BEAUTY HEALTH GROUP LIMITED

(Subject to Deed of Company Arrangement) ACN 009 085 974

NOTICE OF MEETING AND

EXPLANATORY STATEMENT AND

INDEPENDENT EXPERT’S REPORT

General Meeting to be held at The Clarendon Hotel 209 Clarendon Street South Melbourne 3205

On 16 November 2012 commencing at 12PM (EST).

This Notice of Meeting, Explanatory Statement and Independent Expert’s Report should be read in its entirety.

If Shareholders are in doubt as to how to vote, they should seek advice from their accountant, solicitor or other professional adviser without delay.

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BEAUTY HEALTH GROUP LIMITED

(Subject to Deed of Company Arrangement)

ACN 009 085 974

General Information This Notice of Meeting and Explanatory Statement sets out information about the resolutions for the proposed recapitalisation by the Company. Completion of the Proposed Recapitalisation will result in:

(a) new shares being issued which will increase the Company’s capital base;

(b) the appointment of a new board of directors; and

(c) discharge of creditors' claims against the Company.

Further details of the Recapitalisation Proposal are provided in Sections 2 and 4 of the Explanatory Statement. Definitions of capitalised terms used in the Notice of Meeting and Explanatory Statement are set out in Section 7 of the Explanatory Statement. In considering the Resolutions, Shareholders should consider the current financial circumstances of the Company. The terms of the Deed of Company Arrangement provide that if the Proposed Recapitalisation of the Company does not proceed or the terms of the Deed of Company Arrangement are otherwise not complied with, it is likely that the Company will proceed into liquidation. In those circumstances, it is unlikely there will be any return to Shareholders. The Resolutions are therefore important and affect the future of your Company. You are urged to give careful consideration to the Notice of Meeting and the contents of the Explanatory Statement.

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NOTICE OF MEETING

BEAUTY HEALTH GROUP LIMITED (Subject to Deed of Company Arrangement)

ACN 009 085 974

Notice is given that a General Meeting of Shareholders of Beauty Health Group Limited (Subject to Deed of Company Arrangement)

will be held at The Clarendon Hotel 209 Clarendon Street South Melbourne, Victoria on 16 November 2012 commencing at 12PM (EST).

General Business The business to be transacted at the General Meeting is the proposal of the Resolutions set out below. Resolution 1: Election of Mr Cary Peter Stynes

To consider and, if thought fit, to pass the following resolution as an ordinary Resolution:

"Subject to Resolutions 2, 3 and 4 being passed, that Mr Cary Peter Stynes, having been appointed as an Executive Director of the Company and being eligible and having signified his candidature and consented to act, be re-elected as a director of the Company.

Resolution 2: Election of Mr Constantine Andrew Scrinis

To consider and, if thought fit, to pass the following resolution as an ordinary Resolution: "Subject to Resolutions 1, 3 and 4 being passed, that Mr Constantine Andrew Scrinis, having been appointed as an Executive Director of the Company and being eligible and having signified his candidature and consented to act, be re-elected as a director of the Company.

Resolution 3: Election of Mr Gregory John Wood

To consider and, if thought fit, to pass the following resolution as an ordinary Resolution: "Subject to Resolutions 1, 2 and 4 being passed, that Mr Gregory John Wood, having been appointed as a Non Executive Director of the Company and being eligible and having signified his candidature, and consented to act, be re-elected as a director of the Company.

Resolution 4: Issue of New Shares to Boom Capital Pty Ltd or its nominees (excluding B2B Holdings Pty Ltd) To consider and, if thought fit, to pass the following resolution as an ordinary Resolution:

“That, subject to Resolutions 1 to 3 (inclusive) and 5 being passed and in accordance with Listing Rule 10.11 and sections 208 and 611 (item 7) of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of up to 500,140 new shares in the capital of the Company to Boom Capital Pty Ltd or its nominees (excluding B2B Holdings Pty Ltd), as detailed in the accompanying Explanatory Statement.”

Resolution 5: Issue of New Shares to B2B Holdings Pty Ltd To consider and, if thought fit, to pass the following resolution as an ordinary Resolution:

“That, subject to Resolutions 1 to 4 (inclusive) being passed and in accordance with Listing Rule 10.11 and sections 208 and 611 (item 7) of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of up to 100,000 new shares in the capital of the Company to B2B Holdings Pty Ltd, as detailed in the accompanying Explanatory Statement.”

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Voting Exclusion Statement The following voting exclusion statement applies to the Resolutions under the Listing Rules or where applicable, the provisions of the Corporations Act to the following persons (Excluded Persons). The Company will disregard any votes on the following Resolutions cast by the following Excluded Persons:

Resolution No.

Title Excluded Persons

4 Issue of New Shares to Boom Capital or its nominees

Boom Capital (or its nominees, excluding B2B Holdings Pty Ltd) and any of its Associates

5 Issue of New Shares to B2B Holdings Pty Ltd

B2B Holdings Pty Ltd and any of its Associates

However, the Company need not disregard a vote if it is cast by: (a) a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy

form; or (b) the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a

direction on the proxy form to vote as the proxy decides.

Explanatory Statement

The accompanying Explanatory Statement forms part of this Notice of Meeting and should be read in conjunction with it.

The Explanatory Statement provides additional information on matters to be considered at the General Meeting.

The Company has prepared this Notice of Meeting and Explanatory Statement.

The Deed Administrators were not involved in the preparation lodgment of, or the making of representations under, this document and the Deed Administrators accept no liability with respect to the Share Issue or any public documents issued or published in connection with the Share Issue.

The Deed Administrators take no responsibility for any statements in or omissions from this Notice of Meeting and/or the Explanatory Statement.

The Deed Administrators has had no past involvement in the management of the Company and take no responsibility for any statements in, or omissions from, this Notice of Meeting and the Explanatory Statement in relation to the history of the Company.

As at the date of this Notice of Meeting the Company is suspended from trading on ASX and is subject to a Deed of Company Arrangement.

Shareholders should seek independent professional advice in respect of any queries they may have regarding the matters detailed in this Notice of Meeting and the Explanatory Statement.

The Resolutions are subject to and conditional upon each and every Resolution being passed. Accordingly, the Resolutions should be considered collectively as well as individually.

Shareholders are specifically referred to Section 6 of the Explanatory Statement, which contains definitions of capitalised terms used in this Notice of Meeting and the Explanatory Statement.

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Proxies

Please note that:

(a) a Shareholder entitled to attend and vote at the general meeting is entitled to appoint a proxy;

(b) a proxy holder need not be a member of the Company;

(c) a Shareholder may appoint a body corporate or an individual as its proxy;

(d) a body corporate appointed as a Shareholder’s proxy may appoint an individual as its representative to exercise any of the powers that the body may exercise as the Shareholder’s proxy; and

(e) Shareholders entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed proxy form provides further details on appointing proxies and lodging proxy forms. If a Shareholder appoints a body corporate as its proxy and the body corporate wishes to appoint an individual as its representative, the body corporate should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that company’s representative. The authority may be sent to the Company or its share registry in advance of the General Meeting or handed in at the General Meeting when registering as a corporate representative.

Voting Entitlements

In accordance with Regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001, the Company has determined that a person’s entitlement to vote at the General Meeting will be the entitlement of that person set out in the register of Shareholders as at 17:00 (EST) on 14 November 2012. Accordingly, transactions registered after that time will be disregarded in determining Shareholders’ entitlement to attend and vote at the General Meeting. DATED: 1 October 2012 BY ORDER OF THE BOARD

---------------------------------- Constantine Andrew Scrinis Director

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EXPLANATORY STATEMENT TO SHAREHOLDERS

PROPOSAL FOR THE RECAPITALISATION OF BEAUTY HEALTH GROUP LIMITED (ACN 009 085 974)

(Subject to a Deed of Company Arrangement)

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CONTENTS

PAGE NO. 1. Introduction 1 2. Recapitalisation Proposal 1 3. General Meeting 3 4. Other Information 4 5. Regulatory Requirements 7 6. Definitions 13 Proxy Form Independent Expert’s Report

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EXPLANATORY STATEMENT 1. INTRODUCTION This Explanatory Statement has been prepared for the information of Shareholders in relation to the business to be conducted at the Company’s General Meeting. The purpose of this Explanatory Statement is to provide Shareholders with all information known to the Company, which is material to a decision on how to vote on the resolutions in the accompanying Notice of Meeting. This Explanatory Statement should be read in conjunction with the Notice of Meeting. Terms in the Notice of Meeting and this Explanatory Statement are defined in Section 6 of this Explanatory Statement. 2. THE RECAPITALISATION PROPOSAL On 16 July 2004, the Shares in the Company were suspended from quotation on ASX. On 8 August 2011 the Company appointed Mr. John Vouris and Mr. Bradley Tonks of Lawler Partners as joint and several administrators of the Company. At a meeting of the Creditors on 15 November 2011 (Second Meeting of Creditors), the Creditors resolved to enter into a Deed of Company Arrangement (“DOCA”) which included the recapitalization proposal received from Boom Capital Pty Ltd. The DOCA was executed on 6 December 2011. A copy of the DOCA is available for inspection at the office of Lawler Partners at Level 9, 1 O’Connell Street Sydney 2000. 2.2 Proposal As part of the Recapitalisation Proposal, subject to Shareholders resolving to approve the Resolutions, a total of up to 600,140 New Shares will be issued to Boom Capital and or its nominees (including B2B Holdings Pty Ltd) and a total payment of $200,000 (Issue Sum) (being an issue price of $0.33 per share) will be paid to the Deed Administrators. It is proposed that the New Shares will be issued within 3 days of the passing of the Resolutions. The Issue Sum to be paid for the New Shares will be used to pay the costs and disbursements of the Voluntary Administrators and satisfying proved creditors claims. 2.3 PROFORMA CAPITAL STRUCTURE The pro-forma capital structure of the Company on completion of the Recapitalisation Proposal will be as follows:

Description Resolution

(Res)

Number of Shares

% Of Shareholding

Number of Options

% Of Voting Power

Existing Shares 257,203 30% - 30%

Issue to Boom Capital or its nominees (including B2B Holdings Pty Ltd)

Res 4&5 600,140 70% - 70%

TOTAL 857,343 100% 100%

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2.4 QUOTATION OF NEW SHARES ON ASX The Company is admitted to the official list of ASX; however, trading in the Existing Shares was suspended from quotation on 16 July 2004. Following completion of the Recapitalisation Proposal the Company will continue to have its shares suspended from quotation on ASX. Reinstatement to the ASX is at the discretion of ASX and will be subject to the Company being in compliance with ASX and Corporations Act regulatory requirements. 2.5 FORGIVENESS OF CREDITORS’ CLAIMS Under the DOCA, the Claims of the Creditors against the Company will be released and extinguished on the payment of the above amount to the Deed Administrators, the issue of the New Shares to Boom Capital and its nominees and otherwise the effectuation of the DOCA. The DOCA will effectuate after all of the DOCA Conditions have been satisfied, and the obligations thereunder have been performed. However, if any of the DOCA Conditions are not satisfied, then the DOCA may be terminated, and the Company may proceed to liquidation.

3. GENERAL MEETING 3.1 ACTION TO BE TAKEN BY THE EXISTING SHAREHOLDERS In order to proceed with the Recapitalisation Proposal and otherwise to enable the DOCA to be effectuated, the Company must convene a General Meeting of Existing Shareholders for the purposes of passing the Resolutions in compliance with the requirements of the Listing Rules and the Corporations Act. The Notice convening the General Meeting is included at the front of this booklet. Existing Shareholders are encouraged to attend and vote in favour of each of the Resolutions to be put at the General Meeting. If an Existing Shareholder is not able to attend and vote at the General Meeting, the Existing Shareholder is encouraged to complete the proxy form at the back of this booklet and return it to the Company at the address stated on the proxy form not later than 48 hours before the time specified for the commencement of the General Meeting. 3.2 GENERAL MEETING RESOLUTIONS There are 5 Resolutions to be put to the General Meeting. All Resolutions are ordinary resolutions. All the Resolutions in the Notice of Meeting are interconnected and conditional on the passing of each of the other Resolutions, so that those Resolutions will not have any effect unless all of the Resolutions are passed. Certain voting restrictions are imposed in relation to some of the Resolutions as detailed in the accompanying Notice of Meeting under the heading “Voting Exclusion Statement”. Further details of each Resolution is set out in Sections 4 and 5.

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4. OTHER INFORMATION 4.1 SCOPE OF DISCLOSURE The Company is required to provide to shareholders all information, which is known to the Company that is reasonably required by Existing Shareholders in order to decide whether or not it is in the Company’s interests to pass the Resolutions. The Company is not aware of any relevant information that is material to the decision on how to vote on the Resolutions other than as is disclosed in this Explanatory Statement or previously disclosed to Existing Shareholders by the Deed Administrators or by the Company by notification to the ASX. 4.2 VOTING INTENTIONS AND INTERESTS OF DIRECTORS Other than as described below, the directors of the Company have no existing interest in the Company, as at the date of this Explanatory Statement. Each of Boom Capital and B2B Holdings Pty Ltd is a related party of the Company as defined by Section 228 of the Corporations Act. Mr. Constantine Andrew Scrinis, a director of the Company, has a financial interest in and controls Boom Capital. Boom Capital will receive a financial benefit from the Company should the New Shares be issued under the Proposed Recapitalisation. Mr. Gregory John Wood, a director of the Company, has a financial interest in and controls B2B Holdings Pty Ltd. B2B Holdings Pty Ltd will receive a financial benefit from the Company should the New Shares be issued under the Proposed Recapitalisation. Mr. Cary Peter Stynes has no financial interest in either of Boom Capital or B2B Holdings. 4.3 RECOMMENDATION BY DIRECTORS The directors, including Mr Constantine Andrew Scrinis and Gregory John Wood (noting their interest disclosed in section 4.2 above) and Mr Cary Stynes recommend that in the context of the Company's current financial circumstances and given the Creditors’ approval of the DOCA, which includes the Recapitalisation Proposal, the Existing Shareholders should accept the Recapitalisation Proposal and approve the Resolutions to be put to the General Meeting. However, Existing Shareholders must decide how to vote based on the matters set out in the Explanatory Statement. 4.4 TAXATION

The Recapitalisation Proposal may give rise to income tax implications for the Company. Existing Shareholders are advised to seek their own taxation advice on the effect of the Resolutions on their personal position and neither the Company, nor any of the existing directors; the Deed Administrators, the proposed directors or any adviser to the Company accepts any responsibility for any individual Existing Shareholder's taxation consequences on any aspect of the Recapitalisation Proposal. 4.5 EFFECT OF THE RECAPITALISATION PROPOSAL For the purposes of this Explanatory Statement, the following information is provided for consideration by the Existing Shareholders. The Company’s shares were suspended from ASX on 16 July 2004 and the Deed Administrators were appointed as voluntary administrators of the Company on 8 August 2011. Previous historic ASX share trading prices for the Existing Shares are not considered a reliable basis to assess the value of the New Shares. As noted previously, the Company is subject to a DOCA with no further resources to satisfy unsecured Creditors. Due to the Company’s current state of affairs, the lack of profit history

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and the immediate lack of a reliable future cash flow from remaining assets, maintainable earnings are not considered a reliable basis to assess the New Shares. The Deed Administrators have estimated that on a liquidation basis that there would be a deficiency of funds to meet creditor claims. Therefore, in the event of liquidation, there is likely to be no return to shareholders from the Company. Accordingly, the current implicit value of the Existing Shares at the date of this Explanatory Statement would be nil cents. The advantages of passing the Resolutions and subsequent completion of the Recapitalisation Proposal and effectuation of the DOCA include: • the Company would not proceed into liquidation on the basis of its current financial

state (where the Existing Shareholders would receive no return on their investment);

• the appointment of the proposed directors with broad corporate experience; • the Company intends to apply, once it has satisfies all ASIC and ASX listing

requirements, to have its shares re-quoted on the ASX. On 16 July 2004 the Company was suspended from quotation. The Company went into voluntary administration on 8 August 2011. The Company’s shares continue to be suspended from trading on ASX as at the date of this Explanatory Statement. Therefore, in applying to have its shares re-quoted on ASX, the Company will again need to comply with the listing and quotation requirements of Chapters 1 and 2 of the ASX Listing Rules. In particular, the Company will need to satisfy the assets test meaning inter alia that the Company will need to have at least $3 million of net tangible assets. Accordingly it is likely that the Company will need to conduct a future capital raising to satisfy this test. The Company is also likely to need to conduct a capital raising in order to satisfy ASX's “Shareholder Spread” requirements for re-quotation. If the Company's shares are successfully re-quoted on the ASX, it will create a market for those shares and the Existing Shareholders may be in a position to dispose their shares; and

• the Company may acquire a new business. Shareholders should note that if the

Company does acquire a new business, and such acquisition amounts to a change in the nature of the Company's operations for the purposes of ASX Listing Rule 11, shareholder approval may need be sought for the change of the Company’s business and the Company may be required comply with additional ASX listing and quotation requirements of Chapters 1 and 2 of the ASX Listing Rules.

The principal disadvantage to Existing Shareholders is that their existing shareholdings will be significantly diluted if the issue of New Shares is approved under Resolution 4 and Resolution 5. However, this must be balanced with the fact that their existing shareholdings currently have nil value and the fact that, should the Recapitalisation Proposal not proceed, the Company would most likely be placed into liquidation. Following completion of the Recapitalisation Proposal, the shareholdings of the Existing Shareholders, although proportionally reduced, would be likely to have positive value given the cash injection to the Company. 4.6 INDICATIVE VALUE OF EXISTING SHARES IF THE RECAPITALISATION

PROPOSAL IS APPROVED The quantum of benefit to be received by the holders of the Existing Shares if the Recapitalisation Proposal is approved under Resolution 4 and Resolution 5 will depend in part on the price at which the underlying Shares may ultimately trade on ASX should the Company be successful in having its shares re-quoted on ASX.

As the Company shares are currently suspended from ASX, there is no readily available existing market price for the Company’s Shares.

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4.7 RECAPITALISATION AGREEMENT The Deed Administrators, the Company, and Boom Capital entered into a recapitalisation agreement dated 27 August 2011 to recapitalise the Company and the Creditors voted in favour of the DOCA at a creditors meeting held on 15 November 2011. The principal terms of the Recapitalisation Agreement are as follows:

(a) Boom Capital to contribute $200,000.00, payable as to $50,000.00 on execution of the DOCA (which has already been paid) and $150,000.00 following Boom Capital or its nominees (including B2B Holdings Pty Ltd) being issued 600,140 fully paid ordinary shares in the Company.

(b) the existing directors of the Company resigning and being replaced by 3 directors and a Company Secretary nominated by Boom Capital (which has already occurred);

(c) the contribution of $200,000.00 by Boom Capital under the Deed of Company Arrangement will be used, inter alia, to assist in paying the costs of the Administration and satisfying creditors' claims against the Company.

4.8 DEED OF COMPANY ARRANGEMENT On 15 November 2011, pursuant to section 439A of the Corporations Act, a meeting of the Company’s creditors was held at which it was resolved that the Company should execute a DOCA. The Company entered into the DOCA with the Deed Administrators, on 6 December 2011. The DOCA approved by Creditors of the Company provided the following: (a) that it is subject to the following conditions (collectively referred to as “the DOCA

Conditions”);

(i) Boom Capital paying to the Deed Administrators the sum of $200,000.00 in respect of the Recapitalisation Proposal (The deposit of $50,000 of which has already been paid);

(ii) the Deed Administrators paying to the Deed Fund the sum of $200,000.00;

and (b) the debts of the Company to Creditors being extinguished upon compliance with the

DOCA; (c) the Deed Fund shall comprise the following (collectively referred to as “the

Contributions”):

(iii) all cash-on-hand or at bank held by the Deed Administrators or the Company; (iv) the sum of $200,000.00 referred to in paragraph (a) (ii) above;

(d) the DOCA will effectuate after all the DOCA Conditions have been satisfied and the

obligations under the DOCA performed (including distribution of the Deed Fund to participating Creditors);

(e) if any DOCA Conditions are not satisfied, then the DOCA may be terminated and the

Company may proceed into liquidation; (f) all costs incurred by the Deed Administrators are to be paid out of the Deed Fund.

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5. REGULATORY REQUIREMENTS The General Meeting has been called to approve specific aspects of the Recapitalisation Proposal in accordance with the Listing Rules and the Corporations Act, which are summarised below. 5.1 CHANGE OF BOARD The Administrators appointed Constantine Andrew Scrinis, Cary Peter Stynes and Gregory John Wood to the Board on 6 December 2011.The appointment of the new directors will be ratified on approval of Resolutions 1 to 3. Brief profiles of the proposed directors are set out below:

Constantine Andrew Scrinis – Executive Director

Constantine was the founder and managing director of commercial and industrial lighting manufacturer Moonlighting Pty Ltd, a business, which was acquired by Gerard Lighting Pty Ltd in February 2004. Constantine then established and was joint managing director of ASX listed Traffic Technologies Limited (TTI) until his resignation in August 2007. To that time Constantine played a dominant role in building up TTI to become Australia’s largest traffic products company with about $100m in annual revenues. Constantine is also currently the Managing Director of ASX listed Teys Limited. He was appointed a Director of the Company in December 2011. Cary Stynes LL.B (Melb) MAICD – Executive Director Cary Stynes spent six years as a commercial lawyer with international law firm Minter Ellison practicing in commercial litigation, insolvency, media, corporate advisory and mergers and acquisitions. In 1993 he co-founded Point of Sale Media Pty Ltd, which was subsequently acquired in 1995 by ASX, listed Media Entertainment Group Limited (“MEG”). He was appointed a Director of MEG in 1995 and became its Managing Director in 1997, a position he held until CPH Limited acquired the Company in mid 1999. He was Managing Director of and managed the ASX, IPO listing, of Software Communication Group Limited from 1999 to 2001, the recapitalisation of CBD Energy Limited from 2002 to 2003. The re-organisation and recapitalisation under a DOCA of ASX listed, The Swish Group Limited from 2004 to 2011. He was Non-Executive Director of ASX listed Traffic Technologies Limited from 2005 to 2009, MCM Entertainment Limited from 2006 to 2008 and sat on the Board of Childrenʼs Cancer Charity The Koala Foundation from 2006 to 2009. He is currently the principal of Stynes Lawyers and Stynes Consulting, which specialise in corporate reconstructions and recapitalisations of primarily ASX listed companies and providing mergers and acquisition and other advice to early stage companies. He is also a Director of a number of private companies. He was appointed a Director of the Company in December 2011. Gregory John Wood – Non Executive Director

Greg Wood has an extensive history in the corporate advisory, merchant banking and financial services industries. He is currently Managing Director of K S Capital Pty Limited, licensed dealer in securities, and specialises in capital raisings, mergers and acquisitions advice, public company takeovers and financial reconstructions. Mr. Wood is a Chartered Accountant by background. He was appointed a Director of the Company in December 2011.

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5.2 LISTING RULE 10.11 Shareholder approval is being sought for Resolution 4 in relation to the issue of New Shares to Boom Capital or its nominees and Resolution 5 in relation to the issue of New Shares to B2B Holdings Pty Ltd (as set out below) for the purposes of Listing Rule 10.11. Shareholders should note that under Exception 14 of Listing Rule 7.2, if shareholder approval of the issue of New Shares is obtained under Listing Rule 10.11, approval under Listing Rule 7.1 is not required. Accordingly, if shareholders approve Resolution 4 (in relation to the New Share issue to Boom Capital or its nominees) and Resolution 5 (in relation to the New Shares issued to B2B Holdings Pty Ltd) under Listing Rule 10.11, approval under Listing Rule 7.1 will not be required. Chapter 10 of the Listing Rules contains certain provisions in relation to transactions between a company and ‘persons in a position of influence’. Listing Rule 10.11 provides that a company must not issue equity securities to a ‘related party’ without the approval of holders of ordinary securities by ordinary resolution. The term ‘related party’ is defined for these purposes to include a related party within the meaning of section 228 of the Corporations Act and a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained. The directors have determined to seek Shareholder approval under Listing Rule 10.11 to permit the issue of New Shares to Boom Capital or its nominees and B2B Holdings Pty Ltd (as set out below). Boom Capital is an entity controlled by a director of the Company, Mr. Constantine Andrew Scrinis, and is therefore a related party. B2B Holdings Pty Ltd is an entity controlled by a director of the Company, Mr. Gregory John Wood, and is therefore a related party. Although the recipients of the New Shares (other than Boom Capital and B2B Holdings Pty Ltd) may not technically be related parties, since those parties are receiving New Shares as nominees of Boom Capital, the Company seeks shareholder approval under Listing Rule 10.11 out of an abundance of caution. Following the approval of the issue of the New Shares under Resolution 4 and Resolution 5 the Company will still have the capacity to issue 15% of its expanded share capital over the next 12 months as those New Shares once issued will be excluded from the calculation under Listing Rule 7.1. Listing Rule 10.13 contains certain requirements as to the contents of a notice sent to shareholders for the purposes of ASX Listing Rule 10.11 and the following information is included in this Explanatory Statement for that purpose: Name of person

The following nominees of Boom Capital:

312,596 Boom Capital Pty Ltd 100,000 B2B Holdings Pty Ltd

Maximum number of securities to be issued

187,544 Meridian International Research Pty Ltd 600,140

Date by which securities will be issued

Within 3 days of the passing of the Resolutions, but in any event within one month after the date of the meeting.

Issue price

$0.33 per share

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Intended use of funds

The funds raised will be paid to the Deed Administrators to pay the costs of the Administration and satisfy the claims of the unsecured Creditors.

5.3 SECTION 208 OF THE CORPORATIONS ACT Under Chapter 2E of the Corporations Act, a public company cannot give a “financial benefit” to a “related party” unless one of the exceptions set out in sections 210 to 216 of the Corporations Act apply or shareholders have in a general meeting approved the giving of that financial benefit to the related party. Boom Capital is a related party as defined by section 228 of the Corporations Act. Constantine Andrew Scrinis has a financial interest and controls Boom Capital. Boom Capital will be receiving a financial benefit from the Company should it acquire the New Shares and thus requires Existing Shareholders' approval under section 208(1). B2B Holdings Pty Ltd is also a related party as defined by section 228 of the Corporations Act. Greg Wood has a financial interest in and controls B2B Holdings Pty Ltd. B2B Holdings Pty Ltd will be receiving a financial benefit from the Company should it acquire New Shares and thus requires Existing Shareholders' approval under section 208(1). The directors have determined to seek Shareholder approval under Section 208 of the Corporations Act to permit the issue of the securities on the terms of Resolution 4 (in relation to the New Shares to issue to Boom Capital) and Resolution 5 (in relation to the New Shares to be issued to B2B Holdings Pty Ltd). Section 219 of the Corporations Act sets out certain requirements as to the contents of an explanatory statement sent to shareholders for the purposes of Chapter 2E and the following information is included in this Explanatory Statement for that purpose: Names of Related Parties to whom financial benefits will be given

Boom Capital and Mr. Constantine Andrew Scrinis B2B Holdings Pty Ltd and Mr. Gregory John Wood

Nature of financial benefits

Boom Capital Pty Ltd has the right to nominate the recipients of the New Shares in the Company to be issued under the DOCA. Boom Capital will also be issued with 312,596 of those shares. B2B Holdings Pty Ltd will receive 100,000 New Shares.

In relation to each director, that director's recommendation regarding the resolution to approve the Proposed Recapitalisation and the reasons for that recommendation.

All of the directors recommend that in the context of the Company's current circumstances and given the Creditors' approval of the DOCA, which includes the Recapitalisation Proposal, the Existing Shareholders should approve the Resolutions.

In relation to each director, whether that director had in interest in the outcome of the Proposed Recapitalisation.

Mr. Constantine Andrew Scrinis has a financial interest in and controls Boom Capital. Mr. Gregory John Wood has a financial interest in and controls B2B Holdings Pty Ltd.

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Mr. Cary Peter Stynes has no interest in the outcome of the proposed recapitalisation The other persons to be issued New Shares are not related parties of the Company.

5.4 SECTION 611 (ITEM 7) OF THE CORPORATIONS ACT Section 606(1) of the Corporations Act prohibits the acquisition by a person, of voting shares in a company, where because of the acquisition, that person's or someone else's voting power in the company:

• increases from 20% or below to more than 20%; or • increases from a starting point that is above 20% and below 90%,

unless an exception in section 611 applies. If the Proposed Recapitalisation occurs, the voting power of Boom Capital and its associates will increase above 20%. Boom Capital and its nominees voting interest in the Company after the Recapitalisation Proposal will be approximately 70%. Item 7 of section 611 contains an exception to the section 606(1) prohibition where there is an approval by resolution of the target. It is a requirement of item 7 of section 611 that Boom Capital make the following disclosures regarding the Proposed Recapitalisation: Identity of purchaser

Boom Capital Pty Ltd

Full particulars of shares to be issued to purchaser

600,140 ordinary shares, comprising 70% of the Company's issued capital, to be issued to Boom Capital Pty Ltd and its nominees as follows:

312,596 Boom Capital Pty Ltd 100,000 B2B Holdings Pty Ltd

Identity, associations and qualifications of person who is intended to become a director of the Company.

187,544 Meridian International Research Pty Ltd Refer section 5.1 of the Explanatory Memorandum for profiles of the proposed directors. As detailed in their respective profiles, if elected the directors will bring significant background and experience to the Company's board in particular in the area of restructuring and recapitalising ASX companies that are subject to a DOCA and suspended from ASX. While they each have various professional interests and responsibilities, each is committed to the Company and to pursuing opportunities that will create shareholder wealth. If the Recapitalisation Proposal is approved, the directors have agreed to act without remuneration in the short term while the Company undergoes this rebuilding phase.

Statement of intentions regarding the future of the Company:

• Business of the Company: Following the approval

of the Proposed Recapitalisation, the Directors of the Company will undertake a strategic review of the business of the Company. While the specific

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areas within which the Company will operate in the future are not yet known, the Directors will be actively seeking business and investment opportunities that will benefit all shareholders.

• Injection of capital: The Directors of the Company will review the capital requirements of the Company following the strategic review of its business operations. At this stage, it is anticipated that if the Recapitalisation Proposal is approved, a further private placement and or further capital raising will be undertaken to raise the funds necessary to enable the Company to pursue its future endeavors and to satisfy the capital requirements for the re-quotation of its shares on ASX. At this stage, the likely recipients of any placement is unknown.

• Future employment prospects: Following the Proposed Recapitalisation, the Directors will undertake a review of the employment requirements of the Company.

• Intended property transfers: As at the date of this Notice, the Company does not intend to transfer any property.

• Intention to redeploy fixed assets: Any redeployment of any fixed assets of the Company will be considered by the Company following the strategic review of its business operations.

Terms of the Proposed Recapitalisation

Refer to section 5.3 of this Explanatory Memorandum

Date for completion of Proposed Recapitalisation

Within 3 business days of the passing of the Resolutions

Reasons for Proposed Recapitalisation

Refer to section 4 of this Explanatory Memorandum

Interests of directors

Constantine Andrew Scrinis 312,596 Gregory John Wood 100,000

Intention to change dividend or other financial policies

Following the Proposed Recapitalisation, the dividend and financial policies of the Company will be considered by the Board as part of its strategic review.

The directors have determined to seek Shareholder approval under Section 611 (Item 7) of the Corporations Act to permit the issue of the securities on the terms of Resolution 4 (in relation to the New Shares to issue to Boom Capital) and Resolution 5 (in relation to the New Shares to be issued to B2B Holdings Pty Ltd).

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5.5 ASIC AND ASX’S ROLE Under section 218(1) of the Corporations Act, the Company must lodge with ASX and ASIC the Notice of Meeting and the Explanatory Statement at least 14 days before the notice convening a general meeting is given. Under section 218(2) of the Corporations Act, the Company has applied for a review period of less than 14 days. Under Listing Rule 15.1, the Company must lodge the Notice of Meeting and the Explanatory Statement with ASX before finalising it. The fact that the accompanying Notice of Meeting, this Explanatory Statement and other relevant documentation has been received by ASX and ASIC is not to be taken as an indication of the merits of the Recapitalisation Proposal or the Company. ASIC, ASX and its respective officers take no responsibility for any decision an Existing Shareholder may make in reliance on any of that documentation. 6. EXPERT’S REPORT

Part of the purpose of Resolution 4 and Resolution 5 is to enable Shareholders to consider this Resolution in accordance with Section 611 Item 7 of the Corporations Act which, if passed, will permit Boom Capital Pty Ltd to acquire the New Shares, thereby increasing its voting power in the Company to the maximum extent specified in section 5.4 of this Explanatory Memorandum, without contravening Section 606 of the Corporations Act.

ASIC requires that Shareholders who are being asked to consider a proposal to pass a resolution under Section 611 Item 7 of the Corporations Act be provided with an analysis of whether the proposal is fair and reasonable when considered from the perspective of the Shareholders of the Company other than Boom Capital (and its Associates).

For the purpose of Part 2E of the Corporations Act, the nature of the financial benefit being given to a related party be disclosed to Shareholders.

Directors may satisfy their obligations to provide an analysis and a valuation by those directors, not associated with the proposal, by commissioning an independent expert’s report.

The directors have commissioned the Independent Expert to prepare the Expert’s Report to analyse the Recapitalisation Proposal.

The purpose of the Expert’s Report is to analyse whether the Recapitalisation Proposal set out in Resolution 4 and Resolution 5 is fair and reasonable when considered from the perspective of Shareholders other than Boom Capital Pty Ltd and its Associates and to value the benefit comprising the New Shares given to Boom Capital as a related party.

The Independent Expert is required to determine whether the Recapitalisation Proposal is fair and reasonable to non-participating Shareholders.

For the purpose of valuation of the benefit the Independent Expert is required to set out the principal assumptions behind the valuation.

The Expert’s Report, prepared by the Independent Expert is set out in full attached to this Explanatory Memorandum. Shareholders should read the full text of the Expert’s Report to assist them in determining how they wish to vote in respect of Resolution 4 and Resolution 5.

In summary, the Expert’s Report concludes that:

(a) the Company presently has a deficiency of net assets in the range of $2,484,268

(b) the shares of the Existing Shareholders' presently have nil value;

(c) following completion of the Recapitalisation Proposal, the Company will be valued in the range of $350,000 to $400,000;

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(d) given that the Existing Shareholders will hold 30% of the Company following completion of the Recapitalisation Proposal, the interest of the Existing Shareholders will be valued in the range of $105,000 to $120,000;

(e) Constantine Andrew Scrinis, through Boom Capital, will receive a financial benefit of up to $233,520;

(f) Gregory John Wood, through B2B holdings Pty Ltd, will receive a financial benefit of up to $40,670;

(g) as the value of the Existing Shareholders' interests after completion of the Recapitalisation Proposal will be greater than before, the Recapitalisation Proposal is fair; and

(h) on the basis of various advantages to the Company and the Existing Shareholders if the Recapitalisation Proposal proceeds, the Recapitalisation Proposal is reasonable.

7. DEFINITIONS

In the Notice of Meeting and this Explanatory Statement: Administration Date means 8 August 2011, the date on which the Administrators was appointed, or taken to be appointed, as administrators of the Company pursuant to section 436A of the Corporations Act. Administrators means John Vouris and Bradley Tonks of Lawler Partners Level 9 1 O’Connell Street Sydney 2000. Admitted Claim means the amount of a Creditor’s claim admitted by the Deed Administrators in accordance with the DOCA. Admitted Creditor means a Creditor, whose claim has been admitted by the Deed Administrators in accordance the DOCA. ASIC means the Australian Securities and Investments Commission. Associate has the meaning set out in sections 11 to 17 of the Corporations Act. Boom Capital means Boom Capital Pty Ltd (ACN 136 961 316) of Level 2 230 Church Street Richmond Victoria 3121, a Related Party of Constantine Andrew Scrinis, a director of the Company. ASX means ASX Limited ACN 008 624 691. Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day. Claim means a debt owing (whether now, in the future or contingently) by, or a claim subsisting against or alleged to be subsisting against, the Company in favour of a person, which arose on or before the Administration Date irrespective of whether the debt or claim arose by virtue of contract, at law, in equity or otherwise and including (without limitation) a claim sounding only in damages, a debt or a claim arising under a guarantee. Company means Beauty Health Group Ltd (Subject to Deed of Company Arrangement) ACN 009 085 974. Corporations Act means the Corporations Act 2001(Cth). Creditor means any creditors of the Company having a claim against the Company as at the Administration Date.

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Deed Administrators means the Deed Administrators of the DOCA. Deed Fund means the fund comprising of the monies to be paid to and/or collected and/or retained by the Deed Administrators under the DOCA. DOCA means the Deed of Company Arrangement executed on 6 December 2011 between the Deed Administrators, the Company and Boom Capital.

DOCA Conditions means the DOCA conditions referred to in Section 4.8. Existing Shares means the 257,203 issued fully paid shares in the Company before the issue of New Shares to Boom Capital or its nominees (including B2B Holdings Pty Ltd), being the subject of Resolution 4 and Resolution 5. Existing Shareholder means the holder of an Existing Share in the Company. Independent Expert means DMR Corporate Pty Ltd of 470 Collins Street, Melbourne, Victoria 3000 Expert’s Report means the report of the expert attached to and forming part of the Explanatory Statement. Explanatory Statement means the explanatory statement accompanying the Notice of Meeting. General Meeting means the general meeting of the Existing Shareholders convened for the purposes of considering the Resolutions. Listing Rules means the Listing Rules of ASX. New Share(s) means a fully paid ordinary share in the Company that is not an Existing Share. Notice of Meeting means the notice convening the General Meeting.

Recapitalisation Proposal means the proposal for the recapitalisation of the Company as described in Section 2 of this Explanatory Statement.

Related Party means a party so defined by section 228 of the Corporations Act. Resolution means a resolution to be considered at the General Meeting as contained in the Notice of Meeting.

Section means a section of this Explanatory Statement. Share means an ordinary fully paid share in the capital of Beauty Health Group.

Shareholder means a shareholder of the Company.

Beauty Health Group means the Company. EST means Eastern Summer Time in Australia.

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BEAUTY HEALTH GROUP LIMITED (ACN 009 085 974) (Subject to Deed of Company Arrangement)

PROXY FORM

Shareholder Details Holders Name: ………………………………………………………………………………………………………………………………………………. Holders Address: ……………………………………………………………………………………………………………………………………………. Contact Telephone No: ……………………………………………………………………………………………………………………………. Contact Name (if different from above): ………………………………………………………………………………………………………….. Appointment of Proxy I/We being a shareholder/s of Beauty Health Group Limited (Subject to Deed of Company Arrangement) and entitled to attend and vote hereby appoint the following proxy/proxies to attend and act on my/our behalf and to vote in accordance with my/our following directions at the General Meeting of Beauty Health Group Limited (Subject to Deed of Company Arrangement) to be held at 209 Clarendon Street South Melbourne Victoria 3205 on 16 November 2012 at 12pm (EST) and at any adjournment of that meeting.

The Chairman of the meeting (mark with an ‘X’)

IMPORTANT: If the Chairman of the meeting is your proxy, or if appointed your proxy by default and you do not wish to direct him/her how to vote on any of these resolutions, you must mark this box with an “X”. By marking this box, you acknowledge that the Chairman of the meeting may exercise your proxy on those resolutions (for which you have not given a direction) even if he/she has an interest in the outcome of the resolution and that votes cast by him/her, other than as proxy holder, will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote on any of these resolutions, the Chairman of the meeting will not cast your votes on the resolutions (for which you have not given a direction) on a show of hands or on a poll. The Chairman of the meeting intends to vote undirected proxies in favour of each resolution.

OR

If the person you are appointing as your proxy is someone other than the Chairman of the meeting: Write the name of that person in the box below.

% You must specify the % of your votes that you authorize your proxy to exercise if: (a) you have only appointed 1 proxy and do not want

him/her to exercise all of your votes; or (b) if you have appointed 2 proxies under this proxy

form.

If you hold 2 or more Shares in Beauty Health Group Limited, you may appoint a second proxy: Write the name of your second proxy in the box below.

% If you do not name a proxy or your named proxy fails to attend the meeting, the Chairman of the meeting will be appointed as your proxy to attend and act on your behalf and to vote in accordance with the following directions at the General Meeting of Beauty Health Group Limited (Subject to Deed of Company Arrangement) to be held at 209 Clarendon Street South Melbourne 3205 on 16 November 2012at 12 pm (EST) and at any adjournment of that meeting.

Voting directions to your proxy - Please mark only one of the boxes with an “X” for each resolution to indicate your directions. Special Business For Against Abstain

Resolution 1. Appointment of Cary Peter Stynes as a Director

Resolution 2. Appointment of Constantine Andrew Scrinis as a Director

Resolution 3: Appointment of Gregory John Wood as a Director

Resolution 4: Issue of New Shares Boom Capital Pty Ltd or its nominees (excluding B2B Holdings Pty Ltd)

Resolution 5: Issue of New Shares B2B Holdings Pty Ltd

If you mark the “Abstain” box with an “x” for a particular resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll.

PLEASE SIGN HERE This section must be signed in accordance with the instructions overleaf to enable your directions to

be implemented

Individual or Shareholder 1 Shareholder 2 Shareholder 3

Sole Director and Sole Company Secretary

Director Director/Company Secretary

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How to complete this Proxy Form

1 Your Name and Address

Please print your name and address as it appears on your holding statement and the Company’s share register. If Shares are jointly held, please ensure the name and address of each joint shareholder is indicated. Shareholders should advise the Company of any changes. Shareholders sponsored by a broker should advise their broker of any changes. Please note, you cannot change ownership of your securities using this form.

2 Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the Company.

3 Votes on Resolutions

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each Resolution. All your shareholding will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any Resolution by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given Resolution, your proxy may vote as he or she chooses. If you mark more than one box on a Resolution your vote on that Resolution will be invalid.

4 Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy please write the name of that person.

To appoint a second proxy you must state (in the appropriate box) the percentage of your voting rights, which are the subject of the relevant proxy. If the Proxy Form does not specify a percentage, each proxy may exercise half your votes. Fractions of votes will be disregarded.

5 Signing Instructions

You must sign this form as follows in the spaces provided: Individual: where the holding is in one name, the holder must sign. Joint Holding: where the holding is in more than one name, all of the shareholders

should sign. Power of Attorney: to sign under Power of Attorney, you must have already lodged this

document with the company’s share registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the meeting a “Certificate of Appointment of Corporate Representative” should be produced prior to admission.

6 Lodgment of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below not later than 48 hours before the commencement of the meeting. ie. no later than 5pm (EST) on 14 November 2012 Any Proxy Form received after that time will not be valid for the scheduled meeting.

This Proxy Form (and any Power of Attorney and/or second Proxy Form) may be sent or delivered to Level 2 230 Church street Richmond Victoria 3121 or sent by facsimile on (03) 9427 0451.

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DMR CORPORATE ________________________ ___________________________________ DMR Corporate Pty Ltd A.C.N. 063 564 045 470 Collins Street Melbourne Telephone (03) 9629 4277 Victoria 3000 Facsimile (03) 9629 4598 Australia Web www.dmrcorporate.com.au

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4 September 2012 Mr. C. Stynes Director Beauty Health Group Limited c/o Level 2, 230 Church St Richmond, VIC 3121 Dear Mr. Stynes, Re: Independent Expert’s Report 1. Introduction

You have requested DMR Corporate Pty Ltd (“DMR Corporate”) to prepare an independent expert’s report in respect of a proposal under which the shareholders of Beauty Health Group Limited (Administrator appointed) (“BHG” or “the Company”) are to approve the issue of 500,140 new shares to Boom Capital Pty Ltd (“Boom Capital”) and 100,000 new shares to B2B Holdings Pty Ltd (“B2B”) as part of the recapitalization of the Company. If the BHG shareholders approve the resolutions that are proposed, the conditions precedent as specified in the Deed of Company Arrangement (“DOCA”) are met and the proposed recapitalization is completed, then BHG will seek to acquire a new business investment and the reinstatement of the quotation of its securities on the ASX. The Boom Capital and B2B transactions, as set out in Section 2 below, are permitted by Section 611 and by Chapter 2E of the Corporations Act 2001 (“the Act”) provided they are agreed to by shareholders, other than those involved in the proposed transaction or persons associated with such persons (i.e. the Non-Associated Shareholders). A copy of our report will accompany the Notice of Meeting and will be included as part of the Explanatory Statement to be sent by BHG to its shareholders.

2. The Proposed Transaction The shareholders are being asked to vote on the following resolutions:

Resolution 1 – Election of Mr. Cary Stynes (“Stynes”) as a director Resolution 2 – Election of Mr. Constantine Andrew Scrinis (“Scrinis”) as a director Resolution 3 - Election of Mr. Gregory John Wood (“Wood”) as a director Resolution 4 - Approval of the issue of 500,140 new shares to Boom Capital or its nominees Resolution 5 - Approval of the issue of 100,000 new shares to B2B or its nominees

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The Non-Associated Shareholders are being asked to approve the issue of 500,140 new fully paid ordinary shares in the capital of the Company to Boom Capital or its nominees and 100,000 new fully paid ordinary shares in the capital of the Company to B2B or its nominees, in accordance with the terms of the DOCA.

The resolutions are subject to and conditional upon each and every resolution being passed. Accordingly, the resolutions should be considered collectively as well as individually.

All of the above resolutions are interdependent, however we are only required to report on Resolutions 4 and 5 and consequently the issue of the 600,140 shares to Boom Capital or its nominees and B2B or its nominees is hereinafter referred to as the “Proposed Transaction”.

If the Proposed Transaction is approved by the BHG shareholders the capital structure of BHG will become:

The Directors of BHG have requested DMR Corporate to prepare an independent expert’s report in accordance with ASIC Regulatory Guide 111 – Content of expert reports. ASIC Regulatory Guide 111 requires the Independent Expert to advise shareholders whether the Proposed Transaction is fair and reasonable, when considered in the context of the interests of the Non-Associated Shareholders.

3. Summary Opinions 3.1 Fairness In our opinion, the Proposed Transaction set out in Section 2 above is fair and

reasonable to the Non-Associated Shareholders. Our principal reasons for reaching the above opinion are:

• we have assessed the current value of the Non-Associated Shareholders’ 100% interests in BHG at nil (Section 7.8).

• we have valued the Non-Associated Shareholders 30% interest in BHG after the

Proposed Transaction in a range of $105,000 to $120,000 (Section 8.4). As the value of the Non-Associated Shareholders’ interests after the Proposed Transaction is greater than the value of their interests before the Proposed Transaction, we have concluded that the Proposed Transaction is fair.

We have also reviewed the other significant considerations referred to in Section 11 of this report and we consider that the Proposed Transaction is reasonable.

Table 1Number of

Issued PercentageShares

Non-Associated Shareholders 257,203 30.0%

Shares Issued to Boom Capital 500,140 58.3%

Shares Issued to B2B 100,000 11.7%

Total Shares on Issue 857,343 100.0%

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3.2 Financial Benefits

In accordance with Chapter 2E of the Act, Scrinis, will receive a financial benefit in a range of $204,000 to $233,000 and Wood will receive a financial benefit in a range of $41,000 to $47,000, if the Non-Associated Shareholders approve the Proposed Transaction – refer to Section 12 below.

4. Structure of this Report This report is divided into the following Sections:

Section Page

5 Purpose of the Report 3 6 BHG - Key Information 6 7 Valuation of BHG Before the Proposed Transaction 8 8 Valuation of BHG After the Proposed Transaction 10 9 Control Premium 12

10 Assessment as to Fairness 12 11 Other Significant Considerations 12 12 Related parties – Financial Benefits 13 13 Financial Services Guide 13

Appendix

A Sources of Information 15 B Declarations, Qualifications and Consents 16

5. Purpose of the Report This report has been prepared to meet the following regulatory requirements:

• Corporations Act 2001

Section 606 of the Act contains a general prohibition on the acquisition of shares in a company if, as a result of the acquisition, any person increases his or her voting power in the company from 20% or below to more than 20%.

Section 611 of the Act contains an exception to the Section 606 prohibition. For

an acquisition of shares to fall within the exception, the acquisition must be approved in advance by a resolution passed at a general meeting of the company in which shares will be acquired.

BHG is seeking shareholder approval for the Proposed Transaction under Section 611 of the Act, as Boom Capital and its associates, will increase their interests in BHG from less than 20% to above 20% as a result of the issue of shares.

• ASIC Regulatory Guides This report has been prepared in accordance with the ASIC Regulatory Guides and

more particularly: RG 111 – Content of Expert Reports (“RG111”)

RG 111.24 An issue of shares by a company otherwise prohibited under S606 may be approved under item 7 of S611 and the effect on the company’s shareholding is comparable to a takeover bid. Examples of such issues approved under item 7 of S611 that are comparable to takeover bids under Ch 6 include:

(b) a company issues securities in exchange for cash and, as a consequence, the

allottee acquires over 20% of the company.

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RG111.27 There may be circumstances in which the allottee will acquire 20% or more of the voting power of the securities in the company following the allotment or increase an existing holding of 20% or more, but does not obtain a practical measure of control or increase its practical control over that company. If the expert believes that the allottee has not obtained or increased its control over the company as a practical matter, then the expert could take this outcome into account in assessing whether the issue price is ‘reasonable’ if it has assessed the issue price as being ‘not fair’ applying the test in RG111.11.

RG111.10 It has long been accepted in Australian mergers and acquisitions practice that the

words ‘fair and reasonable’ in S640 established two distinct criteria for an expert analysing a control transaction:

(a) is the offer ‘fair’; and (b) is it ‘reasonable’? That is, ‘fair and reasonable’ is not regarded as a compound phrase. RG111.11 Under this convention, an offer is ‘fair’ if the value of the offer price or consideration

is equal to or greater than the value of the securities the subject of the offer. This comparison should be made:

(a) assuming a knowledgeable and willing, but not anxious, buyer and a

knowledgeable and willing, but not anxious, seller acting at arm’s length; and (b) assuming 100% ownership of the ‘target’ and irrespective of whether the

consideration is scrip or cash. The expert should not consider the percentage holding of the ‘bidder’ or its associates in the target when making this comparison. For example, in valuing securities in the target entity, it is inappropriate to apply a discount on the basis that the shares being acquired represent a minority or ‘portfolio’ parcel of shares.

RG111.12 An offer is ‘reasonable’ if it is fair. It might also be ‘reasonable’ if, despite being

‘not fair’, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid before the close of the offer.

ASIC Regulatory Guide 111 requires that the Proposed Transaction be assessed as if it was a takeover of BHG. In assessing a takeover bid Regulatory Guide 111 states that the expert should consider whether the Proposed Transaction is both “fair” and “reasonable”.

• General The terms “fair” and “reasonable” are not defined in the Act, however guidance as to the meaning of these terms is provided by ASIC in Regulatory Guide 111. For the purpose of this report, we have defined them as follows: Fairness - the Proposed Transaction is “fair” if the value of the Non-

Associated Shareholders’ interests after the Proposed Transaction is equal to or greater than the value of their interests before the Proposed Transaction after considering the adequacy of the premium for control.

Reasonableness - the Proposed Transaction is “reasonable” if it is fair. It may

also be “reasonable” if, despite not being “fair” but after considering other significant factors, shareholders should vote in favour of the Proposed Transaction in the absence of a superior proposal being received.

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In determining whether the Proposed Transaction is fair, we have:

• valued the Non-Associated Shareholders’ interests in BHG before the Proposed Transaction;

• valued the Non-Associated Shareholders’ interests in BHG after the

Proposed Transaction; and • compared the values before and after the Proposed Transaction and

assessed the quantum of the control premium.

In determining whether the Proposed Transaction is reasonable we have analysed other significant factors, which the Non-Associated Shareholders should consider prior to accepting or rejecting the Proposed Transaction.

• Corporations Act – Chapter 2E

Section 208 of the Act states that a public company must obtain approval from the company’s members if it gives a financial benefit to a related party unless the benefit falls within the scope of an exception to the Act as set out in Sections 210 to 216 of the Act. Section 210 of the Act states that member approval is not needed to give a financial benefit on terms that:

(a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm’s length; or

(b) are less favourable to the related party than the terms referred to in paragraph (a)

above. Section 228 of the Act defines ‘related parties’ as:

(a) directors of the public company; (b) directors (if any) of an entity that controls the public company; (c) if the public company is controlled by an entity that is not a body corporate – each

of the persons making up the controlling entity; (d) spouses and de facto spouses of the persons referred to in paragraphs (a) to (c)

above.

The issuance of the BHG shares to Boom Capital and its nominees and to B2B and its nominees are permitted by the Act, however Section 208 provides that prior shareholder approval is required before a public company can provide a financial benefit to a related party unless the benefit falls within the scope of an exception to the Act. Shareholders must be provided with all the information that is reasonably required in order for them to decide whether or not it is in the company’s interests to approve the giving of the financial benefit. Section 229(1)(c) of the Act states:

“In determining whether a financial benefit is given you must disregard any consideration that is or may be given for the benefit, even if the consideration is adequate.”

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The ASIC media release issued on 10 August 2004 has expressed the view that the financial benefit must be adequately valued. ASIC has gone on to state:

“An adequate valuation requires the basis of the valuation and the principal assumptions behind the valuation to be disclosed, and in some circumstances it may be necessary to provide a valuation by an independent expert.”

As Boom Capital is a company associated with Scrinis and as B2B is a company associated with Wood, Boom Capital and B2B are both deemed to be a related parties to BHG and consequently the Directors of BHG have requested DMR Corporate to independently assess the value of the financial benefit, if any, that may be given to Scrinis and Wood pursuant to the allotment of shares to Boom Capital.

6. BHG - Key Information 6.1 Background

The background to the proposed restructure of BHG is as follows:

A. The background to BHG has been long and varied over the last 10 years. The company was named Amnet Limited until December 2003, Hailian International Limited until July 2007, HLI Limited until September 2010 and finally Beauty Health Group Limited from September 2010 until the present date. With each change of name came a change of principal business activities and none of the above activities proved to be financially viable.

B. On 16 July 2004 trading in the Company’s shares was suspended on the ASX.

C. On 8 August 2011, Messrs. Bradley Tonks and John Vouris were appointed Joint

and Several Administrators of the Company pursuant to Section 436A of the Act.

D. At a meeting of creditors of the Company on 15 November 2011 it was resolved that the Company enter into a DOCA pursuant to Part 5.3A of the Act. The Company and Boom Capital executed the DOCA on 6 December 2011 and Messrs. Bradley Tonks and John Vouris were appointed as Joint and Several Deed Administrators.

E. The key points included in the DOCA are:

• Boom Capital to contribute $200,000, payable as to $50,000 on execution of

the DOCA and $150,000 following Boom Capital being issued the equivalent of 70% of the issued capital of the Company (subsequently determined to be 600,140 fully paid shares);

• The existing Directors and Company Secretary be replaced by 3 Directors

and a Company Secretary nominated by Boom Capital; and

• The contribution of $200,000 by Boom Capital under the DOCA will be used, inter alia, to satisfy costs and unsecured creditors’ claims against the Company.

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F. Pursuant to the terms of the DOCA the Administrator appointed 3 directors nominated by Boom Capital, to the board of the Company (Messrs. Stynes, Scrinis and Wood) and by virtue of Section 442A of the Act, Karen Mathews, Ian Smith and Pierce Cody were removed as directors on 6 December 2011. The Administrator also appointed a new Company Secretary.

6.2 Share Capital

As at 30 June 2010 BHG had 262,856,506 fully paid ordinary shares on issue and the shareholders approved a consolidation of the Company’s shares on 8 September 2010 on the basis of 1 new share for every 1,022 shares held. The 10 largest shareholders hold 89.5% of BHG’s issued capital as follows:

6.3 Financial Performance and Position The latest financial statements prepared by BHG were for the financial year ended 30 June 2010. The Statement of Comprehensive Income disclosed a loss of $311,825 for the 30/6/2010 financial year and the Administrators report dated 7 December 2011 indicates that a further loss of $1,220,605 was incurred in the 2011 financial year. The Administrators balance sheet as at 30 June 2011 was as follows:

Table 2 Name Number of Shares Held

Mr Andrew McLean <McLean Family A/C> 47,805 Todbern Pty Ltd 59,675 Professor Ling Xiao 33,664 Mrs Mary Catherine Knee 32,154 Mrs Sheena Jane Storm 23,483 Black Flag Investments 12,630 Mr Anthony Kiernan 11,212 Dudley Road Investments Pty Ltd 6,223 Reef Securities Limited 1,995 Vagg Investments Management Services Pty Ltd 1,468

230,309

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7. Valuation of BHG Before the Proposed Transaction 7.1 Value Definition

DMR Corporate’s valuation of BHG has been made on the basis of fair market value, defined as the price that could be realized in an open market over a reasonable period of time given the current market conditions and currently available information, assuming that potential buyers have full information, in a transaction between a willing but not anxious seller and a willing but not anxious buyer acting at arm’s length.

7.2 Valuation Methodologies

In selecting appropriate valuation methodologies, we considered the applicability of a range of generally accepted valuation methodologies. These included:

• share price history; • capitalisation of future maintainable earnings; • net present value of future cash flows; • asset based methods; and • alternate acquirer.

7.3 Share Price History The share price history valuation methodology values a company based on the past trading

in its shares. We normally analyse the share prices up to a date immediately prior to the date when a takeover, merger or other significant transaction is announced to remove any price speculation or price escalations that may have occurred subsequent to the announcement of the proposed transaction.

Table 330/06/11

Administrators$

Current assetsCash and cah equivalents 25,799

Non-current assetsSundry debtors 244,422 Plant and equipment 3,846 Total non-current assets 248,268

Total assets 274,067

Current liabilitiesTrade and other payables 962,169

Non-current liabilitiesBorrowings 1,231,763

Total liabilities 2,193,932

Net assets (1,919,865)

EquityIssued capital 30,430,065 Accumulated losses (32,349,930) Total equity (1,919,865)

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This analysis is not required in this report as the BHG shares were suspended from trading on the ASX in July 2004. Trading has not resumed since that time.

We consider that the share price valuation methodology is not an appropriate methodology

to use to value BHG. 7.4 Capitalization of Future Maintainable Earnings

This methodology involves capitalizing the estimated future maintainable earnings of a business at a multiple which reflects the risks of the business and its ability to earn future profits.

There are different definitions of earnings to which a multiple can be applied. The traditional method is to use net profit after tax – Price Earnings or PE. Another common method is to use Earnings Before Interest and Tax, or EBIT. One advantage of using EBIT is that it enables a valuation to be determined which is independent of the financing and tax structure of the business. Different owners of the same business may have different funding strategies and these strategies should not alter the fundamental value of the business.

Another variation to EBIT is ‘Earnings Before Interest, Tax, Depreciation and Amortization’ – EBITDA. As BHG is presently under Administration and it does not have an operating business generating profits, we consider that the capitalization of future maintainable earnings valuation methodology is not an appropriate methodology to use to value BHG.

7.5 Net Present Value of Future Cash Flows

An analysis of the net present value of the projected cash flows of a business (or discounted cash flow technique) is based on the premise that the value of the business is the net present value of its future cash flows. This methodology requires an analysis of future cash flows, the capital structure, the costs of capital and an assessment of the residual value of the business remaining at the end of the forecast period. As BHG is presently under Administration and does not have an operating business generating cash flows, we consider that the capitalisation of future cash flows is not an appropriate valuation methodology to use to value BHG.

7.6 Asset Based Methods These methodologies are based on the realisable value of a company’s identifiable net

assets. Asset based valuation methodologies include: (a) Net Assets

The net asset valuation methodology involves deriving the value of a company or business by

reference to the value of its assets. This methodology is likely to be appropriate for a business whose value derives mainly from the underlying value of its assets rather than its earnings, such as property holding companies and investment businesses that periodically revalue their assets to market. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realization costs.

(b) Orderly Realisation of Assets

The orderly realisation of assets method estimates the fair market value by determining the

amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

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(c) Liquidation of Assets

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes that the assets are sold in a short time frame.

BHG is presently under Administration and in a report dated 14 March 2012 the

Administrators assessed the likely recovery of monies from the sale of assets and collection of receivables less the Administrators costs to be $159,462. The outstanding creditors were stated to be $2,643,730 so there is a deficiency of net assets of $2,484,268.

BHG is a listed entity on the ASX and generally a residual value can be ascribed to the listed shell that remains after the existing business has stopped operating. This value can only be realised via the backdoor listing of a new business into the existing shell. In our experience, the value ascribed to an ASX listed shell, which has no debts, is in the range of $350,000 to $400,000.

If the value of the shell was deducted from the net deficiency of assets then the deficiency would be reduced to a range of $2,084,268 to $2,134,268. On this basis, we have concluded that the equity in BHG has a nil value.

7.7 Alternate Acquirer

The value that an alternative offeror may be prepared to pay to acquire BHG is a relevant valuation methodology to be considered. The Administrators received alternative offers in October 2011 and they recommended the Boom Capital offer as it was in the creditors’ best interests. We do not consider that an alternative offer is an applicable valuation methodology to use to value BHG prior to the Proposed Transaction taking place.

7.8 Conclusion

In our opinion, based on the net assets valuation methodology described in Section 7.6 above, BHG has a nil value before the Proposed Transaction.

As the Non-Associated Shareholders control 100% of the BHG shares their interests are

valued at nil before the Proposed Transaction. 8. Valuation of BHG After the Proposed Transaction 8.1 Value Definition

We have used the same definition of value in this Section as was applied in Section 7.1 above when we assessed the value of BHG before the Proposed Transaction.

8.2 Valuation Methodologies

In selecting appropriate valuation methodologies, we considered the applicability of the same generally accepted valuation methodologies as detailed in Section 7.2 above and we determined that the appropriate methodology to use to value BHG after the Proposed Transaction was the net assets on a going concern basis.

8.3 Net Assets on a Going Concern Basis BHG is presently under Administration and the Deed Administrators have considered the

orderly realisation of assets valuation methodology (via the DOCA) on both an optimistic

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basis and a pessimistic basis in their report dated 14 March 2012. On the pessimistic basis the net amount available for distribution to creditors was nil. In the 7 November 2011 Administrators Report under Section 439A of the Act the Administrators stated that they have “…recommended to creditors that they vote in favour of the DOCA proposed by Boom Capital and detail why this option is, in our opinion, in the creditors’ best interests”. The creditors accepted this recommendation and they approved the Boom Capital recapitalisation proposal. Based on the Proposed Transaction being implemented and the advice contained in the Administrators reports through to 14 March 2012 we have estimated that there will be approximately $375,860 of available funds to be distributed to priority and unsecured creditors. On this basis the priority creditors ($3,500) will receive a dividend of $1.00 for each priority dollar proven and the unsecured creditors ($2,640,230, including the convertible note holders) are likely to receive a dividend of $0.141 in full satisfaction for each dollar verified in their ‘proof of debt’ claims.

Following the completion of the Proposed Transaction BHG will have nil assets; nil liabilities and the Non-Associated Shareholders will have a 30% interest in the Company. On this basis the Non-Associated Shareholders interests will be valued at nil.

The DOCA appears to have been the preferred course of action, as it will extinguish the

creditors, pay the agreed sums for legal/ASX fees and the Administrators’ costs. The DOCA was approved by the creditors on 15 November 2011 and is now only subject to the shareholders approving the issue of 500,140 BHG shares to Boom Capital and 100,000 shares to B2B.

The value of the corporate shell referred to in Section 7.6 above stills exists, so if the

Proposed Transaction is approved by the Non-Associated Shareholders then BHG may be valued in a range of $350,000 to $400,000 following the reconstruction.

Table 4 AdministratorsStatementof Position2/3/2012

$Cash and cah equivalents 2,873 Interest 94 Deed contributions 216,403 Recoveries from China 495,000 GST 33,702

Total recoveries 748,072

Less: PaymentsASX fees and bank charges 33,854 Legal fees 54,624 Administrators remuneration & expenses 138,286 Deed Administrators Remuneration & expenses 111,743 GST 33,702

372,209

Estimate available for distribution 375,863

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8.4 Conclusion

In our opinion BHG may be valued in a range of $350,000 to $400,000 after the Proposed Transaction has been approved by the Non-Associated Shareholders.

As the Non-Associated Shareholders will have a 30% interest in BHG after the Proposed

Transaction, their interests will be valued in a range of $105,000 to $120,000. 9. Control Premium A control premium represents the difference between the price that would have to be paid

for a share to which a controlling interest attaches and the price at which a share which does not carry with it control of the company could be acquired. Control premiums are normally in a range of 20% to 30%1 above the value of a minority share. The actual control premium paid is transaction specific and depends on a range of factors, such the level of synergies available to the purchaser, the level of competition for the assets and strategic importance of the assets. In this instance there are no synergies to be gained by Boom Capital and its associates from an acquisition of BHG.

In the present circumstances BHG had a net deficiency of assets and it was through the

sale of a controlling interest in the corporate shell to Boom Capital that the Administrator was able to receive the sum of $216,403 and negotiate the settlement of the outstanding claims with convertible note holders and unsecured creditors. This payment effectively represents the control premium that Boom Capital and its associates paid to obtain control of BHG. This value is lower than the range referred to in Section 7.6 above as more risk has been assumed by Boom Capital in overseeing the proposed restructure of BHG and getting the Company relisted. Boom Capital and its associates are entitled to receive 70% of the equity in the Company at this point of time and if that is extrapolated then it represents a control value of $309,147 ($216,403/70%), which is lower than our range of $350,000 to $400,000.

10. Assessment as to Fairness In Section 7.8 we assessed the Non-Associated Shareholders’ interests in BHG to be nil

before the Proposed Transaction. In Section 8.4 above we assessed the Non-Associated Shareholders’ interests in BHG to

be in a range of $105,000 to $120,000 after the Proposed Transaction. As the value of the Non-Associated Shareholders’ interests after the Proposed Transaction

is greater than the value of their interests before the Proposed Transaction, we have concluded that the Proposed Transaction is fair.

11. Other Significant Considerations Prior to deciding whether to approve or reject the Proposed Transaction the Non-

Associated Shareholders should also consider the following factors:

• In Section 10 above we concluded that the Proposed Transaction is fair.

1 RSM Bird Cameron Control Premium Study – September 2010.

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• If the Proposed Transaction is approved then Boom Capital and its associates will assume control of BHG and there will be no outstanding creditors or claims against the Company.

• If the Proposed Transaction is approved the BHG directors will pursue:

(a) a new capital raising to obtain a spread of shareholders with marketable parcels of shares;

(b) the acquisition of a new business which will provide the Company with a net asset base of greater than $3 million; and

(c) the relisting of the Company’s shares on the ASX.

• Once the BHG shares are relisted on the ASX, this will create a market for the BHG shares and this would enable shareholders to crystallise their losses for taxation purposes.

• When a new business is acquired it will further dilute the interests of the Non-

Associated Shareholders in BHG. • If the Non-Associated Shareholders reject the Proposed Transaction then the

Company will most likely proceed into liquidation and the Non-Associated Shareholders will receive nothing.

After reviewing the above significant factors we consider that the Proposed Transaction is reasonable.

12. Related Parties – Financial Benefits

On 6 December 2011 Scrinis was appointed a director of BHG and for the purposes of Chapter 2E he is deemed to be a related party to the Proposed Transaction as he and his associates beneficially own 100% of Boom Capital who will own a 58.3% interest in BHG.

On 6 December 2011 Wood was appointed a director of BHG and for the purposes of

Chapter 2E he is deemed to be a related party to the Proposed Transaction as he and his associates beneficially own 100% of B2B who will own a 11.7% interest in BHG.

In Section 8.4 above we valued BHG in a range of $350,000 to $400,000 after the

Proposed Transaction and this represents a value of $0.41 to $0.47 per share (based on 857,343 shares that will be on issue).

As Boom Capital and its associates will receive 500,140 BHG shares under the Proposed

Transaction, Scrinis will receive a financial benefit in a range of $204,000 to $233,000. As B2B and its associates will receive 100,000 BHG shares under the Proposed

Transaction, Wood will receive a financial benefit in a range of $41,000 to $47,000. 13. Financial Services Guide 13.1 Financial Services Guide

This Financial Services Guide provides information to assist retail and wholesale investors in making a decision as to their use of the general financial product advice included in the above report.

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13.2 DMR Corporate DMR Corporate holds Australian Financial Services Licence No. 222050, authorizing it to

provide general financial product advice in respect of securities to retail and wholesale investors.

13.3 Financial Services Offered by DMR Corporate

DMR Corporate prepares reports commissioned by a company or other entity (“Entity”). The reports prepared by DMR Corporate are provided by the Entity to its members. All reports prepared by DMR Corporate include a description of the circumstances of the engagement and of DMR Corporate’s independence of the Entity commissioning the report and other parties to the transactions. DMR Corporate does not accept instructions from retail investors. DMR Corporate provides no financial services directly to retail investors and receives no remuneration from retail investors for financial services. DMR Corporate does not provide any personal retail financial product advice directly to retail investors nor does it provide market-related advice to retail investors.

13.4 General Financial Product Advice

In the reports, DMR Corporate provides general financial product advice. This advice does not take into account the personal objectives, financial situation or needs of individual retail investors. Investors should consider the appropriateness of a report having regard to their own objectives, financial situation and needs before acting on the advice in a report. Where the advice relates to the acquisition or possible acquisition of a financial product, an investor should also obtain a product disclosure statement relating to the financial product and consider that statement before making any decision about whether to acquire the financial product.

13.5 Independence At the date of this report, none of DMR Corporate, Derek M Ryan nor Mr Paul Lom has

any interest in the outcome of the Proposed Transaction, nor any relationship with the Administrators, BHG, Boom Capital or any of their associates.

Drafts of this report were provided to and discussed with the Administrators of BHG and

the new directors of BHG. Certain changes were made to factual statements in this report as a result of the reviews of the draft reports. There were no alterations to the methodology, valuations or conclusions that have been formed by DMR Corporate. DMR Corporate and its related entities do not have any shareholding in or other relationship with BHG or Boom Capital that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposed Transaction. DMR Corporate had no part in the formulation of the Proposed Transaction. Its only role has been the preparation of this report.

DMR Corporate considers itself to be independent in terms of Regulatory Guide 112 issued by ASIC on 30 March 2011.

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13.6 Remuneration

DMR Corporate is entitled to receive a fee of approximately $13,500 for the preparation of this report, plus out of pocket expenses. With the exception of the above, DMR Corporate will not receive any other benefits, whether directly or indirectly, for or in connection with the making of this report.

Except for the fees referred to above, neither DMR Corporate, nor any of its directors, employees or associated entities receive any fees or other benefits, directly or indirectly, for or in connection with the provision of any report.

13.7 Compensation Arrangements and Complaints Process

As the holder of an Australian Financial Services Licence, DMR Corporate is required to have suitable compensation arrangements in place. In order to satisfy this requirement DMR Corporate holds a professional indemnity insurance policy that is compliant with the requirements of Section 912B of the Act.

DMR Corporate is also required to have a system for handling complaints from persons to whom DMR Corporate provides financial services. All complaints must be in writing and sent to DMR Corporate at the above address.

DMR Corporate will make every effort to resolve a complaint within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service Limited – GPO Box 3, Melbourne Vic 3000.

Yours faithfully DMR Corporate Pty Ltd

Paul Lom - Director Derek Ryan - Director

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Appendix A

Beauty Health Group Limited

Sources of Information The following sources of information have been utilised and relied upon, without independent verification, in the course of preparing this report: • Audited financial statements of BHG for the financial year ended 30 June 2010. • Deed Administrator Reports dated 10 August 2011, 25 August 2011, 2 September 2011, 7 November 2011, 7 December 2011 and 14 March 2012. • Draft Notice of Meeting and Explanatory Statement prepared in April 2012. • Listing of BHG shareholders and option holders as at 16 February 2011. • BHG ASX releases, public announcements, Lawler Partners web site for the Administrators

reports and other public filings. • Discussions with the Administrator and two of the new directors.

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Appendix B

Declarations, Qualifications and Consents 1. Declarations

This report has been prepared at the request of the Directors of BHG pursuant to Section 611 and Chapter 2E of the Act to accompany the notice of meeting of shareholders to approve the Proposed Transaction. It is not intended that this report should serve any purpose other than as an expression of our opinion as to whether or not the Proposed Transaction is fair and reasonable for the BHG shareholders. This report has also been prepared in accordance with the Accounting Professional and Ethical Standards Board professional standard APES 225 – Valuation Services. The procedures that we performed and the enquiries that we made in the course of the preparation of this report do not include verification work nor constitute an audit in accordance with Australian Auditing Standards.

2. Qualifications

Mr Derek M Ryan and Mr Paul Lom, directors of DMR Corporate prepared this report. They have been responsible for the preparation of many expert reports and are involved in the provision of advice in respect of valuations, takeovers and capital reconstructions and reporting on all aspects thereof. Mr Ryan has had over 40 years experience in the accounting profession and he is a Fellow of the Institute of Chartered Accountants in Australia. He has been responsible for the preparation of many expert reports and is involved in the provision of advice in respect of valuations, takeovers and capital reconstructions and reporting on all aspects thereof. Mr Lom is a Chartered Accountant and a Registered Company Auditor with more than 35 years experience in the accounting profession. He was a partner of KPMG and Touche Ross between 1989 and 1996, specialising in audit. He has extensive experience in business acquisitions, business valuations and privatisations in Australia and Europe.

3. Consent DMR Corporate consents to the inclusion of this report in its current form and context in

the BHG Explanatory Statement.

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