empire beer group limited - asx · empire beer group limited acn 119 327 169 notice of general...

Empire Beer Group Limited ACN 119 327 169

Notice of General Meeting and Explanatory Statement

For the General Meeting to be held on 15 October 2008 at 10:00am (WST) at

Freemasons Building, 181 Roberts Road, Subiaco, Western Australia

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Time & Place of Meeting and How To Vote

Venue The General Meeting of Shareholders will be held on 15 October 2008 at 10:00am (WST) at: Freemasons Building 181 Roberts Road Subiaco, Western Australia

How to Vote You may vote by attending the meeting in person, by proxy or authorised representative. Voting in Person To vote in person, attend the meeting on the date and at the place set out above. The meeting will commence at 10:00am (WST). Voting by Proxy To vote by proxy, please complete and sign the proxy form enclosed: • send by post the proxy form or deliver to Empire Beer Group Limited, 945 Wellington Street, West Perth,

Western Australia, 6005; or • deliver the proxy form to Empire Beer Group Limited, 945 Wellington Street, West Perth, Western Australia,

6005; or • send the proxy form by facsimile to the Company on facsimile number INT + 61 8 9322 7602, so that it is received not later than 5:00pm (WST) on 13 October 2008. Proxy forms received later than this time will be invalid.

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Notice of General Meeting

Notice is given that the General Meeting of Shareholders will be held at the Freemasons Building, 181 Roberts Road, Subiaco, Western Australia at 10:00am (WST) on 15 October 2008.

Agenda To consider, and if thought fit to pass the following resolution as an ordinary resolution.

Resolution 1 – Disposal of main undertaking and substantial assets to substantial shareholder of Company

“That, for the purposes of Listing Rules 10.1 and 11.2 and for all other purposes, Shareholders approve the disposal of the Company’s main undertaking, namely the two leasehold businesses of The Royal on the Waterfront in East Perth and the Colonial Brewing Co, Margaret River, and all related business, goodwill, assets, brands and intellectual property, for $4.45 million plus stock at cost to Colonial Leisure Group Pty Ltd, acting as trustee for the Colonial and Empire Brewing Trust, the sole shareholder of Colonial Leisure Group Pty Ltd being Finico Pty Ltd which for the purposes of ASX Listing Rule 10.1.3 is a substantial holder in the Company.”

Voting Exclusion: The Company will disregard any votes cast on Resolution 1 by a party to the transaction and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed, and an associate of those persons. However, the Company need not disregard a vote if: (a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or (b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction

on the proxy form to vote as the proxy decides. Dated this 10th day of September 2008 By order of the Board

___________________ PHIL WARREN Company Secretary

Notes: (1) A shareholder of the Company entitled to attend and vote is entitled to appoint not more than two proxies. Where more

than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the shareholder’s voting rights. If the shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half of the votes. A proxy need not be a shareholder of the Company.

(2) For the purposes of the Corporations Regulations, the Directors have set a snapshot date to determine the identity of

those entitled to attend and vote at the Meeting. The snapshot date is 5.00pm (WST) on 13 October 2008. Accordingly, transactions registered after this time will be disregarded in determining entitlements to attend and vote at the meeting.

Enquiries Shareholders are invited to contact the Company Secretary, Mr Phil Warren on (08) 9322 7600 if they have any queries in respect of the matters set out in these documents.

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Explanatory Statement

1. General Information

This Explanatory Statement has been prepared for the Shareholders in connection with the General Meeting of the Company to be held on 15 October 2008. The purpose of this Explanatory Statement is to provide Shareholders with information that the Board believes to be material to Shareholders in deciding whether or not to approve the above resolution detailed in the Notice. This Explanatory Statement is an important document and should be read carefully in full by all Shareholders. If you have any questions regarding the matters set out in this Explanatory Statement or the preceding Notice, please contact the Company, your stockbroker or other professional adviser.

2. Resolution 1 – Disposal of Main Undertaking and Substantial Assets to Substantial Shareholder of Company

Background

On 11 August 2008 the Company announced that it had entered into the Sale Agreement to dispose of its two leasehold businesses, The Royal on the Waterfront in East Perth and the Colonial Brewing Co, Margaret River, and all related business, assets, brands and intellectual property (collectively the, Hotel Business) to Colonial Leisure Group Pty Ltd acting as trustee for the Colonial and Empire Brewing Trust, the sole shareholder of Colonial Leisure Group Pty Ltd being Finico Pty Ltd, which for the purposes of ASX Listing Rule 10.1.3 is a substantial holder in the Company (Purchaser). Settlement of the Sale Agreement is conditional, amongst other things, upon Shareholders’ approval of the sale of the Hotel Business in accordance with the Sale Agreement. The key terms of the Sale Agreement are set out below. Under the Sale Agreement: • Colonial Brewing Company, a wholly owned subsidiary of the Company, agreed to sell its Royal Hotel

business to the Purchaser;

• Colonial Brewing Company (North Fremantle), a wholly owned subsidiary of the Company, agreed to sell its Colonial Hotel Business to the Purchaser (the two subsidiaries together being the Sellers); and

• the Company agreed to transfer its Australian trademark ‘Colonial Brewing Co’ to the Purchaser. The consideration for the sale is $4,450,000 plus stock at cost. Settlement of the Sale Agreement is conditional on: • approval of the licensing authority under the Liquor Control Act to transfer the liquor licences for the

Hotel Business to the Purchaser; • the assignment of the leases for the Hotel Business to the Purchaser and the consent of the Landlords

to the transfer of the liquor licences to the Purchaser; • the Purchaser being satisfied, in its absolute discretion, with its due diligence enquiries in relation to the

Hotel Business; and • the Company obtaining Shareholder approval for the sale of the Hotel Business in accordance with the

Sale Agreement.

The conditions must be either satisfied or waived within 120 days of the date of the Sale Agreement. If not satisfied or waived by that date, or a later agreed date, either the Purchaser or the Sellers may terminate the Sale Agreement by written notice, save that the Sale Agreement will automatically terminate if the condition requiring Shareholder approval is not satisfied or waived by the due date.

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A sum of $250,000 has been paid by way of deposit, with the remainder of the purchase price due at settlement, save for the stock payment which must be paid 15 Business Days after settlement. Settlement must occur simultaneously with the transfer of the liquor licences to the Purchaser. The Company and the Sellers have agreed to a 2 year non-compete clause within 6 kilometres of the Hotel Business, subject to certain exceptions.

2.2 Listing Rule Requirements

As the Purchaser of the Hotel Business is a substantial holder of the Company for the purposes of ASX Listing Rule 10.1.3 (by way of holding greater than 10% of the voting securities in the Company), Shareholder approval is required under ASX Listing Rule 10.1.

As the Hotel Business constitutes the Company’s main undertaking for the purposes of the ASX Listing Rules, shareholder approval is required for the disposal under ASX Listing Rule 11.2. Accordingly, the Company is seeking Shareholder approval under Resolution 1 for the sale of the Hotel Business for the purposes of ASX Listing Rules 10.1 and 11.2. ASX Listing Rule 10.10 provides that an independent expert’s report on the transaction must be provided to Shareholders. Refer to Section 3 of this Explanatory Statement for further details.

2.3 Indicative Timetable

Subject to the ASX Listing Rules and Corporations Act requirements, the Company anticipates completion of the Sale Agreement in accordance with the following timetable (which may be subject to change):

Event Date Announcement of Transaction 11 August 2008 Despatch of Notice of Meeting 12 September 2008 General Meeting to approve Transaction 15 October 2008 Satisfaction/waiver of all conditions in Sale Agreement 20 October 2008 Settlement of Transaction 22 October 2008

2.4 Directors’ interest in the Sale Agreement No Director has any interest in the Purchaser and will not receive any payment or benefit of any kind under the terms of the Sale Agreement, other than as a Shareholder of the Company.

2.5 Use of funds

On completion and settlement of the Sale Agreement, the Board advise that it is likely that the net cash proceeds will be held as cash or cash equivalents. Normal course adjustments will be made in accordance with the Sale Agreement at settlement, however the Board estimate that following settlement and repayment of Company debt and liabilities associated with the Hotel Business, the net cash proceeds from the transaction will be approximately $2.6 million.

2.6 Future of the Company Upon settlement of the Transaction, ASX will afford the Company 6 months to establish it is in compliance with ASX Listing Rule 12.3, and that not more than 50% of the Company’s total assets are in cash or a form readily convertible to cash. Upon settlement of the Transaction, the Board will pursue business opportunities for the Company which have the potential to create Shareholder value which may or may not be within the hospitality industry. Any new business which Empire acquires or enters into will likely involve a transaction which affects its capital structure. Any such transaction will be conducted in compliance with ASX Listing Rules including as necessary re-compliance with Chapters 1 and 2.

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2.7 Pro-Forma Balance Sheet

Set out in Schedule 1 is a balance sheet of the Company as at 30 June 2008, together with a pro-forma balance sheet assuming completion of the Transaction as at 30 June 2008.

2.8 Rationale for Sale of Hotel Business

Background Over the last 12 - 18 months, Empire has pursued a distribution strategy for its brewing products consisting of:

Development of new “Colonial Brewing” micro brewery venues throughout Australia.

Acquisition of a portfolio of profitable stand alone food and beverage focused hotels suitable for the sale of Colonial Brewing Co Craft Beer brands.

This strategy was progressed by the original acquisition of Colonial Brewing Company (Colonial) in Margaret River in December 2006, and the subsequent acquisition of the leasehold to the Royal Bar and Brasserie (Royal) in East Perth in July 2007. Since the acquisition of the Royal, Empire has considered various acquisition proposals for stand-alone and chained venues, both in WA and elsewhere in Australia, but has been unable to conclude a deal which represented value for its Shareholders. The recent and continuing uncertain climate in capital markets has made financing deals difficult, and increasingly costly. As a result, Empire’s strategy of creating economies of scale through establishing a multi-venue hospitality operation has not been achieved.

Venue Performance The performance of the venues that Empire currently controls and operates has been disappointing. In particular, whilst revenues at the Royal have been satisfactory these have not translated to bottom-line earnings in any meaningful amount, despite much attention to costs from management. The high labour cost and high staff turnover environment in WA has made operating venues increasingly difficult for management. This has impacted adversely on Empire’s gross operating margins. In addition, the hospitality market has continued to soften with the outlook for general retail conditions deteriorating.

Both the Royal and the Colonial have generated losses (inclusive of depreciation and impairment charges) for the most recent fiscal year of $833,006 and $928,929, respectively. Colonial generated a trading loss of $67,552 in its most recent fiscal year. The continuing negative operating cashflows of Colonial are not sustainable and whilst the operating cashflows of the Royal are positive it is not significant enough to sustain operations and meet group working capital and compliance costs of an ASX listed entity. In response to this pressure, in May 2008 Empire successfully raised $575,000 through the issue of convertible notes in order to maintain adequate levels of working capital. These convertible notes carry a coupon of 10%, and may be converted to shares and options in the Company in accordance with the convertible note documentation. Empire’s external debt facility is fully drawn. If the Transaction were not to be completed, Empire would likely continue its strategic review of is assets while continuing to operate the Royal and Colonial. Given the continued losses of the group, the Board cannot rule out that additional capital raising activities would have to be undertaken in order to adequately provide for the group’s working capital. Continuing uncertainty in capital markets conditions make raising capital sub-optimal. F

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Sale Agreement The Board has previously received approaches from parties interested in acquiring the Royal. These approaches, did not, in the Board’s opinion, represent value for Shareholders and the Board therefore chose not to take them forward. Whereas the Colonial produces Empire’s beer product, the Royal represents Empire’s principal distribution avenue for that product. Divesting of the Royal while retaining the Colonial would severely restrict Empire’s ability and prospects to generate revenue through its beer brand. The offer from the Purchaser is effectively a package deal to acquire two separate leasehold venues, and the Board considers this an attractive aspect of the offer. It allows the Company in a single transaction to completely re-focus its efforts in providing value for Shareholders. The Board believes that the return on investment for shareholders in the Colonial and the Royal does not justify the continued holding of these interests by the Company. The Board view the offer proposal from the Purchaser as fair and reasonable.

Upon completion of the Transaction, payment of transaction costs and repayment of debt from sale proceeds, the Company will not have any further liabilities in respect of the Royal and Colonial.

2.9 Directors’ Recommendations

The Directors have a relevant interest in the securities of the Company as set out in the following table:

Director Shares Options

Mel Ashton 544,239 14,286 listed options

500,000 unlisted options

Ian Macliver 2,776,902 1,556,179 listed options

250,000 unlisted options

Kate Lamont 241,935 Nil

Each of the Directors intend to vote their Shares in favour of the Resolution. Based on the information available, all of the Directors consider that the proposed sale of the Hotel Business is in the best interests of the Company and recommend that the Shareholders vote in favour of the Resolution. The Directors have approved the proposal to put the Resolution to Shareholders.

3. Independent Expert’s Report 3.1 ASX Listing Rule 10.10.2

Because the sole shareholder of the entity purchasing the Hotel Business is a substantial holder of Empire, ASX Listing Rule 10.10.2 provides that a report on the transaction by an independent expert must be provided to Shareholders (Report). The Report must state whether the transaction is fair and reasonable to Shareholders whose votes will not be excluded in accordance with the Notice of Meeting.

3.2 Independent Expert

The Board has appointed RSM Bird Cameron Corporate Pty Ltd (RSM Bird Cameron) to produce the Report. The Report is enclosed with this Notice of Meeting. RSM Bird Cameron has concluded that the sale of the Hotel Business in accordance with the Sale Agreement is fair and reasonable to the independent Shareholders. The Board urge all Shareholders to carefully read and consider the Report in reaching a voting decision.

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Glossary

In this Explanatory Statement, the following terms have the following unless the context otherwise requires:

ASIC means Australian Securities Investment Commission.

ASX means ASX Limited ABN 98 008 624 691.

ASX Listing Rules or Listing Rules

means the listing rules of ASX.

Board

means the board of Directors of the Company.

Chairman means the Chairman of the Company.

Colonial Brewing Company means Colonial Brewing Company Pty Ltd (ACN 103 351 168).

Colonial Brewing Company (North Fremantle)

means Colonial Brewing Company (North Fremantle) Pty Ltd (ACN 121 430 055).

Company means Empire Beer Group Limited ACN 119 327 169.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

Notice of Meeting means this notice of meeting including the Explanatory Statement.

Purchaser means the Colonial Leisure Group Pty Ltd (ACN 132 266061) as trustee for the Colonial & Empire Brewing Trust.

Sale Agreement means the Agreement for Purchase of Business dated 11 August 2008 between the Company, Colonial Brewing Company Pty Ltd (ACN 103 351 168), Colonial Brewing Company (North Fremantle) Pty Ltd (ACN 121 430 055) and Colonial Leisure Group (ACN 132 266061) as trustee for the Colonial & Empire Brewing Trust.

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a shareholder of the Company.

Transaction means the sale and purchase transaction contemplated by the Sale Agreement.

WST means Western Standard Time as observed in Perth, Western Australia.

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Schedule 1 – Pro forma balance sheet

Proforma Consolidated Balance Sheet As at 30 June 2008

Consolidated Proforma Proforma

2008

$ Adjustments

$ Balance Sheet

$

ASSETS Current Assets Cash and cash equivalents 306,501 2,347,949 2,654,450 Trade and other receivables 350,392 (350,392) - Inventory 154,858 (154,858) - Total Current Assets 811,751 1,842,699 2,654,450 Non- Current Assets Property, plant and equipment 1,980,220 (1,979,059) 1,161 Intangible assets 2,470,941 (2,470,941) - Total Non- current Assets 4,451,161 (4,450,000) 1,161 TOTAL ASSETS 5,262,912 (2,607,301) 2,655,611 LIABILITIES Current Liabilities Trade and other payables 996,347 (996,347) - Borrowings 1,488,454 (1,488,454) - Total Current Liabilities 2,484,801 (2,484,801) - NET ASSETS 2,778,111 (122,500) 2,655,611 EQUITY Contributed equity 12,261,878 - 12,261,878 Accumulated losses (10,337,878) (122,500) (10,460,378) Reserves 854,111 - 854,111 TOTAL EQUITY 2,778,111 (122,500) 2,655,611

Note: The above Balance Sheet assumes the Transaction settled as at 30 June 2008 and does not take into account movements in assets and liabilities since that date, except for estimated transaction costs in relation to the Transaction.

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8 St Georges Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au

IER Empire Beer Final.doc Liability limited by a scheme approved under Professional Standards Legislation

RSM Bird Cameron Corporate Pty Ltd ABN 82 050 508 024 Licensed Investment Adviser No 255847

Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra

RSM Bird Cameron Corporate Pty Ltd is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms.

E-mail: [email protected] Direct Telephone: 08 9261 9447 Direct Facsimile: 08 9261 9120 AJG:SM Empire Beer

9 September 2008 The Directors Empire Beer Group Limited 945 Wellington Street WEST PERTH WA 6005 Dear Sirs

Independent Experts Report and Financial Services Guide

1. Introduction

1.1. This report has been prepared to accompany the Notice of General Meeting and Explanatory Memorandum for Shareholders for the Meeting of Empire Beer Group Limited (“Empire Beer” or “the Company”) to be held on 14 October 2008 at which Shareholder approval will be sought for Resolution 1 for the following transaction (“Proposed Transaction”):-

Resolution 1 – Disposal of Main Undertaking and Substantial Assets to Substantial Shareholder of Company.

“That, for the purposes of Listing Rules 10.1 and 11.2 and for all other purposes, Shareholders approve the disposal of the Company’s main undertaking, namely the two leasehold businesses of The Royal on the Waterfront in East Perth and the Colonial Brewing Co, Margaret River, and all related business, goodwill, assets, brands and intellectual property, for $4.45 million plus stock at cost to Colonial Leisure Group Pty Ltd, acting as trustee for the Colonial and Empire Brewing Trust, the sole shareholder of Colonial Leisure Group Pty Ltd being Finico Pty Ltd which for the purposes of ASX Listing Rule 10.1.3 is a substantial holder in the Company”.

1.2. The Directors have requested that RSM Bird Cameron Corporate Pty Ltd, being independent and qualified for the purpose, express an opinion as to whether the Proposed Transaction is fair and reasonable to Shareholders not associated with the Proposed Transaction (“the Non-Associated Shareholders”). The Non-Associated Shareholders comprise all holders of ordinary shares in the Company other than Finico Pty Ltd (“Finico”) and the associates of Finico. F

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2. Summary and Conclusion

2.1. In our opinion and for the reasons set out in Sections 8 and 9 of this Report, Resolution 1 in respect of the proposed disposal of the leasehold businesses of the Royal on the Waterfront in East Perth (“the Royal”) and the Colonial Brewing Co. Margaret River (“Colonial Brewing”) to Colonial Leisure Group Pty Ltd (“Colonial Leisure”) is fair and reasonable to the Non-Associated Shareholders of Empire Beer.

2.2. This opinion is based on our view that the advantages outweigh any disadvantages and consequently the Non-Associated Shareholders will be better off if the Proposed Transaction proceeds than if it does not.

2.3. The principal factors affecting our opinion are summarised below and are discussed in more detail in Sections 8 and 9 together with other factors we have considered:

• The consideration to be received under the Proposed Transaction exceeds the assessed aggregate value of the assets and accordingly the Proposed Transaction is fair;

• The Proposed Transaction will significantly increase the net tangible asset backing per share. Had the Proposed Transaction completed on 30 June 2008 the net tangible asset backing per share would have increased from 0.72 cents per share to 6.54 cents per share.

• Upon completion of the Proposed Transaction the Board will be in a position to pursue other business opportunities for the Empire Beer Group with the potential to increase shareholder value.

• The Proposed Transaction is the only offer which includes both The Royal and Colonial Brewing – no other formal offer has been received for Colonial Brewing. If only the Royal were to be disposed of the Empire Beer Group would retain a loss making business and potentially have lost a major distribution channel for Colonial Brewing being the Royal.

• If the Proposed Transaction does not proceed, the preferred alternative strategy is for Empire Beer to continue to operate the Royal and Colonial businesses with a view to finding another purchaser for either or both businesses. Given the continued operating losses of Empire Beer and its subsidiaries (“The Empire Beer Group”) additional capital would in all likelihood be required to be raised to fund the Empire Beer Group’s working capital until assets were realised. At a minimum this would result in a potential dilution of existing shareholders interests in the Empire Beer Group. In the circumstances that the Proposed Transaction does not proceed, and in the event that sufficient additional capital could not be raised, it would be unlikely that the Empire Beer Group could continue as a going concern without a significant improvement in its trading operations.

2.4. This opinion should be considered in conjunction with, and not independently of, the information set out in the remainder of this Report. F

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3. Report Structure

3.1. The remainder of our report is divided into the following sections:-

Section Page 4. Summary of Proposed Transaction.............................................................................. 4 5. Purpose of this Report ................................................................................................... 5 6. Background Information .............................................................................................. 7 7. Valuation Approach .................................................................................................... 13 8. Evaluation..................................................................................................................... 15 9. Other Factors Taken into Consideration in Forming Our Opinion ....................... 19 Appendices A Declarations and Disclaimers B Sources of Information C Financial Services Guide

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4. Summary of Proposed Transaction

4.1. The Proposed Transaction that RSM Bird Cameron Corporate Pty Ltd have been requested to provide an opinion on is the proposed sale of the Empire Beer Group’s assets being the leasehold businesses of the Royal and Colonial Brewing and all related business, assets, brands and intellectual property to Colonial Leisure Group Pty Ltd for the following consideration:

• Payment in cash of $4,450,000; and

• Stock at cost

4.2. The Proposed Transaction is specified in an Agreement for Purchase of Business dated 11 August 2008 (“Sale Agreement”). This Sale Agreement is conditional upon shareholder approval (clause 4.5 of the Sale Agreement).

4.3. The purpose of the Resolution, if approved, is to enable the Company in a single transaction to refocus its efforts in providing shareholder value.

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5. Purpose of this Report

ASX Listing Rules

5.1. Australian Securities Exchange (“ASX”) Listing Rule 10.1 prohibits the Company from acquiring a substantial asset from, or disposing of a substantial asset to, (amongst other persons) a substantial shareholder or any of its associates without the approval of shareholders.

5.2. Finico Pty Ltd being the sole shareholder of Colonial Leisure Group Pty Ltd owns approximately 13.4% of the Company’s issued share capital as at the date of this Report and is therefore a substantial shareholder within the meaning of ASX Listing Rule 10.1.

5.3. An asset is a substantial asset if its value or the value of the consideration for it is 5% or more of the equity interests of the Company as set out in its latest accounts given to the ASX. The equity of the Company as at 30 June 2008 was $2,778,111. The consideration payable for the Royal and Colonial Brewing is $4,450,000 plus stock at cost. The cash consideration of $4,450,000 is approximately 160% of the equity interests of the Company as set out in the latest accounts given to the ASX (Appendix 4E – Preliminary Final Report for the year ended 30 June 2008 (unaudited)) and therefore the Royal and Colonial Brewing together represent a substantial asset.

5.4. Accordingly, the Company is seeking the approval of holders of the Empire Beer’s ordinary securities whose votes are not to be disregarded (the Non-Associated Shareholders) for the Proposed Transaction in accordance with ASX Listing Rule 10.1.

5.5. In addition ASX Listing Rule 11.2 requires that if an entity is to make a significant change to the nature or scale of its activities and that change involves the entity disposing of its main undertaking, then the entity must get the approval of the holders of its ordinary securities and the agreement for the sale of its main undertaking must be conditional on that shareholder approval. As the businesses of the Royal and Colonial Brewing represent Empire Beer’s main undertaking, approval is required.

5.6. Where ASX Listing Rule 10.1 approval is sought, shareholders must be presented with a report on the transaction from an independent expert. The report must state whether the transaction is fair and reasonable to Non-Associated Shareholders. Although the information to be provided to shareholders for the purposes of ASX Listing Rule 11.2 is not specified in the ASX Listing Rules, it is reasonable to assume that it will be covered by that required for ASX Listing Rule 10.1.

5.7. In determining whether the Transaction is “fair and reasonable” we have given regard to the views expressed by the Australian Securities and Investment Commission (“ASIC”) in their Regulatory Guide 111 Content of Expert Reports (“RG 111”).

5.8. RG 111 provides ASIC’s views on how an expert can help security holders make informed decisions about transactions. Specifically it gives guidance to experts on how to evaluate whether or not a proposed transaction is fair and reasonable.

5.9. RG 111 states that the expert report should focus on:

• the issues facing the security holders for whom the report is being prepared; and

• the substance of the transaction rather than the legal mechanism used to achieve it.

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5.10. Although RG 111 does not indicate what is considered fair and reasonable in the specific context of a disposal by a company of a substantial asset, it does provide some guidance as to the considerations relevant in determining whether the Proposed Transaction is fair and reasonable.

5.11. In assessing whether the Proposed Transaction is fair and reasonable to the Non-Associated Shareholders we have considered the advantages and disadvantages of the Proposed Transaction in the event that it proceeds or does not proceed including:

• The consideration offered for the assets being disposed of by the Empire Beer Group in comparison with the assessed value of those assets;

• The future prospects of the Empire Beer Group if the Proposed Transaction does not proceed; and

• Any other commercial advantages and disadvantages to the Non-Associated Shareholders as a consequence of the Proposed Transaction proceeding.

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6. Background Information

6.1. Empire Beer (ASX code EEE) was incorporated on 29 May 2006.

6.2. The Company issued 18,274,286 shares at 35 cents each raising $6,396,000 on IPO on 28 December 2006. The Company was entered onto the official list of the ASX on 9 January 2007.

6.3. On 28 December 2006 Empire Beer acquired Colonial Brewing for a total consideration of $6,503,122 comprising shares and options at fair value ($6,276,429) and cash ($226,693).

6.4. On 18 July 2007 Empire Beer acquired the Royal for a cash consideration of $3,786,088 including incidental costs of $206,977.

6.5. With the acquisition of the Royal the Empire Beer Group’s operating activities comprised:-

6.5.1. On-site manufacture of beer at the Colonial Brewing premises at Margaret River, and the sale of that beer to the Royal in East Perth and through the bar/restaurant located on site at Margaret River (Colonial Brewing);

6.5.2. Operation of the Bar/Restaurant at Margaret River (Colonial Brewing); and

6.5.3. Operation of the Royal in East Perth being a significant bar, brassiere and restaurant.

6.6. The lease for Colonial Brewing is ten years to October 2016 with an option for a further ten years to October 2026. The lease for the Royal is 20 years from 2006 with an option for a further five years to 2031.

6.7. Following the acquisition of the Royal, Empire Beer sought, but was unsuccessful, in identifying and securing suitable additional venues required to establish a multi-venue hospitality operation for the distribution of the Colonial Brewing beer brand and as stand alone food and beverage focused hotels.

6.8. Both the Royal and Colonial Brewing have generated losses since acquisition and the Company’s operating cash flows are not sufficient to sustain operations, meet working capital requirements and compliance costs of an ASX listed entity.

6.9. In May 2008 Empire Beer raised $575,000 through the issue of 575 convertible notes of $1,000 each with a maturity date of 21 May 2009 in order to maintain adequate levels of working capital.

6.10. In view of the unsuccessful expansion strategy, the poor operating performances of the venues and the uncertain climate in capital markets the Directors have pursued a divestment strategy for the Royal and Colonial Brewing.

Financial Analysis

6.11. The financial information set out in the following paragraphs is based on the audited financial statements for the year ended 30 June 2007, the unaudited preliminary final report (Appendix 4E) for the year ended 30 June 2008, unaudited management accounts and financial forecasts prepared by the Empire Beer Group.

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Financial Position

6.12. The table below summarises the unaudited consolidated financial position as at 30 June 2008.

Unaudited 30-Jun-08

Reference $000s

ASSETS Current Assets Cash and cash equivalents 307 Trade and other receivables 350 Inventory 155 Total Current Assets 812 Non Current Assets Property, Plant and Equipment 6.14 1,980 Intangibles 6.15 2,471

Total Non Current Assets 4,451

TOTAL ASSETS 5,263 LIABILITIES Current Liabilities Trade and other payables 996 Interest bearing liabilities 6.16 1,489 Total Current Liabilities 2,485

NET ASSETS 6.13 2,778

EQUITY Issued capital 12,262 Reserves 854 Retained earnings/ (accumulated losses) (10,338)

TOTAL EQUITY 2,778

Table 1 – Empire Beer balance sheet as at 30 June 2008

6.13. As at 30 June 2008, Empire Beer had net assets of approximately $2.8 million comprising principally property, plant and equipment and intangibles. Net tangible assets at this date were approximately $0.3 million. It had a deficiency in working capital (current assets – current liabilities) of approximately $1.7 million.

6.14. Property, plant and equipment as recorded in the unaudited financial statements as at 30 June 2008 comprised:

$000

Land and buildings 1,315

Leasehold Improvements 124

Computer Equipment and Software 69

Plant and Equipment 1,167

Less Impairment (695)

Total 1,980

Table 2 - Summary of Property, Plant and Equipment as at 30 June 2008

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6.15. Intangibles comprise liquor licences of $188k and goodwill of $2,283k.

6.16. Interest bearing liabilities comprise:

Reference $000 Bank loan 6.17 913 Convertible Notes 6.18 575 1,488

Table 3 - Summary of Interest Bearing Liabilities as at 30 June 2008.

6.17. The bank loan is from Members Equity Finance. The loan is a 20 year term loan and is interest only for the first three years, with principal and interest payable for the balance of the loan.

6.18. The convertible notes were issued in May 2008 and comprise 575 convertible notes of $1,000 each with a maturity date of 21 May 2009. The applicable interest rate is 10% per annum payable quarterly in arrears. Each note is convertible into 10,000 ordinary fully paid shares and 10,000 options (exercisable at 10 cents per share on or before 30 June 2011).

6.19. If the Proposed Transaction proceeds, the liabilities represented by the bank loan and the convertible notes will be repaid from the consideration received.

Financial Performance

6.20. The table below sets out a summary of the financial performance of the Empire Beer Group for the year ended 30 June 2008 and for the year ended 30 June 2007.

Unaudited 30-Jun-08

Audited 30-Jun-07

$000s $000s

Revenue 7,401 504 Other revenue 170 178 Total revenue 7,571 682

Cost of goods sold (2,369) (182) Employee benefits expense (3,921) (1,066) Occupancy Costs (505) (81) Other expenses (2,186) (902)

Loss before interest, depreciation, impairment & income tax (1,411) (1,549)

Impairment expense (1,646) (5,131)

Depreciation (236) (176)

Interest (151) (37)

Loss before and after income tax expense (3,445) (6,893)

Table 4 – Summary of Beer Financial performance for the 2 years to 30 June 2008

6.21. As shown in the table above, Empire Beer has made substantial losses in each of the 2 years to 30 June 2008. Although a significant contributor to the losses is the impairment expense in each year, losses were recorded in both years prior to the impairment expense.

6.22. For the year to 30 June 2008, the impairment expense was effectively to reduce the value of Empire Beer’s investment in Colonial Brewing and the Royal to the amount of the sale consideration of $4,450,000 plus stock in the Proposed Transaction.

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6.23. A summary of the financial performance of the two venues and their forecast results to 30 June 2009 is set down below.

Colonial Brewing – Budget Projections

6.24. Colonial Brewing’s budget for the year to 30 June 2009 is set out in the table below together with the actual performance for the period from 29 December 2006 to 30 June 2008 in comparative format.

Budget Period from

Year to Year to 29-Dec-06

30-Jun-09 30-Jun-08 to 30-Jun-07

$000s $000s $000s

Sales Beverage 620 628 286 Food 399 357 214 Merchandise 32 54 14 Total sales 1,051 1,038 504

Cost of goods sold 670 744 338

Gross contribution 381 294 166

Expenses 413 362 355

(Loss) before interest, tax, depreciation & impairment (32) (68) (189)

Table 5 – Colonial Brewing budget performance to 30 June 2009

6.25. As shown in the table above Colonial Brewing is budgeting for an operating loss before interest, depreciation and tax expense of approximately $32,000. This loss is predicated on the Royal continuing to be a key part of its sales distribution, without which beverage sales would be decreased. For the year ended 30 June 2008 beer sales from Colonial Brewing to the Royal were approximately $96,000.

The Royal – Budget Projections

6.26. The Royal’s budget for the year to 30 June 2009 is set out in the table below together with the actual performance from 18 July 2007 to 30 June 2008 in comparative format.

Budget Period from

Year to 18-Jul-07

30-Jun-09 to 30-Jun-08

$000s $000s

Sales Beverage 3,443 3,007 Food 3,377 3,416 Total sales 6,820 6,424

Cost of goods sold (2,026) (2,558)

Gross contribution 4,794 3,866

Expenses (3,954) (3,813)

Earnings before interest, tax & depreciation (EBITDA) 840 133

Table 6 – The Royal budget performance to 30 June 2009

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6.27. The projections are for an EBITDA of $840,000 for the year to 30 June 2009, following an 11½ month period when an EBITDA of only $133,000 was made. This projected increase in profit is driven by drastically improved gross margins for both beverage (increase from 62% to 71%) and food (increase from 59% to 70%).

6.28. The Company reports that whilst revenue targets have generally been achieved, increasing food costs and higher labour costs (as a result of the tight labour market) adversely impacted on the Royal’s ability to meet its forecast operating margins. In addition there were increased costs associated with rebranding the Royal Bar & Brasserie to the Royal on the Waterfront. The performance targets have not been revised downwards in the projections for the year to 30 June 2009.

Cash Flows

6.29. A summary of the cash flows provide the following:

Reference

Unaudited 30 Jun 08

$000

Audited 30 Jun 07

$000 Opening Balance 4,290 -

Net cash flows from operating (used in) operating activities 6.30.1 (975) (1188)

Net cash flows used in investigating activities 6.30.2 (4,098) (587)

Net cash flows from financing activities 6.30.3 1,089 6,065

Closing balance 306 4,290

Table 7 – Summary of Cash Flows

6.30. The cash flows reflect the following:

6.30.1. The trading losses incurred by the venues;

6.30.2. The acquisition of the venues – Colonial Brewing in the period ended 30 June 2007, and the Royal in the year ended 30 June 2008; and

6.30.3. The source of cash funding for the Empire Beer Group being primarily equity in the period ended 30 June 2007 and debt in the year ended 30 June 2008.

6.31. At 30 June 2008 the Empire Beer Group had cash funds of approximately $306,000. The net cash flows from operations over the period reviewed indicate that the net cash outflow from operating activities was approximately $90,000 per month. Should this trend continue into the 2008/09 financial year then in the absence of obtaining alternative source of funding the Empire Beer Group would be cash deficient in the last half of the 2008/09 financial year.

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Share price and performance

6.32. The chart shown below provides a summary of Empire Beer’s closing share price and average daily volume of trades for the last 12 months.

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Figure 1 – Share Price and Volume Listing of Empire Beer (EEE)

6.33. The share price of Empire Beer has progressively declined over the past year, on thin trading, with the market assessing the interim results of the Company in relation to its stated strategic direction.

6.34. Empire Beer currently has a market capitalisation of around $2.5 million. This is comparable to its net asset position as at 30 June 2008.

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7. Valuation Approach Valuation Methodologies

7.1. In assessing the value of the Royal and Colonial Brewing, we have considered a range of valuation methodologies. RG 111.54 proposed that it is generally appropriate for an expert to consider using the following methodologies:

• the discounted cash flow method and the estimated realisable value of any surplus assets;

• the application of earnings multiples to the estimated future maintainable earnings or cashflows added to the estimated realisable value of any surplus assets;

• the amount which would be available for distribution on an orderly realisation of assets;

• the quoted price for listed securities; and

• any recent genuine offers received.

7.2. Although each of these methodologies are set out in terms of the valuation of an entity they can be addressed for the valuation of the Royal and Colonial Brewing as follows:

• We have not addressed the discounted cash flow methodology as a basis of valuation for the Royal or Colonial Brewing because of the lack of availability of comprehensive projections of future cash flows;

• We have considered assessing the valuation of the Royal and Colonial Brewing on the basis of future maintainable earnings because this method is appropriate for established businesses;

• We have addressed the orderly realisation of assets methodology as a basis of valuation for the Royal and Colonial Brewing;

• The quoted price of listed securities is not appropriate as the purchase consideration is cash; and

• We have considered the possibility of alternative offers as an alternative basis of valuation.

7.3. For those methodologies which we have addressed, we set out more detail of the methodology in the following paragraphs.

Capitalisation of future maintainable earnings

7.4. The capitalisation of future maintainable earnings ("FME") values an asset on the basis of its estimated future maintainable earnings. It requires an analysis of earnings and the assessment of the capitalisation multiple.

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Orderly Realisation of Assets

7.5. The value achievable in an orderly realisation of assets is estimated by determining the net realisable value of the assets. This technique is particularly appropriate for businesses with relatively high asset values compared to earnings and cash flows.

Alternative Acquirer

7.6. This valuation method considers the premium which an alternative acquirer would be prepared to pay for the Royal and Colonial Brewing.

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8. Evaluation

8.1. As previously stated in paragraph 5.11, in assessing whether the Proposed Transaction is fair and reasonable to the Non-Associated Shareholders we have considered the advantages and disadvantages of the Proposed Transaction in the event that it proceeds or does not proceed including:

• The consideration offered for the assets being disposed of by the Company in comparison with the assessed value of those assets (refer this section of the report);

• The future prospects of the Company if the Proposed Transaction does not proceed (refer section 9 of this report); and

• Any other commercial advantages and disadvantages to the Non-Associated Shareholders as a consequence of the Proposed Transaction proceeding (refer section 9 of this report).

8.2. The basis of our evaluation is to consider whether the value of the assets to be sold in the Proposed Transaction, are equal to or greater than the value of the consideration offered by Colonial Leisure Group Pty Ltd.

Valuation of the Royal

8.3. As stated in Section 7 we have considered these valuation methodologies for both the Royal and Colonial Brewing:-

• Capitalisation of FME;

• Orderly realisation of assets; and

• Alternative acquirer.

Capitalisation of FME

8.4. This valuation methodology depends on the existence of earnings (as opposed to losses) after adjusting for any non-recurring or non-business income or expenditure. From our review of the results to 30 June 2008 and the budget for the year ending 30 June 2009 we do not consider any adjustments necessary.

8.5. Accordingly we consider that an EBITDA of approximately $133,000 represents the latest historical results for the Royal (refer paragraph 6.26) and an EBITDA of approximately $840,000 (refer paragraph 6.26) reflects management’s best estimate of what will be achieved for the year ending 30 June 2009, and these are the best available guide to the future maintainable earnings.

8.6. There is a reasonable level of market activity relating to hospitality businesses such as the Royal and so earnings multiples can be observed from the market place. Given the location, size and nature of the Royal an EBITDA multiple of 3.5 would not be unreasonable. If this were applied to the budgeted earnings of $840,000 this would provide a value of the Royal of $2,940,000.

Alternative Offers

8.7. We understand from the Directors that there has been one other formal offer for the Royal. This was at a value of $3.2 million plus stock. This offer was declined as an alternative offer had been received from Colonial Leisure for both businesses.

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8.8. The tangible assets of the Royal comprise the following:

Cost

$000

Accumulated Depreciation

$000

Net Book Value $000

Leasehold Improvements 126 2 124 Plant and equipment 466 57 409 Computer Equipment 55 11 44 Total 647 70 577

Table 8 – Summary of Tangible Assets of the Royal

8.9. As shown above the tangible assets of the Royal (excluding stock) had a cost base of approximately $650,000. Given the nature of the assets the value achievable under an orderly realisation of assets would be significantly less than that achieved under either a capitalised earnings basis or in considering alternative offers.

Valuation Summary – The Royal

8.10. Based on the above we consider a fair market value of the Royal to be in the range of $3.0 to $3.2 million plus stock.

Valuation of Colonial Brewing

Capitalisation of FME

8.11. Since Colonial Brewing made losses in the period to 30 June 2007, the year to 30 June 2008 and is projected to make losses in the year to 30 June 2009 we consider that it is not appropriate to value Colonial Brewing on the basis of the capitalisation of future maintainable earnings.

Alternative Offers

8.12. We have not been made aware by the Directors of any alternative offers for Colonial Brewing.


8.13. As at 30 June 2008, the tangible assets of Colonial Brewing comprised the following:

Cost

$000

Depreciation

$000

Cost less Depreciation

$000

Impairment Charge

$000

Net Book Value $000

Land & Buildings 1,451 136 1,315 - 1,315 Plant & Equipment 1,374 591 783 695 88 Total 2,825 727 2,098 695 1,403

Table 9 - Summary of Tangible Assets of Colonial Brewing

8.14. As shown above the tangible assets of Colonial Brewing had a cost base of approximately $2.8 million, written down value before impairment charges of approximately $2.1 million and a net book value after impairment charge of approximately $1.4 million.

8.15. We note that the impairment charge against the plant and equipment has been calculated with reference to the sale price of the Royal and Colonial Brewing of $4.45 million plus stock.

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8.16. With respect to the land and buildings and plant and equipment we note that Burgess Rawson have valued these assets in a valuation report prepared for Empire Beer dated 22 August 2008. In this report they state that:

“We have taken into account the plant and equipment of The Colonial which is $1,300,000 and also that the property is a leasehold interest with 10 + 10 year option when ascertaining its value. Given this, and that the property has not made a profit in two years we are of the opinion that the property could be used for some alternative use which would have to be a destination type usage and as such we have discounted the asset significantly to reflect this and have adopted a value of $700,000.”

Valuation Summary – Colonial Brewing

8.17. Given that Colonial Brewing has historically and is projected to trade at a loss, the fact that no offer has been received to acquire the business assets, other than that received from Colonial Leisure, then the value of $700,000 as determined by Burgess Rawson in their valuation report does not appear unreasonable.

Valuation Summary

8.18. We have assessed value of the Royal and Colonial Brewing (excluding stock) to be in the range of $3.7 million to $3.9 million comprising:

Low $000

High $000

The Royal 3,000 3,200 Colonial Brewing 700 700 Total 3,700 3,900

Table 10 - Summary of Asset Values

8.19. This valuation range can be compared with the cash consideration offered by Colonial Leisure of $4,450,000 (plus stock).

8.20. On the basis of this comparison our opinion is that the Proposed Transaction is fair.

8.21. We note that under the terms of the Sale Agreement the consideration is payable within 5 business days of the conditions precedent being fulfilled.

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Response of market to the announcement of the Proposed Transaction

8.22. As a cross check to the value ascribed to the assets we have considered the markets response to the announcement of the sale.

8.23. The Proposed Transaction was announced to the ASX on 11 August 2008. In the event that the Proposed Transaction was not reasonable we would expect some correction downward in the share price of Empire Beer as the market responds to what it perceives to be an unfavourable transaction for Empire Beer shareholders.

8.24. The share price and volumes over the period just prior to and subsequent to 11 August 2008 are as shown below. The closing share price as at 29 August 2008 was 6 cents.

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Figure 2 – Share Price/Volume for Empire Beer immediately pre and post announcement of the Proposed Transaction on 11

August 2008

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9. Other Factors Taken into Consideration in Forming Our Opinion

Stated Intentions of Empire Beer in Relation to the Proposed Transaction

9.1. The Notice of Meeting states that Empire Beer intends to use the proceeds received from the sale for the following purposes

• Repayment of debt related to hotel business;

• Expenses of the transaction; and

• Working capital to pursue investment opportunities.

Future Prospects of Empire Beer if the Proposed Transaction Does Not Proceed

9.2. Empire Beer has stated that its strategy over the past 18 months has been to pursue the distribution of its brewing products through:

• Development of new “Colonial Brewing” micro brewery venues throughout Australia; and

• Acquisition of a portfolio of stand alone food and beverage focused hotels suitable for the sale of Colonial Brewing beer brands.

9.3. This strategy was addressed by the acquisition of Colonial Brewing in December 2006 and the acquisition of the leasehold for the Royal Hotel in East Perth in July 2007.

9.4. The Directors consider that the performance of the venues that Empire Beer operates have been poor. This is particularly the case for the Royal where the consistent revenues have not produced earnings at the anticipated levels. This has been partly the result of the difficult labour environment in the hospitality industry in Western Australia with high costs and low retention levels.

9.5. The Directors of Empire Beer have also not been able to secure suitable further venue acquisitions to augment the Royal despite substantial efforts over the past year and this has precluded the achievement of the economies of scale which might be available to a multi-venue hospitality operation.

9.6. We understand from the Directors that if the Proposed Transaction does not proceed that the preferred alternative strategy is for the Company to continue to operate the Royal and Colonial Brewing businesses with a view to finding another purchaser for either or both businesses.

9.7. Given the continued operating losses of the Empire Beer Group additional capital would in all likelihood be required to be raised to fund the Empire Beer Group’s working capital until assets were realised. At a minimum this would result in a potential dilution of existing shareholders’ interests in the Empire Beer Group.

9.8. In the circumstances that the Proposed Transaction does not proceed and in the event that sufficient additional capital could not be raised it would be unlikely that the Empire Beer Group could continue as a going concern without a significant improvement in its trading operations.

Advantages and Disadvantages

9.9. In assessing whether the Non-Associated Shareholders are likely to be better off if the Proposed Transaction proceeds than if it does not, we have compared various advantages and disadvantages that are likely to accrue to the Non-Associated Shareholders.

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Advantages

Advantage 1 – Opportunity to pursue other business

9.10. The Proposed Transaction provides the opportunity for the Empire Beer Group to completely exit the beer manufacture and hospitality industry and focus the Empire Beer Group on other business opportunities with the potential to increase shareholder value.

Advantage 2 – Package offer

9.11. The Directors have stated that this is the only offer which includes both the Royal and Colonial Brewing. Approval of the Proposed Transaction would give the Empire Beer Group the freedom to pursue opportunities in other business fields and not be tied to a continuing involvement in the beer brewing industry, an industry in which the Empire Beer Group has in the past and is forecasting in the future to incur losses.

Advantage 3 – Cash offer

9.12. The Sale Agreement is for cash and does not involve Empire Beer taking equity in the purchaser.

Advantage 4 – Consideration to be received at settlement date

9.13. The Sale Agreement provides for the transaction to be settled within 5 business days of the conditions precedent being fulfilled.

Advantage 5 – Increase in Net Tangible Asset Backing

9.14. The net tangible asset backing per issued share in Empire Beer will increase from approximately 0.72 cents to approximately 6.54 cents (based on the unaudited balance sheet as at 30 June 2008) as shown in the table below.

Unaudited as at 30 June 2008

$000

Adjustments for Proposed Transaction

$000

Unaudited Proforma as at 30 June 2008

$000

Tangible Assets Current Assets

Cash and cash equivalents 307 4,605 4,912 Trade and other receivables 350 - 350 Inventory 155 (155) -

Total Current Assets 812 4,450 5,262 Non Current Assets

Property, plant and equipment 1,980 (1,979) 1 Total Non Current Assets 1,980 (1,979) 1 Total Tangible Assets 2,792 2,471 5,263 Liabilities Current Liabilities

Trade and other payables 996 - 996 Interest bearing liabilities 1,489 - 1,489

Total Liabilities 2,485 - 2,485 Net Tangible Assets 307 2,471 2,778 Intangible Assets 2,471 (2,471) - Net Assets 2,778 - 2,778

Shares on Issue 42,467,464 42,467,464

Net Tangible Asset Backing per share 0.72 cents 6.54 cents

Table 10 - Net Tangible Asset Backing per Empire Beer Share

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Disadvantages

Disadvantage 1 – Only offer and unlikely to be other offers

9.15. Colonial Leisure’s offer is the only offer which the Directors are aware of as a package for both the Royal and Colonial Brewing and the Directors consider that it is unlikely that there will be any further offers combining both businesses.

Yours faithfully

A J GILMOUR Director

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APPENDIX A

Declarations and Disclosures

RSM Bird Cameron Corporate Pty Ltd holds Australian Financial Services Licence 255847 issued by ASIC pursuant to which they are licensed to prepare reports for the purpose of advising clients in relation to proposed or actual mergers, acquisitions, takeovers, corporate reconstructions or share issues. Qualifications

RSM Bird Cameron Corporate Pty Ltd is beneficially owned by the partners of RSM Bird Cameron (RSMBC) a large national firm of chartered accountants and business advisors.

Mr. Andrew Gilmour is a director of RSM Bird Cameron Corporate Pty Ltd. He is a Chartered Accountant with extensive experience in the field of corporate valuations and the provision of independent expert’s reports for transactions involving publicly listed and unlisted companies in Australia. Reliance on this Report

This report has been prepared solely for the purpose of assisting the Non-Associated Shareholders of Empire Beer in considering the proposed Transaction. We do not assume any responsibility or liability to any party as a result of reliance on this report for any other purpose. Reliance on Information

Statements and opinions contained in this report are given in good faith. In the preparation of this report, we have relied upon information provided by the directors and management of Empire Beer and we have no reason to believe that this information was inaccurate, misleading or incomplete. However, we have not endeavoured to seek any independent confirmation in relation to its accuracy, reliability or completeness. RSM Bird Cameron Corporate Pty Ltd does not imply, nor should it be construed that it has carried out any form of audit or verification on the information and records supplied to us.

The opinion of RSM Bird Cameron Corporate Pty Ltd 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.

In addition, we have considered publicly available information which we believe to be reliable. We have not, however, sought to independently verify any of the publicly available information which we have utilised for the purposes of this report.

We assume no responsibility or liability for any loss suffered by any party as a result of our reliance on information supplied to us.

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Disclosure of Interest

At the date of this report, none of RSM Bird Cameron Corporate Pty Ltd, RSMBC, Andrew Gilmour, nor any other member, director, partner or employee of RSM Bird Cameron Corporate Pty Ltd and RSMBC has any interest in the outcome of the proposed Transactions, except that RSM Bird Cameron Corporate Pty Ltd are expected to receive a fee of approximately $25,000 based on time occupied at normal professional rates for the preparation of this report. The fees are payable regardless of whether Empire Beer Group Limited receives Shareholder approval for the Proposed Transaction, or otherwise. Consents

RSM Bird Cameron Corporate Pty Ltd consents to the inclusion of this report in the form and context in which it is included with the Explanatory Memorandum to be issued to Shareholders. Other than this report, none of RSM Bird Cameron Corporate Pty Ltd, RSM Bird Cameron Partners or RSMBC has been involved in the preparation of the Notice of General Meeting and Explanatory Statement. Accordingly, we take no responsibility for the content of the Notice of General Meeting and Explanatory Statement as a whole.

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APPENDIX B

Sources of Information

In preparing this report we have relied upon the following principal sources of information:

• Notice of General Meeting and Explanatory Statement for General Meeting to be held on 14 October 2008

• Agreement for Purchase of Business dated 11 August 2008

• Empire Beer Group Limited Annual Report 06/07

• Empire Beer Group Limited Interim Report for the half year ended 31 December 2007

• Empire Beer Group Limited Quarterly Updates for March 2008 and June 2008

• Minutes of Directors Meetings for Empire Beer Group Limited

• IBISWorld Report C2182 – Beer and Malt Manufacturing in Australia

• IBISWorld Report H5720 – Pubs, Taverns and Bars in Australia

• Report by Burgess Rawson valuing the assets of Colonial Brewing at Margaret River dated 22 August 2008.

• Publicly available information including ASX announcements and financial information from subscription services

• Information provided to us during meetings and correspondence with management and directors of Empire Beer

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APPENDIX C Financial Services Guide

Overview

RSM Bird Cameron Corporate Pty Ltd, ABN 82 050 508 024 (“RSM Bird Cameron Corporate Pty Ltd” or “we” or “us” or “ours” as appropriate) has been engaged to issue general financial product advice in the form of a report to be provided to you.

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (“FSG”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

• who we are and how we can be contacted;

• the services we are authorised to provide under our Australian Financial Services Licence, Licence No 255847;

• remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;

• any relevant associations or relationships we have; and

• our complaints handling procedures and how you may access them.

Financial services we are licensed to provide

We hold an Australian Financial Services Licence, which authorises us to provide financial product advice in relation to:

• deposit and payment products limited to:

(a) basic deposit products;

(b) deposit products other than basic deposit products.

• interests in managed investments schemes (excluding investor directed portfolio services); and

• securities (such as shares and debentures).

We provide financial product advice by virtue of an engagement to issue a report in connection with a financial product of another person. Our report will include a description of the circumstances of our engagement and identify the person who has engaged us. You will not have engaged us directly but will be provided with a copy of the report as a retail client because of your connection to the matters in respect of which we have been engaged to report.

Any report we provide is provided on our own behalf as a financial services licensee authorised to provide the financial product advice contained in the report.

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General Financial Product Advice

In our report we provide general financial product advice, not personal financial product advice, because it has been prepared without taking into account your personal objectives, financial situation or needs.

You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. Where the advice relates to the acquisition or possible acquisition of a financial product, you should also obtain a product disclosure statement relating to the product and consider that statement before making any decision about whether to acquire the product. Benefits that we may receive

We charge fees for providing reports. These fees will be agreed with, and paid by, the person who engages us to provide the report. Fees will be agreed on either a fixed fee or time cost basis.

Except for the fees referred to above, neither RSM Bird Cameron Corporate Pty Ltd, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report. Remuneration or other benefits received by our employees

All our employees receive a salary. Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide. Associations and relationships

RSM Bird Cameron Corporate Pty Ltd is beneficially owned by the partners of RSM Bird Cameron, a large national firm of chartered accountants and business advisers. Our directors are partners of RSM Bird Cameron Partners.

From time to time, RSM Bird Cameron Corporate Pty Ltd, RSM Bird Cameron Partners, RSM Bird Cameron and / or RSM Bird Cameron related entities may provide professional services, including audit, tax and financial advisory services, to financial product issuers in the ordinary course of its business. Complaints Resolution Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing, addressed to The Complaints Officer, RSM Bird Cameron Corporate Pty Ltd, P O Box R1253, Perth, WA, 6844. F

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When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination. Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Industry Complaints Service Limited (“FICS”). FICS is an independent company that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial services industry.

Further details about FICS are available at the FICS website www.fics.asn.au or by contacting them directly via the details set out below.

Financial Industry Complaints Service Limited P O Box 579 Collins Street West Melbourne VIC 8007 Toll Free: 1300 78 08 08 Facsimile: (03) 9621 2291

Contact Details

You may contact us using the details set out at the top of our letterhead on page 1 of this report.

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Shareholder Details Name: .................................................................................................................................................. Address: .................................................................................................................................................. Contact Telephone: .................................................................................................................................................. Contact Name (if different from above): .................................................................................................................................................. Appointment of Proxy I/We being a shareholder(s) of Empire Beer Group Limited and entitled to attend and vote at the General Meeting, hereby appoint The Chairman of

the Meeting (mark with an ‘X’)

OR

Write here the name of the person you are appointing if this person is someone other than the Chairman of the General Meeting.

or failing the person named, or if no person is named, the Chairman of the General Meeting, as my/our proxy to attend and act generally at the General Meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the General Meeting of Empire Beer Group Limited to be held at the Freemasons Building, 181 Roberts Road, Subiaco, Western Australia on 15 October 2008 at 10:00am (WST) and at any adjournment of that General Meeting. If no directions are given the Chairman will vote in favour of the Resolution.

IMPORTANT If the Chairman of the General Meeting is your nominated proxy, or may be appointed by default, and you have not directed your proxy how to vote in respect of Resolution 1, please place a mark in this box with an ‘X’. By marking this box you acknowledge that the Chairman of the General Meeting may exercise your proxy even if he has an interest in the outcome of Resolution 1 and that votes cast by him, other than as a proxy holder, would be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your votes on Resolution 1 and your votes will not be counted in computing the required majority if a poll is called on Resolution 1. The Chairman of the General Meeting intends to vote undirected proxies in favour of Resolution 1.

Voting directions to your Proxy – please mark to indicate your directions For Against Abstain* Resolution 1. Approve disposal of main undertaking to substantial holder *If you mark the Abstain box for a particular Resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll. Appointment of a second proxy (see instructions overleaf) If you wish to appoint a second proxy, state the % of your voting rights applicable to the proxy appointed by this form PLEASE SIGN HERE This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented. Individual or Shareholder 1

Shareholder 2

Shareholder 3

Sole Director and Company Secretary

Director Director/Company Secretary

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How to complete this Proxy Form Your Name and Address Please print your name and address as it appears on your holding statement and the company’s share register. If shares are jointly held, please ensure the name and address of each joint shareholder is indicated. Shareholders should advise the company of any changes. Shareholders sponsored by a broker should advise their broker of any changes. Please note, you cannot change ownership of your securities using this form. Appointment of a Proxy If you wish to appoint the Chairman of the General Meeting as your proxy, mark the box. If the person you wish to appoint as your proxy is someone other than the Chairman of the General Meeting please write the name of that person. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the General Meeting will be your proxy. A proxy need not be a Shareholder of the Company. Votes on Resolutions You may direct your proxy how to vote by placing a mark in one of the boxes opposite each Resolution. All your shareholding will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any Resolution by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given Resolution, your proxy may vote as he or she chooses. If you mark more than one box on a Resolution your vote on that Resolution will be invalid. Appointment of a Second Proxy You are entitled to appoint up to two persons as proxies to attend the General Meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning Mr Phil Warren on (08) 9322 7600 or you may photocopy this form. To appoint a second proxy you must on each Proxy Form state (in the appropriate box) the percentage of your voting rights which are the subject of the relevant proxy. If both Proxy Forms do not specify that percentage, each proxy may exercise half your votes. Fractions of votes will be disregarded. Signing Instructions You must sign this form as follows in the spaces provided: Individual: where the holding is in one name, the holder must sign. Joint Holding: where the holding is in more than one name, all of the shareholders should sign. Power of Attorney: to sign under Power of Attorney, you must have already lodged a copy of the Power of Attorney

with the Company’s share registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form

must be signed by that person. If the company (pursuant to section 204A of the Corporations Act) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the General Meeting a “Certificate of Appointment of Corporate Representative” should be produced prior to admission. A form of the certificate is either included in the Notice of General Meeting or may be obtained from the company’s share registry. Lodgement of a Proxy This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below not later than 48 hours before the commencement of the General Meeting. Any Proxy Form received after that time will not be valid for the scheduled General Meeting. This Proxy Form (and any Power of Attorney and/or second Proxy Form) may be sent or delivered to the company’s registered office at Empire Beer Group Limited, 945 Wellington Street, West Perth, WA, 6005 or sent by facsimile to the registered office on (08) 9322 7602.

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empire beer group limited - asx · empire beer group limited acn 119 327 169 notice of general...

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