DIGITALX LTD

ACN 009 575 035

NOTICE OF ANNUAL GENERAL MEETING

Notice is given that the Meeting will be held at:

TIME : 9.00am (WST) DATE : 30 November 2016 PLACE : Level 4, 16 Milligan Street, Perth, Western Australia

The business of the Meeting affects your shareholding and your vote is important.

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered Shareholders at 7.00pm (WST) on 28 November 2016.

BUSINESS OF THE MEETING

AGENDA

1. FINANCIAL STATEMENTS AND REPORTS

To receive and consider the annual financial report of the Company for the financial year ended 30 June 2016 together with the declaration of the directors, the director’s report, the Remuneration Report and the auditor’s report.

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

To consider and, if thought fit, to pass, with or without amendment, the following resolution as a non-binding resolution :

“That, for the purposes of section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the Remuneration Report as contained in the Company’s annual financial report for the financial year ended 30 June 2016.”

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting Prohibition Statement:

A vote on this Resolution must not be cast (in any capacity) by or on behalf of either of the following persons:

(a) a member of the Key Management Personnel, details of whose remuneration are included in the Remuneration Report; or

(b) a Closely Related Party of such a member. However, a person (the voter ) described above may cast a vote on this Resolution as a proxy if the vote is not cast on behalf of a person described above and either:

(a) the voter is appointed as a proxy by writing that specifies the way the proxy is to vote on this Resolution; or
(b) the voter is the Chair and the appointment of the Chair as proxy:
(i) does not specify the way the proxy is to vote on this Resolution; and (ii) expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel.

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – WILLIAM BRINDISE

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 13.2 of the Constitution and for all other purposes, William Brindise, a Director, retires by rotation, and being eligible, is re-elected as a Director.”

4. RESOLUTION 3 – ELECTION OF DIRECTOR – TOBY HICKS

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 13.4 of the Constitution, ASX Listing Rule 14.4 and for all other purposes, Toby Hicks, a Director who was appointed as an additional Director on 28 July 2016, retires, and being eligible, is elected as a Director.”

2916-08/1591787_4

5. RESOLUTION 4 – ELECTION OF DIRECTOR – LEIGH TRAVERS

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 13.4 of the Constitution, ASX Listing Rule 14.4 and for all other purposes, Leigh Travers, a Director who was appointed as an additional Director on 25 July 2016, retires, and being eligible, is elected as a Director.”

6. RESOLUTION 5 – ELECTION OF DIRECTOR – FAISAL KHAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 13.4 of the Constitution, ASX Listing Rule 14.4 and for all other purposes, Faisal Khan, a Director who was appointed as an additional Director on 6 October 2016, retires, and being eligible, is elected as a Director.”

7. RESOLUTION 6 – APPROVAL OF 10% PLACEMENT CAPACITY

To consider and, if thought fit, to pass the following resolution as a special resolution :

“That, for the purposes of Listing Rule 7.1A and for all other purposes, approval is given for the Company to issue up to that number of Equity Securities equal to 10% of the issued capital of the Company at the time of issue, calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 and otherwise on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the issue of Equity Securities under this Resolution 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 any associates of those persons. However, the Company will not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, 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.

8. RESOLUTION 7 – ADOPTION OF EMPLOYEE SHARE PLAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 7.2 (Exception 9(b)) and for all other purposes, approval is given for the Company to adopt an employee incentive scheme titled ‘DigitalX Employee Share Plan’ and for the issue of Shares under that Plan, on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any Director except one who is ineligible to participate in any employee incentive scheme in relation to the Company, and any associates of those Directors. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled

to vote, in accordance with the directions on the Proxy Form, or, 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.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

However, the above prohibition does not apply if:

(c) the proxy is the Chair; and (d) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

9. RESOLUTION 8 – APPROVAL TO ISSUE SHARES TO EXECUTIVE DIRECTOR – LEIGH TRAVERS

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolution 7, for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the Company to issue 500,000 Shares to Leigh Travers (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by any Director except one who is ineligible to participate in the employee share plan in relation to the Company, and any associates of those Directors. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, 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.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either: (i) a member of the Key Management Personnel; or (ii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution. However, the above prohibition does not apply if: (c) the proxy is the Chair; and (d) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

10. RESOLUTION 9 – APPROVAL TO ISSUE SHARES TO NON-EXECUTIVE DIRECTOR – FAISAL KHAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolution 7, for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the Company to

issue 250,000 Shares to Faisal Khan (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(e) the proxy is either: (iii) a member of the Key Management Personnel; or (iv) a Closely Related Party of such a member; and (f) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(g) the proxy is the Chair; and (h) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

11. RESOLUTION 10 – SELECTIVE SHARE BUY-BACK FROM A SUBSTANTIAL HOLDER

To consider, and if thought fit, to pass, with or without amendment, the following resolution as a special resolution :

“That, for the purposes of Section 257D of the Corporations Act, ASX Listing Rule 10.1 and for all other purposes, approval is given for the Company to selectively buy-back and cancel 17,633,839 Shares currently held by Lydian Enterprises Pty Ltd as trustee of the Lydian Trust on the terms and conditions set out in the Explanatory Statement.”

Short Explanation : Under the Corporations Act, a company may make a selective buy-back by a special resolution passed at a general meeting. The Company has entered into an agreement with Lydian Enterprises Pty Ltd as trustee of the Lydian Trust for the buy-back and cancellation of 17,633,839 Shares held by Lydian Enterprises Pty Ltd as trustee of the Lydian Trust. The agreement is conditional on obtaining a special resolution of Shareholders to approve the buy-back. Please refer to the Explanatory Statement for details.

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by any person whose Shares are proposed to be bought back and any of their associates. However, the Company need not disregard a vote if 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 if it is cast by a 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.

Independent Expert’s Report: Shareholders should carefully consider the report prepared by the Independent Expert for the purposes of the Shareholder approval under ASX Listing Rule 10.1. The Independent Expert’s Report comments on the fairness and reasonableness of the transaction the subject of this Resolution to the non-associated Shareholders in the Company. The Independent Expert has determined that the transaction is fair and reasonable to the non-associated Shareholders in the Company.

Dated: 28 October 2016

By order of the Board

Rodion Kostrykine Company Secretary

Voting in person

To vote in person, attend the Meeting at the time, date and place set out above.

Voting by proxy

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

In accordance with section 249L of the Corporations Act, Shareholders are advised that:

each Shareholder has a right to appoint a proxy;
the proxy need not be a Shareholder of the Company; and
a Shareholder who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

Shareholders and their proxies should be aware that changes to the Corporations Act made in 2011 mean that:

if proxy holders vote, they must cast all directed proxies as directed; and
any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 8 9321 4000.

EXPLANATORY STATEMEN T

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions.

1. FINANCIAL STATEMENTS AND REPORTS

In accordance with the Constitution, the business of the Meeting will include receipt and consideration of the annual financial report of the Company for the financial year ended 30 June 2016 together with the declaration of the directors, the directors’ report, the Remuneration Report and the auditor’s report.

The Company will not provide a hard copy of the Company’s annual financial report to Shareholders unless specifically requested to do so. The Company’s annual financial report is available on its website at www.digitalx.com.

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

2.1 General

The Corporations Act requires that at a listed company’s annual general meeting, a resolution that the remuneration report be adopted must be put to the shareholders. However, such a resolution is advisory only and does not bind the company or the directors of the company.

The remuneration report sets out the company’s remuneration arrangements for the directors and senior management of the company. The remuneration report is part of the directors’ report contained in the annual financial report of the company for a financial year.

The chair of the meeting must allow a reasonable opportunity for its shareholders to ask questions about or make comments on the remuneration report at the annual general meeting.

2.2 Voting consequences

A company is required to put to its shareholders a resolution proposing the calling of another meeting of shareholders to consider the appointment of directors of the company ( Spill Resolution ) if, at consecutive annual general meetings, at least 25% of the votes cast on a remuneration report resolution are voted against adoption of the remuneration report and at the first of those annual general meetings a Spill Resolution was not put to vote. If required, the Spill Resolution must be put to vote at the second of those annual general meetings.

If more than 50% of votes cast are in favour of the Spill Resolution, the company must convene a shareholder meeting ( Spill Meeting ) within 90 days of the second annual general meeting.

All of the directors of the company who were in office when the directors' report (as included in the company’s annual financial report for the most recent financial year) was approved, other than the managing director of the company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting.

2916-08/1591787_4

Following the Spill Meeting those persons whose election or re-election as directors of the company is approved will be the directors of the company.

2.3 Previous voting results

At the Company’s previous annual general meeting, the votes cast against the remuneration report were less than 25%.

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – WILLIAM BRINDISE

3.1 General

The Constitution sets out the requirements for determining which Directors are to retire by rotation at an annual general meeting.

William Brindise, who has served as a director since 5 June 2014, retires by rotation and seeks re-election.

3.2 Qualifications and other material directorships

Mr Brindise has a wealth of corporate and financial expertise having spent over 15 years trading energy, metal and grain options and futures. He began his career on the NYMEX working for ZAR trading and after a few years started his own trading/brokerage company, BAK. After 4 successful years he moved off the floor when NYMEX trading became digital and took a job working for the hedge fund SHK Management.

He holds a bachelor degree in Business and Finance from Boston University. Mr Brindise is not and has not been a director of any other ASX listed company for the previous three years.

3.3 Independence

If elected the board does not consider William Brindise be an independent director.

3.4 Board recommendation

The Board supports the re-election of William Brindise and recommends that Shareholders vote in favour of Resolution 2.

4. RESOLUTIONS 3, 4 AND 5 – ELECTION OF DIRECTORS APPOINTED SINCE THE LAST ANNUAL GENERAL MEETING

4.1 General

The Constitution allows the Directors to appoint at any time a person to be a Director either to fill a casual vacancy or as an addition to the existing Directors, but only where the total number of Directors does not at any time exceed the maximum number specified by the Constitution.

Each of Toby Hicks, Leigh Travers and Faisal Khan have been appointed as Directors of the Company since the last annual general meeting.

Pursuant to the Constitution and ASX Listing Rule 14.4, any Director so appointed holds office only until the next following annual general meeting and is then

eligible for election by Shareholders but shall not be taken into account in determining the Directors who are to retire by rotation (if any) at that meeting.

Each of Messrs Hicks, Travers and Khan, having been appointed by other Directors in accordance with the Constitution, will retire in accordance with the Constitution and ASX Listing Rule 14.4 and being eligible, seeks election from Shareholders.

4.2 Qualifications and other material directorships

Mr Toby Hicks

Mr Hicks is a Partner of Steinepreis Paganin Lawyers & Consultants with over 14 years’ experience advising companies, both public and private, on matters relating to corporate governance, capital raisings and mergers and acquisitions, as well as general commercial and strategic legal advice. He acts for a number of ASX listed companies.

In addition to his legal practice, Mr Hicks has served on the Board of Governors of the University of Notre Dame Australia for 14 years and is a member of the University’s Finance, Audit and Risk Committee and the Fremantle Law School Advisory Board.

Mr Hicks holds a Bachelor of Business (Management) and a Bachelor of Laws from the University of Notre Dame Australia as well as a Graduate Diploma in Company Secretarial Practice from Chartered Secretaries Australia (now Governance Institute). He is also a Chartered Secretary.

Mr Hicks is not and has not been a director of any other ASX listed company for the previous three years.

Mr Leigh Travers

Leigh Travers has enjoyed a decade of building relationships in financial and technology markets through his experience at Fintech and investment Advisory companies. He is a current Director and Vice Chairman of the ADCCA, the representative body for digital commerce businesses in Australia. He is the VP of Business Development and Investor Relations and his work is primarily focused on the deployment of the AirPocket application.

Mr Travers previously worked for seven years at Wealth Management firm Euroz Securities as an Investment Advisor. His clients included HNW, Institutions and Listed Companies as he provided trading advice, company buybacks and sell downs and capital raising services.

Mr Travers holds a Bachelor of Commerce and Communications from the University of Western Australia and has completed a Fintech Certification from the Massachusetts Institute of Technology.

Mr Travers is not and has not been a director of any other ASX listed company for the previous three years.

Mr Faisal Khan

Mr Khan is a recognised global expert on remittance, banking, payments and Fintech. He is the owner of Faisal Khan & Company, a leading payments

consultancy to Fortune 100 companies across the banking, fintech and money transfer sectors. The firm provides advisory services in areas like architecting cross-border payment networks, products and solutions, product/idea validation and cross-border transactions in the P2P, B2C and B2B space.

Previously Mr Khan has appeared as a speaker and moderator at various international payments conferences and advises the Digital Finance Institute of Toronto, a think tank created to address prospective issues around the nexus between financial innovation, digital finance policy and regulation, financial inclusion and women in financial technology.

Mr. Khan holds a Bachelors in Electrical Engineering and Masters in Electrical Engineering (Electromagnetics) from the Florida Institute of Technology.

Mr Khan is not and has not been a director of any other ASX listed company for the previous three years.

4.3 Independence

Mr Khan has no interests, position, association or relationship that might influence, or reasonably be perceived to influence, in a material respect his capacity to bring an independent judgement to bear on issues before the board and to act in the best interest of the entity and its security holders generally.

If elected the board considers Mr Khan will be an independent director.

Mr Hicks is a Partner of Steinepreis Paganin Lawyers & Consultants, the Company’s legal advisers.

Mr Travers is an Executive Director of the Company.

If elected the board does not consider that either Messrs Hicks or Travers will be an independent director.

4.4 Board recommendation

The Board supports the re-elections of Messrs Hicks, Travers and Khan.

5. RESOLUTION 6 – APPROVAL OF 10% PLACEMENT CAPACITY

5.1 General

ASX Listing Rule 7.1A provides that an Eligible Entity (as defined below) may seek shareholder approval by special resolution passed at an annual general meeting to have the capacity to issue up to that number of Equity Securities (as defined below) equal to 10% of its issued capital ( 10% Placement Capacity ) without using that company’s existing 15% annual placement capacity granted under ASX Listing Rule 7.1.

An Eligible Entity is one that, as at the date of the relevant annual general meeting:

(a) is not included in the S&P/ASX 300 Index; and

(b) has a maximum market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of $300,000,000.

As at the date of this Notice, the Company is an Eligible Entity as it is not included in the S&P/ASX 300 Index and has a current market capitalisation of $16,794,289.70 (based on the number of Shares on issue and the closing price of Shares on the ASX on11 October 2016).

An Equity Security is a share, a unit in a trust, a right to a share or unit in a trust or option, an option over an issued or unissued security, a convertible security, or, any security that ASX decides to classify as an equity security.

Any Equity Securities issued under the 10% Placement Capacity must be in the same class as an existing class of quoted Equity Securities.

As at the date of this Notice, the Company currently has 1 class of quoted Equity Securities on issue, being the Shares (ASX Code: DCC).

If Shareholders approve Resolution 6, the number of Equity Securities the Company may issue under the 10% Placement Capacity will be determined in accordance with the formula prescribed in ASX Listing Rule 7.1A.2.

Resolution 6 is a special resolution. Accordingly, at least 75% of votes cast by Shareholders present and eligible to vote at the Meeting must be in favour of Resolution 6 for it to be passed.

5.2 Technical information required by ASX Listing Rule 7.1A

Pursuant to and in accordance with ASX Listing Rule 7.3A, the information below is provided in relation to this Resolution 6:

(a) Minimum Price

The minimum price at which the Equity Securities may be issued is 75% of the volume weighted average price of Equity Securities in that class, calculated over the 15 ASX trading days on which trades in that class were recorded immediately before:

(i) the date on which the price at which the Equity Securities are to be issued is agreed; or
(ii) if the Equity Securities are not issued within 5 ASX trading days of the date in section 5.2(a)(i), the date on which the Equity Securities are issued.

(b) Date of Issue

The Equity Securities may be issued under the 10% Placement Capacity commencing on the date of the Meeting and expiring on the first to occur of the following:

(i) 12 months after the date of this Meeting; and
(ii) the date of approval by Shareholders of any transaction under ASX Listing Rules 11.1.2 (a significant change to the nature or scale of the Company’s activities) or 11.2 (disposal of the

Company’s main undertaking) (after which date, an approval under Listing Rule 7.1A ceases to be valid),

( 10% Placement Capacity Period ).

(c) Risk of voting dilution

Any issue of Equity Securities under the 10% Placement Capacity will dilute the interests of Shareholders who do not receive any Shares under the issue.

If Resolution 6 is approved by Shareholders and the Company issues the maximum number of Equity Securities available under the 10% Placement Capacity, the economic and voting dilution of existing Shares would be as shown in the table below.

The table below shows the dilution of existing Shareholders calculated in accordance with the formula outlined in ASX Listing Rule 7.1A(2), on the basis of the market price of Shares and the number of Equity Securities on issue as at11 October 2016.

The table also shows the voting dilution impact where the number of Shares on issue (Variable A in the formula) changes and the economic dilution where there are changes in the issue price of Shares issued under the 10% Placement Capacity.

Number of Shares on Issue (Variable ‘A’ in ASX Listing Rule 7.1A2)
		Dilution
	Issue Price (per Share)	$0.0445 50% decrease in Issue Price	$0.089 Issue Price	$0.1335 50% increase in Issue Price
188,699,884 (Current Variable A)	Shares			18,869,988 Shares
	issued - 10%	18,869,988	18,869,988
	voting dilution	Shares	Shares
	Funds raised	$839,714.48	$1,679,428.97	$2,519,143.45
283,049,826 (50% increase in Variable A)	Shares issued - 10% voting dilution	28,304,983 Shares	28,304,983 Shares	28,304,983 Shares
	Funds raised	$1,259,571.73	$2,519,143.45	$3,778,715.18
377,399,768 (100% increase in Variable A)	Shares issued - 10% voting dilution	37,739,977 Shares	37,739,977 Shares	37,739,977 Shares
	Funds raised	$1,679,428.97	$3,358,857.94	$5,058,286.90

*The number of Shares on issue (Variable A in the formula) could increase as a result of the issue of Shares that do not require Shareholder approval (such as under a prorata rights issue or scrip issued under a takeover offer) or that are issued with Shareholder approval under Listing Rule 7.1.

The table above uses the following assumptions:

There are currently 188,699,884 Shares on issue as at the date of this Notice of Meeting.
The issue price set out above is the closing price of the Shares on the ASX on 11 October 2016..
The Company issues the maximum possible number of Equity Securities under the 10% Placement Capacity.
The Company has not issued any Equity Securities in the 12 months prior to the Meeting that were not issued under an exception in ASX Listing Rule 7.2 or with approval under ASX Listing Rule 7.1.
The issue of Equity Securities under the 10% Placement Capacity consists only of Shares. It is assumed that no Options are exercised into Shares before the date of issue of the Equity Securities.
The calculations above do not show the dilution that any one particular Shareholder will be subject to. All Shareholders should consider the dilution caused to their own shareholding depending on their specific circumstances.
This table does not set out any dilution pursuant to approvals under ASX Listing Rule 7.1.
The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.
The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the 10% Placement Capacity, based on that Shareholder’s holding at the date of the Meeting.

Shareholders should note that there is a risk that:

(i) the market price for the Company’s Shares may be significantly lower on the issue date than on the date of the Meeting; and
(ii) the Shares may be issued at a price that is at a discount to the market price for those Shares on the date of issue.

(d) Purpose of Issue under 10% Placement Capacity

The Company may issue Equity Securities under the 10% Placement Capacity for the following purposes:

(i) as cash consideration in which case the Company intends to use funds raised for further development of AirPocket and general working capital; or
(ii) as non-cash consideration for the acquisition of new assets and investments including/eclusing previously announced acquisitions, in such circumstances the Company will provide a valuation of the non-cash consideration as required by listing Rule 7.1A.3.

The Company will comply with the disclosure obligations under Listing Rules 7.1A(4) and 3.10.5A upon issue of any Equity Securities.

(e) Allocation policy under the 10% Placement Capacity

The recipients of the Equity Securities to be issued under the 10% Placement Capacity have not yet been determined. However, the recipients of Equity Securities could consist of current Shareholders or new investors (or both), none of whom will be related parties of the Company.

The Company will determine the recipients at the time of the issue under the 10% Placement Capacity, having regard to the following factors:

(i) the purpose of the issue;
(ii) alternative methods for raising funds available to the Company at that time, including, but not limited to, an entitlement issue or other offer where existing Shareholders may participate;
(iii) the effect of the issue of the Equity Securities on the control of the Company;
(iv) the circumstances of the Company, including, but not limited to, the financial position and solvency of the Company;
(v) prevailing market conditions; and
(vi) advice from corporate, financial and broking advisers (if applicable).

Further, if the Company is successful in acquiring new resources, assets or investments, it is likely that the recipients under the 10% Placement Capacity will be vendors of the new resources, assets or investments.

(f)

Previous approval under ASX Listing Rule 7.1A

The Company previously obtained approval from its Shareholders pursuant to ASX Listing Rule 7.1A at its annual general meeting held on 30 November 2015 ( Previous Approval ).

The Company has not issued any Equity Securities pursuant to the Previous Approval.

During the 12 month period preceding the date of the Meeting, being on and from30 November 2015, the Company otherwise issued a total of 10,580,303 Shares which represents approximately 5.36% of the total diluted number of Equity Securities on issue in the Company on 30 November 2015, which was 197,355,011

Further details of the issues of Equity Securities by the Company during the 12 month period preceding the date of the Meeting are set out in Schedule 1.

(g)

Compliance with ASX Listing Rules 7.1A.4 and 3.10.5A

When the Company issues Equity Securities pursuant to the 10% Placement Capacity, it must give to ASX:

(i) a list of the recipients of the Equity Securities and the number of Equity Securities issued to each (not for release to the market), in accordance with Listing Rule 7.1A.4; and

(ii) the information required by Listing Rule 3.10.5A for release to the market.

5.3 Voting Exclusion

A voting exclusion statement is included in this Notice. As at the date of this Notice, the Company has not invited any existing Shareholder to participate in an issue of Equity Securities under ASX Listing Rule 7.1A. Therefore, no existing Shareholders will be excluded from voting on Resolution 6.

6. RESOLUTION 7 – ADOPTION OF EMPLOYEE SHARE PLAN

Resolution 7 seeks Shareholders approval for the adoption of the DigitalX Share Plan ( Plan ) in accordance with ASX Listing Rule 7.2 (Exception 9(b)). The Company considers that the adoption of the Plan provides the opportunity for the Company to remunerate and incentivise Eligible Employees (defined under the Plan) by offering them equity in the Company as part of their remuneration from the Company.

However, any issues of Shares under the Plan to a related party or a person whose relation with the company or the related party is, in ASX’s opinion, such that approval should be obtained will require additional Shareholder approval under ASX Listing Rule 10.14 at the relevant time before any Shares can be issued.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period. ASX Listing Rule 7.2 (Exception 9(b)) sets out an exception to ASX Listing Rule 7.1 which provides that issues under an employee incentive scheme are exempt for a period of 3 years from the date on which shareholders approve the issue of securities under the scheme as an exception to ASX Listing Rule 7.1.

If Resolution 7 is passed, the Company will be able to issue Shares under the Plan to eligible participants over a period of 3 years without impacting on the Company’s ability to issue up to 15% of its total ordinary securities without Shareholder approval in any 12 month period.

Shareholders should note that no Shares have previously been issued under the Plan.

The objective of the Plan is to attract, motivate and retain key employees and it is considered by the Company that the adoption of the Plan and the future issue of Shares under the Plan will provide selected employees with the opportunity to participate in the future growth of the Company.

A material feature of the Plan is the issue of Shares pursuant to the Plan may be undertaken by way of provision of a non-recourse, interest free loan to be used for the purposes of subscribing for the Shares based on a price that will be not less than the volume weighted average price at which Shares were traded on

the ASX over the 10 trading days up to and including the date of acceptance of the offer.

A summary of the key terms and conditions of the Plan is set out in Schedule 2. In addition, a copy of the Plan is available for review by Shareholders at the registered office of the Company until the date of the Meeting. A copy of the Plan can also be sent to Shareholders upon request to the Company Secretary. Shareholders are invited to contact the Company if they have any queries or concerns.

7. RESOLUTIONS 8 AND 9 – APPROVAL FOR THE ISSUE OF SHARES TO DIRECTORS

7.1 General

Resolutions 8 and 9 seek approval for the issue of Shares to each of Leigh Travers and Faisal Khan. The issue of the Shares to each of Mr Travers and Mr Khan were agreed as part of their remuneration and incentive to join the Board, bringing their respective experience and skills in the industry to the Company’s Board. The issue of the Shares to each of the Directors is contingent upon those Directors remaining as Directors over a 12 month continuous period following their appointment. Mr Travers was appointed as a Director on 25 July 2016 and Mr Khan was appointed on 6 October 2016.

Subject to the approval of the Plan, under Resolution 7, the Company intends to issue the Shares to each of the relevant Directors within 12 months of the approval of the Resolutions.

Under Listing Rule 10.14, a company cannot issue Shares to a related party of the Company under an employee incentive scheme without first seeking the approval of Shareholders.

7.2 Chapter 2E of the Corporations Act

Under the Corporations Act, for a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The Board has resolved (with Messrs Travers and Khan excluded from the discussion) that the issue of the Shares falls within the relevant exceptions in the Corporations Act, as the issue of the Shares is considered to be reasonable remuneration on the basis that it was an agreed term of their appointment that the Board seek the approval to issue these Shares.

7.3 Technical Information required by ASX Listing Rule 10.15

Pursuant to and in accordance with ASX Listing Rule 10.15, the following information is provided:

(a) the Shares will be issued to:
(i) Resolution 8 – Mr Leigh Travers (or his nominee); and
(ii) Resolution 9 – Mr Faisal Khan (or his nominee);
(b) the number of Shares to be issued is:
(iii) Resolution 8 – 500,000; and
(iv) Resolution 9 – 250,000;
(c) the Shares will be issued for nil cash consideration;
(d) as at the date of this Notice of Meeting, no Shares have previously been issued under the Plan;
(e) all of the Company’s Directors, Alex Karis, William Brindise, Leigh Travers, Toby Hicks and Faisal Khan are ‘Eligible Employees’ under the Plan and are therefore entitled to participate. Other than Mr Travers and Mr Khan, the Company is not seeking approval to issue any Shares to any other Directors under the Plan at this time;
(f) as no amount is payable for the Shares, no loan is contemplated to be provided to either Mr Travers or Mr Khan;
(g) in accordance with Listing Rule 10.15.7, the Shares will be issued within 12 months of the date of the meeting on or around the date on which the relevant recipient has achieved the milestone of being a Director for a continuous period of 12 months since their appointment. The relevant dates of appointment are outlined in Section 7.1 above.

Approval pursuant to ASX Listing Rule 7.1 is not required for the grant of the Shares as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the grant of Shares under Resolutions 8 and 9 will not be included in the use of the Company’s 15% annual placement capacity pursuant to ASX Listing Rule 7.1.

8. RESOLUTION 10 – SELECTIVE BUY-BACK OF SHARES FROM A SUBSTANTIAL HOLDER

8.1 Overview/Background

As announced on 25 August 2016, following the resignation of Mr Zhenya Tsvetnenko as a Director in July 2016, the Company has now entered into a conditional buy-back agreement with Lydian Enterprises Pty Ltd as trustee of the Lydian Trust ( Lydian ), an entity controlled by Mr Tsvetnenko, whereby the Company will buy-back Lydian’s entire remaining shareholding in the Company, being 17,633,839 Shares ( Sale Shares ) ( Agreement ). The terms of the Agreement are summarised in Section 8.2 below.

The purpose of the proposed buy-back of the Sale Shares ( Buy-Back ) to facilitate Mr Tsvetnenko’s exit from the Company.

Resolution 10 seeks the approval of Shareholders to enable the Company to buy-back and cancel the Shares held by Lydian.

8.2 Terms of Agreement

The Agreement contains the following material terms and conditions:

(a) ( Sale and Buy-Back ): subject to the satisfaction of the conditions precedent in (b) below, Lydian has agreed to enter into an agreement to sell the Sale Shares to the Company and the Company has agreed to purchase the Sale Shares from Lydian for $0.03 per Share ( Purchase Price ) free from all encumbrances and with all rights attaching to them;
(b) ( Conditions Precedent ): Completion of the Buy-Back remains, at the date of this Notice, conditional upon the satisfaction (or waiver) of the following conditions precedent ( Conditions ):
(i) the Company receiving all requisite Shareholder approvals required for the acquisition under the Corporations Act and the ASX Listing Rules; and
(ii) Lydian voting all Shares held by it in favour of all Resolutions at the Meeting for which it is eligible to vote.

If the Conditions are not satisfied or waived on or before 5:00pm (WST) on 30 November 2016, the Agreement will be at an end as to its future operation. The Condition in paragraph (b)(i) above cannot be waived.

(c) ( Completion ): Completion of the Buy-Back ( Completion ) will occur at 10.00am on the date that is 5 business days after the satisfaction of the Conditions (or such other time as the parties agree). At Completion of the Agreement:
(i) Lydian must deliver or cause to be delivered to the Company a duly completed share transfer form in respect of the Sale Shares in favour of the Company, together with a copy of Lydian’s holding statement in respect of the Sale Shares; and
(ii) the Company will register the share transfer, cancel the Sale Shares and notify the cancellation of the Sale Shares to ASX and ASIC.
(d) ( Post-Completion Obligations ): Post Completion, the Company must pay the Purchase Price to Lydian in immediately available funds no later than 5 business days following completion of the next capital raising undertaken by the Company after the date of the Agreement through the issue of new Shares for cash consideration.

On 5 September 2016, the Company announced completion of a placement to raise $529,015 before costs, at $0.05 per Share. The proceeds of this capital raising will be used to pay the consideration payable under the Buy-Back and mean that following the receipt of Shareholder approval, the Company will be able to complete all obligations under the Buy-Back, and close this matter out.

The Agreement otherwise contains provisions and warranties which are considered standard for an agreement of this nature.

8.3 ASX Listing Rule 10.1

ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a “substantial asset” from, or dispose of a substantial asset to, a substantial holder (if the person and the person’s associates have a “relevant interest”, or had a relevant interest at any time in the 6 months before the transaction, in at least 10% of the total votes attached to the voting securities).

Lydian is a “substantial holder” for the purposes of ASX Listing Rule 10.1 because in the last 6 months it has held a relevant interest in more than 10% (namely 25.31%) of the Company’s issued Shares. As at the date of this Notice, Lydian still holds a relevant interest in 9.34% of the Company’s issued Shares.

An asset is substantial if its value or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the company as set out in the latest accounts given to ASX under the ASX Listing Rules.

The parcel of Sale Shares is therefore a substantial asset as its value exceeds 5% of the equity interests of the Company.

The Buy-Back therefore requires shareholder approval for the purpose of ASX Listing Rule 10.1.

ASX Listing Rule 10.1 provides that shareholder approval sought for the purpose of ASX Listing Rule 10.1 must include a report on the proposed acquisition from an independent expert.

The Independent Expert’s Report prepared by RSM Australia sets out a detailed examination of the Buy-Back contemplated by Resolution 10 to enable Shareholders to assess its merits. The Independent Expert’s Report concludes that the Buy-Back is fair and reasonable to the non-associated Shareholders of the Company.

8.4 Section 257D of the Corporations Act

The Corporations Act provides that the rules relating to share buy-backs are designed to protect the interests of shareholders and creditors by:

(a) addressing the risk of the transaction leading to the company’s solvency;
(b) seeking to ensure fairness between the shareholders of the company; and
(c) requiring the company to disclose all material information.

In particular, Section 257A of the Corporations Act provides that a company may buy back its own shares if:

(a) the buy-back does not materially prejudice the company’s ability to pay its creditors; and
(b) the company follows the procedures laid down in Division 2 of Part 2J.1 of the Corporations Act.

Pursuant to Section 257D(1) of the Corporations Act, a selective share buy-back must be approved by either:

(a) a special resolution passed at a general meeting of the Company, with no votes being cast in favour of the resolution by any person whose shares are to be bought back or by their associates; or
(b) a resolution agreed to, at a general meeting by all ordinary shareholders.

The phrase “no votes being cast” is intended to operate in a similar way to the way in which voting exclusion statements operate in the context of the ASX Listing Rules.

Pursuant to Section 257D(2) of the Corporations Act, the Company must include with the Notice a statement setting out all information known to the Company that is material to the decision on how to vote on the Resolution. However, the Company does not have to disclose information if it would be unreasonable to require the Company to do so because the Company had previously disclosed the information to Shareholders.

Section 257H(3) of the Corporations Act provides that immediately after the registration of the transfer to a company of shares bought back, the shares are cancelled.

ASIC Regulatory Guide 110 sets out what ASIC expects a company to provide when disclosing such information to shareholders with a notice of meeting. This information is set out below.

8.5 Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The payment of the Purchase Price to Lydian for the Buy-Back constitutes giving a financial benefit and Lydian is a related party of the Company by virtue of being controlled by Mr Tsvetnenko, a former Director of the Company.

The Directors consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the payment of the Purchase Price for the Buy-back because the Agreement was negotiated on an arm’s length basis following the sudden resignation of Mr Tsvetnenko meaning Mr Tsvetnenko had no involvement in the formulation of the Company’s strategy for undertaking the Buy-Back or the pricing of the Buy-Back.

8.6 Impact of Buy-Back on the capital structure of the Company

The effect of the proposed Buy-Back on the Company will be to reduce the total number of Shares on issue by 17,633,839, amounting to 9.34% of the issued capital of the Company.

The overall effect of the Buy-Back on the capital structure of the Company is as follows:

Event	Shares	Options
Securities on issue as at the date of this notice	188,699,884	3,849,517
Less Shares subject to selective buy- back and cancellation	17,633,839	Nil
Shares on issue at Completion of the Transaction	171,036,045	3,849,517

8.7 Effect of the Buy-Back on control of the Company

If Resolution 10 is passed, it is not expected that the Buy-Back will give rise to any change in the control of the Company.

8.8 Source of funding of the Buy-Back

As set out in the announcement dated 5 September 2016, the funds raised in the recent placement are intended to provide the main source of funds for the payment for the Buy-Back, meaning that the payment of the Buy-Back will not have a material effect on the Company’s cash balance prior to the date of the announcement of the Buy-Back.

8.9 Financial effect of the Buy-Back on the Company

The consideration payable to Lydian for the proposed Buy-back is a total of $529,015.17, which has been determined by multiplying the number of Sale Shares by the Purchase Price, being 17,633,839 Shares at $0.03.

Because the terms of the Buy-Back permit the Company to raise funds before completing the payment under the Buy-Back, the Buy-Back is not expected to have any material financial effect on the state of the Company as at the date that the Buy-Back documentation was first announced.

The financial effect on the Company of the Buy-Back will be to reduce Shareholders’ funds (net assets) by $529,015.17. On 5 September 2016, the Company announced that it had raised approximately $529,015 under a placement, which funds will be used to funds the settlement of the Buy-Back.

8.10 Share trading price

The highest, lowest and last trading price of Shares on ASX over the 3 months prior to the date of this Notice is set out below:

	Price	Date
Highest	$0.16	19 July 2016
Lowest	$0.06	25 August 2016
Last	$0.078	25 October 2016

8.11 Advantages and disadvantages of the Buy-Back

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 proposed Resolution 10:

(a) the Buy-Back effectively completes the exit of Mr Tsvetnenko from the Company, including any link between Mr Tsvetnenko and his ongoing personal matters that lead to his resignation;
(b) the Buy-Back ensures that there is no impediment to the Company obtaining any licences or approvals required to operate its business in the United States caused by the ongoing matters there regarding Mr Tsvetnenko;
(c) there will be a lesser number of Shares on issue, consequently the ownership interest in the Company of each Shareholder will increase; and
(d) the Independent Expert has determined that the Buy-Back is fair and reasonable to the non-associated Shareholders of the Company.

The Board believes the disadvantage to Shareholders of the Buy-Back is the reduction in Shareholders’ funds as described in Section 6.9 above, however the Directors note that a placement has recently been completed for the purpose of paying the consideration owing under the Buy-Back and therefore believe the Buy-Back will not prejudice the Company’s ability to pay its creditors or the interests of Shareholders generally.

8.12 Independent Expert’s Report

The Independent Expert's Report prepared by RSM Australia (a copy of which is attached as Annexure A to this Explanatory Statement) assesses whether the transaction contemplated by Resolution 10 is fair and reasonable to the nonassociated Shareholders of the Company.

The Independent Expert’s Report concludes that the transaction contemplated by Resolution 10 is fair and reasonable to the non-associated Shareholders of the Company.

Shareholders are urged to carefully read the Independent Expert’s Report to understand the scope of the report, the methodology of the valuation and the sources of information and assumptions made.

8.13 The Company’s current business plan

The Buy-Back is a considered by the Directors to have no effect on the Company’s business activities and plan going forward which remains the ongoing development of the digital consumer products such as the DigitalX pocket and the participation in the trading of Bitcoin as most recently set out in the Company’s presentation released to ASX on 5 September 2016. Details of the business operations, results and the ongoing business plan are set out in the Company’s ASX announcements available from the ASX website at www.asx.com.au.

8.14 Recommendations of Directors

Based on the information available, including that contained in this Explanatory Statement and the Independent Expert’s Report, all of the Directors consider that the Buy-Back the subject of Resolution 10 is in the best interests of the Company.

The Directors strongly recommend that Shareholders vote in favour of the Resolution. The Directors confirm that they intend to vote in favour of Resolution 10 in relation to all votes that they control. No Director has an interest in the BuyBack other than as holders of securities in the Company.

8.15 Other material information

There is no other information material to the making of a decision by Shareholders where or not to vote in favour of Resolution 10 being information that is known to the Directors which has not previously been disclosed to Shareholders, other than as set out in this Notice.

Pursuant to Section 257H(3) of the Corporations Act, immediately after the registration of the transfer to the Company of the Shares bought back pursuant to Resolution 10, those Shares will be cancelled.

GLOSSARY

$ means Australian dollars.

10% Placement Capacity has the meaning given in Section 5.1.

Agreement means the buy-back agreement dated 24 August 2016 between the Company and Lydian, whereby the Company has conditionally agreed to buy-back the Sale Shares.

Annual General Meeting or Meeting means the meeting convened by the Notice.

ASIC means the Australian Securities & Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or the financial market operated by ASX Limited, as the context requires.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Buy-Back means the buy-back of the Sale Shares by the Company the subject of Resolution 7.

Chair means the chair of the Meeting.

Closely Related Party of a member of the Key Management Personnel means:

(a) a spouse or child of the member;
(b) a child of the member’s spouse;
(c)
a dependent of the member or the member’s spouse;
(d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;
(e)
a company the member controls; or
(f) a person prescribed by the Corporations Regulations 2001 (Cth) for the purposes of the definition of ‘closely related party’ in the Corporations Act.

Company means DigitalX Ltd (ACN 009 575 035).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Eligible Entity means an entity that, at the date of the relevant general meeting:

(a) is not included in the S&P/ASX 300 Index; and
(b) has a market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of less than $300,000,000.

Equity Securities includes a Share, a right to a Share or Option, an Option, a convertible security and any security that ASX decides to classify as an Equity Security.

Explanatory Statement means the explanatory statement accompanying the Notice.

Key Management Personnel has the same meaning as in the accounting standards issued by the Australian Accounting Standards Board and means those persons having authority and responsibility for planning, directing and controlling the activities of the Company, or if the Company is part of a consolidated entity, of the consolidated entity, directly or indirectly, including any director (whether executive or otherwise) of the Company, or if the Company is part of a consolidated entity, of an entity within the consolidated group.

Lydian means Lydian Enterprises Pty Ltd (ACN 139 802 921) as trustee of the Lydian Trust.

Notice or Notice of Meeting means this notice of meeting including the Explanatory Statement and the Proxy Form.

Option means an option to acquire a Share.

Optionholder means a holder of an Option.

Ordinary Securities has the meaning set out in the ASX Listing Rules.

Proxy Form means the proxy form accompanying the Notice.

Remuneration Report means the remuneration report set out in the Director’s report section of the Company’s annual financial report for the year ended 30 June 2016.

Resolutions means the resolutions set out in the Notice, or any one of them, as the context requires.

RSM Australia means RSM Australia Pty Ltd (trading as RSM Australia).

Section means a section of the Explanatory Statement.

Sale Shares means 17,633,839 Shares held by Lydian.

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

Shareholder means a registered holder of a Share.

Variable A means “A” as set out in the formula in ASX Listing Rule 7.1A(2).

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

SCHEDULE 1 – ISSUES OF EQUITY SECURITIES SINCE 30 NOVEMBER 2015

Date	Quantity	Class	Recipients	Issue price and discount to Market Price (if applicable)1	Form of consideration
Issue – 5 September 2016 Appendix 3B –7 September 2016	10,580,303	Shares2	Merchant Capital Markets Pty Ltd through their Merchant Opportunities Fund as announced to the ASX on 5 September 2016.	$0.05 (discount to market of 37.5%)	Amount raised = $529,015 Amount spent = $0 Use of funds: The funds will be used to facilitate the share buy-back as announced to the ASX on 5 September 2016. Amount remaining = $529,015 Proposed use of remaining funds3 The whole of the amount remaining will be used to complete the share buy-back proposed under this Notice, if/when shareholder approval has been received.

Notes:

Market Price means the closing price on ASX (excluding special crossings, overnight sales and exchange traded option exercises). For the purposes of this table the discount is calculated on the Market Price on the last trading day on which a sale was recorded prior to the date of issue of the relevant Equity Securities.
Fully paid ordinary shares in the capital of the Company, ASX Code: DCC (terms are set out in the Constitution).
This is a statement of current intentions as at the date of this Notice. As with any budget, intervening events and new circumstances have the potential to affect the manner in which the funds are ultimately applied. The Board reserves the right to alter the way the funds are applied on this basis.

SCHEDULE 2 – SUMMARY OF TERMS OF EMPLOYEE SHARE PLAN

The key terms of the Employee Share Plan are as follows:

(a) Eligibility : Participants in the Scheme may be Directors, full-time and part-time employees of the Company or any of its subsidiaries ( Participants ).
(b) Administration of Plan : The Board is responsible for the operation of the Plan and has a broad discretion to determine which Participants will be offered Shares under the Plan.
(c) Offer: The Board may issue an offer to a Participant to participate in the Plan. The offer:
(i) will invite application for the number of Shares specified in the offer;
(ii) will specify the issue price for the Shares or the manner in which the Issue Price is to be calculated;
(iii) may invite applications for a loan up to the amount payable in respect of the Shares accepted by the Participant in accordance with the offer;
(iv) will specify any restriction conditions applying to the Shares;
(v) will specify an acceptance period; and
(vi) specify any other terms and conditions attaching to the Shares.
(d) Issue price: the issue price of each Share will be not less the volume weighted average price at which Shares were traded on the ASX over the 10 trading days up to and including the actual date of acceptance of the Shares offered under the Offer.
(e) Restriction Conditions: Shares may be subject to restriction conditions (such as a period of employment) which must be satisfied before the Shares can be sold, transferred, or encumbered. Shares cannot be sold, transferred or encumbered until any loan in relation to the Shares has been repaid or otherwise discharged under the Plan.
(f) Loan: A Participant who is invited to subscribe for Shares may also be invited to apply for a loan up to the amount payable in respect of the Shares accepted by the Participant ( Loan ), on the following terms:
(i) the Loan will be interest free;
(ii) the Loan made available to a Participant shall be applied by the Company directly toward payment of the issue price of the Shares;
(iii) the Loan repayment date and the manner for making such payments shall be determined by the Board and set out in the offer;
(iv) a Participant must repay the Loan in full by the loan repayment date but may elect to repay the Loan amount in respect of any or all of the Shares at any time prior to the loan repayment date;

(v) the Company shall have a lien over the Shares in respect of which a Loan is outstanding and the Company shall be entitled to sell those Shares in accordance with the terms of the Plan;
(vi) a Loan will be non-recourse except against the Shares held by the Participant to which the Loan relates; and
(vii) the Board may, in its absolute discretion, agree to forgive a Loan made to a Participant.
(g) Unfulfilled Restriction Condition: Where a restriction condition in relation to Shares is not satisfied by the due date, or becomes incapable of satisfaction in the opinion of the Board, the Company must, unless the restriction condition is waived by the Board, either:
(i) buy back and cancel the relevant Shares within 12 months of the date the restriction condition was not satisfied (or became incapable of satisfaction) under Part 2J.1 of the Corporations Act at a price equal to the cash consideration paid by the Participant for the Plan Shares (with any Loan not being treated as cash consideration but any Loan Amount repayments by the Participant being treated as cash consideration); or
(ii) arrange to sell the Shares as soon as reasonably practicable either on the ASX or to an investor who falls within an exemption under section 708 of the Corporations Act provided that the sale must be at a price that is no less than 80% of the volume weighted average price at which Shares were traded on the ASX on the 10 trading days before the sale date and apply the sale proceeds ( Sale Proceeds ) in the following priority:
- (A) first, to pay the Company any outstanding Loan Amount (if any) in relation to the Shares and the Company’s reasonable costs in selling the Shares;
- (B) second, to the extent the Sale Proceeds are sufficient, to repay the Participant any cash consideration paid by the Participant or Loan Amount repayments (including any cash dividends applied to the Loan Amount) made by or on behalf of the Participant; and
- (C) lastly, any remainder to the Company to cover its costs of managing the Plan.

(h) Sale of Shares to repay Loan :

(i) A Loan shall become repayable in full where:
(A) the Participant (or, where the Participant is an Associate of an Eligible Employee, the Eligible Employee) ceases to be an Eligible Employee for any reason (including death);
(B) the Participant suffers an event of insolvency;
(C) the Participant breaches any condition of the Loan or the Plan; or

  - (D) a Restriction Condition in relation to Shares subject to the Loan is not satisfied by the due date, or becomes incapable of satisfaction in the opinion of the Board (and is not waived).

(ii) Where a Loan becomes repayable and at that time a Restriction Condition in relation to Shares subject to the Loan is not satisfied, or is incapable of being satisfied in the opinion of the Board (and is not waived), the Shares must be sold and the Sale Proceeds applied to repay the Loan in accordance the Plan.
(iii) Where a Loan in relation to Shares becomes repayable and at that time Restriction Conditions in relation to the Shares have either been satisfied or are waived, the Company must give the Participant a 30 day period to repay the Loan, failing which the Company must sell the Shares and apply the Sale Proceeds in accordance with the Plan.
(i) Power of Attorney: The Participant irrevocably appoints each of the Company and each director of the Company severally as his or her attorney to do all things necessary to give effect to the sale of the Participant’s Shares in accordance with the Plan.
(j) Plan limit: The Company must take reasonable steps to ensure that the number of Shares offered by the Company under the Plan when aggregated with:
(i) the number of Shares issued during the previous 5 years under the Plan (or any other employee share plan extended only to Eligible Employees); and
(ii) the number of Shares that would be issued if each outstanding offer for Shares (including options to acquire unissued Shares) under any employee incentive scheme of the Company were to be exercised or accepted,

does not exceed 5% of the total number of Shares on issue at the time of an offer (but disregarding any offer of Shares or option to acquire Shares that can be disregarded in accordance with relevant ASIC Class Orders).

(k) Restriction on transfer: Participants may not sell or otherwise deal with a Plan Share until the Loan Amount in respect of that Plan Share has been repaid and any restriction conditions in relation to the Shares have been satisfied or waived. The Company is authorised to impose a holding lock on the Shares to implement this restriction.
(l) Quotation on ASX: The Company will apply for each Plan Share to be admitted to trading on ASX upon issue of the Plan Share. Quotation will be subject to the ASX Listing Rules and any holding lock applying to the Shares.
(m) Rights attaching to Shares : Each Plan Share shall be issued on the same terms and conditions as the Company’s issued Shares (other than in respect of transfer restrictions imposed by the Plan) and it will rank equally with all other issued Shares from the issue date except for entitlements which have a record date before the issue date.

PROXY FORM

DIGITALX LTD ACN 009 575 035

ANNUAL GENERAL MEETING

I/We of: being a Shareholder entitled to attend and vote at the Meeting, hereby appoint: Name: OR: the Chair of the Meeting as my/our proxy.

or failing the person so named or, if no person is named, the Chair, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, and subject to the relevant laws as the proxy sees fit, at the Meeting to be held at [3], on [4] at [*5], and at any adjournment thereof.

AUTHORITY FOR CHAIR TO VOTE UNDIRECTED PROXIES ON REMUNERATION RELATED RESOLUTIONS

Where I/we have appointed the Chair as my/our proxy (or where the Chair becomes my/our proxy by default), I/we expressly authorise the Chair to exercise my/our proxy on Resolutions 1 and 7 (except where I/we have indicated a different voting intention below) even though Resolutions 1 and 7 is connected directly or indirectly with the remuneration of a member of the Key Management Personnel, which includes the Chair.

CHAIR’S VOTING INTENTION IN RELATION TO UNDIRECTED PROXIES

The Chair intends to vote undirected proxies in favour of all Resolutions. In exceptional circumstances the Chair may change his/her voting intention on any Resolution. In the event this occurs an ASX announcement will be made immediately disclosing the reasons for the change.

Voting on business of the Meeting	Voting on business of the Meeting	FOR	AGAINST	ABSTAIN
Resolution 1	Adoption of Remuneration Report
Resolution 2	Re-election of Director - Mr William Brindise
Resolution 3	Election of Director – Mr Toby Hicks
Resolution 4	Election of Director – Mr Leigh Travers
Resolution 5	Election of Director – Mr Faisal Khan
Resolution 6	Approval of 10% Placement capacity
Resolution 7	Adoption of Employee Share Plan
Resolution 8	Approval to issue Shares to Executive Director – Leigh
	Travers
Resolution 9	Approval to issue Shares to Non-Executive Director – Faisal
	Khan
Resolution 10	Selective Buy-Back of Shares from a Substantial Holder

Please note : If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is:

Signature of Shareholder(s):

Individual or Shareholder 1 Sole Director/Company Secretary	Shareholder 2 Director	Shareholder 3

		Director/Company Secretary

2916-08/1591787_4

Date:

Contact name: E-mail address:

Contact ph (daytime): Consent for contact by e-mail in relation to this Proxy Form: YES NO

Instructions for completing Proxy Form

1.

( Appointing a proxy ): A Shareholder entitled to attend and cast a vote at the Meeting is entitled to appoint a proxy to attend and vote on their behalf at the Meeting. If a Shareholder is entitled to cast 2 or more votes at the Meeting, the Shareholder may appoint a second proxy to attend and vote on their behalf at the Meeting. However, where both proxies attend the Meeting, voting may only be exercised on a poll. The appointment of a second proxy must be done on a separate copy of the Proxy Form. A Shareholder who appoints 2 proxies may specify the proportion or number of votes each proxy is appointed to exercise. If a Shareholder appoints 2 proxies and the appointments do not specify the proportion or number of the Shareholder’s votes each proxy is appointed to exercise, each proxy may exercise one-half of the votes. Any fractions of votes resulting from the application of these principles will be disregarded. A duly appointed proxy need not be a Shareholder.

( Direction to vote ): A Shareholder may direct a proxy how to vote by marking one of the boxes opposite each item of business. The direction may specify the proportion or number of votes that the proxy may exercise by writing the percentage or number of Shares next to the box marked for the relevant item of business. Where a box is not marked the proxy may vote as they choose subject to the relevant laws. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing instructions ):

( Individual ): Where the holding is in one name, the Shareholder must sign.
( Joint holding ): Where the holding is in more than one name, all of the Shareholders should sign.
( Power of attorney ): If you have not already provided the power of attorney with the registry, please attach a certified photocopy of the power of attorney to this Proxy Form when you return it.
( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held. In addition, if a representative of a company is appointed pursuant to Section 250D of the Corporations Act to attend the Meeting, the documentation evidencing such appointment should be produced prior to admission to the Meeting. A form of a certificate evidencing the appointment may be obtained from the Company.
( Attending the Meeting ): Completion of a Proxy Form will not prevent individual Shareholders from attending the Meeting in person if they wish. Where a Shareholder completes and lodges a valid Proxy Form and attends the Meeting in person, then the proxy’s authority to speak and vote for that Shareholder is suspended while the Shareholder is present at the Meeting.
( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:
(b) post to DigitalX Ltd, Level 4, 16 Milligan Street, Perth WA 6000.; or
(c) facsimile to the Company on facsimile number +61 8 9321 4333;
(d) email to: [email protected]

so that it is received not less than 48 hours prior to commencement of the Meeting.

Proxy Forms received later than this time will be invalid.

Annexure A

==> picture [234 x 257] intentionally omitted <==

==> picture [314 x 257] intentionally omitted <==

==> picture [168 x 26] intentionally omitted <==

==> picture [349 x 18] intentionally omitted <==

==> picture [92 x 16] intentionally omitted <==

==> picture [177 x 19] intentionally omitted <==

==> picture [15 x 19] intentionally omitted <==

==> picture [140 x 19] intentionally omitted <==

==> picture [98 x 42] intentionally omitted <==

==> picture [216 x 27] intentionally omitted <==

RSM Corporate Australia Pty Ltd ABN 82 050 508 024 (“RSM Corporate Australia 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 financial services that we will be providing you under our Australian Financial Services Licence, Licence No 255847;
 remuneration that we and/or our staff and any associates receive in connection with the financial services that we will be providing to you;
 any relevant associations or relationships we have; and
 our complaints handling procedures and how you may access them.

Financial services we will provide

For the purposes of our report and this FSG, the financial service we will be providing to you is the provision of general financial product advice in relation to securities.

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.

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 various fees for providing different financial services. However, in respect of the financial service being provided to you by us, fees will be agreed, and paid by, the person who engages us to provide the report and such fees will be agreed on either a fixed fee or time cost basis. You will not pay to us any fees for our services; the Company will pay our fees. These fees are disclosed in the Report.

Except for the fees referred to above, neither RSM Corporate Australia 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 Corporate Australia Pty Ltd is beneficially owned by the partners of RSM Australia, a large national firm of chartered accountants and business advisers. Our directors are partners of RSM Australia Partners.

From time to time, RSM Corporate Australia Pty Ltd, RSM Australia Partners, RSM Australia and / or RSM Australia 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 should be directed to The Complaints Officer, RSM Corporate Australia Pty Ltd, P O Box R1253, Perth, WA, 6844.

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 Ombudsman Service (“FOS”). FOS 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 FOS are available at the FOS website or by contacting them directly via the details set out below.

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll Free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

Contact Details

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

1.	Introduction ......................................................................................................................................................... 5
2.	Summary and conclusion ................................................................................................................................... 6
3.	Summary of transaction ...................................................................................................................................... 9
4.	Scope of the report ........................................................................................................................................... 10
5.	Profile of DigitalX Limited ................................................................................................................................. 11
6.	Valuation approach ........................................................................................................................................... 16
7.	Valuation of DigitalX Limited Prior to the Buy-Back ......................................................................................... 18
8.	Is the Buy-Back fair to DigitalX Shareholders? ................................................................................................ 22
9.	Is the Buy-Back Reasonable? .......................................................................................................................... 23
A.	Declarations and disclaimers ............................................................................................................................ 27
B.	Sources of information ...................................................................................................................................... 28
C.	Glossary of terms .............................................................................................................................................. 29

==> picture [100 x 43] intentionally omitted <==

RSM Corporate Australia Pty Ltd

8 St Georges Terrace Perth WA 6000 GPO Box R 1253 Perth WA 6844

T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9199

www.rsm.com.au

Report dated: 20 October 2016

The Directors DigitalX Limited Level 7 1008 Hay Street PERTH WA

Dear Directors

==> picture [229 x 26] intentionally omitted <==

==> picture [190 x 26] intentionally omitted <==

1. Introduction

1.1 This Independent Expert’s Report (the “Report” or “IER”) has been prepared to accompany the Notice of Annual General Meeting and Explanatory Statement (“Notice”) to be provided to shareholders for an Annual General Meeting of DigitalX Limited (“DigitalX” or “the Company”) to be held on 30 November 2016, at which shareholder approval will be sought for the buy-back of 17,633,839 shares held by entities associated with Mr Zhenya Tsvetnenko following his resignation as a director of the Company in July 2016. These shares will be cancelled upon completion of the buy-back (“Buy-Back”).
1.2 The Company will pay a consideration of $0.03 per every share held by Mr Tsvetnenko (“Consideration”).
1.3 Under the Buy-Back, no consideration is payable until a capital raising is completed.
1.4 The Directors of the Company have requested that RSM Corporate Australia Pty Ltd (“RSM”), being independent and qualified for the purpose, express an opinion as to whether the Buy-Back is fair and reasonable to shareholders not associated with the Buy-Back (“Non-Associated Shareholders”).
1.5 The request for approval of the Buy-Back is included as Resolution 1 in the Notice.

==> picture [168 x 13] intentionally omitted <==

==> picture [121 x 13] intentionally omitted <==

==> picture [296 x 8] intentionally omitted <==

==> picture [200 x 8] intentionally omitted <==

==> picture [322 x 8] intentionally omitted <==

==> picture [126 x 8] intentionally omitted <==

==> picture [45 x 8] intentionally omitted <==

==> picture [62 x 8] intentionally omitted <==

==> picture [338 x 11] intentionally omitted <==

2. Summary and conclusion

Opinion

2.1 In our opinion, and for the reasons set out in Sections 8 and 9 of this Report, the Buy-Back is fair and reasonable to the Non-Associated Shareholders of DigitalX.

Approach

2.2 ASX Listing Rule 10.1 states that an entity must ensure that neither it, nor any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to a related party of substantial shareholder or any of its associates without the approval of holders of the entity’s ordinary securities.
2.3 A substantial holder is a shareholder that holds at least 10% of the issued capital of a company. A related party could be a director of the Company or a former director at any time within the previous 6 months. Mr Tsvetnenko resigned as chairman of the Company in July 2016 and is a substantial holder with approximately 17.6 million DigitalX Shares (approximately 9.3%) in which he has an interest. Therefore, for the purpose of the ASX Listing Rules, Mr Tsvetnenko is both a related party and a substantial holder of the Company.
2.4 An asset is considered substantial “if its value; or the value of the consideration for it is, or in the ASX’s opinion is, 5% or more of the equity interests of the entity as set out in the latest accounts given to the ASX”.
2.5 Therefore, we have considered whether or not the Buy-Back is “fair” to the Non-Associated Shareholders by assessing and comparing:
The Fair Value of a DigitalX Share; with
The Fair Value of the Consideration,

and, considered whether the Buy-Back is “reasonable” to the Non-Associated Shareholders by undertaking an analysis of the other factors relating to the Buy-Back which are likely to be relevant to the Non-Associated Shareholders in their decision of whether or not to approve the Buy-Back.

2.6 Further information of the approach we have employed in assessing whether the Buy-Back is “fair and reasonable” is set out at Section 4 of this Report.

Fairness

2.7 The table below compares the value of the Assets to the value of the consideration:

Table 1 Assessed values of a DigitalX share pre the Buy-Back and the Consideration

Assessment of fairness	Ref	Value per Share Low High	Value per Share Low High
Fair value of aDigitalXShare	7.20	$0.050	$0.078
Fair value of Consideration	1.2	$0.030	$0.030

Source: RSM analysis

2.8 We have summarised the values included in the table above in the chart below.

Figure 1 DigitalX Share Valuation graphical representation

==> picture [477 x 170] intentionally omitted <==

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

Fair Value of DIgitalX Share
Fair Value of Consideration
$- $0.010 $0.020 $0.030 $0.040 $0.050 $0.060 $0.070 $0.080
A$ per share
----- End of picture text -----

Source: RSM analysis

2.9
The chart above indicates that value of the Consideration is below the range of values for a DigitalX share.
2.10 In accordance with the guidance set out in ASIC RG 111, and in the absence of any other relevant information, for the purposes of complying with ASX Listing Rule 10.1, we consider the Buy-Back to be fair to the NonAssociated Shareholders of DigitalX as the value of a DigitalX Share prior to the Buy-Back is greater than of the value of the Consideration.

Reasonableness

2.11 RG 111 establishes that an offer is reasonable if it is fair. It might also be reasonable if, despite not being fair, there are sufficient reasons for security holders to accept the offer in the absence of any higher bid before the offer closes. As such, we have also considered the following factors in relation to the reasonableness aspects of the Buy-Back:
The future prospects of the Company if the Buy-Back does not proceed; and
Any other commercial advantages and disadvantages to the Non-Associated Shareholders as a consequence of the Buy-Back proceeding.
2.12 If the Buy-Back does not proceed, Mr Tsvetnenko’s shareholding may create a market ‘overhang’, characterised by downward pressure on the market price of shares which arises when the market expects a significant parcel of shares to be sold in the short term.
2.13 The key advantages of the Buy-Back are:
The Buy-Back is fair;
The Buy-Back is being completed at a significant discount to the current quoted market price of the Company’s shares;
The Buy-Back will result in the Non-Associated Shareholders relative interest in the Company increasing; and
the Buy-Back effectively completes the exit of Mr Tsvetnenko from the Company, including any link between Mr Tsvetnenko and his ongoing personal matters that led to his resignation.

2.14 The key disadvantages of the Buy-Back are:
A capital raising was required to fund the Buy-Back reducing the positive impact of the cancellation of Mr Tsvetnenko’s shares as the capital raising had a dilutive impact to the Non-Associated Shareholders; and
The opportunity is not available to all Shareholders.
2.15 We are not aware of any alternative proposals which may provide a greater benefit to the Non-Associated Shareholders of DigitalX at this time.
2.16 In our opinion, the position of the Non-Associated Shareholders of DigitalX if the Buy-Back is approved is more advantageous than if the Buy-Back is not approved. Therefore, in the absence of any other relevant information and/or a superior offer, we consider that the Buy-Back is reasonable for the Non-Associated Shareholders of DigitalX.

3. Summary of transaction

Overview

3.1 Following the resignation of Mr Tsvetnenko as a director of the Company in July 2016, the Company has agreed to buy-back 17,633,839 Shares held by entities associated with Mr Tsvetnenko so that he and his entities will cease to hold any interest in the Company.
3.2 The Company will pay $0.03 per share as Consideration for the Shares and the Shares will be cancelled upon completion of the buy-back (“Buy-Back”),

Key conditions of the Buy-Back

3.3 Completion of the Proposed Acquisition is subject to and conditional upon a number of conditions precedent, including:
Mr Tsvetnenko entering into all agreements to dispose of the remainder of all his approximate 25 million shares in which he has an interest (condition met);
The completion of a capital raising which will help fund the Buy-Back (condition met); and
All regulatory and shareholder approvals beings received.

Rationale for the Buy-Back

3.4 In connection with Mr Tsvetnenko’s resignation from the Company, the Buy-Back effectively completes the exit of Mr Tsvetnenko from the Company, including any link between Mr Tsvetnenko and his ongoing personal matters that lead to his resignation and ensures that there is no impediment to the Company obtaining any licences or approvals required to operate its business in the United States caused by the ongoing matters there regarding Mr Tsvetnenko.

Impact of Buy-Back on DigitalX’s Capital Structure

3.5 The table below sets out a summary of the capital structure of DigitalX prior to and post the Buy-Back.

Table 2 Capital structure

	Prior to Buy-Back	Prior to Buy-Back	Post	Buy-Back1
Mr Tsvetnenko's shareholding	17,633,839	9.3%	-	0.0%
Non-Associated Shareholders	171,066,045	90.7%	171,066,045	100.0%
Total shares on issue	188,699,884	100.0%	171,066,045	100.0%

Source: Company

Assuming shares are cancelled

4. Scope of the report

ASX Listing Rules

4.1 ASX Listing Rule 10.1 states that an entity must ensure that neither it, nor any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to, a substantial shareholder, a related party or any of its associates without the approval of holders of the entity’s ordinary securities.
4.2 A related party could be a director of the Company or a former director from any time in the last 6 months. Mr Tsvetnenko resigned as a director of DigitalX in July 2016. Therefore, for the purposes of the ASX Listing Rules, Mr Tsvetnenko is treated as a related party.
4.3 An asset is considered substantial “if its value; or the value of the consideration for it is, or in the ASX’s opinion is 5% or more of the equity interest of the entity as set out in the latest financial statements given to the ASX”.
4.4 The equity interest of Mr Tsvetnenko and his related entities as at 5 October 2016 was 9.3%. As such the value of the assets will exceed 5% of the value of equity.
4.5 ASX Listing Rule 10.10 states that the notice for the shareholders’ meeting required under ASX Listing Rule 10.1 must include a report on the transaction from an independent expert. The report must state whether, in the expert’s opinion, the transaction is fair and reasonable to the Non-Associated Shareholders.
4.6 Accordingly, DigitalX is to hold a meeting of its Shareholders where it will seek approval for the Buy-Back and the Company has engaged RSM, to prepare a report which sets out our opinion as to whether the Buy-Back is fair and reasonable to Non-Associated Shareholders.

Basis of Evaluation

4.7 In determining whether providing the Security is “fair and reasonable” we have given regard to the views expressed by the ASIC in RG 111.
4.8 RG 111 provides ASIC’s view 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 Buy-Back is fair and reasonable.
4.9 RG 111 states that the expert’s 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.
4.10 RG 111 states that in relation to related party transaction the expert’s assessment of fair and reasonable should not be applied on a composite test – that is, there should be a separate assessment of whether the transaction is “fair and reasonable” as in a control transaction.
4.11 Consistent with the guidelines in RG 111 and our interpretation of RG 111.54, in assessing whether the BuyBack is fair and reasonable to the Non-Associated Shareholders, the analysis undertaken is as follows:
Whether the value of a DigitalX share is greater than the Consideration transferred for the Buy-Back – fairness; and
A review of other significant factors which Non-Associated Shareholders might consider prior to approving the Buy-Back – reasonableness.
4.12 Our assessment of the Buy-Back is based on economic, market and other conditions prevailing at the date of this Report.

5. Profile of DigitalX Limited

Background

5.1 DigitalX Limited is an ASX listed company which operates as an integrated software development payments company in the digital currency market in Australia.
5.2 The company develops a suite of software for institutions and consumers through Blockchain technology and the secure ledger system.
5.3 It provides DigitalX Direct, a private platform designed to provide real time liquidity to institutional investors and large commercial operators; and AirPocket, a peer-to-peer solution for the remittance market, and enables cash transfers throughout the world.
5.4 The Company was formerly known as Digital CC Limited and changed its name to DigitalX Limited in December 2015. DigitalX Limited was incorporated in 1988 and is based in Perth, Australia.

Directors and management

5.5 The current directors and key management of DigitalX are summarised in the table below.

Table 3 DigitalX Directors

Name	Title	Experience
Mr Alex Karis	Chief Executive	Mr. Karis is a telecommunications and marketing entrepreneur with experience in sales
	Officer and Co-	and marketing services in the United States. Mr. Karis is also the founding Executive
	Founder	Chairman of the marketing firm, Karis Marketing Group which provides marketing
		services.
Mr William	Executive	Mr. Brindise has over 15 years’ experience in trading energy, metal and grain options and
Brindise	Director and	futures. He started his career on the New York Mercantile Exchange (NYMEX) working
	Chief Trading	as a trader before starting his own trading and brokerage company, BAK Capital.
	Officer	Following this he joined hedge fund SHK Management.
Mr Leigh	Executive	Mr. Travers is a current Director of the Australian Digital Currency Commerce Association
Travers	Director, VP	(ADCCA), the representative body for digital commerce businesses in Australia. He holds
	Business	a Bachelor of Commerce and Communications from the University of Western Australia.
	Development	Mr. Travers spent seven years at Wealth Management firm Euroz Securities as an
	and Investor	Investment Advisor, during which time he was one of the largest Bitcoin traders in
	Relations	Australia while managing DigitalX’s trading operations in the Southern Hemisphere.
Mr Toby Hicks	Non-Executive	Mr. Hicks holds a Bachelor of Business (Management) and Bachelor of Laws from the
	Director and	University of Notre Dame Australia, which included study at the University of Notre Dame
	Chairman	(South Bend, Indiana). He is also a Chartered Secretary.
		Mr. Hicks is now a Partner of corporate law firm, Steinepreis Paganin with 14 years’
		experience acting in the areas of governance, equity capital raisings, mergers and
		acquisitions and corporate compliance. He acts for a number of ASX listed companies,
		including technology companies. In addition, Mr. Hicks is a Governor of the University of
		Notre Dame Australia and is a member of the University’s Finance, Audit and Risk
		Committee and Law School Advisory Board.
Mr Faisal Khan	Non-Executive	Mr Khan has experience on remittance, banking, payments & financial technology
	Director	(FinTech). He is the owner of Faisal Khan & Company, a payments consultancy to
		Fortune 100 companies across the banking, FinTech and money transfer sectors.
		Previously Mr. Khan has appeared as a speaker and moderator at various international
		payments conferences and advises the Digital Finance Institute in Toronto, a think tank
		created to address prospective issues around the nexus between financial innovation,
		digital finance policy and regulation, financial inclusion, and women in financial
		technology.

Source: Company

Financial Performance

5.6 The following table sets out a summary of the financial performance of DigitalX for the years’ ended 30 June 2015 and 30 June 2016.

Table 4 DigitalX Historical Financial Performance

Consolidated Group	Ref	30-Jun-2016	30-Jun-2015
		Audited	Audited
		US$000's	US$000's
Other Income		52	56
Trading Desk Bitcoin Sales	5.8	38,427	29,337
Trading Desk Bitcoin Purchases	5.8	(37,873)	(28,751)
Professional and consultancy fees		(621)	(1,054)
Corporate expenses		(196)	(128)
Advertising, media and investor relations		(116)	(320)
Employee benefit expenses		(1,640)	(1,799)
Share based payments – employee benefits		-	1,654
Inventory write-down		(131)	-
Depreciation		(10)	(7)
Amortisation		-	(6)
Joint venture investment write down		-	(1,047)
Intangible asset impairment	5.9	(1,107)	-
Realised and unrealised foreign exchange losses		(7)	(255)
Bad debtors expense		(262)	(171)
Other expenses		(601)	(554)
Loss before tax	5.7	(4,083)	(3,044)
Income tax benefit/(expense)		-	-
Loss after income tax from continuing operations		(4,083)	(3,044)
Profit/(Loss)from discontinued operations		666	(3,726)
Loss for theperiod		(3,417)	(6,770)

Source: Company

5.7 The Company incurred net losses after tax from continuing operations of US$3.0 million in FY15 and US$4.1 million in FY16.

5.8 While the Bitcoin trading operations generated modest gross profits of US$0.6 million in each of FY15 and FY16, other operating costs contributed to a net loss in each year.

5.9 In FY16, DigitalX disclosed a US$1.1 million impairment provision against the costs capitalised for its AirPocket intangible asset, writing the carrying value of this asset down from US$1.3 million to US$0.2 million. The Company disclosed, in the FY16 financial statements, that provision had been recorded in the current period as a result of a lack of historical data with respect to the estimates used in determining the Fair Value of AirPocket. The Company also highlighted that the provision is to be reassessed at the next reporting date with anticipation that more information will be available to assess the recoverable amount of the asset.

Financial Position

5.10 The table below sets out a summary of the financial position of DigitalX as at 30 June 2016 and 30 June 2015.

Figure 2 DigitalX Historical Financial Position

Consolidated Group		30-Jun-16	30-Jun-15
		Audited	Audited
	Ref	US$000's	US$000's
Current assets
Cash and cash equivalents	5.12	1,042	2,608
Trade and other receivables		1,038	1,262
Prepayments		89	86
Bitcoins	5.12	163	1,011
Bitcoin mininghardware – assets held for sale	5.12	-	132
Total current assets		2,332	5,099
Non-current assets
Property, plant and equipment		24	6
Intangible assets	5.12	194	476
Total non-current assets		218	483
Total assets		2,550	5,582
Current liabilities
Trade and other payables		520	410
Accrued expenses		258	173
Restorationprovisions		104	104
Total current liabilities		883	687
Total liabilities		883	687
Net assets	5.11	1,668	4,895
Equity
Issued capital		21,249	21,069
Reserves		642	1,822
Accumulated losses		(20,224)	(17,986)
Total equity		1,668	4,905

Source: Company

5.11 The Company disclosed net assets at 30 June 2016 of US$1.7 million, down from US$4.9 million as at 30 June 2015.

5.12 The reduction in net assets was largely driven by cash burn of approximately US$1.6 million, reduction in Bitcoins and Bitcoin mining hardware assets of US$1.0 million and the impairment write down of the AirPocket intangible assets (net US$0.3 million).

Capital Structure

5.13 DigitalX has 188,699,884 ordinary shares on issue. The top 20 shareholders of DigitalX as at 30 September 2016 are set out below.

Table 5 DigitalX Top 20 shareholders

Rank	Name	Total units	% Issued share capital
1	Digital Man LLC	20,514,200	10.87%
2	Lydian Enterprises Pty Ltd	17,633,839	9.34%
3	Hoperidge Enterprises Pty Ltd	14,969,792	7.93%
4	NRB International LLC	12,549,897	6.65%
5	The Trust Company	8,880,303	4.71%
6	Mr Shane Robert Jones + Mrs Carol Robin Jones	8,238,730	4.37%
7	Alba Capital Pty Ltd	8,220,108	4.36%
8	Peterlyn Pty Ltd	7,177,876	3.80%
9	The Gas Superfund Pty Ltd	4,240,000	2.25%
10	Mr Scott Paul Jones + Mr Rodney Malcolm Jones + Mrs Carol Robin Jones	2,533,189	1.34%
11	Mr Raymond McLaren	1,865,790	0.99%
12	River Valley Pty Ltd	1,500,000	0.79%
13	Icon Holdings Pty Ltd	1,200,000	0.64%
14	Mr Maxwell Craig Hartree	1,153,800	0.61%
15	Auto Management Pty Ltd	1,000,000	0.53%
16	Ms Marina Katy Carver	1,000,000	0.53%
17	Fisimia Pty Ltd	1,000,000	0.53%
18	Foxtail Pty Ltd	1,000,000	0.53%
19	Loktor Holdings Pty Ltd	1,000,000	0.53%
20	Melbourne Capital Limited	1,000,000	0.53%
	Total Top 20 Shareholding	116,677,524	61.83%
	Total issued capital	188,699,884

Source: Company

Share price performance

5.14 The figure below sets out a summary of DigitalX closing share prices and traded volumes for the 12 months to 19 October 2016.

Figure 3 DigitalX daily closing share price and traded volumes

==> picture [507 x 204] intentionally omitted <==

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

0.250 30.0
Announcement of
Buy-Back
25.0
0.200
20.0
0.150
15.0
0.100
Announcement of
10.0
resignation of
Zhenya Tsvetnenko
0.050 as Chairman
5.0
0.000 0.0
Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16
Volume Price
Price
Volume (in millions)
----- End of picture text -----

Source: S&P Capital IQ/ ASX

5.15 In the 12-month period to the announcement of the Buy-Back on 25 August 2016, DigitalX Shares were traded with reasonable volume. Over the 180 days prior to the announcement, 49% of DigitalX Shares were traded, indicating that it is a reasonably liquid stock.
5.16 During this period, DigitalX shares traded at between $0.071 and $0.22 per share, with the most significant trading days being 13.1 million shares on 25 July 2016 upon the announcement of the resignation of Mr Tsvetnenko as Chairman of DigitalX, representing 6.9% of the total shares outstanding.
5.17 DigitalX’s share price performance is discussed in more detail in Paragraph 7.11.

6. Valuation approach

Valuation methodologies

6.1 In assessing the Fair Value of an ordinary DigitalX share prior to and immediately following the Buy-Back, we have considered a range of valuation methodologies. RG 111 proposes that it is generally appropriate for an expert to consider using the following methodologies:
the discounted cash flow (“DCF”) method and the estimated realisable value of any surplus assets;
the application of earnings multiples to the estimated future maintainable earnings or cash flows 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.
6.2 We consider that the valuation methodologies proposed by RG 111 can be split into three valuation methodology categories, as follows.

Market based methods

6.3 Market based methods estimate the Fair Value by considering the market value of a company’s securities or the market value of comparable companies. Market based methods include;
The quoted price for listed securities; and
Industry specific methods.
6.4 The recent quoted price for listed securities method provides evidence of the fair market value of a company’s securities where they are publicly traded in an informed and liquid market.
6.5 Industry specific methods usually involve the use of industry rules of thumb to estimate the fair market value of a company and its securities. Generally rules of thumb provide less persuasive evidence of the fair market value of a company than other market based valuation methods because they may not account for company specific risks and factors.

Income based methods

6.6 Income based methods estimate value by calculating the present value of a company’s estimated future stream of earnings or cash flows. Income based methods include:
Capitalisation of maintainable earnings; and
Discounted cash flow methods.
6.7 The capitalisation of earnings methodology is generally considered a short form DCF, where an estimation of the Future Maintainable Earnings (“FME”) of the business, rather than a stream of cash flows is capitalised based on an appropriate capitalisation multiple. Multiples are derived from the analysis of transactions involving comparable companies and the trading multiples of comparable companies.
6.8 The DCF technique has a strong theoretical basis, valuing a business on the net present value of its future cash flows. It requires an analysis of future cash flows, the capital structure and costs of capital and an assessment of the residual value or the terminal value of the company’s cash flows at the end of the forecast

period. This method of valuation is appropriate when valuing companies where future cash flow projections can be made with a reasonable degree of confidence.

Asset based methods

6.9 Asset based methodologies estimate the Fair Value of a company’s securities based on the realisable value of its identifiable net assets. Asset based methods include:
orderly realisation of assets method;
liquidation of assets method; and
net assets on a going concern basis.
6.10 The value achievable in an orderly realisation of assets is estimated by determining the net realisable value of the assets of a company which would be distributed to security holders after payment of all liabilities, including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner. This technique is particularly appropriate for businesses with relatively high asset values compared to earnings and cash flows.
6.11 The liquidation of assets method is similar to the orderly realisation of assets method except the liquidation method assumes that the assets are sold in a shorter time frame.
6.12 The net assets on a going concern method estimates the market values of the net assets of a company but unlike the orderly realisation of assets method it does not take into account realisation costs. Asset based methods are appropriate when companies are not profitable, a significant proportion of the company’s assets are liquid, or for asset holding companies.

Selection of Valuation Methodologies

Valuation of a DigitalX share pre the Buy-Back (non-control basis)

6.13 In assessing the value of a DigitalX share prior to the Buy-Back on a non-controlling basis we have utilised net assets on a going concern.
6.14 We have also utilised the quoted market price methodology.
6.15 Our valuation methodologies were selected on the following basis:
During the year ended 30 June 2016, the Company’s intangible assets (AirPocket) were significantly impaired as a result of a lack of historical data with respect to the estimates used in determining the fair value of AirPocket. As such, the most appropriate basis of valuation is the book value of asset and liabilities.
DigitalX’s shares are listed on the ASX which means there is a regulated and observable market for its shares. However, consideration must be paid to adequate liquidity and activity in order to rely on the quoted market price method;
In our opinion, the DCF methodology cannot be used as future revenue and expenses cannot be forecast with sufficient reasonable basis to meet the requirements of RG111; and
The FME methodology is not appropriate as the Company does not have a history of profits.

7. Valuation of DigitalX Limited Prior to the Buy-Back

7.1 As stated at paragraph 6.13 we have assessed the value of a DigitalX share prior to the Buy-Back on a net assets on a going concern basis and have also considered the quoted price of its listed securities. In both valuations, we have calculated a minority interest value.

Net assets on a going concern

7.2 We have assessed the value of a DigitalX share on a minority basis to be approximately $0.09 to $0.016 per share (undiluted), prior to the Buy-Back, based on net assets on a going concern valuation methodology, as summarised in the table below.

Table 6 Assessed fair value of a DigitalX Share

	Ref:	Low Value	High Value
Net asset value (US$)	5.11	1,667,795	1,667,795
Intangible assets(AirPocket)	7.5	-	1,206,641
$US net asset value		1,667,795	2,874,436
AUD:$US exchange rate	7.6	0.7658	0.7658
AUD net asset value		2,177,847	3,753,508
Undiluted shares on issue	5.13	188,699,884	188,699,884
AUD value per share		0.012	0.020
Minorityinterest discount %	7.8	26%	20%
Minority interest discount		(0.003)	(0.004)
Minority valueper share on a diluted basis(AUD)	7.2	0.009	0.016

7.3 Our assessment has been based on the net assets of the Company as reported in its financial statements as at 30 June 2016.
7.4 In calculating the current market value of DigitalX’s Shares, we have considered the following adjustments to the carrying values of the assets included in the Statement of Financial Position.

AirPocket technology

7.5 As note in paragraph 5.9 above, DigitalX raised a US$1.1 million impairment provision against the costs capitalised for its AirPocket intangible asset as a result of a lack of historical data available to determine the fair value of AirPocket. We have applied the accounting value of the AirPocket for our low valuation of the intangible assets. For the high valuation we have had added back the total investment in the AirPocket technology to reflect the historical investment made by DigitalX to develop AirPocket.

Exchange rate

7.6 We have converted the net assets of the Company to AUD from $US at a rate of 1$US:0.7658AUD as sourced from S&P Capital IQ on 5 October 2016.

Minority interest discount

7.7 In selecting a minority discount, we have given consideration to the RSM 2013 Control Premium Study. The study performed an analysis of control premiums paid over a 7-year period to 31 December 2012 in 345 successful takeovers and schemes of arrangements of companies listed on the ASX. Our study concluded

that, on average, control premiums in takeovers and schemes of arrangements involving Australian companies was in the range of 25% to 35%.

7.8 In valuing an ordinary DigitalX Share prior to the Buy-Back, we have applied the corresponding minority discount range based on said control premiums, being between 20% and 26%.

Quoted Price of Listed Securities

7.9 In order to provide a comparison and cross check to our net assets on a going concern valuation of DigitalX, we have considered the recent quoted market price for DigitalX shares on the ASX prior to the announcement of the Buy-Back.
7.10 Unless stated, the analysis in this section is based on the capital structure of DigitalX.

Analysis of recent trading in DigitalX Shares

7.11 The figure below sets out a summary of the closing share price and volume of DigitalX Shares traded in the 12 months to 23 August 2016.

Figure 4 DigitalX daily closing share price and traded volumes

==> picture [500 x 194] intentionally omitted <==

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

0.250 14.0
12.0
0.200
10.0
0.150
8.0
6.0
0.100
4.0
0.050
2.0
0.000 0.0
Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16
Volume Price
Price
Volume (in millions)
----- End of picture text -----

Source: S&P Capital IQ/ ASX

7.12 During the 12 month period prior to the announcement of the Buy-Back on 25 August 2016, DigitalX Shares were traded reasonably. Over the 180 days prior to the announcement, 49% of DigitalX Shares were traded, indicating that it is a reasonably liquid stock.
7.13 During this period, DigitalX shares traded at between $0.071 and $0.22 per share, with the most significant trading day being 13.1 million shares, representing 6.9% of the total shares outstanding, on 25 July 2016 upon the announcement of the resignation of Mr Tsvetnenko as Chairman of DigitalX.

7.14 To provide further analysis of the quoted market prices for DigitalX’s Shares, we have considered the VWAP over a number of trading day periods ending 24 August 2016. An analysis of the volume in trading in DigitalX’s Shares for the 1, 5, 10, 30, 60, 90, 120 and 180-day trading periods is set out in the table below.

Table 7 Traded volumes of DigitalX Shares to 24 August 2016

# of Days	1 Day	5 Day	10 Day	30 Day	60 Day	90 Day	120 Day	180 Day
VWAP	-	0.074	0.078	0.094	0.105	0.120	0.126	0.143
Total Volume (000's)	0.0	1,523.1	3,325.3	31,643.8	40,184.9	52,769.2	59,391.2	87,006.6
Total Volume as a % of Total Shares	0.00%	0.86%	1.87%	17.77%	22.56%	29.63%	33.34%	48.85%
Low Price	0.000	0.071	0.071	0.071	0.071	0.071	0.071	0.071
High Price	0.000	0.078	0.087	0.160	0.165	0.195	0.200	0.220

Source: S&P Capital IQ/ ASX

Recent significant share transactions

7.15 On 25 August 2016, the date that the Buy-Back was announced, Mr Tsvetnenko disposed 25.4 million shares in an off-market transaction at $0.05 per share.
7.16 Also, a share placement of 10.6 million shares was completed at $0.05 per share on 4 September 2016 to fund the Buy-Back.

Value of DigitalX Share on a non-control minority basis

7.17 In our opinion, the weighted average share price of DigitalX over the 10 days prior to the announcement of the Buy-Back is reflective of the underlying value of a DigitalX Share. As such, we consider a range of values of between $0.050 (off-market transaction price) and $0.078 (10-day VWAP) reflects the quoted market price valuation of a DigitalX Share on a minority basis prior to the Buy-Back.

Table 8 Assessed value of an DigitalX Share – Quoted Price of Listed Securities

		Low	High
	Ref.	AUD	AUD
Quoted market price (minority basis)	7.17	$0.050	$0.078

Source: RSM Analysis

Valuation summary and conclusion

7.18 A summary of our assessed values of an ordinary DigitalX Share on a control basis pre the Buy-Back, derived under the two methodologies, is set out in the table below.

Table 9 DigitalX Share valuation summary

		Low	High
	Ref.	AUD	AUD
Net assets on a going concern	7.2	$0.009	$0.016
Quoted market price	7.17	$0.050	$0.078
Preferred valuation		$0.050	$0.078

Source: RSM Analysis

7.19 We have relied on the quoted market price valuation methodology in our assessment of the Fair Value of a DigitalX Share for the following reasons:
The trading of DigitalX shares is sufficiently liquid to rely on the market price;
High volume intraday trading was experienced on announcements of both the resignation of Mr Tsvetnenko and the Buy-Back;
Mr Tsvetnenko disposed 25.4 million shares off-market at $0.05 per share on 25 August 2016 (the same time the Buy-Back was announced);
A share placement of 10.6 million shares was completed at $0.05 per share on 4 September 2016 to fund the Buy-Back; and
The net assets valuation assumes that there is no upside potential in the Company’s technologies. Given the liquidity in DigitalX shares, we do not consider it appropriate to rely solely on the net asset value of DigitalX because there is a liquid market indicating interest in the Company in excess of the value of its net assets.
7.20 Therefore, in our opinion, the fair value of a DigitalX Share prior to the Buy-Back is between $0.050 and $0.078 on a minority basis.

8. Is the Buy-Back fair to DigitalX Shareholders?

8.1 Our assessed value of a DigitalX share prior to the Buy-Back as compared to the Consideration, is summarised in the figure below.

Table 10 DigitalX Share valuation graphical representation

==> picture [477 x 170] intentionally omitted <==

Source: RSM Analysis

8.2 In accordance with the guidance set out in ASIC RG 111, and in the absence of any other relevant information, for the purposes of complying with ASX Listing Rule 10.1, we consider the Buy-Back to be fair to the NonAssociated Shareholders of DigitalX as the value of a DigitalX Share prior to the Buy-Back (assessed value range of $0.050 and $0.078) is greater than of the value of the Consideration ($0.03).

9. Is the Buy-Back Reasonable?

9.1 RG111 establishes that an offer is reasonable if it is fair. If an offer is not fair it may still be reasonable after considering the specific circumstances applicable to the offer. In our assessment of the reasonableness of the Buy-Back, we have considered:
The future prospects of DigitalX if the Buy-Back does not proceed; and
Other commercial advantages and disadvantages to the Non-Associated Shareholders as a consequence of the Buy-Back proceeding.

Future prospects of DigitalX if the Buy-Back does not proceed

9.2 If the Buy-Back does not proceed then the Company:
Will continue to have Mr Tsvetnenko as a major shareholder;
May be exposed to the potential for unrelated adverse news to impact the share price of the Company; and
Mr Tsvetnenko’s shareholding may create a market ‘overhang’, characterised by downward pressure on the market price of shares which arises when the market expects a significant parcel of shares to be sold in the short term.

Advantages and disadvantages

9.3 In assessing whether the Non-Associated Shareholders are likely to be better off if the Buy-Back proceed, than if it does not, we have also considered various advantages and disadvantages that are likely to accrue to the Non-Associated Shareholders.

Advantages of approving the Buy-Back

Advantage 1 – The Buy-Back is fair

9.4 RG 111 states that a transaction is reasonable if it is fair.

Advantage 2 – The Buy-Back is being completed at a significant discount to the current quoted market price of the Company’s shares

9.5 As highlighted above, the Buy-Back at $0.03 per share is at a significant discount to the quoted market price of the Company’s shares both pre and post announcement of the transaction. Since announcing the BuyBack the shares have traded at between $0.065 and $0.10 per share on significant trading volume for DigitalX. This represents a significant premium to the $0.03 Buy-Back Consideration price per share.

Advantage 3 – The Buy-Back will result in the Non-Associated Shareholders interests increasing

9.6 The Buy-Back will result in the cancellation of Shares which represent approximately 9.3% of the pre BuyBack shares on issue. Non-Associated shareholders will see their relative shareholdings increase as a result.

Advantage 4 – Completes the exit of Mr Tsvetnenko from the Company

9.7 The Buy-Back effectively completes the exit of Mr Tsvetnenko from the Company, including any link between Mr Tsvetnenko and his ongoing personal matters that led to his resignation and ensures that there is no impediment to the Company obtaining any licences or approvals required to operate its business in the United States caused by the ongoing matters there regarding Mr Tsvetnenko.

Disadvantages of approving the Buy-Back

Disadvantage 1 – A capital raising was required to fund the Buy-Back which diluted the Non-Associated Shareholders

9.8 The Buy-Back requires a capital raising to fund the transaction, which was completed on 5 September 2016 at $0.05 per share. Whilst the capital raising was above the Consideration, the placement reduces the positive impact of the cancellation as the capital raising had a dilutive impact on the Non-Associated Shareholders.

Disadvantage 2 – Opportunity not provided to all Shareholders

9.9 The Buy-Back is only offered to Mr Tsvetnenko and, whilst the Consideration is below the current market price of DigitalX Shares, Shareholders with significant parcels of shares may have found it easier to dispose of their shareholding via a buy-back and Shareholders may want an equal opportunity to realise their investment.

Trading in DigitalX shares following the announcement of the Buy-Back

9.10 We set out the closing share price and trading volumes of the Company from 25 August 2016, being the date the Buy-Back was announced, to 19 October 2016

Figure 5 DigitalX daily closing share price and traded volumes post announcement of the Buy-Back

==> picture [501 x 194] intentionally omitted <==

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

0.120 30.0
0.100 25.0
0.080 20.0
0.060 15.0
0.040 10.0
0.020 5.0
0.000 0.0
Aug 16 Sep 16
Volume Share Price
Price
Volume (in millions)
----- End of picture text -----

Source: S&P Capital IQ/ ASX

9.11 As set out above, the share price dropped from a pre-announcement value of $0.074 per share to $0.065 per share following the announcement on trading 26.3 million shares. This represented a significant trading volume for DigitalX.
9.12 Since this date the share price has steadily increased reaching as high as $0.10 per share and recently closing at $0.079 per share on 19 October 2016.

Conclusion on Reasonableness

9.13 In our opinion, the position of the Non-Associated Shareholders if the Buy-Back is approved is more advantageous than the position if it is not approved. Therefore, in the absence of any other relevant information and/or a superior offer, we consider that the Buy-Back is reasonable for the Non-Associated Shareholders of DigitalX.

9.14 An individual shareholder’s decision in relation to the Buy-Back may be influenced by his or her individual circumstances. If in doubt, shareholders should consult an independent advisor.

Yours faithfully

RSM CORPORATE AUSTRALIA PTY LTD

A GILMOUR G YATES

==> picture [82 x 26] intentionally omitted <==

==> picture [112 x 34] intentionally omitted <==

Director Director

==> picture [513 x 132] intentionally omitted <==

APPENDICES

A. DECLARATIONS AND DISCLAIMERS

Declarations and Disclosures

RSM Corporate Australia 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

Our report has been prepared in accordance with professional standard APES 225 “Valuation Services” issued by the Accounting Professional & Ethical Standards Board.

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

Mr. Andrew Gilmour and Mr Glyn Yates are directors of RSM Corporate Australia Pty Ltd. Both Mr Gilmour and Mr Yates are Chartered Accountants 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 Shareholders of the Company in considering the Security. 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 DigitalX Limited and we have no reason to believe that this information was inaccurate, misleading or incomplete. RSM Corporate Australia 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 Corporate Australia 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.

Disclosure of Interest

At the date of this report, none of RSM Corporate Australia Pty Ltd, RSM, Andrew Gilmour, Glyn Yates, nor any other member, director, partner or employee of RSM Corporate Australia Pty Ltd and RSM has any interest in the outcome of the Proposed Transaction, except that RSM Corporate Australia Pty Ltd are expected to receive a fee of $15,000 based on time occupied at normal professional rates for the preparation of this report. The fees are payable regardless of whether DigitalX Limited receives Shareholder approval for the Security, or otherwise.

Consents

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

B. SOURCES OF INFORMATION

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

Drafts and final copies of the Notice of Meeting;
Audited financial statements of the Company for the years ended 30 June 2015 and 30 June 2016;
Reviewed half yearly accounts of the Company for the period to 31 December 2015;
ASX announcements of the Company;
Share Buy-Back Agreement;
S&P Capital IQ database; and
Discussions with Directors, Management and staff of the Company.

C. GLOSSARY OF TERMS

Term or Abbreviation	Definition
$, $A or AUD	Australian Dollar
Act	Corporations Act 2001 (Cth)
APES	Accounting Professional & Ethical Standards Board
ASIC	Australian Securities & Investments Commission
ASX	Australian Securities Exchange
Buy-Back	It has the meaning given to the term in paragraph 1.1 of this Report
Company	DigitalX Limited
Control basis	As assessment of the fair value on an equity interest, which assumes the holder or
	holders have control of entity in which the equity is held
DCF	A method within the income approach whereby the present value of future expected
	net cash flows is calculated using a discount rate
DigitalX	Company
Directors	Directors of the Company
EBIT	Earnings, before, interest and tax
EBITDA	Earnings, before, interest, tax, depreciation and amortisation
Equity	The owner's interest in property after deduction of all liabilities
EV	Enterprise Value, meaning, the total value of the equity in a business plus the value of
	its debt or debt-related liabilities, minus any cash or cash equivalents available to
	meet those liabilities
Fair Value	The amount at which an asset could be exchanged between a knowledgeable and
	willing but not anxious seller and a knowledgeable and willing but not anxious buyer,
	both acting at arm’s length
FME	Future maintainable earnings
FOS	Financial Ombudsman Service
FSG	Financial Services Guide
FY##	Financial year ended 30 June
IER	This Independent Expert Report
Non Associated Shareholders	Shareholders who are not a party, or associated to a party, to the Proposed
	Transaction
Non control basis	As assessment of the fair value on an equity interest, which assumes the holder or
	holders do not have control of entity in which the equity is held
Notice	The notice of meeting to vote on the Buy-Back
NPBT	Net profit before tax
NPAT	Net profit after tax
Regulations	Corporations Act Regulations 2001 (Cth)
Report	This Independent Experts Report
RG 111	ASIC Regulatory Guide 111 Contents of Expert's Reports
RSM	RSM Corporate Australia Pty Ltd
S&P Capital IQ	An entity of Standard and Poors which is a third party provider of company and other
	financial information
USD or $US	United States Dollars
VWAP	Volume weighted average share price

==> picture [326 x 300] intentionally omitted <==

==> picture [98 x 41] intentionally omitted <==

AI assistant

DIGITALX LIMITED — AGM Information 2016

64762_rns_2016-10-30_6518871f-eb0b-4011-9340-a3d5f398b173.pdf

DIGITALX LTD

NOTICE OF ANNUAL GENERAL MEETING

AGENDA

1. FINANCIAL STATEMENTS AND REPORTS

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting Prohibition Statement:

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – WILLIAM BRINDISE

4. RESOLUTION 3 – ELECTION OF DIRECTOR – TOBY HICKS

5. RESOLUTION 4 – ELECTION OF DIRECTOR – LEIGH TRAVERS

6. RESOLUTION 5 – ELECTION OF DIRECTOR – FAISAL KHAN

7. RESOLUTION 6 – APPROVAL OF 10% PLACEMENT CAPACITY

8. RESOLUTION 7 – ADOPTION OF EMPLOYEE SHARE PLAN

Voting Prohibition Statement:

9. RESOLUTION 8 – APPROVAL TO ISSUE SHARES TO EXECUTIVE DIRECTOR – LEIGH TRAVERS

Voting Prohibition Statement:

10. RESOLUTION 9 – APPROVAL TO ISSUE SHARES TO NON-EXECUTIVE DIRECTOR – FAISAL KHAN

Voting Prohibition Statement:

11. RESOLUTION 10 – SELECTIVE SHARE BUY-BACK FROM A SUBSTANTIAL HOLDER

Dated: 28 October 2016

By order of the Board

Rodion Kostrykine Company Secretary

Voting in person

Voting by proxy

EXPLANATORY STATEMEN T

1. FINANCIAL STATEMENTS AND REPORTS

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

2.1 General

2.2

Voting consequences

2.3 Previous voting results

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – WILLIAM BRINDISE

3.1 General

3.2 Qualifications and other material directorships

3.3 Independence

3.4 Board recommendation

4. RESOLUTIONS 3, 4 AND 5 – ELECTION OF DIRECTORS APPOINTED SINCE THE LAST ANNUAL GENERAL MEETING

4.1 General

4.2 Qualifications and other material directorships

Mr Toby Hicks

Mr Leigh Travers

Mr Faisal Khan

4.3 Independence

4.4 Board recommendation

5. RESOLUTION 6 – APPROVAL OF 10% PLACEMENT CAPACITY

5.1 General

5.2 Technical information required by ASX Listing Rule 7.1A

(a) Minimum Price

(b) Date of Issue

( 10% Placement Capacity Period ).

(c) Risk of voting dilution

(d) Purpose of Issue under 10% Placement Capacity

(e) Allocation policy under the 10% Placement Capacity

(f)

Previous approval under ASX Listing Rule 7.1A

(g)

Compliance with ASX Listing Rules 7.1A.4 and 3.10.5A

5.3 Voting Exclusion

6. RESOLUTION 7 – ADOPTION OF EMPLOYEE SHARE PLAN

7. RESOLUTIONS 8 AND 9 – APPROVAL FOR THE ISSUE OF SHARES TO DIRECTORS

7.1 General

7.2 Chapter 2E of the Corporations Act

7.3

Technical Information required by ASX Listing Rule 10.15

8. RESOLUTION 10 – SELECTIVE BUY-BACK OF SHARES FROM A SUBSTANTIAL HOLDER

8.1 Overview/Background

8.2 Terms of Agreement

8.3 ASX Listing Rule 10.1

8.4 Section 257D of the Corporations Act

8.5 Chapter 2E of the Corporations Act

8.6 Impact of Buy-Back on the capital structure of the Company

8.7 Effect of the Buy-Back on control of the Company

8.8 Source of funding of the Buy-Back

8.9 Financial effect of the Buy-Back on the Company

8.10 Share trading price

8.11 Advantages and disadvantages of the Buy-Back

8.12 Independent Expert’s Report

DIGITALX LIMITED AGM Information 2016