pbo prospectus 2001

Prospectus

PanBio LimitedABN 19 010 728 220

UnderwriterJP Morgan

PanBio LimitedABN 19 010 728 220

Corporate Directory

Directors

Mr Ian Sandford (Chairman)

Mr Mel Bridges (Chief Executive Officer)

Mr Jim Kalokerinos (Non-Executive)

Mr Les Watson (Non-Executive)

Mr Tim Bosher (Non-Executive)

Company Secretary

Mr Phillip Auckland

PanBio Registered Office

116 Lutwyche Road

Windsor Brisbane QLD 4030

Share Registry

Computershare Investor Services Pty Limited

Level 3

60 Carrington Street

Sydney NSW 2000

Corporate Adviser

Ernst & Young Corporate Finance Pty Limited

Waterfront Place 5th Level

1 Eagle Street

Brisbane QLD 4000

Solicitor

Corrs Chambers Westgarth

Waterfront Place 35th Level

1 Eagle Street

Brisbane QLD 4000

Investigating Accountant and Auditor

Deloitte Touche Tohmatsu

Riverside Centre 26th Level

123 Eagle Street

Brisbane QLD 4000

Independent Expert

Deloitte Corporate Finance Pty Ltd

Riverside Centre 26th Level

123 Eagle Street

Brisbane QLD 4000

Underwriter

JP Morgan

Level 26

Grosvenor Place

225 George Street

Sydney NSW 2000

Contents

1 Investment Summary 7

2 Details of the Offer 11

3 Industry Overview 15

4 PanBio’s Business 19

5 Corporate Information 29

6 Financial Information 37

7 Risk Factors 45

8 Investigating Accountant’s Report 49

9 Report on Directors’ Financial Forecasts 70

10 Additional Information 72

11 Glossary of Terms 85

Important Information

This Prospectus is dated 22 February 2001 and was lodged with theAustralian Securities and Investment Commission ("ASIC") on thatdate. PanBio Limited ABN 19 010 728 220 will apply for listing andquotation of the Shares on Australian Stock Exchange Limited("ASX") within seven days after the date of this Prospectus. ASICand ASX take no responsibility for the contents of this Prospectus.No securities will be sold, issued or allotted on the basis of thisProspectus later than 13 months after the date of this Prospectus.

The Offer does not constitute a public offer in any jurisdiction otherthan Australia. The distribution of this Prospectus in jurisdictionsoutside Australia may be restricted by law and therefore any person whoresides outside Australia and who receives this Prospectus should seekadvice on and observe any such restrictions. Any failure to comply withthese restrictions may constitute a violation of applicable securities laws.

This Prospectus does not constitute an offer or invitation in any placewhere, or to any person whom, it would not be lawful to make such anoffer or invitation. The Offer constituted by the Prospectus in electronicform is available only to persons (not including US Persons) receivingthis Prospectus in electronic form within Australia.

No person is authorised to give any information or to make any representation in connection with the Offer as described in thisProspectus which is not contained in this Prospectus. Any informationor representation not so contained may not be relied on as havingbeen authorised by the Company in connection with the Offer.Investors should read this Prospectus in its entirety and if necessaryseek professional advice before deciding to apply for Shares.

The Corporations Law prohibits the Company from processingApplications in the seven day period after the date of lodgement ofthis Prospectus with ASIC. This period may be extended by ASIC byup to a further seven days. This period is an exposure period to enablethe Prospectus to be examined by market participants prior to theraising of funds. Applications received during the exposure period willnot be processed until after the expiry of that period. No preferencewill be conferred on Applications received in the exposure period.

Defined terms and conditions used in this Prospectus are explainedin the Glossary.

The Directors are confident PanBio is well positioned to expand using its existing

technologies, extensive product range and proven business processes.

PanBio is an Australian biotechnology company thatdevelops, commercialises and markets diagnostic kitsfor infectious diseases, including test kits for the detection of mosquito-borne viruses including Ross River Fever and Dengue Fever.

PanBio's product range includes more than 60 diagnostictests, most of which were developed in-house. They are distributed to more than 55 countries through theCompany's operations in Australia and the United States,and an extensive network of distributors.

The Company has an active research and development(R&D) program designed to develop new technologyplatforms and products. This R&D program is supportedby arrangements with a number of organisations including the Cooperative Research Centre for DiagnosticTechnologies, companies and research institutions.

Arising out of the R&D program, the Company aims torelease a range of point-of-care rapid tests and molecular diagnostic assays. Given the overseas trend towardstests that can be completed within doctors’ surgeries,and the increased understanding of the links betweendisease and genetic disposition, these two areas presentgrowth opportunities and a platform for future expansion.

PanBio's performance and its commitment to qualityhas been recognised with several awards, including theAustralia Quality Award. For seven consecutive years theCompany has been listed in Business Review Weekly's'Top 100 Fastest Growing Australian Private Companies'and has won a Queensland Innovative ManufacturerAward for Export Achievement.

Through this Prospectus, PanBio is inviting investors tosubscribe for 17 million Shares at an Offer Price of $1.00per Share, giving the Company a market capitalisation of$51 million. PanBio will use the funds raised from the Offerto accelerate its R&D efforts, further its sales and marketingprogram and extend the Company's operations globally.

With the world-wide market for invitro diagnostics productsexpected to reach US$22.9 billion by 2003, US$2.1 billionof which is infectious disease products, the Directors areconfident PanBio is well positioned to expand using itsexisting technologies, extensive product range and provenbusiness processes.

This Prospectus contains detailed information aboutPanBio's operations, financial performance, experiencedmanagement team and plans for future growth. It alsooutlines the potential risks associated with the investment.I encourage you to read this document carefully beforemaking your investment decision.

On behalf of PanBio's Board of Directors, I commend this investment opportunity to you and look forward towelcoming you as a shareholder.

Yours sincerely

Ian Sandford

Chairman

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A Message from the Chairman

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Key Information Summary

Key Dates

Offer opens 2 March 2001Offer closes 23 March 2001Dispatch of shareholder statements 4 April 2001Expected commencement of trading of Shares on ASX 9 April 2001

All dates are indicative only and PanBio, with the Underwriter’s consent, reserves the right to close the Offer early, extend the Offer or cancel the Offer, in each case without prior notice. Prospective investors are encouraged to submit their Applications as early as possible.

Offer Statistics

Offer Price per Share $1.00Minimum Application (2000 Shares) $2,000Number of Shares being offered pursuant to this Prospectus 17 millionNumber of Shares on issue following completion of this Offer 51 millionMarket Capitalisation at the Offer Price $51 million

Key Financial Information

HISTORICAL FORECAST

30 June 98 30 June 99 30 June 00 31 Dec 00 30 June 01 30 June 02(Half-Year)

$000s $000s $000s $000s $000s $000s

Operating revenue (1) 5,273 6,424 7,675 5,431 11,423 14,959EBITDAR (2) 1,143 1,585 1,612 953 1,650 2,105

Less R&D expense (3) (720) (1,331) (1,366) (767) (1,909) (3,393)Plus R&D grants & CRC income (4) - 171 226 578 770 299Depreciation & amortisation (200) (219) (331) (196) (490) (933)

Earnings before interest and tax 223 206 141 568 21 (1,922)

Net interest (51) (18) (135) (98) 16 88Profit before tax 172 188 6 470 37 (1,834)Income tax expense - - (2) (217) (170) -

Net profit/(loss) after tax 172 188 4 253 (133) (1,834)

Revenue multiple (times) (5) 4.5 3.4

Notes:1 Operating revenue in the above table excludes Government grants for the purposes of R&D, CRC income and interest revenue.2 EBITDAR - Earnings Before Interest, Tax, Depreciation, Amortisation and R&D.3 The Company's policy is to expense all R&D expenditure as it is incurred.4 EBIT to the half-year to 31 December 2000 includes revenue from the CRC for Diagnostic Technologies from a technology sale in the amount of $316,081.

In comparing performance, period to period allowance should be made for this income. It should also be noted that this income impacts on the income tax for the December half-year, and the full 2001 year.

5 The Revenue multiple is based upon the Company's market capitalisation of $51 million at the Offer Price following completion of the Offer.

5

How To Apply

Applicants can apply for Shares by:

• Completing the Application Form accompanying this Prospectus; or• Completing a paper copy of the relevant electronic Application Form which accompanies the electronic version of the Prospectus

(both of which can be downloaded from www.panbio.com.au).

Applications must be for a minimum of 2000 Shares and thereafter in multiples of 500 Shares. Completed Application Forms must beaccompanied by a cheque or bank draft for the full amount of the Application. Cheques must be made payable to "PanBio LimitedShare Offer" in Australian dollars, crossed "Not Negotiable" and be drawn on an Australian branch of an Australian bank.

Detailed instructions on how to complete the Application Form are set out on the reverse side of the Application Form accompanying this Prospectus. Completed Application Forms and Application Monies should be mailed or delivered to the Share Registry at:

Computershare Investor Services Pty Limited Computershare Investor Services Pty LimitedLevel 2 GPO Box 704560 Carrington Street SYDNEY NSW 1115SYDNEY NSW 2000

Investment Highlights

Track record of revenue growth

PanBio is a globally focussed Australian biotechnology company with a 10-year track record of revenue growth.

Develops and commercialises products

PanBio has a proven ability to develop, commercialise and market medical diagnostics to test for a range of specific and emerging infectious diseases.

Major manufacturer of Mosquito-borne

viral diagnostics

The Company is a successful developer of arbovirusdiagnostics designed to detect a range of mosquito-borneviral assays, including Ross River Fever and Dengue Fever.

Global markets and operations

PanBio's product range includes more than 60 tests, the majority of which were developed in-house. They are exported to over 55 countries via PanBio's operations in Australia and the United States, and through an international network of distributors.

Fast growing company

For seven consecutive years, PanBio has been listed in Business Review Weekly's 'Top 100 Fastest GrowingAustralian Private Companies'.

Active R&D program

The Company has an active R&D program designed to develop new technologies and extend the product range. This program is supported by arrangements withresearch organisations including the CooperativeResearch Centre for Diagnostic Technologies, StanfordUniversity and Centers for Disease Control.

New diagnostic test platforms (eg point-of-care tests andDNA/RNA diagnostics) offer major growth opportunities.

Experienced management and employee support

PanBio has an experienced management team, with each manager contributing between 12 and 25 years experience in their area of expertise. Management is supported by a highly qualified group of employees, many of whom are shareholders in the Company.

Quality focussed

Recipient of a range of prestigious awards including the Australian Quality Award.

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Investment Summary 1

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This section provides a summary of the investmentopportunity offered by PanBio. It should be read in conjunction with the other more detailed sections of the Prospectus before making any decision to apply for Shares.

1.1 Business Overview

Established in 1988, PanBio develops, commercialises andmarkets diagnostic testing kits for infectious diseases andstrives to be first to market with diagnostics to test foremerging diseases. PanBio’s product range includes morethan 60 diagnostic kits for a number of infectious diseasesincluding Dengue Fever, Ross River Fever, GlandularFever and Whooping Cough. The Company’s productsare marketed to hospitals, pathology laboratories and physicians. The company has distributors in morethan 55 countries world-wide.

The Company has an active R&D program designed to develop new technology platforms and extend itsproduct range. This R&D is performed in-house and in conjunction with a number of strategic research partners. The Company has successfully commercialisedR&D developed both in-house and collaboratively.

The Company’s growth strategy consists of building on itsposition in niche diagnostic products, accelerating its R&Dprogram, diversifying its product range and expanding itsintellectual property portfolio. The Directors believe thesestrategies will allow PanBio to participate in emergingsegments of the infectious disease diagnostic market thatare forecast to experience rapid growth.

PanBio has delivered 10 years of revenue growth and hasinternally funded the majority of its R&D program duringthat period. PanBio has for seven consecutive years beenlisted in Business Review Weekly’s “Top 100 FastestGrowing Australian Companies”.

Over the last five years the Company has consistentlyinvested 13 to 20 per cent of its operating revenue onR&D (excluding depreciation) while maintaining a consistent track record of net profit. Since the 1997 financial year, R&D has been fully expensed.

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Investment Summary

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1.2 Financial Overview

The table below summarises the financial performance of PanBio for the years ended 30 June 1998, 30 June 1999, 30 June 2000, the six months to 31 December 2000 and the Directors’ Forecasts for the financial years ending 30 June 2001 and 30 June 2002.

This information should be read in conjunction with the detailed financial information and risk factors set out in Sections 6 and 7, theInvestigating Accountant’s Report in Section 8 and the Independent Expert’s Report on Directors’ Financial Forecasts in Section 9.Forecasts are, by nature, subject to uncertainty and unexpected events. Events may differ from those forecast and the differences maybe material. Accordingly, no guarantee or assurance can be given that the Directors’ Forecasts will be achieved.

HISTORICAL FORECAST


$000s $000s $000s $000s $000s $000s




Net interest (51) (18) (135) (98) 16 88Profit/(loss) before tax 172 188 6 470 37 (1,834)Income tax expense - - (2) (217) (170) -



Notes:1 Operating revenue in the above table excludes Government grants for the purposes of R&D, CRC income and interest revenue.2 EBITDAR - Earnings Before Interest, Tax, Depreciation, Amortisation and R&D.3 The Company's policy is to expense all R&D expenditure as it is incurred.4 EBIT to the half-year to 31 December 2000 includes revenue from the CRC for Diagnostic Technologies from a technology sale in the amount of $316,081.


5 The Revenue multiple is based upon the Company's market capitalisation of $51 million at the Offer Price following completion of the Offer.

Investment Summary

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The costs of the Offer are being borne by PanBio.

Listing PanBio's Shares on ASX will assist in increasing itsprofile and provide the Company with an enhanced abilityto attract, retain and motivate employees.

1.5 Dividend Policy

Given the nature of PanBio's business and the investmentrequired to achieve the forecast growth, the Directors do not anticipate paying dividends for the years ending 30 June 2001 or 2002. The extent of future dividends and the level of franking will depend on the future profitsand the financial and taxation position of PanBio.

1.6 Risk Factors

There are a number of risk factors specific to the operationsof PanBio and there are risk factors relating to the biotechnologyindustry and stockmarket in general. These risk factorsare discussed in Section 7 and prospective investors areencouraged to read this section carefully.

1.7 Directors and Management

The Board comprises four non-executive Directors (includingthe Chairman) and one executive Director. The day-to-dayoperations are managed by a team of managers with between12 and 25 years experience each in their area of expertiseincluding diagnostics, sales and marketing and finance.

1.8 Employee Share Plan and Employee Option Plan

PanBio has established an Employee Share Plan and anEmployee Option Plan to provide incentives to attract andretain key employees and executives, and to reward other staffin the Company. Details of the Employee Share Plan andEmployee Option Plan are set out in Sections 10.2 and 10.3.

1.3 Description of the Offer

This Prospectus offers for subscription 17 million Shareswhich, upon completion of the Offer, will representapproximately 33.3 per cent of the issued capital of theCompany. The gross proceeds of the Offer will be $17 million.

Details of the Offer are set out in Section 2.

1.4 Purpose of the Offer

The Company plans to use the proceeds of the Offer as follows:

Use $M

Research and development 6.0Sales and marketing operations 2.6Acquisitions/technology licensing 5.2Working capital 1.5Expenses of the Offer 1.7

Total 17

The funds allocated for R&D will be applied to acceleratePanBio's R&D program which is aimed at expanding itsrange of diagnostic products from existing technologyplatforms and developing and commercialising newdiagnostic products and technology platforms. Section4.3 contains details of the Company's R&D program.

The proceeds allocated to sales and marketing will beused to establish and expand the Company's presencein overseas markets, with particular emphasis on theUnited States and Europe.

Approximately $5.2 million has been allocated to the acquisition of businesses and technologies. The Company plans to investigate acquisitions of businesses complementary to its existing business in the United States and Europe. If acquisitions do noteventuate, the Company’s current intention would be to allocate these funds to either R&D, expanding its sales and marketing or licensing new technology.

PanBio's working capital requirements will increase as a result of the growth and expansion of the business.Following planned completion of the Offer, PanBio willhave sufficient working capital and cash reserves tocarry out the Company's stated objectives.

Details of the Offer 22

11

Details of the Offer

12

2.1 The Offer

PanBio offers for subscription 17 million Shares at anOffer Price of $1.00 per Share, payable in full onApplication, to raise $17 million. The rights attaching tothese Shares are detailed in Section 10. No brokerageor stamp duty is payable in respect of an Application forShares under this Prospectus.

2.2 Timetable - When to Apply

Completed Applications may be lodged at any time afterthe Offer opens. The Offer will open on 2 March 2001 andwill close at 5.00pm Australian Eastern Standard Timeon 23 March 2001. The Company, with the Underwriter’sconsent, may extend or close the Offer early or withdrawthe Offer without prior notice.

Investors are encouraged to lodge their Applications assoon as possible after the Offer opens.

2.3 How to Apply

Applicants can apply for Shares by:• Completing the Application Form accompanying this

Prospectus; or• Completing a paper copy of the relevant electronic

Application Form which accompanies the electronic version of the Prospectus, both of which can be downloaded from www.panbio.com.au

Applications must be for a minimum of 2,000 Shares and thereafter in multiples of 500 Shares. CompletedApplication Forms must be accompanied by a cheque orbank draft for the full amount of the Application. Chequesmust be made payable to "PanBio Limited Share Offer" inAustralian dollars, crossed "Not Negotiable" and be drawnon an Australian branch of an Australian bank.

Detailed instructions on how to complete the ApplicationForm are set out on the reverse side of the ApplicationForm accompanying this Prospectus. CompletedApplication Forms and Application Monies should bemailed or delivered to the Share Registry at:

Computershare Investor Services Pty LimitedLevel 260 Carrington StreetSYDNEY NSW 2000

Computershare Investor Services Pty LimitedGPO Box 7045SYDNEY NSW 1115

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2.5 ASX Listing

Application will be made to ASX within seven days afterthe date of this Prospectus for admission of PanBio to theOfficial List and for its Shares to be quoted on ASX.

It is a term of the Offer that if PanBio does not make application to ASX within that time or has not been admittedto the Official List within three months of the date of thisProspectus, any allotment or issue of Shares pursuant tothis Prospectus is void, and all Application Monies mustbe refunded.

ASX takes no responsibility for this Prospectus or theinvestment to which it relates. Admission to the OfficialList should not be taken as an endorsement of PanBio by ASX.

Following the allotment of Shares, successful Applicantswill receive a statement of shareholding that sets out thenumber of Shares they have been allocated in the Offer. It is expected that shareholding statements will be dispatched by standard post by 4 April 2001.

The Company expects that trading on ASX will commence on 9 April 2001.

It is the responsibility of Applicants to determine their allocation prior to trading in Shares. Applicants tradingShares before receiving a shareholding statement do so at their own risk. PanBio and the Underwriter disclaim allliability, whether in negligence or otherwise, to personswho trade Shares before receiving their shareholdingstatement whether on the basis of a confirmation of allocation provided by PanBio or otherwise.

2.4 Allotment

The Company reserves the right to allocate Shares toApplicants in full, to allocate a lesser number of Sharesthan those for which an Application has been made, orto decline an Application. Allotments will be made assoon as possible after the close of the Offer.

In the event that no allotment is made to an Applicant,their Application Monies will be returned in full. Where theallotment is less than the number of Shares applied for,the surplus Application Monies will be returned to theApplicant. Interest will not be paid on any ApplicationMonies returned to an Applicant.

All Application Monies received with Applications will beheld by the Company on trust in a special purposeaccount until acceptance of the Application and/orreturn of funds to unsuccessful Applicants.

Successful Applicants will receive notification of allotmentof Shares as soon as practicable after the close of the Offer.

Details of the Offer

14

2.6 CHESS

PanBio will apply to participate in CHESS and, in accordancewith the ASX Listing Rules and the SCH Business Rules,will maintain an electronic issuer-sponsored subregisterand an electronic CHESS subregister.

2.7 Overseas Distribution

No action has been taken to register or qualify theShares or the Offer, or otherwise permit a public offeringof the Shares in any jurisdiction outside Australia. The distribution of the Prospectus in jurisdictions outsideAustralia may be restricted by law and, therefore, persons who obtain this Prospectus should seek adviceon and observe any such restrictions. Any failure tocomply with these restrictions may constitute a violationof applicable securities laws.

The Prospectus does not constitute an offer or an invitation in any place outside Australia where, or to anyperson to whom, it would be unlawful to make such anoffer or invitation. It is the responsibility of any Applicantswho are citizens or residents of jurisdictions outside ofAustralia to ensure compliance with all laws of any country which are relevant to their Applications.

2.8 Enquiries

Potential investors with questions on how to completethe Application Form, or the contents of this Prospectus,should contact their stockbroker, accountant, lawyer orother professional adviser.

2.9 Electronic Prospectus

The Offer constituted by this Prospectus in electronic formis available only to persons (not including United Statespersons) receiving this Prospectus in electronic form withinAustralia.

Persons who receive a copy of this Prospectus in electronic form at www.panbio.com.au are entitled toobtain a paper copy of the Prospectus (including any relevant accompanying Application Form) free of charge,during the Offer period by telephoning JP Morgan on 1800 180 007.

2.10 Underwriting

The Offer is underwritten by Chase Securities AustraliaLimited trading as JP Morgan ("Underwriter"). The Underwriting Agreement is conditional upon the Companyreceiving valid Applications for 3.6 million Shares from persons that the Underwriter considers, acting reasonably,have been referred or introduced to the Offer by theCompany or the Chairman of the Company and the deliveryto the Underwriter of executed escrow arrangements fromall the Company’s existing shareholders (excluding thosewho became shareholders as a result of the employeebonus issue referred to in the Investigating Accountant’sReport). Details of the material terms of the UnderwritingAgreement, including the conditions of underwriting, thecommissions and other payments due to the Underwriter and the circumstances in which theagreement can be terminated, are set out in Section 10.

2.11 Ranking

Shares issued pursuant to this Prospectus will rank equallyin all respects with the existing fully paid Shares. Full detailsof the rights attaching to Shares are contained in theCompany's Constitution, a summary of which is containedin Section 10.

Industry Overview 3

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Industry Overview

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PanBio is a biotechnology company operating in the healthcare industry, specifically, in the world-wide diagnosticsindustry. The Company specialises in developing andmanufacturing diagnostic testing kits for infectious diseases,particularly emerging diseases including those borne bymosquitoes (arboviruses) and animals (zoonoses).

3.1 World-wide Diagnostics Industry

The invitro diagnostics (IVD) industry involves the development and production of chemical and biochemicalsystems used in the diagnosis and monitoring of variousmedical, industrial and environmental conditions. The valueof the world-wide invitro diagnostics market has beenestimated at $US20 billion in 2000 and is expected to growto $22.9 billion by 2003. Market segments that performdiagnostic procedures include: • the clinical diagnostics market (including hospitals,

private pathology laboratories, reference laboratories, blood banks and patient point-of-care testing);

• the life sciences research market (including university laboratories, private institutes, government and corporate facilities); and

• the industrial market (including food and water quality assurance programs, agricultural diagnostics and animal health testing).

The clinical diagnostics industry involves the developmentand manufacture of products used in performing testson samples of blood and other body fluids to detectmedical conditions. Modern health care practices rely on these tests to:• screen and detect a broad variety of illnesses through

biochemical changes;• diagnose diseases with similar symptoms differentially,

leading to distinct intervention and therapy;• monitor an existing condition by administering

therapeutic drug dosage levels to the patient; and• determine the patient's prognosis or response to therapy

through test procedures, such as viral load monitoring.

3.2 Infectious Disease Diagnostics Industry

PanBio focuses on the infectious disease segment of theclinical diagnostics market. Although infectious diseasesare estimated to kill more than 17 million people world-wide every year, only 30 per cent are clinically diagnosed. The resurgence in both 'old' and 'new' infectious diseases, coupled with the desire for moreaccurate tests, presents a significant opportunity for thedevelopment of fast, accurate and simple diagnostic tests.

Growth in Infectious Disease

Most emerging infectious diseases are zoonotic (animalborne), with rodents and arthropods (eg mosquito andticks) more commonly involved in direct transfer. This isevidenced by the rapid spread of mosquito-borne viruseslike Dengue Fever as a result of natural and man-madechanges in the environment.

Computer models indicate many diseases will surge withthe heating of the earth's atmosphere. Mosquito-bornedisorders will become increasingly prevalent because theirinsect carriers (vectors) are very sensitive to meteorologicalconditions. Malaria and Dengue Fever are also expectedto spread dramatically as global temperatures increase.

Malaria is a problem in more than 90 countries inhabitedby some 2,400 million people or 40 per cent of the world'spopulation. World-wide prevalence of Malaria is in theorder of 300 to 500 million cases each year and it killsmore than one million people annually.

Dengue Fever is now endemic in more than 100 countries inAfrica, the Americas, the Eastern Mediterranean, South-EastAsia and the Western Pacific, putting two-fifths of the world'spopulation at risk of infection.

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The appearance of West Nile virus in New York City lastsummer caught the United States by surprise. Officialswere concerned that this virus, previously only known ofin Africa, Asia and parts of Europe, could find its way toAmerica and not be identified for many months resultingin seven deaths.

Demand for Infectious Disease Diagnostics

The renewed prevalence of infectious diseases hasresulted in demand for highly sophisticated and versatilediagnostics to identify a larger, more diverse range ofpathogens. Recent developments in biotechnology andbiomedical engineering have created unprecedentedopportunities for more speedy, accurate and convenientdiagnosis. Point-of-care rapid tests, of the type offered by PanBio, provide faster turn-around time than conventional methods. The development of resistant disease strains is another challenge.

Point-of-care testing is one of the most promising areasof development for infectious disease tests. It offersalmost immediate results with a range of benefits including:rapid patient diagnosis resulting in earlier treatment withmore appropriate therapeutics; eliminating costly delaysand unnecessary quarantining; and cost savings for bothpatients and insurers.

As health care resources become stretched, testingguidelines and optimised treatment scheduling will becomeincreasingly important, demanding more timely deliveryof diagnostic test information. The result will be a growingneed for highly specific and sensitive diagnostics forinfectious diseases, greater emphasis on point-of-caretesting, and the use of sophisticated molecular diagnostictests that will allow for customised patient therapeutics.

During the next three to eight years, the market for infectious disease tests is expected to be among themost dynamic in the invitro diagnostics industry. PanBioexpects that in five years the industry will increasinglyfocus on point-of-care rapid screening tests to detectpathogens, and on nucleic acid (DNA) tests for earlierdetection and determination of treatment.

The market for point-of-care rapid infectious disease tests performed in physicians' offices and clinics wasapproximately $US350 million in 1998, and is expected to grow to $US870 million by 2003. Point-of-care rapidtests are forecast to experience 15 per cent growththroughout the world. Increasingly sophisticated technology and the use of saliva and urine as alternativesto blood sampling is expected to stimulate the sales of point-of-care rapid immunoassays world-wide, particularlyin developing countries.

Immunoassays form the largest and most diversified segment of the market for infectious disease testing, andcover a wide range of technologies and applications. Theworld-wide market for laboratory-based infectious diseaseimmunoassays was $US1.7 billion in 1998, and is forecastto grow to $US2.1 billion by 2003.

DNA probe-based testing is expected to lead a revolutionin infectious disease testing during the next three to eightyears. In 1997, routine clinical applications for DNA probetests were used for Tuberculosis, Hepatitis, Gonorrhoea,HIV and Chlamydia. The market for molecular (DNA, RNAbased) infectious disease assays was estimated to bearound $US410 million in 1997, and is forecast to grow to$US1.2 billion in 2003.

Industry Overview

The rapid development of the human genome project and the trend in the United States towards managedcare offer exciting opportunities for the invitro diagnosticsindustry. The convergence of genetic information andadvances in technology will continue to accelerate thegrowth of molecular diagnostics. Diagnostic gene detection products allow for detection and in somecases quantification of the nucleic acid sequence thatuniquely identify an infectious disease agent, a humangenetic disease or a single individual. This categoryincludes DNA “chips” which are ordered arrays ofoligonucleotides (DNA sequences) immobilised on aninorganic substrate. DNA chips provide a miniaturisedformat for performing large numbers of reactions at once.

Genetic tests for various diseases represent a major areaof potential growth within the diagnostics market. It ispossible that the number of genetic tests performed willincrease significantly because of many disease causinggenes being identified by the human genome project.

The development of both point-of-care rapid tests andmolecular diagnostics offer the Company the opportunityof partnering with pharmaceutical companies in thedevelopment of new therapeutic drugs.

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PanBio’s Business 4

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4.2 Current Operations

4.2.1 PanBio's Products

PanBio develops, commercialises and markets a range of medical diagnostic kits used by hospitals, pathologylaboratories, general practitioners and research institutionsto test for a number of infectious diseases. Technologiesused to produce these diagnostic test kits include:• Enzyme Linked Immunosorbent Assay (ELISA); • Immunofluorescence (IFA); • Lateral Flow Immunochromatographic Tests (Rapids);• Latex Agglutination; and• Immunoblot (Dip-S-Tick).

A break-up of PanBio's sales by product for the sixmonths to 31 December 2000 is illustrated in the diagram below:

PanBio’s Business

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4.1 Overview

PanBio is an Australian biotechnology company specialisingin developing, manufacturing and marketing diagnostictesting kits for more than 27 infectious diseases includingDengue Fever, Ross River Fever, Glandular Fever andWhooping Cough. It is a successful developer of diagnostictests for arboviruses and provides a broad range ofproducts suitable for use in a variety of conditions.

The Company's product range includes more than 60diagnostic tests, most of which are developed at itsTherapeutic Goods Administration (TGA) registered facility in Australia and FDA/USDA approved facility in theUnited States. The Company's products are exported tomore than 55 countries around the world through itsoperations in Australia and the United States and througha network of distributors.

PanBio has a 10-year track record of revenue growthand for seven consecutive years, PanBio has been listedin Business Review Weekly's 'Top 100 Fastest GrowingAustralian Private Companies'. PanBio has received arange of other national and state awards including theAustralian Quality Award.

The Company has an active R&D program supported by its arrangements with a number of research organisations and is in the process of patenting newdiagnostic technology platforms.

Sa les by Techno logy TypeDecember 2000 - Ha l f -Year

ELISA 47%

Rapids 10%

ContractManufacture/ CAP5%

IFA 5%

Immunoblot7%

Latex 4%

DistributedLines 19%

Other 3%

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In Australia and the United States, PanBio sells directlyto its customers using the Company's sales and marketing representatives. In other countries, theCompany uses distributors and has distribution networks in Asia, Europe, North and South America.

The technologies used by the Company in its productsare detailed below.

ELISA

ELISA is a diagnostic test platform used for blood teststhat detect antibodies produced in response to an infection or a vaccination. The 96-well microplate formatis one of PanBio's major technology platforms and,because it is used in biomedical laboratories around theworld, PanBio has been able to use this technology tomarket its mainstream diagnostic products globally.

ELISA is regarded as an efficient and cost-effective technology because:• customers have the flexibility to perform small batches

of samples using automation;• tests can be processed manually, or with the use of

semi or fully automated instrumentation, depending on the customer's needs;

• instrumentation for ELISA tests is widely available; and• most manufactured kits provide all the reagents

necessary to perform the test.

ELISA tests can be designed to detect all three classes of human antibody (IgG, IgM and IgA) and are usuallycompleted within two hours.

The technology is currently used by the Company to manufacture tests for: • Barmah Forest Virus• Leptospira• Whooping Cough• Brucella• Measles• Dengue• Q-Fever• Epstein Barr Virus (Glandular Fever)• Rickettsia Scrub Typhus• Helicobacter Pylori• Rickettsia Spotted Fever• Human Herpes Virus type 6 • Ross River Virus• Rubella

PanBio’s Business

22

IFA Tests

IFA tests are often used when sample numbers are smallor as a supplementary test for ELISAs. The tests areusually processed manually.

IFA is sometimes the first test platform used to detectantibodies and develop diagnostic products for emerginginfectious diseases, such as bacterial and viral diseases.

Tests manufactured by the Company using this process include:• Arbovirus screen • Japanese Encephalitis• Dengue • Q-fever• Ehrlichia • Rickettsial Diseases• Human Granulocytic • Scrub Typhus

Ehrlichia • West Nile Virus

Rapid Tests

Point-of-care, or rapid tests are simple to perform, requirelittle or no sample manipulation, produce results in less than30 minutes and can be used by non-laboratory personnelwith minimal training. Point-of-care rapid tests also:• enable earlier diagnosis and treatment;• eliminate the costly delays of unnecessary quarantining

of patients suspected of having highly infectious diseases; and

• have the potential to save costs for both patients and insurers.

The use of this technology is expected to grow as itenables diagnosis to be performed outside the laboratory.

Point-of-care testing is an emerging area within the invitro diagnostics market that offers future growth potential. New technology is pushing clinical testing out of traditional central laboratories to point-of-care sites.

The point-of-care testing market includes two majorsegments: hospital and doctor’s offices/satellite facilities(such as clinics and nursing homes).

Technology advances will make testing easier to performat the patients’ bedside. It is likely that some critical, time-sensitive tests will move away from central laboratories and closer to patients.

PanBio believes it is well positioned to take advantage ofthe market trend in point-of-care testing.

Rapid tests offered by the Company are used to diagnose:• Dengue • Malaria (distributed product)• Melioidosis (in clinical trials)• Scrub Typhus (in clinical trials)

Latex Agglutination Tests

The Latex Agglutination test is normally carried out manually at the point-of-care or in laboratories. The test,which was one of the first technologies developed commercially for immunoassays, relies on visual detectionof agglutination (clumping of small microparticles).

Latex Agglutination Tests offered by the Company areused to detect:• Candida (distributed product)• Rickettsia rickettsii (Spotted Fever)• Trichomonas (distributed product)

23

4.2.2 Distributed Products

As well as developing and manufacturing diagnostic products the Company also has a range of productswhich it distributes. These products supplement theCompany's manufactured products in select marketsincluding Australia, South America and New Zealand. In some instances the manufacturer of the products distributes PanBio products in their region.

4.2.3 Contract Manufacture

The Company undertakes limited contract manufacturingof products for third parties. The Company anticipatesthat revenue from this, as a percentage of the Company'stotal revenue, will decrease over time.

4.2.4 Manufacturing Facilities

PanBio is licensed by the TGA to manufacture at its premises in Brisbane, Australia and has a FDA/USDAapproved facility in Baltimore, United States. TheAustralian operation also holds ISO9001 certification.Consistent with regulatory requirements, both facilitieshave routine laboratory space as well as special containment laboratories suitable for working with certainhigh risk micro-organisms, such as Japanese Encephalitisand Yellow Fever. The Brisbane operation also has a specially fitted DNA laboratory.

The majority of the Company's products are manufacturedin-house and current facilities have the capacity toaccommodate increased production volumes. The assembling and packaging of a number of products basedon one of the Company's new technology platforms isoutsourced, however, in all cases, the key biological rawmaterials are controlled by the Company irrespective ofwhether these materials are produced internally using theCompany's biological production facility (eg microbial antigens, monoclonal antibodies, immunofluorescentslides) or sourced from external suppliers.

Dip-S-TicksTM

Dip-S-Ticks are a semi-quantitative enzyme immunoassaythat uses an ELISA dot technique to detect a number ofinfectious diseases. The antigen is dispensed as discretedots onto a solid membrane and is read visually as acoloured spot.

Tests manufactured by the Company using this process include:• Canine Lyme • Q-Fever• Canine Multitest • Rickettsial Diseases• Canine Rickettsia • Salmonella• Dengue Fever • Scrub Typhus• Leptospira • West Nile Virus

PanBio’s Business

24

4.2.5 Research and Development

Since 1996, PanBio has committed approximately 13 to 20 per cent of its operating revenue to R&D activitiesand is forecast to spend between 16 and 23 per cent ofits revenue on these activities in the next two financialyears. This commitment to R&D expenditure hasenabled the Company to develop most of its productrange in-house.

PanBio is experienced not only in developing new technology, but also bringing it successfully to market.PanBio's in-house R&D activities are supported by collaborative research. The Company is a foundingmember of the Australian Cooperative Research Centrefor Diagnostic Technologies (CRC-DT), which includesthe Queensland University of Technology, the CSIRO, La Trobe University and the Children's Health ResearchInstitute. The CRC-DT has already developed threeinfectious disease diagnostic products and licensed amajor technology platform.

Under its agreement with the CRC-DT, PanBio has a right of refusal on the commercialisation of any technology developed. The Company is currentlyassessing two technologies developed by the CRC-DTfor commercialisation.

PanBio also has arrangements supporting its R&D programwith research institutions, universities, commercial organisations, the Armed Forces, and the Centers forDisease Control (CDC). These organisations are located inthe United States, Thailand, Malaysia, Germany and theUnited Kingdom. PanBio has relationships with WHO reference laboratories which assist the Company in itsproduct development.

As well as continuing to develop new products using itsexisting technology platforms, the Company has an activeR&D program aimed at developing new platforms. TheCompany will seek to license any platforms developed, on a non-exclusive basis, to other diagnostics and pharmaceutical manufacturers for the development ofapplications outside PanBio's core area of infectious disease diagnostics. The Company intends to retainexclusive rights to any such technology platforms for usein infectious disease diagnostics. The Company aims toachieve upfront license fees and earn an ongoing royaltystream based on product sales from any licensee.

The details of the R&D activities that the Company is currently undertaking are outlined in Section 4.3 - Growth Prospects.

4.2.6 Intellectual Property

As discussed in Section 4.2.5, PanBio is committed to R&D both through its in-house activities and with its research arrangements.These R&D activities have resulted in the lodgement of a number of patents on intellectual property. These are listed below:

Patent Description Status Current and Potential Outcomes

Homogeneous assay system Provisional patents filed in 1999 This technology is in the very early stage (PQ2246) and 2000 (PQ9612). of development.

Universal lateral flow rapid diagnostic National Phase applications filed The Company will seek to license theplatform. The manufacture of generic in United States and Europe in 2000 manufacturing of the generic lateral flow strip.pre-prepared lateral flow strips. based on PCT/AU98/01038. Licensing opportunities may arise from diagnostic

companies wishing to use the technology.

Analyte Detection PCT application lodged in 1999 Assay prototype in development.based on PCT/AU00/00782. Currently under review.

Filterplate design providing for wicking, National Phase applications filed in Manufacturing of the filterplate has been separation of top from bottom component United States and Europe in 2000 licensed to a multinational company. If sales and provision of a light path. based on PCT/AU98/01037. are made PanBio will receive a royalty. Demand

may be driven by industries performing a variety of bioassays related to drug discovery.

Metal chelate filter International Patent Application filed The filter has proven useful for the capture andin 2000 based on PCT/AU00/00477. purification of proteins. Licensing opportunities

are being actively sought to manufacture and market the filter.

The Company plans to continue to lodge patent applications, where appropriate, as part of its strategy of protecting its intellectual property.

25

PanBio’s Business

26

4.3 Growth Prospects

PanBio aims to continue its growth by accelerating itsR&D program to develop new technology platforms andextend its current product range, expanding theCompany's operations globally and pursuing businessopportunities such as acquisitions that offer synergieswith the existing business.

Key growth initiatives are summarised below:

4.3.1 Accelerating R&D

PanBio plans to expand its intellectual property portfoliothrough continued in-house research, collaborative projects with research partners such as the CRC-DT,and the acquisition or licensing of patented technologies.

The Company intends to continue its practice of entering into arrangements with a variety of companiesand universities in Australia and overseas that offer technologies that complement PanBio's existing platforms.In addition, the Company plans to develop links withpharmaceutical companies by providing technology platforms that enhance programs such as drug discovery.

ELISA

ELISA technology continues to present market opportunitiesand PanBio intends to continue to develop new infectiousdisease assays on this existing platform. Several new tests areplanned for development and release over the next three years.

Point-of-care Rapid Tests

Lateral flow rapid tests present the next level of simplificationin diagnostics after ELISA. The benefits of these assayshave been detailed in earlier sections of the Prospectus.PanBio has an active development program for the releaseof new rapid tests. The Directors see this technologyplatform as one of the key drivers of future growth.

Nucleic Acid Technology (DNA/RNA)

PanBio is researching Nucleic Acid technologies for diagnosisof infectious diseases. DNA based diagnostic technologiesare one of the fastest growing segments in invitro diagnostictechnology today. Infectious disease gene detection productscurrently account for the majority of sales in this marketcategory and this is likely to continue for a number of yearsbecause the use of DNA probe-based assays offers significantadvantages for detecting viruses that are difficult to grow(culture) by traditional methods. Because probe-basedassays allow faster identification of infectious diseases, fewerresources are wasted on patients who do not need treatmentor special isolation precautions. Probe-based infectiousdisease diagnostics have the potential to contribute tolower overall patient treatment costs for certain diseases.

Traditional diagnostic technology relies on a serologicalapproach which detects antibody responses produced by a patient's immune system during or after infection.This methodology is slow and indirect because antibodiescannot commonly be detected until days or weeks afterinfection. By contrast, Nucleic Acid technologies directlydetect the DNA or RNA material, ie genes, of thecausative microorganism in blood or other body fluids or tissues. This allows the earliest possible diagnosis ofinfection, almost always before the detection of antibodies.This includes the detection of pathogens (bacteria, viruses, parasites), tumour markers and markers forgenetic diseases.

PanBio is developing Nucleic Acid methods using multipleprobes together to detect one of several pathogens in a clinical sample or to distinguish between individuals. The technology is also useful for monitoring therapy effectiveness. Because of their sensitivity and specificity,DNA probes are ideally suited to answer disease specificdiagnostic questions that depend on determining thepresence of a defined genetic marker associated with aparticular disease.

27

A key advantage of this technology is that it allows the supply of unique generic filter strips suitable for a variety of diagnostic applications (including DNA baseddiagnostics) without the need for manufacturing equipment. PanBio intends to license the technology forthe manufacture of rapid diagnostic products using this technology platform in areas other than infectious disease diagnostics.

Metal Chelate Filter Technology

PanBio has a patent pending (full International PatentApplication specification filed in 2000) for a filter membranebearing chelated metals. This technology was developedfrom research carried out by the Company. The metalchelate filter has potential for applications in the biosciences industry, particularly in respect to proteinpurification processes. The Company is seeking licenseesfor this technology.

Homogeneous Assay Technologies

PanBio is investigating a variety of approaches to develop a homogeneous assay platform for the detectionof antibodies, antigens and DNA. Homogeneous assaysare invitro assays that occur in liquid phase and are simpleto perform.

The Company has identified a technology developed by a major United States university for a field not related toinvitro diagnostics. A Materials Transfer Agreement hasbeen signed and PanBio has received material with whichto begin applying the new technology. The Company hasfiled a provisional patent with the Australian Patent Officeto protect diagnostic applications of this technology and iscollaborating with the CRC-DT.

Concurrent with the above project, PanBio has identified a number of alternative homogeneous assay platformsarising out of in-house research.

The development of nucleic acid diagnostic tests provides opportunities to collaborate with pharmaceutical companies in developing and monitoring more effectivedrug development programs.

New Technologies

In 1998, PanBio secured a three-year, $975,000 R&DSTART grant from the Australian Government to fund research on its patented Fluid Phase System technologies. These tests rely on liquid-phase incubationof samples with reactants, rather than the absorption or coating of surfaces or filters with assay-specificimmunosorbents or other assay-specific materials. This research has spawned several new technology concepts, a number of which are proceeding to newpatent applications:

Filterplate Design

PanBio has a patent pending (full National Phase specification filed with the United States and Europeanpatent offices in 2000) for a novel 96-well filterplate.

The potential applications of the technology lie in bioscience, particularly in the drug discovery industry.There may also be applications in the field of invitrodiagnostics.

Universal Lateral Flow Technology

PanBio has a patent pending (full National Phase specification filed with the United States and Europeanpatent offices in 2000) for a novel lateral flow rapid diagnostic system. This technology creates a generic lateral flow strip designed to be manufactured in verylarge numbers at a low per unit cost. Development ofthis technology has been satisfactory to date, with the initial milestone Proof of Principle experiments successfully completed.

PanBio’s Business

28

Dendrimer Nanotechnologies

PanBio is investigating the development of dendrimertechnologies, in particular their application to biotechnology.Dendrimers are man-made macromolecules that aresymmetrical, consistent and mathematically predictableunlike polymers that are snakelike and are used in plastics, paints and coatings.

The invention of the dendrimer is part of the evolution of nanotechnology. Nanotechnology involves materialsand systems whose structures and components exhibitnovel and significantly improved physical, chemical andbiological properties and processes because of theirvery small size.

PanBio is developing a relationship with a company inthe United States with a view to forming a joint ventureto commercialise this technology. Successful completionof this joint venture would provide PanBio with access to new fields of business including pharmaceuticaldevelopment and new diagnostic platform technologies.

4.3.2 Increased Penetration in Domestic

and International Markets

The Company believes there are significant opportunitiesto expand its product reach both domestically and internationally. In particular, through the use of its UnitedStates operations, PanBio plans to expand product salesin North and South America and is investigating thepotential of opening a sales office in South America.

4.3.3 Acquisitions

PanBio intends to seek suitable business, product andtechnology acquisitions that will enhance its position in the growing invitro diagnostics industry. The decisionprocess will involve an investigation of the synergies withthe existing business and appropriate levels of return.

Corporate Information 5

29

From top, left to right: Ian Sandford,

Mel Bridges, Jim Kalokerinos, Les Watson

and Tim Bosher

31

Ian Sandford (MBA (Exec), BE (Chem) (Hons), M EngSc, ASIA, FAICD)

Chairman

Ian joined PanBio in 1994 as a non-executive Directorand became non-executive Chairman in 1998. He has20 years experience in corporate development andmanagement and for the past 12 years has worked as amanagement consultant specialising in the formulationand implementation of strategic management systemsand cultures.

Ian was Corporate Development Manager for BarossaCo-operative Winery Ltd (Kaiser Stuhl), and Cudgen RZ Limited, and later worked in the development investment division of AIDC Limited.

From 1995 to 2000, Ian was an independent Director of Norco Co-operative Limited and he is currently aDirector of Burnett Valley Ltd.

Ian holds a Bachelor of Chemical Engineering and aMasters of Engineering Science from the University ofQueensland. He also holds an EMBA from the AustralianGraduate School of Management, is an Associate of theSecurities Institute of Australia and a Fellow of theAustralian Institute of Company Directors.

Mel Bridges (BAppSc, FAICD)

Chief Executive Officer and Director

Mel has 25 years experience in the global diagnosticsindustry and has founded and managed successful diagnostics and biotech based businesses.

He is a founder of PanBio. Previously he was on theBoard and was a founder of Pacific Diagnostics Pty Ltd, which at the time was a scientific distribution company in Australia and New Zealand.

Mel was a member of the Commonwealth GovernmentRoundtable on the Asian Financial Situation and is on theQueensland Biotechnology Advisory Council and theAustralian Quality Council (AQC). He is a Director of theCRC-DT and Diatech Pty Ltd.

Mel holds a Bachelor of Applied Science (Chemistry) fromthe University of Southern Queensland and is a Fellow ofthe Australian Institute of Company Directors (FAICD).

Jim Kalokerinos (BAppSc, BEcon, MAICD)

Non Executive Director

Jim is a founder of PanBio. He has more than 23 yearsexperience in the diagnostics industry including sales andmarketing in the health care sector having worked inAustralia and overseas.

Previously he was a founder of Pacific Diagnostics Pty Ltd,a scientific distribution company in Australia and NewZealand which became wholly owned by BaxterHealthcare in 1993.

Other positions Jim has held include Director Pacific Regionand South America for Metra Biosystems, Inc and he ispresently Region Director Asia Pacific for QuidelCorporation, a United States based rapid test diagnostics company.

Jim holds a Bachelor of Science (Chemistry) from theUniversity of Southern Queensland and a Bachelor ofEconomics from the University of Queensland.

Board of Directors

Board of Directors

32

Les Watson (BSc, MAICD)

Non-Executive Director

Les is a Director and shareholder of PanBio and hasmore than 20 years experience as a medical scientist atQueensland Medical Laboratories and Drs. Sullivan,Nicolaides and Partners (Scientist in charge of theImmunology Department).

His experience in the medical diagnostics industryincludes Product Manager of Immunology at PacificDiagnostics. He established Leroda Pty Ltd and is thedesigner of PathFinder, an automated pathology specimen and sample management instrument.

Les holds a Bachelor of Applied Science degree inMedical Technology from the Queensland Universityof Technology.

Tim Bosher (BComm (Hons), MBA, FCPA)

Non Executive Director

Tim has more than 28 years experience in management,specialising in finance and investment.

He is currently a non-executive Director of Ci TechnologiesGroup Limited (ASX listed) and has held a number of positions with that company during the past ten yearsincluding Chairman, Managing Director and Finance Director.

He holds a Bachelor of Commerce (First Class Honours)from the University of Queensland and an MBA from theUniversity of Hawaii. He is a Fellow, CPA Australia.

PanBio has received a range of national and state awardsincluding the Australian Quality Award.

From top, left to right: Phillip Auckland,

John Kapeleris, Carl Stubbings, Helene Paxton,

Dr Graeme Barnett, Helen Jennings,

Barbara Wyatt and Geoff Lambkin

Phillip Auckland (BBus (Acctg), FCPA)

Chief Financial Officer and Company Secretary

Phillip has 20 years experience in finance, accounting,corporate planning and general management.

Before joining PanBio in 1997, Phillip was a Director of amotor retail operation with two sites and four franchisesin northern New South Wales; General Manager for alarge metropolitan motor retail operation with four sitesand five franchises; State Dealer Development andAdministration Manager for Mazda Australia; andFinancial Analyst for JRA Ltd.

He has also held accounting positions in the finance,construction and manufacturing sectors, and hasworked in audit with Hungerford Hancock & Offner.

Phillip is FCPA qualified and holds a Bachelor ofBusiness (Accounting) from the Queensland University of Technology.

John Kapeleris, (BSc (Hons), Grad Dip Mgt, MBA, MASM, AIMM)

Marketing Manager

John joined PanBio in 1991, and has held several seniorpositions including Research Scientist, QualityAssurance Manager and R&D Manager. In 1995, he wasappointed Business Development Manager and in 1998became Marketing Manager. He is currently responsiblefor sales, marketing and customer service.

In 1994, John was a finalist in the Young Achiever Awardsfor his contribution to the biotechnology industry.

Before joining PanBio, he was a scientist with QueenslandMedical Laboratories.

John holds a Bachelor of Science (Honours) and anMBA from the University of Queensland and has 12 years experience in the diagnostics industry.

Carl Stubbings (BAppSc)

Vice President - PanBio InDx Inc. USA

Carl has 20 years experience in sales and marketing in thehealth care industry with specific experience in diagnostics,nuclear medicine, life sciences and private pathology.

Before joining PanBio in 1997, Carl was BusinessDevelopment Manager for Sydney Diagnostic Servicesand Area Manager for Asia Pacific for Gelman Sciences(USA). His other positions have included Sales andMarketing Manager for Australian Radioisotopes andNational Sales Manager for Pacific Diagnostics.

Helene Paxton (MA, MT (ASCP))

Vice President - PanBio InDx Inc. USA

Helene has more than 25 years experience in the fields ofpathology, immunology and medical diagnostics. She isthe founder and former President of IntegratedDiagnostics Inc, acquired by PanBio in 1999.

Previously, Helene was Co-Department Head ofImmunology and Virology at the Maryland MedicalLaboratory Inc. She has also worked in marketing atKallestad Laboratories.

Helene holds a Master of Arts degree and is a qualifiedmedical technologist. She has published chapters of abook on clinical immunology and numerous papers.

35

Senior Management

Senior Management

Dr Graeme Barnett (BSc, Dip. Sc, MSc, PhD)

Research Manager

Graeme has 23 years experience in medical microbiologyand virology.

He has been Research Manager for Fluid Phase Systemsand New Technologies at PanBio since 1996.

Other positions during his career include ScientificOfficer in paediatric microbiology at the ChristchurchSchool of Medicine, Clinical Scientific Officer in microbiology at Royal North Shore Hospital in Sydneyand the Newcastle Mater Hospital and Principal Scientistand Scientific Director of Virology in the Virology Unit ofthe Hunter Area Pathology Service.

Graeme has written a number of research papers andhas also contributed to four PanBio patents.

Graeme holds a Bachelor's degree, a Post-GraduateDiploma and a Master's degree in microbiology from theUniversity of Otago, a PhD in the serology of infectionand virology from the University of Newcastle and is aMember of the Australian Society for Microbiology.

Helen Jennings (BAppSc)

Quality Manager

Helen has extensive experience in science and management. She was appointed Quality Manager at PanBio in 1994 after commencing work with theCompany as a research/quality control Scientist in 1989.

Prior to working with PanBio, Helen was a scientist atSullivan and Nicolaides Pathology Laboratory.

Helen holds a Bachelor of Science from the QueenslandUniversity of Technology.

Barbara Wyatt (Assoc. Dip. Clin. Lab. Tech.)

Operations Manager

Barbara has more than 20 years experience as aResearch and Laboratory Technician. She commencedwork with PanBio in 1990 and has been responsible forcoordinating all facets of the manufacturing process and the logistics of other key business activities within the Company.

Barbara holds an Associate Diploma in Clinical Laboratory Techniques from the Queensland University of Technology.

Geoff Lambkin (BAppSc)

Production Manager

Geoff has over 26 years experience in medical diagnosticsand manufacturing and was a founding member of thePanBio scientific staff. He was involved in the development of the Company's first test kit for Ross Riverinfection and is currently responsible for the development,manufacture and quality improvement of ELISA test kits.

Prior to joining PanBio, Geoff held the position of senior scientist in the Serology Department of SullivanNicolaides Pathology.

He holds a Bachelor of Applied Science from theQueensland University of Technology.

36

Financial Information 63

37

Financial Information

38

6.1 Introduction

The table below summarises the financial performance of PanBio and its business for the financial years ended 30 June 1998, 30 June 1999, 30 June 2000, the six months to 31 December 2000 as well as the Directors' Forecasts for the financial years ending 30 June 2001 and 30 June 2002.

The historical financial information is discussed in detail in the Investigating Accountant's Report in Section 8 of the Prospectus.The historical financial results have been audited. The results for the years ended 30 June 1999 and 30 June 2000 were audited byDeloitte Touche Tohmatsu. The results for the half-year ended 31 December 2000 were reviewed by Deloitte Touche Tohmatsu.Deloitte Corporate Finance Pty Ltd has expressed their opinion on the forecasts in Section 9.

HISTORICAL FORECAST


$000s $000s $000s $000s $000s $000s




Net interest (51) (18) (135) (98) 16 88Profit before tax 172 188 6 470 37 (1,834)Income tax expense - - (2) (217) (170) -



Notes:1 Operating revenue in the above table excludes Government grants for the purposes of R&D, CRC income and interest revenue.2 EBITDAR - Earnings Before Interest, Tax, Depreciation, Amortisation and R&D.3 The Company has a policy to expense all R&D expenditure as it is incurred.4 EBIT to the half-year to 31 December 2000 includes revenue from the CRC for Diagnostic Technologies from a technology sale in the amount of $316,081.


5 The Revenue multiple is based upon the Company's market capitalisation of $51 million at the date of the Offer Price following completion of the Offer.

39

($000)

Summary of PanBio ’s H istor i ca l and Forecast Operat ing Revenue1989 - 2002

1988/99 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02

Op

er

at

ing

Re

ve

nu

e (

$0

00

)

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Forecast Operating Revenue

Actual Operating Revenue

6.2 Review of Historical and Forecast Results

Operating Revenue

PanBio's operating revenue has grown consistently since its inception. This revenue growth has come through the expansion of PanBio's product range to over 60 diagnostic kits, through increasing its Australian domestic sales volume, and throughexpanding its exports. The graph below shows PanBio's historical operating revenue for the 12.5 years to 31 December 2000 and the forecast operating revenue for the financial years ending 30 June 2001 and 2002.

Financial Year


40

For the years to 30 June 2001 and 2002, the Directorsexpect PanBio to achieve revenue growth in excess ofthat achieved in 2000. This expected revenue growthreflects the following factors:• Continued growth in PanBio's underlying business

as sales to PanBio's customer base and range of diagnostic products continues to expand. The Directors believe that market penetration in current export markets can be improved through increased resources being invested in distributor management and support.

• Expansion of PanBio's products into new

geographical markets. PanBio intends to direct approximately $2.6 million of the float proceeds towards the expansion of overseas sales including implementation of a marketing plan focussed on distributor development and management, technical support and market analysis.

• Increased revenue resulting from the acquisition

of PanBio InDx. PanBio acquired PanBio InDx on 18 November 1999 so the 2000 financial results encompass just over seven months of trading revenue. The revenue forecasts for 2001 and 2002 both incorporate 12 months of revenue from the United States based operations.

• Increased revenue associated with the availability

of the Dengue Fever rapid test. Revenue growth slowed in the 2000 financial year due to supply problems with the Company's largest selling product, the Dengue rapid card test. The product has been returned to market. The forecast for 2001 and 2002 assumes that further successful development is undertaken on the product which results in increased revenues from the sale of the product.

• Release of new ELISA, Nucleic Acid, and rapid

tests. The Directors expect to release a range of new products in the proven ELISA format, the recently released rapid strip test format, as well as Nucleic Acid tests. The new product focus is being directed primarily towards diseases with international market potential.

• Increased revenue resulting from investing of the

proceeds of the Offer in PanBio's business.

The application of funds and resources to areas such as Management Information Systems, e-commerce, production automation, and intellectual property management are expected to contribute to increased revenue.

Earnings Before Net Interest, Tax, Depreciation,

Amortisation and R&D (EBITDAR)

EBITDAR, as used herein, consists of profit or loss fromoperations before net interest, income tax, depreciation,amortisation and R&D expenditure. EBITDAR as a per-centage of total sales revenue is forecast to decreasefrom 21 per cent in 2000 to 14 per cent in the 2001 and2002 financial years as the Company focuses on buildingrevenue growth.

There are three factors causing the reduction in the EBITDAR margin over the forecast period:• The increase in global marketing and distributor

management costs in the 2002 year.• Additional costs associated with maintaining a public

company such as ASX listing fees, share registry fees, annual report preparation and distribution expenses andadditional professional fees.

• Factors relating to the acquisition of the United States operation affecting the 2001 year. On acquisition the United States operation had a lower EBITDAR ratio thanPanBio's Australian operation.

41

The Company has made an investment in Sales andMarketing in the United States in 2001 aimed at drivingrevenue growth there. This investment has a negativeimpact on the ratio for the United States operation in the short term, but is projected to increase sales by 38 per cent in the 2002 year, and improve the UnitedStates EBITDAR ratio.

R&D Expenditure

Since 1996, PanBio has increased its investment in R&D into a range of 13 to 20 per cent of its annualoperating revenue. The Company expects to increase its investment in R&D to approximately 23 per cent ofoperating revenue for the 2002 financial year. TheCompany has allocated approximately $6 million of thefloat proceeds to R&D initiatives. A summary of the keyinitiatives to be undertaken over the forecast period isoutlined in Section 4.3 of this Prospectus.

Since the 1997 financial year the Company has had apolicy of expensing all R&D expenditure in the year it is incurred. On this conservative basis of accounting and with the increased spending on R&D in the 2001and 2002 years the Directors have forecast a net lossafter tax of approximately $0.1 million in 2001 and $1.8 million in 2002.

6.3 Key Forecast Assumptions

Forecasts are, by their nature, subject to uncertainty andthe unexpected. Events may differ from those forecastand the differences may be material. Accordingly, no guarantee or assurance can be given that the Directors'Forecasts will be achieved.

Some specific risk factors, which may influence the business and may impact on the Forecast, are discussed in Section 7. Other factors influencing the business are discussed throughout this Prospectus. In addition, the analysis headed "Sensitivity Analysis" in Section 6.4 indicates the sensitivity of the forecast tochanges in a number of key assumptions.

The principal assumptions underlying the Directors'Forecasts for the years ending 30 June 2001 and 2002are described below. The Forecasts have been preparedby the Directors using best estimate assumptions andwere subject to an independent review by DeloitteCorporate Finance Pty Ltd who concluded that the forecasts, in all material respects, reflect the Directors'assumptions and are presented on a basis consistent with the Australian Accounting Standards applied by the Company.

Deloitte Corporate Finance Pty Ltd have indicated thatnothing has come to its attention which causes it tobelieve that the Directors' assumptions do not provide areasonable basis for the Forecasts and the Forecasts areproperly prepared in accordance with the assumptions.

The Forecasts must be read in conjunction with thisProspectus in its entirety, and, in particular, after reviewingthe assumptions, the sensitivity analysis below, risk factorsin Section 7, and the report on the Directors' Forecasts inSection 9.


42

Key Assumptions

The following are the key assumptions underlying theDirectors' Forecasts:

Operating Revenue Assumptions

• Operating revenue is forecast to increase by approximately 50 per cent in 2001, from $7.7 million in 2000 to $11.4 million in 2001. Operating revenue is forecast to grow to approximately $15 million in 2002,which represents a 32 per cent increase on the 2001 financial year. The revenue forecasts are based upon PanBio management's assessment (having regard to past experience), contracts that are already in place, expected future customer demand and market trends in health care, and the ability of and timeframe within which the Company will further develop existing products and commercialise new products.

Gross Margin and Cost of Sales Assumptions

• The forecast cost of sales represent the Directors'

expected cost of diagnostic product components

based on past experience, current supply and/or

manufacturing agreements, and agreements currently

under negotiation.

• Increases in international export sales are expected to

be accompanied by reducing product margins. The

Directors anticipate pressure on margins to result from

increasing demands from the Company's extensive

international distributor network. However, reduced

margins on export sales are expected to be partly

compensated by the release of new products with

higher margins throughout the forecast period.

Operating Cost Assumptions

• Operating expenses have been based on the management's assessment, according to both past experience and anticipated requirements. Operating costs have been forecast to allow for current cost structures and planned new initiatives including:- Changes to the Company's organisational structure

and the appointment of additional staff in R&D, marketing and production to support the planned growth.

- Capital expenditure on systems, automated manufacturing equipment and building improvements.

- R&D expenditure on currently identified projects.- Export market expansion costs including increases

in travel, advertising and promotion, and a further off-shore office.

- The inclusion of public company costs such as ASX listing fees, annual report preparation and share registry costs.

• Beyond the initiatives outlined above, the Company intends to seek additional technology and product development opportunities. The Directors have made additional allowances in the forecasts for R&D, patenting and licensing to cover these expenditures.

Other Assumptions

• Interest income has been estimated assuming a rate of 5 per cent for 2001 and 3.5 per cent for 2002 on cash balances.

• Debtors will meet their financial obligations to PanBio on an average of 50 days and PanBio will pay its creditors on a 30 day cycle excepting foreign suppliers offering 60 day terms.

• Income tax expense has been based upon the corporatetax rate of 34 per cent for the year ending 30 June 2001and 30 per cent for the year ending 30 June 2002. The Company has also assumed a concessional 125 per centtax deduction rate applicable to eligible R&D expenditure.

• The United States dollar to Australian dollar exchange rate will be United States 59 cents per A$1.00 for the balance of the 2001 financial year, and United States 62 cents per A$1.00 for the 2002 financial year.

Operating revenue is forecast to increase by approximately 50 per cent in 2001,from $7.7 million in 2000 to $11.4 million in 2001.


44

General Assumptions

The following general assumptions have been made inpreparing the forecasts:• There will be no significant changes to the statutory,

legal and regulatory environments which would have amaterially adverse affect on the Company.

• There will be no significant changes in the prevailing economic conditions in Australia.

• There will be no material amendments to any agreement regarding PanBio's business.

• There will be no change in the accounting policies prescribed by Australian Accounting Standards, Statement of Accounting Concepts and other mandatoryprofessional reporting requirements which may have amaterial effect on PanBio's accounts.

• There will be no material change in the competitive environment.

• There will be no litigation that may materially affect revenues or expenses of the Company.

• Good relations with employees will continue and therewill be no major industrial disputes or disturbances.

• The Offer will be fully subscribed and the Company will receive, by April 2001, an amount of $17 million before deducting issue costs of approximately $1.7 million. The Company anticipates that GST on these costs will be approximately $100,000.

• There will be no change in PanBio's capital structure during the forecast period, other than explained in this Offer.

• There will be no dividends paid during the forecast period (2001 and 2002).

6.4 Sensitivity Analysis

The forecasts for the financial years ending 30 June 2001and 30 June 2002 are sensitive to variations in certainassumptions used in this preparation. A summary of theeffect these variations may have on the forecasts is outlinedin the table below. Care should be taken in interpretingthese sensitivities as they are shown in isolation when, in most cases, the variations are interdependent.

It should also be noted that PanBio's business allows somediscretion in managing operating costs, enabling somedegree of counter measures in the event of unexpectedproblems which are not allowed for in the sensitivities.

The effects of movements in a variable may be offset orcompounded by movements in other variables. The effecton earnings before interest, tax, depreciation, amortisationand research and development expenditure presented foreach sensitivity is not intended to be indicative or predictiveof the likely range of outcomes to be experienced withrespect to each sensitivity.

The sensitivities have been stated on the basis of EBITDAR for the financial year ending 30 June 2001 and30 June 2002, assuming no change in any other variable.

Key Assumptions / Change Impact on Impact onVariables EBITDAR for EBITDAR for

FYE 2001 FYE 2002$000s $000s

Sales +/- 10 per cent 599 844Gross margin percentages +/- 5 per cent 567 744on related salesExchange rate* $A/$US + 5 cents 9 (228)Exchange rate* - 5 cents (9) 268

* Note from June 2001 a significant portion of the Company’s earnings will be in US dollars.

Risk Factors 7

45

Risk Factors

46

7.1 Risk Factors

Like all businesses, PanBio is subject to risks and there aremany factors which may impact on the future performanceof the Company. Although some of these risks can bemitigated by the use of safeguards and appropriate systemsand actions, many are outside the control of theDirectors and the Company.

Potential applicants for Shares in PanBio should carefullyconsider the risk factors detailed below, in addition tothe other information included in this Prospectus.

7.2 Risks Specific to PanBio's Operations

Reliance on Key Personnel

PanBio currently employs a number of key management,scientific and technical personnel. In addition, PanBiobelieves that its future success depends, in part, on itsability to attract and retain suitably qualified management,scientific and technical personnel. Competition for suchpersonnel is intense.

PanBio has an Employee Share Plan and an EmployeeOption Plan (the provisions of which are summarised inSection 10) which are aimed at providing incentives, promoting the recruitment and retention of key personneland linking employee performance with overall Companyperformance. The Employee Share Plan and EmployeeOption Plan do not guarantee PanBio will be successfulin attracting and retaining such personnel and failure todo so may adversely affect PanBio's business, operatingresults and financial condition.

Licensing and Compliance with

Regulatory Requirements

In order for the Company to continue operating it requireslicences from various regulatory authorities in various jurisdictions including a licence under the TherapeuticGoods Act in Australia and approvals and/or licencesunder the Federal Food, Drug and Cosmetic Act and the United States Public Health Service Act in the UnitedStates. If any of these licences are suspended, withdrawnor cancelled this will impact on the Company's ability tocontinue its business.

The Company has commenced seeking registration of itsAustralian manufactured products with the FDA in theUnited States to enable it to sell those products in theUnited States. There is no guarantee that registration willbe granted. If it is not granted this may adversely impacton the Company's revenue.

Dependence on Collaboration

and Commercial Arrangements

PanBio relies on a number of collaborative and commercial arrangements to carry out R&D and to market, distribute and manufacture the Company's products. The most important of these collaborativearrangements are outlined in Section 4 and PanBio'smaterial contracts are summarised in Section 10. If any of the parties to these arrangements are unable to carryout their obligations under their arrangements with theCompany, or if any commercial arrangement is breached,discontinued or terminated, this may impact on theCompany's ability to market, distribute, sell and manufacture its products.

47

Intellectual Property and Patent Protection

The commercial success of the Company depends inpart on its ability (and that of its licensors) to obtainpatent protection for products in major markets and topreserve the intellectual property of PanBio and its collaborators. The current status of PanBio's patentsand patent applications are set out in Section 4.2.6. No assurance is given that PanBio will develop technologyor products which are patentable or that patents will begranted on pending or future applications. If patents aregranted, there is no guarantee they will be sufficientlybroad to protect PanBio's intellectual property rights andexclude competitors with similar technology. Substantialcosts may be incurred if PanBio is required to defend itsintellectual property rights against third parties. There isno assurance that obligations to maintain the intellectualproperty of PanBio will not be breached or otherwisebecome known in a manner which provides PanBio withno practical recourse.

Patent applications are generally not published until 18months after the date of priority applications, and in theUnited States may not be published until the time ofgrant. Details of new discoveries tend to become publicknowledge only some time after the actual discoveryand PanBio cannot be certain that it or its licensors werethe first to make the inventions covered by each pendingapplication or that PanBio or its licensors were the firstto file applications for such inventions. No assurance canbe given that any patents granted to PanBio or its licensorswill not be challenged, invalidated or circumvented orthat the rights granted thereunder will provide competitiveadvantages to PanBio.

The commercial success of PanBio will also depend in parton non-infringement of patents granted to third parties.Competitors or potential competitors may have filedapplications for, or may have been granted, patents ormay obtain additional patents that arguably dominatethe products of PanBio or the technology it employs.

If patents granted to third parties contain claims embracingPanBio's products or technology, PanBio may have to obtainappropriate licences under these patents, to cease or altercertain activities or processes, or to develop or obtainalternative technology. There can be no assurance that, ifany licences are required, PanBio will be able to obtain anysuch licence on commercially favourable terms, if at all.

Know-how forms an important part of the intellectualproperty rights owned by the Company. Know-how is the intangible knowledge of the Company, whether in the minds of its employees or recorded in Company documents, processes and procedures. Know-how maybe lost if key personnel cease to be employed by theCompany. Know-how is difficult to formally protect and,although the Company's employment contracts and thegeneral law protect rights in confidential information, thereare limits to that protection, and know-how used by theCompany may be gained by the Company's competitorsif key personnel are employed by those competitors.

Product Development

There are many risks inherent in the development andcommercialisation of diagnostic products and other medical products. Some diagnostic products are subjectto scrutiny by regulatory authorities which may result indelays or even a failure to release the product to market.PanBio cannot guarantee that its R&D will result in marketable products. The Company's forecast revenueassumes that further successful product development will be undertaken on the Company's existing products. If the Company is unable to further develop and/or commercialise products as forecast this may adverselyimpact on the Company's revenue.

Risk Factors

48

Product Liability

PanBio's business activities expose it to potential productliability risks which are inherent in R&D, preclinical studies,clinical trials, manufacturing, sales and marketing and theuse of diagnostic products. There can be no assurancethat future insurance cover will be available to the Companyat an acceptable cost, if at all, or that, in the event of anyclaim, the level of insurance carried by the Company nowor in the future will be adequate or that a product liabilityor other claim would not materially and adversely affectPanBio's business, operating results and financial condition.

International Operations

A large proportion of PanBio's revenues are earned incurrencies other than the Australian dollar. In addition, ifPanBio's diagnostics development program expandsoverseas, then a proportion of PanBio's expenses maybe incurred in currencies other than the Australian dollar.Consequently, in the absence of PanBio entering intoappropriate hedging arrangements, volatility in theAustralian dollar exchange rates could result in fluctuationsin PanBio's operating results and financial condition.

In addition, PanBio will also be subject to any changesto the political or legal environments in countries inwhich it operates.

7.3 Industry Risks

Competition

PanBio's current and future potential competitors include,among others, major diagnostics and biotechnology companies with substantially greater resources than theCompany. There is no assurance that competitors will notsucceed in developing products that are more effective oreconomic than any of those being developed by PanBioor which would render PanBio's products obsolete and/orotherwise uncompetitive. In addition, PanBio may not beable to compete successfully against current or futurecompetitors where aggressive pricing policies are employedto capture market share. Such competition could result inprice reductions, reduced gross margins and loss of marketshare, any of which could materially adversely affectPanBio's business, operating results and financial position.

7.4 General Investment Risks

General Stockmarket Risk

Investors should recognise that there are risks associatedwith any share investment. The price at which the Company'sShares trade may rise above or fall below the Offer Price,depending on many factors, including local and internationalstock markets, movements in interest rates, economicconditions, changes in Government policy and investorsentiment. In particular, investors should recognise thatthe biotechnology sector of the stockmarket can be morevolatile than the stockmarket generally, which may result inlarge fluctuations in the Company's Share price.

Changes in Government Policy

Any change in Government fiscal, monetary, regulatory or foreign policy may affect PanBio's business.

Investigating Accountant’s Report 8

49

50

21 February 2001

The DirectorsPanBio Limited116 Lutwyche RoadWINDSOR QLD 4030

Dear Sirs,

Investigating Accountant’s Report

Introduction

This Report has been prepared at the request of the Directors of PanBio Limited (“PanBio”) for inclusion in a Prospectus to be dated on or about21 February 2001 inviting participation in the issue of up to 17,000,000 fully paid ordinary Shares in PanBio at an issue price of $1.00 per Share.

Background

The Company was incorporated as Batdel Pty Ltd on 16 June 1987. On 9 February 1988 the name of the Company was changed to Kinetic Pty Ltdand began operations manufacturing and selling reagents. Research and development on the current diagnostics test kit business commenced in1991. The reagent business was sold in 1993 and the name of the Company was changed to PanBio Pty Ltd. The Company then fully pursued thedevelopment and manufacture of diagnostic test kits for infectious diseases. On 18 November 1999 the Company acquired the business assets ofIntegrated Diagnostics Inc. through their subsidiary, PanBio InDx Inc. for a combination of cash and notes payable in instalments over 3 years. The Company was changed to an unlisted public company on 30 November 2000.

During the half-year ended 31 December 2000, 692 shares were issued for a total consideration of $9,147. As at 31 December 2000 the Companyhad 506,829 shares on issue.

A bonus issue of 32,515,839 Shares to existing shareholders and 977,332 Shares to employees was made prior to the issue of this Prospectus toeffect the market capitalisation upon listing.

Scope of Report

The Directors have requested Deloitte Touche Tohmatsu to prepare an Investigating Accountant’s Report, which is to include the following information:

• The consolidated profit and loss statement of PanBio for the half-year ended 31 December 2000, and the financial years ended 30 June 1998,1999 and 2000;

• The consolidated balance sheet and consolidated statement of cash flows of PanBio for the half-year ended 31 December 2000, and the financial year ended 30 June 2000;

• The proforma consolidated balance sheet of PanBio as at 31 December 2000 adjusted to include the funds proposed to be raised by thisProspectus; and

• Notes to the financial information.

The proforma consolidated balance sheet has been prepared by the Company on a going concern basis. Accordingly, the amounts at whichassets are disclosed in this Report do not purport to be the amounts that would be realised if such assets were sold at the date of this Report.

This Report has been prepared to provide investors with information on the historical performance and state of affairs of PanBio. This Report doesnot address the rights attaching to the Shares to be issued in accordance with the Prospectus, or the risks associated with such an investment.

The historical information for the financial years ended 30 June 1998, 1999 and 2000 has been extracted from the audited financial reports pertaining to these periods.

Deloitte Touche Tohmatsu audited the financial statements of PanBio for the years ended 30 June 1999 and 2000. Another firm audited the financial statements of PanBio for the year ended 30 June 1998.

The audit of PanBio was conducted in accordance with Australian Auditing Standards. Our procedures included examination, on a test basis, ofevidence supporting the amounts and other disclosures in the financial report, and the evaluation of significant accounting estimates. These procedures were undertaken to form an opinion as to whether, in all material respects, the financial report was presented fairly in accordance withAccounting Standards and other mandatory reporting requirements.

The historical information for the half-year ended 31 December 2000 was extracted from the financial report for that period, which has been subjectto review.

We have reviewed the financial information for the half-year ended 31 December 2000 and the proforma as at 31 December 2000. Our review hasbeen conducted in accordance with Australian Auditing Standard AUS 902 “Review of Financial Reports”. Our review was limited primarily toinquiries of company personnel, review of the historical and proforma financial information, analytical procedures applied to the financial data, performance of certain limited verification procedures and comparison of consistency in the application of accounting standards and policies.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in anaudit. We have not performed an audit and, accordingly, we do not express an audit opinion on the financial information for the half-year ended 31 December 2000 and the proforma information as at that date.

Deloitte Touche Tohmatsu A.B.N. 19 003 833 127Riverside CentreLevel 25 & 26123 Eagle StreetBrisbane QLD 4001GPO Box 1463Brisbane QLD 4001 Australia

DX115Telephone (07) 3308 7000Facsimile (07) 3308 7001www.deloitte.com.au

51

Opinion on Historical Financial Information

In our opinion:

• the consolidated profit and loss statement for the financial years ended 30 June 1998, 1999 and 2000;

• the consolidated statement of cash flows for the financial year ended 30 June 2000; and

• the consolidated balance sheet as at 30 June 2000

together with the notes thereto of PanBio is presented fairly in accordance with applicable Accounting Standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and the accounting policies adopted by PanBio as described inAnnexure 4.

Review Statement on Historical Financial Information

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the financial information as setout in Annexures 1, 2, 3 and 4 does not present fairly:

• the consolidated profit and loss statement, statement of cash flows and notes thereto of PanBio for the half-year ended 31 December2000; and

• the consolidated balance sheet of PanBio as at 31 December 2000;

in accordance with applicable Australian Accounting Standards and other mandatory professional reporting requirements and the accountingpolicies adopted by PanBio as described in the Annexure 4.

Review Statement on Proforma Financial Information

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the proforma financial information as set out in the Annexures to this Report does not present fairly the proforma consolidated balance sheet and cash flows ofPanBio as at 31 December 2000 on the basis of the assumptions used in its preparation as described in Note 1 of Annexure 4.

Subsequent Events

Subsequent to 31 December 2000 and up to the date of this Report, nothing has come to our attention that would cause us to believe material transactions or events outside the ordinary course of business of PanBio have occurred, other than the matters dealt with in thisReport, which would require comment on, or adjustment to, the information contained in this Report, or which would cause such informationto be misleading.

Yours faithfully

DELOITTE TOUCHE TOHMATSU

Sarah Merridew

Partner

Chartered Accountants

The liability of Deloitte Touche Tohmatsu, is limited by, and to the extent of, the Accountants’ Scheme under the Professional Standards Act 1994 (NSW).

52

Note Audited Audited Audited Reviewed

Year Ended Year Ended Year Ended half-year Ended

30 June 98 30 June 99 30 June 00 31 Dec 00

$ $ $ $

Operating revenue 2 5,294,504 6,600,081 7,905,462 5,692,852

Earnings before interest, tax, depreciationamortisation and research and development expense 1,142,997 1,584,977 1,612,065 952,251

Less: Research and development expense 2 (719,965) (1,331,159) (1,366,075) (766,766)

Plus: Research and development Grants and CRC income 2 - 171,400 226,067 577,934

Less: Depreciation and amortisation 2 (200,500) (219,362) (330,622) (196,176)

Earnings before interest and tax 222,532 205,856 141,435 567,243

Net interest expense (50,677) (18,127) (135,162) (97,550)

Operating profit before tax 2 171,855 187,729 6,273 469,693

Income tax attributable to operating profit 3 - - (2,725) (217,286)

Operating profit after income tax 171,855 187,729 3,548 252,407

Retained profits at the beginning of the financial year 933,071 1,054,869 1,191,984 1,195,532

Total available for appropriation 1,104,926 1,242,598 1,195,532 1,447,939

Dividends provided for or paid (50,057) (50,614) - -

Retained profits at the end of the financial year 1,054,869 1,191,984 1,195,532 1,447,939

Notes to the historical financial information are contained in Annexure 4.

Historical Profit and LossStatement

Annexure 1

PanBio Limited

Historical and Proforma Balance Sheet

53

Note Audited Reviewed Reviewed

Year Ended half-year Ended Proforma

30 June 00 31 Dec 00 31 Dec 00

$ $ $

Current Assets

Cash 47,184 107,023 15,576,984 Inventories 5 1,855,783 2,138,563 2,138,563 Receivables 6 1,361,491 1,840,357 1,840,357 Investments 7 291 291 291 Other 8 102,734 312,662 142,701

Total current assets 3,367,483 4,398,896 19,698,896

Non-Current Assets

Property, plant and equipment 9 2,590,046 2,626,509 2,626,509 Intangibles 10 662,881 602,749 602,749 Investments 11 - 398,081 398,081 Other assets 12 86,706 95,341 95,341

Total non-current assets 3,339,633 3,722,680 3,722,680

Total assets 6,707,116 8,121,576 23,421,576

Current Liabilities

Accounts payable 13 1,193,417 1,722,014 1,722,014 Borrowings 14 407,022 943,058 943,058 Provisions 15 272,286 499,727 499,727

Total current liabilities 1,872,725 3,164,799 3,164,799

Non-Current Liabilities

Accounts payable 16 5,756 - - Borrowings 17 2,231,654 1,999,434 1,999,434 Provisions 18 59,639 76,581 76,581

Total non-current liabilities 2,297,049 2,076,015 2,076,015

Total liabilities 4,169,774 5,240,814 5,240,814

Net assets 2,537,342 2,880,762 18,180,762

Equity

Issued capital 19 556,384 565,531 15,865,531 Reserves 20 785,426 867,292 867,292 Retained profits 1,195,532 1,447,939 1,447,939

Total equity 2,537,342 2,880,762 18,180,762

Notes to the historical and proforma balance sheet are contained in Annexure 4.

Annexure 2

PanBio Limited

Historical and Proforma Statement of Cash Flows

54

Note Audited Reviewed Reviewed


30 June 00 31 Dec 00 31 Dec 00

$ $ $

Cash Flows from Operating Activities

Receipts from customers 7,458,820 5,122,243 5,122,243 Payments to suppliers and employees (7,365,609) (4,970,015) (4,970,015) Interest received 2,928 474 474 Interest and other costs of finance paid (174,836) (74,744) (74,744)

Net cash provided by/(used in) operating activities 29(e) (78,697) 77,958 77,958

Cash Flows from Investing Activities

Proceeds from sale of investment securities 1,146 - - Payment for property, plant and equipment (169,890) (174,591) (174,591) Proceeds from sale of property, plant and equipment 16,259 - - Payment for intangibles (81,986) - - Payment for businesses 29(b) (816,193) - -

Net cash provided by/(used in) investing activities (1,050,664) (174,591) (174,591)

Cash Flows from Financing Activities

Proceeds from borrowings 1,670,000 44,491 44,491 Proceeds from share issue - 9,147 17,009,147 Capital raising costs - (169,961) (1,700,000) Repayment of borrowings (901,258) - - Repayment of notes - (170,397) (170,397) Repayment of finance leases - (56,693) (56,693)

Net cash provided by/(used in) financing activities 768,742 (343,413) 15,126,548

Net increase/(decrease) in cash held (360,619) (440,046) 15,029,915

Cash at the beginning of the financial year 180,418 (116,187) (116,187)

Effects of exchange rate changes on the balance of cash held in foreign currencies 64,014 75,486 75,486

Cash at the end of the financial year 29(a) (116,187) (480,747) 14,989,214

Notes to the historcial and proforma cash flows are contained in Annexure 4.

Annexure 3

PanBio Limited

NotesHistorical and Proforma Financial Statements

1. Summary of Accounting Policies

Financial Reporting Framework

The financial information included in this report has beenprepared in accordance with the measurement requirementsof the applicable Accounting Standard and Urgent IssuesGroup Consensus Views. Disclosure requirements of theapplicable Accounting Standards have only been applied asconsidered relevant and appropriate.

The financial report has been prepared on the basis of historical cost and except where stated, does not take intoaccount changing money values or current valuations ofnon-current assets. Cost is based on the fair values of theconsideration given in exchange for assets.

Significant Accounting Policies

Accounting policies are selected and applied in a mannerwhich ensures that the resulting financial information satisfies the concepts of relevance and reliability, therebyensuring that the substance of the underlying transactionsor other events is reported.

The following significant accounting policies have beenadopted in the preparation and presentation of the financial report:

(a) Accounts Payable

Trade payables and other accounts payable are recognisedwhen the economic entity becomes obliged to make futurepayments resulting from the purchase of goods and services.

(b) Acquisition of Assets

Assets acquired are recorded at the cost of acquisition,being the purchase consideration determined as at the dateof acquisition plus costs incidental to the acquisition.

(c) Borrowings

Bills of exchange are recorded at an amount equal to thenet proceeds received, with the premium or discount amortised over the period until maturity. Interest expense is recognised on an effective yield basis.

(d) Capital Gains Tax

No provision has been made for capital gains tax which mayarise in the event of sale of revalued assets as no decisionhas been made to sell any of these assets.

(e) Capital Raising Costs

During the half-year ended 31 December 2000, the companyincurred capital raising costs in preparation for an Initial PublicOffering on the Australian Stock Exchange. These costsinclude professional fees from legal advisors, corporate advisors and investigating accountants. As at 31 December2000, these costs have been capitalised as other currentassets. Upon successful completion of the capital raising,these costs will be offset against the proceeds of the raising.The proforma balance sheet reflects this treatment.

(f) Comparative Figures

Comparative figures are, where appropriate, reclassified so asto be comparable with the figures presented for the currentfinancial year.

(g) Cooperative Research Centre

PanBio Limited is the sole commercial partner in the CRC forDiagnostic Technologies. The company's share of revenuefrom the commercialisation of technology is recognised asearned.

(h) Depreciation

Depreciation is provided on property, plant and equipment,excluding land. Depreciation is calculated on a straight linebasis or diminishing value depending on the asset so as towrite off the net cost or other revalued amount of each assetover its expected useful life. Leasehold improvements aredepreciated over the period of the lease or estimated usefullife, whichever is the shorter, using the straight line method.The following estimated useful lives are used in the calculationof depreciation:

Buildings 40 yearsLeasehold improvements 5 yearsPlant and equipment 2 - 15 yearsEquipment under finance lease 3 - 20 years

55

Annexure 4

PanBio Limited


(i) Employee Entitlements

Provision is made for benefits accruing to employees inrespect of wages and salaries, annual leave, long serviceleave when it is probable that settlement will be requiredand they are capable of being measured reliably.

Provisions made in respect of wages and salaries, annual leave, and long service leave and other employee entitlements expected to be settled within 12 months, aremeasured at their nominal values.

Provisions made in respect of other employee entitlementssuch as long service leave which are not expected to besettled within 12 months are measured as the present valueof the estimated future cash outflows to be made by theeconomic entity in respect of services provided by employees up to the reporting date.

(j) Foreign Currency

All foreign currency transactions during the financial year arebrought to account using the exchange rate in effect at ornear the date of the transaction. Foreign currency monetaryitems at reporting date are translated at the exchange rateexisting at that date.

Exchange differences are brought to account in the profitand loss statement in the period in which they arise exceptthat exchange differences on transactions entered into inorder to hedge the purchase or sale of specific goods andservices are deferred and included in the measurement ofthe purchase or sale.

Exchange differences relating to foreign currency monetaryitems forming part of the net investment in a self-sustainingforeign operation are transferred on consolidation to the foreign currency translation reserve.

Financial statements of self-sustaining foreign controlledentities are translated at reporting date using the currentrate method and exchange differences are taken directly to the foreign currency translation reserve.

(k) Goods and Services Tax

Revenues, expenses and assets are recognised net of theamount of goods and services tax (GST), except:

i. where the amount of GST incurred is not recoverable fromthe taxation authority, it is recognised as part of the cost ofacquisition of an asset or as part of an item of expense; or

ii. for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, thetaxation authority is included as part of receivables orpayables.

(l) Goodwill

Goodwill, representing the excess of the cost of acquisitionover the fair value of the identifiable net assets acquired, isamortised on a straight line basis over a period of 15 years.

(m) Income Tax

Tax-effect accounting principles are adopted whereby incometax expense is calculated on pre-tax accounting profits afteradjustment for permanent differences. The tax-effect of timingdifferences, which occur when items are included or allowedfor income tax purposes in a period different to that foraccounting, is shown at current taxation rates in provision fordeferred income tax and future income tax benefit, as applicable.

(n) Inventories

Inventories are valued at the lower of cost and net realisablevalue. Costs, including an appropriate portion of fixed andvariable overhead expenses, are assigned to inventory onhand by the method most appropriate to each particular classof inventory, with the majority being valued on a first in firstout basis.

(o) Investments

Investments in controlled entities are recorded at Directors’valuation based on the net tangible assets of each controlledentity. Interest revenue is recognised on an accruals basis.

56

Annexure 4

PanBio Limited


(p) Leased Assets

Leased assets classified as finance leases are capitalised asfixed assets. The amount initially brought to account is thepresent value of minimum lease payments.

A finance lease is one which effectively transfers from the lessor to the lessee substantially all the risks and benefits incidental to ownership of the leased property.

Capitalised leased assets are amortised on a straight linebasis over the estimated useful life of the asset.

Finance lease payments are allocated between interestexpense and reduction of lease liability over the term of thelease. The interest expense is determined by applying theinterest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.

Operating lease payments are recognised as an expense on a basis which reflects the pattern in which economic benefits from the leased asset are consumed.

(q) Patents, Trademarks and Licences

Patents and trademarks are expensed as incurred.Licences are recorded at cost and amortised completely inthe first 12 months in which they are used.

(r) Principles of Consolidation

The consolidated financial statements are prepared by combining the financial statements of all the entities thatcomprise the economic entity, being the company (the parent entity) and its controlled entities as defined inaccounting standard AASB 1024 “Consolidated Accounts”.A list of controlled entities appears in note 25 to the financialstatements. Consistent accounting policies are employed inthe preparation and presentation of the consolidated financial statements.

The consolidated financial statements include the information and results of each controlled entity from thedate on which the company obtains control and until suchtime as the company ceases to control such entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealisedprofits arising within the economic entity are eliminated in full.

(s) Receivables

Trade receivables and other receivables are recorded atamounts due less any provision for doubtful debts.

(t) Recoverable Amount of Non-Current Assets

Non-current assets are written down to recoverable amountwhere the carrying value of any non-current asset exceedsrecoverable amount. In determining the recoverable amountof non-current assets, the expected net cash flows have notbeen discounted to their present value.

(u) Research and Development Costs

Research and development costs are recognised as anexpense when incurred.

(v) Revenue Recognition

Sale of Goods and Disposal of AssetsRevenue from the sale of goods and disposal of other assetsis recognised when the economic entity has passed control of the goods or other assets to the buyer.

Grant RevenueRevenue from government grants is recorded when receivableif certain and the amount can be reliably determined.

(w) Assumptions used in preparing Proforma Financial Information

The Proforma consolidated balance sheet as at 31 December2000 and proforma consolidated statement of cash flows forthe half-year ended 31 December 2000 has been included forillustrative purposes only. The Proforma consolidated balancesheet has been prepared by adjusting the historical consolidated balance sheet 31 December 2000 to reflect thefinancial effect of the following transactions as if they hadoccurred at 31 December 2000:(a) The raising of $17,000,000 cash via a share issue under

the Prospectus;(b) The payment of issue expenses in relation to the Prospectus;(c) A bonus issue to existing Shareholders and employees

prior to the issue of the Prospectus; and(d) Transfer of expenses of the listing capitalised at

31 December 2000 to Shareholders equity.

The proforma balance sheet and statement of cash flows as at 31 December 2000 has been prepared using the following assumptions:(a) Costs of raising will amount to $1,700,000 (excl GST)

and include all fees for experts in relation to preparation,lodgement, underwriting and marketing of theProspectus; and

(b) The issue under this Prospectus is fully subscribed.57

Annexure 4

PanBio Limited


58

Audited Audited Audited Reviewed

Year Ended Year Ended Year Ended half-year Ended

30 June 98 30 June 99 30 June 00 31 Dec 00

$ $ $ $

2. Operating Profit

The operating profit before income tax includes the following items of revenue and expense:

Operating revenue

Sales revenue:

Sales of goods 5,216,197 6,235,089 7,573,892 5,366,023

Interest revenue:Other entities 21,531 4,330 4,137 474

Rental revenue 24,250 22,000 8,000 -

Government grants:Research and development - 171,400 144,067 251,564Other 32,526 80,987 74,357 60,000

CRC distribution - - 82,000 10,289

Other - 86,275 19,009 4,502

5,294,504 6,600,081 7,905,462 5,692,852

Non-operating revenue

CRC income from technology sale - - - 316,081

Proceeds from the sale of assets:Property, plant and equipment - - 16,258 -

5,294,504 6,600,081 7,921,720 6,008,933

Expenses

Finance lease finance charges 23,998 22,048 23,856 10,304

Interest - other entities 48,210 410 115,443 87,720

Bad debts written-off - 13,692 - -

Research and development 719,965 1,331,159 1,366,075 766,766

Depreciation of non-current assets:Property, plant and equipment 109,565 114,550 197,643 119,271

Inventory write-downs and other losses 50,946 39,020 104,748 85,401

Investment write-downs - - 1,146 -

Amortisation of non-current assets:Goodwill - - 22,141 21,901 Leased assets 90,935 104,812 101,092 44,238 Leasehold improvements - - 9,746 10,766

Net transfers to provisions:Employee entitlements 109,391 173,585 198,995 220,932 Provision for doubtful debts - - 7,267 2,778

Net foreign exchange loss - - 1,557 18,711

Annexure 4

PanBio Limited


59

Annexure 4

PanBio Limited

Audited Reviewed

Year Ended half-year Ended

30 June 00 31 Dec 00

$ $

3. Income Tax

(a) The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statements as follows:

Operating profit 6,273 469,693

Income tax expense calculated at 34% of operating profit (30 June 2000: 36%) 2,258 159,696

Permanent differences:

Research and development costs (66,464) (25,372)

Non-deductible expenses 13,738 15,922

Prior year tax losses offset against current year tax provision (5,628) -

Future income tax benefit not previously recognised now brought to account (64,887) -

Provision for deferred income tax not previously recognised now brought to account 28,948 -

Foreign losses not deductible in Australia 91,465 67,040

Effect on future income tax benefit and provision for deferred income tax due to the change in income tax rate from 36% to 34% (effective 1 July 2000) 3,295 -

Total permanent differences 467 57,590

Income tax expense attributable to operating profit 2,725 217,286

(b) Future income tax benefits not brought to account as assets:

Tax losses – revenue - -

Tax losses – capital - -

Timing differences - -

- -

The tax effect on profit before tax has not been disclosed for the 30 June 1998 and 1999 year as no tax was payable in those years due to accumulated tax losses.


60

Audited Audited Reviewed

Year Ended Year Ended half-year Ended

30 June 99 30 June 00 31 Dec 00

$ $ $

4. Directors’ Remuneration

The directors of PanBio Limited during the

period ended 31 December were:

Mr I. C. Sandford

Mr M. J. Bridges

Mr J. P. Kalokerinos

Mr L. R. Watson

Mr T. A. Bosher

The aggregate of income paid or payable,

or otherwise made available, in respect of

the financial year, to all directors of each

entity in the economic entity, directly or

indirectly, by the entities in which they are

directors or by any related party

307,363 335,486 200,665

Audited Reviewed Reviewed


30 June 00 31 Dec 00 31 Dec 00

$ $ $

5. Current Inventories

Raw materials - at cost 910,385 1,112,557 1,112,557

Work in progress - at cost 61,907 67,164 67,164

Finished goods - at cost 719,065 958,842 958,842

Stock in transit 164,426 - -

1,855,783 2,138,563 2,138,563

6. Current Receivables

Trade receivables 1,286,457 1,772,990 1,772,990

Provision for doubtful debts (7,267) (2,778) (2,778)

1,279,190 1,770,212 1,770,212

Loans advanced to controlled entities -

Sundry debtors 82,000 55,103 55,103

Goods and services tax recoverable 301 15,042 15,042

1,361,491 1,840,357 1,840,357

Annexure 4

PanBio Limited


61



30 June 00 31 Dec 00 31 Dec 00

$ $ $

7. Current Investments

Shares at Directors' valuation 291 291 291

8. Other Current Assets

Deposits 20,029 25,148 25,148

Capital raising costs - 169,961 -

Prepayments 82,705 117,553 117,553

102,734 312,662 142,704

The proforma balance sheet assumes that the capital raising is successful and therefore capital raising costs are written off against Share Capital.

9. Property, Plant And Equipment

Freehold land1998 independent valuation (i), (ii) 450,000 450,000 450,000

Freehold buildings:1998 independent valuation (i), (ii) 1,029,047 1,029,047 1,029,047 Accumulated depreciation (25,726) (38,695) (38,695)

1,003,321 990,352 990,352

Structural improvements:At cost 113,754 128,763 128,763 Accumulated depreciation (16,937) (29,585) (29,585)

96,817 99,178 99,178

Plant and equipment:At cost 1,492,231 1,692,472 1,692,472 Accumulated depreciation (700,143) (809,075) (809,075)

792,088 883,397 883,397

Equipment under finance lease:At capitalised cost 411,456 411,456 411,456 Accumulated amortisation (163,636) (207,874) (207,874)

247,820 203,582 203,582

2,590,046 2,626,509 2,626,509

(i) The revaluation of freehold land and buildings was performed in 1998 in accordance with an independent valuation by Mr Nicholas Wordsworth, FRICS, AAPI. The valuation has been performed on the basis of current market buying values. Directors have determined the allocation of the valuation between land and buildings. The valuation was not made in accordance with a regular policy of revaluation.

(ii) Potential capital gains tax was not taken into account in the revaluation of freehold land and buildings.

Annexure 4

PanBio Limited


62



30 June 00 31 Dec 00 31 Dec 00

$ $ $

10. Intangibles

Goodwill 606,151 651,620 651,620

Accumulated amortisation (25,256) (48,871) (48,871)

580,895 602,749 602,749

License fees 163,089 163,089 163,089

Accumulated amortisation (81,103) (163,089) (163,089)

81,986 - -

662,881 602,749 602,749

11. Non-Current Investments

CRC income reinvested - 398,081 398,081

12. Other Non-Current Assets

Future income tax benefit 86,706 95,341 95,341

13. Current Accounts Payable

Trade payables and accruals 1,193,417 1,675,077 1,675,077

Goods and services tax payable - 46,937 46,937

1,193,417 1,722,014 1,722,014

14. Current Borrowings

Unsecured:Notes payable 147,852 205,394 205,394

Secured:Bank overdraft (i) 163,371 587,770 587,770 Finance lease liabilities (ii) 95,799 105,769 105,769 Bank loan (iii) - 44,125 44,125

259,170 737,664 737,664

407,022 943,058 943,058

(i) Secured by:(a) Registered All Monies Mortgage by PanBio Limited over the property at 116 Lutwyche Road; (b) Mortgage Debenture by PanBio Limited over all assets and uncalled capital; (c) Limited Guarantee to an amount of $150,000 by Ian Campbell Sandford; (d) Limited Guarantee to an amount of $150,000 by Melvyn John Bridges; (e) Limited Guarantee to an amount of $150,000 by Leslie Robert Watson; and (f) Limited Guarantee to an amount of $150,000 by James Peter Kalokerinos.

(ii) Secured by the assets leased.

(iii) Secured by a letter of Credit from Westpac Banking Corporation

Annexure 4

PanBio Limited


63



30 June 00 31 Dec 00 31 Dec 00

$ $ $

15. Current Provisions

Income tax 58,721 289,972 289,972

Deferred income tax 30,710 25,380 25,380

Employee entitlements 182,855 184,375 184,375

272,286 499,727 499,727

16. Non-Current Accounts Payable

Accruals 5,756 - -

17. Non-Current Borrowings

Unsecured:Notes payable 393,702 217,841 217,841

Secured:Commercial bill facility (i) 1,670,000 1,670,000 1,670,000 Finance lease liabilities (ii) 167,952 111,593 111,593

1,837,952 1,781,593 1,781,593

2,231,654 1,999,434 1,999,434

(i) Secured by:(a) Registered All Monies Mortgage by PanBio Limited over the property at 116 Lutwyche Road; (b) Mortgage Debenture by PanBio Limited over all assets and uncalled capital; (c) Limited Guarantee to an amount of $150,000 by Ian Campbell Sandford; (d) Limited Guarantee to an amount of $150,000 by Melvyn John Bridges; (e) Limited Guarantee to an amount of $150,000 by Leslie Robert Watson; and (f) Limited Guarantee to an amount of $150,000 by James Peter Kalokerinos.

(ii) Secured by the assets leased.

18. Non-Current Provisions

Employee entitlements 59,639 76,581 76,581

Annexure 4

PanBio Limited


64



30 June 00 31 Dec 00 31 Dec 00

$ $ $

19. Issued Capital

Issued capital 556,384 565,531 15,865,531

Number of shares on issue 506,137 506,829 51,000,000

(a) Movement in share capital in $:Opening balance 556,384 556,384 565,531 Shares issued - 9,147 17,000,000 Expenses of issue - - (1,700,000)

Closing balance 556,384 565,531 15,865,531

(b) Balance of shares on issue:Opening balance 506,137 506,137 506,829 Shares issued to 31 December 2000 - 692 -Bonus issue to shareholders - - 32,515,839Shares issued to employees - - 977,332Shares issued under the prospectus - - 17,000,000

Closing balance 506,137 506,829 51,000,000

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(c) Employee Option Scheme (“EOS”):PanBio's EOS was approved at a meeting of Directors on 14 November 2000. Other than the costs incurred in administering the scheme, which are expensed as incurred, the scheme does not result in any expense to the Consolidated entity. On 14 November 2000, it was resolved to offer 900,000 Options to the Directors. The Directors have since accepted the offers. The Company has offered to issue 680,000 options to various employees. The Options are exercisable at $1.00 in 20 per cent parcels on the 1st to 4th anniversary dates with the first 20 per cent parcel being exercisable upon listing of the Company on the ASX. All Options issued to employees will have performance hurdles that must be met prior to exercise on the 1st to 4th anniversary dates. The Options expire on 20 February 2006.

(d) Future Share TransactionsErnst & Young Corporate Finance Pty Limited may, as its option, take 50 per cent of their Corporate Advisers GST inclusive fee ($79,750) as Shares at the Offer Price. The option must be exercised on or before the close of the Offer. This transaction will be in addition to the aboveShares on issue and has not been taken into account in the Proforma balance sheet as at 31 December 2000 due to its uncertain nature.

20. Reserves

(a) Reserves comprise

Asset revaluation 722,366 722,366 722,366

Foreign currency translation 63,060 144,926 144,926

785,426 867,292 867,292

(b) Movements in reserves

Foreign currency translation

Balance at the beginning of the financial year - 63,060 63,060

Translation of foreign operations 63,060 81,866 81,866

Balance at the end of the financial year 63,060 144,926 144,926

Annexure 4

PanBio Limited


65



30 June 00 31 Dec 00 31 Dec 00

$ $ $

21. Dividends

Dividends paid or proposed during the financial year:

Fully franked to 36% - - -

Adjusted franking account balance at 36% 187,371 187,371 187,371

22. Commitments For Expenditure

(a) PanBio Limited is a core commercial partner in the Cooperative Research Centre for Diagnostics Technologies which is 5 years into a 7 year term. PanBio Limited has commitments to make in-kind contributions of research and commercialisation time for which it receives first right of refusal to commercialise intellectual property. The dollar equivalent of this commitment of time and resources is:

Not longer than 1 year 348,000 348,000 348,000

Longer than 1 year and not longer than 5 years 348,000 174,000 174,000

696,000 522,000 522,000

(b) Finance lease liabilities are disclosed in note 24 to the financial statements.

(c) Operating lease liabilities are disclosed in note 24 to the financial statements.

(d) PanBio Limited have committed to a number of payments for license fees in the future. The commitments, stated in Australian dollars, are converted at the appropriate exchange rates at balance date:

Not longer than 1 year 191,062 205,394 205,394

Longer than 1 year and not longer than 5 years 41,535 44,651 44,651

232,597 250,045 250,045

23. Guarantees

As part of the acquisition of assets and selected liabilities of Integrated Diagnostics, Inc. in the USA in November 1999, PanBio Ltd as the ultimate parent entity of PanBio InDx, Inc. has guaranteed the deferred payments owing to SJH, Inc. These guarantees, in equivalent Australian dollars at the balance date, are as follows:

Guarantee PanBio InDx

Provided to Payments Due

SJH, Inc.

November 2001 205,394 205,394

November 2002 232,184 217,841

Annexure 4

PanBio Limited


66



30 June 00 31 Dec 00 31 Dec 00

$ $ $

24. Leases

(a) Finance lease liabilities

No later than 1 year 114,425 104,044 104,044

Later than 1 year and not later than 5 years 183,901 111,591 111,591

Minimum finance lease payments 298,326 215,635 215,635

Less future finance charges (34,575) (24,271) (24,271)

263,751 191,364 191,364

(b) Non-cancellable operating lease liabilities

No later than 1 year 134,182 102,906 102,906

Later than 1 year and not later than 5 years 125,874 80,078 80,078

260,057 182,984 182,984

25. Group Entities

Country of Ownership Interest

Name of Entity Incorporation 30 June 00 31 Dec 00

% %

Controlled entities

PanBio InDx, Inc. (i) USA 100 100

PanBio Holdings, Inc. (i) USA 100 100

(i) These controlled entities carry on business in the USA and are audited by an associated firm of Deloitte Touche Tohmatsu Australia.

26. Acquisition Of Businesses

Names of Proportion Cost of

Businesses Principal Activity Date of Acquisition of Business Acquisition

Acquired Acquired $

Integrated Diagnostics Manufacturing & distribution 18 November 1999 100% 1,338,688

The acquisition was of all assets of Integrated Diagnostics, Inc. and selected liabilities. The net fair value of assets acquired was $764,751 creating goodwill on acquisition was $573,937. At the date of acquisition, $825,928 was paid in cash to the sellers with the balance beingspread in three payments over three years. Details of the payments and guarantees are disclosed in note 23.

Annexure 4

PanBio Limited


67

27. Segment Information

Industry

The PanBio Group operates in the manufacture and sale of medical diagnostic test kits industry.

Revenue Results AssetsGeographical 30 June 00 31 Dec 00 30 June 00 31 Dec 00 30 June 00 31 Dec 00

Australia 6,548,406 4,214,384 257,600 449,583 2,728,334 3,187,063

North America 1,373,314 1,794,549 (254,052) (197,176) (190,992) (306,301)

7,921,720 6,008,933 3,548 252,407 2,537,342 2,880,762

28. Related Party Disclosures

(a) Directors' remuneration and retirement benefits

Details of directors’ remuneration and retirement benefits are disclosed in note 4.Fully Paid

Year Ended half-year Ended

30 June 00 31 Dec 00

$ $

(b) Directors' equity holdings

Ordinary shares

Issued during the financial year to directors and their director-related entities by:

PanBio Limited - 500

Held as at the reporting date by directors and their director-related entities in:PanBio Limited 301,782 302,282

Options

Issued during the financial year to directors and their director-related entities by:PanBio Limited - 900,000

Held as at the reporting date by directors and their director-related entities in:PanBio Limited - 900,000

All options issued during the financial year were made in accordance with the employee option scheme. Further details of these options are disclosed in note 19.

(c) Other transactions with directors

The operating profit or loss before income tax includes the following items of revenue and expense that resulted from transactions with directors or their director-related entities:Leroda Pty Limited, an entity of which Mr L. R. Watson is a director, was paid $38,900 for consulting fees on normal commercial terms and conditions (30 June 2000 - $72,500).

Annexure 4

PanBio Limited


68



30 June 00 31 Dec 00 31 Dec 00

$ $ $

29. Notes To The Statement Of Cash Flows

(a) Reconciliation of cash

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows:

Cash 47,184 107,023 15,576,984

Bank overdraft (163,371) (587,770) (587,770)

(116,187) (480,747) 14,989,214

(b) Businesses acquired

Consideration

Cash 825,928 - -

Notes payable 512,760 - -

1,338,688 - -

Fair value of net assets acquired

Current assetsCash 9,735 - - Inventories 564,835 - - Receivables 168,070 - - Other current assets 30,325 - -

Non-current assetsProperty, plant and equipment 486,226 - -

Current liabilities

Trade creditors (494,440) - -

Net assets acquired 764,751 - - Goodwill on acquisition 573,937 - -

1,338,688 - -

Net cash outflow on acquisition

Cash consideration 825,928 - -

Less cash balances acquired (9,735) - -

816,193 - -

(c) Non-cash financing and investing activities

During the half-year ended 31 December 2000, the economic entity did not have any non-cash financing and investing activities.

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69



30 June 00 31 Dec 00 31 Dec 00

$ $ $

29. Notes To The Statement Of Cash Flows (continued)

(d) Financing facilities

Secured bank overdraft facility:- amount used 94,669 587,770 587,770 - amount unused 255,331 112,230 112,230

Secured commercial bill facility:- amount used 1,670,000 1,670,000 1,670,000 - amount unused - - -

Secured business loan - amount used - 44,125 44,125 - amount unused - 5,875 5,875

(e) Reconciliation of operating profit after income tax to net cash flows from operating activities

Operating profit after income tax 3,548 252,407 252,407

(Profit)/loss on sale of non-current assets (2,164) 355 355

Depreciation and amortisation of non-current assets 330,622 196,177 196,177

Increase in income tax payable 58,721 231,251 231,251

Increase/(decrease) in tax balances (55,996) (13,965) (13,965)

Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses:

(Increase)/decrease in assets:current receivables (353,237) (609,311) (609,311)current inventories (298,980) (226,129) (226,129)other assets (112,008) (436,809) (436,809)

Increase/(decrease) in liabilities:current trade payables 271,043 648,241 648,241 other current liabilities 79,754 35,741 35,741

Net cash from operating activities (78,697) 77,958 77,958

Annexure 4

PanBio Limited

Report on Directors’ Financial Forecasts 9

70

71

Deloitte Corporate Finance Pty LimitedA.B.N. 19 003 833 127Licensed Securities Dealer

Riverside CentreLevel 25 & 26123 Eagle StreetBrisbane QLD 4001GPO Box 1463Brisbane QLD 4001 Australia

DX115Telephone (07) 3308 7000Facsimile (07) 93308 7001www.deloitte.com.au

21 February 2001

The DirectorsPanBio Limited116 Lutwyche RoadWINDSOR QLD 4030

Dear Sirs

Review of Directors’ Financial Forecasts

Introduction

This Report has been prepared at the request of the Directors of PanBio Limited (“PanBio”) for inclusion in a Prospectus to be dated on orabout 21 February 2001 inviting participation in the issue of 17,000,000 fully paid ordinary Shares at $1.00 per Share. Deloitte CorporateFinance Pty Limited is wholly owned by Deloitte Touche Tohmatsu and holds the appropriate dealer’s licence for the issue of this Report.

References to the Company and other terminology used in this Report have the same meaning as defined in the Glossary.

The Directors are solely responsible for the preparation and presentation of the financial forecasts of PanBio for the years ended 30 June 2001 and 2002 as set out in Section 6.1 of the Prospectus (“the Forecasts”) and the information contained therein, including the assumptions on which they are based.

Scope of Report

We have reviewed the Forecasts together with the assumptions on the Forecasts as set out in Section 6 of the Prospectus in order to give a statement thereon to the Directors of PanBio.

Our review of the Forecasts has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our review was limited to enquiries as to the process used in preparing the Forecasts and discussion with management and Directors ofPanBio of the factors considered in determining the assumptions. Our procedures included examination, on a test basis, of evidence supporting the assumptions, amounts and other disclosures in the Forecasts and the evaluation of accounting policies used in the Forecasts.

These procedures have been undertaken in order to state whether:i) anything has come to our attention which causes us to believe that the Directors’ assumptions do not provide a reasonable basis

for the preparation of the Forecasts; andii) in all material respects, the Forecasts are properly prepared on the basis of those assumptions and are on a basis consistent with

the accounting policies adopted and used by PanBio and in accordance with applicable Australian Accounting Standards.

Our review is substantially less in scope than an audit examination conducted in accordance with Australian Auditing Standards. In addition,prospective financial information, such as the Forecasts, relates to events and actions that have not yet occurred and may not occur. Whileevidence may be available to support the assumptions on which the Forecasts are based, those assumptions are generally future orientatedand therefore speculative in nature. Accordingly, actual results may vary from the financial information presented in the Prospectus and suchvariations may be material.

Directors’ Financial Forecasts

The Forecasts have been prepared by management and adopted by the Directors in order to provide prospective investors with a guide tothe future profitability of PanBio for the year ending 30 June 2001 and 2002. The Forecasts have been prepared using assumptions summarised in the Prospectus that include best estimate assumptions relating to future events that management expect to occur andactions that management expect to take.

The sensitivity analysis set out in Section 6.4 of the Prospectus demonstrates the impacts on the forecast results of changes in key assumptions. The prospective financial information is therefore only indicative of the results that may be achievable.

Prospective investors should be aware of the material risks and uncertainties relating to an investment in the Company, which are detailed in the Prospectus, and the inherent uncertainty relating to the prospective financial information.

Statement

Based on our review:i) nothing has come to our attention which causes us to believe that the Directors’ assumptions, as set out in the Prospectus,

do not provide a reasonable basis for the preparation of the Forecasts;ii) the Forecasts are properly prepared on the basis of those assumptions; andiii) the Forecasts are presented on a basis consistent with the accounting policies adopted and used by PanBio and are presented in

accordance with applicable Australian Accounting Standards.

Actual results are likely to be different from the Forecasts since anticipated events frequently do not occur as expected and the variationsmay be material. Accordingly, we express no opinion as to whether the Forecasts will be achieved.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LTD

Grant B. Murdoch Authorised Representative

The liability of Deloitte Touche Tohmatsu, is limited by, and to the extent of, the Accountants’ Scheme under the Professional Standards Act 1994 (NSW).

Additional Information 10

72

Additional Information

10.1 Rights Attaching to Shares

For full details of the rights attaching to the Shares, youshould refer to the Company's Constitution. A copy of theCompany's Constitution is available for inspection at theCompany's registered office. The rights attaching to theShares are summarised below. This summary does not purport to be exhaustive or to constitute a definitive statement of the rights and liabilities of shareholders.

Voting Rights

At a general meeting, subject to any rights or restrictionsattached to any Shares, every shareholder present in personor by proxy, attorney or representative has one vote on ashow of hands and, on a poll, has one vote for each fullypaid Share held, and for every partly paid Share, a vote proportionate to the amount paid up on the Share.

Dividend Rights

The Directors may, before declaring a dividend, set asideout of the profits of the Company such sums as they thinkfit as reserves to be applied, at the discretion of theDirectors, for any purpose for which the profits of theCompany may be properly applied.

Subject to the rights of persons (if any) entitled to Shareswith special rights as to dividend:• all dividends payable in respect of a class of fully paid

Shares shall be paid equally; • all dividends payable in respect of a class of partly paid

Shares shall be apportioned and paid according to theproportion that the amount paid is of the total amountpaid and payable for the issue of the Share, disregardingany amount credited as paid or to be credited as paid inany case.

Dividends may only be paid out of the profits of theCompany.

The Directors may authorise payment by the Company ofsuch dividends, including interim dividends, as the Directorsconsider is justified by the profits of the Company. The payment of these dividends does not require the sanction ofthe Company in general meeting. The Company in generalmeeting may declare a final dividend if and only if the Directors have recommended a final dividend.

Rights on Winding Up

Shareholders shall, upon the Company being wound up, participate in the distribution of any surplus assets in proportion to the amount paid up, or which ought to havebeen paid up, on the Shares held by them at the commencement of the winding up.

Transfer of Shares

There are no restrictions on the transfer, in proper form, ofShares, except as imposed by the Corporations Law or theListing Rules. The Directors are permitted to refuse to register any transfer of Shares only where the Listing Rulesrequire or permit the Company to do so.

Issue of Shares

All issues of Shares are under the control of the Directors whomay, subject to the Company's Constitution, the CorporationsLaw and the Listing Rules, allot them with such rights andrestrictions as to dividends, voting, return of capital or otherwise and on such terms and conditions as the Directorsdetermine. Directors may also grant options to take up unissued Shares in the Company in such manner and onsuch terms as the Directors think fit.

Preference Shares

The Company may issue preference Shares. The Constitutionsets out the rights of preference shareholders.

Variation of Rights

If the Share capital of the Company is divided into differentclasses, the rights and privileges attaching to Shares in thatclass could, subject to the terms of issue of Shares in thatclass, be altered with the approval of a resolution passed at ageneral meeting of the holders of Shares in that class by athree quarters majority of such holders as, being entitled todo so, vote at that meeting, or with the written consent of theholders of at least three-quarters of the Shares in that classon issue.

General Meetings

Every shareholder is entitled to receive notice of every generalmeeting.

73


10.2 Employee Share Plan

Under the Employee Share Plan, the Directors of theCompany may in their sole discretion select employees(including Executive Directors) to whom Shares will beoffered and determine the number of Shares that will beoffered. In selecting employees the Directors will exercisetheir discretion on a non-discriminatory basis but may haveregard to the length of the period of service or employmentof the employee with the Company, the present positionheld by the employee with the Company and the ability,experience, qualifications, performance and motivation ofthe employee.

Each Share will be issued at a price determined by theDirectors but it will not be less than 85 per cent of theweighted average sales price per Share of all sale prices at which Shares are sold on ASX during the period of threebusiness days ending on the business day prior to the dateof the Directors' meeting at which the Directors resolve toissue the Share.

Each Share issued under the scheme will rank equally in allrespects with other issued Shares and will be entitled toparticipate in any pro rata issue of securities to shareholderson the same basis as other issued Shares.

The Company will apply for official quotation of Sharesissued under the scheme by ASX.

The number of Shares issued under the scheme over a five year period will not exceed five per cent of the totalnumber of issued Shares at the time of the offer under theScheme.

In order for employees to obtain certain tax benefits, anemployee’s ability to sell the Shares may be restricted for aperiod of time. The Directors intend to advise employees ofany such restriction at the time an offer is made.

10.3 Employee Option Plan

Under the Employee Option Plan, the Directors may, in theirsole discretion, select employees (including Executive Directors) to whom options will be offered and determine the number of options to be offered. In making their selections, the Directors will exercise their discretion on anon-discriminatory basis but may have regard to the length ofthe period of service or employment of the employee with theCompany, the present position held by the employee with theCompany and the ability, experience, qualifications and motivation of the employee.

The terms upon which the options will be issued include thefollowing:• Each option will entitle the holder to subscribe for one

Share upon exercise of the option.• The options may at the discretion of the Directors be

issued on terms that they may only be exercised if certainperformance criteria are met. The options will not becomeexercisable until any such performance criteria are satisfied.

• The options may be exercised during the five years followingthe date of issue of the option at the following times:- as to 20 per cent of the total number of options held by

the holder at any time after the date the options wereissued;

- as to 20 per cent of the total number of options held bythe holder at any time after the expiration of one yearfrom the date the options were issued;

- as to 20 per cent of the total number of options held bythe holder at any time after the expiration of two yearsfrom the date the options were issued;

- as to 20 per cent of the total number of options held bythe holder at any time after the expiration of three yearsfrom the date the options were issued;

- as to 20 per cent of the total number of options held bythe holder at any time after the expiration of four yearsfrom the date the options were issued.

All options not exercised before the expiration of five yearsfrom the date the options were issued will lapse.

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• The price at which each option may be exercised will bea price determined by the Directors but will not be lessthan 100 per cent of the weighted average sales priceper Share of all sale prices at which Shares are sold onASX during the period of three business days ending onthe business day prior to the date of Directors' meetingat which the Directors resolve to grant the option.

• Options will not confer an entitlement to share in dividends declared and paid by the Company.

• Options will not be quoted by ASX.• Each Share issued pursuant to the exercise of an option

will rank equally in all respects with the issued Shares.• The Company will apply for official quotation by ASX of

the Shares issued on exercise of the options within thetime period allowed by the Listing Rules or ASX.

• Options will not be assignable or transferable except inthe case of the death of a holder when options may betransmitted to the personal representative of thedeceased.

• The options will not confer an entitlement to participatein bonus or pro rata issues of Shares by the Company.

• In the event of any reconstruction of the issued capital ofthe Company, the number of the Shares which eachholder is entitled to subscribe for will be reconstructed in the same proportion as the issued capital of theCompany is reconstructed.

• Nothing contained in the Employee Option Plan will prevent the options being reorganised as required by theListing Rules upon a reorganisation of the issued capitalof the Company.

The Company has offered to issue 680,000 options to various employees. The options are exercisable at $1.00 in20 per cent parcels on the 1st to 4th anniversary dates withthe first 20 per cent parcel being exercisable upon listing on ASX. All options to employees will have performancehurdles that must be met prior to exercise on the 1st to 4thanniversary dates. The options expire on 20 February 2006.

10.4 Material Contracts

10.4.1 CRC Agreements

PanBio is a participant in the Co-operative Centre forDiagnostic Technologies ("the CRC"), under theCommonwealth Government's Co-operative ResearchCentres Programme.

There are two agreements governing the establishment andoperation of the CRC - the Commonwealth Agreement andthe Centre Establishment Agreement.

Commonwealth Agreement

The Commonwealth Agreement is an agreement between theCommonwealth Government and the CRC participants(including PanBio), setting out the terms on which theCommonwealth will provide grant funding to the CRC and theobligations of the CRC participants.

Under the agreement, the Commonwealth will pay grantstotalling $14.256 million over the first seven years of the operation of the CRC (1995-96 to 2001-02). The participantsare required to conduct specified activities in the fields of protein-based diagnostic technology, nucleic acid-baseddiagnostic technology, application and rapid diagnostic technology. The specific contributions of personnel andequipment by each participant are specified in the agreement.PanBio's annual in-kind contribution to the CRC is valued at$238,804, comprising staff time and access to equipment.There is no cash contribution requirement.

Failure of the participants to make contributions could resultin termination of the agreement by the Commonwealth, a liability to the Commonwealth, and the cessation of payment of grant funds.

The participants must carry out the activities to a high standard, promote the objectives of the Commonwealth's Co-operative Research Centres Programme, and report anysubstantial changes to the activities during the term of theagreement. There are also financial and progress reportingrequirements. The participants must use their best endeavours to commercialise the intellectual property rights of the CRC in a manner that ensures maximum benefitsaccrue to Australia.

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Centre Establishment Agreement

The CRC Establishment Agreement is an agreementbetween the CRC participants (including PanBio), andestablishes the CRC as an unincorporated joint venture.The agreement is intended to be read with theCommonwealth Agreement, which takes precedence overthe Centre Establishment Agreement to the extent of anyinconsistency between them.

The equity ("Participating Share") of a participant in the CRC joint venture (including beneficial title to the intellectualproperty rights developed by the CRC) is the proportionwhich the total of the contributions of that participant bearsto the total of all contributions. PanBio's Participating Shareis currently 10.9 per cent.

The participants must conduct the CRC activities and provide contributions in accordance with theCommonwealth Agreement.

The agreement provides that the overall management andcontrol of the CRC is governed by a Board of Management.Each participant is entitled to appoint one representative tothat Board.

Under the agreement, a company, Diatech Pty Ltd, wasrequired to be formed to hold the intellectual property rightsdeveloped by the CRC, in trust for the participants in theirrespective Participating Shares. PanBio and one of theresearch participants hold the two shares of Diatech ontrust for all of the CRC participants in their respectiveParticipating Shares. Each participant is entitled to appoint a director of Diatech.

Participants may make background intellectual propertyrights ("Background IP") available to the CRC for the purposes of the activities. Where Background IP is provided, the provider must warrant that it owns the relevant rights, and that it will not use or licence those rightsin competition with the CRC. The Background IP remainsthe property of the contributing participant. Each participanthas a non-exclusive right to use others' contributedBackground IP rights for the activities of the Centre.

Intellectual property rights developed during the Centre'sactivities ("Centre IP") is held by Diatech. Each party has anon-exclusive right to use Centre IP for the activities of theCRC and research and training, but not commercialisation. If further intellectual property developed by a participant incorporates Background IP or Centre IP, that further IP is the property of its developer, but the developer must not commercialise it without obtaining a licence from the owner of the Centre IP/Background IP.

If Centre IP is to be commercialised, each participant must be offered a non-exclusive licence to commercialise that IP (if only one party accepts, an exclusive licence may also beoffered). If there are no acceptances, the CRC may seekother licensees, but not on more favourable terms without firstoffering those terms to the participants. PanBio does nothave priority above the other CRC participants in relation tothis "first right of refusal" process. However PanBio is now theonly commercial participant in the CRC (the other participantsare research and/or educational institutions). If Centre IP contains the Background IP of a party, a licence from thatparty would need to be obtained.

The Centre Establishment Agreement continues until there isa unanimous agreement of the participants to terminate thearrangements, or until through resignations or expulsions ofparties, only one participant remains.

10.4.2 Underwriting Agreement

The Underwriter has agreed to underwrite the Offer on theterms and conditions of the Underwriting Agreement.

The Underwriting Agreement is subject to the following conditions precedent:(a) the Company lodging the Prospectus with the ASIC;(b) the Company delivering the printed Prospectus and opening

the lists for receipt of Applications by 14 March 2001; (c) the Company delivering a certificate in the agreed form to

the Underwriter before the opening date;(d) the Underwriting Agreement is conditional upon the Company

receiving valid Applications for 3.6 million Shares from personsthat the Underwriter considers, acting reasonably, havebeen referred or introduced to the Offer by the Companyor the Chairman of the Company (“Referred Persons”); and

(e) the delivery to the Underwriter of executed escrowarrangements from all existing shareholders in a form reasonably acceptable to the Underwriter.76


The Underwriter may terminate the Underwriting Agreementif any of the above conditions are not satisfied. If the Companydoes not satisfy the condition in paragraph (e) by 23 March 2001because of a failure to deliver an executed escrow arrangementfor the remaining 195,466 Shares that are not subject toescrow (as set out in Section 10.5) the Underwriter hasagreed to consider whether it will waive the condition precedentin which case the Underwriter will not unreasonably withholdits consent to the waiver.

The Company has agreed to pay the Underwriter:

(a) an underwriting commission being the aggregate of:(i) in respect of applications from persons who are not

Referred Persons, 4 per cent of the value of the Shares issued to those persons ($536,000); and

(ii) in respect of applications from Referred Persons, 2.5 per cent of the value of the Shares issued to Referred Persons ($90,000); and

(b) a management fee of $200,000.

The above amounts are exclusive of GST.

The Company has also agreed to bear certain other costsand expenses incurred by the Underwriters in connectionwith the Offer. Any sub-underwriting or distribution fees arenot reimburseable under the Underwriting Agreement.

If the Underwriting Agreement is terminated or the conditions precedent are not satisfied, the Company mustpay the management fee and the costs and expensesincurred in connection with the Offer to the date theUnderwriting Agreement is terminated. The Company willnot however be liable to pay the underwriting commission.

The Underwriter may also terminate the Underwriting Agreementif any of the following events occur prior to the Companyallotting all the Shares applied for under the Prospectus:(a) no notification: the Company does not notify the

Underwriter of a shortfall;(b) no certificate: the Company does not provide a

certificate in the agreed form within the time frame provided;(c) failure to allot or transfer: the Company fails to allot

and issue Shares for which an Application has beenreceived within the time frame provided;

(d) financial assistance: the Company or a Subsidiarypasses or takes any steps to pass a resolution undersection 260B of the Corporations Law without the priorwritten consent of the Underwriter;

(e) listing: the Company’s admission to the Official List andthe quotation of the Shares forming part of the Offer isnot approved by ASX before the earlier of six weeks afterthe date of the Prospectus and the giving of the notice and the certificate in the agreed form, suchapproval not being subject to any material conditions;

(f) statement of ASX: ASX advises the Company in writingthat official quotation of the Shares in the Offer will not begranted;

(g) Prospectus:(i) ASIC applies for an order under sections 1324B and

1325 of the Corporations Law in relation to theProspectus and the application is not dismissed orwithdrawn before the Offer closes;

(ii) ASIC gives notice of intention to hold a hearing in relation to the Prospectus under section 739(1) of theCorporations Law or makes an interim order undersection 739(3) of the Corporations Law;

(iii) the withdrawal of consent to being named in theProspectus as a director, proposed director or underwriter; or

(iv) the withdrawal of consent to the inclusion in theProspectus of a statement by a person or a statementbased on a person’s statement;

(h) indictable offence: a director of the Company or anySubsidiary is charged with an indictable offence relating toa financial or corporate matter;

(i) ASX200 index change: the value of the ASX200 indexfalls and remains for three consecutive Business Days, atany time after the date of this agreement, 10 per cent ormore below its level at the close of trading on the lastBusiness Day immediately before the date of this agreement;

(j) any of the escrow arrangements in favour of the Underwriter(see Section 10.5) terminate because the Shares were notquoted on the official list by 18 May 2001; or

(k) NASDAQ Index change: the value of the NASDAQ compositeindex falls and remains for three consecutive Trading Days,at any time after the date of this agreement, 10 per cent ormore below its level at the close of trading on the lastTrading Day immediately before the date of this agreement.“Trading Day” means a day in the United States ofAmerica on which NASDAQ is open for normal trading.

(l) subject to the proviso stated at the bottom of this paragraph, any of the following occurs:(i) change in laws:

(A) legislation is introduced into the Australian Parliamentor the Parliament of any State or Territory;

(B) there is an official announcement by the FederalGovernment or the Government of any State orTerritory of any prospective legislation or policy;

(C) ASIC, its delegates or the Reserve Bank ofAustralia adopt any regulation or policy; that does or is likely to prohibit, restrict or regulate the Offer;

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(I) an application or order is made to place theCompany or a Subsidiary under official management or a resolution is passed or any stepsare taken to pass a resolution to place theCompany or a Subsidiary under official management; or

(J) an application or order is made for the windingupor dissolution of the Company or a Subsidiary or aresolution is passed or any steps are taken to passa resolution for the winding-up or dissolution of theCompany or a Subsidiary otherwise than for thepurpose of an amalgamation or reconstructionwhich has the prior written consent of theUnderwriter, such consent not to be unreasonablywithheld;

(v) hostilities: there is an outbreak of hostilities (whetheror not war has been declared) after the date of theUnderwriting Agreement involving any of Australia,Japan, the United Kingdom, Indonesia, the UnitedStates of America, the Commonwealth of IndependentStates or the Peoples Republic of China;

(vi) extended Force Majeure: a Force Majeure lasting inexcess of 1 week occurs;“Force Majeure” means:(A) any act of God;(B) war, revolution, or any other unlawful act against

public order or authority;(C) an industrial dispute;(D) a governmental restraint; or (E) any other event which is not within the control of

the parties;(vii) default: the Company is in default of any of the terms

and conditions or breaches any warranty under theUnderwriting Agreement;

(viii) adverse change: any other change occurs in thefinancial position of the Company and its Subsidiariestaken as a whole including, without limitation, if anyforecast in the Prospectus becomes incapable ofbeing met or, in the Underwriter’s reasonable opinion,unlikely to be met in the projected time;

(ix) constitution: the constitution of the Company or aSubsidiary is amended without the prior written consent of the Underwriter;

(x) investigation: any person is appointed under legislation to investigate the affairs of the Company ora Subsidiary;

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(ii) failure to comply: the Company or a Subsidiary failsto comply with any of the following:(A) a provision of its constitution;(B) any statute;(C) a requirement, order or request, made by or on

behalf of ASIC or any Governmental Agency; or(D) any material agreement summarised in

Section 10.4.1 of the Prospectus;(iii) capital structure: the Company or a Subsidiary

alters its capital structure in a manner not expressly contemplated by the Prospectus without the prior written consent of the Underwriter;

(iv) Insolvency Event: an Insolvency Event occurs or isthreatened;“Insolvency Event” means:(A) a judgment in an amount exceeding $50,000 is

obtained against the Company or a Subsidiaryand is not set aside or satisfied within seven days;

(B) any distress, attachment, execution or otherprocess of a Governmental Agency in an amountexceeding $50,000 is issued against, levied orenforced upon any of the assets of the Companyor a Subsidiary and is not set aside or satisfiedwithin seven days;

(C) a receiver, receiver and manager, official manager,trustee, administrator or similar official is appointed, or steps taken for such appointment,over any of the assets or undertaking of theCompany or a Subsidiary;

(D) the Company or a Subsidiary suspends paymentof its debts generally;

(E) the Company or a Subsidiary is or becomesunable to pay its debts when they are due or isor becomes unable to pay its debts within themeaning of the Corporations Law;

(F) the Company or a Subsidiary enters into orresolves to enter into any arrangement, composition or compromise with, or assignmentfor the benefit of, its creditors or any class ofthem;

(G) the Company or a Subsidiary ceases or threatensto cease to carry on business;

(H) steps are taken by anyone entitled to do so toappoint an administrator to the Company;


(xi) misrepresentation: any material warranty, representation or statement by the Company and itsSubsidiaries in relation to the Offer is found to bematerially false, misleading or incorrect when made;

(xii) Prospectus:(A) there is, or in the Underwriter’s reasonable opinion

there is an omission from the Prospectus ofmaterial required to be disclosed under sections710, 711, 712 and 716 of the Corporations Law;

(B) the Prospectus contains a, or in theUnderwriter’s reasonable opinion contains amisleading or deceptive statement;

(C) any statement in the Prospectus becomes misleading or deceptive;

(D) in the Underwriter’s reasonable opinion a newcircumstance has arisen since the Prospectuswas lodged which would have been required tobe included in the Prospectus that is materiallyadverse from the point of view of an investor;

(E) the Company informs the Underwriter of anychange, information or deficiency, or lodges asupplementary or replacement prospectus; or

(F) any person gives a notice under section 730 ofthe Corporations Law;

(xiii) supplementary or replacement prospectus:the Underwriter reasonably forms the view that asupplementary or replacement prospectus is requiredto be lodged with ASIC under section 719 of theCorporations Law and the Company either doesnot lodge one in the form reasonably required bythe Underwriter or does not comply with subsections724(2) and 724(3) of the Corporations Law;

(xiv) information supplied: any information in respectof the Offer supplied by the Company or on itsbehalf to the Underwriter is false or misleading;

(xv) due diligence: there is a material omission fromthe results of the due diligence investigation performed in respect of the Company or the resultsof the investigation or the verification material arefalse or misleading;

None of the events listed in paragraph (l) entitle theUnderwriter to exercise its right to terminate unless theUnderwriter has determined reasonably in good faith thatthe event has or is likely to:(a) give rise to a liability of the Underwriter under the

Corporations Law; or(b) have an actual material adverse effect on the financial

condition, financial position or financial prospects of theCompany and its Subsidiaries as a whole.

The Company must indemnify the Underwriter and its directors,officers, employees, agents, representatives and advisers(Indemnified Parties) against any claims, actions, damages,losses, liabilities, costs, charges, expenses, outgoings or payments (Losses) which any Indemnified Party pays, suffers,incurs or is liable for in respect of or in any way relating to:(a) the Offer;(b) the Prospectus;(c) the Underwriting Agreement other than the obligation by

the Underwriter to underwrite the Offer;(d) the provision of services by the Underwriter to the Company

in respect of the Offer, the Prospectus or the UnderwritingAgreement;

(e) reliance by an Indemnified Party on information suppliedby the Company;

(f) an announcement, advertisement or publicity made or distributed by or on behalf of the Company in relation tothe Offer; or

(g) an investigation, enquiry or hearing by ASIC, ASX, a government or any Governmental Agency in relation tothe Company, or its related corporations, their officers andrelated parties, the Prospectus or the Offer or preparationof any investigation.

The indemnity does not extend to any Losses resulting from:(a) a penalty or fine that the Indemnified Party is required to

pay for a contravention of the Corporations Law;(b) any other amount payable in respect of which the indemnity

would be illegal, void or unenforceable under any law;(c) an announcement, advertisement or publicity in relation to

the Offer or the Prospectus made or distributed by theIndemnified Party without the approval of the Company;

(d) any liability of the Underwriter to underwrite the Offer; (e) the fraud, bad faith, negligence, wilful misconduct or

wilful default on the part of the Indemnified Party;(f) a representation made by an Indemnified Party in relation

to any of the existing shareholder escrow arrangementssummarised in Section 10.5 that was inconsistent with theProspectus or made without prior consent of the Company,such consent not to be unreasonably withheld; or

(g) a failure by an Indemnified Party to take steps to prevent a breach of any of the existing shareholder escrowarrangements summarised in Section 10.5 in circumstanceswhen a reasonable underwriter would have taken steps toprevent the breach and that represent the amount bywhich the Losses exceed the Losses that would havedirectly resulted from the breach if the Indemnified Partyhad taken steps to prevent the breach.

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10.5 Escrow Arrangements

All shareholders (excluding those who became shareholdersas a result of the employee bonus issue referred to in theInvestigating Accountant’s Report and a Shareholder whoholds 195,466 Shares) have agreed with the Underwriterthat 100 per cent of the Shares they hold will be escrowedfor 12 months. The terms of the escrow arrangements areas follows:• The holders and controllers of Shares will not dispose of,

mortgage or agree to dispose of or do, or omit to do anyact if the act or omission would have the effect of transferring effective ownership or control of their restricted securities during the period of 12 months from the date ofcommencement of official quotation of the Shares on ASX.

• The Underwriter has a right to review the escrow restrictions six months after the commencement of theescrow period to determine whether the restrictionsshould continue to apply.

• The Underwriter is entitled to seek injunctive relief if aparty fails, or threatens to fail, to comply with the escrowrestrictions, or the Underwriter has reason to believe thata party will not comply with the escrow restrictions.

• There is no obligation on the Company to refuse to register a transfer of any of the restricted securities inbreach of the arrangements.

• The holders and controllers of Shares indemnify theCompany and the Underwriter against all losses incurredthat relate to a breach of the escrow restrictions by theholder or controller or the registration by the Company of a transfer of restricted securities.

A Shareholder who holds 2,719,002 Shares may dispose ofor agree or offer to dispose of, or do, or omit to do any actif the act or omission would have the effect of transferringeffective ownership or control of all of the restricted Sharesin any one day as long as the number of Shares held by himat the end of the day is the same as the number held at thestart of that day and in such case the securities acquired in substitution for the restricted securities shall also berestricted securities.

It is a condition of the Underwriting Agreement that theholders of the remaining 195,466 Shares that are not subjectto escrow sign escrow arrangements in a form reasonablyacceptable to the Underwriter (see Section 10.4.2).

A Shareholder who holds 170,838 Shares may mortgage,charge or create a security interest in their restricted securities.

The Shares held by shareholder employees that are not subject to these escrow arrangements, are subject to a 12 month restriction on disposal imposed by the Company.

10.6 Litigation and Claims

The Directors are not aware of any pending or threatened litigation or other legal proceeding which may have a material and adverse effect on PanBio.

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10.7 Directors' shareholdings and other interests

Other than set out above or elsewhere in this Prospectus,no Director, proposed Director or promoter of the Companyhas, or has had in the two years before lodgement of thisProspectus, an interest in:

(a) the formation or promotion of the Company; (b) in any property acquired or proposed to be acquired

by the Company in connection with:(i) the formation or promotion of the Company; or(ii) the offer of Shares under this Prospectus; or

(c) the offer of Shares under this Prospectus, except as set out below or elsewhere in this Prospectus.

The Directors hold interests in the following securities of the Company:

Name Shares Options

Ian Sandford 219,834 200,000

Mel Bridges 5,879,952 400,000

James Kalokerinos 6,927,782 100,000

Les Watson 5,855,845 100,000

Tim Bosher Nil 100,000

Directors may also subscribe for Shares under thisProspectus.

The terms on which the Directors’ options have been issuedare the same as the terms of the Employee Option Planwhich is summarised in Section 10.3 except for the following:

• If the Company has not lodged a prospectus and appliedfor listing on ASX on or before 31 May 2001, all options will lapse.

• The exercise price of each option is $1.00.• The options may be exercised during the period of five

years from the date the Company’s shares are listed forquotation on ASX (Quotation Date) at the following time:- as to 20 per cent of the total number of options held,

at any time after the Quotation Date;- as to 20 per cent of the total number of options held,

at any time after the expiry of one year from theQuotation Date and for Melvyn Bridges, the ChiefExecutive Officer, on the Company meeting the forecast revenue and EBITDAR for the 2000/2001financial year set out in this Prospectus;

- as to 20 per cent of the total number of options held, atany time after the expiry of two years from the QuotationDate and for Melvyn Bridges, on the Company meetingthe forecast revenue and EBITDAR for the 2001/2002financial year set out in this Prospectus;

- as to 20 per cent of the total number of options held,at any time after the expiry of three years from theQuotation Date and for Melvyn Bridges, on theCompany meeting the forecast revenue and EBITDARfor the 2002/2003 financial year contained in theCompany’s annual business plan; and

- as to 20 per cent of the total number of options held,at any time after the expiry of four years from theQuotation Date and for Melvyn Bridges, on theCompany meeting the forecast revenue and EBITDARfor the 2003/2004 financial year contained in theCompany’s annual business plan.

All options not exercised before the end of five years from theQuotation Date will lapse (Option Period).

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• The holder’s right to exercise the Options shall continueuntil the expiration of the Option Period subject to the following:- If a holder ceases to be a Director (except in the case

of sickness, disability, normal retirement or redundancyand/or death) any options held by the holder and notat that time exercised shall be automatically cancelledand shall cease to be of effect.

- In the event of a holder ceasing to be a Director due tosickness and/or disability or redundancy, the remainingDirectors may determine that any options not at thattime exercised shall; continue to have effect until theexpiration of the Option Period, be cancelled and shallcease to be of effect or, subject to the Listing Rules,continue to have effect on any other conditions as theDirectors consider fit.

- If a holder ceases to be a Director due to normal retirement prior to expiration of the Option Period, theholder’s right to exercise options which are exercisableat the date of retirement shall continue to have effectfor a period of 6 months (or such longer period as theremaining Directors may determine) from the date ofretirement. The holder shall not be entitled to exerciseoptions which are not yet exercisable without theapproval of the remaining Directors.

- If a holder dies whilst a Director prior to the expirationof the Option Period, the right of the holder to exercisethe options shall vest in the holder’s executor and/oradministrator who shall have the right to exercise theoptions for a period of 6 months from the date ofdeath or such longer period as the Directors maydetermine.

No person has paid or agreed to pay any amount or hasgiven or agreed to give any benefit to any Director or proposed Director to induce them to become, or to qualify as a Director or for services provided by the Director, proposed Director or promoter in connection with:(a) the formation or promotion of the Company; or(b) the offer of Shares under this Prospectus, except as set out below or elsewhere in this Prospectus.

The Constitution of the Company provides that the Directorsmay be paid, as remuneration for their services, a sum determined from time to time by the Company's shareholdersin general meeting, with that sum to be divided amongst theDirectors in such a manner and proportion as they agree(excluding remuneration of Managing or Executive Directors).The current maximum aggregate amount which has been soapproved by the Company's shareholders for payment to theDirectors is $400,000 (excl. GST) per annum. Currently $178,200(excl. GST) per annum is to be paid to the Company's Non-Executive Directors as Directors’ fees. The Directors arealso entitled to be reimbursed out of the funds of the Company,reasonable travelling, accommodation and other expensesincurred by them while engaged on the business of the Company.

The remuneration of a Managing or Executive Director for hisservices is determined by the Directors. Melvyn Bridges iscurrently paid a package of $282,150 together with an additional 50 per cent performance pay.

The table below summarises contracts and arrangementsbetween Non-Executive Directors (and Non-ExecutiveDirector related entities) and the Company.

Director Contracting Contract Description Entity Amount

Les Watson Leroda Pty Ltd $330 per day Casual consulting(inc. GST) contract with

respect to manufacturing systems. Currentlyaveraging 21 daysper month.

Ian Sandford Jadebourne $22,000 Consulting workPty Ltd t/a in fees assisting theSandford & (inc. GST) Company to raiseAssociates capital under this

Prospectus and list on ASX.

Clearfield Pty Ltd, a company associated with Ian Sandford,has been issued 32,578 Shares (which are included in hisinterests disclosed in Section 10.7) for services performed inconnection with the Offer.

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10.8 Interests of Experts and Advisers

No person named in this Prospectus as a stockbroker orunderwriter to the Offer or as performing a function in a professional, advisory or other capacity in connection withthe preparation or distribution of this Prospectus holds, orhas at any time during the last two years held, any interest in:(a) the formation or promotion of the Company;(b) property acquired or proposed to be acquired by the

Company in connection with:(i) the formation or promotion of the Company; or(ii) the offer of Shares under this Prospectus; or

(c) the offer of Shares under this Prospectus, except as set out below or elsewhere in this Prospectus.

No person has paid or agreed to pay any amount, or hasgiven or agreed to give any benefit to:(a) a stockbroker or underwriter to the Offer; or(b) a person named in this Prospectus as performing a

function in a professional advisory or other capacity inconnection with the preparation or distribution of thisProspectus;

for services provided by the stockbroker, underwriter, orother such person in connection with:(c) the formation or promotion of the Company; or(d) the offer of Shares under this Prospectus; except as set out below or elsewhere in this Prospectus.

Ernst & Young Corporate Finance Pty Limited has acted asCorporate Adviser to the Offer for which it will be paid a feeof $159,500 (incl. GST) and an additional amount for disbursements. Ernst & Young Corporate Finance PtyLimited may at its option, take 50 per cent of this as Sharesat the Offer Price. The option must be exercised on orbefore the close of the Offer.

Deloitte Touche Tohmastu have acted as InvestigatingAccountants to the Offer and have performed work in relationto due diligence enquiries, for which they will be paid a feeof $22,000 (incl. GST) and an additional amount for disbursements.

Deloitte Corporate Finance Pty Ltd has acted as Independent Expert to the Offer for which it will be paid a feeof $51,535 (incl. GST) and an additional amount for disbursements.

Corrs Chambers Westgarth have acted as Lawyers to the Offer for which they will be paid a fee of $171,100 (incl. GST) and an additional amount for disbursements.

Computershare Investor Services Pty Limited has acted asShare Registry for the Offer for which it will be paid a fee of$33,000 (incl. GST).

Chase Securities Australia Limited trading as JP Morgan isentitled to receive payment under the Underwriting Agreementin relation to the Offer, details of which are summarised inSection 10.4.2.

10.9 Consents and Disclaimers

Corrs Chambers Westgarth have given, and have not withdrawn, their written consent to be named as Lawyers tothe Offer in the form and context in which they are named.Corrs Chambers Westgarth have not caused or authorisedthe issue of the Prospectus.

Deloitte Touche Tohmastu have given, and have not withdrawn, their written consent to be named as InvestigatingAccountants and Auditors to the Company in the form andcontext in which they are named with their InvestigatingAccountant's Report in Section 8 being included in the formand context in which it is included. Deloitte Touche Tohmastuhave not caused or authorised the issue of the Prospectus.

Deloitte Corporate Finance Pty Ltd has given, and has notwithdrawn its written consent to be named as IndependentExpert to the Offer in the form and context in which it isnamed with its Report on Directors' Financial Forecasts inSection 9 being included in the form and context in which it is included. Deloitte Corporate Finance Pty Ltd has notcaused or authorised the issue of the Prospectus.

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Ernst & Young Corporate Finance Pty Limited has given,and has not withdrawn, its written consent to be named asCorporate Adviser to the Offer in the form and context inwhich it is named. Ernst & Young Corporate Finance PtyLimited has not caused or authorised the issue of thisProspectus.

Chase Securities Australia Limited has given, and has notwithdrawn, its written consent to be named as Underwriterto the Offer in the form and context in which it is named.Chase Securities Australia Limited has not caused or authorised the issue of this Prospectus.

Computershare Investor Services Pty Limited has given, andhas not withdrawn, its written consent to be named asShare Registrar in the form and context in which it isnamed. Computershare Investor Services Pty Limited hasnot caused or authorised the issue of this Prospectus andtakes no responsibility for any part of the Prospectus.

10.10 Expenses of the Offer

All expenses connected with the Offer are payable byPanBio, including underwriting and issue management fees payable to the Underwriter, corporate advisory fees,accounting fees, legal fees, share registry fees, printingcosts, public relations costs and miscellaneous expenses.These expenses are estimated to be approximately $1.7 million (excl. GST). The Company anticipates that GST will be approximately $100,000.

10.11 Prospectus Availability

Prospectus Availability

This Prospectus is available in electronic form on the Internetat www.panbio.com.au. Any person receiving this Prospectuselectronically is entitled to obtain a paper copy of theProspectus (and attached Application Form) free of charge,during the Offer period by telephoning JP Morgan on 1800 180 007.

Applications must be made by completing a paper copy ofthe Application Form. The Company will not acceptApplication Forms electronically.

Electronic Prospectus

The Application Form may only be distributed attached to a complete and unaltered copy of the Prospectus. TheApplication Form included with this Prospectus contains adeclaration that the investor had personally received the completed and unaltered Prospectus prior to completing theApplication Form.

The Company will not accept a completed Application Form if it has reason to believe that the Applicant has not receiveda complete paper copy or electronic copy of the Prospectusor if it has reason to believe that the Application Form or electronic copy of the Prospectus has been altered or tampered with in any way.

10.12 Directors' ResponsibilityStatement and Consent

Each Director of PanBio has given and has not, at the date of this Prospectus, withdrawn his written consent to the lodgement with ASIC of this Prospectus pursuant to whichPanBio is offering its securities for issue.

This Prospectus is issued by PanBio Limited. Its issue wasauthorised by a resolution of the Directors and is signed by aDirector on behalf of all Directors.

Dated 22 February 2001

84

Glossary of Terms 11

85

Scientific Terms

96-well microplate96 small wells in a plastic plate.

AgglutinationAggregation or clumping of particles, such as bacteria,when exposed to a specific antibody.

ArbovirusArthropod-borne virus (eg mosquitoes).

Antigen-antibody complexA macromolecular complex of antigen and antibody molecules bound specifically together.

AssayTest.

Clinical trialsA study conducted by a qualified laboratory to evaluate aproduct or test for the diagnosis of a specific disease orgroup of diseases.

ConjugatedJoined together.

Dip-S-TickTMA type of Dip-S-Tick that uses an enzyme-linkedimmunosorbent dot technique to detect antibodies. The antigen is dispensed as discrete dots onto a solidmembrane and a positive result is read visually as acoloured dot. May be qualitative or semi-quantitative.

DNADeoxyribonucleic acid, a polymer of nucleotides connectedvia phosphate oxyribose sugar backbone; the genetic material of the cell.

DNA probeA relatively small piece of DNA that is used to find anotherpiece of DNA.

DNA probe based testingTesting based on the use of a labelled probe to identify another piece of DNA.

Enzyme-linked immunosorbent assay (ELISA)An immunological assay that uses an enzyme conjugated toantibodies to produce a visible endpoint.

Food and Drug Administration (FDA)The public health agency responsible for approving food anddrugs for use in the United States of America.

ImmunoassaysTests for detection of antibodies or antigens based on theantigen-antibody interaction.

Immunofluorescent slidesSlides used to perform the indirect immunofluorescent assay.

Indirect fluorescent antibody (IFA) testTest that detects antibody by allowing an antibody to reactwith its substrate and adding a second fluorescein dye-labelled antibody that will bind to the first.

Invitro diagnosticsTest that occur in a test tube or similar.

IncubationEarly phase of disease between infection and appearance ofsymptoms or (in relation to scientific tests) a step in theprocess of a test during which the test is allowed to react.

MicroorganismAn organism of microscopic or submicroscopic size, such asa virus, fungus, bacterium or protozoan.

Monoclonal antibodyAn antibody derived from a single cell producing one antibodymolecule type that reacts with a single epitope.

Nucleic acid tests

Detection method that relies on the analysis of nucleic acids,either DNA or RNA, which involves the use of probes oramplification by any of several methods.

Point-of-care rapid testA simple test requiring no specialised training or equipment,which provides results in as little as five to 30 minutes, making it ideal for use at the patient interface.

PathogenDisease-causing organism.

RNARibonucleic acid. A class of nucleic acids characterised bythe presence of a sugar ribose and the pyrimidine uracil.RNA is the genetic material of many viruses.

ZoonosesDiseases of animals transmissible to humans.86

General Terms

ApplicantsPersons who complete and submit an Application Form in the course of the Offer.

ApplicationAn application to subscribe for Shares under thisProspectus.

Application FormAn Application Form attached to or accompanying thisProspectus.

Application MoneyMoney received from Applicants in respect of their Application.

ASICThe Australian Securities and Investments Commission.

ASXAustralian Stock Exchange Limited.

BoardThe Board of Directors of PanBio.

Business DayA business day as defined by the Listing Rules of ASX.

CHESSClearing House Electronic Subregister System operated by ASX Settlement and Transfer Corporation Pty Ltd.

ConstitutionThe Constitution of PanBio.

CRCThe Co-operative Centre for Diagnostic Technologies.

DirectorsEach of the Directors of PanBio from time to time.

Employee Option PlanThe Employee Option Plan adopted by the Board on 14 November 2000, the terms of which are summarised in Section 10.3.

Employee Share Plan The Employee Share Plan adopted by the Board on 14 November 2000, the terms of which are summarised inSection 10.2.

Governmental AgencyAny government or any governmental, semi-governmental,administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity.

OfferThe offer to the public of 17 million Shares at the Offer Pricepursuant to this Prospectus.

Offer Price$1.00 per Share.

Official List The list of all companies the securities for which are traded on ASX market for securities.

PanBio or CompanyPanBio Limited, ABN 19 010 728 220.

ProspectusThis Prospectus dated 22 February 2001.

SharesOrdinary fully paid shares in the capital of PanBio.

SubsidiaryHas the same meaning as in the Corporations Law.

UnderwriterChase Securities Australia Limited.

Underwriting AgreementThe agreement between the Underwriter and the Companyunder which the Underwriter has agreed to underwrite theOffer.

Urgent Issues Group Consensus ViewsRefers to Urgent Issues Group Abstracts issued by theAustralian Accounting Research Foundation on behalf of theAustralian Society of Certified Practising Accountants and theInstitute of Chartered Accountants in Australia.

87

How to Complete the Application Form

Please complete all relevant sections of the Application Formusing BLOCK LETTERS

(A) Enter the NUMBER OF SHARES you wish to apply for.Applications must be for the minimum of 2,000 as set down onpage 16 of the Prospectus and thereafter in multiples of 500.

(B) Enter the TOTAL AMOUNT of application money payable.To calculate the amount multiply the number of Shares appliedfor by the amount per Share payable.

(C) Enter the FULL NAME(S) and TITLE(S) of all legal entities thatare to be recorded as the registered holder(s). Refer to theName Standards below for guidance on valid registration.

(D) Enter the tax file number(s) of the Applicants. With a joint holding, only the tax file numbers of two holders are required.

(E) Enter the POSTAL ADDRESS for all communications from theCompany. Only one address can be recorded.

(F) Enter telephone numbers and a contact person the registry canspeak to if they have any queries regarding this Application.

(G) If you are sponsored in CHESS by a stockbroker or otherCHESS participant enter your Holder Identification Number (HIN).

(H) Payment must be made in Australian Currency and chequesmust be drawn on an Australian Bank. Cheques or bank drafts must be payable to PANBIO LTDSHARE OFFER and crossed Not Negotiable. Cheques not properly drawn will be rejected. Cheques will generally be deposited on the day of receipt. If cheques are dishonored the Application may be rejected.

(I) Before completing the Application Form the Applicant(s) state(s)they have read the Prospectus to which the Application relates.The Applicant(s) agree(s) that this Application is for Shares inPanBio Limited upon and subject to the terms of theProspectus, agree(s) to take any number of Shares equal to orless than the number of Shares indicated in Box A that may beallotted to the Applicant(s) pursuant to the Prospectus anddeclare(s) that all details and statements made are completeand accurate. It is not necessary to sign the Application Form.

(J) While the Prospectus is current, PanBio Limited or a securitiesdealer who has provided an electronic copy of the Prospectus willsend paper copies of the Prospectus, any supplementary prospectusand this Application Form on request and without charge.

Forward your completed Application together with the Application money to:

PanBio Ltd Share OfferC/- Computershare Investor Services Pty LimitedLevel 2 60 Carrington StreetSydney NSW 2000

OR by post to:

PanBio Ltd Share OfferC/- Computershare Investor Services Pty LimitedGPO Box 7045Sydney NSW 1115

Applications must be received by no later than 5:00pmAustralian Eastern Standard Time on 23 March 2001

Name Standards• Only legal entities may be registered as the holders of securities.• The full and correct name of each entity must be shown.• Salutations such as MR, MRS & MS should be included.• Securities cannot be registered in the name of a trust and no trust

can be implied.• Securities should not be registered in the name of a minor or a

deceased person.• An account designation can be included. If shown, it must be

contained within one line and within the “<>” symbols. The lastword of the designation must be ACCOUNT or A/C.

88

Type of Investor Correct Form of Registration Incorrect Form of Registration

Individual - Use given names in full, not initials. Mr John Alfred Smith J A Smith

Company - Use the company’s full title, not abbreviations. ABC Pty Ltd ABC P/L or ABC Co

Joint Holdings - Use full and complete names. Mr Peter Robert Williams & Peter Robert & Louise S WilliamsMs Louise Susan Williams

Trusts - Use the trustee(s) personal name(s). Mrs Susan Jane Smith Sue Smith Family Trust<Sue Smith Family A/C>

Deceased Estates - Use the executor(s) personal name(s). Ms Jane Mary Smith & Estate of late John SmithMr Frank William Smith or John Smith Deceased<Est John Smith A/C>

Minor (a person under the age of 18) - Mr John Alfred Smith Master Peter SmithUse the name of a responsible adult with an <Peter Smith A/C>appropriate designation.

Partnerships - Use the partners personal names. Mr John Robert Smith & John Smith and SonMr Michael John Smith<John Smith and Son A/C>

Long Names. Mr John William Alexander Mr John W A Robertson-SmithRobertson-Smith

Clubs/Unincorporated Bodies/Business Names - Mr Michael Peter Smith ABC Tennis AssociationUse office bearer(s) personal name(s). <ABC Tennis Association A/C>

Superannuation Funds - Use the name of the trustee of the fund. Jane Smith Pty Ltd Jane Smith Pty Ltd Superannuation Fund<Super Fund A/C>

Application Form

89

PanBio LimitedA.B.N. 19 010 728 220

Public Share Offer

Pin cheque(s) hereDo not staple

PLEASE MAKE CHEQUE(S) PAYABLE TO ‘PANBIO LIMITED SHARE OFFER’

I/We declare that this application is completed according to the declaration/appropriate statements on the reverse of this form and agree to be bound by the Constitution of PanBio Limited. The return of this Application Form with your cheque(s) for the application monies will constitute your offer to subscribe for ordinary Shares in the Company. NO SIGNATURE IS REQUIRED. YOU SHOULD READ THIS PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION FORM. THE PROSPECTUS CONTAINS INFORMATIONABOUT INVESTING IN THE COMPANY’S SHARES. A PERSON WHO GIVES ANOTHER PERSON ACCESS TO THIS APPLICATION FORM MUST AT THESAME TIME BY THE SAME MEANS GIVE THAT PERSON ACCESS TO THE PROSPECTUS AND ANY SUPPLEMENTARY PROSPECTUS.

Write the number of Shares you are applying for here

Minimum 2,000 and then

multiples of 500 Shares

You may be allocated all of the Shares above or a lesser number. (Please make sure that the amount of your cheque(s) equals this amount).

Write your name here

Title, Given Name(s) (no initials) and Surname or Company Name

Joint Applicant 2 or < account name >


Write your postal address here

Number/Street/Box number details

Suburb/Town

Contact Number (work)

( ____ ) _____________________________

Contact Number (home)

( ____ ) _____________________________

Contact Name (print)

_____________________________________

CHESS HIN NO. - If you are a sponsored participant within CHESS then please enter your Holder Identification Number (HIN)

Drawer Cheque No. BSB No. Account No. Amount $A


PLEASE READ ALL INSTRUCTIONS ON REVERSE OF THIS FORM

A x A$ 1.00 = A$ .00B

C

F

D

E

G

H

I

Share Registrar’s Use Only

Broker Reference - Stamp Only

Broker Code

Adviser Code

To meet the requirements of the Corporations Law, this Application Form must not be handed on unless attached to the Prospectus dated 22 February 2001issued by PanBio Limited for the issue of ordinary Shares in PanBio Limited. The Prospectus expires 13 months after 22 February 2001.

Enter your Tax File Number(s) (or exemption category)

TFN of Joint Applicant 3TFN of Individual Applicant

TFN of Joint Applicant 2 ABN of Company, Partnership, Trust or Super Fund















OR by post to:







90












Application Form

91

PanBio LimitedA.B.N. 19 010 728 220

Public Share Offer

Pin cheque(s) hereDo not staple

PLEASE MAKE CHEQUE(S) PAYABLE TO ‘PANBIO LIMITED SHARE OFFER’

I/We declare that this application is completed according to the declaration/appropriate statements on the reverse of this form and agree to be bound by the Constitution of PanBio Limited. The return of this Application Form with your cheque(s) for the application monies will constitute your offer to subscribe for ordinary Shares in the Company. NO SIGNATURE IS REQUIRED. YOU SHOULD READ THIS PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION FORM. THE PROSPECTUS CONTAINS INFORMATIONABOUT INVESTING IN THE COMPANY’S SHARES. A PERSON WHO GIVES ANOTHER PERSON ACCESS TO THIS APPLICATION FORM MUST AT THESAME TIME BY THE SAME MEANS GIVE THAT PERSON ACCESS TO THE PROSPECTUS AND ANY SUPPLEMENTARY PROSPECTUS.

Write the number of Shares you are applying for here

Minimum 2,000 and then

multiples of 500 Shares

You may be allocated all of the Shares above or a lesser number. (Please make sure that the amount of your cheque(s) equals this amount).

Write your name here

Title, Given Name(s) (no initials) and Surname or Company Name



Write your postal address here

Number/Street/Box number details

Suburb/Town

Contact Number (work)

( ____ ) _____________________________

Contact Number (home)

( ____ ) _____________________________

Contact Name (print)

_____________________________________

CHESS HIN NO. - If you are a sponsored participant within CHESS then please enter your Holder Identification Number (HIN)



PLEASE READ ALL INSTRUCTIONS ON REVERSE OF THIS FORM

A x A$ 1.00 = A$ .00B

C

F

D

E

G

H

I

Share Registrar’s Use Only

Broker Reference - Stamp Only

Broker Code

Adviser Code

To meet the requirements of the Corporations Law, this Application Form must not be handed on unless attached to the Prospectus dated 22 February 2001issued by PanBio Limited for the issue of ordinary Shares in PanBio Limited. The Prospectus expires 13 months after 22 February 2001.

Enter your Tax File Number(s) (or exemption category)

TFN of Joint Applicant 3TFN of Individual Applicant

TFN of Joint Applicant 2 ABN of Company, Partnership, Trust or Super Fund















OR by post to:







92












116 Lutwyche R

oad Windsor Q

ld 4030 Australia Telephone +

61 (0) 7 3357 1177Facsim

ile +61 (0) 7 3357 1222 E

mail panbio@

panbio.com.au

Initial Public O

ffer 2001PA

NB

IO P

RO

SP

EC

TU

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pbo prospectus 2001

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