BLACKWALL LIMITED - Annual Report 2012

31 August 2012

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**ASX

Release**

**Full

Year
Financial
Report to 30 June
2012**

Results

The
Group
incurred
a
statutory
loss
of
$2.97
million
for
the
year
ended
30
June
2012.
This loss
is
due
to
an
impairment
of
the
17
million
units
the
Group
holds
in
the
ASX
listed property
trust
known
as
P-‐REIT
(PXT).
The
normalised
operating
profit
after
tax
was $867,000.

7,000.
Profit and Loss
Income
Fund and Asset Management Fees		$2,694,000
Property Management Fees		$1,930,000
Structuring and Performance Fees		nil
Serviced Office Revenue		$787,000
Investment Income		$367,000
Other Income		$555,000
Total Income		$6,333,000
Expenses		($4,794,000)
Earnings Before Interest, Depreciation	and Tax	$1,539,000
Interest Expense		($60,000)
Depreciation		($260,000)
Tax		($352,000)
Operating Profit After Tax (Excludes OEI and Impairments)		$867,000

BLACKWALL
PROPERTY
FUNDS
LIMITED ABN
37
146
935
131

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

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BlackWall’s
revenue
is
derived
from
the
management
and
development
of
a
$450
million real
estate
portfolio.
Historically
a
proportion
of
our
fee
income
has
been
transactional
in nature
or
only
brought
to
account
when
earned.

This
result
reflects
commercial
activity
generally
and
in
particular
lack
of
capital
flows
into property
investments.
While
we
don’t
expect
our
trading
environment
to
improve
quickly we
don’t
expect
things
to
be
as
difficult
as
they
have
been
over
the
past
12
months.
Further it
is
important
to
note
that
despite
difficult
times
our
operations
continue
to
generate
more cash
than
they
cost
to
run.

Dividend

The
Board
has
resolved
to
pay
a
fully
franked
dividend
of
0.5
cent
per
share.
The
record date
for
this
dividend
will
be
12
September
2012
with
a
payment
date
of
31
October
2012.

**Property

Fund
Work-‐outs**

The
challenges
we
have
faced
over
the
past
12
months
have
been
driven
by
the opportunistic/distressed
acquisitions
made
in
2009.
While
the
prices
paid
for
these positions
reflected
the
times
and
distress
of
the
seller,
they
have
taken
up
a
considerable amount
of
senior
executive
time
and
energy.

P-‐REIT

The
largest
of
these
acquisitions
was
when
the
Group
took
control
of
the
unlisted
Reed Property
Trust
(as
it
was
then
known)
in
June
2009.
At
that
time
the
Trust
was
frozen
and its
gearing
was
between
85%
to
100%
(depending
on
the
value
ascribed
to
its
assets).
In the
two
years
following
we
executed
a
number
of
initiatives
to
reduce
debt
and
improve the
balance
sheet.
Today
the
Trust
is
listed
on
the
ASX
(under
the
name
P-‐REIT)
has gearing
below
50%
and,
but
for
the
litigation
circumstances
described
below,
we
would have
expected
to
restart
distributions
in
the
current
half-‐year.

As
part
of
the
due
diligence
process
during
the
acquisition,
we
were
made
aware
of
a number
of
contracts
entered
into
by
previous
management
in
2007
with
the MacarthurCook
Property
Securities
Fund
(ASX
Code:
MPS).
At
that
time
MPS’s
responsible entity
was
a
listed
fund
manager
known
as
MacarthurCook.
Subsequently
MacathurCook was
taken
over
by
the
AIMS
Financial
Group
and
new
directors
and
management
were appointed.

The
contracts
set
out
the
terms
under
which
MPS
invested
$15
million
in
the
Trust
and purported
to
put
in
place
an
arrangement
enabling
MPS
to
redeem
its
investment
in priority
to
P-‐REIT’s
800
retail
investors.
In
May
2010
AIMS
commenced
a
court
action claiming
the
Trust’s
previous
management
breached
these
agreements
and
seeking
orders to
enforce
MPS’s
priority
over
other
unitholders.
BlackWall
and
its
directors
disputed
the claims
and
have
defended
the
action.

-‐2

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The
case
was
heard
before
Justice
Hammerschlag
in
the
Supreme
Court
of
NSW
Equity Division
in
early
July
2012.
On
10
August
2012
Justice
Hammerschlag
handed
down
a judgment
in
favour
of
MPS.
Following
further
legal
advice
the
directors
have
determined that
the
judgment
will
be
appealed.
Depending
on
court
lists
that
appeal
is
not
expected
to be
heard
in
less
than
six
months.

Tankstream

In
the
months
following
our
acquisition
of
the
P-‐REIT
management
rights
the
Group
also acquired
Tankstream
Funds
Management
Limited
(TFML).
This
business
controlled
two funds
known
as
the
Tankstream
Pub
And
Leisure
Fund
(a
pub
operator
and
owner)
and
the Tankstream
Property
Investments
Fund
(TPIF)
(a
property
securities
fund).
Both
vehicles had
questionable
business
models
and
were
under
significant
banking
pressure
in
a declining
market.

As
with
P-‐REIT
BlackWall
has
undertaken
a
number
of
strategies
to
work
with
the respective
lenders.
The
TPIF
debt
has
been
amortised
down
from
$5
million
to
$3
million. Ultimately
we
intend
for
this
fund
to
merge
with
P-‐REIT.

In
conjunction
with
the
Tankstream
transaction
BlackWall
entered
into
a
pub
management joint
venture
known
as
Pelathon
Management
Group.
This
entity
was
appointed
to undertake
the
operational
management
of
the
pub
fund
assets.
BlackWall
has
been working
with
Pelathon
and
the
fund’s
bankers
to
set
an
operational
and
capital
strategy
to move
the
fund
forward.
As
part
of
this
process
Pelathon
has
acquired
the
asset management
rights
to
the
fund
from
BlackWall
and
committed
(subject
to
unitholder approval)
to
a
significant
injection
of
capital
into
the
fund.
It
is
anticipated
that
the
terms
of this
placement
will
be
offered
to
unitholders
also.
BlackWall
will
continue
in
its
capacity
as responsible
entity
with
the
aim
of
passing
this
role
to
Pelathon
also
in
due
course.

With
continued
negative
market
sentiment
in
the
property
funds
management
space
we expect
to
identify
opportunities
to
grow
funds
under
management
at
the
asset
level (through
our
listed
or
unlisted
structures)
and
at
the
corporate
level
(through
the acquisition
of
funds
management
businesses
or
funds
management
contracts).
Some
of these
opportunities
may
be
of
a
similar
nature
to
Reed
and
Tankstream.

**Funds

Management**

BlackWall
manages
property
investment
funds
on
behalf
of
over
4,000
retail
and
high
net worth
investors.

Income
Syndicates -‐ These
investment
structures
aim
to
generate
stable
income
streams and
long
term
capital
gains.

As
shown
in
the
table
below
our
Income
Syndicates
have performed
well
in
2012.

-‐3

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		2012 Performance*
BlackWall Storage Fund		12.46%
BlackWall Penrith Fund No. 2		8.75%
BlackWall Telstra House Trust		10.35%

Cash
distributions

Development
Syndicates – The
group
has
a
long
track
record
in
urban
renewal development
projects.
We
look
for
poorly
configured
or
under
utilised
real
estate
aiming
to generate
value
through
the
adaptive
reuse
of
existing
buildings
to
re-‐position
tenancy profile
or
mix.
Typically
these
assets
are
acquired
in
Development
Syndicates
capitalised by
high
net
worth
investors.
Once
the
development
process
is
substantially
complete
we restructure
the
ownership
into
an
Income
Syndicate.

BlackWall
currently
manages
over
$200
million
of
real
estate
held
in
Development Syndicates.
In
executing
this
development
pipeline
BlackWall
can
generate
recurring
funds and
property
management
fees
as
well
as
transactional
fees
in
the
nature
of
structured finance,
development
and
project
management,
and
leasing.

**More

Information**

Contact
Stuart
Brown
(Chief
Executive
Officer)
or
Tim
Brown
(Chief
Financial
Officer)
on +612
9033
8611.

-‐4

Appendix 4E Result of Announcement to the Market Financial Year Ended 30 June 2012

**APPENDIX

4E**

Result
of
Announcement
to
the
Market Reporting
period:
Financial
year
ended
30
June
2012 Previous
corresponding
period:
20
October
2010
to
30
June
2011

**BlackWall

Property
Funds
Limited ABN
37
146
935
131**

The
Appendix
4E
should
be
read
in
conjunction
with
the
consolidated
financial
statements
of
Blackwall
Property Funds
Limited
for
the
year
ended
30
June
2012.

Results
for
announcement
to
the
market

Results for announcement to the market
	12 months to	20 October
	30 June 2012	2010 to 30	Movement
	$’000	June 2011 $’000	Up / (Down) $’000 %
Revenue from continuing operations Profit / (loss) from continuing operations after	6,538	3,841	2,697	70.22
tax attributable to members of the company	(3,010) *	859	(3,869)	(450.41)
Net profit / (loss) after tax attributable to members of the company	(2,966) *	887	(3,853)	(434.39)

The
current
year
loss
includes
an
impairment
loss
of
$3.5
million
on
investment
classified
as
available
for
sale financial
assets.
Refer
to
the
attached
market
release
for
management
commentary
of
the
results.

	12 months to	20 October 2010 to
	30June2012	30June2011
Net tangible asset backing per share	$0.17	$0.27
Basic earnings / (loss) per share from continuing operations	($0.06)	$0.02
Diluted earnings / (loss) per share from continuing operations Weighted average number of shares used in calculating basic	($0.06)	$0.02
earnings/ (loss) per share	50,372,676	44,358,535

Dividends:

No
dividends
have
been
paid
for
the
year
ended
30
June
2012.

Appendix 4E - 1

Appendix 4E Result of Announcement to the Market Financial Year Ended 30 June 2012

**Audit

/
review
of
accounts
upon
which
this
report
is
based**

This
report
is
based
on
accounts
to
which
one
of
the
following
applies:

✓	The accounts have been audited (refer attached financial statements).		The accounts have been subject to review (refer attached financial statements).
	The accounts are in the process of being audited or subject to review.		The accounts have not yet been audited or reviewed.

………………………………. Stuart
Brown Director

Sydney,
30
August
2012

Appendix 4E - 2

& Controlled Entities

ACN 146 935 131 ABN 37 146 935 131

Consolidated Annual Financial Statements Year Ended 30 June 2012

Financial Statements

Directors’ Report	Page 3
Auditor’s Independence Declaration	Page 9
Corporate Governance	Page 10
ASX Additional Information	Page 18
Group Details	Page 20
Consolidated Statement of Comprehensive Income	Page 21
Consolidated Statement of Financial Position	Page 22
Consolidated Statement of Changes in Equity	Page 23
Consolidated Statement of Cash Flows	Page 24
Notes to the Consolidated Financial Statements	Page 25
Directors’ Declaration	Page 57
Independent Auditor’s Report	Page 58

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT

The Directors of BlackWall Property Funds Limited (“BlackWall” or “the Company”) and its controlled entities (“the Group”) present their report for the year ended 30 June 2012.

Principal Activities

The Group is a vertically integrated property funds management business earning fee income from a portfolio of income producing real estate.

Review of Operations

The net result from continuing operations for the Group for the financial year ended 30 June 2012 was a loss after tax of $2,966,000 (2011: profit after tax $887,000).

The Group holds an investment in P-REIT which was listed on the Australian Securities Exchange (ASX) on 28 October 2011 (ASX code: PXT). TFML Limited (a subsidiary of the Group) acts as the responsible entity for P-REIT. Since listing the P-REIT unit price has traded well below its Net Tangible Assets (NTA) and was $0.10 at 30 June 2012. TFML (as P-REIT’s responsible entity) is a defendant in a Supreme Court action initiated by the MacarthurCook Property Securities Fund. The proceedings relate to a series of transactions entered into before TFML became responsible entity of P-REIT. On 10 August 2012 judgment was entered against TFML for approximately $17.8 million including pre-judgment court interest but excluding costs. TFML is appealing the decision, however given the judgment, the Directors consider that the investment in P-REIT is now impaired. This results in an impairment loss of approximately $3.5 million.

Further commentary on the operations and the results are set out in the ASX announcement accompanying the financial statements.

On 30 June 2012, the Group entered into an agreement to sell the management rights of the BlackWall Pub Fund (“pub fund”) for consideration of $530,000. It will receive $250,000 cash (paid in instalments over 18 months) and a 40% share of Bakehouse Cellars Pty Ltd, the operator of a pub located at the Bakehouse Quarter. Refer to Note 10 for further information. TFML will remain as the responsible entity of the pub fund and will earn fees of $25,000 per annum for undertaking this role. In addition where the Group provides other services (such as corporate advice) to the pub fund it will charge a fee.

Significant Changes in Affairs

BlackWall was listed on the ASX on 21 October 2011.

Dividends

There were no dividends paid for the year ended 30 June 2012 (2011: $nil).

Events Subsequent to Reporting Date and Likely Developments

During the year, an impairment loss of $3,477,000 for the P-REIT units was recognised based on the ASX closing price of $0.10 as at the reporting date (refer to Note 11(b)). As at the date of signing these financial statements, the closing price is $0.076.

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 Group’s operations in future financial years, the results of those operations or the Group’s state of affairs in future financial years.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT (continued)

Going Concern

The 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.

Information on Directors

The names of the Directors 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	Position
Richard Hill	Richard Hill has extensive investment banking	Non-Executive Director and
	experience and was the founding partner of the	Chairman
	corporate advisory firm Hill Young & Associates. Richard
	has invested in the Group’s projects since the early
	1990’s. 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
	& Exchange Commission and the Ontario Securities
	Commission. He is the Chairman of Calliden Group
	Limited and Sirtex Medical Limited and a Director of
	Biota Holdings Limited (all listed on the ASX). In addition
	Richard is Chairman of the Westmead Millennium
	Institute for Medical Research. Previously, Richard was
	an Independent Non-Executive Director of formerly ASX
	listed Pelorus Property Group.
Joseph (Seph)	Seph has worked in the commercial property industry in	Non-Executive Director
Glew	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 1990’s 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 1980’s
	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 was
	Chairman of formerly ASX listed Pelorus Property Group
	and he is now the Executive Chairman of Pelorus Private
	Equity Limited

4 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT (continued)

Information on Directors (continued)

Robin Tedder	Robin has over 35 years’ experience in investment and	Non-Executive Director
	financial markets. He has been an investor in the Group’s
	projects since 1997. Robin manages private equity
	interests and is the Chairman of Vintage Capital Pty Ltd.
	He is a former member of the ASX and has served on the
	boards of several merchant banks in Australia and
	overseas, including Rand Merchant Bank Ltd, Kleinwort
	Benson Australia Ltd and Australian Gilt Securities Ltd
	(as CEO from 1988 to 1995). He is a Director of Italtile
	Australia Pty Ltd (a national retailer under the CTM
	brand, and developer of bulky goods stores), Chairman of
	Apollo Health Management and Australian Ambassador
	for Singularity University (sponsored by NASA and
	Google) of Mountain View California. Robin is also a
	Fellow of the Financial Services Institute of Australasia.
	Previously, Robin was a Director of formerly ASX listed
	Pelorus Property Group and he is now a Non-Executive
	Director of Pelorus Private Equity Limited.
Stuart Brown	Stuart has been involved in property investment for over	Executive Director and Chief
	15 years. Stuart has run debt and equity raising in	Executive Officer
	relation to listed and unlisted real estate structures with
	over a half a billion dollars in value.
	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 unlised public company,
	Pelorus Private Equity.

Don Bayly is the Company Secretary. He has a Bachelor of Commerce and Administration degree 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 Group’s Board meetings held during the financial year are detailed below:

Director	Board Meetings
MeetingsHeld	5
RichardHill	5
SephGlew	5
Robin Tedder	5
StuartBrown	5

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT (continued)

Directors’ Relevant Interests

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

Director	Shares	Shares (%)
RichardHill	1,643,686	3.20
SephGlew	6,232,647	12.14
Robin Tedder	1,799,471	3.51
StuartBrown	678,186	1.32

Options

There were no options granted during the year ended 30 June 2012.

The Group has adopted an Employee Share Option Plan and an Employee Share Bonus Plan. No Employee Share Options or Employee Share Bonuses were granted during the year ended 30 June 2012.

Environmental Regulation and Performance

The Group’s operations are not regulated by any environmental regulation under a law of the Commonwealth or of a State or a Territory other than those that pertain to the ownership and development of real estate.

Measurable Objectives For Achieving Gender Diversity

While being 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:

	Female (No. of people)	Female (%)	Male (No. of people)	Male (%)
Board	0	0	4	100
Executive Management	3	50	3	50
Other	6	55	5	45

Indemnities of Officers

During the financial year the Group has paid premiums to insure each of the Directors named in this report along with Officers of the Group 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 Group, other than conduct involving a willful breach of duty.

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 Group.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT (continued)

Non-audit Services

Amounts paid to the auditor for non-audit services during the year are detailed at Note 23 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 Group 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.

Remuneration Report (Audited)

The Board is responsible for determining the Chief Executive Officer and Senior Executives’ remuneration. The Non-Executive Directors and Chief Executive Officer determine employee remuneration.

When determining the remuneration of the Chief Executive Officer, Senior Executives and employees, the following is taken into consideration:

Remuneration is aligned with the delivery of returns to shareholders;
Responsibilities, results, innovation and entrepreneurial behaviour are recognised and rewarded; and
The Group’s financial position and market conditions.

The Board members have service agreements with the Group. The remuneration payable under each service agreement is subject to review each year by the Board. There are no performance conditions within the service agreements for Board members or contracts for Senior Executives. Any performance payments are at the discretion of the Board.

The nature and the amount of each element of remuneration for key management personnel (Board of Directors and Tim Brown, Chief Financial Officer) is as follows:

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT (continued)

Remuneration Report (Audited) (continued)

Remuneration for the year ended 30 June 2012

	Short Term Post Employment Directors’ Fees Salary and Other Superannuation Total $’000 $’000 $’000 $’000
Richard Hill	85 - - 85
SephGlew	75 - - 75
Robin Tedder	75 - - 75
StuartBrown	- 321 29 350
Tim Brown	- 179 16 195
TOTAL	235 500 45 780

Note: There was no remuneration provided to key management personnel for consulting, post employment retirement benefits, long term incentive plans or long term service.

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

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Stuart Brown Director Sydney, 30 August 2012

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ REPORT (continued)

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BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE

The Board of Directors of BlackWall is responsible for the corporate governance of the Group. Good corporate governance is a fundamental part of the culture and business practices of BlackWall. 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 the Group’s needs. To the extent they are applicable and appropriate for a company of BlackWall’s size and nature, the Group 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”.

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance
Principle 1: Lay solid foundations for management and oversight
1.1	Establish the functions reserved to the Board and those delegated to Senior Executives and disclose those functions.	BlackWall operates with a flat management structure. The Executive Director is involved in the day-to-day operations of the business. Decisions at the Board level and the assessment of executive performance are based on reports received from Executive Director and the consideration of issues by Executive, Non-Executive and Independent Directors at meetings. The Board has adopted a formal Board Charter setting out the responsibilities of the Board. This Charter can be accessed at the Group’s website.	Comply.
1.2	Disclose the process for evaluating the performance of Senior Executives.	The Remuneration Committee (or full Board in absence of Remuneration Committee) will oversee the performance evaluation of the executive team. This will be based on specific criteria, including the business performance of the Group, whether strategic objectives are being achieved and the development of management and personnel.	Comply.

10 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance
1.3	Provide the information indicated in the Guide to reporting on Principle 1.	The Board Charter can be accessed from the Group’s website.	Comply.
Principle 2:Structure the Board to add value
2.1	A majority of the Board should be Independent Directors.	The Board has considered the guidance to Principle 2: Structure the Board to Add Value and in particular, Box 2.1, which contains a list of “relationships affecting independent status”. Currently the Group 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.	The Directors monitor the business affairs of the Group on behalf of shareholders with a specific focus on the profitability of business activities and the efficiency of its managers. In keeping with this consideration, Board positions are held by a majority of members who are significant shareholders and its Chairman is a significant shareholder. BlackWall has not therefore adopted recommendations 2.1 and 2.2 of the ASX Corporate Governance Council. The Board is structured to ensure the efficient interaction between the Board and management. The Board’s primary focus is on driving returns to shareholders by growing Net Tangible Assets and earnings per share over the long term. The Board considers risk management and the ethical conduct of business.
2.2	The Chair should be an Independent Director.	The Chairman, Mr Richard Hill, is an Independent Director.	Comply.
2.3	The roles of Chair and Chief Executive Officer should not be exercised by the same individual.	The Group’s Chairman and Chief Executive Officer is not the same person.	Comply.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance

2.4	The Board should establish a Nomination Committee.	The Group currently does not have a separate Nomination Committee. The roles and responsibilities of a Nomination Committee are currently undertaken by the full Board. This charter can be assessed at the Group’s website.	The Board considers that no efficiencies or other benefits would be gained by establishing a separate committee. BlackWall has not, therefore, adopted Recommendation 2.4 of the ASX Corporate Governance Council. The Board has adopted a Board Charter which it applies, as relevant.
2.5	Disclose the process for evaluating the performance of the Board, its Committees and individual Directors.	The full Board will arrange an annual performance evaluation of the Board, its Committees and individual Directors.	Comply.
2.6	Provide the information indicated in the Guide to reporting on Principle 2.	The skills, experience and expertise relevant to the position held by each Director will be disclosed in the Directors’ Report which forms part of the financial statements. The Board consists of one Independent Director and three Non- Independent Directors. The Directors are entitled to take independent professional advice at the expense of the Group. The period of office held by each Director will be disclosed in the Directors’ Report which forms part of the financial statements. A statement will be included in 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.	Comply.
Principle 3: Promote ethical and responsible decision making
3.1	Establish a code of conduct and disclose the code ora summary ofthe	The Group has adopted a Code of Conduct, which can be accessed at the Group’s	Comply.

12 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance
	code as to:  The practices necessary to maintain confidence in the Group’s integrity;  The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders;  The responsibility and accountability of individuals for reporting and investigating reports of unethical practices.	website.
3.2	Establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually the objectives and the progress in achieving them.	The Group has adopted a Diversity Policy which can be accessed at the Group’s website.	Comply.
3.3	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.	The information will be disclosed in the Directors’ Report of the Group’s financial statements.	Comply.
3.4	Disclose in each annual report the proportion of women employees in the whole organisation, women in Senior Executive positions and women on the Board.	The information will be disclosed in the Directors’ Report of the Group’s financial statements.	Comply.
3.5	Provide the information indicatedinthe Guide to	The information will be disclosedintheDirectors’	Comply.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance
	reporting on Principle 3.	Report of the Group’s financial statements.
Principle 4:Safeguard integrity in financial reporting
4.1	The Board should establish an Audit Committee.	The Group currently has a separate Audit Committee. The roles and responsibilities of the Audit Committee are set out in the Audit Committee Charter. This charter can be assessed at the Group’s website.	Comply.
4.2	The Audit Committee should be structured so that it:  Consists only of Non- Executive Directors;  Consists of a majority of Independent Directors;  Is chaired by an independent chair, who is not chair of the Board;  Has at least three members.	The Audit Committee consists of two members – non-Executive Directors Mr Tedder and Mr Glew. The Audit Committee is chaired by Mr Tedder.	Given the composition of the Board and the size of the Group, Recommendation 4.2 is not complied with in all respects. Mr Tedder is arguably if not technically independent, in possession of the necessary experience for the position. The Board takes the view that the Committee as constituted can discharge its role effectively without the undue expense of appointing three members and an independent chairman.
4.3	The Audit Committee should have a formal charter.	The formal charter can be accessed at the Group’s website.	Comply.
4.4	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 compliance and disclose those policies or a summary of those policies.	The Group will undertake timely market disclosures. The Chief Executive Officer in consultation with the Board will manage investor relations and the release of market sensitive information. The Group will maintain a timetable for its compliance and periodic disclosure requirements.	Comply.

14 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance

5.2	Provide the information indicated in the Guide to reporting on Principle 5.	The continuous disclosure information will be available on the Group’s website. The information will be disclosed in the financial statements.	Comply.
Principle 6: Respect the rights of shareholders
6.1	Design a communications policy for promoting effective communications with shareholders and encouraging their participation at general meetings and disclose that policy or a summary of that policy.	The Group has adopted a Shareholder Communications Strategy which can be accessed at the Group’s website.	Comply.
6.2	Provide the information indicated in the Guide to reporting on Principle 6.	The information will be disclosed in the financial statements.	Comply.
Principle 7: Recognise and manage risk
7.1	Establish policies for the oversight and management of material business risk and disclose a summary of those policies.	The Group has adopted a Risk Management Policy. This Policy outlines the key material risks faced by the Group as identified by the Board.	Comply.
7.2	The Board should require management to design and implement the risk management and internal control system to manage the Group’s material business risks and report to it on whether those risks are being managed efficiently. The Board should disclose that management has reported to it as to the effectiveness of the Group’s management of its material business risks.	The Board has delegated to the Audit Committee responsibility for implementing the risk management system, while the responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management.	Comply.
7.3	The Board should disclose whether it has received assurancefrom	The Board will receive assurance in the form of a declaration fromthe Chief	Comply.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance
	the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.	Executive Officer and the Chief Financial Officer as required by the Corporations Act 2001.
7.4	Companies should provide the information indicated in the Guide to reporting on Principle 7.	The information will be disclosed in the financial statements.	Comply.
Principle 8: Remunerate fairly and responsibly
8.1	The Board should establish a Remuneration Committee.	The Group has not established a separate Remuneration Committee. The roles and responsibilities of a Remuneration Committee are currently undertaken by the full Board.	The Board actively encourages and promotes efficiency, innovation and entrepreneurialism. Senior management meetings are held weekly to discuss issues and opportunities. The Chief Executive Officer and Senior Executives are remunerated on the basis of the Board’s consideration of the employees’ responsibilities and performance, the Group’s financial position and market conditions. The role of the Remuneration Committee is carried out by the full Board. The Board considers that no efficiencies or other benefits would be gained by establishing a separate Remuneration Committee.

8.2	The Remuneration Committee should be structured so that it:	The Group has not established a separate Remuneration Committee. The roles and responsibilities of a Remuneration	Refer 8.1

16 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

CORPORATE GOVERNANCE (continued)

PrincipleNo	Recommendation	Compliance	Reason for Non-compliance
	 Consists of a majority of Independent Directors;  Is chaired by an Independent Director; and  Has a least three members.	Committee are currently undertaken by the full Board.
8.3	Companies should clearly distinguish the structure of Non-Executive Directors’ remuneration from that of Executive Directors and Senior Executives.	The structure of Non- Executive Directors’ remuneration will be clearly distinguished from that of Executive Directors and Senior Executives, in the Directors’ Report which will form part of the financial statements.	Comply.
8.4	Provide the information indicated in the Guide to reporting on Principle 8.	The information will be disclosed in the financial statements.	Comply.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The shareholder information set out below was current as at 24 August 2012.

1. Shareholders

The Company’s top 20 largest shareholdings were:

	Investor	Ordinary Shares (No.)	Shares (%)
1	Vintage Capital Pty Limited	5,203,091	10.14
2	Lymkeesh Pty Ltd	4,225,130	8.23
3	Sandhurst Trustees Ltd ACF Macarthurcook PSF A/C	2,762,000	5.38
	Seno Management Pty Ltd ATF Seno Superannuation
4	Fund	2,393,718	4.66
5	Seno Management Pty Ltd	2,150,000	4.19
6	IHOP Pty Ltd ATF Keppel Investments Unit Trust	1,777,360	3.46
7	Koonta Pty Ltd ATF Koonta Superannuation Fund	1,649,470	3.21
8	Sao Investments Pty Ltd	1,428,262	2.78
9	Pinnatus Pty Ltd	1,141,088	2.22
10	Mcmullin Nominees Pty Ltd	1,098,713	2.14
11	Benyaya Holdings Pty Ltd	1,086,750	2.12
12	Pelorus Private Equity Ltd ATF Pelorus Pipes Trust No 5	938,400	1.83
13	Mr Richard Hill ATF Richard Hill Superannuation Fund	873,604	1.70
14	Methuselah Capital Management Pty Ltd	805,412	1.57
15	Glenahilty Pty Limited	772,088	1.50
16	I P R Nominees Pty Ltd <1965 Irvin Peter Rockman A/C>	755,781	1.47
17	Tampopo Pty Ltd	754,082	1.47
18	Pelorus Private Equity Ltd	700,885	1.37
19	J P Morgan Nominees Australia Limited	674,601	1.31
20	Castlebay Pty Ltd	597,500	1.16

18 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

ASX ADDITIONAL INFORMATION (continued)

2. Distribution of Shareholders

The distribution of shareholders by size of holding was:

Category	No. of Shareholders
1-1,000	295
1,001-5,000	710
5,001-10,000	267
10,001-100,000	249
100,001 and over	52
Total number of shareholders	1,573

BlackWall has 1,034 holders of less than a marketable parcel. The Company has 51,326,021 ordinary shares on issue as at 24 August 2012. All shares carry one vote per share without restrictions. All shares are quoted on the Australian Securities Exchange (ASX Code: BWF).

3. Substantial Shareholders

Substantial shareholders in the Company are set out below:

Investor	Ordinary Shares (No.)	Shares (%)
Joseph (Seph) Glew	6,232,647	12.14
Paul Tresidder	5,977,671	11.65
Vintage Capital Pty Ltd	5,203,091	10.14
IHOP Pty Ltd ATF Keppel Investments Unit Trust	3,101,073	6.04
Sandhurst Trustees Ltd ACF Macarthurcook PSF A/C	2,762,000	5.38

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

GROUP DETAILS

The Group’s details are as follows:

Registered Office	Level 1, 50 Yeo Street Neutral Bay NSW 2089
Principal Place of Business	Level 1, 50 Yeo Street Neutral Bay NSW 2089
Telephone	029033 8611
Fax	029033 8600
Website	www.blackwallfunds.com.au
Registry	Computershare Investor Services Pty Limited 60 Carrington Street, Sydney, NSW 2000 www.computershare.com.au

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Comprehensive Income

For the Year Ended 30 June 2012

Notes Fund and asset management income Property management income Structuring and performance fee income Serviced office income Investment income Gain on disposal of management rights Other income Gain / (loss) on exchange differences Total Revenue 4 Business operating expenses 5 Depreciation 5 Finance costs 5 Impairment 5 Loss on disposal of assets Other expenses Profit / (Loss) Before Income Tax Income tax expense 6 Profit / (Loss) For the Year Other Comprehensive Income / (Loss) Foreign currency translation Unrealised loss on available for sale investments taken to equity Other Comprehensive Loss For the Year Total Comprehensive Income / (Loss) For the Year Profit / (Loss) Attributable To: Owners of the Group Non-controlling interest Total Comprehensive Income / (Loss) Attributable To: Owners of the Group Non-controlling interest Earnings / (Loss) Per Share Continuing operations: Basic and diluted earnings / (loss) per share 22	2012 $’000 20 October 2010 to 30 June 2011 $’000 2,746 1,426 2,073 1,383 - 595 787 338 376 96 530 - 30 - (4) 3
	6,538 3,841 (4,891) (2,498) (260) (59) (60) (25) (3,877) - (44) (15) (3) (11)
	(2,597) 1,233 (369) (346)
	(2,966) 887
	- 1 (32) (59)
	(32) (58)
	(2,998) 829
	(3,010) 859 44 28
	(2,966) 887
	(3,043) 800 45 29
	(2,998) 829
	($0.06) $ 0.02

The accompanying notes form part of these consolidated financial statements.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Financial Position

As at 30 June 2012

Note ASSETS Current Assets Cash and cash equivalents 7 Trade and other receivables 8 Other assets 9 Total Current Assets Non-Current Assets Trade and other receivables 8 Equity accounted investments 10 Financial assets 11 Property, plant and equipment 12 Deferred tax assets 13 Intangible assets 14 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 15 Current tax payable 16 Borrowings 17 Provisions 18 Total Current Liabilities Non-Current Liabilities Other payables 19 Borrowings 17 Provisions 18 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Share capital 20 Reserves Retained earnings / (accumulated losses) Parent Interest Non-controlling interest TOTAL EQUITY	2012 $’000 2011 $’000 1,162 675 1,070 804 40 7
	2,272 1,486
	50 - 285 105 7,411 11,475 683 677 60 38 374 411
	8,863 12,706
	11,135 14,192
	950 993 261 338 425 - 177 148
	1,813 1,479
	81 68 - 450 9 8
	90 526
	1,903 2,005
	9,232 12,187
	11,367 11,286 (92) (58) (2,151) 859
	9,124 12,087 108 100
	9,232 12,187

The accompanying notes form part of these consolidated financial statements.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Changes in Equity

As at 30 June 2012

Ordinary shares $’000 11,286 - - - 195 (114)	Retained earnings/ (accumulated losses) $’000 859 - (3,010) - - -	Foreign currency translation reserve $’000 1 (1) - - - -	Amounts recognised in equity relating to assets classified as available for sale $’000 Attributable to owners of the parent $’000 (59) 12,087 - (1) - (3,010) (33) (33) - 195 - (114)	Non- controlling interest $’000 100 (37) 44 1 - -	Total $’000 12,187 (38) (2,966) (32) 195 (114)
11,367	(2,151)	-	(92) 9,124	108	9,232
- - - 11,423 (137)	- 859 - - -	- - 1 - -	- - - 859 (59) (58) - 11,423 - (137)	- 100 - - -	- 959 (58) 11,423 (137)
11,286	859	1	(59) 12,087	100	12,187

(1) The Company was incorporated on 20 October 2010.

The accompanying notes form part of these consolidated financial statements.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Cash Flows

For the Year Ended 30 June 2012

Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Dividends and distributions received Interest paid Interest received Income tax paid Net Cash Flows From Operating Activities 25 Cash Flows From Investing Activities Proceeds from sale of investments Acquisition of property, plant and equipment Acquisition of subsidiaries, net of cash acquired Proceeds from sale of property, plant and equipment Acquisition of other investments Loans from related parties Loan repayments to related parties Net Cash Flows From / (Used in) Investing Activities Cash Flows From Financing Activities Proceeds from issue of shares Transaction costs for issue of shares Repayment of borrowings Net Cash Flows From / (Used in) Financing Activities Net Increase in Cash Held Cash and cash equivalent at the beginning of the year Effect of exchange rates on cash holdings Cash and Cash Equivalent at End of the Year 7	2012 $’000 20 October 2010 to 30 June 2011 $’000 6,991 3,933 (6,580) (2,296) 277 5 (60) (25) 23 7 (300) (99)
	351 1,525
	1,160 370 (289) (147) - 187 20 - (172) (222) 1,605 536 (2,252) (1,531)
	72 (807)
	195 93 (114) (137) (25) -
	56 (44)
	479 674 675 - 8 1
	1,162 675

The accompanying notes form part of these consolidated financial statements.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies

The financial statements cover the economic entity of BlackWall Property Funds Ltd (“the Company”) and its Controlled Entities (“the Group”). BlackWall Property Funds Ltd is a publicly listed company, incorporated and domiciled in Australia.

The Company was incorporated on 20 October 2010 and accordingly the comparative figures covered the period from incorporation are shown.

The financial statements for the Group for the year ended 30 June 2012 were authorised for issue in accordance with the resolution of the Directors on 30 August 2012.

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 Company 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 Group 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 Group in the preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

New and amended standards adopted by the Group

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2011 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. However, the adoption of the revised AASB 124 Related Party Disclosures were reflected in Note 29, and the adoption of AASB 1054 Australian Additional Disclosures and AASB 2011-1 Amendments to Australian Accounting Standards arising from the TransTasman Convergence Project enabled the removal of certain disclosures in relation to commitments and the franking of dividends.

Going concern

The accompanying notes form part of these consolidated financial statements.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Presentation of Financial Statements

Presentation currency

Both the functional and presentation currency of BlackWall Property Funds Ltd and its Australian subsidiaries is Australian dollars. The New Zealand subsidiary's functional currency is New Zealand Dollars, which is translated to presentation currency (refer to Foreign Currency Translation note below).

Principles of Consolidation

Controlled entities

The consolidated financial statements comprise the financial statements of BlackWall Property Funds Ltd and its subsidiaries as at 30 June 2012. A list of controlled entities is contained in Note 28 to the financial statements. All controlled entities have a June financial year end and use consistent accounting policies. Investments in subsidiaries held by the Group are accounted for at cost less any impairment charges (refer to Note 30).

Acquisitions of subsidiaries 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 the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where controlled entities have 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 BlackWall Property Funds Ltd has the power to control the financial and operating policies of so as to obtain benefits from its activities.

Inter-company balances

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

Non-controlling interests

Non-controlling interests (not held by the Group) are allocated their share of net profit and comprehensive income after tax in the statement of comprehensive income and are presented within equity in the consolidated balance sheet, separately from parent shareholders' equity. Comprehensive income after tax in the statement of comprehensive income are presented within equity in the consolidated balance sheet, separately from parent shareholders' equity.

Foreign Currency Translation

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows:

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Foreign Currency Translation (continued)

assets and liabilities are translated at year end exchange rates prevailing at the reporting date;
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the balance sheet. These differences are recognised in the statement of comprehensive income in the period in which the operation is disposed of.

Property, Plant and Equipment

General information

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis less accumulated depreciation and impairment losses. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day to day servicing of property, plant and equipment are recognised in profit and loss as incurred.

Depreciation

The depreciable amount of all fixed assets is depreciated on a diminishing value basis over their useful lives to the Group commencing from the time the asset is held ready for use.

Useful life

The estimated useful lives used for each class of depreciable assets are:

Furniture, Fixtures and Fittings over 2 to 40 years Office Equipment over 2 to 5 years Motor Vehicles over 5 to 8 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Disposal

An item of property, plant and equipment is derecognised upon disposal or when no further economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is derecognised.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Property, Plant and Equipment (continued)

Impairment of assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible 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.

Financial Instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, 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 nonderivative financial instruments are measured as described below.

Recognition

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flow from the financial assets expire or if the Group 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 Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.

Loans and receivables

Loans and receivables including loans to related entities 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.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Financial Instruments (continued)

Available-for-sale financial assets

The Group's investments in related party listed and unlisted unit trusts are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value. Unrealised gains and losses arising from changes in fair value are 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 are recognised in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Financial liabilities

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

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 Group 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 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.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Intangibles

Goodwill

Goodwill on consolidation is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment or more frequently if circumstances indicate it might be impaired and carried at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units. Each unit to which the goodwill is so allocated:

represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
is not larger than an operating segment determined in accordance with AASB 8 Segment Reporting.

Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. When the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash generating unit and that unit is disposed of, the goodwill associated with the unit disposed of is included in the carrying amount of the unit when determining the gain or loss on disposal of the unit. Impairment losses recognised for goodwill are not subsequently reversed.

As at 30 June 2012, the goodwill in relation to the purchase of the subsidiaries has not been impaired.

Investments in Associates

Investments in associate companies are recognised in the financial statements by applying the equity method of accounting where significant influence is exercised over an investee. Significant influence exists where the investor has the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those policies. The Group generally deems they have significant influence if they have between 20% to 50% of the voting rights.

Under the equity method of accounting, investments in the associates are carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group's share of net assets of the associates. The Group's share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of the interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Interests in Joint Ventures

The Group has an interest in joint ventures that are jointly controlled operations. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled operation involves use of assets and other resources of the venturers rather than establishment of a separate entity. The Group recognises its interest in the jointly controlled operations by recognising its interests in the assets and the liabilities of the joint ventures. The Group also recognises the expenses that it incurs and its share of the income that it earns from the sale of services by the jointly controlled operations.

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 Group 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.

Trade and Other Payables

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 Group 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.

Employee Benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contribution to defined contribution plans are recognised as a personnel expense in profit and loss when they are due.

Other long term employee benefits

The Group's net obligation in respect of long term employee benefits other than defined benefit plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs. These employee benefits have not been discounted to the present value of the estimated future cash outflows to be made for those benefits.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Employee Benefits (continued)

Short term benefits

Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided to the reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs.

Provisions

Provisions are recognised when the Group 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. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

Revenue

Income from management fees in relation to managed investment schemes is recognised when it becomes legally due and payable to the Group.

Revenue from property services contracts is recognised monthly in arrears.

Investment income

Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate.

Dividend revenue is recognised when the right to receive a dividend has been established, which in the case of quoted securities is the ex-dividend date.

Trust distributions are recognised when they are declared by the Trustee or responsible entity.

Foreign currency gains or losses are reported on a net basis.

Income Tax

Current income tax expense

The charge for current income tax expense is based on the profit year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Accounting for deferred tax

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

Income Tax (continued)

Deferred tax calculation

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred income tax assets

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Benefit brought to account

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Tax consolidation

BlackWall Property Funds Limited has elected to form a tax consolidated group with its wholly-owned entities for income tax purposes under the tax consolidation regime with effect from 1 January 2011. As a consequence, all members of the tax consolidated group are taxed as a single entity from that date. The head entity within the tax consolidated group is BlackWall Property Funds Limited.

In addition to its own current and deferred tax amounts, BlackWall Property Funds Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group in conjunction with any tax funding arrangement amounts.

The Group recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it is probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

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 Per Share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

New Accounting Standards and Interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.

‑ (i) AASB 9 Financial Instruments, AASB 2009 11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2015)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption. When adopted, the standard will affect in particular the Group’s accounting for its available-forsale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. In the current reporting period, such gains/losses recognised in other comprehensive income is not material.

There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The Group has not yet decided when to adopt AASB 9.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

New Accounting Standards and Interpretations (continued)

(ii) 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 Group 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 focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control.

The Group’s investment in the joint venture partnership will be classified as a joint venture under the new rules. As the Group already applies the equity method in accounting for this investment, AASB 11 will not have any impact on the amounts recognised in its financial statements.

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 Group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Group’s investments. Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a “partial disposal” concept. The Group is still assessing the impact of these amendments.

The Group 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.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies (continued)

New Accounting Standards and Interpretations (continued)

(iii) 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 Group 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 Group 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.

(iv) Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)

In September 2011, the AASB released a revised standard on accounting for employee benefits. It requires the recognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the so-called ‘corridor’ method) and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is currently included in profit or loss. The standard also introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timing of the recognition of termination benefits. The amendments will have to be implemented retrospectively. Had the Group adopted the new rules in the current reporting period, the impact to profit or loss and other comprehensive income would have been immaterial. The Group has not yet decided when to adopt the new standard.

(v) AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income

This amendment requires entities to separate items presented in other comprehensive income into two groups, based upon whether they might be recycled to profit and loss in the future. The Trust has not yet assessed the impact of the amendments, if any.

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.

2. Critical Accounting Estimates and Judgments

The Directors 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 Group.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

2. Critical Accounting Estimates and Judgments (continued)

Key estimates - Impairment

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. The Directors believed it appropriate to raise no impairment provisions for the year ended 30 June 2012, except for provisions raised under Note 11 (a).

Key estimates – available-for-sale financial assets

Financial asset provisions have been raised with reference to the prevailing prices at 30 June 2012 of available-for-sale assets measured at fair value with gains and losses recognised in other comprehensive income, except for impairment of investment in P-REIT as disclosed in Note 11. 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.

3. Segment Information

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Group's primary format for segment reporting is based on business segments. The business segments are determined based on the Group management and internal reporting structure. There is only one geographical segment being Australasia.

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 Group has adopted three reporting segments, Fund and Property Management, Investments and Corporate. Following the acquisition of funds management operations, the Group’s fee earning activities are primarily derived from property assets held within funds or held on balance sheet. As such the Group’s operations and reporting lines are better represented by consolidating all of the fee earning, operating property businesses within the Fund and Property Management segment and returns derived by holding investments in property securities under the segment referred to as Investments.

The Fund and Property Management segment engages in funds and asset management as well as property services that include property management, leasing and general property consultancy. Management treats these operations as one “fee earning” operating segment.

The Investments segment includes interests in property related investments such as units in related party listed and unlisted unit trusts, loans and cash. It generates income from dividends, distributions, and interest.

The Corporate segment represents general administrative functions at the head office (e.g. salaries).

Transfer prices between business segments are set at an arm’s length basis.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

3. Segment Information (continued)

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

Year ended 30 June 2012 Sales to external customers Inter-segment sales Total segment revenue Inter-segment eliminations Total consolidated revenue Business operating expenses Depreciation Finance costs Loss on sale of investments Impairment Other expenses Inter-segment expenses Total segment expenses Inter-segment eliminations Total consolidated expenses Profit/(loss) before income tax Other comprehensive income / (loss) Net loss on available-for-sale financial assets Total comprehensive income / (loss) for the period before tax For the period 20 October 2010 to 30 June 2011 Sales to external customers Inter-segment sales Total segment revenue Inter-segment eliminations Total consolidated revenue Business operating expenses Depreciation Finance costs Loss on sale of investments Other expenses Inter-segment expenses Total segment expenses Inter-segment eliminations Total consolidated expenses Profit / (loss) before income tax Other comprehensive income / (loss) Foreign currency translation Net loss on available-for-sale financial assets Total comprehensive income / (loss) for the period before tax 30 June 2012 Segment assets Segment liabilities Net assets 30 June 2011 Segment assets Segment liabilities Net assets	Fund and Property Management $’000 Investments $’000 Corporate $’000 6,166 372 - 84 - -	Consolidated Total $’000 6,538 84
	6,250 372 - (3,757) (94) (1,040) (260) - - (60) - - - (44) - (400) (3,477) - (2) - (1) (84) - -	6,622 (84)
		6,538
		(4,891) (260) (60) (44) (3,877) (3) (84)
	(4,563) (3,615) (1,041)	(9,219) 84
		(9,135)
	1,687 (3,243) (1,041) - (32) -	(2,597) (32)
	1,687 (3,275) (1,041)	(2,629)
	3,743 98 - 531 - -	3,841 531
	4,274 98 - (2,026) (34) (438) (59) - - (25) - - - (15) - (8) - (3) (531) - -	4,372 (531)
		3,841
		(2,498) (59) (25) (15) (11) (531)
	(2,649) (49) (441)	(3,139) 531
		(2,608)
	1,625 49 (441)	1,233
	1 - - - (59) -	1 (59)
	1,626 (10) (441)	1,175
	3,734 7,401 - (1,903) - -	11,135 (1,903)
	1,831 7,401	9,232
	2,716 11,476 - (1,902) (103) -	14,192 (2,005)
	814 11,373 -	12,187

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

4. Revenue

Revenue
Note Revenue from continuing operation: Fund and asset management income Property management income Structuring and performance fee income Serviced office income Investment income - Dividends and distributions - Finance income Other revenue: Other income Gain on disposal of management rights 4(a) Gain / (loss) on exchange differences Total revenue	2012 $’000 20 October 2010 to 30 June 2011 $’000 2,746 1,426 2,073 1,383 - 595 787 338 344 89 32 7
	376 96 30 - 530 - (4) 3
	556 3
	6,538 3,841

(a) On 30 June 2012, the Group sold its management rights of BlackWall Pub Fund for a total consideration of $530,000. The consideration comprises $250,000 cash (refer to Note 8) and a 40% share in Bakehouse Cellars Pty Ltd (refer to Note 10).

5. Expenses

Business operating expenses: Employee & consultants’ costs Occupancy costs Administration expenses Depreciation Finance costs Impairment – writedown of loans and receivables – investment in P-REIT ncome Tax Expense Current tax Deferred tax Overprovision of prior year tax Total income tax expense	2012 $’000 20 October 2010 to 30 June 2011 $’000 3,008 1,822 1,007 456 876 220
	4,891 2,498 260 59 60 25 400 - 3,477 -
	3,877 - 2012 $’000 20 October 2010 to 30 June 2011 $’000 373 353 22 10 (26) (17)
	369 346

6. Income Tax Expense

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

6. Income Tax Expense (continued)

Prima facie tax payable on profit / (loss) from ordinary activities before income tax at 30% (2011: 30%) Add / (less) tax effect of: - Entertainment - Penalties - Impairment - Costs of issuing equity - Tax losses relating to foreign subsidiary not recognised - Overprovision of prior year tax Total income tax expense	2012 $’000 20 October 2010 to 30 June 2011 $’000 (779) 367 5 1 1 1 1,163 - (15) (8) 20 - (26) (15)
	369 346

Note the impairment loss on the Group’s investment in P-REIT ($3,476,661) has not been recognised as a deferred tax asset (Note 13) at this time. As a result the Group is still reporting a tax expense for the year ended 30 June 2012 despite reporting a loss before tax.

7.

Current Assets - Cash and Cash Equivalents

Cash on hand Cash at bank Total cash and cash equivalents	2012 $’000 2011 $’000 1 1 1,161 674
	1,162 675

(a) Effective interest rate

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

(b) Reconciliation of cash

Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the statement of financial position as follows:

Cash and cash equivalents Total cash and cash equivalents	2012 $’000 2011 $’000 1,162 675
	1,162 675

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

8. Current and Non-current Assets - Trade and Other Receivables

Current Notes Trade receivables, net of impairment: - Related parties - Other parties Total trade receivables Other receivables, net of impairment: - Related parties 8(a) - Other parties Total other receivables Total Current Trade and Other Receivables Non-Current Other receivables: - Related parties 8(a) Total Non-Current Other Receivables	2012 $’000 2011 $’000 244 143 621 534
	865 677 200 - 5 127
	205 127
	1,070 804
	2012 $’000 2011 $’000 50 -
	50 -

Further information relating to trade and other receivables to related parties is set out in Note 29. None of the receivables were impaired as at 30 June 2012 (2011: $nil).

(a) On 30 June 2012, the Group sold its management rights of BlackWall Pub Fund for a total consideration of $530,000, consisting of $250,000 cash and a 40% share in Bakehouse Cellars Pty Ltd (refer to Note 10). $200,000 cash is receivable within the next 12 months from the balance date (classified as current receivables) and the final cash receipt of $50,000 is receivable on 31 December 2013 (classified as non-current receivables).

9.

Current Assets - Other Assets Prepayments Total Other Assets	2012 $’000 2011 $’000 40 7
	40 7

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

10. Non-Current Assets - Equity Accounted Investments

Ownership Interest Name Principal Country of Incorporation 2012 % 2011 % APG Asset Management Pty Ltd Financial services and management company Australia 50 50 Pelathon Management Group Pty Ltd Pub management company Australia - 40 Bakehouse Cellars Pty Ltd Pub owner operator Australia 40 - Total equity accounted investments	Carrying Amount of Investment 2012 $’000 2011 $’000 5 5 - 100 280 -
	285 105

On 30 June 2012, the Group acquired a 40% interest in Bakehouse Cellars Pty Ltd, as part payment for the sale of management rights of the BlackWall Pub Fund. Bakehouse Cellars owns and operates a pub at the Bakehouse Quarter. Previously Bakehouse Cellars Pty Ltd was owned 100% by Pelathon Management Group Pty Ltd. As a result, $90,000 of the investment in Pelathon Management Group Pty Ltd was impaired as at 30 June 2012 (2011: $nil), and the investment in Pelathon is now classified as available-for-sale (Note 11).

11. Non-Current Assets - Financial Assets

Note Loans and receivables 11(a) Available-for-sale assets 11(b) Total non-current financial assets (a) Loans and receivables, net of impairment Loans and receivables to related parties Loans and receivables to non-related parties Total loans and receivables	2012 $’000 2011 $’000 47 742 7,364 10,733
	7,411 11,475
	47 741 - 1 47 742

$792,000 of loans and receivables were impaired as at 30 June 2012 (2011: $613,000). Further information relating to loans and receivables to related parties is set out in Note 29.

(b) Available-for-sale assets Bakehouse Bonds P-REIT Units Pelathon Management Group Pty Ltd BlackWall Storage Fund Units BlackWall Telstra House Trust Units BlackWall Pub Group Units Tankstream Property Investments Fund Units Total available-for-sale assets	5,059 5,000 1,717 4,372 10 - 111 783 104 520 219 58 144 - 7,364 10,733

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

11. Non-Current Assets - Financial Assets (continued)

Further information relating to loans and receivables to related parties is set out in Note 29.

The Group holds an investment in P-REIT which was listed on the Australian Securities Exchange (ASX) on 28 October 2011 (ASX code: PXT). TFML Limited (a subsidiary of the Group) acts as the responsible entity for P-REIT. Since listing the P-REIT unit price has traded well below its Net Tangible Assets (NTA) and was $0.10 at 30 June 2012. TFML (as P-REIT’s responsible entity) is a defendant in a Supreme Court action initiated by the MacarthurCook Property Securities Fund. The proceedings relate to a series of transactions entered into before TFML became responsible entity of P-REIT. On 10 August 2012 judgment was entered against TFML for approximately $17.8 million including pre-judgment court interest but excluding costs. TFML is appealing the decision, however given the judgement, the Directors consider that the investment in P-REIT is now impaired. This results in an impairment loss of approximately $3.5 million.

The Bakehouse Bonds are CPI linked debt instruments against a large scale mixed use property known as the Bakehouse Quarter in North Strathfield, Sydney. The Bonds’ face value of $5 million is indexed to CPI and the current value at 30 June 2012 is $5.059 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 available-for-sale assets are investments in various managed investment schemes that members of the Group act as responsible entity or investment manager for.

12. Non-Current Assets - Property, Plant and Equipment

Furniture, fixtures and fittings: - At cost - Less accumulated depreciation Office equipment: - At cost - Less accumulated depreciation Motor vehicles: - At cost - Less accumulated depreciation Total property, plant and equipment	2012 $’000 2011 $’000 987 592 (372) (29)
	615 563 177 116 (109) (25)
	68 91 - 28 - (5)
	- 23
	683 677

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

12. Non-Current Assets - Property, Plant and Equipment (continued)

30 June 2012 Balance at the beginning of year Additions Disposals Depreciation expense Balance at the end of year 30 June 2011 Balance at the beginning of period Additions Depreciation expense Balance at the end of period	Furniture, fixtures and fittings $’000 Office equipment $’000 Motor vehicles $’000 Total $’000 563 91 23 677 292 15 - 307 (18) - (23) (41) (222) (38) - (260)
	615 68 - 683
	- - - - 592 116 28 736 (29) (25) (5) (59)
	563 91 23 677

The majority of additions are in relation to the Group’s serviced office business (WT Serviced Offices) and the fit out of a new premise at the Bakehouse Quarter in North Strathfield.

13. Non-Current Assets - Deferred Tax Assets Deferred tax assets balance comprises: Employee entitlements Accrued income Accrued expenses Unearned income Prepayments Total deferred tax assets Movements: Balance at the beginning of year Credited / (charged) to the profit and loss Balance at the end of year	2012 $’000 2011 $’000 56 47 (23) (36) 27 20 - 5 - 2
	60 38
	38 - 22 38
	60 38

44 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

14. Non-Current Assets - Intangible Assets Goodwill: - At cost Total intangible assets 30 June 2012 Balance at the beginning of year Disposal Balance at the end of year 30 June 2011 Balance at the beginning of period Additions Balance at the end of period		2012 $’000 2011 $’000 374 411
		374 411
		Goodwill $’000 411 (37) 374 - 411 411

The recoverable amount of the operating business cash-generating units (CGUs) is determined based on value in use (‘VIU’) calculations. For the operating business CGUs, the assumptions used for determining the recoverable amount of each CGU are based on past experience and expectations for the future, utilising both internal and external sources of data.

No impairment arose as a result of the review of goodwill for the operating business CGUs for the year.

The following describes the key assumptions on which management has based its cash flow projections when determining VIU relating to the operating business CGUs.

Cash Flows

The VIU calculations use after-tax cash flow projections based on actual operating results, and financial forecasts covering a five year period which have been approved by management. These forecasts are based on management estimates to determine income, expenses, capital expenditure and cash flows for each CGU.

Growth Rate

The growth rate used to extrapolate the cash flows beyond the five-year period is 3%. The growth rate reflects the forecast long term average growth rate for each CGU.

Discount Rate

The discount rate applied to the cash flow projections is 10% (government bond rate of 4% plus a 6% risk factor).

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

15. Current Liabilities - Trade and Other Payables

Current Liabilities - Trade and Other Payables
Trade payables: - Related parties - Other parties Sundry payables and accrued expenses Rental income in advance Total trade and other payables	2012 $’000 2011 $’000 12 126 867 764
	879 890 50 86 21 17
	950 993

Further information relating to trade payables from related parties is set out in Note 29.

16. Current Liabilities - Current Tax Payable

Current Liabilities - Current Tax Payable
Income tax payable Total current tax payables Current and Non-current Liabilities - Borrowings Current Non-current Total borrowings	2012 $’000 2011 $’000 261 338
	261 338
	2012 $’000 2011 $’000 425 - - 450
	425 450

17. Current and Non-current Liabilities - Borrowings

The borrowings that are due on 30 November 2012 have now been classified as current liabilities. The Directors are confident that the borrowings will be extended after their expiry date. On 4 July 2012, the Group repaid $25,000 (shown as part of the current liabilities as at 30 June 2012) to reduce the borrowings to $400,000.

18. Current and Non-current Liabilities - Provisions

Current – employee benefits Non-current – employee benefits Total provisions 30 June 2012 Balance at the beginning of year Additional provisions recognised Balance at the end of year 30 June 2011 Balance at the beginning of period Additional provisions recognised Balance at the end of period	2012 $’000 2011 $’000 177 148 9 8	2012 $’000 2011 $’000 177 148 9 8
	186 156
		Provisions $’000 156 30
		186
		- 156
		156

The number of employees for the Group as at 30 June 2012 is 17 (2011: 18).

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

19. Non-current Liabilities - Other Payables

Tenant deposits Total other payables	2012 $’000 2011 $’000 81 68
	81 68

20. Share Capital

(a) Summary Table 51,326,021 (30 June 2011: 44,358,535) Ordinary Total issued capital (b) Movement in shares on issue At the beginning of reporting period Shares issued during the year At reporting date		2012 $’000 2011 $’000 11,367 11,286
		11,367 11,286
		2012 No. 2011 No. 44,358,535 - 6,967,486 44,358,535
		51,326,021 44,358,535

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At the shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

All shares are fully paid and have no par value.

21. Dividends

There were no dividends paid for the year ended 30 June 2012 (2011: $nil).

Franking credits available for the subsequent reporting periods based on a tax rate at 30% (2011: 30%)	Parent entity 2012 $’000 2011 $’000 672 388

The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for:

(a) franking credits that will arise from the payment of the amount of the provision for income tax,

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

22. Earnings / (Loss) Per Share

Basic and diluted earnings/(loss) per share
Calculated as follows:
Profit/(loss) attributable to the owners of the Group
Weighted average number of shares for basic and diluted
earnings per share
Auditors’ Remuneration
Remuneration of ESV (the auditor of the Group) for:
- auditing or reviewing the financial statements for the
Group
- taxation and compliance services
Total ESV remuneration
Remuneration of non-ESV firm for:
- auditing the financial statements for the Group
- other assurance services
- taxation and compliance services
Total non-ESV remuneration
Total auditors’ remuneration

2012
20 October 2010 to
30 June 2011
($0.06)
$0.02
($3,010,000)
$859,000
50,372,676
44,358,535
2012
$’000
20 October 2010 to
30 June 2011
$’000
62
38
13
5
75
43
18
3
6
-
3
-
27
3
102
46

23. Auditors’ Remuneration

24. Commitments

(a)Operating lease commitments

Operating leases relate to tenancy leases with lease terms of between 1 and 5 years. All operating lease contracts contain clauses for yearly CPI reviews.

Lease commitments payable: - payable within 1 year - payable within 2 – 5 years Total lease commitments payable	2012 $’000 2011 $’000 940 357 2,773 893
	3,713 1,250

(b) Capital lease commitments

No capital commitments were in existence as at 30 June 2012 (2011: Nil).

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

25. Reconciliation of Operating Cash Flows

Profit / (loss) for the year
Non-cash flows in profit:
Dividends and distributions
Unrealised loss / (gain) in foreign exchange
Gain on disposal of management rights
Depreciation
Loss on disposal of assets
Impairment
Changes in assets and liabilities:
(Increase)/decrease in trade receivables
(Increase)/decrease in other receivables
(Increase)/decrease in prepayments
(Increase)/decrease in related party loans
(Increase)/decrease in deferred tax balances
Increase/(decrease) in unearned revenue
Increase/(decrease) in trade payables and accruals
Increase/(decrease) in income taxes payable
Increase/(decrease) in provisions
Net cash flows from operating activities

2012
$’000
20 October 2010 to
30 June 2011
$’000
(2,966)
887
(74)
(84)
4
(3)
(530)
-
260
59
44
15
3,877
-
(114)
(117)
(9)
(108)
(33)
3
(8)
(138)
(22)
(4)
4
17
(34)
721
(78)
252
30
25

351
1,525

26. Contingent Liabilities and Contingent Assets

The Group had no contingencies as at 30 June 2012 (2011: Nil), except for the following:

The Group in its capacity as investment manager of the BlackWall Storage Fund ("BSF") is entitled to a performance fee based on the uplift in BSF’s underlying properties. The fee is payable on expiry of BSF which is October 2013. Current property valuations will result in a performance fee of around $1 million payable to BlackWall and its subsidiaries. Approximately $250,000 of this fee will be attributable to outside equity interests.

27. Subsequent Events

The Group holds an investment in P-REIT and an impairment loss of $3,476,661 of the P-REIT units was recognised based on the ASX closing price of $0.10 as at 30 June 2012 (refer to Note 11(b)). As at the date of signing these financial statements, the closing price is $0.076.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

28. Controlled Entities

Controlled Entities
	Country of
Name	incorporation	Percentage	Owned
		2012	2011
		%	%
Parent entity:
BlackWall Property Funds Limited	Australia	100	100
Subsidiaries of parent entity:
BlackWall Management Services Pty Ltd	Australia	100	100
Capital Storage Services Pty Ltd	Australia	51	51
TFML Limited	Australia	100	100
WTSO Pty Ltd	Australia	100	100

29. Related Party Transactions

(a) Related Entities, Associates and Joint Venture Entities, Managed Funds

The Group provides a wide range of corporate services to its related entities, associates, joint venture entities and managed funds.

Associates and Joint Venture Entities

Interests held in associates and joint venture entities by the Group are set out in Note 10 to the financial statements.

Managed Funds

The Group holds investments in a number of property funds for which it acts as either manager or responsible entity (refer to Note 11).

Fees and Transactions

Management fees are charged to these entities predominantly for property and fund management services. The management fees are paid under a management agreement and the fees charged are determined with reference to arm's length commercial rates.

These services principally relate to:

Investment management: provision of strategic investment advice, asset management and investment portfolio services.
Asset management: provision of property management services, property portfolio advisory services, maintenance and insurances, strategic advice and management supervision services, administration, marketing and risk management services.

The Group recharges its related entities, associates, joint venture entities and managed funds, for administration services which include accounting and bookkeeping fees, corporate secretarial services, and those expenses that are incurred by members of the Group on behalf of the related entities, associates, joint venture entities and managed funds.

In addition, the Group pays the following fees to related entities:

Rent for use of the Group's Bakehouse Quarter serviced offices and Neutral Bay head office and serviced office premises. The rent paid is determined with reference to arm's length commercial rates.
Consulting fees and recharges.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

29. Related Party Transactions (continued)

(a) Related Entities, Associates and Joint Venture Entities, Managed Funds (continued)

Other transactions and outstanding balances with related entities, associates, joint venture entities and managed funds relate to loans payable and receivable and distributions from managed funds.

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.

The following represents the transactions that occurred during the financial year and the balances outstanding at the year end between the Group and its related entities.

	2012	2011
	$’000	$’000
Revenue:
- Management fees and recharges	3,910	2,497
- Distribution from managed funds	71	88
- Interest	285	-
- Gains on disposal of management rights	530	-
Expenses:
- Rent and outgoings paid	945	417
- Consulting fees and recharges	117	-
Outstanding balances:
- Trade and other receivables (note 8)	494	143
- Loans receivables (note 11)	47	741
- Trade and other payables (note 15)	(12)	(126)

(b) Other related party transactions

Related party transactions that occurred during the year other than those described in Note 29(a) above are as follows:

Date of	*Purchaser/Seller ()**	Financial Assets	Shares /Units	Total
transaction			Purchased / (Sold)	Consideration
			No.	Paid/(Received)
				$’000
30 September 2011	JPS Properties Pty	BlackWall Storage	(356,000)	(392)
	Ltd/BlackWall	Fund
24 October 2011	BlackWall /Pelorus Private	P-REIT	200,000	60
	Equity Ltd
31 October 2011	BlackWall /Pelorus Private	P-REIT	2,400,000	720
	Equity Ltd
1 April 2012	BlackWall /P-REIT	BlackWall Storage	48,160	53
		Fund
29 June 2012	Alerik Pty Ltd/BlackWall	BlackWall Telstra	(400,000)	(400)
		House Trust

BlackWall includes both Blackwall Property Funds Ltd and its controlled entities.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

30. Parent Entity Disclosures

The following summarises the financial information of the Group’s parent entity, BlackWall Property Funds Limited, as at and for the year ended 30 June.

Results: Profit / (loss) after tax Other comprehensive income / (loss) after tax Total comprehensive income /(loss) after tax Financial position: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Share capital Retained earnings / (accumulated losses) Reserves Total equity	2012 $’000 2011 $’000 (2,592) 151 42 (42)
	(2,550) 109
	1,000 629 8,304 11,198
	9,304 11,827 (383) (432) - -
	(383) (432)
	8,921 11,395
	11,367 11,286 (2,446) 151 - (42)
	8,921 11,395

The parent entity had no contingencies or capital commitments at 30 June 2012 (2011: Nil).

31. Directors and Key Management Personnel

(a) Key management personnel relevant interests

Key management personnel include both Directors (refer Directors’ Report) and Tim Brown (Chief Financial Officer).

Key management personnel have relevant interests in shares of the Company as set out in the following table:

Joseph (Seph) Glew Robin Tedder Richard Hill Stuart Brown Tim Brown Total shareholding	Balance at 30 June 2011 No. ’000 Net change No. ’000 Balance at 30 June 2012 No. ’000* 7,472 (1,239) 6,233 1,779 - 1,779 1,644 - 1,644 672 6 678 65 18 83
	11,632 (1,215) 10,417

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

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

31. Directors and Key Management Personnel (continued)

(b) Key management personnel compensation

30 June 2012 Joseph (Seph) Glew Robin Tedder Richard Hill Stuart Brown Tim Brown 20 October 2010 to 30 June 2011 Joseph (Seph) Glew Robin Tedder Richard Hill Stuart Brown Tim Brown	Short-term benefits Post- employment benefits Total Directors’ fees $’000 Salary and other $’000 Superannuation $’000 $’000 75 - - 75 75 - - 75 85 - - 85 - 321 29 350 - 179 16 195
	235 500 45 780
	38 - - 38 38 - - 38 42 - - 42 - 161 14 175 - 88 8 96
	118 249 22 389

32. Financial Risk Management

(a) Financial risk management

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

This note presents information about the Group'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 has overall responsibility for the establishment and oversight of the risk management framework. It monitors the Group’s risk exposure by regularly reviewing finance and property markets.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

32. Financial Risk Management (continued)

(a) Financial risk management (continued)

The Group holds the following major financial instruments.

	2012	2011
	$’000	$’000
Financial assets
Cash and cash equivalents	1,162	675
Available-for-sale assets	7,364	10,733
Financial liabilities
Borrowings	425	450

(b) Market risk

(i) Foreign exchange risk

The Group has dealings with a company that operates in New Zealand however the exposure to foreign exchange risk is not material.

(ii) Interest rate risk

The Group has exposure to market risk for changes in variable interest rates on borrowings. The impact from movement in interest rates is not material based on the current borrowings balance. The major available-for-sale asset – the Group’s $5 million 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 the inflation and therefore affected by the inflation rate.

The weighted average effective interest rates for cash and borrowings were 3.5% (2011: 4.75%) and 7.53% (2011: 7.79%) respectively.

At 30 June, if interest rates had moved, with all other variables held constant, pre-tax profit would not be materially affected.

(iii) Price risk

The major exposure is the Group’s investments in P-REIT units and the Bakehouse Bonds. With all other variables held constant, the Bonds’ value will only decrease should the current property values in the Bakehouse Quarter decrease by more than 29%, which is highly unlikely.

In relation to investment in P-REIT, if the share price decreases by more than 10% this will result in an unrealised loss of $120,000.

(c) Credit risk

The Group 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.

54 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

32. Financial Risk Management (continued)

(d) Liquidity risk

The Group has borrowings that are due for renewal within 12 months. Management is confident that the borrowings will be renewed. In addition, the Group repaid $25,000 on 4 July 2012 to reduce the borrowings to $400,000. Refer to Note 17 for further details.

At 30 June 2012 Financial assets Cash and cash equivalents Trade and other receivables Loans and receivables Available-for-sale assets Financial liabilities Trade and other payables Borrowings At 30 June 2011 Financial assets Cash and cash equivalents Trade and other receivables Loans and receivables Available-for-sale assets Financial liabilities Trade and other payables Borrowings	Maturing within 1 year $’000 Maturing 1 – 5 years $’000 Maturing over 5 years $’000 Total $’000 1,162 - - 1,162 1,070 50 - 1,120 - 47 - 47 7,364 7,364
	2,232 97 7,364 9,693 950 - - 950 425 - - 425
	1,375 - - 1,375 675 - - 675 804 - - 804 - 742 - 742 10,733 10,733
	1,479 742 10,733 12,954 993 - - 993 - 450 - 450
	993 450 - 1,443

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

FINANCIAL STATEMENTS (continued)

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

32. Financial Risk Management (continued)

(e) Fair value measurements

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

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 or liability, either directly (as prices) or indirectly (derived from prices) (Level 2), and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The following table presents the Group’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	Level 2	Level 3	Total balance
	$’000	$’000	$’000	$’000
At 30 June 2012
Available-for-sale assets	1,717	588	5,059	7,364
At 30 June 2011
Available-for-sale assets	-	5,733	5,000	10,733

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 2012 Balance at the beginning of year Fair value movement Balance at the end of year At 30 June 2011 Balance at the beginning of period Purchases Balance at the end of period		Available-for-sale assets $’000 Level 3 Total $’000 5,000 5,000 59 59
		5,059 5,059 Available-for-sale assets $’000 Level 3 Total $’000 - - 5,000 5,000
		5,000 5,000

The fair vale of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1.

The fair value of available-for-sale financial assets that are not traded in active markets are based on published unit prices at year end (Level 2).

There were no transfers between Level 1, 2 and 3 financial instruments during the year, except for investments in P-REIT. It is now classified as Level 1 financial instrument as it is listed on the ASX (June 2011: Level 2).

For all other financial assets and liabilities, the carrying value is an approximation of fair value.

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

DIRECTORS’ DECLARATION

In the Directors’ opinion:

(a) the financial statements and notes set out on pages 21 to 56 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 consolidated entity’s financial position as at 30 June 2012 and of its performance for the financial year ended on that date, and
(b) there are reasonable grounds to believe that the Group 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 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.

==> picture [135 x 74] intentionally omitted <==

Stuart Brown

Director Sydney, 30 August 2012

BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

INDEPENDENT AUDITOR’S REPORT

==> picture [595 x 704] intentionally omitted <==

58 BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

INDEPENDENT AUDITOR’S REPORT (continued)

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BlackWall Property Funds - Consolidated Financial Statements For The Year Ended 30 June 2012

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& Controlled Entities ACN 146 935 131 ABN 37 146 935 131

Level 1, 50 Yeo Street, Neutral Bay, Sydney NSW 2089 Australia PO Box 612, Neutral Bay, Sydney NSW 2089 Australia

AI assistant

BLACKWALL LIMITED — Annual Report 2012

64590_rns_2012-08-30_fe156497-e867-4be9-a217-dc73737f2d58.pdf

**ASX

**Full

Results

Dividend

**Property

P-­‐REIT

Tankstream

**Funds

**More

**APPENDIX

**BlackWall

Dividends:

**Audit

& Controlled Entities

CONTENTS

Financial Statements

Principal Activities

Review of Operations

Significant Changes in Affairs

Dividends

Events Subsequent to Reporting Date and Likely Developments

Going Concern

Information on Directors

Information on Directors (continued)

Meeting Attendances

Directors’ Relevant Interests

Options

Environmental Regulation and Performance

Measurable Objectives For Achieving Gender Diversity

Indemnities of Officers

Non-audit Services

Auditor’s Independence Declaration

Auditor

Rounding Of Amounts

Remuneration Report (Audited)

Remuneration Report (Audited) (continued)

Remuneration for the year ended 30 June 2012

1. Shareholders

2. Distribution of Shareholders

3. Substantial Shareholders

GROUP DETAILS

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Comprehensive Income

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Financial Position

As at 30 June 2012

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Changes in Equity

As at 30 June 2012

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Consolidated Statement of Cash Flows

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

1. Statement of Significant Accounting Policies

Basis of Preparation

New and amended standards adopted by the Group

Going concern

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

Notes to the Consolidated Financial Statements

For the Year Ended 30 June 2012

Presentation of Financial Statements

Presentation currency

Principles of Consolidation

Controlled entities

Inter-company balances

Non-controlling interests

Foreign Currency Translation

Group companies

BlackWall Property Funds Limited and Controlled Entities

ABN 37 146 935 131

BLACKWALL LIMITED Annual Report 2012

P-‐REIT