Full Financial Report

ADVANCED ENGINE COMPONENTS LIMITED ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

ABN 67 009 081 770 For personal use only use personal For

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Table of Contents

Annual Report Corporate Information 1 Directors’ Report 2 Statement of Profit or Loss and Other Comprehensive Income 15 Statement of Financial Position 16 Statement of Changes in Equity 17 Statement of Cash Flows 18 Notes to the Financial Statements 19 Directors’ Declaration 41 Independent Auditors Report 42 Auditor’s Independence Declaration 46 Corporate Governance Statement 47 Additional ASX Information 56

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 Corporate Information

ASX Code ACE (currently suspended)

Directors Mr Faldi Ismail (appointed 5 June 2015) Dr Brendan de Kauwe (appointed 5 June 2015) Mr Nicholas Young (appointed 5 June 2015 and resigned 27 October 2015) Mr Peter Wall (appointed 27 October 2015) Mr Chris Ntoumenopoulos (appointed 27 October 2015) Mr Vivekananthan M.V. Nathan (resigned 9 June 2011) Mr Graham Keys (resigned 5 June 2015) Mr Antony Middleton (resigned 5 June 2015) Mr Kin Wa Pun (Albert) (resigned 5 June 2015) Mr Manharial Bhaichand Gathani Jain (resigned 5 June 2015) Mr Ming Fai (Arnold) Chan (resigned 24 September 2010)

Company Secretary Company Secretary during Financial Year Ms Shannon Coates (appointed 24 September 2015) Ms Alicia Mitton (resigned 16 December 2014)

Registered Office Share Registrar 108 Outram Street Automatic Registry Services West Perth WA 6005 Level 1, 7 Ventnor Avenue Tel: (08) 9486 7244 West Perth WA 6005 Fax: (08) 9463 6373 Tel: 1300 288 664

Auditors (appointed 5 June 2015) Postal Address Ernst & Young PO Box 1974 11 Mounts Bay Road

West Perth WA 6872 Perth WA 6000 For personal use only use personal For

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report

The Directors submit their report on Advanced Engine Components Limited (“ACE” or “the Company”) and the entities it controlled at the end of, or during (the “Group”), the year ended 30 June 2011. Directors

The names of the Company Directors in office during the financial year and until the date of this report were as follows. Directors were in office for this entire period unless otherwise stated. Mr Faldi Ismail (appointed 5 June 2015) Dr Brendan de Kauwe (appointed 5 June 2015) Mr Nicholas Young (appointed 5 June 2015 and resigned 27 October 2015) Mr Peter Wall (appointed 27 October 2015) Mr Chris Ntoumenopoulos (appointed 27 October 2015) Mr Vivekananthan M.V. Nathan (resigned 9 June 2011) Mr Graham Keys (resigned 5 June 2015) Mr Antony Middleton (resigned 5 June 2015) Mr Kin Wa Pun (Albert) (resigned 5 June 2015) Mr Manharial Bhaichand Gathani Jain (resigned 5 June 2015) Mr Ming Fai (Arnold) Chan (resigned 24 September 2010)

Mr Mark Summers and Mr Jack James were appointed as Administrators of the Company on 29 August 2014. On 24 October 2014 Mr Summers and Mr James were appointed as Joint and Several Deed Administrators of the Company. Mr Summers subsequently resigned as Administrator of the Deed leaving Mr James as sole Administrator until the effectuation of the Deed of Company Arrangement (“DOCA”) on 23 September 2015. From During this period, the powers of the Company’s officers (including Directors) were suspended and the administrators assumed control of the Company’s business. Faldi Ismail (appointed 5 June 2015) Mr Ismail has significant experience working as a corporate advisor specialising in the restructure and recapitalisation of a wide range of ASX- listed companies having many years of investment banking experience covering multiple sectors. He has significant cross-border experience, having advised on numerous overseas transactions including capital raisings, structuring of acquisitions and joint ventures in numerous countries. Mr Ismail is also a Director of dual listed Asiamet Resources Limited, (TSX-V/AIM listed – Ticker Code “ARS”) and additionally is the founder and operator of Otsana Capital, a boutique advisory firm specialising in mergers & acquisitions, reverse takeovers, capital raisings and initial public offerings. Mr Ismail is currently a Non-Executive Director of the following ASX-listed companies: Galicia Energy Corporation Ltd (ASX:GAL), WHL Energy Limited (ASX: WHN), BGD Corporation Limited (ASX:BGD) and Marion Energy Limited (ASX: MAE). Brendan de Kauwe (appointed 5 June 2015) Dr de Kauwe studied a Bachelor of Science and Bachelor of Dental Surgery from the University of Western Australia. He also holds a Post Graduate Diploma in Applied Finance, majoring in Corporate Finance, and is currently completing his Masters in Applied Finance. He is also an ASIC compliant (RG146) Securities Advisor. Dr de Kauwe’s extensive science and bio-medical background with more than 10 years’ experience in the health sector; coupled with his finance backing, gives him an integral understanding in the evaluation of projects over a diverse range of sectors. Dr de Kauwe has held the following ASX listed roles: Executive Chairman – Actinogen Ltd (ASX: ACW); Director – Raya Group Limited (ASX:RYG), Director – Prescient Therapeutics Ltd (ASX: PTX) (Formerly Virax Holdings Ltd); Director – Cossack Energy Ltd. As an advisor with Otsana Capital he has been involved in a number of corporate restructures, capital raisings, and evaluations of a diverse range of assets. Peter Wall (appointed 27 October 2015) Mr Wall is a corporate lawyer and has been a Partner at Steinepreis Paganin (Perth based corporate law firm) since July 2005. Mr Wall graduated

from the University of Western Australia in 1998 with a Bachelor of Laws and Bachelor of Commerce (Finance). He has also completed a Masters For personal use only use personal For of Applied Finance and Investment with FINSIA. Peter has a wide range of experience in all forms of commercial and corporate law, with a particular focus on technology, equity capital markets and mergers and acquisitions. He also has significant experience in dealing in cross border transactions. Mr Wall has been a director of the following other ASX listed companies: Burleson Energy Ltd (current), GRP Corporation Ltd (current), Dourado Resources NL (current), Phytotech Medical Limited (current), Minbos Resources Limited (current), MyFiziq Limited (current), Activistic Ltd (current), Global Metals Exploration NL (current), Discovery Resources Limited (ceased 8 November 2013), NSL Consolidated Limited (ceased 20 December 2012), BrainChip Holdings Ltd (ceased 4 August 2015).

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

Chris Ntoumenopoulos (appointed 27 October 2015) Mr Ntoumenopoulos is a partner at CPS Capital, a WA based stockbroking and corporate advisory firm. He has worked in financial markets for the past 12 years, focusing on Capital Raisings, Portfolio Management and Corporate Advisory. Mr Ntoumenopoulos has advised and funded numerous ASX companies from early stage venture capital, through to IPO. He is an executive director of various private companies which span across finance, technology and medical sectors. Mr Ntoumenopoulos has a Bachelor of Commerce degree from the University of WA, majoring in Money and Banking, Investment Finance and Electronic Commerce. Chris is currently a director of ASX listed ResApp Health Limited. Nicholas Young (appointed 5 June 2015 and resigned 27 October 2015) Mr Young holds a Bachelor of Commerce, majoring in Accounting and Finance is, a Chartered Accountant and has completed the Insolvency Education Program at the Australian Restructuring Insolvency and Turnaround Association. Mr Young commenced his career in the Corporate Restructuring division of an accounting firm and has gained valuable experience in Australia and Southern Africa, across a wide range of industries, including mining and exploration, mining services, renewable energy, professional services, manufacturing and transport. Mr Young has been involved in the recapitalisation of various ASX-listed companies. Mr Young has held the following ASX listed roles: Director - BGD Corporation Limited (10 September 2014 to 1 February 2015) and Director - Marion Energy Limited (appointed 28 October 2015 to 5 November 2015). Graham Keys (resigned 5 June 2015) Mr Keys is a former corporate finance partner of Ernst & Young. He has experience as Executive Director, and subsequently Managing Director, of a publicly listed company, as non-executive Chairman of publicly listed companies and as the executive officer of two large private companies. He formed Norvest Corporate Pty Ltd, a specialist corporate advisory firm, in April 2000 and is the current Executive Chairman of that company. He was appointed a Non-executive Director of ACE on 9 May 2003 and Chairman on 19 October 2004. During the past three years, Mr Keys has also served as a director of Brand New Vintage Ltd and Sterling Biofuels International Ltd. Antony Middleton (resigned 5 June 2015) Mr Middleton holds a Bachelor of Engineering and Master of Business Administration from the University of Western Australia, and a Company Directors’ Diploma from the University of New England. Mr Middleton has held senior management positions with government agencies including Chairman and Chief Executive Officer of Transperth and also on various international engineering projects. He is past National Chairman and a Fellow of the Chartered Institute of Logistics and Transport in Australia, and a Fellow of the Institution of Engineers (Australia). Mr Middleton is currently the President of Natural Gas Vehicles for Australia (NGVA) the body representing all sectors of the natural gas vehicle industry in Australia. Mr Middleton was appointed a Director of ACE in March 1997 and Chairman in December 2002. He retired as Chairman and was appointed Managing Director in August 2003. During the past three years Mr Middleton has not served as a director for any other Australian listed companies. Kin Wa Pun (Albert) (resigned 5 June 2015) Mr Pun has significant international investment experience. Mr Pun is the Managing Director and founder of Cherry Capital Management Limited (“Cherry”), a Hong Kong based financial advisory company, providing strategic and financial advice to its clients. He is currently appointed as the Chief Advisor of KGI Asia Limited, a Hong Kong based regional investment bank. Prior to joining Cherry, Mr Pun was the Chief Financial Officer and a member of the board of Directors of KG Investment Holdings Limited, a regional financial services group in Hong Kong. Both KGI Asia Limited and KG Investment Holdings Limited are part of the Koos Group which is one of the largest business groups in Taiwan. Mr Pun also previously worked at Morgan Stanley Asia Limited as Vice President. Mr Pun has a Master of Sciences and Bachelor of Social Sciences degree from the University of Hong Kong. Mr Pun was appointed a Non-executive Director of ACE on 28 November 2006. During the past three years Mr Pun has not served as a director for any other Australian listed companies. Ming Fai (Arnold) Chan (resigned 24 September 2010) Mr Chan has significant international investment experience. He is currently the Chief Executive Officer of Full Seas Technology Limited which is a technology provider for an intelligent management system used in electric power network in some Chinese cities. Prior to that, he was the President of Dandelion Capital Group (“Dandelion”), a company focusing on special situation investment opportunities in China. Mr Chan has over twenty years’ experience in investment advisory and asset management. He established Dandelion, in 2006, and co-founded the KGI Group, a pan–Asian investment bank, in 1997. He has also worked with HSBC and Jardine Fleming, based in Hong Kong, with responsibilities throughout Asia. Mr Chan is an independent non-executive Director of China LotSynergy Holdings Limited a company listed

on the Hong Kong stock exchange. Mr Chan has a Bachelor of Social Sciences degree from the University of Hong Kong with a major in For personal use only use personal For Economics. Mr Chan was appointed a Non-executive Director of ACE on 28 May 2009. During the past three years Mr Chan has not served as a director for any other Australian listed companies.

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

Vivekananthan MV Nathan (resigned 9 June 2011)

Mr Nathan is the Deputy Chairman of Deleum Berhad (“Deleum”) a Malaysian based public listed company. Deleum was incorporated in November 2005 and is the holding company of Delcom Services Sdn Bhd (DSSB). DSSB has been supplying a diverse range of supporting specialised products and services to the oil and gas industry for over 25 years. Mr Nathan is a co-founder of DSSB. He joined ESSO Malaysia in 1962 in the Instrumentation and Electrical Engineering Services Department and undertook assignments at ESSO refineries in Malaysia and Thailand. He then worked for Mobil Refinery, Singapore and subsequently as Project Engineer with Avery Laurence (S) Pte Ltd on various projects in Brunei, Thailand and Indonesia and also attended training in Japan with Yokogawa Electric Works. He later joined Teledyne Inc. and was based in the USA for training in management before being posted as its Marketing Director of the Far East Operations. In 1982, together with his founding partners he spearheaded DSSB's venture into the oil and gas industry and was appointed as its Managing Director and later re-designated as President. He was appointed the Deputy Executive Chairman of Deleum in 2006 and re-designated to his current position in June 2010. Mr Nathan is a Council Member of the Malaysian Gas Association and sits on the boards of World Gas Conference (WGC) 2012, Malaysia Deepwater Production Contractors Sdn Bhd and Malaysia Deepwater Floating Terminal (Kikeh) Ltd.

Manharlal Bhaichand Gathani Jain (resigned 5 June 2015) Mr Gathani is a Director of PKF Tax Services Sdn Bhd in Malaysia and a Fellow of the Malaysian Institute of Taxation. He joined the Inland Revenue Board of Malaysia (IRB) soon after completing his Bachelor of Arts at the University of Malaya. His long service culminated in the Directorship of the East Malaysian IRB office of Sabah in 1975. He was awarded the "Ahli Darjah Setia Kinabalu" (ADSK) title by the Yang Di Pertua Sabah in 1978. He has successfully integrated his long civil service career with a successful professional practice since his departure from the IRB. Mr Gathani’s experience and interpretation of the tax laws have gained him wide recognition in the business community. He has acted as an advisor to a number of corporations for all kinds of strategic tax and business related matters. He has also served in the publication committee of the Malaysian Institute of Taxation.

Principal Activities The Company’s principal activities in the course of the financial year were the sale of ACE patented Natural Gas Vehicle Systems (“NGVS”), natural gas engines incorporating ACE’s NGVS and associated components and spare parts. Due to funding difficulties throughout the period the Company reviewed various strategies for the ongoing development and commercialisation of its technology and products. As a result of these reviews and to conserve available cash the Company minimised its product development and trading operations.

Operating Results The loss after tax for the year attributable to the members of Advanced Engine Components Limited was $8,952,292 (2010: $3,778,378).

Dividends

No dividends have been declared or paid to shareholders at the date of this report (2010: Nil).

Review of Operations and Financial Results

Due to funding difficulties throughout the period the Company reviewed various strategies for the ongoing development and commercialisation of its technology and products. As a result of these reviews and to conserve available cash the Company minimised its product development and trading operations.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Incomplete records Due to funding difficulties throughout the period the Company reviewed various strategies for the ongoing development and commercialisation of its technology and products. As a result of this review, product development and trading operations were minimised and in April 2011 the operations of the Group were placed on care and maintenance. At its request the Company was suspended from trading on the Australian Securities Exchange (“ASX”) on 5 April 2011. As detailed in Note 22 to the financial statements, on 6 March 2012, the Company announced that it had signed a Business Sale Agreement (BSA) with Westport Innovations (Australia) Pty Ltd (the Purchaser), under which the Purchaser would acquire the Company's non-China business assets, including all Australian inventory, plant & equipment, intellectual property and non-China contracts. In addition, on 12 November 2013, the Company announced that it had signed a co-marketing and supply agreement for its China business, as an extension of the BSA, under which it had agreed to sell its China inventory, equipment, customer and supplier contracts to the Purchaser.

On 29 August 2014, the Board resolved to place the Company into voluntary administration and appointed Mr Mark Summers and Mr Jack James of Palisade Business Consulting as joint and several administrators of the Company. Following appointment of the administrators, the powers of the Company’s officers (including Directors) were suspended and the administrators assumed control of the Company’s business, property and affairs.

The financial report has been prepared by Directors who were not in office for the periods presented in this report, nor were they parties involved with the Company and did not have oversight or control over the group’s financial reporting systems including but not limited to being able to obtain access to complete accounting records of the Company. In addition, Directors have not been able to source books and records of the company’s subsidiaries and associate. The Directors who prepared this financial report were appointed on or after 5 June 2015. Every reasonable effort has been made by the Directors to ascertain the true position of the Company as at 30 June 2011.

To prepare the financial report, the Directors have reconstructed the financial records of the Group using data extracted from the Group’s accounting system for the entire financial year. However, there may be information that the current Directors have not been able to obtain, the impact of which may or may not be material on the financial statements.

These financial statements do not contain all the required information or disclosures in relation transactions undertaken by the Company as this information is unascertainable due to the administration process and/or the change in directorships and key management personnel.

Consequently, although the Directors have prepared this financial report to the best of their knowledge based on the information made available to them, they are of the opinion that it is not possible to state that this financial report has been prepared in accordance with Australian Accounting Standards including Australian interpretations, other authoritative pronouncements of the Australian Accounting Standard Board and the Corporations Act 2001, nor is it possible to state this financial report gives a true and fair view of the Group’s financial position Significant Changes in State of Affairs

There were no significant changes in the State of Affairs throughout the Financial Year. Product development and trading operations were minimised and in April 2011 the operations were placed on care and maintenance.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

After Balance Sheet Date Events

On 6 March 2012, the Company announced that it had signed a Business Sale Agreement (“BSA”) with Westport Innovations (Australia) Pty Ltd (the Purchaser), under which the Purchaser would acquire the Company's non-China business assets, including all Australian inventory, plant & equipment, intellectual property and non-China contracts. This sale was for consideration of $1.45 million, comprising cash, assumption of certain employee entitlements for transferring ACE employees and the repayment by the purchaser of certain bridging finance debt owing by ACE to the purchaser. The sale was completed on 20 March 2012. On 12 November 2013, the Company announced that it had signed a co-marketing and supply agreement for its China business, as an extension of the BSA, under which it had agreed to sell its China inventory, equipment, customer and supplier contracts to the Purchaser for the Chinese yuan equivalent of US$210,000 (inclusive of VAT) to be paid in part in cash and in part forgiveness of debt. The Company retained the ACE trade mark for China and the non-exclusive right to manufacture, service and sell the ACE natural gas system in China; and access in China, on a fee for service basis and agreed terms to existing ACE technology, former employees and supply of product including software and technical services. On 29 August 2014, the Company announced that it had accepted an offer from Otsana Pty Ltd (trading as Otsana Capital) (“Otsana”) to recapitalise the Company that will result in all the outstanding debts of the Company being compromised via a Deed of Company Arrangement (“DOCA”) and sufficient cash being injected into the Company to support its near-term business objectives. The Directors resolved to appoint Mark Summers and Jack James of Palisade Business Consulting as joint and several Administrators on the same day. On 3 October 2014, the creditors resolved for the Company to execute a DOCA and that Jack James and Mark Summers be appointed Administrators of the DOCA. The DOCA was executed on 24 October 2014. On 16 December 2014, Ms Alicia Mitton resigned as company secretary. On 7 January 2015, the Company announced that the recapitalisation of the Company under the DOCA that was executed on 24 October 2014 had been delayed due to the requirement for the Company to receive shareholder approval for several transactions that had been undertaken. Mr Mark Summers also resigned as Deed Administrator, with Mr Jack James continuing as Deed Administrator. On 13 March 2015 the creditors of the Company accepted a varied DOCA put to them by the Deed Administrator. On 20 March 2015 the Deed Administrator announced they had finalised negotiations for a restructure and recapitalisation of the Company. The key terms of the restructure and re-capitalisation were: (a) consolidation of existing share capital on a 1:40 basis; (b) issue of 5,000,000 new post consolidation shares at a deemed issue price of $0.02 to the Creditors Trust, as consideration for settling $10,656,596 (as estimated by the Deed Administrator) owing to non-trade creditors of the Company; (c) the Company to pay $200,000 cash to the Creditors Trust as consideration for settling all creditor claims of approximately $953,871 (as estimated by the Deed Administrator); (d) an agreement to the issue of 25,000,000 new post-consolidation shares for a total consideration of $250 and 25,000,000 options, exercisable on or before 4 years from the date of issue, at a total issue price of $250 price to sophisticated or professional investors who are clients of Otsana; and (e) resignation of existing Directors with appointment of nominated Directors. Shareholders approved the recapitalisation transactions at a Shareholders meeting on 5 June 2015. At this meeting, the following resolutions were also passed: (a) the previous disposal of the Group’s China inventory, equipment and supplier contracts was ratified; (b) the removal of BDO Audit (WA) Pty Ltd from office and the appointment of Ernst & Young as auditor; and (c) Mr Faldi Ismail, Dr Brendan de Kauwe and Mr Nicholas Young were appointed as Directors of the Company. Following the meeting, Mr

Graham Keys, Mr Anthony Middleton, Mr Manharlal Bhaichand Jain Gathani and Mr Kin Wa Pun resigned as Directors of the Company. For personal use only use personal For

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

On 19 June 2015, it was announced that the consolidation of share capital had been completed, resulting in 5,092,289 post-consolidation shares being on issue.

On 7 September 2015, 25,000,000 promotor placement shares were issued for a total of $250, 5,000,000 creditor placement shares were issued pursuant to the DOCA and 25,000,000 promoter placement options were issued. On 22 September 2015, the Company entered into a number of identical convertible loan agreements with unrelated parties (except for as detailed below) for a total amount of $300,000. The Company must seek shareholder approval to convert the loaned amounts no later than 3 months after 22 September 2015. Subject to the Shareholder approval being obtained, each convertible loan holder irrevocably directs the Company to satisfy the repayment of the funds advanced by issuing Shares at a deemed issue price of $0.02 per Share upon conversion. If Shareholder approval is not obtained, the funds advanced are repayable no later than 4 months after 22 September 2015 or any other date as is agreed in writing between the parties. The Company may repay funds advanced at any time and amount repaid cannot be redrawn. No interest is payable and no security is required. One of the convertible loan agreements, for an amount of $20,000, is held by Davinch Pty Ltd, an entity controlled by Mr Chris Ntoumenopoulos, a current Director of the Company. On 23 September 2015, the DOCA was wholly effectuated and control of the Company reverted back to the Board of Directors. On 24 September 2015, Ms Shannon Coates was appointed as Company Secretary of the Company. On 5 October 2015, the Company announced that it had signed a binding Heads of Agreement to acquire 100% of Investia Technologies Pty Ltd (“Investia”), a software and technology development company. In consideration for the acquisition and subject to the necessary shareholder approvals, ACE will issue to Investia shareholders: - 17,500,000 fully paid ACE shares at a deemed price of $0.02 and 17,500,000 options exercisable at $0.03 each, expiring three years from date of issue; and - Up to 32,500,000 deferred consideration shares subject to certain milestones being achieved. Settlement of the acquisition will be subject to the required regulatory approvals and completing a capital raising of a minimum of $3,400,000 through the offer of ACE shares at a price of not less than $0.02 per share. On 27 October 2015, the Company announced the appointments of Mr Peter Wall and Mr Chris Ntoumenopolous as Non-Executive Directors and the resignation of Mr Nicholas Young as a Non-Executive Director.

Other than as outlined above, at the date of this report, there are no matters or circumstances which have arisen since 30 June 2011 that have significantly affected or may significantly affect: • the operations, in financial years subsequent to 30 June 2011, of the Consolidated Entity; • the results of those operations, in financial years subsequent to 30 June 2011, of the Consolidated Entity; or • the state of affairs, in financial years subsequent to 30 June 2011, of the Consolidated Entity.

Future Developments, Prospects and Business Strategies Other than those matters noted elsewhere in this financial report, likely developments, future prospects and business strategies of operations have not been included in this report as the Directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the Company

Environmental Issues

The Company is not subject to any significant environmental regulations under either Commonwealth or State legislation. The Board is not aware of any breach of environmental requirements as they apply to the Company.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

Directors’ Interests

As at the date of this report, the interests of the Directors in shares and options of Advanced Engine Components Limited were:

Number of Ordinary Number of Options over Director Shares Ordinary Shares Mr Faldi Ismail 2,500,000 6,250,0001 Dr Brendan de Kauwe - - Mr Peter Wall - - Mr Chris Ntoumenopoulos2 - - 1. Exercisable at $0.02 on or before 3 September 2019 2. An entity associated with Mr Ntoumenopolous holds one convertible note with a face value of $20,000, convertible at $0.02 per share, subject to Shareholder approval. Director Options Holdings at 30 June 2011

The Directors in office at the date of this Directors Report are not in a position to confirm the accuracy or otherwise of Director Options Holdings Movements for the 30 June 2011 Financial Year in this Report.

Director Shareholdings at 30 June 2011 The Directors in office at the date of this Directors Report are not in a position to confirm the accuracy or otherwise of Director Shareholding Movements for the 30 June 2011 Financial Year in this Report.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

Remuneration Report (Audited) The financial report has been prepared by Directors who were not in office for the periods presented in this report, nor were they parties involved with the Company and did not have oversight or control over the group’s financial reporting systems including but not limited to being able to obtain access to complete accounting records of the Company, its subsidiaries and associate. The Directors who prepared this financial report were appointed on or after 5 June 2015.

The Directors who are in office at the date of this report had no involvement in adopting, implementing or complying with the remuneration policies during the financial period being reported on. These policies may or may not have been in place during the financial period. If the recapitalisation process is successful, the Directors who are in office at the date of this report will adopt a new remuneration policy in accordance with the corporate governance framework adopted by the Board on 11 October 2015.

(a) Names of the Company Directors at any time during the financial year

Mr Graham Keys Mr Antony Middleton Mr Vivekananthan M.V. Nathan (resigned 9 June 2011) Mr Kin Wa Pun (Albert) Mr Manharial Bhaichand Gathani Jain Mr Ming Fai (Arnold) Chan (resigned 24 September 2010)

(b) Remuneration Policy

The objective of the Company’s key management personnel reward framework was to ensure reward for performance is competitive and appropriate for the results delivered. The Board reviewed all staff’s remuneration, including the Managing Director and key management, at Board meetings throughout the Financial Year. It was agreed the approach to be taken over the following 12 months would have regard to the ongoing impact of the financial global crisis on the financial position of the Group. As a result, no salary increases were granted to the Managing Director or key management. All Australian staff were placed on an as needs basis from April 2011. ACE’s remuneration policy was designed to align Director and key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific short and long-term incentives. There is no direct relationship between performance and Non-Executive Directors and key management personnel remuneration. In assessing individual remuneration levels consideration is given to the employee’s service to reward the achievement of corporate goals and strategic objectives. The Board of ACE believed the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel and Directors to run and manage the Company to create goal congruence between Directors, key management personnel and shareholders, and to remunerate these key management personnel and Directors on normal commercial terms commensurate with their experience and responsibilities. For the 2011 financial year the policy was varied having regard to the financial circumstances of the Company. During the year ended 30 June 2011, ACE did not have a separately established remuneration committee. The duties and responsibilities typically delegated to such a committee were included in the responsibilities of the full Board. The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives was as follows: The remuneration policy, setting the terms and conditions for the Executive Director and key management personnel, was approved by the non-executive Directors on the Board. All key management personnel received a base salary (based on factors such as length of service and experience), superannuation, fringe benefits, options and performance incentives. The Board reviewed key management personnel packages

annually by reference to the economic entity’s performance, key management personnel performance and comparable information from For personal use only use personal For industry sectors and other listed companies in similar industries. The Managing Director and key management received a superannuation guarantee contribution required by the government, which was 9%, and did not receive any other retirement benefits. Some individuals, however, chose to sacrifice part of their salary to increase payments towards superannuation.

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

All remuneration paid to Directors and key management personnel is valued at the cost to the Company and expensed. The Board policy was to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities but which also took into consideration the financial state of the company. The Board determined payments to the Non- Executive Directors and reviewed their remuneration annually. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting.

Other than as stated above, to 30 June 2011 there was no direct relationship between performance and Director and key management personnel remuneration.

During the year the Company did not grant any options over ordinary shares to the Managing Director and key management personnel as part of their remuneration.

(d) Compensation of key management personnel: Year ended 30 June 2011 The financial report has been prepared by Directors who were not in office for the periods presented in this report, nor were they parties involved with the Company and did not have oversight or control over the group’s financial reporting systems including but not limited to being able to obtain access to complete accounting records of the Company, its subsidiaries and associate. The Directors who prepared this financial report were appointed on or after 5 June 2015. Accordingly, the Company does not have adequate information to enable the remuneration report disclosures required by Corporations Act 2001 for the year ended 30 June 2011 to be made. Year ended 30 June 2010

Share-based Short Term Post-Employment Long Term % of Value of 30 June 2010 Payment Total Remuneration that Superannuation Long Service Options Salary & Fees Consists of Options Leave

Provision $ $ $ $ $

Directors Mr G Keys 25,000 - - - 25,000 - Mr A Middleton 88,871 15,557 3,714 - 108,142 - Mr A Pun ------Mr A Chan (i) 4,165 - - - 4,165 -

Mr V Nathan ------Mr M Gathani ------Other Key Management Mr B Neumann 65,238 40,746 2,402 - 108,386 - Mr N McLaren 109,777 12,798 470 - 123,045 -

Mr M McKay 104,288 9,386 - - 113,674 - For personal use only use personal For Total 397,339 78,487 6,586 - 482,412 No proportion of the above remuneration is performance based. (i) Mr Chan resigned on 24 September 2010.

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

(e) Service contracts

Executive Service Contracts Mr Antony Middleton, Managing Director Mr Middleton joined ACE as an Executive Director in March 1997, became the Executive Chairman in December 2002 and was appointed Managing Director in August 2003. Mr Middleton’s remuneration package was reviewed annually as part of the annual appraisal scheme. For the 2011 financial year Mr Middleton’s salary was set at $160,568 per annum effective 1 July 2010. Due to the impact of the global financial crisis Mr Middleton was not paid for the full year. The Company or the employee may terminate the contract by providing one months’ notice of intention to terminate or by payment or forfeiture of salary in lieu. Where the employee is aged over 45 years and has completed at least two years continuous service an additional one weeks notice or payment in lieu will be given.

Mr Barry Neumann, Engine Development Manager Mr Neumann joined ACE as Engine Development Manager in 1987. For the 2011 financial year, Mr Neumann’s remuneration package was set at $130,000 per annum effective 1 July 2010. The remuneration package was reviewed annually as part of the annual appraisal scheme. Due to the impact of the global financial crisis all Australian based employees hours were reduced. Mr Neumann’s salary was pro-rata to the reduced hours worked. The Company or the employee may terminate the contract by providing one months’ notice of intention to terminate or by payment or forfeiture of salary in lieu. Where the employee is aged over 45 years and has completed at least two years continuous service an additional one weeks’ notice or payment in lieu will be given.

Mr Nathon McLaren, Electronics Division Manager Mr McLaren joined ACE in 1999. He was appointed Electronics Division Manager in 2003. For the 2011 financial year, Mr McLaren’s remuneration package was set at $130,000 per annum effective 1 July 2010. The remuneration package was reviewed annually as part of the annual appraisal scheme. Due to the impact of the global financial crisis all Australian based employees hours were reduced. Mr McLaren’s salary was pro-rata to the reduced hours worked. The Company or the employee may terminate the contract by providing one months’ notice of intention to terminate or by payment or forfeiture of salary in lieu. Where the employee is aged over 45 years and has completed at least two years continuous service an additional one weeks’ notice or payment in lieu will be given.

Mr Mike McKay, Senior Mechanical Engineer Mr McKay joined ACE as Senior Mechanical Engineer in 2006. For the 2011 financial year, Mr McKay’s remuneration package was set at $130,000 per annum effective 1 July 2010. The remuneration package was reviewed annually as part of the annual appraisal scheme. Due to the impact of the global financial crisis all Australian based employee’s hours were reduced. Mr McKay’s salary was pro-rata to the reduced hours worked. The Company or the employee may terminate the contract by providing one months’ notice of intention to terminate or by payment or forfeiture of salary in lieu. Where the employee is aged over 45 years and has completed at least two years continuous service an additional one weeks’ notice or payment in lieu will be given.

(f) Loans to Key Management Personnel and other transactions with Key Management Personnel

Mr Graham Keys Mr Keys is a Director and the major Shareholder of Norvest Corporate Pty Ltd, which provides various corporate, capital raising, accounting, management and company secretarial services to the Company at normal commercial rates. During the year Norvest Corporate Pty Ltd supplied these services to the Company to the value of $103,063 (2010: $297,812). As at 30 June 2011, the Company owed Norvest Corporate Pty Ltd $445,472 (2010: $342,409), this amount is reflected in payables and is non-interest bearing. During 2010, Norvest Corporate Pty Ltd made various unsecured loans to the Company with a maximum outstanding at any point in time of $46,361. At 30 June 2011 the amount outstanding was $Nil (2010: nil). Interest of 15%pa was payable on the daily outstanding balance.

In April 2009, Norvest Corporate Pty Ltd facilitated refinancing of the CIM SSF $750,000 loan through a syndicate of investors. Mr Keys, For personal use only use personal For through his private company Seibu Pty Ltd ATF G L Keys FT, provided $315,000 of the funding. Pursuant to the terms of the refinancing, and shareholder approval granted on 3 July 2009, Seibu Pty Ltd is entitled to receive interest of 15%pa, calculated on the outstanding daily loan balance, and has been granted 4,117,000 options. The options are exercisable on or before 30 November 2011 at various exercise prices calculated on the volume weighted average share price in the month preceding the date of issue. Nil (2010: $47,250) interest was paid during the year ended 30 June 2011 and $315,000 (2010: $315,000) was still outstanding as at 30 June 2011.

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

(f) Loans to Key Management Personnel and other transactions with Key Management Personnel

During 2010 Norvest Corporate Pty Ltd facilitated $400,000 of the rights issues monies be placed on deposit at call with an associated company. The monies on deposit earned 9% pa interest. At 30 June 2010 the balance owing to ACE, inclusive of accrued interest, was $318,621. Subsequent to 30 June 2010 ACE redrew the deposit in full to meet ongoing cash flow requirements.

Mr Anthony Middleton Mr Middleton, through his private company Jildane Pty Ltd ATF Middleton Super Fund, provided $30,000 of the syndicate funding to refinance the CIM SSF $750,000 loan. Pursuant to the terms of the refinancing, and shareholder approval granted on 3 July 2009, Jildane Pty Ltd is entitled to receive interest of 15%pa, calculated on the outstanding daily loan balance, and has been granted 368,000 options. The options are exercisable on or before 30 November 2011 at various exercise prices calculated on the volume weighted average share price in the month preceding the date of issue. No (2009: $4,500) interest was paid during the year ended 30 June 2011 and $30,000 (2010: $30,000) was still outstanding as at 30 June 2011.

Mr Albert Pun Mr Pun is a Director of ACE’s major shareholder 698 Capital International Ltd and its related entity, 698 Capital Asia Pacific Limited (“698 Capital”). In August 2008, 698 Capital agreed to provide ACE with a $2 million sales financing facility. Interest is charged at the National Australia Bank Indicator rate at the time of execution of the agreement together with a $17,500 facility fee. As ACE shareholders agreed to the issue of 5 million options, exercisable at 20 cents on or before 31 December 2010, the interest rate was reduced by 0.75%. 698 Capital subsequently agreed to increase the sales financing facility to $3 million in 2009. 698 Capital received a $16,750 facility fee and 6 million options, as approved by shareholders on 25 November 2009, for increasing and extending the facility. The options are exercisable on or before 30 November 2011 at various exercise prices calculated on the volume weighted average share price in each of the six months preceding the date of issue. In February 2010, 698 Capital’s $750,000 short term loan and $3,000,000 sales financing facility, together with all outstanding interest, were consolidated as one loan repayable at call (note 13(iii)). During the 2010 financial year, the $3,000,000 due to 698 Capital under the convertible note that expired on 31 December 2009 (note 13(iii)) was restructured as a loan and extended to 31 December 2011 (note 13). The accrued interest on the convertible note was offset against 698 Capital’s equity subscription under the rights issue. The Company issued 3,000,000 options to 698 Capital, as approved by shareholders, for extending the loan and in lieu of a 1% increase in the base interest rate on the loan. The options are exercisable on or before 30 November 2011 at an exercise price of 5.5 cents per share. 698 Capital provided $375,000 of the syndicate funding to refinance the CIM SSF $750,000 loan. Pursuant to the terms of the refinancing, and shareholder approval granted on 3 July 2009, 698 Capital is entitled to receive interest of 15%pa, calculated on the outstanding daily loan balance, and has been granted 4,875,000 options. The options are exercisable on or before 30 November 2011 at various exercise prices calculated on the volume weighted average share price in the month preceding the date of issue. Total interest of nil (2010: $56,250) was paid during the year ended 30 June 2011.

End of Remuneration Report

For personal use only use personal For

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

Shares Under Option As at 30 June 2011, the following were unissued ordinary shares were under options:

• 2,500,000 (2010: 2,500,000) options exercisable at 6.0 cents per share expiring on or before 30 November 2011.

• 4,250,000 (2010: 4,250,000) options exercisable at 5.5 cents per share expiring on or before 30 November 2011.

• 2,000,000 (2010: 2,000,000) options exercisable at 5.0 cents per share expiring on or before 30 November 2011.

• 3,220,000 (2010: 3,220,000) options exercisable at 4.7 cents per share expiring on or before 30 November 2011.

• 750,000 (2010: 750,000) options exercisable at 4.4 cents per share expiring on or before 30 November 2011.

• 750,000 (2010: 750,000) options exercisable at 4.3 cents per share expiring on or before 30 November 2011.

• 1,750,000 (2010: 1,750,000) options exercisable at 3.6 cents per share expiring on or before 30 November 2011.

• 1,750,000 (2010: 1,750,000) options exercisable at 3.7 cents per share expiring on or before 30 November 2011.

• 1,750,000 (2010: 1,750,000) options exercisable at 7.1 cents per share expiring on or before 30 November 2011.

• 1,750,000 (2010: 1,750,000) options exercisable at 6.2 cents per share expiring on or before 30 November 2011.

• 750,000 (2010: 750,000) options exercisable at 5.9 cents per share expiring on or before 30 November 2011.

• 1,000,000 (2010: 1,000,000) options exercisable at 5.65 cents per share expiring on or before 30 November 2011.

• 750,000 (2010: 750,000) options exercisable at 5.4 cents per share on expiring or before 30 November 2011.

• 750,000 (2010: 750,000) options exercisable at 5.3 cents per share on expiring or before 30 November 2011.

All of the above options subsequently expired without being exercised.

There are 25,000,000 ordinary shares are under options (on a post-consolidation basis) as at the date of this report.

Meetings of Directors

There were 11 Director meetings held during the financial year attended by all of the Directors.

Meetings of Audit Committee

There were 2 audit committee meetings held during the financial year attended by all of the Audit Committee members.

Indemnifying Officers

The Directors of the Company, for the year ended 30 June 2011, were indemnified by the Company against any liability incurred by them in their capacity as officers in defending any proceedings, whether civil or criminal, in which judgment is given in their favour or in which they are acquitted or in connection with any application in relation to any such proceedings in which relief is under the Law granted to them by the Court.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Directors’ Report (continued)

Indemnification of auditors

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page 43.

Non-Audit Services

No fees for non-audit services were paid to the external auditors during the year ended 30 June 2011 (2010: Nil).

Signed in accordance with a resolution of the Board of Directors.

Faldi Ismail Non-Executive Chairman Perth, Western Australia, Dated 18 November 2015

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2011

Notes 30 Jun 2011 30 Jun 2010 $ $

Revenue 4 1,266,336 1,647,506 Cost of sales (1,089,892) (1,767,932) Gross profit / (loss) 176,444 (120,426)

Other income 4 373,090 725,225 Distribution expenses (95,700) (58,140) Marketing expenses (282) (28,356) Administrative expenses 4 (2,769,820) (3,447,969) Other operating expenses 4 (343,883) (279,073) Impairment of trade and other receivables 7 (2,389,303) - Impairment of investment in associate 9 (69,703) - Impairment of intangible assets 11 (4,387,381) (364,209) Finance costs 4 (993,538) (849,852) Gain on deconsolidation of subsidiaries 24 988,355 - Results from operating activities (9,511,721) (4,422,800) Loss before income tax benefit (9,511,721) (4,422,800) Income tax benefit 5 559,429 626,904 Loss for the period (8,952,292) (3,795,896)

Other comprehensive income: Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations (79,991) 17,518 Other comprehensive income for the year, net of tax (79,991) 17,518

Total comprehensive loss for the year (9,032,283) (3,778,378)

Loss attributable to:

Members of the parent entity (8,952,292) (3,795,896)

(8,952,292) (3,795,896) Total comprehensive loss attributable to:

Members of the parent entity (9,032,283) (3,778,378)

For personal use only use personal For

(9,032,283) (3,778,378)

Basic and Diluted loss per share (dollar per share) 19 (1.76) (0.94)

The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Consolidated Statement of Financial Position as at 30 June 2011

30 Jun 2011 30 Jun 2010 Notes $ $

Current Assets Cash and cash equivalents 6 138,546 828,891 Trade and other receivables 7 51,034 1,955,560 Inventories 8 811,886 1,704,617 Total Current Assets 1,001,466 4,489,068

Non-Current Assets Investment in associate 9 - 40,317 Plant and equipment 10 277,522 275,300 Intangible assets 11 - 4,557,337 Total Non-Current Assets 277,522 4,872,954

Total Assets 1,278,988 9,362,022

Current Liabilities Trade and other payables 12 1,503,125 1,420,887 Borrowings 13 9,981,230 6,323,935 Short term provisions 14 773,530 324,613 Total Current Liabilities 12,257,885 8,069,435

Non-Current Liabilities - 3,120,082 Borrowings 13 Long term provisions 14 - 119,119 Total Non-Current Liabilities - 3,239,201

Total Liabilities 12,257,885 11,308,636

Net Liabilities (10,978,897) (1,946,614)

Shareholders deficit Issued capital 15 21,193,635 21,193,635 Reserves 16 1,353,280 1,433,271 Accumulated losses (33,525,812) (24,573,520) Total Shareholders Deficit (10,978,897) (1,946,614)

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Consolidated Statement of Changes in Equity for the Year Ended 30 June 2011

Share Based Foreign Convertible Asset Payment Exchange Issued Notes Revaluation Reserve Translation Accumulate Capital $ Reserve $ Reserve d Losses Total $ $ $ $ $

Balance as at 1 July 2009 18,208,020 158,000 750,000 494,940 62,473 (20,777,624) (1,104,191) Net Loss for the year - - - - - (3,795,896) (3,795,896) Other comprehensive - - 17,518 income/(loss) - - - 17,518 Total comprehensive loss for the - - 17,518 year - - (3,795,896) (3,778,378) Transactions with owners, recognised directly in equity Contributions by owners 3,004,425 (158,000) - - - - 2,846,425 Share based payments - - - 108,340 - - 108,340 Share capital issue cost (18,810) - - - - - (18,810) Balance as at 30 June 2010 (24,573,520 21,193,635 - 750,000 603,280 79,991 ) (1,946,614)

Balance as at 1 July 2010 (24,573,520 21,193,635 - 750,000 603,280 79,991 ) (1,946,614) Net Loss for the year - - - - - (8,952,292) (8,952,292) Other comprehensive - - (79,991) income/(loss) - - - (79,991) Total comprehensive loss for the - - - year - - (8,952,292) (9,032,283) Transactions with owners, recognised directly in equity ------Balance as at 30 June 2011 21,193,635 - 750,000 603,280 - (33,525,812) (10,978,897)

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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ADVANCED ENGINE COMPONENTS LIMITED ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011

Consolidated Statement of Cash Flows for the Year Ended 30 June 2011

Note 2011 2010 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 1,011,994 3,398,324 Payments to suppliers and employees (2,075,237) (4,027,766) Interest received 18,000 5,254

Interest and other costs of finance paid (157,981) (121,730)

R&D tax credit 559,429 -

Net cash used in operating activities 26 (643,795) (745,918)

CASH FLOWS FROM INVESTING ACTIVITIES

Expenditure on capitalised development costs 523,441 (1,011,312)

Expenditure on plant and equipment 30,946 (43,887)

Investment in associate 29,386 -

Net cash from investing activities 583,773 (1,055,199)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of equity instruments - 1,904,425

Transaction costs associated with issue of shares - (18,810)

Proceeds from borrowings 766,595 1,046,703

Repayment of borrowings (149,381) (582,265)

Net cash from financing activities 617,214 2,350,053

Net (decrease)/ increase in cash and cash equivalents (690,345) 548,936 Cash and cash equivalents at the beginning of the financial

year 828,891 279,955

Cash and cash equivalents at the end of the financial year 6 138,546 828,891

The above Statement of Cash Flows should be read in conjunction with the accompanying notes. For personal use only use personal For

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

1. Reporting Entity The consolidated financial statements of Advanced Engine Components Limited (“the Company”) for the year ended 30 June 2011 were authorised for issue in accordance with a resolution of the Directors on 18 November 2015. The Company was incorporated in Australia. The Group is a for-profit entity.

2. Basis of Preparation (a) Statement of Compliance These financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (“AASBs”) (including Australian interpretations) adopted by the Australian Accounting Standard Board (“AASB”) and the Corporations Act 2001 where possible (refer to note 2(b)). These financial statements of the Group also comply with the International Financial Reporting Standards (“IFRSs”) and interpretations adopted by the International Accounting Standards Board (“IASB”) where possible (refer to note 2(b)). The Group adopted new accounting standards issued during the year where possible. Adoption of these new and revised standards did not impact the Group’s financial position or performance for the year ended 30 June 2011.

The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (b) Incomplete records Due to funding difficulties throughout the period the Company reviewed various strategies for the ongoing development and commercialisation of its technology and products. As a result of this review, product development and trading operations were minimised and in April 2011 the operations of the Group were placed on care and maintenance. At its request the Company was suspended from trading on the Australian Securities Exchange (“ASX”) on 5 April 2011. As detailed in Note 22, on 6 March 2012, the Company announced that it had signed a Business Sale Agreement (BSA) with Westport Innovations (Australia) Pty Ltd (the Purchaser), under which the Purchaser would acquire the Company's non-China business assets, including all Australian inventory, plant & equipment, intellectual property and non-China contracts. In addition, on 12 November 2013, the Company announced that it had signed a co-marketing and supply agreement for its China business, as an extension of the BSA, under which it had agreed to sell its China inventory, equipment, customer and supplier contracts to the Purchaser.

(c) only use personal For Going concern The group incurred a loss of $8,952,292 for the year ended 30 June 2011. In addition, the Group has net current liabilities of and shareholders’ deficit $10,978,897.

The financial report has been prepared on the basis of a going concern, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The Directors believe it is appropriate to prepare these accounts on a going concern basis because under the DoCA effectuated on 23 September 2015 the Company has extinguished all liabilities associated with the previous administration of the Company is in the process of undertaking the following transactions:

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

• Completion of a capital raising to raise a minimum of $3,400,000. • Acquisition of Investia Technologies Pty Ltd (“Investia”), a software and technology development company. In consideration for the acquisition, ACE will issue to Investia shareholders: • 17,500,000 fully paid ACE shares at a deemed price of $0.02 and 17,500,000 options exercisable at $0.03 each, expiring three years from date of issue. • Up to 32,500,000 deferred consideration shares subject to certain milestones being achieved.

Refer to Note 22: Events subsequent to reporting date for further details.

The cash flow forecast indicates that based on the completion of the capital raising as described above, the consolidated entity will have sufficient cash flows to meet all commitments and working capital requirements for a period of at least 12 months from the signing of this financial report. The directors are also confident that all the necessary regulatory approvals and requirements will be met to enable the company to be re-instated on the ASX and for the transaction with Investia to proceed. Accordingly, the directors are satisfied that the going concern basis of the preparation is appropriate.

Should the Group not achieve the matters set out above, there is significant uncertainty whether the Group will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

The financial report does not contain any adjustments relating to the recoverability and classification of recorded assets or liabilities that might be necessary should the Group not be able to continue as a going concern.

3. Significant Accounting Policies The accounting policies set out below have been applied consistently in the year ended 30 June 2011 financial statements.

(a) Basis of consolidation Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

For the purposes of the financial statements for the year ended 30 June 2011, the Directors have not been able to obtain financial information of the group’s subsidiaries and accordingly, the financial information of the group’s subsidiaries have been deconsolidated effective 1 July 2010. (b) Foreign currency translation Functional and presentation currency

The functional currency of each entity within the Group is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the profit or loss.

For personal use only use personal For Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognized other comprehensive Income; otherwise the exchange difference is recognised in profit or loss.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows:

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting period; • income and expenses are translated at average exchange rates for the period; and • retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in the profit or loss in the period in which the operation is disposed of. (c) Income tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (d) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • Receivables and payables are stated with amounts of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Commitments or contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (e) Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating Leases The minimum lease payments made under operating leases are charged against profits in equal instalments over the accounting periods covered by the lease term where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item.

The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements and amortised. For personal use only use personal For

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Finance leases Leases which effectively transfer substantially all of the risks and rewards incidental to ownership of the leased item to the Company are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised.

Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and recognised directly in profit or loss.

(f) Impairment of assets with indefinite useful life The Group assesses at each reporting date whether there is an indication that an asset (or CGU) may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s or CGU’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell (FVLCS) and its value in use (VIU). The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the asset is tested as part of a larger CGU. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset/CGU is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. (g) Cash and cash equivalents Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. (h) Trade and other receivables Trade receivables, which generally have 30-90 day terms are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. (i) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: • Raw materials: purchase cost on a first in, first out basis • Finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. (j) Investments and jointly controlled entities A jointly controlled entity (JCE) is a corporation, partnership or other entity in which each venturer holds an interest. A JCE operates in the same way as other entities, except that a contractual arrangement establishes joint control. A JCE controls the assets of the joint venture, earns its own income and incurs its own liabilities and expenses. Interests in JCEs are accounted for using the equity method. (k) Plant and equipment Plant and equipment are carried at cost, less accumulated depreciation and any impairment. (i) Depreciation Depreciation is calculated on a straight – line basis over the estimated useful life of the asset as follows: • Plant and equipment – over 5 to 10 years

• Motor vehicle under finance lease – 5 years For personal use only use personal For The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each financial year end. The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Refer to note 3(f) for further details on impairment testing. An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Any gain or loss on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit and loss in the year the item is derecognised.

(ii) Revaluations Following initial recognition at cost, plant and equipment are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and any subsequent impairment losses. An independent expert valuer determined the fair value by reference to the market-based evidence, which is the amount, which the asset could be exchanged between knowledgeable parties at an arm’s length transactions. (l) Revenue recognition Interest Revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Sale of goods Revenue is recognised when the significant risks and rewards of the goods have passed to the buyer and can be measured reliably and is probable future economic benefits will flow to the entity. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer. (m) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. (n) Borrowings All borrowings are initially recognised as the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing borrowings are subsequent measured at amortised cost using the effective interest method. (o) Borrowing costs Borrowing costs are recognised as an expense when incurred, except where they are directly attributable to the acquisition or construction of qualifying assets, in which case they are capitalised as part of the cost of that asset. (p) Provisions Employee leave benefits Provision is made for employee benefits accumulated as a result of the employee rendering services up to the reporting date. These benefits including on costs expected to be settled within one year, together with benefits arising from wages and salaries and annual leave which will be settled after one year, are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. Long service leave including on costs, payable later than one year have been measured at the present value of estimated future cash outflows to be made for those benefits using the projected unit credit method. Warranty provisions Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually. (q) Government grants Government grants are assistance by the government in the form of transfers of resources to the Company in relation to the current development program. Government grants are not recognised until it is reasonable assurance that the grants will be received.

(r) Share-based payments transactions For personal use only use personal For The Company operated an Employee Share Option Plan (ESOP), which provides benefits to employees (including Directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity- settled transactions”). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. Options granted as part of employee remuneration have been valued using an option pricing model which takes into account the factors including the option exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

dividends on the underlying share, current market price of the underlying share, the expected life of the option, and any barriers associated with vesting. The fair value of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance condition are fulfilled, ending on the date on which the relevant employee become fully entitled to the option (“vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: • The extent to which the vesting period has expired, and • The number of options that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions included in the determination of fair value at grant date. No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market condition. Where the terms of an equity-settled option are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as result of the medication, as measured at the date of modification. Where an equity-settled option is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the option is recognised immediately. (s) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (t) Earnings per share (i) Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (u) Accounting estimates and judgements Estimated and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are: Impairment Testing The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data.

4. Other Income and Expenses 30 June 2011 30 June 2010 $ $

Otheronly use personal For income

Interest received 18,800 5,649 Foreign exchange gain 326,705 42,380 Government grant - 140,193 Insurance recovery for bad debts written off - 465,000 Other 27,585 72,003 373,090 725,225

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Administrative expenses Depreciation of plant and equipment 5,374 86,216 Occupancy expenses 221,726 264,794 Corporate expenses 265,645 411,598 Amortisation of leasehold improvements 23,350 101,296 Amortisation of intangible assets 693,397 310,906 Provision for warranties - 2,388 Employee entitlements 61,303 175,714 Research expenses 865,569 703,973 Inventory written off - 584,628 Bad debts written off 45,514 656,064 Other 587,942 150,392 2,769,820 3,447,969

4. Other Income and Expenses 30 June 2011 30 June 2010

$ $

Other operating expenses Foreign exchange loss 343,883 279,073 343,883 279,073

Finance costs Other loans - interest 151,074 124,293 Director related entities - interest 842,464 725,559 993,538 849,852

30 June 2011 30 June 2010 $ $ 5. Income Tax Benefit (a) Income tax recognised in profit or loss Income tax expense/(income) 559,429 626,904

The prima facie income tax expense on pre-tax accounting loss from operations reconciles to the income tax expense in the financial statements as follows: Loss from operations (9,511,721) (4,422,800) Income tax expenses calculated at 30% (2,853,516) (1,326,840) Research and development allowance 559,429 626,904 Share based payments * 29,016 Sundry items not deductible * 181,159

Temporary differences not recognised * (93,769) For personal use only use personal For Deferred tax assets relating to tax losses not recognised * 1,171,227 Other reconciling items 2,853,516 - Adjustment due to different tax rates between China and Australia * 39,207 Income tax benefit 559,429 626,904

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

* As detailed in Note 2 (b), the directors do not have access to sufficient information to enable this level of disclosure to be made.

Carry forward losses Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June 2011 because the directors do not believe it is appropriate to regard realisation of the future income tax benefits as probable. Deferred tax Disclosure of each type of temporary difference as at 30 June 2011 and the amount of any unrecognised deductible temporary differences or unused tax losses has not been included as the directors do not have access to sufficient information to enable this level of disclosure to be made.

30 Jun 2011 30 Jun 2010 $ $ 6. Cash and Cash Equivalents Cash at bank and on hand 138,546 828,891

Immediately following the appointment of Administrators on 29 August 2014 all bank accounts were frozen and remaining funds transferred to the Administrators account for the benefit of creditors.

30 Jun 2011 30 Jun 2010 $ $ 7. Trade and Other Receivables

(a) Current Trade and Other Receivables Trade and other receivable 3,558,375 785,392 Less: Provision for doubtful debts (3,522,746) (15,793) Net trade and other receivable 35,629 769,599 Loan to Monika ACE Limited 603,746 915,558 Write back of limited recourse loan (Note 13) (603,746) - Other receivables: Prepayments - 197,452 Deposits and GST receivables 15,405 72,951 Current trade and other receivables 51,034 1,955,560

As a result of the subsequent sale of the Australian and China business an impairment charge of $2,389,303 to reflect the non-recoverability of trade debtors particularly related to the China business was recorded.

8. Inventories 30 Jun 2011 30 Jun 2010 $ $

Raw Materials – at cost 357,155 372,209 Work in progress – at cost 269,720 197,792 Finished goods – at cost 185,011 1,134,616

only use personal For 811,886 1,704,617 During the financial year ended 30 June 2010 $584,628 was recognised as an expense for inventories carried at net realisable value. This is recognised in cost of sales.

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

9. Investment in Associate The Company had entered into a joint venture arrangement in Thailand to build new natural gas (“NG”) powered vehicles and re-power existing vehicles with NG engines. The Company is partners in joint venture with Monika Motors Limited (63%) and a Thai based individual (11%). The Company’s shareholding is 26%. The investment in the joint venture company was accounted for using the equity method of accounting. The carrying value of the investment has been written off at 30 June 2011 as the Directors do not consider the carrying value of the investment as recoverable.

As detailed in Note 2 (b), the directors do not have access to sufficient information to enable disclosures associated with the investment in an associate to be made.

10. Plant and Equipment

Plant and Leasehold Capital WIP Equipment Equipment Total $ $ $ $

Carrying value at 1 July 2009 119,240 119,814 179,872 418,926 Additions 17,797 - 25,709 43,506 Transfer from Capital WIP - 77,946 (77,946) - Depreciation expense (86,216) (101,296) - (187,512) Exchange difference 380 - - 380

Carrying value at 30 June 2010 51,201 96,464 127,635 275,300 Deconsolidation of ACE China assets (13,350) (13,350) Additions 1,821 - 42,478 44,299 Depreciation expense (5,374) (23,353) - (28,727) Carrying value at 30 June 2011 34,298 73,111 170,113 277,522

11. Intangible assets – Development Costs 30 Jun 2011 30 Jun 2010 $ $

Carrying value at 1 July 4,557,337 4,232,970 Additions – internal development 523,441 1,011,312 Government Grant received - (11,830) Amortisation charge (693,397) (310,906) Impairment (4,387,381) (364,209) Carrying value at 30 June - 4,557,337

Development costs have been capitalised at cost. This intangible asset has been assessed as having a finite life of five years and amortised using a straight line method over the period from commencement of commercial sales. As a result of subsequent sale of the asset, the carrying value of the asset has been written down to a nil value at 30 June 2011.

30 Jun 2011 30 Jun 2010 12. Trade and Other Payables $ $ Trade payables 1,065,875 523,379

Otheronly use personal For payables 426,143 747,846 Foreign currency payable 11,107 149,662 Trade and other payables 1,503,125 1,420,887

Following effectuation of the DOCA on 23 September 2015 (Refer to Note 22), all liabilities, contingent liabilities, obligations, warranties and long-term commitments of the Company were released.

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

13. Borrowings 30 Jun 2011 30 Jun 2010 $ $ Current Insurance premiums finance (i) - 149,381 Bridging Finance CCM Global Limited (ii) 137,269 - Non-recourse Loan from CCM Global Limited (iii) - 1,010,393 Loan from 698 Capital Asia Pacific Ltd (iv) 5,082,648 4,435,284 Loan from 698 Capital Asia Pacific Ltd (v) 3,412,282 - Director related loans (vi) 629,327 - Syndicate Loan from Norvest Corporate Pty Ltd (vii) 719,704 728,877 9,981,230 6,323,935

Non Current - secured Loan from 698 Capital Asia Pacific Ltd (refer note 13(v)) - 3,120,082 - 3,120,082

Following effectuation of the DOCA on 23 September 2015 (Refer to Note 22), all liabilities, contingent liabilities, obligations, warranties and long-term commitments of the Company were released. (i) Terms are 3.95% (2010: 3.95%) interest per annum on borrowed amount repayable over 10 months to February 2012. (ii) Terms are 9% interest per annum payable quarterly in arrears. Accrual of interest was ceased during the year as agreed with the lender due to the financial difficulties facing the Group. (iii) The Company facilitated a US$700,000 (balance at 30 June 2011: US$615,000) loan from an unrelated company, CCM Global Limited, to the Thailand joint venture company, Monika ACE Limited. The loan was delivered directly to Monika ACE Limited and did not involve cash flow through the Company. The Company has recorded an asset and a liability of US$700,000 (balance at 30 June 2011: US$615,000) in the financial statements for the years ended 30 June 2011. The amount payable to CCM Global Limited, by the Company, is not repayable until the amount receivable from Monika ACE Limited is collected. As at 30 June 2011, the receivable from Monika ACE Limited was impaired (see note7) and accordingly, the liability was written back against the asset as the liability is not considered payable. (iv) 698 Capital Asia Pacific Ltd’s (“698”) $750,000 short term loan and $3,000,000 sales financing facility, together with all outstanding interest, were consolidated as one loan repayable at call. Terms are 11.68% interest per annum payable quarterly in arrears. Accrual of interest was ceased during the year as agreed with the lender due to the financial difficulties facing the Group. (v) The $3,000,000 due under the convertible note that expired on 31 December 2009 was restructured as a loan and extended to 31 December 2011. Terms of the loan were: • 9.74% interest per annum payable quarterly in arrears. • Secured by a fixed and floating charge over the assets of the Company with the Norvest Syndicate having prior charge over the Irisbus Contract. As mentioned above, all charges were released with the sale of the Non China Business Assets in March 2012 and the debt released pursuant to the DOCA. (vi) Terms are 9% interest per annum payable quarterly in arrears. Accrual of interest was ceased during the year as agreed with the lender due to the financial difficulties facing the Group. (vii) Terms are 15% interest per annum. $30,000 of the principal was repaid on 12 April 2010. The remaining principal of $720,000 is repayable on demand. The Syndicate consists of parties related to the former Directors of ACE. Accrual of interest was ceased during the year as agreed with the lender due to the financial difficulties facing the Group.

For personal use only use personal For

ADVANCED ENGINE COMPONENTS ABN 67 009 081 770 ANNUAL REPORT 30 JUNE 2011 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

14. Provisions 30 Jun 2011 30 Jun 2010 $ $ Provision for annual leave 307,846 - Provision for long service leave 379,951 357,999 Provision for warranties 85,733 85,733 Total provision 773,530 443,732

Current 773,530 324,613 Non-current - 119,119

(i) Following effectuation of the DOCA on 23 September 2015 (Refer to Note 22), all liabilities, contingent liabilities, obligations, warranties and long-term commitments of the Company were released. (ii) The remaining provisions at 30 June 2011 were all transferred or settled as part of the Non China Business Asset Sale in March 2012.

15. Issued Capital No. $

(a) Fully paid ordinary shares 203,683,388 21,193,635 In the 30 June 2010 year - 479 shares were issued (for $61) on exercise of options; 21,818,182 fully paid shares were issued (for $1,200,000) by way of placement and 32,806,611 fully paid shares were issued (for $1,804,364) pursuant to a non-renounceable rights issue. There were no movements of issued capital during the year ended 30 June 2011. On 19 June 2015 the company completed a share consolidation, resulting in 5,092,289 post-consolidation shares being on issue at that date.

(b) Options As at 30 June 2011, the following were options over unissued ordinary shares: