FIRST AU LIMITED — Share Issue/Capital Change 2014

Sep 18, 2014

PUBLIC HOLDINGS (AUSTRALIA) LIMITED

A.C.N. 000 332 918

19 September 2014

Dear Shareholder

We enclose your cheque from Public Holdings (Australia) Limited (‘Company’) representing a return of capital. If you have received this letter without an accompanying cheque, you may have arranged for a direct bank transfer to your nominated Australian banking institution. Please contact Link Market Services Limited on +61 1300 554 474 should you require payment confirmation.

At a General Meeting of shareholders held on 8 September 2014, shareholders resolved:

"That for the purposes of sections 256B and 256C of the Corporations Act and for all other purposes, the issued share capital of the Company be reduced by the return to ordinary shareholders of an amount equal to 85% of the Company’s net assets on a pro-rata basis based on each ordinary shareholders’ shareholding at the Record Date, as described in the Explanatory Memorandum which accompanies and forms part of this Notice of General Meeting."

The capital return was considered by the Company’s Board as an appropriate means of allowing shareholders to realise a significant percentage of the underlying value represented by their shareholding in the Company. This was in circumstances where they may otherwise be unable to do so given the relative inactivity (and therefore lack of liquidity) of trading in the Company’s ordinary shares.

At the same General Meeting, new directors were elected (effective from the completion of the placement of the Company’s shares held by Atlas Securities Pty Limited), Mr Bryan Frost, Mr Peter Chapman and Mr Clayton Dodd. The incoming directors of the Company intend to explore opportunities for a new business activity or undertaking which might reinvigorate the Company. Prior to embarking upon such a new direction it is appropriate to return substantial value to the current shareholders to avoid any outcome wherein they were effectively compelled to invest in a new business activity or undertaking.

In order to implement the proposed capital return, the Company has applied to ASX for and obtained a wavier of ASX Listing Rule 7.25 which would otherwise prevent the Company from undertaking a proposal for an equal return of capital to its ordinary shareholders where that return would (or would be likely to) result in a decrease in the trading price of the Company’s ordinary shares and see those shares trade at a price lower than $0.20.

Entitlement to participate

All of the Company’s shareholders who are registered on the Company’s share register as at 5.00pm on 12 September 2014 ( Record Date ) will participate in the capital return (refer to the timetable below).

Amount of entitlement

The capital return and reduction will be by way of a distribution of an amount of capital equal to 85% of the Company’s net assets as at the date of the Notice of Meeting, but taking into account operating expenses and other costs incurred in connection with implementation and completion of the capital return.

The amount of capital returned to shareholders is based on Company net assets of $1,171,251 at the current date and shares on issue of 14,979,000. The capital return at 85% of the Company’s net assets equates to $995,563 or approximately $0.06646 (6.646 cents) per share.

Effect of the proposed return of capital on the Company

The capital return will be paid from the Company’s existing cash. The effect of the capital return is that the net assets of the Company will be reduced by 85%, to approximately $175,688.

The capital return will have no effect on the total number of shares on issue. Following the capital return, the Company will have 14,979,000 shares on issue. The Company currently has no options on issue.

Registered Office: Level 1 / 123 Whitehorse Road, Balwyn Vic. 3103 Australia. Telephone 03 9817 0700 Facsimile 03 9817 0799

Timetable

The capital return takes effect in accordance with the following timetable:

Event	Date
Meeting held and results announced to ASX	8 September 2014
Last date of trading on a pre-capital return basis	9 September 2014
Trading on an ‘ex-return of capital basis commences’	10 September 2014
Record Date	12 September 2014

Shareholder approval and regulatory requirements

The capital reduction is an ‘equal capital reduction’ in accordance with section 256B(2) of the Corporation Act as:

• it relates only to ordinary shares in the capital of the Company;

• it applies to each holder of ordinary shares in the same proportion to the number of ordinary shares they hold in the Company; and

• the terms of the reduction are the same for each holder of ordinary shares in the Company.

Pursuant to section 256C of the Corporations Act, the capital reduction has been approved by an ordinary resolution passed at a general meeting of the Company’s shareholders. An ordinary resolution requires a simple majority of votes cast by shareholders present (whether in person or by proxy or representative).

Directors’ Opinion

The directors are satisfied that the Company will remain solvent following the capital return and that the capital return will not materially prejudice the Company’s ability to pay its creditors. The amount of capital returned has been calculated by reference to the net asset position of the Company (i.e. the assets of the Company less any liabilities including liabilities to creditors), and as such the Company will maintain sufficient cash reserves to pay its creditors.

Taxation implications for shareholders

The Company has obtained tax advice from Babbage & Co, accountants, regarding the taxation implications for shareholders of the proposed capital return. Babbage & Co advise that on the assumption that shareholders hold their shares on capital account, the return of capital should generally create no immediate tax liability for shareholders. A return of capital on shares acquired after 19 September 1985 will generally reduce the capital gains tax cost base of a shareholder’s shares in the Company. This reduction in cost base may result in an increased capital gain, or reduced capital loss, upon the eventual disposal of a shareholder’s shares in the Company. A return of capital will only create a capital gain at the time of the return if the return of capital is in excess of the cost base of the relevant share. Shareholders should review the cost base of their shareholding in the Company when considering the potential taxation implications.

The taxation implications of the proposed capital return may vary depending on the particular circumstances applicable to each shareholder. Accordingly, shareholders are urged to seek their own advice based on their own particular circumstances as to the tax consequences of the return of capital.

Yours Sincerely

David McBain

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COMPANY SECRETARY