Immuron Ltd — Regulatory Filings 2004

Sep 27, 2004

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ANADIS Emited ANNUAL REPORT 2004

ABN: 80 063 114 045

CONTENTS

Board of Directors	X.
Jectures Advisors	5
Chairman's report	6
CEO's report	X,
Anadis Research & Product Portfolio	8
Anadis Alliances	Ŵ.
Anacis Manufacturing	23
Financial Statements	n.

Notice of Annual General Meeting

The Anadis Annual General Meeting will be held at St Michaels Uniting Church Hall 120 Collins Street Melbourne at 2.00pm 9 November 2004

Anti-Minika ANNUA MERORI 2004

$(3.2 - 1.3 - 1)$

• Total revenue up 24.9% for the year to over \$4.2m.
• Agreement with Tatura Milk finalised
• Travelan enters manufacturing and marketing
• Enterovirus 71 development with Taiwan successful, going forward into commercialisation phase.
• H.pylori program clinical trial at Melbourne's Alfred Hospital is CX successful. Product enters commericalisation phase.
• Successfully completes private placement of new shares to raise \$4.25m, n prodominately to our strategic partner Tatura Milk Industries.
• Wins Biodefence grant of over \$780,000 for the research project "Neutralisation of Respiratory Toxins and Pathogens". Early work is already the subject of collaboration with the Australian Department of PAGE 23
• New company website go to www.anadis.com.au

Effect of exposure to inhaled IgG on lung histology (Figure 3)

Lungs of mice treated with whole rabbit IgG. showed no pathological changes compared with untreated animals. SSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS

Registration

$ABOVE$ Results from the Respiratory Protection (Bio-warfare) Project

${\it LEFT}$ TACHS Bucket (Anadis and Tatura patented Colostrum Hartesting System)

Board of Directors and Services and Services and Services and Services and Services and Services and Services

Technical Advisors

Free Cons Crasman Associé d'As Tehacan Kuresiya

Profilm Didley Profilement and Did Did Anderson

Z,

Board of Directors

Philip Molyneux B.Econ FCA

Chairman & Non-Executive Director Chartered accountant $\sim$ professional experience in excess of 30 years. Former Partner of Ernst & Young. Experienced in public company accountability, finance and corporate governance. Director of a number of listed public companies for over 10 years. Also involved with a number of not-for-profit organisations.

Conor Graham

Managing Director & CEO Extensive background in both the management of bioscience companies and in the development and marketing of bioscience related products.

Dr Peter Jenkins MBBS FRACP

Non Executive Director Consultant Physician & Gastroenterologist. Director of listed and unlisted public biotechnology companies and experience in the management of gastrointestinal diseases and the challenges facing biotech companies.

Professor Roy Robins-Browne MB BCh PhD FRCPA FRCPath FASM

Non Executive Director Head of and Professor of Microbiology & Immunology - University of Melbourne.

Head of Microbiological Research - Murdoch Children's Research Institute.

Roman Zwolenski BSc Biosciences

Non-Executive Director and Non-Executive Director of several other Australian biotech companies.

Over 30 years senior management experience with multinational corporations and with Australian companies in the biomedical and biotech sectors.

Technical advisors

Professor Colin Chapman BPharm BVSc(Hons) PhD FPS

Advisor - Pharmaceutical products & formulations. Head of Pharmacy College Monash.

Associate Professor JG (Hans) Kusters PhD

Advisor - Gastrointestinal Disease Associate Professor, Department of Gastroenterology & Hepatology Vrije Universiteit, Amsterdam. Academic Hospital Digzigt, Rotterdam, The Netherlands.

Professor Andrew Sinclair BAgSc PhD

Advisor - Nutraceuticals & Nutritional Physiology.

Professor Frank Dudley BSc(Med) MBBS FRACP MD

Advisor - Gastrointestinal Disease & Clinical Management. Head of Gastroenterology - Melbourne's Alfred Hospital.

Dr David Anderson is Deputy Director of the McFarland Burnet Institute in Melbourne.

He is an internationally recognised virologist with particular expertise in picornaviruses (like EV71).

He has been brought on to further support the Anadis push into virology with the commercialisation of the EV71 project.

Chairman's Report

Fellow shareholders.

The 2003/04 year has seen:

• Continued growth in Anadis manufacturing activities.
• The launching of our first product, Travelan,
• On going research success, and,
• A successful share placement, strengthening our cash position.

The contract manufacturing by the company has continued to expand, with this years growth 20% over the levels achieved in 2002/03. Although Aussie Bodies continues to be our major client, increase has come from overseas sales, with Anadis opening up new markets in Asia.

We successfully obtained Therapeutic Goods Administration licensing for our first product, Travelan - a preventative product against "Travelers" diarrhoea. We expect this product will be available in Victorian based pharmacies by the time you receive this report. Initially, the launch will be limited to Victoria, with expanded promotion to the rest of Australia in the first half of 2005, and overseas to follow there after.

We have achieved excellent results with our Enterovirus 71 research. It has been proved that the methodology developed by Anadis and Taiwan's Development Centre for Biotechnology ("DCB") will provide an effective product for controlling EV71. Our scientific team successfully developed the vaccine, and then the preventative; all this work happening in less than three years. An amazing achievement when compared against traditional drug development pipelines.

In October 2003, we had the successful completion of a clinical trial, at Melbourne's Alfred Hospital, based on our H.pylori program. Those that received the active product experienced significant relief in symptoms and showed a significant reduction in H.pylori infection. We are now at the process of commercializing these technologies into products for sale here and internationally -initially as a nutraceutical for the Asian market.

We continue to develop our bioshielding and anti-terrorism products, having received more Government funding for both these projects.

The strategic alliance between Tatura Milk Industries and Anadis that began in May 2005, was contractually finalised in June 2004. This new agreement ensures that

Anadis has access to a large dairy herd for the collection for colostrum derived antibodies. Importantly, since year end, Tatura Milk Industries became a major shareholder through a placement for just over 10% of the shares. The total placement injected over \$4.25 million into the company and provided security of our cash reserves.

I would like to thank Conor Graham, our CEO, and his hard working team for another year of moving forward. The research committee, headed by Professor Roy Robins-Browne, and the audit committee headed by Dr Peter Jenkins have both been very hardworking. Finally, I thank my fellow directors for their continued wise counsel. We look forward to Anadis delivering more progress in 2005.

P Molyneaux Chairman

CEO's Report

Dear Shareholders.

The 2003/04 financial year was one of great progress and achievement for the company, both scientifically, and as a business, in a difficult industry. Our platform based technologies lead our progress into the future, with research success beginning to become commercial success.

The Scientific team at Anadis, continue to move forward with research into delicate molecule protection (the Bio-Shield project) and immediate respiratory protection technologies. The importance of this research is reflected in the ability for Anadis to continue to win government grants for each of these projects. We have had great success in our ability to attract the grants and funding that we apply for, with four projects being assisted - this is no small achievement.

It is exciting to see, positive outcomes begin to be reflected in the markets valuation of our company. We have had considerable share price increase over the financial year, as the market realizes the potential of our research and that commercialization of our own products, ultimately benefits our shareholders.

With many achievements under our belts, we move forward into this new financial year - with Travelan entering

its distribution and marketing campaign, EV-71 production scale up, H.pylori nutraceuticals for Asia, and of course the anticipation of further research success.

I would like to thank you, the shareholders, for your commitment to the company so far, and expect that your continued support will aid our success, as Anadis delivers on the promise of biotechnology.

C GRAHAM Director.

Anadis Product & Research Portfolio

This past financial year has seen further development of many of our technologies, the birth of some new ideas and, perhaps most exciting, the completion of Anadis' first research based product - Travelan.

Anadis is somewhat unique in that we will have a diverse product portfolio based on platform technologies, and we follow a "pipeline" concept for product development. Anadis has always believed in the benefit of releasing early stage products, such as functional food or "over-the-counter" (OTC) nutraceuticals from our development pipeline to have early commercial success, help cover R&D expenditure, and create shareholder value. Anadis products are derived from platform technology based on the science of bovine colostrum and its application to passive immunity, in which we are a world leader.

The Anadis product portfolio is substantially varied for a company of our size and although some may see this diversity as a drawback, we see it as an opportunity. Our platform technologies have resulted in novel ways to help solve particular health problems and made us attractive to those who require particular health problems to be solved in novel ways.

We here at Anadis are proud to present our diverse product portfolio to shareholders and the rest of the world $-$ at Anadis we are truly 'committed to delivering on the promise of biotechnology'.

Product & Research Portfolio

• Travelan U
• Enterovirus 71 O
• H.Pylori Program O

W

• Bioshield 10 O
• Respiratory profection Z
• · Tatura Anadis Colostrum Harvesting System Entracts

1

Travelan

Travelan is Anadis' first R&D based product to be sold in the marketplace. Travelan is the first clinically proven non-antibiotic preventative for Travellers' Diarrhoea, formulated against its most common cause: Enterotoxigenic E.coli. The response to this product has been quite extraordinary, with interest from pharmacies, travel groups, corporate, airlines and the military.

Over 125,000 packets of Travelan will be produced in the initial production run, with this number set to triple and continue to grow to match the demand.

What is Travellers' Diarrhoea (TD)?

TD, otherwise known as Bali Belly, Montezuma's Revenge, Delhi Belly, Tourist Trot - amongst others; is the number one health problem in international travel in terms of frequency and economic impact. It is most often caused through the ingestion of the bacteria E.coli that is present in the water. This can be through drinking water, or even eating food that has been washed in the local water. The E.coli, once inside the body, attach to the small intestine wall, where they release the toxins that cause the intestine reaction that is TD.

The symptoms of TD can include vomiting, abdominal cramps, fever and diarrhoea. Up until now it was only possible to treat the symptoms, and only in extremely severe cases, antibiotics can be used. In any case, having any symptoms, however mild, can be disconcerting and disruptive, or even ruin an important business trip, or worse still, a well deserved holiday.

TD affects numerous travellers worldwide $-$ up to 40% of the millions of international travellers (estimated up to 600 million cases per year). Over one third of these travellers become ill enough to require medical attention. Travelan works in a novel way to prevent TD - by not allowing the E.coli to attach to the intestine wall. If the E.coli can not attach, they can not release toxins and cause diarrhoea.

How does Travelan Work?

Travelan is packed full of antibodies against the major 13 common strains of E.coli, it is these antibodies that attach themselves to the E.coli and thus prevent the E.coli from causing the body harm. See following diagram

Travelan is made using Bovine Colostrum Powder (BCP). Colostrum is the first milk given by the cow after calving. Because only the first milking is collected and processed for Travelan, the BCP has the highest level of antibodies and other natural anti-microbials.

Our patented method of collecting and processing the raw product ensures a high concentration of antibody molecules and their stability. BCP has three functions:

• i. Passive immunity: The BCP used in Travelan is harvested from Australian dairy cows that have been immunised with a patented vaccine to produce very high levels of antibodies (specific proteins that bind to the bacteria). These antibodies bind to these E.coli and inhibit their attachment to the gut wall.
• ii. BCP naturally has high levels of substances that have non-specific anti-microbial properties - including lactoferrin and lactoperoxidase.
• iii. BCP naturally contains factors that aid in the relief of symptoms of transient gastrointestinal complaints.

Future for Travelan

Commercially. Travelan is now only in its birth stage, with the initial release confined to the Victorian market. Over the coming year, as a result of interest expressed, Anadis will be looking to market Travelan nationally and in a number of overseas destinations in Asia (including China), Europe and the Americas. Travelan is also being evaluated for military use. Travelan has no comparative substitutes and its usefulness is ever increasing in our rapidly changing world, with higher rates of travel, and general health concerns.

Enterovirus 71 (EV-71)

Since November 2002, Anadis has been working with Taiwan's Development Centre for Biotechnology (DCB) to produce a preventative product against Enterovirus 71 - a polio like disease affecting a large number of our Asian neighbours - in particular young children. The EV-71 project combines Anadis' advanced protein production and delivery technologies with Taiwan's knowledge and experience with Enterovirus 71.

This joint venture has been progressing rapidly, with the development being fully funded from Taiwan.

Taiwan's DCB selected Anadis because of the Company's successful Phase Il clinical trials of Travelan, and the platform technology of providing passive immunity transfer for disease treatment and prevention.

Australian and Taiwanese scientists have drawn up a joint development plan to create a product that will be safe and acceptable to children.

As part of the Enterovirus 71 project Anadis has begun working on an effective product to prevent transmission of the virus. The technology will provide a product that will be readily accepted by regulatory authorities, and will act as a 'suit of armour' over an epidemic.

Children will be less likely to contract the disease or be harmed by it.

Anadis scientists are confident that an effective preventative can finish development over the coming months. This represents a fraction of the time required to create a conventional vaccine, which generally takes at least 10 years to develop.

Successful in vivo trials, our prototype vaccines are effective at producing a strong response in vaccinated animals. What is more important, the strong response has been proven to also strongly neutralize the EV-71 virus. We can now move forward to the product manufacturing stage.

Product development has now entered its next phase, as vaccine development is advanced. Several vaccine formulations are to be tested in cattle on our research farm, resulting in a formulation to be scaled-up into commercial animals.

What is EV-71?

Enterovirus 71, a polio like disease, is one of the viruses that causes 'hand, foot and mouth' or 'slapped cheek' disease in young children. Mild symptoms usually include a rash and quieter than normal behavior, while a significant proportion of younger children can develop nervous signs such as fits, paralysis and even death.

A large portion of the children affected by the severe form of the disease can die. (In Taiwan alone over 500 children per year can be affected by the severe form of Enterovirus 71).

According to Taiwanese government figures, since 1998 there have been millions of cases reported with thousands of severe cases and hundreds of deaths. In 1998 alone, more than four and a half million illnesses were caused by the virus including 500 severe neurological cases and 78 deaths. And most of these were children under the age of four.

Enterovirus 71, as yet, isn't well known in Australia, yet in the Asia-Pacific region - mainly Taiwan and China - major outbreaks are becoming increasingly common. Enterovirus 71 is an emerging 'disease state', and medical authorities are comparing the disease with the spread of polio in Europe and North America in the late 19th century. Outbreaks of Enterovirus 71 are mainly confined to Asia but have recently been reported in Europe and Australia.

This year, besides Taiwan, Enterovirus 71 outbreaks have occurred in Vietnam, China and Hong Kong.

Intellectual property

Along with two applicable Anadis patents, both parties will co jointly own any additional intellectual property generated during development. At this stage one additional patent is under development specifically relating to the EV71 work.

Opportunities for Anadis

This agreement is one of major commercial significance to Anadis. Under the terms of the agreement, Anadis receives the exclusive global manufacturing rights of the bioactive materials, and the product, for a minimum of five years; royalties from all sales in Asia; and sole distribution rights for all markets outside Asia. Recently Anadis achieved a joint marketing agreement for sales of the product in Asia - this would further enhance the potential return for Anadis and its shareholders.

The DCB anticipates the market in Taiwan, alone, to be in excess of one hundred and ten million doses per annum. Following an initial launch in Taiwan, Anadis in conjunction with the DCB can then introduce this product into other parts of Asia and the rest of the world.

H.pylori Program - Treatment of gastritis and gastric ulcers (H.pylori)

Since the 2003 Annual Report immense progress has been made on the Pyloran project, with the completion of a Phase II clinical trial in the Alfred Hospital Melbourne. This trial, under the supervision of Professor Frank Dudley, has shown that the Pyloran product, as developed by Anadis, is of significant benefit to patients suffering from gastritis associated with the bacterium, H.pylori, and a good adjunct ulcer therapy.

Based on these results, Anadis hopes to have an over-the-counter Nutraceutical product for gastritis relief, ready for the Asian market during 2005. H. pylori is associated with the development of most duodenal and gastric ulcers and, additionally, some forms of gastric cancer and lymphoma. The World Health Organisation has declared the bacterium H.pylori a Class 1 carcinogen, equivalent in seriousness to tobacco smoke.

Patients participating in this trial were suffering from H.pylori positive nonulcer active dyspepsia with symptoms of nausea, abdominal discomfort/pain and bloating. Those that received the Anadis product showed significant relief in symptoms and a significant reduction in H.pylori infection.

One of the issues with H.pylori is the alarmingly high rate of carriers of the bacteria. Recent research suggests over 30% of people in the western world, and more than 50% in Asia, are carriers of H.pylori. Of these people, a minimum of 20% will develop ulcers or other gastrointestinal symptoms.

Why is Pyloran different?

Conventional treatments exist, but they have their limitations. Inhibitor drugs are typically given for long periods and don't address the infection, while emerging antibiotic resistance is compromising antibiotic therapy. By contrast to conventional treatment, Pyloran offers a highly promising alternative with no risk of antibiotic resistance, minimising adverse impact on a patient's wellbeing.

The Pyloran Research Project

Anadis' intellectual property and experience with H.pylori, passive immunity, vaccine manufacture, protein shielding technology, formulation and manufacturing have inspired funding from AusIndustry. Commonwealth 'START' grants totaling A\$525,203 have been received to assist Anadis in the development of a series of treatments. Work on a candidate vaccine against H.pylori is also in progress.

Continuing product development involves scientists and technicians based at Melbourne University, the Murdoch Children's Research Institute, the Alfred Hospital, Frei University in Rotterdam, Anadis' own facility, and at Tatura Milk Industries. Discussions are in progress with several pharmaceutical companies in the Asia-Pacific region, who are interested in further research and commercial development and distribution of H.pylori products.

Provisional patents are being lodged to protect the technological advances of the H.pylori project.

H.pylori vaccine

Anadis is currently involved in work to develop a candidate vaccine against H.pylori. As mentioned before in regards to Pyloran, H.pylori has been declared a Class 1 carcinogen by the World Health Organisation, as serious as tobacco smoke. Initial findings are showing promising results, and research continues. More information will be published as soon as findings and results are available.

BioShield 10

BioShield 10 is a set of patented technologies for the protection of human friendly bacteria (probiotics), vaccines, enzymes, delicate proteins & antibiotics, in the hostile stomach environment.

Anadis' technology for delivering pharmaceutical and other bioactive molecules to the stomach wall and the small intestine is a spin-off from the H.pylori research. As the technology develops, it appears to offer delivery solutions to a wide range of proteins and drugs that are sensitive to digestive acids. These technologies could give new life to many manufacture's products that would otherwise be destroyed in the stomach.

• Tests conducted by Anadis have demonstrated that 90 per cent of probiotics taken orally are destroyed in the harsh stomach environment within 10 minutes.
• In contrast, BioShielding techniques protects the problotics to the degree that 90 per cent are still alive after one hour of exposure, thereby allowing greater numbers of problotic bacteria into the intestine to promote positive gut health.

"Probiotics are buman friendly bacteria that can be used to 'crowd out' pathogenic gut bacteria and promote the health of the digestive tract. Currently, they are mainly presented in natural yogurts and fermented drinks."

The AusIndustry grant for A\$250,000 under the Biotech Innovation Fund has facilitated Anadis' research into the effects of bioshielding, and will help take it to a commercial level. The research focuses on demonstrating the ability of bioshielding to protect beneficial bacteria (probiotics) in a range of gut-benefiting foods.

Commercialisation

• A hurdle shelf life of 30 days for a probiotics has been set by probiotic companies, with emphasis on temperature (non-refrigerated) and dry form delivery.
• Anadis has a product (BioShield 10 probiotic viable Corn Flakes), kept at room temperature, for well over 24 weeks. The application of this technology is through tasteless and odorless spray on the food, this opens the door for a vast number of "Functional Food" opportunities from probiotic breakfast cereal to probiotic hamburger buns for fast food outlets.

Serious interest in BioShield 10 has been expressed by a number of international probiotic manufactures and negotiations are underway.

Provisional patents have been lodged to protect the technological advances of the Bioshield 10 project.

Anadis has recently been approached by a major American vaccine development institute to help them with delivery of new oral vaccines that have already been developed with support from the Gates Foundation and the World Health Organisation, for use in children in tropical regions. The institute proposes to fully fund pre-clinical and clinical trials of a co-formulation of their vaccines and Anadis Bioshielding technologies. Negotiations are continuing, to make this Anadis technology integral to delivery of cutting edge vaccines against enteric agents.

Bio-Warfare Respiratory Protection --Combating Bioterrorism

In February 2004, Anadis successfully attracted another major research grant from the Commonwealth Government for a total of \$786,500 for the project: "Neutralisation of Respiratory Toxins and Pathogens". This project builds on Anadis technology for temporary protection against respiratory pathogens.

Early work on this technology is already the subject of collaboration between Anadis and the Australian Department of Defence to develop short-term respiratory protection for military personnel and civilian emergency workers, against a range of airborne biological warfare agents - initially Anthrax and Plague.

Prestigious International Support

The extra funding, from the above mentioned grant, will enable Anadis to interact with international researchers and manufacturers. In particular, support and input has been offered from MARCE (the Mid-Atlantic Regional Centre of Excellence in Biodefense and Emerging Infectious Diseases) headquartered in Baltimore, USA. MARCE is a multi-campus organisation that was recently funded by the US government for US\$42 million and has input from 16 prestigious Government, commercial and academic institution from around Washington DC.

The Director of MARCE, Professor Mike Levine has commented on the importance of this US-Australian collaboration, in strengthening the biodefense efforts for both countries. This assistance from MARCE will provide Anadis with expertise in key areas such as: scientific input from some of the world's top medical researchers, access to secure test facilities and field readiness evaluation reports.

Professor Mike Levine, Professor of Medicine and Pediatrics, in addition to being Director of MARCE, is the Director, Center for Vaccine Development, University of Maryland School of Medicine and, amongst others, sits on the NIAID (National Institute of Allergy and Infection Diseases) Blue Ribbon Panel on Bioterrorism Committee.

What is the Respiratory project?

The Respiratory Protection project focuses on the protective actions of antibodies and their ability to bind and coat bacteria within the respiratory tract, thereby reducing the capacity of the pathogen to affect humans. These protective antibodies can be prepared in a large scale utilizing bovine colostrum, a field in which Anadis is a world leader.

In the past, bacteria that cause Plague and Anthrax have proved to be very difficult to vaccinate against or to treat with antibiotics because they survive within immune cells in the lungs. Laboratory trials have since shown the Anadis technology to be highly successful in protecting the lungs against a Yersinia bacterium, a bacterium that is closely related to the species that causes Plague.

Conventional approaches to fight these diseases rely on vaccines that need to be taken months before exposure or treatments given after exposure. Anadis' breakthrough technology has potential to offer immediate protection against airborne virus and bacteria such as Anthrax and the Plague, and improve responsiveness to conventional therapy after exposure.

Integration of the technology into future emergency and medical plans will be assisted by an advisory network, from a joint effort with expertise in Defence and Emergency Management, Public Health and Biotechnology both in Australia and the USA.

Opportunities

The joint research agreement, with MARCE, is based around two key pieces of intellectual property owned by Anadis. The first covers immediate protection against bacteria such as Yersinia pestis (the Plague bacteria), Bacillus anthracis (Anthrax bacteria) and shigatoxin (a bacterial toxin made deadly through delivery by air). The second is Anadis' fast-developing expertise and intellectual property on shielding delicate bioactive proteins in hostile environments (BioShield 10).

The respiratory technology will be supported by production techniques that Anadis has developed for other products. This ensures that mass production of the future products can be accomplished quickly and effectively in Australia.

Importantly, Anadis also views this research as a spring-board for further development opportunities in civilian applications. These applications include the prevention and treatment of respiratory diseases such as Asthma and Hayfever.

TACHS-Tatura Anadis Colostrum Harvesting System

Anadis Scientific and Field staff, together with Tatura Milk Industries and its farmers, have developed a revolutionary way to collect and process colostrum, resulting in a higher quality, higher value product.

This innovation, the Tatura Anadis Colostrum Harvesting System (TACHS) has substantially altered the economics of small volume, specialty products collection. For the first time ever, farmers can easily and cost-effectively collect large volumes of top quality colostrum with very little impact on the flow of farm life and the usual dairy process. In fact, farm workload is reduced as are the associated costs, with TACHS offering a number of advantages and economies.

The system allows for separation and selection on an animal by animal basis, with close monitoring of animal health - resulting in excellent quality control. Because only the first milking of colostrum is taken, there is more than enough colostrum left to feed the calves.

The colostrum is "milked" from the cow into the TACHS system, where it is packaged, and then frozen almost immediately. Each cow's product is separate and can be tracked by a unique identifier. An integrated sampling pouch is part of the system, so quality testing can be carried out on a small scale, well before bulking product at the factory. Once frozen the bioactivity of the colostrum remains intact. This is opposed to conventional methods where the colostrum may be sitting for days, before it is frozen, where it begins to decompose.

Colostrum can now be collected from all stages of the calving period, not just at peak calving times. This is particularly important for hyper immune programs where the animals are specially vaccinated. TACHS works well for all farms from small to large, thus allowing us to access TMI's entire supplier base. Transportation by refrigerated van, rather than liquid tanker, is more efficient and cost-effective.

High quality product can be stock piled while frozen and processed as needed, and product not suitable for human consumption can be returned to the farm for calves.

Intellectual property

A series of provisional patents have been lodged to protect TACHS from unlicensed use.

TACHS benefits

Set-up costs are small, and savings in collection and processing costs can be handed back to farmers, providing greater returns and acceptance of the system

• TACHS has proved to be profitable and efficient.
• TACHS fits well with animal welfare aims.

TACHS allows Anadis to be clearly differentiated as the premium quality colostrum, as opposed to other high volume colostrum producers, thereby commanding a premium price. TACHS also allows for the strict quality control that is necessary for nutraceutical and pharmaceutical products.

In addition to first milking colostrum, other high value milk fractions can be collected using TACHS.

ANADIS & TATURA MILK INDUSTRIES FORMAL ALLIANCE

The alliance between Anadis and Tatura Milk Industries (TMI) began in May 2003 under a heads of agreement, and has now grown into a contractual arrangement for the mutual benefit of both organizations. This new agreement ensures that

Jeff Martin CEO Tatura & Conor Grabam CEO Anadis

Anadis has access to a large dairy herd for the collection of colostrum derived antibodies, and the facilities required for the manufacture of Travelan and other Anadis products.

Under the Agreement Anadis has:

"Right of First Call" over all colostrum that TMI collects. This ensures that as more Hyper-immune Colostrum (Colostrum from cows that have been immunized with Anadis'

patented vaccines) is required, the supply base will be available for this production.

• $\bullet$ Access to large scale production facilities at TMI, particularly large scale micro-filtration and freeze-drying capacity for the processing of large quantities of antibodies.
• $\bullet$ Become a party to the "Anadis - Tatura Innovation Engine Room (ATIER)", a research committee to co-develop new products for Australia and overseas. In particular the group will be focused on Functional Foods and Nutraceuticals.

This agreement represents a major milestone for the commercialization of Anadis products, which has already commenced with the collection and manufacture of Travelan.

Anadis has been successfully working in conjunction with TMI for a number of years and is very pleased to finally have a contractual agreement that ensures a continuity of success. The TACHS systems is an example of the success of this alliance.

About TMI

TMI is a co-operative dairy company based in the Goulburn Valley in Victoria, which processes about half a billion litres of milk each year, from more than 450 regional dairy farms, into value added dairy products, including cream cheese, infant formula, specialized powders, and dairy proteins and bio-actives. These are sold locally as well as exported overseas, mainly to Asia.

The TMI herd is made up from the member dairy farms, each with an average of over 200 cows. TMI historically has a record of the highest payment to farmers for their milk and has been able to maintain this record by being at the forefront of innovative dairy product manufacture.

Tony Mckenna GM Technical and Nutritions TMI, Jeff Martin, Conor Grabam & David Woods Company Secretary Anadis

ANADIS MANUFACTURING

Once again the Manufacturing division at Anadis has had an impressive year. Production has increased substantially, facilities have received significant upgrades, and we have been awarded new accreditations for quality and manufacture.

In the first six months of the 2003-04 financial year, production revenue rose by 27%, and the entire year production revenue was up 20.3%. Throughput has

Top. Main blending machine Boltom. Packing room

increased with our first order to China dispatched in early June.

The production facility delivers the best in blending and packaging solutions, under the tightest deadlines, with efficient management of products, from concept to retail shelf. We are able to offer a true premium service to our customers.

Our strategic arrangement with Tatura Milk Industries, further strengthens our business reputation and provides a diverse platform from which to provide premium services to our clients. Together with our customers, our creative and scientific teams share and develop ideas in order to achieve products and goals that could not have been done alone.

The facilities have been upgraded to meet the increase in demand with the installation of a new small blending room, new packaging areas, and a new storage system to handle the increased loads.

Anadis has established strong links with major manufacturing, trading organisations and government bodies. Anadis is also pleased to announce that we have now officially received HACCP (Hazard Analysis and Critical Control Point) registration under the internationally recognized CODEX

standard. The manufacturing facility has been HACCP compliant for some time under state and federal government requirements. HACCP recognizes and addresses all issues of food production relating to Quality, Risk Assessment and Control, as well as Food Safety for local and overseas markets.

In addition, GMP (Good Manufacturing Practices) certification was achieved; thus providing Anadis with a respectable assemblage of credibility and accountability systems.

Anadis Manufacturing now complies with the following national and international standards:

AQIS standard for Dairy product and processed food exports Anadis is registered to produce, store and export dairy products and processed organic foods from Australia, subject to legislative guidelines

European accreditation

Anadis is eligible to export Australian dairy products to the EU, and is listed as an approved company to produce and handle dairy products on behalf of potential independent exporters

Hazard Analysis and Critical Control Point standard (HACCP) This is an internationally recognized system, which is becoming the world standard for ensuring safety and quality in the manufacture of food and nutraceuticals

Principles of Good Manufacturing Practice (GMP)

This endorses that Anadis products are manufactured in clean conditions and free of contaminants.

Freeze drying services add value to health & food industry

Contract freeze drying caters to boutique requirements for valueadded products and allows for pilot scale assessment for other research and development organizations. Anadis has assisted in R&D programs involved in the freeze drying of active materials from a variety of sources for later extraction. This has been particularly focused at cancer research. Upon completion of their research and development, Anadis is then in a position to gain commercial scale manufacturing rights from these customers.

Growing international market for colostrum products

Development of TACHS will allow Anadis, in conjunction with TMI, to capitalise on the fast growing international interest for colostrum and colostrum-based products. The Anadis management team has established strategic alliances with complementary therapies, sports food, infant formula and female health companies, in Taiwan, Japan, China and Korea, with a view to becoming a preeminent supplier. Anadis researchers continue to develop new products that incorporate natural extracts, particularly within the fast growing market for health promoting foods.

Looking forward

The 2004/05 financial year will see Anadis continuously increasing its manufacturing customer base, with diverse and exciting products as well as continuing to provide first class services to our existing customers, working together to help them expand their businesses.

$\overline{28}$

●

Anadis Limited ABN 80 063 114 045 ANNUAL REPORT 30 JUNE 2004

Financial Statements

Contents

Company Particulars	31
Directors' Report	32
Corporate governance statement	37
Statement of financial performance	42
Statement of financial position	43
Statement of cash flows	44
Notes to the Financial Statements	45
Directors' Declaration	58
Independent Audit Report to the Members	64
Additional ASX Information	66

Company particulars

Directors	Mr Philip Molyneux Chairman Mr Conor Graham Managing Director and CEO Dr Peter Jenkins Professor Roy Robins-Browne Mr. Roman Zwolenski
Secretary	Mr David Woods
Notice of Annual General Meeting		The Annual General Meeting of Anadis Limited
	will be held in:	St. Michael's Hall, 120 Collins Street, Melbourne
	time:	2:00 pm
	date:	9 November, 2004
Principal registered office in Australia	4 Capital Link Drive, Campbeistield. Victoria 3061 Telephone: (61) 3 9358 6388 Facsimile: (61) 3 9358 6399 www.anadis.com.au
Share register	Computershare Registry Services Pty Ltd Yarra Falis, 452 (ohnston Street, Abbotsford VIC 3067 Telephone: #300 850 505
Auditor	PricewaterhouseCoopers 333 Collins Street Melbourne VIC 3000
Solicitors	Landers & Rogers Lawyers Level 12, 600 Bourke Street Melbourne VIC 3000
Bankers	222 Exhibition Street Melbourne VIC 3000	Australia and New Zealand Banking Group Limited
Stock Exchange Listing	Anadis Limited shares are fisted on the Australian Stock. Exchange

Your directors present their report on Anadis Limited for the year ended 30 June 2004.

Directors

The names and details of the Directors of the Company in office during the financial year and until the date of this report are:

Philip Molyneux Conor Graham Dr Peter Jenkins Professor Roy Robins-Browne Roman Zwolenski

Principal activities

Anadis Limited is an Australian biopharmaceutical Company, which specialises in research and development of bovine colostrum derived products for therapeutic use in humans and animals.

Anadis Limited also carries on a manufacturing operation in health foods.

Operating results and dividends

The operating foss of the Company for the year ended 30 June 2004 was \$1,162,035 (2003: \$1,279,584). No dividends were paid or declared during the period.

Review of operations and results

During the year the Company continued to pursue a comprehensive research and development. programme including three human clinical trials. The manufacturing facility continues to generate cash flow for the Company.

Significant changes in the state of affairs

There are no significant changes to the Company's state of affairs.

Significant events after the balance date

On 21 July, 2004 the Company announced that it would make a Placement of 10,900,000 fully paid ordinary shares at 39 cents each to raise \$4,251,000. The Placement, which was arranged directly by the Company without commissions or placement fees, was completed on 30 July, 2004.

Except for the above, there are no significant events which have occurred since 30 June 2004.

Future developments and results

Anadis Limited continues to be principally a research company developing human therapeutics from bovine colostrum.

The development of a nutraceuticals business alongside the research programme allows the Company to exploit the research results at an earlier stage than pharmaceutical proof.This business, with the manufacturing facility, is regarded as an important adjunct to the Company's research activities, it will provide an early revenue source which will partly underwrite the balance of the research programme.

Further information on likely developments in the operations of the Company and the expected results of operations have not been included in this report because the Directors believe it could be likely to result. in unreasonable prejudice to the Company.

Environmental regulation

Anadis Limited complies with all State and Local Health standards for the manufacture of dairy based products and is approved as a registered food processing facility (licence number 20379) under the Australian Code of Practice for Dairy Factories, Dairy Food Safety Act (Victoria).

Anadis Limited has also obtained registration as an export establishment for the production of prescribed goods within the Australian Quarantine Inspection Service (AQIS). The Company is HACCP and GMP accredited.

Information on directors

Director	Experience	Special Responsibilities	Pacticulars of director's interest in shares and options. of Anadis Limited
			Ordinary shares	Options
Philip Molyneux B. Econ. FCA	Chairman – non-executive director independent non-executive chairman for 6 years. Philip- is a chartered accountant and was a partner of Ernst & Young, He is a director of several listed and unlisted companies as well as not-for- profit organisations.	Chairman Member of the Audit & Risk Management Committee	250,000	350,000
Executive director
Conor Graham	Managing director & chief executive officer for 7 years. Conor has an extensive background in the management of bioscience companies and in the development and marketing of bioscience related products.	Managing Directon & Chief Executive Officer:	4,098,690	750,000
Non-executive directors
Dr. Peter Jenkins MBBS, FRACP	independent non-executive director for 10 years. Peter is a gastroenterologist with experience in the management of gastrointestinal diseases and the challenges facing biotech companies.	Chairman of Audit & Risk Management Committee & Member of Scientific Committee	4,400,000	250,000
Professor Roy Robins-Browne MB, BCh, PhD, FRCPA, FRCPath, FASM	Non-executive director for 6 years. Roy is Professor of Microbiology & Immunology at University of Melbourne. He is also Head of Microbiological Research, Murdoch Children's Research Institute.	Chairman of Scientific Committee	15,000	250,000
Roman Zwolenski B Sc	Non-executive director for 2 year. Roman is a former CEO of an Australian listed biotech company and a senior marketing executive of a major healthcare corporation. He is also a director of several Australian biotech companies.	Member of the Audit & Risk Management Committee	0	250,000

Directors meetings

The number of Directors meetings (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows:

	Full meetings of directors		Meeting of non-executive		Audit & Risk	Meeting of committees
			directors		Management			Scientific
	А	Γš	А	B	А	B	А	Β
Philip Molyneux		I B	A	4	4	4	绿绿	茶品
Copor Graham		ΙI	法	崇	接条	豪莊	接接	豪華
Dr. Peter Jenkins		łΟ	4	4	4	4	9	9
Professor Roy
Robins-Browne		١O	4		接条	公证	9	9
Roman Zwolenski			A	4	A	4	接索	※※

A = Number of meeting held during the time the director held office or was a member of the committee during the year.

8 = Number of meetings attended.

* = Not a non-executive director

** = Not a member of the relevant committee

Remuneration report

Principles used to determine the nature and amount of remuneration

The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors, the chief executive officer and the executive team. The Board assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit. from retention of a high quality Board and executive team. The chief executive officer and members of the senior management team have employment contracts, details of which are set out in 'Notes to the Financial Statements' - Note 28.

The framework provides a mix of fixed and variable pay and a blend of short and long-term incentives.

Non-executive directors

Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board. The Chairman's fees are determined independently to the fees of non-executive directors based on comparative roles in the external market. Directors do receive share options when approved by shareholders.

Directors' fees

The current base remuneration was last reviewed with effect from 1 July 2003. The Chairman's remuneration is inclusive of committee fees while additional fees are also paid to non-executive directors. for their membership of Board committees. Bonuses are not paid.

Non-executive directors fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. The pool, which was last varied by shareholders on 11 November, 2003, stands at \$250,000 for cash remuneration.

Retirement allowances for directors.

Non-executive directors retirement payments are limited to compulsory employer superannuation.

Executive pay

Executives are given the opportunity to receive the base emolument in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.

Details of remuneration

Details of the nature and amount of each element of the emolument of each director of the Company and each of the additional officers of the Company receiving the highest emoluments for the year ended 30 June, 2004 are set out in the following tables.

	Primary	Post- employment
	Cash	Super-
	salary and	annuation
Name	fees

Name	salary and fees	annuation
	S	s	S	s
Philip Molyneux	50.000	4.500	44.100	98.600
Conor Graham	203,000	72,000	94.500	369.500
Dr Peter Jenkins	37.500	3.375	31.500	72.375
Professor Roy Robins-Browne	37.500	3.375	31.500	72.375
Roman Zwolenski	37.500	3.375	21.000	61.875

Equity Options

Total

At the 2003 Annual General Meeting the shareholders approved the issue options to non-executive and executive Directors under the Anadis Executive Share Option Pian No. 1. The options are for 3 years with immediate vesting and have been valued using Black-Scholes method with a volatility of 90% (The threeyears for Mr. Zwołenski commenced in December 2002 when the volatility was 76%.)

	Primary		POSC- employment	Equity
Name	Cash salary and fees	Non- monetary benefits	Super- annuation	Options	Total
	\$	\$	\$	\$	\$
Fred Mears (Factory Manager)	109.807	×	30.193	13.200	153,200
Dr. Grant Rawlin (GM R&D)	39.372	3.084	12.544	13.200	168.200
Steven Skorobogarty (GM Nutraceuticals Division)	38.954	3.540	12.506	13.200	168,200

Other executives of the Company

Options Granted. Options were issued to the executives on 34 May, 2002. They are for 4 years with a 2 year vesting period and have been valued using the Black-Scholes method with a volatility of 74%.

Share options granted to directors and the most highly remunerated officers

Options over unissued ordinary shares of the Company granted during or since the end of the financial year to any of the directors or the specified executive officers of the Company as part of their remuneration were as follows:

	Options granted
	350.000
	750.000
	250,000
	250.000
	250,000
	P.G. Molyneux - Chairman C.J. Graham > Managing director/CEO » non-executive director - non-executive director R. Zwolepski - non-executive director

At the 2003 Annual General Meeting the shareholders approved the issue options to non-executive and executive directors under the Anadis Executive Share Option Pian No. 1.

Shares under options

As at the date of this report, there were 3,350,000 unissued shares under option as follows:

Number	Issue Price of Shares	Expiry date
200,000	\$0.40	22 April, 2005
200,000	\$0.45	22 April, 2005
700,000	\$0.50	31 May, 2006
50,000	\$0.35	15 August, 2005
50,000	\$0.39	15 August, 2005
50.000	\$0.24	25 November, 2005
50,000	\$0.27	25 November, 2005
50.000	\$0.22	5 June, 2006
50,000	\$0.25	5 June, 2006
50.000	\$0.34	18 September, 2006
50,000	\$0.38	18 September, 2006
250,000	\$0.35	10 December: 2005
850,000	\$0.55	II November, 2006
750,000	\$0.55	14 November, 2006
3.350.000

The vesting date for the options expiring on 31 May, 2006 was 31 May, 2004. All other options can be exercised at any time.

No option holder has any right under the options to participate in any other share issue of the Company.

During the year:

• 1,500,000 options held by Mr. C Graham (CEO/MD) lapsed, and
• 500,000 options were exercised at 30 cent per share.

Indemnification and insurance of directors

During the financial year, the Company has to insured directors and officers of the Company. The premium paid is commercially sensitive and so is not disclosed.

The fiabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company and any other payments. arising from fiabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Signed in accordance with a resolution of the Directors

P MOLYNEUX Director

Melbourne 11 August 2004.

C GRAHAM Director

Corporate Governance

The Board of Anadis Limited is accountable to the shareholders and other stakeholders for the performance of the Company. To this end, the Board is committed to maintaining the highest ethical standards and best practice in the area of corporate governance to ensure that the Company's business is conducted in the best interests of all concerned.

The Company has prepared and implemented practices that address all the Principles set out by the ASX Corporate Governance Council. These practices will be reviewed regularly to ensure their relevance and application to the Company's responsibilities and activities.

By adopting these Principles, the Board seeks to create value and provide accountability commensurate with the risks involved.

ASX Principle 1: Lay solid foundations for management and oversight.

Role of the Board,

The primary role of the Board is to provide effective governance over the Company's affairs to ensure the interests of the shareholders are protected and the confidence of the investing market is maintained. whilst having regard for the interests of all the stakeholders.

This role is exercised by the Board, as whole, and each director exercising diligent attention to the affairs of the Company, in particular the Board is responsible for:

• 1. Setting the Company's values and standards of conduct and ensuring that these are adhered to,
• 1. Providing strategic direction and approving corporate strategic initiatives,
• 1. Oversight of the Company, including its control and accountability systems,
• 1. Appointing and removing the chief executive officer,
• 1. Reviewing and ratifying systems of risk management and internal compliance and controls, codes of conduct and legal compliance,
• 1. Monitoring senior management performance and ensuring appropriate resources are available,
• 1. Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures, and
• 1. Approving and monitoring financial and other reporting to shareholders and regulatory authorities.

To ensure that all new Board members understand what is expected of them, in addition to their obligations under the Corporation Law, the Company provides them with a letter setting out the key terms and conditions relating to their appointment.

Role of Management,

Through the chief executive officer, management is responsible to the Board for the:

• 1. Development and implementation of agreed corporate strategy and performance objectives,
• 1. Undertaking the day to day activities of the Company,
• 1. Identifying all matters to be included in a risk profile of the Company and ensuring that effective risk management systems are implemented and adhered to,
• 1. Observing the code of conduct, and
• 1. Ensuring that the Board is fully informed of all matters which may have a material impact on the ability of the Company to meet its obligations.

ASX Principle 2: Structure the Board to add value.

Board Composition.

The Board determines its size and composition, subject to the limits imposed by the Company's Constitution, which requires a minimum of three and a maximum of ten. Currently there are five (5) directors.

The Company will at all times bear in mind the need to have a majority of independent directors. An independent director is independent of management and free of any business or other relationship that could materially interfere with the exercise of their unfettered and independent judgment.

Notwithstanding this, the Board recognises that in a small, specialised industry such as biotechnology, it is very desirable that board members have some industry background and therefore may not be completely independent.

Currently all non-executive directors, including the Chairman, are considered to be independent.

In particular, the Board has considered the independence of Professor Roy Robins-Browne and Mr. Roman Zwołenski.

Much of the Company's research work is done at the University of Melbourne in departments managed by Professor Robins-Browne. The work was initially won on a competitive basis and no personal benefit is earned by Professor Robins-Browne as a consequence of this work, in fact, the Company believes it benefits from the oversight of research consequent upon Professor Robins-Browne's supervision.

A company, in which Mr. Zwofenski is both a director and shareholder, provided some consulting advice to the Company in early 2002. There has been no consulting advice provided for over two years by either Mr. Zwolenski or the firm with which he is associated. The Board reviewed the Company's past association and conduded that the relationship does not affect Mr. Zwolenski's independence.

Director	Independent	Non-executive	Board roles
Philip G. Molyneux Appointed: (5/1/1998 Re-elected: 2001	YES.	YES	Board Chairman Audit & Risk Committee
Conor J. Graham Appointed: 1/5/1997		NO.	CEO/MD
Dr. Peter § Jenkins Appointed: (7/1/94 Re-elected: 2002	YFS.	YES	Chair Audit & Risk Committee Science Committee
Prof Roy Robins-Browne Appointed: 2/2/98 Re-elected: 2003	YES.	YES	Chair Science Committee
Roman Zwołenski Appointed: 24/9/02 Elected: 2002	YFS	YES	Audit & Risk Committee

The current Board members are:

The skills, experience and expertise of each director is set in the Directors Report in the annual report.

The Board collectively and each director individually may take, at the expense of the Company, such independent professional advice as is considered necessary to fulfill their relevant duties and responsibilities.

Board Committees

The Board has established two committees, Audit & Risk and Science, to assist in the execution of its duties and to allow detailed consideration of complex issues.

The Company does not have a separate nomination committee or a remuneration committee as these tasks are carried out by the full Board.The Board believes that, at this stage of the Company's development, these functions are best handled by the full Board. The Board will establish other committees, either permanent or ad hoc, as required by the Company's future development. In addition and for the reasons mentioned, the Board does not currently have a formal policy on selecting new directors.

38

Audit & Risk Management Committee.

The Committee is dedicated to independently:

• 1. Verifying and safeguarding the integrity of the company's reporting,
• 1. Identifying assessing and monitoring management applications of risk minimisation procedures, and
• 1. Informing the Board of material changes to the Company's risk profile.

The Board has given the Committee all the necessary powers to carry out the above.

Science Committee.

The primary objective of the Committee is to provide technical support to management in the conduct of the Company's research programs and to critically review the research findings.

This is achieved by undertaking regular meetings with management and providing access to a wide range of scientific knowledge including a number of technical advisors retained by the Company.

ASX Principle 3: Promote ethical and responsible decision- making.

The Company has adopted the Australian National Health and Medical Research Council guidelines on ethical research practices.

Code of Conduct.

Anadis is guided in all its activities by respect for all its stakeholders including employees, shareholders, contractors, customers and suppliers.

The Board has articulated the Company's requirements for standards of conduct, from directors and senior management, based on the following principles;

• 1. Directors are subject to re-election every three years,
• 1. The Chairman must be independent,
• 1. Conflict of interest must be avoided wherever possible. If, for any reason, a potential conflict arises, the director/employee must declare the conflict and absent themselves from all discussions and decisions. on the relevant matter.
• 1. Employees and directors must respect the confidentiality of the Company's assets, including intellectual property, both during and after employment,
• 1. The Company will comply with all relevant legislation and regulation,
• 1. The Company will deal fairly with all its stakeholders, and
• 1. The Company will promote a culture of ethical behavior, encouraging openness amongst employees, directors and contractors.

Trading in Company Securities

The Company's policy is that there be no dealings in the Company's securities, whether in permitted periods or at any other time:

• 1. When a designated officer is in possession of inside information, or
• 1. Where the dealing is for short-term or speculative gain, or
• 1. Within a period that is 72 hours prior to and 48 hours after any announcement.

Apart from these restrictions a designated officer can, unless there are special circumstances, only deal in the Company's securities in the following periods:

• Within the period commencing 48 hours after the announcement of the half year and full year financial results respectively and ending I month after each of those announcements.
• Within the period commencing 48 hours after the dispatch of the annual report made to shareholders through to one month after the annual general meeting.

Each director has entered into an agreement with the Company to provide information to allow the Company to notify the ASX of any share transactions within five business days

ASX Principle 4: Safeguard integrity in financial reporting.

In addition to the financial review functions of the Audit & Risk Committee referred to above, the Board regularly reviews the monthly financial reports. It also requires the Chief Executive Officer to provide written assurances in respect to the accuracy and compliance of the annual and haff yearly published financial statements. Due to the size of the Company, there is not a separate role for a Chief Financial Officer and, as a result, the Chief Executive Officer fills that role.

The Audit &Risk Committee has its own Charter, three non-executive members (all of whom are independent) and is chaired by an independent member who is not the chairman of the Board. Details of the number of meetings are set out in the Directors Report in the annual report.

The auditor provides a certificate to the Company confirming their independence. Rotation of the auditor will proceed as required by Law or Regulation. The Company currently has no intention of replacing the existing auditors, however should this arise it will made a selection following a competitive process. Nonaudit work is arranged based on cost and the needs of the Company

ASX Principle 5: Making timely and balanced disclosure.

As a company whose shares are traded on the Australian Stock Exchange (ASX), Anadis is very conscious. that it has an obligation to ensure that the market is both fully and accurately informed about material matters by timely and balanced disclosure.

The information disclosed will be factual and presented in a clear and balanced way. The Company has prepared and issued to all senior staff a written policy document on this matter and requires strict adherence to this policy. Continuous disclosure is a standard agenda item at all Board meetings.

ASX Principle 6: Respect the rights of shareholders.

The Company is committed to respecting the rights of sharehofders and facilitating the effective exercise of those rights.

This is achieved by:

• 1. Effective and regular communications including a regular newsletter and modern up to date website.
• 1. Providing access to timely, balanced and understandable information about the Company and its current and future direction, and
• 1. Facilitating easy participation at general meetings.

The Company's external auditor attends each general meeting and is available to answer any questions. with regard to the conduct of the audit and their report.

ASX Principle 7: Recognise and managing risk.

In addition to the risk review functions of the Audit & Risk Committee referred to above, the Board receives regular written reports from the Science Committee and the Chief Executive Officer covering all matters within their respective portfolios.

As part of its Charter, the Audit & Risk Committee has prepared an annual checklist of risk management. and internal control matters which it systematically reviews with senior staff including external consultants. The Chief Executive Officer also provides a written statement that the control systems are operating efficiently and effectively in all material respects.

In addition to the usual business risks, the particular risks associated with the Company's activities are:

• 1. long lead times and high costs associated with biotech R&D,
• 1. the low success rate of biotech research in Australia,
• 1. stringent health regulations which are subject to regular change,
• 1. the high level of funding required over a long period of time, and
• 1. securing intellectual property.

ASX Principle 8: Encourage enhanced performance.

To ensure that the directors and key executives are equipped to develop the Company, the directors are committed to fairly review and actively encourage enhanced board and management effectiveness. This will be achieved by informing, training, and evaluating individual and collective performance regularly. and fairly.

Measurable and qualitative indicators will be established for board members (including their roles on committees) and key executives and performance will be regularly reviewed against these indicators. This process will be applied during the next financial year.

ASX Principle 9: Remunerate fairly and responsibly.

The Board notes the Corporate Governance Council recognises that, for small companies, the efficiencies expected to flow from a formal committee structure may not be apparent. The Board agrees with this view.

The full Board will exercise these responsibilities and set the policies for remuneration of directors and senior managers so as to comply with the Corporation Act, accounting standards and the ASX Listing Rules. Remuneration for executive directors and staff is determined by reference to market rates. From time to time employees are offered Options under plans previously agreed by shareholders. In a company at this stage of its development, the only meaningful performance target is the share price and the exercise price for such options are set well in advance of where the shares are trading at the time of issueand, for executives, usually have a two year vesting period.

As the number of options on issue at anyone time is low and the price and exercise periods differ, the Board considers that the exercise of such options will have little or no effect on the Company's share price or Earnings Per Share.

in setting remuneration for non-executive directors, the Board will use the following principles;

• 1. Non-executive directors shall be paid fees and superannuation plus supplements for committee work. within the aggregate amount set by shareholders in general meeting (last set in 2003 at \$250,000 for cash remuneration),
• 1. Non-executive directors participate in options arrangements subject to shareholder approval. The Board does not accept that options should not be given to non-executive directors as it believes (and shareholders have previously agreed) that in an R&D company their particular expertise is vital to the team effort and therefore options are a valid incentive,
• 1. Non-executive directors retirement payments are limited to compulsory employer superannuation, and
• 1. Bonuses will not be paid to non-executive directors.

Details of remuneration paid to directors and senior staff is set out in the Directors Report in the annual report.

ASX Principle 10: Recognise the legitimate interests of stakeholders.

The Board is committed to delivering maximum share value to the shareholders while maintaining high standards of customer service and employment, in addition, the Company aims to achieve full compliance with refevant legislation and contribute to the wider community and therefore all stakeholders.

This will be achieved by the application of the principles set out in this Corporate Governance Statement.

Statement of Financial Performance for the year ending 30 June 2004

	Note	2004	2003
		£.	\$
Revenue from ordinary activities	2	4,284,872	3,429,488
Raw materials and consumables used Employee benefits expense Depreciation and amortisation expenses Borrowing costs Research and development -- external Factory overheads Directors' fees Travel expenses Corporate and administrative expenses		(2,354,881) (1,641,501) (183,341) (2, 434) (587,072) (244,02) (162,500) (81,855) (522,055)	(2,018,555) (1,250,612) (162,381) (974) (961, 905) (207, 194) (125,738) (85,780) (231,662)
Profit/ (loss) from ordinary activities before income tax benefit	3	(1,494,788)	(1.615,313)
income tax benefit	4	332,753	335.729
Profit/ (loss) from ordinary activities after income tax benefit	16	(1,162,035)	(1,279,584)
		Cents	Cents
Basic earnings per share	26	(1, 43)	(1.58)
Diluted earnings per share	26	(1, 43)	(1.58)

The above statement of financial performance should be read in conjunction with the accompanying notes

Statement of Financial Position as at 30 June 2004

	Note	2004	2003
		\$	£
CURRENT ASSETS
Cash	5	311,834	381,820
Receivables	6	605,313	654,093
investments	7	1,000,000	2,130,000
Inventories	8	802,309	600,902
Other assets	9	128,130	46,605
TOTAL CURRENT ASSETS		2,847,586	3,813,420
NON-CURRENT ASSETS
Plant and equipment	łО	1,769,059	1,830,224
Intangible assets	针	293, FT9	314,065
TOTAL NON-CURRENT ASSETS		2,062,178	2,148,289
TOTAL ASSETS		4,909,765	5,954,709
CURRENT LIABILITIES
Accounts payable	12.	677,483	666,093
Interest bearing liabilities	13.	26,974	10,195
Provisions	$+4$	127,234	79.953
Other	15		113,828
TOTAL CURRENT LIABILITIES		831,691	870,069
NON-CURRENT LIABILITIES
Interest bearing liabilities	łЗ		26,974
Provisions	$+4-$	46,746	14,303
TOTAL NON-CURRENT LIABILITIES		46,746	41,277
TOTAL LIABILITIES		878,437	911,346
NET ASSETS		4,031,328	5,043,363
EQUITY
Share capital	$\frac{1}{2}$	12,742,048	12,592,048
Accumulated losses	16	(8,710,720)	(7.548.685)
TOTAL EQUITY		4,031,328	5,043,363

The above statement of financial position should be read in conjunction with the accompanying notes

	Note	2004 Inflow $/$ (Outflow) \$	2003 inflow/ (Outflow) \$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of goods and services
tax) Payments to suppliers and employees (inclusive of goods		4,079,287	3,193,836
and services tax)		(6.081.966)	(4,822,377)
interest received		101,389	180,101
Grants received		335,409	340,879
R&D tax rebate		332.753	335,729
Borrowing costs		(2, 434)	(974)
Net Cash Flow from Operating Activities	22	(1,235,562)	(772,806)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment		(114, 424)	(91.516)
Proceeds from maturing debentures		1,130,000	670,000
Net Cash Flow from Investing Activities		1,015,576	578,484
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		150,000
Net Cash Flow from Financing Activities		150,000
Net increase/(decrease) in cash held		(69,986)	(194,322)
Cash at beginning of financial year		381,820	576,142
Cash at end of financial year	21	311,834	381,820

Statement of Cash Flows for the year ending 30 June 2004

The above statement of cash flows should be read in conjunction with the accompanying notes

Note 1. Summary of significant accounting policies

(a) Basis of Accounting

The financial report is a general purpose financial report which has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001.

It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year.

(b) Foreign Currency Translation

Transactions in foreign currencies are converted to Australian dollars at the rates of exchange ruling at the date of each transaction. At balance date, amounts outstanding in foreign currencies are converted to Australian dollars at the rate of exchange ruling at the end of the financial year. All gains and losses are brought to account in determining the profit or loss for the year.

(c) Cash

For the purpose of the Statement of Cash Flows, cash includes cash on hand and in banks, money market investments, bank term deposits readily convertible to cash, net of outstanding bank overdrafts.

(d) Inventories

Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overheads expenditure, the latter being allocated on the basis of normal operating capacity.

(e) Property, plant and equipment

Property, plant and equipment are carried at the lower of cost and recoverable amount.

Depreciation on plant and equipment is calculated on a diminishing value basis to write off the net cost or revalued amount of each item of plant and equipment (excluding land) over its expected useful life to the Company. Depreciation on buildings is calculated on a straight line basis to write off the net cost or revaiued amount of the property (excluding iand) over its expected useful life to the Company.

Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. Profits and losses on disposals of plant and equipment are taken into account in determining the result for the period.

The expected useful lives are as follows:

Buildings	50 years
Building Improvements	10 -- 40 years
Plant & Equipment	5 - i5 years
Computers	$2 - 3$ years
Furniture and Fittings	$5 - 15$ years

(f) Intangible assets

Goodwill

Where a Company or operation is acquired, the identifiable net assets acquired are measured at fair value.The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, including any fiability for restructuring costs, is brought to account as goodwill and amortised on a straight line basis over 20 years, being the period during which the benefits are expected to arise.

(g) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific revenue criteria must be met before revenue is recognised:

Sale of Goods - Controf of the goods has passed to the buyer.

interest » When the right to receive consideration for the investment has been attained.

Grant revenue - recognised on reaching milestones within the relevant project's timetable.

Note 1. Summary of significant accounting policies (continued)

(h) Employee Benefits

The amounts expected to be paid to employees for their pro-rata entitlements to long service and annual leave are accrued annually on the basis of statutory and contractual requirements. The contributions made to superannuation funds are charged against the profit and loss account.

(i) Earnings Per Share

Basic earnings per share is determined by dividing the operating profit or loss after income tax attributable to members of the Company by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(j) Income Tax

Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation.

Income tax on cumulative timing differences is set aside to the deferred income tax or future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.

(k) Research & Development

Costs incurred on research and development projects are deferred to future periods to the extent they are expected beyond any reasonable doubt to be recoverable.

Directors' and Executive Remuneration (I)

Equity-based compensation benefits

Equity-based compensation benefits are provided to Directors and Executives via the Anadis Executive Share Option Plan No.1.

No accounting entries are made in relation to the Anadis Executive Share Option Plan No.1 until options. are exercised, at which time the amounts receivable from employees are recognised in the statement of financial position as share capital In accordance with AASB 1046 Director and Executive Disclosures by Disclosing Entities, the amounts disclosed for remuneration of directors and executives in note 28 include the assessed fair values of options at the date they were granted.

(m) Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred.

(n) Receivables

All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 45 days from the date of recognition.

Collectibility of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists.

(o) Trade and other creditors

These amounts represent liabilities for goods and services provided to the entity prior to the end of the $\,$ financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(p) Maintenance and repairs

Routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred.

(q) Recoverable amount of non-current assets

The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal.

46

Note 1. Summary of significant accounting policies (continued)

Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount write-down occurs.

(r) International Financial Reporting Standards (IFRS)

The Australian Accounting Standards Board (AASB) is adopting (FRS for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian equivalents to IFRS, and the Urgent-Issues Group will issue abstracts corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee. The adoption of Australian equivalents to IFRS will be first reflected in the company's financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006.

Entities complying with Australian equivalents to IFRS for the farst time will be required to restate their comparative financial statements to amounts reflecting the application of IFRS to that comparative period. Most adjustments required on transition to IFRS will be made, retrospectively, against opening retained eamings as at 1 July 2004.

The Company Secretary has recently attended an IFRS implementation workshop run by the company's auditors to assess the financial reporting implications of the above standards and a transition plan is currently being prepared for the consideration of the Audit & Risk Committee to ensure the timely implementation of the new standards.

Major changes identified to date that will be required to the company's existing accounting policies include the following:

Intangible assets -- goodwill

Under the Australian equivalent to IFRS 3 Business Combinations, amortisation of goodwill will be prohibited, and will be replaced by annual impairment testing focusing on the cash flows of the related cash generating unit.

This will result in a change to the current accounting policy, under which goodwill is amortised. on a straight line basis over the period during which the benefits are expected to arise and not exceeding 20 years.

2 Equity-based compensation benefits.

Under the Australian equivalent to IFRS 2 Share-based Payment, equity-based compensation to employees will be recognised as an expense in respect of the services received. This will result in a change to the current accounting policy, under which no expense is recognised for equity based compensation.

Note 2. Revenue

	2004	2003
	\$	\$
Revenue from Operating Activities
Sale of goods	3,677,553	3,058,560
Revenue from Outside Operating Activities
interest	86.588	\$43,877
Government grants	424.019	200.773
Other grants	96.712	26,278
	607,319	370,928
Total Revenue	4,284,872	3,429,488

	2004 5	2003 S
Note 3. Operating loss
Operating profit/(loss) before income tax expense includes
the following specific expenses:
Cost of sales of goods	3,072,443	2.563.106
Amortisation -- Goodwill	17.946	17.946
Depreciation	165,395	144,435
Borrowing costs expensed	2.434	974
Research and development expenditure - net of Grants	762.872	1,189,667
Note 4. Income tax
The income tax expense for the financial year differs from the
amount calculated on the profit/(loss). The differences are reconciled as follows.
Loss from ordinary activities before income tax expense	(1,494,788)	(1,615,313)
income tax calculated $@30\% (2003 + 30\%)$	(448, 436)	(484,594)
Tax effect of permanent differences:
Research and development tax concession	(57,270)	(73,866)
Research and development tax rebate	(332,753)	(335, 729)
Timing differences and tax losses not brought to account	498,182	551,595
Other items	7.524	6.865
income tax expense/(benefit) attributable to operating profit/(loss)	(332,753)	(335, 729)
The future income tax benefit arising from tax losses not brought
to account at balance date as a result of realisation of the
benefit not being virtually certain:	2.155.546	2.042.166

This benefit for tax losses will only be obtained if:

(a) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;

(b) the Company continues to comply with the conditions for deductibility imposed by the tax legislation; and

(c) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.

Note 5. Cash

Cash at bank and on hand .	-203.409	160.713.
Short term deposits	108.425	221.107
	-311.834	-38 1.820
(Ferman and the control of the control of the control of the control of the control of

Short term deposits are held in a cash 'at call' account.

	2004	2003
Note 6. Receivables	S	S
Trade debtors	596,757	630,736
Other debtors	8,556	23,357
	605,313	654,093
Note 7. Investments
Debentures The debentures have been issued by a subsidiary of the	1,000,000	2,130,000
Company's bankers to mature within the next five months.
Note 8. Inventories
Raw materials -- at cost	421,737	239,600
Work in progress - at cost	88,825
Finished Goods -- at cost	291,747	361,302
	802,309	600,902
Note 9. Other assets
Prepayments	56,636	46,605
Accrued Revenue	71,494
	128,130	46.605
Note 10. Plant and equipment
Land
At cost	73,647	73,647
	73,647	73,647.
Buildings
At Cost	655,155	655, 155
Accumulated depreciation	(46, 120)	(33,017)
Building Improvements	609,035	622, 38
At Cost	267,412	267,412
Accumulated depreciation	(45,892)	(32,219)
	224,520	235, 193
Plant and equipment
At cost	1,037,543	954,752
Accumulated depreciation	(290, 487)	(181,201)
	747,056	773,55 }
Computer Equipment
At Cost	73,240	55,011
Accumulated depreciation	(44,933)	(33,181)
	28,307	24,830

Note 10. Plant and equipment (continued)	2004	2003
Furnàure & Fittings.	\$	\$
At Cost	141.353	148.352
Accumulated depreciation	(51,859)	(37, 487)
	89.494	103,865
Total Cost	2,248,350	2,147,329
Total Accumulated Depreciation	(479.291)	(317, 105)
	1,769,059.	1,830,224

Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below.

		Land Buildings	Building Improvement equipment	Plant and	Computer equipment	Furniture & Fittings	Total
	\$	\$			\$		\$
Carrying amount
at Huly 2003.		73,647 622,138	235,193	773.551	21,830	103.865	1,830,224
Additions		٠	٠	82.793	21,437		104.230
Disposals	٠	×.	٠
Deprediation expense		(3, 103)	(13,673)	(109,288)	(14,960)		$(14,371)$ $(165,395)$
Carrying amount at 30 June 2004		73,647 609,035	221.520	747.056	28,307	89.494	1.769.059

Included in the Plant and Equipment are assets with a carrying value of \$20,490 (2003 - \$32,782). which have been financed under a hire purchase agreement.

The basis of valuation of land and buildings is at cost/written down value. The most recent appraisal was at 9 August, 2004 and was based on independent assessments that valued the land and building at between \$1,050,000 and \$1,150,000.

Note II. Intangible assets
	2004	2003
	\$	\$
Goodwill	358.921	358,921
Less Accumulated Amortisation	(65, 802)	(47,856)
	293.119	311,065
Note 12. Accounts Payable
Trade creditors	515,454	426.611
Sundry creditors and accruals	162,029	239,482
	677,483	666,093
Note 13. Interest Bearing Liabilities
Current liabilities
Hire purchase	26.974	10.195
Non-current liabilities
Hire purchase		26.974

The hire purchase contract is repayable in monthly installments with a final payment due February, 2005. plus a one off payment of \$20,176. This liability has been secured against the assets purchased, the book value of which is disclosed in Note 10.

			2004	2003 \$
Note 14. Provisions
Current liabilities
	Employee entitlements		127,234	79,953
Non-current liabilities
	Employee entitlements		46.746	14,303
Employee numbers
	Number of employees at reporting date		18	13.
Note 15. Other
Current liabilities
	Income received in advance			113.828
	Note 16. Accumulated losses
	Accumulated losses at the beginning of the financial year		(7,548,685)	(6,269,101)
	Net (loss)/ profit attributable to the members of Anadis		(1,162,035)	(1,279,584)
	Accumulated (losses) at the end of the financial year		(8,710,720)	(7,548,685)
	Note 17. Share Capital		2004	2003
			\$	\$
Issued and Paid Up Capital
	81,663,403 (2003: 81,163,403) ordinary shares fully paid		12,742,048	12,592,048
Movements in share capital
Date	Details	Number of	Issue	\$
1/07/2002	Balance	Shares 84,463,403	Price	12,592,048
30/06/03	Balance	81,163,403		12,592,048
29/01/04	Share Issue/exercise of options	500,000	0.30	\$50,000
30/06/2004	Balance	81,663,403		12.742.048

Refer to Note 29 for shares issued since reporting date.

Note 17 Share Capital (continued)

Share Options

Unissued ordinary shares under option at balance date:

Number	Issue Price of Shares	Expiry date
200,000	\$0.40	22 April 2005
200.000	\$0.45	22 April 2005
700,000	\$0.50	31 May 2006
50,000	\$0.35	15 August, 2005
50.000	\$0.39	5 August, 2005
50,000	\$0.24	25 November, 2005
50.000	\$0.27	25 November, 2005
50.000	\$0.22	5 June, 2006
50.000	\$0.25	5 June, 2006
50.000	\$0.34	8 September, 2006
50,000	\$0.38	18 September, 2006
250,000	\$0.35	10 December, 2005
850,000	\$0.55	日 November, 2006
750,000	\$0.55	14 November, 2006
3.350.000

Movement in share options during the year

100,000 options were granted on 12 August 2003 pursuant to an agreement with Oatlie Properties Pty. Ltd, under which it is providing professional services to the Company Each option is convertible to one ordinary share at any time on or before 5 June, 2006 at a fixed price of \$0.22 for \$0,000 and \$0.25 for the remaining 50,000.

100,000 options were granted on 30 October, 2003 pursuant to an agreement with Oatlie Properties. Pty. Ltd. under which it is providing professional services to the Company. Each option is convertible to one ordinary share at any time on or before 18 September, 2006 at a fixed price of \$0.34 for 50,000 and \$0.38 for the remaining 50,000.

The 2003 annual general meeting resolved to issue:

• 250,000 options to Mr. Zwolenski, a director, to acquire shares in the Company under the Anadis Τ. Executive Share Plan No. 1 @ 0.35 each, vesting immediately and expiring 10 December, 2005,
• 1. 350,000 options to Mr. Molyneux, the Chairman, to acquire shares in the Company under the Anadis Executive Share Plan No. 1 @ 0.55 each, vesting immediately and expiring 11 November, 2006,
• 250,000 options to each of Dr. Jenkins and Prof Robins-Browne, directors, to acquire shares in 3. the Company under the Anadis Executive Share Plan No. 1 @ 0.55 each, vesting immediately and expiring FF November, 2006, and
• 750,000 options to Mr. Graham, Managing Director, to acquire shares in the Company under the 4. Anadis Executive Share Plan No. 1 @ 0.55 each, vesting immediately and expiring 14 November, 2006

During the year:

• $\overline{\mathbb{F}}$ ,500,000 options held by Mr. C. Graham (CEO/MD) lapsed, and
• 500,000 options were exercised at 30 cent per share.

The Anadis Executive Share Plan is for directors of Anadis Limited.The options are granted for no consideration after receiving approval from the Company's shareholders.

Note 18. Superannuation Commitments

All employees are entitled to various levels of benefits on retirement, disability or death. The superannuation plans are accumulation plans. The Company contributes a percentage of the directors fees and salaries of employees to the superannuation plans.

Note 19. Related Party Disclosure

Directors

The Directors of the Company during the financial year were: Philip Molvneux Conor Graham Dr Peter Jenkins Professor Roy Robins-Browne Roman Zwolenski Remuneration received or receivable by the directors of the Company is disclosed in Note 28.

Transactions with Directors and their Director related companies are as follows:

In the 1999/00 year, the Company agreed to pay a royalty to Mr Conor Graham on all worldwide sales of the antibody tablet manufactured by the Company or any licence of the Company and incorporating the invention described as "pharmaceutical composition containing antibodies" and the subject of Australian patent application number PM [313, The royalty is set at one and a half percent (1.5%) of the wholesale price received by the Company for the product. In the event the Company sells its manufacturing and marketing rights on the basis of receiving one up front payment the only royalty payable is set at 1.5% of the amount received by the Company for those rights. To date, there have been no payments.

Mr. Zwolenski is a director of and shareholder in Sequence Capital Group Pty. Ltd. ('Sequence'). Sequence has, in the year ended 30 June, 2003 and prior to this, provided corporate and marketing services. Since Mr. Zwolenski's appointment to the board on 24 September, 2002, the Company has paid Sequence \$15,400 for services rendered prior to his appointment and \$15,400 for services rendered after his appointment. Prior to his appointment the Company issued 400,000 options to Sequence.

Share and share option transactions with Directors and their Director related entities

The aggregate number of shares and share options held by the Directors of the Company and their Director related entities at balance date were:

Class of share or option	2004	2003
Ordinary shares	-8.453.690	-8.323.690
Options over ordinary shares	1.850.000	1.500.000

Note 20. Economic Dependency

Anadis Limited depends for a significant volume of revenue on Aussie Bodies Pty Ltd. During the year ended 30 June 2004, approximately 85% (2003 - 89%) of the Company's revenue from sale of goods was sourced from this customer. The Company has a five year contract with Aussie Bodies Pty Ltd to manufacture milk based products, this commenced in April 2001.

Note 21. Cash Reconciliation for the Statement of Cash Flows

	2004	2003
		S.
Cash	203.409	160.713
Short term deposits	108,425	221,107
Balance per statement of cash flows.	311.834	381,820

Note 22. Reconciliation of net cash used in operating activities to operating loss after income tax 2004 2003 \$ \$ Operating loss after income tax $(1,162,035)$ $(1,279,584)$ Adjustments: (83,341) 162,381 Depredation and amortisation Change in Assets & Liabilities: Decrease/(Increase) in inventories $(201, 408)$ $(171, 644)$ Decrease/(Increase) in debtors and prepayments $(32,746)$ $(141, 463)$ (Decrease)/increase in accounts payable $11,389$ 464,209 (Decrease)/increase in other liabilities $(113,828)$ 113,828 (Decrease)/increase in borrowings 37.169 (Decrease)/increase in employee benefits 79,725 42,298 Net cash used by operating activities $(1,235,562)$ $(772, 806)$

Note 23. Remuneration of Auditors

During the year the following fees were paid for services provided by the auditor of the Company:

Assurance services

L. Audit services
Fees paid to PricewaterhouseCoopers Australian family
Audit and review of financial reports and other audit work under the Corporations Act. 2001	53.750	47.000
Total remuneration for audit services	53.750	47.000
2. Other assurance services
Fees paid to PricewaterhouseCoopers Australian firm:
Other audit related services	2,350
IFRS accounting services	4.500
Total remuneration for other assurance services	6,850
Total remuneration for assurance services	60.600	47,000
Taxation services
Fees paid to PricewaterhouseCoopers Australian firm:
Tax compliance services, including review of company income tax
returns		8,000
Total remuneration for taxation services		8,000

The Company's policy on the engagement of auditors is set out in the Corporate Governance Statement (ASX Principle 4) in this Report.

Note 24. Segment Information

Business Segment:

The Company conducts Research & Development activities and manufactures health foods. Geographical Segment: The Company operates within Australia.

2004 \$ \$ \$ Manufacturing Research & Unallocated Total Development Operating revenue 3,677,553 3,677,553 520,731 520,731 Other revenue 86,588 86,588 interest revenue Total segment revenue 3,677,553 520,731 86,588 4,284,872 Segment result 605,110 $(762, 872)$ $(1,337,026)$ $(1,494,788)$ Taxation 332,753 332,753 Profit/(Loss) after tax 605,110 $(530, 119)$ $(1,337,026)$ $(1,162,035)$ Segment assets 2,987,583 435,910 1,486,272 4,909,765 Segment liabilities 318,802 310,304 249,331 878,437 Depreciation & 98,398 55,612 29,331 183,341 amortisation expense Other non-cash expense 8,285 17,438 54,002 79,725 Acquisition of non-current 82,793 104,230 $21,437$ $\overline{\phantom{a}}$ segment assets

2003	\$	\$	S	\$
	Manufacturing	Research &	Unallocated	Total
		Development
Operating revenue	3,058,560			3,058,560
Other revenue		227,051		227,051
interest revenue			143,877	143,877
Total segment revenue	3,058,560	227,051	143,877	3,429,488
Segment result	537,966	(1,189,667)	(963, 612)	(1,615,313)
Taxation		335,729		335,729
Profit/(Loss) after tax	537.966	(853,938)	(963,612)	(1279,584)
Segment assets	2,827,204	420.028	2,707,477	5,954,709
Segment liabilities	366,142	416,858	128,346	911.346
Depreciation & amortisation expense	91.742	45.477	25,162	162,381
Other non-cash expense			21.034	21,034
Acquisition of non- current segment assets	35.486	42.444	13,586	91.516

\$

	Notes to Financial Statements, 30 June 2004

Note 25. Research Commitments	2004	2003 \$
The Company has entered into agreements with certain research organisations for ongoing research. Under these agreements the Company is committed to providing funds over future periods as follows:
Payable within one year.	75,000	《40.380
Payable within 13-24 months		10,250
Payable within 25-36 months
Research commitments not recognised in the financial statements	75,000	150,630
Note 26. Earnings Per Share	2004	2003
	Cents	Cents
Basic earnings per share	(1.43)	(1.58)
Diluted earnings per share	(1.43)	(.58)
	2004	2003
	Number	Number
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	81310,802	81.163.403
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted
earnings per share	81.310.802	81.163.403

In future, the weighted average number of ordinary shares used as the denominator will be impacted by the post reporting date event referred to in Note 29.

Reconciliation of earnings used in calculating earnings per share

The numerator used in calculation of both Basic EPS and Diluted EPS is a loss of $$1,162,035$ (2003 - \$1,279,584) and there are no reconciling items to the loss from ordinary activities before income tax expense.

Options

Options that have been granted are considered to be potential ordinary shares, however their conversionto ordinary shares does not increase the loss per share, as such the options are not dilutive and have not been included in the determination of diluted earnings per share. The options have not been included in the determination of basic earnings per share. Details of options are set out in Note 17.

Note 27. Financial Instruments

(a) Credit risk exposures

The credit risk on financial assets of the Company which have been recognised on the balance sheet is generally the carrying amount, net of any provision for doubtful debts.

Note 27. Financial Instruments (continued)

(b) Interest rate risk exposures
The Company is exposed to interest rate risk through primary financial assets and fiabilities. The following
tables summarise interest rate risk for the Company, together with effective int

2004	Note	Fixed interest maturing in:
		Floating		I year on over I to	Non interest	Total
		interest	less	5 years	bearing
		rate
		\$	\$	\$	\$	\$
Financial assets
Cash	5	203,409	108,425			313,834
Receivables	6				596,757	596,757
Other debtors	6				8,556	8,556
Debentures	7	$\overline{\phantom{0}}$	1,000,000		$\overline{\phantom{a}}$	1,000,000
		203,409	1,108,425	÷.	605,313	1,917,147
Weighted average interest rate %		3.02	5.47
Financial liabilities
Accoursts payable	12				677,483	677,483
interest bearing liabilities.	13		26,974			26,974
Other	15				$\overline{\phantom{a}}$
			26,974	$\blacksquare$	677,483	704,467
Weighted average interest rate %			6.88
Net financial assets (liabilities)		203,409	1,081,451		(72, 170)	1,212,690

2003	Note		Fixed interest maturing in:
		Floating	l year or	over I to	Non	Total
		interest	less	5 years	interest bearing
		rate
		\$	\$	\$	\$	\$
Financial assets
Cash	5	160,713	221,107			381,820
Receivables	6				630,736	630,736
Other debtors	6				23,357	23,357
Debentures	$\gamma$		2.130,000			2,130,000
		160,713	2,351,107		654,093	3,165,913
Weighted average interest rate %		2.80	4.66
Financial liabilities
Accounts payable	$\overline{12}$				666,093	666,093
interest bearing liabilities.	13		10.195	26,974		37,169
Other	15			$\overline{\phantom{a}}$	113,828	113,828
			10.195	26,974	779,921	817,090
Weighted average interest rate %			6.88	6.88
Net financial assets (liabilities)		160,713	2,340,912		$(26,974)$ $(125,828)$	2,348,823

Note 27. Financial Instruments (continued)

(c) Net fair values

The financial assets and fiabilities as shown above are disclosed at their aggregate net fair values. With respect to assets, net fair values are determined using the cost to the Company to acquire the asset. Net fair values for liabilities are determined by reference to the value of the liability when incurred

Note 28. Directors and executive disclosures

Directors The following persons were directors of Anadis Limited during the financial year:

Chairman - non-executive P Molyneux

Executive director

C Graham, Managing director and chief executive officer

Non executive directors

Or P (enkins) Professor R Robins-Browne R Zwołenski

Executives (other than directors) with the greatest authority for strategic direction and management

The following persons were the executives with the greatest authority for the strategic direction and management of the Company during the financial year:

Name	Position
-F Mears I	-Factory Manager
- Dr G Rawlin I	General Manager – Research and Development
S Skorobogaty	General Manager – Nutraceuticals Division

All of the above persons were also specified executives during the year ended 30 June, 2003.

Remuneration of directors and executives

Principles used to determine the nature and amount of remuneration

The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors, the chief executive officer and the executive team. The Board assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from retention of a high quality Board and executive team. The chief executive officer and members of the senior management team have employment contracts.

The framework provides a mix of fixed and variable pay and a blend of short and long-term incentives.

Non-executive directors

Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board. The Chairman's fees are determined independently to the fees of non-executive directors based on comparative roles in the external market. Directors do receive share options when approved by shareholders.

Directors' fees

The current base remuneration was last reviewed with effect from 3 July, 2003.The Chairman's remuneration is inclusive of committee fees while additional fees are also paid to non-executive directors for their membership of Board committees. Bonuses are not paid.

Non-executive directors fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. The pool, which was last varied by shareholders on 11 November, 2003, stands at \$250,000 for cash remuneration.

Note 28. Directors and executive disclosures (continued)

Retirement allowances for directors.

Non-executive directors retirement payments are limited to compulsory employer superannuation.

Executive pay

$20.00000000000000000000000000000000000$

2003

Executives are given the opportunity to receive the base emolument in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.

Details of remuneration

Details of the remuneration of each director of the Company and each of the executives of the Company, including their personally related entities, are set out in the following table.

Uirectors
2004.	Primary	Post-employment	Equity
Name	Cash salary Superannuation		Options	Total
	and fees \$	\$	\$	\$
Philip Molyneux	50.000	4.500	44.300	98,600
Conor Graham	203,000	72.000	94.500	369,500
Or Peter lenkins	37,500	3.375	31,500	72,375
Professor Roy Robins- Browne	37.500	3.375	31.500	72,375
Roman Zwolenski	37,500	3,375	24,000	61,875
Total	365.500	86.625	222.600	674.725

At the 2003 Annual General Meeting the shareholders approved the issue options to non-executive and executive Directors under the Anadis Executive Share Option Pian No. 1. The options are for 3 years with immediate vesting and have been valued using Black-Scholes method with a volatility of 90% (The three years for Mr. Zwołenski commenced in December 2002 when the volatility was 76%.)

Total remuneration of the directors of the Company for the year ended 30 June, 2003 is set out below. Information for individual directors is not shown as this is the first financial report prepared since the issueof AASB 1046 Director and Executive Disclosures by Disclosing Entities.

Primary	Post-employment	Equity
Cash salary	Superannuation	Options	Total
\$
282,269	89.981		372,250
	and fees

Note 28. Directors and executive disclosures (continued)

Other executives of the Company

2004.	Primary Cash salary and	Non-monetary benefits	Post-employment Superannuation	Equity Options	Total
Name	fees \$	\$	\$	\$	\$
Fred Mears (Factory Manager)	109.807	٠	30.193	13,200	153,200
Dr. Grant Rawlin (GM R&D)	39.372	3.084	12.544	13.200	168,200
Steve Skorobogaty (GM Nutraceuticals Division)	38.954	3.540	12.506	13.200	168,200
Total	388.133	6.624	55.243	39,600	489.600

Options Granted. Options were issued to the executives on 34 May, 2002. They are for 4 years with a 2 year vesting period and have been valued using the Black-Scholes method with a volatility of 74%.

Total remuneration of the executives of the Company for the year ended 30 June, 2003 is set out below. Information for individual executives is not shown as this is the farst financial report prepared since the issue of AASB 1046 Director and Executive Disclosures by Disclosing Entities.

2003. Name	Primary Cash salary and fees	Non-monetary benefits	Post-employment Superannuation	Equity Options	Total
				S
Total	354.156		65.675	43.200	-463.031

Service agreements

Remuneration and other terms of employment for the Managing Director, and specified executives are formalised in service agreements. Each of these agreements provide for the provision of a total package which can be taken in any form agreed by the Company and participation, when eligible, in the Anadis Executive Share Option Plan No. 1 (for directors) or the Anadis Limited Employee Share Option Plan (for executives). Other major provisions of the agreement relating to remuneration are set out below.

C Graham, Managing Directors & Chief Executive Officer

• Term of agreement 3 years commencing 1 May, 2002.
• Total remuneration, inclusive of superannuation, for the year ended 1 May, 2005 of \$275,000, to be reviewed annually by the Board.
• In the fast three years there is no provision to terminate the agreement other than for breach of the agreement.

F Mears, Factory Manager

• Term of agreement 2 years commencing 1 january, 2004.
• Total remuneration, inclusive of superannuation, for the year ended 31 December, 2004 of \$140,000, to be reviewed annually by the Board.
• In the first two years there is no provision to terminate the agreement other than for breach of the agreement.

Dr. G Rawlin, General Manager - Research & Development

• Term of agreement 2 years commencing 1 (anuary, 2003,
• Total remuneration, inclusive of superannuation, for the year ended 31 December, 2004 of \$155,000, to be reviewed annually by the Board,
• In the first two years there is no provision to terminate the agreement other than for breach of the agreement.

Note 28. Directors and executive disclosures (continued)

5 Skorobogaty, General Manager -- Nutraceuticals Division.

• Term of agreement 2 years commencing 1 january, 2003.
• Total remuneration, inclusive of superannuation, for the year ended 31 December, 2004 of \$155,000, to be reviewed annually by the Board,
• In the first two years there is no provision to terminate the agreement other than for breach of the agreement.

Share based compensation - options

The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as follows:

Grant date	Expiry date	Exercise price	Value per loption lat grant	IDate exercisable
			ldate
III November, 2003	10 December, 2005	10.35.	10.084	H00% after H. November, 2003.
III November, 2003.	l I i November, 2006.	10.55	10.126	1100% after 11 November, 2003
114 November, 2003	14 November, 2006	0.55	10.126	1100% after 14 November, 2003
31 May, 2002	31 May, 2006	0.50	10.144	100% after 31 May, 2004.

Options are granted to directors under the Anadis Executive Share Option Plan No. I, which was approved by shareholders prior to listing in 1999. Options are granted to staff, at the discretion of the Board, under the Anadis Limited Employee Share Option Pian which was approved by directors on 14 May, 2002.

Options are granted under the Plans for no consideration. Options can be granted for up to a five year period with a vesting date set by the Board.

Options granted under the Plans carry no dividend or voting rights.

When exercisable, each option is convertible into one ordinary share.

All options are issued with an exercise price set considerably in excess of the market price at the time of grant.

Equity instrument disclosures relating to directors and executives.

Options provided as remuneration

Details of options over ordinary shares in the Company provided to each director and each of the executives are set out below. When exercisable, each option is convertible into one ordinary share in Anadis Limited, Further information on the options is set out in Note 17.

Name	Number of options granted	Number of options vested
Directors	during the year	during the year
P Molyneux C Graham P (enkins R. Robins-Browne R Zwołenski	350.000 750.000 250,000 250,000 250,000	350.000 750.000 250.000 250.000 250.000
Executives
F Mears G Rawlin 5 Skorobogaty	٠ ٠ ٠	200.000 200.000 200.000

Note 28. Directors and executive disclosures (continued)

Option holdings

The number of options over ordinary shares in the Company held during the year by each director of the Company and each of the executives, including personally related entities, are set out below.

lName. Balance at l the start of Iduring the lthe vear	I Granted vear as Iremuneration.	Exercised during the changes vear	– IOther during the Ivear l({apsed}	Balance at lthe end of lthe vear	IVested and lexercisable at the end of the Ivear
-----------------------------------------------------------------	-----------------------------------------------	-----------------------------------------	----------------------------------------------	----------------------------------------	------------------------------------------------------------------

Directors

IP Molyneux I		350.000		350.000	350.000
IC Graham .	.500.000	750.000	1,500,000}	750.000	750.000
IP lenkins.		250.000		-250.000	250.000
IR Robins-Browne -		250.000		-250.000	250.000
IR Zwolenski		250.000		-250.000	250,000

Executives

lF Mears	200,000		200,000	200.000
G Rawlin	200,000		200,000	200,000
S Skorobogaty i	200,000		200.000	200.000

No options are vested and unexercisable at the end of the year.

Share holdings

The number of shares over ordinary shares in the Company held during the year by each director of the Company and each of the executives, including personally related entities, are set out below.

Name	Balance at the start of the year	Received during the year on the exercise of options.	Other changes during the year	Balance at the end of the year
Directors
P Molyneux	250,000			250,000
IC Graham	4.098.690			4.098.690
P Jenkins	3,960,000		130,000	4,090,000
R Robins-Browne	15.000		v	15,000
R Zwolenski
Executives
F Mears
IG Rawlini			۰
lS Skorebovatvi	7.500.			7.500

Loans to directors and executives.

There are no loans to any director or employee, including their personally related entities (2003 $\cdot$ nil).

Note 29. Events occurring after reporting date

On 21 July, 2004 the Company announced that it would make a Placement of 10,900,000 fully paid ordinary shares at 39 cents each to raise \$4,251,000. The Placement, which was arranged directly by the Company without commissions or placement fees, was completed on 30 July, 2004.

After the Placement the number of fully paid shares on issue was 92,563,403 and the Paid Up Capital was. \$16,993,048.

Directors Declaration for the years ending 30 June 2004

The directors' declare that the financial statements and notes set out on pages 42 to 62:

• (a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
• (b) give a true and fair view of the Company's financial position as at 30 June 2004 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date.

in the directors' opinion:

• (a) the financial statements and notes are in accordance with the Corporations Act 2001; and
• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

C GRAHAM Director

P MOLYNEUX Director

Melbourne 11August 2004.

Independent Audit Report to the Members

PriceWATERHOUSE(COPERS

PricewaterhouseCoopers ABN 52 780 433 757

333 Colleys Street MELBOURNE VIC 3000 GPO 86x 1333L MELBOURNE VIC 3001 DX 77 Melbourne Australia www.pwc.com/au Telephone +61 3 8603 1000 Facsimile +61 3 8603 1999

Independent audit report to the members of Anadis Limited

Audit Opinion

In our opinion, the financial report of Anadis Limited:

• gives a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of Anadis Limited as at 30 June 2004, and of its performance for the year ended on that date and
• is presented in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, and the Corporations Regulations 2001.

This opinion must be read in conjunction with the rest of our audit report.

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for Anadis Limited (the company), for the year ended 30 june 2004.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 200 i. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit approach

We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherentlimitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2004, Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's financial position, and its performance as represented by the results of its operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

When this audit report is included in an Annual Report, our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2004.

Pricewate house Copers

PricewaterhouseCoopers

$\mathcal{H}$ $\longrightarrow$

SC Bannatyne Partner

Melbourne 11 August 2004

Additional ASX Information for the year ending 30 June 2004

Additional information required by the Australian Stock Exchange not shown elsewhere in this report is as follows. The information was applicable at 1 September, 2004

a) Statement of shareholdings

Analysis of numbers of equity security holders by size of holding

	Ordinary shares
	Shares	Options
$1 - 1.000$	80	O
$1.001 - 5.000$	522	O
5,001 - 10,000	-436	Ð
10,001 - 100,000	876	ŧ
100,00% and over-	-112	10
	2.026	Ιŧ

b) Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

	Ordinary Shares
	Number held	Percentage of Issued Shares
Tatura Milk Industries Limited	0.100.000	10.91
Paracroft Pty, Ltd	9,571,051	10.34
Equity Trustees Limited	988,440	2.15
Mrs. Ese Behari	9.970,718	2.13
Westpac Custodian Nominees Limited	1,839,880	1.99.
Mr. Peter James Jenkins	1.400,000	1.5 E
Kobyboyn Pty, Limited	1.237,500	1.34
Pepella Pty, Etd.	1.153,163	1.25
TP Morgan Nominees Australia Limited	1,054,047	. 4
S.C. Driver & J.E. Driver	1,000,000	1.08
Tartan Pines Pty. Ltd	1,000,000	1.08
Drill Investments Pty, Etd.	932,000	LO E
First Guardian Capital Pty, Limited	756,767	0.82
Ginga Pty, Ltd.	710.802	0.77
Mr. Colin Burton Chapman	697,154	0.73
Mr. Richard Wilson, Darson	676,875	0.73
Eander Custodians Pty, Ltd	644,277	0.70
Mr. Peter Munro McLengan	625,000	0.68
KPL Limited	606,000	0.65
Renmar Australi Pty, Ltd.	509,600	0.55
	38,473,274	41.56

c) Voting rights

All ordinary shares carry one vote per share without restriction.

d) Unquoted equity securities	Number on issue	Number of holders
Options issued to take up ordinary shares	3.450.000*	łΤ
*Number of unissued ordinary shares under the options.
Holders of 20% or more of unquoted equity securities in the Company are set out below:
	Number held	Percentage
Options issued to take up ordinary shares
Mr Conor Graham	750.000	21.74
e) Substantial holders
Substantial holders in the Company are set out below:
	Number held	Percentage
Ordinary Shares
Anadis Group	11,095,321	11.99
Tatura Milk industries Limited	10.100.000	10.91

Company Particulars

Directors	Mr Philip Molyneux Crairnian Mr Conor Graham Managing Director and CEO
	Dr Peter Jenkins Professor Roy Robins Browne Mr Roman Zwolenski
Company Secretary	Mr David Woods
Principal registered off ce in Australia	4 Capital Link Drive Campbellfield Victoria 3061 Telephone (61) 3 9358 6388 Facsimile (61) 3 9358 6399 www.anadis.com.au
Share register	Computershare Registry Services Pty Ltd 452 Johnston Street Abbotsford Victoria 3067 Telephone (61) 1300 850 505
Auditor	PricewaterhouseCoopers 333 Collins Street Melbourne Victoria 3000
Soletors	Lander & Rogers Lawyers Level 12,600 Bourke Street Melbourne Victoria 3000
Bankers	Australia and New Zealand Banking Group Limited 222 Exhibit on Street Melbourne Victoria 3009
Stock Exchange Listing	Anadis Limited shares are listed on the Australian Stock Exchange

4 Capital Link Dríve, Campbellfield 3061 Victoria Australia - www.anadis.com.au