METABOLISM HEALTH LIMITED ABN 25 009 121 644

(Subject to Deed of Company Arrangement)

NOTICE OF GENERAL MEETING AND EXPLANATORY STATEMENT

For a General Meeting to be held on Wednesday, 7 July 2004 at II am at The Celtic Club 48 Ord Street West Perth WA 6005

CONTENTS PAGE

PAGE

LETTER TO SHAREHOLDERS
TIME AND PLACE OF MEETING AND HOW TO VOTE
NOTICE OF GENERAL MEETING
EXPLANATORY STATEMENT
INDEPENDENT EXPERT'S REPORT
PROXY FORM

This is an important document. Please read it carefully.

If you are unable to attend the General Meeting, please complete the form of proxy enclosed
and return it in accordance with the instructions set out on that form.

LETTER TO SHAREHOLDERS

Dear Shareholder

On 19 January 2004, the Directors of Metabolism Health Limited (Metabolism Health or the Company) appointed Brian McMaster of Ernst & Young, as Administrator of the Company under Section 436A of the Corporations Act.

The appointment was made after the Company's securities were suspended, on 15 January 2004, from trading on the Official List of Australian Stock Exchange Limited.

At a meeting of creditors held on 1 April 2004, the Administrator proposed to the creditors of the Company that it was in the best interests of creditors to enter into a deed of company arrangement. At this meeting, creditors voted in favour of the Company entering into a deed of company arrangement with Ascent Capital Pty Ltd (Ascent Capital) so that Ascent Capital may recapitalise the Company (Recapitalisation Proposal). On 4 April 2004, the deed of company arrangement was executed by the relevant parties, a summary of which is set out in this Memorandum Deed of Company Arrangement) and nominees of Ascent Capital being David Steinepreis, Hugh Warner and Gary Steinepreis were appointed Directors of the Company on 16 April 2004.

The Deed of Company Arrangement, subject to conditions being met, requires that an amount of \$510,000, certain assets and rights to the benefit of the Company be made available for the satisfaction of the claims of creditors and to meet the costs of the Administrator and Deed Administrator and for \$185,000 to be allocated to acquire all intellectual property and certain assets from The Metabolism Centre Pty Ltd (TMC). Ascent Capital has provided the additional funding to meet the costs associated with this Notice of General Meeting and will provide \$510,000 in additional loan funds, via a conditional loan agreement, to enable the Company to meet the terms of the Deed of Company Arrangement.

The proposal from Ascent Capital requires members in General Meeting to vote on and pass the following Resolutions all of which are interdependent, other than the resolution referred to below at (i):

$(a)$ the consolidation of the capital of the Company on the basis that every 2 Shares be consolidated into 1 Share:
$(b)$ the issue and allotment of 50,000,000 Shares at an issue price of 0.25 cents per Share, following the consolidation of capital, to raise \$125,000 for working capital. The determination of the allottees is at the sole discretion of Ascent Capital;
$(c)$ the issue and allotment of 65,000,000 Shares at an issue price of 0.50 cents per Share, following the consolidation of capital, to raise \$325,000 for working capital. The determination of the allottees is at the sole discretion of Ascent Capital;
$(d)$ the issue and allotment of 115,000,000 Shares at an issue price of 1 cent per Share, following the consolidation of capital to raise \$1,150,000 for working capital. The determination of the allottees is at the sole discretion of Ascent Capital;
$(e)$ the issue and allotment of up to $40,000,000$ Shares at an issue price of I cent per Share, following the consolidation of capital to raise up to \$400,000 for working capital, via an over-subscription facility. The determination of the allottees is at the sole discretion of Ascent Capital;
the issue of 30,000,000 Options following the consolidation of capital. $(f)$ The determination of the allottees is at the sole discretion of Ascent Capital;
the re-election of the nominees of Ascent Capital as Directors of the Company; $(g)$
the Section 195 Approval; and $(h)$
$(i)$ the change of the name of the Company to M Health Limited.

The Resolutions proposed which are included in the attached Notice of General Meeting enable the Company to satisfy the terms of the Deed of Company Arrangement.

If the above Resolutions are passed and the proposed restructuring and recapitalisation is completed, the Company will seek the reinstatement of the quotation of its securities on ASX. Ascent Capital has advised the Deed Administrator that it intends the Company to continue with the development of its business through the continued operation of the Company's flagship store in Subiaco. The Directors are pleased to inform Shareholders that the Subiaco Store will be reopened for business prior to the Meeting and funds will be provided by Ascent Capital to meet the ongoing costs of rent and services of the business. These funds are provided as a loan, the repayment of which will be subject to the successful recapitalisation of the Company.

If Shareholders reject the Recapitalisation Proposal, settlement of the Deed of Company Arrangement will not occur and Metabolism Health will be placed into liquidation. If this is the case, creditors will be required to prove in liquidation and it is likely that there would be no return to Shareholders.

Pursuant to clause 6.3 of the Deed of Company Arrangement, the Administrator has delegated certain powers to David Steinepreis, Hugh Warner and Gary Steinepreis who were appointed Directors of the Company on 16 April 2004, to enable those Directors to prepare, finalise and despatch this Notice of Meeting to Shareholders and chair the Shareholders meeting.

The Deed Administrator is not responsible for the contents of this Notice of General Meeting, the Explanatory Statement or the Memorandum generally, nor the report by Stanton Partners Corporate Pty Ltd attached to and forming part of the Memorandum. The Deed Administrator does not accept any responsibility for any disclosure in or failure to include any disclosure in those documents.

Yours faithfully

David Steinepreis Director

TIME AND PLACE OF MEETING AND HOW TO VOTE

Venue

The General Meeting of the Shareholders of Metabolism Health Limited (subject to deed of company arrangement) will be held at:

The Celtic Club 48 Ord Street West Perth WA 6005

Commencing II am on Wednesday, 7 July 2004

How to Vote

You may vote by attending the meeting in person, by proxy or authorised representative.

Voting in Person

To vote in person, attend the meeting on the date and at the place set out above. The meeting will commence at II am.

Voting by Proxy

To vote by proxy, please complete and sign the proxy form enclosed with this Notice of General Meeting as soon as possible and either:

send the proxy by facsimile to the Company on facsimile number (08) 9481 2690 ٠ (International: + 618 9481 2690); or
deliver to Level 1, 33 Ord Street, West Perth WA 6005 or PO Box 637, West Perth WA $\bullet$ 6872:

so that it is received not later than 11 am on Monday 5 July 2004.

Your proxy form is enclosed.

METABOLISM HEALTH LIMITED ABN 25 009 121 644

(Subject to deed of company arrangement)

NOTICE OF GENERAL MEETING

Notice is given that a General Meeting of Shareholders of Metabolism Health Limited (subject to deed of company arrangement) (Metabolism Health or Company) will be held at The Celtic Club, 48 Ord Street, West Perth, WA at 11 am on Wednesday, 7 July 2004.

AGENDA

The Explanatory Statement that accompanies and forms part of this Notice of Meeting describes the matters to be considered as special business.

SPECIAL BUSINESS

It is a requirement of the Recapitalisation Proposal that each of the resolutions set out below (other than resolution 7) are passed, otherwise none of the resolutions will have any effect.

Resolution I - Consolidation of Capital

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, subject to and conditional on the passing of Resolutions 2 to 6 (inclusive), in accordance with Section 254H of the Corporations Act, Listing Rule 7.20 and 7.22.1 of the Listing Rules of Australian Stock Exchange Limited and the Company's Constitution and for all other purposes:

$(a)$ the issued capital of the Company be consolidated on the basis that every two (2) fully paid ordinary shares in the capital of the Company be consolidated into one (1) fully paid ordinary share in the capital of the Company; and
that the number of Existing Options on issue be consolidated in the same manner $(b)$ as the ordinary share capital and that the exercise price of the Existing Options be amended in inverse proportion to that ratio; and
$(c)$ that the number of Existing Convertible Cumulative Preference Shares on issue be consolidated in the same manner as the ordinary share capital in accordance with the Existing Convertible Cumulative Preference Shares terms and conditions,

and where this consolidation results in a fraction of a fully paid ordinary share, Existing Option or Existing Convertible Cumulative Preference Share being held by a member of the Company, the Directors of the Company be authorised to round that fraction up to the nearest whole number."

Short Explanation: Under the Corporations Act, a company may convert all or any of its Shares into a smaller amount by resolution passed at a general meeting. In that circumstance, the Company is required to consolidate its Existing Options in accordance with the Listing Rules. The Convertible Cumulative Preference Shares are to be converted in accordance with their terms and conditions.

Resolution 2 - Allotment and Issue of Shares and Options

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, subject to and conditional on the passing of Resolution 1 and Resolutions 3 to 6 (inclusive), for the purposes of Listing Rules 7.1 and 10.11 of the Listing Rules of the Australian Stock Exchange Limited, Sections 208 and item 7 of Section 611 of the Corporations Act and for all other purposes, approval is given for:

the Company to allot and issue up to 50,000,000 fully paid ordinary shares in the $(a)$ capital of the Company at an issue price of 0.25 cents per ordinary share (on a post consolidation basis) to raise \$125,000; and
the Company to allot and issue up to 65,000,000 fully paid ordinary shares in the $(b)$ capital of the Company at an issue price of 0.50 cents per ordinary share (on a post consolidation basis) to raise \$325,000; and
the Company to allot and issue up to 115,000,000 fully paid ordinary shares in $\left( c\right)$ the capital of the Company at an issue price of I cent per ordinary share (on a post consolidation basis) to raise \$1,150,000; and
the Company to allot and issue up to 40,000,000 fully paid ordinary shares in the $(d)$ capital of the Company at an issue price of I cent per ordinary share (on a post consolidation basis) to raise \$400,000 via an over-subscription facility; and
$(e)$ the Company to grant up to 30,000,000 options each to acquire one fully paid ordinary share in the capital of the Company at an exercise price of 1 cent each (on a post consolidation basis) on or before 31 December 2007; and
$(f)$ those parties set out in the Explanatory Statement to acquire a relevant interest in issued voting shares in the Company on the issue of fully paid ordinary shares and on the exercise of the options referred to in paragraph (e) above in accordance with this Resolution.

and otherwise on the terms set out in the Explanatory Statement accompanying this Notice."

Short Explanation: As part of the recapitalisation of the Company, Shares and Options will be issued to Ascent Capital, David Steinepreis, Gary Steinepreis and Hugh Warner (who include Directors of the Company (or entities controlled by them)) and to nominated third parties. For this reason, approval is sought under ASX Listing Rules 7.1 and 10.11 and Section 208 of the Corporations Act. Approval is also sought to allow those parties (who could be deemed to be acting in concert) to acquire a relevant interest in more than 20% of the Company. Please refer to the Explanatory Statement for details.

Voting Exclusion: The Company will disregard any votes cast on this resolution by:

$(a)$ Ascent Capital, David Steinepreis, Gary Steinepreis and Hugh Warner and a person who may participate in the proposed issue and any person who might obtain a benefit, except a benefit solely in the capacity of a security holder if the resolution is passed, and any associates of those persons; and
$(b)$ a person who is to receive securities in relation to the entity and their associates.

Resolution 3 - Re-Election of Mr David Steinepreis

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, subject to and conditional on the passing of Resolutions 1 to 2 (inclusive) and Resolutions 4 to 6 (inclusive), Mr David Steinepreis being a Director of the Company who was appointed on 16 April 2004, retires in accordance with the Company's constitution and, being eligible and offering himself for re-election, be appointed as a Director of the Company."

Resolution 4 - Re-Election of Mr Gary Steinepreis

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, subject to and conditional on the passing of Resolutions 1 to 3 (inclusive) and Resolutions 5 to 6 (inclusive), Mr Gary Steinepreis being a Director of the Company who was appointed on 16 April 2004, retires in accordance with the Company's constitution and, being eligible and offering himself for re-election, be appointed as a Director of the Company."

Resolution 5 - Re-Election of Mr Hugh Warner

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, subject to and conditional on the passing of Resolutions 1 to 4 (inclusive) and Resolution 6, Mr Hugh Warner being a Director of the Company who was appointed on 16 April 2004, retires in accordance with the Company's constitution and, being eligible and offering himself for re-election, be appointed as a Director of the Company."

Resolution 6 - Section 195 Approval

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That subject to and conditional on the passing of Resolutions 1 to 5 (inclusive), for the purposes of section 195(4) of the Corporations Act and for all other purposes, Shareholders approve and authorise the Directors to complete the transactions as contemplated in this Notice."

Short Explanation: Approval of Resolution 2 may result in the Directors appointed by this General Meeting having a "material personal interest" in the Recapitalisation Proposal, completion of the Deed of Company Arrangement and other matters referred to in this notice. In the absence of this Resolution 6, the Directors may not be able to form a quorum at any meetings necessary to carry out the transactions contemplated by this Notice which may mean that the Deed of Company Arrangement cannot be completed and as a consequence the Company being placed into liquidation.

Resolution 7 - Change of Name

To consider and if thought fit, to pass, with or without amendment, the following resolution as a special resolution:

"That, for the purpose of Section 157(1) of the Corporations Act and for all other purposes, the name of the Company be changed to M Health Limited and the Constitution be amended accordingly."

DATED THIS 13th DAY OF MAY 2004 BY ORDER OF THE BOARD

GARY STEINEPREIS COMPANY SECRETARY

NOTES:

ŧ. A Shareholder of the Company who is entitled to attend and vote at a general meeting of Shareholders is entitled to appoint not more than two proxies. Where more than one proxy is appointed, each proxy may be appointed to represent a specified proportion of the Shareholder's voting rights. If the Shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half of the votes. A proxy need not be a Shareholder of the Company.
1. Where a voting exclusion applies, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the proxy form to vote as the proxy decides or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.
In accordance with Regulation 7.11.37 of the Corporations Act, the Directors have set a snapshot date to determine the 3. identity of those entitled to attend and vote at the Meeting. The snapshot date is 11 am (WST) on 5 July 2004.

EXPLANATORY STATEMENT

This Explanatory Statement and all attachments are important documents. They should be read carefully.

L. GENERAL INFORMATION

This Explanatory Statement has been prepared for the Shareholders of Metabolism Health Ltd (subject to Deed of Company Arrangement) (Metabolism Health or Company) in connection with the general meeting of the Company.

In considering the Resolutions, Shareholders must bear in mind the current financial circumstances of the Company. In this regard, Shareholders should note that the Administrator has prepared reports to creditors of the Company in accordance with Section 439A(4) of the Corporations Act. The reports set out in detail the financial position of the Company, the actions and investigations taken by the Administrator, the reasons for the failure of the Company and the Administrator's recommendation for the future of the Company. A copy of these reports can be provided on request to the Administrator, but Shareholders should note that these were prepared for the benefit of Metabolism Health's creditors and any opinions expressed by the Administrator in these reports relate to the creditors' interests which may not be aligned with the Shareholders' interests. As such the Shareholders should not place reliance on these reports.

If the Resolutions are passed and the proposed re-structuring set out in the Recapitalisation Proposal is completed, the Company will be in a position to seek the reinstatement of its securities to official quotation on ASX. This reinstatement is, of course, subject to the discretion of ASX.

If Shareholders reject the proposed restructuring, the recapitalisation proposal conditions precedent will not be met and Metabolism Health will be placed into liquidation. If the Company is placed into liquidation, it is unlikely that there would be a return to Shareholders.

$L_{\rm{L}}$ Overview

$1.1.1$ Background

The Company was incorporated on 8 February 1985 as Ascot Mining NL Since incorporation the Company has had a number of name changes, the most recent of which is Metabolism Health Limited. In its current format, the Company traded as Metabolism Health Limited as a provider of proprietary services in the health, fitness and lifestyle industry. More specifically, the Company, through its subsidiary TMC, operated a weight loss business which utilised a model for identifying the presence of metabolic dysfunction and other causes of weight gain.

Whilst Metabolism Health made progress on the development of its business model, continuing operating losses were sustained and the continuation of trading was dependant on the ability of the Company to restructure its business and to attract sufficient capital to fund activities in the future. Ultimately, these funds were not available to the Company.

The Company has maintained its intellectual property associated with its business and is continuing with the operation of its flagship store in Subiaco. A description of the activities of the Company and the use of this intellectual property is more fully described in section 1.1.3 below.

$1.1.2$ Suspension of Trading of Company's Shares and Appointment of Administrator

The Company's securities were suspended from trading on ASX on 15 January 2004 following a request from the Company and the appointment of an external administrator to TMC, on the same date.

On 19 January 2004, the Directors of Metabolism Health appointed Brian McMaster of Ernst & Young, as Administrator of the Company under Section 436A of the Corporations Act.

At a meeting of creditors held on 1 April 2004, the Administrator proposed to the creditors of the Company that it was in the best interests of creditors to enter into a deed of company arrangement. At this meeting, creditors voted in favour of the Company entering into a deed of company arrangement with Ascent Capital so that Ascent Capital may recapitalise the Company. On 4 April 2004, the Deed of Company Arrangement was executed by the relevant parties, a summary of which is set out in this Memorandum and nominees of Ascent Capital, being David Steinepreis, Hugh Warner and Gary Steinepreis, were appointed Directors of the Company on 16 April 2004.

The Deed of Company Arrangement requires that an amount of \$10,000 and certain assets of the Company be made available for satisfaction of the claims of creditors and to meet the costs of the Administrator and Deed Administrator and for \$185,000 to be allocated to acquire all intellectual property and certain assets from TMC. It also provides that the administration of the Company terminates following the passing of the resolutions at the Meeting, payment of \$510,000, and the transfer of certain assets to the Trustee for creditors, all of which is more fully described at section 1.2.2 below.

$1.1.3$ Future of the Company

It is the present proposal of Ascent Capital to continue the business of the Company and the purpose of this Meeting is to give effect to the Deed of Company Arrangement and matters associated with the Deed of Company Arrangement, to allow the Company to continue the development of the Company's business.

Since posting this Notice to Shareholders, the Company has reopened its flagship Subiaco Store and has begun trading again, via the Future Health Joint Venture. As part of the reestablishment of operations, Ascent Capital has negotiated on behalf of the Company a new lease over the Subiaco Store and paid all rent due on the premises and funds will be provided by Ascent Capital to meet the ongoing costs of the business. These funds are provided as a loan, the repayment of which will be subject to the successful recapitalisation of the Company.

The Company proposes to raise sufficient working capital to carry out its activities and as part of the working capital budget, the Company intends to pursue new investments within Australia and overseas by way of acquisition, development and/or exploitation.

It is the intention of the Company to initially focus on the development of its weight loss business at the Subiaco Store with the aim of being able to demonstrate the effectiveness of this business model prior to seeking an expansion of the business.

Details of the Directors are set out in section 1.2.1.

$1.1.4$ The Future Health Joint Venture and Summary of Calchek Pty Ltd

The following is a summary of the material terms of the Future Health Joint Venture:

Ascent Capital and Calchek Pty Ltd (Calchek) and/or its nominee has agreed to enter into a joint venture in relation to the intellectual property owned by Metabolism Health and related assets on the following terms:

The joint venture shall take effect if the Recapitalisation Proposal occurs which i). expression shall be defined as creditor and Shareholder approval of Ascent Capital's Recapitalisation Proposal, the appointment of Ascent Capital's nominees as Directors of Metabolism Health, the removal of Metabolism Health from external administration and the re-instatement to trading of Metabolism Health's securities to ASX.
ii) Metabolism Health shall have a 50% interest and Calchek and/or its nominee shall have a 50% interest in the joint venture.
iii) The joint venture shall operate from premises at 239 Hay Street, Subiaco, Western Australia.
iv) Metabolism Health will provide the following to the joint venture:
(a) the Premises, including the funding for the lease on the Premises;
(b) initial funding of \$20,000 in cash;
(c) all intellectual property owned by Metabolism Health which relates to the joint venture;
(d) the TMC Assets; and
(e) the right to acquire up to five (5) calorimeters from the liquidator of TMC, provided that Ascent Capital has been successful in negotiating this option.

The above funds shall be available firstly to purchase the calorimeters and secondly to enhance the development of the intellectual property as agreed between the joint venture partners.

v) Calchek will provide the following to the joint venture:
(a) appropriately qualified personnel with the relevant experience to operate the equipment and processes for analysis;
(b) management of the financial operations of the joint venture and Premises.
vi) At the end of the first year of the joint venture Metabolism Health will have the option to subscribe a further \$100,000 in funding to retain its 50% interest in the joint venture. If Metabolism Health contributes these funds they shall again be used by agreement by the joint venture parties to further the exploitation of the intellectual property.
vii) In the event that Metabolism Health elects not to contribute the extra \$100,000 its joint venture interest will be diluted to 10%.
viii) After the second year of the joint venture the parties shall assess the commercial viability of the intellectual property and make a decision (with voting rights based on their proportional interest in the joint venture) whether to continue the joint venture or sell the joint venture assets.

Metabolism Health also proposes, as part of its commitments, to review and evaluate other opportunities in the health, fitness and lifestyle industry to increase sales and market awareness of the Future Heath Joint Venture's services.

Summary of Calchek

Established in 2002, Calchek Pty Ltd is an Australian owned company with offices located in Perth, Western Australia. With over 20 highly credentialed software and electronic engineers and a strong management team consisting of finance, business, marketing and medical professional, the company was formed to design, manufacture and distribute indirect calorimetry equipment to the medical, weight loss and sport and fitness industries worldwide.

Calchek Pty Ltd, designed their calorimetry testing equipment and software in consultation with a Sports Physiologist and Respiratory Physiologist to ensure the equipment met their specific technical and cost requirements. Moreover, this collaboration between manufacturer (Calchek) and the consumer has resulted in a range of testing equipment capable of accurately measuring the three energy systems (aerobic, glycolytic and phosphorcreatine). This has opened up the opportunity to utilise the scientific and assessment capabilities of indirect calorimetry across a wider range of health and wellness related issues that are of great prevalence and relevance in the world today. These issues include inter alia, the increasing incidence, at an alarming rate, of obesity and type II diabetes throughout the world's population.

$1.1.5$ Purpose of Capital Raisings

The purpose of the capital raisings are to:

fund the Company's obligations under the Joint Venture;
provide funds for the acquisition and development of additional opportunities in the health, fitness and lifestyle industry, as identified by the Company;
provide funds for further acquisition and development of other investments, as identified by the Company; and
meet the administration costs of the Company and the expenses of the recapitalisation of the Company.

In particular, it is proposed that the funds raised will be applied as follows:

Use of Funds - Expenditure Budget (Assuming all resolutions are passed and Over-Subscriptions Accepted)

	Year I	Year 2
	\$
Total funds to be raised under the Capital	2,000,000
Raisings
Utilised as follows:
Contribution to the Joint Venture and business	228,000	200,000
development
Review and evaluation of new projects	200,000	210,000
Total general working capital budget	428,000	410,000
Payment to Deed Administrator to satisfy obligations
under the Deed of Company Arrangement	510,000
Working capital including expenses associated with the
recapitalisation proposal *	350,000	302,000
Total funds utilised	,288,000	712,000

* Note that the expenses of the recapitalisation are estimated at \$75,000 (refer to the proforma statement of financial position section 2.1.9).

Use of Funds - Expenditure Budget (Assuming all resolutions are passed and no Over-Subscriptions Accepted)

	Year I	Year 2
	\$	\$
Total funds to be raised under the Capital	1,600,000
Raisings
Utilised as follows:
Contribution to the Joint Venture and business	28,000	150,000
development
Review and evaluation of new projects	50,000	150,000
Total general working capital budget	278,000	300,000
Payment to Deed Administrator to satisfy obligations
under the Deed of Company Arrangement	510,000
Working capital including expenses associated with the
recapitalisation proposal *	275,000	237,000

Total funds utilised	063,000	537,000

* Note that the expenses of the recapitalisation are estimated at \$75,000 (refer to the proforma statement of financial position section 2.1.9).

Ascent Capital

Background

Ascent Capital was formed by David Steinepreis, Hugh Warner and Gary Steinepreis to pursue the reconstruction and recapitalisation of existing listed companies, assist in the establishment of new businesses and the listing of new companies on recognised stock exchanges including the ASX, OFEX and AIM in the United Kingdom.

Mr David Steinepreis is the Chairman of Ascent Capital and a 33.3% shareholder and each of Mr Hugh Warner and Mr Gary Steinepreis are executive Directors and 33.3% shareholders. Details of each of these parties are set out below.

Ascent Capital and its Directors have successfully listed, recapitalised and relisted a number of companies including:

$\mathbb{I}$ . Aeris Technologies Ltd
$2.$ Avon Resources Ltd
1. Extract Resources Ltd
Fusia Limited 4.
1. IM Medical Ltd
1. Imugene Limited
MediVac Limited 7.
1. Mokuti Mining Ltd
OBJ Limited 9.
$10.$ Q-Vis Limited
Resonance Health Ltd Η.
$12.$ Service Stream Ltd
$13.$ Synergy Metals Ltd
$|4.$ View Resources Ltd

$1.2$ Summary of the terms of the Recapitalisation Proposal and Deed of Company Arrangement

Set out below is a detailed summary of the Recapitalisation Proposal and Deed of Company Arrangement.

$1.2.1$ Details of Recapitalisation Proposal

At a meeting of creditors on 1 April 2004, the Recapitalisation Proposal was accepted by the creditors. On 4 April 2004, the Deed of Company Arrangement was executed, details of which are contained in section 1.2.2 below and on 16 April 2004, David Steinepreis, Hugh Warner and Gary Steinepreis were appointed Directors of the Company.

Ascent Capital

By way of background, Ascent Capital comprises Mr David Steinepreis, Mr Gary Steinepreis and Mr Hugh Warner. Detailed information in respect of these persons is set out below.

Mr David Steinepreis

David Steinepreis is a Chartered Accountant and former partner of an international accounting firm where he specialised in strategic corporate advice and taxation for listed companies. He entered commerce as a Director, adviser and major shareholder of a number of listed companies in the gold, diamonds, oil and new mining technology sectors. Mr Steinepreis is a Director of Mokuti Mining Limited, IM Medical Ltd, QVis Limited, Service Stream Ltd, OBJ Limited, Fusia Limited and Black Range Minerals Ltd (subject to deed of company arrangement), companies listed on the ASX, Black Rock Oil & Gas PLC, an oil and gas exploration company listed on the London AIM market and MinRes Resources Inc, a company listed on the Canadian Venture Exchange. Mr Steinepreis is also chairman of Ascent Capital.

Mr Hugh Warner

Hugh Warner holds a Bachelor of Economics Degree from the University of Western Australia. Mr Warner has been involved with a number of private and publicly listed companies in Australia, UK and Canada involved in the oil and gas, gold, diamonds and He contributes general corporate and company secretarial technology sectors. management skills along with a strong knowledge of both the Australian and UK Stock Exchange requirements. Mr Warner is a Director of Mokuti Mining Limited, IM Medical Ltd, Q-Vis Limited, Service Stream Ltd, OBJ Limited, Fusia Limited and Black Range Minerals Ltd (subject to deed of company arrangement), companies listed on the ASX, MinRes Resources Inc. listed on the Canadian Venture Exchange and Ascent Capital.

Mr Gary Steinepreis

Gary Steinepreis holds a Bachelor of Commerce degree from the University of Western Australia and is a Chartered Accountant. Mr Steinepreis provides corporate, management and accounting advice to a number of companies involved in the resource, technology and leisure industries. He is a Director of Australian Development Capital Ltd, Mokuti Mining Limited, OBJ Limited, Fusia Limited, Black Range Minerals Ltd (subject to deed of company arrangement) and Q-Vis Limited, companies listed on the Australian Stock Exchange and Black Rock Oil & Gas PLC listed on the London AIM market and Ascent Capital.

Terms of the Recapitalisation Probosal

The essential terms of the Recapitalisation Proposal are as follows:

the consolidation of the capital of the Company on the basis that every 2 Shares be $(a)$ consolidated into I Share:
the issue and allotment of 50,000,000 Shares at an issue price of 025 cents per $(b)$ Share, following the consolidation of capital, to raise \$125,000 for working capital. The determination of the allottees is at the sole discretion of Ascent Capital;
the issue and allotment of 65,000,000 Shares at an issue price of 0.50 cents per $(c)$ Share, following the consolidation of capital, to raise \$325,000 for working capital. The determination of the allottees is at the sole discretion of Ascent Capital;
the issue and allotment of up to 115,000,000 Shares at an issue price of 1 cent per $(d)$ Share, following the consolidation of capital to raise up to \$1,150,000 for working capital. The determination of the allottees is at the sole discretion of Ascent Capital;
(e) the issue and allotment of up to 40,000,000 Shares at an issue price of I cent per Share, following the consolidation of capital to raise up to \$400,000 for working capital, via an over-subscription facility. The determination of the allottees is at the sole discretion of Ascent Capital;
the issue of 30,000,000 | Cent Options, following the consolidation of capital. The $(f)$ determination of the allottees is at the sole discretion of Ascent Capital;
the appointment of the nominees of Ascent Capital as Directors of the Company; (g)
$(h)$ change of the name of the Company, if required by Ascent Capital; and
any other approvals required to give effect to the objects of the Deed of Company $(i)$ Arrangement or as required by the ASX or ASIC.

The funds raised pursuant to the capital raisings set out above will be applied as detailed in Section 1.15 of this Explanatory Statement.

The Recapitalisation Proposal is conditional upon ASX giving its approval to lift the suspension on the trading of the Company's securities following completion of the proposal.

$1.2.2$ Details of Deed of Company Arrangement

The Deed of Company Arrangement has been entered into by the Company, Brian McMaster and Ascent Capital. The Deed of Company Arrangement was executed on 4 April 2004 following the approval of creditors of the Recapitalisation Proposal on I April 2004. The Deed of Company Arrangement incorporates the terms of the Recapitalisation Proposal.

Settlement and effectuation of the Deed of Company Arrangement may only occur once the conditions precedent have been satisfied or waived by the relevant party. The conditions precedent relevant to this Notice can be summarised as:

$(a)$ TMC being placed into liquidation;
$(b)$ ASX providing written confirmation that, after settlement, that it will lift the suspension on the trading of the securities of the Company without the need to re-comply with chapters 1 & 2 of the Listing Rules;
The transaction documents being executed by all parties and taking effect which $(c)$ documents shall include the Deed of Company Arrangement, the Metabolism Health Limited Creditors Trust Deed, Sale Agreement evidencing the sale of the TMC Assets to the Company, Release and Discharge evidencing the release and discharge of all liabilities between the Company and TMC, the Loan Agreement evidencing a loan of \$510,000 by Ascent Capital to the Company and any other documents contemplated by the Deed of Company Arrangement; and
$(d)$ approval by Shareholders of the Resolutions.

At Settlement, the following shall occur:

The Liquidator of TMC shall transfer to the Company the TMC Assets in $(a)$ consideration for \$185,000:
$(b)$ The Administrator of the Company and the Liquidator of TMC shall release and discharge each other from all claims (present or future, certain or contingent, liquidated and unliquidated, ascertained or sounding only in damages) including under Section 588V of the Act;
$(c)$ the Trustee on behalf of creditors will receive a payment of \$325,000 from the cash funds to be paid to the Deed Administrator (totalling \$510,000) upon the resolutions at the meeting being passed and the creditors shall receive a dividend from the funds received from any sale of the assets of the Company which are transferred to the Deed Administrator (as that term is defined in the Deed of Company Arrangement) and the Administrator shall pay \$185,000 to the Liquidator of TMC in consideration for the TMC Assets.
$(d)$ the Administrator shall provide the Company with a certificate of effectuation and release the Company from Administration;
$(e)$ creditors of the Company must accept their entitlements under the Deed of Company Arrangement in full satisfaction and complete discharge of their debts and claims which they have or claim against the Company;
$(f)$ the Company will transfer, amongst others, the following assets to the Deed Administrator (referred to as the Trustee):
$(i)$ cash at bank:
$(ii)$ debtors:
any GST refunds; $(iii)$
stock, inventory, plant, equipment and office furniture; $(iv)$
shares and options in subsidiaries and shares and options in other $(v)$ investments; and
any causes of action the Company currently has against a third party; $(v_i)$

other than the TMC Assets.

the Trustee will consider the claims of creditors which arose on or before the $\left( g\right)$ date of the administration and will pay a dividend to creditors in accordance with the order of priority set out in the Corporations Act.

If the conditions precedent are not satisfied, Settlement will not occur and the Company will be placed into liquidation. If the Company is liquidated, it is likely that Shareholders will not receive a dividend from the assets.

$1.2.3$ Conclusion

The resolutions set out in the Notice are important and affect the future of Metabolism Health. Shareholders are therefore urged to give careful consideration to the Notice and the contents of this Explanatory Statement.

$2.$ THE RESOLUTIONS

Resolution 1 - Consolidation of Capital

The Company is seeking Shareholder approval to consolidate the number of Shares on issue on a 1 for 2 basis.

Section 254H of the Corporations Act provides that a company may, by resolution passed in general meeting, convert all or any of its shares into a larger or smaller number of shares. The ASX Listing Rules also require that the number of options on issue be consolidated in the same ratio as the ordinary capital and the exercise price be amended in inverse proportion to that ratio. The terms of the Convertible Cumulative Preference Shares also requires consolidation in the same proportion as the Shares.

If Resolution I is passed, the number of Shares on issue will be reduced from 55,233,447 to approximately 27,700,902. The terms and conditions of the Shares will not be affected.

As from the effective date of the resolution (being the date following the date of the Meeting), all holding statements for Shares and Existing Options will cease to have any effect, except as evidence of the entitlement to a certain number of post consolidation Shares and Existing Options.

After the consolidation becomes effective, the Company will arrange for new holding statements to be issued to Shareholders and optionholders. It is the responsibility of each Shareholder or optionholder to check the number of Shares and Existing Options held prior to a disposal.

For the purposes of the ASX Listing Rules, the Company is required to follow the following timetable for the consolidation:

Event	Date
Company to send out Notice of Meeting	7 June 2004
Company tells ASX that Shareholders have approved the consolidation and last day for trading in pre-reorganised securities	7 July 2004
Trading in the reorganised securities would commence on a deferred settlement basis, if the securities were trading. The securities are currently suspended.	8 July 2004
First day for Company to send notice to security holders and first day for Company to register securities on a post re-organisation basis and issue of holding statements	15 July 2004
Last day for securities to be entered on the holders security holding and deferred trading would end, if the securities were trading. The securities are currently suspended.	21 July 2004

For the reference of Shareholders, the Company provides the following additional information:

The current capital structure of the Company is as follows:

Convertible Cumulative Preference Shares (CCPS)

Following completion of the consolidation and the capital raisings (but not including any over-subscriptions) as set out in this Notice, the capital structure of the Company will be as follows:

Shares	Share Capital
	Existing Shares on Issue
27,700,902	Shares on issue post consolidation (subject to rounding)
	Resolution 2 - No Over-subscriptions
50,000,000	Issue of Shares at 0.25 cents each
65,000,000	Issue of Shares at 0.50 cents each
115,000,000	Issue of Shares at 1 cent each
257,700,902	Shares on issue after consolidation and capital raising
Options	Option Description
	Existing Options on Issue (post consolidation)
88,957	Unlisted options exercisable at \$200 on or before 30 June 2004
5,000	Unlisted options exercisable at \$300 on or before 30 June 2004
3,000	Unlisted options exercisable at \$500 on or before 30 June 2004
1,666,667	Unlisted options exercisable at \$0.40 on or before 31 December 2005 Resolution 2
30,000,000	Unlisted 1 cent Options exercisable on or before 31 December 2007
31,755,624	Total Options on Issue
CCPS	CCPS Description
	Existing CCPS on Issue (post consolidation)
1,000	Series A
1,000	Series B

Total CCPS on Issue 2,000

Following completion of the consolidation and the capital raisings (including acceptance of all of the over-subscriptions) as set out in this Notice, the capital structure of the Company will be as follows:

Shares	Share Capital
	Existing Shares on Issue
27,700,902	Shares on issue post consolidation (subject to rounding)
	Resolution 2 - Including Over-subscriptions
50,000,000	Issue of Shares at 025 cents each
65,000,000	Issue of Shares at 0.50 cents each
115,000,000	Issue of Shares at 1 cent each.
40,000,000	Issue of Shares at 1 cent each – Over-subscription Facility
297,700,902	Shares on issue after consolidation and capital raising
Options	Option Description
	Existing Options on Issue (post consolidation)
88,957	Unlisted options exercisable at \$200 on or before 30 June 2004
5,000	Unlisted options exercisable at \$300 on or before 30 June 2004
3,000	Unlisted options exercisable at \$500 on or before 30 June 2004
1,666,667	Unlisted options exercisable at \$0.40 on or before 31 December 2005

	Resolution 2
30,000,000	Unlisted 1 cent Options exercisable on or before 31 December 2007
31,755,624	Total Options on Issue
CCPS	CCPS Description
	Existing CCPS on Issue (post consolidation)
1,000	Series A
1,000	Series B
2.000	Total CCPS on Issue

Not all security holders will hold a number of Shares, Existing Options or Convertible Cumulative Preference Shares that can be evenly divided by 2. If a fractional entitlement occurs, the Directors will round that fraction up to the nearest whole number.

It is considered that there are no taxation consequences that exist for security holders arising from a consolidation. However, security holders are advised to seek their own tax advice on the effect of the consolidation and neither the Company, the Administrator, the Deed Administrator nor the Directors (or the Company's advisers) accept responsibility for the individual taxation consequences arising from the consolidation.

Resolution 2-Allotment and Issue of Shares $2.1$

$2.1.1$ Background

The Shares and Options to be issued under Resolution 2 are being issued in accordance with the Recapitalisation Proposal and the Deed of Company Arrangement. The Shares and Options to be issued under Resolution 2 will be to Ascent Capital and other parties nominated by Ascent Capital.

The issue of 50,000,000 Shares (post consolidation) at 0.25 cents each and the issue of 65,000,000 Shares (post consolidation) at 0.50 cents each will be to Ascent Capital and other parties nominated by Ascent Capital who have proposed, negotiated and presented the Recapitalisation Proposal, as approved by creditors, and as contained in this Notice of General Meeting. A total of 30,000,000 Options exercisable at I cent each are proposed to be issued to Ascent Capital and third parties nominated by Ascent Capital.

Up to 155,000,000 Shares (post consolidation and including over-subscriptions) at 1 cent each will also be issued to Ascent Capital and other third parties nominated by Ascent Capital, which may include the public and Shareholders of the Company, and will be made as a general offer in accordance with the terms of the Recapitalisation Proposal.

Part of the funds raised from the allotment of the Shares pursuant to Resolution 2, being \$510,000, will be used to repay the loan funds of \$510,000 provided by Ascent Capital which will be used for the purpose of satisfying the claims of creditors and making payment to the Administrator of their fees, costs and expenses. The balance of the funds raised, being \$1,090,000, (or \$1,490,000 if all of the over-subscriptions are accepted) shall be used by the Company to meet the costs of the Recapitalisation Proposal and to meet the costs of the Company's ongoing operations. It is the intention of the Company to accept a minimum of \$58,000 in oversubscriptions to cover the initial contribution to the Future Health Joint Venture and premises rental payments made by Ascent Capital Pty Ltd.

$2.1.2$ ASX Listing Rules

Resolution 2 requires approval in accordance with ASX Listing Rules 7.1 and 10.11.

ASX Listing Rule 10.11

ASX Listing Rule 10.11 requires a company to obtain Shareholder approval by ordinary resolution prior to the issue of securities to a related party of the Company.

126,000,000 Shares (assuming over-subscriptions are accepted) to be issued pursuant to Resolution 2 may be issued to parties comprising Ascent Capital and other parties nominated by Ascent Capital (or entities controlled by them) and will include the issue and allotment to entities controlled by Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis.

Directors are related parties of the Company. Ascent Capital is a related party of Gary Steinepreis, Hugh Warner and David Steinepreis as it is an entity controlled by them and is therefore a related party of the Company. For this reason, approval for the issue of the Shares to these parties is required pursuant to ASX Listing Rule 10.11.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Shares to Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis as approval is being obtained under ASX Listing Rule 10.11.

ASX Listing Rule 10.13 sets out a number of matters which must be included in a notice of meeting proposing an approval under ASX Listing Rule 10.11. For the purposes of ASX Listing Rule 10.13, the following information is provided in relation to Resolution 2:

(a) the allottees of the Shares and Options for the purposes of ASX Listing Rule 10.11 are David Steinepreis, Hugh Warner, Gary Steinepreis and Ascent Capital and the maximum number of securities to be issued by the Company is as set out in the following table (post consolidation). The grantees referred to below shall be entitled to specify any nominee as determined by them subject to paragraph (b) below:

Table I

	Column 1:	Column 2:	Column 3:	Column 4:	Column 5:
	No. of Shares currently held both directly & indirectly (post consolidation)	Maximum No. of Shares to be issued at $0.25$ cents Resolution 2	Maximum No. of Shares to be issued at $0.50$ cents Resolution 2	Maximum No. of Shares to be issued at I cent Resolution 2	Maximum No. of I Cent Options to be issued pursuant to Resolution 2
David
Steinepreis		6,900,000	9.150,000	21,750,000	5,000,000
Hugh Warner		6,900,000	9,150,000	21.750.000	5,000,000
Gary Steinepreis
		6,900,000	9,150,000	21,750,000	5,000,000
Ascent Capital	$\ddot{}$	2,300,000	3,050,000	7.250.000	15,000,000
Total		23,000,000	30,500,000	72,500,000	30,000,000

(b) in the event the allottee does not take up the maximum allocation, that allottee is entitled to nominate a third party or parties to subscribe for the Shares and/or Options. That third party must be approved by the Directors in their discretion and provided that no nominee will acquire voting power that is greater than 20% of the Company;
(c) the Shares and Options to be issued to Ascent Capital, David Steinepreis, Gary Steinepreis and Hugh Warner, will be issued on one date and not later than one month after the date of the Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules);
(d) as noted above, Ascent Capital is an entity controlled by the Directors and as such is a related party of the Company;
(e) the Shares will be issued to Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis at the various issue prices set out in the above table;
(f) the Options will be issued to Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis for no consideration;
(g) the Shares will rank equally with the existing Shares on issue (post consolidation);
(h) the Options will be granted on the terms and conditions set out in Section 2.1.6 of this Explanatory Statement (post consolidation);
(i) the funds raised from the issue of the Shares pursuant to Resolution 2 will be used in accordance with Section 1.1.5 of the Explanatory Statement. Shareholders are referred to Sections 1.1 and 1.2 of this Explanatory Statement.

ASX Listing Rule 7.1

The remaining Shares to be issued pursuant to Resolution 2 may be issued to non related parties. Accordingly, approval is required pursuant to ASX Listing Rule 7.1 for the issue of these Shares.

The reason for an approval under ASX Listing Rule 7.1 is because the number of Shares proposed to be issued pursuant to Resolution 2 will exceed 15% of the capital of the Company on issue during the past 12 months.

The following information is provided to Shareholders for the purposes of obtaining Shareholder approval pursuant to ASX Listing Rules 7.1 and 10.11 for Resolution 2:

the maximum number of Shares to be issued by the Company pursuant to $(a)$ Resolution 2 is 270,000,000 at a total issue price of \$2,000,000;
the Shares and Options are proposed to be issued to Ascent Capital, the $(b)$ Directors (as detailed above) and nominated third parties, none of whom are (or will be at the time of the issue of the Shares and Options) related parties to the Company, in the maximum amounts set out in the table and notes below:

Table 2

	Column 1: No. of Shares currently held	Column 2: Maximum No. of Shares	Column 3: Maximum No. of I Cent	Total of existing shareholdings	Total No. of I Cent Options to be
	both directly & indirectly (post consolidation)	to be issued pursuant to Resolution 2	Options to be issued pursuant to Resolution 2	and maximum no. of Shares to be issued	issued
David		37,800,000	5,000,000	37,800,000	5,000,000
Steinepreis		37,800,000	5.000,000	37,800,000	5,000,000
Hugh Warner	$\tilde{~}$
Gary Steinepreis		37,800,000	5,000,000	37,800,000	5,000,000
Ascent Capital	$\tilde{~}$	12,600,000	15,000,000	12,600,000	15,000,000
Third Parties to be nominated by Ascent
Capital	$\overline{\phantom{a}}$	144,000,000	$\blacksquare$	144,000,000
Total	۰	270,000,000	30,000,000	270,000,000	30,000,000

$(c)$ the third party must be approved by the Directors in their discretion and provided that no nominee will acquire voting power that is greater than 20% of the Company;
$(d)$ the Shares and Options issued to the third parties will be issued pursuant to a Prospectus and will be issued to non related parties of the Company. It is anticipated that these Shares and Options will be allotted on one date and will be issued not later than 3 months after the date of the Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules);
the Shares will be issued to the third parties at the various issue prices set out in the $(e)$ above table:
$(f)$ the Options will be issued for no consideration:
$(g)$ the Shares issued will rank equally with the existing Shares on issue (post consolidation);
the Options will be granted on the terms and conditions set out in Section 2.1.6 of $(h)$ this Explanatory Statement (post consolidation); and
the funds raised from the issue of the Shares pursuant to Resolution 2 will be used $(i)$ in accordance with section 1.1.5 of the Explanatory Statement. Shareholders are referred to sections 1.1 and 1.2 of this Explanatory Statement.

$2.1.3$ Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act regulates the provision of financial benefits to related parties by a public company. Section 208 of the Corporations Act prohibits a public company giving a financial benefit to a related party unless one of a number of exceptions applies.

A "financial benefit" is defined in the Corporations Act in broad terms and includes a public company issuing securities.

For the purpose of this meeting, a "related party" includes:

$(a)$ a Director;
$(b)$ an entity over which a Director has control; and
$(c)$ an entity which believes, or has reasonable grounds to believe, that it is likely to become a related party in the future.

For the purposes of Chapter 2E of the Corporations Act, David Steinepreis, Hugh Warner and Gary Steinepreis are each a related party of the Company by virtue of the fact that they are, or will be, Directors. David Steinepreis, Hugh Warner and Gary Steinepreis are also Directors of and each 33.3% shareholders in Ascent Capital. Accordingly, Ascent Capital is a related party of each of David Steinepreis, Hugh Warner and Gary Steinepreis and is therefore a related party of the Company.

Section 208 of the Corporations Act provides that for a public company to give a financial benefit to a related party of that company, the public company must:

obtain the approval of members in the way set out in Sections 217 to 227; and $(a)$
$(b)$ give the benefit within 15 months after the approval.

For the avoidance of doubt, the Company is seeking Shareholder approval for the purposes of Chapter 2E of the Corporations Act in respect of the Shares proposed to be issued pursuant to Resolution 2 to David Steinepreis, Hugh Warner, Gary Steinepreis and Ascent Capital or their nominees.

The following information is provided to satisfy the requirements of Section 219 of the Corporations Act:

$(a)$ the proposed financial benefit to be given to the related party (or nominee) is the maximum number of Shares and Options set out in Table 1 in section 2.1.2 and proposed to be allotted to that proposed entity or nominee;
the Shares proposed to be issued pursuant to Resolution 2 are being issued to the $(b)$ related parties with the various issue prices at set out in Table 1 of Section 2.1.2. The Options are being issued to the related parties for no consideration. These

values are as proposed by Ascent Capital in its Recapitalisation Proposal and as incorporated into the Deed of Company Arrangement;

as the Company has been placed in administration and a Deed of Company $(c)$ Arrangement has now been signed, the existing Directors have no authority to act on behalf of the Company, except with prior approval of the Deed Administrator. Accordingly, the Directors make no recommendation to Shareholders in respect of Resolution 2:
$(d)$ if Shareholders approve the allotment and issue of the Shares and the grant of the Options to David Steinepreis, Hugh Warner, Gary Steinepreis and Ascent Capital and all or any of the Options are exercised, the effect will be to dilute the shareholding of existing Shareholders. The market price for Shares during the term of the Options would normally determine whether or not those parties exercise the Options. If at the time any of the Options are exercised, the Shares are trading on ASX at a price which is higher than the exercise price of the Options, there may be a perceived cost to the Company. Subject to any adjustments arising from further issues of securities by the Company, 30,000,000 Shares (post consolidation) will be allotted and issued upon exercise of the Options issued to these related parties with the effect that the shareholding of existing Shareholders will be diluted by approximately 9.11% (based on 297,700,902 Shares on issue and assuming no other Options are exercised and assuming all Resolutions contained in this Notice are implemented and the consolidation pursuant to Resolution 1 is effected);
a valuation of the Options proposed to be issued is set out below; and $(e)$
additional information in relation to Resolution 2 is set out throughout this $(f)$ Explanatory Statement. In particular, an Independent Expert's Report, attached to this Memorandum, has been provided in relation to Resolution 2 which sets out a valuation of the Company and concludes that the proposed transaction is fair and reasonable to non-associated Shareholders. Shareholders should therefore read this Explanatory Statement in its entirety before making a decision as to how to vote in relation to Resolution 2.

For the purposes of the related party provisions, the following additional information is disclosed:

The remuneration paid to the related parties over the last 12 months from the $(a)$ date of issue of this Notice is as follows:

Ascent Capital	SNii
David Steinepreis	\$Nii
Hugh Warner	\$Nii
Gary Steinepreis	\$Nii

There is currently no remuneration being paid to the related parties of the Company.

$(b)$ The Company's Shares have been suspended from trading on ASX since 15 January 2004 accordingly, no information can provided as to recent price history.
The Directors interest in Shares and Options in the Company is as disclosed in $(c)$ Table 1 of Section 2.1.2

Valuation of Options $2.1.4$

The Options issued pursuant to the Resolutions in this Notice have been valued using the

Black & Scholes pricing model. The assumptions that have been used to value the Options are as follows:

$(a)$ the last expiry date of the Options is 31 December 2007;
$(b)$ all of the Options are exercisable at 1 cent (post consolidation);
the market price of a Share is 1 cent (post consolidation); $(c)$
a common volatility factor of 25% and 50%; $(d)$
$(e)$ an interest rate of 5.715%;
the valuation ascribed to the Options may not necessarily represent the market $(f)$ price of the Options at the date of the valuation; and
the valuation date for the Options is the date of this Notice. $\left( g \right)$

The above parameters result in a range of values for an option expiring on 31 December 2007 of:

25% volatility 0.27 cents

50% volatility 0.42 cents

The above values assumes that the market price of a Share will be 1 cent (being the issue price of the Shares to investors). The actual market value will not be known until the Shares are requoted on the ASX.

$2.1.5$ Section 611 of the Corporations Act

General

Pursuant to Section 606(1) of the Corporations Act, a person must not acquire a relevant interest in issued voting shares in a listed company if the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person and because of the transaction, that person's or someone else's voting power in the company increases:

$(a)$ from 20% or below to more than 20%; or
$(b)$ from a starting point above 20% and below 90%.

The voting power of a person in a body corporate is determined in accordance with Section 610 of the Corporations Act. The calculation of a person's voting power in a company involves determining the voting shares in the company in which the person and the person's associates have a relevant interest.

If the person is a body corporate, the "associate" reference includes a reference to a Director or secretary, a related body corporate or a Director or secretary of a related body corporate.

The "associate" reference includes a reference to a person in concert with whom a primary person is acting or proposes to act.

A person has a relevant interest in securities if they:

are the holder of the securities: $(a)$

$(b)$ have the power to exercise, or control the exercise of, a right to vote attached to securities: or
have power to dispose of, or control the exercise of a power to dispose of, the $(c)$ securities.

It does not matter how remote the relevant interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

Pursuant to Resolution 2, in accordance with the Recapitalisation Proposal, it is proposed that the Company approve the issue and allotment up to 126,000,000 Shares and up to 30,000,000 Options to David Steinepreis, Hugh Warner and Gary Steinepreis (or entities controlled by them) and Ascent Capital. The maximum number of Shares and Options to be subscribed for or acquired by each of these parties is set out in Table 1 of Section 2.1.2.

Shareholders are also referred to the Independent Expert's Report prepared by Stanton Partners Corporate Pty Ltd and attached to this Memorandum.

Ascent Capital

Ascent Capital is a company owned as to 33.3% each by entities controlled by David Steinepreis, Hugh Warner and Gary Steinepreis and each of these parties are Directors of Ascent Capital.

The voting power of Ascent Capital therefore includes Ascent Capital's voting power and the voting power of each of its associates (David Steinepreis, Hugh Warner and Gary Steinepreis).

The voting power of each of David Steinepreis, Hugh Warner and Gary Steinepreis comprises the votes attached to the Shares in which they will each have a direct relevant interest, and, as they each control over 20% of the voting power of Ascent Capital, they will each have a deemed relevant interest in the Shares in which Ascent Capital has a relevant interest.

Ascent Capital will also be nominating third parties who will subscribe for Shares pursuant to Resolution 2. These parties are likely to be persons that are personally known to the Directors of Ascent Capital however neither Ascent Capital nor its Directors will have any power to control or control the manner in which these persons will vote or dispose of those Shares when issued.

Reasons for Approval

Shareholder approval under item 7 of section 611 of the Corporations Act is required because after settlement under the Deed of Company Arrangement and the Recapitalisation Proposal, Ascent Capital and its associates will each have a voting power that will exceed 20% of the issued capital of the Company. Those persons may also hold Options which, if exercised, will increase their voting power in the Company.

Information is required to be provided to Shareholders under ASIC Policy Statement 74 and the Corporations Act. Shareholders are also referred to the Independent Expert's Report prepared by Stanton Partners Corporate Pty Ltd and attached to this Memorandum.

For the purposes of the Corporations Act and the approval under item 7 of section 611 for Ascent Capital and its associates, the following information is disclosed:

Identity of persons who will hold a relevant interest in the Shares to be allotted and issued.

The persons who will hold a relevant interest in issued Shares and who may be issued

Shares under the capital raisings pursuant to Resolution 2 are Ascent Capital and each of the directors of Ascent Capital.

The identities of the directors of Ascent Capital and details of Ascent Capital in its own right are set out in section 1.1.5 and section 1.2.1 of this Explanatory Statement. That section sets out detailed information in respect of each of those persons.

Shares to which the allottee will have voting power immediately before and after the allotment.

As at the date of this Notice, each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis do not own any Shares in the Company as shown in Column 1 of Table 3 below.

The maximum number of Shares (post consolidation) that each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis will have a relevant interest in (assuming none of their Options are exercised) is 126,000,000 and assuming all of their Options are exercised is 156,000,000 is set out in the table below (Table 4).

Table 3

	Column I: No. of Shares currently held both directly & indirectly (post consolidation)	Column 2: Maximum No. of Shares to be issued pursuant to Resolution 2	Total of existing shareholdings and maximum no. of Shares to be issued	Maximum No. of I Cent Options to be issued
David Steinepreis	$\blacksquare$	37,800,000	37,800,000	5,000,000
Hugh Warner		37,800,000	37,800,000	5,000,000
Gary Steinepreis	$\blacksquare$	37,800,000	37,800,000	5,000,000
Ascent Capital	$\mathbf{a}$	12,600,000	12,600,000	15,000,000
Total		126,000,000	126,000,000	30,000,000

The maximum number of Shares and Options that may be held by each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis and third parties is set out in the table below (Table 4).

Table 4

	Shares	Options	Fully Diluted Total
	(Undiluted position)
David Steinepreis	37,800,000	5,000,000	42.800,000
Hugh Warner	37,800,000	5,000,000	42,800,000
Gary Steinepreis	37,800,000	5,000,000	42,800,000
Ascent Capital	12,600,000	15,000,000	27,600,000
Total	126,000,000	30,000,000	156,000,000
Third Parties	144,000,000		144.000.000
Existing Shareholders	27,700,902		27,700.902
Existing Optionholders		1,755,624	1.755.624
Totals	297,700,902	31,755,624	329.456.526

Also set out above are the matters required to be disclosed in accordance with Item 7 of Section 611 of the Corporations Act. This information is disclosed on the assumption that:

settlement under the Deed of Company Arrangement has occurred; $(a)$
$(b)$ all Resolutions set out in the Notice are duly passed; and
the capital raisings pursuant to Resolution 2 are fully subscribed. $(c)$

The maximum extent of the increase in the relevant allottees' voting power in the Company that would result from the Shares to be issued:

Each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis will increase their voting power as follows:

Table 5

Scenario	Maximum extent of the increase in voting power
None of the Existing Options or 1 Cent Options are exercised.	From 0% to 42.3%
Each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis exercise the I Cent Options to be granted pursuant to l Resolution 2.	From 0% to 47.6%
All Existing Options and 1 Cent Options are exercised.	From $0\%$ to $47.3\%$

The voting power that the relevant allottees would have as a result of the Shares to be issued:

Each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis will have the following voting power:

Table 6

Scenario	Voting power
None of the Existing Options or 1 Cent Options are exercised.	42.3%
Each of Ascent Capital, David Steinepreis, Hugh Warner and Gary Steinepreis exercise the I Cent Options to be granted pursuant to Resolution 2.	47.6%
All Existing Options and I Cent Options are exercised.	47.3%

The maximum extent of the increase in the voting power of each of the allottees' associates that would result from the Shares to be issued:

Each of David Steinepreis, Hugh Warner, Gary Steinepreis and Ascent Capital are associates of each other. Therefore the maximum extent of the increase in the voting power of each of the allottees' associates is as set out in Table 5 above.

The voting power that each of the allottees' associates would have as a result of the Shares to be issued:

The voting power of each of the allottees' associates is as set out in Table 6 above.

Other Required Information

The following further information is disclosed:

It is the intention of the Company to initially focus on the development of its $(a)$ weight loss business at the flagship Subiaco Store with the aim of being able to demonstrate the effectiveness of this business model prior to seeking an expansion of the business and accordingly, since posting this Notice to Shareholders, the Company has reopened the flagship Subiaco Store. Further information regarding the future intentions of the Company is set out in Section 1.1.3;

$(b)$ the Company will be required to raise sufficient capital to fund existing and future operations. To this end, the Company is seeking Shareholder approval to proceed with a placement. Shareholders should refer to Resolution 2 for further details regarding this capital raising;
$(c)$ there are currently no employees of the Company nor are there any proposals whereby any property will be transferred between the Company and the allottees, vendor or purchaser or any person associated with any of them and, other than the proposed disposal of some of the Company's existing assets as required under the Deed of Company Arrangement and the Future Health Joint Venture, there is no current intention to redeploy any other fixed assets of the Company;
$(d)$ there is no intention to change the Company's existing policies in relation to financial matters or dividends. At present, the Company does not pay a dividend. The dividend policy of the Company will be assessed in accordance with the future profitability of the Company's business; and
Shareholders must also note that collectively, David Steinepreis, Hugh Warner $(e)$ and Gary Steinepreis and Ascent Capital, may be granted up to 30,000,000 I Cent Options. If all these 1 Cent Options were exercised, the voting power of each of these parties would be increased based on the number of I Cent Options exercised. Shareholders are therefore also approving the increase in the voting power of each of these parties arising as a result of the exercise of those 1 Cent Options.

$2.1.6$ Terms and conditions of I cent Options

The material terms and conditions of the Options are as follows:

each option entitles the holder, when exercised, to one (1) Share; $(a)$
$(b)$ the options are exercisable at any time on or before 31 December 2007;
$(c)$ the exercise price of the options is 1 cent each (on a post-consolidation basis);
$(d)$ subject to the Corporations Act, the Constitution and the ASX Listing Rules, the options are fully transferable;
the options are exercisable by delivering to the registered office of the Company $(e)$ a notice in writing stating the intention of the option holder to exercise a specified number of options, accompanied by an option certificate, if applicable, and a cheque made payable to the Company for the subscription monies due, subject to the funds being duly cleared funds. The exercise of only a portion of the options held does not affect the holder's right to exercise the balance of any options remaining;
$(f)$ all shares issued upon exercise of the options will rank pari pasu in all respects with the Company 's then issued shares. The options will be unlisted however the Company reserves the right to apply for quotation at a later date;
there are no participating rights or entitlements inherent in the options and $\left( g\right)$ holders will not be entitled to participate in new issues of options to Shareholders during the currency of the options. However, the Company will ensure that, for the purpose of determining entitlements to any issue, option holders will be notified of the proposed issue at least seven (7) business days before the record date of any proposed issue. This will give option holders the opportunity to exercise the options prior to the date for determining entitlements to participate in any such issue;
$(h)$ in the event of any reconstruction (including consolidation, subdivision, reduction or return of capital) of the issued capital of the Company prior to the expiry date of the options, all rights of the option holder will be varied in accordance with the ASX Listing Rules; and
in the event the Company makes a pro rata issue of securities, the exercise price $\left( i\right)$ of the options will change in accordance with the formula set out in ASX Listing Rule 6.22.2.

$2.1.7$ Directors Recommendations

As the Company is under external administration, the existing Directors of the Company do not make any recommendation in respect of the Recapitalisation Proposal. Shareholders should read this Memorandum in full, including the letter from the Chairman and the Independent Expert's Report referred to below to form an opinion on the merits of the proposal.

$2.1.8$ Independent Expert's Report

The Independent Expert's Report, attached to this Memorandum and prepared by Stanton Partners Corporate Pty Ltd sets out a detailed examination of the issue of Shares and Options to Ascent Capital and its associates pursuant to Resolution 2 to enable Shareholders to assess the merits and decide whether to approve Resolution 2.

To the extent that it is appropriate, the Independent Expert's Report sets out further information with respect to this proposed transaction and concludes that Resolution 2 is fair and reasonable to the non associated Shareholders of the Company.

Shareholders are urged to carefully read the Independent Expert's Report to understand the scope of the report, the methodology of the valuation and the sources of information and assumptions made.

$2.1.9$ Proforma Statement of Financial Position

Set out below is a statement of financial position of the Company as at 30 April 2004, together with the proforma statement of financial position on the basis of the assumptions set out below.

METABOLISM HEALTH LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT (DOCA))

Statement of Financial Position as at 30 April 2004

	Notes	31 December 2003 Unaudited	Proforma after capital raising (no over subscriptions) and completion of DOCA	Proforma after capital raising (with over subscriptions) and completion of DOCA \$
CURRENT ASSETS
Cash assets		9.682	1,090,000	1,490,000
Prepayments		10.424
GST receivables		17.610
TOTAL CURRENT ASSETS		37,716	1,090,000	1,490,000
NON-CURRENT ASSETS
Plant & equipment	3	6,509	185,000	185,000
Investment - TMC	4	800,000
Loan - TMC	4	4.440.553
TOTAL NON-CURRENT
ASSETS		5,247,862	185,000	185,000
TOTAL ASSETS		5,285,578	1,275,000	1,675,000
CURRENT LIABILITIES
Trade creditors		135.011	75.000	75,000
Sundry creditors		72.678
PAYG payable		12,758
TOTAL CURRENT LIABILITIES		220,447	75,000	75,000
TOTAL LIABILITIES		220,447	75.000	75,000
NET ASSETS		5,065,131	1,200,000	1,600,000
EQUITY
Contributed equity	2	4,302,847	5,902,847	6,302,847
Option issue reserve		1,274,293	1,274,293	1,274,293
Accumulated losses		(512,009)	(5,977,140)	(5,977,140)
TOTAL EQUITY		5,065,131	.200.000	1,600,000

Note

$\mathbb{L}$ The movement in the cash assets is reconciled as follows:

Cash assets:	s
Opening balance
Placement of Shares at 0.25 cents	125.000	125,000
Placement of Shares at 0.50 cents	325,000	325,000
Placement of Shares at 1 cent - Public Issue	1.150.000	1.150.000
Placement of Shares at 1 cent – Over-subscriptions		400,000
Payment to satisfy obligations under DOCA	(510,000)	(510,000)
Closing balance	.090.000	490.000

$2.$ The movement in the contributed equity is reconciled as follows:

Contributed equity:	Ŧ
Opening balance	4.302.847	4.302.847
Placement of Shares at 0.25 cents	125.000	125.000
Placement of Shares at 0.50 cents	325,000	325,000
Placement of Shares at 1 cent - Public Issue	1.150.000	1.150.000
Placement of Shares at 1 cent – Over-subscriptions		400.000
Closing balance	5.902.847	6.302.847

$\overline{3}$ . Pursuant to the terms of the Deed of Company Arrangement, the Company has entered into a conditional sale agreement with the Liquidator of TMC, evidencing the sale of the TMC Assets to the Company in consideration for \$185,000.
1. TMC is currently in liquidation and the estimated realisable value of this investment and loan is \$nil.

$2.2$ Resolutions 3, 4 and 5 - Re-election of Directors

The Recapitalisation Proposal provides for the appointment of Ascent Capital's nominees to the Board of the Company. Ascent Capital has nominated David Steinepreis, Hugh Warner and Gary Steinepreis as Directors to the Board.

David Steinepreis, Hugh Warner and Gary Steinepreis are current Directors, as they were appointed since the date of the last Shareholders meeting, and their re-election is requirement of the Recapitalisation Proposal.

Set out earlier in this Explanatory Statement is a summary of the backgrounds of each of these persons.

$2.3$ Resolution 6 - Section 195 Approval

Section 195 of the Corporations Act essentially provides that a director of a public company may not vote or be present during meetings of directors when matters in which that director holds a "material personal interest' are being considered.

Approval of Resolution 2 may result in the Directors appointed by this General Meeting having a "material personal interest" in the Recapitalisation Proposal, completion of the Deed of Company Arrangement and other matters referred to in this notice. In the absence of this Resolution 6, the Directors may not be able to form a quorum at any meetings necessary to carry out the transactions contemplated by this Notice which may mean that the Deed of Company Arrangement cannot be completed and as a consequence the Company being placed into liquidation.

The Directors have accordingly exercised their right under section 195(4) of the Corporations Act to put the issue to Shareholders to resolve upon.

$2.4$ Resolution 7 - Change of name

Resolution 7 is a special resolution to change the name of the Company to M Health Limited.

ENQUIRIES 3.

Shareholders are invited to contact Hugh Warner, Ascent Capital, on (08) 9420 9300 if they have any queries in respect of the matters set out in these documents.

GLOSSARY

Act means the Corporations Act 2001 (Cth)

Administrator means Brian McMaster of Ernst & Young.

Ascent Capital means Ascent Capital Pty Ltd (ABN 19 065 055 816).

ASIC means Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited.

ASX Listing Rules or Listing Rules means the Listing Rules of ASX.

Board means the board of Directors of the Company.

Company and Metabolism Health means Metabolism Health Limited (subject to deed of company arrangement) (ABN 25 009 121 644).

Constitution means the Company's constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Deed Administrator means Brian McMaster of Ernst & Young.

Deed of Company Arrangement means the Deed of Company Arrangement entered into by the Company, the Administrator and Ascent Capital and executed on 4 April 2004 following the approval of creditors of the Recapitalisation Proposal on 1 April 2004.

Directors means the Directors of the Company.

Explanatory Statement means the explanatory statement to the Notice.

Existing Option means those options to acquire a Share in the capital of the Company at varying exercise prices and for varying terms previously issued by the Company.

Independent Expert's Report means the independent expert's report prepared by Stanton Partners Corporate Pty Ltd which is annexed to this Notice.

Meeting means the meeting of Shareholders convened by this Notice.

Notice means this notice of meeting accompanying this Explanatory Statement.

Option or I cent Option means an unlisted option to acquire one Share in the capital of the Company at an exercise price of I cent each on or before 31 December 2007.

Recapitalisation Proposal means the Recapitalisation Proposal, proposed by Ascent Capital Pty Ltd and approved by creditors on 1 April 2004 which is summarised at section 1.2 of this Memorandum.

Shares means fully paid ordinary Shares in the capital of the Company.

Shareholder(s) means a holder of Shares.

Trustee means Brian McMaster.

TMC means The Metabolism Centre Pty Ltd (ACN 097 913 463) (Liquidator Appointed)

TMC Assets means all intellectual property owned by TMC, all plant and equipment located in the Subiaco Store and all goodwill associated with the business carried out by TMC.

STANTON PARTNERS CORPORATE PTY LTD

A.C.N 063 036 331 1 HAVELOCK STREET WEST PERTH 6005 WESTERN AUSTRALIA

TELEPHONE: (08) 9481 3188 FACSIMILE: (08) 9321 1204

e-mail: [email protected]

10 May 2004

Metabolism Health Limited (Subject to Deed of Company Arrangement) C/- Ascent Capital Pty Ltd Level 1, 33 Ord Street WEST PERTH WA 6005

Dear Sirs

RE: METABOLISM HEALTH LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 009 121 644) MEETING OF SHAREHOLDERS PURSUANT TO SECTION 611 (ITEM 7) OF THE CORPORATIONS ACT AND LISTING RULE 10.11 RELATING TO THE PROPOSAL TO ISSUE UP TO 270,000,000 POST CONSOLIDATED ORDINARY SHARES TO ASCENT CAPITAL PTY LTD ("ASCENT") AND THE ASCENT GROUP OR THIRD PARTIES NOMINATED BY ASCENT AND THE ISSUE OF UP TO 30,000,000 OPTIONS TO ASCENT CAPITAL AND THE ASCENT GROUP OR THIRD PARTIES NOMINATED BY ASCENT

$\mathbf{1}$ . Introduction

$1.1$ We have been requested by the directors of Ascent Capital Pty Ltd ("Ascent") to prepare an independent expert's report to determine the fairness and reasonableness of the transactions referred to in Resolution 2 as detailed in the Notice of Meeting ("the Notice") to Metabolism Health Limited ("MHL" or "Company") shareholders.

Resolution $2(a)$ relates to the proposal for the Company to allot and issue up to $50,000,000$ fully paid ordinary shares in the capital of the Company at an issue price of 0.25 cents per ordinary share (on a post consolidated basis) to Ascent or the Ascent Group or third parties nominated by Ascent to raise \$125,000. Resolution 2(b) relates to the proposal for the Company to allot and issue up to $65,000,000$ fully paid ordinary shares in the capital of the Company at an issue price of 0.50 cents per ordinary share (on a post consolidated basis) to Ascent or the Ascent Group or third parties nominated by Ascent to raise $$325,000$ . Resolution 2(c) relates to the proposal to allot and issue up to 115,000,000 fully paid ordinary shares in the Company at an issue price of not less than 1 cent per ordinary share (on a post consolidated basis) to Ascent or the Ascent Group or third parties nominated by Ascent to raise \$1,150,000. Resolution 2(d) relates to the proposal to issue up to 40,000,000 fully paid shares in the Company (on a post consolidated basis) to Ascent or the Ascent Group or third parties nominated by Ascent to raise \$400,000 via an over-subscription agreement.

Resolution $2(e)$ relates to the proposal to grant up to $30,000,000$ options each to acquire one fully paid ordinary share in the capital of the Company at an exercise price of 1 cent each (on a post-consolidated basis to Ascent, the Ascent Group or third parties nominated by Ascent). Resolution 2(f) relates to the proposal to allow the parties that are to receive the options pursuant to resolution $2(e)$ to exercise the options and take up shares in the Company.

Further details are noted below and in the Explanatory Statement to Shareholders of MHL.

$1.2$ MHL in the last quarter of 2003 acquired 100% of The Metabolism Centre Pty Ltd ("TMC") a company that operated a weight loss business which included a model for identifying the presence of metabolism dysfunction and other causes of weight gain. Unfortunately, operating losses were sustained and the continuation of trading was dependant on the ability of the Company to restructure its business (the TMC business) and to attract capital to fund activities in the future. Ultimately, the funds were not available to the Company.
$1.3$ On 19 January 2004, Mr Brian McMaster of Ernst & Young was appointed Administrator of the Company by the directors of MHL pursuant to Section 436A of the Corporations Act ("TCA").

At a meeting of creditors held on 1 April 2004, the Administrator proposed to the creditors of the Company that it was in the best interest of creditors to enter into a Deed of Company Arrangement ("DOCA"). At this meeting, creditors voted in favour of the Company entering into a DOCA with Ascent so that Ascent may recapitalise the Company.

$1.4$ The DOCA was signed on 4 April 2004 following the approval of creditors of the recapitalisation proposal on 1 April 2004.

The proposal from Ascent requires members in General Meeting to vote on and pass the following resolutions all of which are interdependent, other than the resolution referred to below at (i):

$(a)$ the consolidation of the capital of the Company on the basis that every 2 shares be consolidated into 1 share (and the number of options on issue consolidated in the same manner as the ordinary shares and that the exercise price of the options be amended in inverse proportion to that ratio);
$(b)$ the issue and allotment of up to $50,000,000$ shares at an issue price of 0.25 cents per share following the consolidation of capital, to raise up to \$125,000 for working capital. The determination of the allottees is at the sole discretion of Ascent;
$(c)$ the issue and allotment of up to $65,000,000$ shares at an issue price of 0.50 cents per share following the consolidation of capital to raise up to \$325,000 for working capital. The determination of the allottees is at the sole discretion of Ascent:
$(d)$ the issue and allotment of up to $115,000,000$ shares at an issue price of 1 cent per share following the consolidation of capital to raise up to $$1,150,000$ for working capital. The determination of the allottees is at the sole discretion of Ascent;

$(e)$ the issue and allotment of up to $40,000,000$ shares at an issue price of 1 cent per share following the consolidation of capital to issue a further \$400,000 pursuant to an over-subscription facility. The determination of the allottees is at the sole discretion of Ascent
$(f)$ the issue of 30,000,000 share options, exercisable at 1 cent each following the consolidation of capital. The determination of the allottees is at the sole discretion of Ascent:
$(g)$ the re-appointment of the nominees of Ascent (Messrs D Steinepreis, G Steinepreis and H Warner) as Directors of the Company;
$(h)$ shareholders approve and authorise the Directors to complete the transactions as contemplated in the Notice and Explanatory Statement to Shareholders;
$(i)$ change of the name of the Company to M Health Limited.

Pursuant to the DOCA, upon "Completion" (as defined), Ascent will loan \$510,000 to the Company, the proceeds of which will be to:

pay \$325,000 into a Creditors Trust Deed; and
$\blacksquare$ pay \$185,000 to TMC (In Liquidation) as consideration for the TMC assets (refer below).

The Creditors Trust Deed is set up to meet the costs of the Administration and after such costs are paid, make a distribution to the unsecured creditors of MHL. It is expected that the unsecured creditors will receive \$1 in the dollar or close to that figure.

MHL proposes to acquire from TMC certain assets ("TMC Assets"). These are:

Logo of the Metabolism Centre
Patents, Design and Domain Name $\blacksquare$
All plant and equipment located at the Subiaco store
All other intellectual property including TMC's client list. $\blacksquare$

The \$510,000 will be reimbursed to Ascent upon the completion of the capital raisings pursuant to Resolution 2.

Ascent has negotiated on behalf of MHL a new lease on the Subiaco store to 30 June 2004 at a cost of \$21,000 with an option for a further six months at a cost of \$17,000. Ascent has paid the initial \$21,000 and will seek reimbursement of the rent paid (and possibly the second rent payment if made by Ascent) out of the proceeds of the funds raised.

It is proposed that the Subiaco store of the previous Metabolism Centre business will begin trading prior to the Shareholders Meeting via the Future Health Joint Venture ("FHJV"). The FHJV will be a joint venture between MHL and Calchek Pty Ltd ("Calchek") or nominees. MHL will have a 50% interest and Calchek 50%. The FHJV will operate from 239 Hay Street, Subiaco WA. MHL will provide to the FHJV the following:

Initial funding of \$20,000 B
The premises, including the funding for the lease of the premises

All intellectual property owned by MHL which relates to the FHJV $\blacksquare$
The TMC Assets
The right to acquire up to five calorimeters from the liquidator of TMC provided that $\blacksquare$ Ascent has been successful in negotiating the option.

Calchek will provide appropriate qualified personnel and manage the financial operations of the FHJV and premises. MHL after year one will have the option to subscribe for a further \$100,000 in funding to retain its 50% interest or dilute to 10%. After year one, the joint venture parties will assess the commercial viability of the technology and make a decision as to whether to continue the FHJV or sell the FHJV assets.

Further details on the Company's history and plans are referred to elsewhere in this report and the Explanatory Statement to Shareholders.

$1.5$ For the purposes of Chapter 2E of the TCA, Messrs D Steinepreis, G Steinepreis and H Warner are all related parties of the Company by virtue of the fact that they are directors of MHL. Messrs D Steinepreis, G Steinepreis and H Warner are directors of and 33.33% shareholders in Ascent. For the purposes of this report all of the above named directors and Ascent are referred to as the Ascent Group.
$1.6$ Under the DOCA, arrangements have been made with all unsecured creditors for the settlement of their debts (as full and final settlement). Furthermore, upon successful completion of the DOCA, the Company would:
Be released from Deed of Company Arrangement; $\bullet$
Apply to have the suspension on the trading of the securities of the Company to be $\bullet$ lifted and be requoted on the ASX;
Have approximately \$957,000 cash funds after capital raising costs, the initial $\bullet$ commitment of \$20,000 to the FHJV and the reimbursement of up to \$38,000 on the Subiaco store (\$1,357,000 cash funds if oversubscriptions are accepted); and
Have a 50% interest in the FHJV.
$1.7$ There are six other resolutions (Resolutions 1 and 3 to 7) being put to the shareholders of MHL. We are not reporting on the fairness and reasonableness of such proposals. This report specifically addresses Resolution 2 only. However, we note the other Resolutions 1, 3, 4, 5 and 6 are all part of the recapitalisation process of MHL and need to be passed for the recapitalisation process pursuant to the Deed and Agreements to be consummated.
$1.8$ Under Section 606 of TCA, a person must not acquire a relevant interest in issued voting shares in a company if because of the transaction, that persons or someone else's voting power in the company increases:
$(a)$ from 20% or below to more than 20%; or
from a starting point that is above 20% and below 90%. (b)

Under Section 611 (Item 7) of TCA, Section 606 does not apply in relation to any acquisition of shares in a company by resolution passed at a general meeting at which no votes were cast in favour of the resolution by the acquirer or the disposer or their respective associates. An independent expert is required to report on fairness and reasonableness of the transaction pursuant to a Section 611 (Item 7) meeting.

1.9 Following the consummation of the Resolutions relating to the share structure of the Company, the following table depicts the new share structure of the Company:

	Existing Shareholdings (post consolidation) Existing Shareholders	Maximum No. of Shares to be issued pursuant to resolution $2(a)$	Maximum No. of Shares to be issued pursuant to Resolution 2(b)	Minimum No. of Shares to be issned pursuant to Resolution 2(c)	Maximum No. of 1 cent Options to be issued pursuant to Resolution 2(e)
David Steinepreis		6,900,000	9,150,000	21,750,000	5,000,000
Hugh Warner		6.900.000	9.150.000	21,750,000	5.000.000
Gary Steinepreis		6,900,000	9,150.000	21,750,000	5,000,000
Ascent		2.300,000	3,050,000	7,250,000	15,000,000
Ascent Group		23,000,000	30,500,000	72,500,000	30,000,000
Third Parties to be
Nominated by Ascent		27,000,000	34,500,000	42,500,000
Total	27,700.902	50.000,000	65.000,000	115,000,000	30,000,000

Furthermore, if full oversubscriptions are accepted as allowed for under Resolution $2(d)$ , 40,000,000 shares would be issued to third parties nominated by Ascent.

The shareholding interests of the Ascent Group would be as follows:

	Ignoring oversubscriptions and ignoring Options %	Including Options Exercised and ignoring oversubscriptions %	Oversubscriptions accepted (Ignoring Options ) %
David Steinepreis	14.67	14.88	12.70
Hugh Warner	14.67	14.88	12.70
Gary Steinepreis	14.67	14.88	12.70
Ascent Capital	4.88	9.59	4.23
Ascent Group	48.89	54.23	42.33
Third Parties nominated by Ascent	40.36	36.14	48.37

The total number of shares on issue (post-consolidated) would be 257,700,902 and 287,700,902 if the 30,000,000 options referred to above are exercised. There would be 297,700,902 shares on issue if all 40,000,000 oversubscriptions are applied for and accepted (before the exercise of the 30,000,000 options).

It is assumed that the remaining options noted in Section 2 of the Explanatory Statement to Shareholders will not be exercised.

Therefore, an independent expert's report pursuant to the Section 611 (Item 7) of TCA is required to report on the fairness and reasonableness of the transactions pursuant to Resolution 2. Also, as Messrs G Steinepreis, H Warner and D Steinepreis of Ascent are deemed by ASX Listing Rules to be related parties, shareholder approval under Listing Rule 10.11 is required. Ascent has requested Stanton Partners Corporate Pty Ltd to prepare an independent expert's report to assist the shareholders of MHL in determining as to whether they vote for or against Resolution 2 as outlined in the Notice.

$1.10$ Apart from this introduction, the report considers the following:
Summary of opinion
Implications of the proposals ۰
Future directions of MHL
Basis of technical valuation of MHL
Premium for control
Fairness and reasonableness of the proposal
Conclusion as to fairness and reasonableness
Sources of information
Appendix A

$2.$ Summary of Opinion

$2.1$ In determining the fairness and reasonableness of the transactions pursuant to Resolution 2, we have had regard to the guidelines set out by the Australian Securities and Investments Commission ("ASIC") in its Policy Statements 75 and 74.

Policy Statement 75 states that an opinion as to whether an offer is fair and/or reasonable shall entail a comparison between the offer price and the value that may be attributed to the securities under offer (fairness) and an examination to determine whether there is justification for the offer price on objective grounds after reference to that value (reasonableness).

Policy Statement 74 states that, where an acquisition of shares by way of an allotment is to be approved by shareholders pursuant to Section 611 (Item 7) of TCA, it is desirable to commission a report by an independent expert stating whether or not the proposal is fair and reasonable, having regard to the interests of shareholders other than the proposed allottee (in this case, Ascent, the Ascent Group or third parties nominated by Ascent) and whether a premium for potential control is being paid by the allottee(s).

Accordingly, our report relating to Resolution 2 is concerned firstly with the fairness and reasonableness of the proposals with respect to the existing non associated shareholders of MHL, and secondly whether the price payable for a potential control includes a premium for control.

$2.2$ In our opinion:

The proposals as outlined in Resolution 2 that would allow Ascent and the Ascent Group or third parties nominated by Ascent to acquire up to 270,000,000 post consolidated shares and 30,000,000 share options in MHL and allow the options to be exercised on or before the expiry date are, on balance fair and reasonable to the non associated shareholders of MHL.

The opinions expressed above are to be read in conjunction with the more detailed analysis and comments made in this report.

3. Implications of the Proposal

$3.1$ Prior to the DOCA, the total number of shares on issue in MHL was 55,401,803. If all the resolutions are consummated, Ascent and the Ascent Group or third parties nominated by

Ascent will own 89.25% of the post consolidated capital of the Company (as depicted in paragraph 1.9) (or 90.70% if all oversubscriptions are accepted). As the third parties nominated by Ascent are only deemed under TCA to be related, the actual holding of the post-consolidated capital of the Company by the Ascent Group is 48.89% (or 42.33% if all oversubscriptions are accepted). If the 30,000,000 options proposed to be issued pursuant to Resolution 2(e) are exercised then Ascent and the Ascent Group or third parties nominated by Ascent will own 90.37% of the post-consolidated capital of the Company (54.23% by the Ascent Group).

It is estimated by the Ascent directors that the cost of the reconstruction process (legal fee, corporate fees, expert's report and capital raising fee) will be around \$75,000. The Administrators fees are payable out of the Creditors Trust Fund.

$3.2$ Following the consummation of all terms and conditions of the various Deeds and assuming all resolutions are consummated, the MHL unaudited pro-forma Statement of Financial Position is expected to disclose:

	Notes	Estimated financial position (realisable) values) as per the Report as to Affairs ("RATA") a former director of MHL S	Pro-forma after capital raising and completion of DOCA \$
Current Assets
Cash assets	$\mathbf{I}% =\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}{i}+\mathbf{I}^{T}\mathbf{e}_{i}+\mathbf{I$	9,681	1,015,000
Receivables
Total Current Assets		9,681	1,015,000
Non-Current Assets
Investment in TMC (was \$800,000)
Loans to TMC (over \$4.44 million
owed)		150,000
Plant & equipment		3,000	185,000
Total Non-Current Assets		153,000
Total Assets		162.861	1,200,000
Current Liabilities Owing under the FHJV			20,000
Owing to Ascent (rent to 31 December
2004)			38,000
Unsecured creditors		220,447
Administration costs (estimated at \$130,000)
Total Current Liabilities		220,447	58,000
Net Assets (Liabilities)		(57, 586)	1,142,000

Equity
Contributed equity	$\overline{c}$	4,302,847	5,827,847
Option issue reserve		1,274,293	1,274,293
Accumulated losses		(5,634,726)	(5,960,140)
Total Equity (deficiency)		(57, 586)	1,142,000

The Administrator in his report to the creditors of MHL estimated that on a liquidation basis, the return to creditors would be nil.

Note

1. The movement in the cash assets is reconciled as follows:
Cash assets:	\$
Opening balance
Placement of Shares at 0.25 cents	125,000
Placement of Shares at 0.50 cents	325,000
Placement of Shares at 1 cent - Public Issue	1,150,000
Payment to satisfy obligations under DOCA	(510,000)
Payment for costs of share issue	(75,000)
Closing balance	1,015,000

2. The movement in the contributed equity is reconciled as follows:
Contributed equity:	\$
Opening balance	4,302,847
Placement of Shares at 0.25 cents	125,000
Placement of Shares at 0.50 cents	325,000
Placement of Shares at 1 cent - Public Issue	1,150,000
Capital raising costs	(75,000)
Closing balance (257,700,902 shares)	5,827,847

The FHJV asset has not been independently valued for the purposes of the Statement of Financial Position and is not included above. As noted above, the Company has a commitment to contribute \$20,000 to the FHJV in its first year of operation and will need to reimburse up to \$38,000 to Ascent for rent on the Subiaco store to 31 December 2004.

In the event that oversubscriptions of \$400,000 are achieved, the net assets increase to \$1,542,000 and the issued capital would increase by \$400,000.

$3.3$ We are advised by the directors of Ascent that following the consolidation of share options on issue and the proposal to issue share options pursuant to Resolution $2(e)$ , the number of share options on issue will be as listed in section 2 of the Explanatory Statements to Shareholders. The options under Resolution $2(e)$ will be $30,000,000$ options exercisable at 1 cent each, on or before 31 December 2007.
$3.4$ It is proposed that the existing directors, David Steinepreis, Gary Steinepreis and Hugh Warner will be re-elected to the Board of MHL.

4. Future directions of MHL

$4.1$ We have been advised by a representative of Ascent and an existing director of MHL (Hugh Warner) that:
The short term intention is to complete the DOCA including the recapitalisation process;
At the time of preparation of this report they are not aware of any proposals currently contemplated whereby MHL will acquire any property or assets from Ascent, the Ascent Group or third parties nominated by Ascent or where MHL is to transfer any of its property or assets to Ascent, the Ascent Group or third parties nominated by Ascent;
The Board of Directors of MHL will be as noted in paragraph 3.4 above;
The Company proposes to change its name to M Health Limited;
No dividend policy has been set and is not proposed to be set until such time as the Company is profitable and has a positive cash flow;

As part of the recapitalisation process, the Company proposes to seek requotation of the Company's shares on the ASX; and
The proposal by Ascent is for the Company to exploit the FHJV of which the Company will have an initial 50% interest. Also, the Company intends to pursue new investments within Australia and overseas. This may involve opportunities in the health, fitness and lifestyle industries.

5. Basis of Technical Valuation of MHL

5.1 Allotment of Shares
$5.1.1$ In considering the proposals as outlined in Resolution 2 we have sought to determine if the potential considerations payable by Ascent, the Ascent Group or third parties nominated by Ascent is fair and reasonable to the existing non-associated shareholders of MHL.
$5.1.2$ The proposals pursuant to Resolution 2 would be fair to the existing non-associated shareholders if the value of the considerations being offered by Ascent, the Ascent Group or third parties nominated by Ascent are greater than the current implicit value of the shares of MHL immediately prior to the transactions. Accordingly, we have sought to determine a theoretical value that could reasonably be placed on MHL shares for the purposes of this report.
The valuation methodologies we have considered in determining the current technical 5.1.3 value of an MHL share are:
Capitalised maintainable earnings/discounted cash flow $\bullet$
Takeover bid the price which an alternative acquirer might be willing to offer $\bullet$
Adjusted net asset backing and windup value $\bullet$
The weighted market value price of MHL shares $\bullet$
5.2 Capitalised maintainable earnings/discounted cash flows
$5.2.1$ As noted above, MHL is under a DOCA and under the control of a Deed Administrator. Due to MHL's current state of affairs, the lack of a profit history arising from business undertakings and the immediate lack of a reliable future cash flow from a business activity, we have considered these methods of valuation not to be relevant for the purposes of this report (also refer 3.2 above).
5.3 Takeover bid

We have been advised by Ascent that they do not believe that there would be any existing shareholder or proposed shareholder that has an interest in taking over the Company by way of a formal takeover bid. However, we note that under the DOCA and recapitalisation process, Ascent, the Ascent Group or third parties nominated by Ascent would own 89.25% of the post-consolidated capital of the Company (or Ascent Group would own 48.89%). A review of the Administrators Report revealed that they looked at a number of recapitalisation proposals. The creditors of the Company considered three recapitalisation proposals and the majority voted for the Ascent proposal.

5.4 Net asset backing and windup value
5.4.1 As noted elsewhere in this report, prior to the DOCA and recapitalisation process, MHL is in a net liability position and the Deed Administrators of MHL estimate on a windup basis, there is a deficiency in funds and the creditors may receive minimal or nil return. Therefore, on a liquidation basis, the shareholders interests in MHL are worth nil (refer paragraph 3.2).
The unaudited statement of financial position of the Company at 31 December 2003 is $5.4.2$ depicted in paragraph 2.1.9 of the Explanatory Statement to Shareholders. Under the DOCA at settlement, all assets and liabilities as noted below of the Company will be transferred to the Deed Administrators.
cash at bank
debtors
any GST refunds
stock, inventory, plant, equipment and office furniture
shares and options in subsidiaries and other investments
any causes of action the Company currently has against a third party
all other assets of the company except the TMC Assets referred to in paragraph 1.4 of this report and in the Explanatory Statement to Shareholders.

The Company will set up the FHJV at an initial cost of \$20,000.

5.4.3 Purely based on the book value of a reconstructed MHL, the net assets would be disclosed at \$1,142,000 which would be equivalent to approximately 0.44 cents per post consolidated share, assuming 257,700,902 shares would be on issue after the recapitalisation process. The eash asset backing per share would be 0.37 cents after paying out \$20,000 to the FHJV and the reimbursement of up to \$38,000 to Ascent. This compares with the current value of an MHL share of nil cents.
$5.5$ Weighted average market price of MHL shares
$5.5.1$ As the Company is suspended from the Australian Stock Exchange Limited, we do not believe it is appropriate to value an MHL share based on prior quoted prices of MHL shares on the ASX.
5.6 After taking into account the matters referred to in the preceding paragraphs, we are of the view that the current theoretical value of an MHL share (prior to the recapitalisation process) is nil cents.
5.7 If the DOCA and the recapitalisation process are finalised, the book value of a MHL share immediately post construction and recapitalisation would approximate 0.44 cents per share. If the over-subscriptions of \$400,000 were obtained, the net asset backing per share would be 0.51 cents (0.45 cents per share net eash asset backing).

6. Premium for Control

6.1 Premium for control for the purposes of this report has been defined as the difference between the price per share that a buyer would be prepared to pay to obtain a controlling interest in the Company and the price per share at which the same person would be required to pay per share which does not carry with it control of the Company.

6.2 Under TCA, control may be deemed to occur when a shareholder or group of associated shareholders control more than 20% of the issued capital. In this case, Ascent and the Ascent Group or third parties nominated by Ascent would hold approximately 89.25% of the expanded post-consolidated issued capital of MHL (or Ascent and the Ascent Group would own 48.89%).
6.3 The MHL shares that are proposed to be issued to Ascent, the Ascent Group or third parties nominated by Ascent are deemed to be theoretically worth nil cents. Of the amount raised, \$325,000 will be used by the Deed Administrators to be made available to creditors, pursuant to the DOCA and \$185,000 payable to the Liquidator of TMC to acquire the TMC Assets (Ascent initially pays the \$510,000 and will be reimbursed out of the proceeds of the share issue). In our opinion, it is possible that Ascent, the Ascent Group or third parties nominated by Ascent are paying a premium for control, however, the non associated shareholders of MHL are benefiting in that the theoretical value of an MHL share rises from nil cents (with some liabilities) to a company with a theoretical cash backed value of approximately 0.37 cents per share and all liabilities extinguished (but an obligation to meet rental commitments pertaining to the Subiaco premises).

$7.$ Fairness and Reasonableness of the Proposals

We have set out below some of the advantages, disadvantages and other factors pertaining to the proposals, pursuant to Resolution 2 and the recapitalisation proposals generally.

Advantages

$7.1$ The passing and consummation of Resolution 2 in conjunction with the completion of the DOCA and recapitalisation process would result in an approximate net cash injection of $$957,000$ (and up to $$1,357,000$ if all over-subscriptions of $$400,000$ are accepted) (after the payment of the \$20,000 pertaining to the FHJV and reimbursing Ascent up to \$38,000) into the Company and having a company with no liabilities, compared with the current position whereby the Company is under a DOCA and is in a net liability position. The Company does have obligations to continue funding of the FHJV as noted in paragraph 1.4 of this report and meet lease commitments pertaining to Subiaco.
$7.2$ If the proposals per Resolution 2 are consummated along with the completion of the DOCA, the eash asset backing of an MHL post consolidated share rises from nil cents to approximately $0.37$ cents (0.45 cents per share if all \$400,000 in over-subscriptions are accepted).
7.3 If Resolution 2 is passed together with the completion of the DOCA and recapitalisation process, the Company's chances to seek re-quotation of its shares on the ASX are enhanced. By obtaining re-quotation of the Company's shares, the existing shareholders are offered liquidity to sell their shares (reduced on a 1 for 2 basis) on the ASX.
$7.4$ Ascent and the Ascent Group bring expertise to the Company in that Messrs D Steinepreis, G Steinepreis and H Warner have all had experience as directors or managers of public listed companies. They will also seek new business opportunities. Further details on such directors are outlined in the Explanatory Statement to Shareholders.

Disadvantages

$7.5$ A significant shareholding in the Company is being given to Ascent, the Ascent Group or third parties nominated by Ascent. However, we note that MHL will be recapitalised with approximately \$957,000 in cash, will have no debt (other than the lease obligations on the Subiaco premises) and will have the opportunity to exploit the 50% interest in the FHJV.
7.6 MHL would only have approximately \$957,000 after the consummation of the DOCA and the recapitalisation process is complete (plus the 50% interest in the FHJV). Further fundraisings may be required to be undertaken in the near future. If further shares are issued, the percentage share holding of the existing shareholders of MHL may be diluted However, as noted above, the current value of the existing down even further. shareholders interests in MHL's shares, are worth nil.
$7.7$ The FHJV may not be commercially successful and the Company may incur new losses. Conversely, the FHJV may be successfully exploited and may lead to an increase in the value of an MHL share which may be worth more than Ascent, the Ascent Group or third parties nominated by Ascent are to pay for the 230,000,000 shares (or 270,000,000 shares if over-subscriptions are accepted).

Other

7.8 The 30,000,000 options, if exercise would result in an inflow of funds to MHL of \$300,000. The exercise price of the $30,000,000$ options is 1 cent each. The trading price of an MHL share (after re-quotation of the Company's shares on the ASX that is dependant on the re-capitalisation process) at the date of exercise of the options would probably be in excess of 1 cent before the option holders (the Ascent Group) exercised the options.

8. Conclusion as to Fairness and Reasonableness

$8.1$ After taking into account the matters referred to in 7 above and elsewhere in this report, we are of the opinion that, on balance, the proposals as outlined in Resolution 2 are fair and reasonable to the non-associated shareholders of MHL.

$9_r$ Sources of Information

9.1 In making our assessment as to whether the proposals under Resolution 2 are fair and reasonable, we have reviewed relevant published available information and other unpublished information on MHL, which is relevant in the current circumstances. In addition, we have held discussions with one of the Directors of MHL (and a representative of Ascent) about the present state of affairs of MHL. Statements and opinions contained in this report are given in good faith, but in the preparation of this report, we have relied in part on information provided by the MHL directors and a representative of Ascent.
9.2 Information we have received includes, but is not limited to:
Draft April and May 2004 Notice of General Meeting of Shareholders of MHL (and $\bullet$ Draft Explanatory Statement To Shareholders attached);
Discussions with one of the directors of MHL and a representative of Ascent;
MHL's unaudited financial position as at 31 December 2003 and 19 January 2004;
The Administrator's Reports and Circulars to Creditors pursuant to Section 493A of the Corporations Act for MHL of 5 February 2004 and 24 March 2004;

The Prospectus of MHL (then called Mustang Group Limited) of September 2003; $\bullet$
MHL Annual Report for the year ended 30 June 2003; and $\bullet$
Proposed Deed between the Company, the Administrator and Ascent of 4 April $\bullet$ 2004.

Our report includes Appendix A attached to this report. 9.3

Yours faithfully STANTON PARTNERS CORPORATE PTY LTD

$\gamma_{c}$ , $\mathcal{G}_{\mathcal{L}}$

J P Van Dieren, FCA Director

AUTHOR INDEPENDENCE

This annexure forms part of and should be read in conjunction with the report of Stanton Partners Corporate Pty Ltd dated 10 May 2004, relating to Resolution 2 outlined in the Notice of Meeting of Shareholders of MHL.

At the date of this report, Stanton Partners Corporate Pty Ltd does not have any interest in the outcome of the proposals. Stanton Partners, an accounting practice affiliated with Stanton Partners Corporate Pty Ltd, were the auditors of MHL (then known as Mustang Group Limited) for the vear ended 30 June 2003, however ceased to be auditors on 6 October 2003. Stanton Partners Corporate Pty Ltd undertook the preparation of an investigating accountant's report ("IAR") in September 2003 for inclusion in a prospectus dated 26 September 2003 when MHL was in the process of raising funds as part of the acquisition of TMC that occurred in November 2003. MHL owes \$4,565.55 (inclusive of GST) to Stanton Partners and Stanton Partners Corporate Pty Ltd for work on the IAR and minor costs relating to resigning as auditors. There are no other relationships with MHL other than now acting as an independent expert for the purposes of this report. There are no existing relationships between Stanton Partners Corporate Pty Ltd and the parties participating in the transactions detailed in this report which would affect our ability to provide an independent opinion. The fee to be received for the preparation of this report is based on the time spent at normal professional rates plus out of pocket expenses and is estimated not to exceed \$6,000 (excluding GST). The fee is payable regardless of the outcome. With the exception of that fee, neither Stanton Partners Corporate Pty Ltd nor John P Van Dieren have received nor will or may they receive any pecuniary or other benefits, whether directly or indirectly for or in connection with the making of this report. Stanton Partners Corporate Pty Ltd has prepared ten independent expert reports of a similar nature where Ascent has been involved in the re-capitalisation of various companies in Administration.

Stanton Partners Corporate Pty Ltd, Stanton Partners or any partners of Stanton Partners do not hold any securities in MHL. There are no pecuniary or other interests of Stanton Partners Corporate Pty Ltd that could be reasonably argued as affecting its ability to give an unbiased and independent opinion in relation to the proposal. Stanton Partners Corporate Pty Ltd and Mr J Van Dieren have consented to the inclusion of this report in the form and context in which it is included as an annexure to the Notice.

QUALIFICATIONS

We advise Stanton Partners Corporate Pty Ltd is the holder of an Investment Advisers Licence under the Corporations Act 2001 relating to advice and reporting on mergers, takeovers and acquisitions. A number of the partners of Stanton Partners are directors of Stanton Partners Corporate Pty Ltd. Stanton Partners and Stanton Partners Corporate Pty Ltd have extensive experience in providing advice pertaining to mergers, acquisitions and strategic and financial planning for both listed and unlisted companies and businesses.

Mr John P Van Dieren, FCA, the person responsible for the preparation of this report, has extensive experience in the preparation of valuations for companies and in advising corporations on takeovers generally and in particular on the valuations and financial aspects thereof, including the fairness and reasonableness of the consideration offered.

The professionals employed in the research, analysis and evaluation leading to the formulation of opinions contained in this report, have qualifications and experience appropriate to the tasks they have performed.

DECLARATION

This report has been prepared at the request of Ascent in order to assist the shareholders of MHL to assess the merits of the proposals (Resolution 2) to which this report relates. This report has been prepared for the benefit of the MHL shareholders and those persons only who are entitled to receive a copy for the purposes of Section 611 (Item 7) of the Corporations Act and ASX Listing Rule 10.11 and does not provide a general expression of Stanton Partners Corporate Pty Ltd's opinion as to the longer term value of MHL, the assets of MHL or the FHJV. Stanton Partners Corporate Pty Ltd does not imply, and it should not be construed, that it has carried out any form of audit on the accounting or other records of MHL. Neither the whole, nor any part of this report, nor any reference thereto may be included in or with or attached to any document, circular, resolution, letter or statement, without the prior written consent of Stanton Partners Corporate Pty Ltd to the form and context in which it appears.

DISCLAIMER

This report has been prepared by Stanton Partners Corporate Pty Ltd with due care and diligence. However, except for those responsibilities which, by law cannot be excluded, no responsibility arising in any way whatsoever for errors or omission (including responsibility to any person for negligence) is assumed by Stanton Partners Corporate Pty Ltd, Stanton Partners, its partners, employees or consultants for the preparation of this report.

DECLARATION AND INDEMNITY

Recognising that Stanton Partners Corporate Pty Ltd may rely on information provided by MHL, Ascent and its officers (save whether it would not be reasonable to rely on the information having regard to Stanton Partners Corporate Pty Ltd experience and qualifications), Ascent has agreed:

a) to make no claim by it or its officers against Stanton Partners Corporate Pty Ltd to recover any loss or damage which MHL may suffer as a result of reasonable reliance by Stanton Partners Corporate Pty Ltd on the information provided by MHL and Ascent; and
(b) to indemnify Stanton Partners Corporate Pty Ltd against any claim arising (wholly or in part) from MHL and Ascent or any of its officers providing Stanton Partners Corporate Pty Ltd any false or misleading information or in the failure of MHL or Ascent or its officers in providing material information, except where the claim has arisen as a result of wilful misconduct or negligence by Stanton Partners Corporate Pty Ltd.

A draft of this report was presented to Ascent for a review of factual information contained in the report. Comments received relating to factual matters were taken into account, however the valuation methodologies and conclusions did not alter. Whilst the Deed Administrator has reviewed a draft of this report, neither the Deed Administrator, his professional advisers, Ernst $\&$ Young or its employees are responsible for comments in the report. The Deed Administrator does not accept any responsibility for any disclosures in or failure to include any disclosures in this report. The information contained in this report has not been independently verified by the Deed Administrator, his professional advisers, Ernst $\&$ Young or its employees who expressly disclaim responsibility for the accuracy or completeness of the information in this report.

PROXY FORM

APPOINTMENT OF PROXY

METABOLISM HEALTH LIMITED (subject to deed of company arrangement)

ABN 25 009 121 644

I/We

GENERAL MEETING

Name: Address:

being a Member of METABOLISM HEALTH LIMITED entitled to attend and vote at the Meeting, hereby

Appoint

Name of proxy

or failing the person so named or, if no person is ramed, the Chairman of the Meeting or the Chairman's nominee, to vote in accordance with the following directions or, if no directions have been given, as the proxy sees fit at the General Meeting to be held at The Celtic Club, 48 Ord Street, West Perth WA 6005 on Wednesday, 7 July 2004 at 11 am and at any adjournment thereof. If no directions are given, the Chairman will vote in favour of all of the resolutions.

Voting on Business of the General Meeting

		FOR	AGAINST	ABSTAIN
Resolution 1	Consolidation of Capital
Resolution 2	Allotment and Issue of Shares and Options
Resolution 3	Re-election of Mr David Steinepreis
Resolution 4	Re-election of Mr Gary Steinepreis
Resolution 5	Re-election of Mr Hugh Warner
Resolution 6	Section 195 Approval
Resolution 7	Change of Name
OR.

If the Chairman of the Meeting is to be your proxy and you have not directed your proxy how to vote on the Resolutions please place a mark in this box. By marking this box, you acknowledge that the Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of the Resolutions and that votes cast by him, other than as proxy holder, will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your votes on the Resolutions and your votes will not be counted in computing the required majority if a poll is called on these Resolutions. The Chairman will vote in favour of all of the resolutions if no directions are given.

If two proxies are being appointed, the proportion of voting rights this proxy represents is

Signed this By:	day of	2004
Individuals and joint holders		Companies (affix common seal if appropriate)
Signature		Director
Signature		Director/Company Secretary
Signature		Sole Director and Sole Company Secretary

METABOLISM HEALTH LIMITED ABN 25 009 121 644 Instructions for Completing 'Appointment of Proxy' Form

A member entitled to attend and vote at a Meeting is entitled to appoint not more than two proxies to attend $\mathbf{L}$ and vote on their behalf. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member's voting rights. If the Shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes.
$2.$ A duly appointed proxy need not be a member of the Company. In the case of joint holders, all must sign.
1. Corporate Shareholders should comply with the execution requirements set out on the Proxy Form or otherwise with the provisions of Section 127 of the Corporations Act. Section 127 of the Corporations Act provides that a company may execute a document without using its common seal if the document is signed by:
2 Directors of the company;
a Director and a company secretary of the company; or
for a proprietary company that has a sole Director who is also the sole company secretary that Director.

For the Company to rely on the assumptions set out in Section 129(5) and (6) of the Corporations Act, a document must appear to have been executed in accordance with Section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of Section 127(1) or (2) as applicable. In particular, a person who witnesses the affixing of a common seal and who is the sole Director and sole company secretary of the company must state that next to his or her signature.

1. Completion of a Proxy Form will not prevent individual Shareholders from attending the Meeting in person if they wish. Where a Shareholder completes and lodges a valid proxy form and attends the Meeting in person, then the proxy's authority to speak and vote for that Shareholder is suspended while the Shareholder is present at the Meeting.
1. Where a Proxy Form or form of appointment of corporate representative is lodged and is executed under power of attorney, the power of attorney or a certified copy must be lodged in like manner as this proxy.
Please complete and sign this Proxy Form as soon as possible and either: send the proxy by facsimile to 6. the Company on facsimile number (08) 9481 2690 (International: + 61 8 9481 2690); or deliver to the Level 1, 33 Ord Street, West Perth WA 6005 or PO Box 637, West Perth WA 6872; so that it is received not later than 11 am on Monday, 5 July 2004.

AI assistant

FIN RESOURCES LIMITED — Proxy Solicitation & Information Statement 2004

64920_rns_2004-06-07_85922448-2718-42a6-9cf3-255efb6c1554.pdf

METABOLISM HEALTH LIMITED ABN 25 009 121 644

NOTICE OF GENERAL MEETING AND EXPLANATORY STATEMENT

CONTENTS PAGE

PAGE

LETTER TO SHAREHOLDERS

TIME AND PLACE OF MEETING AND HOW TO VOTE

Venue

How to Vote

Voting in Person

Voting by Proxy

Your proxy form is enclosed.

METABOLISM HEALTH LIMITED ABN 25 009 121 644

NOTICE OF GENERAL MEETING

AGENDA

SPECIAL BUSINESS

Resolution I - Consolidation of Capital

Resolution 2 - Allotment and Issue of Shares and Options

Resolution 3 - Re-Election of Mr David Steinepreis

Resolution 4 - Re-Election of Mr Gary Steinepreis

Resolution 5 - Re-Election of Mr Hugh Warner

Resolution 6 - Section 195 Approval

Resolution 7 - Change of Name

DATED THIS 13th DAY OF MAY 2004 BY ORDER OF THE BOARD

GARY STEINEPREIS COMPANY SECRETARY

NOTES:

EXPLANATORY STATEMENT

L. GENERAL INFORMATION

$L_{\rm{L}}$ Overview

$1.1.1$ Background

$1.1.2$ Suspension of Trading of Company's Shares and Appointment of Administrator

$1.1.3$ Future of the Company

$1.1.4$ The Future Health Joint Venture and Summary of Calchek Pty Ltd

Summary of Calchek

$1.1.5$ Purpose of Capital Raisings

Use of Funds - Expenditure Budget (Assuming all resolutions are passed and Over-Subscriptions Accepted)

Use of Funds - Expenditure Budget (Assuming all resolutions are passed and no Over-Subscriptions Accepted)

Ascent Capital

Background

$1.2$ Summary of the terms of the Recapitalisation Proposal and Deed of Company Arrangement

$1.2.1$ Details of Recapitalisation Proposal

Ascent Capital

Mr David Steinepreis

Mr Hugh Warner

Mr Gary Steinepreis

Terms of the Recapitalisation Probosal

$1.2.2$ Details of Deed of Company Arrangement

$1.2.3$ Conclusion

$2.$ THE RESOLUTIONS

Resolution 1 - Consolidation of Capital

Resolution 2-Allotment and Issue of Shares $2.1$

$2.1.1$ Background

$2.1.2$ ASX Listing Rules

ASX Listing Rule 10.11

Table I

ASX Listing Rule 7.1

Table 2

$2.1.3$ Chapter 2E of the Corporations Act

Valuation of Options $2.1.4$

$2.1.5$ Section 611 of the Corporations Act

General

Ascent Capital

Reasons for Approval

Identity of persons who will hold a relevant interest in the Shares to be allotted and issued.

Shares to which the allottee will have voting power immediately before and after the allotment.

Table 3

Table 4

Table 5

Table 6

Other Required Information

$2.1.6$ Terms and conditions of I cent Options

$2.1.7$ Directors Recommendations

$2.1.8$ Independent Expert's Report

$2.1.9$ Proforma Statement of Financial Position

METABOLISM HEALTH LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT (DOCA))

Note

$2.2$ Resolutions 3, 4 and 5 - Re-election of Directors

$2.3$ Resolution 6 - Section 195 Approval

FIN RESOURCES LIMITED Proxy Solicitation & Information Statement 2004

$9_r$ Sources of Information