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Annual Report: CBD Energy Limited - 2008

C B D E N E R G Y L I M I T E D (ACN 010 966 793)

2008

ANNUAL REPORT

CBD Energy Limited Annual Report 2008

Page 2

CBD ENERGY LIMITED CORPORATE DIRECTORY

Directors

Mr Mark Vaile Non-Executive Director and Chairman

Mr James Link Non-Executive Director

Mr Gerry McGowan Managing Director

Company Secretary

Mr Richard Pillinger

Registered Office

Suite 2 Level 2 53 Cross Street Double Bay NSW 2028 Ph: (02) 9363 9920 Fax: (02) 9363 9955

Auditors

Hall Chadwick Chartered Accountants Level 29, St Martins Tower 31 Market Street Sydney NSW 2000

Bankers

Westpac Banking Corporation 275 Kent Street Sydney NSW 2000

Share Registry

Computershare Investor Services Pty Ltd 60 Carrington Street Sydney NSW Phone (02) 8234-5000

Australian Stock Exchange Code

Ordinary Shares: CBD

Website

http://www.cbdenergy.com.au


Page 3

TABLE OF CONTENTS

Chairman’s Review 4

Corporate Governance Statement 6

Directors' Report 10

Consolidated Income Statement 19

Consolidated Balance Sheet 20

Consolidated Statement of Changes in Equity 21

Consolidated Cash Flow Statement 22

Notes to the Financial Statements 23

Directors’ Declaration 59

Independent Audit Report 60

Auditor’s Independence Declaration 62

ASX Additional Information 63


Page 4

CHAIRMAN’S REVIEW

Dear Shareholder,

On behalf of the directors of CBD Energy Limited, I am pleased to have been appointed to the Board of CBD Energy Limited and as Chairman I look forward to building upon the work undertaken by the company during and since the end of the financial year.

Following my appointment to the Board on 8th September 2008, the new board of directors approved the Singleton Green Co-Venture agreement with Buildev, along with two further binding 50/50 Co-Venture agreements with Buildev in relation to remote area energy projects in Queensland, with a total combined project value of A$330 million (CBD share A$165 million) The projects provide an opportunity for CBD to expand its energy services division by incorporating sustainability principles in the delivery of energy and utility services to tenants of industrial estates. The other important milestones achieved by the company during the year as outlined in the review of operations include;

• Formation of new subsidiaries – KI Solar and CBD Labs..

• Completion of the Larkden transaction with I-Sol Ventures GmbH to acquire its wholly owned subsidiary, Larkden Pty Ltd (Larkden), which is the owner of patents relating to graphite block energy storage technology and other intellectual property.

• Completion for KI Solar of the installation of six dual axis rotating photovoltaic SOLON solar movers with a total generation capability of 100Kw, situated on the site of Hydro Tasmania’s Currie power station on King Island, Tasmania.

• Concluding agreements for KI Solar with Hydro Tasmania, including

20 year Power Purchase Agreement

Connection Agreement; and

Operations and Maintenance Agreement ; and

• Completion of building the proto-type energy storage heat block, including the commissioning and completion of engineering design work associated with its construction, including its acceptance testing for inclusion of this technology within the King Island project.

• Strong growth in the traditional businesses of Captech and Parmac was experienced during the year, with Captech delivering a profit of $1,438,028 (2007: $549,171), and Parmac delivering a profit of $ 1,291,517 (2007: $ 499,916) representing an increase of over 158% on the previous year.

The balance sheet of the economic entity is solid with net assets at $19.1 Million as at 30 June 2008, with relatively no debt.

In addition, CBD expects to install Australia’s first solar / VRB battery. The battery has been developed by Cellstrom GmbH, a company owned by ISol Ventures GmbH which is a shareholder of CBD. Cellstrom is a sustainable power supply company based in Austria. The patented system is based on vanadium redox flow technology (VRB). It is ideally suited to use with renewable energy sources and will complement CBD's own graphite based storage technology.

Cellstrom has been improving the vanadium redox flow battery since 2002, leading to the development of the revolutionary FB 10/100 energy storage system, distinguished by its reliability and high quality. The implications of this innovation is that solar technology will be able to provide power when the sun isn’t shining.

The pipeline of infrastructure projects in place require a substantial amount of upfront capital to be invested to finance construction, which, when completed, is expected to deliver a long term reliable income stream from a quality energy utility.


Page 5

CHAIRMAN’S REVIEW - CONTINUED

The capital requirements of the project pipeline along with the various Buildev Co-Venture agreements require the

company to raise up to $AUD 65 Million to which the company has appointed LH Financial (LHF), a New York based

private equity investment firm, to manage a proposed capital raising for CBD.

I expect to provide shareholders with further information at the Annual General meeting of the Company which will be held in November 2008.

Yours sincerely,

Mark Vaile Chairman Dated: 25th September 2008


Page 6

CORPORATE GOVERNANCE STATEMENT

The Board of Directors of CBD Energy Limited is responsible for the corporate governance of the company and its controlled entities. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.

This statement outlines the main corporate governance practices during the financial year. Practices that vary from the Corporate Governance Council Recommendations (CGC Recommendations) are identified in this statement.

Board Responsibilities

The Board acts on behalf of and is accountable to shareholders. The Board seeks to identify the expectations of shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The Board guides and monitors and fulfils its responsibility to protect shareholder interests and enhance shareholder value by:

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

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

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

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

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

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

• Establishing and maintaining appropriate ethical standards; and

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

It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information.

The Board delegates to the Managing Director and the executive team responsibility for the operation and administration of the Company.

Structure of the Board

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

Name Position Term in Office

Mark Vaile Non-Executive Director and Chairman 0 years < 1 month (Appointed 8 September 2008)

James Link Non-Executive Director 0 years < 1 month (Appointed 8 September 2008)

Gerry McGowan Executive Director and Chairman 4 years 6 months (Appointed 5 April 2004)

Appointed Managing Director on 8th September 2008

The skills, experience and expertise relevant to the position held by each Director in office at the date of the annual report is included in the Directors’ Report.


Page 7

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Board Composition

The key elements of the Board composition include:

• ensuring, where practicable to do so, that a majority of the Board are independent directors • the Board of the Company currently comprises 1 executive director and 2 independent non executive directors • non-executive directors bring a fresh perspective to the board’s consideration of strategic, risk and performance

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

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

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

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

During the full year under review and up to the date of directors signing this report, the Company did not adhere to the CGC Board recommendations that the majority of directors should be independent non-executive directors. When assessing the independence of directors and the former chairman under recommendation 2.1 and 2.2 both Mr McGowan and former directors, Dr Warczak and Mr John de Gouveia, although meeting other criteria and bringing independent judgement to bear on their respective roles, are both not defined as independent directors, primarily due to the fact that both Messrs McGowan and Warczak are officers of entities who are substantial shareholders of the company and Mr de Gouveia served as executive director from 26/11/07 to 8/9/08. The company has not followed recommendation 2.1 and 2.1 as the Board believes that the best interests of the company during this time were served through its two major shareholders acting as Directors and in an executive capacity. Also, it is the opinion of the Board that Mr McGowan brings significant compensation through the experience and skills he brings to the Board which is believed to be essential at this point in the company’s growth plan. The composition of the Board changed on 8 September 2008 whereby the majority of the board are now independent directors.

Terms of Appointment as a Director

The Company’s constitution provides that a Director other than the Managing Director may not retain office for more than three calendar years or beyond the third annual general meeting following his or her election, whichever is longer, without submitting for re-election. One third of the Directors retire each year and are eligible for re-election. The Directors who retire by rotation at each annual general meeting are those with the longest length of time in office since their appointment or last election. All Directors must be elected by the shareholders. It is not a requirement for a person who is a Director to own shares in the Company.

Access to External and Independent Advice

The company provides the capacity for any Director to obtain separate professional advice on any matter being discussed by the Board and for the Company to pay the cost incurred. Before engagement is made, the Director is required to obtain the Chairman of the Board’s approval. Approval will not be unreasonably denied and the Director will be expected to provide the Board with a copy of that advice.

Board Performance

The performance of the Board and key executives of controlled entities is reviewed regularly by the Board against their contribution to the performance of the consolidated entity.

Remuneration

The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves and the key executives of controlled entities. It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions and their experience and expertise. To assist in achieving this objective, the Board takes account of the Company’s financial and operating performance in setting the nature and amount of executive Directors’ and executives’ remuneration. In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of the Company and the performance of the individual during this period.


Page 8


Remuneration - continued

The expected outcomes of the remuneration structure are:

• Attraction of quality management to the Company.

• Retention and motivation of key executives.

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

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

Board Committees

The Company does not adhere to the CGC Board recommendations 2.4, 4.2 and 9.2 that require listed entities to establish nomination, audit and remuneration committees. During the year ended 30 June 2008, the company did not have separately established nomination, audit and remuneration committees. In view of the size of the Company, the Board considers that establishing formally constituted committees for audit, board nominations and remuneration would contribute little to its effective management as matters that may otherwise be dealt with by committees under CGC recommendations, are dealt with by the full Board.

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

Code of Conduct

The Board had drawn up a code of conduct to guide Board members, executives and employees in carrying out their duties and responsibilities and to maintain confidence in the Company’s integrity. Executives and employees are encouraged to report to Board members any concerns regarding potentially unethical practices.

Securities Trading

Dealings are not permitted in the Company’s securities at any time when Directors, officers or employees are in the possession of price sensitive information not already available to the market. In addition, the Corporations Act 2001 prohibits the purchase or sale of securities whilst a person is in possession of inside information. The Directors have routine discussions at the Board meetings to determine when trading in the Company’s securities is inappropriate due to being in possession of price sensitive information.

Certification of Financial Statements

On an annual basis, the Chief Executive Officer and Chief Financial Officer provide a written statement to the Board that in their view the company’s financial reports present a true and fair view of the Company’s financial condition and operational results are in accordance with relevant accounting standards.

Continuous Disclosure

The Company has established procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. All ASX announcements are handled by the Company Secretary and authorised by the Chairman of the Board of Directors. The Company has procedures to ensure that the ASX’s continuous disclosure requirements are strictly followed and that unauthorised disclosure of price sensitive information is not made other than through the ASX’s Company Announcements Office.


Page 9


Communication to Market and Shareholders

The Board recognises it is its duty to ensure that its shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders and the market through:

• The Annual Report which is distributed to all shareholders;

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

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

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

The Company’s reports and ASX announcements may be viewed and downloaded from the ASX website: www.asx.com.au (stock code: CBD).

Due to the size of the company it has not yet allocated resources to developing appropriate Corporate Governance information on its website.

External Auditor

It is Company’s policy that the external auditor attends the Annual General Meeting of the Company and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

Corporate Governance Council (CGC) Best Practice Recommendations

The Company’s corporate governance practices were in place throughout the year ended 30 June 2008. With the exception of the departures from the Corporate Governance Council recommendations detailed above, the corporate governance practices of the Company were compliant with the Council’s best practice recommendations.

Due to the nature, size and scale of the Company’s operations the CGC best practice recommendations are assessed annually or sooner upon a change in the scale of operations as to their practical application and any changes are reported annually in the Company Annual Report.


Page 10

DIRECTORS’ REPORT

Your Directors submit their report for the year ended 30 June 2008.

Director names and particulars

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

• Mark Vaile – Non-Executive Director and Chairman (Appointed 8/9/08) • James Link– Non-Executive Director (Appointed 8/9/08) • Gerry McGowan – Executive Director and Chairman (1/7/07 to 8/9/08)

Appointed Managing Director on 8/9/08

• Michael Warczak – Non Executive Director (Resigned 8/9/08) • John de Gouveia – Independent Non-Executive Director (1/7/07 to 25/11/07)

Executive Director ( 26/11/07 to 8/9/08) (Resigned 8/9/08)

Mr Mark Vaile Non – Executive Director & Chairman of CBD (Appointed 8/9/2008)

Mr Vaile was Deputy Prime Minister of Australia from June 2005 to November 2007. He was elected to the Australian Parliament in 1993 and resigned in July 2008. He was Minister for Trade from July 1999 to September 2006 and was responsible for negotiating Australia’s free trade agreements with the United States, Singapore and Thailand. He has held the ministerial portfolios of Transport and Regional Development (twice) and Agriculture, Fisheries and Forestry. Mr Vaile was elected leader of the National Party in June 2005.

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

• None

Mr James Link Non – Executive Director (Appointed 8/9/2008)

Mr Link is a director of Great Lakes Aviation Limited. He was previously the President of Raytheon Aircraft Finance Corporation, following roles as Vice President & Treasurer, Vice President Worldwide Sales and Special Assistant to the CEO. Mr Link worked with the Raytheon group from 1985 until retiring in 2001. His qualifications include MBA Finance, MBA Marketing and BSA Accounting.

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

• None

Gerry McGowan – Executive Director – Chairman (1/7/2007 to 8/9/2008)

Appointed Managing Director on 8/9/2008

Mr. McGowan was appointed to the Board on 5 April 2004. Mr McGowan is a former executive of TNT and Mayne Nickless. Gerry started his own company in 1982 and won the distribution of John Fairfax product nationally. He launched Impulse Airlines in 1992, and then sold to Qantas in 2001. Currently Gerry is Executive Chairman of Pacific Aviation Pty Limited and TRW Holdings Pty Limited, an investment company with exposure to the energy and aviation industries. Mr McGowan also previously served as a director under a ministerial appointment to the Board of Air Services Australia.

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

• None


Page 11

DIRECTORS’REPORT (CONTINUED)

Dr Michael Warczak, BDS (Syd) OAM – Non Executive Director: (Resigned 8/9/2008)

Dr. Warczak was appointed to the Board on 6 June 2005 and resigned on 8 September 2008. Dr. Warczak is a sophisticated investor with significant share market and property interests. He brings to CBD Energy a wealth of domain knowledge and a strong interest in energy management. His involvement in CBD Energy traces back to before 2000 and at one time, in addition to his substantial holding in the company, performed the functions of a director and Chief Executive. Mike was instrumental in establishing the Ukraine Consulate General in Australia and supports a range of charitable associations. These as well as his general humanitarian activities led to him being recognised in the 2005 Queens Birthday Honours List being awarded a Medal of the Order of Australia.

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

• None

John de Gouveia – B.Bus. M Com, CA - Independent Non-Executive Director (1/7/07 to 25/11/07) Executive Director 26/11/07 to 8/9/08 (Resigned 8/9/2008)

Mr. de Gouveia was appointed to the Board on 21 December 2005 and resigned on 8 September 2008. Mr de Gouveia is a Chartered Accountant with extensive experience in public practice. On 26 November 2007 John joined CBD Energy Ltd on a full time basis as CFO and executive director. (Resigned 8/9/08) Prior to joining CBD Energy Limited, John was the managing director of Corporate & Administrative Services Pty Ltd, an entity that is part of the Washington H. Soul Pattinson (“WHSP”) group of companies that provides company secretarial and accounting services primarily to ASX listed entities. During his 5 years of service for the WHSP group, John was the company secretary for Biron Capital Ltd, Pacific Strategic investments Limited, HWW Limited, Brickworks Investment Company Ltd and Souls Private Equity Ltd. Mr De Gouveia was also the company secretary of CBD Energy Limited and resigned on 8 September 2008.

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

• None

Company Secretary

Richard Pillinger, Bsc, CA

Mr Pillinger was appointed as Company Secretary of CBD Energy Limited on 8 September 2008. Mr Pillinger is a Chartered Accountant with extensive experience in public practice and commercial financial roles.

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

Mr. de Gouveia resigned as Company Secretary of CBD Energy Limited on 8 September 2008. The qualifications of Mr de Gouveia are noted above.


Page 12


Directors’ Meetings

The number of meetings of Directors held during the financial year and the number of meetings attended by each Director (while they were a Director) were as follows:

Board Meetings

Director

Meetings Attended

Attended

held

Meetings Eligible to Attend

Mark Vaile (Appointed 8/9/08) 0 0

James Link (Appointed 8/9/08) 0 0

Gerry McGowan

5 5

John de Gouveia (Resigned 8/9/08) 5 5

Michael Warczak (resigned 8/9/08)

4 5

Principal activities

The principal activities of the consolidated entity for 2008 are the provision of energy and mechanical services.

Results of Operations

The result of operations for the year after income tax was a loss of $536,331 (2007: loss of $389,951).

Dividends

The company has not paid or recommended to pay a dividend in respect of the financial year ended 30 June 2008.

Review of Operations

The consolidated entity achieved a net loss after tax of $536,331 for the year ended 30 June 2008. This compares with a net loss of $389,951 for the corresponding year ended 30 June 2007.

The 2008 net loss comprises; $

- Operating profit from Parmac and Captech 2,729,545

- Remote Area Power Systems overhead development costs ( 866,098)

- Parent Company Overhead costs ( 2,399,778)

Total Net Loss ( 536,331)

The 2008 financial year operating loss of $536,331 is the result of continued additional expenses incurred by the parent company in its move to the renewable energy market.

During the year the company undertook further steps towards adding shareholder value and broadening its activities in the energy sector by expanding its capability in both energy storage and renewable energy technologies and applications.

A number of important milestones have been achieved during the year;

• Formation of new subsidiaries – KI Solar and CBD Labs..

• Completion of the Larkden transaction with I-Sol Ventures Gmbh to acquire its wholly owned subsidiary, Larkden Pty Ltd (Larkden), which is the owner of patents relating to graphite block energy storage technology and other intellectual property.

• Completion for KI Solar of the installation of six dual axis rotating photovoltaic SOLON solar movers with a total generation capability of 100Kw, situated on the site of Hydro Tasmania’s Currie power station on King Island, Tasmania.


Page 13


Review of Operations - Continued

Concluding agreements for KI Solar with Hydro Tasmania, including

20 year Power Purchase Agreement

Connection Agreement; and

Operations and Maintenance Agreement

• Completion of building the proto-type energy storage heat block, including the commissioning and completion of engineering design work associated with its construction, including its acceptance testing for inclusion of this technology within the King Island project.

• Execution of option deed with Buildev Developments Pty Ltd, giving CBD exclusive rights to negotiate the terms of a joint venture agreement to provide energy and utility services to a new industrial estate in Singleton NSW.

Details of significant changes in the state of affairs

In the opinion of the directors, there were no significant changes in the state of affairs of the company during the financial period under review not otherwise disclosed in this annual report.

Subsequent Events

On 9th April, 2008, the company’s wholly owned subsidiary, Parmac Air Conditioning & Mechanical Services Pty Ltd executed a contract for the acquisition of land and buildings situated at 15 Terracotta Drive, Blackburn VIC for $ 1,275,000 plus GST.

Settlement of the property took place on 1st September and the balance paid on settlement was $ 1,275,015. (GST Inclusive)

On 8th September 2008, the composition of the board of Directors changed. Mr Mark Vaile and Mr James Link were appointed directors and subsequently Messrs Warczak and de Gouveia resigned from the board.

On 8th September 2008, the new Board approved the following transactions with Buildev;

(a) Singleton Co-Venture Deed between the Company and Singleton Green Pty Ltd (ACN 120 098 320);

(b) Bowen Co-Venture Deed between the Company and BD (Qld) Project G061 Pty Ltd (as trustee of the

BD (Qld) Project G061 Unit Trust) (ACN 124 718 707);

(c) Emerald Co-Venture Deed between the Company and BD (Qld) Project G075 Pty Ltd (as trustee of the

BD (Qld) Project G075 Unit Trust) (ACN 119 969 274);

The Singleton Co-Venture Deed is subject to a condition precedent that requires CBD Energy Limited to complete a

capital raising of at least $AUD 25 Million by 19 December 2008. The Singleton Co-Venture Deed also requires CBD

Energy Limited to pay a signing fee of $500,000.

In the event that the condition precedent requiring CBD Energy Limited to complete a capital raising of at least $AUD 25

Million by 19 December 2008 is not satisfied, Buildev will be entitled to retain the signing fee of $500,000. The Company

has appointed LH Financial (LHF) a New York based private equity investment firm, to manage a proposed capital

raising for CBD.

The signing fee of $500,000 was subsequently paid by CBD Energy Ltd into the Co-Venture bank account on 11th

September 2008.

Other than the matters discussed above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.


Page 14


Likely Developments and Expected Results

The directors will continue to seek options for the growth of the company and the restoration of shareholder value. Further information as to likely developments in the operations of the economic entity and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the economic entity.

Share options on issue

At the date of this report there are no ASX Listed options over unissued ordinary shares in CBD Energy Limited on issue and there are 22,500,000 unlisted share options on issue. Refer to note 15 (c) (Share capital) of the financial statements for details of options, including issue price and expiry date.

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

Environmental regulations

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

Directors Shareholdings at 30 June 2008

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

Ordinary Shares Unlisted options over Ordinary Shares

Mr Mark Vaile – Non Executive Chairman

(Appointed 8/9/08)

- -

Mr James Link – Non Executive Director

(Appointed 8/9/08)

- -

Mr. Gerry McGowan – Managing Director

17,588,925

17,500,000

Mr. John de Gouveia

Non-Executive Director (1/7/07 to 25/11/07)

Executive Director 25/11/07 to 8/9/08

(Resigned 8/9/08)

- 2,500,000

Dr. Michael Warczak – Non-Executive Director

(Resigned 8/9/08)

12,530,000 2,500,000


Page 15

DIRECTORS’ REPORT (CONTINUED)

Remuneration Report

(i) Remuneration Policy

The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves, the Chief Executive Officer and the executive team. It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions and their experience and expertise.

At the Annual General Meeting on 29 November 2006 it was resolved to increase the maximum remuneration of Directors to $300,000 per annum.

(ii) Key Management Personnel Remuneration

Remuneration packages contain the following key elements:

(a) Primary benefits – salary/fees, bonuses and non-monetary benefits including the provision of a motor vehicle or the payment of a car allowance where necessary.

(b) Post employment benefits including superannuation. (c) Other benefits

(iii) The following table discloses the remuneration of the key management personnel of the Consolidated Entity.

Primary Bonus Superannuation Equity Compensation

Total

Key management personnel $ $ $ $ $

Gerry McGowan – Executive Director - Directors Fees - Executive Services

Fees

55,000 395,000

- -

4,950 -

- -

59,950 395,000

John de Gouveia – Executive Director -Directors Fees - Salary (CFO) (26/12/07 to 30/6/08) (Resigned 8/9/08)

50,000

134,166

- -

4,500

11,667

- -

54,500

145,833

Michael Warczak – Non-Executive Director (Resigned 8/9/08)

- - 49,0503 - 49,050

Mark Fogarty – Commercial director

Yury Brodsky Managing Director/CEO CapTech

144,474

128,008

-

-

50,758

34,600

-

10,0001

195,232

172,608

Alan McClaren Managing Director/CEO Parmac 137,158 - 60,817 10,0002 207,975

Total 1,043,806 - 216,342 20,000 1,280,148

1- pursuant to Extraordinary General Meeting held on 15 June 2007, 200,000 ordinary shares at 5 cents each were issued to Mr. Yury Brodsky on 24 August 2007 to satisfy the executive service agreement.

2- pursuant to Extraordinary General Meeting held on 15 June 2007, 200,000 ordinary shares at 5 cents each were issued to Mr. Alan McClaren on 24 August 2007 to satisfy the executive service agreement.

3- total directors fees paid to Michael Warczak were paid in the form of superannuation contributions to his nominated fund.


Page 16


Remuneration Report (Continued)

(iv) Contracts of employment

Directors

All the directors of the Company are engaged under an appointment that does not contain specified incentive entitlements including options.

Executives

Gerry McGowan

Chief Executive Officer CBD Energy Limited

Consulting Agreement with TRW Pty Ltd

Gerry McGowan is engaged by CBD Energy Limited under a monthly consulting agreement with TRW Pty Ltd to provide the full-time executive services of Gerry McGowan as the CEO of the company.

The consulting agreement is operating on a month-by-month basis.

The base contract amount is $ 395,000 pa. (GST exclusive)

Performance Conditions

The consulting agreement does not provide for the payment of a bonus. Bonus payments (if any) are discretionary and determined annually by the Board upon satisfactory achievement of KPI’s and meeting operating budgets.

John de Gouveia

Chief Financial Officer & Company Secretary CBD Energy Limited (Resigned 8/9/08)

Contract of Employment

John de Gouveia commenced with CBD Energy Limited on 26 November 2007, on a full time basis, as chief financial officer and company secretary. John is engaged on a month-by-month basis, with a period of notice of 1 month required to terminate the contract.

The contract amount is $ 250,000 pa, inclusive of superannuation.


The contract does not provide for the payment of a bonus. Bonus payments (if any) are discretionary and determined annually by the Board upon satisfactory achievement of KPI’s and meeting operating budgets.

Mark Fogarty

Commercial director CBD Energy Limited


Mark Fogarty is employed by CBD Energy Limited under a contract of employment. The length of the contract is 5 years from 1 July 2007 to 30 June 2012, with a period of notice of 6 months required to terminate the contract.





Page 17


Remuneration Report (Continued)

(iv) Contracts of employment - Continued

Executives - Continued

Alan McClaren

Managing Director/CEO Parmac Airconditioning


Alan McClaren is employed by Parmac Airconditioning and Mechanical Services Pty Ltd under a contract of employment. The length of the contract was 3 years from 1 January 2004 to 1 January 2007, with a period of notice of 3 months required to terminate the contract. The contract was renewed on 1 January 2007 and will continue to 1 January 2012.

The base contract amount is $ 150,000 pa plus $30,000 superannuation component, plus a car allowance of $10,000 pa (total package $190,000).



Yury Brodsky

Managing Director/CEO CapTech


Yury Brodsky is employed by Capacitor Technologies Pty Ltd under a continuing contract of employment. The length of the initial contract was for 1 year from 1 December 2003 to 1 December 2004, with a period of notice of 1 month required to terminate the contract. A new contract was signed on 1 January 2007 and will continue until 30 June 2012.

The base contract amount is $140,000pa plus the superannuation guarantee levy, plus a car allowance of 10,000pa (total annual package $162,600).



In addition the company utilises electrical contracting services offered by Brodpower Pty Ltd , a company in which Yury Brodsky has a ownership interest.

The service contract with Brodpower Pty Ltd operates on a revenue share basis whereby CapTech makes a 25% margin on all electrical installation work outsourced to Brodpower Pty Ltd.

Non-audit Services

The board of directors is satisfied that the provision of non-audit services during the year by Hall Chadwick Chartered Accountants is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services provided did not compromise the external auditor’s independence for the following reasons:

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

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

in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees for non-audit services were paid to the external auditors Hall Chadwick Chartered Accountants during the year ended 30 June 2008.: Taxation services $ 9,850 Corporate Services $ 4,000 Total $13,850


Page 18


Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Indemnification and Insurance of Directors and Officers and Auditors

The Company has agreed to indemnify all directors and officers of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company has insured against amounts which it may be liable to pay on behalf of directors and officers or which it otherwise agrees to pay by way of indemnity.

Insurance Premiums

During the year, the Company paid insurance premiums for directors’ and officers’ liability insurance policies, which cover all directors and officers of the Company. Details of the nature of the liabilities covered, and the amount of the premium paid in respect of, the directors’ and officers’ insurance policies are not disclosed, as such disclosure is prohibited under the terms of the insurance contracts.

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2008 has been received and is included on page 62.

Signed in accordance with a resolution of the Directors

Gerry McGowan Director Dated: 25th September 2008


Page 19

CBD ENERGY LIMITED AND CONTROLLED ENTITIES CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

Economic Entity Parent Entity

Note

2008 $

2007

$

2008

$

2007

$ Continuing Operations

Revenue 2 18,310,371 13,541,555 572,642 59,839

Cost of goods sold 3(a) (10,823,798) (8,176,401) - -

Gross profit 7,486,573 5,365,154 572,642 59,839

Depreciation and amortisation expense

3(a) (165,262) (150,090) (5,813) (5,843)

Finance costs 3(a) (39,103) (198,286) (11,607) (176,263)

Salaries and employee benefits expense

3(b) (4,736,517) (3,614,757) (871,127) (252,521)

Administration expenses 3(c) (3,116,213) (1,789,188) (2,083,873) (845,442)

Profit /(loss) on disposal of plant and equipment

34,191 (2,784) - (7,167)

Loss before income tax expense (536,331) (389,951) (2,399,778) (1,227,397)

Income tax expense 4 - - - -

Net loss attributable to members of CBD Energy Limited

(536,331) (389,951) (2,399,778) (1,227,397)

Overall operations

Basic earnings per share (cents per share)

21 (0.32 cents) (0.45 cents)

Diluted earnings per share (cents per share)

21 (0.29 cents) (0.39 cents)

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


Page 20

CBD ENERGY LIMITED AND CONTROLLED ENTITIES CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008


CURRENT ASSETS Note

2008 $

2007 $

2008 $

2007 $

Cash and cash equivalents 17(b) 5,272,955 3,969,848 3,421,390 3,470,773

Trade and other receivables 5 4,826,132 3,042,560 10,698,999 1,911,164

Inventories 6 1,178,124 942,228 - -

Other assets 7 32,789 62,043 450 -

Assets held for sale 8 - 343,064 - -

TOTAL CURRENT ASSETS 11,310,000 8,359,743 14,120,839 5,381,937

NON-CURRENT ASSETS

Financial assets 9 15,003 15,003 2,067,165 2,066,965

Plant and equipment 10 2,635,496 1,170,907 59,495 -

Intangibles 11 8,336,264 2,038,243 - -

TOTAL NON-CURRENT ASSETS 10,986,763 3,224,153 2,126,660 2,066,965

TOTAL ASSETS 22,296,763 11,583,896 16,247,499 7,448,902

CURRENT LIABILITIES

Trade and other payables 12 2,476,038 2,282,630 1,070,927 887,285

Financial liabilities 13 53,115 4,803,511 - 4,740,504

Provisions 14 325,570 268,246 - -

TOTAL CURRENT LIABILITIES 2,854,723 7,354,387 1,070,927 5,627,789

NON-CURRENT LIABILITIES

Financial liabilities 13 245,083 839,851 - 588,393

TOTAL NON-CURRENT LIABILITIES

245,083 839,851 - 588,393

TOTAL LIABILITIES 3,099,806 8,194,238 1,070,927 6,216,182

NET ASSETS 19,196,957 3,389,658 15,176,572 1,232,720

EQUITY

Issued capital 15 79,536,896 63,193,266 79,536,896 63,193,266

Reserves 16 52,339 52,339 52,339 52,339

Retained earnings (60,392,278) (59,855,947) (64,412,663) (62,012,885)

TOTAL EQUITY 19,196,957 3,389,658 15,176,572 1,232,720

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


Page 21

CBD ENERGY LIMITED AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR TO 30 JUNE 2008

Economic Entity $ $ $ $

Share Capital

Share Option Reserve

Retained Earnings

Total

Balance at 01.07.2006 60,622,205 - (59,465,996) 1,156,209

Shares issued 2,582,073 - - 2,582,073

Share issue costs (11,012) - - (11,012)

Share options recognised - 52,339 - 52,339

Loss attributable to members of parent entity

- - (389,951) (389,951)

Sub-total 2,571,061 52,339 (389,951) 2,233,449

Dividends paid or provided for - - - -

Balance at 30.06.2007 63,193,266 52,339 (59,855,947) 3,389,658

Shares issued 16,664,796 - - 16,664,796



- - (536,331) (536,331)

Sub-total 16,343,630 - (536,331) 15,807,299


Balance at 30.06.2008 79,536,896 52,339 (60,392,278) 19,196,957

Parent Entity

Balance at 01.07.2006 60,622,205 - (60,785,488) (163,283)

Shares issued 2,582,073 - - 2,582,073


Share options recognised - 52,339 - 52,339

Loss for the year - - (1,227,397) (1,227,397)

Sub-total 2,571,061 52,339 (1,227,397) 1,396,003


Balance at 30.06.2007 63,193,266 52,339 (62,012,885) 1,232,720

Shares issued 16,664,796 - - 16,664,796



- - (2,399,778) (2,399,778)

Sub-total 16,343,630 - (2,399,778) 13,943,852


Balance at 30.06.2008 79,536,896 52,339 (64,412,663) 15,176,572

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


Page 22

CBD ENERGY LIMITED AND CONTROLLED ENTITIES CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008 Economic Entity Parent Entity

Note 2008

$ 2007

$ 2008

$ 2007

$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 17,448,767 12,429,631 149,817 5,894

Payments to suppliers and employees

(20,091,747) (13,126,792) (3,029,120) (1,018,244)

Interest received 232,518 29,173 168,031 4,482

Finance costs (27,496) (159,893) - (129,757)

NET CASH FLOWS USED IN OPERATING ACTIVITIES

17(a) (2,437,958) (827,881) (2,711,272) (1,137,625)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment

431,584 6,000 - -

Investment in controlled entities - - (200) (100)

Payments for investments - (15,003) - (15,000)

Project licence fees - (293,616) - -

Development costs (13,613) (237,088) - -

Payment for the purchase of controlled entities

(39,612) - - -

Purchase of property, plant and equipment

(1,592,871) (920,957) (65,308) -

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

(1,214,512) (1,460,664) (65,508) (15,100)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issues of ordinary shares

5,059,496 2,507,073 5,059,496 2,507,073

Share issue costs (321,166) (11,012) (321,166) (11,012)

Share application monies received - 4,740,504 - 4,740,504

Repayment of finance leases (68,267) (126,211) - (26,861)

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

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

Advances from/( to ) controlled entities

- - (2,296,447) (1,179,968)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

4,670,063 6,660,354 2,441,883 5,579,736

NET INCREASE/(DECREASE) IN CASH HELD

1,017,593 4,371,809 (334,897) 4,427,011

Add opening cash brought forward 3,969,848 (401,961) 3,470,773 (956,238)

Effect of exchange rates on cash held in foreign currency

285,514 - 285,514 -

CLOSING CASH CARRIED FORWARD

17(b) 5,272,955 3,969,848 3,421,390 3,470,773

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


Page 23

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial report covers CBD Energy Limited and controlled entities (the economic entity), and CBD Energy Limited as an individual parent entity. CBD Energy Limited is a listed public company, incorporated and domiciled in Australia. The nature of the operations and principal activities of the group are the provision of energy and mechanical services.

This financial report is prepared in Australian dollars.

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, 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.

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

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

The company continues to incur consolidated losses in its move to the renewable energy market and therefore its ability to continue to operate as a going concern is dependent on continued capital and/or debt raising. The company plans to undertake capital raisings sufficient to meet its obligations under the Singleton Co-Venture Deed of $AUD 25 Million and to provide additional working capital as and when required.

In view of the above circumstances, the Directors are of the opinion that the consolidated entity will have sufficient funding and that it is appropriate to prepare the 30 June 2008 financial report on a going concern basis.

Accounting Policies

a. Principles of Consolidation

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

A list of controlled entities is contained in Note 9 to the financial statements. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased. Subsidiaries are fully consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group.


Page 24


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

b. Income Tax

The change for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognized to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilized.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with conditions of deductibility imposed by the law.

CBD Energy Limited and it’s wholly- owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime. CBD Energy Limited is responsible for recognizing the current and deferred tax assets and liabilities for the tax consolidated group. The group notified the ATO on 2 January 2003 that it had formed an income tax consolidated group to apply from 1 July 2002. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.

c. Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs.

d. Construction Contracts and Work in Progress

Construction work in progress is valued at cost, plus profit recognized to date less and provision for anticipated future losses. Cost includes both variable and fixed costs relating to specific contracts, and those costs that are attributable to the contract activity in general and that can be allocated on a reasonable basis.

Construction profits are recognized on the stage of completion basis and measured using the proportion of costs incurred to date as compared to expected actual costs. Where losses are anticipated they are provided for in full.

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

e. Property, Plant and Equipment

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

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.


Page 25



e. Property, Plant and Equipment - continued

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation

Property, plant and equipment is depreciated on a straight line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

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

Class of Fixed Asset Depreciation Rate

Leasehold improvements 4-5%

Plant and Equipment 5-33%

Leased plant and equipment 15%

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

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

f. Leases

Leases of fixed assets where substantially all the risks and benefits incidental to ownership of the asset are transferred to the leasee are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the economic entity will obtain ownership of the asset or over the term of the lease.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, and charged as expenses in the periods in which they are incurred.

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

g. Intangibles

Goodwill

Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.


Page 26


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Policies (continued)

g. Intangibles - continued

Licences and patents

Licence fees and patents are recognised at cost of acquisition. Licence fees and patents have a finite life and are amortised on a systematic basis, matched to the future economic benefits over the life of the asset, less any impairment losses.

Development Costs

Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs are amortised on a systematic basis, matched to the future economic benefits over the life of the asset, less any impairment losses.

h. Employee Benefits

Wages and salaries and annual leave

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Superannuation

The amount charged to the Income Statement in respect of superannuation represents the contributions made by the economic entity to the employees’ nominated superannuation funds.

i. Provisions

Provisions are recognized when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will results and that outflow can be reliably measured.

j. Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within financial liabilities in current liabilities on the balance sheet.

k. Trade and other receivables

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

l. Trade and other payables

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

m. Financial liabilities

Financial liabilities, where there is a compound financial instrument, are classified so the liability component and equity component are shown separately on the Statement of Financial Position from the time of their initial recognition. Interest, where applicable, is charged as an expense as it accrues and is included in interest-bearing liabilities.

n. Borrowings

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


Page 27


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Policies (continued)

o. Share capital

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

p. Foreign currencies

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

q. Revenue

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

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

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

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

r. Finance Costs

Borrowing costs are recognised in income in the period in which they are incurred.

s. Goods and Services Tax (GST)

Revenues, expenses and assets are recognized net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognized as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows

t. Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.


Page 28



Critical Accounting Estimates and Judgments - continued

Key Estimate – Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.

No impairment has been recognised in respect of intangibles for the year ended 30 June 2008. The controlled entities were contributing profits towards the group. Should any of the controlled entities fail to perform, an impairment loss would be recognised up to the maximum carrying value of intangibles at 30 June 2008 of $8,336,264.

Apart from this, there are no other key assumptions or sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying amount of certain assets and liabilities within the next reporting period.

Australian Accounting Standards not yet effective

The economic entity has not applied any Australian Accounting Standards or Australian Accounting interpretations that have been issued but are not yet operative for the year ended 30 June 2008.

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application.

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 AASB 8 and AASB 2007-3 become mandatory for the Group’s 30 June 2010 financial report. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a management approach to reporting on the financial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. Application of AASB 8 may result in different segments, segment results and different type of information being reported in the segment note of the financial report. However, it is not expected to affect any of the amounts recognised in the financial statements. (ii) AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 Revised accounting standards for business combinations and consolidated financial statements become mandatory for the Group’s 30 June 2010 financial report. The new rules generally apply only prospectively to transactions that affect the level of ownership held in the controlled entities in the year of initial application. For example, under the new rules: all payments including contingent consideration to purchase a business are to be recorded at fair value at the

acquisition date, with contingent payments subsequently remeasured at fair value through the income statement; all transaction costs will be expensed; the Group will need to decide whether to continue calculating goodwill based only on the parent’s share of net

assets or whether to recognise goodwill also in relation to the non-controlling (minority) interest; and when control is lost, any continuing ownership interest in the entity will be remeasured to fair value and a gain or

loss recognised in the income statement. The Group has not yet determined the potential effects of the amended standard on the Group’s financial report (iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 The revised AASB 101 will become mandatory for the group’s 30 June 2010 financial statements. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet, this one being as at the beginning of the comparative period. The Group has not yet determined the full potential effect of the revised standard on the group’s disclosures.


Page 29



Australian Accounting Standards not yet effective (continued)

(iv) Revised AASB 123 Borrowing Costs Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 will become mandatory for the Group’s 30 June 2010 financial statements and will constitute a change in accounting policy for the group. In accordance with the transitional provisions the Group will apply the revised AASB 123 to qualifying assets for which capitalisation of borrowings costs commences on or after the effective date. The Group has not yet determined the potential effect of the revised standard on future earnings. (v) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payment: Vesting Conditions and Cancellations changes the measurement of share-based payments that contain non-vesting conditions. AASB 2008-1 becomes mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effects of the amended standard on the Group’s financial report


Page 30



2008 $

2007

$

2008

$

2007

$ NOTE 2 - REVENUE

Revenues from operating activities

Revenue from sales and services 17,792,339 13,511,762 - -

Total revenues from operating activities 17,792,339 13,511,762 - -

Revenues from non-operating activities

Interest – other persons 232,518 29,793 168,031 4,482

Other revenue - - 119,097 55,357

Realised gains on foreign exchange 285,353 - 285,353 -

Unrealised gains on foreign exchange 161 - 161 -

Total revenues from non-operating activities 518,032 29,793 572,642 59,839

Total revenues 18,310,371 13,541,555 572,642 59,839

NOTE 3 - LOSS FOR THE YEAR

(a) Expenses

Depreciation of current assets

Building and improvements - 1,936 - -

Total depreciation of current assets - 1,936 - -

Depreciation of non-current assets

Property, plant and equipment 164,828 138,552 5,813 5,843

Total depreciation of non-current assets 164,828 138,552 5,813 5,843

Amortisation of non-current assets

Goodwill - - - -

Leasehold improvements 434 9,602 - -

Total amortisation of non-current assets 434 9,602 - -

Total depreciation and amortisation expense of non-current assets

165,262 148,154 5,813 5,843

Total depreciation and amortisation expenses 165,262 150,090 5,813 5,843

Cost of inventories recognised as an expense 10,823,798 8,176,401 - -

Finance costs

Other persons 39,103 198,286 11,607 176,263

Total finance costs 39,103 198,286 11,607 176,263


Page 31



NOTE 3 - LOSS FOR THE YEAR (continued)

2008 $

2007

$

2008

$

2007

$

(b) Salaries and employee benefits expense

Salary and employee benefits

(4,716,517)

(3,562,418)

(871,127)

(252,521)

Share /option based payments (20,000) (52,339) - -

Total Salaries and employee benefits expense (4,736,517) (3,614,757) (871,127) (252,521)

(c) Administration and other expenses

Corporate administration costs (1,845,352) (823,630) (1,564,911) (736,491)

Occupancy costs (637,012) (490,994) (146,882) (46,828)

Travel costs (284,913) (138,283) (209,439) (10,219)

Communications costs (83,401) (75,233) (21,543) (6,094)

Other administrative expenses (265,535) (261,048) (141,098) (45,810)

Total administration and other expenses (3,116,213) (1,789,188) (2,083,873) (845,442)

NOTE 4 - INCOME TAX

(a) The components of tax expense comprise:

Current tax - - - -

Deferred tax - - - -

- - - -

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

Operating (loss) before income tax (536,331) (389,951) (2,399,778) (1,227,397)

Prima facie tax on operating (loss) at the statutory income tax rate of 30% (2007: 30%)

160,899 116,985 719,933 368,219

Tax effect of permanent differences:

- Other items (share option expense) (6,000) (15,702) - (15,702)

Income tax benefit / (expense) 154,899 101,283 719,933 352,517

Future tax benefit recognised / (not recognised) (154, 899) (101,283) (719,933) (352,517)

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

Balance of franking account at balance date 523,709 523,709 523,709 523,709


Page 32


NOTE 4 - INCOME TAX (continued)


2008 $

2007

$

2008

$

2007

$

Income tax losses

The following deferred tax assets have not been brought to account as assets:

Tax losses – revenue 2,631,137 2,476,238

Tax losses – capital 4,684,450 4,684,450

Total tax losses 7,315,587 7,160,688

A deferred tax asset for the consolidated entity has not been brought to account at the reporting date.

The deferred tax asset will only be obtained if:

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

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

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

Tax consolidation

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

NOTE 5 – TRADE AND OTHER RECEIVABLES

Current

Trade receivables* 4,802,165 3,011,075 - 51,103

Other receivables 23,967 31,485 68,100 66,243

Loans to controlled entities** - - 10,630,899 1,793,818

Total current receivables 4,826,132 3,042,560 10,698,999 1,911,164

* Trade receivables for the economic entity includes an amount of $720,000 due from Hydro Tasmania, pursuant to a rebate awarded and due from the Department of Infrastructure, Energy and Resources under the Renewable Remote Power Generation Program (RRPGP).

Hydro Tasmania (the applicant) on behalf of KI Solar Pty Ltd, applied and was awarded a grant under the RRPGP program. As the applicant, Hydro Tasmania is liable to return the funds to the Department of Infrastructure, Energy and Resources in the event that certain conditions of the rebate are not maintained, specifically the requirement that “All equipment that is part of the project and for which RRPGP funding is provided must remain at the project location for at least 5 years.”

In order to cover the potential liability of Hydro Tasmania, KI Solar Pty Ltd has provided a fixed and floating charge over its assets, which is expected to be released at the end of the 5 year term.

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


Page 33



2008 $

2007

$

2008

$

2007

$

NOTE 6 - INVENTORIES

Current

Raw materials, at cost 610,283 581,074 - -

Work in progress, at cost 567,841 361,154 - -

Total inventories 1,178,124 942,228 - -

NOTE 7 – OTHER ASSETS

Current

Prepayments 23,232 48,950 - -

Deposits 9,557 13,093 450 -

Total other assets 32,789 62,043 450 -

NOTE 8 – ASSETS HELD FOR SALE**

Land

At cost - 262,000 - -

Accumulated depreciation - - - -

Total land - 262,000 - -

Building and improvements

At cost - 83,000 - -

Accumulated depreciation - (1,936) - -

Total building and improvements - 81,064 - -

Total assets held for sale - 343,064 - -

** On 30 July 2007, the freehold land and buildings in Cooma NSW, sold by public auction on 16 June 2007 for $409,000 was settled.

NOTE 9 - FINANCIAL ASSETS

Investment in controlled entities at cost - - 2,052,165 2,051,965

Shares in other corporations at cost 15,003 15,003 15,000 15,000

Total other financial assets 15,003 15,003 2,067,165 2,066,965


Page 34


INTERESTS IN SUBSIDIARIES Controlled entities of CBD Energy Limited

Name Country of Incorporation

Percentage of equity held by the economic entity

Investment

2008 %

2007 %

2008 $

2007 $

A.C.N. 086 311 051 Pty Ltd***

(formerly CBD Online Pty Ltd

Australia 100 100 - -

A.C.N. 087 574 570 Pty Ltd***

(formerly CBD Online Australia Pty Ltd)


A.C.N. 106 309 111 Pty Ltd***

(formerly CBD Energy Management Pty Ltd)


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

Parmac Airconditioning & Mechanical Services Pty Ltd

Australia 100 100 1,311,865 1,311,865

Remote Area Power Systems Pty Ltd

Australia 100 100 100 100

CBD Project Holdings Pty Ltd Australia 100 100 - -

(formerly Lloyd Project Holdings Pty Ltd)

Lloyd Energy Australia Pty Ltd Australia 100 100 - -

KI Solar Pty Ltd Australia 100 - 100 -

CBD Labs Pty Ltd Australia 100 - 100 -

Larkden Pty Ltd Australia 100 - - -

Total 2,052,165 2,051,965

All entities operated solely in their place of incorporation. *** On 3rd April 2007 the dormant entities, A.C.N. 086 311 051 Pty Ltd, A.C.N. 087 574 570 Pty Ltd and A.C.N. 106 309 111 Pty Ltd were placed into a members voluntary liquidation. The dormant entities are in the final stages of liquidation, which is expected to be completed on or before 31 December 2008. INTERESTS IN JOINT VENTURE ENTITIES Remote Area Power Systems Pty Ltd has a 50% interest in RE Storage Pty Ltd and Integrated Energy Solutions Pty Ltd (known as Wind Energy Storage Pty Ltd prior to a name change on 9/5/2008) with Hydro Tasmania, acquired as part of the asset acquisition agreement with Lloyd Energy Systems Limited on 7th December 2006. As at 30 June 2008, the joint venture entities did not directly hold any assets.


Page 35



2008

$ 2007

$ 2008

$ 2007

$ NOTE 10 - PLANT AND EQUIPMENT

Computer hardware & software

At cost 79,165 62,637 20,575 -

Accumulated depreciation (35,342) (30,513) (2,245) -

Total computer hardware & software 43,823 32,124 18,330 -

Motor vehicles

At cost 194,902 73,327 - -

Accumulated depreciation (22,627) (9,987) - -

Total motor vehicles 172,275 63,340 - -

Plant and equipment

At cost 1,059,791 336,928 - -

Accumulated depreciation (215,804) (170,368) - -

Total plant and equipment 843,987 166,560 - -

Furniture, fittings & office equipment

At cost 74,372 27,576 44,733 -

Accumulated depreciation (20,690) (12,916) (3,568) -

Total furniture, fittings & office equipment 53,682 14,660 41,165 -

Leased motor vehicles

At cost 402,585 387,688 - -

Accumulated amortisation (125,182) (82,887) - -

Total leased motor vehicles 277,403 304,801 - -

Leasehold improvements

At cost 17,378 17,378 - -

Accumulated amortisation (11,606) (11,172) - -

Total leasehold improvements 5,772 6,206 - -

Capital work in progress

At cost 1,111,054 583,216 - -


Total capital work in progress 1,111,054 583,216 - -

Land and building

At cost 127,500 - - -


Total land and building 127,500 - - -

Total plant and equipment

At cost 3,066,747 1,488,750 65,308 -

Accumulated amortisation/depreciation (431,251) (317,843) (5,813) -

Total plant and equipment 2,635,496 1,170,907 59,495 -

Assets pledged as security: other than as disclosed in Note 27, none of the consolidated entity’s assets were pledged as security under financial arrangement during the years ended 30 June 2008 and 30 June 2007.


Page 36


NOTE 10 - PROPERTY, PLANT AND EQUIPMENT (continued)

Reconciliations

Economic Entity

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

Carrying amount at 1

July 2007 Additions Disposals

Depreciation /

Amortisation expense

Carrying amount at 30 June

2008

Computer Hardware & Software 32,124 28,671 (974) (15,998) 43,823

Motor Vehicles 63,340 150,329 (17,764) (23,630) 172,275

Plant and Equipment 166,560 738,614 (6,585) (54,602) 843,987


14,660 47,496 (201) (8,273) 53,682

Leased motor vehicles 304,801 51,072 (16,145) (62,325) 277,403

Leasehold improvements 6,206 - - (434) 5,772

Capital work in progress 583,216 527,838 - - 1,111,054

Land and building - 127,500 - - 127,500

1,170,907 1,671,520 (41,669) (165,262) 2,635,496

Parent Entity

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

Carrying amount at 1

July 2007 Additions Disposals

Depreciation /

Amortisation expense

Carrying amount at 30 June

2008

Computer Hardware & Software - 20,575 - (2,245) 18,330


- 44,733 - (3,568) 41,165

- 65,308 - (5,813) 59,495


Page 37



2008 $

2007

$

2008

$

2007

$

NOTE 11 - INTANGIBLES

Goodwill –at cost

1,547,926

1,547,926 - -

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

1,507,539 1,507,539 - -

Licence & patents 6,578,024 293,616 - -

Development costs 250,701 237,088 - -

Total intangibles 8,336,264 2,038,243 - -

Reconciliation

Goodwill

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

Additions - - - -

Impairment writedown - - - -

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

Licence and Patents

Balance at beginning of the year 293,616 293,616 - -

Additions 6,284,408 - - -


Balance at end of the year 6,578,024 293,616 - -

Development costs

Balance at beginning of the year 237,088 - - -

Additions 13,613 237,088 - -


Balance at end of the year 250,701 237,088 - -

Intangibles are allocated to cash-generating units based on the group’s reporting segments.

2008

$ 2007

$

Energy services

Goodwill - Captech 340,895 340,895

License 293,616 293,616

Patents – Larkden 6,284,408 -

Development Costs 250,701 237,088

Mechanical services

Goodwill - Parmac 1,166,644 1,166,644

Total 8,336,264 2,038,243


Page 38


NOTE 11 – INTANGIBLES (Continued) Impairment testing for cash-generating units containing goodwill For the purpose of impairment testing, goodwill is allocated to the Group’s operating segments (divisions) During the 30 June 2008 financial year, the Company assessed the recoverable amount of goodwill for both Captech and Parmac and determined that goodwill associated with each Company is not impaired. The recoverable amount of the cash-generating unit, being the assets of the Company, was assessed by reference to the cash-generating unit’s value-in-use. Value-in-use is calculated based on the present value of cash flow projections over a 4-year period with a terminal value based on year 4 projections. The cash flows are discounted using a rate of 25% and use annual growth rates of between 1% to 5%. Management believes that any reasonable possible change in the key assumptions in which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate carrying amount of those cash-generating units. Recoverability of license costs, development costs and capital works in progress The carrying amount of the sub-license acquisition cost of $293,616, acquired from Lloyd Energy in December 2006, to use the graphite block energy storage technology. The technology is a patented high temperature thermal energy storage system which allows electrical energy to be stored in the form of heat, within the graphite block and then used for electricity generation. The carrying amount of development costs of $250,701 represents the Group’s 50% share of the costs incurred for the development of the King Island Power Station, situated on the site of the Hydro Tasmania’s Currie power station. The carrying amount of capital works in progress of $1,111,054 (as disclosed in note 10 – Plant and equipment) represents the cost to construct the proto-type graphite block energy storage technology, which is located at our Silverwater premises and to be used for the King Island project. The combined recoverable amount of the licence costs, development costs and capital works in progress, as detailed above was assessed by reference to the cash-generating unit’s value-in-use. Value-in-use is calculated based on the present value of cash flow projections over the expected 25 year life of the King Island project. The cash flows are discounted using a rate of 15% and use an annual load growth rate of 3%. Recoverability of Patents – Larkden The carrying amount of patents of $6,284,408 represents the cost to acquire Larkden Pty Ltd, the owner and holder of patents relating to the graphite energy storage technology. The transaction to acquire Larkden was approved by members of CBD Energy Limited at an EGM held on 18th June 2008. The recoverable amount is supported by the valuation undertaken as part of the independent experts report by VMC Global, dated 24 April 2008. A discounted cash flow model was used by VMC Global to value Larkden based on the present value of cash flow projections over the period from 2008 to 2017, discounted using a rate of 15.75% and incorporating a growth model that aims to gain approximately 19% of the remote area power storage market of 514MW over approximately 85 project sites in the 10 year period from 2008 to 2017.


Page 39



2008 $

2007

$

2008

$

2007

$ NOTE 12 - TRADE AND OTHER PAYABLES

Current

Trade creditors 1,997,054 1,801,414 67,814 248,832

Accruals 478,984 481,216 165,320 76,498

Loans from controlled entities* - - 837,793 561,955

Total current payables 2,476,038 2,282,630 1,070,927 887,285

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

NOTE 13 – FINANCIAL LIABILITIES

Current

Share application monies received in advance - 4,740,504 - 4,740,504

Finance leases 53,115 63,007 - -

Total current financial liabilities 53,115 4,803,511 - 4,740,504

Non-current

Secured

Finance leases 245,083 251,458 - -

Loan - 588,393 - 588,393

Total non-current financial liabilities 245,083 839,851 - 588,393

Total financial liabilities 298,198 5,643,362 - 5,328,897

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

Details of finance lease commitments are disclosed in note 18.

NOTE 14 - PROVISIONS

Employee entitlements 325,570 268,246 - -

Total current provisions 325,570 268,246 - -

Reconciliation: Economic Entity Parent Entity

Balance at 1 July 2007 268,246 -

Additional provisions 126,078 -

Amounts used (68,754) -

Balance at 30 June 2008 325,570 -


Page 40


NOTE 15 - ISSUED CAPITAL

Notes Economic Entity Parent Entity

2008 $

2007

$

2008

$

2007

$

(a) Share capital

Ordinary shares fully paid 15(b) 79,536,896 63,193,266 79,536,896 63,193,266

79,536,896 63,193,266 79,536,896 63,193,266

(b) Movements in ordinary shares on issue

2008 2007

No of shares $ No of shares $

Beginning of the financial year 98,958,731 63,193,266 70,551,071 60,622,205

Issue of shares 118,084,550 16,664,796 28,407,660 2,582,073

Transaction costs relating to shares issued - (321,166) - (11,012)

End of the financial year 217,043,281 79,536,896 98,958,731 63,193,266

On 24 August 2007, pursuant to Extraordinary General Meeting held on 15 June 2007, the Company issued:

i. 27,800,000 shares at 14 cents each raising $3,892,000

ii. 12,400,000 shares at 5 cents each to satisfy outstanding loan and executive contract of employment

iii. 15,000,000 unlisted options, granted on 15 June 2007 and exercisable at 25 cents each on or before 30 June 2011 to a director.

On 14 September 2007, pursuant to Extraordinary General Meeting held on 15 June 2007, the Company issued 42,200,000 shares at 14 cents each raising $5,908,000.

On 18 June 2008, pursuant to Extraordinary General Meeting held on 18 June 2008, the Company issued 35,684,550 shares valued at 17.5 cents each as purchase consideration for the acquisition of Larkden Pty Ltd.

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.


Page 41


NOTE 15 - ISSUED CAPITAL (continued)

(c) Share options

Options over ordinary shares:

The following options to purchase fully paid ordinary shares in the Company were outstanding at 30 June 2008:

Number of Options

Date Granted Opening Balance 01/07/07

Granted/

(exercised)

Lapsed Closing Balance 30/06/08

Exercise Price

$

Exercise Period

Unlisted Options

29 November 2006 7,500,000 - - 7,500,000 $0.10 30 June 2011

15 June 2007 15,000,000 - - 15,000,000 $0.25 30 June 2011

Sub-Total 22,500,000 - - 22,500,000

(d) Terms and conditions of contributed equity

Ordinary shares

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

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

(e) 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 and financial liabilities, supported by financial assets.

There are no externally imposed capital requirements.

NOTE 16 – RESERVES


2008 $

2007

$

2008

$

2007

$

Reserves

Share option reserve 52,339 52,339 52,339 52,339

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


Page 42


NOTE 17 - CASH FLOW STATEMENT


2008

$ 2007

$ 2008

$ 2007

$

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

Net loss (536,331) (389,951) (2,399,778) (1,227,397)

Non-cash items

Depreciation and amortisation of non-current assets 165,262 150,090 5,813 5,843

Share based payment recognised 20,000 52,339 - 52,339

(Profit) /loss on sale of property plant & equipment (34,191) 2,784 - 7,167

Realised gains on foreign exchange (285,353) - (285,353) -

Unrealised gains on foreign exchange (161) - (161) -

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

(Increase) / Decrease in trade and other receivables (1,783,572) (1,082,751) 49,246 (115,706)

(Increase) / Decrease in inventories (235,896) (332,426) - -

Decrease / (Increase) in other assets 29,254 17,989 (450) 8,113

(Decrease) / increase in trade and other creditors 154,099 588,084 (92,196) 93,623

(Decrease) / increase in other financial liabilities 11,607 38,393 11,607 38,393

(Decrease) / Increase in provisions 57,324 127,568 - -

Net cash flow from operating activities (2,437,958) (827,881) (2,711,272) (1,137,625)

(b) Reconciliation of cash

Cash and cash equivalent s balance comprises:

- cash assets 5,272,955 3,969,848 3,421,390 3,470,773

Closing cash and cash equivalents balance 5,272,955 3,969,848 3,421,390 3,470,773

(c) Non cash financing and investing activities - Acquisition of entities On 15 April 2008, the Company signed an agreement with I – Sol Ventures Gmbh to acquire its wholly-own subsidiary, Larkden Pty Ltd along with other international patent applications relating to the reduction and purification of silica and thermal engine technology. The non-cash acquisition consideration of $ 6,244,796 was satisfied with the issue of 35,684,550 ordinary shares of the Company which was approved in the Extraordinary General Meeting held on 18 June 2008. On 24 August 2007, the company issued 12,000,000 shares at 5 cents each to satisfy an outstanding loan to Souls Private Equity Limited and 400,000 shares under the terms of an executive contract of employment for executives of Captech and Parmac , both subsidiary entities of CBD.


Page 43


NOTE 18 – LEASING COMMITMENTS


Lease expenditure commitments Finance leases (non-cancellable)

2008

$

2007

$

2008

$

2007

$

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

Minimum lease payments

- not later than one year 75,732 86,019 - -

- later than one year but not later than five years 280,487 298,522 - -

Total minimum lease payments 356,219 384,541 - -

Future finance charges



Total future finance charges 58,021 70,076 - -

Total finance lease liabilities 298,198 314,465 - -

- Current liability 53,115 63,007 - -

- Non current liability 245,083 251,458 - -

Total finance lease liabilities 298,198 314,465 - -

Operating leases

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

Minimum lease payments



615,743 649,484 - -

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

NOTE 19 – CONTINGENT LIABILITIES Controlled entities

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


Page 44


NOTE 20 - SUBSEQUENT EVENTS

On 9th April, 2008, the company’s wholly owned subsidiary, Parmac Air Conditioning & Mechanical Services Pty Ltd executed a contract for the acquisition of land and buildings situated at 15 Terracotta Drive, Blackburn VIC for $ 1,275,000 plus GST.

Settlement of the property took place on 1st September and the balance paid on settlement was $ 1,275,015. (GST Inclusive)

On 8th September 2008, the composition of the board of Directors changed. Mr Mark Vaile and Mr James Link were appointed directors and subsequently Messrs Warczak and de Gouveia resigned from the board.

On 8th September 2008, the new Board approved the following transactions with Buildev;

(a) Singleton Co-Venture Deed between the Company and Singleton Green Pty Ltd (ACN 120 098 320);

(b) Bowen Co-Venture Deed between the Company and BD (Qld) Project G061 Pty Ltd (as trustee of

the BD (Qld) Project G061 Unit Trust) (ACN 124 718 707);

(c) Emerald Co-Venture Deed between the Company and BD (Qld) Project G075 Pty Ltd (as trustee of

the BD (Qld) Project G075 Unit Trust) (ACN 119 969 274);

The Singleton Co-Venture Deed is subject to a condition precedent that requires CBD Energy Limited to complete a

capital raising of at least $AUD 25 Million by 19 December 2008. The Singleton Co-Venture Deed also requires CBD

Energy Limited to pay a signing fee of $500,000.

In the event that the condition precedent requiring CBD Energy Limited to complete a capital raising of at least $AUD

25 Million by 19 December 2008 is not satisfied, Buildev will be entitled to retain the signing fee of $500,000. The

Company has appointed LH Financial (LHF) a New York based private equity investment firm, to manage a proposed

capital raising for CBD.

The signing fee of $500,000 was subsequently paid by CBD Energy Ltd into the Co-Venture bank account on 11th

September 2008.

Other than the matters discussed above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.

NOTE 21 - EARNINGS PER SHARE Economic Entity

2008 2007

$ $

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

Earnings used in calculating basic earnings per share (536,331) (389,951)

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

Net loss from continuing operations (536,331) (389,951)

Loan interest 11,607 38,393

Earnings used in calculating diluted earnings per share (524,724) (351,558)


Page 45


NOTE 21 - EARNINGS PER SHARE - Continued

Number of Number of

Shares

2008

Shares

2007

Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS 168,047,527 85,859,173

Weighted average number of options outstanding 14,228,027 5,043,145

Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS 182,275,554 90,902,318

Overall operations:

Basic earnings per share (loss) - cents (0.32)¢ (0.45)¢

Diluted earnings per share (loss) - cents (0.29) ¢ (0.39) ¢

NOTE 22 - AUDITORS’ REMUNERATION


2008 $

2007

$

2008

$

2007

$

Amounts received or due and receivable by the auditors for:

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

50,000 33,846 50,000 33,846

Taxation services 9,850 - 9,850

Corporate Services 4,000 - 4,000

Total remuneration of auditors 63,850 33,846 63,850 33,846


Page 46


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

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

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

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

(i) At balance date the parent entity owed Capacitor Technologies Pty Ltd $201,618 (2007: receivable $61,619). The movement in the loan amount relates to working capital advances by the subsidiary to its parent entity.

(ii) At balance date the parent entity owed Parmac Airconditioning & Mechanical Services Pty Ltd $636,174 (2007: $500,336). The movement in the loan amount relates to working capital advances by the subsidiary to its parent entity.

(iii) At balance date, Remote Area Power Systems Pty Ltd owed the parent entity $4,346,491 (2007: $1,793,818). The movement in the loan amount related to working capital advances by the parent entity to its subsidiary.

(vi) At balance date, CBD Labs Pty Ltd owed the parent entity $6,284,408 (2007: $nil). The movement in the loan amount related to the acquisition of Larkden Pty Ltd

(b) Ultimate parent

CBD Energy Limited is the ultimate parent company.

(c) Director related transactions

(i) During the financial year ending 30 June 2008, TRW Holdings Pty Ltd, an entity in which a Director, Gerry McGowan has a direct interest, received payments for executive services provided by Mr Gerry McGowan and for the reimbursement of travel expenses and other operating disbursements incurred on behalf of the company. The total amount paid or payable to TRW Holdings Pty Ltd was $623,560. (2007:$ 341,895).

(ii) During the financial year ending 30 June 2008, the Company acquired office equipment, furniture and fittings from TRW Holdings Pty Ltd, an entity in which a Director, Gerry McGowan has a direct interest. The assets were acquired at market value. The total amount paid or payable to TRW Holdings Pty Ltd was $52,558 (2007: $nil).

(iii) On 26th November 2007, a director, Mr John de Gouveia commenced full time employment with CBD Energy Limited as Chief Financial Officer and Company Secretary. Previously the accounting, CFO and company secretarial services provided by Mr de Gouveia was via a commercial arrangement with his previous employer, Corporate and Administrative Services Pty Ltd, being a entity in which Mr de Gouveia previously held a 25% direct interest, as part of those employment arrangements, which simultaneously ceased on 26th November 2007 upon joining CBD on a full time basis. Fees, reimbursement of travel expenses and other disbursements paid or payable to Corporate and Administrative Services Pty Ltd was $ 63,182 (2007: $140,594)

Amounts paid directly to Mr de Gouveia from 26/11/07 to 30/6/08 for the reimbursement of travel expenses and other operating disbursements incurred on behalf of the company was $4,386 (2007: Nil)

(d) Key management personnel’s remuneration

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

(e) Key management related transactions

During the financial year ended 30 June 2008, the economic entity paid $28,336 (2007: $46,500) to CAMRAP Superannuation Fund, an entity related to Alan McClaren, Managing Director/CEO of Parmac, for rental lease of office building on normal commercial terms.


Page 47


NOTE 24 - SEGMENT INFORMATION

Business and Geographic Segments

The consolidated entity’s operating companies are organised and managed separately according to the nature of the products and services they provide, with each segment offering different products and serving different markets. Business Segments The consolidated group has the following two business segments:: 1. Energy Efficiency Solutions

• CapTech manufacture energy saving products (power factor correction equipment) and energy quality products (reactors and filters), and also supply components (capacitors) and energy consulting services. In general, their power correction equipment can reduce energy consumption by 25% and their other products provide for improvement in quality and thereby efficiency of power use.

• RAPS is an energy solutions company providing wind, solar and energy storage in an integrated solutions package. The company is focused on diesel reduction and the overall reduction of greenhouse gas emissions by providing renewable power technology to both on-grid and remote area power systems.

• CBD Labs is responsible for technology development and has already led groundbreaking development in the energy storage area with the development of its graphite based thermal energy storage system (RAPS ESM). The company will continue to refine the product as well as to examine and quantify new uses and partnerships to explore the technology. CBD Labs will manage the graphite storage patent and licence holders.

2. Mechanical Services Solutions

• Parmac provides a full range of mechanical services and air-conditioning services in support of developers, builders and commercial tenants at the mid tier level. Their speciality is working within existing mechanical services infrastructure and tight deadlines to deliver high-quality commercial grade air-conditioning solutions.

Segment accounting policies

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributable to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions and borrowings. Segment assets and liabilities do not include deferred taxes.

Intersegment transfers

Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment transactions are the same as those charged for similar goods to parties outside of the consolidated group at an arm’s length. These transfers are eliminated on consolidation.

Geographic Segments

The consolidated group’s business segments are located in Australia.


Page 48


NOTE 24 - SEGMENT INFORMATION (continued)

Primary Reporting – Business Segments

2008

Energy Services

$

Mechanical Services

$

Corporate

$

Eliminations

$

Economic Entity

$

Revenue outside the economic entity

6,785,575

10,952,154

287,128

-

18,024,857

Inter-segment revenue 1,542,065 - - (1,542,065) - Other revenue - - 285,514 285,514 Total revenue 8,327,640 10,952,154 572,642 (1,542,065) 18,310,371

Segment operating profit 571,930 1,291,517 (2,399,778) - (536,331)

Income tax expense - - - - - Operating profit / (loss)

after tax

571,930

1,291,517

(2,399,778)

-

(536,331)

Depreciation and Amortisation

73,805

85,644

5,813

-

165,262

Segment Assets 21,331,456 4,612,732 16,199,783 (21,389,264) 20,754,707

Unallocated Assets - - - - 1,507,539 Total Assets 22,262,246

Segment Liabilities 13,092,673 2,036,615 1,023,210 (13,052,692) 3,099,806

Unallocated Liabilities - - - - - Total Liabilities 3,099,806

Acquisition of non-current

assets 1,346,538 259,674 65,308 - 1,671,520

2007

Energy Services

$

Mechanical Services

$

Corporate

$

Eliminations

$

Economic Entity

$

Revenue outside the economic entity

5,265,107

8,223,319

53,129

-

13,541,555

Inter-segment revenue - - 6,709 (6,709) - Total revenue 5,265,107 8,223,319 59,838 (6,709) 13,541,555

Segment operating profit 337,528 499,916 (1,227,395) - (389,951)

Income tax expense - - - - - Operating profit / (loss)

after tax

337,528

499,916

(1,227,395)

-

(389,951)

Depreciation and Amortisation

61,240

83,008

5,842

-

150,090

Segment Assets 4,171,513 2,961,175 7,409,923 (4,466,254) 10,076,357

Unallocated Assets - - - - 1,507,539 Total Assets 11,583,896

Segment Liabilities 2,789,269 1,642,039 6,177,203 (2,414,273) 8,194,238

Unallocated Liabilities - - - - - Total Liabilities 8,194,238

Acquisition of non-current

assets 668,288 194,356 - - 862,644


Page 49


NOTE 24 - SEGMENT INFORMATION (continued)

Secondary Reporting – Geographic Segments

The consolidated group’s business segments operate predominately in one geographic segment located within the Sates and Territories of Australia.

NOTE 25 - FINANCIAL INSTRUMENTS The consolidated group’s financial instruments include trade and other receivables, payables, finance leases, cash and short term deposits. As a result of the group’s operations and sources of finance, it is exposed to credit risk, liquidity risk and market risk. Credit risk

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

Maximum exposure to credit risk June 2008 June 2007

Cash 5,272,955 3,969,848

Trade receivables** 4,802,165 3,011,075

Other receivables 23,967 31,485

10,099,087 7,012,408

** None of the Company’s receivables are past due (2007: nil). The aging of the Group’s trade receivables at the reporting date was:

AGING OF TRADE RECEIVABLES

Economic Entity

Gross 2008

$

Impairment 2008

$

Gross 2007

$

Impairment 2007

$

Current 2,201,530 - 1,658,770 -

Due: 1-30 days 1,278,239 - 1,078,318 -

Due: 31-60 days 326,854 - 59,932 -

Due: 60 days to one year 995,542 - 214,055 -

Due more than one year - - - -

Total Trade Receivables 4,802,165 - 3,011,075 -

Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables, as detailed in the above aging analysis, as the amounts shown are within agreed trading terms of 30 days. Amounts for periods ranging from 31 days to 180 days represent retention sums payable at various project stages and all customers that have a good credit history with the Group with no previous history of default.


Page 50


NOTE 25 - FINANCIAL INSTRUMENTS (continued) Liquidity risk Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Maturity analysis for financial liabilities:

30 June 2008

Due within

1 year $

Due between 1 to 5 years

$

Total $

Payables 2,476,038 - 2,476,038

Financial liabilities 53,115 245,083 298,198

Provisions - 325,570 325,570

Total financial liabilities 2,529,153 570,653 3,099,806

30 June 2007

Due within

1 year $

Due between 1 to 5 years

$

Total $

Payables 2,282,630 - 2,282,630

Financial liabilities 5,391,904 251,458 5,643,362

Provisions - 268,246 268,246

Total financial liabilities 7,674,534 519,704 8,194,238

Payables

The Group’s trade payables are typically settled between 30 to 60 days and represent amounts due to established

suppliers of goods and services.

Financial Liabilities

As at 30 June 2008, the group’s financial liabilities represent amounts due under motor vehicle finance leases (refer

note 18 )

Amounts due within 1 year for the previous corresponding period includes an amount of $4,740,504 representing

share application monies received in advance, a convertible loan of $588,393 and motor vehicle finance leases of

$63,007.

Provisions

The Group’s provisions represent amounts due for employee entitlements to annual leave and long services.


Page 51


NOTE 25 - FINANCIAL INSTRUMENTS (continued) Market risk Market risk is the risk that changes in market prices such as interest rates will affect the group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising return.

Interest rate risk

The group’s exposure to market interest rates relates primary to the group’s long-term debt obligations. The level of debt is disclosed in note 13. As the nature of the debt is finance leasing, no interest rate swaps had been entered into during the term of the lease.

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

30 June 2008 Financial assets and liabilities

Note

Weighted Average Interest

Rate %

Interest bearing

$

Non-interest bearing

$

Total $

Financial assets

Cash – current 17(b) 6.80% 5,272,955 - 5,272,955

Trade and other receivables 5 - 4,826,132 4,826,132

Total financial assets 5,272,955 4,826,132 10,099,087

Financial liabilities

Payables 12 - 2,476,038 2,476,038

Financial liabilities 13 7.58% 298,198 - 298,198

Provisions 14 - 325,570 325,570

Total financial liabilities 298,198 2,801,608 3,099,806

Net financial assets/(liabilities) 4,974,757 2,024,524 6,999,281

30 June 2007 Financial assets and liabilities

Financial assets

Cash – current 17(b) 2.83% 3,969,848 - 3,969,848

Trade and other receivables 5 - 3,042,560 3,042,560

Total financial assets 3,969,848 3,042,560 7,012,408

Financial liabilities

Payables 12 - 2,282,630 2,282,630

Financial liabilities 13 10.4% 902,858 4,740,504 5,643,362

Provisions 14 - 268,246 268,246

Total financial liabilities 902,858 7,291,380 8,194,238

Net financial assets/(liabilities) 3,066,990 (4,248,820) (1,181,830)

At 30 June 2008, if interest rates had moved, with all other variables held constant, post tax profit and equity would have been affected as below:

Post tax profit

Higher/(lower)

Equity

Higher/(lower)

2008 2007 2008 2007

+1.0% I100 basis points) 34,639 25,588 34,639 25,588

-1.0% (100 basis points) (34,639) (25,588) (34,639) (25,588)


Page 52


NOTE 25 - FINANCIAL INSTRUMENTS (continued)

Foreign exchange risk

The group operates predominately in Australia and reports in Australian dollars. The group maintains a foreign currency account upon capital injection from Solon AG. The group also made purchases for materials at different currencies. As a result, the group is exposed to foreign currency risks arising from movements in foreign currency exchange rates and no hedge is taken for foreign currency risk.

The group’s exposure to foreign currency risk at reporting date was:

2008

Euro USD YEN

Cash and cash equivalent 22,704 - -

Payables (54,270) (4,943) (83,300)

Net exposure (31,566) (4,943) (83,300)

2007

Euro USD YEN

Cash and cash equivalent 2,000,272 - -

Payables (66,950) - (132,000)

Net exposure 1,933,322 - (132,000)

At 30 June 2008, if foreign exchange rates had moved, with all other variables held constant, post tax profit and equity would have been affected as below:

Post tax profit

Higher/(lower)

Equity

Higher/(lower)

2008 2007 2008 2007

Foreign exchange +10% (4,855) 243,614 (4,855) 243,614

Foreign exchange -10% 3,972 (199,320) 3,972 (199,320)

NOTE 26 – KEY MANAGEMENT PERSONNEL COMPENSATION

(a) Details of key management personnel

Name of individual Position held Period of responsibility

Gerry McGowan Executive director: CEO 1 Jul 07 – 30 Jun 08 (i)

Michael Warczak Non–executive director 1 Jul 07 – 30 Jun 08

John de Gouveia

Non-executive director Executive director

1 Jul 07 – 26 Nov 07 26 Nov 07 – 30 June 08

Mark Fogarty Commercial director 1 Jul 07 – 30 Jun 08 (i)

Alan McClaren Managing Director/CEO: Parmac 1 Jul 07 – 30 Jun 08 (i)

Yury Brodsky Managing Director/CEO: CapTech 1 Jul 07 – 30 Jun 08 (i)

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


Page 53


NOTE 26 – KEY MANAGEMENT PERSONNEL COMPENSATION (continued)

(b) Remuneration of key management personnel

(i) Remuneration Policy

The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves, the Chief Executive Officer and the executive management team. It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive management team by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions and their experience and expertise.

(ii) Remuneration of key management personnel

Year Primary Primary Bonus

Superannuation Equity Total

$ $ $ $ $ Gerry McGowan 2008 450,000 - 4,950 - 454,950

2007 55,000 - 4,950 52,339 112,289

John de Gouveia 2008 184,166 - 16,167 - 200,333

2007 50,000 - 4,500 - 54,500

Michael Warczak 2008 - - 49,050 - 49,050

2007 45,000 - 4,050 - 49,050

Mark Fogarty 2008 144,474 - 50,758 - 195,232

2007 - - - - -

Yury Brodsky 2008 128,008 - 34,600 10,000 172,608

2007 130,008 15,000 10,800 - 155,808

Alan McClaren 2008 137,158 - 60,817 10,000 207,975

2007 156,613 15,336 22,698 - 194,647

Total Remuneration 2008 1,043,806 - 216,342 20,000 1,280,148

2007 436,621 30,336 46,998 52,339 566,294


Page 54



(b) Remuneration of key management personnel (continued)

(iii) Shareholdings of key management personnel

2008

Opening balance 1 July 2007

Granted as remuneration

On exercise of options

Net change other*

Closing balance 30 June 2008

Gerry McGowan 17,588,925 - - - 17,588,925

John de Gouveia - - - - -

Michael Warczak 12,530,000 - - - 12,530,000

Mark Fogarty 500,000 - - 185,500 314,500

Yury Brodsky - 200,000 - - 200,000

Alan McClaren

- 200,000 - - 200,000

Total 30,618,925 400,000 - 185,500 30,833,425

2007



On exercise of options

Net change other**


Gerry McGowan 12,588,925 - - 5,000,000 17,588,925

John de Gouveia - - - - -

Michael Warczak 7,530,000 - - 5,000,000 12,530,000

Mark Fogarty - - - - -

Yury Brodsky - - - - -

Alan McClaren

- - - - -

Total 20,118,925 - - 10,000,000 30,118,925 On 15 June 2007, the Company held an EGM which approved the issue of 200,000 ordinary shares at 5 cents each to Alan McClaren and 200,000 ordinary shares at 5 cents each to Yury Brodsky in accordance with their executive contracts of employment. Shares were issued on 24 August 2007.

* The column heading “Net change other” during the 2008 year refers to shares purchased or sold during the financial year.

** The column heading “Net change other” during the 2007 year relates to an acquisition of shares by way of a share placement, approved by members at the Annual General Meeting held on 29th November 2006


Page 55



(b) Remuneration of key management personnel (continued) (iv) Option holdings of key management personnel (ASX Listed “CBDO”)

2008

The Company did not have listed options on issue during the year ended 30 June 2008

2007



Net change other*


Gerry McGowan - - - -

John de Gouveia - - - -

Michael Warczak 500,000 - (500,000) -

Mark Fogarty - - - -

Yury Brodsky - - - -

Alan McClaren

- - - -

Total 500,000 - (500,000) -

(v) Unlisted option holdings of key management personnel 2008 Note



Net change other


Gerry McGowan (a) 2,500,000

- - 2,500,000

(b) 15,000,000 - - 15,000,000

John de Gouveia (a) 2,500,000 - 2,500,000

Michael Warczak (a) 2,500,000 - 2,500,000



Alan McClaren

- - - - Total 22,500,000 - - 22,500,000

2007



Net change other


Gerry McGowan (a) - 2,500,000 - 2,500,000

(b) - 15,000,000 - 15,000,000

John de Gouveia (a) - 2,500,000 - 2,500,000

Michael Warczak (a) - 2,500,000 - 2,500,000



Alan McClaren

- - - -

Total - 22,500,000 - 22,500,000

On 15 June 2007, the Company held an EGM which approved the issue of 15,000,000 incentive options to Gerry McGowan. The incentive options are exercisable at 25 cents on or before 30 June 2011. The incentive options were subsequently issued by the Company to Mr McGowan on 24th August 2007.

Note (a) – Unlisted options exercisable at 10 cents on or before 30 June 2011

Note (b) - Unlisted options exercisable at 25 cents on or before 30 June 2011

* The column heading “Net change other” refers to options lapsed during the financial year.


Page 56



(v) Contracts of employment

Gerry McGowan

Chief Executive Officer CBD Energy Limited

Consulting Agreement with TRW Pty Ltd

Gerry McGowan is engaged by CBD Energy Limited under a monthly consulting agreement with TRW Pty Ltd to provide the full-time executive services of Gerry McGowan as the CEO of the company.

The consulting agreement is operating on a month-by-month basis.

The base contract amount is $ 395,000 pa. (GST exclusive)


The consulting agreement does not provide for the payment of a bonus. Bonus payments (if any) are discretionary and determined annually by the Board upon satisfactory achievement of KPI’s and meeting operating budgets.

John de Gouveia

Chief Financial Officer & Company Secretary CBD Energy Limited (Resigned 8/9/08)


John de Gouveia commenced with CBD Energy Limited on 26 November 2007, on a full time basis, as chief financial officer and company secretary. John is engaged on a month-by-month basis, with a period of notice of 1 month required to terminate the contract.




Mark Fogarty

Commercial director CBD Energy Limited


Mark Fogarty is employed by CBD Energy Limited under a contract of employment. The length of the contract is 5 years from 1 July 2007 to 30 June 2012, with a period of notice of 6 months required to terminate the contract.





Page 57



(v) Contracts of employment (continued)

Alan McClaren

Managing Director/CEO Parmac Airconditioning


Alan McClaren is employed by Parmac Airconditioning and Mechanical Services Pty Ltd under a contract of employment. The length of the contract was 3 years from 1 January 2004 to 1 January 2007, with a period of notice of 3 months required to terminate the contract. The contract was renewed on 1 January 2007 and will continue to 1 January 2012.

The base contract amount is $ 150,000 pa plus $30,000 superannuation component, plus a car allowance of $10,000 pa (total package $190,000).



Yury Brodsky

Managing Director/CEO CapTech


Yury Brodsky is employed by Capacitor Technologies Pty Ltd under a continuing contract of employment. The length of the initial contract was for 1 year from 1 December 2003 to 1 December 2004, with a period of notice of 1 month required to terminate the contract. A new contract was signed on 1 January 2007 and will continue until 30 June 2012.

The base contract amount is $140,000pa plus the superannuation guarantee levy, plus a car allowance of 10,000pa (total annual package $162,600).



In addition the company utilises electrical contracting services offered by Brodpower Pty Ltd, a company in which Yury Brodsky has a ownership interest.

The service contract with Brodpower Pty Ltd operates on a revenue share basis whereby CapTech makes a 25% margin on all electrical installation work outsourced to Brodpower Pty Ltd.

NOTE 27 - ASSETS PLEDGED AS SECURITY

The consolidated entity does not hold title to the equipment under finance lease pledged as security.

The consolidated entity has provided a fixed and floating charge over the assets of KI Solar , details of which are contained in Note 5.

Other than the matters discussed above, the consolidated entity did not have any other assets pledged as security in relation to financial assets or liabilities at balancing date.

NOTE 28 – AUTHORISATION

The financial report was authorised for issue on 25 September 2008 by the Board of Directors.


Page 58


NOTE 29 – COMPANY DETAILS The registered office of the company is: Suite 2 Level 2 53 Cross Street Double Bay NSW 2028 The principal places of business are: CBD Energy Limited Suite 2 Level 2 53 Cross Street Double Bay NSW 2028 Capacitor Technologies Pty Limited Unit 13 40 Edina Road Ferntree Gully VIC 3156 Parmac Air Conditioning & Mechanical Services Pty Ltd 160-162 Pakington Street Kew VIC 3156 Remote Area Power Systems Pty Ltd 54 Skarratt Street Silverwater NSW 2265 KI Solar Pty Ltd Suite 2 Level 2 53 Cross Street Double Bay NSW 2028 CBD Labs Pty Ltd Suite 2 Level 2 53 Cross Street Double Bay NSW 2028


Page 59

DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of the Company, the Directors declare that:

1. the financial statements and notes, as set out on pages 19 to 58, 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 Chief Executive Officer and Chief Financial 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.

This declaration is made in accordance with a resolution of the Board of Directors.

Gerry McGowan Director Sydney 25th September 2008


Page 63

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 15 September 2008.

(a) Distribution of equity securities

The number of shareholders, by size of holding, in each class of share are:

Ordinary Fully Paid Shares

Distribution of Shareholdings Number of Holders Number of Shares

1-1,000 790 248,563

1,001-5,000 466 1,258,545

5,001-10,000 209 1,751,855

10,001-100,000 420 14,824,570

100,001 and over 84 198,959,748

Total Number of Shareholders 1,969 217,043,281

The number of shareholders holding less than a marketable parcel of shares are:

1,122

923,185

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:

Listed Ordinary Shares Name of Holder Number of Shares Percentage of Ordinary Shares

1 I-Sol Ventures GMBH 35,684,550 16.44

2 Solon AG 33,860,744 15.60

3 Souls Private Equity Limited 23,071,429 10.63

4 TRW Holdings Pty Limited 15,833,512 7.30

5 UBS Wealth Management Australia Nominees Pty Ltd

13,743,849 6.33

6 Warczak Enterprises Pty Ltd <Warczak Super Fund A/C>

12,530,000 5.77

7 Cogent Nominees Pty Limited 8,471,403 3.90

8 ANZ Nominees Limited <Cash Income A/C> 7,803,389 3.60

9 HSBC Custody Nominees (Australia) Limited 7,014,623 3.23

10 Huntley Investment Company Limited 3,000,000 1.38

11 Citicorp Nominees Pty Limited 2,493,214 1.15

12 Buyers Network International Pty Ltd

<Super Fund A/C>

2,075,000 0.96

13 Mr Gregory Arthur Rector 2,000,000 0.92

14 Secure Portfolio Management Pty Ltd

<The SPM A/C>

2,000,000 0.92

15 Mr Francis Albert Robertson 1,999,998 0.92

16 Washington H. Soul Pattinson & Company Limited

1,785,715 0.82

17 Bamsky Pty Ltd

<McGowan Family Superfund A/C>

1,755,413 0.81

18 Wahgunyah Holdings Pty Ltd 1,742,913 0.80

19 Dixson Trust Pty Ltd 1,527,726 0.70

20 S & C Finlay Holdings Pty Limited 1,300,000 0.60

Total Top 20 179,693,478 82.78

Total issued capital 217,043,281 100.00


Page 64

ASX Additional Information (Continued)

(c) Substantial shareholders The names of the substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:

Number of Shares Percentage Held

Souls Private Equity Limited 23,071,429 10.63%

TRW Holdings Pty Ltd 17,588,925 8.10%

Warczak Enterprises Pty Ltd 12,530,000 5.77%

(d) Voting rights The voting rights attaching to each class of equity securities are set out below:

Subject to any special rights or restrictions for the time being attaching to any class of Shares and Articles 14.3, 14.6, 14.7, 14.8 and 15.10:

(a) on a show of hands at a meeting of Members, every Eligible Voter present has one vote; and

(b) on a poll at a meeting of Members, every Eligible Member (not being a Corporation) present in person or by proxy or attorney, and every Eligible Member (being a Corporation) present by a Representative or by proxy or attorney, has one vote for each Share that Eligible Member holds, but:

(i) if at any time there is on issue any Share which has not been fully Paid Up that Share on a poll will confer only that fraction of one vote which the amount paid (not credited) on that Share, excluding any amounts paid up in advance of the applicable due date for payment, bears to the total amounts paid and payable (excluding amounts credited) on that Share; and

(ii) if the total number of votes to which an Eligible Member is entitled on a poll does not constitute a whole number, then the Company will disregard the fractional part of that total.

(e) Other Information

There is no current on-market buy back in place,

Documents

CBD Annual Report June 2007 nobreaks - …content.stockpr.com/cbdenergy/media/e4da01e04fc1304646c92f02958f... · Auditor’s Independence Declaration ... 10/100 energy storage system,