SUPPLEMENTARY TARGET’S STATEMENT

NSX LIMITED Level 2, 117 Scott Street, Newcastle NSW, 2300 PO BOX 283, Newcastle, NSW, 2300 P: +61 2 4929 6377 F: +61 2 4929 1556

www.nsxa.com.au www.simvse.com.au

Incorporating NSX Limited ABN: 33 089 447 058 National Stock Exchange of Australia Limited ABN: 11 000 902 063 SIM Venture Securities Exchange Limited ABN: 41 087 708 898

This is an important document and requires your immediate attention. If you are in any doubt as

For personal use only use personal For to how to act, you should consult your financial or legal adviser as soon as possible. If you have recently sold all of your NSX Shares, please disregard this document.

Supplementary Target's Statement

This document is a supplementary target's statement under section 644 of the Corporations Act 2001 (Cth). It is the first supplementary target's statement (Supplementary Target's Statement) to the target's statement of NSX Limited (ACN 089 447 058) (NSX) dated 22 June 2011 (Original Target's Statement) in relation to the off-market takeover bid of FEX Equity Markets Pty Limited (ACN 150 665 044) (FEX) for all of the ordinary shares in NSX (Offer). This Supplementary Target's Statement supplements, and should be read together with, the Original Target's Statement. This Supplementary Target's Statement will prevail to the extent of any inconsistency with the Original Target's Statement. Unless the context requires otherwise, capitalised terms defined in the Original Target's Statement have the same meaning where used in this Supplementary Target's Statement. This Supplementary Target's Statement is dated, and was lodged with the Australian Securities and Investments Commission (ASIC) on 18 July 2011. Neither ASIC nor any of its officers takes any responsibility for the contents of this Supplementary Target's Statement. This Supplementary Target's Statement has been approved by a resolution passed by the directors of NSX other than Ann Bowering and Thomas Price who did not attend at the Board meeting approving this Supplementary Target’s Statement.

Signed for and on behalf of NSX Limited.

Michael Cox Chairman

18 July 2011

For personal use only use personal For

1 Independent Expert's Report.

On 28 June 2011, NSX announced that it would commission an Independent Expert's Report in relation the Offer. NSX engaged KPMG Corporate Finance (Aust) Pty Ltd (KPMG) to produce an Independent Expert's Report. KPMG has concluded that the Offer is fair and reasonable. A copy of the Independent Expert's Report is attached as Annexure A. 2 No Change to Director Recommendations.

Each of the Directors (other than Ann Bowering and Thomas Price) continue to recommend that you accept the Offer in the absence of a superior proposal. Details on how to accept the Offer are set out in section 12.3 of FEX’s Bidder’s Statement. 3 Timetable.

The General Meeting of NSX to consider an amendment of the NSX Constitution to remove the "unacceptable control situation" and voting limit provisions will be held at 11.00am on Thursday 28 July 2011 at the offices of NSX, Level 1, 102 Gloucester Street, The Rocks, Sydney, NSW 2000. The Offer is scheduled to close at 5pm Sydney time on 5 August 2011 (unless extended). If you have any questions in relation to the Offer, please call the NSX Shareholder Information Line on 02 4929 6377 (inside Australia) or +61 2 4929 6377 (outside Australia) between 10.00am and 4.00 pm (Sydney time) Monday to Friday. 4 Consents.

KPMG Corporate Finance (Aust) Pty Ltd has given and has not withdrawn before the date of this Supplementary Target's Statement its written consent to be named as Independent Expert and to the inclusion of the Independent Expert's Report in this Supplementary Target's Statement and statements said to be based on its Independent Expert's Report in the form and

context in which they are included. For personal use only use personal For

Page 1 of 4

Annexure A

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Page 2 of 4

ABCD KPMG Corporate Finance (Aust) Pty Ltd ABN: 43 007 363 215 Australian Financial Services Licence No. 246901 Telephone: +61 2 9335 7000 10 Shelley Street Facsimile: +61 2 9335 8021 Sydney NSW 2000 DX: 1056 Sydney www.kpmg.com.au P O Box H67 Australia Square 1213 Australia

The Independent Directors NSX Limited Level 2, 117 Scott Street Newcastle NSW 2300

18 July 2011

Dear Sirs

Independent expert report & Financial services guide

1 Introduction On 13 May 2011, NSX Limited (NSX) announced that it had received an off-market takeover bid from FEX Equity Markets Pty Ltd (FEX EM), a wholly owned subsidiary of Financial & Energy Exchange Limited (FEX), for all of the fully paid shares in NSX. Under the terms of the offer, FEX EM is offering cash consideration of 23.5 cents per fully paid NSX share (the Offer Price) for all of the NSX shares in which FEX EM and its associates do not already have an interest (the Offer). The Offer is subject to a number of conditions precedent including a minimum acceptance of at least 90% of the total number of NSX shares on issue.

The Bidder’s Statement was lodged with the Australian Securities and Investment Commission (ASIC) and NSX on 13 May 2011. In the Bidder’s Statement, FEX EM advised that as at 13 May 2011, FEX and its associates had a relevant interest in 24,901,650 NSX shares, giving FEX 25.14% voting power in NSX.

The Independent Directors of NSX have requested KPMG Corporate Finance (Aust) Pty Ltd (KPMG) prepare an Independent Expert’s Report (IER) to express an opinion as to whether the Offer is fair and reasonable to the fully paid shareholders of NSX other than FEX and its associates (Non-Associated NSX Shareholders).

This IER has been prepared by KPMG for the inclusion in the amended Target’s Statement to be sent to NSX Shareholders. This report should not be used for any other purposes or by any other party.

1.1 Parties to the Offer NSX operates the National Stock Exchange of Australia (NSXA) and the SIM Venture Securities Exchange (SIM VSE), a joint venture operated by NSX and FEX. NSX also operated a market for taxi licences in the Victorian metropolitan area (Taxi Market) however on 28 March 2011 its contract with the

For personal use only use personal For Victorian Government to operate this market expired. Additionally, on 31 March 2011, NSX sold its market for the trading of water entitlements (the WaterExchange) to Envex Water Pty Ltd (Envex Water).

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

The NSX is listed on the Australian Stock Exchange (ASX), and as at the close of trade on 12 July 2011, had a market capitalisation of $19.3 million.

FEX EM is a wholly owned subsidiary of FEX, an Australian unlisted public company. FEX was established in 2006 with the aim of offering globally competitive licensed marketplaces for both derivative and equity products with a particular focus on the development and listing of tradeable products within the commodity, energy and environmental asset classes. FEX’s main businesses are the Mercari Swap Execution Facility, SIM VSE and the Envex partnership with Macquarie Group Limited.

2 Summary of the Offer Should the Offer be accepted, NSX shareholders will receive 23.5 cents in cash for each NSX share on issue. This represents a premium of 14.6% above the last closing price prior to the announcement of the Offer. FEX EM has advised that it will make payment to accepting shareholders on or before the earlier of:

• one month after the Offer is accepted, or if the Offer is subject to a defeating condition when accepted, one month after any contract resulting from acceptance becomes unconditional

• provided the Offer has become unconditional, 21 days after the end of the offer period.

The Offer is subject to a number of conditions precedent that are outlined in section 2.1.

As previously noted, at the release of the Bidder’s Statement FEX and its associates had a relevant interest in 24,901,650 NSX shares1. The maximum amount of cash consideration that FEX EM would be required to pay under the Offer is $17,619,555 if:

• acceptances are received in respect to all of the NSX shares (in which FEX EM and its associates do not already have a relevant interest) on issue at the close of the Offer

• all NSX options are converted into NSX shares and accepted into the Offer.

FEX EM proposes to fund the Offer using existing cash balances of FEX which were in excess of $3,000,000 as at the date of the Bidder’s Statement and an unconditional loan of $15,000,000 from Vitron Werkbund Sud Australia Pty Limited (Vitron), an associated company. Vitron owns 11.81% of the issued capital of NSX2.

To the extent that the issued options are out of the money at the Offer price of 23.5 cents per share, the maximum consideration payable pursuant to the Offer would reduce to approximately $17.4 million.

1 FEX’s associates include Vitron Werkbund Sud Australia Pty Limited (Vitron) and Iron Mountain Pty Limited (Iron For personal use only use personal For Mountain). FEX holds 11,271,278 NSX shares, Vitron holds 11,700,000 NSX shares and Iron Mountain holds 1,930,372 NSX shares. 2 As at 1 July 2011.

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2.1 Conditions precedent

The Offer is subject to the following conditions:

• amendment to the NSX Constitution to remove “unacceptable control situation” provisions which currently impose certain restrictions on shareholders in NSX with voting power above 15%

• FEX EM and its associates acquiring a relevant interest in at least 90% of the total number of NSX shares on issue

• no “prescribed occurrences” as listed in section 652C of the Act occur during the offer period

• the ASX All Ordinaries Index not falling and remaining more than 20% below the closing level on 12 May 2011 (of 4776.6 points) for three consecutive trading days

• no material adverse change to NSX

• all other regulatory approvals and consents (if any) being obtained and no regulatory action being taken.

Further details in relation to the conditions precedent are set out in Section 12.9 of the Bidder’s Statement.

3 Requirement for our report

We understand that in the present circumstances there is no statutory requirement for NSX to obtain an IER. Notwithstanding this, the Directors of NSX have requested KPMG to prepare an IER to the Non- Associated NSX Shareholders. In approaching this assignment we have followed procedures as if an IER were required pursuant to Section 640 of the Corporations Act (the Act), where a target company must commission an IER when the bidder is connected with the target.

In undertaking the work associated with the IER, we have had regard to Regulatory Guide (RG) 111 issued by ASIC in relation to the content of the expert reports and ASIC RG 112 in respect of the independence of the expert.

RG 111 “Content of expert reports”, issued by ASIC, indicates the principles and matters which it expects a person preparing an IER to consider. The form of analysis for a takeover transaction considers whether the transaction is “fair and reasonable” and, as such, incorporates issues as to value. In particular:

• ‘fair and reasonable’ is not regarded as a compound phrase For personal use only use personal For • an offer is ‘fair’ if the value of the offer price or consideration is equal to or greater than the value of the securities subject to the offer. This comparison should be made:

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- assuming a knowledgeable and willing, but not anxious buyer and knowledgeable and willing, but not anxious seller acting at arms’ length

- assuming 100% ownership of the ‘target’ and irrespective of whether the consideration is scrip or cash. The expert should not consider the percentage holding of the ‘bidder’ or its associates in the target when making this comparison

• an offer is ‘reasonable’ if it is ‘fair’

• an offer may be reasonable if, despite not being fair, the expert believes after considering other significant factors, that there are sufficient reasons for shareholders to accept the offer in the absence of any higher bid before the close of the offer.

Under this framework, and in the absence of a higher offer, the Offer would be considered fair, and therefore reasonable, if the consideration received is equal to, or greater than, the assessed full underlying value of the shares of NSX, assuming 100% ownership of NSX. Should the Offer be considered not fair, it may still be reasonable if, despite not being fair, other significant factors and the alternatives are sufficient to indicate the offer should be accepted in the absence of any higher bid.

4 Summary of our opinion

In our opinion the Offer is fair and reasonable to NSX Shareholders.

4.1 The Offer is fair

Based upon a net assets approach, we have valued a share in the issued capital of NSX at between 5.7 cents and 11.4 cents. In this regard the Offer Price of $0.235 per NSX share exceeds the value of an ordinary NSX share. Accordingly, we have formed the view that the Offer is fair. In forming this view we have considered the valuation parameters implicit in the trading of comparable securities and transactions involving similar entities.

4.2 The Offer is reasonable

As we have formed the opinion that the Offer Price is fair it is, by definition, reasonable. In our view this conclusion is also supported by the following factors:

• NSX has incurred losses at the operating level (earnings before interest, tax, depreciation and amortisation) for the two years ended 30 June 2010 as well as for the half year ended 31 December 2011

• with additional licenses being issued for the establishment of new securities exchanges in Australia,

For personal use only use personal For the business environment confronting NSX will become more competitive

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• the number of trades on NSX during the year ended 30 June 2010 was below the level for the year ended 30 June 2006

• NSX is a small securities exchange, its ability to participate in global rationalisation and consolidation is limited

• the market for NSX shares is ‘thin’

• the Offer reflects a premium over the last traded price of NSX shares before the Offer was announced and provides an exit mechanism for shareholders

• no superior offer has emerged since the Offer was announced on 13 May 2011.

5 Other matters In forming our opinion, we have considered the interests of the Non-Associated NSX Shareholders as a whole. This advice therefore does not consider the financial situation, objectives or needs of individual Non-Associated NSX Shareholders. It is not practical or possible to assess the implications of the Offer on individual Non-Associated NSX Shareholders as their financial circumstances are not known. The decision of individual Non-Associated NSX Shareholders as to whether or not to approve the Offer is a matter for individuals based on, amongst other things, their risk profile, liquidity preference, investment strategy and tax position. Individual Non-Associated NSX Shareholders should therefore consider the appropriateness of our opinion to their specific circumstances before acting on it. As an individual’s decision to vote for or against the proposed resolutions may be influenced by his or her particular circumstances, we recommend that individual Non-Associated NSX Shareholders including residents of foreign jurisdictions seek their own independent professional advice.

Our report has also been prepared in accordance with the relevant provisions of the Act and other applicable Australian regulatory requirements. This report has been prepared solely for the purpose of assisting Non-Associated NSX Shareholders in considering the Offer. We do not assume any responsibility or liability to any other party as a result of reliance on this report for any other purpose.

All currency amounts in this report are denominated in Australian dollars unless otherwise stated. For personal use only use personal For

12075186_4 5 © 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International. ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Neither the whole nor any part of this report or its attachments or any reference thereto may be included in or attached to any document, other than the Target’s Statement to be sent to Non-Associated NSX Shareholders in relation to the Offer, without the prior written consent of KPMG as to the form and context in which it appears. KPMG consents to the inclusion of this report in the form and context in which it appears in the Target’s Statement.

The above opinion should be considered in conjunction with and not independently of the information set out in the remainder of this report, including the appendices.

Yours faithfully

Ian Jedlin Michael Jones Authorised representative Authorised representative

For personal use only use personal For

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Contents

Financial Services Guide 8

6 Scope of report 11 6.1 Purpose 11 6.2 Basis of assessment 11 6.3 Limitations and reliance on information 12 6.4 Disclosure of information 12

7 Industry overview 13 7.1 General 13 7.2 Stock exchanges 13

8 Profile of NSX 15 8.1 Overview 15 8.2 Operating businesses 15 8.3 Financials 18 8.4 Capital structure 20

9 Profile of FEX 25 9.1 Overview 25 9.2 Operating businesses 25 9.3 Funding the Offer 26

10 Assessment of the Offer 26 10.1 General 26 10.2 Approach 26 10.3 Implied price to net assets multiple 27 10.4 Comparable companies 27 10.5 Comparable transactions 29 10.6 Summary of assessment 30

Appendix 1 – KPMG Corporate Finance disclosures 31

Appendix 2 – Sources of information 33

Appendix 3 – Comparable companies 34

Appendix 4 – Comparable transactions 43 For personal use only use personal For Appendix 5 – Control premium 48

7 © 2011 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International.

Financial Services Guide Dated 18 July 2011

disclosure document or, if you are offered a financial What is a Financial Services Guide (FSG)? product for issue or sale, a Product Disclosure Statement This FSG is designed to help you to decide whether to (PDS). The purpose of the disclosure document or PDS use any of the general financial product advice provided is to help you make an informed decision in relation to a by KPMG Corporate Finance (Aust) Pty Ltd ABN 43 financial product. The contents of the disclosure 007 363 215, Australian Financial Services Licence document or PDS, as relevant, will include details such as Number 246901 (KPMG Corporate Finance) and Ian the risks, benefits and costs of acquiring the particular Jedlin and Michael Jones as authorised representatives of financial product. KPMG Corporate Finance (Authorised Representatives), authorised representative numbers Financial services that KPMG Corporate Finance and 404177 and 408373, respectively. the Authorised Representatives are authorised to provide This FSG includes information about: KPMG Corporate Finance holds an Australian Financial • KPMG Corporate Finance and its Authorised Services Licence, which authorises it to provide, amongst Representatives and how they can be contacted other services, financial product advice for the following classes of financial products: • the services KPMG Corporate Finance and its • Authorised Representatives are authorised to provide interests in managed investments schemes excluding investor directed portfolio services; and • how KPMG Corporate Finance and its Authorised • Representatives are paid securities,

• any relevant associations or relationships of KPMG to retail and wholesale clients. We provide financial Corporate Finance and its Authorised product advice when engaged to prepare a report in Representatives relation to a transaction relating to one of these types of financial products. The Authorised Representatives are authorised by KPMG Corporate Finance to provide • how complaints are dealt with as well as information about internal and external dispute resolution systems financial product advice on KPMG Corporate Finance's behalf. and how you can access them; and

• the compensation arrangements that KPMG KPMG Corporate Finance and the Authorised Corporate Finance has in place. Representatives’ responsibility to you KPMG Corporate Finance has been engaged by NSX The distribution of this FSG by the Authorised Limited (NSX or Client) to provide general financial Representatives has been authorised by KPMG product advice in the form of a Report to be included in Corporate Finance.

For personal use only use personal For the Supplementary Target’s Statement (Document) prepared by NSX in relation to FEX Equity Markets Pty This FSG forms part of an Independent Expert’s Report (Report) which has been prepared for inclusion in a

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. ABCD

Ltd’s offer to acquire all the shares in NSX that it and its KPMG Corporate Finance officers and representatives associates do not already own (Transaction). (including the Authorised Representatives) receive a salary or a partnership distribution from KPMG’s You have not engaged KPMG Corporate Finance or the Australian professional advisory and accounting practice Authorised Representatives directly but have received a (the KPMG Partnership). KPMG Corporate Finance's copy of the Report because you have been provided with representatives (including the Authorised a copy of the Document. Neither KPMG Corporate Representatives) are eligible for bonuses based on Finance nor the Authorised Representatives are acting for overall productivity. Bonuses and other remuneration and any person other than the Client. benefits are not provided directly in connection with any engagement for the provision of general financial product KPMG Corporate Finance and the Authorised advice in the Report. Representatives are responsible and accountable to you for ensuring that there is a reasonable basis for the Further details may be provided on request. conclusions in the Report. Referrals General Advice Neither KPMG Corporate Finance nor the Authorised As KPMG Corporate Finance has been engaged by the Representatives pay commissions or provide any other Client, the Report only contains general advice as it has benefits to any person for referring customers to them in been prepared without taking into account your personal connection with a Report. objectives, financial situation or needs. Associations and relationships You should consider the appropriateness of the general Through a variety of corporate and trust structures KPMG advice in the Report having regard to your circumstances Corporate Finance is controlled by and operates as part before you act on the general advice contained in the of the KPMG Partnership. KPMG Corporate Finance's Report. directors may be partners in the KPMG Partnership. The Authorised Representative Ian Jedlin is a partner in the You should also consider the other parts of the Document KPMG Partnership. The Authorised Representative before making any decision in relation to the Transaction. Michael Jones is not a partner in the KPMG Partnership. The financial product advice in the Report is provided by Fees KPMG Corporate Finance may receive and KPMG Corporate Finance and the Authorised remuneration or other benefits received by our Representatives and not by the KPMG Partnership. representatives

KPMG Corporate Finance charges fees for preparing From time to time KPMG Corporate Finance, the KPMG reports. These fees will usually be agreed with, and paid Partnership and related entities (KPMG entities) may by, the Client. Fees are agreed on either a fixed fee or a provide professional services, including audit, tax and time cost basis. In this instance, the Client has agreed to financial advisory services, to companies and issuers of pay KPMG Corporate Finance $60,000 (excluding GST financial products in the ordinary course of their and out of pocket expenses) for preparing the Report. businesses. KPMG Corporate Finance and its officers, KPMG entities have provided advisory services to NSX representatives,only use personal For related entities and associates will not receive any other fee or benefit in connection with the for which professional fees were received. Over the past provision of the Report. two years professional fees of $50,000 have been received from NSX. KPMG entities have not provided FEX Equity Markets Pty Ltd any services over the past

ABCD

two years. None of those services have related to the The Australian Securities and Investments Commission Transaction or alternatives to the Transaction. also has a freecall infoline on 1300 300 630 which you may use to obtain information about your rights. No individual involved in the preparation of this Report holds a substantial interest in, or is a substantial creditor Compensation arrangements of, the Client or has other material financial interests in KPMG Corporate Finance has professional indemnity the transaction. insurance cover as required by the Corporations Act 2001(Cth). Complaints resolution

Internal complaints resolution process Contact Details

If you have a complaint, please let either KPMG You may contact KPMG Corporate Finance or the Corporate Finance or the Authorised Representatives Authorised Representative using the contact details: know. Formal complaints should be sent in writing to The KPMG Corporate Finance (Aust) Pty Ltd Complaints Officer, KPMG, PO Box H67, Australia 10 Shelley St Square, Sydney NSW 1213. If you have difficulty in Sydney NSW 2000 putting your complaint in writing, please telephone the Complaints Officer on 02 9335 7000 and they will assist PO Box H67 you in documenting your complaint. Australia Square NSW 1213 Telephone: (02) 9335 7000 Written complaints are recorded, acknowledged within 5 Facsimile: (02) 9335 7200 days and investigated. As soon as practical, and not more than 45 days after receiving the written complaint, the Ian Jedlin response to your complaint will be advised in writing. C/O KPMG PO Box H67 External complaints resolution process Australia Square NSW 1213 If KPMG Corporate Finance or the Authorised Telephone: (02) 9335 7000 Representatives cannot resolve your complaint to your Facsimile: (02) 9335 7200 satisfaction within 45 days, you can refer the matter to the

Financial Ombudsman Service (FOS). FOS is an Michael Jones independent company that has been established to C/O KPMG provide free advice and assistance to consumers to help PO Box H67 in resolving complaints relating to the financial services Australia Square industry. NSW 1213 Telephone: (02) 9335 7000 Further details about FOS are available at the FOS Facsimile: (02) 9335 7200 website www.fos.org.au or by contacting them directly at:

Address: Financial Ombudsman Service Limited, GPO Box 3, Melbourne Victoria 3001

Telephone:only use personal For 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected].

ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

6 Scope of report

6.1 Purpose

The Independent Directors of NSX have requested KPMG to prepare an IER advising whether, in our opinion, the Offer is fair and reasonable to Non-Associated NSX Shareholders.

6.2 Basis of assessment 6.2.1 Guidance RG 111 “Content of expert reports”, as issued by the ASIC, provides guidance in relation to the content of independent expert reports prepared for transactions under Chapter 5, 6 and 6A of the Act. RG 111 refers to a ‘control transaction’ as being the acquisition of a controlling stake in a company that could be achieved by way of a takeover offer, compulsory acquisition, buy-out, scheme of arrangement and capital reorganisation. The Offer is a takeover offer by FEX EM for the shares in NSX and as such we have considered the analysis that should be undertaken by an expert for a takeover bid. In respect of control transactions, under RG 111, fair and reasonable are separate tests.

6.2.2 Fairness RG 111 defines an offer as fair when the value of the consideration is equal to or greater than the value of the securities subject to the offer. The comparison should be made assuming a knowledgeable and willing but not anxious buyer and knowledgeable and willing but not anxious seller acting at arms’ length, 100% ownership of the ‘target’ and irrespective of whether the consideration is scrip or cash. In addition the expert should not consider the percentage holding of the ‘bidder’ or its associates in the target when making this comparison.

Accordingly, KPMG has assessed whether the Offer is fair by determining the valuation parameters implicit in the Offer (assuming 100% control) and comparing these with the observable market comparisons after allowing for any specific factors associated with an investment in NSX.

6.2.3 Reasonableness According to RG 111 (in respect of control transactions), an offer is reasonable if it is fair. However, an offer can also be reasonable even if it is not fair if the expert believes that there are sufficient reasons for shareholders to accept the offer in the absence of any higher bid before the close of the offer. To assess the reasonableness of the Offer, KPMG has considered the following factors:

• the current issues facing NSX

• alternative options available

• advantages and disadvantages and other considerations of the Offer

• implications if the Offer is not approved. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

6.3 Limitations and reliance on information

In preparing this report and arriving at our opinion, we have considered the information detailed in Appendix 2 of this report. Nothing in this report should be taken to imply that KPMG has verified any information supplied to us, or has in any way carried out an audit of the books of account or other records of NSX for the purposes of this report.

Further, we note that an important part of the information base used in forming our opinion is comprised of the opinions and judgements of management. In addition, we have also had discussions with NSX’s management in relation to the nature of its business operations, its specific risks and opportunities, its historical results and its prospects for the foreseeable future. This type of information has been evaluated through analysis, enquiry and review to the extent practical. However, such information is often not capable of external verification or validation.

We have no reason to believe that any material facts have been withheld from us but do not warrant that our inquiries have revealed all of the matters which an audit or extensive examination might disclose. The statements and opinions included in this report are given in good faith, and in the belief that such statements and opinions are not false or misleading.

The information provided to KPMG included forecasts/projections and other statements and assumptions about future matters (forward looking financial information) prepared by the management of NSX. Whilst KPMG has relied upon this forward looking financial information in preparing this report, NSX remains responsible for all aspects of this forward looking financial information. Achievement of forecast/projected results is not warranted or guaranteed by KPMG. Forward looking financial information is by its nature uncertain and is dependent on a number of future events that cannot be guaranteed. Actual results may vary significantly from the forecasts/projections relied on by KPMG. Any variations from forecasts/projections may affect our valuation and opinion.

It is not the role of the independent expert to undertake the commercial and legal due diligence that a company and its advisers may undertake. The Independent Directors of NSX, together with the Company’s legal advisers, are responsible for conducting due diligence in relation to NSX. KPMG provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process, which is outside our control and beyond the scope of this report. We have assumed that the due diligence process has been and is being conducted in an adequate and appropriate manner.

The opinion of KPMG is based on prevailing market, economic and other conditions at the date of this report. Conditions can change over relatively short periods of time. Any subsequent changes in these conditions could impact upon our opinion. We note that we have not undertaken to update our report for events or circumstances arising after the date of this report other than those of a material nature which would impact upon our opinion.

6.4 Disclosure of information

In preparing this report, KPMG has had access to all financial information considered necessary in order to provide the required opinion. NSX has requested KPMG limit the disclosure of some commercially

For personal use only use personal For sensitive information relating to NSX and its subsidiaries. This request has been made on the basis of the commercially sensitive and confidential nature of the operational and financial information of the

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

operating entities comprising NSX. As such the information in this report has been limited to the type of information that is regularly placed into the public domain by NSX.

7 Industry overview

7.1 General

The financial services sector in Australia is a large and integral part of the Australian economy. The growth and integration into the Australian economy has largely been contributed to the deregulation of the banking system in the early eighties and the introduction of compulsory superannuation contributions in the early nineties.

The largest services provided to the financial sector include stock exchange services, share registry services, custodial and trustee services, investment management services and credit card administration. These services encompass the Stock Exchange and Share Registry Services Industry in Australia. IBISWorld estimates that the expected revenue for the industry will grow to $19.5 billion over the next 5 years, up from $11.4 billion in 2010-11, which represents a compound annual growth rate of approximately 11.4% for this period.

Set out in the figure below is the revenue breakdown by service type for the year ended 30 June 2010 (FY10) for the industry.

Figure 1: FY10 Stock Exchange and Share Registry Services Industry revenue breakdown

Trustees 6% Stock exchanges 6% Other 27% Share registries 6%

Credit car administration 15% Custody, administration & investment management 40%

Source: IBISWorld – Stock exchange and share registry services in Australia – April 2011

The stock exchanges sector contributes approximately $684 million, or approximately 6.0%, of the total industry revenue.

7.2 Stock exchanges

Stock exchanges provide trading facilities, or a “market”, for participants to trade stocks and other security instruments. The level of activity on stock exchanges is dependent on current economic and For personal use only use personal For investor sentiment, as well as the value of and turnover of financial assets. This in turn is directly influenced by domestic and international financial market conditions.

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

The largest stock exchange service provider in Australia is the ASX, which was formed by the merger between the Sydney Futures Exchange and the Australian Stock Exchange in 2006. As at 30 June 2011, the ASX had 2,247 listed entities on the exchange, with 160 new listings for the year ended 30 June 2011 (FY11) representing a 73% increase from FY10. The total market capitalisation of the entities listed on the ASX was approximately at $1.35 trillion at 30 June 2011.

The ASX offers the provision of:

• a market for the raising of new capital from investors • a market for the trading of this capital between investors • a market for the exchange of options contracts • detailed information about listed securities along with information about the market in general • a market regulatory function.

7.2.1 Competition Competition in the equity stock exchange sector is currently light, with the ASX dominating the market. Under the Act, an operator of a financial market, such as a trading platform for equities, must hold an Australian Market Licence (AML). The entities that currently hold an AML are the NSX, the ASX, the Asian Pacific Exchange Limited (APEL) and Chi-X (which was granted a conditional AML in May 2011).

The regulatory barriers to become a national stock exchange are relatively high while the other barriers, such as the cost of setting up a trading platform, are declining as a result of developments in technology. New entrants must obtain an AML from ASIC, and once granted, must meet a range of on-going obligations. ASIC guidelines require that an entrant must be of good standing and appropriate, must be commercially suitable and apt and have adequate financial resources. In addition, to operate successfully in the market place an adequate trading platform and specific technology is required. Moreover, since stock exchanges are capital-intensive with large economies of scale, new entrants must achieve a certain level of trading volume to operate profitably, giving larger established exchanges a competitive advantage.

7.2.2 Outlook Future growth in the demand for stock exchange services will be driven by increasing funds under management underpinned by superannuation and demographic trends. In the short to medium term industry consolidation, both domestically and globally, is expected to continue which is likely to increase competition, particularly for major industry participants. The entrance of overseas competitors and the introduction of alternative trading systems will likely result in a structural shift within the industry. For example, Chi-X, a low-cost platform for equities and managed investments operated by Japanese investment bank Nomura, has recently received a conditional AML, and other entities such as Liquidnet have applied to ASIC for an AML. Alternative trading systems are likely to attract some of the institutional trading that currently takes place on the ASX. Moreover, we understand that the entrance of alternative trading systems in overseas markets has resulted in increased price competition and a

For personal use only use personal For reduction in trading costs.

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

8 Profile of NSX

8.1 Overview

NSX is an Australian public company which listed on the ASX on 13 January 2005. NSX operates the NSXA, the Taxi Market, the WaterExchange and SIM VSE. The figure below outlines the organisation structure of the NSX.

NSX Limited

SIM VSE Group BSX Services Pty BSX Systems Pty NSX Services Pty NSXA WGMPL Pty Ltd Holdings Limited Ltd Ltd Ltd

NSX Clearing NSX Fidelity SIM VSE Nominees Pty TWEL Pty Ltd Fund Ltd

WEX SIM Fidelity Co mp en sation Fund Fund

SIM VSE is operated as a joint venture between NSX and FEX formed in June 2010. As part of the joint venture agreement, BSX Services and BSX Systems were transferred from the SIM Group to NSX. Currently, FEX has contributed $500,000 to the joint venture for an 8.33% holding in SIM VSE Group Holdings Limited (SIM VSE Group) (formerly, BSX Group Holdings Ltd), the parent of SIM VSE. Ultimately, FEX may contribute an additional $2.5 million in working capital to earn a total interest in SIM VSE Group of 50%.

8.2 Operating businesses

The figure set out below outlines the revenue breakdown for the NSX operating businesses for FY10.

Figure 2: FY10 NSX business revenue breakdown

Waterexchange 24%

Stock exchanges Taxi Market 60%

16% For personal use only use personal For

Source: NSX Annual Report 2010 The following section provides an overview of the NSX businesses.

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

8.2.1 Stock Exchanges The NSX operates two stock exchanges, the NSXA and the SIM VSE, which provide a low cost alternative to the ASX for companies that wish to publically list their securities to raise capital from a wider market. The NSXA and the SIM VSE use the X-Stream Nasdaq OMX trading system to provide a robust and efficient trading market.

NSXA The NSXA provides the listing, capital raising and related stock exchange services to small to medium enterprises. NSXA operates an integrated platform for electronic trading and settlement. The market is not certificated (i.e. shareholders do not receive share certificates) and settlement is achieved via the use of the ASX Settlement and Transfer Corporation (ASTC) CHESS platform.

SIM VSE SIM VSE was officially launched on 30 June 2010 to operate an equities exchange for companies with Cleantech credentials, for example, companies operating in the clean technology, renewable energy and related technology and service sectors. The market is not certificated and settlement is achieved via the use of the ASTC CHESS platform.

8.2.1.1 Regulatory requirements As holders of AMLs, both NSXA and SIM VSE are required, amongst other things, to have available adequate resources (including financial, technological, and human resources) to provide the financial services covered by their licences and to carry out supervisory arrangements. In particular, NSXA and SIM VSE are required to have in place retail investor compensation arrangements in accordance with Part 7.5 Division 3 of the Corporations Act. NSXA is required to have in place minimum cover of $800,0003 to compensate investors, and SIM VSE is required to have in place minimum cover of $1,000,000 to compensate investors.

8.2.1.2 Performance The stock exchange businesses are the traditional business of NSX and contribute the greatest proportion of the company’s total revenue. The main drivers of revenue for the stock exchanges are application and annual listing fees charged to companies who wish to list on the NSXA or the SIM VSE. The fee revenue generated is dependent on the market capitalisation of the listed entity at the time of listing and subsequently as at 30 June each year.

Set out in the table below are key statistics relating to both exchanges from the year ended 30 June 2007 (FY07) to FY11. Table 1: NSX stock exchanges listing history FY07 FY08 FY09 FY10 FY11 Listed securities (no.) 111 123 136 151 138 Market Capitalisation ($m) 1,174 1,238 1,250 2,517 2,857

Source: NSX Limited Annual Report 2010, NSX Limited For personal use only use personal For

3 Of this amount a minimum of $100,000 is sourced from the NSX Fidelity Fund and the remaining $700,000 is in the form of a cash deposit provided by NSX held as a letter of credit with Westpac Bank.

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Set out in the table below are key operational statistics relating to both exchanges from FY07 to FY11. Table 2: NSX stock exchanges trading history FY07 FY08 FY09 FY10 FY11 Volume traded (‘000 shares) 85,548 53,872 22,635 31,315 247,718 Value traded ($’000) 42,369 27,789 8,248 9,943 152,207 Trades (no.) 1,833 1,470 900 1,269 2,578 Source: NSX Limited Annual Report 2010, NSX Limited

The listing of African Petroleum Corporation and International Petroleum Limited on the NSXA in June 2010 more than doubled the market capitalisation of companies listed. The listing has brought additional stockbrokers and advisors to the NSXA market. We understand that there was only one new listing on the NSXA during FY11.

8.2.2 Taxi Market BSX Services operated a Melbourne based trading platform for the trading of taxi licences and assignments in the Victorian metropolitan area which was developed alongside the Victorian government and industry bodies. The Taxi Market has a national trading platform, the National Licence Exchange, which is available to taxi brokers outside the Victorian metropolitan area. However, while the platform is in place the framework for trading on a national scale is yet to be launched and implemented.

The taxi market contract with the Victorian Government expired in March 2011 at which time the Government has the option to extend the contract for an additional two years. On 9 March 2011, the Victorian Taxi Directorate chose not to exercise the option and the contract terminated on 26 March 2011. We note that BSX Services sector contributed:

• a profit before tax of $13,000 for FY10

• a loss before tax of $9,000 for the half year ended 31 December 2010 (1H11).

8.2.3 WaterExchange Watergroup Management Pty Ltd, which operated the WaterExchange, was acquired by NSX in late 2007 for $10.8 million. The WaterExchange is a web-based facility, www.waterexchange.com.au, with the primary function to facilitate the trading of both temporary and permanent water entitlements. WaterExchange earns fees from the trading in these rights and manages the settlement process on behalf of brokers and their clients.

During 2010, to reduce the continued losses from the WaterExchange, the NSX Board sought to find a buyer for the business. On 17 December 2010, the NSX entered into a binding agreement with Envex Water to sell selected assets of WaterExchange and cease to operate the market. The major assets to be sold include the software, associated databases, intellectual property, domain names and website that is used to operate the WaterExchange and WaterAuction systems. Envex Water is a joint venture between Macquarie Investment Holdings Limited, FEX and Climate Exchange Plc. The transaction was completed

on 31 March 2011. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

8.3 Financials 8.3.1 Income statement Set out in the table below are the audited consolidated income statements for NSX for FY10 and the reviewed consolidated income statements for NSX for 1H11.

Table 3: NSX income statement $ FY10 1H11 Revenue 2,390,478 890,354 Expenses Employee benefits expense (1,380,085) (645,770) Consultancy expenses (112,010) (268,844) Compliance & legal expenses (304,171) (78,659) Market trading expenses (591,055) (400,458) Occupancy expenses (195,728) (106,697) General administration expenses (578,684) (253,345) Other expenses (303,007) (125,385) Total expenses (3,464,740) (1,879,158) EBITDA (normalised) (1,074,262) (988,804) Joint venture formation expenses (312,483) - Legal (Bladier) (357,671) - EBITDA (including adjustments) (1,744,416) (988,804) Depreciation, amortisation & impairments (195,265) (42,222) EBIT (1,939,681) (1,031,026) Net interest 156,089 119,298 Net profit/(loss) before tax (1,783,592) (911,728) Net profit/(loss) after tax (1,783,592) (911,728) Source: NSX Limited 31 December 2010 half year report and NSX Limited Annual Report 2010

In relation to the income statement, we note:

• revenues comprise listing fees, water trading fees, taxi market income and exchange hosting service fees. Revenues have been negatively impacted due to lower water trading fees resulting from recent wetter weather conditions and minimal new listings on NSXA and SIM VSE

• joint venture formation expenses relate to expenses incurred in relation to SIM VSE

• during FY10, the Victorian County Court ruled the case Bladier versus NSX Limited in favour of the plaintiff (Bladier) . The case related to the contractual entitlements to Mr Bladier as Managing Director of NSX. Pursuant to the ruling, $428,182, comprising $357,671 of direct payment from NSX with the balance made up of insurance entitlement and interest, was paid to Bladier

• throughout FY10 and 1H11, NSX management have been pursuing cost reduction and revenue

improvement initiatives. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

More broadly we note:

• NSX has incurred losses since 2001

• in the NSX Target Statement it is noted that the “current level of business activity means that the Company is presently still expending more money than it derives from its customers”.

8.3.2 Balance sheet Set out in the table below is the audited consolidated balance sheet for NSX as at 30 June 2010 and the reviewed consolidated balance sheet as at 31 December 2010.

Table 4: NSX balance sheet As at $ 30 June 2010 31 December 2010 Current assets Cash and cash equivalents 3,956,045 2,471,122 Trade and other receivables 144,216 263,462 Commercial bills 2,500,000 3,500,000 Other current assets 108,519 352,792 Total current assets 6,708,780 6,587,376 Property, plant and equipment 144,190 125,506 Total non-current assets 144,190 125,506 Total assets 6,852,970 6,712,882 Current liabilities Trade and other payables 660,131 947,122 Short-term provisions 63,483 42,701 Total current liabilities 723,614 989,823 Other long-term provisions 58,426 63,857 Total non-current liabilities 58,426 63,857 Total liabilities 782,040 1,053,680 Net assets 6,070,930 5,659,202 Issued capital 35,276,833 35,732,331 Retained earnings (29,205,903) (30,106,753) Parent interest 6,070,930 5,625,578 Non-controlling interest - 33,624 Total equity 6,070,930 5,659,202 Source: NSX Limited 31 December 2010 half year report

In relation to the balance sheet, we note:

• of the cash balance held, $1.7 million is held in trust as part of NSX’s market compensation arrangements

• For personal use only use personal For non-controlling interest relates to FEX’s 8.33% ownership in SIM Group.

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

8.3.3 Cash flow statement Set out in the table below are the audited consolidated cash flow statements for NSX for FY10 and the reviewed consolidated cash flow statements for NSX for 1H11. Table 5: NSX Limited cash flow statement $ FY10 1H11 Cash from operating activities Receipts from customers 2,788,059 1,259,064 Payments to suppliers and employees (5,112,061) (2,339,747) Interest received 198,431 119,298 Finance costs (42,342) - Cash flow from operating activities (2,167,913) (961,385) Cash from investing activities Acquisition of property, plant and equipment (52,976) (23,538) Cash flow from investing activities (52,976) (23,538) Cash from financing activities Proceeds from issuing shares 4,285,054 500,000 Cost of issue of shares (78,817) - Cash flow from financing activities 4,206,237 500,000 Net increase (decrease) in cash held 1,985,348 (484,923) Cash at beginning of year 4,470,697 6,456,045 Cash at end of year 6,456,045 5,971,122 Source: NSX Limited 31 December 2009 half year report and NSX Limited Annual Report 2009

In relation to the cash flow statement, we note:

• under their joint venture arrangement, on 6 October 2010 NSX issued 8% of SIM Group Holdings Limited share capital to FEX after the receipt of FEX’s first instalment of $500,000

• during FY10 NSX issued 16,446,200 new shares at $0.17 per share in a non-renounceable rights issue to shareholders and 7,446,000 in a share placement to New Equity World Pty Ltd at $0.20 per share.

8.4 Capital structure 8.4.1 Share capital As at 1 July 2011, NSX had 99.1 million fully paid ordinary shares and 1.5 million partly paid shares on

issue. NSX’s top 10 shareholders is summarised in the tables below. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Table 6: Top 10 fully paid ordinary shareholders as at 1 July 2011 Balance as at % Holder name 1 July 2011 interest Vitron 11,700,000 11.81% New Equity World Pty Ltd 11,270,520 11.38% FEX 11,258,802 11.37% Irrico Australia Pty Ltd 10,500,000 10.60% WSE Investment Fund No 2 Pty Ltd 9,113,898 9.20% Asteria T & I Pty Ltd 7,500,000 7.57% Australian Mining Group Ltd 7,432,500 7.50% Citicorp Nominees Pty Ltd 5,313,261 5.36% Renergy Pty Ltd 4,788,665 4.83% Lin Lang International Trading Pty Ltd 2,220,000 2.24% Total top 10 shareholders 81,097,646 81.87% Total invested capital 99,059,556 100.00% Source: NSX Limited

We note that:

• FEX has ultimate control over Vitron

• in January 2010, NSX completed a rights issue at $0.17 per share in order to:

- strengthen the balance sheet

- satisfy regulatory requirements

- provide capital for growth.

Table 7: Top partly paid shareholders as at 1 July 2011 Balance as at % Holder name 16-Apr-10 interest First Newcastle Pty Limited 700,000 46.67% Roebeach Pty Ltd 700,000 46.67% WCL Nominees Pty Limited 100,000 6.67% Total top shareholders 1,500,000 100.00% Total invested capital 1,500,000 100.00% Source: NSX Limited

The partly paid shares are paid to 1 cent with the remaining of 99 cents payable at the holder’s discretion. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Table 8: Spread of shareholders as at 11 July 2011 Number of holders Range Ordinary Partly paid 1 – 1,000 46 - 1,001 – 5,000 196 - 5,001 – 10,000 107 - 10,001 – 100,000 188 1 101,001 and over 39 2 Total 576 3 Source: NSX Limited

As at 11 July 2011, the number of shareholdings held in less than marketable parcels was 1494. The number of unmarketable shares was 236,135, or 0.24% of shares on issue.

8.4.2 Options As at 8 July 2011, there were a total of 737,383 options on issue, these being:

• 413,971 unlisted options, with an exercise price of $0.50 and expiring on 15 October 2016. These options are ultimately held by Richard Symon (an ex-director)

• 323,412 unlisted options, with an exercise price of $0.50 and expiring on 15 October 2017. These options are owned by NSX employees Scott Evans and Ian Craig in equal proportions.

8.4.3 Directors interests The following table outlines the director’s shareholdings in NSX as at 8 July 2011.

Table 9: Directors’ share holdings Director’s name Fully paid shares Partly paid shares Number of % of total Number of % of total

shares held shares on issue shares held shares on issue Michael Cox 2,609 0.00% (2) 700,000 46.67% Thomas Price (1) 11,259,278 11.41% - 0.00% Ann Bowering - 0.00% - 0.00% Peter Koller (alternate for Thomas Price) - 0.00% - 0.00% Bruce McNab (alternate for Ann Bowering) - 0.00% - 0.00% Total directors’ securities 11,261,887 11.41% 700,000 46.67% Total securities on issue 98,677,203 1,500,000 Source: NSX Target’s Statement - 22 June 2011, Appendix 3Y Change of Director’s Interest Notice Note: (1) Thomas Price’s relevant interest in NSX shares (as a Director of FEX). He does not personally hold NSX shares. (2) 0.0026% The alternative Directors, Peter Koller and Bruce McNab, were appointed to overcome any perceived

conflicts of interest that may have arisen with Thomas Price and Ann Bowering in relation to the Offer. For personal use only use personal For

4 At market price of $0.18 per share.

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

8.4.4 Share price performance Set out in the figure below is NSX’s daily closing share price and volume of shares traded for the three years to 5 July 2011.

Figure 4: NSX share price performance 0.35 1,400

0.30 Announcement 1,200 Date 0.25 1,000 Volume ('000) 0.20 800

0.15 600 Price ($) 0.10 400

0.05 200

0.00 0

Volume Closing price

Source: Capital IQ

In relation to the figure above, we note:

• on 14 August 2009, Tiga Trading Pty Ltd (Tiga) acquired 6.3 million NSX shares on market. Tiga is ultimately owned by Thorney Investment Group

• on 30 November 2009, NSX announced that it had successfully placed 10 percent of the issued capital in new capital

• since 13 May 2011 (Announcement Date), NSX has traded relatively flat with an average closing price of $0.22, and maximum and minimum closing prices of $0.23 and $0.19, respectively.

8.4.5 Volume weighted average price and liquidity analysis On the last trading day prior to the Announcement Date NSX closed at $0.21, with the Offer representing a premium of 14.6% to this price. Set out in the table below is an analysis of the volume weighted

average price (VWAP) and historical liquidity of NSX for the 12 months prior to Announcement Date. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Table 10: NSX VWAP – 12 months to 12 May 2011 Price Price Price Cumulative Cumulative Issued Period (low) (high) VWAP value volume capital $ $ $ $’000 ‘’000 % 1 week 0.21 0.21 0.21 2 12 0.0 1 month 0.20 0.22 0.20 40 203 0.2 3 months 0.20 0.22 0.20 101 497 0.5 6 months 0.19 0.25 0.21 245 1,161 1.2 12 months 0.17 0.25 0.19 1,667 8,841 9.0 Source: Capital IQ In relation to the table above, we note 1.2% of NSX shares on issue traded in the six months prior to Announcement Date, and 9.0% in the 12 months prior to Announcement Date. Given the low trading volumes of NSX, it is reasonable to conclude that NSX shares are illiquid and hence caution needs to be taken in considering the traded share price as a proxy for value.

The following table is an analysis of the VWAP since Announcement Date to 5 July 2011. Table 11: NSX VWAP – Announcement Date to 5 July 2011 Price Price Price Cumulative Cumulative Issued Period (low) (high) VWAP value volume capital $ $ $ $’000 ‘’000 % 1 week (29 June 2011 to 5 July 2011) 0.20 0.20 0.20 2.2 11.0 0.0 1 month (6 June 2011 to 5 July 2011) 0.19 0.23 0.22 41.6 192.6 0.2 Since Announcement Date 0.19 0.23 0.22 64.7 297.9 0.3 Source: Capital IQ In relation to the table above, we note that from Announcement Date to 5 July 2011, 0.3% of NSX shares on issue were traded at prices which did not exceed the Offer Price.

For completeness, set out in the table below is a comparison of the volume of shares traded in NSX (reproduced from Table 10) and ASX over the 12 months prior to Announcement Date. Table 12: Liquidity analysis for the 12 months ending 12 May 2011 NSX Limited ASX Limited Cumulative Issued Cumulative Issued volume capital Volume capital Period '000 % '000 % 1 week 12 0.0 3,567 2.0 1 month 203 0.2 17,233 9.8 3 months 497 0.5 58,219 33.2 6 months 1,162 1.2 104,600 59.7 12 months 8,841 9.0 249,932 143.1 Source: Capital IQ

In relation to the table above, we note that this analysis confirms that it is reasonable to conclude that

NSX shares are relatively illiquid. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

8.4.6 Distributions No distributions paid or declared during FY10 and 1H11.

9 Profile of FEX

9.1 Overview

Given FEX EM is a wholly owned subsidiary of FEX and has no current business activities other than the Offer, we have focused our analysis on FEX. FEX is an Australian unlisted public company that was established in 2006. FEX’s principal activity is to develop an exchange business in Australia with a focus on energy, commodities, mining and environmental products.

FEX is currently focused on completing the development of a cash settled futures market, and as such, recently applied for an AML under Pt 7.2 of the Corporations Act. Under the terms of its licence application, FEX proposes to operate an exchange market for energy, commodity and environmental derivatives (FEX derivatives market). The financial products that will be traded on the FEX derivatives market at launch will be denominated in US dollars and will be cash-settled. The trading system FEX proposes to use is provided by Nasdaq OMX Group.

FEX has six major shareholders (in excess of 5%) who have a combined shareholding of 76% of the current shares on issue. These shareholders are outlined in the following table.

Table 13: FEX top shareholders % Holder name interest Iron Mountain Entertainment Pty Ltd 31% AMB Holdings Ltd 13% Golden Horizon Finance Co Ltd 13% Joyway Consultants 7% Megabay Holdings 7% Nasdaq OMX 5% Total top shareholders 76% Source: FEX website

9.2 Operating businesses

FEX’s main operations are:

• Mercari Swap Execution Facility: FEX owns 100% of Mercari Pty Limited, which operates an electronic over-the-counter (OTC) market for interest rate, foreign exchange, commodity, energy and environmental products

• SIM VSE: as previously noted, SIM VSE is a 50/50 joint venture between FEX and NSX which operates a securities market specialising in listings for Cleantech companies. At present, NSX owns 91.67% of SIM VSE while FEX owns 8.33%. FEX is to purchase the remaining 41.67% to increase

For personal use only use personal For its ownership to 50%

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

• Envex partnership (Envex): FEX is a substantial shareholder in Envex Services Pty Limited (35%), with Macquarie Group Limited and FEX controlling over 85% of this business. Envex provides OTC and futures execution services for a range of environmental and energy commodities via its majority owned subsidiary Nextgen. Nextgen is Australia’s leading broker of wholesale electricity and environmental credits. Envex also has a role in the design of innovative environmental products to help service the needs of market participants. As previously noted, on 31 March 2011 Envex Water purchased the WaterExchange from NSX.

9.3 Funding the Offer

As previously noted, the maximum amount of cash consideration that FEX EM would be required to pay under the Offer is $17,619,555 provided that:

• acceptances are received in respect to all of the NSX shares (in which FEX EM and its associates do not already have a relevant interest) on issue at the close of the Offer

• all NSX options are converted into NSX shares and accepted into the Offer.

FEX EM proposes to fund this amount and the expenses associated with the Offer using existing cash balances of FEX which were in excess of $3,000,000 as at the date of the Bidder’s Statement and an unconditional loan of $15,000,000 from Vitron, an associated company, to FEX EM.

FEX and Vitron have each irrevocably agreed to make available, either by way of loan or subscription for equity capital, their respective proportions of the funding amounts required under the Offer at the request of FEX EM.

10 Assessment of the Offer

10.1 General

As discussed in Section 3 “fair and reasonable” is not a compound phrase. In order to assess whether the Offer is fair, we are required to determine whether the price paid per NSX share pursuant to the Offer is equal to or greater than the value of a NSX fully paid ordinary share. This section sets out our assessment of the Offer Price relative to the underlying value of an NSX share.

10.2 Approach

We have adopted a net assets based methodology to assess the fairness of the Offer Price. We consider net assets is the most appropriate basis upon which to assess the underlying value of a NSX share among other generally accepted methodologies, such as discounted cash flow and capitalisation of earnings, for the following reasons:

• the poor historical performance of NSX

- NSX generated negative normalised EBITDA of $1,074,262 in FY10 and $988,804 in 1H11 For personal use only use personal For - NSX has incurred a net loss after tax since 30 June 2001. NSX’s loss was $1,783,592 in FY10 and $911,728 in 1H10

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

• it is uncertain as to if or when NSX will become profitable

• significant cost reductions and/or revenue growth are required for the business to breakeven

• the lack of long term financial forecasts.

Having regard to the above, we will assess whether the Offer Price is fair by determining the price to net assets multiple implied by the Offer Price and comparing this to the trading multiples of comparable companies and the multiples at which comparable companies have transacted.

10.3 Implied price to net assets multiple

We have taken NSX’s net asset position from the latest reviewed balance sheet as at 31 December 2010. We note that NSX have advised no fair value adjustments to this balance sheet are required at the date of this IER. The table below illustrates the price to net assets multiple implied by the Offer Price.

Table 14: Implied price to net assets multiple

Offer Price per share (cents) 23.5 Net assets per share (cents) 5.7 Price to net (tangible) assets multiple (times) 4.1 Source: NSX Limited, KPMG Analysis

In relation to the table, we note that NSX had no intangible assets as at 31 December 2010.

10.4 Comparable companies

The share market valuation of listed stock exchanges can be analysed to provide an indication of whether the price to net assets multiple implied by the Offer Price is fair. We note that the comparable company multiples reflect the trading of portfolio interests and therefore exclude a premium for control. As the Offer is for 100% control of NSX, in order to compare the comparable company trading multiples to the multiple implied by the Offer, a premium for control should be added to the comparable company trading multiples. On average, based on empirical evidence as outlined in Appendix 5, control premiums are between 25% to 40% based on equity. Based on this, we have applied a 30% premium for control to the multiples of our listed comparables.

A summary of the price to net assets and price to net tangible assets (NTA) of comparable companies is set out in the table below. Details of each of these companies and a brief description are contained in

Appendix 3. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Table 15: Comparable companies Excluding premium for control Including premium for control Price to net Price to net Price to NTA Price to NTA assets assets Australia and New Zealand Mean 2.6x 7.7x 3.3x 9.9x Median 2.6x 7.7x 3.3x 9.9x Max 3.3x 7.9x 4.3x 10.3x Min 1.8x 7.4x 2.3x 9.6x Asia Pacific Mean 5.8x 6.6x 7.5x 8.6x Median 4.6x 5.2x 6.0x 6.8x Max 10.9x 12.9x 14.2x 16.8x Min 1.9x 2.3x 2.5x 3.0x Europe and North America Mean 2.0x 1.7x 2.6x 2.2x Median 2.0x 1.7x 2.6x 2.2x Max 3.1x 2.0x 4.0x 2.6x Min 0.9x 1.4x 1.2x 1.8x Rest of World Mean 3.8x 5.5x 4.9x 7.1x Median 3.2x 5.6x 4.1x 7.2x Max 7.6x 7.6x 9.9x 9.9x Min 1.1x 3.2x 1.4x 4.2x Total Mean 3.3x 5.7x 4.3x 7.4x Median 2.7x 5.2x 3.4x 6.8x Max 10.9x 12.9x 14.2x 16.8x Min 0.9x 1.4x 1.2x 1.8x Source: Capital IQ, KPMG Analysis Note: Excludes outliers In relation to the table, we note:

• the latest reported financial data available for each of the comparable companies at 4 July 2011 has been used to calculate net assets and NTA

• market capitalisation (price) is as at 4 July 2011.

Our analysis of the comparable companies’ price to net asset multiples has considered the various differences between the companies and NSX which have included relative size, number of securities listed, diversity of business operations and service offering, growth potential, regulatory environment, competition, and company specific characteristics, among other things. The figure below demonstrates the relative size of NSX in terms of number of securities listed on it and market capitalisation in relation

to that of a selection of comparable companies. For personal use only use personal For

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ABCD NSX Limited Independent expert report & Financial services guide 18 July 2011

Figure 3: Comparable companies – Number of listed securities and market capitalisation 4,500

4,000 TSX 3,500

3,000 LSE

2,500

2,000 ASX

1,500 HKSE OSE NYSE

Number securities of listed 1,000 KLSE SGX Deutsche Boerse Nasdaq OMX 500 JSE PSE NSX 0 0 5,000 10,000 15,000 20,000 25,000 30,000 Market Capitalisation (A$m) Source: Capital IQ, World Federation of Exchanges, KPMG Analysis In evaluating the multiple implicit in the Offer Price of 4.1 times against the multiples of comparables, we note the following:

• the mean and median price to NTA multiple for Australia and New Zealand exchanges (including a premium for control) was 9.9 times

• the mean price to NTA multiple for Asian exchanges (including a premium for control) was 8.6 times and the median was 6.8 times

• the mean and median price to NTA multiple for European and North America exchanges (including a premium for control) was 2.2 times

• the mean price to NTA multiple for Rest of the World exchanges (including a premium for control) was 7.1 times and the median was 7.2 times.

10.5 Comparable transactions

There has been a recent trend for rationalisation of national securities markets in order to gain an increased number of listings and a more diversified business base. A list of transactions is set out in Appendix 4 and the mean and median implicit price to net assets and price to NTA multiples are

summarised below. For personal use only use personal For

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Table 16: Comparable companies Price to net Price to NTA assets (times) (times) Mean 6.0 8.6 Median 7.0 9.1 Source: Capital IQ, Thomson SDC, KPMG Analysis Note: Excludes outliers In the context of the transactions set out in Appendix 4, we note that all of the target companies were profitable at the EBITDA level (as opposed to NSX).

10.6 Summary of assessment

In forming our opinion as to the fairness of the Offer Price we have considered the characteristics of NSX as compared to other listed securities exchanges as set out in Figure 3 above and the relative equity values of the transactions set out in Appendix 4. We have also taken into consideration the historical profitability of NSX, number of new listings and the trends in the volumes of shares traded on NSX.

Having considered all of the above factors, together with the potential for NSX to participate in any globalisation trends and the likely further competition which will occur in the securities market sector in Australia, in our opinion the fair value of a share in NSX, assuming ownership of 100% of the equity would be determined at a price to NTA multiple of less than 4.1 times. In this regard we note that in May 2009, PricewaterhouseCoopers Securities Limited (pwc) prepared an independent expert report in relation to the proposed issue of NSX shares to NZX Limited at $0.15 per share. In that report pwc:

• valued a share in the issued capital of NSX on a net assets basis for the same reasons we have identified above

• applied a NTA multiple of 1 to conclude the fair value of a NSX share was between 7.0 cents and 8.3 cents (depending upon the treatment of the AMLs).

In our opinion, value is a forward looking concept which relates to the ability of an investor to generate commercial returns from the exploitation of a group of assets. In this context, an investment in NSX would be considered speculative as NSX has not generated a profit since 2001.

After considering the above as well as any changes in the operations of NSX since 2009, we are of the opinion that a NTA multiple of between 1 and 2 times should be applied in assessing the fairness of the Offer price. Accordingly, in our opinion:

• the fair value of a share in NSX is in the range of 5.7 cents to 11.4 cents

• the Offer is fair to the Non-Associated NSX Shareholders. For personal use only use personal For

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Appendix 1 – KPMG Corporate Finance disclosures Qualifications The individuals responsible for preparing this report on behalf of KPMG are Ian Jedlin and Michael Jones. Ian is a member of the Institute of Chartered Accountants in Australia and a fellow of the Financial Securities Institute of Australia. Michael is a member of the Institute of Chartered Accountants in Australia and holds a Master of Commerce Degree from the University of New South Wales. Ian and Michael each have a significant number of years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

Disclaimers It is not intended that this report should be used or relied upon for any purpose other than KPMG’s opinion as to whether the Offer is in the best interests of the Non-Associated NSX Shareholders shareholders. KPMG expressly disclaims any liability to any company shareholder who relies or purports to rely on the report for any other purpose and to any other party who relies or purports to rely on the report for any purpose whatsoever.

Other than this report, neither KPMG nor the KPMG Partnership has been involved in the preparation of any other document prepared in respect of the Offer. Accordingly, we take no responsibility for the content of the Target Statement as a whole or other documents prepared in respect of the Offer.

Independence In addition to the disclosures in our Financial Services Guide, it is relevant to a consideration of our independence that, during the course of this engagement, KPMG provided draft copies of this report to management of NSX for comment as to factual accuracy, as opposed to opinions which are the responsibility of KPMG alone. Changes made to this report as a result of those reviews have not altered the opinions of KPMG as stated in this report.

Consent KPMG consents to the inclusion of this report in the form and context in which it is included with the Target Statement to be issued to the shareholders of NSX. Neither the whole nor the any part of this report nor any reference thereto may be included in any other document without the prior written consent of KPMG Corporate Finance as to the form and context in which it appears.

Indemnity NSX has agreed to indemnify and hold harmless KPMG, the KPMG Partnership and/or KPMG entities related to the KPMG Partnership against any and all losses, claims, costs, expenses, actions, demands, damages, liabilities or any other proceedings, whatsoever incurred by KPMG, the KPMG Partnership and/or KPMG entities related to the KPMG Partnership in respect of any claim by a third party arising

from or connected to any breach by you of your obligations. For personal use only use personal For NSX has also agreed that KPMG, the KPMG Partnership and/or KPMG entities related to the KPMG Partnership shall not be liable for any losses, claims, expenses, actions, demands, damages, liabilities or

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any other proceedings arising out of reliance on any information provided by you or any of your representatives, which is false, misleading or incomplete. NSX has agreed to indemnify and hold harmless KPMG, the KPMG Partnership and/or KPMG entities related to the KPMG Partnership from any such liabilities we may have to you or any third party as a result of reliance by KPMG, the KPMG Partnership and/or KPMG entities related to the KPMG Partnership on any information provided by you or any of your representatives, which is false, misleading or incomplete.

Our report has been prepared in accordance with professional standard APES 225 "Valuation Services" issued by the Accounting Professional & Ethical Standards Board (APESB). The individuals responsible for preparing this report on behalf of KPMG are Ian Jedlin and Michael Jones. KPMG and the individuals responsible for preparing this report have acted independently. KPMG was remunerated a fixed fee amount, with no part of the fee contingent on the conclusions reached, or the content or future use of this report. Except for these fees, KPMG has not received and will not receive any pecuniary or other benefit whether direct or indirect for or in connection with the preparation of this report.

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Appendix 2 – Sources of information

In preparing this report we have been provided with and considered the following sources of information:

Publicly available information: • Bidder’s and replacement Bidder Statement dated 13 May 2011 and 1June 2011

• Target’s Statement dated 22 June 2011

• company presentations, annual and interim reports, and ASX announcements of NSX

• various ASX company announcements

• various press and media articles

• “Stock exchange and share registry services” published by IBISWorld Pty Ltd, April 2011

• FEX website

• World Federation of Exchanges

• financial information from Capital IQ, Thompson Financial Securities and Connect 4.

Non-public information • FY11 budget

• FY12 and FY13 forecast

• Board meeting minutes

• Register of top 20 shareholders

In addition, we have had discussions with Scott Evans and Michael Cox.

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Appendix 3 – Comparable companies

Comparable company Country Market Enterprise Revenue EBITDA Price / Price / Cap Value LTM Margin Net NTA LTM Assets A$m A$m A$m % times times Australia and New Zealand ASX Limited Australia 5,329 2,214 764 78.5% 1.8 7.9 NZX Limited NZ 233 217 38 42.8% 3.3 7.4 Mean (excluding outliers) 60.7% 2.6 7.7 Median (excluding outliers) 60.7% 2.6 7.7 Asia Pacific Osaka Securities Exchange Co Ltd Japan 1,124 797 263 52.1% 1.9 2.3 Hong Kong Exchanges & Clearing Ltd HK 21,715 16,714 964 80.5% 18.2 18.2 Singapore Exchange Ltd Singapore 6,192 5,675 508 60.6% 10.9 12.9 Philippine Stock Exchange Inc Philippines 314 282 22 68.2% 8.4 8.4 Bursa Malaysia Bhd Malaysia 1,270 854 121 53.7% 4.6 5.2 Mean (excluding outliers) 63.0% 6.5 7.2 Median (excluding outliers) 60.6% 6.5 6.8 Source: Capital IQ (data as at 4 July 2011) Note: LTM = Last Twelve Months, NTM = Next Twelve Months, nmf = not meaningful Outliers have been shaded and excluded from the calculation of mean (where specified)

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Comparable company Country Market Enterprise Revenue EBITDA Price / Price / Cap Value LTM Margin Net NTA LTM Assets A$m A$m A$m % times times Europe and North America London Stock Exchange Group plc UK 4,268 4,802 1,047 55.2% 2.5 nmf PLUS Markets Group plc UK 11 2 5 n/a 1.4 1.4 Deutsche Boerse AG Germany 13,525 27,460 3,064 55.7% 2.8 17.1 Hellenic Exchanges SA Greece 432 256 73 59.9% 2.0 2.0 NYSE Euronext, Inc. US 8,472 10,410 4,009 27.5% 1.2 nmf Nasdaq OMX Group Inc. US 4,301 12,458 3,134 27.2% 0.9 nmf CME Group Inc. US 18,547 19,952 3,036 71.9% 1.0 nmf IntercontinentalExchange, Inc. US 8,702 8,571 1,162 71.8% 3.1 75.4 TMX Group Inc. Canada 3,137 3,082 598 57.3% 2.9 nmf Mean (excluding outliers) 53.3% 2.0 1.7 Median (excluding outliers) 56.5% 2.0 1.7 Source: Capital IQ (data as at 4 July 2011) Note: LTM = Last Twelve Months, NTM = Next Twelve Months, nmf = not meaningful Outliers have been shaded and excluded from the calculation of mean (where specified)

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Comparable company Country Market Enterprise Revenue EBITDA Price / Price / Cap Value LTM Margin Net NTA LTM Assets A$m A$m A$m % times times Rest of world JSE Limited Sth Africa 771 617 192 42.8% 3.1 4.1 BM&F Bovespa SA Brazil 12,676 11,157 1,124 74.2% 1.1 6.7 Bolsa De Valores De Colombia Columbia 408 375 32 34.3% 7.6 7.6 Bolsa Mexicana de Valores SAB de CV Mexico 1,121 946 144 40.4% 2.4 3.2 Warsaw Stock Exchange Poland 754 699 82 56.9% 3.9 4.4 Mean (excluding outliers) 49.7% 3.6 5.2 Median (excluding outliers) 42.8% 3.1 4.4

Total Mean (excluding outliers) 55.6% 3.3 5.7 Median (excluding outliers) 56.3% 2.7 5.2 Source: Capital IQ (data as at4 July 2011) Note: LTM = Last Twelve Months, NTM = Next Twelve Months, nmf = not meaningful Outliers have been shaded and excluded from the calculation of mean (where specified)

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The following is an overview of the comparable companies.

Australia and New Zealand ASX Limited ASX Limited operates as a multi-asset class listed exchange group under the brand name Australian Securities Exchange. Its activities comprise of primary market and capital formation process, secondary market trading and price discovery, central counterparty risk transfer and securities settlement for both the equities and fixed income (including OTC) markets. ASX functions as a market operator, supervisor, clearinghouse and payments system facilitator. It promotes good corporate governance among Australia’s listed companies and helps educate retail investors. ASX, through its subsidiary, SFE Corporation Limited, also offers exchange-traded and OTC financial services in the Asia Pacific region. The company is based in Sydney, Australia.

NZX Limited NZX Limited provides information, markets and infrastructure in securities, energy and agricultural areas. Its capital markets services consist of offerings for companies wishing to raise growth capital and investors looking for secure and liquid investment opportunities. In addition, the company provides Smartshares, an exchange traded fund provider, which manages five passive funds that track the NZX 50 Portfolio Index, NZX 10 Index, NZX MidCap Index, Australian S&P/ASX MidCap 50 Index, and the S&P/ASX 20 Index, as well as runs three SmartKiwi funds, and FundSource that offers fund managers and financial intermediaries research on investment funds. Further, it offers registry services for listed and unlisted issuers in New Zealand and various electronic administrative and compliance fund management services for New Zealand and Australian fund managers. The company is based in Wellington, New Zealand.

Asia Pacific Osaka Securities Exchange Co., Ltd Osaka Securities Exchange Co., Ltd., provides marketplace for transactions of securities, securities related futures and options in Japan. It operates the Osaka Securities Exchange which offers a marketplace for equities, stocks, convertible bonds, exchange traded funds, venture and country funds, private finance initiatives, covered warrants and equity options contracts. The company engages in trading, clearing, listing and administering listed products and transaction participants. The company is based in Osaka, Japan.

Hong Kong Exchanges and Clearing Limited Hong Kong Exchanges and Clearing Limited, engages in the ownership and operation of the stock exchange, futures exchange and their related clearinghouses in Hong Kong. The company operates in four segments: Cash Market, Derivatives Market, Clearing Business and Information Services. The Cash Market segment operates the stock exchange, which covers products traded on the cash market platforms, such as equities, debt securities, unit trusts, callable bull/bear contracts, exchange traded funds, warrants and rights. The Derivatives Market segment’s operations comprise the derivatives products traded on

For personal use only use personal For Hong Kong Futures Exchange Limited. The Clearing Business segment operates three clearing houses, including Hong Kong Securities Clearing Company Limited, The SEHK Options Clearing House Limited

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and HKFE Clearing Corporation Limited. The Information Services segment develops, promotes, compiles and sells market data and issuer information. The company is based in Central Hong Kong.

Singapore Exchange Limited Singapore Exchange Limited operates as an integrated securities and derivatives exchange in Singapore. The company provides listing, trading, clearing, depository, market data, and connectivity and issuer services, as well as member services for the securities and derivatives markets. Its security products, traded on an electronic screen-based system, include bonds, debentures, loan stocks, business trusts, equities, exchange traded funds, global depository receipts, infrastructure funds, real estate investment trusts, company warrants, structured warrants, certificates, stapled securities, and extended settlement contracts, as well as securities borrowing and lending program. The company’s derivative products, traded electronically, consist of interest rate futures and options on futures, equity index futures and options on futures, structured warrants and certificates. It also operates SGX AsiaClear, a clearing platform for OTC traded derivatives, which provides central counterparty clearing facility for a range of freight, energy, commodity and financial derivatives, as well as operates a commodity exchange. The company is based in Singapore.

The Philippine Stock Exchange, Inc. The Philippine Stock Exchange, Inc. provides trading, clearing, depository and information services for the equity market. The company engages in synchronizing the settlement of funds and the transfer of securities, guaranteeing the settlement of trades in the event of trading participant default and administering the appropriate risk management functions in order to ensure settlement, as well as offers an electronic platform for trading, clearing and settlement, depositary and custodianship of fixed income securities and its derivatives. The company is based in Pasig City, the Philippines.

Bursa Malaysia Berhad Bursa Malaysia Berhad, an exchange holding company, provides exchange-related services in Malaysia. Its services include trading, clearing, settlement and depository services. The company operates securities, futures and options, and offshore financial exchanges. It also operates and maintains clearinghouses and a central depository for securities listed on the exchange. In addition, it offers information services related to the provision and dissemination of information relating to securities quoted on the exchanges. The company was formerly known as Kuala Lumpur Stock Exchange and changed its name to Bursa Malaysia Berhad in April 2004. Bursa Malaysia Berhad is based in Kuala Lumpur, Malaysia.

Eruope and North America London Stock Exchange Group plc London Stock Exchange Group plc, engages in the admission of securities to trading, the delivery of trading systems, clearing and settlement of trading in securities, and the organization and regulation of markets in securities, as well as the provision of associated information and technology services. The company operates in three segments: Capital Markets, Post Trade Services and Information and Technology Services. The Capital Markets segment facilitates the companies to raise capital, which

For personal use only use personal For includes equity and debt, as well as provides liquid secondary markets for the trading of those and other securities. It operates through the Main Market, which provides listing and trading environment for investors and companies; AIM, an equities market for smaller growing companies; Professional Securities

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Market for listed debt and depository receipt securities; and Specialist Fund Market, which provides services for specialized investment entities. The Post Trade Services segment provides a range of risk management and trade processing services to ensure the completion of trades and custody of assets. The Information and Technology Services segment generates information ranging from data on individual trades and share price movements to company announcements. This segment also provides market data and trading systems over the Internet. The company is based in London, United Kingdom.

PLUS Markets Group plc PLUS Markets Group plc, operates as an investment exchange and trade data monitor in the United Kingdom. The company operates The PLUS Stock Exchange that provides cash trading and listing services, and supports the execution of retail flow across the various United Kingdom and European securities; and the PLUS Derivatives Exchange, which offers derivatives trading services and focuses on short to medium term interest rate related products. It offers two markets, including The PLUS-quoted market, an exchange-regulated market for small and mid-cap issuers; and The PLUS-listed market, a listed market for established companies and the larger funds. The company also provides trading services, including facilitating the execution of retail flow via retail service provider networks and the provision of capital commitment in small and mid-cap issuers. In addition, it offers market data services comprising the supply of real-time prices and trading data generated by trading services activity, and provision of PLUS trading data, which is offered directly to market participants and to end-users through vendor terminals. PLUS Markets Group plc is based in London, the United Kingdom.

Deutsche Boerse AG Deutsche Boerse AG develops and operates electronic trading systems that provide securities and derivatives trading, clearing, settlement, custody and market data services. Its Xetra segment provides electronic trading system and floor trading platforms, as well as operates as a central counterparty for equities and involves in the process listing of securities. This segment also offers Xetra international market, a trading system that enables trading, clearing and settlement in six European markets. The company’s Eurex segment provides a marketplace for trading futures and options contracts, as well as provides Eurex Clearing, a clearing house that forms the interface between trading and post-trading tasks. This segment also offers marketplace for hedging against storm damage and interest-bearing instruments such as swaps. In addition, it operates as a central counterparty for bonds, derivatives and repo transactions. Its Clearstream segment provides the post-trade infrastructure for the Eurobond market and services for securities from approximately 50 markets worldwide. This segment also offers services that include the issuance, settlement and custody of securities, as well as investment fund services and global securities financing. The company’s Market Data & Analytics segment collects, refines and provides data related to prices and trading revenues, indices, master data and statistics and macroeconomic data, as well as involves in index development. Its Information Technology segment develops, implements and operates trading and settlement systems. Deutsche Boerse AG is headquartered in Frankfurt am Main, Germany.

Hellenic Exchanges S.A. Hellenic Exchanges S.A. engages in the clearing and settlement of transactions in the cash market in organized securities markets, as well as in the settlement of transactions in derivative financial products in

For personal use only use personal For Greece. The company provides services for the organization and support of the operation of the stock and derivatives markets, as well as other financial instruments in the Athens Exchange; and support services to brokerage company branch offices and investors in the Thessaloniki Stock Exchange Centre. It also

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provides capital market services in the areas of listing of companies, clearing and settlement, rights issues, shareholder registry changes, distribution of dividends, subscriptions and member terminals, central registry, off-exchange transfers and operation of the ATHEX-CSE platform. Hellenic Exchanges is headquartered in Athens, Greece.

NYSE Euronext NYSE Euronext operates securities exchanges. It operates various stock exchanges, including the New York Stock Exchange (NYSE), NYSE Arca, Inc., and NYSE Amex LLC in the United States; and five European-based exchanges that comprise Euronext N.V. — the Paris, Amsterdam, Brussels, and Lisbon stock exchanges, as well as the NYSE Liffe derivatives markets in London, Paris, Amsterdam, Brussels, and Lisbon. The company’s Derivatives segment provides access to trade execution in derivatives products, options and futures, and offers clearing services. NYSE Euronext’s Cash Trading and Listings segment engages in offering access to trade execution in cash trading and settlement of transactions in European markets. Its Information Services and Technology Solutions segment operates sell side and buy side connectivity networks for its markets and for other market centres, as well as information technology software and solutions. The segment also sells and distributes market data and related information to data subscribers for proprietary data products and offers asset management and consultancy services to exchanges. The company is headquartered in New York, United States.

NASDAQ OMX Group, Inc. The NASDAQ OMX Group, Inc. provides trading, clearing, exchange technology, securities listing and public company services worldwide. It offers trading across various asset classes, capital formation solutions, financial services and exchanges technology, market data products and financial indexes, as well as clearing, settlement and depository services. The company also provides broker services comprising technology and customized securities administration solutions, such as back-office systems to financial participants. In addition, it offers global listing services, technology solutions for trading, clearing, settlement and information dissemination, as well as develops and licenses NASDAQ OMX branded indexes. The NASDAQ OMX Group supports the operations of approximately 70 exchanges, clearing organizations and central securities depositories. The NASDAQ OMX Group, Inc. is based in New York, United States.

CME Group Inc. CME Group Inc. operates the CME, CBOT, NYMEX and COMEX regulatory exchanges worldwide. The company provides a range of products available across various asset classes. It offers various products that provide a means of hedging, speculation and asset allocation relating to the risks associated with interest rate sensitive instruments, equity ownership, changes in the value of foreign currency, credit risk and changes in the prices of commodities. CME Group owns and operates clearing house, CME Clearing, which provides clearing and settlement services for exchange-traded contracts and counter derivatives transactions. Its primary trade execution facilities consist of its CME Globex electronic trading platform and open outcry trading floors, as well as privately negotiated transactions that are cleared and settled through its clearinghouse. In addition, the company offers market data services. It has strategic partnerships with BM&FBOVESPA S.A., Bursa Malaysia Derivatives, Singapore Exchange Limited, Green Exchange, Dubai Mercantile Exchange, Johannesburg Stock Exchange and Bolsa Mexicana de

For personal use only use personal For Valores, S.A.B. de C.V., as well as joint venture agreement with Dow Jones & Company. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group is headquartered in Chicago, Illinois.

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IntercontinentalExchange, Inc. IntercontinentalExchange, Inc. operates regulated futures exchanges, clearing houses and OTC markets for commodities and derivative financial products. It operates futures and OTC marketplaces for trading and clearing an array of energy, emissions and agricultural commodities, credit default swaps, equity indexes and foreign exchange contracts. It operates in three segments: Futures, OTC, and Market Data. The Futures segment offers trading and clearing in standardized derivative contracts on its regulated exchanges. The OTC segment provides electronic trading, clearing and brokerage services in energy markets and credit derivatives. The Market Data segment offers various market data services and products for futures and OTC market participants and observers. The company is headquartered in Atlanta, Georgia.

TMX Group Inc. TMX Group Inc. owns and operates cash and derivative markets for equities, and energy and fixed income asset classes in Canada and the United States. It operates in three segments: The Cash Markets, The Derivatives Markets and The Energy Markets. The Cash Markets segment owns and operates Canada’s two national stock exchanges, Toronto Stock Exchange (senior equity market) and TSX Venture Exchange (public venture equity market). This segment also operates Shorcan, a fixed income inter-dealer broker and Equicom, an investor relations and corporate communications services provider. The Derivatives Markets segment offers markets for trading derivatives, clearing options and futures contracts, as well as OTC products. This segment also provides interest rate, index and equity derivatives. The Energy Markets segment operates Natural Gas Exchange, a North American exchange for the trading and clearing of natural gas and electricity contracts. The company was formerly known as TSX Group Inc. and changed its name to TMX Group Inc. in June 2008. TMX Group Inc. is headquartered in Toronto, Canada.

Rest of world JSE Limited JSE Limited operates as a securities exchange in South Africa. It provides electronic trading, clearing and settlement services in equities, financial and agricultural equity derivatives and interest rate instruments. The company also provides financial information. In addition, it operates a financial online reporting portal that allows companies to file their financial reports online. Further, the company offers JSE, an official business and lifestyle quarterly magazine of the Johannesburg Stock Exchange. JSE Limited is based in Sandown, South Africa.

BM&FBOVESPA S.A. BM&FBOVESPA S.A. engages in the development and management of systems for the trading and settlement of securities and derivatives products. It offers trading systems for equities, fixed-income securities, equity derivatives, financial derivatives, spot U.S. dollar and commodities. The company also provides clearing and settlement services, securities listing and market data vending. In addition, it acts as a central securities depository, licenses software and stock indices, and provides financial institutions with fee-based access to its trading systems. Further, it conducts registration, clearing, settlement and risk management activities through its clearinghouses; owns open outcry, electronic and Web-based trading

For personal use only use personal For systems; and offers registration of OTC and custody services for agribusiness securities, gold certificates and other assets and securities. The company is based in Sao Paulo, Brazil.

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Bolsa De Valores De Colombia S.A. Bolsa De Valores De Colombia S.A. operates as a stock exchange in Columbia. It administers transaction platforms for fixed income market and equities markets, derivatives and foreign exchange markets, as well as systems for fixed income market and equities primary emission systems. It also provides equities clearing and liquidation services, and routing and automatized systems, as well as engages in the sale of market information. The company is based Bogota, Colombia.

Bolsa Mexicana de Valores, S.A.B. de C.V. Bolsa Mexicana de Valores, S.A.B. de C.V. operates securities markets in Mexico. It operates in four segments: Stock Exchange, Financial Derivatives, Central Counterparties and Inter-dealer Brokerage Services. The Stock Exchange segment operates as a securities exchange for listed entities in accordance with the Ley de Mercado de Valores. The Financial Derivatives segment operates an exchange of futures and options, and provides of related equipment and services to facilitate such transactions. The Central Counterparties segment operates clearinghouses for the capital and derivatives markets. The Inter-Dealer Brokerage Services segment offers inter-dealer brokerage services involving fixed-income instruments registered in the Registro Nacional de Valores. The company also provides pricing information related to government and corporate bonds, equities and warrants, as well as offers risk management consulting services. The company is based in Mexico City, Mexico.

Warsaw Stock Exchange Warsaw Stock Exchange operates as a stock exchange. The company offers trading of shares, bonds, subscription rights, allotment certificates and investment certificates, as well as derivative instruments, such as futures, options and index participation units. The company is based in Warsaw, Poland.

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Appendix 4 – Comparable transactions

Completion Ref Target Acquirer Geography Stake Equity EV/ Price/ Net Price/ Date Acquired Value EBITDA Assets NTA % (A$m) times times times 21-Dec-10 [1] The NASDAQ OMX Group Inc Repurchase US 11.5 504 5.2 0.1 n/a 8-Jul-10 [2] Climate Exchange Limited IntercontinentalExchange, Inc. Europe 95.2 559 150.1 4.4 15.1 29-Aug-08 [3] Creditex Group, Inc. IntercontinentalExchange, Inc. US & CAD 100.0 559 15.4 n/a n/a 22-Aug-08 [4] NYMEX Holdings Inc. CME Group Inc. US & CAD 100.0 7,916 13.4 8.1 12.0 8-May-08 [5] Bovespa Holding SA BM&F Bovespa SA Brazil 100.0 7,760 34.0 8.0 8.0 1-May-08 [6] Montreal Exchange Inc. TMX Group Inc. US & CAD 100.0 1,466 25.1 9.1 9.1 29-Feb-08 [7] OMX AB Borse Dubai Limited Europe 93.9 5,522 21.6 7.0 n/a 27-Feb-08 [8] OMX AB Nasdaq OMX Group Inc. Europe 100.0 4,911 17.9 0.9 n/a 19-Dec-07 [9] Intl. Sec Exchange Holdings, Inc. Eurex Frankfurt AG US & CAD 100.0 3,385 22.9 8.8 8.8 14-Nov-07 [10] Imarex ASA CMEG NYMEX Holdings Inc. Europe 15.1 57 25.7 0.6 0.9 25-Sep-07 [11] London Stock Exchange Group Dubai International Fin Centre Europe 28.0 1,853 14.2 n/a n/a 20-Sep-07 [12] London Stock Exchange Group Qatar Holding LLC Europe 20.0 1,437 15.3 n/a n/a 12-Jul-07 [13] CBOT Holdings Inc. CME Group Inc. US & CAD 100.0 12,844 27.5 17.7 17.7 1-Oct-07 [14] Borsa Italiana SpA London Stock Exchange PLC Italy 100.0 2,546 15.0 n/a n/a 4-Apr-07 [15] Euronext N.V. NYSE Euronext, Inc. Europe 91.4 14,967 21.4 6.7 12.5 14-Feb-07 [16] Bourse de Montreal Inc NYMEX Holdings Inc Canada 10.0 89 20.9 1.0 1.0 12-Jan-07 [17] The New York Board of Trade IntercontinentalExchange, Inc. US & CAD 100.0 1,413 58.5 n/a n/a 6-Oct-06 [18] Oslo Bors VPS Holding ASA OMX AB Europe 10.0 58 9.8 9.5 10.2 25-Jul-06 [19] SFE Corp. Ltd. ASX Limited Australia 100.0 4,808 9.8 11.0 14.2 18-Apr-06 [20] London Stock Exchange Plc Nasdaq OMX Group Inc. Europe 15.0 1,067 18.7 12.1 15.1 7-Mar-06 [21] Archipelago Holdings Inc. NYSE Euronext, Inc. US & CAD 100.0 1,030 35.7 1.7 3.4 9-Feb-05 [22] NASDAQ OMX Copenhagen A/S OMX AB Europe 100.0 283 8.6 0.7 1.0 Mean (excluding outliers) 18.9x 6.0x 8.6x Median (excluding outliers) 18.3x 7.0x 9.1x Source: Capital IQ ,Thomson SDC For personal use only use personal For Note: Converted from its functional currency to Australian dollars as at the announcement of the transaction as per Capital IQ Outliers have been shaded and excluded from the calculation of mean (where specified)

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The following is an overview of the comparable transactions.

[1] On 21 December 2010, Nasdaq OMX Group Inc, a New York-based provider of exchange and trading services, repurchased 22.8 mil common shares, or 11.5% stake in the company, from Borse Dubai, for a total value of US$497.1 million. The NASDAQ OMX Group Inc, provides stock exchange and trading services. It includes securities listing and information products and services provided through two segments: Market Services, which include transaction-based business and market information services business, and Issuer Services, which include securities listings business and financial products business.

[2] On 8 July 2010, IntercontinentalExchange, Inc acquired the remaining 95.2% stake in Climate Exchange Plc from INVESCO Asset Management Limited and other shareholders for approximately £340 million in cash. Climate Exchange Limited engages in the ownership, operation, and development of exchanges to facilitate trading in environmental financial instruments, including emissions reduction credits in both voluntary and mandatory markets in Europe and the United States. The company operates European Climate Exchange that focuses on compliance certificates for the mandatory European Emissions Trading Scheme; Chicago Climate Futures Exchange, a regulated exchange in the United States with a growing portfolio of environmental futures contracts; and Chicago Climate Exchange, which operates voluntary, but contractually binding cap and trade system for greenhouse gas emissions reductions.

[3] On 29 August 2008, IntercontinentalExchange acquired Creditex Group Inc. from TA Associates, Inc., Internet Capital Group Inc. and other shareholders for approximately $560 million. Creditex Group Inc. provides trade execution of credit derivatives and credit default swaps to money centre banks and investment banking firms in the United States, Europe and Asia. It offers electronic, voice and hybrid trading services, as well as post trade processing services. It also provides Delta-Neutral Auctions, which offers jump-to-default risk reduction and acts as a co-administrator of the ISDA cash settlement auctions.

[4] On 22 August 2008, CME Group, Inc. acquired NYMEX Holdings, Inc. CMEG NYMEX Holdings Inc. operates as a physical commodities exchange in the United States. It enables customers to trade in energy futures and options contracts, including contracts for crude oil, natural gas, heating oil and gasoline; and metals futures and options contracts comprising contracts for gold, silver, copper and aluminium.

[5] On 8 May 2008, Brazilian Mercantile & Futures Exchange acquired Bovespa Holding SA for BRL 12.3 billion. Under the proposed restructuring plan, the new exchange will be a public company whose shares will be listed to trade on the Novo Mercado. Bovespa Holding SA operates as an equities and equity derivatives exchange in Americas. It engages in the entire chain of trading, clearing and settlement, risk management, central counterparty and central depository of securities through integrated and electronic systems. Further, it operates as a central depository and custodian of the securities traded on BOVESPA’s equity and fixed income markets.

[6] On 1 May 2008, TSX Group Inc. acquired Montreal Exchange Inc. for CAD 1.3 billion from Wayne Finch, Luc Bertrand, Jean Turmel Caisse de Depot et Placement du Quebec and NYMEX Holdings, Inc. Montreal

Exchange Inc., an electronic exchange, provides products and services in the areas of financial derivatives For personal use only use personal For market, clearing services and IT business solutions in Canada and internationally. It offers risk management products to individual and institutional investors for protecting their investments and ensuring growth. The company’s risk management products include equity derivatives, currency derivatives, index derivatives and interest rate derivatives. It also provides options on exchange-traded funds and energy derivatives. In addition,

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the company develops a SOLA trading system. Further, it operates as an issuer, clearinghouse and guarantor of exchange traded derivatives in Canada.

[7] On 29 February 2008, Borse Dubai Ltd. acquired a 94% stake in OMX AB from Investor AB, Nordea Bank AB., Olof Stenhammar, Didner & George, Nykredit and Magnus Bocker, Swedish Government and other shareholders for a consideration of approximately SEK 26.4 billion. OMX AB owns and operates stock exchanges primarily in the in the Nordic and Baltic regions.

[8] On 27 February 2008, NASDAQ Stock Market, Inc. acquired OMX AB from Borse Dubai Ltd. and Qatar Holding LLC for approximately US$3.9 billion. OMX AB owns and operates stock exchanges primarily in the in the Nordic and Baltic regions. It operates exchanges in Stockholm, Helsinki, Copenhagen, Iceland, Tallinn, Riga and Vilnius. The company, through its exchanges, offers various services comprising trading in equities, derivatives and bonds; listing and information; clearing, payment, and custody; registration and securities administration; a range of cross-border settlement; and broker services, including technology and services in the administration of securities.

[9] On 19 December 2007, Eurex Deutschland, a subsidiary of Deutsche Börse AG and SWX Swiss Exchange acquired International Securities Exchange Holdings Inc. International Securities Exchange Holdings, Inc., operates and regulates an electronic options exchange in primary and secondary markets in the United States. It offers a trading platform in listed equity and index options, options trading on underlying equity, ETF and FX products. The company also licenses its Parimutuel Derivative Call Auction technology to investment banks and other financial institutions for trading in event-driven derivatives markets.

[10] On 14 November 2007, NYMEX Holdings Inc. acquired a 15.1% stake in Imarex NOS ASA from Frontline Ltd. for US$52 million. Imarex ASA operates market places for commodities and their derivatives, conducts clearing and settlement of transactions and provides market analysis and other related services. The company operates in four segments: Clearing, Exchange, OTC and Market Services. The company offers services in Germany, Singapore, Houston, Genoa, London, Frankfurt, Stavanger, New Jersey, Connecticut, New Hampshire, Vancouver and Zurich.

[11] On 25 September 2007, Dubai International Financial Centre acquired a 28% stake in London Stock Exchange plc from Nasdaq Stock Market Inc. for £796 million. London Stock Exchange Group plc engages in the admission of securities to trading, the delivery of trading systems, clearing and settlement of trading in securities, the organization and regulation of markets in securities and the provision of associated information and technology services. The company operates in three segments: Capital Markets, Post Trade Services, and Information and Technology Services.

[12] On 20 September 2007, Qatar Holding LLC acquired a 20% stake in London Stock Exchange plc for approximately £620 million on September 20, 2007. London Stock Exchange Group plc engages in the admission of securities to trading, the delivery of trading systems, clearing and settlement of trading in securities, the organization and regulation of markets in securities and the provision of associated information and technology services. The company operates in three segments: Capital Markets, Post Trade Services, and

For personal use only use personal For Information and Technology Services.

[13] On 12 July 2007, Chicago Mercantile Exchange Holdings Inc. acquired CBOT Holdings, Inc. for a consideration of US$7,993 million. CBOT Holdings, Inc. is a futures and futures-options exchange. It trades various futures and options products through open auction and electronic trading systems. The company trades

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agricultural products, interest rates contracts, Dow Jones Industrial Average futures contracts and metal products. It also provides various clearing services. In addition, the company, in partnership with Singapore Exchange, operates the Joint Asian Derivatives Exchange that trades commodity products. Further, CBOT Holdings, in partnership with Dow Jones Newswires, publishes Commodity News For Tomorrow that provides market data products information, market information and data vendor information.

[14] On 1 October 2007, London Stock Exchange Plc completed its private tender offer to merge with Borsa Italiana SpA , a Milan-based provider of securities brokerage services. Borsa Italiana primary activities include integrating trading and clearing operations on regulated and non-regulated markets for cash products and derivatives.

[15] On 4 April 2007, NYSE Group, Inc. acquired Euronext NV from The Children's Investment Fund Management, Harris Associates L.P., Atticus Capital, LLC and other shareholders in a transaction valued at US$10.2 billion. Euronext N.V. operates as an integrated cross border exchange primarily in Europe. The company engages in trading in equity securities and other cash instruments, including bonds, warrants, trackers and structured funds. It also offers trading in a range of interest rate, equity, index, commodity and currency derivative products, as well as soft and agricultural commodity derivatives.

[16] On 14 February 2007, NYMEX Holdings Inc acquired a 10% stake in Bourse De Montreal Inc, a provider of stock exchange services, for CAD$81.8 million.

[17] On 12 January 2007, IntercontinentalExchange. Inc. acquired the New York Board of Trade, Inc. for consideration of US$1.1 billion. The company operates as a physical commodity futures exchange in New York. It facilitates investors to buy and sell financial instruments related to agricultural products, currencies and market indexes.

[18] On 6 October 2006, OMX AB acquired a 10% stake in Oslo Bors Holding ASA for a consideration of SEK 317 million. Oslo Børs VPS Holding ASA operates marketplaces for listing and trade in securities, registration of ownership, and clearing and settlement of securities in the Norwegian securities market. The company organizes trading in equities, primary capital certificates, fixed income products and derivatives products.

[19] On 25 July 2006, Australian Stock Exchange Limited acquired SFE Corporation Limited for a value of approximately $2.3 billion. SFE Corporation Limited provides exchange-traded and over-the-counter financial products and services in the Asia Pacific region and internationally. It offers trading, risk management, and clearing and settlement products and services in Australia and New Zealand. The company operates in two segments, Exchange Traded and Non Exchange Traded. The Exchange Traded segment activities include trading, clearing, and settlement of derivative contracts traded on the Sydney Futures Exchange. The Non Exchange Traded segment offers settlement, depository, and registry services for debt securities.

[20] On 18 April 2006, NASDAQ Stock Market, Inc. acquired a 15.0% stake in London Stock Exchange plc from Threadneedle Asset Management Holdings Ltd. London Stock Exchange Group plc engages in the

For personal use only use personal For admission of securities to trading, the delivery of trading systems, clearing and settlement of trading in securities, the organization and regulation of markets in securities and the provision of associated information and technology services. The company operates in three segments: Capital Markets, Post Trade Services and Information and Technology Services.

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[21] On 7 March 2006, The New York Stock Exchange and Archipelago Holdings Inc. merged to form a combined entity, NYSE Group, Inc. becoming a publicly held company. Archipelago Holdings Inc. operates the Archipelago Exchange, an open all-electronic stock exchange in the United States for trading in New York Stock Exchange, Nasdaq, American Stock Exchange and Pacific Exchange-listed stocks. Its trading platforms link traders to multiple U.S. market centres without market intermediaries and provide customers with electronic execution and open, direct and anonymous market access.

[22] On 9 February 2005, OMX AB and Copenhagen Stock Exchange A/S merged for form a single entity. NASDAQ OMX Copenhagen A/S operates a Danish securities market, where shares, bonds, investment certificates, and derivatives are listed and traded. The company also runs a clearing centre for derivatives. It provides the channel through which, the Danish companies can raise risk capital. In addition, NASDAQ OMX

Copenhagen A/S operates separate segments for the small and medium-sized companies. For personal use only use personal For

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Appendix 5 – Control premium

It is generally acknowledged that in order to acquire a controlling interest in a listed company, the acquirer must pay a premium over and above the price at which the shares in the target are trading on the ASX prior to the announcement of the takeover bid. The premium reflects the benefits the acquirer achieves through holding a controlling interest in contrast to a portfolio shareholding.

The benefits of acquiring all the shares in a target company may typically include:

• full and unfettered access to the cash flows of the business

• control over dividend decisions

• control over voting at shareholder meetings and in particular decisions requiring special resolutions, and the composition of the board of directors

• absolute control over the future direction of the company without having to deal with minority shareholder issues

• ability to group tax losses and enter into tax consolidated groups.

Premia are paid for reasons that vary from case to case. In some situations, the premium paid may be greater than others due to synergies or other benefits the acquirer expects to realise. It has been observed that transactions have been typically completed with an implied acquisition premium in the order of 25 percent to 40 percent to the pre-trading equity price of the target, based on the analysis of publicly available data.5

In order to assess a reasonable range for implied acquisition premia in Australia, we have analysed transaction data over the 10 year period 19 September 2000 to 20 September 2010. A data set of 539 takeovers was sourced from Connect 4, constituting successful bids, where data on implied market values and two, five and 20-day premia were available. The value of takeovers (friendly and hostile) ranged from approximately $nil million to $25.0 billion over this period, with an average of approximately $761 million, after excluding those transactions considered to be outliers based on the size of their premium relative to others in the data set and those with negative premia.

Including all 539 transactions, our analysis indicated that 20-day acquisition premia ranged from those with negative premia to 2,800%, with an average and median of approximately 41.7% and 26.2%, respectively.

Excluding those transactions considered to be outliers, the average and median premia are approximately 37% and 30%, respectively. We also note that approximately 33% of those takeovers reviewed, excluding outliers,

had premia greater than 40%. For personal use only use personal For

5 Lonergan, W (2003, 4th ed) “The Valuation of Businesses, Shares and Other Equity”

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It is apparent from our review of these transactions that there is a wide dispersion of observed acquisition premia. This is not unexpected given that acquisition premia can be affected by a wide range of factors, including:

• market speculation prior to the official announcement of a takeover

• the level of pre-existing ownership by the offeror

• the level of operating synergies and/or special benefits that may exist to an offeror

• the impact of contested/hostile takeovers

• the liquidity of the stock prior to the offer

• the level of gearing employed by the target company.

For personal use only use personal For

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