This is fixed in AFS 1.4.
There is an error in RMTarget 1.0 that causes the PC to contain an incorrect value when a watchpoint is hit. To fix this, you must perform the following steps:

1) In the Sources/rm_asm.s file, locate the following text in the RM_DataAbortHandler function:

      IF RM_OPT_HARDWATCHPOINT
      ; If we do support hardware watchpoints then create a packet header
      ; with the opcode set to RM_MSG_HARDWATCH.
      RM_DEBUG_READ_MOE a4, ip
      CMP     a4, #RM_MOE_HARDWATCH
      MOVEQ   a4, #RM_MSG_HARDWATCH
      MOVNE   a4, #RM_MSG_DATAABORT
      ELSE 

2) Insert two additional instructions immediately before the ELSE statement as follows:

      IF RM_OPT_HARDWATCHPOINT
      ; If we do support hardware watchpoints then create a packet header
      ; with the opcode set to RM_MSG_HARDWATCH. 

      RM_DEBUG_READ_MOE a4, ip
      CMP     a4, #RM_MOE_HARDWATCH
      MOVEQ   a4, #RM_MSG_HARDWATCH
      MOVNE   a4, #RM_MSG_DATAABORT 

      ADDEQ   lr, lr, #4      ; change lr to point to the next instruction
      STREQ   lr, [sp, #12]   ; overwrite lr on the stack with the new value
      ELSE   

(DE 57614)