WP ANNUAL DIRECT REPORT PROPERTY 2001 TRUST (ARSN 091 direct )

Transcription

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2 Performance in Brief 1 2. Investment Report 2 3. Property Management Report 3 4. Management 4 5. Corporate Governance Statement 5 6. Directors Report 7 7. Financial Report Independent Audit Report Distribution Performance Directory 29 Macquarie Direct Property Management Limited ABN is 100% owned by Macquarie Bank Limited. No member of the Macquarie Bank Group guarantees the capital value of the units or any particular rate of return. This is not an offer or invitation for subscription or purchase of or a recommendation of securities. Macquarie Direct Property Management Limited, as Manager and Responsible Entity of the WP Direct Property Trust, is entitled to fees for so acting. Macquarie Bank Limited and its related bodies corporate, together with its officers and directors, may hold units in the WP Direct Property Trust.

3 2-4 4 ) +-1 *41- The Directors, management and staff of Macquarie Direct Property Management Limited (the Manager) are pleased to present the 2001 Annual Report for WP Direct Property Trust (WP Direct). Summary of Distributions For the Year ended 30 June 2001 WP Direct (per Unit) Distribution to Unitholders being: cents Tax Free Distribution % Tax Deferred Distribution % Taxable Distribution 34.29% Net Asset Backing per Unit $0.96 Number of Units Issued 15,350,000 3 Number of Unitholders Tax free income is income sheltered by building allowances under Division 43 of the Income Tax Assessment Act 1997 and does not have to be reported for income tax purposes. However, tax free income does reduce the size of any capital loss made on the investment 2 Tax deferred income is income sheltered by depreciation allowances under Division 42 of the Income Tax Assessment Act 1997 and does not have to be reported for income tax purposes. Tax deferred income does, however, reduce the cost base of the investment and hence is brought into the calculation of capital gains tax upon disposal of the investment. 3 Total number of units allotted prior to signing accounts. 1

4 Income Distribution The income distributed to Unitholders was 4.1% above prospectus forecasts. The Manager distributed $1,462,088 which equated to cents per unit, as against the prospectus forecast of 9.15 cents. The distribution was 65.71% tax sheltered as disclosed in the tax statements sent to Unitholders in August. Net Assets The Net Asset Backing per WP Direct unit as at 30 June 2001 was $0.96. Distribution Outlook Distributions to date have been in advance of prospectus forecasts and the Manager expects this to continue over the next 12 months. The Manager expects to exceed the prospectus forecast of 9.38 cents per unit for the 2001/2002 year. Distribution Timetable Distributions for WP Direct will be paid approximately five weeks after the end of each normal quarter following completion of the end of quarter accounting and where necessary completion of an audit or audit review. A table of key dates is shown below giving the approximate distribution dates for the coming year. Quarter Ending Books Close Distribution Payment Date September September October 2001 December December February 2002 March March April 2002 June June August

5 ! ; ) )/ The Property 24 Kokera Street, Wallsend, New South Wales Key Property Details Anchor Tenants: Lease Terms: Coles Myer Limited Aldi Foods Limited Coles - 24 years to October 2012 plus 2 x 6 year options Aldi - 10 years to June 2010 plus 1 x 10 year and 2 x 5 year options Property Description Wallsend Plaza Shopping Centre is a neighbourhood shopping centre located approximately 10 kilometres from the City of Newcastle. Tenants include two supermarkets and approximately 40 specialty shops. The property includes additional land for expansion plus a 585 vehicle car park. Leasing In August last year agreement was reached with Franklins to vacate their premises and Aldi, the new German supermarket operator, took occupation in September and commenced paying rent. The official opening of the new Aldi premises occurred in April The customer count for the period April 2001 to June 2001 was up 15% on the corresponding period last year. During the year to 30 June 2001, there were over 2.7 million customer visitations to the centre. In addition, the Coles supermarket was nominated as the cheapest supermarket on a national basis, by Choice Magazine (produced by the Australian Consumers Association). This survey was based on the total cost of a basket of items Australia wide. New leases were signed in the Centre during the period, along with lease renewals, although some shops remain vacant. The overall vacancy level for the period has reduced to 7.7% of the total area, and the Manager is continuing to work closely with the Managing Agent to lease these remaining shops. 3

6 " ) )/- - 6 Directors of the Manager The Directors of Macquarie Direct Property Management Limited comprise: Stephen Girdis Chairman Stephen is an Executive Director of Macquarie Bank Limited and heads up Macquarie s Property division. Stephen is a director or alternate director of all the management companies of Macquarie s listed and direct syndication property funds management businesses. Stephen has 18 years experience in chartered accounting, property finance, funds management and investment banking and is an Associate of both the Institute of Chartered Accountants in Australia and the Securities Institute of Australia. James Rae Non-executive Director James has over 25 years experience in the accounting profession, the last 18 years as principal of his own accountancy practice. James has been involved with the property and finance industry during this time and is an Associate of the Institute of Chartered Accountants in Australia. James is a director of a number of private companies and a non-executive director of Capital & Counties (Australia) Holdings Limited and its group companies. Ian Pratt Non-executive Director Ian has over 30 years experience in the accounting profession and was until recently a principal at Stockford Limited. Stockford is a listed company and Australia s sixth biggest accounting and financial advisory group. Ian is an Associate of the Institute of Chartered Accountants in Australia and also acts as director of a number of private companies. Richard Cutler Executive Director and Chief Executive Officer Richard is a Division Director of Macquarie Bank Limited. He has over 28 years experience in the property industry, during which time he has devised and implemented asset management strategies for large corporations and has been responsible for the packaging and marketing of numerous major property developments. Richard is a registered valuer and has held a number of directorships with major property related companies. His areas of expertise include asset management, corporate advisory, property acquisitions and marketing. The Manager s Executive Team Ian Williams General Manager Ian is an Associate Director of Macquarie Bank Limited. He has 16 years experience in finance and investment banking. He was previously General Manager of the Hills Motorway Trust and Operations Manager for the listed property trusts managed by Macquarie s Property Investment Management division. He is a director of the trustee of the Macquarie Bank Staff Superannuation Fund and is a member of the Australian Institute of Company Directors and the Australian Human Resources Institute. Ian is responsible for the financial administration of Macquarie Direct Property s trusts. Merryn Dodd Property Trust Analyst Merryn has been with Macquarie Bank Limited for over three years and has experience in mortgage lending, operations management, and commercial and business banking. Merryn assists with the dayto-day operations of the Manager and the administration of the unlisted property trusts. 4

7 # )6-/ 8-4 ) +- 56) Services that may be Provided to the Trust by Macquarie Bank Group on a Commercial Basis In accordance with the terms of the Trust s Constitution, the Responsible Entity has the right to seek professional advice at the Trust s expense. Macquarie Bank Group employs over 4,500 staff and as part of its existing business is able to offer various services in areas that the Trust will be seeking professional support. These services will be provided on an arms length basis at normal commercial rates. Examples of areas in which Macquarie Bank Group may provide such services are property due diligence, property management services, property agency services including facility management and leasing services, project management services, accounting services, print design, corporate advisory and development advisory services. In the course of normal activity, Macquarie Bank Group may also provide interest rate management and cash management products to the Trust. Conflict Resolution The arrangements set out in the previous section give rise to the potential for conflicts of interest between the interests of the Trust, the Macquarie Bank Group and the Manager of the Trust. No transactions will be entered into by the Responsible Entity with a member of the Macquarie Bank Group or where the Macquarie Bank Group has an interest (other than its role as Responsible Entity) unless that transaction has been approved by a majority of the independent Directors. Macquarie Bank Group Directors do not vote on these resolutions. In this context, transactions is given a very wide meaning and includes, inter alia, all approvals, consents, waivers and agreements required. Any decision to make a claim against any member of the Macquarie Bank Group is to be determined by the independent Directors only. 5

8 In addition to these mechanisms, the Directors of the Responsible Entity are under a fiduciary duty to the Trust to act in the Trust s best interests in relation to decisions affecting the Trust when they are voting as a member of the Responsible Entity s board. The Directors and executive staff of the Responsible Entity are expected to act with integrity and honesty at all times. The Executive Directors and the executive staff of the Responsible Entity are employees of the Macquarie Bank Group and have adopted the code of ethics prescribed by the Bank. This code requires the maintenance of the highest standards of ethical conduct. Unitholder Reporting The Responsible Entity aims to ensure that the Unitholders are informed of all major developments affecting the Trust s state of affairs. Information is communicated to Unitholders as follows: annual Financial Statements; proposed major changes in the Trust which may impact on Unitholders rights are submitted to a vote of Unitholders; and Unitholder Newsletters. 6

9 $, \ The Directors of Macquarie Direct Property Management Limited (Manager), the responsible entity of WP Direct Property Trust (WP Direct), present their report together with the financial report of WP Direct for the financial year ended 30 June Directors The following persons held office as Directors of Macquarie Direct Property Management Limited during the financial year and up to the date of this report: Stephen Girdis Ian Pratt James Rae William Moss (resigned 14 March 2001) Richard Cutler (appointed 14 March 2001). 2. Principal Activities of the Trust The principal activity of WP Direct during the financial year was property investment. WP Direct was established on 21 February 2000, registered on 3 March 2000 and commenced operations on 9 June 2000 with the acquisition of a supermarket based retail property located at Wallsend, Newcastle, NSW. There were no significant changes in the nature of the Trust s activities during the financial year. 3. Distributions The distribution of WP Direct s income for the financial year ended 30 June 2001 was cents per unit. Interim distributions were made of , and cents per unit paid 6 November 2000, 5 February 2001 and 30 April A final distribution for the financial year ended 30 June 2001 of cents per unit was paid on 10 August Review of Operations The performance of WP Direct (Trust), as represented by the results of its operations, was as follows: 1/7/00-30/6/01 21/2/00-30/6/00 Property Rental Income 3, Net Operating Income/(Loss) from Ordinary Activities 1,460 (245) 5. Value of Assets Value of Trust Assets 31,287 32,805 The value of WP Direct s assets is derived using the basis set out in Note 1 to the financial statements. 7

10 DIRECTORS REPORT (CONT.) 6. Interests in the Trust The movement in units on issue in WP Direct during the year is set out below: 1/7/00-30/6/01 21/2/00-30/6/00 Units Issued during the Year 2,186,790 13,163,210 Units on Issue 15,350,000 13,163, Changes in the State of Affairs In the opinion of the Directors, there were no significant changes in the state of affairs of WP Direct that occurred during the financial year under review. 8. Matters Subsequent to the End of the Period Since the end of the financial year, the Directors are not aware of any other matter or circumstance not otherwise dealt with in the report or financial statements that has significantly or may significantly affect the operations of WP Direct, the results of those operations or the state of affairs of WP Direct in financial years subsequent to the financial year ended 30 June Likely Developments and Expected Results of Operations At the time of making this report, it is anticipated that the results of WP Direct will continue to be in accordance with prospectus forecasts. 10. Indemnification and Insurance of Officers and Auditors No insurance premiums are paid for out of the assets of WP Direct in regards to insurance cover provided to either the officers of Macquarie Direct Property Management Limited or the auditors of the Trust. So long as the officers of Macquarie Direct Property Management Limited act in accordance with the Trust Constitution and the law, the officers remain indemnified out of the assets of WP Direct against losses incurred while acting on behalf of WP Direct. The auditors of WP Direct are in no way indemnified out of the assets of the Trust. 11. Fees Paid to and Interests Held in the Trust by the Manager or its Associates Fees paid or payable to the Manager and its associates by WP Direct during the financial year are disclosed in Note 20 to the financial statements. The interests in WP Direct held by the Manager or its associates as at the end of the financial year are disclosed in Note 20 to the financial statements. 12. Environmental Regulations The operations of WP Direct are not subject to any particular environmental regulations under a Commonwealth, State or Territory law. 8

11 DIRECTORS REPORT (CONT.) 13. Rounding of Amounts to the Nearest Thousand Dollars WP Direct is a registered scheme of the kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission relating to the rounding off of amounts in the directors report and financial report. Amounts in the directors report and financial report have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated. This report is made in accordance with a resolution of the Board of Directors. Stephen Girdis Chairman 20 September

12 % 1 ) +1) STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2001 Income Property Income Note 1/7/00-30/6/01 21/2/00-30/6/00 Property Rental Income 3, Property Expenses 3 (473) (22) Net Property Income 2, Other Income Interest Income Total Income from Ordinary Activities 3, Expenditure Manager s Fee Borrowing Costs 1, Trust Establishment Costs - 2 Auditor s Remuneration 5(a) 9 - Other Expenses 5(b) 65 7 Total Expenditure from Ordinary Activities 1, Net Operating Income/(Loss) from Ordinary Activities 6 1,460 (245) Investment Revaluations credited directly to reserves - - Increase in Equity (excluding transactions with Unitholders) 1,460 (245) Basic Earnings per Unit (cents) (1.86) Diluted Earnings per Unit (cents) (1.86) Refer to Notes 6 and 7 for distribution details. The above Statement of Financial Performance should be read in conjunction with the accompanying notes. 10

13 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2001 Note Current Assets Cash ,509 Receivables Other Total Current Assets 991 2,750 Non-Current Assets Investments 10 30,296 30,055 Total Non-Current Assets 30,296 30,055 Total Assets 31,287 32,805 Current Liabilities Payables ,939 Provisions Other Total Current Liabilities 515 2,114 Non-Current Liabilities Interest Bearing Liabilities 14 16,000 18,100 Total Non-Current Liabilities 16,000 18,100 Total Liabilities 16,515 20,214 Net Assets 14,772 12,591 Unitholders Equity Units on Issue 15 15,184 13,001 Reserves 16 (484) (409) Undistributed Income 6 72 (1) Total Unitholders Equity 14,772 12,591 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 11

14 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2001 Cash Flows from Operating Activities Note 1/7/00-30/6/01 Inflows/ (Outflows) 21/2/00-30/6/00 Inflows/ (Outflows) Property Rental Income Received 3, Property Expenses Paid (1,257) (45) Other Operating Expenses Paid (160) (7) GST Remitted to ATO (135) - Interest Received Net Cash Flows from Operating Activities 18 2, Cash Flows from Investing Activities Payments for Property Investments (1,791) (28,505) Net Cash Flows from Investing Activities (1,791) (28,505) Cash Flows from Financing Activities Proceeds from Unit Issues 2,177 13,173 Borrowing Costs (146) (405) Proceeds from Borrowings Repayment of Borrowings - (2,100) 18,100 - Cost of Unit Issue (166) - Distributions Paid to Unitholders (1,261) - Interest Paid (1,434) - Net Cash Flows from Financing Activities (2,930) 30,868 Net Increase in Cash Held (2,371) 2,509 Cash at the Beginning of the Year 2,509 - Cash at the End of the Year ,509 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 12

15 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Significant Accounting Policies The significant policies which have been adopted in the preparation of these financial statements are stated to assist in a general understanding of the financial report. (a) Basis of Preparation This financial report has been prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at fair value. The financial report of WP Direct is a general purpose financial report and has been prepared in accordance with the requirements of the Constitution and in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001, as far as they are consistent with the Constitution. The accounting policies adopted in preparing the financial report have been consistently applied by the trust except as otherwise indicated. (b) Valuation of Investments The Constitution requires that all investments in real property must be revalued at regular intervals appropriate to the nature of the property. The investment property is revalued to market value by an independent valuer at intervals not exceeding three years. In addition, the investment property will be revalued whenever there is a significant change in market value within the relevant period. This revaluation is based on market value which represents the price at which the investment property could be sold at the date of revaluation assuming reasonable exposure to the market and a reasonable settlement period, and has been prepared in accordance with the Corporations Act The liability for capital gains tax that may arise if the property were sold is not accounted for in these financial statements. WP Direct is required to distribute to unitholders any taxable capital gains arising on the sale of investment properties and is therefore not liable to pay capital gains tax. The investment property is stated at fair value. In accordance with Accounting Standard AASB 1041: Revaluation of Non-Current Assets, properties that have been independently valued in the past 12 months are carried at that valuation. Where properties have not been independently valued in the past 12 months, they are carried at Directors valuation. Unrealised gains arising on revaluation of the investment property are accounted for by crediting the asset revaluation reserve. Unrealised losses arising on revaluation of the investment property are charged to the asset revaluation reserve to the extent they reverse any previous revaluation increment and any residual is charged to the Statement of Financial Performance and transferred to the capital reserve. Property acquisition costs are capitalised into the value of the investment property at the time of purchase. Additions and other expenditure on investment properties which are capital in nature are capitalised as incurred. (c) Depreciation Land and buildings have the function of an investment and are regarded as a composite asset. In accordance with Accounting Standards, investment properties are not subject to depreciation. Accordingly, the buildings and any component thereof (including plant and equipment) are not depreciated. Taxation allowances for the depreciation of buildings and plant and equipment are claimed by WP Direct and contribute to the tax free and tax deferred components of distributions. 13

16 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Significant Accounting Policies (Cont.) (d) Receivables Receivables are carried at the amounts due to WP Direct. Rent and outgoings receivable are due for settlement within 30 days of recognition. The collectability of debts is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off in the relevant period in which they are identified. A provision for doubtful debts is raised where some doubt as to collection exists. (e) Borrowing Costs Borrowing costs associated with the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset. Borrowing costs not associated with qualifying assets are capitalised and amortised over the term of the borrowing period. (f) Deferred Expenditure Significant items of expenditure having a future benefit are amortised over the periods to which they relate. (g) Payables Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to WP Direct. The amounts are unsecured and are usually paid within 30 or 60 days of recognition. (h) Interest Bearing Liabilities Bank loans are carried at their principal amounts. Interest is accrued on bank loans over the relevant period it becomes due and is recorded as part of payables. (i) Equity Transaction Costs Transaction costs arising on the issue of equity are recognised directly in equity as a reduction of the proceeds of equity instruments to which the costs relate. (j) Capital Reserve In accordance with the provisions of the Constitution, amounts may be transferred from the capital reserve to fund distributions. (k) Property Rental Income Property rental income represents income earned from the rental of the investment property (exclusive of outgoings recovered from tenants) and is brought to account on an accruals basis. (l) Income Tax Under current income tax legislation, WP Direct is not liable to income tax provided its taxable income (including assessable realised capital gains) is fully distributed to unitholders. 14

17 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Significant Accounting Policies (Cont.) (m) Derivatives The Trust has entered into an interest rate swap agreement and an interest rate cap agreement to hedge against the risk of an increase in interest rates on the Trust s debt. Derivative financial instruments are not held for speculative purposes and are not recognised in the financial statements on inception. The net payments or receipts due under the swap agreement are accounted for on an accruals basis and are included in interest expense. (n) Comparative Figures Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current financial year. 2. Trust Formation and Termination WP Direct was established on 21 February 2000 and operations of the trust commenced with the acquisition of the property at Wallsend, Newcastle on 9 June 2000 and will terminate on its 80th anniversary unless terminated earlier in accordance with the provisions of the Constitution. 3. Property Expenses Non-recoverable outgoings expenses were $473,000 (period to 30 June 2000: $22,000). All other property expenses are recovered from the tenants. 4. Manager's Fee The Manager of WP Direct is Macquarie Direct Property Management Limited, a wholly owned subsidiary of Macquarie Bank Limited. The Manager s fee of $172,000 (period to 30 June 2000: nil) is calculated as 0.55% per annum of the gross assets of WP Direct, payable quarterly in arrears. WP Direct does not provide any other benefits to the Manager other than those described in Note 20. 5(a). Auditor s Remuneration 1/7/00-30/6/01 $ 21/2/00-30/6/00 $ Audit of the Financial Report 6,265 - Other Services 2,705-8,970-15

18 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE /7/00-30/6/01 21/2/00-30/6/00 5(b). Other Expenses Accounting 3 - Bank Fees 5 7 Compliance Fees 4 - Legal Fees 20 - Postage 7 - Printing 10 - Registry Fees 7 - Unitholders Communication 4 - Valuation Fees Other expenses have been paid in accordance with the Constitution. Note 1/7/00-30/6/01 21/2/00-30/6/00 6. Undistributed Income Undistributed Income/(Loss) at the Beginning of the Year (1) - Net Operating Income/(Loss) from Ordinary Activities 1,460 (245) Transferred from Reserves Available for Distribution 1, Distribution to Unitholders during the Year 7 (1,096) - Provision for Distribution 7, 12 (366) (165) Undistributed Income Carried Forward 72 (1) 16

19 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Distribution Payable Distributions provided for or paid by WP Direct are: 1/7/00-30/6/01 21/2/00-30/6/00 Distribution Paid Interim distributions of , and cents per unit were paid on 6 November 2000, 5 February 2001 and 30 April 2001 respectively 1,096 - Distribution Payable Final distribution of cents per unit was paid to WP Direct unitholders on 10 August Total Distributions Paid and Payable 1, The distribution for the year by WP Direct had a 51.31% tax deferred component and 14.40% tax free component (period to 30 June 2000: 90.25% tax deferred and 9.75% tax free). 8. Receivables Rent Receivable Outgoings Receivable Other Other Current Assets Prepayments Investments Wallsend Plaza, Newcastle* 30,296 30,055 *Acquisition date, 9 June The property was last independently valued on 5 February 2000 at $27,500,000. The valuers were Chris Smith, AAPI ASIA, and Rex Stafford, Landmark White (NSW) Pty Ltd. 17

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Investments (cont.) Carrying Amount at Beginning of the Year 30,055 - Additions ,055 Disposals - - Revaluation Increments - - Carrying Amount at End of the Year 30,296 30, Payables Managers Fees 85 - Sundry Creditors and Accruals 24 1,861 Outgoings Payable - 6 GST Payable 40 - Interest Payable , Provisions Distribution Opening Balance Amount Available for Distribution 1, Paid during the Period (1,261) - Undistributed Income Carried Forward (72) - Closing Balance* * The provision for distribution represents the distribution of WP Direct which was paid on 10 August 2001 (2000: 10 August 2000). 13. Other Liabilities Units Yet to Be Issued Interest Bearing Liabilities Bank Loan** 16,000 18,100 ** The loan is secured by a registered first mortgage over the property investment of WP Direct. 18

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Units on Issue 13,163,210 Units Allotted on Issue at 1 July ,001 13,001 2,186,790 Units Issued During the Period 2 2,183-15,350,000 Units on Issue at 30 June ,184 13,001 1 Net of transaction costs of $162, Net of transaction costs of $3,996. As stipulated in the Constitution, each unit represents a right to an individual share in the Trust and does not extend to a right to the underlying assets of the scheme. There are no separate classes of units and each unit has the same rights attaching to it as all other units in the Trust. On 15 June 2000, WP Direct allotted 13,163,210 units at $1.00 each following the initial public offering. Investment proceeds consisted of $1.00 per unit on application. A further 2,186,790 units at $1.00 each were allotted on 9 August Reserves Capital Reserve Opening Balance Transfer to Distribution (Note 6) Closing Balance Reconciliation of Cash For the purposes of the Statement of Cash Flows, cash includes cash held in banks. Cash as at 30 June 2001 as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: Macquarie Bank Limited 138 2,509 Total Cash 138 2,509 19

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Reconciliation of Net Operating Income/(Loss) to Net Cash Flows From Operating Activities 1/7/00-30/6/01 21/2/00-30/6/00 Net Operating Income/(Loss) from Ordinary Activities 1,460 (245) Classified as Financing Activities Borrowing Costs 1, Change in Assets and Liabilities Increase/(Decrease) in Assets Receivables (358) (96) Other (76) (145) Increase/(Decrease) in Liabilities Payables Net Cash Flows from Operating Activities 2, Net Tangible Assets Net tangible assets are calculated as follows: Total Tangible Assets 31,287 32,805 Less Total Liabilities (16,515) (20,214) Net Tangible Assets 14,772 12,591 Total Number of Units on Issue 15,350,000 13,163,210 Net Tangible Asset Backing per Unit $0.96 $ Related Party Transactions Manager The Manager of WP Direct is Macquarie Direct Property Management Limited, a wholly owned subsidiary of Macquarie Bank Limited. Directors The names of persons who were Directors of Macquarie Direct Property Management Limited at any time during the financial year are as follows: Stephen Girdis Ian Pratt James Rae William Moss (resigned 14 March 2001) Richard Cutler (appointed 14 March 2001). 20

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Related Party Transactions (Cont.) Manager s Fee and Other Transactions Under the terms of the Constitution, the Manager is entitled to receive a management fee of a maximum of 1.0% per annum of the gross assets of WP Direct, calculated monthly, based on the most recent valuation of the property. Pursuant to the Prospectus issued in March 2000, the Manager has agreed to receive a fee payable of 0.55% per annum of the gross assets of WP Direct. 1/7/00-30/6/01 21/2/00-30/6/00 Manager s fee for the period paid or payable directly by the Trust Syndication fee received by the Manager on the Trust s purchase of the property - 1,350 The Manager paid any relevant commissions in relation to the equity raising from the fee. As at 30 June 2001, WP Direct held funds totalling $138,174 (2000: $2,509,261) on deposit with Macquarie Bank Limited. WP Direct earns interest on deposits at commercial rates. Interest income from these deposits totalling $63,391 (period to 30 June 2000: $69,725) was included in the determination of the net operating income for WP Direct for the year ended 30 June These balances may differ from the Statement of Financial Position due to unsettled transactions. Macquarie Bank Limited will be reimbursed $3,000 (2000: $nil) for the cost of providing accounting services for the year ended 30 June The bank loan and interest rate cap, as detailed in Note 23, are held with SPAL Limited, a related party of the Manager. The above fees and transactions were based on normal commercial terms and conditions. Units Held by the Manager and Related Bodies Corporate of the Manager The aggregate number of WP Direct units held directly, indirectly or beneficially by directors or related bodies corporate at 30 June 2001 was nil (2000: nil). Related bodies corporate and their associates of the Manager held no units in WP Direct as at 30 June 2001 (2000: nil). 21. Segment Information The Trust is an unlisted property trust which invests in the retail property market in Australia. 22. Earnings per Unit Basic Earnings per Unit (cents) 9.51 (1.86) Diluted Earnings per Unit (cents) 9.51 (1.86) Weighted Average Number of Ordinary Units on Issue Used in the Calculation of Basic Earnings per Unit 15,350,000 13,163,210 Net Operating Income/(Loss) from Ordinary Activities of $1,460,000 (2000: ($245,000)) was used as earnings in calculating the basic and diluted earnings per unit. 21

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Additional Financial Instrument Disclosures (a) Terms and Conditions Cash Surplus funds of WP Direct are held at call in the operating account of WP Direct. Interest is receivable monthly in arrears. At 30 June 2001, the interest rate on these funds was 4.00% per annum (2000: 4.85% per annum). Bank Loan The bank loan is an interest only loan and is due for repayment in June Details of security held by the bank are included in Note 14. Of the total $16 million borrowings, the interest rate on $10.25 million is fixed at 7.475% per annum and the interest rate on $5.75 million is variable. At 30 June 2001, the variable interest rate was 7.30% per annum (2000: 7.24% to 7.44% per annum). Interest Rate Swap WP Direct has entered into an interest rate swap agreement that entitles it to receive interest, at quarterly intervals, at a floating rate on a notional principal amount and obliges it to pay interest at a fixed rate on the same amount. The swap agreement allows WP Direct to raise long term borrowings at a floating rate and effectively swap them into a fixed rate of 6.67% per annum. The interest rate swap agreement terminates in October Interest Rate Cap WP Direct has entered into a 6.5% per annum fixed rate interest rate cap agreement for the period from October 2004 until June The cap enables the Trust to minimise exposure to interest rate risk on variable rate borrowings. 22

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Additional Financial Instrument Disclosures (Cont.) (b) Interest Rate Risk WP Direct s exposure to interest rate risk and the effective interest rate on financial instruments at balance date are: WP Direct 30 June 2001 Floating Interest Rate Fixed Interest Rate Maturing 1 Year or Less 1 to 5 Years Over 5 Years Non- Interest Bearing Total Assets Cash Receivables Total Financial Assets Weighted Average Effective Interest Rate (% pa) 4.00% Liabilities Payables and Other Liabilities Interest Bearing Liabilities 5,750-10, ,000 Interest Rate Swap (8,000) - 8, Distribution Payable Total Financial Liabilities (2,250) - 18, ,515 Net Financial Assets/(Liabilities) 2,388 - (18,250) - 71 (15,791) Weighted Average Effective Interest Rate (% pa) 6.86% 7.02% 23

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Additional Financial Instrument Disclosures (Cont.) (b) Interest Rate Risk (Cont.) WP Direct 30 June 2000 Floating Interest Rate Fixed Interest Rate Maturing 1 Year or Less 1 to 5 Years Over 5 Years Non- Interest Bearing Total Assets Cash 2, ,509 Receivables Total Financial Assets 2, ,605 Weighted Average Effective Interest Rate (% pa) 4.85% Liabilities Payables and Other Liabilities ,949 1,949 Interest Bearing Liabilities 7,850-10, ,100 Interest Rate Swap (8,000) - 8, Distribution Payable Total Financial Liabilities (150) - 18,250-2,114 20,214 Net Financial Assets/(Liabilities) 2,659 - (18,250) - (2,018) (17,609) Weighted Average Effective Interest Rate (% pa) 6.69% 7.12% 24

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE Additional Financial Instrument Disclosures (Cont.) (b) Interest Rate Risk (Cont.) Note Reconciliation of Net Financial Liabilities to Net Assets Net Financial Liabilities as above (15,791) (17,609) Non-Financial Assets and Liabilities Investments 10 30,296 30,055 Prepayments Net Assets per Statement of Financial Position 14,772 12,591 (c) Credit Risk Credit risk represents the economic loss that would be recognised if counterparties failed to perform as contracted. Financial Instruments Recognised in the Statement of Financial Position The credit risk on the financial assets of WP Direct which have been recognised in the Statement of Financial Position is the carrying amount, net of any provisions for doubtful debts. (d) Net Fair Values of Financial Assets and Liabilities Financial Instruments Recognised in the Statement of Financial Position The financial assets and liabilities of WP Direct are carried at amounts that approximate their net fair value. 25

28 DIRECTORS DECLARATION The Directors of Macquarie Direct Property Management Limited, the responsible entity, declare that the financial statements as set out on pages 10 to 25: (a) (b) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and give a true and fair view of WP Direct s financial position as at 30 June 2001 and of its performance, as represented by the results of its operations and its cash flows, for the year ended on that date. In the directors opinion: (a) (b) the financial statements and notes are in accordance with the Corporations Act 2001; and there are reasonable grounds to believe that WP Direct will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Directors. Stephen Girdis Chairman 20 September

29 & 1,-2-,- 6 )7, INDEPENDENT AUDIT REPORT TO THE UNITHOLDERS OF WP DIRECT PROPERTY TRUST Scope We have audited the financial report of WP Direct Property Trust (WP Direct) for the year ended 30 June 2001 as set out on pages 10 to 26. The directors of Macquarie Direct Property Management Limited, the responsible entity, are responsible for the financial report which includes the financial statements of WP Direct. We have conducted an independent audit of the financial report in order to express an opinion on it to the unitholders of the Trust. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements, the Corporations Act 2001 in Australia, and the Trust Constitution, so as to present a view which is consistent with our understanding of the financial position of WP Direct, and its performance as represented by the results of its operations and its cash flows. The audit opinion expressed in this report has been formed on the above basis. Audit Opinion In our opinion, the financial report of WP Direct is in accordance with: (a) the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position of WP Direct as at 30 June 2001 and of its performance for the year ended on that date; and complying with Accounting Standards and the Corporations Regulations 2001; and (b) (c) the Trust Constitution; and other mandatory professional reporting requirements. PricewaterhouseCoopers Chartered Accountants AJ Loveridge Partner Sydney 20 September

30 ',15641* ) +- WP Direct Property Trust Period Ended Net Distribution Tax Free Distribution Tax Deferred Distribution Taxable Distribution cents/unit cents/unit cents/unit cents/unit Year to 30 June /9/ /12/ /3/ /6/ Year to 30 June

31 , ; Manager & Responsible Entity Macquarie Direct Property Management Limited (ABN ) Registered Office Level 15, 1 Martin Place Sydney NSW Directors of the Manager Stephen Girdis (Chairman) James Rae Ian Pratt Richard Cutler Secretaries Dennis Leong John Wright Manager s Offices Level 13, 1 Martin Place Sydney NSW 2000 Custodian Trust Company of Australia Limited New South Head Road Edgecliff NSW 2027 Auditor of the Trust PricewaterhouseCoopers 201 Sussex Street Sydney NSW 1171 Unit Registry Computershare Investor Services Pty Ltd Level 3 60 Carrington Street Sydney NSW 2000 GPO Box 7045 Sydney NSW 1115 Telephone: (02) Facsimile: (02) sydneyservices@computershare.com.au GPO Box 4294 Sydney NSW 1164 Telephone: (02) (local call cost) Facsimile: (02) propfunds@macquarie.com.au Internet: Level 23, 101 Collins Street Melbourne VIC 3000 Level 1, 300 Queen Street Brisbane QLD 4000 Level 27, Allendale Square 77 St George s Terrace Perth WA 6850 To arrange changes of address, please contact the Unit Registry at the address listed above or telephone (02) For further information on this or any other Macquarie Property investment contact your stockbroker, financial adviser or Ask Macquarie on (local call cost).

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