QUESTE COMMUNICATIONS LIMITED — Major Shareholding Notification 2002

Dec 12, 2002

Form 603

Corporations Act 2001 Section 671B

Notice of initial substantial holder

To Company Name/Scheme	QUESTE COMMUNICATIONS LIMITED
ACN/ARSN	081 688 164
1. Details of substantial holder (1)
Name	AZHAR CHAUDHRI
	RENMUIR HOLDINGS LTD (incorporated in the British Virgin Islands)

CHI TUNG INVESTMENTS LTD (incorporated in the British Virgin Islands)

ACN/ARSN (if applicable)

The holder became a substantial holder on 11 November 1998 (being the date of official quotation of the Company on ASX)

2. Details of voting power

The total number of votes attached to all the voting shares in the company or voting interests in the scheme that the substantial holder or an associate(2) had a relevant interest(3) in on the date the substantial holder became a substantial holder are as follows:

Class of securities (4)	Number of securities	Persons' votes (5)	Voting power (6)
Ordinary Shares	4,520,450	4.520.450	15.37%
Partly Paid Ordinary Shares (issuedat 20 cents each and partly paid toone cent each)	20.000.000	1.000.000	3.40%
Total		5.520.450	18.77%

3. Details of relevant interests

The nature of the relevant interest the substantial holder or an associate had in the following voting securities on the date the substantial holder became a substantial holder are as follows:

Holder of relevant interest	Nature of relevant interest (7)	Class and number of securities
Renmuir Holdings Ltd	Registered holder of shares in the Company issued as vendorconsideration pursuant to a deed of sale of software dated 3August 1998, details of which are described in the Annexureto this notice marked "E" ("Deed of Sale")	2,633,500 (A)	Ordinary Shares
Chi Tung Investments Ltd	Registered holder of shares in the Company issued pursuantto applications made under a prospectus lodged with ASIC on6 August 1998, a copy of which accompanies this notice andis marked "I" ("Prospectus")	1,050,000 (B)	Ordinary Shares
Chi Tung Investments Ltd	Registered holder of shares in the Company issued as vendorconsideration pursuant to the Deed of Sale	16,000,000	Partly Paid Shares
Chi Tung Investments Ltd	Registered holder of shares in the Company acquired in off-market transfer, details of which are described in theAnnexure to this notice marked "F"	4,000,000	Partly Paid Shares

Azhar Chaudhri	Taken under section 608(3) of the Corporations Act to have arelevant interest (by reason of Azhar Chaudhri having votingpower above 20% in a body corporate, Data Base SystemsLtd, which controls Fast Scout Ltd by being the registeredholder and having voting power in excess of 50% of FastScout Ltd) in shares in the Company purchased by FastScout Ltd pursuant to contracts for the purchase of shares on	826,950	Ordinary Shares
	ASX between 3 August 2000 and 9 August 2000, details ofwhich are described in the Annexure to this notice marked "G"
Azhar Chaudhri	Registered holder of shares in the Company issued pursuantto applications made under the Prospectus	10,000	Ordinary Shares
Azhar Chaudhri	Taken under section 608(3)(b) of the Corporations Act tohave a relevant interest in shares in the Company held by ChiTung Investments Ltd and Renmuir Holdings Ltd, by reasonof Azhar Chaudhri having control of Chi Tung Investments Ltdand Renmuir Holdings Ltd pursuant to trusts details of whichare described in the Annexure to this notice marked "H"	3,683,500	Ordinary Shares
Azhar Chaudhri	Taken under section 608(3)(b) of the Corporations Act tohave a relevant interest in shares in the Company held by ChiTung Investments Ltd and Renmuir Holdings Ltd, by reasonof Azhar Chaudhri having control of Chi Tung Investments Ltdand Renmuir Holdings Ltd pursuant to trusts details of whichare described in the Annexure to this notice marked "H"	20,00,0000	Partly Paid Shares

There have been changes to this holding; see Annexure A for details.

$(A)$ $(B)$ There have been changes to this holding; see Annexure B for details.

4. Details of present registered holders

The persons registered as holders of the securities referred to in paragraph 3 above are as follows:

Holder of relevant interest	Registered holder of securities	Person entitled to be registeredas holder (8)	Class and number ofsecurities
				Ordinary
Azhar Chaudhri	Azhar Chaudhri	Azhar Chaudhri	10.000	Shares
Each of Azhar Chaudhri and				Ordinary
Renmuir Holdings Ltd	Renmuir Holdings Ltd	Renmuir Holdings Ltd	2,633,500	Shares
Each of Azhar Chaudhri and				Ordinary
Chi Tung Investments Ltd	Chi Tung Investments Ltd	Chi Tung Investments Ltd	1,050,000	Shares
				Ordinary
Azhar Chaudhri	Fast Scout Ltd	Fast Scout Ltd	826,950	Shares
Each of Azhar Chaudhri and				Partly Paid
Chi Tung Investments Ltd	Chi Tung Investments Ltd	Chi Tung Investments Ltd	20,000,000	Shares

5. Consideration

The consideration paid for each relevant interest referred to in paragraph 3 above, and acquired in the 4 months prior to the day that the substantialholder became a substantial holder is as follows:

Holder of relevant interest	Date of acquisition	Consideration (9)		Class and number of securities
		Cash	Non-cash
Each of Azhar Chaudhri andRenmuir Holdings Ltd	3 August 1998		A 35.78% interestin the software, asspecified in theDeed of Sale	2.633,500 (A)	Ordinary Shares
Azhar Chaudhri	5 November 1998	$2,000		10,000	Ordinary Shares
Each of Azhar Chaudhri andChi Tung Investments Ltd	5 November 1998	$210,000		1.050.000 (B)	Ordinary Shares
Each of Azhar Chaudhri andFast Scout Ltd	Between 3 August2000 and 9 August2000	$285,359.70		826,950	Ordinary Shares
Each of Azhar Chaudhri andChi Tung Investments Ltd	3 August 1998		An 8% interest inthe software, asspecified in theDeed of Sale	16.000.000	Partly Paid Shares
Each of Azhar Chaudhri andChi Tung Investments Ltd	6 August 2002	$2,579		4.000.000	Partly Paid Shares

There have been changes to this holding; see Annexure A for details. $(A)$

There have been changes to this holding; see Annexure B for details. $(B)$

6. Associates

The reasons the persons named in paragraph 3 above are associates of the substantial holder are as follows:

Name and ACN/ARSN (if applicable)	Nature of association
Renmuir Holdings Ltd	Controlled by Azhar Chaudhri
Chi Tung Investments Ltd	Controlled by Azhar Chaudhri
Azhar Chaudhri	Acting in concert with Renmuir Holdings Ltd
Azhar Chaudhri	Acting in concert with Chi Tung Investments Ltd
Renmuir Holdings Ltd	Controlled by Azhar Chaudhri who controls Chi Tung Investments Ltd
Chi Tung Investments Ltd	Controlled by Azhar Chaudhri who controls Renmuir Holdings Ltd

7. Addresses

The addresses of persons named in this form are as follows:

Name	Address
Azhar Chaudhri	175A Sarwar Road, Rawalpindi PAKISTAN
Renmuir Holdings Ltd	7th Floor, Allied Kajima Building, 138 Gloucester Road, HONG KONG
Chi Tung Investments Ltd	7th Floor, Allied Kajima Building, 138 Gloucester Road, HONG KONG
Fast Scout Ltd	Level 14, The Forrest Centre, 221 St Georges Terrace, Perth, WESTERN AUSTRALIA 6000
Data Base Systems Ltd	Lot H Level 7 Wisma Oceanic Jalan Okk, Awang Besar 87007, Federal Territory of Labuan, EastMalaysia, MALAYSIA

Signature

print name	Azhar Chaudhri	capacity	Individually and for Renmuir Holdings Ltd and Chi TungInvestments Ltd
sign here	Ź.$-\frac{1}{2}$	date	10 December 2002

DIRECTIONS

• (1) If there are a number of substantial holders with similar or related relevant interests (eg a corporation and its related corporations, or the manager and trustee of an equity trust), the names could be included in an annexure to the form. If the relevant interests of a group of persons are essentially similar, they may be referred to throughout the form as a specifically named group if the membership of each group, with the names and addresses of members is clearly set out in paragraph 7 of the form.
• (2) See the definition of "associate" in section 9 of the Corporations Act 2001.
• (3) See the definition of "relevant interest" in sections 608 and 671B(7) of the Corporations Act 2001.
• (4) The voting shares of a company constitute one class unless divided into separate classes.
• The total number of votes attached to all the voting shares in the company or voting interests in the scheme (if any) that the person or an associate has a relevant $(5)$ interest in
• (6) The person's votes divided by the total votes in the body corporate or scheme multiplied by 100.
• (7) Include details of:
  • any relevant agreement or other circumstances by which the relevant interest was acquired. If subsection 671B(4) applies, a copy of any document setting $(a)$ out the terms of any relevant agreement, and a statement by the person giving full and accurate details of any contract, scheme or arrangement, must accompany this form, together with a written statement certifying this contract, scheme or arrangement; and
  • any qualification of the power of a person to exercise, control the exercise of, or influence the exercise of, the voting powers or disposal of the securities to $(b)$ which the relevant interest relates (indicating clearly the particular securities to which the qualification applies).

See the definition of "relevant agreement" in section 9 of the Corporations Act 2001.

• (8) If the substantial holder is unable to determine the identity of the person (eg if the relevant interest arises because of an option) write "unknown".
• (9) Details of the consideration must include any and all benefits, money and other, that any person from whom a relevant interest was acquired has, or may, become entitled to receive in relation to that acquisition. Details must be included even if the benefit is conditional on the happening or not of a contingency. Details must be included of any benefit paid on behalf of the substantial holder or its associate in relation to the acquisitions, even if they are not paid directly to the person from whom the relevant interest was acquired.

This is Annexure A of one page referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December 2002.

sign here $\varphi$

Azhar Chaudhri

ANNEXURE A

Movements in Holdings of Renmuir Holdings Ltd

Details of Pre-Listing Movements:

• Renmuir Holdings Ltd was the registered holder of 3,578,000 ordinary shares $11$ issued as vendor consideration for a 35.78% interest in the software pursuant to the Deed of Sale (details of which are described in the Annexure to this notice marked "E");
• On 4 August 1998, Renmuir Holdings Ltd disposed of 50,000 ordinary shares for no $2.$ consideration pursuant to an off-market transfer, (details of which are described in the Annexure to this notice marked "C");
• Accordingly, as at the date of listing of the Company on 11 November 1998, 3. Renmuir Holdings Ltd was the registered holder of 3,528,000 ordinary shares;

Details of Post-Listing Movements:

On 22 August 2001, 894,500 ordinary shares were transferred pursuant to a deed of 4. purchase of software (details of which are described in the Annexure to this notice marked "D") ("Deed of Purchase")

This is Annexure B of one page referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December 2002.

sign here $\subset$ $\overline{\phantom{a}}$

Azhar Chaudhri

ANNEXURE B

Movements in Holdings of Chi Tung Investments Limited

• $1.$ Chi Tung Investments Ltd was the registered holder of 1,250,000 ordinary shares issued pursuant to applications made under the Prospectus (a copy of which accompanies this notice as an Annexure and is marked "F") totalling $250,000;
• 1. On 22 August 2001, 200,000 ordinary shares were transferred pursuant to the Deed of Purchase (details of which are described in the Annexure to this notice marked "D")

This is Annexure C of one page referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December 2002.

sign here $\sim$ $\sqrt{2}$

Azhar Chaudhri

ANNEXURE C

Off-market transfer for disposal ordinary shares by Renmuir Holdings Limited

• An off-market transfer dated 4 August 1998 between Renmuir Holdings Ltd, as $1.$ transferor and Desmond Luplau & Joanne Luplau <A/c D Luplau PSF>, as transferee;
• $2.$ The transfer involved 50,000 fully paid ordinary shares in the capital of Queste Communications Ltd;
• 1. No consideration was payable pursuant to such transfer.

This is Annexure D of one page referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December 2002.

sign here

Azhar Chaudhri

ANNEXURE D

Deed Of Purchase Of Software

By a binding agreement dated 30 July 1998 between Island Australia Pty Ltd (a company associated with current directors, Mr Farooq Khan and Mr Yaqoob Khan), Mawson Group W.A. Pty Ltd (a company associated with former directors, Messrs Brett McKeon, Malcolm Watkins and Bradley McGougan), Renmuir Holdings Ltd (a company associated with current director Mr Azhar Chaudhri), Chi Tung Investments Ltd (a company associated with Mr A. Chaudhri), KYA Corporation Pty Ltd (a company associated with Mr Y. Khan) and Grandstar Investments Pty Ltd (a company associated with Messrs B.McKeon, M. Watkins and B.McGougan) of the one part (the "Purchasers") and Queste America Inc (a company associated with former director, Mr Russell Grewe) of the other part (the "Seller"), the Purchasers agreed to purchase a group of internet telephony software programs comprising the single line version of the VoiceNet System (including a number of versions of the same) and work in progress relating to the development of a 24 line VoiceNet System owned by the Seller together (the "Software").

The consideration for such purchase was agreed to be the sum of A$2,000,000 or 2,500,000 ordinary fully paid shares in the capital of the Company payable by the Purchasers in proportion to the interest or share they each acquire in the Software.

The interest or share of the Purchasers in such software is as follows: Island Australia Pty Ltd (17.00%), Mawson Group W.A. Pty Ltd (30.36%), Renmuir Holdings Ltd (35.78%), Chi Tung Investments Ltd (8.00%), KYA Corporation Pty Ltd (6.86%) and Grandstar Investments Pty Ltd $(2.00%).$

The Purchasers have the right to elect which of the two alternative payment options will be made to pay for the Software. The consideration is payable sixty (60) days from the date upon which certain restricted vendor/promoter shares in the capital of the Company held by the Purchasers are released from any escrow provisions imposed by the ASX, namely the securities issued as vendor consideration pursuant to the Deed of Sale described in Annexure "E" of this Notice. Such securities were released from escrow on 6 November 2000.

This is Annexure E of one page referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December 2002.

sign here $\sqrt{}$

Azhar Chaudhri

ANNEXURE E

Deed Of Sale Of Software

By a binding agreement dated the 3rd August 1998 between Island Australia Pty Ltd (a company associated with current directors, Mr Farooq Khan and Mr Yaqoob Khan), Mawson Group W.A. Pty Ltd (a company associated with former directors, Messrs Brett McKeon, Malcolm Watkins and Bradley McGougan), Renmuir Holdings Ltd (a company associated with current director Mr Azhar Chaudhri), Chi Tung Investments Ltd (a company associated with Mr A. Chaudhri), KYA Corporation Pty Ltd (a company associated with Mr Y. Khan) and Grandstar Investments Pty Ltd (a company associated with Messrs B.McKeon, M. Watkins and B.McGougan) of the one part (the "Sellers") and the Company of the other part, the Sellers agreed to sell the Software to the Company.

This software comprises the Software purchased by the Sellers from Queste America Inc pursuant to the Deed of Purchase described in Annexure "D" of this Notice. The consideration for the purchase of the Software by the Company is the issue and allotment to the Sellers of shares in the capital of the Company at a total issue price of A$2,000,000 comprising the issue of 9,000,000 ordinary shares in the capital of the Company issued at a price of twenty (20) cents each fully paid and 20,000,000 ordinary shares at an issue price twenty (20) cents each which have been partly paid to one cent each and upon which there is an outstanding amount payable of 19 cents per share.

This is Annexure F of one page referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December 2002.

sign here $\sim$ $\leftarrow$ $-$

Azhar Chaudhri

ANNEXURE F

Off-market transfer for acquisition of 4,000,000 Partly Paid Ordinary Shares by Chi Tung Investments Ltd

• An off-market transfer dated 6 August 2002 between Farooq Khan, as transferor $1.$ and Chi Tung Investments Ltd, as transferee;
• The transfer involved 4,000,000 unlisted partly paid (to one cent per share with $2.$ nineteen cents per share outstanding) ordinary shares in the capital of Queste Communications Ltd;
• The consideration paid by the transferee was $2,579.00. 3.

This is Annexure G of one page referred to in the form 603, Notice of Initial Substantial Holder signed by Azhar Chaudhri and dated 10 December 2002.

sign here $K = C$

Azhar Chaudhri

ANNEXURE G

Details of the acquisition of ordinary shares in the Company by Fast Scout Limited pursuant to contracts on ASX between 3 August 2000 and 9 August 2000:

Date	No. Ordinary SharesAcquired	Consideration ($)
03-Aug-00	26,500	8,480.00
03-Aug-00	50,000	16,500.00
03-Aug-00	50,000	16,750.00
08-Aug-00	5,000	1,500.00
08-Aug-00	10,500	3,255.00
08-Aug-00	35,000	11,550.00
08-Aug-00	71,500	24,310.00
08-Aug-00	35,000	12,075.00
09-Aug-00	16,820	5,214.20
09-Aug-00	29,630	10,370.50
09-Aug-00	65,000	23,400.00
09-Aug-00	87,000	31,755.00
09-Aug-00	35,000	12,950.00
09-Aug-00	10,000	3,200.00
09-Aug-00	30,000	9,900.00
09-Aug-00	75,000	25,500.00
09-Aug-00	80,000	27,600.00
09-Aug-00	35,000	12,250.00
09-Aug-00	80,000	28,800.00
Totals	826,950	$285,359.70

This is Annexure H of one page referred to in the form 603, Notice of Initial Substantial Holder signed by Azhar Chaudhri and dated 10 December 2002.

sign here

Azhar Chaudhri

ANNEXURE H

Synopsis of Trust Arrangements:

• Renmuir Holdings Ltd and Chi Tung Investments Ltd are companies incorporated in $1.$ the British Virgin Islands - they are the registered holder of securities in Queste Communications Ltd;
• The shareholder of each of Renmuir Holdings Ltd and Chi Tung Investments Ltd $2.$ holds the legal interests in Renmuir Holdings Ltd and Chi Tung Investments Ltd on bare trust for Farooq Khan ("First Trusts");
• Farooq Khan, in turn, holds the beneficial interests in Renmuir Holdings Ltd and Chi 3. Tung Investments Ltd on bare trust for Azhar Chaudhri ("Second Trusts").
• Therefore, Azhar Chaudhri is the ultimate beneficial holder of the interests in 4. Renmuir Holdings Ltd and Chi Tung Investments Ltd and has the power to direct Farooq Khan as bare trustee of the Second Trusts.

This is Annexure I of 114 pages referred to in the form 603, Notice of Initial Substantial Holder signed by me and dated 10 December. I certify that this is a true copy of the document of which it purports to be a copy.

sign here $\sim$

Azhar Chaudhri

ANNEXURE I

Copy of prospectus of Queste Communications Ltd lodged with ASIC on 6 August 1998

Queste Communications Ro

AKEN DELGEBIG!

RACKET STATE

For an offer of 12,500,000 ordinary shares at an issue price of 20 cents pershare payable in full on application to raise a total of $2,500,000.The Directors reserve the right to accept Oversubscriptions for up to a furt 5,000,000 ordinary shares at an issue price of 20 cents per share.

UNDERVALE: ACATELISSUE

Australian Financial Securities Pty LtdLicenced Dealer in Securities

BROKERTO TRIEBSUE

TABLEOPEONIENTS

SEGTONER
General Information For Applicants
SEGIONE
CONDELEDICTOR
SECTIONECatalon Celantien
SEGTONE
International Company
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SEGIONTADECIDIORUM NOICHE STEEM
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SECTION TO
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SECTION RP
Accident Information	F.P
SEGIONAE
DEL MOISE IN GOSSIVOLOME	Tœ
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the trictons of solicing and soliciton forms	TI B

GENERAL INFORMATION FOR APPLICANTS Section 1

THE SHARE OFFER

This Prospectus invites subscriptions for 12,500,000 ordinary shares of 20 cents each in Queste Communications Ltd at an issue price of 20 cents per share to raise a total of $2,500,000. The Directors have reserved the right to accept Oversubscriptions for up to a further 5,000,000 ordinary shares at an issue price of 20 cents per share.

Applications must be for at least 10,000 Shares or a greater number in multiples of 1,000 Shares.

CAPITAL STRUCTURE

The capital structure of Queste Communications Ltd prior to and following the close of the Issue will be as follows:

Share Capital Prior to the Issue	Number
Ordinary shares issued at a price of 20 cents each: Fully Paid:	9,000,100
Ordinary shares issued at a price of 20 cents each and beingpartly paid to 1 cent each(with an outstanding liability to pay 19 cents per share)	20,000,000
Shares Offered by this Prospectus
Ordinary shares issued at a price of 20 cents each:Payable in full on application	12,500,000
Oversubscriptions under Prospectus
Ordinary shares issued at a price of 20 cents each:Payable in full on application	5,000,000
Total issued ordinary shares on Close of Offer(Including Oversubscriptions)	46,500,100

Note: The above does not include the existing 5,000,000 Options to subscribe for shares in the Company currently on issue, details of which are setout at Section 12 of this Prospectus.

DATE OF PROSPECTUS

This Prospectus is dated the 6th day of August 1998.

DATE OF ISSUE OF PROSPECTUS

The date of issue of this Prospectus is the 7th day of August 1998.

No shares will be issued or allotted on the basis of this Prospectus later than twelve months after the date of issue of this Prospectus.

AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION

A copy of this Prospectus was lodged with the Australian Securities and Investment Commission (ASIC) on the 6th day of August 1998.

The ASIC takes no responsibility as to the contents of this Prospectus.

GENERAL INFORMATION FOR APPLICANTS

KEY DATES FOR INVESTORS

Prospectus lodged with the ASIC 6th August 1998 Lodgement of Application for Admission to the Australian Stock Exchange Ltd (ASX) 11th August 1998 Offer Opens 20th August 1998

The Directors reserve the right (with the approval of the Underwriter) to close the application lists, whether with or without prior notice at any time after the Opening Date of the Offer.

UNDERWRITER

This Issue is underwritten to the extent of $2,500,000 by Australian Financial Securities Pty Ltd, a licensed dealer in securities, details of such underwriting being setout at Section 12 of this Prospectus.

BROKER TO THE ISSUE

The Broker to this Issue is Chartpac Securities Ltd, a corporate member of the ASX.

HOW TO APPLY FOR SHARES

This is an important document and should be read in its entirety prior to making an application for Shares. Applications for Shares will only be accepted on the Application Form attached to this Prospectus.

Details on how to apply for Shares are set out in full at Section 14 of this Prospectus.

Investors with questions on how to complete the Application Form or who require additional copies of the Prospectus should telephone Mr Richard Dougherty on behalf of the Underwriter on (08) 9474 3384 or Mr Simon Cato on behalf of the Broker to the Issue on (08) 9325 3888 between 9.00 a.m. and 5.00 p.m. weekdays.

The Directors have reserved the right to close the application lists, whether with or without prior notice at any time after the Opening Date of the Offer.

Accordingly, investors are advised to lodge their applications as soon as possible.

OVERSEAS APPLICANTS

This Prospectus is directed to residents of Australia as is the invitation to subscribe for the Shares offered by this Prospectus. This Prospectus is not intended to, and does not constitute an Offer of securities in any place or to any person to whom the making of such an Offer would not be lawful under the laws of any jurisdiction outside Australia. It is the responsibility of any overseas applicants to seek advice and ensure compliance with all laws of any country relevant to their application.

QUESTE

÷

GENERAL INFORMATION FOR APPLICANTS

IMPORTANT NOTICE

THE SHARES OFFERRED BY THIS PROSPECTUS ARE OF A SPECULATIVE NATURE.

Prospective investors should read the full text of this Prospectus as the information contained in individual sections is not intended to and does not provide a comprehensive review of Queste Communications Ltd or the Shares offered under this Prospectus.

If you do not understand the contents of this Prospectus you should contact the Company's Underwriter or the Broker to the Issue, or consult your financial adviser, stockbroker, accountant or solicitor.

TERMINOLOGY

A number of terms and abbreviations used in this Prospectus have defined meanings which appear in the Definitions and Glossary of Terms.

QUESTE

CORPORATE DIRECTORY Section 2

BOARD OF DIRECTORS

Mr Farooq Khan: Mr Brett McKeon: Mr Malcolm Watkins: Mr Russell Grewe: Mr Yaqoob Khan: Mr Bradley McGougan: Mr Michael J van Rens: Mr Azhar Chaudhri:

Chairman and Managing Director Non Executive Director Non Executive Director Non Executive Director Executive Director Non Executive Director Non Executive Director Non Executive Director

COMPANY SECRETARY

Mr Yaqoob Khan

PRINCIPAL AND REGISTERED OFFICE

4 Judd Street, South Perth, Western Australia 6151 Tel: +618 9474 4981 Fax: +618 9322 1515

AUDITORS AND INVESTIGATING ACCOUNTANTS

Deloitte Touche Tohmatsu Level 16, Central Park 152-158 St Georges Terrace Perth, W.A. 6000 Tel: +618 9365 7000 Fax: +618 9365 7001

SOLICITORS

Solomon Brothers Level 40, Exchange Plaza 2 The Esplanade, Perth, Western Australia 6000 Tel: +618 9221 5888 Fax: +618 9221 5955

UNDERWRITERS TO THE PUBLIC ISSUE

Australian Financial Securities Pty Ltd A.C.N. 081 477 796 4th Floor, 3-5 Bennett Street, East Perth, Western Australia 6004 Tel: +618 9474 3384 Fax: +618 9474 3207

BROKERS TO THE PUBLIC ISSUE

Chartpac Securities Ltd A.C.N. 065 746 581 Level 3, 231 Adelaide Terrace, Perth, W.A. 6000 Tel: +618 9325 3888 Fax: +618 9325 3883

INDEPENDENT TECHNOLOGY EXPERTS

WACTI Level 1, 94 Burswood Road, Burswood, Western Australia 6100 Tel: +618 9354 8880 Fax: +618 9354 8818

SHARE REGISTRY

Advanced Share Registry Services Level 6, 200 Adelaide Terrace Perth, Western Australia 6000 Tel: +618 9221 7288 Fax: +618 9221 7869

QUESTE

LETTER FROM CHAIRMAN Section 3

4 Judd Street South Perth 6151 Western Australia

Tel: +618 9474 4981 $Fax: + 61893221515$

LETTER FROM THE CHAIRMAN

$28^{\mathrm{TH}}$ July 1998

Dear Investor.

On behalf of the Board of Directors of Queste Communications Ltd, I am pleased to offer investors the opportunity to invest in an Australian company that is poised to enter the world telecommunications market utilising the unique medium of the rapidly evolving Internet.

The Internet is an information superhighway that combines elements of telecommunications, computing, broadcasting, publishing, commerce and information services into a revolutionary new basis for global communications.

The growth of the Internet has given rise to many commercial opportunities that were unthinkable just a few years ago and the Company is strategically placed to exploit such an opportunity through its VoiceNet System. This system is a special software program that capitalises on the ability of the Internet to act as a medium for the transmission of voice data including telephone calls.

The VoiceNet System allows businesses and individuals to place telephone calls over the Internet at rates potentially far cheaper than those possible through the normal telephone network.

This presents an exciting commercial opportunity for the Company to act as both the supplier of such systems to third parties and to operate a telephony network in competition with the major telecommunications companies.

It is proposed that the Shares offered by this Prospectus will raise a total of $2,500,000 together with the right to accept over subscriptions for a further $1,000,000 which will be used to advance the business of the Company.

This Prospectus contains detailed information on the Company and its proposed operations. I urge you to read it fully and carefully prior to making your decision to invest in the Company.

On behalf of the Directors, I commend this Prospectus to you and look forward to welcoming you as a shareholder in the Company.

Yours Sincerely.

Farooq Khan Chairman Queste Communications Ltd

Section 4

INVESTMENT OVERVIEW

The information contained in this section of the Prospectus provides an overview and is not intended to be a comprehensive summary of the Prospectus. It should be read in conjunction with the information contained in all sections of this Prospectus.

THE COMPANY

Queste Communications Ltd is an Australian company incorporated on the 10th day of March 1998 with the objective of taking advantage of the many commercial opportunities arising through the phenomenal worldwide growth of the Internet and the de-regulation of the Australian telecommunications market from the 1st July 1997.

An investment in the company offers subscribers the strategic opportunity to participate in the exciting growth of the telecommunications industry both in Australia and worldwide.

THE VOICENET SYSTEM

In pursuit of these corporate objectives, Queste Communications Ltd has acquired from companies associated with Messrs Farooq Khan, Brett McKeon, Yaqoob Khan, Malcolm Watkins, Bradley McGougan and Azhar Chaudhri (being directors of the Company) the Current VoiceNet System.

This system is an Internet Telephony (sometimes referred to as a Voice over IP or VoIP) software program that allows business and individuals to place long distance telephone calls over the Internet instead of through the traditional Public Switched Telephone Network (PSTN).

The VoiceNet System is a telephone to telephone system that combines the convenience of normal telephone calling but with potentially significant cost savings arising as a result of routing long distance calls over the Internet rather than through the traditional PSTN.

The VoiceNet System does not require changes to existing telephony and data infrastructures. It can be used with existing PSTN telephone lines and Private Branch Exchange (PBX) systems. When used for alternative long distance telephone calls, the VoiceNet System is utilised without the end customers even needing computers, modems, or Internet access.

The Current VoiceNet System is a single line telephone system allows one telephone call at a time to be placed through the system. The Current VoiceNet System software runs on a Personal Computer (PC) that has an Internet connection which can either be based on a Local Area Network (LAN) or on a dial up basis using a modem.

The concept is simple; an individual simply dials a local telephone number to which the VoiceNet System is connected, an Interactive Voice Response (IVR) system prompts the user to enter the long distance telephone number wished to be dialed and the VoiceNet System then routes the call over the Internet to a second VoiceNet System (located in the destination dialed) and from there to the call destination.

CALL PROGRESSION

An illustration of the setup and operational flow of the Current VoiceNet System is outlined in the diagram below:

CURRENT VOICENET SYSTEM CALL COSTS

The cost structure involved in placing a call using the Current VoiceNet System comprises the following components:

• Two Local Phone Charges: One to make the call into the local VoiceNet System and the $(a)$ second being the remote VoiceNet System calling the desired destination number; and
  • $(b)$ The cost of the Internet bandwidth used in the data packet transmission for the call.

Based on assumptions outlined at page 27 of this Prospectus, indicative costs for point (b) above have been estimated at between 1.26 cents per minute to 1.995 cents per minute for the Current VoiceNet System.

TECHNOLOGY AWARD

The Current VoiceNet System has received an Editors Choice Award from the publishers of CTITM magazine. CTI magazine is a leading United States publication on Internet and Network Telephony and attached to this Prospectus at Section 8 is a letter from CTI confirming the award granted.

VOICENET SYSTEM DEVELOPMENT WORK

Whilst the Current VoiceNet System is sufficiently developed in terms of functionality and call quality to be appropriate for small business, private or home use (and accordingly the Company is capable of deriving revenue from the sale of the system), the Directors believe the current system requires further development and enhancement for large scale commercial applications in order to obtain the full benefits of the system and to maximise the revenue capable of being generated through sales of the system.

To this end the Company proposes to expand the Current VoiceNet System having a single line capacity to the 24 Line VoiceNet System capable of handling 24 simultaneous telephone calls.

Based upon industry standard calculations, one 24Line VoiceNet System is estimated by WA CTI, the independent technology experts to this Prospectus, to be capable of handling 500 calls in an hour. This is based on industry standard benchmarks of a 10% acceptable busy tone and an average call duration of 2 min 30 seconds. Further details of such capacity are outlined in the Expert Report of WA CTI at Section 11 of this Prospectus.

VOICENET SYSTEM DEVELOPMENT WORK

It is proposed that such development work will incorporate recently formulated international interoperability standards for the transmission of voice data over the Internet.

It is also intended that the development work on the 24Line VoiceNet System will incorporate calling billing interfaces to allow commercial users of such system to accurately bill customers for long distance calls placed using the system.

The Company will use a portion of the proceeds of funds raised by this Prospectus to undertake software development works to develop the 24Line VoiceNet System.

Details of the software development works proposed and the estimated costs for these works are outlined later in this Prospectus. WA CTI, the independent technology experts to this Prospectus comment on such works in their report forming part of this Prospectus.

SOFTWARE DEVELOPMENT AGREEMENT

Queste America Inc, a company owned by Mr Russell Grewe (a director of this Company) has been contracted to undertake the software development works to develop the 24Line VoiceNet System.

Mr Grewe, through his company, Queste America Inc has been selected to undertake such works as he originally led the software team that developed the Current VoiceNet System.

Details of such contract are setout at Section 12 of this Prospectus.

VOICENET SYSTEM MARKETS

The markets for the Current VoiceNet System and the proposed 24 Line VoiceNet System are world wide with the largest markets being those catered for by the proposed 24Line VoiceNet System. Target markets include Internet Service Providers (ISP), Commercial Users and Operators of Call Centers and Help Lines. These target markets are outlined in greater detail in Section 7 of this Prospectus.

THE BUSINESS

The business of Queste will be focused on the following activities:

• the commercial marketing, sale and exploitation of the Current VoiceNet System and all $\mathbf{1}$ . future versions;
• $\overline{2}$ . the conducting of further development work to enhance the commercial value of the Current VoiceNet System into the 24Line VoiceNet System;
• $31$ the possible creation of its own VoiceNet telephony network within Australia and selected overseas destinations either by itself or by way of linkage to other VoiceNet System networks operated by third parties; and
• 1. the active pursuit of new commercial opportunities within the telecommunications industry as and when they arise

PURPOSE OF THE ISSUE AND USE OF FUNDS

The purpose of the capital raising (including any Oversubscriptions) under this Prospectus is:

• $(i)$ to provide funding for the development of the business of the Company;
• to fund marketing costs of the Current VoiceNet System and any improvements thereto; $(ii)$
• to fund further research and development of the VoiceNet System into the 24Line VoiceNet $(iii)$ System;
• $(iv)$ to provide working capital for the operations of the Company;
• to provide capital for any further commercial opportunities within the telecommunications $(v)$ sector that may be determined by the Company;
• to meet the costs of this Issue, including underwriters fees, commissions, legal and accounting $(vi)$ fees, experts and advisers fees and costs of printing, publication and distribution of the Prospectus:

PURPOSE OF THE ISSUE AND USE OF FUNDS

• $(vii)$ to enable the public to participate in the ownership of the Company; and
• to seek sufficient additional shareholders of the Company each with a minimum marketable $(viii)$ parcel of shares to satisfy the net tangible assets test and shareholder spread requirements of the Australian Stock Exchange Ltd (ASX) and to permit the quotation of the Company's shares on the ASX.

WORKING CAPITAL

On completion of the Issue, the Directors believe the Company will have sufficient working capital to carry out its stated objectives.

SHARE CAPITAL AND STRUCTURE

The Company currently has on issue 29,000,100 ordinary shares, 9,000,100 of which have been issued at a price of 20 cents per share which amount has been fully paid for and 20,000,000 ordinary shares issued at a price of 20 cents per share which have been partly paid to 1 cent each and upon which there is an outstanding amount payable of 19 cents per share. In addition, the Company has issued a total of 5,000,000 options to subscribe for ordinary shares at a subscription price of twenty (20) cents per share.

Upon completion of the Issue of 12,500,000 Shares pursuant to this Prospectus, the number of shares on issue will increase to a total of 41,500,100.

In addition, the Directors reserve the right to accept Oversubscriptions of up to 5,000,000 ordinary shares at an issue price of 20 cents per share.

SHARE CAPITAL AND STRUCTURE

The pro-forma capital structure of the Company following completion of the Issue and assuming no Oversubscriptions is set out below:

Number of OrdinaryShares		Share CapitalS
100	Current Issued CapitalSubscriber shares issued on incorporation ofCompany	20
9,000,00	Ordinary Shares issued at $0.20 each fully paidto various Vendors (being associated entities ofDirectors) in consideration of assets acquired	1,800,000
20,000,000	Ordinary Shares issued at $0.20 each and beingpaid to one (1) cent each (with an outstandingliability to pay $0.19 per share) to variousVendors (being associated entities of Directors)in consideration of assets acquired	200,000
12,500,000	Shares Offered by this ProspectusOrdinary Shares at an issue price of $0.20 eachpayable in full on application	2,500,000
	Issued Capital on Completion of Issue
41,500,100		4,500,020

Note: If Oversubscriptions of $1,000,000 are received and accepted, the total number of shares on issue on completion of the Issue will be 46,500,100 shares.

SHARE OPTIONS

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$\ddot{\phantom{a}}$

The Company has issued a total of 5,000,000 options to subscribe for ordinary shares at an issue price of twenty cents ($0.20) per share to various Directors of the Company. Details of the holders of such options and the amounts payable upon an exercise of such options are as follows:

Name	No of Options	Total Subscription Price
Mr F. Khan	3,240,000	$648,000
Mr B.McKeon	300,000	$60,000
Mr M J van Rens	500,000	$100,000
Mr M. Watkins	300,000	$60,000
Mr B. McGougan	300,000	$60,000
Mr Y.Khan	360,000	$72,000
TOTAL	5,000,000	$1,000,000

Details of the terms of issue of these options are set out at Section 12 of this Prospectus.

The exercise of these options will cause a further 5,000,000 ordinary shares to issue. If exercised, the Company will receive funds equal to $1,000,000.

÷

INVESTMENT OVERVIEW

OWNERSHIP STRUCTURE

The following table shows the beneficial ownership of the issued capital of the Company as defined under the Corporations Law upon completion of the Issue but before the exercise of any Options and assuming no Oversubscriptions.

Name	No of 3Fully PaidShares	2 % ofFully PaidShares	No ofPartly PaidShares:	$\frac{9}{6}$ ofPartly PaidShares
DirectorsFarooq KhanRenmuir Holdings Ltd(A company associated with Mr F.Khanand Mr A.Chaudhri)	203,528,000
Sub-Total	3,528,020	16.41%
WAIS Pty Ltd(A company associated with Mr B.McKeon, MrM. Watkins and Mr B. McGougan)Mawson Goup W.A. Pty Ltd(A company associated with Mr B.McKeon, MrM. Watkins and Mr B. McGougan)	202,986,020
Sub-Total	2,986,040	13.89%
Island Australia Pty Ltd(A company associated with Mr F.Khan and MrY.Khan)Chi Tung Investments Ltd(A company associated with Mr F Khan and Mr	1,700,020	7.91%	16,000,000	80%
A.Chaudhri)
Yaqoob KhanKYA Corporation Pty Ltd(A company associated with Mr Y.Khan)	20686,000
Sub-Total	686,020	3.19%
Grandstar Investments Pty Ltd(A company associated with Mr B.McKeon, MrM. Watkins and Mr B. McGougan)			4,000,000	20%
Other Shareholders prior to the Issue	100,000	$0.46%$
Sub Total	9,000,100	41.86%	20,000,000	100%
Shares To Be Issued under this Prospectus	12,500,000	58.14%		n/a
STOTAL	$21.500,100$ $100%$ $20,000,000$ $1.100%$

OWNERSHIP STRUCTURE

The Underwriter is a company associated with Mr B.McKeon, Mr M.Watkins and Mr B.McGougan. The Underwriter in that capacity may take up any shortfall in the Issue pursuant to the terms of its underwriting agreement with the Company. In such circumstances, the share interest of Mr B.McKeon, Mr M.Watkins and Mr B.McGougan in the Company may increase from that set out above as a consequence of their association with the Underwriter. In addition, companies associated with Mr F. Khan, Mr A.Chaudhri and Mr M.J. van Rens are sub-underwriting a portion of the Issue and accordingly may take up shares offered by this Prospectus pursuant to their sub-underwriting obligations. Their shareholding may therefore increase from that set out above. The Directors of the Company may also subscribe for Shares pursuant to this Prospectus and their shareholding may therefore increase from that set out above as a consequence of such subscription.

ACQUISITION OF VOICENET SYSTEM

The Company has issued to companies associated with Mr F.Khan, Mr B.McKeon, Mr A.Chaudhri, Mr M. Watkins, Mr B. McGougan and Mr Y.Khan (being Directors of the Company) a total of 9,000,000 ordinary shares in the capital of the Company issued at a price of twenty (20) cents each and 20,000,000 ordinary shares issued at a price of 20 cents per share which have been partly paid to 1 cent each and upon which there is an outstanding amount payable of 19 cents per share as consideration for the Company acquiring from such parties ownership of the Current VoiceNet System.

Details of the terms of acquisition of the Current VoiceNet System are set out at Section 12 of this Prospectus.

BUSINESS AND INVESTMENT RISKS

There are risks associated with an investment in the Company. The risk factors affecting the Company and its business are set out at Section 9 of this Prospectus. The Shares offered by this Prospectus carry no guarantee with respect to return on capital investment, payment of dividends or the future value of the shares. The Shares being offered by this Prospectus must be regarded as a speculative investment.

DIVIDEND POLICY

The Directors intend to recommend that dividends be paid out of profits whenever profitability and cashflow permit and will endeavour, subject to the Company's taxation liability to ensure that such dividends are franked to the greatest extent possible.

However, the Directors cannot give any assurances as to the extent, timing or actual payment of any future dividends or the actual level of franking credits, as they are dependent upon a number of factors including actual future earnings, the financial position of the Company, the taxation position of the Company and the prevailing operating and market conditions.

DIRECTORS

The Directors of Queste Communications Ltd bring a wide range of experience to the Board including company management, law, accounting and software development and programming.

This diverse background and skill will be required for the future activities and success of the Company.

UNDERWRITER

The Issue (not including any Oversubscriptions) is underwritten by Australian Financial Securities Pty Ltd. Details of such underwriting are set out at Section 12 of this Prospectus.

EXPERTS REPORTS

• WA CTI have prepared an Expert's Report which contains a technical review of the Current VoiceNet System and the proposed software development of the 24Line VoiceNet System.
• Deloitte Touche Tohmatsu have prepared an Independent Accountant's Report.

These reports are setout at Section 11 of this Prospectus.

VENDOR SECURITIES

The ASX as a condition of granting the application by Queste Communications Ltd for admission to the Official List of the ASX, may classify certain shares currently held by existing shareholders of the Company acquired or to be acquired as a consequence of the acquisition of the Current VoiceNet System by the Company as vendor securities. The ASX may also classify options to acquire shares in the Company as vendor securities. Prior to the official quotation of the Shares the subject of this Issue, the existing and prospective holders of such shares. and the holders of options in the Company will or may be required by the ASX to enter into escrow agreements with Queste Communications Ltd on the basis that the ASX regards such shares and or options as vendor securities.

The Directors expect that any such escrow arrangements will prohibit the transfer of effective ownership or control of such vendor securities for a period of 24 months from the date of listing of the Company as the ASX may determine and upon such other terms as are outlined in the Listing Rules of the ASX.

Queste

Prospectus

DETAILS OF THE OFFER Section 5

SHARES OFFERED FOR SUBSCRIPTION AND OVER SUBSCRIPTIONS

This Prospectus provides information on the offer to the public of 12,500,000 fully paid ordinary shares at a subscription price of 20 cents per share, payable in full on application.

The rights attaching to the Shares are set out at Section 12 of this Prospectus.

MINIMUM SUBSCRIPTION AND OVERSUBSCRIPTIONS

The Minimum Subscription to be raised pursuant to this Prospectus is $2,500,000.

If Minimum Subscription is not received within 4 months from the date of issue of this Prospectus, the Company shall repay within 7 days after the end of those 4 months all monies received by the Company from Applicants for Shares.

The Directors reserve the right to accept Oversubscriptions for up to 5,000,000 fully paid ordinary shares at a subscription price of 20 cents per share.

After the close of the Issue and assuming full Oversubscriptions are received, the total number of shares issued pursuant to this Prospectus will comprise 17,500,000 fully paid ordinary shares.

DATE OF PROSPECTUS

This Prospectus is dated the 6th day of August 1998.

APPLICATIONS FOR SHARES

To apply for the Shares offered by this Prospectus the application form attached to this Prospectus must be completed in accordance with the application instructions.

All applications must be for a minimum of 10,000 Shares and thereafter in multiples of 1,000 Shares, accompanied by payment of 20 cents per share applied for.

This represents a minimum investment of $2000.00 and multiples of $200.00 thereafter.

Applicants are encouraged to submit their applications as soon as possible.

DETAILS OF THE OFFER

APPLICATIONS FOR SHARES

Payment must be by way of cheque or bank draft drawn and payable at an Australian bank.

Cheques must be made payable to "Queste Communications Share Float Account" and crossed "Not Negotiable" All cheques must be in Australian currency.

Application forms must not be circulated to prospective investors unless attached to a copy of this Prospectus.

All share applications together with the accompanying cheque must be delivered to:

The Underwriter:

Australian Financial Securities Pty Ltd of 4th Floor, 3-5 Bennett Street, East Perth, Western Australia, 6004

or

The Broker to the Issue:

Chartpac Securities Ltd of Level 3, 231 Adelaide Terrace, Perth, Western Australia, 6000

A duly completed and lodged application form will constitute an offer by the Applicant to subscribe for the number of Shares applied for pursuant to the Application Form.

The invitation to subscribe for Shares under this Prospectus is directed to residents of Australia. No action has been taken to register or qualify the Shares or this Prospectus or otherwise permit an offer of the Shares in any Jurisdiction outside Australia.

No brokerage or stamp duty is payable by Applicants in respect of their applications for Shares under this Prospectus.

APPLICATION LIST

The application list will open at 9.00 am Perth time on the $20th$ day of August 1998.

The Directors have reserved the right (after consultation with the Underwriter) to close the application lists, whether with or without prior notice at any time after the opening date for share applications.

The Company will accept lodgement of applications prior to the opening of the application list.

Applicants are advised to forward completed applications as soon as possible.

ALLOTMENT POLICY

Application monies will be held in a specific bank account on trust for Applicants until the allocation of Shares is complete or the Directors determine the offer will be cancelled.

Where no allotment is made to an Applicant the application monies will be refunded to that applicant in full without interest.

Prospectus

DETAILS OF THE OFFER

ALLOTMENT POLICY

$\mathrm{O}$ ues

In allocating Shares, the Directors reserve the right to allot an Applicant a lesser number of Shares than that applied for or to decline an application.

Where an application is declined and no allotment is made, the amount tendered on application will be refunded in full without interest.

If the number of Shares allotted is less than the number applied for, surplus application monies will be refunded without interest.

If any allotment of Shares is made, all accrued interest earned on the application monies will be retained by the Company.

Successful applicants will be forwarded their share notice setting out their allotted share holding as soon as possible after the closing of the application list.

Whilst it is not obligatory for an Applicant to quote their Tax File Number (TFN), tax will be withheld for individuals at the highest personal marginal tax rate plus the Medicare levy (currently a total of 48.5%) and for companies, at the current company tax rate, on the unfranked portion of any dividends if Australian resident shareholders do not quote their TFN or exemption.

Shareholders may notify the Company of their TFN or exemption by completing the TFN details on the Share Application Form.

SHARE ALLOTMENT

The Directors will (subject to Minimum Subscription being received) allot Shares as soon as possible after the closing of the Application List subject to ASX approval of listing and admission of the Company to the Official List of the ASX and the quotation on the ASX of the Shares offered by this Prospectus.

No Shares will be allotted or issued later than 12 months from the date of issue of this Prospectus.

If all of the Shares offered by this Prospectus are not subscribed by reason of the Underwriter exercising its rights of termination under the Underwriting Agreement (as set out at Section 12 of this Prospectus) all application monies received will be repaid to the Applicants without interest.

AUSTRALIAN STOCK EXCHANGE LISTING

Application will be made to the ASX not later than 3 business days after the date of issue of this Prospectus for the Company to be admitted to the Official List of the ASX and for Official Quotation of the Shares offered by this Prospectus.

The fact that the ASX may admit the Company to its Official List is not to be taken in any way as an indication of the merits of the Company or of the Shares now offered for subscription. The ASX takes no responsibility for the contents of this Prospectus, including the experts' reports it contains.

If permission is not granted for the Company to be admitted to the Official List of the ASX and for Official Quotation of the Shares offered by this Prospectus within six weeks after the date of issue of this Prospectus (or such longer period, not exceeding twelve weeks, as the ASX may approve) all application monies received pursuant to this Prospectus will be refunded in full to Applicants (without interest).

DETAILS OF THE OFFER

CHESS

The Company will apply pursuant to the ASX listing rules, to participate in the Clearing House Electronic Subregister System (CHESS). Under this system the Company will not issue share certificates to shareholders who will instead be provided with a Share Notice that sets out the number of Shares allotted to the shareholder.

If applicable, the Share Notice will also inform the shareholder of their Holder Identification Number and Sponsoring Issuer Number. Shareholders will receive an explanation of sale and purchase procedures under CHESS with their Share Notice.

If a shareholding changes during a month, Shareholders will receive a statement at the end of that month. Shareholder may also request statements at any time although the Company may charge an administration fee for such service.

Applicants are responsible for determining their allocation prior to trading in the Shares and Applicants selling Shares before obtaining their Share Notice do so at their own risk.

UNDERWRITER AND UNDERWRITING FEES

Australian Financial Securities Pty Ltd has entered into an Underwriting Agreement with the Company to underwrite the Issue. The obligation to underwrite does not extend to any Oversubscriptions by the Company as outlined in this Prospectus. The Underwriter will receive fees totaling $250,000 pursuant to the Underwriting Agreement. Where the Underwriter causes applications to be lodged for Oversubscriptions, the Underwriter will be entitled to receive further fees being an underwriting fee equal to Six Percentum (6%) of the value of all Oversubscriptions lodged by the Underwriter with the Company (which proceed to allotment by the Company) and an issue management and co-ordination fee equal to Four Percentum (4%) of the value of all such Oversubscriptions lodged by the Underwriter with the Company (which proceed to allotment by the Company).

Details of the Underwriting Agreement including the circumstances under which the Underwriter may terminate its obligations are set out at Section 12 of this Prospectus.

The Underwriter is a company associated with Mr B.McKeon, Mr M.Watkins and Mr B.McGougan who are also directors of the Company.

SHARE REGISTER

The Share Register of the Company is maintained by Advanced Share Registry Services and subject to the Corporations Law, will be available for inspection between the hours of 9.00 a.m. and 5.00 p.m. each business day.

ENQUIRIES

Applicants who have queries on how to complete the Application Form or who require additional copies of this Prospectus should contact:

The Underwriter:

Mr Richard Dougherty of Australian Financial Securities Pty Ltd of 4th Floor, 3-5 Bennett Street, East Perth, Western Australia 6004 Tel: (08) 947 43384 Fax: (08) 947 43207

Or

The Broker to the Issue:

Mr Simon Cato of Chartpac Securities Ltd of Level 3, 231 Adelaide Terrace, Perth, Western Australia, 6000 Tel: (08) 9325 3888 Fax: (08) 9325 3883

QUESTE

Section 6 BOARD OF DIRECTORS

THE DIRECTORS

FAROOQ KHAN (36) Chairman and Managing Director

Mr Khan holds a Bachelor of Jurisprudence and Bachelor of Law degree from the University of Western Australia and is currently admitted to practice in the Supreme Court of Western Australia and the High Court of Australia. After practicing for a number of years, principally in the area of corporate law, Mr Khan left the law to join a manufacturing and wholesaling company having had operations in Australia, Saudi Arabia, Kuwait, Oman, and the United Arab Emirates. Mr Khan is presently a Director of such company and brings considerable experience both in commercial law and in the management and administration of an operating company.

BRETT MCKEON (34) Non Executive Director

Mr McKeon has practiced for the last 13 years in the financial services industry and is currently the Managing Director of a national group of companies involved in Mortgage Origination that have operations throughout Australia and in New Zealand. Mr McKeon will bring considerable experience in company management and administration to the Company.

YAQOOB KHAN (33) Executive Director

Mr Khan holds a Bachelor of Commerce Degree from the University of Western Australia and a Masters Degree in Industrial Administration from Carnegie Mellon University, Pittsburgh. After working for several years in the Australian Taxation Office, Mr Khan completed his postgraduate Masters degree and commenced work with an overseas company as a senior executive responsible for the areas of product marketing, costing systems and production management. Mr Khan brings considerable international experience in key aspects of corporate finance, production and marketing.

MALCOLM WATKINS (34) Non Executive Director

Mr Watkins is a director and shareholder in one of Australia's largest independent finance broking houses, the Australian Finance Group. Mr Watkins is responsible for the group's technology development programs, electronic delivery systems and national marketing operations. He has held senior management positions within industries ranging from horticulture through to computer equipment. Mr Watkins currently sits on 8 company boards and will bring some 18 years experience in company product/quality control, consumer delivery systems and strategic marketing.

BOARD OF DIRECTORS

THE DIRECTORS

RUSSELL GREWE (37) Non Executive Director

Mr Grewe holds Bachelor and Master of Science degrees in Computer Engineering and has over 15 years experience in the data-communications and networking industries specialising in software architecture design and programming. He has held positions ranging from project development engineering to senior corporate management. Over the course of his career, Mr. Grewe has become adept at bringing together a number of computing disciplines in order to deliver timely products to new markets. Mr. Grewe has completed assignments as the Group Manager of a subsidiary company of Dynatech Corporation of the United States and as Vice President of Engineering of Digital Technology Inc a network analysis and communications company. Mr Grewe is currently a Director and Shareholder of Queste America Inc, the developer of the Current VoiceNet System.

MICHAEL J VAN RENS (44) Non Executive Director

Mr van Rens has worked in the financial services industry for the last 15 years and has considerable experience in financial planning and investment advice. He is the Company Secretary of the Western Australian leasing operation, Financial Resources Ltd and has been a Board member of the Colonial Franchise Trust since its inception in 1994.

BRADLEY MCGOUGAN(42) Non Executive Director

Mr McGougan has been involved in the Life and General Insurance industry for over twenty years having worked with the AMP Society and AGC (Insurances) Ltd. Mr McGougan was the founding director of Western Australian Insurance Services Pty Ltd which has expanded into a large financial services group comprising 15 companies with offices throughout Australia.

AZHAR CHAUDHRI (37) Non Executive Director

Mr Chaudhri holds a Bachelor of Science degree in Maths and Physics and a Masters degree in Economics. He has also undertaken postgraduate studies with Computer Data Systems in affiliation with the National Centre for Information Technology in the United Kingdom. Mr Chaudhri has considerable expertise in computer systems, analysis and design and advanced programming experience, particularly with respect to business and information technology systems.

Section 7

HISTORY OF THE INTERNET

The Internet is a global-linked network of computers that allows many varied forms of electronic information to be passed across the network and over long distances.

The Internet began during the Cold War when the United States Department of Defence decided to create a communications network for the various branches of government that could survive a nuclear attack.

This work led to the creation of ARPANET (Advanced Research Projects Agency Net) which was conceived as a network of computers designed to function despite the loss of a substantial part of the system due to a nuclear or other catastrophic occurrence. The system was designed so that each computer (called a node) would be capable of sending, routing and receiving information by taking messages and breaking them into different parts known as "packets" and sending these packets along separate routes to their eventual destination.

These packets of data could take any path through the network to their ultimate destination with each node being treated equally and without a single computer being the hub or core through which all information would have to pass. As a result of there being no central core to the network, if large parts of the system were destroyed, the packets would automatically find an alternative path to get through.

The ARAPNET grew to include universities, research institutions and large companies (originally mainly defence contractors) who found the system a simple and reliable means of facilitating electronic text communication, online discussion groups, access to distant databases and the transfer of electronic files.

Over time, ARPANET gave way to what we today know as the Internet. This was brought on by the development of a standard communications protocol known as "TCP/IP" (Transmission Control Protocol/Internet Protocol) which replaced ARPANETs original "Network Control Protocol" or NCP.

The adoption of a TCP/IP protocol allowed all of the networks of the Internet to send data back and forth without conflict.

The "Transmission Control Protocol" or TCP allowed information to be broken into different packets at its source and then put back together again at its final destination.

"Internet Protocol" or IP created an addressing system for the information ensuring that the packets sent across multiple nodes and networks using different standards arrived at the correct address for reassembly by the Transmission Control Protocol.

During the early 1980s, all the interconnected networks were converted to the TCP/IP protocol and the Internet was born.

In 1990, HTML (Hypertext Machine or Markup Language), a new Internet protocol was developed, which allowed for the communication of graphic information on the Internet. Graphic pages could be developed, transmitted and accessed across the Internet leading to the creation of what became known as a Web site, which then became part of a huge hypertext network called the World Wide Web (WWW). The enhanced Internet was informally renamed the Web and a huge additional audience was created.

Subsequent developments allowed the transmission of further forms of electronic packets, one of which allowed for the transmission of audio data over the Internet and the creation of what is now called Internet Telephony.

k,

DESCRIPTION OF THE VOICENET SYSTEM

INTERNET TELEPHONY

The nature of the Internet is packet based, that is the sending of small packets of electronic data across the system. The "data" can take many forms including encoded digital versions of speech and accordingly digital packets of data as defined by an Internet Protocol (IP) can allow telephone like communication over the Internet.

The challenge with packet based voice communication occurs because packets of digital information can and do take different routes over the Internet and arrive at different times, these packets have to be re-assembled in real time and in the correct order to allow for a timely delivery of telephone like communication without significant pauses or sound gaps.

THE VOICENET SYSTEM: OVERVIEW

Queste Communications Ltd is the owner of the VoiceNet System which is an Internet Telephony software program that allows the Internet to be used as a means of transmission of voice data, allowing business and individual users to place long distance calls over the Internet rather than through the traditional PSTN.

The VoiceNet System allows calls to be made from telephone to telephone using intermediate computers incorporating telephony voice cards and running the VoiceNet System software to:

• $(a)$ convert speech into a electronic data format;
• $(b)$ compress and convert the data into digital packets suitable for transmission over the Internet;
• $(c)$ route the packets over the Internet to another VoiceNet System at the desired far-end location;
• $(d)$ contact the far end telephone, re-assemble the packets of data in real time into audible form and relay the call to the far end telephone user.

The system combines the convenience of normal telephone calling with the cost savings associated with the transmission of data over the Internet compared with the PSTN.

A diagram illustrating the operational flow of the VoiceNet System is setout below:

NIES.

Prospectus

DESCRIPTION OF THE VOICENET SYSTEM

CALL PROGRESSION USING THE VOICENET SYSTEM

The following sets out how calls are placed through the VoiceNet System, how calls are processed by the network and how various subscribers interact with the network:

• A telephone call is made to a local VoiceNet System. The call can be made from a PBX $\mathbf{I}$ extension or directly from an outside PSTN line;
• The system detects the incoming call and answers it using voice prompts; $\overline{2}$ .
• If required, the caller identifies themselves through an access control procedure which can $31$ include the keying in of a PIN Number or a user code;
• The caller is requested to dial the destination number or a speed dial number. $\overline{4}$ .
• $51$ Once access is confirmed, the destination number is routed by the system to another VoiceNet System located at the destination area called. The routing mechanism supports multiple VoiceNet System locations and determines which other VoiceNet System to forward the call to.
• A connection is established between the local system and the far end VoiceNet System. 6.
• The far-end VoiceNet System dials the destination number and establishes a connection 7. between the parties.

CURRENT VOICENET SYSTEM OPERATIONAL AND SYSTEM REQUIREMENTS

The Current VoiceNet System is a single line version that allows one telephone call at a time to be made from a particular VoiceNet System to another.

The Current VoiceNet System software is designed to run on a Personal Computer (PC) containing at least a 133 Mhz Intel PentiumTM processor with at least 32 Mega Bytes (MB) of Random Access Memory (RAM) operating under a Microsoft Windows™95 operating system.

The Current VoiceNet System software works in conjunction with third party telephony voice modems that are TAPI (Telephony Application Program Interface) compliant.

These modems plug into the PC and provide the telephone connection to the PSTN either directly or through a PBX.

CURRENT VOICENET SYSTEM OPERATIONAL AND SYSTEM REQUIREMENTS

The Current VoiceNet System is designed to operate in conjunction with a Media Phonics PhoneRiderTM telephony modem.

The PC must also have an Internet connection which can either be based on a Local Area Network (LAN) or on a dial up basis using a TAPI compliant modem.

CURRENT VOICENET SYSTEM FEATURES

Interactive Voice Response (IVR):

The Current VoiceNet System features an interactive voice response which provides callers with various voice prompts to guide them through the VoiceNet calling system. Users also receive audible call progress messages from the system. If a call is disconnected, the voice prompt informs the caller of the reason (ie call is busy, invalid number, remote VoiceNet is busy or unavailable etc).

Dialing

The Current VoiceNet System is capable of detecting the destination number dialed by the caller, provided the caller is using a touch tone keypad. Callers have the option of using two (2) different dialing methods:

E.164 Numbering

The VoiceNet System implements the standard E.164 numbering plan which is an international standardisation of telephone access numbers. The implementation of such system allows a caller to dial a destination number exactly as they would from a regular telephone. The dialing number to an overseas country would for example include the exit code (i.e 0011), the country code (ie 1 for the United States), the area/city code and then the local telephone number.

Speed Dialling

The VoiceNet System allows callers to enter a speed dial number in lieu of the full number of the destination. This allows users to reach extensions on remote PBX's by simply entering a short sequence similar to calling a local extension. After calling the local system, the caller would dial a "*" sign followed by the speed dial number code of the destination number.

Full Duplex Speech

The VoiceNet System is configured for full duplex speech.

Types of Calls

Each particular VoiceNet System is capable of supporting three types of telephone calls: System to System (STS), Direct Inward Station Addressing (DISA) and Direct Outward Station Addressing (DOSA). Details of these call types are more particularly outlined at Clause 1.3 of the report of WA CTI contained in Section 11 of this Prospectus.

Call Monitoring

Call monitoring is provided as a graphical representation of the call status of the line connected to the VoiceNet System and provides a real time display of the line and its current activity.

Security

Access to the Current VoiceNet System can be controlled with user authentication numbers and optional Personal Identification Numbers (PIN). This allows for system administrators to maintain security by limiting user access.

CURRENT VOICENET SYSTEM FEATURES

Call Restriction

An additional security feature of the Current VoiceNet System is the ability to restrict calls on both outgoing and incoming calls as well as defining restrictions between local, national and international access.

Call Routing

Routing tables allow telephone calls to any area code to be routed to the best available VoiceNet System based upon user defined criteria. Further details of such feature are outlined at Clause 1.7 of the report of WA CTI contained in Section 11 of this Prospectus.

Speed Dialing

The VoiceNet System incorporates the use speed dialing allows shortcuts to frequently dialed telephone numbers.

CALL QUALITY

The call quality of the Current VoiceNet System differs in character from a normal telephone call. Due to the nature of compression and decompression of normal speech into electronic packets and the transmission of this data over a sometimes congested Internet, the call quality of the Current VoiceNet System is less than that associated with the PSTN.

WA CTI at Clause 1.14 of their report contained in Section 11 of this Prospectus comment on the voice quality of the Current VoiceNet System.

ILLUSTRATIVE COSTINGS

The advantage of placing a long distance call through the VoiceNet System compared with the PSTN relates to the compression ratios for Internet routed voice data coupled with the different cost structures incurred for the transmission of such data over the Internet.

The cost structure involved in placing a long distance call utilising the VoiceNet System can be broken into the following components:

• $(a)$ The local phone call component. This normally involves the cost of two local phone charges; one to make the call to the local VoiceNet System and the second cost of the remote VoiceNet System calling the desired destination number; and
• $(b)$ The cost of the Internet bandwidth used in the data packet transmission for the particular call.

The competitive advantages in using the VoiceNet System rather than the PSTN for long distance calls relates to the second component of the cost structure, namely the Internet bandwidth charge.

ILLUSTRATIVE COSTINGS

In Australia, there are a number of providers of Internet connectivity who provide and maintain the physical network infrastructure for the Internet in Australia and the connection of Australian Internet users with the rest of the world.

The transmission of data over the Internet involves a cost structure that is typically based upon the amount or volume of data traffic sent across the Internet. The capacity to transmit a volume of data is commonly referred to as the amount of "bandwidth" capacity of the Internet. The actual volume of data transmitted or transferred is commonly calculated by reference to the number of "Bits" of data transmitted or transferred.

In Australia, the providers of such network infrastructure charge varying tariffs for the transmission of Internet data over their networks. These can vary with some providing a flat rate for transmission of data anywhere in the world, others varying their tariffs based on whether the data transfer is within Australia, whether the data transfer originates and ends at their network or whether the data traffic is sent from Australia to overseas destinations. In addition, discounts are often provided for high users of Internet bandwidth.

The Current VoiceNet System operates by compressing voice data into electronic packets that are sent across the Internet and then decompressed by the far-end VoiceNet System.

COMPRESSION ILLUSTRATION

The amount of data the VoiceNet System sends across the Internet becomes a function of the amount of compression of the voice data; the greater the amount of compression, the smaller each electronic packet size, therefore the smaller the amount of Internet bandwidth used and accordingly the lower the cost for the transmission of the data.

The Current VoiceNet System compresses voice data to create an average transmission rate of approximately 14 kilobits (kb) of data per second.

This equates to a transmission rate of approximately 840 kb of data transmission per minute per telephone line.

DEVELOPMENT GOALS

4 Line VoiceNet System

It is proposed that a 4 line version will be designed to work with standard off the shelf telephony voice modem cards that have an on-board Digital Signal Processor (DSP) which will perform the necessary voice compression and decompression. It is envisaged this will offload the CPU of the PC from having to perform computational intensive compression and decompression calculations, thereby increasing product performance.

It is proposed that the 4-line system will be a working version of limited functionality for the purposes of demonstrating the multi-line capability of simultaneous Internet Telephony conversations using a VoiceNet System.

It is further proposed that the system will be designed to work under a Windows $NT^{TM}$ operating system.

This 4-line system will not be a complete marketable product as a number of features including call logging billing and settlement will be added after completion of the 24Line VoiceNet System. However if market conditions demand the introduction of a 4-line system, then such system can be sold as a reduced set version with an upgrade module to the 24Line VoiceNet System subsequently provided once the 24Line VoiceNet System is completed.

24Line VoiceNet System

This high capacity system is proposed as an extension of the 4-line system and will support 24 simultaneous phone conversations. The hourly capacity of such a system is referred to in the report of WA CTI setout in Section 11 of this Prospectus.

It is intended that such version will incorporate interfaces to allow commercial users to integrate the system with accounting packages to create accurate call billing, monitoring and settlement procedures.

The 24Line VoiceNet System will endeavor to achieve better compression ratios than those achieved with the Current VoiceNet System; though this cannot be guaranteed as the actual compression ratios are not capable of estimation until the system is fully developed.

It is proposed that the 24Line VoiceNet System will be packaged and sold with a computer and related hardware as a standalone VoiceNet Telephony Server in two configurations; either a standard PC tower or a rack mountable unit.

Like the 4-line version, it is proposed to design the 24-line system to work in conjunction with standard off the shelf telephony voice modems incorporating a DSP.

It is proposed that this system will be designed to work under a Windows $NT^{TM}$ operating system.

ILLUSTRATIVE COSTINGS

The following table illustrates the potential cost of transmission of a telephone call over the Internet based upon the operating parameters of the Current VoiceNet System having a data compression transfer rate of 840 kilobits /minute (840kb/minute).

For the purposes of the table two indicative bandwidth charges have been assumed based on indicative tariffs currently in the Australian marketplace. These rates are assumed at A$0.19 per 8000 kilobits of international data traffic and an assumed rate of A$0.12 per 8000 kilobits for domestic data traffic in Australia.

Indicative Costing Table For Current VoiceNet System

Example 18 Transmission Rates:	International DataTraffic (cents)	Domestic Data:Traffic (cents)
Data Transmission Cost per 8000 kilobits	19 cents	12 cents
Data Transmission Cost per 1000 kilobits	2.375 cents	1.5 cents
Current VoiceNet System Compression$= (840$ kilobits/minute)
Cost Per Minute Based on CurrentCompression Ratio $=$	1.995 cents/minute	1.26 cents/minute

Note: The call costings illustrated above should be regarded as indicative only. Actual costings are dependent upon several factors including:

• actual bandwidth charges in place at the relevant time which may be higher or lower a) than those assumed above;
• any discounts that may be commercially negotiated for data traffic; $b)$
• the amount of data transmitted; and $c)$
• d) actual packet size and compression ratios achieved.

Clause 1.11 of the report of WA CTI contained at Section 11 of this Prospectus sets out the packet size and compression ratios determined by them for the Current VoiceNet System which indicate a compression transfer rate of 14 kilobits of data a second.

DEVELOPMENT GOALS

24Line VoiceNet System

An illustration of this proposed 24-line system incorporating a PBX connection is shown in the following diagram:

Subject to the above development goals being achieved, it is then proposed to expand the 24 line version into a module system that links 24 line units together in order to provide larger line capacities in multiples of 24 lines. It is proposed that this product will be packaged and sold as multiple rack mountable units.

H.323 Protocol

It is also proposed to develop the 24Line VoiceNet System in two versions; one of which will adopt the H.323 Internet Protocol. The H.323 Internet Protocol is an internationally agreed-upon specification developed by the International Telecommunications Union (ITU) which defines how PCs can interoperate to share audio and video streams over computer networks such as the Internet.

There are certain advantages in developing a system in compliance with this Protocol which allows for interoperability with other systems and industry standardisation.

The principal disadvantages are the cost of implementation of the Protocol and the higher bandwidth usage incurred when implementing the Protocol.

Accordingly, the two versions of the 24Line VoiceNet System will cater for those purchasers who require interoperability (at the expense of higher bandwidth useage) and those purchasers for whom interoperability is not important, but who wish to achieve the highest possible compression ratios (and hence lower call tariffs).

DEVELOPMENT GOALS

The Current VoiceNet System is sufficiently developed in terms of functionality and call quality to be appropriate for small business, private or home use. Accordingly, the Company is capable of deriving revenue from the sale of such system and will devote part of the funds raised pursuant to the Issue to market such system.

The Directors believe the Current VoiceNet System requires further development and enhancement for large scale commercial applications that require a multi-line capacity. The development of a multi-line VoiceNet System is appropriate to obtain the full benefits of the system and to maximise the revenue capable of being generated through sales of the system.

To this end the Company believes the Current VoiceNet System having a single line capacity needs to be expanded to the 24Line VoiceNet System capable of handling 24 simultaneous telephone calls.

Based upon industry standard calculations, one 24Line VoiceNet System has been estimated by WA CTI, the independent technology experts to this Prospectus, to be capable of handling 500 calls in an hour. This is based on industry standard benchmarks of a 10% acceptable busy tone and an average call duration of 2 min 30 seconds. Further details of such capacity are outlined in the Expert Report of WA CTI at Section 11 of this Prospectus.

The development of the 24Line VoiceNet System will afford the Company the following commercial advantages from that of the Current VoiceNet System:

• $(i)$ a wider potential market for the sale of such systems:
• a lower capital set-up cost per line for potential purchasers of the system; $(ii)$
• $(iii)$ better call administration and billing procedures;
• $(iv)$ a possibly higher level of data compression leading to lower call costs;
• $(v)$ a possibly better call quality tailored to commercial and corporate users.

It is accordingly proposed that the Current VoiceNet System be expanded to a multi-line version initially of 4 lines and then of 24 lines. It is also proposed that such development work will incorporate the recently developed H.323 Internet Protocol for the transmission of voice data over the Internet which allows for interoperability of such system with third party systems.

Details of the major development goals for the 4 line and 24 line versions are as follows:

4 Line VoiceNet System

The Current VoiceNet System software utilises the Central Processing Unit of the PC to form the compression/decompression of voice data and the translation of that data into packets to be sent and received over the Internet.

SOFTWARE DEVELOPMENT SCHEDULE

In order to effect the development of the 24Line VoiceNet System, a portion of the funds raised by this Prospectus will be applied towards further software development of the VoiceNet System.

In this regard, Queste America Inc, a company owned by Mr Russell Grewe (a director of this Company) has been contracted to undertake further software development work on the Current VoiceNet System including but not limited to the expansion of the Current VoiceNet System into a 24Line VoiceNet System.

Mr Grewe, through his company, Queste America Inc has been selected to undertake such works as he originally led the software team that developed the Current VoiceNet System.

A software development agreement has accordingly been entered into between the Company and Queste America Inc which incorporates a detailed timetable and costing for such software development works.

The agreement provides for completion and delivery of a limited function 4 line VoiceNet System within 20 weeks of project start, a period of 44 weeks from project start for completion and delivery of a H.323 Compliant 24 Line Voice Net System, a period of 51 weeks for completion and delivery of a Non H 323 24 Line Voice Net System and a further period of 11 weeks to complete and deliver final modules allowing multiple links of 24 line VoiceNet Systems and remote administration

The costs of such development work are stated in the software development agreement to be United States Dollars $US 567,000.

WA CTI, the technology experts to this Prospectus comment on such works in their report setout at Section 11 of this Prospectus.

Further details of the agreement with Queste America Inc to carry out such software development works are outlined in Section 12 of this Prospectus.

The successful completion of the software development works, the meeting of the development timetable and the creation of the 24Line VoiceNet System is dependent upon Queste America Inc meeting its obligations under its contract with the Company and accordingly, the completion of the software development works, the meeting of the development timetable and the creation of the 24Line VoiceNet System cannot be guaranteed by the Company.

TARGET MARKETS

The Current VoiceNet System and all future developments to the same including the 24Line VoiceNet System are and will be proprietary assets of the Company respectively.

As the Company's rights to these assets have no territorial limitation for exploitation, the commercial markets for the same are world-wide.

The nature of the Internet as a world-wide network incorporating standard communication protocols also means that the VoiceNet System can be readily introduced into markets outside of Australia without the need for major software amendments to suit the particular requirements of a country or geographic zone.

TARGET MARKETS

The Current VoiceNet System and the 24Line VoiceNet System proposed by the software development works will target the following worldwide commercial markets:

Internet Service Providers (ISP's)

The Current VoiceNet System and particularly, the proposed 24 Line VoiceNet System is ideally suited for ISP's world-wide who can incorporate the system into their existing businesses to provide customers with an alternative long distance calling mechanism to that of the PSTN.

This provides ISP's with a means of creating a value added service for their existing customer bases, adding to their existing customer base by providing a new service and increasing their traditional revenue base from that of providing a simple dial-up connection to the Internet.

The creation of a telephony network service will require the purchase by such ISP's of multiple VoiceNet Systems set up and maintained by them or the Company in each call location to be offered or by way of a linkage with other ISP's who already have a VoiceNet System installed to create a network of linked VoiceNet Systems in various geographic locations.

Local Access Transfer Area (LATA) Market of the United States

An important marketing focus for the proposed multi-line version of the 24Line VoiceNet System will be the InterLATA and IntraLATA telephony markets of the United States.

The United States local telephony market is divided into predefined telephony boundaries known as LATAs (Local Access Transport Areas). All states are broken into several such areas and they do not necessarily follow normal telephone area code boundaries. There are two types of timed toll telephone calls within the United States and they are dependent on the boundaries of these LATAs.

Long distance toll calls are defined as those travelling between LATAs (known as InterLATA calls) and such calls are handled by long distance United States telephone companies such as AT&T, MCI and Sprint. The most common occurrence of InterLATA calls are those occurring between various states.

In addition, local timed calls can occur and are those calls made within a LATA, but are outside of the callers local untimed call area. This type of call is still within a local phone companies LATA but is charged at a per minute rate.

Both these LATA markets are of importance as the 24 Line VoiceNet System is capable of being introduced by commercial operators such as ISP's who can potentially incorporate the system into their existing businesses as a means of offering InterLATA and IntraLATA phone services in competition with telecommunication carriers.

TARGET MARKETS

Local Access Transfer Area (LATA) Market of the United States

In particular, due to the nature of division of LATA boundaries, timed IntraLATA calls can occur between adjacent cities but also within a particular city. As an illustration, the city of Los Angeles is broken up into a number of LATA's (Area codes such as 818, 310, 213 and 714) as shown by the following diagram.

Given the sometimes relatively close geographical distance between IntraLATA boundaries (where a city is broken into several LATA's), the creation of a network of VoiceNet Systems by an operator such as an ISP within a city to bypass these IntraLATA timed calls offers commercial potential.

The ultimate commercial potential of a VoiceNet System in such markets will be a function of the price competitiveness of a VoiceNet System call compared with the cost of a InterLATA or IntraLATA call. This competitiveness cannot be conclusively established until the 24Line VoiceNet System is developed and the operating parameters of the system established.

The Directors however believe it is reasonable to assume there is potential for the sale of VoiceNet Systems to operators in the United States who are capable of setting up multiple VoiceNet Systems either within different areas of a particular city or between various cities and or states.

TARGET MARKETS

Company Networks

Companies that have a main office and regional and overseas branches together with service firms such as accountants and lawyers that have offices in a number of states are ideally placed to take advantage of the VoiceNet System. These groups could setup the system in each office to create an in-house telephony network that can reduce long distance telephone costs.

Telemarketing Operations

Call costs are one of the major expenses of a telemarketing operation, particularly when such operation involves long distance calls. There is considerable scope for such operators to reduce one of their major costs by the introduction of a VoiceNet System network that would allow long distance customer calls to be routed over the Internet..

Call Centers and Help Lines

It is a common feature for businesses that have Help Lines or Call Centers to offer customers a local number to place orders and deal with customer service issues such as technical support and advice even though the ultimate destination of such call involves a long distance call charge. The company providing such service often bears the long distance cost component of such calls. The incorporation of a VoiceNet System for such Help Lines or Call Centers potentially provides significant telephony cost savings for such businesses. It is envisaged that a VoiceNet System could be setup in each region where the service is to be provided and the systems linked to the main service centers VoiceNet System.

Queste Communications Own Network

Upon completion of the 24Line VoiceNet System, the Company will also consider creating its own VoiceNet telephony network within Australia and selected overseas destinations. The Company may also consider broadening the scope of such network by linking its network to other VoiceNet System networks operated by other parties, should the same be in existence at that time.

Whether the Company proceeds with such option will be a function of the ultimate development of the 24 Line VoiceNet System and market conditions at the time. The creation of a large scale integrated telephony network based upon the VoiceNet System may require the Company to raise further funds at that time and this will be one factor affecting the decision of the Company to proceed with this option.

Prospectus

AWARD FROM CTI MAGAZINE

Section 8

The Directors Queste Communications Ltd. 4 Judd Street South Perth, Western Australia 6151

Re: Editors' Choice Gold Award

May 26, 1998

Dear Sirs:

This letter serves to confirm that the single-line version of the VoiceNet System tested by this magazine was awarded a Gold $CTl^{\otimes}$ Editors' Choice Award in the July 1997 issue of $CT^{0}$ in recognition of an outstanding contribution to the computer-telephony integration industry. CTT® is a publication of Technology Marketing Corporation, Inc. (TMCTM).

This award is granted in keeping with our commitment to being the industry's leading source of in-depth information on computer telephony products, solutions, and innovations. Our engineers and staff conduct our reviews and distribute the Awards based on objective, verifiable criteria to make our readers' purchasing decisions as easyand as informed as possible. Neither $CTI^0$ , $TMC^{TM}$ , nor their affiliates have any financial relationship with Queste.

Please accept our congratulations for the award.

Finally, we consent to the inclusion of this letter in a Prospectus prepared by the Company for the purpose of offering shares to the public.

Sincerely,

Richard Tehrani Publisher

BUSINESS AND INVESTMENT RISKS Section 9

Prospective Investors in the Company should be aware that subscribing for Shares in the Company involves a number of risks. The Shares offered by this Prospectus carry no guarantee with respect to return on capital investment, payment of dividends or the future value of the Shares. The Shares being offered by this Prospectus must be regarded as a speculative investment. The following factors together with the other information setout in this Prospectus should be carefully considered in any assessment of the Company and or the Shares offered by this Prospectus before investing in the Shares offered. This Prospectus should be read in its entirety and Prospective Investors should consult their financial adviser, stockbroker, accountant or solicitor before making an investment decision. Reference in this Prospectus to a third party should not be taken to mean an endorsement by that third party of the Company or the Shares offered by this Prospectus.

SHARE INVESTMENT

The Company is applying for a listing of its shares on the ASX. Applicants should be aware that there are risks associated with listed share investments. It is important to recognise that the value of shares can go up or down due to circumstances affecting the stock market generally or the Company in particular. Therefore the price at which the Company's shares may trade may be above or below the issue price of 20 cents per share.

ECONOMIC CONDITIONS

The market for the Company's products is both Australia and overseas. As such, it is exposed to fluctuations in worldwide economic factors in the ordinary course of its business. Such fluctuations are by their very nature cyclical, subject to change and outside the control of the Company and may have an adverse material affect on the Company.

DEVELOPMENT RISK

The major growth and revenue stream of the Company is highly dependent upon the successful completion of the 4 Line and 24Line VoiceNet System. The successful completion of such systems in a timely manner or at all is dependant upon Queste America Inc meeting its contractual obligations under its agreement with the Company to so develop the systems and accordingly, the completion of the 4 Line and 24Line VoiceNet System cannot be guaranteed by the Company.

In addition, as with the development of any new product, the Company faces a number of risks including the risk that commercially acceptable products cannot be successfully developed or that significant delays and increased costs may arise or that the products developed may not meet the current needs of the marketplace.

SUPPLIER RISK

The Company relies and will rely on a number of third party suppliers to provide electronic hardware components under which the Current VoiceNet System, the 4 Line and the 24Line VoiceNet System will operate. Whilst the Company will as a matter of normal business prudence study such suppliers to ensure they are able to fulfil the needs of the Company and that the Company has diversified its reliance away from any one supplier to as high a degree as is possible in the circumstances, the ultimate supply of components from such suppliers will be outside of the control of the Company.

BUSINESS AND INVESTMENT RISKS

OBSOLESCENCE

There can be no guarantee that the Company's technology and products will not become obsolete in the future. The VoiceNet System is a software system integrated with electronic hardware and historically such systems are characterised by rapid technological change, product obsolescence due to technological advances and wide fluctuations in supply and demand for such products due to the rapidly changing nature of the market, all of which may affect the Company.

INTERNET ACCESS CHARGES

The core competitive advantage of the VoiceNet System over the PSTN is the compression ratios for voice data coupled with the different data transmission charges incurred by use of the Internet over long distances compared with the costing structure for long distance calls placed through the PSTN. The setting of such prices and Internet access charges in Australia and world-wide is beyond the control of the Company and over time such competitive advantage may decline or be removed.

INTEGRATION OF VOICENET SYSTEMS

One marketing objective of the Company is the sale of VoiceNet Systems to ISP's in differing geographic areas who will link their VoiceNet Systems into an integrated telephony network. The creation of such an integrated telephony network, particularly between different ISP's in different countries may present difficulties regarding, amongst other matters, coordination issues, regulatory issues and issues such as reciprocal billing and call settlement procedures.

COMPETITION

There are a number of other companies that have developed or are developing systems that are capable of telephone to telephone transmission of calls over the Internet in competition with the VoiceNet System and the Company will be competing with such companies for the sale of such systems in a world market.

The Company expects to experience competition from such companies, many with significantly greater financial and technical resources than the Company. To the extent that the Company's products achieve market acceptance, other companies may offer competitive or technologically advanced products or embark on pricing strategies that could adversely effect the operating performance of the Company.

The ultimate success of the Company in introducing its products into world markets is therefore not guaranteed and will in addition to the foregoing, be a function of a number of factors including the quality and perceived quality of its products, the success of the marketing efforts adopted by the Company and the general business practices and methods of the Company in its operations.

In Australia, there is also a competing internet telephony system currently in operation by a major internet service provider. This system is proprietary to that company and is offered as a commercial telephone service to the public as a means of saving on interstate and international calls.

The Directors do not believe the potential revenue streams of the Company and that provider significantly overlap as an important revenue source for the Company is proposed as the seller of operational VoiceNet Systems to third parties such as ISPs (who will setup their own telephony networks) rather than as the operator of a telephony network based on the VoiceNet System.

BUSINESS AND INVESTMENT RISKS

COMPETITION

Whilst the Company will consider creating its own VoiceNet telephony network within Australia and selected overseas destinations the present intention is to focus the marketing efforts of the Company towards the sale of operating VoiceNet Systems.

However should this occur or where third parties purchase operational VoiceNet Systems to offer such a service, they will be in direct competition with the telephony services provided by companies such as the internet service provider referred to above.

In the event that such internet service provider should determine to sell its proprietary software to third parties in a manner similar to the Company, the Company will be in direct competition with such company.

REGULATORY RISK

The telecommunications industry in Australia was de-regulated on the 1st July 1997 and this may cause uncertainty in the industry in Australia. Insofar as the operations of the Company relate to Australia, they could have a material adverse affect on the Company.

Similarly, changes in the regulatory environment relating to the Internet connectivity industry in Australia could have a material adverse affect on the Company.

The provision of a telephony service based upon the VoiceNet System by customers of the Company (or the Company itself should it determine to also become an operator) will require those customers to be registered as telecommunications providers by the Australian Government.

The sale of the VoiceNet System in other countries may be the subject of governmental regulation and this may have a material adverse affect on the revenue stream of the Company.

OTHER RISK FACTORS

Th commercial success and the share price of the Company may also be affected by the following risk factors:

• No assurances as to the future profitability or dividends can be given as they are dependant upon future earnings and the working capital requirements of the Company;
• Changes in interest rates, exchange rates, relevant taxation and other legal regimes and governmental policies in Australia and overseas may adversely affect the Company;
• The Directors expect that the proceeds of the public capital raising will provide sufficient capital resources to enable the Company to achieve its current business objectives. However, the Directors can give no assurances that such objectives will in fact be met without future borrowing's or further capital raisings and if such borrowings or capital raisings are required, that they can be obtained on terms favourable to the Company;

BUSINESS AND INVESTMENT RISKS

OTHER RISK FACTORS

• There can be no guarantee that the market strategies of the Company will ultimately prove to be valid or $\bullet$ accurate and will also be dependent upon various factors which are outside the control of the Company.
• As a seller of telecommunications systems, the Company faces uncertainty as to its ability to develop sales in a cost effective manner;
• The Company may face difficulty in entering world markets;
• A relatively small proportion of the Company's value is represented by tangible assets other than cash which will be used to fund the operations of the Company.
• Queste Communications Ltd was incorporated on the 10th March 1998 and has no operating history upon which to judge its prospects;
• The failure to attract and retain key employees in the future may have a material adverse effect on the Company;
• There can be no guarantee that investor confidence in the telecommunications industry or the Internet will not change in a manner adverse to the interests of the Company;

While prudent management techniques will be used by the Directors of the Company to minimise risk to shareholders, investors must be aware of the risks inherent in their investment in the Company at the time of making their investment in the Company.

The above list of risk factors should also not be taken as an exhaustive list of the risks faced in investing in the Company. The above factors and others not specifically referred to may in the future materially effect the financial performance of the Company and the value of the Shares and accordingly an investment in this Company should be considered speculative.

Section

FINANCIAL INFORMATION

The financial information outlined below must be read in conjunction with the other material contained in this Prospectus.

The financial information contained in this Prospectus reflects an assessment of the business potential of Queste Communications Ltd based upon the existing and planned products of the Company and the marketing strategies of the Company.

The Directors of Queste Communications Ltd have determined to adopt a conservative approach to providing financial information and therefore no earnings forecasts have been included in this Prospectus. The Directors believe that at this stage of the Company's development, any earnings forecast is likely to be inaccurate and based upon hypothetical assumptions which may or may not eventuate.

Any earnings forecast would therefore not reflect the actual position of the Company and would be misleading to potential investors.

Any investment in the Company is therefore to be made with the knowledge that the Directors of the Company have not provided earnings forecasts and investors should therefore treat any investment in the Company as speculative.

Some of the factors that have caused the Directors to decide to exclude earnings forecasts from this Prospectus are:

• the Company is at an early stage in the formation of its business;
• the Company is proposing to conduct further development work on the VoiceNet System which if successful, will have a significant impact on the Company;
• the eventual outcome of the development works cannot presently be established and may evolve based upon the works conducted;
• the potential revenue stream of the Company is affected by the final outcome of such development works; and
• no final determination has been made by the Company on whether it will seek to setup its own telephony network based on the proposed multi-line version of the VoiceNet System or the scale of operations if such decision is made. Such a decision, if made may require the Company to raise further funds depending upon the scale of the network proposed.

Notwithstanding the exclusion of an earnings forecast for the Company, the Directors set out below a brief outline of the potential revenue sources and costs associated with the business of Queste Communications Ltd:

REVENUE SOURCES

As setout in this Prospectus, the Company is the owner of the Current VoiceNet System and proposes certain development work to enhance the commercial value of such system by creating the 24 Line VoiceNet System.

The Company proposes to derive income from:

• the sale of VoiceNet Systems to third parties such ISP's, business and commercial users $(i)$ having branch offices, small office and home users, Call Centre and Help Line Operators and Telemarketing companies;
• $(ii)$ the provision of service and maintenance work for installed VoiceNet Systems;

FINANCIAL INFORMATION

REVENUE SOURCES

• the provision of product upgrades and enhancements to users of the VoiceNet System as and $(iii)$ when the same occur;
• in addition the Company will consider setting up its own VoiceNet telephony network within $(iv)$ Australia and selected overseas destinations and/or linking such network to other networks of the VoiceNet System operated by other parties. In such circumstances, the Company expects to derive income from individuals and businesses using the network to make telephone calls. It is envisaged that a two tier timed call tariff will be introduced for users of the systems. Such call tariff will be based on the call destination being either within the same country as its origin or at a call destination outside of the country of origin; and
• such other business opportunities within the telecommunications industry as may be $(v)$ presented to the Company from time to time.

INITIAL AND OPERATING EXPENSES

The costs associated with the setup and ongoing business of the Company can be presently divided into six components:

• Initial Business Setup Costs
• General Overhead and Administration Costs
• Research and Development Costs
• VoiceNet System Marketing and Demonstration Costs
• VoiceNet System telephony network costs
• Other telecommunications opportunities

The following schedule summarises the proposed expenses of the Company for the first two years of its operations:

Initial Business Set-Up Costs	$857,000
General Overhead and Administration Costs	$245,000	$245,000
Research and Development Costs	$945,000
VoiceNet System Marketing and DemonstrationCosts	$35,000	$100,000

Schedule of Estimated Expenditures For First Two Years

The above schedule represents the expected expenditures of the Company. The actual expenditures incurred may vary from those outlined above as a number of the proposed expenditures are not the subject of binding contracts and are discretionary in nature. They cannot accordingly be quantified with precision at this stage. Those expenditures that are the subject of binding contracts are outlined at Section 12 of this Prospectus. A significant portion of the binding contract expenditure relates to Research and Development. This cost is payable in United States Dollars and is subject to exchange rate fluctuations. The Company does not intend to hedge its currency exposure and accordingly, the amounts payable from time to time under such contract can vary up or down. For the purposes of the above schedule an exchange rate of Australian Dollars to United States Dollars of 0.60 is assumed.

FINANCIAL INFORMATION

INITIAL AND OPERATING EXPENSES

Further details of the six expenditure components outlined above are as follows:

Initial Business Setup Costs

These costs relate to the setup of the Company's business operations including the costs of the capital raising proposed by this Prospectus. In particular, the Company has entered into a binding contract for the purchase of a strata titled office suite in Perth of approximately 210 square metres from which the Company will base its operations. The acquisition cost of such property is $425,000. Further details of the contract to acquire such property is outlined at Section 12 of this Prospectus. The Company has decided to acquire office accommodation rather than lease premises for a number of reasons including the fact that the creation of a suitable telephony network infrastructure (including high bandwidth internet connectivity) to demonstrate the VoiceNet System is a cost that is specific to the Company's premises and represents an investment better suited to premises the Company owns rather than leases. The purchase of office accommodation also creates a tangible asset that is available to the Company to borrow against should the Company require funds in the future.

In addition to the property acquisition, the initial setup costs include the underwriting fees payable to the Underwriters to the Issue in the amount of $250,000 (further details of such contract being outlined at Section 12 of this Prospectus) and incidental costs to formation of the Company's business including office fit-out and furniture costs, office equipment costs such as fax, photocopier and computers.

General Overhead and Administration Costs

These costs relate to the management and administration of the Company and include salaries and wages, executive and non-executive directors fees, travel, insurance, taxes, superannuation, accounting/audit fees and general office expenditures such as telephone, stationery, postage and parking costs. As the Company has not commenced business, these expenses cannot be quantified with precision at this stage. Section 12 of this Prospectus outlines executive and non-executive directors fees and accounting/audit fees that have been determined at the date of this Prospectus.

Research and Development Costs

The Company has entered into a Software Development Agreement with Queste America Inc to develop the 24 Line VoiceNet System. Details of such contract are setout at Section 12 of this Prospectus. The costs of such research and development will be expended progressively by the Company over the term of such agreement.

VoiceNet System Marketing and Demonstration Costs

These are the costs associated with marketing the Current VoiceNet System and the proposed 24 Line VoiceNet System. The principal markets for such systems have been identified as being ISP's, business and commercial users having branch offices, small office and home users, Call Centers, Help Line Operators and Telemarketing operations.

FINANCIAL INFORMATION

INITIAL AND OPERATING EXPENSES

VoiceNet System Marketing and Demonstration Costs

It is anticipated that the Company will set-up a local site incorporating the Current VoiceNet System at its Perth offices and a far end system at leased premises located at a capital city on the eastern seaboard of Australia to demonstrate the system to potential customers.

ķр.

Upon successful completion of the 24 Line VoiceNet System the demonstration sites will be expanded to incorporate such system.

In addition, the Company proposes to expend funds towards the marketing and promotion of the VoiceNet System.

As the Company has not commenced business, these expenses cannot be quantified with precision at this stage.

VoiceNet System Telephony Network Costs

These are the costs involved should the Company determine to set up its own telephony network and will comprise the capital costs of setting up such system, (either as a stand alone network or a network connected with other VoiceNet System operators) and the ongoing management and administration costs of such business. The scale of such undertaking will determine whether the capital reserves of the Company are sufficient for that purpose. It is envisaged that any creation of a large scale integrated telephony network based upon the 24 Line VoiceNet System with multiple call locations in Australia and overseas locations may require the Company to raise further funds at that time. At present no determination can be made on this business direction until the outcome of the proposed software development works for the proposed 24 Line VoiceNet System are completed and market conditions for the introduction of such a system are assessed at that time.

Other Telecommunications Opportunities

It is proposed that other business opportunities within the telecommunications industry will be actively pursued provided they present a reasonable commercial prospect for the Company. The pursuit of such other opportunities will impact upon the operating costs of the business and will be a function of the particular commercial opportunity presented at that time.

The pursuit of such commercial opportunities may result in a re-allocation of Company resources and finances to pursue such opportunities. The Company may also determine to issue further shares in its capital to fund such opportunities or undertake other types of financing to fund such opportunity.

OTHER FINANCIAL INFORMATION

The Company will depreciate fixed assets over their useful life using the straight line method.

Prospectus

Sunjet Holdings Pty Ltd

EXPERTS REPORTS - WA CTI

Section 11

Trading as WA CTI WACTI ACN 075 089 986 L1, 94 Burswood Road BURSWOOD W.A. 6100 Excellence In Computer Religion

Expert Report On Queste Technology

VoiceNet Software System

Executive Summary

The following document details a report prepared by WA CTI on the Single Line VoiceNet Software system that has been developed by Oueste America Inc. as well as a critique of the proposed development schedule for a twenty four line VoiceNet system. These products share the common intent of carrying voice communications over data networks as an alternative to the public telephone system.

WA CTI performed an extensive evaluation of the Single Line system that included both a technical verification and a subjective impression of the quality of the communications possible using the products.

In summary WA CTI were impressed by the technical competence of the Single Line VoiceNet system. It performed just as it purported to do, and did so with a more than acceptable subjective voice quality over data networks that do not necessarily provide a smooth path for time sensitive data such as voice.

When moving to a consideration of the approach Queste America Inc. intended to take to develop an evolutionary 4 line system followed by a production 24 line system WA CTI had some minor initial concerns but these were very rapidly addressed in a totally professional manner by Queste America Inc.

By the conclusion of the report process WA CTI were satisfied that not only was the existing product a strong demonstration of competency but also that the organisation possessed the ability to develop a 24 line system that would be a very strong contender in this emergent communications field.

Finally WA CTI considered the revenue capabilities of both the existing organisation and the potential for a 24 line system.

This was done so in the light of the potential investment by Queste Communications Ltd. in Queste America Inc. for this development project.

WA CTI are of the opinion that the single line product in isolation has some revenue potential. The 24 line system has every chance of being a strong contender in the emergent field of Voice Over Data Communications.

NB. An indication of the capacity of the four line and twenty-four system are as follow:

• Four line system $-45$ calls in an hour
• Twenty-four line system 500 calls in an hour.

These are based on industry standard benchmarks of 10% acceptable busy tone and an average call duration of 2 min 30 seconds calls.

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EXPERTS REPORTS - WA CTI

Table of Contents

INTRODUCTION	48
THE PRODUCT	48
METHODOLOGY	49
PLATFORM PRESENTATION	49
SYSTEMS VERIFICATIONS	50
1.1 - Interactive Voice Responses (IVR)	50
1.2 - Dialing Methods	51
1.3 - Different Call Types	51
1.4 - Call MonitoringReal Time DisplayLog File	525252
1.5 - Security	52
1.6 - Call Restriction	53
1.7 - Call Routing	53
1.8 - Management Features	54
1.9 - Call Process	55
1.10 - Full Duplex Capability	56
1.11 - Data analysisCompressionFraming and Bit RateInter-Frame Jitter	56565758
SUBJECTIVE TESTING	58
1.12 - IVR WAV Files	58

46

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EXPERTS REPORTS - WA CTI
1.13 - Graphical User Interface	58
1.14 - Voice Quality	59
REVENUE POTENTIAL FOR VOICENET SOFTWARE	59
REVIEW OF DEVELOPMENT SCHEDULE OF 24 LINE SYSTEM	60
PROJECT PLAN COMMENTS	61
COMMENTS ON PLAN CONSTRUCTION	61
TIMELINE & RESOURCE VIABILITY	61
CONTINGENCY & REVIEWS	62
FACILITIES FOR EXTERNAL FACTORS	62
CONCLUSION TO REVIEW OF DEVELOPMENT SCHEDULE	63
AUTHOR BIOGRAPHIES	70
1.15 - Christopher David Jewell Guppy	70
1.16 - Jefferson Dean Newton Astfalck	71
GLOSSARY	72

INTRODUCTION

This report has been prepared by WA CTI for Queste Communications Ltd (Queste) for inclusion in a Prospectus for the raising of $2,500,000 for the listing of the company on the Australian Stock Exchange Limited.

WA CTI was commissioned by Queste to provide an independent evaluation and opinion on the VoiceNet software system owned by the company.

Specifically this process was to include a review of the existing single line version of the software (herein called the Single Line VoiceNet system) together with a review and comment upon the proposed software development schedule for the 24-line version of the VoiceNet system.

A specific requirement of the testing process was to confirm the compression and packet size transmission rates that are claimed for the Single Line VoiceNet system.

This report constitutes a record of the testing conducted by WA CTI, including appropriate commentary and observations together with a review of the software development schedule.

THE PRODUCT

The Single Line VoiceNet system (abbreviated herein as VoiceNet) is an application for conducting voice conversations over IP. By this it is meant that the product is intended to act as an alternative to the conventional PSTN by transporting voice over the Internet.

In the past few years a number of products, including some in the freeware category, have appeared which purport to perform this function. The Single Line VoiceNet system illustrates a far more comprehensive approach that has produced a product that addresses both the corporate and the small office/home office/telecommuter segments of the market.

SoHo is undoubtedly a growth market but the significant arena for these products remains the corporate sector. In this context, the single line product that has been tested, whilst appropriate for the SoHo market, has to be considered evolutionary to the large-scale corporate sector.

It is the considered opinion of the authors of this report that it is the 24-line product that has been proposed that has the major potential in the marketplace.

The intent of this testing was therefore, at least in part, to determine the feasibility of such a product from the evidence of the deliverables produced to date.

METHODOLOGY

For the type of software under examination it was determined that a two-part methodology would be appropriate.

This would consist of an initial objective phase during which the application software would be installed and the various operational parameters confirmed, following which a more subjective process could commence.

With any software the usability and presentation of the interface is a matter of subjective opinion. With Voice software there is also the subjective perception of the audio content to be considered.

Therefore the subjective phase would consist of the collation of the impressions of a test group as to the perceived suitability of the interface and quality of the audio output.

To this end the table that appears at Appendix A was compiled for the objective phase.

For the subjective phase standard industry weightings were used to define the perceived quality of the audio. The other subjective parameters were the subject of extended discussion and collaborative input to produce the opinions that are recorded herein.

Platform Presentation

Microsoft™ Windows 95 has redefined market perceptions on the friendliness of systems- especially where the process of installing new software and necessary hardware is concerned.

To confirm that the Single Line VoiceNet system and the MediaPhonics PhoneRider Interface cards that it is designed to operate with did not have any installation issues two clean PC platforms were prepared.

These were set up in the configuration detailed at Appendix B, following which the MediaPhonics cards were installed and the VoiceNet Software copied to the systems.

No installation issues whatsoever were encountered with either the cards or the software.

The cards in particular installed exactly as per the instructions and when one minor configuration glitch occurred a Troubleshooter Wizard immediately appeared and provided useful assistance to finish the installation.

MediaPhonics cards are not presently available in Australia to our knowledge and as a consequence do not yet have any ACA (Australian Communications Authority) authorisation for use on the Australian telephone Network.

If the Single Line VoiceNet system is to be marketed in Australia this will need to be rectified. The good news is that these are an excellent, extremely well designed card and are likely to attract a strong following once approved.

VoiceNet loaded with no difficulties and presented a wizard to permit configuration.

This was a straightforward process, and the two systems were quickly configured on a Local Area Network and communicating with each other.

The screen capture at Figure 1. Shows the VoiceNet interface on completion of configuring the wizard with some site addresses and local telephone number information.

Following this process and making the appropriate connections the systems were ready for the initial tests.

Initial VoiceNet Screen

SYSTEMS VERIFICATIONS

$1.1$ Interactive Voice Responses (IVR)

When installed VoiceNet establishes a folder of .WAV files that are played as appropriate to provide a "human" interface for the user throughout the call establishment process.

These files have been recorded using a neutral "mid-Atlantic" male voice (see elsewhere for subjective reactions to these recordings.)

In order to confirm the IVR operation the system was "exercised' through a series of typical cycles and the selection and playing of the respective files monitored.

The results of this process are at Appendix A.

Essentially the IVR performed without fault, the correct file being played for each circumstance as appropriate.

$1.2$ Dialing Methods

VoiceNet supports both the E.164/1.331 (05/97) International Public telecommunication numbering plan and speed dialing.

The former is essential for unambiguous communications with devices anywhere on the International Telecommunications Network. The latter is simply a mapping within the system itself to circumvent having to repeatedly enter full E.164 number strings.

This feature therefore permits for example a direct connection to be made to an extension on a remote PABX in the same manner that one would dial an internal extension.

To confirm that VoiceNet fully supports E.164 a series of calls were placed to numbers on the PSTN.

These included local, intra and inter state connections as well as calls to International destinations.

No difficulties were encountered during any facet of this test.

When one wrong number was deliberately entered the PSTN messaging to that effect was returned to the VoiceNet system with no problem and when an inadvertent incorrect number was entered a connection was made to the valid, but incorrect device.

This trial was then repeated with the same (correct) numbers configured for Speed Dialing with the same result.

Finally an incorrect number was entered and mapped to a Speed Dial number that again returned the appropriate message from the PSTN.

$1.3$ Different Call Types

VoiceNet supports three distinctly different call types, these being:

• ↘ STS (System to System) This call emulates a normal PSTN call and appears at the destination PABX exactly as if a conventional call had been made to the main switchboard number.
• ↘ DOSA (Direct Outward Station Addressing) This call routes via a Destination PABX but picks up an outside line on that switch and dials out to another number. By this means any number anywhere can be reached via the destination system.
• ⋗ DISA (Direct Inward Station Addressing) This call allows an extension number to be appended to the main number of a destination PABX. When the call arrives at the PABX it is routed to the extension without further operator intervention.

Trials were undertaken of all call types.

In common with any software application it was necessary to become familiar with the operation of VoiceNet when placing calls, but once familiarity was established all types of calls could be placed with ease and speed dial numbers added without difficulty.

$14$ Call Monitoring

Real Time Display

VoiceNet includes a graphical representation of the progress of the call as a standard feature.

This was a welcome inclusion, especially during the learning phase of coming to terms with the application as mentioned above.

More important, for a regular user of the system the Call Monitor provides useful statistics and feedback that significantly increase both the impressions of control and of friendliness when using VoiceNet.

Call monitoring was used throughout the tests without incident.

Log File

Call monitoring also maintains a log file that was used to track the progress of testing.

Similarly the log file was both useful and incident free.

1.5 Security

To be truly useful in a commercial environment any system that utilises external assets or provides a potential path into an organisation must have robust security.

VoiceNet relies upon a mix of User Identification numbers and optional PIN (Personal Identification Number) procedures for its security.

Some WA CTI staff have had extensive experience in the security area and were keen to see just how robust this approach was.

In practice any system that uses unique ID's has to be considered vulnerable if an ID can be guessed, extrapolated or detected. VoiceNet is certainly vulnerable to such attacks. However the optional PIN adds significantly to the system's security through forcing an attack-in-depth approach with access privileges set at different levels and with variable change patterns likely.

In this regard VoiceNet could be regarded as being at least as secure as the operating system it is installed upon, and probably more so.

Network security is a science unto itself and any responsible Network Administrator would not be likely to rely solely upon application provided security, whilst at the same time welcoming it as an additional layer in an overall defence plan.

VoiceNet security was tested by invoking/canceling User (caller) ID/PIN protection and then trialing the various combinations as shown at Appendix A.

The system performed precisely as expected and offered all the security that such an approach can be reasonably expected to achieve.

$53 -$

EXPERTS REPORTS - WA CTI

$1.6$ Call Restriction

In reality the most likely scenario for system abuse that can impact an organisation will come from within.

To counter this threat an administrator will look for an ability to restrict access and to be able to vary such restrictions at will.

VoiceNet provides for call restriction on both outgoing and incoming calls and includes a choice of granularity from user to system level as well as defining restrictions between local, national and international access.

Restrictions are easy to apply and to modify.

Testing consisted of establishing an unrestricted call at differing levels, terminating the call, changing the rights so that such a call was now restricted and attempting to re-instate the call.

Restriction performed exactly as would be expected with no exceptions.

$1.7$ Call Routing

VoiceNet permits control over a call route in terms of allowing the user to determine if required the best route for a call to take. This control is based upon selecting the best available VoiceNet system to route through.

In data terms this feature is called "least cost routing" and can be crucial to the fine-tuning of any Wide Area Network (WAN.)

When planning a WAN a host of considerations always arise, especially when the network crosses national boundaries. Services that are nominally identical can attract radically different tariffs and some links can be vital to certain types of transfer and therefore not available for opportunistic utilisation.

These considerations, when applied to the concept of adding data encapsulated voice to an existing or planned WAN become crucial, in terms of choosing the voice package. Because, if it does not offer sufficient control then voice traffic may compromise links that have been designed and scaled for the prevailing data flow model.

This is especially important on networks that include cloud technologies such as X.25 or Frame Relay where the internal routes within the cloud are not at the discretion of the administrator and no traffic prioritisation is natively offered.

VoiceNet essentially offers the option to pick the call "Way Point' which in practical terms is the limit that any system could offer.

Nonetheless on most real world networks this facility would offer more than enough flexibility.

The limited extent of the test configuration meant it was not possible to be hugely sophisticated in setting up routing alternatives. However within those constraints the Call Routing feature performed as described.

$1.8$ Management Features

Administrators also need to have control over systems that are their responsibility in more pragmatic terms and VoiceNet makes provision for these needs as well.

Thus the administrator has extensive control over the service. The network parameters and the line connections themselves are fully configurable and the service can also be restricted to certain hours of operation.

Configuring the network parameters and the line had been part of the initial system set up and this had been a straightforward, unambiguous process.

Setting restrictions on hours of operation was equally easy.

In so setting the screen at figure two shows a completed time configuration.

To test that the restriction was effective the system clock was reset to various times outside of the permitted operating period. On every occasion the system then became non-operational until returned to a permitted time/day slot.

About the only criticism that could be leveled at this facility would be a certain lack of flexibility in not being able to set times on a daily basis.

The system as it is at present allows one time slot and one day group to be set. It would be convenient to for example be able to set more than one time slot in a day and to have different time slots for different days of the week.

54

Hours of service screen

$1.9$ Call Process

The testing procedures necessary to verify the many features of VoiceNet necessitated numerous call set ups and scenarios.

Calls were made and received using all call types as enumerated in 1.3 above.

Taking into account the inherent nature of the Internet, the calls all proceeded without incident.

It was however because of the variable nature of the Internet that subjective testing was primarily conducted on an emulated system. The alternative would have introduced far too many variables and made any accurate assessment of VoiceNet's true capabilities impossible.

Nonetheless when operated in "live" mode on an Internet connection VoiceNet was more than capable at performing its intended role and both incoming and outgoing calls achieved a high success rate, typically greater than 90% across all trials.

For an Internet VOIP application this should be considered more than satisfactory as a 10% call failure rate is an accepted industry standard.

On a controlled test environment the success rate for call initiation and call completion was 100%.

$1.10$ Full Duplex Capability

It is claimed that the VoiceNet system supports a full duplex capability.

By this it is meant that communications can proceed in both directions across the communications link at the same time. This is in contrast to, for example, the simplex communications of a radio system where the rigid good manners of the ending "over" are crucial to unambiguous communications.

WA CTI were able to quickly confirm in live trials that the system was indeed fully duplex, in exactly the same manner as the PSTN.

$1.11$ Data analysis

VoiceNet digitises analogue voice signals, placing the resultant code inside standard data frames and passing them across a network to be disassembled and de-coded by the remote system.

Further, in order to minimise the amount of bandwidth that these frames occupy GSM compression is applied to minimise the AMOUNT of data that needs be transported in the first place.

In any network, but especially in Wide Area Networks (WANs) and on the Internet, bandwidth is at a premium. Therefore the least amount of this resource that VoiceNet demands the better this will be and the more readily prospective purchasers will accept it.

In order to investigate the impact of VoiceNet upon a network, a variety of tools were employed. However primarily they fall under the single category of Protocol Analysers.

Again, WA CTI contains experts who spend significant amounts of time investigating data networks using these sorts of tools. There was therefore intense interest in seeing what VoiceNet was doing when it placed encapsulated voice information onto the network.

Finally, before proceeding to the specifics of the data analysis it should be noted that VoiceNet includes a silence suppression feature called VAD (Voice Activity Detector.) This feature was enabled throughout the tests, some early evaluations having determined that its impact was almost entirely unobtrusive and its benefits marked.

Compression

Compression algorithms always produce variant results depending upon the type of data presented for manipulation.

Voice is in some respects simpler than many forms of data that may be encountered but it does have its own challenges and problems.

In selecting GSM compression VoiceNet is to some degree being unconventional as it is the hardware based Kelp compression algorithms that have been attracting all of the attention recently in this field.

However VoiceNet is a software based system that must depend upon third party hardware to be functional. Sophisticated Routers and Multiplexers aside, there is no hardware available that VoiceNet could be designed to that would support suitable compression.

By selecting GSM Queste have both adopted a sophisticated compression method (that chosen for Digital mobile communications) and contained their compression approach within the code which they control.

WA CTI proceeded then to examine the capability of GSM as implemented by Queste.

Digital audio if left native will consume a full 64kb of bandwidth constantly. This is far too much on expensive WAN links and totally impractical on slow modem connections of typically 28.8kb/s.

GSM promises a compression ratio of up to 10 to 1. There are however overheads to be considered, as well as the variable nature of the data itself so this theoretical result was unlikely to be seen

In a series of tests conducted with VoiceNet the best results seen were a little over 8kb, the worst somewhat more than 17kb.

A median as determined by statistical analysis was in the close order of 14kb. This is an absolute figure, including associated overheads, and whilst not quite as compressed as some of the more exotic hardware solutions can achieve, it is more than acceptable, and in line with Queste's claims for the product.

GSM performs very well indeed with VoiceNet and is obviously an appropriate choice as the means of compression for the system.

Framing and Bit Rate

Throughput is defined by absolute frame rate, which was verified by the compression achieved.

An important secondary consideration has to do with valid bit rate and frame size.

This concept refers to the necessity for frames to have a finite size with both minimum and maximum delimeters.

When an application presents data in an inefficient fashion to a network the outcome is generally a large number of frames that have had to be padded to achieve the minimum permitted size.

Alternatively an application may fail to translate its own framing requirements in the local environment to the network in an appropriate manner. In this case frames that are above the valid minimum size, but still smaller than necessary, will be transported across the network. This condition produces a marked decline in efficiency because the overhead associated with each frame is being carried more often than is necessary.

It was anticipated that the nature of voice as the source for data would lead to problems with framing and that both padded and inefficient sized frames would be seen during an analysis session.

This was not however the case. The combination of the VoiceNet software and the Media Phonics hardware seems to be extremely capable at making best use of available frame rate. Certainly frames that were not filled to maximum permitted size were seen but no padded frames were observed. In this regard therefore the system behaves as well as and indeed better than many applications that are in routine use on the Internet and private wide area networks. This result once again indicates an appropriate choice of hardware, efficiently written software code and an understanding of the need for network efficiency with such a product.

Inter-Frame Jitter

Jitter would generally be considered an artefact of hardware. However the testing schedule called for Jitter to be examined and this was therefore included in the test schedule.

Within the limitations of the testing equipment available jitter met or exceeded the manufacturer's claims.

This concluded the objective test phase.

SUBJECTIVE TESTING

As previously described, this phase of the testing was undertaken by a small panel of testers some of whom had had previous experience with packages similar to VoiceNet and some who had never been previously exposed to such a system. The comments below represent an agreed consensus by the testers involved.

IVR WAV Files $1.12$

Several testers commented favourably upon both the quality and modulation of the WAV files used. However, there were some comments that an alternative accent might be more acceptable.

This type of response is not at all unusual in respect of IVR systems especially when the voice involved has an accent that differs from that of the testers involved. The panel agreed that an appropriate approach to improve this situation might be to increase the number of WAV files and offer users a choice in configuring the file that would play for particular conditions.

In this way individual users would be able to tailor the files to suit themselves and pick amongst varying accents and genders. This has similarities to assembling a sound theme under Windows 95 and is perhaps the type of flexibility that modern users are coming to expect.

This is however by no means a significant criticism of the system.

Graphical User Interface $1.13$

The VoiceNet interface is a standard Windows presentation, as can be seen in the screen shots that are presented elsewhere in the report. Most testers were perfectly happy with this although there was a comment made two more sophisticated users who had experience with other systems that it was rather bland.

In reality however, these systems and most particularly the 24 line system, would be used primarily by Internet Service Providers and other such computing professionals. To these persons functionality is far more important that superficial appearances.

The testing team had no problems whatsoever with the functionality of the interface.

$1.14$ Voice Quality

Industry standard techniques are not particularly sophisticated. Essentially the approach is to regard the quality presented over the PSTN as being the benchmark. This is termed Toll quality.

The following table shows the scale used to quantify voice quality and the accepted industry comments for the various levels of the scale.

Score Quality	Description of Impairment.
Excellent	Imperceptible.
Good	Just Percentible, not Annoying
Fair	Perceptible and Should Annoving
Poor	Amoving but not Objectionable
Bad	Jery Annoying and Objectionable

Voice Quality Guidelines

It must first be understood that VoiceNet does not produce Toll quality and neither does it claim to.

None of the currently available Voice Over IP systems are able to approach Toll quality without being completely profligate with precious bandwidth.

However, it was the panels opinion that VoiceNet did extremely well. We were fortunate in having amongst our testers people with recent experience of CELP hardware based systems and these testers were particularly impressed.

At the end of the testing a score of 4.2 was determine to be fair. This compares favourably with ACELP (G.729) and is actually the same score as has been assigned to 32K ADPCM (G.726).

This is an extremely good score for a software based solution and whilst WA CTI would be unsurprised if a different panel were to produce a slightly lower score we are also happy to stand by this evaluation in the context of the testing performed.

These comments conclude the report on the Subjective Phase of the testing.

REVENUE POTENTIAL FOR VOICENET SOFTWARE

WA CTI were asked specifically to comment upon their perception of the revenue making capability potential for Queste Communications Ltd.

It is the considered opinion of WA CTI that it is reasonably likely that the company will generate revenue from its ordinary activities within three years.

WA CTI make this statement in consideration of the maturity of the Single Line VoiceNet system, which could be an immediate revenue maker, but more significantly in consideration of the larger, more lucrative market that the 24 line system plans to address.

REVIEW OF DEVELOPMENT SCHEDULE OF 24 LINE SYSTEM

The Single Line VoiceNet system that WA CTI has tested and reported upon above is an example of competence on the part of Queste America Inc. in developing a Voice Over IP system.

However a single line system can only have limited appeal in the market place. Queste Communications Ltd. realise this fact and have engaged Queste America Inc. to develop a system on their behalf that will provide 24 simultaneous connections.

This product will be a significantly more sophisticated package than the single line version and in keeping with its commercial nature it is planned to include some additional modules. The development and/or selection of these modules is included in the development schedule.

The specific modules that are planned include provision for billing and for remote control of servers.

The target markets of Internet Service Providers and Large Corporate entities would regard both facilities as extremely important. WA CTI concur that the 24 line version will be far more marketable with these inclusions to permit providers to charge back usage and control servers without having to be physically at the console itself.

Telecommunications traffic is calculated using a unit of measurement called an Erlang. Erlangs are calculated as a product of call duration, acceptable percentage of busy tone, and the number of telecommunications circuits available.

A simple computer package is used to run these calculations. Having performed these calculations an indication of the capacity of the four line and twenty-four line systems are as follow:

• Four line system $-45$ calls in an hour
• Twenty-four line system 500 calls in an hour.

These are based on industry standard benchmarks of 10% acceptable busy tone and an average call duration of 2 min 30 seconds calls.

Such a product will have a ready market in the Internet Service Provider field and may also be attractive to large corporate organisations.

WA CTI have been requested as part of this overall report to examine and comment upon the software development schedule to be undertaken by Queste America Inc.to develop the 24 line VoiceNet system.

It will be seen in the author biographies at the rear of the report that Mr. Jeff Astfalck, one of the authors of this report has had extensive experience in software development projects and it is his comments upon the development schedule that now follow.

PROJECT PLAN COMMENTS

Comments on Plan Construction

The development schedule for the 24 line system has been reduced to a project plan consisting of a timeline and interdependent relationships.

This evaluation of the plan provided concentrates on the viability of the plan as scheduled in the timeline chart and not on the construction of the relationship chart, nor the structure of the plan apart from these few comments.

The plan presented has been through a refining process to produce a coherent approach to the project.

This has produced an effective time scale that takes into account contingencies for bottlenecks to constrict progress.

Although not reflected in the static plan as presented in the timeline chart, this relationship reveals the plan's capacity to permit multiple parallel paths during the course of the project.

Parallel activity planning allows the available resources to continue being productive whilst any logjams are being cleared or, as commonly happens, simply until the problem clears itself.

Timeline & Resource Viability

The Timeline presented is viable.

There are six resources being used for the project with approx. 8000 hours scheduled to the task. The project has been effectively resource leveled with only brief periods occurring where some resources are scheduled for extended days.

The following specific comments should be considered when accepting the viability of the timeline:

• The purchase of the H.323 components is a milestone that includes due consideration for the processes required for its completion.
• The delivery task for the four-line product is scheduled for lweek of activity. However it should be noted that a sensible amount of both lead and lag time has been allowed to give credence to this estimate.
• The 'time not resources' schedule indicates that the four line development period is 35 days with the integration and test phase being 50 days.

The 24-line development also has 55 days of development plus 52 days of integration and test.

This is likely to be correct on the basis of past experience as it is believed that the 24 line development should be greater but the integration and test should be less given the experience of the four line integration and test.

In summary the general appearance of the four-line and twenty four line development phase is realistic.

Contingency & Reviews

Consideration has been given to a pre-planned scope for contingency. This is mature as although there is no reason to assume that contingency will be required, it is appropriate to allow within a plan for some pressure relief.

This has been intelligently constructed within the plan to allow the team to move forward should they be on or ahead of time however there is also some planned absorption for the inevitable unforeseen outcomes.

There is an allowance for independent subjective review.

The description of the integration test and evaluation phase includes a facility for external review.

This is a technological development that is being generated by Information Technology people emulating the Telecommunications arena.

Information Technology is all about definable results and testable performance whereas voice is a subjective and emotive area. As in the first section of this document subjective user acceptance testing is an essential part of the process.

Facilities for External Factors

A part of the project planning process must include an initial disaster recovery plan. This does not need to be exhaustive in detail but does need to reflect some preparation and intelligence. This is an area akin to insurance - it may never be required, but if circumstances arise it will provide the means to put the project back on track.

To give a simple example:

The small size of the team and the loading of certain members risks a situation where an illness that affects two critical resources for three weeks could derail the project by up to a month and a half.

It is therefore reassuring to note that the plan includes a comprehensive Disaster Recovery Plan to re-establish both resources and facilities in the event of a disaster and also to surge additional resources should the project fall behind schedule.

Conclusion to Review of Development Schedule

Software development projects can be extremely difficult to predict and this is a central reason for having a detailed project plan against which the progress of the project can be measured.

Queste are to be commended for having produced a plan that defines the project boundaries in a realistic manner and sets timelines for discrete tasks that are achievable.

This report would be deficient were it not to be critical of the elements that are perceived, from a wealth of prior experience, to be either lacking in detail or relying upon a totally smooth passage.

However it should be noted strongly that whilst WA CTI's Project Management Specialist had a number of initial concerns, these were effectively dealt with and either clarified or rectified by Queste America Inc. as appropriate. Also none of these pertained to the overall viability of the plan nor did there ever appear any reasons to doubt Queste's ability to deliver as promised.

Project planning is not normally a core competency of software developers so it is not surprising that a project specialist was able to reveal initial deficiencies in a plan prepared by the said developers. What is refreshing is the manner in which the concerns were taken on board by Queste and addressed in a completely satisfactory manner.

On balance WA CTI are of the opinion that Queste America Inc. can deliver the twenty four line version of the VoiceNet software system as per the software development schedule provided to WA CTI by Queste America Inc.

WA CTI therefore endorse the development plan by Queste, and have confidence in Queste's ability to deliver a 24 line system as described.

63

÷.

$\omega_{\rm{max}}$

$\overline{\phantom{a}}$

$\bar{\chi}$

EXPERTS REPORTS - WA CTI-5

No.	Test Item	Status	Outcome	Comment
	PLATFORM PREPARATIONAppendix A
$\mathbf{1}$	PC Builds	Complete $(a)$10/4/98	2 x Dell OptiplexPC's fullyconfigured(see appendix xxfor configuration)
$\overline{2}$	InstallMediaPhonicsCards	Complete @11/4/98	Both cardsinstalled and testedOK	Excellent cards, easilyinstalled by PnP, diagnosticsand configuration verystraightforward (one PC raisedan IRQ conflict, in-builttroubleshooter resolved easily)
3	InstallVoiceNetsoftware	Complete $\omega$11/4/98	Both PC's set upwith VoiceNet andtested OK	Software installed easily usingWinZip 6.2 from Zip filereceived in Email,configuration easy andcomprehensible.
$\overline{\mathbf{4}}$	Network PC's	Complete $\omega$11/4/98	Both PC's visiblein Net'Hood andable to transferfiles	3Com cards performed well,NetBEUI and TCP/IPprotocols installed.
5	ConfigureModems	Complete $\omega$11/4/98	Both Modemsinstalled and testedOK	USR Sportster modems easilyset up and tested.
6	Installonboard Testsoftware	Complete $\omega$12/4/98	CPU and systemmonitors installedand tested OK	Enhanced tools to monitorsubject software's impact onsystem resources and CPUutilisation.

No.	Test Item	Status	Outcome	Comment
	Appendix BSystem Verification Trials
$\mathbf{1}$	Assess WAVQuality	Complete12/4/98	Highly PleasantVoice Modulation	The Sound Files have been wellchosen and are informativewithout being condescending
$\overline{2}$	Verify IVROperation	Complete13/4/98	Successfulcompletion of test	No issues whatsoever
	Welcome
	Caller ID
	Invalid ID
	PIN
	Invalid PIN
	CallProceeding
	Near EndBusy
	Far End Busy
	InvalidNumber
	No Route
	VoiceNetBusy
	VoiceNetUnavailable
	ConnectionLost
	$\mathcal{L}$$\mathcal{L}$
$\overline{3}$	Verify:	Complete	Successful	Local, National and International
	E.164numbering	15/4/98	completion of test	calls all completed successfully
	Speed Dialing

$\hat{\mathbf{v}}$

$\bar{\mathbf{z}}$

$\overline{4}$	Verify theoperation ofdifferentTypes ofCalls:System toSystem (STS)Direct InwardStationAddressing(DISA)DirectOutwardStationAddressing(DOSA)	Complete15/4/98	Successfulcompletion of test	All call types performed asanticipated
5	Verify theoperation ofCallMonitoring:Real-timedisplayLog file	Complete16/4/98	Successfulcompletion of test	Welcome feature!
6	Verify theoperation ofSecurity:Correct callerID/CorrectPINCorrect callerID/IncorrectPINIncorrectcaller IDNo caller IDrequiredCorrect callerID/no PINrequired	Complete17/4/98	Successfulcompletion of test	Security systems more thanadequate for this type of system

$\overline{7}$	Verify theoperation ofCallRestriction:Outgoing userrestrictedOutgoingsystemrestrictedIncoming userrestrictedIncomingsystem	Complete 20/4/98	Successfulcompletion of test	Adequate control
	restricted
8	Verify theoperation ofCall Routing:Route by area	Complete 21/4/98	Successfulcompletion of test	Adequate performance
	code
	Route bycountry codeNo route
9	Verify theManagementfeatures:Hours ofService	Complete 21/4/98	Successfulcompletion of test	More control over access periodswould be aBonus, otherwise acceptable
	NetworkparametersLineConfiguration
10	Verify theCall Process:Outgoingcall	Concurrent withall other tests	Successfulcompletion oftests	Better than 90% success on theinternet. 100% on a controllednetwork
	Incoming

	call
11	Verify datacompressionrate:	Complete 24/4/98	Successfulcompletion of test	Varied between 8kb and 17kb, aspredicted by specification whenVAD (Voice Activity Detector)enabled
12	Frame rate	Complete 24/4/98	Successfulcompletion of test	See text
13	Bit rate	Complete 24/4/98	Successfulcompletion of test	See text
14	Frame size	Complete 24/4/98	Successfulcompletion of test	System adapted frame size withinindustry parameters with minimalframe stuffing.
15	Inter-framejitter(outboundonly)	Complete 24/4/98	Successfulcompletion of test	Within the limitations of the toolsused, the jitter rate was minimaland met or exceededmanufacturer specifications.
16	Packetduplication	Complete 24/4/98	Successfulcompletion of test	The system appears only toduplicate packets when requiredby the higher layers of theprotocol stack. That is, when datareceived by the end node is notconsidered valid (for example, asa consequence of a CRC error)then a packet is resent. On acontrolled network this conditionwas not observed. On the Internetsome instances were seen,however, they were minimal andwere not perceptible to humanear.

QUESTE
--------

No.	Test Item	Status	Outcome	Comment
	Appendix CSubjective Testing
1	IVR WAVfiles	Complete 26/4/98	Statisticallysignificantsample collected	Panel consensus held that whilstthe files presented were adequateand initially pleasant they couldrapidly become irritating.Therefore, a recommendationwould be to expand the file paletteand permit customisation by theindividual user.
$\overline{2}$	GUI Interface	Complete 26/4/98	Statisticallysignificantsample collected	On balance the interface isfunctional and unobtrusive.However, compared to competingproducts, it is considered to besomewhat bland. Severalrespondents felt that the interfaceshould be rethought with greaterrespect for the applicationsfunctionality as a 'telephone'interface. (A referent was theCOM2001 interface)
$\overline{3}$	Voice Quality	Complete 27/4/98	Statisticallysignificantsample collected	VoiceNet Is not toll quality, anddoes not claim to be. However, theconsidered opinion of the panelwas that the quality equaled orexceeded ALCAP 8K (G.729) Thiswould imply an MOS score of 4.2or better, which is more thanacceptable.

£,

EXPERTS REPORTS - WA CTI

$\ddot{\phantom{a}}$

Author Biographies

1.15 Christopher David Jewell Guppy

Chris comes from a background in military aviation where he was involved for a number of years with complex avionics systems and particularly with their realistic introduction to front-line military elements.

In the post military arena Chris has been part of the data-networking explosion since well before the emergence of the Open Standards that have come to so totally define the industry. As a member of IEEE and numerous other Industry bodies he has long been a part of the process of evolving and inducting radical technologies as they emerge into the commercial arena.

Chris has seeded and operated a number of companies that have worked in this field. Presently he is retained as a senior engineer and consultant with one of WA's leading IT providers.

In 1994 Chris first became aware of the potential for CTI as a convergent force in the communications industry.

Since then as a part of his diverse interests he has been involved in several Computer Telephony projects whilst also expanding his involvement in data analysis, which is central to any quantification of the impact that new applications have on established communications infrastructures.

As part of WA CTI Chris' primary contribution is a deep understanding of data structures and interpreting the results of analysis sessions on live systems.

This, combined with a long involvement in producing reports that are intended to effectively communicate complex concepts and ideas to an audience that may not have the background to otherwise appreciate the ramifications of the document are the central skills that he brings to WA CTI.

Chris holds a number of significant Industry qualifications from manufacturers such as 3Com, Network Associates, Bay Networks, Cisco, Novell and Microsoft.

1.16 Jefferson Dean Newton Astfalck

Jeff is a Director of WA CTI, and is also actively involved as a principal in a Telecommunications Solutions Provider that operates primarily in the Corporate PABX environment.

Jeff came to the Telecommunications Industry via the Australian Navy, which culminated in an intensive IT project to develop software systems in support of the Seahawk Helicopter project.

On leaving the Navy Jeff joined the Integrated Logistics Support Division of the Australian Submarine Corporation where he project managed the software systems and support of training for the Collins class submarine induction to the Australian Navy.

Whilst with the ASC Jeff was admitted to the Australian Institute of Project Managers and accredited as a Project Manager.

Upon leaving the ASC Jeff entered the Data Communications arena and managed the Western Australian Office of a Systems Integration organisation.

The opportunity arose to be involved with an emergent Western Australian Telecommunications Solutions Provider. Jeff managed a team for this provider that delivered sophisticated consultancy capabilities to the market place and also developed and implemented innovative Interactive Voice Response (IVR) solutions in early CTI projects.

Through these endeavors Jeff leveraged his experience in the data field, together with his capabilities in Project Management to add a new dimension to the traditional Telecommunication products that his employer had previously been providing.

Jeff's next position was with a National Telecommunications Solution Provider, where he is presently the State Manager and also the National Organization's leader in the field of Computer Telephony Integration, primarily with respect to providing solutions to Telstra clients.

Because Jeff's primary role is in Solutions delivery whilst his primary interests are in the future for integration of Telephony and Data he has formed WA CTI to provide a centre of excellence for CTI evaluation and consultancy.

Jeff's qualifications presently include being a Bachelor of Science and holding a Graduate Diploma of Education (Computer Education). Jeff is also an appointed Justice of the Peace (NSW).

Glossary

JUESTE

Soho - Small Office Home Office - Perhaps the most rapidly expanding market at this time

IP - Internet Protocol - The primary computer protocol of the internet

PSTN - Public Switch Telephone Network - ie Telstra

LAN - Local Area Network

WAN - Wide Area Network

VAD - Voice Activity Detector - Conserves bandwidth by suppressing silence. Only useful signal is carried

GSM - Global System for Mobile telecommunication - a compression method developed for and used by digital mobile telephone systems.

KELP/CELP - Hardware compression systems widely used in router and multiplexer based VOIP systems

KB - Kilobyte. 1024 bytes.

Kb (Kb) - kilobit, 1024 bits.

Bit - The smallest unit of computer code, on/off, zero/one

Bytes - A group of 8 bits comprising one computer 'word'

ADPCM (G.726) - Adaptive Differential Pulse Code Modulation. A compression method

ACELP (G.729) - Adaptive CELP. A compression method

WAV files - Sound recordings encoded as data

PABX - Private Automatic Branch Exchange. A private telephone switch connected to the public telephone network

X.25 - An older, slow but very reliable Wide Area Networking technology

Frame Relay - A cloud based Wide Area Networking technology which is replacing X.25. It offers higher speed and assumes a higher quality of infrastructure than is the case with X.25

VOIP - Voice Over Internet Protocol.

Router - A hardware device commonly used to connect local and wide area networks together. Routers can be programmed to make decisions about data streams such as which route to take through a WAN.

Multiplexers - A device which combines voice and data streams into a common flow of information across a network and reconstructs the streams at the destination

Bit Rate - A bit is the smallest fragment of data, possibly, being either a 0 or a 1 (on/off). Bit rate therefore defines the speed at which data is passing

$\bar{a}$

Frame Size - When data is prepared for transporting across a network it is packaged into units called frames. A frame consists of a header which carries source and destination address information, and other information necessary for the frame to negotiate a network, and the data payload. Various networking methodologies set minimum and maximum frame sizes.

IVR Systems - Interactive Voice Response Systems. Commonly used for initial filtering of incoming calls. A synthetic voice offers the callers choices which are selected by keying numbers on the callers telephone handset.

H.323 - A standard that defines systems for transporting data such as voice and video across networks. If systems are produced to the H.323 standard, they will be able to interoperate without necessarily being from the same manufacturer.

Jitter - An alignment problem with transmission data that can render the data unintelligible if the rate is excessive. Analagous to the jitter seen in a video signal when there are synchronisation problems.

Section 11

Central Park Level 16 152-158 St Georges Terrace Perth WA 6000 PO Box A46 Perth WA 6837 Australia

DX 206 Telephone (08) 9365 7000 (08) 9365 7001 Facsimile www.deloitte.com.au

Ref: f:\cad\737253\98queste.iar.doc\po\nam

4 August 1998

The Directors Oueste Communications Limited 4 Judd St SOUTH PERTH WA 6151

Dear Sirs

INVESTIGATING ACCOUNTANT'S REPORT

1. Introduction

This report has been prepared for inclusion in a Prospectus relating to the proposed Issue by Queste Communications Limited ("Queste") of 12,500,000 ordinary 20 cent shares to be issued at a price of 20 cents per Share.

$2.$ Basis Of Preparation

This report has been prepared to provide investors with information on historical results and the assets and liabilities of Queste. This report does not address the rights attaching to the shares to be issued in accordance with this Prospectus, nor the risks associated with the investment.

Background 3.

Queste Communications Ltd was incorporated on 10 March 1998. Queste is to acquire the VoiceNet system from companies associated with Messrs Farooq Khan, Brett McKeon, Yaqoob Khan, Malcolm Watkins, Bradley McGougan and Azhar Chaudhri (all being directors of Queste). Queste has then contracted Queste America Inc to undertake software development works to further develop and commercialise the VoiceNet system.

Scope Of Examination $\ddot{4}$ .

à.

You have requested Deloitte Touche Tohmatsu ("Deloitte") to prepare an Investigating Accountant's Report on:

• the results of Queste for the year ended 30 June 1998; $(i)$
• the statement of assets and liabilities of Queste as at 30 June 1998; and $(ii)$
• proforma statement of assets and liabilities of Queste as at 30 June 1998 adjusted to include $(iii)$ funds to be raised by this Prospectus and the completion of the transactions referred to in Note 2 of Appendix 3.

During our review of the financial position of the Company we have made such enquiries and performed such procedures, as we considered necessary for the purpose of this report. Our review included:

• $(i)$ the audit of the balance sheet as at 30 June 1998 and the operating results to that date of Oueste:
• $(ii)$ discussions with Directors and other key management;
• $(iii)$ review of contractual agreements;
• a review of publicly available information; $(iv)$

We did not value the assets to be acquired by Queste. The value of these assets is dependent upon revenues (if any) generated from future trading and/or sale of the software and technology.

Opinion 5.

In our opinion the proforma statement of assets and liabilities as set out in Appendix 2 presents fairly the proforma assets and liabilities of Queste as at 30 June 1998 in accordance with the accounting methodology required by Australian Accounting Standards on the basis of assumptions and transactions set out in Appendix 3.

Other Matters 6.

At the date of this report Deloitte does not have any material interest in Queste Communications Limited either directly or indirectly, nor in the outcome of the offer.

Deloitte were not involved in the preparation of any other part of the Prospectus and accordingly make no representations or warranties as to the completeness and accuracy of any information contained in any other part of the Prospectus.

Yours faithfully

Delatte Saule Schraten

DELOITTE TOUCHE TOHMATSU

ï

APPENDIX I

Profit and Loss Statement

Queste Communications Limited

	Audited4 Months to30 June 1998S
Operating revenue
Operating loss	(33, 394)
Income tax expense attributable to operating loss
Operating (loss) after income tax	(33, 394)

The Company was incorporated on 10 March 1998. As a consequence, the trading results referred to above are from the date of incorporation to 30 June 1998.

To be read in conjunction with Appendix 3

J.

$77 -$

EXPERTS REPORTS - Deloitte Touche Tohmatsu

APPENDIX 2

Statement of Assets and Liabilities

	Note	AuditedEntity30 June 1998S	ProformaEntity30 June 1998S
CURRENT ASSETSCash	3	20	1,713,154
TOTAL CURRENT ASSETS		20	1,713,154
NON-CURRENT ASSETSPropertyIntangibles	45		440,6422,000,000
TOTAL NON-CURRENT ASSETS			2,440,642
TOTAL ASSETS		20	4,153,796
CURRENT LIABILITIESCreditors	6	(33, 394)	(34, 166)
TOTAL CURRENT LIABILITIES		(33, 394)	(34, 166)
TOTAL LIABILITIES		(33, 394)	(34, 166)
NET ASSETS		(33, 374)	4,119,630
SHAREHOLDERS' EQUITYShare capitalAccumulated losses	78	20(33, 394)	4,187,190(67, 560)
TOTAL SHAREHOLDERS' EQUITY		(33, 374)	4,119,630

To be read in conjunction with Appendix 3

APPENDIX 3

Notes to the Profit and Loss Statement and Statement of Assets and Liabilities

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES $\mathbf{1}$

(a) Basis of Accounting

The Profit and Loss Statement and Statement of Assets and Liabilities have been prepared in accordance with applicable Accounting Standards, the Corporations Law and mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and we have made such disclosures as considered necessary. They have also been prepared on the basis of historical cost and do not take into account changing monetary values. The accounting policies have been consistently applied, unless otherwise stated.

(b) Property

Property is carried at cost less accumulated depreciation. Depreciation is provided on all property other than freehold land at rates calculated to allocate the cost of the assets against revenue over the assets estimated useful lives.

(c) Intangibles

Intangibles are recorded at the cost of the asset. The realisation of the book value of the assets is dependent upon revenues (if any) generated from future trading and/or sale of the software and technology. Intangibles will be written off over the estimated life of the technology.

ACTUAL AND PROPOSED TRANSACTIONS TO ARRIVE AT CONSOLIDATED $2.$ PROFORMA STATEMENT OF ASSETS AND LIABILITIES

The proforma balance sheet reflects the position of Queste subsequent to the capital raising. The 30 June 1998 statement of assets and liabilities is adjusted to reflect the effect of the actual and proposed transactions pursuant to the proposed capital raising and assumes no oversubscription of shares. The transactions reflected in the proforma balance sheet are as follows;

• Purchase of the VoiceNet system software and associated technology from the promoters of the a) company for 9,000,000 fully paid ordinary shares at a price of 20 cents and 20,000,000 ordinary shares at a price of 20 cents partly paid to 1 cent.
• The issue of 12,500,000 fully paid ordinary shares at an issue price of 20 cents each to raise b) $2,500,000.
• The costs of the capital raising in relation to the Prospectus and Share Issue: $\mathbf{c}$

i) Underwriting fee of $250,000

• ii) Estimated further costs of $62,830.
• Purchase of office building for $440,642. The purchase is conditional upon Queste $\mathbf{d}$ successfully listing on the Australian Stock Exchange.
• The payment of creditors existing at 30 June 1998 of $33,394. $e)$
• Additional expenses incurred subsequent to 30 June 1998 of $34,166. $\hat{\mathbf{D}}$

		AuditedCompany30 June 1998$	ProformaCompany30 June 1998S
	Note
3. CASH
Cash at Bank		20	1,713,154
The movements in cash at bank are as follows:Audited - 30 June 1998			20
Issue of Shares Pursuant to Prospectus	2(b)		2,500,000
Prospectus Issue costsPurchase of Office	2(c)2(d)		(312, 830)(440, 642)
Payment of creditors	2(e)		(33, 394)
			1,713,154
4. PROPERTY
The movements in property are as follows:Purchase of Office Building	2(d)		440,642
5. INTANGIBLES
The movements in intangibles are as follows:Purchase of VoiceNet system (i)	2(a)		2,000,000
The intangible asset will be purchased(i)from companies associatedwithMessrs Farooq Khan, Brett McKeon,Watkins,Khan, MalcolmYaqoobAzharMcGouganandBradley

The realisation of the book value of the assets is dependent upon revenues (if any) generated from future trading or sale of the software and technology.

Chaudhri (all being directors of the

company).

$\hat{\mathbf{A}}$

79

		Note	AuditedCompany30 June 1998S	ProformaCompany30 June 1998S
	6. CREDITORS & BORROWINGS
	Current (i)		(33, 394)	(33, 394)
	Creditors includes amounts payable to the(i)Directors in relation to expenses incurred on thecompany's behalf
	The movement in creditors is as follows:
	Payment of creditors	2(e)		33,394
	Payment of additional expenses	2(f)		(34, 166)
			(33, 394)	(34, 166)
7.	SHARE CAPITAL
	Issued capital
	100 Ordinary Shares at 20 cents each		20	20
	9,000,000 Ordinary shares issued at 20 cents each	2(a)		1,800,000
	20,000,000 Ordinary shares issued 20 cents each,	2(a)
	partly paid to 1 cent			200,000
	12,500,000 Ordinary shares issued at 20 cents each (i)	2(b)		2,500,000
	Write-off of listing costs	2(c)		(312, 830)
			$\cdot 20$	4,187,190

This excludes any oversubscriptions. Should the Directors accept oversubscriptions of 5,000,000 $(i)$ ordinary shares at an issue price of 20 cents, pursuant to the Prospectus, issued capital would increase by a further $1,000,000.

Each partly paid share shall:

• Entitle its holder to a fraction of a vote of an ordinary share equivalent to the proportion actually paid for the share;
• Not be subject to a call for at least two years
• Not be subject to a call more than twice in one financial year or twice within six months $\bullet$
• Not be subject to a call for an amount greater than 10% of the then outstanding amount due $\bullet$ and payable for such shares

DeloitteTouche Tohmatsu Δ

$\ddot{\phantom{a}}$

Note	AuditedCompany30 June 1998S	ProformaCompany30 June 1998S
	(33, 394)	(33, 394)
The payment of expenses incurred subsequent2(f)		(34, 166)
	(33, 394)	(67, 560)

9. OPTIONS

Existing Options	No of Options	Terms of Issue
Director Options	5,000,000	Exercisable at $0.20 on or before 21 July 2003
Total Issued Options oncompletion of Issue	5,000,000

Deloitte ToucheTohmatsu Ø

$\epsilon$

Section 12

ADDITIONAL INFORMATION

INCORPORATION

The Company was incorporated in Western Australia as a public company limited by shares on the 10th day of March 1998.

RIGHTS ATTACHING TO SHARES

The following is only a brief summary of the rights attaching to the shares of the Company currently on issue and the Shares offered by this Prospectus. The detailed provisions relating to the rights attaching to such shares are contained in the Corporations Law, the Listing Rules of the ASX and the Constitution of the Company.

A copy of the Constitution of the Company may be inspected during normal office hours at the registered office of the Company situated at 4 Judd Street, South Perth, Western Australia, 6151.

The Shares offered by this Prospectus and the shares of the Company currently on issue are ordinary shares. Of the 29,000,100 ordinary shares currently on issue, 9,000,100 have been issued at a price of 20 cents per share which amount has been fully paid for and 20,000,000 have been issued at 20 cents each and are partly paid to 1 cent each and upon which there is an outstanding amount payable of 19 cents per share.

The Shares issued by this Prospectus are ordinary shares that will be issued at a price of 20 cents per share payable in full on application and will accordingly rank equally with the existing issued 9,000,100 ordinary fully paid shares in all respects including but not limited to rights to future dividends, voting, bonus and rights issues.

The 20,000,000 ordinary partly paid shares upon which there is an outstanding amount payable of 19 cents per share have limited rights on a number of matters including voting rights and rights to dividends as outlined in the Constitution of the Company.

No dividend is currently declared or proposed.

The following is a general summary of the rights attaching to the existing issued capital of the Company and the Shares to be issued pursuant to this Prospectus:

Voting

At any meeting, each shareholder present in person or by proxy, attorney or representative has one vote for each ordinary fully paid share held either upon a show of hands or by a poll. Holders of partly paid shares shall have a fraction of a vote for each partly paid share held with the fractional vote of each share being equivalent to the proportion which the amount actually paid (not credited) for that share is of the total amounts paid and payable (excluding amounts credited) for that share. Amounts paid in advance of a call are ignored when calculating proportions.

The holder of a partly paid share shall not be entitled to vote at a meeting in respect of those shares on which calls are outstanding.

Subject to the Corporations Law in relation to a special resolution, a resolution of members at a general meeting will be carried if more than one half of the votes at the meeting are cast in favour of the resolution.

RIGHTS ATTACHING TO SHARES

General Meetings

Each ordinary shareholder in the Company will be entitled to receive notice of and attend and vote at general meetings of the Company and to receive all notices, accounts and other documents required to be sent to shareholders under the Constitution of the Company or the Corporations Law. The Directors may whenever they think fit, convene a general meeting of the members of the Company and the Directors will convene a general meeting whenever requisitioned by the members in accordance with the Corporations Law.

Dividends

The profits of the Company, which the Directors may from time to time determine to distribute to the members by way of dividend, will be divisible amongst the members in proportion to the amounts paid on the shares held by them, subject to the rights attached to any shares issued upon special terms. An amount paid in advance of a call is not to be included as an amount paid on a share for the purposes of calculating entitlement to dividends for such a share.

Rights on Winding Up

Subject to the rights of members (if any) entitled to shares with special rights in a winding up, all monies and property that are to be distributed amongst members on a winding up, shall be distributed in proportion to the shares held by them respectively, irrespective of the amount paid up or credited as paid up on the shares.

Transfer of Shares

Subject to the Constitution of the Company, the Corporations Law, the Listing Rules of the ASX and any other applicable law of Australia, Shares are freely transferable.

Variation of Rights

The rights, privileges and restrictions attaching to shares of a class, can be altered, with the approval of a special resolution passed at a separate general meeting of the holders of shares of that class, (being a three quarters majority of those holders who, being entitled to do so, vote at that meeting) or with the written consent of the holders of at least three quarters of that class of shares on issue. Any variation is subject to the provisions of the Corporations Law.

Creation and Issue of Further Shares

The issue and allotment of any additional shares is under the control of the Directors, and, subject to any restriction on the issue and allotment of shares imposed by the Constitution of the Company, the Corporations Law, the Listing Rules of the ASX or as may be directed by the members of the Company at a general meeting when authorising the issue of any new shares, the Directors may issue and allot such shares on such terms and conditions and with such rights and privileges as they deem fit.

A minimum of 100 members of the Company entitled to vote or members holding at least 5% of the total voting rights in the Company have the right under the Corporations Law to serve notice pursuant to section 1427 (2) of the Corporations Law on the Company no later than 30th September 1998 stating that section 1427 (2) of the Corporations Law is to apply to the Company in which case the Company cannot issue shares if the issue would make the total number of the Company's issued shares in that particular class exceed the total number of shares of that class into which the Company's authorised share capital was divided as at the $30th$ June 1998, ie 500,000,000 ordinary shares.

83

RIGHTS ATTACHING TO SHARES

Partly Paid Shares

The Directors may, subject to compliance with the Constitution of the Company, the Corporations Law and the Listing Rules of the ASX issue partly paid shares upon which there are outstanding amounts payable. Such shares will have limited rights to vote and to receive dividends as outlined above.

Preference Shares

The Directors may allot and issue preference shares on such terms and conditions as they think fit, subject to compliance with the Constitution of the Company, the Corporations Law and the Listing Rules of the ASX.

Directors

The number of Directors of the Company will be no less than three and no more than ten or such lesser number as the Directors determine provided that the number so determined must not be less than the number of Directors when the determination takes effect. The Directors may fill casual vacancies and appoint additional Directors. The Company in general meeting may by ordinary resolution increase or decrease the number of Directors . Subject to the Corporations Law, a general meeting of the members of the Company, may by ordinary resolution remove a Director and at each annual general meeting, one third of the Directors will retire from office and be eligible for re-election. Each Director, excluding the Managing Director, must retire no later than at the third annual general meeting following his or her last election and may submit himself or herself for re-election.

Inconsistency of Constitution With ASX Listing Rules

The ASX may, upon the Company making application for admission to the Official List of ASX, require the Company to make amendments to the Constitution of the Company so that the Constitution complies with recent amendments to the ASX Listing Rules. Where the ASX so requires, the Company will alter its Constitution to comply with the then current ASX Listing Rules.

CONSTITUTION OF THE COMPANY

The Company has a written set of internal rules governing the affairs of the Company known as a Constitution. This Constitution sets out certain rights duties and powers of the members and Directors and include amongst other matters, provisions relating to dividends and the liquidation of the Company. A copy of the Constitution of the Company may be inspected during normal office hours at the registered office of the Company situated at 4 Judd Street, South Perth, Western Australia.

TERMS AND CONDITIONS OF EXISTING OPTIONS

The Company has granted options to a number of Directors of the Company. All existing options have been issued on identical terms with the general terms and conditions of these options being as follows:

TERMS OF ISSUE OF JULY 2003 OPTIONS

Entitlement 1.

Each option (herein referred to as an "Option") shall entitle the holder the right to subscribe (in cash) for one (1) fully paid ordinary share in the capital of the Company.

Issue Price $2.$

No amount is payable by the holder of an Option for the issue of the Option to that holder.

$3.$ Option Period

Each Option will expire on the 21st July 2003 (such date being referred to as the "Option Expiry Date"). Subject to Clause 7 hereof, each Option may be exercised at any time prior to the Option Expiry Date and any Option not so exercised shall automatically expire on the Option Expiry Date.

4. Ranking of Share Allotted on Exercise of Option

Each ordinary share allotted as a result of the exercise of an Option will, subject to the Constitution of the Company, rank in all respects pari passu with the existing ordinary fully paid shares in the capital of the Company on issue at the date of allotment.

$5.$ Notification to Option Holders

A registered owner of an Option (herein referred to as an "Option Holder") will be entitled to receive and will be sent all reports , accounts and notices required to be given to the members of the Company but will not be entitled to attend or vote at any meeting of the members of the Company unless they are in addition to being Option Holders; members of the Company.

6. Transfer of an Option

Each Option is transferable at any time prior to the Option Expiry Date. This right is subject to any restrictions on the transfer of an Option that may be imposed by the Australian Stock Exchange Ltd (the "ASX") in circumstances where the Company is listed upon the ASX.

7. Method of Exercise of an Option

A certificate or holding statement will be issued by the Company with respect to Options held $71$ by an Option Holder. Attached to or endorsed on the reverse side of each certificate or holding statement will be a notice that is to be completed when exercising the Options the subject of the certificate or holding statement (herein such notice being called a "Notice of Exercise of Options"). Options may be exercised by the Option Holder completing the Notice of Exercise of Options and forwarding the same to the Secretary of the Company. The Notice of Exercise of Options must state the number of Options exercised and the consequent number of ordinary shares in the capital of the Company to be allotted; which number of Options must be a multiple of 2,500 if only part of the Option Holders total Options are exercised, or if the total number of Options held by an Option Holder is less than 2,500, then the total of all Options held by that Option Holder must be exercised.

TERMS AND CONDITIONS OF EXISTING OPTIONS

TERMS OF ISSUE OF JULY 2003 OPTIONS

• The Notice of Exercise of Options by an Option Holder must be accompanied by payment in $7.2$ full for the relevant number of shares being subscribed, being an amount of Twenty Cents $($0.20)$ per share.
• Subject to Clause 7.1 hereof, the exercise of less than all of an Option Holders Options will $7.3$ not prevent the Option Holder from exercising the whole or any part of the balance of the Option Holders entitlement under the Option Holders remaining Options.
• $7.4$ On exercise of Options, the Option Holder must surrender to the Company the Option Holders option certificate or holding statement with respect to those Options being exercised.
• If the Option Holder exercises less than the total number of Options then registered in the $7.5$ Option Holders name:
  • 7.5.1 the Option Holder must surrender the option certificate or holding statement with respect to the Option Holders Options to the Company; and
  • the Company must cancel that option certificate or holding statement and issue to the $7.5.2$ Option Holder a new certificate or holding statement with respect to the balance of the Option Holders unexercised Options.
• Within 14 days from the date the Option Holder properly exercises Options held by the 7.6 Option Holder, the Company shall issue and allot to the Option Holder that number of fully paid ordinary shares in the capital of the Company so subscribed for by the Option Holder.
• If the Company is listed upon the ASX, the Company will within three (3) business days from $7.7$ the date of issue and allotment of shares pursuant to the exercise of an Option, apply to the ASX for, and use its best endeavors to obtain, Official Quotation of all such shares, in accordance with the Corporations Law and the Listing Rules of the ASX.

8. Reconstruction

In the event of a reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of the Company, the number of Options or the exercise price of Options or both shall be reconstructed (as appropriate) in a manner in accordance with the Listing Rules of the ASX (where the Company is listed on the ASX) and which would not result in any benefits being conferred on the Option Holders which are not conferred on shareholders (subject to the provisions with respect to rounding of entitlements as sanctioned by the meeting of shareholders approving the reconstruction of capital) but in all other respects the terms for the exercise of Options shall remain unchanged.

Participation in New Share Issues 9.

There are no participating rights or entitlements inherent in the Options to participate in any new issues of capital which may be made or offered by the Company to its shareholders from time to time prior to the Option Expiry Date unless and until the Options are exercised. The Company will ensure that during the exercise period of the Options, the Record Date for the purposes of determining entitlements to any new such issue, will be at least 9 Business Days after such new issues are announced in order to afford the Option Holder an opportunity to exercise the Options held by the Option Holder.

TERMS AND CONDITIONS OF EXISTING OPTIONS

TERMS OF ISSUE OF JULY 2003 OPTIONS

$10.1$

Change of Options Exercise Price or Number of Underlying Shares

If the Company is listed on the ASX and makes a pro rata issue (except a bonus issue) to the holders of ordinary shares, the exercise price of each Option shall be reduced in accordance with the following formula:

$$ O' = O - \frac{E[P-(S+D)]}{N+1} $$

Where:

$\mathcal{O}^*$		the new exercise price of the Option.
$\Omega$		the old exercise price of the Option.
E	$=$	the number of underlying shares into which one Option is exercisable.
P	⋍	the average market price per share (weighed by reference to volume) of theunderlying shares during the 5 trading days ending on the day before the exrights date or the ex entitlements date.
S		the subscription price for a share under the pro rata issue.
D		any dividend due but not yet paid on the existing underlying shares (exceptthose to be issued under the pro rata issue).
N		the number of shares with rights or entitlements that must be held to receivea right to one new share.

No change will be made pursuant to the application of the above formula to the number of shares to which the Option Holder is entitled.

• $10.2$ If the Company is listed upon the ASX, the reduction of the exercise price of each Option in accordance with the above formula shall be subject to the provisions of the Listing Rules of the ASX.
• $10.3$ If the Company makes a bonus issue of shares or other securities convertible into ordinary shares pro rata to holders of ordinary shares the number of shares issued on exercise of each Option will include the number of bonus shares that would have been issued if the Option had been exercised by the Option Holder prior to the books closing date for bonus shares. No change will be made in such circumstances to the exercise price of each Option.

TERMS OF ISSUE OF PARTLY PAID SHARES

The Company has issued 20,000,000 ordinary shares at an issue price of 20 cents each which have been partly paid to 1 cent each and upon which there is an outstanding amount payable of 19 cents per share. The total outstanding liability of the holders of these shares is the sum of $3,800,000.00. These shares have been issued to various companies associated with the Directors of the Company. The terms of issue of such partly paid shares are as follows:

No call will be made by the Directors on such partly paid shares until the expiry of at $\mathbf{1}$ . least two years from the date of issue of such shares;

À.

88

ADDITIONAL INFORMATION

$\ddot{\phantom{0}}$

TERMS OF ISSUE OF PARTLY PAID SHARES

• No more than two (2) calls will be made upon such shares in any one financial year $2.$ and no call within any one financial year will be made within six (6) months from the date of a previous call;
• No call may be made for more than Ten Percentum (10%) of the then outstanding $31$ amount due and payable for such shares;
• The Directors may with the prior written consent of a particular holder of such shares $41$ vary as for that particular holder the foregoing terms upon which the Directors shall be entitled to make a call;
• Nothing shall prevent the holders of such shares pre-paying up from time to time or $51$ at any one time the whole or part of the amount unpaid on such shares even though no amount has been called to be paid up by the Directors;
• Dividends of the Company shall be paid to the holders of such shares in the 6. proportion which the amount paid (not credited) on the share is of the total amounts paid and payable (excluding amounts credited) on such share held by them. An amount paid in advance of a call is not to be included as an amount paid on that share for the purposes of calculating entitlement to dividends for such a share;
• Where the Company shall be listed upon the ASX, the Company will not whilst there $71$ shall remain any outstanding liability with respect to such shares apply for Official Ouotation of the same with the ASX;
• Upon such shares being fully paid for in accordance with calls made by the Directors 8. such that there shall be no outstanding liability with respect to the same, such shares will rank in all respects pari passu with the existing ordinary fully paid shares in the capital of the Company then on issue:
• Where the Company shall be listed upon the ASX, upon such shares being fully paid 9. for in accordance with calls made by the Directors such that there shall be no outstanding liability with respect to the same, the Company will within three (3) business days from receipt of the monies fully paying up such shares, apply for Official Quotation of all such shares, in accordance with the Corporations Law and the Listing Rules of the ASX;
• Where the Company shall reorganise its capital, the number of such partly paid 10. shares must be reorganised in the same proportions as other classes of shares and the reorganisation must not involve cancellation or reduction of the total amount payable and unpaid by the holder of such shares;
• The holders of such shares shall have a fraction of a vote for each partly paid share $-11.$ held with the fractional vote of each share being equivalent to the proportion which the amount actually paid (not credited) for that share is of the total amounts paid and payable (excluding amounts credited) for that share. An amount paid in advance of a call is not to be included as an amount paid up on that share for the purposes of calculating the voting entitlement of such a share;
• The holders of such shares shall not be entitled to vote at a meeting in respect of 12. those shares on which calls are outstanding and unpaid;
• Where there is any inconsistency between the terms of issue of these partly paid 13. shares and the terms of the Listing Rules of the ASX (in circumstances where the Company shall be listed upon the ASX) the terms of the Listing Rules of the ASX shall prevail; and
• Save for the specific terms of issue of these partly paid shares as referred to above 14. (and subject to the Listing Rules of the ASX) in all other respects, the terms of issue of such partly paid shares shall be in accordance with the provisions of the Constitution of the Company.

PRINCIPAL MATERIAL CONTRACTS

The following contracts are considered significant or material to the Company or are of such a nature that an investor may wish to have particulars of them when making a decision to apply for the Shares under this Prospectus.

The main provisions of these Material Contracts are summarised below. As this section contains only a brief summary, the provisions of each are not fully described. To understand fully all rights and obligations pertaining to the Material Contracts, it will be necessary to read them in full. The documents are available for inspection at the registered office of the Company during normal business hours.

Deed Of Purchase Of Software A.

By a binding agreement dated the 30th July 1998 between Island Australia Pty Ltd (a company associated with Mr F. Khan and Mr Y. Khan), Mawson Group W.A. Pty Ltd (a company associated with Messrs B.McKeon, M. Watkins and B.McGougan), Renmuir Holdings Ltd (a company associated with Messrs A.Chaudhri and F.Khan), Chi Tung Investments Ltd (a company associated with Messrs A.Chaudhri and F.Khan), KYA Corporation Pty Ltd (a company associated with Mr Y.Khan) and Grandstar Investments Pty Ltd (a company associated with Messrs B.McKeon, M. Watkins and B.McGougan) of the one part (the "Purchasers") and Queste America Inc (a company associated with Mr R.Grewe) of the other part (the "Seller"), the Purchasers agreed to purchase a group of internet telephony software programs comprising the Current VoiceNet System (including a number of versions of the same) and work in progress relating to the development of a 24 line VoiceNet System owned by the Seller together ("the Software"). The consideration for such purchase was agreed to be the sum of Australian Dollars $2,000,000.00 or Two Million Five Hundred Thousand (2,500,000) ordinary fully paid shares in the capital of the Company payable by the Purchasers in proportion to the interest or share they each acquire in the Software. The interest or share of the Purchasers in such software is as follows: Island Australia Pty Ltd (17.00%), Mawson Group W.A. Pty Ltd (30.36%), Renmuir Holdings Ltd (35.78%), Chi Tung Investments Ltd (8.00%), KYA Corporation Pty Ltd (6.86%) and Grandstar Investments Pty Ltd (2.00%). The Purchasers have the right to elect which of the two alternative payment options will be made to pay for the Software. The consideration is payable sixty (60) days from the date upon which certain Restricted Vendor/Promoter shares in the capital of the Company held by the Purchasers are released from any escrow provisions imposed by the ASX. The agreement reflects the fact that the Purchasers are purchasing the software pursuant to a plan to onsell the same to the Company in consideration for the Company issuing and allotting shares in its capital to the Purchasers with the Company then undertaking a capital raising and a listing upon the ASX. The agreement also provides that the Purchasers will procure the appointment of Mr R. Grewe to the board of directors of the Company. The agreement is conditional upon each of the Purchasers selling their respective interests in the Software to the Company in exchange for shares in the Company.

Note: It is anticipated that the ASX will impose an escrow period of two years on all shares received by the Purchasers as a consequence of the sale of such software to the Company.

Deed Of Sale Of Software B.

By a binding agreement dated the 3rd August 1998 between Island Australia Pty Ltd (a company associated with Mr F. Khan and Mr Y. Khan), Mawson Group W.A. Pty Ltd (a company associated with Messrs B.McKeon, M. Watkins and B.McGougan), Renmuir Holdings Ltd (a company associated with Messrs A.Chaudhri and F.Khan), Chi Tung Investments Ltd (a company associated with Messrs A.Chaudhri and F.Khan), KYA Corporation Pty Ltd (a company associated with Mr Y.Khan) and Grandstar Investments Pty Ltd (a company associated with Messrs B.McKeon, M. Watkins and B.McGougan) of the one part (the "Sellers") and the Company of the other part, the Sellers agreed to sell the Software to the Company.

PRINCIPAL MATERIAL CONTRACTS

Deed Of Sale Of Software $\mathbf{B}$ .

This software comprises the Software purchased by the Sellers from Queste America Inc pursuant to the Material Contract referred to as the "Deed of Purchase of Software" at "A" above. The consideration for the purchase of the Software by the Company is the issue and allotment to the Sellers of shares in the capital of the Company at a total issue price of Australian Dollars $2,000,000.00 comprising the issue of 9,000,000 ordinary shares in the capital of the Purchaser issued at a price of twenty (20) cents each fully paid and 20,000,000 ordinary shares at an issue price twenty (20) cents each which have been partly paid to 1 cent each and upon which there is an outstanding amount payable of 19 cents per share. The total outstanding liability with respect to such 20,000,000 partly paid shares is $3,800,000.00.

Note: The terms upon which the outstanding liability of the 20,000,000 partly paid shares is payable is outlined in the foregoing heading of this Section 12 titled "Terms of Issue of Partly Paid Shares".

$\mathcal{C}$ . Software Development Agreement

By a binding agreement dated the 3rd August 1998 between the Company, Queste America Inc (the "Developer") and Russell Grewe (the "Key Man") the Company engaged the Developer to conduct software development works to expand the Current Single Line VoiceNet System into a 24line system having two versions; one of which will adopt the H.323 Internet Protocol. The agreement is conditional upon the Company becoming admitted to the Official List of the ASX. The agreement contemplates a time period of 61 weeks to fully complete the software development works through an agreed series of software development milestones, the completion of each being certified by an independent computer expert appointed by the Company and the Developer. The agreement provides for completion and delivery of a limited function 4 line VoiceNet System within 20 weeks of project start, a period of 44 weeks from project start for completion and delivery of a H.323 Compliant 24 Line Voice Net System, a period of 51 weeks for completion and delivery of a Non H.323 24 Line Voice Net System and a further period of 11 weeks to complete and deliver final modules allowing multiple links of 24 line VoiceNet Systems and remote administration. The agreement provides for the purchase of certain computer hardware and software to allow the software development works to proceed. This cost is paid by the Purchaser. The total contract price including such computer hardware and software purchases is the amount of United States Dollars $US567,000.00. The agreement does not specify a cost for the purchase of an off the shelf accounting package which will interface with the two versions of the proposed 24 Line VoiceNet System, but the contract price incorporates the software development works necessary for such accounting package to be integrated with such systems. The agreement recognises the importance of the Key Man (who is a director, shareholder and employee of the Developer) in the conduct of the software development works and requires the Key Man for the course of the software development works to remain a director, shareholder and employee of the Developer, to do no act, matter or thing that shall prejudice or prevent the Developer from carrying out its obligations under the agreement and to do all acts matters and things on behalf of the Developer as are necessary and required for the Developer to meet its obligations under the agreement. The agreement also provides for a life insurance policy to be taken over the Key Man in the amount of Australian Dollars $2,000,000.00 with the costs of the policy borne equally by the Developer and the Company. The beneficiary of such policy is the Company.

Note: The Company has an obligation to pay the Developer under the terms of the agreement in United States dollars. The Company does not intend to hedge its United States Dollar currency exposure.

Note: As at the date of this Prospectus, such Key Man policy has not been instituted.

90

PRINCIPAL MATERIAL CONTRACTS

D. Property Purchase Agreement

By a binding agreement dated the 10th July 1998 between the Company as Purchaser and "The 189 Syndicate" care of Becktel Ltd as Vendor, the Company entered into a contract to purchase Lots 30 and 33 of 189 St Georges Terrace, Perth for a purchase price of $425,000. Such lots comprise adjoining strata titled office suites situated on the 7th Floor of 189 St Georges Terrace, Perth having a combined area of approximately 210 square metres. The agreement is subject to the condition that the Company meets its Minimum Subscription under its proposed Prospectus Issue to raise $2,500,000, the Company being admitted to the Official List of the ASX within 12 weeks from the date of issue of its Prospectus and such Prospectus issuing within 30 days from the date of acceptance of the offer to purchase the property by the Vendor.

Note: The date of acceptance of the offer to purchase the property by the Vendor is the 10th July 1998.

Ε. Underwriting Agreement

The Company on the 6th day of August 1998 entered into an Underwriting Agreement with Australian Financial Securities Pty Ltd (the "Underwriter") whereby the Underwriter has agreed to underwrite the Prospectus Issue of 12,500,000 ordinary shares in the capital of the Company offered at an issue price of Twenty Cents ($0.20) per share payable in full on application to raise a total amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00). The major terms of such agreement are:

• the Underwriter agrees subject to the terms of the agreement to underwrite the subscription of the whole of the Issue of 12,500,000 ordinary shares to raise $2,500,000;
• the underwriting obligation does not extend to any Oversubscriptions allowed under the Prospectus;
• the Underwriter shall be entitled to appoint such sub-underwriters as it may think fit on such terms and conditions not inconsistent with the terms of the agreement as the Underwriter may determine,
• the Prospectus shall be prepared by the Company in consultation with the Underwriter;
• the Company shall ensure that the Prospectus complies with the Corporations Law and the Listing Rules;
• the Company shall take and accept full responsibility for the form and content of the Prospectus and for all claims and proceedings howsoever arising in relation to the same or the publication thereof (other than as may arise out of the form or content of any material prepared, published or circulated by the Underwriter without the prior written consent of the Company) and the Company will indemnify and keep indemnified the Underwriter from and against all such claims and proceedings and all expenses and legal costs arising as a consequence of such responsibility of the Company to the Underwriter;
• the Company will pay to the Underwriter a fixed underwriting fee in the sum of One Hundred and Fifty Thousand Dollars ($150,000.00) such amount being equal to Six Percentum (6%) of the value of the Issue Shares and a sum equal to Six Percentum (6%) of the value of all Oversubscriptions lodged by the Underwriter with the Company (being Oversubscriptions that proceed to allotment of shares by the Company);
• the Company will pay to the Underwriter a fixed issue management and co-ordination fee in the sum of One Hundred Thousand Dollars ($100,000.00) such amount being equal to Four Percentum (4%) of the value of the Issue Shares and a sum equal to Four Percentum (4%) of the value of all Oversubscriptions lodged by the Underwriter with the Company (being Oversubscriptions that proceed to allotment of shares by the Company);

91

PRINCIPAL MATERIAL CONTRACTS

$E.$ Underwriting Agreement

• the total fees thereby payable to the Underwriter (not including fees payable for Oversubscriptions lodged by the Underwriter ) equal $250,000;
• the Underwriter will not be entitled to any payments if any of the contingencies referred to in Clause 13 of the agreement occur and the Underwriter exercises its right to terminate the agreement;
• Clause 13 of the agreement provides that in the event one or more of the following events occurs at any time after the date of the agreement and ending on the date the Underwriter is required to fulfill its obligations under the agreement, the Underwriter without cost or liability to itself by written notice to the Company, may at its election, at any time specifying one or more of the following events, terminate the agreement and the obligations of the Underwriter imposed herein:
  • a) a default, breach or failure of or by the Company in the performance of any of its obligations under this agreement;
  • b) the occurrence in the opinion of the Underwriter of a material and adverse change after the date of this agreement in the actual or financial position of the Company;
  • c) a contravention by the Company of any provision of its Constitution, the Corporations Law or any legislation relating to the securities industry or taxation of the Commonwealth of Australia or any State or Territory thereof;
  • d) a material mis-statement inaccuracy or omission being made or revealed in either the Prospectus or any document supplied or statement made in reliance upon which the Underwriter has agreed to enter into the agreement;
  • any claim is made against the Company that the Company has infringed or is likely to e). infringe a patent, design or copyright owned by any other party, or that the Company has been or is likely to be passing off its products or processes as the products or processes of another party or that the Company is or has been or is likely to be in any other way whatsoever infringing the intellectual property rights of another party;
  • the introduction into the Parliament of the Commonwealth of Australia or the Parliament $\hat{\mathbf{n}}$ of the State of Western Australia of any law or prospective law changing the financial, economic or political conditions which in the opinion of the Underwriter adversely alters the financial or economic condition of the Company or adversely alters any condition or circumstances existing at the date of this agreement relating to capital issues generally or the Issue in particular;
  • g) the non registration of the Prospectus by the Australian Securities And Investment Commission no later than fourteen (14) days from the 10th day of August 1998;
  • h) unconditional approval by the ASX for the Quotation of the Company on the Official List being refused or not being granted within twenty one (21) days from the Closing Date of the Issue:
  • the occurrence of any event which would require the Company to be liable to be wound i) up, or proceedings for the winding up of the Company being instituted or any meeting being convened to consider a resolution for such winding up or the Company entering into a Scheme of Arrangement for the benefit of its creditors or an Administrator or Receiver or Manager being appointed over the property of the Company;
  • the creation or coming into existence of any charge over the property of the Company or $\mathbf{j}$ any subsidiary of the Company without the prior written approval of the Underwriter;
  • a breach by the Company of any of the covenants or warranties made to the Underwriter k) under the agreement;

PRINCIPAL MATERIAL CONTRACTS

Ε. Underwriting Agreement

• the All Ordinaries Index of the ASX falls below 2300 irrespective of whether the said $\mathbf{D}$ index then rises above the above stated level:
• m) the Australian/United States Dollar exchange rate falls below A$1=$US0.58;
• n) the outbreak of hostilities or a state or war (whether declared or not) involving any one or more of the Commonwealth of Australia, Japan, the United Kingdom, the United States of America, the Union of Soviet Socialist Republics, Indonesia or the Peoples Republic of China:
• there being a material default in the opinion of the Underwriter by the Company or there o) being a material change in the opinion of the Underwriter (and not being approved by the Underwriter in writing) in any of the Material Contracts referred to in the Prospectus or there is a failure by the Company to execute any of the Material Contracts referred to in the Prospectus:
• The waiver or delay by the Underwriter in terminating the agreement upon the terms outlined above shall not limit or effect or impede the Underwriter in terminating this agreement upon the happening of any other event by which the Underwriter shall be entitled to terminate the agreement.
• Prior to the Company being able to call upon the Underwriter to fulfill its obligations under the underwriting agreement, the Company is required to lodge a certificate with the Underwriter signed by at least six (6) Directors of the Company stating that as at the date of such certificate:
  • a) the Company has not contravened any provision of its Constitution, the Corporations Law or any other applicable legislation or the Prospectus;
  • b) there has been no material or adverse change in the actual or projected condition, financial position or financial prospects in the immediately forseeable future of the Company from that described in the Prospectus:
  • c) there has been no material or adverse alteration to the Company's assets and interests as set forth in the Prospectus since the date of execution of the agreement;
  • d) there has been no default by the Company under any provision of the agreement including any covenants made by the Company to the Underwriter;
  • nothing has occurred which materially or adversely effects the truth or completeness of $e$ ) the contents of the Prospectus;
  • the Company has generally complied with all of its obligations to be performed with f) respect to the Issue; and
  • none of the contingencies referred to in Clause 13 of the agreement have occurred. g).
• Subject to and conditional upon the receipt by the Underwriter of a notice by the Company outlining the shortfall in applications for shares in the Prospectus Issue received by the Company and the receipt of the certificate by the six (6) Directors within five (5) Business Days from the Closing Date of the Prospectus, the Underwriter shall lodge or cause to be lodged with the Company within Ten (10) Business Days thereafter, applications in a proper form for shares equal in number to the shortfall accompanied by payment in full for such number of shares provided always that at all times up to such date, the matters referred to in the certificate issued by the Directors are then still true, correct and accurate.

DIRECTORS INTERESTS

OIES

The Directors of the Company in office at the date of this Prospectus and their executive capacity are as follows:

• Mr Farooq Khan:
• Mr Brett McKeon:
• Mr Malcolm Watkins:
• Mr Russell Grewe:
• Mr Yaqoob Khan:
• Mr Bradley McGougan:
• Mr Michael J van Rens:
• Mr Azhar Chaudhri:

Chairman and Managing Director Non Executive Director Non Executive Director Non Executive Director Executive Director Non Executive Director Non Executive Director Non Executive Director

Except as set out in this Prospectus, no Director of the Company and no firm of which a Director of the Company is involved has any interest in the promotion of the Company or of any property proposed to be acquired by the Company, and no amounts, whether in cash or shares or otherwise, have been paid to any Director of the Company (or to any firm in which he is involved) either to induce him to become or to qualify him as a Director, or otherwise for services rendered by him or any firm in which he is involved in connection with the promotion or formation of the Company.

Loans to the Company

Various Directors directly and companies associated with such Directors have lent the following amounts to the Company.

Director	Amount: S
Mr F. KhanMr Y Khan	$1460.37$10,163.71
Company's associated withMessrs F. Khan and Y. Khan	$4199.50
Company's associated withMessrs B.McKeon, M.Watkinsand B.McGougan	$2111.89

These loans are interest free and will be repaid out of the proceeds of the Issue.

Holding of Shares and Options

There are no shareholding qualifications for Directors under the Constitution of the Company.

At the date of this Prospectus the Directors hold either directly or indirectly the following shares and options in the Company as defined under the Corporations Law:

Mr F. Khan directly holds 20 ordinary fully paid shares in the Company. He is also a director of Island Australia Pty Ltd and holds 80% of the issued capital of that company and accordingly 80% of the voting shares of that company. As a director and shareholder in Island Australia Pty Ltd Mr Khan has a relevant interest in the 1,700,020 shares in the capital of the Company owned by Island Australia Pty Ltd. Mr Khan is also the beneficial owner of 100% of the issued capital of Renmuir Holdings Ltd and Chi Tung Investments Ltd. Mr Khan holds both these beneficial interests on trust for Mr A.Chaudhri (a director of the Company). As Mr Khan has a beneficial interest in both such companies, Mr Khan has a relevant interest in the 3,528,000 shares in the capital of the Company owned by Renmuir Holdings Ltd and the 16,000,000 partly paid shares paid to 1 cent each in the capital of the Company owned by Chi Tung Investments Ltd.

By virtue of the matters outlined above, Mr Khan has a relevant interest in 5,228,040 fully paid shares and 16,000,000 partly paid shares in the capital of the Company.

94

DIRECTORS INTERESTS

Holding of Shares and Options

Based on the Issue being fully subscribed and assuming no Oversubscriptions, the relevant interest of Mr Khan in the shares of the Company will equal 26.79% of the total voting rights of the Company.

Mr Khan directly holds 3,240,000 options.

Mr B.McKeon, Mr M.Watkins and Mr B.McGougan through M.B.M. Investments Pty Ltd, MSW Investments Pty Ltd and Banyard Holdings Pty Ltd being companies they respectively control, collectively hold 100% of the issued capital of Access Life and General Insurance Pty Ltd ("Access"). Mr McKeon, Mr M. Watkins and Mr B. McGougan are also directors of Access.

Access holds shares 1200 ordinary fully paid shares in the capital of WAIS Pty Ltd ("WAIS") out of a total issued capital of 1700 ordinary fully paid shares. Access accordingly holds 70.58% of the voting shares of WAIS. Mr McKeon, Mr M. Watkins and Mr B. McGougan are directors of WAIS.

WAIS directly holds 20 fully paid shares in the capital of the Company. WAIS also holds 100% of the issued capital of Mawson Group W.A. Pty Ltd ("Mawson") and Grandstar Investments Pty Ltd ("Grandstar").

Mr B.McGougan is a director of Mawson. Mr McKeon, Mr M.Watkins and Mr B.McGougan are directors of Grandstar.

Mawson hold 2,986,020 ordinary fully paid shares in the capital of the Company and Grandstar holds 4,000,000 shares issued at 20 cents each which have been partly paid to 1 cent each in the capital of the Company.

By virtue of the shareholdings and directorships outlined above, Mr McKeon, Mr M.Watkins and Mr B.McGougan are associated with each other for the purposes of the Corporations Law and each such person accordingly has a relevant interest in 2,986,040 fully paid shares and 4,000,000 partly paid shares in the capital of the Company held by Mawson and Grandstar respectively.

Based on the Issue being fully subscribed and assuming no Oversubscriptions, the relevant interest in the shares of the Company held by Mr McKeon, Mr M. Watkins and Mr B. McGougan will equal 14.16% of the total voting rights of the Company.

In addition Mr McKeon directly holds 300,000 July 2003 Options, Mr M. Watkins directly holds 300,000 July 2003 Options and Mr B.McGougan directly holds 300,000 July 2003 Options.

Mr Y. Khan directly holds 20 ordinary fully paid shares in the Company. He is also a director of KYA Corporation Pty Ltd and holds 50% of the issued capital of that company and accordingly 50% of the voting rights of that company. As a director and shareholder in KYA Corporation Pty Ltd Mr Khan has a relevant interest in the 686,000 shares in the capital of the Company owned by KYA Corporation Pty Ltd. Mr Khan also holds 10% of the issued capital of Island Australia Pty Ltd and accordingly 10% of the voting rights of that company. As a shareholder in Island Australia Pty Ltd Mr Khan therefore has a relevant interest in the 1,700,020 shares in the capital of the Company owned by Island Australia Pty Ltd.

By virtue of the matters outlined above, Mr Khan has a relevant interest in 2,386,040 fully paid shares in the capital of the Company.

Based on the Issue being fully subscribed and assuming no Oversubscriptions, the relevant interest of Mr Khan in the shares of the Company will equal 10.60% of the total voting rights of the Company.

Mr Khan directly holds 360,000 options.

DIRECTORS INTERESTS

Holding of Shares and Options

• Mr Michael J van Rens holds no shares in the Company. Mr van Rens directly holds 500,000 options.
• Mr Azhar Chaudhri is the ultimate beneficial owner of the whole of the issued capital of Renmuir Holdings Ltd which holds 3,528,000 shares in the capital of the Company and Chi Tung Investments Ltd which holds 16,000,000 partly paid shares paid to 1 cent each in the capital of the Company. Mr Chaudhri holds no options.

By virtue of the matters outlined above, Mr Chaudhri has a relevant interest in 3,528,000 fully paid shares and 16,000,000 partly paid shares in the capital of the Company.

Based on the Issue being fully subscribed and assuming no Oversubscriptions, the relevant interest of Mr Chaudhri in the shares of the Company will equal 19.24% of the total voting rights of the Company.

Mr Russell Grewe as the sole director and shareholder of Queste America Inc has a relevant interest in 2,500,000 shares based upon the prospective ability of Queste America Inc to receive a transfer of 2,500,000 fully paid shares in the Company from the Purchasers as defined in the Material Contract referred to at paragraph A above as the "Deed Of Purchase Of Software" and as a consequence of the obligations of such Purchasers towards Mr R. Grewe and Queste America Inc under the terms of such contract. Where the Purchasers shall elect to transfer 2,500,000 fully paid shares in the Company to Queste America Inc upon the terms of that agreement, the indirect shareholding of Mr F. Khan, Mr Y.Khan, Mr A.Chaudhri, Mr Mr McKeon, Mr M.Watkins and Mr B.McGougan in the capital of the Company will accordingly decrease.

Mr Grewe holds no options.

Non Executive Directors Fees

$\ddot{\phantom{a}}$

The Constitution of the Company provides that the Directors (subject to special provisions relating to the appointment of a Managing Director or Executive Director) shall be paid out of the funds of the Company for their services as Directors, a sum not exceeding such fixed sum per annum as may be determined by the Directors prior to the first annual general meeting. This sum is to be divided amongst themselves and in default of agreement, equally. The current aggregate amount so resolved for such Non Executive Directors is $55,000. The remuneration of the Directors shall not be increased except pursuant to a resolution passed at a general meeting of the Company where notice of the suggested shall have been given to members in he notice convening the meeting. Under the Listing Rules of the ASX, the maximum fees payable to Directors may not be increased without the prior approval of the members of the Company in general meeting. The Directors are also entitled to be paid reasonable travelling, accommodation and other expenses incurred in consequence of attendance at meetings of Directors and otherwise in the execution of their duties as Directors. A Director may also be paid additional amounts as fees or as the Directors determine where a Director performs extra services or makes any special exertions which in the opinion of the Directors are outside the scope of ordinary duties of a Director.

DIRECTORS INTERESTS

Executive and Managing Directors Fees

The remuneration of a Managing Director or of an Executive Director shall from time to time be fixed by the Directors. The remuneration may be by way of salary or commission or participation in profits or by all or any of these modes but may not be by commission on or as a percentage of operating revenue.

Mr F. Khan and Mr Y. Khan are the Executive Directors of the Company with Mr F. Khan holding the position of Managing Director of the Company. The total salaries currently payable to each of these executive directors is as follows:

Mr F.Khan: $75,000 gross salary per annum Mr Y.Khan: $50,000 gross salary per annum

Software Development Fees

The Company has entered into software development contract with Queste America Inc (a company associated with Mr R. Grewe who is a Director of the Company) whereby Queste America Inc has been contracted to conduct software development works to expand the Current Single Line VoiceNet System into a 24line system having two versions; one of which will adopt the H.323 Internet Protocol.

Queste America Inc will receive fees for undertaking the works required under such contract in the amount of United States Dollars $US567,000.00.

Other Fees or Benefits

Mr F. Khan will receive from the proceeds of the Issue the sum of $18,500 for legal services provided by him to the Company in relation to the preparation of the Prospectus and related documentation.

Mr B. McKeon will receive from the proceeds of the Issue the sum of $18,300 for the provision of secretarial, administrative and management services to the Company.

The Constitution of the Company also provides that Directors will be indemnified against liabilities incurred by them in their capacity as such Directors to the extent permitted by the Corporations Law.

In this regard the Company has at its cost provided to the Directors a Directors and Officers Liability Insurance cover in the amount of $3,500,000 for any one claim or $3,500,000 in the aggregate to cover and indemnify the Directors from claims made against them in their capacity as Directors. The first years premium for such insurance policy is $17,200.

DIRECTORS INTERESTS

Acquisition of Current VoiceNet System

Companies associated with Messrs F.Khan, B.McKeon, M.Watkins, Y.Khan, B.McGougan and A. Chaudhri have been allotted shares in the Company pursuant to the acquisition by the Company of a group of internet telephony software programs, details of which are set out at in the Material Contract "B" above referred to as the "Deed Of Sale Of Software".

Sub-Underwriting Fees

Companies associated with Mr F. Khan, Mr A.Chaudhri and Mr M.J. van Rens are sub-underwriting a portion of the Issue and accordingly may take up shares offered by this Prospectus pursuant to their sub-underwriting obligations. Those companies will accordingly receive a sub-underwriting fee from the Underwriter to the extent of their respective obligations to sub-underwrite the Issue. If the subunderwriting commitments of such companies are fully taken up, the entitlement of Mr F. Khan, Mr A.Chaudhri and Mr M.J. van Rens to shares in the Company will increase as follows:

• Mr F. Khan and Mr A.Chaudhri through their beneficial entitlement in Chi Tung Investments Ltd: 2,500,000 shares
• Mr M.J. van Rens through his company Michael van Rens Financial Services Pty Ltd (A.C.N. 009) 202 635): 2,500,000 shares

VENDOR SECURITIES

The ASX as a condition of granting the application by Queste Communications Ltd for admission to the Official List of the ASX, may classify certain shares currently held by existing shareholders of the Company acquired as a consequence of the acquisition of the Current VoiceNet System by the Company or shares which Queste America Inc may become entitled to pursuant to the Materia! Contract referred to above as the "Deed of Purchase of Software", as vendor securities. The ASX may also deem options issued by the Company for no consideration as vendor securities. Prior to the official quotation of the Shares the subject of this Issue, the existing and prospective holders of such shares and the holders of options in the Company will or may be required by the ASX to enter into escrow agreements with Queste Communications Ltd on the basis that the ASX regards such shares and or options as vendor securities.

The Directors expect that any such escrow arrangements will prohibit the transfer of effective ownership or control of such vendor securities for a period of time up to 24 months from the date of listing of the Company unless the prior written consent of the ASX is first obtained.

INTERESTS OF EXPERTS AND ADVISERS

Except as disclosed in this Prospectus, no expert or any firm in which any expert is a partner, has or has had in the two years before the lodgment of this Prospectus, an interest in the promotion of, or in any property proposed to be acquired by, or in any Material Contract entered into by the Company and no amounts, whether in cash or shares or otherwise, have been paid or agreed to be paid to any expert (or to any firm in which he or she is a partner) for services rendered by the expert or the firm in connection with the promotion or formation of the Company. No form of payment of any kind will be made or agreed to be made to any such expert or firm other than in cash.

Deloitte Touche Tohmatsu have acted as Investigating Accountants for the Issue and have prepared a report setout at Section 11 of this Prospectus. The Company has paid or has agreed to pay $5000 plus disbursements in connection with their report.

INTERESTS OF EXPERTS AND ADVISERS

WA CTI have acted as Experts by providing a technology report on the VoiceNet System. The Company has paid or has agreed to pay $11,500 plus disbursements in connection with their report. WA CTI have also provided expert services to the Company to confirm the suitability of premises purchased by the Company for its operations and to confirm the acquisition of the source code for the Current VoiceNet System. These fees equal $2,100.

Australian Financial Securities Pty Ltd as the Underwriter to the Issue will receive fees equal to $250,000 plus an underwriting fee equal to Six Percentum (6%) of the value of all Oversubscriptions lodged by the Underwriter with the Company (and being shares that are actually allotted by the Company) and an issue management and co-ordination fee equal to Four Percentum (4%) of the value of all Oversubscriptions lodged by the Underwriter with the Company (and being shares that are actually allotted by the Company).

CONSENTS

Experts Consents

Deloitte Touche Tohmatsu has given and has not, before lodgment of this Prospectus, withdrawn their written consent to the issue of this Prospectus with their name as Auditors of the Company and as Investigating Accountants and the inclusion of the Investigating Accountant's Report in the form and context in which it is included in Section 11 of this Prospectus For the purposes of Section 1010 of the Corporations Law, except for the inclusion of their name as the Auditors of the Company and Investigating Accountant, the inclusion of their Investigating Accountant's Report and the inclusion of their consent in this Prospectus, Deloitte Touche Tohmatsu have not authorised or caused the issue of any other part of this Prospectus.

WA CTI have given and have not withdrawn their written consent before lodgment of this Prospectus. to be named in this Prospectus and to the issue of this Prospectus with the technology report contained in this Prospectus in the form and context in which it is included.

Stockbrokers Consent

Chartpac Securities Ltd have given their written consent to be named in this Prospectus, in the form and context in which it appears and have not withdrawn that consent before lodgment of this Prospectus.

Notwithstanding that it may be referred to in this Prospectus, Chartpac Securities Ltd have not been involved in the preparation of this Prospectus nor have they authorised or caused the issue of this Prospectus. Chartpac Securities Ltd make no representation regarding the Prospectus, take no responsibility for any statements contained herein or any omission from this Prospectus and accept no liability for the completeness or accuracy of information contained in this Prospectus.

Underwriters Consent

Australian Financial Securities Pty Ltd have given their written consent to be named in this Prospectus, in the form and context in which it appears and have not withdrawn that consent before lodgment of this Prospectus.

CONSENTS

Solicitors Consent

Solomon Brothers, have given their written consent to being named in this Prospectus as one of the Australian solicitors to the Company and have not withdrawn their consent prior to lodgment of this Prospectus with the ASIC. For the purposes of Section 1010 of the Corporations Law, notwithstanding that they may be referred to elsewhere in this Prospectus, Solomon Brothers advise that they have only provided advice to the Company in relation to the drafting of the contracts referred to in paragraph B on pages 89 and 90 and paragraph C on page 90 of this Prospectus and that the only part of this Prospectus which Solomon Brothers have authorised to issue is this paragraph and Solomon Brothers have not authorised or caused to issue any other part of this Prospectus and were not involved in the preparation of this Prospectus other than in assisting in the drafting of the wording of paragraph B on pages 89 and 90 and paragraph C on page 90.

Other Consents.

Advanced Share Registry Services have given their written consent to be named in this Prospectus, in the form and context in which it appears and have not withdrawn that consent before lodgment of this Prospectus.

Notwithstanding that it may be referred to in this Prospectus, Advanced Share Registry Services have not been involved in the preparation of this Prospectus nor have they authorised or caused the issue of this Prospectus. Advanced Share Registry Services make no representation regarding the Prospectus, take no responsibility for any statements contained herein or any omission from this Prospectus and accept no liability for the completeness or accuracy of information contained in this Prospectus.

Technolgy Marketing Corporation Inc, the publishers of CTI Magazine have given their written consent to the inclusion of their letter to Company dated the 26th May 1998 in this Prospectus and have not withdrawn that consent before lodgment of this Prospectus.

EXPENSES OF THE ISSUE

The total expenses of the Issue are estimated to be approximately $315,000.

SENSITIVE INFORMATION: ASIC CLASS ORDER

Under Class Order 94/183, the ASIC allows the granting of relief from Section 1029 of the Corporations Law in relation to information in the Material Contracts referred to in this Prospectus which are of such a nature that its release to the public would likely to result in unreasonable prejudice to the Company. That information is not within the public domain and is commercially sensitive. Release of that information to the Company's competitors would adversely affect the Company's business.

DOCUMENTS AVAILABLE FOR INSPECTION

Certified copies of the Constitution, the Material Contracts, the letter from CTI Magazine referred to in this Prospectus, the various consents referred to above and this Prospectus are available for inspection without charge at the registered office of the Company.

These certified copies will be available for at least 12 months after registration of this Prospectus. They are available for inspection during normal office hours.

In accordance with the Class Order of the ASIC referred to above, some information has been removed from the copies of the documents that are available for inspection. The Directors believe that the information that has been removed is confidential or of such a nature that its disclosure to the public would adversely effect the Company. The Directors further believe that the information that has been removed is not information that an investor or the professional advisers of an investor would reasonably require and reasonably expect to find in this Prospectus for the purpose of making an informed assessment of the Offer.

COMPANY TAX STATUS

The Directors expect the Company will be taxed in Australia as a public company.

LITIGATION

There is no litigation of any nature or threatened which may effect the Company or its activities.

DEFINITIONS AND GLOSSARY OF TERMS

Section 13

The following definitions apply throughout this Prospectus unless otherwise stated:

Applicant(s) - means person(s) who submit valid Application Form(s) for Shares pursuant to this Prospectus.

Application Form - means the form attached to and forming part of this Prospectus by which parties can apply for Shares.

ASIC - means the Australian Securities and Investment Commission

ASX – means the Australian Stock Exchange Ltd

Bandwidth - means the data carrying capacity of a Network.

Bit – means the smallest unit of computer code, on/off, zero/one

Byte - means a group of 8 bits comprising one computer 'word'

CHESS - means the Clearing House Electronic Sub-Register System established and operated by the ASX.

Company - means Queste Communications Ltd (A.C.N. 081 688 164)

CPU - means Central Processing Unit. This is the core of the computer that performs the major computational functions of the computer.

Current VoiceNet System - means the existing single line version of the VoiceNet System.

Directors - means the Directors of the Company.

DSP - means Digital Signal Processor. This is an electronic component that converts analog sound into electronic digital packets and vice versa.

H.323 Protocol - means an international standard developed by the International Telecommunications Union for conferencing over packet-based networks. Its main benefits are a single standard to permit Internet telephony products to inter-operate, interoperability standards for ISDN and telephony-based conferencing systems, and the flexibility to support different hardware, software, and network capabilities.

IP - means Internet Protocol which is the network protocol (or uniform rules)that handles the addressing, of electronic packets over the Internet seeing to it that packets are routed across multiple nodes and or across multiple networks with multiple standards to the correct destination.

ISP- means Internet Service Provider. A company that provides an intermediate link between a computer or a network and the Internet.

Issue - means the offering of 12,500,000 ordinary fully paid shares at an issue price of 20 cents each payable in full on application in the capital of the Company pursuant to the terms of this Prospectus.

IVR - means Interactive Voice Response. A synthetic voice offers the caller choices which are selected by keying numbers on the callers telephone handset.

103

DEFINITIONS AND GLOSSARY OF TERMS

$Kb$ (Kb) – means kilobit or 1024 bits.

Kbps - means Kilobits per second. This represents a data transfer rate of 1024 bits/second.

KB - means Kilobyte which is equal to 1024 bytes.

LAN - means Local Area Network. A network of computers communicating over short distances in a restricted area, such as a University campus. Many LAN's in turn connect to wider networks such as WAN's.

Listing Rules - means the listing rules of the ASX

Material Contract(s) - means the material contracts referred to in Section 12 of this Prospectus

Minimum Subscription – means the subscription by Applicants of 12,500,000 ordinary fully paid shares in the capital of the Company at an issue price of 20 cents each payable in full on application pursuant to the terms of this Prospectus and the receipt by the Company of payment for such shares in accordance with the Corporations Law in the sum of $2,500,000.

MB - means Mega Bytes. This is equal to 1000 Kilobytes of data.

Network - means a group of computers able to communicate with each other because there is a communications link between them and because they each obey a set of rules to correctly interpret and deal with data sent between them. The Internet is an example of a Network.

Offer - means the offer of Shares (plus any Oversubscriptions) pursuant to this Prospectus

Official List - means the official list of companies admitted to the ASX

Oversubscriptions - means right of the Company to accept further applications for shares pursuant to this Prospectus in addition to the Issue of up to 5,000,000 ordinary fully paid shares at an issue price of 20 cents each payable in full on application in the capital of the Company.

PABX - means Private Automatic Branch Exchange. A private telephone switch connected to the public telephone network

PC - means a Personal Computer. Commonly known as "IBM compatible" computers running on a Windows™ operating system and containing an INTEL™ CPU.

Prospectus - means the document comprising this Prospectus.

PSTN - means the Public Switch Telephone Network

Queste - means Queste Communications Ltd (A.C.N. 081 688 164)

RAM - means Random Access Memory. This is the computers memory storage area used while the computer is on. This memory is cleared each time the computer is turned off.

Shares - means the 12,500,000 ordinary fully paid shares in the Company offered under this Prospectus plus any Oversubscriptions.

TAPI - means Telephone Application Program Interface which is a standard program interface that lets computers "talk" over telephones or video phones to other computers.

TCP/IP - means Transmission Control Protocol/Internet Protocol

DEFINITIONS AND GLOSSARY OF TERMS

TCP - means Transmission Control Protocol is the network protocol (or uniform rules) that converts messages into streams of electronic packets at the source and then reassembles them back into messages at the destination.

24 Line VoiceNet System - means the proposed multi line version of the VoiceNet System capable of handling 24 simultaneous telephone calls, such system to be developed in two versions as outlined in the body of the Prospectus.

Underwriter -. means Australian Financial Securities Pty Ltd (A.C.N.081 477 796)

VoIP - means Voice Over Internet Protocol

VoiceNet System - means the internet telephony software program that allows telephone calls to be placed over the Internet as more particularly outlined in the body of this Prospectus which at the date of this Prospectus comprises the Current VoiceNet System and is proposed to extend to and include the 24Line VoiceNet System.

WAN - means Wide Area Network. A network of computers able to communicate over a wide area. A WAN often links a number of WAN's together. The Internet is an example of a WAN.

105

DIRECTORS STATEMENT

This Prospectus has been signed by each of the Directors of Queste Communications Ltd or by his duly authorised agent in accordance with section 1021 of the Corporations Law.

DATED the

day of August 1998

. . . . . . . . . . . . . . . . . . . . Farooq Khan

. . . . . . . . . . . . . . . . . . . . Brett McKeon

. . . . . . . . . . . . . . . . . . . . Malcolm Watkins

. . . . . . . . . . . . . . . . . . . . Yaqoob Khan

. . . . . . . . . . . . . . . . . . . . Bradley McGougan

. . . . . . . . . . . . . . . . . . . . Michael J. van Rens

. . . . . . . . . . . . . . . . . . . . Russell Grewe by Brett McKeon being his agent authorised in writing

. . . . . . . . . . . . . . . . . . . . Azhar Chaudhri by Yaqoob Khan being his agent authorised in writing

Instructions to Applicants and Application Form

Section 14

How to complete the Application Form

Please complete all relevant sections of the Application Form in BLOCK LETTERS. These instructions are crossreferenced to each section of the Form.

A				is therefore $2000.00 and is capable of being increased in multiples of $200.00 thereafter.		Insert the Number of Shares you wish to apply for in Section A. The application must be for a minimum of 10,000Shares and thereafter may be in multiples of 1,000 Shares. The minimum dollar value capable of being subscribed
В				Shares. A handy Ready Reckoner is provided below. Insert the relevant amount in Section B.		Calculate your application money by multiplying the number of Shares by 20 cents being the issue price of the
	Shares10,000	SAmount$2000.00	Shares20,000	SAmount$4,000.00	Shares250,000	SAmount$50,000.00
	11,00012,000	$2,200.00$2,400.00	25,00050,000	$5,000.00$10,000.00	500,000750,000	$100,000.00$150,000.00
	15,000	$3,000.00	100,000	$20,000.00	etc	etc
C	will be accepted.	as it appears on your CHESS holding statement.		can be registered. Applications using the wrong form of name may be rejected.		Write the Full Name you wish to appear on your holding statement. This must be either your own name or thename of a company. You should refer to the back of the Application Form for the correct forms of name whichIf you have written a CHESS HIN in Section F, please ensure that you write your name in exactly the same formatApplications in the name of a minor, a trust or estate, business, firm or partnership, club, association or otherunincorporated body cannot be accepted. Applications made in the individual name(s) of (the) person(s) who is(are) the legal guardian(s), trustee(s), proprietor(s), partner(s) or office bearer(s) (as applicable) of those entities
D	If you are applying as Joint Applicants, complete Section D. You should refer to the back of the Application Form,for instructions on the correct form of name. Up to three joint Applicants may register. An account designationmay be entered on the last line of this section. It should be contained within $\Diamond$ brackets with A/C at the end eg.
Е	Enter your Postal Address for all correspondence. All communications to you from Queste CommunicationsLimited's Share Registry (holding statements, annual / interim reports, correspondence, etc) will be mailed to theperson(s) and address as shown. For joint applications, only one address can be entered.
$\mathsf F$	If you are already a CHESS participant, or sponsored by a CHESS participant, write your Holder IdentificationNumber (HIN) here.
G	Insert your Tax File Number (TFN) or Exemption Category. Where applicable, please enter the TFN for eachJoint Applicant. Quotation of your TFN is not compulsory and will not affect you application.
H				Please insert your Telephone Number(s) and contact name in case there are irregularities with your application.
$\mathbf{I}$				Australian currency. Your cheque(s) or bank draft(s) must be drawn on an Australian bank.		Make your cheque(s) or bank draft(s) payable to "Queste Communications Share Float Account" in
				Attach your cheque(s) or bank draft(s) to the Application Form where indicated.
				Complete the details of your cheque(s) or bank draft(s) in this section,
		LODGEMENT OF APPLICATIONS
				Please mail your completed Application Form and cheque(s) or bank draft(s) to:
				Chartpac Securities of Level 3, 231 Adelaide Terrace, Perth, Western Australia 6000; or
				Australian Financial Securities Pty Ltd of 3-5 Bennett Street, East Perth, Western Australia, 6004

WULDIL		Prospectus
Instructions to Applicants and Application Form				Section 14
Queste Communications Limited				FIRM STAMP
ACN:081 688 164		BROKER STAMP
Share Offer Application Form			Broker Code (office use)
			Adviser Code (office use)
Please print clearly in
BLOCK LETTERS.				This amount must
I/we apply to purchase			I/we lodge full application money being	equal the number of
				Shares applied for
А	в- $			multiplied by the Issue Price
				of 20cents per share.

By lodging this application form and cheque for the subscription amount I/we hereby authorise the Company to complete and execute any document necessary to effect the issue of Shares to me/us and agree to be bound by the Constitution of the Company. $\mathcal{L}$

COMPLETE FULL NAME DETAILS (refer overleaf for correct forms or registrable names)

$\bigcap_{x\in\mathbb{Z}}\bigcup_{x\in\mathbb{Z}}$

C
	Title		Given names or company name		Surname
D
	Title		Joint Applicant #2
	Title				Joint Applicant #3 (or designated account eg. )
	COMPLETE ADDRESS DETAILS
Ε
	Street Number	Street						◟
	Suburb/City or Town						State	Postcode
F	X		G
	CHESS HIN (if applicable)				Tax File Numbers(s) or Exemption Category
н
	Home Telephone Number			Work Telephone Number			Contact Name
	CHEQUE DETAILS : Important - Please make cheques payable to "Queste Communications Share Float Account"
1						S
	Drawer	Bank		Branch		Amount
						$
	Drawer	Bank		Branch		Amount
					Total - must equal amount in $B$	S
	DECLARATION: I/we declare that the lodgement of this Application Form constitutes my/our offer to subscribe for Shares in theCompany. I/we represent and acknowledge that I/we have read and understood the Prospectus to which this Application Formrelates. I/we hereby authorise the Company to complete and execute any document necessary to effect the transfer and

allotment of any Shares. I/we agree to take any number of Shares equal to or less than those applied for. By lodging this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and that all statements made by me/us are complete and accurate.

NO SIGNATURE IS REQUIRED ON THIS FORM.

108

Further Information for Applicants

TREATMENT OF APPLICATION

The return of an Application Form with your cheque for the application money will constitute your offer to purchase or subscribe for Shares. If your Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be treated as valid.

The decision of the Company as to whether to treat your application as valid, and how to construe, amend or complete it, shall be final. The decision on the number of Shares to be Allocated to you shall also be final. You will not, however, be treated as having offered to purchase more Shares than is indicated on the Application Form.

Applying Investors whose application are not Accepted, or are Accepted in respect of a lower number of Shares than the number applied for, will receive a refund of all or part of their application money without interest, as applicable.

CORRECT FORMS OF REGISTRABLE NAMES

Note ONLY legal entities are allowed to hold Shares. Applications must be in the name(s) of natural persons, companies or other entities acceptable to the Company. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may by included by way of an account designation if completed exactly as described in the examples of correct forms below.

TYPE OF INVESTOR	CORRECT FORM	EXAMPLES OF INCORRECTFORM
IndividualsGive full name - not initials	JOHN FRED WILLIAMS	J. F. Williams
Persons under the age of 18Do not use the name of theminor, use name(s) ofparent(s)/guardian(s)	MICHAEL JOHN WILSON &SARAH JANE WILSON	Andrew Wilson
CompaniesUse company title, notabbreviations	JOHN WILLIAMS PTY LTD	J. Williams Co.John Williams P/L
TrustsDo not use the name of thetrust, use name(s) of trustee(s)	JOHN FRED WILLIAMS	John Williams Family Trust
Deceased EstatesDo not use the name ofdeceased, use personal namesof executor(s)	JANE MARY MCDONALD	Estate of the Late John Smith
PartnershipsDo not use the name ofpartnership, use personalnames of partners	SARAH JANE WILSON &MICHAEL JOHN WILSON<sarah &="" a="" c="" son="" wilson="">	Sarah Wilson & Son
Clubs/Unincorporated BodiesDo not use name of clubs etc,use personal names of officebearer(s)	JOHN FRED WILLIAMS	ABC Tennis Association
Superannuation FundDo not use name of fund usename(s) of trustee(s)	SARAH WILSON PTY LTD	Sarah Wilson Pty LtdSuperannuation Fund

QUESIE		Prospectus
Instructions to Applicants and Application Form		Section 14
Queste Communications LimitedACN:081 688 164Share Offer Application FormPlease print clearly in	BROKER STAMPBroker Code (office use)Adviser Code (office use)	FIRM STAMP
BLOCK LETTERS.I/we apply to purchase	I/we lodge full application money being	This amount mustequal the number ofShares applied for
	в£	multiplied by the Issue Price

By lodging this application form and cheque for the subscription amount I/we hereby authorise the Company to complete and execute any document necessary to effect the issue of Shares to me/us and agree to be bound by the Constitution of the Company.

COMPLETE FULL NAME DETAILS (refer overleaf for correct forms or registrable names)

$\blacktriangle$

$\mathbf C$
	Title	Given names or company name		Surname
D
	Title	Joint Applicant #2
	Title		Joint Applicant #3 (or designated account eg. )
	COMPLETE ADDRESS DETAILS
Ε
	Street NumberStreet					₹
	Suburb/City or Town				State	Postcode
F	X	G
	CHESS HIN (if applicable)			Tax File Numbers(s) or Exemption Category
н
	Home Telephone Number		Work Telephone Number		Contact Name

CHEQUE DETAILS : Important - Please make cheques payable to "Queste Communications Share Float Account"

Drawer	Bank	Branch	Amount
BankDrawer	Branch	Amount
		Total - must equal amount in B

DECLARATION: I/we declare that the lodgement of this Application Form constitutes my/our offer to subscribe for Shares in the Company. I/we represent and acknowledge that I/we have read and understood the Prospectus to which this Application Form relates. I/we hereby authorise the Company to complete and execute any document necessary to effect the transfer and allotment of any Shares. I/we agree to take any number of Shares equal to or less than those applied for. By lodging this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and that all statements made by me/us are complete and accurate.

NO SIGNATURE IS REQUIRED ON THIS FORM.

of 20cents per share.

Further Information for Applicants

TREATMENT OF APPLICATION

The return of an Application Form with your cheque for the application money will constitute your offer to purchase or subscribe for Shares. If your Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be treated as valid.

The decision of the Company as to whether to treat your application as valid, and how to construe, amend or complete it, shall be final. The decision on the number of Shares to be Allocated to you shall also be final. You will not, however, be treated as having offered to purchase more Shares than is indicated on the Application Form.

Applying Investors whose application are not Accepted, or are Accepted in respect of a lower number of Shares than the number applied for, will receive a refund of all or part of their application money without interest, as applicable.

CORRECT FORMS OF REGISTRABLE NAMES

Note ONLY legal entities are allowed to hold Shares. Applications must be in the name(s) of natural persons, companies or other entities acceptable to the Company. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may by included by way of an account designation if completed exactly as described in the examples of correct forms below.

TYPE OF INVESTOR	CORRECT FORM	EXAMPLES OF INCORRECTFORM
IndividualsGive full name - not initials	JOHN FRED WILLIAMS	J. F. Williams
Persons under the age of 18Do not use the name of theminor, use name(s) ofparent(s)/guardian(s)	MICHAEL JOHN WILSON &SARAH JANE WILSON	Andrew Wilson
CompaniesUse company title, notabbreviations	JOHN WILLIAMS PTY LTD	J. William's Co.John Williams P/L
TrustsDo not use the name of thetrust, use name(s) of trustee(s)	JOHN FRED WILLIAMS	John Williams\Family/Trust
Deceased EstatesDo not use the name ofdeceased, use personal namesof executor(s)	JANE MARY MCDONALD	Estate of the Late/John Smith
PartnershipsDo not use the name ofpartnership, use personalnames of partners	SARAH JANE WILSON &MICHAEL JOHN WILSONSARAH WILSON & SON A/C>	Sarah Wilson & Son
Clubs/Unincorporated BodiesDo not use name of clubs etc,use personal names of officebearer(s)	JOHN FRED WILLIAMS	ABC Tennis Association
Superannuation FundDo not use name of fund use$name(s)$ of trustee(s)	SARAH WILSON PTY LTDSUPER FUND A/C>

110

Queste Communications Ltd. ACN 081 688 164 4 Judd Street, South Perth Western Australia, 6151Tel: +618 9474 4981- Fax: +618 9322 1515