TALIUS GROUP LIMITED — Capital/Financing Update 2010

Sep 27, 2010

ADVANCE ENERGY LIMITED

ACN 111 823 762

PROSPECTUS

FOR

A non-renounceable pro-rata offer to Eligible Shareholders on the basis of 14 Listed Options for every 15 Shares held as at the Record Date at an issue price of 0.1 cents per Listed Option.

The Listed Options are exercisable at 3 cents each on or before 31 August 2012

The Rights Issue is fully underwritten by Glory Run Pty Ltd.

THIS OFFER CLOSES AT 5.00PM WST ON 28 OCTOBER 2010

VALID ACCEPTANCES MUST BE RECEIVED BEFORE THAT TIME.

Please read the instructions in this Prospectus and on the accompanying Entitlement and Acceptance Form regarding the acceptance of your Entitlement under the Offer.

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. IT SHOULD BE READ IN ITS ENTIRETY.

IF YOU ARE IN DOUBT ABOUT WHAT TO DO, YOU SHOULD CONSULT YOUR PROFESSIONAL ADVISER WITHOUT DELAY.

THE OPTIONS OFFERED BY THIS PROSPECTUS ARE OF A SPECULATIVE NATURE.

IMPORTANT INFORMATION

This Prospectus is dated 28 September 2010 and was lodged with the ASIC on that date with the consent of all Directors. Neither ASIC nor ASX nor their respective officers take any responsibility for the contents of this Prospectus.

No Listed Options will be issued on the basis of this Prospectus any later than 13 months after the date of this Prospectus (being the expiry date of this Prospectus).

A copy of this Prospectus is available for inspection at the registered office of the Company at Suite 4, 16 Ord Street, West Perth 6005, during normal business hours. The Company will provide a copy of this Prospectus to any person on request. The Company will also provide copies of other documents on request (see Section 5.6).

The Listed Options offered by this Prospectus and their underlying shares should be considered speculative. Please refer to Section 4 for details relating to investment risks.

The Entitlement and Acceptance Form accompanying this Prospectus is important. Please refer to instructions in Section 1.8 regarding the acceptance of your Entitlement. Applications for Listed Options can only be submitted on an original Entitlement and Acceptance Form sent with a copy of this Prospectus by the Company. The Entitlement and Acceptance Form sets out an Eligible Shareholder’s Entitlement to participate in the Offer.

Revenues and expenditures disclosed in this Prospectus are recognised exclusive of the amount of goods and services tax, unless otherwise disclosed.

No person is authorised to give any information or to make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with the Offer.

No action has been taken to permit the offer of Listed Options under this Prospectus in any jurisdiction other than Australia and New Zealand.

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of those laws. This Prospectus does not constitute an offer of Listed Options in any jurisdiction where, or to any person to whom, it would be unlawful to issue this Prospectus.

This document is important and should be read in its entirety before deciding to participate in the Offer. This does not take into account the investment objectives, financial or taxation or particular needs of any Applicant. Before making any investment in the Company, each Applicant should consider whether such an investment is appropriate to his/her particular needs, and considering their individual risk profile for speculative investments, investment objectives and individual financial circumstances. Each Applicant should consult his/her stockbroker, solicitor, accountant or other professional adviser without delay. Some of the risk factors that should be considered by potential investors are outlined in Section 4.

By returning an Entitlement and Acceptance Form, you acknowledge that you have received and read this Prospectus and you have acted in accordance with the terms of the Offer detailed in this Prospectus.

Definitions of certain terms used in this Prospectus are contained in Section 7. All references to currency are to Australian dollars and all references to time are to WST, unless otherwise indicated.

Eligible Shareholders with registered addresses in Australia and New Zealand only can obtain a copy of this Prospectus during the period of the Rights Issue on the Company's website, www.advanceenergyltd.com.au. The electronic version of this Prospectus does not include the Entitlement and Acceptance Form which accompanies the printed copy of this Prospectus to be mailed to Eligible Shareholders with registered addresses in Australia and New Zealand on or around 14 October 2010.

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CORPORATE DIRECTORY

Directors

Anthony Short Managing Director Kip Plankinton Non-Executive Director Gordon Sklenka Non-Executive Director

Company Secretary

David Ballantyne

Registered Office

Lawyers

Hardy Bowen Ord Street West Perth 6005 Western Australia

Auditor

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street Subiaco 6008 Western Australia

Suite 4, 16 Ord Street West Perth 6005 Western Australia

USA Office

2401 Fountain View, Suite 416 Houston, TX 77057 United States of America

Share Registry

Advanced Share Registry Services Pty Ltd 150 Stirling Highway Nedlands 6009 Western Australia

ASX Code: AVD

Website: www.advanceenergyltd.com.au

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PROPOSED TIMETABLE

Appendix 3B given to ASX	23 September 2010
Lodgement of Prospectus with ASIC and provision of copies to ASX	28 September 2010
Company sends letter to Shareholders containing information required by Appendix 3B	29 September 2010
Existing Shares quoted on an "ex" basis	6 October 2010
Record date for determining entitlements	12 October 2010
Prospectus and Entitlement and Acceptance Form despatched to Eligible Shareholders	14 October 2010
Announce to ASX that Prospectus has been sent to Eligible Shareholders	14 October 2010
Closing Date	28 October 2010
Listed Options quoted on a deferred settlement basis	29 October 2010
Anticipated date for allotment and issue of the Listed Options	1 November 2010
Notify ASX of under-subscriptions	3 November 2010
Anticipated date for despatch of holder statements (and last day for the Company to confirm to ASX all information required by Appendix 3B)	4 November 2010
Anticipated date of commencement of Listed Options trading	5 November 2010

This timetable is indicative only and subject to change. Subject to the Listing Rules, the Directors reserve the right to vary these dates, including the Closing Date for the Offer, without prior notice. Any extension of the Closing Date will have a consequential effect on the anticipated date for allotment and issue of the Listed Options. The Directors also reserve the right not to proceed with the whole or part of the Rights Issue at any time prior to allotment. In that event, the relevant Application Monies will be returned without interest.

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TABLE OF CONTENTS

	TABLE OF CONTENTS
Section	Page No
1.	Details of the Offer ............................................................................................ 2
2.	Effect of the Offer .............................................................................................. 6
3.	Action required by Shareholders .................................................................... 9
4.	Risk factors ..................................................................................................... 10
5.	Additional information .................................................................................... 18
6.	Directors' Statement and Consent ................................................................ 28
7.	Glossary of Terms .......................................................................................... 29

1. Details of the Offer

1.1 The Offer

The Offer under this Prospectus is a non-renounceable pro-rata offer to Eligible Shareholders on the basis of 14 Listed Options for every 15 Shares held on the Record Date at an issue price of $0.001 (0.1 cent) per Listed Option ( Offer ).

The Listed Options have an expiry date of 31 August 2012 and an exercise price of $0.03 (3 cents).

At the date of this Prospectus, the Company has 217,426,895 Shares, 14,100,000 Unlisted Options and 9 Convertible Performance Shares on issue. The Company also has on issue 11,925,000 Convertible Notes with a combined face value of $11,925,000.

On the basis that no Unlisted Options, Convertible Performance Shares or Convertible Notes are exercised or converted prior to the Record Date, the Offer is for up to 202,931,768 Listed Options.

Where the determination of the Entitlement of any Eligible Shareholder results in a fraction of an Listed Option, such fraction will be rounded down to the nearest whole Listed Option.

Refer to Section 5.1 for a summary of the terms and conditions attaching to the Listed Options and Section 5.2 for a summary of the rights attaching to the underlying Shares.

1.2

Purpose of the Offer

Completion of the Offer will result in an increase in cash in hand of approximately $202,932 (before the payment of costs associated with the Offer).

Funds raised under the Offer are proposed to be expended as follows:

Description of Cash Outflows	Offer
1. Working capital	$181,434
2. Costs of the Offer	$21,498
Total funds raised under this Offer	$202,932

1.3 Opening and Closing Dates

The Company will accept Entitlement and Acceptance Forms from the Record Date for determining Eligible Shareholders’ Entitlements under the Offer until 5.00pm WST on the Closing Date or such other date as the Directors in their absolute discretion shall determine, subject to the requirements of the Listing Rules.

1.4 Underwriting and sub-underwriting of Offer

The Offer is fully underwritten by Glory Run Pty Ltd ( Glory Run ) Glory Run will be paid a fee of 6% of the funds raised under the Offer. The material terms of the Underwriting Agreement are set out in section 5.3.

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Glory Run is a wholly-owned subsidiary of Odin Energy Ltd ( Odin ). Glory Run and Odin are Shareholders of the Company and, as at the date of this Prospectus, collectively hold a relevant interest in 10.09% of the voting Shares in the Company.

Mr Alex Bajada, who was chairman of the Company until 21 June 2010, is a Director of both Glory Run and Odin.

Odin and its Associates who are currently Shareholders have confirmed to the Company that they intend to take up all of their Entitlements as Eligible Shareholders with respect to their collective holding of 21,735,029 Shares.

In the event that no Eligible Shareholders subscribe for Listed Options pursuant to the Offer and Glory Run is required to fulfil its underwriting commitments for the entire Offer, Glory Run would be issued and 202,931,768 Listed Options. In the event this occurs, with its current shareholding of 21,735,029 Shares, Glory Run would, on a fully-diluted basis, hold 51.7% of the Shares and Options (Listed and Unlisted) in the Company. However, in order to exercise all of these Listed Options, Glory Run would be required to pay a total of $6,087,953 ($0.03 per Listed Option).

1.5

Risks of the Offer

An investment in Listed Options and the underlying Shares should be regarded as speculative. In addition to the general risks applicable to all investments in listed securities, there are specific risks associated with an investment in the Company which are set out in Section 4.

1.6 Non-renounceable offer

The rights to Listed Options under the Offer are non-renounceable. Accordingly, there will be no trading of Entitlements on ASX and you may not dispose of your Entitlement to subscribe for Listed Options to another party. If you do not take up your Entitlement under the Offer by the Closing Date, the Offer to you will lapse.

1.7 Entitlement and Acceptance Forms

Acceptance of a completed Entitlement and Acceptance Form by the Company creates a legally binding contract between the Applicant and the Company for the number of Listed Options accepted by the Company. The Entitlement and Acceptance Form does not need to be signed to be a binding acceptance of Listed Options.

If the Entitlement and Acceptance Form is not completed correctly it may still be treated as valid. The Directors’ decision as to whether to treat the acceptance as valid and how to construe, amend or complete the Entitlement and Acceptance Form is final.

1.8 Issue and dispatch

Listed Options under the Offer are expected to be issued, and security holder statements dispatched, on or before the date in the proposed timetable in this Prospectus.

It is the responsibility of Applicants to determine their allocation prior to trading in the Listed Options. Applicants who sell Listed Options before they receive their holding statements do so at their own risk.

1.9 Application Monies held on trust

All Application Monies received for the Listed Options will be held on trust in a bank account maintained solely for the purpose of depositing Application Monies received

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pursuant to this Prospectus until the Listed Options are issued. All Application Monies will be returned (without interest) if the Listed Options are not issued.

1.10

ASX quotation

Application has been made to ASX for official quotation of the Listed Options. If permission is not granted by ASX for the official quotation of the Listed Options offered by this Prospectus within 3 months after the date of this Prospectus (or such period as the ASX allows), the Company will repay, as soon as practicable, without interest, all Application Monies received pursuant to this Prospectus.

1.11

CHESS

The Company participates in the Clearing House Electronic Subregister System, known as CHESS. ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532 ( ASTC ), a wholly owned subsidiary of ASX, operates CHESS in accordance with the Listing Rules and the Securities Clearing House Business Rules.

Under CHESS, Applicants will not receive a certificate but will receive a statement of their holding of Listed Options.

If you are broker sponsored, ASTC will send you a CHESS statement.

The CHESS statement will set out the number of Listed Options issued under this Prospectus, provide details of your holder identification number, the participant identification number of the sponsor and the terms and conditions applicable to the Shares.

If you are registered on the Issuer Sponsored subregister, your statement will be dispatched by Advanced Share Registry Services and will contain the number of Listed Options issued to you under this Prospectus and your security holder reference number.

A CHESS statement or Issuer Sponsored statement will routinely be sent to Listed Optionholders at the end of any calendar month during which the balance of their Listed Optionholding changes. Listed Optionholders may request a statement at any other time; however, a charge may be made for additional statements.

1.12 Residents Outside Australia and New Zealand

The Offer is not being extended to any shareholders whose registered address is outside Australia or New Zealand. The Company is of the view that it is unreasonable to make the Offer to shareholders outside Australia and New Zealand, having regard to:

• the number of those Shareholders;

• the number and value of Listed Options to be offered to those persons; and

• the cost of complying with overseas legal requirements.

The Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer other than for shareholders in Australia and New Zealand. The Company is not required to make offers under the Prospectus to Shareholders other than in Australia and New Zealand. Where the Prospectus has been dispatched to Shareholders domiciled outside Australia or New Zealand and where the country's Shares code or legislation prohibits or restricts in any way the making of the offers contemplated by the Prospectus, the Prospectus is provided for information purposes only.

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1.13 Taxation implications

The Directors do not consider it appropriate to give Shareholders advice regarding the taxation consequences of subscribing for Listed Options under this Prospectus.

The Company, its advisers and its officers do not accept any responsibility or liability for any such taxation consequences to Shareholders. As a result, Shareholders should consult their professional tax adviser in connection with subscribing for Listed Options under this Prospectus.

1.14

Major activities and financial information

A summary of the major activities and financial information relating to the Company for the six months ending 30 June 2010 is set out in the half year report of the Company lodged with ASX on 30 August 2010 a copy of which is available on the Company's website at www.advanceenergyltd.com.au.

The Company's continuous disclosure notices (i.e. ASX announcements) since 30 June 2010 are listed in Section 5.6.

Copies of these documents are available free of charge from the Company. Directors strongly recommend that Shareholders and potential investors review these and all other announcements prior to deciding whether or not to participate in the Offer.

1.15

Privacy

The Company collects information about each Applicant provided on an Entitlement and Acceptance Form for the purposes of processing the Acceptance and, if the Acceptance is successful, to administer the Applicant’s security holding in the Company.

By submitting an Entitlement and Acceptance Form, each Applicant agrees that the Company may use the information provided by an Applicant on the Entitlement and Acceptance Form for the purposes set out in this privacy disclosure statement and may disclose it for those purposes to the share registry, the Company’s related bodies corporate, agents, contractors and third party service providers, including mailing houses and professional advisers, and to ASX and regulatory authorities.

If you do not provide the information required on the Entitlement and Acceptance Form, the Company may not be able to accept or process your Acceptance.

An Applicant has an Entitlement to gain access to the information that the Company holds about that person subject to certain exemptions under law. A fee may be charged for access. Access requests must be made in writing to the Company’s registered office.

1.16 Enquiries concerning Prospectus

Enquiries relating to this Prospectus should be directed to the Company Secretary by telephone on 08 9486 1122.

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2. Effect of the Offer

2.1 Capital structure on completion of the Offer

	Balance at Date of the prospectus	To be issued **under the Offer **	Balance After the **Offer **
Shares	217,426,895		217,426,895
Unlisted Options	14,100,000(1)		14,100,000
Listed Options	-	202,931,768 (4)	202,931,768
Convertible Performance Shares	9(2)		9
Convertible Notes	11,925,000 (3)		11,925,000

(1) 13,850,000 Unlisted Options exercisable at $0.25 per Option by 31/12/2010. 250,000 Unlisted Options exercisable at $0.40 per Option by 31/12/2010.

(2) Each Converting Preference Share (CPS) converts into 1,000,000 Shares as follows:

Class	Number Issued	Milestone
Class B	5	Upon achieving production of 500 Barrels of Oil Equivalent per Day (BOEPD)
Class C	2	Upon achieving production of 1,000 BOEPD
Class D	2	Upon achieving production of 1,500 BOEPD

(3) Convertible Notes terms are as follows:

Class	Number Issued	Face Value $	Maturity	Conversion Terms	Coupon
Unlisted Convertible Notes	250,000 5,000,000	250,000 5,000,000	21 January 2011 28 September 2012	Convertible at greater of $0.08 or 70% of volume weighted average price (VWAP) of Shares 30 days before conversion	12% payable quarterly
Listed Convertible Notes	6,675,000	$6,675,000	31 December 2014	Convertible at greater of $0.08 or 85% of volume weighted average price (VWAP) of Shares 30 days before conversion	9.5% payable quarterly

(4) The maximum number of Listed Options to be issued under the Offer assumes that no Unlisted Options, CPSs or Convertible Notes are exercised or converted before the Record Date.

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2.2 Pro forma statement of financial position

	Reviewed by	Unaudited	Pro-forma
	Auditor	28 September	Balance Sheet
	30 June 2010	2010
	$000	$000	$000
CURRENT ASSETS
Cash and cash equivalents	351	454	635
Trade and other receivables	372	372	372
Other financial assets	-	-	-
TOTAL CURRENT ASSETS	723	826	1,007
NON-CURRENT ASSETS
Property plant and equipment	379	379	379
Oil and gas properties	20,460	20,460	20,460
Other financial assets	151	151	151
TOTAL NON-CURRENT ASSETS	20,990	20,990	20,990
TOTAL ASSETS	21,713	21,816	21,997
CURRENT LIABILITIES
Trade and other payables	789	789	789
Provisions	164	164	164
Interest bearing liabilities	4,435	4,435	4,435
Other financial liabilities	-	-	-
TOTAL CURRENT LIABILITIES	5,388	5,388	5,388
NON-CURRENT LIABILITIES
Deferred tax liability	-	-	-
Interest bearing liabilities	11,741	11,741	11,741
TOTAL NON-CURRENT	11,741	11,741	11,741
LIABILITIES
TOTAL LIABILITIES	17,129	17,129	17,129
NET ASSETS	4,584	4,687	4,868
EQUITY
Contributed equity	15,777	16,160	16,363
Reserves	1,609	1,609	1,609
Accumulated losses	(12,802)	(13,082)	(13,104)
TOTAL EQUITY	4,584	4,687	4,868

Basis of Preparation

The pro forma statement of financial position has been prepared in accordance with the draft ASIC Guide to Disclosing Pro Forma Financial Information (issued July 2005).

The pro forma balance sheets have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business.

The pro forma statement of financial position is based on the statement of financial position as at 30 June 2010 that has then been adjusted to reflect the following material transactions:

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Subsequent Events

• (a) Proceeds from the issue of 38,309,173 Shares at $0.01 per share to raise $383,092; and

• (b) Net reduction in cash of $280,000 as a result of:

• (i) Revenues from the sale of oil and gas;

• (ii) Lease operating expenses;

• (iii) Severance taxes;

• (iv) US Interest expenses;

• (v) US General and Administrative costs; and

• (vi) Australian corporate overheads and expenses.

Pro Forma Adjustments

Proforma Adjustment	Allocation ($)
Cash	202,932
Cash	(21,616)
Equity	201,065
Retained Earnings	(21,616)

2.3 Market price of Shares

The highest and lowest market sale prices of the Company’s Shares on ASX during the 3 months immediately preceding the date of lodgement of this Prospectus with the ASIC and the respective dates of those sales were:

Highest: $0.015 per Share on 19 July 2010 Lowest: $0.007 per Share on 25 June 2010

The latest available market sale price of the Company’s Shares on ASX prior to the date of lodgement of this Prospectus with the ASIC was $0.014 per Share on 28 September 2010.

2.4 Dividend policy

The Directors are not able to say when and if dividends will be paid in the future, as the payment of any dividends will depend on the future profitability, financial position and cash requirements of the Company.

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3. Action required by Shareholders

3.1 Acceptance of Listed Options under this Prospectus

Your entitlement to participate in the Offer will be determined on the Record Date. The entitlement of Eligible Shareholders receiving this Prospectus is shown on the Entitlement and Acceptance form sent to Eligible Shareholders with this Prospectus.

Should you wish to accept all of your Entitlement to Listed Options, then applications for Listed Options under this Prospectus must be made on the Entitlement and Acceptance Form which accompanies this Prospectus, in accordance with the instructions referred to in this Prospectus and on the Entitlement and Acceptance Form. Please read the instructions carefully.

Should you wish to only take up part of your Entitlement, then applications for Listed Options under this Prospectus must be made on the Entitlement and Acceptance Form which accompanies this Prospectus in accordance with the instructions referred to in this Prospectus and on the Entitlement and Acceptance Form. Please read the instructions carefully.

Please complete the Entitlement and Acceptance Form by filling in the details in the spaces provided and attach a cheque for the amount indicated on the Entitlement and Acceptance Form.

Completed Entitlement and Acceptance Forms must be accompanied by a cheque in Australian dollars, crossed "Not Negotiable" and made payable to "Advance Energy Limited Share Issue Account" and lodged at any time after the issue of this Prospectus and on or before the Closing Date at the Company’s share registry (by delivery or by post) at:

By delivery Advanced Share Registry Services Pty Ltd 150 Stirling Highway Nedlands WA 6009 By post Advanced Share Registry Services Pty Ltd PO Box 1156 Nedlands WA 6909

3.2 Entitlements not taken up

If you do not wish to accept any of your Entitlement, you are not obliged to do anything.

The number of Shares you hold and the entitlement attaching to those Shares will not be affected should you choose not to accept any part of your Entitlement.

3.3 Enquiries concerning your Entitlement

If you have any queries concerning your Entitlement please contact Advanced Share Registry Services, 150 Stirling Highway Nedlands, on Telephone: +61 8 9389 8033

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4. Risk factors

Activities in the Company and its controlled entities, as in any business, are subject to risks, which may impact on the Company’s future performance. The Company and its controlled entities have implemented appropriate strategies, actions, systems and safeguards for known risks, however, some are outside its control.

The Directors consider that the following summary, which is not exhaustive, represents some of the major risk factors which Shareholders need to be aware of in evaluating the Company’s business and risks of increasing your investment in the Company. Shareholders should carefully consider the following factors in addition to the other information presented in this Prospectus.

The principal risks include, but are not limited to, the following:

4.1 Risks specific to Advance Energy

(a) Funding Ongoing Operations

The Company currently has $11.925m in convertible notes (listed and unlisted) and US$3.0m in secured borrowings. The Company's revenue from oil and gas averaged US$245,000 per month in the first eight month of 2010 (approximately $330,000 as at the date of this Prospectus). Monthly expenditure includes approximately $120,000 in interest costs.

The ability of the Company to continue as a going concern is dependent on its ability to trade profitably, secure additional funding through either the issue of further shares and/or options and convertible notes or entering into negotiations with third parties regarding the sale and/or farm out of assets of the Company, or a combination thereof.

As announced on 24[th] August 2010 and 16[th] September 2010, the Company intends to reduce debt by the sale of part or all of its assets and has entered into marketing agreements with PLS Inc to facilitate the sale of assets. The Board cannot forecast what offers it may receive for any or all of the assets and will need to consider a range of factors including but not limited to the cash flow from remaining production, the cash available for developing remaining properties and increasing realisable value and the maturity dates for convertible notes in deciding whether to accept any offer for the sale of its assets.

(b) Repayment of Convertible Notes

Section 2.1 describes the maturity dates of existing unlisted and listed convertible notes. In the event that all Noteholders elected to redeem their convertible notes rather than convert them, the Company would need to have sufficient cash to meet these events. Cash to redeem notes can be obtained from several sources including but not limited to equity issues, retained earnings and the sale and/or monetisation of oil and gas properties. The ability to successfully raise funds will depend on a variety of factors including but not limited to overall economic conditions, commodity prices, the established production and proved reserves of oil and gas properties and the prevailing market conditions in the USA.

(c) Currency Risk

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The Company's main business operations are based in the United States. As a result, revenues, cash inflows, expenses, capital expenditure and commitments will be primarily denominated in United States dollars.

To comply with Australian reporting requirements for the Company, the income, expenditure and cash flows of its subsidiary will be converted to and accounted for in Australian dollars. This will result in the income, expenditure and cash flows of the Company being exposed to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar, as determined in international markets.

(d) Reliance on Key Personnel and consultants

The Company is reliant on a small number of key personnel and consultants. The loss of one or more of these key contributors could have an adverse impact on the operations and success of the business.

It may be particularly difficult for the Company to attract and retain suitably qualified and experienced people, given the current high demand in the industry and relatively small size of the Company, compared to other industry participants.

(e) Third Party Risks

The operations of the Company require the involvement of a number of third parties, including suppliers, contractors and customers. Financial failure, default or contractual non-compliance on the part of such third parties may have a material impact on the Company’s operations and performance. It is not possible for the Company to predict or protect itself against all such risks.

(f) Minority Interest in Projects

The Company has a minority interest in certain of its projects and does not act as operator. There exists a risk that as a minority participant in the projects, the Company may have the value of its interest in its projects reduced by actions taken by majority holders or the operators. There may be few legal impediments preventing majority holders and operators from exploiting their positions as controlling joint venture participants to the detriment of minority participants in the Projects.

Should majority interest holders not act in the best interests of Advance Energy as a minority holder in any of its projects, this may have a material adverse effect on the value of the Company’s holding in the project, which may in turn have a material adverse effect on the Company’s profitability and/or the market price of the Company’s securities.

(g) New Projects and Acquisitions

The Company may consider acquisitions that may add value to the Company. The acquisition of new business opportunities (whether completed or not) may require the payment of monies (as a deposit and/or exclusivity fee) after only limited due diligence and prior to the completion of comprehensive due diligence. There can be no guarantee that any proposed acquisition will be completed or be successful. If the proposed acquisition is not completed, monies already advanced may not be recoverable, which may have a material adverse effect on the Company.

If an acquisition is completed, the Board will need to reassess, at that time, the funding allocated to current projects and new projects, which may result in the

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Company reallocating funds from other projects and/or the raising of additional capital (if available). Furthermore, notwithstanding that an acquisition may proceed upon the completion of due diligence, the usual risks associated with oil and gas activities will remain.

4.2 Oil and Gas Industry Risks

The Company operates in the oil and gas sector and is subject to risks relating to exploration, drilling and production of oil and gas which may not generally be associated with other sectors.

The exploitation of oil and gas reserves and successful project development is considered to be of a high risk nature and contains inherent risks including but not limited to:

(a) Acquisition Risks

Prior to any acquisition, the Company will conduct due diligence on the projects to satisfy themselves in relation to the potential to successfully achieve an economically recoverable hydrocarbon reserve. There can be no guarantee, however, that such a reserve will result from such an acquisition and the Company may have expended resources which do not result in discoveries being economically viable.

(b) Exploration and Development Risks

Oil and gas exploration and development involves significant risks which only occasionally provide high rewards. In addition to the normal competition for prospective ground, and the high costs of discovery and development of an economic deposit, factors such as demand for commodities, stock market fluctuations affecting access to new capital, sovereign risk, environmental issues, labour disruption, project financing, foreign currency fluctuations and technical problems all affect the ability of a company to profit from a discovery.

There is no assurance that exploration and development of the Company’s projects, or any other projects that may be acquired in the future, will result in the discovery of an economic oil and gas deposit. Even if an apparently viable deposit is identified, there is no guarantee that it can be profitably exploited.

(c) Drilling Risks

The Company’s drilling operations may be curtailed, delayed or cancelled due to a number of factors including weather conditions, mechanical difficulties, shortage or delays in the delivery of rigs and/or other equipment and compliance with governmental requirements. While drilling may yield some hydrocarbons there can be no guarantee that the discovery will be sufficiently productive to justify commercial development or cover operating costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs.

(d) Operating Risks

Industry operating risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as accidental spills or leakage of petroleum liquids, gas leaks, ruptures or discharges of toxic gasses, the occurrence of any of which could result in substantial losses to the Company due to injury or loss of life, severe damage to or destruction or property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation

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and penalties and suspension of operations. Damages occurring as a result of such risks may give rise to claims against the Company. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of operations of the Company.

(e) Commercialisation of Discoveries

It may not always be possible for the Company to participate in the exploitation of any successful discoveries which may be made in any projects in which the Company has an interest. Such exploitation will involve the need to obtain the necessary licences or clearances from the relevant authorities, which may require conditions to be satisfied and/or the exercise of discretions by such authorities. It may or may not be possible for such conditions to be satisfied. Further, the decision to proceed to further exploitation may require the participation of other companies whose interests and objectives may not be the same as the Company. As described above, such further work may require the Company to meet or commit to financing obligations for which it may not have planned.

(f) Hydrocarbon Reserve Estimates

Hydrocarbon reserve estimates are an expression of judgment based on knowledge, experience and industry practice. Estimates that were valid when made may change significantly when new information becomes available.

In addition, reserve estimates are necessarily imprecise and depend to some extent on interpretations, which may prove inaccurate. Should the Company encounter oil and/or gas deposits or formations different from those predicted by past drilling, sampling and similar examinations, reserve estimates may have to be adjusted and production plans may have to be altered in a way which could adversely affect the Company’s operations.

(g) Competition

The Company will compete with other companies, including major oil companies. Some of these companies have greater financial and other resources than the Company and, as a result, may be in a better position to compete for future business opportunities. Many of the Company’s competitors not only explore for and produce oil and gas, but also carry out refining operations and market petroleum and other products on a worldwide basis. There can be no assurance that the Company can compete effectively with these companies.

(h) Claims by Indigenous Inhabitants

The current and future oil and gas assets of the Company may be subject to land claims by indigenous people. Should this occur, the Company’s ability to conduct exploration and/or mining activities may be affected, which may have a material adverse effect on the Company’s financial performance and the price at which its securities trade.

The Company is not aware of any land claims or potential claims by indigenous people in respect of its exploration activities that could significantly affect its tenure or mining exploration or any future production operations.

• (i) Insurance

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Insurance of all risks associated with oil and gas exploration and production is not always available and, where it is available, the cost may be high. The company will have insurance in place considered appropriate for the Company’s needs. Advance Energy may not be insured against all losses due to either the insurance not being available or due to the premium being excessive in relation to the benefits accruing.

(j) Government Regulation

The Company’s operations are in the oil and gas industry in the USA which is subject to extensive regulation and present operations are subject to regulation by the Texas Railroad Commission. Regulations relating to the exploration for and development, production, gathering and marketing of oil and gas will affect the Company’s operations. Some of the regulations set forth standards for discharge permits for drilling operations, drilling and abandonment bonds or other financial responsibility requirements, reports concerning operations, the spacing of wells, unitisation and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity to conserve supplies of oil and gas.

The Company cannot predict how existing, or future laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will be adopted, or the effect such changes may have on the Company’s business or financial condition.

(k) Environmental and Other Regulatory Requirements

The Company’s operations will be subject to environmental laws, including but not limited to, those governing the management of waste, the protection of water and air quality, the discharge of materials into the environment, and the preservation of natural resources, impact and influence the Company’s operations. If the Company fails to comply with environmental laws regarding the discharge of oil, gas, or other materials into the air, soil or water it may be subject to liabilities to the government and third parties, including civil and criminal penalties.

Existing and possible future environmental legislation, regulations and actions could cause additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted. Before exploration and production activity can commence on any property, the Company must obtain regulatory approvals and there is no assurance that such approvals will be obtained.

The Company has, and may from time to time in the future agree to, indemnify sellers of producing properties against some liabilities for environmental claims associated with these properties.

(l) Hydrocarbon Product Prices

The market price of hydrocarbon products is volatile and cannot be controlled. If the price of hydrocarbons should drop significantly and remain depressed, the economic prospects of the projects which the Company has an interest in could be significantly reduced or rendered uneconomic. There is no assurance that, even if significant quantities of hydrocarbon products are discovered, a profitable market may exist for their sale. Factors beyond the control of the Company may affect the marketability of any commodity discovered. Oil and gas prices have fluctuated widely in recent years. The marketability is also

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affected by numerous other factors beyond the control of the Company, including government regulations relating to royalties, allowable production and importing and exporting of oil and gas and petroleum products, the effect of which cannot be accurately predicted.

(m) Title

The system for obtaining title to oil and gas leases in Texas and generally other areas of the United States that the Company may operate in is complex given that numerous parties may hold the undivided mineral rights to a particular tract of land. Securing the leases to those rights often requires lengthy negotiation with the various parties. In order to independently verify that the parties with whom the Company is dealing are the correct and sole holders of the mineral rights and to analyse the full rights and restrictions applying to the interest held by those parties requires that a company obtain detailed title opinions from appropriately qualified and experienced lawyers. This can be a lengthy and expensive process and the final opinions are often the subject of numerous qualifications. It is therefore customary that such title opinions are not sought until the company proposed to conduct a drilling operation and/or expend significant amounts of money on a particular lease.

The Company has adopted this customary approach and, accordingly, may not have obtained the detailed title opinions on its leases other than those that are currently in production or on which drilling has been proposed in the near future.

As a consequence there may be third parties that hold or claim mineral rights in relation to the leases held by the Company which have not previously been identified.

Further, some of the leases in which the Company has an interest may have a fixed term and be subject to applications for renewal. The renewal of the term of each lease is usually at the discretion of the relevant lessor. If a lease is not renewed or granted, the Company may suffer significant damage through loss of the opportunity to develop and discover any oil or gas resources on that lease.

(n) Land Access

Immediate access to leases cannot in all cases be guaranteed. The Company may, from time to time, be required to seek consent of landholders or other persons or groups with an interest in real property encompassed by the Company’s leases. Compensation may be required to be paid by the Company to land holders in order that the Company may carry out exploration and/or production activities.

(o) Equipment and Personnel Availability

Due to exploration and development activities in the USA, and in Texas particularly, there may be delays in securing drilling rigs or other equipment and personnel required to carry out the Company’s planned activities.

In addition, there may also be upward pressure on costs and mechanical failure may result in delays which may result in significant cost overruns.

Any of these factors may have a material impact on the Company’s profitability and cash flows.

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4.3 General Investment Risks

(a) Securities Investment

There are risks associated with any investment in securities. The prices at which the Company’s Shares and Listed Options trade, may fluctuate in response to a number of factors.

Furthermore, the stock market, and in particular the market for oil and gas exploration companies, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. There can be no guarantee that these trading prices will be sustained. These factors may materially affect the market price of the Shares and Listed Options regardless of the Company’s operational performance.

(b) Share and Listed Option Price Variations

The Listed Options are to be quoted on the ASX, where their price may rise or fall in relation to the issue price. The Listed Options issued under this Prospectus carry no guarantee in respect of profitability, dividends, return of capital, or the price at which they may trade on the ASX. The value of the Listed Options will be determined by the stock market and will be subject to a range of factors beyond the control of the Company, and the Directors and officers of the Company. Such factors include, but are not limited to, the demand for and availability of Listed Options as well as the underlying shares, movements in domestic interest rates, exchange rates, fluctuations in the Australian and international stock markets and general domestic and economic activity. Returns from an investment in the Shares may also depend on general stock market conditions as well as the performance of the Company. There can be no guarantee that an active market in the Shares will develop or that the market price of the Shares will not decline below the issue price.

(c) Regulatory Risks

Changes to legislation in Australia and the USA, including changes to the taxation system, may affect future earnings and the relative attractiveness of investing in the Company. Changes in government policy or statutory changes may affect the Company and the attractiveness of an investment in it.

(d) General Economic Conditions

Economic conditions in Australia, the USA and globally, may affect the performance of the Company. Factors such as currency fluctuations, inflation, interest rates, supply and demand and industrial disruption may have an impact on operating costs and share market prices. The Company’s future possible revenue and its Share and Listed Option prices can be affected by these factors all of which are beyond the control of the Company or its Directors. In addition, the Company’s ability to raise additional capital, should it be required, may be affected.

4.4 Investment speculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may, in the future materially affect the financial performance of the Company and the value of the Listed Options offered under this Prospectus or the underlying Shares. Therefore, the Shares underlying the Listed Options to be issued pursuant to this Prospectus carry no guarantee with respect to the

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payment of dividends, returns of capital or the market value of those Shares. Potential investors should consider that the investment in the Company is speculative and should consult their professional adviser before deciding whether to apply for Listed Options pursuant to this Prospectus.

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5. Additional information

5.1 Terms and Conditions attaching to Listed Options

• (a) Entitlement

The Listed Options entitle the holder to subscribe for one (1) Share upon the exercise of each Listed Option.

• (b) Exercise Price

The Exercise Price of each Listed Option is $0.03.

• (c) Expiry Date

Each Listed Option expires on 31 August 2012

• (d) Exercise Period

The Listed Options are exercisable at any time on or prior to the Expiry Date.

• (e) Notice of Exercise

• The Listed Options may be exercised by notice in writing to the Company and payment of the Exercise Price for each Listed Option being exercised. Any notice of exercise of a Listed Option received by the Company will be deemed to be a notice of the exercise of that Listed Option as at the date of receipt.

• (f) Shares issued on exercise

Shares issued on exercise of the Listed Options rank equally with other issued Shares.

• (g) Quotation of Shares on exercise

Application will be made by the Company to ASX for the official quotation of Shares issued upon the exercise of the Listed Options.

• (h) Timing of issue of Shares

After a Listed Option is validly exercised, the Company must as soon as possible issue the Share and do all such acts matters and things to obtain:

• (i) the grant of quotation for the Share on ASX no later than 5 days from the date of exercise of the Listed Option; and

• (ii) receipt of cleared funds equal to the sum payable on the exercise of the Listed Options.

• (i) Participation in new issues

There are no participation rights or entitlements inherent in the Listed Options and the holder will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Listed Options.

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However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 10 Business Days after the issue is announced. This will give Listed Optionholders the opportunity to exercise their Listed Options prior to the date for determining entitlements to participate in any such issue.

• (j)

• Adjustment for bonus issues of Shares

If the Company makes a bonus issue of Shares or other securities to existing Shareholders (other than an issue in lieu or in satisfaction, of dividends or by way of dividend reinvestment):

• (i) the number of Shares which must be issued on the exercise of a Listed Option will be increased by the number of Shares which the Listed Optionholder would have received if the Listed Optionholder had exercised the Listed Option before the record date for the bonus issue; and

• (ii) no change will be made to the Exercise Price.

• (k) Adjustment for rights issue

If the Company makes an issue of Shares pro rata to existing Shareholders (other than an issue in lieu of in satisfaction of dividends or by way of dividend reinvestment) the Exercise Price of a Listed Option will be reduced according to the following formula:

– New exercise price = O – E [P (S+D)] N+1

• O = the old Exercise Price of the Listed Option.

• E = the number of underlying Shares into which one (1) Listed Option is exercisable.

• P = average market price per Share weighted by reference to volume of the underlying Shares during the 5 trading days ending on the day before the ex rights date or ex entitlements date.

• S = the subscription price of a Share under the pro rata issue.

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

• N = the number of Shares with rights or entitlements that must be held to receive a right to one (1) new Share.

• (i) Adjustments for reorganisation

If there is any reconstruction of the issued share capital of the Company, the rights of the Listed Optionholder may be varied to comply with the Listing Rules which apply to the reconstruction at the time of the reconstruction.

• (l) Adjustments for reorganisation

If there is any reconstruction of the issued share capital of the Company, the rights of the Listed Optionholder may be varied to comply with the Listing Rules which apply to the reconstruction at the time of the reconstruction.

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• (m) Quotation of Listed Options

Application for quotation of the Listed Options will be made by the Company.

• (n) Listed Options transferable

The Listed Options are transferable.

• (o) Lodgement Instructions

Cheques shall be in Australian currency made payable to the Company and crossed "Not Negotiable". The application for Shares on exercise of the Listed Options with the appropriate remittance should be lodged at the Company's share registry.

5.2 Rights Attaching to Shares

A summary of the rights attaching to Shares in the Company is set out below. This summary is qualified by the full terms of the Constitution (a full copy of the Constitution is available from the Company on request free of charge) and does not purport to be exhaustive or to constitute a definitive statement of the rights and liabilities of Shareholders. These rights and liabilities can involve complex questions of law arising from an interaction of the Constitution with statutory and common law requirements. For a Shareholder to obtain a definitive assessment of the rights and liabilities which attach to Shares in any specific circumstances, the Shareholder should seek legal advice.

(a) Voting

At a general meeting, on a show of hands every Shareholder present in person has one vote. At the taking of a poll, every Shareholder present in person or by proxy and whose shares are fully paid has one vote for each of his or her Shares. On a poll, the holder of a partly paid share has a fraction of a vote with respect to the share. The fraction is equivalent to the proportion which the amount paid (not credited) bears to the total amount paid and payable (excluding amounts credited).

(b) General meetings

Each Shareholder is entitled to receive notice of, attend and vote at general meetings of the Company and to receive all notices, reports and financial reports and other documents required to be sent to Shareholders under the Constitution of the Company, the Corporations Act and the Listing Rules.

(c) Dividends

The Directors may pay to Shareholders any interim and final dividends as, in the Directors' judgement, the financial position of the Company justifies. The Directors may fix the amount, the record date for determining eligibility and the method of payment. All dividends must be paid to the Shareholders in proportion to the number and the amount paid on the shares held.

(d) Transfer of Shares

Generally, all Shares in the Company are freely transferable subject to the procedural requirements of the Constitution, and to the provisions of the Corporations Act, the Listing Rules and the ASTC Settlement Rules. The Directors may decline to register an instrument of transfer received where the transfer is not in registrable form or where refusal is permitted under the Listing Rules or the ASTC Settlement Rules. If the Directors decline to register a

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transfer the Company must give reasons for the refusal. The Directors must decline to register a transfer when required by the Corporations Act, the Listing Rules or the ASTC Settlement Rules.

(e) Variation of rights

The Company may only modify or vary the rights attaching to any Shares with the prior approval by a special resolution of the holders of Shares, or with the written consent of the holders of at least three-fourths of the issued Shares.

(f) Directors

The minimum number of Directors is three and the maximum is ten. Currently, there are three Directors. Directors must retire on a rotational basis so that one-third of Directors must retire at each annual general meeting. Any other Director who has been in office for three or more years must also retire. A retiring Director is eligible for re-election. The Directors may appoint a Director either in addition to existing Directors or to fill a casual vacancy, who then holds office until the next annual general meeting.

(g) Decisions of Directors

Questions arising at a meeting of Directors are decided by a majority of votes. In the case of an equality of votes on a resolution, the Chairman has a casting vote.

(h) Issue of further Shares

Subject to the Constitution, the Corporations Act 2001 and the Listing Rules, the Directors may issue, or grant options in respect of, Shares to such persons on such terms as they think fit. In particular, the Directors may issue preference shares, including redeemable preference shares, and may issue shares with preferred, deferred or special rights or restrictions in relation to dividends, voting, return of capital and participation in surplus on winding up.

(i) Officers' indemnity

To the full extent permitted by the law and to the extent not covered by insurance, the Company must indemnify each officer of the Company against all losses and liabilities incurred by the person as an officer of the Company, including costs and expenses incurred in defending an action for liability incurred by that person.

(j) Alteration to the Constitution

The Constitution can only be amended by a special resolution passed by at least 75% of Shareholders present and voting at a general meeting. At least 28 days' notice of the intention to propose the special resolution must be given.

5.3 Underwriting Agreement

The Company has entered into the underwriting agreement with Glory Run Pty Ltd (the Underwriter ) to fully underwrite the Offer ( Underwriting Agreement ). The key terms of the Underwriting Agreement are below.

The Underwriter will be paid by the Company an underwriting fee of 6% of the underwritten amount. The Company must pay the Underwriter's reasonable costs and expenses of underwriting the Offer.

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If any of the following termination events occur the Underwriter may terminate the underwriting agreement:

• (a) the Underwriter reasonably forms the view that there is a material omission from the Prospectus, or that the Prospectus contains a statement that is misleading or deceptive;

• (b) the Underwriter reasonably forms the view that any projection or forecast in the Prospectus becomes, to a material extent, incapable of being met, or is unlikely to be met;

• (c) the All Ordinaries Index of ASX as determined at close of trading falls to a level that is 90% or less of the level at the close of trading on the execution date of the Underwriting Agreement;

• (d) the approval of ASX to official quotation of the Shares being refused or not being granted;

• (e) the Company or any officer of the Company contravening in any matter of substance any provision of its Constitution or any statute;

• (f) the Company altering or announcing any intention to alter its capital structure or its Constitution without the prior consent of the Underwriter;

• (g) the Company being wound up;

• (h) any meeting being called to consider a resolution for the winding up of the Company;

• (i) any proceedings being commenced against the Company for its winding up;

• (j) the Company being placed under official management or an inspector being appointed with respect to it or a receiver or manager of any of its assets being appointed pursuant to the Corporations Act;

• (k) the Company committing any material breach of the Underwriting Agreement or failing to carry out any of its material obligations pursuant to the Underwriting Agreement;

• (l) any act of God, war, revolution, or any other unlawful act against public order or authority, an industrial dispute, a governmental restraining, or any other event which is not within the control of the parties, lasting in excess of 2 weeks occurs;

• (m) the occurrence of any calamity or crisis or any change in financial, political or economic conditions or currency exchange rates or controls in Australia or any restriction or limitation on the nature or basis of trading of equities on ASX;

• (n) any material adverse change or disruption occurs in the existing financial markets, political or economic conditions of Australia, Japan, the United Kingdom, the United States of America or the international financial markets or any material adverse change occurs in national or international political, financial, economic conditions, in each case the effect of which is that, in the reasonable opinion of the Underwriter, it is impracticable to market the Offer or to enforce contracts to issue and allot or sub-underwrite the securities pursuant to this Prospectus or that the success of the Offer is likely to be adversely affected;

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• (o) any director of the Company being charged with an indictable offence relating to any financial or corporate matter;

• (p) any law or regulation being introduced into the Parliament of the Commonwealth of Australia or any of the legislatures of the States or Territories of Australia or any prospective law or other measure being passed or becoming effective, having the effect of prohibiting, restricting or regulating the principal business of the Company, the Offer, or the operation of stock markets generally; or

• (q) there is any material breach of the covenants contained in the Underwriting Agreement.

Nothing above prejudices or nullifies any claims for damages that the Underwriter may have against the Company for or arising out of any breach of covenant or failure by the Company to observe or perform the obligations on its part contained in the Underwriting Agreement.

The Company indemnifies the Underwriter and its officers and employees against all loss arising in any way out of any breach of law (whether by act or omission) in relation to the Offer or the Prospectus or issue or out of any announcement, advertising, publicity or other promotion made or distributed by the Company or on its behalf in relation to the Offer or the Prospectus, and such indemnity extends to all reasonable costs and expenses (including reasonable legal costs on a frill indemnity basis) in connection with them.

The indemnity in the Underwriting Agreement does not extend to an indemnity against any loss arising out of the wilful misconduct, fraud or negligence of the Underwriter.

5.4 Directors' interests in Company Shares

The Directors or their nominees currently each hold Shares as follows:

Director	No. of Shares	No. of Unlisted Options	No. of CPS
Anthony Short	25,792,435	4,000,000	3
Gordon Sklenka	10,927,499	2,000,000	1
Kip Plankinton	-	-	-

5.5 Company is a disclosing entity

The Company is a disclosing entity under the Corporations Act. It is subject to regular reporting and disclosure obligations under both the Corporations Act and the Listing Rules. These obligations require the Company to notify ASX of information about specific events and matters as they arise for the purpose of ASX making the information available to the stock market conducted by ASX. In particular, the Company has an obligation under the Listing Rules (subject to certain limited exceptions), to notify ASX once it is, or becomes aware of information concerning the Company which a reasonable person would expect to have a material effect on the price or value of the Company's Shares or Options.

The Company is also required to prepare and lodge with ASIC yearly and half-yearly financial statements accompanied by a Directors' statement and report, and an audit review or report.

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Copies of documents lodged with the ASIC in relation to the Company may be obtained from, or inspected at, an ASIC office (see Section 5.6 below).

5.6 Copies of documents

Copies of documents lodged by the Company in connection with its reporting and disclosure obligations may be obtained from, or inspected at, an office of ASIC. The Company will provide free of charge to any person who requests it during the period of the Offer, a copy of:

• (a) the Annual Report of the Company for the year ended 31 December 2009, being the last financial year for which an annual financial report was lodged with the ASIC on 31 March 2010 in relation to the Company before the issue of this Prospectus;

• (b) the Half-Yearly Report and Accounts for the period ending 30 June 2010 as lodged with ASX on 27 August 2010;

• (c) the following continuous disclosure notices given by the Company to notify ASX of information relating to the Company since the Company lodged its most recent Half-Yearly Report for the period ended 30 June 2010 and before the date of issue of this Prospectus are as follows:

Date Lodged	Subject of Announcement
23/09/2010	Appendix 3B
16/09/2010	Market Update
01/09/2010	Option Rights Issue
01/09/2010	Appendix 4D Half Year 30 June 2010
27/08/2010	Interim Report 30 June 2010
24/08/2010	Market Update
12/09/2010	Additional Shortfall Placement
30/07/2010	Quarterly Activities and Cashflow Report 30 June 2012
26/07/2010	Amended Appendix 3Y
23/07/2010	Change of Director’s Interest
21/07/2010	Rights Issue Entitlement Uptake and Shortfall
15/07/2010	Response to ASX Query – Director’s Interest Notice
09/07/2010	Change of Director’s Interest Notice

The following documents are available for inspection throughout the application period of this Prospectus during normal business hours at the registered office of the Company at Suite 4, 16 Ord Street, West Perth, Western Australia:

• (a) this Prospectus;

• (b) the Constitution; and

• (c) the consents referred to in Section 5.13 and the consents provided by the Directors to the issue of this Prospectus.

5.7 Information excluded from continuous disclosure notices

There is no information which has been excluded from a continuous disclosure notice in accordance with the Listing Rules, and which is required to be set out in this Prospectus.

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5.8 Determination by the ASIC

The ASIC has not made a determination which would prevent the Company from relying on section 713 of the Corporations Act in issuing the Listed Options under this Prospectus.

5.9 Directors' interests

Except as disclosed in this Prospectus, no Director or proposed director, and no firm in which a Director or proposed director is a partner:

• (a) has any interest nor has had any interest in the last two years prior to the date of this Prospectus in the formation or promotion of the Company, the Offer or property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or

• (b) has been paid or given or will be paid or given any amount or benefit to induce him or her to become, or to qualify as, a Director, or otherwise for services rendered by him or her in connection with the formation or promotion of the Company or the Offer.

5.10 Directors remuneration

The following table shows the total remuneration, including Directors’ fees, paid to both Directors and former Directors in since 1 January 2008. Fees paid for 2010 are up to 30 June 2010.

Director	Director Fees, Consulting $	Bonus $	Total $
Mr Alex Bajada(1) 2010 2009 2008	13,000 54,500 54,500		13,000 54,500 54,500
Mr Anthony Short 2010 2009 2008	55,000 220,000 220,000		55,000 220,000 220,000
Mr Gordon Sklenka 2010 2009 2008	25,000 100,728 100,728		25,000 100,728 100,728
Mr Paul Berresford(2) 2010 2009 2008	12,500 8,667 -		12,500 8,667 -
Mr Kip Plankinton(3) 2010 2009 2008	11,363 49,904 -		11,363 49,904 -

(1) Ceased to be a Director 21 June 2010

(2) Appointed 14 September 2009. Ceased to be a Director 31 May 2010

(2) Appointed 9 April 2009

5.11 Interests of other persons

Except as disclosed in this Prospectus, the Underwriter, promoter and all other persons named in this Prospectus as performing a function in a professional, advisory or other

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capacity in connection with the preparation or distribution of this Prospectus do not have, and have not had in the 2 years before the date of this Prospectus, any interests in:

• (a) the formation or promotion of the Company;

• (b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or

• (c) the Offer,

and no amounts have been paid or agreed to be paid (in cash or Shares or otherwise) and no other benefit has been given or agreed to be given to any of those persons for services provided by those persons in connection with the formation or promotion of the Company or the Offer.

Glory Run Pty Ltd is acting as Underwriter to the Offer and will receive fees set out in Section 5.3. In addition, Glory Run Pty Ltd and its Associates currently hold a relevant interest in 21,735,029 Shares.

Hardy Bowen will be paid approximately $5,000 (plus GST) in fees for legal services as at the date of this Prospectus in connection with the Offer. In addition, Hardy Bowen has been paid or is entitled to be paid approximately $88,773.82 for legal services provided to the Company in the period of 2 years prior to the date of this Prospectus.

5.12 Expenses of Offer

The estimated expenses of the Offer are as follows:

ASIC Lodgement fee ASX quotation fee Underwriter Fees Legal and preparation expenses Printing, mailing and other expenses Total	Offer $ 2,068 1,930 12,000 5,000 500
	21,498

These expenses have been paid or will be payable by the Company.

5.13 Consents

The following consents have been given in accordance with the Corporations Act and have not been withdrawn as at the date of lodgement of this Prospectus with the ASIC:

• (a) Hardy Bowen have given, and have not withdrawn, their written consent to being named in this Prospectus as solicitors to the Company. Hardy Bowen have had no involvement in the preparation of any part of this Prospectus other than being named as solicitors of the Company. Hardy Bowen have not authorised or caused the issue of this Prospectus or the making of the Offer. Hardy Bowen make no representation regarding, and to the extent permitted by law excludes any responsibility for, any statements in or omissions from any part of this Prospectus.

• (b) Advanced Share Registry Services has given and, as at the date hereof, has not withdrawn, its written consent to be named as share registrar in the form

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and context in which it is named. Advanced Share Registry Services has had no involvement in the preparation of any part of this Prospectus other than being named as share registrar of the Company. Advanced Share Registry Services has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of this Prospectus.

• (c) Glory Run Pty Ltd has given and, as at the date hereof, has not withdrawn, its written consent to be named as an underwriter of the Offer.

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6. Directors' Statement and Consent

This Prospectus is issued by Advance Energy Limited. The issue of this Prospectus has been authorised by a resolution of the Directors of the Company.

In accordance with section 720 of the Corporations Act, each of the Directors of the Company has consented to the lodgement of this Prospectus with ASIC pursuant to section 718 of the Corporations Act and has not withdrawn that consent.

This Prospectus is signed for and on behalf of all the Directors by:

==> picture [213 x 73] intentionally omitted <==

Anthony Short Director

Dated: 28 September 2010

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7. Glossary of Terms

These definitions are provided to assist persons in understanding some of the expressions used in this Prospectus.

$ means Australian dollars.

Acceptance means a valid acceptance of Shares made pursuant to this Prospectus on an Entitlement and Acceptance Form.

Annual Report means the financial report lodged by the Company with ASIC in respect to the year ended 31 December 2009 and includes the corporate directory, chairman’s report, review of activities, Shareholder information, financial report of the Company and its controlled entities for the year ended 31 December 2009, together with a Directors’ report in relation to that financial year and the auditor’s report for the period to 31 December 2009.

Applicant means a person who submits an Entitlement and Acceptance Form.

Application Monies means application monies for Listed Options received by the Company from an Applicant.

ASIC means the Australian Securities and Investments Commission.

ASTC means ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532.

Associate has the meaning given to it in the Corporations Act.

ASX means ASX Limited ABN 98 008 624 691 and where the context permits, the Australian Securities Exchange operated by ASX Limited.

Board means the Directors meeting as a board.

Business Day means Monday to Friday inclusive, other than a day that ASX declares is not a business day.

CHESS means ASX Clearing House Electronic Subregistry System.

Closing Date means the date identified as such in the proposed timetable.

Company or Advance Energy means Advance Energy Limited ACN 111 823 762.

Constitution means the constitution of the Company as at the date of this Prospectus.

Convertible Notes means the listed and unlisted convertible notes issued by the Company at the date of this Prospectus.

Corporations Act means the Corporations Act (Cth) 2001.

CPS means the converting performance shares issued by the Company at the date of this Prospectus.

Directors mean the directors of the Company as at the date of this Prospectus.

Eligible Shareholder means a person registered as the holder of Shares on the Record Date whose registered address is in Australia and New Zealand.

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Entitlement means the entitlement to Listed Options under the Offer as set out in Section 1.1.

Entitlement and Acceptance Form means the Entitlement and acceptance form sent with this Prospectus that sets out the Entitlement of Shareholders to subscribe for Listed Options pursuant to the Offer.

Issuer Sponsored means Shares issued by an issuer that are held in uncertificated form without the holder entering into a sponsorship agreement with a broker or without the holder being admitted as an institutional participant in CHESS.

Listed Option means the Listed Option described in Section 5.1.

Listed Optionholder means a holder of Listed Options.

Listing Rules means the Listing Rules of ASX.

Offer means the Offer as defined in Section 1.1.

Prospectus means this prospectus dated in Section 6.

Record Date means 5:00pm (WST) on the date identified in the proposed timetable.

Rights Issue means the rights issue as defined in Section 1.2.

Section means a section of this Prospectus.

Share means an ordinary fully paid share in the capital of the Company.

Shareholders mean a holder of Shares.

Shortfall Options means that number of the Listed Options that have not validly been applied for by the Closing Date.

Underwriter means Glory Run Pty Ltd ACN 127 715 520.

Underwriting Agreement means the underwriting agreement between the Company and the Underwriter.

Unlisted Option means the unlisted options already issued by the Company described in Section 2.1

Unlisted Optionholder means a holder of Unlisted Options.

WST means Western Standard Time, being the time in Perth, Western Australia.

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ENTITLEMENT AND ACCEPTANCE FORM

PLEASE READ CAREFULLY THE PROSPECTUS DATED 28 SEPTEMBER 2010 ACCOMPANYING THIS FORM. THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCKBROKER OR LICENSED PROFESSIONAL ADVISER.

ADVANCE ENERGY LIMITED

ACN 111 823 762

REGISTERED OFFICE: Suite 2, 16 Ord Street, West Perth, WA 6005

SHARE REGISTRY: Advanced Share Registry Services Pty Ltd, 150 Stirling Highway, NEDLANDS, WA 6009

HIN/SRN Securities Sub Register Form Number No of Shares held as at 5.00pm WST on 12 October 2010 Entitlement to Options on a 14 for 15 basis Amount payable on acceptance at $0.001 per Listed Option

Non-renounceable pro-rata offer to Eligible Shareholders on the basis of 14 Listed Options for every 15 Share held at an issue price of $0.001 per Listed Option as at the Record Date.

To the Directors

ADVANCE ENERGY LIMITED

1. I/We the above mentioned, being registered on 12 October 2010 as the holder(s) of ordinary fully paid shares in your Company hereby accept the below mentioned Listed Options in accordance with the enclosed Prospectus;

2. I/We enclose my/our cheque or bank draft made payable to ADVANCE ENERGY LIMITED – SUBSCRIPTION ACCOUNT, for the amount shown being payment at the rate of $0.001 per Listed Option;

3. I/We hereby authorise you to revise the register of securityholders in respect of the number of Listed Options allotted to me/us; and

5. I/We agree to be bound by the Constitution of the Company.

RETURN OF THIS DOCUMENT WITH THE REQUIRED REMITTANCE WILL CONSTITUTE YOUR ACCEPTANCE OF THE LISTED OPTIONS BEING OFFERED

		Shares Accepted	Shares Accepted	Amount Enclosed at$0.001per Listed Option	Amount Enclosed at$0.001per Listed Option	Amount Enclosed at$0.001per Listed Option
	PLEASE ENTER	Drawer	Bank		Branch	Amount
	CHEQUE DETAILS THANKYOU

My/Our contact numbers in the case of inquiry are: Telephone ( ) . . . . . . . . . . . . . . . . . . . . . . . . . Fax ( ) . . . . . . . . . . . . . . . . . . . . . . . . . Email: …………………………………………….

NOTE: Cheques and bank drafts should be made payable to ADVANCE ENERGY LIMITED – SUBSCRIPTION ACCOUNT, crossed “NOT NEGOTIABLE” and forwarded to Advanced Share Registry Services, PO Box 1156, Nedlands, Western Australia 6909 to arrive no later than 5.00pm W.S.T on 28 October 2010.

Complete this panel and sign below only if a change of address is to be registered with the Company New Address: Signature(s): Date: Please indicate your correct title: Director / Secretary /

ISSUE CLOSES 5.00PM W.S.T. ON 28 OCTOBER 2010.

THE DIRECTORS RESERVE THE RIGHT TO MAKE AMENDMENTS TO THIS FORM WHERE APPROPRIATE PLEASE REFER OVERLEAF FOR INSTRUCTIONS

EXPLANATION OF ENTITLEMENT

1. The front of this form sets out the number of Listed Options that you are entitled to accept.

2. Your entitlement may be accepted either in full or in part. There is no minimum acceptance.

3. You may not apply for Listed Options in excess of your maximum entitlement using this form.

4. The price payable on acceptance of each Listed Option is $0.001.

5. You may accept your entitlement in full by completing the Entitlement and Acceptance Form overleaf.

APPLICATION INSTRUCTIONS

2. The issue price of $0.001 per Listed Option is payable in full upon application.

3. Payments must be made in Australian currency by cheque or bank draft drawn on and payable at a bank within Australia. Cheques and bank drafts drawn on banks outside Australia in either Australian currency or in foreign currency will not be accepted.

4. The cheque or bank draft must be made payable to ADVANCE ENERGY LIMITED – SUBSCRIPTION ACCOUNT and crossed “Not Negotiable”.

5. When completed, this form together with the appropriate payment in Australian currency should be forwarded to ADVANCED SHARE REGISTRY SERVICES LTD, PO Box 1156, NEDLANDS, WA 6909.

6. Acceptances must be received by Advanced Share Registry Services no later than 5.00pm W.S.T on 28 October 2010.

ENQUIRIES

Any enquiries should be directed to the Company’s share registry:

Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia 6009

Postal Address: PO Box 1156 Nedlands, Western Australia 6909

Telephone (61-8) 9389 8033 Facsimile (61-8) 9389 7871