).

Robin has 37 years’ experience in investment and financial
markets. He has been an investor in BlackWall’s projects
since 1997. Robin is the Chairman of Vintage Capital Pty Ltd,
an investment company with interests in property, wealth
management, logistics and healthcare. He is a former member
of the ASX and has served on the boards of several
investment banks in Australia and overseas. He is a Director
of Probiotec Ltd (a pharmaceutical manufacturing company
listed on the ASX) and a Director of the retailer, Italtile
Australia Pty Ltd. Robin is also a Fellow of the Financial
Services Institute of Australasia. Robin is a Non-Executive
Director of Pelorus Private Equity Limited a position he held
when it traded on the ASX under the name Pelorus Property
Group Limited. Robin is also a Non-Executive Director of the
ASX listed BlackWall Property Funds Limited which is the
ultimate holding company of TFML Limited (the Trust’s
Responsible Entity).

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report (continued)

Information on Directors of the Responsible Entity (continued)

Name

Special Experience

Stuart Brown

Stuart has been involved in property investment for over 15
years across funds management, property services and
finance. In 2006 he was appointed Chief Operating Officer
and Chief Financial Officer of the then ASX listed Pelorus
Property Group Limited and later Managing Director. Stuart
has run debt and equity raising in relation to listed and
unlisted real estate structures with assets valued at over a
half a billion dollars. In his earlier career, Stuart practised as a
solicitor in the areas of real estate, mergers and acquisitions
and corporate advisory with Mallesons and Gilbert + Tobin.
Stuart is also a Director of the unlisted public company,
Pelorus Private Equity Limited and the ASX listed BlackWall
Property Funds Limited which is the ultimate holding
company of the Trust’s Responsible Entity TFML Limited.
Stuart is also an independent Director of Coogee Boys’
Preparatory School.

Position

Executive Director
and Chief Executive
Officer

Company Secretary

Don Bayly is the Company Secretary. He has a Bachelor of Commerce and Administration from Victoria
University. Don has over 20 years’ compliance management experience.

The Board has looked to achieve a board membership that includes a mix of skills, experience and
technical expertise that is best suited to the business.

Meeting Attendances

Attendance at the Responsible Entity’s Board meetings held during the financial year is detailed below:

Director
Meetings Held
Richard Hill
Seph Glew
Robin Tedder
Stuart Brown

Directors’ Relevant Interests

Board Meetings
5
5
5
5
5

As at the date of this report the Directors’ relevant interests in units or options in the Trust are:

Director
Richard Hill
Seph Glew
Robin Tedder
Stuart Brown

Shares (%)

Units (No.)
-
49,445,000
14,718,624
875,760

Units (%)
-
23.83
7.09
0.42

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

Directors’ Report (continued)

Options

There were no options granted during the year ended 30 June 2013.

Remuneration Report (Audited)

management personnel.

Responsible Entity and Custodian Remuneration

There was no remuneration paid from the Trust to the Directors of the Responsible Entity and its key

In accordance with the terms of the Trust Constitution and the product disclosure statement, the

Responsible Entity is entitled to receive a management fee based on 0.65% p.a. of the gross asset value of

the Trust and the recovery of other administrative costs. Refer to Note 24 for total remuneration paid to

the Responsible Entity.

The Custodian is The Trust Company Limited. The custody fee is calculated at the greater of $15,000 p.a.

or 0.025% p.a. of the gross asset value of the Trust, plus GST. In addition, the Custodian is entitled to be

paid any out-of-pocket expenses incurred in the performance of its duties.

Interests in the Fund

The number of units on issue at 30 June 2013 was 207,524,039. There were no additional issues or

redemptions of units during the financial year. TFML Limited, the Responsible Entity of the Trust and its

ultimate holding company BlackWall Property Funds Limited, holds 22,465,285 units in the Trust.(cid:3)

Environmental Regulation and Performance

The Trust and its controlled entity’s operations are not regulated by any significant environmental law or

regulation under either Commonwealth or State legislation. However, the Responsible Entity believes that

the Trust and its controlled entity have adequate systems in place for the management of its

environmental requirements and is not aware of any instances of non-compliance of those environmental

requirements as they apply to the Trust.

Measurable Objectives For Achieving Gender Diversity

Notwithstanding the Responsible Entity does not directly employ staff, through its arrangement with

Blackwall Property Funds it is committed to employing people on best fit for the job based on ability,

performance and potential, our goal is to build a workforce that reflects the diversity of the communities

This means creating a work environment where employee differences such as gender, age, culture,

disability and lifestyle choice are valued. The objective is therefore one of a 50/50 gender split and is

Female (No. of people)

Female (%) Male (No. of people)

Male (%)

Proceedings On Behalf of The Trust

See commentary earlier in these financial statements and Note 15.

in which we operate.

reflected as follows:

Executive Management

Board

Other

100

P-REIT

Directors’ Report (continued)

Options

There were no options granted during the year ended 30 June 2013.

Remuneration Report (Audited)

There was no remuneration paid from the Trust to the Directors of the Responsible Entity and its key
management personnel.

Responsible Entity and Custodian Remuneration

In accordance with the terms of the Trust Constitution and the product disclosure statement, the
Responsible Entity is entitled to receive a management fee based on 0.65% p.a. of the gross asset value of
the Trust and the recovery of other administrative costs. Refer to Note 24 for total remuneration paid to
the Responsible Entity.

The Custodian is The Trust Company Limited. The custody fee is calculated at the greater of $15,000 p.a.
or 0.025% p.a. of the gross asset value of the Trust, plus GST. In addition, the Custodian is entitled to be
paid any out-of-pocket expenses incurred in the performance of its duties.

Interests in the Fund

The number of units on issue at 30 June 2013 was 207,524,039. There were no additional issues or
redemptions of units during the financial year. TFML Limited, the Responsible Entity of the Trust and its
ultimate holding company BlackWall Property Funds Limited, holds 22,465,285 units in the Trust.(cid:3)

Environmental Regulation and Performance

The Trust and its controlled entity’s operations are not regulated by any significant environmental law or
regulation under either Commonwealth or State legislation. However, the Responsible Entity believes that
the Trust and its controlled entity have adequate systems in place for the management of its
environmental requirements and is not aware of any instances of non-compliance of those environmental
requirements as they apply to the Trust.

Measurable Objectives For Achieving Gender Diversity

Notwithstanding the Responsible Entity does not directly employ staff, through its arrangement with
Blackwall Property Funds it is committed to employing people on best fit for the job based on ability,
performance and potential, our goal is to build a workforce that reflects the diversity of the communities
in which we operate.

This means creating a work environment where employee differences such as gender, age, culture,
disability and lifestyle choice are valued. The objective is therefore one of a 50/50 gender split and is
reflected as follows:

Board
Executive Management
Other

Female (No. of people)
0
2
5

Female (%) Male (No. of people)
4
2
4

0
50
56

Male (%)
100
50
44

Proceedings On Behalf of The Trust

See commentary earlier in these financial statements and Note 15.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Directors’ Report (continued)

Indemnities of Officers

During the financial year the Responsible Entity has paid premiums to insure each of the Directors named
in this report along with Officers of the Responsible Entity against all liabilities for costs and expenses
incurred by them in defending any legal proceedings arising out of their conduct while acting in the
capacity of Director or Officer of the Responsible Entity, other than conduct involving a wilful breach of
duty. The insurance policy prohibits disclosure of the nature of the liability, the amount of the premium
and the limit of liability.

No indemnities have been given or insurance premiums paid, during or since the end of the financial year,
for any person who is or has been an auditor to the Trust.

Non-audit Services

Amounts paid to the auditor for non-audit services during the year are detailed at Note 18 of the financial
statements. The Directors are satisfied that the provision of non-audit services is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The nature and
scope of each type of non-audit service provided means that auditor independence was not compromised.

Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act
2001 is set out in these financial statements.

Auditor

ESV Chartered Accountants continues in office in accordance with section 327 of the Corporations Act
2001.

Rounding of Amounts

The Trust is a group of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in
accordance with that Class Order, amounts in the Directors’ Report and the financial statements are
rounded off to the nearest thousand dollars, unless otherwise indicated.

Signed in accordance with a resolution of the Board of Directors.

Stuart Brown
Director
Sydney, 20 August 2013

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

Directors’ Report (continued)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Corporate Governance

The Board of Directors of TFML Limited as Responsible Entity for P-REIT (an open ended unit trust) is
responsible for the corporate governance practices that provide an appropriate framework for managing
the Trust for the benefit of unitholders. Good corporate governance is a fundamental part of the culture
and business practices of TFML. The Board has adopted comprehensive systems of control and
accountability as the basis for administration of corporate governance. The Board is committed to
administering the policies and procedures with openness and integrity, pursuing the true spirit of
corporate governance commensurate with TFML’s needs. To the extent they are applicable and
appropriate for a company of TFML’s size and nature, TFML has adopted the ASX Corporate Governance
Council’s “Corporate Governance Principles and Recommendations Second Edition” and “Summary Table
of the 30 June 2010 Changes to Second Edition of the Corporate Governance Principles and
Recommendations”.

Recommendation

Principle No
Principle 1: Lay solid foundations for management and oversight
1.1

Compliance

Establish the
functions
reserved to the Board
and those delegated to
Senior Executives and
disclose those functions.

The Responsible Entity has
appointed
Compliance
a
Committee but for the purposes
of corporate governance has
adopted BlackWall’s
largely
governance
and
policies
procedures. The Responsible
Entity and BlackWall operate
with
flat management
structure. The Chief Executive
Officer and Chief Financial
Officer are involved in the day-
to-day
the
operations
business. Decisions at the Board
level and the assessment of
are
executive
based on reports received from
the Chief Executive Officer and
the consideration of issues by
Executive and Non-Executive
Directors at Board meetings.

performance

1.2

Disclose the process for
evaluating
the
performance of Senior
Executives.

The Responsible Entity does not
directly employ executives or
staff. The Board of TFML and
the BlackWall Remuneration
Committee (or full Board in
absence
Remuneration
Committee) will oversee the
performance evaluation of the
executive team. This is based on
criteria including the business
performance of TFML and the
Trust,
strategic
objectives are being achieved
and
of
management and personnel.
Performance reviews of senior

development

whether

the

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

Reason for Non-compliance

Comply.

P-REIT

Principle No

Recommendation

Compliance

Reason for Non-compliance

Executives have taken place

during the reporting period and

they are in accordance with the

process above.

1.3

Provide the information

The Board Charter can be

Comply.

indicated in the Guide to

accessed

from

BlackWall’s

reporting on Principle 1.

website.

Principle 2: Structure the Board to add value

2.1

A majority of the Board

The Board has considered the

The Directors monitor the

should be Independent

guidance

Principle

Directors.

Structure the Board to Add

Value and in particular, Box 2.1,

which

contains

“relationships

independent status”.

list of

affecting

Currently TFML Limited has

one Independent Director, Mr

Richard Hill, who is also the

Chairman, and

three Non-

Independent Directors, Mr

Brown, who acts in an Executive

capacity, and Mr Glew and Mr

Tedder who act

in a Non-

Executive capacity.

business

affairs of

the

Responsible Entity on behalf

of the unitholders of the

Trust with a specific focus

the profitability

business activities and the

efficiency of its managers. In

keeping

with

consideration,

this

Board

positions are held by a

majority of members who

are significant unitholders.

The Responsible Entity has

not

therefore

adopted

recommendations 2.1 and

2.2 of the ASX Corporate

Governance Council.

The Board’s primary focus is

driving

returns

unitholders by growing Net

Tangible

Assets

and

earnings per unit over the

long

term. The Board

considers risk management

and the ethical conduct of

business.

The Board is structured with

a combination of skills and

experiences.

The Board

members’

skills

and

experience are consistent

with the business operations

that the Responsible Entity

undertakes including:

(cid:120) Structured finance and

fund management;

(cid:120) Property management

P-REIT

Corporate Governance (continued)

Principle No

Recommendation

Compliance
Executives have taken place
during the reporting period and
they are in accordance with the
process above.

Reason for Non-compliance

1.3

Provide the information
indicated in the Guide to
reporting on Principle 1.

The Board Charter can be
accessed
BlackWall’s
website.

from

Comply.

Principle 2: Structure the Board to add value
2.1

A majority of the Board
should be Independent
Directors.

Principle

The Board has considered the
guidance
2:
Structure the Board to Add
Value and in particular, Box 2.1,
list of
which
“relationships
affecting
independent status”.

contains

Currently TFML Limited has
one Independent Director, Mr
Richard Hill, who is also the
three Non-
Chairman, and
Independent Directors, Mr
Brown, who acts in an Executive
capacity, and Mr Glew and Mr
in a Non-
Tedder who act
Executive capacity.

affairs of

The Directors monitor the
business
the
Responsible Entity on behalf
of the unitholders of the
Trust with a specific focus
on
of
the profitability
business activities and the
efficiency of its managers. In
keeping
this
consideration,
Board
positions are held by a
majority of members who
are significant unitholders.
The Responsible Entity has
not
adopted
recommendations 2.1 and
2.2 of the ASX Corporate
Governance Council.

therefore

with

Assets

driving

returns

The Board’s primary focus is
on
to
unitholders by growing Net
Tangible
and
earnings per unit over the
long
term. The Board
considers risk management
and the ethical conduct of
business.

The Board is structured with
a combination of skills and
The Board
experiences.
members’
and
skills
experience are consistent
with the business operations
that the Responsible Entity
undertakes including:

(cid:120) Structured finance and
fund management;
(cid:120) Property management

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Corporate Governance (continued)

Principle No

Recommendation

Compliance

P-REIT

Reason for Non-compliance

and leasing;

(cid:120) Property development.
The Board considers risk
management and the ethical
conduct of business.

2.2

2.3

2.4

2.5

2.6

The Chair should be an
Independent Director.

Refer to 2.1.

The roles of Chair and
Chief Executive Officer
should not be exercised
by the same individual.

TFML’s Chairman and Chief
Executive Officer are not the
same person.

Comply.

Board

The
should
establish a Nomination
Committee.

Disclose the process for
the
evaluating
of
performance
the
Board,
its Committees
and individual Directors.

Provide the information
indicated in the Guide to
reporting on Principle 2.

The Responsible Entity does not
foresee the Board composition
changing in the near future and
therefore has not established a
Nomination Committee. The
Board
the
independence of a Director is
not compromised simply by the
fact that the Director
is a
significant investor in P-REIT.

considers

that

gained
a

The Board considers that no
efficiencies or other benefits
would
by
be
separate
establishing
committee. TFML has not,
therefore,
adopted
Recommendation 2.4 of the
ASX Corporate Governance
Council.

The full Board will arrange an
annual performance evaluation
of the Board, its Committees
and individual Directors.

Comply.

skills, experience and
The
expertise
the
relevant
position held by each Director
will be disclosed
the
Directors’ Report which forms
part of the financial statements.

The Directors are entitled to
take independent professional
advice at the expense of the
Responsible Entity. The period
of office held by each Director
will be disclosed
the
Directors’ Report which forms
part of the financial statements.

A statement will be included in

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

3.4

Disclose in each annual The

information will

be Comply.

Principle No

Recommendation

Compliance

Reason for Non-compliance

the Directors’ Report of the

financial statements as to the

mix of skills and diversity that

the Board is looking to achieve

in its membership.

Principle 3: Promote ethical and responsible decision making

3.1

Establish

code of

The Responsible Entity has

Comply.

conduct and disclose the

adopted a Code of Conduct,

code or a summary of the

which can be accessed at the

code as to:

BlackWall

website,

www.blackwallfunds.com.au.

(cid:120) The

practice

necessary to maintain

confidence

the

Company’s integrity;

(cid:120) The

practices

necessary to take into

account

their

legal

obligations and the

reasonable

expectations of their

stakeholders;

(cid:120) The

responsibility

and accountability of

individuals

reporting

for

and

investigating reports

of unethical practices.

requirements

for

the

Board

measurable

establish

objectives

for

achieving

gender

diversity and

for

the

Board to assess annually

the objectives and the

progress

in achieving

them.

the Board in accordance

with the Diversity Policy

and progress

towards

achieving them.

3.2

Establish

policy

The Responsible Entity has

Comply.

concerning diversity and

adopted a Diversity Policy

disclose the policy or a

which can be accessed at the

summary of that policy.

BlackWall

website,

The policy should include

www.blackwallfunds.com.au.

3.3

Disclose in each annual

The

information will

Comply.

report

the measurable

disclosed

the Directors’

objectives for achieving

Report of the Trust’s financial

gender diversity set by

statements.

P-REIT

Corporate Governance (continued)

Principle No

Recommendation

Reason for Non-compliance

Compliance
the Directors’ Report of the
financial statements as to the
mix of skills and diversity that
the Board is looking to achieve
in its membership.

Principle 3: Promote ethical and responsible decision making
3.1

Comply.

code of
a
Establish
conduct and disclose the
code or a summary of the
code as to:

The Responsible Entity has
adopted a Code of Conduct,
which can be accessed at the
BlackWall
website,
www.blackwallfunds.com.au.

(cid:120) The

practice
necessary to maintain
confidence
the
Company’s integrity;

(cid:120) The

their

practices
necessary to take into
account
legal
obligations and the
reasonable
expectations of their
stakeholders;

(cid:120) The

responsibility
and accountability of
for
individuals
reporting
and
investigating reports
of unethical practices.

Establish
policy
concerning diversity and
disclose the policy or a
summary of that policy.
The policy should include
for
requirements
the
establish
to
Board
objectives
measurable
gender
for
achieving
diversity and
the
Board to assess annually
the objectives and the
progress
in achieving
them.

for

The Responsible Entity has
adopted a Diversity Policy
which can be accessed at the
BlackWall
website,
www.blackwallfunds.com.au.

Comply.

information will

be
The
disclosed
the Directors’
Report of the Trust’s financial
statements.

Comply.

Disclose in each annual
report
the measurable
objectives for achieving
gender diversity set by
the Board in accordance
with the Diversity Policy
and progress
towards
achieving them.

3.2

3.3

3.4

Disclose in each annual The

information will

be Comply.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Corporate Governance (continued)

P-REIT

Compliance
disclosed
the Directors’
Report of the Trust’s financial
statements.

Reason for Non-compliance

Principle No

Recommendation

Compliance

Reason for Non-compliance

recommendations

the

Board.

Principle No

3.5

Recommendation
report the proportion of
women employees in the
organisation,
whole
women
Senior
in
Executive positions and
women on the Board.

Provide the information
indicated in the Guide to
reporting on Principle 3.

information will

be
The
disclosed
the Directors’
Report of the Trust’s financial
statements.

Principle 4: Safeguard integrity in financial reporting
Board
4.1

The
establish
Committee.

should
Audit

The
Entity
Responsible
currently has a separate Audit
The roles and
Committee.
responsibilities of the Audit
Committee are set out in the
Audit Committee Charter. This
charter can be accessed at the
BlackWall
website,
www.blackwallfunds.com.au.

4.2

The Audit Committee
should be structured so
that it:

(cid:120) Consists only of Non-
Executive Directors;
(cid:120) Consists of a majority
Independent

of
Directors;

the

The Audit Committee consists
independent
of
members of the Compliance
Committee.

two

(cid:120) Is

an
chaired
Independent
Chair,
who is not Chair of the
Board;
(cid:120) Has at

three

least

members.

Comply.

Principle 5: Make timely and balanced disclosure

5.1

Establish written policies

TFML will undertake timely

Comply.

Audit

Given

The Board has established
an Audit Committee and
adopted an Audit Charter.
The
Committee
consists of the independent
members of the Compliance
the
Committee.
composition of the Board
and the size of the company,
ASX Recommendation 4.2 is
not complied with
in all
respects. The Board takes
the view that the Committee
as constituted can discharge
role effectively. The
its
Committee
the
auditing process for half-
yearly and annual financial
statements and meets prior
to, during and post the audit
to discuss. During meetings
the Committee minutes its
roles and responsibilities in
regards
audit
addressing the need for a
formal
The
Committee has direct access
to the auditor during the
the
auditing period and
auditor
the
Committee meetings. The
Committee may make

reviews

charter.

attends

the

4.3

The Audit Committee

The

formal charter can be

Comply.

have

formal

accessed at

the BlackWall

should

charter.

website,

www.blackwallfunds.com.au.

4.4

Provide the information

The Audit Committee will meet

Comply.

in the Guide to reporting

at least twice in each year,

on Principle 4.

before sign off of the annual and

half-year financial statements.

and procedures designed

market disclosures. The Chief

to ensure

compliance

Executive

Officer

with ASX Listing Rule

consultation with the Board will

disclosure requirements,

manage investor relations and

ensure accountability at a

the release of market sensitive

Senior Executive level for

information. The Responsible

that

compliance

and

Entity will maintain a timetable

disclose those policies or

for its compliance and periodic

summary of

those

disclosure requirements.

policies.

5.2

Provide the information

The

information will

Comply.

indicated in the Guide to

disclosed

the

financial

reporting on Principle 5.

statements.

Principle 6: Respect the rights of shareholders

6.1

Design a communications

The

Responsible

Entity

Comply.

policy

for promoting

effective communications

with shareholders and

undertakes

measures

number

ensure

its

unitholders are informed of its

encouraging

their

operations including:

participation at general

meetings and disclose

that policy or a summary

of that policy.

(cid:120) The

Directors

Executive

Non-Executive

and

Officer

Chief

are

available to meet or speak

to unitholders;

(cid:120) The

Directors

Non-Executive

and

Chief

Executive Officer make

themselves

available

independent

research

houses, brokers and other

participants in the financial

markets;

(cid:120) Making available P-REIT’s

annual

and

half-yearly

financial

reports

electronically via email and

website;

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Corporate Governance (continued)

Principle No

Recommendation

Compliance

Reason for Non-compliance
recommendations
Board.

the

4.3

4.4

The Audit Committee
should
formal
have
charter.

formal charter can be
the BlackWall

The
accessed at
website,
www.blackwallfunds.com.au.

Comply.

Provide the information
in the Guide to reporting
on Principle 4.

The Audit Committee will meet
at least twice in each year,
before sign off of the annual and
half-year financial statements.

Comply.

Principle 5: Make timely and balanced disclosure
5.1

Establish written policies
and procedures designed
to ensure
compliance
with ASX Listing Rule
disclosure requirements,
ensure accountability at a
Senior Executive level for
that
and
compliance
disclose those policies or
a
those
policies.

summary of

Officer

TFML will undertake timely
market disclosures. The Chief
Executive
in
consultation with the Board will
manage investor relations and
the release of market sensitive
information. The Responsible
Entity will maintain a timetable
for its compliance and periodic
disclosure requirements.

5.2

Provide the information
indicated in the Guide to
reporting on Principle 5.

The
disclosed
statements.

information will

the

be
financial

Principle 6: Respect the rights of shareholders
6.1

Comply.

Responsible
a
to

Entity
The
of
undertakes
measures
its
unitholders are informed of its
operations including:

number
ensure

Design a communications
for promoting
policy
effective communications
with shareholders and
encouraging
their
participation at general
meetings and disclose
that policy or a summary
of that policy.

(cid:120) The

Non-Executive
Chief
and
Directors
Executive
are
Officer
available to meet or speak
to unitholders;

(cid:120) The

Non-Executive
Directors
Chief
and
Executive Officer make
to
themselves
independent
research
houses, brokers and other
participants in the financial
markets;

available

(cid:120) Making available P-REIT’s
half-yearly
and
annual
financial
reports
electronically via email and
website;

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Corporate Governance (continued)

P-REIT

Reason for Non-compliance

Principle No

Recommendation

Compliance

Reason for Non-compliance

Principle No

Recommendation

Compliance
(cid:120) Enabling access to P-REIT’s
external auditor at
the
Annual General Meeting;
and

(cid:120) Placing on its website all
releases to the ASX and the
media, and full notices of all
meetings and the Trust’s
information on its website
including access to archived
information.

Comply.

information will

the

be
financial

The
disclosed
statements.

The Responsible Entity and
BlackWall have adopted a Risk
Management Policy. This Policy
outlines the key material risks
faced by P-REIT.

through a

The Responsible Entity and
BlackWall identify and manage
risk
framework
managed by the Chief Executive
Officer. Risks are reported to
the Board by management at
each Board meeting and the
Chairman may
an
extraordinary meeting when
circumstances require.

call

6.2

Provide the information
indicated in the Guide to
reporting on Principle 6.

Principle 7: Recognise and manage risk
Establish policies for the
7.1
oversight
and
management of material
business
and
disclose a summary of
those policies.

risk

The Board should require
management to design
and implement the risk
management
and
internal control system
to manage the Trust’s
material business risks
and report
it on
whether those risks are
being
managed
efficiently. The Board
that
should
has
management
reported to it as to the
effectiveness
the
company’s management
of its material business
risks.

disclose

7.2

7.3

Comply.

Board will

The
receive
assurance
in the form of a
the Chief
from
declaration
Executive Officer and the Chief
Financial Officer as required by
the Corporations Act 2001.

Chief

Board

The
should
disclose whether it has
received assurance from
the
Executive
Officer (or equivalent)
and the Chief Financial
Officer (or equivalent)
that
declaration
provided in accordance
with section 295A of the
Corporations Acts 2001
is founded on a sound

the

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

system

management

risk

and

internal control and that

the system is operating

effectively in all material

respects in relation to

financial reporting risks.

Committee

should be

structured so

that

it:

(cid:120) Consists of a majority

Independent

Directors;

(cid:120)

chaired by an

Independent

Director; and

(cid:120) Has at

least three

members.

distinguish the structure

Non-Executive

Directors’ remuneration

from that of Executive

Directors

and

Senior

Executives.

provide the information

indicated in the Guide to

reporting on Principle 8.

7.4

Companies

should

The

information will

Comply.

provide the information

disclosed

the

financial

indicated in the Guide to

statements.

reporting on Principle 7.

Principle 8: Remunerate fairly and responsibly

8.1

The

Board

should

The Responsible Entity does not

The Responsible Entity does

establish a Remuneration

directly employ executives or

not

directly

employ

Committee.

staff.

executives or staff.

8.2

The

Remuneration

Refer 8.1

8.3

Companies should clearly

Refer 8.1

8.4

Companies

should

Refer 8.1

Compliance

Reason for Non-compliance

P-REIT

Corporate Governance (continued)

Principle No

7.4

Recommendation
risk
system
management
and
internal control and that
the system is operating
effectively in all material
respects in relation to
financial reporting risks.

Companies
should
provide the information
indicated in the Guide to
reporting on Principle 7.

Principle 8: Remunerate fairly and responsibly
8.1

Board

The
should
establish a Remuneration
Committee.

The Responsible Entity does not
directly employ executives or
staff.

information will

the

be
financial

The
disclosed
statements.

Comply.

The Responsible Entity does
employ
not
executives or staff.

directly

8.2

The
Committee
structured so

Remuneration
should be
it:
that

Refer 8.1

(cid:120) Consists of a majority
Independent

(cid:120)

chaired by an

of
Directors;
Is
Independent
Director; and

8.3

8.4

(cid:120) Has at

least three

members.

Companies should clearly
distinguish the structure
of
Non-Executive
Directors’ remuneration
from that of Executive
Senior
Directors
Executives.

and

Companies
should
provide the information
indicated in the Guide to
reporting on Principle 8.

Refer 8.1

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ASX Additional Information

Additional information required by the Australian Securities Exchange Limited and not shown elsewhere
in this report is as follows. The unitholder information set out below was current as at 9 August 2013.

ASX Additional Information (continued)

2. Distribution of Shareholders

The distribution of unitholders by size of holding was:

1. Unitholders

The Trust’s top 20 largest unitholdings were:

Investor

Units (No.)

Units (%)

Kirela Pty Ltd ATF Kirela Development Unit Trust

Pelorus Private Equity Ltd

Sandhurst Trustees Ltd ACF MacarthurCook PSF A/C

Australian Executor Trustees Ltd ACF Tankstream
Property Investments Fund

BlackWall Property Funds Ltd

Vintage Capital Pty Ltd

TFML Limited

Koonta Pty Ltd ATF Koonta Superannuation Fund

Jagar Property Consultants Pty Ltd

10 Benyaya Holdings Pty Ltd

11 Harmareed Pty Ltd ATF The Reed Superannuation Fund

Seno Management Pty Ltd ATF Seno Superannuation
Fund

I P R Nominees Pty Ltd <1965 Irvin Peter Rockman A/C>

Mr Andrew Craig Irvine & Ms Beverley Frances Irvine

15 Netwealth Investments Ltd

16 Chavoo Pty Ltd ATF Midhurst Superannuation Fund

Frogstorm Pty Ltd ATF The Bossanova Superannuation
Fund

18 Pinnatus Pty Ltd

19 D.L.N. Investments Pty Ltd

Mr Eric Joblin + Mrs Gillian Joblin + Mr G Joblin and Ms K
Joblin

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

43,460,337

28,660,000

22,581,875

19,238,234

17,465,285

10,236,859

5,000,000

4,154,347

3,484,664

2,764,732

2,159,942

2,000,000

1,252,033

1,151,142

1,065,317

1,000,000

875,760

849,510

847,417

800,000

20.94

13.81

10.88

9.27

8.42

4.93

2.41

2.00

1.68

1.33

1.04

0.96

0.60

0.55

0.51

0.48

0.42

0.41

0.39

P-REIT has 17 holders of less than a marketable parcel. The Trust has 207,524,039 units on issue.. All

units carry one vote per unit without restrictions. All units are quoted on the Australian Securities

Category

1-1,000

1,001-5,000

5,001-10,000

10,001-100,000

100,001 and over

Total number of unitholders

Exchange (ASX Code: PXT).

3. Substantial Unitholders

Investor

Joseph (Seph) Glew

Paul Tresidder

Pelorus Private Equity Ltd

Substantial unitholders in the Trust are set out below:

Sandhurst Trustees Ltd ACF MacarthurCook PSF A/C

BlackWall Property Funds Ltd

Australian Executor Trustees Ltd ACF Tankstream

Property Investments Fund

Robin Tedder

No. of Holders

117

475

101

751

Units (No.)

Units (%)

49,445,000

47,917,779

28,660,000

22,581,875

22,465,285

19,238,234

14,718,624

23.83

23.09

13.81

10.88

10.83

9.27

7.09

P-REIT

ASX Additional Information (continued)

2. Distribution of Shareholders

The distribution of unitholders by size of holding was:

Category
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total number of unitholders

No. of Holders
2
56
117
475
101
751

P-REIT has 17 holders of less than a marketable parcel. The Trust has 207,524,039 units on issue.. All
units carry one vote per unit without restrictions. All units are quoted on the Australian Securities
Exchange (ASX Code: PXT).

3. Substantial Unitholders

Substantial unitholders in the Trust are set out below:

Investor

Joseph (Seph) Glew

Paul Tresidder

Pelorus Private Equity Ltd

Sandhurst Trustees Ltd ACF MacarthurCook PSF A/C

BlackWall Property Funds Ltd

Australian Executor Trustees Ltd ACF Tankstream
Property Investments Fund

Robin Tedder

Units (No.)

Units (%)

49,445,000

47,917,779

28,660,000

22,581,875

22,465,285

19,238,234

14,718,624

23.83

23.09

13.81

10.88

10.83

9.27

7.09

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Trust Details

The Responsible Entity’s details are as follows:

Registered office and principal
place of business

TFML Limited
Level 1, 50 Yeo Street
Neutral Bay NSW 2089

Telephone
Fax
Website

Registry

02 9033 8611
02 9033 8600
www.blackwallfunds.com.au

Computershare Investor Services Pty Limited
60 Carrington Street
Sydney NSW 2000
www.computershare.com.au
Telephone: 02 8234 5000

P-REIT

ARSN 109 684 773

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Year Ended 30 June 2013

Revenue From Continuing Operations

Rental income

Dividends and distributions

Interest income

Other income

Total Revenue

Unrealised gain on revaluation (net)

Property outgoings

Depreciation expenses

Custodian fees

Administration expenses

Finance costs

Other operating expenses

Loss on sale of investments

Litigation expenses

Profit / (Loss) For the Year

Note

4(a)

5, 15

2013

$’000

10,210

2,023

3,611

15,863

(2,047)

(2,403)

(31)

(1,027)

(3,863)

(109)

(103)

(1,444)

4,836

(437)

4,399

2012

$’000

10,261

2,226

297

2,597

15,418

(2,136)

(2,759)

(23)

(1,053)

(4,783)

(462)

(9)

(19,719)

(15,526)

(602)

(16,128)

Other Comprehensive Income / (Loss)

Items that will be reclassified to profit or loss

Unrealised loss on available-for-sale investments

4(b)

Other Comprehensive Loss For the Year

Total Comprehensive Income / (Loss) For the Year

Earnings / (Loss) Per Unit

Basic and diluted earnings/(loss) per unit

$0.02

($ 0.07)

The accompanying notes form part of these consolidated financial statements.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Year Ended 30 June 2013

(cid:6)(cid:145)(cid:144)(cid:149)(cid:145)(cid:142)(cid:139)(cid:134)(cid:131)(cid:150)(cid:135)(cid:134)(cid:3)(cid:22)(cid:150)(cid:131)(cid:150)(cid:135)(cid:143)(cid:135)(cid:144)(cid:150)(cid:3)(cid:145)(cid:136)(cid:3)(cid:19)(cid:148)(cid:145)(cid:976)(cid:139)(cid:150)(cid:3)(cid:145)(cid:148)(cid:3)(cid:15)(cid:145)(cid:149)(cid:149)(cid:3)(cid:131)(cid:144)(cid:134)(cid:3)(cid:18)(cid:150)(cid:138)(cid:135)(cid:148)(cid:3)(cid:6)(cid:145)(cid:143)(cid:146)(cid:148)(cid:135)(cid:138)(cid:135)(cid:144)(cid:149)(cid:139)(cid:152)(cid:135)(cid:3)(cid:12)(cid:144)(cid:133)(cid:145)(cid:143)(cid:135)

(cid:9)(cid:145)(cid:148)(cid:3)(cid:150)(cid:138)(cid:135)(cid:3)(cid:155)(cid:135)(cid:131)(cid:148)(cid:3)(cid:8)(cid:144)(cid:134)(cid:135)(cid:134)(cid:3)(cid:885)(cid:882)(cid:3)(cid:13)(cid:151)(cid:144)(cid:135)(cid:3)(cid:884)(cid:882)(cid:883)(cid:885)

Revenue From Continuing Operations
Rental income
Dividends and distributions
Interest income
Other income
Unrealised gain on revaluation (net)
Total Revenue

Property outgoings
Depreciation expenses
Custodian fees
Administration expenses
Finance costs
Other operating expenses
Loss on sale of investments
Litigation expenses
Profit / (Loss) For the Year

Other Comprehensive Income / (Loss)
Items that will be reclassified to profit or loss
Unrealised loss on available-for-sale investments
Other Comprehensive Loss For the Year
Total Comprehensive Income / (Loss) For the Year

Note

4(a)

5
5

5, 15

4(b)

2013
$’000

10,210
2,023
19
-
3,611
15,863

(2,047)
(2,403)
(31)
(1,027)
(3,863)
(109)
(103)
(1,444)
4,836

(437)
(437)
4,399

2012
$’000

10,261
2,226
37
297
2,597
15,418

(2,136)
(2,759)
(23)
(1,053)
(4,783)
(462)
(9)
(19,719)
(15,526)

(602)
(602)
(16,128)

Earnings / (Loss) Per Unit
Basic and diluted earnings/(loss) per unit

$0.02

($ 0.07)

The accompanying notes form part of these consolidated financial statements.

(cid:23)(cid:138)(cid:135)(cid:3)(cid:131)(cid:133)(cid:133)(cid:145)(cid:143)(cid:146)(cid:131)(cid:144)(cid:155)(cid:139)(cid:144)(cid:137)(cid:3)(cid:144)(cid:145)(cid:150)(cid:135)(cid:149)(cid:3)(cid:136)(cid:145)(cid:148)(cid:143)(cid:3)(cid:146)(cid:131)(cid:148)(cid:150)(cid:3)(cid:145)(cid:136)(cid:3)(cid:150)(cid:138)(cid:135)(cid:149)(cid:135)(cid:3)(cid:133)(cid:145)(cid:144)(cid:149)(cid:145)(cid:142)(cid:139)(cid:134)(cid:131)(cid:150)(cid:135)(cid:134)(cid:3)(cid:976)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142)(cid:3)(cid:149)(cid:150)(cid:131)(cid:150)(cid:135)(cid:143)(cid:135)(cid:144)(cid:150)(cid:149)(cid:484)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Consolidated Statement of Financial Position

As at 30 June 2013

(cid:4)(cid:149)(cid:3)(cid:131)(cid:150)(cid:3)(cid:885)(cid:882)(cid:3)(cid:13)(cid:151)(cid:144)(cid:135)(cid:3)(cid:884)(cid:882)(cid:883)(cid:885)

ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Non-current Assets
Financial assets
Investment properties
Total Non-current Assets
TOTAL ASSETS

LIABILITIES
Current Liabilities
Trade and other payables
Other liabilities
Borrowings
Derivative financial instruments
Provision
Total Current Liabilities
TOTAL LIABILITIES (EXCLUDING NET ASSETS
ATTRIBUTABLE TO UNITHOLDERS)
Net Assets Attributable to Unitholders

Note

6
7
8

9
10

11
12
13
14
15

2013
$’000

39
612
405
1,056

38,323
81,350
119,673
120,729

801
60
49,500
693
19,700
70,754

70,754
49,975

2012
$’000

1,306
455
373
2,134

38,368
81,350
119,718
121,852

525
102
55,580
1,069
19,000
76,276

76,276
45,576

TOTAL LIABILITIES

120,729

121,852

The accompanying notes form part of these consolidated financial statements.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Consolidated Statement of Changes in Net Assets Attributable to Unitholders

For the Year Ended 30 June 2013

Units on
Issue
No.’000

207,524
-
-
-
207,524

Issued
Units
$’000

105,958
-
-
-
105,958

106,006
-
-
(48)
105,958

Retained
Earnings /
(Accumulated
Losses)
$’000

(60,133)
4,836
-
(686)
(55,983)

(44,607)
(15,526)
-
-
(60,133)

Balance at 1 July 2012
Profit for the year
Other comprehensive income
Change of accounting policies (*)
Balance at 30 June 2013

Balance at 1 July 2011
Loss for the year
Other comprehensive loss
Listing costs
Balance at 30 June 2012

Amounts
recognised in
equity relating
to assets
classified as
available-for-

sale

$’000

(249)
-
(437)
686
-

353
-
(602)
-
(249)

Total
$’000

45,576
4,836
(437)
-
49,975

61,752
(15,526)
(602)
(48)
45,576

* Transfer from available-for-sale reserve to restate retained earnings / (accumulated losses) for the early adoption of
AASB 9. See Note 1 relating to details of change of accounting policies.

The accompanying notes form part of these consolidated financial statements.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Consolidated Statement of Cash Flows

For the Year Ended 30 June 2013

Cash Flows From Operating Activities
Receipt from customers
Payments to suppliers
Litigation expenses
Distribution received
Interest received
Interest paid
Net Cash Flows From Operating Activities

Cash Flows From Investing Activities
Payments for purchase of securities
Payments for purchase of plant & equipment
Proceeds from disposal and redemption of securities
Net Cash Flows From Investing Activities

Cash Flows From Financing Activities
Payments for listing costs
Repayment of borrowings
Net Cash Flows Used in Financing Activities

Note

Net Increase / (Decrease) in Cash Held
Cash and cash equivalents at the beginning of the year
Cash and Cash Equivalents at End of the Year

2013
$’000

10,841
(3,887)
(743)
1,588
19
(3,845)
3,973

-
(26)
866
840

-
(6,080)
(6,080)

(1,267)
1,306
39

2012
$’000

10,709
(4,326)
(552)
1,834
36
(4,670)
3,031

(149)
(42)
396
205

(80)
(2,300)
(2,380)

856
450
1,306

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies

The financial statements cover the economic entity of P-REIT and its controlled entity, the Yandina Sub-

trust (together referred to as “the Trust”). P-REIT is a managed investment scheme registered in Australia.

The Yandina Sub-trust is a discretionary trust established and domiciled in Australia.

TFML Limited is the Responsible Entity and investment manager of the Trust. The Trust Company Limited

is the Custodian of the Trust. The relationship of these parties with the Trust is governed by the terms and

conditions specified in the Constitution.

The financial statements for the Trust for the year ended 30 June 2013 were authorised for issue in

accordance with the resolution of the Directors of the Responsible Entity on 20 August 2013.

Basis of Preparation

These financial statements are general purpose financial statements that have been prepared in accordance

with Australian Accounting Standards and other authoritative pronouncements of the Australian

Accounting Standards Board and the Corporations Act 2001. The financial statements of the Trust also

comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting

Standards Board.

The financial statements have been prepared on an accruals basis and are based on historical costs modified

by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair

value basis of accounting has been applied.

The Trust is a group of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in

accordance with that Class Order amounts in the Directors’ Report and the financial statements are rounded

off to the nearest thousand dollars, unless otherwise indicated.

The following is a summary of the material accounting policies adopted by the Trust in the preparation of

the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

New and amended standards adopted

None of the new standards and amendments to standards that are mandatory for the first time for the

financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any

prior period and are not likely to affect future periods. However, amendments made to AASB 101

Presentation of Financial Statements effective 1 July 2012 now require the statement of profit or loss and

other comprehensive income (“profit or loss”) to show the items of comprehensive income grouped in those

that are not permitted to be reclassified to profit or loss in a future period and those that may have to be

reclassified if certain conditions are met.

The accompanying notes form part of these consolidated financial statements.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Consolidated Statement of Cash Flows

For the Year Ended 30 June 2013

Cash Flows From Operating Activities

Note

Receipt from customers

Payments to suppliers

Litigation expenses

Distribution received

Interest received

Interest paid

Net Cash Flows From Operating Activities

Cash Flows From Investing Activities

Payments for purchase of securities

Payments for purchase of plant & equipment

Proceeds from disposal and redemption of securities

Net Cash Flows From Investing Activities

Cash Flows From Financing Activities

Payments for listing costs

Repayment of borrowings

Net Cash Flows Used in Financing Activities

Net Increase / (Decrease) in Cash Held

Cash and cash equivalents at the beginning of the year

Cash and Cash Equivalents at End of the Year

2013

$’000

10,841

(3,887)

(743)

1,588

(3,845)

3,973

(26)

866

840

(6,080)

(1,267)

1,306

2012

$’000

10,709

(4,326)

(552)

1,834

(4,670)

3,031

(149)

(42)

396

205

(80)

(2,300)

(2,380)

856

450

1,306

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies

The financial statements cover the economic entity of P-REIT and its controlled entity, the Yandina Sub-
trust (together referred to as “the Trust”). P-REIT is a managed investment scheme registered in Australia.
The Yandina Sub-trust is a discretionary trust established and domiciled in Australia.

TFML Limited is the Responsible Entity and investment manager of the Trust. The Trust Company Limited
is the Custodian of the Trust. The relationship of these parties with the Trust is governed by the terms and
conditions specified in the Constitution.

The financial statements for the Trust for the year ended 30 June 2013 were authorised for issue in
accordance with the resolution of the Directors of the Responsible Entity on 20 August 2013.

Basis of Preparation

These financial statements are general purpose financial statements that have been prepared in accordance
with Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001. The financial statements of the Trust also
comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.

The financial statements have been prepared on an accruals basis and are based on historical costs modified
by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair
value basis of accounting has been applied.

The Trust is a group of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in
accordance with that Class Order amounts in the Directors’ Report and the financial statements are rounded
off to the nearest thousand dollars, unless otherwise indicated.

The following is a summary of the material accounting policies adopted by the Trust in the preparation of
the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

New and amended standards adopted

None of the new standards and amendments to standards that are mandatory for the first time for the
financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any
prior period and are not likely to affect future periods. However, amendments made to AASB 101
Presentation of Financial Statements effective 1 July 2012 now require the statement of profit or loss and
other comprehensive income (“profit or loss”) to show the items of comprehensive income grouped in those
that are not permitted to be reclassified to profit or loss in a future period and those that may have to be
reclassified if certain conditions are met.

The accompanying notes form part of these consolidated financial statements.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

Early adoption of standards

The Trust has early adopted AASB 9 Financial Instruments, with effect 1 January 2013, as the Directors
believe the revised accounting policy for fair value adjustments to the Trust’s investments more reliably
presents the financial information for users to assess the amounts, timing and uncertainty of future cash
flows. In accordance with the transition provisions in AASB 2012-6, comparative figures have not been
restated. See Financial Instruments policy note below for further details on the impact of the change in
accounting policy.

Going concern

These financial statements have been prepared on a going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of
business. In reaching this conclusion the Directors have considered Trust’s capacity to meet an obligation to
pay the full claim, costs and interest in relation to the litigation proceedings commenced by MPS as
explained in the Directors’ Report. In this regard the Directors note:

1. As at the date of these financial statements the Trust has borrowings of $48.5 million and gross assets

of $120.7 million;

2. $81.4 million of the Trust’s assets are income producing real estate for which there is a deep and active

market;

3. The Trust’s legal advisers have given preliminary advice that in the event the Trust’s appeal to the

NSW Court of Appeal was unsuccessful:

a. depending on the terms of that Judgment, the Trust has reasonable prospects of being granted

leave to appeal to the High Court of Australia; and
in the event the Trust chose to seek leave to appeal to the High Court of Australia the Trust
should be successful in having the Judgment stayed pending the outcome of the appeal
process.

Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year. Any change of presentation has been made in order to make the
financial statements more relevant and useful to the user.

Presentation currency

Both the functional and presentation currency of the Trust is Australian dollars.

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Principles of Consolidation

Controlled entities

The consolidated financial statements comprise the financial statements of P-REIT and its controlled entity

as at 30 June 2013 (refer to Note 23). The controlled entity has a June financial year end and uses

consistent accounting policies. Investments in the controlled entity held by the parent entity are accounted

for at cost less any impairment charges (refer to Note 25).

Acquisitions of controlled entities are accounted for using the acquisition method. The consideration for

each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given,

liabilities incurred or assumed, and equity instruments issued by P-REIT in exchange for control of the

acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where a controlled entity has entered or left the economic entity during the year, its operating results have

been included from the date control was obtained or until the date control ceased.

A controlled entity is an entity P-REIT has the power to control the financial and operating policies of so as

to obtain benefits from its activities.

Inter-entity balances

All inter-entity balances and transactions between entities in the Trust, including any unrealised profits or

losses, have been eliminated on consolidation. Accounting policies of the controlled entity have been

changed where necessary to ensure consistencies with those policies applied by the parent entity.

Impairment of assets

At each reporting date, the Trust reviews the carrying values of its assets to determine whether there is any

indication that those assets have been impaired.

If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value

less costs to sell and value in use, is compared to the asset’s carrying value. In assessing value in use, either

the estimated future cash flows are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset, or the

income of the asset is capitalised at its relevant capitalisation rate.

An impairment loss is recognised if the carrying value of an asset exceeds its recoverable amount.

Impairment losses are expensed to the income statement.

Impairment losses recognised in prior periods are assessed at each reporting date for any indication that

the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the

estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that

the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of

depreciation or amortisation, if no impairment loss has been recognised.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

Early adoption of standards

The Trust has early adopted AASB 9 Financial Instruments, with effect 1 January 2013, as the Directors

believe the revised accounting policy for fair value adjustments to the Trust’s investments more reliably

presents the financial information for users to assess the amounts, timing and uncertainty of future cash

flows. In accordance with the transition provisions in AASB 2012-6, comparative figures have not been

restated. See Financial Instruments policy note below for further details on the impact of the change in

accounting policy.

Going concern

These financial statements have been prepared on a going concern basis, which contemplates continuity of

normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of

business. In reaching this conclusion the Directors have considered Trust’s capacity to meet an obligation to

pay the full claim, costs and interest in relation to the litigation proceedings commenced by MPS as

explained in the Directors’ Report. In this regard the Directors note:

1. As at the date of these financial statements the Trust has borrowings of $48.5 million and gross assets

2. $81.4 million of the Trust’s assets are income producing real estate for which there is a deep and active

of $120.7 million;

market;

3. The Trust’s legal advisers have given preliminary advice that in the event the Trust’s appeal to the

NSW Court of Appeal was unsuccessful:

a. depending on the terms of that Judgment, the Trust has reasonable prospects of being granted

leave to appeal to the High Court of Australia; and

in the event the Trust chose to seek leave to appeal to the High Court of Australia the Trust

should be successful in having the Judgment stayed pending the outcome of the appeal

process.

Notwithstanding the deficiency in current assets over current liabilities the Directors believe the bank

facilities of $49.5 million (now $48.5 million), classified as a current liability for reasons set out at Note 13,

will be renewed and extended after May 2014.

Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in

presentation for the current financial year. Any change of presentation has been made in order to make the

financial statements more relevant and useful to the user.

Presentation currency

Both the functional and presentation currency of the Trust is Australian dollars.

Principles of Consolidation

Controlled entities

The consolidated financial statements comprise the financial statements of P-REIT and its controlled entity
as at 30 June 2013 (refer to Note 23). The controlled entity has a June financial year end and uses
consistent accounting policies. Investments in the controlled entity held by the parent entity are accounted
for at cost less any impairment charges (refer to Note 25).

Acquisitions of controlled entities are accounted for using the acquisition method. The consideration for
each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by P-REIT in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where a controlled entity has entered or left the economic entity during the year, its operating results have
been included from the date control was obtained or until the date control ceased.

A controlled entity is an entity P-REIT has the power to control the financial and operating policies of so as
to obtain benefits from its activities.

Inter-entity balances

All inter-entity balances and transactions between entities in the Trust, including any unrealised profits or
losses, have been eliminated on consolidation. Accounting policies of the controlled entity have been
changed where necessary to ensure consistencies with those policies applied by the parent entity.

Impairment of assets

At each reporting date, the Trust reviews the carrying values of its assets to determine whether there is any
indication that those assets have been impaired.

If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value
less costs to sell and value in use, is compared to the asset’s carrying value. In assessing value in use, either
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset, or the
income of the asset is capitalised at its relevant capitalisation rate.

An impairment loss is recognised if the carrying value of an asset exceeds its recoverable amount.
Impairment losses are expensed to the income statement.

Impairment losses recognised in prior periods are assessed at each reporting date for any indication that
the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss has been recognised.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

Financial Instruments

Derivative financial instruments and hedging

The Trust uses derivative financial instruments such as interest rate swaps to hedge its risks associated
with interest rates. Such derivative financial instruments are initially recognised at fair value on the date
the derivative contract is entered into and are subsequently remeasured to fair value. Derivatives are
carried as assets when their fair value is positive and as liabilities when their fair value is negative.

The fair values of interest rate swaps are determined by reference to market values for similar instruments.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss
for the year.

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt instruments, trade and other
receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised at fair value plus, for instruments not at fair value
through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-
derivative financial instruments are measured as described below.

Recognition

A financial instrument is recognised if the Trust becomes a party to the contractual provisions of the
instrument. Financial assets are recognised if the Trust’s contractual rights to the cash flow from the
financial assets expire or if the Trust transfers the financial assets to another party without retaining
control or substantially all risks and rewards of the asset. Purchases and sales of financial assets are
accounted for at trade date, i.e. the date that the Trust commits itself to purchase or sell the asset. Financial
liabilities are derecognised if the Trust’s obligations specified in the contract expire or are discharged or
cancelled.

Loans and receivables

Loans and receivables including loans to related entities and to key management personnel are non-
derivative financial assets with fixed or determinable payments that are not quoted in an active market and
are stated at amortised cost using the effective interest rate method. Gains and losses are recognised in
profit and loss when the loans and receivables are derecognised or impaired, as well as through the
amortisation process.

Available-for-sale financial assets

(i) Debt investments – at fair value through profit or loss

Up until 31 December 2012 the Trust’s investments in related party unlisted unit trusts were classified as
available-for-sale financial assets. Subsequent to initial recognition, they were measured at fair value.
Unrealised gains and losses arising from changes in fair value were recognised in other comprehensive
income and accumulated in equity, with the exception of impairment losses, interest calculated using the
effective interest method, and foreign exchange gains and losses on monetary assets, which were
recognised in profit or loss. Where the investment was disposed of or was determined to be impaired, the
cumulative gain or loss previously accumulated in the investments revaluation reserve was reclassified to
profit or loss.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

The fair values of investments that are actively traded in organised financial markets are determined by

reference to quoted market bid prices at the close of business on the balance date. For investments in

related party unlisted unit trusts, fair values are determined by reference to published unit prices of these

investments which are based on the net tangible assets of each of the investments.

Fair value

Impairment

At each reporting date, the Trust assesses whether there is objective evidence that a financial instrument

has been impaired. A financial instrument 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. In the case of

available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to

determine whether an impairment has arisen.

An impairment loss in respect of a financial instrument 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. An impairment loss in respect of an available-for-sale financial asset is

calculated by reference to its fair value.

Individually significant financial instruments are tested for impairment on an individual basis. The

remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

Impairment losses are recognised in the statement of profit or loss and other comprehensive income. An

impairment loss is reversed if the reversal can be related objectively to an event occurring after the

impairment loss was recognised. For financial instruments measured at amortised cost, the reversal is

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal

recognised in profit and loss.

Financial liabilities

payments and unrealised movements.

Classification – from 1 January 2013

From 1 January 2013 the Trust classifies its financial assets in the following measurement categories: those

to be measured subsequently at fair value and those to be measured at amortised cost. The classification

depends on the Trust’s business model for managing the financial assets and the contractual terms of the

cash flows.

The Bakehouse Bond is classified as debt investment at fair value through profit or loss.

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Financial Instruments

Derivative financial instruments and hedging

The Trust uses derivative financial instruments such as interest rate swaps to hedge its risks associated

with interest rates. Such derivative financial instruments are initially recognised at fair value on the date

the derivative contract is entered into and are subsequently remeasured to fair value. Derivatives are

carried as assets when their fair value is positive and as liabilities when their fair value is negative.

The fair values of interest rate swaps are determined by reference to market values for similar instruments.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss

for the year.

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt instruments, trade and other

receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised at fair value plus, for instruments not at fair value

through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-

derivative financial instruments are measured as described below.

Recognition

A financial instrument is recognised if the Trust becomes a party to the contractual provisions of the

instrument. Financial assets are recognised if the Trust’s contractual rights to the cash flow from the

financial assets expire or if the Trust transfers the financial assets to another party without retaining

control or substantially all risks and rewards of the asset. Purchases and sales of financial assets are

accounted for at trade date, i.e. the date that the Trust commits itself to purchase or sell the asset. Financial

liabilities are derecognised if the Trust’s obligations specified in the contract expire or are discharged or

cancelled.

Loans and receivables

Loans and receivables including loans to related entities and to key management personnel are non-

derivative financial assets with fixed or determinable payments that are not quoted in an active market and

are stated at amortised cost using the effective interest rate method. Gains and losses are recognised in

profit and loss when the loans and receivables are derecognised or impaired, as well as through the

amortisation process.

Available-for-sale financial assets

Up until 31 December 2012 the Trust’s investments in related party unlisted unit trusts were classified as

available-for-sale financial assets. Subsequent to initial recognition, they were measured at fair value.

Unrealised gains and losses arising from changes in fair value were recognised in other comprehensive

income and accumulated in equity, with the exception of impairment losses, interest calculated using the

effective interest method, and foreign exchange gains and losses on monetary assets, which were

recognised in profit or loss. Where the investment was disposed of or was determined to be impaired, the

cumulative gain or loss previously accumulated in the investments revaluation reserve was reclassified to

profit or loss.

Statement of Significant Accounting Policies (continued)

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Fair value

The fair values of investments that are actively traded in organised financial markets are determined by
reference to quoted market bid prices at the close of business on the balance date. For investments in
related party unlisted unit trusts, fair values are determined by reference to published unit prices of these
investments which are based on the net tangible assets of each of the investments.

Impairment

At each reporting date, the Trust assesses whether there is objective evidence that a financial instrument
has been impaired. A financial instrument 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. In the case of
available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to
determine whether an impairment has arisen.

An impairment loss in respect of a financial instrument 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. An impairment loss in respect of an available-for-sale financial asset is
calculated by reference to its fair value.

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

Impairment losses are recognised in the statement of profit or loss and other comprehensive income. An
impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognised. For financial instruments measured at amortised cost, the reversal is
recognised in profit and loss.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal
payments and unrealised movements.

Classification – from 1 January 2013

From 1 January 2013 the Trust classifies its financial assets in the following measurement categories: those
to be measured subsequently at fair value and those to be measured at amortised cost. The classification
depends on the Trust’s business model for managing the financial assets and the contractual terms of the
cash flows.

(i) Debt investments – at fair value through profit or loss

The Bakehouse Bond is classified as debt investment at fair value through profit or loss.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

(ii) Equity investments

Financial Instruments (continued)

All equity investments are measured at fair value. Equity investments that are held for trading are
measured at fair value through profit or loss.

The adoption of the revised AASB 9 did not affect the Trust’s accounting for its financial liabilities, as the

new requirements only affect the accounting for financial liabilities that are designated at fair value through

Measurement – from 1 January 2013

At initial recognition, the Trust measures a financial asset at its fair value. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss.

statements are as follows:

profit or loss. The Trust does not have any such liabilities.

The impact of these changes in the Trust’s accounting policy on non-current assets in the financial

A gain or loss on a debt investment that is subsequently measured at fair value and is not part of a hedging
relationship is recognised in profit or loss and presented net in the profit or loss within other income or
other expenses in the period in which it arises.

The Trust subsequently measures all equity investments at fair value. Changes in the fair value of financial
assets at fair value through profit or loss are recognised in profit or loss as applicable.

Change in accounting policy

The policies were changed to comply with AASB 9 Financial Instruments, AASB 2009-11 Amendments to
Australian Accounting Standards arising from AASB 9 and AASB 2012-6 Amendments to Australian
Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures. This version of AASB
9 replaces the provisions of AASB 139 that relate to the recognition, classification and measurement of
financial assets and financial liabilities and the derecognition of financial instruments. It requires financial
assets to be classified into two measurement categories: those measured as at fair value and those
measured at amortised cost. The determination is made at initial recognition. The classification depends on
the entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument.

While AASB 9 does not need to be applied until financial reporting periods commencing on or after 1
January 2015, the Group has decided to adopt it early from 1 January 2013. On that date, the Trust’s
management has assessed which business models apply to the financial assets held by the Trust at the date
of initial application of AASB 9 (1 January 2013). The main effects resulting from this assessment were:

(cid:120)

All equity and debt investments ($36,633,000 as at 1 January 2013) had to be reclassified from(cid:3)
available-for-sale to financial assets at fair value through profit or loss (“financial assets at FVTPL”).(cid:3)
Fair value movements on these investments can no longer be recorded through other comprehensive(cid:3)
income (OCI). They also do not meet the criteria to be classified as at amortised cost in accordance(cid:3)
with AASB 9, because the objective of the business model is not to hold these instruments in order to(cid:3)
collect their contractual cash flows. Related fair value losses of $686,000 were transferred from the(cid:3)
available-for-sale financial assets reserve to retained earnings/(accumulated losses) on 1 January(cid:3)
2013. Since 1 January 2013, fair value gains after tax related to these investments amounting to
$599,000 were recognised in profit or loss.

The Trust did not have any financial assets in the balance sheet that were previously designated as fair
value through profit or loss but are no longer so designated. Neither did it designate any other financial
asset at fair value through profit or loss on initial application of AASB 9.

Current year impact $’000

Prior year restatement $’000

December

Reclassification

2012

Increase/

(Decrease)

June

2013

June

2012

Reclassification

June 2012

(Restated)

Balance sheet (extract)

Non-current Assets

Financial Assets at FVTPL (*)

Available-for-sale Financial Assets

Reserves

Retained Earnings/(Accumulated Loss) (**)

2,131

36,633

38,764

(686)

(57,742)

(58,428)

36,633

(36,633)

686

(686)

(441)

38,323

(441)

38,323

2,445

(55,983)

(249)

(60,133)

(60,382)

249

(249)

(60,382)

* Decrease in financial assets at FVTPL includes fair value gain of $333,000 less disposal of $774,000.

** Increase in retained earnings includes earnings of $2,445,000 since December 2012.

Investment Properties

Investment properties are measured initially at cost, including transaction costs. The carrying amount

includes the cost of replacing part of an existing investment property at the time that cost is incurred if the

recognition criteria are met and excludes the costs of day-to-day servicing of an investment property.

Subsequent to initial recognition, investment properties are stated at fair value, which is based on active

market prices, adjusted if necessary, for any difference in the nature, location or condition of the specific

asset at the balance sheet date. Gains or losses arising from changes in the fair values of investment

properties are recognised in profit or loss in the year in which they arise. Included in the value

measurement are adjustments for straightlining of lease income.

Cash and Cash Equivalents

Trade and Other Receivables

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly

liquid investments with original maturities of three months or less, and bank overdrafts.

Trade receivables are recognised and carried at original invoice amount less a provision for any

uncollectable debts. An estimate for doubtful debts is made when there is objective evidence that the Trust

will not be able to collect the receivable. Financial difficulties of the debtor and default payments are

considered objective evidence of impairment. Bad debts are written off when identified as uncollectable.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

All equity investments are measured at fair value. Equity investments that are held for trading are

measured at fair value through profit or loss.

Measurement – from 1 January 2013

At initial recognition, the Trust measures a financial asset at its fair value. Transaction costs of financial

assets carried at fair value through profit or loss are expensed in profit or loss.

A gain or loss on a debt investment that is subsequently measured at fair value and is not part of a hedging

relationship is recognised in profit or loss and presented net in the profit or loss within other income or

other expenses in the period in which it arises.

The Trust subsequently measures all equity investments at fair value. Changes in the fair value of financial

assets at fair value through profit or loss are recognised in profit or loss as applicable.

Change in accounting policy

The policies were changed to comply with AASB 9 Financial Instruments, AASB 2009-11 Amendments to

Australian Accounting Standards arising from AASB 9 and AASB 2012-6 Amendments to Australian

Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures. This version of AASB

9 replaces the provisions of AASB 139 that relate to the recognition, classification and measurement of

financial assets and financial liabilities and the derecognition of financial instruments. It requires financial

assets to be classified into two measurement categories: those measured as at fair value and those

measured at amortised cost. The determination is made at initial recognition. The classification depends on

the entity’s business model for managing its financial instruments and the contractual cash flow

characteristics of the instrument.

While AASB 9 does not need to be applied until financial reporting periods commencing on or after 1

January 2015, the Group has decided to adopt it early from 1 January 2013. On that date, the Trust’s

management has assessed which business models apply to the financial assets held by the Trust at the date

of initial application of AASB 9 (1 January 2013). The main effects resulting from this assessment were:

(cid:120)

All equity and debt investments ($36,633,000 as at 1 January 2013) had to be reclassified from(cid:3)

available-for-sale to financial assets at fair value through profit or loss (“financial assets at FVTPL”).(cid:3)

Fair value movements on these investments can no longer be recorded through other comprehensive(cid:3)

income (OCI). They also do not meet the criteria to be classified as at amortised cost in accordance(cid:3)

with AASB 9, because the objective of the business model is not to hold these instruments in order to(cid:3)

collect their contractual cash flows. Related fair value losses of $686,000 were transferred from the(cid:3)

available-for-sale financial assets reserve to retained earnings/(accumulated losses) on 1 January(cid:3)

2013. Since 1 January 2013, fair value gains after tax related to these investments amounting to

$599,000 were recognised in profit or loss.

(cid:120)

The Trust did not have any financial assets in the balance sheet that were previously designated as fair

value through profit or loss but are no longer so designated. Neither did it designate any other financial

asset at fair value through profit or loss on initial application of AASB 9.

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

(ii) Equity investments

Financial Instruments (continued)

The adoption of the revised AASB 9 did not affect the Trust’s accounting for its financial liabilities, as the
new requirements only affect the accounting for financial liabilities that are designated at fair value through
profit or loss. The Trust does not have any such liabilities.

The impact of these changes in the Trust’s accounting policy on non-current assets in the financial
statements are as follows:

Current year impact $’000

December
2012

Reclassification

Increase/
(Decrease)

June
2013

June
2012

Prior year restatement $’000
Reclassification

June 2012
(Restated)

Balance sheet (extract)
Non-current Assets
Financial Assets at FVTPL (*)
Available-for-sale Financial Assets

Reserves
Retained Earnings/(Accumulated Loss) (**)

2,131
36,633
38,764

(686)
(57,742)
(58,428)

36,633
(36,633)
-

686
(686)
-

(441)
-
(441)

-
2,445
2,445

38,323
-
38,323

-
-
-

-
(55,983)
(55,983)

(249)
(60,133)
(60,382)

-
-
-

249
(249)
-

-
-
-

-
(60,382)
(60,382)

* Decrease in financial assets at FVTPL includes fair value gain of $333,000 less disposal of $774,000.

** Increase in retained earnings includes earnings of $2,445,000 since December 2012.

Investment Properties

Investment properties are measured initially at cost, including transaction costs. The carrying amount
includes the cost of replacing part of an existing investment property at the time that cost is incurred if the
recognition criteria are met and excludes the costs of day-to-day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated at fair value, which is based on active
market prices, adjusted if necessary, for any difference in the nature, location or condition of the specific
asset at the balance sheet date. Gains or losses arising from changes in the fair values of investment
properties are recognised in profit or loss in the year in which they arise. Included in the value
measurement are adjustments for straightlining of lease income.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly
liquid investments with original maturities of three months or less, and bank overdrafts.

Trade and Other Receivables

Trade receivables are recognised and carried at original invoice amount less a provision for any
uncollectable debts. An estimate for doubtful debts is made when there is objective evidence that the Trust
will not be able to collect the receivable. Financial difficulties of the debtor and default payments are
considered objective evidence of impairment. Bad debts are written off when identified as uncollectable.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

Trade and Other Payables

New Accounting Standards and Interpretations

Liabilities for trade creditors are carried at cost which is the fair value of the consideration to be paid in the
future for goods or services received, whether or not billed to the Trust at balance date. The amounts are
unsecured and are usually paid within 30 days of recognition.

Interest Bearing Borrowings

Interest bearing borrowings are initially recognised at fair value less any related transaction costs.
Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost.

Provisions

Provisions are recognised when the Trust has a legal or constructive obligation, as a result of past events,
for which it is probable that an outflow of economic benefits will result and that outflow can be reliably
measured.

Revenue

Rent

Rent comprises rental and recovery of outgoings from property tenants. Rental income from investment
properties is accounted for on a straight-line basis over the lease term. Lease incentives granted are
recognised as an integral part of total rental income.

Investment income

Interest income is recognised as interest accrues using the effective interest method. Dividend and
distribution revenue is recognised when the right to receive income has been established. All revenue is
stated net of the amount of goods and services tax (GST).

Income Tax

Under current income tax legislation the Trust is not liable to Australian income tax provided the
unitholders are presently entitled to the taxable income of the Trust. The Trust has carried forward income
tax losses and net capital losses of $16.27 million and $14.29 million respectively from June 2012.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables
and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow
statement on a gross basis, except for the GST component of investing and financing activities, which are
disclosed as operating cash flows.

Earnings / (Loss) Per Unit (EPU)

The Trust presents basic and diluted EPU. Basic EPU is calculated by dividing the profit or loss attributable
to ordinary unitholders of the Trust by the weighted average number of units outstanding during the
period. Diluted EPU is determined by adjusting the profit or loss attributable to ordinary unitholders and
the weighted average number of units outstanding for the effects of all dilutive potential units.

Certain new accounting standards and interpretations have been published that are not mandatory for 30

June 2013 reporting periods. The Trust’s assessment of the impact of these new standards and

interpretations is set out below.

(i) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests

in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and

Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the

Consolidation and Joint Arrangements Standards (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting

for joint arrangements, consolidated financial statements and associated disclosures. AASB 10 replaces all

of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements,

and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity

presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the

mechanics of consolidation. However, the standard introduces a single definition of control that applies to

all entities. It focuses on the need to have both power and rights or exposure to variable returns. Power is

the current ability to direct the activities that significantly influence returns. Returns must vary and can be

positive, negative or both. Control exists when the investor can use its power to affect the amount of its

returns. There is also new guidance on participating and protective rights and on agent/principal

relationships. While the Trust does not expect the new standard to have a significant impact on its

composition, it has yet to perform a detailed analysis of the new guidance in the context of its various

investees that may or may not be controlled under the new rules.

AASB 11 introduces a principles based approach to accounting for joint arrangements. The Trust is not

affected by this standard as it does not have any joint arrangements. AASB 12 sets out the required

disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the

disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard by the

Trust will not affect any of the amounts recognised in the financial statements, but will impact the type of

information disclosed in relation to the Trust’s investments. The Trust is not affected by these amendments.

The Trust does not expect to adopt the new standards before their operative date. They would therefore be

first applied in the financial statements for the annual reporting period ending 30 June 2014.

(ii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards

arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair

value disclosures. The Trust has yet to determine which, if any, of its current measurement techniques will

have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the

new rules on any of the amounts recognised in the financial statements. However, application of the new

standard will impact the type of information disclosed in the notes to the financial statements. The Trust

does not intend to adopt the new standard before its operative date, which means that it would be first

applied in the annual reporting period ending 30 June 2014.

There are no other standards that are not yet effective and that are expected to have a material impact on

the entity in the current or future reporting periods and on foreseeable future transactions.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Statement of Significant Accounting Policies (continued)

Trade and Other Payables

New Accounting Standards and Interpretations

Liabilities for trade creditors are carried at cost which is the fair value of the consideration to be paid in the

future for goods or services received, whether or not billed to the Trust at balance date. The amounts are

unsecured and are usually paid within 30 days of recognition.

Interest Bearing Borrowings

Interest bearing borrowings are initially recognised at fair value less any related transaction costs.

Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost.

Provisions are recognised when the Trust has a legal or constructive obligation, as a result of past events,

for which it is probable that an outflow of economic benefits will result and that outflow can be reliably

Provisions

measured.

Revenue

Rent

Investment income

Income Tax

Rent comprises rental and recovery of outgoings from property tenants. Rental income from investment

properties is accounted for on a straight-line basis over the lease term. Lease incentives granted are

recognised as an integral part of total rental income.

Interest income is recognised as interest accrues using the effective interest method. Dividend and

distribution revenue is recognised when the right to receive income has been established. All revenue is

stated net of the amount of goods and services tax (GST).

Under current income tax legislation the Trust is not liable to Australian income tax provided the

unitholders are presently entitled to the taxable income of the Trust. The Trust has carried forward income

tax losses and net capital losses of $16.27 million and $14.29 million respectively from June 2012.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST

incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is

recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables

and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow

statement on a gross basis, except for the GST component of investing and financing activities, which are

disclosed as operating cash flows.

Earnings / (Loss) Per Unit (EPU)

The Trust presents basic and diluted EPU. Basic EPU is calculated by dividing the profit or loss attributable

to ordinary unitholders of the Trust by the weighted average number of units outstanding during the

period. Diluted EPU is determined by adjusting the profit or loss attributable to ordinary unitholders and

the weighted average number of units outstanding for the effects of all dilutive potential units.

Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2013 reporting periods. The Trust’s assessment of the impact of these new standards and
interpretations is set out below.

(i) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests
in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and
Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the
Consolidation and Joint Arrangements Standards (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting
for joint arrangements, consolidated financial statements and associated disclosures. AASB 10 replaces all
of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements,
and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity
presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the
mechanics of consolidation. However, the standard introduces a single definition of control that applies to
all entities. It focuses on the need to have both power and rights or exposure to variable returns. Power is
the current ability to direct the activities that significantly influence returns. Returns must vary and can be
positive, negative or both. Control exists when the investor can use its power to affect the amount of its
returns. There is also new guidance on participating and protective rights and on agent/principal
relationships. While the Trust does not expect the new standard to have a significant impact on its
composition, it has yet to perform a detailed analysis of the new guidance in the context of its various
investees that may or may not be controlled under the new rules.

AASB 11 introduces a principles based approach to accounting for joint arrangements. The Trust is not
affected by this standard as it does not have any joint arrangements. AASB 12 sets out the required
disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the
disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard by the
Trust will not affect any of the amounts recognised in the financial statements, but will impact the type of
information disclosed in relation to the Trust’s investments. The Trust is not affected by these amendments.

The Trust does not expect to adopt the new standards before their operative date. They would therefore be
first applied in the financial statements for the annual reporting period ending 30 June 2014.

(ii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair
value disclosures. The Trust has yet to determine which, if any, of its current measurement techniques will
have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the
new rules on any of the amounts recognised in the financial statements. However, application of the new
standard will impact the type of information disclosed in the notes to the financial statements. The Trust
does not intend to adopt the new standard before its operative date, which means that it would be first
applied in the annual reporting period ending 30 June 2014.

There are no other standards that are not yet effective and that are expected to have a material impact on
the entity in the current or future reporting periods and on foreseeable future transactions.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Critical Accounting Estimates and Judgments

The Directors of the Responsible Entity evaluate estimates and judgments incorporated into the financial
statements based on historical knowledge and best available current information. Estimates assume a
reasonable expectation of future events and are based on current trends and economic data, obtained both
externally and within the Trust.

Key estimates – impairment
The Trust assesses impairment at each reporting date by evaluating conditions specific to the Trust that
may lead to impairment of assets. Refer to Note 7 for impairment details.

Key estimates – financial assets
Up to 31 December 2012, investments in unlisted securities (except for investments in BlackWall Pub
Group) and debt instruments have been classified as available-for-sale financial assets and movements in
fair value are recognised directly in the asset revaluation reserve. Changes in fair value of investments in
BlackWall Pub Group are recognised directly in the profit and loss. From 1 January 2013, all investments
have been classified as financial assets at FVTPL with gains and losses recognised in profit or loss. The fair
value of the unlisted securities is determined by reference to the net assets of the underlying entities. The
fair value of the listed securities is based on the closing price from the Australian Securities Exchange as at
the reporting date. The fair value of the Bakehouse Bonds is measured by its face value adjusted for CPI
movements.

Key estimates – fair values of investment properties
The Trust carries its investment properties at fair value with changes in the fair values recognised in profit
or loss. It obtains independent valuations every three to five years. At the end of each reporting period, the
Directors of the Responsible Entity update their assessment of the fair value of each property, taking into
account the most recent independent valuations. The key assumptions used in this determination are set
out in Note 10. If there are any material change in the key assumptions due to changes in economic
conditions, the fair value of the investment properties may differ and may need to be re-estimated.

Segment Information

AASB 8 requires operating segments to be identified on the basis of internal reports about components of
the Trust that are regularly reviewed by the chief operating decision maker in order to allocate resources to
the segment and to assess its performance. The Trust’s primary format for segment reporting is based on
business segments. The business segments are determined based on the Trust management and internal
reporting structure. There is only one geographical segment being Australia.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. The operating businesses are organised and managed separately
according to the nature of the products and services provided, with each segment representing a strategic
business unit that offers different products and serves different markets.

The Trust has adopted three reporting segments, Direct Property, Other Investments and Unallocated. The
Direct Property segment includes the ownership and leasing out of commercial, industrial and retail
properties in Australian Capital Territory, New South Wales and Queensland. Income is derived from rent
and property revaluations. The Other Investments segment includes interests in debt instruments and
property related securities such as units in unlisted unit trusts. It generates income from dividends,
distributions, and interest. The Unallocated segment covers general functions.

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

3. Segment Information (continued)

The segment information for the year ended 30 June is as follows:

30 June 2013

Sales to external customers

Net unrealised gain on revaluation

Total segment revenue

Segment operating profit

Finance costs

Litigation expenses

Other comprehensive loss

Total comprehensive income/(loss)

30 June 2012

Sales to external customers

Net unrealised gain/(loss) on revaluation

Total segment revenue

Segment operating profit

Finance costs

Litigation expenses

Other comprehensive loss

Total comprehensive income/(loss)

30 June 2013

Segment assets

Segment liabilities

30 June 2012

Segment assets

Segment liabilities

Direct

Other

Consolidated

Property

Investments

Unallocated

$’000

Direct

Other

Property

Investments

Unallocated

$’000

Consolidated

Total

$’000

10,229

2,249

12,478

7,060

(3,863)

3,197

10,298

4,202

14,500

8,377

(4,783)

3,594

2,023

1,362

3,385

3,083

(437)

2,646

2,523

(1,605)

918

599

(602)

(3)

(1,444)

(19,719)

Total

$’000

12,252

3,611

15,863

10,143

(3,863)

(1,444)

(437)

4,399

12,821

2,597

15,418

8,976

(4,783)

(19,719)

(602)

(16,128)

120,729

(70,754)

121,852

(76,276)

81,945

(50,946)

38,784

(108)

(19,700)

82,906

(57,077)

38,946

(199)

(19,000)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Critical Accounting Estimates and Judgments

The Directors of the Responsible Entity evaluate estimates and judgments incorporated into the financial

statements based on historical knowledge and best available current information. Estimates assume a

reasonable expectation of future events and are based on current trends and economic data, obtained both

externally and within the Trust.

Key estimates – impairment

The Trust assesses impairment at each reporting date by evaluating conditions specific to the Trust that

may lead to impairment of assets. Refer to Note 7 for impairment details.

Key estimates – financial assets

Up to 31 December 2012, investments in unlisted securities (except for investments in BlackWall Pub

Group) and debt instruments have been classified as available-for-sale financial assets and movements in

fair value are recognised directly in the asset revaluation reserve. Changes in fair value of investments in

BlackWall Pub Group are recognised directly in the profit and loss. From 1 January 2013, all investments

have been classified as financial assets at FVTPL with gains and losses recognised in profit or loss. The fair

value of the unlisted securities is determined by reference to the net assets of the underlying entities. The

fair value of the listed securities is based on the closing price from the Australian Securities Exchange as at

the reporting date. The fair value of the Bakehouse Bonds is measured by its face value adjusted for CPI

movements.

Key estimates – fair values of investment properties

The Trust carries its investment properties at fair value with changes in the fair values recognised in profit

or loss. It obtains independent valuations every three to five years. At the end of each reporting period, the

Directors of the Responsible Entity update their assessment of the fair value of each property, taking into

account the most recent independent valuations. The key assumptions used in this determination are set

out in Note 10. If there are any material change in the key assumptions due to changes in economic

conditions, the fair value of the investment properties may differ and may need to be re-estimated.

AASB 8 requires operating segments to be identified on the basis of internal reports about components of

the Trust that are regularly reviewed by the chief operating decision maker in order to allocate resources to

the segment and to assess its performance. The Trust’s primary format for segment reporting is based on

business segments. The business segments are determined based on the Trust management and internal

reporting structure. There is only one geographical segment being Australia.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that

can be allocated on a reasonable basis. The operating businesses are organised and managed separately

according to the nature of the products and services provided, with each segment representing a strategic

business unit that offers different products and serves different markets.

The Trust has adopted three reporting segments, Direct Property, Other Investments and Unallocated. The

Direct Property segment includes the ownership and leasing out of commercial, industrial and retail

properties in Australian Capital Territory, New South Wales and Queensland. Income is derived from rent

and property revaluations. The Other Investments segment includes interests in debt instruments and

property related securities such as units in unlisted unit trusts. It generates income from dividends,

distributions, and interest. The Unallocated segment covers general functions.

Segment Information

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

3. Segment Information (continued)

The segment information for the year ended 30 June is as follows:

30 June 2013
Sales to external customers
Net unrealised gain on revaluation
Total segment revenue
Segment operating profit
Finance costs
Litigation expenses
Other comprehensive loss
Total comprehensive income/(loss)

30 June 2012
Sales to external customers
Net unrealised gain/(loss) on revaluation
Total segment revenue
Segment operating profit
Finance costs
Litigation expenses
Other comprehensive loss
Total comprehensive income/(loss)

30 June 2013
Segment assets
Segment liabilities

30 June 2012
Segment assets
Segment liabilities

Direct
Property
$’000

Other
Investments
$’000

Unallocated
$’000

Consolidated
Total
$’000

10,229
2,249
12,478
7,060
(3,863)
-
-
3,197

2,023
1,362
3,385
3,083
-
-
(437)
2,646

-
-
-
-
-
(1,444)
-
(1,444)

12,252
3,611
15,863
10,143
(3,863)
(1,444)
(437)
4,399

Direct
Property
$’000

Other
Investments
$’000

Unallocated
$’000

Consolidated
Total
$’000

10,298
4,202
14,500
8,377
(4,783)
-
-
3,594

2,523
(1,605)
918
599
-
-
(602)
(3)

-
-
-
-
-
(19,719)
-
(19,719)

12,821
2,597
15,418
8,976
(4,783)
(19,719)
(602)
(16,128)

81,945
(50,946)

38,784
(108)

-
(19,700)

120,729
(70,754)

82,906
(57,077)

38,946
(199)

-
(19,000)

121,852
(76,276)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Revenue

4(a) Revenue
Rent:
- Rental income
- Straight-line rental income

Investment income:
- Dividends and distributions
- Interest income

Other income
Net unrealised gain / (loss) on:
- Investment properties
- Financial assets through profit and loss
- Interest rates swaps
- Impairment of trade receivables and other assets
Net unrealised gain / (loss)
Total revenue

4(b) Net unrealised gain / (loss) on financial assets

Note

4(b)

2013
$’000

9,707
503
10,210

2,023
19
2,042
-

1,873
1,362
376
-
3,611
15,863

2012
$’000

9,722
539
10,261

2,226
37
2,263
297

5,153
(1,605)
(940)
(11)
2,597
15,418

As a result of early adoption of AASB 9 at 1 January 2013, unrealised movements on revaluation of financial
assets have now been recognised in profit or loss instead of other comprehensive income. See Note 1 for
details of change of accounting policies. Total unrealised gain / (loss) on financial assets are as follows:

Unrealised gain / (loss) recognised in profit or loss
Unrealised loss recognised in other comprehensive income
Total unrealised gain / (loss) on financial assets

Expenses

Depreciation expenses
Adminstration expenses:
- Responsible entity fees
- Fund management expenses

Finance costs
Litigation expenses

Current Assets - Cash and Cash Equivalents

Cash at bank
Cash on deposit
Total cash and cash equivalents

Note

Cash at bank earns interest at floating rates based on daily bank deposit rates.

2013
$’000
1,362
(437)
925

2013
$’000
2,403

794
233
1,027
3,863
1,444

2013
$’000
39
-
39

2012
$’000
(1,605)
(602)
(2,207)

2012
$’000
2,759

791
262
1,053
4,783
19,719

2012
$’000
706
600
1,306

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Current Assets - Trade and Other Receivables

Trade and other receivables, net of impairment:

- Related parties

- Other parties

Total Trade and Other Receivables

Current Assets - Other Assets

Prepayments

Total other assets

Non-current Assets - Financial Assets

No receivables were impaired as at 30 June 2013 (2012: $11,000). Further information relating to

receivables from related parties is set out in Note 24.

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Total financial assets

Note

9(a)

As a result of early adoption of AASB 9 from 1 January 2013, all available-for-sale assets were reclassified as

financial assets at FVTPL. See Note 1 for details of change of accounting policies.

(a) Financial assets at FVTPL / Available-for-sale financial assets

Financial assets at FVTPL

2013

$’000

31,089

4,424

2,810

38,323

2012

$’000

917

Available-for-

sale financial

assets

2012

$’000

30,353

1,225

5,873

37,451

Bakehouse Bonds

Investment in unlisted related entities

Investment in unlisted other entities

Total financial assets

The Bakehouse Bonds are CPI linked debt instruments secured against a large scale mixed use property

known as the Bakehouse Quarter in North Strathfield, Sydney. The Bonds’ face value of $30 million is

indexed to CPI and the current value at 30 June 2013 is $31.09 million. The Bonds will mature on 30 June

2020. In addition, a coupon of 5.5% per annum is paid quarterly in arrears. All other assets are investments

in various managed investment schemes.

2013

$’000

409

203

612

2013

$’000

405

2013

$’000

38,323

2012

$’000

413

455

2012

$’000

373

2012

$’000

917

37,451

38,368

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Revenue

4(a) Revenue

Rent:

- Rental income

- Straight-line rental income

Investment income:

- Dividends and distributions

- Interest income

Other income

Net unrealised gain / (loss) on:

- Investment properties

Note

2013

$’000

9,707

503

10,210

2,023

2,042

1,873

1,362

376

3,611

15,863

2013

$’000

1,362

(437)

925

2013

$’000

2,403

794

233

1,027

3,863

1,444

2013

$’000

2012

$’000

9,722

539

10,261

2,226

2,263

297

5,153

(1,605)

(940)

(11)

2,597

15,418

2012

$’000

(1,605)

(602)

(2,207)

2012

$’000

2,759

791

262

1,053

4,783

19,719

2012

$’000

706

600

1,306

- Financial assets through profit and loss

4(b)

- Interest rates swaps

- Impairment of trade receivables and other assets

Net unrealised gain / (loss)

Total revenue

4(b) Net unrealised gain / (loss) on financial assets

As a result of early adoption of AASB 9 at 1 January 2013, unrealised movements on revaluation of financial

assets have now been recognised in profit or loss instead of other comprehensive income. See Note 1 for

details of change of accounting policies. Total unrealised gain / (loss) on financial assets are as follows:

Unrealised gain / (loss) recognised in profit or loss

Unrealised loss recognised in other comprehensive income

Total unrealised gain / (loss) on financial assets

Expenses

Depreciation expenses

Adminstration expenses:

- Responsible entity fees

- Fund management expenses

Finance costs

Litigation expenses

Cash at bank

Cash on deposit

Total cash and cash equivalents

Current Assets - Cash and Cash Equivalents

Cash at bank earns interest at floating rates based on daily bank deposit rates.

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Current Assets - Trade and Other Receivables

Trade and other receivables, net of impairment:
- Related parties
- Other parties
Total Trade and Other Receivables

2013
$’000

409
203
612

2012
$’000

413
42
455

No receivables were impaired as at 30 June 2013 (2012: $11,000). Further information relating to
receivables from related parties is set out in Note 24.

Current Assets - Other Assets

Prepayments
Total other assets

Non-current Assets - Financial Assets

Financial assets at fair value through profit or loss
Available-for-sale financial assets
Total financial assets

Note
9(a)
9(a)

2013
$’000
405
405

2013
$’000
38,323
-
38,323

2012
$’000
373
373

2012
$’000
917
37,451
38,368

As a result of early adoption of AASB 9 from 1 January 2013, all available-for-sale assets were reclassified as
financial assets at FVTPL. See Note 1 for details of change of accounting policies.

(a) Financial assets at FVTPL / Available-for-sale financial assets

Bakehouse Bonds
Investment in unlisted related entities
Investment in unlisted other entities
Total financial assets

Financial assets at FVTPL
2012
$’000

2013
$’000

Available-for-
sale financial
assets
2012
$’000

31,089
4,424
2,810
38,323

-
917
-
917

30,353
1,225
5,873
37,451

The Bakehouse Bonds are CPI linked debt instruments secured against a large scale mixed use property
known as the Bakehouse Quarter in North Strathfield, Sydney. The Bonds’ face value of $30 million is
indexed to CPI and the current value at 30 June 2013 is $31.09 million. The Bonds will mature on 30 June
2020. In addition, a coupon of 5.5% per annum is paid quarterly in arrears. All other assets are investments
in various managed investment schemes.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

10.

Non-current Assets - Investment Properties

11.

Current Liabilities - Trade and Other Payables

Chancellor Homemaker Centre
Silver @ The Exchange
APN Yandina
BlueScope Coolum
Canberra Eye Hospital
APN Toowoomba
Total investment properties
Movements in investment properties:
Balance at the beginning of the financial year
Additions (subsequent expenditures)
Straight-line rental income
Depreciation
Revaluation
Balance at the end of the financial year

2013
$’000
20,400
18,250
24,100
4,700
7,900
6,000
81,350

81,350
27
503
(2,403)
1,873
81,350

2012
$’000
20,400
18,250
24,100
4,700
7,900
6,000
81,350

78,375
42
539
(2,759)
5,153
81,350

The Trust obtained independent valuations for its investment properties Silver @ The Exchange, APN
Yandina and Canberra Eye Hospital in February 2012 and June 2010 for Chancellor Homemaker Centre,
BlueScope Coolum and APN Toowoomba. The valuations were performed by registered independent
valuers under the instructions from the Trust’s bank by reference to recent market sales of similar
properties and common valuation methodologies including capitalisation of income projections and
discounted cash flow projections.

For the year ended June 2013, the Directors have updated their assessment of the fair value of all
properties. The key assumptions of the Directors’ valuations have been taken from the last independent
valuation reports with adjustments for changes in net income.

The holding values generate the following capitalisation rates (initial yield):

Chancellor Homemaker
Silver @ The Exchange
APN Yandina
BlueScope Coolum
Canberra Eye Hospital
APN Toowoomba

9.7%
10.8%
9.6%
8.2%
8.9%
9.5%

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Trade payables:

- Related parties

- Other parties

Sundry payables and accrued expenses

Total trade and other payables

12.

Current Liabilities - Other liabilities

Rental income received in advance

Total other liabilities

13.

Current Liabilities - Borrowings

Secured bank bill facilities

Total borrowings

2013

$’000

543

591

210

801

2013

$’000

2012

$’000

401

482

525

2012

$’000

102

2013

$’000

49,500

2012

$’000

55,580

Further information relating to trade payables from related parties is set out in Note 24.

The bill facilities are secured by registered first mortgages over the freehold land and buildings (refer to

Note 11). During the financial year $6.08 million of debt has been repaid to the Trust’s lenders. In August

2013, the Trust repaid a further $1 million to reduce the debt to $48.5 million.

The Trust borrowings of $49,500,000 (at 30 June, now $48,500,000) will mature in May 2014 and therefore

is classified as a current liability. The facility is within its loan to value ratio covenant (direct property to

debt – currently 60% (61% as at June 2013) against a covenant of 65%).

The Trust’s debt facilities are on the following terms:

(cid:120) Expiry in May 2014.

(cid:120) Facilities incur an all up margin of 2.35%.

$29 million of borrowings are hedged under interest rate swap contracts. Refer to Note 14 for further

details. The average interest rate on the facility for the year was 6.56% (2012: 7.76%.)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Chancellor Homemaker Centre

Silver @ The Exchange

APN Yandina

BlueScope Coolum

Canberra Eye Hospital

APN Toowoomba

Total investment properties

Movements in investment properties:

Balance at the beginning of the financial year

Additions (subsequent expenditures)

Straight-line rental income

Depreciation

Revaluation

Balance at the end of the financial year

2013

$’000

20,400

18,250

24,100

4,700

7,900

6,000

81,350

503

(2,403)

1,873

81,350

2012

$’000

20,400

18,250

24,100

4,700

7,900

6,000

81,350

78,375

539

(2,759)

5,153

81,350

The Trust obtained independent valuations for its investment properties Silver @ The Exchange, APN

Yandina and Canberra Eye Hospital in February 2012 and June 2010 for Chancellor Homemaker Centre,

BlueScope Coolum and APN Toowoomba. The valuations were performed by registered independent

valuers under the instructions from the Trust’s bank by reference to recent market sales of similar

properties and common valuation methodologies including capitalisation of income projections and

discounted cash flow projections.

For the year ended June 2013, the Directors have updated their assessment of the fair value of all

properties. The key assumptions of the Directors’ valuations have been taken from the last independent

valuation reports with adjustments for changes in net income.

The holding values generate the following capitalisation rates (initial yield):

Chancellor Homemaker

Silver @ The Exchange

APN Yandina

BlueScope Coolum

Canberra Eye Hospital

APN Toowoomba

9.7%

10.8%

9.6%

8.2%

8.9%

9.5%

10.

Non-current Assets - Investment Properties

11.

Current Liabilities - Trade and Other Payables

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Trade payables:
- Related parties
- Other parties

Sundry payables and accrued expenses
Total trade and other payables

2013
$’000

48
543
591
210
801

Further information relating to trade payables from related parties is set out in Note 24.

12.

Current Liabilities - Other liabilities

Rental income received in advance
Total other liabilities

13.

Current Liabilities - Borrowings

Secured bank bill facilities
Total borrowings

2013
$’000
60
60

2013
$’000
49,500
49,500

2012
$’000

81
401
482
43
525

2012
$’000
102
102

2012
$’000
55,580
55,580

The bill facilities are secured by registered first mortgages over the freehold land and buildings (refer to
Note 11). During the financial year $6.08 million of debt has been repaid to the Trust’s lenders. In August
2013, the Trust repaid a further $1 million to reduce the debt to $48.5 million.

The Trust borrowings of $49,500,000 (at 30 June, now $48,500,000) will mature in May 2014 and therefore
is classified as a current liability. The facility is within its loan to value ratio covenant (direct property to
debt – currently 60% (61% as at June 2013) against a covenant of 65%).

The Trust’s debt facilities are on the following terms:

(cid:120) Expiry in May 2014.
(cid:120) Facilities incur an all up margin of 2.35%.

$29 million of borrowings are hedged under interest rate swap contracts. Refer to Note 14 for further
details. The average interest rate on the facility for the year was 6.56% (2012: 7.76%.)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

14.

Current Liabilities - Derivative Financial Instruments

19.

Lease Commitments Receivable

Interest rate swaps
Total derivative financial instruments

2013
$’000
693
693

2012
$’000
1,069
1,069

The Trust is party to interest rate swaps in the normal course of business in order to hedge exposure to
fluctuations in interest rate through $29 million of interest rate swap contracts. The gain or loss from
remeasuring the interest rate swaps at fair value is recognised in profit or loss. The terms of the interest
rate swaps are:

(cid:120)
(cid:120)
(cid:120)

$10 million swapped at 5.22% to 9 June 2014.
$9 million swapped at 4.22% to 10 November 2014.
$10 million swapped at 5.26% to 1 June 2014.

15.

Current Liabilities - Provision

Provision for litigation claim
Total provision

2013
$’000
19,700
19,700

2012
$’000
19,000
19,000

TFML (as P-REIT’s Responsible Entity) is a defendant in a Supreme Court action initiated by MPS. The
proceedings relate to a series of transactions entered into 2007, that is, before TFML became Responsible
Entity of the Trust. On 10 August 2012 Judgment was entered against TFML for approximately $17.8 million
including Judgment court interest (to the date of Judgment) but excluding costs. Further information on the
Judgment can be found in the MPS Litigation section of the Directors’ Report. TFML’s appeal of this decision
was heard in early April 2013 and the appeal decision is expected soon. A provision for Judgment amount of
$19.7 million (including a plaintiff’s cost estimate and Judgment court interest of $1.9 million), is carried in
these financial statements.

16.

Distributions

There were no distributions paid or declared for the year ended 30 June 2013 (2012: $nil).

17.

Earnings / (Loss) Per Unit

Basic and diluted earnings/(loss) per unit
Calculated as follows:
Profit /(loss) for the year
Weighted average number of units for earnings per unit

18.

Auditors’ Remuneration

Remuneration of ESV (the auditor of the Trust) for:
- auditing or reviewing the financial statements for the Trust
- taxation and compliance services
Total auditors’ remuneration

2013

$0.02

2012

($0.07)

$4,836,000
207,524,039

($15,526,000)
207,524,039

2013
$’000

40
13
53

2012
$’000

51
19
70

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

Future minimum rental receivable under non-cancellable operating leases as at 30 June are as follows:

There are no operating lease commitments payable or any other capital commitments as at 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

Lease commitments receivable:

- receivable within 1 year

- receivable within 2 – 5 years

- receivable more than 5 years

Total lease commitments receivable

(2012: Nil).

20.

Reconciliation of Operating Cash Flows

Profit/(loss) for the year

Non-cash flows in profit:

- Unrealised gain on revaluation

- Depreciation

- Straight-line rental income

- Loss on sale of financial assets

- Litigation expenses

Changes in assets and liabilities:

Increase in trade and other receivables

Increase in trade and other payables

Increase /(decrease) in other liabilities

Net cash flows from operating activities

21.

Contingent Assets and Contingent Liabilities

There are no other contingent liabilities or contingent assets as at 30 June 2013.

22.

Subsequent Events

In August 2013, $1 million of borrowings was repaid to the Trust’s lender (refer to Note 13).

Other than the matters referred to in these financial statements, to the best knowledge of the Directors, there

have been no other matters or circumstances that have arisen since the end of the year that have materially

affected or may materially affect the Trust’s operations in future financial years, the results of those

operations or the Trust’s state of affairs in future financial years.

2013

$’000

7,816

21,847

24,776

54,439

2013

$’000

4,836

(3,611)

2,403

(503)

103

700

(188)

246

(13)

3,973

2012

$’000

7,788

22,501

30,080

60,369

2012

$’000

(15,526)

(2,597)

2,759

(539)

19,000

(295)

188

3,031

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

14.

Current Liabilities - Derivative Financial Instruments

19.

Lease Commitments Receivable

Interest rate swaps

Total derivative financial instruments

2013

$’000

693

2012

$’000

1,069

The Trust is party to interest rate swaps in the normal course of business in order to hedge exposure to

fluctuations in interest rate through $29 million of interest rate swap contracts. The gain or loss from

remeasuring the interest rate swaps at fair value is recognised in profit or loss. The terms of the interest

rate swaps are:

(cid:120)

$10 million swapped at 5.22% to 9 June 2014.

$9 million swapped at 4.22% to 10 November 2014.

$10 million swapped at 5.26% to 1 June 2014.

15.

Current Liabilities - Provision

Provision for litigation claim

Total provision

2013

$’000

19,700

2012

$’000

19,000

TFML (as P-REIT’s Responsible Entity) is a defendant in a Supreme Court action initiated by MPS. The

proceedings relate to a series of transactions entered into 2007, that is, before TFML became Responsible

Entity of the Trust. On 10 August 2012 Judgment was entered against TFML for approximately $17.8 million

including Judgment court interest (to the date of Judgment) but excluding costs. Further information on the

Judgment can be found in the MPS Litigation section of the Directors’ Report. TFML’s appeal of this decision

was heard in early April 2013 and the appeal decision is expected soon. A provision for Judgment amount of

$19.7 million (including a plaintiff’s cost estimate and Judgment court interest of $1.9 million), is carried in

these financial statements.

16.

Distributions

17.

Earnings / (Loss) Per Unit

Basic and diluted earnings/(loss) per unit

Calculated as follows:

Profit /(loss) for the year

Weighted average number of units for earnings per unit

$4,836,000

207,524,039

($15,526,000)

207,524,039

18.

Auditors’ Remuneration

Remuneration of ESV (the auditor of the Trust) for:

- auditing or reviewing the financial statements for the Trust

- taxation and compliance services

Total auditors’ remuneration

2013

$0.02

2013

$’000

2012

($0.07)

2012

$’000

Future minimum rental receivable under non-cancellable operating leases as at 30 June are as follows:

Lease commitments receivable:
- receivable within 1 year
- receivable within 2 – 5 years
- receivable more than 5 years
Total lease commitments receivable

2013
$’000

7,816
21,847
24,776
54,439

2012
$’000

7,788
22,501
30,080
60,369

There are no operating lease commitments payable or any other capital commitments as at 30 June 2013
(2012: Nil).

20.

Reconciliation of Operating Cash Flows

Profit/(loss) for the year
Non-cash flows in profit:
- Unrealised gain on revaluation
- Depreciation
- Straight-line rental income
- Loss on sale of financial assets
- Litigation expenses
Changes in assets and liabilities:
Increase in trade and other receivables
Increase in trade and other payables
Increase /(decrease) in other liabilities
Net cash flows from operating activities

2013
$’000
4,836

(3,611)
2,403
(503)
103
700

(188)
246
(13)
3,973

2012
$’000
(15,526)

(2,597)
2,759
(539)
9
19,000

(295)
188
32
3,031

There were no distributions paid or declared for the year ended 30 June 2013 (2012: $nil).

21.

Contingent Assets and Contingent Liabilities

There are no other contingent liabilities or contingent assets as at 30 June 2013.

22.

Subsequent Events

In August 2013, $1 million of borrowings was repaid to the Trust’s lender (refer to Note 13).

Other than the matters referred to in these financial statements, to the best knowledge of the Directors, there
have been no other matters or circumstances that have arisen since the end of the year that have materially
affected or may materially affect the Trust’s operations in future financial years, the results of those
operations or the Trust’s state of affairs in future financial years.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

24.

Related Party Transactions (continued)

Income

Other income

Expenses

reimbursements

Architectural fees

Remuneration paid to Responsible Entity / Investment Manager

Property management, leasing fees, accounting fees, and expense

Outstanding Balances with Related Parties

Receivables from related parties - current

Payables to related parties - current

25.

Parent Entity Disclosures

ended 30 June.

Profit/(loss) for the year

Other comprehensive loss

Total comprehensive income/(loss) for the year

Financial position:

Current assets

Non-current assets

Total assets

Current liabilities

Total liabilities

2013

$’000

2012

$’000

1,114

1,297

794

319

409

297

790

497

413

2012

$’000

(15,526)

(602)

(16,128)

2,022

120,555

122,577

(75,681)

46,896

2013

$’000

4,836

(437)

4,399

875

120,510

121,385

(70,090)

51,295

The following summarises the financial information of the Trust’s parent entity, P-REIT, as at and for the year

Other than as disclosed in Note 21, the parent entity had no contingencies at 30 June 2013 (2012: Nil).

The parent entity has not entered into any capital commitments as at 30 June 2013 (2012: Nil).

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

23.

Controlled Entities

Name

Country of incorporation

Percentage Owned

Parent entity:
P-REIT
Controlled entity of parent entity:
Yandina Sub-trust

Australia

2013

100%

2012

100%

24.

Related Party Transactions

(a) Related Entities

The Trust is managed by TFML Limited as Responsible Entity and investment manager. BlackWall
Property Funds Limited is the ultimate parent of TFML Limited. The Directors of TFML Limited are key
management personnel of the Trust. The names of persons holding position of Directors during the year
until the signing of this report unless otherwise stated are Richard Hill , Joseph (Seph) Glew, Stuart Brown
and Robin Tedder.

(b) Interests in Related Parties

As at year end the Trust owned units in the following funds. The funds and the Trust have a common
Responsible Entity or Investment Manager (TFML Limited) or are related entities of TFML.

Fund

BlackWall Storage Fund
BlackWall Pub Group
BlackWall Penrith Fund No. 2
BQF
Pelorus Private Equity
WRV Unit Trust

Unitholdings (units)

2013
-
26,640,640
1,050,000
331,029
6,289,511
175,000

2012
-
22,923,810
1,050,000
-
-
175,000
34,486,180 24,148,810

Distribution
Received ($’000)
2012
2013
26
-
-
-
85
92
-
-
-
-
10
1
121
93

The Trust also holds Bakehouse Bonds with a fair value of $31.09 million (2012: $30.35 million) which

Net assets attributable to unitholders

earn interest of $1.65 million (2012: $1.65 million). Further details refer to Note 9.

In accordance with the terms of the Trust Constitution and the product disclosure statement, the
Responsible Entity and Investment Manager is entitled to receive a management fee based on 0.65% p.a.
of the value of the Trust’s assets and the recovery of other administrative costs.

All transactions with related parties were made on normal commercial terms and conditions and at
market rates, and were approved by the Board where applicable. Related party transactions that occurred
during the year are as follows:

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

23.

Controlled Entities

Name

Parent entity:

P-REIT

Controlled entity of parent entity:

Yandina Sub-trust

Australia

2013

100%

2012

100%

24.

Related Party Transactions

(a) Related Entities

and Robin Tedder.

(b) Interests in Related Parties

The Trust is managed by TFML Limited as Responsible Entity and investment manager. BlackWall

Property Funds Limited is the ultimate parent of TFML Limited. The Directors of TFML Limited are key

management personnel of the Trust. The names of persons holding position of Directors during the year

until the signing of this report unless otherwise stated are Richard Hill , Joseph (Seph) Glew, Stuart Brown

As at year end the Trust owned units in the following funds. The funds and the Trust have a common

Responsible Entity or Investment Manager (TFML Limited) or are related entities of TFML.

Fund

Unitholdings (units)

BlackWall Storage Fund

BlackWall Pub Group

BlackWall Penrith Fund No. 2

BQF

Pelorus Private Equity

WRV Unit Trust

Distribution

Received ($’000)

2012

2013

1,050,000

331,029

6,289,511

175,000

26,640,640

22,923,810

1,050,000

34,486,180 24,148,810

175,000

2012

121

The Trust also holds Bakehouse Bonds with a fair value of $31.09 million (2012: $30.35 million) which

earn interest of $1.65 million (2012: $1.65 million). Further details refer to Note 9.

In accordance with the terms of the Trust Constitution and the product disclosure statement, the

Responsible Entity and Investment Manager is entitled to receive a management fee based on 0.65% p.a.

of the value of the Trust’s assets and the recovery of other administrative costs.

All transactions with related parties were made on normal commercial terms and conditions and at

market rates, and were approved by the Board where applicable. Related party transactions that occurred

during the year are as follows:

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

24.

Related Party Transactions (continued)

Country of incorporation

Percentage Owned

Income
Other income
Expenses
Remuneration paid to Responsible Entity / Investment Manager
Property management, leasing fees, accounting fees, and expense
reimbursements
Architectural fees

Outstanding Balances with Related Parties
Receivables from related parties - current
Payables to related parties - current

25.

Parent Entity Disclosures

2013
$’000

794

319
1
1,114

409
48

2012
$’000

297

790

497
10
1,297

413
81

The following summarises the financial information of the Trust’s parent entity, P-REIT, as at and for the year
ended 30 June.

Profit/(loss) for the year
Other comprehensive loss
Total comprehensive income/(loss) for the year

Financial position:
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets attributable to unitholders

2013
$’000
4,836
(437)
4,399

875
120,510
121,385
(70,090)
(70,090)
51,295

2012
$’000
(15,526)
(602)
(16,128)

2,022
120,555
122,577
(75,681)
(75,681)
46,896

Other than as disclosed in Note 21, the parent entity had no contingencies at 30 June 2013 (2012: Nil).

The parent entity has not entered into any capital commitments as at 30 June 2013 (2012: Nil).

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

26.

Directors and Key Management Personnel

27. Financial Risk Management (continued)

(a) Directors and key management personnel relevant interests

Key management personnel include all Directors (refer to the Directors’ Report) and Chief Financial
Officer of the Responsible Entity.

The Directors and key management personnel have relevant interests in units of the Trust as set out in
the following table:

Joseph (Seph) Glew
Stuart Brown
Robin Tedder
Richard Hill
Tim Brown
Total shareholding

Balance at 30 June
2012
No. ’000
52,140
854
4,482
-
20
57,496

Net change *
No. ’000
(2,895)
22
10,237
-
-
7,364

Balance at 30 June
2013
No. ’000
49,245
876
14,719
-
20
64,860

* Net change refers to changes in relevant interests in units during the financial year.

(b) Key management personnel compensation

No salary, cash bonus or monetary benefit was paid out of the Trust’s assets to any key management
personnel during the year (2012: Nil).

27.

Financial Risk Management

(a) Financial risk management

The main risks the Trust are exposed to through its financial instruments are market risk (including
interest rate risk and price risk), credit risk and liquidity risk. The Trust's principal financial instruments
are financial assets and borrowings (including interest rate swaps). Additionally, the Trust has various
other financial instruments such as cash, trade debtors and trade creditors, which arise directly from its
operations.

This note presents information about the Trust's exposure to each of the above risks, their objectives,
policies and processes for measuring and managing risk, and the management of capital.

The Board of Directors of the Responsible Entity have overall responsibility for the establishment and
oversight of the risk management framework. They monitor the Trust’s risk exposure by regularly
reviewing finance and property markets.

Major financial instruments held by Trust which are subject to financial risk analysis are as follows:

Financial assets
Financial assets at FVTPL (*)
Available-for-sale financial assets (*)
Financial liabilities
Borrowings

2013
$’000

38,323
-

49,500

2012
$’000

917
37,451

55,580

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

(a) Financial risk management (continued)

* As a result of early adoption of AASB 9 from 1 January 2013, all available-for-sale financial assets have been

reclassified to financial assets at fair value through profit or loss. See Note 1 change of accounting policies for

details.

(b) Market risk

(i)

Interest rate risk

The Trust has exposure to market risk for changes in variable interest rates on borrowings. This

risk is managed by the Trust by entering into interest rate swap contracts with financial institutions

to protect part of the borrowings ($29 million) as detailed in Note 14. The major available-for-sale

financial asset - the Trust’s interest in Bakehouse Bonds is subject to a fixed coupon rate of 5.5%

p.a., and as a result is not directly exposed to the interest rate risk. However, the Bonds’ value is

linked to inflation and therefore affected by the inflation rate.

The Trust’s exposure to interest rate risk, which is the risk that a financial instrument’s value will

fluctuate as a result of changes in market interest rates, and the effective weighted average interest

rates on borrowings is as follows.

30 June 2013

Weighted average

effective interest

30 June 2012

Weighted average

effective interest

rate

6.56

Balance

$’000

(49,500)

rate

7.76

Balance

$’000

(55,580)

Borrowings

The interest rate swaps of $29 million were hedged at an average rate of 4.92% (2012: 4.92%) and

the terms are:

•

$10 million swapped at 5.22% to 9 June 2014.

$9 million swapped at 4.22% to 10 November 2014.

$10 million swapped at 5.26% to 1 June 2014.

Sensitivity analysis

At 30 June, if interest rates on borrowings had moved (after hedging effects), as illustrated in the

table below, with all other variables held constant, profit would have been affected as follows:

Movement in interest rates

+ 1.0%

- 0.5%

Net profit

Higher / (Lower)

2013

$’000

(205)

103

2012

$’000

(552)

276

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

26.

Directors and Key Management Personnel

27. Financial Risk Management (continued)

(a) Directors and key management personnel relevant interests

Key management personnel include all Directors (refer to the Directors’ Report) and Chief Financial

Officer of the Responsible Entity.

The Directors and key management personnel have relevant interests in units of the Trust as set out in

(a) Financial risk management (continued)

* As a result of early adoption of AASB 9 from 1 January 2013, all available-for-sale financial assets have been
reclassified to financial assets at fair value through profit or loss. See Note 1 change of accounting policies for
details.

Balance at 30 June

(b) Market risk

(i)

Interest rate risk

The Trust has exposure to market risk for changes in variable interest rates on borrowings. This
risk is managed by the Trust by entering into interest rate swap contracts with financial institutions
to protect part of the borrowings ($29 million) as detailed in Note 14. The major available-for-sale
financial asset - the Trust’s interest in Bakehouse Bonds is subject to a fixed coupon rate of 5.5%
p.a., and as a result is not directly exposed to the interest rate risk. However, the Bonds’ value is
linked to inflation and therefore affected by the inflation rate.

The Trust’s exposure to interest rate risk, which is the risk that a financial instrument’s value will
fluctuate as a result of changes in market interest rates, and the effective weighted average interest
rates on borrowings is as follows.

30 June 2013

30 June 2012

Weighted average
effective interest
rate
%
6.56

Weighted average
effective interest
rate
%
7.76

Balance
$’000
(49,500)

Balance
$’000
(55,580)

Borrowings

The interest rate swaps of $29 million were hedged at an average rate of 4.92% (2012: 4.92%) and
the terms are:
•
•
•

$10 million swapped at 5.22% to 9 June 2014.
$9 million swapped at 4.22% to 10 November 2014.
$10 million swapped at 5.26% to 1 June 2014.

Sensitivity analysis

At 30 June, if interest rates on borrowings had moved (after hedging effects), as illustrated in the
table below, with all other variables held constant, profit would have been affected as follows:

Movement in interest rates
+ 1.0%
- 0.5%

Net profit
Higher / (Lower)

2013
$’000

(205)
103

2012
$’000

(552)
276

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

the following table:

Joseph (Seph) Glew

Stuart Brown

Robin Tedder

Richard Hill

Tim Brown

Total shareholding

2012

No. ’000

52,140

854

4,482

57,496

Net change *

No. ’000

(2,895)

10,237

7,364

2013

No. ’000

49,245

876

14,719

64,860

* Net change refers to changes in relevant interests in units during the financial year.

(b) Key management personnel compensation

No salary, cash bonus or monetary benefit was paid out of the Trust’s assets to any key management

personnel during the year (2012: Nil).

27.

Financial Risk Management

(a) Financial risk management

The main risks the Trust are exposed to through its financial instruments are market risk (including

interest rate risk and price risk), credit risk and liquidity risk. The Trust's principal financial instruments

are financial assets and borrowings (including interest rate swaps). Additionally, the Trust has various

other financial instruments such as cash, trade debtors and trade creditors, which arise directly from its

operations.

This note presents information about the Trust's exposure to each of the above risks, their objectives,

policies and processes for measuring and managing risk, and the management of capital.

The Board of Directors of the Responsible Entity have overall responsibility for the establishment and

oversight of the risk management framework. They monitor the Trust’s risk exposure by regularly

reviewing finance and property markets.

Major financial instruments held by Trust which are subject to financial risk analysis are as follows:

Financial assets

Financial assets at FVTPL (*)

Available-for-sale financial assets (*)

Financial liabilities

Borrowings

2013

$’000

38,323

49,500

2012

$’000

917

37,451

55,580

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

27. Financial Risk Management (continued)

(ii) Price risk

(d) Liquidity risk (continued)

The Trust is not exposed to any major price risk except for a material change in the property
valuation of the Bakehouse Quarter, which could potentially lead to a decrease in the Bakehouse
Bonds’ value on their maturity.

The Trust is not exposed to any major credit risk except for the Bakehouse Bonds. The credit risk for the
Bakehouse Bonds is of the same nature as the price risk described above.

(d) Liquidity risk

The Trust is exposed to the following major liquidity risks:
1. Borrowings that are due for renewal within 12 months, however, management is confident that the
borrowings will be renewed. In addition, the Trust repaid $1 million in August 2013 to reduce the
borrowings to $48.5 million. Refer to Note 13 for further details.

2. Ability to realise assets – Refer to going concern paragraph under Note 1 as to management’s view on

the Trust’s ability to realise assets.

At the end of the reporting period, the Trust held the following financial arrangements:

At 30 June 2013
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at FVTPL

Financial liabilities
Trade and other payables
Other liabilities
Interest rate swaps
Borrowings
Provision for litigation costs

Maturing
within 1 year
$’000

Maturing
1 – 5
years
$’000

Maturing
over 5 years
$’000

39
612
-
651

801
60
693
49,500
19,700
70,754

-
-
7,234
7,234

-
-
31,089
31,089

-
-
-
-
-
-

Total
$’000

39
612
38,323
38,974

801
60
693
49,500
19,700
70,754

At 30 June 2012

Financial assets

Cash and cash equivalents

Trade and other receivables

Available-for-sale financial assets

Financial assets at FVTPL

Financial liabilities

Trade and other payables

Other liabilities

Interest rate swaps

Borrowings

Provision for litigation costs

(e) Fair value measurements

Maturing

within 1 year

Maturing

1 – 5

years

$’000

Maturing

over 5 years

$’000

7,098

917

8,015

30,353

$’000

1,306

455

1,761

525

102

1,069

55,580

19,000

76,276

Total

$’000

1,306

455

37,451

917

40,129

525

102

1,069

55,580

19,000

76,276

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the

following fair value measurement hierarchy:

(cid:120) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1),

Inputs other than quoted prices included within Level 1 that are observable for the asset, either

directly (as prices) or indirectly (derived from prices) (Level 2), and

Inputs for the asset that are not based on observable market data (unobservable inputs) (Level 3).

(cid:120)

The following table presents the Trust’s financial assets and liabilities measured at fair value as at 30

June. Refer to Note 2 for further details of assumptions used and how fair values are measured.

Level 1

$’000

Level 2

$’000

Level 3

$’000

Total balance

$’000

At 30 June 2013

Financial assets at FVTPL

- Unquoted equities

- Debt instruments

Interest rate swaps

(693)

7,234

31,089

38,323

7,234

31,089

38,323

(693)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

27. Financial Risk Management (continued)

(ii) Price risk

(d) Liquidity risk (continued)

At 30 June 2012
Financial assets
Cash and cash equivalents
Trade and other receivables
Available-for-sale financial assets
Financial assets at FVTPL

Financial liabilities
Trade and other payables
Other liabilities
Interest rate swaps
Borrowings
Provision for litigation costs

Maturing
within 1 year
$’000

Maturing
1 – 5
years
$’000

Maturing
over 5 years
$’000

1,306
455
-
-
1,761

525
102
1,069
55,580
19,000
76,276

-
-
7,098
917
8,015

-
-
-
-
-
-

-
-
30,353
-
30,353

-
-
-
-
-
-

Total
$’000

1,306
455
37,451
917
40,129

525
102
1,069
55,580
19,000
76,276

(e) Fair value measurements

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:

(cid:120) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1),
(cid:120)

Inputs other than quoted prices included within Level 1 that are observable for the asset, either
directly (as prices) or indirectly (derived from prices) (Level 2), and
Inputs for the asset that are not based on observable market data (unobservable inputs) (Level 3).

(cid:120)

The Trust is not exposed to any major price risk except for a material change in the property

valuation of the Bakehouse Quarter, which could potentially lead to a decrease in the Bakehouse

Bonds’ value on their maturity.

(d) Liquidity risk

The Trust is not exposed to any major credit risk except for the Bakehouse Bonds. The credit risk for the

Bakehouse Bonds is of the same nature as the price risk described above.

The Trust is exposed to the following major liquidity risks:

1. Borrowings that are due for renewal within 12 months, however, management is confident that the

borrowings will be renewed. In addition, the Trust repaid $1 million in August 2013 to reduce the

borrowings to $48.5 million. Refer to Note 13 for further details.

2. Ability to realise assets – Refer to going concern paragraph under Note 1 as to management’s view on

the Trust’s ability to realise assets.

At the end of the reporting period, the Trust held the following financial arrangements:

At 30 June 2013

Financial assets

Cash and cash equivalents

Trade and other receivables

Financial assets at FVTPL

Financial liabilities

Trade and other payables

Other liabilities

Interest rate swaps

Borrowings

Provision for litigation costs

Maturing

within 1 year

$’000

1 – 5

years

$’000

Maturing

over 5 years

$’000

7,234

31,089

612

651

801

693

49,500

19,700

70,754

Total

$’000

612

38,323

38,974

801

693

49,500

19,700

70,754

The following table presents the Trust’s financial assets and liabilities measured at fair value as at 30
June. Refer to Note 2 for further details of assumptions used and how fair values are measured.
Level 1
$’000

At 30 June 2013
Financial assets at FVTPL
- Unquoted equities
- Debt instruments

Interest rate swaps

-
-
-
-

-
-
-
(693)

7,234
31,089
38,323
-

7,234
31,089
38,323
(693)

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

Total balance
$’000

Level 2
$’000

Level 3
$’000

P-REIT

Managed by

Directors’ Declaration

Stuart Brown

Director

Sydney, 20 August 2013

In the opinion of the Directors of TFML Limited, the Responsible Entity of P-REIT:

(a)

the financial statements and notes set out on pages 23 to 50 are in accordance with the Corporations

Act 2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory

professional reporting requirements, and

(ii) giving a true and fair view of the Trust’s financial position as at 30 June 2013 and of its

performance for the financial year ended on that date, and

(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.

Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as

issued by the International Accounting Standards Board.

The Directors of the Responsible Entity have been given the declarations by the Chief Executive Officer and

Chief Financial Officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Board of Directors of the Responsible Entity.

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

27. Financial Risk Management (continued)

(e) Fair value measurements (continued)

At 30 June 2012
Available-for-sale financial assets
- Unquoted equities
- Debt instruments
Financial assets at FVTPL

Interest rate swaps

Level 1
$’000

Level 2
$’000

Level 3
$’000

Total balance
$’000

-
-
-
-
-

-
-
-
-
(1,069)

7,098
30,353
917
38,368
-

7,098
30,353
917
38,368
(1,069)

The following table is a reconciliation of the movements in financial assets classified as Level 3 for the
year ended 30 June:

At 30 June 2013

Balance at the beginning of the year
Purchases
Disposals/redemptions
Fair value movement
Reclassification
Balance at the end of the year

Financial assets
at FVTPL
$’000
917
185
(774)
1,362
36,633
38,323

Available-for-
sale financial
assets
$’000
37,451
1,473
(1,854)
(437)
(36,633)
-

Level 3 Total
$’000
38,368
1,658
(2,628)
925
-
38,323

* As a result of early adoption of AASB 9 from 1 January 2013, all available-for-sale financial assets have
been reclassified to financial assets at fair value through profit or loss. See Note 1 change of accounting
policies for details.

At 30 June 2012

Balance at the beginning of the year
Purchases
Disposals/redemptions
Fair value movement
Balance at the end of the year

Financial assets
at FVTPL
$’000
2,522
-
-
(1,605)
917

Available-for-
sale financial
assets
$’000
38,309
149
(405)
(602)
37,451

Level 3 Total
$’000
40,831
149
(405)
(2,207)
38,368

The fair value of available-for-sale financial assets and financial assets at FVTPL is determined by
reference to the net assets of the underlying entities. All these instruments are included in Level 3.

There were no transfers between Level 1, 2 and 3 financial instruments during the year. For all other
financial assets and liabilities carrying value is an approximation of fair value.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

P-REIT

Managed by

Directors’ Declaration

In the opinion of the Directors of TFML Limited, the Responsible Entity of P-REIT:

(a)

the financial statements and notes set out on pages 23 to 50 are in accordance with the Corporations
Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory

professional reporting requirements, and

(ii) giving a true and fair view of the Trust’s financial position as at 30 June 2013 and of its

performance for the financial year ended on that date, and

(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.

Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.

The Directors of the Responsible Entity have been given the declarations by the Chief Executive Officer and
Chief Financial Officer required by section 295A of the Corporations Act 2001.

The following table is a reconciliation of the movements in financial assets classified as Level 3 for the

This declaration is made in accordance with a resolution of the Board of Directors of the Responsible Entity.

Stuart Brown
Director
Sydney, 20 August 2013

P-REIT

ARSN 109 684 773

Notes to the Consolidated Annual Financial Report

For the Year Ended 30 June 2013

27. Financial Risk Management (continued)

(e) Fair value measurements (continued)

At 30 June 2012

Available-for-sale financial assets

- Unquoted equities

- Debt instruments

Financial assets at FVTPL

Interest rate swaps

year ended 30 June:

At 30 June 2013

Balance at the beginning of the year

Purchases

Disposals/redemptions

Fair value movement

Reclassification

Balance at the end of the year

policies for details.

At 30 June 2012

Balance at the beginning of the year

Purchases

Disposals/redemptions

Fair value movement

Balance at the end of the year

7,098

30,353

917

38,368

(1,069)

$’000

38,368

1,658

(2,628)

925

38,323

Level 1

$’000

Level 2

$’000

Level 3

$’000

Total balance

$’000

(1,069)

7,098

30,353

917

38,368

Financial assets

at FVTPL

Available-for-

sale financial

Level 3 Total

$’000

917

185

(774)

1,362

36,633

38,323

assets

$’000

37,451

1,473

(1,854)

(437)

(36,633)

Financial assets

Available-for-

sale financial

at FVTPL

$’000

2,522

(1,605)

917

assets

$’000

38,309

149

(405)

(602)

37,451

Level 3 Total

$’000

40,831

149

(405)

(2,207)

38,368

* As a result of early adoption of AASB 9 from 1 January 2013, all available-for-sale financial assets have

been reclassified to financial assets at fair value through profit or loss. See Note 1 change of accounting

The fair value of available-for-sale financial assets and financial assets at FVTPL is determined by

reference to the net assets of the underlying entities. All these instruments are included in Level 3.

There were no transfers between Level 1, 2 and 3 financial instruments during the year. For all other

financial assets and liabilities carrying value is an approximation of fair value.

P-REIT - Consolidated Annual Financial Report For The Year Ended 30 June 2013

Consolidated Annual Financial ReportYear Ended 30 June 2013Managed By:Level 1, 50 Yeo Street Neutral Bay, NSW 2089Responsible Entity: TFML LimitedABN 39 079 608 825