IFRS-GOING CONCERN-AUSTRALIAN COMPANY-AICPA

Basis of Presentation, Statement of Compliance, Going Concern Assessment 1.72 Diploma Group Limited (Jun 2011) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (in part)

1. Corporate Information and Basis of Preparation Diploma Group Limited is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The address of the registered office is First floor, 140 Abernethy Road, Belmont, Western Australia 6104. The financial report of Diploma Group Limited for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the Directors on 28 September 2011. Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared in accordance with the historical cost basis. The financial report is presented in Australian dollars and all values are rounded to the nearest
thousand dollars ($'000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies. Statement of Compliance The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Going Concern For the year ended 30 June 2011, the Group had a cash deficit at the end of the financial year of $1.806 million, a net operating cash outflow of $8.269 million, and project specific debt totalling $12.490 million due for repayment by September 2011. This amount includes $9.326 million of debt relating to an associate (Zenith), not recognised on the Group's balance sheet. The $9.326 million represents Diploma's share of the total project specific debt of $22.397 million. In addition the Group was
in breach of a financial covenant on a corporate facility which had a net drawn down balance at 30 June 2011 of $5.518 million. Notwithstanding the above, the Directors' are of the opinion that, at the date of signing the financial report, the Group is a going concern having regard to the following pertinent matters: 1. $13.071 million of the $22.397 million of debt associated with the Zenith project was refinanced on 26 September 2011. The balance of this project specific debt totalled $9.326 million which represents Diploma's share. Approval for the refinance of Diploma's share of the project specific debt was received on 28 September 2011. The refinanced facility together with subsequent unit sales in the Zenith project will enable Diploma to repay its share of the Zenith project debt and provide the Group with $1.488 million in working capital along with 30% from each subsequent sale. The settlement profile of the currently contracted
apartments will generate further cash inflow to the Group with the refinanced facility expected to be cleared by December 2011.

2. The project specific debt on the Group's Rockingham project (Salt 5) totalling $1.704 million was refinanced on 8 September 2011 and is now due for repayment on 5 April 2012 at which point the facility is expected to be refinanced into a construction facility.

3. Since year end the project specific debt associated with the Cove and Foundry Road projects, totalling $4.618 million has been repaid. The Group has obtained additional funding secured against the remaining unsold stock in these developments totalling $3.1 million.

4. The repayment date on the project specific debt on the Group's iSpire project totalling $1.500 million was extended to February 2012 at which point the facility is expected to be refinanced into a construction facility.

5. The Eleven78 project is due for completion by November 2011. 122 of the 126 apartments in this development have been presold either during or post the GFC. This project is expected to settle quickly once complete and is expected to return in excess of $10 million in cash to the Group.

6. The bank acknowledged the breach at 30 June 2011 and do not intend to take any action. The bank has renewed the facility for a further term until 31 October 2012. The new facility will include a reduction to the measure of the covenant breached and the limit will be reduced to $5.0 million. Furthermore, the same bank has re-affirmed their commitment to the financing of the last stage of the Group's Joondalup (Edge) development due to commence in October 2011.

7. The Group has cash in hand of $2.3 million as at 29 September 2011.