ELDERS LIMITED - Annual Report 2008

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26 September 2008

Company Announcements Platform Australian Securities Exchange

FUTURIS ANNUAL REPORT

In accordance with Listing Rule 4.5.1, please find attached the Futuris Annual Report for the year ended 30 June 2008.

Ross Mallett Company Secretary

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2 0 0 8 A N N U A L R E P O R T

Re-alignment of strategy, capital and resources; to Focus on our core performing rural and regional businesses and the value generated by the primary production deliveR impRoved Financial and sector to; shaRe pRice peRFoRmance

Futuris corporation limited ABN 34 004 336 636

annual general meeting

The 2008 annual general meeting of Futuris Corporation Limited will be held on Tuesday 28 October at the Adelaide Festival Centre commencing at 10.00am Adelaide Time. A formal notice of meeting has been mailed to shareholders. Additional copies can be obtained from the Company’s registered office or down loaded from its website at www.futuris.com.au

terms and abbreviations

This report uses terms and abbreviations relevant to the Company’s activities and financial accounts. The terms “the Company”, “Futuris Corporation” and “Futuris” are used in this report to refer to Futuris Corporation Limited and or its subsidiaries. The terms “the year” and “2008” refer to the twelve months ended 30 June 2008 unless otherwise stated. Similarly, references to 2007 or 2008 refer to the twelve months to 30 June of that year. Unless otherwise specified, the term “30 June” refers to 30 June 2008.

	contents	Page
	Our Business	3
	2008: The year in brief	4
	From the Chairman: 2008 and the future	6
	Chief Executive’s Review	8
	Review of operations
	Elders Rural Services	12
	Elders Financial Services	16
	Forestry	18
	Automotive	21
	Directors’ biographical details	22
	Corporate Governance Report	23
	Directors’ Report Remuneration Report	34 39
	Discussion & analysis of financial statements	54
	10 year summary	56
	Annual Financial Report	57
	ASX additional information	144
	Shareholder Information	145

This document has been prepared to provide shareholders with an overview of Futuris Corporations’ performance for the 2008 financial year and its outlook.

The Annual Report is mailed to shareholders who elect to receive a copy and is available free of charge on request (see Shareholder Information printed in this Report). The Annual Report can also be accessed via the Company’s website at www.futuris.com.au

2OO8 was a CHaLLENGING yEar.

But also one which highlighted the quality of the company’s performing rural and regional assets.

The company revised its strategic agenda as initiatives in rural telecommunications were denied.

We identified greater value potential in Elders to be unlocked through a careful reinvestment program.

Agricultural markets strengthened and wheat marketing was deregulated, creating new business opportunities.

Initiatives taken in 2008 are crystallising in the new year as non-core assets are sold, debt is reduced, core businesses reformed and management transitions completed.

The end result is that we have narrowed our strategic focus to concentrate on the primary production sector and our core rural and regional assets which are well positioned to participate in the rising economic growth being generated by agricultural and forestry activities.

�

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�

Our BusINEss

We participate in and enable wealth generation from Australia’s internationally competitive rural and regional sector.

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4 million
16,500 grower 160,000 ha tree
rural and regional 70,000 farmers
investors plantations
dwellers
Financial services Rural services Forestry
• Elders Rural Bank • Merchandise and • Hardwood
• Elders Insurance farm supplies plantation
• Wealth Management • Livestock and meat establishment and
• Grain management
Revenue: • Wool • Harvest and export
• Real estate of woodfibre
$219 million
EBT [] : $35.3 million • Financial services • Sawmilling and
distribution value added timber
Employees [] : 315 products
Revenue:
$2,472 million Revenue:
EBIT [] : $60.7 million $231 million
EBIT [] : $61.3 million
Employees [] : 2,752
Employees [] : 426
World markets
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Underlying (ie exclusive of non-recurring items). Additional income in 2008 was also sourced from interests held in the automotive sector and Amcom Telecommunications.

** Full-time equivalent employees.

�

2OO8: tHE yEar IN BrIEF

An eventful year for Futuris

Financial results

Underlying profit of $8�.� million vs $�06.� million in �007
higher interest costs, a lower contribution from AACo and divestment of property operations
Non-recurring items totalling -$�7.8 million chiefly arising from Elders review, restructuring and discontinuation of non-core activities
Reported profit to shareholders of $�6.� million vs $�05.� million in �007
impact of non-recurring items and lower underlying profit
Year end gearing of �9% compared to ��% in �007
reflects higher debt levels and interest rates
Dividend maintained at 9.5 cents per share fully franked

Elders rural services

Underlying EBIT contribution up ��% to $60.7 million
strongest result yet, driven by network, grain and HiFert after drought-affected first half
Formation of Elders Toepfer Grain joint venture
proven successful in SA barley market, ready for wheat deregulation
Elders commences restructuring and business improvement process
reinvesting in core operations to lift performance

Elders Financial services

Earnings before tax (EBT) contribution of $�5.� million
in line with expectations in difficult market
Elders Rural Bank increased profit ��%
earnings and loans growth, improving credit metrics
Insurance EBT of $�8.� million, down from $��.9 million
claims experience return to normal levels, premium growth

Forestry

Underlying EBIT of $6�.� million vs $6�.6 million in �007
broadly maintained through growth in non-MIS income
MIS sales of $�7.6 million, down from $6�.5 million
below expectations
�0% price rise negotiated for plantation woodchip
demand for sustainable resource

automotive

Underlying EBIT up from $9.5 million to $�6.� million
benefits to Australian operations from prior year’s initiatives

Corporate

Withdrawal of funding for OPEL network by incoming Federal Government
OPEL network and Elders telecommunication strategy terminated
Corporate strategy re-stated
focus on performing rural & regional assets and the primary production sector
New CEO to be appointed
search process underway following resignation of Les Wozniczka

Key Financial results

Year ended 30 June

$ million	�008	2007	Change %
Sales Revenue	�,��.�	3,228.5	�%
Underlying EBIT	�7�.7	169.4	�%
Net interest	56.9	40.0	��%
Underlying proft before tax	��.8	129.4	-��%
Minority interests	9.6	2.8	��%
Tax on underlying proft	��.0	20.2	�%
Underlying Proft to shareholders	8�.�	106.4	-��%
Non-recurring items after tax	-�7.8	-1.0	n/m
Reported proft	�6.�	105.4	-65%
Cash fow from operating activities	-��.�	85.0	-��6%
Borrowings	768.0	610.4	�6%
Net Debt	5��.0	364.9	��%
Net Assets	�,�96.�	1,196.6	8%
Earnings per share– underlying basic	��.��	14.65	-��%
Earnings per share– reported basic	�.8�	14.51	-67%

n/m = not meaningful

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14.65
2.78
169 172 106 13.18
157
88 10.86 11.13
84 2.10
131 9.57
72 1.82
63 1.58
96
1.10
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
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EBIT (underlying $ million)

Profit after tax (underlying $ million)

Earnings per share Share Price (cents underlying) ($ per share)

2OO8 aNd tHE FuturE

From the Chairman

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Stephen Gerlach Chairman

It is clearly disappointing to report lower profit in a year when the Company’s earnings before interest and tax increased, and when our rural services, banking and automotive operations had their best results yet.

Despite the strong performances from Elders Rural Services and Elders Rural Bank, Futuris recorded a lower, and below expectation, underlying profit to shareholders of $84.2 million after tax, chiefly due to higher interest expense and a lower contribution from Australian Agricultural Company (AAco). This result compares to the 2007 and record underlying profit to shareholders of $106.4 million.

While reported profit has been affected by a number of non-recurring items, Directors have determined to maintain total dividends at 9.5 cents per share, fully franked.

This outcome, together with other events such as:

the cancellation of Federal funding for the OPEL rural and regional broadband network,
higher interest costs;
ongoing weakness in the Company’s share price;
and the opportunities provided by the emergence of a more favourable market outlook for soft commodities and the reinvigoration of Elders;
has led the board to decide that a realignment and acceleration of our strategy is required.

Our future is to be built around the primary production sector. The Company’s performing rural and regional businesses, most particularly Elders, occupy a leading and highly strategic position in the Australian agricultural sector. Board and management are resolved to execute divestment of non-core assets, reduce debt and concentrate the Company’s resources on its core businesses so that a greater share of income is translated into operating profit distributable to shareholders. Capital is being managed to support the objectives of lifting returns and shareholder value outcomes from the Company’s asset base.

The application of this strategy is evident in nonrecurring items of -$47.8 million after tax in the 2008 accounts, virtually all of which have resulted from the discontinuation or sale of non-core assets and projects and the restructuring of Elders Rural Services to be more closely aligned to its clients.

The divestment of non-core assets across the Company was advanced through the sale of shareholdings in Clean Seas Tuna and the divestment of the Rail and Bus thermal operations. Initiatives are in train for other non-core assets. In this respect a divestment process for our shareholding in Amcom Telecommunications was announced subsequent to year-end.

Other events during 2008 presented both challenges and opportunities.

The process of board renewal has continued with the appointment of Mr Hutch Ranck in June 2008 as a non-executive director. Hutch brings to Futuris the experience and judgement acquired through the performance of senior management roles in the chemical and agricultural chemicals sectors in Australia and abroad over a number of years. His present position is Managing Director, DuPont Australia and New Zealand.

Outlook

The volatility in financial markets added to the cost of debt but it has also highlighted the quality and value of the Company’s financial services licences. ITC’s sales of forestry Managed Investment Schemes fell short of target but the business benefitted from rising woodchip and land valuations. The prospect of carbon abatement and emissions trading schemes adds to the longer term value of ITC.

Finally, the deregulation of wheat marketing has delivered a new business opportunity, ideally suited to Elders’ far reaching relationships with the nation’s wheat farmers. Through the formation of the Elders Toepfer Grain joint venture we have taken the necessary steps to position Futuris to become an effective participant in the deregulated market.

Leadership

Shortly before year-end the Board accepted the resignation of Les Wozniczka from the position of Chief Executive.

We will continue with the non-core asset divestment program, and expect this will result in a reduction to debt levels during the 2009 financial year.

Futuris has built strong core businesses. The reinvestment in, and the ongoing concentration of resources around these operations in 2009, is expected to be progressively reflected in shareholder value gains as we realign our balance sheet, simplify our structure and focus management talent and effort on those businesses.

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Stephen Gerlach Chairman

Les’ efforts over the past ten years, including five years as CEO, have been responsible for the development of Futuris’ best assets, in particular Elders’ rise as the leading rural services organisation in Australia and the establishment and success of Elders Rural Bank. The Board of Directors wish to record their appreciation of Les’ contribution in establishing a solid foundation for the Company’s business.

The recruitment of a new Chief Executive is currently in progress and is expected to be completed within the current year.

Mike Guerin commenced as Managing Director of Elders Rural Services and we look forward to his contribution. I acknowledge the contribution made by Greg Hunt to Elders over 28 years, most particularly in the period since 1996 when the Elders business was acquired by the Company.

rEpOrt By tHE CHIEF ExECutIvE

From the CEO

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Les Wozniczka Chief Executive Officer

2008 was a challenging year for financial markets generally and has proven to be a highly significant year for Futuris.

The initiatives and decisions taken during the year have resulted in a rationalisation of its asset base which is in progress, a tighter focus of corporate strategy and the commitment to completing the business and balance sheet improvements that will deliver improved returns to shareholders.

Underlying this activity, the Company’s core operating businesses have, generally, performed solidly:

Elders Rural Services recorded its best financial results yet, a commendable result given the severe impact of drought on results for the first half;
Elders Financial Services demonstrated the quality of its business with a solid result amidst volatile financial markets; and
ITC effectively maintained EBIT despite lower MIS sales, benefitting from the rising value of plantation grown woodfibre and of agricultural land, rising harvest revenues and improvement from processing operations.

Automotive operations also had a good year, increasing profit generation considerably.

Collectively, these operations generated earnings before interest and tax of $171.7 million, the highest yet recorded by the Company.

Futuris is thus able to undertake change from a position of stability and confidence. Its core businesses, particularly Elders, are well positioned; it has a structured program for realisation of capital from non-core assets, and the resultant debt reduction will see a greater share of earnings flowing to profit.

Corporate development & strategic initiatives

As a result of developments during 2008 the Company has re-oriented its corporate strategy from that previously advised. The re-orientation has flowed from:

1) recognition of the desirability of improving returns, shareholder value outcomes and cash generation across the Company;
2) the decision by the incoming Federal Government that it would not provide funding for the OPEL rural and regional broadband network awarded by the previous Government;
3) higher interest rates and an increase in market wariness of debt as a result of the volatility in international financial markets.
4) the identification of substantial earnings potential within Elders Rural Services through business improvement and reform projects; and
5) the combination of significantly improved markets and values for agricultural inputs and outputs, and the new opportunities arising from the deregulation of the export grain sector.

Futuris has concentrated its corporate focus on the rural and regional sector, and debt reduction. The application of this philosophy was reflected in the following decisions and actions in 2008:

1) leadership change and the commitment to business improvement in Elders Rural Services. The recruitment and appointment of a new management team was initiated to bring a fresh approach to Elders Rural Services. The new management team has been charged with invigorating the organisation’s service delivery, operation and financial performance to best practice.
2) formation of the Elders Toepfer Grain joint venture as the vehicle for participation in deregulated grain markets. The joint venture matches Elders’ grain accumulation capabilities with the capabilities and presence of Toepfer International, a global grain originator, trader and logistics operator.
3) divestment of the non-core Rail and Bus Thermal operations. The divestment leaves Futuris Automotive and its shareholding in Air International Global Thermal as the sole remaining manufacturing assets. Divestiture of these assets is intended for 2009.
4) the decision to divest the Company’s 43% shareholding in AAco. This shareholding, while

consistent with the Company’s strategy, did not provide sufficient cash or shareholder value returns to justify retention. While the formal sale process failed to generate executable transactions prior to year end, the Company anticipates capital from the shareholding will be realised.

5) divestment of the Company’s shareholding in Clean Seas Tuna Limited. The sale yielded proceeds of $7.8 million and a profit of $1.4 million.
6) divestment of 22,000 hectares of plantation land by ITC to Agricultural Land Trust (formerly known as Westralia Land Trust). The transaction resulted in proceeds of $90.3 million, with the land being leased by ITC from Agricultural Land Trust under long term agreements.
7) the decision to divest the Company’s 50.4% shareholding in Amcom Telecommunications. It is expected that capital will be realised from this shareholding through the share placement and buy-back proposal announced by Amcom subsequent to year end. The proposal remains subject to Amcom shareholder approval.
8) decisions to discontinue non-core activities within Elders. The Elders strategic review identified activities and operations considered non-core due to their existing and projected returns or noncomplementarity. As a result, Elders has ceased non-indent greasy wool trading and will close certain assets and projects including horticulture supply chain operations.
9) acquisition of a 100% wholly owned equity position in Elders New Zealand. The acquisition of the outstanding 50% interests in Elders New Zealand will best facilitate the development of New Zealand operations within Elders Rural Services. The New Zealand farm sector presents as a significant increment to Elders’ existing business that also offers potential for enhancement of its dairy-related trade.

The continued application of this strategy in 2009 is expected to result in further rationalisation of the Company’s asset base and reinvestment around its core performing rural and regional assets.

Financial Results & position

Futuris generated an underlying profit to shareholders of $84.2 million for the year compared with the 2007 result and company record of $106.4 million. While lower than the previous year, the 2008 result is one of the highest achieved by Futuris, having only been exceeded twice.

The movement in underlying earnings compared with 2007 is attributable to a $16.9 million rise in interest expense, lower earnings from Australian Agricultural Company and the absence of earnings from the divested property operations, which contributed EBIT of $21.5 million to the previous year’s result. Futuris recorded an equity accounted loss of $4.1 million from its shareholding in AAco in 2008, which compares with the corresponding profit of $5.6 million in the previous year.

The 2008 accounts incorporated a number of significant non-recurring items which, collectively, totalled a charge of $47.8 million and reduced the reported (statutory) profit to shareholders to $36.4 million compared with $105.4 million in 2007.

Gearing as at 30 June was 29%, compared with 24% at the beginning of the year. The Company’s year-end financial position remains comfortably within its finance facilities and covenants.

Further detail on the non-recurring items and discussion of the financial results and position is provided in the Discussion and Analysis to the financial statements appearing on page 54.

Review of operations

Rural Services

Elders Rural Services had a demanding, but ultimately, good year.

The business recovered from a drought-affected first half year to record underlying EBIT of $60.7 million, up 24% on the previous year’s comparative. The result featured an extremely strong performance by its network and network-related operations, which lifted their EBIT contribution by 42%.

These gains were offset in part by lower income from agribusiness and joint venture interests which incurred a loss of $2.5 million, largely due to results from downstream wool processing. The achievement of satisfactory financial performance from these assets will be sought.

While Elders has performed relatively well through difficult seasonal conditions, it is the view of management that the business can, with the appropriate investment and change, provide much better returns. The improvement in soft commodity

markets and the opportunities created by the deregulation of grain markets have heightened the potential of the business.

The appointment of Mike Guerin as Managing Director, Elders Rural Services during the year completed the first stage of a management transition for the business. Under Mike Guerin’s leadership, a program of business reform and improvement is being pursued to lift Elders’ sales and margin performance.

Initiatives to date include the complete re-orientation of the business from a product-centric to a customer facing structure, the replacement of state offices and management structures to a regionally-based and sales-focussed system and the discontinuation of non-performing and non-core operations. The end result of the program will be a more efficient organisation with greater relevance and responsiveness to its clients, generating greater value for shareholders. The business transformation program is expected to take two to three years to complete.

The expansion of product lines underwritten directly by Elders Insurance during the year complements the business’ existing products and is consistent with the development of its non-farm business which now accounts for two-thirds of its policy book.

Returns from Elders Financial Services in 2009 are expected to to be affected by lower anticipated margins from insurance operations, including escalation in reinsurance costs. Notwithstanding this, the results achieved by both the bank and insurance operations in 2008 has underscored the quality of their business and their performance capability in uncertain markets.

On a more general level, wheat deregulation, the shift towards cash sales for crops and the increase in working capital requirements for farming, are all expected to stimulate growth and change to the rural finance market in the near to medium term. Elders Financial Services is well positioned for these changes through the relationships between the Elders network and Australian farmers.

Forestry

The accumulation of a 15% share of the newly deregulated South Australian barley market was one of the highlights of Elders’ 2008 results. Elders’ performance in this market has proven the effectiveness of the Elders Toepfer Grain joint venture and the capacity of the Elders network as an accumulator.

Subsequent to year-end, the Elders Toepfer joint venture was one of the first new entrants to receive accreditation by the Australian government as an accredited bulk exporter of wheat. Through the joint venture, Elders anticipates commencing bulk exports of wheat from the 2008/09 harvest.

2008 has shown that Elders has a strong profitable foundation and the capability to compete effectively in grain accumulation. The favourable shift in prices and outlook for the Australian rural sector is expected to provide a supportive environment for Elders Rural Services to pursue its sales, value generation and business improvement objectives.

Elders Financial Services

Elders Financial Services recorded solid results notwithstanding the volatility prevailing in financial markets.

Elders Rural Bank increased its profit contribution by 14% whilst maintaining credit quality. The tightening finance markets during the year highlighted the benefits of the investment made in securing and holding a banking licence through ready access to retail funding sources.

Results from insurance operations were affected by the return of claims experience to more customary levels and the impact of softer insurance markets. Elders Insurance generated earnings before tax of $18.1 million compared with $23.9 million in 2007.

ITC broadly maintained its earnings contribution with an underlying result of $61.3 million compared with $61.6 million in the previous year. Results from forestry benefitted from the flow-on benefits of the higher benchmark woodchip price negotiated during the year, growth in accrued income as well as appreciation in the value of ITC’s land bank.

The price negotiated during the year for plantation woodchip exports to Japan of $207.40 per tonne is 10% higher than the previous price. The new price represents the largest increase in many years and is an affirmation of the positive market outlook for certified plantation woodchip.

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Underlying EBIT by business operating division 2007
$ million �008
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70
60 60 62 6�
50 49
40
30
27 �6
20 �� 22
10 10
7
�
0
-� -7
-10
Elders Elders ITC Automotive Agricultural Property Investment
Rural Financial Associates & Other
Services (AAco/WBA)
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�0

ITC is also increasing its revenue from harvest and handling of woodchip, which rose from $16.9 million to $23.0 million. This figure is forecast to rise in coming years as the plantation area harvested rises.

ITC succeeded in offsetting the capital requirements of plantation establishment during the year through the aforementioned sale and leaseback of plantation land to Agricultural Land Trust. Proceeds from the land sale exceeded ITC’s expenditure on new land during the period. This transaction is expected to be the first of a number of similar transactions by ITC.

ITC is reducing its reliance on the retail MIS market as a source of income and funding plantation establishment. This is gradually being achieved through the rise in accrued income, management, and harvest and port fees. ITC is also targeting plantation funding from the wholesale investment market.

However, the retail MIS market will remain a major source of income until further wholesale investors are secured, and plantation land available for second rotation increases to threshold levels. ITC’s 2008 MIS sales of $37.6 million were significantly lower than the previous year’s result of $61.5 million. As a result of these lower sales, a lower earnings contribution is expected from ITC in 2009.

Outlook and conclusion

2009 is expected to be a year of consolidation.

Elders Rural Services’ new management will progress its restructuring and improvement program, whilst addressing the business opportunities created by wheat deregulation and strong markets for agricultural produce and inputs.

Elders Financial Services is expected to deal successfully with the tighter financial markets based on its proven credit quality, conservative approach and strong client relationships. ITC will be conducting its largest ever plantation harvesting program, establish over 7,500 hectares of new plantations and continue the process of building its revenue base outside retail MIS operations.

Futuris’ strength lies in its core businesses in rural services, financial services and forestry. Each of our operations in these sectors has proven the quality of their business in demanding circumstances over the past 12 to 24 months. They are led by an enthusiastic, capable team of Managing Directors and are well positioned to grow and, given reasonable conditions, deliver improved returns for shareholders over the medium term.

ITC is well positioned for the longer term. The business looks forward to benefitting from rising cash flow as harvest volumes increase and the prospect of price rises for the Company’s woodchip resource which is currently estimated to generate over 27 million green metric tonnes of woodfibre over the next 10 years. Overlaying this, the introduction of carbon management and trading systems offer the prospect of financial recognition for the 3.2 million tonnes of carbon dioxide estimated to be sequestered by ITC’s estate per annum.

In closing I would like to express my appreciation to my fellow directors and employees in the Company for the support they have provided.

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Les Wozniczka Chief Executive Officer

Automotive

Futuris Automotive has been the subject of a business development program to capture value inherent in its capabilities and industry position.

The business’ results in 2008 reflect the progress that has been made, with its earnings contribution rising from $9.5 million to $26.2 million. In Australia, expanded product range and the benefits of productivity measures enabled Futuris Automotive to offset the impact of low volumes.

The business has made progress in developing its significance as a participant in the global sector in 2008 with increased volumes and new contracts in China, as well as successes in Thailand and South Africa.

Health, safety and environmental outcomes are an important aspect of operational performance. Most divisions improved in 2008 and are targeting further improvement in the new year.

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ELdErs ruraL sErvICEs

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Strong recovery, network driving earnings growth

Mike Guerin Managing Director Elders Rural Services

Main features and outcomes

Underlying EBIT increased 24% to $60.7 million
Appointment of new management team
Formation of Elders Toepfer Grain Joint Venture
Successful entry into SA barley market and accreditation as bulk wheat exporter
Operational review, restructuring and business improvement underway

Key financial results

Key fnancial results
$ million, 12 months to 30 June:	�008	2007
Sales	�,�7�.�	2,309.5
EBIT:
Network & related	6�.�	44.6
Other Agribusiness	(�.5)	4.5
UnderlyingEBIT	60.7	49.1
Non-recurringitems: Reported EBIT Net operatingcash fows	(�6.7) ��.0 �8.�	- 49.1 102.1
Capital Expenditure	�8.8	27.0

Supply chain activities whereby the Elders network provides a conduit for buyers seeking to source Australian agricultural produce that meets their specifications. This includes grain accumulation for the Elders Toepfer Grain joint venture.
Elders Toepfer Grain, a 50:50 joint venture involving Elders and leading international grain trader Toepfer international in the acquisition and sale of grain from Australian growers for sale to international and domestic buyers.
Operations through which Elders participates in value-adding sectors of the supply chain. These initiatives include Elders involvement in feedlots, live export, meat marketing, conduct of wool auctions and exchanges in Australia and overseas, wool trading and processing (through BWK) and wool dumping and handling (Australian Wool Handlers joint venture).
Participation in commercial operations such as the HiFert fertiliser joint venture to share in earnings generated at the wholesale level of the farm services sector.

Business development

Elders seeks to develop its business through a strategy which leverages the value of its network, relationships with approximately 70,000 farmers and the goodwill that the business has earned through years of service. Business growth is pursued through three avenues:

Elders Rural Services is one of the leading suppliers to the Australian and New Zealand rural and regional sectors. Elders provides farmers with the financial, physical and technical and advisory inputs for successful farming through a network that extends to 294 Australian branches and 154 agency locations and 14 New Zealand branches. “Elders” has built an unmatched reputation and goodwill through more than 160 years of service to the Australian farm sector.

The Elders network also serves non-farm rural and regional communities with real estate, financial services and other products such as merchandise.

Elders supports its network operations through Brad Preston, participating in the value chain upstream and Territory downstream of ‘the farm gate’ through its initiatives Sales Manager, Bunbury, in meat and livestock, grain, wool and fertiliser. Western Australia These initiatives include:

(1) increasing the value transacted through the network by increasing sales under existing product areas and delivering complementary new products that satisfy client needs and shareholder value metrics.
(2) improving the financial performance and efficiency of Elders’ service delivery and operations, including fully exploiting economies arising from Elders’ presence and scale as a regional service provider.
(3) extending participation along the value chain upstream and downstream of the farm gate where complementary to Elders’ core operations.
(4) Ongoing review and performance for the purpose of managing operations so that client, shareholder, employee and community objectives are appropriately satisfied.

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Performance

In 2008 Elders Rural Services recorded its strongest financial performance yet, with underlying EBIT of $60.7 million compared with $49.1 million in the previous year. The growth is due to improvement from Elders’ network and network-related operations which increased their underlying EBIT contribution from $44.6 million to $63.2 million.

Key drivers in this result were the increase in revenue and returns brought by the combination of stronger product and input prices and generally improved seasonal conditions. Sales of merchandise (principally fertiliser and agricultural chemical sales), grain operations, and distribution of financial services were the major sources of earnings growth by the Elders network. HiFert was the major source of earnings growth from network related operations.

Other Agribusiness operations, which comprise downstream wool processing and meat-related interests contributed an EBIT loss of $2.5 million, largely due to poorer returns from wool processing.

Underlying results exclude non-recurring items totalling a charge of $36.7 million before tax. The non-recurring items principally result from a review of Elders Rural Services strategy and operations. As a result of the review, a number of assets or projects have been identified as non-core and discontinued, sold or prepared for sale. In addition, provision has been made for costs of, and redundancies arising from, the restructuring of Elders to a regionally based – client facing management structure.

The non-recurring items included charges arising from the discontinuation of sub-scale and noncore operations in horticulture. Elders ongoing involvement in this sector will be as a supplier of merchandise and other inputs.

The business has committed to a restructuring and business improvement program aimed at enhancing Elders’ sales competitiveness and improving margins. Anticipated benefits are expected to be apparent from 2010 onwards.

The deregulation of bulk exports of Australian wheat from 1 July 2008 has opened up market opportunities hitherto not available. Elders will address these through the Elders Toepfer Grain joint venture, formed during the year and proven successful in the newly deregulated South Australian barley market.

Sustainability

Environment

Elders feedlots at Charlton (Victoria) and Killara (New South Wales) are subject to local and state government environmental and animal welfare legislation.

Operations at both feedlots are quality assured under the National Feedlot Accreditation Scheme, which is independently administered and audited annually by Aus-Meat. In addition, the operations are conducted under the provisions of the Australian Code of Practice for the Welfare of Cattle in Beef Feedlots (1996) and the Australian Model Code of Practice for the Welfare of Animals - Cattle (1992).

No breaches of any of the relevant acts, codes of practice or accreditation schemes under which Killara or Charlton feedlots are approved and operate were reported during the year ended 30 June 2008 or to the date of this Report.

Certain states have state and local government regulations that apply to saleyards owned and/or operated by Elders, in particular, in relation to effluent run-off, dust and noise. These regulations vary from state to state and generally only apply to saleyards above a prescribed size.

No breaches of these environmental regulations were reported during the year ended 30 June 2008 or to the date of this Report.

Elders’ merchandise operations are subject to state environmental regulations governing the storage, handling and transportation of dangerous goods such as agricultural and veterinary chemicals and fertilisers.

The majority of Elders’ merchandise operations are accredited under the Agsafe co-regulatory accreditation program. The program provides accreditation for premises and training and accreditation for individuals in the safe transport, handling and storage of agricultural and veterinary chemicals.

Licences for the handling and storage of dangerous goods are obtained and maintained by Elders wherever necessary as part of the Agsafe process. No material incidents were reported in relation to the handling and storage of dangerous goods during the year.

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Elders Rural Services Sales Revenue

$ million

Human Resources

Elders Rural Services employed 2752 full time equivalent employees as at 30 June.

Investment is made to support the development and productivity of employees and maintain a workplace that is progressive and fair for all. Training is provided at all levels and through a number of media including online learning. New modules, enrolments and completions of online learning all rose on 2007 levels. New initiatives included the development and introduction of formalised role-based training for livestock staff. This training will support standardisation of livestock practices and provided consistent and TAFE accredited learning.

Elders supports its commitment to occupational health and safety (OH & S) with training, workshops, communications programs and a strategic OH & S plan. The plan was revised during the year and improvement-oriented objectives and targets established. Safety performance improved with the total number of workplace injuries falling from 428 to 387 and the lost time injury frequency rate per million hours worked falling from 5.4 to 3.3.

2500
2000
1500
1000
500
0
2007	�008
$ million		2007	�008
Merchandise		1038.7	�,�50.�
Livestock		520.9	��.5
Wool		423.2	�87.�
Real Estate		88.3	9�.�
Grain		175.7	��9.�
Financial Services Distribution		39.0	�0.9
Other		23.7	�8.�
Total		2,309.5	�,�7�.�

Elders maintain a large motor vehicle fleet as well as a dedicated forklift operation. A range of initiatives including driver training, vehicle efficiency, vehicle benchmarking, detailed business performance reporting and management systems support the safe operation of the vehicle fleet. The total fleet size has reduced by one hundred vehicles with a reduction in overall kilometres travelled.

Community

As a rural service organisation, Elders is committed to supporting the communities which it serves. Elders provides employment and a range of services to its network of branches throughout Australia. Elders’ branches support local initiatives and charities and Elders’ staff members participate in community service organisations.

At a corporate level, Elders’ initiatives supported a number of charities and a number of non-government organisations and initiatives of relevance to its client base. Elders’ major commitment is its $2.5 million 5-year partnership with Landcare Australia to promote environmental sustainability on Australian farms. Other sponsorships and initiatives included the McGrath Foundation, CarbonSmart and the Sustainable Agriculture Initiative.

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ELdErs FINaNCIaL sErvICEs

Solid result, performing to expectations

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Tim Plant Managing Director Elders Financial Services

Main features and outcomes

Elders Rural Bank increases loans by 12% to $3.6 billion
Elders Rural Bank profit up 14%
Elders Insurance contribution in line with expectations

Key financial results

Key fnancial results
$ million	�008	2007
Sales revenue	��8.5	204.0
Total underlyingEBIT	��.�	27.2
Reported EBIT	��.�	27.2
Insurance & wealth interest	��.�	12.3
Earnings before tax	�5.�	39.5

Operations

Elders Financial Services comprises the Company’s prudentially regulated operations in banking, insurance and wealth management.

Elders Rural Bank is the holder of APRA

authorisation to operate as an authorised deposit taking institution under the terms of the Banking Act 1959. The bank is a 50:50 joint venture of Futuris and Bendigo and Adelaide Bank Limited. Elders Rural Bank concentrates on rural lending, with its products and services being distributed through the Elders network under an exclusive distribution agreement. Elders Rural Bank has little exposure to wholesale markets, sourcing approximately 95% of its funding from retail and treasury deposits. Elders Rural Bank is reported as an equity accounted associate within the Company’s accounts.

Insurance operations consist of underwriting through Elders Insurance Limited, an APRA licensed insurer, and insurance agency services. Insurance products are distributed through the Elders network in a business model based on local presence and prompt local service for rural and regional clients. Elders insurance operations are supported by a franchise network of 207 agents and salespeople throughout Australia.

Although farm insurance is a speciality, two-thirds of its insurance book is accounted for by non-farm product, principally regional small to medium enterprises and personal lines.

Wealth management operations are conducted through 32 licensed financial advisors providing financial planning and advice to rural and regional clients.

Performance

Contribution from Elders Financial Services, while lower, was consistent with the outcome expected from the return of insurance claims experience to customary levels. The division’s result featured ongoing growth in earnings from Elders Rural Bank, offset by reduced profit from Insurance.

Elders Rural Bank continued its record of matching growth whilst maintaining credit quality. The bank contributed (through equity accounted earnings) profit after tax of $20.5 million, 15% higher than its 2007 contribution of $17.9 million.

Loans under management as at 30 June were $3.63 billion, compared with $3.23 billion twelve months earlier. Deposits grew by 15% over the course of the year to be $3.73 billion, compared with $3.23 billion. Credit quality trends for the year were positive with the ratio of net non-performing loans to gross loans falling from 0.36% to 0.33%.

Insurance operations increased gross written premium by 7% to $456.6 million. Earnings before tax from insurance operations was $18.1 million compared with $23.9 million, a result in line with industry trends.

During the year Elders Insurance expanded products underwritten to include commercial motor, property, liability, marine, crop and professional lines. The new product lines underwritten complement the farm related packages and are targetted to meet the needs of the business’ substantial non-farm regional client base.

Financial markets are currently volatile and margins are lower than in previous years. While this is expected to impact earnings growth in the near term, our operations are in good shape and well positioned to participate in servicing the growing finance and insurance requirements of the Australian rural and regional sector.

High Street location, Gawler, South Australia

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�8

FOrEstry

Growing, supported by favourable demand outlooks

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Vince Erasmus Managing Director, ITC

Main features and outcomes

Total revenue increased 13%
EBIT broadly maintained at $61 million
MIS project sales of $37.6 million, down from $61.5 million
Improved results from timber processing
• 10% price increase in woodchip price negotiated

Forestry financial results

$ million	�008	2007
Total Revenue	��.�	205.5
UnderlyingEBITDA	66.6	66.6
Depreciation & Amortisation	5.�	5.0
Equityaccounted income	��.�	11.1
UnderlyingEBIT	6�.�	61.6
Non-recurringitems Reported EBIT MIS sales	0.� 6�.� �7.6	- 61.6 61.5

ITC is an integrated forestry and timber company engaged in plantation establishment and management, the harvest, handling and export sale of woodfibre and the sustainable production of value-added hardwood timber products.

ITC is also engaged in the export of woodfibre and operation of associated facilities. In Tasmania ITC is a 50% interest holder in the SmartFibre joint venture with Forest Enterprises Australia (FEA). In Western Australia, ITC is also a 50% interest holder in the Plantation Pulpwoods Terminals joint venture, which owns and operates a 1 million tonne per annum capacity woodchip handling and loading facility in Albany, Western Australia.

Processing operations involve the harvest and sawmilling of regrowth native timber under sustainable management practices in Victoria and Tasmania.

ITC is a 31% shareholder in FEA a listed integrated forestry and timber company. Equity share income from FEA is included in ITC earnings.

Performance

Total revenue generated from ITC rose by 13% in 2008. Increased revenue contribution was received from all sources excepting plantation establishment, which fell due to the year’s lower MIS sales.

ITC’s 2008 MIS projects generated sales of $37.6 million compared with $61.5 million in the previous year. The 2008 MIS sales will fund the plantation of approximately 7,500 hectares of hardwood forest. ITC harvested and sold woodfibre from 2,300 hectares of plantation in the Albany and Bunbury region in 2008 (3,000 in 2007).

ITC’s plantation operations have Forestry Stewardship Council (FSC) certification and comprise an area under management approximating 160,000 hectares which is estimated to sequester approximately 3.2 million tonnes of carbon dioxide per annum. Approximately 28% of the ITC estate is owned with the balance leased.

Plantation operations consist of hardwood forest, managed on behalf of investors, who have funded the estate through subscription to managed investment schemes (MIS) or through direct investment. MIS sales presently account for the large majority of plantation funding raised. Broadening of the funding base is being pursued through the attraction of wholesale investment funds.

Plantations are predominantly eucalypt, with smaller Sally Collins, National Research plantings in sandalwood, teak and red mahogany. Plantations are located in south-west Western Co-ordinator, Albany, Australia, Kununurra, the Green Triangle region and Western Australia northern Queensland.

EBIT generation was broadly maintained with ITC’s underlying EBIT of $61.3 million comparing to $61.6 million in the previous year. The stable EBIT result is attributable to increased earnings from virtually all parts of the business other than MIS sales. EBIT increments were realised from increased woodchip prices, the expansion and maturation of the ITC estate, land appreciation, higher harvest volumes, improvement from processing income and higher equity accounted income from FEA.

Timber processing contributed EBITA of $4.7 million from sales of $69.1 million, which compares to the 2007 EBITA of $3.8 million from $61.1 million.

The favourable demand outlook for certified plantation grown woodfibre is being reflected in prices. The benchmark price of $207.40 per bdmt negotiated by ITC with Japanese buyers during the year represents an increase on the previous year’s price of 10% and was the largest increase in 25 years.

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The 2008 accounts include equity accounted income of $12.2 million ($11.1 million in 2007), $11.0 million of which is an estimate of the equity share expected to arise from FEA. Variations between this estimate and that arising from the release of audited accounts by FEA will be recognised in 2009.

Sustainability

Environment

ITC, as a matter of policy seeks to prevent, or otherwise minimise, mitigate and remediate any adverse effects of its operations on the environment. No significant breaches of relevant environmental legislation or regulations occurred during the period covered by this report.

ITC holds ISO14001:1996 accreditation in respect of its environmental management system across its operations nationally.

The Company was successfully audited under its Forest Stewardship Council (FSC) certification during the year. Approximately 80% of the Company’s plantations under management are now FSC certified.

Additionally, the Company’s Timber division achieved chain of custody certification under the Australian Forestry Standard, which is mutually recognised as part of the Programme for Endorsement of Forest Certification Schemes (PEFC). PEFC certifies nearly 200 million hectares of forest worldwide. By securing

this certification, the Company’s GoodWood and SupaLam products can be tracked from origin to end-use, meaning ITC Timber customers can be certain that these products are sustainably produced.

ITC continued its corporate partnership with leading environmental organisation, WWF-Australia. The partnership seeks to encourage sustainable forestry management practices across the forestry sector whilst also jointly pursuing the uptake of credible forest certification by forest owners across Australia, including the public authorities who licence ITC’s harvesting from state-owned native regrowth forests.

Community

ITC contributes to the communities where it operates through support for local sporting, cultural and charity events and organisations. ITC provided in-kind support and sponsorship for over 46 events and organisations in 2006. Through Futuris, ITC was also a sponsor of the Australian String Quartet’s 2008 Regional Performance Program.

Human resources and safety management

ITC had 426 employees as at 30 June compared with 389 at the beginning of the year.

ITC’s safety performance standards are benchmarked against the Australian Safety Standards. ITC recorded an improved lost time injury frequency rate of 46 for the year compared with 58 in the previous year.

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autOMOtIvE

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Mark de Wit Managing Director Futuris Automotive

Main features and outcomes

Sales revenue up 16%
Earnings growth from new business and efficiency initiatives

Improved results from associate Global Thermal contributed to improvement in equity accounted income. This improvement was due to $3.8 million in equity losses being written off against the funding loan provided by Futuris Administration (included in Investments and other).

Growth in ex-Australian operations and contracts

Key financial results

Key fnancial results
$ million	�008	2007
Sales	�8�.�	329.9
UnderlyingEBITDA	��.�	26.8
Depreciation & Amortisation UnderlyingEBIT:	�6.�	17.1
Futuris Automotive	��.9	10.7
Associates (equityacc)	�.�	(1.2)
UnderlyingEBIT	�6.�	9.5
Reported EBIT	�6.�	9.5

In China, Futuris Automotive Interiors (Anhui) commenced production and supply to Chery Automobile, China’s fastest growing Chinese-owned automobile brand. In addition, contracts have been secured for the supply of seating with a new customer, JAC in Hefei, Anhui province, commencing in 2009. Futuris Automotive commenced supply of carpets to Mercedes in South Africa through a joint venture with Feltex Automotive Division. Futuris Automotive has, in a proposed joint venture withThai Summit Auto Parts Industry Co., secured contracts for the supply of seating for two vehicles to be produced by GM Thailand from 2010.

Futuris Automotive is engaged in the design, development and manufacture of interior systems (seat systems, seat hardware, carpet systems, door trims, headliners and controls including steering columns and pedal assemblies) for passenger vehicles.

Sustainability

Futuris Automotive conducts its operations within the parameters of management plans to ensure its day-to-day activities are completed safely and in an environmentally and socially responsible manner.

Operations are conducted in Australia, under long term contracts to local vehicle manufacturers including General Motors Holden, Ford Australia and Toyota, and in China, through the Futuris Automotive Interiors (Anhui) joint venture. The joint venture is contracted to supply seating for emerging Chinese manufacturer Chery Automobile Co.

Environment

Futuris Automotive’s key manufacturing plants in Australia are all accredited to ISO 14001 and TS 16949 certification.

The organisation’s operating facilities are subject to relevant environmental protection legislation and regulation in the areas in which they operate. There were no reportable incidents or breaches of applicable environmental legislation arising from Futuris Automotive’s operations during the year.

Futuris Automotive also holds a 35% interest in

Air International Global Thermal Systems, a global supplier of passenger vehicle thermal systems to the Australian, US and Chinese automotive sectors.

Results

Sales revenue rose by 16% to $384.2 million as a result of initiatives to expand its product range in Australia and the addition of sales from the commencement and ramp-up of supply in China to Chery Automotive. In Australia, Futuris expanded its interior trim capabilities and customers.

Safety

Safety is managed through a series of safety committees at each operation which report to senior management on performance. During the 12 months to 30 June 2008, Futuris Automotive recorded a lost time injury frequency rate of 11.0 per million hours worked compared to the preceding year’s rate of 8.5 per million hours worked.

Underlying EBIT generated by Futuris Automotive operations rose from $10.7 million to $23.9 million due to the efficiency and restructuring initiatives carried out in the previous two years and the additional business brought by the aforementioned product expansion. Most significant amongst these was the rationalisation of Australian assembly operations to two facilities, completed during 2008.

Human Resources

Futuris Automotive employed a total of 1,044 people in Australia at 30 June 2008 compared with 861 at the same time in the previous year. In addition 268 people are employed by Futuris Automotive and its offshore joint ventures (223 as at 30 June 2007).

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Board of directors

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Mr Stephen Gerlach, LLB Chairman Mr Gerlach age 63 - Non-executive member of the Board since November 1996 and Chairman since July 2003. He chairs the Company’s Nomination & Prudential and Remuneration Committees. Formerly Managing Partner of Adelaide legal firm Finlaysons, Mr Gerlach has extensive experience as a corporate advisor and company director. Mr Gerlach also holds directorships at Santos Limited (chairman) and Santos Finance Ltd (chairman). He is the Chairman of Foodbank SA Inc, a director of Foodbank Australia Ltd and a Trustee of the Australian Cancer Research Foundation. Mr Gerlach previously served as a director of Southcorp Limited from 1994 to 2005. Mr Gerlach is a resident of South Australia.

Dr James Charles Fox, BE MEngSci PhD Dr Fox age 56 - Non-executive director and Deputy Chairman, Chairman of the Occupational Health, Safety and Environment Committee, member of the Remuneration and Nomination and Prudential Committees and director of Elders Australia Ltd. A non-executive director of Futuris since July 1985, Dr Fox has more than 25 years experience as a public company director across a range of internationally based businesses. His particular expertise is in the building of innovative, technology based companies in competitive international markets. After 8 years working with a large international management consulting company, he started his own technology based product and service company in 1987. Following the merger of Dr Fox’s company with the then listed Vision Systems Limited in 1993, he was appointed CEO of the combined group until his retirement in 2006 following a heavily competed takeover of the company. Dr Fox is also a director of Air New Zealand, MS Research Australia Ltd, Optiscan Ltd, Altitude Ltd and TTP Group (UK). Dr Fox is a resident of Victoria.

Mr Charles E Bright, BA MA(Oxon) Mr Bright age 63 - Non-executive member of the Board since May 2002. He is a member of the Nomination & Prudential Committee and a director ITC Ltd, APT Projects Limited, ITC Project Management Limited and Chairman of BWK AG Supervisory Board. Mr Bright has over 30 years’ experience in investment banking with positions including Chairman of Potter Warburg Securities and Head of Corporate Finance for HSBC in Australia. Mr Bright is also acting Chairman of Australian Agricultural Company Limited and a director of Tassal Group Limited and Webster Limited. Mr Bright previously served as a director of Australian Plantation Timber Limited from 2002 to 2005. Mr Bright is a resident of Victoria.

Mr Raymond G Grigg, FSAE-I FAICD Mr Grigg age 67 - Non-executive director of the Company since February 2004. He is also a Nonexecutive director of Futuris Automotive Group of companies, and a member of the Futuris Audit committee. Mr Grigg has extensive experience and leadership in senior management within the automotive industry, having joined the Board following a 47 year career with General Motors Corporation where Mr Grigg held a number of senior positions both in Australia and overseas. At retirement Mr Grigg was President and Representative Director, General Motors Asia Pacific (Japan) as well as Chairman, CEO and Representative Director of GM Japan. Previous positions held include General Manager-Operations at GM Holden in Australia and Executive Director, GM International CKD Operations in Germany. Mr Grigg is also a non-executive director of Adtrans Group Limited and Vice President of the Royal Automobile Association of SA Inc and Bedford Industries Ltd. Mr Grigg is a resident of South Australia.

Mr Ian G MacDonald, SF Fin Mr MacDonald age 54 - Non-executive member of the Board since November 2006. He is a director of Elders Rural Bank Ltd, Elders Insurance Ltd, Elders Insurance Agencies Pty Ltd, Elders Trustee Ltd and Elders Financial Services Group Pty Ltd. He is also a member of the Australian Institute of Company Directors and a Senior Fellow of the Financial Services Institute of Australasia. Mr MacDonald has had an extensive career in banking both in Australia and internationally, having served National Australia Bank Ltd for 34 years including performance of a number of senior management roles, including Chief Operating Officer, Yorkshire Bank, Executive General Manager, Financial Services Australia, and Group Chief Information Officer. Mr MacDonald is a director of Arab Bank Australia Ltd and CPT Global Ltd. Mr MacDonald is a resident of Victoria.

Mr James Hutchison (Hutch) Ranck, BS Econ Mr Ranck age 60 - was appointed a Non-executive member of the Board on 24 June 2008. He is Managing Director of DuPont Australia & New Zealand and Group Managing Director for DuPont operations in ASEAN. Mr Ranck has had a long and distinguished career with Du Pont where he has held senior management positions in Australia and overseas in finance, chemicals, pharmaceuticals and agricultural products. He is currently Chair of the BCA Education, Skills and Innovation Task Force and a director of the Australian Bush Heritage Foundation. Mr Ranck is a resident of New South Wales.

Mr Anthoni Salim, B Bus Mr Salim age 58 - Non-executive member of the Board since March 2003. He is President and Chief Executive Officer of the Salim Group, one of Indonesia’s leading business groups. Salim Group holds extensive interests in the importation, manufacture and distribution of food and foodstuffs. Mr Salim is a director of First Pacific Company Limited, Chief Executive of PT Indofood Sukses Makmur and a member of the advisory board for Allianz Group, one of the world’s leading insurance groups. Mr Salim is a resident of Jakarta, Indonesia.

Mr Graham D Walters, AM, FCA Mr Walters age 66 – Non-executive member of the Board since January 2002. He is Chairman of the Audit Committee and was appointed a director of Elders Australia Ltd from January 2008 and was a director of the Elders Financial Services Group Pty Ltd until 1 September 2008. Mr Walters has extensive experience in accounting having formerly held roles as Chairman of Partners at KPMG South Australia and as a Member of the National Board of KPMG. Mr Walters also holds directorships of Australian Rail Track Corporation Limited and BioInnovation SA. He is also Chairman of the South Australian Executive Committee of Westpac Banking Corporation. Mr Walters is a resident of South Australia.

Mr Leslie Peter Wozniczka, MBA BSc(Hon) Mr Wozniczka age 52 - Executive Director of the Board since January 2002. He is the Chief Executive and Managing Director of the Futuris Group. He is a member of the Remuneration and Nomination and Prudential Committees and a director on all main operating subsidiary boards including: Elders Australia Ltd, Elders Financial Services Group Pty Ltd, Elders Insurance Ltd, Integrated Tree Cropping Limited and Futuris Automotive Group Ltd. Prior to joining the Board, Mr Wozniczka served in the role of Chief Operating Officer of Futuris from January 1999. Prior to joining Futuris, Mr Wozniczka managed private investment interests and held senior management positions within the corporate service and investment banking sectors including the position of Director Corporate, Potter Warburg. Mr Wozniczka also holds directorships in Australian Agricultural Company Limited, Hi Fert Pty Ltd, Amcom Ltd and Forest Enterprises Australia Limited. Mr Wozniczka is a resident of South Australia. On 26 June 2008 Mr Wozniczka submitted his resignation as Chief Executive and Managing Director of the Futuris Group with such resignation to become effective upon appointment of a successor.

Company secretaries

Ms Sonya Catherine Furey BEc(Acc) LLM FCA Ms Furey was appointed Group Tax Manager in December 1999 and Company Secretary in December 2002. Prior to joining Futuris, Ms Furey held a management role at KPMG, Corporate Tax Consulting. Ms Furey holds a Bachelor of Economics (Accounting) from Flinders University of South Australia and a Master of Laws (Corporate and Commercial) from the University of Adelaide. She is a Fellow of the Institute of Chartered Accountants and a Fellow of the Taxation Institute of Australia.

Mr Ross Edwin Mallett JD BBus FCIS FCPA Mr Mallett was appointed Company Secretary in March 2008. Before joining Futuris Mr Mallett was Deputy Company Secretary of BHP Billiton Ltd and prior to that held senior company secretarial roles at WMC Resources Ltd and CRA Limited (now Rio Tinto Ltd). Mr Mallett holds a Juris Doctor from Monash University and a Bachelor of Business from Deakin University. He is a Fellow, National Councillor, Director and former National President of Chartered Secretaries Australia and a Fellow of CPA Australia.

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COrpOratE GOvErNaNCE statEMENt

The Board is committed to acting in the best long-term interest of shareholders, customers, employees and the community. Directors believe there is a positive link between the delivery of long term value to stakeholders and good corporate governance and are therefore committed to enhancing corporate values and culture and continuous improvement in governance.

This corporate governance statement summarises the key elements of the Company’s governance framework and our approach to governance. The statement also reports on key changes to the governance framework and key policies that have occurred during the reporting period and up to the date of this report.

The Board has in place a Board Charter that consolidates the principles, policies and practices of its governance framework as reflected in this statement.

In developing our governance framework we have taken into account the Corporate Governance Principles and Recommendations (Best Practice Recommendations) published by the ASX Corporate Governance Council (ASXCGC). We believe that the Company’s governance practices comply in all substantial respects with the ASXCGC’s Best Practice Recommendations, including the revised principles and recommendations published in August 2007. We have published a table on our website at www.futuris.com.au comparing the Company’s governance practices with the ASXCGC’s Best Practice Recommendations.

role of the Board

The Board is responsible for the governance of the Company. It has implemented governance policies and practices that are designed to:

provide clear accountability;
protect the rights and interests of shareholders and other stakeholders;
provide for proper management of the Company’s assets;
support the achievement of the Company’s fiduciary, environmental, safety, social and other obligations;
preserve and enhance the Company’s reputation and standing in the community; and
support the achievement of shareholder value within a framework of appropriate risk assessment and management.

The corporate governance policies and practices are reinforced by a commitment by the Company to the highest standards of legislative compliance, financial integrity and ethical behaviour.

Management and Oversight

The Board Charter defines those duties that are reserved for the Board and its Committees and those that are delegated to management.

Board

The main responsibilities of the Board as set out in the Board Charter are to:

provide input into, and adopt, the strategic plan and budget of the Company as prepared by management;
monitor performance against the business plan and budget;
approve and monitor the progress of all material acquisitions, divestments, contracts and capital expenditure;
approve capital raisings (debt or equity) by the Company;
oversee the audit, compliance and financial and operational risk management functions of the Company;
oversee the Company’s financial reporting and communication to the Company’s shareholders and the investment community and shareholderrelations generally;
appoint and remove the Chief Executive and determine that person’s remuneration (including termination benefits);
review the performance of the Board as a whole and of individual directors; and
monitor and assess the performance of the Chief Executive and the Company’s senior executive team.

Committees

The Board has established a number of Board Committees (Nomination & Prudential Committee, Remuneration Committee, Occupational Health, Safety & Environment Committee and Audit Committee) to increase the Board’s efficiency and effectiveness in fulfilling these responsibilities. The role and responsibilities of these Committees are detailed in formal charters that can be found on the Company’s website. In addition, a Corporate Risk and Compliance Committee comprising senior executives of the Company operates under a Board-endorsed risk management policy and reports to the Board on a regular basis. The responsibilities and composition of these committees are detailed on pages 29 to 32.

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Delegation of Responsibility to Management

The Board delegates responsibility for the day-today operation and administration of the Company to the Chief Executive. The Board monitors the Chief Executive’s performance on an ongoing basis through regular management reporting and through the reporting of the various Board Committees and Corporate Risk and Compliance Committee. The Company has in place a comprehensive delegation of authority under which the Chief Executive and the executive team operate. The Board reviews the obligations set out in the Board Charter and the delegations on a regular basis.

Resignation of CEO

On 26 June 2008 the Board announced that it had accepted the resignation of the Chief Executive Mr Les Wozniczka to become effective upon completion of an international search for a successor. Mr Wozniczka joined Futuris in 1999 and was appointed Chief Executive in 2003. When announcing Mr Wozniczka resignation, the Chairman said that while there was general agreement on the steps that the Company needs to take for sustainable earnings growth and to achieve satisfactory market recognition for the value of its core businesses, Mr Wozniczka has come to the view, and the Board agrees with him, that it is time for a new leader to drive that process. The Board has retained the services of international search firm Egon Zehnder to assist in the identification of potential candidates to replace Mr Wozniczka.

Subsidiary Boards

The Company maintains subsidiary company boards in respect of the Group’s major operating divisions to assist in the oversight function. The oversight functions delegated to the subsidiary boards are recorded in formal subsidiary company charters and in the delegation of authority document.

Company Secretary

Under the Board Charter, the Company Secretary(s) is accountable to, and reports directly to, the Board (through the Chairman where appropriate) on all governance matters.

Board structure - Composition, Independence & Oversight

Board Composition

The composition of the Board is determined by the Company’s Constitution and by Board Policy.

Company, one third of directors (other than the managing director and directors who have been appointed since the previous AGM) and any other director who will at the conclusion of the meeting have been in office for 3 or more years and AGMs since they were last elected to office, are required to retire and may stand for re-election;

directors who have filled casual vacancies are required to be elected at the first annual general meeting following their appointment to the Board; - the majority of directors must be non-executive; and - directors (and prospective directors) must satisfy prudential criteria arising from the Company’s undertaking to comply with all requirements of specified regulators in respect of licences the Company holds. The licences include the Company’s undertaking to comply with APRA Policy Statements, Policy Framework or Prudential Standards relating to the prudential supervision of conglomerates in respect of its ownership interest in Elders Rural Bank Ltd – further detail is set out in the Nominations section below.

(b) by Board policy:

The Board Charter prescribes specific requirements (set out below) in relation to the composition of the Board and the independence, skills and experience of directors:

Director Independence

The Company has adopted an Independence Policy that is published on the website. The Policy states that the majority of the Board must comprise independent directors.

In determining whether or not a director is to be considered independent, the Board will have regard to whether the director:

is a substantial shareholder in the Company;
within the last 3 years, has been an employee of the Company, a material adviser to the Company or a principal or employee of any material adviser to the Company;
is a material supplier to, or a material customer of, the Company;
is directly or indirectly associated with any of the above persons;
is otherwise free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company; and
is of independent character and judgment.

(a) by the Company’s Constitution:

The Company’s Constitution sets down the following requirements in relation to the composition of the Board:

the number of directors may be not less than 3 and not more than 12. The Board has determined that, at the current stage of the Company’s development, the optimum number of directors is 9 (inclusive of the Chief Executive)
at each annual general meeting (AGM) of the

Whether an interest, relationship or business is ‘material’ is considered having regard to the nature, circumstances and activities of the director and from the perspective of the Company, the persons and entities with whom the director has an affiliation, and the director.

The Board does not believe that the period of service of a director necessarily hinders the director’s ability to exercise independent thought and judgement

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and to act in the best interests of the Company. The directors believe that experience and knowledge of the Company’s operations are important contributors to the efficient working of the Board and the best interests of the Company.

Director skills & experience

The Board is to be comprised of individuals with an appropriate mix and depth of skills, experience and knowledge in order to meet the Board’s responsibilities and objectives.

The Board of Directors currently comprises a nonexecutive chairman who is elected by the full Board, seven other non-executive directors and a managing director/chief executive. The qualifications, experience, special responsibilities and period of office of each director may be found on page 22 of this report.

Financial Services

(Elders Financial Services Group Pty Ltd): Mr D Malcolm (Chairman), Mr I MacDonald, Mr M Ormsby, Mr M Pirone, Mr M Tozer (non-executive directors), Mr L Wozniczka (executive director) and Mr T Plant (Elders Financial Services Group Pty Ltd managing director).

Forestry

(Integrated Tree Cropping Ltd):

Mr D Watt (Chairman), Mr C Bright, Mr T Davies, Mr P Toyne (non-executive directors), Mr L Wozniczka (executive director) and Mr V Erasmus (Integrated Tree Cropping Ltd managing director).

Futuris Automotive

(Futuris Automotive Group Ltd): Mr B Griffiths (Executive Chairman), Mr R Grigg (non-executive director), Mr L Wozniczka, Mr P Zachert and Mr M Sadlon (executive directors) and Mr M de Wit (Futuris Automotive Group Ltd managing director).

Chairman

The Board Charter prescribes that the Chairman should be an independent director and details his responsibilities. Mr Stephen Gerlach was appointed Chairman on 1 July 2003. The Board has determined that Mr Gerlach is an independent non-executive director. The Chairman’s role includes:

Providing effective leadership to the Board in all Board matters;
Publicly representing the Board’s views to stakeholders;
Promoting effective relations between the Board and management;
Leading the process of review of the performance of the Board, Committees and individual directors;
Guiding the setting of agenda items and conduct of Board and shareholder meetings; and
Overseeing succession of non-executive directors and the Chief Executive.

Subsidiary Boards – Main Operating Divisions

As stated above, the Company maintains subsidiary company boards in respect of the Group’s major operating divisions to assist in the oversight function and to comply with prudential obligations of prudentially regulated entities within the Group. Board policy requires that, where appropriate, a Futuris non-executive director sit on the subsidiary company board of each main operating division to extend independent oversight down to those boards. Where appropriate, other independent non-executive directors with appropriate experience relevant to the division have been appointed to subsidiary boards.

Details of current subsidiary boards of the Company’s main operating divisions are set out below:

Rural Services

(Elders Australia Ltd): Mr R McLean (Chairman), Dr J Fox, Mr D Mutton, Ms B McGahan, Mr G Walters (non-executive directors), Mr L Wozniczka and Mr P Zachert (executive directors) and Mr M Guerin (Elders Australia Ltd managing director).

Subsidiary Boards – Prudentially Regulated/Supervised Entities

The boards of the Company’s prudentially supervised interests, Elders Rural Bank Limited (50% interest), Elders Insurance Limited (100% interest) and Mutual Benefit Consulting Limited (100%) interest are maintained in accordance with requirements and guidelines of the Australian Prudential Regulation Authority (APRA), the governmental regulatory body responsible for the prudential regulation of authorised deposit taking institutions, general insurance companies and superannuation funds in Australia. As a result, a number of independent directors not associated with the shareholders (the Company and Bendigo and Adelaide Bank Limited in the case of Elders Rural Bank and the Company in the case of Elders Insurance Limited) sit on these boards, and one of those independent directors is appointed chairman, and the Board is comprised of individuals selected for their special skills and knowledge.

The Company, through wholly owned subsidiaries, also holds a variety of Australian Financial Services Licences as authorised by the Corporations Act 2001 and supervised by the Australian Securities and Investment Commission (ASIC).

The Company, through its subsidiary Elders Trustees Ltd, is an authorised Trustee under the Trustees Act (1988), South Australia.

The current boards of prudentially regulated interests of the Company comprise:

Elders Rural Bank Limited:

Mr J Hazel (Chairman), Ms R Clubb, Mr J Patton, Mr B Walters (independent directors), Mr I MacDonald, Mr T Plant, Mr M Ormsby, (as representatives of the Company), Mr R Johanson, Mr J M Hirst and Mr J McPhee (representatives of Bendigo and Adelaide Bank) and Mr P Hutchinson (managing director).

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Elders Financial Services Group Pty Ltd:

Mr D Malcolm (Chairman), Mr M Pirone, Mr M Tozer, Mr I MacDonald (independent directors), Mr L Wozniczka, Mr T Plant and Mr M Ormsby (as representatives of the Company).

Elders Insurance Limited and Elders Trustees Ltd: Have the same board composition as Elders Financial Services Group Pty Ltd.

Mutual Benefit Consulting Ltd:

Mr M Ormsby, Mr N Stevens, Mr D Quirk and Ms H Lorigan.

Boards of other Entities in which the Company has an interest

In some cases Futuris non-executive directors are asked to sit on the boards of other entities in which the Company has a significant interest to extend independent oversight down to those boards. Mr Bright sits on the boards of Australian Agricultural Company Limited (42% interest) and Webster Limited (30% interest).

Other Non-executive Director Activities/ Involvement

In addition to the time spent in the preparation for and attendance at Board and committee meetings, nonexecutive directors visit operational sites and assist the Company in local, national and international industry matters. Non-executive directors are also involved in business and strategic planning meetings.

Mr G Walters is the chairman of Master Fund (WA) Pty Ltd, the trustee company of the Company’s superannuation fund.

Access to Independent Professional Advice & Other Resources

Directors may obtain independent, professional advice, at the Company’s expense, on matters relevant to the Company’s affairs to assist them in carrying out their duties as directors, subject to providing prior notice to the Chairman.

All directors have direct access to, and may seek information directly from, the Company’s External and Internal Auditors provided that all such enquiries are first advised to the Chairman and the Chief Executive.

Directors have access to the Company’s management and Company information through the Chief Executive to assist them in carrying out their duties as directors.

Attendance at meetings by Directors

10 formal Board meetings are scheduled each year. Additional meetings are convened to consider specific or urgent matters, as required. Attendance by directors at Board and Committee meetings held during the year ended 30 June 2008 is detailed below.

	Board of	Directors	Audit Committee	Audit Committee	Nomination	Nomination	Remuneration	Remuneration	Occupational Health,	Occupational Health,
					& Prudential		Committee		Safety &	Environment
					Committee				Committee
	Attended	Maximum	Attended	Maximum	Attended	Maximum	Attended	Maximum	Attended	Maximum
		Possible		Possible		Possible		Possible		Possible
		Attended		Attended		Attended		Attended		Attended
S Gerlach	15	15	-	-	1	2	3	3	1	1
J C Fox	13	15	-	-	2	2	3	3	1	1
C E Bright	15	15	-	-	2	2	-	-	-	-
R G Grigg	14	15	8	8	-	-	-	-	1	1
W H Johnson^	5	6	1	3	-	-	-	-	-	-
I G MacDonald	15	15	5	5	-	-	-	-	-	-
J H Ranck#	0	1	-	-	-	-	-	-	-	-
A Salim*	6	15	-	-	-	-	-	-	-	-
G D Walters	15	15	8	8	-	-	-	-	-	-
L P Wozniczka	15	15	-	-	2	2	3	3	1	1

Based overseas

^ Retired from the Board 23/10/07

Joined the Board 24/06/08

Where directors are unable to attend meetings either in person or by telephone (eg if they are overseas) the Chairman or the Chief Executive endeavours to canvass their views on key matters prior to the meeting in order to represent their views at the meeting.

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(South Australia) (Specified Regulator: State Government of South Australia)

Nominations and review

Objectives

The Board’s objective in relation to Board nomination and review is to ensure that:

the Company has adopted selection, appointment and review practices that result in a board:
with an effective composition, size, mix of skill sets and experience and commitment to adequately discharge its responsibilities and duties and add value to the Company and its shareholders;
that has a proper understanding of, and competence to deal with, the current and emerging issues of the businesses of the Company; and
can effectively review and challenge the performance of management and exercise independent judgement.
shareholders and other stakeholders understand and have confidence in those selection, appointment and review practices.
the prudential criteria that directors must satisfy at all times arising out of the Company’s undertaking to comply with the requirements of Specified Regulators to protect the value of the Company’s substantial assets allocated to financial services activities are met. The prudential criteria is set out in the Fit and Proper Person Policy section below. The Nomination & Prudential Committee assists the Board in meeting its prudential objectives.

Fit and Proper Person Policy

The Company has a fit and proper person policy and process to provide directors with assurance that existing and potential directors and persons appointed to senior executive positions within the Group are able to satisfy appropriate fitness and proprietary standards that will enable them to discharge their prudential responsibilities throughout the term of their appointment.

The Company has made an undertaking to comply with all requirements of specified regulators in respect of licences the Company holds including the Company’s undertaking to comply with APRA Policy Statements, Policy Framework and Prudential Standards in relation to the Company’s ownership interest in the following assets:

Elders Rural Bank Ltd, an authorized deposit taking institution under the Banking Act 1959 (Specified Regulator: APRA);
Elders Insurance Ltd, an authorised insurance business under the Insurance Act 1973 (Specified Regulator: APRA);
ITC Project Management Ltd, APT Projects Ltd, Elders Ltd, Elders Trustees Ltd, Mutual Benefit Consulting Ltd, The Australian Superannuation Group Ltd, Elders Risk Management Ltd, Elders Rural Bank Ltd, Elders Insurance Ltd, all authorised entities to provide financial products or provide financial advice under the Corporations Act 2001 (Specified Regulator: ASIC);
Elders Trustee Ltd, an entity authorised to invest trust funds under the Trustee Act 1936

The prudential criteria set down in the Company’s Fit and Proper Person Policy are as follows:

any director or proposed director of the Company must comply with appropriate prudential standards formulated by the Company which reflect APRA’s or another specified regulators prudential standards and guidelines (Prudential Criteria);
any director who does not comply with those Prudential Criteria (or who is the subject of an adverse determination by APRA) is disqualified from continuing to hold the office of director;
limits are imposed on board representation by directors affiliated with any one substantial shareholder to prevent any substantial shareholder from exercising an undue measure of control and influence over the policies or operations of the Company and Elders Rural Bank Ltd;
a standing committee of the Board (the Nomination and Prudential Committee) formulates, reviews and administers appropriate Prudential Criteria;
the key principles of the Prudential Criteria adopted by the Company are that directors and certain senior executives of the Group should be able to meet the following compliance requirements:
possess the confidence, character, diligence, honesty, integrity and judgement to perform properly the duties of the responsible person position held;
the person is not disqualified under the Banking Act 1959, the Insurance Act 1973 or the Superannuation Industry (Supervision) Act 1993 from holding their position; and
the person has either no conflict of interest in performing their duties or if the person has a conflict of interest, it would be prudent for the Company to conclude that the conflict will not create a material risk that the person will fail to properly perform their duties.
In addition to these general criteria, the Company will also apply (but not be restricted to) the following specific criteria for an individual to qualify as a “fit and proper” person.

That they have never:

failed to discharge responsibilities as a director or manager of, or a professional service provider to, a body corporate, statutory body, partnership, trust, or commercial or professional enterprise of any kind (entity) with diligence, honesty, integrity or judgement;
been the subject of justifiable criticism, discipline, punishment, adverse findings, directions or orders, by a court, tribunal, official inquiry, regulatory agency, complaints handling body, dispute resolution body, or professional or industry body concerning conduct in relation to:
› the management of an entity; or
› commercial or professional activities.
been the subject of civil or criminal proceedings, or enforcement action, in relation to:
› the management of an entity; or
› commercial or professional activities.

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been expelled or excluded from, or refused admission to, a professional or industry body, or a clearing house or exchange;
been involved with the affairs of an entity that was expelled or excluded from, or refused admission to, a professional or industry body, or a clearing house or exchange;
been refused a licence or authorisation relating to a commercial or professional activity, or had such a licence or authorisation revoked;
been involved with the affairs of an entity that was refused a licence or authorisation relating to a commercial or professional activity, or had such a licence or authorisation revoked;
had their appointment terminated, or resigned or been asked to resign, from a position as director or manager of, or professional service provider to, an entity in circumstances which reflected adversely on their competence, character, diligence, honesty, integrity or judgement in discharging their responsibilities in the position;
seriously or persistently failed to manage their debts or financial affairs in accordance with contractual or other legal obligations in circumstances where such failure caused loss to others;
been, or acted as, a director or manager of, or professional advisor to, an entity that:
› was, or later came to be, insolvent;
› was, or later came to be, under insolvency administration;
› was, or later came to be, under statutory or judicial management; or
› failed to repay, or otherwise failed to meet its financial obligations to, creditors or beneficiaries;

and engaged in unreasonable or unlawful conduct that caused or contributed to the insolvency, placement under insolvency administration or statutory or judicial management, or failure to repay or otherwise meet obligations to creditors or beneficiaries;

contravened any regulatory requirement or professional standard relating to:
› the management of an entity; or
› commercial or professional activities;
been unreasonably or improperly obstructive of, or misleading or untruthful in dealing with, a court, tribunal, official inquiry, regulator, complaints handling body, dispute resolution body, or professional or industry body;
breached a fiduciary obligation or other legal or professional obligation involving trust or conflict of interest or perpetrated or participated in negligent, deceitful or otherwise discreditable business or professional practices; or
failed to comply with a fit and proper person policy of an APRA-regulated institution.

The Board Review Process

The composition of the Board is reviewed on an annual basis coinciding with the annual general meeting cycle to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, or when it is considered that the Board would benefit from the services of a new director with particular skills, the Nomination & Prudential Committee selects a panel of candidates with appropriate expertise and experience for consideration by the full Board. The Committee also takes into account the Prudential Criteria and may seek advice from external consultants if necessary in selecting candidates for Board positions. The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders and re-election at three yearly intervals.

Formal letters of appointment setting out key terms and conditions are in place for all directors.

Director Induction and Training

Upon appointment, new directors are given a detailed briefing by the Chairman on key board issues and by the Chief Executive and senior executives on the nature of the Company’s business and its key drivers. New directors are also provided with appropriate background documentation. Issues covered in the induction include:

the Company’s financial, strategic, operational and risk management position;
directors’ rights, duties and responsibilities; and
the role of the Board and the Board committees.

Directors also undertake training and development on an as needs basis. Directors are also regularly briefed on the Group’s businesses and industry or technical issues impacting the Group and at least one meeting a year is held in conjunction with a tour of one of the Company’s operations.

Board Performance Assessment

The Board reviews its own performance and that of its Committees on an ongoing basis. The Chairman also holds individual discussions with each director to discuss their performance on a needs basis. The non-executive directors are responsible for evaluating the performance of the Chief Executive, who in turn evaluates the performance of all other senior executives. The evaluations are based on specific criteria, including the Company’s business performance, whether long-term strategic objectives are being achieved and the achievement of individual performance objectives. This process was followed in respect of the 2008 financial year.

The Board Charter prescribes that before a director is recommended for re-election, the Chairman consults with the other directors regarding the director’s effectiveness. Based upon the outcome of these consultations, the Board then determines whether or not to recommend the director for re-election.

The Nomination & Prudential Committee assists in this review process.

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remuneration

Nomination & Prudential Committee

Membership

The members of the Nomination & Prudential Committee at the date of this Report are: Mr S Gerlach (Chairman) Mr C E Bright Dr J C Fox Mr L P Wozniczka

The Nomination & Prudential Committee currently comprises four directors, the majority being independent directors and includes the Chairman of the Board and the Chief Executive Officer. The Chief Executive Officer may participate in discussions with respect to matters concerning the main Board of the Company but has no voting rights with respect to such matters. Members are appointed for an initial term of three years but are eligible for re-appointment.

Role of the Nomination & Prudential Committee The Nomination & Prudential Committee operates under a formal charter adopted by the Board which can be viewed on the Company’s website at www.futuris.com.au.

The Committee’s principal responsibilities are to regularly review and make recommendations to the Board on:

the necessary and desirable competencies of members of the Boards of the Company and its subsidiaries and their committees;
appropriate processes for the review of the performance of the Boards of the Company and its subsidiaries;
appropriate policies with respect to the maximum period of service and retirement age for directors;
appropriate succession plans for the Boards of the Company and its subsidiaries and the Chief Executive Officer;
the appropriate size of the Board so as to encourage efficient decision-making;
recommendations for the appointment (including re-appointment in the case of directors retiring by rotation) and removal of directors of the Company and its subsidiaries;
the scope and content of letters of appointment of non-executive directors; and
skills development and continuing education programs for directors of the Company and its subsidiaries;
appropriate induction procedures designed to allow new directors to participate fully and actively in board decision-making at the earliest opportunity and the effectiveness of those procedures; and
fulfilment of the Company’s prudential obligations.

With respect to subsidiary boards, the Chief Executive consults with the Chairman and the Chairman of the relevant subsidiary boards on nomination and prudential processes, as appropriate.

Remuneration Policy

Objectives

The Board’s objective is to ensure that the Company has adopted remuneration policies that meet the needs of the Company and encourage a performance oriented culture. Discussion of the policies and remuneration structure is contained in the Remuneration Report on page 39 of this Annual Report.

Chief Executive

A summary of the key terms of the Chief Executive’s employment contract, including termination arrangements, were disclosed to the market through the ASX at the time of appointment and updated with respect to material changes through the ASX. The remuneration components including termination benefits, were finalised following advice from an independent remuneration expert.

Non-Executive Directors

The Board determines the fees payable to nonexecutive directors with the assistance of the Remuneration Committee.

Non-executive directors are not entitled to performance-based bonuses or to participate in the Company’s employee incentive scheme.

The Board resolved to dispense with retirement allowances for any non-executive director appointed after 30 June 2004 and to freeze retirement allowances as at 30 June 2004 for all directors in office at that date. Accrued entitlements will be paid at the time of retirement.

Details of indemnity and insurance arrangements for directors and officers are reported on page 37 of this report.

Remuneration Committee

Membership

The members of the Remuneration Committee at the date of this Report are: Mr S Gerlach (Chairman) Dr J C Fox Mr L P Wozniczka

The Remuneration Committee comprises three directors, the majority being independent directors and includes the Chairman of the Board and the Chief Executive Officer. The Chief Executive Officer leaves the meeting during those periods in which consideration is being given to his compensation arrangements. Committee members are appointed for an initial term of three years but are eligible for re-appointment.

Role of the Remuneration Committee

The Remuneration Committee operates under a formal charter adopted by the Board which can be viewed on the Company’s website at www.futuris.com.au.

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The Committee’s principal responsibilities are to:

ensure that appropriate policies are in place for compensation arrangements for the Chief Executive Officer, senior management, the Company’s employees generally and the Board itself;
advise and make recommendations to the Board on employee share and option schemes, executive option plans, performance incentive packages, superannuation entitlements, retirement and termination benefits and policies;
review the Chief Executive Officer’s recommendations with respect to the remuneration of key executives – Chief Financial Officer and Divisional Managing Directors - and his plans for the remuneration of employees in general, to ensure that the Company’s remuneration policies are sufficiently competitive and equitable to retain and incentivise a high quality workforce;
review any equity plans with specific approval required by the Board for equity plans for Directors and the Chief Executive Officer and approval required by the Committee for key executives and the terms of any Group plan;
review and recommend for Board approval, where appropriate, any employment contracts outside normal parameters.

In the case of subsidiary boards, similar processes are undertaken by the Chief Executive, who consults with the Chairman of the Company, the Futuris Remuneration Committee and the Chairman of the relevant subsidiary, as appropriate.

Occupational Health, safety and Environment

The Board is committed to fulfilling the Company’s obligation to operate its businesses in a safe, ethically responsible and sustainable manner and has established the Occupational Health, Safety and Environment Committee to assist it in meeting this objective.

Occupational Health, Safety and Environment (OHSE) Committee

Membership

The members of the OHSE Committee at the date of this Report are: Dr J C Fox (Chairman) Mr S Gerlach Mr R G Grigg Mr L P Wozniczka

Its primary functions are to:

establish the strategic direction and targets for health, safety and environmental management;
provide a forum for discussion between the Board and management on health, safety and environment issues;
review the Company’s performance in relation to health, safety and environment matters ;
review the adequacy and performance of the Company’s health, safety & environment functions and management of the functions;
review the effectiveness of the Company’s health, safety & environment policy framework, management systems and internal controls including any health, safety and environment standards, plans and audit process;
monitor the social, environmental and ethical impact of the Company’s operations and set standards for social, environmental and ethical practices;
consider the key risks arising from health, safety & environment issues;
monitor progress in the achievement of health, safety and environment targets;
monitor and consider the impact of changes and emerging issues in health, safety and environment legislation, community expectations, research findings and technology;
consider reports submitted by Company management on health, safety and environment performance and issues including reports on material issues such as serious injury or death or significant environmental incidents associated with the Company’s operations;
receive and consider presentations from business unit general managers on the health, safety and environment management and performance of their operations; and
visit the Company’s operational sites to familiarise committee members with the health, safety and environment issues associated with the operations on those sites and to assure members that appropriate systems and controls have been implemented.

Integrity of Financial reporting

The Board is concerned to ensure the integrity of the Company’s financial reporting is independently verified and has established the Audit Committee to assist it in achieving this objective.

Audit Committee

Membership

The OHSE Committee comprises four directors, the majority being independent directors and is chaired by the Deputy Chairman of the Board. Committee members are appointed for an initial term of three years but are eligible for re-appointment.

Role of the OHSE Committee

The OHSE Committee operates under a formal charter adopted by the Board which can be viewed on the Company’s website at www.futuris.com.au.

The members of the Audit Committee at the date of this Report are: Mr G D Walters (Chairman) Mr I G MacDonald Mr R G Grigg

All members of the Audit Committee are independent, non-executive directors. At least one member of the Committee is required to be a qualified accountant or other financial professional with experience of accounting and financial matters.

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The Committee Chairman Mr G D Walters has extensive experience in accounting and financial matters having formerly held the role of Chairman of Partners at KPMG South Australia. Committee members are appointed for an initial term of three years but are eligible for re-appointment.

Details of the members’ qualifications can be found on page 22 of this report.

Representatives of Company’s management attend meetings from time to time at the discretion and invitation of the Committee.

specific non-audit services (including information technology and human resources services) are provided to the Company by the auditor.
in relation to the provision of other non-audit services the following guidelines must be followed: - management must consider the actual, perceived and potential impact upon the independence of external audit prior to engaging external audit to undertake any non-audit service;
the outsourcing of any internal audit project to the external auditors or the undertaking of any joint internal/external audit review, will require prior Audit Committee approval;
the Audit Committee must consider whether

Role of the Audit Committee

The Audit Committee operates under a formal charter adopted by the Board which can be viewed on the Company’s website at www.futuris.com.au. Its primary functions are to:

assist the Board in meeting its oversight responsibility in relation to:
Integrity of financial statements and financial accounting policies and practices;
External auditor’s qualifications, performance and independence;
Oversight and performance of the internal audit function; and
Financial reporting risk management and internal control and regulatory compliance.
improve the credibility and objectivity of the accountability process;
improve the effectiveness of the internal and external audit functions and act as a forum for improving communication between the Board and the external auditors and, where applicable, the internal auditors;
facilitate the maintenance of the independence of the external auditor;
provide a structured reporting line for internal audit facilitating the maintenance of the objectivity of the internal audit functions; and
improve the quality of external reporting of financial information and reports and assist in establishing the objectives, and the assessment of the performance, of the internal audit function.
the provision of such non-audit services is compatible with maintaining the external auditors’ independence, by obtaining assurance and confirmation that the additional services provided by the external auditor are not in conflict with the audit process. In order to assist with this assessment, management will provide the Audit Committee with details of the amount of non-audit services undertaken by the external auditors as a proportion of all audit and non-audit engagements, entered into by the Group for the period; and
as a general rule, the Company does not utilise external auditors for internal audit purposes or consulting matters, other than services which are in the nature of audit, such as review of tax compliance.

The Audit Committee is responsible for ongoing review of the External Audit Independence Policy and reports to the Board on the continuing suitability of the policy and recommended changes to the existing policy, as and when required.

risk Management

The Board has in place a Risk Management Framework to assist the Company in achieving its risk management objectives – to ensure the Group’s assets are protected against financial loss, business risks are identified and properly managed, legal and regulatory obligations are satisfied, and business risks are appropriately monitored by the Board.

External Audit Independence Policy

The Company has in place a formal policy that:

details the Group’s position in respect of the key issues which may impair, or appear to impair, external audit independence;
details the internal procedures implemented to ensure the independence of auditors; and
establishes a framework that enables the Audit Committee to evaluate compliance with the policy and report to the Board on compliance.

The key principles in the policy are:

an auditor is not independent if:
an employment relationship exists or could be deemed to exist, between the Company and the auditor, its officers or former officers, employees or former employees, and certain relatives;
- a financial relationship exits between the auditor and the Company; and

Under the Risk Management Policy the Board is responsible for oversight of the risk management process and framework. Senior executive management have primary responsibility for identification and management of material business risks within the Group’s businesses and are accountable to the Board for designing, implementing and monitoring the process of risk management and integrating it into the day to day activities of the Group’s businesses. Subsidiary boards are responsible for monitoring the management of key business risks of their respective subsidiaries. All personnel are responsible for managing risks in their areas.

The Corporate Risk and Compliance Committee (CRCC) operates to assist the Board by applying and monitoring compliance with the Company’s Risk Management Policy and reporting to the Board on a regular basis.

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The Audit Committee is responsible for assessing the effectiveness of internal processes for determining and managing key financial risk areas and the OHSE Committee is responsible for assessing the effectiveness of internal processes for determining and managing key OHSE risks.

Elders’ trading operations operate under formal charters supervised by the CRCC.

The Group’s prudentially regulated entities, Elders Rural Bank Limited, Elders Insurance Limited and Mutual Benefit Consulting Pty Ltd, have each adopted risk management policies that specifically address the risks and risk management issues faced by those entities and maintain risk management committees to apply and monitor compliance with those policies.

Corporate Risk and Compliance Committee

Membership

The Corporate Risk and Compliance Committee comprises senior executives of the Company and includes participation from representatives of the main operating divisions as invitees. The CRCC reports to the Chief Executive and copies of all minutes of the CRCC are provided to the Board, Audit and OHSE Committees at the next meeting following the CRCC meeting.

Responsibilities

The Committee operates under the Group’s Risk Management Policy and is responsible for:

reviewing the Group’s risk position on a consolidated basis;
establishing, reviewing and approving corporate risk management strategies;
ensuring these strategies are in line with the Group’s broader objectives;
monitoring the risk management activities of business divisions and subsidiaries, including specific exposures, transactions and instruments used;
ensuring accurate, timely and comprehensive risk management reports are presented to the Board and the Audit and OHSE Committees on a regular basis;
reviewing market, operational, credit and insurance risk matters; and
reviewing the Group’s health, safety and environmental responsibilities.

The Committee is also responsible for ongoing review of the policy and reports to the Board on the continuing suitability of the policy and for recommending changes to the existing policy as and when required.

Management Certificates

In accordance with the Board Charter, Section 295A of the Corporations Act and Recommendation 7.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, prior to approving the financial reports of the Company, the Board receives from the Chief Executive and the Chief Financial Officer a certificate confirming that:

the Company’s financial statements present a true and fair view, in all material respects, of the Company’s financial position and performance and are in accordance with the Corporations Act and

relevant Australian Accounting Standards and that there are reasonable grounds to believe the Company will be able to pay its debts when they become due and payable;

the above statements on the integrity of the financial statements are founded on a sound system of risk management and internal control which, in all material respects, implements the Board’s policies;
the Company’s risk management and internal control systems, to the extent that they relate to financial reporting, are operating effectively in all material respects; and
where the above statements cannot be made in an unqualified manner, an explanation will be provided of the facts contributing to such a circumstance and the implications of these facts for both the financial reports and the Company.

The Board has received an unqualified certificate from the Chief Executive and Chief Financal Officer in respect of the financial year ended 30 June 2008.

Treasury Policy

The Company’s treasury operation is responsible for managing currency and interest rate risks together with managing the Company’s finance facilities.

Treasury operates within formal policies, and compliance with key policies is regularly reported to the Board.

The primary objectives are to have an appropriate debt maturity profile to fund on-going working capital and liquidity needs and to prudently manage exposures to variable interest rates and foreign exchange movements.

Conduct and Ethics

Code of Conduct

The Board is committed to promoting conduct and behaviour that is honest, fair, legal and ethical and respects the rights of the Company’s shareholders and other stakeholders in the Company, including clients and customers, suppliers, creditors and employees. The Board has adopted a code of conduct that details the conduct and behaviour it expects from its members and the employees of the Company.

The Code, which may be accessed from the Company’s website, details the Company’s position with respect to dealings with parties with whom the Company engages, use of position and company information, gifts and gratuities and conflicts of interest and the principles the Company promotes with respect to honesty and integrity, occupational health and safety, equal opportunity, legal compliance, competition, privacy, environment and community.

The Board has also adopted a Reporting of Unacceptable Conduct Policy to encourage and facilitate disclosure of unacceptable conduct, including fraud or illegal activity, occurring in the company. The Policy, and associated reporting process, addresses the issues associated with alleged improper

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announcements made about the Company’s on-going business activities.

conduct including reporting, responsibility, confidentiality and effective investigation.

Share Trading Policy

The Board encourages non-executive directors to own the Company’s securities to further align their interests with the interests of other shareholders. Details of directors’ shareholdings in the Company can be found on page 37 of this report.

The Company has in place a share trading policy that prescribes that directors and senior executives may only deal in the Company’s securities for a period of six weeks after:

the announcement of the Company’s full year results;
the announcement of the Company’s half year results;
the Company’s Annual General Meeting; and
any rights trading period applying in respect of a prospectus issued by the Company.
other than in exceptional circumstances.

A director or senior executive must not deal in the Company’s securities during this six week period, if the director or senior executive is in possession of unpublished information that, if generally available, might materially affect the price of the Company’s securities. Prior to dealing, a director must notify the Chairman and the Company Secretary and senior executives must notify the Company Secretary.

The Share Trading Policy can be found on the Company’s website at www.futuris.com.au.

Communication with the Market & shareholders

The Board is committed to managing disclosure of its affairs and communicating effectively with its shareholders so as to retain investor confidence and to encourage full and fair value for the Company’s securities. This commitment is enacted through the application of an External Disclosure and Market Communications Policy and a Communications strategy and the application of supporting procedures.

Each year the Company communicates to its shareholders and the investment markets through a program of regular announcements to fulfil its periodic reporting obligations, supplemented by announcements made on an ad-hoc basis to fulfil continuous disclosure obligations.

In addition:

the Company releases briefings on Company developments and events to the market as a whole;
the Company’s senior management interacts with members of the investment community and financial and business media through a variety of forums including results briefings, ‘one on one’ meetings and discussions; and
background and technical information is provided to institutional investors, market analysts and the financial and business media to support major announcements made to the ASX and minor

External Disclosure and Market Communications Policy

Under the Policy the Company has instituted (and monitors) procedures designed to ensure:

the Company’s compliance with continuous disclosure obligations contained in applicable ASX Listing Rules and the Corporations Act 2001. Procedures followed to achieve this include the formation of a Disclosure Advisory Group that works with the Chief Executive in the consideration of disclosure issues, the communication of disclosure requirements and procedures to senior management together with procedures to facilitate the timely flow of relevant information to the Disclosure Advisory Group;
the timely release and dissemination of information (within the requirements of continuous disclosure obligations) necessary for the formation of an informed and balanced view of the Company;
information disclosed in investor or media briefings is not “market sensitive”. If market sensitive information is inadvertantly disclosed during a briefing it will immediately be released to the market at large through the ASX; and
that stakeholders have equal opportunity, subject to reasonable means, to access information issued externally by the Company. This is addressed through a broad range of media including the Company’s website, webcasts of the Company’s Annual General Meeting and full year and half year results briefings (which are also archived and available for view on the Company’s website), and an information subscription service through which interested parties can register for electronic advice of announcements. All public releases are archived and available for view on the Company’s website at www.futuris.com.au.

The Board is also concerned to ensure that shareholders are in a position to participate effectively in general meetings and to this end:

the Company has adopted in all substantial respects the ASX Corporate Governance Council guidelines for communication with shareholders and improving shareholder participation at general meetings; and
it is a term of engagement of the Company’s external auditors that they attend the Company’s Annual General Meetings and are available to answer questions about the conduct of the audit of the Company and the preparation and content of the auditor’s report in respect of the relevant reporting period.

Disclosure of Governance Information

Information concerning the Company’s governance framework and practices, principles and policies is posted on the Company’s website at www.futuris.com.au in the section marked: Investor Centre: Corporate Governance, as and when introduced or amended.

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dIrECtOrs’ rEpOrt

The Directors present their report for the year ended 30 June 2008.

Directors

The Directors of the Group in office at the date of this report are:

Non-Executive Directors:

Stephen Gerlach (Chairman) James Charles Fox (Deputy Chairman) Charles Ernest Bright Raymond George Grigg Ian Graham MacDonald James Hutchison Ranck Anthoni Salim Graham Douglas Walters

Executive Director:

Leslie Peter Wozniczka (Chief Executive Officer and Managing Director)

J H Ranck joined the Board on 24 June 2008. W H Johnson retired from the Board on 23 October 2007. All other Directors held their position as Director for the whole of the year and up to the date of this report.

On 26 June 2008 the Board announced that it had accepted the resignation of the Chief Executive Mr Les Wozniczka to become effective upon completion of an international search for a successor.

Company Secretaries: Sonya Catherine Furey Ross Edwin Mallett

A summary of the experience, qualifications and special responsibilities of each Director and each Group Company Secretary is provided on page 22.

Principal Activities

The principal activities of the Futuris Group during the year were the:

(a) Provision of services and inputs to the rural sector;
(b) Provision of financial and other services to rural and regional customers; and
(c) Management of investor-funded hardwood plantations and manufacture of quality sawn timber products; and
(d) Supply of automotive components.

Results and Review of Operations

The profit of the Group for the year, after tax and outside equity interest, was $36,447,000 (2007: $105,430,000). A review of the operations and results of the consolidated entity and its principal businesses during the year is contained in pages 6 to 21 of this report.

Significant Changes in the State of Affairs

In the opinion of Directors, there were no significant changes in the state of affairs of the consolidated entity during the year other than those referred to on pages 6 to 21 of this report.

Events Subsequent to Balance Date

No matter or circumstance has arisen since the end of the year, which is not otherwise dealt with in this report, that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.

Likely Developments and Future Results

Discussion of likely developments in the operations of the consolidated entity and the expected results for those operations in future financial years is included in the information on pages 6 to 21 of this report. Further information about the likely developments in the operations of the consolidated entity and the expected results for those operations in subsequent financial years has not been included in this report because, in the opinion of the Directors, their inclusion would prejudice the interests of the consolidated entity.

��

Share and Other Equity Issues During the Year

The following information summarises the equity issues made by the Company during the year.

1,387,500 employee options were exercised during the year resulting in the issue of 1,387,500 fully paid ordinary shares in the Company.

404,456 convertible notes were converted during the year resulting in the issue of 404,456 fully paid ordinary shares in the Company.

5,746,830 fully paid ordinary shares were issued under the Company’s employee share plan.

12,757,050 fully paid ordinary shares were issued in accordance with the terms of the Company’s dividend reinvestment plan (DRP). A further 24,609,680 ordinary shares were issued in accordance with the terms of the underwriting agreement in respect of the DRP.

No other equity issues were made during the year.

Dividends and Other Equity Distributions

Details of dividends paid or payable in respect of the year are as follows:

Dividends paid on fully paid ordinary shares:	$000
Final 2007 dividend of 5.5 cents paid on 24 October 2007 (franked to 100%)	40,284
Interim 2008 dividend of 4 cents paid on 1 April 2008 (franked to 100%)	30,515
Final 2008 dividend of 5.5 cents payable on 28 October 2008 (franked to 100%)	42,930
Distributions paid on Futuris Hybrids*:	$000
Quarterly distribution of 1.5215 cents paid on 30 September 2007 (franked to 100%)	2,282
Quarterly distribution of 1.5985 cents paid on 31 December 2007 (franked to 100%)	2,398
Quarterly distribution of 1.6475 cents paid on 31 March 2008 (franked to 100%)	2,471
Quarterly distribution of 1.7515 cents paid on 30 June 2008 (franked to 100%)	2,627

(*NB distribution of 1.5189 cents due for payment on 30 June 2007 was paid 2 July 2007 due to 30 June 2007 falling on a Saturday)

Share Options

Share options are issued to company executives as part of the Group’s remuneration policy. Information on this policy and associated procedures is provided in the Remuneration Report commencing on page 39 of this annual report.

The total quantity of options issued as at 30 June 2008 represented 3.25% of the Group’s issued ordinary shares.

Details of options over unissued shares at the date of this report are as follows:

�5

�) Options on Issue:

All options listed in this table are subject to minimum tenure restrictions of 3 years.

Date Options Granted	Number of Options Granted	Issue Price	Option Expiry Date
7/10/03	250,000	$1.71	7/10/08
1/10/04	1,975,000	$1.68	27/10/09
31/3/05	200,000	$2.00	31/03/10
26/7/06	228,000	$2.25	8/08/10
4/10/05	2,440,000	$2.06	4/10/10
4/10/05	750,000	$2.06	4/10/10
25/10/06	150,000	$1.83	31/10/11
25/10/06	100,000	$1.92	31/10/11
25/10/06	3,420,000	$2.02	25/10/11
25/7/06	1,950,000	$2.17	31/10/11
25/7/06	200,000	$2.17	31/10/11
31/8/07	1,000,000	$2.54	31/08/12
1/10/07	3,550,000	$2.45	1/10/12
1/3/08	750,000	$2.45	1/3/13
1/7/03	2,000,000	$1.37	1/07/13
24/10/07	1,500,000	$2.36	31/10/13
24/10/07	1,500,000	$2.36	31/10/14
24/10/05	1,500,000	$2.06	25/10/15
25/10/06	1,500,000	$2.06	31/10/16
	��,96�,000

�) Options issued since the end of the previous financial year

Date Options Granted	Number of Options Granted	Issue Price	Option Expiry Date
31/8/07	1,000,000	$2.54	31/8/12
1/10/07	3,550,000	$2.45	1/10/12
24/10/07	1,500,000	$2.36	31/10/13
24/10/07	1,500,000	$2.36	31/10/14
1/3/08	750,000	$2.45	1/3/13
	8,�00,000

�) Options exercised since the end of the previous financial year

Date Options Granted	Number of Shares Issued	Share Issue Price	Option Expiry Date
24/10/02	250,000	$1.23	24/10/07
1/10/04	575,000	$1.68	27/10/09
4/10/05	125,000	$2.06	4/10/10
25/10/06	437,500	$2.02	25/10/11
	�,�87,500

�) Options lapsed since the end of previous financial year

Date Options Granted	Number of Lapsed Options	Option Issue Price	Option Expiry Date
1/10/04	450,000	$1.68	27/10/09
25/10/06	1,187,500	$2.02	25/10/11
4/10/05	500,000	$2.06	4/10/10
	�,��7,500

�6

Directors’ Interests

At the date of this report, the interests of the directors in shares and other equity securities of the Group are:

	No. of ordinary shares	No. of ordinary shares	No. of Futuris	Hybrids
	Benefcial Interest	Non-benefcial Interest	Benefcial Interest	Non-benefcial Interest
Non-Executive Directors
S Gerlach	492,522	-	-	-
J C Fox	26,765	-	-	-
C E Bright	103,492	-	-	-
R G Grigg	31,560	-	-	-
I G MacDonald	60,000	-	-	-
J H Ranck	20,000	-	-	-
A Salim	33,545,578	-	-	-
G D Walters	21,000	-	-	-
Executive Directors
L P Wozniczka	4,521,341	8,470	1,000	500

At the date of this report, the following options are on issue to directors.

	No. of options	Exercise Price	Expiry	No. of options exercised in year
L P Wozniczka	2,000,000 (a)	$1.37	1/7/13	Nil
L P Wozniczka	1,500,000 (a)	$2.06	25/10/15	Nil
L P Wozniczka	1,500,000 (a)	$2.06	25/10/16	Nil
L P Wozniczka	1,500,000 (a)	$2.36	31/10/13	Nil
L P Wozniczka	1,500,000 (a)	$2.36	31/10/14	Nil

(a) Each option issue is made up of 2 equal tranches of options and each tranche is (or has been) subject to performance hurdles.

Directors’ Meetings

Details of the number of meetings held by the Board of Directors, and Board Committees and the attendance at those meetings is provided in the Corporate Governance section of this report on page 26.

Indemnification of Officers and Auditors

Insurance arrangements established in the previous year concerning officers of the consolidated entity were renewed during the year.

The consolidated entity paid an insurance premium in respect of a contract insuring each of the directors of the Company named earlier in this report and each full time executive officer, director and secretary of Australian Group entities against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. The terms of the policy prohibit the disclosure of the premiums paid.

Each director has entered into a Deed of Access, Insurance and Indemnity which provides:

that the Company will maintain an insurance policy insuring the director against any liability incurred by the director in the director’s capacity as an officer of the Company to the maximum extent allowed by law;
for indemnity against liability as a director, except to the extent of indemnity under the insurance policy or where prohibited by law; and
for access to company documents and records, subject to undertakings as to confidentiality.

The consolidated entity has not entered into any agreement to indemnify its auditor.

Remuneration of Directors and Senior Executives

Details of the remuneration arrangements in place for directors and senior executives of the Group are set out in the Remuneration Report commencing on page 39 of this Annual Report. In compiling this report the Group has met the disclosure requirements prescribed in the Australian accounting standards and the Corporations Act 2001.

�7

Environmental Regulation Performance

The Futuris Group is subject to a range of environmental legislation in the places that it operates. Details of the Group’s Environmental Regulation Performance can be found on pages 14, 20 and 21 of this report.

Rounding of Amounts

The parent entity is a Group of the kind specified in Australian Securities and Investments Commission class order 98/0100. In accordance with that class order, amounts in the financial report and Directors’ report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise.

Non-Audit Services and Auditor Independence

Non-audit services provided by the Group’s auditor, Ernst & Young to the Group during the course of the financial year are disclosed below. Based on advice received from the Audit Committee the Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed under the Corporations Act for the following reasons:

all non-audit services have been reviewed by the Audit Committee to ensure they do not impact on the impartiality or objectivity of the auditor; and
the nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Tax services (primarily compliance) $253,662 Other compliance and assurance services $272,316

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out below.

This report has been made in accordance with a resolution of directors.

==> picture [104 x 49] intentionally omitted <==

==> picture [126 x 95] intentionally omitted <==

----- Start of picture text -----

S Gerlach
Chairman
L P Wozniczka
Director
----- End of picture text -----

10 September 2008

Auditor’s Independence Declaration to the Directors of Futuris Corporation Limited.

In relation to our audit of the financial report of Futuris Corporation Limited for the financial year ended 30 June 2008, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

==> picture [169 x 34] intentionally omitted <==

Alan Herald Partner

Adelaide 10 September 2008

�8

AUDITED

FuturIs COrpOratION LIMItEd rEMuNEratION rEpOrt 3O JuNE 2OO8

This Remuneration Report forms part of the Directors’ Report and details the remuneration arrangements in place for directors and senior executives of the Group. In compiling this report the Group has met the remuneration disclosure requirements prescribed in the Australian Accounting Standards, the Corporations Act 2001 and the revised ASX Corporate Governance Principles and Recommendations (“ASX Corporate Governance Principles”).

	Section 1
	Board Remuneration Committee	40
	Section 2
	Non-executive directors’ remuneration	40
	Section 3
	Executive director and senior executive remuneration	42
	Section 4
	Nominated executives’ contract terms	48
	Section 5
	Remuneration disclosure tables	50
	Section 6
	Equity instruments in relation to directors and executives	51

�9

AUDITED

section 1 Board remuneration Committee

The Company’s overall objective is to generate strong returns for shareholders and to deliver enhanced shareholder value through performance in the short and longer terms. To achieve those objectives the Company needs to have the best, brightest, most experienced and committed people available to it. The Company’s remuneration strategy is a key factor in delivering the Company’s overall objective.

Role of Remuneration Committee

The Remuneration Committee assists the Board to ensure that Futuris and each individual operating company establish and maintain remuneration strategies and policies that are aligned with the Company’s overall objectives and accord with best practice as set down in the ASX Corporate Governance Principles. The role and responsibilities of the Remuneration Committee are set out in the Corporate Governance Statement on pages 29 and 30 of this Annual Report and the Committee’s Charter is published on the Company’s website at www.futuris.com.au.

Group Remuneration Strategy

The Futuris Group remuneration strategy seeks to encourage a performance orientated culture that will:

provide competitive reward opportunities to attract and retain high calibre executives and Directors and to motivate them to pursue sustainable long term growth and success for Futuris, the operating subsidiary companies and shareholders;
align the rewards and interests of Directors and senior executives with the long term growth and success of the Group within an appropriate control framework;
demonstrate a clear relationship between senior executive performance and remuneration; and
be consistent and responsive to the needs of each operating subsidiary company and the Group.

The Group remuneration strategy has been developed to allow each operating subsidiary company the autonomy to manage remuneration policies and procedures within the framework established for the Group and in-line with budget targets. All remuneration determinations for executives above a predetermined level of seniority within the Group, or those which would otherwise fall outside the established framework, must be individually approved by the Chief Executive, the Futuris Remuneration Committee or the Board, as appropriate.

section 2 Non-executive directors’ remuneration

A. Board policy

Non-executive directors are remunerated by way of fees in the form of cash and superannuation (as a consequence of the superannuation guarantee levy) and generally in accordance with Recommendation 8.2 of the ASX Corporate Governance Principles. No directors fees are paid to executive directors.

Non-executive directors do not participate in the Company’s cash or equity incentive plans and directors appointed after 30 June 2004 do not receive retirement benefits other than superannuation contributions disclosed in this report. Directors appointed to the Board prior to 30 June 2004 are entitled to receive $150,000 on retirement. Only two directors are eligible for this retirement benefit.

Non-executive directors’ have formal letters of appointment with the Company. Length of tenure is governed by the Company’s Constitution and the ASX Listing Rules, which provides that all non-executive directors’ are subject to re-election by shareholders every three years.

B. Non-executive directors’ remuneration

Non-executive director fees are reviewed by the Board on an annual basis, taking into account the qualifications and time commitment of each director, supported by advice from external remuneration consultants. The fees paid are generally consistent with those paid to non-executive directors of comparable companies, while remaining within the aggregate fee limit of $1,800,000 per annum approved by shareholders at the Company’s 2006 Annual General Meeting. Statutory superannuation guarantee contribution amounts are not included in the aggregate fee limit.

As at the date of this report, the annual base fee amount paid to each non-executive director, other than the Chairman and the Deputy Chairman, is $90,000 per annum. The Chairman receives an annual composite fee of $350,000 and the Deputy Chairman receives a fee of $130,000. Additional fees are payable to non-executive directors, other than the Chairman, who sit on Board committees.

As mentioned in the Corporate Governance Statement, it is Board policy that, where appropriate, a non-executive director sit on the boards of the Company’s main operating divisions to extend oversight to those subsidiary boards. Additional fees are paid to non-executive directors who sit on subsidiary boards, with fees currently ranging from $60,000 to $75,000 per annum depending on the size and complexity of the operating divisions and the estimated time commitment. Additional fees are also paid to some non-executive directors who sit on subsidiary board committees.

The Board encourages non-executive Directors to own securities in the Group to further align their interests with the interests of other shareholders. Details of Directors’ shareholdings in the Group can be found in table [6a] of this Report. All shares held by non-executive Directors were acquired by the Directors on-market or through the Company’s Dividend Reinvestment Plan (DRP).

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AUDITED

Details of non-executive directors’ remuneration for the 2007 and 2008 financial years are set out in the following table:

Table �a (A$)		Short Term Payments(7)	Short Term Payments(7)	Post Employment	Total
		Base Fee	Other	Superannuation
S Gerlach (Chairman)(7) (8)	�008	�50,000	-	��,686	�6�,686
	2007	350,000	-	12,686	362,686
J C Fox	�008	��0,000	68,�� (3)	�7,850	��6,�8�
(Deputy Chairman)(8)	2007	90,000	50,000	12,600	152,600
C E Bright	�008	90,000	60,000 (2)	��,686	�6�,686
	2007	90,000	60,000	12,686	162,686
R G Grigg(7)	�008	90,000	66,000 (4)	��,0�0	�70,0�0
	2007	90,000	66,000	12,686	168,686
W H Johnson	�008	��,0�5	�50,000 (8)	6,590	�98,6�5
(Deputy Chairman)(8) (9)	2007	130,000	16,000	12,686	158,686
I G MacDonald	�008	90,000	��,7�� (5)	�0,856	�5�,589
	2007	60,000(1)	40,833	12,052	112,885
J H Ranck(1)	�008	-	-	-	-
	2007	-	-	-	-
A Salim	�008	90,000	-	-	90,000
	2007	90,000	-	-	90,000
G D Walters	�008	90,000	�6�,500 (6)	��,6�5	�7�,��5
	2007	90,000	106,500	12,686	209,186
Total	�008	97�,0�5	6�7,566	�07,��	�,7�6,95�
	2007	990,000	339,333	88,082	1,417,415

Notes:

(1) J H Ranck joined the Board on 24 June 2008.
(2) C Bright is a Futuris Board representative on the main operating subsidiary board Integrated Tree Cropping Ltd (ITC) and received ITC subsidiary board fees of $50,000 and ITC Research and Development Committee fees of $10,000.
(3) J Fox was appointed Deputy Chairman on 27 November 2007 and receives a Deputy Chairman fee of $130,000 (pro-rated 7 months). He was a Futuris Board representative on the Elders Telecommunications Steering Committee until April 2008 and received Committee fees of $50,000 (pro-rated 10 months) and sat on the main operating subsidiary board Elders Australia Ltd and received fees of $60,000 (pro-rated for 7 months).
(4) R Grigg is a member of the Futuris Board Audit Committee and received a Futuris Board Audit Committee fee of $16,000. R Grigg is also a Futuris Board representative on the main operating subsidiary board Futuris Automotive Group Ltd and received a Futuris Automotive subsidiary board fee of $50,000.
(5) I MacDonald is a Futuris Board representative on the main operating subsidiary board, Elders Financial Services Group Pty Ltd for which he received a subsidiary board fee of $70,000. Mr MacDonald is also a Futuris representative on the board of Elders Rural Bank Ltd (ERB) in which Futuris holds a 50% interest. Mr MacDonald received an ERB board fee of $62,400. Mr MacDonald also received a fee of $16,000 (pro rated 7 months) as a member of the Futuris Board Audit Committee.
(6) G Walters is chairman of the Futuris Board Audit Committee and received a Futuris Board Audit Committee fee of $24,000. Mr Walters was a Futuris Board representative on the main operating subsidiary board, Elders Financial Services Group Pty Ltd (EFSG) and received an EFSG subsidiary board fee of $70,000 and for his role as Chairman of the EFSG Audit Committee received a fee of $12,500. He was also a Futuris Board representative on the main operating subsidiary board Elders Australia Ltd and received fees of $60,000 (pro-rated for 6 months) and received a fee of $25,000 for his role as trustee chairman on the Mastersuper board.
(7) In addition to statutory superannuation guarantee contributions, Directors may salary sacrifice their short term payments into superannuation. A number of directors have chosen to do so and are marked (7). For simplicity we have not split the short term payments to disclose the salary sacrificed superannuation portion.
(8) Each director marked (8) has an entitlement of $150,000 to be paid on retirement. Retirement benefits ceased from 30 June 2004. Mr Johnson had his retirement benefit paid out following his retirement on 23 October 2007.
(9) W H Johnson retired from the Board on 23 October 2007.

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AUDITED

section 3 Executive director and senior executive remuneration

The disclosure in this section relates to the remuneration of key management personnel of both the Company and the consolidated entity (being those persons with authority and responsibility for planning, directing and controlling the activities of the Company during the financial year).

Key management personnel for the purposes of this report include the following persons who were non-executive directors and senior executives during the financial year:

Non-executive Directors	Senior Executives
Name Position held	Name Position held
S Gerlach Chairman	L P Wozniczka Chief Executive Offcer
J C Fox Deputy Chairman	V Erasmus Managing Director Integrated Tree Cropping
C E Bright Director	M de Wit Managing Director Futuris Automotive (appointed Managing Director 1 January 08)
R G Grigg Director	B Griffths Executive Chairman Futuris Automotive
I G MacDonald Director	M Guerin Managing Director Rural Services (appointed 1 March 08)
J H Ranck Director (appointed 24 June 08)	T Plant Managing Director Financial Services
A Salim Director	P Zachert Chief Financial Offcer
G D Walters Director
Former Directors	Former Executives
W H Johnson Former Director (retired 23 October 07)	G Hunt Former Managing Director Rural Services (ceased employment 13 July 07)

A. Board policy

The Board seeks to align employee remuneration with the commercial needs and performance of each operating subsidiary company and the objectives of the consolidated entity as a whole.

The Board has delegated to the Remuneration Committee oversight of the Company’s remuneration policies and practices. Remuneration polices and practices are benchmarked to the market by external, independent consultants to ensure that remuneration for executives meets a range of criteria, including:

that executives are appropriately rewarded having regard to their role and responsibilities
an appropriate balance between fixed and “at risk” remuneration components is maintained and in relation to the “at risk” component, an appropriate balance between short term and long term incentives
performance measures reflect long term drivers of shareholder value
paying for performance, where superior or upper quartile remuneration is only paid for demonstrable superior performance
remuneration is competitive when compared to both internal and external relativities.

The Board approves the performance and remuneration plans and outcomes for the CEO on the recommendation of the Chairman and the Remuneration Committee. The plans and outcomes for the divisional Managing Directors are approved by the Remuneration Committee on the recommendation of the CEO and the CEO approves the plans and outcomes for senior executives on the recommendation of the divisional Managing Directors. The Remuneration Committee reviews the key elements of employment contracts for divisional Managing Directors, any non-standard contracts and the CEO’s recommendations for equity incentives to senior executives.

B. Remuneration structure

The remuneration structure has been designed to support the Board’s remuneration policy. Executives’ remuneration is made up of the following three main elements:

Fixed remuneration – including salary, non-monetary benefits (including Fringe Benefits Tax (FBT) grossed-up) and superannuation;
Short-term incentives; and
Long-term incentives.

A description of each component is set out below. Remuneration packages are strategically structured to ensure a portion of an executive’s reward depends on meeting individual, business unit or group targets and objectives, including maximising returns for shareholders. Generally, the portion of ‘at risk’ remuneration (being short and long-term incentive elements) increases with seniority.

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Table �a - Target Remuneration Structure

AUDITED

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----- Start of picture text -----

100%
Threshold long-term incentive
80% Budgetted short-term incentive
Fixed remuneration
60%
40%
20%
0%
CEO CFO & Senior
Divisional MDs Management
% of Remuneration
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The above table highlights the targeted proportion of fixed and ’at risk’ remuneration components at different executive levels.

C. Fixed Remuneration

Fixed remuneration is made up of base salary, retirement benefits and any other benefits the executive has nominated to receive as part of his or her package. These benefits may include motor vehicle leases, car parking and any additional superannuation contributions beyond the mandatory 9% employer contributions .

Executives may also receive non-monetary benefits in addition to their stated total remuneration. These may include product allowances and other miscellaneous benefits, and FBT associated with such benefits.

The level of fixed remuneration is set by reference to the market and is determined by the scope of the role and the level of knowledge, skill and experience required of the individual.

Fixed remuneration is reviewed annually and is adjusted to reflect each executive’s performance over the previous year, as assessed through each subsidiary’s Performance Management Evaluation (PME) program. The PME program assesses employee performance against a number of agreed key performance objectives.

D. Short-term incentives

All executives participate in either a Futuris’ Group or a divisional Short Term Incentive Plan (STIP). The objective of the relevant STIP is to encourage executives to meet their own individual and business unit performance targets, while also supporting the Futuris Group overall business objectives.

Under the relevant STIP, each participant has a target opportunity, set as a percentage of fixed remuneration, which is typically between 30 and 60 per cent for senior executives (and up to 150 per cent for the Chief Executive Officer).

Actual payments are determined by each executive’s performance against:

business financial objectives, based on pre-determined key business measures; and
individual objectives, assessed against a range of agreed Key Performance Indicators (KPIs).

Measuring business performance

The KPIs used to assess group performance may vary from year to year and from operating subsidiary to operating subsidiary, depending on changing business objectives. Group wide performance goals are set for the CEO and CFO and corporate office executives and business division specific performance goals are established for executives in each of the business divisions.

Business financial KPIs include Budgeted Net Profit After Tax (NPAT), Cashflow, Earnings Before Interest and Tax (EBIT) and Return on Net Assets (RONA). A minimum of 50% of KPIs at CEO, CFO and Divisional Managing Director level are based on financial KPIs.

Individual business KPIs include setting of performance measures relating to safety, business excellence, continuous improvement and delivery of long term strategic initiatives.

All short-term incentive plan payments are made after the signing of the annual audited accounts of the Company.

The Chief Executive, in conjunction with the Chairman, has the authority to make discretionary bonus payments to executives (except in relation to himself) when superior performance warrants additional reward.

Payments of short-term incentives are generally cash based however selected senior executives may be required to take part of the incentive in the form of fully paid shares. Other executives may elect to take part or all of the incentive in the form of fully paid ordinary shares in lieu of cash. These shares may be new shares issued by the Company or purchased on-market. If the shares are purchased they are allocated at their average market cost and in accordance with the terms of the Company’s Employee Share – Save As You Earn Plan.

��

AUDITED

E. Long-term incentives

Futuris has a number of long term equity participation and incentive programs in place. These plans are summarised below.

			Number of Current	Number of Shares/
			Participants	Options Outstanding
Name of Plan	Purpose	Eligibility Criteria	as at �0 June �008	as at �0 June �008
Futuris Loan	The FLSP is designed to provide an equity	Invitation only.	3,496	21,289,879
Share Plan	participation opportunity for all selected	Offers range from
(FLSP)	eligible group employees, including	$3,000 to $17,500 per
	executives. Shares are provided and paid	annum per employee
	for by way of a non-recourse, interest	depending on seniority
	free loan. Dividends are used to repay the	and current year
	loan. Shares do not vest for three years,	performance.
	but there are no performance conditions
	once issued.
Futuris ‘Save as	The SAYE plan, is a qualifying Division	All permanent	43	204,264
You Earn’ Plan	13A (ITAA 36) deferred benefit employee	employees.
(SAYE)	share scheme, designed to enable
	employees to ‘sacrifice’ remuneration
	entitlements on a pre-tax basis and
	receive Futuris shares in-lieu. Tax on
	these shares can be deferred for up to
	10 years. Futuris makes no contribution
	to this plan other than supporting the
	costs of administration.
Futuris Employee	FESOP is a qualifying Division 13A	Invitation only	117	25,338,000
Share Option	(ITAA 36) employee option scheme.	for eligible group
Plan (FESOP)	Options to acquire Futuris shares are	executives.
	granted to selected eligible group
	executives at market (or premium) price,
	subject to a minimum of three years
	service and performance conditions
	(See below) determined by the Board
	at the time of grant.

The FESOP is the principal Long Term Incentive Plan (LTIP) for executives and is designed to reward executives for delivering long-term shareholder returns. The plan was last approved by shareholders in October 2007. Under the plan, participants are issued with employee options which may create an entitlement to newly issued ordinary shares in the Company if certain performance conditions are met (and subject to continued employment).

Participation in all plans is at the Board’s discretion, and, with the exception of the CEO, CFO and divisional Managing Directors, no individual has a contractual right to participate in the plan or to receive any guaranteed benefit under any plan. In the case of the CEO, options are only issued after shareholder approval is given.

The specific performance conditions and allocation ranges of each executive category, and the relationship between the rewards under these plans and Futuris’ financial performance are set out below. Relative Total Shareholder Return (TSR) and Growth in Earnings Per Share (EPS) were chosen as the basis of performance measurement for the CEO because both are widely accepted measures of the creation of shareholder value over the medium to long term. In 2007 the Board decided to adopt Growth in TSR in place of Relative TSR as a performance measure primarily because Relative TSR did not adequately cater for the unique nature of Futuris as a group of agricultural businesses or businesses servicing the agricultural sector which is subject to significant volatility in returns based on seasonal conditions. The Board considered use of an absolute TSR hurdle to be both appropriate in the circumstances and readily understandable.

��

AUDITED

Performance Conditions under FESOP

Issue Date	Number of Options Granted	Issue Price	Hurdle Description
CEO FESOP Grants
October 2003	2,000,000 options in	$�.�7	Tranche � (Relative TSR Hurdle)
(approved by	2 tranches		Relative Total Shareholder Return (TSR) measured over a rolling
shareholders at 2003 AGM)	Tranche � 1,000,000 options subject		3 years to 30 June 2006 and then re-tested 3 monthly thereafter until 30 June 2012. For options to vest the percentile ranking of Futuris’ growth in its Accumulation Index relative to such growth
	to TSR Hurdle		in the ASX/S&P 200 Accumulation Index must equal or exceed
	Tranche � 1,000,000 options subject to EPS Hurdle		the prescribed ranking, as follows: Hurdle Rate % of Tranche � options that vest Less than 50th percentile (median) Nil
			At the 50th percentile 50%
			50th to 75th percentile Pro-rata
			At 75th percentile 100%
			Tranche � (EPS Hurdle)
			Futuris’ Cumulative Average Annual Growth Rate (CAGR) in EPS*
			is measured over a rolling 3 years to 31 August 2006 and then
			6 monthly thereafter until 31 August 2009. For the options to vest
			the Futuris CAGR in EPS must equal or exceed the compound
			hurdle rate set for Tranche 2 options, as follows:
			Hurdle Rate % of Tranche � options that vest
			Below 8% Nil
			8% 50%
			Between 8% and 12% Pro-rata
			12% or more 100%
			* Adjusted for acquisitions and divestments, if relevant.
October 2005	1,500,000 options	$�.05	Tranche � (Relative TSR Hurdle)
(approved by	in 2 tranches		Similar to 2003 FESOP with TSR measured over a rolling
shareholders at 2005 AGM)	Tranche � 750,000 options - TSR Hurdle		3 years to 30 June 2008 and then 3 monthly thereafter until 30 June 2011. Tranche � (EPS Hurdle) Similar to 2003 FESOP with EPS measured over a rolling
	Tranche � 750,000 options - EPS Hurdle		3 years to 31 August 2008 and then 6 monthly thereafter until 31 August 2011. Any options that have not become exercisable at the end of the measurement period will lapse.
October 2006	1,500,000 options	$�.05	Tranche � (Relative TSR Hurdle)
(approved by	in 2 tranches		Similar to 2003 FESOP with TSR measured over a rolling
shareholders at 2005 AGM)	Tranche � 750,000 options -		3 years to 30 June 2009 and then 3 monthly thereafter until 30 June 2012.
	TSR Hurdle		Tranche � (EPS Hurdle)
	Tranche � 750,000 options -		Similar to 2003 FESOP with EPS measured over a rolling 3 years to 31 August 2009 and then 6 monthly thereafter until 31 August 2012. Any options that have not become exercisable
	EPS Hurdle		at the end of the measurement period will lapse.

�5

Performance Conditions under FESOP (continued)

AUDITED

Issue Date	Number of Options Granted	Issue Price	Hurdle Description
CEO FESOP Grants
October 2007	1,500,000 options	$�.�6	Tranche � (CAGR TSR Hurdle)
(approved by	in 2 tranches		The Futuris’ Cumulative Average Annual Growth Rate (CAGR)
shareholders at 2007 AGM)	Tranche � 750,000 options -		in TSR measured over the three year period to 30 June 2010 and then re-tested six monthly thereafter until 30 June 2011. Any options that have not become exercisable at the end of
	TSR Hurdle		the measurement period will lapse.
	Tranche � 750,000 options -		For options to vest the CAGR in Futuris’ TSR must equal or exceed the compound hurdle rate, as follows:
	EPS Hurdle		Hurdle Rate % of Tranche � options that vest
			Below 12% Nil
			12% 50%
			Between 12% and 16% Pro-rata
			16% or more 100%
			Tranche � (EPS Hurdle)
			Vesting hurdle rates are similar to 2003 FESOP with EPS
			measured over a rolling 3 years to 30 June 2010 and then
			re-tested on 30 June 2011.

CFO and Divisional Managing Directors FESOP Grants

The CFO and Divisional Managing Directors may be offered, at the discretion of the Board, three equal Tranches of up to 250,000 options with each Tranche being subject to a separate performance hurdle, as follows:

Tranche � (��%) – RONA, NPAT and/or EBIT hurdles (First financial year)

Tranche � (��%) – RONA, NPAT and/or EBIT hurdles (Second financial year)

Tranche � (��%) – RONA, NPAT and/or EBIT hurdles (Third financial year)

The hurdles are cumulative across the three years over which the performance hurdles are measured. Therefore, if the hurdle is not met in respect of the first financial year, and, for example, the first and second financial year performance when added together exceeds the sum of the first and second year financial hurdle, the Tranche 1 hurdle will be satisfied.

If the performance hurdle in respect of each Tranche is met, the options may only be exercisable during the period 3 to 5 years following their date of issue. All unvested and unexercised options will lapse on their fifth anniversary.

Key Functional Managers and Other Key Managers FESOP Grants

Options may be issued within strict limits, at the discretion of the Board, to selected deserving employees based on excellent performance over the preceding 12 months. No future performance conditions are imposed in respect of these options, however, for the options to vest the employee must continue to be employed by the Company for at least 3 years from the date of issue. Allocation of long term incentives to key managers encourages future performance, improves the retention rate for these important contributors and increases alignment of their interests with those of shareholders.

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Relationship between Futuris’ Financial Performance and Executive Rewards

Short Term Incentives

Short Term Incentives (STIs) are paid to executives on achievement of a range of financial and non-financial performance targets. The following table shows the Company’s performance in relation to a number of financial and operational performance measures over a 5 year period.

Performance Measure ($ millions)	�008	�007	�006	�005	�00�
Sales Revenue	3,312.1	3,228.5	3,355.8	3,174.7	2,707.3
Underlying EBIT	171.7	169.4	157.1	131.3	96.1
Statutory Proft	36.4	105.4	87.4	58.6	23.8
Cashfow from Operating Activities	(14.1)	85.0	127.4	(9.3)	121.1

One of the main performance measures for the STI is EBIT and despite poor weather conditions during the financial period both sales and underlying EBIT improved.

Long Term Incentives

Long Term Incentives (LTIs) only vest when the Company achieves superior returns for shareholders as measured by Total Shareholder Return (TSR) and Earnings per Share (EPS) for the CEO and RONA, NPAT and/or EBIT for other senior executives.

(a) Total Shareholder Return (TSR)

Futuris’ TSR has underperformed the ASX/S&P 200 Accumulation Index (All and Industrials) and the selected Peer Group over the most recent financial period and on a cumulative basis over the period from 2003 to 2008. Accordingly, none of the CEO’s 2003 and 2005 Tranche 1 options are likely to vest as the TSR performance hurdles over the period 1 July 2003 to the present, are unlikely to be met. This is despite the fact that the Company outperformed the ASX/S&P 200 Accumulation Index (All and Industrials) over all performance measurement periods from 2003 to 30 June 2007 and performed at the top of the TSR for the selected Peer Group in 2007.

Futuris’ relative TSR performance against two comparator groups (ASX 200/S&P and ASX 200/S&P Industrials Only) and the selected Peer Group* is set out as follows:

Annual TSR Growth 2003-2008

Cumulative TSR Performance

==> picture [497 x 275] intentionally omitted <==

----- Start of picture text -----

80.0% 160.0%
60.0% 140.0%
40.0% 120.0%
20.0% 100.0%
0.0% 80.0%
-20.0% 40.0%
-40.0% 20.0%
-60.0% 0.0%
-80.0% -20.0%
2003 2004 2005 2006 2007 2008
-40.0%
2004 2005 2006 2007 2008
Year
Futuris Futuris
ASX200 ASX200
ASX200 Industrials ASX200 Industrials
Peer Companies (mean) Peer Companies (mean)
----- End of picture text -----

*The selected Peer Group comprised Adelaide Bank Limited, ABB Grain Limited, AWB Limited, Bendigo Bank Limited, Bank of Queensland Limited, Gunns Limited, Great Southern Ltd and Timbercorp Limited.

�7

AUDITED

(b) Earnings per share

Based on Futuris’ Cumulative Average Annual Growth Rate in Earnings per Share performance from 2005 to 2008 all of the CEO’s 750,000 Tranche 2 options granted in 2005 are likely to vest.

Set out below are two graphs, one showing the movement in the Company’s underlying profit and EBIT to shareholders from 2004 to 2008 and the other showing the cumulative growth in the Company’s EPS (adjusted to exclude the impact of divestments) over the period from 2004 to 2008.

EBIT and Profit to shareholders Underlying $ million

==> picture [353 x 136] intentionally omitted <==

----- Start of picture text -----

180
169 171 Profit to shareholders
157
150 EBIT
131
120
105
90 96
88 84
72
60 63
30
0
2004 2005 2006 2007 2008
----- End of picture text -----

Absolute EPS Hurdle (Adjusted to exclude divestments) Cents

==> picture [337 x 138] intentionally omitted <==

----- Start of picture text -----

16
Reported EPS
14
Underlying EPS
12 Adjusted EPS
10
8
6
4
2
0
2004 2005 2006 2007 2008
----- End of picture text -----

section 4 Nominated executives’ contract terms

Formal employment contracts have been entered into with the Chief Executive and each of the 6 key management personnel. A summary of the key terms of employment contracts for nominated executives is outlined below.

Contracts for nominated executives have no fixed term. Participation in various Short Term Incentive Plans is at the Board’s discretion. Participation in the Long Term Incentive Plans is also at the Boards discretion and subject to shareholder approval in the case of the Chief Executive. Participants who cease employment before either the performance or service conditions have been met will forfeit all unvested entitlements, unless otherwise determined by the Board in circumstances such as death, redundancy, total and permanent disability and retirement.

Futuris may terminate employment contracts immediately for cause, in which case the executive is not entitled to any payment other than the value of fixed remuneration up to the termination date.

�8

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Table �a. Summary of the key terms of employment contracts for nominated executives

Name	Employing	Date of	Duration of	Termination	Termination	Termination	Short Term	Long Term
	Company	Contract	Contract	by Futuris	by	Payments	Incentive	Incentive
				(without	Employee	(only where
				cause)		Termination
						by Company)
L Wozniczka(1)	Futuris	26 February	No Fixed	12 months	12 months	Payment in	Refer Section	Employee
	Corporation	2004 (as	Term	notice	notice	lieu of notice	3D above	Options –
	Ltd	amended)				based on		Refer section
						Base Salary.		3E above
						Discretion of
						Board to pay
						portion of
						STI and LTI
M de Wit(2)	Futuris	20 April	No Fixed	3 months	3 months	Payment in	Refer Section	Employee
	Automotive	2006	Term	notice	notice	lieu of notice	3D above	Options –
	Group Ltd					based on		Refer section
						Base Salary.		3E above
						Discretion of
						Board to pay
						portion of STI
						and LTI.
V Erasmus	Integrated	23 March	No Fixed	12 months	12 months	Payment in	Refer Section	Employee
	Tree	2006 (as	Term	notice	notice	lieu of notice	3D above	Options –
	Cropping	amended)				based on		Refer section
	Ltd					Base Salary.		3E above
						Discretion of		$1 million
						CEO to pay		NPAT out
						portion of STI		performance
						and LTI.		for 2010.
B Griffiths	Futuris	30 August	No Fixed	12 weeks	4 weeks	Payment of	Refer Section	2% to 3% of
	Automotive	2005 (as	Term	notice	notice	$2 million.	3D above	any increases
	Group Ltd	amended)						in value of
								Company’s
								Automotive
								Operations
M Guerin(3)	Elders	1 March	No Fixed	12 months	6 months	Payment in	Refer Section	Employee
	Australia	2008	Term	notice	notice	lieu of notice	3D above	Options –
	Ltd					based on		Refer section
						Base Salary.		3E above
						Discretion of
						CEO to pay
						portion of STI
						and LTI.
G Hunt(4)	Elders	27	No Fixed	12 months	4 weeks	Payment in	Refer Section	Employee
	Australia	September	Term	notice	notice	lieu of notice	3D above	Options –
	Ltd	2002 (as				based on		Refer section
		amended)				Base Salary		3E above
T Plant	Elders	9 August	No Fixed	12 months	6 months	Payment in	Refer Section	Employee
	Financial	2006 (as	Term	notice	notice	lieu of notice	3D above	Options –
	Services	amended)				based on		Refer section
	Group					Base Salary.		3E above
	Pty Ltd					Discretion
						of CEO to pay
						portion of
						STI and LTI
P Zachert	Futuris	18	No Fixed	12 months	6 months	Payment in	Refer Section	Employee
	Corporation	December	Term	notice	notice	lieu of notice	3D above	Options –
	Ltd	2002 (as				based on		Refer section
		amended)				Base Salary		3E above

Notes:

(1) On 26 June 2008 the Board announced that it had accepted the resignation of the Chief Executive Mr Les Wozniczka to become effective upon completion of an international search for a successor. The Board has retained the services of international search firm Egon Zehnder to assist in the identification of potential candidates to replace Mr Wozniczka.

(2) Mark de Wit was appointed Managing Director of Futuris Automotive and a Key Management Person on 1 January 2008.

(3) Mike Guerin was appointed Managing Director Elders Rural Services and a Key Management Person on 1 March 2008.

(4) Greg Hunt ceased to be an employee on 13 July 2007

(5) The Chief Executive, in consultation with the Chairman and the chairman of the relevant main operating subsidiary, has the authority to amend the terms of employment contracts (except in relation to himself) where circumstances warrant.

�9

AUDITED

section 5 remuneration disclosure tables

Details of executive directors’ and key management personnel remuneration for the 2007 and 2008 financial year are set out in Table 5a.

Table 5a			Short	Term Payments		Share Based	Payments	Post Employment	Total
(A$)		Base Salary		Bonus	Other Non	Options	Shares	Superannuation
					Monetary
L P Wozniczka	�008	�,��7,59�	(6)	---	��,65�	6��,�77	-	�0�,�80	�,�78,000
	2007	1,245,000		1,100,000(1)	12,551	710,550	-	186,750	3,254,851
M de Wit(5)	�008	��9,9�7		��,500	-	�9,7�8	7,8�0	�8,59�	858,587
	2007	-		-(1)	-	-	-	-	-
V Erasmus	�008	5�0,7��		�7�,500	�6,06�	77,666	7,8�0	��,��9	906,90�
	2007	407,615		230,918(1)	-	62,529	5,801	42,385	749,248
B Griffths	�008	608,8�9		�00,000(1)	-	�9,��0	7,8�0	7�,�9�	9�8,�50
	2007	630,550		195,500(1)	22,143	39,310	849	91,175	979,527
M Guerin	�008	�75,8��		�05,000(4) (2))	8,��	58,�6�	-	�5,8�6	�6�,�6�
	2007	-		-(1)	-	-	-	-	-
G Hunt	�008	�,�79,��	(3)	-(1)	�7,�87	-	-	�7,706	�,5��,5�7
	2007	589,631		275,000(1)	141,580	83,103	5,801	53,119	1,148,234
T Plant	�008	57�,�7�		��5,000(2)	-	88,665	7,8�0	��,��9	998,975
	2007	537,314		245,000(2)	16,568	81,813	5,801	12,686	899,182
P Zachert	�008	555,80�		��5,000 (1)	-	88,6�6	7,8�0	��,��9	780,�86
	2007	524,814		500,000(1)	19,432	142,644	5,801	12,686	1,205,377
Total	�008	6,77�,��9		�,��9,000(1)	�0�,5��	�,0�6,965	�9,050	�98,�8�	9,659,�80
	2007	3,934,924		2,546,418(1)	212,274	1,119,949	24,053	398,801	8,236,419

Notes:

(1) L Wozniczka and P Zachert have elected to take any short term bonus in fully paid ordinary shares in lieu of cash. The shares are purchased on market and allocated to L Wozniczka and P Zachert at their average market cost and in accordance with the terms of the Company’s Employee Share – Save As You Earn Plan. This is reflected in Table 6a below. A similar election was made in respect of the prior year.
(2) M Guerin and T Plant have elected to take 50% of any short term bonus in fully paid ordinary shares in lieu of cash. The shares are purchased on market and allocated to M Guerin and T Plant at their average market cost and in accordance with the terms of the Company’s Employee Share – Save As You Earn Plan. This is reflected in Table 6a below.
(3) G Hunt ceased his employment with the Group on 13 July. 2007. On termination, in accordance with the terms of his employment agreement, Mr Hunt received a termination payment amounting to $1,625,000 and leave entitlements of $779,679, expensed in previous years.
(4) M Guerin commenced employment on 1 March 2008.
(5) M de Wit was not a Key Management Person in 2007. He was appointed Managing Director of Futuris Automotive on 1 January 2008.
(6) Includes leave entitlements of $65,723 expensed in previous years.

AUDITED

section 6 Equity instruments in relation to directors & executives

Table 6a. Share movements: non-executive directors and executives

			Shares acquired	Shares acquired	Other shares
			during the year	during the year	acquired/		Balance of		Balance of
		Shares held at	as part of	through the	(disposed of)	Other changes	shares held at		shares held at
		start of year	remuneration	vesting of LTIP	during the year	during the year	end of year		reporting date
Non-executive Directors
S Gerlach	�008	�78,�9�	-	-	��,0��	-	�9�,5��		�9�,5��
	2007	428,491	-	-	50,000	-	478,491		478,491
J C Fox	�008	�6,765	-	-	-	-	�6,765		�6,765
	2007	26,765	-	-	-	-	26,765		26,765
C E Bright	�008	�0�,�9�	-	-	-	-	�0�,�9�		�0�,�9�
	2007	103,492	-	-	-	-	103,492		103,492
R G Grigg	�008	��,560	-	-	-	-	��,560		��,560
	2007	20,000	-	-	11,560	-	31,560		31,560
W H Johnson	�008	��,5�8,�8�	-	-	-	-	��,5�8,�8�	(4)	��,5�8,�8�	(4)
	2007	23,548,181	-	-	-	-	23,548,181		23,548,181
I G MacDonald(3)	�008	60,000	-	-	-	-	60,000		60,000
	2007	-	-	-	60,000	-	60,000		60,000
J H Ranck	�008	-	-	-	-	-	-		�0,000
	2007	-	-	-	-	-	-		-
A Salim	�008	��,5�5,578	-	-	-	-	��,5�5,578		��,5�5,578
	2007	33,545,578	-	-	-	-	33,545,578		33,545,578
G D Walters	�008	��,000	-	-	-	-	��,000		��,000
	2007	21,000	-	-	-	-	21,000		21,000
Total	�008	57,8�5,067	-	-	��,0��	-	57,8�9,098		57,8�9,098
	2007	57,693,507	-	-	121,560	-	57,815,067		57,815,067
Executives
L P Wozniczka	�008	�,5��,��	-	-	-	-	�,5��,��		�,5��,��
	2007	4,015,333	502,008 (1)	-	4,000	-	4,521,341		4,521,341
M de Wit	�008	��,69�	�0,�86	-	-	-	5�,980		5�,980
	2007	32,025	9,669	-	-	-	41,694		41,694
V Erasmus	�008	9,669	�0,�86	-	-	-	�9,955		�9,955
	2007	-	9,669	-	-	-	9,669		9,669
B Griffths	�008	�,5�0,��9	�0,�86	-	(�77,706)	-	�,�7�,0�9		�,�7�,0�9
	2007	2,668,317	-	200,000	(1,327,878)	-	1,540,439		1,540,439
M Guerin	�008	-	�0,076(2)	-	��0,000	-	�70,076		�70,076
	2007	-	-	-	-	-	-		-
G Hunt	�008	709,5�9	-	-	-	-	709,5�9		709,5�9
	2007	699,668	9,861	-	-	-	709,529		709,529
T Plant	�008	��5,�75	��0,5�5(2)	-	-	-	��5,690		��5,690
	2007	58,700	56,475 (1)	-	-	-	115,175		115,175
P Zachert	�008	�,��,606	��,9�7(2)	-	-	-	�,��8,5��		�,�56,��
	2007	1,048,055	228,185(1)	250,000	(202,634)	-	1,323,606		1,323,606
Total	�008	8,�6�,�5�	��6,�66	-	(��7,706)	-	8,��0,��		8,��7,70�
	2007	8,522,098	815,867	450,000	(1,526,512)	-	8,261,453		8,261,453

Notes:

(1) The 2007 comparative figure has been amended to replace the estimate of shares acquired as part of STI with actual shares acquired.

(2) Shares acquired includes an estimate of shares to be acquired in October 2008 as part of the 2008 STI.

(3 ) Shares held in name of spouse.

(4 ) W H Johnson retired from the Board on 23 October 2007. Shares shown at year end and reporting date reflect his holding on 23 October 2007.

5�

AUDITED

Table 6b. Aggregate Long Term Incentive Plan opportunities received and changes

Option holdings of Directors and Key Management Personnel

	Balance at			Options		Vested at �0 June �008	Vested at �0 June �008
	beginning of	Options	Options	Lapsed or	Balance at
�008_(Number)_	period	Exercised	Granted	Surrendered	end of period	Exercisable Not exercisable
Directors
L P Wozniczka	5,000,000	-	3,000,000	-	8,000,000	1,000,000	750,000
Key Management	Personnel
M de Wit(1)	300,000	-	200,000	-	500,000	100,000	-
V Erasmus	750,000	-	-	-	750,000	-	550,000
B Griffths	300,000	-	-	-	300,000	-	300,000
M Guerin(1)	-	-	750,000	-	750,000	-	250,000
G Hunt	1,250,000	(687,500) (2)	-	(562,500)(3)	-	-	-
T Plant	1,100,000	-	-	-	1,100,000	-	850,000
P Zachert	750,000	-	-	-	750,000	-	625,000
Total	9,�50,000	(687,500)	�,950,000	(56�,500)	��,�50,000	�,�00,000	�,��5,000

Notes:

(1) Messrs Guerin and de Wit were not Key Management Personnel in 2007.

(2) On exercise of options 687,500 shares were issued to Mr Hunt. The issue value of options exercised was $1,351,250 and the price paid per share was 125,000 @ $1.68; 437,500 @ $2.02; and 125,000 @ $2.06.

(3) The value of options lapsed was $1,136,250.

�007_(Number)_
Directors
L P Wozniczka	5,000,000	-	-	-	5,000,000	1,000,000	-
Key Management	Personnel
V Erasmus	750,000	-	-	-	750,000	-	350,000
B Griffths	400,000	(200,000) (2)	100,000	-	300,000	-	300,000
G Hunt(1)	1,250,000	-	-	-	1,250,000	-	687,500
T Plant	1,100,000	-	-	-	1,100,000	-	600,000
P Zachert	1,000,000	(250,000) (3)	-	-	750,000	-	500,000
Total	9,500,000	(�50,000)	�00,000	-	9,�50,000	�,000,000	�,��7,500

Notes:

(1) Mr G Hunt, reported as Key Management in 2007, is no longer an employee of the Group.

(2) On exercise of options 200,000 shares were issued to Mr Griffiths. The issue value of options exercised was $246,000 and the

price paid was $1.23.

(3) On exercise of options 250,000 shares were issued to Mr Zachert. The issue value of options exercised was $377,500 and the price paid per share was $1.51.

5�

AUDITED

Table 6c. Current Long Term Incentive Plan opportunities (by offer)

	Granted	Vested		Value at Grant	Value	Exercise	First	Expiry and	Options as
	Options	Options	Grant	Date ($ per	at Grant	Price ($)	Exercise	Last Exercise	% of
	(Number)	(Number)	Date	share) (1)	Date ($)		Date	Date	Remuneration
�008
Directors
L Wozniczka
(Tranche 1 TSR)	750,000	-	24 Oct 07	0.25	187,500	2.36	30 Jun 10	30 Jun 13	8.2
L Wozniczka
(Tranche 2 TSR)	750,000	-	24 Oct 07	0.37	277,500	2.36	30 Jun 11	30 Jun 14	12.2
L Wozniczka
(Tranche 1 EPS)	750,000	-	24 Oct 07	0.39	292,500	2.36	30 Jun 10	30 Jun 13	12.8
L Wozniczka
(Tranche 2 EPS)	750,000	-	24 Oct 07	0.42	315,000	2.36	30 Jun 11	30 Jun 14	13.8
Key Management	Personnel
M De Wit	-	-	-	-	-	-	-	-	-
V Erasmus	-	200,000	-	-	-	-	-	-	-
B Griffths	-	-	-	-	-	-	-	-	-
M Guerin	750,000	250,000	1 Mar 08	0.42	315,000	2.45	1 Mar 11	1 Mar 13	86.7
G Hunt	-	187,500	-	-	-	-	-	-	-
T Plant	-	250,000	-	-	-	-	-	-	-
P Zachert	-	125,000	-	-	-	-	-	-	-
�007
Directors
L Wozniczka	-	-	-	-	-	-	-	-	-
Key Management	Personnel
V Erasmus	-	200,000	-	-	-	-	-	-	-
B Griffths	100,000	-	28 Aug07	0.47	47,000	2.45	5 Oct 10	5 Oct 10	4.8
G Hunt	-	187,500	-	-	-	-	-	-	-
T Plant	-	250,000	-	-	-	-	-	-	-
P Zachert	-	250,000	-	-	-	-	-	-	-

Notes:

(1) The valuation of the options was prepared independently based on the Trinomial methodology.

All equity transactions with directors and key executives other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arms length.

5�

dIsCussION aNd aNaLysIs OF FINaNCIaL statEMENts

�. Income Statement

Proft
$ million	�008	2007
UnderlyingEBIT	�7�.7	169.4
Net interest	56.9	40.0
Underlying proft before tax	��.8	129.4
Minorityinterests	9.6	2.8
Tax on underlying proft	��.0	20.2
UnderlyingProft to shareholders	8�.�	106.4
Non-recurringitems after tax	�7.8	(1.0)
Reportedproft	�6.�	105.4
Earningsper share– underlyingbasic	��.��	14.65
Earningsper share– reported basic Earningsper share– reported diluted	�.8� �.�0	14.51 13.50

Proft and loss items
$ million	�008	2007
Sales Revenue	�,��.�	3,228.5
EBITDA (underlying)	��.�	207.0
Depreciation & amortisation	��.6	37.6
Income from associates	5�.�	45.9
Interest Revenue	�5.�	14.0
Borrowingcosts	7�.�	54.0
Net Borrowingcosts	56.9	40.0

The 2007 result included a non-recurring charge totalling $1.0 million after tax, comprising gains arising from the sale of the Company’s property development operations and expenditure on the successful OPEL bid for Broadband Guarantee Infrastructure Program funding.

Futuris Corporation has recorded an Underlying Profit to Shareholders of $84.2 million for the 2008 financial year, 21% lower than the corresponding result of $106.4 million in 2007.

Underlying profit excludes non-recurring items totalling a loss of $47.8 million after tax. Inclusive of these items, reported profit for 2008 was $36.4 million compared with $105.4 million in the previous year.

The non-recurring items include:

A net charge of $3.7 million from telecommunications initiatives comprising discount on acquisition and fair value adjustment totalling $9.9 million on the consolidation of Amcom Telecommunications; offset by charges of $13.6 million arising from the Federal Government’s cancellation of funding for the OPEL rural and regional broadband network.
A loss on book value of $8.2 million incurred in the sale of the Rail and Bus HVAC business.
A total charge of $25.4 million relating to Elders, principally being charges and provisions arising from review and restructuring of Elders Rural Services.
Other restructuring costs totalling $7.6 million principally relating to the restructuring of Transit operations for divestment.
Other items totalling a net loss of $2.9 million comprising gain on acquisition, loss on sale/ writedown of other non-core assets to anticipated realisable value.

Significant revenue and expense outcomes for the year include:

Sales revenue rose 3% ($84 million) chiefly due to growth contributed by all Elders Rural Services and the contribution of sales from Amcom, which was consolidated during the year. These items offset the absence of contribution from the divested Property operations which generated sales revenue of $137.7 million in 2007.
Income contribution from associates and joint ventures rose $5 million (12%) due to increases from HiFert; and Elders Rural Bank and the commencement of the Elders Toepfer Grain joint venture which offset reduction from Australian Wool Handlers, AACo and Webster. The FY2007 comparative has been restated by $4.7 million to reflect change in the impact of a change in accounting policy by FEA.
Interest revenue rose by 10% due to higher interest rates.
Net Borrowing costs rose $16.9 million due to higher average debt levels and interest rates.
Depreciation and amortisation charge rose by $5.0 million, essentially due to the consolidation of Amcom ($5.1 million).
Tax expense of $9.0 million includes tax on underlying earnings of $21.0 million offset by tax benefit on non-recurring items.

5�

�. Balance Sheets

$ million (unless otherwise indicated) as at:	�0 June �00830 June 2007	�0 June �00830 June 2007
Shareholders’ equity Cash Current inventories Property,P & E	�,�96.� ��.0 �96.8 ��.0	1,196.6 244.3 358.0 220.4
Investments- equitya/c	69�.5	586.3
Investmentproperty	�56.�	248.3
Intangibles	�06.8	288.3
Current borrowings Non-current borrowings Gross Borrowings	�6�.9 60�.0 767.9	214.2 396.2 610.4
Net debt	5��.0	364.9
Gearing(%)	�9%	24%
NTAper share ($)	$�.��	$1.22

Gearing as at 30 June was 29% compared with 24% at the beginning of the year. Cash was maintained at $244 million, while gross borrowings increased $157.5 million due to financing requirements including cash redemption of convertible notes at maturity ($136.1 million).

Year-end cash includes insurance reserves and cash held in trust totalling $174.9 million. If this restricted cash is excluded, net debt at year-end would be $697.9 million and gearing 35%.

Net debt is calculated as follows: current and non-current borrowings + derivatives on financial instruments less cash and less deferred receivable on financial instruments ($0.9 million in FY08).

Significant movements in the balance sheet during the year included:

Current inventories were $396.8 million, 11% higher due to higher prices of merchandise stock within Elders Rural Services.
A 18% increase in Investments accounted for using the equity method. This increase is due to increments arising from reinvestment in Elders Rural Bank, Webster and recognition of iiNet as an associate of Amcom.
Property, plant and equipment rose by 42%, with the increase due to the consolidation of Amcom.

�. Cash Flow

$ million	�008	2007
Net operating cash fows	(��.�)	85.0
PP & E payments	��9.8	105.1
Payments for Investments	�07.5	77.0
Net investing cash fows	(8�.�)	(190.8)
Net fnancing cash fows	96.�	(187.4)
Cash movement	(0.�)	(293.2)
Net debt movement	�58.0	162.9

Operating activities generated a net outflow of $14.1 million (inflow of $85.0 million in FY07). Factors in the result included:

$18.7 million increase in net interest payments;
$35.2 million increase in tax paid;
unfavourable cash impact of a number of nonrecurring items, which collectively impacted cash flows by a total of $47.8 million;
lower cash generation from Forestry and Elders Rural Services operations;
improved cash generation by Automotive operations.
benefit on non-recurring items.

Cash outflow from investing activities included:

24% increase in capital expenditure ($129.8 million vs $105.1 million) with major items being:
investment in forestry assets, principally being plantation land of $86.4 million ($63.2 million);
investment by Elders Rural Services of $28.8 million,
- Proceeds of $97.4 million from sale of investments, chiefly being sale of plantation land ($90.3 million);
Application of $107.5 million to investments, which included capital contribution for Elders Rural Bank ($19.0 million); investment in Amcom and iiNet ($14.5 million); investment in Webster and aquaculture related investments ($18.2 million); and contribution of capital to the Elders Toepfer Joint Venture ($5.0 million).

Financing resulted in a net in-flow of $96.3 million. Cash of $136.1 million was applied to repayment of convertible notes which matured at 31 December 2007. Debt was drawn down by $250.2 million and a further cash inflow of $46.8 million from the underwriting of dividends.

Investment properties rose from $248.3 million to $256.4 million, due to net acquisition of plantation land by ITC.
Intangibles rose 6%, with the increase reflecting the consolidation of Amcom.

10 year summary Financial results

$ million unless otherwise indicated		2008	2007	2006	2005	2004	2003	2002	2001	2000	1999
Profitability
Sales revenue		3,312.1	3,228.5	3,355.8	3,174.7	2,707.3	2,464.3	2,145.8	1,968.4	1,759.7	1,482.2
Total revenue		3,496.1	3,366.9	3,422.6	3,232.0	2,791.0	2,844.8	2,537.6	2,177.7	1,832.6	1,570.5
Reported EBIT*by Segment
Rural Services1		20.9	56.3	65.8	26.8	19.0	152.3	47.3	101.0	86.7	72.6
Financial Services1		22.4	27.2	26.9	-	-	-	-	-	-	-
Forestry		61.4	61.6	39.9	32.2	10.9	-	-	-	-	-
Automotive Systems		26.2	9.5	16.3	99.3	19.5	19.3	30.7	22.4	21.1	21.4
Property		-	30.4	16.3	-3.3	7.5	0.3	4.8	1.4	-	-
Other		-36.9	-16.2	-8.4	-11.8	-5.0	-5.5	17.1	3.2	11.6	2.9
Total EBIT		94.0	168.8	156.8	143.2	51.9	166.4	99.9	128	119.4	96.9
Underlying**EBIT		171.7	169.4	157.1	131.3	96.1	84.0	91.9	88.6	108.9	91.4
Underlying**proft before tax		114.8	129.4	118.2	106.4	86.1	65.0	71.2	65.2	81.1	81.0
Abnormal & non-recurring items		-47.8	-1.0	-0.9	-13.2	-44.2	82.4	8.0	39.4	10.5	12.2
Tax expense		21.0	20.2	-21.4	-47.9	-12.2	-38.5	-13.9	-18.1	-12.3	-19.6
Minority interests		9.6	-2.8	-9.0	-11.8	-5.9	-6.9	-2.9	-6.5	-5.1	-5.3
Statutory proft		36.4	105.4	87.4	58.6	23.8	102.0	62.4	80.0	74.2	68.3
Underlying proft after tax		84.2	106.4	88.3	71.8	62.8	48.0	56.5	55.8	61.5	64.0
Cash flow from operating activities -14.1			85.0	127.4	-9.3	121.1	-55.6	113.8	188.8	64.7	75.0
Shareholders’ equity		1,296.2	1,196.6	1,227.9	970.3	961.2	843.6	749.1	723.0	692.4	612.0
Share information
Dividend per share (cents)
Interim		4.0	4.0	4.0	4.0	4.0	4.0	4.0	4.0	4.0	3.6
Final		5.5	5.5	5.0	5.0	4.0	4.0	4.0	4.0	4.0	3.6
Total		9.5	9.5	9.0	9.0	8.0	8.0	8.0	8.0	8.0	7.2
Dividend provided for or paid#		73.4	65.4	59.9	53.7	52.3	50.6	48.7	48.4	47.9	37.4
Hybrid distribution		8.9	8.9	1.8	-	-	-	-	-	-	-
Share price^ ($ per share)		1.10	2.78	2.1	1.82	1.58	1.68	1.36	2.64	1.8	1.97
Market capitalisation^		858.4	2,045	1,514	1,207	1,041	1,096	836	1,595	1,087	1,013
Number of shareholders^		32,187	31,956	33,337	35,394	40,028	42,625	45,508	30,844	28,233	22,499
Ordinary shares on issue^	780,545,644		735,640,128	720,911,089	663,243,696	659,138,427	652,293,766	614,870,776	605,136,707	604,159,207	514,065,747
Share issues		Dividend	Dividend	Dividend	Dividend	Dividend	Dividend	Dividend	Dividend	Dividend	Conversion
		reinvestment	reinvestment	reinvestment	reinvestment	reinvestment	reinvestment	reinvestment	reinvestment	reinvestment	of options
		plan, (fully	plan,	plan,	plan,	plan,	plan, private	plan	plan,	plan,	and notes,
	underwritten),		conversion	conversion	conversion	conversion	placement	conversion	conversion	conversion	10% bonus
		conversion	of options	of options	of options	of options	conversion	of options	of options	of options
		of options and	Convertible	institutional			of options
	convertible notes		notes conversion	placement
Ratios and statistics
Reported earnings per share (cents)		4.82	14.5	13.1	8.9	3.6	16.2	10.2	13.2	12.9	12.2
Return on shareholders’ equity %
- Underlying proft		6.5	8.9	7.2	7.4	6.5	5.7	7.5	7.7	8.9	10.5
- Reported proft		2.8	8.8	7.1	6.0	2.5	12.1	8.3	11.1	10.7	11.2
Net tangible assets per share ($)		1.14	1.22	1.17	0.82	0.94	0.88	0.8	0.85	0.84	0.81
Gearing %†		29	24	14	23	1	0	15	33	37	51
Dividend payout ratio %		197	68	69	65	222	49	78	61	62	59

[1] Prior to 2006 Financial services result reported within Rural Services.
Reported earnings before interest and tax (inclusive of non-recurring and abnormal items).
** Underlying profit and earnings results excluding abnormal and non-recurring items (includes material profit/loss on asset disposal).
In respect of dividends declared for the financial year.
^ As at 30 June.
As measured by ratio of net interest-bearing debt/shareholders equity+net interest-bearing debt.

ANNUAL FINANCIAL REPORT

3O JUNE 2OO8

	Income Statement	58
	Balance Sheet	59
	Cash Flow Statement	60
	Statement of Changes in Equity	61
	Notes to the financial statements
Note 1	Corporate Information	64
Note 2	Statement of Significant Accounting Policies	64
Note 3	Revenue and Expenses	83
Note 4	Income Tax	85
Note 5	Receivables	87
Note 6	Livestock	89
Note 7	Forestry	89
Note 8	Inventories	90
Note 9	Derivative Financial Instruments	90
Note 10	Other Financial Assets	90
Note 11	Investments in Associates and Joint Ventures	90
Note 12	Property, Plant and Equipment	94
Note 13	Investment Properties	96
Note 14	Intangibles	97
Note 15	Other Assets	98
Note 16	Payables	98
Note 17	Interest Bearing Loans and Borrowings	98
Note 18	Provisions	99
Note 19	Contributed Equity	101
Note 20	Convertible Notes	101
Note 21	Hybrid Equity	101
Note 22	Reserves	102
Note 23	Retained Profits	103
Note 24	Dividends	103
Note 25	Minority Interests	104
Note 26	Notes to the Cash Flow Statement	104
Note 27	Results of Insurance Activities	105
Note 28	Expenditure Commitments	107
Note 29	Contingent Liabilities	108
Note 30	Segment Information	108
Note 31	Supplemental Statement of Net Debt by Segment	111
Note 32	Auditors Remuneration	113
Note 33	Investments in Controlled Entities	113
Note 34	Key Management Personnel	121
Note 35	Related Party Disclosures	127
Note 36	Earnings Per Share	129
Note 37	Financial Instruments	130
Note 38	Share Based Payment Plans	136
Note 39	Superannuation Commitments	137
Note 40	Business Combinations	137
Note 41	Subsequent Events	139
Note 42	Discontinued Operations and Businesses Disposed	140
Directors’ Declaration		141
Independent Auditor’s Report		142

Income Statement for the year ended 3O June 2OO8

		Consolidated	Consolidated		Parent
		2008	2007	2008	2007
	Note	$000	$000	$000	$000
Continuing operations
Sales revenue	3	3,274,659	3,016,517	-	-
Cost of sales		(2,426,096)	(2,220,224)	-	-
Other revenues	3	112,510	67,683	166,780	238,337
Other expenses	3	(869,750)	(777,263)	(31,056)	(238,782)
Share of net profits/(losses) of associates and
joint ventures accounted for using the equity method	11	51,236	46,023	1,204	1,043
Profit/(loss) on sale of non current assets	3	(2,369)	6,218	-	3,370
Profit/(loss) before net finance costs and income tax expense		140,190	138,954	136,928	3,968
Interest revenue	3	15,422	13,872	20,545	30,752
Finance costs	3	(72,320)	(49,532)	(32,404)	(37,051)
Profit/(loss) from continuing operations before income tax expense		83,292	103,294	125,069	(2,331)
Income tax (expense)/benefit	4	(7,712)	(14,189)	(15,093)	74,231
Profit/(loss) from continuing operations after income tax expense		75,580	89,105	109,976	71,900
Net profit of discontinued operations and gain
on disposal of discontinued operations, net of tax	42	(29,490)	19,094	-	-
Net profit/(loss) for the year		46,090	108,199	109,976	71,900
Attributable to:
Minority interest		(9,643)	(2,769)	-	-
Members of the parent	23	36,447	105,430	109,976	71,900
Reported Operations
Basic earnings per share (cents per share)	36	4.82¢	14.51¢
Diluted earnings per share (cents per share)	36	4.40¢	13.50¢
Continuing Operations
Basic earnings per share (cents per share)	36	8.71¢	11.89¢
Diluted earnings per share (cents per share)	36	7.96¢	11.27¢
Discontinued Operations
Basic earnings per share (cents per share)	36	(3.89)¢	2.62¢
Diluted earnings per share (cents per share)	36	(3.56)¢	2.23¢

The accompanying notes form an integral part of this income statement.

Balance Sheet as at 30 June 2008

		Consolidated	Consolidated		Parent
		2008	2007	2008	2007
	Note	$000	$000	$000	$000
Current Assets
Cash and cash equivalents	26	244,043	244,310	42,162	-
Trade and other receivables	5	633,782	633,465	1,213,663	1,516,141
Current tax receivable	4	-	-	13,315	-
Livestock	6	37,023	55,121	-	-
Inventories	8	396,846	357,978	-	-
Derivative financial instruments	9	706	3,031	-	-
Other	15	132,277	112,581	-	-
Total Current Assets		1,444,677	1,406,486	1,269,140	1,516,141
Non Current Assets
Receivables	5	241,328	190,310	25,628	37,001
Forestry	7	25,716	21,421	-	-
Inventories	8	-	1,638	-	-
Other financial assets	10	27,232	38,736	204,592	204,592
Investments in associates and joint ventures	11	694,492	586,254	101,758	93,639
Property, plant and equipment	12	312,983	220,448	236	308
Investment properties	13	256,417	248,257	-	-
Intangibles	14	306,836	288,323	-	-
Deferred tax assets	4	79,178	79,813	35,019	5,785
Other	15	27,058	26,853	-	-
Total Non Current Assets		1,971,240	1,702,053	367,233	341,325
Total Assets		3,415,917	3,108,539	1,636,373	1,857,466
Current Liabilities
Trade and other payables	16	966,726	889,567	299,979	437,319
Interest bearing loans and borrowings	17	164,905	214,204	-	116,481
Current tax payable	4	32,000	61,341	-	21,437
Provisions	18	208,136	204,455	6,450	7,000
Total Current Liabilities		1,371,767	1,369,567	306,429	582,237
Non Current Liabilities
Interest bearing loans and borrowings	17	550,657	354,466	320,614	343,176
Derivative financial instruments	9	52,366	41,731	51,456	40,589
Deferred tax liabilities	4	53,802	57,865	5,933	8,191
Provisions	18	91,149	88,309	-	-
Total Non Current Liabilities		747,974	542,371	378,003	391,956
Total Liabilities		2,119,741	1,911,938	684,432	974,193
Net Assets		1,296,176	1,196,601	951,941	883,273
Equity
Contributed equity	19	694,118	608,493	694,118	608,493
Convertible notes - equity portion	20	-	54,263	-	54,263
Hybrid equity	21	145,151	145,151	145,151	145,151
Reserves	22	16,190	(22,408)	12,263	4,355
Retained earnings	23	353,991	403,063	100,409	71,011
Total Parent Entity Interest in Equity		1,209,450	1,188,562	951,941	883,273
Minority interest	25	86,726	8,039	-	-
Total Equity		1,296,176	1,196,601	951,941	883,273

The accompanying notes form an integral part of this balance sheet.

Cash Flow Statement for the year ended 30 June 2008

		Consolidated	Consolidated		Parent
		2008	2007	2008	2007
		$000	$000	$000	$000
		Inflows	Inflows	Inflows	Inflows
	Note	(Outflows)	(Outflows)	(Outflows)	(Outflows)
Cash Flows from Operating Activities
Receipts from customers		8,979,463	8,858,049	4,261	-
Payments to suppliers and employees		(8,890,863)	(8,785,525)	(57,270)	(22,068)
Dividends received		28,840	33,843	21,450	11,630
Interest received		13,635	19,965	6,809	3,794
Interest and other costs of finance paid		(72,318)	(59,989)	(43,611)	(32,759)
GST (paid) /refunded		(15,299)	(18,580)	(2,411)	14,056
Income taxes (paid) /refunded		(30,291)	4,915	(30,939)	84,040
Other operatinginflows /(outflows)		(27,261)	32,347	-	(2,978)
Net operatingcash flows	26(a)	(14,094)	85,025	(101,711)	55,715
Cash Flows from Investing Activities
Payment for property, plant and equipment and
investment properties		(129,847)	(105,147)	-	(80)
Payment for investments		(107,461)	(77,013)	(43,010)	(5,500)
Payment for design and development		(7,124)	(6,252)	-	-
Proceeds from sale of property, plant and equipment
and investment properties		97,835	9,921	-	24
Proceeds from sale of investments		23,079	26,642	36,686	(185,741)
Loans to controlled entities		-	-	277,615	283,054
Loans to associated entities		(28,017)	(22,932)	(3,813)	11,229
Repayment of loans by related parties		-	597	-	-
Loans to growers		(5,219)	(4,909)	-	-
Loans repaid by growers		4,299	3,567	-	-
Loans repaid by third parties		52,266	-	53,545	-
Payment for outside equity interests in controlled entity		-	(136,222)	-	-
Payment for controlled entities, net of cash acquired	40(a)	2,323	-	-	-
Proceeds from disposal of controlled entity	40(b)	15,437	120,959	-	-
Net investingcash flows		(82,429)	(190,789)	321,023	102,986
Cash Flows from Financing Activities
Proceeds from issue of shares and other equity		7,082	2,570	2,415	21,845
Proceeds from borrowings		250,186	95,904	-	-
Repayment of borrowings		(148,156)	(212,042)	(136,132)	(103,767)
Proceeds from leasing		-	636	-	-
Principal repayments of lease liabilities		(1,331)	(2,784)	-	-
Dividends paid		(58,340)	(71,731)	(56,590)	(74,272)
Dividends underwritten		46,815	-	46,815	-
Net financingcash flows		96,256	(187,447)	(143,492)	(156,194)
Net increase/(decrease) in cash held		(267)	(293,211)	75,820	2,507
Cash/(overdraft) at the beginningof the financial year		244,310	537,521	(33,658)	(36,165)
Cash/(overdraft) at the end of the financial year	26(b)	244,043	244,310	42,162	(33,658)

The accompanying notes form an integral part of this cash flow statement.

Statement of Changes in Equity for the year ended 30 June 2008

	Issued	Convertible		Hybrid	Retained	Minority	Total
Consolidated ($000)	Capital	Notes	Reserves	Equity	Earnings	Interest	Equity
As at 1 July 2007	608,493	54,263	(22,408)	145,151	403,063	8,039	1,196,601
Currency translation differences	-	-	3,615	-	-	-	3,615
Cash flow hedge reserve	-	-	3,415	-	-	-	3,415
Acquisition of minority interests
in controlled entity	-	-	-	-	-	(695)	(695)
Partnership profits	-	-	-	-	-	(1,653)	(1,653)
Total income and expense
for the period recognised
directly in equity	-	-	7,030	-	-	(2,348)	4,682
Profit for year	-	-	-	-	36,447	9,643	46,090
Total income and expense
for the period	-	-	7,030	-	36,447	7,295	50,772
Attributable to:
Equity holders of the parent							43,477
Minority Interest							7,295
Equity Transactions:
Issue of share capital,
employee share plan	11,453	-	-	-	-	-	11,453
Exercise of options	2,415	-	-	-	-	-	2,415
Business combinations	-	-	27,501	-	-	72,160	99,661
Sale of Investment	-	-	-	-	-	(768)	(768)
Cost of share based payments	-	-	2,449	-	-	-	2,449
Shares vested to employees (net)	-	-	(1,274)	-	-	-	(1,274)
Dividend Reinvestment Plan	23,988	-	-	-	-	-	23,988
Dividends to shareholders	-	-	-	-	(72,848)	-	(72,848)
Dividends Underwritten	46,815	-	-	-	-	-	46,815
Hybrid Equity Distribution	-	-	-	-	(9,779)	-	(9,779)
Convertible notes converted	954	(378)	-	-	-	-	576
Convertible notes matured	-	(53,885)	-	-	-	-	(53,885)
Recognition of share of reserve
for losses in associate	-	-	2,892	-	(2,892)	-	-
As at 30 June 2008	694,118	-	16,190	145,151	353,991	86,726	1,296,176

The accompanying notes form an integral part of this statement of changes in equity.

Statement of Changes in Equity for the year ended 30 June 2008 (continued)

	Issued	Convertible		Hybrid	Retained	Minority	Total
Consolidated ($000)	Capital	Notes	Reserves	Equity	Earnings	Interest	Equity
As at 1 July 2006	577,717	57,384	63,843	145,151	371,367	12,463	1,227,925
Currency translation differences	-	-	(4,151)	-	-	-	(4,151)
Cash flow hedge reserve	-	-	2,140	-	-	-	2,140
Acquisition of minority interests
in controlled entity	-	-	-	-	-	(5,273)	(5,273)
Change in accounting policy in
associate(Note 2(a))	-	-	-	-	5,389	-	5,389
Partnership profits	-	-	-	-	-	(1,920)	(1,920)
Total income and expenses
for the period recognised
directly in equity	-	-	(2,011)	-	5,389	(7,193)	(3,815)
Profit for year	-	-	-	-	105,430	2,769	108,199
Total income and expense
for the period	-	-	(2,011)	-	110,819	(4,424)	104,384
Attributable to:
Equity holders of the parent							108,808
Minority interest							(4,424)
Equity transactions:
Issue of share capital,
employee share plan	11,542	-	-	-	-	-	11,542
Exercise of options	2,571	-	-	-	-	-	2,571
Cost of share based payments	-	-	3,726	-	-	-	3,726
Shares vested to employees (net)	-	-	(6,937)	-	-	-	(6,937)
Scrip consideration	2,984	-	-	-	-	-	2,984
Dividend Reinvestment Plan	5,793	-	-	-	-	-	5,793
Dividends to shareholders	-	-	-	-	(65,393)	-	(65,393)
Hybrid Equity Distribution	-	-	-	-	(8,879)	-	(8,879)
Convertible notes converted	7,886	(3,121)	-	-	-	-	4,765
Fair value revaluations of
associate’s land and buildings
(Note 2)	-	-	(85,880)	-	-	-	(85,880)
Recognition of share of reserve
for losses in associate	-	-	4,851	-	(4,851)	-	-
As at 30 June 2007	608,493	54,263	(22,408)	145,151	403,063	8,039	1,196,601

The accompanying notes form an integral part of this statement of changes in equity.

Statement of Changes in Equity for the year ended 30 June 2008 (continued)

	Issued	Convertible		Hybrid	Retained	Total
Parent ($000)	Capital	Notes	Reserves	Equity	Earnings	Equity
As at 1 July 2007	608,493	54,263	4,355	145,151	71,011	883,273
Currency translation differences	-	-	74	-	-	74
Cash flow hedge reserve	-	-	7,638	-	-	7,638
Total income and expenses for the period
recognised directly in equity	-	-	7,712	-	-	7,712
Profit for year	-	-	-	-	109,976	109,976
Total income and expense for the period	-	-	7,712	-	109,976	117,688
Attributable to:
Equity holders of the parent						117,688
Minority interest						-
Equity transactions:
Issue of share capital, employee share plan	11,453	-	-	-	-	11,453
Exercise of options	2,415	-	-	-	-	2,415
Cost of share based payments	-	-	522	-	-	522
Shares vested to employees (net)	-	-	(326)	-	-	(326)
Dividend Reinvestment Plan	23,988	-	-	-	-	23,988
Dividends to shareholders	-	-	-	-	(70,799)	(70,799)
Dividends underwritten	46,815	-	-	-	-	46,815
Hybrid Equity Distribution	-	-	-	-	(9,779)	(9,779)
Convertible notes converted	954	(378)	-	-	-	576
Convertible notes matured	-	(53,885)	-	-	-	(53,885)
As at 30 June 2008	694,118	-	12,263	145,151	100,409	951,941
As at 1 July 2006	577,717	57,384	(487)	145,151	73,383	853,148
Currency translation differences	-	-	(113)	-	-	(113)
Cash flow hedge reserve	-	-	3,651	-	-	3,651
Total income and expenses for the period
recognised directly in equity	-	-	3,538	-	-	3,538
Profit for year	-	-	-	-	71,900	71,900
Total income and expense for the period	-	-	3,538	-	71,900	75,438
Attributable to:
Equity holders of the parent						75,438
Minority interest						-
Equity transactions:
Issue of share capital, employee share plan	11,542	-	-	-	-	11,542
Exercise of options	2,571	-	-	-	-	2,571
Cost of share based payments	-	-	1,963	-	-	1,963
Shares vested to employees (net)	-	-	(659)	-	-	(659)
Scrip consideration	2,984	-	-	-	-	2,984
Dividend Reinvestment Plan	5,793	-	-	-	-	5,793
Dividends to shareholders	-	-	-	-	(65,393)	(65,393)
Hybrid Equity Distribution	-	-	-	-	(8,879)	(8,879)
Convertible notes converted	7,886	(3,121)	-	-	-	4,765
As at 30 June 2007	608,493	54,263	4,355	145,151	71,011	883,273

The accompanying notes form an integral part of this statement of changes in equity.

Notes to the Financial Statements for the year ended 30 June 2008

Note 1. Corporate Information

The financial report of Futuris Corporation Limited for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Directors on 10 September 2008.

Futuris Corporation Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in Note 30.

Note 2. Statement of significant accounting policies

(a) Basis of accounting

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards.

This report has been prepared on a historical cost basis, except for investment properties, valuation of livestock carrier, derivative financial instruments and available for sale financial assets that have been measured at fair value, and biological assets that are measured at fair value less estimated point of sale costs. The carrying values of recognised assets and liabilities that are hedged with fair value hedges are adjusted to record changes in the fair values attributable to the risks that are being hedged.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies.

The consolidated financial statements include the financial statements of the parent entity, Futuris Corporation Limited, and its controlled entities, referred to collectively throughout these financial statements as the “Group”.

The accounting policies and disclosures are consistent with those of the previous financial year, except for the following change:

During the fiscal year, Forest Enterprises Australia Limited, an associate, changed its accounting policy in relation to plantation land that is leased to growers in the consolidated entity’s Managed Investment Schemes. Plantation land was previously accounted for under AASB 116 Property Plant and Equipment. Forest Enterprises Australia has now elected to account for fair value adjustments of plantation land under AASB 140 Investment Property. This change has been implemented as the directors of Forest Enterprises Australia are of the opinion that classification of plantation land as investment properties more accurately reflects the relationship between the growers and the consolidated entity. As part of this change, certain costs, which were previously expensed, are now capitalised and included in the cost of the land, prior to applying fair value adjustments.

The financial impact of the above accounting policy change on the current year earnings is an additional $2.60 million and a restatement of the 2007 opening retained earnings by $5.39 million and prior year profit by $4.72 million.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board, which include Australian Equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Australian Accounting Standards and Interpretations that have recently been issued or amended, but are not yet effective, have not been adopted by the Group for the annual reporting period ending 30 June 2008. These are outlined in the table next page.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(b) Statement of compliance (continued)

			Application		Application
			date of	Impact on Group	date for
Reference	Title	Summary	standard	financial report	Group
AASB 8 and	Operating Segments	New standard replacing	1 January	AASB 8 is a disclosure	1 July 2009
AASB 2007-3	and consequential	AASB 114 Segment Reporting,	2009	standard so will have
	amendments to other	which adopts a management		no direct impact on the
	Australian Accounting	reporting approach to		amounts included in the
	Standards	segment reporting.		Group’s financial statements,
				although it may indirectly
				impact the level at which
				goodwill is tested for
				impairment. In addition,
				the amendments may have
				an impact on the Group’s
				segment disclosures.
AAASB 123	Borrowing Costs and	The amendments to AASB	1 January	These amendments to	1 July 2009
(Revised) and	consequential	123 require that all borrowing	2009	AASB 123 require that all
AASB 2007-6	amendments to other	costs associated with a		borrowing costs associated
	Australian Accounting	qualifying asset be capitalised.		with a qualifying asset be
	Standards			capitalised. The Group has
				previously elected to capitalise
				borrowing costs associated
				with qualifying assets and as
				such the amendments are not
				expected to have any impact.
AASB 101	Presentation of	Introduces a statement of	1 July 2009	These amendments are	1 July 2009
(Revised) and	Financial Statements	comprehensive income.		only expected to affect the
AASB 2007-8	and consequential amendments to other Australian Accounting Standards	Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements.		presentation of the Group’s financial report and will not have a direct impact on the measurement and recognition of amounts disclosed in the financial report. The Group has not determined at this stage whether to present a single statement of comprehensive income or two separate statements.
AASB	Amendments to	The amendments clarify	1 January	The Group has share-based	1 July 2009
2008-1	Australian Accounting	the definition of ‘vesting	2009	payment arrangements that
	Standard – Share-based	conditions’, introducing the		may be affected by these
	Payments: Vesting	term ‘non-vesting conditions’		amendments. However, the
	Conditions and	for conditions other than		Group has not yet determined
	Cancellations	vesting conditions as		the extent of the impact, if any.
		specifically defined and
		prescribe the accounting
		treatment of an award
		that is effectively cancelled
		because a non-vesting
		condition is not satisfied.
AASB	Amendments to	The amendments provide	1 January	These amendments are not	1 July 2009
2008-2	Australian Accounting	a limited exception to the	2009	expected to have any impact
	Standards – Puttable	definition of a liability so as		on the Group’s financial
	Financial Instruments	to allow an entity that issues		report as the Group does not
	and Obligations arising	puttable financial instruments		have on issue or expect to
	on Liquidation	with certain specified features,		issue any puttable financial
		to classify those instruments		instruments as defined by
		as equity rather than financial		the amendments.
		liabilities.

Notes to the Financial Statements for the year ended 30 June 2008

(b) Statement of compliance (continued)

			Application		Application
			date of	Impact on Group	date for
Reference	Title	Summary	standard	financial report	Group
AASB 3	Business Combinations	The revised standard	1 July 2009	The Group may enter into	1 July 2009
(Revised)		introduces a number of		some business combinations
		changes to the accounting		during the next financial year
		for business combinations,		and may therefore consider
		the most significant of which		early adopting the revised
		allows entities a choice for		standard. The Group has not
		each business combination		yet assessed the impact of
		entered into – to measure		early adoption, including which
		a non-controlling interest		accounting policy to adopt.
		(formerly a minority interest)
		in the acquiree either at its fair
		value or at its proportionate
		interest in the acquiree’s
		net assets. This choice will
		effectively result in recognising
		goodwill relating to 100%
		of the business (applying
		the fair value option) or
		recognising goodwill relating
		to the percentage interest
		acquired. The changes apply
		prospectively.
AASB 127	Consolidated and	Under the revised standard,	1 July 2009	If the Group changes its	1 July 2009
(Revised)	Separate Financial	a change in the ownership		ownership interest in existing
	Statements	interest of a subsidiary		subsidiaries in the future,
		(that does not result in loss		the change will be accounted
		of control) will be accounted		for as an equity transaction.
		for as an equity transaction.		This will have no impact on
				goodwill, nor will it give rise
				to a gain or a loss in the
				Group’s income statement.
AASB	Amendments to	Amending standard issued	1 July 2009	Refer to AASB 3 (Revised)	1 July 2009
2008-3	Australian Accounting	as a consequence of revisions		and AASB 127 (Revised) above.
	Standards arising from	to AASB 3 and AASB 127.
	AASB 3 and AASB 127
AASB	Customer Loyalty	Deals with the accounting for	1 July 2008	The Group does not have	1 July 2008
Interpretation	Programmes	customer loyalty programmes,		any customer loyalty
13		which are used by companies		programmes and as such
		to provide incentives to		this interpretation is not
		their customers to buy their		expected to have any impact
		products or use their services.		on the Group’s financial report.
AASB	AASB 119 – The Limit	Aims to clarify how to	1 January	The Group has a defined	1 July 2008
Interpretation	on a Defined Benefit	determine in normal	2008	benefit pension plan and as
14	Asset, Minimum Funding	circumstances the limit on		such this interpretation may
	Requirements and their	the asset that an employer’s		have an impact on the Group’s
	Interaction	balance sheet may contain in		financial report. However,
		respect of its defined benefit		any impact is not likely to be
		pension plan.		material.

Notes to the Financial Statements for the year ended 30 June 2008

(b) Statement of compliance (continued)

			Application		Application
			date of	Impact on Group	date for
Reference	Title	Summary	standard	financial report	Group
AASB	Amendments to	The main amendments of	1 January	Recognising all dividends	1 July 2009
2008-7	Australian Accounting	relevance to Australian	2009	received from subsidiaries,
	Standards - Cost of	entities are those made to		jointly controlled entities
	an Investment in a	AASB 127 deleting the ‘cost		and associates as income
	Subsidiary, Jointly	method’ and requiring all		will likely give rise to greater
	Controlled Entity or	dividends from a subsidiary,		income being recognised by
	Associate	jointly controlled entity or		the parent entity after adoption
		associate to be recognised		of these amendments.
		in profit or loss in an entity’s
		separate financial statements		In addition, if the Group enters
		(i.e., parent company accounts).		into any group reorganisation
		The distinction between pre-		establishing new parent
		and post-acquisition profits is		entities, an assessment will
		no longer required. However,		need to be made to determine
		the payment of such dividends		if the reorganisation meets
		requires the entity to consider		the conditions imposed to be
		whether there is an indicator		effectively accounted for on a
		of impairment.		‘carry-over basis’ rather than
				at fair value.
		AASB 127 has also been
		amended to effectively allow
		the cost of an investment
		in a subsidiary, in limited
		reorganisations, to be based on
		the previous carrying amount
		of the subsidiary (that is, share
		of equity) rather than its fair
AASB	Amendments to	The improvements project is	1 January	The Group has not yet	1 July 2009
2008-5	Australian Accounting	an annual project that	2009	determined the extent
	Standards arising	provides a mechanism for		of the impact of the
	from the Annual	making non-urgent, but		amendments, if any.
	Improvements Project	necessary, amendments to
		IFRSs. The IASB has separated
		the amendments into two
		parts: Part 1 deals with
and	Further Amendments	changes the IASB identified
AASB	to Australian Accounting	resulting in accounting
2008-6	Standards arising	changes; Part II deals with	1 July 2009
	from the Annual	either terminology or editorial
	Improvements Project	amendments that the IASB
		believes will have minimal
		impact.
Amendments	Eligible Hedged Items	To clarify how the principles	1 July 2009	The Group has not yet	1 July 2009
to International		that determine whether a		determined the extent
Financial		hedged risk or portion of cash		of the impact of the
Reporting		flows is eligible for designation		amendments, if any.
Standards		should be applied in particular
		situations.

Adoption of new accounting standard

The Group has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1 January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit and loss or the financial position of the equity.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(c) Basis of consolidation

All inter-entity balances and transactions have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

Investments in subsidiaries held by the Group are accounted for at cost in the separate financial statements of the parent entity.

Financial statements of foreign controlled entities presented in accordance with overseas accounting principles are, for consolidation purposes, adjusted to comply with Group policy and generally accepted accounting principles in Australia.

(d) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment of goodwill and intangibles with indefinite useful lives

The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount are discussed in note 2(r).

Share based payment transactions

The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using both an external valuer for certain instruments and internally with a trinomial model, refer further to information on share based payments transactions at note 2(x) and note 38.

Other significant accounting estimates and assumptions are disclosed elsewhere in the financial statements where relevant.

(e) Cash and cash equivalents

For the purposes of the cash flow statement, cash includes cash on hand and in banks and money market investments, net of outstanding bank overdrafts. For the purpose of the balance sheet bank overdrafts are included within interest bearing loans and borrowings in current liabilities and cash only includes cash on hand and in banks and money market investments.

(f) Trade and other receivables

Trade and other receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

(g) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined on the first in, first out basis, and comprises the cost of purchase including costs of bringing the inventories to sale location. In the case of manufactured goods, direct materials, direct labour costs, variable overhead and a portion of fixed overhead costs allocated on the basis of normal operating capacity are included.

Freehold property previously held by the property segment of the Group for development and resale was valued at the lower of cost and net realisable value.

Borrowing costs in the prior year that were directly attributable to property held for development and resale which were considered qualifying assets were capitalised as part of the cost of those assets.

Where commodity inventories are acquired principally for the purpose of selling in the near term and generating a profit, such commodities are measured at fair value less costs to sell with changes in fair value less costs to sell recognised in the income statement.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(h) Livestock

The Group holds biological assets in the form of livestock, primarily beef cattle and sheep. These assets are measured at fair value, which has been determined based upon various assumptions, including livestock prices, less point of sale costs and other incidental costs, mortality rates, average daily weight gain, average daily feed price and the dress percentage. These assumptions are updated monthly and reflect the different categories of livestock held. The market value increments or decrements are recorded in the net profit.

(i) Forestry

The Group has interests in forestry plantations through plantation areas established and maintained on its own account and interests in the forestry managed investment schemes, which have reverted to the consolidated entity as a result of default by an original grower and forfeiture of their plantation interest. Forestry plantation timber owned by the Group are valued at each reporting date at fair value and increments and decrements in fair value are recognised in the income statement in the financial period in which they occur.

Fair value is determined as follows:

Up until the time at which the initial inventory of the plantation is conducted (expected to be between four to six years) by applying historical costs; and
After initial inventory and up until harvest of the timber – anticipated fair value less estimated point of sale costs.

As there is no active and liquid market for immature forestry plantation timber, fair value less estimated point of sales costs is based on forecast plantation growth and yields at the current average annual growth rates, prices based on the current price plus indexation of between 2.5% and 5% per annum and forecast of the net present values of future net cash flows from harvest at a discount rate of 9% and costs of maintaining plantations to maturity.

(j) Investments and other financial assets

Financial assets are classified as either financial assets at fair value through the profit or loss, loans and receivables, held to maturity investments, or available for sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value. In the case of investments not at fair value through profit or loss they include directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, reevaluates this designation at each financial year end.

(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss based on quoted market bid prices at the close of business on the balance date.
(ii) Held to maturity investments

Non derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity when the Group has the positive intention and ability to hold to maturity. Investments that are held for an undefined period are not included in this classification. Held to maturity investments are subsequently measured at amortised cost.

For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iv) Available for sale investments

Available for sale investments are those non derivative financial assets that are designated as available for sale or are not classified as any of the preceding categories. After initial recognition, available for sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or deemed to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

The fair value of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of similar instruments, or discounted cash flow analysis.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(k) Investment in associates

Interests in associated entities are brought to account using the equity method. Associates are entities over which the Group has significant influence and that are neither subsidiaries nor joint ventures. Under this method, the investment in associates is initially recognised at cost. Subsequently the investment is carried at cost plus post-acquisition changes in the Group’s share of net assets of the associate, less any impairment in value and adjusted for any differences in accounting policies. The consolidated income statement reflects the Group’s share of the results of operations of the associate.

Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any changes and discloses this, when applicable in the consolidated statement of changes in equity.

(l) Investment in joint ventures

Interests in joint venture entities are accounted for by applying the equity method of accounting. The Group identifies joint venture entities where the Group is in a position of joint control over the entity. Investments in joint venture entities are carried at the equity accounted amount less any impairment in value.

(m) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses, except for the livestock carrier, which is independently valued. Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the asset’s fair value at the balance sheet date.

Property, plant and equipment, excluding freehold land and assets under construction, are depreciated over their useful economic lives as follows:

lives as follows:
	Life	Method
Buildings	50 years	Straight line
Leasehold improvements	Lease term	Straight line
Plant and equipment – owned	3 to 10 years	Straight line
Plant and equipment – leased	Lease term	Straight line
Livestock carrier	10 years	Straight line
Network Infrastructure	5 to 25 years	Straight line

The useful lives are consistent with those of the prior year.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is derecognised.

(n) Investment properties

Initially, investment properties are measured at cost including transaction costs. Subsequent to initial recognition investment properties are stated at fair value. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise.

Investment properties are derecognised when they have either been disposed of or, when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on the derecognition of an investment property are recognised in the income statement in the period of derecognition.

Transfers are made to investment property when, and only when, there is a change in use, evidenced by ending of owner occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale.

In accordance with Group policy, investment properties disposed of during the year were revalued prior to disposal with the revaluation recognised in the income statement rather than a gain on disposal.

(o) Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is not amortised but is reviewed annually for impairment, or more frequently if there is any indication that the carrying value may be impaired.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(o) Goodwill (continued)

As at the acquisition date, any goodwill acquired is allocated to each of the cash generating units expected to benefit from the combination’s synergies. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is not larger than a segment based on either the Group’s primary or secondary reporting format determined in accordance with AASB114 Segment Reporting.

(p) Intangible assets

Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The useful lives of these intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised on a straight line basis over their useful lives (5-20 years).

Brand names, which are considered to have an indefinite life, are not amortised but are regularly tested for impairment. Expenditure incurred in developing, maintaining or enhancing brand names is expensed in the year in which it is incurred.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred.

(q) Design and development

Research costs are expensed as incurred.

Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured and the Group can demonstrate the technical feasibility of completing the asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.

Any expenditure carried forward is amortised from the commencement of commercial production on a straight-line basis over the period of the expected benefit, which is over a 3 year period. These development costs are Automotive related and primarily represent engineering costs incurred in developing products under awarded contracts.

(r) Impairment

Non-financial assets

The carrying values of all assets, other than inventories and deferred tax assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Assumptions used by the Group in basing its cash flow projections when determining the value in use are to use the budgeted results for the following three years, after which a growth rate was added, and discounted based on an appropriate weighted average cost of capital. The weighted average cost of capital is a more reflective rate of the Group’s position in terms of the time value of money for the Group and the risks it faces and therefore considered more appropriate than an incremental borrowing rate or other market borrowing rate.

Impairment for goodwill is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. Where the fair value of the assets acquired is less than the cost of acquisition the difference is recognised directly in the income statement. Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash generating unit retained. Impairment losses for goodwill are not subsequently reversed.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(r) Impairment (continued)

Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of indefinite life intangibles annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.

Financial Assets

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (ie the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in the income statement.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred on financial assets carried at cost (because its fair value cannot be reliably measured) the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.

If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the income statement. Reversals of impairment losses for equity instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit or loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

(s) Trade and other payables

Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that remain unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

(t) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

(u) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Certain subsidiaries are affected by warranty claims. Claims are covered by a provision for warranty, which has been calculated based on past experience of the level of repairs and returns.

Where subsidiaries have entered into leasing arrangements that require the leased asset to be returned at the end of the lease term in its original condition an estimate is made of the costs of restoration or dismantling of any improvements and a provision is raised.

A provision for dividend is not recognised as a liability unless the dividends are declared, on or before, reporting date.

Provisions for restructuring or termination benefits are only recognised when a detailed plan has been approved and the restructuring or termination benefits have either commenced or been publicly announced, or when firm contracts have been entered into.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(v) Provision for employee entitlements
(i) Wages, salaries, and annual leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in provisions in respect of employee’s services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

(w) Pensions and other post employment benefits

The Group maintains an Australian-based superannuation fund comprising both an accumulation section and a defined benefits section. The defined benefits section of the fund has been closed since December 1996 and all employees after that date must join the accumulation section.

With respect to the accumulation section of the fund, employees are entitled to accumulated benefits on retirement, resignation, disability or death. During the year, Group contributions are paid in accordance with legislative requirements, the fund’s rules and employee salary packages. Employees may also contribute to the fund. The assets of the accumulation section of the fund are sufficient to satisfy all benefits that would be vested in the event of termination.

With respect to the defined benefit section of the fund, relevant Group entities are obliged to contribute to the fund as set out in the Trust Deed and in accordance with legal requirements. During the year, superannuation entitlements are paid in accordance with legislative requirements at levels necessary to ensure that there are sufficient assets to meet the liabilities determined by actuarial valuations undertaken at regular intervals not exceeding three years. Member contributions are at a set rate.

The Group’s subsidiary, BWK AG, also maintains a defined benefit fund, referred to as provision for pensions. This provision is calculated by applying the projected unit credit method. This calculation is based on no growth in the fund, an interest rate for accounting purposes of 4.5% as well as mortality tables provided by an independent actuary in 2005.

Actuarial gains and losses for the defined benefits section of the fund are recognised in the income statement.

(x) Share based payment

The Group provides benefits to employees in the form of share-based payment transactions, which may include shares or rights over shares (equity-settled transaction such as options).

There are currently two share based plans in place to provide these benefits:

(i) Employee Share Option Plan (ESOP), which provides benefits to senior executives; and
(ii) Employee Share Loan Plan (ESLP), which provides benefits to all employees.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined using a trinomial model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Futuris Corporation Limited (market conditions). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i) the extent to which the vesting period has expired; and
(ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest.

This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

Shares in the Group re-acquired on market and held by the Employee Share Plan at the reporting date are classified in reserves.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(y) Convertible notes

The component of the convertible non-cumulative redeemable notes that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of issue costs.

On the issue of the convertible redeemable notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a long-term liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity, net of issue costs. The value of the conversion option is not changed in subsequent years.

The corresponding mandatory coupon payments on those notes are charged as interest expense in the income statement.

Issue costs are apportioned between the liability and equity components of the non-cumulative redeemable convertible notes based on the allocation of proceeds to the liability and equity components when the instruments are first recognised.

The convertible notes were fully repaid on 3 January 2008.

(z) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are included in equity as a deduction, net of tax, from the proceeds.

(aa) Hybrid notes

Hybrid notes are classified as equity. Incremental costs directly attributable to the issue of the Hybrid notes are included in equity as a deduction, net of tax, from the proceeds. Distributions to note holders are made quarterly at the discretion of Directors.

(ab) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options, dilutive convertible notes and dilutive hybrid notes).

(ac) Revenue

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably.

Rendering of services – non insurance related

Where the contract can be reliably measured, it is probable that the economic benefits associated with the transaction will flow to the Group and the stage of completion can be reliably measured. Stage of completion is measured by reference to the labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Interest and dividend income

Dividend revenue is recognised when the shareholder’s right to receive the payment is established. Interest revenue is recognised as it accrues using the effective interest rate method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Forestry revenue

Revenue from the provision of forestry services is recognised by reference to the financial period during which the relevant services are provided. Any unearned portion of these fees at financial year end is brought to account in the balance sheet as a liability and recognised in subsequent periods.

(ad) Borrowing costs

Borrowing costs were recognised within the property division as an expense when incurred, unless attributable to qualifying assets in which case they were capitalised against the asset (refer note 2(g)).

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ae) Construction contracts

Profit was previously recognised on construction contracts in proportion to the stage of completion when it was probable that the economic benefits arising from the contracts would flow to the Group, the costs attributable to the contract to date could be clearly identified, and when the costs to complete the contract could be reliably estimated.

Stage of completion was determined based on engineering determinations. Any material losses on construction contracts were brought to account as soon as they were considered probable.

The Group disposed of the Property division during the year ended 30 June 2007.

(af) Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and rewards incidental to ownership.

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as operating leases.

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

(ag) General insurance activities

Significant accounting estimates and assumptions

The ultimate liability arising from claims made under insurance contracts

Provision is made at the year end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Group.

The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.

The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Group, where more information about the claim event is generally available. IBNR claims may often not be apparent to the insured until many years after the events giving rise to the claims have happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail classes, claims are typically reported soon after the claim event and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims, the Group uses a variety of estimation techniques, generally based upon statistical analyses of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:

Changes in Group processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;
Changes in the legal environment;
The effects of inflation;
Changes in the mix of business;
The impact of large losses; and
Movements in industry benchmarks.

A component of these estimation techniques is usually the estimation of the current cost of notified but not paid claims. In estimating the cost of these the Group has regard to the claim circumstances as reported, any information available from loss adjusters and information on the cost of settling claims with similar characteristics in the previous period.

Large claims impacting each relevant business class are generally assessed separately, being measured on a case by case basis or projected separately in order to allow for the possible distortive effect of the development and incidence of these large claims.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ag) General insurance activities (continued)

Where possible the Group adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.

Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.

Details of specific assumptions used in deriving the outstanding claims liability at year end are detailed in Note 27.

Assets Arising from Reinsurance Contracts

Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Group may not receive amounts due to it and these amounts can be reliably measured.

Accounting policies in relation to general insurance activities are as follows:

Premium Revenue

Direct premium comprises amounts charged to the policyholder, excluding amounts collected on behalf of third parties, principally stamp duties. The earned portion of premiums received and receivable, including unclosed business, is recognised as revenue. Premium on unclosed business is brought to account based upon the pattern of booking of renewals and new business.

Unearned Premium

Unearned premium is based on the term of the risk which closely approximates the pattern of risks underwritten based on the 365th method.

At each balance date, the adequacy of the unearned premium liability is assessed on a net of reinsurance basis against the present value of the expected future cash flows relating to potential future claims in respect of the relevant insurance contracts, plus an additional risk margin to reflect the inherent uncertainty of the central estimate. The assessment is carried out at the divisional level, being a portfolio of contracts that are broadly similar and managed together as a single portfolio. If the unearned premium liability, less related intangible assets and deferred acquisition costs, is deficient, then the resulting deficiency is recognised in the income statement of the Company. The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess being recorded in the balance sheet as an unexpired risk liability.

Outwards Reinsurance Premiums

Premium ceded to reinsurers is recognised as an expense in accordance with the pattern of reinsurance service received. Accordingly, a portion of outwards reinsurance premium is treated at the reporting date as a prepayment.

Reinsurance commission revenue is recognised over the term of the underlying insurance policy or indemnity period, consistent with the terms of the on-going treaty arrangements.

Outstanding Claims Liability

The provision for outstanding claims is measured as the central estimate of the present value of expected future claims payments plus a risk margin. The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (“IBNR”); claims incurred but not enough reported (“IBNER”); and estimated claims handling costs.

The expected future payments are discounted to present value using a risk free rate.

A risk margin is applied to the central estimate, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the central estimate. The risk margin increases the probability that the net liability is adequate to a minimum of 90%.

Reinsurance and Other Recoveries Receivable

Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid, IBNR and unexpired risk liabilities are recognised as revenue.

Reinsurance and other recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveries are measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstanding claims.

Acquisition Costs

A portion of acquisition costs relating to unearned premium revenue is deferred in recognition that it represents future benefits to the organisation. Deferred acquisition costs are measured at the lower of cost and recoverable amount. A write-down to recoverable amount is recognised where the present value of expected future claims (including settlement costs) in relation to business written to the reporting date exceeds related unearned premiums. Deferred acquisition costs are amortised over the period expected to benefit from the expenditure.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ag) General insurance activities (continued)

Fire Brigade and Other Charges

Fire service levies and other charges received or receivable from policyholders are included in premiums. A liability for fire brigade and other charges is recognised on business written to the reporting date, regardless of whether assessments have been issued by the appropriate authority. Levies and charges payable by the organisation are expensed on the same basis as the recognition of premium revenue, with the portion relating to unearned premium being recorded as a prepayment.

Assets Backing General Insurance Liabilities

The Group has determined that all assets are held to back general insurance liabilities on the basis that all assets are valued at fair value in the balance sheet.

The following policies apply to assets held to back general insurance liabilities:

Financial Assets

Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised profits and losses recognised in the income statement.

Details of fair values of different types of assets are listed below:

Cash assets and bank overdrafts are carried at face value of the amounts deposited or drawn. The carrying amount of cash assets and bank overdrafts approximate their fair value.
Fixed interest securities are initially recognised at cost and the subsequent fair value is taken as the quoted bid price of the instrument at the balance sheet date.
Unlisted fixed interest securities are recorded at amounts based on valuations using rates of interest equivalent to the yields obtainable on comparable investments at balance date.

Financial assets are derecognised when the rights to receive future cash flows from the assets have expired, or have been transferred, and Elders Insurance Limited has transferred substantially all the risks and rewards of ownership.

Receivables

Amounts due from policy holders and intermediaries are initially recognised at face value, being the amounts due. They are subsequently measured at fair value which is approximated by taking the initially recognised amount and reducing it for impairment as appropriate.

A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The discount is calculated using a risk free rate. The impairment charge is recognised in the income statement.

Actuarial Assumptions and Methods

Short-Tail Classes

With short-tail classes, there is not a significant delay between the occurrence of the claim and the claim being paid out by the Group. The costs of claims notified to the Group at the balance sheet date are estimated on a case by case basis to reflect the individual circumstances of each claim. The ultimate expected cost of claims is projected from this data by reference to statistics which show how estimates of claims incurred in previous periods have developed over time to reflect changes in the underlying estimates of the cost of notified claims and late notifications.

Liability

Claims estimates for the Group’s liability business are derived from analysis of the results of several different actuarial methods. Ultimate numbers of claims are projected based on the past reporting patterns. Payments experience is analysed based on averages paid per claim incurred and averages paid per claim finalised. Historic case estimate development is also used to develop a model of future payments. The resulting average claim sizes from these models are analysed, along with the loss ratios and other statistics, in order to determine a final estimate of outstanding claims.

Claims inflation is incorporated into the resulting projected payments, either explicitly or implicitly, to allow for both general economic inflation as well as any superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as developments of legal precedent.

Projected payments are discounted to allow for the time value of money. The liability class of business is also subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ag) General insurance activities (continued)

The following assumptions have been made in determining the outstanding claims liabilities

	2008	2007	2008	2007
	Short-Tail	Short-Tail	Liability	Liability
Discount Rate	6.9%	6.5%	6.9 %	6.5 %
Discount Mean Term (Years)	0.35	0.35	2.50	2.55
Claims Handling Expense Ratio	5.0%	5.0%	6.0%	6.0%
Ultimate Gross Loss Ratio Latest Accident Year	74%	73%	47%	47%

Process Used to Determine Assumptions

A description of the processes used to determine these assumptions is provided below:

Average Weighted Term to Settlement

The average weighted term to settlement is calculated separately by class of business based on historic settlement patterns.

Expense Rate

Claims handling expenses are calculated by reference to past experience of claims handling costs as a percentage of past payments.

Discount Rate

Discount rates derived from market yields on Commonwealth Government securities as at the balance date have been adopted.

Sensitivity Analysis - Insurance Contracts

(i) Summary

The Group conducts sensitivity analyses to quantify the exposure to risk of changes in the underlying variables. The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed below. The movement in any key variable will impact the performance and equity of the Group. The tables below describe how a change in each assumption will affect the insurance liabilities and show an analysis of the sensitivity of the level of liabilities to changes in these assumptions net of reinsurance.

Variable Impact on Current Year Results of Movement in Variable Average Weighted Term to Settlement A decrease in the average term to settlement rates would lead to more claims being paid sooner than anticipated. Expected payment patterns are used in determining the outstanding claims liability. An increase or decrease in the average weighted term would have an opposing impact on the liabilities. Expense Rate An estimate for the internal costs of handling claims is included in the outstanding claims liability. An increase or decrease in the expense rate assumption would have a corresponding impact on the liabilities. Discount Rate The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money. An increase or decrease in the assumed discount rate will have an opposing impact on total claims expense.

(ii) Impact of Changes In Key Variables 30 June 2008

(ii) Impact of Changes In Key Variables 30 June 2008
Variable	Change in Variable	Net Outstanding Claims
		Liabilities
		Increase/(Decrease)
Total Portfolio		$’000
Recognised Amounts per the Financial Statements (note 27).		91,622
Discount Rate	+1.0% p.a.	(1,035)
	-1.0% p.a.	1,076
Discount Mean Term (Years)	+0.5 years	(2,986)
	-0.5 years	3,086
Claims Handling Expense Rate	+1.0%	1,690
	-1.0%	(1,690)

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ag) General insurance activities (continued)

The reconciliation of the movement in outstanding claims liabilities and the claims development table have been presented on a net of reinsurance and other recovery basis to give the most meaningful insight into the impact on the income statement.

Insurance Contracts - Risk Management Policies and Procedures

The financial condition and operation of the Group are affected by a number of key risks including insurance risk, interest rate risk, currency risk, credit risk, market risk, liquidity risk, financial risk, compliance risk and operational risk.

Objectives in Managing Risks Arising from Insurance Contracts and Policies for Mitigating those Risks

The Group has the objective to control insurance risk thus reducing the volatility of operating profits. In addition to the inherent uncertainty of insurance risk, which can lead to significant variability in the loss experience, profits from insurance business are affected by market factors, particularly competition and movements in asset values. Short-term variability is, to some extent, a feature of insurance business.

In accordance with Prudential Standards GPS220 Risk Management and GPS230 Reinsurance Management issued by the Australian Prudential Regulation Authority (APRA), the Group’s insurance businesses have developed, implemented and maintained a sound and prudent Risk Management Strategy (RMS) and Reinsurance Management Strategy (REMS).

The RMS and REMS identify the policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Group. Annually, the Group’s insurance businesses certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Group has systems in place to ensure compliance with legislative and prudential requirements and that the Group’s insurance businesses have satisfied itself as to the compliance with RMS and REMS.

The RMS and REMS have been approved by both the Board of Elders Insurance Limited and APRA. Key aspects of the processes established in the RMS to mitigate risks include:

The maintenance and use of sophisticated management information systems, which provide up to date, reliable data on the risks to which the business is exposed at any point in time.
Actuarial models, using information from the management information systems, are used to calculate premiums and monitor claims patterns. Past experience and statistical methods are used as part of the process.
Documented procedures are followed for underwriting and accepting insurance risks.
Natural disasters such as bushfires are more challenging to manage. The Group monitors exposure to such risks through special modelling techniques involving the collation of data on weather patterns which support decisions on limiting exposure.
Reinsurance is used to limit the Group’s exposure. When selecting a reinsurer, the Group only consider those companies that provide high security using rating information from the public domain or gathered through internal investigations.
In order to limit concentrations of credit risk in purchasing reinsurance the Group has regard to existing reinsurance assets and seeks to limit excess exposure to any single reinsurer or group of related reinsurers.
The mix of assets in which the Group invests is driven by the nature and term of the insurance liabilities. The management of assets and liabilities is closely monitored to attempt to match the maturity dates of assets with the expected pattern of claim payments.

Terms and Conditions of Insurance Business

The terms and conditions attaching to insurance contracts affect the level of insurance risk accepted by the Group. The majority of direct insurance contracts written are entered into on a standard form basis. There are no special terms and conditions that have a material impact on the financial statements.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ag) General insurance activities (continued)

Concentration of Insurance Risk

The Group’s exposure to concentrations of insurance risk is mitigated by a diversified portfolio. Specific processes for monitoring identified key concentrations are set out below.

Risk	Source of Concentration	Risk Management Measures
Natural Catastrophes	Properties concentrated in	The Group’s underwriting strategy requires individual risk premiums
	regions that are subject to:	to be differentiated in order to reflect the higher loss frequency in
	• Earthquakes	particular geographical areas.
	• Bushfires
	• Cyclones
	• Hail Storms
		The Group has modelled aggregated risk by postcode using
		commercially available catastrophe models. The Group’s exposure
		data across the Australian portfolio encompasses all fire risks.
		Based on the probable maximum loss per the models, the Group
		purchases catastrophe reinsurance cover to limit exposure to
		any single event.

(ah) Income tax

Income tax disclosed in the income statement comprises of current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at balance date, and any adjustments to tax payable in respect of previous years.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax assets and unused tax losses can be utilised:

except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

(ai) Other taxes

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

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(ai) Other taxes (continued)

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(aj) Foreign currency translation

Both the functional and presentation currency of Futuris Corporation Limited and its Australian subsidiaries is Australian dollars (AUD).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

All exchange differences in the consolidated financial report are taken to the income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

As at the reporting date the assets and liabilities of overseas subsidiaries are translated into the presentation currency of Futuris Corporation Limited at the rate of exchange ruling at the balance sheet date, and the income statements are translated at the weighted average exchange rates for the period.

The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

(ak) Derivative financial instruments

The Group uses derivative financial instruments to manage its exposure to foreign exchange, commodity price and interest rate risks. Such derivative financial instruments are stated at fair value.

The fair value of derivative financial instruments is determined by reference to quoted market prices. Where a quoted market price is not available, the fair value is the estimated amount the consolidated entity would receive or pay to terminate the derivative financial instrument taking into account available market information.

The gain or loss arising from changes in fair value is recognised immediately in the income statement, unless the derivative qualifies for hedge accounting, in which case the accounting treatment is set out below.

For the purposes of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction.

In relation to fair value hedges which meet the conditions for special hedge accounting, any gain or loss from re-measuring the hedging instrument at fair value is recognised immediately in the income statement.

Any gain or loss attributable to the hedged risk on re-measurement of the hedged item is adjusted against the carrying amount of the hedged item and recognised in the income statement. Where the adjustment is to the carrying amount of a hedged interestbearing financial instrument, the adjustment is amortised to the income statement such that it is fully amortised by maturity.

In relation to cash flow hedges to hedge firm commitments which meet the conditions for special hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion is recognised in the income statement.

When the hedged firm commitment results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability.

For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the income statement in the same year in which the hedged firm commitment affects the net profit and loss, for example when the future sale actually occurs.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.

Notes to the Financial Statements for the year ended 30 June 2008

Note 2. Statement of significant accounting policies (continued)

(al) Derecognition of financial assets and financial liabilities

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

(am) Business combinations

The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and calculation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Except for non current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the business combination over the fair value of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only after reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(an) Non current assets and disposal groups held for sale and discontinued operations

Non current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or amortised. For an asset or disposal group to be classified as held for sale, it must be available for immediate sale in its present condition and its sale must be highly probable.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non current asset (or disposal group) is recognised at the date of de-recognition.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations

Notes to the Financial Statements for the year ended 30 June 2008

Note 3. Revenue and Expenses

Note 3. Revenue and Expenses
		Consolidated			Parent
		2008	2007	2008		2007
	Note	$000	$000	$000		$000
Sales revenue:
Continuing operations
Sale of goods		2,302,774	2,061,214	-		-
Sale of biological assets		407,776	456,143	-		-
Commission and other selling charges		280,463	262,134	-		-
Insurance premium revenue	27	193,144	182,254	-		-
Other sales related income		90,502	54,772	-		-
		3,274,659	3,016,517	-		-
Discontinued operations	42	37,456	211,994	-		-
		3,312,115	3,228,511	-		-
Other revenue:
Continuing operations
Change in fair value of financial assets
designated as fair value through profit and loss		30,290	15,025	4,706		3,799
Dividends
- Controlled entities		-	-	150,000	221,850
- Other entities		3,920	404	-		327
Other		78,300	52,254	12,074		12,361
		112,510	67,683	166,780	238,337
Discontinued operations	42	4,826	400	-		-
		117,336	68,083	166,780	238,337
Interest revenue:
Continuing operations
- Controlled entities		-	-	20,509		30,121
- Associated entities		3,396	389	-		10
- Other entities		12,026	13,483	36		621
		15,422	13,872	20,545		30,752
Discontinued operations	42	-	107	-		-
		15,422	13,979	20,545		30,752
Other expenses:
Continuing operations
Distribution expenses		487,006	407,890	-		-
Marketing expenses		14,666	23,305	-		-
Occupancy expenses		17,492	11,312	1,096		1,247
Administrative expenses		154,713	144,733	26,835		20,624
Insurance claims & related expenses		128,981	120,292	-		-
Other expenses		66,892	69,731	3,125	216,911
		869,750	777,263	31,056	238,782
Discontinued operations	42	53,535	25,278	-		-
		923,285	802,541	31,056	238,782
Depreciation and amortisation:
Property, plant and equipment		34,901	29,593	72		33
Leased assets		678	1,563	-		-
Design and development		4,046	4,576	-		-
Patents, trademarks and other		2,959	1,857	-		-
		42,584	37,589	72		33

Notes to the Financial Statements for the year ended 30 June 2008

Note 3. Revenue and Expenses (continued)

Note 3. Revenue and Expenses(continued)
		Consolidated			Parent
		2008	2007	2008		2007
	Note	$000	$000	$000		$000
Finance costs:
Interest expense - other entities		70,344	53,876	31,168		35,125
Finance lease charges		404	727	-		-
Other finance costs		1,572	2,296	1,236		1,926
		72,320	56,899	32,404		37,051
Less borrowing costs capitalised (note 2(g))		-	(7,367)	-		-
		72,320	49,532	32,404		37,051
Discontinued operations	42	11	4,471	-		-
		72,331	54,003	32,404		37,051
Specific net gains and (expenses):
Profit/ (loss) on sale of non current assets
- Property, plant and equipment		(553)	2,993	-		-
- Profit on sale of investments		(1,816)	3,225	-		3,370
		(2,369)	6,218	-		3,370
Discontinued operations	42	-	8,920	-		-
		(2,369)	15,138	-		3,370
Impairments and other significant gains / (losses):
Telco operations closure costs		(12,948)	-	-		-
Horticulture operations closure costs		(6,710)	-	-		-
Loss on sale of Rail and Bus division		(16,189)	-	-		-
Seed and Fodder write offs		(1,278)	-	-		-
Reorganisation costs		(22,472)	-	-		-
Write-off other projects and activities		(13,134)	-	-		-
Discount on acquisition		6,042	-	-		-
Derivative fair value gain		3,853	-	-		-
Profit on sale/Discount on acquisition		4,441	-	-		-
Sale of Caversham		-	8,920	-	(76,952)
Telecommunications bid and establishment costs		-	(9,566)	-		-
Impairment losses on telecommunications closure		(6,453)	-	-		-
Impairment losses on property, plant and equipment		(6,300)	-	-		-
Impairment losses on intangibles		(6,581)	-	-		-
		(77,729)	(646)	-	(76,952)
Employee benefit expense:
- Wages and salaries		(287,332)	(277,774)	(13,040)		(5,318)
- Post employment benefits including superannuation		(23,345)	(25,005)	(473)		(244)
- Workers compensation		(4,337)	(5,173)	(57)		(117)
- Share based payments		(3,009)	(4,212)	(522)		(770)
		(318,023)	(312,164)	(14,092)		(6,449)
Other impairment losses:
Impairment losses		(2,332)	(7,714)	-		-
Impairment reversals		989	7,445	-		-
Impairment losses (net)		(1,343)	(269)	-		-
Discount on acquisitions - gain		-	4,100	-		-
Redundancies and restructuring costs		-	(11,732)	-		-
Operating leases - minimum lease payments		(67,253)	(60,151)	(574)		(796)
Foreign exchange net gains/(losses)		(251)	(436)	-		-
Provision for doubtful debts and bad debts (written off)/recovered		(1,026)	1,315	-		-

Notes to the Financial Statements for the year ended 30 June 2008

Note 4. Income Tax

Note 4. Income Tax
	Consolidated			Parent
	2008	2007	2008		2007
Note	$000	$000	$000		$000
(a) Major components of income tax expense are:
Income Statement
Current income tax
Current income tax charge/(benefit)	(5,752)	15,812	1,692	(66,304)
Adjustments in respect of current income tax of previous years	(5,335)	(5,877)	42,980		(5,177)
Deferred income tax
Origination and reversal of temporary differences	2,072	10,610	(29,579)		(2,750)
Income tax expense/(benefit) reported in income statement	(9,015)	20,545	15,093	(74,231)
Statement of Changes in Equity
Deferred income tax
Net loss on revaluation of cash flow hedges	3,274	2,624	3,274		2,624
Net gain on fair value revaluations of associate’s land	-	(36,806)	-		-
Income tax expense/(benefit) reported in equity	3,274	(34,182)	3,274		2,624
(b) A reconciliation of income tax expense applicable to accounting
profit before income tax at the statutory income tax rate to income
tax expense at the Group’s effective income tax rate is as follows:
Accounting profit/(loss) before tax from:
- Continuing Operations	83,292	103,294	125,069		(2,331)
- Discontinued Operations	(46,217)	25,450	-		-
Total Accounting profit/(loss) before tax	37,075	128,744	125,069		(2,331)
Income tax expense/(benefit) at 30% (2007: 30%)	11,123	38,623	37,521		(699)
Adjustments in respect of current income tax of previous years	(5,335)	(5,877)	42,980		(5,177)
Share of associate (profits)	(12,151)	(9,819)	(361)		(3,526)
Non assessable (profits)/losses	(4,062)	(2,636)	252		-
Non deductible depreciation and amortisation	1,852	993	-		-
Non deductible other expenses	1,843	248	29		32
Concessional deductions	-	(500)	-		-
Non assessable dividends	(596)	-	(45,000)	(66,555)
Employee Share Plan Costs	924	1,577	141		713
Losses available to offset against future taxable income	-	-	(20,406)		-
Other	(2,613)	(2,064)	(63)		981
Income tax expense/(benefit) as reported in income statement	(9,015)	20,545	15,093	(74,231)
Aggregate Income tax expense is attributable to:
- Continuing Operations	7,712	14,189	15,093	(74,231)
- Discontinued Operations	(16,727)	6,356	-		-
	(9,015)	20,545	15,093	(74,231)
Current tax payable/(receivable)	32,000	61,341	(13,315)		21,437

Notes to the Financial Statements for the year ended 30 June 2008

Note 4. Income Tax

Note 4. Income Tax
	Balance	Sheet	Income	Statement
	2008	2007	2008	2007
Note	$000	$000	$000	$000
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred income tax liabilities
Revaluations of investment properties to fair value	(8,269)	(4,508)	1,175	-
Revaluations of foreign exchange contracts (cash flow hedges) to fair value	(5,669)	(2,089)	307	1,903
Deferred expenses	-	(742)	-	(575)
Shares in associated entities	(8)	(3,748)	1,034	(101)
Exchange rates to fair value	(835)	(3,957)	(1,142)	2,925
Non-assessable accrued income	(19,022)	(7,948)	10,753	(9,320)
Forestry assets (standing timber)	(5,669)	(4,010)	1,131	2,097
Plant and equipment temporary differences	1,404	(5,532)	(2,757)	4,077
Prepayments	(52)	(170)	(3)	4,325
Research and development	(8,182)	(12,192)	935	1,593
Other debtors	(4,915)	-	1,046	(1,328)
Other	(2,585)	(12,969)	(7,694)	2,380
Gross deferred income tax liabilities	(53,802)	(57,865)	4,785	7,976
Deferred income tax assets
Losses available to offset against future taxable income	33,109	20,972	(578)	2,254
Provision for employee entitlements	14,794	16,685	(80)	2,443
Other provisions	13,607	15,585	(1,837)	521
Forestry product investment income	9,822	12,068	2,252	(523)
Accrued expenditure	1,450	1,107	268	514
Deferred borrowing costs	988	1,156	210	(15)
Other capitalised expenses	4,220	2,065	(2,261)	(1,009)
Other	1,188	10,175	(687)	(1,551)
Gross deferred income tax assets	79,178	79,813	(2,713)	2,634
Deferred income tax charge			2,072	10,610
Parent
Deferred income tax liabilities
Unrealised gain on financial instruments	(5,891)	(2,383)	235	2,383
Other debtors	-	1,095	589	(1,095)
Shares in associated entities	(29)	284	-	(284)
Other	(13)	(7,187)	218	(2,568)
Gross deferred income tax liabilities	(5,933)	(8,191)	1,042	(1,564)
Deferred income tax assets
Losses available to offset against future taxable income(i)	30,470	-	(30,470)	-
Accrued expenditure	15	(468)	(80)	494
Deferred borrowing costs	975	1,156	201	158
Prepayments	-	1,374	(3)	191
Other debtors	506	-	-	(64)
Provisions	1,927	2,100	(727)	(2,100)
Other	1,126	1,623	458	135
Gross deferred income tax assets	35,019	5,785	(30,621)	(1,186)
Deferred income tax charge			29,579	(2,750)

(i) Group losses not previously recognised in the Parent entity

Notes to the Financial Statements for the year ended 30 June 2008

Note 4. Income Tax (continued)

Estimated deferred tax assets attributable to tax losses not recognised in the financial statements of $19.09 million (2007: $14.64 million) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose.

At 30 June 2008, there is no recognised or unrecognised deferred income tax liability (2007: $Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, associates or joint venture, as the Group has no liability for additional taxation should these amounts be remitted.

Tax Consolidation

Futuris and its 100% owned subsidiaries are in a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to wholly owned subsidiaries.

Wholly owned Australian subsidiaries are required to make contributions to the head entity for tax liabilities and deferred tax balances arising from external transactions occurring after the implementation of tax consolidations. The contributions are calculated as a percentage of taxable income as if each subsidiary is a stand alone entity. Contributions are payable following payment of the liabilities by Futuris. The assets and liabilities arising under the tax funding agreement are recognised as intercompany assets and liabilities with a consequential adjustment to income tax expense or benefit.

In addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or upon leaving the Group.

The head entity of the tax consolidated group is Futuris Corporation Limited.

Note 5. Receivables

Note 5. Receivables
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Current
Trade debtors(i)	421,781	415,036	-		-
Allowance for doubtful debts	(7,636)	(11,082)	-		-
	414,145	403,954	-		-
Amounts receivable from:
- controlled entities	-	-	1,198,435	1,502,079
- associated entities	36,821	30,416	964		914
	36,821	30,416	1,199,399	1,502,993
Finance debtors	825	842	-		-
Reinsurance and other recoveries receivable	69,689	60,182	-		-
Deferred settlements	36,450	74,163	-		-
Other receivables	78,225	66,546	14,266		13,148
Allowance for non-recovery	(2,373)	(2,638)	(2)		-
	181,991	63,908	14,264		13,148
	633,782	633,465	1,213,663	1,516,141
Movements in the allowance for doubtful debts – trade debtors
Opening balance of allowance for doubtful debts	11,082	12,895	-		-
Trade debts written off	(4,771)	(1,953)	-		-
Trade debts provided for duringthe year	1,325	140	-		-
Closing balance of allowance for doubtful debts	7,636	11,082	-		-

Notes to the Financial Statements for the year ended 30 June 2008

Note 5. Receivables (continued)

Note 5. Receivables(continued)
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Movements in allowance for non-recovery – other receivables
Opening balance of allowance for non-recovery	2,638	1,795	-		-
Other receivables written off	(304)	-	-		-
Other receivables provided for during the year	39	843	2		-
Other	-	-	-		-
Closing balance of allowance for non-recovery	2,373	2,638	2		-
Non Current
Reinsurance and other recoveries receivable	29,974	31,081	-		-
Deferred settlements	20,187	31,772	-		-
Other receivables	130,525	91,821	20,186		31,772
Allowance for non recovery	-	-	-		-
	130,525	91,821	20,186		31,772
Amounts receivable from associated entities	60,642	35,636	5,442		5,229
	241,328	190,310	25,628		37,001

(i) Included in trade debtors is $118.19 million (2007: $106.35 million) which is subject to credit insurance with various terms and conditions.

Trade receivables are non interest bearing and are generally on 30 to 90 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. An allowance of $1.03 million (2007: provision recovery of $1.43 million) has been recognised in the Income Statement for the current year for specific debtors for which such evidence exists. These amounts have been measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received.

The ageing analysis of trade debtors is as follows:
0-30 days	326,229	347,979	-	-
Trade debtors past due but not considered impaired
31-60 days	47,548	13,799	-	-
61-90 days	6,567	4,089	-	-
+91 days	33,801	38,087	-	-
	87,916	55,975	-	-
Trade debtors past due and considered impaired
31-60 days	-	233	-	-
61-90 days	922	-	-	-
+91 days	6,714	10,849	-	-
	7,636	11,082	-	-

Total trade debtors	421,781	415,036	-	-

Notes to the Financial Statements for the year ended 30 June 2008

Note 5. Receivables (continued)

Note 5. Receivables(continued)
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
The ageing analysis of other current receivables is as follows:
0-30 days	31,561	29,310	-		-
+31 days not past due	33,616	28,391	14,266		13,148
	65,177	57,701	14,266		13,148
Other current receivables past due but not considered impaired
31-60 days	-	-	-		-
61-90 days	-	-	-		-
+91 days	10,675	6,207	-		-
	10,675	6,207	-		-
Other current receivables past due and considered impaired
31-60 days	-	-	-		-
61-90 days	-	-	-		-
+91 days	2,373	2,638	-		-
	2,373	2,638	-		-
Total other current receivables	78,225	66,546	14,266		13,148

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.

For terms and conditions relating to related party receivables refer to note 35.

Details regarding the effective interest rate and credit risk of non current receivables are disclosed in note 37.

Note 6. Livestock

Note 6. Livestock
Current
Fair value at start of the period (note 2(h))	55,121	71,898	-	-
Purchases during the year	244,882	220,777	-	-
Cost of sales during the year	(261,634)	(235,192)	-	-
Fair value increment/(decrement) in period	(1,346)	(2,362)	-	-
Fair value at the end of the period	37,023	55,121	-	-

At balance date 41,856 head of beef cattle (2007: 50,546) and nil sheep (2007: 1,465) are included in livestock.

Note 7. Forestry

Note 7. Forestry
Non Current
Fair value at start of the period (note 2(i))	21,421	17,164	-	-
Purchases during the year	526	1,172	-	-
Costs incurred in respect of forestry plantations	829	1,448	-	-
Fair value increment/(decrement) in period	2,940	1,637	-	-
Fair value at the end of the period	25,716	21,421	-	-

Physical quantity of forestry plantation timber at the end of the year is 550,000m[3] (2007: 495,000m[3] ).

Notes to the Financial Statements for the year ended 30 June 2008

Note 8. Inventories

		Consolidated	Consolidated
		2008	2007	2008	2007
		$000	$000	$000	$000
Current
Raw materials and bulk stores - at net realisable value		64,884	76,223	-	-
Work in progress - at cost		32,504	37,745	-	-
Finished goods	- at net realisable value	270,689	217,080	-	-
	- at fair value less cost to sell(i)	28,769	26,930	-	-
		299,458	244,010	-	-

		396,846	357,978	-	-
Non Current
Properties held	for development - at cost	-	1,638	-	-

(i) The Group’s commodities are measured at fair value less costs to sell.

Inventory write-downs recognised as an expense totalled $2.82 million (2007: $0.21 million) for the Group and $Nil for the parent entity (2007: $Nil).

Note 9. Derivative Financial Instruments

Note 9. Derivative Financial Instruments
Current
Asset
Forward exchange contracts	706	3,031	-	-
Non Current
Liability
Forward exchange contracts	52,366	41,731	51,456	40,589

Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to fluctuations in interest and foreign exchange rates.

For financial risk management policies of the Group, refer to note 37.

Note 10. Other Financial Assets

Note 10. Other Financial Assets
Non Current
Unlisted investments - available for sale:
Other entities, at cost(i)	27,232	38,736	60	60
Controlled entities, at cost	-	-	212,847	212,847
Provision for diminution	-	-	(8,315)	(8,315)
	27,232	38,736	204,592	204,592

(i) These investments are measured at cost as fair value cannot be reliably measured, due to the equity instruments not being traded in a liquid market environment.

Note 11. Interests in Associates and Joint Ventures

Note 11. Interests in Associates and	Joint Ventures
Associates
- listed	342,790	307,267	-	-
- unlisted	169,647	127,784	3,523	2,319
	512,437	435,051	3,523	2,319
Joint ventures
- unlisted	182,055	151,203	98,235	91,320
	694,492	586,254	101,758	93,639

Notes to the Financial Statements for the year ended 30 June 2008

Note 11. Interests in Associates and Joint Ventures (continued)

(a) Interests In Associates

(i) Details of material interests in associated entities are as follows:

Name of	Principal activity of	Principal activity of	Balance date	Ownership	Ownership	Consolidated Entity	Consolidated Entity
Associate		Associate	of Associate	Interest		Investment
				2008	2007	2008	2007
				%	%	$000	$000
Air International Thermal (US)
Holdings Inc(i)		Automotive	31 Dec	35	35	4,096	2,740
Air International Thermal (Belgium) NC	(ii)	Automotive	31 Dec	35	35	-	-
Futuris Automotive Interiors
(Anhui) Company Ltd(iii)		Automotive	31 Dec	70	70	12,114	14,586
Elders Rural Holdings Limited(iv)		Agribusiness	30 Jun	50	50	3,931	5,822
Australian Agricultural Company Ltd		Beef production	31 Dec	43	43	126,026	130,158
AWH Pty Ltd (formerly Australian
Wool Handlers Pty Ltd)		Wool processing	30 Jun	50	50	36,769	38,287
Forest Enterprises Australia Ltd		Forestry	30 Jun	31	31	105,149	95,577
ELF Pty Ltd (Hi-Fert Pty Ltd)		Fertiliser	30 Jun	50	50	71,436	62,619
Agricultural Land Trust
(formerly Westralia
Property Trust)		Land management	30 Jun	51	49	20,985	21,378
Webster Ltd		Agribusiness	30 Jun	33	27	21,164	15,721
iiNet Limited		Telecommunications	30 Jun	22	-	68,530	-
Other – non strategic investments						42,237	48,163
						512,437	435,051

All associates other than (i) to (iv) are Australian resident companies.

Air International Thermal (US) Holdings Inc is incorporated in the USA, Air International Thermal (Belgium) NC is incorporated in Belgium, Futuris Automotive Interiors (Anhui) Company Ltd is incorporated in Mauritius, and Elders Rural Holdings Limited is incorporated in New Zealand.

Futuris Automotive Interiors (Anhui) Company Ltd is considered a jointly controlled entity due to the control provided in the shareholders’ agreement to the minority parties.

Agricultural Land Trust has continued to be accounted for as an equity accounting investment on the basis that significant influence existed but not control. The trust has a distribution reinvestment plan which will apply in relation to the June 2008 distribution. Futuris will not take part in the reinvestment plan, therefore diluting ownership below 50%.

Notes to the Financial Statements for the year ended 30 June 2008

Note 11. Interests in Associates and Joint Ventures (continued)

Note 11. Interests in Associates and Joint Venture	s(continued)	s(continued)
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
(ii) Share of associates’ profit/(loss)
Revenue	1,003,236	831,711	6,816		7,022
Profit before income tax	45,717	31,794	1,528		681
Income tax (expense)/benefit	(12,882)	(6,528)	(324)		362
Profit after income tax	32,835	25,266	1,204		1,043
Outside minority equity interests	(469)	(262)	-		-
Share of net results of associates	32,366	25,004	1,204		1,043
(iii) Share of associates’ balance sheet
Current assets	462,365	382,805	3,560		2,899
Non current assets	879,233	732,960	952		711
	1,341,598	1,115,766	4,512		3,610
Current liabilities	311,593	248,393	538		583
Non current liabilities	423,269	303,344	147		65
	734,862	551,736	685		648
Net assets	606,736	564,029	3,827		2,962
(iv) Commitments and contingent liabilities
Share of associates’ capital expenditure
commitments (contracted)	7,279	1,711	-		-
Share of associates’ operating lease commitments	16,846	55,920	-		-
Share of associates’ contingent liabilities	-	1,414	-		-

(b) interests in joint ventures

(i) Interest in Elders Rural Bank Limited

The Group holds a 50% interest in Elders Rural Bank Limited whose principal activity is the provision of rural financial services. Elders Rural Bank Limited is controlled jointly by the parent entity and Bendigo and Adelaide Bank Limited. As Elders Rural Bank Limited is jointly controlled, the assets, liabilities and result of Elders Rural Bank Limited are not consolidated by the Group.

Notes to the Financial Statements for the year ended 30 June 2008

Note 11. Interests in Associates and Joint Ventures (continued)

Note 11. Interests in Associates and Joint Ventures(continued)
	Consolidated
	2008	2007
	$000	$000
a. Summary of balance sheet of Elders Rural Bank Limited
Finance receivables	3,639,631	3,240,992
Other assets	676,910	529,834
Total assets	4,316,541	3,770,826
Finance deposits	3,729,305	3,230,799
Other liabilities	273,216	281,525
Total liabilities	4,002,521	3,512,324
Net assets	314,020	258,502
Share of net assets	157,010	129,251
b. Summary of share of profit of Elders Rural Bank Limited
Profit before income tax	29,334	25,888
Tax expense	(8,803)	(7,761)
	20,531	18,127
Timingvariance in origination fees recognised,due to dissimilar accounting policies	-	(263)
Share of net results	20,531	17,864
c. Share of commitments and contingent liabilities of Elders Rural Bank Limited	20	20
(ii) Interest in other joint ventures
a. Share of other joint ventures’ balance sheet
Current assets	35,461	6,207
Non current assets	25,002	18,944
	60,463	25,151
Current liabilities	35,257	4,946
Non current liabilities	465	6
	35,722	4,953
Net assets	24,741	20,198
b. Share of other joint ventures’ profit or loss
Revenue	17,095	755
Profit before income tax	(1,050)	(1,662)
Income tax (expense)/benefit	(611)	-
Profit after income tax	(1,661)	(1,662)
Outside minority equity interests	-	-
Share of net results of joint venture	(1,661)	(1,662)
c. Share of commitments and contingent liabilities of other joint ventures	442	1,159

Notes to the Financial Statements for the year ended 30 June 2008

Note 12. Property, Plant and Equipment

Note 12. Property, Plant and Equipment
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Non Current
Freehold land - cost	13,727	15,141	-		-
Buildings
Cost	30,627	29,741	11		11
Accumulated depreciation and impairment	(4,934)	(4,277)	-		-
	25,693	25,464	11		11
Leasehold improvements
Cost	26,076	30,713	-		174
Accumulated amortisation and impairment	(12,493)	(12,889)	-		(149)
	13,583	17,824	-		25
Plant and equipment (owned)
Cost	489,428	376,514	225		842
Accumulated depreciation and impairment	(281,658)	(256,437)	-		(570)
	207,770	120,077	225		272
Plant and equipment (leased)
Cost	8,363	11,599	-		-
Accumulated amortisation and impairment	(2,478)	(3,474)	-		-
	5,885	8,125	-		-
Livestock Carrier
Cost	27,203	27,142	-		-
Accumulated depreciation and impairment	(8,378)	(5,966)	-		-
	18,825	21,176	-		-
Assets under construction - cost	27,498	12,641	-		-
Total property, plant and equipment	312,983	220,448	236		308

Refer to note 17 for interest bearing loans and borrowings secured by property, plant and equipment.

Notes to the Financial Statements for the year ended 30 June 2008

Note 12. Property, Plant and Equipment (continued)

Note 12. Property, Plant and Equipment(continued)
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Reconciliations of the carrying amounts for each class of property,
plant and equipment are set out below:
Freehold land
Carrying amount at beginning of year	15,141	10,767	-		-
Additions	153	3,859	-		-
Disposals	(2,036)	(257)	-		-
Reversal of impairment/(impairment)	989	-	-		-
Exchange fluctuations	14	-	-		-
Transfers	(534)	772	-		-
Carrying amount at end of year	13,727	15,141	-		-
Buildings
Carrying amount at beginning of year	25,464	14,733	11		11
Additions	3,648	9,403	-		-
Disposals	(6,138)	(678)	-		-
Depreciation	(1,799)	(1,376)	-		-
Impairment	-	(400)	-		-
Exchange fluctuation	395	1,530	-		-
Transfers	4,123	2,252	-		-
Carrying amount at end of year	25,693	25,464	11		11
Leasehold improvements
Carrying amount at beginning of year	17,824	16,079	25		2
Additions	1,677	4,536	-		28
Disposals	(334)	(130)	-		-
Amortisation	(2,485)	(2,252)	(25)		(5)
Acquisition through entity acquired	458	-	-		-
Reversal of impairment/(impairment)	(48)	-	-		-
Transfers	(3,509)	(409)	-		-
Carrying amount at end of year	13,583	17,824	-		25
Plant and equipment
Carrying amount at beginning of year	120,077	106,373	272		237
Additions	26,001	24,469	-		115
Acquisition through entity acquired	98,854	-	-		-
Disposals	(13,171)	(13,727)	-		(52)
Depreciation	(28,205)	(23,590)	(47)		(28)
Reversal of impairment/(impairment)	(6,334)	6,458	-		-
Transfers to Investment properties	-	(2,666)	-		-
Transfers	9,787	25,985	-		-
Exchange fluctuation	761	(3,225)	-		-
Carrying amount at end of year	207,770	120,077	225		272
Leased plant and equipment
Carrying amount at beginning of year	8,125	9,731	-		-
Additions	193	388	-		-
Disposals	(2,316)	(26)	-		-
Transfers	561	(405)	-		-
Amortisation	(678)	(1,563)	-		-
Carrying amount at end of year	5,885	8,125	-		-

Notes to the Financial Statements for the year ended 30 June 2008

Note 12. Property, Plant and Equipment (continued)

	Consolidated	Consolidated
	2008	2007	2008	2007
	$000	$000	$000	$000
Livestock Carrier
Carrying amount at beginning of year	21,176	25,533	-	-
Additions	61	1,053	-	-
Depreciation	(2,412)	(2,375)	-	-
Impairment	-	(3,035)	-	-
Disposals	-	-	-	-
Carrying amount at end of year	18,825	21,176	-	-
Assets under construction
Carrying amount at beginning of year	12,641	15,129	-	-
Additions	24,017	14,436	-	-
Disposals	(39)	(1,150)	-	-
Exchange fluctuation	43	(19)	-	-
Reversal of impairment/(impairment)	(777)	-	-	-
Transfers	(8,387)	(15,755)	-	-
Carrying amount at end of year	27,498	12,641	-	-

Note 13. Investment Properties

Note 13. Investment Properties
Non Current
Investment properties as per valuation	256,417	248,257	-	-
Investment properties - at fair value
Carrying amount at beginning of year	248,257	192,591	-	-
Transfer from other property, plant, equipment	-	2,666	-
Fair value adjustments, net	22,324	15,025	-	-
Acquisition of investment properties	77,810	47,003	-	-
Disposal of investment properties	(92,070)	(3,540)	-	-
Foreign exchange variation	96	(5,488)	-	-
Carrying amount at end of year	256,417	248,257	-	-

The fair value represents the amount at which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction at the date of valuation, in accordance with Australian Valuation Standards.

Investment properties consist of plantation land and certain land and buildings within the Group.

Plantations are initially measured at cost, including transaction costs. When sub-leases are granted under managed investment schemes to Growers, the basis of valuation is changed to fair value. The following basis is used to assess fair value at each balance date:

current market value of land is assessed;
land price increases estimated to year after harvest at 2% (2007: 0.5%) real increase;
expected future receivables from rental income are assessed;
cash flows are discounted at 9%.

Land and buildings are stated at fair value, which has been determined based on valuations performed by Robert C Spiess as at 30 June 2007. Robert C Spiess are independent, certified property valuers and developers.

Notes to the Financial Statements for the year ended 30 June 2008

Note 14. Intangibles

Note 14. Intangibles
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Non Current
Patents, trade marks and licences - (gross carrying amount)	12,623	16,254	-		-
Accumulated amortisation and impairment	(7,295)	(7,011)	-		-
Net carryingamount	5,328	9,243	-		-
Goodwill - (gross carrying amount)	225,444	206,199	-		-
Accumulated impairment	(17,558)	(9,501)	-		-
Net carryingamount	207,886	196,698	-		-
Brand names - (gross carryingamount)	60,519	60,400	-		-
Development costs, rent roll & other - (gross carrying amount)	37,242	22,714	-		-
Accumulated amortisation and impairment	(4,139)	(732)	-		-
Net carryingamount	33,103	21,982	-		-

Total intangibles	306,836	288,323	-		-
Reconciliation of movement:
Patents, trade marks and licences
As at 1 July	9,243	9,338	-		-
Additions	-	3,427	-		-
Disposal /Transfers	(2,866)	(1,956)	-		-
Amortisation/Impairment	(1,049)	(1,566)	-		-
As at 30 June	5,328	9,243	-		-
Goodwill
As at 1 July	196,698	198,420	-		-
Acquisition of subsidiary	14,615	-	-		-
Additions	8,721	2,457	-		-
Impairment	(6,484)	(3,311)	-		-
Disposal /Transfers	(5,664)	(868)	-		-
As at 30 June	207,886	196,698	-		-
Brand names
As at 1 July	60,400	60,400	-		-
Acquisition of subsidiary	228	-	-		-
Impairment	(109)	-	-		-
As at 30 June	60,519	60,400	-		-
Development costs, rent rolls and other
As at 1 July	21,982	2,483	-		-
Additions	16,754	20,476	-		-
Disposal /Transfers	1,232	(686)	-		-
Amortisation/Impairment	(6,865)	(291)	-		-
As at 30 June	33,103	21,982	-		-

Refer Note 2 (o) and (p) for the accounting policy in relation to goodwill and other intangible assets.

The brand names are valued in the accounts at $60.52 million and are not being amortised. An independent valuation, dated 30 June 2005, is currently being used to support this carrying amount.

Goodwill acquired through business combinations and acquisitions has been allocated to the respective cash generating unit (CGU) for impairment testing based on a value in use calculation.

The discount rate applied to the cash flow projections is 14.5% pre-tax (2007: 14.1%).

Notes to the Financial Statements for the year ended 30 June 2008

Note 15. Other Assets

Note 15. Other Assets
	Consolidated			Parent
	2008	2007	2008	2007
	$000	$000	$000	$000
Current
Insurance deferred acquisition costs	27,019	25,373	-	-
Reinsurance premium ceded	84,550	67,616	-	-
Deferred expenses	1,919	3,744	-	-
Prepayments	18,790	15,848	-	-
	132,277	112,581	-	-
Non Current
Deferred design and development expenditure
- as at 1 July	64,936	59,153	-	-
- current period costs	(11,920)	5,783	-	-
	53,016	64,936	-	-
Accumulated amortisation	(25,958)	(38,083)	-	-
	27,058	26,853	-	-
Note 16. Payables
Current
Trade creditors(i)	458,960	486,837	-	-
Other creditors and accruals	274,905	186,288	4,450	11,818
Unearned insurance premium	193,227	168,443	-	-
Unearned forestry income	39,634	47,999	-	-
Loans from controlled entities(ii)	-	-	295,529	425,501
	966,726	889,567	299,979	437,319

(i) Trade and other creditors are non interest bearing and are normally settled on 30 day terms.

(ii) Loans from controlled entities are interest bearing based on commercial rates and repayable on demand.

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

Details regarding the effective interest rate and credit risk of non current receivables are disclosed in note 37.

Note 17. Interest Bearing Loans and Borrowings

Current
Bank overdraft	-	-	-	33,658
Secured loans (a)	30,704	28,749	-	-
Unsecured loans	133,006	99,057	-	-
Lease liabilities (b)	1,196	3,575	-	-
Convertible notes (c) (d)	-	82,823	-	82,823
	164,905	214,204	-	116,481
Non Current
Secured loans (a)	22,107	6,298	-	-
Unsecured loans	301,501	100,000	100,000	100,000
Lease liabilities (b)	6,435	4,992	-	-
Unsecured notes (e)
- November 2009	48,294	53,233	48,294	53,233
- November 2014	30,184	33,271	30,184	33,271
- May 2015	142,136	156,672	142,136	156,672
	550,657	354,466	320,614	343,176

Notes to the Financial Statements for the year ended 30 June 2008

Note 17. Interest Bearing Loans and Borrowings (continued)

(a) Secured loans are secured by various fixed and floating charges over the assets of the controlled entities concerned.
(b) Lease liabilities are secured by a charge over the leased assets.
(c) 62,500,000 subordinated unsecured redeemable convertible notes were issued during the 2000 year. These notes had a face value of $2.40 each and bore interest at a coupon of 7% per annum. The convertible notes were redeemed on 31 December 2007.
(d) With the adoption of AASB139 Financial Instruments: Recognition and Measurement and AASB 132 Financial Instruments: Disclosure and Presentation from 1 July 2005 the convertible notes were disclosed with both a liability and equity component. Refer note 2 (y).
(e) Unsecured notes are issued in the United States of America financial markets and are denominated in United States dollars. Terms of maturity vary between November 2009 and May 2015 and interest rates vary between 5.67% and 8.48%. The notes have been swapped into Australian dollars as noted in Note 37(g).
(f) The carrying amount of the Group’s current and non current borrowings approximate their fair value. The USPP debt is fair valued to the extent hedged.
(g) During the current and prior years, there were no defaults or breaches of any of the loans.
(h) Details regarding the liquidity, effective interest rate and credit risk of interest bearing liabilities are disclosed in note 37.
(i) Financing arrangements

The Group has access to the following bank financing facilities with a number of financial institutions.

	Consolidated	Consolidated	Consolidated		Parent
	Accessible	Drawn	Unused	Accessible	Drawn	Unused
	$000	$000	$000	$000	$000	$000
2008
Multi-option facilities	975,000	428,502	546,498	100,000	100,000	-
Other	84,046	58,811	25,235	-	-	-
2007
Multi-option facilities	850,000	228,743	621,257	100,000	100,000	-
Other	37,131	37,131	-	-	-	-

$100 million (2007: $100 million) of the multi option facilities are provided on a five year bullet basis with ability to refresh (current maturity December 2012) and are subject to compliance with various banking covenants.
$475 million (2007: $475 million) of the multi option facilities are provided on a three year evergreen basis with annual review/ extension (current maturity December 2010) and are subject to compliance with various banking covenants.
$400 million (2007: $275 million) of the multi option facilities are provided on a 364 day evergreen basis with biannual review/ extension (current maturity June 2009) and are subject to compliance with various banking covenants. A further $100 million is available for leasing, contingent instruments, and other facilities.
$100.8 million (2007: $37.1 million) being the balance of the facilities are provided to controlled entities on varying terms.

Note 18. Provisions

Note 18. Provisions
	Consolidated	Parent
	2008	2008
	$000	$000
Employee entitlements (a)
As at 1 July	71,312	-
Arising during year	20,525	-
Utilised	(20,770)	-
Unused amounts reversed	(2,880)	-
Discount rate adjustment	(628)	-
As at 30 June	67,559	-
Insurance claims (b)
As at 1 July	184,357	-
Arising during year	216,419	-
Utilised	(208,778)	-
Discount rate adjustment	(713)	-
As at 30 June	191,285	-

Notes to the Financial Statements for the year ended 30 June 2008

Note 18. Provisions (continued)

Note 18. Provisions(continued)
	Consolidated		Parent
	2008		2008
	$000		$000
Warranty (d)
As at 1 July	5,997		-
Arising during year	3,234		-
Utilised	(2,248)		-
Unused amounts reversed	(4,261)		-
Discount rate adjustment	-		-
As at 30 June	2,722		-
Restructuring
As at 1 July	4,811		-
Arising during year	7,242		-
Utilised	(5,164)		-
Unused amounts reversed	-		-
As at 30 June	6,889		-
Redundancy
As at 1 July	2,319		-
Arising during year	1,027		-
Utilised	(2,429)		-
Unused amounts reversed	-		-
As at 30 June	917		-
Make good provision (c)
As at 1 July	5,532		-
Arising during year	404		-
Utilised	-		-
Unused amounts reversed	(176)		-
Discount rate adjustment	546		-
As at 30 June	6,306		-
Other
As at 1 July	18,436		7,000
Arising during year	21,790		6,450
Utilised	(12,579)		(6,456)
Unused amounts reversed	(4,040)		(544)
Discount rate adjustment	-		-
As at 30 June	23,607		6,450
	2008	2007	2008	2007
Total Current	208,136	204,455	6,450	7,000
Total Non Current	91,149	88,309	-	-
	299,285	292,764	6,450	7,000

(a) All employee entitlements for parent entity employees are recognised in a controlled entity’s balance sheet.
(b) The weighted average term to settlement from balance date of outstanding claims is expected to be less than 12 months. Refer to note 27 for more details about Insurance activities for the Group.
(c) A make good provision is recorded at the commencement of a lease or operation being the present value of restoration obligations, while the cost of future restoration is capitalised as part of the asset. The capitalised cost is depreciated over the life of the lease or project and the provision is increased as the discounting of the liability unwinds.
(d) A provision is recognised for expected warranty claims on products sold during the last five years, based on past experience of the level of repairs and returns. It is expected that most of these costs will be incurred in the next financial year and all will have been incurred within two years of the balance sheet date. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the two-year warranty period for all products sold.

100

Notes to the Financial Statements for the year ended 30 June 2008

Note 19. Contributed Equity

Note 19. Contributed Equity
	Consolidated			Parent
	2008	2007	2008	2007
	$000	$000	$000	$000
Issued and paid up capital
780,545,644 ordinary shares (2007: 735,640,128)	694,118	608,493	694,118	608,493
Movements during year:		2008		2007
	Number	$000	Number	$000
Opening balance	735,640,128	608,493	720,911,089	577,717
Conversion of options	1,387,500	2,415	1,670,000	2,571
Scrip consideration	-	-	1,326,335	2,984
Issued capital, employee share plan	5,746,830	11,453	5,451,257	11,542
Dividends underwritten	24,609,680	46,815	-	-
Dividend reinvestment plan	12,757,050	23,988	2,939,852	5,793
Convertible notes converted	404,456	954	3,341,595	7,886
Closing balance	780,545,644	694,118	735,640,128	608,493

Effective 1 July 1998, the Corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly the Company does not have authorised capital nor par value in respect of its issued capital.

Capital management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

Management are constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

In accordance with the APRA requirements of Elders Insurance Limited, there is an imposed Minimum Capital Requirement (“MCR”) of 150%, Management has a target MCR of 175%, and manages capital to that level by paying dividends or obtaining capital from the parent (Refer to Note 2). Management monitor the achievement of the MCR Management Target on a monthly basis, in addition the calculation is incorporated into the Budget and is monitored as part of that budgeting process. During the year Management has complied with their target MCR of 175%.

Note 20. Convertible Notes

Note 20. Convertible Notes
Convertible notes
Issued	-	54,263	-	54,263

The convertible notes were repaid on 3 January 2008. Note 17 contains the terms and conditions that were applicable to the convertibles notes.

Note 21. Hybrid Equity

Note 21. Hybrid Equity
Hybrid equity
Issued and fully paid up	145,151	145,151	145,151	145,151

1,500,000 perpetual, subordinated, convertible unsecured notes (“Hybrids”) were issued in April 2006 at $100 each. If the Board resolves to pay them, distributions will be paid quarterly in arrears on 31 March, 30 June, 30 September and 31 December each year. Distributions are frankable. Until 30 June 2011 (the first remarking date) the distribution rate will be the 3 month bank bill swap rate plus a margin of 2.20% pa. On a remarketing date, Futuris has discretion to either redeem the Hybrid for cash or convert the Hybrid into ordinary shares. Alternatively, Futuris can accept a one-off step up of 250 bps in margin or pursue a remarketing process to set a new margin.

101

Notes to the Financial Statements for the year ended 30 June 2008

Note 22. Reserves

Note 22. Reserves
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Asset revaluation reserve
Opening balance	-	85,880	-		-
Change in recognition of land policy	-	(85,880)	-		-
Closingbalance	-	85,880	-		-
Business combination reserve
Opening balance	-	-	-		-
Arisingduringthe year	27,501	-	-		-
Closingbalance	27,501	-	-		-
Employee equity benefits reserve
Opening balance	(24,780)	(21,569)	2,426		1,122
Current year share option expense	734	2,419	434		1,912
Current year share plan expense	1,715	1,307	88		51
Other share plan transfers	(1,274)	(6,937)	(326)		(659)
Closingbalance	(23,605)	(24,780)	2,622		2,426
Foreign currency translation reserve
Opening balance	(8,362)	(4,211)	(74)		39
Currency translation differences	3,541	(4,151)	-		(113)
Currency translation differences realised	74	-	74		-
Closingbalance	(4,747)	(8,362)	-		(74)
Net unrealised gains reserve
Opening balance	492	(1,648)	2,003		(1,648)
Application of AASB 132 and 139	3,618	-	-		-
Cash flow hedge reserve	(203)	2,140	7,638		3,651
Closingbalance	3,907	492	9,641		2,003
Share of reserve for losses in joint venture
Opening balance	10,242	5,391	-		-
Current year movement	2,892	4,851	-		-
Closingbalance	13,134	10,242	-		-

Total Reserves	16,190	(22,408)	12,263		4,355

Nature and purpose of reserves:

Asset revaluation reserve

The asset revaluation reserve is used to record increases in the fair value of assets held at fair value by the Group or its associates and decreases to the extent that such decreases relate to an increase on the same asset previously recognised in equity. This reserve was reversed in the prior year.

Business combination reserve

This reserve is used to record fair value adjustments to those assets acquired by the Group in a business combination.

Employee equity benefits reserve

This reserve is used to record the value of equity benefits (both options and share loans) provided to employees and Directors as part of their remuneration.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.

Net unrealised gains reserve

This reserve records fair value changes on available-for-sale investments and the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Share of reserve for losses in joint venture

Elders Rural Bank (ERB) has APRA reporting requirements for a general provision for credit losses to be recognised directly in equity. The Group therefore is required to recognise the proportionate interest in ERB’s reserve for credit losses directly in equity.

102

Notes to the Financial Statements for the year ended 30 June 2008 Note 23. Retained Earnings

Note 23. Retained Earnings
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Retained earnings at the beginning of the financial year	403,063	371,367	71,011		73,383
Change in accounting policy in associate (note 2 (a))	-	5,389	-		-
Net profit attributable to members	36,447	105,430	109,976		71,900
Dividends provided for or paid	(82,627)	(74,272)	(80,578)	(74,272)
Movements in equity (refer to Statement of Changes in Equity)	(2,892)	(4,851)	-		-
Retained earnings at the end of the financial year	353,991	403,063	100,409		71,011
Note 24. Dividends
a) Dividends proposed
Fully franked dividend of 5.5¢ per share
(2007: 5.5¢ per share, fully franked)	42,930	40,463	42,930		40,463
This fnal dividend was declared by Directors after year end
and is payable on 28 October 2008.
b) Dividends paid during the year
Current year interim
- fully franked dividend of 4¢ per share (2007: 4¢ per share, partly franked)	30,515	29,233	30,515		29,233
Previous year final
- fully franked dividend of 5.5¢ per share (2007: 5¢ per share, fully franked)	40,284	36,160	40,284		36,160
Hybrid distribution fullyfranked	9,779	8,879	9,779		8,879
	80,578	74,272	80,578		74,272
Subsidiary Equity dividends on ordinary shares:
Dividends paid to external parties during the year
- Amcom fully franked dividend paid November 2007 of 0.5¢ per share
andpaid April 2008 of 0.3¢per share	2,049	-	-		-
	82,627	74,272	80,578		74,272

c) Franking credit balance

The franked portions of the dividends recommended after 30 June 2008 will be out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2008.

	Parent	Parent
	2008	2007
	$000	$000
Franking credits available for subsequent financial years
based on tax rate of 30% (2007: 30%)	22,501	33,956

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

(a) franking credits that will arise from the payment of the amount of the provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date;
(d) franking credits that may be prevented from being distributed in subsequent financial years; and
(e) franking credits that have been added to the Parent due to the acquisition of Integrated Tree Cropping Ltd.

The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of:

(18,399) (17,313)

103

Notes to the Financial Statements for the year ended 30 June 2008

Note 25. Minority Interests

Note 25. Minority Interests
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Minority interests comprise interests in the following items:
Contributed equity	58,323	7,275	-		-
Retained earnings	28,403	764	-		-
	86,726	8,039	-		-

Note 26. Notes to the Cash Flow Statement

Note 26. Notes to the Cash Flow Statement
(a) Reconciliation of net profit /(loss) after tax to net cash flows	from operations
Profit/(loss) after income tax expense	36,447	105,430	109,976	71,900
Depreciation and amortisation	42,584	37,589	72	33
Share of associates and joint venture (profit)	(51,236)	(43,151)	(1,204)	(1,043)
Dividends from associates	33,527	33,843	12,085	11,630
Dividend from controlled entities	-	-	(143,000)	(221,850)
Interest income from controlled entities	-	-	(20,509)	(30,121)
Fair value adjustments to financial assets	(26,094)	(15,025)	(783)	-
Impairment of assets	21,955	269	-	-
Movement in provision for:
- doubtful debts	(3,711)	(2,035)	-	-
- employee entitlements	(4,492)	4,102	-	-
- other provisions	11,014	7,372	(550)	(126)
Deferred tax asset	(635)	(3,138)	(29,234)	(3,402)
Deferred income tax	(4,063)	(7,770)	(2,258)	6,023
Provision for tax	(29,341)	35,241	(38,026)	4,248
Net profit/(loss) on sale of non current assets	2,369	(6,218)	-	(3,370)
Net profit/(loss) on sale of controlled entity	18,525	(8,920)	-	212,911
Cost of share based payments	2,449	3,726	522	1,963
Other non cash items	7,429	(13,055)	(7,812)	-
Operational cash flow generated	56,727	128,260	(120,721)	48,796
Change in operating assets and liabilities net of effects of
acquisitions and disposals of entities and the consolidation
of controlled entities:
- (Increase)/decrease in receivables and other assets	(136,640)	(30,230)	26,378	1,380
- (Increase)/decrease in inventories	(12,395)	(21,145)	-	-
- Increase/(decrease) in payables and accruals	78,214	8,140	(7,368)	5,539
Net cash flows from operating activities	(14,094)	85,025	(101,711)	55,715

(b) Non cash financing and investing activities

During the financial year the following non cash transactions occurred. These transactions are not reflected in the cash flow statement:

the issue of 507,336,079 ordinary shares for the value of $24.0 million under the terms of the dividend reinvestment plan (2007: 2,939,852 ordinary shares for $5.8 million).
no receivables were settled by way of conversion into an equity interest in 2008 (2007: $20.5 million).

104

Notes to the Financial Statements for the year ended 30 June 2008

Note 26. Notes to the Cash Flow Statement (continued)

Note 26. Notes to the Cash Flow Stateme	nt(continued)	nt(continued)
	Consolidated			Parent
	2008	2007	2008	2007
	$000	$000	$000	$000
Cash And Cash Equivalents
Cash at bank and in hand	244,043	243,878	42,162	-
Short-term deposits	-	432	-	-
	244,043	244,310	-	-
Bank overdraft (note 18)	-	-	42,162	(33,658)
	244,043	244,310	42,162	(33,658)

Cash at year end includes $158.15 million (2007: $177.0 million) of insurance cash, the use of which is subject to restrictions in accordance with the Insurance Act and the Insurance (Agents and Brokers) Act. Cash also includes $17.31 million (2007: $6.16 million) of cash held in trust on behalf of certain controlled entities.

Note 27. Results of Insurance Activities

The summary of financial position below reflects the contribution to the Group of the general insurance activities of Elders Insurance Limited (EIL). EIL is a wholly owned entity of the parent entity and is subject to prudential supervision by the Australian Prudential Regulatory Authority.

Profit from ordinary activities includes the following results from general insurance activities:

Direct premium revenue	339,037	316,488	-	-
Outward reinsurance premiums	(145,893)	(134,234)	-	-
	193,144	182,254	-	-
Claims expense	(243,975)	(235,901)	-	-
Reinsurance and other recoveries	121,432	121,629	-	-
Claims handlingcosts	(6,438)	(6,020)	-	-
Net claims incurred (a)	(128,981)	(120,292)	-	-
Underwriting expenses
- Amortisation of deferred acquisition costs	(64,254)	(53,747)	-	-
- Recurring acquisition costs	(15,495)	(14,156)	-	-
- Other underwritingcosts	(3,279)	(2,883)	-	-
	(83,028)	(70,786)	-	-
Other underwritingrevenue	35,709	33,107	-	-
Net underwriting result	16,844	24,283	-	-
Investment revenue	11,886	10,733	-	-
General and administration expenses	(12,801)	(11,312)	-	-
Profit from ordinary activities before income tax	15,929	23,704	-	-
Income tax (expense)	(4,880)	(7,130)	-	-
Net profit	11,049	16,574	-	-

105

Notes to the Financial Statements for the year ended 30 June 2008

Note 27. Results of Insurance Activities (continued)

(a) Net claims incurred comprises:

		2008			2007
	Current	Prior	Total	Current	Prior	Total
	Year	Year		Year	Year
	$000	$000	$000	$000	$000	$000
Gross claims incurred and
related expenses - undiscounted	(279,792)	27,086	(252,706)	(256,333)	12,168	(244,165)
Reinsurance and other recoveries
- undiscounted	133,677	(10,371)	123,306	131,426	(9,251)	122,175
Net claims incurred - undiscounted	(146,115)	16,715	(129,400)	(124,907)	2,917	(121,990)
Discount and discount movement
- gross claims	9,409	(7,116)	2,293	7,310	(5,067)	2,243
Discount and discount movement
- reinsurance and other recoveries	(5,004)	3,130	(1,874)	(3,377)	2,832	(545)
Net discount movement	4,405	(3,986)	419	3,933	(2,235)	1,698
Total direct claims incurred	(141,710)	12,729	(128,981)	(120,974)	682	(120,292)

Process for Determining Risk Margin

The overall risk margin was determined allowing for diversification between different APRA business classes and the relative uncertainty of the outstanding claims estimate for each class. Uncertainty was analysed for each class taking into account potential uncertainties relating to the actuarial models and assumptions, the quality of underlying data used in the models, the general insurance environment and the impact of legislative reform.

The assumptions regarding uncertainty for each class were applied to the net central estimates and the results were aggregated, allowing for diversification in order to arrive at an overall provision which is intended to have a 90% probability of sufficiency.

Risk Margins Applied (Net of Diversification)

Risk Margins Applied (Net of Diversification)
	2008	2007
	%	%
Long Tail Classes	27.1	25.7
Short Tail Classes	15.0	13.3
Overall Margin Allowingfor Diversification	19.9	18.7
	Consolidated
	2008	2007
	$000	$000
Outstanding Claim Liabilities
Central Estimate	166,104	160,824
Risk Margin	34,370	30,941
Claims HandlingCosts	8,648	8,134
	209,122	199,899
Discount to Present Value	(17,836)	(15,543)
Liability For Outstanding Claims	191,286	184,356
Current	128,209	122,581
Non Current	63,077	61,775
Total Outstanding Claims	191,286	184,356

106

Notes to the Financial Statements for the year ended 30 June 2008

Note 27. Results of Insurance Activities (continued)

Reconciliation of Movement in Net Discounted Outstanding Claims Liability

	Consolidated	Consolidated
	2008	2007
	$000	$000
At 1 July	85,425	72,928
Increase in Net Claims Incurred Current Accident Year	141,711	120,974
Movements in Prior Year Claims Provision
- Discount	(186)	(273)
- Risk Margin	240	-
- Other Movements in Prior Year	(12,784)	(409)
Incurred Claims Recognised in the Income Statement	128,981	120,292
Net Claim Payments	(122,783)	107,795
At 30 June	91,622	85,425

Note 28. Expenditure Commitments

Note 28. Expenditure Commitments
	Consolidated			Parent
	2008	2007	2008		2007
	$000	$000	$000		$000
Lease Commitments
Finance leases:
- not later than one year	1,520	3,972	-		-
- later than one year but not later than five years	7,047	5,717	-		-
- later than five years	-	208	-		-
Minimum lease payments	8,567	9,897	-		-
Future finance charges	(936)	(1,330)	-		-
Lease liabilities	7,631	8,567	-		-
Disclosed in the financial statements as:
- current (note 17)	1,196	3,575	-		-
- non current (note 17)	6,435	4,992	-		-
	7,631	8,567	-		-
Operating leases:
- not later than one year	66,740	62,327	574		4,093
- later than one year but not later than five years	167,936	162,786	2,297		22,481
- later than five years	132,931	132,971	2,871		15,467
	367,607	358,084	5,742		42,041

The Group has finance leases and hire purchase contracts for various items of plant and machinery with a carrying amount of $5.89 million (2007: $8.13 million). These lease contracts expire within 1 to 4 years. The leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease.

The Group leases the majority of its branch networks and capital city properties under operating leases. The lease commitments comprise base amounts adjusted where necessary for escalation clauses primarily based on inflation rates. Leases generally provide the Group with a right of renewal at the end of the lease term. The extent of lease commitments is a factor that is considered in the calculation of certain borrowing covenants.

Capital Expenditure Commitments

Capital Expenditure Commitments
Capital expenditure contracted for but not otherwise provided for
in these accounts:
- not later than one year	38,878	30,505	-	-
- later than one year but not later than five years	-	-	-	-
- over five years	-	-	-	-
	38,878	30,505	-	-

107

Notes to the Financial Statements for the year ended 30 June 2008

Note 29. Contingent Liabilities

Note 29. Contingent Liabilities
	Consolidated			Parent
	2008	2007	2008	2007
	$000	$000	$000	$000
Contingent liabilities at balance date, not otherwise provided for in these
financial statements, are as follows:
Claims lodged for damages resulting from the use of products or services	3,258	2,982	-	-
Discounted Trade Bills	550	1,250	-	-
Guarantees issued to third parties arisingin the normal course of business	93,881	66,451	93,881	66,451
	97,689	70,683	93,881	66,451

Unquantifiable contingent liabilities

(a) The Group has contingent obligations in respect of leased premises, which have been sub-let to associated entities.
(b) Benefits are payable under service agreements with executive directors and officers of the Group under certain circumstances such as termination or achievement of prescribed performance hurdles.
(c) The consolidated entity has entered into an agreement in respect to an associated entity within the automotive segment of the business, which includes a put option for the remaining 50% of the equity not held by the Futuris Group, contingent on certain events occurring, including the takeover of all or part of the Group.

Other contingent liabilities

Disputed tax assessments

As previously disclosed the Group has received income tax assessments from the Australian Taxation Office (“ATO”) increasing tax payable on the disposal of the Building Products division in 1998. The Group has appealed the assessments. A separate challenge to the validity of one of the assessments was ultimately unsuccessful as determined by the High Court in its judgement handed down on 31 July 2008. Management consider the current provisioning in relation to this matter to be adequate and will vigorously defend the assessments through the appeal process.

Also, as previously disclosed, the Group has received income tax assessments disallowing capital losses arising on the disposal of the Elders wool handling business in 1998 and utilised during the years 1998 to 2003. The Group continues to be of the view that current provisioning is adequate in respect of these assessments. The Group is confident of the position it has adopted and intends to defend vigorously the losses claimed.

During the period 22 May 2008 to 31 July 2008 several subsidiaries of the Company received assessments denying the utilisation of losses arising from the funding activities of the Group’s intercompany financier. The assessments are attributable to the 2003 year. In total, the primary tax assessed was $14.7m, penalties of $3m and interest of $7m. A provision has been raised against this potential exposure. The Group is confident of the position it has adopted and intends to defend vigorously the deductions claimed.

Other guarantees

(a) As disclosed in Note 33, the parent entity has entered into a Deed of Cross Guarantee with certain controlled entities. The effect of this Deed is that Futuris Corporation Limited and each of these controlled entities has guaranteed to pay any deficiency of any of the companies party to the Deed in the event of any of those companies being wound up.
(b) The parent entity and certain entities in the Group are parties to various guarantees and indemnities pursuant to bank facilities and operating lease facilities extended to the Group and commitments under unsecured notes.

Note 30. Segment Information

The Group is organised and managed separately according to the nature of the products and services provided. The consolidated entity comprises the following distinguishable components; Rural Services, Financial Services, Forestry, Automotive Components and Investment & Other.

Rural Services include the provision of a range of agricultural products and services through a common distribution channel and its associate Australian Agricultural Company Ltd.

Financial Services include the provision of a range of financial services through a common distribution channel and the joint venture Elders Rural Bank.

Forestry includes the Group’s interests in forestry plantations and processing.

Automotive Components include the manufacturing and sales of automotive components of which the key components are seating, heating ventilating and air-conditioning systems.

108

Notes to the Financial Statements for the year ended 30 June 2008

Note 30. Segment Information (continued)

In 2007, Property includes the sale and development of land and commercial developments. During the 2007 fiscal year, the Property division was sold, therefore there is no June 2008 segment result disclosed for Property.

The Investment & Other segment includes the general investment activities not associated with the other business segments and the administrative corporate office activities, this includes the Rail and Bus division and the Telecommunications division.

Segment results have been determined on a consolidated basis and represent the earnings before corporate net borrowing costs and income tax expense.

The Group operates predominantly within Australia. All other geographical operations are not material to the financial statements.

Business Segments

	Rural	Financial	Forestry	Automotive	Investment	Total
	Services	Services		Components	& Other
2008	$000	$000	$000	$000	$000	$000
External sales	2,472,331	218,534	191,344	384,241	45,665	3,312,115
Other revenue	13,965	49,909	27,714	21,374	19,796	132,758
Share of net profit/(loss) of associates	9,460	20,531	12,200	2,269	6,776	51,236
Total revenue	2,495,756	288,974	231,258	407,884	72,237	3,496,109
Underlying EBIT	57,537	22,407	61,351	26,168	4,250	171,713
Significant items	(36,668)	-	87	-	(41,148)	(77,729)
Segment Result	20,869	22,407	61,438	26,168	(36,898)	93,984
Earnings before interest, tax,
depreciation & amortisation	36,201	23,019	66,634	42,268	(31,554)	136,568
Depreciation & amortisation	(15,332)	(612)	(5,196)	(16,100)	(5,344)	(42,584)
Segment Result	20,869	22,407	61,438	26,168	(36,898)	93,984
Corporate net interest expense						(56,909)
Profit from ordinary activities
before tax						37,075
Segment assets	1,190,632	711,580	734,380	258,719	371,892	3,267,203
Unallocated assets
(includingtax assets)	-	-	-	-	-	148,714
Segment liabilities	583,383	465,782	71,337	96,071	101,803	1,318,376
Unallocated liabilities
(includingtax liabilities)	-	-	-	-	-	811,549
Carrying value of equity
investments	296,771	156,943	106,202	40,239	94,337	694,492
Acquisition of property, plant
& equipment, intangible
assets and other non current
assets, including design
and development	67,104	28,333	88,601	17,145	40,880	242,063
Non cash expenses other
than depreciation and
amortisation	16,852	9	-	(6,540)	2,446	12,767
Profit/(loss) on sale
of investments	(1,816)	-	-	-	-	(1,816)

109

Notes to the Financial Statements for the year ended 30 June 2008

Note 30. Segment Information (continued)

Business Segments

	Rural	Financial	Forestry	Automotive	Property	Investment	Total
	Services	Services		Components		& Other
2007	$000	$000	$000	$000	$000	$000	$000
External sales	2,309,531	203,961	173,850	329,871	137,719	73,579	3,228,511
Other revenue	29,281	12,272	20,575	16,334	407	18,331	97,200
Share of net profit/(loss)
of associates	12,844	17,864	11,080	(1,242)	-	5,374	45,920
Total revenue	2,351,656	234,097	205,505	344,963	138,126	97,284	3,371,631
Underlying EBIT	56,289	27,192	61,644	9,520	21,476	(6,707)	169,414
Significant items	-	-	-	-	8,920	(9,566)	(646)
Segment Result	56,289	27,192	61,644	9,520	30,396	(16,273)	168,768
Earnings before interest, tax,
depreciation & amortisation	71,501	27,259	66,614	27,752	30,450	(17,219)	206,357
Depreciation & amortisation	(15,212)	(67)	(4,970)	(18,232)	(54)	946	(37,589)
Segment Result	56,289	27,192	61,644	9,520	30,396	(16,273)	168,768
Corporate net interest expense							(40,024)
Profit from ordinary activities
before tax							128,744
Segment assets	1,134,287	615,490	682,210	197,639	-	337,346	2,966,972
Unallocated assets
(includingtax assets)	-	-	-	-	-	-	141,567
Segment liabilities	566,807	390,662	81,165	82,428	-	62,412	1,183,474
Unallocated liabilities
(includingtax liabilities)	-	-	-	-	-	-	728,464
Carrying value of equity
investments	274,431	129,497	95,630	18,354	-	68,342	586,254
Acquisition of property, plant
& equipment, intangible
assets and other non current
assets, including design
and development	39,768	2,688	93,180	38,148	-	6,244	180,028
Non cash expenses other
than depreciation and
amortisation	(2,262)	-	612	(7,732)	9	(197)	(9,570)
Profit/(loss) on sale
of investments	(146)	-	-	-	-	3,371	3,225

110

Notes to the Financial Statements for the year ended 30 June 2008

Note 31. Supplementary Statement of Net Debt by Segment

	Rural	Financial	Forestry	Automotive	Investment	Total
	Services	Services		Components	& Other
2008	$000	$000	$000	$000	$000	$000
Earnings before interest & tax	20,869	21,957	61,438	25,548	(35,828)	93,984
Depreciation and amortisation	15,332	612	5,196	16,100	5,344	42,584
Equity accounted earnings	(9,460)	(20,531)	(12,200)	(2,269)	(6,776)	(51,236)
Dividends received from associates	6,394	12,085	2,490	4,185	2,994	28,148
(Profit)/loss on sale of property, plant
& equipment	(1,133)	(2)	(998)	726	1,960	553
Loss on sale of investments	1,816	-	-	-	-	1,816
Loss on sale of investment properties	-	-	479	-	-	479
Discount on acquisition	(1,743)	-	(1,351)	-	(6,042)	(9,136)
Interest (net)	(354)	13,312	(543)	(60)	(71,038)	(58,683)
Tax (paid)/refunded	(8,393)	(8,658)	2,525	(1,227)	(14,538)	(30,291)
Share based payments	1,003	410	342	172	522	2,449
Impairment losses/(reversals)	4,588	64	-	-	134	4,786
Fair value adjustments on financial assets	(830)	-	(25,264)	-	(3,824)	(29,918)
Provisions and other	15,003	35,832	(39,490)	15,907	10,835	38,087
Operating cash flow before
movements in working capital	43,092	55,081	(7,376)	59,082	(116,257)	33,622
Movement in workingcapital	5,152	(38,370)	(4,041)	1,165	(11,622)	(47,716)
Operating cash flow	48,244	16,711	(11,417)	60,247	(127,879)	(14,094)
Capital expenditure	(28,842)	(100)	(86,427)	(7,326)	(7,152)	(129,847)
Proceeds on sale of property,
plant and equipment	2,939	24	94,324	548	-	97,835
Proceeds sale of investments	7,877	4,715	-	-	25,924	38,516
Proceeds sale of controlled entity	-	-	-	-	-	-
Payments for investments and other	(32,775)	(28,234)	(829)	(22,573)	(23,050)	(107,461)
D&D capitalised	-	-	-	(7,124)	-	(7,124)
Loans to associated parties (net)	(16,973)	-	591	-	(11,635)	(28,017)
Loans repaid from third parties (net)	-	-	-	-	52,266	52,266
Loans from growers (net)	-	-	(920)	-	-	(920)
Acquisition of controlled entity (net)	-	-	-	-	2,323	2,323
Investing cash flow	(67,774)	(23,595)	6,739	(36,475)	38,676	(82,429)
Proceeds from issue of
shares and other equity	-	-	-	-	7,082	7,082
Dividends paid	(974)	-	-	-	(57,366)	(58,340)
Dividends underwritten	-	-	-	-	46,815	46,815
Repayment of matured equity instrument	-	-	-	-	(53,885)	(53,885)
Other	-	-	-	-	(131)	(131)
Other flows	(974)	-	-	-	(57,485)	(58,459)
Total	(20,504)	(6,884)	(4,678)	23,772	(146,688)	(154,982)
Opening net debt						(364,948)
Total flows						(154,982)
Consolidation of Amcom debt						(15,318)
Convertible notes classified as debt converted	to equity during the year (non cash movement)					576
Fair value adjustments to debt						11,697
Closing net debt						(522,975)

111

Notes to the Financial Statements for the year ended 30 June 2008

Note 31. Supplementary Statement of Net Debt by Segment (continued)

Note 31. Supplementary S	tatement o	f Net Debt	by Segm	ent(continued)
	Rural	Financial	Forestry	Automotive	Property	Investment	Total
Services		Services		Components		& Other
2007	$000	$000	$000	$000	$000	$000	$000
Earnings before interest & tax	56,289	27,192	61,644	9,520	30,396	(16,273)	168,768
Depreciation and amortisation	15,212	67	4,970	17,142	54	144	37,589
Equity accounted earnings	(12,844)	(17,864)	(11,080)	1,345	-	(5,477)	(45,920)
Dividends received
from associates	20,430	11,630	1,235	-	-	548	33,843
(Profit)/loss on sale of property,
plant & equipment	(3,736)	4	(276)	1,015	-	-	(2,993)
(Profit)/loss on sale of investments 146		-	-	-	-	(3,371)	(3,225)
Profit on sale of controlled entities -		-	-	-	(8,920)	-	(8,920)
Profit on sale of investment
properties	-	-	(235)	-	-	-	(235)
Discount on acquisition	-	-	(1,600)	(2,500)	-	-	(4,100)
Interest (net)	(4,307)	12,272	683	82	(74)	(48,680)	(40,024)
Tax (paid)/refunded	2,968	(5,864)	504	(2,756)	-	10,063	4,915
Share based payments	2,625	149	588	626	40	(302)	3,726
Impairment losses/(reversals)	(1,851)	1,311	599	(2,467)	-	2,677	269
Fair value adjustments on
financial assets	-	-	(15,025)	-	-	-	(15,025)
Provisions and other	(15,041)	2,392	(20,654)	10,452	(15,583)	37,478	(956)
Operating cash flow before
movements in working capital	59,891	31,289	21,353	32,459	5,913	(23,193)	127,712
Movement in workingcapital	42,219	(7,526)	(16,001)	(11,556)	(24,665)	(25,158)	(42,687)
Operating cash flow	102,110	23,763	5,352	20,903	(18,752)	(48,351)	85,025
Capital expenditure	(27,042)	(734)	(63,156)	(14,215)	-	-	(105,147)
Proceeds on sale of property,
plant and equipment	5,447	13	4,138	323	-	-	9,921
Proceeds sale of investments	68	-	-	-	-	26,574	26,642
Proceeds sale of controlled entity	-	-	-	-	-	120,959	120,959
Payments for investments
and other	(15,414)	(7,650)	(30,024)	(20,300)	-	(3,625)	(77,013)
D&D capitalised	-	-	-	(6,252)	-	-	(6,252)
Loans to associated parties (net)	(18,715)	-	597	-	-	(4,217)	(22,335)
Loans from growers (net)	-	-	(1,342)	-	-	-	(1,342)
Acquisition of controlled
entity (net)	(5,361)	-	-	-	-	(130,861)	(136,222)
Investing cash flow	(61,017)	(8,371)	(89,787)	(40,444)	-	8,830	(190,789)
Proceeds from issue of
shares and other equity	-	-	-	-	-	2,570	2,570
Dividends paid	-	-	(5,532)	-	-	(66,199)	(71,731)
Other flows	-	-	(5,532)	-	-	(63,629)	(69,161)
Total	41,093	15,392	(89,967)	(19,541)	(18,752)	(103,150)	(174,925)
Opening net debt							(202,012)
Total flows							(174,925)
Convertible notes classified as debt converted		to equity during the year		(non cash movement)			4,765
Fair value adjustments to debt							7,224
Closing net debt							(364,948)

112

Notes to the Financial Statements for the year ended 30 June 2008

Note 32. Auditors Remuneration

Note 32. Auditors Remuneration
	Consolidated			Parent
	2008	2007	2008	2007
	$	$	$	$
The auditor of Futuris Corporation Limited is Ernst & Young.
Amounts received or due and receivable by Ernst & Young
(Australia) for:
- auditing or review of financial statements	2,113,296	1,752,207	265,776	254,640
- tax services (primarily compliance)	253,662	345,858	221,027	315,353
- other compliance and assurance services	272,316	158,076	158,779	22,764
	2,639,274	2,256,141	645,582	592,757
Amounts received or due and receivable by related practices of
Ernst & Young (Australia) for:
- auditingor review of financial statements	265,048	212,348	-	-
	265,048	212,348	-	-
Amounts received or due and receivable by non Ernst & Young
audit firms for:
- auditing or review of financial statements	30,000	454,060	-	-
- tax services	156,274	454,660	124,624	120,000
- internal audit	741,634	583,186	87,758	75,000
- other services(i)	2,090,494	731,124	412,688	535,605
	3,018,402	2,223,030	625,070	730,605

(i) Other services in the parent entity include specific projects and due diligence services

Note 33. Investments in Controlled Entities

Note 33. Investments in Controlled Entities
		% Held by Group
		2008	2007
A Top Pty Ltd	(g)	100		100
Abbino Pty Ltd	(g)	100		100
Acehill Investments Pty Ltd	(a)	100		100
ACN 073 323 038 Pty Ltd	(g)	100		100
Active Leisure (Sports) Pty Ltd	(a)	100		100
Agribusiness Insurance Brokers Pty Ltd	(g)	100		100
AI Asia Pacific Operations Holding Limited	(c)(e)	100		100
AI Bus Products Limited	(c)(e)	100		100
AI China Operations Holding Limited	(c)(e)	100		100
AI Coachair Holdings Limited	(c)(e)(j)	-		100
AIM Metals Pty Ltd	(a)	100		100
Air International (China) Pty Ltd	(a)	100		100
Air International (India) Pty Ltd	(g)	100		100
Air International (Malaysia) Sdn Bhd	(c)(e)(j)	-		100
Air International (UK) Holdings Ltd	(c)(e)(j)	-		100
Air International (UK) Ltd	(c)(j)	-		100
Air International (Ventures) No 2 Pty Ltd	(a)	100		100
Air International (Ventures) No 3 Pty Ltd	(j)	-		100
Air International Asia Pacific Operations Pty Ltd	(a)	100		100
Air International Coachair Sdn Bhd	(c)(j)	-		100
Air International Coachair Pty Ltd	(j)	-		100
Air International (Malaysia) Pty Ltd	(a)	100		100
Air International Transit China Co Ltd	(c)(j)	-		100
Air International Transit Taiwan Co Ltd	(j)	-		100

113

Notes to the Financial Statements for the year ended 30 June 2008 Note 33. Investments in Controlled Entities (continued)

Note 33. Investments in Controlled Entities(continued)
		% Held by Group
		2008	2007
Air International Transit Pty Ltd	(j)	-		100
Air International Vehicle Air Conditioning (Shanghai) Co Ltd	(c)	100		100
Albany Woolstores Pty Ltd	(g)	66		66
Albany Woolstores Pty Ltd	(g)	66		66
Aldetec Pty Ltd	(a)	100		100
Aldetec Unit Trust	(f)	100		100
APM Coachair Sdn Bhd	(c)(j)	-		50
Amcom Pty Ltd	(i)	50		-
Amcom Telecommunications Limited	(h)	50		-
Amnet Internet Services Pty Ltd	(i)	50		-
Amnet IT Services Pty Ltd	(i)	50		-
Amnet IX Pty Ltd	(i)	50		-
AMG Marketing & Research Pty Ltd	(g)	100		100
APO Administration Limited	(c)(e)	100		100
APT Finance Pty Ltd	(a)	100		100
APT Forestry Pty Ltd	(a)	100		100
APT Projects Ltd	(a)	100		100
APT Land Pty Ltd	(a)	100		100
APT Nurseries Pty Ltd	(a)	100		100
Artreal Pty Ltd	(g)	100		100
Ashwick (Vic) No 102 Pty Ltd	(a)	100		100
Austech Ventures Ltd	(a)	100		100
Australian Combined Meat Processors Pty Ltd	(i)	100		100
Australian Plantation Timber Ltd	(a)	100		100
Australian Retirement Managers Limited	(a)	100		100
Ar Finance Pty Ltd_(formally Australian Rural Finance Pty Ltd)_	(g)	100		100
Australian Topmaking Services Limited	(a)	100		100
B & W Rural Pty Ltd	(h)	51		51
Balcooma Pty Ltd	(g)	100		100
Banks Marsden Pty Ltd	(g)	100		100
Bedcell Pty Ltd	(g)	100		100
BHC Sales & Marketing Pty Ltd	(g)	100		100
Brimhall Pty Ltd	(g)	100		100
Broadwater Hospitality Pty Ltd	(g)	100		100
Broadwater Hospitality Management Pty Ltd	(g)	100		100
BHC Sales and Marketing Pty Ltd	(g)	100		100
Bremer Woll Kämmerei AG	(c)(e)	100		100
BWK Australia Pty Ltd	(g)	100		100
BWK Elders Australia Pty Ltd	(a)	100		100
BWK Elders Europe GmbH	(c)(e)(i)	100		100
BWK Holdings Pty Ltd	(a)	100		100
BWK Elders Europtop GmbH	(c)	100		100
BWK Elders Industry and Trade	(c)	100		100
BWK Chemifraser GmbH	(c)	100		100
BWK Eastern Wool	(c)	100		100
BREWA WTE GmbH	(c)	100		100
BREWA Umwelt Service GmbH	(c)	100		100
Carbon Bid Co Pty Ltd	(g)	100		100
Canosac Limited	(c)(f)	100		100

114

Notes to the Financial Statements for the year ended 30 June 2008 Note 33. Investments in Controlled Entities (continued)

		% Held by Group	% Held by Group
		2008	2007
Caversham Investments Pty Ltd	(a)	100		100
Caversham Landscape D. & C. Pty Ltd	(g)	100		100
Caversham Projects Pty Ltd	(g)	100		100
Caversham Property (Sales) Pty Ltd	(g)	100		100
Caversham Property Holdings Pty Ltd	(a)	100		100
Charlton Feedlot Pty Ltd	(a)	100		100
Clima Air Conditioning Pty Ltd	(j)	-		100
Coachair (Thailand) Company Ltd	(c)(j)	-		100
Colotti Pty Ltd	(g)	100		100
Costilla Pty Ltd	(g)	100		100
CP Ventures Ltd	(a)	100		100
Danny F11 Investments Pte Ltd	(c)	100		100
Dawley Pty Ltd	(g)	100		100
Domeni Pty Ltd	(g)	100		100
E. & R. Steeden Pty Ltd	(a)	100		100
E Globulus Pty Ltd	(g)	100		100
Elders Australia Limited	(a)	100		100
Elders Australia Aktien Holding GmbH & Co KG	(c)	100		100
Elders Australia Beteiligungs GmbH	(c)(h)	90		90
Elders Burnett Moore WA Pty Ltd	(g)	100		100
Elders China Trading Company	(c)	100		100
Elders Distribution Company Pty Ltd	(g)	100		100
Elders Financial Solutions Pty Ltd	(g)	100		100
Elders Global Wool Holdings Pty Ltd	(a)	100		100
Elders Hycube Pty Ltd	(g)	70		70
Elders Insurance Agencies Pty Ltd
(formally Elders Insurance Brokers Pty Ltd)	(g)	100		100
Elders Financial Services Group Pty Ltd		100		100
Elders Insurance Ltd		100		100
Elders International Australia Limited	(a)	100		100
Elders Limited		100		100
Elders Mortgage Brokers Pty Ltd	(g)	100		100
Elders Project Management Pty Ltd	(g)	100		100
Elders Real Estate (NSW) Pty Ltd	(g)	100		100
Elders Real Estate (Qld) Pty Ltd	(g)	100		100
Elders Real Estate (WA) Pty Ltd	(g)	100		100
Elders Real Estate (Tasmania) Pty Ltd	(g)	100		100
Elders Real Estate Franchise (Vic) Pty Ltd	(g)	100		100
Elders Risk Management Pty Ltd	(g)	100		100
Elders Communications Pty Ltd
(formally Elders Telecommunications Pty Ltd)	(a)	100		100
Elders Telecommunications Infrastructure Pty Ltd	(g)	100		100
Elders Trustees Limited		100		100
Elders Underwriting Agency Pty Ltd	(g)	100		100
Elders Webster Pty Ltd	(g)	100		100
Elders Wool International Pty Ltd	(g)	100		100
Elders-GM Properties (SA) Pty Ltd	(a)	100		100
Elders-GM Properties (Vic) Pty Ltd	(a)	100		100
EREF Pty Ltd	(g)	100		100

115

Notes to the Financial Statements for the year ended 30 June 2008

Note 33. Investments in Controlled Entities (continued)

Note 33. Investments in Controlled Entities(continued)
		% Held by Group
		2008	2007
Ezesoftwrite Pty Ltd	(i)	50		-
Family Hospitals Pty Ltd	(a)	100		100
Fares Exports Pty Ltd	(a)	100		100
Fares Exports Management Mexico, S.A. de C.V.	(c)	100		100
Fares Exports Trading Mexico, S.A. de C.V.	(c)	100		100
Farmers Investment Trust	(f)	100		100
FGSF Pty Ltd	(g)	100		100
Future Proof Technologies (WA) Pty Ltd	(i)	50		-
Futuris Administration Pty Ltd	(a)	100		100
Futuris Agencies Pty Ltd	(a)	100		100
Futuris Automotive Group Ltd_(formerly Air International Group Ltd)_	(a)	100		100
Futuris Automotive Pty Ltd_(formerly Air International Pty Ltd)_	(a)	100		100
Futuris Automotive Interiors (Anhui) Pty Ltd	(c)	100		100
Futuris Automotive Interiors (Australia) Pty Ltd
(formerly Air International Seating Pty Ltd)	(a)	100		100
Futuris Automotive Interiors Holdings Pty Ltd
(formerly Air International Seating Holdings Pty Ltd)	(a)	100		100
Futuris Automotive Interiors (Barbados) Inc	(c)	100		100
Futuris Automotive Interiors (US) Inc	(c)	100		100
Futuris Automotive Interiors (Mauritius) Ltd	(c)	100		100
Futuris Transit System (US) Inc	(c)(j)	-		100
Futuris Rural Pty Ltd	(a)	100		100
Futuris Ventures Pty Ltd	(a)	100		100
Futuris/Tamper Joint Venture Unit Trust	(f)	100		100
Geelong Wool Combing Ltd	(a)	100		100
George Moss (Qld) Pty Ltd	(a)	100		100
George Moss Pty Limited	(a)	100		100
Grouville Pty Ltd	(g)	100		100
H W Hayes & Sons (Ipswich) Pty Ltd	(g)	100		100
Hallette Pty Ltd	(g)	100		100
Harvey Meat Processing Pty Ltd	(g)	100		100
HKW Blumenthal GmbH	(c)	100		100
Hollymont Ltd	(a)	100		100
Hose & Pipe Pty Ltd	(a)	100		100
IMA Investment Management Australia (ADF) Pty Ltd	(a)	100		100
IMA Investment Management Australia Pty Ltd	(a)	100		100
Innerhadden Ltd	(a)	100		100
Integrated Tree Cropping Ltd_(formally Hatmore Pty Ltd)_	(g)	100		100
ITC Ltd	(a)	100		100
ITC Finance Pty Ltd	(a)	100		100
ITC Fibre Pty Ltd	(a)	100		100
ITC Land Holdings Pty Ltd	(a)	100		100
ITC Project Management Ltd	(a)	100		100
ITC Timberlands Ltd	(a)	100		100
ITC Timber Pty Ltd	(a)	100		100
ITC Timber China Pty Ltd	(g)	100		100
ITC Timber Seymour Pty Ltd	(a)	100		100
ITC Timber Heyfield Pty Ltd	(a)	100		100
ITC Timber Alexandra Pty Ltd	(a)	100		100

116

Notes to the Financial Statements for the year ended 30 June 2008 Note 33. Investments in Controlled Entities (continued)

		% Held by Group	% Held by Group
		2008	2007
ITC Timber Tasmania Pty Ltd	(a)	100		100
J.A. Gilmour & Sons (NSW) Pty Ltd	(g)	100		100
JSB New Zealand Limited	(c)	100		50
JS Brooksbank & Co Australasia Ltd	(c)	100		50
J.S. Brooksbank Pty Ltd	(i)	100		50
Jetoleaf Pty Ltd	(g)	100		100
Kentlake Holdings Pty Ltd	(g)	100		100
Keratin Holdings Pty Ltd	(a)	100		100
Killara Feedlot Pty Ltd	(i)	53		53
Kojonup Farm Pty Ltd	(g)	100		100
Leisure Industries International Pty Ltd	(a)	100		100
M.E. Deniliquin Pty Ltd	(g)	100		100
Manet Holdings Pty Ltd	(a)	100		100
Manor Hill Pty Ltd	(a)	100		100
Marybrook Development Company Pty Ltd	(g)	100		100
Marybrook Investments Ltd	(a)	100		100
Milltoc Pty Ltd	(a)	100		100
Mutual Benefit Consulting Pty Ltd	(g)	100		100
Mylang Pty Ltd	(a)	100		100
New Ashwick Pty Ltd	(g)	100		100
Neues Wolkontor GmbH	(c)	100		100
North Australian Cattle Company Pty Ltd	(a)	100		100
Pacrim Meat & Livestock Trading Pty Ltd	(g)	100		100
Pakenham Properties Pty Ltd	(g)	100		100
Pernatty Pty Ltd	(g)	100		100
Pitt Son & Keene Pty Ltd	(g)	100		100
Planttech Pty Ltd	(a)	100		100
Prestige Property Holdings Pty Ltd	(a)	100		100
Primac Exports Pty Ltd	(a)	100		100
Primac Elders Real Estate Pty Ltd	(g)	100		100
Primac Holdings Pty Ltd	(a)	100		100
Primac Pty Ltd	(a)	100		100
Primac Pastoral Co Pty Ltd	(g)	100		100
Primac Superannuation Nominees Pty Ltd	(g)	100		100
Primac Travel Pty Ltd	(g)	100		100
PT Elders Indonesia	(c)	100		100
Rachid Fares Enterprises of Australia Pty Ltd	(g)	100		100
Rescue Proof technology Group Pty Ltd	(i)	50		-
Redray Enterprises Pty Ltd	(a)	100		100
Relatran Pty Ltd	(g)	100		100
SA Bid Co Pty Ltd	(a)	100		100
Sigma Air Conditioning (SA) Pty Ltd	(j)	-		100
Southern Wool Services (Goulburn) Pty Ltd	(g)	100		100
Steeden Holdings Pty Ltd	(a)	100		100
Steering Systems Australia Pty Ltd	(a)	100		100
Sycamore Enterprises Pty Ltd	(a)	100		100
Sydney Woolbrokers Limited	(i)	66		66
Tashmore Pty Ltd	(g)	100		100
Therm Air Australia Pty Ltd	(a)	100		100

117

Notes to the Financial Statements for the year ended 30 June 2008

Note 33. Investments in Controlled Entities (continued)

Note 33. Investments in Controlled Entities(continued)
		% Held by Group
		2008	2007
Topsoils of Australia Pty Ltd	(g)	100		100
Tomkins Financial Services Pty Ltd	(d)	100		100
Torrens Investments Pte Ltd_(formerly Farid F Investments Pte Ltd)_	(c)	100		100
Treecrop Pty Ltd	(g)	100		100
Trend-to-Zero Pty Ltd	(a)	100		100
Ultra Enterprises Pty Ltd	(g)	100		100
Ultrasound Australia Pty Ltd	(a)	100		100
Ultrasound International Pty Ltd	(a)	100		100
Ultrasound Technical Services Pty Ltd	(a)	100		100
United Alliance Group Ltd_(formerly Elders Distribution Company Pty Ltd)_	(g)	100		100
Victorian Group of Companies Pty Ltd	(d)	100		100
Victorian Investment Corporation Pty Ltd	(a)	100		100
Victorian Producers Co-operative Company Pty Ltd	(a)	100		100
Vickner Pty Ltd	(g)	100		100
Vockbay Pty Limited	(a)	100		100
VP Services Pty Ltd	(g)	100		100
VP Travel Pty Ltd	(g)	100		100
WA Bid Co Pty Ltd	(g)	100		100
Agricultural Land Management Limited
(formally Westralia Property Management Ltd)		100		100
Wool Exchange (WA) Pty Ltd	(g)	67		67
Wooltech Marketing Pty Ltd	(g)	100		100
Yenley Pty Ltd	(g)	100		100

(i) Pursuant to Australian Securities and Investments Commission Class Order 98/1418 dated 13 August 1998, relief has been granted to these controlled entities of Futuris Corporation Limited from the Corporations Act 2001 requirements for preparation, audit and publication of accounts. As a condition of the Class Order, Futuris Corporation Limited, and the controlled entities subject to the Class Order, entered into a deed. The effect of the deed is that Futuris Corporation Limited has guaranteed to pay any deficiency in the event of the winding up of any member of the Closed Group, and each member of the Closed Group has given a guarantee to pay any deficiency, in the event that Futuris Corporation Limited or any other member of the closed group is wound up.

The parties that comprise the Closed Group are denoted by (a) above. Parties added to the Closed Group during the year are denoted by (b) above. Parties removed from the Closed Group during the year are denoted by (k) above.

118

Note 33. Investments in Controlled Entities (continued)

Notes to the Financial Statements for the year ended 30 June 2008

Note 33. Investments in Controlled Entities(continued)
	2008	2007
	$000	$000
The consolidated income statement and balance sheet of the entities
which are members of the Closed Group are as follows:
Consolidated income statement of the Closed Group
Profit from continuing operations before income tax	80,773	53,551
Income tax benefit/(expense)	6,804	4,900
Profit after income tax from continuing operations	87,577	58,451
Profit after tax from discontinued operation (refer note 42)	(29,490)	19,094
Net profit for the period	58,087	77,545
Retained earnings at the beginning of the period	(16,600)	(54,744)
Impact of acquisitions/disposals	4,422	34,869
Dividends provided for or paid	(78,569)	(74,270)
Retained earnings at the end of the period	(32,660)	(16,600)
Consolidated balance sheet of the Closed Group
Current Assets
Cash assets	229,225	3,001
Receivables	494,856	365,289
Inventories	142,466	184,015
Other	121,938	7,408
Total current assets	988,485	559,713
Non Current Assets
Receivables	231,082	127,159
Investments in associates and joint ventures	441,593	448,696
Other financial assets	573,711	542,964
Inventories	25,720	23,059
Property, plant and equipment	110,583	122,498
Investment properties	221,597	220,244
Intangibles	119,273	108,159
Deferred tax assets	58,555	57,492
Other	27,058	25,446
Total non current assets	1,809,172	1,675,717
Total assets	2,797,657	2,235,430
Current Liabilities
Payables	898,678	660,055
Interest bearing liabilities	134,055	185,838
Current tax liabilities	18,063	49,149
Provisions	167,425	42,817
Total current liabilities	1,218,221	937,859

119

Notes to the Financial Statements for the year ended 30 June 2008

Note 33. Investments in Controlled Entities (continued)

Note 33. Investments in Controlled Entities(continued)
	2008	2007
	$000	$000
Non Current Liabilities
Interest bearing liabilities	526,079	348,098
Derivative Financial Instruments	52,366	41,731
Deferred tax liabilities	38,783	45,062
Provisions	67,361	3,565
Total non current liabilities	684,589	438,456
Total liabilities	1,902,810	1,376,315
Net Assets	894,847	859,115
Equity
Contributed equity	694,118	608,493
Convertible notes - equity portion	-	54,263
Hybrid equity	145,151	145,151
Reserves	88,238	67,808
Retained earnings	(32,660)	(16,600)
Shareholder equity attributable to members of
Futuris Corporation Limited	894,847	859,115

Certain members of the Closed Group, in addition to certain controlled entities, are guarantors in connection with the consolidated entity’s borrowings facilities disclosed at note 17 and in connection with the unsecured and convertible notes disclosed at note 20.

(ii) All companies are incorporated and carry on business in Australia except for the companies designated by (c) above which are incorporated in the following countries:

Company

Country of Incorporation

AI Asia Pacific Operations Holdings Limited Hong Kong SAR AI Bus Products Limited Hong Kong SAR AI China Operations Holding Limited Hong Kong SAR AI Coachair Holding Limited Hong Kong SAR Air International (Malaysia) Sdn Bhd Malaysia Air International (UK) Holdings Ltd United Kingdom Air International (UK) Ltd United Kingdom Air International Coachair Sdn Bhd Malaysia Air International Transit China Co Ltd China Air International Vehicle Air Conditioning (Shanghai) Co Ltd China APM Coachair Sdn Bhd Malaysia APO Administration Limited Hong Kong SAR Bremer Woll Kämmerei AG Germany BWK Elders Europe GmbH Germany BWK Elders Europtop GmbH Germany BWK Elders Industry and Trade Germany BWK Chemifraser GmbH Germany BWK Eastern Wool Germany BREWA WTE GmbH Germany BREWA Umwelt Service GmbH Germany Canosac Limited Hong Kong SAR Coachair (Thailand) Co Ltd Malaysia Danny F11 Investments Pte Ltd Singapore Elders Australia Aktien Holding GmbH & Co KG Germany Elders Australia Beteiligungs GmbH Germany Elders China Trading Company Ltd China Fares Exports Management Mexico, S.A. de C.V. Mexico Fares Exports Trading Mexico, S.A. de C.V. Mexico Futuris Automotive Interiors (Anhui) Pty Ltd Mauritius

120

Notes to the Financial Statements for the year ended 30 June 2008

Note 33. Investments in Controlled Entities (continued)

Company Country of Incorporation Futuris Automotive Interiors (Barbados) Inc Barbados Futuris Automotive Interiors (Mauritius) Ltd Mauritius Futuris Automotive Interiors (US) Inc USA Futuris Transit Systems (US) Inc USA HKW Blumenthal GmbH Germany JSB New Zealand Limited New Zealand JS Brooksbank & Co Australasia Ltd New Zealand Neues Wolkontor GmbH Germany PT Elders Indonesia Indonesia Torrens Investments Pte Ltd Singapore

(iii) Entities acquired during the period are denoted by (d).
(iv) Entities audited by firms other than the parent entity auditors or by affiliates of the parent entity auditor are denoted by (e).
(v) Entities exempted from audit requirements due to overseas legislation or non-corporate status are denoted by (f).
(vi) Entities classified by the Corporations Act 2001 as small proprietary companies relieved from audit requirements are denoted by (g). In addition, a number of small proprietary companies are party to the Class Order deed referred to in (i).
(vii) Entities denoted by (h) are controlled entities, as the Group has the capacity to control via a dominance of financial, management and technological control.
(viii) Entities denoted by (i) are entities where an entity controlled by the parent entity holds a controlling interest in the entity.
(ix) Entities denoted by (j) are entities that were disposed of during the year. An equity interest has been retained in some of these entities.
(x) Certain branch locations are subject to agreements whereby profits are shared on a proportionate 50% basis albeit under the control of the controlled entities within the Group.

Note 34. Key Management Personnel

(a) Details of Key Management Personnel

Directors

S Gerlach Chairman
C E Bright Non Executive Director J C Fox Non Executive Director R G Grigg Non Executive Director
W H Johnson Non Executive Director (retired 23 October 2007)
A Salim Non Executive Director
G D Walters Non Executive Director I G MacDonald Non Executive Director J H Ranck Non Executive Director (appointed 25 June 2008)

Other Key Management Personnel

L P Wozniczka Director and Chief Executive Officer (resigned 26 June 2008) M de Wit Managing Director – Futuris Automotive Group Ltd B Griffiths Executive Chairman – Futuris Automotive Group Ltd G Hunt Managing Director – Elders Rural Services (resigned 13 July 2007) M Guerin Managing Director – Elders Rural Services (commenced 1 March 2008) J V M Erasmus Managing Director – ITC Ltd T Plant Managing Director – Elders Financial Services Group P Zachert Chief Financial Officer

121

Notes to the Financial Statements for the year ended 30 June 2008

Note 34. Key Management Personnel (continued)

(b) Remuneration of Specified Directors and other Key Management Personnel

Remuneration Policy

For information on Group Remuneration Policy, Structure and the relationship between remuneration payment and performance please refer to the Remuneration Report on pages 39 to 53 of the Annual Report.

L Wozniczka

Mr Wozniczka’s agreement is terminable on 12 months notice under the terms of his agreement. The remuneration package structure consists of three elements, fixed remuneration, short term incentive and long term incentive. The latter two elements are performance based and details have been provided in the remuneration report.

Notice terms under the agreement are comparable with industry standards and ensure that both parties are protected. Either the Group or Mr Wozniczka may terminate the employment agreement at any time on 12 month’s prior written notice. In specified (non-default) circumstances both parties have the right to terminate the agreement on 1 month’s notice. On 26 June 2008, the Board announced that it had accepted the resignation of Mr Wozniczka to become effective upon completion of an international search for a successor.

M De Wit

Mr de Wit was appointed as Chief Executive Officer – Futuris Automotive Group Ltd on 1 January 2008. Mr de Wit’s agreement is terminable on 3 months’ notice under the terms of his agreement.

Mr de Wit’s remuneration package consists of three elements, fixed remuneration, short term incentives and long term incentives. The latter two elements are performance based and details have been described in general terms in the Remuneration Report.

Mr de Wit’s fixed remuneration is reviewed annually by the Futuris Chief Executive Officer in conjunction with the Futuris Automotive Chairman and the Remuneration Committee. Mr de Wit may earn up to 50% of his fixed remuneration as a short term incentive for the Futuris Auto division achieving budget earnings before interest and tax. A further 50% of his fixed remuneration may be earned for out performance. A long term incentive for the achievement of profitability thresholds is 250,000 options annually (up to a maximum of 750,000 options) under the Group’s employee option plan.

The Futuris Chief Executive has discretion to vary these arrangements where circumstances warrant after consultation with the Futuris Auto Chairman and the Remuneration Committee.

B Griffiths

Mr Griffiths commenced the role of Executive Chairman – Futuris Automotive Group Ltd on 1 January 2008. Mr Griffiths contract commenced 1 July 2004 and is terminable on 12 weeks notice under the terms of his agreement. The current agreement reflects Mr Griffiths’ length of service and the effect of certain elements of agreements put in place over previous years.

The remuneration package structure consists of three elements, fixed remuneration, short term incentives and long term incentives. The fixed remuneration element is reviewed annually by the Chief Executive Officer in consultation with the Chairman and the Chairman of Futuris Automotive Group Limited. Mr Griffiths short term incentive has two components. The first component consists of a payment of up to 50% of his fixed remuneration, subject to the achievement of annual performance hurdles determined by the Chief Executive in consultation with the Chairman and chairman of Futuris Automotive Group Ltd, including both quantitative and qualitative financial measures. The second component consists of a share in a bonus pool in the event that Futuris Automotive Group Limited achieves prescribed target return on net assets. In addition to participation in the Company’s employee option plan, Mr Griffith’s long term incentive includes a value creation incentive, being 2% to 3% of any increases in value of the Company’s Automotive operations.

The agreement provides for a termination benefit of $2 million in the event that employment with Futuris Automotive Group Limited is terminated without cause or due to death or permanent incapacity.

The Chief Executive Officer has discretion to vary these arrangements where circumstances warrant after consultation with the Chairmen of the Group and Futuris Automotive Group Ltd.

G Hunt

Mr Hunt left the Group on 13 July 2007. Mr Hunt’s agreement was terminable on 12 months’ notice under the terms of his agreement.

Mr Hunt’s remuneration package consisted of three elements, fixed remuneration, short term incentives and long term incentives. The latter two elements were performance based and details have been described in general terms in the remuneration report.

122

Notes to the Financial Statements for the year ended 30 June 2008

Note 34. Key Management Personnel (continued)

(b) Remuneration of Specified Directors and other Key Management Personnel (continued)

M Guerin

Mr Guerin joined the Company in March 2008 as Managing Director for the Elders Rural Services Group (ERS). Mr Guerin’s agreement is terminable on 12 months’ notice under the terms of his agreement.

Mr Guerin’s remuneration package structure consists of three elements, fixed remuneration, short term incentives and long term incentives. The latter two elements are performance based and details have been described in general terms in the Remuneration Report.

Mr Guerin’s fixed remuneration is reviewed annually by the Chief Executive Officer in conjunction with the ERS Chairman and the Remuneration Committee. Mr Guerin may earn up to 60% of his fixed remuneration as a short term incentive for the ERS division outperforming budget earnings before interest and tax and achieving agreed KPI targets. A long term incentive for the achievement of profitability thresholds is 250,000 options annually (up to a maximum of 750,000 options) under the Group’s employee option plan.

The Chief Executive has discretion to vary these arrangements where circumstances warrant after consultation with the ERS Chairman and the Remuneration Committee.

V Erasmus

Mr Erasmus has the role of Managing Director for the Integrated Tree Cropping (ITC) division. His contract is terminable on 12 months notice under the terms of his agreement.

Mr Erasmus’ remuneration package structure consists of three elements, fixed remuneration, short term incentives and long term incentives. The latter two elements are performance based and details have been described in general terms in the Remuneration Report.

Fixed remuneration is reviewed annually by the Chief Executive Officer in consultation with the Chairmen of the Group and ITC.

An annual short term incentive of up to 80% of fixed remuneration is payable based on achievement of agreed KPI targets and outperformance of budget earnings before tax. A long term incentive for achievement of budgeted earnings before interest and tax is 200,000 options annually (up to a maximum of 600,000 options) under the Group’s employee option plan.

The Chief Executive Officer has discretion to vary these arrangements where circumstances warrant after consultation with the Chairmen of the Group and ITC.

T Plant

Mr Plant has the role of Managing Director for the Elders Financial Services Group (EFSG) division. Mr Plant’s agreement is terminable on 12 months’ notice under the terms of his agreement.

Mr Plant’s remuneration package structure consists of three elements, fixed remuneration, short term incentives and long term incentives. The latter two elements are performance based and details have been described in general terms in the Remuneration Report.

Mr Plant’s fixed remuneration is reviewed annually by the Chief Executive Officer in conjunction with the EFSG Chairman and the Remuneration Committee. Mr Plant may earn up to 60% of his fixed remuneration as a short term incentive for the EFSG division outperforming budget earnings before interest and tax and achieving agreed KPI’s. A long term incentive for the achievement of profitability thresholds is 250,000 options annually (up to a maximum of 750,000 options) under the Group’s employee option plan.

The Chief Executive has discretion to vary these arrangements where circumstances warrant after consultation with the EFSG Chairman and the Remuneration Committee.

P Zachert

Mr Zachert’s agreement is terminable on 12 months notice under the terms of his agreement.

Mr Zachert’s remuneration package structure consists of three elements, fixed remuneration, short term incentives and long term incentives. The latter two elements are performance based and details have been described in general terms in the Remuneration Report.

Fixed remuneration is reviewed annually by the Chief Executive in consultation with the Chairman. The short term incentive element consists of a payment of 50% of fixed remuneration for the achievement of budget net profit after tax. A long term incentive for the achievement of budget net profit after tax is 250,000 options annually (up to a maximum of 750,000 options over three years) under the Company’s employee option plan.

The Chief Executive has discretion to vary these arrangements where circumstances warrant after consultation with the Chairman.

123

Notes to the Financial Statements for the year ended 30 June 2008

Note 34. Key Management Personnel (continued)

(b) Remuneration of Specified Directors and other Key Management Personnel (continued)

Compensation by Category

	Consolidated	Consolidated	Parent	Parent
	2008	2007	2008	2007
	$	$	$	$
Short term	9,814,591	6,186,240	2,120,042	1,801,797
Post employment	505,525	486,884	217,409	199,436
Share based payments	1,066,013	2,983,211	720,932	2,458,995
	11,386,129	9,656,335	3,058,383	4,460,228

2008	Balance at	Options	Options	Options	Balance	Vested at 30	June 2008 (4)
(Number)	beginning of	Exercised	Granted	Lapsed	at end of	Exercisable	Not
	period				period		exercisable
Directors
L P Wozniczka	5,000,000	-	3,000,000	-	8,000,000	1,000,000	750,000
Key Management Personnel
M de Wit	300,000	-	200,000	-	500,000	100,000	-
B Griffiths	300,000	-	-	-	300,000	-	300,000
G Hunt	1,250,000	(687,500)	-	(562,500)	-	-	-
M Guerin	-	-	750,000	-	750,000	-	250,000
V Erasmus	750,000	-	-	-	750,000	-	550,000
T Plant	1,100,000	-	-	-	1,100,000	-	850,000
P Zachert	750,000	-	-	-	750,000	-	625,000
Total	9,450,000	(687,500)	3,950,000	(562,500)	12,150,000	1,100,000	3,325,000

2007

(Number)

Directors
L P Wozniczka(1)	5,000,000	-	-	-	5,000,000	1,000,000	-
Key Management Personnel
B Griffiths	400,000	(200,000)	100,000	-	300,000	-	300,000
G Hunt(1)	1,250,000	-	-	-	1,250,000	-	687,500
P Hall	-	-	-	-	-	-	-
P Zachert(1)	1,000,000	(250,000)	-	-	750,000	-	500,000
V Erasmus	750,000	-	-	-	750,000	-	350,000
T Plant	1,100,000	-	-	-	1,100,000	-	600,000
Total	9,500,000	(450,000)	100,000	-	9,150,000	1,000,000	2,437,500

124

Notes to the Financial Statements for the year ended 30 June 2008 Note 34. Key Management Personnel (continued)

(d) Shareholdings of Directors and other Key Management Personnel

2008	Balance at	On Exercise	Granted as	Net Change	Balance at
Ordinary shares	beginning of	of Options	Remuneration (5)	Other	end of period
	period
Directors
S Gerlach	478,491	-	-	14,031	492,522
C E Bright	103,492	-	-	-	103,492
J C Fox(2)	26,765	-	-	-	26,765
R G Grigg	31,560	-	-	-	31,560
W H Johnson(2)	23,548,181	-	-	-	23,548,181
A Salim	33,545,578	-	-	-	33,545,578
G D Walters	21,000	-	-	-	21,000
I G MacDonald	60,000	-	-	-	60,000
J H Ranck	-	-	-	-	-
L P Wozniczka(2)	4,521,341	-	-	-	4,521,341
Key Management Personnel
M de Wit	41,694	-	10,286	-	51,980
B Griffiths(5)	1,540,439	-	10,286	(377,706)	1,173,019
G Hunt	709,529	-	-	-	709,529
M Guerin	-	-	40,076	230,000	270,076
V Erasmus	9,669	-	10,286	-	19,955
T Plant	115,175	-	130,515	-	245,690
P Zachert(5)	1,323,606	-	124,917	-	1,448,523
Total	66,076,520	-	326,366	(133,675)	66,269,211
Convertible Notes & Hybrid Instruments
Directors
L P Wozniczka(2)	51,100	-	-	(49,600)	1,500
2007
Ordinary Shares
Directors
S Gerlach	428,491	-	-	50,000	478,491
C E Bright	103,492	-	-	-	103,492
J C Fox(2)	26,765	-	-	-	26,765
R G Grigg	20,000	-	-	11,560	31,560
W H Johnson(2)	23,548,181	-	-	-	23,548,181
A Salim	33,545,578	-	-	-	33,545,578
G D Walters	21,000	-	-	-	21,000
I G MacDonald	-	-	-	60,000	60,000
J H Ranck	-	-	-	-	-
L P Wozniczka(2)	4,015,333	-	502,008	4,000	4,521,341
Key Management Personnel
M de Wit	32,025	-	9,669	-	41,694
B Griffiths(2)	2,668,317	200,000	-	(1,327,878)	1,540,439
G Hunt	699,668	-	9,861	-	709,529
V Erasmus	-	-	9,669	-	9,669
T Plant	58,700	-	56,475	-	115,175
P Zachert(2)	1,048,055	250,000	228,185	(202,634)	1,323,606
Total	66,215,605	450,000	815,867	(1,404,952)	66,076,520

Convertible Notes & Hybrid Instruments

Directors

L P Wozniczka[(2)] 51,100 - - - 51,100

125

Notes to the Financial Statements for the year ended 30 June 2008

Note 34. Key Management Personnel (continued)

(d) Shareholdings of Directors and other Key Management Personnel (continued)
(1) Opening balance includes additional options approved in 2008 relating to 2007.
(2) Shareholdings include non beneficial interests – refer to the Directors Report.
(3) Price paid for options exercised are as follows:
B Griffiths 200,000 shares for $1.23
P Zachert 500,000 shares for $1.51
(4) Options vested in respect of performance conditions, length of service conditions still required to be met.
(5) Included in total remuneration for the period as per remuneration report.

(e) Loans to Directors and other Key Management Personnel

	Balance at	Interest	Interest not	Loan	Loan	Balance at	Highest
	beginning	Charged	Charged (2)	Written	Repaid/	end of	owing in
	period			Off	Other	period	period
	$000	$000	$000	$000	$000	$000	$000
Directors
2008	-	-	-	-	-	-	-
2007	-	-	-	-	-	-	-
Executives (ii)
2008	696	10	-	-	100	806	1,593
2007	1,672	72	-	-	(1,048)	696	1,874
Total
2008	696	10	-	-	100	806	1,593
2007	1,672	72	-	-	(1,048)	696	1,874

(i) Interest not charged includes employee share scheme interest

(ii) There are 3 key executives within the loan group (2007: 2)

Details of individuals with loans above $100,000 in the reporting period are as follows:

Executives
G Hunt	696	-	-	-	(696)	-	696
P Zachert	-	1	-	-	688	689	689
J V M Erasmus	-	9	-	-	108	117	208

Terms and Conditions

The loan to Mr Hunt was secured by a mortgage over property and was repaid in full in October 2007. The loan was interest free and included as part of Mr Hunt’s total remuneration.

The loan to Mr Zachert was made in June 2008 and is a short term personal loan with interest being charged at a commercial interest rate of 9%. The loan is unsecured, however the Company has sufficient lien over the annual leave, salary and bonus entitlements of Mr Zachert to ensure the loan can be repaid in full.

The loan to Mr Erasmus relates to a bridging loan to purchase a house and other assets pending foreign house sale. Interest is charged at the Australian Taxation Office deemed rate for Fringe Benefits Tax purposes of 9% for 2007/08.

126

Notes to the Financial Statements for the year ended 30 June 2008

Note 34. Key Management Personnel (continued)

(f) Other Transactions and Balances with Directors and other Key Management Personnel

The aggregate amounts recognised in respect of the following types of transactions with directors of entities in the Group and their director-related entities were:

their director-related entities were:
			Consolidated
		2008		2007
Transaction type	Director concerned	$000		$000
Sales through rural agency services	W H Johnson	381		313
	C E Bright	390		376
Purchase of merchandise	W H Johnson	658		281
	C E Bright	75		45
	L P Wozniczka	-		5
Purchases through rural agency services	W H Johnson	7		1
	C E Bright	8		-

The above transactions were made on commercial terms and conditions and at market rates.

In addition, directors of the parent entity or its controlled entities, or their director-related entities, may purchase goods and services from the Group in their domestic dealings and within normal customer or employee relationships on terms and conditions no more favourable than those available in similar arms length dealings.

The amounts involved are immaterial to the Group and include the following:

(i) Sales of goods;
(ii) Provision of insurance services;
(iii) Provision of rural agency services;
(iv) Provision of deposit facilities.

Note 35. Related Party Disclosures

(a) Ultimate Controlling Entity

The ultimate controlling entity of the Group is Futuris Corporation Limited.

(b) Transactions with related parties in the wholly owned group

Transactions between the parent entity and related parties in the wholly owned group during the years ended 30 June 2008 and 30 June 2007 consisted of:

(i) loans advanced by Futuris Corporation Limited;
(ii) loans repaid by Futuris Corporation Limited;
(iii) the receipt and payment of interest on the above loans;
(iv) the payment of dividends to Futuris Corporation Limited;
(v) the receipt of management fees by Futuris Corporation Limited;
(vi) the provision of accounting and administrative services;
(vii) the provision of transport services;
(viii) the provision of guarantees and credit facilities; and
(ix) the transfer of tax losses as permitted by the Income Tax Assessment Act.

These transactions were undertaken on commercial terms and conditions.

127

Notes to the Financial Statements for the year ended 30 June 2008

Note 35. Related Party Disclosures (continued)

Transactions between the wholly owned Group and partly owned controlled entities consisted of:

	2008	2007
	$000	$000
Dividend income	958	1,795
Interest income	-	901
Loans advanced	-	6,589
Purchases of inventories	-	706
Recharges - other	352	414
Sales	2,366	15,372
Wool handling fee	-	557
Wool supply agreement	-	(1,382)

All transactions with controlled entities not wholly owned are conducted on commercial terms and conditions.

Balances with controlled entities not wholly owned

Owing to the Group	17,059	23,781
Owingfrom the Group	(4,008)	(3,406)

(d) Transactions with other partly owned related parties consisted of:

		Consolidated	Consolidated
Transaction type	Class of related party	2008	2007	2008	2007
		$000	$000	$000	$000
Loans to other related parties
Loans advanced	Associate	12,475	2,922	-	-
Loans repayments	Associate	3,179	847	-	-
Interest received or receivable	Associate	1,237	779	-	-
Other transactions
Dividends received	Associate	21,167	22,213	-	-
Dividend received	Joint Venture	12,085	11,630	12,085	11,630
Distribution fees received	Joint Venture	34,590	32,546	-	-
Management fee paid on transfer of
cash accounts	Joint Venture	104	984	-	-
Reimbursement of expenses	Joint Venture	15,743	18,656	-	-
Transfer of cash accounts	Joint Venture	72	154	-	-
Capital contributions	Joint Venture	19,000	5,500	19,000	5,500
Purchases	Associate	134,122	112,796	-	-
Sale of inventory	Associate	58,693	33,746	-	-
Sale of plant & equipment	Associate	-	1,706	-	-
Other services & recharges	Associate	25,190	35,142	-	-
Acquisition of investments	Associate	39,794	89,830	-	231

All transactions with other related parties are conducted on commercial terms and conditions.

Balances with other partly owned related parties

Owing to the Group	Associate	61,781	52,699
Owing from the Group	Associate	-	-
Owing to the Group	Joint Venture	8,348	6,270
Owing from the Group	Joint Venture	-	-

128

Notes to the Financial Statements for the year ended 30 June 2008

Note 36. Earnings Per Share

Note 36. Earnings Per Share
		Consolidated
	2008		2007
	$000		$000
The following reflects the net profit and share data used in the
calculations of earnings per share (EPS):
Reported Operations
Basic
Net profit attributable to members (after tax)	36,447		105,430
Dilutive
Operating profit after tax	36,447		105,430
Interest on convertible notes	-		10,148
Net profit attributable to members (after tax) adjusted for the effect
of convertible notes	36,447		115,578
Continuing Operations
Basic
Net profit attributable to members (after tax)	36,447		105,430
Less: Net (profit)/loss of discontinued operations (net of tax)	29,490		(19,059)
Net profit of continued operations (net of tax)	65,937		86,371
Dilutive
Net profit of continued operations (net of tax)	65,937		86,371
Interest on convertible notes	-		10,148
Net profit of continued operations (net of tax) adjusted for the effect
of convertible notes	65,937		96,519
Discontinuing Operations
Net profit/(loss) of discontinued operations (net of tax)	(29,490)		19,059
Weighted average number of ordinary shares (‘000) used in
calculating basic EPS	756,662		726,666
Dilutive share options (‘000)	71,864		129,568
Adjusted weighted average number of ordinary shares used in
calculating dilutive EPS (‘000)	828,526		856,234

In 2007, convertible notes of 57,119,165 have been included in the calculation of dilutive EPS, as they are believed to be dilutive, given the current share price compared with the conversion price. In 2008, the convertible notes have matured and therefore are not included in the diluted EPS calculation.

Hybrid notes have been included in the calculation of dilutive EPS, as they are believed to be dilutive.

Basic underlying earnings per share (cents per share)	11.13¢	14.65¢
Diluted underlying earnings per share (cents per share)	10.16¢	13.62¢

Underlying earnings are earnings from ordinary activities adjusted for specific non recurring items.

Non recurring items (net of tax) used in calculating underlying basic and dilutive EPS is $47.76 million (2007: $1.05 million). See note 3 for details of significant items.

129

Notes to the Financial Statements for the year ended 30 June 2008

Note 37. Financial Instruments

Exposure to commodity, interest rate, credit and foreign exchange risks arise in the normal course of business. The Group has policies in place to manage these exposures within Board approved limits.

(a) Commodity Risk

The Group enters into contracts for the purchase and sale of various commodities, in the ordinary course of business operations. Differences in the timing of purchase and sale contracts create an exposure to commodity price risk.

All business units that have exposure to commodity price risk operate within the confines of a Board approved risk management policy. The Group enters into futures, swaps and option contracts to manage commodity price risk within the established Board approved limits.

The Group classifies financial instrument commodity purchase and sale contracts, commodity futures, swaps and option contracts as fair value derivatives. All open contracts are fair valued at balance date with any gains and losses on these contracts, together with the associated costs to completion of these contracts, being recognised immediately through the income statement.

The Group has elected not to apply hedge accounting for the financial reporting of commodity contracts classed as financial instruments.

The sensitivity analysis below estimates the impact of a +/- 10% movement in the price of wool, with all other variables held constant. This analysis excludes the impact of these price movements on agency commission related to these commodities.

		Post Tax Profit/Equity
		Higher/(Lower)
	2008		2007
	$000		$000
Consolidated
+ /- 10%	+/- 787	+/-	1,230
Parent
+ /- 10%	-		-

The impact on equity incorporates the impact on profit and is therefore of the same magnitude.

(b) Interest rate risk exposures

The Group is exposed to interest rate risk through primary financial assets and liabilities, modified through derivative financial instruments. Cross currency interest swaps are used to hedge the Australian dollar value of cash flows associated with the payment of principal and interest on long term fixed rate borrowings and to swap a fixed rate exposure into an Australian floating interest rate exposure.

Interest rate swap agreements are used to convert floating interest rate exposures on certain debt to fixed rates. These swaps entitle the Group to receive, or oblige it to pay, the amounts, if any, by which actual interest payments on nominated loan amounts exceed or fall below specified interest amounts.

At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk that are not designated in cash flow hedges:

	Consolidated	Consolidated		Parent
	2008	2007	2008	2007
	$	$	$	$
Financial assets
Non current receivables
- Debtors	2,179	-	-	-
- Other debtors	5,715	6,649	-	-
- Receivables from associates	30,668	22,313	5,442	5,229
- Reinsurance and other recoveries receivable	29,974	31,081	-	-
Cash and cash equivalents	244,043	244,310	42,162	-
	312,579	304,353	47,604	5,229
Financial liabilities
Bank overdrafts	-	-	-	(33,658)
Interest bearing loans and borrowings	(451,846)	(277,280)	-	-
Loan from associate	(6,081)	-	-	-
	(457,927)	(227,280)	-	(33,658)
Net Exposure	(145,348)	77,073	(47,604)	(28,429)

130

Notes to the Financial Statements for the year ended 30 June 2008

Note 37. Financial Instruments (continued)

(b) Interest rate risk exposures (continued)

The Group’s policy is to manage its finance costs using a mix of fixed and variable rate debt. The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date. At 30 June 2008, if interest rates had moved as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

have been affected as follows:
	Post Tax Profit/Equity	Higher/(Lower)
	2008	2007
	$000	$000
Consolidated
+ 100 basis points	(1,453)	771
- 100 basis points	1,453	(771)
Parent
+ 100 basis points	476	(284)
- 100 basis points	(476)	284

The impact on equity is not materially different to the post tax profit impact given the loans are fair valued to the extent they are hedged. Movements in profit are due to higher/lower interest costs from variable rate debt and cash balances. The sensitivity is higher in 2008 than 2007 because of higher debt levels.

(c) Liquidity risk exposures

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and committed available lines of credit.

Consolidated			Maturing	In
	1 Year or Less	Over 1 to 5	Years	More than 5 Years	Total
2008	$000	$000		$000	$000
Financial liabilities
Secured loans	30,704	22,107		-	52,811
Unsecured loans	133,006	301,496		-	434,502
Unsecured notes 1999	-	48,294		30,184	78,478
Unsecured notes 2005	-	-		142,136	142,136
Finance leases	1,193	6,438		-	7,631
Payables	966,726	-		-	966,726
Taxation payable	32,000	-		-	32,000
	1,163,629	378,335		172,320	1,714,284
2007
Financial liabilities
Secured loans	28,749	6,298		-	35,047
Unsecured loans	99,057	100,000		-	199,057
Unsecured notes 1999	-	53,233		33,271	86,504
Unsecured notes 2005	-	-		156,672	156,672
Convertible notes	82,823	-		-	82,823
Finance leases	3,575	4,807		185	8,567
Payables	889,567	-		-	889,567
Taxation payable	61,341	-		-	61,341
	1,165,112	164,338		190,128	1,519,578

131

Notes to the Financial Statements for the year ended 30 June 2008 Note 37. Financial Instruments (continued)

Parent			Maturing	In
	1 Year or Less	Over 1 to 5	Years	More than 5 Years	Total
2008	$000	$000		$000	$000
Financial liabilities
Unsecured loans	-	100,000		-	100,000
Unsecured notes 1999	-	48,294		30,184	78,478
Unsecured notes 2005	-	-		142,136	142,136
Payables	299,979	-		-	299,979
	299,979	148,294		172,320	620,593
2007
Financial liabilities
Bank Overdraft	33,658	-		-	33,658
Unsecured loans	-	100,000		-	100,000
Unsecured notes 1999	-	53,233		33,271	86,504
Unsecured notes 2005	-	-		156,672	156,672
Convertible notes	82,823	-		-	82,823
Payables	437,319	-		-	437,319
Taxation payable	21,437	-		-	21,437
	575,237	153,233		189,943	918,413

132

Notes to the Financial Statements for the year ended 30 June 2008

Note 37. Financial Instruments (continued)

(d) Credit risk exposures

The Group’s exposures to credit risk on the balance sheet are indicated by the carrying amounts of its financial assets. The Group minimises concentrations of credit risk by undertaking transactions with a large number of debtors in various locations and industries. The credit risk amounts do not take into account the value of any collateral or security. The credit worthiness of counterparties is regularly monitored and subject to defined credit policies, procedures and limits. The following amounts disclosed do not reflect expected losses and are shown gross of provisions.

	2008	2007
	$000	$000
Location of credit risk
Australia	803,121	746,443
Asia (excluding China)	5,446	19,871
China	28,257	14,540
Europe	35,002	29,110
Japan	20,919	3,880
North America	24	18,764
Other	3,213	4,887
Total gross receivables	895,982	837,495
Industry classification
Rural	245,395	208,706
Automotive	91,863	85,843
Financial Services	254,331	232,148
Forestry	170,503	146,449
Other(1)	133,890	164,349
Total gross receivables	895,982	837,495

(1) Includes $56.64 million (2007: $105.94 million) in relation to deferred settlement of the property sale transaction.

The credit risk associated with cash is located primarily in Australia.

133

Notes to the Financial Statements for the year ended 30 June 2008

Note 37. Financial Instruments (continued)

(e) Foreign Exchange Risk

The Group is exposed to movements in the exchange rates of a number of currencies, in the ordinary course of business operations. The predominant exposure is to movements in the AUD/USD and AUD/EUR exchange rates. These are primarily generated from the following activities:

(i) Purchase and sale contracts written in foreign currency, or priced in AUD but determined from a foreign currency value at a future date;
(ii) Receivables and payables denominated in foreign currencies;
(iii) Commodity derivatives traded in a currency other than AUD;
(iv) Commodity cash prices that are partially determined by movements in exchange rates;
(v) Costs to sale such as transportation and commission denominated in foreign currency; and
(vi) Funding raised in foreign currency.

Foreign exchange risk is managed within Board approved limits using forward foreign exchange and foreign currency option contracts. Where possible, exposures are netted off against each other to minimise the cost of hedging.

In managing foreign exchange risk, hedge accounting will be applied for financial reporting purposes for selected exposures based upon the size and duration of the exposure.

Where hedge accounting is not applied, foreign currency contracts are fair valued at balance date with gains and losses recognised immediately through the income statement.

At 30 June 2008, the Group had the following exposures to foreign currencies that were not designated in cash flow hedges:

	Consolidated	Consolidated
	2008	2007	2008	2007
	$000	$000	$000	$000
Financial Assets
Cash and cash equivalents – EUR	1,950	6,429	-	-
Cash and cash equivalents – USD	1,003	3,400	-	-
Cash and cash equivalents – GBP	40	762	-	-
Cash and cash equivalents – RMB	939	532	-	-
Cash and cash equivalents – IDR	151	253	-	-
Cash and cash equivalents – Other	247	944	-	-
Debtors – EUR	16,779	27,114	-	-
Debtors – USD	3,963	9,370	-	-
Debtors – CNY	-	4,608	-	-
Debtors – ZAR	1,242	1,934	-	-
Debtors – JPY	23	2,889
Debtors – RMB	493	651	-	-
Debtors – TRL	2,166	472
Debtors – other	331	7,328	-	-
Other debtors - EUR	1,777	-	-	-
Other debtors - ZAR	-	1,932	-	-
Other debtors - CNY	225	912	-	-
Other debtors - GBP	-	3,462	-	-
Other debtors - TRL	1,160	-	-	-
Other debtors – other	73	1,221	-	-
Receivables from associates – EUR	1,151	4,963	-	-
Receivables from associates – NZD	1,079	3,897	-	-
	34,792	83,073	-	-

134

Notes to the Financial Statements for the year ended 30 June 2008

Note 37. Financial Instruments (continued)

(e) Foreign Exchange Risk (continued)

	Consolidated	Consolidated
	2008	2007	2008	2007
	$000	$000	$000	$000
Financial Liabilities
Trade and other payables – EUR	(1,395)	-	-	-
Trade and other payables – USD	(3,769)	-	-	-
Trade and other payables – Other	(631)	(2,821)	-	-
Bank Overdrafts – MYR	-	(500)	-	-
Interest bearing loans and borrowings - EUR	(36,890)	(30,605)	-	-
Interest bearing loans and borrowings – USD	(10,099)	(2,101)	-	-
Interest bearing loans and borrowings – CNY	(81)	(959)	-	-
Interest bearing loans and borrowings – RMB	(1,698)	(1,734)	-	-
Interest bearingloans and borrowings – MYR	-	(1,098)	-	-
	(54,563)	(39,818)	-	-
Net exposure	(19,771)	43,255	-	-

Given the Group effectively hedges its overall foreign currency position, exchange rate movements will have an insignificant impact on profit and equity and therefore no sensitivity analysis has been provided.

(f) Fair value of financial assets and liabilities

All financial assets and liabilities have been recognised in the balance sheet at their net fair values, except for the following:

	Carrying	amount	Fair	Value
	2008	2007	2008	2007
	$000	$000	$000	$000
Financial Assets
Listed shares (equity accounted - refer note 11)	342,790	297,163	449,786	497,326

(g) Hedging activities

At 30 June 2008, the Group had a number of interest rate swap agreements and cross currency swap agreements in place. These swaps are used to hedge the movements in interest rates and the changes in fair value of borrowings denominated in a foreign currency (USD).

The Group also held a number of forward exchange contracts designated as hedges of contracted future sales to customers and contracted future purchases from suppliers for which the Group has firm commitments. The foreign currency contracts are being used to hedge the foreign currency risk of the firm commitments.

The terms of these swap agreements and forward contracts are as follows:

	Amount in Total	Maturity	Pay Rate/	Number of
	$AUD’000		Exchange Rate	Designated
				Hedge Contracts
At 30 June 2008
Interest Rate Swaps	379,054	Sep 2009 to June 2015	5.49% to 6.67%	5
Cross Currency Swaps	291,709	Nov 2009 to May 2015	BBSW + Margin	5
At 30 June 2007
Interest Rate Swaps	425,000	May 2008 to June 2015	4.88% to 5.85%	5
Cross Currency Swaps	291,709	Nov 2009 to May 2015	BBSW + Margin	5

135

Notes to the Financial Statements for the year ended 30 June 2008

Note 38. Share Based Payment Plans

Note 38. Share Based Payment Plans
			Consolidated			Parent
			2008	2007	2008		2007
The number of full time equivalents employed at	30	June are:	4,317	5,002	23		21

(a) Employee option ownership scheme

The parent entity issues from time to time options over ordinary shares to senior employees of the Group. These options are issued at the sole discretion of the Directors as part of employees’ remuneration packages.

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options issued during the year:

	2008	2008	2007	2007
	No. (‘000)	WAEP	No. (‘000)	WAEP
Outstanding at the beginning of the year	18,488	1.91	12,090	1.75
Issued during the year	10,000	2.36	8,763	2.06
Lapsed during the year	(1,762)	1.97	(695)	2.01
Exercised during the year	(1,388)	1.74	(1,670)	1.54
Outstanding at the end of the year	25,338	2.09	18,488	1.91

The range of exercise prices for options outstanding at the end of the year was $1.37 - $2.54.

The weighted average remaining contractual life for the share options outstanding as at 30 June 2008 is 4.13 years (2007: 4.18 years).

The expense recognised in the income statement in relation to these options is disclosed in note 3.

(b) Employee share plan (ESP)

Shareholders approved the implementation of an ESP at a general meeting in November 1989 and October 1998. Within the ESP, two schemes exist. The general terms and conditions of these schemes comprise:

i) General Employee Scheme under which permanent employees may acquire shares in the parent company with a market value ranging from $3,000 to $17,500 per year per employee; and
ii) Incentive Scheme under which selected employees will be eligible to acquire shares in the parent company on such terms as the Directors decide are appropriate in the circumstances of the employee.

During the financial year no ordinary shares (2007: nil) in the parent company were transferred to eligible employees for nil consideration under the Incentive Scheme.

Shares are issued to eligible employees by way of an interest free loan and are subject to holding restrictions, which prevent the employee dealing in the shares until the restriction period has expired. All shares issued under the plan rank equally with other shares of their class and participants enjoy all rights attaching to that class of shares. Any loan is repayable from dividends and the proceeds of sale of shares issued under the plan but is otherwise non-recourse to the employee, the shares being held by the Trustee as security for repayment of loan. This plan is accounted for and valued as an option plan, with the contractual life of each option equivalent to the estimated loan life.

(c) Option pricing model

The fair value of the share options is estimated as at the date of grant using a Trinomial valuation model and taking into account the terms and conditions upon which the options were granted.

The following table lists the inputs to the model used for the period:

	2008	2007
Dividend Yield (%)	-	-
Expected Volatility (%)	32.00	28.00
Risk-free interest rate (%)	6.89	6.05
Expected life of options (years)	3.00	3.00
Option exercise price ($)	1.99	2.12
Weighted average share price at measurement date ($)	1.97	2.16

136

Notes to the Financial Statements for the year ended 30 June 2008

Note 39. Superannuation Commitments

Details of the Group’s superannuation fund (accumulation and defined benefit) as extracted from the plan’s most recent financial reports are as follows:

	30 June 2008	30 June 2007
	$000	$000
Net market value of plan assets	680,945	706,709
Accrued benefits as at 30 June 2008 (2007)	(680,945)	(706,709)
Excess of plan assets over accrued benefits	-	-

Contributions to the accumulation section of the fund by the employer are paid in accordance with legislative requirements, the fund’s rules and employee salary packages. Employees may also contribute. The assets of the accumulation section of the fund are sufficient to satisfy all benefits that would be vested in the event of termination.

Funding recommendations made by the actuary are based on assumptions of various matters such as future salary levels, mortality rates, membership turnover and interest rates. Comprehensive actuarial valuations are made at three yearly intervals, and the last such assessment was made as at 30 June 2007, by S Mules, F.I.A.A. from Mercer Investment Nominees Ltd. The next actuarial valuation is to be conducted as at 30 June 2010.

The objective of the valuation is to ensure that the benefit entitlements of employees are fully funded by the time they become payable. To achieve this objective, the actuary has used the aggregate funding method, which entails contributions to be paid out as a constant percentage of members’ salaries over their working lifetimes.

The defined benefit fund does not comprise a material portion of the fund and thus disclosure of the components of the net benefit income recognised in the Group income statement in accordance with AASB 119 Employee Benefits has not been made.

Note 40. Business Combinations

Changes in the Composition of the Entity

(a) Controlled entities acquired

During the 2008 financial year, the Group acquired an additional 1.06% share in Amcom Limited. As a result, Amcom Limited became a controlled entity on 19 December 2007 and its operating results have been included within the consolidated income statement from that date. As at 30 June 2008, the Group owns 50.15% of Amcom Limited.

Equity and consideration paid in current period	Date	Proportion	June
	Control	of Shares	2008
	Acquired	Acquired	$000
Amcom Limited
- Purchase consideration	19/12/07	0.95%	1,539
- Fair Value of identifiable assets acquired (refer below)			(1,372)
Goodwill on acquisition relating to step acquisitions			167
Discount relating to Amcom Limited purchased from step acquisitions			(6,042)
Discount relating to other immaterial business combinations			(3,094)
Total discount recognised on business combinations			(9,136)

137

Notes to the Financial Statements for the year ended 30 June 2008

Note 40. Business Combinations (continued)

(a) Controlled Entities Acquired (continued)

The aggregate amounts of assets and liabilities acquired	Acquiree’s	Fair value
by major class are:	carrying amount
	$000	$000
Cash	3,862	3,862
Receivables	4,731	4,731
Inventories	1,452	1,452
Investments	30,843	55,391
Property, plant and equipment	61,467	101,427
Intangibles	14,802	14,802
Other assets	1,931	1,931
Tax assets and liabilities	16	(11,972)
Creditors and provisions	(11,871)	(11,871)
Borrowings	(15,318)	(15,318)
Net identifiable assets acquired	91,915	144,435
Minority interests 49.96%	-	(72,160)
Less interest already acquired at 49.09%	-	(70,903)
	91,915	1,372
Outflow of cash to acquire the entities, net of cash acquired:
Cash consideration	(1,539)	(1,539)
Cash balance acquired	3,862	3,862
Net Inflow/(Outflow) of cash	2,323	2,323

A discount has been recognised on the acquisition of Amcom Ltd representing the excess of fair value over book value of the iiNet equity investment and the fair value of Amcom’s fibre network, taken at each step of the acquisition process.

For the purposes of calculating the discount on acquisition as at 31 December 2007, the fair value of Amcom’s net assets was determined previously using actual iiNet share price and estimated fibre construct benchmarks used by Amcom Ltd. Prior to 30 June 2008, independent valuations of the identifiable tangible and intangible assets of Amcom have been performed. As a result of finalising the acquisition accounting the discount previously recorded has been adjusted to reflect the final valuation position.

Amcom was equity accounted through to 30 November 2007 after which Amcom was consolidated.

The full year impact of Amcom’s contribution is $4.92 million to the net profit of the Group. From the date of acquisition, Amcom has contributed $2.70 million to the net profit of the Group.

(b) Controlled Entities Disposed

On 11 September 2007, the Group sold the following Transit companies:

Air International Transit Pty Ltd Air International (UK) Holdings Ltd Air International Coachair Pty Ltd Air International (Ventures) No 3 Pty Ltd Clima Air Conditioning Pty Ltd Sigma Air Conditioning (SA) Pty Ltd Air International Transit (China) Co Ltd Transit Systems (US) Inc Air International Transit (Taiwan) Co Ltd Air International (UK) Ltd Air International Coachair Sdn Bhd Air International (Malaysia) Sdn Bhd APM-Coachair Sdn Bhd Coachair (Thailand) Company Ltd AI Coachair Holdings Limited

On 10 May 2007, the Group sold certain Caversham companies, taking a 25% interest in the Aspen Development Fund No 1. Limited. The companies disposed of were as follows:

Caversham Property Pty Ltd Caversham Property Developments Pty Ltd Bradwell Pty Ltd

138

Notes to the Financial Statements for the year ended 30 June 2008

Note 40. Business Combinations (continued)

(b) Controlled Entities Disposed (continued)

Details of the disposals are as follows:

	Consolidated	Consolidated
	2008	2007
	$000	$000
Proceeds received on disposal of shares
Cash	15,437	120,959
Deferred settlement	-	63,418
Investment in Aspen Development Fund No. 1 Limited (2007)	-	22,500
Less costs of disposal	(3,400)	(27,653)
	12,037	179,224
The carrying amounts of assets and liabilities disposed of by major class are:
Receivables	17,865	6,686
Inventories	18,212	158,622
Other assets	690	-
Property, plant & equipment	2,943	139
Capitalised costs	2,186	-
Investment properties	-	9,352
Payables	(11,842)	(4,366)
Provisions	8,722	(129)
External borrowings	(8,214)	-
Net assets/(liabilities) of entity sold	30,562	170,304
Profit/(loss) on disposal (before tax)	(18,525)	8,920

Note 41. Subsequent Events

Subsequent to year end the Group entered into an arrangement to dispose of its investment in Amcom Telecommunication Limited (“Amcom”). Under the arrangement, the Group sold 170 million shares in Amcom at 17 cents a share or $28.9 million. The Group also entered into an agreement (“Buy-back Agreement”) with Amcom pursuant to which Amcom has agreed to buy back and cancel the remaining 100 million shares held by Futuris for 19.7 cents per share or $19.7 million, subject only to shareholder approval (excluding votes cast by Futuris and shareholders associated with Futuris). Under the terms of the Buy back Agreement, payment of $7 million of the $19.7 million buy-back consideration will be deferred until 31 January 2009. Futuris has the right to terminate the proposed selective buy-back in certain circumstances, including where a superior proposal (compared to the proposed buy-back) emerges to acquire all of Amcom.

No other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the consolidated financial statements, that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.

139

Notes to the Financial Statements for the year ended 30 June 2008

Note 42. Discontinued Operations and Businesses Disposed

Operations within Horticulture, Telecommunications and Transit divisions were disposed during 2008. Particular companies within the Property division were disposed of on 10 May 2007 and these are reported as discontinued operations in 2007. This note shows the results of the continuing businesses and the discontinued business.

	Continuing	Continuing	Discontinued	Consolidated	Continuing	Discontinued	Consolidated
For the year ended 30 June		2008	2008	2008	2007	2007	2007
		$000	$000	$000	$000	$000	$000
Sales revenue		3,274,659	37,456	3,312,115	3,016,517	211,994	3,228,511
Cost of sales	(2,426,096)		(34,953)	(2,461,049)	(2,220,224)	(166,119)	(2,386,343)
Other revenues		112,510	4,826	117,336	67,683	400	68,083
Other expenses		(869,750)	(53,535)	(923,285)	(777,263)	(25,278)	(802,541)
Share of net profits of associates
and joint ventures accounted
for using the equity method		51,236	-	51,236	46,023	(103)	45,920
Profit on sale of non current assets		(2,369)	-	(2,369)	6,218	8,920	15,138
Profit before net borrowing costs
and tax expense		140,190	(46,206)	93,984	138,954	29,814	168,768
Interest revenue		15,422	-	15,422	13,872	107	13,979
Borrowingcosts		(72,320)	(11)	(72,331)	(49,532)	(4,471)	(54,003)
Profit/(loss) before tax expense		83,292	(46,217)	37,075	103,294	25,450	128,744
Income tax (expense)/benefit		(7,712)	16,727	9,015	(14,189)	(6,356)	(20,545)
Net profit/(loss) for year		75,580	(29,490)	46,090	89,105	19,094	108,199
Net profit attributable to minority interest		(9,643)	-	(9,643)	(2,734)	(35)	(2,769)
Net profit/(loss) attributable to members
of the parent entity		65,937	(29,490)	36,447	86,371	19,059	105,430
Revenue and Expenses
Sales revenue:
Sale of goods		2,710,550	37,456	2,748,006	2,517,357	117,343	2,634,700
Commission and other selling charges		280,463	-	280,463	262,134	-	262,134
Construction contract revenue		-	-	-	-	93,634	93,634
Insurance premium revenue		193,144	-	193,144	182,254	-	182,254
Other sales related income		90,502	-	90,502	54,772	1,017	55,789
		3,274,659	37,456	3,312,115	3,016,517	211,994	3,228,511
Other expenses:
Distribution expenses		487,006	10,909	497,915	407,890	10,349	418,239
Marketing expenses		14,666	603	15,269	23,305	2,795	26,100
Occupancy expenses		17,492	374	17,866	11,312	663	11,975
Administrative expenses		154,713	7,823	162,536	144,733	10,831	155,564
Insurance claims & related expenses		128,981	-	128,981	120,292	-	120,292
Other expenses		66,892	33,826	100,718	69,731	640	70,371
		869,750	53,535	923,285	777,263	25,278	802,541
Profit/(loss) on sale of non current assets
- property, plant and equipment		(553)	-	(553)	2,993	-	2,993
- investments		(1,816)	-	(1,816)	3,225	-	3,225
- controlled entities		-	-	-	-	8,920	8,920
		(2,369)	-	(2,369)	6,218	8,920	15,138
				2008	2007
Cash flow information - discontinued operations				$000	$000
The net cash flow of the divested Property Division are as follows:
Operatingactivities				-	7,640
Net cash inflow				-	7,640

140

Directors’ Declaration

(1) In the opinion of the directors:
(a) the financial statements and notes of the company and of the Group are in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the company’s and Group’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and
- (ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2008.
(3) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the closed group identified in note 33, will be able to meet any obligations or liabilities to which they are, or may become subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the directors.

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G D Walters

Director

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L P Wozniczka Director

Adelaide 10 September 2008

141

Ernst & Young Building 121 King William Street Adelaide SA 5000 Australia GPO Box 1271 Adelaide SA 5001 Tel: +61 8 8417 1600 Fax: +61 8 8417 1775 www.ey.com/au

��

Independent auditor’s report to the members of Futuris Corporation Limited

Report on the Financial Report

We have audited the accompanying financial report of Futuris Corporation Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. The Auditor’s Independence Declaration would have been expressed in the same terms if it had been given to the directors at the date this auditor’s report was signed. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Auditor’s Opinion

In our opinion:

the financial report of Futuris Corporation Limited is in accordance with the Corporations Act 2001, including:
i giving a true and fair view of the financial position of Futuris Corporation Limited and the consolidated entity at 30 June 2008 and of their performance for the year ended on that date; and
ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.
the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

142

��

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 39 to 53 of the Annual Report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Futuris Corporation Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001 .

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Ernst & Young

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A Herald Partner

Adelaide

10 September 2008

143

ASX ADDITIONAL INFORmATION

(a) Distribution of Equity Securities as at 27 August 2008

			No. of Shares	No. of Holders	% of Shares	No. of Hybrids No. of Holders	No. of Hybrids No. of Holders	% of Hybrids
1	-	1,000	2,877,244	7,887	0.37	644,616	2,566	42.97
1,001	-	5,000	35,289,399	12,579	4.52	198,321	101	13.22
5,001	-	10,000	48,706,052	6,517	6.24	97,906	13	6.53
10,001	-	100,000	112,014,942	4,856	14.35	559,157	16	37.28
100,001	-	maximum	581,658,007	230	74.52	-	-	-
			780,545,644	32,069	100.00	1,500,000	2,696	100.00
The number of holders holding less than a marketable parcel 382							7

(b) Voting rights

i) Ordinary Shares: all ordinary shares carry one vote per share without restriction.

ii) Futuris Hybrids: Hybrids do not carry any voting rights under the Company’s constitution.

(c) Stock Exchange quotation

The Company’s ordinary shares and Futuris Hybrids are listed on the Australian Securities Exchange. The Home Exchange is Melbourne.

(d) Twenty Largest Shareholders as at 20 August 2008

The twenty largest holders of ordinary shares and Futuris Hybrids.

	No. of Shares	% of Shares	No. of Hybrids	% of Hybrids
HSBC Custody Nominees (Australia) Limited	207,861,895	26.63	18,921	1.26
National Nominees Limited	77,973,314	9.99	98,301	6.55
Citicorp Nominees Pty Limited	46,428,557	5.95	13,359	0.89
J P Morgan Nominees Australia Limited	41,641,771	5.33	60,012	4.00
Pacifc Agrifoods Pty Limited	33,545,578	4.30	-	-
Studio Nominees Pty Limited	24,046,181	3.08	-	-
Cogent Nominees Pty Limited	16,730,524	2.14	13,211	0.88
ANZ Nominees Limited	13,894,000	1.78	80,246	5.35
Goldman Sachs JBWere Capital Markets Ltd	10,507,709	1.35	-	-
Ms Lucy Pamela Christian	8,837,027	1.13	-	-
Mrs Helen Elizabeth Watkins	8,402,000	1.08	-	-
Queensland Investment Corporation	7,785,897	1.00	-	-
AMP Life Limited	7,460,718	0.96	-	-
UBS Nominees Pty Ltd	6,648,363	0.85	53,613	3.57
UBS Wealth Management Australia Nominees Pty Ltd	4,228,226	0.54	-	-
Qualia Investments Pty Limited	3,936,448	0.50	-	-
CPU Share Plans Pty Limited	3,679,101	0.47	-	-
Jalnex Pty Limited	3,000,000	0.38	-	-
RBC Dexia Investor Services Australia Nominees Pty Limited	2,768,218	0.35	20,556	1.37
McCusker Holdings Pty Ltd	2,500,000	0.32	-	-
Merrill Lynch (Australia) Nominees Pty Limited	-	-	53,669	3.58
The Australian National University	-	-	50,000	3.33
Bond Street Custodians Limited	-	-	26,582	1.77
M F Custodians Ltd	-	-	21,391	1.43
NSF Nominees Pty Limited	-	-	20,970	1.40
Equity Trustees Limited	-	-	20,056	1.34
Australian Executor Trustees (SA) Limited	-	-	16,825	1.12
BT Portfolio Services Limited	-	-	12,073	0.80
Minjela Pty Ltd	-	-	11,000	0.73
Mr Stephen Philip Goldberg + Mrs Janine Heather Goldberg	-	-	10,500	0.70
Tree Pot Pty Ltd	-	-	10,000	0.67
Perpetual Custodians Limited	-	-	9,050	0.60
Total	531,875,527	68.14	620,335	41.36

Total held by twenty largest ordinary shareholders as a percentage of this class is 68.14%. Total held by twenty largest hybrid holders as a percentage of this class is 41.36%.

(e) Substantial shareholders listed in the Company’s register of substantial shareholders as at 27 August 2008 were:

(e) Substantial shareholders listed in the	Company’s register of substantial shareholders as at 27 August 2008 were:
Shareholder	Number of shares
M&G Investment Management	102,547,247
Schroder Investment Management	40,062,837
DFA	39,400,635
IOOF Holdings Limited	39,195,175
Taube Hodson Stonex Partners	38,423,440

144

SHAREHOLDER INFORmATION

Share Registry

Tax and dividend/interest payments

Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street, Adelaide, South Australia, 5000 Telephone: 1300 55 61 61 Facsimile: +61 (0)8 8236 2305 Website: www.computershare.com.au

Enquiries and share registry address

Futuris is obliged to deduct tax from dividend/ interest payments (which are not fully franked) to holders registered in Australia who have not quoted their tax file number (TFN) to the Company. Shareholders who have not already quoted their TFN can do so by contacting Computershare. A notification form is available from either the Company’s or Computershare’s website.

Shareholders with enquiries about their shareholdings should contact the Company’s share registry, Computershare Investor Services Pty Ltd, on telephone: 1300 55 61 61.

Online shareholder information

Shareholders can obtain information about their holdings or view their account instructions online, as well as download forms to update their holder details. For identification and security purposes, you will need to know your Holder Identification Number (HIN/SRN), Surname/Company Name and Post/Country Code to access. This service is accessible via the Investor Centre on the Company’s website or direct via the Computershare website.

Dividends

The final dividend of 5.5 cents per share will be paid on 28 October 2008, to shareholders entitled to receive dividends and registered in the books of the Company at the close of business on 2 October 2008. The dividend will be fully franked for Australian tax purposes. No Australian withholding tax will be deducted from dividends paid to shareholders who are resident overseas.

Change of address

Shareholders who have changed their address should advise Computershare in writing. Written notification can be mailed or faxed to Computershare at the address given above and must include both old and new addresses and the security holder reference number (SRN) of the holding. Change of address forms are available for download from either the Company’s or Computershare’s website. Alternatively, holders can amend their details on-line via Computershare’s website. Shareholders who have broker sponsored holdings should contact their broker to update these details.

Direct payment to bank accounts

Dividend and interest payments may be paid direct to bank, building society or credit union accounts in Australia. Shareholders who wish their dividends/interest payments to be paid this way must advise Computershare in writing. Direct credit advice forms can be obtained upon request from Computershare or via either the Company’s or Computershare’s website. Instructions relating to the 2008 final dividend must be received by the record date of 2 October 2008.

Annual Report mailing list

Shareholders who wish to vary their annual report mailing arrangements should advise Computershare in writing. Electronic versions of the report are available to all via the Company’s website. Annual Reports will be mailed to all shareholders who elect to be placed on the mailing list for this document. Report election forms can be downloaded from either the Company’s or Computershare’s website.

Forms for download

All forms relating to amendment of holding details and holder instructions to the Company are available for download from either the Company’s or Computershare’s website.

145

Investor information

Information about the Company is available from a number of sources:

Website: www.futuris.com.au
E-news: Shareholders can nominate to receive company information electronically.
This service is hosted by Computershare and holders can register via the Investor Centre on the Company’s website or direct via Computershare’s website.
Publications: the annual report is the major printed source of company information. Other publications include the Half-yearly report, company press releases, presentations and Open Briefings. All publications can be obtained either through the Company’s website or by contacting the Company.
Direct enquiry with the Manager, Investor Relations, Mr Don Murchland by telephone 08 8425 4617 or via email [email protected]. Securities analysts, institutional and other potential investors seeking information about the Company should contact Don Murchland.

Shareholders’ Calendar[*]

2008
July 1	Start of 2008 fnancial year
August 14	Announcement of full year result and fnal dividend
September 26	Shares trade ex-2008 fnal dividend
October 2	Record date for fnal dividend/DRP participation
October 28	Annual General Meeting
October 28	Payment of fnal dividend
2009
February 12	Announcement of half-year fnancial results
June 30	End of fnancial year
August 12	Announcement of 2009 full year results

*Dates may be subject to change

146

company directory

directors

S Gerlach, LLB, Chairman

J C Fox, BE, MEngSci, PhD, Deputy Chairman C E Bright, BA MA(Oxon) R G Grigg, FSAE-I, FAICD I G MacDonald, SF Fin J H Ranck, BS Econ A Salim, BBus G D Walters, AM, FCA L P Wozniczka, BSc(Hons) MBA

secretaries

S C Furey, BEc(Acc), LLM, FCA R E Mallett, JD BBus, FCIS, FCPA

Registered office

Level 9, 121 King William Street Adelaide, South Australia, 5000 Telephone: (08) 8425 4999 Facsimile: (08) 8410 1597 Email: [email protected] Website: www.futuris.com.au

investor Registry

Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street Adelaide, South Australia, 5000 Telephone: 1300 55 61 61 Facsimile: +61 (0)8 8236 2305 Website: www.computershare.com.au

auditors

Ernst & Young

Bankers

Australia & New Zealand Banking Group BNP Paribas Citigroup Commonwealth Bank of Australia National Australia Bank Westpac Banking Corporation

stock exchange listings

Futuris Corporation Limited ordinary shares and subordinated convertible unsecured notes (Futuris Hybrids) are listed on the Australian Securities Exchange

trustee for Futuris hybrids

Permanent Trustee Company Limited 151 Rathdowne Street Carlton South, Victoria, 3053

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AI assistant

ELDERS LIMITED — Annual Report 2008

64835_rns_2008-09-25_2d1344a7-4d6a-4f84-be2c-cac25429f92b.pdf

annual general meeting

terms and abbreviations

2OO8 was a CHaLLENGING yEar.

Our BusINEss

2OO8: tHE yEar IN BrIEF

Financial results

Elders rural services

Elders Financial services

Forestry

automotive

Corporate

Key Financial results

2OO8 aNd tHE FuturE

From the Chairman

Outlook

Leadership

rEpOrt By tHE CHIEF ExECutIvE

From the CEO

Corporate development & strategic initiatives

Financial Results & position

Review of operations

Rural Services

Forestry

Elders Financial Services

Outlook and conclusion

Automotive

ELdErs ruraL sErvICEs

Main features and outcomes

Key financial results

Business development

Performance

Sustainability

Environment

Human Resources

Community

ELdErs FINaNCIaL sErvICEs

Main features and outcomes

Key financial results

Operations

Elders Rural Bank is the holder of APRA

Performance

FOrEstry

Main features and outcomes

Forestry financial results

Performance

Sustainability

Environment

Community

Human resources and safety management

autOMOtIvE

Main features and outcomes

Key financial results

Sustainability

Environment

Results

Safety

Human Resources

Board of directors

Company secretaries

COrpOratE GOvErNaNCE statEMENt

role of the Board

Management and Oversight

Board

Committees

Delegation of Responsibility to Management

Resignation of CEO

Subsidiary Boards

Company Secretary

Board structure - Composition, Independence & Oversight

Board Composition

(b) by Board policy:

Director Independence

(a) by the Company’s Constitution:

Director skills & experience

Financial Services

Forestry

Futuris Automotive

ELDERS LIMITED Annual Report 2008