FSA GROUP LIMITED — Proxy Solicitation & Information Statement 2008

Feb 13, 2008

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FSA GROUP LIMITED ACN 093 855 791

NOTICE OF EXTRAORDINARY GENERAL MEETING

AND

EXPLANATORY MEMORANDUM

Date of Meeting: Friday 14 March 2008 Time of Meeting: 2.00pm (Sydney time) Place of Meeting: FSA Group Ltd Level 3, 70 Phillip Street Sydney NSW 2000

This Notice of Extraordinary General Meeting should be read in its entirety. If shareholders are in doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser prior to voting.

NOTICE OF EXTAORDINARY GENERAL MEETING

Notice is given that an Extraordinary General Meeting of shareholders of FSA GROUP LIMITED ACN 093 855 791 (" Company ") will be held at the offices of FSA Group Ltd, Level 3, 70 Phillip Street, Sydney, NSW 2000 on Friday, 14 March 2008 at 2.00pm (Sydney time).

AGENDA

ORDINARY BUSINESS

1. ISSUE OF OPTIONS

To consider and, if thought fit, pass the following Ordinary Resolution without modification:

“That in accordance with the provisions of Listing Rule 10.11 of the ASX Listing Rules and Chapter 2E of the Corporations Act 2001 (Cwlth) ( Corporations Act ) and for all other purposes, the Company be authorised to issue two-hundred and fifty thousand (250,000) options to subscribe for ordinary shares in the Company ( Shares ) exercisable at the higher of:

a) 60 cents ($0.60); or

• b) the closing price of Shares on the Australian Securities Exchange on the trading day immediately prior to the date of the Meeting ,

each on or before 31 January 2010 ( Options ) to Mr Stan Kalinko ( the Recipient ) being a Director of the Company or his nominee on the terms and conditions as contained in this Notice and attached Explanatory Memorandum.”

• A copy of this Notice and the Explanatory Memorandum which accompanies this Notice has been lodged with the Australian Securities & Investments Commission in accordance with Section 218 of the Corporations Act.

• The Company intends to issue the Options as soon as practicable following the Meeting and in any event no later than one (1) month from the date of the Meeting.

• A detailed summary of the proposed terms of the Options is contained within the Explanatory Memorandum.

VOTING EXCLUSION STATEMENT

The Company will disregard any votes cast on this Resolution by:

• The Recipient; and

• any associate of the Recipient.

However, the Company need not disregard a vote if:

• it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form to vote as the proxy decides.

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GENERAL BUSINESS

To consider any other business as may be lawfully put forward in accordance with the Constitution of the Company.

BY ORDER OF THE BOARD

Anthony Carius Joint Company Secretary 14 February 2008

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EXPLANATORY MEMORANDUM

1. INTRODUCTION

This Explanatory Memorandum is provided to shareholders of FSA GROUP LIMITED ABN 093 855 791 ( Company ) to explain the resolution to be put to Shareholders at the Extraordinary General Meeting to be held at FSA Group Ltd, Level 3, 70 Phillip Street, Sydney, NSW, 2000 on Friday 14 March 2008 commencing at 2.00pm (Sydney time).

The Directors recommend shareholders read the accompanying Notice of Meeting and this Explanatory Memorandum in full before making any decision in relation to the resolution.

Terms used in this Explanatory Memorandum are defined in Section 3.

The Notice of Meeting sets out the details of one ordinary resolution to be put to Shareholders comprising the following:

2. ISSUE OF OPTIONS – MR STAN KALINKO

Introduction

The Directors have resolved to refer to members for approval of the proposed grant of 250,000 options to Mr Stan Kalinko (or nominee) ( Recipient ) each exercisable at the higher of:

• a) 60 cents ($0.60); or

• b) the closing price of Shares on the Australian Securities Exchange on the trading day immediately prior to the date of the Meeting ,

each on or before 31 January 2010 ( Options ).

Share Price History

Tabled below is the historical market data of the Company’s shares for the last three (3) months.

FSA Group Limited Share Price for the 3 Months from 01.11.07 – 11.02.08

Share Price ($) Low	Share Price ($) High	Share Price ($) Last
.30 (22/01/08)	.735 (1/11/07, 2/11/07,6/11/07,7/11/2007)	.38 (11/02/08)

Approval for the issue of the Options is sought in accordance with the provisions of Listing Rule 10.11 of the ASX Listing Rules and Chapter 2E of the Corporations Act 2001 . As approval is being sought under Listing Rule 10.11, approval will not be required under Listing Rule 7.1.

In order for the Options to be granted to a director, the requirements of Chapter 2E of the Corporations Act need to be observed.

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Options Terms

A summary of the material terms of the Options is set out below:

• The securities to be issued to the Recipient are options to subscribe for ordinary shares in the capital of the Company;

• The Options are to be issued for no consideration.

• Shares issued on exercise of the Options will rank pari passu with all existing ordinary shares of the Company from the date of issue;

• The Options will vest on 28 June 2009 ( Vesting Date );

• The Options may be exercised wholly or in part by notice in writing to the Company received at any time on or after the Vesting Date but on or before 31 January 2010 together with a cheque for the exercise price of the Option multiplied by the number of Shares in respect of which Options are being exercised;

• The exercise price ( Exercise Price ) for the Options is the higher of:

  • 60 cents ($0.60); or

  • the closing price of Shares on the Australian Securities Exchange on the trading day immediately prior to the date of the Meeting;

• The Options shall be unlisted;

• Upon allotment of Shares pursuant to the exercise of Options, the Company shall use its best endeavours to have such Shares quoted and listed on the Official List of the ASX;

• The Options will not be transferable in whole or in part and may not be exercised by any other person (except, in the case of the Director Option holder’s death, by his or her legal personal representative).

• The number of Options that may be exercised at one time must be not less than 1,000.

• Option holders do not participate in dividends or in bonus issues unless the Options are exercised and the resultant Shares of the Company are issued prior to the record date to determine entitlements to the dividend.

• While the Recipients do not have any participating rights in new issues of securities in the Company during the term of any Options held, in the event of a bonus issue or pro-rata issue the Recipients shall be afforded a period of at least 10 business days before the record date to determine entitlements to the issue, to exercise the Options and it shall be a condition of the Options that any entitlements to bonus issues of securities are only available to Recipients in the event of a prior exercise of the Options.

• In the event of any reconstruction (including consolidation, subdivision, reduction or return) of the issued capital of the Company:

• (i) the number of Options, the Exercise Price of the Options, or both will be reconstructed (as appropriate) in a manner consistent with the ASX Listing Rules as applicable at the time of reconstruction, but with the intention that such reconstruction will not result in any benefits being conferred on the holders of the Options which are not conferred on Shareholders; and

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• (ii) subject to the provisions with respect to rounding of entitlements as sanctioned by a meeting of Shareholders approving a reconstruction of capital, in all other respects the terms for the exercise of the Options will remain unchanged.

• If there is a bonus issue to the holders of Shares in the Company, the number of Shares over which the Option is exercisable may be increased by the number of Shares which the Option holder would have received if the Option had been exercised before the record date for the bonus issue.

• The terms of the Options shall only be changed if holders (whose votes are not to be disregarded) of Shares in the Company approve of such a change. However, the terms of the Options shall not be changed to reduce the Exercise Price, increase the number of Options or change any period for exercise of the Options.

• If, during the life of any Option:

• (i) shares are offered pro rata for subscription by the Company to its Shareholders generally by way of rights issue; and

• (ii) where the Company is listed on ASX, the price at which each share is so offered is less than the market price in force on the day of public announcement of the rights issue,

then the subscription price applicable to each share then comprised in the Option may be reduced by the value of the theoretical rights entitlement per cum rights share and that theoretical rights entitlement per cum rights share shall be taken to have a value calculated by applying the formula:

• O[1] = O - E [P - (S + D)] N + 1

where

• O[1] = the new exercise price of the option

• O = the old exercise price of the option

• E = the number of underlying securities into which one option is exercisable

• P = the average market price per security (weighted by reference to volume) of the underlying securities during the five (5) trading days ending on the day before the ex right date or the ex entitlements date

• S = the subscription price for a security under the pro-rata issue

• D = the dividend due but not yet paid on existing underlying securities (except those to be issued under the pro-rata issue)

• N = the number of securities which rights of entitlements that must be held to receive a right to one new security

Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act 2001 (Cwlth) prohibits a public company from giving a financial benefit to a related party of a public company unless the benefit falls within one of various exceptions to the general prohibition. One of the exceptions includes where the company first obtains the approval of its shareholders in general meeting in circumstances where the requirements of Chapter 2E in relation to the convening of that meeting have been met.

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A “related party” for the purposes of the Corporations Act is defined widely and includes a director of the public company.

A “financial benefit” for the purposes of the Corporations Act has a very wide meaning. It includes the public company paying money or issuing securities to the related party. In determining whether or not a financial benefit is being given, it is necessary to look to the economic and commercial substance and effect of what the public company is doing (rather than just the legal form). Any consideration which is given for the financial benefit is to be disregarded, even if it is full or adequate.

This proposed resolution, if passed, will confer financial benefits to the Recipient and the Company seeks to obtain member approval in accordance with the requirements of Chapter 2E of the Corporations Act and for this reason and for all other purposes the following information is provided to shareholders.

(a) The related party to whom Resolution 1 would permit the financial benefit to be given

Mr Stan Kalinko (or his nominee), being a director of the Company.

(b) The nature of the financial benefit

The nature of the proposed financial benefit to be given is:

• the grant of 250,000 Options to the Recipient as referred to in Resolution 1;

• the Options shall be granted for no cash consideration; and

• the Options shall be exercisable into fully paid shares exercisable on or before 31 January 2010.

(c) Directors’ Recommendation

With respect to Resolution 1, each of the Directors of the Company (excluding Mr Kalinko) recommend that shareholders vote in favour of this resolution. The reasons for their recommendation include:

• (i) the grant of the Options as proposed to the Recipient will provide him with incentive for future services he will provide to the Company to further the progress of the Company.

• (ii) the options are not intended as a substitute for salary or wages or as a means for compensation for past services rendered; and

• (iii) in the Company’s circumstances as they existed as at the date of this Explanatory Memorandum, the Directors considered that the incentive provided a cost-effective and efficient incentive as opposed to alternative forms of incentives (eg cash bonuses, increased remuneration). However, it must be recognised that there will be an opportunity cost to the Company, being the price at which the Company could grant the Options to a third party.

As Mr Kalinko is interested in the outcome of Resolution 1, he accordingly makes no recommendation to shareholders in respect of this resolution.

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(d) Directors’ Interest and other remuneration

Mr Kalinko has a material personal interest in the outcome of Resolution 1, as it is proposed that Options be granted to him (or his nominee) as set out in Resolution 1.

Excluding the Options, Mr Kalinko (and entities associated with him) holds 10,000 ordinary shares and 250,000 options exercisable at $0.98 on or before 31 January 2010 to subscribe for ordinary shares in the Company. Other than the Options to be issued to Mr Kalinko pursuant to Resolution 1, Mr Kalinko shall receive director's remuneration of $45,000 per annum (excluding superannuation) from the Company for his services as a Non-Executive Director.

If all of the Options granted are exercised by Mr Kalinko, the following will be the effect on his holdings in the Company:

Director	Current Share Holding	% of Total Share Capital (115,437,513 shares on **issue1) **	Share Capital Upon Exercise	% of Total Share Capital (115,687,513 **shares on issue1) **
Mr Kalinko	10,000	0.01%	260,000	0.22%

Notes:

1Assuming that none of the following current options or Convertible Redeemable Preference Shares on issue are exercised or converted:

• a. 500,000 options exercisable at $0.25 on or before 31 January 2010;

• b. 640,000 options exercisable at $0.60 on or before 31 January 2010;

• c. 450,000 options exercisable at $0.655 on or before 31 January 2010;

• d. 250,000 options exercisable at $0.98 on or before 31 January 2010; and

• e. 16 Convertible Redeemable Preference Shares convertible into a maximum of 16,000,000 ordinary shares.

(e) Valuation

The Options are not currently quoted on the ASX and as such have no market value. The Options each grant the holder thereof a right of grant of one ordinary share in the Company upon exercise of the Option and payment of the exercise price of the Option described above. Accordingly, the Options may have a present value at the date of their grant.

The Options may acquire future value dependent upon the extent to which the shares exceed the exercise price of the Options during the term of the Options.

As a general proposition, options to subscribe for ordinary fully paid shares in a company have value. Various factors impact upon the value of options including things such as:

• (i) the period outstanding before the expiry date of the options;

• (ii) the exercise price of the options relative to the underlying price or value of the securities into which they may be converted;

• (iii) the proportion of the issued capital as expanded consequent upon exercise represented by the shares issued upon exercise (ie whether or not the shares that might be acquired upon exercise of the options represent a controlling or other significant interest);

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• (iv) the value of the shares into which the options may be converted; and

• (v) whether or not the options are listed (ie readily capable of being liquidated).

There are various formulae which can be applied to determining the theoretical value of options (including the formula known as the Black-Scholes Model option valuation formula).

The Company has estimated the value of the Options and has done so using the Black-Scholes Model, which is widely used and a recognised model for pricing options. The value of an option calculated by the Black-Scholes Model is a function of the relationship between a number of variables, being the share price, the exercise price, the time to expiry, the risk-free interest rate and the volatility of the Company’s underlying share price.

Inherent in the application of the Black-Scholes Model are a number of inputs, some of which must be assumed. The data relied upon in applying the Black-Scholes Model was:

• an estimated exercise price of the options being based on the estimated closing price of shares on the trading day immediately prior to the date of the Meeting, being $0.60.

• Exercise date being on or before 31 January 2010;

• A volatility measure of 69.507%;

• A risk-free interest rate of 6.63%; and

• A dividend yield of Nil (n/a).

(assumed data)

Some relatively minor variables were included in the calculation to estimate the value of Option as “American style” options (being exercisable at any time prior to the stated expiry date). Theoretically, the Black-Scholes Model prices “European style” options (being exercisable only on this exercise date).

Based on this information, the Company has adopted an indicative value for the Options of $0.098 each.

On that basis, the respective value of the Options to be issued pursuant to Resolution 1 are as follows:

Mr Kalinko – $24,487;

(f) Any other information that is reasonably required by shareholders to make a decision and that is known to the Company or any of its Directors

There is no other information known to the Company or any of its directors save and except as follows:

Market Price movements:

The option valuation noted above is based on a market price of the Shares at the time of the valuation, being $0.365.

There is a possibility that the market price of the Shares will change up to the date of the Extraordinary General Meeting.

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The effect on the valuation per Option of movements in the market price of the Shares is set out below:

Market Price	Valuation per option
$0.30	$0.066
$0.50	$0.182
$0.70	$0.329
$0.90	$0.493
$1.10	$0.667
$1.30	$0.849

Opportunity Costs

The opportunity costs and benefits foregone by the Company issuing the Options to the Recipient is the potentially dilutionary impact on the issued share capital of the Company (in the event that the options are exercised). Until exercised, the issue of the Options will not impact upon the number of ordinary shares on issue in the Company. To the extent that upon their exercise the dilutionary impact caused with the issue of shares will be detrimental to the Company, this is more than offset by the advantages accruing from the Company securing the services of experienced and skilled directors on appropriate incentive terms.

It is also considered that the potential increase of value in the Options is dependent upon a concomitant increase in the value of the Company generally.

Taxation Consequences

No stamp duty will be payable in respect of the grant of the Options. No GST will be payable by the Company in respect of the grant of the Options (or if it is then it will be recoverable as an input credit).

AASB 2 “Share Based Payments” requires that these payments shall be measured at the more readily determinable fair value of the equity instrument. Under the accounting standards this amount will be expensed in the statement of financial performance. Where the grant date and the vesting date are different the total expenditure calculated will be allocated between the two dates taking into account the terms and conditions attached to the instruments and the counterparties as well as management’s assumptions about probabilities of payments and compliance with and attainment of the set out terms and conditions.

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Dilutionary Effect

If all of the Options granted are exercised by Mr Kalinko, the following will be the dilutionary effect on the current issued capital of the Company:

Shareholders	Current Share Capital	Current Share Capital	Share Capital Upon Exercise	Share Capital Upon Exercise
Current Shareholders*	115,427,513	99.99%	115,427,513	99.78%
Mr Stan Kalinko	10,000	0.01%	260,000	0.22%
Total	115,437,513	100.00%	115,687,513	100.00%

*Assuming that none of the following current options or Convertible Redeemable Preference Shares on issue are exercised or converted:

• a. 500,000 options exercisable at $0.25 on or before 31 January 2010;

• b. 640,000 options exercisable at $0.60 on or before 31 January 2010;

• c. 450,000 options exercisable at $0.655 on or before 31 January 2010;

• d. 250,000 options exercisable at $0.98 on or before 31 January 2010; and

• e. 16 Convertible Redeemable Preference Shares convertible into a maximum of 16,000,000 ordinary shares.

Save as set out in this Explanatory Memorandum, the Directors are not aware of any other information that will be reasonably required by Shareholders to make a decision in relation to benefits contemplated by the proposed Resolution 1.

3. INTERPRETATION

In this Notice of Meeting and Explanatory Memorandum:

ASX means ASX Limited;

Company means FSA Group Limited;

Corporations Act means the Corporations Act 2001 (Cwlth)

Shares means fully paid ordinary shares in the Company;

Listing Rules means the Official Listing Rules of ASX

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Any inquiries in relation to the Resolutions or the Explanatory Memorandum should be directed to Anthony Carius (Joint Company Secretary):

Anthony Carius FSA Group Ltd Level 3, 70 Phillip Street, Sydney NSW 2000 Ph: 1300 660 032 Fax: +61 7 3303 0601

PROXY, REPRESENTATIVE AND VOTING ENTITLEMENT INSTRUCTIONS

Shareholders are entitled to appoint up to two individuals to act as proxies to attend and vote on their behalf. Where more than one proxy is appointed each proxy may be appointed to represent a specific proportion of the shareholder's voting rights. If the appointment does not specify the proportion or number of votes each proxy may exercise, each proxy may exercise half of the votes. The proxy may, but need not, be a shareholder of the Company.

Shareholders who are a body corporate are able to appoint representatives to attend and vote at the Meeting under Section 250D of the Corporations Act 2001 (Cwlth).

The proxy form must be signed by the shareholder or his/her attorney duly authorised in writing or, if the shareholder is a corporation, in a manner permitted by the Corporations Act.

The proxy form (and the power of attorney or other authority, if any, under which the proxy form is signed) or a copy or facsimile which appears on its face to be an authentic copy of the proxy form (and the power of attorney or other authority) must be deposited at, posted to, or sent by facsimile transmission as follows:

IN PERSON: - FSA Group Ltd, Level 3, 70 Phillip Street SYDNEY NSW 2000 BY MAIL:- FSA Group Ltd, Locked Bag 29 Australia Square, NSW 1215 BY FAX :- (07) 3303 0601

or with the Company’s Share Registry:

IN PERSON: - Link Market Services Ltd, Level 12, 300 Queen Street, Brisbane, Queensland

not less than 48 hours before the time for holding the meeting, or adjourned meeting as the case may be, at which the individual named in the proxy form proposes to vote.

If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission. A form of the certificate may be obtained from the Company’s share registry, Link Market Services Limited .

A proxy form is attached to this Notice.

VOTING ENTITLEMENT

For the purposes of determining voting entitlements at the Meeting, shares will be taken to be held by the persons who are registered as holding the shares at 7pm on 12 March 2008. Accordingly, transactions registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

SIGNING INSTRUCTIONS

You must sign the proxy form as follows in the spaces provided:

	Individual:	Where the holding is in one name, the holder must sign.
	Joint Holding:	Where the holding is in more than one name, all of the security holders should sign.
	Power of Attorney:	To sign under Power of Attorney, you must have already lodged this document with
		the registry. If you have not previously lodged this document for notation, please
		attach a certified photocopy of the Power of Attorney to this form when you return it.
	Companies:	Where the company has a Sole Director who is also the Sole Company Secretary,
		this form must be signed by that person. If the company (pursuant to section 204A
		of the Corporations Act 2001) does not have a Company Secretary, a Sole Director
		can also sign alone.
		Otherwise this form must be signed by a Director jointly with either another Director
		or a Company Secretary.
		Please indicate the office held by signing in the appropriate place.

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PROXY FORM

I/WE

of

being shareholder(s) of FSA GROUP LIMITED (“Company”)

hereby appoint

of failing him/her

of:

of:

or failing him/her the Chairman as my/our proxy to vote for me/us and on my/our behalf at the extraordinary general meeting of the Company to be held at FSA Group Ltd, Level 3, 70 Phillip Street, Sydney, NSW, 2000, on Friday 14 March 2008 at 2.00pm (Sydney time) and at any adjournment thereof in respect of all of my/our shares in the Company unless otherwise specified below.

If you wish to indicate how your proxy is to vote, please tick the appropriate places below. If the Chairman is appointed as your proxy, or may be appointed by default, and if you do not wish to direct your proxy how to vote as your proxy in respect of a resolution, you acknowledge that the Chairman may exercise your proxy even if he/she has an interest in the outcome of the resolution and votes cast by him/her other than as proxy holder will be disregarded because of that interest. The Chairman advises that it is his/her intention to vote in favour of all resolutions in respect of any undirected proxies which may be granted in favour of the Chairman.

If two proxies are appointed, the proportion of voting rights this proxy is authorised to exercise is [ ]%. (An additional proxy form will be supplied by the Company on request.)

If you wish to appoint the proxy to exercise voting power over only some of your shares, the number of shares in respect of which this proxy is to operate is ……………….. shares (Note: proxy will be over all shares if left blank)

If no directions are given, the Proxy may vote as the Proxy thinks fit or may abstain. By signing this appointment you acknowledge that the Proxy (whether voting in accordance with your directions or voting in their discretion under an undirected Proxy) may exercise your proxy even if he/she has an interest in the outcome of the resolution and even if votes cast by him/her other than as proxy holder will be disregarded because of that interest.

I/we direct my/our proxy to vote as indicated below:

RESOLUTION

RESOLUTION For Against Abstain 1. Approval for the issue of Options to Mr Stan Kalinko Individual or Security holder 1 Security holder 2 Security holder 3 Sole Director and Director Director/Company Secretary Sole Company Secretary (If appointed)

Contact Name Contact Daytime Telephone Date 1922192_1.DOC