QUESTE COMMUNICATIONS LIMITED — Capital/Financing Update 2004

Jun 3, 2004

Total No of Pages: 1

Friday, 4 June 2004

COMPANY UPDATE AND CAPITAL MANAGEMENT

The Company continues to seek opportunities for the commercial exploitation of its VoiceNet VoIP telephone technology. The Company notes that VoIP technology is gaining increasing market acceptance as an switched alternative to conventional telephony transmission systems.

As a consequence of the reversion of the Australian rights to its VoiceNet technology, the Company is now able to concentrate its activity on the Australian domestic market.

The Company is currently investigatingupgrading various feature sets of the VoiceNet VoIP technology to assist in its commercial exploitation.

The Company currently has 28,404,879 ordinary shares on issue and 20,000,000 partly paid shares which are paid up to 1 cent, with 19 cents still payable (20 cents in total) (the "Partly Paid" shares). The Company's undiluted Net Tangible Assets per share ("NTA") is approximately 43 cents per share and its fully diluted NTA per share (taking into account the effect of the immediate conversion of the Partly Paid shares) is approximately 33 cents per share.

The Directors of the Company believe that the existence of such a large number of outstanding Partly Paid shares relative to the Company's total issued capital is creating a negative sentiment amongst shareholders and investors towards the Company's stock.

In particular, the effect of conversion of such Partly Paid shares dilutes the NTA per fully paid share of the Company and given the significant number of such Partly Paid shares on issue, any future increase in the NTA backing of the Company creates the opportunity for a value shift from the holders of fully paid shares to the holder of the Partly Paid shares

Whilst the Company is able to progressively make calls for the payment of the unpaid portion of the Partly Paid shares, the terms of their issue are such that it could, theoretically, take over 30 years for the Partly Paid shares to become fully paid.

The Directors have therefore decided, as a capital management exercise, to commence discussions with the holder of the Partly Paid shares (the "Holder") with a view to reach a settlement whereby, in exchange for cash and/or ordinary fully paid shares in theCompany, the Partly Paid shares arecancelled. If agreement between the Company and the Holder is reached, then a settlement proposal (the "Settlement Proposal") will be put to shareholders for approval at a General Meeting. An Independent Expert Report ("IER") will be commissioned by the Company to consider the terms of the Settlement Proposal to ensure it is far and reasonable to the Company. The IER will be given to shareholders as part of the General Meeting documentation.

The timing of this capital management decision is in part due to the pending relisting in July 2004 of Central ExchangeLimited ("CXL"), in which the Company is a shareholder. Earlier maior. todav. shareholders of CXL voted in favour of the relisting of CXL as a Listed Investment As such, once re-listed the Company. Directors believe that the activities of CXL will result in a much greater market interest in the Company's (Queste's) shares. The Directors are therefore keen to deal with the outstanding Partly Paid shares as soon as is practicable.

For Further Information:

Victor Ho Company Secretary Email: vho@queste.com.au

www.queste.com.au

QUESTE COMMUNICATIONS LIMITED

A.B.N. 58 081 688 164

Level 14, 221 St Georges Terrace, Perth WA 6000 $T$ | + 61 (8) 9214 9777 $F$ | + 61 (8) 9322 1515