Filed Pursuant to Rule 424(B)(2)
Registration No. 333-56805
PROSPECTUS

BARBEQUES GALORE LIMITED

1,044,845 American Depositary Shares,
each representing One Ordinary Share

This prospectus (the "Prospectus") relates to the public offering (the
"Offering"), which is not being underwritten, of up to 1,044,845 American
Depositary Shares (the "Resale ADSs"), each representing one ordinary share,
A$3.64 par value ("Ordinary Share"), of Barbeques Galore Limited ("Barbeques
Galore" or the "Company"), a public limited company organized under the laws
of Australia. Ordinary Shares of the Company are represented by American
Depositary Shares ("ADSs") upon deposit with the Depositary (as defined
herein) which in turn are evidenced by American Depositary Receipts ("ADRs").
See "Description of Ordinary Shares" and "Description of American Depositary
Receipts."

All of the Resale ADSs offered in the Offering represent Ordinary Shares
being sold by certain shareholders of the Company named herein (the "Selling
Shareholders"). 997,926 of these Ordinary Shares were received upon the
conversion of certain notes (the "Convertible Notes") immediately prior to
consummation of the Company's initial public offering in the United States
(the "IPO") on November 7, 1997 and the remainder of these Ordinary Shares are
held by long-term shareholders of the Company currently desiring to divest all
or a portion of their holdings in the Company. See "Certain Transactions--
Delisting Transaction and Conversion of Convertible Notes." All of the
Ordinary Shares sold by the Selling Shareholders hereby were issued in
offshore transactions, not required to be registered under the Securities Act
of 1933, as amended (the "Securities Act"). A total of 997,926 of the Resale
ADSs offered hereby are being registered pursuant to an agreement between the
Company and certain holders of the Convertible Notes that the Company would
undertake to register the Ordinary Shares received upon conversion of the
Convertible Notes subsequent to the expiration of lock-up agreements entered
into by certain Selling Shareholders in connection with the Company's IPO. The
remaining Ordinary Shares offered hereby are not subject to any registration
rights agreements and are being voluntarily registered hereunder by the
Company.

The Resale ADSs may be offered by the Selling Shareholders from time to time
in transactions on The Nasdaq Stock Market's National Market ("Nasdaq"), in
privately negotiated transactions, or by a combination of such methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Shareholders may effect such transactions by
selling the Resale ADSs to or through broker-dealers and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholders or the purchasers of the Resale ADSs for whom
such broker-dealers may act as agent or to whom they sell as principal or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Plan of Distribution."

The Company will not receive any of the proceeds from the sale of the Resale
ADSs by the Selling Shareholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Resale ADSs being
offered by the Selling Shareholders.

The Company intends that this registration statement will remain effective
until no later than December 31, 1998. On June 1, 1998, the last reported sale
price for the ADSs, as reported on Nasdaq, was US$9.50 per share. The
Company's ADSs are currently quoted on Nasdaq under the symbol "BBQZY."

----------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 11.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is June 29, 1998

No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus, and if given or
made, such information or representation must not be relied upon as having
been authorized by the Company, the Selling Shareholders or by any other
person. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the Resale ADSs or the Ordinary Shares in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof.

No action has been or will be taken in any jurisdiction by the Company or
the Selling Shareholders that would permit a public offering of the Resale
ADSs or the Ordinary Shares or possession or distribution of this Prospectus
in any jurisdiction where action for that purpose is required, other than in
the United States. Persons into whose possession this Prospectus comes are
required by the Company and the Selling Shareholders to inform themselves
about and to observe any restrictions as to the offering of the Resale ADSs or
the Ordinary Shares and the distribution of this Prospectus.

TABLE OF CONTENTS

PAGE
----

Enforceability of Civil Liabilities
Under the Federal Securities Laws.................................... 2
Available Information................................................. 3
Financial Statement Presentation...................................... 4
Trademarks............................................................ 4
Prospectus Summary.................................................... 5
Risk Factors.......................................................... 11
Exchange Rates........................................................ 21
Use of Proceeds....................................................... 22
Dividend Policy....................................................... 22
Capitalization........................................................ 22
Selected Consolidated Financial Data.................................. 23
Selected Additional Consolidated Financial Data....................... 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................................................ 28
Business.............................................................. 38
Management............................................................ 49
Certain Transactions.................................................. 55
Principal Shareholders................................................ 58
Selling Shareholders.................................................. 61
Description of Ordinary Shares........................................ 63
Description of American Depositary Receipts........................... 66
Certain Tax Considerations............................................ 73
Shares Eligible for Future Sale....................................... 78
Plan of Distribution.................................................. 79
Legal Matters......................................................... 80
Experts............................................................... 80
Index to Defined Terms................................................ 81
Index to Consolidated Financial Statements............................ F-1

ENFORCEABILITY OF CIVIL LIABILITIES UNDER THE FEDERAL SECURITIES LAWS

Barbeques Galore is a public company limited by shares and is registered and
operates under the Corporations Law of the Commonwealth of Australia. Since
most of the Company's directors and officers and certain of the experts named
in the Registration Statement on Form F-1 of which this Prospectus is a part
(together with all exhibits and amendments thereto, the "Registration
Statement") reside outside the United States, it may not be possible to effect
service on such persons in the United States or to enforce, in foreign courts,
judgments against such persons obtained in U.S. courts and predicated on the
civil liability provisions of the Federal securities laws of the United
States. Furthermore, since all directly owned assets of the Company are
outside the United States, any judgment obtained in the United States against
the Company may not be collectible within the United States. The Company has
been advised by its Australian counsel, Freehill, Hollingdale & Page, that
there is doubt as to the enforceability in the Commonwealth of Australia, in
original actions or in actions for enforcement of judgments of United States
courts, of civil liabilities predicated solely upon federal or state
securities laws of the United States, especially in the case of enforcement of
judgments of United States courts where the defendant has not been properly
served in Australia.

AVAILABLE INFORMATION

Except as described below, the Company is subject to the information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), applicable to foreign private issuers, and in accordance therewith will
file reports, including annual reports on Form 20-F, and other information
with the Securities and Exchange Commission (the "Commission"). In addition,
the Company has agreed in the Underwriting Agreement relating to the Company's
IPO in November 1997 to submit to the Commission quarterly reports, which will
include unaudited quarterly consolidated financial information, on Form 6-K
for the first three quarters of each fiscal year, and file its annual report
on Form 20-F within the time period prescribed under Section 13 of the
Exchange Act for the filing by domestic issuers of quarterly reports on Form
10-Q and annual reports on Form 10-K, respectively. Such reports and other
information filed by the Company can also be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 13th Floor, 7 World Trade Center, New York,
New York 10048. Copies of such materials can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web internet
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. In addition, the
ADSs of the Company are quoted on Nasdaq, and the Company's reports and other
information may be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, DC 20006. As a foreign private issuer, the Company
is exempt from the rules under the Exchange Act prescribing the furnishing and
the content of proxy statements. The Company is presently unable to determine
if it will qualify as a foreign private issuer after consummation of this
Offering. However, in the event it does not qualify as a foreign private
issuer following consummation of this Offering, the Company will comply with
all U.S. securities laws applicable to a domestic U.S. issuer.

This Prospectus, which constitutes a part of the Registration Statement,
omits certain of the information contained in the Registration Statement and
the exhibits and schedules set forth therein, which has been filed
electronically with the Commission pursuant to the Securities Act and the
rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits and schedules thereto, may be obtained, upon
payment of the fee prescribed by the Commission, or may be examined without
charge at the Office of the Commission or at the Commission's web site.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.

The Company will furnish the Depositary referred to under "Description of
American Depositary Receipts" with annual reports which will include a review
of operations and annual audited consolidated financial statements prepared in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP"). The Company will also furnish the Depositary with quarterly
reports which will include unaudited quarterly consolidated financial
information prepared in accordance with U.S. GAAP. The Depositary has agreed
with the Company that, upon receipt of such reports, it will promptly mail
such reports to all registered holders of ADSs. The Company will also furnish
to the Depositary all notices of shareholders' meetings and other reports and
communications that are made generally available to shareholders. The
Depositary will arrange for the mailing of such documents to record holders of
ADSs.

FINANCIAL STATEMENT PRESENTATION

The Company publishes its consolidated financial statements in Australian
dollars. In this Prospectus, references to "$" or "US$" or "U.S. dollars" or
"dollars" are to United States dollars and references to "A$" are to
Australian dollars. For the convenience of the reader, this Prospectus
contains translations of certain Australian dollar amounts into U.S. dollars
at the rate indicated. Translations of Australian dollars into U.S. dollars
have been made at the noon buying rate in New York City on the relevant date
for cable transfers in Australian dollars as certified by the Federal Reserve
Bank of New York (the "Noon Buying Rate"). Unless otherwise indicated, the
date of translation was (i) for amounts calculated as of a date, such date and
(ii) for amounts calculated for a period, an average rate during the period.
Any translation should not be construed as a representation that the
Australian dollar amounts actually represent such U.S. dollar amounts or could
be converted into U.S. dollars at the rate indicated. On June 1, 1998, the
Noon Buying Rate was US$0.6150 = A$1.00. See "Exchange Rates."

Prior to 1997, the Company's fiscal year ended on June 30. Effective as of
April 9, 1997, the Company changed its fiscal year end from June 30 to January
31 (beginning with the fiscal year ended January 31, 1997). As used in this
Prospectus, each fiscal year of the Company is identified by the calendar year
in which it ends. For example, references to "fiscal year 1996" or "fiscal
1996" shall mean the fiscal year ended June 30, 1996, and due to the change in
fiscal year end, references to "fiscal year 1998" or "fiscal 1998" shall mean
the fiscal year ended January 31, 1998. Because of the change in fiscal year,
fiscal 1997 was a seven-month period.

----------------

Unless the context otherwise requires, references herein to "share" or
"shares" are references to both the ADSs (including the Resale ADSs) and the
Ordinary Shares.

TRADEMARKS

BARBEQUES GALORE(R), TURBO(R), CAPT N COOK(R), COOK-ON(R) and BAR-B-CHEF(R)
are federally registered trademarks and/or service marks in the United States.
The Company also uses the phrase AMERICA'S LARGEST CHAIN OF BARBECUE
STORES(TM) as a common-law trademark in the United States. BARBEQUES GALORE
and COOK-ON are also registered with the State of California. In Australia,
the Company or its subsidiaries have registered, among others, the names
NORSEMAN and KENT, and additionally use the phrase YOUR OUTDOOR COOKING AND
CAMPING STORE as a common-law trademark. This Prospectus contains other trade
names, trademarks and service marks of the Company and other organizations.

PROSPECTUS SUMMARY

This Prospectus contains certain statements of a forward-looking nature
relating to future events affecting the Company or the markets or industries in
which it operates or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
the caption "Risk Factors," which could cause events or actual results to
differ materially from those indicated by such forward-looking statements. The
following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus. As used in this
Prospectus, unless the context otherwise requires, the terms "Barbeques Galore"
and "Company" include Barbeques Galore Limited and its consolidated
subsidiaries and their respective operations. Except as otherwise specified,
all information in this Prospectus is adjusted to reflect a 18.223-for-1
reverse share split of all outstanding Ordinary Shares immediately prior to
consummation of the Company's initial public offering in the United States (the
"IPO") in November 1997 (the "Reverse Share Split").

THE COMPANY

Barbeques Galore believes that it is the leading specialty retail chain of
barbecue and barbecue accessory stores in Australia and the United States,
based on number of stores and sales volume. The Company's belief is based on
its years of experience in the barbecue retail industry as well as its contacts
with other industry retailers, suppliers and trade associations. The Company
opened its first store in Sydney, Australia in 1977 and opened its first U.S.
store in Los Angeles in 1980. Barbeques Galore stores carry a wide assortment
of barbecues and related accessories which are displayed in a store format that
emphasizes social activities and healthy outdoor lifestyles. Its stores also
carry a comprehensive line of fireplace products and, in Australia, home
heating products, camping equipment and outdoor furniture. As of April 30,
1998, the Company owned and operated 33 stores in all six states in Australia
and 38 stores (including three U.S. Navy concession stores) in seven states in
the United States. In addition, as of such date, there were 46 licensed stores
in Australia and seven franchised stores in the United States, all of which
operate under the "Barbeques Galore" name.

The Company's unique retailing concept differentiates Barbeques Galore from
its competitors by (i) offering an extensive selection of barbecues and related
accessories to suit all consumer lifestyles, preferences and price points, (ii)
showcasing these products at convenient store locations with a shopping
environment that promotes the total barbecuing experience and (iii) providing
exceptional customer service through well-trained sales associates who have in-
depth knowledge of the products and understanding of customer needs. These
competitive strengths are enhanced by the Company's barbecue and home heater
manufacturing operations, which enable the Company to realize higher margins,
control product development and improve inventory flexibility and supply.

The Company's growth strategy is to continue expansion of its U.S. store base
and to continue refurbishing (through relocating or remodeling) existing stores
in Australia. From January 31, 1997 to January 31, 1998, the Company grew from
27 to 37 Company-owned stores (including three U.S. Navy concession stores),
representing a 37% increase in the number of owned stores in the United States.
The Company currently plans to open approximately 15 new stores in the United
States in calendar year 1998 of which four have opened, six are under
construction and the remaining five are in lease negotiation. The Company also
currently intends to open 15 new stores in the United States in calendar year
1999. In addition, the Company has initiated a major refurbishment plan for its
Australian store base to enhance store productivity. From January 31, 1997 to
January 31, 1998, four stores have been refurbished in Australia with an
average increase in sales of approximately 41.6% during that period for those
stores.

The Company's net sales increased by approximately A$30.9 million, or 20.9%,
to A$179.3 million for the twelve months ended January 31, 1998 from A$148.4
million for the twelve months ended January 31, 1997.

This growth resulted primarily from the opening of 11 new stores in the United
States (including one franchise store and one U.S. Navy concession store) and
one new store in Australia, as well as the refurbishment or relocation of four
stores in Australia. Also contributing were growth in comparable store sales
during the periods, sales from stores not included in comparable stores data
and an A$3.8 million increase in Australian wholesale sales, mainly to mass
merchants. For the three month period ended April 30, 1998, the Company's net
sales increased by A$6.3 million, or 21.0%, to A$36.7 million from A$30.4
million for the three-month period ended April 30, 1997. Comparable store sales
for the twelve months ended January 31, 1996, 1997 and 1998 were A$88.0
million, A$98.8 million and A$113.7 million, respectively.

----------------

Comparable store sales data presented herein for any period consists of sales
in such period by stores which were open during the corresponding period of the
immediately preceding calendar or fiscal year, as applicable. However, sales
for three U.S. Navy concession stores have been excluded from such calculations
as these three concession stores are operated at the Navy's discretion. The
Navy provides the Company space on three Navy bases under an at will
arrangement and directly purchases the inventory for resale in two of the three
concession stores. The Company owns the inventory at the third concession store
and owns the fixtures installed in all three concession stores.

The Company is presently unable to determine if it will qualify as a foreign
private issuer after consummation of this Offering. However, in the event the
Company determines that it does not qualify as a foreign private issuer
following consummation of this Offering, the Company will comply with all U.S.
securities laws applicable to a domestic U.S. issuer. See "Available
Information."

SUMMARY CONSOLIDATED FINANCIAL DATA

SEVEN MONTHS TWELVE MONTHS THREE MONTHS
ENDED ENDED ENDED
FISCAL YEAR ENDED JUNE 30, JANUARY 31,(1) JANUARY 31,(1) APRIL 30,
---------------------------------------- --------------------- --------------------- -----------------------
1993 1994 1995 1996 1996 1997 1997 1998 1997 1998
--------- --------- --------- --------- ----------- --------- ----------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
In thousands, except per share data

STATEMENT OF OPERATIONS
DATA:
Net sales....... A$114,973 A$124,635 A$138,057 A$141,691 A$ 92,074 A$ 98,752 A$148,369 A$179,325 A$ 30,366 A$ 36,744
Cost of goods
sold(2)........ 82,630 84,104 92,290 98,158 62,789 67,955 103,324 122,072 20,891 25,117
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross profit.... 32,343 40,531 45,767 43,533 29,285 30,797 45,045 57,253 9,475 11,627
Selling, general
and
administrative
expenses....... 27,992 35,462 40,058 39,339 24,328 25,740 40,751 48,992 9,798 12,462
Store pre-
opening costs.. 205 135 64 153 114 200 239 435 114 147
Relocation and
closure
costs(3)....... -- -- -- 875 -- 461 1,336 20 -- 15
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating income
(loss)......... 4,146 4,934 5,645 3,166 4,843 4,396 2,719 7,806 (437) (997)
Equity in income
of affiliates,
net of tax..... 412 660 963 836 709 252 379 547 50 96
Interest
expense........ 2,526 1,999 2,230 2,262 1,619 1,593 2,236 3,334 879 388
Other expenses
(income)(4).... -- -- -- (2,303) (2,303) 1,132 1,132 -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss)
before income
taxes.......... 2,032 3,595 4,378 4,043 6,236 1,923 (270) 5,019 (1,266) (1,289)
Income tax
expense
(benefit)...... 176 1,278 573 98 1,286 366 (822) 1,488 (566) (502)
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income
(loss)......... A$ 1,856 A$ 2,317 A$ 3,805 A$ 3,945 A$ 4,950 A$ 1,557 A$ 552 A$ 3,531 A$ (700) A$ (787)
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Basic earnings
per share(5)... A$ 0.46 A$ 0.53 A$ 0.86 A$ 0.89 A$ 1.11 A$ 0.38 A$ 0.13 A$ 1.43 A$ (0.38) A$ (0.17)
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Diluted earnings
per share(5)... A$ 0.46 A$ 0.53 A$ 0.86 A$ 0.89 A$ 1.11 A$ 0.38 A$ 0.13 A$ 1.18 A$ (0.38) A$ (0.17)
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Weighted average
shares
outstanding(5).. 4,047 4,358 4,450 4,450 4,450 4,073 4,228 2,473 1,844 4,541
========= ========= ========= ========= ========= ========= ========= ========= ========= =========

In thousands

BALANCE SHEET
DATA:
Working
capital........ A$ 16,600 A$ 25,400 A$ 26,856 A$ 24,710 A$ 25,139 A$ 22,552 A$ 22,552 A$ 36,917 A$ 28,534 A$ 37,154
Total assets.... 55,400 60,538 67,624 66,562 67,544 67,970 67,970 82,074 71,740 89,315
Total long-term
debt........... 10,223 16,988 17,690 15,819 11,631 34,276 34,276 18,121 41,468 22,363
Shareholders'
equity......... 21,316 24,385 26,326 27,817 30,349 10,165 10,165 43,927 8,813 43,575

In thousands, except percentages

SELECTED U.S. OPERATING
DATA:
Stores open at
period-end..... 17 17 21 19 25 25 34 28 35
Average net
sales per
store(6)....... A$ 1,389 A$ 1,630 A$ 1,572 A$ 862 A$ 822 A$ 1,579 A$ 1,731 A$ 363 A$ 420
Comparable store
sales
increase(7).... -- 21.2% 10.0% 10.0% 4.1% 6.5% 18.9% 16.1% 7.7%
Selling square
feet........... 49.3 51.3 59.5 55.7 72.7 70.2 96.6 83.5 114.4
Sales per
selling square
foot........... A$ 437 A$ 519 A$ 489 A$ 279 A$ 251 A$ 469 A$ 538 A$ 112 A$ 123

In thousands, except percentages

SELECTED AUSTRALIAN
OPERATING DATA:
Stores open at
period-end..... 32 31 31 32 32 32 32 32 33
Average net
sales per
store(6)....... A$ 1,719 A$ 1,844 A$ 2,081 A$ 1,446 A$ 1,658 A$ 2,222 A$ 2,411 A$ 398 A$ 441
Comparable store
sales
increase(8).... -- 4.3% 8.1% 6.0% 10.6% 11.6% 5.0% 3.9% 6.6%
Selling square
feet........... 275.3 273.9 279.9 272.3 281.3 276.6 291.2 281.7 303.5
Sales per
selling square
foot........... A$ 206 A$ 216 A$ 230 A$ 165 A$ 182 A$ 256 A$ 265 A$ 45.3 A$ 46.5

- --------
(1) As of April 9, 1997, the Company changed its fiscal year end from June 30
to January 31 (effective January 31, 1997).
(2) Cost of goods sold includes the cost of merchandise sold during the
periods, warehouse, distribution and store-level occupancy costs.
(3) Includes A$262,000 incurred during the year ended June 30, 1996 in
connection with the restructuring of the Company's Australian licensing
division, A$613,000 incurred in June 1996 in connection with the relocation
of the Company's barbecue manufacturing operations and an A$369,000
provision accrued in January 1997 in connection with the relocation of the
Company's enameling facilities.
(4) Includes an A$2.3 million gain during the year ended June 30, 1996, related
to the Company's sale of its equity interest in GLG New Zealand and an
A$1.1 million charge incurred in December 1996 in connection with the
Capital Reduction and delisting.
(5) Basic earnings per share are computed by dividing net income by the
weighted average number of ordinary shares. Diluted earnings per share are
computed by dividing net earnings available to ordinary shareholders, as
adjusted for the effect of the elimination of after-tax interest expense
related to assumed conversion of the convertible notes, by the weighted
average number of Ordinary Shares and dilutive ordinary share equivalents
for the period.
(6) For stores open at beginning of period indicated.
(7) The number of comparable stores used to compute such percentages was 17 for
each of fiscal 1995 and 1996, 16 and 19 for the seven-month periods ended
January 31, 1996 and 1997, respectively, 19 and 25 for the twelve-month
periods ended January 31, 1997 and 1998, respectively, and 19 and 26 for
the three-month periods ended April 30, 1997 and 1998, respectively.
(8) The number of comparable stores used to compute such percentages was 32 and
31 for fiscal 1995 and 1996, respectively, 31 and 33 for the seven-month
periods ended January 31, 1996 and 1997, respectively, 33 and 32 for the
fiscal years ended January 31, 1997 and 1998, respectively, and 30 and 30
for the three-month periods ended April 30, 1997 and 1998, respectively.

SUMMARY ADDITIONAL CONSOLIDATED FINANCIAL DATA

As of April 9, 1997, the Company changed its fiscal year end from June 30 to
January 31. The following summary additional consolidated financial data has
been restated to conform the financial presentation to a January 31 fiscal year
end, and are qualified by reference to and should be read in conjunction with
"Selected Additional Consolidated Financial Data" and notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements and notes thereto included
elsewhere in this Prospectus and the financial statements for the twelve-month
periods presented below included in the Registration Statement of which this
Prospectus is a part. Management believes the data presented below provide a
more meaningful basis of comparison between prospective and historical
reporting periods, as the Company will continue to report financial information
in the future on the basis of its current January 31 fiscal year end. Except
for the data for the twelve-month period ended January 31, 1998, all summary
additional consolidated financial data for the three-month and twelve-month
periods presented below is unaudited but in the opinion of management, has been
prepared on the same basis as the audited consolidated financial statements of
the Company and reflects all adjustments necessary for a fair presentation of
such data. The summary additional unaudited financial data as of and for the
twelve months ended January 31, 1996 and 1997 has been derived from the
unaudited consolidated financial statements of the Company as of such dates and
for the periods then ended, to which KPMG has reported that it has applied
limited procedures in accordance with professional standards for a review of
such information. These unaudited consolidated financial statements and the
review report thereon are included in the Registration Statement of which this
Prospectus is a part. The summary additional consolidated financial data as of
and for the twelve-months ended January 31, 1998 has been derived from the
consolidated financial statements of the Company as of such date and for the
period then ended, which have been audited by KPMG and which are included
elsewhere in this Prospectus. Operating results for the three months ended
April 30, 1997 and 1998 are unaudited and are not necessarily indicative of the
results that may be expected for the entire year.

THREE MONTHS ENDED
TWELVE MONTHS ENDED JANUARY 31, APRIL 30,
--------------------------------- --------------------
1996 1997 1998 1997 1998
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
In thousands, except per share data

STATEMENT OF OPERATIONS
DATA:
Net sales............... A$138,877 A$148,369 A$179,325 A$ 30,366 A$ 36,744
Cost of goods sold(1)... 94,899 103,324 122,072 20,891 25,117
--------- --------- --------- --------- ---------
Gross profit............ 43,978 45,045 57,253 9,475 11,627
Selling, general and
administrative
expenses............... 38,921 40,751 48,992 9,798 12,462
Store pre-opening
costs.................. 178 239 435 114 147
Relocation and closure
costs(2)............... -- 1,336 20 -- 15
--------- --------- --------- --------- ---------
Operating income
(loss)................. 4,879 2,719 7,806 (437) (997)
Equity in income of
affiliates, net of
tax.................... 1,205 379 547 50 96
Interest expense........ 2,428 2,236 3,334 879 388
Other expenses
(income)(3)............ (2,303) 1,132 -- -- --
--------- --------- --------- --------- ---------
Income (loss) before
income taxes........... 5,959 (270) 5,019 (1,266) (1,289)
Income tax expense
(benefit).............. 496 (822) 1,488 (566) (502)
--------- --------- --------- --------- ---------
Net income (loss)....... A$ 5,463 A$ 552 A$ 3,531 A$ (700) A$ (787)
--------- --------- --------- --------- ---------
Basic earnings per
share(3)............... A$ 1.23 A$ 0.13 A$ 1.43 A$ (0.38) A$ (0.17)
========= ========= ========= ========= =========
Diluted earnings per
share(3)............... A$ 1.20 A$ 0.13 A$ 1.18 A$ (0.38) A$ (0.17)
========= ========= ========= ========= =========
Weighted average shares
outstanding (in
thousands)(4).......... 4,450 4,228 2,473 1,844 4,541
========= ========= ========= ========= =========

THREE MONTHS ENDED
TWELVE MONTHS ENDED JANUARY 31, APRIL 30,
-------------------------------- --------------------
1996 1997 1998 1997 1998
----------- ----------- -------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
In thousands

BALANCE SHEET DATA:
Working capital......... A$25,139 A$22,552 A$36,917 A$ 28,534 A$ 37,154
Total assets............ 67,544 67,970 82,074 71,740 89,315
Total long-term debt.... 11,631 34,276 18,121 41,468 22,363
Shareholders' equity.... 30,349 10,165 43,927 8,813 43,575

In thousands, except per share data

In thousands, except percentages

SELECTED AUSTRALIAN
OPERATING DATA:
Stores open at period-
end.................... 32 32 32 32 33
Average net sales per
store(5)............... A$ 1,924 A$ 2,222 A$ 2,411 A$ 398 A$ 441
Comparable store sales
increase(7)............ 1.4% 11.6% 5.0% 3.9% 6.6%
Selling square feet..... 267.1 276.6 291.2 281.7 303.5
Sales per selling square
foot................... A$ 231 A$ 256 A$ 265 A$ 45.3 A$ 46.5

- --------
(1) Cost of goods sold includes the cost of merchandise sold during the
periods, warehouse, distribution and store-level occupancy costs.
(2) Includes A$262,000 incurred during the year ended June 30, 1996 in
connection with the restructuring of the Company's Australian licensing
division, A$613,000 incurred in June 1996 in connection with the relocation
of the Company's barbecue manufacturing operations and an A$369,000
provision accrued in January 1997 in connection with the relocation of the
Company's enameling facilities.
(3) Includes an A$2.3 million gain during the year ended June 30, 1996, related
to the Company's sale of its equity interest in GLG New Zealand and an
A$1.1 million charge incurred in December 1996 in connection with the
Capital Reduction and delisting.
(4) Basic earnings per share are computed by dividing net income by the
weighted average number of ordinary shares. Diluted earnings per share are
computed by dividing net earnings available to ordinary shareholders, as
adjusted for the effect of the elimination of after-tax interest expense
related to assumed conversion of the convertible notes, by the weighted
average number of Ordinary Shares and dilutive ordinary share equivalents
for the period.
(5) For stores open at beginning of period indicated.
(6) The number of comparable stores used to compute such percentages was 17 for
each of fiscal 1995 and 1996, 16 and 19 for the seven-month periods ended
January 31, 1996 and 1997, respectively, 19 and 25 for the twelve-month
periods ended January 31, 1997 and 1998, respectively, and 19 and 26 for
the three-month periods ended April 30, 1997 and 1998, respectively.
(7) The number of comparable stores used to compute such percentages was 32 and
31 for fiscal 1995 and 1996, respectively, 31 and 33 for the seven-month
periods ended January 31, 1996 and 1997, respectively, 33 and 32 for the
twelve-months periods ended January 31, 1997 and 1998, respectively, and 30
and 30 for the three-month periods ended April 30, 1997 and 1998,
respectively.

RISK FACTORS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. Prospective investors should carefully consider the
factors set forth below, as well as other information contained in this
Prospectus, in evaluating an investment in the Ordinary Shares and the ADSs.

IMPLEMENTATION OF GROWTH STRATEGY

The growth of the Company is dependent, in large part, upon the Company's
ability to successfully execute its Company-owned store expansion program in
the United States and its store refurbishment plan in Australia. Pursuant to
the U.S. store expansion program, the Company opened 10 new stores in calendar
1997. The Company also currently intends to open approximately 15 new stores
in the United States in calendar 1998, of which four have opened, six are
under construction and the remaining five are in lease negotiation. The
Company also currently intends to open 15 new stores in the United States in
calendar 1999. The Company incurred capital expenditures relating to this
program in the United States of approximately US$1.8 million in 1997 and
expects to incur approximately US$2.5 million in each of calendar 1998 and
1999. Pursuant to the Company's Australian store refurbishment program, in
calendar 1997, the Company remodeled five existing stores, opened one new
store, relocated one store and closed one store. The Company further intends
to refurbish four stores and, in March, opened its one planned new store in
calendar 1998, and intends to refurbish two stores and open two new stores in
calendar 1999. The Company incurred capital expenditures relating to this
program in Australia of approximately A$2.5 million in 1997 and expects to
incur approximately A$1.5 million to A$2.5 million in each of calendar 1998
and 1999. The proposed expansion is substantially more rapid than the
Company's historical growth. The success of these store expansion and
refurbishment efforts will be dependent upon, among other things, the
identification of suitable markets and sites for new stores, negotiation of
leases on acceptable terms, construction or renovation of sites, receipt of
all necessary permits and governmental approvals therefor, and, if necessary,
obtaining additional financing for those sites. In addition, the Company must
be able to hire, train and retain competent managers and personnel and manage
the systems and operational components of its growth. There can be no
assurance that the Company will be able to locate suitable store sites or
enter into suitable lease agreements. In addition, there can be no assurance
that, as the Company opens new stores in existing markets, these new stores
will not have an adverse effect on comparable store net sales at existing
stores in these markets. The failure of the Company to open new stores or
relocate or remodel existing stores on a timely basis, obtain acceptance in
markets in which it currently has limited or no presence, attract qualified
management and personnel or appropriately adjust operational systems and
procedures would adversely affect the Company's future operating results. See
"Business--Store Expansion and Refurbishment."

The success of the Company's growth strategy may also depend upon factors
beyond its immediate control. The Company has retained outside real estate
consultants to assist in site selection and lease negotiations, and may
depend, to an increasing extent, on the services of such consultants and other
real estate experts as it accelerates the rate of new store expansion. The
failure of any such consultants or experts to render needed services on a
timely basis could adversely affect the Company's new store expansion.
Similarly, changes in national, regional or local real estate and market
conditions could limit the ability of the Company to expand into target
markets or sites.

As part of its growth strategy, the Company intends to open stores in new
markets where it will not initially benefit from knowledge of local market
conditions, pre-existing retail brand name recognition or marketing,
advertising, distribution and regional management efficiencies made possible
by its store networks in existing markets. Expansion into new markets may
present operating and marketing challenges that are different from those
encountered in the past by the Company in its existing markets. As a result of
its expansion program and its entry into new markets, primarily in the United
States, and its refurbishment program in Australia, the Company has
experienced, and expects to continue to experience, an increase in store pre-
opening costs and refurbishment-related expenses. There can be no assurance
that the Company will anticipate all of the challenges

and changing demands that its expansion will impose on its management or
operations, and the failure to adapt thereto would adversely affect the
Company's implementation of its growth strategy.

If the Company determined to, or was required to, close a Barbeques Galore
store, the Company would attempt to sublet the vacated store space in order to
cover ongoing lease costs. Even if the Company were able to sublet such store,
the Company may incur significant costs in writing off leasehold improvements.

In addition, the Company's proposed expansion plans will result in increased
demand on the Company's managerial, operational and administrative resources.
As a result of the foregoing, there can be no assurance that the Company will
be able to successfully implement its growth strategies, continue to open new
stores or maintain or increase its current growth levels. The Company's
failure to achieve its expansion plan could have a material adverse effect on
its future business, operating results and financial condition. See "--
Management of Operational Changes" and "--Reliance on Systems."

EFFECT OF ECONOMIC CONDITIONS AND CONSUMER TRENDS

The success of the Company's operations depends upon a number of factors
related to consumer spending, including future economic conditions affecting
disposable consumer income such as employment, business conditions, interest
rates and taxation. If existing economic conditions were to deteriorate,
consumer spending may decline, thereby adversely affecting the Company's
business and results of operations. Such effects may be exacerbated by the
significant current regional concentration of the Company's business in
Australia and the Pacific West and Southwestern U.S. markets.

The success of the Company depends on its ability to anticipate and respond
to changing merchandise trends and consumer demands in a timely manner. The
Company believes it has benefitted from a lifestyle trend toward consumers
spending more quality time together in outdoor family gatherings and social
activities. Any change in such trend could adversely affect consumer interest
in the Company's major product lines. Moreover, the Company's products must
appeal to a broad cross-section of consumers whose preferences (as to product
features such as colors, styles, finishes and fuel types) cannot always be
predicted with certainty and may change between sales seasons. If the Company
misjudges either the market for its merchandise or its customers' purchasing
habits, it may experience a material decline in sales or be required to sell
inventory at reduced margins. The Company could also suffer a loss of customer
goodwill if its manufacturing operations or stores do not adhere to its
quality control or service procedures or otherwise fail to ensure satisfactory
quality of the Company's products. These outcomes may have a material adverse
effect on the Company's business, operating results and financial condition.

MANAGEMENT OF OPERATIONAL CHANGES

The Company has identified a number of areas for improvement in its
operations which will have a significant impact on the implementation of its
growth strategy. The Company has, in recent years, replaced or upgraded its
management information systems and integrated its central inventory management
systems with point-of-sale terminals in Barbeques Galore stores, and currently
plans to introduce automated replenishment of store inventory in Australia in
the near term. In the United States, the Company is currently upgrading to the
latest version of software by JDA Software Group Inc. ("JDA") and is using
both outside consultants and the vendor to assist with the process. The total
expected capital expenditure for such project is not expected to be
significant. In addition, the Company intends to transfer its general ledger
and accounts payable functions from its existing computer system to the above-
mentioned JDA software system in the near future. The Company is currently in
the process of relocating its enameling operations (which are located 10 miles
away) to the same facilities as its barbecue and home heater manufacturing
operations adjacent to its Australian headquarters, adding an in-line powder
coating operation and rearranging the assembly, warehouse and Australian
distribution operations to further improve its production flow, inventory
control and distribution management. These changes are scheduled to be
completed in June 1998. The relocation of the Company's enameling operations
and related changes will cost approximately A$454,000 (of which A$369,000 has
already been accrued), will require

additional capital expenditures of approximately A$2.8 million and will
require the Company to obtain a number of building, environmental and other
governmental permits. In addition, as the Company expands into new regions or
accelerates the rate of its U.S. store expansion, the Company may need
additional warehouse capacity. In order to meet such needs, the Company
intends to secure another distribution center or expand its current warehouse
facilities in the United States or utilize public warehousing space, in each
case depending on availability and cost at such time. There can be no
assurance as to whether or when the Company will be able to effect its systems
upgrades, enameling plant relocation plans, any expansion or replacement of
distribution facilities, or any other necessary operational changes that may
arise, or that the Company will not incur cost overruns or disruptions in its
operations in connection therewith. The failure of the Company to effect these
and any other necessary operational changes on a timely basis would adversely
affect the ability of the Company to implement its growth strategy and,
therefore, its business, financial condition and operating results.

COMPETITION

The retail and distribution markets for barbecues and the Company's other
product offerings are highly competitive in both the United States and
Australia. The Company's retail operations compete against a wide variety of
retailers, including mass merchandisers, discount or outlet stores, department
stores, hardware stores, home improvement centers, specialty patio, fireplace
or cooking stores, warehouse clubs and mail order companies. The Company's
manufacturing and wholesale operations compete with many other manufacturers
and distributors throughout the world, including high-volume manufacturers of
barbecues and home heaters. Barbeques Galore competes for retail customers
primarily based on its broad assortment of competitively priced, quality
products (including proprietary and exclusive products), convenience, customer
service and the attractive presentation of merchandise within its stores. Many
of the Company's competitors have greater financial, marketing, distribution
and other resources than the Company, and particularly in the United States,
may have greater name recognition than the Company. Furthermore, the lack of
significant barriers to entry into the Company's segment of the retail
industry may also result in new competition in the future.

SEASONALITY; WEATHER; FLUCTUATIONS IN RESULTS

The Company's business is subject to substantial seasonal variations which
have caused, and are expected to continue to cause, its quarterly results of
operations to fluctuate significantly. Historically, the Company has realized
a major portion of its net sales and a substantial portion of its net income
for the year during summer months and holiday seasons when consumers are more
likely to purchase barbecue products, camping equipment and outdoor furniture.
In anticipation of its peak selling seasons (late spring and early summer),
the Company substantially increases its inventory levels and hires a
significant number of part-time and temporary employees. In non-peak periods,
such as late winter and early fall, the Company has regularly experienced
monthly losses. Since the Company has historically derived a greater portion
of its sales from its larger Australian store base, these seasonal trends have
generally resulted in increased sales and income during the Australian summer
months of November through January and substantially lower-than-average sales
and income during the months of February, March, May and July. The Company
believes this is the general pattern associated with its segment of the
Australian retail industry and expects this pattern will continue in the
future. Partially offsetting the effects of seasonality, the Company operates
in both the Southern and Northern hemispheres, which have opposite seasons,
and offers fireplace products and (in Australia) home heaters in the fall and
winter months. However, sales of any of the Company's major product lines (in
particular, home heaters) may vary widely in peak seasons depending on, among
other things, prevailing weather patterns, local climate conditions, actions
by competitors and shifts in timing of holidays. The Company's quarterly and
annual results of operations may also fluctuate significantly as a result of a
variety of other factors, including the timing of new store openings, releases
of new products and changes in merchandise mix throughout the year. The
Company has in the past experienced quarterly losses, particularly in its
fiscal first quarter, and expects that it will experience such losses in the
future. Because of these fluctuations in operating results, the results of
operations in any quarter are not necessarily indicative of the results that
may be achieved for a full fiscal year or any future quarter. If for any
reason the Company's sales or gross margins during peak seasons or periods
were substantially below expectations, the Company's quarterly and annual
results would be adversely affected.

RELIANCE ON SYSTEMS

In the United States, the Company has installed a JDA Software Group Inc.
("JDA") system on an IBM AS400 platform, which allows it to manage
distribution, inventory control, purchasing, sales analysis, warehousing and
financial applications. The Company currently runs its general ledger and
accounts payable applications on its pre-existing computer system, but intends
to transfer these functions to the more powerful JDA system in the near
future. At the store level, the Company has installed POS computer terminals
as its cash registers in all stores. Each POS terminal is equipped with a bar
code scanner for ease of product input and validation. Each store's
transaction data is captured by its POS terminals and transferred into the
main JDA system daily. The JDA system provides extensive reporting and inquiry
capability at both the store and corporate levels, including daily transaction
data, margin information, exception analysis and stock levels. Additionally,
the system permits inventory and pricing updates to be electronically
transmitted to the stores on a daily basis.

In Australia, Barbeques Galore currently uses a system which runs on a
proprietary Wang VS software environment, together with a Novell network
utilizing Microsoft applications. This software processes all distribution,
warehouse management, inventory control, purchasing, merchandising, financial
and office automation applications. As in the United States, each store in
Australia is equipped with POS terminals that receive pricing and inventory
information and permit the Company to poll sales transaction data daily. The
Australian system provides a range of reporting and inquiry capability at both
the store and corporate levels similar to that in the United States. The
Company relies upon its existing management information systems in operating
and monitoring all major aspects of the Company's business, including sales,
gross margins, warehousing, distribution, purchasing, inventory control,
financial, accounting and human resources. The Company's reliance upon such
systems will likely increase upon the anticipated introduction of automated
store replenishment in Australia. Any disruption in the operation of the
Company's management information systems, or the Company's failure to continue
to upgrade, integrate or expend capital on such systems as its business
expands, could have a material adverse effect upon the Company's business,
operating results and financial condition.

Like many computer systems, the Company's Wang computer system in Australia
uses two digit data fields which recognize dates using the assumption that the
first two digits are "19" (i.e., the number 97 is recognized as the year
1997), such condition being referred to as the "year 2000 problem." Therefore,
in the Australian system, the Company's date critical functions relating to
the year 2000 and beyond, such as sales, distribution, purchasing, inventory
control, financial and human resource systems, may be adversely affected
unless changes are made to this computer system. The Company has appointed a
computer consultant to upgrade its systems in Australia and currently intends
to purchase a new UNIX server and certain additional hardware and software
which, because of their more recent design, should not be subject to the year
2000 problem. The Company expects that upgrades to its computer systems with
respect to the year 2000 problem will require capital expenditures of
approximately A$0.75 million and will be completed by April 1999. However, no
assurance can be given that these issues can be resolved in a cost-effective
or timely manner or that the Company will not incur significant expense in
resolving these issues. The Company's newly installed computer system in the
United States has been designed to avoid the occurrence of such problems with
the year 2000.

DEPENDENCE ON KEY EMPLOYEES

The Company's success is largely dependent on the efforts and abilities of
its executive officers, particularly, Sam Linz, Chairman of the Board, Robert
Gavshon, Deputy Chairman of the Board, John Price, Head of Research and
Product Development and Director, and Sydney Selati, President of Barbeques
Galore, Inc., the Company's U.S. operating subsidiary, and Director. These
individuals have an average of 15 years of experience with the Company and
have chief responsibility for the development of the Company's current
business and growth strategies. In addition, in August 1997, the Company
appointed L.D. "Chip" Brown as Chief Operating Officer for its U.S. operations
to manage daily operations in the United States, permitting Mr. Selati to
concentrate on the Company's U.S. growth strategy. The Company does not have
employment contracts with any of its executive officers. The loss of the
services of these individuals or other key employees could have a

material adverse effect on the Company's business, operating results and
financial condition. The Company's success is also dependent upon its ability
to continue to attract and retain qualified employees to meet the Company's
needs for its new store expansion program in the United States and its store
refurbishment plans in Australia.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; DEPENDENCE ON SIGNIFICANT
VENDORS AND SUPPLIERS

Barbeques Galore, with its headquarters, manufacturing, enameling, wholesale
and non-U.S. store operations in Australia, transacts a majority of its
business in Australia and obtains a significant portion of its merchandise,
parts and raw materials from China, Taiwan, Indonesia, Thailand, Italy and
other markets outside of the United States and Australia. There are risks
inherent in doing business in international markets, including tariffs,
customs, duties and other trade barriers, difficulties in staffing and
managing foreign operations, political instability, expropriation,
nationalization and other political risks, foreign exchange controls,
technology export and import restrictions or prohibitions, delays from customs
brokers or government agencies, seasonal reductions in business activity,
subjection to multiple taxation regimes and potentially adverse tax
consequences, any of which could materially adversely affect the Company's
business, operating results and financial condition.

The Company purchases certain of its finished inventory and manufacturing
parts and all of its raw materials from numerous vendors and suppliers and
generally has no long-term purchase contracts with any vendor or supplier.
During the twelve months ended January 31, 1998, the Company purchased
inventory from over 400 vendors in the United States, Australia and Asia. In
such period, approximately 25% of the Company's merchandise purchases were
obtained from the Company's ten largest vendors. Although no vendor accounted
for more than 5% of the Company's merchandise purchases in such period (other
than Horan's Steel Pty Ltd., an Australian steel distributor ("Horan's
Steel"), and Bromic Pty Ltd., an Australian gas components importer
("Bromic")), the Company considers certain barbecue brands to be significant
to its business, especially in the United States. Also during such period, the
Company purchased barbecue and home heater parts from over 50 suppliers in
Asia, Australia and North America. Horan's Steel and Bromic supplied the
Company with approximately 20% and 21%, respectively, of the Company's factory
parts and raw material purchases and approximately 80% of the Company's
factory parts and raw material purchases were obtained from the Company's ten
largest suppliers. The Company's results of operations could be adversely
affected by a disruption in purchases from any of these key vendors or
suppliers or from volatility in the prices of such parts or raw materials,
especially the price of steel, which has fluctuated in the past. In addition,
some of the Company's key suppliers currently provide the Company with certain
incentives, such as volume and trade discounts as well as other purchasing
incentives. A reduction or discontinuance of these incentives could have an
adverse effect on the Company. Although the Company believes that its
relationships with its vendors and suppliers are good, any vendor or supplier
could discontinue selling to the Company at any time.

PRODUCT LIABILITY AND GOVERNMENTAL AND OTHER REGULATION

Many of the Company's products use gas and flame and, consequently, are
subject to regulation by authorities in both the United States and Australia
in order to protect consumers, property and the environment. For example, the
Company's products and the personal use thereof are subject to regulations
relating to, among other things, the use of fire in certain locations
(particularly restrictions relating to the availability or frequency of use of
wood heating in homes and barbecues in apartments), restrictions on the sale
or use of products that enhance burning potential such as lighter fluid,
restrictions on the use of gas in specified locations (particularly
restrictions relating to the use of gas containers in confined spaces) and
restrictions on the use of wood burning heaters. Compliance with such
regulations has not in the past had, and is not anticipated to have, a
material adverse effect on the Company's business, operating results and
financial condition. Nonetheless, such regulations have had, and can be
expected to have, an increasing influence on product claims, manufacturing,
contents, packaging and heater usage. In addition, failure of a product could
give rise to product liability claims if customers, employees or third parties
are injured or any of their property is damaged while using a Company product.
Such injury could be caused, for example, by a gas valve malfunction, gas leak
or an unanticipated flame-up resulting in injury to persons and/or property.
Even if such circumstances were beyond the Company's

control, the Company's business, operating results and financial condition
could be materially adversely affected. In the event of such an occurrence,
the Company could incur substantial litigation expense, receive adverse
publicity, suffer a loss of sales or all or any of the foregoing. Although the
Company maintains liability insurance in both Australia and the United States,
there can be no assurance that such insurance will provide sufficient coverage
in any particular case. In Australia, the limit of the Company's product
liability coverage is A$50 million. In the United States, the Company's U.S.
operating subsidiary is covered by a policy having general liability coverage
limited at US$12 million and third party liability coverage limited at US$11
million. There is no assurance that certain jurisdictions in which the Company
operates will not impose additional restrictions on the sale or use of the
Company's products.

In addition, the Company's barbecue and home heater manufacturing and
enameling operations are subject to regulations governing product safety and
quality, the discharge of materials hazardous to the environment, water usage,
workplace safety and labor relations. The Company's distribution facilities
are also subject to workplace safety and labor relations regulations. The
Company believes that it is in substantial compliance with such regulations.
The sale of certain products by the Company may result in technical violations
of certain of the Company's leases which prohibit the sale of flammable
materials in or on the leased premises. As a barbecue and barbecue accessories
store, the Company sells lighter fluid, lighters, matches and similar products
which may be considered flammable when in contact with open flame or
activated. The Company does not store containers of gas for barbecue grills in
its stores. The Company stores matches, lighters and the like in closed
containers or in displays where the chance of activation is remote, and does
not store such items near open flames. Over the Company's operating history,
the Company's landlords have been made aware that the Company sells such
products. To date, no landlord has terminated or threatened termination of any
lease due to such sales.

The foregoing regulations and restrictions could have a material adverse
effect on the Company's business, operating results or financial condition.

UNCERTAINTIES REGARDING MANUFACTURING AND DISTRIBUTION OF MERCHANDISE

The Company manufactures a substantial portion of the barbecues and home
heaters sold in its stores and distributes merchandise to Barbeques Galore
stores primarily from its distribution centers located at its headquarters in
Australia and Irvine, California. Throughout the manufacturing process, the
Company utilizes heavy machinery and equipment to produce and assemble
barbecues and home heaters from parts and raw materials supplied from numerous
third party suppliers. In distributing merchandise, the Company relies upon
third party sea carriers to ship its manufactured products from Australia to
the United States, as well as third party surface freight carriers to
transport all its merchandise from its distribution centers and warehouses to
stores. Accordingly, the Company is subject to numerous risks associated with
the manufacturing and distribution of its merchandise, including supply
interruptions, mechanical risks, labor stoppages or strikes, inclement
weather, import regulation, changes in fuel prices, changes in the prices of
parts and raw materials, economic dislocations and geopolitical trends. In
addition, the Company believes that, while its distribution facilities are
sufficient to meet Barbeques Galore's current needs, the Company may need
another distribution center or larger facilities in the United States or
Australia to support the further growth and expansion of stores.

RISKS RELATED TO FRANCHISED AND LICENSED STORES

As of April 30, 1998, there were 46 licensed stores in Australia and seven
franchised stores in the United States, all of which are operated under the
"Barbeques Galore" name by independent licensees or franchisees who purchase
proprietary and other store products, and receive support services, from the
Company. The licensees and franchisees operate such stores pursuant to
agreements which typically permit licensees and franchisees to assign the
agreements to their immediate family and provide the licensees and franchisees
with exclusive geographical sales territories. The Company monitors its
licensed and franchised stores to assure their conformity to Barbeques
Galore's standards and image and requires the licensees and franchisees to
comply with Barbeques Galore's merchandising and advertising guidelines.
Although the Company believes that its licensees and franchisees are presently
in substantial compliance with Company guidelines and that its license and

franchise arrangements have not been problematic in any material respect in
the past, serious or protracted failures by licensees or franchisees to adhere
to Company standards could adversely affect customer loyalty and diminish the
Company's brand name or reputation for quality products and services, and
could require the Company to devote significant management attention and
resources to enforcing its rights under such agreements. Conversely, if the
Company fails to provide adequate support services or otherwise breaches its
contractual obligations to any licensee or franchisee, such failure or breach
could result in termination of, or litigation relating to, the relevant
licensing or franchise agreement and the loss of fees and sales revenue
thereunder. The licensing agreements in Australia are terminable at will
(absent fraud) by the licensees only, generally upon sixty days' notice.

CURRENCY FLUCTUATIONS

The Company prepares its consolidated financial statements in Australian
dollars, but a substantial portion of the Company's revenues and expenses are
denominated in U.S. dollars and, to a lesser extent, other foreign currencies.
Accordingly, the Company is subject to risks of currency exchange to the
extent of currency fluctuations between the Australian dollar and the U.S.
dollar or other currencies in which the Company transacts its business. This
currency imbalance has resulted in, and may continue to result in, foreign
currency transaction gains and losses. In the past, the Company's Australian
operations have hedged a major portion of its imports against exchange rate
fluctuations with respect to the Australian dollar. However, in its U.S.
operations, the Company has not, and it currently does not, actively hedge
against exchange rate fluctuations, although it may elect to do so in the
future. Accordingly, changes in exchange rates may have a material adverse
effect on the Company's net sales, cost of goods sold, gross margin and net
income, any of which alone or in the aggregate may in turn have a material
adverse effect on the Company's business, operating results and financial
condition. Such currency issues could, thus, affect the market price for the
ADSs. Although the Company does not anticipate paying any regular cash
dividends on the Ordinary Shares or the ADSs in the foreseeable future, the
above exchange rate fluctuations would affect the conversion into US dollars
(for payment to holders of ADSs) by the Depositary of any cash dividends paid
in Australian dollars on the Ordinary Shares represented by the ADSs. See
"Exchange Rates," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Description of American Depositary Receipts."

CONTROL OF THE COMPANY

Messrs. Sam Linz, Robert Gavshon, Sydney Selati and John Price beneficially
own 28.5%, 4.9%, 3.2% and 1.6%, respectively, of the Ordinary Shares of the
Company outstanding on a fully diluted basis. If these individuals as a group
were to vote in the same manner on any matter requiring approval of a majority
of the outstanding Ordinary Shares of the Company, such shareholders would
strongly influence the outcome of such vote. This level of influence, together
with the Company's charter documents, may have a significant effect on
delaying, deferring or preventing a change of control of the Company and may
adversely affect the voting and other rights of other holders of Ordinary
Shares or ADSs in that the election of the Company's directors and the outcome
of corporate actions requiring shareholder approval, such as mergers and
acquisitions, changes in the Company's charter documents and certain matters
relating to equity incentive plans may be effected without significant
additional shareholder input. From time to time, the Company has entered into
transactions with certain of these shareholders or with companies controlled
by them. The Company believes that these transactions were completed on terms
at least as favorable to the Company as could have been obtained from
unaffiliated third parties. Such transactions and any future transactions
between the Company and its directors, executive officers and other affiliates
must be approved by a majority of the Company's disinterested directors. See
"Certain Transactions," "Principal Shareholders," "Selling Shareholders" and
"Description of Ordinary Shares" and Note 16 to the Consolidated Financial
Statements.

RESTRICTIONS ON FOREIGN OWNERSHIP; ANTITAKEOVER RESTRICTIONS

Under Australian law, foreign persons are prohibited from acquiring more
than a limited percentage of the shares in an Australian company without
approval from the Australian Treasurer or in certain other limited

circumstances. These limitations are set forth in the Australian Foreign
Acquisitions and Takeovers Act (the "Takeovers Act"). Under the Takeovers Act,
as currently in effect, any foreign person, together with associates, is
prohibited from acquiring 15% or more of the outstanding shares of the Company
(or else the Treasurer may make an order requiring the acquiror to dispose of
those shares within a specified period of time). In addition, if a foreign
person acquires shares in the Company and as a result the total holdings of
all foreign persons and their associates exceeds 40% in the aggregate without
the approval of the Australian Treasurer, then the Treasurer may make an order
requiring the acquiror to dispose of those shares within a specified time. The
Company has been advised by its Australian counsel, Freehill, Hollingdale &
Page, that under current foreign investment policy, however, it is unlikely
that the Treasurer would make such an order where the level of foreign
ownership exceeds 40% in the ordinary course of trading, unless the Treasurer
finds that the acquisition is contrary to the national interest. The same rule
applies if the total holdings of all foreign persons and their associates
already exceeds 40% and a foreign person (or its associate) acquires any
further shares, including in the course of trading in the secondary market of
the ADSs. In addition, if the level of foreign ownership exceeds 40% at any
time, the Company would be considered a foreign person under the Takeovers
Act. In such event, the Company would be required to obtain the approval of
the Treasurer for the Company, together with its associates, to acquire (i)
more than 15% of an Australian company or business with assets totaling over
A$5 million or (ii) any direct or indirect ownership interest in Australian
residential real estate. In addition, the percentage of foreign ownership of
the Company would also be included in determining the foreign ownership of any
Australian company or business in which it may choose to invest. Since the
Company has no current plans for any such acquisitions and only owns
commercial property, any such approvals required to be obtained by the Company
as a foreign person under the Takeovers Act will not affect the Company's
current or future ownership or lease of property in Australia. However, there
would be no material tax consequence to shareholders of the Company (including
holders of ADSs) resulting from the Company being deemed a foreign person
under the Takeovers Act. If all of the ADSs offered hereby are acquired by
foreign persons or their associates, then the level of foreign ownership of
the Company's equity securities will be approximately 63.8%. The level of
foreign ownership could also increase in the future if additional existing
Australian investors decide to sell their shares into the U.S. market or if
the Company were to sell additional Ordinary Shares or ADSs in the future.

The Company has additionally provided that all stock options outstanding
under the Company's Executive Share Option Plan at such time as the Company
becomes subject to a takeover bid pursuant to which the offeror acquires at
least thirty percent (30%) of the outstanding Ordinary Shares of the Company
shall become immediately exercisable for a period of up to 120 days, measured
from the date the Board notifies the optionee of the takeover bid. Similarly,
the Company has provided that all stock options outstanding under the
Company's 1997 Share Option Plan at such time as the Company is acquired by
merger or asset sale pursuant to which such stock options are not assumed or
replaced by the successor corporation shall become immediately exercisable for
a period of one (1) year (or until the expiration of the stock option term, if
earlier). There are 203,038 Ordinary Shares underlying stock options
outstanding pursuant to the Executive Share Option Plan, which, barring
acceleration, will become exercisable on February 1, 1999 and 199,400 Ordinary
Shares underlying stock options granted concurrently with the Company's IPO,
consummated on November 7, 1998, under the 1997 Share Option Plan, which,
barring acceleration, will become exercisable in three equal installments on
November 7, 2000, November 7, 2001 and October 7, 2002 according to the terms
of the 1997 Share Option Plan. Such investment restrictions and dilutive
acceleration events could have a material adverse effect on the Company's
ability to raise capital as needed and could make more difficult or render
impossible attempts by certain entities (especially foreign entities, in the
case of the Takeovers Act) to acquire the Company, including attempts that
might result in a premium over market price to holders of ADSs. See
"Management--Executive Share Option Plan," "Management--1997 Share Option
Plan" and "Description of Ordinary Shares--Australian Takeover Laws."

The Memorandum and Articles of Association of the Company (collectively, the
"Articles") contain certain provisions that could impede any merger,
consolidation, takeover or other business combination involving the Company or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company. Provisions contained in the
Articles, among other things, (i) in effect divide the Board of

Directors of the Company into three classes, which serve for staggered three-
year terms, (ii) provide that the shareholders may amend or repeal special
resolutions, including changes to the Articles and extraordinary transactions,
only by a vote of at least 75% of the votes cast at a meeting at which a
quorum is present, (iii) require extended notice (of up to 21 days) for
special resolutions considered by the Board of Directors, and (iv) authorize
the Board of Directors, without any vote or action by shareholders of the
Company, to issue, out of the Company's authorized and unissued capital
shares, shares in different classes, or with special, preferred or deferred
rights, which may relate to voting, dividend, return of capital or any other
matter. Although the Company currently has no plans to issue any preferred
shares, the rights of the holders of Ordinary Shares or ADSs will be subject
to, and may be adversely affected by, the rights of the holders of any
preferred or senior share that may be issued in the future. The issuance of
any preferred or senior shares, and the other provisions of the Articles
referred to above, could have the effect of making it more difficult for a
third party to acquire control of the Company. See "Description of Ordinary
Shares--Australian Takeover Laws."

Australian law requires the transfer of shares in the Company to be made in
writing, and stamp duty at the rate of 0.6% is payable in relation to any
transfer of shares. No stamp duty will be payable in Australia on the transfer
of ADSs provided that any instrument by which the ADSs are transferred is
executed outside Australia.

In certain circumstances, nonresidents of Australia may be subject to
Australian tax on capital gains made on the disposal of shares or ADSs. The
rate of Australian tax on taxable gains realized by non-residents of Australia
is 36% for companies. For individuals, the rate of tax increases from 29% to a
maximum of 47%. These circumstances are described in "Certain Tax
Considerations--Australian Taxation."

ENFORCEABILITY OF CIVIL LIABILITIES

The Company is an Australian public limited company. Most of its directors
and executive officers reside outside the United States (principally in the
Commonwealth of Australia). All or a substantial portion of the assets of
these persons and of the Company are located outside the United States
(principally in the Commonwealth of Australia). As a result, it may not be
possible for investors to effect service of process within the United States
upon such persons or the Company or to enforce against such persons or the
Company in foreign courts judgments obtained in United States courts
predicated upon the civil liability provisions of the Federal securities laws
of the United States. The Company has been advised by its Australian counsel,
Freehill, Hollingdale & Page, that there is doubt as to the enforceability in
the Commonwealth of Australia, in original actions or in actions for
enforcement of judgments of U.S. courts, of civil liabilities predicated upon
federal or state securities laws of the United States, especially in the case
of enforcement of judgments of U.S. courts where the defendant has not been
properly served in Australia. See "Description of Ordinary Shares--
Enforceability of Civil Liabilities."

POSSIBLE ADVERSE EFFECT ON MARKET PRICE FOR ADSS OF SHARES ELIGIBLE FOR FUTURE
SALE

The Company has granted stock options to purchase up to an aggregate of
203,038 Ordinary Shares (the "Options") under the Company's Executive Share
Option Plan, which options are currently owned by Sam Linz, Robert Gavshon,
Sydney Selati, John Price, David James and Kevin Ralphs (or companies
controlled by them), and, in connection with its IPO, granted stock options to
purchase up to an aggregate of 199,400 Ordinary Shares under the 1997 Share
Option Plan, exercisable in three equal installments on November 7, 2000,
November 7, 2001 and October 7, 2002. The Company has also reserved an
additional 129,854 authorized and unissued Ordinary Shares to grant pursuant
to stock options to directors, officers, employees and independent contractors
of the Company at a future date under the 1997 Share Option Plan. The Company
may in the future issue these or other equity or equity derivative securities.
See "Management--Executive Share Option Plan" and "Management--1997 Share
Option Plan."

ADSs sold in the IPO in November 1997 and option shares registered on the
Company's registration statements covering the Company's Executive Share
Option Plan and the 1997 Share Option Plan are also, or will be in the near
future, eligible for immediate and unrestricted sale in the public market at
any time.

Substantially all of the other shares of the Company's Ordinary Shares are not
restricted and are freely tradeable in the public market. The 1,044,845
Ordinary Shares registered for sale pursuant to this Prospectus will be freely
saleable after the date of this Prospectus. Sales of substantial amounts of
such Ordinary Shares or ADSs or other securities, or the prospect of such
sales, could adversely affect the market price of the Ordinary Shares or the
ADSs and the Company's ability to raise capital through an offering of
securities. See "Shares Eligible for Future Sale."

POSSIBLE VOLATILITY OF ADS PRICE

Since the Company's IPO in November 1997, there have been extreme
fluctuations in the per share price and the trading volume of such shares. On
November 7, 1997, the Company's Ordinary Shares were first sold to the public
at US$11.00 per share. On December 30, 1997, the closing price on Nasdaq for
the Company's Ordinary Shares was US$5.75. On April 30, 1998, the closing
price on Nasdaq for the Company's Ordinary Shares was US$9.63. There can be no
assurance that an active or stable trading market will develop or, if one does
develop, that it will be maintained. In addition, the market price of the ADSs
may be significantly affected by such factors as quarter to quarter variations
in the Company's results of operations and general market conditions or market
conditions specific to the industries in which the Company operates. In
addition, the stock market in recent years has experienced price and volume
fluctuations that have often been unrelated or disproportionate to the
operating performance of companies. These fluctuations, as well as general
economic and market conditions, may adversely affect the market price of the
Ordinary Shares or ADSs. There can be no assurance that the Depositary will be
able to effect any currency conversion or to sell or otherwise dispose of any
distributed or offered property, subscription or other rights, Ordinary Shares
or other securities related to the ADSs in a timely manner or at a specified
rate or price, as the case may be. See "Certain Transactions--Delisting
Transaction and Conversion of Convertible Notes" and "Description of American
Depositary Receipts."

EXCHANGE RATES

The Australian dollar is convertible into U.S. dollars at freely floating
rates, and there are currently no restrictions on the flow of Australian
currency between Australia and the United States. On June 1, 1998, the Noon
Buying Rate was US$0.6150 = A$1.00. The following table sets forth, for the
periods indicated, certain information concerning Noon Buying Rates for
Australian dollars.

FISCAL YEAR PERIOD
ENDED JANUARY 31, AVERAGE(1) HIGH LOW END
----------------- ---------- ------ ------ ------

1994
First Quarter.............................. 0.7020 0.7217 0.6692 0.7073
Second Quarter............................. 0.6837 0.7095 0.6655 0.6900
Third Quarter.............................. 0.6639 0.6916 0.6450 0.6665
Fourth Quarter............................. 0.6782 0.7108 0.6569 0.7086
1995
First Quarter.............................. 0.7143 0.7248 0.7016 0.7155
Second Quarter............................. 0.7312 0.7452 0.7041 0.7395
Third Quarter.............................. 0.7400 0.7458 0.7303 0.7425
Fourth Quarter............................. 0.7649 0.7780 0.7404 0.7566
1996
First Quarter.............................. 0.7383 0.7590 0.7229 0.7282
Second Quarter............................. 0.7248 0.7442 0.7088 0.7385
Third Quarter.............................. 0.7508 0.7704 0.7312 0.7595
Fourth Quarter............................. 0.7427 0.7607 0.7339 0.7463
1997
First Quarter.............................. 0.7717 0.7915 0.7483 0.7875
Second Quarter............................. 0.7926 0.8025 0.7727 0.7727
Third Quarter.............................. 0.7895 0.7998 0.7731 0.7917
Fourth Quarter............................. 0.7908 0.8162 0.7623 0.7623
1998
First Quarter.............................. 0.7786 0.7982 0.7574 0.7806
Second Quarter............................. 0.7572 0.7866 0.7349 0.7478
Third Quarter.............................. 0.7279 0.7508 0.6866 0.7011
Fourth Quarter............................. 0.6709 0.7126 0.6357 0.6845
1999
First Quarter.............................. 0.6650 0.6868 0.6440 0.6520
Second Quarter (through June 1, 1998)...... 0.6312 0.6520 0.6150 0.6150

- --------
(1) Determined by averaging the closing price for each date in the period.

Fluctuations in the exchange rate between the Australian dollar and the U.S.
dollar may affect the Company's earnings, the book value of its assets and its
shareholders' equity as expressed in Australian and U.S. dollars, and
consequently may affect the market price for the ADSs. Such fluctuations will
also affect the conversion into U.S. dollars by the Depositary of cash
dividends, if any, paid in Australian dollars on the Ordinary Shares
represented by the ADSs. See "Dividend Policy" and "Description of American
Depositary Receipts--Distributions on Deposited Securities."

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the Resale
ADSs by the Selling Shareholders.

DIVIDEND POLICY

Since the Ordinary Shares were delisted from the Australian Stock Exchange
("ASE") on December 31, 1996, the Company has not declared or paid any cash
dividends on its Ordinary Shares other than a dividend in an aggregate amount
equal to A$500,000 paid on April 21, 1997. The Company does not anticipate
paying any regular dividends on the Ordinary Shares or ADSs in the foreseeable
future. In addition, the Company is subject to certain restrictions on the
declaration or payment of dividends under the credit facility (the "ANZ
Facility") by and between the Company and the Australian and New Zealand
Banking Group Limited ("ANZ"), as well as the term loan and revolving line of
credit facility (the "Merrill Lynch Facility") by and between Barbeques
Galore, Inc. (the Company's U.S. operating subsidiary) and Merrill Lynch
Business Financial Services, Inc. ("Merrill Lynch").

CAPITALIZATION

The following table sets forth the capitalization of the Company as of April
30, 1998. This table should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto included elsewhere
herein or in the Registration Statement of which this Prospectus is a part.

APRIL 30, 1998
------------------
ACTUAL ACTUAL(2)
-------- ---------
(UNAUDITED)
Dollars in thousands

Current portion of long-term debt........................ A$ 147 US$ 96
======== =========
Long-term debt........................................... 18,975 12,372
Shareholders' equity:
Ordinary Shares, A$3.64 par value: 27,437,853 shares
authorized; 4,541,652 shares issued and outstanding,
actual(1)............................................. 16,532 10,779
Additional paid-in capital............................... 24,554 16,009
Foreign currency translation adjustment.................. 1,612 1,051
Retained earnings........................................ 877 572
-------- ---------
Total shareholders' equity........................... 43,575 28,411
-------- ---------
Total capitalization............................... A$62,550 US$40,783
======== =========

- --------
(1) Excludes an aggregate of 203,038 Ordinary Shares issuable upon the
exercise of stock options granted to certain executives of the Company in
January 1997, but not exercisable until February 1999, except under
certain circumstances. Also excludes 199,400 Ordinary Shares issuable
upon the exercise of stock options granted under the Company's 1997 Share
Option Plan concurrently with the Offering, but not exercisable until
November 7, 2000, at which time one-third of such shares shall become
exercisable, the remaining two-thirds to become exercisable in equal
installments on November 7, 2001 and October 7, 2002. See "Management--
Executive Share Option Plan" and "Management--1997 Share Option Plan."
(2) Amounts translated at the Noon Buying Rate on April 30, 1998 of US$0.6520
= A$1.00.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data of the Company should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere in this Prospectus. The statement of
operations data for the fiscal years ended June 30, 1995 and 1996 and the
balance sheet data as of June 30, 1996 were derived from the consolidated
financial statements of the Company for the fiscal years ended June 30, 1995
and 1996, which have been audited by Horwath Sydney Partnership, independent
auditors, and are included in the Registration Statement of which this
Prospectus is a part. The statement of operations data for the fiscal years
ended June 30, 1993 and 1994 and the balance sheet data as of June 30, 1993,
1994 and 1995 were derived from the consolidated financial statements of the
Company for the fiscal years ended June 30, 1993, 1994 and 1995 which have
been audited by Horwath Sydney Partnership, but are not included herein. The
statement of operations data for the seven months ended January 31, 1997 and
the twelve months ended January 31, 1998 and the balance sheet data as of such
dates have been derived from the consolidated financial statements of the
Company for the seven months ended January 31, 1997 and the twelve months
ended January 31, 1998, which have been audited by KPMG, independent certified
public accountants, and are included elsewhere herein. The selected
consolidated financial data for the seven months ended January 31, 1996 and
the twelve months ended January 31, 1997 and the balance sheet data as of such
dates were derived from the foregoing consolidated financial statements of the
Company for the fiscal year ended June 30, 1996 and for the seven months ended
January 31, 1997, and are unaudited, and in the opinion of management include
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the information included therein. The selected
consolidated financial data for the three months ended April 30, 1997 and 1998
were derived from the unaudited consolidated financial statements as of and
for the periods then ended, which are not included herein.

SEVEN MONTHS TWELVE MONTHS
ENDED ENDED
FISCAL YEAR ENDED JUNE 30, JANUARY 31,(1) JANUARY 31,(1)
---------------------------------------- --------------------- ---------------------
1993 1994 1995 1996 1996 1997 1997 1998
--------- --------- --------- --------- ----------- --------- ----------- ---------
(UNAUDITED) (UNAUDITED)
In thousands, except per share data

STATEMENT
OF
OPERATIONS
DATA:
Net
sales.. A$114,973 A$124,635 A$138,057 A$141,691 A$ 92,074 A$ 98,752 A$148,369 A$179,325
Cost
of
goods
sold(2).. 82,630 84,104 92,290 98,158 62,789 67,955 103,324 122,072
--------- --------- --------- --------- --------- --------- --------- ---------
Gross
profit.. 32,343 40,531 45,767 43,533 29,285 30,797 45,045 57,253
Selling,
general
and
administrative
expenses.. 27,992 35,462 40,058 39,339 24,328 25,740 40,751 48,992
Store
pre-
opening
costs.. 205 135 64 153 114 200 239 435
Relocation
and
closure
costs(3).. -- -- -- 875 -- 461 1,336 20
--------- --------- --------- --------- --------- --------- --------- ---------
Operating
income
(loss).. 4,146 4,934 5,645 3,166 4,843 4,396 2,719 7,806
Equity
in
income
of
affiliates,
net
of
tax.. 412 660 963 836 709 252 379 547
Interest
expense.. 2,526 1,999 2,230 2,262 1,619 1,593 2,236 3,334
Other
expenses
(income)(4).. -- -- -- (2,303) (2,303) 1,132 1,132 --
--------- --------- --------- --------- --------- --------- --------- ---------
Income
(loss)
before
income
taxes.. 2,032 3,595 4,378 4,043 6,236 1,923 (270) 5,019
Income
tax
expense
(benefit).. 176 1,278 573 98 1,286 366 (822) 1,488
--------- --------- --------- --------- --------- --------- --------- ---------
Net
income
(loss).. A$ 1,856 A$ 2,317 A$ 3,805 A$ 3,945 A$ 4,950 A$ 1,557 A$ 552 A$ 3,531
--------- --------- --------- --------- --------- --------- --------- ---------
Basic
earnings
per
share(5).. A$ 0.46 A$ 0.53 A$ 0.86 A$ 0.89 A$ 1.11 A$ 0.38 A$ 0.13 A$ 1.43
========= ========= ========= ========= ========= ========= ========= =========
Diluted
earnings
per
share(5).. A$ 0.46 A$ 0.53 A$ 0.86 A$ 0.89 A$ 1.11 A$ 0.38 A$ 0.13 A$ 1.18
========= ========= ========= ========= ========= ========= ========= =========
Weighted
average
shares
outstanding(5).. 4,047 4,358 4,450 4,450 4,450 4,073 4,228 2,473
========= ========= ========= ========= ========= ========= ========= =========

In thousands

BALANCE
SHEET
DATA:
Working
capital.. A$ 16,600 A$ 25,400 A$ 26,856 A$ 24,710 A$ 25,139 A$ 22,552 A$ 22,552 A$ 36,917
Total
assets.. 55,400 60,538 67,624 66,562 67,544 67,970 67,970 82,074
Total
long-
term
debt.. 10,223 16,988 17,690 15,819 11,631 34,276 34,276 18,121
Shareholders'
equity.. 21,316 24,385 26,326 27,817 30,349 10,165 10,165 43,927

In thousands,
except
percentages

SELECTED
U.S.
OPERATING
DATA:
Stores
open
at
period-
end.. 17 17 21 19 25 25 34
Average
net
sales
per
store(6).. A$ 1,389 A$ 1,630 A$ 1,572 A$ 862 A$ 822 A$ 1,579 A$ 1,731
Comparable
store
sales
increase(7).. -- 21.2% 10.0% 10.0% 4.1% 6.5% 18.9%
Selling
square
feet.. 49.3 51.3 59.5 55.7 72.7 70.2 96.6
Sales
per
selling
square
foot.. A$ 437 A$ 519 A$ 489 A$ 279 A$ 251 A$ 469 A$ 538
In
thousands,
except
percentages
SELECTED
AUSTRALIAN
OPERATING
DATA:
Stores
open
at
period-
end.. 32 31 31 32 32 32 32
Average
net
sales
per
store(6).. A$ 1,719 A$ 1,844 A$ 2,081 A$ 1,446 A$ 1,658 A$ 2,222 A$ 2,411
Comparable
store
sales
increase(8).. -- 4.3% 8.1% 6.0% 10.6% 11.6% 5.0%
Selling
square
feet.. 275.3 273.9 279.9 272.3 281.3 276.6 291.2
Sales
per
selling
square
foot.. A$ 206 A$ 216 A$ 230 A$ 165 A$ 182 A$ 256 A$ 265

THREE MONTHS
ENDED
APRIL 30,
-----------------------
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
In thousands, except per share data

STATEMENT
OF
OPERATIONS
DATA:
Net
sales.. A$ 30,366 A$ 36,744
Cost
of
goods
sold(2).. 20,891 25,117
----------- -----------
Gross
profit.. 9,475 11,627
Selling,
general
and
administrative
expenses.. 9,798 12,462
Store
pre-
opening
costs.. 114 147
Relocation
and
closure
costs(3).. -- 15
----------- -----------
Operating
income
(loss).. (437) (997)
Equity
in
income
of
affiliates,
net
of
tax.. 50 96
Interest
expense.. 879 388
Other
expenses
(income)(4).. -- --
----------- -----------
Income
(loss)
before
income
taxes.. (1,266) (1,289)
Income
tax
expense
(benefit).. (566) (502)
----------- -----------
Net
income
(loss).. A$ (700) A$ (787)
----------- -----------
Basic
earnings
per
share(5).. A$ (0.38) A$ (0.17)
=========== ===========
Diluted
earnings
per
share(5).. A$ (0.38) A$ (0.17)
=========== ===========
Weighted
average
shares
outstanding(5).. 1,844 4,541
=========== ===========

In thousands

BALANCE
SHEET
DATA:
Working
capital.. A$ 28,534 A$ 37,154
Total
assets.. 71,740 89,315
Total
long-
term
debt.. 41,468 22,363
Shareholders'
equity.. 8,813 43,575

In thousands,
except
percentages

SELECTED
U.S.
OPERATING
DATA:
Stores
open
at
period-
end.. 28 35
Average
net
sales
per
store(6).. A$ 363 A$ 420
Comparable
store
sales
increase(7).. 16.1% 7.7%
Selling
square
feet.. 83.5 114.4
Sales
per
selling
square
foot.. A$ 112 A$ 123
In
thousands,
except
percentages
SELECTED
AUSTRALIAN
OPERATING
DATA:
Stores
open
at
period-
end.. 32 33
Average
net
sales
per
store(6).. A$ 398 A$ 441
Comparable
store
sales
increase(8).. 3.9% 6.6%
Selling
square
feet.. 281.7 303.5
Sales
per
selling
square
foot.. A$ 45.3 A$ 46.5

- -------
(1) As of April 9, 1997, the Company changed its fiscal year end from June 30
to January 31 (effective January 31, 1997).
(2) Cost of goods sold includes the cost of merchandise sold during the
periods, warehouse, distribution and store-level occupancy costs.
(3) Includes A$262,000 incurred during the year ended June 30, 1996 in
connection with the restructuring of the Company's Australian licensing
division, A$613,000 incurred in June 1996 in connection with the
relocation of the Company's barbecue manufacturing operations and an
A$369,000 provision accrued in January 1997 in connection with the
relocation of the Company's enameling facilities.
(4) Includes an A$2.3 million gain during the year ended June 30, 1996,
related to the Company's sale of its equity interest in GLG New Zealand
and an A$1.1 million charge incurred in December 1996 in connection with
the Capital Reduction and delisting.
(5) Basic earnings per share are computed by dividing net income by the
weighted average number of ordinary shares. Diluted earnings per share
are computed by dividing net earnings available to ordinary shareholders,
as adjusted for the effect of the elimination of after-tax interest
expense related to assumed conversion of the convertible notes, by the
weighted average number of Ordinary Shares and dilutive ordinary share
equivalents for the period.
(6) For stores open at beginning of period indicated.
(7) The number of comparable stores used to compute such percentages was 17
for each of fiscal 1995 and 1996, 16 and 19 for the seven-month periods
ended January 31, 1996 and 1997, respectively, 19 and 25 for the twelve-
month periods ended January 31, 1997 and 1998, respectively, and 19 and
26 for the three-month periods ended April 30, 1997 and 1998,
respectively.
(8) The number of comparable stores used to compute such percentages was 32
and 31 for fiscal 1995 and 1996, respectively, 31 and 33 for the seven-
month periods ended January 31, 1996 and 1997, respectively, 33 and 32
for the fiscal years ended January 31, 1997 and 1998, respectively, and
30 and 30 for the three-month periods ended April 30, 1997 and 1998,
respectively.

SELECTED ADDITIONAL CONSOLIDATED FINANCIAL DATA

As of April 9, 1997, the Company changed its fiscal year end from June 30 to
January 31. The following selected additional consolidated financial data has
been restated to conform the financial presentation to a January 31 fiscal
year end, and are qualified by reference to and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the Selected Consolidated Financial Data of the Company and
the consolidated financial statements and notes thereto included elsewhere in
this Prospectus and the financial statements for the twelve-month periods
presented below included in the Registration Statement of which this
Prospectus is a part. Management believes that the data presented below
provide a more meaningful basis of comparison between prospective and
historical reporting periods, as the Company will continue to report financial
information in the future on the basis of its current January 31 fiscal year
end. Except for the data for the twelve-month period ended January 31, 1998,
all selected additional consolidated financial data for the three-month and
twelve-month periods presented below is unaudited but, in the opinion of
management, has been prepared on the same basis as the audited consolidated
financial statements of the Company and reflects all adjustments necessary for
a fair presentation of such data. The selected additional unaudited financial
data as of and for the twelve months ended January 31, 1996 and 1997 has been
derived from the unaudited consolidated financial statements of the Company as
of such dates and for the periods then ended, to which KPMG has reported that
it has applied limited procedures in accordance with professional standards
for a review of such information. These unaudited consolidated financial
statements and the review report thereon are included elsewhere in the
Registration Statement of which this Prospectus is a part. The summary
consolidated financial data as of and for the twelve-months ended January 31,
1998 has been derived from the consolidated financial statements of the
Company as of such date and for the period then ended, which have been audited
by KPMG and which are included elsewhere in this Prospectus. Operating results
for the three months ended April 30, 1997 and 1998 are unaudited and are not
necessarily indicative of the results that may be expected for the entire
year.

THREE MONTHS
TWELVE MONTHS ENDED JANUARY 31, ENDED APRIL 30,
--------------------------------- ------------------
1996 1997 1998 1997 1998
----------- ----------- --------- -------- --------
(UNAUDITED) (UNAUDITED) (UNADUDITED)
In thousands, except per
share data

STATEMENT OF OPERATIONS
DATA:
Net sales............... A$138,877 A$148,369 A$179,325 A$30,366 A$36,744
Cost of goods sold(1)... 94,899 103,324 122,072 20,891 25,117
--------- --------- --------- -------- --------
Gross profit............ 43,978 45,045 57,253 9,475 11,627
Selling, general and
administrative
expenses............... 38,921 40,751 48,992 9,798 12,462
Store pre-opening
costs.................. 178 239 435 114 147
Relocation and closure
costs(2)............... -- 1,336 20 -- 15
--------- --------- --------- -------- --------
Operating income
(loss)................. 4,879 2,719 7,806 (437) (997)
Equity in income of
affiliates, net of
tax.................... 1,205 379 547 50 96
Interest expense........ 2,428 2,236 3,334 879 388
Other expenses
(income)(3)............ (2,303) 1,132 -- -- --
--------- --------- --------- -------- --------
Income (loss) before
income taxes........... 5,959 (270) 5,019 (1,266) (1,289)
Income tax expense
(benefit).............. 496 (822) 1,488 (566) (502)
--------- --------- --------- -------- --------
Net income (loss)....... A$ 5,463 A$ 552 A$ 3,531 A$ (700) A$ (787)
--------- --------- --------- -------- --------
Basic earnings per
share(3)............... A$ 1.23 A$ 0.13 A$ 1.43 A$ (0.38) A$ (0.17)
========= ========= ========= ======== ========
Diluted earnings per
share(3)............... A$ 1.20 A$ 0.13 A$ 1.18 A$ (0.38) A$ (0.17)
========= ========= ========= ======== ========
Weighted average shares
outstanding
(in thousands)(4)...... 4,450 4,228 2,473 1,844 4,541
========= ========= ========= ======== ========

THREE MONTHS
TWELVE MONTHS ENDED JANUARY 31, ENDED APRIL 30,
--------------------------------- --------------------
1996 1997 1998 1997 1998
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
In thousands, except per share data

BALANCE SHEET DATA:
Working capital......... A$ 25,139 A$ 22,552 A$ 36,917 A$ 28,534 A$ 37,154
Total assets............ 67,544 67,970 82,074 71,740 89,315
Total long-term debt.... 11,631 34,276 18,121 41,468 22,363
Shareholders' equity.... 30,349 10,165 43,927 8,813 43,575

In thousands, except percentages

SELECTED U.S. OPERATING DATA:
Stores open at period-
end.................... 19 25 34 28 35
Average net sales per
store(5)............... A$ 1,655 A$ 1,579 A$ 1,731 A$ 363 A$ 420
Comparable store sales
increase(6)............ 14.2% 6.5% 18.9% 16.1% 7.7%
Selling square feet..... 54.8 70.2 96.6 83.5 114.4
Sales per selling square
foot................... A$ 517 A$ 469 A$ $538 A$ 112 A$ 123
In thousands, except
percentages
SELECTED AUSTRALIAN OP-
ERATING DATA:
Stores open at period-
end.................... 32 32 32 32 33
Average net sales per
store(5)............... A$ 1,924 A$ 2,222 A$ 2,411 A$ 398 A$ 441
Comparable store sales
increase(7)............ 1.4% 11.6% 5.0% 3.9% 6.6%
Selling square feet..... 267.1 276.6 291.2 281.7 303.5
Sales per selling square
foot................... A$ 231 A$ 256 A$ 265 A$ 45.3 A$ 46.5

- --------
(1) Cost of goods sold includes the cost of merchandise sold during the
periods, warehouse, distribution and store-level occupancy costs.
(2) Includes A$262,000 incurred during the year ended June 30, 1996 in
connection with the restructuring of the Company's Australian licensing
division, A$613,000 incurred in June 1996 in connection with the
relocation of the Company's barbecue manufacturing operations and an
A$369,000 provision accrued in January 1997 in connection with the
relocation of the Company's enameling facilities.
(3) Includes an A$2.3 million gain during the year ended June 30, 1996,
related to the Company's sale of its equity interest in GLG New Zealand
and an A$1.1 million charge incurred in December 1996 in connection with
the Capital Reduction and delisting.
(4) Basic earnings per share are computed by dividing net income by the
weighted average number of ordinary shares. Diluted earnings per share are
computed by dividing net earnings available to ordinary shareholders, as
adjusted for the effect of the elimination of after-tax interest expense
related to assumed conversion of the convertible notes, by the weighted
average number of Ordinary Shares and dilutive ordinary share equivalents
for the period.
(5) For stores open at beginning of period indicated.
(6) The number of comparable stores used to compute such percentages was 17
for each of fiscal 1995 and 1996, 16 and 19 for the seven-month periods
ended January 31, 1996 and 1997, respectively, 19 and 25 for the twelve-
month periods ended January 31, 1997 and 1998, respectively, and 19 and 26
for the three-month periods ended April 30, 1997 and 1998, respectively.
(7) The number of comparable stores used to compute such percentages was 32
and 31 for fiscal 1995 and 1996, respectively, 31 and 33 for the seven-
month periods ended January 31, 1996 and 1997, respectively, 33 and 32 for
the twelve-month periods ended January 31, 1997 and 1998, respectively,
and 30 and 30 for the three-month periods ended April 30, 1997 and 1998,
respectively.

Unaudited Additional Quarterly Financial Data. The following table sets
forth, for the periods indicated, certain selected statement of operations
data and operating data for each of the Company's last eight fiscal quarters.
The quarterly statement of operations data and selected operating data set
forth below were derived from unaudited financial statements of the Company,
which in the opinion of management of the Company contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation thereof.

QUARTER ENDED
--------------------------------------------------------------------------
JUL 31, OCT 31, JAN 31, APR 30, JUL 31, OCT 31, JAN 31, APR 30,
1996 1996 1997 1997 1997 1997 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
In thousands, except per
share data

STATEMENT OF OPERATIONS
DATA:
Net Sales............... A$31,967 A$35,255 A$53,494 A$30,366 A$40,028 A$43,539 A$65,392 A$36,744
Cost of goods sold...... 22,879 24,249 35,989 20,891 27,529 29,815 43,836 25,117
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit............ 9,088 11,006 17,505 9,475 12,499 13,724 21,556 11,627
Selling, general and
administrative
expenses............... 9,576 10,088 12,351 9,798 11,930 12,384 14,874 12,462
Store pre-opening
costs.................. 64 79 96 114 95 37 189 147
Relocation and closure
costs.................. 875 -- 461 -- -- -- 20 15
-------- -------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................. (1,427) 839 4,597 (437) 474 1,303 6,473 (997)
Equity in income of
affiliates............. 87 103 109 50 138 153 206 96
Interest expense........ 438 678 710 879 881 1,111 463 388
Other expenses
(income)............... -- 36 1,096 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes........... (1,778) 228 2,900 (1,266) (269) 345 6,216 (1,289)
Income tax expense
(benefit).............. (1,330) 98 847 (566) (83) 143 1,996 (502)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)....... A$ (448) A$ 130 A$ 2,053 A$ (700) A$ (186) A$ 202 A$ 4,220 A$ (787)
======== ======== ======== ======== ======== ======== ======== ========
Basic earnings per
share.................. A$ (0.10) A$ 0.03 A$ 0.58 A$ (0.38) A$ (0.10) A$ 0.11 A$ 0.97 A$ (0.17)
======== ======== ======== ======== ======== ======== ======== ========
Diluted earnings per
share.................. A$ (0.10) A$ 0.03 A$ 0.52 A$ (0.38) A$ (0.10) A$ 0.11 A$ 0.96 A$ (0.17)
======== ======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding............ 4,450 4,450 3,569 1,844 1,844 1,844 4,336 4,542
======== ======== ======== ======== ======== ======== ======== ========

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus.

OVERVIEW

Barbeques Galore believes that it is the leading specialty retail chain of
barbecue and barbecue accessory stores in Australia and the United States,
based on number of stores and sales volume. The Company's belief is based on
its years of experience in the barbecue retail industry as well as its
contacts with other industry retailers, suppliers and trade associations. The
Company opened its first store in Sydney, Australia in 1977 and opened its
first U.S. store in Los Angeles in 1980. Barbeques Galore stores carry a wide
assortment of barbecues and related accessories, a comprehensive line of
fireplace products and, in Australia, home heating products, camping equipment
and outdoor furniture. As of April 30, 1998, the Company owned and operated 33
stores in all six states in Australia and 38 stores (including three U.S. Navy
concession stores) in seven states in the United States. In addition, as of
such date, there were 46 licensed stores in Australia and seven franchised
stores in the United States, all of which operate under the "Barbeques Galore"
name.

The Company derives its revenue primarily from four categories: Australian
retail, United States retail (including royalties and sales to franchisees),
Australian licensing (including license fees and sales to licensees) and
Australian wholesale. These categories represented 43.1%, 34.4%, 8.9% and
12.9%, respectively, of the Company's net sales for the twelve months ended
January 31, 1998, representing a 9.1%, 52.9%, (3.8)% and 19.6% increase
(decrease), over their respective net sales levels for the twelve months ended
January 31, 1997. For the three months ended April 30, 1998, these categories
represented 38.3%, 46.2%, 6.9% and 7.9%, respectively, of the Company's net
sales for such period, representing a 10.5%, 50.5%, (6.4)% and (8.8)% increase
(decrease) over their respective net sales levels for the three months ended
April 30, 1997.

The Company believes the majority of its future growth will result from the
continuing expansion of its U.S. retail business, primarily through the
opening of new stores, and the refurbishment of its Australian store base. In
the United States, the Company has embarked upon a major program to expand
Company-owned stores. In calendar 1997, the Company opened 10 new stores and
plans to open approximately 15 new stores in calendar 1998, of which four have
opened, six are under construction and the remaining five are in lease
negotiation. The Company also currently intends to open 15 new stores in the
United States in calendar 1999. The Company incurred capital expenditures
relating to this program in the United States of approximately US$1.8 million
in 1997 and expects to incur approximately US$2.5 million in each of calendar
1998 and 1999. In Australia, the Company has undertaken a refurbishment
program to relocate or remodel existing stores. In calendar 1997, the Company
remodelled five stores in Australia, opened one new store, relocated one store
and closed one store. In calendar 1998, the Company currently plans to
refurbish four stores in addition to the one planned new store already opened
in Australia in that time frame. The Company also intends to refurbish two
stores in Australia and open two new stores in Australia in calendar 1999. The
Company incurred capital expenditures relating to this program in Australia of
approximately A$2.5 million in 1997 and expects to incur approximately A$1.5
million to A$2.5 million in each of calendar 1998 and 1999. As a result of its
store expansion and refurbishment programs, the Company has experienced, and
expects to continue to experience, increases in store pre-opening costs and
refurbishment-related expenses. See "Risk Factors--Implementation of Growth
Strategy."

A number of the Company's existing licensees have elected to refurbish their
stores in accordance with the Company's established criteria although no
licensee is required to do so. The Company maintains an assistance program to
provide advice relating to these enhancements. No financial incentives are
offered directly by the Company to encourage licensee refurbishment, although
the Company believes its new store concept provides a more consumer-friendly
shopping environment. The Company expects that Australian licensing will
provide

moderate growth in revenues if the economy of rural Australia continues to
revitalize. The Company may license additional Barbeques Galore stores in
Australia on a selective basis, although it does not intend to franchise any
additional stores in the United States (except within geographical territories
as required under existing franchise agreements). Although the Company has
recently experienced some growth in its wholesale operations, it does not
expect to experience significant revenue growth in the future and currently
has no plans to operate a wholesale distribution business in the United
States. See "Risk Factors--Effect of Economic Conditions and Consumer Trends,"
"Business--Licensing and Franchising" and "Business--Business Strengths and
Competition--Store Environment."

Through its vertically integrated operations, the Company manufactures a
proprietary line of barbecues and home heaters for its retail stores and
licensees as well as other barbecue and home heater products for its wholesale
customers. By controlling its own manufacturing operations, the Company
believes it is able to realize higher margins, control product development and
improve inventory flexibility and supply. The Company estimates that, during
the twelve months ended January 31, 1998, approximately 40% of its barbecue
sales were derived from sales of its proprietary barbecues, and approximately
65% of its home heating sales were derived from sales of its proprietary home
heating lines. The Company believes that its existing manufacturing and
enameling operations are sufficient to meet presently anticipated production
increases that may arise from the Company's store expansion and refurbishment
program. See "Risk Factors--Management of Operational Changes" and "Business--
Manufacturing."

In connection with the implementation of its United States and Australian
growth strategy, the Company incurred several one-time expenses during 1996.
The Company relocated and combined its barbecue manufacturing operations from
11 separate off-site buildings to a single facility at its corporate
headquarters and distribution center in Sydney, Australia at an expense of
approximately A$613,000 plus additional capital expenditures of approximately
A$2.3 million. This relocation has resulted in initial cost savings of
approximately A$515,000 through the end of July 1997. In a further effort to
improve its production flow, inventory control and distribution management,
the Company is in the process of relocating its enameling operations to the
same facility, and intends to add an in-line powder coating operation and
rearrange the assembly, warehouse and distribution operations. These changes
are scheduled to be completed in the first half of 1998 at an expected cost of
A$454,000, against which the Company has already accrued A$369,000. In
addition, the Company has purchased two properties nearby the Company's
Australian headquarters, for an aggregate purchase price of approximately
A$5.25 million, with an additional approximately A$1.0 million needed to
upgrade one of the properties, which properties will provide additional
warehouse, distribution and assembly space. As of April 30, 1998, the Company
has closed on one of the properties and incurred approximately A$3.5 million
of such capital expenditure, with the remainder of the purchase price and
upgrade expense expected to be incurred between June and August 1998, after
the closing of the purchase of the second property. The Company believes these
changes will result in estimated initial cost savings of A$350,000 to
A$450,000 in the first full twelve months after completion. The planned
relocation of the Company's enameling operations and related changes will
involve an additional A$2.8 million in capital expenditures, a significant
amount of which will be expended after April 30, 1998, and has required the
Company to obtain a number of building, environmental and other governmental
permits, some of which are currently being processed. In addition, the Company
incurred approximately A$354,000 of one-time charges relating to the
restructuring of its Australian licensing division (of which A$262,000 was
incurred during the year ended June 30, 1996 and the remainder was accrued in
January 1997), in which the licensing division's management and administration
were integrated into the Company's retail and wholesale divisions. The
restructuring has resulted in an estimated annual cost savings of A$400,000.
See "Risk Factors--Management of Operational Changes," "Risk Factors--
Management of Operational Changes," "Business--Manufacturing" and "Business--
Licensing and Franchising."

In December 1996, the Company completed its delisting from the ASE, which
included the repurchase of Ordinary Shares from the public. These transactions
were financed through A$11.2 million in borrowings under the ANZ Facility and
A$10.0 million in proceeds from the sale of the Convertible Notes, which were
converted into an aggregate of 1,197,926 Ordinary Shares in connection with
the Company's IPO in November 1997. In connection with the delisting and
issuance of the Convertible Notes, the Company incurred various one-time

charges (primarily financing, underwriting and legal fees) aggregating
approximately A$1.1 million. The Company repaid a portion of such debt in full
and converted the remainder of such debt into Ordinary Shares upon
consummation of its IPO, and over the lifetime of such debt, paid interest
totalling approximately A$900,000. In connection with its IPO, the Company and
certain shareholders of the Company sold 1,700,000 ADSs at a price of US$11.00
per share for an aggregate offering amount of approximately US$18.7 million,
of which the Company received approximately US$16.5 million. After
registration expenses of approximately A$493,580, underwriting expenses of
approximately A$1,652,597 and other related expenses of A$1,749,506 (of which
A$83,703 were related to direct and indirect reimbursements to directors and
officers of the Company for expenses incurred in connection with the IPO), the
Company's net proceeds from that offering were approximately A$19.7 million
(approximately US$13.8 million). See "Certain Transactions--Recent Delisting
Transaction and Conversion of Convertible Notes."

The Company recognizes income from affiliates representing its one-third
equity interest in Bromic and its 50% equity interest in GLG Taiwan. The
Company also received income from its 50% equity interest in GLG New Zealand.
The Company sold its equity interest in GLG New Zealand in December 1995.

In 1997, the Company changed its fiscal year-end from June 30 to January 31
in order to conform to the conventional fiscal year for the U.S. retail
industry.

The Company is subject to a corporate tax rate of 36% in Australia and 34%
in the United States (excluding state taxes). Historically, the Company's tax
rate has been lower than these stated rates as a result of the exclusion of
affiliate income items from Australian taxation and the realization of net
operating loss carryforwards against U.S. income.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain selected
statement of operations data as a percentage of net sales:

TWELVE MONTHS SEVEN MONTHS TWELVE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JANUARY 31, JANUARY 31, APRIL 30
-------------- ----------------- ----------------- -----------------------
1995 1996 1996 1997 1997 1998 1997 1998
------ ------ ----------- ----- ----------- ----- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)

STATEMENT OF OPERATIONS
DATA:
Net Sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold...... 66.8 69.3 68.2 68.8 69.6 68.1 68.8 68.4
------ ------ ----- ----- ----- ----- ----- -----
Gross profit............ 33.2 30.7 31.8 31.2 30.4 31.9 31.2 31.6
Selling, general and
administrative
expenses............... 29.0 27.8 26.4 26.1 27.5 27.3 32.3 33.9
Store pre-opening
costs.................. 0.0 0.1 0.1 0.2 0.2 0.2 0.4 0.4
Relocation and closure
costs.................. 0.0 0.6 0.0 0.5 0.9 0.0 0.0 0.0
------ ------ ----- ----- ----- ----- ----- -----
Operating income
(loss)................. 4.2 2.2 5.3 4.4 1.8 4.4 (1.5) (2.7)
Equity in income or
affiliates, net of
tax.................... 0.7 0.6 0.8 0.3 0.3 0.3 0.2 0.3
Interest expense........ 1.6 1.6 1.8 1.6 1.5 1.9 2.9 1.1
Other expenses
(income)............... 0.0 (1.6) (2.5) 1.1 0.8 0.0 0.0 0.0
------ ------ ----- ----- ----- ----- ----- -----
Income (loss) before
income taxes........... 3.3 2.8 6.8 2.0 (0.2) 2.8 (4.2) (3.5)
Income tax expense
(benefit).............. 0.4 0.1 1.4 0.4 (0.6) 0.8 (1.9) (1.4)
------ ------ ----- ----- ----- ----- ----- -----
Net income (loss)....... 2.9% 2.7% 5.4% 1.6% 0.4% 2.0% (2.3)% (2.1)%
====== ====== ===== ===== ===== ===== ===== =====

Three Months Ended April 30, 1998 (Unaudited) Compared to Three Months Ended
April 30, 1997 (Unaudited)

Net sales increased by approximately A$6.3 million, or 21.0%, to A$36.7
million for the three months ended April 30, 1998 from A$30.4 million for the
three months ended April 30, 1997. One new store was opened in the United
States during the three months ended April 30, 1998. In Australia one new
store was opened and no stores were refurbished during this period. Comparable
store sales increased 7.1% and contributed A$3.3 million to the increase in
net sales. Comparable store sales increased 7.7% in the United States and 6.6%
in Australia. Increased sales of A$2.7 million also resulted from eight new
stores which opened in the United States in the previous nine months and which
did not form part of the comparative store sales.

Gross profit increased approximately A$2.1 million, or 22.7% to A$11.6
million for the three months ended April 30, 1998 from A$9.5 million for the
three months ended April 30, 1997. Gross margin (gross profit as a percentage
of sales) increased to 31.6% during the three months ended April 30, 1998 from
31.2% during the comparable period in 1997. The increase in gross margin was
primarily due to sales mix.

Selling, general and administrative expenses (which exclude store pre-
opening expenses) increased approximately A$2.7 million, or 27.2%, to A$12.5
million for the three months ended April 30, 1998 from A$9.8 million for the
three months ended April 30, 1997. As a percentage of net sales, selling,
general and administrative expenses increased to 33.9% during the three months
ended April 30, 1998 from 32.3% during the comparable period in 1997.

The increase was primarily due to lower operating leverage from the greater
number of stores open in the United States and Australia in the first quarter
of 1998 during a period when sales are at their seasonal low, additional
expenditure incurred in the United States on the build-up of the
infrastructure subsequent to the first quarter of 1997 and increased
Australian retail advertising expenditure prior to the Easter selling season
in 1998.

Store pre-opening expenses increased by A$33,000 to A$147,000 due to the
number and timing of United States' store opening expenditure.

Operating loss increased by $560,000 to A$997,000 for the three months ended
April 30, 1998 from A$437,000 for the three months ended April 30, 1997.

Income from affiliates increased by A$46,000 to A$96,000 in the three months
ended April 30, 1998 from A$50,000 for the three months ended April 30, 1997.
This increase resulted mainly from an increase in profitability of the
Company's Taiwanese affiliate.

Interest expense decreased by A$491,000 to A$388,000 in the three months
ended April 30, 1998 from A$879,000 for the three months ended April 30, 1997.
The decrease reflects the reduced debt requirements of the Company subsequent
to the capital raising as a result of its IPO in November 1997.

The Company's effective tax rate was 38.9% in the three months ended April
30, 1998 and 44.7% in the three months ended April 30, 1997. The higher
effective tax rate (a benefit) in the comparable period in 1997 reflects an
over-provision in the prior period.

Twelve Months Ended January 31, 1998 (Audited) Compared to Twelve Months
Ended January 31, 1997 (Unaudited)

Net sales increased approximately A$30.9 million, or 20.9%, to A$179.3
million for the twelve months ended January 31, 1998 from A$148.4 million for
the twelve months ended January 31, 1997. Eleven new stores were opened in the
United States during the twelve months ended January 31, 1998 of which eight
were in existing markets, including one franchise store in Atlanta, and the
remaining three in San Antonio, Texas, Mandarin, Florida and Pearl Harbor,
Hawaii (a U.S. Navy concession store). In Australia, one store was opened and
four refurbished or relocated. Comparable store sales increased 13% and
contributed A$13.1 million of the

increase in net sales. Comparable store sales increased 18.9% in the United
States and 5.0% in Australia. Increased sales also resulted from stores not
forming part of the comparative store sales, including new stores opened in
the U.S. in the previous twelve months. The balance of the increased sales was
primarily attributable to an A$3.8 million increase in Australian wholesale
sales, mainly to mass merchandisers.

Gross profit increased approximately A$12.3 million, or 27.1%, to A$57.3
million for the twelve months ended January 31, 1998 from A$45.0 million for
the twelve months ended January 31, 1997. Gross margin (gross profit as a
percentage of sales) increased to 31.9% during the twelve months ended January
31, 1998 from 30.4% during the comparable period in 1997. The increase in
gross margin was primarily due to production efficiencies gained in the
Australian manufacturing operation. The increase was partially offset by a
reduction in gross margin in the United States as a result mainly of a change
in product mix and newer stores with a typically lower gross margin in their
first year of operation and additional distribution costs incurred to support
the store expansion program.

Selling, general and administrative expenses (which exclude store pre-
opening expenses) increased approximately A$8.2 million, or 20.2%, to A$49.0
million for the twelve months ended January 31, 1998 from A$40.8 million for
the twelve months ended January 31, 1997. As a percentage of net sales,
selling, general and administrative expenses decreased to 27.3% during the
twelve months ended January 31, 1998 from 27.5% during the comparable period
in 1997.

Store pre-opening expenses increased A$196,000 to A$435,000 due to three
more company-owned stores opening in the twelve months ended January 31, 1998
than in the comparable period in 1997.

Relocation and closure costs decreased by $1.3 million to A$20,000 for the
twelve months ended January 31, 1998. These costs mainly relate to the
restructuring of the Licensee and Wholesale Divisions and the relocation of
manufacturing operations.

Operating income (excluding relocation and closure costs) increased by A$3.8
million to A$7.8 million for the twelve months ended January 31, 1998 from
A$4.1 million for the twelve months ended January 31, 1997. As a percentage of
net sales, operating income (excluding relocation and closure costs) increased
to 4.4% in the twelve months ended January 31, 1998 from 2.7% in the
comparable period in 1997.

Income from affiliates increased by A$168,000 to A$547,000 in the twelve
months ended January 31, 1998 from A$379,000 in the twelve months ended
January 31, 1997. This increase resulted mainly from an increase in
profitability of the Company's Taiwanese affiliate.

Interest expense increased by A$1.1 million to A$3.3 million in the twelve
months ended January 31, 1998 from A$2.2 million in the twelve months ended
January 31, 1997. The increase resulted from the interest at 10.25% per annum
payable on convertible notes of A$10.0 million that were issued on December
31, 1996 and converted to Ordinary Shares concurrent with the Company's IPO on
November 7, 1997.

The Company's effective tax rate was 29.6% in the twelve months ended
January 31, 1998 and 304.4% during the comparable period in 1997 due,
primarily, to a reduction in the valuation allowance in relation to the net
deferred tax asset of the United States operation. The valuation allowance was
fully written back during the twelve months ended January 31, 1997, as the
Company believed it would recoup the benefit of the tax losses and temporary
differences which gave rise to the net deferred tax asset.

Seven Months Ended January 31, 1997 (Audited) Compared to Seven Months Ended
January 31, 1996 (Unaudited)

Net sales increased approximately A$6.7 million, or 7.3%, to A$98.8 million
for the seven months ended January 31, 1997, from A$92.1 million for the seven
months ended January 31, 1996. Four new stores were opened in the United
States and one new store opened in Australia during the seven months ended
January 31,

1997, contributing approximately A$941,000 and A$610,000, respectively, to the
increase in net sales. In addition, refurbishment was completed on two stores
in Australia during the same period with these stores adding a further A$1.1
million to the increase in net sales. Comparable store sales increased 7.2%
and contributed A$4.3 million of the increase in net sales for the seven
months ended January 31, 1997. Comparable store sales increased 4.1% in the
United States and 10.6% in Australia. A generally poor U.S. retail environment
during the 1996 Olympic season impacted U.S. comparable store sales. The
remaining portion of the increase in sales was attributable to sales resulting
from two new stores opened in the United States in the preceding two quarters,
a one-time close-out sale of wood heaters to Australian licensees and an
increase in barbecue sales to Australian licensees. This increase in sales was
partially offset by the loss of a major Australian wholesale customer and the
Company's decision to discontinue third party enameling work.

Gross profit increased approximately A$1.5 million, or 5.2%, to A$30.8
million for the seven months ended January 31, 1997 from A$29.3 million for
the seven months ended January 31, 1996. Gross margin decreased to 31.2%
during the seven months ended January 31, 1997 from 31.8% during the
comparable period in 1996. The decrease in gross margin was primarily due to
the Company's pursuit of increased market share in the high-volume, low-margin
end of the Australian barbecue market. In addition, sales by new U.S. stores
include a large portion of lower-margin sales during initial periods of
operation. This, combined with increased freight costs for new stores located
outside of California, also contributed to the decrease in gross margin.

Selling, general and administrative expenses increased approximately A$1.4
million, or 5.8%, to A$25.7 million for the seven months ended January 31,
1997 from A$24.3 million for the seven months ended January 31, 1996. As a
percentage of net sales, selling, general and administrative expenses
decreased to 26.1% for the seven months ended January 31, 1997 from 26.4% for
the seven months ended January 31, 1996. The decrease was primarily due to
improved operating leverage in the Australian store base and cost savings in
the Australian licensee and wholesale divisions brought about by the
restructuring of the licensee division. This decrease was partially offset by
increased infrastructure spending in the United States related to Company
expansion.

Store pre-opening expenses increased A$86,000 to A$200,000 for the seven
months ended January 31, 1997 from A$114,000 for the seven months ended
January 31, 1996, primarily due to the opening of four new stores in the
United States.

Relocation and closure costs increased to A$461,000 for the seven months
ended January 31, 1997 from A$0 for the seven months ended January 31, 1996 in
connection with the organizational restructuring of the licensee and wholesale
divisions and the provision for certain costs for the planned relocation of
its enameling plant in 1998.

Operating income (excluding relocation and closure costs) increased by
A$14,000 to A$4,857,000 for the seven months ended January 31, 1997 from
A$4,843,000 for the seven months ended January 31, 1996. As a percentage of
net sales, operating income (excluding relocation and closure costs) decreased
to 4.9% in the seven months ended January 31, 1997 from 5.3% in the comparable
period in 1996.

Income from affiliates decreased by A$457,000 to A$252,000 in the seven
months ended January 31, 1997 from A$709,000 in the seven months ended January
31, 1996. This decrease resulted from the Company's sale of its equity
interest in its New Zealand affiliate in December 1995.

Interest expense remained constant at approximately A$1.6 million for the
seven months ended January 31, 1997 and the seven months ended January 31,
1996.

Other expense (income) increased to an expense of A$1.1 million for the
seven months ended January 31, 1997 from income of A$2.3 million for the seven
months ended January 31, 1996. In the 1997 period, the Company incurred
expenses of approximately A$1.1 million related to the Capital Reduction,
while in the 1996 period, the Company recognized a gain of A$2.3 million from
the sale of its equity interest in its New Zealand affiliate, as described
above.

The Company's effective tax rate was 19.0% in the seven months ended January
31, 1997 and 20.6% in the seven months ended January 31, 1996. The difference
in rates compared to the expected rate of 36% is a result of the exclusion
from Australian taxation of equity in income from affiliates, the gain on sale
of its equity in a New Zealand affiliate and a reduction in the valuation
allowance in relation to the net deferred tax asset of the United States
operation. The valuation allowance was fully written back in the seven months
ended January 31, 1997 because the Company believed that it would recoup the
benefit of the tax losses and temporary differences which gave rise to the net
deferred tax asset. Excluding the effect of these items, the effective tax
rate would have been 43.9% in the seven months ended January 31, 1997 and
37.1% in the seven months ended January 31, 1996. This difference is mainly
attributable to increased state taxes in the United States for the seven
months ended January 31, 1997.

Twelve Months Ended June 30, 1996 (Audited) Compared to Twelve Months Ended
June 30, 1995 (Audited)

Net sales increased approximately A$3.6 million, or 2.6%, to A$141.7 million
for the fiscal year ended June 30, 1996 from A$138.1 million for the fiscal
year ended June 30, 1995. Comparable store sales increased 5.0% and
contributed approximately A$4.1 million of the increase in net sales for the
1996 fiscal year. Comparable store sales increased 10.0% in the United States
and 8.1% in Australia. The combined comparable store sales increase was
impacted by a decrease in the US$/A$ exchange rate of approximately 13.0% in
that period. Sales during fiscal 1996 also increased as a result of the
opening of four new Company-owned stores and two franchised stores in the
United States, the opening of one new store in Australia and increases in
other stores not included in the comparable store calculation. The combined
sales increases were partially offset by decreases in the Australian licensee
and wholesale divisions, primarily due to the declining wood heating market
and overall softness in the Australian rural economy.

Gross profit decreased approximately A$2.3 million, or 4.9%, to A$43.5
million for fiscal 1996 from A$45.8 million for fiscal 1995. As a percentage
of net sales, gross margin decreased to 30.7% during fiscal 1996 from 33.2%
during fiscal 1995. The decrease in gross margin in the 1996 period was
primarily due to an increase in the cost of the Company's manufactured
products as a result of the factory relocation, the one-time close-out sales
of the Company's wood heating inventory and general pressure on margins in the
Australian retail sector. In the United States, gross margin increased as a
result of a change in sales mix towards higher margin proprietary products.

Selling, general and administrative expenses decreased approximately
A$719,000, or 1.8%, to A$39.3 million for fiscal 1996 from A$40.1 million for
fiscal 1995. As a percentage of net sales, selling, general and administrative
expenses decreased to 27.8% during fiscal 1996 from 29.0% during fiscal 1995.
The decrease was primarily due to increased operating leverage in its
Australian store base resulting from store refurbishment and the restructuring
of the Australian licensee division. This decrease was partially offset by
infrastructure spending related to the opening of five new U.S. stores,
including new hiring and staff training expenses.

Store pre-opening expenses increased A$89,000 to A$153,000 during fiscal
1996 from A$64,000 for fiscal 1995, primarily due to the opening of four new
stores in the United States.

Relocation and closure costs increased to A$875,000 for fiscal 1996 from A$0
for fiscal 1995, primarily due to the relocation of the Company's
manufacturing operation and the restructuring of the Company's Australian
licensing division.

Operating income (excluding relocation and closure costs) decreased A$1.6
million to A$4.0 million for fiscal 1996 from A$5.6 million for fiscal 1995.
Approximately A$2.3 million of the decrease was due to an increase in the cost
of the Company's manufactured products following the factory relocation, the
one-time close-out sales of the Company's wood heating inventory and general
pressure on margins in the Australian retail sector. This decrease in gross
profits was partially offset by a decrease in selling, general and
administrative expenses of approximately A$719,000.

Income from affiliates decreased A$127,000 to A$836,000 in fiscal 1996 from
A$963,000 in fiscal 1995, due to the loss of income from the GLG New Zealand
after the Company sold its equity interest therein in December 1995.

Interest expense increased by A$32,000 to A$2,262,000 in fiscal 1996 from
A$2,230,000 in fiscal 1995.

Other income increased to A$2.3 million in fiscal 1996 from A$0 in fiscal
1995, due to the gain on the sale of the Company's New Zealand affiliate.

The Company's effective tax rate was 2.4% in fiscal 1996 and 13.1% in fiscal
1995. The difference in rates is primarily the result of the exclusion from
Australian taxation of both equity in income from affiliates and gain on the
sale of its New Zealand affiliate, as well as a reduction in the valuation
allowance for deferred tax assets due to the realization of net operating loss
carryforwards against U.S. taxes. Excluding these items, the effective tax
rate would have been 46.8% for the fiscal year ended June 30, 1996 and 31.2%
for the fiscal year ended June 30, 1995.

UNAUDITED QUARTERLY RESULTS AND SEASONALITY

The Company's quarterly results of operations have fluctuated, and are
expected to continue to fluctuate materially, primarily because of the
seasonality associated with the barbecue and fireplace industries and related
item sales. The timing of new store openings and related pre-opening and other
startup expenses, net sales contributed by new stores, increases or decreases
in comparable store sales, changes in the Company's merchandise mix and
overall economic conditions also contribute to fluctuations in the Company's
quarterly results. The Company believes this is the general pattern associated
with its segment of the retail industry and expects this pattern will continue
in the future. In order to partially offset the effects of seasonality, the
Company operates in both the Southern and Northern hemispheres, which have
opposite seasons, and offers fireplace products and (in Australia) home
heaters in the fall and winter months. In anticipation of its peak selling
season, the Company substantially increases its inventory levels and hires a
significant number of part-time and temporary employees. In non-peak periods,
such as late winter and early fall, the Company has regularly experienced
monthly losses. Because of these fluctuations in net sales and net income
(loss), the results of operations of any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year or any
future quarter. See "Risk Factors--Seasonality; Weather; Fluctuations in
Results."

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations through cash flow from
operations and bank borrowings. In November 1997, the Company completed its
IPO, raising net proceeds of approximately US$13.8 million (approximately
A$19.7 million). Approximately A$12.0 million (approximately US$8.4 million)
has been used to repay indebtedness incurred under the ANZ Facility.
Approximately US$1.8 million has been used to repay all indebtedness
outstanding under the Merrill Lynch Facility as of the completion of the IPO.
The Company intends to use the remaining approximately US$3.6 million
(approximately A$5.1 million) of the IPO proceeds to fund a portion of the
Company's operations and investing activities and to continue the expansion of
the Company's operations in the United States.

In July 1994, the Company and ANZ entered into the ANZ Facility. The ANZ
Facility is subject to annual review and modification, in accordance with
standard Australian practice, and is currently undergoing modification as a
consequence of changes in the Company resulting from the Company's IPO. The
Company expects that its new credit facility with ANZ will be finalized in
June 1998. Under the ANZ Facility as in effect immediately prior to the
Company's IPO, the Company and its subsidiaries had credit facilities
aggregating up to A$53.7 million, including a real property loan in principal
amount of A$2.2 million, a multi-purpose facility in principal amount of
A$30.0 million, a trade finance facility in principal amount of A$10.0
million. Indebtedness under the property loan bore interest at 9.35% per annum
and was subject to a variable prepayment penalty depending on the term of the
loan. The Company also utilized a standby credit facility in principal

amount of A$12.0 million in order to fund the Capital Reduction, all of such
standby credit facility having been repaid upon consummation of the Company's
IPO in November 1997 and will not be renewed. The majority of the remainder of
the Company's borrowings under the ANZ Facility were usually in the form of
90- to 180-day bills, which typically bore interest at a market rate plus an
additional percentage fee to ANZ of approximately 1.25%. No significant
prepayment penalties were associated with these loans. The ANZ Facility was
secured by a first security interest in all present and future assets of the
Company located in Australia and a second security interest being taken
(subordinate to a lien under the Merrill Lynch Facility) in all assets of the
Company located in the United States. In addition, the ANZ Facility was
guaranteed by each subsidiary of the Company, including The Galore Group
(USA), Inc. and Barbeques Galore, Inc. (referred to collectively as "Galore
USA"). Although the Company generally maintains a good working relationship
with ANZ, the Company can provide no assurance that the terms of the revised
ANZ Facility will be as favorable to the Company as the terms of the ANZ
Facility in place immediately prior to the consummation of the Company's IPO.

In February 1995, Barbeques Galore Inc., the Company's U.S. operating
subsidiary, entered into a five year credit facility with Merrill Lynch. As of
April 30, 1998, such facility includes a term loan in aggregate principal
amount of US$300,000 (the "Term Loan") and a revolving line of credit in
aggregate principal amount of US$300,000 (the "Revolving Line," and
collectively with the Term Loan, the "Merrill Lynch Facility"). Indebtedness
under the Revolving Line and Term Loan accrues interest at the 30-day
commercial paper rates plus 2.65%, and is payable monthly. The Merrill Lynch
Facility is secured by a first security interest in all Galore USA present and
future assets. The Merrill Lynch Facility is guaranteed by the Company and The
Galore Group (USA), Inc., the parent of Barbeques Galore, Inc.

In October 1996, the Company, SBC Warburg Dillon Read Australia Limited
("SBC Warburg Australia"), as representative of the holders of the Convertible
Notes, and certain principal shareholders of the Company entered into certain
debt instruments, pursuant to which the Company issued and sold A$10.0 million
in aggregate principal amount of Convertible Notes in December 1996. All of
the Convertible Notes were converted into 1,197,926 Ordinary Shares of the
Company in connection with the consummation of the Company's IPO in November
1997. Certain holders of Ordinary Shares acquired upon conversion of the
Convertible Notes were Selling Shareholders in the Company's IPO, selling an
aggregate of 200,000 Ordinary Shares acquired upon conversion of the
Convertible Notes, and the remainder of the Ordinary Shares received upon such
conversion are being registered pursuant to the Registration Statement of
which this Prospectus is a part. See "Certain Transactions--Recent Delisting
Transaction and Conversion of Convertible Notes."

For the three-month period ended April 30, 1998, the twelve-month period
ended January 31, 1998, the seven-month period ended January 31, 1997 and the
twelve-month period ended June 30, 1996, cash flow (used in) provided by
operating activities was A$(1.4) million, A$(1.1) million, A$7.2 million and
A$4.6 million, respectively. The cash used by operations primarily reflects
the increase in inventory levels related to the Company's build-up of
inventories and the increased number of stores in the United States.

Net cash flows used in investing activities for the three-month period ended
April 30, 1998, the twelve-month period ended January 31, 1998, the seven-
month period ended January 31, 1997 and the twelve-month period ended June 30,
1996 were A$5.0 million, A$4.5 million, A$2.8 million and A$0.06 million,
respectively. The cash flows used in investing activities have resulted
primarily from capital expenditures related to new store openings in the
United States, store refurbishments in Australia and the acquisition, during
the quarter ended April 30, 1998, of a 45,000 square foot property for
approximately A$3.5 million to relocate the Company's enameling operations to
the same facilities as its barbecue and home heater manufacturing operations
adjacent to the Company's Australian headquarters. Subsequent to April 30,
1998, the Company acquired a 60,000 square foot property near its Australian
headquarters for its warehousing and distribution operations at a cost of
approximately A$1.75 million, with an additional approximately A$1.0 million
capital expenditure required to upgrade the facility before use. Purchase of
this property is scheduled to close between June and August 1998. The Company
anticipates that it will continue to incur significant capital commitments in
connection with further expansion.

The cash flows used in operations and investing activities have been largely
sourced from long term borrowings under the ANZ and Merrill Lynch Facilities
and from the net proceeds from the Company's IPO.

At April 30, 1998 the Company had working capital of A$37.2 million. At
April 30, 1998 the Company maintained minimal amounts in cash and cash
equivalents, relying instead on undrawn facilities under its borrowing
arrangements with ANZ and Merrill Lynch. For the twelve months ended January
31, 1997 and January 31, 1998, the Company's average capital expenditures to
open a new store in the United States were approximately A$196,000 and
A$270,000, respectively, and the Company's average capital expenditures to
refurbish a store in Australia were approximately A$400,000 and A$425,000,
respectively. In calendar 1997, the Company spent an aggregate of
approximately A$5.9 million, of which approximately A$2.2 million was spent on
U.S. store expansion and approximately A$2.1 million was spent on the
Australian store refurbishment program. In calendar 1998, the Company
currently anticipates that it will spend an aggregate of approximately A$9.0
million, of which approximately A$3.9 million will be spent on U.S. store
expansion and approximately A$1.6 million will be spent on the Australian
store refurbishment program. The Company currently expects to fund the
foregoing capital expenditures in the United States and Australia using a
portion of net proceeds from the Company's IPO and net cash flow from
operations. The Company expects to continue to incur significant capital
commitments in connection with further expansion. The actual costs that the
Company will incur in connection with the opening and refurbishment of future
stores cannot be predicted with precision because such costs will vary based
upon, among other things, geographic location, the size of the stores and the
extent of remodeling required at the selected sites. See "Business--Store
Expansion and Refurbishment."

The Company believes the proceeds raised from the Offering and the remaining
ANZ and Merrill Lynch Facilities are sufficient to meet its presently
anticipated working capital and capital expenditure requirements for at least
the next twelve months.

The Company has from time to time in the past and may in the future enter
into foreign currency forward contracts as a means of offsetting fluctuations
in the dollar value of foreign currency accounts. Typically these are U.S.
dollar-denominated contracts with major financial institutions and have
settlement dates of less than one year. At January 31, 1997, January 31, 1998
and April 30, 1998, the estimated notional amount of these contracts was A$4.2
million, A$0 million and A$0, respectively.

NEW PRONOUNCEMENTS BY FINANCIAL ACCOUNTING STANDARDS BOARD

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. SFAS No. 130 is effective for financial statements issued for
periods beginning after December 15, 1997.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. SFAS No.
131 establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS No. 131 is
effective for financial statements issued for periods beginning after December
15, 1997.

The impact of these new pronouncements will be to increase the level of
disclosure in subsequent financial statements.

BUSINESS

The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

GENERAL

Barbeques Galore believes that it is the leading specialty retail chain of
barbecue and barbecue accessory stores in Australia and the United States,
based on number of stores and sales volume. The Company's belief is based on
its years of experience in the barbecue retail industry as well as its
contacts with other industry retailers, suppliers and trade associations. The
Company opened its first store in Sydney, Australia in 1977 and opened its
first U.S. store in Los Angeles in 1980. Barbeques Galore stores carry a wide
assortment of barbecues and related accessories which are displayed in a store
format that emphasizes social activities and healthy outdoor lifestyles. Its
stores also carry a comprehensive line of fireplace products and, in
Australia, home heating products, camping equipment and outdoor furniture. As
of April 30, 1998, the Company owned and operated 33 stores in all six states
in Australia and 38 stores (including three U.S. Navy concession stores) in
seven states in the United States. In addition, as of such date, there were 46
licensed stores in Australia and seven franchised stores in the United States,
all of which operate under the "Barbeques Galore" name.

The Company believes that various demographic trends have led to the
increased popularity of outdoor cooking. Specifically, the Company believes
that there has been a shift toward consumers wanting to spend more quality
time together in family gatherings and social activities around the home, as
well as an increased desire to be outdoors. As a pleasant and inexpensive
outdoor activity, barbecuing is increasing in popularity due to its
convenience (especially in the case of gas barbecues), great flavors and easy
clean-up. Furthermore, as consumers are turning decks, patios and other
outdoor spaces into entertainment centers and "virtual" outdoor kitchens, they
are increasingly seeking barbecues with enhanced features along with a wide
array of barbecue accessories. The Company believes that its strong focus on
barbecues and related accessories positions it to capitalize on these trends
and provides significant opportunities for future growth.

The Company's unique retailing concept differentiates Barbeques Galore from
its competitors by (i) offering an extensive selection of barbecues and
related accessories to suit all consumer lifestyles, preferences and price
points, (ii) showcasing these products at convenient store locations with a
shopping environment that promotes the total barbecuing experience and (iii)
providing exceptional customer service through well-trained sales associates
who have in-depth knowledge of the products and understanding of customer
needs. These competitive strengths are enhanced by the Company's barbecue and
home heater manufacturing operations, which enable the Company to realize
higher margins, control product development and improve inventory flexibility
and supply.

COMPANY HISTORY

Barbeques Galore opened its first store in Sydney, Australia in 1977 to
serve an unfilled niche in the retail market for versatile, well-designed
barbecues. Since then, the Company has become the leading barbecue retailer in
Australia, with an estimated 90% consumer awareness level and an approximately
30% retail market share. In 1980, the Company opened its first U.S. store in
Los Angeles.

During the 1980s, the Company vertically integrated its operations by
expanding into barbecue manufacturing in order to capture higher margins,
control product development and improve inventory flexibility and supply.
Fireplace products and, in Australia, home heaters were added to take
advantage of the winter selling season. In Australia, the Company further
diversified its product line through the addition of camping equipment and
outdoor furniture, both of which complement the Company's main barbecue line.

In April 1987, the Company listed its Ordinary Shares on the ASE. In October
1996, as part of its plans to accelerate new store expansion in the United
States, the Company announced its intention to repurchase shares

from the public and delist from the ASE (pursuant to a transaction which was
consummated as of December 31, 1996) and to seek capital in the United States.
The Company consummated its IPO in November 1997. See "Certain Transactions--
Recent Delisting Transaction."

BUSINESS STRENGTHS AND COMPETITION

The retail and distribution markets for barbecues and the Company's other
product offerings are highly competitive in both the United States and
Australia. The Company's retail operations compete against a wide variety of
retailers, including mass merchandisers, discount or outlet stores, department
stores, hardware stores, home improvement centers, specialty patio, fireplace
or cooking stores, warehouse clubs and mail order companies. The Company's
manufacturing and wholesale operations compete with many other manufacturers
and distributors throughout the world, including high-volume manufacturers of
barbecues and home heaters. Many of the Company's competitors have greater
financial, marketing, distribution and other resources than the Company, and
particularly in the United States, may have greater name recognition than the
Company. Furthermore, the lack of significant barriers to entry into the
retail market which the Company services may also result in new competition in
the future. Barbeques Galore competes for retail customers primarily based on
its broad assortment of competitively priced, quality products (including
proprietary and exclusive products), convenience, customer service and the
attractive presentation of merchandise within its stores. The Company believes
that the following business strengths have contributed significantly to its
past success and intends to further capitalize on those strengths in executing
its growth strategy.

Selection of Merchandise. Barbeques Galore offers an extensive selection of
quality barbecues and barbecue accessories designed to suit consumer
lifestyles, preferences and price points. Its stores offer a variety of
barbecues, with a range of styles, finishes and special features, including
the Company's proprietary brands as well as more than 60 other barbecues under
different brand names. Accompanying these barbecues are an assortment of
barbecue replacement parts and accessories which generate high margins. As the
leading retail chain specializing in barbecues and related merchandise,
Barbeques Galore offers consumers one-stop shopping convenience for virtually
all of their barbecue cooking needs.

Store Environment. The Company's stores offer a shopping environment which
is consistent with its outdoor lifestyle image and promotes the total
barbecuing experience. The Company's newer stores generally have high
ceilings, wide aisles and extensively use natural materials such as wood and
stone. Merchandise is displayed to convey the breadth and depth of the
Company's product lines. An array of barbecues are displayed on the selling
floor complete with accessories to provide the consumer the opportunity to
compare and contrast different models. Store presentation is based on a
detailed and comprehensive store plan regarding visual merchandising to assure
that all stores provide a consistent portrayal of the Barbeques Galore image.
Average store retail selling area is approximately 3,300 square feet in the
United States and 8,400 square feet in Australia.

Customer Service. The Company recognizes that customer service is
fundamental to its success. The Company has a "satisfaction guaranteed" return
policy and honors all manufacturer warranties for products sold at its stores.
Store managers and sales associates undergo product and sales training
programs which enable them to recommend merchandise that satisfies each
customer's lifestyle and needs. The Company monitors each store's service
performance and rewards high quality customer service both on a team and
individual level. The Company believes that its employees' knowledge of its
product offerings and the overall barbecue market, and their understanding of
customer needs, are critical components of providing customer service and
distinguish it from its competitors.

Convenient Store Locations. The Company positions its stores in locations
that maximize convenience and accessibility. Stores are typically situated at
highly visible locations and in close proximity to middle to upper-income
residential neighborhoods or areas of new housing construction. Stores
generally feature ample customer parking space and ready access to major
thoroughfares. Many stores are situated in retail power centers or close to
complementary retail stores, further attracting customer traffic. As a result
of its site selection criteria, the Company believes it has been effective in
identifying successful new store locations.

Integrated Manufacturing Operation; New Product Development. Through its
vertically integrated operations, the Company manufactures a proprietary line
of barbecues and home heaters for its retail stores. In addition, the Company
has an experienced in-house research and development team dedicated to
barbecue and home heater market analysis and product development that can
identify and respond to changing consumer trends. The Company believes that
controlling its own manufacturing operations allows it to realize higher
margins, control product development and improve inventory flexibility and
supply.

Experienced Management Team. The Company's senior management team has an
average of more than 28 years of retail industry experience. Since the current
executive management team assumed responsibility in 1982, the number of
Barbeques Galore stores has grown from 12 stores (including one licensed
store) as of June 30, 1982 to 124 stores (including 53 licensed or franchised
stores) as of April 30, 1998. The Company believes that management's
experience positions it to execute its business and growth strategies. The
directors and executive officers of the Company beneficially own approximately
39.1% of the Company's outstanding Ordinary Shares. See "Principal
Shareholders."

STORE EXPANSION AND REFURBISHMENT

The Company's growth strategy is to continue expansion of its U.S. store
base and to continue refurbishing (through relocating or remodelling) existing
stores in Australia. From January 31, 1997 to April 30, 1998, the Company grew
from 27 to 38 Company-owned stores (including three U.S. Navy concession
stores), representing a 41% increase in the number of owned stores in the
United States. The Company currently plans to open approximately 15 new stores
in the United States in calendar 1998, of which four have opened, six are
under construction and the remaining five are in lease negotiation. The
Company also currently intends to open 15 new stores in the United States in
calendar 1999. For new stores in the United States, the Company estimates that
the average cost of leasehold improvements, furniture and fixtures will range
from approximately US$120,000 to US$180,000 per store, after taking into
account landlord contributions, depending on the condition of the site. Start-
up inventory purchases for new stores are estimated at between US$120,000 and
US$150,000 per store and pre-opening costs (which are expensed in the period
in which the store opens) are estimated to be US$40,000 per store. New
Barbeques Galore stores opened in the United States typically are profitable
during their first twelve months of operation, generating on average
approximately US$80,000 of store level contribution (operating income before
store pre-opening expenses and non-cash items such as depreciation). See "Risk
Factors--Implementation of Growth Strategy."

For the twelve months ended January 31, 1998 and the three months ended
April 30, 1998, the Company's owned stores in the United States (that were
open for at least 12 months) averaged approximately US$1.3 million and
US$279,000, respectively, in net sales and produced approximately US$394 and
US$82, respectively, of net sales per selling square foot. The average cost of
leasehold improvements, furniture and fixtures acquired for these stores
during these periods was approximately US$198,000 and US$120,000,
respectively, per store after taking into account landlord contributions.
Inventory holdings at such stores averaged US$115,000 and US$115,000,
respectively, during these periods. These stores generated an average store
level contribution (operating income before store pre-opening expenses and
non-cash items such as depreciation) of approximately US$182,000 and
US$25,000, respectively, in these periods. For the twelve months ended January
31, 1998, the Company's United States net sales were derived 90.1% from
existing stores and 9.9% from the ten new stores (including one new U.S. Navy
concession store) opened in that period. For the three months ended April 30,
1998, the Company's United States net sales were derived 99.5% from existing
stores and 0.5% from the one new store open in that period.

To implement its strategy in the United States, the Company intends to
penetrate selected new markets while simultaneously expanding existing markets
to increase market share and operating leverage without cannibalizing the
productivity of existing stores. Although a major portion of the initial U.S.
store expansion is being targeted at large metropolitan markets in Sunbelt
states (from California to the Carolinas), the Company believes that its
retail concept has national potential and may consider entering markets in the
Pacific Northwest, Mid-Atlantic and Northeast regions. In evaluating potential
markets and specific store locations, the Company considers

demographic factors such as population, income levels, number of single family
homes and housing starts, as well as other factors such as visibility,
accessibility, lot size, proximity to heavy traffic and ample parking. Many
stores are situated in retail power centers or close to complementary retail
stores, further attracting customer traffic. Given its rapid store expansion
strategy, the Company has retained outside real estate consultants to assist
in site selection and lease negotiations. Once a site has been determined and
becomes available, the Company is generally able to open a store within six to
eight weeks due to its standardization of store design, merchandise displays
and store operations. As a result of its site selection criteria, the Company
believes it has been highly effective in identifying successful new store
locations. The Company's ability to implement its expansion plans will depend
upon a number of factors further discussed in "Risk Factors--Implementation of
Growth Strategy."

In addition, the Company has initiated a major refurbishment plan for its
Australian store base to enhance store productivity. From January 31, 1997 to
April 30, 1998, five existing stores have been remodelled, one new store has
been opened, one store has been relocated and one store has been closed. Under
its current plans, the Company intends to refurbish four stores in addition to
the one planned new store it has already opened in calendar 1998 and intends
to refurbish two stores and open two new stores in calendar 1999. The Company
intends to relocate a number of these stores in retail power centers or close
to complementary retail stores which fit the Company's desired demographics
and other site selection standards. Refurbished stores will be upgraded to
replicate the Company's prototype store environment. The Company estimates
that the cost of such store relocations will generally range from
approximately A$350,000 to A$450,000 per store, depending on the required
level of leasehold improvements and replacement furniture, fixtures and
inventory. Increased inventory holdings for these stores generally range
between A$100,000 and A$200,000 depending on the size of the stores.
Management believes that such store relocations will position the Company
within potentially significant new markets in Australia, and that such store
remodellings will increase customer traffic and comparable store sales. See
"Risk Factors--Implementation of Growth Strategy."

MERCHANDISING

Merchandise Categories. Barbeques Galore's unique merchandising concept
differentiates the Company from its competitors by offering a breadth and
depth of high quality, competitively-priced proprietary and other brand name
barbecues and barbecue accessories which management believes is generally not
available from any other single retailer.

Barbeques Galore offers an extensive selection of barbecues and barbecue
accessories designed to suit all consumer lifestyles, preferences and price
points. Its stores offer a wide variety of gas, charcoal and electric
barbecues, including barbecues manufactured by the Company under its
proprietary Turbo, Capt N Cook, Cook-On and Bar-B-Chef brands as well as more
than 60 other barbecues under different brands, including those made by Weber-
Stephen Products Co., Sunbeam Corporation, Rinnai, Onward Multi-Corp. (Broil
King and Broil Mate), Meco, DCS, Fiesta and other grill manufacturers. The
Company's proprietary barbecues generally generate higher gross margins than
barbecues of other manufacturers. For the twelve months ended January 31,
1998, proprietary barbecue retail sales represented approximately 34.8% and
32.0% of the Company's total net sales in the United States and Australia,
respectively. For the three months ended April 30, 1998, proprietary barbecue
retail sales represented approximately 39.7% and 32.0% of the Company's total
net sales in the United States and Australia, respectively.

Customers can choose among barbecues with a full range of styles (kettle,
table-top, patio-bases, carts, built-in, portable and others), finishes (from
stainless steel to colorful porcelain-enamelled steel) and special features
(such as side burners, multiple burners, warming racks, rotisseries, griddle
plates and electronic ignition and other touch controls). Accompanying these
barbecues are a wide assortment of barbecue replacement parts (including many
hard-to-find items) and accessories, including tools, grill brushes, utensils,
covers, smokers, rotisseries, griddles, fryers, kabob racks, cleaners,
charcoal, wood chips and custom barbecue "islands," as well as a variety of
barbecue sauces, marinades, spices, rubs, aprons, mitts, cookbooks, cooking
videotapes and other grill novelties. In general, accessories not only
generate impulse purchases and encourage repeat business, but also command
higher margins than barbecues. Accordingly, as part of its ongoing
merchandising strategy, the

Company intends to increase sales of barbecue accessories as a percent of
total retail sales. Under a cross-branding arrangement, certain stores in the
United States also offer gourmet steaks and food products made and distributed
by Omaha Steaks International, Inc., a national mail order vendor.

In addition, to complement the Company's main barbecue and related accessory
line and to take advantage of the winter selling season, Barbeques Galore
stores also carry a comprehensive line of fireplace products and, in
Australia, a full line of gas and wood home heaters. Australian stores also
offer camping equipment (including tents, sleeping bags, coolers and outdoor
cookware) and outdoor furniture (including deck furniture, picnic tables,
standing umbrellas and lounge chairs) to benefit from of the lack of any
dominant national retailer of such merchandise. These products broaden
customer appeal, generate additional customer traffic and repeat business and
improve overall store productivity.

The following table sets forth the Company's five major merchandise
categories as an approximate percentage of net sales in the United States and
Australia for the twelve months ended January 31, 1998:

UNITED STATES AUSTRALIA
------------- ---------

Barbecues............................................ 71.6% 56.1%
Barbecue Accessories................................. 19.0 7.0
Home Heaters and Fireplace Products.................. 9.4 12.1
Camping Equipment.................................... -- 15.7
Outdoor Furniture.................................... -- 9.1
----- -----
100.0% 100.0%
===== =====

Competitive Pricing. The Company's stores and advertisements guarantee that
Barbeques Galore will beat any advertised price for the same product. In
addition, through its manufacturing capabilities, the Company offers a high
quality proprietary line of barbecues that generates higher margins than other
manufacturers' products. The Company believes that it maintains its price-
competitiveness and higher margins by benefitting from its in-depth knowledge
of the barbecue market and its size and purchasing power, resulting in volume
discounts and special vendor arrangements. As a result, the Company is able to
focus on providing an exciting store environment and superior customer
service, while maintaining competitive prices.

CUSTOMER SERVICE

The Company believes that its employees' extensive knowledge of its product
offerings and the overall barbecue market, and their understanding of customer
needs, are critical components of providing excellent customer service and
distinguish it from its competitors. Store managers and sales associates
undergo extensive product and sales training programs, receiving instruction
in all aspects of the Company's products and store operation, as well as
cooking classes. In order to attract and retain highly motivated employees
committed to providing exceptional customer service, the Company emphasizes
competitive wages, bonuses and commissions, and career path development. Sales
associates are expected to greet each customer, discuss the customer's needs,
suggest merchandise that satisfies the customer's lifestyle and barbecuing
preferences, and recommend accessories that enhance the use and enjoyment of
such merchandise. The Company centralizes many key aspects of its operations
such as its distribution, inventory, human resource functions and management
information systems, in order to allow store employees to focus their efforts
and attention on customer service. The Company monitors each store's
performance on an on-going basis through customer comment forms, anonymous
spot-check visits by outside consultants, focus group sessions and regular
customer care surveys. The Company also rewards high quality customer service
through cash awards, special incentives such as free dinners and vacations and
commendation plaques.

Barbeques Galore stores offer barbecue assembly, home delivery and repair
services. The Company's "satisfaction guaranteed" return policy permits
customers who are not completely satisfied with their purchases to return
items for an exchange, credit or refund. The Company also honors all
manufacturer warranties for products sold at its stores.

MARKETING AND PROMOTION

The Company's principal marketing strategy is to capitalize on the growing
interest in leisure, entertainment and family quality time by emphasizing the
fun and healthy outdoor lifestyle aspects of its products in its marketing and
promotional campaigns.

The Company promotes this image in a variety of media. Catalogs and sales
brochures containing color pictures of products and accessories being used in
social settings are made available to customers at each store and are sent to
customers on store mailing lists and in direct mail campaigns. In order to
attract first-time customers and increase repeat store visits, the Company
regularly runs highly visible newspaper advertisements in selected markets.
Television and radio commercials appear periodically during peak seasonal
periods or to publicize promotional events. Barbeques Galore also promotes its
store grand openings, conducts in-store barbecue and cooking demonstrations
where permissible, and appears at home, garden and trade shows. In the past,
the Company has sponsored cross-promotions with other popular retail chains.
Total retail advertising expenditures represented approximately 6.5% of net
retail sales during the twelve months ended January 31, 1998 and approximately
7.0% of net retail sales during the three months ended April 30, 1998.

STORE OPERATIONS

The Company has six district managers in the United States and five regional
supervisors in Australia, each of whom is responsible for the store operations
within his or her district or region. The district managers report to the Vice
President and Director of Operations in the United States and the regional
supervisors report to the General Manager of Retail/Licensees in Australia.
Each district manager or regional supervisor trains, develops and works
directly with store managers to monitor store performance and ensure adherence
to the Company's merchandising guidelines and operating standards. Incentive
compensation for district managers and regional supervisors is tied to the
achievement of specified sales and operating profit targets.

The typical staff of a Barbeques Galore store consists of a store manager,
an assistant store manager, up to five hourly sales associates and a service
technician. Part-time sales associates, cashiers and technicians are added
during peak seasons or busy periods as necessary. The Company seeks to recruit
and retain highly motivated employees who are committed to providing friendly
and knowledgeable service. The Company recruits its store employees primarily
through on-campus interviews, professional recruiters and referrals, and
conducts four to eight-week training programs. In order to emphasize career
advancement opportunities, the Company has established defined career paths
for store employees and generally promotes district managers and store
managers from within the ranks of its sales force. In the United States, store
managers are paid a salary plus commissions based on gross sales volume and a
bonus based on store profit performance, while sales associates receive
commissions only. Australian store managers and sales associates receive a
salary and participate in store bonus pools based on store profit performance.
See "Business--Customer Service."

MANUFACTURING

In its Australian factory facilities, the Company manufactures barbecues
under its proprietary Turbo, Capt N Cook, Cook-On and Bar-B-Chef brands and
certain private label brands, as well as home heaters under its proprietary
Norseman and Kent brands. During the twelve months ended January 31, 1998,
approximately 32.0% of the Company's net sales in the United States, and
approximately 32.0% of the Company's net sales in Australia, were represented
by barbecues manufactured by the Company. The Company believes that
controlling its own manufacturing operations allows it to realize higher
margins, control product development and improve inventory flexibility and
supply, without affecting its relationships with third party vendors. The
Company's manufacturing operations are closely coordinated with its research
and development activities. The Company has a research and development team
which is dedicated to barbecue market analysis and product development. The
ten members of this research and development team have an average of over 10
years of industry experience. The team continuously studies sales data,
customer feedback, consumer trends and product designs, working closely with
the Company's other departments (in both the United States and Australia) and
suppliers to develop

the annual Barbeques Galore product line. The Company expended approximately
A$0.9 million during the twelve-month period ended January 31, 1998, on
research and development activities.

In the manufacturing process, metal barbecue frames are constructed at the
Company's factory, located at its headquarters in Sydney, Australia, before
being shipped off-site to its enameling operations or third party painting
facilities, where they are coated and finished or painted before being
redelivered to the factory floor. Gas barbecue manifolds are assembled by hand
and tested individually at the factory for compliance with Australian Gas
Association and American Gas Association standards. Barbecues are then
assembled in the factory's automated production line from the completed
frames, burners and other parts (or, in certain cases, shipped to the
Company's U.S. distribution center for assembly). While keeping the same
breadth of product line, in 1997 the Company rationalized the number of frames
it manufactures from 19 to 12 to extend production runs, improve inventory
control and promote efficiency. Barbeques Galore maintains strict quality
control standards and its barbecues are under limited warranty for one to ten
years from the date of retail purchase, depending on the part being warranted.

Management believes that the Company's existing manufacturing and enameling
operations are sufficient to meet anticipated production increases that may
arise from its current store expansion and refurbishment programs. The Company
estimates that its plants currently have the capacity to increase barbecue
output by approximately 30% without any material capital expenditures, and
believes this is sufficient to meet its expansion needs through 1999. The
Company further believes it could approximately double current output through
the addition of six new steel presses (at an aggregate cost of A$1.5 million
to A$2.0 million) and extra worker shifts.

In order to streamline its manufacturing operations to enhance production
efficiencies, in July 1996, the Company relocated its barbecue manufacturing
operations to the location of its corporate headquarters and distribution
center in Sydney, Australia. The Company is currently in the process of
relocating its enameling operations to the same facilities, adding an in-line
powder coating operation and rearranging the assembly, warehouse and
distribution operations to improve production flow, inventory control and
distribution management. These changes are scheduled to be completed in June
1998 and will cost an estimated A$454,000 (against which A$369,000 has already
been accrued) and will require capital expenditures of approximately A$2.8
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Risk Factors--Management of Operational Changes."

PURCHASING

The Company believes that it has good relationships with its merchandise
vendors and suppliers of parts and raw materials and does not anticipate that,
as the number of its stores or its manufacturing volume increases, there will
be any significant difficulty in obtaining adequate sources of supply in a
timely manner and on satisfactory economic terms.

Retail. The Company deals with its merchandise vendors principally on an
order-by-order basis and does not maintain any long-term purchase contracts
with any vendor. Merchandise mix is purchased for its U.S. and Australian
stores by the Company's central buying staffs in its respective headquarters.
In selecting merchandise, the buying staffs obtain input from a variety of
sources, including the Company's research and development team, store
employees, focus groups, customer surveys, industry conventions and trade
shows. During the twelve months ended January 31, 1998, the Company purchased
its inventory from over 400 vendors in the United States, Australia and Asia.
No single vendor accounted for more than 5% of merchandise purchases during
this period, although the Company considers certain brands to be significant
to its business, especially in the United States. The Company does not believe
that the loss of any single brand, including those made by Weber-Stephen
Products Co., Onward Multi-Corp or Fiesta Gas Grills, Inc., would have a
material adverse effect on its operating results. Approximately 25% of the
Company's merchandise purchases were obtained in such period from the
Company's ten largest vendors. See "Risk Factors--Risks Associated with
International Operations; Dependence on Significant Vendors and Supplies."

Manufacturing. The Company also purchases parts and raw materials for use in
its manufacturing and enameling operations. During the twelve months ended
January 31, 1998, the Company's buying staffs purchased barbecue and home
heater parts from over 50 suppliers in Asia, Australia and North America. No
single supplier accounted for more than 5% of factory parts and raw material
purchases during this period, other than Horan's Steel, an Australian steel
distributor, and Bromic, an Australian gas components importer, which
accounted for approximately 20% and 21% of these purchases, respectively.
There is currently no formal supply contract between the Company and Horan's
Steel. In December 1997, the Company appointed Sheet Metal Supplies Pty Ltd as
its steel supplier, with full effect from May 1998. Other major suppliers of
barbecue components include G.L.G. Trading Pte. Ltd. ("GLG Taiwan"), a
Taiwanese company that purchases grills, burners and other products directly
from factories in China and Taiwan. The Company has a 50% ownership interest
in GLG Taiwan and a one-third ownership interest in Bromic. Approximately 80%
of the Company's factory parts and raw material purchases were obtained in
such twelve-month period from the Company's ten largest suppliers. In order to
set production budgets, the price of certain parts and raw materials such as
steel is negotiated and fixed well in advance of production usage. The Company
uses back-up suppliers to ensure competitive pricing. In addition, some of the
Company's key suppliers currently provide the Company with certain purchasing
incentives, such as volume rebates and trade discounts. See "Risk Factors--
Risks Associated with International Operations; Dependence on Significant
Vendors and Suppliers" and "Business--Manufacturing."

DISTRIBUTION

The Company maintains a 44,000 square foot distribution center at its U.S.
headquarters in Irvine, California and 136,000 square foot combined
distribution and warehousing facilities at, and nearby its Australian
headquarters. In May 1998, the Company purchased, for approximately A$1.75
million, with an additional A$1.0 million needed to upgrade the property, a
distribution facility nearby its existing Australian distribution facilities
which will replace a leased distribution facility and eliminate the necessity
to utilize public warehousing space in the foreseeable future. The purchase of
this property is expected to close in June 1998. The Company also uses smaller
warehouses in Perth (operated by an independent distributor) and Brisbane,
Australia, for its wholesale and licensee distribution operations and leases
additional public warehouse space in Sydney, Los Angeles and Texas as
necessary.

Merchandise is delivered by vendors and suppliers to the Company's
distribution facilities and, in certain instances, directly to stores, where
it is inspected and logged into the Company's centralized inventory management
systems. Merchandise is then shipped by Company trucks or third party surface
freight weekly or twice weekly, providing stores with a steady flow of
merchandise. Shipments by the Company's Australian operations to its Irvine
distribution center are made by third party sea freight, so that its Irvine
distribution center can maintain about two to three months of Company-
manufactured inventory at all times, which the Company believes is sufficient
to meet expected U.S. store requirements for such products.

The Company maintains separate inventory management systems in Australia and
the United States which allow it to closely monitor sales and track in-store
inventory. Current plans include the introduction of an automated store
inventory replenishment system in order to better manage its inventory. The
Company estimates that its inventory shrinkage represents no more than 0.5% of
its aggregate retail sales. The Company and its advisors are not aware of any
barbecue industry source from which an industry average shrinkage rate can be
derived. However, the Company believes that the general shrinkage rate for
retailers is approximately 1.5% to 2.0%, and that the Company's rate compares
favorably to that of other retailers.

As the Company expands into new regions or accelerates the rate of its U.S.
store expansion, it may eventually need additional warehouse capacity. In
order to meet such needs and to minimize the impact of freight costs, the
Company intends to secure another distribution center, expand its current
warehouse facilities in the United States or utilize public warehousing space.
Management believes that there is an ample supply of warehousing space
available at commercially reasonable rates. Wherever possible, the Company
also solicits the cooperation of its vendors, through drop shipments to public
warehouses and/or stores, in order to reduce its

freight and handling costs. The Company believes that its existing Australian
distribution arrangements, together with public warehousing space as needed,
are sufficient to meet its current needs.

MANAGEMENT INFORMATION SYSTEMS

In Australia, Barbeques Galore has installed a system which runs on a
proprietary Wang VS software environment, together with a Novell network
utilizing Microsoft applications. This software processes all distribution,
warehouse management, inventory control, purchasing, merchandising, financial
and office automation applications. As in the United States, each store in
Australia is equipped with POS terminals that receive pricing and inventory
information and permit the Company to poll sales transaction data daily. The
Australian system provides a range of reporting and inquiry capability at both
the store and corporate levels similar to that in the United States. The
Company believes that its management information systems are an important
factor supporting its growth and is committed to utilizing technology to
maintain its competitive position.

WHOLESALE OPERATIONS

In Australia, the Company distributes proprietary and private brand name
products and other imported merchandise, on a wholesale basis, through a
wholly-owned Australian subsidiary, Pricotech Leisure Brands Pty Ltd.
("Pricotech"). Wholesale products offered by Pricotech include Cook-On
barbecues, Companion gas camping equipment, Igloo coolers and Kent home
heaters. Pricotech distributes these products primarily to Australian mass
merchants, chains and buying groups. Customers typically buy these products
based on price. In the twelve months ended January 31, 1998 and the three
months ended April 30, 1998, the five largest customers of Pricotech accounted
for approximately 60% and 43.7%, respectively, of its net sales of A$23.2
million and A$2.9 million, respectively. The Company's wholesale operations,
in which its investment consists primarily of inventory and receivables,
currently fill excess production capacity at the Company's manufacturing and
enameling plants. The Company currently has no plans to operate a wholesale
distribution business in the United States.

LICENSING AND FRANCHISING

As of April 30, 1998, the Company licensed 46 Barbeques Galore stores,
generally in rural areas of Australia, and franchised seven Barbeques Galore
stores in the United States. The Company receives annual licensing fees and
franchising royalties, and benefits primarily from these arrangements through
the sale of Barbeques Galore merchandise to the licensees and franchisees.
Independent licensees and franchisees operate such stores pursuant to
agreements which require them to comply with Barbeques Galore's merchandising
and advertising guidelines and conform to the Barbeques Galore image. These
agreements typically provide the licensees and franchisees with exclusive
geographical sales territories. Most of the Australian licensing agreements
have an indefinite term but permit licensees to terminate their arrangements
at will, while franchisees in the United States are generally contractually
bound for fixed periods with renewal options. During the twelve months ended
January 31, 1998, total net sales to licensee and franchisee stores was A$15.6
million and US$5.3 million, respectively. The Company estimates that the
retail sales of Barbeques Galore products alone by

licensees and franchisees was approximately A$24.5 million and US$2.8 million,
respectively, in the same period. During the three months ended April 30,
1998, net sales to licensee and franchise stores was approximately A$2.4
million and US$1.3 million, respectively. The Company estimates that the
retail sales of Barbeques Galore products alone by licensees and franchisees
was approximately A$3.8 million and US$790,000, respectively, in the same
period. A number of the Company's existing licensees have refurbished their
stores in accordance with the Company's established criteria (although no
licensee is required to do so), and the Company maintains an assistance
program to provide advice relating to these enhancements. The Company may
license additional Barbeques Galore stores in Australia on a selective basis,
although it does not intend to franchise any additional stores in the United
States (except within geographical territories as required under existing
franchising agreements).

EMPLOYEES

As of April 30, 1998, the Company employed a total of approximately 960
persons, on a permanent, part-time, or temporary basis. The number of
temporary employees fluctuates depending on seasonal needs. None of the
Company's employees is covered by a collective bargaining agreement, although
to the Company's knowledge, nine workers in its enameling plant belong to a
labor union. The Company considers its relations with employees to be good and
believes that its employee turnover rate is low.

PROPERTIES

The Company currently leases all of its stores and expects that its policy
of leasing, rather than owning, store properties will continue as it expands.
Existing store leases provide for original lease terms that generally range
from two to ten years, with single or multiple renewal options that range from
three to ten years at increased rents. Certain of the leases provide for
scheduled rent increases or for contingent rent (based upon store sales
exceeding stipulated amounts). The Company guarantees two franchised store
leases, one of which is secured by the franchisee's rights in its Barbeques
Galore franchise.

In Sydney, Australia, the Company owns its headquarters, a 136,000 square
foot portion of its distribution and warehousing facility, a 60,000 square
foot portion of which was purchased by the Company in the first quarter of
1998, is expected to close in June 1998 and will need to undergo certain
upgrades prior to full usage. The Company additionally owns its assembly
facility in Australia, measuring 45,000 square feet, which was purchased for
A$3.5 million in the first quarter of 1998. The additional Company-owned space
will replace the distribution facility that the Company previously leased in
Australia and eliminates the necessity to utilize public warehousing space in
the foreseeable future. The Company leases the adjacent 75,000 square foot
barbecue and home heater factory (under a five-year lease with four successive
five-year renewal options for a total maximum lease term of 25 years), and
leases a 20,000 square foot wholesale and licensee store distribution center
in Brisbane (under a five-year lease with one five-year renewal option). In
addition, the Company leases its enameling plant premises. This lease will
expire in June 1998 and, prior to expiration, the Company intends to complete
the move of its enameling operations to its main factory. The Company is also
able to, and periodically does, lease space for short terms in public
warehouses in Australia. In Irvine, California, the Company leases its home
office and 44,000 square foot U.S. distribution center under leases scheduled
to expire in 2000 (subject to a two-year renewal option). As in Australia,
additional public warehouse space is leased for short terms. See "Business--
Manufacturing."

The Company's ownership interest in its Sydney headquarters and all of its
leasehold interests in real property are subject to a mortgage interest of ANZ
under a Deed of Charge and related documents between ANZ (successor-in-
interest to Westpac Banking Corporation) and the Company. See Exhibit No.
10.4.

TRADEMARKS AND PATENTS

"Barbeques Galore," "Turbo," "Capt N Cook," "Bar-B-Chef" and "Cook-On" are
federally registered trademarks and/or service marks in the United States. In
addition, the Company owns a federal trademark

registration for the distinctive configuration of its Turbo grill. The Company
also uses the phrase "America's Largest Chain of Barbecue Stores" as a common-
law trademark in the United States. "Barbeques Galore" and "Cook-On" are
registered trademarks with the State of California. In Australia only, the
Company uses the phrase "Your Outdoor Cooking and Camping Store" as a common-
law trademark and, among others, the names "Norseman" and "Kent" as registered
trademarks. The Company further utilizes a number of different trademarks
relating to various barbecues, barbecue accessories, home heaters, camping
equipment and outdoor furniture manufactured or offered by the Company. The
Company is not presently aware of any claims of infringement or other
challenges to the Company's right to use its marks and the Company's name in
the United States.

The Company owns an Australian patent with respect to a weighing stand
apparatus for gas containers. The Company has a patent application pending in
Australia for its "Flamethrower" gas grill ignition system. The Company also
owns a number of copyrighted works, including brochures and other literature
about its products and many drawings and designs that it uses in marketing
those products.

GOVERNMENTAL REGULATION

Many of the Company's products use gas and flame and, consequently, are
subject to regulation by authorities in both the United States and Australia
in order to protect consumers, property and the environment. For example, the
Company's barbecue and home heater manufacturing and enameling operations are
subject to regulations governing product safety and quality, the discharge of
materials hazardous to the environment, water usage, workplace safety and
labor relations. The Company believes that it is in substantial compliance
with such regulations. The Company's products or personal use thereof are
subject to regulations relating to, among other things, the use of fire in
certain locations (particularly restrictions relating to the availability or
frequency of use of wood heating in homes and barbecues in apartments),
restrictions on the sale or use of products that enhance burning potential
such as lighter fluid, restrictions on the use of gas in specified locations
(particularly restrictions relating to the use of gas containers in confined
spaces) and restrictions on the use of wood burning heaters. See "Risk
Factors--Product Liability and Governmental and Other Regulation."

In addition, if the Company's level of foreign ownership exceeds 40%, the
Company would be considered a foreign person and would require certain
governmental approvals in connection with certain acquisitions in Australia.
See "Risk Factors--Restrictions on Foreign Ownership; Antitakeover
Restrictions."

LEGAL PROCEEDINGS

There are no material pending legal proceedings against the Company. The
Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
business, results of operations or financial condition of the Company.

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company are as
follows:

NAME AGE POSITION
---- --- --------

Directors and Executive
Officers of the Company
Sam Linz.................... 58 Chairman of the Board
Robert Gavshon(1)........... 51 Deputy Chairman of the Board and General
Counsel
John Price.................. 48 Head of Research and Product Development and
Director
Sydney Selati............... 59 President--Galore USA and Director
Philip Gardiner(1)(2)....... 51 Director
Gordon Howlett(1)(2)........ 56 Director
David Glaser................ 49 Company Secretary
David James................. 37 Chief Financial Officer
Kevin Ralphs................ 44 Chief Financial Officer--Galore USA
Key Employees--Australia
William Lyons............... 56 Managing Director of Manufacturing--Park-Tec
Engineering Pty Limited and Australian
Enamellers Pty Limited
Ian Redmile................. 46 General Manager--Pricotech Leisure Brands Pty
Limited
Peter Spring................ 39 General Manager of Retail/Licensees--
Barbeques Galore Australia Pty Limited
Gary Whitehouse............. 48 General Manager of Logistics
Key Employees--United States
L.D. "Chip" Brown........... 37 Chief Operating Officer--Galore USA
Michael Varley.............. 50 Vice President of Purchasing, Distribution
and Product Development
Austin Yeh.................. 50 Vice President and Director of Operations

- --------
(1)Member of the Audit Committee
(2) Member of the Compensation Committee

Sam Linz has served as Chairman of the Board since joining the Company in
May 1982. Until July 1997, Mr. Linz served as non-executive Chairman of the
Board of Rebel Sport Limited ("Rebel"), a leading national sports superstore
chain in Australia. Mr. Linz was one of the founders of Rebel and was a major
shareholder until he sold his interest in July 1997. Prior to joining the
Company, Mr. Linz developed and managed a large chain of liquor stores and
hotels in South Africa in association with Mr. Selati. Mr. Linz has over 31
years of experience in the retail industry.

Robert Gavshon joined the Company in January 1983 as General Counsel and has
also served as Deputy Chairman of the Board since August 1993. Until July
1997, Mr. Gavshon served as a non-executive Director of Rebel. Mr. Gavshon was
one of the founders of Rebel and was a shareholder until he sold his interest
in July 1997. Prior to joining the Company, Mr. Gavshon acted as group counsel
and director of corporate affairs for a multinational corporation based in
Sydney, Australia and prior thereto as a partner in a large commercial law
firm in South Africa. Mr. Gavshon has over 16 years of experience in the
retail industry.

John Price joined the Company in 1981 as General Manager of Wholesale and
has served as Head of Research and Product Development since June 1989, and as
Director of the Company since November 1989. Prior to joining the Company, Mr.
Price helped found and was Managing Director of Cook-On-Gas Products Pty
Limited, a developer and manufacturer of consumer gas products which was
acquired by the Company in 1981. Mr. Price has over 25 years of experience in
the development and marketing of consumer gas products.

Sydney Selati has served as Director of the Company since July 1997 and
President of Galore USA since May 1988. From 1984 until 1988, Mr. Selati was
President of Sussex Group Limited, a chain of retail furniture stores
including Huffman-Koos, Colby's and Barker Brothers. Prior to that, Mr. Selati
developed and managed a large chain of liquor stores and hotels in South
Africa in association with Mr. Linz. Mr. Selati has over 31 years experience
in the retail industry.

Philip Gardiner has served as a non-executive Director of the Company since
April 1987. Mr. Gardiner also serves as a director for several other
Australian companies related to agriculture and mining and has, since 1994,
been a Member and Chairman of the Western Australian Ministers for Primary
Industry and Fisheries Wool Strategy Group (a state-government-appointed
position). In addition, from 1979 to 1994, Mr. Gardiner served both as an
executive and non-executive director for Macquarie Bank Limited, a prominent
Australian banking institution. Currently, Mr. Gardiner is the full-time
manager of his farm in Western Australia.

Gordon Howlett has served as a non-executive Director of the Company since
August 1991. Since April 1997, Mr. Howlett has served as Managing Director of
Adshel Street Furniture Pty Ltd., specializing in advertising-related outdoor
furniture such as bus shelters. Prior to that, from March 1994 to February
1997, Mr. Howlett served as the Executive General Manager of national and
international operations at Qantas Airways Limited. From 1981 to 1994, Mr.
Howlett was Managing Director of Avis Australia and Vice President of Avis
throughout the Asia-Pacific region.

David Glaser has served as Company Secretary since March 1994. Mr. Glaser
has also provided retail management accounting services for the retail
subsidiary of the Company from February 1996 to April 1998 and, from July 1988
to February 1994, was the financial administrator to certain other of the
Company's subsidiaries. Prior to joining the Company, Mr. Glaser was a partner
at Arthur Andersen in South Africa. Mr. Glaser has extensive commercial
experience in retail, manufacturing and service industries both locally and
overseas.

David James joined the Company in January 1992, serving the Company in
several group financial roles, ultimately as General Manager--Finance &
Administration until his departure in September 1996. From September 1996 to
July 1997, Mr. James was employed by HMV Australia Pty Ltd., a subsidiary of
EMI plc, as Finance Director. He rejoined the Company in July 1997 as Chief
Financial Officer of the Company. Prior to 1992, Mr. James served as a Senior
Audit Manager for KPMG in Australia.

Kevin Ralphs has served as Chief Financial Officer of Galore USA since
February 1989. From May 1988 to February 1989, Mr. Ralphs served as Controller
of Galore USA. Mr. Ralphs has also served as controller for American Digital
Products, Inc., a distributor of computer peripherals in the Northeast United
States, treasurer for Hosken Intermediaries, Inc., a reinsurance brokerage
firm, and financial manager for Royal Beech-Nut (Pty) Ltd., a foreign
subsidiary of Nabisco.

William Lyons has served as Managing Director of Manufacturing for Park-Tec
Engineering Pty Limited, an operating subsidiary of the Company since
September 1987. Prior to joining the Company, Mr. Lyons served as the Manager
of Quintrex Marine, a division of Alcan, and as the Manager of Vass Electrical
Engineering. Prior to managing Quintrex Marine and Vass Electrical
Engineering, Mr. Lyons was involved in Design, Production and Factory
Management of Cope Allman for 17 years.

Ian Redmile joined the Company in August 1992 as a State Manager for an
Australian state and has served as General Manager of Pricotech, the Company's
wholesaling subsidiary, since February 1997. Prior to joining the Company, Mr.
Redmile has served as Key Account/Sales Manager for Unilever Australia for 12
years.

Peter Spring has served as General Manager of Retail/Licensees for Barbeques
Galore Australian Pty Limited, an operating subsidiary of the Company since
October 1995. Prior to that, Mr. Spring served as General Manager of the
Operations of Pricotech and has served the Company since its inception in
1977.

Gary Whitehouse joined the Company in May 1990 as National Warehouse Manager
and has served as General Manager of Logistics for the Company since July
1996. Prior to joining the Company, Mr. Whitehouse served as Financial Systems
Accountant for Qantas Airways. Prior to that, Mr. Whitehouse held managerial
positions, including commercial manager, state branch manager and
warehousing/distribution manager.

L.D. "Chip" Brown joined the Company in August 1997 as Chief Operating
Officer of Galore USA. Prior to joining the Company, from September 1993 to
July 1997, Mr. Brown served in a variety of operations including retail and
technology-related positions at PepsiCo, Inc., in the capacities of Senior
Director/Product Manager from November 1995 to July 1997, Process Team Leader
from March 1995 to November 1995 and Market Manager from September 1993 to
March 1995. Mr. Brown was a Division President with DeLoitte & Touche from
1991 to July 1993 and, prior to that, held a variety of positions at Ford
Motor Company and General Electric Company.

Michael Varley joined the Company in January 1982 and served in a variety of
sales- and buying-related positions, until May 1989 when he was appointed Vice
President of Operations and Purchasing. Mr. Varley has served as Vice
President of Purchasing, Distribution and Product Development since May 1994.
From 1978 to 1981, Mr. Varley served as manufacturing/production manager for
Mistral Fans, Inc., a manufacturing company, in both the United States and
Australia. Prior to that, Mr. Varley worked as a product engineer and
technical salesperson for several companies in the United Kingdom, South
Africa and Australia.

Austin Yeh has served as Vice President and Director of Operations for
Galore USA since May 1994. Prior to joining Galore USA, Mr. Yeh served for 15
years as Director of Operations for C&R Clothiers, a major menswear retailer.

At least one-third of the Board of Directors of the Company is elected at
each annual meeting of shareholders. No director may serve for a period in
excess of three years without submitting himself for re-election. The Board of
Directors has a Compensation Committee comprised of Messrs. Gardiner and
Howlett that reviews and makes recommendations for remuneration packages for
executive directors and senior executives, and an Audit Committee presently
comprised of Messrs. Gavshon, Gardiner and Howlett that advises on the
establishment and maintenance of internal controls and ethical standards as
well as on the quality and reliability of financial information provided by
the Company's independent auditors.

The Company is currently reviewing candidates for an additional independent
director, residing in the United States. When such new director is designated,
he or she may serve on the Audit Committee, and may replace one of the current
members of the Audit Committee.

EXECUTIVE SHARE OPTION PLAN

On January 31, 1997, the Company adopted the Executive Share Option Plan
(the "Executive Plan"). Under the Executive Plan, a total of 203,038 Ordinary
Shares were reserved for issuance. On January 31, 1997, the Board granted
stock options comprising the entire share reserve under the Executive Plan.
Each such stock option has an exercise price of A$8.38 per Ordinary Share. The
Executive Plan terminated on December 31, 1997. Accordingly, no additional
stock options will be granted under the Executive Share Option Plan. However,
all options granted prior to the termination date of the Executive Plan are
subject to the terms and conditions of the documents evidencing each such
option.

All stock options granted under the Executive Plan will become exercisable
on February 1, 1999. The stock options will generally lapse thirty days after
the cessation of the employment of the optionee (or the executive controlling
the optionee, if the optionee is an entity (an "Entity Optionee")), whether or
not exercisable. In

addition, the stock options will automatically lapse (i) if the optionee or
Entity Optionee transfers, assigns, or encumbers any right or interest in the
options without the Company's consent (except for a one-time exemption for a
transfer by a director or Entity Optionee controlled by a director to an
employee of the Company or its related entities) or (ii) for Entity Optionees,
if the Entity Optionee ceases to be controlled by the employee or director of
the Company who controlled the Entity Optionee on the date of grant. Each
stock option will terminate five years after the grant date (the "Expiration
Date"), if such options do not lapse or are not exercised prior to the
Expiration Date. The stock options will automatically accelerate and become
immediately exercisable, for the thirty days prior to their lapse, in the
event the optionee (or executive controlling the Entity Optionee) ceases to be
employed by the Company or a related entity due to death, permanent disability
or ill health. In addition, the Board, in its sole discretion, may accelerate
any outstanding stock option or extend the period until lapse, even if expired
(but in no event to a date later than the Expiration Date), upon any other
event terminating the employment of the optionee or the executive controlling
the Entity Optionee. In the event the Company is subject to a takeover bid
pursuant to which the offeror acquires at least thirty percent of the
outstanding Ordinary Shares of the Company, the Board may accelerate stock
options outstanding at that time for a period of up to 120 days measured from
the date the Board notifies the optionee of the takeover bid. Any stock option
exercised under the Executive Plan must be for a minimum of twenty percent of
the stock options included in the relevant grant.

In the event of changes to the Company's capital structure, appropriate
adjustments will be made to the stock option exercise price and the number of
shares subject to each outstanding stock option.

1997 SHARE OPTION PLAN

The Company's 1997 Share Option Plan (the "1997 Plan") was adopted by the
Board of Directors on October 1, 1997, and was approved by the shareholders as
of October 7, 1997. A total of 329,254 Ordinary Shares have been authorized
for issuance under the 1997 Plan. The number of Ordinary Shares reserved for
issuance under the 1997 Plan will automatically increase on the first trading
day of each calendar year, beginning with the 1999 calendar year, during the
term of the 1997 Plan by an amount equal to one percent (1%) of the Ordinary
Shares outstanding on December 31st of the immediately preceding calendar
year. In no event may any one participant in the 1997 Plan receive stock
option grants for more than 27,438 Ordinary Shares per calendar year.

The 1997 Plan consists of the Option Grant Program, under which eligible
individuals in the Company's employ or service (including officers and other
employees, non-employee Board members, consultants and other independent
advisors of the Company, or any parent or subsidiary) may, at the discretion
of the Plan Administrator, be granted stock options to purchase Ordinary
Shares at an exercise price not less than eighty-five percent (85%) of their
fair market value on the option grant date.

The 1997 Plan will be administered by the Compensation Committee. The Plan
Administrator will have complete discretion, within the scope of its
administrative jurisdiction under the 1997 Plan, to determine which eligible
individuals are to receive stock option grants, the time or times when such
grants are to be made, the number of shares subject to each such grant, the
exercise and vesting schedule to be in effect for the grant, the maximum term
for which any granted stock option is to remain outstanding and the status of
any granted stock option as either an incentive stock option or a non-
statutory stock option under the U.S. Federal tax laws.

Options granted under the 1997 Plan will generally become exercisable in
three equal annual installments measured from the option grant date. The
exercise price for options granted under the 1997 Plan may be paid in cash or
in Ordinary Shares valued at fair market value on the exercise date. The
Company is in the process of establishing a procedure pursuant to which
options under the 1997 Plan may be exercised through a same-day sale program
without any cash outlay by the optionee. In addition, the Plan Administrator
may provide financial assistance to one or more optionees in the exercise of
their outstanding stock options by allowing such individuals to deliver a
full-recourse, interest-bearing promissory note in payment of the exercise
price and any associated withholding taxes incurred in connection with such
exercise.

In the event that the Company is acquired by merger or asset sale, each
outstanding stock option under the 1997 Plan will immediately accelerate and
become fully exercisable for all of the shares subject to such outstanding
options, unless such stock options are to be assumed or replaced by the
successor corporation (or parent thereof). Any stock options that do not
automatically accelerate upon the occurrence of a merger or asset sale of the
Company, will immediately accelerate, and such repurchase rights will
accordingly lapse, upon the involuntary termination of the optionee within 18
months after the effective date of the merger or asset sale. Stock options
accelerated in connection with such involuntary termination will be
exercisable as fully-vested shares until the earlier of (i) the expiration of
the stock option term or (ii) a one (1)-year period measured from the
effective date of the involuntary termination. The Plan Administrator has the
authority to effect, with the consent of the affected option holders, the
cancellation of outstanding stock options under the 1997 Plan in return for
the grant of new stock options for the same or a different number of shares
with an exercise price per share based upon the fair market value of the
Ordinary Shares on the new grant date.

The Board may amend or modify the 1997 Plan at any time. However, no such
amendment or modification shall adversely affect the rights of any optionee
without his or her consent. The 1997 Plan will terminate on October 1, 2007,
unless sooner terminated by the Board.

COMPENSATION OF DIRECTORS AND OFFICERS

The aggregate annual compensation, including bonuses under the incentive
program described below, paid by the Company to all directors and executive
officers of the Company (nine persons) as a group for services (i) for the
twelve-month period ended June 30, 1996 was A$1,258,896, (ii) for the twelve-
month period ended January 31, 1997 was A$1,277,085 and (iii) for the twelve-
month period ended January 31, 1998 was A$1,462,568. However, this aggregate
compensation amount does not include any stock options granted to such
individuals. See "Management--Options to Purchase Securities."

The total amount set aside by the Company and its subsidiaries to provide
superannuation benefits for such officers and directors for the twelve-month
period ended January 31, 1998 was A$92,125.

The Company has an incentive program whereby certain executives will receive
a bonus if certain budget objectives are attained during each fiscal year. For
the fiscal year ending January 31, 1999, under this program, Mr. Linz, Mr.
Gavshon, Mr. Price, and Mr. James will each receive a bonus of 20%, and Mr.
Selati, Mr. Lyons, Mr. Spring, Mr. Redmile and Mr. Whitehouse will each
receive a bonus of 10%, of their respective base salaries if the Company
achieves its budgeted pre-tax profit before trading contingencies. Mr. Selati,
Mr. Lyons, Mr. Spring and Mr. Redmile will each receive an additional bonus of
10% of his base salary if his division achieves its budgeted operating
contribution, regardless of whether or not the Company's budget is achieved.
Additionally, Mr. Whitehouse will receive a bonus of 10% of his base salary if
the Company's inventory level budget is attained.

OPTIONS TO PURCHASE SECURITIES

As of April 30, 1998, there were outstanding options to purchase a total of
402,438 Ordinary Shares granted by the Company, of which 221,038 were held by
directors and officers of the Company. These outstanding options were granted
under both the Company's Executive Share Option Plan and the 1997 Share Option
Plan. There were no other warrants or rights to purchase the Company's
Ordinary Shares outstanding as of April 30, 1998. The following table sets
forth information concerning outstanding options as of April 30, 1998:

NUMBER OF ORDINARY PRICE PER OPTION EXPIRATION
SHARES UNDER OPTION ORDINARY SHARE DATE
------------------- -------------- -----------------

Executive Share Option
Plan(1)................ 203,038 A$ 8.38 February 1, 2002
1997 Share Option
Plan(2)................ 199,400 US$11.00 November 6, 2002
Directors and Officers
as a Group(3).......... 221,038 -- --

- --------
(1) Options under the Executive Share Option Plan will generally expire on the
earlier of the Expiration Date or thirty days after the cessation of
employment of the optionee or the Entity Optionee. See "Management--
Executive Share Option Plan."
(2) Options under the 1997 Share Option Plan will generally expire on the
earlier of the Expiration Date or three months after the cessation of
employment of the optionee. See "Management--1997 Share Option Plan."
(3) Directors and Officers as a group received options under both the
company's Executive Share Option Plan and the 1997 Share Option Plan. See
"Management--Executive Share Option Plan" and "--1997 Share Option Plan."

CERTAIN TRANSACTIONS

DELISTING TRANSACTION AND CONVERSION OF CONVERTIBLE NOTES

In December 1996, the Company delisted from the ASE after repurchasing
2,743,878 Ordinary Shares and cancelling stock options to purchase 101,520
Ordinary Shares pursuant to a "Capital Reduction" program for a total
consideration of A$20.1 million, exclusive of transaction costs, financed
through the issuance and sale of A$10.0 million in aggregate principal amount
of the Convertible Notes and the borrowing of A$11.2 million under the ANZ
Facility. In connection with the Company's IPO in November 1997, the Company
converted all of the Convertible Notes into 1,197,926 Ordinary Shares, 200,000
of which were sold in the Offering by the holders thereof. Certain holders of
the Convertible Notes, including Fagume Pty Ltd., an affiliate of Gordon
Howlett, a director of the Company, National Australia Trustees Ltd., on
behalf of Philip Gardiner, a director of the Company, Michael Varley, an
employee of the Company, Don and Mary McLeod, an ex-employee (and family) of
the Company, Sarah Gavshon, the mother of Robert Gavshon, a director and
executive officer of the Company, and Mildred Pogorelsky, the mother-in-law of
Sam Linz, a director and executive officer of the Company, received Ordinary
Shares pursuant to such conversion on the same terms as all other holders of
Convertible Notes. These individuals were not permitted to sell securities in
the Company's IPO. As a result of the conversion of the Convertible Notes, all
debt instruments relating to the Convertible Notes by and among the Company,
SBC Warburg Australia, as representative of the holders of the Convertible
Notes, and Sam Linz, Robert Gavshon, Sydney Selati, John Price and affiliates
of such individuals were terminated. The Company, however, agreed to provide
SBC Warburg Australia and the holders of the Ordinary Shares received upon
conversion of the Convertible Notes one demand registration right pursuant to
which such holders could have their shares registered for resale after the
expiration of the 180 day underwriters' lock-up period following the Company's
IPO in November 1997. The Registration Statement of which the Prospectus is a
part is being filed as a result of the exercise of such demand registration
right. The Company has also voluntarily registered an additional 46,919
Ordinary Shares hereunder.

SBC Warburg Australia, a financial advisor to a group of shareholders
holding, in the aggregate, more than five percent of the outstanding Ordinary
Shares of the Company, received underwriting and advising fees of A$750,000 in
connection with the Offering and a one-time fee of A$15,000 in connection with
the original issuance of the Convertible Notes.

In connection with the issuance and sale of the Convertible Notes, the
Company granted stock options to purchase up to an aggregate of 203,038
Ordinary Shares under the Executive Share Option Plan to Messrs. Sam Linz,
Robert Gavshon, Sydney Selati and John Price, who are directors and executive
officers of the Company.

TRANSACTIONS WITH AFFILIATES

The Company holds a one-third ownership interest in Bromic, which supplies
gas valves and related products to the Company. Bromic receives approximately
28% of its revenues from sales to the Company, which in turn is Bromic's
largest customer. In the twelve months ended January 31, 1998 and the three
months ended April 30, 1998, the Company purchased approximately A$4.0 million
and A$0.7 million, respectively, of products from Bromic. The Company
guaranteed A$900,000 indebtedness of Bromic to ANZ, which was repaid in full
in February 1997, releasing the guarantee.

In addition, the Company holds a 50% equity interest in GLG Taiwan, which
supplies the Company with grills, burners and other products. GLG Taiwan
receives approximately 80% of its revenues from sales to the Company, which in
turn is GLG Taiwan's largest customer. In the twelve months ended January 31,
1998 and the three months ended April 30, 1998, the Company purchased
approximately A$7.1 million and A$0.9 million, respectively, of products from
GLG Taiwan.

SHAREHOLDERS AGREEMENT

Certain shareholders of the Company have in the past been party to a
Shareholders Agreement providing for certain preemptive and other rights. The
Shareholders Agreement was terminated prior to consummation of the Company's
IPO in November 1997.

TRANSACTIONS INVOLVING PRINCIPAL SHAREHOLDERS AND EXECUTIVE OFFICERS

Messrs. Linz, Gavshon, Selati and Price beneficially own 28.5%, 4.9%, 3.2%
and 1.6%, respectively, of the outstanding Ordinary Shares of the Company.
Accordingly, these individuals may exert substantial influence over the
business and affairs of the Corporation, including the election of the
Company's directors and the outcome of corporate actions requiring shareholder
approval.

From time to time in the past, Messrs. Linz, Gavshon and Selati and certain
members of their respective families have advanced funds, re-payable on
demand, to the Company to be used for general corporate purposes. As of
January 31, 1997, the aggregate balance of these advances was A$1,231,000.
Through these advances, the Company had been able to obtain funds at
relatively attractive short-term borrowing rates of approximately 2% per annum
below the overdraft rate received by the Company. As of July 31, 1997, the
Company had repaid all amounts owing on such advances and terminated these
borrowing arrangements. The Company may reinstate these or similar
arrangements in the future if its Board of Directors determines that to do so
would be in the best interests of the Company.

The Company purchases labels for certain of its products from a relative
(now deceased) of Mr. Price's wife. On an average yearly basis, the Company
purchases approximately A$346,000 of such labels. Mr. and Mrs. Price receive
no monetary benefit from this relationship.

The Company leases cars for the use of Messrs. Linz, Gavshon, Price and
Selati, at a rate of approximately A$3,909, A$3,910, A$1,620 and US$900,
respectively, per month per car.

The Company pays the premiums on a disability insurance policy naming Mr.
Selati as the insured. If benefits were paid to Mr. Selati under this policy,
he would receive approximately US$7,900 per month until he reaches age 65.

In connection with the Capital Reduction, the Company acquired from Mr.
Selati, who is the President of Galore USA and a Director of the Company, his
15% interest in that company, in exchange for the issuance to Mr. Selati of
137,189 Ordinary Shares, valued at A$1,000,000. The Company elected Mr. Selati
to its Board of Directors on July 21, 1997.

Mr. Linz's sister, together with her husband in one instance and her husband
and son in the other instance, owns two entities ("Related Franchisors"), each
of which operates one franchised Barbeques Galore store in Orange County,
California. The Related Franchisors' franchise agreements provide the Related
Franchisors with the exclusive right to open, upon Company approval,
additional Barbeques Galore stores within a specified territory in Orange
County.

A portion of the Ordinary Shares and stock options repurchased or cancelled
in connection with the Capital Reduction were repurchased from or cancelled in
exchange for payment to principal shareholders of the Company. The Company
repurchased or cancelled stock options, as applicable: 8,231 Ordinary Shares
beneficially owned by Gordon Howlett, a director of the Company, for an
aggregate of A$60,000; 37,107 Ordinary Shares beneficially owned by Philip
Gardiner, a director of the Company, for an aggregate of A$270,482; stock
options granted to Mr. Price for the purchase of 27,438 Ordinary Shares in
exchange for A$10,000; and stock options granted to David Glaser, the
Secretary of the Company, and Kevin Ralphs, the Chief Financial Officer of
Galore USA, each for the purchase of 2,743 Ordinary Shares in exchange for
A$2,500 each. These transactions were on terms the same as or less favorable
than those provided to other shareholders or option holders whose interests
were repurchased or cancelled.

In November 1997, the Company granted options under the 1997 Share Option
Plan to purchase up to an aggregate of 18,000 Ordinary Shares to directors and
executive officers of the Company at the Offering price. Mr. Kevin Ralphs
received a grant of 10,000 Ordinary Shares, Mr. David James received a grant
of 5,000 Ordinary Shares and Mr. David Glaser received a grant of 3,000
Ordinary Shares. These options become exercisable in equal installments on
November 7, 2000, November 7, 2001 and October 7, 2002. See "Management--
Options to Purchase Securities."

The Company leases certain retail facilities to Rebel under an arms-length
landlord-tenant relationship. For the seven months ended January 31, 1997 and
the twelve months ended January 31, 1998, Rebel reimbursed the Company
A$352,000 and A$260,000 for these leases. Until July 10, 1997, Messrs. Linz
and Gavshon were directors and significant shareholders of Rebel.

COMPANY POLICY CONCERNING TRANSACTIONS WITH AFFILIATES

Under the Australian Corporations Law, directors are prohibited from
entering into transactions with the Company conferring a benefit on any
director which are not on "arms-length" commercial terms, except where limited
exemptions apply or detailed approval procedures are first observed. The
Company has adopted a more stringent policy based on the Australian
Corporations Law that requires that all transactions with directors, executive
officers and other affiliates will be on terms that are believed to be at
least as favorable to the Company as could be obtained from unaffiliated third
parties and that such transactions must be approved by a majority of the
Company's disinterested directors.

The Company believes that the foregoing transactions with directors,
executive officers and other affiliates were completed on terms as favorable
to the Company as could have been obtained from unaffiliated third parties.

PRINCIPAL SHAREHOLDERS

The following table sets forth the beneficial ownership of the Ordinary
Shares as of June 1, 1998 and as adjusted to reflect the sale of the shares
pursuant to the Offering with respect to (i) each person or entity known by
the Company to beneficially own 5% or more of the outstanding Ordinary Shares,
(ii) each of the Company's directors, (iii) each of the Company's executive
officers, and (iv) all directors and executive officers of the Company as a
group.

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- SHARES THAT MAY BE --------------------
NAME NUMBER PERCENT SOLD IN OFFERING NUMBER PERCENT(2)
- ---- ------------ ---------- ------------------ --------- ----------

Sam Linz(3)............. 1,293,891 28.5% 0 1,293,891 28.5%
Robert Gavshon(4)....... 223,499 4.9 0 223,499 4.9
John Price(5)........... 71,880 1.6 0 71,880 1.6
Philip Gardiner(6)...... 23,596 * 23,596 0 *
Gordon Howlett(7)....... 13,718 * 13,718 0 *
Sydney Selati(8)........ 147,008 3.2 0 147,008 3.2
Wispjune Pty Limit-
ed(9).................. 162,205 3.6 0 162,205 3.6
Level 10
1 Market Street
Sydney, NSW 2000
Geblon Pty Limited(10).. 167,402 3.7 0 167,042 3.7
Level 10
1 Market Street
Sydney, NSW 2000
Sarwill Pty Limit-
ed(11)................. 149,016 3.3 0 149,016 3.3
Suite 6
10-12 Woodville Street
Hurstville, NSW 2000
All executive officers
and directors as a
group
(9 persons)(12)........ 1,773,592 39.1% 37,314 1,736,278 38.2%

- --------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Ordinary Shares subject to stock options, warrants and
convertible securities currently exercisable or convertible, or
exercisable or convertible within sixty (60) days of the date hereof, are
deemed outstanding for computing the percentage of the person holding
such stock options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, the
persons named in the table have sole voting and investment power with
respect to all Ordinary Shares shown as beneficially owned by them. The
percentages calculated are based on 4,541,652 shares issued and
outstanding as of June 1, 1998. Excludes 203,038 Ordinary Shares issuable
upon the exercise of stock options granted under the Executive Share
Option Plan and 199,600 Ordinary Shares issuable upon the exercise of
stock options granted under the 1997 Share Option Plan. There are an
additional 129,854 authorized and unissued Ordinary Shares reserved for
the grant of stock options under the 1997 Share Option Plan.
(2) Assuming all Ordinary Shares offered are sold by such Selling
Shareholder.
(3) Includes 162,205 Ordinary Shares held by Wispjune Pty Limited
("Wispjune"), a company in which Mr. Linz owns a 72.5% interest, with Mr.
Gavshon and Mr. Price owning the remaining 22.5% and 5.0%, respectively,
and 167,402 Ordinary Shares held by Geblon Pty Limited ("Geblon"), a
company in which Mr. Linz and Mr. Gavshon each has a 50% ownership
interest, with Mr. Linz retaining voting control of the company. See
Notes (9) and (10) below. Excludes 88,460 Ordinary Shares held by ANZ
Nominees Limited on behalf of members of Mr. Linz's immediate family, of
which 32,596 may be sold pursuant to the Registration Statement of which
this Prospectus is a part. See "Selling Shareholders." Also excludes

10,756 Ordinary Shares held of record by Bosmana Pty Limited ("Bosmana"),
on behalf of The Galore Management Superannuation Fund, for which Mr.
Linz, Mr. Gavshon, Mr. James and a fourth Company employee serve as the
four trustees (the group having voting and dispositive power), all of
which may be sold pursuant to the Registration Statement of which this
Prospectus is a part. See "Selling Shareholders." Also excludes 3,567
Ordinary Shares held of record by Galore Group Nominees Pty Ltd. ("Galore
Nominees"), on behalf of The Galore Staff Superannuation Fund, for which
Mr. Linz, Mr. Gavshon and two other Company employees serve as the four
trustees (the group having voting and dispositive power), all of which may
be sold pursuant to the Registration Statement of which this Prospectus is
a part. See "Selling Shareholders." Mr. Linz disclaims beneficial
ownership of the foregoing Ordinary Shares held by ANZ Nominees Limited,
Bosmana and Galore Nominees, except to the extent of his pecuniary
interest therein. None of Messrs. Linz, Gavshon or James individually or
by agreement has voting or investment control over the securities held by
ANZ Nominees, Bosmana or Galore Nominees.
(4) Includes 149,016 outstanding Ordinary Shares held by Sarwill Pty Limited
("Sarwill"), a corporation owned by Mr. Gavshon and his wife. See Note
(11). Also includes 1,495 outstanding Ordinary Shares held by Mr.
Gavshon's resident children. Excludes 162,205 Ordinary Shares held by
Wispjune, in which Mr. Gavshon has a 22.5% interest, and 167,402 Ordinary
Shares held by Geblon, a company in which Mr. Gavshon holds a 50%
interest. See Notes (3), (9) and (10). Excludes 10,756 Ordinary Shares
held of record by Bosmana on behalf of The Galore Management
Superannuation Fund, for which Mr. Linz, Mr. Gavshon, Mr. James and a
fourth Company employee serve as the four trustees (the group having
voting and dispositive power), all of which may be sold pursuant to the
Registration Statement of which this Prospectus is a part. See "Selling
Shareholders." Also excludes 3,567 Ordinary Shares held of record by
Galore Nominees on behalf of the Galore Staff Superannuation Fund, for
which Mr. Linz, Mr. Gavshon and two other Company employees serve as the
four trustees (the group having voting and dispositive power), all of
which may be sold pursuant to the Registration Statement of which this
Prospectus is a part. See "Selling Shareholders." Mr. Gavshon disclaims
beneficial ownership of the Ordinary Shares held by Wispjune, Geblon,
Bosmana and Galore Nominees, except to the extent of his pecuniary
interest therein. None of Messrs. Linz, Gavshon or James individually or
by agreement has voting or investment control over the securities held by
Bosmana or Galore Nominees.
(5) Excludes 162,205 outstanding Ordinary Shares held by Wispjune, in which
Mr. Price has a 5.0% interest. Also excludes 10,756 Ordinary Shares held
of record by Bosmana on behalf of The Galore Management Superannuation
Fund, for which Mr. Linz, Mr. Gavshon, Mr. James and a fourth Company
employee serve as the four trustees (the group having voting and
dispositive power), all of which may be sold pursuant to the Registration
Statement of which this Prospectus is a part. See "Selling Shareholders."
Mr. Price disclaims beneficial ownership of the Ordinary Shares held by
Wispjune and Bosmana, except to the extent of his pecuniary interest
therein. None of Messrs. Linz, Gavshon or James individually or by
agreement has voting or investment control over the securities held by
Bosmana. See Notes (3) and (9).
(6) Includes 23,596 Ordinary Shares held by National Australia Trustees Ltd.
Mr. Gardiner disclaims beneficial ownership of such Ordinary Shares,
except to the extent of his pecuniary interest therein. Certain Ordinary
Shares previously held by Mr. Gardiner were repurchased by the Company in
the delisting transaction. See "Certain Transactions."
(7) Includes 13,718 Ordinary Shares held by Fagume Pty. Limited. Certain
Ordinary Shares previously held by Mr. Howlett were repurchased by the
Company in the delisting transaction. See "Certain Transactions."
(8) Includes 68,595 Ordinary Shares owned by the Selati Living Trust dated
June 30, 1984, of which Mr. Selati and his wife are trustees. Also
includes 68,594 Ordinary Shares held by the Selati Family Partnership
L.P., of which Mr. Selati is the sole general partner. Also includes
9,545 Ordinary Shares, previously inadvertently reported as 9,819
Ordinary Shares, held by Mr. Selati's wife. Excludes 4,665 Ordinary
Shares held by Mr. Selati's three adult children. Mr. Selati disclaims
beneficial ownership of all Ordinary Shares held by his children.
(9) Mr. Linz, Mr. Gavshon and Mr. Price, Directors of the Company, own 72.5%,
22.5% and 5.0%, respectively, of Wispjune. As such, Mr. Linz is deemed to
have voting and investment control with respect to these Ordinary Shares.
Mr. Gavshon and Mr. Price have disclaimed beneficial ownership of the
Ordinary

Shares held by Wispjune, except to the extent of their pecuniary interest
in such Ordinary Shares. See Notes (3), (4) and (5).
(10) Mr. Linz and Mr. Gavshon, Directors of the Company, each own 50.0% of the
Ordinary Shares of Geblon, with Mr. Linz retaining voting control of the
Company. Mr. Gavshon disclaims his beneficial ownership of the Ordinary
Shares held by Geblon except to the extent of his pecuniary interest in
such Ordinary Shares. See Notes (3) and (4).
(11) Mr. Gavshon, a Director of the Company, jointly with his wife, is the
owner of Sarwill. See Note (4) above.
(12) See Notes (3) through (11).

SELLING SHAREHOLDERS

The Ordinary Shares that may be offered hereby were originally issued by the
Company in offshore transactions not subject to the Securities Act. The
Selling Shareholders listed below (which term includes their transferees,
pledges, donees or successors) may from time to time offer and sell the number
of Ordinary Shares set forth opposite his, her or its name pursuant to the
Registration Statement of which this Prospectus is a part any and all Ordinary
Shares. The table sets forth information with respect to beneficial ownership
of the Ordinary Shares by the Selling Shareholders as of June 1, 1998. The
Selling Shareholder's position, office or other material relationship with the
Company for the last three years, if any, is also stated.

The following table sets forth certain information as of June 1, 1998. Any
or all of the Ordinary Shares listed below may be offered for sale pursuant to
the Registration Statement of which this Prospectus is a part by the Selling
Shareholders from time to time. Accordingly, no estimate can be given as to
the amounts of Ordinary Shares that will be held by the Selling Shareholders
upon consummation of any such sales. In addition, the Selling Shareholders
identified below may have sold, transferred, or otherwise disposed of all or a
portion of their Ordinary Shares since the date on which the information
regarding their Notes was provided, in transactions exempt from the
registration requirements of the Securities Act.

All information in the following table is based solely upon information
furnished to the Company by the Selling Shareholders. From time to time,
additional information concerning ownership of the Ordinary Shares may rest
with certain holders thereof not named in the preceding table, with whom the
Company believes it has no affiliation.

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)(2)
----------------------- SHARES THAT MAY BE ----------------------
NAME NUMBER PERCENT SOLD IN OFFERING NUMBER PERCENT
---- ------------ ---------- ------------------ ----------- ----------

Blaironia Pty Limited... 49,221 1.1% 49,221 0 *
Halcyon Pty Limited(3).. 19,688 * 19,688 0 *
Timewalk Pty Limited.... 49,221 1.1 44,221 0 *
RG Investments
(Australia) Pty
Limited................ 49,221 1.1 49,221 0 *
Navarra Investments Pty
Ltd.(3)................ 1,968 * 1,968 0 *
Depofo Pty Ltd.(3)...... 2,461 * 2,461 0 *
Talbot Pty Limited(3)... 9,844 * 9,844 0 *
Scelara Pty Ltd......... 19,688 * 19,688 0 *
Borlas Pty Limited...... 49,221 1.1 49,221 0 *
Dalbrun Pty Ltd.(3)..... 19,688 * 19,688 0 *
Pesas Pty Ltd. (A/C
Super Fund)(3)......... 19,688 * 19,688 0 *
Rupert Baroona Pty Ltd--
the Carter Account(3).. 12,304 * 12,304 0 *
Nassa Investments Pty
Limited(3)............. 9,844 * 9,844 0 *
Shane D. Finemore(3).... 9,844 * 9,844 0 *
Warana Holdings Pty
Ltd.(3)................ 29,532 * 29,532 0 *
Kelstan Pty Ltd.(3)..... 49,221 1.1 49,221 0 *
Kahuna Investments Pty
Ltd.(3)................ 49,221 1.1 49,221 0 *
Megwill Pty Ltd A/C WPG
Super Fund (3)......... 24,610 * 24,610 0 *
Potter Warburg Nominees
Pty Limited(3)......... 9,844 * 9,844 0 *
Todizo Pty Limited(3)... 45,776 1.0 45,776 0 *
AJA Investments Pty
Limited(3)............. 39,376 * 39,376 0 *
National Nominees
Limited................ 59,064 1.3 59,064 0 *
ANZ Nominees
Limited(4)............. 176,171 3.9 120,307 55,864 1.2
Conargo Plains Pty
Ltd.(3)................ 9,844 * 9,844 0 *
RJR Capital Pty
Ltd.(3)................ 49,221 1.1 49,221 0 *
Chirico Pty Ltd.(3)..... 49,221 1.1 49,221 0 *
P.K. Capital Pty
Ltd.(3)................ 12,797 * 12,797 0 *
Exim Nominees Pty Ltd... 11,320 * 11,320 0 *
Dennis Hoffman.......... 452 * 452 0 *

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)(2)
---------------------- SHARES THAT MAY BE -----------------------
NAME NUMBER PERCENT SOLD IN OFFERING NUMBER PERCENT
---- ----------- ---------- ------------------ ---------- ----------

Joyce Hoffman........... 452 * 452 0 *
David Katz.............. 7,697 * 7,697 0 *
Robert & Ann Patricia
McLeod(5).............. 4,528 * 4,528 0 *
Don & Mary McLeod(5).... 5,487 * 5,487 0 *
Michael Varley(5)....... 5,487 * 5,487 0 *
Keith Abrahams.......... 4,528 * 4,528 0 *
Richard Wunsh........... 2,263 * 2,263 0 *
Patjon Pty Ltd.(5)...... 24,404 * 24,404 0 *
Alney Pty Ltd.(5)....... 11,649 * 11,649 0 *
GDL Investments Pty
Ltd.(5)................ 12,753 * 12,753 0 *
Australip Pty Ltd....... 11,320 * 11,320 0 *
Martin Tabachnick....... 4,528 * 4,528 0 *
Dresner Investments Pty
Ltd.................... 4,528 * 4,528 0 *
Jokari Pty Ltd.......... 2,263 * 2,263 0 *
Mildred Pogorelsky(5)... 2,743 * 2,743 0 *
Sarah Gavshon(5)........ 2,743 * 2,743 0 *
David Schnaid........... 2,952 * 2,952 0 *
Lawrence Oster.......... 1,176 * 1,176 0 *
Fagume Pty. Limited(5).. 13,718 * 13,718 0 *
National Australia
Trustees Ltd.(5)....... 23,596 * 23,596 0 *
The Galore Management
Superannuation
Fund(5)................ 10,756 * 10,756 0 *
Galore Staff
Superannuation
Fund(5)................ 3,567 * 3,567 0 *

- --------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Ordinary Shares subject to stock options, warrants and
convertible notes currently exercisable or convertible, or exercisable or
convertible within sixty (60) days of the date hereof, are deemed
outstanding for computing the percentage of the person holding such stock
options but are not deemed outstanding for computing the percentage of any
other person. Except as indicated by footnote, the persons named in the
table have sole voting and investment power with respect to all Ordinary
Shares shown as beneficially owned by them. The percentages calculated are
based on 4,541,652 Ordinary Shares issued and outstanding as of June 1,
1998.
(2) Assuming all Ordinary Shares offered are sold by such Selling Shareholder.
(3) The Selling Shareholder is affiliated with an officer or director of SBC
Warburg Australia, a co-manager in the Company's IPO in November 1997.
(4) In the Company's IPO in November 1997, ANZ Nominees Limited was reported
as beneficially owning 106,291 Ordinary Shares prior to such offering and
87,711 Ordinary Shares after such offering, inadvertently excluding an
additional 88,459 Ordinary Shares then beneficially owned by ANZ Nominees
Limited. ANZ Nominees Limited holds 88,460 Ordinary Shares on behalf of
members of Mr. Linz's immediate family, of which 32, 596 may be sold
pursuant to the Registration Statement of which this Prospectus is a part.
Mr. Linz has disclaimed beneficial ownership of all such Ordinary Shares.
(5) Cedarford Pty Pte., a company owned by Robert and Ann Patricia McLeod, is
a licensee of the Company. Don McLeod was an employee of the Company until
April 30, 1998. Michael Varley is Vice President of Purchasing,
Distribution and Product Development of Galore USA. Patjon Pty Ltd., Alney
Pty Ltd. and GDL Investments Pty Ltd. are associated with financial and
corporate advisors to the Company. In addition, Patjon Pty Ltd., Alney Pty
Ltd. and GDL Investments Pty Ltd. are holders of Convertible Notes, but
the Company believes that each beneficially owns less than 10% of the
voting securities of the Company on a fully diluted basis. Mildred
Pogorelsky is Mr. Linz's mother-in-law. Sarah Gavshon is Mr. Gavshon's
mother. Fagume Pty Ltd. and National Australia Trustees Ltd. are
corporations affiliated or associated with Mr. Howlett and Mr. Gardiner,
Directors of the Company, respectively. Mr. Linz, Mr. Gavshon, Mr. James
and a fourth Company employee serve as the four trustees of The Galore
Management Superannuation Fund. Mr. Linz, Mr. Gavshon, and two other
Company employees serve as the four trustees of the Galore Staff
Superannuation Fund.

DESCRIPTION OF ORDINARY SHARES

The rights afforded the Ordinary Shares underlying the ADSs are governed by
the Articles of the Company and the laws applicable in the Commonwealth of
Australia. This includes in particular the Australian Corporations Law. The
following description summarizes those rights and is qualified in its entirety
by reference to the Articles, copies of which are included elsewhere herein.

General. The Company has authorized capital of A$100,000,000 divided into
27,437,853 shares of A$3.64 each (rounded to the nearest cent). At June 1,
1998 there were 4,541,652 fully paid Ordinary Shares issued and outstanding.

The Directors of the Company have the power to issue authorized but unissued
shares in different classes, or with special, preferred or deferred rights and
restrictions, or on deferred terms for payment of the subscription amount.
These rights may relate to voting, dividend, return of capital or any other
matter, and may include redeemable preference shares.

Voting. Each shareholder present in person, by proxy or by properly
appointed representative shall have one vote at a meeting of shareholders
unless a poll is called. If a poll of shareholders is called, then each
shareholder shall have one vote per share, subject to any special rights
attaching to shares at the time of issue and to provisos that (i) a
shareholder shall not be entitled to vote unless all calls and other sums
presently payable by that shareholder in respect of shares in the Company have
been paid, and (ii) partly paid shares, which have not been offered pro rata
to other shareholders, shall only confer a proportional vote per share. At
this time there are no partly paid shares authorized or outstanding. A poll
may be called by the chairman, any five shareholders, or any shareholder or
shareholders holding 10% of the paid-up capital or the total votes of persons
entitled to vote.

At least 14 days notice must be given of any meeting, with the requirement
extending to 21 days if any special resolution is to be voted on at the
meeting. The quorum for a meeting shall be three members, with a proviso that
if a quorum does not attend, then, unless it is a meeting convened on a
shareholder request, the meeting shall be adjourned to such day as the
directors determine, or if no determination, to the same day, time and place
in the next week. If a quorum does not attend the adjourned meeting, the
meeting shall be dissolved. If a quorum does not attend a meeting that was
convened on a shareholder request, the meeting shall be dissolved without any
later adjourned meeting.

An annual general meeting of shareholders must be convened to consider the
financial accounts and to vote on directors, with at least one third of the
directors presenting themselves for re-election. No director may serve for a
period in excess of three years without submitting himself for re-election,
provided, however, that a retiring director may be re-appointed. This Board
re-election procedure could delay shareholders from removing a majority of the
Board for a period of three years, unless they are able to obtain the
requisite vote to remove a director. The foregoing may have a significant
effect in delaying, deferring or preventing a change in control of the
Company, even though such change might be beneficial to the Company and its
shareholders, and may adversely affect the voting and other rights of other
holders of Common Stock.

Four of the Company's officers and directors beneficially own an aggregate
of 38.2% of the Company's outstanding Ordinary Shares. Accordingly, these
shareholders are able to significantly influence the election of the Company's
directors and the outcome of corporate actions requiring shareholder approval,
such as mergers and acquisitions, regardless of how many other shareholders of
the Company may vote. See "Risk Factors--Control of the Company."

Resolutions. There are two main types of shareholder resolutions under
Australian corporate law, ordinary resolutions, which must be approved by more
than 50% of the votes cast (with the chairman having a vote), and special
resolutions, which must be approved by at least 75% of the votes cast.
Appointment of directors and

most general business is decided by ordinary resolution, while matters such as
changes to the Articles and liquidation require a special resolution.

Class Rights. If at any time the Company has more than one class of shares
on issue then the rights attaching to a class cannot be varied without the
approval of a special resolution passed at a meeting of those shareholders.

Transfer of Shares. Shares in the Company may be transferred by any usual
form of transfer or other form approved by the Directors of the Company, but
the certificate for the shares must be filed with the Company. Currently,
applicable law requires transfers to be made in writing and stamp duty of 0.6%
must be paid in relation to any transfer. The Directors may refuse to register
any transfer of shares where any of the following apply: (i) the Company has a
lien on the shares; (ii) where the transfer is of a partly paid share in
respect of which the directors have required the transferee or an authorized
officer of the transferee to complete a statutory declaration stating that the
transferee is financially able to meet any unpaid liability in respect of the
share and such a declaration has not been received by the Company; (iii) where
the Company may refuse to register the transfer under the Official Listing
Rules of the ASE; or (iv) the Company is required to refuse to register the
transfer in accordance with a law relating to stamp duty or pursuant to a
court order.

There are no preemptive rights. The persons and entities that previously
held the Convertible Notes are entitled to cause, and this Offering results
from a request for, the Company to apply for official quotation of their
converted Ordinary Shares on the stock exchange or securities market on which
the Company is listed. All Ordinary Shares received upon conversion of the
Convertible Notes are included herein or were previously registered and sold
in connection with the Company's IPO in November 1997.

Buyback. There is a general limitation under the Australian Corporations Law
on the Company purchasing or providing financial assistance in relation to the
acquisition of shares in the Company. However, there is a specific exemption
allowing the Company to make limited buybacks of shares in the Company. Any
buyback must satisfy a range of conditions, which conditions vary depending on
whether the buyback involves the acquisition of more than 10% of the capital
of the Company and/or whether all shareholders have the opportunity to
participate equally in that buyback. These restrictions do not apply to debt
securities.

Australian Takeover Laws. Under Australian law, foreign persons are
prohibited from acquiring more than a limited percentage of the shares in an
Australian company without approval from the Australian Treasurer or in
certain other limited circumstances. These limitations are set forth in the
Takeovers Act. Under the Takeovers Act, as currently in effect, any foreign
person, together with associates, is prohibited from acquiring 15% or more of
the outstanding shares of the Company (or else the Treasurer may make an order
requiring the acquiror to dispose of those shares within a specified period of
time). In addition, if a foreign person acquires shares in the Company and as
a result the total holdings of all foreign persons and their associates
exceeds 40% in aggregate without the approval of the Australian Treasurer,
then the Treasurer may make an order requiring the acquiror to dispose of
those shares within a specified time. The Company has been advised by its
Australian counsel, Freehill, Hollingdale & Page, that under current foreign
investment policy, however, it is unlikely that the Treasurer would make such
an order where the level of foreign ownership exceeds 40% in the ordinary
course of trading, unless the Treasurer finds that the acquisition is contrary
to the national interest. The same rule applies if the total holdings of all
foreign persons and their associates already exceeds 40% and a foreign person
(or its associate) acquires any further shares, including in the course of
trading in the secondary market of the ADSs. In addition, if the level of
foreign ownership exceeds 40% at any time, the Company would be considered a
foreign person under the Takeovers Act. In such event, the Company would be
required to obtain the approval of the Treasurer for the Company, together
with its associates, to acquire (i) more than 15% of an Australian company or
business with assets totaling over A$5 million or (ii) any direct or indirect
ownership interest in Australian residential real estate. In addition, the
percentage of foreign ownership of the Company would also be included in
determining the foreign ownership of any Australian company or business in
which it may choose to invest. Since the Company has no current plans for any
such acquisitions and only owns commercial property, any such approvals
required to be obtained by the Company as a foreign person under the Takeovers
Act will not affect

the Company's current or future ownership or lease of property in Australia.
However, there would be no material tax consequence to shareholders of the
Company (including holders of ADSs) resulting from the Company being deemed a
foreign person under the Takeovers Act. If all of the ADSs offered hereby are
acquired by foreign persons or their associates, then the level of foreign
ownership of the Company's equity securities will be approximately 63.8%. The
level of foreign ownership could also increase in the future if existing
Australian investors decide to sell their shares into the U.S. market or if
the Company were to sell additional Ordinary Shares or ADSs in the future.

Dividends. Holders of Ordinary Shares are entitled to receive, on a pro rata
basis in proportion to the capital paid upon on such shares, such dividends as
may be recommended by the Directors and approved by shareholders in a general
meeting, subject to such other preferential or special rights as may be
attached to any new shares issued by the Company. The ability of U.S. persons
who hold ADSs to participate in rights offerings or share dividend
alternatives which the Company may undertake in the future will be restricted
if the Company decides not to register such offerings pursuant to the
Securities Act. While the Company is not currently planning any such action,
no assurance can be given that such action will not be taken in the future or
that, if any such action is taken by the Company, it will be feasible to
include U.S. persons.

Liquidations. On a liquidation, the liquidator may divide among the
shareholders the whole or any part of the assets of the Company and may vest
the whole or any part of such assets upon trust for the benefit of the
shareholders. Such action requires the approval of a special resolution and is
at the discretion of the liquidator. No shareholder shall be compelled to
accept any shares or other securities where there is any liability.

Related Party Provisions. Under the Corporations Law, directors are
prohibited from entering into transactions with the Company conferring a
benefit on any Director which are not on "arms-length" commercial terms,
except where limited exemptions apply or detailed approval procedures are
first observed.

Enforceability of Civil Liabilities. The Company is an Australian public
limited company. Almost all of its current Directors and executive officers
reside outside the United States (principally in the Commonwealth of
Australia). All or a substantial portion of the assets of these persons and of
the Company are located outside the United States (principally in the
Commonwealth of Australia). As a result, it may not be possible for investors
to effect service of process within the United States upon such persons or the
Company or to enforce against such persons or the Company in foreign courts
judgments obtained in U.S. courts predicated upon the civil liability
provisions of the Federal securities laws of the United States. The Company
has been advised by its Australian counsel, Freehill, Hollingdale & Page, that
there is doubt as to the enforceability in the Commonwealth of Australia, in
original actions for enforcement of judgments of U.S. courts, of civil
liabilities predicated solely upon Federal or state securities laws of the
United States, especially in the case of enforcement of judgments of U.S.
courts where the defendant has not been properly served under Australian law.

DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

The following is a summary of certain provisions of the Deposit Agreement
(including any exhibits thereto, the "Deposit Agreement") dated as of November
6, 1997 among the Company, Morgan Guaranty Trust Company of New York, as
depositary (the "Depositary"), and the holders (the "Holders") from time to
time of the ADRs issued thereunder. The following description summarizes all
material provisions of the Deposit Agreement and is qualified in its entirety
by reference to the Deposit Agreement. Copies of the Deposit Agreement are
available for inspection at the principal office of the Depositary in New York
(the "Principal New York Office"), which is presently located at 60 Wall
Street, New York, New York 10260. Terms used herein and not otherwise defined
shall have the respective meanings set forth in the Deposit Agreement.

ADRs evidencing ADSs are issuable by the Depositary pursuant to the terms of
the Deposit Agreement. Each ADS represents, as of the date hereof, the right
to receive one Ordinary Share deposited under the Deposit Agreement (together
with any additional Ordinary Shares deposited thereunder and all other
securities, property and cash received and held thereunder at any time in
respect of or in lieu of such deposited Ordinary Shares, the "Deposited
Securities") with the Custodian under the Deposit Agreement (together with any
successor or successors thereto, the "Custodian"). An ADR may evidence any
number of ADSs. Only persons in whose names ADRs are registered on the books
of the Depositary will be treated by the Depositary and the Company as
Holders.

DEPOSIT, TRANSFER AND WITHDRAWAL

In connection with the deposit of Ordinary Shares under the Deposit
Agreement, the Depositary or the Custodian may require the following in form
satisfactory to it: (a) a written order directing the Depositary to execute
and deliver to, or upon the written order of, the person or persons designated
in such order an ADR or ADRs evidencing the number of ADSs representing such
deposited Ordinary Shares (a "Delivery Order"); (b) proper endorsements or
duly executed instruments of transfer in respect of such deposited Ordinary
Shares; (c) instruments assigning to the Custodian or its nominee any
distribution on or in respect of such deposited Ordinary Shares or indemnity
therefor; and, (d) proxies entitling the Custodian to vote such deposited
Ordinary Shares. As soon as practicable after the Custodian receives Deposited
Securities pursuant to any such deposit or pursuant to the form of ADR, the
Custodian shall present such Deposited Securities for registration of transfer
into the name of the Custodian or its nominee, to the extent such registration
is practicable, at the cost and expense of the person making such deposit (or
for whose benefit such deposit is made) and shall obtain evidence satisfactory
to it of such registration. Deposited Securities shall be held by the
Custodian for the account and to the order of the Depositary at such place or
places and in such manner as the Depositary shall determine. Deposited
Securities may be delivered by the Custodian to any person only under the
circumstances expressly permitted in the Deposit Agreement.

After any such deposit of Ordinary Shares, the Custodian shall notify the
Depositary of such deposit and of the information contained in any related
Delivery Order by letter, first class airmail postage prepaid, or, at the
request, risk and expense of the person making the deposit, by cable, telex or
facsimile transmission. After receiving such notice from the Custodian, the
Depositary, subject to the terms and conditions of the Deposit Agreement,
shall execute and deliver at the Transfer Office (the "Transfer Office") which
is presently located at the Principal New York Office, to or upon the order of
any person named in such notice, an ADR or ADRs registered as requested and
evidencing the aggregate ADSs to which such person is entitled.

Subject to the terms and conditions of the Deposit Agreement, the Depositary
may so issue ADRs for delivery at the Transfer Office only against deposit
with the Custodian of: (a) Ordinary Shares in form satisfactory to the
Custodian; (b) rights to receive Ordinary Shares from the Company or any
registrar, transfer agent, clearing agent or other entity recording Ordinary
Share ownership or transactions; or, (c) other rights to receive Ordinary
Shares (until such Ordinary Shares are actually deposited pursuant to (a) or
(b) above, "Pre-released ADRs") only if (i) Pre-released ADRs are fully
collateralized (marked to market daily) with cash or U.S. government
securities held by the Depositary for the benefit of Holders (but such
collateral shall not

constitute "Deposited Securities"), (ii) each recipient of Pre-released ADRs
agrees in writing with the Depositary that such recipient (a) owns such
Ordinary Shares, (b) assigns all beneficial right, title and interest therein
to the Depositary, (c) holds such Ordinary Shares for the account of the
Depositary and (d) will deliver such Ordinary Shares to the Custodian as soon
as practicable and promptly upon demand therefor and (iii) all Pre-released
ADRs evidence not more than 20% of all ADSs (excluding those evidenced by Pre-
released ADRs), provided that the Depositary reserves the right to change or
disregard such limit from time to time as it deems appropriate. The Depositary
may retain for its own account any earnings on collateral for Pre-released
ADRs and its charges for issuance thereof. At the request, risk and expense of
the person depositing Ordinary Shares, the Depositary may accept deposits for
forwarding to the Custodian and may deliver ADRs at a place other than its
office. Every person depositing Ordinary Shares under the Deposit Agreement is
deemed to represent and warrant that such Ordinary Shares are validly issued
and outstanding, fully paid, nonassessable and free of preemptive rights, that
the person making such deposit is duly authorized so to do and that such
Ordinary Shares (A) are not "restricted securities" as such term is defined in
Rule 144 under the Securities Act of 1933 unless at the time of deposit they
may be freely transferred in accordance with Rule 144(k) and may otherwise be
offered and sold freely in the United States or (B) have been registered under
the Securities Act of 1933. Such representations and warranties shall survive
the deposit of Ordinary Shares and issuance of ADRs.

Subject to the terms and conditions of the Deposit Agreement, upon surrender
of an ADR in form satisfactory to the Depositary at the Transfer Office, the
Holder thereof is entitled to delivery at the Custodian's office of the
Deposited Securities at the time represented by the ADSs evidenced by such
ADR. At the request, risk and expense of the Holder thereof, the Depositary
may deliver such Deposited Securities at such other place as may have been
requested by the Holder. Notwithstanding any other provision of the Deposit
Agreement or the ADR, the withdrawal of Deposited Securities may be restricted
only for the reasons set forth in General Instruction I.A.(1) of Form F-6 (as
such instructions may be amended from time to time) under the Securities Act
of 1933.

DISTRIBUTIONS ON DEPOSITED SECURITIES

Subject to the terms and conditions of the Deposit Agreement, to the extent
practicable, the Depositary will distribute by mail to each Holder entitled
thereto on the record date set by the Depositary therefor at such Holder's
address shown on the ADR Register, in proportion to the number of Deposited
Securities (on which the following distributions on Deposited Securities are
received by the Custodian) represented by ADSs evidenced by such Holder's
ADRs:

(a) Cash: Any U.S. dollars available to the Depositary resulting from a
cash dividend or other cash distribution or the net proceeds of sales of
any other distribution or portion thereof authorized in the Deposit
Agreement ("Cash"), on an averaged or other practicable basis, subject to
(i) appropriate adjustments for taxes withheld, (ii) such distribution
being impermissible or impracticable with respect to certain Holders, and
(iii) deduction of the Depositary's expenses in (1) converting any foreign
currency to U.S. dollars by sale or in such other manner as the Depositary
may determine to the extent that it determines that such conversion may be
made on a reasonable basis, (2) transferring foreign currency or U.S.
dollars to the United States by such means as the Depositary may determine
to the extent that it determines that such transfer may be made on a
reasonable basis, (3) obtaining any approval or license of any governmental
authority required for such conversion or transfer, which is obtainable at
a reasonable cost and within a reasonable time and (4) making any sale by
public or private means in any commercially reasonable manner.

(b) Ordinary Shares: (i) Additional ADRs evidencing whole ADSs
representing any Ordinary Shares available to the Depositary resulting from
a dividend or free distribution on Deposited Securities consisting of
Ordinary Shares (an "Ordinary Share Distribution") and (ii) U.S. dollars
available to it resulting from the net proceeds of sales of Ordinary Shares
received in an Ordinary Share Distribution, which Ordinary Shares would
give rise to fractional ADSs if additional ADRs were issued therefor, as in
the case of Cash.

(c) Rights: (i) Warrants or other instruments in the discretion of the
Depositary representing rights to acquire additional ADRs in respect of any
rights to subscribe for additional Ordinary Shares or rights of

any nature available to the Depositary as a result of a distribution on
Deposited Securities ("Rights"), to the extent that the Company timely
furnishes to the Depositary evidence satisfactory to the Depositary that
the Depositary may lawfully distribute the same (the Company has no
obligation to so furnish such evidence), or (ii) to the extent the Company
does not so furnish such evidence and sales of Rights are practicable, any
U.S. dollars available to the Depositary from the net proceeds of sales of
Rights as in the case of Cash, or (iii) to the extent the Company does not
so furnish such evidence and such sales cannot practicably be accomplished
by reason of the nontransferability of the Rights, limited markets
therefor, their short duration or otherwise, nothing (and any Rights may
lapse); and

(d) Other Distributions: (i) Securities or property available to the
Depositary resulting from any distribution on Deposited Securities other
than Cash, Ordinary Share Distributions and Rights ("Other Distributions"),
by any means that the Depositary may deem equitable and practicable, or
(ii) to the extent the Depositary deems distribution of such securities or
property not to be equitable and practicable, any U.S. dollars available to
the Depositary from the net proceeds of sales of Other Distributions as in
the case of Cash. Such U.S. dollars available will be distributed by checks
drawn on a bank in the United States for whole dollars and cents (any
fractional cents being withheld without liability for interest and added to
future Cash distributions).

To the extent that the Depositary determines in its discretion that any
distribution is not practicable with respect to any Holder, the Depositary may
make such distribution as it so determines is practicable, including the
distribution of foreign currency, securities or property (or appropriate
documents evidencing the right to receive foreign currency, securities or
property) or the retention thereof as Deposited Securities with respect to
such Holder's ADRs (without liability for interest thereon or the investment
thereof).

There can be no assurance that the Depositary will be able to effect any
currency conversion or to sell or otherwise dispose of any distributed or
offered property, subscription or other rights, Ordinary Shares or other
securities in a timely manner or at a specified rate or price, as the case may
be.

U.S. SECURITIES LAWS

The ability of U.S. persons who hold ADSs to participate in rights offerings
or share dividend alternatives which the Company may undertake in the future
will be restricted if the Company decides not to register such offerings under
the Securities Act. While the Company is not currently planning any such
action, no assurance can be given that such action will not be taken in the
future or that, if any such action is taken by the Company, it will be
feasible to include U.S. persons.

DISCLOSURE OF INTERESTS

To the extent that the provisions of or governing any Deposited Securities
may require disclosure of or impose limits on beneficial or other ownership of
Deposited Securities, other Ordinary Shares and other securities and may
provide for blocking transfer, voting or other rights to enforce such
disclosure or limits, Holders and all persons holding ADRs agree to comply
with all such disclosure requirements and ownership limitations and to
cooperate with the Depositary in the Depositary's compliance with any Company
instructions in respect thereof, and, in the Deposit Agreement, the Depositary
has agreed to use reasonable efforts to comply with such Company instructions.

RECORD DATES

The Depositary will, after consultation with the Company if practicable, fix
a record date (which shall be as near as practicable to any corresponding
record date set by the Company) for the determination of the Holders who shall
be entitled to receive any distribution on or in respect of Deposited
Securities, to give instructions for the exercise of any voting rights, to
receive any notice or to act in respect of other matters and only such Holders
shall be so entitled.

VOTING OF DEPOSITED SECURITIES

As soon as practicable after receipt from the Company of notice of any
meeting or solicitation of consents or proxies of holders of Ordinary Shares
or other Deposited Securities, the Depositary shall mail to Holders a notice
stating (a) such information as is contained in such notice and any
solicitation materials, (b) that each Holder on the record date set by the
Depositary therefor will be entitled to instruct the Depositary as to the
exercise of the voting rights, if any, pertaining to the Deposited Securities
represented by the ADSs evidenced by such Holder's ADRs and (c) the manner in
which such instructions may be given, including instructions to give a
discretionary proxy to a person designated by the Company. Upon receipt of
instructions of a Holder on such record date in the manner and on or before
the date established by the Depositary for such purpose, the Depositary shall
endeavor insofar as practicable and permitted under the provisions of or
governing Deposited Securities to vote or cause to be voted (or to grant a
discretionary proxy to a person designated by the Company to vote in
accordance with (c) above) the Deposited Securities represented by the ADSs
evidenced by such Holder's ADRs in accordance with such instructions. The
Depositary will not itself exercise any voting discretion in respect of any
Deposited Securities. If no instructions are received by the Depositary from
any Holder with respect to any of the Deposited Securities represented by the
ADSs evidenced by such Holders' ADRs on or before the date established by the
Depositary for such purpose, the Depositary shall deem such Holder to have
instructed the Depositary to give a discretionary proxy to a person designated
by the Company with respect to such Deposited Securities and the Depositary
shall give a discretionary proxy to a person designated by the Company to vote
such Deposited Securities, provided, that no such instruction shall be deemed
given and no such discretionary proxy shall be given with respect to any
matter as to which the Company informs the Depositary (and the Company agrees
to provide such information as promptly as practicable in writing) that (i)
the Company does not wish such proxy given, (ii) substantial opposition exists
or (iii) such matter materially and adversely affects the rights of holders of
Ordinary Shares; provided, further, that the Depositary shall not be obligated
to give any such proxy unless and until the Depositary has been provided with
an opinion, which shall be given at the time of entering into the Deposit
Agreement and prior to each vote in which a discretionary proxy is to be
provided, of counsel to the Company, in form and substance satisfactory to the
Depositary, to the effect that (i) the granting of such proxy does not subject
the Depositary to any reporting obligations in the Commonwealth of Australia,
including any states thereof, (ii) the granting of such proxy will not result
in a violation of any of the laws of either the Commonwealth of Australia or
any states thereof and (iii) the voting arrangement and proxy as contemplated
herein will be given effect under Australian law.

There can be no assurance that the Holders generally or any Holder in
particular will receive the notice described in this subheading sufficiently
prior to the date established by the Depositary for the receipt of
instructions to ensure that the Depositary will in fact receive such
instructions on or before such date. Neither the Depositary nor the Company
shall be responsible for any failure to carry out any instructions to vote any
of the Deposited Securities, or for the manner in which any such vote is cast
or the effect of any such vote.

INSPECTION OF TRANSFER BOOKS

The Deposit Agreement provides that the Depositary will keep books at its
Transfer Office for the registration, registration of transfer, combination
and split-up of ADRs, which at all reasonable times will be open for
inspection by the Holders and the Company for the purpose of communicating
with Holders in the interest of the business of the Company or a matter
related to the Deposit Agreement.

REPORTS AND OTHER COMMUNICATIONS

The Depositary shall make available for inspection by Holders at the
Transfer Office any reports and communications received from the Company which
are both (a) received by the Depositary as the holder of the Deposited
Securities and (b) made generally available to the holders of such Deposited
Securities by the Company. The Depositary shall also send to the Holders
copies of such reports when furnished by the Company. Any such reports and
communications furnished to the Depositary by the Company shall be furnished
in English.

On or before the first date on which the Company makes any communication
available to holders of Deposited Securities or any securities regulatory
authority or stock exchange, by publication or otherwise, the Company shall
transmit to the Depositary a copy thereof in English or with an English
translation or summary. In connection with any registration statement under
the Securities Act relating to the ADRs or with any undertaking contained
therein, the Company and the Depositary shall each furnish to the other and to
the Commission or any successor governmental agency such information as shall
be required to make such filings or comply with such undertakings. The Company
has delivered to the Depositary, the Custodian and any Transfer Office, a copy
of all provisions contained in the Articles or any other charter document of
or governing the Shares and any other Deposited Securities which are issued or
adopted by the Company or any affiliate of the Company (other than copies of
Australian laws, rules and regulations) and, promptly upon any change thereto,
the Company shall deliver to the Depositary, the Custodian and any Transfer
Office, a copy (in English or with an English translation) of such provisions
as so changed. The Depositary and its agents may rely upon the Company's
delivery thereof for all purposes of the Deposit Agreement.

CHANGES AFFECTING DEPOSITED SECURITIES

Subject to the terms and conditions of the Deposit Agreement, the Depositary
may, in its discretion, amend the form of ADR or distribute additional or
amended ADRs (with or without calling the ADRs for exchange) or cash,
securities or property on the record date set by the Depositary therefor to
reflect any change in par value, split-up, consolidation, cancellation or
other reclassification of Deposited Securities, any Ordinary Share
Distribution or Other Distribution not distributed to Holders or any cash,
securities or property available to the Depositary in respect of Deposited
Securities from (and, in the Deposit Agreement, the Depositary is authorized
to surrender any Deposited Securities to any person and to sell by public or
private sale any property received in connection with) any recapitalization,
reorganization, merger, consolidation, liquidation, receivership, bankruptcy
or sale of all or substantially all the assets of the Company, and to the
extent the Depositary does not so amend the ADR or make a distribution to
Holders to reflect any of the foregoing, or the net proceeds thereof, whatever
cash, securities or property results from any of the foregoing shall
constitute Deposited Securities and each ADS shall automatically represent its
pro rata interest in the Deposited Securities as then constituted.

AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT

The ADRs and the Deposit Agreement may be amended by the Company and the
Depositary, provided that any amendment that imposes or increases any fees or
charges (other than stock transfer or other taxes and other governmental
charges, transfer or registration fees, cable, telex or facsimile transmission
costs, delivery costs or other such expenses), or that shall otherwise
prejudice any substantial existing right of Holders, shall become effective 30
days after notice of such amendment shall have been given to the Holders.
Every Holder of an ADR at the time any amendment to the Deposit Agreement so
becomes effective shall be deemed, by continuing to hold such ADR, to consent
and agree to such amendment and to be bound by the Deposit Agreement as
amended thereby. In no event shall any amendment impair the right of the
Holder of any ADR to surrender such ADR and receive the Deposited Securities
represented thereby, except in order to comply with mandatory provisions of
applicable law.

The Depositary may (upon written notice to the Company if, any time after 60
days have expired after the Depositary will have delivered to the Company a
written notice of its election to resign, a successor depositary will not have
been appointed and accepted its appointment in accordance with the Deposit
Agreement), and shall at the written direction of the Company, terminate the
Deposit Agreement and the ADRs by mailing notice of such termination to the
Holders at least 30 days prior to the date fixed in such notice for such
termination. After the date so fixed for termination, the Depositary and its
agents will perform no further acts under the Deposit Agreement and the ADRs,
except to advise Holders of such termination, receive and hold (or sell)
distributions on Deposited Securities and deliver Deposited Securities being
withdrawn. As soon as practicable after the expiration of six months from the
date so fixed for termination, the Depositary shall sell the Deposited
Securities and shall thereafter (as long as it may lawfully do so) hold in a
segregated account the net proceeds of such sales, together with any other
cash then held by it under the Deposit Agreement, without liability for
interest, in trust for the pro rata benefit of the Holders not theretofore
surrendered. After making such sale, the Depositary

shall be discharged from all obligations in respect of the Deposit Agreement
and the ADRs, except to account for such net proceeds and other cash. After
the date so fixed for termination, the Company shall be discharged from all
obligations under the Deposit Agreement except for its obligations to the
Depositary and its agents.

CHARGES OF DEPOSITARY

The Depositary may charge each person to whom ADRs are issued against
deposits of Ordinary Shares including deposits in respect of Ordinary Share
Distributions, Rights and Other Distributions and each person surrendering
ADRs for withdrawal of Deposited Securities, US$5.00 for each 100 ADSs (or
portion thereof) evidenced by the ADRs delivered or surrendered. The Company
will pay all other charges and expenses of the Depositary and any agent of the
Depositary (except the Custodian) pursuant to agreements from time to time
between the Company and the Depositary, except (i) stock transfer or other
taxes and other governmental charges (which are payable by Holders or persons
depositing Ordinary Shares), (ii) cable, telex and facsimile transmission and
delivery charges incurred at the request of persons depositing, or Holders
delivering Ordinary Shares, ADRs or Deposited Securities (which are payable by
such persons or Holders), (iii) transfer or registration fees for the
registration of transfer of Deposited Securities on any applicable register in
connection with the deposit or withdrawal of Deposited Securities (which are
payable by persons depositing Ordinary Shares or Holders withdrawing Deposited
Securities; there are no such fees in respect of the Ordinary Shares as of the
date of the Deposit Agreement) and (iv) expenses of the Depositary in
connection with the conversion of foreign currency into U.S. dollars (which
are paid out of such foreign currency).

LIABILITY OF HOLDERS FOR TAXES

If any tax or other governmental charge shall become payable by or on behalf
of the Custodian or the Depositary with respect to the ADRs, any Deposited
Securities represented by the ADRs evidenced thereby or any distribution
thereon, such tax or other governmental charge shall be paid by the Holder
thereof to the Depositary. The Depositary may refuse to effect any
registration, registration of transfer, split-up or combination thereof or,
subject to the terms and conditions of the Deposit Agreement, any withdrawal
of such Deposited Securities until such payment is made. The Depositary may
also deduct from any distributions on or in respect of Deposited Securities,
or may sell by public or private sale for the account of the Holder thereof
any part or all of such Deposited Securities (after attempting by reasonable
means to notify the Holder thereof prior to such sale), and may apply such
deduction or the proceeds of any such sale in payment of such tax or other
governmental charge, the Holder thereof remaining liable for any deficiency,
and shall reduce the number of ADSs evidenced thereby to reflect any such
sales of Deposited Securities. In connection with any distribution to Holders,
the Company will remit to the appropriate governmental authority or agency all
amounts (if any) required to be withheld and owing to such authority or agency
by the Company; and the Depositary and the Custodian will remit to the
appropriate governmental authority or agency all amounts (if any) required to
be withheld and owing to such authority or agency by the Depositary or the
Custodian. If the Depositary determines that any distribution in property
other than cash (including Ordinary Shares or rights) on Deposited Securities
is subject to any tax that the Depositary or the Custodian is obligated to
withhold, the Depositary may dispose of all or a portion of such property in
such amounts and in such manner as the Depositary deems necessary and
practicable to pay such taxes, by public or private sale, and the Depositary
shall distribute the net proceeds of any such sale or the balance of any such
property after deduction of such taxes to the Holders entitled thereto.

GENERAL LIMITATIONS

The Depositary, the Company, their agents and each of them shall: (a) incur
no liability (i) if law, regulation, the provisions of or governing any
Deposited Security, act of God, war or other circumstance beyond its control
shall prevent, delay or subject to any civil or criminal penalty any act which
the Deposit Agreement or the ADRs provides shall be done or performed by it,
or (ii) by reason of any exercise or failure to exercise any discretion given
it in the Deposit Agreement or the ADRs; (b) assume no liability except to
perform its obligations to the extent they are specifically set forth in the
ADRs and the Deposit Agreement without gross negligence or bad faith; (c)
except in the case of the Company and its agents, be under no obligation to
appear in, prosecute or defend any action, suit or other proceeding in respect
of any Deposited Securities or the ADRs; (d) in the case of

the Company and its agents hereunder be under no obligation to appear in,
prosecute or defend any action, suit or other proceeding in respect of any
Deposited Securities or the ADRs, which in its opinion may involve it in
expense or liability, unless indemnity satisfactory to it against all expense
(including fees and disbursements of counsel) and liability be furnished as
often as may be required; or (e) not be liable for any action or inaction by
it in reliance upon the advice of or information from legal counsel,
accountants, any person presenting Ordinary Shares for deposit, any Holder, or
any other person believed by it to be competent to give such advice or
information. The Depositary, its agents and the Company may rely and shall be
protected in acting upon any written notice, request, direction or other
document believed by them to be genuine and to have been signed or presented
by the proper party or parties. The Depositary and its agents will not be
responsible for any failure to carry out any instructions to vote any of the
Deposited Securities, for the manner in which any such vote is cast or for the
effect of any such vote. The Depositary and its agents may own and deal in any
class of securities of the Company and its affiliates and in ADRs. The Company
has agreed to indemnify the Depositary and its agents under certain
circumstances and the Depositary has agreed to indemnify the Company against
losses incurred by the Company to the extent such losses are due to the
negligence or bad faith of the Depositary.

Prior to the issue, registration, registration of transfer, split-up or
combination of any ADR, the delivery of any distribution in respect thereof,
or, subject to the terms and conditions of the Deposit Agreement, the
withdrawal of any Deposited Securities, the Company, the Depositary or the
Custodian may require: (a) payment with respect thereto of (i) any stock
transfer or other tax or other governmental charge, (ii) any stock transfer or
registration fees in effect for the registration of transfers of Ordinary
Shares or other Deposited Securities upon any applicable register, and (iii)
any applicable charges as provided in the Deposit Agreement; (b) the
production of proof satisfactory to it of (i) the identity and genuineness of
any signature and (ii) such other information, including without limitation,
information as to citizenship, residence, exchange control approval,
beneficial ownership of any securities, compliance with applicable law
(including, but not limited to evidence of compliance with the Corporations
Law, the Banking (Foreign Exchange) Regulations or the Foreign Acquisitions
and Takeovers Act 1975 of Australia), regulations, provisions of or governing
Deposited Securities and terms of the Deposit Agreement and the ADRs, as it
may deem necessary or proper; and (c) compliance with such regulations as the
Depositary may establish consistent with the Deposit Agreement. The issuance
of ADRs, the acceptance of deposits of Ordinary Shares, the registration,
registration of transfer, split-up or combination of ADRs or, subject to the
terms of the Deposit Agreement, the withdrawal of Deposited Securities may be
suspended, generally or in particular instances, when the ADR Register or any
register for Deposited Securities is closed or when any such action is deemed
advisable by the Depositary or the Company.

GOVERNING LAW

The Deposit Agreement is governed by and shall be construed in accordance
with the laws of the State of New York.

MORGAN GUARANTY TRUST COMPANY OF NEW YORK

The Depositary is Morgan Guaranty Trust Company of New York, a New York
banking corporation, which has its principal office located in New York, New
York. Morgan Guaranty Trust Company of New York is a commercial bank offering
a wide range of banking and trust services to its customers in the New York
metropolitan area, throughout the United States and around the world.

The Consolidated Balance Sheets of J.P. Morgan & Co. Incorporated ("J.P.
Morgan"), the parent corporation of Morgan Guaranty Trust Company of New York,
are set forth in its most recent Annual Report and Form 10-Q. The Annual
Report, Form 10-K and Form 10-Q of J.P. Morgan are on file with the
Commission.

The Articles of Association of Morgan Guaranty Trust Company of New York and
By-Laws together with the annual report, Form 10-K and Form 10-Q of J.P.
Morgan will be available for inspection at the Principal New York Office of
the Depositary. J.P. Morgan Securities Inc., a co-managing underwriter in the
Company's IPO consummated in November 1997, is an affiliate of Morgan Guaranty
Trust Company.

CERTAIN TAX CONSIDERATIONS

Following are, under the caption "Certain Tax Considerations--Australian
Taxation," the opinion of Freehill, Hollingdale & Page as to the material
Australian tax consequences and, under the caption "Certain Tax
Considerations--United States Taxation," the opinion of Brobeck, Phleger &
Harrison LLP as to the material U.S. Federal income tax consequences of the
acquisition, ownership and disposition of Ordinary Shares or Resale ADSs by
U.S. Holders (as defined below). These opinions do not deal with the tax
consequences to U.S. Holders who carry on a business in Australia through a
permanent establishment. For purposes of these opinions, "U.S. Holder" means a
beneficial owner of Ordinary Shares or Resale ADSs that (i) for U.S. federal
income tax purposes is a U.S. resident, a U.S. citizen, a domestic
corporation, a domestic partnership, or a non-foreign estate or trust and (ii)
does not own directly, indirectly or constructively 10% or more of the voting
stock of the Company ("10% U.S. Shareholder"). These opinions do not purport
to be a complete technical analysis or listing of all potential tax effects to
holders of Ordinary Shares or Resale ADSs. Except as otherwise noted, the
statements of Australian and U.S. tax laws set forth below are based on the
laws in force as of the date of this Prospectus, including the bilateral
taxation convention between Australia and the United States (the "Treaty"),
and are subject to any changes in Australian and U.S. law occurring after such
date. No arrangements exist or are proposed under which the Company will
assume liability for, or reimburse to shareholders, any tax that the Company
may withhold in respect of dividends in accordance with tax legislation.
Purchasers of Resale ADSs or Ordinary Shares should consult their tax advisors
concerning the Australian tax and U.S. Federal income tax consequences of
their ownership of the Resale ADSs or Ordinary Shares. Further, purchasers who
are residents of jurisdictions other than the United States should consult
their tax advisors as to the tax consequences of investing in the Resale ADSs
or Ordinary Shares under the laws of their jurisdictions of residence.

These opinions represent only the best judgment of Freehill, Hollingdale &
Page and Brobeck, Phleger & Harrison LLP regarding the application of
Australian tax laws and United States Federal income tax laws under the
Internal Revenue Code of 1986, as amended (the "Code"), respectively, as well
as existing judicial decisions, administrative regulations and published
rulings and procedures in the respective jurisdictions. These opinions are not
binding upon the relevant Australian taxation authorities or the Internal
Revenue Service, as applicable, or the courts in the respective jurisdictions,
and there is no assurance that the relevant Australian taxation authorities or
the Internal Revenue Service, as the case may be, will not successfully assert
contrary positions. Furthermore, no assurance can be given that future
legislative, judicial decisions or administrative changes, applicable either
on a prospective or retroactive basis, might not materially alter these
opinions.

AUSTRALIAN TAXATION

The following is the opinion of Freehill, Hollingdale & Page, as to the
material Australian tax consequences to U.S. Holders of the acquisition,
ownership and disposition of Resale ADSs and Ordinary Shares.

Dividends. Fully franked dividends (i.e., dividends paid out of the
Company's profits which have been subject to Australian income tax at the
maximum corporate tax rate) which are paid to shareholders who are not
residents of Australia will not be subject to Australian income or Australian
withholding taxes. Unfranked dividends (i.e., dividends that are paid out of
profits that have not been subject to Australian income tax) are subject to
Australian withholding tax when paid to shareholders who are non-residents of
Australia. In the event the Company pays partially franked dividends,
shareholders will be subject to withholding tax on the unfranked portion.
Pursuant to the Treaty, the withholding tax imposed on dividends paid by the
Company to a U.S. resident is limited to 15%.

Dividends which are paid to the Company by a U.S. subsidiary out of the
trading profits of that subsidiary will give rise to a credit in the Company's
"foreign dividend account" ("FDA"). Where the Company has a credit balance in
its FDA and makes a written FDA declaration specifying that all or a portion
of an unfranked dividend to be paid by the Company is an FDA dividend, the
amount so specified will be exempt from Australian withholding tax. The
payment of an FDA dividend gives rise to a debit in the Company's FDA account.

Sales of Resale ADSs or Ordinary Shares. Nonresidents of Australia who do
not hold and have not at any time in the five years preceding the date of
disposal held (for their own account or together with associates) 10% or more
of the issued share capital of a public Australian company are not liable for
Australian capital gains tax on the disposal of shares or Resale ADSs of such
company.

Nonresidents of Australia are subject to Australian capital gains tax on the
disposal of shares or Resale ADSs of a private Australian company where the
disposal consideration exceeds the cost base (indexed for inflation where the
shares or Resale ADSs are held for 12 months or more). The rate of Australian
tax on taxable capital gains realized by nonresidents of Australia is 36% for
companies. For individuals, the rate of tax increases from 29% to a maximum of
47%. Nonresidents of Australia who are subject to Australian tax on capital
gains made on the disposal of shares or Resale ADSs are required to file an
Australian income tax return for the year in which the disposal occurs.

A company listed on a stock exchange (a "Listed Company") will be treated as
a private company in respect of a fiscal year for Australian tax purposes if
it is closely held (i.e. at any time during that fiscal year, not less than
75% of the paid up capital of the Company, voting power or dividend rights is
held by 20 or fewer persons), unless the Australian Commissioner of Taxation
(the "Commissioner"), pursuant to the discretion granted to him, rules that
such company will be treated as a public company for such fiscal year. As the
Resale ADSs are listed for quotation or The Nasdaq National Market, the
Company will be deemed a Listed Company.

On July 9, 1997, the Commissioner ruled that the Company will be treated as
a public company for Australian tax purposes for the year ending January 31,
1998. Such ruling is based on the Company's expectation that it will not be
closely held at any time after the Offering. However, because the ownership of
the Company must be continuously monitored, Freehill Hollingdale & Page gives
no assurance that the Company will not become closely held.

Non-residents who are securities dealers or in whose hands a profit on
disposal of Resale ADSs or Ordinary Shares is regarded as Ordinary income and
not as a capital gain (such Resale ADSs and Ordinary Shares are referred to as
"revenue assets") will be subject to Australian income tax on Australian
source profits arising on the disposal of the Resale ADSs or Ordinary Shares,
unless such profits are exempt from Australian tax under the Treaty. Freehill
Hollingdale & Page expresses no opinion as to whether the Resale ADSs or
Ordinary Shares are revenue assets because such a conclusion depends on the
particular facts and circumstances of the individual investor concerned.
Prospective investors should consult their own tax advisors in this regard.

Pursuant to the Treaty, capital gains or profits arising on the disposal of
Resale ADSs or Ordinary Shares which constitute "business profits" of an
enterprise carried on by a resident of the United States who does not carry on
business in Australia through a permanent establishment to which such gains or
profits are attributable are exempt from Australian tax. The term "business
profits" is not defined in the Treaty and thus its meaning in the present
context is that which the term has under Australian tax law. The Australian
Courts have held that the term business profits is not confined to profits
derived from the carrying on of a business but must embrace any profit of a
business nature or commercial character. The term "permanent establishment" is
defined in the Treaty to mean a fixed place of business through which an
enterprise is carried on and includes an Australian branch of the non-resident
and an agent (other than an agent of independent status) who is authorized to
conclude contracts on behalf of the non-resident and habitually exercises that
authority in Australia. Any capital gains or profits derived by a resident of
the United States from the disposal of the Resale ADSs or Ordinary Shares held
as revenue assets (including gains derived by a securities dealer) will
constitute business profits under the Treaty and, thus be exempt from
Australian tax, provided that such holder does not carry on business in
Australia through a permanent establishment to which such gains or profits are
attributable.

Non-residents with no taxable capital gains or income from sources in
Australia other than dividends with respect to the Ordinary Shares or Resale
ADSs are not required to file an Australian income tax return.

Stamp Duty. Under the law as it currently stands, stamp duty is imposed in
the Australian Capital Territory on any transfer of shares in a company
incorporated in the Australian Capital Territory and will be payable on the
transfer of Ordinary Shares in the Company. In the absence of a relevant
exemption, duty will be payable on the transfer of Ordinary Shares in the
Company at the rate of A$0.60 for each A$100.00 of the higher of the
consideration paid or payable to acquire the Ordinary Shares or unencumbered
value of the Ordinary Shares. That duty is payable by the transferee. Freehill
Hollingdale & Page expresses no opinion regarding the availability of any
exemption from stamp duty, since the availability of exemptions depends upon
the particular circumstances surrounding each transaction.

Technically, duty at the same rate as applies to the transfer of Ordinary
Shares in the Company may apply to transfers of ADRs or ADSs relating to
Ordinary Shares. However, based on recent discussions with the Australian
Capital Territory revenue authorities, it is understood that the authorities
do not consider it appropriate for duty to be charged on transfers of ADRs or
ADSs to foreign residents. A specific exemption is not provided under current
Australian Capital Territory stamp duties laws but is expected to be
introduced later this year. Freehill, Hollingdale & Page expresses no opinion
regarding the availability of any one of the proposed exemptions from stamp
duty, since the availability of any one of the exemptions from stamp duty
depends upon the terms of the legislation once introduced and the particular
circumstances of each transaction.

REPRESENTATIONS BY THE COMPANY

The following are representations made by the directors of the Company and
have been relied upon by Freehill Hollingdale & Page in rendering their
opinion set forth under the caption "Certain Tax Considerations--Australian
Taxation."

The Company anticipates that all dividends, if any, to be paid in the
foreseeable future will be fully franked. Dividend statements will be sent to
all Ordinary Shareholders which indicate the extent to which dividends are
franked and the amount of any tax withheld.

On July 9, 1997, the Australian Commissioner of Taxation (the
"Commissioner") ruled that the Company will be treated as a public company for
Australian tax purposes. The significance of this treatment for Australian tax
purposes is addressed in the opinion of Freehill Hollingdale & Page set forth
under the caption "Certain Tax Considerations--Australian Taxation." The
Commissioner's ruling is based on the Company's expectation that it will not
be closely held after the offering (i.e. it will not be the case that 20 or
fewer persons hold 75% or more of the paid up capital of the Company, its
voting power or dividend rights).

The Company is not currently, and does not expect that, in subsequent years,
it will become closely held, and therefore, expects that it will continue to
be a public company for Australian tax purposes. However, because the
ownership of the Company must be continuously monitored, there can be no
assurance that the Company will not become closely held. The Company will
monitor its share register and, if the need arises, seek a further exercise of
the Commissioner's discretion. The Company will notify its shareholders in the
event the Company is unsuccessful in maintaining its status as a public
company.

UNITED STATES TAXATION

The following is the opinion of Brobeck, Phleger & Harrison LLP as to the
material U.S. Federal income tax consequences to U.S. Holders of the
acquisition, ownership and disposition of the Resale ADSs and Ordinary Shares.

Holders of Resale ADSs Deemed to be Owners of Ordinary Shares. For purposes
of the Code, a U.S. Holder of Resale ADSs will be treated as the owner of the
underlying Ordinary Shares represented by such Resale ADSs. Exchanges,
deposits and withdrawals of Ordinary Shares for Resale ADSs or Resale ADSs for
Ordinary Shares by a U.S. Holder will not result in recognition of gain or
loss for U.S. Federal income tax purposes.

Cash Dividends. Distributions (other than a mere pro rata distribution of
Ordinary Shares) made by the Company with respect to the Ordinary Shares,
including Ordinary Shares represented by Resale ADSs (including the amount of
any Australian taxes withheld therefrom), will be includable in the gross
income of a U.S. Holder as dividend income from a source other than within the
United States to the extent of current or accumulated earnings and profits of
the Company. Such dividends will not be eligible for the dividends received
deduction otherwise allowed to corporations. To the extent, if any, that the
amount of any such distribution exceeds the Company's current and accumulated
earnings and profits, it will be treated first as a tax-free return of the
U.S. Holder's tax basis in its Resale ADSs to the extent thereof, and then, to
the extent in excess of such tax basis, as capital gain. Dividends paid in
Australian dollars will be includable in income in a U.S. dollar amount based
on the prevailing U.S. dollar-Australian dollar exchange rate on the date of
receipt by the Depositary or the date of receipt by the U.S. Holder of
Ordinary Shares, whether or not the payment is converted into U.S. dollars at
that time. Any gain or loss recognized upon a subsequent sale or conversion of
the Australian dollars will be U.S. source ordinary income or loss. Any
Australian tax withheld from a dividend will be treated as a foreign tax
creditable (subject to the limitations discussed below) against the U.S.
Federal income tax liability of the U.S. Holder. Amounts creditable against
U.S. tax are permitted, at the election of the U.S. Holder, to be deducted.
Under the Code, the amount of foreign tax eligible for credit against the U.S.
Federal income tax liability of a U.S. Holder is limited to the amount of U.S.
tax attributable to the U.S. Holder's taxable income from sources other than
within the United States (such limitation, the "Overall Limitation"). For
purposes of computing the Overall Limitation, the amount of foreign tax
eligible for credit is calculated separately with respect to specific classes
of income. For this purpose, dividends paid by the Company will be "passive
income" or, in the case of certain holders, "financial services income."
Because the ability of a U.S. Holder to credit foreign taxes against such U.S.
Holder's U.S. Federal income tax liability depends on such U.S. Holder's
particular circumstances, Brobeck, Phleger & Harrison LLP expresses no opinion
as to the availability of such a credit. Prospective investors must consult
their own tax advisors in this regard.

Sale of Resale ADSs or Ordinary Shares. Upon a sale or exchange of Resale
ADSs or Ordinary Shares, a U.S. Holder will recognize gain or loss equal to
the difference between the amount realized upon the disposition and such
holder's adjusted tax basis in the Resale ADSs or Ordinary Shares. Such gain
or loss will be a capital gain or loss if the holder has held his Resale ADSs
or Ordinary Shares as capital assets. Capital gains recognized on the sale or
exchange by individuals of capital assets are subject to a 28% maximum tax
rate if the capital assets have been held for more than one year but not more
than 18 months and a 20% maximum tax rate if the capital assets have been held
for more than 18 months. Capital losses may only be deducted to the extent of
capital gains, except that individuals may deduct up to $3,000 of net capital
losses against ordinary income. Because the ability of U.S. Holders to deduct
capital losses depends on each U.S. Holder's particular circumstances,
Brobeck, Phleger & Harrison LLP expresses no opinion as to the availability of
such deduction. Prospective investors must consult their own tax advisors in
this regard.

No Australian Tax is imposed on the capital gains of a U.S. Holder arising
from the sale or exchange of Resale ADSs or Ordinary Shares provided that the
Company continues to be treated as a public company for Australian tax
purposes. See "--Australian Taxation--Sales of Resale ADSs or Ordinary
Shares." In the event that the Company is not treated as a public company and,
consequently, Australian tax is imposed on the sale or exchange of Resale ADSs
or Ordinary Shares, U.S. Holders should consult their own tax advisors with
respect to their ability to credit such tax against their U.S. federal income
taxes. Because the ability of a U.S. Holder to credit foreign taxes against
such U.S. Holder's U.S. Federal income tax liability depends on such U.S.
Holder's particular circumstances, Brobeck, Phleger & Harrison LLP expresses
no opinion as to the availability of such a credit. Prospective investors must
consult their own tax advisors in this regard.

Passive Foreign Investment Company. A Passive Foreign Investment Company
("PFIC") is a foreign corporation in which either (1) 75% or more of its gross
income in a tax year is passive or (2) at least 50% of the average percentage
of its assets (by value or, if the corporation so elects, by adjusted tax
basis) produce or are held for the production of passive income. As of the
date of this Prospectus, the Company is not a PFIC. If the Company becomes a
PFIC, the U.S. Federal income tax consequences to a U.S. Holder of the
purchase,

ownership, disposition or deemed disposition of Resale ADSs will change
significantly from the consequences presented in this discussion. Because the
determination of PFIC status in the future will be based upon annual
determinations of the composition of the income and assets of the Company,
Brobeck, Phleger & Harrison LLP expresses no opinion as to whether the Company
will become a PFIC in the future and no opinion as to the material U.S.
Federal income tax consequences to U.S. Holders that would result if the
Company were to become a PFIC in the future.

SHARES ELIGIBLE FOR FUTURE SALE

In November 1997, the Company registered, issued and sold 1,700,000 ADSs
(each representing one Ordinary Share of the Company) at a price of US$11.00
per share, for an aggregate offering amount of approximately US$18.7 million,
including 1,500,000 ADSs sold by the Company for an aggregate offering amount
of approximately US$16.5 million and 200,000 ADSs registered for the selling
securityholders, at $11.00 per share for an aggregate offering amount of
US$2.2 million. The ADSs were registered on a Form F-1 registration statement,
file number 333-37259, with the Securities and Exchange Commission, which
registration statement became effective on November 3, 1997. The managing
underwriters were J.P. Morgan & Co. and SBC Warburg Australia. The Company did
not receive any of the proceeds from the offering of ADSs on behalf of the
selling securityholders in the IPO.

As of April 30, 1998, there were outstanding options to purchase a total of
402,438 Ordinary Shares granted by the Company, of which 221,038 were held by
directors and officers of the Company. These outstanding options were granted
under both the Company's Executive Share Option Plan and the 1997 Share Option
Plan. There were no other warrants or rights to purchase the Company's
Ordinary Shares outstanding as of April 30, 1998. None of these options is
presently exercisable, nor will any become exercisable within the next sixty
(60) days. The Company may in the future issue these or other equity or equity
derivative securities. See "Management--1997 Share Option Plan" and
"Management--Executive Share Option Plan."

Upon effectiveness of the Registration Statement of which this Prospectus is
a part, assuming no exercise of outstanding stock options after April 30,1998,
the Company will have 4,541,652 Ordinary Shares outstanding (including those
represented by the ADSs). Substantially all of such Ordinary Shares will be
freely tradable without further registration under the Securities Act, subject
to compliance with Rule 144.

In general, under Rule 144, as in effect on the date of this Prospectus, an
affiliate of the Company, or person (or persons whose shares are aggregated)
who has beneficially owned restricted shares for at least one year, will be
entitled to sell in any three-month period commencing at least 90 days after
the date of this Prospectus a number of shares that does not exceed the
greater of (i) 1% of the then outstanding Ordinary Shares (approximately
45,416 shares as of June 1, 1998) or (ii) the average weekly trading volume of
the Company's Ordinary Shares (as represented by ADSs) on Nasdaq during the
four calendar weeks immediately preceding the date on which notice of the sale
is filed with the SEC. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. In addition, affiliates of the Company
must comply with the restrictions and requirements of Rule 144, other than the
one-year holding period requirement, in order to sell Ordinary Shares which
are not "restricted securities" (such as Ordinary Shares acquired by
affiliates in the public markets). A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has
beneficially owned restricted shares for at least two years is entitled to
sell such shares immediately following the consummation of the Offering
pursuant to Rule 144(k) without regard to the limitations described in this
paragraph. For purposes of calculating the holding periods under Rule 144, the
holders of Ordinary Shares issued upon conversion of Convertible Notes are
deemed to have acquired their Ordinary Shares when they acquired their
Convertible Notes.

PLAN OF DISTRIBUTION

The Company will not receive proceeds from the sale of Resale ADSs in this
Offering. The Resale ADSs offered hereby may be sold by the Selling
Shareholders from time to time in transactions on Nasdaq, in negotiated
transactions, or a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to prevailing market prices or at negotiated prices. The Selling
Shareholders may effect such transactions by selling the Resale ADSs to or
through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling
Shareholders and/or the purchasers of the Resale ADSs for whom such broker-
dealers may act as agents or to whom they sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions).

In order to comply with the securities laws of certain states, if
applicable, the Resale ADSs will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Resale ADSs may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.

The Selling Shareholders and any broker-dealers or agents that participate
with the Selling Shareholders in the distribution of the Resale ADSs may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Resale ADSs
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.

The Company has advised the Selling Shareholders that, during such time as
they may be engaged in a distribution of the Ordinary Shares included herein,
they must comply with the applicable provisions under Regulation M under the
Exchange Act, ("Regulation M") and, in connection therewith, the Selling
Shareholders may not engage in any stabilization activity in connection with
any securities of the Company, that they must furnish copies of this
Prospectus to each broker-dealer through which the Ordinary Shares included
herein may be offered, and that they may not bid for or purchase any
securities of the Company or attempt to induce any person to purchase any
securities of the Company except as permitted under Regulation M. The Selling
Shareholders have also agreed to inform the Company and broker-dealers through
whom sales may be made hereunder when the distribution of the shares is
completed.

Rules 102 and 103 under Regulation M prohibit participants in a distribution
from bidding for or purchasing any of the securities that are the subject of
the distribution for an account in which the participant has a beneficial
interest. Rule 104 under Regulation M governs bids and purchases made to
stabilize the price of a security in connection with a distribution of the
security.

A total of 997,926 of the Resale ADSs were originally issued upon conversion
of the Convertible Notes in connection with the Company's IPO, the Convertible
Notes having been issued in offshore transactions not required to be
registered under the Securities Act. In connection with the conversion of all
of the Convertible Notes upon consummation of the Company's IPO, the Company
contractually agreed to register under the Securities Act these Ordinary
Shares on behalf of the Selling Shareholders. A total of 46,919 of the Resale
ADSs are being registered voluntarily by the Company hereby and were also
originally issued by the Company in offshore transactions, not required to be
registered under the Securities Act. The Company has agreed to pay all fees
and expenses incident to the filing of this Registration Statement, including
fees of the Company's counsel relating to Selling Shareholder issues, other
than underwriting discounts and commissions.

LEGAL MATTERS

The validity of the ADSs offered hereby under Australian law and certain
Australian tax matters will be passed upon for the Company and the Selling
Shareholders by Freehill, Hollingdale & Page, Solicitors & Attorneys, Sydney,
Australia. Certain legal matters relating to the ADSs will be passed upon by
Brobeck, Phleger & Harrison LLP, Palo Alto, California, special U.S. counsel
for the Company and the Selling Shareholders.

EXPERTS

The Consolidated Balance Sheet of the Company as of June 30, 1996 and the
Consolidated Statements of Operations, Shareholders' Equity and Cash Flows for
each of the two years in the period ended June 30, 1996 included herein have
been audited by Horwath & Horwath, independent public accountants, as
indicated in their report with respect thereto, and are included in the
Registration Statement of which this Prospectus is a part in reliance upon the
authority of said firm as experts in auditing and accounting. The Consolidated
Balance Sheets of the Company as of June 30, 1993, 1994 and 1995 and the
Consolidated Statements of Operations, Shareholders' Equity and Cash Flows for
each of the two years in the period ended June 30, 1994 have been audited by
Horwath & Horwath and are not included herein.

The Consolidated Financial Statements of Barbeques Galore Limited and
subsidiaries as of January 31, 1998 and January 31, 1997 and for the twelve-
month period ended January 31, 1998 and the seven-month period ended January
31, 1997 have been included herein in reliance upon the report of KPMG,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. With respect
to the unaudited interim financial information for the annual periods ended
January 31, 1995, 1996 and 1997 included in the Registration Statement of
which this Prospectus is a part, KPMG has reported that they applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report (included in the Registration
Statement of which this Prospectus is a part) states that they did not audit
and they do not express an opinion on this interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of Section 11 of
the Securities Act for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act.

INDEX TO DEFINED TERMS

DEFINED TERM LOCATION
------------ --------

10% U.S. Shareholder "Certain Tax Considerations"
1997 Plan "Management--1997 Share Option Plan"
ADRs Cover Page
ADSs Cover Page
ANZ "Use of Proceeds"
ANZ Facility "Dividend Policy"
Articles "Risk Factors--Restrictions on Foreign Ownership;
Antitakeover Restrictions"
ASE "Dividend Policy"
Barbeques Galore Cover Page
Bosmana "Principal Shareholders"--Note 3 to Table
Bromic "Risk Factors--Risks Associated with International
Operations; Dependence on Significant Vendors and
Suppliers"
Capital Reduction "Certain Transactions--Recent Delisting Transaction"
Cash "Description of American Depositary Receipts--
Distributions on Deposited Securities"
Code "Certain Tax Considerations--United States Taxation--
Holders of ADSs Deemed to be Owners of Ordinary Shares"
Commission "Available Information"
Commissioner "Certain Tax Considerations--Australian Taxation"
Company Cover Page
Convertible Notes Cover Page
Custodian "Description of American Depositary Receipts"
Delivery Order "Description of American Depositary Receipts--Deposit,
Transfer and Withdrawal"
Deposit Agreement "Description of American Depositary Receipts"
Depositary "Description of American Depositary Receipts"
Deposited Securities "Description of American Depositary Receipts"
Entity Optionee "Management--Executive Share Option Plan"
Exchange Act "Available Information"
Expiry Date "Management--Executive Share Option Plan"
EPS "Management's Discussion and Analysis of Financial
Condition and Results of Operations--New Pronouncements
by Financial Accounting Standards Board"
Executive Plan "Management--Executive Share Option Plan"
Expiration Date "Certain Tax Considerations--Australian Taxation"
Galore USA "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources"
Geblon "Principal Shareholders"--Note 2 to Table
GLG Taiwan "Business--Manufacturing"
Holders "Description of American Depositary Receipts"
Horan's Steel "Risk Factors--Risks Associated with International
Operations; Dependence on Significant Vendors and
Suppliers"
JDA "Risk Factors"
J.P. Morgan "Description of American Depositary Receipts--Morgan
Guaranty Trust Company of New York"
Listed Company "Certain Tax Considerations--Australian Taxation"
Merrill Lynch "Use of Proceeds"
Merrill Lynch Facility "Dividend Policy"
Nasdaq Cover page
Noon Buying Rate "Financial Statement Presentation"

DEFINED TERM LOCATION
------------ --------

Noteholders "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview"
Offering Cover Page
Optics "Risk Factors--Implementation of Growth Strategy"
Options "Risk Factors--Shares Eligible for Future Sale"
Ordinary Share Cover Page
Ordinary Share Distribution "Description of American Depositary Receipts--
Distributions on Deposited Securities"
Other Distributions "Description of American Depositary Receipts--
Distributions on Deposited Securities"
Overall Limitation "Certain Tax Considerations--United States
Taxation--Cash Dividends"
Ownership Test "Certain Tax Considerations--Australian Taxation--
Sales of ADSs or Ordinary Shares"
PFIC "Certain Tax Considerations--United States
Taxation--Passive Foreign Investment Company"
POS "Business--Store Operations"
Pre-released ADRs "Description of American Depositary Receipts--
Deposit, Transfer and Withdrawal"
Pricotech "Business--Wholesale Operations"
Principal New York Office "Description of American Depositary Receipts"
Prospectus Cover Page
Rebel "Management--Executive Officers, Directors and Key
Employees"
Registration Statement "Enforceability of Civil Liabilities Under the
Federal Securities Laws"
Regulation M "Plan of Distribution"
Related Franchisors "Certain Transactions--Transactions Involving
Principal Shareholders"
Reverse Share Split "Prospectus Summary"
Revolving Line "Management's Discussion and Analysis--Liquidity
and Capital Resources"
Rights "Description of American Depositary Receipts--
Distributions on Deposited Securities"
Rule 144 "Risk Factors--Shares Eligible for Future Sale"
Sarwill "Principal Shareholders"--Note 4 to Table
SBC Warburg Australia "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources"
Securities Act Cover Page
Selling Shareholders Cover Page
SFAS "Management's Discussion and Analysis of Financial
Condition and Results of Operations--New
Pronouncements by Financial Accounting Standards
Board"
Standby Facility "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources"
Takeovers Act "Risk Factors--Restrictions on Foreign Ownership;
Antitakeover Restrictions"
Term Loan "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources"
Transfer Office "Description of American Depositary Receipts--
Deposit, Transfer and Withdrawal"
Treaty "Certain Tax Considerations"
U.S. GAAP "Available Information"
U.S. Holder "Certain Tax Considerations"
Wispjune "Principal Shareholders"--Note 3 to Table

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Independent Auditors' Reports.............................................. F-2
Consolidated Balance Sheets................................................ F-4
Consolidated Statements of Operations...................................... F-5
Consolidated Statements of Shareholders' Equity............................ F-6
Consolidated Statements of Cash Flows...................................... F-7
Notes to Consolidated Financial Statements................................. F-8

F-1

INDEPENDENT AUDITORS' REPORTS

The Board of Directors and Shareholders
Barbeques Galore Limited

We have audited the accompanying consolidated balance sheets of Barbeques
Galore Limited and subsidiaries as of January 31, 1998 and 1997 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year ended January 31, 1998 and the seven months ended January
31, 1997. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in Australia, the registrant's local standards, which are
substantially equivalent to auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Barbeques
Galore Limited and subsidiaries as of January 31, 1998 and January 31, 1997
and the results of their operations and their cash flows for the years ended
January 31, 1998 and seven months ended January 31, 1997 in conformity with
generally accepted accounting principles in the United States.

/s/ KPMG
KPMG

April 10, 1998 Sydney, Australia

F-2

The Board of Directors and Shareholders
Barbeques Galore Limited

SCOPE

We have audited the accompanying consolidated financial statements of
Barbeques Galore Limited and subsidiaries incorporating the consolidated
balance sheet as of June 30, 1996, and consolidated statements of operations,
shareholders' equity and cash flows for the years ended June 30, 1996 and June
30, 1995. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in Australia, that are substantially equivalent to auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and the significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

AUDIT OPINION

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Barbeques
Galore Limited and subsidiaries as of June 30, 1996, and the results of their
operations and their cash flows for the years ended June 30, 1996 and June 30,
1995, in conformity with generally accepted accounting principles in the
United States.

/s/ Horwath Sydney Partnership
HORWATH SYDNEY PARTNERSHIP

August 8, 1997 Sydney, Australia

F-3

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, JANUARY 31, JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1996 1997 1998 1998 1997 1998
-------- ----------- ----------- ----------- ----------- -----------
(US$) (UNAUDITED) (UNAUDITED)
(IN A$THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

ASSETS
Current assets:
Cash and cash
equivalents........... $ 26 $ 30 $ 166 $ 111 $ 33 $ 31
Accounts receivable,
net................... 7,835 7,350 9,862 6,601 7,429 7,962
Receivables from
affiliates............ 119 362 143 96 74 250
Inventories............ 36,933 33,928 43,030 28,800 37,558 47,302
Deferred income
taxes................. 1,113 2,472 2,031 1,359 2,550 2,393
Prepaid expenses and
other current
assets................ 742 1,131 1,079 722 1,550 1,577
------- ------- ------- ------- ------- -------
Total current
assets.............. 46,768 45,273 56,311 37,689 49,194 59,515
Non-current assets:
Receivables from
affiliates............ 697 696 642 430 696 480
Property, plant and
equipment, net........ 16,457 18,348 21,038 14,081 18,113 24,967
Goodwill, net.......... 628 1,476 1,507 1,009 1,470 1,486
Deferred income
taxes................. 841 871 1,194 799 901 1,405
Other non-current
assets................ 1,171 1,306 1,382 925 1,366 1,462
------- ------- ------- ------- ------- -------
Total assets......... $66,562 $67,970 $82,074 $54,933 $71,740 $89,315
======= ======= ======= ======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft......... $ 1,445 $ 1,826 $ -- $ -- $ 2,102 $ 2,610
Accounts payable and
accrued liabilities... 14,388 13,693 16,648 11,143 15,428 17,835
Payables to related
parties............... 942 1,231 -- -- 1,055 --
Current maturities of
long-term debt........ 3,848 2,964 198 133 5 147
Current portion of
obligations under
capital leases........ 999 1,395 1,729 1,157 1,162 1,312
Income taxes payable... 436 1,612 819 548 908 457
------- ------- ------- ------- ------- -------
Total current
liabilities......... 22,058 22,721 19,394 12,981 20,660 22,361
Non-current liabilities:
Long-term debt......... 12,772 20,718 14,716 9,849 27,844 18,975
Convertible notes...... -- 10,042 -- -- 10,042 --
Obligations under
capital leases,
excluding current
portion............... 3,047 3,516 3,405 2,279 3,582 3,388
Other long-term
liabilities........... 868 808 632 423 799 1,016
------- ------- ------- ------- ------- -------
Total liabilities.... 38,745 57,805 38,147 25,532 62,927 45,740
------- ------- ------- ------- ------- -------
Shareholders' equity:
Ordinary shares,
A$3.64 par value;
authorized 27,437,853
shares................ 16,220 6,720 16,532 11,065 6,720 16,532
Additional paid-in
capital............... 14,113 4,613 24,554 16,434 4,613 24,554
Foreign currency
translation
adjustment............ 3 200 1,177 788 47 1,612
Retained earnings
(deficit)............. (2,519) (1,368) 1,664 1,114 (2,567) 877
------- ------- ------- ------- ------- -------
Total shareholders'
equity.............. 27,817 10,165 43,927 29,401 8,813 43,575
------- ------- ------- ------- ------- -------
Total liabilities and
shareholders'
equity.............. $66,562 $67,970 $82,074 $54,933 $71,740 $89,315
======= ======= ======= ======= ======= =======

See accompanying notes to consolidated financial statements.

F-4

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

7 MONTHS 12 MONTHS 3 MONTHS 3 MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED ENDED ENDED
JUNE 30, JUNE 30, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1995 1996 1997 1997 1998 1998 1997 1998
---------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (US$) (UNAUDITED) (UNAUDITED)
(IN A$ THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Net sales............... $138,057 $141,691 $98,752 $148,369 $179,325 $131,266 $30,366 $36,744
Cost of goods sold,
warehouse, distribution
and occupancy costs.... 92,290 98,158 67,955 103,324 122,072 89,357 20,891 25,117
-------- -------- ------- -------- -------- -------- ------- -------
Gross profit............ 45,767 43,533 30,797 45,045 57,253 41,909 9,475 11,627
Selling, general, and
administrative
expenses............... 40,058 39,339 25,740 40,751 48,992 35,862 9,798 12,462
Store pre-opening
costs.................. 64 153 200 239 435 318 114 147
Relocation and closure
costs.................. -- 875 461 1,336 20 15 -- 15
-------- -------- ------- -------- -------- -------- ------- -------
Operating income........ 5,645 3,166 4,396 2,719 7,806 5,714 (437) (997)
-------- -------- ------- -------- -------- -------- ------- -------
Equity in income of
affiliates, net of
tax.................... 963 836 252 379 547 400 50 96
Interest expense........ 2,230 2,262 1,593 2,236 3,334 2,440 879 388
Other expenses
(income)............... -- (2,303) 1,132 1,132 -- -- -- --
-------- -------- ------- -------- -------- -------- ------- -------
Income (loss) before
income taxes........... 4,378 4,043 1,923 (270) 5,019 3,674 (1,266) (1,289)
Income tax expense
(benefit).............. 573 98 366 (822) 1,488 1,089 (566) (502)
-------- -------- ------- -------- -------- -------- ------- -------
Net income.............. $ 3,805 $ 3,945 $ 1,557 $ 552 $ 3,531 $ 2,585 $ (700) $ (787)
======== ======== ======= ======== ======== ======== ======= =======
Earnings per share
(A$ per share):
Basic earnings per
share.................. $ 0.86 $ 0.89 $ 0.38 $ 0.13 $ 1.43 $ 1.05 $ (0.38) $ (0.17)
======== ======== ======= ======== ======== ======== ======= =======
Diluted earnings per
share.................. $ 0.86 $ 0.89 $ 0.38 $ 0.13 $ 1.18 $ 0.86 $ (0.38) $ (0.17)
======== ======== ======= ======== ======== ======== ======= =======
Weighted average shares
outstanding (in
thousands)............. 4,450 4,450 4,073 4,228 2,473 2,473 1,844 4,541
======== ======== ======= ======== ======== ======== ======= =======

See accompanying notes to consolidated financial statements.

F-5

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOREIGN
ADDITIONAL CURRENCY RETAINED TOTAL
SHARES ORDINARY PAID-IN TRANSLATION EARNINGS SHAREHOLDERS'
OUTSTANDING SHARES CAPITAL ADJUSTMENT (DEFICIT) EQUITY
----------- -------- ---------- ----------- --------- -------------
(IN A$ THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Balances at June 30,
1994................... 4,450 $ 16,220 $ 14,113 $ 468 $(6,416) $ 24,385
Net income.............. -- -- -- -- 3,805 3,805
Dividend of $0.4560 per
share.................. -- -- -- -- (2,028) (2,028)
Foreign currency
translation
adjustment............. -- -- -- 164 -- 164
------- -------- -------- ------ ------- --------
Balances at June 30,
1995................... 4,450 16,220 14,113 632 (4,639) 26,326
Net income.............. -- -- -- -- 3,945 3,945
Dividend of $0.1367 per
share.................. -- -- -- -- (608) (608)
Dividend of $0.2733 per
share.................. -- -- -- -- (1,217) (1,217)
Foreign currency
translation
adjustment............. -- -- -- (629) -- (629)
------- -------- -------- ------ ------- --------
Balances at June 30,
1996................... 4,450 16,220 14,113 3 (2,519) 27,817
Net income.............. -- -- -- -- 1,557 1,557
Dividend of $0.0911 per
share.................. -- -- -- -- (406) (406)
Foreign currency
translation
adjustment............. -- -- -- 197 -- 197
Repurchase of ordinary
shares................. (2,744) (10,000) (10,000) -- -- (20,000)
Issuance of ordinary
shares................. 137 500 500 -- -- 1,000
------- -------- -------- ------ ------- --------
Balances at January 31,
1997................... 1,843 6,720 4,613 200 (1,368) 10,165
Net loss................ -- -- -- -- (700) (700)
Foreign currency
translation
adjustment............. -- -- -- (153) -- (153)
Dividend of $0.2715 per
share.................. -- -- -- -- (499) (499)
------- -------- -------- ------ ------- --------
Balance at April 30,
1997 (unaudited)....... 1,843 6,720 4,613 47 (2,567) 8,813
Net income.............. -- -- -- -- 4,231 4,231
Foreign currency
translation
adjustment............. -- -- -- 1,130 -- 1,130
Issuance of ordinary
shares................. 1,500 5,460 18,149 -- -- 23,609
Conversion of
convertible notes...... 1,198 4,360 5,682 -- -- 10,042
Initial public offering
(the "Offering")
costs.................. -- -- (3,898) -- -- (3,898)
Other................... -- (8) 8 -- -- --
------- -------- -------- ------ ------- --------
Balances at January 31,
1998................... 4,541 16,532 24,554 1,177 1,664 43,927
------- -------- -------- ------ ------- --------
Net loss................ -- -- -- -- (787) (787)
Foreign currency
translation
adjustment............. -- -- -- 435 -- 435
------- -------- -------- ------ ------- --------
Balances at April 30,
1998 (unaudited)....... 4,541 $ 16,532 $ 24,554 $1,612 $ 877 $ 43,575
======= ======== ======== ====== ======= ========

See accompanying notes to consolidated financial statements.

F-6

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED YEAR ENDED 7 MONTHS ENDED 12 MONTHS ENDED YEAR ENDED 3 MONTHS ENDED 3 MONTHS ENDED
JUNE 30, JUNE 30, JANUARY 31, JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1995 1996 1997 1997 1998 1997 1998
----------- ----------- --------------- ---------------- ------------ -------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN A$ THOUSANDS)

CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income.......... $ 3,805 $ 3,945 $ 1,557 $ 552 $ 3,531 $ (700) $ (787)
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation and
amortization...... 2,755 3,080 2,633 4,031 4,236 826 1,438
Deferred income
taxes............. (365) (536) (1,389) (1,794) 118 (108) (566)
Amounts set aside
to provisions..... 70 270 (269) (703) (925) (540) (474)
Gain on sale of
affiliate......... -- (2,303) -- -- -- -- --
Undistributed
income of
affiliates........ 4 124 (252) (6) (219) (49) (40)
Loss (gain) on sale
of property, plant
and equipment..... 250 76 663 707 (52) -- 1
Debt issue costs... -- -- 1,132 1,132 -- -- --
Changes in
operating assets
and liabilities:
Receivables and
prepaid expenses.. (1,959) 275 (421) 1,292 (2,316) (380) 1,580
Inventories........ (4,942) 1,547 3,219 3,039 (9,185) (3,688) (4,247)
Other assets....... (203) (6) (1) (45) (81) (18) (24)
Accounts payable
and accrued
liabilities....... 2,326 (1,901) 332 2,425 3,755 1,141 1,754
-------- -------- -------- -------- -------- ------- -------
Net cash provided by
(used in) operating
activities......... 1,741 4,571 7,204 10,630 (1,138) (3,516) (1,365)
-------- -------- -------- -------- -------- ------- -------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Proceeds from sale
of affiliate....... -- 2,222 173 173 -- -- --
Proceeds from sale
of property, plant
and equipment...... 189 63 51 84 322 -- 11
Capital
expenditures....... (2,242) (4,609) (3,201) (6,602) (5,000) (104) (4,969)
Loan repayments
received........... 181 2,270 140 320 181 50 (38)
-------- -------- -------- -------- -------- ------- -------
Net cash provided by
(used in) investing
activities......... (1,872) (54) (2,837) (6,025) (4,497) (54) (4,996)
-------- -------- -------- -------- -------- ------- -------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Repayment of long-
term debt.......... (19,305) (12,661) (4,304) (4,711) (34,111) (1,212) (7,792)
Proceeds from long-
term debt.......... 21,135 9,429 21,534 19,522 24,274 5,365 12,000
Debt issue costs.... -- -- (1,132) (1,132) -- -- --
Bank overdraft
proceeds
(repayments)....... -- 1,445 381 1,826 (1,826) 276 2,610
Principal payments
under capital
leases............. (670) (827) (443) (874) (1,782) (357) (436)
Dividends paid...... (2,028) (1,825) (406) (1,623) (499) (499) --
Repurchase of
ordinary shares.... -- -- (20,000) (20,000) -- -- --
Proceeds from
issuance of
ordinary shares.... -- -- -- -- 23,609 -- --
Offering costs...... -- -- -- -- (3,898) -- (156)
-------- -------- -------- -------- -------- ------- -------
Net cash provided by
(used in) financing
activities......... (868) (4,439) (4,370) (6,992) 5,767 3,573 6,226
-------- -------- -------- -------- -------- ------- -------
Effects of exchange
rate fluctuations.. (26) (60) 7 (24) 4 -- --
-------- -------- -------- -------- -------- ------- -------
Net increase
(decrease) in cash
and cash
equivalents........ (1,025) 18 4 (2,411) 136 3 (135)
Cash and cash
equivalents at
beginning of
period............. 1,544 519 26 2,441 30 30 166
Adjustment to
opening cash
balance arising
from
deconsolidation of
former subsidiary.. -- (511) -- -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Cash and cash
equivalents at end
of period.......... $ 519 $ 26 $ 30 $ 30 $ 166 $ 33 $ 31
======== ======== ======== ======== ======== ======= =======

See accompanying notes to consolidated financial statements.

F-7

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of business

Barbeques Galore Limited ("Barbeques Galore" or "the Company") is an
Australian resident company which is involved in the manufacture of barbecues
and heaters, and wholesale and retail sales of barbecues, heaters, camping
equipment, outdoor furniture, leisure products and related accessories through
company-owned and licensed stores in Australia. The Company is also involved
in the retailing, through Company-owned and franchised stores, of barbecues,
fireplace equipment and accessories in the United States of America. The
Company's manufacturing operations are located in Australia.

(b) Principles of consolidation

The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated on consolidation.

Inventories are comprised of raw materials and stores, work in progress and
finished goods. Inventories are valued at the lower of cost or market using
the first-in, first-out ("FIFO") method.

(d) Derivative financial instruments

The Company uses foreign currency forward contracts to offset earnings
fluctuations from anticipated foreign currency cash flows. These instruments
are marked to market and the results recognized immediately as income or
expense.

(e) Investments in affiliated companies

Investments in the ordinary shares of 20% to 50% owned companies are
accounted for by the equity method.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost. Plant and equipment under
capital leases are initially recorded at the present value of minimum lease
payments. The method of depreciation and estimable useful lives over which
property, plant and equipment are depreciated are as follows:

METHOD YEARS
------------- -----

Buildings.........................................Straight line 40
Machinery and equipment...........................Straight line 8-12
Leasehold improvements............................Straight line 5-20
Leased plant and equipment........................Straight line 3-5

Plant and equipment held under capital leases and leasehold improvements are
amortized on a straight line basis over the shorter of the lease term or
estimated useful life of the asset.

(g) Goodwill

Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is amortized on a straight line basis over the
expected periods to be benefited, generally 20 years.

F-8

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(h) Research and development, and advertising

Research and development, and advertising costs are expensed as incurred.
Amounts expensed were as follows:

YEAR ENDED YEAR ENDED 7 MONTHS ENDED 12 MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, JANUARY 31, JANUARY 31, JANUARY 31,
1995 1996 1997 1997 1998
---------- ---------- -------------- --------------- -----------
(UNAUDITED)
(IN A$ THOUSANDS)

Research and
development............ $ 996 $1,260 $ 541 $1,070 $ 924
Advertising............. 7,161 7,478 5,319 7,547 8,397
====== ====== ====== ====== ======

(i) Income taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases as well as
operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income (loss) in the period that includes
the enactment date.

(j) Share option plan

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
123, Accounting for Stock-Based Compensation, in 1996, under which the Company
elected to continue following the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations for its share option plan. As such, compensation expense would
be recorded on the date of grant only if the current market price of the
underlying share exceeded the exercise price.

(k) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, and other sources are recorded when it is
probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated.

(l) Use of estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(m) Impairment of long-lived assets and long-lived assets to be disposed of

The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
on July 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted operating
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the

F-9

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell. Adoption of this
Statement did not have a material impact on the Company's financial position,
results of operations, or liquidity.

(n) Rent expense, surplus leased space and lease incentives

The Company leases certain store locations under operating leases which
provide for annual payments that increase over the lives of the leases. Total
payments under the leases are expensed as incurred over the lease terms.

Where premises under a non-cancelable operating lease become vacant during
the lease term, a charge is recognized on that date equal to the present value
of the expected future lease payments less any expected future sub-lease
income.

If the Company receives incentives provided by a lessor to enter into an
operating lease agreement, these incentives are brought to account as
reductions in rent expense over the term of the lease on a straight-line
basis.

(o) Revenue recognition

Revenue (net of returns and allowances) is recognized at the point of
shipment for wholesale sales to external customers and the point of sale for
retail goods.

(p) Cash and cash equivalents

Cash includes cash on hand and at bank. For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.

(q) Store pre-opening costs

Store pre-opening costs are expensed when incurred.

(r) Earnings per share

Basic earnings per share are computed by dividing net earnings available to
ordinary shareholders by the weighted average number of ordinary shares.
Diluted earnings per share are computed by dividing net earnings available to
ordinary shareholders, as adjusted for the effect of the elimination of after-
tax interest expense related to assumed conversion of the convertible notes,
by the weighted average number of ordinary shares and dilutive ordinary share
equivalents for the period.

(s) Foreign currency translation

Foreign currency transactions are converted to Australian currency at the
rates of exchange applicable at the dates of the transactions. Amounts
receivable and payable in foreign currencies at balance date are converted at
the year end rates. Gains and losses from conversion of monetary assets and
liabilities, whether realized or unrealized, are included in income or loss
before income taxes as they arise.

Assets and liabilities of overseas subsidiaries are translated at year end
rates and operating results at the average rates ruling during the year.

F-10

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The information in US dollars in the consolidated balance sheets and
consolidated statements of operations is presented solely for the convenience
of the reader and has been translated at the Noon Buying Rate on January 31,
1998 of US$0.6693 per A$1.00 and at the average rate for the fiscal year ended
January 31, 1998 of US$0.7320 per A$1.00 respectively. These translations
should not be construed as representations that the Australian dollar amounts
actually represent such US dollar amounts or could be converted into US
dollars at the rate indicated or at any other rate.

2 DERIVATIVE FINANCIAL INSTRUMENTS

The notional amount of foreign currency forward contracts used as a means of
offsetting fluctuations in the dollar value of foreign currency accounts
payable totaled:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Foreign exchange contracts........................... $4,232 $--
====== ====

The fair value of these contracts at each period end is not significant. All
of the currency derivatives expire within one year and are for United States
dollars. The counterparties to the contracts are major financial institutions.
The risk of loss to the Company in the event of non-performance by a
counterparty is not significant.

3 ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Trade accounts receivable............................ $6,903 $9,929
Less: Reserve for doubtful accounts.................. (377) (497)
------ ------
6,526 9,432
Receivables from related parties..................... 125 88
Other receivables.................................... 699 342
------ ------
$7,350 $9,862
====== ======

4 INVENTORIES

The major classes of inventories are as follows:

JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1997 1998 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN A$ THOUSANDS)

Finished goods............. $29,470 $37,999 $31,656 $42,160
Work in progress........... 1,778 1,328 1,984 1,325
Raw materials.............. 3,116 4,222 4,362 4,311
------- ------- ------- -------
34,364 43,549 38,002 47,796
Less: Reserve for obsoles-
cence..................... (436) (519) (444) (494)
------- ------- ------- -------
$33,928 $43,030 $37,558 $47,302
======= ======= ======= =======

F-11

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5 INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies consist of 33 1/3 percent of the
ordinary shares of Bromic Pty Limited and subsidiaries ("Bromic"), an
Australian Group which imports and distributes componentry to the gas and
appliance industries, and 50 percent of the ordinary shares of GLG Trading Pte
Limited ("GLG"), a Singapore company which acts as a buying office for
Barbeques Galore and other third parties. The shareholding in this company was
originally 100 percent but was reduced to 50 percent on July 1, 1995 by
issuing shares in that company to a Director of GLG who is also the General
Manager of that company.

The Company also previously held a 50 percent interest in GLG (NZ) Limited
("GLG NZ"). This investment was sold in December 1995 for total consideration
of A$2,395,000. A gain on sale of A$2,303,000 has been recognized in the
income statement and is included in other expenses (income).

Bromic provides liquid petroleum gas cylinders and related products such as
manifolds, bundy tubes, glass and barbecue ignitions to the Company. GLG
supplies cast iron used in the manufacture of burners, hot plates and grills,
small assembled barbecues and certain accessories such as tongs and warming
racks. Purchasing from GLG NZ consisted mainly of cowls, flue kits, spare
parts and other heating equipment.

Sales to affiliated companies are not significant. Interest is also charged
on amounts owing from affiliates at commercial rates but is not significant.
Amounts owing from affiliates are in relation to cash advances.

Prices charged between the Company and its affiliates are set at the level
of prices that are charged to unrelated parties. Trading with affiliates for
each period and amounts outstanding at each period end are as follows:

7 MONTHS 12 MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED YEAR ENDED
JUNE 30, JUNE 30, JANUARY 31, JANUARY 31, JANUARY 31,
1995 1996 1997 1997 1998
---------- ---------- ----------- ----------- -----------
(UNAUDITED)
(IN A$ THOUSANDS)

Purchases from affili-
ates:
--Bromic............... $3,953 $3,769 $2,320 $3,476 $ 4,019
--GLG NZ............... 197 188 -- 188 --
--GLG Pte Ltd.......... -- 5,446 3,336 3,840 7,148
------ ------ ------ ------ -------
$4,150 $9,403 $5,656 $7,504 $11,167
====== ====== ====== ====== =======
Dividends received or
due and receivable from
affiliates
--Bromic............... $ 250 $ 175 $ -- $ 175 $ 250
--GLG NZ............... 717 495 -- -- --
--GLG Pte Ltd.......... -- 198 -- 198 83
------ ------ ------ ------ -------
$ 967 $ 868 $ -- $ 373 $ 333
====== ====== ====== ====== =======

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------

Receivable from affiliates:
--Bromic............................................ $ 863 $592
--GLG NZ............................................ 195 --
--GLG Pte Ltd....................................... -- 193
------ ----
1,058 785
------ ----
Investment in affiliates............................. $ 491 $710
====== ====

F-12

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Investments in affiliates are included in the balance sheet as other non-
current assets. As the shares of these entities are not traded, the investment
in these companies is carried at the equity accounted value representing cost
plus the Company's share of undistributed profits. Income statement
information has been presented for the respective twelve month periods. The
balance date of all affiliates is June 30. Combined summarized financial data
at their most recent balance dates and January 31, 1998 are as follows:

JUNE 30, JUNE 30, JUNE 30, JANUARY 31,
1995 1996 1997 1998
----------- ----------- ----------- -----------
(IN A$ THOUSANDS)

Current assets.............. $ 13,974 $ 7,229 $ 6,925 $ 7,414
Current liabilities......... 13,734 4,778 3,666 4,038
-------- -------- -------- --------
Working capital............. 240 2,451 3,259 3,376
Property, plant and equip-
ment, net.................. 6,131 1,307 1,215 1,224
Other assets................ 389 549 408 223
Long-term debt.............. (4,261) (2,498) (2,412) (2,417)
-------- -------- -------- --------
Shareholders' equity........ $ 2,499 $ 1,809 $ 2,470 $ 2,406
======== ======== ======== ========
Sales....................... $ 37,049 $ 22,926 $ 18,034 $ 18,460
======== ======== ======== ========
Gross profit................ $ 11,983 $ 9,025 $ 4,637 $ 4,571
======== ======== ======== ========
Net income.................. $ 2,131 $ 1,484 $ 963 $ 1,176
======== ======== ======== ========

6 PROPERTY, PLANT AND EQUIPMENT

JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1997 1998 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN A$ THOUSANDS)

Land and buildings.......... $ 3,198 $ 3,218 $ 3,218 $ 6,848
Machinery and equipment..... 15,453 18,001 15,902 19,066
Leasehold improvements...... 6,110 8,262 6,055 8,486
Assets under capital
leases..................... 6,912 8,298 6,908 8,303
-------- -------- -------- --------
31,673 37,779 32,083 42,703
Less: ccumulated
depreciation/amortization.. (13,325) (16,741) (13,970) (17,736)
-------- -------- -------- --------
$ 18,348 $ 21,038 $ 18,113 $ 24,967
======== ======== ======== ========

7 GOODWILL

JANUARY 31 JANUARY 31, APRIL 30, APRIL 30,
1997 1998 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN A$ THOUSANDS)

Goodwill.................... $ 1,704 $ 1,800 $ 1,704 $ 1,800
Less: Accumulated amortiza-
tion....................... (228) (293) (234) (314)
-------- -------- -------- --------
$ 1,476 $ 1,507 $ 1,470 $ 1,486
======== ======== ======== ========

F-13

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8 LEASES

The Company is obligated under various capital leases for store improvements
and certain machinery and equipment that expire at various dates during the
next five years. The capital leases for store improvements relate to the
purchase of furniture and fixtures installed in retail stores. These retail
stores are all managed under operating leases. Machinery and equipment under
capital leases includes leased machinery, office furniture and fixtures and
certain motor vehicles. All capital lease liabilities are secured by the asset
to which the lease relates. The gross amount of store improvements and
machinery and equipment and related accumulated amortization recorded under
capital leases are as follows:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Store improvements................................... $ 3,119 $ 4,966
Machinery and equipment.............................. 3,793 3,332
------- -------
6,912 8,298
Less: Accumulated amortization....................... (2,216) (3,473)
------- -------
$ 4,696 $ 4,825
======= =======

The Company also has entered into non-cancelable operating leases, primarily
for retail stores. These leases generally contain renewal options for periods
ranging from three to five years and require the Company to pay all executory
costs such as maintenance and insurance. Rental expense for operating leases
(except those with lease terms of a month or less that were not renewed)
consisted of the following:

Rental expense.......... $9,609 $9,867 $6,181 $10,153 $11,948
====== ====== ====== ======= =======

Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of January 31, 1998 are:

CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN A$ THOUSANDS)

Year ending January 31,
1999.................................................... $ 2,203 $11,819
2000.................................................... 1,670 10,248
2001.................................................... 1,429 8,348
2002.................................................... 594 6,870
2003.................................................... 211 4,971
Years subsequent to 2003................................ -- 16,041
------- -------
Total minimum lease payments............................ 6,107 $58,297
=======
Less: Amount representing interest (at rates ranging
from 7.3% to 13.5%).................................... (973)
-------
Present value of net minimum capital lease payments..... 5,134
Less: Current portion of obligations under capital
leases................................................. (1,729)
-------
Obligations under capital leases, excluding current por-
tion................................................... $ 3,405
=======

F-14

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Trade accounts payable............................. $ 4,968 $ 6,477
Accrued liabilities................................ 5,887 7,416
Employee benefits.................................. 1,745 1,976
Other.............................................. 1,093 779
------- -------
$13,693 $16,648
======= =======

Included in other liabilities at January 31, 1998 is an amount of $369,000
in respect of the planned relocation of the enameling facilities. The accrual
relates to future lease costs on the vacated premises, the writedown of plant
that will be scrapped (allowing for future depreciation charges until the
planned exit date) and costs to make good the premises. An exit plan was
established and approved by the Board of Directors prior to January 31, 1997.
The expected completion is June 1998.

10 LONG-TERM DEBT

Long-term debt consists of the following:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Current:
Bank bills........................................... $ 2,964 $ 198
------- -------
$ 2,964 $ 198
======= =======
Non-current:
Bank bills........................................... $18,568 $12,566
Property loan........................................ 2,150 2,150
------- -------
$20,718 $14,716
======= =======

The Company and its subsidiaries have access to a facility with the
Australia and New Zealand Banking Group Limited ("ANZ") (the "ANZ Facility")
with credit facilities aggregating up to A$41,700,000, comprising a multi-
purpose facility of A$31,700,000 and a trade finance facility of A$10,000,000.
As at January 31, 1998 the Company had not utilized A$25,890,000 of the total
facility. The ANZ Facility is secured by a first security interest over the
assets of the Company's present and future Australian assets. The Company has
agreed to grant to ANZ, and ANZ is in the process of creating, a second
security interest (subordinate to a lien under the Merrill Lynch Facility
detailed below) in all the Company's assets in the United States. The ANZ
Facility is further guaranteed by each subsidiary of the Company.

Bank bills are generally taken out over a 90 day period and rolled over at
the end of their respective terms. As at January 31, 1998, the weighted
average interest rate accruing on the bank bills utilized under the ANZ
Facility was 6.2% per annum.

The property loan is accruing interest at a rate of 9.6% per annum and is
secured by a registered first mortgage over the freehold property of the
Company.

F-15

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

All committed facilities are provided subject to the standard Australian
practice of regular annual review of required limits, the Company's
performance and the normal terms and conditions, including financial
covenants, applicable to bank lending. The Company was in compliance with the
financial covenants set out in the ANZ Facility agreement as at January 31,
1998.

The Company has historically renegotiated its credit facilities on similar
terms and conditions. Negotiations with ANZ with respect to an extension of
the existing facility are well advanced and ANZ has formally indicated its
willingness to extend the facility. For this reason, the majority of the
outstanding balance relating to bank bills and term loans is classified as a
non-current liability.

In February 1995, Barbeques Galore Inc., the Company's U.S. operating
subsidiary, entered into a five year credit facility with Merrill Lynch
Business Financial Services ("Merrill Lynch"). As currently in effect, such
facility includes a term loan in aggregate principal amount of US$600,000 (the
"Term Loan") and a revolving line of credit in aggregate principal amount of
US$1,250,000 (the "Revolving Line," and collectively with the Term Loan, the
"Merrill Lynch Facility"). Indebtedness under the Revolving Line and Term Loan
accrues interest at the 30-day commercial paper rates plus 2.65% or 2.70%,
respectively, and is payable monthly. The Merrill Lynch Facility is secured by
a first security interest in all Galore USA present and future assets. The
Merrill Lynch Facility is guaranteed by the Company and Galore USA, the parent
of Barbeques Galore, Inc. Pursuant to the Offering on November 7, 1997, the
Company utilised a portion of the net proceeds to repay all outstanding
indebtedness under the aforementioned term loan and revolving line of credit
facility. As of January 31, 1998 Galore USA had not utilised US$1,845,000 of
this facility.

The Company's total long-term debt matures as follows:

YEAR ENDING JANUARY 31,
-----------------------
(IN A$ THOUSANDS)

1999...................................................... $ 198
2000...................................................... 14,716
-------
$14,914
=======

In conjunction with the Capital Reduction in December 1996 (detailed in Note
12 to the consolidated financial statements), the Company issued unsecured
convertible notes with a face value of A$8.38 amounting to A$10,041,952. The
notes carried an interest rate of 10.25% per annum, included financial
covenants and conferred rights to the noteholders as creditors and not as
shareholders. Immediately prior to the consummation of the Offering, all
outstanding convertible notes of the Company were converted into 1,197,926
ordinary shares of A$3.64 each.

F-16

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11 INCOME TAXES

Income (loss) before income taxes was taxed under the following
jurisdictions:

Australia............... $2,905 $2,730 $ 3,091 $(755) $4,614
United States........... 1,473 1,313 (1,168) 485 405
------ ------ ------- ----- ------
$4,378 $4,043 $ 1,923 $(270) $5,019
====== ====== ======= ===== ======

The expense (benefit) for income taxes is presented below:

Current:
Australia............... $ 906 $ 477 $ 1,670 $ 738 $1,107
United States........... 32 157 85 234 263
------ ------ ------- ----- ------
938 634 1,755 972 1,370
------ ------ ------- ----- ------
Deferred:
Australia............... (365) (536) (499) (904) 286
United States........... -- -- (890) (890) (168)
------ ------ ------- ----- ------
$ 573 $ 98 $ 366 $(822) $1,488
====== ====== ======= ===== ======

Income tax expense (benefit) attributable to income from continuing
operations differed from the amounts computed by applying the Australian
federal income tax rate to pretax income (loss) from continuing operations as
a result of the following:

Computed "expected" tax
expense (benefit)...... $1,445 $1,455 $ 692 $ (97) $1,807
Increase (reduction) in
income taxes resulting
from:
State taxes, net of
federal tax benefit.... 32 157 56 208 29
Change in the valuation
allowance.............. (474) (663) (388) (1,109) (79)
Equity in earnings of
affiliates not subject
to taxation............ (318) (301) (91) (136) (79)
Capital profit on sale
of affiliate........... -- (829) -- -- --
Other, net.............. (112) 279 97 312 (190)
------ ------ ----- ------- ------
$ 573 $ 98 $ 366 $ (822) $1,488
====== ====== ===== ======= ======

F-17

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Deferred tax assets:
Provisions not presently deductible................ $1,482 $1,521
Plant and equipment, due to differences in
depreciation...................................... 424 637
Inventories, due to capitalized costs.............. 195 263
Borrowing expenses capitalized for tax purposes.... 302 12
Leases, due to differences in lease payments,
interest and amortization......................... 136 113
Unearned income.................................... 116 --
Net operating loss carryforward.................... 562 299
Other.............................................. 432 573
------ ------
Total gross deferred tax assets.................... $3,649 $3,418
====== ======
Deferred tax liabilities:
Prepayments........................................ $ 178 $ 193
Rebates receivable................................. 128 --
------ ------
Total gross deferred tax liabilities............... 306 193
------ ------
Net deferred tax asset............................. $3,343 $3,225
====== ======

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. In
order to fully realize the deferred tax asset, the company will need to
generate future taxable income of approximately A$808,307 prior to the
expiration of the net operating loss carryforwards in 2012. Based upon
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences. The amount
of the deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income during the carry forward
period are reduced.

12 SHAREHOLDERS' EQUITY

On December 31, 1996, the Company consummated a series of transactions to
effect a reduction in the ordinary shares of the Company (the "Capital
Reduction"). Pursuant to the Capital Reduction, the Company repurchased and
cancelled 2,743,878 fully paid ordinary shares and 101,520 options to purchase
ordinary shares, for a total consideration of A$20,078,000. The Company
financed the Capital Reduction through:

(i) the issuance and sale of A$10,041,952 in convertible notes; and

(ii) the provision of an additional standby facility of A$12,000,000 from
ANZ. Pursuant to the Offering on November 7, 1997, the Company utilised a
portion of the net proceeds to repay the aforementioned indebtedness
incurred under the standby facility.

The effect of the Capital Reduction was to reduce the ordinary shares of the
Company to A$6,219,661 (comprising 1,706,542 fully paid ordinary shares of
A$3.64 each) from A$16,220,000 (comprising 4,450,420

F-18

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

fully paid ordinary shares of A$3.64 each). Subsequent to the consummation of
the Capital Reduction, all outstanding ordinary shares were owned by the
executive directors of the Company and their related interests and the
Company's pension plan. The Company was delisted from the Australian Stock
Exchange following the Capital Reduction.

The Company incurred costs in connection with the Capital Reduction of
approximately $1,132,000. These amounts have been expensed and are included in
other expenses (income) in the consolidated statements of operations for the
period to January 31, 1997.

Additionally, in connection with the Capital Reduction, the Company also
acquired the remaining 15% interest in Galore USA from Mr. Sydney Selati,
President of Galore USA, for consideration of A$1,000,000. The transaction was
effected by the issuance of 137,189 ordinary shares ($7.29 per share) of the
Company. Mr. Sydney Selati was subsequently appointed a director of Barbeques
Galore on July 21, 1997.

On November 7, 1997 the Company completed the Offering. As a part of the
offer process the following changes in securities occurred:

. Immediately prior to the consummation of the Offering, all outstanding
issued share capital of the Company was subject to a 18.223-for-1
reverse share split; as a result, the issued and outstanding capital of
the Company was reduced to 1,843,726 ordinary shares with a par value of
A$3.64 each.

. Immediately prior to the consummation of the Offering, all outstanding
convertible notes of the Company were converted into 1,197,926 ordinary
shares.

. Pursuant to the Offering, the Company sold 1,500,000 American Depositary
Shares (ADSs) at a price of US$11.00 per share.

. Pursuant to the Offering, a further 200,000 ADSs were sold by certain
shareholders of the Company at a price of US$11.00 per share.

13 SHARE OPTION PLANS

Executive Share Option Plan

Effective January 31, 1997, the Company adopted an executive share option
plan (the "Executive Plan") under which the Board of Directors granted certain
members of management options to purchase ordinary shares in the Company. A
total of 203,038 options were issued under the Executive Plan with an exercise
price of A$8.38 per share. The options do not vest until February 1, 1999
after which each Optionholder is entitled to subscribe for one fully paid
ordinary share. The options are not quoted and are due to expire on the
earlier of the 5th anniversary from the issue date or, subject to certain
conditions, on cessation of employment.

The fair value of each share option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
weighted average risk-free interest rate of 5.93%; no dividend yield; expected
lives of 1.5 years and volatility of 80.28%. The fair value of the options as
at January 31, 1998 has been calculated to be A$462,931.

1997 Share Option Plan

Under the terms of the Company's 1997 share option plan (the "1997 Plan"), a
total of 329,254 ordinary shares have been authorized for issuance. The 1997
Plan received approval from the Board of Directors of the Company on October
1, 1997 and was approved by the shareholders as of October 7, 1997. Options to
purchase

F-19

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

199,400 ordinary shares with an exercise price of US$11.00 per share were
granted concurrently with the Offering including 18,000 ordinary shares to
executive officers of the Company. Each of the options granted concurrently
with the Offering will generally become exercisable in three equal
installments on the third, fourth and fifth anniversaries of the Offering. The
number of ordinary shares reserved for issuance under the 1997 Plan will
automatically increase on the first trading day of each calendar year,
beginning with the 1999 calendar year, during the term of the 1997 Plan by an
amount equal to one percent (1%) of the ordinary shares outstanding on
December 31 of the immediately preceding calendar year. In no event may any
one participant in the 1997 Plan receive option grants for more than 27,438
ordinary shares per calendar year.

The 1997 Plan consists of the Option Grant Program, under which eligible
individuals in the Company's employ or service (including officers and other
employees, non-employee Board members and independent consultants) may, at the
discretion of the Plan Administrator, be granted options to purchase ordinary
shares at an exercise price not less than eighty-five percent (85%) of their
fair market value on the grant date.

The Plan Administrator will have complete discretion, within the scope of
its administrative jurisdiction under the 1997 Plan, to determine which
eligible individuals are to receive option grants, the time or times when such
option grants are to be made, the number of shares subject to each such grant,
the vesting schedule to be in effect for the option grant, the maximum term
for which any granted option is to remain outstanding and the status of any
granted option as either an incentive stock option or a non-statutory stock
option under the Federal tax laws.

The fair value of each share option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
weighted average risk-free interest rate of 5.93%; no dividend yield; expected
lives of 5 years and volatility of 80.28%. The fair value of the options as at
January 31, 1998 has been calculated to be A$794,134.

Terminated plan

On November 25, 1993, the Company adopted a share option plan ("the 1993
Plan") pursuant to which the Company's Board of Directors could grant share
options to officers and key employees. 128,958 options were granted with an
exercise price of A$5.83 on November 25, 1993. On November 28, 1995, the
Company granted a further 27,438 options with an exercise price of A$5.65.

On December 31, 1996 and in connection with the Capital Reduction, all
outstanding options were repurchased by the Company from the optionholders.
Compensation for the cancellation of the 101,520 options amounted to A$78,000.

The total compensation paid by the Company to cancel the options has been
expensed during the 7 months to January 31, 1997 and is included in selling,
general and administrative expenses.

F-20

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company applies APB Opinion No. 25 in accounting for its share option
plans and, accordingly, no compensation cost has been recognized for its share
options in the seven month period to 31 January 1997 and the year ended 31
January, 1997 and 1998, respectively. Had the Company determined compensation
cost based on the fair value at the grant date for its share options under
SFAS 123 the Company's net income would have been reduced to the pro forma
amounts indicated below:

7 MONTHS ENDED 12 MONTHS ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1997 1998
-------------- --------------- -----------
(IN A$ THOUSANDS, EXCEPT PER SHARE DATA)

Net income
As reported................... $1,557 $ 552 $3,531
Pro forma..................... 1,557 552 3,239
Net income per common and common
equivalent share
As reported................... $ 0.38 $0.13 $ 1.43
Pro forma..................... $ 0.38 $0.13 $ 1.31

SUMMARY

A summary of the status of the Company's Executive, 1997 and 1993 share
option plans as of June 30, 1995 and 1996, and January 31, 1997 and 1998, and
changes during the years ended on those dates is presented below:

WEIGHTED-
AVERAGE OPTIONS EXERCISABLE
OPTIONS EXERCISE PRICE AT YEAR END
-------- -------------- -------------------

Outstanding balance at July 1,
1994......................... 117,982 A$ 5.83
Forfeited..................... (10,975) 5.83
-------- ------- -------
Outstanding balance at June
30, 1995..................... 107,007 5.83 107,007
-------- ------- -------
Granted....................... 27,438 5.65
Forfeited..................... (32,925) 5.83
-------- ------- -------
Outstanding balance at June
30, 1996..................... 101,520 5.78 101,520
-------- ------- -------
Granted....................... 203,038 8.38
Cancelled..................... (101,520) 5.78
-------- ------- -------
Outstanding balance at January
31, 1997..................... 203,038 8.38 --
-------- ------- -------
Granted....................... 199,400 16.44
-------- ------- -------
Outstanding balance at January
31, 1998..................... 402,438 A$12.37 --
======== ======= =======

The options exercisable at June 30, 1995 and 1996 were in relation to the
1993 share option plan. The 1993 share option plan was terminated during the
period ended January 31, 1997. The weighted average fair value of options
granted during the years ended January 31, 1997 and 1998 were $2.28 and $4.01,
respectively.

The following table summarizes information about share options outstanding
at January 31, 1998:

NUMBER WEIGHTED- WEIGHTED-
OUTSTANDING AT AVERAGE REMAINING AVERAGE
JANUARY 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE
---------------- ----------------- --------------

203,038 1.5 years A$ 8.38
199,400 5.0 years 16.44
-------
402,438 3.2 years A$12.37
=======

F-21

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14 COMMITMENTS AND CONTINGENCIES

Product liability claims have been made against certain companies in the
group which are not expected to result in any material loss to the Company.

The Company entered into a joint and several guarantee together with the
directors of Bromic Pty Limited in favor of ANZ in respect of a A$900,000
facility. On February 25, 1997, ANZ released the Company from this guarantee.

15 GEOGRAPHIC SEGMENT INFORMATION

Financial information by geographic region is summarized below on the basis
that the Operating income of the United States does not include all the income
attributable to it for product manufactured and purchased for the United
States by the Australian subsidiaries:

AUSTRALIA UNITED STATES TOTAL
--------- ------------- --------
(IN A$ THOUSANDS)

12 MONTHS TO JANUARY 31, 1998
Net revenues............................... $117,613 $61,712 $179,325
======== ======= ========
Operating income........................... $ 7,309 $ 497 $ 7,806
======== ======= ========
Identifiable assets........................ $ 59,560 $22,514 $ 82,074
======== ======= ========
12 MONTHS TO JANUARY 31, 1997
Net revenues............................... $108,003 $40,366 $148,369
======== ======= ========
Operating income........................... $ 2,076 $ 643 $ 2,719
======== ======= ========
Identifiable assets........................ $ 53,162 $14,808 $ 67,970
======== ======= ========
7 MONTHS TO JANUARY 31, 1997
Net revenues............................... $ 75,997 $22,755 $ 98,752
======== ======= ========
Operating income (loss).................... $ 5,537 $(1,141) $ 4,396
======== ======= ========
Identifiable assets........................ $ 53,162 $14,808 $ 67,970
======== ======= ========
12 MONTHS TO JUNE 30, 1996
Net revenues............................... $104,737 $36,954 $141,691
======== ======= ========
Operating income........................... $ 1,828 $ 1,338 $ 3,166
======== ======= ========
Identifiable assets........................ $ 53,225 $13,337 $ 66,562
======== ======= ========
12 MONTHS TO JUNE 30, 1995
Net revenues............................... $104,051 $34,006 $138,057
======== ======= ========
Operating income........................... $ 4,206 $ 1,439 $ 5,645
======== ======= ========
Identifiable assets........................ $ 55,337 $12,287 $ 67,624
======== ======= ========

F-22

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

16 RELATED PARTY TRANSACTIONS

The directors of the Company believe that transactions with related parties
are on normal terms and conditions no more favourable than those available to
other third parties unless otherwise stated.

Amounts are advanced to the Company by the directors at a commercial rate of
interest.

The company shares premises and incurs rent and operating expenses on behalf
of Rebel Sport Limited. Mr. Linz and Mr. Gavshon were directors and
significant shareholders of Rebel Sport Limited up until July 10, 1997. These
amounts are payable to the Company on 30 day terms.

The above related party transactions and amounts outstanding at each period
end are as follows:

JANUARY 31, JANUARY 31,
1997 1998
----------- -----------
(IN A$ THOUSANDS)

Amounts owing to directors or director related
entities......................................... $1,231 $--
====== ====

7 MONTHS
YEAR ENDED YEAR ENDED ENDED 12 MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, JANUARY 31, JANUARY 31, JANUARY 31,
1995 1996 1997 1997 1998
---------- ---------- ----------- --------------- -----------
(UNAUDITED)
(IN A$ THOUSANDS)

Interest costs incurred
in respect of amounts
advanced by directors
or director related
entities............... $ 22 $ 97 $ 50 $ 96 $ 44
Amounts advanced to
Rebel Sport Limited.... 683 678 410 713 320
Amounts reimbursed by
Rebel Sport Limited.... 597 703 352 (641) 260
====== ====== ====== ====== ======

17 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:

Interest................ $2,418 $2,327 $1,528 $2,432 $3,362
Income taxes............ 559 968 423 812 2,163
====== ====== ====== ====== ======

During the period ended January 31, 1997 the Company acquired Mr. Sydney
Selati's 15% interest in Galore USA for consideration of A$1,000,000. The
transaction was effected by the issuance of 137,189 ordinary shares (A$7.29
per share) of the Company.

F-23

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During the periods, the Company acquired plant and equipment by means of
capital leases which are not reflected in the consolidated statements of cash
flows with an aggregate fair value of:

Equipment acquired under
capital leases......... $1,883 $1,682 $1,471 $1,893 $1,729
====== ====== ====== ====== ======

On July 1, 1995, the company's interest in GLG Trading Pte Limited was
reduced from 100% to 50% by the issue of additional shares in GLG Trading Pte
Limited. The deconsolidation of GLG Trading Pte Limited has resulted in the
reversal of the opening cash balance of GLG Trading Pte Limited in the
Statement of Cash Flows as the Company has accounted for its investment on an
equity basis from July 1, 1995.

18 PENSION PLANS

The Company and its Australian subsidiaries have established defined
contribution pension plans for the provision of benefits to their Australian
employees on retirement, death or disability. Benefits provided under the
plans are based on contributions for each employee. Company contributions are
6% of gross salary for all employees except for certain executives for whom
the Company contributes 10%.

The Company and employees contribute various percentages of gross income.
The plans are of an accumulation type and as such, the Company has:

. no commitment to fund retirement benefits other than the percentage of
each employee's salary as prescribed by the relevant trust deed; and

. no legal obligation to cover any shortfall in the funds' obligations to
provide benefits to employees on retirement.

The pension plans comply with Australian regulatory provisions set by the
Insurance and Superannuation Commission. The Company has complied with the
provisions of the Superannuation Guarantee Charge Act.

The Company also sponsors a defined contribution plan in the United States
covering substantially all employees who meet specified age and service
requirements. Company contributions are discretionary.

Contributions expensed under these plans were as follows:

YEAR ENDED YEAR ENDED 7 MONTHS ENDED 12 MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, JANUARY 31 JANUARY 31, JANUARY 31,
1995 1996 1997 1997 1998
---------- ---------- -------------- --------------- -----------
(UNAUDITED)

Contribution expense.... $919 $1,015 $600 $996 $1,113
==== ====== ==== ==== ======

F-24

BARBEQUES GALORE LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

19 EARNINGS PER SHARE

YEAR ENDED YEAR ENDED 7 MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1996 JANUARY 31, 1997
----------------------- ----------------------- -----------------------
PER SHARE PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ --------- ------ ------ --------- ------ ------ ---------
(IN A$ THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Income.................. $3,805 $3,945 $1,557
------ ------ ------
BASIC EPS
Income available to
common shareholders.... 3,805 4,450 $0.86 3,945 4,450 $0.89 1,557 4,073 $0.38
===== ===== =====
EFFECT OF DILUTIVE SECU-
RITIES
Convertible shares net
of tax................. -- -- -- -- 56 79
Options demand
exercised.............. -- -- -- -- -- 93
------ ----- ------ ----- ------ -----
DILUTED EPS
Income available to
common shareholders
plus assumed
conversions............ $3,805 4,450 $0.86 $3,945 4,450 $0.89 $1,613 4,245 $0.38
====== ===== ===== ====== ===== ===== ====== ===== =====

12 MONTHS ENDED YEAR ENDED
JANUARY 31, 1997 JANUARY 31, 1998
----------------------------- ------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- -------- ---------- --------- -------- ----------
(IN A$ THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Income.................. $ 552 $ 3,531
------- ---------
BASIC EPS
Income available to
common shareholders.... 552 4,228 $ 0.13 3,531 2,473 $ 1.43
======== ========
EFFECT OF DILUTIVE
SECURITIES
Convertible shares net
of tax................. -- -- 504 919
------- -------- --------- --------
Options demand
exercised.............. -- -- -- 41
DILUTED EPS
Income available to
common shareholders
plus assumed
conversions............ $ 552 4,228 $ 0.13 $ 4,035 3,433 $ 1.18
======= ======== ======== ========= ======== ========

Options to purchase 199,400 shares of A$16.44 per share were outstanding at
January 31, 1998 but were not included in the computation of diluted EPS as
the options exercise price was greater than the average market price of the
common shares. These options expire on October 1, 2007.

20 SUBSEQUENT EVENT

The Company purchased a property for approximately A$3.5 million pursuant to
a decision to relocate its enameling operations to the same facilities as its
barbecue and home heater manufacturing operations adjacent to its Australian
headquarters.

F-25