A N N U A L R E P O R T 2 0 2 3 o W S nt N yrm d, P e R g rid B t n o m r y P 5 5 2 BlackWall Limited June 2023 and Other Comprehensive Income Contents 3 Directors’ Report 6 Statement of Profit or Loss 6 Balance Sheet 7 Statement of Cash Flows 8 Statement of Changes in Equity 9 Notes to the Financial Statements 20 Directors’ Report – Continued 24 Directors’ Declaration 25 Auditor’s Independence Declaration and Audit Report Directors’ Report Chairman’s Update and Review BlackWall (BWF) will pay a final dividend of 2.5 cents per share (cps) to bring the full year dividend to 5.0 cps fully franked. BlackWall net earnings from activities were $3.1 million (4.7cps) but after adjusting for the mark-to-market value of its investment in WOTSO Property (WOT) the group is reporting a statutory loss of $1.0 million. At balance date BlackWall held 16.9 million WOT securities which were marked down to a value of $1.14 per security (ps). The directors are confident in the future of WOT and are focused on the underlying value of its assets and the potential of the WOTSO business. We believe that WOT has an underlying NAV of $1.51 ps and are exploring options that might assist this value to be reflected in the market. We have also been reviewing the operations and structure of BlackWall and have resolved to make an offer to acquire Pelorus Private Equity Ltd (Pelorus). This was announced to the market on 24 August and will involve BlackWall offering 1 BWF share for every 3 Pelorus shares. Pelorus was previously listed on the ASX but de-listed in 2010 before splitting into a number of separate entities with BlackWall emerging from that process. Subsequent reductions in capital saw Pelorus left as an unlisted public company with net assets of $16 million and a value of 7cps. Through acquisitions and the growth in the value of assets Pelorus now has net assets of $60 million (excluding deferred taxes) and a value of 20cps. Pelorus has interests in several commercial properties and holds just under 20% of WOT in addition to investments in a number of start-up ventures. A pro forma balance sheet of the combined group is summarised on the next page. Should the takeover proceed total assets for the combined group grow to over $100 million assuming a WOT share price of $1.14ps. The current share price is $1.25ps which puts gross assets at $114 million and at $1.51ps this rises to $126 million. The acquisition of Pelorus is subject to acceptance by Pelorus shareholders and approvals at meetings to be held by BlackWall and WOTSO Property which we hope to achieve by the end of November. Assuming success with the Pelorus takeover, BlackWall will funds its management activities. focus on growing investment and J R (Seph) Glew Chairman BlackWall Limited June 2023 3 Transaction Balance Sheet Summaries The balance sheets below show BlackWall and Pelorus’ net assets at 30 June 2023 and the combined position should the transaction proceed. Some adjustments have been made to reflect our assessment of value of the businesses. The main adjustment being the inclusion of a valuation for the BlackWall fund and property management business that is not reflected in the financial statements under accounting standards. The adjustments are detailed below the table. Cash and receivables Fund and property management business valuation Investment in WOTSO Property Commercial property investments (BWF managed) Investment in IndigoBlack Other investments Employee loans Other assets Total Assets Trade and other payables Borrowings Provisions Total Liabilities Adjusted Net Assets Adjusted Net Assets per Share Reconciliation to Statutory Reports: Adjusted net assets Statutory Adjustments: Fund and property management business valuation Deferred tax liabilities Other assets Other liabilities Other investments - Indigoblack Construction Other investments - Teletrack Trade and other payables 1 4 5 3 5 1 2 3 3 4 5 5 June 23 BlackWall $’000 Notes Post Transaction Consolidated Pro-Forma $’000 6,477 20,000 55,420 21,643 1,000 1,633 2,227 83 108,483 718 5,000 1,034 6,752 June 23 Pelorus $’000 150 - 36,154 21,643 500 1,633 1,200 68 61,348 21 - 62 83 6,327 20,000 19,266 - 500 - 1,027 15 47,135 697 5,000 972 6,669 40,466 61,265 101,731 @ $0.60 ea @ $0.20 ea 40,466 61,265 (20,000) (1,710) 308 (329) (479) - - - (10,207) - - (478) 750 (750) Statutory Net Assets 18,256 50,580 Notes 1. A valuation of BlackWall’s fund and property management business has been added. 2. Total net assets have been adjusted to exclude the effects of deferred taxes. The deferred tax liability for Pelorus has yet to be finalised. 3. Effects of the leasing accounting standard have all been removed. 4. BlackWall’s and Pelorus’ investments in Indigoblack Construction are measured using the equity method. This has been adjusted to reflect an estimate of fair value. 5. Reflection of an option arrangement over one of Pelorus’ investment to show the net position. 4 5 5 P y r m o n t B r i d g e R d , P y r m o n t N S W BlackWall Limited June 2023 ers St, Adelaide S A d 3 Flin 2 7 & 2 1 2 BlackWall FY 23 Performance Review Profit or Loss Management fee income Transaction income Other (loss) / profit Revenue Total operating expenses Operating Profit Government COVID assistance Investment distributions received Funds From Activities WOT – unrealised loss Depreciation and finance costs (Loss) / Profit Before Tax Income tax benefit / (expense) (Loss) / Profit After Tax Commentary 2023 $’000 6,597 352 (39) 6,910 (4,855) 2,055 37 1,012 3,104 (4,221) (232) (1,349) 343 (1,006) 2022 $’000 5,739 634 (18) 6,355 (4,435) 1,920 223 968 3,111 (1,205) (50) 1,856 (210) 1,646 • Revenue increased by 9% largely due to growth in the number of properties managed by the group and the turnover of the WOTSO Flexspace business. • Investment distributions increased by 5%. WOT distributions are received as returns of capital due to tax losses contained in WOT and are not included in revenue but are shown in Funds From Activities above. • Statutory loss after tax driven by unrealised revaluations of holdings in WOT to the ASX price of $1.14 at 30 June 23. WOT’s net asset value is $1.51 per security. The investment segment as a result shows a loss of $4 million. • The Pyrmont Bridge Road Mortgage Fund was renewed during the year. It is secured over the asset that we manage at 55 Pyrmont Bridge Road in Pyrmont, NSW. We also manage the equity syndicate that owns the property. The Directors’ Report continues on page 20. BlackWall Limited June 2023 5 Financial Statements Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2023 Balance Sheet at 30 June 2023 Management fees Transaction income Associate (loss) / income Total Revenue Operating expenses Operating Profit Revaluation loss Government COVID stimulus Depreciation – property, plant and equipment Finance costs – interest expense (Loss) / Profit Before Income Tax Income tax benefit / (expense) (Loss) / Profit for the Year Other comprehensive income Note 2 2 2 4 3 11 5 Total (Loss) / Profit and Other Comprehensive (Loss) / Income Earnings Per Share 2023 $’000 6,597 352 (39) 6,910 (4,855) 2,055 (3,209) 37 (177) (55) (1,349) 343 (1,006) - (1,006) 2022 $’000 5,739 544 72 6,355 (4,435) 1,920 (237) 223 (44) (6) 1,856 (210) 1,646 - 1,646 (Loss) / Profit Attributable to the Ordinary Equity Holders: Basic (loss) / earnings per share Diluted (loss) / earnings per share 19 19 (1.5) cents (1.5) cents 2.5 cents 2.5 cents Assets Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-current Assets Investments Employee loans Investment using equity method Right of use lease asset Property, plant and equipment Total Non-current Assets Total Assets Liabilities Current Liabilities Trade and other payables Right of use lease liability Provision for employee benefits Provision for tax payable Borrowings Total Current Liabilities Non-current Liabilities Deferred tax liabilities Right of use lease liability Provision for employee benefits Total Non-current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Retained earnings Total Equity Statutory net assets per share Note 2023 $’000 2022 $’000 6 7 8 10 9 12 11 13 16 14 17 6 15 16 14 5,788 539 6,327 19,266 1,027 21 308 15 20,637 26,964 697 140 806 60 5,000 6,703 1,710 189 106 2,005 8,708 1,166 1,293 2,459 23,412 1,056 40 444 122 25,074 27,533 916 137 701 273 - 2,027 2,592 329 25 2,946 4,973 18,256 22,560 16,455 73 1,728 18,256 $0.27 16,447 73 6,040 22,560 $0.33 6 BlackWall Limited June 2023 Reconciliation of Operating Cash Flows (Loss) / Profit for the Year Non-Cash Flows in (Loss) / Profit: Unrealised loss Depreciation on right of use lease asset Depreciation on property, plant and equipment Interest expense on lease liability Equity accounted loss / (profit) Operating Cash Flows Before Movement in Working Capital Decrease / (increase) in trade and other receivables Decrease in deferred tax liabilities (Decrease) / increase in trade and other payables Decrease in income taxes payable Increase in provisions Net Cash Flows from Operating Activities 2023 $’000 (1,006) 3,209 136 177 16 39 2,571 754 (882) (219) (213) 186 2,197 2022 $’000 1,646 237 138 44 20 (253) 1,832 (961) (278) 434 (123) 222 1,126 Statement of Cash Flows for the year ended 30 June 2023 Cash Flows from Operating Activities Management fee receipts and recoveries Net interest received / (paid) Government COVID stimulus Payments to suppliers and employees Income tax paid Net Cash Flows from Operating Activities Cash Flows from / (used in) Investing Activities Returns of capital from WOT investment Proceeds on disposal of Gymea Bay investment Dividend received from IndigoBlack investment Investment in WOT securities Payment for property, plant and equipment Net Cash Flows from / (used in) Investing Activities Cash Flows from Financing Activities Loans received Proceeds from issue of shares Dividends paid to shareholders Rental payments Net Cash Flows from / (used in) Financing Activities Net Increase / (Decrease) in Cash Held Reconciliation of Cash Balances: Cash and cash equivalents at the beginning of the year Net increase / (decrease) in cash held Cash and Cash Equivalents at End of the Year All items inclusive of GST where applicable. Note 8 11 18 16 2023 $’000 8,292 42 37 (5,422) (752) 2,197 1,012 - - (75) (70) 867 5,009 8 (3,306) (153) 1,558 4,622 1,166 4,622 5,788 2022 $’000 5,690 (4) 223 (4,172) (611) 1,126 968 181 90 (2,015) (25) (801) - 1,311 (3,450) (153) (2,292) (1,967) 3,133 (1,967) 1,166 7 BlackWall Limited June 2023 Statement of Changes in Equity for the year ended 30 June 2023 No. of Shares on Issue Issued Capital $’000 Retained Earnings $’000 Balance at 1 July 2022 Loss for the year Other comprehensive income Total Comprehensive Loss for the Year Transactions with Owners in Their Capacity as Owners: Dividend paid Issue of shares Total Transactions with Owners Balance at 30 June 2023 Balance at 1 July 2021 Profit for the year Other comprehensive income Total Comprehensive Income for the Year Transactions with Owners in Their Capacity as Owners: Dividend paid Issue of shares Total Transactions with Owners Balance at 30 June 2022 Share Capital and Reserves (a) Summary Table 67,480,237 ordinary shares (June 2022: 67,466,445) Total (b) Movement in Shares on Issue Number of Shares At the beginning of reporting period Issue of shares under employee share scheme Issue of shares under options scheme At Reporting Date 8 67,466,445 16,447 - - - - 13,792 13,792 67,480,237 63,141,445 - - - - 4,325,000 4,325,000 67,466,445 - - - - 8 8 16,455 14,080 - - - - 2,367 2,367 16,447 6,040 (1,006) - (1,006) (3,306) - (3,306) 1,728 7,844 1,646 - 1,646 (3,450) - (3,450) 6,040 Reserves $’000 73 - - - - - - 73 73 - - - - - - 73 Total $’000 22,560 (1,006) - (1,006) (3,306) 8 (3,298) 18,256 21,997 1,646 - 1,646 (3,450) 2,367 (1,083) 22,560 No further shares have been issued since 30 June 2023. No amounts are unpaid on any of the shares. Ordinary shares participate in dividends. All ordinary shares carry one vote per share without restriction. All shares are 2023 $’000 16,455 16,455 2022 $’000 16,447 16,447 fully paid. (c) Reserves Share options reserve 2022 No. Total 2023 $’000 73 73 2022 $’000 73 73 The following options are on issue at the date of this report: 2023 No. 67,466,445 13,792 - 63,141,445 - 4,325,000 Options 67,480,237 67,466,445 Employee and Directors options Expiry Date Exercise Price 5 October 2023 $0.55 Number 475,000 BlackWall Limited June 2023 Notes to the Financial Statements 1. Segment Information The segment information for the group is as follows. For information on segment reporting, refer to the Statement of Significant Accounting Policies note for more details. Revenue $’000 Distribution Received $’000 COVID Stimulus $’000 Operating Expense $’000 Funds From Activities $’000 Revaluation (Loss) $’000 Interest and Depn $’000 Profit or Loss 2023 BlackWall Investments Corporate Total Operations Profit or Loss 2022 BlackWall Investments Corporate Total Operations Balance Sheet 2023 BlackWall Investments Corporate Consolidated Balance Sheet 2022 BlackWall Investments Corporate Consolidated 6,949 (39) - 6,910 6,102 253 - 6,355 - 1,012* - 1,012 - 968 - 968 37 - - 37 223 - - 223 (3,464) (719) (672) (4,855) (3,071) (607) (757) (4,435) 3,522 254 (672) 3,104 3,254 614 (757) 3,111 - (4,221) - (4,221) - (1,205) - (1,205) Assets $’000 2,976 23,988 - 26,964 Assets $’000 4,013 23,520 - 27,533 * Refer to Note 3 for further information on the revaluation loss and distributions received as returns of capital during the year. Pre-tax Profit $’000 3,345 (4,022) (672) (1,349) 3,210 (597) (757) 1,856 (177) (55) - (232) (44) (6) - (50) Liabilities $’000 (1,955) (6,711) (42) (8,708) Liabilities $’000 (2,103) (2,597) (273) (4,973) Net Assets $’000 1,021 17,277 (42) 18,256 Net Assets $’000 1,910 20,923 (273) 22,560 9 BlackWall Limited June 2023 2. Revenue Revenue is earned through management and transaction fees from real estate investment structures. Fund management fees Property management fees Project management fees Leasing fees Expense recovery and other fees Management Fees Total Transaction fee - Asset acquisitions Transaction fee - Debt establishment fee Transaction fee - Restructure fee Transaction fee - Asset disposal Transaction income - Gymea Bay Transaction Income Total Associate - share of comprehensive (loss) / income Total Revenue Timing of revenue recognition: - Management fees incurred over time - Transaction income at a point in time 2023 $’000 3,840 741 611 475 930 6,597 214 118 20 - - 352 (39) 6,910 6,597 313 6,910 2022 $’000 3,161 693 762 214 909 5,739 328 - - 35 181 544 72 6,355 5,739 616 6,355 4. Operating Expenses Employee and consultant expenses Other operating expenses Depreciation - right of use assets Lease interest costs Total 5. Income Tax (Benefit) / Expense Current tax Deferred tax Total Prima facie tax (receivable) / payable on (loss) / profit from ordinary activities before income tax at 25.0% (2022: 25.0%) Add / (less) tax effect of: Non-deductible items Over provision in prior years Total 2023 $’000 3,567 1,137 136 15 4,855 2023 $’000 539 (882) (343) (337) (6) - (343) 2022 $’000 3,330 947 138 20 4,435 2022 $’000 488 (278) 210 464 (226) (28) 210 The Associate income is the share of losses from BWF’s investment in the construction business of IndigoBlack. See Note 9 for further information. 3. Unrealised Loss on Investments WOT distribution received as return of capital WOT mark to market loss from share price Total 2023 $’000 1,012 (4,221) (3,209) 2022 $’000 968 (1,205) (237) During FY 2023 the group received $1.012 million in WOT distributions as returns of capital, which have been applied as a reduction to the cost of the investment. The unrealised loss of $4.2 million re-values the group’s investment based on the Australian Securities Exchange (ASX) price of WOT securities at 30 June of $1.14 6. Cash, Cash Equivalents and Borrowings The group is holding $5 million in cash on deposit that was received through a related party borrowing for the same amount (2022: $nil). The related party loan has a margin of 2.5% over the cash rate. The deposit is currently earning interest at a rate of 4.85%. 7. Trade and Other Receivables Trade receivables: Related parties Total Trade Receivables Other receivables Total 2023 $’000 534 534 5 539 2022 $’000 1,289 1,289 4 1,293 per security and therefore includes $1.012 million received in cash. For additional information refer to Note 8. Further information relating to trade receivables from related parties is set out in Note 24. None of the receivables were impaired as at 30 June 2023 (2022: $nil). 10 BlackWall Limited June 2023 8. Investments 11. Property, Plant and Equipment WOTSO Property is listed on the ASX under the code “WOT”. At 30 June 2023, WOT was quoted at $1.14 per security on the ASX (2022: $1.39 per security). A reconciliation of investments is set out below: June 2023 Balance at the beginning of the year Return of capital Purchase of additional units Mark to market valuation Balance at the End of the Year June 2022 Balance at the beginning of the year Return of capital Purchase of additional units Mark to market valuation Balance at the End of the Year 9. Equity Accounted Investments Investee IndigoBlack Construction & OCD 2023 Ownership % 25 2022 Ownership % 25 Carrying amount at beginning of year Share of comprehensive (loss) / income Dividend repaid / (received) Disposal of investments Carrying Amount at End of Year 10. Employee Loans At cost Less accumulated depreciation Total Written Down Value Carrying amount at the beginning of year Additions Depreciation expense Carrying Amount at the End of Year 12. Right of Use Lease Asset Right of use lease asset Less: Accumulated depreciation Written Down Value of Right of Use Lease Assets WOT $’000 23,412 (1,012) 75 (3,209) 19,266 22,602 (968) 2,015 (237) 23,412 2023 $’000 994 (979) 15 2023 $’000 122 70 (177) 15 2023 $’000 773 (465) 308 2022 $’000 924 (802) 122 2022 $’000 141 25 (44) 122 2022 $’000 773 (329) 444 2023 $’000 21 21 2022 $’000 40 40 Total 2023 $’000 40 (39) 20 - Total 2022 $’000 58 253 (90) (181) 21 40 BWF leases its head office located in Neutral Bay, NSW. BWF has entered into an option agreement with its Neutral Bay landlord that if exercised is expected to see its lease terminated. An option fee of $10,000 was received in 2021, and a further $490,000 is receivable if the option is exercised. In September 2022 the option period was extended by 12 months. If the option is exercised in September 2023, the remaining fee is payable 6 months later, and the group will relocate to the Cremorne property that is owned by the WOT Property Group. 13. Trade and Other Payables Trade payables: Other parties Related parties Total Trade Payables Sundry payables and accrued expenses Total Further information relating to trade payables to related parties is set out in Note 24. 2023 $’000 2022 $’000 530 29 559 138 697 680 102 782 134 916 11 Loans have been made to Directors and employees for them to acquire shares under the employee share scheme. The loans attract interest at a rate equivalent to the deemed ATO loan interest rate and are secured against the shares. All dividends received in relation to the secured shares are used to repay the loans. At 30 June 2023, $1.0 million in loans have been issued to employees of the group (2022: $1.1 million). BlackWall Limited June 2023 14. Provisions Current – employee benefits Non-current – employee benefits Total Provisions Balance at the beginning of year Net additional provision increase Balance at the End of Year The number of BWF employees as at 30 June 2023 was 21 (2022: 21). 15. Deferred Tax Liabilities Deferred Tax Liabilities / (Assets) Balance Comprises: Financial assets Provision for employee benefits Accrued expenses Lease assets Total Movements: Balance at the beginning of year Charged to profit and loss Balance at the End of Year 16. Lease Liabilities Opening balance Interest charged Repayments Modifications Total Lease Liabilities Current Non-current Total 12 2023 $’000 806 106 912 726 186 912 2023 $’000 1,970 (228) (27) (5) 1,710 2,592 (882) 1,710 2023 $’000 466 16 (153) - 329 140 189 329 2022 $’000 701 25 726 504 222 726 2022 $’000 2,801 (182) (21) (6) 2,592 2,870 (278) 2,592 2022 $’000 596 20 (153) 3 466 137 329 466 17. Provision for Tax Payable Payable at the beginning of year Current year tax liability Payments made Over provision in prior years Payable at the End of Year 18. Dividends 2023 $’000 273 539 (752) - 60 Fully franked dividends paid to shareholders during the financial year were as follows: 2022 final dividend of 2.4 cents paid on 8 September 2022 (2021 final: 2.6 cents) 2023 interim dividend of 2.5 cents paid on 21 March 2023 (2022 interim: 2.6 cents) Total 2023 $’000 1,619 1,687 3,306 2022 $’000 396 516 (611) (28) 273 2022 $’000 1,696 1,754 3,450 In addition, the Board has declared a final fully franked dividend of 2.5 cents per share to be paid on 30 November 2023. Franking credits available for subsequent periods based on a tax rate of 25.0% (2022: 25.0%) 2023 $’000 1,170 2022 $’000 1,437 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. 19. Earnings Per Share Basic (loss) / earnings per share Diluted (loss) / earnings per share Calculated as follows: (Loss) / Profit attributable to the owners of the group Weighted average number of shares for basic EPS Weighted average number of shares for diluted EPS 2023 (1.5) cents (1.5) cents 2022 2.5 cents 2.5 cents ($1,006,000) 67,469,770 67,523,399 $1,646,000 65,629,785 65,704,671 BlackWall Limited June 2023 20. Auditor’s Remuneration Remuneration of ESV for: Audit and assurance services Taxation services Other audit of AFSL and compliance plans Total 21. Contingencies 2023 $ 42,950 9,150 24,270 76,370 2022 $ 43,000 11,050 24,200 78,250 Associates Interests held in associates by the group are set out in Note 9. Managed Funds The group holds investments in a number of property funds for which it acts as either manager or responsible entity. 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. The group had no contingent assets or liabilities at 30 June 2023 (2022: $nil). These services principally relate to: 22. Subsequent Events The Board has declared a final fully franked dividend of 2.5 cps to be paid on 30 November 2023. • funds management: provision of strategic investment advice, asset management and investment portfolio services; and • property management: property portfolio advisory services, maintenance and insurances, strategic advice and management supervision services, administration, leasing, project management, On 24 August 2023 BlackWall announced an intention to make a takeover bid for Pelorus Private Equity Limited. marketing and risk management services. Further details are contained in the announcement and in the Directors’ report. The group recharges its related parties, associates and managed funds for administration services which To the best of the Directors’ knowledge, since the end of the financial year there have been no other matters or include accounting and bookkeeping fees, corporate secretarial services and those expenses that are incurred circumstances that have materially affected the group’s operations or may materially affect its operations, state by members of the group on behalf of the related parties, associates and managed funds. In addition, the group of affairs or the results of operations in future financial years. pays the following fees to related entities: 23. Controlled Entities Name Parent Entity: BlackWall Limited Subsidiaries of Parent Entity: BlackWall Management Services Pty Ltd BlackWall Fund Services Limited Bakehouse Management Pty Ltd Bakehouse Quarter Trust BlackWall Management (NZ) Ltd Country of Incorporation Australia Australia Australia Australia Australia New Zealand Percentage Owned 2023 (%) 2022 (%) n/a 100 100 100 100 - n/a 100 100 100 100 100 24. Related Party Transactions (a) Related Parties, Associates, Managed Funds In these financial statements, related parties are parties as defined by AASB 124 Related Party Disclosures rather than the definition of related parties under the Corporations Act 2001 and ASX Listing Rules. • rent for BWF head office. The rent paid is determined with reference to arm’s length commercial rates; and • director fees. Other transactions and outstanding balances with related parties, associates and managed funds relate to loans payable and receivable and distributions from managed funds. All transactions with related parties were made on arm’s length commercial terms and conditions, at market rates, and were approved by the Board where applicable. The following table discloses the revenue and expenses between related parties as well as the balances outstanding at year end between BWF and its related parties. Revenue: Management fees Transaction and performance fees Distribution / returns of capital from funds Expenses: Rent and outgoings paid Outstanding Balances: Trade and other receivables – current Employee loans Trade and other payables – current Loan payable 2023 $ 2022 $ 5,909,612 340,057 992,299 4,999,788 387,650 968,307 192,952 180,744 533,745 1,026,643 28,887 5,000,000 1,288,708 1,055,530 101,751 - 13 BlackWall Limited June 2023 (b) Interests in Related Parties As at year end the group owned units in the following related entities: 26. Financial Risk Management Entity WOT Holdings 2023 No. 2022 No. 16,900,000 16,843,284 Distribution / Returns of Capital 2023 $ 1,012,000 1,012,000 2022 $ 968,307 968,307 (a) Financial Risk Management The main risks the group is exposed to through its financial instruments are market risks (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, its 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 (c) Key Management Personnel Compensation Total remuneration paid 2023 $ 2022 $ 1,020,000 970,000 risk exposure by regularly reviewing finance and property markets. The group holds the following major financial instruments: Detailed remuneration disclosures and relevant interests are provided in the Directors’ Report. 25. Parent Entity Information Results: Profit after tax Total Comprehensive Income After Tax Financial Position: Current assets Non-current assets Total Assets Current liabilities Non-current liabilities Total Liabilities Net Assets Share capital Accumulated losses Reserves Total Equity 2023 $’000 2022 $’000 Financial Assets Cash and cash equivalents Investment in WOT Employee loans Financial Liabilities Trade and other payables Lease liabilities Borrowings 2023 $’000 5,788 19,266 1,027 697 329 5,000 2022 $’000 1,166 23,412 1,056 916 466 - (b) Sensitivity Analysis The group is exposed to interest rate risk. In relation to interest rate risk, if interest rates on borrowings were to increase or decrease by 1%, profit after tax would increase or decrease by $35,000. 368 368 298 1,096 1,394 (873) (3,179) (4,052) The investment in WOT securities is subject to price risk. A 10% decrease in the ASX trading price (from the (2,658) 16,447 (19,164) 59 (2,658) price at 30 June 2023, being $1.14 per security) would result in an unrealised loss after tax of $1,144,950. (c) Capital Management The group’s objectives when managing capital are to: • safeguard its ability to continue as a going concern, so that it can continue to provide returns for 831 831 22 1,316 1,338 (391) (6,073) (6,464) (5,126) 16,455 (21,640) 59 (5,126) The parent entity had no contingencies or capital commitments at 30 June 2023 (2022: $nil). The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 28. shareholders and benefits for other stakeholders, and • maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, issue new shares, buy-back shares, purchase or sell assets. 14 BlackWall Limited June 2023 (d) Liquidity Risk At 30 June 2023 Financial Liabilities Trade and other payables Lease liabilities Borrowings At 30 June 2022 Financial Liabilities Trade and other payables Lease liabilities Maturing within 1 Year $’000 Maturing within 2-5 Years $’000 Maturing in 5 or more Years $’000 697 140 5,000 5,837 916 137 1,053 - 189 - 189 - 329 329 - - - - - - - Total $’000 697 329 5,000 6,026 916 466 1,382 (e) Fair Value Measurements (i) Fair Value Hierarchy The group classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making measurements. The fair value hierarchy has the following levels: (ii) Valuation Techniques Used To Derive Level 3 Fair Values There are currently no Level 3 financial assets. The fair value of the financial assets are usually determined by reference to the net assets of the underlying entities. (iii) Fair Value Measurements Using Significant Observable Inputs (Level 3) There were no balances classified as Level 3 financial assets during the year. There were no transfers between Level 1, 2 and 3 during the year. 27. Critical Accounting Estimates and Judgements The Directors evaluate estimates and judgements 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 in economic data, obtained both externally and within the group. 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. Key Estimates – Financial Assets Investments in listed securities have been classified as financial assets and movements in fair value are recognised through the profit or loss statement. The fair value of the listed securities is based on the closing • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities; price from the ASX as at the reporting date. • Level 2 – 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); and 28. Statement of Significant Accounting Policies • Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). BlackWall Limited is a publicly listed company, incorporated and domiciled in Australia. The financial statements for the group were authorised for issue in accordance with a resolution of the Directors on the date they were issued. The fair value of financial assets traded in active markets is subsequently based on their quoted market prices at the end of the reporting period without any deduction for estimated future selling costs. The quoted market price used for financial assets held by the group is the current bid price. The following table presents the group’s financial assets measured at fair value as at 30 June. Refer to Note 27 for further details of assumptions used and how fair values are measured. 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 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 At 30 June 2023 Investment in WOT At 30 June 2022 Investment in WOT Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 basis of accounting has been applied. 19,266 23,412 - - - - 19,266 23,412 BWF is a group of the kind referred to in ASIC Instrument 2016/191 and, in accordance with that Instrument, 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. 15 BlackWall Limited June 2023 Going Concern The financial statements have been prepared on a going concern basis, which contemplates continuity of normal Intercompany Balances All intercompany balances and transactions between entities in the group, including any unrealised profits or business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where BWF is in a net current liability position of $376,000 at 30 June 2023. The borrowings of $5 million are classified as current due to the demand nature of the loan and cash is held on hand that offsets these borrowings. Further, the group has $19.3 million of listed WOT securities that can be readily converted to cash. Segment Reporting AASB 8 Operating Segments 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 necessary to ensure consistencies with those policies applied by the parent entity. Associates Interests in associates are accounted for using the equity method. Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group’s share of the post acquisition profits or losses of the investee in profit or loss. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. resources to the segment and to assess its performance. The group’s primary format for segment reporting When the group’s share of losses in an equity accounted investment equals or exceeds its interest in the entity, is based on business segments. The business segments are determined based on the group management including any other unsecured long-term receivables, the group does not recognise further losses, unless it has and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a incurred obligations or made payments on behalf of the other entity. The carrying amount of equity accounted segment as well as those that can be allocated on a reasonable basis. The operating businesses are organised investments is tested for impairment in accordance with these policies. 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: BlackWall, Investments, and Corporate. Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any The BlackWall segment engages in funds and asset management as well as property services that include accumulated depreciation and impairment losses. property management, leasing and general property consultancy. Income earned by the segment includes Plant and equipment are measured on the cost basis less accumulated depreciation and impairment losses. recurring income from fund and asset management mandates and transaction-based income typically related The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of to those mandates. Management treats these operations as one fee earning operating segment. The assets an item if it is probable that the future economic benefits embodied within the part will flow to the group and its assigned to the segment are those it is required to hold to comply with its AFSL capital adequacy requirements. cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day- 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 relates to company taxation and selected corporate overheads. 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 Presentation of Financial Statements Both the functional and presentation currency of BWF and its Australian subsidiaries is Australian dollars. the group commencing from the time the asset is held ready for use. The estimated useful lives used for each class of depreciable assets are: Principles of Consolidation The consolidated financial statements comprise the financial statements of BWF and its subsidiaries. A list Furniture, fixtures and fittings Office equipment 2 to 10 years 4 to 10 years of controlled entities is contained in Note 23. All controlled entities have a June financial year end and use Right of use assets are depreciated on a straight-line basis, with reference to the remaining lease term, including consistent accounting policies. Investments in subsidiaries held by the group are accounted for at cost, less options to extend if reasonably certain to extend the lease term. any impairment charges (refer to Note 25). Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. 16 The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. BlackWall Limited June 2023 Disposal An item of property, plant and equipment is derecognised upon disposal or when no further economic benefits Financial Assets All financial assets at FVTPL have been classified as financial assets, with gains and losses recognised in profit are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is or loss. The group classifies its financial assets in the following measurement categories: those to be measured subsequently at fair value and those to be measured at amortised cost. The classification depends on the group’s business model for managing the financial assets and the contractual terms of the cash flows. derecognised. (i) Equity Investments All equity investments are measured at fair value. Equity investments that are held for trading are measured at 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. fair value through profit or loss. (ii) Loans and Receivables 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 profit and loss. 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 Loans and receivables including loans to related parties 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. 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 receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. between its carrying amount, and the present value of the estimated future cash flows discounted at the original Non-derivative financial instruments are recognised at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non- derivative financial instruments are measured as described below. Recognition A financial instrument is recognised if the 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. 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 profit or loss. 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. 17 BlackWall Limited June 2023 Financial Liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal Short Term Benefits Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting payments and amortisation. 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 Investments in Associates Investments in associate companies are recognised in the financial statements by applying the equity method on-costs. 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 Revenue BWF Property Fees include management fees and transaction fees. They are recognised when it becomes have control or joint control over those policies. legally due and payable to the group. 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. 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 credit loss impairment 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. Investment Income Finance income comprises interest on funds invested and gains on the disposal of financial assets. Interest income is recognised as interest accrues using the effective interest method. Dividend and distribution revenue is recognised when the right to receive income has been established. In-specie distributions and returns of capital are brought on to the balance sheet by an adjustment in the carrying value of the relevant investment and then reflected in the profit and loss as an unrealised gain. All revenue is stated net of the amount of GST. Leases AASB 16 was adopted by the group on 1 July 2019, applying the modified retrospective approach. Right of use assets and liabilities are recognised for all leases with a lease term of more than 12 months; unless the underlying asset is of a low value. Initial recognition of both the right of use asset and corresponding lease liability is calculated using the present value of remaining lease payments; discounted using the rate implicit in the lease or, if not easily determinable, the lessee’s incremental borrowing rate. The right of use asset is adjusted for any prepaid or accrued lease payments or onerous lease contracts. 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. 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 Employee Benefits Other Long Term Employee Benefits The group’s net obligation in respect of long term employee benefits 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. 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. 18 BlackWall Limited June 2023 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 GST Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised credited directly to equity, in which case the deferred tax is adjusted directly against equity. as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities the balance sheet are shown inclusive of GST. and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets investing and financing activities, which are disclosed as operating cash flows. 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 BWF 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 BWF. In addition to its own current and deferred tax amounts, BWF also recognises the current tax liabilities (or assets) Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends The final dividend for June period is declared and authorised after the end of the reporting period, therefore provision for dividend is not booked in the current year accounts. EPS The group presents basic and diluted 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. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Any change of presentation has been made in order to make the and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled financial statements more relevant and useful to the user. 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 New Accounting Standards and Interpretations BWF has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those of the previous financial year. Several amendments apply for the first time in the current year. However, they do not impact the annual consolidated financial statements of the group. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Based on our preliminary assessment, amounts receivable from or payable to other entities in the group. we do not expect them to have a material impact on the group. 19 BlackWall Limited June 2023 Directors’ Report Continued ASX Additional Information Additional information required by the ASX and not shown elsewhere in this report is as follows. The shareholder information set out below was current as at 27 July 2023. 2. Distribution of Shareholders The distribution of shareholders by size of holding was: Category 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Number of Shareholders No. of Shareholders 290 460 212 301 62 1,325 1. Shareholders The group’s top 20 largest shareholdings were: Investor 1 Seno Management Pty Ltd 2 Vintage Capital Pty Limited 3 Lymkeesh Pty Ltd 4 Frogstorm Pty Ltd5 National Nominees Limited 6 Sandhurst Trustees Ltd 7 Glenahilty Pty Ltd 8 Koonta Pty Ltd 9 Sao Investments Pty Ltd 10 Kiut Investments Pty Ltd 11 Frolic Events Pty Ltd 12 Bin24 Business Advisors Pty Limited 13 Maloo Investments Pty Ltd 14 Pinnatus Pty Ltd 15 Mr Richard Hill & Mrs Evelyn Hill 16 Frolic Events Pty Ltd 17 Oyama Pty Limited 18 Mr Archibald Geoffrey Loudon 19 Tampopo Pty Ltd 20 Netwealth Investments Limited 20 BWF has 67,480,237 ordinary shares on issue. All shares carry one vote per share without restrictions. All shares are quoted on the Australian Securities Exchange (ASX: BWF). Shares No. Shares % 6,215,000 5,759,943 4,304,742 3,400,000 3,165,000 2,762,000 2,724,515 2,550,985 2,225,000 1,976,175 1,960,000 1,950,000 1,464,370 1,178,434 1,151,295 1,000,000 1,000,000 986,973 777,983 633,310 9.21 8.54 6.38 5.04 4.69 4.09 4.04 3.78 3.30 2.93 2.90 2.89 2.17 1.75 1.71 1.48 1.48 1.46 1.15 0.94 3. Substantial Shareholders BWF’s substantial shareholders are set out below: Investor Seph Glew Paul Tresidder Robin Tedder Pelorus Private Equity Limited Archibald Geoffrey Loudon Stuart Brown Shares No. Shares % 10,613,667 8,703,155 8,518,282 4,175,000 4,080,959 4,000,000 15.73 12.90 12.62 6.19 6.05 5.93 4. Directors’ and KMPs’ Relevant Interests Details of each KMP’s relevant interests in BWF is shown below: Investor Timothy Brown (Joint MD and CFO) Jessica Glew (Joint MD and COO) Seph Glew (Non-Executive Chairman) Richard Hill (Non-Executive Director) Robin Tedder (Non-Executive Director) 1 August 2022 2,960,000 2,050,178 10,582,667 1,969,278 8,495,017 Net Change - 9,458 31,000 - 23,265 27 July 2023 2,960,000 2,059,636 10,613,667 1,969,278 8,518,282 Total 26,057,140 63,723 26,120,863 BlackWall Limited June 2023 Business Risks You should be aware that investment in BWF carries material risks and that several factors may affect future value and any dividends, many of which are beyond the control of the group. Many of these risks are inherited Material Business Risk Technology Changes and Innovation from the underlying assets and the performance of the funds that BWF manages. Acquiring and holding shares in the group therefore involves risks and, while not exhaustive, some of these risks are set out in this section. Material Business Risk Potential Impact Management Plan Inflation The majority of the property we manage is contracted on a gross lease basis. This exposes BWF to the risk that property outgoings (for example, energy, financing, services and labour) may increase faster than income and therefore impact our fee revenue. This is a risk we have accepted as mismatches in income and expenses are a normal property risk and are expected to balance out over time. Lease ratchets, along with CPI adjustment clauses, alleviate a large portion of the risk. Material Business Risk Changes in the Commercial Property Market Potential Impact Management Plan As BWF derives income from management and transaction fees that are linked to the commercial property market, changes in that market may impact cashflow. BWF has little control over changes in the commercial property market it manages but monitors movements in the market and considers the funds it manages in light of these movements. Potential Impact Management Plan Rapid advancements in technology may cause BWF to be less competitive in the market. Management continually monitors industry trends to remain at the forefront of new technologies and innovation, while investing in relevant technology as necessary. Material Business Risk Discontinuation of Financial Support for Businesses Potential Impact Management Plan Tenant insolvencies may cause a significant negative impact on BWF’s fee revenue and financial position. BWF takes appropriate measures to manage its revenue streams and cash reserves. Additionally, BWF continually monitors the financial health of tenants and parties to mitigate the risk of potential insolvencies. Material Business Risk Employee Recruitment and Retention Potential Impact Management Plan The tightening labour market and upward pressure on wages impacts the day-to- day operation of our business. We continually review our remuneration and rewards and training programs with the aim of being a competitive and attractive employer. Material Business Risk Cyber Risk Material Business Risk Legislative and Regulatory Changes Potential Impact Increased costs and compliance risk associated with adhering to regulatory requirements. As with most businesses we do have cyber risks that we cannot eliminate entirely but our risks are relatively small and we perform regular system reviews to ensure sensitive information is properly stored or destroyed. BWF monitors changes to legislation and regulatory requirements and adjusts its operations accordingly. Management Plan We hold specific cyber insurance policies that provide cover in the event of a cyber attack/breach. Potential Impact Management Plan Material Business Risk Climate Change and Climate Related Events Material Business Risk Macroeconomic Factors Potential Impact Climate change related weather events could cause substantial damage to the assets BWF manages. In this scenario BWF’s ability to charge fees during this time may be hampered. Potential Impact Threat of domestic and global recession, ongoing impacts of COVID and investor sentiment are some of the primary macroeconomic considerations that may impact our business. Management Plan BWF ultimately has no control over this risk but continues to operate to drive sustainability initiatives in the assets it manages. Management Plan As a management team we continually monitor these factors however, ultimately, they are often beyond our control. 21 BlackWall Limited June 2023 Information on Officeholders The names of the Officeholders during or since the end of the year are set out below. Richard Hill Non-Executive Director Joseph (Seph) Glew Non-Executive Director and Chairman Seph has worked in the commercial property industry in New Zealand, the USA and Australia and has driven large scale property development and financial structuring for real estate for over 40 years. In addition, since the early 1990s Seph has run many “turn-around” processes in relation to distressed properties and property structures for both private and institutional property owners. While working for the Housing Corporation of New Zealand and then AMP, Seph qualified as a registered valuer and holds a Bachelor of Commerce. In the 1980s he served as an Executive Director with New Zealand based property group Chase Corporation and as a Non-Executive Director with a number of other listed companies in New Zealand and Australia. Timothy Brown Joint Managing Director and CFO Tim is Joint Managing Director and Chief Financial Officer for the BlackWall group and its funds. Tim joined the Richard Hill has extensive investment banking experience and was the founding partner of the corporate advisory firm Hill Young & Associates. Richard has invested in the group’s projects since the early 1990s. Prior to forming Hill Young, Richard held a number of Senior Executive positions in Hong Kong and New York with 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. Richard has served as a director (Chairman) of the Westmead Institute for Medical Research and director (Chairman) of Sirtex Medical Limited (Sirtex), formerly listed on ASX. Robin Tedder Non-Executive Director Robin began his career on the dealing desk of a merchant bank in 1976. In 1981 he founded Hatmax Capital Markets which grew rapidly through organic development and merger with Australian Gilt Securities in 1988, such that by the time he departed after 14 years as CEO in 1995, over 80 people were employed across debt capital markets, both the Sydney Futures Exchange and ASX, in asset management and corporate finance. In 1995 Robin established Vintage Capital which became an active investor in funds management, commercial property, retailing, healthcare and logistics. He has been an investor in the group’s projects since 1997, is a former member of ASX, and has served on various boards of both listed and private companies since 1984. He group in 2008 as Financial Controller and became Chief Financial Officer in 2009. He took on the Managing is the Chairman of the group’s Board Audit Committee. Director role along with Jessie in late 2019. He has a Bachelor of Commerce from the University of New South Wales and is a member of the Institute of Chartered Accountants of Australia and New Zealand. With over 20 years’ experience in the financial services and property industries, he started his career with Deloitte and joined Lend Lease Corporation in 2002. Tim is also on the board of Eastern Suburbs Cricket Club and Coogee Boy’s Preparatory School. Jessie Glew Joint Managing Director and COO Jessie is Joint Managing Director and Chief Operating Officer (COO) for the BlackWall group and its funds. Jessie has been with BlackWall since early 2011 and has a strong background in and passion for the property industry. For the past 13 years, Jessie has specialised in working with distressed properties and spaces, and the operations of the WOTSO business. Jessie holds a Bachelor’s degree in International Communication from Macquarie University and NSW Real Estate License. Alexander Whitelum (to 10 March 2023) Company Secretary Alex joined the BlackWall group in 2020 and executed all aspects of the group’s corporate and fund transactions, was responsible for corporate governance functions and did oversee investor relations. Previously, Alex was a lawyer at Clayton Utz in their Corporate, M&A and Capital Markets team. Alex holds a Bachelor of Laws (Hons) and a Bachelor of Commerce (Economics) from Macquarie University. He is admitted as a solicitor to the Supreme Court of New South Wales and the High Court of Australia. Agata Ryan (from 10 March 2023) Company Secretary Agata joined BlackWall in February 2023 and overseas all aspects of BlackWall’s corporate and fund transactions, the corporate governance and regulatory functions and investor relations. Before joining BlackWall, Agata worked Jessie joined the Board of The Kids Cancer Project in 2021 and over the last 2 years has provided insights and as a lawyer at a boutique property law firm and prior to that was legal counsel in the commercial property legal operational knowledge to help support The Kids Cancer Project. team at Stockland. Agata holds a Bachelor of Arts, Master of Commerce and Juris Doctor degree from UNSW. She is admitted as a solicitor of the Supreme Court of New South Wales and the High Court of Australia. 22 BlackWall Limited June 2023 Meeting Attendances Rounding of Amounts Director Seph Glew Timothy Brown Jessie Glew Richard Hill Robin Tedder No. of Board Meetings Held Board Meeting Attendance 6 6 6 6 6 6 6 6 5 6 The Audit Committee, comprised of Richard Hill and Robin Tedder, met twice during the reporting period. Both committee members attended each meeting. Environmental Regulation 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. However, the group believes that it has adequate systems in place for the management of its environmental requirements and is not aware of any instances of non-compliance of those environmental requirements as they apply to the group. Indemnities of Officers The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, and in accordance with that legislative instrument 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 remuneration of KMP. For the reporting period the Board has determined that KMP included the Managing Directors (MD), Chief Financial Officer (CFO), and the Chief Operating Officer (COO). KMP determine the employees’ remuneration. When determining the remuneration of KMP, senior executives or 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 remuneration payable to KMP is reviewed at times deemed appropriate by the Board. There are no performance conditions for Board members or contracts for KMP. Any performance payments are at the discretion of the Board. The nature and the amount of each element of remuneration paid to the Board members During the financial year the group has paid premiums to insure each of the Directors named in this report along and KMP for the reporting period are listed below: 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 wilful 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. Corporate Governance Statement A description of the group’s current corporate governance practices is set out in the group’s corporate governance statement which can be accessed at blackwall.com.au Short Term Directors’ Fees 2022 2023 $ $ Salary and Other 2022 $ 2023 $ Post-employment Superannuation Total 2023 $ 2022 $ 2023 $ 2022 $ Timothy Brown Jessie Glew Seph Glew Richard Hill - - - - 100,000 100,000 85,000 85,000 Robin Tedder 85,000 85,000 347,500 322,500 27,500 27,500 375,000 350,000 347,500 322,500 27,500 27,500 375,000 350,000 - - - - - - - - - - - - 100,000 100,000 85,000 85,000 85,000 85,000 Total 270,000 270,000 695,000 645,000 55,000 55,000 1,020,000 970,000 Auditor and Non-audit Services An amount of $24,270 was paid to the auditor for non-audit services during the year (2022: $24,200) as detailed in Note 20. The Directors are satisfied that the provision of non-audit services is compatible with the general standard Loans have been made to KMP in order for them to acquire shares under BlackWall’s employee share scheme. The loans attract interest at a rate equivalent to the deemed ATO loan interest rate and are secured against the shares. All dividends received from these shares repay the loan balance. The following loans were outstanding of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non- at year-end: audit service provided means that auditor independence was not compromised. 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. ESV continues in office in accordance with section 327 of the Corporations Act 2001. Timothy Brown Jessie Glew Total 2023 $ 509,659 491,500 2022 $ 524,000 505,330 1,001,159 1,029,330 23 BlackWall Limited June 2023 Share Options (a) Unissued Options The following options are currently on issue. Directors’ Declaration In the Directors’ opinion: Expiry Date Exercise Price Number Under Option (a) the financial statements and notes are in accordance with the Corporations Act 2001, including: Richard Hill Employees Total 05 October 2023 05 October 2023 55 cents 55 cents 300,000 175,000 475,000 (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 group’s financial position as at 30 June 2023 and of its performance for the financial year ended on that date; and (b) Shares Issued on the Exercise of Options No ordinary shares were issued during or subsequent to the current financial year in the exercise of options. No amounts are unpaid on any of the shares on issue. Subsequent Events and Significant Changes in Affairs The Board has declared a final fully franked dividend of 2.5 cents per share to be paid on 30 November 2023. (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. The Statement of Significant Accounting Policies 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 Joint Managing Directors and Chief Financial Officer required by section 295A of the Corporations Act 2001. On 24 August 2023 BlackWall announced an intention to make a takeover bid for Pelorus Private Equity Limited. Further details are contained in the announcement and in the Directors’ report. This declaration is made in accordance with a resolution of the Board of Directors. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. Signed in accordance with a resolution of the Board of Directors. Tim Brown Director Jessie Glew Director Tim Brown Director Jessie Glew Director Sydney, 29 August 2023 Sydney, 29 August 2023 Sydney, 29 August 2023 Sydney, 29 August 2023 24 BlackWall Limited June 2023 Auditor’s Independence Declaration and Audit Report 25 BlackWall Limited June 2023 - - - - 26 BlackWall Limited June 2023 BlackWall Limited June 2023 27 BlackWall Limited ACN 146 935 131 TELEPHONE +61 2 9033 8611 ADDRESS 50 Yeo Street, Neutral Bay, NSW, 2089 EMAIL info@blackwall.com.au WEBSITE www.blackwall.com.au REGISTRY Computershare Investor Services Pty Limited Level 3, 60 Carrington Street Sydney NSW 2000 www.computershare.com.au