WISR LIMITED - Proxy Solicitation & Information Statement 2013

Berklee Limited (ACN 004 661 205)

Explanatory Statement for Shareholders

This Explanatory Statement has been prepared for the information of Shareholders of Berklee Limited ACN 004 661 205 (the "Company") in connection with the business to be considered at an Extraordinary General Meeting of Shareholders of the Company to be held on 17 June 2013 at 11:30 am AEST.

This Explanatory Statement is provided to assist the Shareholders in the consideration of the proposed Resolutions, contained in the Notice, and forms part of the Notice.

The Directors recommend that Shareholders read this Explanatory Statement in full before making any decision on the Resolutions to be considered at the Extraordinary General Meeting.

1. Resolutions - Approval of Sale of Assets by Company

1.1 Background

The Company is seeking Shareholder approval for each of the separate Resolutions set out in the Notice which will effectively allow the Company to sell its main business undertaking, to a related party of the Company (or their nominees) for the purposes of Listing Rules 10.1, 11.2 and Chapter 2E of the Corporations Act.

On 27 March 2013, the Company entered into an asset sale agreement ( Sale Agreement ) with Tilbal Pty Ltd ( Tilbal ) whereby, subject to shareholder approval, Tilbal agreed to acquire the Berklee business in accordance with the terms set out in clause 1.2 below. Tilbal is associated with Mr. Rick van Berkel a director of the Company until his resignation on 27 March 2013, and a substantial shareholder.

Completion of the Sale Agreement will afford the Company the ability to stop the ongoing significant cash drain on the limited funds of the Company while transferring liabilities in respect of all employees (with the exception of four excluded management employees), current and future entitlements and potential liability under supplier and distributor agreements.

The Company is also seeking approval from Shareholders to sell its headquarters, being the land and buildings located at Learmonth Road, Wendouree ( Premises ). This is not part of the Sale Agreement and is contained in a separate resolution (Resolution 2).

To the extent that each of the Resolutions are approved, the Company will be divesting its primary undertaking and will result in the Company ceasing to continue to trade. The Company intends to return surplus funds to Shareholders.

The Company has obtained an Independent Expert's Report from Wilson Hanna to address the fairness and reasonableness of the proposed sale of business to the non-related sharholders. The Wilson Hanna report is attached as Annexure B. The Wilson Hanna report has concluded that the sale of the business to Tilbal is fair and reasonable .

The purpose of the Extraordinary General Meeting and this Explanatory Memorandum is to inform Shareholders and to secure all necessary approvals in accordance with the requirements of the Constitution, the Corporations Act and the ASX Listing Rules.

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1.2 Sale of Assets Agreement

The Sale Agreement is between the Company, Tilbal Pty Ltd, Undacar Parts Vic Pty Ltd, and Rick John van Berkel. The Agreement is subject to and conditional upon the Company receiving the approval from the Shareholders, the subject of this EGM, as well as the Company granting and the Purchaser entering into a lease of the Premises.

Under the Sale Agreement the Company sells all of its assets (as defined in the Sale Agreement to include the Manufacturing Assets, the Office Furniture and Equipment, the Intellectual Property, the Goodwill, Tooling, and Advertising Material for the Purchase Price).

The Company's obligations under the Sale Agreement include;

i. delivering each of the Sale Assets to the Purchaser on the date of completion free from all encumbrances;
ii. deliver to the Purchase all asset records;
iii. provide to the Purchaser releases and discharges in respect of all security interests of the Sale Assets; and
iv. grant the lease of the Premises.

Tilbal's obligations under the Sale Agreement

The Sale Agreement sets out the following obligations on the Purchaser:

(a) Manufacturing and Administration Assets

Purchase all plant and equipment required to manufacture automotive exhaust product including but not limited to both the Berklee and Mercury branded product with the exception of all leased vehicles, mobile phones, bulk welding gas tank and IT hardware and software;
Purchase all plant and equipment to manufacture laundry trolley program;
Purchase all plant and equipment required to manufacture any other items as currently manufactured at the Wendouree plant;
Purchase all office furniture and equipment;

(b) Inventory

Purchase all raw materials, work in progress, finished goods including trolleys, exhaust and imported product currently held by Berklee at 70% of cost price, held by Tilbal on a consignment basis and will be paid for, in the case of raw materials and work in progress, 60 days after the month in which it is used in production and in the case of finished goods, 45 days after the month end in which it is invoiced;
In the event that Tilbal ceases to trade prior to all Berklee inventory being sold then each party will be responsible for the stock that it owns to liquidate as they see fit;

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Undertake that Berklee inventory will be used in manufacturing or sold before making or purchasing any new inventory.

(c)

Intellectual Property

Purchase the name and goodwill associated with the Berklee brand
Purchase all the trademarks and rights associated with the Berklee name
Purchase all jigs and fixtures currently held at Wendouree and in China required to continue current operations
Purchase all marketing and promotional materials
Purchase all rights associated with the Undacar brand

(d) Supply and Distribution of all Products Manufactured by Berklee

Assume all commitments and liabilities associated with the supply and distribution of Berklee and Mercury products;
Assume all commitments and liabilities associated with the supply and distribution of the laundry trolley business;
Assume the operational responsibility for Undacar Parts (Vic.) Pty. Ltd.;
Takeover the supply of all other commitments currently undertaken by Berklee through its Wendouree plant.

(e)

Staff Liabilities.

Offer all employees, with the exception of four excluded management employees, employment with Tilbal under the exact same terms and conditions as they are currently employed by Berklee
Assume liability for staff entitlements including Long Service Leave, Holiday Pay, Sick Pay, redundancies and other entitlements, for Berklee and Undacar employees with the exception of the excluded management employees.
Be responsible for paying out the entitlements of any employee offered a position by Tilbal who declines that offer.

(f)

Building Leases

Enter into a lease for the Wendouree building on a 1x1x1x1x1 basis. Rent will be $1.00 dollar per annum with all outgoings being paid by the tenant. In the event that the property is sold to a third party, the rent will increase to $200,000 pa in the first year and to be renegotiated thereafter;
Make good the Wendouree property including the removal of all of the tenant’s installations and repair, patch-up, paint and make good the premises at the end of or earlier termination of the lease;
Assume responsibility for the Melbourne lease and any make good required if and when the lease is terminated.

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(g) Consideration & Liability

Pay $1 for all of the assets acquired under paragraphs (a),(c) and (d) above;
Assume a substantial proportion of the debts and liabilities of the Company, including but not limited to those under paragraphs (d), (e) and (f) above, but excluding the accounts receivable and accounts payable.
Pay for Inventory in accordance with paragraph (b) above

1.3 Lease of Premises

As part of the Company's obligations under the Sale Agreement, a new lease will be granted to the Purchaser.

The lease is for a term of one (1) year with four (4) further option of one (1) year each and will initially be for an annual rental of $1.00. The additional provisions of the lease provide that in the event the Company sells the Premises to a third party, the rent will automatically increase to the sum of $200,000.00 per annum, payable by equal monthly instalments. The lease otherwise contains the usual terms and covenants found in leases of similar premises, including requiring the tenant (Purchaser) to pay all outgoings.

1.4 Value of the Financial Benefit

The value of the financial benefit of the Sale Agreement to the Company is able to be seen in the pro forma balance sheet of the Company (as at 31 December 2012) included with this document as Annexure A. The balance sheet sets out the financial impact of the transaction on the Company by comparing the Company's financial position before and after the proposed transaction.

Shareholders are advised that the comparison in the balance sheet in Annexure A has factored in the assumption that most if not all of the stock will be able to be sold at the discounted rate of 30% (as provided for in the Sale Agreement).

In addition, Shareholders need to be aware that Tilbal is assuming certain liabilities which were not required to be recorded in the balance sheet at 31 December 2012, such as those pursuant to a retrenchment provision and the lease make good provision.

1.5 Listing Rules and Corporations Act

Given that the Purchaser under the Sale Agreement is a related party to the Company, the Company, under Resolution 1, seeks Shareholder approval to comply with the regulatory requirements of Chapter 2E of the Corporations Act as well as Listing Rules 10.1 and 11.2.

Listing Rules 10.1 and 11.2

Listing Rule 10.1 provides a general restriction on a listed company from disposing of a substantial asset to a related party, without Shareholder approval. Shareholder approval is required to comply with listing rule 10.1 since the proposed purchaser under the Agreement

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is a related party to the Company and the transaction under the Agreement may be considered to be the disposal of a substantial asset for the purposes of the rule.

Listing Rule 11.2 provides that an entity must not dispose of its main undertaking without obtaining the approval of its Shareholders. The rule further provides that a listed entity must not enter into an agreement to dispose of its main undertaking unless the agreement is conditional on that entity getting that approval. The Company confirms that the Sale Agreement that has been entered into is conditional upon Shareholder approval.

Shareholder approval is required to comply with Listing Rule 11.2 since, pursuant to Resolutions 1 and 2, the Company will be disposing of a main undertaking.

Section 208 Corporations Act

Chapter 2E of the Corporations Act regulates the provision of financial benefits to related parties by a public company. The Sale Agreement entered into, which includes provisions granting a lease over the Company's primary premises, constitutes the provision of a financial benefit to a related party. Section 229 of the Corporations Act includes as examples of a "financial benefit" the sale of assets or the granting of a lease to a related party.

A "related party" is widely defined under the Corporations Act and includes a director of a Company and a person who may become a director of the Company. An entity controlled by a related party (as defined in the Act) is also a related party of the public company. For these reasons Tilbal Pty Ltd and Rick John van Berkel, by virtue of the fact that Mr van Berkel was a director of the Company in the 6 month period preceding the date of the Sale Agreement, are considered related parties of the Company.

Chapter 2E of the Corporations Act prohibits the Company from giving a financial benefit to a related party of the Company unless either:

a. the giving of the financial benefit falls within an exemption to the provision; or
b. prior shareholder approval is obtained to the giving of the financial benefit and the benefit is given within 15 month after shareholder approval is obtained.

2. Information Requirements for Chapter 2E of the Corporations Act

2.1 Reasons

Financial Performance and Market

The financial results of the Company for the six months to 31 December 2012 reported a loss of $1.862m from turnover of $2.271m. The cash flow from operating activities was a negative $668k which equates to $111k per month. Since 31 December 2012 the cash reserves have continued to be eroded at a similar run rate.

The market size of the Australian automotive aftermarket exhaust industry continues to contract from an estimated size of $100-$110 million in mid-2000’s to estimated size of $50 million in 2013. The introduction of ‘disposable’ cars, an exhaust system material change by the car manufacturers from mild steel to stainless steel subsequently reducing replacement rates, the change from leaded to unleaded fuels and a newer car park have significantly contributed to this market contraction. The aging exhaust fitter customer base and the recent spate of exhaust shop closures also poses a risk to suppliers.

The intensity of competition remains high due to the low barriers to entry and the high Australian dollar. Berklee continues to face manufacturing cost pressures and decreasing

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sales at the distribution level despite several different strategic combinations being implemented. Competitors that employ a full import distribution model are also facing cost pressure from declining volumes and subsequently reduced purchasing power.

Despite the growth opportunities in the 4x4 market segment, the standard replacement segment will continue to decline and further industry consolidation will occur. The industry has recently observed some rationalisation in the aftermarket exhaust business. This will no doubt place more pressure on Berklee and its distributors and continue to erode manufacturing volumes and sales revenue. All Berklee distributors will continue to battle against competitor import models unless Berklee can significantly reduce its costs.

Trolley sales remain behind forecast primarily due to Spotless closing several laundries and redeploying existing trolleys. Since the takeover by Private Equity in late 2012, Spotless has continued to drive costs down and there is little doubt that Berklee will be under intense pressure to reduce unit costs when the existing preferred supplier agreement (between Berklee and Spotless) expires in mid-2014.

Company Actions

Detailed below is the sequence of steps taken by the Company in attempting to deal with the changing market and that subsequently led to the Company's decision to enter into the Sale Agreement:

(a) Company instigated discussions with other industry participants to gain their understanding of the industry and the case for rationalisation.
(b) Consideration of various acquisition opportunities.
(c) Consideration of the wind up value of the Group based on a report by Lawler Draper & Dillon
(d) Conduct of a strategic review in December 2010, with the announcement of the Boards preferred options in June 2011;
(e) Commenced discussions with ProEx in May 2011 which ultimately led to introduction to Revolution Racegear Group of Companies (RRG);
(f) Signing of two agreements to transform the distribution business with Mercury Mufflers and Spotless Limited in August/Sept 2011;
(g) Resignation of the then Managing Director and significant shareholder Mr.Ed van Berkel and the appointment of Brett Jones as his replacement to assist in accelerating the transformation of the business in November 2011;
(h) Transfer of distribution rights to Mercury for WA (Feb 2012), Qld (Mar 2012) and NSW (Apr 2012);
(i) Strategic planning session by Board March 2012 reaffirming direction;
(j) Continued sales decline as market continues to shrink and Mercury and Spotless take up less than original forecasts ;
(k) July 2012 approach from RRG considered by specially constituted Independent Directors Committee;

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(l) Approach from RRG rejected due to insufficient detail, concerns over risks and time frame, essentially liquidation of the business and no formal offer received that was capable of evaluation and acceptance eventuating;
(m) Agreement to offshore certain product lines to improve margins;
(n) A Conditional Non- Binding Proposal received on 10 August 2012 from Mr. R van Berkel and “Bid Group” to acquire the shares in the Company not already owned, for consideration of $0.50 per share;
(o) Withdrawal of “Bid Groups” proposal on 1 February 2013 due to their inability to raise finance and the deteriorating financial position of Berklee;
(p) Receipt of a proposal from the Managing Director on 15 February 2013 to acquire the exhaust distribution and Berklee IP;
(q) Receipt of proposal on 15 February 2013 from Tilbal Pty. Ltd, a company associated with Mr. R van Berkel to acquire the business of Berklee;
(r) Trading into the first quarter of 2013 continues to decline.

Continued Decline in Trading Results

The Board has been acutely aware of the need to turn the business around and reverse the escalating trend of monthly operating losses. The first step in this program has been the exit from direct distribution and the pickup of additional manufacturing volume through the Mercury agreement. Unfortunately the Mercury deal has not to date delivered the synergies anticipated and the trolley business has to date failed to deliver in line with the original expectations. This has prompted further examination of the cost base and the examination of who the most natural owner of the business should be.

Management have continued to seek to turn the business around and are making progress in terms of streamlining working capital towards more appropriate levels and composition, however the business has been unable to achieve on a monthly basis the necessary sales volumes to deliver a cash neutral outcome. Consequently the business value continues to decline month on month notwithstanding that the business currently remains solvent.

2.2 Advantages in the Opinion of the Board of Voting in Favour of Resolution 1

The Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder's decision on how to vote on the Resolutions:

(a) as soon as the sale is completed the drain on the Company’s limited and diminishing cash reserves will be significantly reduced. To continue trading will only see the cash potentially disappear within twelve months at the current run rate;
(b) it is a binding and non-conditional offer, thereby providing certainty to Shareholders;
(c) all manufacturing employees will maintain their continuing employment;
(d) the Company will be released from the majority of its employee leave entitlements and potential redundancy liabilities;
(e) the Company will also be released from any potential contingent liabilities in relation to supply and distribution agreements;

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(f) the property will be leased and occupied with all outgoings paid for by the tenant which, while reducing the Company’s cash drain will also ensure that as the property will be occupied it will be protected and appropriately maintained;
(g) the risks associated with the auction and disposal of plant and equipment will be removed;
(h) If the Sale Agreement proceeds, the Directors will not need to consider other less favourable options to preserve the Company’s cash reserves before they are completely diminished. One option would be to immediately put the Company into Administration which may lead to a quick “fire sale” liquidation of assets or alternatively to close the business and pay out all existing and resulting liabilities.
(i) as soon as the sale has been completed the Company will then be in a position to put the Ballarat property on the market and return available proceeds to Shareholders.

2.3 Disadvantages in the Opinion of the Board of Voting in Favour of Resolution 1

The Directors are of the view that the following non-exhaustive list of disadvantages maybe relevant to Shareholder's decision on how to vote on the Resolutions:

(a) the Company would be responsible for disposing of any inventory, not previously used in manufacture or sold by Tilbal, should Tilbal cease trading;
(b) the Company may be delisted once the underlying business of the Company has been sold;
(c) the initial peppercorn lease may be an unattractive return to Shareholders;
(d) the rent payable under the lease immediately after the sale of the property may not provide an attractive yield to a potential purchaser for the first year although it would be subject to review at the end of the year in which the property is sold;

2.4 The Nature of the Financial Benefit (Sale Agreement)

The nature of the financial benefit to be given is the transfer of the Sale Assets (including rights to the business name) and a lease of the Premises as more fully outlined in clauses 1.2 and 1.3 above.

The related parties to whom the benefit is to be given are Tilbal Pty Ltd (a related entity to Rick John van Berkel) and Rick John van Berkel, a director of the company until his resignation on 27 March 2013.

2.5 Interest of Directors (Sale Agreement)

Apart from Mr Rick John van Berkel, none of the other Company directors has any interest in the outcome of Resolution 1.

As per the voting exclusion statement in the Notice, Mr Rick van Berkel and his associated entities are excluded from voting on the Resolution 1 at this EGM.

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2.6 Independent Expert's Report

The Independent Directors resolved to appoint Wilson Hanna as independent experts and commissioned it to prepare a report to provide an opinion as to whether or not the proposal the subject of Resolution 1 is fair and reasonable to the existing Shareholders (excluding Shareholders associated with Tilbal).

The report is also prepared to satisfy the requirements of Chapter 2E of the Corporations Act and Listing Rule 10.1. What is fair and reasonable must be judged by the independent expert in all the circumstances of the proposal. This requires taking into account the likely advantages to shareholders if the proposal is approved and comparing them with the disadvantages to them if the proposal is not approved.

Wilson Hanna has concluded that the transaction proposed by Resolution 1 is fair and reasonable to the existing non-related Shareholders, although all Shareholders are strongly advised to read the report carefully for the purpose of forming their own views as to the appropriateness of the Resolutions.

2.7 Other material information

As announced by the Company on 8 April 2013, the Company received a proposal from Revolution Racegear Pty Ltd (RRG) dated 4 April 2013 offering to acquire the Berklee business (excluding the Wendouree property). The Independent Directors requested further information from RRG in order to clarify various aspects of its proposal and the responses have been included in the summary below.

RGG's proposal to acquire the Berklee business is on the following terms:

(a) Equipment, dyes, jigs, tooling and other plant for $150,000 plus GST;
(b) Goodwill, brand names, trademarks and all other intellectual property for $50,000 plus GST;
(c) Employees:
(i) The managing director, Brett Jones, to be offered employment

(ii) For other employees not retained by RRG, payment of accrued annual leave and long service leave entitlements but excluding redundancies

(d) Lease – RRG will take over the lease of Undacar premises in Keilor.

(e) Stock
(i) Manufacturing plant stock of saleable inventory held on consignment and paid for after used or sold at rate of 90 cents in dollar;
(ii) Undacar VIC stock held on consignment and paid for after sale at rate of 75 cents in dollar.

As Berklee Limited has entered into a binding agreement with Tilbal Pty Ltd, the Independent Directors did not believe it appropriate to enter into formal discussions with Revolution Racegear Pty Ltd until after Shareholders have indicated whether they approve of the sale of the Berklee business to Tilbal Pty Ltd. However the Independent Directors requested the further information from Revolution Racegear Pty Ltd in order to clarify various aspects of its proposal in order to fully inform shareholders.

It should be noted that the late proposal is not an offer capable of acceptance and would require a formal contract to be negotiated and agreed by the parties. That contract, if

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entered into by RRG, would then require approval by Shareholders at a subsequent meeting should the Shareholders not approve the transaction with Tilbal Pty Ltd.

Other than as set out in this Explanatory Statement, the Directors are not aware of any other information which may reasonably be expected to be material to the making of a decision by Shareholders whether or not to vote in favour of the Resolutions.

2.8 Consideration of Alternative Proposals and Director's recommendation

As referred to above, the transaction contemplated by the Sale Agreement was preferred by the Independent Directors over the alternative prospects as it offered the Company the most beneficial outcome.

The prospect of placing the Company into voluntary administration was, as referred to in 2.3(e), a path that the directors felt would need to occur in the event that a solution to the Company's ongoing trading difficulties could not be found. The directors would not have been able to justify allowing the Company to continue accruing losses of approximately $100,000 per month. However, placing the Company into administration would have been, in the opinion of the directors, materially detrimental to the Company. Such a course of action would have meant that:

a) the Company remained liable for all outstanding liabilities and would have been required to pay these in full;
b) the Premises would be left vacant exposing it to potential vandalism whilst the Company continued to remain liable for all building outgoings;
c) the vacant Premises would be arguably a lot more difficult to sell and deliver a lesser return on sale.

Accordingly, this course of action was deemed to be less beneficial to the Company when compared to the Tilbal offer.

As the RRG offer was made subsequent to the Company entering into the Sale Agreement, the Company could not have accepted the offer even if it was thought to be superior to the Tilbal offer.

Notwithstanding the above, the Independent Directors have considered the late proposal from RRG and solely for the Shareholder's information advise that, based on the details of that proposal, the current circumstances of the Company and recognizing that it is not an offer capable of acceptance, they are of the view that there is simply not enough information to be able to determine whether or not the RRG offer is superior to that of Tilbal's. Furthermore, there are always substantial and inherent uncertainties, complexities risks and delays involved when purporting to document a proposal such as that made by RRG, into an offer that is binding and capable of acceptance, such that the directors could not justify making a recommendation against the current Tilbal offer.

Based on the information available, including the reasons contained in this Explanatory Memorandum and the Independent Expert's Report, the advantages and disadvantages, the prospects and alternatives available to the Company and having consulted with the Company's nominated corporate and legal advisors, the Independent Directors consider that Resolution 1 is in the best interests of the Company and recommend that Shareholders VOTE IN FAVOUR of the Resolution.

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3. Proposed Sale of Premises

3.1 Proposal

As referred to above, the Company is also seeking Shareholder approval to sell the Premises. As the sale of the Premises would constitute the divesting of a substantial asset, the Company requires approval of the Shareholders under Listing Rule 11.2. The proposed sale of the Premises does not form part of, nor is it dependant on the Sale Agreement, and is not a related party transaction.

For the reasons outlined in clause 2.1 above, the Company wishes to sell the Premises and return the surplus funds to Shareholders.

As the Company may wish to sell the Premises regardless of whether the transaction contemplated by Resolution 1 is approved, Shareholders should note that Resolution 2 is not dependent upon or subject to the passing of Resolution 1.

3.2 Tax Treatment

All Shareholders are encouraged to seek their own professional advice in relation to their own tax position.

By way of general commentary only, the Company has been advised that to the extent that the Premises are sold for an amount in excess of its tax base a prima facie taxable capital gain will occur. This prima facie gain will be taxable at 30%. The gain may be reduced, potentially to nil, to the extent that either current period or prior period tax losses are available.

The availability of prior period tax losses will depend upon the composition of the share register at the time the tax losses were incurred compared with the time the losses are to be utilized, the status of the company (ie public or private) and the application of the tax legislation in respect of tax losses given the fact pattern prevailing at the time.

The Company reiterates, however, that Shareholders should not rely on this commentary in making their decision and should obtain their own tax advice. The Company, its advisers and officers, do not accept any responsibility or liability for any taxation consequences to Shareholders in respect of the transactions proposed.

3.3 Interest of Directors (Sale of Premises)

As already stated, the sale of the Premises does not form part of, nor is it dependant on the Sale Agreement, and is not a related party transaction

Accordingly, the persons excluded from voting on Resolution 1 are not precluded, and may vote on Resolution 2.

3.4 Directors Recommendations

Based on the information available, including the reasons contained in this Explanatory Memorandum, the prospects and alternatives available to the Company and having consulted with the Company's nominated corporate and legal advisors, the Directors consider that Resolution 2 is in the best interests of the Company and recommend that Shareholders VOTE IN FAVOUR of the Resolution.

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3.5 Indicative timetable for distribution

Indicative timetable for distribution
Event	Date
Notice sent to ASIC Notice sent to Shareholders 3 May 2013 17 May 2013 Date of Extraordinary General Meeting of Shareholders 17June 2013 Anticipated date of completion of Sale of Assets 30 June 2013

Shareholders should note that these dates are indicative only and may change.

4. Glossary

In this Explanatory Statement, unless the context otherwise requires:

Advertising Material	means all marketing, advertising and promotional documents in the possession of the Company which relate to its business.
CGT	means Australian capital gains tax
Company	means Berklee Limited
Corporations Act	means the Corporations Act 2001 (Cth), and all regulations made pursuant to such legislation, as amended from time to time.
Director	means director of the Company
Explanatory Statement	means the explanatory statement of accompanying the Notice
Intellectual Property	means all trademarks, business names, copyright, patents and other similar rights owned by the Company in connection with the business of the Company or the Sale Assets and includes the trademark "Berklee"
Manufacturing Assets	means all plant and equipment owned by the Company in the manufacture of automotive exhaust products and being the items specifically set out in the schedule to the Sale of Assets Agreement
Notice	means the notice of extraordinary general meeting of the Company attached to and forming part of this document
Office Furniture and Equipment	means items of furniture and equipment owned by the Company and in its possession as at the completion date under the Sale of Assets Agreement
Premises	means the land contained in Certificate of Title Volume 9858 Folio 413 and known as 265-285 Learmonth Road, Wendouree, Victoria.

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	13
Purchase Price	means the sum of $1.00
Purchaser	means Tilbal Pty Ltd
Resolutions	mean the ordinary resolutions as further described in the Notice
Sale of Assets Agreements	means the agreement for the sale of the Sale Assets dated 27 March 2013 between the Company, Tilbal Pty Ltd, Undacar Parts Pty Ltd and Rick John van Berkel
Sale Assets	Means the Manufacturing Assets, the Office Furniture and Equipment, the Intellectual Property, the Goodwill, the Tooling and the Advertising Material of the Company.
Shareholder	means a holder of Shares
Share	means an ordinary share in the Company
Tooling	means all tooling, jigs and fixtures owned by the Company which are in its possession as at the completion date of the Sale of Assets Agreement.

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Annexure A - Pro Forma Balance Sheet

Berklee Limited

Proforma balance sheet

Berklee Limited Proforma balance sheet
$’000 Cash Receivables Inventory Current assets Property, plant and equipment Total assets Trade and other payables Provisions Current liabilities Total liabilities Net assets	31 Dec 12 Note 1 1,453 1,209 1,260	Adjusted Note 2 Note 3 Note 4 Total 1,453 1,209 ‐378 882
	3,922 4,695 ‐370	3,544 4,325
	8,617 529 421 950	7,869 529 ‐132 ‐25 264 793
	950	793
	7,667 ‐370	132 25 ‐378 7,076

Note 1 – Sale of plant and equipment for $1. De-recognition of plant and equipment at net written down value as at 31 December 2012.

Note 2 – De-recognition of transferring employees leave entitlements. Annual leave $17k and long service leave $115k.

Note 3 – De-recognition of previously recognized make good provision for Undacar Victoria warehouse.

Note 4 - Adjust inventory net of provisions to reflect agreement to sell at 70% of cost. This assumes no inventory which has been fully provided for will be realized. To the extent it is, the net assets will increase by that amount.

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Annexure B - Wilson Hanna Independent Expert's Report

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Wilson Hanna

==> picture [37 x 46] intentionally omitted <==

Corporate

Wilson Hanna Pty Ltd Level 6 | 370 St Kilda Road MELBOURNE VIC 3004 T: 03 9686 7000 | F: 03 9686 7005 www.wilsonhanna.com.au

17
May
2013

The
Independent
Directors Berklee
Limited 265-‐285
Learmonth
Road WENDOUREE
VIC
3355

Dear
Sirs

**Independent

Expert’s
Report
-‐
Update**

Please
find
enclosed
a
copy
of
our
revised
Independent
Expert’s
Report,
following
consultation today
with
representatives
from
the
Australian
Securities
&
Investments
Commission.

In particular,
we
would
like
to
draw
your
attention
to
the
following
specific
changes:

§ Clarification
of
the
valuation
approach
adopted
–
refer
section
5.2.2,
on
page
19,
of
our detailed
report;
§ Additional
commentary
regarding
asset
values
as
set
out
in
section
5.2.3,
on
page
20,
of our
detailed
report;
§ Additional
commentary
regarding
the
inclusion
of
certain
contingent
liabilities
as
set
out in
section
5.2.3,
on
page
21,
of
our
detailed
report.

Further,
page
3
of
our
summary report
was
also
amended
to
make
reference
to
the
inclusion
of
certain
contingent liabilities;

§ Additional
commentary
in
respect
of
the
proposed
rental
and
inventory
arrangements and
why
in
our
opinion
they
do
not
affect
the
fairness
of
the
Proposed
Transaction,
as
set out
in
section
5.2.3,
on
page
22,
of
our
detailed
report;
and
§ The
date
of
our
report
has
now
been
changed
from
2
May
2013
to
17
May

It
is
worth
noting
that
the
above
changes
did
not
result
in
any
change
to
our
overall
conclusion
as to
the
fairness
and
reasonableness
of
the
Proposed
Transaction.

Yours
sincerely

WILSON HANNA PTY LTD

==> picture [84 x 72] intentionally omitted <==

JOHN PATTON Director

==> picture [94 x 60] intentionally omitted <==

MARTIN TOLL Director

Page 1 of 1

Wilson Hanna Pty Ltd ABN 22 158 038 101 | AFS Licence No. 426848

Wilson Hanna

==> picture [37 x 46] intentionally omitted <==

Corporate

Wilson Hanna Pty Ltd Level 6 | 370 St Kilda Road MELBOURNE VIC 3004 T: 03 9686 7000 | F: 03 9686 7005 www.wilsonhanna.com.au

17
May
2013

The
Independent
Directors Berklee
Limited 265-‐285
Learmonth
Road WENDOUREE
VIC
3355

Dear
Sirs

**Independent

Expert’s
Report
and
Financial
Services
Guide**

Introduction

Berklee
Limited
(“Berklee”
or
“the
Company”)
is
an
Australian
manufacturer
and
distributor
of specialist
industrial
products,
including
automotive
mufflers
and
exhaust
products,
trolleys
and other
speciality
equipment,
that
originally
commenced
trading
operations
in
1966.

The Company
is
based
in
Ballarat,
Victoria
and
has
been
listed
on
the
Australian
Securities
Exchange (“ASX”)
since
March
1989.

**Proposed

Transaction**

On
27
March
2013,
the
Company
entered
into
a
Sale
Agreement
(the
‘Agreement’)
with
Tilbal
Pty Ltd
(‘Tilbal’)
and
Mr
Rick
van
Berkel
to
sell
certain
assets
and
liabilities
to
Tilbal
for
$1.00
(the ‘Proposed
Transaction’),
conditional
on
receiving
shareholder
approval.

In
the
Agreement,
Tilbal
has
offered,
amongst
other
things,
to:

§ acquire
the
Berklee
business,
consisting
of
certain
assets
of
the
Company
but
specifically excluding
land
and
buildings
in
Wendouree,
cash
and
debtors;
§ acquire
the
inventory,
on
a
consignment
basis,
with
Berklee
receiving
70%
of
the historical
cost
for
all
inventory
either
used
in
production
or
sold
by
Tilbal;
§ employ
all
Company
employees,
including
Undacar
Parts
(Vic)
Pty
Ltd
(‘Undacar
Vic’) employees,
but
excluding
four
employees,
on
the
same
terms
and
conditions,
with
their associated
employee
entitlement
liabilities
being
transferred
across
to
Tilbal;
and
§ enter
into
a
lease
agreement
for
the
Wendouree
factory
and
office
complex
and
to
take over
the
existing
lease
of
the
Undacar
Vic
premises
in
East
Keilor.

The
Independent
Directors
of
the
Company[1] unanimously
recommend
that
the
shareholders
of the
Company
that
are
not
a
related
party
of
Tilbal
(“Non-‐Related
Party
Shareholders”)
vote
for the
Proposed
Transaction,
in
the
absence
of
a
superior
proposal
being
received.

Each Independent
Director
of
the
Company
who
is
eligible
intends
to
vote
in
favour
of
the
Proposed Transaction.

1
For
the
purpose
of
the
Proposed
Transaction,
Alan
Beckett
and
Grantly
Anderson
are
considered
as independent
directors
of
Berklee.
Refer
to
the
Chairman’s
letter
accompanying
the
Explanatory Memorandum
for
further
details.

Page 1

Wilson Hanna Pty Ltd ABN 22 158 038 101 | AFS Licence No. 426848

==> picture [117 x 30] intentionally omitted <==

**Purpose

of
the
report**

A
company
is
required
to
seek
shareholder
approval
before
giving
a
financial
benefit
to
a
related party,
pursuant
to
Section
208
of
the
Corporations
Act,
2001.
We
understand
that
Mr
Rick
van Berkel
is
a
related
party
by
virtue
of
the
fact
that
he
is
a
current
director
of
Tilbal
and
was
also
a director
of
Berklee
up
until
his
resignation
on
27
March
2013.
In
addition,
we
understand
that Mr
Rick
van
Berkel
and
his
associated
entities
currently
hold
an
interest
of
26.59%
in
the
total issued
share
capital
of
the
Company.

The
Independent
Directors
of
the
Company
have
engaged
Wilson
Hanna
Pty
Ltd
(“Wilson Hanna”)
to
prepare
an
Independent
Expert’s
Report,
in
relation
to
Resolution
1
of
the
Notice
of Extraordinary
General
Meeting,
to
assess
whether
the
Proposed
Transaction
is
fair
and reasonable
to
the
Non-‐Related
Party
Shareholders
of
the
Company
based
on
the
ASX
listing
rules, ASIC
Regulatory
Guidelines
and
as
a
matter
of
good
practice.

In
Chapter
10
of
the
ASX
listing
rules,
it
states
that
an
entity
must
ensure
that
it
does
not
dispose of
a
substantial
asset
to
persons
in
a
position
of
influence
without
the
approval
of
its shareholders.
Notwithstanding
that
the
assets
to
be
sold
under
the
Proposed
Transaction
are unlikely
to
satisfy
the
substantial
asset
test
under
ASX
listing
rule
10.1,
the
independent
directors have
engaged
Wilson
Hanna
based
on
the
significance
of
the
transaction
to
the
Company.

ASIC's
Regulatory
Guidelines
aim
to
improve
the
disclosures
around
related
party
transactions. Regulatory
Guide
76
“Related
Party
Transactions”
(“RG
76”)
states
that
an
independent
expert report
may
be
necessary
where:

§ The
financial
benefit
is
difficult
to
value;
§ The
transaction
is
significant
from
the
point
of
view
of
the
entity.
Furthermore
RG 76.112
states
that
“ a
transaction
may
be
considered
to
be
significant
if
it
involves
a
change of
business
activities…
for
reasons
other
than
the
dollar
amount
involved” ;
or
§ The
independent
directors
do
not
have
the
expertise
or
resources
to
provide independent
advice
to
members
about
the
value
of
the
financial
benefit.

The
independent
expert’s
report
sets
out
whether,
in
Wilson
Hanna’s
opinion,
the
Proposed Transaction
is
fair
and
reasonable
to
the
Non-‐Related
Party
Shareholders
of
the
Company.

A copy
of
this
report
will
accompany
the
Notice
of
Extraordinary
General
Meeting
&
Explanatory Memorandum
(‘Explanatory
Memorandum’)
to
be
sent
to
Berklee
shareholders.

This
letter contains
a
summary
of
Wilson
Hanna’s
opinion
and
main
conclusions.

**Summary

of
Opinion**

In
Wilson
Hanna’s
opinion,
the
Proposed
Transaction,
as
set
out
in
Resolution
1
of
the Notice
of
Extraordinary
General
Meeting,
is
fair
and
reasonable
to
the
Non-‐Related
Party Shareholders,
in
the
absence
of
a
superior
proposal.

_**Fairness

Assessment**_

In
forming
our
opinion
in
relation
to
the
fairness
of
the
Proposed
Transaction
to
the
Non-‐Related Party
Shareholders,
we
have
had
regard
to
ASIC
Regulatory
Guide
111
“Content
of
Expert Reports”
(“RG
111”)
which
states
that
a
proposed
related
party
transaction
is
‘fair’
if
the
value
of the
financial
benefit
to
be
provided
by
the
entity
to
the
related
party
is
equal
to
or
less
than
the value
of
the
consideration
being
provided
to
the
entity
and
that
this
comparison
should
be
made assuming
a
knowledgeable
and
willing,
but
not
anxious,
buyer
and
a
knowledgeable
and
willing, but
not
anxious,
seller
acting
at
arm’s
length.

In
valuing
the
financial
benefit
given
and
the consideration
received
by
the
entity,
all
material
terms
of
the
proposed
transaction
should
be taken
into
account.

Page 2

==> picture [117 x 30] intentionally omitted <==

The
monetary
consideration
offered
by
Tilbal
to
the
Company
under
the
Proposed
Transaction for
the
assets,
as
set
out
in
the
Agreement,
is
$1.00.
In
addition,
the
Agreement
sets
out
a
number of
liabilities
and
obligations
to
be
transferred
by
Berklee
to
Tilbal
as
part
of
the
Proposed Transaction.

The
following
table
summarises
the
core
elements
of
the
Proposed
Transaction,
based
on
the audited
financial
statements
as
at
31
December
2012:

	Low	High
	$’000	$’000
Total Sale Assets Less: Total Liabilities & Contingencies	370 889	370 1,179

Net benefit to Berklee shareholders	519	809
Source: Berklee

Prior
to
reaching
any
conclusion,
the
following
factors
were
also
taken
into
account:

§ Tilbal
has
agreed
to
enter
into
a
lease
with
the
Company
for
the
Wendouree
factory
at
a peppercorn
rental
of
$1.00
per
annum
for
a
period
of
time
whilst
the
Company
attempts to
sell
the
property.

As
part
of
the
lease
arrangement,
Tilbal
has
agreed
to
pay
the property
outgoings
and
maintenance
costs,
as
well
as
any
make
good
costs
upon vacating
the
property.
Depending
on
the
length
of
time
taken
by
the
Company
to
sell
the property,
it
is
difficult
to
estimate
the
extent
of
any
additional
benefit
provided
by
the Company
to
Tilbal.

§ Tilbal
has
offered
to
pay
the
Company
70%
of
the
historical
cost
of
inventory
upon
its sale
or
use
in
the
manufacturing
process,
which
approximates
the
current
written
down value
of
inventory.

Depending
on
the
composition
and
quantum
of
inventory
actually used
or
sold
by
Tilbal,
it
is
difficult
to
estimate
the
extent
of
any
additional
benefit
that may
be
provided
by
the
Company
to
Tilbal.

§ The
Company
has
not
recognised
any
value
on
its
balance
sheet
for
intellectual
property. Further,
the
Company’s
current
market
capitalisation
of
$3.5
million
represents
a substantial
discount
to
the
value
of
net
assets
of
$7.7
million
in
the
financial
statements as
at
31
December
§ The
liabilities
to
be
transferred
to
Tilbal
under
the
Proposed
Transaction
include
certain actual
liabilities
as
set
out
on
the
balance
sheet
as
at
31
December
2012
and
certain contingent
liabilities
of
the
Company
not
listed
on
the
balance
sheet.

After
having
regard
to
all
of
the
above,
the
value
of
the
financial
benefit
to
be
provided
by
the Company
to
Tilbal
is
less
than
the
consideration
offered
by
Tilbal
to
the
Company,
and
therefore the
Proposed
Transaction
is
in
Wilson
Hanna’s
opinion
considered
to
be
‘fair’.

_**Reasonableness

Assessment**_

For
the
purpose
of
assessing
whether
or
not
the
Proposed
Transaction
is
reasonable
to
the
Non-‐ Related
Party
Shareholders
of
the
Company,
we
have
considered
a
number
of
likely
advantages and
disadvantages
and
other
factors
associated
with
the
Proposed
Transaction.
We
note
that
in accordance
with
RG
111,
the
Proposed
Transaction
is
reasonable
if
it
is
fair.

Advantages

§ Reduce
Operating
Losses

The
Company
is
currently
generating
operating
losses
of
approximately
$100,000
each
month. Should
the
Proposed
Transaction
be
successful,
it
is
management’s
view
that
this
should
be

Page 3

==> picture [117 x 30] intentionally omitted <==

reduced
to
approximately
$25,000
to
$30,000
per
month
whilst
the
Company
undertakes
an orderly
realisation
of
its
remaining
assets.

§ **Improved

Asset
Realisation
Returns**

Under
the
Proposed
Transaction,
the
business
operations
of
the
Company
are
to
be
transferred to
Tilbal
as
a
going
concern
and
as
such
should
lead
to
higher
asset
realisation
returns
in
respect of
the
outstanding
debtors
and
inventory
holdings.

It
should
also
result
in
the
Company
being able
to
undertake
a
more
orderly
realisation
of
remaining
assets.

§ **Prospect

of
Capital
Returns
to
Shareholder**

Over
the
past
12
months,
the
total
value
of
Berklee
shares
traded
on
the
ASX
was
approximately $0.4
million.
With
only
53
transactions
taking
place
during
the
year,
there
was
little
liquidity
in the
Company’s
shares.
In
the
event
that
the
Proposed
Transaction
is
successful
and
following
an orderly
realisation
of
the
remaining
assets
by
the
Company,
there
is
the
prospect
of
a
capital return
for
the
Company’s
Shareholders.

Disadvantages

§ **Not

a
clean
‘exit’**

The
Proposed
Transaction
does
not
provide
the
Company’s
Shareholders
with
a
clean
‘exit’,
as the
Company
is
still
required
to
conduct
an
orderly
realisation
of
the
remaining
assets,
which may
take
some
time.

§ **Inventory

Risk**

The
Company
retains
the
risk
on
inventory
until
it
is
used
or
sold
by
Tilbal.

Furthermore,
the Directors
have
advised
that
any
inventory
that
is
still
outstanding
after
12
months
will
be reviewed
with
a
view
to
disposing
of
it.

§ **Opportunity

Cost**

The
Proposed
Transaction
results
in
the
business
operations
being
sold
to
Tilbal
and
therefore the
opportunity
cost
to
the
Company’s
Shareholders
is
that
they
forego
the
right
to
participate
in any
future
value
that
may
have
been
generated
by
the
Company
should
it
have
been
successful
in turning
the
business
around
or
finding
a
superior
offer.

**Other

Factors**

§ **Alternative

Offers**

We
understand
that
the
Berklee
Board
has
considered
a
number
of
proposals
for
the
Company since
2012,
and
also
called
for
expressions
of
interest
in
an
ASX
Announcement
on
1
February 2013.
Further,
we
understand
that
the
Proposed
Transaction
is
the
only
formal
offer
received
to date
that
the
Directors
believe
is
capable
of
being
put
to
the
Company’s
shareholders.

§ **One-‐off

Transaction
costs**

We
have
been
advised
by
Berklee
management
that
the
costs
associated
with
the
Proposed Transaction
borne
by
the
Company
are
approximately
$0.1
million.

We
understand
that
these costs
will
be
borne
by
the
Company
irrespective
of
whether
the
Proposed
Transaction
proceeds or
not.

§ **Berklee

Shareholders’
position
if
the
Proposed
Transaction
is
not
approved**

If
the
Proposed
Transaction
is
not
approved
by
the
Non-‐Related
Party
Shareholders,
and
a superior
offer
is
not
forthcoming,
it
is
the
current
Directors’
intention
to
explore
alternative options
including
the
potential
‘winding
up’
of
the
Company.

This
view
is
based
on
the Company’s
current
operating
performance
and
outlook
for
the
industry.

Page 4

==> picture [117 x 30] intentionally omitted <==

**Overall

Conclusion**

After
considering
the
abovementioned
quantitative
and
qualitative
factors,
Wilson
Hanna has
concluded
that
the
Proposed
Transaction
is
fair
and
reasonable
to
the
Non-‐Related Party
Shareholders.

**Other

Matters**

This
report
is
general
financial
product
advice
only
and
has
been
prepared
without
taking
into account
the
objectives,
financial
situation
or
needs
of
the
Company’s
individual
shareholders. Accordingly,
before
acting
in
relation
to
their
investment,
shareholders
should
consider
the appropriateness
of
the
advice
having
regard
to
their
own
objectives,
financial
situation
or
needs. Shareholders
should
also
read
the
Explanatory
Memorandum
issued
by
the
Company
in
relation to
the
Proposed
Transaction.

The
decision
of
whether
or
not
to
approve
the
Proposed
Transaction
is
a
matter
for
individual shareholders,
based
on
their
own
views
as
to
value,
their
expectations
about
future
market conditions
and
their
particular
circumstances
including
risk
profile,
liquidity
preference, investment
strategy,
portfolio
structure
and
tax
position.

Shareholders
who
are
in
doubt
as
to the
action
they
should
take
in
relation
to
the
Proposed
Transaction
should
consult
their
own professional
adviser.

Similarly,
it
is
a
matter
for
individual
shareholders
as
to
whether
to
buy,
hold
or
sell
securities
in the
Company.
This
is
an
investment
decision
independent
of
a
decision
on
whether
to
vote
for
or against
the
Proposed
Transaction
upon
which
Wilson
Hanna
does
not
offer
an
opinion. Shareholders
should
consult
their
own
professional
adviser
in
this
regard.

Wilson
Hanna
has
prepared
a
Financial
Services
Guide
as
required
by
the
Corporations
Act,
2001. The
Financial
Services
Guide
is
set
out
in
the
following
section.

This
letter
is
a
summary
of
Wilson
Hanna’s
opinion.
The
full
report
from
which
this
summary
has been
extracted
is
attached
and
should
be
read
in
conjunction
with
this
summary.

The
opinion
is
made
as
at
the
date
of
this
letter
and
reflects
circumstances
and
conditions
as
at that
date.

Yours

faithfully WILSON
HANNA
PTY
LTD

==> picture [84 x 72] intentionally omitted <==

JOHN
PATTON Director

==> picture [94 x 60] intentionally omitted <==

MARTIN
TOLL Director

Page 5

**BERKLEE

LIMITED**

Financial
Services
Guide and Independent
Expert’s
Report in
relation
to
the
Proposed
Transaction
with Tilbal
Pty
Ltd

Wilson
Hanna
Pty
Ltd ABN
22
158
038
101
|
AFS
Licence
No.
426848

17
May
2013

Wilson Hanna Corporate

==> picture [37 x 46] intentionally omitted <==

Wilson Hanna Pty Ltd Level 6 | 370 St Kilda Road MELBOURNE VIC 3004 T: 03 9686 7000 | F: 03 9686 7005 www.wilsonhanna.com.au

**Financial

Services
Guide** –
17
May
2013

**1.

Wilson
Hanna**

Wilson
Hanna
Pty
Ltd
(“Wilson
Hanna”)
carries
on
a
business
and
has
its
registered
office
at Level
6,
370
St
Kilda
Road,
Melbourne
VIC
3004.

Wilson
Hanna
holds
Australian
Financial Services
Licence
No.
426848
authorising
it
to
provide
financial
product
advice
on
securities
to wholesale
and
retail
clients.

Wilson
Hanna
has
been
engaged
by
Berklee
Limited
(“Berklee”
or
“the
Company”)
to
provide general
financial
product
advice
in
the
form
of
an
independent
expert’s
report
(“Report”)
in relation
to
the
proposed
transaction
with
Tilbal
Pty
Ltd
(“Tilbal”)
whereby
Tilbal
has
made
an offer
to
acquire
certain
business
assets
and
liabilities
from
the
Company
(“the
Proposal”).

**2.

Financial
Services
Guide**

This
Financial
Services
Guide
(“FSG”)
has
been
prepared
in
accordance
with
the
Corporations Act,
2001
and
provides
important
information
to
help
retail
clients
to
make
a
decision
as
to
their use
of
general
financial
product
advice
in
a
report,
the
services
we
offer,
information
about
us, our
dispute
resolution
process
and
how
we
are
remunerated.

Wilson
Hanna
provides
this
FSG
in
connection
with
its
provision
of
the
Report
which
is
to
be included
in
the
Explanatory
Memorandum
that
will
be
accompany
the
notice
of
meeting
to Company
shareholders
(“Explanatory
Memorandum”).

**3.

General
Financial
Product
Advice**

In
this
Report,
we
provide
general
financial
product
advice.
The
advice
in
this
Report
does
not take
into
account
your
personal
objectives,
financial
situation
or
needs.

You
have
not
engaged
Wilson
Hanna
directly
but
have
received
a
copy
of
the
Report
because
you have
been
provided
with
a
copy
of
the
Explanatory
Memorandum.

Wilson
Hanna
is
not
acting for
any
person
other
than
the
Company’s
board
of
directors.

Wilson
Hanna
does
not
accept
instructions
from
retail
clients.

Wilson
Hanna
provides
no financial
services
directly
to
retail
clients
and
receives
no
remuneration
from
retail
clients
for financial
services.

Wilson
Hanna
does
not
provide
any
personal
retail
financial
product
advice directly
to
retail
investors
nor
does
it
provide
market-‐related
advice
to
retail
investors.

**4.

Remuneration**

When
providing
the
Report,
Wilson
Hanna’s
client
is
the
Company.

Wilson
Hanna
receives
its remuneration
from
the
Company.

In
respect
of
this
Report,
Wilson
Hanna
will
receive
an estimated
fee
of
$47,500
plus
GST,
which
is
based
on
commercial
rates,
plus
reimbursement
of out-‐of-‐pocket
expenses.

No
related
body
corporate
of
Wilson
Hanna,
or
any
of
the
directors
or
employees
of
Wilson Hanna
or
any
of
those
related
bodies
or
any
associate
receives
any
remuneration
or
other
benefit attributable
to
the
preparation
and
provision
of
the
Explanatory
Memorandum.

Page 1

==> picture [117 x 30] intentionally omitted <==

**5.

Independence**

Wilson
Hanna
is
required
to
be
independent
of
Berklee
in
order
to
provide
this
Report.

The guidelines
for
independence
in
the
preparation
of
independent
expert
report’s
are
set
out
in Regulatory
Guide
112 Independence
of
expert issued
by
the
Australian
Securities
&
Investments Commission
(“ASIC”).

The
following
information
in
relation
to
the
independence
of
Wilson Hanna
is
stated
below:

“Wilson
Hanna
and
its
related
entities
do
not
have
at
the
date
of
this
report,
and
have
not
had within
the
previous
two
(2)
years,
any
shareholding
in
or
other
business
or
professional relationship
with
Berklee
or
Tilbal
that
could
reasonably
be
regarded
as
capable
of
affecting its
ability
to
provide
an
unbiased
opinion
in
relation
to
the
Proposed
Transaction.

Wilson
Hanna
has
no
involvement
with,
or
interest
in
the
outcome
of
the
Proposed Transaction,
other
than
the
preparation
of
this
Report.

_Wilson
Hanna
will
receive
an
estimated
fee
of
$47,500
based
on
commercial
rates
for
the preparation
of
this
report.

This
fee
is
not
contingent
on
the
outcome
of
the
Proposed Transaction.

Wilson
Hanna’s
out
of
pocket
expenses
in
relation
to
the
preparation
of
this Report
will
be
reimbursed.
Wilson
Hanna
will
receive
no
other
benefit
for
the
preparation
of this
Report._

Wilson
Hanna
considers
itself
to
be
independent
in
terms
of
Regulatory
Guide
112
issued
by ASIC.”

**6.

Complaints
Process**

Wilson
Hanna
has
an
internal
complaints
handling
mechanism
and
is
a
member
of
the
Financial Ombudsman
Service
(membership
no.
31585).
If
you
have
any
concerns
regarding
this
Report, please
contact
the
Compliance
Officer
in
writing
at
Wilson
Hanna,
Level
6,
370
St
Kilda
Road, Melbourne
VIC
3004.
If
you
have
difficulty
in
putting
your
complaint
in
writing,
please
telephone the
Compliance
Officer
on
03
9686
7000
and
they
will
assist
you
in
documenting
your
complaint.

If
Wilson
Hanna
cannot
resolve
the
complaint
to
your
satisfaction
within
45
days,
you
can
refer the
matter
to
the
Financial
Ombudsman
Service
at
GPO
Box
3,
Melbourne
VIC
3000
or
phone 1300
780
808.
This
service
is
provided
free
of
charge.

Wilson
Hanna
is
only
responsible
for
this
Report
and
FSG.

Complaints
or
questions
about
the Explanatory
Memorandum
should
not
be
directed
to
Wilson
Hanna
as
it
is
not
responsible
for that
document.
Wilson
Hanna
will
not
respond
in
any
way
that
might
involve
any
provision
of financial
product
advice
to
any
retail
investor.

**7.

Compensation
Arrangements**

Wilson
Hanna
holds
professional
indemnity
insurance
that
satisfies
the
compensation requirements
of
section
912B
of
the
Corporations
Act,
2001.

Page 2

**Table

of
Contents**

1		DETAILS OF THE PROPOSED TRANSACTION .................................................................. 1
2		PURPOSE & SCOPE OF THE REPORT .................................................................................. 3 2.1 PURPOSE.................................................................................................................................................. 3 2.2 BASIS OFASSESSMENT.......................................................................................................................... 4
3		PROFILE OF THE INDUSTRY ................................................................................................. 6 3.1 AUTOMOTIVEPARTS& ACCESSORIESMANUFACTURINGSECTOROVERVIEW.......................... 6 3.2 CURRENTINDUSTRYPERFORMANCE................................................................................................. 6 3.3 INDUSTRYOUTLOOK............................................................................................................................. 8 3.4 REGULATION& POLICY........................................................................................................................ 9 3.5 INDUSTRYASSISTANCE......................................................................................................................... 9
4		PROFILE OF BERKLEE .......................................................................................................... 11 4.1 HISTORY................................................................................................................................................ 11 4.2 STRATEGYUPDATE............................................................................................................................. 12 4.3 PRODUCTS............................................................................................................................................ 13 4.4 FINANCIALPERFORMANCE............................................................................................................... 14 4.5 FINANCIALPOSITION......................................................................................................................... 14 4.6 NETBORROWINGS.............................................................................................................................. 15 4.7 CAPITALSTRUCTURE ANDOWNERSHIP......................................................................................... 15 4.8 SHAREPRICEPERFORMANCE........................................................................................................... 16
5		EVALUATION OF THE PROPOSED TRANSACTION ...................................................... 18 5.1 CONCLUSION........................................................................................................................................ 18 5.2 FAIRNESS.............................................................................................................................................. 19 5.2.1 Summary ........................................................................................................................................ 19 5.2.2 Approach ........................................................................................................................................ 19 5.2.3 Value of the Consideration under the Proposed Transaction ................................. 20 5.3 REASONABLENESS.............................................................................................................................. 23 5.3.1 Opportunity Cost ......................................................................................................................... 23 5.3.2 Alternatives ................................................................................................................................... 24 5.3.3 Berklee’s Bargaining Position ............................................................................................... 25 5.3.4 Other Advantages and Benefits ............................................................................................ 25 5.3.5 Disadvantages and Risks ......................................................................................................... 26 5.3.6 Other Factors ................................................................................................................................ 26 5.4 SHAREHOLDERDECISION.................................................................................................................. 26
6		SOURCES OF INFORMATION, QUALIFICATIONS AND DECLARATIONS ................ 27 6.1 SOURCES OFINFORMATION............................................................................................................... 27 6.2 QUALIFICATIONS................................................................................................................................. 27 6.3 DISCLAIMERS....................................................................................................................................... 27 6.4 INDEPENDENCE................................................................................................................................... 28 6.5 LIMITATIONS ANDRELIANCE ONINFORMATION.......................................................................... 28 6.6 CONSENTS............................................................................................................................................ 29 6.7 OTHER................................................................................................................................................... 29
7		APPENDIX B – GLOSSARY ................................................................................................... 30

**1 Details

of
the
Proposed
Transaction**

Berklee
Limited
(“Berklee”
or
“the
Company”)
is
an
Australian
manufacturer
and
distributor
of specialist
industrial
products
including
automotive
mufflers
and
exhaust
products,
trolleys
and other
speciality
equipment,
and
has
been
listed
on
the
Australian
Securities
Exchange
(“ASX”) since
March
1989.

The
Company
advised
the
shareholders
of
Berklee
(“the
Shareholders”)
via
an
ASX Announcement
on
22
February
2013,
that
the
Company
“ was
in
receipt
of
…
proposals
from parties
interested
in
acquiring
certain
assets
of
the
Company ”.

On
27
March
2013,
the
Company
made
a
further
ASX
Announcement
advising
it
had
“ entered
into a
Sale
Agreement
(the
“Agreement”)
with
Tilbal
Pty
Ltd
(“Tilbal”)
and
Mr
Rick
van
Berkel ”
that
was “ _conditional
only
on
receiving
shareholder
approval”.

To
this
end,
“an
Extraordinary
General Meeting
of
shareholders
to
vote
on
the
sale
will
be
scheduled
for
late
May
2013
with
a
planned completion
date
of
1
June
2013_ ”.

Under
the
Agreement,
Tilbal
“ agreed
to
acquire
the
Berklee
business,
consisting
of
the
assets
of
the Company
but
excluding
inventory,
the
land
and
buildings
in
Wendouree
and
certain
other
assets (including
cash,
accounts
receivable
and
motor
vehicles)
and
will
offer
all
factory
and
Undacar Parts
(Vic)
Pty
Ltd
employee’s
continuing
employment
and
assume
liability
for
their
entitlements
at the
date
of
completion.
Inventory
will
be
acquired
on
a
consignment
basis.
Tilbal
has
also
agreed
to lease
the
Wendouree
factory
and
office
complex
and
to
take
over
the
lease
of
Undacar
Parts
(Vic) Pty
Ltd
premises
in
East
Keilor ”.

We
understand
that
Mr
Rick
van
Berkel
is
a
director
of
Tilbal
and
was
also
a
director
of
Berklee up
until
his
resignation
on
27
March
2013.
In
addition,
we
understand
that
Mr
Rick
van
Berkel and
his
associated
entities
currently
hold
an
interest
of
26.59%
in
the
total
issued
shares
of
the Company.

On
28
March
2013,
the
Company
made
an
ASX
Announcement
providing
further
details
in relation
to
the
Agreement
with
Tilbal.

In
particular,
Tilbal
“ _has
agreed
to
acquire
the
Berklee business,
consisting
of
the
assets
of
the
Company
but
excluding
inventory,
the
land
and
buildings
in Wendouree
and
certain
other
assets
(including
cash,
accounts
receivable
and
motor
vehicles)
and will
offer
all
factory
and
Undacar
Parts
(Vic)
Pty
Ltd
employees
continuing
employment
and
assume liability
for
their
entitlements
at
the
date
of
completion.

The
consideration
for
the
business
is
$1. Inventory
will
be
acquired
on
a
consignment
basis
and
paid
as
used
in
manufacture
or
sold
for
a consideration
for
70%
of
cost.

Tilbal
has
also
agreed
to
lease
the
Wendouree
factory
and
office complex
and
to
take
over
the
lease
of
Undacar
Parts
(Vic)
Pty
Ltd
premises
in
East
Keilor_ ”.

In
the
Agreement,
the
Vendor
(Berklee)
has
agreed
to
sell
and
the
Purchaser
(Tilbal)
has
agreed to
buy
all
of
the
Sale
Assets
on
the
terms
and
conditions
contained
in
the
Agreement,
with
the Sale
Assets
being
defined
as:

a) Manufacturing
Assets;
b) Office
Furniture
and
Equipment;
c) Intellectual
Property;
d) Goodwill
for
the
Business;
e) Tooling;
and
f) Advertising
Material,

but
does
not
include
the
Excluded
Assets.

Page 1

Excluded
Assets
have
been
defined
to
mean
“ the
accounts
receivable
(of
whatever
nature)
of
the Vendor
and/or
Undacar,
stock,
mobile
telephones,
motor
vehicles,
IT
systems
(including
all computer
hardware
and
software)
and
bulk
gas
tank ”.

Tilbal
also
agreed,
amongst
other
things,
to:

§ “ assume
all
Liability
of
the
Vendor
under
the
Laundry
Trolley
Agreement
and
the Distribution
Agreement ”;
§ “ be
liable
for
all
‘make
good’
obligations
of
the
Vendor
with
respect
to
the
Keilor
Former Lease… ”;
§ “ execute
the
Guarantee
and
Indemnity
on
the
Completion
Date
guaranteeing
the performance
by
the
Purchaser
under
the
Agreement
including,
but
not
limited
to
all moneys
payable
by
the
Purchaser
under
or
in
connection
with
the
Agreement ”;
§ “ enter
into
the
Premises
Lease
on
Completion
Date ”;
§ “ make
an
offer
of
employment
to
each
of
the
Employees
on
terms
and
conditions
which
are no
less
favourable… ”;
§ “ allow
each
Transferring
Employee
an
entitlement
to
sick
leave
which
includes
sick
leave entitlements
that
had
accrued
to
that
Transferring
Employee
as
an
employee
of
the
Vendor or
Undacar
(as
applicable)
but
were
untaken
at
Completion
Date ”;
§ “ treat
the
period
of
service
which
each
Transferring
Employee
had
with
the
Vendor
or Undacar
(as
applicable)
as
service
with
the
Purchaser ”;
§ “ pay
on
the
Completion
Date
in
full,
the
Employee
Entitlements
of
any
Employee
not agreeing
to
transfer
his
or
her
employment
to
the
Purchaser ”.

The
Premises
Lease
relates
to
the
Company’s
property
at
265-‐285
Learmonth
Road,
Wendouree, Victoria
3355.
The
Agreement
specifies
the
terms
of
the
lease
to
include
the
following:

§ an
initial
term
of
one
(1)
years
commencing
on
the
Completion
Date;
§ four
further
options
of
one
(1)
year
each;
§ an
annual
rental
of
$1.00
but
if
the
Premises
are
sold
by
the
Vendor
to
a
third
party
the annual
rental
will
automatically
revert
to
$200,000
plus
outgoings
plus
GST
for
the
first year
of
the
lease;
§ the
Purchaser
to
be
liable
for
all
outgoings
including
insurance.

Employees
has
been
defined
as
“ the
employees
of
the
Vendor
and
those
employees
employed
by Undacar
Parts
(Vic)
Pty
Ltd
but
does
not
include
any
of
the
Excluded
Employees ”.

Excluded
Employees
has
been
defined
to
mean:

a) Brett
Jones;
b) John
Anderson;
c) Ron
Larkin;
and
d) Donna
Bergemann.

The
Offer
received
is
subject
to
the
following
conditions
precedent
being
satisfied,
including:

§ approval
from
the
Berklee
shareholders
at
an
Extraordinary
General
Meeting;
§ Tilbal
executing
a
Premises
Lease
and
the
principal
of
Tilbal,
Mr
Rick
van
Berkel, executing
a
Guarantee
and
Indemnity;
and
§ satisfaction
of
any
other
regulatory
requirements
(if
any)
required
under
the
Listing Rules
before
the
transactions
contained
in
the
Agreement
may
proceed
to
Completion.

In
the
event
that
the
Proposed
Transaction
is
successful,
we
understand
that
the
Company
will
be primarily
left
with
the
following:

§ Land
&
Buildings
at
Wendouree;

Page 2

§ Cash
on
hand;
§ Debtors;
§ Inventory;
§
Less
Creditors;
§ Less
employee
entitlements
and
statutory
employee
obligations
in
relation
to
the Excluded
Employees.

**2 Purpose

&
Scope
of
the
Report**

2.1 Purpose

The
Proposed
Transaction
is
subject
to
the
approval
of
the
Non-‐Related
Party
Shareholders
of
the Company
in
accordance
with
Section
208(1)
of
the
Corporations
Act.
Section
208
of
Chapter
2E of
the
Corporations
Act
requires
a
company
to
seek
shareholder
approval
before
giving
a financial
benefit
to
a
related
party
unless
the
benefit
falls
within
an
exception
provided
for
in section
210
of
the
Corporations
Act.

“Related
party”
is
defined
in
section
228
of
the
Corporations
Act.
Tilbal
is
deemed
to
be
a
related party
of
Berklee
by
virtue
of
the
fact
that
Mr
Rick
van
Berkel
is
a
director
of,
and
controls,
Tilbal, and
was
also
a
director
of
Berklee
up
until
his
resignation
on
27
March
2013.
Mr
Rick
van
Berkel and
his
associated
entities
are
also
a
substantial
shareholder
with
an
interest
of
26.59%
in
the Company’s
shares.

A
“financial
benefit”
is
broadly
defined
in
Section
229
of
the
Corporations
Act,
and
includes
the sale
of
an
asset
by
a
public
company
to
a
related
party.
Accordingly,
the
Proposed
Transaction with
Tilbal
constitutes
the
giving
of
a
financial
benefit
by
Berklee
to
Tilbal.

Regulatory
Guide
76
“Related
Party
Transactions”
(“RG
76”)
states
that
it
may
be
necessary
for entities
to
include
a
valuation
from
an
independent
expert,
to
accompany
the
notice
of
meeting for
member
approval
under
Chapter
2E
of
the
Corporations
Act
where:

§ The
financial
benefit
is
difficult
to
value;
§ The
transaction
is
significant
from
the
point
of
view
of
the
entity
(see
RG
76.112);
or
§ The
independent
directors
do
not
have
the
expertise
or
resources
to
provide independent
advice
to
members
about
the
value
of
the
financial
benefit.

The
Proposed
Transaction
does
not
appear
to
fall
within
ASX
Listing
Rule
10.1,
which
prohibits an
entity
from
disposing
of
an
asset
worth
more
than
5%
of
its
net
assets
to
a
related
party without
the
approval
of
non-‐associated
shareholders,
as
the
Proposed
Transaction
amounts
to
a disposal
of
less
than
5%
of
Berklee’s
net
assets.

Although
there
is
no
requirement
under
the
ASX
Listing
Rules
for
an
independent
expert’s
report, the
independent
directors
have
engaged
Wilson
Hanna
Pty
Ltd
(‘Wilson
Hanna’)
to
prepare
an independent
expert’s
report
to
accompany
the
Explanatory
Memorandum,
to
assist
Non-‐Related Party
Shareholders
in
their
evaluation
of
whether
or
not
to
approve
the
Proposed
Transaction pursuant
to
Resolution
1
of
the
Notice
of
Extraordinary
General
Meeting.

The
independent expert’s
report
sets
out
whether,
in
Wilson
Hanna’s
opinion,
the
Proposed
Transaction
is
fair
and reasonable
to
the
Non-‐Related
Party
Shareholders
of
the
Company
along
with
the
reasons
for that
opinion.

The
sole
purpose
of
this
report
is
as
an
expression
of
Wilson
Hanna’s
opinion
as
to
whether
the Proposed
Transaction
is
fair
and
reasonable
having
regard
to
the
interests
of
the
Non-‐Related Party
Shareholders
of
Berklee.

A
copy
of
the
report
will
accompany
the
Explanatory Memorandum
to
be
sent
to
shareholders
by
the
Company.

Page 3

This
report
is
general
financial
product
advice
only
and
has
been
prepared
without
taking
into account
the
specific
objectives,
financial
situation
or
needs
of
individual
Shareholders. Accordingly,
before
acting
in
relation
to
their
investment,
Shareholders
should
consider
the appropriateness
of
the
advice
having
regard
to
their
own
objectives,
financial
situation
or
needs. Shareholders
should
also
read
the
Explanatory
Memorandum
issued
by
the
Company
in
relation to
the
Proposed
Transaction.

Voting
for
or
against
the
Proposed
Transaction
is
a
matter
for
individual
Shareholders
based
on their
views
as
to
value,
their
expectations
about
future
market
conditions
and
their
particular circumstances
including
risk
profile,
liquidity
preference,
investment
strategy,
portfolio
structure and
tax
position.
Shareholders
who
are
in
doubt
as
to
the
action
they
should
take
in
relation
to the
Proposed
Transaction
should
consult
their
own
professional
adviser.

Similarly,
it
is
a
matter
for
individual
Shareholders
as
to
whether
to
buy,
hold
or
sell
securities
in the
Company
(“the
Shares”).

This
is
an
investment
decision
independent
of
any
decision
of whether
to
vote
for
or
against
the
Proposed
Transaction
upon
which
Wilson
Hanna
does
not offer
an
opinion.
Shareholders
should
consult
their
own
professional
adviser
in
this
regard.

**2.2 Basis

of
Assessment**

Neither
the
ASX
nor
the
Australian
Securities
&
Investments
Commission
(“ASIC”)
provide specific
guidance
as
to
the
analysis
required
in
assessing
whether
a
proposed
transaction
is
fair and
reasonable
to
non
associated
shareholders
for
the
purposes
of
Section
208(1).

ASIC
has
issued
Regulatory
Guide
111
(“RG
111”)
that
provides
guidelines
in
respect
of independent
expert’s
reports
under
the
Corporations
Act.

RG
111
differentiates
between
the analysis
required
for
control
transactions
and
other
transactions.

In
the
context
of
control transactions
(whether
by
takeover
bid,
by
scheme
of
arrangement,
by
the
issue
of
securities
or
by selective
capital
reduction
or
buyback),
it
comments
on
the
meaning
of
“fair
and
reasonable”.
For most
other
transactions,
the
expert
is
to
weigh
up
the
advantages
and
disadvantages
of
the proposal
for
shareholders.
This
involves
a
judgement
on
the
part
of
the
expert
as
to
the
overall commercial
effect
of
the
transaction,
the
circumstances
that
have
led
to
the
proposal
and
the alternatives
available.

The
expert
must
weigh
up
the
advantages
and
disadvantages
of
the proposal
transaction
and
form
an
overall
view
as
to
whether
the
shareholders
are
likely
to
be better
off
if
the
proposed
transaction
is
implemented
than
if
it
is
not.

In
paragraph
56
of
RG
111,
ASIC
states
that
where
an
expert
assesses
whether
a
related
party transaction
is
‘fair
and
reasonable’
(whether
for
the
purposes
of
Chapter
2E
or
ASX
Listing
Rule 10.1),
this
test
should
not
be
applied
as
a
composite
test
and
that
there
should
be
a
separate assessment
of
whether
the
transaction
is
‘fair’
and
‘reasonable’,
as
in
a
control
transaction.

Further,
in
paragraph
57
of
RG
111,
ASIC
states
that
a
proposed
related
party
transaction
is
‘fair’ if
the
value
of
the
financial
benefit
to
be
provided
by
the
entity
to
the
related
party
is
equal
to
or less
than
the
value
of
the
consideration
being
provided
to
the
entity
and
that
this
comparison should
be
made
assuming
a
knowledgeable
and
willing,
but
not
anxious,
buyer
and
a knowledgeable
and
willing,
but
not
anxious,
seller
acting
at
arm’s
length.
In
valuing
the
financial benefit
given
and
the
consideration
received
by
the
entity,
all
material
terms
of
the
proposed transaction
should
be
taken
into
account.

Reasonableness
is
said
to
involve
an
analysis
of
other
factors
that
shareholders
might
consider prior
to
voting
on
a
proposed
transaction.
In
paragraph
62
of
RG
111,
when
deciding
whether
a proposed
transaction
is
‘reasonable’,
factors
that
an
expert
might
consider
include:

§ The
financial
situation
and
solvency
of
the
entity,
including
the
factors
set
out
in
RG 111.26,
if
the
consideration
for
the
financial
benefit
is
cash;
§ Opportunity
costs;
§ The
alternative
options
available
to
the
entity
and
likelihood
of
those
options
occurring;
§ The
entities
bargaining
position;

Page 4

§ Whether
there
is
selective
treatment
of
any
security
holder,
particularly
the
related party;
§ Any
special
value
of
the
transaction
to
the
purchaser,
such
as
particular
technology
or the
potential
to
write
off
outstanding
loans
from
the
target;
and
§ The
liquidity
of
the
market
in
the
entity’s
securities.

In
addition
to
the
above,
ASIC
generally
expects
an
expert
who
is
asked
to
analyse
a
related
party transaction
to
express
an
opinion
on
whether
the
transaction
is
‘fair
and
reasonable’
from
the perspective
of
non-‐associated
members.
Furthermore,
ASIC
provides
specific
guidance
in
respect of
related
party
transactions
in
RG
76
“Related
Party
Transactions”.

Fairness
is
a
more
demanding
test.
A
‘fair’
proposal
will
always
be
‘reasonable’
but
a
‘reasonable’ proposal
may
not
necessarily
be
‘fair’.
A
proposed
related
party
transaction
could
be
considered ‘reasonable’
if
there
were
valid
reasons
to
accept
or
vote
in
favour
notwithstanding
that
it
was not
‘fair’.

Wilson
Hanna
has
determined
whether
the
Proposed
Transaction
is
fair
to
the
Company’s
Non-‐ Related
Party
Shareholders
by
comparing
the
value
of
the
consideration
being
offered
against
the value
of
the
assets,
liabilities
and
obligations
being
sought
in
the
Proposed
Transaction.

In
considering
whether
the
Proposed
Transaction
is
reasonable
to
the
Non-‐Related
Party Shareholders,
Wilson
Hanna
has
considered
a
number
of
factors,
including:

§ Whether
the
Proposed
Transaction
is
fair;
§ The
implications
to
the
Company
and
the
Non-‐Related
Party
Shareholders
if
the Proposed
Transaction
is
not
approved;
§ Other
likely
advantages
and
disadvantages
associated
with
the
Proposed
Transaction
as required
by
RG
111;
and
§ Other
costs
and
risks
associated
with
the
Proposed
Transaction
that
could
potentially affect
the
Company’s
Non-‐Related
Party
Shareholders.

Page 5

**3 Profile

of
the
Industry**

**3.1 Automotive

Parts
&
Accessories
Manufacturing
Sector
Overview**

Companies
in
this
industry
manufacture
non-‐electrical
automotive
components,
including various
car
accessories,
mufflers
and
child
restraints.

They
do
not
manufacture
engines
or
car seats.

These
companies
may
supply
the
motor
vehicle
assemblers
or
replacement
parts
(the aftermarket).

The
primary
activities
of
this
industry
are:

§ car
accessory
manufacturing
§ child
car
restraint
manufacturing
§ gearbox
manufacturing
§ muffler
and
radiator
manufacturing
§ roof
rack
manufacturing
§ seat
belt
manufacturing
§ shock
absorber
manufacturing
§ suspension
component
manufacturing
§ transmission
and
clutch
manufacturing
§ wheel
manufacturing

**3.2 Current

Industry
Performance**

The
Automotive
Parts
and
Accessories
Manufacturing
industry
has
encountered
many
challenges over
the
past
five
years,
resulting
in
industry
revenues
falling
by
an
estimated
3.9%
per
annum for
the
five
years
through
2012-‐13
to
reach
$5.49
billion[2] .
Key
reasons
for
this
decline
include:

§ Strong
competition
from
cheap
imports
benefiting
from
lower
production
costs
and supporting
supply
chains
in
developing
economies.
§ The
strong
Australian
dollar
over
the
period
has
made
imported
parts
and
accessories more
affordable
to
Australian
buyers.
§ Tariffs
were
reduced
from
10%
to
5.0%
for
the
aftermarket
segment
in
2010
which
has adversely
effected
the
cost
competitiveness
of
locally
manufactured
product
as compared
to
imports.
§ Lower
demand
from
local
motor
vehicle
manufacturers
has
in
turn
affected
the
demand from
automotive
part
manufacturers.
§ Abolition
of
local
market
content
requirements.

As
a
result,
domestic
car
and
truck
manufacturers
have
increasingly
bought
imported
automotive parts
and
accessories
at
the
expense
of
domestic
component
manufacturers.

Domestic
motor
vehicle
manufacturers
also
shifted
to
cheaper
imports
as
the
downstream industry
struggled
to
remain
viable.

Due
to
the
growing
popularity
of
small
imported
cars, demand
for
domestically
produced
vehicles
weakened.

The
trend
also
hurt
component manufacturers
as
the
two
industries
are
closely
related.
The
industry’s
only
bright
spot
has
been the
consistent
rise
in
motor
vehicle
numbers,
thereby
providing
growth
opportunities
in
the aftermarket.

2 Information
in
this
report
on
the
Automotive
Parts
and
Accessories
Manufacturing
sector
is
from
a
range of
sources.
The
major
sources
are “IBISWorld
Industry
Report
C2819
Automotive
Parts
and
Accessories Manufacturing
in
Australia” October
2012,
www.abs.gov.au
Australian
Bureau
of
Statistics,
www.fcai.com.au Federal
Chamber
of
Automotive
Industries, www.fapm.com.au Federation
of
Automotive
Products Manufacturers

Page 6

Industry
profitability
has
also
suffered
over
the
past
five
years,
with
industry
operating
profit margins
falling
from
an
estimated
9.8%
in
2007-‐08
to
7.4%
in
2012-‐13.
The
industry’s
operating profit
margins
reached
a
low
of
4.8%
in
2008-‐09
as
demand
languished.
Demand
dropped
as
the global
downturn
caused
motor
vehicle
production
to
slow
and
as
consumers
delayed
after-‐ market
purchases.

Margins
have
since
recovered
as
the
industry
downsized
capacity
and consolidated
the
number
of
players.

The
industry
life
cycle
is
depicted
in
the
diagram
below
and
shows
that
the
Automotive
Parts
and Accessories
Manufacturing
industry
is
a
mature
business
in
a
state
of
decline.

==> picture [415 x 399] intentionally omitted <==

Soaring
input
costs
have
put
pressure
on
profitability
over
the
past
five
years,
with
the
price
of inputs,
including
plastic
resin
and
steel,
increasing.

The
financial
difficulties
of
automotive parent
companies
General
Motors
and
Ford
exacerbated
this
situation.

Competition
from cheaper
countries
and
a
relatively
strong
Australian
dollar
also
dampened
profitability.

In
early
2011,
Toyota
and
Ford
both
cut
car
production.
Toyota
was
hampered
by
a
lack
of
parts from
its
Japanese
factories
following
the
March
2011
earthquake,
whereas
Ford’s
troubles
were the
result
of
poor
demand
for
its
large
vehicles
produced
locally.

The
slower
production
from Ford
reduced
the
demand
for
components
made
locally,
which
was
partially
offset
by
Toyota’s situation,
resulting
in
a
switch
to
domestic
components.
This
shift
was
not
material
however
due to
a
lack
of
supply
of
relevant
parts.

Unlike
motor
vehicle
manufacturers,
component
manufacturers
are
often
small,
privately
owned

Page 7

businesses
without
the
means
or
capital
base
to
trade
through
prolonged
downturns.
Faced
with falling
demand,
revenue
and
profitability,
manufacturers
started
going
out
of
business.
Over
the past
five
years,
component
manufacturer
numbers
have
fallen
by
approximately
2.2%
per annum.

Competition
between
component
manufacturers
is
based
on
quality
of
products,
delivery timeliness
and
price.

Bargaining
power
has
shifted
towards
the
motor
vehicle
manufacturers since
the
abolishment
of
the
local
content
rule.

Component
producers
now
face
sustained pressure
from
imports,
especially
in
the
aftermarket
segment.

Price
parity
with
imports
is expected
especially
for
those
components
that
are
of
similar
quality.

Australian
component
manufacturers
are
finding
it
increasingly
difficult
to
compete
with
lower-‐ cost
foreign
competitors.
Investment
in
new
technology
such
as
supply-‐chain
management
and collaborative
forecasting
(where
members
of
the
supply
chain
share
forecasting
data
to
reduce bottlenecks)
may
help
to
meet
this
challenge.
It
may
also
assist
in
delivery
timeliness.

IBISWorld
expects
that
in
the
next
five
years,
only
those
suppliers
making
higher-‐value
parts
will survive,
while
commodity
parts
will
be
sourced
from
low
production
cost
countries
such
as
China and
India.

**3.3 Industry

Outlook**

The
demand
for
automotive
parts
is
determined
by
motor
vehicle
manufacturing
activity
(both domestically
and
overseas)
and
demand
in
the
aftermarket,
which
is
largely
determined
by
the number
of
vehicles
on
the
road.

The
performance
of
the
domestic
motor
vehicle
manufacturing
industry
has
been
negatively affected
by
high
oil
prices,
which
curtailed
demand
for
its
product
offerings,
namely
large passenger
motor
vehicles.

As
such,
production
has
been
falling
since
2006-‐
07
and
with
it
the demand
for
original
equipment
parts.

Motor
vehicle
demand
depends
on
the
price
of
cars, availability
of
credit
and
household
income.

The
aftermarket
is
a
less
volatile
segment,
though
it
is
highly
competitive
due
to
import penetration.

Reductions
in
tariffs
have
also
facilitated
competition
from
imports.

Demand
for replacement
parts
depends
on
the
number
of
registered
vehicles,
the
age
of
vehicles
(which influences
wear
and
tear)
and
the
number
of
random
events
such
as
accidents.

Component
manufacturers
face
several
challenges.

Domestic
automotive
manufacturers
are expected
to
continue
to
face
problems.

It
follows
that
weak
demand
from
downstream manufacturers
will
limit
the
growth
potential
of
the
Automotive
Parts
and
Accessories Manufacturing
industry.

Furthermore,
overseas
manufacturers
continue
to
pose
strong
import competition,
with
penetration
expected
to
increase.
With
downstream
markets
floundering
and imports
satisfying
a
greater
portion
of
domestic
demand,
industry
revenue
is
forecast
to
fall
3.0% per
annum
over
the
five
years
through
to
2017-‐18
to
reach
$4.72
billion.

The
number
of
established
players
is
also
forecast
to
fall
by
an
annualised
0.9%
over
the
next
five years
due
to
a
combination
of
voluntary
consolidation
and
the
exit
of
unprofitable
businesses. Potential
productivity
gains
are
likely
to
be
sought
through
the
redundancy
of
excess
staff,
with component
manufacturers
expected
to
lay
off
workers
in
a
bid
to
become
more
profitable.
As
a result,
employment
numbers
are
forecast
to
fall
by
an
annualised
1.7%
over
the
five
years through
2017-‐18.

Restructuring
effects
will
take
a
while
to
spread
across
the
industry
and domestic
component
manufacturers
will
still
struggle
to
match
the
profitability
of
foreign manufacturers.

Imports
are
at
a
high
level
in
the
industry
satisfying
an
estimated
43.2%
of
domestic
demand when
averaged
over
the
past
five
years.
Import
penetration
has
increased
during
this
period
as domestic
motor
vehicle
manufacturers
increasingly
source
components
from
overseas
suppliers. The
domestic
market’s
preference
for
imports
is
due
to
the
lower
production
costs
and

Page 8

supporting
supply
chains
in
developing
economies.

Import
penetration
is
also
expected
to increase
over
the
five-‐year
outlook
as
manufacturing
capacity
continues
to
move
overseas.

International
trade
is
a
major
determinant
of
an
industry’s
level
of
globalisation.

Import competition
can
bring
greater
risk
for
local
companies
as
foreign
producers
satisfy
domestic demand
that
local
firms
would
otherwise
supply.
The
increasing
import
trend
is
depicted
in
the following
diagram.

==> picture [415 x 206] intentionally omitted <==

Over
the
past
five
years,
the
price
of
imported
components
fell
due
to
a
reduction
in
tariff
rates, free
trade
agreements
and
a
strong
Australian
dollar.

Imports
from
China
rose
rapidly
as
the country
built
a
strong
manufacturing
base.

Meanwhile,
imports
from
Japan
fell
following
the devastating
earthquake
in
March
2011.

**3.4 Regulation

&
Policy**

There
are
no
specific
regulations
or
licences
affecting
specialist
component
producers
servicing the
industry.

However
a
component
producer
needs
to
register
with
the
government
and accreditation
is
necessary.

The
products
manufactured
need
to
comply
with
specifications
set out
in
the
Australian
Design
Rules
regulation.
Exporting
participants
are
also
required
to
comply with
similar
design
rules
and
standards
at
destination
countries.

The
Federation
of
Automotive
Products
Manufacturers
(FAPM)
is
the
association
of
component manufacturers
that
assists
in
policy
development
at
the
Federal
level.

In
the
next
five
years, environmental-‐friendliness
is
expected
to
become
more
important.

The
government
is committed
to
reducing
carbon
emissions,
which
could
have
an
effect
on
the
type
of
products manufactured
within
the
industry.

Manufacturers
may
also
need
to
‘green’
their
production processes
to
meet
new
carbon
dioxide
targets.

**3.5 Industry

Assistance**

Tariffs
on
passenger
motor
vehicles
and
original
equipment
components
were
reduced
to
10%
in 2005.

The
present
tariff
rate
is
10%
for
original
equipment
components
and
5.0%
for
the aftermarket
segment.
Tariffs
on
imported
original
equipment
components
will
be
cut
to
5.0%
in 2015.

Components
imported
from
countries
with
which
Australia
has
free
trade
agreements typically
do
not
carry
any
tariffs.

A
comprehensive
review
of
the
industry
was
conducted
in
2008
and
a
report
tabled
with
the government
in
August
2008.
The
review
led
by
the
Honourable
Steve
Bracks
made
a
number
of recommendations
that
were
predicated
on
changing
the
behaviour
of
automotive
firms
and
the

Page 9

industry
to
make
them
more
competitive
and
better
able
to
meet
global
challenges,
including
the move
to
a
lower
carbon
environment.

Under
the
new
Bracks
plan,
the
Automotive
Transformation
Scheme
(ATS)
replaces
the Automotive
Competitiveness
and
Investment
Scheme
(ACIS).

It
runs
from
2011
to
2020
and includes
$3.4
billion
in
aid.
The
first
stage
of
the
ATS
will
provide
$1.5
billion
between
2011
and 2015,
45%
of
which
will
be
available
to
entities
in
the
supply
chain
and
the
remaining
55%
will go
to
motor
vehicle
manufacturers.
Component
manufacturers
will
mainly
use
the
funds
to
claim 50%
of
their
research
and
development
costs.

They
will
also
have
to
show
commitment
to improving
the
skills
of
the
labour
force
and
to
environmental
goals.

The
Automotive
Industry
Structural
Adjustment
Program
(AISAP)
will
provide
$116.3
million
to the
supply
chain
to
address
their
labour
and
structural
issues.

The
aim
is
to
lay
off
inefficient workers
and
create
jobs
for
skilled
ones.

Structural
issues
are
to
be
addressed
through consolidation
and
mergers.

The
next
five
years
will
continue
to
test
the
viability
of
the
industry.

Downstream
automotive manufacturers
are
expected
to
continue
to
struggle
from
the
impact
of
increasing
import competition.

The
downstream
markets
along
with
the
industry
will
contend
with
imports satisfying
a
greater
portion
of
domestic
demand.

With
demand
from
industry’s
main
market contracting,
industry
revenue
is
forecast
to
fall
at
an
annualised
rate
of
3.0%
over
the
five
years through
2012-‐18.

Page 10

**4 Profile

of
Berklee**

4.1 History

The
Company
is
based
in
Ballarat,
Victoria,
and
commenced
trading
operations
in
1966.

In March
1989,
the
Company
became
a
publicly
listed
company
and
its
shares
are
traded
on
the Australian
Securities
Exchange
(code
BER).

Since
this
time,
the
Company
has
manufactured
automotive
mufflers
and
exhaust
systems, primarily
under
the
“Berklee”
brand
name.

Today,
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
currently
has
approximately
27 employees,
and
for
the
6
months
ended
31
December
2012
had
net
assets
of
$7.7
million
and sales
from
continuing
operations
of
$1.4
million.

Sales
from
continuing
operations
were
$5.6 million
for
the
year
ended
30
June
2012.

In
the
1970’s,
the
Company
expanded
into
the
nation-‐wide
distribution
of
its
manufactured products
and
other
ancillary
parts
by
establishing
five
distribution
companies.

These distribution
companies,
which
in
1987
became
wholly-‐owned
subsidiaries
of
Berklee,
together with
the
Tasmanian
distribution
company
established
in
1992,
formed
the
Undacar
Parts Division.

In
2007,
Berklee
achieved
Automotive
TS
16949
accreditation.

This
accreditation
is
an Australian-‐wide
pre-‐requisite
automotive
standard
to
supply
Original
Equipment
Manufacturers (“OEM”).
The
accreditation
is
audited
annually
and
attests
to
the
core
processes
and
standards adopted
by
the
Company.

On
12
November
2010,
at
the
time
of
announcing
the
appointment
of
its
new
Chairman
(Mr
Alan Beckett),
the
Company
announced;

“that
it
would
conduct
a
review
of
all
business
strategy
options
appropriate
to
the
Company
and
the results
of
that
process
are
expected
to
be
communicated
to
shareholders
prior
to
30
June
2011.”

On
30
June
2011,
the
Board
announced
a
new
direction
to
enhance
shareholder
value.

The announcement
detailed
that;

“the
Board
had
examined
a
number
of
scenarios
with
the
assistance
of
an
external
consultant including;

§ winding
up
the
company
and
returning
capital
to
shareholders;
§ merging
with,
or
selling
to,
a
competitor
with
a
view
to
rationalising
the
industry;
or
§ significantly
rationalising
the
business
and
operation
under
a
very
different
business model.

_Each
option
has
been
explored
in
detail
…
to
ascertain
the
likely
return
to
shareholders.

After exhaustive
discussion
and
consultation
with
our
external
financial
and
legal
advisors
the
Board
has resolved
that
the
most
appropriate
strategy
for
the
Company
is
to:_

§ become
a
specialised
metal
engineering
solutions
business
§ diversify
into
non
automotive
lines
§ continue
as
a
supplier
in
the
replacement
and
OEM
market
using
company
and
other manufacturing
facilities
§ complete
the
restructure
of
the
company’s
distribution
business
§ review
the
capital
management
strategy

Page 11

**4.2 Strategy

Update**

Following
the
outcome
of
the
strategic
review
that
was
announced
on
30
June
2011,
the Company
has
undertaken
a
range
of
initiatives
including:

_**(i)

Rationalisation
of
Undacar
Distribution
Operations**_

In
an
effort
to
stem
the
operating
losses
incurred
from
the
Company’s
distribution
activities, Berklee
decided
to
adopt
a
distribution
exit
strategy
that
involved
entering
into
new
alliance
and supply
agreements
rather
than
opting
for
a
simple
closure.

It
was
the
Board’s
view
that
this approach
had
more
potential
to
maximise
the
monetisation
of
distribution
assets,
such
as
stock and
debtors
when
compared
to
simply
shutting
the
doors
and
disposing
of
assets
at
liquidation values.

Since
this
time,
the
Company
has
announced
the
formation
of
a
Strategic
Alliance
with
another long
established
Australian
exhaust
business,
Mercury
Mufflers.

Under
the
agreement
with Mercury,
Berklee
has
been
granted
the
rights
to
manufacture
the
Mercury
brand
product,
with Mercury
becoming
the
distributor
of
the
Berklee
brand
product
in
New
South
Wales,
Queensland and
Western
Australia.

In
relation
to
South
Australia
and
Tasmania,
the
Company
entered
into
separate
exclusive distribution
agreements
with
Sustrev
Pty
Ltd,
trading
as
Muffler
Bits,
and
Launceston
Auto Spares
Pty
Ltd,
trading
as
Berklee
Exhaust
&
Bikes,
respectively.

As
a
consequence,
the Company’s
Undacar
operations
in
these
states
have
now
ceased
trading.

The
only
remaining
Undacar
trading
operation
owned
by
the
Company
is
located
in
the
state
of Victoria.

In
recognition
of
the
mature
aftermarket
exhaust
industry,
the
rationale
for
these
alliances
and arrangements
was
to
provide
the
following
benefits
to
the
Company,
its
Shareholders
and customers
including:

§ Preserve
the
value
of
the
respective
product
brands;
§ Achieve
better
economies
of
scale
with
each
company
focused
on
one
core
activity;
§ Enable
greater
ability
to
compete
in
the
market
place
because
the
businesses
are
joining forces
to
take
on
the
competition;
§ Provide
increased
customer
satisfaction
from
a
broader
service
offering
with
access
to market
leading
brands;
§ Ensure
retention
of
Australian
made
high
quality
product
enabling
product
range rationalisation,
whilst
supporting
design
and
development
capability;
and
§ Deliver
stronger
sales
and
marketing
capabilities
with
extensive
industry
knowledge
and experience
to
drive
sales
and
increase
market
share.

_**(ii)

Spotless
Contract**_

In
August
2011,
Berklee
signed
a
three-‐year
Preferred
Supplier
Agreement
with
Spotless
Group Limited
(‘Spotless’)
for
the
supply
of
stainless
steel
trolleys
in
their
hospital
and
hospitality businesses.
This
was
considered
an
important
step
in
the
process
of
transforming
Berklee
into
a ‘specialised
metal
engineering
solutions
business’.
Sales
revenue
pursuant
to
this
agreement
was expected
to
be
in
excess
of
$7
million
over
the
three-‐year
period
of
the
agreement.

The
trolley
was
designed
in-‐house
and
is
now
made
from
a
combination
of
imported
and
local elements,
with
all
assembly
work
being
carried
out
in
the
Ballarat
facility.
The
associated
capital expenditure
to
facilitate
the
manufacture
of
this
product
was
relatively
minor
as
it
leveraged
the Company’s
existing
workforce
and
machinery
on
hand.

Page 12

In
2012,
private
equity
firm,
Pacific
Equity
Partners
(‘PEP’),
was
successful
in
its
efforts
to acquire
Spotless.
Following
the
acquisition
by
PEP,
the
sale
of
trolleys
has
slowed
and
has
been well
below
expectations.

_**(iii)

China
Replacement
Strategy**_

Consistent
with
the
Company’s
strategic
plan,
a
decision
was
made
to
have
selected
products manufactured
in
China.
In
2012,
certain
equipment
was
shipped
to
the
appointed
manufacturer in
China
in
order
to
have
the
top
20
products
manufactured
offshore
at
a
reduced
price
(referred to
as
the
“China
Replacement
Strategy’).

As
this
is
only
a
relatively
recent
initiative,
products only
started
to
arrive
in
Australia
in
January
2013.

Summary

Whilst
the
above
strategies
have
led
to
changes
in
the
operations
of
the
Company,
these initiatives
have
not
been
successful
in
addressing
the
underlying
operating
losses
being experienced
by
the
Company,
as
outlined
in
the
Directors
Report
in
the
financial
statements
for the
6
months
ended
31
December
2012,
which
stated:

“ The
Directors
are
extremely
disappointed
with
the
results
for
the
half
to
31
December
2012.
The automotive
after
market
sector
in
which
the
Company
operates
is
in
significant
decline
and attempting
to
compete
with
an
Australian
manufactured
cost
base
is
difficult.
Competitors
continue to
benefit
from
the
high
Australian
dollar
and
as
a
consequence
sales
to
Berklee’s
distributors
have suffered
significantly.

As
a
result,
the
restructuring
of
the
distribution
network
has
not
yielded
the
benefits
expected. Whilst
the
losses
attributable
to
distribution
have
reduced
significantly,
they
have
not
been
offset
by increased
performance
in
the
manufacturing
business.

The
Company
has
attempted
to
expand
its
product
range
through
the
introduction
of
a
range
of industrial
products,
however
a
key
customer’s
capital
spending
has
been
put
on
hold
following
a takeover
of
their
operations
by
private
equity.

Consequently,
the
Company
has
seen
a
dramatic
decline
in
revenue
and
whilst
the
Company
has begun
to
shift
production
to
China
sourced
product,
the
benefits
of
lower
costs
has
not
yet
fed through
to
improved
sales. ”

Further,
in
Note
1(b)
of
the
financial
statements
for
the
6
months
ended
31
December
2012,
the Directors
stated
that
“ in
the
event
that
the
Directors
are
unable
to
successfully
negotiate
the
sale
of the
business,
the
Directors
would
consider
the
option
of
the
orderly
sale
of
assets
of
the
Consolidated entity ”.

4.3 Products

It
is
management’s
view
that
the
Company’s
exhausts
are
widely
accepted
in
the
industry
as
the best
quality
locally
manufactured
exhausts.

They
are
designed
in
Australia
and
have
the reputation
of
fitting
correctly,
the
first
time.
In
addition
to
the
Berklee
exhaust
systems,
Berklee has
developed
the
following
brands:

§ PEX
Performance
Exhaust
–
providing
a
range
of
performance
exhaust
systems
and accessories
to
cater
for
those
customers
looking
for
extra
performance
as
well
as
the
4x4 market;
and
§ Ballistic
–
providing
a
premium
exhaust
system
for
high
performance
vehicles.

Page 13

The
full
range
of
Berklee
exhaust
brands
are
promoted
in
the
market
as:

==> picture [130 x 57] intentionally omitted <==

==> picture [103 x 57] intentionally omitted <==

==> picture [135 x 48] intentionally omitted <==

**4.4 Financial

Performance**

The
financial
performance
of
the
Company
for
the
four
years
ended
30
June
2012,
and
the
6 months
ended
31
December
2012,
is
summarised
below.

Berklee Earnings History	6 Mths Dec 12	FY12	FY11	FY10	FY09
	$’000	$’000	$’000	$’000	$’000
Income Statements
Revenue from continuing operations	1,400	5,638	6,115	9,969	11,055
Revenue from discontinued operations	901	3,628	3,233	n/a	n/a
Profit/(Loss) before income tax - continuing operations	(1,532)	(917)	(564)	675	1,461
Profit/(Loss) before income tax - discontinued operations	(330)	(1,232)	(1,841)	n/a	n/a
Income tax expense/(benefit) continuing operations	0	0	376	134	(372)
Income tax expense/(benefit) discontinued operations	0	0	(553)	n/a	n/a
Operating profit/(Loss) after income tax	(1,862)	(2,149)	(2,228)	541	1,833
CASH FLOW STATEMENTS
Cash flow from operatingactivities	(668)	123	(920)	(12)	84
Source: Berklee Financial Reports (Audited)

As
is
clear
from
the
summary
above,
the
Company’s
revenue
has
been
consistently
declining
each year,
as
has
its
profitability.
The
losses
from
the
(now
discontinued)
distribution
business
have significantly
impacted
the
results,
mainly
in
the
last
three
years.

As
part
of
Berklee’s
strategic restructuring
plan,
the
Company
has
now
entered
into
new
distribution
arrangements
with external
parties
in
all
states
except
Victoria.

In
FY12,
the
business
managed
to
achieve
a
slightly
better
than
break
even
result
on
a
cash
flow basis,
largely
a
result
of
its
efforts
to
reduce
the
Company’s
net
working
capital
position.
In
the financial
statements
for
the
6
months
ended
31
December
2012,
the
Company
has
been
unable
to achieve
the
necessary
sales
volumes
on
a
monthly
basis
to
achieve
a
cash
neutral
outcome. Consequently,
the
business
value
has
continued
to
decline
month
on
month,
notwithstanding
that the
business
remains
solvent
due
to
its
asset
base.

**4.5 Financial

Position**

The
reported
consolidated
financial
position
of
the
Company
as
at
30
June
for
the
four
years ended
2012
and
the
6
months
ended
31
December
2012,
is
summarised
below.

Berklee Balance Sheet History	December 2012	June 2012	June 2011	June 2010	June 2009
	$’000	$’000	$’000	$’000	$’000
Balance Sheet
Current Assets	3,922	5,772	7,862	9,062	8,637
Non Current Assets	4,695	5,668	6,443	4,091	6,223
Total Assets	8,617	11,440	14,305	13,963	14,860
Current Liabilities	950	1,872	2,374	1,548	1,778
Non Current Liabilities	0	39	53	44	52
Total Liabilities	950	1,911	2,427	1,592	1,830
Net Assets	7,667	9,529	11,878	12,371	13,030
Source: Berklee Financial Reports (Audited)

Page 14

In
line
with
the
declining
profitability,
the
Company’s
net
asset
position
has
been
steadily
eroded, despite
the
following
significant
events:

§ Revaluation
of
land
&
buildings
upwards
by
$1.9
million
in
FY11;
§ Realisation
gain
of
$1.2
million
on
the
disposal
of
property,
plant
&
equipment
in
FY10; and
§ Realisation
gain
of
$2.4
million
on
the
disposal
of
property,
plant
&
equipment
in
FY09.

During
recent
times,
management
has
been
focused
on
reducing
inventory
and
managing
the working
capital
of
the
business.

**4.6 Net

Borrowings**

The
net
borrowings
of
Berklee
over
the
past
four
years
ended
30
June
2012
and
the
6
months ended
31
December
2012,
were
as
follows.

Berklee Borrowing History	December 2012	June 2012	June 2011	June 2010	June 2009
	$’000	$’000	$’000	$’000	$’000
Borrowings	0	44	29	0	0
Source: Berklee Financial Reports (Audited)

Since
FY09,
where
borrowings
of
approximately
$1.3
million
were
repaid
from
the
proceeds
of the
sale
of
property
plant
&
equipment,
the
Company’s
gearing
has
been
negligible
and
was
nil
as at
31
December
2012.

Over
this
4.5
year
period,
the
trading
losses
generated
by
the
Company have
largely
been
absorbed
by
the
sale
of
further
property
plant
&
equipment
(at
higher
prices than
book
value)
along
with
reductions
in
the
level
of
working
capital.

**4.7 Capital

Structure
and
Ownership**

The
Company
has
approximately
10
million
ordinary
shares
on
issue
today.
There
are
no
other classes
of
share
or
options
that
have
been
issued
by
the
Company.
As
at
2
April
2013,
the
top
20 shareholders
were
as
follows:

		% of
Shareholder	No. of shares	shares
		issued

Ausned Pty Ltd α	1,779,031	17.79
W. M. van Berkel	602,362	6.02
P. J. Hayman	572,620	5.73
Dr D.G.M. Welsh	415,030	4.15
Riniki Pty Ltd (Super Fund Account)α	414,023	4.14
E. & C. van Berkel Family Trust#	355,806	3.56
Dorran Pty Ltd	350,000	3.50
E. J. van Berkel#	326,371	3.26
Ago Pty Ltd	306,627	3.07
Riniki Pty Ltd (RJ & NC van Berkel Account)α	286,282	2.86
Angueline Investments Pty Limited	263,557	2.64
C. Stubbs & C. Stubbs (CE-ES Super Fund Account)	250,000	2.50
Maldew Holdings Pty Ltd (Super Fund Account)	248,693	2.49
Maelstrom Pty Ltd (Falkiner Super Fund Account)	248,353	2.48
M. Yannis	242,232	2.42
BP Sido Pty Ltd (Super Fund Account)	193,812	1.94
R. G. Yannis	189,705	1.90
C. A. van Berkel#	162,782	1.63

Page 15

Marko Nominees Pty Ltd (No 1 Account)	147,343	1.47
R. van Berkelα	143,177	1.43
	7,497,806	74.97
Other shareholders	2,502,637	25.03
Total	10,000,443	100.00

# -‐
Common
shareholding
of
Mr
E.J.
van
Berkel:
844,959 α -‐
Common
shareholding
of
Mr
R.J.
van
Berkel:
2,659,501

_**Source:

Computershare**_

The
Van
Berkel
family
holds
a
significant
shareholding
through
various
entities
controlled
by family
members,
and
we
understand
that
the
various
family
members
vote
their
shares independently
of
each
other.
However,
under
Section
228
of
the
Corporations
Act,
in
relation
to related
parties
and
financial
benefits,
the
following
parties
are
considered
to
be
related
parties
of Mr
Rick
van
Berkel:

§ Spouse;
§ Parents;
and
§ Children

**4.8 Share

Price
Performance**

A
summary
of
the
price
and
trading
history
of
Berklee
over
the
last
12
months
is
set
out
below:

	Highest	Lowest	Closing	Volume	Number of
Date	price	price	price	Traded	transactions
04-Apr-12	0.3900	0.3900	0.3900	356	1
12-Apr-12	0.3900	0.3900	0.3900	1,004	1
17-Apr-12	0.3900	0.3900	0.3900	3,559	1
24-Apr-12	0.3900	0.3900	0.3900	7,421	1
27-Apr-12	0.3900	0.3900	0.3900	5,000	1
17-May-12	0.3900	0.3900	0.3900	4,200	1
15-Jun-12	0.4000	0.4000	0.4000	7,117	1
18-Jun-12	0.4000	0.3900	0.3900	4,461	2
20-Jun-12	0.3900	0.3900	0.3900	5,644	1
03-Jul-12	0.3900	0.3900	0.3900	7,117	1
06-Jul-12	0.3900	0.3900	0.3900	13,239	1
12-Jul-12	0.3200	0.3200	0.3200	2,847	1
17-Jul-12	0.3200	0.3200	0.3200	71,021	3
23-Aug-12	0.4800	0.3200	0.4800	4,796	2
24-Aug-12	0.4800	0.4500	0.4800	65,986	2
12-Sep-12	0.4600	0.4400	0.4600	205,469	3
02-Oct-12	0.4600	0.4400	0.4600	61,132	2
05-Oct-12	0.5000	0.5000	0.5000	3	1
18-Oct-12	0.4800	0.4800	0.4800	118,000	1
14-Nov-12	0.4000	0.4000	0.4000	6,000	1
16-Nov-12	0.3800	0.3800	0.3800	2,670	2
03-Dec-12	0.4200	0.4200	0.4200	11,535	1
17-Jan-13	0.3500	0.3500	0.3500	356	1
18-Jan-13	0.3250	0.3250	0.3250	8,541	2
30-Jan-13	0.3400	0.3400	0.3400	3,559	1

Page 16

04-Feb-13	0.3200	0.3000	0.3000	158,147	6
13-Feb-13	0.3200	0.3200	0.3200	89,975	1
14-Feb-13	0.3400	0.3400	0.3400	16,368	1
20-Feb-13	0.3250	0.3250	0.3250	3,557	1
21-Feb-13	0.3300	0.3300	0.3300	6,618	1
22-Feb-13	0.3500	0.3400	0.3500	5,551	2
13-Mar-13	0.3200	0.3200	0.3200	2,847	1
14-Mar-13	0.3200	0.3200	0.3200	40,712	2
28-Mar-13	0.3500	0.3500	0.3500	14,233	1
02-Apr-13	0.3550	0.3550	0.3550	14,233	1
03-Apr-13	0.3900	0.3900	0.3900	35,581	1
TOTALS				1,008,855

Source: Computershare

As
the
above
table
shows,
the
Company
is
not
a
highly
traded
stock.
The
Berklee
Share
price
has varied
over
the
year
from
a
low
of
$0.30
to
a
high
of
$0.50,
albeit
on
very
thin
volumes.

Page 17

**5 Evaluation

of
the
Proposed
Transaction**

5.1 Conclusion

In
Wilson
Hanna’s
opinion,
the
Proposed
Transaction
is
fair
and
reasonable
to
the
Non-‐Related Party
Shareholders
of
the
Company,
in
the
absence
of
a
superior
proposal.

The
Proposed
Transaction
does
however
require
careful
consideration
given
the
related
party relationship
between
the
Company
and
Tilbal,
by
virtue
of
Mr
Rick
van
Berkel,
notwithstanding the
monetary
consideration
being
offered
is
nominal.
Mr
Rick
van
Berkel
is
a
director
of
Tilbal and
up
until
27
March
2013
was
a
director
of
the
Company.
Additionally,
Mr
Rick
van
Berkel
and his
associated
entities
hold
a
26.59%
shareholding
in
the
Company.

Other
important
factors
that
Berklee
Shareholders
should
take
into
account
when
deciding whether
to
vote
for
or
against
the
Proposed
Transaction
include
the
following:

§ The
current
strategy
of
the
Company,
including
the
relative
recent
China
Replacement initiative,
has
not
led
to
any
material
improvement
in
its
trading
operations.

The Company
still
continues
to
generate
operating
losses
in
the
vicinity
of
$100,000
per month.

In
the
event
that
Proposed
Transaction
is
approved,
management
estimates operating
losses
in
the
vicinity
of
$25,000
to
$30,000
per
month,
whilst
they
undertake to
realise
the
remaining
assets;

§ The
Independent
Directors
of
the
Company
advised
Wilson
Hanna
that
the
Board
put
in place
appropriate
protocols
and
procedures
to
ensure
that
the
Proposed
Transaction was
negotiated
on
an
arm’s
length
basis.

Wilson
Hanna
has
no
reason
to
believe
that Berklee
and
Tilbal
did
not
have
an
equal
bargaining
position
in
negotiating
the
Proposed Transaction;

§ Over
the
past
12
months,
the
total
value
of
Berklee
shares
traded
on
the
ASX
was approximately
$0.4
million.

With
only
53
transactions
taking
place
during
the
year, there
is
a
lack
of
liquidity
in
the
Company’s
shares.

§ There
are
currently
limited
alternative
options
available
to
Berklee
Shareholders
other than
trade-‐on,
vote
for
the
Proposed
Transaction,
hope
for
an
alternative
offer
to materialise
or
liquidation.

We
understand
that
the
Berklee
Board
has
considered
a number
of
proposals
for
the
Company
since
2012,
and
also
called
for
expressions
of interest
in
an
ASX
Announcement
on
1
February
2013.
Further,
we
understand
that
the Proposed
Transaction
is
the
only
offer
received
to
date
that
the
Directors
believe
is capable
of
being
put
to
the
Company’s
Shareholders.

§ The
Proposed
Transaction
has
a
number
of
benefits
for
the
Company,
including:
Opportunity
to
significantly
reduce
the
operating
losses
currently
being generated
by
the
Company;
Enhances
the
potential
realisation
returns
from
the
remaining
assets
of
the Company;
Transfers
a
number
of
liabilities,
potential
contingent
liabilities
and
obligations of
the
Company
across
to
Tilbal;
and
Provides
a
pathway
for
an
eventual
capital
return
to
Shareholders,
after
an orderly
realisation
of
the
remaining
assets.

Page 18

5.2 Fairness

5.2.1 Summary

Our
approach
to
assessing
the
fairness
of
the
Proposed
Transaction
has
been
determined
having regard
to
paragraph
57
of
RG
111
which
states
that
a
proposed
related
party
transaction
is
‘fair’ if
the
value
of
the
financial
benefit
to
be
provided
by
the
entity
to
the
related
party
is
equal
to
or less
than
the
value
of
the
consideration
being
provided
to
the
entity
and
that
this
comparison should
be
made
assuming
a
knowledgeable
and
willing,
but
not
anxious,
buyer
and
a knowledgeable
and
willing,
but
not
anxious,
seller
acting
at
arm’s
length.
In
valuing
the
financial benefit
given
and
the
consideration
received
by
the
entity,
all
material
terms
of
the
proposed transaction
should
be
taken
into
account.

The
monetary
consideration
of
$1.00
offered
by
Tilbal
to
the
Company
under
the
Proposed Transaction
is
on
the
face
of
it
negligible.
Additionally,
the
impact
on
the
face
of
the
Company’s balance
sheet
is
also
not
significant.

After
having
regard
to
a
number
of
factors
including
the quantum
of
assets,
liabilities
and
obligations
transferred
from
Berklee
to
Tilbal
as
well
as
the prospect
of
significantly
reducing
the
ongoing
operating
losses
currently
being
experienced
by the
Company,
in
Wilson
Hanna’s
opinion,
the
Proposed
Transaction
is
‘fair’
and
therefore ‘reasonable’.

5.2.2 Approach

Typically,
the
most
reliable
evidence
as
to
the
value
of
a
business
or
asset
is
the
price
at
which comparable
businesses
or
assets
have
been
bought
or
sold
in
arms
length
transactions.

In
the absence
of
direct
market
evidence
of
value,
estimates
of
value
are
made
using
methodologies
that infer
value
from
other
available
evidence.
There
are
four
primary
valuation
methodologies
that are
commonly
used
for
valuing
businesses
or
assets:

§ capitalisation
of
earnings
or
cash
flows;
§ discounting
of
projected
cash
flows;
§ industry
rules
of
thumb;
and
§ estimation
of
the
aggregate
proceeds
from
an
orderly
realisation
of
assets

Each
of
these
valuation
methodologies
is
appropriate
in
different
circumstances.

The
primary criteria
for
determining
which
methodology
is
appropriate,
is
the
actual
practice
adopted
by purchasers
of
the
type
of
business
or
asset
involved.

In
view
of
the
Company’s
loss
making
operating
results
and
prospects,
we
consider
it
to
be inappropriate
to
adopt
a
capitalisation
of
earnings
or
cash
flows
valuation
approach,
nor
a discounted
cash
flow
approach.
Further,
given
the
nature
of
the
Proposed
Transaction,
there
are no
industry
rules
of
thumb
that
are
considered
appropriate
in
the
circumstances.

Accordingly, we
have
adopted
an
orderly
realisation
of
assets
approach.

In
adopting
the
orderly
realisation
of
assets
approach,
Wilson
Hanna
has
also
had
regard
to certain
contingent
liabilities,
as
specified
in
the
Agreement,
which
will
be
transferred
to
Tilbal under
the
Proposed
Transaction.
Wilson
Hanna
considers
that
these
contingent
liabilities
need to
be
taken
into
consideration
when
assessing
the
fairness
of
the
Proposed
Transaction
because these
obligations
are
being
transferred
to
Tilbal.

Further,
in
the
event
that
the
Proposed Transaction
is
not
approved
by
the
Non-‐Related
Party
Shareholders,
and
a
superior
offer
is
not forthcoming,
it
is
the
current
Directors
intention
to
explore
alternate
options
including
the potential
winding
up
of
the
Company
due
to
its
poor
operating
performance
and
outlook.
This
in turn
would
result
in
these
contingent
liabilities
becoming
actual
liabilities.

As
at
31
December
2012,
the
Directors
of
the
Company
considered
the
carrying
values
of
its assets,
including
the
assets
of
the
Proposed
Transaction,
and
after
having
regard
to
third
party valuations
impaired
these
assets
to
reflect
their
fair
values.

Page 19

**5.2.3 Value

of
the
Consideration
under
the
Proposed
Transaction**

The
monetary
consideration
offered
by
Tilbal
to
the
Company
under
the
Proposed
Transaction for
the
Sale
Assets,
as
set
out
in
the
Agreement,
is
$1.00.
A
summary
of
the
Sale
Assets
is
set
out below:

==> picture [254 x 148] intentionally omitted <==

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

December
Sale
Assets
Notes
2012
$’000
Manufacturing
Assets
1
330
Office
Furniture
&
Equipment
1
3
Intellectual
Property
2
0
Goodwill
of
the
Business
2
0
Tooling
1
37
Advertising
Material
2
0
TOTAL
SALE
ASSETS
370
Source:
Financial
Statements
for
6
months
ended
31
December
2012
----- End of picture text -----

Notes:

The
assets
in
the
financial
statements
as
at
31
December
2012
were
written
down
by
the Directors
of
the
Company
to
reflect
their
fair
values,
after
having
regard
to
third
party valuations.

As
part
of
our
analysis,
we
reviewed
these
third
party
valuations
and
the basis
on
which
they
were
prepared.

In
the
event
that
the
Proposed
Transaction
is
not
approved
by
the
Non-‐Related
Party Shareholders,
and
a
superior
offer
is
not
forthcoming,
it
is
the
current
Directors intention
to
explore
alternative
options
including
the
potential
winding
up
of
the Company.
Accordingly,
we
consider
the
value,
and
the
basis
on
which
it
was
prepared,
to be
appropriate
in
the
circumstances.

The
Company
has
been
depreciating
these
assets
by
approximately
$28K
each
month since
31
December
2012.

The
financial
statements
for
the
6
months
ended
31
December
2012
contained
a
nil value
for
these
asset
classes.

In
addition
to
the
above,
the
Agreement
sets
out
a
number
of
liabilities
and
obligations
to
be transferred
by
Berklee
to
Tilbal
as
part
of
the
Proposed
Transaction.

These
liabilities
and obligations
include
a
mix
of
readily
quantifiable
liabilities
as
well
as
a
number
of
potential contingent
liabilities
and
obligations
that
require
assumptions
and
a
degree
of
judgement
in order
to
estimate
the
potential
liabilities.
Set
out
in
the
table
below
is
a
summary
of
the
liabilities and
contingencies:

and contingencies:
Liabilities & Contingencies	Notes	Low	High
		$’000	$’000
Liabilities Annual Leave Long Service Leave Make Good Keilor (Undacar Vic) Contingencies Employee Redundancies Make Good Wendouree Material Contract Termination	1 2 3 4 5 6	16 115 25 283 100 350	16 115 40 283 125 600

TOTAL LIABILITIES & CONTINGENCIES		889	1,179
Source: Berklee

Page 20

Notes:

This
represents
the
accrued
annual
leave
liability
for
all
employees,
other
than
Excluded Employees,
as
at
31
December
2012;
This
represents
the
accrued
long
service
leave
liability
for
all
employees,
other
than Excluded
Employees,
as
at
31
December
2012;
This
represents
the
estimate
of
the
likely
make
good
that
will
be
incurred
upon
vacating the
Keilor
premises.
As
at
31
December
2012,
a
provision
of
$25K
had
been
recognised in
the
financial
statements;

_Wilson
Hanna
considers
that
the
following
contingent
liabilities
need
to
be
taken
into consideration
when
assessing
the
fairness
of
the
Proposed
Transaction
because
these obligations
are
being
specifically
transferred
to
Tilbal.

Further,
if
the
Proposed Transaction
is
not
approved
by
the
Non-‐Related
Party
Shareholders,
and
a
superior
offer
is not
forthcoming,
it
is
the
current
Directors
intention
to
explore
alternate
options
including the
potential
winding
up
of
the
Company
due
to
its
poor
operating
performance
and outlook.
This
in
turn
would
result
in
these
contingent
liabilities
becoming
actual
liabilities and
as
such
the
following
liabilities
have
been
considered
when
assessing
the
fairness
of
the Proposed
Transaction._

This
represents
the
estimated
redundancy
liability
for
all
employees,
other
than Excluded
Employees,
as
at
31
December
2012;
This
represents
the
Directors
estimate
of
the
likely
make
good
costs
that
will
be
incurred upon
vacating
the
Wendouree
premises;
and
The
Directors
have
based
their
estimate
of
the
potential
contract
termination
payments on
analysis
conducted
by
an
external
party
together
with
management’s
commercial experience.
Under
the
terms
of
the
Company’s
material
contracts,
the
Company
may
be able
to
reduce
and/or
transfer
various
financial
obligations
to
other
parties.
The
above range
reflects
the
Company’s
ability,
or
otherwise,
to
do
so.

As
part
of
our
analysis, Wilson
Hanna
has
reviewed
the
Directors’
estimate
of
its
potential
liabilities.

On
the
face
of
it,
Berklee
is
transferring
a
net
liability
position
in
the
order
of
$519K
-‐
$809K
to Tilbal
in
exchange
for
$1.00.

Tilbal in exchange for $1.00.
	Low	High
	$’000	$’000
Total Sale Assets Less: Total Liabilities & Contingencies	370 889	370 1,179

Net benefit to Berklee shareholders	519	809
Source: Berklee

Additionally,
the
following
factors
have
been
taken
into
consideration
before
arriving
at
any conclusions:

Rental
Arrangement
–
The
Proposed
Transaction
involves
Tilbal
paying
a
peppercorn rental
of
$1.00
per
annum
for
the
use
of
the
factory
at
Wendouree
until
the
property
is sold,
at
which
time
the
rent
increases
to
$200K
for
one
year.
In
exchange,
Tilbal
will
be responsible
for
the
insurance,
outgoings
and
maintenance
associated
with
the
property, which
is
estimated
to
be
in
the
vicinity
of
$95K
to
$100K
per
annum,
up
until
its
sale
to
a third
party.

Given
the
location
and
nature
of
the
property
and
the
Company’s
intention
to
sell
it, management
believe
the
Company
is
unlikely
to
attract
an
external
party
as
a
tenant
in the
lead
up
to
any
sale
due
to
the
likely
costs
and
uncertainties
involved
with
any
such interim
arrangement
by
a
potential
tenant.

Page 21

Whilst
it
is
recognised
that
Tilbal
potentially
receives
a
benefit
from
the
peppercorn rental
arrangement
under
the
Proposed
Transaction,
for
an
unquantifiable
period
of time,
this
must
be
weighed
up
against
Tilbal
assuming
the
obligations
to
pay
the property
outgoings,
and
maintenance
costs,
until
the
property
is
sold.

Additionally,
Wilson
Hanna
considers
that
the
increased
rental,
following
the
sale
of
the property,
together
with
the
make
good
obligations
being
transferred
to
Tilbal, approximates
a
market
rental.

Accordingly,
Wilson
Hanna
considers
that
the
proposed
rental
arrangement
does
not affect
the
fairness
of
the
Proposed
Transaction.

§ Inventory
Holdings
–
In
recent
years,
the
Company
has
endeavoured
to
sell
all
slow moving
inventory
holdings
with
varying
degrees
of
success.

As
at
31
December
2012, the
Directors
increased
the
provision
against
the
value
of
inventory
to
$600K,
resulting in
the
inventory
balance
being
reduced
to
$1.259
million.

As
part
of
the
Proposed
Transaction,
Tilbal
holds
the
stock
on
a
consignment
basis
and has
agreed
to
pay
the
Company
70%
of
the
historical
cost
of
the
inventory
upon
its
sale or
use
in
the
manufacturing
process.

In
the
event
that
Tilbal
was
able
to
use
or
sell
all
of
the
inventory
holdings,
the
Company should
receive
proceeds
that
approximate
the
current
book
value
of
inventory
(ie. ($1.259M
+
$0.600M)
=
$1.859M
(being
historical
cost)
x
70%
=
$1.3M).

In
the
event
that
the
Proposed
Transaction
is
not
successful,
the
Company
considers
that the
fair
value
for
inventory
has
been
reflected
in
the
balance
sheet
as
at
31
December 2012.

Accordingly,
Wilson
Hanna
considers
that
the
inventory
arrangement
does
not
affect
the fairness
of
the
Proposed
Transaction.

§ Operating
Losses
–
In
the
event
that
the
Proposed
Transaction
is
successful, management
believe
this
should
lead
to
a
significant
reduction
in
the
operating
losses being
experienced
by
the
Company.

Currently,
the
Company
is
generating
operating losses
in
the
vicinity
of
$100K
each
month.

Whilst
a
number
of
ongoing
costs
are
still likely
to
be
incurred
after
Completion
Date
–
for
example,
ASX
Listing
fees,
audit
and
tax costs,
and
employee
obligations
in
respect
of
the
remaining
employees
of
the
Company
– it
follows
that
the
Proposed
Transaction
should
lead
to
a
lower
level
of
operating
losses being
incurred,
thereby
slowing
the
erosion
in
the
net
asset
position
of
the
Company.

The
ongoing
operating
costs
have
been
estimated
by
the
Company
to
be
in
the
vicinity
of $25K
to
$30K
per
month.

§ Goodwill
and
Intellectual
Property
–
The
Company
commenced
operations
in
1966
and since
this
time
has
developed
a
range
of
tools,
practices,
knowledge
and
know-‐how; acquired
a
depth
of
experience
in
the
industry
and
has
established
a
number
of
brands. The
value
of
this
intellectual
property
has
not
been
recognised
as
an
asset
on
the
balance sheet
of
the
Company
as
at
31
December
In
considering
the
potential
value
of
this intellectual
property,
Wilson
Hanna
has
had
regard
to
the
likely
benefits
being
derived along
with
the
financial
performance
of
the
Company.

Given
the
magnitude
of
the operating
losses
and
the
considerable
time
period
over
which
they
have
been
incurred, when
coupled
with
the
current
performance
of
the
Company
and
the
outlook
for
the automotive
parts
&
accessories
market
in
Australia,
it
is
difficult
to
arrive
at
any
positive value
for
the
underlying
goodwill
and
intellectual
property
of
the
Company.

This
is
further
supported
by
the
fact
that
the
Company’s
current
market
capitalisation
of approximately
$3.5
million
is
significantly
below
the
book
value
of
net
assets
of
$7.7 million
as
at
31
December
2012.

After
having
regard
to
all
of
the
above,
the
value
of
the
financial
benefit
to
be
provided
by
the Company
to
Tilbal
is
less
than
the
monetary
consideration
offered
by
Tilbal
to
the
Company,
and therefore
the
Proposed
Transaction
is
in
Wilson
Hanna’s
opinion
considered
to
be
‘fair’.

Page 22

5.3 Reasonableness

We
note
that
pursuant
to
RG
111,
the
Proposed
Transaction
is
reasonable
if
it
is
fair.
However,
in assessing
the
Proposed
Transaction,
we
have
also
considered
a
number
of
factors
including:

§ The
Opportunity
Cost;
§ Alternatives;
§ Berklee’s
Bargaining
Position;
§ Other
Advantages
and
Benefits;
§ Disadvantages
and
Risks;
and
§ Other
Matters.

Each
of
these
factors
is
now
considered
in
more
detail
below.

**5.3.1 Opportunity

Cost**

In
considering
the
opportunity
cost
to
the
Company
of
the
Proposed
Transaction,
we
have
had regard
to
a
number
of
factors
including:

§ In
recent
years,
the
Company
has
examined
a
broad
range
of
scenarios
including:
the
winding
up
of
the
Company
and
returning
capital
to
Shareholders;
merging
with,
or
selling
to,
a
competitor
with
a
view
to
assisting
in
the rationalisation
of
the
industry;
and
significantly
rationalising
the
Company.
§ Consistent
with
the
above,
the
Company
has
explored
a
number
of
potential
options
over the
past
few
years
to
realise
value
for
its
Shareholders
and
has
engaged
in
discussions with
a
number
of
industry
participants.

Despite
these
efforts,
it
is
the
Directors
view that
no
firm
offers
have
eventuated
that
could
be
put
to
Berklee
Shareholders,
other
than the
Proposed
Transaction
with
Tilbal.

§ Management
has
endeavoured
to
turn
the
Company
around
and
has
made
some progress
in
terms
of
restructuring
the
business
and
streamlining
its
working
capital levels.

However,
the
Company
has
still
been
unable
to
achieve
the
necessary
sales volume
to
deliver
a
cash
neutral
outcome.
Consequently,
the
Company’s
value
continues to
decline
month
on
month,
notwithstanding
it
currently
remains
solvent,
due
to
its positive
asset
base.

§ The
recent,
current
and
projected
trading
performance
of
the
Company,
coupled
with
its lack
of
scale,
relatively
low
market
capitalisation
and
lack
of
liquidity
in
its
Shares,
has led
the
Board
to
consider
whether
the
costs
of
public
ownership
outweigh
the
benefits.
§ In
the
financial
statements
for
the
6
months
ended
31
December
2012,
the
Auditor’s Review
Report
contained
an
Emphasis
of
Matter,
as
follows:
“ Without
qualifying
our
conclusion
expressed
above,
we
draw
attention
to
Note 1(b)
in
the
half-‐year
financial
report
which
indicates
that
the
consolidated
entity reported
an
operating
loss
after
tax
of
$1,862k
for
the
six
month
period
to
31 December
2012
(prior
half
year
-‐
loss
of
$933k)
and
cash
outflows
from
operations of
$668k
(prior
half
year
-‐
loss
of
$847k).
The
consolidated
entity
has
a
surplus
of current
assets
over
current
liabilities
of
$2,972k
(year
ended
30
June
2012
-‐ $3,900k)
and
a
positive
net
asset
position
of
$7,667k
(year
ended
30
June
2012
-‐ $9,529k).
The
directors
are
currently
in
negotiations
for
the
sale
of
various
parts of
the
business.
Depending
on
the
outcome
of
these
negotiations,
the
directors
will consider
other
options
such
as
the
orderly
sale
of
the
consolidated
entity’s
assets. Whilst
the
consolidated
entity
currently
has
positive
working
capital
and
equity, these
conditions,
along
with
other
matters
as
set
forth
in
Note
1(b),
indicate
the existence
of
a
material
uncertainty
which
may
cast
significant
doubt
about
the

Page 23

consolidated
entity’s
ability
to
continue
as
a
going
concern
and,
therefore,
the consolidated
entity
may
be
unable
to
realise
its
assets
and
discharge
its
liabilities in
the
normal
course
of
business .”

§ In
Note
1(b)
of
the
financial
statements
for
the
6
months
ended
31
December
2012,
the Directors
state
“ _in
the
event
that
the
Directors
are
unable
to
successfully
negotiate
the
sale of
the
business,
the
Directors
would
consider
the
option
of
the
orderly
sale
of
assets
of
the Consolidated
entity…
In
the
event
that
the
Consolidated
entity
is
unsuccessful
in
either
of these
courses
of
action,
there
is
material
uncertainty
whether
the
Consolidated
entity
could continue
as
a
going
concern.

If
the
Consolidated
entity
is
unable
to
continue
as
a
going concern
it
may
be
required
to
realise
its
assets
and
discharge
its
liabilities
other
than
in
the normal
course
of
business_ ”.

§ In
conclusion,
the
opportunity
cost
of
the
Company’s
Shareholders
accepting
the Proposed
Transaction
with
Tilbal
is
that
they
would
forgo
the
right
to
participate
in
any future
value
generated
should
the
Company
be
successful
in
turning
around
its
trading performance.

5.3.2 Alternatives

In
weighing
up
the
Proposed
Transaction,
the
Non-‐Related
Party
Shareholders
of
the
Company need
to
have
regard
to
the
alternatives
realistically
available
to
them.

Wilson
Hanna
considered
a
number
of
alternatives
available
to
the
Company,
including:

§ The
Company
retaining
full
ownership
of
the
business
and
assets
that
form
part
of
the Proposed
Transaction,
and
continuing
to
trade
as
currently
configured.
This
represents the
current
position
and
will
be
the
outcome
if
the
Proposed
Transaction
is
not approved.

Under
this
scenario,
it
is
the
view
of
management
that
the
Company
is
likely
to
continue experiencing
operating
losses
thereby
further
eroding
its
net
asset
position.

The Directors
also
commented
in
Note
1(b)
of
the
financial
statement
for
the
6
months
ended 31
December
2012,
that
“ in
the
event
that
the
Directors
are
unable
to
successfully negotiate
the
sale
of
the
business,
the
Directors
would
consider
the
option
of
the
orderly sale
of
assets
of
the
Consolidated
entity ”.

Further,
as
mentioned
in
5.3.1
above,
the
Directors
indicated
that
the
status
quo
is
not
an option
for
the
Company
as
they
are
of
the
view
that
“ _there
is
material
uncertainty whether
the
Consolidated
entity
could
continue
as
a
going
concern.

If
the
Consolidated entity
is
unable
to
continue
as
a
going
concern
it
may
be
required
to
realise
its
assets
and discharge
its
liabilities
other
than
in
the
normal
course
of
business_ ”.

§ The
Company
undertaking
its
own
orderly
realisation
of
assets.
This
scenario
presents potential
challenges
where
the
Company
plans
to
cease
trading,
especially
in
regard
to the
collection
of
debtors
and
orderly
realisation
of
inventory,
along
with
the
contingent liabilities
that
are
likely
to
be
triggered
(including
make
good
provisions,
potential contract
damages
and
warranty
related
issues).

This
alternative
has
some
similarities
with
the
Proposed
Transaction,
however
the Company
is
likely
to
be
exposed
to
operating
losses
for
a
longer
timeframe
if
it
continues to
trade.
In
addition,
where
the
Company
ceases
trading,
the
collection
of
debtors
and inventories
may
be
more
difficult
and
a
number
of
potential
material
contract
contingent liabilities
may
be
triggered.

§ The
Company
waiting
for
alternative
offers.

We
understand
that
the
Berklee
Board
has considered
a
number
of
proposals
for
the
Company
since
2012,
and
also
called
for expressions
of
interest
in
an
ASX
Announcement
on
1
February
2012.

Further,
we understand
that
the
Proposed
Transaction
is
the
only
formal
offer
received
to
date
that the
Directors
believe
is
capable
of
being
put
to
the
Company’s
shareholders.

This scenario
needs
to
be
weighed
up
against
the
current
operating
losses
being
experienced

Page 24

by
the
Company
and
the
outlook
for
the
industry.

In
Wilson
Hanna’s
opinion,
these
alternatives
are
either
unlikely
to
result
in
a
superior
outcome or
lack
certainty
when
compared
with
the
terms
and
conditions
of
the
Proposed
Transaction.

**5.3.3 Berklee’s

Bargaining
Position**

The
Proposed
Transaction
was
negotiated
on
an
arm’s
length
basis.
Wilson
Hanna
believes
that Berklee
and
Tilbal
had
an
equal
bargaining
position
in
negotiating
the
Proposed
Transaction:

§ Berklee
established
an
independent
Board
committee
consisting
of
Mr
Alan
Beckett
and Mr
Grantly
Anderson
to
consider
the
Proposed
Transaction.

Berklee’s
other
directors, Mr
Rick
van
Berkel
and
Mr
Brett
Jones[3] did
not
participate
in
the
negotiation
of
the Proposed
Transaction,
as
they
were
not
considered
to
be
independent;

§ The
cash
component
of
the
consideration
offered
under
the
Proposed
Transaction, whilst
immaterial,
exceeds
the
value
of
the
assets,
liabilities
and
obligations
to
be transferred
to
Tilbal,
as
set
out
in
section
5.2.2;
and
§ Notwithstanding
the
monthly
operating
losses
being
experienced
by
the
Company, Berklee
was
free
to
negotiate
with
Tilbal
by
virtue
of
its
existing
cash
reserves
and property
assets
owned
by
the
Company.

**5.3.4 Other

Advantages
and
Benefits**

The
Proposed
Transaction
has
other
benefits
for
the
Company
and
its
Shareholders,
including:

§ The
opportunity
to
significantly
reduce
the
operating
losses
being
generated
by
the Company.

The
Company
has
been
experiencing
losses
in
the
order
of
approximately $100,000
per
month.
Should
the
Proposed
Transaction
be
successful,
it
is
management’s view
that
this
should
lead
to
a
significant
reduction
in
these
operating
losses.

Having said
this,
certain
costs
would
still
continue
to
be
incurred,
including
(but
not
limited
to) ASX
Listing
fees,
audit,
tax
and
employee
expenses
associated
with
remaining
employees and
directors;

§ Potential
to
enhance
the
likely
realisation
returns
from
the
assets
remaining
with
the Company.

Should
the
Proposed
Transaction
be
successful,
the
business
operations transferred
to
Tilbal
are
likely
to
continue
as
a
going
concern
and
as
such
is
likely
to
lead to
higher
realisations
by
the
Company
in
respect
of
the
collectability
of
debtors
and inventory
as
well
as
a
likely
reduction
in
potential
contingent
liabilities
(including
make good
provisions,
contract
damages
and
potential
warranty
related
issues)
as
these obligations
will
be
transferred
and
assumed
by
Tilbal;

§ The
Proposed
Transaction
affords
further
protection
to
the
Company
as
Mr
Rick
van Berkel
is
required,
as
a
Conditions
Precedent,
to
execute
a
Guarantee
and
Indemnity thereby
reducing
potential
ongoing
exposures
back
to
the
Company
for
liabilities
and obligations
transferred
across
to
Tilbal;
§ The
lease
arrangement
with
Tilbal
in
respect
of
the
Wendouree
property,
may
enhance the
saleabilty
of
the
property
to
certain
buyers
given
that
the
property
comes
with
a ready
tenant,
albeit
at
a
below
market
rent;
and
§ The
cessation
of
the
trading
business
should
lead
to
a
more
orderly
realisation
of
assets, thereby
enabling
a
capital
return
to
Shareholders
in
due
course.

3 Mr
Brett
Jones
was
not
a
member
of
the
independent
Board
committee
as
he
had
lodged
his
own
separate competing
proposal
to
acquire
parts
of
the
Company.
It
is
worth
noting
that
Mr
Brett
Jones
is
not
a
party
to the
Proposed
Transaction,
and
has
been
nominated
as
one
of
the
Excluded
Employees
by
Tilbal.

Page 25

**5.3.5 Disadvantages

and
Risks**

There
are
a
number
of
disadvantages
associated
with
the
Proposed
Transaction,
including:

§ It
does
not
provide
the
Company
Shareholders
with
a
clean
exit,
as
the
Company
is
still required
to
conduct
an
orderly
realisation
of
the
remaining
assets,
which
may
take
some time;
§ The
Company
retains
the
risk
on
inventory
until
it
is
used
or
sold.

Furthermore,
the Directors
have
advised
that
any
inventory
that
is
still
outstanding
after
12
months
will be
reviewed
with
a
view
to
disposing
of
it.

§ The
Proposed
Transaction
provides
for
the
transfer
of
certain
liabilities
and
contractual obligations.

This
may
necessitate
the
consent
or
approval
being
obtained
from
third parties,
which
may
or
may
not
be
forthcoming;

§ The
peppercorn
rent
in
respect
of
the
Wendouree
property
could
remain
at
$1.00
for
an extended
period
of
time,
should
the
property
prove
slow
to
sell;
and
§ The
lease
arrangement
with
Tilbal
in
respect
of
the
Wendouree
property,
at
a
below market
rental,
may
detract
from
the
saleabilty
of
the
property
to
certain
buyers
should those
buyers
be
seeking
immediate
occupancy.

**5.3.6 Other

Factors**

The
Company
has
estimated
that
the
transaction
costs
associated
with
the
Proposed
Transaction will
be
approximately
$0.1
million,
the
vast
majority
of
which
will
have
been
incurred
prior
to
the time
that
the
Company’s
Non-‐Related
Party
Shareholders
vote
on
the
Proposed
Transaction. These
costs
are
one
off
in
nature
and
not
material
in
the
overall
context,
representing approximately
2.8%
of
the
Company’s
current
market
capitalisation.
While
the
transaction
costs are
significant
in
the
context
of
the
consideration
being
offered
under
the
Proposed
Transaction, this
is
not
unusual
given
the
relatively
small
value
of
the
Proposed
Transaction.

This
view
is
based
on
the Company’s
current
operating
performance
and
outlook
for
the
industry.

After
having
regard
to
all
of
the
above,
the
Proposed
Transaction
is
in
Wilson
Hanna’s
opinion considered
to
be
‘reasonable’.

**5.4 Shareholder

Decision**

The
decision
whether
to
vote
for
or
against
the
Proposed
Transaction
is
a
matter
for
individual shareholders
based
on
each
shareholder’s
view
as
to
value,
their
expectations
about
future market
conditions
and
their
particular
circumstances
including
risk
profile,
liquidity
preference, investment
strategy,
portfolio
structure
and
tax
position.

In
particular,
taxation
consequences may
vary
from
shareholder
to
shareholder.
If
in
any
doubt
as
to
the
action
they
should
take
in relation
to
the
Proposed
Transaction,
shareholders
should
consult
their
own
professional adviser.

Page 26

**6 Sources

of
Information,
Qualifications
and
Declarations**

**6.1 Sources

of
Information**

In
preparing
this
report,
Wilson
Hanna
has
relied
upon,
without
independent
verification, various
sources
of
information,
including:

§ the
Explanatory
Memorandum
and
notice
of
meeting;
§ Audited
Financial
Statements
for
the
five
years
ended
30
June
2012
and
the
6
months ended
31
December
2012;
§ Independent
valuations
of
property,
plant
and
equipment;
§ ASX
announcements;
§ IBISWorld
Industry
Report
C2819
“Automotive
Parts
and
Accessories
Manufacturing
in Australia”;
§ Computershare
Registry
and
share
price
information;
§ Australian
Bureau
of
Statistics,
www.abs.gov.au;
§ Federal
Chamber
of
Automotive
Industries,
www.fcai.com.au;
§ Federation
of
Automotive
Products
Manufacturers,
www.fapm.com.au;
§ Discussions
with
management
and
site
visits;
§ Berklee
website;
§ Correspondence
in
relation
to
potential
alternative
monetisation
options;
§ Unaudited
management
accounts
for
Berklee
for
YTD
FY13;
§ a
budget
for
Berklee
for
the
year
ending
30
June
2013
prepared
by
Berklee
management;
§ material
contracts;
§ other
confidential
documents,
board
papers,
minutes,
strategy
papers,
presentations
and working
papers;
and
§ other
publicly
available
information.

Wilson
Hanna
has
also
held
discussions
with,
and
obtained
information
from,
the
Company’s senior
management,
directors
and
consultants.

6.2 Qualifications

Wilson
Hanna
Pty
Ltd
holds
Australian
Financial
Services
Licence
number
426848
under
the Corporations
Act,
2001.

The
persons
responsible
for
preparing
this
report
on
behalf
of
Wilson
Hanna
are
John
Patton
BEc ACA
F
Fin
and
Martin
Toll
B
Bus
ACA.

Each
has
a
significant
number
of
years
of
experience
in relevant
corporate
advisory
matters.

Each
of
the
above
persons
is
a
representative
of
Wilson Hanna
pursuant
to
its
Australian
Financial
Services
Licence
under
Part
7.6
of
the
Corporations Act.

6.3 Disclaimers

It
is
not
intended
that
this
report
should
be
used
or
relied
upon
for
any
purpose
other
than
as
an expression
of
Wilson
Hanna’s
opinion
as
to
whether
the
Proposed
Transaction
is
fair
and reasonable.
Wilson
Hanna
expressly
disclaims
any
liability
to
any
Berklee
Shareholder
who
relies or
purports
to
rely
on
the
report
for
any
other
purpose
and
to
any
other
party
who
relies
or purports
to
rely
on
the
report
for
any
purpose
whatsoever.

Page 27

Wilson
Hanna
has
prepared
this
report
with
care
and
diligence
and
the
statements
and
opinions given
by
Wilson
Hanna
in
this
report
are
given
in
good
faith
and
in
the
belief
on
reasonable grounds
that
such
statements
and
opinions
are
correct
and
not
misleading.

Neither
Wilson Hanna,
nor
any
of
its
officers
or
employees,
accepts
any
responsibility
for
errors
or
omissions however
arising
in
the
preparation
of
this
report,
provided
that
this
shall
not
absolve
Wilson Hanna
from
liability
arising
from
an
opinion
expressed
recklessly
or
in
bad
faith.

Wilson
Hanna
has
had
no
involvement
in
the
preparation
of
the
Explanatory
Memorandum issued
by
the
Company
and
has
not
verified
or
approved
any
of
the
contents
of
the
Explanatory Memorandum.

Wilson
Hanna
does
not
accept
any
responsibility
for
the
contents
of
the Explanatory
Memorandum
(except
for
this
report).

6.4 Independence

Prior
to
accepting
this
engagement,
Wilson
Hanna
considered
its
independence
with
respect
to the
Proposed
Transaction
with
reference
to
the
ASIC
Regulatory
Guide
112 Independence
of Expert’s
Reports (“RG
112”).

Wilson
Hanna
does
not
have
at
the
date
of
this
report,
and
has
not
had
within
the
previous
two years,
any
business
or
professional
relationship
with
the
Company
or
Tilbal
or
any
financial
or other
interest
that
could
reasonably
be
regarded
as
capable
of
affecting
its
ability
to
provide
and unbiased
opinion
in
relation
to
the
Proposed
Transaction.

Wilson
Hanna
advises
that
no
Wilson
Hanna
executives
hold
any
shares
in
Berklee
or
Tilbal.

Wilson
Hanna
commenced
analysis
of
the
Company
in
October
2012,
following
receipt
of
the initial
indicative
takeover
offer
by
interests
associated
with
Mr
Rick
van
Berkel.

The
Proposed Transaction
is
materially
different
from
the
initial
offer.

At
no
stage
has
Wilson
Hanna participated
in
setting
the
terms
of,
or
negotiations
leading
to,
the
Proposed
Transaction.

Wilson
Hanna
had
no
part
in
the
formulation
of
the
Proposed
Transaction.
It’s
only
role
has
been the
preparation
of
this
report.

Wilson
Hanna
will
receive
an
estimated
fee
of
$47,500
for
the
preparation
of
this
report.
This
fee is
not
contingent
on
the
outcome
of
the
Proposed
Transaction.

Wilson
Hanna’s
out
of
pocket expenses
in
relation
to
the
preparation
of
this
report
will
also
be
reimbursed.
Wilson
Hanna
will receive
no
other
benefit
for
the
preparation
of
this
report.

**6.5 Limitations

and
Reliance
on
Information**

This
report
and
opinion
is
based
on
economic,
market
and
other
conditions
prevailing
at
the
date of
this
report.
Such
conditions
can
change
significantly
over
relatively
short
periods
of
time.

Wilson
Hanna
has
prepared
this
report
on
the
basis
of
financial
and
other
information
provided by
the
Company
and
publicly
available
information.

Wilson
Hanna
has
considered
and
relied upon
this
information.
Wilson
Hanna
has
no
reason
to
believe
that
any
information
supplied
by the
Company
was
false
or
that
any
material
information
has
been
withheld.

Wilson
Hanna
has evaluated
the
information
provided
by
the
Company
and
other
experts
through
inquiry,
analysis and
review,
and
nothing
has
come
to
our
attention
to
indicate
the
information
provided
was materially
misstated
or
would
not
afford
reasonable
grounds
upon
which
to
base
our
report. Nothing
in
this
report
should
be
taken
to
imply
that
Wilson
Hanna
has
audited
any
information supplied
to
us,
or
has
in
any
way
carried
out
an
audit
on
the
books
of
accounts
or
other
records
of the
Company.

This
report
has
been
prepared
to
assist
the
independent
directors
of
the
Company
in
advising
the Non-‐Related
Party
Shareholders
in
relation
to
the
Proposed
Transaction.
This
report
should
not be
used
for
any
other
purpose.
In
particular,
it
is
not
intended
that
this
report
should
be
used
for any
purpose
other
than
as
an
expression
of
Wilson
Hanna’s
opinion
as
to
whether
the
Proposed

Page 28

Transaction
is
fair
and
reasonable
to
the
Non-‐Related
Party
Shareholders.

The
Company
has
agreed
that
it
will
indemnify
Wilson
Hanna
and
any
director,
officer,
employee, consultant
or
adviser
of
Wilson
Hanna,
who
may
be
involved
in
or
in
any
way
associated
with
the performance
of
services
contemplated
by
our
engagement
letter,
against
any
and
all
losses, claims,
damages
and
liabilities
arising
out
of
or
related
to
the
performance
of
those
services, except
gross
negligence
and
wilful
misconduct,
and
which
arise
from
reliance
on
information provided
by
the
Company,
which
the
Company
knew
or
should
have
known
to
be
false
and/or reliance
on
information,
which
was
material
information
the
Company
had
in
its
possession
and which
the
Company
knew
or
should
have
known
to
be
material
and
which
the
Company
did
not provide
to
Wilson
Hanna.

The
Company
will
reimburse
any
indemnified
party
for
all
expenses (including
without
limitation,
legal
expenses)
on
a
full
indemnity
basis
as
they
are
incurred.

6.6 Consents

Wilson
Hanna
consents
to
the
issuing
of
this
report
in
the
form
and
context
in
which
it
is
to
be included
in
the
Explanatory
Memorandum
to
be
sent
to
Shareholders
of
the
Company.
Neither the
whole
nor
any
part
of
this
report
nor
any
reference
thereto
may
be
included
in
any
other document,
resolution,
letter
or
statement
without
the
prior
written
consent
of
Wilson
Hanna
as to
the
form
and
context
in
which
it
appears.

6.7 Other

The
accompanying
letter
dated
17
May
2013
and
the
Appendices
form
part
of
this
report. Wilson
Hanna
has
prepared
a
Financial
Services
Guide
as
required
by
the
Corporations
Act,
2001. The
Financial
Services
Guide
is
set
out
at
the
beginning
of
this
report.

WILSON
HANNA
PTY
LTD 17
May
2013

Page 29

**7 Appendix

B
–
Glossary**

==> picture [434 x 446] intentionally omitted <==

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

|||
|---|---|
|$|Australian
Dollars|
|ACIS|Automotive
Competitiveness
and
Investment
Scheme|
|ASIC|Australian
Securities
and
Investments
Commission|
|ASX|Australian
Securities
Exchange|
|ATS|Automotive
Transformation
Scheme|
|Berklee|Berklee
Limited|
|Berklee
Shareholders|Shareholders
of
Berklee|
|Company|Berklee
Limited|
|FAPM|Federation
of
Automotive
Products
Manufacturers|
|FSG|Financial
Services
Guide|
|FY|Financial
Year|
|Non-‐Related
Shareholders|The
shareholders
of
Berklee
not
related
to
Mr
Rick
van
Berkel|
|pursuant
to
Section
228
of
the
Corporations
Act|
|OEM|Original
Equipment
Manufacturer|
|PEP|Pacific
Equity
Partners|
|Peppercorn|A
peppercorn
in
legal
parlance
is
a
metaphor
for
a
very
small|
|payment,
a
nominal
consideration,
used
to
satisfy
the
requirements|
|for
the
creation
of
a
legal
contract.|[4]|
|RG
76|ASIC
Regulatory
Guide
76
“Related
party
transactions”|
|RG
111|ASIC
Regulatory
Guide
111
“Content
of
expert
reports”|
|RG
112|ASIC
Regulatory
Guide
112
“Independence
of
experts”|
|Spotless|Spotless
Group
Limited|
|Tilbal|Tilbal
Pty
Ltd
and
other
associated
individuals
and
entities
that
are|
|existing
shareholders
of
Berklee|
|VWAP|Volume
Weighted
Average
Price|
|Wilson
Hanna|Wilson
Hanna
Pty
Ltd|
|YTD|Year
to
date|

----- End of picture text -----

4
Wikipedia
definition

AI assistant

WISR LIMITED — Proxy Solicitation & Information Statement 2013

66093_rns_2013-05-19_4ec7dbbe-580c-43f0-8678-7fd547c8c610.pdf

Berklee Limited (ACN 004 661 205)

Explanatory Statement for Shareholders

1. Resolutions - Approval of Sale of Assets by Company

1.1 Background

1.2 Sale of Assets Agreement

Tilbal's obligations under the Sale Agreement

(a) Manufacturing and Administration Assets

(b) Inventory

(c)

Intellectual Property

(d) Supply and Distribution of all Products Manufactured by Berklee

(e)

Staff Liabilities.

(f)

Building Leases

(g) Consideration & Liability

1.3 Lease of Premises

1.4 Value of the Financial Benefit

1.5 Listing Rules and Corporations Act

Listing Rules 10.1 and 11.2

Section 208 Corporations Act

2. Information Requirements for Chapter 2E of the Corporations Act

2.1 Reasons

Financial Performance and Market

Company Actions

Continued Decline in Trading Results

2.2 Advantages in the Opinion of the Board of Voting in Favour of Resolution 1

2.3 Disadvantages in the Opinion of the Board of Voting in Favour of Resolution 1

2.4 The Nature of the Financial Benefit (Sale Agreement)

2.5 Interest of Directors (Sale Agreement)

2.6 Independent Expert's Report

2.7 Other material information

2.8 Consideration of Alternative Proposals and Director's recommendation

3. Proposed Sale of Premises

3.1 Proposal

3.2 Tax Treatment

3.3 Interest of Directors (Sale of Premises)

3.4 Directors Recommendations

3.5 Indicative timetable for distribution

4. Glossary

In this Explanatory Statement, unless the context otherwise requires:

Annexure A - Pro Forma Balance Sheet

Berklee Limited

Proforma balance sheet

Corporate

**Independent

WILSON HANNA PTY LTD

Corporate

**Independent

Introduction

**Proposed

**Purpose

**Summary

_**Fairness

_**Reasonableness

Advantages

§ **Improved

§ **Prospect

Disadvantages

§ **Not

§ **Inventory

§ **Opportunity

**Other

§ **Alternative

§ **One-­‐off

§ **Berklee

**Overall

**Other

Yours

**BERKLEE

**Financial

**1.

**2.

**3.

**4.

**5.

**6.

WISR LIMITED Proxy Solicitation & Information Statement 2013

§ **One-‐off