2006 ANNUAL REPORTcontent.stockpr.com/cbdenergy/media/1448bf151d36a2823da5482e847742d7.pdfThe Board guides and monitors the business and affairs of the Company on behalf of the

Annual Report: CBD Energy Limited - 2006

C B D E N E R G Y L I M I T E D

(ACN 010 966 793)

2006

ANNUAL REPORT

CBD Energy Limited Annual Report 2006

Page 2

CBD ENERGY LIMITED

CORPORATE DIRECTORY

Directors

Mr Gerry McGowan Executive Director and Chairman

Dr Michael Warczak Non-Executive Director

Mr John de Gouveia Independent Non-Executive Director (appointed 21 December 2005)

Company Secretary

Mr John de Gouveia

Registered Office

Suite 2

Level 2

53 Cross Street

Double Bay NSW 2028

Ph: (02) 9363 9920

Fax: (02) 9363 9955

Auditors

PKF Chartered Accountants Level 11, CGU Tower 485 LaTrobe Street Melbourne Victoria 3000

Bankers

Westpac Banking Corporation 360 Collins Street Melbourne Victoria 3000

Share Registry

Computershare Investor Services Pty Ltd 60 Carrington Street Sydney NSW

Australian Stock Exchange Code

Ordinary Shares: CBD Listed Options: CBDO

Website

http://www.cbdenergy.com.au


Page 3

TABLE OF CONTENTS

Executive Chairman’s Review 4

Corporate Governance Statement 5

Directors' Report 9

Consolidated Income Statement 17

Consolidated Balance Sheet 18

Consolidated Statement of Changes in Equity 19

Consolidated Cash Flow Statement 20

Notes to the Financial Statements 21

Directors’ Declaration 56

Independent Audit Report 57

Auditor’s Independence Declaration 58

ASX Additional Information 59


Page 4

EXECUTIVE CHAIRMAN’S REVIEW

Dear Shareholder,

The 2006 financial year operating profit of $36,779 marks a turning point for the company when compared to its recent

history of IFRS adjusted losses of $11,914,435 for the 2005 financial year and $ 28,920 for the 2004 financial year.

The investment in OP depleted the company of its assets and profitability to a point where recovery has proved

challenging to the new management of CBD Energy Limited.

During the year, the company disposed of OP industries with settlement taking place on 9 December 2005. Following the

sale, the company continued to incur costs associated with OP for such items as professional fees for the OP audit and

taxation returns.

In addition, Westpac Banking Corporation have appointed Ernst & Young to undertake monthly monitoring of our

operating performance, including a review of our business plans, budgets and cash flows, which has added a significant

cost to our operating overheads.

The ability for the company to continue to operate as a going concern is dependant on the support of its current bankers,

Westpac Banking Corporation and the support of its major shareholders. The company plans to seek shareholder

approval to undertake a further capital raising sufficient to reduce the current debt level of $2Million due to Westpac

down to an acceptable level.

As announced to the market in our half year report, the re-organisation of internal management via the departure of the

CEO and the re-assignment of operational responsibility directly to the general managers of each remaining subsidiary

(Parmac and Captech) has been a positive move, with both managers reporting directly to the Executive Chairman and

the Board.

The engagement of consultants in the energy sector , namely Mr Mark Fogarty, Mr John Gianassca and Mr Jeffrey Bye

has allowed the company to explore strategies to improve the operations of Captech and to also explore new

opportunities in the energy sector.

The improvements achieved for Captech include the successful application by CBD Energy Limited to the NSW Energy

Savings Fund of a $420,000 grant to assist in the installation of power factor correction equipment. The funding

agreement between CBD Energy Limited and the Department of Energy, Utilities and Sustainability (“DEUS”) was

formally executed on 14 August 2006. The next stage for Captech is to conclude its sales and marketing plans for its

expansion into the NSW market.

Parmac Air-conditioning and Mechanical Services expanded its maintenance and installation capability during the year

and notwithstanding this investment it was able to deliver a positive result for the 2006 year, which to a large extent is

due to their excellent reputation in the Melbourne market. Parmac is well positioned to deliver increased revenues in the

2007 financial year.

Going forward, the Board continues to investigate other opportunities in the energy sector that have the potential to

restore shareholder value and allow the company to expand its capabilities in the energy sector.

Yours sincerely,

Gerry McGowan Chairman Dated: 29th September 2006


Page 5

CORPORATE GOVERNANCE STATEMENT

The Board of Directors of CBD Energy Limited is responsible for the corporate governance of the company and its

controlled entities. The Board guides and monitors the business and affairs of the Company on behalf of the

shareholders by whom they are elected and to whom they are accountable.

This statement outlines the main corporate governance practices during the financial year. Practices that vary from the

Corporate Governance Council Recommendations (CGC Recommendations) are identified in this statement.

Board Responsibilities

The Board acts on behalf of and is accountable to shareholders. The Board seeks to identify the expectations of

shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible

for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those

risks. The Board guides and monitors and fulfils its responsibility to protect shareholder interests and enhance

shareholder value by:

• Approving and periodically reviewing the business and financial objectives and strategies and plans of the Company;

• Monitoring the financial performance of the Company, including approval of the Company’s financial statements;

• Ensuring that adequate internal control systems and procedures exist and that compliance with these systems and procedures is maintained;

• Identifying areas of significant business or financial risk to the Company and ensuring management takes appropriate action to manage those risks;

• Reviewing the performance and remuneration of Board members and key members of staff;

• Monitoring the operations of the consolidated entity and the performance of management;

• Establishing and maintaining appropriate ethical standards; and

• Reporting to shareholders, the Australian Securities and Investments Commission and the Australian Stock Exchange as required.

It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes

internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of

assets, the maintenance of proper accounting records and the reliability of financial information.

The Board delegates to the Executive Chairman and the executive team responsibility for the operation and

administration of the Company.

Structure of the Board

The Directors in office and the term in office held by each Director at the date of this report are as follows:

Name Position Term in Office

Gerry McGowan Executive Director and Chairman 2 years 5 months (Appointed 5 April 2004)

Michael Warczak Non-Executive Director 1 year 4 months (Appointed 6 June 2005)

John de Gouveia Independent Non-Executive Director 9 months (Appointed 12 December 2005)

The skills, experience and expertise relevant to the position held by each Director in office at the date of the annual

report is included in the Directors’ Report.


Page 6

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Composition

The key elements of the Board composition include:

• ensuring, where practicable to do so, that a majority of the Board are independent directors • the Board of the Company currently comprises 1 executive director/Chairman, 1 non executive directors and 1

independent non executive director • non-executive directors bring a fresh perspective to the board’s consideration of strategic, risk and performance

matters and are best placed to exercise independent judgement and review and constructively challenge the performance of management

• the Company is to maintain a mix of directors on the Board from different backgrounds with complementary skills and experience

• the Board seeks to ensure that: - at any point in time, its membership represents an appropriate balance between directors with experience

and knowledge of the Company and directors with an external perspective • the size of the Board is conducive to effective discussion and efficient decision making.

The Company does not adhere to the CGC Board recommendations that the majority of directors should be independent

non-executive directors. When assessing the independence of directors and the chairman under recommendation 2.1

and 2.2 both Mr McGowan and Dr Warczak, although meeting other criteria and bringing independent judgement to bear

on their respective roles, are both not defined as independent directors, primarily due to the fact that both Messrs

McGowan and Warczak are officers of entities who are substantial shareholders of the company. The company has not

followed recommendation 2.1 and 2.1 as the Board believes that the best interests of the company will be served through

its two major shareholders acting as Directors. Also, it is the opinion of the Board that Mr McGowan brings significant

compensation through the experience and skills he brings to the Board which is believed to be essential at this point in

the company’s recovery and growth plans.

Terms of Appointment as a Director

The Company’s constitution provides that a Director other than the Managing Director may not retain office for more than

three calendar years or beyond the third annual general meeting following his or her election, whichever is longer,

without submitting for re-election. One third of the Directors retire each year and are eligible for re-election. The

Directors who retire by rotation at each annual general meeting are those with the longest length of time in office since

their appointment or last election. All Directors must be elected by the shareholders. It is not a requirement for a person

who is a Director to own shares in the Company.

Access to External and Independent Advice

The company provides the capacity for any Director to obtain separate professional advice on any matter being

discussed by the Board and for the Company to pay the cost incurred. Before engagement is made, the Director is

required to obtain the Chairman of the Board’s approval. Approval will not be unreasonably denied and the Director will

be expected to provide the Board with a copy of that advice.

Board Performance

The performance of the Board and key executives of controlled entities is reviewed regularly by the Board against their

contribution to the performance of the consolidated entity.

Remuneration

The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves and the

key executives of controlled entities. It is the Company’s objective to provide maximum stakeholder benefit from the

retention of a high quality Board and executive team by remunerating Directors and key executives fairly and

appropriately with reference to relevant employment market conditions and their experience and expertise. To assist in

achieving this objective, the Board takes account of the Company’s financial and operating performance in setting the

nature and amount of executive Directors’ and executives’ remuneration. In relation to the payment of bonuses, options

and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of the

Company and the performance of the individual during this period.


Page 7


Remuneration - continued

The expected outcomes of the remuneration structure are:

• Attraction of quality management to the Company.

• Retention and motivation of key executives.

• Performance incentives which allow executives to share the rewards of the success of the Company.

Further details of the Company’s remuneration policy, including details of the amount of remuneration and all monetary and non-monetary components for each of the five highest paid (non-Director) executives during the year and for all Directors, are set out in the Directors’ Report. There is no scheme to provide retirement benefits, other that statutory superannuation, to non-executive Directors. Shareholder approval is required for all equity-based remuneration payable to Board members.

Board Committees

The Company does not adhere to the CGC Board recommendations 2.4, 4.2 and 9.2 that require listed entities to

establish nomination, audit and remuneration committees. During the year ended 30 June 2006, the company did not

have separately established nomination, audit and remuneration committees. In view of the size of the Company, the

Board considers that establishing formally constituted committees for audit, board nominations and remuneration would

contribute little to its effective management as matters that may otherwise be dealt with by committees under CGC

recommendations, are dealt with by the full Board.

The requirement for nominations, audit and remuneration is evaluated annually or sooner upon a change in the scale of

operations.

Code of Conduct

The Board had drawn up a code of conduct to guide Board members, executives and employees in carrying out their

duties and responsibilities and to maintain confidence in the Company’s integrity. Executives and employees are

encouraged to report to Board members any concerns regarding potentially unethical practices.

Securities Trading

Dealings are not permitted in the Company’s securities at any time when Directors, officers or employees are in the

possession of price sensitive information not already available to the market. In addition, the Corporations Act 2001

prohibits the purchase or sale of securities whilst a person is in possession of inside information. The Directors have

routine discussions at the Board meetings to determine when trading in the Company’s securities is inappropriate due to

being in possession of price sensitive information.

Certification of Financial Statements

With effect from the financial year ended 30 June 2006 the Chief Executive Officer and Chief Financial Officer have

provided a written statement to the Board that in their view the company’s financial reports present a true and fair view of

the Company’s financial condition and operational results are in accordance with relevant accounting standards.

Continuous Disclosure

The Company has established procedures designed to ensure compliance with ASX Listing Rule disclosure

requirements and to ensure accountability at a senior management level for that compliance. All ASX announcements

are handled by the Company Secretary and authorised by the Chairman of the Board of Directors. The Company has

procedures to ensure that the ASX’s continuous disclosure requirements are strictly followed and that unauthorised

disclosure of price sensitive information is not made other than through the ASX’s Company Announcements Office.


Page 8


Communication to Market and Shareholders

The Board recognises it is its duty to ensure that its shareholders are informed of all major developments affecting the

Company’s state of affairs. Information is communicated to shareholders and the market through:

• The Annual Report which is distributed to all shareholders;

• The Annual General Meeting and other shareholder meetings called to obtain approval for Board action as appropriate and as required which are open for attendance by all shareholders;

• The Half-Yearly Financial report and Quarterly Cash Flow Statements which are placed in the public domain by posting to the ASX website;

• Other announcements made in accordance with ASX Listing Rules, which are placed in public domain by posting to the ASX website

The Company’s reports and ASX announcements may be viewed and downloaded from the ASX website:

www.asx.com.au (stock code: CBD).

Due to the size of the company it has not yet allocated resources to developing appropriate Corporate Governance

information on its website.

External Auditor

It is Company’s policy that the external auditor attends the Annual General Meeting of the Company and is available to

answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

Corporate Governance Council (CGC) Best Practice Recommendations

The Company’s corporate governance practices were in place throughout the year ended 30 June 2006. With the

exception of the departures from the Corporate Governance Council recommendations detailed above, the corporate

governance practices of the Company were compliant with the Council’s best practice recommendations.

Due to the nature, size and scale of the Company’s operations the CGC best practice recommendations are assessed

annually or sooner upon a change in the scale of operations as to their practical application and any changes are

reported annually in the Company Annual Report.


Page 9

DIRECTORS’ REPORT

Your Directors submit their report for the year ended 30 June 2006.

Director names and particulars

The names and particulars of the directors of the Company during or since the end of the financial year are:

• Gerry McGowan – Executive Director and Chairman

• Michael Warczak – Non Executive Director

• John de Gouveia – Independent Non-Executive Director – Appointed to the Board on 21 December 2005

• Wayne Rudland – Executive Director - Chief Executive Officer – Resigned on 21December 2005

Gerry McGowan – Executive Director – Chairman

Mr. McGowan was appointed to the Board and as Chairman on 5 April 2004. Mr McGowan is a former executive of

TNT and Mayne Nickless. Gerry started his own company in 1982 and won the distribution of John Fairfax product

nationally. He launched Impulse Airlines in 1992, and then sold to Qantas in 2001. Currently Gerry is Executive

Chairman of TRW Holdings Pty Limited, an investment company with exposure to the energy and aviation industries.

He is also Executive Chairman of Pacific Aviation Pty Limited and is Chairman of Lloyd Energy - Lloyd has spent the

past three years in R & D on a large scale energy storage system.

During the past three years Mr McGowan has also served as a director of the following other listed companies:

• None

Dr Michael Warczak, OAM – Non Executive Director

Dr. Warczak was appointed to the Board on 6 June 2005. Dr. Warczak is a sophisticated investor with significant share

market and property interests. He brings to CBD Energy a wealth of domain knowledge and a strong interest in

energy management. His involvement in CBD Energy traces back to before 2000 and at one time, in addition to his

substantial holding in the company, performed the functions of a director and Chief Executive. Mike was instrumental

in establishing the Ukraine Consulate General in Australia and supports a range of charitable associations. These as

well as his general humanitarian activities led to him being recognised in the 2005 Queens Birthday Honours List being

awarded a Medal of the Order of Australia.

During the past three years Dr Warczak has also served as a director of the following other listed companies:

• None

John de Gouveia – Independent Non-Executive Director – Appointed to the Board on 21 December 2005

Mr. de Gouveia was appointed to the Board on 21 December 2005. Mr de Gouveia is a Chartered Accountant with

extensive experience in public practice. John is currently the managing director of Corporate & Administrative Services

Pty Ltd, an entity that provides company secretarial and accounting services to ASX listed entities. Mr De Gouveia is

also the company secretary of CBD Energy Ltd and has held that position since 29 September 2005

During the past three years Mr de Gouveia has also served as a director of the following other listed companies:

• None


Page 10

DIRECTORS’REPORT (CONTINUED)

Wayne Rudland – Executive Director - Chief Executive Officer – Resigned 21 December 2005

Mr. Rudland was formerly CBD’s Chief Operations Officer (COO). He was appointed Chief Executive Officer on 1 July

2004 and accepted a Board position on 16 November 2004 to assist in establishing the ongoing strategy and bed

down CBD’s acquisitions. Besides his strong engineering background Wayne has significant public and private

company senior executive experience. Prior to joining CBD Energy he was the COO of Hyro Limited and before that

CEO of WTL Limited and earlier, a General Manager with Adacel Technologies Limited, all listed companies. Wayne

has a Masters Degree in Engineering Science, a Bachelor Degree in Mechanical Engineering and Graduate Diplomas

in Operations Research and Management Studies. He is a Fellow of the Institution of Engineers Australia and a

Chartered Professional Engineer.

During the past three years Mr Rudland has also served as a director of the following other listed companies:

• WTL Limited – Resigned as a director on the 13 September 2002.

Company Secretary

John de Gouveia, B. Bus, M Com, CA

Mr. de Gouveia was appointed company secretary of CBD Energy Limited on 29 September 2005. The qualifications of

Mr de Gouveia are noted above.

Directors’ Meetings

The number of meetings of Directors held during the financial year and the number of meetings attended by each

Director (while they were a Director) were as follows:

Notes Board Meetings

Director Meetings Attended Meetings Eligible to Attend

Gerry McGowan 10 10

Michael Warczak 10 10

John de Gouveia (a) 6 6

Wayne Rudland (b) 4 4

Notes:

(a)Period of responsibility commenced on 21 December 2005

(b)Period of responsibility ceased on 21 December 2005

Principal activities

The principal activities of the consolidated entity for 2006 are the provision of energy and mechanical services.

Apart from the disposal of OP Industries in November 2005, there has been no significant change in the nature of

activities during the financial year.

Results of Operations

The result of operations for the year after income tax was a profit of $ 36,779 (2005: $11,914,435 loss).


Page 11


Review of Operations

The consolidated entity reported a profit after tax of $ 36,779 for the year ended 30 June 2006.

The financial year ended 30 June 2006 marks a turning point in the company’s recent history that sees in the company

returning to profitability following its investment and subsequent disposal of OP industries which depleted the company of

its assets and profitability to a point where recovery has proved to be a difficult task.

The annual profit results of the company was as follows;

• Profit for the 1st half of the year 242,001

• Loss for the 2nd

half of the year ( 205,222)

Full Year Result $ 36,779

The results for the second half of the year were affected by one-off costs associated with professional audit and tax

return preparation fees for the company and for its di-vestment in OP Industries. In addition, Westpac Banking

Corporation have appointed Ernst & Young to undertake monthly monitoring of the Company’s operating performance

which has added a significant cost to our operating overhead.

Notwithstanding the result in the second half of the year, the remaining businesses of Parmac and Captech performed

profitability during the financial year, although both businesses were affected by the financial and operational impact of

the OP investment.

The 2006 annual result for Parmac and Captech as disclosed in the operating segment note was as follows;

Revenue

$

Profit

$

Total Assets at Cost

$

Parmac Airconditioning and

Mechanical Services Pty Ltd

(”Parmac”)

5,910,568 379,444 1,881,009

Capacitor Technologies Pty Ltd

(“Captech”)

3,909,165 207,257 1,937,013

Following the disposal of OP Industries management resources are now redirected and focussed on improving the

performance of Parmac and Captech.

Mr Allan McClaren who is the CEO of Parmac is now back at the helm and the results and performance of Parmac has

significantly improved. The results for Captech are expected to further improve in the current year following the

successful application to the NSW Energy Savings Fund for a $420,000 grant to subsidise the installation of power factor

correction equipment. With the assistance of consultants in the energy sector, the company is now focussed on

implementing its sales and marketing plans for Captech expansion into the NSW market.

Details of significant changes in the state of affairs

In the opinion of the directors, there were no significant changes in the state of affairs of the company during the financial

period under review not otherwise disclosed in this annual report.


Page 12


Subsequent Events

On 19th

July 2006 the company announced the completion of a $275,000 capital raising via the placement of 5.5 million

shares at 5 cents per share. The placement of shares is pursuant to Listing Rule 7.1 and results in an increase of 7.23%

in the number of shares on issue.

The purpose of the placement was to provide additional working capital of $200,000 and to settle consulting fee

obligations of $75,000.

Likely Developments and Expected Results

The directors will continue to seek options for the growth of the company and the restoration of shareholder value.

Further information as to likely developments in the operations of the economic entity and the expected results of those

operations in future financial years has not been included in this report because disclosure of the information would be

likely to result in unreasonable prejudice to the economic entity.

Share options on issue

At the date of this report a total of 4,007,571 ASX Listed options over unissued ordinary shares in CBD Energy Limited

are on issue. (ASX Code: CBDO) Refer to note 15 (c) (Share capital) of the financial statements for details of options,

including issue price and expiry date.

During and since the end of the financial year, no share options were granted to the directors and executives of the

company.

No shares have been issued during or since the end of the year as a result of the exercise of options.

Environmental regulations

CBD Energy Limited consolidated entity is in compliance with all its obligations pertaining to environmental regulations.

Dividends

The company has not paid or recommended to pay a dividend in respect of the financial year ended 30 June 2006.

Directors Shareholdings

The following table sets out each director’s relevant interest in shares and options of CBD Energy Limited:

Ordinary Shares Options over Ordinary Shares

ASX Listed (CBDO)

Mr. Gerry McGowan 12,588,925 -

Dr. Michael Warczak 7,530,000 500,000

Mr. John de Gouveia - -

Employees

The consolidated Entity employed 34 employees as at June 30th

2006 (2005: 269 employees)


Page 13

DIRECTORS’ REPORT (CONTINUED)

Remuneration Report

(i) Remuneration Policy

The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves, the

Chief Executive Officer and the executive team. It is the Company’s objective to provide maximum stakeholder benefit

from the retention of a high quality Board and executive team by remunerating Directors and key executives fairly and

appropriately with reference to relevant employment market conditions and their experience and expertise.

Notwithstanding the remuneration policy for directors, due to the previous years operating result of the company and the

subsequent recovery plans of the company, the directors have elected not to receive director fees following an initiative

implement by the Chairman.

(ii) Elements of director and executive remuneration

Remuneration packages contain the following key elements:

(a) Primary benefits – salary/fees, bonuses and non-monetary benefits including the provision of a motor vehicle or

the payment of a car allowance where necessary.

(b) Post employment benefits including superannuation.

(c) Other benefits

(iii) The following table discloses the remuneration of the directors and the executives of the Company and

group executives of the Consolidated Entity.

Notes Primary Superannuation Equity

Compensation

Other

Compensation

Total

Current Directors $ $ $ $ $

Gerry McGowan (a) - - - - -

Michael Warczak (a) - - - - -

John de Gouveia (a)(c) - - - - -

Total - - - - -

Directors who held office

during the year

Wayne Rudland (a)(b) 60,000 5,400 - 60,000 125,400

Total 60,000 5,400 - 60,000 125,400

Notes

(a) Directors have passed a resolution to forego directors’ fees (effective from 28 July 2004)

(b) Period of responsibility as a Director 1 July 2005 – 21 December 2005

(c) Period of responsibility as a Director 21 December 2005 – 30 June 2006


Page 14


Remuneration Report (Continued)

(iii) The following table discloses the remuneration of the directors and executives of the Company and group

executives of the Consolidated Entity. (Continued)

Executives Notes Primary Superannuation Equity

Compensation

Other

Compensation

Total

$ $ $ $ $

Wayne Rudland CEO– CBD Energy Ltd

60,000 5,400 - 60,000 125,400

Alan McClaren Managing Director/CEO

Parmac

111,343 9,670 - - 121,013

Yury Brodsky Managing Director/CEO

CapTech

110,008 9,000 - - 119,008

Total 281,351 24,070 - 60,000 365,421

Other than the executives noted above, there are no other executives of the company that satisfy the definitions of

executives under the Corporations Act 2001.

During the year, there were no element of remuneration paid to Directors or executives which had a performance related

element. The terms of employment contracts for executives are noted below, including performance related element,

which were not triggered during the 30 June 2006 financial year.

(iv) Contract of employment

Directors

Wayne Rudland was employed by the company under a contract of employment. The length of the contract was for 2

years from 1 July 2004 to 1 July 2006, with a period of notice of 3 months required to terminate the contract. Mr Rudland

is the only director who was employed under a contract of employment due to his previous position as Chief Executive

Officer (Further details shown under specified executives). (Resigned on 21 December 2005.)

All other directors are employed under a letter of appointment that does not contain specified incentive entitlements

including options.

Executives Details

Wayne Rudland

CEO– CBD Energy Ltd

Contract of Employment

Wayne Rudland was employed by the company under a contract of employment. The length of

the contract was for 2 years from 1 July 2004 to 1 July 2006, with a period of notice of 3

months required to terminate the contract. The base contract amount was $ 250,000 pa,

inclusive of the superannuation guarantee levy.

Commencing 1 July 2005 and by mutual agreement, the base contract amount was reduced to

$120,000 pa, inclusive of the superannuation guarantee levy.

Performance Conditions

The contract provided for the issue of options under the employee share option plan upon

satisfactory achievement of KPI’s and meeting FY2006 budget.

Upon the resignation of Mr Rudland on 21 December 2005, he was paid a termination

payment of $60,000.


Page 15


Remuneration Report (Continued)

(v) Contract of employment (Continued)

Alan McClaren

Managing Director/CEO

Parmac Airconditioning


Alan McClaren is employed by Parmac Airconditioning and Mechanical Services Pty Ltd under

a contract of employment. The length of the contract is 3 years from 1 January 2004 to 1

January 2007, with a period of notice of 3 months required to terminate the contract.

The base contract amount is $ 109,000 pa, inclusive of the superannuation guarantee levy.

Effective 1 January 2006 the base contract amount will increase to $150,000 pa package,

inclusive and comprising salary, superannuation guarantee levy and a fully maintained motor

vehicle in addition to a bonus payment structure based upon achieving set EBITA levels.


The contract provides for the issue of options under the employee share option plan upon

satisfactory achievement of KPI’s and meeting quarterly sales and profit targets. In view of the

company’s performance, no ESOP options have been issued and the directors will review the

future application of the employee share option plan.

Commencing 1 January 2006 a bonus structure will apply if FY06 EBITA exceeds $400,000 for

Parmac. The structure operates whereby 30% to 50% of the EBITA result achieved over the

hurdle amount is payable equally to Alan McClaran and the Contracts Manager.

For the 30 June 2006 financial year, no bonus payments were due to Mr McClaren based on

performance achieved during the year.

Yury Brodsky


CapTech


Yury Brodsky is employed by Capacitor Technologies Pty Ltd under a continuing contract of

employment. The length of the initial contract was for 1 year from 1 December 2003 to 1

December 2004, with a period of notice of 1 month required to terminate the contract.

Following completion of the initial contract term, the contract is operating on a continuous

basis until varied by mutual agreement.

The base contract amount is $100,000pa plus the superannuation guarantee levy, plus a car

allowance of 10,000pa and a performance bonus of $15,000pa (total annual package

$133,555).


The contract provides for the payment of a bonus determined annually by the Board upon

satisfactory achievement of KPI’s and meeting operating budgets.

In addition the company utilises electrical contracting services offered by Brodpower Pty Ltd , a

company in which Yury Brodsky has a ownership interest.

The service contract with Brodpower Pty Ltd operates on a revenue share basis whereby

CapTech makes a 25% margin on all electrical installation work outsourced to Brodpower Pty

Ltd.

For the 30 June 2006 financial year, no bonus payments were due to Mr Brodsky.


Page 16


Non-audit Services

The board of directors is satisfied that the provision of non-audit services during the year by PKF Chartered Accountants

is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The

directors are satisfied that the services provided did not compromise the external auditor’s independence for the

following reasons:

all non-audit services are reviewed and approved by the board of directors prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

the nature of the services provided do not compromise the general principles relating to auditor independence

as set out in the Institute of Chartered Accountants in Australia and CPA Australia’s Professional Statement F1: Professional Independence.

Details of amounts paid or payable to the auditor for non audit services provided during the year by the auditor are

outlined in note 22 to the financial statements.

Indemnification and Insurance of Directors and Officers and Auditors

The Company has agreed to indemnify the current Directors of the Company against all liabilities to another person

(other than the Company or a related body corporate) that may arise from their position as Directors of the Company and

its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement

stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company has not provided any insurance or indemnification for the auditor of the Company or any related body

corporate.

Insurance Premiums

At 30 June 2006 the Company had not entered into any insurance policies in respect of Directors and Officers’ liability.

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2006 has been received and is included on page 58.

Signed in accordance with a resolution of the Directors

Gerry McGowan Chairman Dated: 29th September 2006


Page 17

CBD ENERGY LIMITED AND CONTROLLED ENTITIES

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2006

Economic Entity Parent Entity

Note

2006 $

2005

$

2006

$

2005

$

Continuing Operations

Revenue 3 10,460,871 7,996,406 2,477,976 84,467

Cost of goods sold 4(a) (5,987,086) (5,049,617) - -

Depreciation and amortisation expense

4(a) (90,392) (118,344) ( 6,246) (12,395)

Finance costs 4(b) (243,604) (282,786) ( 243,604) (271,429)

Salaries and employee benefits expense

( 2,924,566) (2,501,599) (367,672) (500,216)

Administration and other expenses

4(d) (1,177,785) (1,457,357) (528,461) (625,391)

Loss on disposal of assets (4,348) (40,000) (4,348) (40,000)

Bad and doubtful debts - (57,627) - (3,976,461)

Impairment written down 4(c) - (120,599) - (8,098,121)

Profit /(Loss) before income tax expense

33,090 (1,631,524) 1,327,645 (13,439,546)

Income tax expense 5 - - - -

Operating Profit/(Loss) from continuing operations

33,090 (1,631,524) 1,327,645 (13,439,546)

Discontinued Operations

Net profit / (loss) of discontinued operations

286,656 (10,282,911) - -

Loss on sale of discontinued operations

(282,967) - - -

Profit / (loss) on discontinued operations

29 3,689 (10,282,911) - -

Net profit attributable to members of CBD Energy Limited

16 36,779 (11,914,435) 1,327,645 (13,439,546)

Overall operations

Basic earnings per share (cents per share)

21 0.05 cents (20.44) cents

Diluted earnings per share (cents per share)

21 0.05 cents (20.44) cents

Continuing operations


21 0.05 cents (2.80) cents


21 0.05 cents (2.80) cents

Discontinuing operations


21 - (17.64) cents


21 - (17.64) cents

The above Income Statement is to be read in conjunction with the accompanying notes.


Page 18


CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2006


CURRENT ASSETS Note

2006 $

2005 $

2006 $

2005 $

Cash and cash equivalents 17(b) 562,525 3,580,686 8,248 1,107,606

Trade and other receivables 6 1,959,809 11,218,007 190,724 42,479

Inventories 7 609,802 1,052,698 - -

Other assets 8 80,032 226,762 8,113 99,274

3,212,168 16,078,153 207,085 1,249,359

Non-current assets classified as held for sale

2 - 1,881,586 - -

TOTAL CURRENT ASSETS 3,212,168 17,959,739 207,085 1,249,359

NON-CURRENT ASSETS

Other receivables 6 - - - 477,646

Property, plant and equipment 9 499,676 413,247 23,919 34,512

Other financial assets 10 - - 2,051,865 2,051,865

Intangibles 11 1,507,539 1,507,539 - -

TOTAL NON-CURRENT ASSETS 2,007,215 1,920,786 2,075,784 2,564,023

TOTAL ASSETS 5,219,383 19,880,525 2,282,869 3,813,382

CURRENT LIABILITIES

Trade and other payables 12 1,730,402 12,451,735 454,805 1,368,987

Other financial liabilities 13 1,002,883 1,440,228 991,347 1,002,507

Current tax payable - 550,000 - 550,000

Provisions 14 140,678 1,450,333 - 32,816

2,873,963 15,892,296 1,446,152 2,954,310

Non-current liability directly associated with non-current assets classified as held for sale

2 - 168,493 - -

TOTAL CURRENT LIABILITIES 2,873,963 16,060,789 1,446,152 2,954,310

NON-CURRENT LIABILITIES

Other financial liabilities 13 1,189,211 2,700,306 1,000,000 2,350,000

TOTAL NON-CURRENT LIABILITIES

1,189,211 2,700,306 1,000,000 2,350,000

TOTAL LIABILITIES 4,063,174 18,761,095 2,446,152 5,304,310

NET ASSETS 1,156,209 1,119,430 ( 163,283) (1,490,928)

EQUITY

Share capital 15 60,622,205 60,622,205 60,622,205 60,622,205

Accumulated losses 16 (59,465,996) (59,502,775) (60,785,488) (62,113,133)

TOTAL EQUITY 1,156,209 1,119,430 ( 163,283) (1,490,928)

The above Balance Sheet is to be read in conjunction with the accompanying notes.


Page 19


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR TO 30 JUNE 2006

Economic Entity $ $ $

Share Capital

Accumulated losses

Total

Balance at 01.07.2004 56,084,144 (47,588,340) 8,495,804

Shares issued net of costs 4,538,061 - 4,538,061

Loss attributable to members of parent entity

- (11,914,435) (11,914,435)

Sub-total 60,622,205 (59,502,775) 1,119,430

Dividends paid or provided for - - -

Balance at 01.07.2005 60,622,205 (59,502,775) 1,119,430

Profit attributable to members of parent entity

- 36,779 36,779

Sub-total 60,622,205 (59,465,996) 1,156,209


Balance at 30.06.2006 60,622,205 (59,465,996) 1,156,209

Parent Entity

Balance at 01.07.2004 56,084,144 (48,673,587) 7,410,557

Shares issued net of costs 4,538,061 - 4,538,061

Loss for the year - (13,439,546) (13,439,546)

Sub-total 60,622,205 (62,113,133) (1.490.928)


Balance at 01.07.2005 60,622,205 (62,113,133) (1,490,928)

Profit for the year - 1,327,645 1,327,645

Sub-total 60,622,205 (60,785,488) (163,283)


Balance at 30.06.2006 60,622,205 (60,785,488) (163,283)

The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes.


Page 20


CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2006


Note

2006 $

2005

$

2006

$

2005

$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 33,096,759 64,854,000 145,698 78,042

Payments to suppliers and employees

(33,377,630) (68,372,494) (734,002) (1,239,615)

Interest received 66,888 84,171 12,590 26,469

Finance costs (274,912) (300,291) (251,716) (271,429)

NET CASH FLOWS USED IN OPERATING ACTIVITIES

17(a) (488,895) (3,734,614) (827,430) (1,406,533)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment

15,538 9,382 - -

Security deposits 12,133 30,000

Payment for acquisition of business - (644,000) - (644,000)

Net proceeds from sale of controlled entity

29 (871,233) 625,000

Purchase of property, plant and equipment

(128,047) (326,399) - (10,724)

NET CASH FLOWS (USED IN) / PROVIDED BY INVESTING ACTIVITIES

(971,609) (961,017) 655,000 (654,724)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issues of ordinary shares

- 4,538,061 - 4,538,061

Repayment of finance leases (202,937) (513,307) (8,872) (4,420)

Proceeds from borrowings – other - 550,000 550,000

Repayment of borrowings (1,350,000) (1,350,000)

Advances from/( to ) controlled entities

- - 436,664 (3,803,489)

NET CASH FLOWS (USED IN) / PROVIDED BY FINANCING ACTIVITIES

(1,552,937) 4,574,754 ( 922,208) 1,280,152

NET DECREASE IN CASH HELD (3,013,441) (120,877) ( 1,094,638) (781,105)

Add opening cash brought forward 2,611,480 2,732,357 138,400 919,505

CLOSING CASH CARRIED FORWARD

17(b) (401,961) 2,611,480 ( 956,238) 138,400

The above Cash Flow Statement is to be read in conjunction with the accompanying notes.


Page 21

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report that has been prepared in accordance with Australian

Accounting Standards, Urgent Issues Group Interpretations, other authoritative pronouncements of the Australian

Accounting Standards Board and the Corporations Act 2001.

The financial report covers CBD Energy Limited and controlled entities (the economic entity), and CBD Energy Limited

as an individual parent entity. CBD Energy Limited is a listed public company, incorporated and domiciled in Australia.

The nature of the operations and principal activities of the group are the provision of energy and mechanical services.

This financial report is prepared in Australian dollars.

Statement of Compliance

The financial report of CBD Energy Limited and controlled entities (the economic entity), and CBD Energy Limited as an

individual parent entity comply with all Australian equivalents to International Financial Reporting Standards (AIFRS) in

their entirety.

The following is a summary of the material accounting policies adopted by the economic entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation First-time Adoption of Australian Equivalents to International Financial Reporting Standards

The economic entity and CBD Energy Limited as an individual parent entity have prepared financial statements in

accordance with the Australian equivalents to International Financial Reporting Standards (AIFRS) from 1 July 2005.

In accordance with the requirements of AASB 1: First-time Adoption of Australian Equivalents to International Financial

Reporting Standards, adjustments to the parent entity and consolidated entity accounts resulting from the introduction of

AIFRS have been applied retrospectively to 2005 comparative figures excluding cases where optional exemptions

available under AASB 1 have been applied. These consolidated accounts are the first Annual financial statements of the

economic entity to be prepared in accordance with Australian equivalents to IFRS.

Reconciliations of the transition from previous Australian GAAP to AIFRS have been included in Note 2 to this report.

Reporting Basis and Conventions The financial report has been prepared on an accruals basis and is based on historical costs.

Accounting Policies

a. Principles of Consolidation

A controlled entity is any entity CBD Energy Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 10 to the financial statements. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the year, their operating results have been

included/excluded from the date control was obtained or until the date control ceased. Subsidiaries are fully consolidated

from the date on which control is transferred to the group and cease to be consolidated from the date on which control is

transferred out of the group.


Page 22

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Accounting Policies (continued)

b. Income Tax

The change for current income tax expense is based on the profit for the year adjusted for any non-assessable or

disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance

sheet.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising

between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred

income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where

there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is

settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to

equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognized to the extent that it is probable that future tax profits will be available against

which deductible temporary differences can be utilized.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no

adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive

sufficient future assessable income to enable the benefit to be realised and comply with conditions of deductibility

imposed by the law.

CBD Energy Limited and it’s wholly- owned Australian subsidiaries have formed an income tax consolidated group under

the Tax Consolidation Regime. CBD Energy Limited is responsible for recognizing the current and deferred tax assets

and liabilities for the tax consolidated group. The group notified the ATO on 2 January 2003 that it had formed an income

tax consolidated group to apply from 1 July 2002. The tax consolidated group has entered a tax sharing agreement

whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net

profit before tax of the tax consolidated group.

c. Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of manufactured products includes

direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the

basis of normal operating capacity. Costs are assigned on the basis of weighted average costs.

d. Construction Contracts and Work in Progress

Construction work in progress is valued at cost, plus profit recognized to date less and provision for anticipated future

losses. Cost includes both variable and fixed costs relating to specific contracts, and those costs that are attributable to

the contract activity in general and that can be allocated on a reasonable basis.

Construction profits are recognized on the stage of completion basis and measured using the proportion of costs

incurred to date as compared to expected actual costs. Where losses are anticipated they are provided for in full.

Construction revenue has been recognized on the basis of the terms of the contract adjusted for any variations or claims

allowable under the contract.


Page 23


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Accounting Policies (continued)

e. Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and

impairment losses.

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing

costs and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only

when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item

can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial

period in which they are incurred.

Depreciation

Property, plant and equipment is depreciated on a straight line basis over their useful lives to the economic entity

commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of

either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Leasehold improvements 4-5%

Plant and Equipment 5-33%

Leased plant and equipment 15%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is

greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses

are included in the income statement.


Page 24


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Policies (continued)

f. Leases

Leases of fixed assets where substantially all the risks and benefits incidental to ownership of the asset are transferred

to the leasee are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of

the leased property or the present value of the minimum lease payments, including any guaranteed residual values.

Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the

economic entity will obtain ownership of the asset or over the term of the lease.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, and charged

as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognized as a liability and amortised on a straight-line basis over the life

of the lease term.

g. Intangibles

Goodwill

Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business or

for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and

carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying

amount of goodwill relating to the entity sold.

h. Employee Benefits

Wages and salaries and annual leave

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to

balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts

expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year

have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Superannuation

The amount charged to the Income Statement in respect of superannuation represents the contributions made by the

economic entity to the employees’ nominated superannuation funds.

i. Provisions

Provisions are recognized when the group has a legal or constructive obligation, as a result of past events, for which it is

probable that an outflow of economic benefits will results and that outflow can be reliably measured.

j. Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid

investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within

short-term borrowings in current liabilities on the balance sheet.


Page 25




k. Trade and other receivables

Receivables are recognised as the amounts due. Collectability of receivables is reviewed on an ongoing basis. Debts which are believed to be uncollectible are written off. A provision is raised for amounts for which collection is considered doubtful.

l. Trade and other payables

Liabilities are recognised for amounts to be paid subsequent to the reporting date for goods and services received, whether or not billed, by the consolidated entity prior to the reporting date.

m. Interest-bearing liabilities

Financial liabilities, where there is a compound financial instrument, are classified so the liability component and equity

component are shown separately on the Statement of Financial Position from the time of their initial recognition.

Interest, where applicable, is charged as an expense as it accrues and is included in interest-bearing liabilities.

n. Borrowings

Commercial bills are recognised in the financial statements on the basis of the nominal amounts outstanding at balance date plus accrued interest.

o. Share capital

Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising from the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

p. Foreign currencies

Translation of foreign currency transactions

Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by the entities within the consolidated entity that are outstanding at the reporting date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. All resulting exchange differences arising on settlement or restatement are brought to account in determining the net profit or loss for the financial year.

q. Revenue

Revenue from the sale of goods is recognized upon the delivery of goods to customers.

Interest revenue is recognized on a proportional basis taking into account the interest rates applicable to the financial

assets.

Dividend revenue is recognized when the right to receive a dividend has been established. Dividends received from

associates and joint venture entities are accounted for in accordance with the equity method of accounting.

Revenue from the rendering of service is recognized upon delivery of the service to the customers.

All revenue is stated net of goods and services tax (GST).


Page 26




r. Finance Costs

Finance costs directly attributable to buildings under construction are capitalised as part of the cost of these assets.

All other borrowing costs are recognized in income in the period in which they are incurred.

s. Goods and Services Tax (GST)

Revenues, expenses and assets are recognized net of the amount of GST, except where the amount of GST incurred is

not recoverable from the Australian Tax Office. In these circumstances the GST is recognized as part of the cost of

acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown

inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and

financing activities, which are disclosed as operating cash flows

t. Earnings per share

Basic earnings per share

Basic earnings per share is determined by dividing the operating profit / loss after income tax attributable to members of the Company by the weighted average of ordinary shares outstanding during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account any change in earnings per share that may arise from the exercise of options outstanding during the financial year.

u. Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation

for the current financial year.

v. Going Concern

The ability for the company to continue to operate as a going concern is dependant on the support of its current bankers,

Westpac Banking Corporation and the support of its major shareholders. The company plans to seek shareholder

approval to undertake a further capital raising sufficient to reduce the current debt level of $2Million due to Westpac

down to an acceptable level.

In view of the circumstances outlined above the Directors are of the opinion that the consolidated entity will have sufficient funding and that it is appropriate to prepare the 30 June 2006 financial report on a going concern basis.

Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and

best available current information. Estimates assume a reasonable expectation of future events and are based on

current trends and economic data, obtained both externally and within the group.

Key Estimate – Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to

impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.

No impairment has been recognised in respect of goodwill for the year ended 30 June 2006. The controlled entities were

contributing profits towards the group. Should any of the controlled entities not performing, an impairment loss would be

recognised up to the maximum carrying value of goodwill at 30 June 2006 of $1,507,539.

Apart from this, there are no other key assumptions or sources of estimation uncertainty that have a risk of causing a

material adjustment to the carrying amount of certain assets and liabilities within the next reporting period.

Australian Accounting Standards not yet effective

The economic entity has not yet applied any Australian Accounting Standards or UIG interpretations that have been

issued as at balance date but are not yet operative for the year ended 30 June 2006 and are not expected to have any

material impact in the future periods.


Page 27


NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING

STANDARDS

Economic Entity Reconciliation of Equity at 1 July 2004

Previous GAAP at 1.7.2004

$

Adjustments on introduction of Australian

equivalents to IFRS

$

Australian equivalents to

IFRS at 1.7.2004 $

CURRENT ASSETS Cash and cash equivalents 2,732,357 - 2,732,357 Trade and other receivables 15,618,007 - 15,618,007 Inventories 1,250,278 - 1,250,278 Other financial assets 92,378 - 92,378 TOTAL CURRENT ASSETS 19,693,020 - 19,693,020

NON-CURRENT ASSETS Property, plant and equipment 2,615,050 - 2,615,050 Intangibles 8,141,881 - 8,141,881 TOTAL NON-CURRENT ASSETS 10,756,931 - 10,756,931 TOTAL ASSETS 30,449,951 - 30,449,951

CURRENT LIABILITIES Trade and other payables 17,237,979 - 17,237,979 Other financial liabilities 695,359 - 695,359 Income tax 670,000 - 670,000 Provisions 896,427 - 896,427 TOTAL CURRENT LIABILITIES 19,499,765 - 19,499,765

NON CURRENT LIABILITIES Provisions 109,853 - 109,853 Other financial liabilities 2,344,529 - 2,344,529 TOTAL NON CURRENT LIABILITIES 2,454,382 - 2,454,382 TOTAL LIABILITIES 21,954,147 - 21,954,147 NET ASSETS 8,495,804 - 8,495,804

EQUITY Issued capital 56,084,144 - 56,084,144 Accumulated losses (47,588,340) - (47,588,340) TOTAL EQUITY 8,495,804 - 8,495,804

At parent entity level, there was no impact on equity on adoption of Australian equivalents to International Financial

Reporting Standards and the Balance Sheet presented under previous GAAP on 1 July 2004 is the same as the

Balance Sheet presented under AIFRS.


Page 28



STANDARDS (continued)

Economic Entity Reconciliation of Equity at 30 June 2005

Previous GAAP at 30.6.2005

$

Adjustments on introduction of


IFRS $


IFRS at 30.6.2005

$

CURRENT ASSETS Cash and cash equivalents 3,580,686 - 3,580,686 Trade and other receivables 11,218,007 - 11,218,007 Inventories 1,052,698 - 1,052,698 Other financial assets 226,762 - 226,762 16,078,153 - 16,078,153 Non current assets and assets of disposed operation classified as held for sale

-

1,881,586

1,881,586

TOTAL CURRENT ASSETS 16,078,153 1,881,586 17,959,739 NON-CURRENT ASSETS Property, plant and equipment 2,294,833 (1,881,586) 413,247 Intangibles 1,430,143 77,396 1,507,539 TOTAL NON-CURRENT ASSETS 3,724,976 (1,804,190) 1,920,786

TOTAL ASSETS 19,803,129 77,396 19,880,525 CURRENT LIABILITIES Trade and other payables 12,451,735 - 12,451,735 Other financial liabilities 1,440,228 - 1,440,228 Income tax 550,000 - 550,000 Provisions 1,450,333 - 1,450,333 15,892,296 - 15,892,296 Liabilities directly associated with non current assets classified as held for sale

-

168,493

168,493

TOTAL CURRENT LIABILITIES 15,892,296 168,493 16,060,789 NON CURRENT LIABILITIES Provisions 168,493 (168,493) - Other financial liabilities 2,700,306 - 2,700,306 TOTAL NON CURRENT LIABILITIES 2,868,799 (168,493) 2,700,306 TOTAL LIABILITIES 18,761,095 - 18,761,095 NET ASSETS 1,042,034 - 1,119,430

EQUITY Issued capital 60,622,205 - 60,622,205 Accumulated losses (59,580,171) 77,396 (59,502,775) TOTAL EQUITY 1,042,034 77,396 1,119,430

At parent entity level, there was no impact on equity on adoption of Australian equivalents to International Financial

Reporting Standards and the Balance Sheet presented under previous GAAP on 30 June 2005 is the same as the

Balance Sheet presented under AIFRS.

The movements as a result of introduction of A-IFRS results from the write back of goodwill amortisation and

application of the disclosure requirements of A-IFRS in relation to Discontinued Operations.


Page 29



STANDARDS (continued)

Economic Entity

Previous GAAP

Effect of transition to Australian

equivalents to IFRS


IFRS $ $ $

Reconciliation of Profit and Loss for the full year of 30 June 2005 Revenue 55,336,424 (47,340,018) 7,996,406 Cost of goods (47,899,748) 42,850,131 (5,049,617) Depreciation and amortisation expense (1,140,560) 1,022,216 (118,344) Finance costs (300,291) 17,505 (282,786) Salaries & employee benefit expenses (5,783,797) 3,282,198 (2,501,599) Administration and other expenses (4,284,474) 2,827,116 (1,457,358) Loss on disposal of assets (40,000) - (40,000) Bad and doubtful debts (69,442) 11,815 (57,627) Goodwill written down (7,809,943) 7,689,344 (120,599) Profit attributable to continuing operations

(11,991,831) 10,360,307 (1,631,524)

Discontinued operations Revenue - 47,340,018 47,340,018 Expenses - (57,622,929) (57,622,929) Profit / (loss) on discontinued operations - (10,282,911) (10,282,911) Net profit / (loss) attributable to members of CBD Energy Ltd

(11,991,831) 77,396 (11,914,435)

At parent entity level, there was no impact on profit on adoption of Australian equivalents to International Financial

Reporting Standards and the Income Statement presented under previous GAAP for the full year to 30 June 2005 is

the same as the Income Statement presented under AIFRS.

Effect of AIFRS on the Statement of Cash Flows

There are no material differences between the cash flow statement presented under AIFRS and the cash flow statement

presented under the superseded policies.

Note to the Reconciliation of Income and Equity

Goodwill

The consolidated entity has elected not to restate business combinations that occurred prior to the date of transition to

AIFRS, the carrying amount of goodwill at the date of transition has not changed. Adjustment to goodwill relates to add

back of amortization which is not allowed under AIFRS and the impairment writedown of goodwill to nil.

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting

Standards

This is the first annual financial report of the Peregrine Corporate Ltd prepared in accordance with AIFRS. Accounting

Standard AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been

applied in preparing this financial statement.

The company has elected to adopt the exemption in AASB 1 First-time Adoption of Australian Equivalents to

International Financial Reporting Standards (“AASB 1”) to not restate comparatives for the effects of AASB 132 Financial

Instruments: Disclosure and Presentation’ and AASB 139 ‘Financial Instruments: Recognition and Measurement.


Page 30



2006 $

2005

$

2006

$

2005

$ NOTE 3 - REVENUE FROM CONTINUING OPERATIONS

Revenues from operating activities

Revenue from sales and services 9,824,740 7,936,396 - -

Total revenues from operating activities 9,824,740 7,936,396 - -

Revenues from non-operating activities

Interest – other persons 36,131 35,571 12,590 26,469

Reversal of provisions no longer required 600,000 - 600,000 -

Proceeds on sale of controlled entity - note (i) - - 1,750,000 -

Other revenue - 24,439 115,386 57,998

Total revenues from non-operating activities 636,131 60,010 2,477,976 84,467

Total revenues from ordinary activities 10,460,871 7,996,406 2,477,976 84,467

Note (i) – Gain on sale of OP Industries Pty Ltd is detailed in note 29. Gain on sale in parent entity offset by the carrying value of net assets disposed is detailed in note 29.

NOTE 4 - NTINUED) AND LOSSES/(GAINS)

(a) Depreciation, amortisation expenses and cost of inventories included in the income statement

Depreciation of non-current assets

Property, plant and equipment 88,822 118,344 6,246 12,395

Total depreciation of non-current assets 88,822 118,344 6,246 12,395

Amortisation of non-current assets

Goodwill - - - -

Leasehold improvements 1,570 - - -

Total amortisation of non-current assets 1,570 - - -

Total depreciation and amortisation expense 90,392 118,344 6,246 12,395

Cost of inventories recognised as an expense 5,987,085 5,049,617 - -

(b) Finance costs

Other persons – Westpac Banking Corporation 243,604 282,786 243,604 271,429

Total finance costs 243,604 282,786 243,604 271,429


Page 31



NOTE 4 - EXPENSES AND LOSSES/(GAINS) (CONT)

2006 $

2005

$

2006

$

2005

$

(c) Material/significant items

Profit/(Loss) from ordinary activities before income tax expense includes the following material revenues and expenses whose disclosure is relevant in explaining the financial performance of the entity:

Proceeds on sale of controlled entity (note 29) - - 1,750,000 -

Reversal of provisions 600,000 - 600,000 -

Amount included in other revenue 600,000 - 2,350,000 -

Impairment write down of:

Goodwill - 120,599 - -

Investments in subsidiary - - - 8,098,121

- 120,599 - 8,098,121

(d) Administration and other expenses

Corporate administration costs (550,919) (531,003) (479,408) (369,005)

Occupancy costs (187,074) (199,746) (5,093) (62,294)

Travel costs (56,667) (114,987) (4,950) (47,364)

Communications costs (65,242) (81,449) (5,590) (26,211)

Other expenses (317,883) (530,183) (33,420) (120,517)

Total other expenses from ordinary activities (1,177,785) (1,457,358) (528,461) (625,391)

Defined contribution plan expenses (195,324) (181,576) (15,634) (38,703)

NOTE 5 - INCOME TAX

(a) The components of tax expense comprise:

Current tax - - - -

Deferred tax - - - -

- - - -

The prima facie tax on profit / (loss) before income tax differs from the income tax provided in the financial statements as follows:

Operating (profit)/loss before income tax (36,779) 11,991,831 (1,327,645) (13,439,546)

Prima facie tax on (profit)/loss at statutory income tax rate of 30% (2005: 30%)

11,034 (3,597,549) 398,293 4,031,864

Tax effect of permanent differences:

- Other items - 117,371 - -

- Write off of goodwill - 2,342,983 - -

Income tax expense / (benefit) 11,034 (1,137,195) 398,293 (4,031,864)

Future tax benefit (recognised) / not recognised (11,034) 1,137,195 (398,293) 4,031,864

Income tax attributable to Profit/(loss) from ordinary activities - - - -

Balance of franking account at balance date - - - -


Page 32


NOTE 5 - INCOME TAX (continued)


2006 $

2005

$

2006

$

2005

$

Income tax losses

The following deferred tax assets from revenue losses at 30 % have not been brought to account as assets:

Tax losses – revenue 550,051 553,361

A deferred tax asset for the consolidated entity is not brought to account at reporting date as realisation of the benefit is not probable.

The deferred tax asset will only be obtained if:

(a) Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;

(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and

(c) No changes in tax legislation adversely affect the consolidated entity in realising the benefit.

Tax consolidation

Effective 1 July 2002, for the purposes of income taxation, CBD Energy Limited and its 100% owned subsidiaries formed a tax consolidation group. The head entity within the tax consolidated group is CBD Energy Limited.

NOTE 6 – TRADE AND OTHER RECEIVABLES

Current

Trade receivables 1,959,809 493,399 1,640 18,848

Amount due from customers for contract work - 10,356,065 - -

Allowance for doubtful debts - (160,000) - -

1,959,809 10,689,464 1,640 18,848

Other receivables - 528,543 - 23,631

Loans to controlled entities* - - 189,084 -

Total current receivables 1,959,809 11,218,007 190,724 42,479

Non-current

Loans to controlled entities* - - - 5,810,761

Provision for non-recovery - - - (5,333,115)

Total non-current receivables at recoverable amount - - - 477,646

* Amounts owed by controlled entities are unsecured and on interest free terms.

The Directors reviewed the carrying value of the loan assets at each reporting date. At 30 June 2005, the Directors decided to make a provision for non-recovery to reflect the recoverable amount of non-current receivables to take account of the continued losses of specific subsidiary companies and because of uncertainty regarding net cash flows from these subsidiary companies. The loan balances at 30 June 2006 of $189,084 relate to amounts owing from Capacitor Technologies Pty Ltd.


Page 33



2006 $

2005

$

2006

$

2005

$

NOTE 7 - INVENTORIES

Current

Raw materials 422,718 159,379 - -

Work in progress 187,084 - - -

Finished Goods - 893,319 - -

Total inventories 609,802 1,052,698 - -

NOTE 8 – OTHER ASSETS

Current

Prepayments 20,184 155,480 8,113 69,274

Deposits 42,130 33,585 - 30,000

Other 17,718 37,697 - -

Total other assets 80,032 226,762 8,113 99,274


Page 34



2006 $

2005

$

2006

$

2005

$

NOTE 9 - PROPERTY, PLANT AND EQUIPMENT

Computer hardware & software

At cost 48,780 43,381 - 11,231

Accumulated depreciation (15,839) (11,539) - (7,682)

Total computer hardware & software 32,941 31,842 - 3,549

Motor vehicles

At cost 61,553 79,781 - -

Accumulated depreciation (22,637) (17,507) - -

Total motor vehicles 38,916 62,274 - -

Plant and equipment

At cost 297,068 293,114 - -

Accumulated depreciation (119,416) (75,175) - -

Total plant and equipment 177,652 217,939 - -

Furniture, fittings & office equipment

At cost 25,617 22,252 - 2,290

Accumulated depreciation (8,165) (4,906) - (254)

Total furniture, fittings & office equipment 17,452 17,346 - 2,036

Leased motor vehicles

At cost 253,771 99,120 33,386 33,386

Accumulated amortisation (36,864) (15,274) (9,467) (4,459)

Total leased motor vehicles 216,907 83,846 23,919 28,927

Leasehold improvements

At cost 17,378 - - -

Accumulated amortisation (1,570) - - -

Total leasehold improvements 15,808 - - -

Total property, plant and equipment

At cost 704,167 537,648 33,386 46,907

Accumulated amortisation/depreciation (204,491) (124,401) (9,467) (12,395)

Total property plant and equipment 499,676 413,247 23,919 34,512

Assets pledged as security: Fixed and floating charges over the consolidated entity assets including plant and

equipment have been pledged as security to Westpac Banking Corporation.


Page 35


NOTE 9 - PROPERTY, PLANT AND EQUIPMENT (continued)

Reconciliations

Economic Entity

Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year.

Computer Hardware

& Software

Motor Vehicles

Plant and Equipment

Furniture, fittings &

office equipment

Leased motor

vehicles


Total property, plant and

equipment

Carrying amount at beginning

31,842 62,274 217,939 17,346 83,846 - 413,247

Additions 12,163 - 3,954 5,655 154,651 17,378 193,801

Depreciation expense (8,408) (10,726) (44,241) (3,857) (21,590) (1,570) (90,392)

Disposal (2,656) (12,632) - (1,692) - - (16,980)

Carrying amount at end

32,941 38,916 177,652 17,452 216,907 15,808 499,676

Parent

Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year.

Computer Hardware

& Software

Motor Vehicles

Plant and Equipment

Furniture, fittings &

office equipment

Leased motor

vehicles


Total property, plant and

equipment

Carrying amount at beginning

3,549 - - 2,036 28,927 -

34,512

Additions - - - - - -

Additions from acquisition of entities

- - - -

- -

-

Depreciation expense (893) - - (344) (5,008) - (6,246)

Disposal (2,656) - - (1,692) - - (4,348)

Carrying amount at end

- - - - 23,919 - 23,919


Page 36



2006 $

2005

$

2006

$

2005

$

NOTE 10 - OTHER FINANCIAL ASSETS

Investment in controlled entities at cost - - 2,051,865 2,051,865

Total other financial assets - - 2,051,865 2,051,865

At 30 June 2005 the Company wrote down its investment in OP Industries Pty Ltd to recoverable amount of nil and recorded an expense of $8,090,121. This write down was based upon the poor financial performance of OP Industries Pty Ltd for the financial year ended 30 June 2005 as disclosed elsewhere in the financial report. As detailed in note 29, the Company had entered into a contract to sell OP Industries Pty Ltd immediately after 30 June 2005, and the write down was reflective of fair value less costs to sell under the contract.

INTERESTS IN SUBSIDIARIES

Controlled entities of CBD Energy Limited

Name Country of Incorporation

Percentage of equity held by the economic entity

Investment

2006 %

2005 %

2006 $

2005 $

CBD Online Pty Ltd Australia 100 100 - -

CBD Online Australia Pty Ltd Australia 100 100 - -

CBD Energy Management Pty Ltd

Australia 100 100 - -

Capacitor Technologies Pty Ltd Australia 100 100 740,000 740,000

Parmac Airconditioning Pty Ltd Australia 100 100 1,311,865 1,311,865

OP Holdings Pty Ltd Australia - 100 - 8,098,121

Less: Provision for diminution

In value of controlled entity

-

(8,098,121)

Total 2,051,865 2,051,865

All entities operated solely in their place of incorporation.


2006 $

2005

$

2006

$

2005

$

NOTE 11 - INTANGIBLES

Goodwill –at cost 1,547,926 1,547,926 - -

Accumulated impaired losses (40,387) (40,387)

Total intangibles 1,507,539 1,507,539 - -

Reconciliation

Balance at beginning of the year 1,507,539 8,141,881 - -

Additions - 1,175,601 - -

Impairment writedown - (7,809,943) - -

Balance at end of the year 1,507,539 1,507,539 - -

During the 30 June 2005 financial year, the consolidated entity assessed the carrying value of goodwill applicable to OP Industries Pty Ltd as having a recoverable amount of nil, based on fair value less costs to sell by reference to the sale of OP Industries Pty Ltd, detailed in note 29. The impairment of goodwill was allocated to discontinuing operations.


Page 37


NOTE 11 - INTANGIBLES (continued)

Goodwill is allocated to cash-generating units based on the group’s reporting segments.

2006

$ 2005

$

Energy services 340,895 340,895

Mechanical services 1,166,644 1,166,644

Total 1,507,539 1,507,539

During the 30 June 2006 financial year, the Company assessed the recoverable amount of goodwill and determined that goodwill associated with the Company is not impaired. The recoverable amount of the cash-generating unit, being the assets of the Company and goodwill, was assessed by reference to the cash-generating unit’s value-in-use. Value-in-use is calculated based on the present value of cash flow projections over a 5-year period approved by the Board of Directors and projected out a further 5 years. The cash flows are discounted using a rate of 20% and annual growth rates of 3% to 5%. Management believes that any reasonable possible change in the key assumptions in which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate carrying amount of those cash-generating units.


2006 $

2005

$

2006

$

2005

$

NOTE 12 - TRADE AND OTHER PAYABLES

Current

Trade creditors 1,622,152 7,894,899 200,935 126,735

Amounts due for purchase of O.P Consolidated - 1,125,000 - 1,125,000

Amounts due for purchase of Parmac - 50,000 - 50,000

Accruals 108,250 3,381,836 105,772 67,252

Loans from controlled entities* - - 148,098 -

Total current payables 1,730,402 12,451,735 454,805 1,368,987

* Amounts owed to controlled entities are unsecured and on interest free terms.

NOTE 13 – OTHER FINANCIAL LIABILITIES

Current

Secured

Bank overdraft 964,486 969,206 964,486 969,206

Finance leases 38,397 471,022 26,861 33,301

Total current interest-bearing liabilities 1,002,883 1,440,228 991,347 1,002,507

Non-current

Secured

Finance leases 189,211 350,306 - -

Commercial Bills 1,000,000 2,350,000 1,000,000 2,350,000

Total non-current interest-bearing liabilities 1,189,211 2,700,306 1,000,000 2,350,000

Total interest-bearing liabilities 2,192,094 4,140,534 1,991,347 3,352,507

The above interest bearing liabilities are secured against the assets they finance as disclosed further in note 28.

Details of fair value of the group’s interest bearing liabilities are set out in note 25.

Details of finance lease commitment are disclosed in note 18.


Page 38


Notes Economic Entity Parent Entity

2006 $

2005

$

2006

$

2005

$

NOTE 14 - PROVISIONS

Employee entitlements 140,678 1,450,333 - 32,816

Total current provisions 140,678 1,450,333 - 32,816

NOTE 15 - SHARE CAPITAL

(a) Share capital

Ordinary shares fully paid 15(b) 60,622,205 60,622,205 60,622,205 60,622,205

60,622,205 60,622,205 60,622,205 60,622,205

(b) Movements in ordinary shares on issue

2006 2005

No of shares $ No of shares $

Beginning of the financial year 70,551,071 60,622,205 52,913,303 56,084,144

Issue of shares at $0.28 - - 17,637,768 4,938,575

Transaction costs relating to share issues - - (400,514)

End of the financial year 70,551,071 60,622,205 70,551,071 60,622,205

Notes: On 28 February 2005 the company issued 17,637,768 fully paid ordinary shares at $0.28 a share pursuant to 1 for 3 renounceable rights issue in order to repay debt and to raise additional working capital.

The proceeds form the share issue were as follows; $

Gross Proceeds from share issue: 4,938,575 (17,637,768 @ $0.28 per share) Less: Transactions costs and underwriting fees ( 400,514)

Net Proceeds from Share Issue $ 4,538,061

(c) Share options

Options over ordinary shares:

In January 2004, as part of the capital raising for the acquisition of Parmac Airconditioning Pty Ltd the Company issued 4,007,571 options to purchase ordinary shares (200,376,970 pre consolidation of 50:1) These options are listed on the Australian Stock Exchange and are exercisable at $1.00 on or before 5 January 2007.


Page 39


NOTE 15 - SHARE CAPITAL (continued)

(c) Share options (continued) The following options to purchase fully paid ordinary shares in the Company were outstanding at 30 June 2006:

Number of Options

Date Granted Opening Balance 01/07/05

Granted/

(exercised)

Lapsed Closing Balance 30/06/06

Exercise Price

$

Exercise Period

Listed Options

27 January 2004 4,007,571 - - 4,007,571 $1.00 5 January 2007

Sub-Total 4,007,571 - - 4,007,571

(d) Terms and conditions of contributed equity

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

NOTE 16 –ACCUMULATED LOSSES


2006 $

2005

$

2006

$

2005

$

Accumulated losses

Balance at beginning of year (59,502,775) (47,588,340) (62,113,133) (48,673,587)

Net profit (loss) for the year 36,779 (11,914,435) 1,327,645 (13,439,546)

Total available for appropriation (59,465,996) (59,502,775) (60,785,488) (62,113,133)

Balance at end of year (59,465,996) (59,502,775) (60,785,488) (62,113,133)


Page 40


NOTE 17 - CASH FLOW STATEMENT


2006

$ 2005

$ 2006

$ 2005

$

(a) Reconciliation of net profit (loss) after tax to the net cash flows from operations

Net Profit/(loss) 36,779 (11,914,435) 1,327,645 (13,439,546)

Non-cash items

Depreciation and amortisation of non-current assets 90,392 701,364 6,246 12,395

Impairment Write down of goodwill & other non cash items

- 8,171,743 - -

Foreign exchange losses - 3,838 - -

Bad debt write off - 69,442 - -

Provision for non recovery of loan to subsidiary entities

- - - 3,976,461

Loss on sale of property plant & equipment 4,348 40,000 4,348 40,000

Loss on sale of Ventronics - 89,858 - -

Profit on sale of OP Industries (3,689) - (1,750,000) -

Reversal of Provisions (600,000) - (600,000) -

Lease liability payments - - 8,868 -

Write of investment in subsidiary to recoverable amount

- - - 8,098,121

Changes in assets and liabilities net of effects of disposal of discontinuing operations:

Decrease in trade and other receivables (221,690) 4,400,000 40,839 20,044

Decrease in inventories (58,633) 197,580 - -

Decrease / (Increase) in other assets 94,356 (134,384) 61,160 (44,833)

(Decrease) / increase in trade and other creditors 526,847 (7,387,682) 112,720 27,149

(Decrease) in other financial liabilities - - (6,440) -

(Decrease) / Increase in provisions 5,436 2,148,062 (32,816) 23,676

(Decrease) in tax payable - (120,000) - (120,000)

Movement in assets associated with OP Industries Pty Ltd(note 29) (363,041) - - -

Net cash flow from operating activities (488,895) (3,734,614) (827,430) (1,406,533)

(b) Reconciliation of cash

Cash balance comprises:

- cash assets 562,525 3,580,686 8,248 1,107,606

- overdraft (964,486) (969,206) (964,486) (969,206)

Closing cash balance (401,961) 2,611,480 (956,238) 138,400

(c) Financing facilities available

At balance date, the following financing facilities had been negotiated and were available:

Total facilities – third parties 2,000,000 3,500,000 2,000,000 3,500,000

Facilities used at balance date – third parties 1,964,486 3,319,206 1,964,486 3,319,206

Facilities unused at balance date – third parties 35,514 180,794 35,514 180,794


Page 41


NOTE 18 – EXPENDITURE COMMITMENTS


Lease expenditure commitments Finance leases (non-cancellable)

2006

$

2005

$

2006

$

2005

$

Minimum lease payments

- not later than one year 55,489 527,151 - -

- later than one year but not later than five years 219,920 381,395 - -

Total minimum lease payments 275,409 908,546 - -

Future finance charges



Total future finance charges 47,801 87,218 - -

227,608 821,328 - -

- Current liability 38,397 471,022 - -

- Non current liability 189,211 350,306 - -

227,608 821,328 - -

The economic entity has acquired motor vehicles by means of finance leases. Leases do not exceed 4 years in duration

Operating leases

Non-cancellable operating lease contracted for but not capitalised in this financial statements:

Minimum lease payments



132,218 980,661 - -

Operating leases relate to the lease of offices and warehouses for periods not greater than 3 years under non-cancellable leases.


Page 42


NOTE 19 - CONTINGENT LIABILITIES Controlled entities

The parent entity has provided a commitment to its subsidiary entities to support those companies’ ongoing operations for at least the next 12 months. Provision has been made in the accounts for the non-recovery of any associated loans.

NOTE 20 - SUBSEQUENT EVENTS

On 19th

July 2006 the Company announced the completion of a $275,000 capital raising via the placement of 5.5 million

shares at 5 cents per share. The placement of shares is pursuant to Listing Rule 7.1 and results in an increase of 7.23%

in the number of shares on issue.

The purpose of the placement was to provide additional working capital of $200,000 and to settle consulting fee

obligations of $75,000.

NOTE 21 - EARNINGS PER SHARE Economic Entity

2006 2005

$ $

The following reflects the income and share data used in the calculations of basic and diluted earnings per share:

Net profit / (loss) from continuing operations 33,090 (1,631,524)

Net profit / (loss) from discontinuing operations 3,689 (10,282,911)

Earnings used in calculating basic earnings per share 36,779 (11,914,435)

Number of Number of

Shares

2006

Shares

2005

Weighted average number of ordinary shares used in calculating basic earnings per share and diluted earnings per share 70,551,071 58,277,117

Overall operations:

Basic earnings per share (loss) - cents 0.05¢ (20.44)¢

Diluted earnings per share (loss) - cents 0.05¢ (20.44)¢

Continuing operations

Basic earnings per share (loss) - cents 0.05¢ (2.80)¢

Diluted earnings per share (loss) - cents 0.05¢ (2.80)¢

Discontinuing operations

Basic earnings per share (loss) - cents - (17.64)¢

Diluted earnings per share (loss) - cents - (17.64)¢

Effect of dilutive securities

Options on issue at 30 June 2005 and 30 June 2006 are not considered to be potential ordinary shares based on market circumstances at balance date and have not been included in the determination of diluted earnings per share. Details relating to options are set out in Note 15. Details of ordinary share issues post 30 June 2006 are detailed in note 20.

Conversions, calls, subscription or issues after 30 June 2006

Since the end of the financial year, there have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report, other than for those listed at note 20.


Page 43


NOTE 22 - AUDITORS’ REMUNERATION Economic Entity Parent Entity

2006 $

2005

$

2006

$

2005

$

Amounts received or due and receivable by the auditors for:

Auditing or reviewing the financial reports of the entity and any other entity in the consolidated entity

130,320 168,020 182,272 168,020

Due diligence services - 22,110 - 22,110

Other compliance taxation services in relation to the entity and any other entity in the consolidated entity

66,802 58,176 2,350 58,176

Total remuneration of auditors 197,122 248,306 184,622 248,306

NOTE 23 - RELATED PARTY DISCLOSURES (a) Wholly-owned group transactions

CBD Energy Limited is the ultimate parent entity in the wholly owned group comprising the Company and its wholly owned controlled entities. The Company was incorporated in Australia.

During the current and previous financial year, the Company advanced and was repaid loans and provided management and administrative assistance to other entities in the wholly owned group. Any loans within the consolidated entity were provided interest free. Management and administrative assistance have been provided without charge.

Transactions with related parties were made on normal commercial terms and conditions unless otherwise stated.

(i) At balance date Capacitor Technologies Pty Ltd owed the parent entity $189,083 (2005: $320,086). The movement in the loan amount relates to working capital advances by the parent entity to its subsidiary.

(ii) At balance date the parent entity owed Parmac Airconditioning Pty Ltd $148,101 (2005: receivable $157,560). The movement in the loan amount relates to working capital advances by the parent entity to its subsidiary.

(b) Ultimate parent

CBD Energy Limited is the ultimate parent company.

(c) Director related transactions

(i) During the financial year ending 30 June 2006, TRW Holdings Pty Ltd, an entity in which a Director, Gerry McGowan has a direct interest, received payments for the reimbursement of travel expenses and other operating disbursements incurred on behalf of the company. The total amount paid or payable to TRW holdings Pty Ltd was $ 24,988. (2005:$ 11,591)

(ii) During the financial year ended 30 June 2006, Corporate and Administrative Services Pty Ltd, an entity in which a Director, John de Gouveia has a direct interest, provided accounting and secretarial services to the Company at market rate. Fees , reimbursement of travel expenses and other disbursements paid or payable to Corporate and Administrative Services Pty Ltd was $77,664 (2005: nil)

(d) Key management personnel’s remuneration

Details of key management personnel’s remuneration and their share and option holdings in the company are disclosed in note 26 – Directors and Executive Remuneration.

(e) Key management related transactions

During the financial year ended 30 June 2006, the economic entity paid $42,083 to CAMRAP Superannuation Fund, an entity related to Alan McClaren, Managing Director/CEO of Parmac, for rental lease of office building on normal commercial terms.


Page 44


NOTE 24 - SEGMENT INFORMATION

Segment products and locations

The consolidated entity’s operating companies are organised and managed separately according to the nature of the products and services they provide, with each segment offering different products and serving different markets.

The principal activities of entities within the consolidated entity were: Energy Efficiency Solutions

• CapTech manufacture energy saving products (power factor correction equipment) and energy quality

products (reactors and filters), and also supply components (capacitors) and energy consulting services. In

general, their power correction equipment can reduce energy consumption by 25% and their other products

provide for improvement in quality and thereby efficiency of power use.

Mechanical Services Solutions

• Parmac provides a full range of mechanical services and air-conditioning services in support of developers,

builders and commercial tenants at the mid tier level. Their speciality is working within existing mechanical

services infrastructure and tight deadlines to deliver high-quality commercial grade air-conditioning solutions.

Segment accounting policies

There have been no inter-segment sales or transfers. Revenues are attributed to geographic areas based on the location of the assets producing the revenues.

Segment accounting policies are the same as the consolidated entity’s policies described in Note 1. During the financial year, there were no changes in segment accounting policies that had a material effect on the segment information.


Page 45


NOTE 24 - SEGMENT INFORMATION (CONTINUED)

Primary Reporting – Business Segments

2006

Energy Services

$

Mechanical Services

$

Corporate

$

Eliminations $

Economic Entity –

Continuing $


Revenue outside the economic entity

3,921,123 5,922,151 2,367,597 (1,750,000) 10,460,871 22,607,512

Inter-segment revenue - - 99,854 (99,854) - - Total revenue 3,921,123 5,922,151 2,467,451 (1,849,854) 10,460,871 22,607,512

Segment operating profit 207,257 379,444 1,327,643 (1,877,565) 36,779 3,689 Income tax expense - - Operating profit after tax 36,779 3,689

Depreciation and Amortisation

55,409 28,737 6,246 - 90,392 -

Segment Assets 1,937,013 1,881,009 2,282,869 (2,389,047) 3,11,844 - Unallocated Assets - - - - 1,507,539 - Total Assets 5,219,383 -

Segment Liabilities 892,397 1,061,808 2,446,151 (337,182) 4,063,174 - Unallocated Liabilities - - - - - - Total Liabilities 4,063,174 -

Acquisition of non-current assets

2,461 191,340 - - 193,801 -

2005

Energy Services

$

Mechanical Services

$

Corporate $

Eliminations $

Economic Entity–

Continuing $


Revenue outside the economic entity

4,975,043 4,350,039 84,467 (1,413,143) 7,996,396 47,340,018

Total revenue 4,975,043 4,350,039 84,467 (1,413,143) 7,996,406 47,340,018

Segment operating profit 1,340,897 256,049 (1,422,591) (1,805,879) (1,631,524) (10,282,911) Income tax expense - - - - - - Operating profit after tax (1,631,524) (10,282,911)

Depreciation and Amortisation

74,308 1,003,521 12,395 - 1,090,224 -

Individually significant items:

Write Down of investment carrying value

-

8,098,121

-

(8,098,121)

-

-

Write Down of Goodwill - - - 7,809,943 7,809,943 -

Provision diminution in value of loans – controlled entities

-

-

3,918,834

(3,918,834)

-

-

Segment Assets 1,936,868 17,047,264 3,813,382 (4,424,528) 18,372,986 -

Unallocated Assets - - - - 1,507,539 -

Total Assets 19,880,525 -

Segment Liabilities 777,716 13,156,716 5,304,310 (477,647) 18,761,095 -

Unallocated Liabilities - - - - - - Total Liabilities 18,761,095 -

Acquisition of non-current Assets

44,955 367,143 44,109 (35,061) 421,146 -


Page 46


NOTE 24 - SEGMENT INFORMATION (CONTINUED)

Secondary Reporting – Geographic Segments

2006

Australia $

Eliminations $

Economic Entity

(continuing operations)

$

Discontinued operations

$

Segment revenue 10,560,725 (99,854) 10,460,871 22,607,512 Segment Assets 5,141,987 - 5,141,987 - Other segment information: Acquisition of non-current Assets

193,801

- 193,801 -

2005

Australia $

Hong Kong $

Eliminations $

Economic Entity

(continuing operations)

$

Discontinued operations

$

Segment revenue 7,829,697 1,579,852 (1,413,143) 7,996,406 47,340,018 Segment Assets 22,797,514 - (2,994,385) 19,803,129 - Other segment information: Acquisition of non-current Assets

456,207 - (35,061) 421,146 -

NOTE 25 - FINANCIAL INSTRUMENTS Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements. Net fair value of financial assets and liabilities On balance sheet The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the consolidated entity approximates their carrying value. The net fair value of other monetary financial assets and financial liabilities is based upon market prices where a market exists or by the expected future cash.


Page 47


NOTE 25 - FINANCIAL INSTRUMENTS (CONTINUED) Off balance sheet The consolidated entity has potential financial liabilities, which may arise from certain contingencies disclosed in Note 19. As explained in that note, no material losses are anticipated in respect of any of those contingencies.

On balance sheet financial assets and liabilities

2006 2005

Financial assets

Carrying Amount

$

Net Fair Values

$

Carrying Amount

$

Net Fair Values

$

Cash assets 562,525 562,525 3,580,686 3,580,686

Receivables 1,959,809 1,959,809 11,218,007 11,218,007

2,522,334 2,522,334 14,798,693 14,798,693

Financial liabilities

Payables (1,730,402) (1,730,402) (12,451,735) (12,451,735)

Tax provision - - (550,000) (550,000)

Interest-bearing liabilities (2,192,094) (2,192,094) (4,140,534) (4,140,534)

Employee benefits (140,678) (140,678) (1,618,826) (1,618,826)

(4,063,174) (4,063,174) (18,761,095) (18,761,095)

(1,540,840) (1,540,840) (3,962,402) (3,962,402)

Credit risk

The credit risk on financial assets of the consolidated entity which have been recognised in the Balance Sheet is generally the carrying amount, net of any provisions. Credit risk refers to the risk that a counter party will default on the contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted the policy of only dealing with credit worthy counterparts as a means of mitigating the risk of financial loss from defaults. The consolidated entity measures credit risk on a fair value basis. The maximum credit risk exposure for each class of financial assets is represented by the carrying amount of those assets as disclosed in the balance sheet and notes to the financial statements.

Interest rate risk

The consolidated entity’s exposure to interest rate risks and the effective weighted average interest rates of financial assets and financial liabilities, are as follows:

30 June 2006 Financial assets and liabilities

Note

Weighted Average Interest

Rate %

Floating Interest

Rate $

Due within

1 year $

Due

between 1 to 5 years

$

Non-interest bearing

$

Total $

Financial assets

Cash – current 17(b) 5.00% 562,525 - - - 562,525

Trade debtors - current 6 - - - - 1,959,809 1,959,809

Total financial assets 562,525 - - 1,959,809 2,522,334


Payables 12 - - - - 1,730,402 1,730,402

Interest bearing liabilities 13 11.2% 1,964,486 38,397 189,211 - 2,192,094

Employee benefits 14 - - - - 140,678 140,678

Total financial liabilities 1,964,486 38,397 189,211 1,871,080 4,063,174

Net financial assets/(liabilities) (1,401,961) (38,397) (189,211) 88,729 (1,540,840)


Page 48


NOTE 25 - FINANCIAL INSTRUMENTS (CONTINUED)

30 June 2005 Financial assets and liabilities

Note

Weighted Average Interest

Rate %

Floating Interest

Rate $

Due within

1 year $

Due

between 1 to 5 years

$

Non-interest bearing

$

Total $

Financial assets

Cash – current 17(b) 5.15% 3,580,686 - - - 3,580,686

Trade debtors - current 6 n/a - - - 11,218,007 11,218,007

Total financial assets 3,580,686 - - 11,218,007 14,798,693


Payables 12 n/a - - - 12,451,735 12,451,735

Tax provision n/a - - - 550,000 550,000

Interest bearing liabilities 13 7.73% 3,319,206 471,022 350,306 - 4,140,534

Employee benefits 14 - - - 1,450,333 1,450,333

Employee benefits classified as held for sale

- - - 168,498 168,493

Total financial liabilities 3,319,206 471,022 350,306 14,620,561 18,761,095

Net financial assets/ (liabilities) 261,480 (471,022) (350,306) (3,402,554) (3,962,402)

Reconciliation of Net Financial Assets to Net Assets

Note 2006

$ 2005

$

Net financial (liabilities) (1,540,840) (3,962,402)

Non-financial assets and liabilities

Other assets 80,032 226,762

Inventories 7 609,802 1,052,698

Property, plant and equipment 9 499,676 2,294,833

Intangibles 11 1,507,539 1,507,539

Net assets per Balance Sheet 1,156,209 1,119,430


Page 49


NOTE 26 – DIRECTORS AND EXECUTIVES REMUNERATION

(a) Details of key management personnel

Name of individual Position held Period of responsibility

Gerry McGowan Executive director: Chairman 1 Jul 05 – 30 Jun 06 (i)

Wayne Rudland Executive director: CEO 1 Jul 05 – 21 Dec 05

Michael Warczak Non–executive director 1 Jul 05 – 30 Jun 06 (i)

John de Gouveia Non-executive director 21 Dec 05 – 30 Jun 06 (i)

Wayne Rudland CEO – CBD Energy Ltd 1 Jul 05 – 21 Dec 05

Alan McClaren Managing Director/CEO: Parmac 1 Jul 05 – 30 Jun 06 (i)

Yury Brodsky Managing Director/CEO: CapTech 1 Jul 05 – 30 Jun 06 (i)

Note (i) these individuals continue to hold office at the date of this report

(b) Remuneration of key management personnel

(i) Remuneration Policy

The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves, the

Chief Executive Officer and the executive management team. It is the Company’s objective to provide maximum

stakeholder benefit from the retention of a high quality Board and executive management team by remunerating

Directors and key executives fairly and appropriately with reference to relevant employment market conditions and

their experience and expertise.

(ii) Remuneration of key management personnel

Year Primary Primary

Bonus

Superannuation Equity Total

$ $ $ $ $ Gerry McGowan 2006 - - - - -

2005 - - - - -

Wayne Rudland 2006 120,000 - 5,400 - 125,400

2005 221,250 - 19,912 - 241,162

Michael Warczak 2006 - - - - -

2005 - - - - -

John de Gouveia 2006 - - - - -

2005 - - - - -

Robert Edis 2006 - - - - -

2005 115,904 - 8,211 - 124,115

Yury Brodsky 2006 110,008 - 9,000 - 119,008

2005 118,758 - 9,787 - 128,544

Alan McClaren 2006 142,200 - 11,371 - 153,571

2005 102,806 - 9,125 - 111,931

Lloyd Doddridge 2006 - - - - -

2005 18,842 - 1,695 - 20,537

Total Remuneration 2006 372,208 - 25,771 - 397,979

2005 575,560 - 48,730 - 626,289


Page 50


NOTE 26 – DIRECTORS AND EXECUTIVES REMUNERATION (continued)

(b) Remuneration of key management personnel (continued)

(iii) Shareholdings of Directors and key management personnel

2006 Directors

Opening balance 1 July 2005

Granted as remuneration

On exercise of options

Net change other*

Closing balance 30 June 2006

Gerry McGowan 11,807,015 - - 781,910 12,588,925

Michael Warczak 7,530,000 - - - 7,530,000

John de Gouveia - -

Total 19,337,015 - - - 20,118,925

Key management personnel

Alan McClaren - - - - -

Yury Brodsky - - - - -

Total - - - - -

* Net change other relates to transactions on market or acquisition of shares in the Company’s rights issue during the financial year. For period of responsibility, refer to note 26(a). Net change other refers to shares purchased or sold during the financial year

Opening

balance 1

July 2004

Granted as

remuneration

On exercise

of options

Net change

other*

Closing balance

30 June 2005

Directors

Gerry McGowan 6,000,000 - - 5,807,015 11,807,015

Wayne Rudland (i) 58,824 - - - 58,824

Michael Warczak 6,363,200 - - 1,166,800 7,530,000

Denis Ledbury (i) - - - - -

John McCarthy (i) - - - - -

Nicholas Kephala (i) 10,349,617 - - - 10,349,617

David Hood (i) 97,647 - - - 97,647

Robert Edis (i) - - - - -

Total 22,869,288 - - 6,973,815 29,843,103

Specified Executives

Wayne Rudland (ii) 58,824 - - - 58,824

Earl Sakareassen (ii) 347,866 - - - 347,866

Alan McClaren - - - - -

Yury Brodsky - - - - -

Total 406,690 - - - 406,690

Note (i) Former of directors of CBD Energy Limited who were directors during all or part of the 30 June 2005 financial

year

Note(ii) Former Key management personnel during all or part of the 30 June 2005 financial year

Note (*) Net change other relates to acquisitions on market or acquired during the Company’s rights issue.


Page 51


NOTE 26 – DIRECTORS AND EXECUTIVES REMUNERATION (continued)

(b) Remuneration of key management personnel (continued)

(iv) Option holdings of Directors and specified Executives (ASX Listed “CBDO”)

2006 Directors

Opening balance 1 July

2005

Granted as remuneration

Net change other*

Closing balance 30 June 2006

Gerry McGowan - - - -

Michael Warczak 500,000 - - 500,000

John de Gouveia - - - -

Total 500,000 - - 500,000

Key management personnel

Alan McClaren - - - -

Yury Brodsky - - - -

Total - - - -

For period of responsibility, refer to note 26(a). Net change other refers to options purchased or sold during the financial year.

Opening

balance 1 July

2004

Granted as

remuneration

Net change

other*

Closing

balance 30

June 2005

Directors

Gerry McGowan - - - -

Wayne Rudland (i) 39,216 - - 39,216

Michael Warczak 500,000 - - 500,000

Denis Ledbury (i) - - - -

John McCarthy (i) - - - -

Nicholas Kephala (i) - - - -

David Hood (i) - - - -

Robert Edis (i) - - - -

Total 539,216 - - 539,216

Key Management personnel

Wayne Rudland (i) 39,216 - - 39,216

Earl Sakareassen (i) - - - -

Alan McClaren - - - -

Yury Brodsky - - - -

Total 39,216 - - 39,216

Note (i) Former of directors of CBD Energy Limited who were directors during all or part of the 30 June 2005 financial

year

Note(ii) Former Key management personnel during all or part of the 30 June 2005 financial year

Note (*) Net change other relates to acquisitions on market or acquired during the Company’s rights issue.


Page 52


NOTE 26 – DIRECTORS AND EXECUTIVES REMUNERATION (Continued)

(v) Contract of employment

Specified Executives Details

Wayne Rudland

CEO– CBD Energy Ltd


Wayne Rudland was employed by the company under a contract of employment. The

length of the contract was for 2 years from 1 July 2004 to 1 July 2006, with a period of

notice of 3 months required to terminate the contract. The base contract amount was

$250,000 pa, inclusive of the superannuation guarantee levy.

Commencing 1 July 2005 and by mutual agreement, the base contract amount was

reduced to $120,000 pa, inclusive of the superannuation guarantee levy.


The contract provided for the issue of options under the employee share option plan

upon satisfactory achievement of KPI’s and meeting FY2006 budget.

Upon the resignation of Mr Rudland on 21 December 2005, he was paid a termination

payment of $60,000.

Alan McClaren


Parmac Airconditioning


Alan McClaren is employed by Parmac Airconditioning and Mechanical Services Pty

Ltd under a contract of employment. The length of the contract is 3 years from 1

January 2004 to 1 January 2007, with a period of notice of 3 months required to

terminate the contract.

The base contract amount is $ 109,000 pa, inclusive of the superannuation guarantee

levy.

Effective 1 January 2006 the base contract amount will increase to $150,000 pa

package, inclusive and comprising salary, superannuation guarantee levy and a fully

maintained motor vehicle in addition to a bonus payment structure based upon

achieving set EBITA levels.


The contract provides for the issue of options under the employee share option plan

upon satisfactory achievement of KPI’s and meeting quarterly sales and profit targets.

In view of the company’s performance, no ESOP options have been issued and the

directors will review the future application of the employee share option plan.

Commencing 1 January 2006 a bonus structure will apply if FY06 EBITA exceeds

$400,000 for Parmac. The structure operates whereby 30% to 50% of the EBITA result

achieved over the hurdle amount is payable equally to Alan McClaran and the

Contracts Manager.

For the 30 June 2006 financial year, no bonus payments were due to Mr McClaren

based on performance achieved during the year.


Page 53


NOTE 26 – DIRECTORS AND EXECUTIVES REMUNERATION (Continued)

(v) Contract of employment - Continued

Specified Executives Details

Yury Brodsky


Cap Tech


Yury Brodsky is employed by Capacitor Technologies Pty Ltd under a continuing

contract of employment. The length of the initial contract was for 1 year from 1

December 2003 to 1 December 2004, with a period of notice of 1 month required to

terminate the contract. Following completion of the initial contract term, the contract is

operating on a continuous basis until varied by mutual agreement.

The base contract amount is $100,000pa plus the superannuation guarantee levy, plus

a car allowance of 10,000pa and a performance bonus of $15,000pa (total annual

package $133,555).


The contract provides for the payment of a bonus determined annually by the Board

upon satisfactory achievement of KPI’s and meeting operating budgets.

In addition the company utilises electrical contracting services offered by Brodpower Pty

Ltd , a company in which Yury Brodsky has a ownership interest.

The service contract with Brodpower Pty Ltd operates on a revenue share basis

whereby CapTech makes a 25% margin on all electrical installation work outsourced to

Brodpower Pty Ltd.

For the 30 June 2006 financial year, no bonus payments were due to Mr Brodsky.


NOTE 27 - CONSTRUCTION CONTRACTS 2006

$ 2005

$ 2006

$ 2005

$

Construction work in progress - 38,533,000 - -

Progress billings and advances received - 29,206,660 - -

Amount due from customers for contract work - 9,326,340 - -

The economic entity does not have long term construction contracts in relation to its ongoing operations in 30 June 2006 financial year.

NOTE 28 - ASSETS PLEDGED AS SECURITY

In accordance with the security arrangements of liabilities, as disclosed in notes 13 and 18, to the financial statement, effectively all non-current assets of the consolidated entity, except goodwill and deferred tax assets have been pledged as security.

The consolidated entity does not hold title to the equipment under finance lease pledged as security.


Page 54


NOTE 29 – DISCONTINUING OPERATIONS

Disposal of controlled entities On 24 June 2005, the Company announced a plan to dispose of its wholly owned subsidiary OP Industries Pty Limited and its controlled entities (“OP”). Sale of OP was completed in early December 2005. At 30 June 2005, the expected proceeds on sale were $1,750,000, less the then carrying amount of OP net assets of $1,746,311 giving an expected profit of $3,689. The results of the discontinued operations which have been included in the income statement, and a comparison of the results of OP for the year ended 30 June 2005, are as follows: Profit/loss of discontinued operation: 30/06/2006

$ 30/06/2005

$ Revenue from operating activities 22,607,512 47,340,018 Expenses from operating activities (22,320,856) (57,622,929)

Profit /(loss) from discontinued operation before income tax expense

286,656 (10,282,911)

Income tax expense - - 286,656 (10,282,911) Loss on remeasurement to fair value less costs to sell - - Loss on disposal of operation (282,967) - 3,689 - Attributable to income tax expense - - Amount reported in Income Statement 3,689 (10,282,911)

The carrying amounts of assets and liabilities of the discontinued operation at the time entering into the contract of sale were:

30/06/2006 $

30/06/2005 $

Total assets 13,267,195 14,155,893 Total liabilities (11,234,228) (12,409,582) Net assets 2,032,967 1,746,311

The net cash flows of the discontinued operation which have been incorporated into the cash flow statement, and a comparison for the year ended 30 June 2005, are:

30/06/2006 $

30/06/2005 $

Net cash flows from operating activities (363,041) (2,543,712) Net cash flows from investing activities (73,193) (305,727) Net cash flows from financing activities (168,312) 3,229,711 Net cash flows generated by discontinued operation (604,546) 380,272

Results of the sale of discontinued operation which has been incorporated in the income statement are: 30/06/2006

$

Cash proceeds of sale 625,000 Release of obligations 1,125,000

Net sale price 1,750,000 Carrying amount of net assets sold (2,032,967) Amount reported in the Income Statement (282,967)


Page 55


NOTE 29 – DISCONTINUING OPERATIONS (continued)

Disposal of controlled entities (continued) The major classes of assets and liabilities comprising the discontinued operation disposed of at the date of sale are as follows: 30/11/2005

$

Cash and cash equivalent 1,496,233 Trade and other receivables 8,964,147 Inventories 530,729 Other financial assets 527,251 Property, plant and equipment 1,748,834 13,267,194

Trade and other payables (10,676,728) Other financial liabilities (557,499) Total liabilities associated with assets classified as held for sale (11,234,227) Carrying amount of net assets sold 2,032,967

Cashflow on disposal of discontinued operation: Cash proceeds on disposal 625,000 Less cash balance disposed of (1,496,233) Net proceeds reported in Statement of Cash Flows (871,233)

NOTE 30 – AUTHORISATION

The financial report was authorised for issue on 29 September 2006 by the Board of Directors.


Page 56

DIRECTORS DECLARATION

In accordance with a resolution of the Directors of the Company, the Directors declare that:

In the opinion of the Directors:

1. The financial statements and notes of the Company and of the consolidated entity are in accordance with

the Corporations Act 2001, including:

A. Giving a true and fair view of the Company’s and the consolidated entity’s financial position as at

30 June 2006 and of their performance for the financial year ended on that date; and

B. Complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable.

3. This declaration has been made after receiving the declaration required to be made to the directors in

accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2006.

On behalf of the Board

Gerry McGowan

Chairman Sydney

29 September 2006


Page 59

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 26 September 2006.

(a) Distribution of equity securities

The number of shareholders, by size of holding, in each class of share are:

Ordinary Fully Paid Shares

Distribution of Shareholdings Number of Holders Number of Shares

1-1,000 837 267,628

1,001-5,000 396 979,252

5,001-10,000 142 1,113,865

10,001-100,000 286 9,666,385

100,001 and over 77 64,023,941

Total Number of Shareholders 1,738 76,051,071

The number of shareholders holding less than a marketable parcel of shares are:

1,402

2,663,041

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:

Listed Ordinary Shares Name of Holder Number of Shares Percentage of Ordinary Shares

1 TRW Holdings Pty Ltd 12,588,925 16.55

2 Warczak Enterprises Pty Ltd 7,530,000 9.90

3 Larnaca Investments Pty Ltd 7,500,000 9.86

4 Alpha Capital Anstalt 4,000,000 5.26

5 Secure Portfolio Management Pty Ltd 3,450,000 4.54

6 Cityrose Holdings Pty Ltd 2,849,617 3.75

7 Buyers Network International Pty Ltd 1,853,868 2.44

8 CVC Limited 1,666,667 2.19

9 S & C Finlay Holdings Pty Ltd 1,530,000 2.01

10 Dixson Trust Pty Ltd 1,527,726 2.01

11 Fobbing Hall Pty Ltd 950,000 1.25

12 Mr Francis Albert Robertson 855,526 1.12

13 Miss Miao Miao Guo 718,000 0.94

14 Level 1 Pty Ltd 709,408 0.93

15 J. Lewis Services Pty Ltd 700,000 0.92

16 Night Haven Pty Ltd 662,533 0.87

17 Miss Catherine Elizabeth Warczak 640,145 0.84

18 Willow Tree Press Ltd 625,000 0.82

19 Mr David Platt & Mrs Sue Platt 600,000 0.79

20 UBS Wealth Management Australian Nominees Pty Ltd

547,866 0.72

Total Top 20 51,505,281 67.71

Total issued capital 76,051,071 100.00


Page 60

ASX ADDITIONAL INFORMATION (CONTINUED)

(c) Substantial shareholders The names of the substantial shareholders who have notified the Company in accordance with section 671B of the

Corporations Act 2001 are:

Number of Shares Percentage Held

Larnaca Investments Pty Ltd 7,500,000 9.86%

Warczak Enterprises Pty Ltd 7,530,000 9.90%

TRW Holdings Pty Ltd 12,588,925 16.55%

(d) Voting rights The voting rights attaching to each class of equity securities are set out below:

Subject to any special rights or restrictions for the time being attaching to any class of Shares and Articles 14.3, 14.6, 14.7, 14.8 and 15.10:

(a) on a show of hands at a meeting of Members, every Eligible Voter present has one vote; and

(b) on a poll at a meeting of Members, every Eligible Member (not being a Corporation) present in person or by proxy or attorney, and every Eligible Member (being a Corporation) present by a Representative or by proxy or attorney, has one vote for each Share that Eligible Member holds, but:

(i) if at any time there is on issue any Share which has not been fully Paid Up that Share on a poll will confer only that fraction of one vote which the amount paid (not credited) on that Share, excluding any amounts paid up in advance of the applicable due date for payment, bears to the total amounts paid and payable (excluding amounts credited) on that Share; and

(ii) if the total number of votes to which an Eligible Member is entitled on a poll does not constitute a whole number, then the Company will disregard the fractional part of that total.

(e) Option holders information

The Company has listed options over unissued shares.

The voting rights attached to the options is NIL.

ASX Code: CBD O – Listed

Options expiring 05/01/07 exercisable at $1.00

Options granted: Unexercised as at 26 September 2006 4,007,571

Distribution of Option holdings No. of Options No. of Holders

1 - 1,000 - -

1,001 - 5,000 19,229 6

5,001 - 10,000 88,967 11

10,001 - 100,000 1,470,110 45

100,000 and over 2,429,265 9

Total Number of Option holders 4,007,571 71


Page 61

Twenty largest optionholders

The names of the twenty largest holders of quoted options are:

Listed Options Name of Holder Number of Options Percentage of Options

1 Warczak Enterprises Pty Ltd 500,000 12.48

2 Studio 54 Pty Limited 407,715 10.17

3 Night Haven Pty Ltd 338,560 8.45

4 Buyers Network International Pty Ltd 300,000 7.49

5 International Business Network (Services) Pty Ltd

250,000 6.24

6 Captain Starlight Nominees Pty Ltd 183,840 4.59

7 Mr Paul Mallia & Mrs Carmen Mallia 180,000 4.49

8 Askety Pty Ltd 158,366 3.95

9 Mrs Deborah Highland 150,000 3.74

10 J Lewis Services Pty Ltd 79,371 1.98

11 Mr Rudolf Horvat 78,534 1.96

12 Etob Pty Ltd 78,432 1.96

13 Westglade Pty Ltd 64,662 1.61

14 Mr Roger Milne 55,530 1.39

15 Mr Edward William Taylor 50,000 1.25

16 Ms Ablin Chamela 40,000 1.00

17 Mr Alan Robert Marriott 40,000 1.00

18 Mr Kenneth Yu 39,686 0.99

19 Mr Mark Anthony Ricciuto 39,288 0.98

20 Mrs Linda Rudland 39,288 0.98

Total Top 20 3,073,272 76.70

Total listed options 4,007,571 100.00

Documents

2006 ANNUAL REPORTcontent.stockpr.com/cbdenergy/media/1448bf151d36a2823da5482e847742d7.pdfThe Board guides and monitors the business and affairs of the Company on behalf of the