MAGONTEC LIMITED — AGM Information 2014

Apr 29, 2014

NOTICE OF ANNU AL GENERAL MEETI NG

Limited

This document constitutes the Notice of Meeting for the 2014 Annual General Meeting of Magontec Limited (ACN 010 441 666).

The thirty first Annual General Meeting of Magontec Limited (ACN 010 441 666) (the “Company”, “Magontec” or “MGL”) will be held in the "Pinaroo 2” room Level 1 of the Grace Hotel 77 York Street (corner York and King Streets) Sydney NSW on Thursday 29 May 2014 at 11.00 am (Sydney time). The Annual Report is available for viewing on the Company’s web site at the following web address: http://mgl.live.irmau.com/IRM/content/annualreports.html

The business to be dealt with at the Meeting is:

O R D I N A R Y B U S I N E S S

ITEM 1: Financial Report, Directors’ Report and Auditor’s Report (Refer “Explanatory Notes” at the foot of this Notice)

Resolution 1 “To receive and consider the Financial Report, including the Directors’ Declaration for the twelve-month reporting period ended 31 December 2013 and the related Directors’ Report and Auditor’s Report thereon.”

ITEM 2: Adoption of the Remuneration Report (advisory only resolution) (Refer to “Explanatory Notes” at the foot of this Notice)

To consider, and if thought fit, pass the following resolution as an advisory only resolution (i.e. non-binding upon Directors):

Resolution 2 “To adopt the Remuneration Report as set out in the Annual Report for the twelve-month reporting period ended 31 December 2013

Voting Exclusion Statement: The Company will disregard any votes cast on this resolution by key management personnel or their closely related parties, or votes made by undirected proxies. 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 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.

ITEM 3: Re-election of Director (ordinary resolution) (Refer to “Explanatory Notes” at the foot of this Notice)

Resolution 3 “That Mr Robert Shaw, who retires by rotation, in accordance with clause 11.4 of the Constitution of the Company, and being eligible, offers himself to be re-elected as an Independent Director of the Company effective from the close of the Annual General Meeting.”

ITEM 4: Election of Director (ordinary resolution) (Refer to “Explanatory Notes” at the foot of this Notice)

Resolution 4 “That Mr Robert Kaye, who retires in accordance with clause 11.1(g) of the Constitution of the Company, and being eligible, offers himself to be re-elected as an Independent Director of the Company, effective from the close of the Annual General Meeting.”

ITEM 5: Election of Director (ordinary resolution) (Refer to “Explanatory Notes” at the foot of this Notice)

Resolution 5 “That Mr Willie Andre Labuschagne, who retires in accordance with clause 11.1(g) of the Constitution of the Company, and being eligible, offers himself to be re-elected as a Non-Executive Director of the Company, effective from the close of the Annual General Meeting.”

ITEM 6: Replacement of the Constitution of Magontec Ltd (special resolution) (Refer to “Explanatory Notes” at the foot of this Notice)

Resolution 6 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 136(2) of the Corporations Act 2001 (Cth) and for all other purposes, approval is given for the Company to repeal its existing Constitution and adopt a new Constitution in its place in the form tabled at the meeting and signed by the Chairman of the Meeting for identification purposes, with effect from the close of the Meeting.”

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ITEM 7: Approval of additional 10% Placement Facility (special resolution) (Refer to “Explanatory Notes” at the foot of this Notice)

Resolution 7 To consider and, if thought fit, to pass, with or without amendment, the following Resolution as a special resolution:

“That, for the purpose of Listing Rule 7.1A and for all other purposes, Shareholders approve the issue of Equity Securities up to 10% of the issued capital of the Company (at the time of the issue) calculated in accordance with the formula prescribed in Listing Rule 7.1A.2, for the purpose and on the terms set out in the Explanatory Statement.”

Voting Exclusion Statement: The Company will disregard any votes cast on Resolution 7 by any person who may participate in the issue of Equity Securities under the Additional 10% Placement Facility and any 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 person associated with those persons. However, the Company will not disregard any votes cast on Resolution 7 by such person if:

• (a) the person is acting as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or

• (b) the person is the Chairman of the Meeting acting 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.

D E T E R M I N A T I O N O F V O T I N G E N T I T L E M E N T

For the purposes of this meeting, all persons who are registered holders of shares in the Company at 7:00pm Sydney time on Tuesday 27 May 2014 will be entitled to vote.

A P P O I N T I N G A P R O X Y

A member entitled to vote may appoint a proxy to attend and vote on behalf of the member. If the member is entitled to cast more than two votes, the member may appoint two proxies to attend and vote instead of the member. Where more than one proxy is appointed, each proxy may be appointed to represent a specified portion of the member’s voting rights. If no such specification is given and two proxies are appointed, each may exercise half the votes to which the member is entitled. A proxy need not be a member. Proxies must be executed in accordance with the instructions in the notes accompanying the proxy form.

To be valid, the signed proxy form (together with an original or certified copy of the power of attorney if applicable) must be:

• Lodged with Boardroom Pty Limited at Level 7, 207 Kent Street, Sydney NSW 2000;

• Delivered by post to Boardroom Pty Limited GPO Box 3993, Sydney NSW 2001; or

• Sent by facsimile to Boardroom Pty Limited on +61 2 9290 9655.

so as to be received by Boardroom Pty Limited by 11:00 am Sydney time on Tuesday 27 May 2014 being not less than 48 hours before the time for holding the meeting.

E X P L A N A T O R Y N O T E S

ITEM 1: Financial Report and Directors’ Report and Auditor’s Report for the twelve-month reporting period ended 31 December 2013.

The Corporations Act 2001 (Cth) ( Corporations Act ) requires that the Financial Report, including the Directors’ Declaration for the twelvemonth reporting period ended 31 December 2013 and the related Directors’ Report and Auditors’ Report, be laid before the Annual General Meeting. In addition, the Company’s Constitution provides for such reports and statements to be received and considered at the meeting. None of the Corporations Act 2001 (Cth), the ASX Listing Rules or the Company’s Constitution requires a vote of shareholders at the Annual General Meeting on such reports or statements. However, shareholders will be given ample opportunity to raise questions with respect to these reports and statements at the meeting.

ITEM 2: Adoption of Remuneration Report for the twelve-month reporting period ended 31 December 2013 (advisory only resolution)

Shareholders are entitled to vote on the question whether the Remuneration Report as contained in the Annual Report for the twelve-month reporting period ended 31 December 2013 is to be adopted. Shareholders should note, however, that this is an "advisory only" resolution, which does not bind the Directors of the Company.

The Board recommends that shareholders vote in favour of Resolution 2.

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ITEM 3: Re-election of Director – Mr Robert Shaw (ordinary resolution)

Mr Robert Shaw retired and was re-elected to the Board of the Company as an Independent Director by shareholders at the Annual General Meeting on 22 November 2011 in accordance with clause 11.1(g) of the Company’s Constitution.

Under clause 11.4 of the Constitution, a director shall not retain office for a period in excess of 3 years or beyond the third annual general meeting following his election (whichever is the longer period), without submitting himself for re-election. As this meeting will be the third annual general meeting since Mr Shaw’s appointment as a director by shareholders, Mr Shaw will retire and stand for re-election at the meeting. Under clause 11.1(d) of the Constitution, the resolution to appoint Mr Shaw is not required to be preceded by a shareholder nomination.

The Board (other than Mr Shaw) recommends that shareholders vote in favour of Resolution 3.

ITEM 4: Re-election of Director – Mr Robert Kaye (ordinary resolution)

On 16 July 2013 Mr Robert Kaye was appointed as an Independent Director of the Company under clause 11.1(f) of the Company’s Constitution. That clause states:

“The Directors may at any time appoint any person to be a Director either to fill a casual vacancy or as an addition to the existing Directors but so that the total number of Directors shall not at any time exceed the number determined in accordance with this Constitution.”

The resolution at Item 4 gives effect to clause 11.1(g) of the Company’s constitution which states:

“Any Director appointed in accordance with Clause 11.1(f) shall (unless in the meantime he has been appointed a Managing Director) hold office only until the next following annual general meeting and shall then be eligible for re-election.”

Under clause 11.1(d) of the Constitution, the resolution to appoint Mr Kaye is not required to be preceded by a shareholder nomination.

The Board (other than Mr Kaye) recommends that shareholders vote in favour of Resolution 4.

ITEM 5: Re-election of Director - Mr Willie Andre Labuschagne (ordinary resolution)

On 22 January 2014 Mr Willie Andre Labuschagne was appointed as a Non-Executive Director of the Company under clause 11.1(f) of the Company’s Constitution. That clause states:

“The Directors may at any time appoint any person to be a Director either to fill a casual vacancy or as an addition to the existing Directors but so that the total number of Directors shall not at any time exceed the number determined in accordance with this Constitution.”

The resolution at Item 5 gives effect to clause 11.1(g) of the Constitution which states:

“Any Director appointed in accordance with Clause 11.1(f) shall (unless in the meantime he has been appointed a managing Director) hold office only until the next following annual general meeting and shall then be eligible for re-election.”

Under Article 11.1(d) of the Constitution, the resolution to appoint Mr Labuschagne is not required to be preceded by a shareholder nomination.

The Board (other than Mr Labuschagne) recommends that shareholders vote in favour of Resolution 5.

ITEM 6: Replacement of the Constitution of Magontec Ltd (special resolution).

6.1 General

A company may modify or repeal its constitution or a provision of its constitution by special resolution of Shareholders.

The Company’s current Constitution was adopted prior to 2006. In recent times, minor amendments were agreed by shareholders at the Company’s Annual General Meetings on 22 November 2006 and 18 November 2008.

Since that time, there have been a number of amendments to the Corporations Act, the ASX Listing Rules and other applicable law and rules. Accordingly, the Company has conducted a full review of the existing Constitution to bring it into line with current law and best market practice. As the changes introduced affect numerous provisions in the Constitution, it is proposed that a new Constitution be adopted, rather than amending a multitude of specific provisions in the existing Constitution. If Resolution 6 is passed the new Constitution will take effect and replace the current Constitution from the close of the meeting.

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The new Constitution is broadly consistent with the provisions of the existing Constitution with many of the changes minor or administrative in nature. The key differences between the existing Constitution and the proposed new Constitution are summarised below. This summary is not intended to be an exhaustive explanation of all the changes effected by the adoption of the proposed new Constitution.

The proposed new Constitution is available for inspection at the Company’s office. A complete copy will be sent by mail or email to any Shareholder who requests it. Requests for inspection or a copy should be directed to the Company Secretary (+61 2 8231 7085 or corporate@magontec.com). A copy of the proposed new Constitution is also available on the Company’s website at http://mgl.live.irmau.com/IRM/content/Constitution.html. Shareholders are invited to contact the Company Secretary if they have any questions regarding the proposed new Constitution.

6.2 Summary of key proposed changes

• (a) Dividends

Since the existing Constitution was last amended in November 2008, the Corporations Act has been amended to allow for the payment of dividends other than from profits. Accordingly, the proposed new Constitution does not restrict dividends to be paid from profits and provides that payment of dividends is generally subject to the Corporations Act.

• (b) Sale of small holdings

In line with current market practice and as permitted under the ASX Listing Rules, the proposed new Constitution includes provisions which will enable the Company to sell unmarketable parcels of shares and return sale proceeds to holders of such parcels. Unmarketable parcels of shares are holdings of shares in the Company valued at less than $500.

Provisions of a similar effect are included in clause 6A of the existing Constitution which allows the Company to sell unmarketable parcels on the ASX. The provisions in clause 25 of the proposed new Constitution will give the Company more flexibility to effect a sale of unmarketable parcels by allowing such sale in any manner determined by the Directors (rather than just on the ASX).

If the Company gives notice of an intended sale to holders of unmarketable parcels in accordance with these new provisions, those holders will be able to notify the Company that they wish to retain all or part of their parcels if they do not wish all or part of their parcels to be sold. Clause 25 of the proposed new Constitution outlines in detail the process that the Company must follow for dealing with unmarketable parcels.

As the administrative costs of maintaining a large number of small holdings are significant, it is the Company’s current intention to reduce the number of small holdings in accordance with these new provisions within 12 months of the adoption of the new Constitution by arranging an off-market sale of unmarketable parcels to a third party or third parties. As noted above, holders of unmarketable parcels will have the ability to opt out of such sale at the relevant time if they wish to retain their holdings.

• (c) Proportional takeover provisions

The law regarding takeovers allows companies to amend their constitutions to prohibit the registration of a transfer of shares resulting from an offer made under a proportional takeover bid, unless Shareholders approve the bid.

Similar provisions are included in clause 6.2 of the existing Constitution however these are out of date and have expired as they have not been renewed within 3 years of coming into effect. Accordingly, the Company has included at clause 9 of the proposed new Constitution provisions whereby a proportional takeover bid for Shares may only proceed after the bid has been approved by a meeting of Shareholders held in accordance with the terms set out in the Corporations Act.

What is a proportional takeover bid and why does the Company need proportional takeover approval provisions?

Under a proportional takeover bid the bidder offers to buy a proportion only of each Shareholder’s Shares in the Company. This means that control of the Company may pass without members having the chance to sell all their Shares to the bidder.

In order to deal with this possibility, the Company may provide in its constitution that:

• in the event of a proportional takeover bid being made for Shares in the Company, members are required to vote by ordinary resolution and collectively decide whether to accept or reject the offer; and

• the majority decision of the Company’s members will be binding on all individual members.

The Directors consider that members should be able to vote on whether a proportional takeover bid ought to proceed given such a bid might otherwise allow control of the Company to change without members being given the opportunity to dispose of all of their Shares for a satisfactory control premium. The Directors also believe that the right to vote on a proportional takeover bid may avoid members feeling pressured to accept the bid even if they do not want it to succeed.

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NOTICE OF ANNU AL GENERAL MEETI NG

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In compliance with the information requirements of section 648G(5) of the Corporations Act, Shareholders are advised of the information below.

Effect of clause 9 of proposed new Constitution

The effect of clause 9 is that, if a proportional takeover offer is received, Shareholders shall vote on a resolution to approve the proportional bid (at a meeting of Shareholders or by means of a postal ballot). The deadline for the resolution to be voted on and passed must be at least 14 days before the bid closes.

If the proportional bid is not approved, the registration of any transfer of shares resulting from an offer made under the proportional bid will be prohibited and the bid will be deemed to be withdrawn. If the proportional bid is approved, the transfers will be registered, provided they comply with the other provisions of the Corporations Act and the Company’s Constitution. The bid will be taken to have been approved if the resolution is not voted on within the deadline specified under the Corporations Act.

The provisions of clause 9 do not apply to takeover bids for the whole of the issued shares in the Company. Clause 9 will be operational in the manner described above for a period of three years (or longer if it is subsequently renewed by further resolutions of Shareholders).

Reasons for proposing the resolution

Without the proposed clause 9, a proportional takeover bid may enable control of the Company to be acquired without Shareholders having an opportunity to dispose of all their shares to the bidder. Shareholders therefore risk holding a minority interest in the Company. If the Shareholders considered that control of the Company was likely to pass under any takeover bid, they could be placed under pressure to accept the offer even if they do not want control of the Company to pass to the bidder. The proposed clause 9 will prevent this by permitting Shareholders to decide whether a proportional takeover bid should be permitted to proceed.

The bidder and its associates would not be permitted to vote on the matter and thereby influence the outcome.

Current acquisitions

As at the day on which this statement is prepared, none of the Directors of the Company is aware of a proposal by a person to acquire, or to increase the extent of, a substantial interest in the Company.

Potential advantages and disadvantages of the proportional takeover approval provisions for Shareholders

The potential advantages of the proposed proportional takeover approval provisions for Shareholders are that:

• The proposal would enable shareholders to act in a cohesive manner and thereby avoid the coercion of shareholders that arises where they believe the offer to be inadequate, but nevertheless accept through fear that other shareholders will accept.

• The proposal would enable shareholders, by combining together, to veto a change of control that would lock them into a minority position.

• The existence of the approval machinery in the proposed new Constitution would make it more probable that any takeover bid will be a full bid for the whole shareholding of each member, so that shareholders may have the opportunity of disposing of all their shares rather than of a proportion only.

• If a proportional takeover bid should be made, the existence of the approval machinery will make it more probable that a bidder will set its offer price at a level that will be attractive to the shareholders who vote.

The potential disadvantages of the proposed proportional takeover approval provisions for Shareholders are that:

• By placing obstacles in the way of proportional takeover bids, the proposal may tend to discourage proportional takeover bids, thus reducing the opportunity for shareholders to sell a portion of their holding.

• It is possible (though, in the opinion of the Board, unlikely) that the existence of the provisions might have an adverse effect on the market value of the Company’s shares by making a proportional takeover bid less likely and thereby reducing any takeover speculation element in the share price.

• An individual shareholder who wishes to accept a proportional takeover bid will be unable to sell to the bidder unless a majority of shareholders favour the proportional takeover bid.

The Board considers that the potential advantages for members of the proportional takeover approval provisions outweigh the potential disadvantages.

Advantages and disadvantages of the proposal for the directors

If the Directors consider that a proportional takeover bid should be opposed, they will be assisted in preventing the bidder from securing control of the Company if the bidder needs a majority of the votes cast by the independent Shareholders before it can succeed.

On the other hand, under the proposal, if a proportional takeover bid is commenced, the Directors must seek the shareholders’ views. They must do so even if the Directors believe that the bid should be accepted.

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At present it is only the Directors who express on behalf of the company any formal view on the adequacy or otherwise of a takeover bid. Under the approval machinery the most effective view on a proportional takeover bid will become the view expressed by the vote of the shareholders themselves.

• (d) Terminology and simplification

The new Constitution updates the defined terms to reflect current terminology under the Corporations Act and ASX Listing Rules. Additionally, the new Constitution has been simplified to omit detailed mechanical provisions contained in the Corporations Act and ASX Listing Rules which do not need to be set out in the Company’s constitution. These include provisions in the current Constitution detailing the content requirements for a notice of meeting, the form of the proxy form to accompany such notice and the requirements for the preparation and audit of annual accounts.

The Board recommends that shareholders vote in favour of Resolution 6.

ITEM 7: Approval of additional 10% Placement Facility (special resolution).

7.1 Background

Listing Rule 7.1A enables eligible entities to issue Equity Securities of up to 10% of its issued ordinary share capital through placements over a 12 month period following the entity’s annual general meeting ( Additional 10% Placement Facility ). The Additional 10% Placement Facility is in addition to the Company’s 15% placement capacity under Listing Rule 7.1.

An eligible entity for the purposes of Listing Rule 7.1A is an entity that is not included in the S&P/ASX 300 Index and has a market capitalisation of $300 million or less, as at the time of the entity’s annual general meeting. The Company is an eligible entity as at the time of this Notice of Annual General Meeting and is expected to be an eligible entity as at the time of the Annual General Meeting.

Resolution 7 seeks Shareholder approval to enable the Company to issue Equity Securities under the Additional 10% Placement Facility throughout the 12 months after the Annual General Meeting. The effect of Resolution 7 will be to allow the Directors to issue Equity Securities under Listing Rule 7.1A during the period as set out below.

Resolution 7 is a special resolution and therefore requires approval of 75% of the votes cast by Shareholders present and eligible to vote at the Annual General Meeting (in person, by proxy, by attorney or, in the case of a corporate Shareholder, by a corporate representative).

The exact number of Equity Securities that the Company may issue under the Additional 10% Placement Facility will be determined in accordance with the formula prescribed in Listing Rule 7.1A.2 (refer to section 8.2(a) of this Notice of Annual General Meeting below). The Company is seeking a mandate to issue securities under the Additional 10% Placement Facility to enable the Company to pursue its growth strategy and to act quickly as potential business opportunities arise.

7.2 Regulatory Requirements

In compliance with the information requirements of Listing Rule 7.3A, Shareholders are advised of the following information:

(a) Minimum Issue Price

Equity securities issued under the Additional 10% Placement Facility must be in the same class as an existing class of quoted Equity Securities of the Company. As at the date of this Notice of Annual General Meeting, the Company has on issue one class of Equity Securities, namely Ordinary Fully Paid Shares.

The issue price of Equity Securities issued under the Additional 10% Placement Facility must not be lower than 75% of the VWAP for securities in the same class calculated over the 15 trading days on which trades in that class were recorded immediately before:

• (i) the date on which the Equity Securities are issued; or

• (ii) the date on which the price of Equity Securities is agreed, provided that the issue is thereafter completed within 5 business days.

(b) Dilution

As at the date of this Notice of Annual General Meeting, the Company has 1,115,043,832 Shares on issue. If Shareholders approve Resolution 7 the Company will have the capacity to issue a maximum of approximately 111,504,383 Equity Securities under the Additional 10% Placement Facility in accordance with Listing Rule 7.1A.

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NOTICE OF ANNU AL GENERAL MEETI NG

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The precise number of Equity Securities that the Company will have capacity to issue under Listing Rule 7.1A will be calculated at the date of issue of the Equity Securities in accordance with the following formula:

(A x D) – E

• A is the number of fully paid shares on issue 12 months before the date of issue or agreement:

• (a) plus the number of fully paid shares issued in the 12 months under an exception in Listing Rule 7.2;

• (b) plus the number of partly paid shares that became fully paid in the 12 months;

• (c) plus the number of fully paid shares issued in the 12 months with approval of holders of shares under Listing Rule 7.1 and 7.4;

• (d) less the number of fully paid shares cancelled in the 12 months.

Note that A is has the same meaning in Listing Rule 7.1 when calculating an entity’s 15% placement capacity.

• D is 10%

• E is the number of Equity Securities issued or agreed to be issued under Listing Rule 7.1A.2 in the 12 months before the date of the issue or agreement to issue that are not issued with the approval of shareholders under Listing Rule 7.1 or 7.4.

If Resolution 7 is approved by Shareholders and the Company issues Equity Securities under the Additional 10% Placement Facility, existing Shareholders’ voting power in the Company will be diluted as shown in the table below to the extent Shareholders do not receive any Shares under such issues. There is a risk that:

• i. the market price for the Company’s Equity Securities may be significantly lower on the date of the issue of the Equity Securities than on the date of the Annual General Meeting; and

• ii. the Equity Securities may be issued at a price that is at a discount to the market price for the Company’s Equity Securities on the issue date or the Equity Securities are issued as part of consideration for the acquisition of a new investment ,

which may have an effect on the amount of funds raised by the issue of the Equity Securities.

The below table shows the dilution of existing Shareholders on the basis of the current market price of Shares and the current number of ordinary securities for variable “A” calculated in accordance with the formula in Listing Rule 7.1A(2) as at the date of this Notice of Annual General Meeting .

The below table also shows:

• (i) two examples where variable “A” has increased, by 50% and 100%. Variable “A” is based on the number of ordinary securities the Company has on issue. The number of ordinary securities on issue may increase as a result of issues of ordinary securities that do not require Shareholder approval (for example, a pro rata entitlements issue or scrip issued under a takeover offer) or future specific placements under Listing Rule 7.1 that are approved at a future Shareholders’ meeting; and

• (ii) two examples of where the issue price of ordinary securities has decreased by 50% and increased by 50% as against the current market price .

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Variable “A” in Listing Rule 7.1A.2			Dilution
	Issue price	$0.0290	$0.0145	$0.0435
		Base Issue Price	50% decrease in Base Issue Price	50% increase in Base Issue Price
Current Variable A	Shares issued	111,504,383 New Shares	111,504,383 New Shares	111,504,383 New Shares
1,115,043,832
Shares	Funds raised	$3,233,627	$1,616,814	$4,850,441
50% increase in current Variable A	Shares issued	167,256,575 New Shares	167,256,575 New Shares	167,256,575 New Shares
1,672,565,748
Shares	Funds raised	$4,850,441	$2,425,220	$7,275,661
100% increase in current Variable A	Shares issued	223,008,766 New Shares	223,008,766 New Shares	223,008,766 New Shares
2,230,087,664
Shares	Funds raised	$6,467,254	$3,233,627	$9,700,881

The table has been prepared on the following assumptions:

1. The Company issues the maximum number of Equity Securities available under the Additional 10% Placement Facility.

2. 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%.

3. The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the Additional 10% Placement Facility, based on that Shareholder’s holding at the date of the Meeting.

4. The table shows only the effect of issues of Equity Securities under Listing Rule 7.1A, not under the 15% placement capacity under Listing Rule 7.1.

5. The issue of Equity Securities under the 10% Placement Facility consists only of Shares. If the issue of Equity Securities includes listed Options, it is assumed that those listed Options are exercised into Shares for the purpose of calculating the voting dilution effect on existing Shareholders.

6. The Base Issue Price is $0.029, being the closing price of the Shares on ASX on 11 April 2014.

(c) Issue Period

If Shareholders approve Resolution 7, the Company will have a mandate to issue Equity Securities under the Additional 10% Placement Facility under Listing Rule 7.1A from the date of the Annual General Meeting until the earlier of the following to occur:

• i. the date that is 12 months after the date of the Annual General Meeting; and

• ii. the date of the approval by Shareholders of a transaction under Listing Rule 11.1.2 (a significant change to the nature or scale of activities) or 11.2 (disposal of main undertaking),

(the Additional 10% Placement Period ).

The Company will only issue Equity Securities under the Additional 10% Placement Facility during the Additional 10% Placement Period. Further, the approval under this Resolution 7 for the issue of the Equity Securities will cease to be valid in the event that shareholders approve a transaction under Listing Rule 11.1.2, a significant change to the nature or scale of activities; or Listing Rule 11.2 (disposal of main undertaking).

(d) Purpose of Issues

The Company may seek to issue the Equity Securities for the following purposes:

• i. non-cash consideration for the acquisition of the new assets and investments. In such circumstances the Company will provide a valuation of the non-cash consideration as required by Listing Rule 7.1A.3; or

• ii. cash consideration. In such circumstances, the Company intends to use the funds raised towards an acquisition of new assets or investments (including expense associated with such acquisition), and/or general working capital.

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The Company will provide further information at the time of issue of any Equity Securities under the Additional 10% Placement Facility in compliance with its disclosure obligations under ASX Listing Rules 7.1A.4 and 3.10.5A.

(e) Allocation Policy

The Company’s allocation policy is dependent on the prevailing market conditions at the time of any proposed issue pursuant to the Additional 10% Placement Facility. The identity of the persons to whom Equity Securities will be issued will be determined on a caseby-case basis having regard to the factors including but not limited to the following:

• (i) the methods of raising funds that are available to the Company, including but not limited to, rights issue or other issues in which existing security holders can participate;

• (ii) the effect of the issue of the Equity Securities on the control of the Company;

• (iii) the financial situation and solvency of the Company; and

• (iv) advice from corporate, financial and broking advisers (if applicable).

The persons to whom Equity Securities will be issued under the Additional 10% Placement Facility have not been determined as at the date of this Notice but may include existing Shareholders and/or new Shareholders.

Further, if the Company is successful in acquiring new investments, it is likely that the persons to whom Equity Securities will be issued under the Additional 10% Placement Facility will be the vendors of the new investments.

The persons to whom Equity Securities will be issued under the Additional 10% Placement Facility will not include related parties of the Company.

(f) Previous issues of Equity Securities made in the 12 months preceding the Meeting

The Company has not previously obtained Shareholder approval under Listing Rule 7.1A and as such is not required to provide information in respect of previous issues of Equity Securities made in the 12 months preceding the Meeting.

• (g) Voting exclusion statement

A voting exclusion statement for Resolution 7 is included in the Notice of Annual General Meeting preceding this Explanatory Statement.

At the date of the Notice of Annual General Meeting, the Company has not approached any particular existing security holder or an identifiable class of existing security holders to participate in the issue of the Equity Securities. Accordingly, the proposed persons to whom any Equity Securities may be issued under the Additional 10% Placement Facility are not as yet known or identified. In these circumstances (and in accordance with the note set out in ASX Listing Rule 14.11.1 relating to ASX Listing Rules 7.1 and 7.1A), for a person’s vote to be excluded, it must be known that that person will participate in the proposed issue. Where it is not known who will participate in a possible issue (as is the case in respect of any Equity Securities issued under the Additional 10% Placement Facility), Shareholders must consider the proposal on the basis that they may or may not get a benefit and that it is possible that their holding will be diluted, and there is no reason to exclude their votes.

No existing Shareholder’s votes will therefore be excluded under the voting exclusion in the Notice of Annual General Meeting.

Board Recommendation

The Board believes that the Additional 10% Placement Facility is beneficial for the Company as it will give the Company the flexibility to issue further securities representing up to 10% of the Company’s share capital during the next 12 months. Accordingly, the Board unanimously recommend that Shareholders approve Resolution 7.

By order of the board.

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J Talbot

Company Secretary 11 April 2014

Helpline: If you have any questions regarding the meeting or proxy voting, please do not hesitate to contact the Company’s share registrar Boardroom Pty Limited on 1300 737 760 for Australian shareholders or +61 2 9290 9600 for overseas shareholders.

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