First affidavit of Daniel Mathew Bryant - Arnold Bloch Leibler

25ln the 2000, 2001 and 2002 Gunns Woodlot Schemes, Growers could elect, at thetime of their application to invest, to harvest and sell their own trees, provided that theGrower:(a)agreed to indemnify GPL for any loss or damage caused by the Grower inharvesting the trees;(b)complied with all reasonable directions of GPL in relation to harvesting andremoving the wood; and(c)paid all amounts owing under the management agreement and GrowerForestry Right Deed(Electing Grower)26GPL would still be responsible for maintaining the Electing Grower's trees up untilharvesting.27ln practice, I understand from Robin Dickson, Operations Manager at GPL that,based on the average number of woodlots held by Growers, it would have been costprohibitive for individual Growers to be Electing Growers.28Consequently, only one Groweris an Electing Grower. He invested in 180 hectaresin the 2002 Gunns Woodlot Project. The Electing Grower's woodlots were specificallyselected so that they were segregated from all other woodlots and would thereforenot impact on GPL's harvesting schedule.29Other than the one Electing Grower, GPL was responsible for maintaining andharvesting the trees for all other Growers in all the Gunns Woodlot Schemes.30The Growers would pay an up-front fee of between $4,345 - $7,480 which was inmost cases said to be a planting and establishing cost. ln the 2002-2009 GunnsWoodlot Schemes, no further funds would generally be payable by Growers until thetrees were harvested. ln the 2000 and 2001 Gunns Woodlot Schemes, Growerswere required to make ongoing contributions toward rent and maintenance ($320-330per woodlot indexed in accordance with CPI) as well as, in some cases, pruning andthinning costs.31ln all Gunns Woodlot Schemes, Growers were allocated a specific woodlot andowned the trees on that woodlot. This would generally occur around 9-12 monthsfollowing approval of the application and entering into the management agreement.Id

At this stage, GPL would give notice to the Grower of their allocation and enter intothe Grower Forestry Right Deed, Other than the 2000 and 2001 Gunns WoodlotSchemes, rent was payable as a proportion of the proceeds of sale on harvest.32Proceeds of sale for all Gunns Woodlot Schemes (other than the one ElectingGrower) were to be pooled (on a scheme by scheme basis) and distributed by GPL toGrowers based on the number of woodlots held.Terms of Grower Leases3334From my discussions with ABL, I understand the following matters in respect of theterms of the Grower Leases.The Grower Leases, applicable to the Gunns 2000 and Gunns 2001 WoodlotSchemes, have the following characteristics:(a) the Grower Leases are subject to a head lease between GPL and thelandowner (or lessor) (Head Lease);(b)Grower Leases generally run for between 13 lo 25 years (depending on theplanting option selected by the Grower on application);(c) rent is paid annually in arrears;(d)(e)(f)(g)the land may only be used for the establishment and maintenance of trees inaccordance with the relevant Gunns Woodlot Scheme to which the GrowerLease relates;Growers are entitled to access the land to carry out the permitted activities(meaning establishing, planting, tending, maintaining and harvesting the treesand carrying out the scheme);Growers must obey the obligations imposed on GPL under the Head Lease;pursuant to the Head Lease, there is an obligation to maintain public riskinsurance with a reputable insurer with certain minimum limits;(h)(i)if the Management Agreement is terminated by GPL, GPL is also entitled toterminate the Grower Lease;the Grower Lease automatically terminates if the Head Lease terminates; andI

0) on termination of the Grower Lease, all right, title and interest in the trees isassigned and transferred to GPL.Terms of Grower Forestry Right Deeds35The Grower Forestry Right Deeds, applicable to the Gunns 2002 to 2009 WoodlotSchemes, have the following characteristics:(a) the Grower Forestry Right Deeds are subject to any head forestry right deedbetween GPL and the landowner (Head Forestry Right Deed);(b)Grower Forestry Right Deeds generally run for between 13 to 25 years(depending on the planting option selected by the Grower on application);(c)rent for the whole term of the Grower Forestry Right Deeds is generally paid inarrears from the proceeds of the harvest of the trees. Accordingly, in mostcases, GPL will not receive any further rent payments from Growers duringthe term of the deed;(d)(e)(f)(g)the land may only be used for the establishment and maintenance of trees inaccordance with the relevant Gunns Woodlot Scheme to which the GrowerForestry Right Deeds relate;Growers are entitled to access the land to carry out the permitted activities(meaning establishing, planting, tending, maintaining and harvesting the treesand carrying out the scheme);Growers must obey the obligations imposed on GPL under the Head ForestryRight Deed between GPL and the landowner or head lessor;pursuant to the Head Forestry Right Deed, there is an obligation to maintainpublic risk insurance with a reputable insurer with certain minimum limits;(h)(i)(¡)if the Management Agreement is terminated by GPL, GPL is also entitled toterminate the Grower Forestry Right Deed;the Grower Forestry Right Deed automatically terminates if the Head ForestryRight Deed terminates; andon termination of the Head Forestry Right Deed, other than for GPL's breach,all right, title and interest in the trees is assigned and transferred to GPL.10

conditional upon us proceeding to an orderly realisation of the Gunns WoodlotScheme assets (namely, the trees) in conjunction with the Receivers' sale of theGunns Group's forestry assets located in Tasmania, including the land the subject ofthe Gunns Limited Leases (together, Gunns Tasmanian Forestry Estate).545556On or about 5 April 2013, we received an offer from the Receivers whereby GunnsLimited agreed not to terminate the Gunns Limited Leases conditional upon, inter aliathe orderly realisation of the Gunns Tasmanian Forestry Estate. The offer was onlyopen for acceptance until 5pm on 5 April 2013. On 5 April 2013, we accepted thatoffer (Standstill Agreement).Now produced and shown to me marked .DMB-8' is a true copy of the StandstillAgreement.Pursuant to the Standstill Agreement, Gunns Limited has agreed not to terminate theGunns Limited Leases subject to the realisation of the Gunns Tasmanian ForestryEstate on the following timetable:(a)(b)(c)the Liquidators making this Application within 15 business days. Either partyhas a right to terminate the Standstill Agreement if the Application is not heardand determined within 90 days;upon the Court making the Orders sought, the Liquidators and Receiverscommencing a joint sale campaign. Either party has a right to terminate theStandstill Agreement if the Gunns Tasmanian Forestry Estate is not put tomarket within 30 days of Court Orders;following execution of sale contracts, the Liquidators apply to the Court forapproval of the sale (Approval Application). Either party has a right toterminate the Standstill Agreement if the Approval Application is not heard anddetermined within 90 days of execution of the sale contracts.57The Standstill Agreement is also subject to a number of other conditionsparticular:ln(a) either party is entitled to terminate the Standstill Agreement if GPL ceases tobe responsible entity of any of the Gunns Woodlot Schemes;(b)Gunns Finance Pty Ltd (in liquidation)(receivers and managers appointed)(Gunns Finance) will provide a proposal to all Growers in the Gunns WoodlotSchemes who have grower loans with Gunns Finance whereby the sale of the15.11(

Gunns Tasmanian Forestry Estate would not of itself constitute an event ofdefault under those loans, subject to Gunns Finance receiving the netproceeds referrable to each Grower that accepts the proposal, up to theamount owing by that Grower to Gunns Finance.Communications with the Receivers in respect of the AFH Leases58As set out in paragraph 38 above, Associated Forests Holdings leased land to GPL(pursuant to the 213 AFH Leases) (AFH Land) which is used in the Gunns WoodlotSchemes. The Receivers are in control of AFH's interest of the AFH Leases.59 The StandstillAgreement applies also to the AFH LeasesCommunications with the Receivers of the Irusfees of the AFP Trusts60 As set out in paragraph 38(d) above, the trustees of the AFP Trusts leased land toGunns Limited (AFP Leases), which Gunns Limited sub-leased to GPL in the form offorestry right deeds (AFP Sub-Leases). GPL then sub-leased the land to theGrowers in the form of sub-forestry right deeds. The Receivers are in control ofGunns Limited's leasehold interest in the AFP Leases.61 Australian Executor Trustees Limited (AET) is the trustee for the Australian ForestPlantations Trust (Receivers and Managers Appointed) (AFPT). Wesley ValeEngineering Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed)(Wesley Vale) is the trustee for the Australian Forestry Plantations Trust No 2(Receivers and Managers Appointed) (AFPT2).62636465Peter Anderson and Shaun Fraser of McGrathNicol are the joint receivers andmanagers of the AFP Trusts (AFP Receivers).On 17 October 2012 we were sent lease default notices issued by the AFP Receiversin respect of the AFP Leases.Now produced and shown to me and marked 'DMB-9" is a copy of the letters fromMcGrathNicol to Gunns Limited dated 17 October 2012.During the period of administration, we applied for a number of extensions to theconvening period provided for under section 439A of the Act and to the rent-freeperiod provided for under section 4438 of the Act (Administration Proceeding).66On 20 November 2012, Barry Wight and Michael Boudrie of our office spoke to MrAnderson. I am informed by Mr Wight and verily believe that Mr Wight informed Mr16

Anderson of the proposal regarding the alternate RE, further details of which are setout below, and that it was likely a condition of that proposal would be for landlords toagree to reduce the rent payable and/or to vary the terms of the head leases so thatrental is deferred until realisation of the harvest proceeds.67686970On 21 November 2012 we were sent lease termination notices in respect of the AFPLeases.Now produced and shown to me marked "DMB-10' are true copies of the leasetermination notices in respect of the AFP Leases.On 22 November 2012, we received two letters in substantially the same form fromthe AFP Receivers stating that the alternate RE proposal would be unacceptable tothem if it contained any of the conditions as set out in paragraph 66 above. The AFPReceivers further advised that they would oppose any application to extend the rentfreeperiod provided for under section 4438 oÍ the Act unless we agree to the trusteesof the AFP Trusts taking possession of the AFP Land.On 28 November 2012, the AFP Receivers filed an interlocutory process in theAdministration Proceeding seeking, pursuant to section 4408(2) of the Act, theCourt's leave to retake possession of the AFP Land the subject of the AFP Leases(AFP 440B(2) Application).71ln support of the AFP 4408(2) Application and in opposition to our application for anextension to the convening period, Mr Anderson, one of the AFP Receivers, swore anaffidavit in which he deposed, inter alia:(a)as at 30 September 2012, outstanding rent due under the AFP Leases totalled$1,737,232;(b)Bryan Webster, of the Receivers of the Gunns Group of Companies, hadwritten to Mr Anderson seeking a standstill arrangement in respect of the AFPLeases;(c)he responded to Mr Webster advising that he was unable to agree to anystandstill arrangement absent a concrete proposal for a sale and/orrecapitalisation;(d) on 21 November 2012, AFPT and AFPT2 terminated the AFP Leases;17

(e)he had real doubt that there is a replacement RE proposal in existence whichcould ever be acceptable to the AFP Receivers bearing in mind that the AFPLeases have been terminated;(f)the AFP Receivers have duties to realise the secured assets of the AFPTrusts, including the AFP Land, in an expeditious manner. The AFPReceivers are ready to commence a sale campaign for the AFP Land as soonas they are able to retake possession;(g)on taking possession of the AFP Land, the AFP Receivers have statutoryduties in relation to fire and regulatory compliance works on the AFP Land. lfthese works are not undertaken, they could give rise to a serious risk ofpersonal liability and also make it difficult to obtain insurance; and(h) the AFP Receivers are without income until a sale of the AFP Land is effected.72Now produced and shown to me marked "DMB-11" is a true copy of the affidavit ofPeter Anderson sworn 28 November 2012 less the exhibits.73The AFP 44OB(2) Application was heard by the Honourable Justice Robson of thisCourt on 29 November 2012 and 10, 11 and 12 December. On 19 December 2012,the Honourable Justice Robson handed down his judgment and, amongst otherthings, dismissed the AFP 4408(2) Application.74The rent free period expired on 31 January 2013. On this day, pursuant to section4438(3) of the Act, we issued a Form 5098 Notice on the AFP Receivers advisingthem that we did not intend to exercise any rights in respect of the AFP Land.75Now produced and shown to me marked'DMB-12" is a true copy of our5098 Noticeto the AFP Receivers dated 31 January 2013.767778By letter dated 4 February 2013, Minter Ellison, solicitors for the AFP Receivers,wrote to ABL, referring to the 5098 Notice and requesting permission for the AFPReceivers to retake possession of the AFP Land.Now produced and shown to me marked.DMB-13" is a true copy of the letterfromMinter Ellison to ABL dated 4 February 2013.By letters dated 6 February 2013, ABL responded to Minter Ellison on ourinstructions:18-$'

(a)in our capacity as then-administrators of Gunns Limited, lessee of the AFPLand, consenting to the AFP retaking possession of the AFP Land; and(b)in our capacity as then-administrators of GPL, reserving all Growers' rights inrespect of the AFP Land.79 Now produced and shown to me marked "DMB-í4" is a true copy of the letters fromABL to Minter Ellison dated 6 February 2013.80 I continued to keep the AFP Receivers informed of our progress regarding theAlternate RE Proposal (set out in more detail below) and our decision to proceed to arealisation of the Gunns Tasmanian Forestry Estate. The AFP Receivers haveinformed us that they intend to sell the AFP Land and improvements (ie trees)separately from our Gunns Tasmanian Forestry Estate sale process and will agree toaccount to us for the Growers' interests, subject to agreement on apportionment. Weare continuing to negotiate the sale and apportionment process with the AFPReceivers.Communications with Forestry Tasmania in respect of the Forestry Tasmania Leases81 As set out in paragraph 38 above, Forestry Tasmania leased land to GPL (pursuantto the 18 Forestry Tasmania Leases) (Forestry Tasmania Land) which is used in theGunns Woodlot Schemes.8283Under the Forestry Tasmania Leases, rent is paid annually in advance. Rent hasbeen paid up to 30 June 2013. The next pqyment is due on 1 July 2013.On 19 April 2013, we met with executives of Forestry Tasmania in relation to thestatus of the liquidation of GPL and, in particular, our plans to progress with theapplication to the courts for a power of sale. From these discussions, it is ourunderstanding that, in the event that no alternate RE proposal was pursued, ForestryTasmania would work productively together with us in relation to an orderly realisationof scheme assets, having regard to the interests of Growers, Forestry Tasmania andother stakeholders.Communications with other landowners in respect of other Head Leases relating to GunnsWoodlot Schemes84ln addition to the Gunns Limited Leases, AFH Leases, AFP Leases and ForestryTasmania Leases, the Gunns Woodlot Schemes are operated on land leased fromthird party landowners who are mostly farmers and graziers (Tasmanian Farmers19 .11

and Graz¡ers Leases). There are over 500 Tasmanian Farmers and GraziersLeases.8586We have received over 374 default and 11 termination notices in respect of theTasmanian Farmers and Graziers Leases. As set out in paragraph 44 above, wehave instructed ABL to maintain a default notice register and to update it as furtherdefault notices and termination notices are issued to GPL. We fonruard any default ortermination notices received to ABL. We have also instructed ABL to respond tothese notices acknowledging receipt of the notice but reserving GPL's rights as wellas the Growers' rights in relation to the trees.Since our appointment, we have been in contact with the lessors of the TasmanianFarmers and Graziers Leases, both directly and indirectly via the Tasmanian Farmersand Graziers Association (TFGA) and Private Forests Tasmania, a statutory authoritywhich assists the private forestry sector (PFT). Updates relevant to the TasmanianFarmers and Graziers Leases have also been posted on our website.87On 11 April 2013, Michael Boudrie of ourotfice and lmetwith Jan Davis, CEO, andDavid Gatenby, President, of the TFGA to inform them of our rationale for movingtoward a realisation of the Gunns Tasmanian Forestry Estate and what it meant forthe lessors of the Tasmanian Farmers and Graziers Leases. Following that meeting,the TFGA provided us with a list of options that may be acceptable to the lessorsunder a realisation process. These options included:(a) Landowners purchasing the trees;(b)Sale of the trees to a third party purchaser either encumbered orunencumbered by the Gunns Woodlot Schemes. Current leases could betransferred to purchasers (subject to remedying any breaches) or purchaserswould enter into new lease arrangements with the landowners;(c) Sale of both the land and the trees to third party purchaser; and(d)Ownership of trees reveding back to landowners as a result of GPL's allegeddefaults under the leases.20

88 We are working productively with TFGA to explore these options. Similar discussionshave been held with PFT.Expressions of lnterest Gampaign for replacement RE89On 15 October 2012, we commenced a campaign seeking expressions of interest forthe role of responsible entity to replace GPL in respect of the Gunns WoodlotSchemes and the Great Southern Schemes (EOlCampaign).90 We published an advertisement in respect of the EOI Campaign in the AustralianFinancial Review and on our website at www.ppbadvisorv.com on 15 October 2012.ln addition, as part of the EOI Campaign, we approached potential new responsibleentities directly.91 Pursuant to the EOI Campaign, we called for:(a)indicative non-binding proposals to be submitted on or before 30 October2012; and(b) final and binding proposals to be submitted on or before 12 November 201292 We notified interested parties that we required any proposals to specifically address,amongst other things:(a)which Schemes the interested party would seek to assume the role ofResponsible Entity;(b)the interested party's intentions relating to the future operations andrestructure of the Schemes;(c) how the interested party intended to deal with(i)the leases in respect of which the Schemes' operations are conducted;(ii) statutory compliance issues; and(iii) outstanding Grower claims;(d) how the interested party intended to finance its proposal; and(e)what conditions the interested party would impose upon its taking over the roleof Responsible Entity from GPL.21

939495As part of the EOI Campaign, we established a GPL Replacement Responsible EntityDataroom (the Dataroom) in which documents relating to the Gunns WoodlotSchemes and the Great Southem Schemes were uploaded for review and analysis byinterested parties.The documentation in the Dataroom is confidential and can only be accessed wherean interested party executes a confidentiality undertaking. Ten parties executedconfidentiality undertakings and commenced due diligence.On 30 October 2012, four parties provided confidential indicative non-bindingproposals.969798On 12 November 2012, we received two confidential draft final proposals from twoseparate parties, Macquarie Bank Limited (Macquarie) and W.A, Blue Gum Limited(WA Blue Gum).Following receipt of the proposals, we continued to negotiate with both Macquarieand WA Blue Gum.On 4 February 2013, we informed WA Blue Gum that we had agreed a shortexclusivity period with another party. During this exclusivity period, WA Blue Guminformed us in that it was formally withdrawing from the process.Alternate RE Proposal99Macquarie originally submitted a confidential draft final proposal on 12 November2012. Macquarie submitted a confidential revised draft final proposal on 20November 2012 (Alternate RE Proposal).100 The Alternate RE Proposal essentially proposed to convert the Gunns WoodlotSchemes from non-contributory schemes to contributory.101 Extensive discussions, negotiations and meetings were conducted by us and ouradvisors with Macquarie following receipt of the Alternate RE Proposal. Macquariealso conducted discussions and negotiations with key Grower representatives andother stakeholders in relation to its proposed restructure of the Gunns WoodlotSchemes.102As of 24 January 2013 (on which date we applied for an extension to the conveningperiod to allow, inter alia, further time to develop the Alternate RE Proposal), it wasenvisaged that meetings of the Growers to consider and vote upon whether to:22q7f

(a) replace GPL as responsible entity of the Gunns Woodlot Schemes; and(b) approve amendments to the constituent documents relating to the GunnsWoodlot Schemes necessary to enable the restructure,would be convened before the end of March 2013103 Priorto any meeting being convened, we required Macquarie to submit:(a)(b)a final proposal which included details of the structure of fees which Growerswould be liable for under the new contributory model (Contributory Model);proposed constitutional amendments (Proposed ConstitutionalAmendments); and(c)proposed explanatory memorandum which would be sent to Growers whenthe meetings were called (Proposed EM)(together, Alternate RE Proposal Documents)104 Various iterations of the Alternate RE Proposal Documents were received during ournegotiations. The last draft of the Alternate RE Proposal Documents was received byus on 26 March 2013 (Latest Alternate RE Proposal Documents).105 Now produced and shown to me marked "Confidential Exhibit DMB-15" is a truecopy of the LatestAlternate RE Proposal Documents received.106 The Alternate RE Proposal and Altemate RE Proposal Documents were provided tous on a strictly confidential basis and contain commercially sensitive informationrelating to the future viability of the Gunns Woodlot Schemes. I respectfully requestthat the Court order that the Alternate RE Proposal Documents be kept confidentialas their disclosure to third parties would likely jeopardise the value we can achieve inany future sale campaign.107 As with earlier iterations of the Alternate RE Proposal Documents, we continued tohold serious concerns with the Alternate RE Proposal and Latest Alternate REProposal Documents such that we did not consider a meeting of growers could beconvened. Our main concerns were:(a)The projected economic returns to the Growers and various stakeholdersunder the Alternate RE Proposal, based on our analysis of the ContributoryModel and taking into account advice from independent experts, were likely to23

e less beneficial than the likely returns from an orderly realisation of theassets.(b) Having regard to discussions with ABL about the Proposed ConstitutionalAmendments (in regards to which legal professional privilege is expresslyclaimed and not waived), we are of the view that the Proposed ConstitutionalAmendments may be onerous and adversely affect the rights of Growers.(c)Replacement of the responsible entity of the Gunns Woodlot Schemespursuant to the Alternate RE Proposal was conditional upon a number ofmatters, including obtaining Court approval on various issues. We consideredthere was a significant risk that:(i)the conditions could not be met. lf the conditions could not be met,GPL would then need to wind up the Gunns Woodlot Schemes andrealise the assets (or vice versa). However, the delay caused andcosts incurred in trying to meet the conditions would significantlyreduce the value of the scheme assets and potential return toGrowers; and(ii)even if the conditions could be met, it would take a considerableamount of time and cost to meet them. During this period, there was asignificant risk that key agreements (in particular, leases of the landused in the Gunns Woodlot Schemes) would be terminated andGrowers could lose their interest in the schemes.(d)GPL is insolvent and we are without sufficient funds to continue to maintainthe plantations during the period required to fulfil the above conditionprecedents. The value of the plantations would likely decrease if theplantations are not maintained. The plantations will also be at a heightenedrisk of destruction by fire if fire maintenance is not undertaken prior to the nextfire season commencing in October 2013.(e)We were on notice from the Receivers that, under the Grower Loans, theContributory Model and the Proposed Constitutional Amendments may haveamounted to a "Material Adverse Effect" such that an Event of Default wouldoccur and allow Gunns Finance to demand immediate repayment in full of theoutstanding amount of the loan.24

108 Following receipt of the Latest Altemate RE Proposal Documents, we expressed ourconcerns to Macquarie. Macquarie informed us that the Latest Alternate RE ProposalDocuments were being amended.109 As set out in paragraphs 47 lo 59 above, we had in the meantime been negotiating anagreement with the Receivers regarding the Gunns Limited Leases and AFH Leases.The Standstill Agreement, reached on 5 April 2013, is conditional upon us and theReceivers proceeding to joint sale of the Gunns Tasmanian Forestry Estate whichwas inconsistent with replacing the responsible entity of the Gunns WoodlotSchemes.110 Accordingly, on 5 April 2013, we wrote to Macquarie informing it that we were ceasingour discussions in respect of the Macquarie Proposal.111 Now produced and shown to me marked "DMB-16' is a true copy of our letter toMacquarie dated 5 April 2013.Primary Securities' Proposalto Replace GPL as RE112 Outside of the formal EOI Campaign, we were aware that Growers in the Gunns 2000and 2001 Woodlot Schemes were considering their position including whether toconvene meetings to consider and vote upon replacing GPL as RE of some of theGunns Woodlot Schemes with Primary Securities Ltd (Primary) and to approvecertain amendments to the constitutions of those schemes.113 On 15 March 2013, Primary provided to us a copy of Notices of Meeting in relation tothe Gunns 2000 Project and Gunns 2001 Project (Primary Meetings), along withcovering letters to Growers, which it advised had been sent out to Growers that day.114 Now produced and shown to me marked "DMB-í7" ate true copies of the Notices ofMeeting and covering letters as posted on Primary's website atwww. pri marysecu rities. com. au.115 We understand that the Primary Meetings were called by the following Growers who,together, hold more than 5% of the interests in the Gunns 2000 Scheme and Gunns2001 Scheme:(a) Willis Flavell Partnership;(b) Andrew Spykes; and(c)David and Brigid Willis25

116 The covering letters stated that the Primary Meetings had been called urgently inresponse to a notice of breach of the head leases issued by the Receivers for nonpaymentof rent. The letter stated that the effect of termination of the head leaseswould be that Growers would lose all rights to their sub-leases and trees. The letteradvised that the explanatory memorandum would be posted on Primary's websiteshortly,117 The Notices of Meeting set out the following three resolutions which would be put toGrowers at the Primary Meetings:(a)Resolution 1: that the Constitution, Leases and Management Agreements forthe Gunns 2000 Project and Gunns 2001 Project be amended as set out inthe annexure to the Explanatory Memorandum;(b)Resolution 2: Subject to Resolution 3 being passed, that GPL be removed asRE of the Gunns 2000 Project and Gunns 2001 Prolect;(c)Resolution 3: Subject to Resolution 2 being passed, that Primary be appointedas RE of the Gunns 2000 Project and Gunns 2001 Project.(Primary Proposal)118 As set out in paragraph 116 above, the Explanatory Memorandum was not providedto Growers at the time of issuing the Notices of Meeting. The Notices of Meetingstated that "Resolutions 2 and 3 will be put to Growers provided that PrimarySecurities Ltd has not withdrawn, before the commencement of the meeting, itswritten consent to act as the replacement responsible entity for the Scheme".119 An Explanatory Memorandum relating to the Primary Proposal was posted on thePrimary website on 27 March 2013. An "lnterim Agency Agreement" and coveringletter were also posted on the website.120 Now produced and shown to me marked "DMB-18" are true copies of the ExplanatoryMemorandum, lnterim Agency Agreement and covering letter as posted on Primary'swebsite.121ABL also fonuarded to me a copy of an email received from Rob Garton Smith,Managing Director of Primary, dated 29 March 2013 which informed ABL and theReceivers' solicitors, Ashurst, that the Explanatory Memorandum and otherdocuments had been posted on Primary's website and requested the solicitors to26

eview the material and advise if they believed any statements were incorrect orrequired supplementing,122 Now produced and shown to me marked "DMB-í9' is a true copy of the email fromRob Garton Smith to ABL and Ashurst.123 On 4 April 2013, we received an email from Mr Flavell, one of the Growers who hadcalled the Primary Meetings, providing us with a copy of a letter to Growers andadvising us that he had emailed and posted the letter to Growers in the Gunns 2000Scheme and Gunns 2001 Scheme.124 Now produced and shown to me marked 'DMB-20" is a true copy of the email fromMr Flavell and attached letter to Growers.125 From our reading of the documents, it appeared to us that Primary's main impetus forcalling the meetings was to prevent and/or act upon any potential termination of theHead-Leases by the Receivers. As set out in paragraphs 56 to 57 above, this riskwas removed as a result of the Standstill Agreement.126 We also held a number of concerns with the Primary Proposal. On 5 April 2013, ABLwrote to Primary on our behalf setting out our concerns with the Primary Proposal andattaching a letter from GPL to Growers in the Gunns 2000 Scheme and Gunns 2001Scheme which we intended to send immediately to Growers.127 Now produced and shown to me marked "DMB-21' is a true copy of the letter fromABL to Primary dated 5 April 2013.128 At 8:42pm on 5 April 2013, I caused to be emailed to Growers in the Gunns 2000Scheme and Gunns 2001 Scheme for whom we have email addresses the letter thatwas attached to the ABL letter referred to above. A copy of the letter was also postedon our website at www.ppbadvisorv.com.129 On 9 April 2013, we were informed by Primary that a letter to Growers had beenuploaded onto Primary's website informing Growers that, as a result of our letter toGrowers in the Gunns 2000 Scheme and Gunns 2001 Scheme of 5 April 2013 andour email to all Growers of 5 April 2013 (as set out in paragraphs 126 to 128 above),the Primary Meetings would be adjourned for three weeks in order to consider andrespond to the matters raised in our correspondence. lt appears from the letter thatPrimary was still interested in replacing GPL as RE of the Gunns 2000 Scheme andGunns 2001 Scheme.27

130 Now produced and shown to me marked "DMB-22' is a copy of the letter to Growersdated 9 April 2013 downloaded from Primary's website.131 I am informed by Kimberley Mackay of ABL that she attended the Primary Meetingson our behalf and that the meetings were both adjourned to 9 May 2013. Ms MacKaymade herself available to answer questions from the Growers who attended.Sale Process in the Best lnterests of Growers and creditors132 We determined that it would be in the best interests of Growers to pursue a sale ofthe trees rather than continuing to pursue a replacement RE. The key factors whichled to this conclusion included:(a)the potential returns to Growers, having regard to the costs that may bepayable by Growers by continuing the schemes and independent evidence,would more than likely be less than could be achieved in an immediate sale;(b)both the Alternate RE Proposal and Primary Proposal were subject to anumber of conditions which we considered would be difficult to meet and therewas therefore no certainty under either of these alternate RE proposals thatthe Gunns Woodlot Schemes would continue;(c)we had been seeking expressions of interest for a replacement RE for almost6 months and did not have any acceptable proposal as at that time. lt hadbecome clear to us that it was very unlikely a party would be willing to takeover as RE of the Gunns Woodlot Schemes in circumstances where that partywould be required to assume the liabilities of GPL, including the outstandingrent payable on the Head Leases, and fund the continued operation of theGunns Woodlot Schemes without any income or contributions from Growersuntil harvest (other than in the 2000 and 2001 Gunns Schemes). Weconsidered it would be improbable that an acceptable proposal would bereceived within a reasonable timeframe that would warrant us delaying thesale process any longer, without significant ongoing risk to the value of thescheme assets;(d)in light of the above conclusions, we did not consider it would be in the bestinterests of growers to expend any more money on seeking an alternate RE.However, we do not see any impediment to Growers and third partiesundertaking their own processes and seeking to replace GPL as RE of anyal28

the schemes independently of us prior to us exercising any rights to terminateGrowers'rights; and(e)The Receivers have agreed to maintain the Gunns Limited Land and AFHLand, including any necessary tree maintenance, until those assets arerealised. However, if the Receivers withdrew their consent to maintain, GPLwould need to take over maintenance. GPL is insolvent and we are withoutsufficient funds maintain. The value of the plantations is likely to decrease ifthe plantations are not maintained. The plantations will also be at aheightened risk of destruction by fire if fire maintenance is not undertakenprior to the next fire season commencing in October 2013.133 On 6 April 2013, we wrote to Growers informing them that we had determined that asale of the trees was in their best interests and that we were going to apply to theCourt for directions that we were justified in doing so.134 Now produced and shown to me marked "DMB-23' is a copy of our letter to Growersof 6 April 2013.135 Absent a new RE, based on my team's discussions with Mr Dickson, we cannot seehow the Gunns Woodlot Schemes are capable of continuing to operate or,alternatively, how the Gunns Woodlot Schemes could be wound up with theresponsibility for maintenance and harvesting of the trees reverting to individualGrowers without any scheme structure in place for the following reasons:(a)At the time of establishment, land leased (or subleased) by GPL and used inthe Gunns Woodlot Schemes is assigned a unique number that is used toidentify an area of plantation, described as a "Development Area" or "D4".There are multiple Development Areas in each Gunns Woodlot Scheme.Development Areas vary in size, but average approximately 37 hectares insize. Each Development Area has been divided into individual woodlots ofapproximately one hectare.(b)ln most cases, there are multiple Growers with woodlots within eachDevelopment Area. The individual woodlots are not delineated on the groundby access roads or other dividers or buffer zones. Global Positioning System(GPS) is required to accurately identify a Grower's individual woodlot orwoodlots within the Development Area.29

(c)ln the Gunns 2008 Project, Growers were allocated woodlots spread outacross different Development Areas in order to, amongst other things, reducefire risks.(d) The way in which woodlots have been allocated means that some Growers'lots are surrounded on all sides by other Growers'woodlots, or in some casesby another Grower's lots on one side and a natural boundary (i.e. a river) orprivate property on another. A Grower whose woodlot or woodlots aresurrounded on all sides by other Growers' woodlots (or natural or otherboundaries) could not access his or her woodlot to commence haruestingwithout obtaining access across the surrounding woodlots for the necessaryvehicles and equipment. ln reality, harvest would need to commence from theside nearest the relevant main vehicular access and progress across theDevelopment Area as trees are harvested and access can be given.(e)The average Grower holding per scheme is 10.4 hectares of trees. lt isunlikely to be feasible to harvest trees on such a small scale.(f)It is unlikely that the majority of Growers would be able to market and sell theirtrees on an individual basis. GPL's product supply contracts were usuallybased on an annual tender process with GFP and, in some cases, third partypurchasers in relation to entire Development Areas. Whereas the averageDevelopment Area is 37 hectares, the average Grower has only 10.4hectares.(g)It is possible that Growers could agree among themselves to pool resourcesand share the cost of haruest. lf some (but not all) Growers owning woodlotswithin a Development Area "elected" to pool resources to harvest their treesthemselves, Growers who do not wish to harvest their trees themselves will bepre.¡udiced as they will lose the benefit of any economies of scale. ln somecases, depending on the number of remaining lots, it may not be feasible for a"non-electing" Grower to harvest their trees. Similarly, such a "non-electing"Grower may be prejudiced as the felling of part of a Development Area mayleave the remaining trees exposed to the elements, which can damage anddiminish the value of those trees.(h) Existing access roads or firebreaks would need to be maintained or upgradedto enable the necessary vehicles to traverse the roads and firebreaks insafety.30d

oOutside of thinning and harvesting, Growers would need to continue tomaintain their trees, both to preserve the value of the trees as well as toprevent fire risks. Fire maintenance also goes beyond Growers' woodlots andtrees and includes ongoing maintenance on access roads, firebreaks andproperty boundaries. Undertaking fire maintenance would require acoordinated effort by Growers on, at a minimum, a Development Area basisincluding agreement from all parties to meet the costs of that maintenance.0)lf part of a Development Area is harvested, the remaining trees will alsorequire ongoing maintenance. This presents practical difficulties both in sellingor leasing the land to a new owner and, in the event a new owner is found, if anew owner of the land wishes to develop or use that land for their ownpurposes. From a Grower's perspective, Growers may face difficultiesharvesting their trees at a later date if access is restricted by the new use ofparts of a Development Area.Grower Leases and Grower Forestry Right Deeds are at risk of termination136 Many of the Head Leases and Head Forestry Right Deeds are at risk of terminationdue to the non-payment of rent (as set out in paragraph 44 to 46 above).137 lf the Head Leases and/or Head Forestry Right Deeds terminate, the Grower Leasesand Grower Forestry Right Deeds will also immediately terminate.138 On termination of any of the above agreements, the Growers' ownership of the treesmay be at risk.139 The Receivers have agreed to a standstill arrangement whilst the parties attempt torealise the assets relating to the Head Leases and Head Forestry Right Deeds. Otherlandlords have agreed to work with us during a realisation of the Gunns TasmanianForestry Estate, allowing us to protect Growers' interests in the trees. However, if theStandstill Agreement is terminated or frustrated on the basis that a conditionprecedent cannot be met, the Receivers may have a right to immediately terminatethe Head Leases and Head Forestry Right Deeds.140 From my discussions with ABL, I understand that the Growers may seek to avoidtermination of the Grower Forestry Right Deeds by claiming relief against forfeiture.To do so, I am told that they would need to assume the obligations of GPL under theHead Leases and/or Head Forestry Right Deeds. For example:.N31

(a)the Growers would need to immediately pay to landlords any outstanding rent.As set out in paragraph 45 above, this could be up to $14.3 million. lf there isany rent outstanding and, if so, the amount, may need to be resolved asbetween the landlords and Growers;(b)the Growers would need to agree to continue to pay rent, management feesand other costs associated with the schemes for the remaining life of theschemes. According to the records of the Gunns Group, the estimated futurediscounted costs could be between $141 million and $190 million dependingon the discount factor applied;(c)the Growers would need to obtain and maintain appropriate insurance for theland covered by the Head Leases and Head Forestry Right Deeds. lf eachGrower attempted to obtain insurance individually for their own woodlots, thecost of that insurance would likely be prohibitive.141 ln addition, the relevant Gunns Woodlot Schemes would need to continue andtherefore the Growers would need to find a party willing to act as RE. As set outabove, we have sought offers in the EOI Campaign to take on this role, but noreasonable unconditional offer has been received.Amendment of Gunns Woodlot Schemes142 From my discussions with ABL, I understand that section 601GC(1Xb) of the Actpermits the responsible entity to modify the constitution of a registered scheme if theresponsible entity reasonably considers the change will not adversely affectmembers' rights. The constitutions governing the Gunns Woodlot Schemes alsoprovide GPL with a commensurate power of amendment.143 Currently, the constitutions provide that GPL has all the powers of a natural personand all the powers that are reasonably necessary for it to carry out its functions andduties under the relevant constitution having regard to its role as the responsibleentity of the relevant project.144 We propose that the constitutions be amended to include an express power to GPL toterminate, relinquish, surrender or disclaim the Grower Forestry Right Deeds at thetime of, or in anticipation of, the sale of the underlying assets, on the condition thatGrowers were entitled to the net proceeds of sale, or consideration received ontermination, relinquishment, surrender or disclaimer, which is referrable to the trees(Power of Sale). The Growers' entitlement to receive a payment on harvest woul32q

effectively be replaced with an entitlement to receive a payment on sale orrelinquishment.145 We propose to make the Power of Sale amendments without the sanction of a specialresolution. We consider that amendments can be made without Grower meetingsbeing held to make those amendments as the amendments are not adverse toGrowers'rights.146 ln determining whether the proposed Power of Sale amendments would adverselyaffect Growers' rights, we had regard to the Growers' rights as they exist now, that isin the context of an insolvency, and considered whether those rights would bechanged following the proposed Power of Sale amendments. To the extent that therights had changed, we undertook a process of comparison and assessment in orderto determine whether the amendment would have an adverse affect.147 From my discussions with ABL, I understand that the constitutions provide Growerswith the following primary rights:(a)(b)to be allocated a Woodlot or Woodlots, at GPL's absolute discretion, and toenter into a Grower Lease or Grower Forestry Right Deed of the relevant land;to receive a distribution from the proceeds of the harvesting and sale of theirtrees and the exploitation of any carbon rights in relation to their trees inaccordance with the Management Agreement; and(c) the right to receive a distribution in the winding up of the Scheme148 For the reasons set out above, we consider the Grower Leases and Grower ForestryRight Deeds are at serious risk of termination. On termination, Growers may lose allinterest in their trees and primary rights set out in paragraphs 147(a) to 147(c) above.Accordingly, the Growers' rights have already been adversely affected without anyamendment having been made. ln these circumstances, the Growers'sole remainingright under the constitutions would be the right to participate in any distribution madein the winding up of the Gunns Woodlot Schemes.149 We are proposing that the constitutions be amended to provide an express right tothe RE to terminate, relinquish or surrender the Project Documents. We are seekingthis right on the condition that the Growers will be entitled to the net proceeds of saleor consideration received on the termination, relinquishment or surrender of the33V

Project Documents which is referrable to the trees. We would seek the Courl'sdirection before exercising this right.150The Growers' rights following the proposed Power of Sale amendments are differentfrom their current rights. However, as the Grower Leases and Forestry Right Deedswill most probably be terminated, currently the Growers' only right would be a claimas unsecured creditors. Under the proposed Power of Sale amendments, the risk oftermination other than for value is removed and replaced with an entitlement toreceive value for the termination of their rights. We consider that this position is morefavourable for the Growers than the current position of uncertainty and risk.Therefore, we consider that the proposed Power of Sale amendments will notadversely affect Growers' rights.Sale Process151 Gunns'primary assets include(a)approximately 200,000 hectares of freehold land located in Tasmania (GunnsLimited Land) of which 50% is planted with trees. Of those trees:(i)approximately 56,041 hectares of the planted trees relate to the GunnsWoodlot Schemes (Freehold Scheme Trees);(ii)approximately 29,976 hectares of planted trees are owned by GunnsLimited in its personal capacity (Gunns-owned Freehold Trees); and(i¡i) approximately 6,499 hectares of trees are owned by a joint venture,Tamar Tree Farms (TTF), 62% of which is controlled by a GunnsGroup entity and 38% controlled by a third party;(b) GPL's leasehold interest in the Gunns Limited Land;(c)approximately 165,026 hectares of leasehold land located in Tasmania(Tasmanian Leasehold Land) of which :(i)approximately 27,039 hectares of the planted trees relate to the GunnsWoodlot Schemes (Leasehold Scheme Trees);(ii) approximately 8,175 hectares of planted trees are owned by GunnsLimited in its personal capacity (Gunns-owned Leasehold Trees);(d) port operations for the export of woodchips at Burnie and Tamar;34

(e) other administrative facilities, including otfices and outbuildings;(f)plans relating to construction of a new pulp mill(the Freehold Scheme Trees and Leasehold Scheme Trees are collectivelyreferred to as the Gunns Woodlot Scheme Trees. The Gunns-ownedFreehold Trees and Gunns-owned Leasehold Trees are collectively referred toas the Gunns-owned Trees)(Gunns Tasmanian Forestry Estate)152 We consider the best possible price will be achieved by offering the GunnsTasmanian Forestry Estate for sale at the one time and providing interested partieswith the option of bidding for part or all of the Gunns Tasmanian Forestry Estate.Accordingly, pursuant to the terms of the Standstill Agreement (as set out inparagraph 54 to 57 above), we have agreed to conduct a joint sale campaign with theReceivers.153 ln order for the sale process to achieve the best outcome for the Growers andcreditors, we also believe that potential bidders will need to be satisfied that they arebuying the Gunns Tasmanian Forestry Estate with clear title. lf the potential biddersare not so satisfied, we expect that any bids will be heavily discounted.154 We consider that the granting of a Power of Sale will provide sufficient comfort topotential purchasers of the ability of the liquidators to give clear title on settlement ofany sale. Potential purchasers should therefore be willing to participate in the saleprocess and incur the costs and take the time needed to submit a binding bid. Thisshould maximise the price obtained for the Gunns Tasmanian Forestry Estate,including the Gunns Woodlot Scheme Trees.155 Any sale contract will be conditional on the liquidators obtaining approval from theCourt to exercise the Power of Sale. lt is our intention to request potential purchasersto allocate the purchase price between the various Gunns Tasmanian Forestry Estateassets and to allocate the purchase price between the land and the trees in relation tothe Gunns Limited Land and Tasmanian Leasehold Land.Directions Sought156 For the reasons outlined above, we are seeking a direction from the Court that we arejustified in causing GPL to amend the relevant Constitutions, pursuant to s601GC, toprovide for an express right to terminate the Project Documents. Now produced and ,J35

shown to me and marked "DMB-24" is the form of the proposed Deed Poll to amendeach of the Constitutions to be executed by GPL. We will not exercise this powerwithout first seeking the Court's direction that we would be justified in doing so at therelevant time.Service of Affidavit157 ln addition to the communications set out in this affidavit, we have been in regularcontact with the Grower Committee and other individual Growers regarding ourconcerns with the Alternate RE Proposal, our decision to proceed to a realisationof the Gunns Tasmanian Forestry Estate and our intention to apply for a Power ofSale.158 I have instructed our solicitors, ABL, to serve a copy of this atfidavit on thefollowing persons for their information:(a) the Australian Securities and lnvestments Commission;(b) the Committees of lnspection;(c) the Grower Committee;(d) the Receivers;(e) the AFP Receivers;(f)Forestry Tasmania;(g) New Forests Trusts;(h) Private Forests Tasmania;(i)û)the Tasmanian Farmers and Graziers Association; andthe Willis Flavell Partnership, Andrew Spykes and David and Brigid Willis bytheir solicitors Mills Oakley Lawyers.159 I will also cause a copy to be posted on the websites of PPB Advisory and ABL.36

AFFIRMED at Melbournein the State of Victoriaby DANIEL MATHEW BRYANTthis 26th day of April 2013)))))rBefore meJ ULIA PAUI.A KRETZENBACHERArnold Blæh loibþrL€w|21, 333 Colline Streeti¡leboume 3000n the2W437

SCHEDULE 1 - GUNNS WOODLOT SCHEMES1 Gunns Plantations Woodlot Prolect 2000 ARSN 092 354 5352Gunns Plantations Woodlot Prolect 2001 ARSN 094 18227934Gunns Plantations Woodlot Project 2002 ARSN 099 584 675Gunns Plantations Woodlot Project 2003 ARSN 104 2137105Gunns Plantations Woodlot Project 2004 ARSN 108 690 0806Gunns Plantations Woodlot Project 2005 ARSN 113 092 8547I9Gunns Plantations Limited Woodlot Project 2006 ARSN 1 18 534 106Gunns Plantations Limited Woodlot Project 2008 ARSN 128 933 237Gunns Plantations Ltd Woodlot Project 2009 ARSN 135 49O 29238

SCHEDULE 21 GUNNS L|MTTED (ACN 009 478148)2 GUNNS NEW ZEALAND PTY LTD (ACN 069 051 378)3KAUR| TIMBER COMPANY LTD (ACN 004085714)4GUNNS FOREST PRODUCTS PTY LTD (ACN 004 208 904)5soRrsDALE PTY LTD (ACN 054 548 971)6WESLEY VALE ENGTNEERTNG PTY LTD (ACN 006 955 568)7INORTHERN FOREST TNVESTMENTS PTY LTD (ACN 009 493 707)KW|C PTY LTD (ACN 126 089 950)oAUSPTNE LTMTTED (ACN 004 289 730)10 S.E.A.S. PLANTATTONS PTY LTD (ACN 005 791 695)11 souTH EAST AFFORESTATTON SERVTCES PROPR|ETARY L|M|TED (ACN007 898 259)12 AUSPTNE PLANTATIONS PTY LTD (ACN 002327 808)13 TTMBERSALES PROPRTETARY LIMITED (ACN 004 848 864)14 SAPFOR TRADTNG PROPRTETARY LIMTTED (ACN 007 924 254)15 S.E.A.S. SAPFOR FORESTS PROPRIETARY LTMITED (ACN 007 872120)16 GTP ALEXANDRA PTY LTD (ACN 121 653772)17 GTP HEYFTELD PTY LTD (ACN 000 041 814)18 GTP SOUTHWOOD PTY LTD (ACN 081 613710)19 GUNNS PLANTATTONS LTMTTED (ACN 091232209)20 GUNNS HOLDTNGS PTY LTD (ACN 009 520 085)21 GUNNS FTNANCE PTY LTD (ACN 091 861 700)39

22ASSOCTATED FOREST HOLDTNGS PROPRTETARY LIMITED (ACN 004 352078)2324TASMANTAN PULP & FOREST HOLDTNGS LTMTTED (ACN 009 488 733)TBVTC PTY LTD (ACN 004161782)25EAST COAST PASTORAL CO PTY LTD (ACN 009 519 528)26GUNNS CONSOLTDATED INVESTMENTS PTY LTD (ACN 128 619 045)2728TASMANTAN SOFTWOODS PTY LTD (ACN 009 501 786)S.E.A.S. ESTATES PTY LTD (ACN 007 923971)29MANNA HOLDTNGS PTY LTD (ACN 008 008 197)30AUSPINE TREE FARMS PTY LTD (ACN 100 307 373)31TASPINE PTY LTD (ACN OO9 477 730)323334s.E.A.S. SAPFOR TNVESTMENT SERVICES PROPRTETARY LtM|TED (ACN 008164 289)s.E.A.S. SAPFOR HARVESTTNG PROPRTETARY L|M|TED (ACN 007 511211)GTP CH|NA PTY LTD (ACN 093 919 414)35GTP SEYMOUR PTY LTD (ACN 091 652 550)36GTP HOLDTNGS PTY LTD (ACN 009 478 068)(ALL tN LtQUtDAT|ON) (THE'GUNNS GROUP')40