SERVICE STREAM LIMITED

17 February 2014

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ASX & Media Release

Service Stream – Notice of Extraordinary General Meeting

Attached is a copy of the Notice of Extraordinary General Meeting and associated Proxy Form for Service Stream’s Extraordinary General Meeting to be held on 19 March 2014. These documents were dispatched to all shareholders today.

For further details contact:

Jessica Lyons, Company Secretary Tel: +61 3 9677 8817

About Service Stream Limited:

Service Stream is a public company listed on the Australian Securities Exchange (Code: SSM) with annual revenue in excess of $500 million. The Service Stream Group is a provider of essential network services to the telecommunications, energy and water industries. Service Stream operates out of more than 25 locations nationwide and maintains a workforce of more than 3,000 employees and contractors. For more information please visit www.servicestream.com.au.

SERVICE STREAM LIMITED ABN 46 072 369 870 HEAD OFFICE Level 4, 357 Collins Street, Melbourne Vic 3000 | Mailing Address: PO Box 14570 Melbourne VIC 8001 T +61 3 9677 8888 | F +61 3 9677 8877 | E [email protected] | www.servicestream.com.au

SERVICE STREAM LIMITED

ACN 072 369 870

NOTICE OF MEETING

AND

EXPLANATORY MEMORANDUM

TO BE HELD AT

10.30AM ON WEDNESDAY, 19 MARCH 2014 At Intercontinental Melbourne - The Rialto, 495 Collins Street, Melbourne, Victoria

To be valid, Proxy Forms for use at the meeting must be completed and returned to the Company no later than 10.30AM (Melbourne Time) on Monday, 17 March 2014.

Chairman’s Letter

Dear Shareholder,

I am pleased to provide you with this Notice of Meeting and Explanatory Memorandum, relating to a proposed fully underwritten capital raising of $20.0 million, made up of two parts:

a. a share placement to certain sophisticated and professional investors; and
b. a non-renounceable rights issue to shareholders with an Australian or New Zealand registered address on the record date of 1 April 2014.

The capital raising will not proceed unless both the placement and the rights issue are approved by shareholders.

Service Stream will use the proceeds of the capital raising to accelerate the Company’s return to a more sustainable financial position, with lower levels of net debt and bank guarantee utilisation. This will provide additional flexibility for the Company to pursue growth opportunities.

Shareholders will be asked to approve the capital raising at an extraordinary general meeting at 10.30am on Wednesday, 19 March 2014.

Background

Service Stream operates in a number of markets with growth opportunities, and is keen to explore those opportunities.

The Board and senior management team, headed by Managing Director, Terry Sinclair, have continued to focus on the Company’s balance sheet, operating conditions and overall performance. When the Board received a proposal to invest in the Company, it was able to consider that proposal in the context of its anticipated financing discussions (the Company’s lending facilities are due for repayment or refinancing on 31 August 2014) and ambitions for growth in its key markets.

The Board reached the conclusion that undertaking the placement and rights issue, having agreed appropriate terms, would be advantageous to the Company as it:

strengthens the Company’s balance sheet;
accelerates the lowering of the Company’s debt and banking guarantees;
improves the Company’s working capital position; and
enables the Company to explore new growth opportunities.

Consequently, the Board recommends that shareholders vote in favour of all resolutions to be put to the extraordinary general meeting.

While the details of the capital raising are set out more fully in the attached Notice of Meeting and Explanatory Memorandum, I have outlined below some of the highlights of the proposal.

High level summary of the capital raising

The $9.35 million placement is underwritten by Wilson HTM Corporate Finance Ltd (“Wilson HTM”) at $0.22 per share. This represents an 11.8 % premium to the volume weighted average price (VWAP) for the previous 30 trading days of $0.197 per share, calculated on the date the capital raising was announced, 24 January 2014.

Thorney International, which is an existing substantial shareholder in the Company, has agreed to subscribe for $2.0 million of shares in the placement, Thorney Opportunities (an ASX listed investment company) has agreed to subscribe for $6.0 million of shares in

the placement, and certain other sophisticated and professional investors (who are clients of Wilson HTM) have agreed to subscribe for the balance of $1.35 million.

The rights issue will occur after the placement and will be underwritten by Wilson HTM, and sub-underwritten by Thorney International (as to $1.6 million) and Thorney Opportunities (as to $4.9 million). The shares issued under the placement are entitled to participate in the rights issue.

The rights issue will be non-renounceable, on a 2 for 11 basis, raise $10.7 million and be at $0.18 per share. This represents an 8.6% discount to the 30 day VWAP of $0.197 per share (calculated on the date the capital raising was announced). Thorney International (holding 20.1% of the Company at the time of the rights issue) and Thorney Opportunities (holding 8.3%) have agreed to apply for their full entitlement at $0.18 per share.

Shareholders may apply for shares in addition to their full entitlement under the rights issue. Thorney International and Thorney Opportunities will not apply for shares in addition to their entitlement. Any shortfall under the rights issue will first be satisfied by allocations made by the Board at its discretion pursuant to any such over-subscriptions, and then under the underwriting and sub-underwriting arrangements.

Each of Thorney International and Thorney Opportunities has agreed to sub-underwrite the rights issue. Depending on the level of take up of the offer, Thorney International will hold between 20.1% and 22.4%, and Thorney Opportunities will hold between 8.3% and 15.4% of the Company after completion of the rights issue. Depending on the level of take up of the offer, in total, Thorney International and Thorney Opportunities will together hold between 28.4% and 37.8% of the Company after completion of the rights issue.

The Directors believe these arrangements provide certainty of funding from a supportive current shareholder (in Thorney International) and a new shareholder (Thorney Opportunities) as well as providing an opportunity for all eligible shareholders to participate in the capital raising on attractive terms.

The implementation and completion of the placement and rights issue is subject to the approval of Resolutions 1 and 2 by shareholders at the Meeting (to allow the increase in voting power of each of Thorney International, Thorney Opportunities and certain Thorney associated entities above 20% and so that the placement does not reduce the number of shares the Company is permitted to issue under ASX Listing Rule 7.1).

The capital raising is not conditional on approval of Resolution 3 (which seeks to ensure that the placement of the balance of the shares does not reduce the number of shares the Company is permitted to issue under ASX Listing Rule 7.1)

Subject to Shareholders approving Resolutions 1 and 2, the placement is expected to complete on 24 March 2014, the rights issue offer documents are expected to be despatched on 3 April 2014 and the rights issue is expected to complete on 30 April 2014.

Directors’ consideration of the capital raising

The Directors believe that the capital raising is advantageous, with the following benefits:

it will materially strengthen the Company's balance sheet;
it enables the Company to explore new growth opportunities;
it enables the Company to undertake its next refinancing on more favourable terms;
the placement will occur at an 11.8% premium to the 30 day VWAP share price (calculated on the date the capital raising was announced); and
shareholders will have the opportunity to invest further in Service Stream at an 8.6% discount to the 30 day VWAP (calculated on the date the capital raising was announced) by participating in the rights issue.

However, the capital raising has some disadvantages:

Thorney International and Thorney Opportunities will acquire a significant shareholding in the Company as a result of the placement which will have the effect of reducing the overall percentage holding of existing shareholders in the Company;
the rights issue will dilute positions held by shareholders who do not apply for their full entitlement. As the rights issue is structured as a non-renounceable offer, shareholders who do not take up their entitlements will not be able to receive any potential value for them;
under the placement and the rights issue (including the sub-underwriting arrangements entered into by Thorney International and Thorney Opportunities), the maximum percentage shareholding of each of Thorney International and Thorney Opportunities, assuming no other shareholder participates in the rights issue, will be 22.4% and 15.4% respectively;
there may be conflicts between the interests of Thorney International and Thorney Opportunities on the one hand and the other shareholders on the other. For example, each of Thorney International and Thorney Opportunities will be in a position to exercise influence over all matters that may require shareholder approval;
the rights issue is at an 8.6% discount to the 30 day volume weighted average price (VWAP) of $0.197 per Share, calculated on 24 January 2014 (which was the date the Capital Raising was announced); and
there are approximately $1.1 million in costs associated with the capital raising.

Your Directors believe that the advantages of the capital raising outweigh any disadvantages.

A more detailed assessment of the benefits and disadvantages of the capital raising is included in section 3 of the accompanying Explanatory Memorandum.

Independent Expert

BDO, as Independent Expert, has concluded that the capital raising is not fair but reasonable to shareholders not associated with Thorney International and Thorney Opportunities. The Independent Expert’s Report is set out in Appendix A to the Explanatory Memorandum.

Directors’ Recommendation to Vote in Favour

Your Directors unanimously recommend that shareholders vote in favour of the Resolutions, subject to the Independent Expert not changing its conclusion that the capital raising is “not fair but reasonable” to shareholders not associated with Thorney International and Thorney Opportunities.

Each Director who owns shares intends to vote those shares in favour of the Resolutions, and to take up all of their entitlements under the rights issue.

Further Information

The Explanatory Memorandum contains further details of the capital raising, including a discussion of the advantages, disadvantages and risks. Please read the Explanatory Memorandum carefully before deciding how to vote.

You can vote in person at the Meeting on Wednesday, 19 March 2014. If you cannot attend the Meeting in person, you can vote by proxy, power of attorney or corporate representative using the Proxy Form enclosed with the Explanatory Memorandum.

If you have any questions about the proposed capital raising, please consult your independent financial or legal adviser.

The Board believes that the capital raising will benefit the Company and its shareholders. I encourage you to participate and vote in favour of the Resolutions.

Yours sincerely,

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Peter Dempsey Chairman

Notice of Meeting

Notice is given that an Extraordinary General Meeting of Shareholders will be held as follows:

Time: 10.30am
Date: Wednesday, 19 March, 2014
Place: Intercontinental Melbourne - The Rialto, 495 Collins Street, Melbourne, Victoria

At the Meeting, Shareholders will be asked to consider the Resolutions set out below to implement the Placement and the Rights Issue.

Words and phrases commencing with a capital letter used in this Notice of Meeting (including in the Resolutions) have the meaning set out in the Glossary.

Resolutions

The Capital Raising will only proceed if Resolutions 1 and 2 below are passed by the required majority of Shareholders. The Capital Raising is not conditional on Shareholders passing Resolution 3.

Resolution 1: Approval of the Placement to Thorney International and Thorney Opportunities (ASX Listing Rule 7.1 and item 7 of section 611 of the Corporations Act)

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

“ That, subject to Resolution 2 being passed, approval is given for the purposes of ASX Listing Rule 7.1 and item 7 of section 611 of the Corporations Act and for all other purposes to the acquisition by:

(a) Thorney International Pty Ltd of 9,090,910 Shares (resulting in a voting power in the Company, immediately after completion of the Placement, of 28.4%; which voting power will also be held by all Thorney Entities); and
(b) Thorney Opportunities Limited of 27,272,730 Shares (resulting in a voting power in the Company, immediately after completion of the Placement, of 28.4%; which voting power will also be held by all Thorney Entities),

pursuant to the Placement and on the terms and conditions set out as described in the Explanatory Memorandum accompanying this Notice of Meeting relating to the Placement."

Resolution 2: Approval of the acquisition of Shares by Thorney International and Thorney Opportunities under the Sub-underwriting Agreements relating to the Rights Issue (item 7 of section 611 of the Corporations Act)

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

“ That, subject to Resolution 1 being passed, approval is given for the purposes of item 7 of section 611 of the Corporations Act and for all other purposes to the acquisition by:

(a) Thorney International Pty Ltd of up to 9,103,744 Shares (resulting in a voting power in the Company, immediately after completion of the Rights Issue, of up to 37.8%, which voting power will also be held by all Thorney Entities); and
(b) Thorney Opportunities Limited of up to 27,311,225 Shares (resulting in a voting power in the Company, immediately after completion of the Rights Issue, of up to 37.8%; which voting power will also be held by all Thorney Entities),

pursuant to the terms of the Sub-underwriting Agreements as they relate to any shortfall under the Rights Issue and on the terms and conditions set out as described in the

Explanatory Memorandum accompanying this Notice of Meeting relating to the Rights Issue.’’

Resolution 3: Approval of the Placement to other sophisticated and professional investors (ASX Listing Rule 7.1)

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

“That approval is given for the purposes of ASX Listing Rule 7.1 and for all other purposes for the issue of 6.1 million Shares to sophisticated and professional investors (who are clients of Wilson HTM Corporate Finance Ltd) in connection with the Placement on the terms and conditions set out as described in the Explanatory Memorandum accompanying this Notice of Meeting.”

Recommendation

The Directors unanimously recommend that Shareholders vote in favour of the Resolutions.

Voting and eligibility

Entitlement to vote

The Board has determined that all Shareholders on the Register as at 7.00pm on Monday, 17 March 2014 will be entitled to attend and vote at the Meeting subject to the voting exclusion statement detailed below.

It is important that you vote on the Resolutions either in person at the Meeting or by completing and returning the Proxy Form attached to this Notice.

Voting exclusion statements

In accordance with the ASX Listing Rules and the Corporations Act, the Company will disregard any votes cast on:

Resolutions 1 and 2 by Thorney International Pty Ltd and Thorney Opportunities Ltd or any of their Associates; and
Resolution 3, by any sophisticated or professional investor who participated in the issue of shares under the Placement (other than Thorney International Pty Ltd and Thorney Opportunities Ltd), or 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
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.

Votes of Shareholders

On a show of hands, each Shareholder present in person or by proxy or by attorney or, in the case of a body corporate, by a corporate representative at the Meeting shall have one vote. Where a person present at the Meeting represents more than one Shareholder, on a show of hands that person is entitled to one vote only and that vote is cast for all Shareholders represented.

On a poll, every Shareholder present in person or by attorney or by proxy or, in the case of a body corporate, by a representative shall have one vote for each Share held.

Required majority

Resolutions 1, 2 and 3 are ordinary resolutions and will be approved if passed by a simple majority of the votes cast by Shareholders present in person or by proxy, attorney or, in the case of a body corporate, by a corporate representative at the Meeting and entitled to vote on the ordinary resolution.

If you wish to vote for the Capital Raising you will need to vote in favour of both Resolutions 1 and 2 as each of these Resolutions are interdependent and the Capital Raising will not be implemented without both of the Resolutions being passed.

Resolution 3 relates to the Company’s capacity to place Shares to investors without obtaining Shareholder approval. The Capital Raising is not conditional on Shareholders approving Resolution 3. The Capital Raising will proceed if Resolutions 1 and 2 are approved, whether or not Resolution 3 is approved. If Resolution 3 is not approved (but the other two Resolutions are), the Shares issued to sophisticated and professional investors under the Placement (other than Thorney International and Thorney Opportunities, for which approval is sought under Resolution 1) will be taken into account for the purposes of ASX Listing Rule 7.1 which imposes a 15% cap (based on number of ordinary shares on issue 12 months prior to the relevant issue) on the number of ordinary shares that a company may issue in any rolling 12 month period.

How you may vote

You may attend the Meeting in person and vote at the Meeting. If you are unable to attend the Meeting in person:

a Shareholder entitled to attend and vote at the Meeting is entitled to appoint no more than two proxies or two attorneys;
you may appoint a proxy using the Proxy Form attached to this Notice of Meeting;
where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the Shareholder’s voting rights. If a Shareholder appoints two proxies, and the appointment does not specify the proportion of the Shareholder’s voting rights that the proxy may exercise, each proxy will exercise one-half of the voting rights;
a proxy, attorney or corporate representative need not be a Shareholder of the Company;
where you have specified the manner in which the proxy is to vote in respect of a particular Resolution in the Proxy Form, the proxy is not entitled to vote on the Resolution except as specified in the Proxy Form;
a proxy has the authority to act generally at the Meeting and vote on the Shareholder’s behalf as he or she thinks fit on any motion to adjourn the Meeting, amend a Resolution or on any other procedural motion put at the Meeting, unless the member gives a direction to the contrary;
a valid Proxy Form will be deemed to confer authority to demand or join in demanding a poll; and
to be valid, a Proxy Form must be signed by the Shareholder or the Shareholder’s attorney or, if the Shareholder is a corporation, executed in accordance with the corporation’s constitution and the Corporations Act.

To be valid, a Proxy Form and the power of attorney or other authority (if any) under which it is signed (or an attested copy of it) must be received by no later than 10.30am (Melbourne time) on Monday, 17 March 2014. Proxies may be lodged by the following methods:

(a) received by the Company’s share registrar, Computershare Investor Services, by:
(1) delivery to “Yarra Falls”, 452 Johnston Street, Abbotsford, Victoria 3067;
(2) post to GPO Box 242, Melbourne, Victoria, 8060; or
(3) fax to 1800 783 447 or +61 3 9473 2555,

before 10.30am (Melbourne time) on Monday, 17 March 2014; or

(b) received by the Company (attention: Ms Vicki Letcher, Company Secretary) at Level 4, 357 Collins Street, Melbourne, Victoria, 3000; or by fax on 03 9677 8877, before 10.30am (Melbourne time) on Monday, 17 March 2014.
(c) A proxy may also be appointed electronically by:
(1) visiting www.investorvote.com.au and following the instructions provided;
(2) scanning the QR code with your mobile device; or
(3) visiting www.intermediaryonline.com to submit your voting intentions (for Intermediary Online subscribers (custodians) only),

before 10.30am (Melbourne time) on Monday, 17 March 2014. A proxy cannot be appointed online if they are appointed under power of attorney or similar authority.

Event			Date and time
Dispatch of Notice of	Meeting	and	Monday, 17 February 2014
Explanatory Memorandum
Last date to lodge Proxy Form			10.30am on Monday, 17 March 2014
Extraordinary General Meeting			10.30am on Wednesday, 19 March
			2014
Issue of Shares under Placement			Monday, 24 March 2014
Record Date for Rights Issue			Tuesday, 1 April 2014
Dispatch Rights Issue Offer documents			Thursday, 3 April 2014
Rights Issue Offer opens			Thursday, 3 April 2014
Rights Issue Offer closes			Thursday, 17 April 2014
Issue of Shares under Rights Issue			Wednesday, 30 April 2014

Explanatory Memorandum

1 Background to the Capital Raising

Despite material challenges in 2013, the Directors of Service Stream believe that the Company has significant potential to continue to increase value for Shareholders and that it is well positioned for future growth.

Nonetheless, the Company’s lending facilities (renegotiated in 2013) are due for repayment or refinancing on 31 August 2014. Given the relatively short term of the lending facilities, and the ongoing growth objectives of the Company, the Board worked very closely with the Managing Director, Terry Sinclair, to monitor the Company’s balance sheet, operating conditions and overall performance. When the Board received a proposal to invest in the Company, it was able to consider that proposal in the context of this ongoing review.

Your Directors have reviewed the proposal and, based on the terms negotiated believe it would be advantageous to undertake the Capital Raising, which accelerates the process of reducing the Company’s level of debt and enables it to pursue growth opportunities.

The Directors believe that the Company will benefit from the proposed Capital Raising for the following reasons:

it will materially strengthen the Company’s balance sheet;
it will enhance the Company’s ability to take advantage of growth opportunities;
the proposed Placement and Rights Issue enables the Company to undertake its next refinancing on more favourable terms;
the Placement will occur at an 11.8% premium to the 30 day VWAP (calculated on the date the Capital Raising was announced, 24 January 2014);
Shareholders will have the opportunity to invest further in Service Stream at an 8.6% discount to the 30 day VWAP by participating in the Rights Issue; and
Shareholders will have the ability to apply for Shares in addition to their entitlement under the Rights Issue. Any shortfall under the Rights Issue will first be satisfied by allocations made by the Board at its discretion pursuant to any such over-subscriptions, and then under the underwriting and sub-underwriting arrangements.

2 The Resolutions

2.1 Resolution 1: Approval of the Placement to Thorney International and Thorney Opportunities (Item 7 of section 611 of the Corporations Act and ASX Listing Rule 7.1)

Section 606 of the Corporations Act (the Takeover prohibition) prohibits a person acquiring a Relevant Interest in issued voting shares of a listed company (such as Service Stream) if that person’s, or someone else’s, voting power in the company would exceed 20% after the acquisition. Shareholder approval of the acquisition, by ordinary resolution, is an exception to this prohibition.

On completion of the Placement, Thorney International will own approximately 20.1% of the Company’s issued share capital and Thorney Opportunities will own approximately 8.3% of the Company’s issued share capital. As a result of the relevant interest and voting power provisions in the Corporations Act, Thorney International, Thorney Opportunities and the Thorney Entities will have a voting power in the Shares of 28.4%.

The effect of Resolution 1 is to seek Shareholder approval for the Placement so that there is no breach of the takeover prohibition.

In addition, ASX Listing Rule 7.1 imposes a limit on the number of ordinary shares that a company may issue in any rolling 12 month period. Generally speaking, that cap is 15% of the ordinary shares on issue 12 months prior to the relevant issue. If shareholders approve the relevant issue of ordinary shares by ordinary resolution, the relevant issue is not taken into account for the purposes of the 15% cap.

Therefore, the effect of Resolution 1 is that the Shares issued to Thorney International and Thorney Opportunities under the Placement will not be taken into account for the purposes of the 15% cap and the Company will retain the ability to issue further Shares to the extent of its unused capacity under ASX Listing Rule 7.1.

2.2 Resolution 2: Approval of the acquisition of Shares by Thorney International and Thorney Opportunities under the Sub-underwriting Agreements relating to the Rights Issue (item 7 of section 611 of the Corporations Act)

Under the terms of the Sub-underwriting Agreements, the Rights Issue will be subunderwritten by Thorney International (as to $1.6 million) and Thorney Opportunities (as to $4.9 million).

On completion of the Rights Issue, depending on the extent to which other Shareholders participate in the Rights Issue, Thorney International will own between 20.1% and 22.4% of the Company’s issued share capital and Thorney Opportunities will own between 8.3% and 15.4% of the Company’s issued share capital. As a result of the relevant interest and voting power provisions in the Corporations Act, Thorney International, Thorney Opportunities and the Thorney Entities will each, depending on the extent to which other Shareholders participate in the Rights Issue, have a voting power in the Shares of between 28.4% and 37.8%.

The effect of the Sub-underwriting Agreements is that the voting power of Thorney International and Thorney Opportunities may increase in circumstances where the voting power of Thorney International and Thorney Opportunities already exceeds 20% (as a result of the Placement). While the sub-underwriting of a rights issue is an exception to the takeover prohibition, there have been challenges to such sub-underwritings on the basis that they are designed for a shareholder to gain control of a company in a way that amounts to unacceptable circumstances. The effect of Resolution 2 is to seek Shareholder approval for the sub-underwriting by Thorney International and Thorney Opportunities of the Rights Issue so that there is no breach of the takeover prohibition.

2.3 Resolution 3: Approval of the Placement to sophisticated and professional investors (ASX Listing Rule 7.1)

ASX Listing Rule 7.1 imposes a limit on the number of ordinary shares that a company may issue in any rolling 12 month period. Generally speaking, that cap is 15% of the ordinary shares on issue 12 months prior to the relevant issue. If Shareholders approve the relevant issue of ordinary shares by ordinary resolution, the relevant issue is not taken into account for the purposes of the 15% cap.

The effect of Resolution 3 is that the Shares issued to sophisticated and professional investors under the Placement (other than Thorney International and Thorney Opportunities, for which approval is sought under Resolution 1) will not be taken into account for the purposes of the 15% cap and the Company will retain the ability to issue further Shares to the extent of its unused capacity under ASX Listing Rule 7.1.

The sophisticated and professional investors are clients of Wilson HTM.

The Capital Raising will proceed if Resolutions 1 and 2 are approved whether or not Resolution 3 is approved. If Resolution 3 is not approved (but the other two Resolutions are, the Shares issued to sophisticated and professional investors under the Placement (other than Thorney International and Thorney Opportunities, for which approval is sought under Resolution 1) will be taken into account for the purposes of ASX Listing Rule 7.1 which imposes a 15% cap (based on number of ordinary shares on issue 12 months prior to the relevant issue) on the number of ordinary shares that a company may issue in any rolling 12 month period.

3 Advantages and disadvantages of the Capital Raising

3.1 Purpose of this section of the Notice of Meeting and Explanatory Statement

This section identifies significant issues for Shareholders to consider in relation to the proposed implementation of the Capital Raising. The proposed Capital Raising will directly affect your holding of Shares.

Before deciding how to vote at the Meeting, Shareholders should carefully consider the factors discussed below, as well as the other information contained in this Explanatory Memorandum.

3.2 Reasons to vote in favour of Resolution 1 and Resolution 2

The Directors recommend that Shareholders vote in favour of Resolution 1 and Resolution 2 to approve the proposed Placement and the Rights Issue, for the reasons set out below:

(a) The proceeds of the Capital Raising will materially strengthen Service Stream’s balance sheet : The proceeds of the Capital Raising will be approximately $20.0 million before associated fees and expenses (including a fee that Service Stream has agreed to pay the Underwriters being 2.0% of the $9.35 million to be raised under the Placement and a further 4.0% of the $10.7 million to be raised under the Rights Issue, equal to approximately $0.6 million). These funds will enable Service Stream to materially reduce its financial leverage through a combination of reducing debt and bank guarantees owed under its various lending facilities and increasing its working capital.
(b) Shares issued to Thorney International and Thorney Opportunities under the Placement are being issued at a premium : The subscription price under the Placement represents a premium of 11.8% to the 30 trading day VWAP, and a 15.8% premium to the last closing price of Shares, both calculated immediately prior to the announcement of the proposed Capital Raising on 24 January 2014.

(c) Opportunity for Shareholders to make a further investment in Service Stream at a discount : The Rights Issue provides all eligible Shareholders (as at the Record Date) with an opportunity to make a further investment in Service Stream at an issue price of $0.18 per Share which represents an 8.6% discount to the 30 trading day VWAP of Shares, and a 5.3% discount to the last closing price of Shares, both calculated immediately prior to the announcement of the Capital Raising proposal on 24 January 2014. Shareholders may also apply for Shares in excess of their full entitlement under the Rights Issue. Any shortfall under the Rights Issue will first be satisfied by allocations made by the Board at its discretion pursuant to any such over-subscriptions, and then pursuant to the Underwriting Agreement and Sub-underwriting Agreements.
(d) Enhances outcomes of next refinance : The proposed Placement and Rights Issue enables the Company to secure the refinancing of the facilities when they are due later in the year on more favourable terms.
(e) Maintains placement capacity : Whilst the Directors currently have no intention to issue Shares in addition to the Capital Raising, the approvals sought under Listing Rule 7.1 will enable the Company to maintain its capacity to raise additional equity capital should the Directors consider that it is in the best interests of Shareholders to do so.

3.3 Reasons to vote against Resolution 1 and Resolution 2

The Directors consider that there are also disadvantages associated with the Capital Raising and Shareholders should take these into consideration when deciding how to vote on Resolution 1 and Resolution 2. These include:

(a) Thorney International and Thorney Opportunities voting power in Service Stream : After completion of the Capital Raising, if no other Shareholders participate in the Rights Issue, the Shares of Thorney International and Thorney Opportunities will be:
(1) Thorney International - up to 86.6 million Shares; and
(2) Thorney Opportunities - up to 59.5 million Shares.

Thorney International, Thorney Opportunities and the Thorney Entities will each have a voting power of up to 37.8% in the Company depending on the level of participation of other Shareholders in the Rights Issue.

Accordingly, Thorney International and Thorney Opportunities may be in a position to exercise influence over matters which require Shareholder approval.

(b) Conflicting interest between Thorney International and Thorney Opportunities and other Shareholders : The interests of Thorney International and Thorney Opportunities might not always be aligned with the interests of other Shareholders. However, Shareholders do retain the benefit of protections provided by applicable laws and the ASX Listing Rules in relation to dealings between Service Stream and Thorney International and Thorney Opportunities. Relevant protections include:
(1) in certain circumstances, a requirement to obtain Shareholder approval for transactions including transactions between Service Stream and Thorney International and Thorney Opportunities;
(2) a requirement for all Directors of Service Stream to comply with applicable laws relating to conflicts of interest; and

(3) a requirement for all Directors to comply with legal obligations to act in good faith in the best interests of Service Stream and for proper purposes, having regard to the interests of the Shareholders and Service Stream as a whole.
(c) Shares will be offered at a discount under the Rights Issue : The Shares to be issued under the Rights Issue will be offered at $0.18 per Share, which represents an 8.6% discount to the 30 day VWAP of Shares, and 5.3% discount to the last closing price of Shares, both calculated immediately prior to the announcement of the Capital Raising on 24 January 2014. The Directors consider that this price is appropriate so as to encourage all Shareholders to participate in the Rights Issue.
(d) Potential for significant dilution of ownership interests : Upon implementation of the Capital Raising, the number of Shares will increase from 284.4 million to 386.4 million. This means that each Share will represent a lower proportion of ownership of Service Stream after the Capital Raising. While Shareholders can increase the number of Shares they hold by participating in the Rights Issue, their overall percentage interest in the recapitalised Service Stream will still be reduced under the Capital Raising due to the Shares to be issued to Thorney International and Thorney Opportunities under the Placement. Shareholders who do not subscribe for their full entitlement of Shares under the Rights Issue (and Shareholders who are not eligible to participate in the Rights Issue) will be diluted under the Placement and the Rights Issue.
(e) Rights Issue is non-renounceable : The Rights Issue is non-renounceable. That means than Shareholders who do not elect to take up all of their entitlement (and Shareholders who are ineligible to participate in the Rights Issue) will not receive any potential value for their renounced entitlements.
(f) Costs of undertaking Capital Raising : Service Stream estimates that the total costs of the Capital Raising, including the negotiation of transaction documents, calling and holding of the Meeting, issue of the proposed Placement Shares, conduct of the Rights Issue and payment of corporate, legal, advisory and the Registry fees, will be approximately $1.1 million. If the Capital Raising proceeds, the Underwriter will receive a fee being 2.0% of the $9.35 million to be raised under the Placement and a further 4.0% of the $10.7 million to be raised under the Rights Issue, equal to approximately $0.6 million (included within the $1.1 million).

3.4 Resolution 3 and ASX Listing Rule 7.1 generally

The Directors do not currently have any intention to issue Shares in addition to the Capital Raising. However, the Directors consider that it is appropriate for approval to be sought at the Meeting in respect of the Shares issued under the Placement (both to Thorney International and Thorney Opportunities as sought under Resolution 1, and to the additional sophisticated and professional investors who subscribe for Shares under the Placement as sought under Resolution 3). This approval will enable the Company to raise additional equity capital without Shareholder approval where the Directors consider it is in the best interests of Shareholders to do so in circumstances not covered by the exceptions to ASX Listing Rule 7.1 contained in ASX Listing Rule 7.2.

The Directors believe that it is in the best interests of the Company that the Directors maintain their ability to issue up to 15% of the issued capital of the Company.

4 Additional information

4.1 Thorney International and Thorney Opportunities

Thorney Opportunities is an investment vehicle listed on the ASX and managed by Thorney Management Services Pty Ltd. Thorney International is currently the largest shareholder of Service Stream and is part of the private Thorney Group. The Thorney Entities have a shareholding in Thorney Opportunities of 30.04%.

4.2 Service Stream lending facilities

The Company has a multi-option banking facility with Australia and New Zealand Banking Group and Westpac Banking Corporation, which includes a general security agreement over all the Company’s assets.

The facility provides the Company with cash advance, bank guarantee and overdraft facilities which currently total $90.5 million. The facility is scheduled to expire on 31 August 2014.

The Banks hold a security interest over all of the Company’s assets. At 31 December 2013, the cash advance facility was fully drawn at $50 million and the overdraft was drawn to $0.1 million. With cash on hand of $12.0 million, net debt (being borrowings net of unrestricted cash) was $38.1 million. In addition, the Company’s bank guarantee facility was drawn to $32.6 million.

The multi-option syndicated facility contains terms which are typical of a facility of this nature as well as some negative pledges and undertakings which were required to be given due to the Company’s financial position as at 30 June 2013. The facility contains a number of financial covenants and requirements including those relating to required shareholder funds, tangible net worth, the value of qualifying assets against which borrowing may occur, fixed charges coverage ratio and quarterly EBITDA relative to the Company’s FY14 operating budget.

Since 30 June 2013, the Company has complied with its obligations under the facility and has made repayments totalling $10 million in accordance with the requirements of the facility.

It is anticipated that undertaking the Capital Raising will materially reduce constraints on Service Stream by reducing the overall level of net debt and bank guarantees and by providing greater flexibility for refinancing the Company’s lending facilities.

4.3 Information required by Corporations Act and ASX Listing Rules

In accordance with ASIC Regulatory Guide 74 ( Acquisitions approved by members ) and ASX Listing Rule 7.3, the information that Shareholders require in order to assess the merits of the Capital Raising is set out below.

Identity of allottee(s)

The allottees of the Shares under the Placement will be Thorney Opportunities Limited, Thorney International Pty Ltd and certain sophisticated and professional investors (who are clients of Wilson HTM) to whom offers of Placement shares will be made by the Company.

Entitlement

Thorney International and Thorney Opportunities have undertaken to take up their full entitlement in the Rights Issue. Assuming there is no shortfall on the Rights Issue, the Company will, subject to Shareholder approval, issue under the Placement and the Rights Issue (but not the sub-underwriting of the Rights Issue):

(a) 21.0 million Shares to Thorney International; and
(b) 32.2 million Shares to Thorney Opportunities,

in accordance with the terms and conditions of issue outlined in this Explanatory Memorandum.

Assuming a shortfall in the Rights Issue from shareholders other than Thorney Opportunities and Thorney Investments, the Company will, subject to Shareholder approval, issue up to (inclusive of Shares issued under the Placement, the Rights Issue and the sub-underwriting of the Rights Issue):

(a) 30.1 million Shares to Thorney International; and
(b) 59.5 million Shares to Thorney Opportunities,

in accordance with the terms and conditions of issue outlined in this Explanatory Memorandum.

Under the Sub-underwriting Agreements, the Company will issue up to:

(a) 9.1 million Shares as part of the shortfall to Thorney International; and
(b) 27.3 million Shares as part of the shortfall to Thorney Opportunities.

Under the Placement, 6.1 million Shares will be issued to certain sophisticated and professional investors to whom offers of Placement shares will be made by the Company (in addition to the Placement shares issued to Thorney International and Thorney Opportunities). The sophisticated and professional investors are clients of Wilson HTM.

The exact number of Shares that will be issued to each of Thorney International and Thorney Opportunities will depend on the extent to which other Shareholders do not take up their entitlement under the Rights Issue.

The table below shows the Shares to be issued to each of Thorney International and Thorney Opportunities depending on the level of take-up by other Shareholders in the Rights Issue.

Take-up by	Shares to be issued to Thorney	Shares to be issued to Thorney	Shares to be issued to Thorney	Shares to be issued to Thorney
other	International under the Sub-		Opportunities under the Sub-
Shareholders	underwriting Agreements		underwriting Agreements
in the Rights
Issue
	Shares	Percentage*	Shares	Percentage*
0%	9.1 million Shares	2.4%	27.3 million Shares	7.1%
25%	6.8 million Shares	1.8%	20.5 million Shares	5.3%
50%	4.6 million Shares	1.2%	13.7 million Shares	3.5%

Take-up by Shares to be issued to Thorney other International under the SubShareholders underwriting Agreements in the Rights Issue

Shares to be issued to Thorney Opportunities under the Subunderwriting Agreements

	Shares	Percentage*	Shares	Percentage*
100%	0 Shares	0.0%	0 Shares	0.0%

The percentage of the total issued capital of the Company this represents on completion of the Capital Raising.

The table below shows the maximum number of Shares to be issued to each of Thorney International and Thorney Opportunities under the Capital Raising (assuming none of the other Shareholders take up their entitlement under the Rights Issue).

	Shares to be issued	to Thorney	Shares to be issued to Thorney	Shares to be issued to Thorney
	International		Opportunities
	Shares	Percentage*	Shares	Percentage*
Placement	9.1 million Shares	2.4%	27.3 million Shares	7.1%
Rights Issue	11.9 million	3.1%	5.0 million Shares	1.3%
entitlement	Shares
Rights Issue	Up to 9.1 million	Up to 2.4%	Up to 27.3 million	Up to 7.1%
sub-underwrite	Shares		Shares
Total**	Up to 30.1 million	Up to 7.8%	Up to 59.5 million	Up to 15.4%
	Shares		Shares

The percentage of the total issued capital of the Company this represents on completion of the Capital Raising.
** Totals are rounded to the nearest 0.1%.

Intentions

If the Capital Raising proceeds, Thorney International and Thorney Opportunities have no intention to seek to change any of the following:

the conduct of the business of the Company in its existing form;
the assets of the Company;
the property used in the Company’s business;
the deployment of the fixed assets of the Company; and
the Company’s existing workforce.

Neither Thorney International nor Thorney Opportunities has any present intentions to inject further capital into the Company other than the Capital Raising.

The Directors do not anticipate any changes to the existing financial and dividend policies of the Company. Thorney International and Thorney Opportunities have not indicated to the Directors that they intend to seek to change the financial or dividend policies of the Company.

The Directors may in the future resolve to inject further capital into the Company by way of debt or equity or a combination of both; however any such decision will depend on the relevant circumstances and requirements of the Company and be subject to any relevant Shareholder approvals.

Terms of Shares

Shares under the Placement will be issued at $0.22 per Share and Shares under the Rights Issue will be issued at $0.18 per Share.

Shares issued under the Placement and the Rights Issue will rank equally with other Shares already on issue.

Intended use of funds

Funds raised under the Placement and the Rights Issue will be used by Service Stream to increase working capital and repay some debt owed under its current lending facilities, strengthening the balance sheet and providing additional financial flexibility to pursue growth opportunities.

Date of issue

Shares under the Placement will be issued by Monday, 24 March 2014. Shares under the Rights Issue will be issued by Wednesday, 30 April 2014.

Reasons for the Capital Raising

Primary reasons for conducting this Capital Raising include:

it will materially strengthen the Company’s balance sheet;
it will enhance the Company’s ability to take advantage of growth opportunities;
it will reduce the overall level of debt and provide greater flexibility for refinancing the Company’s financing facilities when they are due later this year; and
Shareholders will have the opportunity to invest further in Service Stream at an 8.6 % discount to the 30 day VWAP (calculated on the date of announcement of the Capital Raising, 24 January 2014) by participating in the Rights Issue.

Interests of current Directors

The current Directors do not have an interest in the Capital Raising other than their ability to participate, like any other Shareholder, in the Rights Issue. Directors and other related parties are unable to participate in the Placement; however, each of the Directors intends to take up their full entitlements in the Rights Issue.

The following table sets out each Director’s holding in Shares in the Company as at 24 January 2014.

	Fully paid ordinary shares
Directors	Number
P Dempsey	570,000
D Page	129,400
B Gallagher	8,792,113
S Wilks	500,000
R Grant	457,646

Maximum percentage of Shares and voting power after Capital Raising

Thorney International’s current Shareholding in the Company is 19.9% while Thorney Opportunities has no current Shareholding in the Company.

The maximum number of Shares issued under the Capital Raising will be 101.9 million Shares – with the maximum number of Shares to be issued under the Placement being 42.5 million Shares and the Rights Issue being 59.4 million Shares.

The maximum percentage of Shares owned by Thorney International and Thorney Opportunities resulting from the Capital Raising will be up to 22.4% and 15.4% respectively, in both cases expressed as a percentage of Shares on issue after the Capital Raising is completed.

The maximum voting power, as a result of the Capital Raising, of Thorney International and Thorney Opportunities (as well as the maximum voting power of the Thorney Entities) is 37.8%. The maximum increase in voting power, as a result of the Capital Raising, of Thorney International is 17.9% and of Thorney Opportunities is 37.8%. These are percentages of voting power after the Capital Raising is completed.

The maximum extent of the increase in the voting power, as a result of the Capital Raising, of each of the Associates of Thorney International is 17.9%. The maximum voting power of each of the Associates of Thorney International and Thorney Opportunities, as a result of the Capital Raising, is 37.8%. These are percentages of voting power after the Capital Raising is completed.

Recommendation of Directors

The Directors unanimously recommend that Shareholders vote in favour of the Resolutions, subject to the Independent Expert not changing its conclusion that the Capital Raising is “not fair but reasonable” to Shareholders not associated with Thorney International and Thorney Opportunities.

5 Independent Expert’s report

The Company engaged BDO to provide the Independent Expert’s Report on the Capital Raising. The Independent Expert’s Report opines on whether the Capital Raising is fair and reasonable to Shareholders who are not associated with Thorney Opportunities and Thorney International. It also provides Shareholders with information that is material to the decision as to how to vote on the Resolutions.

The Independent Expert has concluded that the Capital Raising is not fair but reasonable to Shareholders who are not associated with Thorney Opportunities and Thorney International. The report also contains an assessment of the advantages and disadvantages of the Capital Raising.

According to the Independent Expert, the key advantages of the Capital Raising are:

(a) The consideration of $0.22 per Share payable under the Placement falls within the hypothetical range of the fair market value of an equity interest in Service Stream when adjusted for a placement discount and is therefore not unfavourable to Shareholders not associated with Thorney International and Thorney Opportunities.
(b) The consideration of $0.18 per Share payable under the Rights Issue is consistent with comparable transactions.
(c) Shareholders are able to apply for Shares in addition to their full entitlement under the Rights Issue, which increases the likelihood of Shares being taken up by entities not associated with Thorney Opportunities and Thorney International.
(d) Thorney Opportunities and Thorney International are strategic investors, are not actively involved in managing the business of Service Stream and are likely to entertain reasonable offers for Shares in the event of a takeover scenario.
(e) Service Stream’s current borrowings mature in August 2014. The terms of the refinance may be more favourable to Service Stream if the Capital Raising proceeds.
(f) The proceeds from the Capital Raising may improve Service Stream’s balance sheet and alleviate near-term concerns over breaches of covenants and refinancing risk. This may also allow Service Stream to focus on its business rather than covenant and refinancing risk.

According to the Independent Expert, the key disadvantages of the Capital Raising are:

(a) If the Capital Raising is approved, existing Shareholders not associated with Thorney International and Thorney Opportunities will receive a lower percentage of any future profits, due to the dilution effects of the Placement.
(b) The completion of the Placement will result in a voting power of approximately 28.4% being held by Thorney International, Thorney Opportunities and the Thorney Entities. If no Shareholders other than Thorney International and Thorney Opportunities take up their entitlements under the Rights Issue, this will result in a voting power of approximately 37.8% being held by Thorney International, Thorney Opportunities and the Thorney Entities. This may have an adverse impact on Shareholders not associated with Thorney International, Thorney Opportunities and the Thorney Entities as these entities may be able to block special resolutions with their combined voting power.
(c) Thorney International, Thorney Opportunities and the Thorney Entities may be able to strategically block takeovers, and Service Stream may be less likely to be a takeover target. Accordingly, there is less possibility of Shareholders participating in any premium payable under a takeover.
(d) Thorney International and Thorney Opportunities are entitled to a fee for subunderwriting the Rights Issue. The sub-underwriting fee is payable by Wilson HTM from the proceeds of the underwriting fee which will be paid by the Company to Wilson HTM in accordance with the terms of the Underwriting Agreement.

The Independent Expert’s Report is attached as Appendix A. You should read the Independent Expert’s Report in its entirety before deciding how to vote on the Resolutions.

6 Material contracts

6.1 Capital Raising contracts

As part of the Capital Raising process:

(a) the Company and Wilson HTM entered into the Underwriting Agreement in relation to the Placement and the Rights Issue; and
(b) Wilson HTM, Thorney International and Thorney Opportunities entered into the Sub-underwriting Agreements in relation to the Rights Issue.

Under the Underwriting Agreement and the Sub-underwriting Agreements, subject to Shareholder approval:

(a) Wilson HTM agrees to underwrite the Placement and the Rights Issue;
(b) Thorney International (as to $2.0 million) and Thorney Opportunities (as to $6.0 million) agree to subscribe for Shares in the Placement;
(c) Thorney International (as to 11.9 million Shares) and Thorney Opportunities (as to 5.0 million Shares) agree to take up their full entitlements under the Rights Issue; and
(d) Thorney International and Thorney Opportunities agree to sub-underwrite the Rights Issue on a several basis up to a maximum of 9.1 million Shares and 27.3 million Shares respectively.

These contractual arrangements are summarised below.

6.2 Underwriting Agreement

The Placement and the Rights Issue are fully underwritten by Wilson HTM pursuant to an underwriting agreement dated 23 January 2014. The Underwriting Agreement contains standard conditions precedent for a transaction of this nature, including the requirement to obtain shareholder approval in respect of the Capital Raising. The Company has provided representations and warranties, and an indemnity in favour of Wilson HTM. Wilson HTM is also entitled to terminate the Underwriting Agreement in certain circumstances, including if: the Company fails to lodge the prospectus in connection with the Rights Issue by a specified date; the S&P ASX All Ordinaries Index or the S&P/ASX Small Ordinaries Index closes for 3 consecutive trading days at a level that is more than 15% lower than the level of either index on 23 January 2014; a disclosure in the Rights Issue prospectus is misleading or deceptive (including by omission) in a material particular; the Company breaches the Underwriting Agreement and fails to remedy the breach within a specified period of time; there is a disruption to trading in securities in certain exchanges; or the Takeovers Panel makes a declaration of unacceptable circumstances in respect of the Capital Raising.

6.3 Sub-underwriting Agreement

Thorney Opportunities and Thorney International have agreed to take up the relevant Shares under the Placement, and sub-underwrite the Rights Issue pursuant to Sub-underwriting agreements dated 22 January 2014. The Sub-underwriting Agreements contain standard terms and representations for a transaction of this nature and may be terminated only if the Underwriting Agreement is terminated.

7 Glossary

The following definitions are used in the Notice of Meeting and Explanatory Memorandum:

Term	Meaning
Associate	has the meaning given to that term by Division 2 of Part 1 of
	the Corporations Act.
ASIC	the Australian Securities & Investments Commission.
ASX	ASX Limited ACN 008 624 691.
ASX Listing Rules	the Listing Rules of the ASX as amended from time to time.
Board	the board of Directors of the Company.
Capital Raising	the Placement and the Rights Issue.
Company or Service	Service Stream Limited ACN 072 369 870.
Stream
Constitution	the constitution of the Company, as amended from time to time.
Corporations Act or Act	the_Corporations Act 2001_(Cth).
Director	a director of the Company.
Explanatory Memorandum	the explanatory memorandum set out in this document.
Extraordinary General	the general meeting of Shareholders of the Company
Meeting or Meeting	convened by this Notice of Meeting.
Independent Expert	BDO Corporate Finance (East Coast) Pty Ltd
	(ABN 70 050 038 170).
Independent Expert’s	the independent expert’s report prepared by the Independent
Report	Expert annexed to this Notice of Meeting as Appendix A.
Notice of Meeting	the notice of extraordinary general meeting set out in this
	document.

the proposed placement of:


Placement	the proposed placement of:
	• 9.1 million Shares to Thorney International; and
	• 27.3 million Shares to Thorney Opportunities,
	at $0.22 per Share to raise $9.35m.
Proxy Form	the proxy form attached to this Notice of Meeting.
Registry	Computershare Investor Services Pty Limited ACN 078 279 277.
Relevant Interest	has the meaning given in sections 608 and 609 of the
	Corporations Act.
Resolution	a resolution referred to in the Notice of Meeting.
Rights Issue	the proposed non-renounceable rights issue of two Shares for
	every 11 Shares held as at the record date for the Rights Issue
	at $0.18 per Share to raise $10.70m.
Share	a fully paid ordinary share in the capital of the Company.
Shareholder	a holder of a Share.
Sub-underwriting	the agreements dated 22 January 2014 between each of
Agreements	Thorney International and Thorney Opportunities and Wilson
	HTM under which each of Thorney International and Thorney
	Opportunities sub-underwrite part of the Rights Issue.

Thorney Entities • Thorney Investment Group Australia Pty Ltd ACN 117 488 892
• Thorney Alpha Pty Ltd ACN 162 820 537 • Thorney Beta Pty Ltd ACN 162 828 677 • Thorney Management Services Pty Ltd ACN 164 880 148 • Thorney Omega Pty Ltd ACN 163 964 636 • Thistle Custodians Pty Ltd ACN 078 027 193 • Thistle Holdings Pty Ltd ACN 075 051 464 • TIGA Trading Pty Ltd ACN 118 961 210 • TIGA Property Pty Ltd ACN 117 811 453 • TIGA (Ballarat) Pty Ltd ACN 117 812 030 • TIGA (Hawthorn) Pty Ltd ACN 126 952 663 • TIGA Tails Pty Ltd ACN 080 534 416 • TIGA Finance Pty Ltd ACN 118 521 412 • TIGA Trading Pty Ltd ACN 118 961 210 • Alex Waislitz • Jamahjo Pty Ltd ACN 117 488 696

Thorney International Thorney International Pty Ltd ACN 132 886 698. Thorney Opportunities Thorney Opportunities Ltd ACN 080 167 264. Underwriting Agreement the agreement dated 23 January 2014 between Wilson HTM and the Company under which Wilson HTM underwrites the Placement and Rights Issue. Wilson HTM Wilson HTM Corporate Finance Ltd ACN 057 547 323.

Appendix A: Independent Expert’s Report

INDEPENDENT EXPERT’S REPORT Service Stream Limited in relation to Capital Raising

6 February 2014

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Level 11, 1 Margaret St SYDNEY NSW 2000 Australia

Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au

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This Financial Services Guide is issued in relation to an independent expert’s report ( IER ) prepared by BDO Corporate Finance (East Coast) Pty Ltd (ABN 70 050 038 170) ( BDOCF ) at the request of the independent directors ( Independent Directors ) of Service Stream Limited ( SSM ).

Engagement

The IER is intended to accompany the notice of meeting and explanatory statement ( Documents ) that is to be provided by the Independent Directors to the shareholders of SSM to assist them in deciding whether to approve the proposed placement and rights issue of equity to Thorney Opportunities Limited (TOP) and Thorney International Pty Ltd (THIN) ( Capital Raising ).

Financial Services Guide

BDOCF holds an Australian Financial Services Licence (License No: 247420) ( Licence ). As a result of our IER being provided to you BDOCF is required to issue to you, as a retail client, a Financial Services Guide ( FSG ). The FSG includes information on the use of general financial product advice and is issued so as to comply with our obligations as holder of an Australian Financial Services Licence.

Financial services BDOCF is licensed to provide

The Licence authorises BDOCF to provide reports for the purposes of acting for and on behalf of clients in relation to proposed or actual mergers, acquisitions, takeovers, corporate restructures or share issues, to carry on a financial services business to provide general financial product advice for securities and certain derivatives (limited to old law securities, options contracts and warrants) to retail and wholesale clients.

BDOCF provides financial product advice by virtue of an engagement to issue the IER in connection with the issue of securities of another person.

Our IER includes a description of the circumstances of our engagement and identifies the party who has engaged us. You have not engaged us directly but will be provided with a copy of our IER (as a retail client) because of your connection with the matters on which our IER has been issued.

Our IER is provided on our own behalf as an Australian Financial Services Licensee authorised to provide the financial product advice contained in the IER.

General financial product advice

Our IER provides general financial product advice only, and does not provide personal financial product advice, because it has been prepared without taking into account your particular personal circumstances or objectives (either financial or otherwise), your financial position or your needs.

Some individuals may place a different emphasis on various aspects of potential investments.

An individual’s decision in relation to voting on the Capital Raising described in the Documents may be influenced by their particular circumstances and, therefore, individuals should seek independent advice.

Benefits that BDOCF may receive

BDOCF will receive a fee based on the time spent in the preparation of the IER in the amount of approximately $45,000 (plus GST and disbursements). BDOCF will not receive any fee contingent upon the outcome of the Capital Raising, and accordingly, does not have any pecuniary or other interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the Capital Raising.

Remuneration or other benefits received by our employees

All our employees receive a salary. Employees may be eligible for bonuses based on overall productivity and contribution to the operation of BDOCF or related entities but any bonuses are not directly connected with any assignment and in particular are not directly related to the engagement for which our IER was provided.

Referrals

BDOCF does not pay commissions or provide any other benefits to any parties or person for referring customers to us in connection with the reports that BDOCF is licensed to provide.

Associations and relationships

BDOCF is the licensed corporate finance arm of BDO East Coast Partnership, Chartered Accountants and Business Advisers. The directors of BDOCF may also be partners in BDO East Coast Partnership, Chartered Accountants and Business Advisers.

BDO East Coast Partnership, Chartered Accountants and Business Advisers is comprised of a number of related entities that provide audit, accounting, tax and financial advisory services to a wide range of clients.

BDOCF’s contact details are as set out on our letterhead.

BDOCF is unaware of any matter or circumstance that would preclude it from preparing the IER on the grounds of independence under regulatory or professional requirements. In particular, BDOCF has had regard to the provisions of applicable pronouncements and other guidance statements relating to professional independence issued by Australian professional accounting bodies and Australian Securities and Investments Commission ( ASIC ).

Complaints resolution

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing, addressed to The Complaints Officer, BDO Corporate Finance (East Coast) Pty Ltd, Level 11, 1 Margaret Street, Sydney NSW 2000.

On receipt of a written complaint we will record the complaint, acknowledge receipt of the complaint and seek to resolve the complaint as soon as practical. If we cannot reach a satisfactory resolution, you can raise your concerns with the Financial Ombudsman Service Limited ( FOS ). FOS is an independent body established to provide advice and assistance in helping resolve complaints relating to the financial services industry. BDOCF is a member of FOS. FOS may be contacted directly via the details set out below.

Financial Ombudsman Service Limited GPO Box 3

Melbourne VIC 3001 Toll free: 1300 78 08 08 Email: [email protected]

BDO Corporate Finance (East Coast) Pty Ltd ABN 70 050 038 170 AFS Licence No. 247420 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (East Coast) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

Level 11, 1 Margaret St SYDNEY NSW 2000 Australia

Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au

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The Independent Directors Service Stream Limited Level 4 357 Collins Street MELBOURNE VIC 3000

6 February 2014

Dear Independent Directors

INDEPENDENT EXPERT’S REPORT IN RELATION TO CAPITAL RAISING

Introduction

BDO Corporate Finance (East Coast) Pty Ltd (ABN 70 050 038 170) (BDOCF, we or us) has been engaged by the independent directors of Service Stream Limited (Independent Directors) (SSM or the Company) to prepare an independent expert’s report (IER or Report), setting out our opinion as to whether the proposed placement of equity to Thorney Opportunities Limited (TOP) and Thorney International Pty Ltd (THIN) and rights issue, is fair and reasonable to non-associated shareholders of SSM (Non-associated Shareholders) (Capital Raising).

TOP is an investment vehicle listed on the ASX and managed by Thorney Management Services Pty Ltd. As at 15 January 2014, Thorney Holdings Pty Ltd is reported to hold 30.04% of the voting power of TOP. THIN is currently the largest shareholder of SSM and is part of the Thorney Group.

Proposed Capital Raising

On 24 January 2014, SSM announced a proposed capital raising comprising a proposed placement and a proposed rights issue, the key terms of which are set out as follows:

Proposed Placement - Placement of 42,500,000 fully paid ordinary shares in SSM (Shares) at $0.22 per Share to Thorney Opportunities Limited (TOP), Thorney International Pty Ltd (THIN) and certain sophisticated and professional clients of Wilson HTM for a total consideration of $9.35 million (Proposed Placement). The Proposed Placement is fully underwritten by Wilson HTM. The Proposed Placement to TOP and THIN is expected to be $6.0 million and $2.0 million respectively. The balance will be offered to certain other sophisticated and professional clients of Wilson HTM.
Proposed Rights Issue - A 2 for 11 non-renounceable rights issue to be undertaken at the issue price of $0.18 per Share and expected to raise $10.7 million before costs (Proposed Rights Issue). Wilson HTM will fully underwrite the Rights Issue whilst TOP and THIN will sub-underwrite in the same proportion as the Placement participation. The Placement shares will participate in the Rights Issue. The shareholders of the Company (Shareholders) are permitted to take up additional rights in the event of a shortfall.

Full details of the above is set out in the notice of meeting and explanatory statement (Documents) to be sent to the Shareholders in respect of an extraordinary general meeting to be convened on Wednesday, 26 March 2014 (Meeting).

Purpose of Report

If the Capital Raising proceeds, as a result of the relevant interest and voting provisions in the Corporations Act, TOP, THIN and other Thorney entities (Thorney) may increase their voting power in the shares of SSM (Voting Power) from 19.9% to between 28.4% and 37.8% (depending on the extent of take up by Non-associated Shareholders in the Proposed Rights Issue) thereby increasing their Voting Power from below 20% to more than 20%.

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The Independent Directors have engaged us to prepare a Report in relation to the Capital Raising to opine whether it is fair and reasonable to Non-associated Shareholders for the purposes of Section 611(7) of the Corporations Act 2001 (Cth) (Act) and Australian Securities and Investments Commission (ASIC) Regulatory Guide 74: Acquisitions approved by members (RG74).

Accordingly, this Report is to accompany the Documents to be sent to Shareholders to assist them in deciding whether to approve the Capital Raising.

Summary of Opinion

We have considered the terms of the Capital Raising as outlined in the body of this Report and have concluded that the Capital Raising is not fair but reasonable to the Non-associated Shareholders.

A summary of our analysis in forming the above opinion is provided below.

Fairness Assessment

In undertaking our fairness opinion we have had regard to ASIC Regulatory Guide 111 Content of expert reports (RG 111).

A knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length.
100% ownership of the target company, irrespective of the percentage holding of the bidder or its associates in the target company.

From discussions with ASIC in relation to the interpretation of RG111.11, they have advised that the appropriate assessment is to compare:

The fair market value of a SSM Share pre-transaction on a control basis (being the value of the securities the subject of the offer per RG111.11)
The fair market value of a SSM Share post-transaction on a minority basis (being the offer price or consideration per RG111.11)

The basis for the above form of comparison is to ensure our analysis is in line with RG111.5 to RG111.7 which includes statements as follows:

The main purpose of the report is to adequately deal with the concerns that could reasonably be anticipated of those persons affected by the proposed transaction.
The form of analysis an expert uses to evaluate a transaction should address the issues faced by security holders.

On completion of the Capital Raising, Thorney will collectively own between 92,863,640 and 146,162,897 SSM Shares representing a Voting Power of between 28.4% and 37.8%. We note that the extent of Thorney’s Voting Power on completion of the Capital Raising depends on the extent of take up by Non-associated Shareholders in the Proposed Rights Issue.

We have formed our opinion in relation to fairness by comparing the:

Fair market value of a SSM Share before the Capital Raising (including a premium for control); and
Fair market value of a SSM Share after the Capital Raising on a minority basis.

The Capital Raising is fair if the value of a SSM Share after the Capital Raising on a minority basis is equal to or greater than the fair market value of a SSM Share before the Capital Raising (including a premium for control). The results of our fairness analysis are summarised below.

BDO Corporate Finance (East Coast) Pty Ltd

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Table 1: Fairness assessment (per Share)

$ per Sh are Ref Low High
Fair mark et value of aS SM Share befor e the CapitalR aising on a con trol basis 0 0.29 0.42
Fair mar basis ket value of a SSM Share afte r the Propose d Capital Raisi ng on a minori ty 8.3 0.2 1 0.30
*Source:BD OCF Analysis*

Figure 1: Comparison between a SSM Share before the Capital Raising on a control basis and a SSM Share after the Capital Raising on a minority basis

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Source: BDOCF analysi s

As the v a lue of a SS M Share after the Capital R aising on a m inority basis is less than the range of assessed fai r market v a lues of a SS M Share befor e the Capital Raising (including a premi u m for contro l ), we have c o ncluded tha t the Capi t al Raising is n ot fair to th e Non-associa t ed Sharehold e rs.

We note that dilution w ill occur du e to the Prop o sed Rights Is s ue. Rights are generally is s ued at a dis c ount in orde r to encou r age all shar e holders to p a rticipate. The dilutionary nature of th e rights impa c ts the abov e analysis. W e note tha t the value of SSM Shares post Proposed Placement b u t prior to th e Proposed Ri g hts Issue is between $0.2 2 and $0.3 2 .

The Capital Raising is Reasonable

In accor d ance with R G 111 an offer is reasonabl e if it is fair. It might also b e reasonabl e if, despite b eing not fair , the expert believes t h at there are sufficient re a sons for No n -associated S hareholders t o accept th e offer in th e absence o f a superior o ffer.

Whilst th e Capital Rai s ing is not fai r , we have as s essed the re a sonableness o f the Capita l Raising by c o nsidering th e factors a r ising thereto.

In our o p inion the C a pital Raising is reasonab l e to the No n -associated Shareholders . We have c o nsidered th e factors w hich the Non - associated S h areholders m ay consider in their asses s ment of the C apital Raising. A summar y of the fa c tors conside r ed in our rea s onableness a ssessment ar e as follows:

Table 2: Summary of factors considered in the reasonableness assessment Advantages

In our assessment of r easonableness we have consi d ered alternati v e sources of finance for SSM. Given SSM’s current leverage ratio, an equity raise is the most lik e ly source of fi n ance, and the most likely mechanism for an equity raise is a share place m ent.
In ord e r to assess a h y pothetical pri c e at which a s h are placemen t may take place, we have co n sidered the value of SSM shares on a minority b asis using the COE methodol o gy as the ASX p rice may not f u lly reflect the value of SSM s h ares.
� Place m ents are gene r ally undertake n at a discount and as such w e have also con s idered discou n ts in our analy s is. � The c a lculations behind this assess m ent are includ e d at Section 10.1 . The amou n ts are compar e d below:

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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Table 2a: Comparison of potential placements to Proposed Placement consideration

$	Ref	Low	High
Fair market value of equity interest in SSM (minority basis) adjusted for	10.1.1	0.17	0.27
placement discount
Consideration per share	10.1.1	0.22	0.22

As the consideration falls at the midpoint of the range of the fair market value of an equity interest in SSM (minority basis), adjusted for a placement discount, it is our opinion that the Proposed Placement is not unfavourable to the Non-Associated Shareholders as it is in line with other potential sources of finance.
We have also assessed the price at which the Proposed Rights Issue is to take place. Rights issues are generally undertaken at a discount to encourage shareholders to participate.
We note that 67% of the observed rights issues occurred at a discount between 0% and 15% compared to the share price. Based on this analysis we consider the pricing of the Proposed Rights Issue to be consistent with comparable transactions.
SSM have established a Shortfall Facility whereby any shareholders (other than Thorney) can subscribe for Rights Shares not taken up by other shareholders. This dispersion strategy together with the pricing of the Proposed Rights Issue increases the likelihood of Shares being taken up by Non-associated Shareholders.
Thorney are investment managers and are not actively involved in managing the business of SSM.
Thorney’s Voting Power will increase to between 28.4% and 37.8% as a consequence of the Capital Raising, depending on the extent of shortfall in the Proposed Rights Issue (since the Proposed Rights issue is being partially sub-underwritten by Thorney), creating a potential blocking stake. However, Thorney are investment managers and are therefore likely to entertain reasonable offers for SSM shares.
SSM’s current borrowings mature in August 2014. The terms of the refinance may be more favourable to SSM if the Capital Raising goes ahead.
Proceeds from the Capital Raising may improve the balance sheet and alleviate near term concerns over breaches of covenants and refinancing risk. This may also allow SSM Management to explore new growth opportunities, and focus on the business rather than potential covenant breaches and refinancing risk.

Disadvantages

If the Capital Raising is approved, existing Shareholders will receive a lower percentage of any future profits, due to the dilution effects noted above.
The completion of the Capital Raising will result in a Voting Power of between 28.4% and 37.8% being held by Thorney. The completion of the Capital Raising may have an adverse impact on the voting power of existing ordinary shareholders as Thorney may be able to block special resolutions with its voting power.
The completion of the Capital Raising will result in Thorney having a strategic interest in SSM, therefore Thorney will have the ability to strategically block future interested parties making a takeover for SSM. As SSM is less likely to be a target for takeover, there is less possibility of Shareholders participating in premium payable in a takeover. This is mitigated as Thorney are investment managers and may consider reasonable offers for SSM.
Thorney is entitled to a fee of $183,101 for sub-underwriting the Proposed Rights Issue.
Other
The tax implications associated with the Capital Raising will vary depending on the particular circumstances of each Shareholder. Shareholders are advised to seek independent tax advice in relation to the effect of the Capital Raising.
SSM will incur additional transaction costs (legal fees, independent expert and others) regardless of whether the Capital Raising is approved or not.

Source: BDOCF analysis

Other Matters

Shareholders’ individual circumstances

Our analysis has been undertaken, and our conclusions are expressed at an aggregate level. Accordingly, BDOCF has not considered the effect of the Capital Raising on the particular circumstances of individual Shareholders. Some individual Shareholders may place a different emphasis on various aspects of the Capital Raising from that adopted in this IER. Accordingly, individual Shareholders may reach different conclusions as to whether or not the Capital Raising is fair and reasonable in their individual circumstances.

BDO Corporate Finance (East Coast) Pty Ltd

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The decision of an individual Shareholder in relation to the Capital Raising may be influenced by their particular circumstances and accordingly Shareholders are advised to seek their own independent advice.

Approval or rejection of the Capital Raising is a matter for individual Shareholders based on their expectations as to the expected value and future prospects and market conditions and their particular circumstances, including risk profile, liquidity preference, portfolio strategy and tax position. Shareholders should carefully consider the Documents. Shareholders who are in doubt as to the action they should take in relation to the Capital Raising should consult their professional adviser.

Current Market Conditions

Our opinion is based on economic, market and other conditions prevailing at the date of this IER. Such conditions can change significantly over relatively short periods of time.

Changes in those conditions may result in any valuation or other opinion becoming quickly out-dated and in need of revision. We reserve the right to revise any valuation or other opinion, in the light of material information existing at the valuation date that subsequently becomes known to us.

Glossary

Capitalised terms used in this Report have the meanings set out in the glossary.

Sources of Information

Appendix 2 to the IER sets out details of information referred to and relied upon by us during the course of preparing this IER and forming our opinion.

The statements and opinions contained in this IER are given in good faith and are based upon our consideration and assessment of information provided by SSM.

Under the terms of our engagement, SSM agreed to indemnify the partners, directors and staff (as appropriate) of BDO East Coast Partnership and BDOCF and their associated entities, against any claim, liability, loss or expense, costs or damage, arising out of reliance on any information or documentation provided by SSM which is false or misleading or omits any material particulars, or arising from failure to supply relevant information.

Limitations

This IER has been prepared at the request of the Independent Directors for the sole benefit of the Independent Directors and Shareholders to assist them in their decision to approve or reject the Capital Raising. This IER is to accompany the Documents to be sent to the Shareholders to consider the Capital Raising and was not prepared for any other purpose.

Accordingly, this IER and the information contained herein may not be relied upon by anyone other than the Independent Directors and Shareholders without our written consent. We accept no responsibility to any person other than the Independent Directors and Shareholders in relation to this IER.

This IER should not be used for any other purpose and we do not accept any responsibility for its use outside this purpose. Except in accordance with the stated purpose, no extract, quote or copy of our IER, in whole or in part, should be reproduced without our written consent, as to the form and context in which it may appear.

We have consented to the inclusion of the IER with the Documents. Apart from this IER, we are not responsible for the contents of the Documents or any other document associated with the Capital Raising. We acknowledge that this IER may be lodged with regulatory authorities.

Summary

This summary should be read in conjunction with the attached IER that sets out in full the purpose, scope, basis of evaluation, limitations, information relied upon, analysis and our findings.

BDO Corporate Finance (East Coast) Pty Ltd

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Glossary

A glossary of terms used throughout this IER is set out in Appendix 1 .

Financial Service Guide

BDOCF holds an Australian Financial Services Licence which authorises us to provide reports for the purposes of acting for and on behalf of clients in relation to proposed or actual mergers, acquisitions, takeovers, corporate restructures or share issues. A financial services guide is attached to this IER.

Yours faithfully

BDO CORPORATE FINANCE (EAST COAST) PTY LTD

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Sebastian Stevens Director

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David McCourt

Director

BDO Corporate Finance (East Coast) Pty Ltd

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1.	PU RPOSE AND BAC KGROUND .... ................... .................. .................. ................... .................. ................ 2
1.1.	Pu rpose ........... .................. ................... .................. .................. ................... .................. ................ 2
1.2.	Ca pital Raising ... .................. ................... .................. .................. ................... .................. ................ 2
1.3.	Su b-Underwriting of the Rights Is sue ............. .................. .................. ................... .................. ................ 2
1.4.	Pro forma Capital Structure post Proposed Capi tal Raising ..... .................. ................... .................. ................ 2
2.	SC OPE AND LIMITA TIONS ......... ................... .................. .................. ................... .................. ................ 4
2.1.	Sco pe .............. .................. ................... .................. .................. ................... .................. ................ 4
2.2.	Su mmary of Regu latory Requirem ents ............ .................. .................. ................... .................. ................ 4
2.3.	Ba sis of Assessme nt ............... ................... .................. .................. ................... .................. ................ 5
2.4.	Sp ecial Value .... .................. ................... .................. .................. ................... .................. ................ 7
2.5.	Re liance on Inform ation ......... ................... .................. .................. ................... .................. ................ 7
2.6.	Lim itations ....... .................. ................... .................. .................. ................... .................. ................ 8
2.7.	Ass umptions ...... .................. ................... .................. .................. ................... .................. ................ 8
3.	PR OFILE OF SSM . .................. ................... .................. .................. ................... .................. ................ 9
3.1.	Ov erview ......... .................. ................... .................. .................. ................... .................. ................ 9
3.2.	Bu siness Operatio ns............... ................... .................. .................. ................... .................. ................ 9
3.3.	Gr oup Structure . .................. ................... .................. .................. ................... .................. ................ 9
3.4.	Ch ronological ord er of events ... ................... .................. .................. ................... .................. .............. 10
3.5.	His torical Financi al Information ................... .................. .................. ................... .................. .............. 11
3.6.	Go ing concern ... .................. ................... .................. .................. ................... .................. .............. 13
3.7.	Ca pital Structure and Ownership .................. .................. .................. ................... .................. .............. 14
4.	PR OFILE OF THOR NEY ............ ................... .................. .................. ................... .................. .............. 14
5.	IND USTRY OVERV IEW ............. ................... .................. .................. ................... .................. .............. 15
5.1.	Ke y drivers and re cent economic highlights ..... .................. .................. ................... .................. .............. 15
5.2.	Ind ustry outlook . .................. ................... .................. .................. ................... .................. .............. 16
6.	VA LUATION METH ODOLOGY ..... ................... .................. .................. ................... .................. .............. 16
6.1.	Va luation Require ments .......... ................... .................. .................. ................... .................. .............. 16
6.2.	Va luation Method ologies Conside red for SSM .... .................. .................. ................... .................. .............. 16
6.3.	Ca pitalisation ofe arnings ........ ................... .................. .................. ................... .................. .............. 16
6.4.	Sh are price tradin g analysis ..... ................... .................. .................. ................... .................. .............. 16
6.5.	Pre mium for Cont rol .............. ................... .................. .................. ................... .................. .............. 16
6.6.	Va luation in Acco rdance with AP ES 225 .......... .................. .................. ................... .................. .............. 17
7.	VA LUATION OF SS M PRIOR TO TH E PROPOSED TR ANSACTION ON A CONTROL BA SIS .............. .................. .............. 17
7.1.	Va luation summa ry ............... ................... .................. .................. ................... .................. .............. 17
7.2.	Fa ir market value of SSM usingC OE method ..... .................. .................. ................... .................. .............. 18
7.3.	Ap proach ......... .................. ................... .................. .................. ................... .................. .............. 18
7.4.	No rmalised earnin gs .............. ................... .................. .................. ................... .................. .............. 18
7.5.	Ca pitalisation mu ltiple ........... ................... .................. .................. ................... .................. .............. 20
7.6.	Ne t Debt .......... .................. ................... .................. .................. ................... .................. .............. 21
7.7.	Tra nsaction costs .................. ................... .................. .................. ................... .................. .............. 21
7.8.	Pe rformance Righ ts ............... ................... .................. .................. ................... .................. .............. 21
7.9.	Cro ss-check again st recent ASXt rading in SSMS hares ........... .................. ................... .................. .............. 21
8.	VA LUATION OF SS M POST CAPITA L RAISING ONA MINORITY BAS IS ............... ................... .................. .............. 23
8.1.	Va luation summa ry ............... ................... .................. .................. ................... .................. .............. 23
8.2.	Va luation Post Pro posed Placeme nt............... .................. .................. ................... .................. .............. 24
8.3.	Va luation Post Rig hts Issue ...... ................... .................. .................. ................... .................. .............. 25
9.	FA IRNESS ASSESSM ENT ............ ................... .................. .................. ................... .................. .............. 26
10.	RE ASONABLENESS ASSESSMENT .. ................... .................. .................. ................... .................. .............. 26
10.1.	Ad vantages ....... .................. ................... .................. .................. ................... .................. .............. 26
10.2.	Dis advantages .... .................. ................... .................. .................. ................... .................. .............. 28
10.3.	Ot her Factors .... .................. ................... .................. .................. ................... .................. .............. 28
10.4.	Co nclusion ........ .................. ................... .................. .................. ................... .................. .............. 29
11.	QU ALIFICATIONS, DECLARATIONS AND CONSENT S................. .................. ................... .................. .............. 29
11.1.	Qu alifications .... .................. ................... .................. .................. ................... .................. .............. 29
11.2.	Ind ependence .... .................. ................... .................. .................. ................... .................. .............. 29
11.3.	Dis claimer ........ .................. ................... .................. .................. ................... .................. .............. 30
APPENDIX 1: GLOSSARY .. .................. ................... .................. .................. ................... .................. .............. 31
APPENDIX 2: SOURCES OF INFORMATION ................... .................. .................. ................... .................. .............. 32
APPENDIX 3: VALUATIONM ETHODS - BUS INESSES AND AS SETS ........... .................. ................... .................. .............. 33
APPENDIX 4: COMPARABLE COMPANY DES CRIPTIONS ..... .................. .................. ................... .................. .............. 35
APPENDIX 5: COMPARABLE COMPANY MU LTIPLES – CONT ROL BASIS ..... .................. ................... .................. .............. 36
APPENDIX 6: COMPARABLE COMPANY MU LTIPLES – MINO RITY BASIS ..... .................. ................... .................. .............. 37
APPENDIX 7: COMPARABLE COMPANY TRA NSACTIONS .... .................. .................. ................... .................. .............. 38
APPENDIX 8: COMPARABLE PLACEMENTT RANSACTIONS. .................. .................. ................... .................. .............. 39
APPENDIX 9: COMPARABLE RIGHTS TRAN SACTIONS ....... .................. .................. ................... .................. .............. 40

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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1. PURPOSE AND BACKGROUND

1.1. Purpose

W e have been appointed b y the Indepe n dent Direct o rs to prepar e an IER set t ing out our opinion as t o w h ether the C a pital Raising i s fair and re a sonable to S S M's Non-asso c iated Shareh o lders.

T h is IER is to a c company th e Documents r equired to b e provided to the Shareho l ders. It has b een prepare d to assist the I n dependent D i rectors in fulfilling their o bligation to provide the S hareholders with full an d p r oper disclos u re to enable them to as s ess the merits of the Ca p ital Raising a nd to decide whether t o a p prove the Ca p ital Raising.

A s ummary of t h e backgroun d to the terms of the Capi t al Raising is s et out below .

1.2. Capital Raising

T h e terms of t h e Capital Rai s ing are show n below.

1.2.1. Proposed Placement

T h e terms of t h e Proposed Placement are as follows: Table 3: Terms of Proposed Placement N umber of SSM S hares 42,500,000 I s sue price per S hare $0.22 Total consideration $9,350,000 Source: SSM Management and B DOCF Analysi s U nder the ter m s of the Proposed Place m ent, TOP an d THIN are to subscribe for $6 million a n d $2 million r espectively w ith the bala n ce offered t o certain so p histicated a n d profession a l clients of W ilson HTM. T he Proposed Placement is fully underw r itten by Wils o n HTM.

1.2.2. Proposed Rights Issue

T h e terms of t h e Proposed R i ghts Issue ar e as follows:

Ta ble 4: Terms o f Rights Issue
R ights Issue Rati o			2:11
N umber of SSMS hares			59,444,285
Is sue price perS hare			$0.18
T otal considera tion			$10,699,971
So *urce:*SSM Ma nagement andB DOCF Analysis
Th e Rights will be issued for	all ordinary s	hares, includi ng those crea ted under the Proposed Pla cement.

1.3. Sub-Underwriting of the Rights Issue

Ri g hts will be fully under w ritten by W i lson HTM a n d sub-under w ritten by T h orney. Thor n ey will sub - u n derwrite in t h e same prop o rtion as their placement p articipation.

1.4. Pro forma Capital Structure post Proposed Capital Raising

T h ere are currently 284,44 3 ,570 Shares on issue to e xisting Shar e holders. An overview of the potentia l shareholdings o f Thorney and the Non- A ssociated S h areholders following the Proposed Placement an d P r oposed Right s Issue is sho w n below.

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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1.4.1. Capital Structure if all Shareholders take up their rights

Assuming Thorney takes up its subscription in the Proposed Placement and all shareholders (including Thorney) take up their entitlement under the Proposed Rights Issue on a pro rata basis, the pro forma capital structure is as follows:

Table 5: Capital Structure post Capital Raising assuming Proposed Rights Issue is taken up on a pro rata basis

Security Capital structure (Current) Capital Structure (Proposed Placement) Capital Structure (Rights Issue)	Security Capital structure (Current) Capital Structure (Proposed Placement) Capital Structure (Rights Issue)	Security Capital structure (Current) Capital Structure (Proposed Placement) Capital Structure (Rights Issue)
Ordinary Shares % Ordinary Shares % Ordinary Shares %
Ordinary Shares (Shareholders other than Thorney) 227,943,570 80.1%	234,079,934 71.6%	276,639,922 71.6%
Ordinary Shares (Thorney) 56,500,000 19.9%	92,863,636 28.4%	109,747,934 28.4%
Total 284,443,570 100.0%	326,943,570 100.0%	386,387,855 100.0%

Source: SSM Management and BDOCF Analysis

The Capital Raising would result in Thorney increasing their Voting Power from 19.9% to 28.4%.

1.4.2. Capital structure if the Non-Associated Shareholders do not take up their rights and the Proposed Rights Issue shortfall is sub-underwritten by Thorney to the full extent of their commitments

If the Proposed Rights Issue is undersubscribed, the shortfall is sub-underwritten by TOP and THIN in proportion to their participation in the placement. TOP and THIN have agreed to apply for their full entitlement under the rights issue, but not to apply for shares in addition to their entitlement. Assuming no shareholders other than Thorney takes up their entitlement to the Proposed Rights Issue and the shortfall is taken up by TOP and THIN to the full extent of their sub-underwriting commitments, the pro forma capital structure is as follows:

Table 6: Capital Structure post Capital Raising assuming Proposed Rights Issue is undersubscribed and shortfall is taken up by Thorney to the full extent of their sub-underwriting commitments

Security Capital structure (Post Initial Placement) Capital Structure (Post Final Placement) Capital Structure (Post Rights Issue)	Security Capital structure (Post Initial Placement) Capital Structure (Post Final Placement) Capital Structure (Post Rights Issue)	Security Capital structure (Post Initial Placement) Capital Structure (Post Final Placement) Capital Structure (Post Rights Issue)
Ordinary Shares % Ordinary Shares % Ordinary Shares %
Ordinary Shares (Shareholders other than Thorney) 227,943,570 80.1%	234,079,934 71.6%	240,224,959 62.2%
Ordinary Shares (Thorney) 56,500,000 19.9%	92,863,636 28.4%	146,162,897 37.8%
Total 284,443,570 100.0%	326,943,570 100.0%	386,387,855 100.0%

Source: SSM Management and BDOCF Analysis

If the Proposed Rights Issue is undersubscribed, the Voting Power of Thorney may increase to 37.8%.

1.4.3. Rights Issue Sensitivities

As Thorney is sub-underwriting the rights issue, Thorney may increase their percentage holding above the 28.4% interest that Thorney would hold directly after the placement shares have been issued. The percentage that Thorney would hold post the Rights Issue depends on the level of taken up Rights by other Shareholders as demonstrated in the table below. In the table, we have assumed that no shares are taken up under the Shortfall Facility.

BDO Corporate Finance (East Coast) Pty Ltd

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Table 7: Rights Issue Sensitivity

	$ ’000s

	R ights taken up by Other Shar eholders	0% 25%	50%	75%	100%

S hares held byT horney post Pl acement 92,864 92,864 92,864 92,864 92,864
R S ights attached hares to Thorney ’s existing 16,884 16,884 16,884 16,884 16,884
T u horney’s in nderwriting of terest befo Rights Issue re sub- 109,748 109,748 109,748 109,748 109,748
R t ights available han Thorney to Sharehol ders other 42,560 42,560 42,560 42,560 42,560
R t ights taken u han Thorney) p by Sharehold ers (other - 10,640 21,280 31,920 42,560
R ights Shortfall 42,560 31,920 21,280 10,640 -
S hortfall sub-un derwritten byT horney 36,415 27,311 18,207 9,104 -
S hortfall sub-un derwritten byW ilson HTM 6,145 4,609 3,073 1,536 -
S T SM shares held horney by 146,163 137,059 127,955 118,852 109,748
T otal SSM Share s on Issue 386,388 386,388 386,388 386,388 386,388
T horney’s inter est in SSM 37.8% 35.5% 33.1% 30.8% 28.4%
So *urce: BDOCF* *analysis*	*urce: BDOCF* *analysis*

T h e above pro forma capita l structures do not includ e the potenti a l vesting of p erformance r ights held b y S S M employees under the Lo n g Term Ince n tive Plan.

2. SCOPE AND LIMITATIONS

2.1. Scope

T h e scope of t h e procedures we underto o k in forming o ur opinion o n whether th e Capital Rais i ng is fair an d reasonable to the Non-ass o ciated Shar e holders has been limited to those p r ocedures w e believe ar e required in order to form o u r opinion. O ur procedur e s did not include verificat i on work nor constitute a n a u dit or assura n ce engagem e nt in accord a nce with Aus t ralian Auditi n g and Assura n ce Standard s .

T h e assessmen t of whether the Capital R aising is fai r and reasonable to the N o n-associated Shareholder s in v olved deter m ining the fai r market valu e of various s e curities, ass e ts and liabili t ies.

F o r the purpos e s of our opin i on, the term fair market v alue is defin e d as the pric e that would b e negotiate d in an open an d unrestricte d market bet w een a knowledgeable, w i lling, but no t anxious pu r chaser and a k n owledgeable , willing, but n ot anxious v e ndor, acting at arm’s len g th.

2.2. Summary of Regulatory Requirements

T h e Independe n t Directors have engaged us to prepar e a Report in r elation to the Capital Rai s ing to satisf y the requireme n ts of:

Section 611 of the Act.
ASIC Regu l atory Guide 7 4 ‘Acquisitio n s approved b y members’ ( RG 74 ).

T h e regulatory requirements relevant to t his IER are summarised below.

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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2.2.1. Section 611 of the Act and RG 74

If the Capital Raising proceeds, Thorney may increase their voting power in the shares of SSM from 19.9% to between 28.4% and 37.8% (depending on the extent of shortfall in the Proposed Rights Issue) thereby increasing their Voting Power from below 20% to more than 20%.

Section 606 of the Act expressly prohibits transactions that result in a person or entity that, with their associates, increases their voting power from:

20% or below to more than 20%; or
A point that is above 20% to below 90%,

without making a full takeover offer to all shareholders or otherwise falling within another exception (such as shareholder approval under Item 7 of Section 611 of the Act).

Item 7 of Section 611 of the Act provides an exception to the prohibition on the basis that the acquisition is approved by resolution at a general meeting. RG 74 issued by ASIC sets out the obligation to supply shareholders with all information that is material by either:

The directors undertaking a detailed examination of the proposal themselves, if they consider that they have sufficient expertise; or
By commissioning an independent expert's report.

In compliance with the above the Independent Directors decided to commission an independent expert's report regarding the ‘fairness and reasonableness’ of the Capital Raising to the Non-associated Shareholders.

2.3. Basis of Assessment

In determining whether the Capital Raising is fair and reasonable to Shareholders, we have had regard to the following ASIC guidelines:

RG 111 ‘Content of expert reports’
Regulatory Guide 112 ‘Independence of experts’ ( RG 112 ).

In particular, RG 111 establishes guidelines in respect of independent expert reports under the Act.

RG 111 establishes two distinct criteria for an expert analysing a control transaction. The tests are:

Is the offer ‘fair’
Is it ‘reasonable’?

That is, the terms fair and reasonable are regarded as separate elements and are not regarded as a compound phrase.

Fair

A knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length.
100% ownership of the target company, irrespective of the percentage holding of the bidder or its associates in the target company.

On completion of the Capital Raising, Thorney would own between 92,863,636 and 146,162,897 SSM Shares representing a Voting Power of between 28.4% and 37.8%.

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From discussions with ASIC in relation to the interpretation of RG111.11, they have advised that the appropriate assessment is to compare:

The fair market value of a SSM Share pre-transaction on a control basis (being the value of the securities the subject of the offer per RG111.11)
The fair market value of a SSM Share post-transaction on a minority basis (being the offer price or consideration per RG111.11).

The basis for the above form of comparison is to ensure our analysis is in line with RG111.5 to RG111.7 which includes statements as follows:

The main purpose of the report is to adequately deal with the concerns that could reasonably be anticipated of those persons affected by the proposed transaction.
The form of analysis an expert uses to evaluate a transaction should address the issues faced by security holders.

Reasonable

In accordance with paragraph 12 of RG111, an offer is ‘reasonable’ if it is ‘fair’. An offer could be considered ‘reasonable’ if there are valid reasons to approve it (in the absence of any higher bid before the close of the offer), notwithstanding that it may not be regarded as ‘fair’.

RG 111.13 sets out some of the factors that an expert might consider in assessing the reasonableness of an offer, including:

The bidder’s pre-existing voting power in securities in the target.
Other significant security holding blocks in the target.
The liquidity of the market in the target’s securities.
Taxation losses, cash flow or other benefits through achieving 100% ownership of the target.
Any special value of the target to the bidder, such as particular technology, the potential to write off outstanding loans from the target, etc.
The likely market price if the offer is unsuccessful.
The value to an alternative bidder and likelihood of an alternative offer being made.

Further, RG 111.26 states that an issue of shares for cash may have other benefits that should be considered in deciding whether the transaction is reasonable. These benefits may include:

The provision of new capital to exploit business opportunities
A reduction in debt and interest payments, or
A needed injection of working capital.

In addition to the above, we have also considered the outcome of the Transaction as guided under RG 111 Paragraph 5:

In deciding on the appropriate form of analysis for a report, an expert should bear in mind that the main purpose of the report is to adequately deal with the concerns that could reasonably be anticipated of those persons affected by the proposed transaction. An expert should focus on the purpose and outcome of

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the transaction, that is, the substance of the transaction, rather than the legal mechanism used to effect the transaction.

General requirements in relation to the IER

In preparing the IER, ASIC requires the independent expert when deciding on the form of analysis for a report, to bear in mind that the main purpose of the report is to adequately deal with the concerns that could reasonably be anticipated by those persons affected by the Capital Raising. In preparing the IER we considered the necessary legal requirements and guidance of the Act, ASIC regulatory guides and commercial practice.

The IER also includes the following information and disclosures:

Particulars of any relationship, pecuniary or otherwise, whether existing presently or at any time within the last two years, between BDO East Coast Partnership or BDOCF and any of the parties to the Capital Raising.
The nature of any fee or pecuniary interest or benefit, whether direct or indirect, that we have received or will or may receive for or in connection with the preparation of the IER.
We have been appointed as independent expert for the purposes of providing an IER for the Documents.
That we have relied on information provided by the Independent Directors and management of SSM and that we have not carried out any form of audit or independent verification of the information provided.
That we have received representations from the Independent Directors in relation to the completeness and accuracy of the information provided to us for the purpose of our IER.

2.4. Special Value

We have not considered special value in forming our opinion. Special value is the amount that a potential acquirer may be prepared to pay for a business in excess of the fair market value. This premium represents the value to the particular potential acquirer of potential economies of scale, reduction in competition, other synergies and cost savings arising from the acquisition under consideration not available to likely purchasers generally. Special value is not normally considered in the assessment of fair market value as it relates to the individual circumstances of special purchasers.

2.5. Reliance on Information

This IER is based upon financial and other information provided by the Independent Directors and management of SSM. We have considered and relied upon this information. Unless there are indications to the contrary, we have assumed that the information provided was reliable, complete and not misleading, and material facts were not withheld. The information provided was evaluated through analysis, inquiry and review for the purpose of forming an opinion as to whether the Capital Raising is fair and reasonable.

We do not warrant that our inquiries have identified or verified all of the matters which an audit, extensive examination or due diligence investigation might disclose. In any event, an opinion as to whether a corporate transaction is fair and reasonable is in the nature of an overall opinion rather than an audit or detailed investigation.

It is understood that the accounting information provided to us was prepared in accordance with generally accepted accounting principles.

Where we relied on the views and judgement of management the information was evaluated through analysis, inquiry and review to the extent practical. However, such information is often not capable of direct external verification or validation.

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Under the terms of our engagement, SSM has agreed to indemnify BDOCF and BDO East Coast Partnership, and their partners, directors, employees, officers and agents (as applicable) against any claim, liability, loss or expense, costs or damage, arising out of reliance on any information or documentation provided, which is false or misleading or omits any material particulars, or arising from failure to supply relevant documentation or information.

2.6. Limitations

This IER may be lodged by the Independent Directors with regulatory and statutory bodies and will be included in the Documents to be sent to the Shareholders. The Independent Directors acknowledge that our IER has been prepared solely for the purposes noted previously in the document and accordingly we disclaim any responsibility from reliance on the IER in regard to its use for any other purpose. Except in accordance with the stated purposes, no extract, quote or copy of the IER, in whole or in part, should be reproduced without our prior written consent, as to the form and context in which it may appear.

Our procedures in the preparation of the IER have involved an analysis of financial information and accounting records. This did not include verification work nor constitute an audit or review in accordance with Australian Auditing and Assurance Standards and consequently has not enabled us to obtain assurance that we would become aware of all significant matters that might be identified in an audit or review. Accordingly, we have not expressed an audit or review opinion.

It was not our role to undertake, and we have not undertaken any commercial, technical, financial, legal, taxation or other due diligence, other similar investigative activities in respect of SSM. We understand that the Independent Directors has been advised by legal, accounting and other appropriate advisors in relation to such matters as necessary. We provide no warranty or guarantee as to the existence, extent, adequacy, effectiveness and/ or completeness of any due diligence or other similar investigative activities by the Independent Directors or their advisors.

We note that the IER does not deal with the individual investment circumstances of Shareholders and no opinion has been provided in relation to same. Some individual Shareholders may place a different emphasis on various aspects of the Capital Raising from that adopted in our IER. Accordingly, individuals may reach different conclusions on whether or not the Capital Raising is fair and reasonable to them. An individual Shareholder’s decision in relation to the Capital Raising may be influenced by their particular circumstances and, therefore, Shareholders are advised to seek their own independent advice.

Apart from the IER, we are not responsible for the contents of the Documents or any other document. We have provided consent for inclusion of the IER in the Documents. Our consent and the Documents acknowledge that we have not been involved with the issue of the Documents and that we accept no responsibility for the Documents.

2.7. Assumptions

In forming our opinion, we have made certain assumptions and outline these in our IER including:

Assumptions outlined in the valuation sections.
That matters such as title to all relevant assets, compliance with laws and regulations and contracts in place are in good standing, and will remain so, and that there are no material legal proceedings, other than as publicly disclosed.
Information sent out in relation to the Capital Raising to Shareholders or any regulatory or statutory body is complete, accurate and fairly presented in all material respects. Additionally, publicly available information relied on by us is accurate, complete and not misleading.
If the Capital Raising is implemented, that they will be implemented in accordance with the stated terms and that the legal mechanisms to implement the Capital Raising are correct and effective.

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There ar e no undue c h anges to th e terms and conditions of the Capital Raising or c o mplex issue s unknown t o us.

3. PROFILE OF SSM

3.1. Overview

Service S tream Limit e d (SSM) prov i des infrastru c ture-related access, desi g n, build, in s tallation and maintenanc e services p redominantl y to the tele c ommunicati o ns and utilities industry. T he group ha s three key business units : Fixed Co m munication s , Mobile Com m unications a nd Energy and Water.

3.2. Business Operations

S S M operates t h ree business units, as foll o ws: 3.2.1. Fixed Communications

S S M’s Fixed Communication s business un i t provides d e sign, constr u ction and m a intenance s e rvices to th e o w ners of copp e r and fibre o ptic telecom m unications i n frastructure assets.

3.2.2. Mobile Communications

S S M’s Mobile C ommunications business u nit provides turnkey and project ma n agement ser v ices for sit e a c quisition, de s ign and cons t ruction of w i reless telecommunication s infrastructu r e across Aus t ralia. Telstr a a n d Vodafone- H utchinson ar e the major c u stomers of t h is unit.

3.2.3. Energy and Water

S S M’s Energy and Water bu s iness unit pr o vides specialist metering and environ m ental servic e s to utilitie s a n d governme n t authorities nationally. T he group al s o provides c ontact centr e services a n d end-to-en d c u stomer supp o rt for key co n tracts.

3.3. Group Structure

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3.4. Chronological order of events

A summary of SSM’s significant events in chronological order is set out below:

Table 8: Chronological order of events

Date	Chronological order of events
2004	SSM Identified a Large And Fragmented Industrial Services Market
	Initial capital raisingamountingto$11.25M
Nov 2004	Acquisition of Skilled Communications Services Pty Ltd
	Skilled Communications Services Pty Ltd is acquired and as a result changes its name to Service Stream
	Communications Limited
7 Jan 05	Service Stream Solutions Pty Ltd is Incorporated
	The new entityService Stream Solutions PtyLtd is incorporated into thegroup.
1 Mar 05	Acquisition of Pracom Ltd
	The large call centre outsourcing business Pracom Ltd is acquired as an extension to SSM’s existing
	telecommunications service offerings. Pracomprimarilyoutsources for Vodafone and Optus
28 Oct 05	Acquisition of Milcom Pty Ltd
	SSM acquires Milcom Pty Ltd, a specialist training organisation, in order to improve the Groups access to
	training. The acquisition is also expected to provide additional revenue through the delivery of training
	to other organisations.
21 Aug 06	Acquisition of Fibercom Technologies Pty Ltd
	Fibercom Technologies Pty Ltd is a provider of maintenance and is expected to further the Groups
	provision of maintenance capabilities.
4 Jan 07	Merger of SSM and Total Communications Infrastructure Services Limited (TCI)
	TCI installs mobile phone towers and provides upgrades and maintenance to all three Australian mobile
	networks. The services provided by TCI extend SSM’s Fixed Communications capabilities. SSM changes its
	name and ticker from Service Stream Limited(ASX:STR)to Service Stream Holdings(ASX:SSM)
10 Jan 07	Acquisition of General Purpose Group Pty Ltd
	General Purpose Group Pty Ltd is a provider of large-scale infrastructure and will introduce the group
	into this market.
24 Apr 07	Service Stream Infrastructure Services Pty Ltd is Incorporated
	The new entity Service Stream Infrastructure Services Pty Ltd is incorporated into the Group establishing
	the Groups Infrastructure Services brand.
19 Jun 07	Acquisition of a Serviceworks Pty Ltd Division
	SSM acquires the meteringdivision of Serviceworks PtyLtd.
11 Sep 07	Acquisition of Alinta Asset Management Assets
	SSM acquires sub meteringassets from Alinta Asset Management
1 Oct 07	Acquisition of Mccourt Dando
	SSM acquires the group of companies owned and operated by McCourt Dando opening the Group to the
	large scale drilling,trenchingand boringmarkets used in large scale civilprojects.
1 Feb 08	Acquisition of AMRS
	The Group acquires the group of companies owned by AMRA establishing the move into the utility
	reading and replacement market. This acquisition enables the company to supply and install domestic
	solarpanels as well asprovide services to the Victoria Smart Meterprogram.
22 Feb 08	Acquisition of South East Queensland Underroad Drillers
	SSM Acquires South EastQueensland Underroad Drillers
Recent Operational History
8 Jul 09	CEO Resignation
	Patrick Flannigan resigns as Chief Executive Officer
6 Jan 10	Managing Director Appointed
	Graeme Sumner is appointed as ManagingDirector
6 Sep 11	Joint Venture Contract Announcement
	SSM announces its Syntheo Joint Venture with Lend Lease has obtained a contract for the design and
	construction of the NBN in Western Australia.
14 Nov 11	Joint Venture Contract Announcement
	SSM announces that the Syntheo Joint Venture has obtained a contract in South Australia and the
	Northern Territoryfor the design and construction of the NBN.
18 Mar 13	Trading Halt
	SSM announce a trading halt in relation to issues in the Fixed Communications segments, especially the
	Syntheo Joint Venture

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Table 8: Chronological order of events

Date	Chronological order of events
20 Mar 13	Provision of Market Update
	SSM updates the market on the FY13 revision of EBITDA to $20m along with the anticipation of
	impairment between$70-90m ofgoodwill in the Fixed Communications segment.
8 Apr 13	Managing Director Resigns
	Graeme Sumner resigns as the Managing Director of SSM, Brett Gallagher is appointed as Executive
	Director on an interim basis
11 Jun 13	Trading Halt
	SSM announce a trading halt in order to clarify issues regarding the Fixed Communications segments,
	specificallythe Syntheo Joint Venture
13 Jun 13	Voluntary Suspension From The ASX
	SSM request to be voluntarily suspended from the ASX in relation to the issues regarding the Fixed
	Communications segment,specificallythe financialperformance of this segment
5 Aug 13	Voluntary Suspensions Lifted
	The voluntary suspension of the Group from the ASX is lifted and a market update in relation to the FY13
	financial performance due to SSM’s obligations on the Syntheo Joint venture with Lend Lease is
	provided. Guidance for FY13 EBITDA to be a loss of $13m and a write down of $90m goodwill in the Fixed
	Communications Segment is indicated.
30 Aug 13	FY13 Results Announced
	Results are announced to the market confirming an EBITDA loss of $13.4m and a $90m impairment of
	goodwill contributingto a net loss after tax of$107m.
14 Oct 13	New Managing Director Announced
	TerrySinclair is announced as the new ManagingDirector as of 6 November 2013

Source: SSM Management

3.5. Historical Financial Information

3.5.1. Financial Performance

The audited statements of comprehensive income of SSM for FY2011 to FY2013 are set out below:

Table 9: Historical statements of comprehensive income of SSM

$’millions unless stated otherwise	FY2011 (Audited)	FY2012 (Audited)	FY2013 (Audited)
Revenue	633	592	525
Direct Costs	(514)	(467)	(424)
Indirect Costs	(85)	(87)	(114)
EBITDA	35	38	(13)

Goodwill Impairment	-	-	(90)
Depreciation and Amortisation	(6)	(7)	(8)
EBIT	28	31	(112)
Finance Charges	(6)	(4)	(2)
Profit Before Tax	23	27	(114)
Tax benefit/(expense)	(6)	(8)	7
Profit After Tax	16	19	(107)
*Source:* FY2011 – FY2013 annual reports and SSM management

We note the following in relation to the above:

Revenue decreased in FY2013 by approximately $67 million.
Major costs include employee salaries and benefits, subcontractor fees, site and construction costs and raw materials.

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SSM recorded an EBITDA loss of $13.4 million in FY13, primarily due to the following developments within the Fixed Communications business unit:
Material losses were incurred on the Syntheo Joint Venture (“Syntheo”), a 50% joint venture with Lend Lease. Syntheo was formed to complete various contracted design and construction works for the National Broadband Network Co (“NBN Co”). Under various contracts in the Northern Territory, South Australia and Western Australia, Syntheo was required to repay to NBN Co certain amounts that had been advanced to Syntheo for overhead expenses. It was determined that these unavoidable costs of meeting contractual obligations would exceed any future economics benefits to Syntheo. SSM has agreed for Lend Lease to assume full control of Syntheo and SSM’s share of the full losses associated with the venture totalled $19.5 million (FY2013 $19.9 million).
In addition operational difficulties arose due to a substantial change in the mix of work within Fixed Communications including the wind down or ramp up of significant contracts, resulting in further Fixed Communications losses of $12.1 million.
The carrying value of goodwill in relation to various acquisitions made in the Fixed Communications business unit was written down by $90 million in FY2013.

3.5.2. Historical Statements of Financial Position

The statements of financial position of SSM as at 30 June 2011, 30 June 2012 and 30 June 2013 are set out below:

Table 10: Historical statements of financial position of SSM

$’millions unless stated otherwise	FY2011 (Audited)	FY2012 (Audited)	FY2013 (Audited)
Current Assets
Cash and Cash Equivalents	9	21	13
Trade and Other Receivables	105	64	62
Inventories	14	12	18
Accrued Revenue	41	98	88
Other	3	3	5
Total Current Assets	173	197	186
Non Current Assets
Property, Plant and Equipment	10	10	15
Intangible Assets	210	212	124
Other	9	6	-
Total Non Current Assets	229	228	139
Total Assets	402	425	325
Current Liabilities
Trade and Other Payables	79	81	70
Borrowings	5	1	65
Provisions	13	11	10
Other	6	5	-
Total Current Liabilities	104	98	147
Non Current Liabilities
Trade and Other Payables	-	-	10
Borrowings	42	54	-
Provisions	2	3	3
Other	-	-	8
Total Non Current Liabilities	44	56	21
Total Liabilities	148	155	167
Net Assets	254	271	158

Source: FY2011 – FY2013 annual reports and SSM management

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We note the following in relation to the above:

The financial position of SSM worsened in FY2013 mainly due to losses incurred from the Syntheo Joint Venture and the aforementioned operational difficulties resulting from Fixed Communications contracts.
Net Assets reduced by approximately $113 million in FY2013, primarily due to the Fixed Communications impairment charge of $90 million.
Net debt increased by approximately $18.2 million in FY2013 to $52.0 million, comprising $65.4 million in borrowings and $13.4 million in cash.

3.6. Going concern

We note the following extract from Note 2 of the 30 June 2013 annual report released on 22 August 2013:

The Group breached a number of covenants under its banking facilities at 31 March 2013 and 30 June 2013 as a consequence of the impact of the business’ operating performance on its 12 month rolling EBITDA and EBIT metrics and the impairment charge relating to Fixed Communications’ goodwill.

Since balance date, the Group has received credit approved term sheets from its financiers, Australia & New Zealand Banking Group Ltd and Westpac Banking Corporation for the renewal of its banking facilities out to 31 August 2014. The facilities being offered under the credit approved term sheets include a cash advance facility with an initial limit of $60 million, an overdraft facility of $5 million and a bank guarantee facility of $37 million. In addition to the payment of an establishment fee, the revised facilities will attract line fees and margins that will result in an increase in costs of between 200 and 250 bps compared to FY13. The credit approved term sheets define a number of conditions precedent and conditions subsequent.

The Board is confident the conditions precedent and subsequent will be satisfied. The Board also considered the terms of the offer to be commercially acceptable and proposes to accept the offer and to proceed to documentation.

The revised banking facilities will require the business to operate within reduced facility limits and to commit to the repayment of a total of $13 million from the cash advance facility over the course of FY14.

Under the terms of the offer, the breaches of covenants at 31 March 2013 and 30 June 2013 will be waived by the financiers upon execution of the final lending documentation. In addition, several of the former facility covenants are suspended, amended or replaced with more relevant measures. The former earningsbased covenants have been suspended and replaced with a covenant relating to performance against budgeted EBITDA. The asset-based covenants of Shareholder Funds and Net Tangible Assets will be reset in line with the actual metrics as at 30 June 2013.

Management and the Board have reviewed the Group’s cashflow forecasts in the context of the Group’s obligations under the revised facilities, and are of the view that there are reasonable grounds on which to conclude that the Group can continue to operate as a going concern.

Accordingly, the consolidated financial statements have been prepared on a going concern basis in the belief that the Company will realise its assets and settle its liabilities and commitments in the normal course of business.

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3.7. Capital Structure and Ownership

A s at the date o f this Report, SSM had the following se c urities on iss u e:

As at the dateo f this Report , SSM had the following sec urities on issu e:	As at the dateo f this Report , SSM had the following sec urities on issu e:	As at the dateo f this Report , SSM had the following sec urities on issu e:
T able 11: SSM s ecurities on is sue
	S ecurity To tal Details
F o ully paid rdinaryshares 284,443, 570
P R erformance ights 3,660, 045 � Pe res Th � Ea ve rformance righ pect of the e rights are due ch Performance stingcriteria. ts have been is FY12 tranche to vest in Nov Rights conver sued under the and FY13 tra ember 2014 an ts into one Sha Long Term In nche (Perform d 2015 respect re, subject to centive Plan in ance Rights). ively. satisfaction of
So Th *urce:*SSM Ma e Performanc nagement, SSM e Rights ares Annual Report ubject to ser FY2013 vice and perf ormance crite ria being:

� Service criteria - the participant m u st be an employee at the v esting date; a nd

Performance criteria – the two sep a rate hurdles u nder this cri t eria are as f o llows:
50% of th e Performanc e Rights will v est if SSM’s total shareholder return ( T SR) over the performanc e period ra n ks at or above the 75[th] pe r centile (full a chievement) of a relevan t peer group o f companies , being tho s e comprising the ASX 200 Industrials in d ex. If SSM’s T SR ranks at o r above 50[th] p ercentile bu t below 75[t] [h] percentile, t he vesting of the Perform a nce Rights w i ll be pro rat e d.
50% of th e Performanc e Rights will v est if SSM ac h ieves earnin g s per share ( EPS) annual g rowth of 10 % or more ( f ull achievem e nt) over the performance period from a n agreed ba s e EPS. If SS M achieves EP S annual gr o wth of 7.5% and above b u t below 10 % , the vesting of the Perf o rmance Righ t s will be pr o rated. Th e EPS base fo r FY12 and FY 1 3 tranches are 5.80 cents and 6.60 cen t s respectively

T h e top 10 Shareholders of S SM as at 2 O c tober 2013 (apart from T h orney Invest m ent Group w hich reflect s the latest posit i on) are sum m arised in th e table below:

T able 12: Top 1 0 shareholder s before Capita l Raising	T able 12: Top 1 0 shareholder s before Capita l Raising
		Nu mber of	P ercentage of
S hareholder		Ordinar y Shares	T otal Ordinary
		held		Shares held
T horneyInvestm ent Group		56 ,500,000		19.86%
M aple-Brown Ab bott		28 ,038,834		9.86%
G andel Group		15 ,797,924		5.55%
D imensional Fun ds Advisors		10 ,928,782		3.84%
In telligent Inves tor Funds		9 ,564,982		3.36%
B rett Gallagher		8 ,792,113		3.09%
P eter Van Hoof	FamilyHoldings	8 ,277,789		2.91%
J ohn Rubino		6 ,900,611		2.43%
R ealindex Invest ments		4 ,864,055		1.71%
R odger BrookeF amilyHoldings		4 ,062,411		1.43%
S ub-total		153, 727,501		54.04%
O ther sharehold ers		130 ,716,069		45.96%
T otal		284, 443,570		100.00%
So *urce:*SSM ma nagement

4. PROFILE OF THORNEY

T O P is an inves t ment vehicl e listed on th e ASX and ma n aged by Tho r ney Manage m ent Services Pty Ltd. THI N is currently t h e largest shareholder of SSM and is part of th e Thorney G r oup which s pecialises i n in v estments in s tocks of small to mid cap c ompanies.

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5. INDUSTRY OVERVIEW

S S M operates a s a service provider primarily to th e telecomm u nications an d utilities in d ustries. Th e t e lecommunications industr y is made u p of direct c a rriers or se r vice provide r s involved i n the design , o p eration and m aintenance of voice, da t a, text, sound and video, cable, wirel e ss and satellite networks . T h e utilities in d ustry is made up of retai l ers and dist r ibution netw o rk owners a n d operators i n electricity , g a s and water.

5.1. Key drivers and recent economic highlights

C o mpanies wi t hin the telecommunicati o ns industry rely on the demand fo r telecommu n ications an d b r oadcasting s e rvices, as su c h the followi n g factors will influence re v enue:

Gener a l economic c onditions: E c onomic acti v ity correlates with expe n diture on co m munication s techn o logy from co m mercial and domestic co n sumers.
Speed of Networks: The commu n ication speed of devices and network s will determine consume r dema n d for certain products and services wit h in the Telecommunication s Industry
Produ c t Prices: Aff o rdable price s of communi c ation services will ensure consumers c o ntinue to us e comm u nication dev i ces provided by the Indus t ry
Emerg i ng communi c ation techno l ogies: The c o ntinual deve l opment of c o mmunicatio n s devices an d Networks ensures p r oducts main t ain a new, vi b rant and ex c iting environ m ent.
Techn o logical int e gration: Th e integratio n of domestic and co m mercial a c tivities wit h comm u nication dev i ces motivat e s demand for products an d services (M o bile banking, Mobile socia l media , VoIP).
Popul a tion: Public i n frastructure relies heavil y on public demand.
Geogr a phical population densit y : The proxi m ity of large p opulous are a s determine s the ease t o which communicat i on Networks and Servic e s are able t o deliver ef f icient and e ffectively t o custo m ers.
Gover n ment Policie s : The suppo r t of the government with p rojects such as the Natio n al Broadban d Network (NBN) ena b les the indus t ry to compe t e on a global scale.
S p ecific driving factors of Service Provide r s to the Telecommunicati o n Industry in c lude:
Price: Th e Cost of the p roducts and s ervices provi d ed will alwa y s influence c ustomer beh a viour
Customer Relationship s : The abili t y to form w ell establis h ed and lon g term relat i onships wit h customers indicates customer sati s faction refl e cts a company’s ability to accomplish custome r requirem e nts
Up-to-dat e product del i very: Servic e Providers m u st adapt the latest technology and be able to delive r the latest products and services available
Employee performanc e : Employees must have s ufficient tra i ning and ab i lities to be able to fulfi l customer r equirements effective an d efficiently

A n other key d r iver to the industry is t he barriers t o entry. Th e se barriers i nclude the i nitial capita l in v estment re q uirements, a bility to de l iver modern products a n d services a s required b y customers , regulatory req u irements (Communication s Act 1997, A ustralian Co m munications and Media A u thority), an d the competitiv e environmen t .

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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5.2. Industry outlook

T h e introducti o n of the Nat i onal Broadb a nd Network i s expected t o shift a pri m ary portion o f the marke t b a ck towards fixed communication.

T h e introducti o n of further technologic a l advancements, includin g the fibre-t o -the-home ( F ITH) service s a n d 4G networ k s will have a high impact o n the indust r y and service providers.

6. VALUATION METHODOLOGY

6.1. Valuation Requirements

W e have forme d our opinion in relation t o fairness by comparing the:

Fair ma r ket value of a SSM Share b e fore the Ca p ital Raising (including a pr e mium for co n trol); and
Fair ma r ket value of a SSM Share a f ter the Capi t al Raising on a minority ba s is.

T h e Capital Raising is fair if t he value of a SSM Share a f ter the Capital Raising on a minority basis is equal t o o r greater tha n the fair ma r ket value of a SSM Share before the Capital Raisin g (including a premium fo r c o ntrol). Details of common methodologi e s for valuing businesses and assets are i n cluded at Appendix 3 .

S e t out below is a discuss i on of the v a luation methods we consider appropriate for th e purposes o f u n dertaking ou r valuation as s essment of S SM.

6.2. Valuation Methodologies Considered for SSM

W e have assess e d the equity value of SSM using the fol l owing metho d ologies:

Capitali s ation of earnings (COE)
Share p r ice trading a n alysis.

6.3. Capitalisation of earnings

W e have asses s ed the equi t y value of S SM using CO E , plus (or m inus) the m a rket value of any surplu s assets/(liabiliti e s). In accor d ance with R G 111.15, we have conside r ed the fair m arket value o f SSM on th e b a sis of a kno w ledgeable an d willing, bu t not anxious, seller that i s able to con s ider alternat i ve options t o the bid. Henc e , the conseq u ences of SS M breaching its financial c ovenants as a result of f a iling to rais e c a pital and ma y be required to repay de b t on demand have not be e n assessed a s part of the valuation bu t h a ve been considered in our reasonablen e ss assessmen t .

W e selected t h e COE meth o d as the mo s t suitable m ethodology t o assess the e quity value as SSM has a hi s tory of profi t able operati o ns and (on a normalised b a sis) and is e x pected to co n tinue operating as a goin g c o ncern.

W e note tha t a discoun t ed cash fl o w ( DCF ) m e thod is ap p licable for this busine s s. However , S S M management has not pr o vided suita b le long-term forecasts to u ndertake a D CF calculati o n due to th e in h erent uncer t ainties in th e forecasts be y ond FY2014.

6.4. Share price trading analysis

In order to pr o vide additio n al evidence o f the fair market value o f SSM, we h a ve consider e d recent AS X tr a ding prices o f SSM securit i es as a secondary valuatio n method.

6.5. Premium for Control

In v estment fun d amentals di c tate that th e value of 10 0 % of a comp a ny is normal l y greater th a n the sum o f v a lues attributable to the individual shares of that company b a sed on tran s actions in m inority shar e h o ldings.

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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T h e difference between the value of 10 0 % of a comp a ny and the total value of minority share holdings i s referred to as a premium for control tak i ng into acco u nt control a n d synergisti c benefits for the acquirer . C o ntrol of a co m pany by a s h areholder gi v es that shar e holder rights to which mi n ority shareh o lders are no t e n titled, inclu d ing control o f the compan y ’s policies a n d strategies, and use of c a sh flows of t h e company.

T h e level of premium for c o ntrol paid in a takeover b id will vary a cross industr i es and is de p endent upo n the specifics of the compan y being acqui re d. We have reviewed Aus t ralian public company ac q uisitions ove r the past three y ears. This re v iew indicate s a premium f or control ra n ge of 20% to 35%.

R G 111.11 indi c ates that a n offer is ‘fair’ if the val u e of the off e r price or c o nsideration is equal to o r gr e ater than t h e value of t h e securities t he subject o f the offer. T he comparis o n must be made assumin g 1 0 0% ownershi p of the ta r get compan y , irrespectiv e of the pe r centage hol d ing of the bidder or it s associates in the target com p any.

B a sed on the a bove, we h a ve considere d a control p remium of 25% in the C O E method. O ur secondar y v a luation meth o dology, bei n g the recent quoted market prices of S SM, is on a m inority inter e st basis, an d therefore we a p ply a control premium of 2 5% to the minority interest Shares ASX v aluation.

6.6. Valuation in Accordance with APES 225

T h is engageme n t has been c o nducted in accordance with profession a l standard A P ES 225 Valuation Services , as issued by th e Australian P r ofessional a n d Ethical Sta n dards Board.

7. VALUATION OF SSM PRIOR TO THE PROPOSED TRANSACTION ON A CONTROL BASIS

7.1. Valuation summary

S e t out in the table below is a summary o f our assessment of the eq u ity value of S SM per Shar e , prior to th e C a pital Raising, on a control basis:

Table 13: Equity value of SSM per Share on a control basis $ per Share Ref. Low High C OE 0 0.29 0.42 S hare market trading method 7.9 0.25 0.25 BDOCF selected valuation 0.29 0.42 Source: BDOCF a nalysis T h e fair marke t value of SS M using the C O E method ha s been deter m ined prior to the Capital R aising. B a sed on the a bove, the e q uity value o f SSM using t he share tra d ing method reflects a di s count to ou r assessed low a n d high equit y value of SSM of 30% and 5 2 % respectively using the C OE method.

W e have adopt e d the COE m ethod as the primary met h od as it bes t reflects the fair market v alue of SSM’ s b u siness as th e share tradi n g analysis c o ncludes low t o moderate trading liqui d ity and the a uditors hav e hi g hlighted goi n g concern is s ues (as detai l ed in Section 3.6 ).

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7.2. Fair market value of SSM using COE method

Our assessment of the fair market value of SSM is set out below:

Table 14: Valuation Summary

$'000s unless stated otherwise	Ref.	Low	High
Normalised earnings	7.4	20,000	22,379
Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) multiple (control basis)	7.5	6.0	7.0
Enterprise Value - control basis		120,000	156,650
Add/(Less):
Net debt	7.6	(38,100)	(38,100)
Transaction costs	7.7
		(440)	(440)
Equity Value - control basis (before capital raising activities)		81,460	118,110
Shares outstanding prior to Capital Raising (‘000s)	1.5	284,444	284,444
Equity Value per Share ($) - control basis (before capital raising activities)		0.29	0.42

Source: BDOCF analysis

Based on the above, the fair market value of SSM per Share on a control basis ranges between $0.29 to $0.42 per Share.

7.3. Approach

In utilising the COE method to value SSM, we have considered the following:

An estimate of the normalised earnings of SSM
Selection of an appropriate earnings capitalisation multiple (inclusive of premium for control)
Where necessary, deducted from the resultant equity value
Any future capital expenditure and working capital requirements, where applicable
Any potential contingent liabilities, if any
Considered the value of any surplus assets and liabilities.

Set out below are the key parameters and our considerations of the above.

7.4. Normalised earnings

Normalised earnings (“ NE ”) is the assessed level of earnings, that, in real terms can be expected to be derived by the existing operations of the business for a particular period excluding any one off or accounting based profits or losses.

In our opinion, the appropriate earnings to adopt in valuing SSM is earnings before interest, tax, depreciation and amortisation (“EBITDA”) because it allows for comparison of companies irrespective of their gearing, tax jurisdiction and accounting policies.

Our estimate of the NE of SSM has been determined after consideration of:

SSM’s normalised historical earnings
SSM’s forecast FY2014 earnings
Growth prospects and the effect of changes and trends in the Industry that may impact on earnings
The SWOT analysis of SSM and the effectiveness of SSM’s competitive strategy in managing any threats.

BDO Corporate Finance (East Coast) Pty Ltd

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The historical and forecast earnings are summarised below, together with the normalisation adjustments:

Table 15: Normalised earnings

$'000s unless stated otherwise	Ref.	FY2012 Actual	FY2013 Actual
Reported EBITDA		38,042	(13,391)
Normalisation adjustments
Add/(Less):
Ericsson Dispute Provision	a	11,800	3,200
Syntheo Joint Venture Impact	b	(242)	19,856
Surplus KPI Provisions	c	(1,200)	-
Profit on sale of Inventory	d	(2,300)	-
Other Surplus Provisions	e	(4,600)	-
Fixed Communications Performance	f	-	12,114
Foreign Exchange Translation	g	-	600
Normalised EBITDA		41,500	22,379

Source: BDOCF analysis

Details of the normalisation adjustments above are set out below:

a. Adjustments relating to the removal of provisions for costs associated with a contractual dispute with Ericsson.
b. SSM entered into a joint venture (Syntheo Joint Venture or “Syntheo”) with Lend Lease for delivery of works to the National Broadband Network. The joint venture incurred material losses in FY13 and it was determined that the contracts entered into by Syntheo were onerous. Lend Lease assumed full control of Syntheo and SSM’s share of full losses incurred on the project totalled $19.5 million.
c. Relates to the write back of surplus provisions relating to Fixed Communications contracts.
d. SSM sold Fixed Communications inventory following the cessation of a contract at levels higher than the written down value, with profit of $2.3 million realised.
e. Other surplus provisions relate to a range of surplus provisions including a pricing dispute with a major customer, surplus contract bonus provisions and other minor amounts.
f. SSM Management has provided a normalisation adjustment for the abnormal FY13 performance of the Fixed Communications business unit when compared to historical and forecast performance with this adjustment restoring FY13 EBITDA after corporate allocations to a break-even position. This business unit now has new management and is no longer distracted by the Syntheo Joint Venture.
g. Removal of a one time write off of a Foreign Currency Translation Reserve following the sale of an investment in a wireless infrastructure operation in India.

We note that on 30 August 2013, SSM announced to the market forecast FY2014 EBITDA of $20.0 million. We have reviewed year to date results for SSM and Management’s FY14 budget. Based on this review, SSM’s previous market guidance in relation to FY2014 EBITDA does not appear unreasonable.

We have assessed the NE for SSM to be in the range from $20.0 million to $22.38 million. In selecting our range, we have considered the following factors:

Having considered the normalised historical earnings, we placed greater reliance on FY2013 earnings as it represents the most recent performance of the Company. As such, we have adopted the FY2013 earnings as the higher end of our range.

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In determining the normalised EBITDA range we have also considered the forecast results for FY2014. SSM has provided guidance on FY2014 EBITDA to the market of $20.0 million. We have adopted $20.0 million as the lower end of our range.

7.5. Capitalisation multiple

The appropriate earnings multiple is usually assessed by collecting market evidence with respect to the earnings multiples of companies with operations that are broadly comparable to those of the entity being valued.

Such multiples are derived from:

Share market prices of broadly comparable listed companies
Prices achieved in mergers and acquisitions of broadly comparable companies (usually reflecting a controlling interest status)

In selecting appropriate comparable companies, we had regard to:

listed Australian companies that provide similar services to SSM within the Industry. Our analysis was performed based on data available as at 20 January 2014.
acquisitions of Australian companies that provide similar services to SSM.

7.5.1. Listed comparable companies

We have selected a range of broadly comparable companies that engage in services within the telecommunications industry. Set out in Appendix 4 are descriptions of the operations of the identified companies. The stock market trading valuation parameters for the companies are set out in Appendix 5 .

Our assessment of the earnings multiples have been derived predominantly from the multiples observable from trades of minority parcels of shares in listed entities. Accordingly, the trading prices reflect a minority interest value. When valuing a controlling interest, an appropriate allowance should be made for a premium for control. Empirical evidence and our analysis on premiums for control indicate that these premiums tend to range between 20% to 35%.

We have applied a premium for control of 25% considering the following:

Empirical evidence as described above.
The strategic benefit that a controlling interest in SSM would provide a hypothetical willing purchaser.
Generally accepted market practices.

Our assessment of comparable companies produced a range of earnings multiples (excluding outliers), with an average and median FY2013 EBITDA of approximately 6.0 times and 7.0 times (inclusive of premium for control) respectively.

The capitalisation rate should reflect the growth prospects of the business, the quality of its earnings and the risks of the business. In order to ascertain the appropriate multiple range to apply to SSM, we have undertaken a limited review of the characteristics of the companies that we consider most comparable.

7.5.2. Transaction multiples

We reviewed a number of transactions relating to acquisitions of businesses with operations or risks similar to SSM. A summary of comparable transactions is set out in Appendix 7 .

Our assessment of comparable transactions produced a range of EBITDA multiples (excluding outliers), of approximately 6.0 times and 8.0 times.

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7.5.3. Multiple applicable to SSM – controlling interest

Based on our analysis above, we have arrived at a capitalisation multiple range applicable to SSM of 6.0 times to 7.0 times. In our opinion, this multiple reflects:

The multiples of companies broadly comparable to SSM.
A controlling interest multiple.

7.6. Net Debt

As at 31 December 2013 (unaudited) SSM had borrowings of $50.0 million and cash of $11.9 million.

In order to determine the value of SSM’s equity we have deducted the value of net debt being $38.1 million.

7.7. Transaction costs

SSM management have advised that the Company will incur costs associated with the Proposed Placement and Proposed Rights Issue of approximately $440k. These costs relate to legal fees, consultancy fees, listing and registry fees for the new shares, fees associated with the preparation of this Report and excluding the capital raising fee.

Much of these costs will be incurred by SSM regardless of whether the Proposed Placement and Proposed Rights Issue proceed. As such, we have considered an adjustment for the amount of $440k to reflect these costs.

7.8. Performance Rights

As discussed in Section 0 , there are currently 3.66 million unlisted performance rights on issue. These performance rights are subject to the satisfaction of vesting criteria. We are of the opinion that the vesting of the performance rights is unlikely in the short to medium term. We note than in any event, due to the immaterial number of performance rights compared to SSM Shares on issue, the value of the performance rights would not have a material effect on the value of SSM shares.

7.9. Cross-check against recent ASX trading in SSM Shares

We have also considered the ASX quoted market price for SSM Shares which reflects a minority interest price for SSM Shares.

The table below summarises trades over the year up until the 20 January 2014:

Table 16: Volume Weighted Average Share Price of Daily Trades

	High	Low	VWAP	Total Volume Traded	Annualised Turnover (Note 1)	Average Bid/Ask Spread
	($)	($)	($)	('000s)	(%)
As at 20 Jan 2014	0.20	0.20	0.20	0.20	17.8%	0.00%
5 days to 20 Jan 2014	0.20	0.20	0.20	0.90	26.7%	0.00%
1 month to 20 Jan 2014	0.20	0.20	0.20	4.00	19.8%	0.00%
3 months to 20 Jan 2014	0.20	0.20	0.20	29.60	41.9%	0.00%
6 months to 20 Jan 2014	0.20	0.10	0.18	70.90	49.4%	0.82%
12 months to 20 Jan 2014	0.50	0.10	0.21	167.9	59.2%	1.60%

Sources: Capital IQ; BDOCF analysis

Note 1: Annualised turnover is calculated as period turnover divided by trading days in the period, multiplied by trading days in the year. Legend: VWAP denotes volume weighted average share price.

BDO Corporate Finance (East Coast) Pty Ltd

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We note the following with respect to SSM Shares during the 12 months up to 20 January 2014:

SSM Shares traded between $0.10 per Share and $0.50 per Share.
Over 4 separate trading periods over the 12 month period analysed, the daily volume traded was greater than 4 million Shares. These spikes in volume are charted in below. Whilst on some days announcements to the ASX were made (which provide possible reasons for the unusual trading activity), reasons for the unusual trading activity are not always traceable to any particular event(s).
VWAP prices are observed to be on a downward trend.
The total traded volume of Shares over the 12 months to 20 January 2014 was approximately 59.2% of the total weighted average number of Shares on issue over the period. Whilst there is reasonable liquidity of trading in SSM shares, we note that a significant volume of trading occurred in specific trading spikes as outlined in Figure 2 below.
Over the year analysed, there were 198 days of trading activity out of a total of 253 trading days.

Figure 2 shows SSM’s daily close price and the volume of Shares traded each day over the period from 21 January 2013 to 20 January 2014 inclusive.

Figure 2 : Daily Closing Share Prices and Volumes from 21 January 2013 to 20 January 2014

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

Share Price $ Volume (millions)
0.45 14.0
D
0.40
12.0
0.35
A
10.0
0.30 C
0.25 8.0
0.20 6.0
B
0.15
4.0
0.10
2.0
0.05
- -
Volume SSM Share Price
----- End of picture text -----

Source: Capital IQ; BDOCF analysis

BDO Corporate Finance (East Coast) Pty Ltd

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F a ctors which m ay have had an impact on trading in SS M Shares are d etailed belo w :

Table 17: SSM ASX Announcements

N A ote Date 20 Mar2 21 Mar2 22 Mar2 Announ 013 Market SSM ad an agr back th the Nor SSM an reduced SSM a impairm was an on acqu 013 013 cement Detail Update: vised that Syn eement with e remaindero thern Territory nounced FY13 to $20 million nnounced th ent charge of ticipated in re isitions undert s theo had reach NBN Co to ha f its activities . EBITDA guida . at a non-c $70 to $90 mill lation to goodw aken in 2008. ed nd in nce ash ion ill	N A ote Date 20 Mar2 21 Mar2 22 Mar2 Announ 013 Market SSM ad an agr back th the Nor SSM an reduced SSM a impairm was an on acqu 013 013 cement Detail Update: vised that Syn eement with e remaindero thern Territory nounced FY13 to $20 million nnounced th ent charge of ticipated in re isitions undert s theo had reach NBN Co to ha f its activities . EBITDA guida . at a non-c $70 to $90 mill lation to goodw aken in 2008. ed nd in nce ash ion ill	Prior D Closin Share Pr ay g ice Closin Share Price g % Movemen t Volume (million)

		0.40 0 .20 (50% ) 8.9
		0.20 0 .20 - 9.0
		0.20 0 .20 - 9.7
B 23 May2 013 SSM ann than covena facility ounced thata expected E nts under e agreements ha s a result of low BITDA, cert xisting bank d been breache er ain ing d.		0.20 0 .20 - 5.4
C 6 Aug 20 13 SSM an EBITDA Commu excess EBITDA $13 mil nounced that loss fro nications segm of $30 millio loss for FY13 lion. it anticipated m its Fix ent for FY13 n and an ove of approximat an ed in rall ely		0.10 0 .10 - 8.8
D 22 Oct2 013 Executi detailin FY13 an ve Director’s g reduced fin d FY14 outlook AGM Presentat ancial results . ion for		0.20 0 .20 - 12.4
So *urce:*ASX	*urce:*ASX

W e note the a b ove observat i on of the tra d ing activitie s of SSM indicates a low to moderate tr a ding liquidit y o f SSM Shares. We have c o nsidered th e historical S hare prices of SSM to p r ovide some support as a s e condary valu a tion for the f air market v a lue of SSM p e r Share.

W h en assessin g the fair ma r ket value of a SSM Share from the ab o ve analysis, w e consider $0.20 to bes t reflect the ASX pricing for S S M.

Table 18: SSM Share – ASX Pricing

Ref Low High	Ref Low High	Ref Low High
S SM Share – ASX Pricing (minori ty interest) per Share ($) 0.20 0.20
C ontrol premium (%) 6.5 25% 25%
S SM Share – ASX Pricing (contr ol basis) per S hare ($) 0.25 0.25
So N	o *urce:*BDOCFa *te:* The above nalysis may have round ing difference s

8. VALUATION OF SSM POST CAPITAL RAISING ON A MINORITY BASIS

8.1. Valuation summary

S e ction 8 sets o ut our asses s ment of bot h the fair m a rket value of SSM post Ca p ital Raising o n a minorit y b a sis (including the Capital R aising proce e ds, transacti o n costs and c apital raising fees).

BDO Corp o rate Finance ( E ast Coast) Pty Ltd

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We have set out our analysis in two stages:

Post Proposed Placement.
Post Proposed Placement and Proposed Rights Issue.

8.2. Valuation Post Proposed Placement

The Proposed Placement would result in Thorney holding a Voting Power of 28.4% (assuming Thorney subscribes for all of its allocated placement shares). Our assessment of this scenario is set out below:

Table 19: Valuation Summary – Equity Value post Proposed Placement

$'000s unless stated otherwise	Ref.	Low	High
Normalised earnings	7.4	20,000	22,379
Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) multiple (minority basis)	8.2.1	5.0	6.0
Enterprise Value - minority basis		100,000	134,272
Add/(Less):
Net debt	7.6	(38,100)	(38,100)
Equity Value - minority basis (before Proposed Placement)		61,900	96,172
Add/(Less):
Proceeds from Proposed Placement	8.2.2	9,350	9,350
Capital raising fee	0	(187)	(187)
Transaction costs	8.2.4	(440)	(440)
Equity Value - minority basis (after Proposed Placement)		70,623	104,895
Shares outstanding (‘000s) (following Proposed Placement)	1.5	326,944	326,994
Equity Value - minority basis (after Proposed Placement) per Share ($)		0.22	0.32
*Source:*BDOCF analysis
*Note:*The above may have rounding differences

Based on the above, we have determined equity interests in SSM after the Proposed Placement on a minority basis to be between $0.22 to $0.32 per Share.

8.2.1. Multiple applicable to SSM – minority interest

Based on our analysis in Section 7.5 , we assessed an appropriate earnings multiple (on a controlling interest basis). We note that the capitalisation multiple range assessed in Section 0 was a controlling interest multiple. Appendix 6 includes the share market prices of broadly comparable listed companies on a minority basis. Based on our analysis above, we have arrived at a capitalisation multiple range applicable to SSM on a minority basis of 5.0 times to 6.0 times.

8.2.2. Proceeds from Proposed Placement

The total proceeds from the Proposed Placement are calculated below:

Table 20: Total proceeds from Proposed Placement

Number of Shares	Issue Price ($)	Proceeds ($)
Placement Shares 42,500,000	0.22	9,350,000

Source: Subscription Agreement and Underwriting Agreement

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8.2.3. Proposed Placement capital raising fee

Wilson HTM will underwrite the Proposed Placement and is entitled to receive a capital raising fee of 2% of $9,350,000 (being the total capital to be raised under the Proposed Placement) which equates to $187,000 and has been adjusted in the valuation of the equity interests in SSM.

8.2.4. Transaction costs

SSM management have advised that the Company will incur costs associated with the Capital Raising of approximately $440k. These costs relate to legal fees, consultancy fees, listing and registry fees for the new shares and fees associated with the preparation of this Report.

Much of these costs will be incurred by SSM regardless of whether the Proposed Placement and Rights Issue proceed. As such, we have considered an adjustment for the amount of $440k to reflect these costs.

8.3. Valuation Post Rights Issue

The Proposed Rights Issue would result in Thorney holding a Voting Power of up to 37.8% (depending on the extent of shortfall in the Proposed Rights Issue). Our assessment of this scenario is set out below:

Table 21: Valuation Summary – Equity Value post Proposed Rights Issue

$'000s unless stated otherwise	Ref.	Low	High
Equity Value - minority basis (after Proposed Rights Issue)	8.2	70,623	104,895
Add/(Less):
Proceeds from Proposed Rights Issue	8.2.2	10,700	10,700
Capital raising fee	0	(428)	(428)
Equity Value - minority basis (after Proposed Rights Issue)		80,895	115,166
Shares outstanding (‘000s) (following Proposed Rights Issue)	1.5	386,388	386,388
Equity Value - minority basis (after Proposed Rights Issue) per Share ($)		0.21	0.30

Source: BDOCF analysis Note: The above may have rounding differences

Based on the above, we have determined equity interests in SSM after the Proposed Rights Issue on a minority basis to be between $0.21 to $0.30 per Share.

We note that rights issues are generally priced at a discount in order to make the rights issue attractive to

shareholders.

We would expect the value of shares post Proposed Rights Issue to be less than the value Post Proposed Placement due to the dilutionary impact of the Proposed Rights Issue.

8.3.1. Proceeds from Rights Issue

The total proceeds from the Proposed Rights Issue are calculated below:

Table 22: Total proceeds from Proposed Rights Issue

Number of Shares	Issue Price ($)	Proceeds ($)
Rights Shares 59,444,285	0.18	10,699,971

Source: Subscription Agreement and Underwriting Agreement

8.3.2. Proposed Rights Issue capital Raising Fee

Wilson HTM will also underwrite the Proposed Rights Issue and is entitled to receive a capital raising fee of 4% of $10,699,971 (being the total capital to be raised under the Proposed Rights Issue) which equates to $428,000 and has been adjusted in the valuation of the equity interests in SSM. Thorney will receive $183,101 of this amount for sub-underwriting the Proposed Rights Issue.

BDO Corporate Finance (East Coast) Pty Ltd

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9. FAIRNESS ASSESSMENT

In order to determine whet h er the Capit a l Raising is " fair", we ha v e compared t he fair mar k et value of a S S M Share afte r the Capital Raising on a minority basi s with our as s essed fair m a rket value of a SSM Shar e b e fore the Cap i tal Raising (i n cluding a pr e mium for co n trol).

T h e result of o u r fairness an a lysis is sum m arised below .

Th e result of ou r fairness ana lysis is summ arised below.	Th e result of ou r fairness ana lysis is summ arised below.	Th e result of ou r fairness ana lysis is summ arised below.
T able 23: Fairn ess assessment (per Share)
$ per Share Ref Low High
	F c air market valu ontrol basis e of a SSM Sha re before the Capital Raising on a 0 0.29 0.42
	F m air market val inority basis ue of a SSM Sh are after theC apital Raising on a 8.1 0.21 0.30
So *urce:*BDOCF An alysis

F r om the abov e , the range o f fair market values of a S S M Share after the Capital Raising on a m inority basi s is less than the range of ass e ssed fair market values o f a SSM Share before the C apital Raisin g on a contro l b a sis. Accordin g ly, the Capital Raising is c onsidered to be not fair to the Non-ass o ciated Share h olders.

W e note that dilution will o c cur due to t h e Proposed R ights Issue. R ights are ge n erally issued at a discoun t in order to enc o urage all sh a reholders to p articipate. T he dilutionar y nature of t h e rights imp a cts the abov e a n alysis. We n o te that the v alue of SSM S hares post P roposed Plac e ment but p r ior to the Pr o posed Right s Is s ue is betwee n $0.22 and $0.32.

10. REASONABLENESS ASSESSMENT

F o r the purpos e s of RG 111, an offer is c o nsidered to be reasonabl e if it is fair. However, e v en if it is no t fair it may be r e asonable if t here are suff i cient reason s for the shar e holders to a c cept the offer.

T h e factors that we have co n sidered are s et out below :

10.1. Advantages 10.1.1. Pricing of Potential Placements

In our assessm e nt of reason a bleness we h a ve consider e d alternative sources of fi n ance for SS M . Given SSM’ s c u rrent levera g e ratio, an e q uity raise is the most lik e ly source of f inance, and t he most likely mechanis m for an equity r a ise is a share placement.

In order to ass e ss a hypothe t ical price at which a shar e placement may take pla c e we have c o nsidered th e v a lue of SSM s h ares on a minority basis u sing the CO E methodolog y as the ASX p rice may no t fully reflec t the value of SS M shares.

Pl a cements ar e generally u n dertaken at a discount and as such we have also c o nsidered suc h discounts i n o u r analysis. A n alysis of disc o unts for pla c ement pricin g compared t o share tradi n g values is at Appendix 8.

T h e result of o u r analysis is s ummarised b e low.

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Table 24: Comparison of potential placements to Proposed Placement consideration

$’000s unless stated otherwise	Ref	Low	High
Equity Value - minority basis (before Capital Raising)	10.1	61,900	96,172
Shares outstanding prior to Capital Raising (‘000s)		284,444	284,444
Equity Value per Share ($) - minority basis (before Capital Raising)		0.22	0.34
Placement Discount (20%)		(0.04)	(0.07)
Hypothetical Placement Consideration		0.17	0.27

Source: BDOCF analysis

The consideration payable under a hypothetical placement has been calculated after applying a placement discount observed in comparable equity offerings on the ASX to our valuation of SSM shares (on a minority basis). This value has been compared to the issue price under the Proposed Placement. Comparable placement transactions have been presented at Appendix 8 .

The amounts are compared below:

Table 25: Comparison of hypothetical placement price to Proposed Placement consideration

$	Low		High
Hypothetical Placement Consideration		0.17	0.27
Proposed Placement Consideration		0.22	0.22

Source: BDOCF analysis

As the consideration falls at the midpoint of the range of the fair market value of an equity interest in SSM (minority basis), adjusted for a placement discount, it is our opinion that the Proposed Placement is not unfavourable to the Non-Associated Shareholders when assessed as a non controlling placement.

10.1.2. Pricing of Potential Rights Issues

We have also assessed the price at which the Proposed Rights Issue is to take place. Rights issues are generally undertaken at a discount to encourage shareholders to participate.

We note that 67% of the observed rights issues occurred at a discount between 0% and 15% compared to the share price. Based on this analysis we consider the pricing of the Proposed Rights Issue to be consistent with comparable transactions.

Comparable rights transactions have been presented at Appendix 9 .

10.1.3. Shortfall Facility

SSM have established a Shortfall Facility whereby any shareholders (other than Thorney) can subscribe for Rights Shares not taken up by other shareholders. This dispersion strategy together with the pricing of the Proposed Rights Issue increases the likelihood of Shares being taken up by Non-associated Shareholders.

10.1.4. Thorney Interest in SSM

Thorney’s Voting Power will move to 28.4% as a consequence of the Proposed Placement and possibly to 37.8% as the Proposed Rights Issue is partially sub-underwritten by Thorney, creating a potential blocking stake. However, Thorney are strategic investors/fund managers, are not actively involved in managing the business of SSM and are likely to entertain reasonable offers for SSM shares.

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10.1.5. Refinancing Terms

SSM’s current borrowings mature in August 2014. The terms of the refinance may be more favourable to SSM if the Capital Raising proceeds.

10.1.6. Alleviation of Risks and Management Focus

Proceeds from the Capital Raising may improve the balance sheet and alleviate near term concerns over breaches of covenants and refinancing risk. This may also allow SSM Management to focus on the business rather than covenant and refinancing risk.

10.2. Disadvantages

10.2.1. Potential loss of distribution of future profits

If the Capital Raising is approved, existing Shareholders will receive a lower percentage of any future profits, due to the dilution effects noted above.

10.2.2. Adverse impact on voting power of existing ordinary shareholders

The completion of the Proposed Placement will result in an interest of approximately 28.4% being held by Thorney. We note that if no shareholders other than Thorney take up their entitlement to the Rights Issue, Thorney’s Voting Power could reach 37.8%. The completion of the Capital Raising may have an adverse impact on shareholders as Thorney may be able to block special resolutions with its voting power.

10.2.3. Blocking stake

The completion of the Capital Raising will result in Thorney having a strategic interest in SSM, therefore Thorney have the ability to strategically block future interested parties making a takeover of SSM. As SSM is less likely to be a target for takeover, there is less possibility of Shareholders participating in premium payable in a takeover. This is mitigated as Thorney are investment managers and are likely to consider reasonable offers for SSM.

10.2.4. Sub-Underwriting Fee

Thorney is entitled to a fee of $183,101 for sub-underwriting the Proposed Rights Issue.

10.3. Other Factors

10.3.1. Taxation implications for Shareholders

The tax implications associated with the Capital Raising will vary depending on the particular circumstances of each Shareholder. Shareholders are advised to seek independent tax advice in relation to the effect of the Capital Raising.

10.3.2. Transaction costs

SSM will incur additional transaction costs (legal fees, independent expert and others) regardless of whether the Capital Raising is approved or not.

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10.4. Conclusion

B a sed on the above, we conclude that t h e Capital Raising is not fa i r but reason a ble to the Non-associate d S h areholders.

W e have reach e d this conclusion due to t h e following f a ctors:

the price o f the Propos e d Placemen t is within our assessed ran g e of a hypot h etical place m ent.
the price of the Rights Issue is d eemed not u nfavourable to Non-asso c iated share h olders whe n compared with other e q uity offering s .
the poten t ial benefits o f reducing SS M ’s current l e verage ratio.
the natur e of Thorney’ s interest in S S M.

11. QUALIFICATIONS, DECLARATIONS AND CONSENTS

11.1. Qualifications

B D OCF is the l i censed corp o rate finance arm of BDO East Coast P artnership, C hartered Ac c ountants an d B u siness Advis e rs. BDOCF provides ad v ice in relation to all as p ects of val u ations and h as extensiv e e x perience in t h e valuation o f corporate e ntities and p r ovision of expert’s report s .

M r Sebastian S t evens, BBus, CPA and AC A , is a director of BDOCF. M r Stevens is also a partner of BDO Eas t C o ast Partners h ip. Mr Steve n s is the direc t or responsib l e for the pre p aration of t h is IER.

M r Stevens h a s over 20 y ears experi e nce all asp e cts of corp o rate adviso r y including mergers an d a c quisitions, v a luations and transaction a dvisory serv i ces. He also has significa n t experienc e in providin g in t ernational and cross-bor d er services including int e rnational co o rdination of assignments. Accordingly , M r Stevens is c o nsidered to h ave the app r opriate exp e rience and p r ofessional q u alifications to provide th e a d vice offered.

M r David McCourt, BBus, C A , is a direc t or of BDOCF. Mr McCou r t is also a p artner of B D O East Coas t P a rtnership. Mr McCourt ha s been respon s ible for the r eview of this IER.

M r McCourt ha s over 14 years experienc e in a numbe r of specialis t corporate a d visory activities includin g c o mpany valua t ions, financi a l modelling, preparation a nd review of business fea s ibility studie s , accounting , a d vising on me r gers and ac q uisitions and advising on independent e xpert report s . Accordingl y , Mr McCour t is considered t o have the a ppropriate e xperience a n d profession a l qualificati o ns to provi d e the advic e o f fered.

11.2. Independence

W e are not a w are of any m atter or circ u mstance th a t would preclude us from preparing t h is IER on th e gr o unds of ind e pendence ei t her under re g ulatory or p r ofessional re q uirements. In particular, we have ha d regard to the provisions o f applicabl e pronounce m ents and o t her guidanc e statement s relating t o p r ofessional in d ependence i s sued by Aust r alian profess i onal account i ng bodies an d ASIC.

W e consider o u rselves to b e independe n t in terms of RG 112 Independence o f experts, is s ued by ASIC . N e ither BDOCF , nor its own e r practice, B D O East Coas t Partnership, has acted i n any capacit y for SSM wit h regard to any m atter in the p ast.

B D OCF was not involved in a dvising on, negotiating, s e tting, or oth e rwise acting in any capa c ity for SSM i n relation to the Capital Raisi n g. Further, B DOCF has not held and, a t the date of this IER, doe s not hold an y shareholding in, or other rel a tionship wit h SSM or Thor n ey that coul d be regarde d as capable of affecting it s a b ility to provi d e an unbiased opinion in r e lation to th e Capital Raising.

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BDOCF will receive a fee of approximately to $45,000, plus Goods and Services Tax for the preparation of this IER. BDOCF will not receive any fee contingent upon the outcome of the Capital Raising, and accordingly, does not have any pecuniary or other interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the Capital Raising.

11.3. Disclaimer

This IER has been prepared at the request of the Independent Directors and was not prepared for any purpose other than that stated in this IER. This IER has been prepared for the sole benefit of the Independent Directors and Shareholders. Accordingly, this IER and the information contained herein may not be relied upon by anyone other than the Independent Directors and Shareholders without our written consent. We accept no responsibility to any person other than the Independent Directors and Shareholders in relation to this IER.

The statements and opinions contained in this IER are given in good faith and are based upon our consideration and assessment of information provided by the Independent Directors, executives and management of all the entities.

BDO Corporate Finance (East Coast) Pty Ltd

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APPENDIX 1: GLOSSARY

Term	Definition
*Act*	Corporations Act 2001 (Cth)
*ASIC*	Australian Securities and Investments Commission
*ASX*	Australian Securities Exchange
*Board*	Board of directors of SSM
*BDOCF, we or us*	BDO Corporate Finance (East Coast) Pty Ltd (ABN 70 050 038 170)
*Capital Raising*	The Proposed Placement and Rights Issue
*COE*	Capitalisation of earnings
*Consideration*	Net proceeds raised under Capital Raising
*DCF*	Discounted cash flow method
*Documents*	Notice of meeting and explanatory statement
*EBITDA*	Earnings before interest, taxation, depreciation and amortisation
*EPS*	Earnings per share
*FOS*	Financial Ombudsman Service Limited
*FSG*	Financial Services Guide
*FY20xx*	Financial year ended/ing 30 June 20xx
*IER or Report*	Independent expert’s report
*Independent Directors*	Independent directors of SSM
*Industry*	Telecommunications Industry
*Licence*	Australian Financial Services Licence (No. 247420)
*Meeting*	General meeting of Shareholders
NE	Normalised earnings
*Non-associated Shareholders*	The shareholders of SSM not associated with Thorney
*NPV*	Net present value
*Options*	Unlisted options in SSM
*PBT*	Profit before tax
*Performance Rights*	Performance rights have been issued under the Long Term Incentive Plan in respect of the
	FY12 tranche and FY13 tranche. The rights are due to vest on 30 June 2014 and 30 June
	2015
*Proposed Placement*	Placement of 42,500,000 Shares at $0.22 per share to TOP, THIN and certain sophisticated
	and professional clients of Wilson HTM for a total consideration of $9.35 million
*Thorney*	TOP, THIN and other Thorney entities
*Rights Issue*	A 2 for 11 non-renounceable rights issue to be undertaken at the issue price of $0.18 per
	Share and is expected to raise $10.7 million before costs
*Rights Shares*	The shares to be issued under the Rights Issue
*RG 74*	ASIC Regulatory Guide 74: Acquisitions approved by members
*RG 111*	ASIC Regulatory Guide 111: Content of expert reports
*RG 112*	ASIC Regulatory Guide 112: Independence of experts
*Shares*	Fully paid shares in SSM
*Shareholders*	Shareholders of SSM
*SSM or the Company*	Service Stream Limited
*SWOT*	Strengths, weaknesses, opportunities and threats
*THIN*	Thorney International Pty Ltd ACN 132 886 698
*TOP*	Thorney Opportunities Limited ACN 080 167 264
*Voting Power*	Voting Power in the Shares of SSM
*VWAP*	Volume weighted average unit price

Source : BDOCF

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APPENDIX 2: SOURCES OF INFORMATION

In preparing this IER, we had access to and relied upon the following principal sources of information:

Final draft notice of meeting and explanatory statement
Public announcements in relation to the Capital Raising
Annual reports, half yearly reports, and ASX market releases for SSM
SSM corporate structure and details of Shareholders’ register as at 2 October 2013
Various discussions with the Board and management of SSM
ASIC guidance notes and regulatory guides as applicable
Information sourced from Capital IQ and Connect4
Other generally available public information

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APPENDIX 3: VALUATION METHODS - BUSINESSES AND ASSETS

In conducting our assessment of the fair market value of SSM Shares the following commonly used business valuation methods have been considered:

Discounted Cash Flow Method

The discounted cash flow ( DCF ) method is based on the premise that the value of a business or any asset is represented by the present value of its future cash flows. It requires two essential elements:

the forecast of future cash flows of the business asset for a number of years (usually five to 10 years); and
the discount rate that reflects the riskiness of those cash flows used to discount the forecast cash flows back to net present value ( NPV ).

DCF is appropriate where:

the businesses’ earnings are capable of being forecast for a reasonable period (preferably 5 to 10 years) with reasonable accuracy;
earnings or cash flows are expected to fluctuate significantly from year to year;
the business or asset has a finite life;
the business is in a 'start up' or in early stages of development;
the business has irregular capital expenditure requirements;
the business involves infrastructure projects with major capital expenditure requirements; or
the business is currently making losses but is expected to recover.

Capitalisation of Earnings Method

This method involves the capitalisation of normalised earnings by an appropriate multiple. Normalised earnings are the assessed sustainable profits that can be derived by the vendor’s business and excludes any one off profits or losses. An appropriate earnings multiple is assessed by reference to market evidence as to the earnings multiples of comparable companies.

This method is suitable for the valuation of businesses with indefinite trading lives and where earnings are relatively stable or a reliable trend in earnings is evident.

Net Realisable Value of Assets

Asset based valuations involve the determination of the fair market value of a business based on the net realisable value of the assets used in the business.

Valuation of net realisable assets involves:

separating the business or entity into components which can be readily sold, such as individual business Shares or collection of individual items of plant and equipment and other net assets; and
ascribing a value to each based on the net amount that could be obtained for this asset if sold.

The net realisable value of the assets can be determined on the basis of:

orderly realisation : this method estimates fair market value by determining the net assets of the underlying business including an allowance for the reasonable costs of carrying out the sale of assets, taxation charges and the time value of money assuming the business is wound up in an orderly manner. This is not a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value;

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liquidation : this is a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value; or
going concern : the net assets on a going concern basis estimates the market value of the net assets but does not take into account any realisation costs. This method is often considered appropriate for the valuation of an investment or property holding company. Adjustments may need to be made to the book value of assets and liabilities to reflect their going concern value.

The net realisable value of a trading company’s assets will generally provide the lowest possible value for the business. The difference between the value of the company’s identifiable net assets (including identifiable intangibles) and the value obtained by capitalising earnings is attributable to goodwill.

The net realisable value of assets is relevant where a company is making sustained losses or profits but at a level less than the required rate of return, where it is close to liquidation, where it is a holding company, or where all its assets are liquid. It is also relevant to businesses which are being segmented and divested and to value assets that are surplus to the core operating business. The net realisable assets methodology is also used as a check for the value derived using other methods.

These approaches ignore the possibility that the company’s value could exceed the realisable value of its assets.

Share Market Trading History

The application of the price that a company’s shares trade on the ASX is an appropriate basis for valuation where:

the shares trade in an efficient market place where ‘willing’ buyers and sellers readily trade the company’s shares; and
the market for the company’s shares is active and liquid.

Constant Growth Dividend Discount Model

The dividend discount model works best for:

firms with stable growth rates;
firms which pay out dividends that are high and approximate free cash flow to equity;
firms with stable leverage; and
firms where there are significant or unusual limitations to the rights of shareholders.

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APPENDIX 4: COMPARABLE COMPANY DESCRIPTIONS

We undertook a search using Capital IQ for listed companies that are primarily listed in Australia and operate in the telecommunications services industry segment. The companies considered comparable and a brief description of their operations is provided below:

Exchange	Ticker	Company	Main Activities
ASX	BSA	BSA Limited	BSA Limited provides engineering and contracting, communications and
			technical, and installation and maintenance services for broadcast and
			telecommunications industries.
ASX	AMM	Amcom	Amcom Telecommunications Limited operates as an information technology (IT)
		Telecommunications	and telecommunications company in Australia.
		Limited
ASX	BGL	BigAir Group	BigAir Group Limited, together with its subsidiaries, provides fixed wireless
		Limited	broadband solutions for businesses and campus environments in Australia.
ASX	IAB	Inabox Group	Inabox Group Limited operates as a non-carrier telecommunications aggregator.
		Limited
ASX	IIN	iiNet Limited	iiNet Limited provides Internet and telephony services to residential, regional,
			government, and corporate customers in Australia.
ASX	MAQ	Macquarie Telecom	Macquarie Telecom Group Limited provides various telecommunication and
		Group Limited	hosting services to corporate and government customers in Australia.
ASX	MTU	M2 Group Limited	M2 Group Ltd provides telecommunications services to residential and business
			customers in Australia and New Zealand.
ASX	NWT	NewSat Limited	NewSat Limited provides satellite broadband and communication services
			worldwide.
ASX	PSZ	PS & C Limited	PS&C Ltd. focuses on the provision of information, communications, and
			technology (ICT) consulting and professional services.
ASX	VOC	Vocus	Vocus Communications Limited provides telecommunications, data centre, and
		Communications	high bandwidth connectivity solutions to ISP and telecommunications markets
		Limited	across Australia and New Zealand.
ASX	WRR	World Reach	World Reach Limited, together with its subsidiaries, designs, manufactures, and
		Limited	distributes equipment, applications, and services for the information
			communication and technology markets worldwide.
NZSE	CNU	Chorus Limited	Chorus Limited, a telecommunications utility company, provides fixed line
			communications infrastructure services in New Zealand.
ASX	DWS	DWS Limited	DWS Limited provides information technology services to S&P/ASX 50
			corporations and government bodies.
ASX	CSV	CSG Limited	SG Limited provides print and communication solutions in Australia and New
			Zealand.
ASX	OKN	Oakton Limited	Oakton Limited provides consulting services in the information technology (IT)
			industry in Australia and internationally.
ASX	CGO	CPT Global Limited	CPT Global Limited provides IT consultancy services in Australia, North America,
			and Europe.
ASX	DTL	Data#3 Limited	Data#3 Limited, together with its subsidiaries, provides information and
			communication technology (ICT) solutions in Australia and the Asia Pacific.
ASX	EPD	Empired Limited	Empired Limited provides various IT services and solutions primarily in Australia
			and South East Asia.
ASX	UXC	UXC Limited	UXC Limited provides business solutions in the areas of information,
			communication, and technology in Australia and New Zealand.

Source: Capital IQ and relevant company websites

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APPENDIX 5: COMPARABLE COMPANY MULTIPLES – CONTROL BASIS

Outlined below are trading multiples of listed comparable companies which we have considered in arriving at a suitable capitalisation multiple (control basis) for SSM:

Company Name	Latest	Market Cap	FY2013	EBITDA
	Financial Year End	as at 20 Jan 2014	EBITDA AUDm	Multiple FY2013
		AUDm
BSA Limited	30 Jun 2013	26	13	4.2
Amcom Telecommunications Limited	30 Jun 2013	511	41	16.0
BigAir Group Limited	30 Jun 2013	137	13	13.5
Inabox Group Limited	30 Jun 2013	15	3	7.9
iiNet Limited	30 Jun 2013	1,088	172	9.7
Macquarie Telecom Group Limited	30 Jun 2013	175	30	7.3
M2 Group Limited	30 Jun 2013	1,128	117	14.5
NewSat Limited	30 Jun 2013	287	4	66.1
PS & C Limited	30 Jun 2013	48	6	10.4
Vocus Communications Limited	30 Jun 2013	267	22	17.5
World Reach Limited	30 Jun 2013	1	0	46.3
Chorus Limited	30 Jun 2013	573	513	4.3
DWS Limited	30 Jun 2013	171	24	8.4
CSG Limited	30 Jun 2013	258	21	19.1
Oakton Limited	30 Jun 2013	148	13	13.4
CPT Global Limited	30 Jun 2013	23	1	27.7
Data#3 Limited	30 Jun 2013	139	18	5.0
Empired Limited	30 Jun 2013	63	3	26.7
UXC Limited	30 Jun 2013	340	34	11.6
Average (excluding outliers)				6.8
Median (excluding outliers)				7.3

Source: Capital IQ and BDOCF Analysis

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APPENDIX 6: COMPARABLE COMPANY MULTIPLES – MINORITY BASIS

Outlined below are trading multiples of listed comparable companies which we have considered in arriving at a suitable capitalisation multiple (minority basis) for SSM:

Company Name	Latest	Market Cap	FY2013	EBITDA
	Financial Year End	as at 20 Jan 2014	EBITDA AUDm	Multiple FY2013
		AUDm
BSA Limited	30 Jun 2013	26	13	3.7
Amcom Telecommunications Limited	30 Jun 2013	511	41	12.8
BigAir Group Limited	30 Jun 2013	137	13	10.8
Inabox Group Limited	30 Jun 2013	15	3	6.4
iiNet Limited	30 Jun 2013	1,088	172	8.1
Macquarie Telecom Group Limited	30 Jun 2013	175	30	5.8
M2 Group Limited	30 Jun 2013	1,128	117	12.0
NewSat Limited	30 Jun 2013	287	4	49.0
PS & C Limited	30 Jun 2013	48	6	8.2
Vocus Communications Limited	30 Jun 2013	267	22	14.5
World Reach Limited	30 Jun 2013	1	0	44.0
Chorus Limited	30 Jun 2013	573	513	4.1
DWS Limited	30 Jun 2013	171	24	6.6
CSG Limited	30 Jun 2013	258	21	16.0
Oakton Limited	30 Jun 2013	148	13	10.7
CPT Global Limited	30 Jun 2013	23	1	21.9
Data#3 Limited	30 Jun 2013	139	18	3.1
Empired Limited	30 Jun 2013	63	3	21.6
UXC Limited	30 Jun 2013	340	34	9.2
Average (excluding outliers)				5.4
Median (excluding outliers)				5.8

Source: Capital IQ and BDOCF Analysis

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APPENDIX 7: COMPARABLE COMPANY TRANSACTIONS

Outlined below are transaction multiples derived from our research:

Acquirer	Target	Announcement	Consideration/
		Date	EBITDA
Telecommunications Services
NEC Corporation	CSG Limited	30 May 2012	5.3
Amcom Telecommunications Limited	L7 Solutions	22 Nov 2011	6.6
TPG Telecom Limited	Intrapower Limited	14 Jul 2011	8.5
Schneider Electric SA	SCADAgroup Pty Limited	13 Apr 2010	16.3
First Opportunity Fund Limited	Vocus Communications Limited	12 Apr 2010	35.4
Telecommunications Providers
M2 Telecommunications Group	Primus Telecom Holdings Pty Limited	16 Apr 2012	7.6
Limited
Tel.Pacific Limited	Gotalk Limited	18 Dec 2011	8.2
iiNet Limited	TransACT Capital Communications Pty	21 Nov 2011	5.6
	Limited

Source: Capital IQ and BDOCF analysis

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APPENDIX 8: COMPARABLE PLACEMENT TRANSACTIONS

Outlined below are comparable ASX placement discounts derived from our research:

Company	Ticker	Date	Price	Discount
Austin Engineering Limited	ANG	December 2013	3.20	11%
Donaco International Limited	DNA	December 2013	0.86	4%
Applabs Technologies Limited	ALA	November 2013	0.20	33%
Collection House Limited	CLH	September 2013	1.65	13%
IRESS Limited	IRE	September 2013	7.15	21%
NEXTDC Limited	NXT	August 2013	2.60	4%
NetComm Wireless Limited	NTC	June 2013	0.26	13%
Dyesol Limited	DYE	June 2013	0.17	66%
FlexiGroup Limited	FXL	June 2013	3.99	7%
NetComm Wireless	NTC	June 2013	0.26	13%
RungePincockMinarco Limited	RUL	May 2013	0.55	8%
Tox Free Solutions Limited	TOX	May 2013	3.16	7%
Silver Chef Limited	SIV	March 2013	5.20	21%
Engenco Limited	EGN	January 2013	0.15	25%

Source: Capital IQ and BDOCF analysis

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APPENDIX 9: COMPARABLE RIGHTS TRANSACTIONS

Outlined below are comparable ASX rights discounts derived from our research:

Company	Ticker	Date	Price	Discount
ASX Limited	ASX	June 2013	30.00	(16.2%)
ALS Limited	ALQ	July 2013	7.80	(17.0%)
Cromwell Property Group	CMW	May 2013	1.00	-
IRESS Limited	IRE	August 2013	7.15	(13.9%)
Virgin Australia Holdings Limited	VAH	November 2013	0.38	(5.0%)
Domino’s Pizza Enterprises	DMP	August 2013	10.20	(13.6%)
BKI Investment Company Limited	BKI	September 2013	1.48	(7.5%)
Corporate Travel Management	CTD	November 2013	4.60	(22.0%)
Australian Agricultural Company Limited	AAC	September 2013	1.00	(16.7%)
Platinum Capital Limited	PMC	November 2013	1.55	(3.1%)
Australian Education Trust	AEU	November 2013	1.52	(5.0%)
Freedom Foods Group Limited	FNP	September 2013	2.10	(16.0%)
Ingenia Communities Group	INA	September 2013	0.36	(10.0%)
Bionomics	BNO	March 2013	0.36	(10.0%)
Ausenco Limited	AAX	November 2013	0.70	(41.7%)
AV Jennings Limited	AVJ	April 2013	0.38	(5.0%)
Prima Biomed Limited	PRR	April 2013	0.02	(80.0%)
Freedom Foods Group Limited	FNP	April 2013	1.04	(5.5%)
Admedus Limited	AHZ	September 2013	0.05	(50.0%)
Generation Healthcare REIT	GHC	April 2013	0.97	(3.0%)
Clime Capital Limited	CAM	February 2013	1.00	(9.1%)
Site Group International Limited	SIT	November 2013	0.14	(30.0%)
Indoor Skydive Australia Group Limtied	IDZ	September 2013	0.40	(50.0%)
Patrys Limited	PAB	November 2013	0.05	(50.0%)
APN Property Group Limited	APD	October 2013	0.25	(16.7%)
CogState Limited	CGS	November 2013	0.37	(7.5%)

Source: Capital IQ and BDOCF analysis

BDO Corporate Finance (East Coast) Pty Ltd

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Lodge your vote:

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
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Online:

www.investorvote.com.au

ABN 46 072 369 870



By Mail:

Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria 3001 Australia

T 000001 000 SSM MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

Alternatively you can fax your form to (within Australia) 1800 783 447 (outside Australia) +61 3 9473 2555

For Intermediary Online subscribers only (custodians) www.intermediaryonline.com

For all enquiries call:

(within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000

Proxy Form

Vote online



Go to www.investorvote.com.au or scan the QR Code with your mobile device. Follow the instructions on the secure website to vote.

Your access information that you will need to vote:

Control Number: 999999

SRN/HIN: I9999999999 PIN: 99999 PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential.

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For your vote to be effective it must be received by 10.30am (Melbourne time) Monday, 17 March 2014

How to Vote on Items of Business

All your securities will be voted in accordance with your directions.

Appointment of Proxy

Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote as they choose. If you mark more than one box on an item your vote will be invalid on that item.

Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%.

Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Step 1 overleaf.

A proxy need not be a securityholder of the Company.

Signing Instructions for Postal Forms

Individual: Where the holding is in one name, the securityholder must sign.

Joint Holding: Where the holding is in more than one name, all of the securityholders should sign.

Power of Attorney: If you have not already lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please sign in the appropriate place to indicate the office held. Delete titles as applicable.

Attending the Meeting

Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate “Certificate of Appointment of Corporate Representative” prior to admission. A form of the certificate may be obtained from Computershare or online at www.investorcentre.com under the information tab, "Downloadable Forms".

Comments & Questions: If you have any comments or questions for the company, please write them on a separate sheet of paper and return with this form.

GO ONLINE TO VOTE,  or turn over to complete the form

Samples/000001/000001/i

MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

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Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a broker (reference number commences with ’ X ’) should advise your broker of any changes.

Proxy Form

Please mark

Appoint a Proxy to Vote on Your Behalf



I 9999999999 I ND

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to indicate your directions

XX

I/We being a member/s of Service Stream Limited hereby appoint

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the Chairman of the Meeting

OR



PLEASE NOTE: Leave this box blank if you have selected the Chairman of the Meeting. Do not insert your own name(s).

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, and to the extent permitted by law, as the proxy sees fit) at the Extraordinary General Meeting of Service Stream Limited to be held at Intercontinental Melbourne - The Rialto, 495 Collins Street, Melbourne, Victoria on Wednesday, 19 March 2014 at 10.30am (Melbourne time) and at any adjournment or postponement of that meeting.

Items of Business  PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.

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For Against Abstain
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Resolution 1 Approval of the Placement to Thorney International and Thorney Opportunities (ASX Listing Rule 7.1 and item 7 of section 611 of the Corporations Act) Resolution 2 Approval of the acquisition of Shares by Thorney International and Thorney Opportunities under the Sub-underwriting Agreements relating to the Rights Issue (item 7 of section 611 of the Corporations Act) Resolution 3 Approval of the Placement to other sophisticated and professional investors (ASX Listing Rule 7.1)

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The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

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SIGN
Signature of Securityholder(s) This section must be completed.
Individual or Securityholder 1 Securityholder 2 Securityholder 3
Sole Director and Sole Company Secretary Director Director/Company Secretary
Contact
Contact Daytime
Name Telephone Date / /
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S S M

1 7 9 1 0 4 A

AI assistant

SERVICE STREAM LIMITED — Capital/Financing Update 2014

65865_rns_2014-02-16_230a2d87-3319-4845-9aee-259c8c2df977.pdf

ASX & Media Release

Service Stream – Notice of Extraordinary General Meeting

For further details contact:

Service Stream Limited

About Service Stream Limited:

SERVICE STREAM LIMITED

ACN 072 369 870

NOTICE OF MEETING

AND

EXPLANATORY MEMORANDUM

Chairman’s Letter

Background

High level summary of the capital raising

Directors’ consideration of the capital raising

Independent Expert

Directors’ Recommendation to Vote in Favour

Further Information

Notice of Meeting

Notice of Meeting

Resolutions

Resolution 1: Approval of the Placement to Thorney International and Thorney Opportunities (ASX Listing Rule 7.1 and item 7 of section 611 of the Corporations Act)

Resolution 2: Approval of the acquisition of Shares by Thorney International and Thorney Opportunities under the Sub-underwriting Agreements relating to the Rights Issue (item 7 of section 611 of the Corporations Act)

Resolution 3: Approval of the Placement to other sophisticated and professional investors (ASX Listing Rule 7.1)

Recommendation

Voting and eligibility

Entitlement to vote

Voting exclusion statements

Votes of Shareholders

Required majority

How you may vote

Explanatory Memorandum

1 Background to the Capital Raising

2 The Resolutions

2.1 Resolution 1: Approval of the Placement to Thorney International and Thorney Opportunities (Item 7 of section 611 of the Corporations Act and ASX Listing Rule 7.1)

2.2 Resolution 2: Approval of the acquisition of Shares by Thorney International and Thorney Opportunities under the Sub-underwriting Agreements relating to the Rights Issue (item 7 of section 611 of the Corporations Act)

2.3 Resolution 3: Approval of the Placement to sophisticated and professional investors (ASX Listing Rule 7.1)

3 Advantages and disadvantages of the Capital Raising

3.1 Purpose of this section of the Notice of Meeting and Explanatory Statement

3.2 Reasons to vote in favour of Resolution 1 and Resolution 2

3.3 Reasons to vote against Resolution 1 and Resolution 2

3.4 Resolution 3 and ASX Listing Rule 7.1 generally

4.1 Thorney International and Thorney Opportunities

4.2

Service Stream lending facilities

4.3 Information required by Corporations Act and ASX Listing Rules

Identity of allottee(s)

Entitlement

Intentions

Terms of Shares

Intended use of funds

Date of issue

Reasons for the Capital Raising

Interests of current Directors

Maximum percentage of Shares and voting power after Capital Raising

Recommendation of Directors

6 Material contracts

6.1 Capital Raising contracts

6.2 Underwriting Agreement

6.3

Sub-underwriting Agreement

Engagement

Financial Services Guide

Financial services BDOCF is licensed to provide

General financial product advice

Benefits that BDOCF may receive

Remuneration or other benefits received by our employees

Referrals

Associations and relationships

Complaints resolution

INDEPENDENT EXPERT’S REPORT IN RELATION TO CAPITAL RAISING

Introduction

Proposed Capital Raising

Purpose of Report

Summary of Opinion

Fairness Assessment

Table 1: Fairness assessment (per Share)

The Capital Raising is Reasonable

SERVICE STREAM LIMITED Capital/Financing Update 2014