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					                                                                                                                                                                           Capitol Health Limited
                             � � � � �� � � � � �� �                                                                                                                                        ACN 117 391 812
                                                       � � � � � � �




        Prospectus
        For the issue of 9,000,000 Shares
        at an issue price of 20 cents per Share
        to raise $1,800,000.

        Underwriter to the Issue
        MARKETECH PTY LTD
        AUSTRALIAN FINANCIAL SERVICES LICENCE No. 230014




Important Information: This document is important and should be read in its entirety. You should consult your financial advisor about its contents. The Offer should be considered speculative and be read
in conjunction with the risk factors outlined in this Prospectus.
Corporate Directory
DIRECTORS

Managing Director                                                 Mr Andrew Harrison
Non-Executive Director                                            Dr Russell Fine
Non-Executive Director                                            Mr Anthony Ho

Company Secretary                                                 Mr Kim Hogg



PRINCIPAL BUSINESS ADDRESS
& REGISTERED OFFICE                                               SHARE REGISTRY

Level 1, 189 Hay Street                                           Computershare Investor Services Pty Ltd
SUBIACO WA 6008                                                   Level 2, Reserve Bank Building
                                                                  45 St George's Terrace
                                                                  PERTH WA 6000
Telephone: (61 8) 9382 1311                                       Telephone: (61 8) 9323 2000
Facsimile: (61 8) 9382 1322                                       Facsimile: (61 8) 9323 2033
Email: andrewh@capitolhealth.com.au



INVESTIGATING ACCOUNTANT                                          BANKERS

Stanton Partners Corporate Pty Ltd                                Bank of Western Australia Limited*
Level 1                                                           Level 30, Bankwest Tower
1 Havelock Street                                                 108 St George’s Terrace
WEST PERTH WA 6005                                                PERTH WA 6000



AUDITOR                                                           UNDERWRITER TO THE ISSUE

Stantons International                                            Marketech Pty Ltd
Level 1                                                           Level 2
1 Havelock Street                                                 17 Prowse Street
WEST PERTH WA 6005                                                WEST PERTH WA 6005



SOLICITORS                                                        WEBSITE

Steinepreis Paganin                                               www.capitolhealth.com.au
Level 4
16 Milligan Street
PERTH WA 6000



* This entity has not been involved in the preparation of this Prospectus and has not consented to being named
in this Prospectus. Their name is included for information purposes only.




                                             Capitol Health Limited - Prospectus                            Page 1
Page 2   Capitol Health Limited - Prospectus
Table of Contents
            CORPORATE DIRECTORY                             1

            TABLE OF CONTENTS                               3

            IMPORTANT INFORMATION                           4

            MANAGING DIRECTOR’S LETTER                      5

            1.0 INVESTMENT SUMMARY                          6

            2.0 DETAILS OF THE OFFER                        9

            3.0 COMPANY OVERVIEW                           13

            4.0 DIRECTORS AND COMPANY SECRETARY            19

            5.0 CORPORATE GOVERNANCE                       21

            6.0 RISK FACTORS                               24

            7.0 FINANCIAL INFORMATION                      27

            8.0 INVESTIGATING ACCOUNTANT’S REPORT          29

            9.0 ADDITIONAL INFORMATION                     43

            10.0 DIRECTORS’ STATEMENT                      56

            11.0 GLOSSARY                                  57

            12.0 APPLICATION FORMS                         58




                     Capitol Health Limited - Prospectus        Page 3
Important Information
This Prospectus is dated 17 May 2006. A copy of                     This Prospectus will be issued as an Electronic
this Prospectus was lodged with the Australian                      Prospectus and may be accessed on the internet
Securities and Investments Commission ("ASIC")                      at www.capitolhealth.com.au. The Offer pursuant
on 17 May 2006. The ASIC takes no responsibility                    to an Electronic Prospectus is only available to
for the contents of this Prospectus.                                persons receiving an electronic version of this
                                                                    Prospectus within Australia. The Corporations
No Shares will be issued on the basis of this                       Act prohibits any person from passing to another
Prospectus later than 13 months after the date of                   person the Application Form unless it is attached
this Prospectus. Application will be made within                    to or accompanies the complete and unaltered
7 days after the date of this Prospectus for the                    version of this Prospectus. During the Offer
Shares offered by this Prospectus to be listed for                  period, any person may obtain a hard copy of the
quotation on ASX.                                                   Prospectus by contacting the Company (at email:
The distribution of this Prospectus in jurisdictions                andrewh@capitolhealth.com.au); or telephone
outside Australia may be restricted by law and                      (61 8) 9382 1311) and Capitol Health will send for
persons who come into possession of this                            free, either a hard copy or a further electronic copy
Prospectus should seek advice and observe any                       of the Prospectus or both.
such restrictions. Any failure to comply with such                  In accordance with Chapter 6D of the Corporations
restrictions may constitute a violation of applicable               Act this Prospectus is subject to an Exposure
securities law. This Prospectus does not constitute                 Period of 7 days from the date of lodgement with
an offer in any place in which, or to any person to                 the ASIC. This period may be extended by the ASIC
whom, it would not be lawful to make an offer.                      for a further period of up to 7 days. The purpose of
Applicants should read this document in its                         the Exposure Period is to enable this Prospectus
entirety and, if in any doubt, consult with their                   to be examined by market participants prior to the
professional advisors before deciding whether to                    raising of funds. If this Prospectus is found to be
apply for Shares. There are risks associated with                   deficient, Applications received during the Exposure
an investment in Capitol Health and the Shares                      Period will be dealt with in accordance with Section
offered under this Prospectus must be regarded as                   724 of the Corporations Act. Applications received
a speculative investment. The Shares offered under                  prior to the expiration of the Exposure Period
this Prospectus carry no guarantee with respect to                  will not be processed until after the expiry of the
return on capital investment, payment of dividends                  Exposure Period. No preference will be conferred on
or future value.                                                    Applications received during the Exposure Period
                                                                    and all Applications received during the Exposure
Certain abbreviations and other defined terms are                    Period will be treated as if they were simultaneously
used throughout this Prospectus. Defined terms                       received on the Opening Date.
are generally identifiable by the use of an upper
case first letter. Details of the definitions and                     Unless otherwise stated, items shown in this
abbreviations used are set out in Section 11 of this                Prospectus are not assets of Capitol Health Limited.
Prospectus.




Page 4                                        Capitol Health Limited - Prospectus
Managing Director’s Letter
17 May 2006



Dear Investor



On behalf of my fellow Directors, I am pleased to provide you with an opportunity to become a shareholder in
Capitol Health Limited (“Capitol Health” or “Company”).

Capitol Health was established to focus on the fragmented and high margin Australian dental industry. The
consolidation that has occurred in recent times in other medical and allied health fields in Australia has not
affected the dental industry. This is partially as a result of a historical regulatory framework limiting ownership
of dental practices to individual dentists, and industry economics that contrast significantly from other fields of
medical practice such as general medical practices.

Capitol Health’s objective is to build a leading dental healthcare business with potential for sustainable growth
and profitability. The Company’s principal focus is to provide the use of dental surgeries and facilities to self
employed dentists who carry on their own dental practices. Capitol Health will also provide these practices with
management and administrative support services.

The services provided by Capitol Health allow dentists to concentrate on the delivery of clinical services instead
of applying their time to the administrative aspects of carrying on a practice. Capitol Health charges a fee for the
provision of surgeries, facilities and services under a services agreement and facilities licence with each dental
practitioner.

Capitol Health has acquired its first dental surgery facility in Fremantle, Western Australia and has contracted to
acquire a second facility in Booragoon, Western Australia. Relevant historical financial information relating to the
Company is set out in Section 7 of this Prospectus.

The Company’s Board brings a unique blend of experience and expertise to the dental business, with a proven
track record in clinical practice, successful management of large organisations, and experience in capital
markets.

Detailed information about the Offer and Capitol Health’s business, as well as the risks of investing in the
Company, is set out in this Prospectus which I encourage you to read carefully.

My fellow Directors and I recommend the Offer to you and look forward to welcoming you as a shareholder of
the Company.




Yours sincerely




Andrew Harrison
Managing Director




                                               Capitol Health Limited - Prospectus                              Page 5
Investment Summary                                                                     1.0
This section is not intended to provide full information for investors considering an investment in the Company.
The Prospectus should be read and considered in its entirety.


1.1 Introduction                                                       Booragoon, Western Australia. Currently, these
                                                                       practices are served by three dentists, and several
Capitol Health Limited (“Capitol Health”) was                          support and ancillary service personnel.
incorporated in December 2005. Its main activity is
focused on the fragmented and high margin dental                       The key aspects of the acquisition strategy of the
industry in Australia. The Company principally                         Company are as follows:
provides the use of dental surgeries and facilities,
                                                                       • Surgeries and facilities are acquired from
and practice administration and management
                                                                       practitioners;
services to dentists who carry on their own dental
practices.                                                             • Approximately 60-70% of the acquisition price will
                                                                       be financed by debt; and
The $2.42 billion Australian dental industry has
largely remained unaffected by the consolidation                       • Service agreements and facilities licenses are
that has occurred in many other medical and                            entered into with all registered dentists practicing at
allied health fields. This is partially as a result of a                each surgery (usually for terms of 2 – 5 years).
historical regulatory framework limiting ownership of
dental practices to individual dentists, and industry                  The Company aims to apply the capital raised by
economics that differ markedly from other fields of                     this Offer to improve the existing and contracted
medical practice such as general medical practices.                    surgeries and facilities and seek the acquisition of
                                                                       additional surgeries.
Capitol Health expects revenue streams from
existing and contracted acquisitions of dental
surgeries and facilities, and has a strong focus on
generating earnings in its first full year of operations.
                                                                       1.3 Purpose of the Offer
                                                                       The Offer will raise $1.8 million (assuming the
                                                                       minimum subscription is raised) before the costs
1.2 Summary of the Company’s Business                                  associated with the Offer.

The Company’s principal business activity is to                        The Company's main purpose for this capital raising
acquire dental surgeries and their associated                          includes:
facilities and equipment. It will provide the use of
                                                                       a)   The funding of the contracted acquisition of
these dental surgeries and facilities to self employed
                                                                       a dental surgery and facility located in Booragoon,
dentists who carry on their own dental practices.
                                                                       Western Australia (details of which are set out in
Capitol Health will also provide these practices with
                                                                       Section 9.1 of this Prospectus);
management and administrative support services.
                                                                       b)   Upgrading of capital equipment, facilities and
The services provided by Capitol Health allow
                                                                       information technology systems of the surgeries
dentists to concentrate on the delivery of clinical
                                                                       owned and to be owned by the Company;
services allowing them to relieve themselves of
their time otherwise occupied by the administrative                    c)     Establishment of corporate and administration
aspects of the practice. Capitol Health charges a fee                  facilities;
for the provision of surgeries, facilities and services
under an agreement with each dental practitioner.                      d)   Funding the cost of recruiting additional
                                                                       operations staff;
Capitol Health has acquired its first dental
surgery facility in Fremantle, Western Australia                       e)  Funding the review and due diligence costs of
and has contracted to acquire a second facility in                     new acquisitions;



Page 6                                           Capitol Health Limited - Prospectus
f)  Financing the costs associated with this Offer;
and

g)   Providing on-going working capital
requirements.



1.4 Utilisation of Funds
The funds raised under the Offer will be applied as
follows:


                                                                                         $
  Contracted acquisition of Booragoon Dental Surgery                                  $188,325
  Additional capital equipment for surgeries                                          $261,000
  Upgrade of dental management and accounting software and systems                     $52,000
  Development of procurement system                                                    $48,000
  Establishment of corporate and administration facilities                            $130,000
  Recruitment costs of additional operations staff                                     $80,000
  Review and due diligence costs of new acquisitions                                  $215,000
  Costs payable under the Offer                                                       $169,000
  TOTAL PLANNED EXPENDITURE                                                          $1,143,325
  Unallocated working capital from the Offer                                          $656,675
  Amount of the Offer                                                                $1,800,000



1.5 Working Capital Adequacy
The Directors are of the opinion that on completion
of the Offer, the Company will have sufficient
working capital to carry out its stated objectives.



1.6 Effect of the Offer
The principal effect of the Offer (if the minimum
subscription is raised) will be to:

(a) increase net working capital by approximately
$1,631,000 after deducting estimated expenses of
the Offer; and

(b) increase the number of Shares on issue from
47,100,001 as at the date of this Prospectus to
56,100,001 Shares.




                                               Capitol Health Limited - Prospectus                Page 7
1.7 Capital Structure
The pro-forma capital structure of Capitol Health is
set out below for illustrative purposes to reflect the
issued and paid up capital structure of the Company
on completion on the Offer.

  SHARES                                                                                 Number        %           $
  Shares currently on issue                                                              47,100,001   84.0%      573,211
  Shares now offered for subscription                                                    9,000,000    16.0%    1,800,000
  TOTAL SHARES ON ISSUE AT COMPLETION OF THE OFFER                                      56,100,001    100.0%   2,373,211



  UNLISTED OPTIONS                                                                       Number
  Options currently on issue                                                            10,000,000
  TOTAL OPTIONS ON ISSUE AT COMPLETION OF THE OFFER                                     10,000,000


Notes:

(a) The Shares and unlisted Options currently on issue may be subject to ASX escrow provisions restricting
their transferability. In the event that ASX determines that escrow restriction does not apply to these securities,
the Company will enter into voluntary escrow arrangements with these securities holders for all or part of their
holding for a maximum period of 12 months from the date of Listing, subject to any applicable Corporations Act
requirements.

(b) The Options currently on issue are unlisted and exercisable at 20 cents each before 31 March 2010. Other
terms and conditions of these Options are summarised in Section 9 of this Prospectus.

(c)      The rights attaching to the Shares are summarised in Section 9 of this Prospectus.

(d)      No oversubscriptions will be accepted.

(e) Further details of the Company’s capital structure are set out in the Investigating Accountant’s Report in
Section 8 of this Prospectus.



1.8 Risk Factors
Prospective investors in the Company should be
aware that subscribing for Shares in the Company
involves a number of risks. The key risk factors of
which investors should be aware are described in
Section 6 of this Prospectus. Investors are urged
to consider these risks carefully and if appropriate
consult their advisors, before deciding whether to
invest in the Company.




Page 8                                            Capitol Health Limited - Prospectus
Details Of The Offer
2.1 Shares Offered for Subscription
This Prospectus invites investors to apply for a total
of 9,000,000 Shares at an issue price of 20 cents
                                                                                     2.0
each to raise $1,800,000. No oversubscriptions will
be accepted.

The Offer is open to all public investors. Applications
must be for a minimum of 10,000 Shares and
thereafter in multiples of 1,000 Shares. All Shares
issued pursuant to this Prospectus will be issued as
fully paid and will rank equally in all respects with
the Shares already on issue.

The minimum subscription to the Offer is 9,000,000
Shares to raise $1,800,000, which is equivalent to
full subscription.

Applications under the Offer will only be accepted
on the Application Form attached to this Prospectus.



2.2 Indicative Timetable

 Date of Prospectus:                                                                        17 May 2006
 Opening Date:                                                                              25 May 2006
 Closing Date:                                                                              7 June 2006
 Despatch of Holding Statements:                                                            9 June 2006
 Quotation of Shares on ASX expected:                                                       14 June 2006



Notes:

(1) The Directors and Underwriter reserve the right to vary these dates for any reason (e.g. should the
Exposure Period be extended).

(2) The Directors reserve the right to close the Offer earlier or later than as indicated above, subject to the
requirements of the Corporations Act.

(3) The above are anticipated dates only. The date the Shares are expected to be issued and/or commence
trading on the Official List of ASX may vary with any change to the Closing Date.




                                               Capitol Health Limited - Prospectus                                Page 9
2.3 Allotment and Allocation of Shares                               2.6 Underwriting
Subject to ASX granting conditional approval for                     The Offer is fully underwritten by Marketech Pty Ltd
the Company to be admitted to the Official List, the                  (“Marketech”), Australian Financial Services Licence
allotment of Shares to Applicants will occur as soon                 No. 230014. Details of the agreement between the
as possible after the Offer is closed, following which               Company and Marketech are described in Section 9
statements of Shareholdings will be despatched.                      of this Prospectus.
It is the responsibility of Applicants to determine
their allocation prior to trading in Shares. Applicants
who sell Shares before they receive their holding
                                                                     2.7 Non-Resident Investors
statements will do so at their own risk.
                                                                     This Prospectus does not, and is not intended to,
Pending issue of the Shares, or return of the
                                                                     constitute an offer of securities in any jurisdiction
Application monies, the Application monies will be
                                                                     where, or to any person to whom, it would not be
held in trust for the Applicants.
                                                                     lawful to issue the Prospectus or make the Offer.
The Company has the right to allocate Shares under                   Residents of countries outside Australia should
the Offer. The Company may reject any Application                    consult their professional advisers as to whether
or allocate any fewer Shares than applied for under                  any government or other consents are required,
the Offer.                                                           or whether any formalities need to be observed
                                                                     should they wish to make an Application to take
If an Application is not accepted, or is accepted                    up Shares on the basis of this Prospectus. It is
in part only, the relevant part of the Application                   the responsibility of any Applicant who is resident
monies will be refunded. Interest will not be paid on                outside Australia to ensure compliance with all laws
Application monies refunded.                                         of any country relevant to their Application.

                                                                     No action has been taken to register or qualify
                                                                     the Shares or the Offer or otherwise to permit an
2.4 Minimum Subscription                                             offering of the Shares in any jurisdiction outside
The minimum subscription for the Offer is 9,000,000                  Australia. The return of a completed Application
Shares raising $1,800,000 before expenses of                         Form will be taken by the Company to constitute a
the Offer. No Shares will be issued pursuant to                      representation and warranty by the Applicant that all
this Prospectus until the minimum subscription is                    relevant approvals have been obtained.
reached. Should the minimum subscription not be                      The Offer pursuant to an Electronic Prospectus is
reached within four (4) months after the date of this                only available to persons receiving an electronic
Prospectus, all Applications will be dealt with in                   version of this Prospectus within Australia.
accordance with the Corporations Act.



2.5 Oversubscriptions
No oversubscriptions will be accepted.




Page 10                                        Capitol Health Limited - Prospectus
2.8 ASX Listing                                                       an electronic issuer-sponsored sub register and
                                                                      an electronic sub register. The two sub registers
Within 7 days from the date of this Prospectus,                       together will make up the Company’s principal
application will be made for the Company to be                        register of Securities.
admitted to the Official List of the ASX and for
admission of the Shares offered by this Prospectus                    Under this system, the Company will not issue
to quotation on the ASX.                                              certificates to investors. Instead, Shareholders
                                                                      will receive a statement of their holdings in the
If approval for Quotation is not granted within 3                     Company. If an investor is broker sponsored, ASTC
months after the date of this Prospectus, or such                     will send them a CHESS statement.
longer period permitted by the Corporations Act,
the Company will not allot or issue any Shares,                       The CHESS statement will set out the number of
and will repay all Application monies without                         Shares allotted to each holder under the Prospectus
interest and within the time prescribed by the                        and give details of their Holder Identification
Corporations Act.                                                     Number, in the case of a holding on the CHESS
                                                                      sub-register.
The ASX takes no responsibility for the contents
of this Prospectus. The fact that ASX may grant                       In the case of an Issuer Sponsored Sub-register, the
Quotation of the Shares is not to be taken in any way                 Company’s share registry will send shareholders
as an indication of the merits of the Company or the                  a statement that will contain the number of Shares
Shares offered pursuant to this Prospectus.                           allotted under the Prospectus and the Shareholder's
                                                                      Security Holder Reference Number.

                                                                      A CHESS statement or Issuer Sponsored statement
2.9 Escrow Provisions                                                 will routinely be sent to holders at the end of any
                                                                      calendar month during which the balance of their
Securities issued to promoters, seed capital
                                                                      holding changes. A holder may request a statement
investors and others prior to the Offer may be
                                                                      at any other time, however a charge may be incurred
subject to the restricted securities provisions of
                                                                      for additional statements.
the Listing Rules. Accordingly, a proportion of
such securities, to be determined by ASX, may
be required to be held in escrow for a period of
time, as determined by ASX. In the event that ASX                     2.11 Opening and Closing Dates
determines that escrow restriction does not apply
                                                                      The Offer will open on 25 May 2006, or such later
to these securities, the Company intends to enter
                                                                      date as may be prescribed by the ASIC, and will
into voluntary escrow restrictions with the holders
                                                                      remain open until 5.00pm WST on 7 June 2006
of these securities on all or part of their holding for
                                                                      subject to the right of Capitol Health to either close
a maximum period of 12 months from the date of
                                                                      the Offer at an earlier time and date or to extend the
listing, subject to any applicable Corporations Act
                                                                      Closing Date without prior notice.
requirements.
                                                                      Applicants are encouraged to submit their
                                                                      Applications as early as possible.
2.10 CHESS
                                                                      No Shares will be issued on the basis of this
Capitol Health proposes to participate in the                         Prospectus later than 13 months after the date of
Clearing House Electronic Sub-register System                         this Prospectus.
("CHESS"), operated by ASX Settlement and
Transfer Corporation Pty Ltd ("ASTC") a wholly
owned subsidiary of ASX, in accordance with the
Listing Rules and ASTC Settlement Rules. On
admission to CHESS, the Company will operate




                                                 Capitol Health Limited - Prospectus                                   Page 11
2.12 How to Apply                                                   2.15 Privacy Act
Applications for Shares under the Offer can only                    The Company collects information about each
be made on the Application Form issued with and                     Applicant from an Application Form for the purposes
attached to this Prospectus in Section 12.                          of processing the Application and, if the Application
                                                                    is successful, to administer the Applicant's security
The Application Form must be completed in                           holding in the Company.
accordance with the instructions set out on the back
of the Application Form.                                            By submitting an Application Form, each Applicant
                                                                    agrees that the Company may use the information in
The completed Application Form and accompanying                     the Application Form for the purposes set out in this
cheque(s) should be posted, at any time after the                   privacy disclosure statement and may disclose it for
issue of the Prospectus, to:                                        those purposes to the share registry, the Company's
CAPITOL HEALTH LIMITED                                              related bodies corporate, agents, contractors and
c/- Computershare Investor Services Pty Ltd                         third party service providers, (including mailing
GPO Box D182                                                        houses), the ASX, ASIC and other regulatory
PERTH WA 6840                                                       authorities.

or delivered to:                                                    If an Applicant becomes a security holder of
                                                                    the Company, the Corporations Act requires the
CAPITOL HEALTH LIMITED                                              Company to include information about the security
c/- Computershare Investor Services Pty Ltd                         holder (name, address and details of the securities
Level 2, Reserve Bank Building                                      held) in its public register. This information must
45 St George's Terrace                                              remain in the register even if that person ceases to
PERTH WA 6000                                                       be a security holder of the Company. Information
                                                                    contained in the Company's registers is also used
Cheques must be made payable to "Capitol
                                                                    to facilitate distribution payments and corporate
Health Limited Trust Account" and crossed "Not
                                                                    communications (including the Company's financial
Negotiable". No brokerage or stamp duty is payable
                                                                    results, annual reports and other information that the
by Applicants. Completed Application Forms must
                                                                    Company may wish to communicate to its security
reach one of the above addresses by no later
                                                                    holders) and compliance by the Company with legal
than the Closing Date unless the Closing Date is
                                                                    and regulatory requirements.
extended. The Company reserves the right to close
the Offer early.                                                    If Applicants do not provide the information required
                                                                    on the Application Form, the Company may not be
Applications must be for a minimum of 10,000
                                                                    able to accept or process the Application.
Shares at 20 cents per Share. Applications for more
than 10,000 Shares must be in multiples of 1,000.



2.14 Enquiries in Relation to the Offer
This Prospectus provides information for potential
investors in Capitol Health, and should be read in its
entirety. If after reading this Prospectus, you have
any questions about any aspect of an investment
in Capitol Health, please contact your stockbroker,
accountant or independent financial adviser.




Page 12                                       Capitol Health Limited - Prospectus
Company Overview
3.1 Company History and Business Activity
Capitol Health Limited (“Capitol Health”) was
incorporated in December 2005. Its main activity
                                                                                       3.0
                                                                      • Improve management and software systems
                                                                      supporting the surgeries; and

                                                                      • Provide a blend of senior management and clinical
is focussed on the fragmented and high margin                         experience and expertise on its Board.
dental industry in Australia. The Company principally
                                                                      In addition to providing surgical facilities to dentists,
provides the use of dental surgeries and facilities,
                                                                      the Company also provides a range of practice
and practice administration and management
                                                                      management, administrative, technology and other
services to self employed dentists who carry on their
                                                                      support services. These services include:
own dental practices.
                                                                      • Invoicing and collection of fees;
The Australian dental industry has largely remained
unaffected by the consolidation that has occurred in                  • Recoupment of insurance rebates from health
many other medical and allied health fields. This is                   funds;
partly as a result of a historical regulatory framework
limiting ownership of dental practices to individual                  • Accounting and budgeting services;
dentists, and industry economics that differ
                                                                      • Ordering and management of consumables such
markedly from other fields of medical practice such
                                                                      as dental restorative materials;
as general medical practices.
                                                                      • Patient appointment and scheduling services;
The Company currently owns a dental surgery
in Fremantle, Western Australia. This practice                        • Maintenance of dental records; and
generated annual revenue of $310,000 for the
financial year ending 30 June 2005. The Company                        • Use of specialised equipment such as x-ray
has also contracted with one of its Non-Executive                     equipment.
Directors, Dr Russell Fine, to acquire his dental
                                                                      This range of services provided by Capitol Health
surgery in Booragoon, Western Australia. Further
                                                                      allows dentists to concentrate on the delivery
details of these arrangements are set out in Section
                                                                      of dental services allowing them to relieve
9.1 of this Prospectus. In the financial year ending
                                                                      themselves of their time otherwise occupied by the
30 June 2005, Dr Fine’s practice generated annual
                                                                      administrative aspects of carrying on a practice. It is
revenue of $1,312,000. These acquisitions provide
                                                                      proposed that Capitol Health will charge a fee for the
a foundation for the Capitol Health business model
                                                                      provision of surgeries, facilities and services under a
and will provide revenue, in the form of service and
                                                                      services agreement and facilities licence with each
facility fees, to the Company.
                                                                      dental practitioner.
The key focus of Capitol Health will be to acquire
individual dental surgeries and facilities in Australia
and attract new dentists to use the services
available at the Company’s established facilities.

The Capitol Health business model seeks to:

• Maintain and grow the revenue base of each
surgery and its brand;

• Gain access to debt facilities to leverage
acquisitions;

• Derive scale benefits from increasing the number
of surgeries under management;




                                                 Capitol Health Limited - Prospectus                                      Page 13
3.2 Market Positioning                                                 3.3 Scale Advantages
The consumer perception of dental practices and                        The advantages of scale are at the heart of the
their services is markedly different from other health                 economics of industry consolidation. The dental
and medical services. Other medical fields that                         industry has two main characteristics from which
have consolidated individual practices have typically                  significant scale advantages can be achieved. They
been branded under a common marketing banner.                          are the material intensive nature of dental revenue
This is true for pathology, physiotherapy, radiology                   (relative to other medical fields such as general
and to a lesser extent, in general medical practice.                   medical practices which rely largely on hourly labour
                                                                       rates), and the highly fragmented nature of practice
The Directors believe that many successful dental                      ownership.
practices are “boutique” in nature and cater to a
particular set of patients. This is often driven by                    Material Intensive Revenue – There are a relatively
price, clinical focus, location, individual style, and                 high proportion of non-labour costs associated
the demographic qualities of patients.                                 with dental revenue. These are largely related to
                                                                       physical supplies (for example composite resins
There has been success in developing chains                            or implant materials), and equipment inputs (such
of practices (often owned by an entrepreneurial                        as drill handpieces, X-ray machines and tooth
dentist) focussed on a standard offering and public                    whitening lasers). These cost economics provide
perception. It is the Directors’ view that these                       an opportunity to introduce better procurement
chains inherently limit their appeal through the                       practices on significantly larger volumes with the
very thing that made them successful – their brand                     aim of compressing costs and increasing margins.
perception. An example of this phenomenon is
dentists focusing on insurance rebates (implying                       Fragmentation – Major dental supply organisations
lower out of pocket expenses), low cost operations,                    set pricing and negotiation tactics on the basis
and “value for money” perception.                                      of dealing with individuals without much power in
                                                                       the supply chain, and who often lack a methodical
The strategy of acquiring dental surgeries and                         approach to procurement. Negotiation with
facilities and re-branding them under a common                         suppliers at an aggregated level will inherently derive
banner on a larger scale has had limited success.                      further benefits in cost reduction.
A strategic imperative of Capitol Health is to acquire                 Other benefits derived from scale include:
surgeries fitting the Company’s target profile and
provide services to them under their original brand.                   • Management of inventories to better apply working
The Company will endeavour to achieve growth                           capital;
in revenue by enhancing individual brands and                          • Introduction of a common practice software platform;
improving marketing upon acquisition.
                                                                       • A group wide focus on customer relationship man-
This strategy, while foregoing the benefits of unified                   agement (CRM) platforms, systems and practices;
scale marketing, allows acquisition and operating
flexibility, without associating the entire operation of                • Introduction of more efficient systems for back
the business with a particular brand. The Company                      office management;
is then free to acquire a range of surgeries, from the                 • More efficient purchasing of advertising media
cosmetically focused, to value chains, to suburban                     (wholesale media buying);
family oriented practices. This would create greater
scale opportunities than would otherwise be                            • Group education, professional development and
available.                                                             training;

                                                                       • Lease negotiation; and

                                                                       • More efficient access to debt facilities and equity
                                                                       markets, particularly for equipment and acquisition
                                                                       financing.



Page 14                                          Capitol Health Limited - Prospectus
3.4 Proposed Changes to the Revenue Mix                              A review of the Company’s proposed revenue profile
                                                                     is set out below.
A review of a traditional small to medium
practice model suggests that there is significant
improvement in margins available through changes                                Proposed Company Revenue Profile
to the revenue model of the practice.
                                                                                            Other
                                                                            Prosthetist
Shown below are two typical practice revenue                                                 2%
                                                                               13%
models that have been analysed:
                                                                     Hygienist
                                                                       15%
               Traditional Example 1

                                    Other                                                              Dentist Clinical
                                     5%                                                                     70%


                                                                     • The introduction of regular patient visits with
                                                                     scale and clean procedures carried out by a
                                                                     hygienist represents 15% of total revenue. This
       Dentist Clinical                                              has a twofold effect: higher margins are achieved
            95%                                                      in hygiene procedures on a lower direct cost base,
                                                                     and the dentist is free to perform more complex
                                                                     higher margin procedures. The hygienist also often
                                                                     identifies previously undiagnosed problems during
               Traditional Example 2                                 routine maintenance.

                                                                     • The availability of an in-house denture service
                     Other
       Hygiene                                                       (or Prosthetist) provides an opportunity to add to
                      5%
        10%                                                          revenue catchment instead of traditional referrals for
                                                                     this service.

                                                                     • Additional revenue catchment may be achieved
                                                                     by reducing referral for certain procedures, and
                                   Dentist Clinical                  bringing these common procedures in-house.
                                        85%                          In-house development and training may also
                                                                     improve revenue by reducing referrals to specialist
• The focus in these traditional practices is the                    dentists in certain cases.
dentists providing the whole range of services
themselves. Indeed some practices reviewed have                      The main contrast between the traditional and
a 100% dentist clinical revenue stream. That is, the                 Capitol Health’s proposed revenue models is the
majority of revenue billed in the practice relies on the             opportunity to generate higher non-dentist revenue
time of the principal and any associate dentists.                    on a lower cost base.

• These models are characterised by inferior repeat
revenue from lower cost semi-clinical employees
– such as hygienists and therapists.

• They also present very low other in-house revenue
streams such as OPG (orthopantomogram) X-rays,
dentures etc.




                                                Capitol Health Limited - Prospectus                                   Page 15
3.5 Key Benefits of the Company’s                                     3.6 Benefits to Practitioners from the sale
    Business Model                                                       of their surgery and facilities
The Company believes that its business model may                     The Company believes that the sale of surgeries
offer the following benefits:                                         to the Company may offer the following benefits to
                                                                     dental practitioners:
• Improvements in productivity resulting from the
use of a better practice model for revenue and                       • Equity is unlocked from the business, which
costs.                                                               may otherwise be difficult to realize, providing a
                                                                     succession plan, along with a future income stream.
• Reductions in major cost lines will result from
better procurement practices based on aggregating                    • Dentists may be incentivised to continue to
and tendering supply, and eventually enough scale                    perform well and develop business with an equity
for a more Just In Time (JIT) approach to inventory                  stake in the Company (through a share option plan).
management. This has a significant effect on
working capital through better management of                         • The infrastructure and management services make
stock.                                                               it easier for the dentist to concentrate on his or her
                                                                     core competencies.
• Training will form a major part of the development
of employees and practitioners, both for clinical staff              • Dentists will be able to draw on collective clinical
in such areas as implantology and new technology,                    and practical knowledge developed across the
and customer service staff interfacing with                          network.
customers.                                                           • Further investments are made to implement
• Identification and acquisition methodologies                        new procedures (to improve clinical and financial
will ensure each surgery acquired fits our geo-                       management).
demographic and clinical revenue profiles to                          • Maintenance of practice name and clinical
ensure quality revenue and catchment areas.                          independence may assist in the retention of existing
Target characteristics such as practices that have                   patients.
been neglected, and that have under employed
technology provide natural avenues for growth.

• All practices will move to a single information
technology platform. This will enable consolidated
procurement, inventory management, Customer
Relationship Management and financial
management across the practices.

• More aggressive and unified marketing of
individual local brands, focusing on each practice
and its boutique nature will result in consistent
brand architecture.

• Focusing principal and associate dentists on
clinical areas (which generate revenue) rather than
distracting their attention into practice management
and administration issues (which do not generate
revenue).




Page 16                                        Capitol Health Limited - Prospectus
3.7 Succession and Mentoring                                         3.8 Establishing New Surgeries
A key issue in maintaining and growing practice                      An additional expansion opportunity for the
revenue in any surgery acquired, or to be acquired,                  Company involves establishing new surgeries
by Capitol Health is to retain the practice principal,               and “sponsoring” a young dentist with 3-4 years
while instigating a clear succession plan to mitigate                experience into the surgery as principal. This
the risk to revenue of the departure of the principal                removes the need to pay for goodwill, and may be
dentist.                                                             appropriate in emerging localities. The elimination
                                                                     of goodwill will be replaced with the early operating
Each surgery acquired by the Company will be                         losses experienced as a result of building a
assessed and a succession and mentoring plan will                    patient base. This strategy provides an alternative
be implemented based on two key drivers:                             expansion model when young dentists with potential
• The desire of older dentists who have been                         are identified, provided that a suitable location and
principals for some time to “pass on” their expertise                premises can be found.
and experience through mentoring a new dentist;
and

• The desire of younger dentists (2-4 years
experience) to branch out and work towards being
a principal dentist, without the onerous debt and
management responsibilities associated with
purchasing a surgery and practicing independently.

The Company believes that succession will
achieve a number of key objectives of the business
including:

• Mitigating the risk of introducing a principal dentist
unknown by patients, causing a sudden revenue
decrease.

• Mitigating the risk of departure of the principal
dentist upon completion of their agreement.

• Underpinning the revenue growth of the practice.

• In association with professional development and
training introducing new methods and technologies
in the practice that may not otherwise have been
utilised.

• Younger dentists are incentivised by the future
potential of being a principal dentist, without the
management responsibilities, and can be motivated
to continue for longer periods with their participation
in an appropriate share option plan.




                                                Capitol Health Limited - Prospectus                                  Page 17
3.9 Regulatory Aspects                                              3.10 Service agreements and facilities licences
There is various State and Federal legislation                      The Company intends to enter into service
applicable to the dental industry and the provision of              agreements and facilities licenses with each
dental services.                                                    registered dentist at any dental surgery the
                                                                    Company acquires to provide them with the use of
The relevant Federal legislation includes the                       surgical facilities and equipment and services.
legislation establishing the Health Insurance
Commission which applies to dentists who provide                    These agreements generally include the following
specific services under the Medicare healthcare                      aspects:
system.
                                                                    • The initial term of the agreement is generally two to
The dental industry in Western Australia is currently               five years. Upon expiry of the initial term, extension
governed by the Dental Act 1939 (WA) (“Dental Act”)                 of the agreement is by negotiation.
and Dental Prosthetists Act 1985 (WA) (“Dental
Prosthetists Act”).                                                 • The dentists pay the Company a proportion of
                                                                    the fees billed by the dentists during the term of the
The Dental Act currently includes a restriction on                  agreement.
corporate ownership of dental practices. Further
details of this restriction and the measures taken                  • As part of the services provided to the dentists,
by the Company to comply with the applicable                        the Company, on behalf of the dentists, bills and
legislation are set out in Section 6.2.9 of this                    collects all fees. The Company provides monthly
Prospectus.                                                         accounts to the dentists of all fees collected.

The Dental Bill 2005 (WA) (“Dental Bill”) merges                    • Dentists, as self-employed practitioners are
the Dental Act and the Dental Prosthetists Act                      obliged to be registered for goods and services tax.
into a single Act. The new Dental Bill removes                      • Dentists must maintain all necessary regulatory
the prohibition on corporate ownership of dental                    approvals, qualifications and licenses to practice
practices.                                                          dentistry and professional indemnity insurances
The Dental Bill was introduced in the State                         during the term of the agreement.
Legislative Assembly (the lower House of the                        • The agreement also contains warranties and
Parliament of WA) on 23 November 2005 and was                       indemnities, restraint of trade provisions and
read for a third time on 9 May 2006. The Dental Bill’s              confidentiality restrictions that protect the
first reading in the State Legislative Council (the                  Company’s interests when the agreement is
upper House of the Parliament of WA) took place on                  concluded.
11 May 2006 and the second reading was adjourned
for debate on this date. As such, the Company is                    Further details of the Services Agreement and
unable to provide any certainty as to the date the                  Facilities Licenses entered into by the Company are
Dental Bill will be formally enacted, if at all.                    set out in Section 9.1 of this Prospectus.




Page 18                                       Capitol Health Limited - Prospectus
Directors
and Company Secretary
4.1 Directors

                 Mr Andrew Harrison,
                                                                    4.0
                                                   Mr Harrison has significant experience in both
                BCom (Hons), MAICD                 senior management and board positions in publicly
                                                   listed companies. He has held senior positions in a
                  Managing Director
                                                   number of major organisations including Brambles
                                                   Industries Limited, and has played leading roles in
                                                   strategy, management, and business development
                                                   across a number of sectors.
                                                   Prior to forming Capitol Health Limited, Mr Harrison
                                                   was Managing Director of Neptune Marine Services
                                                   Limited, and played an integral role in the initial
                                                   public offering of that company in April 2004, and
                                                   the subsequent global commercialisation of its
                                                   unique technology.
                                                   He was a non-executive director of ASX listed
                                                   Neptune Marine Services Limited until March 2006,
                                                   and is currently a Non Executive Director of C @
                                                   Limited, an ASX listed optical marketer.
                                                   Previously he has worked as a management
                                                   consultant for such clients as Chubb Australasia
                                                   and has been CEO of a Melbourne based marketing
                                                   consultancy. Mr Harrison also holds a Bachelor of
                                                   Commerce (Honours) in Marketing and Commercial
                                                   Law from Curtin University in Western Australia, and
                                                   is a member of the Australian Institute of Company
                                                   Directors.




                     Dr Russell Fine,              Dr Fine is a founding member of Capitol Health and
                         BSc, BDSc                 a Board Certified Dentist, having obtained his dental
                                                   qualifications at the University of Western Australia
                    Clinical Director
                                                   in 1996. During the last 6 years Dr Fine has owned
                    – Non-Executive
                                                   and operated a successful private practice focusing
                                                   on high-end cosmetic and implant dentistry.
                                                   Dr Fine has extensive industry involvement being
                                                   a member of the Australian Dental Association
                                                   (WA and Federal), Treasurer and Secretary of the
                                                   Australian Osseointegration Society (WA), Executive
                                                   Council of the Australian Society for Implant
                                                   Dentistry (WA), and a member of the International
                                                   College of Oral Implantologists.




                              Capitol Health Limited - Prospectus                                  Page 19
                        Mr Anthony Ho,               Mr Ho graduated in 1980 with a Bachelor of
                            BCom, CA                 Commerce from the University of Western Australia.
                                                     He qualified as a Chartered Accountant in 1983 with
                        Non-Executive
                                                     Deloittes. Mr Ho is presently the principal of a public
                             Director
                                                     practice, specialising in providing corporate and
                                                     financial services to ASX-listed companies.
                                                     Prior to establishing his practice in 1991, he spent
                                                     7 years in a senior corporate role with a major
                                                     investment and resource group in Western Australia.
                                                     He is currently a director of Piquant Blue Limited
                                                     and Optima Corporation Limited, companies which
                                                     are listed on ASX.




4.2 Company Secretary

                         Mr Kim Hogg,                Mr Hogg is a principal of a public practice providing
                                BCom                 specialist services to clients seeking to raise capital
                                                     and list on the ASX. He has predominantly been
                                                     involved in the preparation of prospectuses and in
                                                     compliance work as company secretary for both
                                                     listed and unlisted entities. Prior to this, he worked
                                                     with Qantas for three years in a managerial and
                                                     accounting role, and before that in similar roles with
                                                     other private and public organisations, most notably
                                                     Leeuwin Estate and Bridgestone Australia Ltd. Mr
                                                     Hogg completed a Bachelor of Commerce degree
                                                     in 1984 at the University of Western Australia. He is
                                                     currently the company secretary of Neptune Marine
                                                     Services Ltd, Piquant Blue Limited, Dyesol Limited
                                                     and Quickstep Holdings Limited.




Page 20                        Capitol Health Limited - Prospectus
Corporate Governance
The Board of Directors is responsible for the overall
corporate governance of Capitol Health Limited,
and is committed to the principles underpinning
                                                                                    5.0
                                                                   The Board of Directors
                                                                   The Board will comprise both executive and non-
                                                                   executive Directors. Presently there are two non-
best practice in corporate governance, applied
in a manner that meets ASX standards and                           executive Directors and one executive Director. It is
best addresses the Directors’ accountability to                    Capitol Health’s policy to have a majority of non-
Shareholders. However, whilst the Company will                     executive directors on the Board.
endeavour to comply with all of the guidelines under
                                                                   The membership of the Board, its activities and
the ASX Corporate Governance Recommendations,
                                                                   composition is subject to periodic review. The
the Board considers that the Company is not
                                                                   criteria for determining the identification and
currently of a size, nor are its affairs of such
                                                                   appointment of a suitable candidate for the Board
complexity, to justify the additional expense of
                                                                   shall include the quality of the individual, experience
compliance with all recommendations.
                                                                   and achievement, credibility within the Company’s
A brief summary of Capitol Health’s main corporate                 scope of activities, intellectual ability to contribute
governance policies and practices is outlined below.               to the Board’s duties and ability to undertake Board
In addition, the following policies and procedures                 duties and responsibilities.
have been adopted and are available for viewing on
the Company’s website:

   • Role of the Board
                                                                   Committees of the Board
                                                                   The Board has established the following
   • Structure of the Board
                                                                   committees:
   • Responsible Decision Making and Code of
                                                                   Audit Committee
   Conduct
                                                                   The Audit Committee comprises two Board
   • Safeguarding Integrity in Financial Reporting
                                                                   members, all being Non-executive Directors and
   • Timely and Balanced Disclosure                                the Company Secretary. The primary responsibility
                                                                   of this Committee is to monitor the integrity of the
   • Risk Recognition and Management                               financial statements of the Company, and to review
                                                                   and monitor the Company's internal financial control
   • Board performance
                                                                   system.
   • Securities Trading Policy
                                                                   Remuneration Committee
   • Shareholder Rights and Communications
                                                                   The Remuneration Committee comprises two
   Strategy
                                                                   Board members, being the non-executive Directors.
   • Recognition of shareholder interests                          The primary responsibility of this Committee is to
                                                                   discharge the Board's responsibilities in relation
   • Remunerations Responsibility                                  to remuneration of the Company's executives,
                                                                   including securities and benefit plans.
   • Summary of Procedure for Selection of
   External Auditor and Rotation of Engagement
   Audit Partner




                                              Capitol Health Limited - Prospectus                                    Page 21
Role of the Board                                                      • approving and monitoring the progress of major
                                                                       capital expenditure, capital management, and
The management and control of the business is vested                   acquisitions and divestitures, together with any
in the Board. The Board's primary responsibility is                    recommendations from management associated
to oversee the Company’s business activities and                       with these activities.
management for the benefit of the shareholders.

The Board strives to create Shareholder value and
ensure that Shareholders' funds are safeguarded.                       Policies and Procedures
The key responsibilities of the Board include:                         Continuous Disclosure Policy

• the overall corporate governance of the Company                      The Company has adopted a continuous disclosure
including its strategic direction and financial                         policy so as to comply with its continuous disclosure
objectives, establishing goals for management and                      obligations once listed on the ASX. The aims of this
monitoring the attainment of these goals;                              policy are to:

• reporting to shareholders and the market (ASX);                      • report continuous disclosure matters to the Board;

• approving strategic plans, key operational and                       • assess new information and co-ordinate any
financial matters, as well as major investment and                      disclosure or releases to the ASX, or any advice
divestment proposals;                                                  required in relation to that information, in a timely
                                                                       manner;
• approving the nominations of Directors to the
Board and appointment of key executives;                               • provide an audit trail of the decisions regarding
                                                                       disclosure to substantiate compliance with the
• evaluating and rewarding senior management and                       Company’s continuous disclosure obligations; and
ensuring executive succession planning;
                                                                       • ensure that employees, consultants, associated
• ensuring that Directors have a good understanding                    entities and advisers of the Company understand
of the Company’s business;                                             the obligations to bring material information to the
• ensuring Management maintains a sound system                         attention of the Board.
of internal controls to safeguard the assets of the                    Securities Trading Policy
company;
                                                                       The Company has adopted a policy that imposes
• monitoring the performance of the company;                           certain restrictions on Directors and employees
• appointing and removing the Managing Director                        trading in the securities of the Company.
(or equivalent)                                                        The restrictions have been imposed to prevent
                                                                       trading in contravention of the insider trading
• ratifying the appointment and, where appropriate,                    provisions of the Corporations Act.
the removal of the chief financial officer (or
equivalent) and/or the company secretary;

• reviewing and ratifying systems of risk
management and internal compliance and control,
codes of conduct and legal compliance, safety
and occupational health policies, community and
environmental issues;

• monitoring senior management’s performance
and implementation of strategy, and ensuring
appropriate resources are available;




Page 22                                          Capitol Health Limited - Prospectus
Risk Management Policy

The Board has developed and implemented policies
and practices which ensure that the material risks
facing the Company are adequately identified,
assessed, monitored and managed throughout the
whole organisation. These include:

• comprehensive Board papers containing relevant
operational, strategic, financial and legal information
circulated to directors before each meeting;

• actual results for the Company presented to the
Board at each Board meeting, compared against
budget and forecast, with revised forecasts if
required;

• financial authority limits set by the Board; and

• insurance cover appropriate to the size and nature
of the Company’s operations to reduce the financial
impact of any significant insurable losses.

Shareholder Communications Strategy

The Board aims to ensure that Shareholders are
kept informed of all major developments affecting
the Company.

Information is communicated to Shareholders
through:

• continuous disclosure in the form of public
announcements on ASX;

• annual and quarterly reports to shareholders;

• investor briefings;

• the Managing Director’s address delivered at the
Annual General Meeting; and

• notices of all meetings of Shareholders and
explanatory notes of proposed resolutions.




                                                Capitol Health Limited - Prospectus   Page 23
Risk Factors
6.1 General Risks
Factors such as inflation, interest rates, levels of tax,
taxation law and accounting practices, government
                                                                                          6.0
                                                                      markets, movements in interest rates, economic
                                                                      conditions and investor sentiment generally.
                                                                      In addition, world events could affect the price
                                                                      of shares in various sectors. Such events are
legislation or intervention, natural disasters, social                unpredictable and their impact on the individual
upheaval, and war may have an impact on prices,                       companies or markets is beyond the control of the
operating costs and market conditions generally.                      Company.
Accordingly, the Company's future possible revenue
and operations can be affected by these factors,
which are beyond the control of the Company.
                                                                      6.2 Specific Risks
General movements in local and international stock
                                                                      In addition to the risks outlined in Section 6.1, there
markets, and economic conditions could all affect
                                                                      is a range of specific risks associated with the
the market price of the Company's Securities.
                                                                      Company's business operations and its involvement
                                                                      in the healthcare industry. Potential investors in the
                                                                      Company should note the following additional risks
6.1.1     Economic Factors                                            prior to investing:

Factors such as inflation, currency fluctuation,
interest rates, supply and demand and industrial
disruption have an impact on operating costs,                         6.2.1           Limited History
commodity prices and stock market processes. The
                                                                      The Company was incorporated on 1 December
Company's future possible revenues and share price
                                                                      2005 and therefore has a limited history.
can be affected by these factors, which are beyond
                                                                      Accordingly, investors should consider the
the control of the Company and its Directors.
                                                                      Company’s prospects for revenue growth in light of
                                                                      the risks typically encountered by companies in their
                                                                      formative stages.
6.1.2     Stock Market Conditions
Share market conditions may affect the listed shares
regardless of the operating performance. Share                        6.2.2           Key Personnel
market conditions are affected by many factors                        The prospects of the Company depend in part
such as:                                                              on intellectual property, experience and business
• general economic outlook;                                           acumen of a small number of key personnel at this
                                                                      time. The loss of one or more key personnel without
• movements in, or outlook on, interest rates and                     replacement by persons of similar skill may have an
inflation rates;                                                       adverse effect on the business.

• currency fluctuations;

• commodity prices;                                                   6.2.3           Government and Regulatory risks
• changes in investor sentiment towards particular                    The relevant government legislations and policies as
market sectors; and                                                   well as their interpretation and administration can
                                                                      change from time to time. Such changes may affect
• the demand for, and supply of, capital.
                                                                      some or all of the operations of the Company.
Investors should recognise that once the Shares
are listed on ASX, the price of the Shares may fall
as well as rise. Many factors will affect the price of
the Shares including local and international stock



Page 24                                         Capitol Health Limited - Prospectus
6.2.4   Health Insurance policy risks                              6.2.6            Share Market Risks
A proportion of patients of Dentists using the                     In view of the limited history of operations of the
Company’s facilities and services have the costs of                Company, there is no certainty that an active market
their dental work covered or partly covered by health              in the Shares will develop or that the price of the
insurance policies. Reimbursements for dental                      Shares will rise. In the event that liquidity of the
work by health insurance funds vary depending on                   Shares is low, the volatility of the market price of the
a number of factors. Changes by health insurance                   Shares may be high.
funds to their reimbursement policies could affect
the demand for clinical dental services and indirectly
affect the Company’s revenue for providing of
                                                                   6.2.7            Third Party Claims
support facilities and services.
                                                                   There is a risk of claims (such as personal injury and
                                                                   professional negligence claims) being made against
6.2.5   Retention of Dentists                                      the Company by patients and Dentists arising
                                                                   from the services provided by the Company. The
The Company intends to enter into appropriate                      Company is indemnified by the dentists and those
agreements with dentists for the use of the                        indemnities are supported by professional indemnity
Company’s facilities and services. The terms of                    insurances taken out by the individual dentists.
such agreements are set out in Section 9.1 of this                 In addition, the Company holds public liability
Prospectus. The Company’s financial performance                     insurance and intends to take out professional
depends on the retention of dentists who use the                   indemnity insurance (separate from the cover held
Company’s facilities and services. The Company’s                   by each dentist) covering the Company for claims
financial performance and prospects may be                          arising from any professional advice which the
adversely affected if existing dentists cease to                   Company might be regarded as having provided to
use the Company’s facilities and services or if the                the dentists in the provision of its services.
Company is not successful to attract new dentists to
use its services.




                                              Capitol Health Limited - Prospectus                                     Page 25
6.2.8     Dental Legislation Risks                                   6.2.9           Profitability
The operation and ownership of dental practices is                   The Company relies on its management to
governed by the Dental Act 1939 (WA) (“Dental Act”)                  successfully manage the Company’s operations
and the Dental Prosthetists Act 1985 (WA) (“Dental                   and the expansion and development opportunities
Prosthetists Act”). Pursuant to this legislation,                    set out in this Prospectus. However, future
dentists registered in Western Australia are                         operating results are dependent on various other
restricted from:                                                     factors outside the Company’s control. There is no
                                                                     guarantee that the historical performance of the
• practicing as a dentist or as the employee or agent                Company contained in this Prospectus is indicative
for any company that is not a dentist;                               of the Company’s future financial performance.
• entering into a partnership with, or sharing                       Please refer to Section 7 for further information.
earnings as a dentist with a company that is not a
dentist; and

• authorising or permitting their name to be used
by any company that is not a dentist, or in the
performance of any dental operation or service.

Having regard to the current legislation, the
Company (under each individual Services
Agreement and Facilities Licence) seeks to ensure
that:

• the provision of dental services is by the dentists.
The Company does not, and will not, interfere or
direct how the dental services are to be provided;

• the services of all other dental service providers,
including dental prosthetists, hygienists and
therapists are engaged by the relevant dentist; and

• the relationship between the Company and
each dentist is one of principal and independent
contractor (and not one of employer and employee).

The current legislative regime and, in particular,
corporate ownership of dental practices is the
subject of the Dental Bill 2005 (WA) (Dental Bill).
Further details of the Dental Act and Dental Bill are
set out in Section 3.9 of this Prospectus.




Page 26                                        Capitol Health Limited - Prospectus
Financial Information
7.1 Introduction
This section provides a summary of the historical
financial and trading information of the two dental
                                                                                      7.0
practices which have contracted with the Company
under service agreements. This historical financial
information is unaudited and is for the years ended
30 June 2003, 2004 and 2005.

The Directors have considered the matters set out
in ASIC Policy Statement 170 and believe that they
do not have a reasonable basis to forecast future
earnings on the basis that Capitol Health has a
limited trading history and its business is subject
to a number of inherently uncertain influences.
Although the Company will seek to ensure that
strategies are pursued to create acquisition
opportunities, the Capitol Health business model
and the potential scale of revenue generation
cannot be reliably predicted. Accordingly, any
forecast or projected financial information would
contain such a broad range of potential outcomes
and possibilities that it is not possible to prepare a
reliable best estimate forecast or projection. Neither
the Company, nor its officers and advisers make
any statements or give any form of assurance or
warranty that the historical financial performance
can be replicated.



7.2 Historical Financial Information
The following table sets out the unaudited
consolidated trading history for the past three years
of the two practices operating in the surgeries and
facilities acquired and to be acquired. Details of the
terms of acquisition of these two practices are set
out in Section 9.1 of this Prospectus.


   Year ended 30 June:                2003                        2004                  2005        3-YEAR TOTAL
   Revenue                          1,238,107                  1,517,739              1,622,114       4,377,960
   Total Expenses                   (940,685)                 (1,132,149)             (1,187,829)    (3,260,663)
   Net Profit Before Tax              297,422                    385,590                434,285        1,117,297




                                                Capitol Health Limited - Prospectus                                Page 27
This trading history relates to the dental practices
owned and operated by the dentists of the surgeries
acquired and contracted to be acquired by Capitol
Health. The Company’s future revenue and trading
performance will reflect the service and facilities
fees charged to those dentists (refer Section 3.10 for
further details of such service agreements). There is
no assurance that future revenue and earnings will
reflect these historical trading information.



7.3 Proforma Financial Details
A Proforma Consolidated Balance Sheet and
Income Statement to 31 March 2006, assuming
the completion of this Offer, is included in the
Investigating Accountant’s Report in Section 8 of
this Prospectus. This report also includes details of
the capital structure of the Company.



7.4 Corporate Structure
The dental surgeries and facilities are owned and
operated by CHL Operations Pty Ltd, a wholly
owned subsidiary of Capitol Health Limited.




Page 28                                       Capitol Health Limited - Prospectus
Investigating
Accountant’s Report

                   STANTON PARTNERS CORPORATE PTY LTD
                                                                                   8.0
                                                  A.C.N 063 036 331
                                             1 HAVELOCK STREET
                                               WEST PERTH 6005
                                             WESTERN AUSTRALIA
                                            TELEPHONE: (08) 9481 3188
                                             FACSIMILE: (08) 9321 1204

                                           e-mail: jvdieren@stanton.com.au




16 May 2006

The Directors
Capitol Health Limited
189 Hay Street
SUBIACO WA 6008




Dear Sirs

RE: INVESTIGATING ACCOUNTANT’S REPORT




8.1 Introduction                                                  noted in Appendices 2 and 3. The historical and
                                                                  pro-forma financial information is presented in an
This report has been prepared at the request of                   abbreviated form, insofar as it does not include all
the Directors of Capitol Health Limited (“Capitol                 of the disclosures required by Australian Accounting
Health” or “the Company”) for inclusion in a                      Standards applicable to annual financial reports
Prospectus to be dated on or around 17 May 2006                   in accordance with the Corporations Act 2001.
(“the Prospectus”) relating to the proposed issue by              This report does not address the rights attaching
Capitol Health of 9,000,000 shares to be issued at                to the securities to be issued in accordance with
a price of 20 cents per share to raise up to a gross              the Prospectus, nor the risks associated with the
$1,800,000 (“the Offer”). The minimum subscription                investment. Stanton Partners Corporate Pty Ltd has
for the Offer is 9,000,000 shares and the Offer is                not been requested to consider the prospects for
fully underwritten by Marketech Pty Ltd.                          Capitol Health, the securities on offer and related
                                                                  pricing issues, nor the merits and risks associated
                                                                  with becoming a shareholder and accordingly,
8.2 Basis of Preparation                                          has not done so, nor purports to do so. Stanton
                                                                  Partners Corporate Pty Ltd accordingly, takes no
This report has been prepared to provide investors                responsibility for those matters or for any matter or
with information on historical results (income                    omission in the Prospectus, other than responsibility
statement), the balance sheet of Capitol Health and               for this report. Risk factors are set out in Section 6
the pro-forma balance sheet of Capitol Health as                  of the Prospectus.




                                             Capitol Health Limited - Prospectus                                   Page 29
8.3 Background                                                      ($463,037). The acquisition is to be partly financed
                                                                    by way of two loans (a Business Edge loan of
Capitol Health was incorporated on 1 December                       $334,000 from Bankwest and a Hire Purchase loan
2005 with an issued capital of 1 share. To 31 March                 of $261,000 from Capital Finance Australia Limited,
2006, the Company issued 32,100,000 shares to                       (“Capital”)) totalling $595,000. In addition, CHL will
promoters at 0.01 cents to raise a gross $3,210,                    borrow a further $250,000 from Bankwest to pay out
6,000,000 shares at 2 cents each to raise $120,000                  the loan to partly finance the Banksia acquisition, so
and 9,000,000 shares at 5 cents each to raise a                     that the total borrowings from Bankwest and Capital
gross $450,000. In December 2005 the Company                        after the acquisition of the Booragoon Dental Clinic
issued for no consideration 10,000,000 options                      will be $845,000. The $334,000 and the $250,000
exercisable at 20 cents each and expiring on 31                     loans from Bankwest will be payable over 10 years
March 2010.                                                         with an initial interest rate of 7.8% per annum. The
                                                                    $261,000 Hire Purchase loan from Capital will be
The Company incorporated CHL Operations Pty Ltd                     payable over 5 years with an initial interest rate
(“CHL”) on 4 January 2006 as the entity to acquire                  of 10.65% and a balloon repayment of $52,200.
dental surgeries and facilities and provide services                The Hire Purchase loan will be secured over the
to the dental practices. CHL is a wholly owned                      Booragoon Dental Clinic fitout and associated
subsidiary of Capitol Health.                                       equipment. Bankwest will have a first ranking
                                                                    fixed and floating charge over the assets and
The Company in conjunction with CHL (“the                           undertakings of the Company and its subsidiary,
Group”) was set up to acquire dental surgeries and                  CHL, a Setoff Agreement from the Company over
facilities and to 31 March 2006 it has acquired a                   credit funds with Bankwest and a commercial
dental surgery and facilities called Banksia Dental                 guarantee and indemnity from the Company.
Care (“Banksia”). The cost to acquire Banksia was                   Completion of the sale is subject to various
$271,080 (inclusive of stamp duty) and the assets                   conditions precedent being satisfied or waived
acquired were plant and equipment at a deemed                       before 31 July 2006 including each of the registered
fair value of $75,000, inventory of $5,000 and the                  dentists at the Booragoon Dental Clinic entering into
balance of the cost was allocated to goodwill                       a services agreement with CHL and the lessor of the
($191,080). The acquisition was partly funded by                    lease consenting to the assignment of the lease to
way of a loan of $250,000 that bears interest at the                CHL. In terms of the Business Purchase Agreement
rate of 8% per annum. This loan is to be repaid                     the Vendor agrees that for a period of two years
by refinancing with the Bank of Western Australia                    commencing on the completion date, unless the
(“Bankwest”) as noted below and elsewhere in the                    Actual Annual Revenue is equal to or greater than
Prospectus.                                                         the Annual Revenue Target, the services fee payable
                                                                    in terms of the services agreement will be increased
On 2 May 2006 CHL entered into a Business                           by the Target Revenue Fee in accordance with
Purchase Agreement with Dr. Russell Fine trading                    clause 4.6 (b) of the Business Purchase Agreement.
as Booragoon Dental Clinic (“Fine” or “Vendor”) to
acquire a dental surgery and facilities in Booragoon                On 2 May 2006 CHL entered into a Services
(Booragoon Dental Clinic). The Group has paid                       Agreement and Facilities Licence with Fine pursuant
a deposit of $100,000 as part of a conditional                      to which CHL agreed to provide administration
acquisition of the Booragoon Dental Clinic. The                     and billing services, equipment and serviced
acquisition is subject to a listing of the Company                  premises for the use of dentists to conduct Fine’s
on the Australian Stock Exchange (“ASX”). The full                  dental practice from the Booragoon Dental Clinic.
purchase price is $883,325 (inclusive of estimated                  For a term of two years commencing on the date
stamp duty costs of $33,325) and the directors                      of the completion under the Business Purchase
of the Company have allocated the proposed                          Agreement, Fine must utilise the services to conduct
purchase price as to plant and equipment $304,063,                  the practice at the Booragoon Dental Clinic. In
inventories $116,225 and the balance to goodwill                    consideration for the licence and services by CHL,




Page 30                                       Capitol Health Limited - Prospectus
Fine must pay to CHL a services fee (exclusive of                    8.4 Scope of Examination
GST) in an amount equal to a proportion of the
gross amount (inclusive of GST) received by CHL                      You have requested Stanton Partners Corporate Pty
on behalf of Fine, a proportion of the revenue                       Ltd to prepare an Investigating Accountant’s Report
generated from the sale of any dental goods and                      on:
accessories and any laboratory costs and any target
revenue calculated in accordance with the Business                   (i)   The results (Income Statement) of Capitol
Purchase Agreement.                                                  Health from incorporation to 31 March 2006;
                                                                     (ii) The Balance Sheet of Capitol Health as at 31
It is anticipated that prior to the completion of the                March 2006; and
Business Purchase Agreement a new Services                           (iii) The pro-forma Balance Sheet of Capitol Health
Agreement and Facilities Licence will be entered                     as at 31 March 2006 adjusted to include funds to
into with one further dentist operating from the                     be raised by the Prospectus and the completion of
Booragoon Dental Clinic.                                             transactions referred to in note 2 of Appendix 3.

On 1 March 2006, the Company entered into a                          All of the financial information referred to above has
conditional employment contract with Andrew                          not been audited, however the financial information
Harrison (“Harrison”) to become the managing                         has been subject to review by us. The directors of
director of the Company. The contract with                           Capitol Health are responsible for the preparation
Harrison is for a period of 3 years at a salary rate of              and presentation of the historical and pro-forma
$100,000 per annum plus statutory superannuation                     financial information, including the determination
commencing upon the successful listing of the                        of the pro-forma transactions. We have however
Company on the ASX (“commencement date”).                            examined the financial statements and other
The annual salary will be reviewed 6 months from                     relevant information and made such enquiries,
commencement date and thereafter annually                            as we considered necessary for the purposes
throughout the period.                                               of this report. The scope of our examination
                                                                     was substantially less than an audit examination
On 1 March 2006, the Company entered into                            conducted in accordance with Australian Auditing
an agreement with Townshend York Pty Ltd                             Standards and accordingly, we do not express such
(“Townshend”). The agreement is a service                            an opinion. Our examination included:
agreement pursuant to which Townshend agrees
to provide company secretarial services to the                       (i)   Discussions with directors and other key
Company for a fee of $5,000 per month and is                         management of Capitol Health;
subject to the successful listing of the Company on                  (ii) Review of contractual arrangements;
the ASX. The secretarial services fee is subject to                  (iii) A review of publicly available information; and
annual review.                                                       (iv) A review of work papers, accounting records
                                                                     and other documents.
At a general meeting on 30 December 2005 the
Company approved the adoption of an employee
incentive option scheme. To date no options have                     8.5 Opinion
been issued under this scheme.
                                                                     In our opinion, the pro-forma balance sheet as set
Potential investors should read the Prospectus in                    out in Appendix 2 presents fairly, the pro-forma
full. We make no comments as to ownership or                         balance sheet of Capitol Health as at 31 March 2006
values of the assets of the Company (including plant                 in accordance with the accounting methodologies
and goodwill) or of those to be acquired. Further                    required by Australian Accounting Standards on
details on all significant contracts entered into by the              the basis of assumptions and transactions set out
Company since incorporation are referred to in the                   in Appendix 3. No opinion is expressed on the
Material Contracts section 9.1 of the Prospectus.                    historical results, as shown in Appendix 1, except




                                                Capitol Health Limited - Prospectus                                   Page 31
to state that nothing has come to our attention                      Capitol Health in December 2005. Stanton Partners
which would require any further modification to                       Corporate Pty Ltd and Stantons International Pty
the financial information in order for it to present                  Ltd were not involved in the preparation of any
fairly, the results of the periods identified. The                    other part of the Prospectus, and accordingly,
Company has adopted the Australian equivalents                       make no representations or warranties as to the
of International Financial Reporting Standards                       completeness and accuracy of any information
(“AIFRS”).                                                           contained in any other part of the Prospectus.
                                                                     Stanton Partners Corporate Pty Ltd consents to the
To the best of our knowledge and belief, there have                  inclusion of this report (including Appendices 1 to 3)
been no other material items, transactions or events                 in the Prospectus in the form and content in which it
subsequent to 31 March 2006 that have come to                        is included. At the date of this report, this consent
our attention during the course of our review which                  has not been withdrawn.
would cause the information included in this report
to be misleading.

                                                                     Yours faithfully
8.6 Other Matters                                                    STANTON PARTNERS CORPORATE PTY LTD

At the date of this report, Stanton Partners
Corporate Pty Ltd does not have any interest in
Capitol Health either directly or indirectly, or in
the outcome of the offer. Stantons International
Pty Ltd, a firm that is related to Stanton Partners                   J P Van Dieren FCA
Corporate Pty Ltd were appointed as auditors of                      Director




INVESTIGATING ACCOUNTANT'S REPORT - APPENDIX 1
UNAUDITED CONSOLIDATED INCOME STATEMENT

                                                                                                       1 December 2005
                                                                                                       to 31 March 2006
                                                                                                               $
 Operating Revenue - Dentistry                                                                                  37,481


 Cost of sales                                                                                                   5,774
 Goodwill written off                                                                                         100,000
 Employee entitlements                                                                                          25,006
 Interest expense                                                                                                6,890
 Operating costs                                                                                                42,201
 Net (loss) before tax                                                                                       (142,390)
 Income tax attributable to net loss                                                                                  -
 Net (loss) after tax                                                                                        (142,390)




Page 32                                        Capitol Health Limited - Prospectus
UNAUDITED CONSOLIDATED BALANCE SHEETS - APPENDIX 2

                                                                                  Unaudited       Pro-forma
                                                                                31 March 2006     Unaudited
                                                             Note
                                                                                                31 March 2006
                                                                                      $               $
Current Assets
Cash assets                                                     3                  302,568       1,655,467
Inventories                                                     4                    5,000         121,225
Receivables and payments                                        5                  154,445                -
Other                                                           6                  100,000                -
Total Current Assets                                                               562,013       1,776,692


Non Current Assets
Receivables                                                     5                         -               -
Other                                                           6                    8,000           8,000
Investments                                                     7                         -               -
Fixed assets                                                    8                   84,839         388,902
Intangibles                                                     9                   91,080         554,117
Total Non Current Assets                                                           183,919         951,019
Total Assets                                                                       745,932        2,727,711


Current Liabilities
Trade and Other Payables                                       10                   62,532                -
Provisions                                                     11                    2,579           2,579
Interest bearing liabilities                                   12                  250,000          64,557
Total Current Liabilities                                                          315,111           67,136
Non Current Liabilities
Interest bearing liabilities                                   12                         -        780,443
Owing to parent entity                                         13                         -               -
Total Non Current Liabilities                                                             -        780,443
Total Liabilities                                                                  315,111         847,579
Net Assets                                                                         430,821       1,880,132


Equity
Issued capital                                                 14                  573,211       2,082,522
Accumulated losses                                             15                 (142,390)       (202,390)
Total Equity                                                                       430,821       1,880,132


                                To be read in conjunction with Appendix 3



                                          Capitol Health Limited - Prospectus                                 Page 33
INVESTIGATING ACCOUNTANT’S REPORT - APPENDIX 3
NOTES TO THE INCOME STATEMENT AND BALANCE SHEETS

1.        Statement of Significant                                   (c) Income Tax
          Accounting Policies                                       The Company adopts the balance sheet method
                                                                    of tax effect accounting in accordance with the
(a) Basis of Accounting                                             Australian equivalents of International Financial
The Income Statement and Balance Sheets have                        Reporting Standards. Future income tax benefits
been prepared in accordance with applicable                         are not brought to account unless realisation of the
accounting standards, the Corporations Act 2001                     asset is assured beyond reasonable doubt. Future
and mandatory professional reporting requirements                   income tax benefits in relation to tax losses are not
in Australia and we have made such disclosures                      brought to account unless there is high probability
as considered necessary. They have also been                        of realisation of the benefit. The amount of benefits
prepared on the basis of historical cost and do not                 brought to account or which may be realised in the
take into account changing money values. The                        future is based on the assumption that no adverse
accounting policies have been consistently applied,                 change will occur in income tax legislation, the
unless otherwise stated.                                            anticipation that the Company will derive sufficient
                                                                    future assessable income to enable the benefit to be
(b) Basis of consolidation                                          realised and that the Company will comply with the
The consolidated financial statements comprise the                   conditions of deductibility imposed by the law.
financial statements of Capitol Health Limited and
its subsidiary at each balance date. The financial                   (d) Accounts Payable
statements of the subsidiary are prepared for the                   Accounts payable represent the principal amounts
same reporting period as the parent company                         outstanding at balance date, plus, where applicable,
using consistent accounting policies. Adjustments                   any accrued interest.
are made to bring into line any dissimilar policies
that may exist. All intercompany balances and                       (e) Recoverable Amount of Non Current Assets
transactions, including unrealised profits arising                   The carrying amounts of non-current assets are
from intra group transactions, have been eliminated                 reviewed annually by Directors to ensure they are
in full. Unrealised losses are eliminated unless costs              not in excess of the recoverable amounts from
cannot be recovered. Subsidiaries are consolidated                  those assets. The recoverable amount is assessed
from the date on which control is transferred to the                on the basis of the expected net cash flows, which
group and cease to be consolidated from the date                    will be received from the assets employed and
on which control is transferred out of the Group.                   subsequent disposal. The expected net cash flows
Where there is loss of control of a subsidiary, the                 will be discounted to present values in determining
consolidated financial statements include the results                recoverable amounts.
for the part of the reporting period during which
Capitol Health Limited has control.                                 (f)  Operating Revenue
                                                                    Revenue represents interest received and income
                                                                    from the provision of dentistry services to clients.
                                                                    Revenue from rendering of a service is recognised
                                                                    upon the delivery of the service to the customers.

                                                                    (g) Issued Capital
                                                                    Issued capital is recognised at the fair value of
                                                                    the consideration received by the Company. All
                                                                    transaction costs on the issue of shares are
                                                                    recognised directly in equity as a reduction of the
                                                                    share proceeds received.



Page 34                                       Capitol Health Limited - Prospectus
(h) Goodwill                                                        (n) Share-based payment transactions
Goodwill and goodwill on consolidation are initially                The Group has an incentive option scheme which
recorded at the amount by which the purchase                        provides benefits to employees, directors and
price for a business or for a ownership interest in a               consultants of the Group.
controlled entity exceeds the fair value attributed to
its net assets at the date of acquisition. Goodwill on              The cost of these equity-settled transactions with
acquisitions of subsidiaries is included in intangible              employees is measured by reference to the fair value
assets. Goodwill is tested annually for impairment                  at the date at which they are granted. The fair value
and carried at cost less accumulated impairment                     is determined by an external valuer using a binomial
losses. Gains and losses on disposal of an entity                   model.
include the carrying amount of goodwill relating to
the entity sold.                                                    In valuing equity-settled transactions, no account
                                                                    is taken of any performance conditions, other than
(i)   Trade and other receivables                                   conditions linked to the price of shares of Capitol
Trade receivables are recognised and carried                        Health Ltd (‘market conditions’).
at original invoice amount less an allowance for
uncollectible amounts. An estimate for doubtful                     The cost of equity-settled transactions is
debts is made when the collection of the full amount                recognised, together with a corresponding increase
is no longer probable. Bad debts are written off                    in equity over the period in which the performance
when identified.                                                     conditions are fulfilled, ending on the date on which
                                                                    the relevant employees become fully entitled to the
(j)   Inventories                                                   award (‘vesting date’).
Inventories are measured at the lower of cost and
net realisable value.                                               The cumulative expense recognised for equity-
                                                                    settled transactions at each reporting date until
(k) Employee benefits                                                vesting date reflects (i) the extent to which the
Provision is made for the consolidated entity’s                     vesting period has expired and (ii) the number of
liability for employee benefits arising from services                awards that, in the opinion of the directors of the
rendered by employees to balance date. Employee                     Group, will ultimately vest. This opinion is formed
benefits that are expected to be settled within one                  based on the best available information at balance
year have been measured at the amounts expected                     date. No adjustment is made for the likelihood of
to be paid when the liability is settled, plus related              market performance conditions being made as
oncosts. Employee benefits payable later than one                    the effect of these conditions is included in the
year have been measured at the present value of                     determination of fair value at grant date.
the estimated future cash outflows to be made from
those benefits.                                                      No expense is recognised for awards that do not
                                                                    ultimately vest, except for awards where vesting is
(l)  Borrowing costs                                                conditional upon a market condition.
Borrowing costs are recognised in the income
statement in the period in which they are incurred.

(m) Leases
Operating lease payments are recognised as an
expense in the income statement on a straight line
basis over the lease term.




                                               Capitol Health Limited - Prospectus                                  Page 35
2.        Actual and Proposed Transactions
          to Arrive at Pro-forma Unaudited
          Balance Sheet

Actual and proposed transactions adjusting the
31 March 2006 unaudited consolidated Balance
Sheet of Capitol Health in the unaudited pro-forma
consolidated Balance Sheet are as follows:

(a) The issue of 9,000,000 shares at 20 cents
each pursuant to the Prospectus to raise a gross
$1,800,000;

(b) The completion of the acquisition of the
Booragoon Dental Clinic for a total sum of $850,000
plus stamp duty of $33,325 and allocating the
purchase price as to $116,225 for inventories,
$304,063 to plant and equipment and $463,037 to
goodwill. The deposit paid of $100,000 has been
allocated from other current assets. The additional
cash outlay is $155,000 (plus stamp duty) and the
Company borrowing $595,000 from Bankwest and
Capital as part finance of the acquisition;

(c) The payment of accounts payable and accruals
of $62,532;

(d) The payment of further expenses of the public
issue estimated at $147,000 and expensed against
issued capital and transferring $143,689 of prepaid
capital raising costs to share capital (total capital
raising costs $290,689);

(e) The incurring of further administration/salary
costs/interest (net of revenue) of say $60,000;

(f)   The further borrowing from Bankwest of
$250,000 and repaying the existing short term
interest bearing debt of $250,000; and

(g)       Settlement of receivables of $10,756.




Page 36                                           Capitol Health Limited - Prospectus
                                                               Note 2                Unaudited       Unaudited
                                                                                    Consolidated     Pro-forma
                                                                                   31 March 2006    Consolidated
                                                                                                   31 March 2006
                                                                                        $                $
3.   Cash Assets
The movements in cash at bank are as follows:
Unaudited 31 March 2006                                                               302,568         302,568
Issue of shares pursuant to the Prospectus                         (a)                      -        1,800,000
Acquisition of the Booragoon Dental Clinic                        (b)                       -         (188,325)
Repayment of payables                                              (c)                      -          (62,532)
Prospectus costs                                                  (d)                       -         (147,000)
Administration and other costs                                     (e)                      -         (60,000)
Borrowings from Bankwest                                           (f)                      -         250,000
Repay existing debt                                                (f)                      -        (250,000)
Settlement of receivables                                         (g)                                   10,756
                                                                                      302,568        1,655,467



4.   Inventories
Inventories as at 31 March 2006                                                         5,000            5,000
Inventories from Booragoon                                        (b)                       -          116,225
                                                                                        5,000          121,225




                                             Capitol Health Limited - Prospectus                                  Page 37
                                                                   Note 2                Unaudited       Unaudited
                                                                                        Consolidated     Pro-forma
                                                                                       31 March 2006    Consolidated
                                                                                                       31 March 2006
                                                                                            $                $

 5.       Receivables
 Current
 Receivables as at 31 March 2006                                                            10,756          10,756
 Less: Settlement of receivables                                       (g)                       -         (10,756)
                                                                                            10,756                -
 Prepaid capital raising costs as at 31 March 2006                                        143,689          143,689
 Less: Transferred to equity                                           (d)                       -       (143,689)
                                                                                          143,689                 -
                                                                                          154,445                 -


 Non Current
 Loans to CHL Operations Pty Ltd
                                                                                          394,598         394,598
 as at 31 March 2006
 Eliminated on consolidation                                                             (394,598)       (394,598)
                                                                                                 -                -


The Company is owed $394,598 by CHL Operations Pty Ltd and the loan is unsecured and at call.
Under AIFRS, this debt may be reclassified as part of the investment in subsidiaries.



 6.       Other
 Current
 Deposit on Booragoon acquisition as
                                                                                          100,000          100,000
 at 31 March 2006
 Less: Transfer to other assets on acquisition                         (b)                        -       (100,000)
                                                                                          100,000                 -


 Non Current
 Deposits as at 31 March 2006                                                               8,000            8,000



 7.       Investments
 Shares in CHL Operations Pty Ltd
                                                                                                 1               1
 as at 31 March 2006
 Less: Eliminated on consolidation                                                              (1)             (1)
                                                                                                 -                -




Page 38                                          Capitol Health Limited - Prospectus
                                                                Note 2                Unaudited       Unaudited
                                                                                     Consolidated     Pro-forma
                                                                                    31 March 2006    Consolidated
                                                                                                    31 March 2006
                                                                                          $               $

8.    Fixed Assets
Plant and equipment, at cost as at 31 March 2006                                        88,959          88,959
Plant and equipment acquired on acquisition of
                                                                   (b)                         -       304,063
Booragoon Dental Clinic
Less: Accumulated depreciation                                                           (4,120)         (4,120)
                                                                                        84,839         388,902


9.    Intangibles
Goodwill on Banksia as at 31 March 2006                                                 91,080          91,080
Goodwill on Booragoon                                              (b)                         -       463,037
                                                                                        91,080          554,117


The recoverability of the goodwill is dependent on the successful trading relating to the relevant dental surgeries
and facilities. As noted in Note 1(h), an impairment test is to be conducted on the goodwill on a regular basis
and any impairment will be debited to the Income Statement as a cost. For the period ended 31 March 2006
the goodwill on the acquisition of Banksia has been written down by $100,000 and charged to the income
statement.



10. Trade and Other Payables
Accounts payable and accruals as at 31 March 2006                                       62,532          62,532
Less: Payment of accounts payables and accruals                    (c)                         -       (62,532)
                                                                                        62,532                 -



11. Provisions
Annual Leave as at 31 March 2006                                                          2,579           2,579




                                              Capitol Health Limited - Prospectus                                  Page 39
                                                                Note 2                Unaudited       Unaudited
                                                                                     Consolidated     Pro-forma
                                                                                    31 March 2006    Consolidated
                                                                                                    31 March 2006
                                                                                          $               $

 12. Interest Bearing Liabilities
 Current
 Owing to other parties as at 31 March 2006                                            250,000         250,000
 Borrowings from Bankwest and Capital                             (b)(f)                      -         64,557
 Repay other parties                                                (f)                       -       (250,000)
                                                                                       250,000          64,557


 Non Current
 Borrowings from Bankwest and Capital                             (b)(f)                      -        780,443


The borrowings from Bankwest comprise two loans of $334,000 and $250,000. The loans from Bankwest are
to be secured over the assets and undertakings of the Company and its subsidiary. The $334,000 and the
$250,000 loans from Bankwest will be payable over 10 years with an initial interest rate of 7.8% per annum. The
$261,000 Hire Purchase loan from Capital will be payable over 5 years with an initial interest rate of 10.65% and
a balloon repayment of $52,200. The Hire Purchase loan will be secured over the Booragoon Dental Clinic fitout
and associated equipment. Bankwest will have a first ranking fixed and floating charge over the assets and
undertakings of the Company and its subsidiary, CHL, a Setoff Agreement from the Company over credit funds
with Bankwest and a commercial guarantee and indemnity from the Company.




 13. Owing to Holding Company
 Owing to Capitol Health Limited as at 31 March 2006                                   394,958         394,958
 Eliminated on consolidation                                                          (394,958)       (394,958)
                                                                                              -               -


Refer Note 5.


 14. Issued Capital
 47,100,001 shares on issue as at 31 March 2006                                         573,211         573,211
 9,000,000 shares at 20 cents each                                  (a)                       -       1,800,000
                                                                                        573,211       2,373,211
 Less: share issue costs                                            (d)                       -       (290,689)
 Pro-forma (56,100,001 shares)                                                          573,211       2,082,522




Page 40                                       Capitol Health Limited - Prospectus
                                                               Note 2                Unaudited       Unaudited
                                                                                    Consolidated     Pro-forma
                                                                                   31 March 2006    Consolidated
                                                                                                   31 March 2006
                                                                                         $               $

15. Accumulated Losses
Balance as at 31 March 2006                                                           (142,390)       (142,390)
Further estimated losses to 31 May 2006                           (e)                         -       (60,000)
                                                                                      (142,390)      (202,390)



16. Contingent Liabilities and Commitments

Based on discussions with the Directors and legal advisors, to our knowledge, the Company has no material
contingent liabilities not otherwise disclosed in the Prospectus.



17. Rental of Premises Commitments

The Company has subleased head office premises on a casual basis at the rate of approximately $36,000 per
annum (including overheads).

The Company will have lease commitments relating to the two dental surgeries. The commitments are as
follows:


Due within 12 months                                                                    19,947          69,449
Due 2-5 years                                                                           33,245          82,747
Total                                                                                   53,192         152,196


18. Employment Contracts

The Company has entered into an employment agreement with Andrew Harrison as noted in the Background
Section of this report. The commitments under the agreement that are effective from the date of an ASX listing
are as follows:


Due within 12 months                                                                          -        109,000
Due 1 to 2 years                                                                              -        109,000
Due 2-3 years                                                                                 -        109,000
Total                                                                                         -        327,000


In terms of the agreement the salary is subject to review six months after the commencement date.




                                             Capitol Health Limited - Prospectus                                  Page 41
19.       Service Contract

The Company has entered into a service agreement with Townshend as noted in the Background Section of this
report. The commitments under the agreement that are effective from the date of an ASX listing are as follows:



                                                              Note 2                Unaudited       Unaudited
                                                                                   Consolidated     Pro-forma
                                                                                  31 March 2006    Consolidated
                                                                                                  31 March 2006
                                                                                       $                $

 Due within 12 months                                                                      -          60,000
 Due 1 to 2 years                                                                          -          60,000
 Due 2-3 years                                                                             -          60,000
 Total                                                                                     -         180,000




Page 42                                     Capitol Health Limited - Prospectus
Additional Information
9.1 Summary of Material Contracts
Set out below is a summary of the contracts the
Directors consider are material to the terms of the
                                                                                    9.0
                                                                         (v) Capitol Health receiving a letter from
                                                                         ASX confirming that ASX will grant conditional
                                                                         approval for quotation of the Shares on the
                                                                         Official List on terms reasonably acceptable to
Offer and the operation of Capitol Health’s business,                    Capitol Health;
and as such are believed to be relevant to potential
investors in the Company.                                                (vi) CHL Operations receiving finance approval
                                                                         for a loan from a recognised financial institution
Booragoon Dental Clinic – Business Purchase                              on terms acceptable to CHL Operations;
Agreement
                                                                         (vii) Fine not breaching the Purchase Agreement
On 2 May 2006, CHL Operations Pty Ltd (CHL                               and failing to rectify the breach; and
Operations) (a wholly owned subsidiary of the
Company) entered into a business purchase                                (viii) there being no material adverse change
agreement with Dr Russell Fine (trading as                               affecting the Practice, the Assets, or the financial
Booragoon Dental Clinic) (Fine), pursuant to which                       or trading position or prospects of the Practice.
Fine agreed to sell the Assets to CHL Operations
                                                                   (b) (Purchase Price): The Purchase Price is the
and render dental services at the Booragoon Dental
                                                                   amount of $850,000 (including a deposit of $100,000
Clinic (Centre) (Purchase Agreement).
                                                                   which was paid on the date of execution of the
The term “Assets” is defined as the assets used                     Purchase Agreement).
by Fine in operating the dental practice owned
                                                                   (c) (Vendor’s indemnity): Fine indemnifies CHL
and conducted by Fine (Practice) including the
                                                                   Operations in respect of any claim, damage, loss or
business name, all agreements to which Fine is a
                                                                   liability CHL Operations suffers or incurs in respect
party (Contracts), goodwill, plant and equipment,
                                                                   of all liabilities of Fine relating to the Practice or the
practice records, intellectual property, the property
                                                                   Assets (Liabilities), the conduct of the Practice and
lease at which the Centre is conducted (Lease) and
                                                                   the ownership of the Assets by Fine before the date
stock.
                                                                   of completion of the sale of the Assets (Completion
The Purchase Agreement contains the following                      Date).
terms and conditions:
                                                                   (d) (Targets): Fine acknowledges and agrees
(a) (Conditions Precedent): Completion of the                      that for a period of 2 years commencing on the
sale is subject to the following conditions being                  Completion Date (Revenue Target Period), unless
satisfied or waived on or before 31 July 2006:                      the Actual Annual Revenue (being the gross amount
                                                                   billed by CHL Operations on behalf of Fine in any
   (i)  each of the registered dentists at the Centre              given year during the Revenue Target Period) is
   entering into a services agreement with CHL                     equal to or greater than the Annual Revenue Target
   Operations (Services Agreement);                                (as agreed between Fine and CHL Operations), the
                                                                   services fee payable pursuant to the terms of the
   (ii) the lessor of the Lease consenting to the
                                                                   Services Agreement will be increased by the Target
   assignment of such lease from Fine to CHL
                                                                   Revenue Fee to be calculated in accordance with
   Operations on terms reasonably satisfactory to
                                                                   the terms of the Purchase Agreement.
   CHL Operations;

   (iii) the counterparty to each of the Contracts
   consenting to the assignment of the relevant
   contract from Fine to CHL Operations on terms
   reasonably satisfactory to CHL Operations;

   (iv) all relevant security interests and charges
   against the Assets being released;




                                              Capitol Health Limited - Prospectus                                       Page 43
(e) (Employees): Prior to the Completion Date,                           (iv) no claim, litigation or arbitration proceeding
Fine must offer in writing to employ the employees                       or any administrative or governmental
of the Practice (Employees) with effect from                             investigation is pending or threatened against
the Completion Date on terms and conditions of                           Fine in respect of the Practice, Assets or the
employment similar to their current terms and                            provision of dental services by the Practice; and
conditions and as agreed with CHL Operations.
                                                                         (v) Fine is not aware of anything which would
Fine must use its best endeavours to encourage
                                                                         affect any dentist’s ability to perform and comply
the Employees to accept the offer of employment.
                                                                         with the terms of the Purchase Agreement and
Fine is solely responsible for the salaries, annual
                                                                         the Services Agreement.
leave, sick leave and any other benefits of those
Employees who do not accept Fine’s offer of                         (j)   (Indemnity): Fine indemnifies CHL Operations
employment.                                                         in respect of any claim, damage, loss or liability
                                                                    which CHL Operations suffers or incurs by reason
(f)   (Intention): Fine acknowledges that it is
                                                                    of any matter or thing in respect of a warranty being
fundamental to the transaction contemplated by
                                                                    incorrect and any breach by Fine of the Purchase
the Purchase Agreement that Fine must ensure,
                                                                    Agreement.
that all the patients of the Centre should, as from
Completion, attend dentists practising at the                       (k) (Governing Law): The Purchase Agreement is
Centre. Fine acknowledges that during the term of                   governed by the laws of Western Australia.
the Services Agreement, each dentist must comply
with their respective obligations under the Services                Service Agreement and Facilities Licence
Agreement.                                                          – Dr Russell Fine

(g) (Business Name): After Completion, Fine                         On 2 May 2006, CHL Operations Pty Ltd (CHL
will maintain the registration of the business name                 Operations) entered into a services agreement and
on behalf of CHL Operations for the term of the                     facilities licence with Dr Russell Fine (Fine), pursuant
Service Agreement or until such other time a CHL                    to which CHL Operations agreed to provide
Operations may direct.                                              administration and billing services, equipment and
                                                                    serviced premises for the use of dentists to conduct
(h) (Competition): The Purchase Agreement                           Fine’s dental practice (Practice) from Booragoon
contains a competition clause standard for                          Dental Clinic (Centre) (Services Agreement).
agreements of this nature.
                                                                    For a term of two years commencing on the date
(i)  (Warranties): Fine has provided CHL                            of completion under the Purchase Agreement
Operations with a number of standard warranties for                 (Term), Fine must utilise the Services to conduct the
an agreement of this nature including the following:                Practice at the Centre.

    (i) the conduct of the Practice and the                         The “Services” to be provided by CHL Operations
    ownership and use of the Assets by Fine                         includes the provision of:
    complies with all applicable laws including the
    Dental Act;                                                     (a) administration (including the collection of fees
                                                                    and the keeping of accounts), management, support
    (ii) Fine is the legal and beneficial owner of the               staff and suitable reception services;
    Assets free of encumbrances and other third
    party interests or rights;                                      (b) serviced space at the Centre suitable for the
                                                                    conduct of the Practice; and
    (iii) Fine has paid all amounts due to the
    Employees and no Employee has made any claim
    for workers compensation;




Page 44                                       Capitol Health Limited - Prospectus
(c)    all necessary plant and equipment                             Fine must pay the services fee to CHL Operations
                                                                     monthly in arrears.
The term “Licence” is defined as a non-exclusive
licence to use the Centre and the Centre’s                           (e) (Payment to Dentist): On a monthly basis,
equipment and access the Centre’s common areas                       CHL Operations must remit to Fine an amount
for the purpose of conducting the Practice.                          equal to the amount billed by CHL Operations on
                                                                     behalf of Fine for dental services, dental reports and
Under the Services Agreement, CHL Operations                         other services provided by Fine less the amount of
agrees to provide the Services and the Licence                       the Services Fee and any applicable GST and the
to Fine for the Term on the following terms and                      amount of any billings which were written off.
conditions:
                                                                     (f)   (Relationship): The parties acknowledge that
(a) (Control of Practice): CHL Operations must                       the relationship between CHL Operations and Fine is
not direct Fine in any way whatsoever as to how Fine                 that of principal and independent contractor.
conducts the Practice or provides dental services.
Fine must provide dental services in accordance                      (g) (Termination): The Services Agreement
with all applicable laws and Fine’s own professional                 contains a standard termination clause for
judgement and discretion.                                            agreements of this nature.

(b) (Insurance): During the Term, Fine must                          (h) (Restraint): The Services Agreement contains a
maintain appropriate professional indemnity                          standard restraint clause for agreements of this nature.
insurance with an insurer of Fine’s choice and
provide adequate evidence to CHL Operations.                         (i)  (Governing Law): The Services Agreement is
                                                                     governed by the laws of Western Australia.
(c) (Indemnity): Fine is liable for and indemnifies
CHL Operations against any claim, damage, loss                       The Company will also enter into services
or liability whether imposed by the government or a                  agreements and facilities licences with other dental
third party which CHL Operations pays, incurs or is                  practitioners as required on similar terms as those
liable for in respect of any proven, wilful or negligent             summarised above.
acts or omissions on the part of Fine, whether of
a dental service nature or otherwise which cause
damage or loss to property or persons at the Centre.

(d) (Services Fee): In consideration for the
provision of the Licence and Services by CHL
Operations Fine must pay to CHL Operations a
services fee (exclusive of GST) in an amount
equal to:

      (i)  a proportion of the gross amount (inclusive
      of any GST) received by CHL Operations on
      behalf of Fine (where such proportion differs
      depending on whether Fine or a person other
      than Fine renders the services);

      (ii) a proportion of the revenue generated from
      the sale of any dental grids and accessories at
      the Centre; and

      (iii) any laboratory costs and any target revenue
      fee calculated in accordance with the Purchase
      Agreement.




                                                Capitol Health Limited - Prospectus                                    Page 45
Banksia Dental Care – Business Purchase                             Underwriting Agreement
Agreement
                                                                    On 16 May 2006, the Company entered into an
On 9 January 2006, CHL Operations entered into a                    underwriting agreement with Marketech Pty Ltd
business sale agreement with Dr Karen Anderson of                   (Marketech) where Marketech agreed to underwrite
Banksia Dental Care (“Anderson”) (“Business Sale                    the issue of the Shares pursuant to this Prospectus
Agreement”) pursuant to which CHL Operations                        (Underwriting Agreement) on the following terms
agreed to purchase, and Anderson agreed to sell,                    and conditions:
the Banksia Dental Care business and its assets
(“Assets”) free from all encumbrances for the                       (a) (Conditions Precedent): the obligation of
purchase consideration of $262,500. Settlement of                   Marketech to underwrite the Offer is conditional on:
the sale occurred on 9 January 2006.                                     (i)  the Company lodging the Prospectus with
Anderson is restrained from working in, consulting                       the ASIC in a form approved by Marketech on or
to, operating or owning a dental practice for a period                   before 17 May 2006;
of three years from the date of settlement within a                      (ii) the Company receiving a letter from ASX
three kilometre radius of the Banksia Dental Care                        confirming that ASX will grant conditional
premises.                                                                approval for quotation of the Shares on the
Anderson provided a number of warranties to CHL                          Official List;
Operations, including the following:                                     (iii) within 7 days from the date of this
(a) Anderson is the legal owner of all of the Assets                     Prospectus, the Company making application for
which are free of any encumbrance;                                       the Company to be admitted to the Official List of
                                                                         the ASX and for admission of the Shares offered
(b) all plant and equipment are in working order                         by this Prospectus to quotation on the ASX; and
other than fair wear and tear; and
                                                                         (iv) the Company confirming to Marketech
(c) there is no current material dispute relating to                     in writing that the Company and each of the
the Banksia Dental Care premises or its use.                             Directors will co-operate with and provide
                                                                         assistance to Marketech to the extent reasonably
 Anderson has agreed to indemnify CHL Operations                         necessary in the event that any proceeding is
against any damage, loss or liability incurred by                        instigated by a third party in connection with the
a claim proceeding or action made against CHL                            Offer.
Operations which may be suffered or incurred by
CHL Operations as a result of any breach of the                     (b) (Underwriter Fees): The Company agrees that
terms of the Business Sale Agreement by Anderson,                   it will pay Marketech:
including a breach of any of the warranties.
                                                                    (i)   an underwriting fee equal to 5% of the
                                                                    aggregate issue price of the underwritten Shares
                                                                    allotted and issued pursuant to the Prospectus; and

                                                                    (ii) all reasonable legal fees incurred by Marketech
                                                                    in connection with the Underwriting Agreement,
                                                                    the Prospectus and related matters. All other costs
                                                                    of the Offer including all reasonable out-of-pocket
                                                                    expenses of Marketech are to be paid by the
                                                                    Company provided such costs do not exceed the
                                                                    sum of $3,000;

                                                                    (c) (Warranties): The Underwriting Agreement
                                                                    includes standard warranties from both the Company
                                                                    and Marketech for an agreement of this nature;



Page 46                                       Capitol Health Limited - Prospectus
(d) (Indemnity): The Company indemnifies                             The Loan Agreement is conditional upon a number
Marketech from all liabilities, costs or damages                    of standard conditions precedent (including the
incurred directly or indirectly arising out of the                  provision of the above Security) and the Company’s
issue of the Prospectus, the Offer, the Company                     successful completion of at least $1.8 million capital
failing to perform its material obligations under the               raising as part of listing on ASX.
Underwriting Agreement, any warranty given under
                                                                    During the term of the Loan Agreement, CHL
the Underwriting Agreement or any claim for which
                                                                    Operations must maintain a minimum EBITDA
Marketech has any liability in relation to the Offer;
                                                                    (earnings before interest, tax, depreciation, and
(e) (Termination): The Underwriting Agreement                       amortisation) of $175,000 which will be measured
includes a standard termination clause for an                       annually. The Loan Agreement also contains
agreement of this nature;                                           standard default terms for an agreement of this
                                                                    nature.
(f)  (Sub-Underwriting): the Company
acknowledges that the Underwriter is entitled                       Equipment Finance Facility
to contract sub-underwriters with respect to its
                                                                    Pursuant to a letter dated 12 May 2006, Capital
obligations under the Underwriting Agreement; and
                                                                    Finance Australia Ltd (Capital) approved equipment
(g) (Governing Law): the Underwriting Agreement                     finance for the purchase of assets pertaining to the
is governed by the laws of Western Australia.                       Booragoon Dental Centre.

BankWest Loan Facility                                              It is proposed that the Company will enter into a hire
                                                                    purchase agreement with Capital (Hire Purchase
On 8 May 2006, CHL Operations (as borrower), the                    Agreement) on the following terms:
Company (as guarantor) and the Bank of Western
Australia Limited (BankWest) (as lender) entered into               (a)      the facility amount will be $261,000;
a facility agreement (Loan Agreement) pursuant
                                                                    (b) the facility will be secured by the fit out and
to which BankWest will loan to CHL Operations
                                                                    associated equipment;
$584,000 for the purposes of assisting the purchase
of the Booragoon Dental Care and to refinance private                (c) the term of the facility will be 5 years with a
funding in relation to Banksia Dental Care (Loan).                  20% balloon payment at the end of the term; and

The Loan will incur interest at the Variable Business               (d) the indicative interest rate is 10.65% (but can
Edge Loan Reference Rate. The interest rate is                      alter in line with market rates) with indicative monthly
currently 7.40% per annum plus a margin of 0.40%                    repayments of $5,007.
per annum. The Loan is to be repaid in monthly
instalments over 120 months, with the first monthly                  It is expected that the Hire Purchase Agreement will
instalment being $7,104.                                            otherwise be on standard terms for an agreement of
                                                                    this nature.
To secure CHL Operation’s obligations, CHL
Operations must provide to BankWest:                                Employment Agreement between the Company
                                                                    and Mr Andrew Harrison
(a) a registered fixed and floating charge over the
assets of CHL Operations;                                           On 1 March 2006, the Company entered into an
                                                                    employment agreement with Mr Harrison pursuant
(b) a registered fixed and floating charge over the                   to which Mr Harrison agreed to act as managing
assets of the Company;                                              director of the Company.

(c) a setoff agreement from the Company over                        The employment agreement is for a term of 3 years
credit funds with BankWest; and                                     commencing on the Company's admission to the
                                                                    Official List, unless terminated earlier in accordance
(d) a guarantee and indemnity from the Company,
                                                                    with the employment agreement.
(collectively the Security).




                                               Capitol Health Limited - Prospectus                                    Page 47
The Company must pay to Mr Harrison $100,000                          9.3 Litigation
per annum plus statutory superannuation in
consideration for the provision of Mr Harrison’s                      The Company is not involved in any material
services. In addition to the remuneration, the                        litigation or arbitration proceedings, nor, so far as
Company will reimburse Mr Harrison for certain                        the Directors are aware, are any such proceedings
approved expenses.                                                    pending or threatened against the Company.

Company Secretarial Services Agreement
between the Company and Townshend York Pty
Ltd (a company associated with Mr Ho)
                                                                      9.4 Interests of Directors of the Company
                                                                      Directors' Share and Option holdings
On 1 March 2006, the Company entered into
an agreement with Townshend York Pty Ltd                              At the date of this Prospectus the relevant interest
(“Townshend”), of which Mr Ho is a director. The                      of each of the Directors in the Securities of the
agreement is a service agreement pursuant to which                    Company are as follows:
Townshend agree to provide company secretarial
services to the Company for a fee of $60,000 per
annum.
                                                                         Director                Shares           Options
The agreement is for a term of 3 years commencing                        Andrew Harrison      13,400,000        5,000,000
on the Company’s admission to the Official List unless                    Russell Fine           7,550,000       2,500,000
terminated earlier in accordance with the agreement.
                                                                         Anthony Ho            1,000,000        1,000,000
Deeds of Indemnity and Access

The Company has entered into a deed of indemnity                      Directors' Remuneration
and access with each of its Directors and the
                                                                      Non-executive directors’ fees not exceeding an
Company Secretary (“Deeds”).
                                                                      aggregate of $150,000 per annum have been
Under the Deeds, the Company agrees to indemnify                      approved by the Company in general meeting. The
each officer to the extent permitted by the                            level of these fees may be varied by the Company in
Corporations Act against certain liabilities incurred by              general meeting in accordance with its Constitution.
the officer while acting as an officer of the Company,
                                                                      Non-executive directors’ fees to be paid by Capitol
and to insure the officer against certain risks to which
                                                                      Health, upon admission to the Official List of ASX,
the officer is exposed to as an officer of the Company.
                                                                      are as follows:
The Deeds also grant to the officer a right of access
to certain records of the Company for a period of up
to 7 years after the officer ceases to be an officer.                      Director               Directors’ Fees/annum
                                                                         Russell Fine                   $24,000
                                                                         Anthony Ho                     $24,000
9.2 Company Tax Status
The Directors expect the Company will be taxed in
                                                                      Non-executive directors are entitled to be paid
Australia as a public company. The financial year of
                                                                      additional remuneration for any extra services
the Company ends on 30 June annually.
                                                                      undertaken by them at the request of the Board of
                                                                      Directors.

                                                                      The following contractual arrangements (further
                                                                      details of which are set out in Section 9.1 of this
                                                                      Prospectus) have been entered into with Directors
                                                                      (or companies associated with Directors):



Page 48                                         Capitol Health Limited - Prospectus
(a) Business Purchase Agreement between the                         (b) any property acquired or proposed to be
Company and Dr Russell Fine;                                        acquired by the Company in connection with its
                                                                    formation or promotion or the Offer; or
(b) Service Agreement and Facilities Licence
between the Company and Dr Russell Fine;                            (c)      the Offer,

(c) Employment Agreement between the Company                        and no amounts have been paid or agreed to be
and Mr Andrew Harrison; and                                         paid and no benefits have been given or agreed
                                                                    to be given to any of those persons for services
(d) Company Secretarial Services Agreement                          rendered by them in connection with the formation
between the Company and Townshend York Pty Ltd,                     or promotion of the Company or the Offer.
a company associated with Mr Ho.
                                                                    Stanton Partners Corporate Pty Ltd will receive
Interests of Directors                                              professional fees of approximately $7,000 (exclusive
Other than as set out above or elsewhere in this                    of GST) for preparation of the Investigating
Prospectus, no Director has, or had within two years                Accountant's Report included in this Prospectus.
before lodgement of this Prospectus with the ASIC,                  Marketech Pty Ltd is the Underwriter to the Offer
any interest in:                                                    and will be paid fees as disclosed in the Material
(a)    the promotion or formation of the Company;                   Contracts Section (Section 9.1) of this Prospectus.

(b) property acquired or proposed to be acquired                    Marketech Pty Ltd has a relevant interest in
by the Company in connection with its promotion or                  1,928,400 Shares in Capitol Health.
formation or the Offer; or                                          Steinepreis Paganin has acted as solicitors to the
(c)    the Offer.                                                   Company in providing general advice in relation
                                                                    to this Prospectus. In respect of Steinepreis
Except as set out above, no amounts have been                       Paganin’s work, the Company has paid or will pay
paid or agreed to be paid and no benefits have been                  approximately $25,000 (excluding GST) for these
given or agreed to be given to any Director:                        services. Steinepreis Paganin have provided other
                                                                    professional services to the Company in the period
      (i) to induce them to become, or to qualify
                                                                    since incorporation for which the Company will pay
      them as, a Director; or
                                                                    fees totalling approximately $5,000 (excluding GST).
      (ii) for services rendered by them in connection
      with the formation or promotion of the Company
      or the Offer.                                                 9.6 Consents
                                                                    Each of the parties referred to in this Section 9.6:

9.5 Interests of Persons Named                                      (a) does not make, or purport to make, any
                                                                    statement in this Prospectus or on which a
Except as disclosed in this Prospectus, no promoter
                                                                    statement made in the Prospectus is based, other
or any other person named in this Prospectus as
                                                                    than as specified in this Section 9.6; and
performing a function in a professional advisory or
other capacity in connection with the preparation or                (b) to the maximum extent permitted by law,
distribution of this Prospectus, holds, or held within              expressly disclaims and takes no responsibility
two years before lodgement of this Prospectus with                  for any part of this Prospectus other than a
ASIC, any interest in:                                              reference to its name and a statement included in
                                                                    this Prospectus with the consent of that party as
(a)    the formation or promotion of the Company;
                                                                    specified in this Section 9.6.




                                               Capitol Health Limited - Prospectus                                    Page 49
Stanton Partners Corporate Pty Ltd has given its                        constitute a definitive statement of the rights and
written consent to the inclusion in this Prospectus                     liabilities of shareholders.
of its Investigating Accountant's Report and to all
statements referring to that report in the form and                     All Shares issued pursuant to this Prospectus will
context in which they are included and has not                          from the time they are issued, rank pari passu with
withdrawn such consent before lodgement of this                         all the Company’s existing Shares.
Prospectus with ASIC.                                                   Voting
Each of the following has consented to being named                      Subject to any restriction on voting imposed due to
in the Prospectus in the capacity as noted below                        a breach of the Listing Rules relating to restricted
and have not withdrawn such consent prior to the                        shares or any escrow agreement entered into
lodgement of this Prospectus with ASIC:                                 by the Company and a member, every holder of
(a) Steinepreis Paganin, as the solicitors for                          Shares present in person or by proxy, attorney or
Capitol Health;                                                         representative at a meeting of Shareholders has one
                                                                        vote on a vote taken by a show of hands, and, on a
(b) Stantons International, as the auditor of                           poll every holder of Shares who is present in person
Capitol Health;                                                         or by proxy, attorney or representative has one vote
                                                                        for every Share held by him or her, but, in respect of
(c) Stanton Partners Corporate Pty Ltd, as the                          partly-paid shares, shall have a fraction of a vote for
Company's Investigating Accountants;                                    each partly-paid share.
(d)       Marketech Pty Ltd, as the Underwriter; and                    A poll may be demanded before a vote is taken, or
(e) Computershare Investor Services Pty Ltd, as                         before or immediately after the declaration of the
the Share Registry to Capitol Health.                                   result of the show of hands by the chairperson of
                                                                        the meeting, by at least five Shareholders present
There are a number of persons referred to elsewhere                     in person or by proxy, attorney or representative, or
in this Prospectus who are not experts and                              by any one or more Shareholders who are together
who have not made statements included in this                           entitled to not less than 5% of the total voting rights
Prospectus nor are there any statements made                            of all those Shareholders having the right to vote on
in this Prospectus on the basis of any statements                       the resolution.
made by those persons. These persons did not
consent to being named in the Prospectus and did                        Dividends
not authorise or cause the issue of the Prospectus.                     Dividends are payable out of the Company's profits
                                                                        and are declared by the Directors. Dividends
                                                                        declared will (subject to the rights of any preference
9.7 Rights Attaching to Shares                                          shareholders and to the right of the holders of
                                                                        any shares created or raised under any special
There is only one class of share on issue in the                        arrangement as to dividend) be payable on the
Company, being fully paid ordinary shares. The                          Shares in accordance with the Corporations Act.
rights attaching to Shares are:

(a)       set out in the constitution of the Company; and

(b) in certain circumstances, regulated by the
Corporations Act, the Listing Rules, the ASTC
Settlement Rules (formerly the SCH Business Rules)
and the general law.

The following is a broad summary of the rights,
privileges and restrictions attaching to all Shares.
This summary is not exhaustive and does not



Page 50                                           Capitol Health Limited - Prospectus
Transfer of Shares                                                  Shareholder Liability

A Shareholder may transfer Shares by a market                       As the Shares under the Prospectus are fully paid
transfer in accordance with any computerised or                     shares, they are not subject to any calls for money
electronic system established or recognised by ASX                  by the Directors and will therefore not become liable
or the Corporations Act for the purpose of facilitating             for forfeiture.
transfers in shares or by an instrument in writing in a
form approved by ASX or in any other usual form or                  Alteration to the Constitution
in any form approved by the Directors.                              The constitution can only be amended by a special
The Directors may refuse to register any transfer                   resolution passed by at least three quarters of
of Shares, other than a market transfer, where                      Shareholders present and voting at the general
permitted by the Listing Rules or the ASTC                          meeting. At least 28 days written notice specifying
Settlement Rules. The Company must comply                           the intention to propose the resolution as a special
with such obligations as may be imposed on it by                    resolution must be given.
the Listing Rules and where appropriate the ASTC                    ASX Listing Rules
Settlement Rules in connection with any market
transfer and may not prevent, delay or in any way                   If the Company is admitted to the Official List,
interfere with the registration of a market transfer                notwithstanding anything in the constitution of
where to do so would be contrary to the provisions                  the Company, if the Listing Rules prohibit an act
of any of the Listing Rules or the ASTC Settlement                  being done, the act must not be done. Nothing in
Rules.                                                              the Constitution prevents an act being done that
                                                                    the Listing Rules require to be done. If the Listing
Meetings and Notice                                                 Rules require an act to be done or not to be done,
Each Shareholder is entitled to receive notice of and               authority is given for that act to be done or not to
to attend general meetings for the Company and to                   be done (as the case may be). If the Listing Rules
receive all notices, accounts and other documents                   require the constitution to contain a provision
required to be sent to Shareholders under the                       or not to contain a provision the constitution is
constitution of the Company, the Corporations Act                   deemed to contain that provision or not to contain
or the Listing Rules.                                               that provision (as the case may be). If a provision
                                                                    of the constitution is or becomes inconsistent
Winding Up                                                          with the Listing Rules, the constitution is deemed
                                                                    not to contain that provision to the extent of the
The Company has only issued one class of shares,                    inconsistency.
which all rank equally in the event of liquidation.
A liquidator may, with the authority of a special
resolution of Shareholders divide among the
Shareholders in kind the whole or any part of
the property of the Company, and may for that
purpose set such value as he considers fair upon
any property to be so divided, and may determine
how the division is to carried out as between the
Shareholders. The liquidator can with the sanction of
a special resolution of the Company’s Shareholders
vest the whole or any part of the assets in trust for
the benefit of Shareholders as the liquidator thinks
fit, but no Shareholder of the Company can be
compelled to accept any Shares or other shares in
respect of which there is any liability.




                                               Capitol Health Limited - Prospectus                                   Page 51
9.8 Terms and Conditions of Options                                          Exercise of Options and forwarding the same
                                                                             to the Company Secretary to be received prior
The 10,000,000 Options on issue have been granted                            to the expiry date. The Notice of Exercise of
on the following terms and conditions:                                       Options must state the number of Options
                                                                             exercised and the consequent number of
a)        Exercise Price
                                                                             ordinary shares in the capital of the Company
The exercise price of each Option is 20 cents.                               to be allotted; which number of Options must
                                                                             be a multiple of 2,500 if only part of the Option
b)        Entitlement                                                        Holder’s total Options are exercised, or if the
                                                                             total number of Options held by an Option Holder
Each Option shall entitle the holder the right to
                                                                             is less than 2,500, then the total of all Options
subscribe (in cash) for one Share in the capital of the
                                                                             held by that Option Holder must be exercised.
Company.
                                                                             (ii) The Notice of Exercise of Options by an
c)        Option Period
                                                                             Option Holder must be accompanied by payment
The Options will expire at 5.00pm WST on 31                                  in full for the relevant number of shares being
March 2010. Subject to clause (g), Options may be                            subscribed, being an amount of 20 cents ($0.20)
exercised at any time prior to the expiry date and                           per Share.
Options not so exercised shall automatically expire
                                                                             (iii) Subject to paragraph (g)(i) above, the
on the expiry date.
                                                                             exercise of less than all of an Option Holder’s
d)        Ranking of Share Allotted on Exercise of Option                    Options will not prevent the Option Holder from
                                                                             exercising the whole or any part of the balance of
Each Share allotted as a result of the exercise of                           the Option Holder’s entitlement under the Option
any Option will, subject to the Constitution of the                          Holder’s remaining Options.
Company, rank in all respects pari passu with the
existing Shares in the capital of the Company on                             (iv) Within 14 days from the date the Option
issue at the date of allotment.                                              Holder properly exercises Options held by the
                                                                             Option Holder, the Company shall issue and allot
e)        Voting                                                             to the Option Holder that number of Shares in the
                                                                             capital of the Company so subscribed for by the
A registered owner of an Option ("Option Holder")
                                                                             Option Holder.
will not be entitled to attend or vote at any meeting
of the members of the Company unless they are, in                            (v) If the Company is listed on the ASX, the
addition to being an Option Holder, a member of the                          Company will within 3 business days from the
Company.                                                                     date of issue and allotment of Shares pursuant
                                                                             to the exercise of an Option, apply to the ASX for,
f)        Transfer of an Option
                                                                             and use its best endeavours to obtain, Official
Options are transferable at any time prior to the                            Quotation of all such Shares, in accordance with
expiry date. This right is subject to any restrictions                       the Corporations Act and the Listing Rules of the
on the transfer of Options that may be imposed by                            ASX.
the ASX in circumstances where the Company is
                                                                             (vi) The Company will generally comply with
listed on the ASX.
                                                                             the requirements of the Listing Rules in relation
g)        Method of Exercise of an Option                                    to the timetables imposed when quoted Options
                                                                             are due to expire. Where there shall be any
     (i) The Company will provide to each Option                             inconsistency between the timetables outlined
     Holder a notice that is to be completed when                            herein regarding the expiry of the Options and
     exercising the Options ("Notice of Exercise of                          the timetable outlined in the Listing Rules, the
     Options"). Options may be exercised by the                              timetable outlined in the Listing Rules shall apply.
     Option Holder by completing the Notice of




Page 52                                           Capitol Health Limited - Prospectus
(h)   ASX Quotation                                                  9.9 Employee Option Scheme
Application for quotation of the Options on the ASX                  The Company has adopted a scheme called the
will not be made.                                                    Capitol Health Limited Incentive Option Scheme
                                                                     ("Scheme").
(i)   Reconstruction
                                                                     At the date of this Prospectus, no Incentive Options
In the event of a reconstruction (including                          have been granted under the Scheme.
consolidation, sub-division, reduction or return)
of the issued capital of the Company, all rights of                  The purpose of the Scheme is to give employees,
the Option Holder will be changed to the extent                      Directors, executive officers and consultants of the
necessary to comply with the Listing Rules applying                  Company an opportunity, in the form of Incentive
to the reconstruction of capital, at the time of the                 Options, to subscribe for Shares. The Directors
reconstruction.                                                      consider the Scheme will enable the Company to
                                                                     retain and attract skilled and experienced personnel
(j)   Participation in New Share Issues                              and provide them with the motivation to make the
There are no participating rights or entitlements                    Company more successful.
inherent in the Options to participate in any new                    Brief Overview of the Scheme
issues of capital which may be made or offered by
the Company to its shareholders from time to time                    A summary of the Terms and Conditions of the
prior to the expiry date unless and until the Options                Scheme is set out below:
are exercised. The Company will ensure that during
the exercise period, the record date for the purposes                General
of determining entitlements to any new such issue,                   The Board may from time to time, in its absolute
will be at least seven (7) business days after such                  discretion, offer to grant options to eligible
new issues are announced (or such other date if                      participants under the Scheme.
required under the Listing Rules) in order to afford
the Option Holder an opportunity to exercise the                     Each option will be issued for no consideration and
Options held by the Option Holder.                                   will carry the right in favour of the option holder
                                                                     to subscribe for one (1) Share in the capital of the
(k)   No Change of Options' Exercise Price or                        Company.
      Number of Underlying Shares
                                                                     The Board may determine the exercise price of the
There are no rights to change the exercise price                     options in its absolute discretion. Subject to the
of the Options or the number of underlying Shares                    Listing Rules, the exercise price may be nil but to
if there is a bonus issue to holders of ordinary                     the extent the Listing Rules specify or require a
shares. If the Company makes a pro rata issue of                     minimum price, the exercise price in respect of an
securities (except a bonus issue) to the holders of                  offer made following the day on which Shares are
ordinary shares (other than in lieu or in satisfaction               first quoted on the Official List must not be less than
of dividends or by way of dividend reinvestment) the                 any minimum price specified in the Listing Rules.
Option exercise price shall be reduced according to
the formula specified in the Listing Rules.                           Eligible Participants

                                                                     Full time employees, part time employees, Directors
                                                                     and consultants of the Company or an associated
                                                                     body corporate (the Group) are eligible to
                                                                     participate in the Scheme.




                                                Capitol Health Limited - Prospectus                                  Page 53
Lapse of Options                                                     bonus Shares that would have been issued if the
                                                                     option had been exercised prior to the record date
Unless the Board in its absolute discretion                          for the bonus issue. No adjustment will be made to
determines otherwise, options shall lapse                            the exercise price per Share of the option.
immediately if:
                                                                     Reorganisation
(a) the eligible participant ceases to be an
employee or director of, or to render services to, a                 The terms upon which options will be granted will
member of the Group for any reason whatsoever                        not prevent them being reorganised as required by
and the conditions of exercise of the options                        the Listing Rules on the reorganisation of the capital
(Exercise Conditions) have not been met;                             of the Company.

(b) the Exercise Conditions of the options are                       Trigger Events
unable to be met;
                                                                     Upon the occurrence of certain trigger events (for
(c) the date which is 5 years after the date of the                  example the receipt by the Company of a bidder’s
grant of the options, or such other expiry date as                   statement in respect of the Company), the Directors
the Board determines in its discretion at the time of                may determine:
grant of the option (Lapsing Date) has passed; or
                                                                     (a) that the options may be exercised at any time
(d) the expiry of 30 days after the eligible                         from the date of such determination, and in any
participant ceases to be an employee or director                     number until the date determined by the Directors
of, or to render services to, a member of the Group                  acting bona fide so as to permit the holder to
for any reason whatsoever prior to the Lapsing                       participate in any change of control arising from
Date where the Exercise Conditions have been met,                    a trigger event, provided that the Directors will
whichever is earlier.                                                forthwith advise in writing each holder of such
                                                                     determination. Thereafter, the options shall lapse to
Participation in Future Issues                                       the extent they have not been exercised; or
There are no participating rights or entitlements                    (b) to use their reasonable endeavours to procure
inherent in the options and holders will not be                      that an offer is made to holders of options on like
entitled to participate in new issues of capital                     terms (having regard to the nature and value of the
offered to Shareholders during the currency of the                   options) to the terms proposed under the trigger
options. However, the Company will ensure that                       event in which case the Directors shall determine
for the purposes of determining entitlements to                      an appropriate period during which the holder may
any such issue, the record date will be at least 7                   elect to accept the offer and, if the holder has not
business days after the issue is announced. This                     so elected at the end of that period, the options
will give option holders the opportunity to exercise                 shall immediately become exercisable and if not
their options prior to the date for determining                      exercised within 10 days, shall lapse.
entitlements to participate in any such issue.

If the Company makes a pro rata issue of securities
(except a bonus issue) to the holders of Shares
(other than an issue in lieu or in satisfaction of
dividends or by way of dividend reinvestment) the
exercise price of the options shall be reduced in
accordance with the formula in the Listing Rules.

In the event of a bonus issue of Shares being made
pro rata to Shareholders (other than an issue in
lieu of dividends), the number of Shares issued on
exercise of each option will include the number of




Page 54                                        Capitol Health Limited - Prospectus
9.10 Dividend Policy                                                9.13 Electronic Prospectus
In the short-term, the Company anticipates rapid                    Pursuant to Class Order 00/44 the ASIC has
development and growth of the Company's business                    exempted compliance with certain provisions of
and therefore the Board believes that there will be                 the Corporations Act to allow distribution of an
an ongoing requirement to reinvest profits in order to               Electronic Prospectus on the basis of a paper
enhance its longer-term potential to attain consistent              prospectus lodged with the ASIC and the issue of
earnings.                                                           Shares in response to an electronic Application
                                                                    Form, subject to compliance with certain provisions.
The Directors will develop a suitable dividend policy
at the appropriate stage. The Directors can give no                 Persons who have received this Prospectus
assurance as to the extent, timing or actual payment                as an Electronic Prospectus should ensure
of future dividends or the availability or level of                 that they have received the entire Prospectus
franking credits. The level of dividends payable will               accompanied by the Application Form. If they have
depend upon a number of factors including future                    not, they should contact Capitol Health (at email:
earnings, capital requirements and the overall                      andrewh@capitolhealth.com.au; or telephone (61
financial condition of the Company. The Company                      8) 9382 1311) and Capitol Health will send for free,
has not declared or paid any dividends before the                   either a hard copy or a further electronic copy of the
issue of this Prospectus.                                           Prospectus or both.

                                                                    Capitol Health reserves the right not to accept an
                                                                    Application Form from a person if it has reason to
9.11 Taxation                                                       believe that when that person was given access to
                                                                    the electronic Application Form, it was not provided
The acquisition and disposal of Shares in Capitol
                                                                    together with the Electronic Prospectus and any
Health will have tax consequences, which will differ
                                                                    relevant supplementary or replacement prospectus
depending on the individual financial affairs of each
                                                                    or any of those documents were incomplete or
Shareholder. All potential investors in Capitol Health
                                                                    altered. In such a case, the application monies
are urged to take independent financial advice
                                                                    received will be dealt with in accordance with
about the consequences of acquiring Shares from a
                                                                    section 722 of the Corporations Act.
taxation viewpoint and generally.

To the maximum extent permitted by law, Capitol
Health, its officers and each of their respective
advisors accept no liability or responsibility with
respect to the taxation consequences of subscribing
for Shares under this Prospectus.



9.12 Expenses of the Offer
Assuming full subscription, it is estimated that
approximately $169,000 will be payable by the
Company in respect of underwriting fees, experts’
fees, legal, accounting and other fees, design and
printing costs, ASIC and ASX fees and other costs
arising from this Prospectus and the Offer.




                                               Capitol Health Limited - Prospectus                                   Page 55
Directors’ Statement                                            10.0
The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds
to believe that any statements made by the Directors in this Prospectus are not misleading or deceptive and
that in respect to any other statements made in the Prospectus by persons other than Directors, the Directors
have made reasonable enquiries and on that basis have reasonable grounds to believe that persons making the
statement or statements were competent to make such statements, those persons have given their consent to
the statements being included in this Prospectus in the form and context in which they are included and have
not withdrawn that consent before lodgement of this Prospectus with the ASIC, or to the Directors' knowledge,
before any issue of Shares pursuant to this Prospectus.

The Prospectus is prepared on the basis that certain matters may be reasonably expected to be known to likely
investors or their professional advisers.

Each Director has consented to the lodgement of this Prospectus with the ASIC and has not withdrawn that
consent.




Dated: 17 May 2006




Signed for and on behalf of the Company:




Andrew Harrison
Managing Director




Page 56                                     Capitol Health Limited - Prospectus
Glossary
"$A" means Australian Dollars.
"Applicant" means a person who submits an Application.
"Application" means a valid application to subscribe for Securities.
                                                                      11.0
"Application Form" means the Application Form attached to or accompanying this Prospectus.
"ASIC" means Australian Securities and Investments Commission.
"ASTC" means ASX Settlement and Transfer Corporation.
"ASTC Settlement Rules" means the SCH Business Rules as referred to in the Company's constitution and
which are now known as the ASTC Settlement Rules.
"ASX" means Australian Stock Exchange Limited (ACN 008 624 691).
"Auditor" means Stantons International.
"Board" means the Board of Directors of Capitol Health unless the context indicates otherwise.
"Business Day" means a day other than a Saturday or Sunday on which banks are open for business in Perth,
Western Australia.
"CHESS" means ASX Clearing House Electronic Subregistry System.
"CHL Operations" means CHL Operations Pty Ltd (ACN 117 740 128).
"Closing Date" means 7 June 2006.
"Company" or "Capitol Health" means Capitol Health Limited (ACN 117 391 812).
"Corporations Act" and "Act" means the Corporations Act 2001 of Australia.
"Directors" means the board of directors of the Company as it is constituted from time to time.
"Electronic Prospectus" means the electronic version of this Prospectus.
"Exposure Period" means the period of seven (7) days after lodgement of this Prospectus which may be
extended by ASIC by not more than seven (7) days pursuant to section 727(3) of the Corporations Act.
"Investigating Accountant" means Stanton Partners Corporate Pty Ltd.
"Investigating Accountant’s Report" means the report contained in Section 8 of this Prospectus.
"Issue" means the issue of 9,000,000 Shares pursuant to this Prospectus.
"Issuer Sponsored" means shares issued by an issuer that are held in uncertificated form without the holder
entering into a sponsorship agreement with a broker or without the holder being admitted as an institutional
participant in CHESS.
"Listing Rules" mean the Listing Rules of the ASX.
"Offer" means the offer to the public of 9,000,000 Shares to raise a total of $1,800,000.
"Offer Period" means the period commencing on the Opening Date and ending on the Closing Date.
"Official List" means the Official List of the ASX.
"Official Quotation" means quotation of the Shares on the Official List.
"Opening Date" means 25 May 2006.
"Option" means an option to subscribe for one Share in Capitol Health exercisable at 20 cents on or before
31 March 2010.
"Option Holders" mean those parties holding Options to acquire Shares in Capitol Health.
"Prospectus" means this prospectus dated 17 May 2006 in relation to the Offer, including the Electronic
Prospectus.
"Quotation" means quotation of the Shares on ASX.
"Securities" mean Shares and Options.
"Share" means one fully paid ordinary share in Capitol Health.
"Shareholder" means a holder of Shares.
"Underwriter" means Marketech Pty Ltd (ACN 095 275 657 and Australian Financial Services Licence No. 230014)
"WST" means Western Standard Time, Perth, Western Australia.




                                              Capitol Health Limited - Prospectus                         Page 57
Application Forms                    12.0




Page 58         Capitol Health Limited - Prospectus
  � � � � �� � � � � �� �                                                                                                       Capitol Health Limited
                                                                                                                                             ACN 117 391 812
                     � � � � � � �




      Share Registry         Before completing this Application Form, you should read the attached
        Use Only                          Prospectus and the instructions overleaf.




                             Shares at 20 cents per Share in Capitol Health Limited.




  $                                           for the above Shares (at 20 cents per share).

              (PLEASE PRINT)


 Joint Applicant #2 or <designated account>


 Joint Applicant #3 or <designated account>


                     (PLEASE PRINT)
 Street Number                                 Street




  Suburb/Town                                                                                             State         Post code


                                                                                           Telephone number – Business hours
                                                                                       (              )
                                                                                           Telephone number – After hours
                                                                                       (              )


                                                 Applicant #2                                        Applicant #3




 Drawer                                                          Bank                                             Amount of cheque




Return of the Application Form with your cheque for the Application monies will constitute your offer to subscribe for Shares in the
Company. I/We declare that:
(a) this Application is completed according to the declaration/appropriate statements on the reverse of this form and agree to be bound
by the Constitution of the Company; and
(b) I/We have received personally a copy of this Prospectus accompanied by or attached to the Application Form or a copy of the
Application Form or a direct derivative of the Application Form, before applying for Shares.

                          .
You should read this Prospectus carefully before completing this Application Form. The Corporations Act prohibits any person from
passing on this Application Form (whether in paper or electronic form) unless it is attached to or accompanies a complete and
unaltered copy of the Prospectus and any relevant supplementary prospectus (whether in paper or electronic form).
                                                (See application instructions overleaf)




                                                        Capitol Health Limited - Prospectus                                               Page 59
This Application Form relates to the Offer of 9,000,000 Shares in Capitol Health Limited at an issue price of 20 cents per Share,
pursuant to the Prospectus dated 17 May 2006. The expiry date of the Prospectus is the date which is 13 months after the date
of the Prospectus. The Prospectus contains information about investing in the Shares of the Company and you should read this
document before applying for Shares. A person who gives another person access to this Application Form must at the same
time and by the same means give the other person access to the Prospectus, and any supplementary prospectus (if applicable).
While the Prospectus is current, the Company will send paper copies of the Prospectus, and any supplementary prospectus (if
applicable), and an Application Form, on request and without charge.

1. Application for Shares

To calculate application money due, multiply the number of Shares that have been applied for by $0.20. Applications must be for a
minimum of 10,000 Shares and thereafter in multiples of 1,000 Shares. Please forward the completed Application Form and cheque
to:

                                       Capitol Health Limited
                                       c/- Computershare Investor Services
                                       GPO Box D182
                                       PERTH WA 6840

2. Name of Applicant

Write the applicant's FULL NAME. This must be either an individual’s name or the name of a company. If a company, please also
include its ACN / ABN. Note that only legal entities are allowed to hold securities and therefore Application Forms must be in the
name(s) of a natural person(s), company, or other legal entity acceptable to the Company.

If an Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be accepted.
Any decisions of the Directors as to whether to accept an Application Form, and how to construe, amend or complete it, shall be
final. An Application Form will not however, be treated as having offered to subscribe for more Shares than is indicated by the
amount of the accompanying cheque for the application monies.

3. Joint Applicants and/or Account Designations

If JOINT APPLICANTS are applying or an ACCOUNT DESIGNATION is required complete items 2 & 3.

4. Tax File Number or Exemption

An Applicant is not obliged to quote their Tax File Number ("TFN"). However in cases where no TFN is quoted, the Company must
deduct tax from any dividends payable (to the extent that they are not franked) at the top personal marginal tax rate plus the
Medicare levy.


   TYPE OF INVESTOR                                                CORRECT FORM                 SAMPLE OF INCORRECT FORM
   Individual                                                     John Andrew Brown                        J.A. Brown
   Use given names, not initials
   Company                                                      XYZ Proprietary Limited                      XYZ P/L
   Use title, no abbreviations
   Trusts                                                           John Brown                       John Brown Family Trust
   Do not use name of trust alone                              <Brown Family Account>
   Partnerships                                                 John and Greg Brown                      JBGB Partners
   Use partner’s personal names,                             <JBGB + Partners Account>
   not the name of the partnership alone
   Deceased Estates                                                  Jane Brown                     Estate of late John Brown
   Use executor(s) personal name(s)                             <Est John Brown A/C>
   Clubs/Incorporated Bodies / Business Names                     Michael Brown                      XYZ Cricket Association
   Use office bearer(s) personal names(s),                  <XYZ Cricket Association A/C>
   Do not use the names of the clubs etc.
   Superannuation Funds                                            Jane Brown Pty Ltd                  Jane Brown Pty Ltd
   Use of name of trustee of fund,                                 <Super Fund A/C>                   Superannuation Fund
   do not use the name of the fund


5. Address

Enter the Applicant's postal address for all correspondence.

6. Contact Details

Please provide a contact name and daytime telephone number so that the Company can contact that Applicant if there is an
irregularity regarding the Application Form.

7. Payment Details

Payment must be made in Australia currency by cheque or bank cheque drawn on an Australian bank. The amount of the cheque
should agree with the amount shown in the Application Form. Cheques are to be made payable to "Capitol Health Limited Trust
Account" and should be crossed "Not Negotiable". Cash should not be forwarded.




Page 60                                               Capitol Health Limited - Prospectus
  � � � � �� � � � � �� �                                                                                                       Capitol Health Limited
                                                                                                                                             ACN 117 391 812
                     � � � � � � �




      Share Registry         Before completing this Application Form, you should read the attached
        Use Only                          Prospectus and the instructions overleaf.




                             Shares at 20 cents per Share in Capitol Health Limited.




  $                                           for the above Shares (at 20 cents per share).

              (PLEASE PRINT)


 Joint Applicant #2 or <designated account>


 Joint Applicant #3 or <designated account>


                     (PLEASE PRINT)
 Street Number                                 Street




  Suburb/Town                                                                                             State         Post code


                                                                                           Telephone number – Business hours
                                                                                       (              )
                                                                                           Telephone number – After hours
                                                                                       (              )


                                                 Applicant #2                                        Applicant #3




 Drawer                                                          Bank                                             Amount of cheque




Return of the Application Form with your cheque for the Application monies will constitute your offer to subscribe for Shares in the
Company. I/We declare that:
(a) this Application is completed according to the declaration/appropriate statements on the reverse of this form and agree to be bound
by the Constitution of the Company; and
(b) I/We have received personally a copy of this Prospectus accompanied by or attached to the Application Form or a copy of the
Application Form or a direct derivative of the Application Form, before applying for Shares.

                          .
You should read this Prospectus carefully before completing this Application Form. The Corporations Act prohibits any person from
passing on this Application Form (whether in paper or electronic form) unless it is attached to or accompanies a complete and
unaltered copy of the Prospectus and any relevant supplementary prospectus (whether in paper or electronic form).
                                                (See application instructions overleaf)




                                                        Capitol Health Limited - Prospectus                                               Page 61
This Application Form relates to the Offer of 9,000,000 Shares in Capitol Health Limited at an issue price of 20 cents per Share,
pursuant to the Prospectus dated 17 May 2006. The expiry date of the Prospectus is the date which is 13 months after the date
of the Prospectus. The Prospectus contains information about investing in the Shares of the Company and you should read this
document before applying for Shares. A person who gives another person access to this Application Form must at the same
time and by the same means give the other person access to the Prospectus, and any supplementary prospectus (if applicable).
While the Prospectus is current, the Company will send paper copies of the Prospectus, and any supplementary prospectus (if
applicable), and an Application Form, on request and without charge.

1. Application for Shares

 To calculate application money due, multiply the number of Shares that have been applied for by $0.20. Applications must be for a
 minimum of 10,000 Shares and thereafter in multiples of 1,000 Shares. Please forward the completed Application Form and cheque
 to:

                                       Capitol Health Limited
                                       c/- Computershare Investor Services
                                       GPO Box D182
                                       PERTH WA 6840

2. Name of Applicant

Write the applicant's FULL NAME. This must be either an individual’s name or the name of a company. If a company, please also
include its ACN / ABN. Note that only legal entities are allowed to hold securities and therefore Application Forms must be in the
name(s) of a natural person(s), company, or other legal entity acceptable to the Company.

If an Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be accepted.
Any decisions of the Directors as to whether to accept an Application Form, and how to construe, amend or complete it, shall be
final. An Application Form will not however, be treated as having offered to subscribe for more Shares than is indicated by the
amount of the accompanying cheque for the application monies.

3. Joint Applicants and/or Account Designations

If JOINT APPLICANTS are applying or an ACCOUNT DESIGNATION is required complete items 2 & 3.

4. Tax File Number or Exemption

An Applicant is not obliged to quote their Tax File Number ("TFN"). However in cases where no TFN is quoted, the Company must
deduct tax from any dividends payable (to the extent that they are not franked) at the top personal marginal tax rate plus the
Medicare levy.


   TYPE OF INVESTOR                                                CORRECT FORM                 SAMPLE OF INCORRECT FORM
   Individual                                                     John Andrew Brown                        J.A. Brown
   Use given names, not initials
   Company                                                     XYZ Proprietary Limited                       XYZ P/L
   Use title, no abbreviations
   Trusts                                                          John Brown                        John Brown Family Trust
   Do not use name of trust alone                             <Brown Family Account>
   Partnerships                                                John and Greg Brown                       JBGB Partners
   Use partner’s personal names,                            <JBGB + Partners Account>
   not the name of the partnership alone
   Deceased Estates                                                  Jane Brown                     Estate of late John Brown
   Use executor(s) personal name(s)                             <Est John Brown A/C>
   Clubs/Incorporated Bodies / Business Names                    Michael Brown                       XYZ Cricket Association
   Use office bearer(s) personal names(s),                 <XYZ Cricket Association A/C>
   Do not use the names of the clubs etc.
   Superannuation Funds                                           Jane Brown Pty Ltd                   Jane Brown Pty Ltd
   Use of name of trustee of fund,                                <Super Fund A/C>                    Superannuation Fund
   do not use the name of the fund


5. Address

Enter the Applicant's postal address for all correspondence.

6. Contact Details

Please provide a contact name and daytime telephone number so that the Company can contact that Applicant if there is an
irregularity regarding the Application Form.

7. Payment Details

Payment must be made in Australia currency by cheque or bank cheque drawn on an Australian bank. The amount of the cheque
should agree with the amount shown in the Application Form. Cheques are to be made payable to "Capitol Health Limited Trust
Account" and should be crossed "Not Negotiable". Cash should not be forwarded.




Page 62                                              Capitol Health Limited - Prospectus
           � � � � �� � � � � �� �
                               � � � � � � �




      Capitol Health Limited
Level 1, 189 Hay Street, Subiaco WA 6008
Tel: (08) 9382 1311 Fax: (08) 9382 1322
       www.capitolhealth.com.au
             ACN 117 391 812