MACRO METALS LIMITED — Annual Report 2004

Aug 30, 2004

AUTO ENTERPRISES LIMITED

ABN 28 001 894 033

ANNUAL REPORT 2004

TABLE OF CONTENTS

Chairman's Report	1
Directors' Report	$\overline{2}$
Statement of Financial Performance	6
Statement of Financial Position	7
Statement of Cash Flows	8
Notes to Accounts	9
Directors' Declaration	19
Auditors' Report	20
Shareholder Information	22
DIRECTORY
COMPANY SECRETARY	Don Wilson Tel: 02 9439 9964 Fax: 02 9439 9963
REGISTERED OFFICE	c/- Stirling Warton Williams Level 11 St James House 111 Elizabeth Street SYDNEY NSW 2000
SHARE REGISTRY	Computershare Investor Services Level 3 60 Carrington Street SYDNEY NSW 2000 Tel 02 8234 5000 Fax 02 8234 5050
AUDITORS	BDO Chartered Accountants Level 19

BANKERS National Australia Bank 85-95 Marrickville Road MARRICKVILLE NSW 2204

2 Market Street SYDNEY NSW 2000

CHAIRMAN'S REPORT

Without an operating business for any part of the year ended 30 June 2004 all activity was again directed towards locating a suitable investment opportunity.

Several businesses were referred for consideration and were evaluated for possible acquisition.

On 12 July 2004 the Company announced that it had entered an agreement to acquire the business known as Brainytoys.com Pty Ltd. An Information Memorandum is at present being prepared and I expect that shareholders will soon have the opportunity to consider the acquisition of this games and toys business as the new activity to take the Company into the future.

J. BRUCE GIBSON CHAIRMAN

Dated this 30^th day of August 2004

DIRECTORS' REPORT

In accordance with a resolution of the Board. Directors now report as follows with respect to the Company's results for the financial year ended 30^th June 2004 and the state of affairs of the Company that existed at that date.

DIRECTORS

The names and particulars of Directors of the Company in office at the date of this Directors' Report are as detailed below:

J Bruce Gibson, FCA, ACIS - Chairman

Bruce has held the positions of Chairman and Director since 1986. He has 44 years commercial and business experience including 5 years as General Manager of a Sydney stockbroking firm, 24 years as Chairman of a life insurance company and 9 years as Chairman of a major health insurance fund. Bruce has a relevant interest in 850,000 ordinary shares.

Geoffrey John Gibbs

Geoff has been a solicitor for 40 years. He was for 12 years chairman and CEO of a development and sand mining company. Currently he is managing director of Australia's only company manufacturing espresso coffee machines in Australia.

Donald E Wilson

Don has been a Director since November 1998 and has been Company Secretary since December 2001. He has 9 years experience as a business writer with newspaper publishers and 28 years as principal of a communications and investor and media relations company. Don has a relevant interest in 250,000 ordinary shares.

Brian K Tonkin (Alternate to Mr Gibson)

Brian has over 30 years commercial experience in insurance, option broking, computer services, wheel distribution and website development. He was Managing Director of Auto Enterprises as private and public company entities from 1976 to 1990, during which period the Company had an unbroken record of profits. He was Deputy Chairman during the latter of those vears. He is Managing Director of Fidelity Administrators Pty Limited, the trustee company for several businesses involved in website development, website hosting and internet domain registrations. Brian has a relevant interest in 627,900 ordinary shares.

PRINCIPAL ACTIVITIES

The principal activity of the company is holding investments and seeking new business opportunities.

TRADING RESULTS

Audited accounts for the year ended 30th June 2004 disclose an after tax loss of \$58,036. Income of \$8,570 is comprised of \$7,569 interest and \$1,001 from the sale of shares using the share sale facility available in the NRMA demutualisation in 2001. The amount appears in the current accounts as a replacement cheque for the original.

NET TANGIBLE ASSETS

Net tangible assets stand at 1.3 cents per fully paid ordinary share as at balance date.

DIVIDENDS

The Directors recommend that there be no dividend for the 2004 financial year (2003:Nil).

SIGNIFICANT MATTERS

Directors reports 2001, 2002 and 2003 described events in which Halion Limited received in February and April 2001 without the authority of the Company's Board of Directors two amounts totaling \$190,000 transferred from the Company's term deposit account, and granted unauthorised set-off of the Company's term deposit account as security for a Halion Limited overdraft. Subsequent events resulted in \$130,000 being returned to the Company and a liquidator being appointed to Halion Limited by its first secured creditor. The amount of \$60,000 not returned was written off in previous accounts. Negotiations with National Australia Bank in relation to the unauthorised set-off of the Company's term deposit as security for the Halion Limited overdraft, concluded in agreement that the bank retain \$125,000 of the deposit, resulting in the Company writing off that amount to the provision of \$230,000 raised in the 2001 accounts and writing back as income in the 2003 accounts the remaining \$105,000 of the provision no longer required.

The Company held joint and several quarantees from two parties to reimburse any loss occurring up to 30 June 2003 arising from the matters referred to above and issued notices of demand on those two parties. There has been no recovery. In view of potential legal costs with poor prospect of a positive outcome, and the negative implications of continuing legal action in the midst of discussions for acquisitions, the directors resolved not to pursue the matter further. There is no effect on the current year accounts.

EVENTS SUBSEQUENT TO BALANCE DATE

On 12 July 2004, the Company announced that it had entered into the Acquisition Agreement for the purchase of Brainytoys.com Pty Limited (Brainytoys). The acquisition is conditional upon the approval of shareholders and the key features of the agreement are summarised in Note 19 to the Accounts.

DIRECTORS' BENEFITS

Since the end of the previous financial year no Director of the Company has received, or become entitled to receive a benefit, other than amounts totaling \$15,962 paid and payable to a company in which Don Wilson has an interest for secretarial services provided to the Company as determined by the directors.

CORPORATE GOVERNANCE

The Board is responsible for the overall Corporate Governance of the Company including its strategic direction, the establishment of goals for management and monitoring the achievements of these goals.

Two of the three directors, Messrs Gibbs and Gibson are independent directors. A third director, Don Wilson, is the principal of a business that provides secretarial and administration services to the Company, payment for which was \$15,962 for the year to 30 June 2004. By virtue of this related payment, under the governance guidelines, Don Wilson is not an independent director.

Don Wilson is the Company Secretary and nominated contact with Australian Stock Exchange Limited. The skills and experience of the directors is shown with the names of directors in this report.

The Directors have the right to seek professional advice relating to their duties as directors. subject to the approval by the chairman and noting of the item and expected expense in the minutes of the meeting of directors following such approval. No such event occurred in the vear to 30 June 2004.

The Directors have a policy, supervised by the Chairman, that disallows trading by directors in the company's securities on material information until it has been released to the market and sufficient time has lapsed for the information to be assessed. The Company's securities are currently suspended from trading on ASX but may be traded off-market. No event of trading in shares by a director occurred during the year to 30 June 2004.

The names and qualifications of the members of the audit committee and their attendance at committee meetings are shown elsewhere in this report.

There has been no formal performance evaluation of the board. The Company has no operations and no employees, and the sole tasks of the board have been evaluation of new business opportunities, quardianship of the cash assets and supervising the Company's statutory obligations under the Corporations Act and Australian Stock Exchange listing rules.

The Company does not have a remuneration committee. The Company has no employees. Directors' fees, if any, are set out as motions and resolved by shareholders in general meeting. There is no retirement scheme available to directors.

MEETINGS OF DIRECTORS

The following table sets out the number of meetings attended by Directors who held office at any time during the year, and the number of Directors' meetings they were eligible to attend during the financial year:

	Directors' Meetings Attended	Number Eligible to Attend
J.B. Gibson	8	8
G. J. Gibbs	8	8
D.E. Wilson	8	8
B.K. Tonkin (alternate to Mr Gibson)		$\overline{\phantom{a}}$

	Audit Committee Meetings Attended	Number Eligible to Attend
J.B. Gibson FCA, ACIS		4
D.E. Wilson B Com		4

DIRECTORS' REMUNERATION

No directors' fees have been paid. The following table shows amounts paid in all forms of remuneration to directors during the year ended 30^th June 2004.

Directors	Directors' Fees $($ \$ $)$	Consulting Fees $(\$)$	Superannuation Contributions (\$)	Non-Cash Benefits
J.B. Gibson	nil	nil	nil	nil
D.E. Wilson	nil	15,962*	nil	nil
G.J. Gibbs	nil	nil	nil	nil
B.K. Tonkin	nil	nil	nil	nil

*Remuneration to Wilson was in fees to a company in which he has an interest.

EXECUTIVE OFFICERS' REMUNERATION

There were no executive officers of the Company for the period.

INDEMNIFYING OFFICERS OR AUDITORS

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 officer or auditor of the company.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Dated this 30^th day of August 2004

J. BRUCE GIBSON DIRECTOR

STATEMENT OF FINANCIAL PERFORMANCE for the year ended 30 June 2004

	Notes	2004 S	2003 S
Revenues from ordinary activities	$\overline{2}$	8,570	20,730
Accounting and Audit fees Consultancy fees		(22, 386) (15,962)	(22, 947) (22,091)
Share registry and prospectus related expenses		(23, 167)	(25, 140)
Legal costs Other expenses from ordinary activities Provision for Loss on term deposit - written		(2,377) (2,714)	(2, 179) (2,465)
back	3		105,000
(Loss)/Profit from ordinary activities before income tax expense Income tax expense relating to ordinary activities	4	(58,036)	50,908
(Loss)/Profit from ordinary activities after related income tax expense		(58,036)	50,908
Net (Loss)/Profit		(58,036)	50,908
Total changes in equity other than those resulting from transactions with owners as owners		(58,036)	50,908
Basic earnings per share (cents per share)	15	(0.44)	0.39

The accompanying notes form part of and are to be read in conjunction with these financial statements.

AUTO ENTERPRISES LIMITED ABN 28 001 894 033
ABN 28 001 894 033
ANNUAL REPORT JUNE 2004

STATEMENT OF FINANCIAL POSITION as at 30 June 2004

	Notes	2004	2003
CURRENT ASSETS		\$	\$
Cash	5	137,471	199,847
Receivables	6	1,163	4,433
Other Financial Assets	$\overline{7}$	40,000	40,000
TOTAL CURRENT ASSETS		178,634	244,280
TOTAL ASSETS		178,634	244,280
CURRENT LIABILITIES
Payables	8	7,834	15,444
TOTAL CURRENT LIABILITIES		7,834	15,444
TOTAL LIABILITIES		7,834	15,444
NET ASSETS		170,800	228,836
EQUITY
Contributed Equity	9	3,671,211	3,671,211
Reserves	10	714,554	714,554
Accumulated Losses	16	(4,214,965)	(4, 156, 929)
TOTAL EQUITY		170,800	228,836

The accompanying notes form part of and are to be read in conjunction with these financial statements.

AUTO ENTERPRISES LIMITED ABN 28 001 894 033
ABN 28 001 894 033

STATEMENT OF CASHFLOWS for the year ended 30 June 2004

	Notes	2004	2003 \$
Cash Flows from Operating Activities
Receipts from customers Payments to suppliers		(70, 946)	(33,736)
Interest received		7,569	10,730
Net cash used in operating activities	14(b)	(63, 377)	(23,006)
Cash Flows from Investing Activities
Proceeds from sale of shares		1,001
Net cash provided by investing activities		1,001
Cash Flow from Financing Activities
(Payment for) unapproved withdrawn funds			(125,000)
Net cash used in financing activities			(125,000)
Net (decrease) in cash held Cash at the beginning of the financial year		(62, 376) 199,847	(148,006) 117,853
		137,471	(30, 153)
Decrease in provision for loss on term deposit			230,000
Cash at the end of the financial year	14(a)	137,471	199,847

The accompanying notes form part of and are to be read in conjunction with these financial statements.

NOTES TO THE ACCOUNTS for year ended 30 June 2004

$1₁$ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The accounts are a general-purpose financial report that has been prepared in accordance with applicable Accounting Standards, other mandatory professional reporting requirements and the Corporations Act 2001. Auto Enterprises Limited is a listed public company. incorporated and domiciled in Australia. The financial report has been prepared on the basis of historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. The accounting policies have been consistently applied, unless otherwise stated.

The following is a summary of the material accounting policies adopted by the Company in the preparation of the accounts.

INCOME TAX

The Company adopts the liability method of tax-effect accounting whereby income tax expense shown in the Statement of Financial Performance is based on the operating result before income tax adjusted for any permanent differences.

Timing differences which arise due to the different periods in which items of revenue and expense are included in the determination of operating results before income tax and taxable income are brought to account as either a provision for deferred income tax or an asset described as a future income tax benefit applicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit. 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 tax legislation and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

INVESTMENTS

Investments are carried at cost less any material permanent diminutions in the carrying value.

ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

For years ending on or after 30 June 2006, all general purpose financial reports prepared in accordance with the requirements of Chapter 2M of the Corporations Act will be required to comply with Australian equivalents to International Financial Reporting Standards (IFRSs) instead of Australian Accounting Standards presently on issue. Comparative financial statements must also be presented in accordance with Australian equivalents to IFRSs for the year ending 30 June 2005.

The directors are of the opinion that the key differences in the company's accounting policies which will arise from the adoption of IFRS are:

Taxation

A "balance sheet" approach will be adopted under Australian equivalents to IFRSs, replacing the "statement of financial performance" approach currently used by Australian companies. The "balance sheet" method recognises deferred tax balances when there is a difference between the carrying value of an asset or liability, and its tax base. Any initial adjustments to calculate deferred tax assets and liability balances on transition using the new basis will be made through opening balances of retained earnings at 1 July 2004.

Available-For-Sale Financial Assets

Currently the entity measures investments at cost, with an annual review by directors to ensure that their carrying amounts are not in excess of their recoverable amount. Under Australian equivalents to IFRSs, available-for-sale financial assets will be measured at fair value under Australian equivalents to IFRSs, with changes in fair value being recognised directly in equity until the asset is sold, at which time the cumulative gain/loss is taken to profit.

NOTES TO THE ACCOUNTS cont

		2004	2003 \$
2.	REVENUE
	Interest received from unrelated parties Other	7,569 1,001	10,730 10,000
		8,570	20,730
3	LOSS/PROFIT FROM ORDINARY ACTIVITIES
a)	Significant Revenue
	The following item of significant revenue is relevant in explaining the company's financial performance.
	Provision for loss on term deposit – written back		105,000
b)	Variation from Preliminary Final Report
	There is no variation between the figures in these accounts and those presented in the Company's preliminary report to the Stock Exchange.
4	INCOME TAX
a)	The prima facie tax on operating (loss)/profit is reconciled to the income tax expense/(benefit) provided in the financial statements as follows:
	Prima facie tax expense/(benefit) on operating (loss)/profit before tax at 30%	(17, 411)	15,272
	Add tax effect of other non-allowable items		73
	Less Capital profits not subject to income tax	(17, 411) 194	15,345
	Recoupment of prior years tax losses Losses not brought to account	(17, 605)	15,345

Future income tax benefits in respect of tax
losses have not been brought to account. These $b)$ benefits will only be realised if the conditions for deductibility set out in Note 1 occur.

AUTO ENTERPRISES LIMITED ABN 28 001 894 033
ABN 28 001 894 033

NOTES TO THE ACCOUNTS cont

		2004 \$	2003 \$
5	CASH
	Cash at bank and on hand	137,471	199,847
		137,471	199,847
6.	RECEIVABLES
	CURRENT
	GST Receivable	1,163	4,433
		1,163	4,433
7	OTHER FINANCIAL ASSETS
	CURRENT Investment in listed securities - cost	40,000	40,000
8	PAYABLES
	CURRENT
	Trade creditors Accrued expenses	1,834 6,000	9,444 6,000
		7,834	15,444
9	CONTRIBUTED EQUITY
	13,074,000 fully paid ordinary shares	3,671,211	3,671,211
	At the beginning of the year	3,671,211	3,671,211
	Balance at the end of the year	3,671,211	3,671,211
	Number of shares At the beginning of the year Shares issued during the year	No. 13,074,000	No. 13,074,000
	Balance at the end of the year	13,074,000	13,074,000

NOTES TO THE ACCOUNTS cont

10	RESERVES	2004 S	2003
	Capital profits reserve	714,554	714,554

The capital profits reserve represents amounts realised from the sale of the company's assets.

REMUNERATION OF DIRECTORS $11$

The following persons held the position of Director of the Company during the financial year:

J Bruce Gibson Donald Wilson Geoff Gibbs Brian Tonkin (alternate for Mr J B Gibson)

Amounts received or due and receivable by Directors of the Company (see note 12 for details). 15,962

Details of directors' interests in the ordinary shares of the company.

	Number	Number
J. Bruce Gibson	850,000	850,000
Donald Wilson	250,000	250,000
Geoff Gibson
Brian Tonkin (alternate for Mr JB Gibson)	627,900	627,900

22,091

There are no options on issue to directors.

AUTO ENTERPRISES LIMITED ABN 28 001 894 033
ABN 28 001 894 033

NOTES TO THE ACCOUNTS cont

		2004	2003
12	RELATED PARTY TRANSACTIONS	S	S,
(a)	During the year there were no related party transactions apart from consulting fees of \$15,962 received by Wilson McCarthy & Co Pty Limited (a company related to a director, Mr Wilson) for services provided (2003: \$22,091). Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.
	Directors and director related entities as at $30th$ June 2004 held directly or beneficially the following equity interests in the Company as at that date.
	Number of ordinary shares Aggregate share transactions of Directors: acquired by existing directors disposed by existing directors	1,727,900	1,727,900
13	AUDITORS' REMUNERATION
	Amounts receivable by the auditors for: auditing the accounts half year review	8,414 2,474	8,024 3,670
		10,888	11,694

AUTO ENTERPRISES LIMITED ABN 28 001 894 033
ABN 28 001 894 033

NOTES TO THE ACCOUNTS cont

		2004 S	2003 \$
14	NOTES TO STATEMENT OF CASH FLOWS
a)	Reconciliation of Cash
	For the purpose of the statement of cash flows, cash includes cash at bank and on hand net of bank overdrafts.
	Cash at the end of the year is shown in the balance sheet as:
	Cash at bank and on hand	137,471	199,847
		137,471	199,847
b)	Reconciliation of cash flows from operations with (loss)/profit from operating activities
	(Loss)/profit from ordinary activities after income tax Provision for loss on term deposit written back	(58,036)	50,908 (105,000)
	Non- cash flows in (Loss)/Profit from Ordinary Activities
	Profit on sale of non-current assets	(1,001)
	Changes in assets and liabilities:
	Increase in other debtors	3,270	31,829
	(Increase)/decrease in Trade creditors and accruals (Increase)/decrease in other creditors	(7,610)	9,257 (10,000)
	Cash flows from operating activities	(63, 377)	(23,006)

NOTES TO THE ACCOUNTS cont

15

16

	2004	2003
EARNINGS PER SHARE
Basic earnings per Share	$(0.44)$ cents	$0.39$ cents
Diluted earnings per share has not been calculated as there are no potential ordinary shares on issue.
Weighted average number of ordinary shares	No.	No.
outstanding during the year the used in calculation of basic EPS	13,074,000	13,074,000
	S	S
Earnings used in the calculation of basic EPS	(58,036)	50,908
ACCUMULATED LOSSES
Accumulated losses at the beginning of the financial year Net (loss)/profit for the year	(4,156,929) (58,036)	(4,207,837) 50,908
Accumulated losses at the end of the financial year	(4,214,965)	(4, 156, 929)

FINANCIAL INSTRUMENTS $17$

Credit risk exposure $a)$

The credit risk exposure of the Company to financial assets that have been recognised on the balance sheet, is generally the carrying amount, net of any provision for doubtful debts.

Net fair values of financial assets and $b)$ liabilities

The carrying amounts of cash, cash equivalents and non-interest bearing monetary financial assets and liabilities (eg, accounts receivable and payable) approximate fair value.

NOTES TO THE ACCOUNTS cont

Financial 17. Instruments (Cont'd)	Notes	Weighted Average Effective Interest Rate	Floating Interest Rate	Fixed Interest Rate		Non Interest Bearing	Total
2004				Within 1 Year	1 to $5$ Years
Financial Assets
Cash	5	2.75%		137,471			137,471
Receivables	6					1,163	1,163
Investment in Securities	7	6.40%	40,000				40,000
Total Financial Assets			40,000	137,471	$\blacksquare$	1,163	178,634
Financial Liabilities
Payables	8					7,834	7,834
Total Financial Liabilities			$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	7,834	7,834
Net Financial Assets			40,000	137,471		(6,671)	170,800
2003
Financial Assets
Cash	5	2.68%		199,847			199,847
Receivables	6					4,433	4,433
Investment in Securities	7	6.10%	40,000				40,000
Total Financial Assets			40,000	199,847	$\overline{\phantom{a}}$	4,433	244,280
Financial Liabilities
Payables	8					15,444	15,444
Total Financial Liabilities				$\blacksquare$	$\overline{\phantom{a}}$	15,444	15,444
Net Financial Assets			40,000	199,847		(11, 011)	228,836

NOTES TO THE ACCOUNTS cont.

18 SEGMENT REPORTING

The company holds investments and operates solely in Australia.

19 EVENTS SUBSEQUENT TO BALANCE DATE

On 12 July 2004, the Company announced that it had entered into an Acquisition Agreement for the purchase of Brainytoys.com Pty Limited (Brainytoys). The acquisition is conditional upon the approval of shareholders. The key features of the agreement are summarised as follows:

• $(a)$ a significant change in the nature of the Company's activities to a toys and games company.
• (b) the allotment and issue to the vendor of Brainytoys.com Pty Limited of up to 60,953,000 fully paid shares in the capital of the Company and up to 12,500,000 options to subscribe for shares in the capital of the Company as consideration for the acquisition, in two stages. The issue of 35,953,000 of these shares (stage 1) is conditional upon shareholder approval and the issue of securities noted in paragraph (c) below. The issue of 25,000,000 of these shares and all of the options (stage 2) is conditional upon a prospectus issue (paragraph (g) below) of 31,250,000 shares.
• the allotment and issue to Eligible Investors of up to 27,782,000 fully paid $(c)$ shares in the capital of the Company at an issue price of \$0.03 per share and 13,891,000 free attaching options, subject to a minimum issue of 13,333,333 shares to raise \$400,000.
• the resignations of existing directors and the appointment of new directors to $(d)$ reflect the change in activities and new substantial shareholdings.
• a change of name for the company. (e)
• consolidation of the number of shares on issue by a divisor of 5. $(f)$
• a public prospectus issue of shares at a post consolidation issue price of 4 $(q)$ cents a share to raise a minimum \$1,250,000.

Separate meetings of shareholders will be called to enable the agreement transactions. The directors have appointed Lothbury Pty Limited to assist in the implementation of the agreement with the payment of a success fee of \$120,000 (inclusive of out of pocket expenses) payable following the approval of the ASX to reinstate the Company's shares for quotation and trading and the capital raising described in (q).

DIRECTORS' DECLARATION

The Directors of the Company declare that:

• The financial statements and notes set out on pages 6 to 18: a)
• comply with Accounting Standards, Corporations regulations 2001 and the i). Corporations Act 2001
• give a true and fair view of the financial position as at 30 June 2004 and ii) performance for the year ended on that date of the Company; and
• b) in the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

J. BRUCE GIBSON DIRECTOR

Dated this 30^th day of August 2004

Chartered Accountants & Advisers

Level 19, 2 Market Street Sydney NSW 2000 GPO Box 2551 Sydney NSW 2001 Tel. +61 2 9286 5555 Fax +61 2 9286 5599 Email: bdosyd@bdosyd.com.au www.bdo.com.au

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF AUTO ENTERPRISES LIMITED

Scope

The Financial Report and Directors' Responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for Auto Enterprises Limited (the company), for the year ended 30 June 2004.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit Approach

We have conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's financial position, and of its performance as represented by the results of its operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
• assessing the appropriateness of the accounting policies and disclosures used and the ٠ reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit Opinion

In our opinion, the financial report of XYZ Limited is in accordance with:

• $(a)$ the Corporations Act 2001, including:
• $(i)$ giving a true and fair view of the company's financial position as at 30 June 2004 and of its performance for the year ended on that date; and
• complying with Accounting Standards in Australia and the Corporations $(ii)$ Regulations 2001; and
• other mandatory financial reporting requirements in Australia. $(b)$

BDO

BDO Chartered Accountants

K R REID Partner

Dated in Sydney this 30^th day of August 2004

SHAREHOLDER INFORMATION

DIRECTORS INTERESTS

The interest of each Director in the share capital of the Company as shown in the register of Directors Shareholdings at 13 August 2004 is as follows:

		Shares Held Other Relevant Beneficially Interest in Shares
John Bruce Gibson	850,000	-
Don Wilson	250,000	-
Brian Tonkin (alternate to Mr Gibson)	627,900	$\overline{\phantom{a}}$

NUMBER OF EQUITY HOLDERS AND VOTING RIGHTS

As at 13 August 2004 there were 809 shareholders. Shares are not divided into classes and all rank equally as to voting rights, namely on a show of hands every member present or by proxy shall have one vote and upon a poll each share shall have a vote.

Holdings are analysed below according to size of holdings:

Number Held		Ord Share Paid to 25 cents	Total Units	%
	$\overline{\phantom{0}}$	1,000	472	117,486	0.90
1,001	۰	5,000	159	395,227	3.02
5.001	$\overline{a}$	10,000	57	448,256	3.43
10,001	$\overline{\phantom{0}}$	100,000	93	3,091,607	23.65
100,001	$\overline{a}$	over	28	9,021,424	69.00
Rounding Discrepancy				0.00
		Totals	809	13,074,000	100.00

The Company's shares are listed on the Australian Stock Exchange Limited. As at 30 June 2004 the company's shares were suspended from quotation, and there was no market price. Listing is current to 30 June 2005. There is currently no on-market buyback of securities

SUBSTANTIAL SHAREHOLDINGS

As at 13 August 2004 the following shareholders were registered with holdings of 5% or above:

Shareholder	No of Shares	% of Total Shares
Kopai Holdings Pty Limited	1,081,016	8.27
Symvine Pty Limited	938.900	7.18
John Bruce Gibson	850,000	6.50
Wessex Capital Investment Limited	664,312	5.08

AUTO ENTERPRISES LIMITED ABN 28 001 894 033
ABN 28 001 894 033
ANNUAL REPORT JUNE 2004

SHAREHOLDER INFORMATION

20 LARGEST SHAREHOLDERS AS AT 13 August 2004

Name of Shareholder	Fully Paid	% of Issued Capital
Kopai Holdings Pty Limited	1,081,106	8.27
Symvine Pty Limited	938,900	7.18
John Bruce Gibson	850,000	6.50
Wessex Capital Investment Limited	664,312	5.08
Brian Keith Tonkin	627,900	4.80
Keith Gordon & Nita Isabel McKay	400,000	3.06
Keith Gordon & Nita Isabel McKay	400,000	3.06
Rob Wright	400,000	3.06
Golden Words Pty Ltd	269,300	2.06
Chi Cheng Huang	268,000	2.05
Donald Elliott Wilson	250,000	1.91
Rodmin Estates Pty Ltd	250,000	1.91
Jemaya Pty Ltd	242,900	1.86
Lutmar Pty Ltd	240,000	1.84
David William McKay	234,500	1.79
Wayne Keith & Jennifer Fay McKay	234,500	1.79
Golden Words Pty Ltd	206,000	1.58
Rowe Street Investments Pty Ltd	181,251	1.39
John Walter Utz	175,000	1.34
Austron Pty Ltd	150,000	1.15
TOTAL	8,063,579	61.68
Other shareholders	5,010,421	38.32
TOTAL ON ISSUE	13,074,000	100.00