Australia New Agribusiness & Chemical Group Ltd (Administrators Appointed) ACN ("the Company")

Transcription

1 Australia New Agribusiness & Chemical Group Ltd (Administrators Appointed) ACN ("the Company") Administrators' Section 439A Report 11 August 2016 Michael McCann Joint and Several Administrator T E Michael.McCann@au.gt.com Graham Killer Joint and Several Administrator T E Graham.Killer@au.gt.com Anthony Jonsson Joint and Several Administrator T E Tony.Jonsson@au.gt.com 2016 Grant Thornton Section 439A Report August 2016

2 Contents Section Page 1. Introduction 5 2. Executive summary Background information Financial position Sale of a shell company Offences, voidable transactions and insolvent trading Estimated return to creditors Effect on employees Proposal for a deed of company arrangement Administrator's recommendation Remuneration Meeting 53 Appendices A. ARITA creditor information sheet B. DIRRI C. Administrators' Remuneration Report D. Notice of second meeting of creditors E. Proof of Debt form F. Proxy form G. Teleconference registration form 2016 Grant Thornton Section 439A Report August

3 Glossary Administrators Michael McCann, Graham Killer and Anthony Jonsson, Voluntary Administrator's of the Company appointed under Part 5.3A of the Corporations Act 2001 ANB / the Company AllPAP AMG ANZ Apollo ARITA ASIC Australia New Agribusiness & Chemical Group Ltd (Administrators Appointed) All Present and After Acquired Property Australia Mercury Glass Pty Ltd Australian and New Zealand Banking Group Apollo Fertiliser Queensland Pty Ltd Australian Restructuring Insolvency & Turnaround Association Australian Securities and Investments Commission 439A Report A report on the company's business, property, affairs and financial circumstances required to be given to creditors pursuant to Subsection 439A(4) of the Act; and ATO A statement pursuant to paragraph 439A(4)(b) of the Act, setting out the Administrators' opinion and reasons as to each of the options available under Section 439C in respect of the company's future. Australian Taxation Office AUD Australian Dollars ($) BOC BAO BAS c. Circa Bank of China Bao Industry Pty Ltd Business Activity Statement 2016 Grant Thornton Section 439A Report August CBA CCB CY DIRRI Directors DOCA Eligible Employee Creditor ERV exc FEG Flash FY Group GST IP k Kaizen Ltd m PAYG Commonwealth Bank of Australia China Construction Bank Calendar year Declaration of Independence, Relevant Relationships and Indemnities Jun Xiao, Yiming Cui, Naiming Li, Kai Cheng, Yinan Zhang Deed of Company Arrangement under Part 5.3A of the Act Meaning given by Section 9 of the Act Estimated realisable value Excluding Fair Entitlements Guarantee Scheme Flash Lighting Company Ltd Financial Year ANB, Apollo, AMG, Venus Goods and Services Tax Intellectual property Thousand Kaizen Global Investments Ltd limited Millions Pay As You Go

4 Glossary PMSI PPSR Prospective Financial Information Pty Ltd Purchase Money Security Interest Personal Property Securities Register Financial information based on assumptions about events that may occur in the future and possible action by an entity. It is highly subjective in nature and its preparation requires the exercise of considerable judgement. Proprietary Limited the Act Corporations Act 2001 the Landlord Venus YTD ZLD BTP Central Pty Ltd Australia Venus Resource Pty Ltd Year To Date ZLD International Holdings Ltd 2016 Grant Thornton Section 439A Report August

5 Section 1 Introduction 01. Introduction 02. Executive summary 03. Background information 04. Financial Position 05. Sale of a shell company 06. Offences, voidable transactions and insolvent trading 07. Estimated return to creditors 08. Effect on employees 09. Proposal for a deed of company arrangement 10. Administrator's recommendation 11. Remuneration 12. Meeting 2016 Grant Thornton Section 439A Report August 2016

6 Introduction Appointment and first meeting Appointment of Administrators Michael McCann, Graham Killer and Anthony Jonsson were appointed Joint and Several Administrators ("the Administrators") of Australia New Agribusiness & Chemical Group Ltd ("the Company" or "ANB") under Part 5.3A of the Corporations Act 2001 ("the Act") on 20 April 2016 by a meeting of the directors of the Company, pursuant to Section 436A(1) of the Act. The purpose of the appointment of Administrators is to allow for independent insolvency practitioners to take control of and investigate the affairs of an insolvent company. During that time creditors' claims are put on hold. At the end of that period we are required to provide creditors with information and recommendations to assist creditors to decide upon the Company's future. First meeting The first meeting of the Company's creditors was held on 3 May 2016 at the Brisbane office of Grant Thornton Australia, Level 18, 145 Ann St, Brisbane, Queensland. At this meeting, there were no nominations received to replace the Administrator. As such, it was deemed that Michael McCann, Graham Killer and Anthony Jonsson would continue to act as Administrators. Creditors also elected a Committee of Creditors at the meeting, the members of which include: Tuck Chung, representing Flash Lighting Company Ltd Mr Jainwei Li, representing Australia Venus Resource Pty Ltd Mr Peter Edwards, representing U&D Mining Industry (Australia) Pty Ltd Grant Thornton Section 439A Report August

7 Introduction Report to creditors The purpose of this report is to provide creditors with sufficient information for them to make an informed decision about the future of the company, including: - Background information about the company; - The results of our investigations; - The estimated returns to creditors; and - The options available to creditors and our opinion on each of these options. In the time available to us, we have undertaken the following investigations to prepare this report and formulate our opinion: - Review of the Company's books and records; - Review of the Company's assets, including preparation of schedules identifying details of the asset, location, condition, use and registration information (where applicable); - Review of validity of security documents provided by secured creditors, and subsequent discussions with representatives of the secured creditors; - Initial review of the financial performance and position of the Company; - Review of the ability of the Company to continue to trade; - Review of transactions from the Company's bank accounts; - Form an opinion as to whether there may be a claim against the Directors for insolvent trading; and - Form an opinion as to whether any other offences have been committed, including but not limited to offences under the Act. At the meeting of creditors to be held at Grant Thornton, Brisbane, Level 18, 145 Ann St Brisbane at 10.30am on Tuesday, 23 August 2016, creditors will be asked to make a decision by passing a resolution in respect of options available to them. In this report we have recommended to creditors that the Company go into liquidation and detailed why this option is, in our opinion, in creditors' best interests. The Administrators have relied on information provided from numerous sources to prepare the report, including: - Discussions with the Directors, management and staff of the Company; - Information available from public sources, such as, Australian Securities and Investments Commission ("ASIC") and the Personal Property Securities Register ("PPSR"); and - A review of the Company's books and records made available to date. We have not performed an audit and we reserve the right to alter our conclusions, should the underlying data prove to be inaccurate or change materially from the date of this report. In the event that the Company proceeds to liquidation, this report will form the basis of our further investigations. Provided that funding is available, the investigations will be more extensive than those undertaken to date, particularly due to the time constraints of the voluntary administration process. Further investigations may be supported by public examinations of the Directors, officers and others who may be able to provide information about the Company's examinable as that expression is defined in the Act. It is the Administrators' view that this report provides sufficient information to creditors to allow them to make an informed decision as to the Company's future and allows the Administrators to make a reasoned and fair recommendation based upon their opinions and the opinions available to creditors Grant Thornton Section 439A Report August

8 Introduction Compliance, Independence and Communications Compliance with best practice We confirm that this report complies with the statements of best practice issued by the Australian Restructuring Insolvency and Turnaround Association ("ARITA"), with regard to content of the Administrators' report and the Code of Professional Practice with regard to remuneration. Independence As disclosed in our First Notice to Creditors, the Administrators undertook a proper assessment of the risks in relation to their independence prior to accepting the appointment. Our assessment identified no real or potential risk to our independence. We confirm that we have updated the Declaration of Independence, Relevant Relationships and Indemnities ("DIRRI") as stated in the initial Notice to Creditors to provide further information on the Administrators' knowledge and relationships with the previous auditor of the Company's parent entity Australia New Agribusiness & Chemical Group Ltd (Administrators Appointed) ("ANB") relevant to the 2011 audit, and prior audit periods. We disclose that the auditors in 2011 and prior years was BDO Audit (NSW- VIC) Pty Ltd ("BDO Sydney"). The business of BDO Sydney was acquired by Grant Thornton on or around July 2012, and the auditor of BDO Sydney is a current Partner of Grant Thornton. The relationship with the 2011 auditors only became apparent after the Administrators appointment, given that the relationship was some 4 plus years prior to the Administration. The current auditors of ANB, from 2012 onwards, is BDO Audit Pty Ltd ("BDO Queensland"). Grant Thornton has no relationship with the current auditors that would create either a real or potential risk in relation to the Administrators' independence. The Administrators' assessment of the relationships with the previous auditors does not pose a real or potential risk to the Administrators' independence in consideration of: 1. The time that has lapsed since the 2011 audit appointment (over 4 years); 2. Grant Thornton did not audit, nor has it ever audited the Company or ANB; 3. The only fee rendered by Grant Thornton to ANB was in July 2012 for $1,300 to facilitate a transfer of the BDO Sydney audit files to BDO Queensland (current auditors of ANB). A copy of the updated DIRRI is enclosed at Appendix B for your information. Communications with various parties The Administrators have liaised with various parties during the Administration, including: All known creditors (including employees); The Director, management and staff of the Company to understand the business' underlying activity, financial position and reason for failure; Shareholders in relation to allegations made against the Directors and management. The Company's accountants and advisors, PWC (advisor) and its auditor BDO Queensland in order to secure the records of the Company and to better understand key transactions and actions taken by the Company's management Grant Thornton Section 439A Report August

9 Introduction Compliance, Independence and Communications Disclaimer In reviewing this report, creditors should note the following: This report is based on information from the books, records and other information provided by the Directors. Whilst the Administrators have reviewed the information, there has been no independent verification of the information. In considering the options available to creditors and formulating their recommendations, the Administrators have necessarily made forecasts of asset realisation and total creditors. These forecasts and estimates may change. Whilst the forecasts and estimates are the result of the Administrators' best assessments in the circumstances, creditors should note that the outcome for creditors may differ from the information provided in this report. This report is not for general circulation, publication, reproduction or any use other than to assist creditors in evaluating their position as creditors and must not be disclosed without the prior approval of the Administrators. The Administrators do not assume or accept any responsibility for any liability or loss sustained by any creditor or any other party as a result of the circulation, publication, reproduction or any use beyond that permitted above. The statements and opinions given in this report are given in good faith and in the belief that such statements are not false or misleading. Except where otherwise stated, we reserve the right to alter any conclusions reached on the basis of any changed or additional information which may be provided to us between the date of this report and the date of the second meeting. Neither the Administrators, nor any member or employee thereof are responsible in any way whatsoever to any person in respect of any errors in this report arising from incorrect information; and Creditors must seek their own independent legal advice as to their rights and the options available to them at the second meeting of creditors Grant Thornton Section 439A Report August

10 Section 2 Executive summary 01. Introduction 02. Executive summary 03. Background information 04. Financial position 05. Sale of a shell company 06. Offences, voidable transactions and insolvent trading 07. Estimated return to creditors 08. Effect on employees 09. Proposal for a deed of company arrangement 10. Administrator's recommendation 11. Remuneration 12. Meeting 2016 Grant Thornton Section 439A Report August 2016

11 Executive summary Executive summary Background Information The Company was incorporated on 3 May 2010 and operated out of Suite G1, 12 Electronics Street, Eight Mile Plains, which is also the Company's registered office. The Company was formerly known as Daton Group Australia Ltd. The current Directors are Jun Xiao, Yiming Cui, Naiming Li, Kai Cheng and Yinan Zhang. Mr Zhang is also the CEO of the Company. The current Secretary is Yi Yang. The Company, through it's subsidiaries, manufactures and sells compound fertiliser in Australia (Apollo), had glass processing operations (AMG sold March 2016) and holds a 49% interest in a phosphate mining company (Venus). A review of the Company's consolidated accounts reveals that the Company's performance has resulted in consistent and significant net losses in FY14 ($14,963,252) and FY15 ($9,115,418). The Company's accounts record a positive net asset balance of c$10m. It is our opinion that the Company will not realise the recorded values for its subsidiary assets, in-particular the Apollo investment. We consider that the Company could have an actual net asset deficiency, subject to asset realisations secured. Assessment of Viability On appointment, the Administrators undertook an urgent assessment of the viability of the business. ANB did not trade in its own right but oversaw the operations of its subsidiaries. The Administrators did not continue to employee the staff of ANB in consideration of the limited trading being undertaken from its head office, and limited funds available to the Administrator at that time. The Administrators did however continue the Apollo subsidiary operations, so as to undertake a stock sale, and business sale programs. They also sought to secure the assets of AMG, including future sale receivables. ANB does not have control over Venus, but is 49% shareholder. The future return from this investment is unknown. Financial Position Interests in Subsidiaries ANB had three subsidiaries at the time of the Administrators appointment, Apollo, AMG and Venus. Apollo is also subject to Administration and we anticipate that there will only be a small return, if any from this asset. AMG is solvent and its business sold prior to the Administration. We are overseeing the collection of the AMG assets and net remittance to ANB of some c.$900k to $1.1m ANB's 49% interest in Venus (a phosphate mining (start-up) company) has potential to provide the greatest asset recovery for ANB creditors. The recorded value of this asset is c.$12m, but it is subject to a secured creditor claim for $5m from Kaizen. The value of the asset will become more apparent over time. Cash At the date of appointment, the Company's bank accounts held a total of $927k, of which we have secured c.$65k to date. An amount of $862k remains held in a Company account with China Construction Bank. These funds are held as security for a bank guarantee facility provided to the Queensland Government relevant to an Environmental Authority for the Venus phosphate operations. We are in the process of securing these monies as the guarantee is not longer current. Although Venus had claimed title to these monies, we have reached an in principle agreement with Venus that will see these funds paid to the Company in administration Grant Thornton Section 439A Report August

12 Executive summary Executive summary Financial Position Debtors As the company does not trade or sell stock, there were no debtors at the date of our appointment. Other Assets Other known assets of ANB include two term deposits with CBA for c$345k, the deposits are held as security for bank guarantee facilities provided to ANB's landlord for premises and the Queensland Government in relation to a further Environmental Authority for the Venus operation. We do not anticipate the return of any of these monies. Other assets also include a possible ATO refund, net of c.$13k and a receivable account of c.$50k, which can not be traced and would appear to relate to past accounting periods. Plant and Equipment The Company's records indicate that it owns four motor vehicles, some office and computer equipment, furniture and fixtures. Valuation of assets Following our appointment we engaged Grays Asset Services ("Grays") to value the Company's fixed assets. We are unable to disclose the value of Company's assets to creditors at this stage so as not to compromise the potential value achieved on sale of these assets, however we note the realisable value is less than recorded in the Company's books and records. Secured Creditors ANB has several charges registered against it on the Personal Property Securities Register ("PPSR"). Material to the Administration is the charge in favour of Kaizen. Kaizen purports to have security over the Venus Shares in relation to a $5m loan to ANB. We consider that the Kaizen security interest was registered late and may result in the security being void. In this case Kaizen would be ranked as an ordinary unsecured creditor. Kaizen are purporting that its registration was perfected by control over the share certificates prior to the Administration and we are currently investigating the validity of this claim. Most of the charges relate to hire purchase arrangements in relation to leased office equipment, or we are unaware of any underlying debt owed to the registered party by ANB. ATO Liabilities The Company's records suggest that at the date of appointment there was no liability owing to the ATO in relation to income tax and that a net refund may be payable to ANB in relation to GST and PAYG. Employee Entitlements Our preliminary estimate of employee entitlements for the Company is $175,697, which includes payment in lieu of notice and redundancy due to the termination of employees on appointment. Of this $93,510 is payable to excluded employees, who will only receive a priority claim in relation to $3.5k of the amount owed. The balance of $90k will rank as an ordinary unsecured claim. Ordinary Unsecured Creditors Ordinary unsecured creditors total c.$5.175m, of which $4.3m is owing to related or associated parties. A claim for $14.7m was received from Flash Lighting Company Ltd in relation to a $6.5m Series B Convertible Note. On review, we do not consider Flash is a creditor of ANB as the $6.5m consideration does not appear to have been received by ANB. Unsecured creditor claims may increase from the $5.175m estimate where the Kaizen security is invalid, or if any additional claims are received Grant Thornton Section 439A Report August

13 Executive summary Executive summary Offences, voidable transactions and insolvent trading Estimated return from a winding up For general information about offences under the Act, please refer to the enclosed ARITA creditor information sheet, at Appendix A of this report. Voidable transactions Our preliminary investigations into the affairs of the Company to date have identified several transactions that could result in unfair preference claims, uncommercial transaction or director related transaction, which may be void against a Liquidators. The value of the transactions under review is significant. Not all of the transaction under review will be set aside in Liquidation, but further investigation is warranted and we anticipate that some net recovery will be received, and would be greater than any money available under the currently proposed DOCAs relevant to the listed shell sale. Insolvent trading Based on our investigations we have determined that ANB likely became insolvent on or after 30 June 2014, on impairment of a $7.4m receivable. We consider that there are grounds to further investigate whether the Directors can be pursued for an insolvent trading claim if the Company were to go into Liquidation. The value of any claim will be subject to the return to creditors and the quantum of creditor claims. We have prepared an optimistic and pessimistic scenario of the possible return from a winding up, and under the proposed DOCAs involving a sale of the ANB listed shell. We consider that a liquidation scenario will optimise recoveries for creditors as funds received from a Liquidators pursuit of voidable and director related transactions are likely to outweigh the consideration being offered for a sale of the ANB shell. The value ultimately returned to creditors is largely contingent on the value secured for the 49% interest in Venus, and any Liquidators antecedent transaction recoveries. Priority unsecured creditors (employees ) are likely to be paid in full and ordinary unsecured creditors could receive a return of between 40 to 100 cents per dollar if the company is placed in liquidation. The return to ordinary unsecured creditors falls to between 16 to 91 cents per dollar under a DOCA, and we consider the return to creditors under a DOCA to be more volatile given it is predominately reliant on the value secured for the Venus interest. Where value for this asset is not secured, creditors are more likely to receive the pessimistic return. Liquidation: Estimated Return to Creditors Optimistic ($) Liquidation: Pessimistic ($) DOCA: Optimistic ($) DOCA: Pessimistic ($) Priority Unsecured Creditors 100% 100% 100% 100% Kaizen 100% 100% 90.8% 100% Ordinary Unsecured Creditors 100% 40% 91% 16% 2016 Grant Thornton Section 439A Report August

14 Executive summary Executive summary Effect on employees Our preliminary estimate of employee entitlements for the Company is c.$175k including an estimate of c.$105k for PILN and Redundancy. Of the $175k, $90k will be considered an ordinary unsecured claim as it relates to entitlements owing to an excluded employees. Based on our calculations, there appears to be sufficient funds to pay priority entitlements (c.$85k) in full. Should the Company be placed into Liquidation, employees may lodge a claim with FEG which covers outstanding employee entitlements for eligible employees (excluding superannuation). This may facilitate a more timely payment of funds to employees. Proposal for a Deed of Company Arrangement (DOCA) Administrators recommendation A DOCA is an agreement between the Company and its creditors. A DOCA, if approved by creditors, binds all creditors of the Company arising on or before the date of the appointment of the Administrators unless otherwise specified. Any sale of the ANB corporate shell will need to be facilitated via a DOCA and Creditors Trust arrangement to enable the existing liabilities to be removed from the ANB entity. We consider that the additional funds to be received under a DOCA, for the shell sale would be c.$300k and are likely to be less than the additional funds recovered under a liquidation scenario, from a Liquidators investigations and recovery actions. We also have concerns over ANB's ability to complete on any corporate shell / DOCA transaction given the ASX guidelines, changing listing requirements and the support required from ANB shareholders. Section 439A(4)(b) of the Act requires the Administrators of the Company to prepare a statement setting out their opinion as to the status of the Company and the options available to creditors. In this report we have recommended to creditors that the Company be wound up for the following reasons: We have concerns as to the ability of ANB to complete on any DOCA proposal relevant to a sale of the corporate shell; The return to creditors is expected to be higher under a liquidation scenario The activities of ANB and that of its Directors call for further investigation. Remuneration The Administrators remuneration is to be approved by creditors at the forthcoming meeting of creditors A Remuneration Report is enclosed at Appendix C, providing details of work performed to date, estimated future remuneration up to the second meeting of creditors and estimated remuneration of the Liquidators, depending on the creditors' decision of the outcome of the Company at the second meeting. Meeting The second meeting of creditors is to be held at Grant Thornton, Level 18, 145 Ann St Brisbane at 10.30am on Tuesday, 23 August Registration will open 30 minutes prior to the meeting. The notice in regards to this meeting is enclosed at Appendix D. A Proof of Debt and Proxy Form are enclosed at Appendices E and F and are to be returned to our office by 4pm on Monday, 22 August Grant Thornton Section 439A Report August

15 Section 3 Background information 01. Introduction 02. Executive summary 03. Background information 04. Financial position 05. Sale of a shell company 06. Offences, voidable transactions and insolvent trading 07. Estimated return to creditors 08. Effect on employees 09. Proposal for a deed of company arrangement 10. Administrator's recommendation 11. Remuneration 12. Meeting 2016 Grant Thornton Section 439A Report August 2016

16 Background information Group structure Australia New Agribusiness & Chemical Group Ltd (Administrators appointed) 100% ownership 49% shareholder 100% ownership Apollo Fertiliser Queensland Pty Ltd (Administrators appointed) ("Apollo") Australia Venus Resource Pty Ltd ("Venus") Australia Mercury Glass Pty Ltd ("AMG") 24% shareholder 17% shareholder 10% shareholder ZLD International Holdings Limited Kaizen Global Investments Limited BAO Industry Pty Ltd Key Entities in Voluntary Administration Not in Administration Other Shareholders of Venus 2016 Grant Thornton Section 439A Report August

17 Background information Organisational structure Officeholders and shareholders Directors Date appointed Date ceased Jun Xiao 31/05/2012 present Yiming Cui 01/06/2012 present Naiming Li 02/07/2012 present Kai Cheng 01/07/2014 present Yinan Zhang 03/05/2010 present Yan Zhu 05/10/ /06/2014 Yan Zhang 05/10/ /07/2012 Zeng Li 05/10/ /05/2012 Stephen Streeter 05/10/ /04/2011 BeiBei Zhu 03/05/ /10/2010 Jian Zhang 03/05/ /10/2010 Company Secretary Date appointed Date ceased Yi Yang 09/02/2011 present Historical background of the Company The Company was incorporated on 3 May 2010 and operated out of Suite G1, 12 Electronics Street, Eight Mile Plains. This is also the Company's registered office. The Company was formerly known as Daton Group Australia Ltd, and was renamed Australia New Agribusiness & Chemical Group Limited in ANB was listed on the ASX in January 2011 (ASX code "ANB"), and is currently in a trading halt as a result of its Voluntary Administration status. Listed below are details of its majority shareholders. ANB is a holding company which has never traded in its own right. Rather, it has held investment interests in a variety of entities. Historically, ANB s investment interests have included: - Coal and phosphate mining operations; - Fertilizer manufacturing operations both domestic and abroad in China; and - Glass processing operations. ANB s operations are currently limited to interests in phosphate mining operations (via its 49% shareholding in Venus), domestic fertilizer production (via 100% ownership in Apollo) and glass processing (via its 100% ownership in AMG). The glass processing business was sold prior to our appointment (March 2016), and ANB is entitled to the surplus funds in AMG as 100% shareholder. Yan Zhang 05/10/ /02/2011 BeiBei Zhu 03/05/ /10/2010 Officeholders and shareholders cont'd The Company officeholders and shareholders are detailed above, as identified from a search from the ASIC database. At this point, we have not identified any other person who may be considered or deemed to be a shadow director of the Company. According to the ASIC database, there have not been any changes to the shareholdings or officeholders in the 12 months prior to the appointment date. Shareholders No of shares % shares Datong International Holdings Ltd 43,199, % China Joint Investment Holdings Ltd 32,400, % Jamsfield Group Ltd 27,419, % Pershing Australia Nominees 25,186, % Other shareholders 82,909, % Total number of shares 211,115, % Total number of Shareholders 400 ANB Share Register, Computershare, as at 23 May Grant Thornton Section 439A Report August

18 Background information Organisational structure Books and records Pursuant to Section 286 of the Act, a company must keep written financial records that correctly record and explain its transactions, financial position and performance and enable true and fair financial statements to be prepared and audited. Financial records must be kept for seven (7) years after the transactions covered by the records are completed. Failure to maintain books and records may give rise to a presumption of insolvency pursuant to Section 588E of the Act. This presumption may be relied upon by a Liquidator in an application for compensation for insolvent trading and other actions for recoveries pursuant to Part 5.7B of the Act. Our investigations to date indicate: - The Company maintained a MYOB accounting file; - BDO Audit Pty Ltd ("BDO Queensland" or "BDO") were the appointed auditors to ANB; - PWC provided taxation and other general accounting advice. - The internal accountants were Lulu Song and Lily Zhu. - ANB engaged external bookkeepers L&L Accounting Solutions. - ANB's solicitors included Colin Biggers and Paisley Lawyers and Minter Ellison Lawyers. It would appear that ANB maintained records. However, in our review of the records we note: There is an absence of detail regarding the nature and specifics of transactions and it has been difficult to confirm the commercial nature and benefit of the transaction(s); At times there appears to be a discrepancy between that which was documented and the reality of what occurred and was recorded in the Group's accounts. This has been particularly relevant to the capital raising in Venus where documentation regarding incoming investment and shareholders did not reflect investment monies paid or the recorded shareholding. There is limited visibility and clarity regarding the identity of parties that benefited from key transactions. Often monies advance to the Group were directed in the first instance to ANB's CEO and Director, Mr Yinan Zhang or entities / parties associated with him, and then provided to the Group. Accordingly, for some parties there is a lack of certainty around whether monies that were to be paid, were in-fact paid and received by ANB. In several transactions undertaken by ANB there is an apparent and/or perceived "conflict of interest" between certain of the officers of ANB and the counter parties to key transaction(s). Accordingly, concern has been expressed to the Administrators that certain of the officers may not have acted in the best interest of the Group. We are concerned that the disclosure of alleged related or associated party transactions may have been inadequate. Accordingly, members and creditors were not properly advised of the nature and consequence of key investment and business decisions undertaken by ANB. In consideration of the above, we are concerned ANB failed to present a clear rationale and complete feasibility studies or analysis for its business and investment decisions. Several transactions may require further review to determine their commerciality and purpose Grant Thornton Section 439A Report August

19 Background information Historical financials Statement of financial performance Profit and Loss CY 31 December ANB 1/1/16 to Historical financial performance 20/4/16 Consolidated 2015 ANB 2015 Consolidated The statement of financial performance summarised above, has been derived from both the Company's management accounts for CY15 and CY16 (to 20 April 2016), together with the Group's consolidated accounts for CY15, CY14, CY13 and CY12. ANB did not trade any business in its own right but was a holding entity which held investments in various subsidiaries and business assets. Accordingly, it did not earn revenue from its own operations as shown in the ANB management accounts Consolidated 2016 Grant Thornton Section 439A Report August Consolidated $ $ $ $ $ $ Revenue - 2,629,016-3,402, , ,070 Cost of sales - (3,023,648) - (2,476,166) - - Gross Profit / Loss - (394,632) - 926, , ,070 Other income / Profit 8,355 (349,391) 183, ,313 9,118,004 13,455,468 Expenses Distribution ex penses - (74,300) - (354,286) - - Marketing ex penses - (208,252) - (198,506) - - Administration ex penses - (3,563,316) - (3,930,331) (2,057,571) (1,663,513) Occupancy ex penses - (1,363,165) - (1,288,363) (421,930) (70,680) Finance costs - (158,811) - (414,206) (100,481) (146,515) Other ex penses (460,863) (1,678,356) (1,671,053) (10,180,484) (41,808) - Impairment of assets - (3,598,930) Share of loss of associates - (11,691) - - (2,223,694) (12,032) Total Expenses (460,863) (10,656,821) (1,671,053) (16,366,176) (4,845,484) (1,892,740) Net Profit / Loss before tax (452,508) (11,400,844) (1,487,654) (15,021,544) 4,619,381 12,493,798 Income tax - 2,285,426 2,226,785 58,292 (3,554,895) (258,233) Net Profit / Loss after tax (452,508) (9,115,418) 739,131 (14,963,252) 1,064,486 12,235, ANB's key subsidiary assets at the time of our appointment, or shortly prior to, included: Apollo A granulated fertiliser manufacturer in Brisbane. This was a start up venture undertaken by ANB and considerable investment was made in its set up and operations. ANB incurred significant losses since it's inception and failed to reach a scalable production level. Venus A start up phosphate mining operation with mining tenements in North Queensland. ANB originally owned 100% of the shares in this subsidiary. The shareholding was diluted over the past year as additional investment was secured for Venus (c.$12.5m). At the time of the Administration, ANB held a 49% interest in the Venus subsidiary.

20 Background information Historical financials Statement of financial performance Historical financial performance cont. The Venus subsidiary has not produced any profit contribution for the Group and we understand that only one of its tenements is operational (trial mining from September 2015). AMG operated a glass processing business in Brisbane, of which ANB is 100% owner. The AMG business was sold in March 2016 for c$1.5m including stock. Sale proceeds are payable over the course of CY16. Our initial review of AMG is that it is solvent and will contributed funds in excess of $1m back to AMG in the form of a shareholder distribution or loan repayment. The losses recorded in the ANB Group are significant and consistent in recent periods. Further, two of its subsidiary operations are considered start-up ventures where ANB has contributed significant capital to establish operations or acquire core assets but at no return. It appears ANB ran out of funds to continue operations and / or failed to remedy and stem the operating losses being incurred, particularly by the Apollo business. From the records available, there is a lack of evidence to suggest that there was an appropriate level of management and monitoring of the Group's business and lack of documentation and planning in support of key business and investment decisions. Management failed to non only capitalise, plan and monitor its start up projects, ensuring sufficient cash was available, but it did not adequately address the significant operational losses and deficiencies in its business that were being recorded year on year Grant Thornton Section 439A Report August

21 Background information Historical financials Summarised statement of financial position Balance Sheet CY 31 December ANB 2016 Historical position Consolidated 2015 ANB 2015 Consolidated The statement of financial position in the table above is a summary of the Balance Sheet as per management's accounts for CY14, CY15 and CY16 (as at 20 April 2016) and the consolidated accounts for the Group as at CY15, CY14 and CY13. A preliminary analysis of the historical financial position is provided below: ANB has a positive net asset position primarily based on the carrying value of its subsidiary assets in Apollo, Venus and AMG. The net asset position deteriorated significantly on a consolidated position predominantly due to the losses incurred in its subsidiary assets, and the impairment and write off of a $7.4m debt relevant to a sale of subsidiary assets to related parties. In line with this is a decline in cash and working capital assets. In 2014 an apparent negative working capital position was recorded indicating that the Group and ANB has a working capital deficiency and was possibly cashflow insolvent (unable to pay its current liabilities from current assets held) at this time ANB 2014 Consolidated Assets $ $ $ $ $ $ Current Assets 1,325,048 7,831, ,023 7,659,400 1,393,630 23,125,284 Non Current Assets 42,657,769 15,788,332 43,029,418 21,646,956 40,700,237 21,418,671 Total Assets 43,982,817 23,619,980 43,892,441 29,306,356 42,093,867 44,543,955 Liabilities Current Liabilities (9,801,962) (13,094,944) (9,259,079) (9,027,157) (8,199,636) (11,696,344) Non Current Liabilities (9,061,337) (76,096) (9,061,337) (394,840) (9,061,337) - Total Liabilities (18,863,299) (13,171,040) (18,320,416) (9,421,997) (17,260,973) (11,696,344) Net Assets 25,119,518 10,448,940 25,572,025 19,884,359 24,832,894 32,847,611 Contributed Equity 36,615,244 36,615,244 36,615,244 36,615,244 36,615,244 36,615,244 Retained Earnings / Losses (11,495,728) (26,166,304) (11,043,220) (16,730,885) (11,782,351) (3,767,633) Total Equity 25,119,516 10,448,940 25,572,024 19,884,359 24,832,893 32,847, Grant Thornton Section 439A Report August ANB's / the Group's solvency since 2014, and its positive net asset position was reliant on the ability of the Group to leverage its underlying assets to generate short-term cash. Management's actions to generate short-term cashflow for the business included: A sale and lease back of the Apollo premises; A sell down, in effect, of its interest in its phosphate mining tenements through the Venus vehicle. In doing so it appears it retained $3.5m of other investor monies intended for Venus. Securing short-term borrowings of c.$5m in December 2015, secured against its 49% interest in Venus (albeit this in effect replaced borrowings from Venus). A proposed (but failed) share restructure between ANB and a UK based fertiliser distributor to provide working capital and distribution channels / agreements. The actions taken by management ultimately failed to address the working capital deficiency in the Group, resulting in the Group's appointment of Administrators. It appears that shareholder funds, originally c$36m have been completely eroded.

22 Background information Directors' report as to affairs (RATA) RATA Naiming Li Jun Xiao & Yinan Zhang Naiming Li Jun Xiao & Yinan Zhang Yiming Cui Yiming Cui Book Realisable Value ($) Value ($) Assets Interests in Land NIL - Nil NIL Not Completed Nil Debtors " 17,096,745 Nil " " Nil Cash on Hand " ,563 " " 927,563 Cash at Bank " 641, ,035 " " 344,035 Stock " 1,662,821 Nil " " Nil Work in Progress " 132,154 Nil " " Nil P&E " - 123,823 " " 123,823 Other Assets " 13,623,726 28,536,738 " " 28,536,738 Contingent Assets " Unknow n - " " - Total Assets " 33,157,733 29,932,158 " " 29,932,158 Liabilities Secured Creditors " 5,120,000 5,754,508 " " 5,754,508 Priority Unsecured Creditors " - 94,445 " " 94,445 Unsecured Creditors " 20,385,657 4,221,105 " " 4,221,105 Contingent Liabilities " Unknow n - " " - Total Liabilities " 25,505,657 10,070,058 " " 10,070,058 Deficiency / Surplus " 7,652,076 19,862,100 " " 19,862,100 Share Capital " 36,615,244 36,615,243 " 36,615,244 36,615,243 Directors report as to affairs (RATA) Pursuant to Section 438B(2) of the Act, the Directors of the Company are each required to complete a statement about the Company's business property, affairs and financial circumstances, also known as the Report as to Affairs ("RATA"). The RATA is a snapshot in time as at the date of our appointment of the assets and liabilities of the Company, disclosing book values and the estimated realisable value ("ERV") for assets. At appointment, a written request was issued to the Directors to complete the RATA for the Company. We have received RATAs from all directors but for Kai Cheng. The table left summarises the Directors' statements as per their RATAs. We note that not all RATAs were completed correctly. Explanation for difficulties Mr Yinan Zhang, Director and CEO, has commented that the following are key reasons for the Company's failure: - Constant funding/propping up of the Apollo business, which was unable to achieve scale and budgeted sales figures required to become self sustainable. - A proposed share restructure between ANB and a UK based Company (which would have injected c.$20m in funding into the Company) failed, and the Company remained in a position whereby it had insufficient funding to meet its liabilities. Administrators' opinion for difficulties While further investigations are required into the above claims, our investigations to date suggest that the Company's position was brought about by the following; - Poor financial controls and monitoring of performance. - Poor management of operations and cashflow. - Substantial trading losses (in subsidiaries). - The write off of a $7.4m debt owed by related parties Grant Thornton Section 439A Report August

23 Section 5 Financial Position 01. Introduction 02. Executive summary 03. Background information 04. Financial position 05. Sale of a shell company 06. Offences, voidable transactions and insolvent trading 07. Estimated return to creditors 08. Effect on employees 09. Proposal for a deed of company arrangement 10. Administrator's recommendation 11. Remuneration 12. Meeting 2016 Grant Thornton Section 439A Report August 2016

24 Financial Position Investment in Venus Investment in Venus Incorporated on 21 January 2013, Australia Venus Resource Pty Ltd ("Venus") is a phosphate mining company which has tenements in Queensland, Australia. We note that Venus continues to trade and is not in administration. ANB initially held 100% of the Venus shares. In November 2014, ANB entered into an agreement with ZLD International Holdings Ltd ("ZLD") to redistribute the ownership of Venus between ANB and ZLD. In this transaction, ANB provided Venus with phosphate tenements located in far North Queensland in consideration for a 49% shareholding ("Venus Shares"), while ZLD was to commit c.$12.5m in exchange for a 51% shareholding. From a review of Venus' current company search, it appears that ZLD did not contribute all of the funds proposed under the agreement, and other shareholders were introduced. While discussions with management did not reveal why additional shareholders were introduced, or how much was invested by each, the Venus search reveals that the shareholdings of Venus are split as follows: - 49% - ANB (ANB continues to hold a 49% interest in Venus). - 24% - ZLD International Holdings Ltd ("ZLD"); - 17% - Kaizen Global Investments Ltd ("Kaizen"); and - 10% - BAO Industry Pty Ltd (10%) ("BAO"). Prior to transferring the tenements to Venus, ANB recorded a loss of c.$1.6m in CY15 in relation to the write down of the value of the phosphate tenements to their fair value, thereby retaining a value for its interest in Venus at $11.991m. On review of ANB's records it is apparent that ANB received $11.2m of Venus investor monies, of which $7.7 was passed onto Venus. The balance of $3.5m is recorded by ANB as an amount owing to Venus in the form of a loan account between the entities. We have not been provided with the latest financial statements of Venus to confirm the value of the Venue entity. Any sale of the Venus investment will be subject to the pre-emptive share rights set out in the Venus constitution, and possibly a security interest in relation to $5m loaned to ANB by Kaizen. The value of the Venus interest will become more apparent over time once the Kaizen security is addressed, and a sale campaign commenced in relation to the Venus shares. Kaizen Loan and Security over Venus Shares In December 2015, ANB entered into a loan agreement with Kaizen for $7m. We understand that Kaizen advanced $5m to ANB, however, failed to subsequently commit the remaining $2m due to concerns as to ANB's financial position. Kaizen purports to have secured this loan to ANB against the Venus Shares, however we are currently investigating the validity of this security as Kaizen failed to register its security interest over ANB in time and in our opinion failed to secure possession by control of the Venus shares prior to our appointment. In the case that Kaizen does not hold a valid security over the Venus Shares, Kaizen's claim will be an unsecured claim against ANB and any proceeds on the sale of the Venus Shares will be available in full for ANB creditors. Where Kaizen's security is found to be valid, Kaizen will be entitled to be paid $5m from the sale of the Venus shares, in priority to all other creditors. Any surplus from the sale would then be available to the remaining creditors of ANB. Under this scenario the Administrators would seek to ensure that fair market value is realised for the Venus Shares, for the benefit of ANB creditors Grant Thornton Section 439A Report August

25 Financial Position Investment in Apollo Investment in Apollo Apollo Fertiliser Queensland Pty Limited ("Apollo") was incorporated on 26 August 2011 and is a wholly owned subsidiary of ANB. Yinan Zhang is the sole Director of Apollo. Apollo was a start up venture whose operations included the manufacture of granulated fertiliser product for sale to domestic farming distributors. Production commenced in February Significant funds have been invested by ANB to acquire and custom fit Apollo's production plant into is Acacia Ridge property in 2012, and also to fund its operating losses. Net funds invested into Apollo by ANB total $c17.9m. Apollo has been loss making since inception and losses have been significant, in excess of $10m to date. On 20 April 2016, Michael McCann, Graham Killer and Anthony Jonsson of Grant Thornton were also appointed Joint and Several Administrators of Apollo. Any return to ANB from this subsidiary will be in the form of a return on their related party loan account between ANB and Apollo for c.$17.9m. On a preliminary basis, it is estimated that ANB (as a creditor of Apollo for $17.9m) may receive a return of up to 3.5 cents per dollar, or c.$620k on a best case scenario Grant Thornton Section 439A Report August

26 Financial Position Investment in AMG Investment in AMG Australia Mercury Glass Pty Ltd ("AMG") is a wholly owned subsidiary of ANB. AMG is not in administration. AMG was an importer and processor of glass products for the commercial and residential sectors. AMG operated from premises in Acacia Ridge, Brisbane. According to the audited financials of the Group, as at 31 December 2015, ANB held investments in AMG of c.$2m. In March 2016 (prior to the appointment of administrators to ANB), AMG's business was sold to a third party for c.$1.6m including stock, to be paid in 3 instalments ($500k on completion date being 15 March 2016, c.$526k on or before 30 June 2016 and c.$550k on or before December Debtors of c.$600k remained payable to AMG. The first sale instalment of $500k was paid to ANB in March On the Administrators' appointment, Mr Yinan Zhang was sole Director of AMG. Since the appointment the Administrators have replaced Mr Zhang as Director, and are overseeing the affairs of AMG. Grant Thornton has assisted AMG in the collection and payment of its remaining trade and sale debtors, and has attended to the payment of creditors of the Company, Net proceeds from AMG are to be accounted to ANB as parent entity. Since the Administrators' appointment, the second instalment of c.$526k in settlement proceeds (after an adjustment for Employee Entitlements as per the sale agreement), and c.$300k in debtors has been collected. Following the orderly winding up of AMG's affairs, we expect a return to ANB in the order of $1.1m to $900k, as set out herein. AMG Optimistic $ Pessimistic $ Cash at Bank (inc term deposit) 180, ,000 Debtors 598, ,400 Sale of Business Receiv able* 1,070,000 1,070,000 Total Realisation 1,848,000 1,698,400 Less Creditors Trade Creditors (297,000) (326,700) Employ ees (23,000) (25,300) Tax ation (85,000) (93,500) Lessors (leased assets) (90,000) (85,000) Other (160,000) (176,000) Total Creditors (655,000) (706,500) Surplus Funds to Member/ANB 1,193, ,900 *Net of employee entitlement adjustment and $500k instalment paid to ANB March Grant Thornton Section 439A Report August