WISR LIMITED — Annual Report 2012

Sep 26, 2012

Berklee Limited ABN: 80 004 661 205

Financial Statements

For the Year Ended 30 June 2012

Berklee Limited

ABN: 80 004 661 205

For the Year Ended 30 June 2012

CONTENTS Financial Statements Corporate Directory Company Profile Statistical Summary Directors' Report Auditors Independence Declaration under Section 307C of the Corporations Act 2001 Corporate Governance Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Audit Report Additional Information for Listed Public Companies

Page

1 2 3 4 16 17 26 27 28 29 30 60 61 63

Berklee Limited

ABN: 80 004 661 205

Corporate Directory

DIRECTORS

Alan Ian Beckett (Chairman) Brett Andrew Jones (Managing Director) Grantly Martin Anderson Rick John van Berkel COMPANY SECRETARY Brett Andrew Jones (Managing Director)

REGISTERED OFFICE

265-285 Learmonth Road Wendouree (Ballarat) Victoria, Australia Telephone: (03) 5338 1110 Facsimile: (03) 5338 1111 Email: headoffice@berklee.com.au

SHARE REGISTER

Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford, Victoria Telephone: (03) 9415 5000

AUDITOR

RSM Bird Cameron Partners Level 8, 525 Collins Street Melbourne, Victoria

SOLICITOR

Madgwicks Level 33, 140 William Street Melbourne, Victoria

BANKERS

St. George Bank Limited

STOCK EXCHANGE LISTING

Berklee shares are listed on the Australian Stock Exchange

DOMICILE

Publicly listed company incorporated in Australia

1

Berklee Limited

ABN: 80 004 661 205

Company Profile

The company, previously trading as Berklee Products Pty Ltd, was formed in 1966 to assume the manufacturing activities of Berklee, which up until then had operated as an unincorporated business.

Berklee Limited has since 1966 manufactured automotive mufflers and exhaust systems, primarily under the “Berklee” brand name.

In the 1970’s, the company expanded into nation-wide distribution of its manufactured products and other ancillary parts by establishing 5 distribution companies. These distribution companies, which in 1987 became wholly-owned subsidiaries of Berklee Limited, together with the Tasmanian distribution company established in 1992, form the Undacar Parts Division. As of 30 June 2011 the Board decided to exit direct distribution and during 2012 commenced the process of shifting distribution to third party distributors.

Berklee Limited became a publicly listed company in March 1989 and its shares are traded under the Australian Stock Exchange (code BER).

The company is a specialist industrial products manufacturer and distributor. Key products include automotive mufflers and exhaust systems, trolleys and other specialty equipment. The company has approximately 32 employees, assets of $11.4 million and sales from continuing operations of $5.6 million for 2011/12. Berklee is a well established business and the company’s aim is to increase earnings per share and maximise shareholders’ wealth.

2

Berklee Limited

ABN: 80 004 661 205

Statistical Summary

	2011/12 $000	2010/11 $000	2009/10 $000	2008/09 $000	2007/08 $000
BALANCE SHEETS
Share Capital	8,700	8,700	8,700	8,700	8,700
Share Capital and Reserves	9,529	11,878	12,371	13,030	11,197
Non-Current Liabilities	39	53	44	52	1,138
CurrentLiabilities	1,872	2,374	1,548	1,778	2,229
Total Liabilities	1,911	2,427	1,592	1,830	3,367
Non-Current Assets	5,668	6,443	4,091	6,223	7,663
CurrentAssets	5,772	7,862	9,062	8,637	6,901
Total Assets	11,440	14,305	13,963	14,860	14,564
INCOME STATEMENTS
Revenuefromcontinuing operations	5,638	6,115	9,969	11,055	13,178
Revenue from discontinued operations	3,628	3,233	n/a	n/a	n/a
Operating Profit (Loss) Before Income Tax fromcontinuing operations	(917)	(564)	675	1,461	45
Operating Profit (Loss) Before Income Tax fromdiscontinued operations	(1,232)	(1,841)	n/a	n/a	n/a
Income Tax Expense (Benefit) continuing operations	-	376	134	(372)	10
Income Tax Expense (Benefit) discontinued operations	-	(553)	n/a	n/a	n/a
OperatingProfit(Loss)After Income Tax	(2,149)	(2,228)	541	1,833	35
CASH FLOW STATEMENTS
Cash FlowsFromOperatingActivities	123	(920)	(12)	84	514
FINANCIALSTATISTICS
Earnings per Ordinary Share (Basic) on continuingoperations	(9.2c)	(9.4c)	4.7c	13.0c	0.2c
Earnings perOrdinary Share (Basic)	(21.5c)	(22.3c)	4.7c	13.0c	0.2c
Dividends per Ordinary Share (2009/10:Special)	2.0c	2.0c	12.0c	0.0c	2.0c
Return on Total Shareholders' Equity	(22.6%)	(18.8%)	4.4%	14.1%	0.3%
Dividend Times Covered	0.00	0.00	0.39	0.00	0.12
DividendPayoutRatio	0%	0%	255%	0%	801%
NetTangibleAssets perOrdinary Share	95.3c	118.8c	118.5c	89.0c	76.7c
Current Ratio	3.1	3.3	5.9	4.9	3.1
Total Shareholders' Equityto Total Assets	83%	83%	89%	88%	77%
TotalShareholders' Equity toTotal Liabilities	498%	489%	777%	712%	334%
Number of Employees(as at 30 June)	32	65	69	78	89

3

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of company and the entities it controlled at the end of, or during, the year ended 30 June 2012.

Information on directors

The names and details of the Company's directors in office during the financial year and until the date of this report are presented below. Directors were in office for this entire period unless otherwise stated.

Alan Ian Beckett (Non Executive Chairman) Qualifications BEcon FCA GAICD Experience Mr Beckett was appointed to the Board of Berklee Limited as a Non-Executive Director on 1 August 2010, and on 12 November 2010 was appointed Chairman of the Board. He commenced his career with Ernst & Young in 1970 and focused on audit and corporate services in the larger listed public companies sector. He held many senior management positions including Deputy Chairman of Ernst & Young Oceania from 2001 until his retirement from the firm in 2008. He was Managing Partner of the Melbourne office from 1998 to 2001, Managing Partner of the Australian Audit & Corporate Services practice from 1986 to 1989 and again from 1995 to 1998. Interest in shares and Ordinary shares held: 16,661 options Special responsibilities Chairman of the Board and of the Remuneration and Nominations Committee and a member of the Corporate Governance Committee until 30 November 2011. Other current directorships Mr Beckett currently serves as: Non-Executive Director and Chairman of the Risk, Compliance & Audit Committee, Defence Health Ltd; Non-Executive Director of Westbourne Capital Pty. Ltd. and Westbourne Credit Management Ltd; Member of the Department of Defence Audit & Risk Committee; Member of the Board Audit Committee of Note Printing Australia Ltd; and Is a member of the Very Special Kids Foundation.

Brett Jones (Managing Director and Company Secretary; appointed 7 November 2011) Qualifications BEng (Hons) MBA GAICD MIEAust Experience Mr Jones leads all aspects of Berklee Limited's business activities and is committed to developing new products and markets that focus on providing innovative and value-added solutions to the end user. He has held various leadership and senior executive roles within multinational organisations across the automotive components and building product manufacturing industries. Mr Jones received his Bachelor of Engineering degree with first class honours and a Master of Business Administration from the University of Ballarat. He is a member of Engineers Australia, The International Golden Key Honour Society and is a Graduate of the Australian Institute of Company Directors. Interest in shares and Nil options Special responsibilities Managing Director and Company Secretary

4

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Information on directors continued

Edward John van Berkel (Managing Director and Company Secretary; resigned 7 November 2011) Qualifications BBus CA Experience Mr van Berkel commenced his career in 1981 with an international chartered accounting firm. He joined the Company as a senior executive in 1984 and in November of that year became a Director. Mr van Berkel was appointed Company Secretary on 30 September 1987 and served in that position until 1 January 2003, then again from 8 October 2008 to 7 November 2011. Mr van Berkel holds a Bachelor of Business Degree from the University of Ballarat and is an associate of the Institute of Chartered Accountants of Australia. Interest in shares and Ordinary shares held: 844,959 options (while a director) Special responsibilities Managing Director and Company Secretary (to 7 November 2011) Grantly Martin Anderson (Non Executive Director) Qualifications FAICD Experience Mr Anderson was appointed to the Board of Berklee Limited as a Non-Executive Director on 1 August 2010. He is a Fellow of the Australian Institute of Company Directors with over 25 years experience as a director of both public and private companies. Mr Anderson has held executive positions at the most senior level in both public and private international companies including President of PBR International and Regional Managing Director of Britax International Pty Ltd. Currently he is the Chief Executive Officer of ANCA Pty Ltd an international machine tool company headquartered in Melbourne, Australia. Mr Anderson was a Director of the Federation of the Automotive Products Manufacturers for 14 years and was President for 4 years. Interest in shares and Nil options Special responsibilities Deputy Chairman, Chairman of the Audit Committee and member of the Remuneration and Nominations Committee Other current directorships Mr Anderson currently serves as: Director and CEO of ANCA Pty Ltd; Director and President of ANCA Motion Taiwan Non Executive Director and Chairman of Techni Waterjet Pty Ltd; and Director and Chairman AGSN Group Limited

5

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Information on directors continued

Egon Wolfgang Vetter (Non Executive Director; retired 30 November 2011) Qualifications M.Eng Experience Mr Vetter was appointed to the Board of Berklee Limited as a Non-Executive director on 1 September 2003. Mr Vetter holds a masters degree in electronic engineering, is a former managing director of VDO Australia and Hella Australia and a past president of the Federation of Automotive Products Manufacturers (FAPM) Southern Region. Mr Vetter was formerly the chief executive officer of Ceramet Technologies Australia Pty Ltd, an engineering company that produces components in metal injection moulding technology. Interest in shares and Nil options Special responsibilities Chairman of the Corporate Governance Committee and member of the Audit Committee (to 30 November 2011)

Rick John van Berkel (Non Executive Director; appointed 1 December 2011)

Qualifications Bachelor of Applied Management Experience Mr van Berkel commenced employment with Berklee Limited as an apprentice fitter and turner, and has held various positions in the business including Manufacturing Director and Deputy Managing Director, before leaving the company in 1999 to take up other business opportunities. He currently owns and operates several private businesses in the retail environment. Interest in shares and Ordinary shares held: 2,659,501 options Special responsibilities Member of the Audit Committee Other current directorships Mr van Berkel currently serves as: Director and Secretary of Ausned Pty Ltd; Director and Secretary of RBP Investments Pty Ltd; and Director and Secretary of Riniki Pty Ltd

Principal Activities

The principal activities of the Group during the year comprised the manufacture and distribution of specialist industrial products including automotive mufflers and exhaust products, trolleys and other speciality equipment.

Business Review

Review of Operations

The results presented below summarise the performance of the entity during the year, restated to reflect the restructuring of the business between continuing and discontinued operations. Comparatives have also been restated. The restructure was announced to tackle substantial operating losses.

6

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Business Review continued

Consolidated financial highlights following restructure: 2012	2011
'$000	'$000
Revenue from continuing operations 5,638	6,115
Revenue from discontinued operations 3,628	3,233
Total consolidated revenue 9,266	9,348
(Loss) from continuing operations before tax* (917)	(564)
(Loss) from discontinued operations before tax (1,232)	(1,841)
Consolidated (Loss) before tax (2,149)	(2,405)
Consolidated net operating cash flow inclusive of discontinued operations 123	(920)
*The comparative 2011 financial information contains certain material transactions and balances.
Details of their allocation between continuing or discontinued operations is noted below:
 Gains on disposal of land and buildings before tax $527,000: continuing operations;
 Restructuring expense before tax: $122,000 is contained in continuing operations,	while
$1,550,000 is in discontinued operations;
 Write-off of deferred tax assets relating to prior year tax losses of $135,000 and
non-recognition of tax losses of $364,000 are both in continuing operations.

Whilst disappointing the result for the year ended 30 June 2012 was in line with expectations following the decision to restructure the entity. Significant improvement has been made on working capital management and cost reduction.

Revenue from continuing operations was affected by a number of factors arising from the business restructure. These factors are explained under ‘Results from continuing operations’ below.

Consolidated net operating cash flow has improved significantly on the prior year as the campaign to reduce inventory and accounts receivable has successfully been turned to cash.

Results from continuing operations

	2012	2011
	'$000	'$000
Revenue from sales	5,501	5,939
Other revenue	69	38
Cost of materials	(2,578)	(2,889)
Other expenses	(3,351)	(3,692)
Earnings before interest, tax, depreciation and amortisation (EBITDA)	(359)	(604)
Depreciation	(626)	(625)
Earnings before interest and tax (EBIT)	(985)	(1,229)
Interest	68	138
Gain on sale of property	-	527
Operating (Loss) before tax for statutory purposes from continuing operations	(917)	(564)

Sales revenue from continuing operations declined $438,000 (7%) to $5,502,000. This is due to:

 sales of Berklee designed product to Mercury Mufflers only commencing in January 2012 in preparation for them to assume responsibility for the WA branch in February 2012. Sales to

7

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Business Review continued

Queensland and NSW followed in March and April 2012 respectively;

• the manufacture and sale of Mercury designed product did not commence as rapidly as originally assumed due to high inventory levels at Mercury;

• reduced production to assist with the inventory reduction campaign; and

• a decline in the overall car fleet requiring after market exhaust product.

Sales of non-aftermarket product were in line with the prior year. Work continues on rationalising the aftermarket product range and pricing structures as well as expanding the non-aftermarket product range and customer base.

The EBITDA loss from continuing operations of $359,000 improved 40% or $245,000 on the prior year. This is due to significant attention being paid to cost management. Non material operating expenses declined $341,000 or 9% to $3,351,000. Work continues on streamlining these expenses.

The Loss before tax from continuing operations of $917,000 on a like for like basis improved 16% from the prior year loss of $1,091,000 (which excludes gains from the sale of property of $527,000).

The Loss after tax from continuing operations of $917,000 improved from the prior year loss of $940,000 (after inclusion of gains on property and income tax expense in the comparative). The consolidated entity has significant unrecognised tax losses.

The results indicate that further work is required to return the consolidated entity to profitability however significant progress has been made on:

• Tackling supply chain issues such as sourcing, inventory management, and distribution with inventory declining net of provisions by 49% year on year (44% since 31 December 2011) to $1,984,000 with reductions continuing post 30 June 2012. Management are optimistic of reaching target inventory levels by December 2012.

• Streamlining the work force with a continued focus on ensuring the optimal work force structure and flexibility. Head count in the continuing operations has been reduced by 22% to 32 at 30 June 2012 to better reflect the restructured operations needs.

• Operating leases surplus to requirements have been terminated.

• Reviewing pricing arrangements with key customers to improve competitiveness and profitability of the product range.

• Progress made on research and development of new products.

• Improving working capital management with consolidated net operating cash flow for the year positive at $123,000 (2011: $920,000 outflow) notwithstanding the operating loss. Non cash items such as depreciation contribute 62% or $626,000 to the current year loss (2011: 76% or $625,000).

Subject to no unforeseen adverse economic conditions beyond the company’s control occurring, the Directors expect Berklee to return to profitability after the restructure is completed.

Discontinued operations and restructuring

As outlined above the distribution business has been designated a discontinued business for reporting purposes.

Sales from discontinued operations were $3,628,000 compared with $3,233,000 in the prior year. This increase is attributable to the significant campaign to exit excess inventory during the year and the one off sale to Mercury of an initial inventory range for the branches they assumed responsibility for in WA, Queensland and NSW.

8

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Business Review continued

The distribution operations continue in Victoria, South Australia and Tasmania for the time being however management are in the process of finalising options to exit these businesses. These states are included in Revenue from discontinued operations and they continue to face significant competitor pressure. This supports the Board’s decision to restructure the distribution model and focus on expanding the non-aftermarket product range and customer base.

The loss after tax for this business was $1,232,000 compared with $1,288,000 in 2011, notwithstanding the closure of WA, Queensland and NSW. The ability to exit premises and sub let was impacted heavily by the current economic climate resulting in additional cash costs being incurred although for reporting purposes these were applied to the restructuring provision. Losses in those three states have now ceased.

Dividends Paid or Recommended

During the financial year the Directors declared a dividend of 2 cents per share fully franked amounting to a total dividend of $200,000. The Directors have resolved not to pay a final dividend at this time given the discussion’s (which were announced to the market on 23 August 2012) with certain parties.

Group franking credits available for future distribution total $1,543,000.

Other items

Significant Changes in State of Affairs

Other than as discussed in the 'Review of Operations' no significant changes in the Group's state of affairs occurred during the financial year.

Post Balance Date Events

On 23 August 2012 the Directors announced discussions with certain parties which may lead to an offer for all the shares in the Company or which may result in an alternative transaction. At this stage it is not possible to provide any meaningful detail or to comment on the probability of the successful outcome of these discussions.

Apart from the above there have been no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.

Environmental matters

The Group’s operations are subject to various environmental regulations under both Commonwealth and State legislation, which set the minimum requirements the Group must meet.

The Group has a process to monitor compliance with environmental regulations. The directors are not aware of any significant breaches during the period covered by this report.

9

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Other items continued

Rounding of amounts

The company is an entity to which ASIC Class order 98/100 applies and, accordingly, amounts in the financial statements and directors' report have been rounded to the nearest thousand dollars.

Meetings of directors

During the financial year, 15 meetings of directors were held. Attendances by each director during the year at meetings of directors and committees of directors were as follows:

	Directors' Meetings	Directors' Meetings	Audit Committee Meetings	Audit Committee Meetings	Remuneration and Nominations Committee Meetings	Remuneration and Nominations Committee Meetings
	Number eligible to attend	Number attended	Number eligible to attend	Number attended	Number eligible to attend	Number attended
Alan Ian Beckett Brett Andrew Jones Edward John van Berkel Grantly Martin Anderson Egon Wolfgang Vetter Rick John van Berkel	15 8 6 15 8 7	15 8 6 15 8 7	4 3 1* 4 1 3	4 3 1* 4 1 3	1 - - 1 - -	1 - - 1 - -

* By invitation of the Audit Committee

Members acting on the Committees as of the year end were as follows. Additional information relating to membership is contained in the Corporate Governance Statement:

Audit Committee: G.M. Anderson (Committee Chairman) and R.J. van Berkel

Remuneration and Nominations Committee: A.I. Beckett (Committee Chairman) and G.M. Anderson

Until the current year the Board had a Corporate Governance Committee, under the chairmanship of Mr Vetter. Upon Mr Vetter’s retirement the Committee’s responsibilities were assumed by the Board of Directors.

Indemnification and insurance of officers and auditors

During the financial year, Berklee Limited paid a premium of $8,500 plus GST to insure the directors and officers of the Company.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

10

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

Other items continued

Non-audit services

RSM Bird Cameron Partners were appointed Company auditor on 4 November 2005 and will continue in office in accordance with section 327 of the Corporations Act 2001.

The Company may decide to engage the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons:

• all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

• the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

No fees were paid or payable to the external auditors for non-audit services provided during the year ended 30 June 2012.

Auditor's independence declaration

The auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 , for the year ended 30 June 2012 has been received and can be found on page 16 of the financial report.

Remuneration Report

This report is set out to provide information on:

• A Remuneration policy - the approach used by the Company to determine the nature and amount of remuneration;

• B Remuneration details - the nature and amount of remuneration for each director of Berklee Limited, and for the executives receiving the highest remuneration; and

• C Service agreements.

The information provided in the report has been audited as required by Section 308(3C) of the Corporations Act 2001.

11

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

A - Remuneration policy

The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

• competitiveness and reasonableness;

• acceptability to shareholders;

• performance linkage / alignment of executive compensation;

• transparency; and

• capital management.

The Company has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation.

Aligning to shareholders’ interests, the framework:

• has economic profit as a core component of plan design;

• focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value; and

• attracts and retains high calibre executives who receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options and performance incentives.

• Aligning to program participants’ interests, the framework:

• rewards capability and experience;

• reflects competitive reward for contribution to growth in shareholder wealth;

• provides a clear structure for earning rewards; and

• provides recognition for contribution.

The overall level of executive reward takes into account the performance of the consolidated entity over a number of years, with greater emphasis given to the current and prior year. In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

Non-executive directors

The Remuneration and Nominations Committee sets remuneration for non-executive directors annually in such a manner to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was adopted by a special resolution passed at the Annual General Meeting held on 24 November 2006 when shareholders approved an aggregate remuneration of up to a maximum of $500,000 per year. The aggregate remuneration is reviewed annually. The remuneration for non-executive directors is comprised of cash and superannuation contributions.

12

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

A - Remuneration policy continued

Retirement allowances for non-executive directors

There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors.

Executive director remuneration

The Company entered into an employment contract with the Managing Director, with effect from 8 November 2011 for a minimum period of 2 years. The remuneration aspects of the contract aim to reward him with a level and mix of remuneration commensurate with his position and responsibilities within the Company and so as to:

• align the interests of the Managing Director with those of the shareholders; and

• ensure total remuneration is competitive by market standards.

The Remuneration and Nominations Committee assesses the appropriateness of the nature and amount of remuneration of the Managing Director on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Managing Director.

Fixed remuneration

The level of fixed remuneration for the Managing Director is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. The Managing Director receives his fixed remuneration by way of cash and company superannuation payments.

Performance based remuneration

The Managing Director’s remuneration package contains an element that is dependent on a performance condition, which awards a cash bonus subject to the attainment of clearly defined Group and individual measures. On an annual basis, after consideration of the Managing Director’s performance, the Remuneration and Nominations Committee determines the amount, if any, of the short-term incentive to be paid.

Other employee’s remuneration

The Company aims to reward employees with a level of remuneration commensurate with their position and responsibilities within the Company and so as to ensure total remuneration is competitive by market standards.

The Managing Director assesses the nature and amount of employees’ remuneration on a periodic basis to ensure appropriate and realistic having regard to employees’ responsibilities and relevant market conditions.

Retirement benefits

No executives have entered into employment agreements that provide additional termination benefits.

13

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

B - Remuneration details for the year ended 30 June 2012

The Key Management Personnel are those persons having authority and responsibility for planning, directing and controlling the major activities of Berklee Limited and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. The restructuring of the Group’s business has resulted in the rationalisation of various executive roles. The executive positions included in the prior year’s key management disclosures have been discontinued or redirected, such that the key management personnel currently comprise only the members of the Board of Directors, including the Managing Director.

A cash bonus of $10,100 was paid to the Managing Director during the financial year for achievement of certain specific business development outcomes achieved prior to his commencement in the role of Managing Director.

The following table of benefits and payment details, in respect to the financial year, the components of remuneration for each member of the key management personnel of the Group:

2012 Directors A.I. Beckett B.A. Jones E.J. van Berkel* G.M. Anderson E.W. Vetter R.J. van Berkel	Short term benefits Post employment benefits Total Cash salary & fees Leave entitlements paid Other / Termination Non-cash Superann- uation 57,200 - - - 57,200 5,148 62,348 183,099 - 10,100 20,102 213,301 15,775 229,076 62,334 113,055 17,000 - 192,389 7,479 199,868 37,440 - - - 37,440 3,370 40,810 15,600 - - - 15,600 1,404 17,004 - - - - - 23,806 23,806
	355,673 113,055 27,100 20,102 515,930 56,982 572,912

• The other amount paid to Mr E. van Berkel was a termination benefit

2011 Directors G.M. Anderson A.I. Beckett A.O. Hay E.J. van Berkel E.W. Vetter Executives J. Anderson H.L. Costello B.A. Jones J.L. Kristan R.B. Larkin

Short term benefits Post employment benefits Total Cash salary & fees Leave entitlements paid Other Non-cash Superann- uation 33,000 - - - 33,000 2,970 35,970 45,144 - - - 45,144 4,063 49,207 - - - - - 24,979 24,979 170,000 - - - 170,000 21,000 191,000 36,000 - - - 36,000 3,240 39,240 93,155 - - 16,515 109,670 8,384 118,054 61,365 - - 14,622 75,987 49,123 125,110 113,397 - - 5,067 118,464 10,206 128,670 95,076 6,462 8,909 - 110,447 22,182 132,629 79,537 - - - 79,537 7,158 86,695

726,674 6,462 8,909 36,204 778,249 153,305 931,554

14

Berklee Limited

ABN: 80 004 661 205

Directors' Report

30 June 2012

C - Service agreements

Apart from an agreement with the Managing Director, there are no service agreements in place with Key Management Personnel.

Mr Brett Jones, the Managing Director, is employed under a contract which can be terminated with notice by either party. The terms of the contract provide for:

• fixed remuneration of $220,000 per annum inclusive of a salary sacrificed vehicle;

• other benefits of $nil;

• a bonus to be determined by the Remuneration Committee in accordance with an agreed formula;

• termination terms as follows: should his employment be terminated within the minimum two year term (which commenced 8 November 2011) he may be paid a lump sum that is equivalent to an amount he would otherwise have been entitled to had he remained employed from that date to the expiry of the minimum term. He is also entitled to redundancy pay based on years of service in lieu of notice if his employment is terminated at the Company’s initiative because the Company no longer requires the job to be done.

All remuneration paid or payable is disclosed in the tables above.

Superannuation contributions are made in accordance with Superannuation Guarantee Charge requirements or as salary sacrifice arrangements authorised by the Company.

Long service leave and annual leave are accrued for Key Management Personnel in accordance with statutory obligations.

This report is signed in accordance with a resolution of the Board of Directors.

We wish to thank our shareholders, customers and employees for their continued support during the year.

==> picture [157 x 19] intentionally omitted <==

==> picture [157 x 18] intentionally omitted <==

Director: ............................................................... Alan Beckett

==> picture [244 x 86] intentionally omitted <==

----- Start of picture text -----

Director: ................................................................
Brett Jones
----- End of picture text -----

26 September 2012

15

==> picture [596 x 156] intentionally omitted <==

RSM Bird Cameron Partners Level 8 Rialto South Tower 525 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 3 9286 1800 F +61 3 9286 1999 www.rsmi.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Berklee Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• (ii) any applicable code of professional conduct in relation to the audit.

==> picture [199 x 27] intentionally omitted <==

RSM BIRD CAMERON PARTNERS

==> picture [157 x 37] intentionally omitted <==

P A RANSOM Partner

Melbourne, Victoria Dated: 27 September 2012

==> picture [34 x 54] intentionally omitted <==

16

Liability limited by a Major Offices in: scheme approved Perth, Sydney, Melbourne, under Professional Adelaide and Canberra Standards Legislation ABN 36 965 185 036

RSM Bird Cameron Partners is a member of the RSM network. Each member of the RSM network is an independent accounting and advisory firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Berklee Limited (the Company) and the Board of Directors are committed to achieving and demonstrating the highest standards of corporate governance. This statement covers the Group, which comprises the Company and its controlled entities, in relation to the Australian Stock Exchange Corporate Governance Council (CGC) – Corporate Governance Principles and Recommendations – 2nd Edition with 2010 amendments. The Board continually reviews the Group’s policies and practices to ensure they meet the interests of shareholders.

The relationship between the Board and senior management is critical to the Group’s long-term success. The Directors are responsible to the shareholders for the performance of the Company in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.

The responsibility for the operation and administration of the Company is delegated by the Board to the Managing Director and the management team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the Managing Director and the management team on an ongoing basis.

A description of the Company's main corporate governance practices is set out below. Unless otherwise stated, all the good practice recommendations of the ASX Corporate Governance Council have been applied for the entire financial year ended 30 June 2012.

The Board of Directors

The Board operates in accordance with the broad principles set out in its charter which is available from the ‘Board’ information section of the Company website at www.berklee.com.au. The charter details the Board’s composition and responsibilities.

Board composition

Selection and appointment of directors

Due to the size of the Company, all Directors are involved in the selection of candidates for the position of director. The composition of the Board is constantly monitored to ensure the appropriate mix of expertise, experience and competence.

When a vacancy exists, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board selects a potential director with the appropriate expertise and experience.

Potential directors are approached by the Board and their interests in joining the board, together with the responsibilities such an appointment entail, are discussed. Terms and conditions of the appointment, including the level of remuneration, are also communicated to the nominees.

If accepted the Board will appoint the new director(s) during the year, and the person(s) will then stand for election by shareholders at the next Annual General Meeting. Shareholders are provided with relevant information on the candidates for election.

When appointed to the Board, all new directors receive an induction appropriate to their experience to familiarise them with matters relating to the Company’s business, its strategy and current issues.

17

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Responsibilities

The responsibilities of the Board include:

• guiding and monitoring the Company on behalf of the shareholders by whom they are elected and to whom they are accountable;

• seeking to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations;

• identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks;

• ensuring that management’s objectives and activities are aligned with the expectations and risk identified by the Board;

• ensuring the strategic plan is designed to meet stakeholders’ needs and manage business risk;

• ensuring the ongoing development of the strategic plan and approving initiatives and strategies are designed to ensure the continued growth and success of the Group;

• implementation of budgets by management and monitoring progress against budget via the establishment and reporting of both financial and non-financial key performance indicators;

• ensuring that the executive management team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the Managing Director and the executive management team; and

• discharging its stewardship by making use of sub-committees, including an audit committee and a remuneration committee.

Other functions reserved to the Board include:

• approval of the annual and half-yearly financial reports;

• approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestures;

• ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored; and

• reporting to shareholders.

Board members

Details of the members of the Board, their experience, expertise, qualifications and term of office are set out in the Directors’ Report under the heading ‘Information on Directors'.

The Board seeks to ensure that:

• at any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the Group and directors with an external or fresh perspective; and

• the size of the Board is conducive to effective discussion and efficient decision-making.

18

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Term of office

The Company’s Constitution governs the appointment, continuation and removal of directors from office as follows:

• subject to the provisions of Listing Rule 3L (1), at each Annual General Meeting one-third of the directors or, if their number is not a multiple of 3, then the number nearest to but not exceeding one-third of the directors must retire from office;

• the directors to retire by rotation at an Annual General Meeting are those directors who have been longest in office since their last election;

• directors elected on the same day may agree among themselves or determine by lot which of them must retire;

• a director must retire from office at the conclusion of the third Annual General Meeting after the director was last elected, even if his or her retirement results in more than one-third of all directors retiring from office;

• a retiring director will be eligible for re-election; and

• a Managing Director will not, while continuing to hold that office, be subject to retirement as provided in these Articles in respect of other directors, but will be subject to the same provisions as to resignation and removal as the other directors.

The term in office held by each Director in office at the date of this report is as follows:

Director	Term in office
A. I. Beckett	Appointed 1 August 2010
B.A. Jones	Appointed 7 November 2011
G. M. Anderson	Appointed 1 August 2010
R.J. van Berkel	Appointed 1 December 2011

Directors’ independence

The Board has adopted specific principles in relation to directors’ independence. These state that to be deemed independent, a director must be a non-executive and:

• independent of management;

• free from any business or other relationship that could, or could reasonably be perceived to, materially interfere with the exercise of independent judgement;

• not hold / have recently held an executive management position at Berklee;

• not be a substantial shareholder of Berklee, directly or indirectly;

• not be / have been in the last two years, a senior executive of, or the direct provider of consulting / audit services to, a supplier to, or a customer of, Berklee, in a substantial manner; and

• not have an interest or a business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of Berklee.

19

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Materiality is assessed on a case-by-case basis by reference to each director’s individual circumstances.

It is the Board’s view that its Chairman and non-executive directors are independent.

Chairman and Managing Director

The Chairman is responsible for leading the Board, ensuring directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s senior executives.

The Managing Director is responsible for implementing Group strategies and policies.

Commitment

The Board held 15 Board meetings during the year.

Non-executive directors are expected to spend at least 12 days a year preparing for and attending Board and committee meetings and associated activities.

The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2012, and the number of meetings attended by each director is disclosed on page 10 of the Directors’ Report.

Performance of non-executive directors is reviewable by the Chairman on an ongoing basis. Any director whose performance is considered unsatisfactory may be asked to resign.

Conflict of interests

There were no conflicts of interest between the Group and its directors during the current period.

Independent professional advice

Directors and Board Committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company's expense. Prior written approval of the Chairman is required, but this will not be unreasonably withheld.

Performance assessment

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is reviewed annually by the Chairman. The performance of the executives is reviewed annually by the non-executive director members of the Board. The last formal performance evaluation took place in June 2009.

Corporate reporting

The Managing Director has made the following certifications to the Board:

• that the Company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and Group and are in accordance with relevant accounting standards; and

• that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board and that the Company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects.

20

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Board committees

The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the Remuneration and Nominations Committee and the Audit Committee. Until the current year the Board had a Corporate Governance Committee. Upon the retirement of its then chairman, the Committee’s responsibilities were assumed by the Board of Directors.

Each committee is comprised of either:

• at least two non-executive directors, or

• at least one non-executive director and one key management person with experience and expertise in the subject area of the committee.

The committee structure and membership is reviewed on an annual basis.

Each committee has its own written charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. All of these charters are reviewed on an annual basis and are available on the Company website. All matters determined by committees are submitted to the full Board as recommendations for Board decisions.

Minutes of committee meetings are tabled at the subsequent board meeting. Additional requirements for specific reporting by the committees to the Board are addressed in the charter of the individual committees.

Remuneration and Nominations Committee

The Committee has consisted of the following non-executive directors during the year:

• A.I. Beckett (Committee chairman)

• G.M. Anderson

Details of these members’ attendance at Committee meetings are set out in the Directors’ Report on page 10.

The Committee operates in accordance with its charter which is available on the Company website. The Committee is responsible for the selection and nomination of candidates for the position of Director and for determining and reviewing compensation arrangements for the directors and the Managing Director. The Committee assesses the nature and amount of emoluments of the directors and the Managing Director on a periodic basis to ensure they are appropriate and realistic having regard to the person’s responsibilities and relevant employment market conditions.

Further information on directors’ and executives’ remuneration is set out in the Directors’ Report under the heading 'Remuneration Report'.

The Committee’s terms of reference include responsibility for reviewing any transactions between the Group and the directors, or any interest associated with the directors, to ensure the structure and the terms are in compliance with the Corporations Act 2001 and are appropriately disclosed.

Audit Committee

The Audit Committee has consisted of the following non-executive directors during the year:

• G.M. Anderson (Committee chairman)

• R.J. van Berkel – from 1 December 2011

• E.W. Vetter – until 30 November 2011

21

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Details of these members’ attendance at Audit Committee meetings are set out in the Directors’ Report on page 10.

The Audit Committee has appropriate financial expertise and all members are financially literate and have an appropriate understanding of the industries in which the Group operates.

The Audit Committee operates in accordance with a charter which is available on the Company website.

The main responsibilities of the Audit Committee are to:

• provide assistance to the Board in fulfilling its corporate governance and oversight responsibilities in relation to the Company’s financial reporting, internal control structure, risk management systems, and the external audit function. In doing so, it is the responsibility of the committee to maintain free and open communication between the committee, external auditors and management of the Company;

• investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Company and the authority to engage independent counsel and other advisers as it determines necessary to carry out its duties;

• understand the Company’s structure, controls, and types of transactions in order to adequately assess the significant risks faced by the Company in the current environment;

• oversee the Company’s financial reporting process on behalf of the Board and report the results of its activities to the Board;

• ensure the appropriateness of the accounting policies and principles that are used by the Company;

• ensure its policies and procedures remain flexible, in order to best react to changing conditions and circumstances. The committee will take appropriate actions to set the overall corporate ‘tone’ for quality financial reporting, sound business risk practices, and ethical behaviour;

• discuss with management and the external auditors, the adequacy and effectiveness of the accounting and financial controls, including the Company’s policies and procedures to assess, monitor, and manage business risk, and legal and ethical compliance programs;

• meet separately periodically with management, and the external auditors to discuss issues and concerns warranting committee attention, including but not limited to their assessments of the effectiveness of internal controls and the process for improvement. The committee shall provide sufficient opportunity for the external auditors to meet privately with the members of the committee. The committee shall review with the external auditor any audit problems or difficulties and management’s response.

In fulfilling its responsibilities, the Audit Committee shall:

• receive regular reports from the external auditor on the critical policies and practices of the Company, and all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management;

• be directly responsible for making recommendations to the Board on the appointment, reappointment or replacement (subject to shareholder ratification), remuneration, monitoring of the effectiveness, and independence of the external auditors, including resolution of disagreements between management and the auditor regarding financial reporting. The committee shall pre-approve all audit and non-audit services provided by the external auditors and shall not engage the external auditors to perform any non-audit / assurance services that may impair or appear to impair the external auditor’s judgement or independence in respect of the Company;

• obtain and review a report by the external auditors describing:

• the audit firm’s internal quality control procedures;

22

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

• any material issues raised by the most recent internal quality control review, or peer review, of the audit firm;

• all relationships between the external auditor and the Company (to assess the auditor’s independence);

• review and assess the independence of the external auditor, including but not limited to any relationships with the Company or any other entity that may impair the external auditor’s judgement or independence in respect of the Company. Furthermore, the committee shall draft an annual statement for inclusion in the Company’s annual report of whether the committee is satisfied the provision of non-audit services is compatible with external auditor independence;

• discuss with the external auditors the overall scope of the external audit, including identified risk areas and any additional agreed-upon procedures. In addition, the committee shall also review the external auditor’s compensation to ensure that an effective, comprehensive and complete audit can be conducted for the agreed compensation level;

• review and discuss ASX press releases, as well as financial information prior to their release;

• review the half-year financial report and Appendix 4D prior to the filing of these with the ASX. The committee shall also discuss the results of the half-year review and any other matters required to be communicated to the committee by the external auditors under generally accepted auditing standards;

• review all representation letters signed by management to ensure that the information provided is complete and appropriate. The committee shall also discuss the results of the annual audit and any other matters required to be communicated to the committee by the external auditors under generally accepted auditing standards;

• establish procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. The committee shall receive corporate legal reports of evidence of a material violation of the Corporations Act, the ASX Listing Rules or breaches of fiduciary duty; and

• evaluate its performance at least annually to determine whether it is functioning effectively by reference to current best practice.

The Audit Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

External auditors

The Company and Audit Committee policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. RSM Bird Cameron Partners were appointed as the external auditor on 4 November 2005. It is RSM Bird Cameron Partners' policy to rotate audit engagement partners on listed companies at least every five years. The audit partner was rotated in the previous financial year.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in note 19 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Committee.

The external auditor is requested to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

23

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

Risk assessment and management

The Board, through the Audit Committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. These policies are available on the Company website. In summary, the Company policies are designed to ensure that strategic, operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Group’s business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of Conduct (see page 25) is required at all times and the Board actively promotes a culture of quality and integrity.

The Board assesses the Company’s ‘risk profile’ and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Company’s process of risk management and internal compliance and control includes:

• establishing the Company’s goals and objectives, and implementing and monitoring strategies and policies to achieve these goals and objectives;

• continuously identifying and measuring risks that might impact upon the achievement of the Company’s goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks;

• formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk management policies and internal controls; and

• monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and controls, including an annual assessment of the effectiveness of risk management and internal compliance and control.

At each Board meeting, there is a standing agenda and matters included are:

• Document register;

• Accounting;

• Finance;

• Capital expenditure;

• Share registry;

• Directors’ declarations;

• Risk management; and

• Any other matters which may be raised.

The standing agenda is reviewed from time to time to ensure it remains appropriate for the Company’s risk profile.

Mr B. Jones in his role of Managing Director is responsible for raising awareness of all operational risks to the Board members. This role includes providing recommendations to the Board members to make an informed decision in relation to these risks.

In addition, it is a requirement that each major proposal is submitted and discussed at Board level initially.

The Board will then determine what additional information is required in order to arrive at a final decision and, where required, management’s proposed mitigation strategies.

24

Berklee Limited

ABN: 80 004 661 205

Corporate Governance Statement

The environment, health and safety management system (EHSMS)

The Company recognises the importance of environmental and occupational health and safety (OH&S) issues and is committed to the highest levels of performance. To help meet this objective the EHSMS was established to facilitate the systematic identification of environmental and OH&S issues and to ensure they are managed in a structured manner. This system has been operating for a number of years and allows the Company to:

• monitor its compliance with all relevant legislation;

• continually assess and improve the impact of its operations on the environment;

• encourage employees to actively participate in the management of environmental and OH&S issues;

• work with trade associations representing the Group’s businesses to raise standards;

• use energy and other resources efficiently; and

• encourage the adoption of similar standards by the Group’s principal suppliers, contractors and distributors.

• Information on compliance with significant environmental regulations is set out in the Directors’ Report on page 9.

Code of Conduct

The Group has a formal code of conduct to guide directors, managers and employees.

In pursuing high standards of corporate governance, all directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Group.

The Board has a policy that directors and employees of Berklee Limited and its subsidiaries may not buy or sell Berklee Limited shares except within a period of 28 days following the annual and half-yearly results announcements to Australian Stock Exchange Limited and the conclusion of the Annual General Meeting.

The policy supplements the Corporations Act provisions that preclude directors and employees from trading in securities when they are in possession of ‘insider information’.

Continuous disclosure and shareholder communication

The Company Secretary has been nominated as the person responsible for communications with the Australian Stock Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders through:

• the full annual report (hard copy);

• the full annual report (accessible on the Company’s website);

• the interim report (hard copy);

• disclosures made electronically to the ASX; and

• the Annual General Meeting and other meetings so called to obtain approval for Board action as appropriate.

It is both Company policy and the policy of the auditor for the lead engagement partner to be present at the Annual General Meeting and to answer questions about the conduct of the audit and the preparation and content of the auditor’s report.

25

Berklee Limited

ABN: 80 004 661 205

Statement of Comprehensive Income

For the Year Ended 30 June 2012

Note Revenue 4 Other income 4 Gain on sale of property, plant and equipment 5 Changes in inventories of finished goods and work in progress 6 Raw materials and consumables used 6 Employee benefits expense Restructuring provision and impairment charges 6 Depreciation, amortisation and impairments 6 Freight and cartage Lease payments on operating leases Sales and marketing Insurance Other operating expenses Finance costs Loss before income tax Taxation 8 Loss from continuing operations after tax Loss from discontinued operations after tax 7 Loss for the year Other comprehensive income: Net gain on revaluation of land and buildings 15 Other comprehensive income for the year, net of tax Total comprehensive income for the year Result attributable to: Members of the parent entity Total comprehensive income attributable to: Members of the parent entity Earnings per share From continuing and discontinued operations: Basic earnings per share (cents) 27 Diluted earnings per share (cents) 27 From continuing operations: Basic earnings per share (cents) 27 Diluted earnings per share (cents) 27	2012 $000 2011 $000 5,501 5,939 137 176 - 527 39 (30) (2,617) (2,859) (2,373) (2,570) 62 (122) (626) (625) (301) (345) (53) (70) (46) (65) (103) (94) (531) (420) (6) (6)
	(917) (564) - (376)
	(917) (940) (1,232) (1,288)
	(2,149) (2,228)
	- 1,935
	- 1,935
	(2,149) (293)
	(2,149) (2,228)
	(2,149) (2,228)
	(2,149) (293)
	(2,149) (293)
	(21.50) (22.30) (21.50) (22.30) (9.20) (9.40) (9.20) (9.40)

The accompanying notes form part of these financial statements.

26

Berklee Limited

ABN: 80 004 661 205

Statement of Financial Position

As at 30 June 2012

Note ASSETS Current assets Cash and cash equivalents 26 Trade and other receivables 9 Inventories 10 Total current assets Non-current assets Trade and other receivables 9 Property, plant and equipment 11 Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables 12 Borrowings Provisions 13 Total current liabilities Non-current liabilities Long-term provisions 13 Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 14 Asset revaluation reserve 15 (Accumulated losses) / Retained earnings 15 TOTAL EQUITY	2012 $000 2011 $000 2,156 2,298 1,632 1,643 1,984 3,921
	5,772 7,862
	- 189 5,668 6,254
	5,668 6,443
	11,440 14,305
	1,072 1,277 44 29 756 1,068
	1,872 2,374
	39 53
	39 53
	1,911 2,427
	9,529 11,878
	8,700 8,700 2,214 2,214 (1,385) 964
	9,529 11,878

The accompanying notes form part of these financial statements.

27

Berklee Limited

ABN: 80 004 661 205

Statement of Changes in Equity

For the Year Ended 30 June 2012

2012

2012
Note Balance at 1 July 2011 Profit attributable to members Sub-total Dividends paid or provided for 16 Balance at 30 June 2012	Issued capital $000 (Accumulated losses) / Retained earnings $000 Asset Revaluation Reserve $000 Total $000
	8,700 964 2,214 11,878 - (2,149) - (2,149)
	8,700 (1,185) 2,214 9,729 - (200) - (200)
	8,700 (1,385) 2,214 9,529

2011

Note Balance at 1 July 2010 Profit attributable to members Total other comprehensive income for the year Transfer of realised gains from asset revaluation reserve Sub-total Dividends paid or provided for 16 Balance at 30 June 2011	Issued capital $000 (Accumulated losses) / Retained earnings $000 Asset Revaluation Reserve $000 Total $000
	8,700 2,973 698 12,371 - (2,228) - (2,228) - - 1,935 1,935 - 419 (419) -
	8,700 1,164 2,214 12,078 - (200) - (200)
	8,700 964 2,214 11,878

The accompanying notes form part of these financial statements.

28

Berklee Limited

ABN: 80 004 661 205

Statement of Cash Flows

For the Year Ended 30 June 2012

Note Cash from operating activities: Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Net cash provided by / (used in) operating activities 26 Cash flows from investing activities: Proceeds from sale of plant and equipment Disposal costs of property, plant and equipment sold Purchase of property, plant and equipment Net cash (used in) / provided by investing activities Cash flows from financing activities: Proceeds from borrowings Repayment of borrowings Dividends paid by parent entity Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 26	2012 $000 2011 $000 10,316 10,085 (10,255) (11,137) 68 138 (6) (6)
	123 (920)
	25 910 - (30) (105) (168)
	(80) 712
	117 117 (102) (117) (200) (200)
	(185) (200)
	(142) (408) 2,298 2,706
	2,156 2,298

The accompanying notes form part of these financial statements.

29

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

1 Corporate information

The financial report of Berklee Limited (the Company) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the directors on 26 September 2012. The directors have the power to amend and revise the financial report.

The financial report includes the consolidated financial statements of the Company and its controlled entities (the Group).

Berklee Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in the directors' report.

2 Summary of Significant Accounting Policies

(a) Basis of preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 . Berklee Limited is a for-profit entity for the purpose of preparing the financial statements.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of the Parent and all subsidiaries as at 30 June 2012, and the results of all subsidiaries for the year then ended. The Parent and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

30

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(b) Principles of consolidation continued

They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of the Parent, less any impairment charges.

(c) Foreign Currency Transactions and Balances

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Berklee Limited’s functional and presentation currency.

(ii) Transaction and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity.

(d) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of goods

Control of the goods has passed to the buyer upon delivery of the goods to the customer.

(ii) Interest income

Control of a right to receive consideration for the provision of, or investment in, assets has been attained.

31

Notes to the Financial Statements

Berklee Limited

ABN: 80 004 661 205

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(d) Revenue continued

(iii) Dividends

Control of a right to receive consideration for the investment in assets attained, usually evidenced by approval of the dividend at a meeting of shareholders.

All revenue is stated net of the amount of goods and services tax (GST).

(e) Discontinued Operations

A discontinued operation is a component of the Group that has been disposed of, or is classified as held for sale, and that represents a separate major line of business or geographical area of operations or is part of a single coordinated plan to dispose of such a line of business or area of operations. The results of discontinued operations are presented separately in the statement of comprehensive income.

(f) Income Tax

The income tax expense or benefit for the period is the tax payable / refundable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.

An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

32

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(h) Financial instruments continued

Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Tax consolidation legislation

Berklee Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of 1 January 2004.

The head entity, Berklee Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Berklee Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are

recognised as amounts receivable from or payable to other entities in the group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.

(g) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

The amount of the impairment loss is recognised in the statement of comprehensive income. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited in the statement of comprehensive income.

(h) Financial instruments

Recognition and initial measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instruments. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

33

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(h) Financial instruments continued

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Those financial instruments entered into by the Group are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed is recognised in profit or loss.

Classification and subsequent measurement

(i) Financial liabilities

Due to their short term nature trade and other payables are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(ii) Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the income statement as incurred.

Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Unless otherwise disclosed in the notes to the financial statements, the carrying amount of the Group’s financial instruments approximates their fair value.

(i) Inventories

Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:

• Raw materials - purchase cost on a first-in-first-out basis

• Finished goods and work in progress – cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

34

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(j) Property, plant and equipment

Land and buildings are shown at fair value, based on periodic revaluations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the item.

Subsequent costs are included in the asset's carrying amount and recognised as a separate asset, as appropriate, only when it is possible that future economic benefits associated with the item will flow to the group and the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to the statement of comprehensive income during the reporting period in which they are incurred.

Increases in the carrying amounts arising on revaluation of land and buildings are recognised, net of tax, in other comprehensive income and accumulated in reserves in equity. To the extent that the increase reverses a decrease previously recognised in the statement of comprehensive income, the increase is first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to the statement of comprehensive income.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset's useful life to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements, using the straight line method.

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

	Depreciation Rate /
Class of Fixed Asset	Useful Life
Buildings	40 years
Plant and Equipment	2.5 to 15 years
Motor Vehicles	3 to 8 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset's carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount (refer to policy note k).

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold it is a Group policy to transfer any amounts included in reserves in respect of those assets to retained earnings.

35

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(k) Impairment of assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(l) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(m) Employee benefits

Provision is made for the company's liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at present value of the estimated future cash outflows to be made for those benefits. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

(n) Leases and assets acquired under hire purchase arrangements

Finance leases and hire purchase contracts, which transfer to the Group substantially all the risks and benefits incidental to ownership of the asset, are capitalised at the inception of the contract at the fair value of the leased/hire purchased asset or, if lower, at the present value of the minimum contracted payments. Payments are apportioned between the finance charges and reduction of the liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the statement of comprehensive income.

Capitalised assets are depreciated over the shorter of the estimated useful life of the asset and the contract term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

(o) Contributed equity

Ordinary shares are classified as equity and recognised at the fair value of the consideration received by the company.

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. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

If the entity reacquires its own equity instruments, eg as the result of a share buy-back, then those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the income statement and the consideration paid, including any direct attributable incremental cost (net of income taxes) is recognised directly in equity.

36

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(p) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(q) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(r) 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. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

(s) Operating segments

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues.

Operating segments have been identified based on the information provided to the chief operating decision makers – being the Board of Directors.

(t) Parent entity financial information

The financial information for the parent entity, Berklee Limited, disclosed in note 25 has been prepared on the same basis as the consolidated financial statements, except that investments in subsidiaries are accounted for at cost net of impairment in the parent financial statements.

37

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(u) Rounding of amounts

The company has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and directors' report have been rounded off to the nearest thousand dollars.

(v) New and revised accounting standards and interpretations

(i) Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous financial year, other than as noted below.

There are a number of new and amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB), which are applicable for reporting periods beginning on or after 1 July 2011. The Group has adopted all of the mandatory new and amended pronouncements issued that are relevant to its operations and that are effective for the current reporting period. There was no material impact on the consolidated financial statements for the year as a result of adoption of those new and amended pronouncements.

(ii) Early adoption of standards

The Group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2011.

(iii) New accounting standards for application in future periods

The following Standards and Interpretations issued or amended are applicable to the Group but not yet effective and have not been adopted in preparation of the financial statements at reporting date. The Group’s assessment of the impact of these new standards and interpretations is set out below.

AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9

AASB 9 includes requirements for the classification and measurement of financial assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities.

AASB 9 introduces a revised basis of financial asset classification, changes the accounting treatment in respect of equity investments not held for trading, eliminates potential inconsistencies in the treatment of certain financial assets, and clarifies the measurement of financial liabilities under the fair value option.

Various other Standards are consequentially revised through AASB 2009-11. The Standards will be applied by the Group with effect from 1 July 2015, at which point the impacts will be more readily determinable.

38

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(v) New and revised accounting standards and interpretations continued

AASB 10 Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities, replacing parts of AASB 127 Consolidated and Separate Financial Statements. The new model broadens the situations when an entity is considered to be controlled by another entity and provides guidance for applying the model to specific situations, including when acting as a manager, the impact of potential voting rights, and when holding less than a majority of voting rights.

Various other Standards are consequentially revised through AASB 2011-7. The Standards will be applied by the Group with effect from 1 July 2013, at which point the impacts will be more readily determinable.

AASB 12 Disclosure of Interests in Other Entities

AASB 12 governs the disclosures relating to an entity’s interests in subsidiaries, joint arrangements, and associates, including the judgements made by management to determine whether control exists.

The Standard will be applied by the Group with effect from 1 July 2013, at which point the impacts will be more readily determinable.

AASB 13 Fair Value Measurement

AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities, and expands the disclosure requirements for all assets or liabilities carried at fair value.

Various other Standards are consequentially revised through AASB 2011-8. The Standards will be applied by the Group with effect from 1 July 2013, at which point the impacts will be more readily determinable.

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements

The impacts of the Standard, to be applied with effect from 1 July 2013, are not expected to be significant.

AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income

The Standard requires items presented in other comprehensive income on the basis of whether they may be reclassified subsequently to profit or loss and those that will not. The impacts of the standard, to be applied with effect from 1 July 2012, are not expected to be significant.

Annual Improvements to IFRSs 2009–2011 Cycle

This standard sets out amendments to International Financial Reporting Standards (IFRSs) and the related bases for conclusions and guidance made during the International Accounting Standards Board’s Annual Improvements process. The amendments have not yet been adopted by the AASB.

39

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

2 Summary of Significant Accounting Policies continued

(w) Critical accounting estimates and judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.

Management has identified the following critical matters in respect of which significant judgements, estimates and assumptions have been made.

Actual results may differ from the estimates made by management under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of taxable profits in the foreseeable future.

The sensitivity of the carrying amounts are subject to the timing of temporary difference reversals and the continuing availability of tax losses under relevant tax legislation. Should the tax losses no longer be able to be recognised a net deferred tax liability of $188,000 would be recognised.

Valuation of inventories

Inventories are stated at the lower of cost and net realisable value (NRV), with due allowance for excess, obsolete or slow moving items. The Group reviews its inventory throughout the year and at the end of each reporting period to determine if it is properly stated at NRV. NRV is based on current assessments of future demands and market conditions. Given the past and current significance of inventory to the Group, in particular in an environment of restructure, the determination of NRV is considered a critical accounting estimate. Further information is provided in Note 10.

40

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

3 Financial risk management

The Group's principal financial instruments comprise cash and cash equivalents, receivables and payables.

The Group's activities expose it to a range of financial risks: credit risk, market risk (foreign currency risk) and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and foreign exchange rates. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The Group may seek to minimise potential adverse effects on the financial performance by using derivative financial instruments such as forward exchange contracts to hedge certain risk exposures.

Risk management is carried out by the board of directors under policies approved by them, against the objective of supporting the delivery of the Group's financial targets whilst protecting future financial security. The board reviews and agrees policies for managing each of the risks identified below.

Risk exposures and responses

(a) Credit risk

Credit risk arises from cash and cash equivalents and outstanding trade and other receivables. The cash balances are held in financial institutions with high ratings and the trade and other receivables relates to goods sold and delivered to customers. The Group has assessed that there is minimal risk that the cash and trade and other receivables balances are impaired.

It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Group closely monitors trade receivables on an ongoing basis and has set policies and procedures in relation to collections, credit limits and review of trade debtors. Credit limits are allocated to each debtor. Theoretically, these limits should not be exceeded. However, the system does not prevent this and on occasion credit limits are exceeded. Notwithstanding, receivables balances are monitored on an ongoing basis with the result that the Group's experience of bad debts has not been significant. Any uncollectible amounts are provided for on a debtor specific basis.

The Group has recorded a provision for doubtful debts totalling $10,000 as at 30 June 2012 ($6,000 as at 30 June 2011).

(b) Market risk

(i) Foreign currency risk

During the year the Group has had exposure to foreign exchange risk arising from the importation of product using a currency other than the functional currency. Risk arises from commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group's functional currency. The risk is measured using cash flow forecasting. Exposure as of the current year-end is in respect of the United States Dollar and Chinese Yuan (30 June 2011: United States Dollar and Chinese Yuan). The amount payable at the year-end was USD45,000 (AUD44,000) and CNY583,000 (AUD90,000) (30 June 2011: USD38,000 (AUD35,000) and CNY1,023,000 (AUD148,000)). Due to the minimal foreign currency transactions outstanding and the short term nature of the transactions the Group has not sought to manage associated foreign currency risk by entering into forward exchange contracts. Approximately 41% (2011: 12%) of the Group’s purchases are denominated in currencies other than the functional currency.

Had the Australian dollar strengthened/weakened by 10% against the foreign currencies, the Group’s post tax profit would have been approximately $13,400 higher/lower (30 June 2011: approximately $18,300 higher/lower).

41

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

3 Financial risk management continued

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash to ensure the ability to meet financial obligations as they fall due. The Group manages liquidity risk by maintaining a cash reserve and continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

(d) Maturities of financial liabilities

The table below analyses the maturity of financial assets and liabilities based on management's expectations. The risk implied from the values shown in the table reflects a balanced view of cash inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in ongoing operations such as property, plant, equipment and investments in working capital such as inventories and trade receivables. These assets are considered in the Group's overall liquidity risk.

Consolidated 2012 Receivables Payables Net Maturity Consolidated 2011 Receivables Payables Net Maturity	6 months or less 6 months - 2 years >2 years Total '$000 '$000 '$000 '$000 1,573 1,573
	895 895
	678 678
	1,563 189 1,752
	1,052 1,052
	511 189 700

Fair value estimation

The methods for estimating fair value are outlined in the relevant notes to the financial statements.

4 Revenue

Sales revenue - Sale of goods - Interest income - Other income Total Revenue	2012 $000 2011 $000 5,501 5,939 68 138 69 38
	5,638 6,115

42

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

5 Other income

Other income - Net gains on disposal of property, plant and equipment Other income 6 Expenses Cost of sales: Changes in inventories of finished goods and work in progress Raw materials and consumables used Total raw materials and consumables used Depreciation: Plant and machinery Buildings Total depreciation of non-current assets Finance Costs: Borrowing costs Total finance costs Bad and doubtful debts Impairments charged Total bad and doubtful debts Provision for employee benefits: Long service leave Annual leave Total amount charged to provisions for employee benefits Restructuring and impairment charges: (a) Restructuring provision Impairment of inventory	2012 $000 2011 $000 - 527
	- 527
	(39) 30 2,617 2,859
	2,578 2,889
	583 580 43 45
	626 625
	6 6
	6 6
	4 6
	4 6
	10 28 148 188
	158 216
	(62) 122 57 -

(a) Restructuring provision and impairment charges

At 30 June 2011, a provision for restructuring was raised, and certain assets were adjusted to reflect impairments assessed as being necessary in light of the implications of restructuring decisions. The above amounts were charged in aggregate to income during the period for the continuing operations.

The current year result from continuing operations had a $57,000 charge for further inventory provisioning (2011: $nil) and a credit of $62,000 released to the income statement for excess restructuring provisions no longer required (2011: $122,000 charged to continuing operations for restructuring).

43

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

7 Discontinued Operations

As reported at 30 June 2011 the consolidated entity has undertaken a restructuring program and consequently it has designated its distribution arm Undacar Parts as a discontinued operation. As at 30 June 2012 three of the six state branches have been closed and distribution taken over by a third party. It is the consolidated entity’s expectation that the remaining three branches are transitioned to third party arrangements by 30 June 2013. Berklee Limited (the continuing operation) has replaced sales to the branches in WA, Queensland and NSW with sales to Mercury Mufflers the new distributor in those states.

Berklee Limited currently sells product to the remaining Undacar Parts branches in Victoria, South Australia and Tasmania and will replace those revenue streams with direct sales to the proposed third party distributors who will replace Undacar in those states. Revenue from continuing operations reflects sales revenue as it would have been had the discontinued operations been exited at the commencement of the year. Revenue from discontinued operations reflects the portion of consolidated sales revenue which will not continue after the closure of both the exited and remaining branches.

The financial performance of the discontinued operation to the date of sale which is included in profit / (loss) from discontinued operations is as follows:

Revenue Expenses Loss before income tax Income tax benefit Total loss after tax attributable to the discontinued operation	2012 $000 2011 $000 3,628 3,233 (4,860) (5,074)
	(1,232) (1,841) - 553
	(1,232) (1,288)

The net cash flows of the discontinuing division which have been incorporated into the statement of cash flows are as follows:

flows are as follows:
Net cash inflow/(outflow) from operating activities Net cash increase generated by the discontinuing division The above results include the following restructuring charges relating to the discontinued business: Restructuring Impairment Inventory	46 (334)
	46 (334)
	133 598 4 197 116 756
	253 1,551

44

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

8 Income tax

(a) The components of tax expense/(benefit) comprise:

Deferred tax - continuing operations Deferred tax - discontinued operations Income tax expense/(benefit)	2012 $000 2011 $000 - 376 - (553)
	- (177)

(b) The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows:

income tax as follows:
Prima facie tax payable on profit from ordinary activities before income tax at 30% (2011: 30%) - continuing operations - discontinued operations Tax effect amounts which are not deductible (taxable) in calculating taxable income: - other items - derecognition of prior year tax losses - non-recognition of current year tax losses - other adjustment of temporary differences Income tax expense from continuing operations Income tax expense/(benefit) from discontinued operations (c) Deferred tax assets movements: The overall movement in the deferred tax account is as follows: Opening balance Charged / (credited) to the income statement Charged to other comprehensive income Closing balance	(275) (169) (370) (553)
	(645) (722) 1 11 - 135 679 364 (35) 35
	- (177)
	- 376 - (553)
	- (177)
	- 516 - 313 - (829)
	- -

45

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

(d) Deferred tax assets components:

(d) Deferred tax assets components:
Tax assets and liabilities recognised in the balance sheet comprise: - Deferred tax assets attributable to temporary differences - Deferred tax liabilities attributable to temporary differences Net deferred tax balance The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Provision for leave entitlements Provision for diminution of inventory Provision for restructure Operating lease settlement Excess property WDV (tax) over WDV (book) Tax amortisation of deferred costs Tax losses Other Amounts recognised in equity Revaluation of property The deferred tax asset/liability is expected to be recovered/settled over the following timeframe: Within 12 months After 12 months (e) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following: Current tax losses recognised in the Statement of Financial Position: Tax losses not recognised in the Statement of Financial Position:	2012 $000 2011 $000 858 902 (858) (902)
	- -
	132 196 128 229 159 216 (11) (15) 212 212 12 24 188 - 9 (33) (829) (829)
	- -
	418 676 (418) (676)
	- -
	188 -
	1,187 499

These tax losses will be available to the consolidated entity should sufficient taxable income be earned in future periods and statutory conditions for deductibility remain.

46

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

9 Trade and other receivables

Trade and other receivables
CURRENT Trade receivables Provision for impairment of receivables Prepayments Security deposits Other receivables NON-CURRENT Security deposits	2012 $000 2011 $000 1,357 1,493 (10) (6)
	1,347 1,487 59 80 189 - 37 76
	1,632 1,643
	- 189
	- 189

(a) Allowance for impairment loss

Trade receivables are non-interest bearing and are generally on 30 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired.

At 30 June the ageing analysis of trade receivables is as follows:

Current 30 days 60 days 90+ days	717 972 414 436 138 31 88 54
	1,357 1,493

A provision for doubtful debts of $10,000 has been made as at 30 June 2012 (2011: $6,000) resulting in a charge to the Statement of Comprehensive Income for the year of $4,000 (2011: $6,000)

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

(b) Fair value and credit risk

Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security.

47

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

10 Inventories

Inventories
CURRENT Raw materials and stores at cost Work in progress at cost Finished goods at net realisable value 10(a) Stock - consumables at cost	2012 $000 2011 $000 850 918 76 118 997 2,842 61 43
	1,984 3,921

(a) Writedowns

Write downs of inventories to net realisable value during the year were $ 173,000 (2011: $ 756,000), as a consequence of the decision to implement a plan to restructure the business, as disclosed in Note 6.

11 Property, plant and equipment

LAND AND BUILDINGS

Freehold land At valuation Total freehold land Buildings At valuation Less accumulated depreciation Total buildings Total land and buildings PLANT AND EQUIPMENT Plant and equipment Cost Less accumulated depreciation Total plant and equipment Total plant and equipment Total property, plant and equipment	2,670 2,670
	2,670 2,670
	1,720 1,720 (43) -
	1,677 1,720
	4,347 4,390
	8,926 9,360 (7,605) (7,496)
	1,321 1,864
	1,321 1,864
	5,668 6,254

(a) Asset revaluations

The directors obtained an independent assessment of the fair value of freehold land and buildings on 24 March 2011. Fair value is the amount for which the assets could be exchanged between a knowledgeable willing buyer and seller, in an arms length transaction as at the valuation date and has been based on vacant possession, with direct reference to recent market transactions on arm's length terms for land and buildings comparable to that of the Company. The revaluation surplus, net of applicable deferred income taxes, was credited to the asset revaluation reserve.

48

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

11 Property, plant and equipment continued

(b) Historical Cost

If land and buildings were stated at historical cost, amounts would be as follows:

Freehold land Buildings Accumulated depreciation Net book value	2012 $000 2011 $000 365 365
	1,797 1,797 (580) (535)
	1,217 1,262
	1,582 1,627

(c) Movements in Carrying Amounts

Movement in the carrying amount for each class of property, plant and equipment between the beginning and the end of the current financial year:

Current Year Carrying amount at the beginning of the year Additions Disposals Depreciation expense Impairment (d) Carrying amount at the end of year Prior Year Written down value Additions Disposals Depreciation expense Revaluation Impairment (d) Carrying amount at the end of year	Land $000 Buildings $000 Plant and Equipment $000 Total $000 2,670 1,720 1,864 6,254 - - 105 105 - - (15) (15) - (43) (626) (669) - - (7) (7)
	2,670 1,677 1,321 5,668
	365 1,306 2,525 4,196 - - 168 168 - - - - - (44) (632) (676) 2,305 458 - 2,763 - - (197) (197)
	2,670 1,720 1,864 6,254

(d) Impairment Losses

The carrying amount of plant and equipment has been reduced by $197,000 to reflect an impairment recognised as a consequence of the decision to implement a plan to restructure the business, as disclosed in Note 6.

49

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

12 Trade and other payables

Trade and other payables Employee entitlements - annual leave	2012 $000 2011 $000 895 1,023 177 254
	1,072 1,277

(a) Fair value

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

13 Provisions

CURRENT Employee entitlements: Long service leave Provision for restructure (a) NON-CURRENT Employee entitlements: Long service leave	225 348 531 720
	756 1,068
	39 53
	39 53

(a) Provision for restructure

In the previous financial year the directors commenced implementation of a plan to restructure the Group’s business. The strategy adopted incorporates a plan to transform the business into a specialised metal engineering solutions business, diversified to include non-automotive lines in addition to traditional exhaust products and to operate a restructured distribution business better suited to the new direction. A provision has been recognised in the financial statements in respect of anticipated redundancies and contracted closure costs. As of the current year-end, $531,000 remains unutilised. The directors remain committed to the completion of the restructuring program and anticipate it will be complete by 30 June 2013.

Movement in restructuring provision:

Current Opening balance at 1 July 2011 Additional provisions Utilised during the period Balance at 30 June 2012	Restructuring $000 720 71 (260)
	**531 **

50

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

14 Contributed Equity

(a) Share capital

Share capital
10,000,443 (2011: 10,000,443) Ordinary shares, fully paid Total	2012 $000 2011 $000 8,700 8,700
	8,700 8,700

• (i) Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number and amounts paid on shares held. Ordinary shares have no par value.

• (ii) Ordinary shares entitle their holder to one vote, either in person or by proxy, at a general meeting of the company.

(b) Movement in ordinary share capital

There have been no movements in ordinary share capital since 30 October 1998.

(c) Capital Management

When managing capital, which management consider to be all components of equity, management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

During 2012, dividends of $200,000 were paid (2011: $200,000). Management gives particular regard to conservation of liquidity in its recommendations as to the declaration of dividends.

15 Reserves and Retained Earnings

Asset revaluation reserve Opening balance Revaluation of land and buildings Income tax on revaluation taken directly to equity Transfer of realised amounts contained in the reserve to retained profits Total Retained earnings (Accumulated losses) Opening balance Net loss/income for the period Dividends paid for ordinary shares during the financial year Transfer of realised amounts contained in the reserve to retained profits Total	2012 $000 2011 $000 2,214 698 - 2,764 - (829) - (419)
	2,214 2,214
	964 2,973 (2,149) (2,228) (200) (200) - 419
	(1,385) 964

51

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

15 Reserves and Retained Earnings continued

Nature and purpose of reserves

(a) Asset revaluation reserve

The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets. The balance standing to the credit of the reserve may be used to satisfy the distribution of bonus shares to shareholders and is only available for the payment of cash dividends in limited circumstances permitted by law.

16 Dividends

(a) Ordinary shares

Dividends of $0.02 per share (2011: $0.02) paid for ordinary shares during the financial year Total	2012 $000 2011 $000 200 200
	200 200

(b) Franking credits

Franking credits
Franking credits available for subsequent financial years based on a tax
rate of 30% (2011: 30%)	1,543	1,629

The above amounts represent the balance of the franking account as at the end of the financial year 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.

52

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

17 Key Management Personnel

(a) Key Management Personnel

Names and positions held of key management personnel in office at any time during the financial year are:

Key Management Person

Position

Key Management Person	Position
A.I. Beckett	Non-executive Director & Chairman
B.A. Jones	Managing Director and Company Secretary (from 8
	November 2011, previously General Manager
	Business Development)
E.J. van Berkel	Managing Director and Company Secretary (to 7
	November 2011)
G.M. Anderson	Non-executive Director
E.W. Vetter	Non-executive Director (resigned 30 November
	2011)
R.J. van Berkel	Non-executive Director (from 1 December 2011)

Key management personnel had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year.

(b) Key management personnel compensation summary

2012 Total compensation 2011 Total compensation	Short-term benefits $000 Post employment benefit $000 Long-term benefits $000 Termination benefits $000 Total $000 499 57 - 17 573
	778 153 - - 931

The company has taken advantage of the relief provided by Corporation Regulation 2M.6.04 and has transferred the detailed remuneration disclosures to the Directors’ Report. The relevant information can be found on pages 11 to 15 of the Remuneration Report.

53

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

17 Key Management Personnel continued

(c) Equity instrument disclosures relating to key management personnel

Shareholdings

The number of shares in the company held during the financial year by each director of Berklee Limited and other key management personnel of the Group, including their personal related parties, are set out below. There were no shares granted during the reporting period as compensation.

Number of Shares held by Key Management Personnel

2012 Directors of Berklee Ltd A.I. Beckett E.J. van Berkel R.J. van Berkel Other key management personnel of the Group: H. L. Costello	Balance 1/07/2011 Commencement / cessation of role Net change other Balance 30/06/2012* - - 16,661 16,661 844,959 (844,959) - - - 2,659,501 - 2,659,501 34,941 (34,941) - -
	879,900 1,779,601 16,661 2,676,162

Mr E.J. van Berkel resigned as a director during the year.

Mr H.L. Costello ceased to be an employee during the year.

2011 Directors of Berklee Ltd E.J. van Berkel Other key management personnel of the Group: H.L. Costello	Balance 01/07/2010 489,153 34,941	Commencement / cessation of role Net change other Balance 30/06/2011** - 355,806 844,959 - - 34,941
	524,094	- 355,806 879,900

• Net change other refers to shares purchased or sold during the financial year.

** Increase associated with settlement under a deed of partnership variation.

(d) Loans to key management personnel

There were no loans paid between Berklee Limited and its key management personnel during the current and prior period

54

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

18 Related party transactions

(a) Parent entities

The ultimate parent entity within the Group is Berklee Limited

(b) Subsidiaries

Interests in subsidiaries are set out in note 23.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 17.

(d) Terms and conditions

All transactions were made on normal commercial terms and at market rates, except that there are no fixed terms for the repayment of loans between parties.

Outstanding balances are unsecured and are repayable in cash.

19 Auditors' Remuneration

During the year, the following fees were paid or payable for services provided by the auditor:

RSM Bird Cameron Partners - Audit of the financial report - Other services Total remuneration of auditors	2012 $ 2011 $ 63,000 65,000 - -
	63,000 65,000

20 Contingencies

The parent entity and Group had no contingent liabilities as at 30 June 2012.

21 Capital and Leasing Commitments

Operating Lease Commitments Payable - minimum lease payments - not later than 12 months - between 12 months and 5 years	2012 $000 2011 $000 379 644 100 564
	479 1,208

Assets which are the subject of non-cancellable operating leases include motor vehicles, computer hardware and rental property. Motor vehicles have an average lease term of 2.5 years and an average implicit interest rate of 8%. Computer hardware has an average lease term of 3 years and an implicit interest rate of 6.7%. Rental property has an average lease term of 2 years with no implicit interest rate. The Group leases three properties under non-cancellable operating leases expiring within two to three years. The leases have varying terms and renewal rights. On renewal, the terms of the leases are renegotiated.

55

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

22 Financial Reporting By Segments

The company operates primarily within one industry segment, being the specialist industrial products industry, and also operates only within one geographical segment, being Australia.

Additional supplementary segment information:

Customers:

The continuing operations of the consolidated entity have two customers whose individual revenue exceeds 10% of consolidated revenue. The totals of their revenue is for Customer A $1,446,000 (2011: $nil) and Customer B $1,476,000 (2011: $768,000). The consolidated entity has supply agreements with both parties.

23 Controlled Entities

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policies described in note 2:

Name	Country of	Percentage	Percentage
	incorporation	Owned	Owned
		2012	2011
Berklee Retail Pty Ltd	Australia	100%	100%
Undacar Parts (VIC) Pty Ltd	Australia	100%	100%
Undacar Parts (NSW) Pty Ltd	Australia	100%	100%
Undacar Parts (QLD) Pty Ltd	Australia	100%	100%
Undacar Parts (SA) Pty Ltd	Australia	100%	100%
Undacar Parts (WA) Pty Ltd	Australia	100%	100%
Undacar Parts (TAS) Pty Ltd	Australia	100%	100%
Undacar Parts Pty Ltd	Australia	100%	100%

During the year, Berklee Limited decreased impairment provisions against subsidiary loans by $372,000 to $1,792,000, reflecting its assessment of the recoverable amount of the loans based on the net assets of the Undacar Parts subsidiaries. The impact on the parent entity is shown in Note 25.

24 Events after the end of the reporting period

Subsequent to the 30 June 2012 reporting date, on 23 August 2012 the Directors announced discussions with certain parties which may lead to an offer for all the shares in the Company or which may result in an alternative transaction. At this stage it is not possible to provide any meaningful detail or to comment on the probability of the successful outcome of these discussions. Apart from this, no other events have significantly affected, or are likely to affect, the operations or financial position of the Group.

56

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

25 Parent entity

The following supplementary information is provided in respect of the parent entity Berklee Limited:

Statement of Financial Position Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Issued capital Retained earnings Reserves Total Equity Statement of Comprehensive Income Total profit or loss for the year Other comprehensive income Total comprehensive income	2012 $000 2011 $000 5,425 4,230 5,669 8,321
	11,094 12,551
	1,350 1,242 39 25
	1,389 1,267
	8,700 8,700 (1,209) 370 2,214 2,214
	9,705 11,284
	(1,379) (2,818) - 1,935
	(1,379) (883)

(a) Contingent liabilities

The parent entity did not have any contingent liabilities as at 30 June 2012 or 30 June 2011.

(b) Contractual commitments

The parent entity did not have any commitments as at 30 June 2012 or 30 June 2011.

57

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

26 Cash Flow Information

Reconciliation of Cash Flow from Operations with Profit after Income Tax

Net loss for the period Cash flows excluded from profit attributable to operating activities Non-cash flows in profit Depreciation Plant and equipment impairment from restructure (Profit) / loss on disposal of non-current assets Changes in assets and liabilities: (Increase)/decrease in trade receivables (Increase)/decrease in other assets (Increase)/decrease in inventories Increase/(decrease) in trade payables and accruals Increase/(decrease) in income taxes payable Increase/(decrease) in deferred tax assets Increase/(decrease) in provisions Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows: Cash and cash equivalents	2012 $000 2011 $000 (2,149) (2,228) 669 625 7 197 (9) (527) 180 (70) 21 - 1,937 374 (129) 114 - 135 - (312) (404) 721
	123 (971)
	2,156 2,298
	2,156 2,298

58

Berklee Limited

ABN: 80 004 661 205

Notes to the Financial Statements

Year Ending 30 June 2012

27 Earnings per share

(a) Basic earnings per share

(a)	Basic earnings per share
		2012	2011
		cents	cents
	From continuing operations attributable to the ordinary equity holders of
	the company	(9.20)	(9.40)
	From discontinued operations	**(12.30) **	(12.90)
	Total basic earnings per share attributable to the ordinary equity
	holders of the company	(21.50)	(22.30)
(b)	Diluted earnings per share
		2012	2011
		cents	cents
	From continuing operations attributable to the ordinary equity holders of
	the company	(9.20)	(9.40)
	From discontinued operations	**(12.30) **	(12.90)
	Total	**(21.50) **	(22.30)
(c)	Reconciliation of earnings used to calculate earnings per share
		2012	2011
		$000	$000
	Basic and diluted earnings per share
	Profit attributable to ordinary equity holders of the company used in
	calculating earnings per share:
	From continuing operations	**(917) **	(940)
	From discontinued operations	**(1,232) **	(1,288)
		**(2,149) **	(2,228)
(d)	Weighted average number of shares used as the denominator
		2012	2011
	Weighted average number of shares used as the denominator in
	calculating basic earnings per share	10,000,443	10,000,443
	Adjustments for calculation of diluted earnings per share	-	-
	Weighted average number of ordinary shares	10,000,443	10,000,443

59

Berklee Limited

ABN: 80 004 661 205

Directors' Declaration

The directors of the company declare that, in the opinion of the directors:

• (a) the attached financial statements and notes thereto are in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the financial position and performance of the company and of the consolidated entity; and

• (ii) complying with Australian Accounting Standards, including the Interpretations, and the Corporations Regulations 2001 ;

• (b) the financial statements and notes thereto also comply with International Financial Reporting Standards, as disclosed in Note 2;

• (c) the directors have been given the declarations required by s.295A of the Corporations Act 2001; and

• (d) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001 .

On behalf of the Directors

==> picture [157 x 18] intentionally omitted <==

==> picture [157 x 18] intentionally omitted <==

==> picture [157 x 18] intentionally omitted <==

==> picture [219 x 22] intentionally omitted <==

----- Start of picture text -----

Director: ...............................................................
Alan Beckett
----- End of picture text -----

==> picture [249 x 88] intentionally omitted <==

----- Start of picture text -----

Director: ................................................................
Brett Jones
----- End of picture text -----

26 September 2012

60

==> picture [596 x 156] intentionally omitted <==

RSM Bird Cameron Partners Level 8 Rialto South Tower 525 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 3 9286 1800 F +61 3 9286 1999 www.rsmi.com.au

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF BERKLEE LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Berklee Limited, which comprises the consolidated statement of financial position as at 30 June 2012, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards .

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

==> picture [34 x 54] intentionally omitted <==

61

Liability limited by a Major Offices in: scheme approved Perth, Sydney, Melbourne, under Professional Adelaide and Canberra Standards Legislation ABN 36 965 185 036

RSM Bird Cameron Partners is a member of the RSM network. Each member of the RSM network is an independent accounting and advisory firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Berklee Limited, would be in the same terms if given to the directors as at the time of this auditor's report .

Opinion

In our opinion:

• (a) the financial report of Berklee is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 11 to 15 of the directors’ report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Berklee Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001 .

==> picture [199 x 27] intentionally omitted <==

RSM BIRD CAMERON PARTNERS

P A RANSOM

Partner

Melbourne, Victoria Dated: 27 September 2012

62

Berklee Limited

Additional Information for Listed Public Companies

30 June 2012

ASX Additional Information

Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. This information is effective as at 31 August 2012.

(a) Distribution schedule of holdings: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Number of holders of fully paid ordinary shares % of total holding by or on behalf of twenty largest shareholders Holdings less than a marketable parcel	2012 2011 No. of Holders No. of Holders 67 66 119 131 46 49 47 51 23 23
	302 320
	73.95% 73.26% 67 70

Voting rights – Ordinary Shares

On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

(b) Substantial shareholders Ausned Pty Ltd E.J. van Berkel Group W.M. van Berkel P.J. Hayman Angueline Investments Pty Limited (c) Twenty largest shareholders Ausned Pty Ltdα W.M. van Berkel P. J. Hayman Angueline Investments Pty Limited Riniki Pty Ltd (Super Fund Account)α E.& C. van Berkel Family Trust# Dorran Pty Ltd E.J. van Berkel# Ago Pty Ltd Riniki Pty Ltd (RJ & NC van Berkel Account)α C. Stubbs & C. Stubbs (CE-ES Super Fund Account) Maldew Holdings Pty Ltd (Super Fund Account) Maelstrom Pty Ltd (Falkiner Super Fund Account) Dr D.G.M. Welsh BP Sido Pty Ltd (Super Fund Account) M. Yannis R.G. Yannis C.A. van Berkel# Marko Nominees Pty Ltd (No 1 Account) R. van Berkelα

Number held % of issued shares 1,779,031 17.79 844,959 8.45 602,362 6.02 572,620 5.73 418,000 4.18 Number held % of issued shares 1,779,031 17.79 602,362 6.02 572,620 5.73 418,000 4.18 414,023 4.14 355,806 3.56 350,000 3.50 326,371 3.26 306,627 3.07 286,282 2.86 250,000 2.50 248,693 2.49 248,353 2.48 207,055 2.07 193,812 1.94 193,122 1.93 189,705 1.90 162,782 1.63 147,343 1.47 143,177 1.43

7,395,164 73.95

# - Common shareholding of Mr E.J. van Berkel: 844,959

α - Common shareholding of Mr R.J. van Berkel: 2,659,501

63