My Net Fone Limited ACN 118 699 853

Notice of Extraordinary General Meeting and Explanatory Memorandum

Date: 22 February 2012 Time: 10.30am (AEDT) Location: Level 2, 12-14 Waterloo Street, Surry Hills, NSW 2010

This is an important document and requires your attention

This Notice of Extraordinary General Meeting and Explanatory Memorandum should be read in its entirety. If you are in doubt how to deal with it, please consult your financial or other professional adviser.

My Net Fone Limited My Net Fone Limited ACN 118 699 853

29th December 2011

Dear Shareholder

Please fi nd enclosed the following documents in relation to an extraordinary general meeting of shareholders (Shareholders) of My Net Fone Limited (Company) to be held at the Company offi ce, Level 2, 10-14 Waterloo Street, Surry Hills, NSW 2010 at 10.30am (AEDT) on 22 February 2012 (Meeting):

(a) Notice of Meeting (together with an Explanatory Memorandum); and

(b) Proxy Form (together with proxy instructions).

The Meeting is being convened for the purpose of seeking shareholder approval of a resolution which, if approved, will permit the Company to proceed with its acquisition of the Symbio group of companies (Proposed Acquisition), which consists of Symbio Wholesale Pty Limited ACN 136 972 355, Symbio Wholesale (Singapore) Pte Ltd BRN 200913528D and Symbio Networks Pty Limited ACN 102 756 123 (together Symbio).

The My Net Fone group of companies consists of the Company, My Net Fone Australia Pty Limited ACN 109 671 285 and MNF Leasing Pty Limited ACN 136 966 955 (together MNF). MNF is a provider of VoIP and broadband Internet services to residential and enterprise customers in Australia. Symbio provides wholesale VoIP and other IP based communications to MNF as well as to other providers and carriers in Australia and overseas. It operates an extensive VoIP network infrastructure and platforms and has developed a vast amount of intellectual property.

If approved, the acquisition of Symbio will increase the scale of MNF. The transaction is structured so that, following an initial cash payment on completion of the Proposed Acquisition, the Company pays for Symbio’s growth only when (and if) it eventuates in 2012 and 2013.

The details of the proposed resolutions are set out in the Explanatory Memorandum that accompanies and forms part of the Notice of Meeting.

The independent Directors recommend the Proposed Acquisition be approved and seek your support for the resolutions.

If you are not able to attend the Meeting in person, you are urged to complete and lodge the enclosed Proxy Form.

Yours sincerely

Terry Cuthbertson Chairman My Net Fone Limited

1 My Net Fone Limited ACN 118 699 853

SPECIAL BUSINESS

Resolution: Acquisition of Symbio Group of Companies To consider and, if thought fit, pass the following ordinary resolution: “That, for the purposes of Listing Rule 10.1, section 208 of the Corporations Act and for all other purposes, approval is given for the Company to acquire Symbio substantially on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion: Under Listing Rule 14.11, the Company will disregard any votes cast on the Resolution by: • Mr Andy Fung and any of his associates; • Mr Rene Sugo and any of his associates; and • any other person who might obtain a benefit, except a benefit solely in the capacity of a Shareholder, if the Resolution is passed, and any associate of that person or those persons. However, the Company need not disregard a vote if: • it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or • it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form as the proxy decides. Members should refer to the Explanatory Memorandum, which accompanies and forms part of this Notice of Meeting for information regarding the Resolution.

PROXY NOTES

• A member entitled to attend and vote at the Meeting has a right to appoint a proxy. • The proxy need not be a member of the Company. • A member who is entitled to cast two or more votes may appoint up to two proxies and, in the case of such an appointment, may specify the proportion or number of votes each proxy is appointed to exercise. • If a member appoints two proxies and the appointment does not specify the proportion or number of the member’s votes which each proxy may exercise, each proxy may exercise half of the votes. • The proxy form included in this Notice of Meeting must be signed by the member or the member’s attorney. Proxies given by corporations must be signed in accordance with the provisions of section 127 of the Cor- porations Act or by an attorney. • To be valid, the form appointing the proxy and the power of attorney or other authority (if any) under which it is signed (or a certified copy of it) must be lodged with the Share Registry –Link Market Pty Limited at Locked Bag A14, Sydney South, NSW, 1235 using the reply paid envelope supplied or by facsimile to +61 2 9287 0309 as soon as possible and in any event not later than 48 hours prior to the time appointed for the Meeting. • A proxy may decide whether to vote on any resolution, except where the proxy is required by law or the Company’s constitution to vote, or abstain from voting, in their capacity as proxy. If a proxy is directed how to vote on an item of business, the proxy may vote on that item only in accordance with that direction. If a proxy is not directed how to vote on an item of business, the proxy may vote as he or she thinks fit. • If a Shareholder appoints the chairperson of the Meeting as the shareholder’s proxy and does not specify how the chairperson is to vote on an item of business, the chairperson will vote, as proxy for that shareholder, in favour of that item on a poll. MyYour proxy appointment Net form is enclosed. Fone Limited

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DETERMINATION OF VOTING ENTITLEMENTS

In accordance with regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purpose of the Meet- ing, only persons holding Shares at 7.00pm on 20 February 2012 will be treated as Shareholders. This means that only those persons who are the registered holders of Shares at that time will be entitled to attend and vote at the Meeting.

REQUIRED VOTING MAJORITY

The Resolution is proposed as an ordinary resolution. Accordingly, the passage of the Resolution requires approval by a simple majority of the votes cast by members present (whether in person or by proxy) and voting at the Meeting.

Dated: 29th December 2011

By Order of the Board

Catherine Ly Chief Financial Offi cer/ Company Secretary

My Net Fone Limited

3 My Net Fone Limited ACN 118 699 853

EXPLANATORY MEMORANDUM

1. PURPOSE OF INFORMATION

The purpose of this Explanatory Memorandum (which is included in and forms part of the Notice of Meeting) is to provide Shareholders with an explanation of the business and the resolution to be considered at the Meeting which is to be held on 22 February 2012 at 10.30 am at the Company’s office, Level 2, 10-14 Wa- terloo Street, Surry Hills, NSW 2010. The information in the Explanatory Memorandum will also assist members to determine how they wish to vote on the Resolution.

Capitalised terms in this Explanatory Memorandum are defined in the Glossary.

Acquisition of Symbio group of companies To consider and, if thought fit, pass the following resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 10.1, section 208 of the Corporations Act and for all other purposes, approval is given for the Company to acquire Symbio substantially on the terms and conditions set out in the Explanatory Memorandum.”

The Independent Directors unanimously recommend that Shareholders vote in favour of the Resolution to acquire Symbio on the terms and conditions set out in the Explanatory Memorandum.

2. OVERVIEW OF SYMBIO ACQUISITION

MNF provides internet based communications services including VoIP and broadband data services to residential, corporate and government clients.

Symbio provides wholesale VoIP services using its own IP network infrastructure and platforms. Symbio is a key service provider to the Company, which relies upon Symbio’s network to deliver its services. On 30 August 2011, the Board announced that it had entered into a heads of agreement to acquire Symbio from: • Mr Andy Fung; • Mr Rene Sugo; • Amber (Asia) Pty Limited ACN 105 295 092 (Amber), which is controlled by Andy Fung; • Avondale Innovations Pty Limited ACN 109 861 592 (Avondale), which is controlled by Rene Sugo, (together the Vendors). It is intended that if the Proposed Acquisition proceeds the effective date of the Proposed Acquisition will be 1 July 2011 (Effective Date).

What are the details of the Proposed Acquisition?

The purchase price for Symbio is based on five times the combined NPAT of MNF and Symbio over a two year period from the Effective Date of the Proposed Acquisition. The Company will pay for Symbio in three stages as follows: My Net Fone Limited

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• an initial cash amount of $1.3 million, payable on completion of the sale agreement (Initial Payment). $800,000 of the Initial Payment will be paid to Andy Fung/Amber and $500,000 of the Initial Payment will be paid to Rene Sugo/Avondale. • an amount calculated as five times the amount by which the combined NPAT for MNF and Symbio for the 2012 financial year exceeds $1.1 million,1 less the Initial Payment (FY12 Earnout). The FY12 Earnout is payable within 30 business days after the audited accounts for the Company for the financial year ended 30 June 2012 are completed and agreed. 39.36% of the FY12 Earnout will be paid to Andy Fung/ Amber and 60.64% of the FY12 Earnout will be paid to Rene Sugo/Avondale; and • a final amount calculated as five times the amount by which the combined NPAT for MNF and Symbio for the 2013 financial year exceeds $1.8 million,2 less the Initial Payment and FY12 Earnout (FY13 Earnout). The FY13 Earnout is payable within 30 business days after the audited accounts for the Company for the financial year ended 30 June 2013 are completed and agreed. 39.36% of the FY13 Earnout will be paid to Andy Fung/Amber and 60.64% of the FY13 Earnout will be paid to Rene Sugo/Avondale.

The total amount payable by the Company for Symbio is capped at $6 million, thus the total consideration may fall anywhere between $1.3 million and $6 million. All payments will be made in cash from internal business operations.

If the FY12 Earnout or FY13 Earnout are negative based on the calculation set out above, no repayment of consideration already paid is required. If the Proposed Acquisition is approved, the total amount paid for Symbio will therefore depend upon:

• the NPAT contributed by Symbio in the 2012 and 2013 financial years; • the extent to which the MNF’s existing business exceeds or falls short of the forecast NPAT for the 2012 and 2013 financial years; and • any synergy benefits of combining MNF and Symbio.

The Proposed Acquisition is subject to the following conditions:

• approval by Shareholders; and • the parties entering into a legally binding share purchase agreement in a form acceptable to each of the parties.

My Net Fone background: MNF provides VoIP telephony, broadband internet and other IP enhanced services to residential and enterprise customers. MNF derives its revenue from fees and call charges from residential and enterprise customers as well as from sales of customer premises equipment.

Symbio background: Symbio has four main business divisions as follows:

Managed Services Symbio’s managed services division is a leading Australian supplier of VoIP managed services and currently carries over 1.2 billion minutes of wholesale voice traffic per year. The division provides network infrastructure that enables retail providers of voice and data communications to operate their businesses.

1 This amount being the forecast NPAT for the Company, on a standalone basis, for the relevant period. My2 This amount being the forecastNet NPAT for the Company, on Fonea standalone basis, for the relevant period. Limited

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Wholesale Carriage The wholesale carriage division carries incoming and outgoing data from domestic and international service providers both within Australia and between Australia and overseas. Symbio provides a quality and competitively priced service by using a more state of the art IP technology network infrastructure than most of its peers.

Carrier Interconnect and Terminating Access Part of Symbio’s intellectual property is its ownership of a Conditioned Carrier Access Code (CAC) and carrier interconnected VoIP network. This CAC allows Symbio to directly pass traffic to Tier 1 carriers in Australia at the ACCC mandated rate. It also allows Symbio to charge Tier 1 carriers for traffic to Symbio’s network. Symbio is one of only nine carriers in Australia with this capability.

Professional Services This division provides software development, integration services and technical support to businesses implementing VoIP and data services. This is a small part of Symbio’s overall business that is not expected to grow significantly in the near future.

Network To support these service offerings, Symbio has developed its own VoIP network. Symbio has invested heavily in this network which has the capacity to support a significant increase in voice and data volumes in the short to medium term without requiring further investments.

Symbio has developed intellectual property to leverage its existing network. A substantial amount of Symbio’s technology and software has been developed in house which enables Symbio to grow rapidly without incurring extensive costs from purchasing software licences to support larger volumes on its network.

What are the benefits of the Proposed Acquisition?

Increased scale At present the Company is a very small listed entity. If the Proposed Acquisition is completed, it will increase the Company’s size. Large companies generally trade at higher multiples than small companies, with this effect being particularly noticeable for micro-cap companies such as the Company. It is therefore possible that the Shares would have a positive re-rating if the Proposed Acquisition is completed, benefitting Shareholders. The Company may also have more share market liquidity if its size increases, for example as a result of the Proposed Acquisition.

Not paying for growth unless it eventuates Symbio’s management has forecast very strong earnings growth, especially in the 2013 financial year. There is clearly a significant risk that this growth will not be achieved. The price payable by the Company has been structured such that if this growth does not eventuate, the Company will not pay the full $6 million potential consideration for Symbio, but may pay as little as $1.3 million. This significantly reduces the risk to Non-Associated Shareholders of Symbio not achieving the anticipated growth.

Control over network By acquiring Symbio, the Company would gain control of the network used to provide MNF’s services. This provides a number of potential benefits including: • increased certainty of network availability as the Company would be able to prevent Symbio diverting Mynetwork capacity Net to other carriers inFone preference to the Company; Limited

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• certainty of costs relating to use of Symbio’s network. If the Company does not acquire Symbio, there is a possibility that Symbio could increase its pricing to the Company. If the Proposed Acquisition was approved this would mitigate this risk; • direct control over Symbio’s development programme to ensure that the programme is aligned directly with the Company’s goals; and • controlling its network may make the Company a more attractive potential takeover target.

What are the disadvantages of the Proposed Acquisition?

• The structure of the consideration not only presents a risk of paying for the Company exceeding its own forecasts, but may also lead to the Company paying up to five times the amount of any synergies achieved from the combination. It is more usual for acquirers not to pay for synergies. This risk is relatively low because the Company and Symbio are already very close, leaving little additional synergy in the short term. • Some of Symbio’s clients (other than the Company) are competitors to the Company. It is possible that these clients would review their relationships with Symbio if it was owned by the Company, increasing the risk of Symbio losing some clients.

What are the risks of the Proposed Acquisition?

The Company has set out below a summary of some of the risks faced by it in undertaking the Proposed Ac- quisition. The risks noted below should not be taken to be an exhaustive description of the risks faced by the Company. The risks below, and others not specifically referred to below, may in the future affect the financial and operational performance of the Company and the value of its Shares. • There can be no assurance that Symbio’s network and platform technology will always perform in accordance with expectations and, even if it does so, that MNF will be able to successfully commercialise it. • There can be no assurance that other parties/competitors will not develop technologies that directly or indirectly compete with, or supersede, Symbio’s network technology. • There may be unexpected changes in customer demand or expectations for the existing network platform and technology. • MNF competitors in Australia and overseas are numerous and include major multinational carriers and service providers. There can be no assurance that MNF’s competitors will not develop network technologies and platforms that are more effective or which are able to be delivered to the market or gain market acceptance faster and to the detriment of Symbio’s platform.

Implications if the Resolution is not passed

If the Resolution is not approved by Shareholders: • the Proposed Acquisition will not proceed; • the Company will have incurred costs and expended management time and resources in developing and pursuing the Proposed Acquisition without the benefits of the Proposed Acquisition being delivered; and • the Board will continue to look for further merger and acquisition opportunities.

When will the Proposed Acquisition proceed, if approved?

If the Resolution is passed and all other conditions precedent to the Proposed Acquisition are satisfied, it is ex- Mypected that completion Net will occur as soon Fone as practicable after shareholder Limited approval.

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Regulatory requirements

Listing Rules

Listing Rule 10.1 – Transactions with persons in a position to influence Under Listing Rule 10.1, a listed entity must not acquire a ‘substantial asset’ without obtaining shareholder approval if the vendor is a related party (as defined in the Corporations Act), a substantial holder, a subsidiary, an associate of any of those persons or any person whose relationship to the listed entity (or to a related party of the listed entity) is such that the acquisition ought to be approved by the listed entity’s shareholders under List- ing Rule 10.1.

Listing Rule 10.10 further requires that, at any meeting convened for the purpose of approving such an acquisition, the notice must include: (a) a voting exclusion statement; and (b) an independent expert’s report on the fairness and reasonableness of the proposed transaction to shareholders whose votes are not to be disregarded.

What is a ‘Substantial asset’?

Under Listing Rule 10.2, an asset is ‘substantial’ if its value, or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the total paid up capital, reserves and accumulated profits or losses (but disregarding redeemable preference share capital and outside equity interests) (Total Equity) of the listed entity (as dis- closed in the latest accounts given by the listed entity to ASX).

The Total Equity for the Company at 30 June 2011, as reported in its financial report for the year ended 30 June 2011 (lodged with ASX on 28 October 2011) is $386,523. The purchase price payable under the sale agreement for the Proposed Acquisition is a minimum of $1.3 million and a maximum of $6 million. Therefore, the acquisition by the Company of Symbio is an acquisition of a ‘substantial asset’ within the scope of Listing Rule 10.1.

Related party and Substantial Holder

Andy Fung is: • a shareholder and director of Symbio; and • a director of the Company and therefore a related party of the Company under section 228(2) of the Corporations Act.

Amber (which is controlled by Andy Fung) is: • a substantial shareholder of Symbio; and • controlled by Andy Fung and therefore a related party of the Company under section 228(4) of the Corporations Act.

Rene Sugo is: • a shareholder and director of Symbio; and • a director of the Company and therefore a related party of the Company under section 228(2) of the Corporations Act. My Net Fone Limited

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Avondale (which is controlled by Rene Sugo) is: • a substantial shareholder of Symbio; and • controlled by Rene Sugo and therefore a related party of the Company under section 228(4) of the Corporations Act.

Independent Expert’s Report

As required by Listing Rule 10.10, attached at Annexure A is an independent experts report from Leadenhall VRG Pty Ltd (Leadenhall) , which sets out whether, in Leadenhall’s opinion, the Proposed Acquisition is fair and reasonable to the Non-Associated Shareholders. The Directors urge Shareholders to read the Independent Experts Report in its entirety before determining how to vote on the Resolution.

Leadenhall has concluded that the Proposed Acquisition is fair and reasonable to the Non-Associated Share- holders of the Company for the reasons set out in its report.

Voting Exclusion Statement

A voting exclusion statement relating to the Resolution is included in the Notice of Meeting.

Corporations Act

Section 208 – Related Party Transaction Section 208(1) of the Corporations Act provides that a public company is not permitted to give a financial benefit to a related party unless: • it does so with the approval of its shareholders (and the benefit is given within 15 months after the approval); or • the giving of the benefit falls within an exception to the general prohibition (under sections 210 to 216 of the Corporations Act).

Related Party

As indicated above, the Vendors of the Proposed Acquisition are related parties of the Company pursuant to section 228 of the Corporations Act.

Giving a Financial Benefit

On completion of the Proposed Acquisition, the Vendors will receive consideration in the form of: • the Initial Payment of $1.3 million; and • depending on performance of Symbio and the Company in the 2012 financial year, the FY12 Earnout; and • depending on performance of Symbio and the Company in the 2013 financial year, the FY13 Earnout.

Pursuant to section 229(3)(b) of the Corporations Act, the Proposed Acquisition will constitute the giving of a financial benefit to a related party for the purposes of section 208(1) of the Corporations Act. My Net Fone Limited

9 My Net Fone Limited ACN 118 699 853

Exceptions

None of the exceptions to the prohibitions set out in sections 210 to 216 of the Corporations Act apply to the Proposed Acquisition.

Further Approval

Section 208(1)(a) requires that any financial benefit approved by shareholders must be given within 15 months of the relevant approval. If the FY13 Earnout is payable by the Company, it will not be payable until approximately 18 months after completion of the Proposed Acquisition. Therefore the Company may need to seek additional Shareholder approval for the payment (if any) of the FY13 Earnout.

Information to Shareholders

The following information, in addition to the information set out above, is provided to the Shareholders in accordance with the requirements of section 219 of the Corporations Act and ASIC Regulatory Guide 76.

The related parties Mr Andy Fung, a director and substantial shareholder of the Company. Mr Rene Sugo, a director and substantial shareholder of the Company. Amber (Asia) Pty Limited ACN 105 295 092 an entity controlled by Andy Fung (a related party of the Company). Avondale Innovations Pty Limited ACN 109 861 592 an entity controlled by Rene Sugo (a related party of the Company).

Financial Benefit Cash consideration of between $1.3million - $6million (depending on the performance of MNF and Symbio as set out above).

Valuation of Financial The financial benefit is cash, as referred to above. Benefit

Reasons for Giving of The giving of the financial benefit is consideration for the purchase of the Financial Benefit shares of Symbio by the Company.

Recommendation of each Andy Fung and Rene Sugo decline to make a recommendation to Company Director and Shareholders in relation to the Resolution due to their material personal Directors Interests interest in the outcome of the Resolution.

Andy Fung and Rene Sugo both declined to vote on the Proposed Ac- quisition at the relevant Board meeting.

The Independent Directors, Terry Cuthbertson and Michael Boorne (who other than being shareholders of the Company, do not have an interest in the outcome of the Resolution) recommend that Shareholders vote in favour of the Resolution. My Net Fone Limited

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Recommendation of each The reasons for the above recommendations include: Company Director and Directors Interests • Value. The Proposed Acquisition represents good value to the Com- (Continued) pany and is projected to result in increased earnings per share as it is not intended to issue further equity in the Company or incur debt to finance the Proposed Acquisition. The financial benefit is appropriate and reasonable consideration for the acquisition of Symbio;

• Growth. The Proposed Acquisition will deliver an increase to the size and scale of the business of the Company. Sales revenue, gross margin, and bottom-line profitability are all projected to increase; and

• Synergy. Symbio and the Company have enjoyed a strong com- mercial relationship for many years, both in terms of product development and as a supplier / customer. This knowledge reduces the risk associated with the Proposed Acquisition and is projected to reduce the costs associated with negotiating appropriate com- mercial terms between the Company and Symbio in the future, as well as adding transparency to dealings between them Symbio and the Company are in similar businesses selling voice and telephony services to their customers (and so there is no substantial change in the nature of their respective businesses). Further, Symbio has a presence in Singapore which may allow the Company to expand its services into Asia and so providing access to a larger market.

Related parties existing As at the date of this Notice of Meeting: interest • Andy Fung owns 10,000,000 Shares; • Amber owns 3,488,955 Shares; and • Avondale owns 13,488,955.

Therefore:

• Andy Fung and Amber together have a relevant interest in 13,488,955 Shares, which represents 25.67% of the issued capital of the Company; • Rene Sugo and Avondale together have a relevant interest in 13,488,955 Shares, which represents 25.67% of the issued capital of the Company;

The Proposed Acquisition will not affect the relevant interest that Andy Fung, Rene Sugo, Amber or Avondale (or their associates) have in the issued capital of the Company.

Opportunity Costs and The directors do not consider that there are any opportunity costs, or MyBenefits Foregone Netbenefits Fone forgone by the Company, asLimited a result of the Proposed Acquisition.

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Except as set out in this Explanatory Memorandum, the Directors are not aware of any other information that is reasonably required by Shareholders to decide whether or not it is in the Company’s interests to pass the Resolution.

QUERIES

If your have any queries about the Meeting or the Resolution being considered, please contact the Company Secretary, Ms Catherine Ly, on +61 2 8008 8078 or by email on [email protected]

My Net Fone Limited

12 My Net Fone Limited ACN 118 699 853

GLOSSARY

In this Explanatory Memorandum the following terms have the following meanings unless the context otherwise requires:

AEST Australian Eastern Standard Time (or Australian Eastern Daylight Time, as the case may be)

ACCC Australian Competition and Consumer Commission ASIC Australian Securities and Investments Commission ASX ASX Limited CAC Conditioned Carrier Access Code Corporations Act The Corporations Act 2001 (Cth) Directors The directors of the Company Explanatory Memorandum This Explanatory Memorandum accompanying and forming part of the Notice of Meeting

Company My Net Fone Limited ACN 118 699 853 Independent Directors The Directors (other than Mr Andy Fung and Mr Rene Sugo) Independent Experts Report The independent experts report prepared by Leadenhall in respect of the Pro- posed Acquisition and forming part of the Notice of Meeting

IP Internet protocol Leadenhall Leadenhall VRG Pty Ltd ACN 114 534 619 Listing Rules The listing rules of ASX Meeting The extraordinary general meeting of the Company to be held at the Company offi ce, Level 2, 10-14 Waterloo Street, Surry Hills, Sydney at 10.30am (AEDT) on 22 February 2012

MNF The My Net Fone group of companies consisting of the Company, My Net Fone Australia Pty Limited ACN 109 671 285 and MNF Leasing Pty Limited ACN 136 966 955

Non-Associated Shareholders Shareholders (other than Mr Andy Fung and Mr Rene Sugo and their associates) Notice of Meeting The notice of Extraordinary general meeting dated 29 December 2011 including an Explanatory Memorandum and Independent Experts Report

NPAT Net profi t after tax Proposed Acquisition The proposed acquisition of Symbio by the Company substantially on the terms set out in the Explanatory Memorandum

Resolution The resolution to be put to Shareholders at the Meeting as set out in the Notice of Meeting

Share A fully paid ordinary share in the capital of the Company Shareholders A holder of a Share Symbio Symbio Wholesale Pty Limited ACN 136 972 355, Symbio Wholesale (Singapore) Pte Ltd BRN 200913528D and Symbio Networks Pty Limited ACN 102 756 123

VoIP Voice over internet protocol

By Order of the Board

Catherine Ly Chief Financial Offi cer/ Company Secretary MyDated: 29th December Net 2011 Fone Limited

13 LEADENHALL VRG PTY LTD Annexure A

MY NET FONE LIMITED PROPOSED ACQUISITION OF SYMBIO GROUP

Independent Expert’s Report and Financial Services Guide

23 December 2011 LEADENHALL VRG PTY LTD A.B.N. 11 114 534 619 CORPORATEADVISERS Level 1, 31 Franklin Street, Adelaide SA 5000 Level 16, 379 Collins Street, Melbourne Vic 3000 Level 2, 10 Barrack Street, Sydney NSW 2000 ADELAIDE: T (08) 8385 2200 23 December 2011 MELBOURNE: T (03) 8614 1086 SYDNEY: T (02) 9262 9022

The Independent Directors E-Mail: [email protected] My Net Fone Limited Home Page: www.leadenhall.com.au Level 2, 10-12 Waterloo Street Surry Hills NSW 2010

Dear Sirs,

Independent Expert’s Report for My Net Fone Limited

1. INTRODUCTION My Net Fone Limited (“MNF”) is a public company listed on the Australian Securities Exchange (“ASX”) which provides voice over internet protocol (“VoIP”) services to residential and business clients. As at 15 December 2011, MNF had a market capitalisation of approximately $7.9 million. MNF’s services are provided over a broadband network owned and operated by the Symbio group of companies (“Symbio”), comprising Symbio Networks Pty Ltd, Symbio Wholesale Pty Ltd, Symbio Wholesale (Singapore) Pte Ltd, Symbio Technology Pty Ltd and Symbio Development Pty Ltd. Symbio is owned jointly by two of MNF’s directors and co-founders Mr Andy Fung and Mr Rene Sugo. Messrs Fung and Sugo are also significant shareholders of MNF. On 30 August 2011 MNF announced that it had agreed to acquire Symbio. The consideration for the acquisition is an up-front cash payment of $1.3 million, and deferred consideration of up to $4.7 million based on the future profitability of the combined MNF and Symbio after the acquisition.

2. PURPOSE OF THE REPORT The directors of MNF that are not associated with Symbio (the “Independent Directors”) have engaged Leadenhall VRG Pty Ltd (“Leadenhall”) to prepare an independent expert’s report, setting out whether in Leadenhall’s opinion the proposed acquisition of Symbio (“the Proposed Acquisition”) is fair and reasonable to MNF shareholders (apart from Messrs Fung and Mr Sugo) (“Non-associated Shareholders”). Since Messrs Fung and Sugo are related parties of MNF, and Symbio would be a significant asset of MNF, ASX Listing Rule 10.10 requires an independent expert’s report to be provided with the notice of meeting concerning the Proposed Acquisition. The listing rule requires Leadenhall to form a view as to whether the Proposed Acquisition is fair and reasonable to MNF’s Non-associated Shareholders. This report is to be included in the Notice of Meeting to be sent to MNF shareholders and has been prepared exclusively for the purpose of assisting Non-associated Shareholders in their consideration of the Proposed Acquisition. Our report cannot be used for any other purpose unless Leadenhall has provided written consent. We are not responsible to MNF, or any other third party, whether for our negligence or otherwise, if this report is used by any other party or for any other purpose.

3. BASIS OF EVALUATION In order to assess whether the Proposed Acquisition is fair and reasonable we have:  assessed whether the Proposed Acquisition is fair by determining whether the value of the consideration offered is equal to, or less than, our assessed Fair Market Value of Symbio; and  assessed it as reasonable if it is fair, or despite not being fair the advantages to Non-associated Shareholders outweigh the disadvantages. We have therefore analysed the advantages and disadvantages of the Proposed Acquisition. ______Leadenhall VRG Pty Ltd Liability limited by a scheme approved under Professional Standards Legislation A.F.S. Licence No: 293586 My Net Fone LEADENHALL VRG PTY LTD Independent Expert’s Report and Financial Services Guide 23 December 2011

4. SUMMARY AND CONCLUSION The Proposed Acquisition is fair The Proposed Acquisition is fair because the Fair Market Value of Symbio is in line with the Fair Market Value of the consideration offered.

Value of Symbio We have valued Symbio to be in the range from $4.7 million to $5.2 million on a controlling basis. We have estimated the Fair Market Value of Symbio using the capitalisation of earnings method. In applying this methodology we have:  determined a future maintainable EBIT for Symbio of $1.1 million, based on recent historical results and management forecasts for the next two years;  applied a multiple of 4.0 to 4.5 to this maintainable level of EBIT; and  added $0.3 million for surplus cash. The results from this methodology have been cross checked using a discounted cash flow analysis.

Valuation of the consideration offered The total consideration offered for Symbio (“Total Consideration”) consists of a $1.3 million up-front cash payment with up to an additional $4.7 million in deferred consideration (“Deferred Consideration”) depending on the net profit after tax achieved over the next two financial years for the combined MNF and Symbio. We estimated the Fair Market Value of the consideration by considering a range of scenarios for net profit after tax in 2012 and 2013 for MNF and Symbio. For each scenario we discounted the Deferred Consideration to a present value using a discount rate in the range from 25% to 30%. We then applied a probability weighting to each scenario to determine the expected value of the consideration. Based on this analysis, we estimated the Fair Market Value of the Total Consideration offered to be in the range of $4.8 million to $5.2 million.

Conclusion on Fairness We set out below a comparison of the value of Symbio to the value of the Total Consideration offered. Table 1: Comparison of Consideration to Value Low High $m $m

Fair Market Value of Symbio 4.7 5.3 Value of Total Consideration 4.8 5.2

Source: Leadenhall analysis

The future value of Symbio and the amount of the Total Consideration to be paid are linked by the formula applied to determine the contingent consideration, which is described in Section 1 of our detailed report. Since the value of the consideration offered is within] the assessed range for the value of Symbio, the Proposed Acquisition is fair.

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The Proposed Transaction is reasonable We have defined the Proposed Acquisition as being reasonable if it is fair, or if despite not being fair, the overall advantages of the proposal outweigh its disadvantages from the perspective of Non-associated Shareholders. We have also considered the following advantages and disadvantages to Non-associated Shareholders in assessing the reasonableness of the Proposed Acquisition.

Advantages of the Proposed Transaction We set out below the main advantages to Non-associated Shareholders of approving the Proposed Acquisition:  Control over network – by acquiring Symbio MNF will have increased certainty of the availability and costs relating to the use of Symbio’s network. It will also obtain direct control over Symbio’s research and development programme to ensure that the programme is aligned directly with MNF’s goals. This may also make MNF a more attractive potential takeover target.  Increased scale – MNF is a very small listed company. If the Proposed Acquisition is completed it will increase MNF’s size. Large companies generally trade at higher multiples than small companies, with this effect being particularly noticeable for micro-cap companies such as MNF. It is therefore possible that MNF shares would have a positive re-rating if the Proposed Acquisition is completed.  Not paying for growth unless it eventuates – there is a risk that Symbio will not achieve the strong earnings growth forecast by its management. The consideration payable by MNF has been structured such that if this growth does not eventuate MNF will not pay the full $6.0 million potential consideration for Symbio, but may pay as little as $1.3 million.  Franking credits – Symbio has $0.5 million of franking credits that could be distributed to MNF shareholders if the Proposed Acquisition is approved. Depending on their individual tax circumstances, MNF shareholders may value those franking credits should they be distributed.

Disadvantages of the Proposed Transaction The main disadvantages to Non-associated Shareholders of the Proposed Acquisition are summarised below:  Increased cost if MNF existing business exceeds forecasts – the consideration for the Proposed Acquisition is based on a multiple of the future profit after tax for the combined MNF and Symbio. Thus, if MNF’s existing business exceeds its own forecasts the vendor will receive additional consideration of five times the amount by which those forecasts are exceeded (subject to a $6.0 million cap).  Paying for synergies – the structure of the consideration may also lead to MNF paying Symbio’s shareholders up to five times the amount of any synergies achieved from the combination. It is more usual for acquirers not to pay for synergies.  Potential loss of clients – Symbio’s clients, other than MNF, are mainly competitors to MNF. It is possible that these clients would review their relationship with Symbio if it was owned by MNF, increasing the risk of Symbio losing its other clients.  Paying for once-off profits – if the Proposed Acquisition proceeds, it is possible that MNF may end up paying the current shareholders of Symbio additional consideration of five times the amount of any one off profits recorded in the consolidated income statement of MNF (including Symbio) for FY12 or FY13.

Conclusion on reasonableness Since the Proposed Acquisition is fair, it is also reasonable.

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Opinion In our opinion, the Proposed Acquisition is fair and reasonable to Non-associated Shareholders. An individual shareholder’s decision in relation to the Proposed Acquisition may be influenced by their own particular circumstances. If in doubt the shareholder should consult an independent financial adviser. This opinion should be read in conjunction with our detailed report which sets out our scope, analysis and findings in more detail.

Yours faithfully

Hamish Blair Richard Norris Director Senior Adviser

Note: All amounts stated in this report are Australian dollars unless otherwise stated.

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23 December 2011

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Contents 1. Terms of the Proposed Acquisition 9 1.1. Background 9 1.2. Consideration 9 1.3. Development of Transaction 10 2. Scope of the report 11 2.1. Purpose of the report 11 2.2. Basis of evaluation 11 2.3. Fairness 11 2.4. Limitations and reliance on information 12 3. Telecommunications industry 13 3.1. Structure of the industry 13 3.2. Demand Determinants 13 3.3. Critical success factors 13 3.4. Barriers to entry 13 3.5. Technology developments 13 4. Profile of Symbio 14 4.1. Operations 14 4.2. Network 14 4.3. Management and personnel 15 4.4. Competitive position of Symbio 16 4.5. Financial performance 17 4.6. Financial position 20 4.7. Outlook 21 5. Valuation Methodologies 22 5.1. Available valuation methodologies 22 5.2. Selection of valuation methodologies 22 6. Valuation of Symbio 23 6.1. Capitalisation of Future Maintainable Earnings 23 6.2. Discounted Cash Flow 26 7. Valuation of Consideration 28 8. Evaluation 29 8.1. Fairness 29 8.2. Reasonableness 29

Appendix 1: Glossary 32 Appendix 2: Comparable entities 33 Appendix 3: Sources of information 35 Appendix 4: Derivation of discount rate 36 Appendix 5: Qualifications, declarations and consents 42 Appendix 6: Valuation Methodologies 44

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1. Terms of the Proposed Acquisition

1.1. Background MNF is an ASX listed company which provides internet based communications services including VoIP and broadband data services. MNF provides these services to residential, corporate and government clients. Symbio provides wholesale VoIP services using its own IP network. Symbio is a key service provider to MNF which relies upon Symbio’s network to deliver its services. The Symbio group is currently owned by two of MNF’s executive directors, Mr Andy Fung and Mr Rene Sugo. On 30 August 2011, the Board of MNF announced that it had entered into an agreement to acquire Symbio from Mr Fung and Mr Sugo.

1.2. Consideration The purchase price for Symbio is based on five times the net profit after tax of Symbio over the two years to 30 June 2013. MNF will pay for Symbio in three stages as follows:  An initial up-front amount of $1.3 million, payable on signing the contract for sale;  A second payment calculated as five times the amount by which the combined net profit after tax for MNF and Symbio for the 2012 financial year exceeds $1.1 million,1 less the $1.3 million initial payment. This instalment is payable within 30 days after the audited accounts for MNF for the year ended 30 June 2012 (“FY12”) are completed; and  A final payment calculated as five times the amount by which the combined net profit after tax for MNF and Symbio for the 2013 financial year exceeds $1.8 million,1 less the total amounts previously paid. This instalment is payable within 30 days after the audited accounts for MNF for the year ended 30 June 2013 (“FY13”) are completed. The Deferred Consideration comprises the second and third payments. The total amount payable by MNF for Symbio is capped at $6.0 million, thus the Total Consideration may fall anywhere between $1.3 million and $6.0 million. If the Deferred Consideration payable in relation to either FY12 or FY13 would be negative based on the calculation set out above, no repayment of consideration already paid to Symbio’s shareholders is required. If the Proposed Acquisition is approved, the Total Consideration paid by MNF to acquire Symbio will therefore depend upon:  the net profit after tax contributed to MNF by Symbio in the 2012 and 2013 financial years;  the extent to which MNF’s existing business exceeds or falls short of the budgeted net profit after tax for FY12 ($1.1 million) and FY13 ($1.8 million);  any synergy benefits of combining MNF and Symbio; and  the impact of MNF applying purchase price accounting under AASB 3, as described below. If the Proposed Acquisition is completed, MNF will be required to apply purchase price accounting under accounting standard AASB 3 – Business Combinations. A requirement of AASB 3 would be for MNF to recognise the identifiable intangible assets of Symbio on MNF’s consolidated statement of financial position at their Fair Market Value. This will include intangible assets such as software and customer relationships which would then need to be amortised over their useful life. These amounts have not yet been quantified or estimated. However, based on our understanding of Symbio’s business, we would expect a significant amount to be recognised for both software and customer relationships. We have confirmed that any amortisation arising from the application of AASB 3 to the Proposed Acquisition would reduce MNF’s net profit after tax post- acquisition, and therefore reduce the Deferred Consideration. The Proposed Acquisition is subject to a number of conditions including:  approval by MNF shareholders; and  completion of due diligence on Symbio.

1 This amount being the forecast net profit after tax for MNF, on a standalone basis, for the relevant period.

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1.3. Development of Transaction Leadenhall was first engaged to prepare an independent expert’s report in relation to the Proposed Acquisition on 12 September 2011. Our initial draft report was provided to the directors of MNF on 22 September 2011. That draft did not contain our conclusions on value or on whether the Proposed Acquisition was fair and reasonable to MNF’s Non-associated Shareholders. However, that report did highlight our proposed approach for the valuation of Symbio.

Subsequent to the release of our initial draft report to MNF’s independent directors, Symbio disposed of its interest in MNF and declared a $600,000 unfranked dividend. This led to a renegotiation of the transaction terms including revisions to the initial payment and the calculation of the deferred consideration. While we note that this renegotiation occurred after the issue of our initial draft report, MNF’s directors have informed us that the renegotiation arose independently from consideration of our initial draft report. We were not involved in the negotiations between the parties and do not believe that this impacts on our independence or our conclusions.

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2. Scope of the report

2.1. Purpose of the report ASX Listing Rule 10.1 requires a listed entity to obtain shareholders’ approval before it acquires a substantial asset from a related party. An asset is considered to be substantial if its value, or the consideration being paid for it, is 5% or more of the equity in the listed entity, as set out in its latest accounts lodged with the ASX. The equity of MNF on 30 June 2011 was $0.4 million, as set out in the annual report lodged with the ASX on 28 October 2011. As the consideration to be paid for Symbio will be at least $1.3 million, Symbio would become a substantial asset of MNF. Symbio is owned by two of the directors of MNF who are also substantial shareholders of MNF. Accordingly, the Proposed Acquisition is from a related party. As a result, the Proposed Acquisition must be approved by MNF shareholders that are not associated with the transaction. ASX Listing Rule 10.10 requires that the Notice of Meeting sent to shareholders advising them of such a transaction must include a report on the Proposed Acquisition from an independent expert. The report must state whether the transaction is fair and reasonable to the Non-associated Shareholders (i.e. all shareholders of MNF apart from Messrs Fung and Sugo). The Independent Directors have engaged Leadenhall to prepare an independent expert’s report in accordance with Listing Rule 10.10 stating whether the Proposed Acquisition is fair and reasonable to Non-associated Shareholders. This report is to accompany the Notice of Meeting to be sent to shareholders of MNF in order to assist Non-associated Shareholders in their decision whether to vote for, or against, the Proposed Acquisition.

2.2. Basis of evaluation The ASX Listing Rules do not define the term ‘fair and reasonable’ and provide no guidance on what should be considered when assessing whether a proposed transaction is fair and reasonable. However, guidance on what an independent expert should consider and how ‘fair and reasonable’ should be defined is contained in Regulatory Guide 111: Content of expert reports (“RG111”) issued by the Australian Securities and Investment Commission (“ASIC”). RG 111 states that in the context of related party transactions requiring an independent expert’s report as a result of ASX Listing Rule 10, there should be separate assessments of whether the transaction is ‘fair’ and whether it is ‘reasonable’. We have therefore considered the concepts of “fairness” and “reasonableness” separately as discussed below.

2.3. Fairness RG 111 defines a related party transaction as being fair if the value of the financial benefit to be provided by the company to the related party is equal to or less than the value of the consideration being provided to the company. Accordingly, Leadenhall has assessed whether the Proposed Acquisition is fair by comparing the value of Symbio to the value of the proposed consideration. We have assessed the value of Symbio at its Fair Market Value, which is defined by the International Glossary of Business Valuation Terms as: The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms’ length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. This definition of Fair Market Value is consistent with the definition in RG 111 at paragraph 57. Special value is defined as the amount a specific purchaser is willing to pay in excess of Fair Market Value. Such specific purchasers may be willing to pay a premium over Fair Market Value as a result of potential economies of scale, reduction in competition or other synergies they may enjoy arising from the acquisition of the asset. However, to the extent a pool of hypothetical purchasers could all achieve the same level of synergies, these synergies should be included in Fair Market Value. Special value is typically not considered in forming an opinion on the Fair Market Value of an asset and our valuation of Symbio does not include any special value.

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2.3.1 Reasonableness In accordance with RG 111, we have defined the Proposed Acquisition as being reasonable if it is fair, or if, despite not being fair, Leadenhall believes that there are sufficient reasons for Non-associated Shareholders to vote for the proposal. To assess the reasonableness of the Proposed Acquisition we have considered the following significant factors recommended by RG 111:  the financial situation and solvency of MNF;  opportunity costs;  the alternative options available to MNF and their likelihood of occurring;  MNF’s bargaining position;  whether there is selective treatment of any security holder, particularly the related parties;  the related parties’ pre-existing voting power in MNF securities;  any special value of the transaction to MNF; and  the liquidity of the market in MNF’s securities. We have also considered the other significant advantages and disadvantages to Non-associated Shareholders of the Proposed Acquisition.

2.3.2 Individual investors’ particular circumstances We have evaluated the Proposed Acquisition for Non-associated Shareholders as a whole and have not considered its effect on the particular circumstances of individual investors. Due to their particular circumstances, individual investors may place a different emphasis on various aspects of the Proposed Acquisition from the one adopted in this report. Accordingly, individuals may reach different conclusions to ours on whether the Proposed Acquisition is fair and reasonable. If in doubt investors should consult an independent financial adviser.

2.4. Limitations and reliance on information Leadenhall’s opinion is based on current economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over a relatively short period of time. Any such changes subsequent to the issue of this report could impact on our opinion. In preparing this report we have considered the information set out in Appendix 3. We have undertaken limited analysis and enquiry in relation to this information. However, our procedures and enquiries do not include verification work nor constitute an audit in accordance with Australian Auditing Standards. This report should be read in conjunction with the declarations outlined in Appendix 5.

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3. Telecommunications industry Symbio is an operator in the wholesale internet segment of the telecommunications industry in Australia. This segment of the industry provides the supporting network infrastructure for resellers of data based communications, such as MNF.

3.1. Structure of the industry The telecommunication industry includes communication services utilising fixed line technology, mobile phone technology and internet based technology. The wholesale internet segment in which Symbio operates provides telecommunication services utilising internet based technologies. This network infrastructure supports domestic voice and data communications in Australia and communications between Australia and overseas. Consumers of wholesale voice and data include solely internet based carriers such as MNF as well as major full service carriers such as Telstra, Optus and AAPT/Powertel. Symbio’s competitors include large ASX listed companies such as TPG Telecom and iiNet as well as smaller competitors such as Eftel.

3.2. Demand Determinants The wholesale internet providers segment of the telecommunication industry is subject to the following demand determinants.  Economic conditions – demand for wholesale internet services is based on the demand from carriers’ retail customers and business customers. The key economic demand driver for retail services is population growth. The key economic demand driver at the business level is the underlying economic business conditions and the overall level of economic activity.  Consumption patterns and trends – Consumers of wholesale internet services have shown a willingness to adopt new technology that supports their needs at a lower cost than older technologies.  Customer policies – the performance of wholesalers could be affected by the policies of downstream consumers of wholesale internet services (the providers of carrier services).

3.3. Critical success factors The industry has traditionally been structured around offering a low cost service to retail consumers who have been willing to accept a lower quality service. As more sophisticated users of communications services, such businesses, begin to use internet based communication services they will demand high quality services with more features and flexibility.

3.4. Barriers to entry The barriers to entry in the wholesale internet industry are based on access to technology that supports high quality services. There are relativity low barriers to entry in providing lower quality services, with barriers rising as service quality increases. There are relatively long lead times in setting up the appropriate infrastructure to support direct access with the large carriers.

3.5. Technology developments New technological developments in internet based communication have been accelerating the ability for consumers to use VoIP on their mobile phones. VoIP on mobile phones has been especially significant in reducing the cost of international calls from mobiles.

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4. Profile of Symbio Symbio is a private group of companies that were established in 2002 and are owned by their two directors Mr Andy Fung and Mr Rene Sugo. Symbio is a supplier of network systems and infrastructure to support wholesale voice and data services to over 90 customers in Australia, New Zealand and overseas.

4.1. Operations Symbio has four main business divisions as follows: Managed Services Symbio’s managed services division is a leading Australian supplier of VoIP managed services and currently carries 1.2 billion minutes of wholesale voice traffic per year. The division provides network infrastructure that enables retail providers of voice and data communications to operate their businesses. This division’s customers are mainly retail service providers with two major customers, one of which is MNF, together contributing slightly more than half of Symbio’s total revenue. Revenue has a small fixed monthly fee component and a dollar charge per unit of data. Wholesale Carriage The wholesale carriage division carries incoming and outgoing voice and data from domestic and international service providers both within Australia and between Australia and overseas. Symbio provides a high quality competitively priced service by using more efficient network infrastructure than most of its peers. The revenue from international customers is subject to changes in currency. However, the contract terms are reset regularly so Symbio does not have long term exposure to currency fluctuations. Carrier Interconnect and Terminating Access Part of Symbio’s intellectual property is its ownership of a conditioned carrier access code (“CAC”) and carrier interconnected VoIP network. This CAC allows Symbio to directly pass traffic to Tier 1 carriers in Australia at the ACCC mandated rate. It also allows Symbio to charge Tier 1 carriers for traffic to Symbio’s network. Symbio is one of only nine carriers in Australia with this capability. Whilst Symbio’s CAC network has been progressively available for the past two years, only one major carrier has been providing significant volumes directly to Symbio for most of that period. As a result, this division currently provides approximately only 6% of Symbio’s gross profit. Volumes from this major carrier are expected to grow significantly over the next few years due growth in demand for VoIP services from its customers. There is also potential upside from other carriers using the network now that interconnection is near completion. We note that another major carrier started using the network from July 2011. Professional Services This division provides software development, integration services and technical support to businesses implementing VoIP and data services. This is a small part of Symbio’s overall business that is not expected to grow significantly in the near future.

4.2. Network To support these service offerings, Symbio’s has developed its own VoIP network and platforms in Australia, New Zealand and Singapore. Symbio has invested heavily in this network and it has the capacity to support a significant increase in voice and data volumes in the short to medium term. Symbio has developed intellectual property to leverage its existing network. A substantial amount of Symbio’s technology and software has been developed in house which enables Symbio to grow rapidly without incurring extensive costs from purchasing software licences to support larger volumes on its network.

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4.3. Management and personnel The board of Symbio comprises of two directors:  Mr Andy Fung holds a Bachelor and Masters degree in Electrical Engineering and Commerce from the University of New South Wales. He was formerly the Director of Business Development of Lucent Technologies. Mr Fung is the co-founder of Symbio and MNF.  Mr Rene Sugo holds a Bachelor degree in Electronics Engineering from the University of Technology, Sydney. He was formerly the Technical Director of Lucent Technologies. Mr Sugo is the co-founder of Symbio and MNF. The key management personnel comprises of:  James Woods is the Manager of Software Systems. He holds a Bachelor (Honours) degree in Electrical Engineering from the University of New South Wales and has over 15 years’ experience in software design and development activities with leading companies including Alstom, Jtec and Integrated Research. At Symbio, James provides leadership and architectural direction in software development.  John Larsen is the Senior Architect of Software Systems. He holds a degree in Computer Science from the University of Technology, Sydney. He has over ten years of experience in software development and telecommunications. He held positions as firmware engineer, design engineer and software developer with Netcomm, Aurora, JNA, Lucent Technologies and Open Telecommunications. At Symbio, John is responsible for development innovations and practices.  Indika Nanayakkara is the Manager of Product Development. Indika holds a combined degree of Engineering (Telecommunications, 1st Class Honours) and of Commerce (majoring in Finance and Economics) and a Master degree of Accounting, all from the University of Sydney. Indika leads a team at Symbio responsible for designing, developing and implementing state of the art VoIP network infrastructure and platforms.  Alex Tsang is the Manager of Network Operations. He holds a Bachelor degree of Engineering (Telecommunications) and a Masters degree of Commerce, both from the University of New South Wales. He leads a team to perform operational and maintenance activities to ensure integrity and continuing uptime of the networks and minimal service interruption to customers.  Winnie Chu is the Manager of Network Information. She holds a Bachelor degree of Engineering from the University of New South Wales. Winnie manages a team to efficiently maintain and deliver timely network parameters and billing information for internal use as well for external customers.  Edward Parker is the Manager of Customer Service. He holds a Bachelor degree of Engineering (Telecommunications) from the University of Technology, Sydney. Edward’s team is responsible for delivering efficient customer support services and resolution of issues.

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4.4. Competitive position of Symbio The table below sets out a strengths, weaknesses, opportunities and threats analysis (“SWOT”) for Symbio. Table 2: SWOT analysis Strengths Weaknesses  High quality, well-engineered next generation VoIP  Need to widen customer base network infrastructure  Limited capital for potential future investments  Innovative technology  Need to invest in additional human resources  Owns most of the intellectual property of the  Reliant on external parties for some network business elements  Well known in Asia Pacific region

Opportunities Threats  VoIP market is growing quickly with large  Incumbents moving into the VoIP space potential due to changes in the telecommunication  Loss of either one of two key customers industry, especially with the NBN  Increasing competition into core revenue space  Leverage key network assets such as carrier interconnect  Speed of technology change  Overseas opportunities with inbound traffic to  Speed of industry change Australia

Source: Symbio Management and Leadenhall analysis

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4.5. Financial performance We set out below Symbio’s actual financial performance for FY09 to FY11, along with management forecasts for the two subsequent years. Table 3: Symbio’s unaudited financial performance

30-Jun-09 30-Jun-10 30-June-11 30-June-12 30-June-13 Year Ended A$’000 A$’000 A$’000 A$’000 A$’000 (Actual) (Actual) (Actual) (Budget) (Budget) Sales revenue 20,156 25,045 25,080 30,301 35,622 Cost of sales (16,844) (20,743) (21,594) (25,714) (28,752) Gross profit 3,312 4,302 3,486 4,576 6,870 Operating expenses (2,448) (3,365) (2,926) (3,076) (3,691) Other income - - 72 - - Unrealised gain/(loss) on investment (139) - 250 - - EBITDA 725 937 882 1,511 3,179 Depreciation and amortisation (262) (359) (418) (400) (400) EBIT 463 578 463 1,110 2,779 Finance income 38 73 82 50 50 Profit before tax 501 651 545 1,160 2,829 Income tax (60) (129) (35) (185) (695) Profit after tax 441 523 510 975 2,134

Sales Growth 28.9% 24.3% 0.1% 20.8% 17.6% Gross Margin 16.4% 17.2% 13.9% 15.1% 19.3% EBITDA Margin 3.6% 3.7% 3.5% 5.0% 8.9% EBIT Margin 2.3% 2.3% 1.8% 3.7% 7.8% Source: Symbio Notes: Totals may not add due to rounding EBITDA – Earnings before interest, taxation, depreciation and amortisation EBIT – Earnings before interest and taxation

We note that the historical figures for FY08 to FY11 have not been audited. An audit for the one month period of July 2011 was performed. However, that audit resulted in a qualified audit opinion in relation to all information other than the 31 July 2011 statement of financial position. On this basis we consider the historical figures for FY08 to FY11 presented above to be of some limited reliability. In relation to the forecasts for FY12 and FY13 we held discussions with Symbio management to understand the basis on which they have been prepared. We note in Section 6.1.1 below that the current year-to-date management accounts support an annualised EBIT in excess of the FY12 budget. However there is a risk to the achievement of the additional growth in EBIT in FY13 over the FY12 budget. In relation to the above financial performance, we note the following: Revenue Revenues increased by 24% between FY09 and FY10. This was predominantly due to the introduction of new business to the wholesale carriage division. This new business comprised of services connecting Australia to other international customers. There was no growth in revenue in FY11 despite increased traffic volumes due to reduced pricing following new entrants to the market. Whilst Symbio’s overall revenue has increased over the period FY09 to FY11 there is some disparity between the performances of the divisions:

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 Carrier Interconnect and Terminating Access is a new revenue source for Symbio and consequently has grown strongly and is anticipated to grow strongly in the near future as new carriers make use of the service. This service remains a small part of Symbio’s overall revenue for now but accounts for most of the growth in the forecast period.  Managed Services is the major source of Symbio’s revenue. Despite increased volumes, revenue declined in FY11, following price falls as a result of increased competition in this market. Prices have stabilised for now, however management have forecast relatively flat revenue allowing for further price decreases to offset growing volumes. The Managed Services division is heavily reliant on two customers, one of which is MNF; volumes on the network from MNF have risen strongly over this period.  Wholesale Carriage revenue has grown steadily. Volumes have been driven by an increase in international services (calls between Australia and other countries). This is a very competitive market but there are limited opportunities to grow as more carriers in the Asia Pacific region get to know Symbio. There has been some recent impact on revenue from the rise in the Australian dollar against international currencies as some of the data on this network is from voice and data services between Australia other countries.  Professional Services revenue has remained a relatively small component of Symbio’s overall business. Growth opportunities are limited to a small number of clients who require ongoing assistance from Symbio in integrating their systems. Cost of sales The majority of Symbio’s expenses are made up of the data purchases required to carry data between carriers. These costs are directly linked to the volume of data that Symbio provides. They make up 78% of Symbio’s total expenses and are based on rates set by the ACCC. The rest of Symbio’s expenses are relatively fixed and are made up of staff wages and the fixed costs associated with owning and operating its network infrastructure. There is a significant increase in cost of sales as a percentage of revenue from FY10 to FY11. The majority of the increase was attributed to a decline in revenue per minute while cost per minute remained fixed. The cost of sales per minute is expected to decline in FY12 leading to a recovery in gross margin. Gross profit Gross profit rose by 30% between FY09 and FY10. This rise corresponds with the increase in revenue from new wholesale services in FY10. Gross profit fell between FY10 and FY11 due to the increase in cost of sales described above. Gross margin is expected to return to previous levels in FY12 as a result of the reduction in cost of sales back to historical levels. The significant increase in the forecast for FY13 is due to the forecast increase in high margin Carrier Interconnect and Terminating Access revenue and Symbio achieving benefits from its increased scale. Operating expenses Operating expenses rose by 37% between FY09 and FY10 due to increased wage costs and IT expenses. These costs then fell by 13% between FY10 and FY11 due to lower wage costs. This fall in wages was the result of the loss of a few senior employees in FY10 that Symbio did not need to replace. These employees had been engaged in the development of Symbio’s network. Symbio does not expect to need to invest significantly in staff or on other fixed costs to continue to grow the business as it has completed its investment in network infrastructure for the near-term. Hence the forecast is for limited increase in operating expenses for FY12 despite growth in the business. The increase in FY13 corresponds with overall growth in the business. Other income Other income relates to grants received and dividends from an investment in MNF. Symbio has subsequently disposed of its shares in MNF and accordingly, no future income has been forecast. Unrealised gain/(loss) on investment Symbio previously owned shares in MNF. The unrealised gain/loss on investment relates to the revaluation of the investment in MNF to market value. Since this is a once-off item no future income has been forecast. Depreciation Depreciation increases over the period between FY09 to FY11 due to increased investment in network equipment. Investment in Symbio’s network is expected to remain relatively stable in the short term.

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Tax Each year Symbio invests in research and development and has been eligible to receive research and development tax concessions. Additionally Symbio has had carried forward tax losses. As a consequence Symbio’s income tax paid has been lower than the corporate tax rate of 30%. Symbio expects to continue to invest in research and development and for the company’s total tax paid to remain lower than 30% of net profit before tax. Normalised EBIT Symbio’s financial results, as set out above, are subject to a number of non-recurring items. We set out in the table below Symbio’s normalised EBIT for FY09 to FY11. Table 4: Symbio’s normalised unaudited financial performance

30-Jun-09 30-Jun-10 30-June-11 30-June-12 30-June-13 Year Ended A$’000 A$’000 A$’000 A$’000 A$’000 (Actual) (Actual) (Actual) (Budget) (Budget)

Reported EBIT 463 578 463 1,110 2,779 Network development contractors - 100 240 - - Unrealised (gain) / loss on investment 139 - (250) - - MNF dividends - - (35) - - Foreign exchange (gain) / loss (34) 10 19 - - Management fees 25 81 (71) - - Normalised EBIT 593 769 366 1,110 2,779 Source: Symbio and Leadenhall analysis

These adjustments arise as a result of:  Symbio used a number of contractors to assist in building its network. Whilst these costs could arguably have been capitalised they were treated as an expense as incurred. There are no ongoing costs of this nature thus we have removed their impact from the historical earnings to present normalised EBIT.  As described earlier, Symbio used to own shares in MNF. We have removed the impact of the gain/loss from revaluations of the investment and the dividends received.  Symbio recognised various one-off gains and losses on foreign currency transactions and balances.  A management fee has historically been paid to Symbio’s current shareholders. If Symbio was acquired by a third party the management role performed by its shareholders could be replaced by one senior executive. We have adjusted the reported EBIT for the difference between the management fees paid and the expected annual salary for this role.

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4.6. Financial position The unaudited statements of financial position of Symbio as at 30 June 2009, 2010 and 2011 are summarised in the table below. Table 5: Symbio’s unaudited statement of financial position Year Ended 30 Jun 09 30 Jun 10 30 Jun 11 A$’000 A$’000 A$’000 (Actual) (Actual) (Actual) Assets Current assets Cash and cash equivalents 1,280 2,800 1,719 Trade and other receivables 4,184 4,592 4,249 Inventories 127 121 161 Total current assets 5,590 7,513 6,130 Non-current assets Financial assets 250 250 500 Property, plant and equipment 717 1,157 960 Intangible assets 7 5 4 Total non-current assets 974 1,412 1,464 Total assets 6,564 8,925 7,594 Liabilities Current liabilities Trade and other payables 4,377 6,209 4,802 Financial liabilities 25 25 32 Provisions 62 101 691 Tax liabilities 20 - 25 Shareholder loans 1,000 1,000 600 Total current liabilities 5,484 7,335 6,150 Non-current liabilities Financial liabilities 50 30 8 Provisions 48 55 68 Total non-current liabilities 98 85 75 Total liabilities 5,582 7,420 6,226 Net Assets 982 1,504 1,368

Equity Issued Capital 3 3 3 Retained Earnings 979 1,501 1,365 Total Equity 982 1,504 1,368

Source: Symbio Note: Totals may not add due to rounding.

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In relation to Symbio’s financial position, we note the following:  The non-current financial asset relates to Symbio’s investment in MNF shares. The increase of $250,000 in FY11 reflects the increase in the market value of these shares. The shares were subsequently disposed of.  Symbio’s property plant and equipment increased significantly between FY09 and FY11. This is a result of expenditure on capital items to support the company’s network. The subsequent decline is a result of depreciation exceeding capital expenditure.  Receivables and payables rose between FY09 and FY11 in line with increased volumes of data.  The significant increase in provisions at 30 June 2011 relates to a provision for dividends of $600,000, the majority of which has subsequently been paid.  Since 30 June 2011 the shareholder loans have been fully repaid.

4.7. Outlook Capacity on Symbio’s network Symbio’s network has been built to handle significantly higher volumes of traffic than are currently being handled. This means that Symbio will not need to invest significant amounts of capital in upgrading their network in the short term even if planned growth in volumes is achieved. National Broadband Network (“NBN”) The Australian Government is currently building the NBN network in Australia. The NBN will support increased volumes of VoIP and data traffic in Australia due to increased use of internet based telephony. Importantly, under the NBN, customers will require only one provider of broadband and telephony services. Symbio stands to benefit from this increase due to its strong position in the VoIP market.

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5. Valuation Methodologies

5.1. Available valuation methodologies To estimate the Fair Market Value of Symbio we have considered common market practice and the valuation methodologies recommended in RG 111. There are a number of methods that can be used to value a business including:  the discounted cash flow method;  the capitalisation of earnings method;  asset based methods;  analysis of share market trading; and  industry specific rules of thumb. Each of these methods is appropriate in certain circumstances and often more than one approach is applied, at least as a secondary cross-check to a primary method. The choice of methods depends on factors such as the nature of the business being valued, the return on the assets employed in the business, the valuation methodologies usually applied to value such businesses and the availability of the required information. A detailed description of these methods and when they are appropriate is provided in Appendix 6.

5.2. Selection of valuation methodologies The choice of an appropriate valuation methodology is subjective, and depends on several factors such as the company’s historical and projected financial performance, the stage of maturity, the nature of the company’s operations and the availability of information. In selecting an appropriate valuation methodology to value Symbio, we have had regard to the following factors:  Symbio has a history of reasonably stable and growing earnings;  there are a number of publicly listed companies that have similar activities to Symbio for which sufficient data exists to determine earnings multiples;  a number of companies similar to Symbio were acquired in recent years for which sufficient data exists to determine acquisition multiples;  Symbio generates a return on capital employed sufficient to provide a business value in excess of its net asset value;  management have not prepared long term (5 year) forecasts for Symbio; and  there have been no recent transactions in or offers for Symbio shares, other than the Proposed Transaction. Accordingly we are of the opinion that the most appropriate methodology to value Symbio is the capitalisation of maintainable earnings. As a cross-check, we have used the discounted cash flow method. We did not use discounted cash flow as a primary method because of the short term nature of the forecasts prepared by management and the uncertainty around the achievement of the FY13 forecast.

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6. Valuation of Symbio

6.1. Capitalisation of Future Maintainable Earnings We have applied the capitalisation of maintainable earnings methodology as our primary valuation methodology in determining the Fair Market Value of Symbio. A discounted cash flow method is used as a cross-check.

6.1.1 Future Maintainable Earnings (“FME”) The first step in the valuation process is to determine a level of FME to be capitalised for valuation purposes. We have selected earnings before interest and tax (“EBIT”) as the most appropriate measure of earnings for valuing Symbio. EBIT is a profit measure that can be used to assess the financial performance of a company before taking account of its level of debt and tax position, but after allowing for differences in capital intensity between otherwise similar companies as it includes the impact of depreciation. We set out the FME selected for Symbio in the table below. The FME, which are highlighted in grey, are compared to Symbio’s historical financial performance. Table 6: Selected level of FME for Symbio 30-Jun-09 30-Jun-10 30-Jun-11 30-Jun-12 30-Jun-13 FME Year ended Actual Actual Actual Forecast Forecast Forecast $’000 $’000 $’000 $’000 $’000 $’000

Normalised EBIT 593 769 366 1,110 2,779 1,100 Source: Symbio and Leadenhall analysis In arriving at a level of FME for valuation purposes, we have considered the following:  Significant additional revenue commenced in October 2011 from new numbers being included in Symbio’s CAC network. These new numbers are expected to double revenue in the call interconnect and terminating services division;  Symbio’s performance in July 2011, the only period for which its financial results have been audited, was a loss of $28,000 for the month;  The unaudited EBIT for the five months to 30 November 2011 was $520,000, which represents an annualised rate of $1,247,000. However, we note that the mobile revenue rate is set to decrease in January, and no provision for bad debts was recognised in that period; and  Following our discussions with the Independent Directors we understand that the management of Symbio has a history of making accurate or slightly optimistic forecasts. As a result of the considerations above, we have selected a FME of $1.1 million for valuation purposes. We note that any additional growth prospects, over and above the selected FME, attaching to the future earnings of the business have been factored into the selection of a capitalisation multiple. If these higher levels of EBIT are achieved, the vendors of Symbio will be compensated through additional consideration (up to the maximum Total Consideration of $6.0 million). This reflects the linkage between the amount of Deferred Consideration and the profitability achieved in FY12 and FY13.

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6.1.2 Capitalisation Multiple To determine the Fair Market Value of Symbio’s business it is necessary to determine an appropriate earnings multiple to apply to the selected level of FME. Accordingly, we have selected a multiple to apply to the company’s selected FME in the range of 4.0 to 4.5 times EBIT on a controlling basis. In determining this multiple we have had regard to multiples implied the market prices of companies with similar activities to Symbio that are listed on the ASX and multiples implied by recent transactions in the telecommunications industry, as set out in the tables below. Table 7: Trading Multiples of Comparable Companies Enterprise Value(1) EBIT EBIT EBIT ($ Million) Multiple Multiple Multiple Historical Current Forecast FY10 FY11 FY12

My Net Fone Limited 7.5 8.3 8.5 6.3 BigAir Group Limited 35.1 16.6 13.7 4.6 Macquarie Telecommunications Ltd 117.9 7.6 4.7 5.8 Vocus Communications Limited 111.5 23.1 16.3 7.7 Amcom Telecommunications Ltd 144.4 8.8 7.0 5.6 M2 Telecommunications Group Limited 363.2 13.9 8.8 6.9 iiNet Ltd 461.8 11.8 8.7 6.2 TPG Telecom Limited 1,318.0 13.7 9.4 7.6

Mean 13.0 9.6 6.3 Median 12.7 8.7 6.3 Source: Capital IQ 1. The enterprise value is as at 7 December 2011.

Table 8: Transaction Multiples of Comparable Companies Target Acquirer Enterprise Value Current EBIT Control Premium Multiple TransACT Capital iiNet 60.0 3.5(3) N/a IntraPower TPG Holdings 14.3 14.3(1) 114% IP Systems Amcom 20.5 5.0 N/a Engin Seven Group 6.8 9.7(2) 80% Eftel ClubTelco 9.0 7.5 12% Netspace iiNet 40.0 5.0(3) N/a

AAPT Consumer Division iiNet 60.0 5.5(3) N/a

Clever Communications BigAir 4.0 5.3(1) 26%

Mean 26.8 7.0 58%

Median 17.4 5.4 53% Sources: Capital IQ, ASX press releases and company financial reports. 1. Historical EBIT multiple has been used in the absence of publicly available data to determine the current EBIT multiple 2. EBITDA has been used because the company is making a loss at the EBIT level and therefore the EBIT multiple would not be meaningful 3. EBITDA has been used in the absence of publicly available data to determine the EBIT multiple

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In selecting a suitable multiple for Symbio we have considered the following:  The minimum current EBIT multiple for a listed company set out in Table 7 is 4.7 times. The average current trading multiple is 9.6 times. These trading multiples are generally from companies that significantly larger and more diversified than Symbio. Large companies usually attract significantly higher multiples than small companies, all else being equal. However, these are multiples based on transactions in small parcels of shares and do not include a control premium, as discussed in Section 6.1.3 below.  The transaction multiples as set out is Table 8 ranges from 3.5 to 14.3 times. The highest multiple of 14.3 times is significantly higher than the other comparable transactions. This may be the result of TPG Telecom’s belief that they can extract significant synergy benefits from IntraPower by leveraging its existing customer base. The remaining transaction multiples are in the range of 3.5 times to 7.5 times.  Symbio’s financial statements are unaudited. This presents a risk concerning their reliability, which in turn leads to a lower multiple than we would otherwise apply.  Symbio’s business has high barriers to entry which are mainly due to limited access to the technology to provide their services and long lead times for competitors who would need to build competitive infrastructure to offer the same service.  Symbio’s revenue is concentrated in a small number of customers (including MNF) presenting a significant risk if one of those customers was lost. This risk leads to a lower multiple than we would otherwise apply. Symbio’s close relationship with these customers reduces the risk as it can closely manage its network requirements to meet their demands.  Symbio is projecting a significant increase in EBIT in FY13 as a result of growth in revenue from MNF and growth in high margin carrier interconnect revenue.  Symbio has established one of a limited number of networks which is integrated with the leading providers of voice of data services. This is expected to provide strong revenue and earnings growth in the medium term. Based on these considerations we have selected an EBIT multiple to apply to our selected FME for Symbio in the range from 4.0 to 4.5 times on a controlling basis.

6.1.3 Premium for Control A premium for control can be defined as the difference between the price to which a controlling interest attaches and the price at which a share which does not carry with it control of the company could be acquired. The owner of a controlling interest has the ability to do many things that the owner of a minority interest does not. These include:  control the cash flows of the company, such as dividends, capital expenditure and compensation of directors;  determine the strategy and policy of the company;  make acquisitions, or divest operations; and  control the composition of the board of directors. Australian studies indicate the premiums required to obtain control of companies range between 20% and 40% of the portfolio holding equity values. The requirement for an explicit valuation adjustment for a premium for control depends on the valuation methodology and approach adopted. We have determined our assessed multiple of earnings on a controlling basis (as it has been determined primarily having regard to acquisition multiples) and therefore our valuation already reflects a premium for control and no further adjustment is required.

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6.1.4 Surplus cash On its unaudited 30 November 2011 balance sheet the Company had a cash balance of $1.6 million. However, it also had trade creditors of $7.2 million, while the trade creditor balance is generally between $5.0 million and $6.0 million. This suggests that a portion of this cash will be required to pay trade creditors and therefore is not surplus. After discussions with Symbio’s management, we have adopted a surplus cash figure of $0.3 million.

6.1.5 Valuation Conclusion Based on the analysis above, we have assessed the Fair Market Value of 100% of the equity in Symbio on a controlling basis to be in the range of $3.1 million to $3.8 million as set out below.

Table 9: Calculation of Equity Value Low High $’000 $’000 Future Maintainable Earnings (EBIT) 1,100 1,100 EBIT Multiple 4.0 4.5 Enterprise Value 4,400 4,950 Add: Surplus cash 300 300

Value of 100% of the Equity in Symbio on a controlling basis 4,700 5,250 Source: Leadenhall analysis

6.2. Discounted Cash Flow As discussed above, we have applied the capitalisation of future maintainable earnings methodology as our primary valuation methodology in determining the Fair Market Value of Symbio. In this section we have used the discounted cash flow method as a cross-check. This cross-check requires:  analysis of projected cash flows;  determination of an appropriate discount rate; and  analysis of a terminal growth rate. These are discussed below.

6.2.1 Projected Cash Flow Symbio’s management has prepared forecasts for FY12 and FY13 which imply net cash flows of $0.4 million and $2.4 million (before payment of any dividends) respectively. Leadenhall has discussed these forecasts with Symbio management and considered the risks associated with achieving them in order to assess the likelihood of them being achieved. We consider there to be a significant risk to the achievement of these forecasts which could be reflected either by increasing the discount rate or reducing the cash flows. The latter method is more precise, thus we have determined how much the cash flows would need to be reduced by for our discounted cash flow valuation to equate to the enterprise value determined using capitalisation of future maintainable earnings as set out above.

6.2.2 Discount Rates To determine the terminal growth rate implied by our assessed Fair Market Value of Symbio it is necessary to determine an appropriate discount rate to apply to the projected cash flows. A discount rates is applied which discounts future earnings based on the level of risk in the business and the degree of risk in achieving the forecasts. As set out in Appendix 4 we have determined discount rates in the range from 25% to 30% to apply to Symbio’s adjusted forecast cash flows before interest but after tax.

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6.2.3 Terminal Growth Rate Terminal value represents the value of cash flows beyond the explicit forecast period. Terminal values are commonly calculated based on the expected long-term growth rate of future cash flows. We have selected a long term growth rate of between 3% and 5%. This implies that Symbio’s cash flows will continue to grow at a rate that is only slightly higher the expected nominal growth of the Australian economy in real terms (i.e. growth around inflation, or slightly higher). This is possible if Symbio is successful in its plans to grow its business on the back of opportunities such as the NBN and growth in carrier interconnect and terminating access. Due to the relatively high discount rate applied, the impact of varying the terminal value growth rate is not significant.

6.2.4 Conclusion Based on our selected discount rates and terminal growth rates, a reduction in management’s forecasts of approximately 34% would be required for the discounted cash flow method to yield a result equal to the valuation range determined using the capitalisation of future maintainable earnings method. We consider this to be a reasonable level of adjustment given the risks inherent in achieving the forecasts. As a result, we consider that our discounted cash flow analysis supports the conclusions derived with our capitalisation of earnings analysis.

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7. Valuation of Consideration The Total Consideration for Symbio is comprised of up to three payments as described in Section 1 of this report. The amount is capped at $6.0 million, thus the Total Consideration may fall anywhere between $1.3 million and $6.0 million depending upon:  the net profit after tax contributed by Symbio in FY12 and FY13;  the extent to which MNF’s existing business exceeds or falls short of management’s forecasts for FY12 and FY13;  any synergy benefits realised by combining MNF and Symbio; and  the impact of MNF applying purchase price accounting under AASB 3. It should be noted that if Symbio and MNF achieve forecast net profit after tax in FY13 the Total Consideration payable would be $6.0 million (which represents the maximum Total Consideration that could be payable). The Total Consideration payable, compared to the amount by which the combined net profit after tax exceeds the forecast net profit after tax for MNF on standalone basis is shown in the diagram below. Figure 1: Analysis of Total Consideration payable

Total Consideration ($ million) 7.0

6.0

5.0

4.0

3.0 TotalConsideration($million) 2.0

1.0

0.0 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 Amount by which combined NPATexceeds forecast standalone MNF NPAT($ million)

Source: Leadenhall analysis

In order to assess the Fair Market Value of the Total Consideration payable we have considered the likelihood of the combined Symbio and MNF reaching the various levels of NPAT shown in the diagram above for both FY12 and FY13. Based on this assessment we have determined probability weighted expected payments of:  $1.3 million up front;  $3.4 million to $3.7 million for FY12; and  a further $0.7 million to $0.8 million for FY13. In aggregate, these payments result in an expected Total Consideration for Symbio in the range from $5.4 million to $5.8 million. We discounted the Deferred Consideration to a present value using a post-tax discount rate of 25% to 30% as set out in Appendix 4. This provided a present value for the Total Consideration in the range from $4.8 million to $5.2 million.

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8. Evaluation

8.1. Fairness In order to assess whether the Proposed Acquisition is fair we have compared our assessed Fair Market Value of Symbio with our assessment of the Fair Market Value of the Total Consideration offered, as set out below. Table 10: Comparison of Consideration to Value Low High $ million $ million

Fair Market Value of Symbio 4.7 5.3 Fair Market Value of Total Consideration (net present value) 4.8 5.2

Source: Leadenhall analysis Since the value of the consideration offered is within the range of the value of Symbio, the Proposed Acquisition is fair. Whilst we have determined explicit ranges for the Fair Market Value of Symbio and the Total Consideration based on our assessment of the likelihood of Symbio achieving the significant level of growth forecast over the next two years, it should be noted that the future value of Symbio and the amount of Total Consideration to be paid are linked by the formula applied to determine the contingent consideration.

8.2. Reasonableness We have defined the Proposed Acquisition as being reasonable if it is fair, or if despite not being fair, the overall advantages of the proposal outweigh its disadvantages from the perspective of Non-associated Shareholders. As a result we have considered the main advantages and disadvantages to Non-associated Shareholders of the Proposed Acquisition.

8.2.1 Advantages Control over network By owning Symbio MNF would gain control of the network used to provide its services. This provides a number of potential benefits including:  increased certainty of network availability as MNF would be able to prevent Symbio diverting network capacity to other carriers in preference to MNF;  certainty of costs relating to use of Symbio’s network. If MNF does not acquire Symbio it is possible that Symbio could increase its pricing to MNF. If the Proposed Acquisition was approved this would not matter;  removing the risk of a competitor to MNF gaining control of Symbio’s network;  direct control over Symbio’s research and development programme to ensure that the programme is aligned directly with MNF’s goals; and  controlling its network probably makes MNF a more attractive potential takeover target. Increased scale At present MNF is a very small listed company. If the Proposed Acquisition is completed that will increase MNF’s size. Large companies generally trade at higher multiples than small companies, with this effect being particularly noticeable for micro-cap companies such as MNF. It is therefore possible that MNF shares would have a positive re-rating if the Proposed Acquisition is completed, benefitting existing shareholders. MNF is also likely to have more share market liquidity if its size increases, for example as a result of the Proposed Acquisition.

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Not paying for growth unless it eventuates Symbio’s management has forecast strong earnings growth, especially in FY13. There is clearly a significant risk that this growth will not be achieved. The consideration payable by MNF has been structured such that if this growth does not eventuate MNF will not pay the full $6.0 million potential consideration for Symbio, but may pay as little as $1.3 million. This significantly reduces the risk to Non-associated Shareholders of Symbio not achieving the anticipated growth, as the Deferred Consideration will be reduced accordingly. In our assessment of the Fair Market Value of Symbio and the Total Consideration, we have sought to reflect this “linkage” between the two values as far as is practicable. The following chart sets out a comparison of the illustrative potential Fair Market Value of Symbio in FY13 to Total Consideration payable under various scenarios, assuming that:  the appropriate EBIT multiple remains in the range of 4.0 to 4.5;  Symbio was financed with 10% to 20% debt; and  Symbio pays tax at the statutory rate of 30% from FY13.

Figure 2: Comparison of potential future value to Total Consideration payable

Comparison of total consideration with FY13 fair market value 9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0 Consideration / market value ($ million)

1.0

0.0 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 FY13 actual NPAT ($ million)

Fair value in 2013 Total consideration

Source: Leadenhall analysis

This chart shows that if the Proposed Acquisition proceeds, MNF will have only over paid for Symbio if Symbio’s net profit after tax falls to below $300,000, otherwise it will have paid a fair price for Symbio. If the net profit after tax exceeds $1.35 million, then MNF will have paid less than fair value for Symbio.

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Franking credits Symbio has $0.5 million of franking credits that have not been included in our valuation analysis. We understand that at present MNF intends to declare a fully franked dividend to distribute these franking credits to its shareholders if the Proposed Acquisition is approved. Depending on their individual tax circumstances, MNF shareholders may value those franking credits should they be distributed.

8.2.2 Disadvantages Significant cost to Shareholders if MNF existing business exceeds forecasts The contingent deferred consideration for the Proposed Acquisition is based on a multiple of profit after tax for the combined MNF and Symbio in FY12 and FY13. Thus, if MNF’s existing business exceeds its own forecasts over next two years the vendor will receive additional consideration of five times the amount by which those forecasts are exceeded. The consideration is subject to a $6.0 million cap and therefore this disadvantage will only arise if Symbio’s net profit after tax remains below $1.2 million for FY12 and FY13. We have not undertaken a review of MNF’s forecasts for FY12 and FY13 and therefore we do not express an opinion on the likelihood of this situation arising. We note that the forecasts used for this purpose were developed before the Proposed Acquisition was negotiated. We have also discussed the accuracy of MNF’s historical forecasting with the Independent Directors who have confirmed that the forecasts have previously been reasonably reliable and if anything tending towards being higher than the results actually achieved (such under achievement would reduce the Deferred Consideration payable to Symbio’s current shareholders). Paying for synergies The structure of the consideration not only presents a risk of paying for MNF exceeding its own forecasts but may also lead to MNF paying Symbio’s shareholders up to five times the amount of any synergies achieved from the combination. It is more usual for acquirers not to pay for synergies. We have discussed this risk with the Independent Directors who have assessed the risk as being relatively low because MNF and Symbio are already very close, leaving little additional synergy in the short term. Potential loss of Symbio clients Symbio’s clients, other than MNF, are mainly competitors to MNF. It is possible that these clients would review their relationship with Symbio if it was owned by MNF, increasing the risk of Symbio losing its other clients. This would reduce the combined profit and decrease the likelihood of the deferred consideration being paid. Paying for once-off profits If the Proposed Acquisition proceeds, it is possible that MNF may end up paying the current shareholders of Symbio additional consideration of five times the amount of any one off profits recorded in the consolidated income statement of MNF (including Symbio) for FY12 or FY13. Thus for example, if Symbio or MNF realised a gain on disposal of an asset, or a one off foreign currency gain the vendors of Symbio would receive additional compensation of five times the amount of that gain (subject to the $6.0 million cap on Total Consideration).

8.2.3 Conclusion Because the Proposed Acquisition is fair it is also reasonable.

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Appendix 1: Glossary

Term Meaning

ASIC Australian Securities and Investments Commission ASX Australian Stock Exchange Limited CAC Conditioned Carrier Access Code Corporations Act The Corporations Act 2001 Deferred Consideration The payment to Symbio’s shareholders based on FY12 and FY13 NPAT for MNF EBIT Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortisation FY Financial year ended 30 June FSG Financial Services Guide FME Future maintainable earnings MNF My Net Fone Limited Independent Directors Directors of My Net Fone Limited other than Mr Andy Fung and Mr Rene Sugo Leadenhall Leadenhall VRG Pty Ltd Non-associated Shareholders My Net Fone Limited shareholders other than Mr Andy Fung and Mr Rene Sugo NBN National Broadband Network NPAT Net profit after tax NTA Net tangible assets PBT Profit before tax Proposed Acquisition My Net Fone’s offer to acquire Symbio RG111 Regulatory Guide 111: Content of Expert Reports Shareholders Existing holders of Symbio Group Holdings Limited’ shares SWOT Strengths, weaknesses, opportunities and threats The Act The Corporations Act 2001 Symbio Symbio Networks Pty Ltd, Symbio Wholesale Pty Ltd, Symbio Wholesale (Singapore) Pte Ltd, Symbio Technology Pty Ltd and Symbio Development Pty Ltd Total Consideration The aggregate of the up-front payment and the Deferred Consideration VoIP Voice over internet protocol

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Appendix 2: Comparable entities Amcom Telecommunications Ltd Amcom Telecommunications is listed on the ASX. The company provides data and voice services in Australia. Amcom Telecommunications has two major divisions. The fibre division owns its own fibre networks, in Perth, Adelaide and the Northern Territory. The Amnet division provides voice and data services for corporate, government and wholesale customers. BigAir Group Limited BigAir Group Limited was listed on the ASX in 2006. The company was founded in 2002 and provides wholesale internet communication services to internet service providers (“ISP”) using wireless technology. The company owns and operates a fixed WiMAX network which covers metropolitan areas of major Australian cities. iiNet Ltd iiNet is listed on the ASX. The company is the second largest Digital Subscriber Line (“DSL”) provider in Australia. The company supports over 1.3 million broadband, telephony and Internet Protocol TV services in Australia. The company’s services include broadband, naked DSL, mobile broadband and VoIP. Iinet provides ISP services to retail customers as well as to small and medium sized businesses. The company owns and maintains its own broadband network. M2 Telecommunications Group Ltd M2 Telecommunications was founded in 1999 and is listed on the ASX. The company focuses on providing telecommunication services to small and medium telecommunication resellers and ISPs in Australia and New Zealand. The company offers fixed line voice, mobile voice and data and broadband services. Macquarie Telecommunications Ltd Macquarie Telecommunications is listed on the ASX. The company specializes in providing server hosting, cloud computing and VoIP services to corporate and government clients. Macquarie Telecommunications owns its own data centre in North Ryde, Sydney. My Net Fone Limited MNF is a public company listed on ASX which provides broadband and VoIP services to residential and business clients. MNF’s services are provided over a broadband network owned and operated by Symbio. TPG Telecom Limited TPG Telecom has been listed on the ASX since 2001 and was formerly SP Telemedia Limited. TPG Telecom is one of Austrlaia’s largest internet service providers. TPG’s products include broadband, VoIP and managed corporate networks. In 2010 TPG acquired Pipe Networks which provided TPG with access to an Australian fibre optic network and Pipe Pacific Cable between Sydney and Guam. Vocus Communications Limited Vocus Communications Limited is listed on the ASX. The company was founded in 2008 and owns and operates a voice and data network to provide wholesale internet based communications to ISP and telecommunication providers in Australian, New Zealand and the USA. Vocus Communications’ network includes data centres in Sydney, Perth and Melbourne and a dark fibre network in major Australian cities. IntraPower Limited IntraPower has recently been acquired by TPG Telecom Limited. IntraPower Limited was listed on the ASX in 2007 and provides on-demand information and communication services to small and medium sized businesses in Australia. The company services over 2,000 customers in Australia and owns it own high availability network.

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Eftel Ltd Eftel Ltd is listed on the ASX and owns its own broadband network. Eftel has three main business divisions. Eftel corporate is an ISP providing services to businesses and government, Eftel Retail is a ISP to retail consumers and Eftel wholesale provides support services for Australian ISPs. ClubTelco has recently acquired a 75% stake in Eftel by the process of a reverse takeover. Engin Ltd Engin was listed on the ASX and provides VoIP services to allow broadband users to make or receive calls over the internet. Engin offers VoIP services to residential and small business customers. Engin was recently acquired by Seven Group Holdings, a large Australian media company. IP Systems Pty Ltd IP Systems was founded in 1994 and provides VoIP communications services, and video conferencing. The company operates a fibre optic network in Australia and New Zealand. IP Systems has recently been acquired by Amcom Telecommunications. Netspace Netspace was a private Australia ISP providing broadband services in Australia with over 70,000 customers. Netspace has been acquired by iiNet an ASX listed ISP.

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Appendix 3: Sources of information In preparing this report we have had access to the following principal sources of information:  Unaudited consolidated financial statements for Symbio for FY09, FY10 and FY11.  Unaudited financial statements for Symbio Networks Pty Ltd for FY09 and FY10.  Unaudited financial statements for Symbio Wholesale Pty Ltd for FY08, FY09 and FY10.  Audited financial statements for Symbio for the month of July 2011.  Symbio Networks – Key Staff Profile.  Symbio Networks – Symbio Networks Corporate Overview presented September 2011.  Symbio Networks – Symbio FY2012/13 Strategy and Forecasts prepared 28 June 2011.  Heads of Agreement between the board of MNF and the shareholders of Symbio Group dated 24 August 2011.  AGSM Beta Book.  Capital IQ. In addition, we have had discussions and correspondence with certain directors and executives, including the Independent Directors of MNF, Mr Rene Sugo, Mr Andy Fung and Mrs Catherine Ly (Symbio Group’s Chief Financial Officer), in relation to the above information and to current operations and prospects.

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Appendix 4: Derivation of discount rate The selected discount rate range for Symbio Group has been determined using the weighted average cost of Capital (“WACC”) model. We have estimated the cost of equity with the capital asset pricing model (“CAPM”). Summary of WACC concepts The WACC of a firm is the expected cost of the various classes of its capital (i.e. equity and debt), weighted by the proportion of each class of capital to the total capital of the firm, and can be derived using the following formula: E D WACC  *K    *K (  t )1  V e V d c The components of the WACC formula are: Table 11: Components of WACC Input Definition

Kd The pre-tax cost of debt, which is the rate of return required by the providers of debt finance

Ke The after-tax cost of equity, which is the rate of return required by the providers of equity capital

t The applicable corporate tax rate

D The market value of debt

E The market value of equity

D/V The proportion of debt in the capital mix of the relevant business operation

E/V The proportion of equity in the capital mix of the relevant business operation

V D + E

Source: Leadenhall analysis

Post- tax cost of equity (Ke) In the WACC formula shown above, the CAPM provides the means for estimating the cost of equity. CAPM is based on the assumption that investors require a premium for investing in equities rather than in risk free investments (such as government bonds). The cost of equity, Ke, is the rate of return that investors require to make an equity investment in a firm. The cost of equity capital under CAPM is determined using the following formula:

Ke = Rf + β x (Rm – Rf) + α

The components of the CAPM formula are: Table 12: Components of WACC Input Definition

Ke The required post-tax return on equity

Rf The risk free rate of return

Rm The expected return on the market portfolio

MRP The Market Risk Premium (Rm – Rf)

β The beta, the systematic risk of a stock (this is an equity or levered beta)

α The specific company risk premium, to allow for size, key person risk, key client risk, forecast risk etc.

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Each of the components in the above equation is discussed below. Risk free rate (Rf) The relevant risk-free rate of return is the return on a risk-free security, typically for a long-term period. In practice, long dated government bonds are an acceptable benchmark for the risk-free security. We have selected 4.0% being the yield on ten year Commonwealth Government bonds as at 7 December 2011. Equity market risk premium (MRP) The MRP (Rm – Rf) represents the additional return that investors expect from an investment in a well- diversified portfolio of assets (such as a market index). It is the excess return above the risk free rate that investors demand for their increased exposure to risk when investing in equity securities. Leadenhall undertakes an annual calculation of the long term MRP, which is published in Australian Valuation Handbook. Based on this research we have adopted 6% as the MRP which is also consistent with common market practice. Beta estimate (β) Description The beta factor is a measure of the risk of an investment or business operation, relative to a well-diversified portfolio of investments. In theory, the only risks that are captured by beta are those risks that cannot be eliminated by the investor through diversification. Such risks are referred to as systematic, undiversifiable or uninsurable risk. Beta is a measure of the relative riskiness of an asset in comparison to the market as a whole – by definition, the market portfolio has an equity beta of 1.0. The equity betas of various Australian industries listed on the ASX are reproduced below.

Figure 3 Betas for various industries Industry Betas 2009 - 2010 Averages

1.40

1.20 Market Average 1.00

0.80

0.60

0.40

0.20

0.00 Energy Utilities Materials Financials Industrials Health care Consumer staple Telecommunications Information technology Consumer discretionary Source Beta data sourced from the Australian Graduate School of Management (AGSM).

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The Betas shown above are based on the historical volatility of the returns for each industry, relative to the returns of the All Ordinaries Index of the Australian Stock Exchange. Betas derived from share market observations represent equity betas, which reflect the degree of financial gearing of the company. In order to control for this, a more valid analysis of betas can be obtained by “ungearing” or “unlevering” the equity beta by applying the following formula:

a = e / [1 + (D/E x (1-t)] where: Table 13: Components of WACC Input Definition

D/E The debt to equity ratio assumed (based on market values of debt and equity)

T The corporate tax rate

e Equity (geared) beta

a Asset (ungeared) beta

The unlevering (ungearing) of betas involves removing the impact of financial gearing from the equity beta (e) to obtain an asset beta (a). The unlevered beta is a reflection of the underlying risk of the pre-financing cash flows of the entity. The asset beta is subsequently relevered (regeared) to a specified level of gearing to determine the equity beta appropriate for the company being valued using the following formula:

e = a * [1 + (D/E x (1-t)]

The betas of companies comparable to Symbio are included in the following table.

Table 14: Betas of Comparable Companies Market Asset Beta Equity Beta Equity Capitalisation(1) Ungeared Beta Regeared Beta ($ Million)

My Net Fone Limited 8.9 1.25 1.47 BigAir Group Limited 41.6 0.69 0.80 Macquarie Telecommunications Ltd 86.2 0.67 0.79 Vocus Communications Limited 162.4 0.89 1.05 Amcom Telecommunications Ltd 207.7 1.10 1.29 M2 Telecommunications Group Limited 328.7 1.06 1.24 iiNet Ltd 392.3 0.71 0.83 TPG Telecom Limited 1,107.4 1.34 1.58

Equal Weighted Average 0.96 1.13 Median 0.97 1.14 Source: Capital IQ, AGSM Risk Measurement Service 1. The market capitalisation is taken as at 7 December 2011.

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Selected beta (β) In selecting an appropriate beta for Symbio Group we have considered the following:  the geared beta for the telecommunications industry, which we consider Symbio Group to operate in, is 0.4. However this is dominated by Telstra, which is very different to Symbio;  betas of comparable companies range from 0.8 to 1.6; and  the relative riskiness of Symbio Group compared to the overall telecommunications industry and the specific companies highlighted above. As a result we have selected a geared beta of 1.3 to 1.6. Specific company risk premium (α) Size Many studies have demonstrated that on average, smaller companies have higher rates of return than larger companies. A recent study by Leadenhall of companies listed on the Australian Stock Exchange indicated price/earnings multiples for companies in the lowest deciles were lower than the average of all companies, and significantly lower than the largest deciles. Morningstar publishes an annual study (based on US data) of the additional size risk premium to be added to the post-tax cost of equity, as set out in the table below.

Table 15: Evidence of Size Premium Summary statistics of annual returns

Market capitalisation Arithmetic mean Decile Size premium (return in range (US $m) return (%) excess of CAPM)1 (%)

Largest (1st decile) 15,273-314,623 10.42 (0.38)

Large (2nd decile) 6,895-15,079 11.61 0.81

Mid-cap (3rd – 5th decile) 1,779-6974 12.00 1.20

Low-cap (6th – 8th decile) 478-1,776 12.78 1.98

Micro-cap (9th – 10th decile) 1-478 14.87 4.07

Smallest (10th decile)4 1-236 17.16 6.36 Source: Market Results for Stocks, Bonds, Bills, and Inflation 2009 Yearbook, Morningstar SBBI 1. Size premium was calculated as the difference between the actual return and the return calculated using the CAPM 2. Market capitalisation was calculated as at 31 December 2010 3. Morningstar use the 20 year US government bond rate in determining the risk free rate 4. Morningstar provide a further breakdown of the 10th decile, noting that the size premium for the upper half of the 10th decile (decile 10a) was 4.55%, whereas the size premium for the lower half of the 10th decile (decile 10b) was 10.06%. However care must be taken in considering decile 10b due to the volatility of companies in this part of the market

We have selected a small size risk premium of 9% to 11% to reflect the fact that Symbio would be in the lower half of the 10th decile in the Morningstar data based on its size. Other specific risks A further company specific risk premium of 6% to 8% has been selected for Symbio. Symbio has two customers who make up a significant proportion of its revenue which represents a significant key client risk. The forecasts for EBIT growth represent a risk to a purchaser as there is a risk that they are not achieved but little opportunity for Symbio to outperform them. Additionally, Symbio’s two directors are also the company’s founders and only shareholders. Their in-depth knowledge of business and its risks and opportunities represents a key person risk to the company. Conclusion This makes a total specific company risk premium of 15% to 19% taking account of size, key client risk and key person risk. Dividend imputation

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Since July 1987, Australia has had a dividend imputation tax system in place, which aims to remove the double taxation effect of dividends paid to investors. Under this system, domestic equity investors receive a taxation credit (franking credit) for any tax paid by a company. The franking credit attaches to any dividends paid out by a company and the franking credit offsets personal tax. To the extent the investor can utilise the franking credit to offset personal tax, then the corporate tax is now not a real impost. It is best considered as a withholding tax for personal taxes. It can therefore be argued that the benefit of dividend imputation should be added into any analysis of value. However in our view, the evidence relating to the value that the market ascribes to imputation credits is inconclusive. There are the diverse views as to the value of imputation credits and the appropriate method that should be employed to calculate this value. Due to the uncertainty surrounding the extent to which acquirers of assets factor in dividend imputation, we have taken the conservative approach and not factored in dividend imputation.

Conclusion on cost of equity The following table sets out our cost of equity estimate for Symbio based on the assumptions and inputs discussed above: Table 16: Estimated cost of equity for Symbio Group Discount Rate Low High

Risk Free Rate 4.0% 4.0%

Equity Beta 1.3 1.5

Market Risk Premium 6.0% 6.0%

Specific company risk premium (α) 15.0% 19%

Selected cost of equity ( post-tax) 26.8% 32.0% Source: Leadenhall

Corporate tax rate (t) Australia’s current statutory corporate tax rate is 30%. Cost of debt capital (Kd) The cost of borrowing is the expected future borrowing cost of the relevant project and/or business. The conventional practice for estimating Kd is to estimate an appropriate risk premium (over the benchmark risk free rate) for debt based on prevailing yields on debt securities of comparable risk and maturity. We have assessed a premium of 5.0% over the risk free rate based on recent discussion with bankers as well as the borrowing rates observed for small businesses. Debt and Equity Mix The selection of an appropriate capital structure is a subjective exercise. The tax deductibility of the cost of debt means that the higher the proportion of debt, the lower the WACC for a given cost of equity. However, at significantly higher levels of debt, the marginal cost of borrowing would increase due to the greater risk which debt holders are exposed to. In addition, the cost of equity would also be likely to increase due to equity investors requiring a higher return given the higher degree of financial risk that they have to bear. Ultimately for each company there is likely to be a level of debt/equity mix that represents the optimal capital structure for that company. In estimating the WACC, the debt/equity mix assumption should reflect what would be the optimal or target capital structure for the relevant asset. We have selected a debt to enterprise value ratio of 10%.

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Calculation of WACC The table below summarises the discount rate we have derived for Symbio Group, based on the assumptions and inputs discussed above. Table 17: Estimated WACC for Symbio Group Discount Rate Low High

Adjusted Cost of Equity ( Post-Tax) 26.8% 32.0%

Debt to Enterprise Value Ratio 10.0% 10.0%

Debt Margin over Risk Free Rate 5.0% 5.0%

Pre-Tax Cost of Debt 9.0% 9.0%

Post-Tax Cost of Debt 6.3% 6.3%

WACC Post tax Nominal 24.8% 29.4% Source: Leadenhall

Based on this analysis we have selected a post-tax discount rate of 25% to 30% for Symbio, which we have applied to Symbio’s projected net cash flows before interest but after tax.

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Appendix 5: Qualifications, declarations and consents

Responsibility and Purpose This report has been prepared only for the benefit of Non-associated Shareholders for the purpose of assessing the fairness and reasonableness of the Proposed Acquisition. It therefore cannot be used for any purpose other than as described above unless Leadenhall has provided written consent. Other than as specifically identified elsewhere in this report, neither the whole nor any part of this report nor any reference thereto may be included in or with or attached to any document (including electronically), circular, resolution, letter or statement, or released externally to any other party without the prior written consent of Leadenhall as to the form and context in which it appears. No responsibility to third parties We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used for any other purpose or by any other person. Reliance on Information – Accuracy and Completeness The financial information supplied by MNF and Symbio, as set out in Appendix 3, is the prime basis of this engagement. In preparing our analysis we have relied upon the accuracy and completeness of the information provided to us and we have assumed it has been prepared in accordance with applicable accounting standards and the Corporations Act. We have assumed that there is no information or documentation that has been withheld from Leadenhall that potentially may have a material effect on our conclusions. We have not performed anything in the nature of an audit, review or financial due diligence on the information provided for this report. Prospective Information – Provision and Responsibility In relation to prospective financial information, we have relied upon this information as detailed in Appendix 3, without verification by us of historical, budgeted or forecast information. Symbio’s management is responsible for this financial information. Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Leadenhall has relied upon the completeness of the information provided by MNF, Symbio and their officers, employees, agents or advisors which Leadenhall believes, on reasonable grounds, to be adequate, reliable, complete, accurate and not misleading for the purpose of this report. Prospective Information – Procedures Undertaken To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. The procedures involved in Leadenhall’s consideration of this information consisted of enquiries of MNF and Symbio personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit or a review engagement in accordance with Australian Auditing Standards. Based on these procedures and enquiries, Leadenhall considers that there are reasonable grounds to believe that the prospective financial information for Symbio included in this report has been prepared on a reasonable basis. Prospective Information – Not Audited or Verified Leadenhall does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to MNF and Symbio management for confirmation of factual accuracy. We have accepted the information at face value, and have not attempted to test its veracity. Whilst we believe the statements made in this report are accurate, no warranty of accuracy or reliability is given by Leadenhall or its affiliated companies and their respective officers and employees.

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Prospective Information – No Assurance on Achievability We note that the forecasts and projections supplied to us are, by definition, based upon assumptions about events and circumstances that have not yet transpired. Accordingly we give no assurance that any forecast results will be achieved and consequently any future variation between the actual results and any prospective financial information utilised in this report may affect the valuation conclusions included in this report. In relation to the prospective financial information, actual results may be different from the prospective financial information of Symbio referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved. Market Conditions The opinion of Leadenhall is based on prevailing market, economic and other conditions at the date of this report. Conditions can change over relatively short periods of time. Any subsequent changes in these conditions could impact upon value either positively or negatively. Indemnities In recognition that Leadenhall may rely on information provided by MNF, Symbio and their officers, employees, agents or advisors, MNF has agreed that it will not make any claim against Leadenhall to recover any loss or damage which MNF may suffer as a result of that reliance and that it will indemnify Leadenhall against any liability that arises out of Leadenhall’s reliance on the information provided by MNF, Symbio and their officers, employees, agents or advisors or the failure by MNF, Symbio and their officers, employees, agents or advisors to provide Leadenhall with any material information relating to this report. APES 225 This report has been prepared in accordance with APES 225 Valuation Services issued by the Accounting Professional and Ethical Standards Board Limited.

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Appendix 6: Valuation Methodologies In preparing this report we have considered valuation methods commonly used in practice and those recommended by RG 111. These methods include:  the discounted cash flow method;  the capitalisation of earnings method;  asset based methods;  analysis of share market trading; and  industry specific rules of thumb. The selection of an appropriate valuation method to estimate Fair Market Value should be guided by the actual practices adopted by potential acquirers of the company involved. Discounted cash flow method Description Of the various methods noted above, the discounted cash flow method has the strongest theoretical standing. It is also widely used in practice by corporate acquirers and company analysts. The discounted cash flow method estimates the value of a business by discounting expected future cash flows to a present value using an appropriate discount rate. A discounted cash flow valuation requires:  a forecast of expected future cash flows;  an appropriate discount rate; and  an estimate of terminal value. It is necessary to project cash flows over a suitable period of time (generally regarded as being at least five years) to arrive at the net cash flow in each period. For a finite life project or asset this would need to be done for the life of the project. This can be a difficult exercise requiring a significant number of assumptions such as revenue growth, future margins, capital expenditure requirements, working capital movements and taxation. The discount rate used represents the risk of achieving the projected future cash flows and the time value of money. The projected future cash flows are then valued in current day terms using the discount rate selected. A terminal value reflects the value of cash flows that will arise beyond the explicit forecast period. This is commonly estimated using either a constant growth assumption or a multiple of earnings (as described under capitalisation of future maintainable earnings below). This terminal value is then discounted to current day terms and added to the net present value of the forecast cash flows. The discounted cash flow method is often sensitive to a number of key assumptions such as revenue growth, future margins, capital investment, terminal growth and the discount rate. All of these assumptions can be highly subjective sometimes leading to a valuation conclusion presented as a range that is too wide to be useful. Use of the discounted cash flow method A discounted cash flow approach is usually preferred when valuing:  early stage companies or projects;  limited life assets such as a mine or toll concession;  companies where significant growth is expected in future cash flows; or  projects with volatile earnings. It may also be preferred if other methods are not suitable, for example if there is a lack of reliable evidence to support a capitalisation of future maintainable earnings approach. However, it may not be appropriate if:  reliable forecasts of cash flow are not available and cannot be determined; or  there is an inadequate return on investment, in which case a higher value may be realised by liquidating the assets than through continuing the business.

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Capitalisation of earnings method Description The capitalisation of earnings method is a commonly used valuation methodology that involves determining a future maintainable earnings figure for a business and multiplying that figure by an appropriate capitalisation multiple. This methodology is generally considered a short form of a discounted cash flow, where a single representative earnings figure is capitalised, rather than a stream of individual cash flows being discounted. The capitalisation of earnings methodology involves the determination of:  a level of future maintainable earnings; and  an appropriate capitalisation rate or multiple. A multiple can be applied to any of the following measures of earnings:  Revenue - mostly used for companies that do not make a positive EBITDA or as a cross-check of valuation conclusion derived using another method.  EBITDA - most appropriate where depreciation distorts earnings, for example in a company that has a significant level of depreciating assets but little ongoing capital expenditure requirement.  EBITA - in most cases EBITA will be more reliable than EBITDA as it takes account of the capital intensity of the business.  EBIT - whilst commonly used in practice, multiples of EBITA are usually more reliable as they remove the impact of amortisation which is a non-cash accounting entry that does not reflect a need for future capital investment (unlike depreciation).  NPAT - relevant in valuing businesses where interest is a major part of the overall earnings of the group (e.g. financial services businesses such as banks). Multiples of EBITDA, EBITA and EBIT are commonly used to value whole businesses for acquisition purposes where gearing is in the control of the acquirer. In contrast, NPAT (or P/E) multiples are often used for valuing minority interests in a company. The multiple selected to apply to maintainable earnings reflects expectations about future growth, risk and the time value of money all wrapped up in a single number. Multiples can be derived from three main sources. Using the guideline public company method, market multiples are derived from the trading prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market, such as the ASX. The merger and acquisition method is a method whereby multiples are derived from transactions of significant interests in companies engaged in the same or similar lines of business. In Australia this has been called the comparable transaction methodology. It is also possible to build a multiple from first principles. Use of the capitalisation of earnings method The capitalisation of earnings method is widely used in practice. It is particularly appropriate for valuing companies with a relatively stable historical earnings pattern which is expected to continue. The method is less appropriate for valuing companies or assets if:  there are no suitable listed company or transaction benchmarks for comparison;  the asset has a limited life;  future earnings or cash flows are expected to be volatile; or  there are negative earnings or the earnings of a business are insufficient to justify a value exceeding the value of the underlying net assets.

Page 45 of 46 My Net Fone LEADENHALL VRG PTY LTD Independent Expert’s Report and Financial Services Guide 23 December 2011

Asset based methods Description The asset based valuation methods estimate the value of a company based on the realisable value of its net assets, less its liabilities. There are a number of asset based methods including:  orderly realisation;  liquidation value;  net assets on a going concern basis;  replacement cost; and  reproduction cost. The orderly realisation of assets method estimates Fair Market Value by determining the amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner. The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation costs. The asset / cost approach is generally used when the value of the business’ assets exceeds the present value of the cash flows expected to be derived from the ongoing business operations, or the nature of the business is to hold or invest in assets. It is important to note that the asset approach may still be the relevant approach even if an asset is making a profit. If an asset is making less than an economic rate of return and there is no realistic prospect of it making an economic return in the foreseeable future, an asset / cost approach will be the most appropriate method. Use of asset based methods An asset-based approach is a suitable valuation method when:  an enterprise is loss making and is not expected to become profitable in the foreseeable future;  assets are employed profitably but earn less than the cost of capital;  a significant portion of the company’s assets are composed of liquid assets or other investments (such as marketable securities and real estate investments); or  it is relatively easy to enter the industry (for example, small machine shops and retail establishments). Asset based methods are not appropriate if:  the ownership interest being valued is not a controlling interest, has no ability to cause the sale of the company’s assets and the major holders are not planning to sell the company’s assets; or  a business has (or is expected to have) an adequate return on capital, such that the value of its future income stream exceeds the value of its assets. Analysis of share trading The most recent share trading history provides evidence of the Fair Market Value of the shares in a company where they are publicly traded in an informed and liquid market. There should also be some similarity between the size of the parcel of shares being valued and those being traded. Where a company’s shares are publicly traded then an analysis of recent trading prices should be considered, at least as a cross-check to other valuation methods. Industry specific rules of thumb Industry specific rules of thumb are used in certain industries. These methods typically involve a multiple of an operating figure such as eyeballs for internet businesses, numbers of beds for hotels etc. These methods are typically fairly crude and therefore usually only appropriate as a cross-check to a valuation determined using an alternative method.

Page 46 of 46 LODGE YOUR VOTE  ONLINE www.linkmarketservices.com.au

By mail: By fax: +61 2 9287 0309 ACN 118 699 853  My Net Fone Limited  C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

 All enquiries to: Telephone: (02) 8280 7111 *X99999999999* X99999999999

SHAREHOLDER VOTING FORM

I/We being a member(s) of My Net Fone Limited and entitled to attend and vote hereby appoint:

STEP 1 APPOINT A PROXY the Chairman OR if you are NOT appointing the Chairman of the Meeting as your of the Meeting proxy, please write the name of the person or body corporate (excluding (mark box) the registered shareholder) you are appointing as your proxy or failing the person/body corporate named, or if no person/body corporate is named, the Chairman of the Meeting, as my/our proxy and to vote for me/us on my/our behalf at the Extraordinary General Meeting of the Company to be held at 10:30am on Wednesday, 22 February 2012, at the Company office, Level 2, 10-14 Waterloo Street, Surry Hills, NSW 2010 and at any adjournment or postponement of the meeting.

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the meeting. Please read the voting instructions overleaf before marking any boxes with an X STEP 2 VOTING DIRECTIONS

For Against Abstain* Resolution 1 Acquisition of Symbio Group of Companies *MNF PRX101*

 * If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll. STEP 3 SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED Shareholder 1 (Individual) Joint Shareholder 2 (Individual) Joint Shareholder 3 (Individual)

Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director This form should be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth). MNF PRX101 HOW TO COMPLETE THIS PROXY FORM

Your Name and Address To appoint a second proxy you must: This is your name and address as it appears on the company’s (a) on each of the first Proxy Form and the second Proxy Form share register. If this information is incorrect, please make the state the percentage of your voting rights or number of correction on the form. Shareholders sponsored by a broker shares applicable to that form. If the appointments do not should advise their broker of any changes. Please note: you specify the percentage or number of votes that each proxy cannot change ownership of your shares using this form. may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded. Appointment of a Proxy (b) return both forms together. If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If the person you wish to appoint Signing Instructions as your proxy is someone other than the Chairman of the Meeting please write the name of that person in Step 1. If you You must sign this form as follows in the spaces provided: leave this section blank, or your named proxy does not attend Individual: where the holding is in one name, the holder must the meeting, the Chairman of the Meeting will be your proxy. sign. A proxy need not be a shareholder of the company. A proxy may be an individual or a body corporate. Joint Holding: where the holding is in more than one name, either shareholder may sign. Votes on Items of Business – Proxy Appointment Power of Attorney: to sign under Power of Attorney, you must You may direct your proxy how to vote by placing a mark in lodge the Power of Attorney with the registry. If you have not one of the boxes opposite each item of business. All your shares previously lodged this document for notation, please attach a will be voted in accordance with such a direction unless you certified photocopy of the Power of Attorney to this form when indicate only a portion of voting rights are to be voted on any you return it. item by inserting the percentage or number of shares you wish Companies: where the company has a Sole Director who is to vote in the appropriate box or boxes. If you do not mark also the Sole Company Secretary, this form must be signed by any of the boxes on the items of business, your proxy may vote that person. If the company (pursuant to section 204A of the as he or she chooses. If you mark more than one box on an Corporations Act 2001) does not have a Company Secretary, a item your vote on that item will be invalid. Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Appointment of a Second Proxy Company Secretary. Please indicate the office held by signing You are entitled to appoint up to two persons as proxies to in the appropriate place. attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by Corporate Representatives telephoning the company’s share registry or you may copy this If a representative of the corporation is to attend the form and return them both together. meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission in accordance with the Notice of Meeting. A form of the certificate may be obtained from the company’s share registry.

Lodgement of a Proxy Form This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 10:30am on Monday, 20 February 2012, being not later than 48 hours before the commencement of the meeting. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy Forms may be lodged using the reply paid envelope or:

 ONLINE www.linkmarketservices.com.au Login to the Link website using the holding details as shown on the proxy form. Select ‘Voting’ and follow the prompts to lodge your vote. To use the online lodgement facility, shareholders will need their “Holder Identifier” (Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on the front of the proxy form).

 by mail: My Net Fone Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia  by fax: +61 2 9287 0309  by hand: delivering it to Link Market Services Limited, 1A Homebush Bay Drive, Rhodes NSW 2138 or Level 12, 680 George Street, Sydney NSW 2000.

If you would like to attend and vote at the Extraordinary General Meeting, please bring this form with you. This will assist in registering your attendance.