Bounty Industries Limited2008 Annual Report 4 2 CHAIRMAN’S REPORT Operations Bounty is currently operating at the German Creek complex, as a contractor for Anglo Coal (Capcoal Management)

ANNUAL OPERATIONS AND FINANCIAL REPORT

30 JUNE 2008

for

BOUNTY INDUSTRIES LIMITED AND ITS CONTROLLED ENTITIES

ABN: 19 107 411 067

Bounty Industries LimitedBounty Industries LimitedBounty Industries LimitedBounty Industries Limited

Bounty Industries Limited ______________________________________________________________________________

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TABLE OF CONTENTS

1 Corporate Directory 3

2 Chairman’s Report 4

3 Directors ’ Report 8

Information about the Directors & Company Secretary 8

Corporate Governance Statement 10

Principal Activities 22

Operating & Financial Review 22

Events Subsequent to Reporting Date 23

Future Developments 24

Directors’ Interests 24

D & O Insurance 25

Remuneration Report 26

Proceeding on Behalf of the Company 30

Auditors Independence Declaration 30

Non-audit Services 30

4 Financial Statements 31

Income statement 31

Balance sheet 32

Statement of changes in equity 33

Cash flow statement 34

Notes to financial statements 35

5 Directors ’ Declaration 69

6 Independent Audit Report 70

7 Auditors’ Independence Declaration 72

8 ASX Additional Information 73


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1 CORPORATE DIRECTORY

Directors Bankers

Gary Cochrane (Chairman) ANZ Banking Group Ltd

Larry Cook 68 Pitt Street, Sydney NSW 2000

Colin Knox

Julie Garland McLellan Westpac Banking Corporation

274 Kent Street, Sydney, NSW 2000

Company Secretary Stock Exchange

Eryl Baron

Australia Stock Exchange Ltd

Code: BNT, BNTO, BNTGA

Auditor Share Registry

Gould Ralph Assurance Computershare Investor Services Pty Ltd

L42, Suncorp Place, 259 George Street GPO Box D182, Perth 6840

Sydney, NSW 2000

Registered Office Solicitors

Suite 206, Level 2, 65 York Street Watson Mangioni

Sydney 2000 L13, 50 Carrington Street

Phone: 02 8297 1444 Sydney, NSW 2000

Fax: 02 8297 1414


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2 CHAIRMAN’S REPORT

Operations

Bounty is currently operating at the German Creek complex, as a contractor for Anglo Coal (Capcoal

Management) Pty Ltd. Bounty currently operates two projects:

Aquila Mine

Bounty provides a full mining service, and is paid on a $ per metre basis for coal produced, using its own

machinery and workforce. This service is based on a 7 day operation. In March 08 the parties entered

into new contract arrangements which extend the current operation to March 09. The customer has the

option to extend the contract based on Bounty’s on-going successful performance.

The continuous haulage system was recently introduced at Aquila to replace traditional haulage systems.

The company has invested in this new technology to enhance productivity to benefit Bounty and its

customer. This also frees up equipment to further expand operations.

The company continues to maintain high standards of safety and production. During September 2008, it

achieved the milestone of two years without a lost time incident at the Aquila mine. This is a remarkable

achievement and the Aquila team have received our thanks and congratulations.

Bundoora

Bounty provides a partial mining service in the form of Gate Road Development. This is a performance

based operation, using its own workforce, and the client’s machinery. The operation has recently ramped

up to a 7 day operation, thus providing additional contribution to total company performance.

Bounty is establishing an operational base in Central Queensland to better service existing and potential

future operations in the Bowen Basin. This includes workshop facilities and administrative offices. Bounty

continues to maintain its corporate office in Sydney.

Bounty continues to focus on improving its profitability and cashflow. Some indicators of the company’s

financial performance are shown below.


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Industry Outlook

The Australian export coal industry has experienced unprecedented strength over the last 12 months with

very high prices from January 2008 for thermal coal and April 2008 for coking coal. Benchmark prices for

coking coal in particular are now in excess of US$300 per tonne compared to less than US$96 per tonne

for Japanese Fiscal Year (“JFY”) 2007. This price will extend until the end of March 2009. A view by many

industry forecasters that coal prices will remain stronger for longer has prompted coal companies to

review their current production rates and their potential to produce incremental tonnes as port and rail

allocations expand. Some forecasters are predicting higher prices for coking coal for JFY 2009 and prices

as high as US$240 per FOB tonne for JFY 2010. Queensland will be the main beneficiary of demand for

high priced coking coal and Bounty is well placed with its current operations in the Central Bowen Basin

to take advantage of the strength of this market.

The strong demand from China and also India is also underpinned by continued supply disruptions in

many of Australia’s competitors including Indonesia, Vietnam and South Africa. China, which has been a

major competitor for both thermal and coking coal to the Asian markets, became a net importer of coal. In

early 2008 imports started to exceed exports and recent supply disruptions could see the net import

position grow to at least 10 million tonnes by the end of the year. Forecasts for 2009 indicate that it will

move further toward a net importing position of at least 20 million tonnes. Vietnam, which is a key


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exporter to China with up to 30 million tonnes of anthracite in 2007, is also moving to be an eventual net

coal importer as it struggles to match surging domestic demand with its limited overall coal production

capacity. This will have the effect of reducing supply to China while it continues to grow its import

demand. Australia will be well placed to pick up this additional tonnage.

Queensland coking coal production continues to grow steadily. Port and rail expansions now underway at

Dalrymple Bay, Gladstone and Abbott Point will underpin a strong market for coal services companies as

the majors continue to grow their production base over the next three years and maximise recovery of

remnant mining areas and thin seam reserves within existing mining leases.

Recapitalisation and Restructuring

The company has implemented a number of changes at board and general management levels. These

changes improve the company’s corporate governance by introducing more independent non executive

directors and improve the technical and mining ability of the senior management group in moving the

company forward and planning for growth.

During the financial year, Bounty completed an issue of $6.1million in Convertible Notes and a share

placement of $1.3m, both through Martin Place Securities. The company is now funded to undertake its

planned activities.

Company Outlook

Bounty is moving forward in a strong position to capitalise on the growth opportunities that are presented

by the buoyant coal market. A key aim is to expand on the benefits from the introduction of the continuous

haulage system and changes to company management and operating efficiency to improve our overall

productivity, safety and corporate governance.

Bounty has now received enquiries from multi-national mining companies in Queensland and NSW for

additional full mining contract services to assist in providing incremental production from their existing

mining bases. Five projects have been identified that could range in size from 500,000 tonnes per annum

to 1,000,000 tonnes per annum and extend for up to three years. Any one of these projects would have a

significant positive impact on the growth of the company and total annual revenues. Bounty is actively

participating in public tenders for full service contracting as well as talking directly with potential clients

requiring Bounty’s specific thin-seam capabilities.


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Bounty, now with improving cash flow, has the desire to expand on its current mining fleet so as to place

the company in a better competitive position to secure future mining contracts. The time lines from

contract approval to contract commencement are often shorter than the lead times to acquire new

equipment. The availability of equipment can dictate the success of being awarded a new contract and

therefore, where prudent, the board is now implementing planned acquisition of additional equipment,

including a re-manufactured continuous miner, to better place the company for these new opportunities.

Funding at present will be partly from cash flow, or through suitable arrangements with Bounty’s key

financiers.

Another key resource will be achieved by securing experienced mining staff. The company has

established strong processes both locally and internationally for sourcing very experienced and highly

skilled mining staff and is now also implementing a strategy to build its workforce significantly over the

next 12 months.

In summary the company is now planning for growth in a measured and strategic process to balance

current cash flow commitments while building a strong base for future expansion. We are also

implementing new corporate governance and risk management systems to better support this planned

growth and provide more accountability to our share holders.

Gary Cochrane

Chairman

26 September 2008


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3 DIRECTORS’ REPORT

The Directors of Bounty Industries Limited (“Bounty” or the “Parent Entity”) and its controlled entities (the

“Bounty Group”), present their report together with the financial statements for the year ended 30 June

2008.

Information about the Directors & Company Secretary

The names, experience, independence and qualifications of the directors of Bounty during the financial

year and up to the date of this report are as set out below.

Gary Cochrane Chairman

Bachelor of Engineering(Civil), Grad Dip Mining (Ballarat), MBA (Deakin), GAICD

Gary has 25 years experience in the mining, engineering and construction industry in Australia, China,

Indonesia and New Guinea. He has had senior management and technical roles at operating mines in

Australia and New Guinea.

Gary has spent the last 10 years as an international mining and management consultant to the coal and

hard rock mining industries. More recently he has built his own international consulting business which

provides a high level advisory service for mergers and acquisitions, due diligence, valuations and mine

audits.

Gary is a regular commentator on coal industry strategic supply and demand positions and coal

investment opportunities and is a regular speaker at international coal conferences in Australia, China,

and Indonesia. His clients include banking, investment and mining companies from Australia, India,

Japan, Korea, China, UK and Indonesia.

Gary was a founding investor and former director of Millennium Coal which is now a 3 mtpa operating

coal mine in Queensland. He is currently developing several new junior exploration companies with

assets in China, and Australia. Gary is currently completing a Graduate Diploma in Finance.

Gary joined the board on 27 November 2007, and became Chairman on 28 February 2008.


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Larry Cook Director

BSc, (Mine Engineering)

Larry has a degree in Mine Engineering obtained through a Bachelor of Science from West Virginia

University. Larry has 35 years of experience in coal mining, particularly in thin seam coal, and has

operated in all phases of mining from the coal face to executive management. Notably, Larry has

extensive and valuable knowledge with continuous haulage systems

Dr Colin Knox Non-Executive director

PhD, MPA (Harvard), MA (Hons), BSc, BA, Dip Public Finance

Colin Knox has a number of degrees in science, economics and management including a Master of

Public Policy from Harvard University. Colin has held chief executive roles with a number of large New

Zealand based organisations including the Auckland Regional City Council and has been a director of

both listed and unlisted companies. Colin lectures in Management at a senior tertiary level throughout

New Zealand and recently completed writing his PhD. Colin was Chairman of Bounty from March 2005,

and Executive Chairman from February 2007 to February 2008.

Julie Garland McLellan FAICD Non-executive director

Julie is a professional company director with a background in the resources and energy sectors. Julie has

a degree in Civil Engineering, an MBA and a grad dip in applied finance as well as a diploma and an

advanced diploma in corporate governance. She has served the boards of listed and unlisted companies.

As an executive she has been: Managing Director for Gamesa Energy Australia (a multinational energy

company), General Manager Energy and Natural Resources for KPMG and Corporate Planner for BHP.

Julie has been a NSW AICD councillor for three years. Julie joined the board of Bounty on 4th April 2008.

Eryl Baron Chief Financial Officer & Company Secretary

BA Politics & Econ (London)

Eryl Baron commenced her accounting career as a Chartered Accountant with BDO Binder Hamlyn in

London. In 1990 Eryl moved to Sydney and worked in accounting and business in financial control

positions. She has served as chief financial officer and company secretary of listed and unlisted

companies. Eryl is in the final stage of the “Graduate Diploma in Applied Corporate Governance” run by

the Chartered Secretaries Australia, in the first step to becoming a member of the Institute of Chartered

Secretaries.


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The following directors left the board of Bounty during the year:

Mark Gray LLB

Mark Gray was chief executive of the company from March 2005, and later became a non-executive

director. Mark resigned from the board on 27 November 2007.

Gary Williams 1st Class Mine Managers Certificate, Dip Mining, MBA

Gary Williams had been both an executive and non-executive director of the company. Gary resigned

from the board on 29 February 2008.

Amon Mahon BSc, (Mine Engineering)

Amon was an executive director of the company. Amon resigned from the board on 4 April 2008.

Corporate Governance Statement

The Board of Directors is responsible for the corporate governance of Bounty Industries Limited (“the

Company”), and is committed to achieving the highest standards of corporate governance. Given the size

and nature of the Company, the Board considers that the Company complies as far as possible with the

spirit and intentions of the ASX Corporate Governance Council’s Principles and Recommendations. The

Company’s policies are summarized below.

References to Principles and Recommendations are references to the ASX Corporate Governance

Council’s revised Corporate Governance Principles and Recommendations as released in August 2007.

PRINCIPLE 1: Lay solid foundations for management a nd oversight

Role of the Board and Management

The primary role of the Board of Directors of Bounty is the protection and enhancement of shareholder

wealth. To fulfil this role, the Board is responsible for:

• setting strategic direction; and

• appointing the chief executive officer or equivalent; and

• ensuring that the management team is appropriately qualified and experienced to discharge its

responsibilities; and

• establishing goals for management, and monitoring the achievement of these goals; and


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• ensuring appropriate resources are available to senior executives; and

• approving and monitoring financial and other reporting.

The Board meets monthly and holds additional meetings when necessary to address specific matters that

arise. In between meetings, decisions may be adopted by way of circular resolution.

Day to day management of the Bounty Group affairs and the implementation of the corporate strategy

and policy initiatives are formally delegated by the Board to the executive director and management of

Bounty.

The role of the Chairman

The Chairman is responsible for:

• leading the Board of Directors;

• ensuring directors are properly briefed in all matters relevant to their role and responsibilities;

• facilitating Board discussions;

• managing the Board’s relationship with shareholders and with the Company’s senior executives.

The role of the Chief Executive Officer (“CEO”)

The CEO is responsible for:

• implementing Company strategies and policies;

• achieving the Company objectives

• managing the business of the Company; and

• reviewing the performance of senior executives.

Dr Colin Knox undertook the functions of CEO in his role as Executive Chairman until his resignation as

Chairman on 28 February 08. Since that date, and until a permanent CEO is appointed, executive director

Larry Cook has undertaken the functions of CEO.

Independent Professional Advice and Access to Compa ny Information Each director has the right of access to all relevant Bounty Group information and Bounty’s executives.

Directors may seek independent professional advice, subject to agreement by the chairman, at Bounty’s

expense. A copy of advice received by any director is to be made available to all other members of the

Board.


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PRINCIPLE 2: Structure the Board to add value

Board Meetings

The Board meets monthly and holds additional meetings when necessary to address specific matters that

arise. In between meetings, decisions may be adopted by way of circular resolution. The Board

frequently holds meetings at the operations site. This adds to the directors’ understanding of the

operations. The Chief Financial Officer attends scheduled Board meetings and presents the monthly

financial report, and answers questions from the directors on financial performance, accounting, risk

management and treasury.

Board Meetings Director Held Attended

Gary Cochrane 11 11 Larry Cook 17 17 Colin Knox 17 17 Julie Garland McLellan 4 4 Mark Gray 5 5 Gary Williams 11 11 Amon Mahon 13 11

Composition of the Board

The Board of Bounty currently comprises three non-executive directors, two of whom are considered

independent under the definition set out below, and one executive director. This is a departure from

Recommendation 2.1 of the ASX Principles and Recommendations, which recommends that a majority of

the board should be independent directors.

The procedures for election and retirement of directors are governed by the Constitution of Bounty. The

composition of the Board is determined using the following principles:

� The Board shall comprise a mixture of executive and non-executive directors, and where possible

a majority of non executive directors;

� Non executive directors should have no management role within Bounty, but particular skills may

be utilized from time to time in an advisory capacity;

� The Board shall comprise directors with a range of experience encompassing the current and

proposed activities of Bounty;

� The nomination committee is a committee of the board.


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� Where a vacancy exists, the nomination committee will select an appropriate candidate through

consultation with external parties and consideration of the needs of shareholders and the Bounty

Group.

� Such appointments will be referred to shareholders for re-election at the next annual general

meeting; and

� All directors are subject to re-election by shareholders at least every three years.

The Directors in office at the date of this statement are:

� Gary Cochrane, independent non-executive director

� Larry Cook, executive director

� Julie Garland McLellan, Independent non-executive director

� Colin Knox, non-executive director

Independent Directors

The Board has accepted the following definition of an independent director. An independent director is a

director who is not a member of management, is a non executive director and who:

� Is not a substantial shareholder (under the meaning of Corporations Act 2001) of Bounty or an

officer of, or otherwise associated, directly or indirectly, with a substantial shareholder of Bounty;

� Has not within the last three years been employed in an executive capacity by Bounty or another

group member, or been a director after ceasing to hold any such employment;

� Is not a principal of a professional adviser to Bounty or another group member;

� Is not a significant consultant, supplier or customer of Bounty or another group member, or an

officer of or otherwise associated, directly or indirectly, with a significant consultant, supplier or

customer;

� Has no significant contractual relationship with Bounty or another group member other than as a

director of Bounty; and

� Is free from any interest and any business or other relationship which could, or could reasonably

be perceived to, materially interfere with the director’s ability to act in the best interests of Bounty.

Colin Knox is therefore not considered to be independent as he was employed as executive chairman

during the period February 2007 to February 2008.


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Evaluation and Review of Board Performance

Prior to the restructuring of the board during Financial Year 2008, there was a process of continual review

and evaluation of all directors, including executive directors.

As a result of the board restructuring and the introduction of independent directors, the Chairman is in the

process of introducing formal new procedures for evaluating the performance of the board, its committees

and directors.

PRINCIPLE 3: Promote ethical and responsible decisi on-making

Code of Conduct

The Board supports the highest standards of corporate governance. Bounty has established a Code of

Conduct which requires its members and the staff of Bounty to act with integrity and objectivity in relation

to:

� Compliance with the law;

� Record keeping;

� Confidentiality;

� Professional conduct;

� Dealing with suppliers, advisers and regulators; and

� Dealing with the community and employees.

Directors and senior executives are subject to further requirements as follows:

Conflict of Interest

In accordance with the Corporations Act 2001 and Bounty’s constitution directors must keep the Board

advised, on an ongoing basis, of any interest that could potentially conflict with those of Bounty. Where

the Board believes that a significant conflict exists, the director concerned will not receive the relevant

Board papers and will not be present at the meeting whilst the item is considered.

Dealings in Bounty Shares

The Constitution permits directors to acquire shares in Bounty. Company policy prohibits directors,

officers and employees from dealing in Bounty shares whilst in possession of price sensitive information

or during certain periods of activity. In accordance with the provisions of the Corporations Act 2001 and

the Listing Rules of ASX, ASX is advised of any transactions conducted by directors in shares in Bounty.


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Directors’ and officer’ duties

� To act honestly, in good faith and in the best interest of the Company as a whole at all times;

� To use due care and diligence in fulfilling the functions of office and exercising the powers

attached to that office;

� To use the powers of the office for a proper purpose;

� To recognise that primary responsibility is to the Company’s members as a whole, but where

appropriate to have regard for the interests of all stakeholders;

� To refrain from making improper use of information acquired as a director;

� Not to allow personal interest, or the interest of any associated person, to conflict with the

interests of the Company;

� To be independent in judgement and actions and to take all reasonable steps to be satisfied as to

the soundness of all decisions taken by the Board;

� To maintain the confidentiality of information received in the course of the exercise of duties

� Not to engage in conduct likely to bring discredit upon the Company;

� To comply, at all times, with the spirit as well as the letter of the law and with the principles of this

Code.

PRINCIPLE 4: Safeguard integrity in financial repo rting

Audit Committee

Until March 2008, the audit committee was a committee of the whole board. This was a departure from

Recommendation 4.2 in relation to committee membership. The departure was due to the composition of

the board during that period.

Attendance of audit committee meetings held during this period was as follows:

Audit Committee meetings Director Held Attended

Gary Cochrane 1 1 Larry Cook 2 2 Colin Knox 2 2 Julie Garland McLellan n/a n/a Mark Gray 1 1 Gary Williams 2 2 Amon Mahon 2 2


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From April 08, following a restructure of the board, and with a majority of non-executive directors on the

board, a separate audit committee was re-formed.

The committee revised its charter, which clearly sets out the committee’s role and responsibilities,

composition, structure and membership requirements, and the procedures for inviting non-committee

members to attend meetings. The committee has a schedule of meetings for the year which aligns with

scheduled financial reporting requirements, but may also meet form time to time as required.

Committee membership is based on the following principles:

• The Committee consists of three members, all of them non-executive

• The majority of members are independent

• The Chair of the committee is independent, and is not the Chair of the board

• All members are financially literate, and have an understanding of the industry in which the

Company operates.

Membership of the committee is as follows:

Julie Garland McLellan (Chair) (Independent non-executive director)

Gary Cochrane (Independent non-executive director, chairman of main board)

Colin Knox (Non-executive director)

This committee has met twice subsequent to 30 June 2008.

Financial Reporting

Monthly actual results are reported and reviewed by the Board. The Bounty Group reports its financial

performance to shareholders half-yearly, and reports a statement of cashflows quarterly, via the ASX

platform.

Certification of Financial Reports

The executive fulfilling the chief executive function, and the chief financial officer, certify to the board, for

the purpose of S295A of the Corporations Act, each reporting period that:

• The Company’s financial records have been maintained in accordance with s286 of the

Corporations Act 2001 (“the Act”);


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• the Company’s financial reports comply with accounting standards as required by s296 of the Act,

and give a true and fair view of the Company’s financial position;

• the certification is based on a sound system of risk management and internal controls; and

• those risk management systems and internal controls are operating efficiently and effectively.

External Auditors

The auditors of Bounty have access to the Board of Directors at all times. The nomination of external

auditors is the annual responsibility of the Board.

The Board maintains an effective internal control framework to safeguard the Bounty Group's assets,

maintain proper accounting records and ensure the reliability of financial information compiled by Bounty.

Audit Independence

The lead auditor’s independence declaration under Section 307C of the Corporations Act 2001 is set out

on page 72 and forms part of the Directors’ Report for the year ended 30 June 2008.

PRINCIPLE 5: Make timely and balanced disclosure

The Board aims to ensure that shareholders are at all times fully informed in accordance with the spirit

and letter of the Stock Exchange’s continuous disclosure requirements.

Continuous Disclosure

In accordance with ASX Listing Rules 3.1, the Company has adopted the following practices and

procedures for ensuring continuous disclosure to the market.

• All information, including significant event and milestones, that can materially impact the share

price of the Company must be brought to the attention of a Director or the Company Secretary.

• At the time of induction, all employees and key consultants are informed of the Company’s

policies and practices and obligations for continuous disclosure.

• Once a matter is identified as requiring announcement to ASX, the Company Secretary or

delegated party prepares the announcement for the consideration of the full Board.

• Once approved by the Board, or if the Board cannot be assembled in time, the Chairman, the

announcement is authorised for release to the market.


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• All announcements are posted on the company’s web-site at www.bounty.com.au. Time is of

the essence in respect to these matters.

PRINCIPLE 6: Respect the rights of security holders

The Board of Bounty respects the rights of security holders by:

• communicating effectively with them

• giving them ready access to balanced and understandable information about the company and

corporate proposals

• making it easy for them to participate in general meetings.

Information is communicated to shareholders as follows:

� Publicly released documents and general information about the Company are made available on the

Company’s internet web site at www.bounty.com.au. The web site is reviewed regularly to ensure

information is up to date and accurate.

� The annual report is distributed to those shareholders requesting a hard copy. The report is available

electronically on the company’s web-site. The Board ensures that the annual report includes relevant

information about the operations of the consolidated entity during the year, changes in the state of affairs

of the consolidated entity and details of future developments, in addition to the other disclosures required

by the Corporations Act 2001.

• The half-year report contains summarised financial information and a review of the operations of the

consolidated entity during the period. The half-year financial report is prepared in accordance with the

requirements of applicable Accounting Standards and the Corporations Act 2001. It is reviewed by the

company’s auditors, and is lodged with the Australian Securities and Investments Commission and the

ASX. The financial report is sent to any shareholder who requests it.

• Proposed major changes in the consolidated entity which may impact on share ownership rights are

submitted to a vote of shareholders.

The Board encourages full participation of shareholders at the Annual General Meeting, and any other

General Meetings held, to ensure a high level of accountability and identification with the consolidated

entity’s strategy and goals. The company’s auditors are invited to attend each AGM, and shareholders

are invited to ask questions of the auditors and directors. Important issues are presented to the

shareholders as single resolutions.


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The Shareholders are requested to vote on the appointment and aggregate remuneration of Directors, the

granting of options and shares to Directors and changes to the Constitution. Copies of the Constitution

are available to any shareholder who requests it.

PRINCIPLE 7: Recognise and manage risk

Risk Management and internal control system

The Board has established a sound system of risk oversight and management and internal control. The

Board monitors areas of operational and financial risk, and considers strategies for appropriate risk

management arrangements. Where necessary, the Board will draw on the expertise of appropriate

external consultants to assist in dealing with or mitigating areas of risk which are identified.

The Board is responsible for ensuring there are adequate policies in relation to risk management,

compliance and internal control systems. The Company’s policies are designed to ensure strategic,

operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently

managed and monitored to enable achievement of the consolidated entity’s business objectives. Control

procedures cover management accounting, financial reporting, project appraisal, environment, IT

security, compliance and other risk management issues.

The Company's main areas of risk include:

• economic risks;

• market conditions

• mining success

• contract performance

• general operating risks

• commodity price and exchange rate risks;

• environmental risks;

• human resources;

• political and economic climates in areas of operation.

• ongoing capital requirements


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Identification and Management of Risk

The Board’s collective experience will enable accurate identification of the principal risks which may affect

the Company’s business. Management of these risks is discussed by the Board at each Board meeting

and strategic planning meetings. In addition, key operational risks and their management, are recurring

items for deliberation at Board meetings.

Compliance with customers’ systems

When mining our customers’ sites, Bounty complies with the customer’s risk management and safety

systems and procedures.

Certification of Financial Reports

The executive fulfilling the chief executive function, and the chief financial officer, certify to the board, for

the purpose of S295A of the Corporations Act each reporting period that:

• The Company’s financial records have been maintained in accordance with s286 of the

Corporations Act 2001 (“the Act”)

• the Company’s financial reports comply with accounting standards as required by s296 of the Act,

and give a true and fair view of the Company’s financial position; and

• the certification is based on a sound system of risk management and internal controls; and

• those risk management systems and internal controls are operating efficiently and effectively

PRINCIPLE 8: Remunerate fairly and responsibly

Remuneration Committee

The Board has established a remuneration committee. This is a committee of the board, however

directors with a material personal interest will be excluded from participation at the appropriate time. The

Company therefore departs from Recommendation 8.1. The Chair of the committee is Gary Cochrane,

Independent non-executive director.

The remuneration of an executive director will be decided by the Remuneration Committee, without the

affected executive director participating in that decision making process Any equity based remuneration

for executive and non executive directors will only be made with the prior approval of shareholders in

general meeting.


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The maximum remuneration of non-executive Directors is the subject of Shareholder resolution in

accordance with the Company’s Constitution, and the Corporations Act as applicable. The apportionment

of non-executive Director remuneration within that maximum will be made by the Board having regard to

the inputs and value of the Company of the respective contributions by each non-executive Director. Total

fees for non-executive Directors are currently set at $250,000 per annum.

When setting fees and other compensation for non-executive Directors, the Board will seek independent

advice and apply Australian and International benchmarks. The Board may award additional

remuneration to non-executive Directors called upon to perform extra services or make special exertions

on behalf of the Company. There is no scheme to provide retirement benefits, other than statutory

superannuation, to non-executive directors.

In general, non-executive directors are not invited to participate in equity based remuneration schemes.

Shareholder approval was obtained in 2005 for director Colin Knox to participate in the Executive Option

Plan. No options have been, or will be, issued to Dr Knox under this plan. Shareholder approval will be

sought for a new equity based plan for executives in November 2008, and non-executives will not be

included in this plan. Further detail on executive remuneration is provided in the Remuneration Report on

pages 26 to 39.

Summary:

Bounty complies with the ASX Corporate Governance Principles and Recommendations except as

follows:

Recommendation Explanation of Departure

2.1 A majority of the board should be

independent.

While Bounty’s board has three non-executive directors

from a total of four directors, only two members of the

board are considered independent.

2.4 The nomination committee should

consist of a majority of independent

directors.

Bounty’s nomination committee is a committee of the

board. Only two members of the board are considered

independent. The board considers that the function is

best performed using the skills of the entire board.

8.1 The remuneration committee

should consist of a majority of

independent directors.

Bounty’s remuneration committee is a committee of the

board. Only two members of the board are considered

independent. The board considers that the function is

best performed using the skills of the entire board.


__________________________________________________________________________________________ 2008 Annual Report

22

Principal Activities

The principal activities of the Bounty Group are contract coal mining, equipment manufacturing,

maintenance and support. There were no significant changes in the nature of the consolidated group’s

principal activities during the financial year.

Operating & Financial Review

Bounty made an EBITDA profit of $1.8m in FY08, compared with an EBITDA loss of $6.1m loss in FY07,

a $7.9m improvement. Reconciliation from operational EBITDA to the group’s total loss for the financial

year is as follows:

Reconciliation of net loss to EBITDA Economic Entity Variance FY 08 30/06/2008 30/06/2007 to FY07

$ $ $

net loss:

(1,304,602)

(8,687,714)

7,383,112

add back: interest payable

1,225,475 620,896

604,579

less: interest receivable

(107,526)

(45,053)

(62,473)

add back: depreciation and amortisation

2,025,176

2,040,380

(15,204)

EBITDA

1,838,523

(6,071,491)

7,910,014

Contract Mining

The majority of the group’s revenue (91.6%) was earned at the Aquila operation at German Creek (2007:

90.6%). While production remained steady, the rate per metre increased from March 2008 following the

increase in global coal prices. Costs were reduced through several initiatives throughout the year, thus

increasing profitability at Aquila. Towards the end of FY2008, and going forward to FY2009, a higher

percentage of revenue will be earned from the Bundoora operation.

Several internal production and safety records were established at Aquila during the year, including the

highest number of metres produced in a shift (153m) the highest number of metres produced in a week

(1,215m) and a period of zero lost time injuries extended to 670 days at 30 June 08, and continuing.

These production records were established using traditional haulage equipment. The first continuous

haulage system was not taken underground until August 2008, therefore FY08 does not include the effect

of continuous haulage on production.

Bounty undertook labour hire work at Moranbah site, and continues work at Bundoora site.


__________________________________________________________________________________________ 2008 Annual Report

23

Investment in Equipment

During the year, the group focussed on a planned refurbishment schedule in relation to existing assets,

and an investment of a further $2m to complete the first continuous haulage system.

Shareholder Returns

Earnings per share is (0.87) cents (2007: (6.71) cents). The diluted earnings per share is anti-dilutive, and

has not been calculated. The directors have not declared a dividend for the year.

Review of Financial Condition

Liquidity & Funding

The Bounty Group is reliant on cash from current earnings and banking facilities to support the

operations. From time to time Bounty may raise equity capital to fund specific mining projects. There are

no restrictions on the ability to transfer funds from one part of the Group to meet the obligations of other

parts of the Group.

Economic Dependency

For financial year 2008, the revenue of the company was derived from operations at the Aquila and

Bundoora collieries at German Creek mine-site. This will continue in financial year 2009, and Bounty also

anticipates revenue from new opportunities.

Events Subsequent to Reporting Date

In July 2008, Bounty issued a further 1,000,000 shares and 500,000 options to director Larry Cook for

cash consideration, following approval from shareholders at a General Meeting held on 19 June 2008. It

also issued 30,000 options to consulting firm Quay Capital as capital raising fees.

The continuous haulage system is now underground, and is expected to improve on previous productivity.

The unit is being interfaced with other equipment underground, and is already contributing to production.

Since the reporting date, other than the items out above, there has not arisen any item, transaction or

event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the

operations of the Bounty Group, the results of those operations or the state of affairs of the Bounty group.


__________________________________________________________________________________________ 2008 Annual Report

24

Future Developments

Bounty is presently pursing opportunities in both Australia and New Zealand. In New South Wales and

Queensland, Bounty is actively participating in public tenders for full service contracting as well as talking

directly with potential clients requiring Bounty’s specific thin-seam capabilities.

Directors’ Interests: Equity Holdings and Transacti ons

The movement during the reporting period in the number of securities of Bounty Industries Limited

held, directly, indirectly or beneficially, by each director and specified executive, including their

personally related entities is as follows:

Current directors Previous directors

Gary

Cochrane Larry Cook Colin Knox

Julie Garland McLellan Mark Gray

Gary Williams

Amon Mahon Total

(a) (a) (a) 1/07/2007 - 10,000,000 4,354,267 - 3,312,737 4,489,959 10,000,000 32,156,963 Ordinary Shares Movements 1,000,000 - 500,000 - (3,312,737) (4,489,959) (10,000,000) (16,302,696) 30/06/2008 1,000,000 10,000,000 4,854,267 - - - - 15,854,267 1/07/2007 - - - - - - - - Listed 20c Options, expiring Dec 2011 Movements 500,000 - 250,000 - - - - 750,000 30/06/2008 500,000 - 250,000 - - - - 750,000

1/07/2007 - - 5,641,397 -

4,810,245

6,719,408 - 17,171,050 35c / 40c / 45c Vendor Options expiring March 08 Expiry - - (5,641,397) - (4,810,245) (6,719,408) - (17,171,050) 30/06/2008 - - - - - - - - 1/07/2007 - 15,000,000 - - - - 15,000,000 30,000,000 40c options, expiring March 08 Expiry - (15,000,000) - - - - (15,000,000) (30,000,000) 30/06/2008 - - - - - - - - 1/07/2007 - 12,500 12,500 - 62,500 12,500 12,500 112,500 Listed 16c Convertible Notes Movements - 12,500 - (62,500) (12,500) (12,500) (75,000) 30/06/2008 - 12,500 25,000 - - - - 37,500

(a) Mr Gray, Mr Williams and Mr Mahon held their securities until after they left the board of Bounty.


__________________________________________________________________________________________ 2008 Annual Report

25

Loans and other transactions

During the financial year, the group repaid Investment Notes of $149,762 to The Korihi Trust. The

Notes had been issued in 2004 and had earned interest at 15%. Director Dr Colin Knox is a trustee

of The Korihi Trust.

D & O Insurance: Indemnification of Officers or Aud itor

Bounty has agreed to indemnify and keep indemnified the directors and company secretary against

all liabilities incurred as directors and officers of the Bounty Group and all legal expenses incurred as

directors and officers of the Bounty Group.

The indemnity only applies to the extent and in the amount that the directors and officers are not

indemnified under any other indemnity, including an indemnity contained in any insurance policy

taken out by the Bounty Group, under the general law or otherwise. The indemnity does not extend

to any liability:

� To Bounty or a related body corporate of Bounty; or

� Arising out of conduct of the directors and officers involving a lack of good faith.

No indemnities have been given or insurance premiums paid, during the year, for any person who is

or has been an auditor of the company.

Insurance of Officers

Since the end of the previous financial year Bounty has paid insurance premiums of $31,867 in

respect of directors and officers liability and corporate reimbursement, for directors and officers of

Bounty. The insurance premiums relate to:

� Any loss for which the directors and officers may not be legally indemnified by Bounty arising

out of any claim, by reason of any wrongful act committed by them in their capacity as a

director or officer, first made against them jointly or severally during the period of insurance;

and

� Indemnifying Bounty against any payment which it has made and was legally permitted to

make arising out of any claim, by reason of any wrongful act, committed by any director or

officer in their capacity as a director or officer, first made against the director or officer during

the period of insurance.

The insurance policy outlined above does not allocate the premium paid to each individual officer of

Bounty.


__________________________________________________________________________________________ 2008 Annual Report

26

Remuneration Report (Audited)

Remuneration Committee

The Board has established a remuneration committee. This is a committee of the board, however

directors with a material personal interest will be excluded from participation at the appropriate time.

The Chair of the committee is Gary Cochrane, Independent non-executive director. The board, and the

committee, has a majority of non-executive directors.

Financial Year 2008

Company executives receive a base salary which is based on factors such as experience skills and

responsibility, and the package includes superannuation of 9%.

In relation to the Financial year 2008 one executive also received a performance bonus.

Under the company’s current Senior Executive Option Plan, 3.1m options were issued to executives and

directors in November 2005. No options have been issued subsequently. 2.6m options have expired on

termination of the employment of the relevant executives. The 0.5m options remaining are unlikely to be

exercised due to the current share price, and in any case expire in November 2008. No further options

will be issued under this plan.

Under a general employee share plan, 132,500 shares were issued to employees at the Queensland

operations in connection with achievement of health and safety related benchmarks.

Financial Year 2009 and going forward

Remuneration packages will continue to include both fixed and at-risk components, which includes

performance bonus and options. The key performance indicators will be revised to better reflect individual

performance. The performance of executives will be based variously against criteria agreed bi-annually

with each executive, which will include, where relevant, production, health and safety indicators in relation

to specific projects, and shareholder value in relation to the group as a whole.

A new Senior Executive Option plan will be put to shareholders for approval at the Nov 08 AGM.

Executives will be subject to the company’s share trading policy when transacting in shares.

The Remuneration Committee may exercise its discretion in relation to approving incentives, bonuses

and executive options.


__________________________________________________________________________________________ 2008 Annual Report

27

The remuneration policy is designed to attract the highest calibre of executives and reward them for

performance that results in both short and long-term growth in shareholder wealth.

In order to improve governance, the Company is moving to employ a senior number of executives, in

contrast to utilising directors as executives. This will be reflected in increasing numbers of task-specific

senior executives.

Non-executive directors

Non executive directors who draw a salary receive a superannuation contribution of 9% on salary and do

not receive any other retirement benefits.

The board policy is to remunerate non-executive directors at market rates for comparable companies for

time, commitment and responsibilities. The remuneration committee determines payments to the non-

executive directors and reviews their remuneration annually, based on market practice, duties and

accountability. Independent external advice may be sought when required. The maximum aggregate

amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the

Annual General Meeting, and is currently $250,000 per annum in total.

Non-executive directors may be paid additional amounts as fees or as the non-executive director may

determine where a non-executive director performs extra services or makes any special exertions, which

in the opinion of the board are outside the scope of the ordinary duties of a non-executive director.

Fees for non-executive directors are not linked to the performance of the economic entity. In future these

directors will not participate in the equity based remuneration designed for executives. However, to align

directors’ interests with shareholder interests, the directors are encouraged to acquire shares in the

company. Directors are subject to the company’s share trading policy when transacting in shares.


__________________________________________________________________________________________ 2008 Annual Report

28

Details of Remuneration for Year Ended 30 June 2008

The remuneration for each director and each of the specified executives of the consolidated entity

receiving the highest remuneration during the year was as follows:

Short term benefits

Post-

employment

benefits

Share

based

payments

Cash,

Salaries &

commissions

Non-

cash

benefit

Super-

annuation Options Total

$ $ $ $ $

Directors

Mr Colin

Knox

Executive

Chairman

01/07/07 -

26/02/08

104,402

-

-

-

104,402

Mr Colin

Knox

Non-executive

Director

27/02/08 -

30/06/08

16,667

-

-

-

16,667

Mr Mark

Gray

Executive

Director

01/07/07 -

21/11/07

87,084

75,000

3,375

3,808

169,267

Mr Gary

Williams

Executive

Director

01/07/07 -

04/02/08

142,704

-

12,420

4,063

159,187

Mr Gary

Williams

Non-executive

Director

05/02/08 -

29/02/08

15,087

-

-

-

15,087

Mr Larry

Cook

Executive

Director

01/07/07 -

30/06/08

317,238

31,000

18,498

225,979

592,715

Mr Amon

Mahon

Executive

Director

01/07/07 -

04/04/08

206,025

23,250

13,703

225,979

468,957

Mr Gary

Cochrane

Non-executive

Director

27/11/07 -

30/06/08

108,400

-

4,950

-

113,350

Ms Julie

Garland

McLellan

Non-executive

Director

04/04/08 -

30/06/08

15,000

-

1,350

-

16,350

Total

Directors

1,012,607

129,250

54,296

459,829

1,655,982


__________________________________________________________________________________________ 2008 Annual Report

29

Details of Remuneration for Year Ended 30 June 2008 (continued)

Short term benefits

Post-

employment

benefits

Share

based

payments

Specified

Executives

Cash,

Salaries &

commissions

Non-

cash

benefit

Super-

annuation Options Total

$ $ $ $ $

Mr Amon

Mahon

Operations

Manager -

Aquila

05/04/08 -

30/06/08

51,066

-

3,396

-

54,462

Mrs Eryl

Baron

Chief Financial

Officer

01/07/07 -

30/06/08

202,869

-

18,258

6,094

227,221

Total

Specified

Executives

253,935

-

21,654

6,094

281,683

Employment Contracts of Directors and Senior Executives

Mr Larry Cook and Mr Amon Mahon are employed under fixed four-year contracts which expire in May

2009.

Prior to 30 June 2008, Mr Mahon claimed a bonus based on a provision in his employment contract.

Under this provision, a bonus of up to $500,000 is payable subject to the board of Bounty being satisfied

that there are sufficient non-allocated funds available within the company to make the payment. The

board was not satisfied at that time, and is not satisfied at the date of this report, that sufficient non-

allocated funds are available. Legal advice has been received that this remains a contingent liability

Therefore no provision has been made for this bonus in FY08.

Mr Cook’s employment contract contains the same provision. At the date of this report, no claim has been

received from Mr Cook in relation to this provision.

Other executives and management are permanent employees of the Bounty Industries Limited Group,

with no fixed terms in their contract.


__________________________________________________________________________________________ 2008 Annual Report

30

Proceedings on Behalf of the Company

No person has applied for leave of a Court to bring proceedings on behalf of the company or to intervene

in any proceeding to which the company is party for the purpose of taking responsibility on behalf of the

company for all or any part of those proceedings.

Auditor’s Independence Declaration

The lead auditor’s independence declaration under Section 307C of the Corporations Act 2001 is set out

on page 73 and forms part of the Directors’ Report for the year ended 30 June 2008.

Non-audit Services

During the financial year, Gould Ralph Assurance, Bounty’s auditor, performed no non-audit services.

_____________________________

Gary Cochrane

Chairman

Dated at Sydney this 26th day of September 2008


__________________________________________________________________________________________ 2008 Annual Report

31

4 FINANCIAL STATEMENTS Income Statement for the Year ended 30 June 2008 Consolidated Group Parent Entity

Note 2008 2007 2008 2007

$ $ $ $

Revenue from rendering of services 2 24,141,047 20,336,890 1,688,385 506,720

Other revenues 107,526 45,053 104,038 38,912

Total revenue 24,248,573 20,381,943 1,792,423 545,632

Raw materials and consumables used (5,018,806) (4,833,412) - - Employee expenses 4 (15,258,613) (15,381,660) (1,812,383) (2,125,699) Depreciation and amortisation expenses 3 (2,025,176) (2,040,380) (50,268) (141)

Write down to recoverable amount 3 - (3,033,257) - -

Provision for impairment - ( 62,934) - (62,934)

Legal and professional costs (946,476) (1,750,750) (562,343) (1,086,506)

Occupancy expenses (145,041) (217,091) (94,924) (149,750)

Finance costs 3 (1,317,456) (1,700,292) (872,745) (987,001) Write back provision for vendor share issue - 1,200,000 - 1,200,000

Other expenses (841,607) (1,249,881) (450,356) (692,268)

Loss before related income tax expense 3

(1,304,602)

(8,687,714) (2,050,596) (3,358,667)

Income tax expense 6 - - - -

Net loss attributable to members of the parent entity

(1,304,602)

(8,687,714) (2,050,596) (3,358,667)

Cents Cents

Basic earnings per share 7 (0.87c) (6.71c)

The income statement should be read in conjunction with the notes of the financial statements set out on pages 35 to 68.


__________________________________________________________________________________________ 2008 Annual Report

32

Balance sheet at 30 June 2008 Consolidated Group Parent Entity

Notes 2008 2007 2008 2007

$ $ $ $ Current assets

Cash and cash equivalents 9 1,245,732 1,268,743 697,173 961,500

Trade and other receivables 10 3,370,800 3,464,358 37,874 25,545

Inventories 11 347,615 238,761 - - Other current assets 12 336,977 454,314 227,035 221,738

Total current assets 5,301,124 5,426,176 962,082 1,208,783 Non-current assets

Trade and other receivables 10 - - 5,721,208 2,536,513

Financial assets 13 - - 7,019,665 7,019,665

Property, plant & equipment 14 14,388,562 12,610,646 108,080 111,448

Deferred tax assets 17 578,840 572,374 578,840 572,374

Total non-current assets 14,967,402 13,183,020 13,427,793 10,239,999

Total assets 20,268,526 18,609,196 14,389,875 11,448,782

Current liabilities

Trade and other payables 15 4,899,311 6,628,145 815,762 2,022,199

Financial liabilities 16 1,130,185 2,833,379 47,465 87,515 Short-term provisions 18 841,379 447,352 26,243 62,854

Total current liabilities 6,870,875 9,908,876 889,470 2,172,568 Non-current liabilities

Financial liabilities 16 7,847,906 3,753,637 6,354,172 1,987,050 Total non-current liabilities 7,847,906 3,753,637 6,354,172 1,987,050

Total liabilities 14,718,781 13,662,513 7,243,642 4,159,617 Net assets 5,549,745 4,946,683 7,146,233 7,289,165

Equity

Issued capital 19 19,528,507 18,089,262 19,528,507 18,089,262

Accumulated losses 20 (17,145,511) (15,840,909) (15,549,023) (13,498,427) Reserves 21 3,166,749 2,698,330 3,166,749 2,698,330

Total equity 5,549,745 4,946,683 7,146,233 7,289,165

Net tangible assets per share 2.90c 3.08c 3.84c 4.73c The balance sheet should be read in conjunction with the notes of the financial statements set out on pages 35 to 68.


__________________________________________________________________________________________ 2008 Annual Report

33

Statement of changes in equity for the year ended 3 0 June 2008 Ordinary

Share Capital

Options Reserve

Accumulated Losses

Total

$ $ $ $ Consolidated Group Balance at 1 July 2006 11,158,939 1,986,828 (7,153,195) 5,992,572 Shares and options issued during the year

7,496,250

711,502

-

8,207,752

Cost of capital raising (565,927) - - (565,927) Loss attributable to members of parent entity

-

-

(8,687,714)

(8,687,714)

Balance at 30 June 2007

18,089,262

2,698,330

(15,840,909)

4,946,683

Balance at 1 July 2007

18,089,262

2,698,330

(15,840,909)

4,946,683

Shares and options issued during the year

1,800,490

468,419

-

2,268,909


-

-

(1,304,602)

(1,304,602)


19,528,507

3,166,749

(17,145,511)

5,549,745

Parent Entity Balance at 1 July 2006 11,158,939 1,986,828 (10,139,760) 3,006,007 Shares and options issued during the year

7,496,250

711,502

-

8,207,752


-

-

(3,358,667)

(3,358,667)


18,089,262

2,698,330

(13,498,427)

7,289,165

Balance at 1 July 2007 18,089,262 2,698,330 (13,498,427) 7,289,165 Shares and options issued during the year

1,800,490

468,419

-

2,268,909


-

-

(2,050,596)

(2,050,596)


19,528,507

3,166,749

(15,549,023)

7,146,233

The statement of changes inequity should be read in conjunction with the notes of the financial statements set out on pages 35 to 68.


__________________________________________________________________________________________ 2008 Annual Report

34

Cash flow statement for the year ended 30 June 2008 Notes Consolidated Group Parent Company 2008 2007 2008 2007 $ $ $ $ Cash flows from operating activities

Receipts from customers 27,437,367 22,205,625

-

- Payments to suppliers and employees (25,528,341) (24,907,173) (3,824,899) (4,145,839) 1,909,026 (2,701,548) (3,824,899) (4,145,839) Interest received 107,532 55,425 105,521 34,813 Finance costs (678,656) (152,843) (463,724) (15,188) Income tax paid (7,006) - - - Net cash flows provided by / (used in) operating activities 26 1,330,896 (2,798,966) (4,183,102) (4,126,214) Cash flows from investing activities Payments for plant and equipment (3,499,450) (3,985,959) (137,554) (346,006) Proceeds from sale of equipment 12,000 1,250,000 - - Cash movement re: liquidation of subsidiary - (24,000) - - Net cash flow s used in investing activities (3,487,450) (2,759,959) (137,554) (346,006) Cash flows from financing activities Proceeds from issue of shares 1,390,400 7,296,250 1,390,400 7,296,250 Costs related to issue of shares (111,479) (464,821) (111,479) (464,821)

Proceeds from borrowings 3,446,949 1,987,050 3,446,950 1,987,050

Loans from / (to) other entities - 47,000 (648,569) (3,384,759) Repayment of borrowings (2,592,327) (2,542,063) (20,974) - Net cash flows provided by financing activities 2,133,543 6,323,416 4,056,328 5,433,720 Net (decrease) / increase in cash held (23,011) 764,491 (264,327) 961,500 Cash at beginning of financial year 1,268,743 504,252 961,500 - Cash at end of financial year 9 1,245,732 1,268,743 697,173 961,500 The cash flow statement should be read in conjunction with the notes of the financial statements set out on pages 35 to 68.

Bounty Industries Limited___________________________________________________________________________

__________________________________________________________________________________________ 2008 Annual Report

35

Notes to Financial Statements

1 Statement of Significant Accounting Policies

This financial report covers the consolidated group of Bounty Industries Limited and controlled

entities, and Bounty Industries Limited as an individual parent entity, incorporated and domiciled in

Australia.

(a) Basis of preparation

This financial report is a general purpose financial report, prepared in accordance with the Australian

Accounting Standards, including Australian Accounting Interpretations, other authoritative

pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would

result in a financial report containing relevant and reliable information about transactions, events and

conditions to which they apply. Compliance with Australian Accounting Standards ensures that the

financial statements and notes also comply with International Financial Reporting Standards. Material

accounting policies adopted in the preparation of this financial report are presented below. They have

been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs,

modified, where applicable, by the measurement at fair value of selected non-current assets, financial

assets and financial liabilities.

Going concern

As at 30 June 2008, the Group's current liabilities exceeded current assets by $1,569,751 (2007:

$4,482,700). Notwithstanding the deficiency of net current assets at balance date, the Directors have

prepared the financial statements on a going concern basis.

The Directors are satisfied that its operations are now profitable and sufficiently cashflow positive to

meet this deficiency in current assets, and that the introduction of continuous haulage at Aquila will

provide a step change improvement in productivity from this contract.

The Directors are therefore satisfied that Bounty will be able to continue as a going concern. Should

the Directors not achieve the matters set out above, there is significant uncertainty whether the

consolidated entity will be able to continue as a going concern.


__________________________________________________________________________________________ 2008 Annual Report

36

If part or the whole of the economic entity is not able to continue as a going concern, it may be

required to realise assets and extinguish liabilities other than in the normal course of business and at

amounts different to those stated in the financial report.

The financial report does not include any adjustments relating to the recoverability or classification of

recorded assets amounts, or to the amounts or classification of liabilities, which might be necessary

should the consolidated entity not be able to continue as a going concern.

(b) Principles of consolidation

A controlled entity is any entity of which Bounty has the power to control the financial and operating

policies so as to obtain benefits from its activities. 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 are consistent with those policies applied by the parent entity.

(c) Revenue recognition

Revenue from rendering of services

Revenue from contracts is recognised when the service is rendered to the customer.

Interest income

Interest income is recognised as it accrues, taking into account the effective yield on the

financial asset.

(d) Segment reporting

A segment is a distinguishable component of the consolidated entity that is engaged either in

providing product or services (business segment), which is subject to risks and rewards that are

different from those of other segments.

(e) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the

amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these

circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of

an item of the expense.


__________________________________________________________________________________________ 2008 Annual Report

37

Receivables and payables are shown inclusive of GST.

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or

liability in the statement of financial position.

Cash flows are included in the statements of cash flows on a gross basis. The GST components of

cashflows arising from investing and financing activities which are recoverable from, or payable to,

the ATO are classified as operating cashflows.

(f) Foreign currency transactions

Foreign currency transactions are translated into Australian currency at the rates of exchange

prevailing at the dates of the transactions. Amounts receivable and payable in foreign currencies at

balance date are translated at the rates of exchange ruling on that date.

Exchange differences relating to amounts payable and receivable in foreign currencies are brought to

account as exchange gains or losses in the statement of financial performance in the financial year in

which the exchange rates change.

(g) Borrowing costs

Borrowing costs

include interest, amortisation of discounts or premiums relating to borrowings, amortisation of

ancillary costs incurred in connection with arrangement of borrowings and lease finance charges.

Borrowing costs are expensed as incurred.

(h) Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and

deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income

calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date.

Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to

(recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability

balances during the year as well unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of


__________________________________________________________________________________________ 2008 Annual Report

38

the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the

tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax

assets also result where amounts have been fully expensed but future tax deductions are available.

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 assets and liabilities are calculated at the tax rates that are expected to apply to the

period when the asset is realised or the liability is settled, based on tax rates enacted or substantively

enacted at reporting date. Their measurement also reflects the manner in which management expects

to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the

extent that it is probable that future taxable profit will be available against which the benefits of the

deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and

joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of

the temporary difference can be controlled and it is not probable that the reversal will occur in the

foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is

intended that net settlement or simultaneous realisation and settlement of the respective asset and

liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-

off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation

authority on either the same taxable entity or different taxable entities where it is intended that net

settlement or simultaneous realisation and settlement of the respective asset and liability will occur in

future periods in which significant amounts of deferred tax assets or liabilities are expected to be

recovered or settled.

Tax Consolidation

Bounty Industries Limited and its wholly-owned Australian subsidiaries have formed an income tax

consolidated group under tax consolidation legislation. Each entity in the group recognises its own

current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone

taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from

unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity.

The group notified the Australian Tax Office that it had formed an income tax consolidated group to

apply from March 2005. The tax consolidated group has entered a tax funding arrangement whereby

each company in the group contributes to the income tax payable by the group in proportion to their


__________________________________________________________________________________________ 2008 Annual Report

39

contribution to the group’s taxable income. Differences between the amounts of net tax assets and

liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are

recognised as either a contribution by, or distribution to the head entity.

(i) Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing the net profit attributable to members of the

parent entity for the reporting period, after excluding any costs of servicing equity (other than ordinary

shares and converting preference shares classified as ordinary shares for EPS calculation purposes),

by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

(j) Inventories

Tools and critical spare parts used within the business are carried at the lower of cost and net

realisable value.

(k) Plant and equipment

Each class of plant and equipment is carried at cost or fair value less, where applicable, any

accumulated depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in

excess of the recoverable amount from these assets. The recoverable amount is assessed on the

basis of the expected net cash flows that will be received from the assets’ employment and

subsequent disposal. The expected net cash flows have been discounted to their present values in

determining recoverable amounts.

The cost of fixed assets constructed and refurbished within the economic entity includes the cost of

materials, direct labour and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognised 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 and amortisation

The depreciable amount of all fixed assets 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.

Depreciation and amortisation rates and methods are reviewed annually for appropriateness.


__________________________________________________________________________________________ 2008 Annual Report

40

The expected useful lives for each class of assets are as follows;

Plant and equipment 4 - 10 years

Office furniture 3.33 – 8.88 years

Motor vehicles 5.33 years

Computer equipment 2.66 years

Site development over the life of the relevant contract

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 estimate 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.

(l) Intangibles

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.

(m) Development Expenditure

Development expenditure incurred in constructing the mains infrastructure for a project is carried

forward to the extent that it is expected to generate revenue over the life of the project. When

production commences, the accumulated costs carried forward are amortised over the life of the

project.

A regular review is undertaken of each project to determine the appropriateness of continuing to carry

forward costs in relation to that project.

(n) Leased assets

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

asset, but not the legal ownership that is transferred to entities in the economic entity, are classified

as finance leases.


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41

Finance leases

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

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

Operating leases

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

lessor, are charged as expenses in the periods in which they are incurred.

(o) Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances, term deposits and deposits at call.

(p) Impairment of Assets

At each reporting date, the group reviews the carrying values of its assets to determine whether there

is any indication that those assets have been impaired. If such an indication exists, the recoverable

amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is

compared to the asset’s carrying value. Any excess of the asset’s carrying vale over its recoverable

amount is expensed to the income statement.

To aid the Directors in their review, the group obtained an external valuation of the assets, and

performed net present value calculations.

Where it is not possible to estimate the recoverable amount of an individual asset, the group

estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(q) Share Capital

Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any

related income tax benefit.

(r) Trade and other receivables

Trade and other receivables are stated at cost less impairment losses (see accounting policy (n))


__________________________________________________________________________________________ 2008 Annual Report

42

(s) Trade and other payables

Trade and other payables are stated at cost. Trade payables are non-interest bearing and are

normally settled on 30 – 45 day terms.

(t) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.

Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any

difference between cost and redemption value being recognised in the income statement over the

period of the borrowings on an effective interest basis.

Bank loans are recognised at their principal amount, subject to set-off arrangements. Interest

expense is accrued at the contracted rate and included in note 15 Trade and Other Payables.

(u) Expenses

Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight-line

basis over the term of the lease. Lease incentives are recognised in the income statement as an

integral part of the total lease expense and spread over the lease term.

Finance lease payments

Minimum lease payments are apportioned between the finance charge and the reduction of the

outstanding liability. The finance charge is allocated to each period during the lease term so as to

produce a constant periodic rate of interest on the remaining balance of the liability.

Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest

method. Borrowing costs are expensed as incurred and included in net financing costs.

Interest income is recognised in the income statement as it accrues, using the effective interest

method. The interest expense component of finance lease payments is recognised in the income

statement using the effective interest method.

(v) Provisions

A provision is recognised when a legal or constructive obligation exists as a result of a past event, for

which it is probable that an outflow of economic benefits will result and that outflow can be reliably

measured.


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43

(w) Employee entitlements

Wages, salaries, annual leave and sick leave

The provisions for employee entitlements to wages, salaries, annual leave and sick leave represent

present obligations resulting from employees’ services provided up to the balance date. Employee

benefits are expected to be settled within one year, and have been measured at the amounts

expected to be paid when the liability is settled, plus related on-costs.

Superannuation plan

The Company contributes to defined contribution superannuation plans. Contributions are charged

against income as they are made. The Company and its controlled entities have no legal or

constructive obligation to fund any deficit.

(x) Comparatives

The comparative results for the parent company shown are those of Bounty Industries Limited. Where

necessary, comparative information has been reclassified and repositioned for consistency with

current year disclosures.

(y) Critical accounting estimates

The Directors evaluate estimates 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 estimates – 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. Value-in-use calculations performed in

assessing recoverable amounts incorporate a number of key estimates.

The financial report was authorised for issue on 26th September 2008 by the board of directors.


__________________________________________________________________________________________ 2008 Annual Report

44

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $

2 Revenue

Revenue from ordinary activities

Rendering of services revenue from operating activities

24,141,047

20,336,890

1,688,385

506,720

Other revenues: From operating activities:

- Interest

107,526

45,054

104,038

38,912

Total Revenue

24,248,573

20,381,943

1,792,423

545,632

3 Loss for the year

Net gains and expenses

Loss from ordinary activities before income tax expense has been arrived at after charging the following items:

Expenses

Depreciation and Amortisation Depreciation – Plant & equipment (1,726,787) (1,849,744) - - Depreciation – Office Furniture (62,063) (41,444) (50,268) (141) Depreciation – Motor Vehicles (236,326) (149,192) - - (2,025,176) (2,040,380) (50,268) (141) Other Charges Against Assets

Write down of investment to fair value - (329,222) - -

Provision for impairment of infrastructure - (2,704,035) - -

Total write down to recoverable amount - (3,033,257) - -

Impairment of receivables - (62,934) - (62,934) Employee entitlements (394,027) (176,124) (36,610) (26,452)

Rental expense on operating leases (1,642,088) (1,618,059) (98,107) (141,856)

Borrowing costs

(91,982) (1,079,396) (5,496) (894,271)

Interest and finance charges

(1,225,474) (620,896) (867,249) (92,730)

(1,317,456) (1,700,292) (872,745) (987,001)


__________________________________________________________________________________________ 2008 Annual Report

45

Consolidated Group

Parent Entity 2008 2007 2008 2007 $ $ $ $

4 Personnel Expenses Wages and salaries 8,138,062 7,187,282 1,130,171 1,434,903

Other associated personnel expenses 1,356,421 726,409 46,979 37,700

Contributions to defined contribution superannuation funds 575,370 373,343 44,602 66,907

Increase in liability for annual leave 394,027 176,124 36,610 26,452

Equity settled transactions 554,021 559,737 554,021 559,737

Contractors’ expenses 4,240,712 6,358,765 - -

15,258,613 15,381,660 1,812,383 2,125,699

5 Remuneration of auditors

During the period, the auditor of the parent entity and its related practices earned the following remuneration

Audit or review of financial reports of the entity or any entity in the economic entity 71,392 70,309 71,392 70,309

Other services 3,458 5,121 3,458 5,121

Total audit and other assurance services 74,850 75,430 74,850 75,430


__________________________________________________________________________________________ 2008 Annual Report

46

6 Income tax Consolidated Group Parent Entity 2008 2007 2008 2007 Note $ $ $ $

(a) The components of tax expense comprise:

Current tax 17 - - - -

Deferred tax 17 - - - - Recoupment of prior year tax losses - - - -

- - - -

(b) The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows:

Prima facie tax benefit on loss from ordinary activities before income tax @ 30% (2007: 30%) (391,381) (2,606,314) (615,178) (1,007,600)

Add: tax effect of:

- non-allowable items 164,544 500,610 46,336 360,000 - Share options expensed during the year 166,206 213,451 166,205 213,451

(60,631) (1,892,254) (402,637) (434,149)

Less: tax effect of:

- R&D allowances (4,183) - - -

- Allowable items (124,889) (116,754) - - Add: Deferred tax assets not previously brought to account 189,703 2,009,008 402,637 434,149 Income tax credit attributable to entity - - - - Applicable weighted average effective tax rates are as follows; n/a n/a n/a n/a


__________________________________________________________________________________________ 2008 Annual Report

47

7 Earnings per Share 2008 2007 $ $

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

(a) Net Loss (1,304,602) (8,687,714)

Net profit attributable to outside equity interest - -

Earnings used in calculating basic eps (1,304,602) (8,687,714)

(b) Weighted average number of ordinary shares used in calculating basic eps

149,735,119

129,420,995

Weighted average number of options outstanding

n/a n/a

Weighted average number of ordinary shares outstanding during the year used in calculating dilutive eps

n/a n/a

8 Segment Reporting

Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities

include items directly attributable to a segment as well as those that can be allocated on a reasonable

basis. Unallocated items mainly comprise corporate expenses.

Business Segments

The consolidated entity comprises the following main business segments, based on the consolidated

entity’s management reporting system:

• Contract Mining

• Mechanical Engineering

• Development of mining assets

Geographical Segments

The consolidated entity’s Contract Mining and Mechanical Engineering segments operate wholly

within Australia.


__________________________________________________________________________________________ 2008 Annual Report

48

8 Segment Report

(Continued)

Business Segments

Contract Mining

Equipment Leasing and refurbishing

Corporate Office

Inter-segment

elimination / unallocated Consolidated

Year to 30 June 2008 $ $ $ $ $

Sales to external customers 24,141,047

- -

- 24,141,047

Intersegment sales

- 2,051,279 1,688,385 (3,739,664)

-

Total sales revenue 24,141,047 2,051,279 1,688,385 (3,739,664) 24,141,047

Other Revenue (excluding interest)

-

-

-

-

Total segment revenue 24,141,047 2,051,279 1,688,385 (3,739,664) 24,141,047

Segment result 766,085 41,820 (1,287,385) (61,909) (541,390)

Finance costs (763,212)

Profit from ordinary activities before income tax expense (1,304,602)

Income tax expense

-

Net loss (1,304,602)

Depreciation and amortisation expense 1,036,753 938,155 50,268 - 2,025,176

Non-cash expenses other than depreciation and amortisation

-

- 468,419 - 468,419

Segment assets 6,487,205 13,716,833 1,649,005 (1,631,529) 20,221,514

Unallocated corporate assets 47,012

Consolidated total assets 6,487,205 13,716,833 1,649,005 (1,631,529) 20,268,526

Segment liabilities 7,860,455 15,971,702 7,243,644 (16,408,490) 14,667,311

Unallocated liabilities 51,470

Consolidated total liabilities 7,860,455 15,971,702 7,243,644 (16,408,490) 14,718,781

Acquisitions of non-current assets 170,238 4,078,017 46,900

- 4,295,155


__________________________________________________________________________________________ 2008 Annual Report

49

8

Segment Reporting

(continued)

Business Segments Year to 30 June 2007

Contract Mining

Equipment Leasing

Corporate Office

Inter-segment elimination / unallocated Consolidated

$ $ $ $ $

Sales to external customers 20,306,890

- 30,000

30,000 20,366,890

Intersegment sales

-

1,551,415

476,720 (2,028,135)

-

Total sales revenue 20,306,890 1,551,415 506,720 (1,998,135) 20,366,890

Other Revenue (excluding interest)

-

-

-

- -

Total segment revenue 20,306,890 1,551,415 506,720 (1,998,135) 20,366,890

Segment result (3,582,546) (1,110,453) (3,302,518)

(306,826) (8,302,343)

Finance costs (56,149)

Write off to recoverable amount (329,222)

Loss from ordinary activities before income tax expense (8,687,714)

Income tax expense

-

Net loss (8,687,714)

Depreciation and amortisation expense

879,056

1,120,497

40,827

-

2,040,380

Non-cash expenses other than depreciation and amortisation

2,704,035

-

711,502

-

3,415,537

Segment assets 8,366,760 14,204,956 1,071,232 (5,079,717) 18,563,231

Unallocated corporate assets 45,965

Consolidated total assets 8,366,760 14,204,956 1,071,232 (5,079,717) 18,609,196

Segment liabilities 7,712,109 14,935,550 1,657,232 (10,857,733) 13,447,158

Unallocated liabilities 215,355

Consolidated total liabilities 7,712,109 14,935,550 1,657,232 (10,857,733) 13,662,513

Acquisitions of non-current assets 2,195,376 9,535,731 111,589

40,108 11,882,804


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50

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 9 Cash and cash equivalents

Cash at bank and on hand 702,884 966,890 154,325 681,500 Deposits at call 527,848 5,885 527,848 - Term deposit 15,000 295,968 15,000 280,000 1,245,732 1,268,743 697,173 961,500 The deposits at call bear interest at a rate of 6.90% (2007: 6.15%)

The term deposits bear interest at a rate of 6.50 % (2007: 6.20%)

10 Trade and other receivables Current Trade debtors (a) 3,433,909 3,422,116 53,409 62,934

Less: provision for impairment ( 228,600)

(236,663) (62,934) (62,934) 3,205,309 3,185,453 (9,525) -

Goods and Services tax receivable 158,271 98,140 47,399 25,545

Other receivables 7,220 180,765 - - 3,370,800 3,464,358 37,874 25,545 Non-Current Loans to controlled entities - - 15,003,291 11,818,596

Provision against loan to controlled entities - - (9,282,083) (9,282,083)

- - 5,721,208 2,536,513

a) Trade debtors are non-interest bearing and generally on 14 day terms.

11 Inventories

Spares and tools inventory at cost 347,615 238,761 - - 347,615 238,761 - -


__________________________________________________________________________________________ 2008 Annual Report

51

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 12 Other current assets

Prepayments 187,202 370,674 152,780 166,198 Deposits 149,775 83,640 74,255 55,540 336,977 454,314 227,035 221,738

13 Financial assets

Non-current Investments in controlled entities - - 7,019,665 7,019,665

Investment in other entity at cost - 329,222 - -

Less: provision for impairment in value - (329,222) - -

- - 7,019,665 7,019,665


14 Property, plant and equipment

Plant and equipment (at cost) 8,264,197 7,622,163 - - Less: accumulated depreciation (4,055,368) (3,095,587) - - 4,208,829 4,526,576 - -

Office furniture and fittings (at cost) 192,556 44,306 158,489 2,461

Less: accumulated depreciation (82,795) (23,842) (50,409) (141) 109,761 20,464 108,080 2,320

Motor Vehicles (at cost) 61,127 32,867 - - Less: accumulated amortisation (30,209) (22,729) - - 30,918 10,138 - -

Motor Vehicles acquired under lease (at cost) 1,342,858 1,127,844 - -

Less: accumulated amortisation (345,022) (180,951) - - 997,836 946,893 - - Capital works in progress (at cost) 9,041,218 7,106,575 - 109,128

14,388,562 12,610,646 108,080 111,448


__________________________________________________________________________________________ 2008 Annual Report

52

14 Property, plant and equipment (Continued)

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning

and end of the current financial period are set out below.

Consolidated

Group Parent Entity

Plant and equipment $ $ Carrying amount at 1 July 2007 4,526,576 - Additions 487,836 - Transfers from capital works in progress 921,204 - Depreciation expense (note 3) (1,726,787) - Carrying amount at 30 June 08 4,208,829 -

Office Furniture & Fittings $ $ Carrying amount at 1 July 2007 20,464 2,320 Additions 46,900 46,900 Transfers from capital works in progress 109,128 109,128 Disposals (4,668) - Depreciation expense (note 3) (62,063) (50,268)

Carrying amount at 30 June 08 109,761 108,080

Motor Vehicles (Owned and

leased) $ $ Carrying amount at 1 July 2007 957,031 - Additions 471,956 - Disposals (163,907) - Depreciation expense (note 3) (236,326) - Carrying amount at 30 June 08 1,028,754 -

Capital Works in Progress $ $ Carrying amount at 1 July 2007 7,106,575 109,128 Additions 2,964,975 - Transfer to Plant & Equipment (921,204) -

Transfer to Office Furniture & Fittings (109,128) (109,128)

Carrying amount at 30 June 08 9,041,218 -


__________________________________________________________________________________________ 2008 Annual Report

53

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 15 Trade and other payables Current Trade creditors (a) 2,374,173 3,931,550 262,948 590,153 Other creditors and accruals 2,525,138 2,696,595 552,814 1,432,046 4,899,311 6,628,145 815,762 2,022,199 (a) Standard terms for trade accounts payable is settlement within 30 - 45 days

16 Financial liabilities Current Secured lease liabilities (note 22) ( a) 396,371 370,243 - - Other Loans ( b) 544,915 1,624,475 47,465 87,515 Investment Note ( c) 188,899 838,661 - - 1,130,185 2,833,379 47,465 87,515 Non Current Secured lease liabilities (note 22) ( a) 498,518 544,369 - - Other Loans ( b) 995,216 1,222,218 - - Convertible Notes ( d) 6,354,172 1,987,050 6,354,172 1,987,050 7,847,906 3,753,637 6,354,172 1,987,050 (a) The entity’s lease liabilities are secured by the leased assets with a carrying value of

$997,836 (2007: $946,893)

(b) Included in Other Loans is an amount of $1,492,666 (2007: $2,732,763), secured by a Fixed

and Floating Charge over all of the assets and undertakings of subsidiary Bounty Equipment

Leasing Pty Ltd, and over the assets and undertakings of Bounty Industries Limited. A

guarantee and indemnity has been given by Bounty Industries Limited and InCoal Pty Ltd.

(c) The Investment Note is secured by a second charge over the assets of Bounty Equipment

Leasing Pty Ltd.

(d) The non-secured Convertible Notes were issued at 16c, and are convertible on 30 June

2010, bearing interest of 10% per annum. Notes not converted on 30 June 2010 will be

redeemed at 18c per note.


__________________________________________________________________________________________ 2008 Annual Report

54

17 Tax Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ (a) Assets Non-current: Deferred tax asset comprises: Provisions and accruals 578,840 572,374 578,840 572,374 (b) Reconciliations (i) Gross Movement: The overall movement in the deferred tax account is as follows: Opening balance (572,374) (1,009,510) (572,374) 910,746

Charge to the income statement - - - -

Transfer of Deferred tax assets (6,466) 437,136

(6,466)

(1,483,120) Closing balance (578,840) (572,374) (578,840) (572,374) (ii) Deferred Tax Asset

The movement in deferred tax assets for each temporary difference during the year is as follows:

Opening balance 572,374 1,009,511 572,374 (473,611)

Tax allowance relating to motor

vehicles (56,465) (22,620) (56,465) (22,620)

Tax allowance relating to research

and development 169,415 344,745 169,415 344,745

Provisions and accruals (106,484) (759,262) (106,484) 723,860

Closing balance 578,840 572,374 578,840 572,374


__________________________________________________________________________________________ 2008 Annual Report

55

17 Tax (Continued)

Tax Consolidation Legislation

Bounty Industries Limited has implemented the tax consolidation legislation from 31 March 2005

and has reset the tax values of the assets of its subsidiaries on entering the tax consolidation

regime. The tax sharing agreement has been finalised.

Tax Losses

The directors estimate that the deferred tax asset at 30 June 2008 in respect of tax losses not

brought to account is $190k (2007: $2million). The benefit of tax losses will only be obtained if:

I. The consolidated entity derives future assessable income of a nature and of an amount

sufficient to enable the benefit from the deductions for the losses to be realised;

II. The consolidated entity continues to comply with the conditions for deductibility imposed

by the tax legislation; and

III. No changes in tax legislation adversely affect the consolidated entity in realising the

benefit from the deductions for the losses.

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 18 Short-term provisions

Employee benefits (note 27)

Opening balance

447,352 234,826 62,854 -

Movement during the year 394,027 212,526 (36,611) 62,854

Closing balance 841,379 447,352 26,243 62,854


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56

19 Issued capital

(A) Movements in ordinary share capital of the comp any during the period were as follows:

Details Date Note No. of Shares Amount

$ Share Capital Opening Balance 01-Jul-07 142,138,320 18,089,262

Ordinary shares issued to Discovery Capital Limited 30-Sep-07 (a) 1,333,005 100,000

Shares issued under employee share scheme 30-Oct-07 132,500 10,600

Shares issued to previous director on termination 28-Nov 07 (b) 937,500 75,000

Shares issued to raise capital (inc 1.5m issued to directors)

Feb 08 to Jun 08 (c) 23,173,333 1,390,400

Shares issued in settlement of capital raising fees 23 Jun 08 3,453,689 224,490

Costs relating to share issues (361,245) Closing Balance 30-Jun-08 171,168,347 19,528,507

(a) The shares were issued in final settlement of an agreement with Discovery Capital Limited to

release Bounty from an obligation under a Put and Call option, arising form the merger

between Ausmet Resources Limited and the Bounty group in 2005.

(b) Shares were issued to previous director Mark Gray on his resignation in November 2007, in

settlement of his termination payment.

(c) The shares were issued for 6c, with 1 free 20c listed options for each 2 shares acquired. A

further 500,000 shares and 250,000 options were issued under this capital raising in July

2008.

Terms and Conditions of Ordinary Shares

Ordinary shares have the right to receive dividends as declared and, in the event of a winding up of

the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the

number of shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy,

at a meeting of the Company.


__________________________________________________________________________________________ 2008 Annual Report

57

19 Issued capital (continued)

Movements in ordinary share capital of the company during FY2007:

Details Date Note No. of Shares Amount

$ Share Capital Opening Balance 01-Jul-06 100,456,000 11,158,939 Ordinary shares issued during the period 10-Jul-06 15,000,000 3,000,000 Ordinary shares issued during the period 11-Dec-06 25,150,000 4,275,500 Ordinary shares issued on conversion of option 31-Dec-06 103,750 20,750 Ordinary shares issued to Discovery Capital Limited 29-Mar-07 (a) 1,428,570 200,000

Costs relating to share issues (565,927) Closing Balance 30-Jun-07 142,138,320 18,089,262

(B) Movement in listed options of the company durin g the period are as follows: Details Date Note No. of Exercise Options Price Opening Balance 01-Jul-07 - Listing of previously unlisted options 03-Jul-07 12,575,000 20c Issue of options following capital raising (including 750,000 issued to directors) 23-Jun-08 ( c) 11,586,667 20c Issue of options in settlement of capital raising fees 23-Jun-08 695,200 20c

Closing Balance 30-Jun-08 (d) 24,856,867 (C) Movement in unlisted options of the company dur ing the period are as follows: Details Date Note No. of Exercise Options Price Opening Balance 01-Jul-07 73,316,176 various Issued in settlement of capital raising fees Various 5,588,235 various Listing of options (see listed options above) 03-Jul-07 (d) (12,575,000) 20c

Expiry of options on expiry date 31-Mar 08 (55,000,000) various Expiry of employee options on termination of employment (2,300,001) 35c / 40c / 45c

Closing Balance 30-Jun-08 9,029,410


__________________________________________________________________________________________ 2008 Annual Report

58

19 Issued capital (continued) Summary of number of unlisted options on issue at 3 0 June 2008

Expiry (g) (f) (e) (e) (e) Total

8 Nov 2008 - - 166,666 166,666 166,667 499,999

30 Jun 2009 - 2,000,000 - - - 2,000,000

28 Feb 2010 2,941,176 - - - - 2,941,176

30 Jun 2010 3,588,235 3,588,235

Total 6,529,411 2,000,000 166,666 166,666 166,667 9,029,410

(e) staff options issued in 2005

(f) issued in settlement of capital raising fees

Specific terms and conditions of Options:

Exercise Price Expiry Date Transferability (d) Listed Options 20c 31-Dec-11 n/a: listed (e) Unlisted Executive Options 35 / 40 / 45c 8-Nov-08 No

(f) Unlisted options 17c 28-Feb-10, 30-June-

10 (g) Unlisted options 20c 30-Jun-09 No

Common terms and conditions:

• Each Option may be exercised by notice in writing to the Company at any time before its date of expiry. Any notice of exercise of an Option received by the Company will be deemed to be a notice of the exercise of that Option as at the date of receipt.

• There are no participating rights or entitlements inherent in the Options and Option holders will not be entitled to participate in new issues of securities offered to shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements as to any such issue, the record date will be at least 10 business days after the issue is announced so as to give Option holders the opportunity to exercise their Options before the date for determining entitlements to participate in any issue.

• Shares allocated pursuant to the exercise of Options will be allotted following receipt of all the relevant documents and payments and will rank equally with all other Shares on issue.

• In the event of a reconstruction (including consolidation, subdivision, reduction or return) of the issued capital of the Company, all rights of the Option holder shall be reconstructed in accordance with the ASX Listing Rules.

• If, from time to time, before the expiry of the Options the Company makes a pro rata issue of Shares to shareholders for no consideration, the number of Shares over which an Option is exercisable will be increased by the number of Shares which the Option holder would have received if the Option had been exercised before the date for calculating entitlements to the pro rata issue.


__________________________________________________________________________________________ 2008 Annual Report

59

19 Issued capital (continued)

(D) Capital Management

Management controls the capital of the group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the group can fund its operations and continue as a going concern.

The group’s debt and capital includes ordinary share capital, redeemable preference shares, convertible preference shares and financial liabilities, supported by financial assets.

There are no externally imposed capital requirements.

Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. The gearing ratio’s for the year ended 30 June 2008 and 30 June 2007 as follows:

Consolidated Group Parent Entity 2008 2007 2008 2007 Note $ $ $ $ Total borrowings 16 8,978,090 6,587,016 6,401,637 2,074,565 Less cash and cash equivalents 9

(1,245,732)

(1,268,743)

(697,173) (961,500)

Net debt 7,732,358 5,318,273 5,704,464 1,113,064

Total equity 5,549,745 4,946,683 7,146,233 7,289,165

Total capital 13,282,103 10,264,956 12,850,697 8,402,230

Gearing ratio 58% 52% 44% 13%

20 Accumulated Losses

Accumulated losses at the beginning of the financial year (15,840,909) (7,153,195) (13,498,427) (10,139,760)

Net loss attributable to members of Bounty Industries Limited (1,304,602) (8,687,714) (2,050,596) (3,358,667)

Accumulated losses at the end of the financial year (17,145,511) (15,840,909) (15,549,023) (13,498,427)


__________________________________________________________________________________________ 2008 Annual Report

60

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 21 Options Reserve

Opening Balance 2,698,330 1,986,828 2,698,330 1,986,828

Expense during the year 468,419 711,502 468,419 711,502

Closing Balance 3,166,749 2,698,330 3,166,749 2,698,303

The option reserve records items recognised as expenses on valuation of share options.

Unlisted options

No. of options at 1 July 2007

Expired during the

year

No. of options at 30 June

2008 Exercise

price Volatility

Risk free rate

Fair value

Total expense

relating to FY08

Options issued to directors Larry Cook and Amon Mahon 2006 30,000,000 (30,000,000)

- 40c 8.20% 5.66% 0.0385

451,958

Executive options issued 2005 (e) 2,500,000 (2,000,001) 499,999

35c / 40c / 45c 8.30% 5.34%

0.0152

16,461

Options issued May 07 as capital raising fees 2,941,176 - 2,941,176 17c 6.30% 6.14%

-

-

Options issued May 07 as capital raising fees 2,000,000 - 2,000,000 20c 6.30% 6.14%

-

-

Options issued June 08 as capital raising fees 3,588,235 - 3,588,235 17c 7.80% 7.00%

-

-

.

468,419 The options reserve is used to record the share options issued to directors and executives of the company.

Options are valued using the Black-Scholes option pricing model.


__________________________________________________________________________________________ 2008 Annual Report

61

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 22 Commitments

Note (a) Capital expenditure commitments

Contracted but not provided for and payable:

Not later than one year 139,059 20,464 28,096 - (b) Non-cancellable operating lease expense commitm ents Future operating lease commitments not provided for in the financial statements and payable: Within one year 768,989 734,146 47,663 26,950

Later than one year but not later than five years 1,542,863 2,001,487 - -

2,311,852 2,735,633 47,663 26,950 (c) Finance lease payment commitments Finance lease commitments are payable:

Within one year 457,128 441,008 - -

Later than one year but not later than five years 557,480 597,790 - -

1,014,608 1,038,798 - -

Less: Future lease finance charges (119,719) (124,186) - -

894,889 914,612 - - Lease liabilities provided for in the financial statements:

Current 16 396,371 370,243 - -

Non-current 16 498,518 544,369 - -

894,889 914,612 - -

23 Contingent Liabilities

Prior to 30 June 2008, one employee has claimed a bonus based on a provision in his employment

contract. Under this provision, a bonus of up to $500,000 is payable subject to a condition in relation

to the company’s cash reserves.

The board is not satisfied at this time that this condition has been met. Therefore no provision has

been made for this bonus in FY08.


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62

24 Financial Risk Management

(a) Financial Risk Management Policy The group’s financial instruments consist mainly of deposits with banks, accounts receivable and

payable, loans, and leases.

Financial Risk Exposures and Management

Interest rate risk

Interest rate risk is managed with a mixture of fixed and floating rate debt. At 30 June 2008

approximately 95% of group debt is fixed. It is the policy of the group to keep between 65% and

100% of debt on fixed interest rates. For further details on interest rate risk refer to Note24(b)(iii)

Credit risk

The entity’s maximum exposures for credit risks at balance date in relation to each class of

recognised financial asset is the carrying amount of those assets as indicated in the statement of

financial position.

Price risk

The group’s exposure to price risk is limited as its contracts with customers are at a fixed price.

(b) Financial Instruments

(i) Net Fair Value

The net fair value of financial assets and liabilities at balance date approximates their carrying

amount.

(ii) Interest Rate Sensitivity Analysis

At 30 June 2008, the effect on profit and equity as a result of changes in the interest rate, with all

other variable remaining constant would be as follows:

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ Change in loss

Increase in interest rate by 2% (23,122) (17,649) (12,396) (13,126)

Decrease in interest rate by 2% 23,122 17,649 12,396 13,126

Change in Equity

Increase in interest rate by 2% (23,122) (17,649) (12,396) (13,126)

Decrease in interest rate by 2% 23,122 17,649 12,396 13,126


__________________________________________________________________________________________ 2008 Annual Report

63

24 Financial Risk Management (continued)

(iii) Financial instrument composition and maturit y analysis

The tables below reflect the undiscounted contractual settlement terms for financial instruments

of a fixed period of maturity.

Fixed interest rate

maturing in:

2008

Weighted average interest

Floating interest 1 year 1 year to

Non-interest bearing

Note rate rate or less 5 years Total

$ $ $ $ $

Financial Assets Cash and cash equivalents 9 5.52% 1,156,118 - - 89,614 1,245,732

Trade Receivables 10 n/a - - - 3,180,780 3,180,780 Goods and Services tax receivable 10 n/a - - - 158,271 158,271

Other receivables 10 n/a - - - 7,220 7,220

Total financial assets 1,156,118 - - 3,435,885 4,592,003

Financial Liabilities Trade and other payables 15 n/a - - - 2,374,173 2,374,173 Other creditors and accruals 15 n/a - - - 2,572,605 2,572,605

Finance lease liabilities 16 10.93% - 470,557 570,327 - 1,040,884

Other loans 16 9.72% - 497,450 995,216 - 1,492,666

Investment Notes 16 15% - 188,899 - - 188,899

Convertible Notes 16 10% - - 6,100,000 254,172 6,354,172 Total financial liabilities - 1,156,906 7,665,543 5,200,950 14,023,399

Net Financial Liabilities 9,431,396


__________________________________________________________________________________________ 2008 Annual Report

64

24 Financial Risk Management (continued)

Fixed interest maturing in:

2007

Weighted average interest

Floating interest 1 year 1 year to

Non-interest bearing

Note rate rate Or less 5 years Total

$ $ $ $ $

Financial Assets Cash and cash equivalents 9 5.04% 882,451 280,000 - 106,288 1,268,739

Trade Receivables 10 n/a - - - 3,185,453 3,185,453 Goods and Services tax receivable 10 n/a - - - 98,140 98,140

Other receivables 10 n/a - - - 180,765 180,765

Total financial assets 882,451 280,000 - 3,570,646 4,733,097

Financial Liabilities Trade and other payables 15 n/a - - - 3,931,550 3,931,550 Other creditors and accruals 15 n/a - - - 2,170,654 2,170,654

Finance lease liabilities 16 9.99% - 370,243 544,368 - 914,611

Other loans 16 8.72% - 1,510,546 1,222,217 - 2,732,763

Investment Notes 16 15% - 838,661 - - 838,661

Convertible Notes 16 10% - - 1,987,050 - 1,987,050 Total financial liabilities - 2,719,450 3,753,635 6,102,204 12,575,290 Net Financial Liabilities 7,842,193

Trade and sundry payables are expected to be paid as follows:

Consolidated Group Parent Entity

2008 2007 2008 2007

$ $ $ $ Less than 6 months 4,899,311 6,628,146 815,762 2,022,199


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65

25 Controlled Entities 2008 2007 Particulars in relation to controlled entities

Parent entity Bounty Industries Limited Controlled entities Bounty Industries Limited controls the following entities: Bounty Equipment Leasing Pty Limited 100% 100% Bounty Materials Handling Pty Limited 100% 100% Bounty Personnel Industries Pty Limited 100% 100% InCoal Pty Limited 100% 100% NRE Mining Pty Limited 75% 75%

. 26 Cash Flow Information

(a) Reconciliation of Cash Flows from Operations with Loss after Income Tax


Loss after Income Tax (1,304,602) (8,687,714) (2,050,596) (3,358,667) Add non-cash items:

Depreciation & Amortisation of fixed assets 2,025,176 2,040,380 50,268 22,119 Write down assets to recoverable amount - 3,033,257 - - Provision for impairment of receivables - 62,934 - -

Write back of provision for vendor share issue - (1,200,000) - (1,200,000)

Option costs 554,021 711,502 554,021 711,502

Increase / (decrease ) in employee entitlements 394,027 212,526 (36,611) 62,854

Net cash provided by operating activities before change in assets and liabilities 1,668,622 (3,827,115) (1,482,918) (3,762,192) Change in assets and liabilities: Decrease / (increase) in receivables 93,558 1,535,091 (1,508,640) (910,564) (Increase) in Inventories (108,854) (8,753) - - (Increase) / decrease in other assets (56,208) 106,958 (5,297) - (Decrease) / increase in payables (259,755) (605,147) (1,179,781) 2,029,664 (Decrease) in income taxes payable - (437,135) - (437,135) (Decrease) in deferred taxes payable (112,950) (322,125) (112,950) (322,126)

Decrease / (increase) in deferred tax assets 106,483 759,260 106,484 (723,861)

Net cash flow from operating activities 1,330,896 (2,798,966) (4,183,102) (4,126,214)


__________________________________________________________________________________________ 2008 Annual Report

66

26 Cash Flow Information (continued)

(b) Non-cash Financing and Investing Activities During the year, the economic entity acquired plant and equipment with a net aggregate value of

$600,367 (2007: $468,976) by means of finance leases. These acquisitions are not reflected in

the cash flow statement

Consolidated Group Parent Entity 2008 2007 2008 2007 $ $ $ $ 27 Employee Benefits

Current 841,379 447,352 26,243 62,854 Number of employees at year end 65 55 5 8 Superannuation Plan

The Company contributes to a number of defined contribution superannuation plans. The

Company and its controlled entities have no legal or constructive obligation to fund any deficit.

Equity-based plans

The Company has an executive share option plan, which was approved by shareholders at the

general meeting of 7 March 2005. Under the plan, the Directors have the authority to issue 5%

of the total number of issued Shares as at the date the Options are to be issued. The Options

are issued for no consideration and have exercise prices of 35c, 40c, and 45c. No options were

issued during the financial year. 499,999 options under the plan are currently on issue. The

options expire on 8 November 2008.

A new executive and staff share and option plan will be put to the shareholders for approval at

the Annual general Meeting in November 2008.

28 Share Based Payments

In October 2007, 132,500 shares were issued to a total of 52 employees and contractors

employed at the German Creek mine site. The shares were issued under an employee share

scheme, in appreciation for the achievement of safety benchmarks. The share price at the date

of issue was 8c per share. The total value of shares issued was therefore $10,600. (see note 19)

In November 2007, 937,500 shares were issued to Mark Gray in settlement of a termination

payment. The shares were issued at a volume weighted average price over 2 weeks of 8c per

share. The total value of shares issued was therefore $75,000. (see note 19)


__________________________________________________________________________________________ 2008 Annual Report

67

29 Economic Dependency

For financial year 2008, the revenue of the company was derived from 2 production units operating in

the Aquila and Bundoora collieries at German Creek mine-site. All revenue derived from a single

customer. In financial year 2009, revenue will continue from German Creek, and Bounty anticipates

revenue from further production units at different locations.

30 Subsequent Events

In July 2008, Bounty issued a further 1,000,000 shares and 500,000 options to director Larry Cook for

cash consideration, following approval from shareholders at a General Meeting held on 19 June

2008. It also issued 30,000 options to consulting firm Quay Capital as capital raising fees.

The continuous haulage system is now underground in Aquila mine site, and is expected to improve

on previous productivity. The unit is being interfaced with our other equipment underground, and is

already contributing to production.

Since the reporting date, other than the items set out above, there has not arisen any item,

transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect

significantly the operations of the Bounty Group, the results of those operations or the state of affairs

of the Bounty group.

31 Change in Accounting Policy

The following Australian Accounting Standards have been issued or amended and are applicable to

the parent and consolidated group but are not yet effective. They have not been adopted in

preparation of the financial statements at reporting date.

AASB Amendment Standards Affected Outline of Amendment

Application Date of Standard

Application Date for Group

AASB 2007–3 Amendments to Australian Accounting Standards

AASB 5 Non-current Assets Held for Sale and Discontinued Operations

The disclosure requirements of AASB 114: Segment Reporting have been replaced due to the issuing of AASB 8: Operating Segments in February 2007. These amendments will involve changes to segment reporting disclosures within the financial report. However, it is anticipated there will be no direct impact on

1.1.2009 1.7.2009

AASB 6 Exploration for and Evaluation of Mineral

AASB 102 Inventories

AASB 107 Cash Flow Statements

AASB 119 Employee Benefits


__________________________________________________________________________________________ 2008 Annual Report

68

AASB Amendment Standards Affected Outline of Amendment

Application Date of Standard

Application Date for Group

AASB 127 Consolidated and Separate Financial Statements

recognition and measurement criteria amounts included in the financial report

AASB 134 Interim Financial Reporting

AASB 136 Impairment of Assets

AASB 1023

General Insurance Contracts

AASB 1038

Life Insurance Contracts

AASB 8 Operating Segments

AASB 114 Segment Reporting As above 1.1.2009 1.7.2009


AASB 1 First time adoption of AIFRS

The revised AASB 123: Borrowing Costs issued in June 2007 has removed the option to expense all borrowing costs. This amendment will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. However, there will be no direct impact to the amounts included in the financial group as they already capitalise borrowing costs related to qualifying assets.

1.1.2009 1.7.2009

AASB 101 Presentation of Financial Statements

AASB 107 Cash Flow Statements

AASB 111 Construction Contracts

AASB 116 Property, Plant and Equipment

AASB 138 Intangible Assets

AASB 123 Borrowing Costs

AASB 123 Borrowing Costs As above 1.1.2009 1.7.2009


AASB 101 Presentation of Financial Statements

The revised AASB 101: Presentation of Financial Statements issued in September 2007 requires the presentation of a statement of comprehensive income.

1.1.2009 1.7.2009

AASB 101 AASB 101 Presentation of Financial Statements

As above 1.1.2009 1.7.2009


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69

5 DIRECTORS' DECLARATION

In the opinion of the directors of Bounty Industries Limited (“the Company”):

1 the financial statements and notes set out in pages 31 to 68, are in accordance with the

Corporations Act 2001, and:

(a) comply with Accounting Standards and the Corporations Regulations 2001; and

(b) give a true and fair view of the financial position as at 30 June 2008 and of the

performance for the year ended on that date of the company and consolidated

group;

2 the Executive Director and Chief Finance Officer have each declared that:

(a) the financial records of the company for the financial year have been properly

maintained in accordance with section 286 of the Corporations Act 2001;

(b) the financial statements and notes for the financial year comply with the

Accounting Standards; and

(c) the financial statements and notes for the financial year give a true and fair view;

3 In the directors’ opinion there are reasonable grounds to believe that the company will be

able to pay its debts as and when they become due and payable.

Dated at Sydney this 26th day of September 2008

Signed in accordance with a resolution of the Directors:

________________________

Gary Cochrane

Chairman


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70

INDEPENDENT AUDIT REPORT To the members of Bounty Industries Limited

Report on the Financial Report We have audited the accompanying financial report of Bounty Industries Limited and the consolidated entity, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration. The consolidated entity comprises both the company and the entities it controlled during the year.

Directors’ responsibility for the financial report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1 the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, comply with International Financial Reporting Standards.

Auditors’ responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.


__________________________________________________________________________________________ 2008 Annual Report

71

AUDIT OPINION In our opinion: 1. the financial report of Bounty Industries Limited is in accordance with: (a) the Corporations Act 2001, including:

(i) giving a true and fair view of the company's and the consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

(b) other mandatory financial reporting requirements in Australia 2. the consolidated/parent financial statements and notes or financial report also comply with International Financial

Reporting Standards as disclosed in Note 1. EMPHASIS OF MATTERS Without qualification to the opinion expressed above, attention is drawn to the following matter: SIGNIFICANT UNCERTAINTY REGARDING THE CONTINUATION AS A GOING CONCERN As a result of the matters described in Note 1(a) to the financial statements, there is significant uncertainty whether the economic entity will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. Report on Remuneration Report We have audited the Remuneration Report included on pages 26 to 29 of the directors' report for the year ended 30 June 2008.The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion In our opinion the Remuneration Report of Bounty Industries Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

GOULD RALPH ASSURANCE

Chartered Accountants

Malcolm Beard, M.Com., F.C.A.

Partner, 26 September, 2008 Sydney.


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72

The Board of Directors Bounty Industries Limited Suite 206 65 York Street SYDNEY NSW 2000 Dear Members of the Board

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 30 7C OF THE CORPORATIONS ACT 2001

As lead auditor for the audit of Bounty Industries Limited for the year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been: • No contraventions of the auditor independence requirements of the Corporations Act 2001 in

relation to the audit; and • No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Bounty Industries Limited and any entities it controlled during the year. Yours faithfully GOULD RALPH ASSURANCE Chartered Accountants

Malcolm Beard M.Com., F.C.A. Partner

26th September, 2008 Sydney.


__________________________________________________________________________________________ 2008 Annual Report

73

8 ASX ADDITIONAL INFORMATION The shareholder information set out below was appli cable as at 19th September 2008 A. Distribution of equity securities Analysis of equity security holders by size of holding

Number of

shareholders Ordinary Shares Held 1 - 1000 10 4,264 1,001- 5,000 111 349,685 5,001 - 10,000 113 977,593 10,001 - 100,000 376 15,830,712 More than 100,000 182 155,006,093

Total 792 172,168,347

There were 122 holders of less than a marketable parcel of ordinary shares. B. Equity security holders The names of the twenty largest holders of quoted equity securities are listed below:

Ordinary Shares

Number held Percentage of issued

shares

HSBC Custody Nominees Limited 22,166,666 12.9% Mrs Connie Cook 11,000,000 6.4% Mrs Sharon Mahon 10,000,000 5.8% Alcardo Investments Limited 5.582.793 3.2% National Nominees Limited 4,528,697 2.6% Mr Colin Knox <Korihi a/c> 4,354,267 2.5% Mr & Mrs Detata <Detata Super Fund a/c> 4,325,000 2.5%

Calais Investments Australia p/l <G Williams Super Fund a/c> 4,249,959 2.5%

Royal Sunset 3,850,000 2.2% Toucan Rock Limited 3,312,237 1.9% Mr Matthew Telling 2,750,000 1.6% Malcolm Willis 2,500,367 1.5% Citicorp Nominees 1,827,900 1.0% Sancoast Pty Ltd 1,800,000 1.0% Mrs D Campbell 1,700,000 1.0% LGD Investments <Detata Family a/c> 1,690,000 1.0% Martin Place Securities <Staff Super Fund a/c> 1,687,000 1.0% QCI Pty Ltd 1,666,667 1.0% S&K Zielinski 1,550,000 0.9% Toucan Tango Limited 1,509,176 0.9% Shoc Pty Ltd 1,374,000 1.0%

92,050,729 53.5%


__________________________________________________________________________________________ 2008 Annual Report

74

8 ASX ADDITIONAL INFORMATION (continued) Other securities Number on issue Number of holders

Number of listed options on issue

24,856,867 91 Number of unlisted options 9,029,410 3 Number of listed convertible notes 38,125,000 99

C. Substantial holders

Substantial holders in the company are set out below: Shareholder Name Number Held Percentage

HSBC Custody Nominees Limited 22,166,666 12.9%

Mrs Connie Cook 11,000,000 6.4%

Mrs Sharon Mahon 10,000,000 5.8%

D. Voting rights

The voting rights attaching to each class of equity securities are set out below:

(a) Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one

vote and upon a poll each share shall have one vote.

(b) Options

No voting rights.

Documents

Bounty Industries Limited2008 Annual Report 4 2 CHAIRMAN’S REPORT Operations Bounty is currently operating at the German Creek complex, as a contractor for Anglo Coal (Capcoal Management)