The Treasury – Valuation of Group Limited 4 October 2013

Abbreviations

$ dollars unless stated otherwise Capex Capital expenditure COGS Cost of goods sold D&A Depreciation and Amortisation EBIT Earnings Before Interest and Taxes EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation EV Enterprise Value EYTAS Ernst & Young Transaction Advisory Services Limited FX Foreign exchange FY Financial year FYXXA Actual results for the financial year ICT Information and Communication Technology ISP Internet Service Provider Kordia or Kordia Group, KG Kordia Group Limited NPAT Net profit after tax PBT Profit before tax

4 Oct 2013 Abbreviations 2013 SOE Valuations - Kordia.docx

Contents

Executive summary

1. Executive summary ...... 2 Company performance 5

2. Company performance ...... 6 Valuation Analysis 13

3. Valuation analysis ...... 14 Comparison of implied multiples for Kordia Group with trading multiples 19

4. Comparison of implied multiples for Kordia Group with trading multiples ...... 20 Sensitivity Analysis 21

5. Sensitivity Analysis ...... 22 Appendices

A. Comparable companies B. Limitations and disclaimer

4 Oct 2013 Contents 2013 SOE Valuations - Kordia.docx

Executive summary

1. Executive summary

1 4 Oct 2013 Executive summary 2013 SOE Valuations - Kordia.docx

Executive summary

Executive summary This report provides an estimate of the value of the equity in Kordia Group Limited as at 30 June 2013. Recent performance Kordia Group is a broadcasting and services company, with operations based in New Zealand and Australia. In New Zealand, the business owns network infrastructure (transmission towers and digital and microwave assets) which provide broadcast and telecommunications services (Kordia Networks). In both countries Kordia offers engineering consulting, construction and maintenance services for network infrastructure (Kordia Solutions). In FY13 Kordia divested Orcon for approximately $38 million. Orcon contributed $92.1m to group revenue in FY12. Revenues from continuing operations increased by 1% in FY13. This compares to 37% growth in revenue from continuing operations in FY12, with most coming from construction contracts in Australia. Kordia’s EBITDA from continuing operations declined 13.7% in FY13, from $42.5 million in FY12 to $36.7 million. EBITDA margins also declined over the same period from 13.9% to 11.8%. This mainly reflects a shift in revenue mix from the higher margin broadcasting business towards consulting services. Kordia has recorded positive operating cash flows over the past five years. Total debt has reduced over the past 12 months from $71 million to $57 million, down from a peak of $121 million in FY09. Earnings outlook Kordia’s EBIT is expected to decline significantly in FY14 as a result of the earlier than previously expected digital switchover. In preparation for the loss of the analogue TV business, the company has diversified its product and services offerings in recent years. Demand for digital broadcasting services is expected to continue to grow modestly, as a result of the launch of new digital channels on free to air television and new FM radio stations. The increase is not expected to fully offset lost earnings from analogue broadcasting. Kordia expects services to continue to grow modestly from the current base. In addition to the broadcasting business, Kordia Networks has positioned itself as New Zealand’s only business dedicated network provider and intends to grow the business through expansion of its product and services range for businesses customers. Kordia Solutions now accounts for more than two-thirds of the group’s revenue, with Australia being the largest component for this division. The division has won contracts across the telecommunications, energy and resources sectors in Australia and has increased the scale of the business significantly in recent years.

2 4 Oct 2013 Executive summary : Executive summary 2013 SOE Valuations - Kordia.docx

Executive summary

We forecast revenues to increase at a CAGR of 2.5% over the next 10 years. This is consistent with management forecasts of nil real growth. Kordia’s EBITDA margin has declined in recent years as a result of the change in the mix of business. We have assumed a long run average EBITDA margin in the region of 12%, around the FY13 result of 11.8%. Our forecasts imply EBITDA in the range of $43 million to $48 million over the period FY18 to FY23. Base case valuation Our DCF valuation is based on a forecast of Kordia’s earnings over a 10 year period. Our base case mid- point estimate of Kordia’s enterprise value is $194.6 million. We then add surplus assets of $13.1 million and subtract net debt of $52.8 million and provisions of $8.4 million to arrive at a mid-point equity valuation of $146.4 million. We assume WACCs of between 9.2% and 11.6% for Kordia’s three divisions and terminal growth of 2.0%, which is approximately in line with the average of IHS Global Insight’s CPI inflation forecast for New Zealand and Australia. Key assumptions Due to the differences in the nature of their operations, we have valued Kordia’s three business divisions (Kordia Networks, Kordia Solutions New Zealand, Kordia Solutions Australia) separately. We have summed the values of each division to arrive at the value of the group as a whole. We have not been provided with the split of earnings for Kordia’s business divisions and historical information was limited to Kordia’s annual reports and SCIs. We have therefore made some high level assumptions to apportion earnings and cash flows to each major business unit. In forecasting revenue, EBITDA margins and capital requirements we have had regard to Kordia’s Statement of Corporate Intent, management’s high level forecast to FY18 and discussions with management, supplemented by our own analysis. Beyond FY18, we assume growth of 2%, in line with forecast inflation. We assume an NZD / AUD exchange rate of 0.8401 in line with the spot rate as at 28 June 2013. Sensitivity analysis We have tested the sensitivity of our valuation to: „ WACC „ Terminal growth „ EBIT margin

3 4 Oct 2013 Executive summary : Executive summary 2013 SOE Valuations - Kordia.docx

Executive summary

Kordia Group valuation summary Based on our sensitivity analysis we conclude that the likely equity value of Kordia lies within the range of Currency: NZ$000 $136– $161 million.

Summary tables Valuation - Years 1 to 3 41,466 Valuation - Years 4 to 10 64,671 Currency: NZD000 Units FY09A FY10A FY11A FY12A FY13A FY14F FY15F FY16F Terminal value 88,433 Revenue 000's 254,067 258,530 294,949 306,515 309,707 311,800 310,500 326,930 Enterprise value 194,569 Revenue growth % 6.0% 1.8% 14.1% 3.9% 1.0% 0.7% -0.4% 5.3% Net debt (52,826) EBITDA 000's 41,535 53,102 52,041 42,525 36,682 32,920 39,050 41,655 Provisions (8,409) EBITDA margin % 16.3% 20.5% 17.6% 13.9% 11.8% 10.6% 12.6% 12.7% Surplus assets 13,104 Free cash flow 000's n/a n/a n/a n/a n/a 15,328 17,373 14,730 Equity Value 146,438 Source: KG annual reports, KG forecast, EY analysis Ref: Kordia Group - Consolidated Summary - Summary financials Source: EY analysis Ref: Kordia Group - Consolidated Summary - Summary financials The financial metrics in the table above include Orcon’s performance through to FY11. Kordia Group implied valuation multiples LFY NFY Kordia Group EBITDA multiples 5.3 5.9 Comparable companies

Mean 8.2 6.2 Median 6.5 6.1 Source: EY analysis Ref: Kordia Group - Consolidated Summary - Summary financials

4 4 Oct 2013 Executive summary : Executive summary 2013 SOE Valuations - Kordia.docx

Company performance

2. Company performance

5 4 Oct 2013 Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

Kordia Group corporate structure Company overview Source: KG annual report 2013, Kordia Pty Ltd annual report 2012 In recent years Kordia has diversified its product and service offerings in anticipation of the loss of the KordiaGroup Ltd analogue TV broadcast business. The company’s ‘broadcast to broadband’ strategy, put in place from FY06, has led to 60% of revenues being generated from products and services that did not exist in FY05. Kordia Networks provides national communications services for broadcast and telecommunications

KordiaLtd KordiaPty Ltd customers in New Zealand, as well as specialized network systems. Key customers include , (New Zealand) (Australia) , Television, TVNZ, Mediaworks, , Telecom New Zealand, , and 100% 100% The Radio Network. Kordia Solutions provides contracting and consulting services for major telecommunications companies KordiaSolutions KordiaSolutions Pty Ltd (Thailand) Co Ltd including , and Vodafone Hutchison. In Australia, the division designs, builds and operates (Australia) (Thailand) 100% network infrastructure. 49% The key business divisions of the Group are: „ Kordia Networks: Kordia Networks owns and operates network infrastructure in New Zealand, including transmission towers, fibre and microwave assets and has the third largest network in New Zealand. The business can be split into broadcasting and telecommunications services: – Broadcasting services primarily comprise the provision of digital radio and television broadcasting services as well as media content linking services. – Telecommunications services use Kordia’s fibre and microwave assets to provide services to wholesale telecommunications customers and integrators as well as corporate end users. The range of services includes OnKor (a converged network solution that integrates data, voice, video and internet), Kordia Connect (a converged network system for voice and internet, targeted at SMEs), KorKor digital radios (combining the functionality of cell phones, two way radios and GPS) and wholesale services (ethernet exchange, co-location, internet gateway and voice services designed specifically for retail service providers). In addition, Kordia seeks to provide value add services including managed firewall solutions, virtual PBX and hosted backup solutions. The value proposition is the provision of services with very high level of reliability for business critical networks. „ Kordia Solutions Australia: This division provides telecommunications systems integration services. It has a wide range of service offerings including consulting, design, engineering, network deployment and upgrades, commissioning and integration, network operations with 24/7 monitoring, network maintenance, maritime services and management of logistics and warehousing. Kordia Solutions Australia employs approximately 900 staff and provides comprehensive geographical coverage in Australia. The organisation has a diversified portfolio of customers, covering telecommunications, utilities, government and public safety, print media, ICT and, more recently, the energy and natural resources

6 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

sector. The value proposition for customers is the high level of engineering skills encompassing design, build and maintenance capabilities. „ Kordia Solutions New Zealand similarly provides engineering consulting in New Zealand and the Pacific Islands. This division maintains and operates the infrastructure across the Kordia transmission network, and provides specialist contract field services, specialist training for infrastructure operators, and a range of industry wide consultancy services. The division has a range of contracts across the Pacific region for the design, deployment, maintenance and operation of communications networks and solutions. The Networks and the Solutions businesses have very different operating models and face different business risks. The Networks division has long term contracts with clients and therefore stable revenue streams. Kordia Solutions has much shorter contract terms and revenues and earnings are therefore more variable. The largest share of Solutions revenue comes from construction projects in Australia. The Kordia Pty Ltd FY12 annual report notes that a significant proportion of construction and service revenue is earned from major telecommunications network service providers in Australia, such as Vodafone Hutchison Australia Pty Limited, Telstra Corporation, Ericsson Australia Pty Limited, Nokia Siemens Networks Australia Pty Ltd and Optus Communications.

7 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

Kordia Group income statement Historical results Currency: NZ$000 FY09A FY10A FY11A FY12A FY13A Revenue 254,067 258,530 294,949 306,515 309,707 Income statement Expenses (212,532) (205,428) (242,908) (263,990) (273,025) The table on the left shows the consolidated historical income statement for Kordia Group. Orcon’s results EBITDA 41,535 53,102 52,041 42,525 36,682 are included in the core data from FY09 to FY11, and as a contribution from discontinued operations in D&A (33,366) (36,050) (31,692) (25,495) (24,697) FY12 and FY13. EBIT 8,169 17,052 20,349 17,030 11,985 Gain on sale of assets 67 (628) (135) (365) 8,640 Kordia booked an impairment charge of $29 million in FY11 as a result of the digital switchover announced Impairment of advances - - (173) 350 (35) in 2010. We have included this charge below EBIT to enhance the comparability of earnings. Impairment of CGU / assets (198) (1,513) (30,402) - - Finance expense (9,477) (9,850) (8,409) (6,193) (6,213) The income statement has been adjusted to show EBITDA and EBIT excluding impairment charges, gains PBT (1,439) 5,061 (18,770) 10,822 14,377 and losses on asset sales. Tax 312 (6,027) 4,050 (3,493) (3,698) NPAT from cont. op. (1,127) (966) (14,720) 7,329 10,679 Revenues Discontinued operations net - - - 4,773 (7,010) NPAT (1,127) (966) (14,720) 12,102 3,669 Revenue for Kordia Networks grew at a CAGR of 3.0% over the FY09-FY13 period, from $67.8 million to Revenue growth 6.0% 1.8% 14.1% 3.9% 1.0% $76.3 million. EBITDA margin 16.3% 20.5% 17.6% 13.9% 11.8% Kordia Solutions’ revenue grew at a CAGR of 8.4% over the FY09-FY13 period, from $171.1 million to $236 EBIT margin 3.2% 6.6% 6.9% 5.6% 3.9% NPAT margin cont. op. (0.4%) (0.4%) (5.0%) 2.4% 3.4% million. The Australian division accounted for the majority of revenue (approximately 90% in FY12) and NPAT margin (0.4%) (0.4%) (5.0%) 3.9% 1.2% growth over this period. Source: KG annual reports Ref: Kordia Group - Historical P&L - Section Lead - Lead Schedules In FY12, Kordia Solutions’ revenue increased by 47% as a result of winning key contracts in the energy and Kordia Group margins natural resources sector. Source: KG annual reports Margins 60,000 25.0% The earnings profile for the group has changed as a result of the change in the mix of businesses. For 20.5% 50,000 example, in FY12 Orcon generated an EBITDA margin of 16.6% whereas Kordia Pty Limited in Australia 17.6% 20.0% reported an EBITDA margin of 6.1%. 16.3% 40,000 13.9% 15.0% As a result of the change in business operations, the group booked redundancy costs in FY11 ($0.4 million), 0

0 11.8%

0 FY12 ($1.3 million) and FY13 ($2.1 million).

$ 30,000 Z N 10.0% Kordia management is forecasting further charges against earnings in FY14 as a result of the impact of the 20,000 6.6% 6.9% 5.6% digital switchover. 3.9% 3.2% 5.0% 10,000 Balance sheet

0 -% The table on the following page shows the historical balance sheet for Kordia Group. FY09A FY10A FY11A FY12A FY13 The major assets owned by Kordia Group include: EBITDA EBIT EBITDA margin EBIT margin

8 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

Kordia Group balance sheet „ Trade and other receivables, which include provisions for doubtful debts, prepayments and contract work Currency: NZ$000 Jun09A Jun10A Jun11A Jun12A Jun13A in progress ($32.3 million in FY13 and $22.3 million in FY12) Current assets Cash 11,818 3,942 5,559 4,922 4,114 „ Loans and leases receivable (current and non-current): Loans and leases receivable relate to the sale of Inventories 1,867 1,635 1,177 2,273 1,335 Orcon, including deferred consideration. The loans bear interest at market rates and lease receivables Trade and other receivables 42,348 42,168 60,109 77,111 82,833 ($3.1 million) bear an interest rate of 15% and mainly pertain to equipment at customer premises. The Loans and lease receivable - - - - 3,888 leases are for a 28 month period. Derivative assets 46 - 5 - 22 Taxation receivables 1,756 1,091 328 286 1,163 „ Transmission equipment makes up more than 50% of Kordia’s property, plant and equipment. In FY11 Total current assets 57,835 48,836 67,178 84,592 93,355 the company wrote down its broadcasting assets by $29m (excluding tax impact) to account for the Non-current assets earlier than expected switch from analogue to digital-only broadcasting. Property, plant and equipment 165,070 148,785 109,277 113,541 86,579 Intangible assets and goodwill 52,074 54,501 57,955 56,579 22,356 „ Intangible assets mainly comprise goodwill, software and frequency licenses. Loans and lease receivable - - - - 9,216 Deferred tax asset 4,071 4,310 4,111 4,494 3,576 „ Current trade payables include approximately $8.6 million of deferred income. Other 1,029 635 60 - - „ Provisions (current and non-current) include a warranty liability of $0.8 million in relation mainly to design Total non-current assets 222,244 208,231 171,403 174,614 121,727 and build contracts and $7.6 million for ‘make good’ liabilities. Total assets 280,079 257,067 238,581 259,206 215,082 Current liabilities Capex Taxation payable 4,100 1,312 1,065 3,016 1,558 Trade and other payables 43,337 43,495 60,810 76,578 46,716 From FY09-FY12 total additions to assets ranged between $21.1 million and $35.6 million with an average Derivative liabilities 177 25 288 62 833 of $27.8 million. Property, plant and equipment accounted for approximately 81% of all additions to assets Provisions 1,802 1,104 1,806 1,415 3,235 on average. Finance lease liability 965 1,012 203 395 33 Loans and advances - 11,736 10,000 20,000 13,067 Capital expenditure prior to FY13 included investment required to support the Orcon business. In FY12 Total current liabilities 50,381 58,684 74,172 101,466 65,442 Kordia invested significant amounts into transmission equipment in preparation for the digital switchover Non-current liabilities and to prepare for digital broadcasting. Trade and other payables 3,487 4,078 3,777 4,048 5,413 Derivative liabilities 4,260 4,322 3,884 4,627 1,788 Total additions to non-current assets in FY13 were $23.5 million (including Orcon up to the date of sale). Finance lease liability 1,141 286 167 33 - Net cash from investing activities in Orcon in FY13 (9 months) was $8.3 million. Excluding Orcon, total Loans and advances 115,087 80,000 69,020 50,394 43,840 additions in FY13 were approximately $15.2 million. Provisions 3,738 5,690 5,484 6,900 5,174 Deferred tax liability 4,989 8,036 446 - - Bank debt Total non-current liabilities 132,702 102,412 82,778 66,002 56,215 Total liabilities 183,083 161,096 156,950 167,468 121,657 Kordia Group has banking lines for $102 million, of which $56.9 million was utilised as at 30 June 2013. The Net assets 96,996 95,971 81,631 91,738 93,425 sale proceeds from Orcon were used to reduce bank loans. Of the available facility, $15 million is due on 30 Source: KG annual reports June 2013, $37 million on 30 September 2014 and the remaining $50 million on 30 September 2015. Ref: Lead BS - Section Lead - Lead Schedules As per FY13 annual report the weighted average interest rates on bank loans was 3.8% and 7.2% if adjusted for derivatives, line fees and margin. The reduction in total debt forms a part of Kordia’s stated strategy to reduce the overall gearing of the group.

9 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

Volume of data downloaded (Australia)

Source: Australian Bureau of Statistics

600,000 Sector outlook 554,668 The switch from analogue to digital television broadcasting for free to air television in New Zealand is 500,000 70% CAGR timetabled for completion by November 2013. Although Kordia recorded an impairment to its fixed assets in 414,431 FY11, EBIT is expected to decline significantly in FY14 due to the switchover. A large number of ) 400,000 s

e 345,422 t

y transmission assets are expected to become obsolete and will have to be dismantled. Revenue from b a r

e 300,000 274,096 increased demand for new digital transmission services is not believed to be sufficient to offset the loss of T (

a analogue TV broadcasting revenue. t

a 191,655

D 200,000 Growth in consumer demand for online media content, as well as increased business data usage, is 100,000 expected to underpin continued growth in demand for both wired and wireless broadband services. The increased demand is expected to lead to increased investment in network infrastructure in both Australia 0 and New Zealand as well as elsewhere in the Pacific. Dec10A Jun11A Dec11A Jun12A Dec12A The building of government sponsored networks in both New Zealand and Australia is expected to provide Total Broadband a boost to demand for data and digital services. Fibre and 4G wireless networks are expected to result in greater supply and demand for digital services and data delivery, fuelling both investment and the demand for more value add services. These trends are therefore favourable for a firm such as Kordia that seeks to Forecast communications services growth (NZ) provide services to network providers and corporates. Source: NZIER

6.0% The charts to the left and on the following page illustrate the rate at which data usage is increasing in both Australia and New Zealand. 5.0%

4.0% h t w

o 3.0% r G 2.0%

1.0%

0.0% f e p p p 7 2 2 7 2 1 1 2 2 3 0 0 0 0 0 2 2 2 2 2 - - - - - 2 7 7 2 7 1 0 1 2 2 0 0 0 0 0 2 2 2 2 2

Communication services Total GDP

10 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

Spend on telecommunications services (NZ) Source: Statistics New Zealand

9,000 8,724 Historical fixed (wired) broadband penetration rate (New Zealand) 8,500 Source: OECD 6.7% CAGR 35% 8,000 30% 28% 29% 26% 27% 7,500 25%

m 24%

$ 7,071 25% 23% 23% Z 21% e t N 20% a

7,000 r 6,727

n 20% 18% o i 16% t a r t

6,500 e 15% n

e 12% 12% P 9% 10% 6,000 7% 5% 3% 5,500 5% 3%

0% 4 2 4 2 4 2 4 2 4 2 4 2 2 4 2 4 2 4 5,000 4 0 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ------9 3 4 4 5 5 6 6 7 7 8 8 9 0 0 1 1 2 2 0

2008 2010 2012 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Volume of data downloaded (NZ) Company outlook Source: Statistics New Zealand

18 Kordia’s recent performance has demonstrated its ability to adapt to and benefit from market trends, as it 16 has transformed its business from analogue to digital broadcasting, offering services 16 and providing ‘end to end’ engineering consulting for telecommunications. With the transformation largely 14 78% complete, Kordia’s future growth is expected to come from a consolidation of its market position and 12 diversification of its customer base. s e

t 10 9 y

b Kordia’s New Zealand businesses are positioning themselves to deal with the loss of revenue from the a g i 8

G digital switchover. The telecommunications services business has grown, securing contracts in New 6 Zealand and across the Asia-Pacific region. Kordia’s New Zealand business has also focussed on 4 extending the range of services outside the traditional broadcast and telecommunications services; such as 2 installing the fibre optic control system in ’s Victoria Park tunnel and designing the mounting systems for the Tonga solar power project. 0 Jun11A Jun12A With the size and scale of its network assets and the upgrade to handle digital services, the networks Average amount of data consumed per subscriber business is expected to grow with the increase in demand for digital transmission and ancillary services, including cloud based and Ethernet based data delivery. In Australia, Kordia Solutions is currently the only company offering ‘end to end’ engineering services for network infrastructure providers. The division has also diversified to provide services for the resources sector, winning a $117 million project with the energy company, APLNG. Kordia Group has highlighted the following growth areas over the next five year period: „ Managed services (OnKor/Cloud services/Ethernet exchange)

11 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Company Performance

„ Solution services (Kordia Solutions Australia) „ Media Services (Kordia New Zealand) These strategies are underpinned by the following trends that benefit the company: „ Ongoing growth in broadband networks „ Corporate sector engagement with cloud services and ICT simplification „ Design and build activities in Australia, driven by the NBN, mobile network and mining sectors „ On-going strength of the broadcast and heavy infrastructure business in New Zealand

12 4 Oct 2013 Company performance : Company performance 2013 SOE Valuations - Kordia.docx

Valuation Analysis

3. Valuation analysis

13 4 Oct 2013 Valuation Analysis 2013 SOE Valuations - Kordia.docx

Valuation analysis

Kordia Group – earnings estimates Earnings model Currency: NZ$000 FY12A FY13A FY14F FY15F FY16F Revenue 306,515 309,707 311,800 310,500 326,930 In generating the earnings model we have had regard to: Expenses (263,990) (273,025) (278,880) (271,450) (285,275) „ Historical financial information for Kordia Group Ltd and Kordia Pty Ltd EBITDA 42,525 36,682 32,920 39,050 41,655 D&A (25,495) (24,697) (25,882) (25,914) (24,688) „ Kordia’s Statement of Corporate Intent 2014: July 2013 – June 2016 EBIT 17,030 11,985 7,038 13,136 16,967 Revenue growth % 3.9% 1.0% 0.7% -0.4% 5.3% „ Kordia’s DCF forecast for the period of FY14 – FY18 EBITDA margin % 13.9% 11.8% 10.6% 12.6% 12.7% „ Discussions with and information provided by Kordia’s management. EBIT margin % 5.6% 3.9% 2.3% 4.2% 5.2% Source: KG annual reports, KG forecast, EY analysis Earnings estimates Ref: Kordia - Forecast Profit and Loss Kordia Group – earnings estimates graph The table and chart on the left summarise Kordia Group’s forecast earnings, which includes contributions

Source: KG annual reports, KG forecast, EY analysis from Kordia Networks, Kordia Solutions New Zealand and Kordia Solutions Australia. Kordia Solutions

350,000 16.0% Australia prospective financial results have been converted at the spot NZD/AUD exchange rate of 0.8401 13.9% on 28 June 2013. 300,000 12.6% 12.7% 14.0% 11.8% We have split the earnings forecast into the three business divisions, Kordia Networks, Kordia Solutions 12.0% 250,000 10.6% New Zealand and Kordia Solutions Australia. This reflects differences in the nature of operations between 10.0% the networks and the consulting businesses and the differences in geography for the two solutions divisions.

0 200,000 0 0

$ 8.0%

Z We have not been provided with detailed forecasts for Kordia’s individual business divisions. Using

N 150,000 6.0% historical data, supplemented with our own research and analysis, we have made some high level 100,000 assumptions relating to the split of earnings and cash flows amongst the business divisions. 4.0%

50,000 2.0% We assume the mix of revenue between Kordia Networks and Kordia Solutions (New Zealand and Australia) will remain roughly the same as in FY16, the last year for which divisional forecasts are provided in the SCI. 0 0.0% FY12A FY13A FY14F FY15F FY16F For Kordia Networks our forecasts are aligned with the company’s forecasts. We forecast revenue will grow Revenue EBIT EBITDA EBITDA margin % at a CAGR of 4.7% from FY14 to FY18, and at 2% thereafter.

For Kordia Solutions our forecast is similarly aligned to management’s forecast, with an expected decline in revenues as the APLNG project finishes in FY15. We have, however, adopted a more conservative growth assumption for FY16, assuming that revenues will increase by 5% rather than the 13% forecast by management in the SCI. Thereafter our forecasts are similar to management’s. At a group level, Kordia’s revenue is forecast to grow at a CAGR of 3.6% over the period FY14 – FY18. For the period beyond FY18 we have assumed annual growth of 2%, which is in line with expected long term inflation. This assumption is also consistent with management’s forecast of nil real growth beyond their explicit forecasts (SCI).

14 4 Oct 2013 Valuation Analysis : Valuation analysis 2013 SOE Valuations - Kordia.docx

Valuation analysis

Group EBITDA margins are forecast to remain around FY13 levels with a decline in FY14 due to the expected changes in the mix of earnings from the divisions Our estimated long run average EBITDA margin is in the region of 12.0%, reflecting current profitability and the forecast mix of businesses. Cash flow estimates The long lifecycle of Kordia’s technological base means the company can utilise its plant and equipment for a number of years using current technology. With large investments in upgrading the infrastructure in recent periods and a further $21.3 million to be invested in FY14, it is reasonable to assume future capital expenditure falls to maintenance levels. We have therefore assumed capital expenditure is in line with the SCI assumptions for the FY14 – FY18 period, and that thereafter it grows at 2.0% per annum. Our working capital forecast is in line with management’s forecasts up to FY18. Our long term working capital forecasts are adjusted to take into account the change in business mix forecast in the SCI and in management’s forecasts.

15 4 Oct 2013 Valuation Analysis : Valuation analysis 2013 SOE Valuations - Kordia.docx

Valuation analysis

Kordia Group – cash flow forecast Assumptions adopted Currency: NZ$000 FY14F FY15F FY16F Corporate tax rate (implied blended) 29.1% The economic assumptions used for the valuation are presented in the table below. Terminal growth rate (implied blended) 2.0% Units FY12A FY13A FY14F FY15F FY16F FY17F FY18F FY19F FY20F FY21F FY22F FY23F Term. EBIT 7,038 13,136 16,967 Revenue growth % 3.9% 1.0% 0.7% (0.4%) 5.3% 4.9% 4.8% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Less: Tax (2,163) (3,861) (4,946) EBITDA margin % 13.9% 11.8% 10.6% 12.6% 12.7% 12.2% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Add: Depreciation and amortisation 25,882 25,914 24,688 Capex growth % 67.2% (33.5%) (9.4%) (23.7%) 0.6% 7.6% (3.4%) 19.8% 2.0% 2.0% 2.0% 2.0% 2.0% Less: Net capital expenditure (21,254) (16,208) (16,309) Total capex NZ$m 35.3 23.5 21.3 16.2 16.3 17.5 16.9 20.3 20.7 21.1 21.6 22.0 23.3 Less: Increase in WC 5,825 (1,608) (5,670) Source: KG forecast, EY analysis Free cash flow 15,328 17,373 14,730 Ref: Kordia Group - Economic assumptions Source: KG forecast, EY analysis Ref: Corporate tax rate - Kordia Solutions NZ FY12 and FY13 capex data in the table refers to total additions to assets.

16 4 Oct 2013 Valuation Analysis : Valuation analysis 2013 SOE Valuations - Kordia.docx

Valuation analysis

Kordia Group WACC by division Discounted cash flow valuation Kordia Kordia Kordia Networks Solutions Solutions Cost of capital assumption NZ Aus Cost of equity (CAPM) Unlevered free cash flows for each business division are discounted at WACCs of 9.2% for Kordia Networks, Risk free rate of return 4.1% 4.1% 3.8% 11.6% for Kordia Solutions New Zealand and 10.4% for Kordia Solutions Australia. Post tax risk free rate (where applicable) 3.0% 3.0% 3.8% Equity market risk premium 7.5% 7.5% 6.0% We have adopted the ‘simplified Brennan-Lally’ approach to calculate the cost of equity for the New Asset beta 0.74 1.13 1.13 Zealand divisions and a classical approach for the Australian division. Geared beta estimate 1.16 1.26 1.22 The key inputs are: CAPM based cost of equity 11.7% 12.4% 11.1% Cost of equity 11.7% 12.4% 11.1% „ A risk-free interest rate of 4.1% for New Zealand and 3.8% for Australia, based on 10-year government Cost of debt bond yields in the respective jurisdictions as at 30 June 2013. Company credit spread 2.7% 2.7% 2.7% Cost of debt 6.8% 6.8% 6.4% „ Corporate tax rates of 28% for New Zealand and 30% for Australia. Capital structure Debt / Value 36.0% 10.0% 10.0% „ A post-tax market risk premium of 7.5% for New Zealand and 6.0% for Australia. Equity / Value 64.0% 90.0% 90.0% „ Asset betas of 0.74 for Kordia Networks, and 1.13 for Kordia Solutions, based on our comparable WACC Local corporate tax rate 28.0% 28.0% 30.0% company research (see below). Weighted average post-tax cost of equity 7.5% 11.2% 10.0% „ Debt to debt plus equity ratios of approximately 36% for Kordia Networks and 10% for Kordia Solutions Weighted average post-tax cost of debt 1.8% 0.5% 0.5% divisions, consistent with median gearing for our comparable company dataset. WACC (post-tax, nominal) 9.2% 11.6% 10.4% Source: EY analysis We obtain a cost of equity of 11.7% for Kordia Networks, 12.4% for Kordia Solutions New Zealand and Ref: Weighted average cost of capital (WACC) - Section DCF - Discounted cash flows 11.1% for Kordia Solutions Australia.

We have assumed an implied credit rating of BBB for the Kordia Group as a whole. This gives us an estimated debt margin of 2.7%, resulting in a pre-tax cost of debt of 6.8% for the New Zealand divisions and 6.4% for Kordia Solutions Australia.

17 4 Oct 2013 Valuation Analysis : Valuation analysis 2013 SOE Valuations - Kordia.docx

Valuation analysis

Kordia Group valuation summary Summary of DCF valuation Currency: NZ$000 The equity value for Kordia is obtained as follows: Valuation - Years 1 to 3 41,466 „ The Enterprise Value of the three divisions is estimated as $194.6 million. Valuation - Years 4 to 10 64,671 Terminal value 88,433 „ We subtract net debt of $52.8 million. Enterprise value 194,569 Net debt (52,826) „ We subtract provisions for warranties and make good liabilities of $8.4 million. Provisions (8,409) „ We add surplus assets of $13.1 million Surplus assets 13,104 Equity value 146,438 We derive a mid-point equity valuation of Kordia Group of $146.4 million. Source: EY analysis Ref: Kordia Group - Consolidated Summary - Summary financials We have not ascribed any value to Kordia Solutions (Thailand) Co Ltd. We understand that the carrying value of the Group’s net investment in the jointly controlled entity at 30 June 2012 was nil (2011: Nil). The enterprise value of Kordia’s operations of $194.6 million implies a current year EBITDA multiple of 5.3x and a forecast EBITDA multiple of 5.9x. Our terminal value calculation implies an exit EBITDA multiple of 4.4x. Surplus assets Surplus assets comprise the deferred consideration receivable on the sale of Orcon and finance lease receivables. The market values of these assets are assumed to be equal to their carrying value. Provisions and contingencies We have subtracted $8.4 million for provisions in relation to warranties and make good liabilities with respect to leased property. Kordia has other contingent liabilities relating to legal action with a customer and notification for claims in relation to the divestment of Orcon. Management do not expect these liabilities to crystallise and it is in any case not possible to estimate the amounts that will be payable, if any. Therefore no adjustment is made for these contingencies.

18 4 Oct 2013 Valuation Analysis : Valuation analysis 2013 SOE Valuations - Kordia.docx

Comparison of implied multiples for Kordia Group with trading multiples

4. Comparison of implied multiples for Kordia Group with trading multiples

19 4 Oct 2013 Comparison of implied multiples for Kordia Group with trading multiples 2013 SOE Valuations - Kordia.docx

Comparison of implied multiples for K ordia Group with trading multiples

Peer company analysis

Implied EV / EV / EBIT Total Market asset EBITDA - EBITDA - Company name Currency Revenues Earnings margin Debt Cash Cap beta LFY NFY Average 8.8% 1.0 8.2 6.2 Median 7.2% 1.1 6.5 6.1 Cardno Limited NZ$m 1,414 92 9.3% 286 107 881 1.1 6.6 6.2 Coffey International Limited NZ$m 812 (1) 1.3% 105 28 35 n/a 5.7 3.0 Opus International Consultants Ltd. NZ$m 407 23 7.2% 55 76 242 1.0 6.4 6.0 UGL Limited NZ$m 4,516 43 1.4% 878 191 1,343 1.1 16.3 6.3 WorleyParsons Limited NZ$m 10,443 381 5.7% 1,253 379 5,691 1.5 9.7 8.2 WS Atkins plc NZ$m 3,096 161 5.8% 198 431 1,927 1.3 8.0 6.4 Telephone & Data Systems Inc. NZ$m 6,474 99 4.6% 2,226 1,754 3,443 0.7 3.7 4.0 Cable & Wireless Communications Plc NZ$m 2,322 23 16.2% 2,156 182 2,008 0.7 6.5 6.1 Equinix, Inc. NZ$m 2,296 175 22.1% 5,095 1,087 11,784 1.1 16.0 12.1 Macquarie Telecom Group Limited NZ$m 244 13 7.4% 11 11 196 n/a 4.8 3.9 Cable & Wireless Communications Plc NZ$m 2,322 23 16.2% 2,156 182 2,008 0.7 6.5 6.1 Kordia Group 5.3 5.9 Source: S&P Capital IQ, EY analysis Ref: Kordia Group - Comparable companies Commentary We have identified eleven broadly comparable companies for this valuation. A description of the business activities of each company is provided in Appendix A. Six of the companies are engaged in engineering and construction and five are engaged in telecommunications. Overall, our comparable companies had average and median LFY EV/EBITDA ratios of 8.2x and 6.5x respectively. This compares to our implied LFY ratio of 5.3x. Our comparable companies had average and median NFY EV/EBITDA multiples of 6.2x and 6.1x respectively. Our discounted cash flow valuation implies a NFY of 5.9x and a terminal year multiple of 4.4x. We believe our multiples are reasonable given differences in the size and nature of Kordia’s operations.

Comparison of implied multiples for Kordia Group with trading multiples : Comparison of implied multiples for Kordia Group with 20 4 Oct 2013 trading multiples 2013 SOE Valuations - Kordia.docx

Sensitivity Analysis

5. Sensitivity Analysis

21 4 Oct 2013 Sensitivity Analysis 2013 SOE Valuations - Kordia.docx

Sensitivity Analysis

Key assumption sensitivity We have tested the sensitivity of our valuation model to: „ WACC – Kordia Networks (8.7% - 9.7%) – Kordia Solutions NZ (11.1% - 12.1%) – Kordia Solutions Australia (9.9% - 10.9%) „ Terminal growth rate (1% - 3%) „ Earnings (±5%) The results of our sensitivity analysis are shown below. Kordia Group equity value sensitivity analysis

Source: EY analysis

Earnings sensitivity (±5%)

Terminal growth rate (±1%)

WACC (±0.5%)

132 137 142 147 152 157 162 (millions) Based on our sensitivity analysis, we conclude that it is likely that the equity value of Kordia Group lies within the range of $136 million to $161 million.

22 4 Oct 2013 Sensitivity Analysis : Sensitivity Analysis 2013 SOE Valuations - Kordia.docx

Appendix A

Comparable companies

4 Oct 2013 Appendix A : Comparable companies 2013 SOE Valuations - Kordia.docx

Comparable companies

Comparable companies descriptions

Company name Business description Cardno Limited Cardno Limited, an infrastructure and environmental services company, provides professional services in the development and improvement of physical and social infrastructure for communities worldwide. The company offers a range of integrated services in the market sectors of buildings, land, coastal and ocean, environment, emerging markets, management services, mining and energy, transportation, water, and defense. Its services include technical and economic feasibility studies of a project; planning services consisting of statutory planning, urban development, master planning and design, mapping and surveying, and transportation planning; environmental consulting in the areas of natural systems assessment and management, environmental impact assessment and monitoring, agricultural development, climate change management, conservation, and rehabilitation; engineering design of functional structures, spaces, and systems; and landscape architecture services. The company’s services also comprise project management services for the delivery and maintenance of infrastructure and development works; construction management services consisting of construction administration, construction and demolition, construction materials testing, and subsurface utility engineering; asset management, facilities management, and infrastructure services; management consulting; and development assistance. In addition, it develops and supplies engineering software for various aspects of water modeling. Cardno Limited was founded in 1945 and is headquartered in Fortitude Valley, Australia. Coffey International Limited Coffey International Limited provides professional consulting services. It offers specialized environmental services, engineering consultancy, and technical services to the mining industry; scientific testing solutions; and work place health and safety services. The company also provides consulting and training services, and outsourced service delivery solutions that contribute to sustainable growth; and foreign aid consultancy services for markets where economic growth creates demand for mature public services and infrastructure; and in countries, which are at risk of conflict or natural disaster, or which are emerging from it. In addition, it offers project management services in commercial and residential property, urban redevelopment, health, education, justice, and transportation infrastructure projects; and specialist advisory services. Coffey International Limited offers its services primarily in Australia, New Zealand, Canada, the United Kingdom, Brazil, Africa, and the Middle East. The company was founded in 1959 and is based in Sydney, Australia. Opus International Consultants Opus International Consultants Limited provides multidisciplinary consultancy and project management services for government and quasi-government sector in New Zealand, the United Kingdom, Australia, and Canada. The company offers a Ltd. range of services for the building sector comprising architecture and interior design; civil, structural, and geotechnical engineering; building services engineering; fire engineering and building compliance; facilities and property management; property acquisition and planning assistance; project management; landscape design; and sustainability and asset management. It also offers services in the land transportation sector, including bridge and civil engineering; network management; pavement and traffic engineering; performance and traffic modeling; road safety; transportation asset management; transportation infrastructure design; transportation planning and engineering; and travel demand management to road and rail controlling authorities, transportation planning agencies, private developers, and transport operators. In addition, the company offers water and environmental services, such as contaminated land management consultancy services, dairy services, heritage services, environmental business management, landscape architecture, environmental and social impact assessment, environmental training, water and wastewater treatment, water asset and water resources management, and pipe network reticulation. Further, it provides compliance services, data management, economics, geographic information systems, facilities and property management, infrastructure asset management, land surveying, maritime engineering, project procurement and construction, property, research, science and technology, wind engineering and aerodynamics, risk management, and strategic management services. The company was founded in 1870 and is based in , New Zealand. Opus International Consultants Limited is a subsidiary of Opus International (NZ) Ltd. UGL Limited UGL Limited provides outsourced engineering, property, and asset management and maintenance services to governments, institutions, and blue-chip corporations worldwide. It operates in three segments: UGL Engineering, UGL Operations & Maintenance, and DTZ Property. The UGL Engineering segment offers design, engineering, construction, supply, project management, and commissioning services to the rail, transport and technology systems, water, power, resources, and defense sectors. The UGL Operations & Maintenance segment provides asset management and maintenance services to support social and economic infrastructure. The DTZ Property segment offers property services, including leasing agency and brokerage, integrated property and facilities management, capital markets, investment and asset management, valuation, building consultancy, project management, and research and consulting services. The company was formerly known as United Group Limited and changed its name to UGL Limited in 2009. UGL Limited was founded in 1970 and is headquartered in North Sydney, Australia. WorleyParsons Limited WorleyParsons Limited provides professional services to the resources and energy sectors, and complex process industries. It provides engineering design, project delivery services, and maintenance and reliability support services. The company operates in four segments: Hydrocarbons; Minerals, Metals and Chemicals; Infrastructure and Environment; and Power. The Hydrocarbons segment provides its services for fixed offshore production facilities, floating and deep water solutions, offshore pipelines and subsea systems, onshore pipelines and receiving terminals, onshore oil and gas production facilities, and heavy oil and oil sands, as well as LNG liquefaction and re-gasification, refining and petrochemicals, and sulphur management industries. The Minerals, Metals and Chemicals segment provides engineering and project services for base metals, coal, chemicals, ferrous metals, alumina, aluminum, iron ore, and gas cleaning industries. The Infrastructure and Environment segment offers its services to resource infrastructure, urban infrastructure, ports and marine terminals, rail, water, municipal, transport, environment, geophysics, and geotechnical industries. The Power segment offers its services to advanced coal, coal, hydropower, nuclear, renewable energy, and resource power industries, as well as gas turbine based plants and power networks. The company operates in Asia and China, Australia, New Zealand, Canada, Europe, Latin America, the Middle East, North Africa, India, Sub-Saharan Africa, the United States, and the Caribbean. WorleyParsons Limited is based in North Sydney, Australia. WS Atkins plc WS Atkins plc provides design, engineering, and project management consultancy services. It offers engineering, technically integrated design, and project and cost management services to clients in the public, regulated, and private sectors in the United Kingdom. The company also provides infrastructure planning, engineering, construction management, environmental consulting, urban planning, and program management services to state and local government clients, federal agencies, and private businesses in North America. It offers design, engineering, and project management services for buildings, transportation, and other infrastructure programs in the Middle East. In addition, it provides engineering, planning, urban design, architecture, and rail design services in the Asia Pacific; urban planning, architecture, and landscape architectural design services in mainland China; and urban rail development and highways/bridges design services in Hong Kong. Further, the company offers engineering and project management services for the energy market. It also operates in Denmark, Ireland, Norway, Poland, Portugal, and Sweden, as well as Australia. WS Atkins plc serves roads, rail, buildings, energy, defense and security, water and environment, urban development, aerospace and aviation, education, and other sectors. The company was founded in 1938 and is based in Epsom, the United Kingdom. Telephone & Data Systems Inc. Telephone and Data Systems, Inc., a diversified telecommunications service company, provides wireless and wireline telecommunications services in the United States. The company’s wireless services include national consumer and business rate plans; postpaid plans; prepaid service plans, which consist of voice minutes, messaging, and data services; Smartphone messaging, data, and Internet services to access the Web, e-mail, social network sites, text, picture and video messages, and turn-by-turn GPS navigation, as well as to browse and download various applications; and data services comprise news, weather, sports information, games, ring tones, and other services. It provides wireless devices, such as handsets, modems, mobile hotspots, and tablets; and accessories, such as carrying cases, hands-free devices, batteries, battery chargers, and memory cards, as well as wireless device repair services. The company also offers voice services, including local and long- distance telephone, voice over Internet protocol, voice mail, caller ID, and call forwarding services; broadband services, such as digital subscriber lines and other high-speed Internet data services; network access services; and Internet protocol television and satellite video services to commercial and residential customers and carriers. In addition, it provides collocation, hosting, hosted application management, and cloud computing services; and planning, engineering, procurement, installation, sales, and management services for information technology infrastructure, as well as printing and distribution services. As of December 31, 2012, the company served approximately 5.8 million wireless customers and 1 million wireline connections. It sells its products through retail sales, service centers, direct sales, third-party retailers, and independent agents, as well as through Website and telesales. The company was incorporated in 1968 and is headquartered in Chicago, Illinois.

4 Oct 2013 Appendix A : Comparable companies 2013 SOE Valuations - Kordia.docx

Comparable companies

Company name Business description Cable & Wireless Cable & Wireless Communications Plc, together with its subsidiaries, provides telecommunications services to consumers, businesses, and governments in the United Kingdom. It offers mobile data services, including email, mobile service portals, Communications Plc and video calling services; broadband services, including high speed Internet and TV services; fixed line voice telephony services; and entertainment services, such as pay TV services. The company also provides carrier services in approximately 40 countries; and managed services and social telecoms, which comprise management of the telecommunications platform for 911 emergency services operations, as well as provision of CCTV surveillance and telemedicine services to government departments, emergency calls, and academic Internet services. In addition, it offers data centre and hosting services. The company primarily has operations in Caribbean, Panama, and Monaco. Cable & Wireless Communications Plc is based in London, the United Kingdom. Equinix, Inc. Equinix, Inc. provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa, and the Asia- Pacific. It connects companies directly to their customers and partners in networked data centers through the Equinix interconnection platform. The company provides colocation services and related offerings; interconnection services comprising physical cross connect/direct interconnections, Equinix Internet exchange, Equinix metro connect, Internet connectivity services, and Ethernet exchange services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping, and emergency equipment replacement services. It connects approximately 4,000 companies, which comprise cloud and IT service providers, content providers, enterprises, financial companies, network and mobility service providers, carriers, and other bandwidth providers. The company provides its services through direct sales force and channel marketing programs. Equinix, Inc. was founded in 1998 and is headquartered in Redwood City, California. Macquarie Telecom Group Macquarie Telecom Group Limited provides various telecommunication and hosting services to corporate and government customers in Australia. The company offers data network and Internet services, including Internet and broadband business Limited services; wide-area-network optimization services; remote access services; IP VPN applications with MPLS and QoS, and IP migration services; IP network infrastructure; managed network and managed router solutions; and integrated data services. It also provides voice and mobile telecommunications services, such as business fixed line and VoIP solutions; SIP trunking; inbound call centre services; voice and Web conferencing services; and mobile broadband, network, voice, and data services. In addition, the company offers managed hosting services consisting of managed dedicated servers, managed private cloud, managed co-location, managed security, managed storage, backup as a service, hybrid hosting, and virtual hosting services to the online travel, digital media, online learning, online sports, financial services, insurance, payment gateways, and risk management industries. Further, it provides cloud hosting services, including cloud server, cloud firewall, cloud load balancer, and cloud connect services. The company was founded in 1992 and is headquartered in Sydney, Australia. Cable & Wireless Cable & Wireless Communications Plc, together with its subsidiaries, provides telecommunications services to consumers, businesses, and governments in the United Kingdom. It offers mobile data services, including email, mobile service portals, Communications Plc and video calling services; broadband services, including high speed Internet and TV services; fixed line voice telephony services; and entertainment services, such as pay TV services. The company also provides carrier services in approximately 40 countries; and managed services and social telecoms, which comprise management of the telecommunications platform for 911 emergency services operations, as well as provision of CCTV surveillance and telemedicine services to government departments, emergency calls, and academic Internet services. In addition, it offers data centre and hosting services. The company primarily has operations in Caribbean, Panama, and Monaco. Cable & Wireless Communications Plc is based in London, the United Kingdom. Source: S&P Capital IQ Ref: Comparable company descriptions - Section CC - Comparable Companies

4 Oct 2013 Appendix A : Comparable companies 2013 SOE Valuations - Kordia.docx

Appendix B

Limitations and disclaimer

4 Oct 2013 Appendix B : Limitations and disclaimer 2013 SOE Valuations - Kordia.docx

The Report was prepared solely for the purpose of providing the Crown with an independent view of the valuation of Kordia Group Limited as at 30 June 2013 including any relevant and prevailing industry and other factors (which are set out in the Report) (the “Purpose”). This Report is furnished by EYTAS solely for the purposes described and neither this Report nor any copy or extract of or from the Report may be further distributed, reproduced, published, quoted or disclosed except where agreed. The Report is not suitable for any purpose other than the Purpose. It should not be relied upon by any person other than the Crown or for any other purpose. The Report does not, nor does it attempt to, contain all material information and facts about Kordia Group, its business or the industry in which it operates. Although reasonable care has been taken to ensure that the facts stated and any opinions, estimates, forecasts and projections contained in this Report are fair and accurate, EYTAS has not independently verified the information contained in the Report and assume no responsibility for the independent verification or evaluation thereof. Further, the information in this Report is given in good faith and has been obtained from published information and other sources believed to be reliable, accurate and complete at the time of preparation, but its accuracy and completeness is not guaranteed. EYTAS is under no obligation to update the Report if it becomes aware of any change or inaccuracy in the information after the date of the Report. This Report may also include certain statements, estimates, forecasts, and projections about anticipated future performance of Kordia Group and/or the relevant industry which may have been provided to EYTAS. Such information will reflect various assumptions concerning anticipated performance which may or may not prove correct. Accordingly, there can be no assurance that such statements, estimates, forecasts or projections will be realised and variations may be material. Undue reliance must not be placed on such forward looking information. To the fullest extent permitted by law, EYTAS accepts no liability or responsibility to any person for any loss or damage or other consequence suffered, incurred or arising out of the use of or reliance on the Report or its contents or otherwise arising in connection therewith. Information, analysis, opinions and estimates contained within the Report reflects a judgement at the date of provision of the Report and are subject to change without notice.

4 Oct 2013 Appendix B : Limitations and disclaimer 2013 SOE Valuations - Kordia.docx