EVZ LIMITED — Annual Report 2008

Oct 23, 2008

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FY08 Annual Report

Envirozel Limited and Controlled Entities

ABN 87 010 550 357

Contents

CORPORATE DIRECTORY ...................................................................................... 2 ChAIRmAn’s REPORT .......................................................................................... 3 CEO’s REPORT ...................................................................................................... 4 DIRECTORs’ REPORT ............................................................................................ 6 CORPORATE GOVERnAnCE sTATEmEnT ............................................................ 13 AUDITOR’s InDEPEnDEnCE DECLARATIOn ....................................................... 15 InCOmE sTATEmEnTs ........................................................................................ 18 BALAnCE shEETs ............................................................................................... 19 sTATEmEnTs OF ChAnGEs In EQUITY ............................................................... 20 sTATEmEnTs OF CAsh FLOWs ........................................................................... 22 nOTEs TO AnD FORmInG PART OF ThE ACCOUnTs .......................................... 23 DIRECTORs’ DECLARATIOn ................................................................................ 45 InDEPEnDEnT AUDIT REPORT TO ThE mEmBERs .............................................. 46 ADDITIOnAL shAREhOLDER InFORmATIOn ......................................................48

Envirozel Limited | Annual Report FY08 | 1

Corporate Directory

DIRECTORS

M Findlay (Non-Executive Chairman) G McKern (Non-Executive Deputy Chairman) P Jones (Non-Executive Director) K Fagg (Non-Executive Director) G Burns (Non-Executive Director)

SHARE REGISTRY

Computershare Investor Services Pty Ltd 452 Johnston St ABBOTSFORD, VIC 3067 T: 1300 137 328 F: 1300 137 341

CHIEF EXECUTIVE OFFICER

A Powis

COMPANY SECRETARY and

CHIEF FINANCIAL OFFICER

I Wallace

REGISTERED & PRINCIPAL OFFICE

Level 7, 410 Collins St Melbourne, VIC 3000

T: +61 3 9670 4545

• F: +61 3 9670 6670

AUDITORS

Bentleys Melbourne Partnership 114 William Street MELBOURNE, VIC 3000

BANKERS

Commonwealth Bank of Australia

STOCK EXCHANGE LISTING

Australian Securities Exchange Limited (Home Exchange - Melbourne) ASX Code: EVZ

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Envirozel Limited | Annual Report FY08 | 2

Chairman’s Report

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The Company has closed the financial year 2007/2008 with significant growth in both revenue and profit from the previous year. The EBIT of $8.7m was a 40% increase over the previous year’s figure of $6.2m and revenue increased from $48.3m to $88.1m over the same period. This growth is not reflected in the nPAT line because the Company recognised a tax expense of $1.845m compared to the previous year where tax losses were brought to account.

It is important to recognise that most of this growth eventuated from the inclusion of full year results from Danum Engineering, national Engineering and some ten months contribution from TsF Engineering. We achieved very little growth from the existing businesses during the year and it is clear that if EVZ is to progress, we must ensure that we optimise integration opportunities across the five businesses and that systems and cultures are developed to ensure that each business grows organically.

• There has been a consolidation throughout the Group to strengthen the safety culture across all of the operating units.

• We are committing Business Development resources in the operating divisions to become much more active in promoting the EVZ products and skill sets.

There are many other exciting changes occurring throughout the Company, which after a period of consolidation will provide a strong platform of growth.

Over the last three months, a clear strategy has been developed to ensure initially a consolidation period and then plans for organic growth within the existing business. Acquisitions will only be pursued which are complementary to our existing operations or as part of a subsidiary roll up.

The share price has reduced which reflects, in part, the overall stock market sentiment, but also a less than expected performance from the two latest acquisitions namely national Engineering and TsF Engineering. A significant amount of restructuring has occurred to ensure both businesses achieve their full potential.

There have been a number of changes and achievements during the year which will better position the Company for growth in the next stage of its development:

In the short time since my appointment as Chairman, I have been delighted with the commitment and dedication of the management Team in supporting change to ensure the ongoing growth and success of EVZ. The Board has also been totally committed to ensuring that EVZ is well positioned to provide increased shareholder value. I would also like to thank Geoff Coleman, who retired as a Director during the year, for his significant contribution to EVZ. The efforts of the whole team are greatly appreciated.

• The appointment of Mr Andrew Powis as CEO and Mr Ian Wallace as CFO.

• With the resignation of Mr Geoff Coleman from the Board, two new external directors were appointed, mr Graham Burns as an non-Executive Director and my own appointment as non-Executive Chairman after mr Gordon mcKern stepped down to become Deputy Chairman.

To our shareholders, thank you for supporting us through this period of consolidation, and you can be assured that your Board and management Team are totally committed to ensuring that the exciting opportunities available to EVZ are achieved.

• The development for the first time of Business Plans for all business units.

• The establishment of additional branches which has increased our geographical business spread;

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• syfon systems – 1 branch in Brisbane and 1 in singapore, and we have had several project wins in both areas.

• TsF Engineering – 1 branch in Brisbane.

• Brockman Engineering – has expanded its business opportunities in both nsW and Queensland.

Max Findlay Non-Executive Chairman

There will be a further pursuit of business on a national scale to take advantage of growth opportunities including the resource, oil and gas industry sectors.

• Acquisition of TSF Engineering which, in the short term, has not performed as expected, however, it is projected to provide good growth opportunities from the second half of 2008/2009.

Envirozel Limited | Annual Report FY08 | 3

CEOs Report

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2007-2008 has been a challenging year for Envirozel which has necessitated a number of changes within the Group which I believe will produce long term benefits to shareholders. however, with the prevailing market conditions and reduced risk appetite of the Investment Community, it will take time to see the benefit of these changes and the subsequent reflection in the share price.

The appointment of myself as CEO and Ian Wallace as CFO has provided specific focus on operational and managerial functions within the group. In particular, a comprehensive management Team comprising the CEO, CFO and mD’s of the subsidiary companies has now been formed to guide and drive the Company. Primary issues that have and are being addressed and acted upon include:

• Development of long range Business Plans and Budgets.

• Improved standardised reporting formats to provide timely and concise business performance information measured against approved Budgets.

• Business development and cross-selling opportunities between the subsidiary companies and clients has resulted in a number of multiple bid opportunities on relevant projects. To this end, a Group Capability matrix is being finalised to enhance future project opportunities.

• An ongoing analysis of business risks impacting the Group is being undertaken.

• Workforce resources are being managed to limit labour shortages and retain work within the Group wherever possible.

• The Group has further enhanced its commitment to OHS&E as a result of the Group strategic safety Review. many new initiatives and resources are now shared and reviewed between all companies on a regular basis.

Company Highlights

Key highlights from both a Corporate and operating business point of view are:

• Syfon Systems continued with a strong performance and has successfully opened a new office in Brisbane (which it shares with TsF Engineering). This move had an immediate impact and resulted in the receipt of a number of orders that might otherwise have gone to competitors.

syfon singapore has now been established and has subsequently received a number of orders including the Convention Centre Building which forms part of the marina Bay sands project, which is currently the most prestigious project in singapore.

syfon’s forward order books, both in Australia and malaysia (includes singapore) continues to be strong, however, tighter margins are becoming more evident particularly in nsW.

• Brockman Engineering has also performed well and has a strong forward order book which includes the renewal of the shell Corio Refinery contract for a period of 2½ years with a 1 year option. Brockman are also pushing interstate and have successfully secured a new project in moree, northern nsW. Although the Brockman result was strong, the second half results were adversely impacted by the delay in awarding work on a number of projects and we see this trend continuing.

• Danum Engineering under the circumstances, performed well, but obviously on a diminished work load. The loss of the shell maintenance Contract significantly influenced their second half result. The shell contract represented 70% of Danum’s revenue and EBIT base. In the long run Danum will benefit, as it has been forced to significantly diversify its customer base and geographic targets. The business has already replaced approximately 50% of the shell work and is forecasting a steady performance this year, although margins remain tight.

• National Engineering had a difficult year and continues to feel the impact of the International credit squeeze due to its heavy reliance on retail projects, many of which have either been cancelled or delayed. The price of structural steel has increased by approximately 80% in the last 6 months which has resulted in a number of projects being re-designed to use structural concrete. We foresee these conditions continuing for the current year and have reacted by reducing the current workforce in Young, nsW by approximately 25%. We have also appointed a new mD to re-focus the business and address fundamental business principles.

Despite this negativity, there still appears to be many potential projects and we are in the process of appointing a new BDm, who will assist national Engineering to diversify their customer base.

• Cellular Beams. The Company has also recently entered into an exclusive licence agreement for Australia to manufacture and distribute “cellular” steel beams. A cellular beam is the modern version of the traditional ‘castellated’ beam. When a steel beam is “cellularised” it results in a beam approximately 40-60% deeper and therefore stronger than its parent section for the same weight.

Envirozel Limited | Annual Report FY08 | 4

CEOs Report (Continued)

In the current market of ever increasing steel prices, Builders and Engineers can achieve significant savings by utilising this technology. Whilst this technology will not have a significant impact in the new financial year, it is expected to impact on the construction market in the coming years. This technology has provided the EVZ Group with another significant niche market opportunity.

• TSF Engineering & TSF Maintenance. As previously reported on a number of occasions, the acquisition of TsF has been our most difficult to date. The process finally resulted in the removal and replacement of all the senior management positions in TsF except for the manager of TsF maintenance. This process was obviously traumatic, but has resulted in a substantially stronger organisation now equipped to grow into the future.

At the time of acquisition, TsF Engineering had a good forward order book. TsF’s customers have now accepted that the new management team are well in control of the company and have the skill and expertise to grow the business.

Although this work maintained the business through its management transition phase, this work proved to be less profitable than expected.

significant expansion of the previous customer base (which was heavily reliant on Telstra work) is also being targeted (and progressively achieved) to minimise risk exposure. Telstra embargos have impacted on TsF Engineering’s results for the first two months of this year. however, the future for TsF Engineering is very positive, particularly in the emerging areas of co-generation and trigeneration power supply systems.

• The story with respect to TSF Maintenance is very pleasing. This business has effectively doubled its workload at double its previous charge out rate. Although this is a small business, we intend to expand on this opportunity to provide a recurring revenue base.

Health, Safety & Environment

During the year, all subsidiary companies were subjected to a strategic safety Audit. Although all of the businesses are required to comply with high levels of OHS&E standards on the various job sites, it became obvious that there were a number of differences between the various Company safety policies at their own premises. A specialist has now been commissioned to prepare an umbrella framework and standardised reporting procedures which will encompass all companies in the Group and future acquisitions.

A high level of performance, compliance and achievement of a safe working environment sits at the core of our business success.

Our People

The strength of our Company is reliant on the quality and reliability of our employees. It is pleasing to note that in these times of tight labour supply for both blue and white collar workers, that we have successfully retained a consistent team of skilled people throughout the Company. This is even more significant when you take into account the diversity of our various businesses, and the new opportunities that are being pursued to expand and secure our future. none of this could have been achieved without the expertise and dedication of each of the subsidiary company mD’s.

The Way Forward

We have now developed and adopted a comprehensive strategic Plan to take us forward over the next 5 years. The salient points are as follows:

• Continue to integrate and consolidate the existing businesses. Target significant organic growth by expanding our customer base and product offering by developing a proactive (as opposed to reactive) approach to our existing and new customers. To achieve this, Business Development managers are being employed in all companies and we will develop and diversify our customer base and product offering via a comprehensive Business Development management Team.

• The acquisition of “bolt on” businesses will remain as a focus; however, we will ensure that any such businesses are complementary and compatible with the existing businesses.

• The current business/market climate would appear to be an excellent opportunity for strategic roll-ups and it is our intention to proceed down this path. There are many companies in a similar position to EVZ with similar offerings. It is our intention to build a national base for our “steel” based companies which will provide geographic diversity. This geographic diversity is a perfect base for syfon systems, TsF Engineering and Cellular Beams to build from as each of these companies has a unique niche market offering.

In closing, we are in tough and interesting times that present many opportunities. We are building a solid reliable business to capitalise on these various opportunities that will produce solid results in the medium to long term.

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Andrew D Powis CEO

Envirozel Limited | Annual Report FY08 | 5

Directors’ Report

The Directors present their report on the financial statements of the Company and economic entity for the year ended 30 June 2008. In order to comply with the provisions of the Corporations Act, the Directors report as follows:

DIRECTORS

The following persons were Directors of the Company during the financial year and up to the date of this report:

Max FINDLAY (appointed 14 May 2008)

Gordon McKERN

Peter JONES Keith FAGG Graham BURNS (appointed 1 February 2008) Geoff COLEMAN (resigned 31 May 2008)

INFORMATION ON DIRECTORS

Details of the Directors of the Company in office at the date of this report are:

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Max Findlay

Appointed to the Board 14 May 2008 – Non-Executive Director Appointed 1 July 2008 – Non-Executive Chairman.

mr Findlay was the managing Director of Programmed maintenance services Limited from 1988 to 2008 and accumulated significant and relevant experience in the strategy, planning, management and marketing of a growing industrial organisation.

mr Findlay has a Bachelor of Economics and is a Fellow of the Australian Institute of Company Directors. mr Findlay is a member of the Audit Committee, nomination Committee and Remuneration Committee. Interest in Shares 245,000

Gordon McKern

Appointed to the Board 15 December 2003 – Non-Executive Director Appointed 1 July 2008 – Non-Executive Deputy Chairman.

mr mcKern is a Fellow of the Australian Institute of Company Directors. mr mcKern is a member of the nomination Committee and Remuneration Committee.

mr mcKern has extensive experience in the water and steel industries. mr. mcKern was the previous Chairman of the Coliban Water Authority and has been a key participant in the Victorian Government’s restructuring of local governments.

Interest in Shares 8,193,993

Peter Jones

Appointed to the Board 29 March 2004 – Non-Executive Director.

mr Jones is a Chartered Accountant and has extensive skills in business development, financing and property development. mr Jones is Chairman of the Audit Committee.

Interest in Shares 7,713,748

Keith Fagg

Appointed to the Board 20 December 2005 - Non-Executive Director.

mr Fagg owns and operates the Fagg’s mitre 10 business, one of the largest in Australia in the mitre 10 Group. mr Fagg has wideranging managerial skills. mr Fagg is a member of the Audit Committee. Interest in Shares 1,494,169

Graham Burns

Appointed to the Board 1 February 2008 – Non-Executive Director

mr Burns has extensive managerial skills and experience in the property, retail and manufacturing sectors. he is currently the Chief Executive of hunter Land which is the largest industrial developer in the hunter Region of new south Wales. mr Burns is Chairman of the Remuneration Committee. Interest in Shares 1,200,000

Envirozel Limited | Annual Report FY08 | 6

Directors’ Report (Continued)

DIRECTORS’ MEETINGS

The following table sets out the number of Directors’ meetings (including meetings of any committee of Directors) held during the financial year and the number of meetings attended by each Director (whilst they were a Director or committee member):

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DIRECTOR’S MEETINGS AUDIT COMMITTEE MEETINGS
Total number of meetings held: 13 3
No. Held No. Held
No. Attended No. Attended
Whilst a director Whilst a member
M Findlay - Chairman (appointed 14 May 2008) 2 2 0 0
G McKern - Deputy Chairman 12 13 0 0
P Jones 13 13 3 3
K Fagg 13 13 3 3
G Burns (appointed 1 February 2008) 5 6 Not applicable Not applicable
G Coleman (resigned 31 May 2008) 11 12 2 3
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REMUNERATION COMMITTEE MEETINGS

Total number of meetings held:	4
	No. Attended	No. Held Whilst a member
M Findlay (appointed 14 May2008)	0	0
G McKern	1	1
P Jones	3	3
K Fagg	3	3
G Burns(appointed 1 February2008)	0	1
G Coleman(resigned 31 May2008))	4	4

COMPANY SECRETARY

The Company secretary is Ian Wallace. mr Wallace is a Chartered Accountant with accounting and company secretarial experience in listed and unlisted companies.

PRINCIPAL ACTIVITIES

The principal activities of the economic entity are:

• Design and installation of syfonic roof drainage systems to major buildings including airports, shopping centres and sporting venues throughout Australia and south-east Asia.

• Manufacture, service and maintenance of large steel tanks for use in the water, petrochemical and chemical industries,

• Construction, on-site installation, maintenance and shutdown engineering services to petrochemical, aluminium, glass, cement, defence and agriculture industries.

• Design, installation and maintenance of base and back up power generation equipment, communications equipment and marine installations.

• Fabrication and erection of structural steelwork, for large commercial, industrial and retail projects.

OPERATING RESULTS

The operating result for the economic entity for the year after income tax expense was a profit of $5,004,760 compared to a profit after income tax expense in 2007 of $5,959,653. The 2007 comparative included the benefit of previously unrecognised carry forward tax losses.

DIVIDENDS

since the start of the financial year the company paid an interim fully franked dividend on 9 January 2008 of 0.5 cents per share. On 30 may 2008 the company paid a final fully franked dividend of 0.75 cents per share.

REVIEW OF ACTIVITIES

During the year under review the Company:

• Set the foundations for its next stage of growth with the appointment of a Chief Executive Officer, a Chief Financial Officer and the appointment of a non-Executive Chairman with significant experience in the strategy, planning, management and marketing of a growing industrial organisation.

• Established a comprehensive strategy for organic growth across existing businesses, including geographic expansion and acquisitions complementary to existing operations.

• Completed the acquisition of the TSF Engineering business. This acquisition was the most difficult of all of EVZ’s acquisitions which reduced the impact of this business on Group results for the year. however, TsF Engineering has been fully integrated into the EVZ Group and will be a significant contributor to the Company in coming years.

• The syfonic roof drainage business, Syfon Systems, opened an office in Brisbane (also shared with TsF Engineering) which had an immediate impact with the winning of a number of additional Queensland based contracts.

• Syfon Systems successfully established a presence in the Singapore market and has since won several contracts in the region.

• Now has a presence along the Australian eastern seaboard, Malaysia and singapore and will continue to seek suitable markets for its products and services and for acquisition opportunities throughout Australia and other Asian regions.

• Entered into an exclusive Australian licence agreement to manufacture and distribute “cellular” steel beams. This technology has provided the EVZ Group with another significant niche market opportunity.

• Commenced paying Dividends for the first time in its history.

• Raised funds, through share placements and bank funding, to support its acquisitions, growth and operations.

Envirozel Limited | Annual Report FY08 | 7

Directors’ Report (Continued)

CHANGES IN STATE OF AFFAIRS

During the year the company acquired the business of TsF Engineering, through its subsidiary TsF Engineering Pty Ltd. TsF Engineering designs, installs and maintains base and back up power generation equipment, communications equipment and marine installations.

SUBSEQUENT EVENTS

There have not been any matters or circumstances, other than those referred to in the financial statements or notes thereto, that have arisen since the end of the financial year, that have significantly affected, or may significantly affect, the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years after the financial year.

FUTURE DEVELOPMENTS

The Directors believe, on reasonable grounds, that to include in this report particular information regarding likely developments in the operations of the economic entity and the expected results of those operations in financial years after the financial year would be likely to result in unreasonable prejudice to the economic entity. Accordingly, this information has not been included in this report.

PROCEEDINGS ON BEHALF OF THE COMPANY

no person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. no proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.

SHARE OPTIONS

There are no share options.

ENVIRONMETAL REGULATION

The economic entity is not subject to any significant environmental regulations under a Commonwealth, state or Territory Law.

INSURANCE OF OFFICERS

During the financial year the Company insured the Directors and Officers of the Company against legal costs that may be brought against the Officers in their capacity as Officers of the Company. The policy provides for confidentiality with respect to its premium.

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Envirozel Limited | Annual Report FY08 | 8

Directors’ Report (Continued)

NON-AUDIT SERVICES

The Board of Directors, in accordance with advice from the Audit Committee, is satisfied that any provision of non-audit services during the year was compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that any non-audit services provided do not compromise the external Auditor’s independence for the following reasons:

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

• the nature of the services provided do not compromise the general principles relating to Auditor independence in accordance with APEs 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical standards Board

During the year there were no non-audit services provided by the Company’s Auditors.

AUDITORS INDEPENDENCE DECLARATION

As required under section 307C of the Corporations Act 2001, Envirozel Limited has obtained an independence declaration from its Auditors, Bentleys melbourne Partnership. This is included on page 15 of this financial report.

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Envirozel Limited | Annual Report FY08 | 9

Directors’ Report (Continued) Remuneration Report

REMUNERATION REPORT

This report details the nature and amount of remuneration for each Director of Envirozel Limited, and for key management personnel.

Remuneration policy

The remuneration policy of Envirozel Limited has been designed to align Director and Executive objectives with shareholder and business objectives by providing a fixed remuneration component and where appropriate offering specific longterm incentives based on key performance areas affecting the economic entity’s financial results. The Board of Envirozel Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best Executives and Directors to run and manage the economic entity, as well as create goal congruence between Directors, Executives and shareholders.

The Board’s policy for determining the nature and amount of remuneration for Board members and key senior Executives of the economic entity is as follows:

• The remuneration policy, setting the terms and conditions for the executive Directors and other Executives, was developed by the Remuneration Committee and approved by the Board after seeking professional advice where appropriate from independent external consultants.

• All Executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and where appropriate performance incentives.

The Remuneration Committee reviews Executive packages annually by reference to the economic entity’s performance, Executive performance and comparable information from industry sectors and other listed companies in similar industries.

The performance of Executives is measured against criteria agreed with each executive and is based predominantly on the forecast growth of the economic entity’s profits and shareholders’ value. Any bonuses and incentives will be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest caliber of Executives and reward them for performance that results in long-term growth in shareholder wealth.

The Executive Directors and Executives receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Individuals may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to Directors and Executives is valued at the cost to the company and expensed. Option based remuneration is valued using the Black-scholes methodology.

The Board policy is to remunerate non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Remuneration Committee determines payments to the non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice will be sought when required.

The maximum aggregate amount of fees that can be paid to non-Executive Directors is subject to approval by shareholders at the Annual General meeting. Fees for non-Executive Directors are not linked to the performance of the economic entity. however, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and may be able to participate in any employee share/option plan introduced.

Shares and options issued as part of remuneration

The Company has established the Envirozel Limited Division 13A Tax Exempt share Plan which has been approved at a General meeting of shareholders held on 27 march 2007. During the year employees participated in the plan. Participating employees were entitled to acquire the equivalent of $1000 in ordinary shares in the company. These vested ordinary shares were issued at a weighted average market price of $0.513. A total of 590,547 ordinary shares were issued under this plan. Participating employees are prohibited from selling or disposing of these shares unless and until the third anniversary of the date on which the shares were granted and the date on which the employee has ceased employment.

There were no further shares or options issued as part of remuneration during the year to 30 June 2008.

Performance based remuneration

Currently there is no performance based remuneration.

Company performance, Shareholder wealth and Directors’ and Executives’ remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders, Directors and Executives.

Envirozel Limited | Annual Report FY08 | 10

Directors’ Report (Continued) Remuneration Report (Continued)

Details of remuneration for the year ended 30 June 2008

The remuneration for each Director and each of key management personnel of the economic entity during the year was as follows:

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Non-Cash Superannuation
Directors Salary Fees Benefits Contributions Total
2008 $ $ $ $ $
M Findlay (appointed 14 May 2008) - 12,500 - - 12,500
G McKern 126,667 - - 90,000 216,667
P Jones - 52,500 - - 52,500
K Fagg - 22,500 - 22,500 45,000
G Burns (appointed 1 February 2008) - 18,750 - - 18,750
G Coleman (resigned 31 May 2008) - 41,270 - - 41,270
126,667 147,520 - 112,500 386,687
2007
G McKern 167,500 - - - 167,500
P Jones - 42,500 - - 42,500
K Fagg - 2,917 - 39,583 42,500
G Coleman - 42,500 - - 42,500
167,500 87,917 - 39,583 295,000
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Key management personnel of the economic entity

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Share based Non-Cash Superannuation
Salary remuneration Benefits Contributions Total
2008 $ $ $ $ $
A Powis - (Chief Executive Officer) 165,181 1,000 2,277 95,409 263,867
I Wallace - (Chief Financial Officer and Company Secretary) 153,261 - - 35,269 188,530
A Bellgrove - (Managing Director Syfon Systems Pty Ltd) 234,677 1,000 - 13,530 249,207
M Goddard - (Managing Director Brockman Engineering Pty Ltd) 113,421 1,000 21,330 91,064 226,815
V Juchima - (Managing Director Danum Engineering Pty Ltd) 246,039 1,000 - 27,109 274,148
D Williams - (Managing Director National Engineering Pty Ltd) 140,002 1,000 26,693 100,000 267,695
A Green - (Managing Director TSF Engineering Pty Ltd
- commenced 15 November 2007) 132,392 - - 11,893 144,285
1,184,973 5,000 50,300 374,274 1,614,547
2007
A Powis - (Managing Director Syfon Systems Pty Ltd) 205,578 - 26,455 15,939 247,972
A Bellgrove - (General Manager Syfon Systems Pty Ltd) 185,314 - 19,183 14,276 218,773
D Forbes - (Managing Director Brockman Engineering Pty Ltd) 123,102 - - 100,620 223,722
M Goddard - (Project Manager Brockman Engineering Pty Ltd) 100,170 - 3,738 75,729 179,637
V Juchima - (Managing Director Danum Engineering Pty Ltd)
- commenced 1 January 2007 118,522 - - 12,787 131,309
D Williams - (Managing Director National Engineering Pty Ltd)
- commenced 1 June 2007 11,667 - 659 8,333 20,659
I Wallace - (Company Secretary) 95,624 - - - 95,624
P Cooper - (General Manager NuSource Water) 132,322 - 15,000 17,678 165,000
972,299 - 65,035 245,362 1,282,696
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Envirozel Limited | Annual Report FY08 | 11

Directors’ Report (Continued) Remuneration Report (Continued)

Details of remuneration for the year ended 30 June 2008 (Continued)

Remuneration and other terms of employment for certain key Executives are formalised in service agreements. Each of these agreements may provide for the provision of other benefits including car allowances. major provisions of the agreements relating to remuneration are set out below.

A Powis

Chief Executive Officer

• The agreement has no fixed term. There are no incentive terms within the agreement.

I Wallace

Chief Financial Officer and Company Secretary

• The agreement has no fixed term. There are no incentive terms within the agreement.

A Bellgrove

Managing Director - Syfon Systems Pty Ltd

• The agreement has no fixed term. There were no incentive terms within the agreement.

M Goddard

Managing Director - Brockman Engineering Pty Ltd

• The agreement has no fixed term. There are no incentive terms within the agreement.

V Juchima

Managing Director - Danum Engineering Pty Ltd

• Term of agreement – 3 years from 1st January 2007. There are no incentive terms within the agreement.

D Williams

Managing Director - National Engineering Pty Ltd

• Term of agreement – 2 years from 1st June 2007. There are no incentive terms within the agreement.

A Green

Managing Director - TSF Engineering Pty Ltd

• The agreement has no fixed term. There are no incentive terms within the agreement.

signed in accordance with a resolution of the Board of Directors.

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Director – M Findlay

Signed at Melbourne this 26th day of September 2008

Envirozel Limited | Annual Report FY08 | 12

Corporate Governance Statement

For the year ended 30 June 2008

The Board of Directors has adopted a set of Corporate Governance Practices and a Code of Conduct in line with ‘Best Practice Recommendations’ released by the Australian securities Exchange adapted where appropriate for the size, complexity and operations of the Company and its controlled entities. The ongoing relevance and effectiveness of this framework is periodically reviewed to reflect changing circumstances and ways of improving the practices.

Role of the Board and Management

The Board’s role is to govern the economic entity rather than to manage it. In governing the economic entity, the Directors must act in the best interests of the economic entity as a whole. It is the role of senior management to manage the economic entity in accordance with the direction and delegations of the Board and it is the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.

The Board’s responsibilities are summarised as:

1. Leadership of the organisation.

2. Ensuring the health, safety and well-being of Directors, Officers, Employees and Contractors.

3. strategy formulation.

4. Overseeing planning activities.

5. shareholder liaison.

During the period to 29 February 2008, the Board believed it was appropriate to have an Executive Chairman who had expertise crucial to the growth and development of the economic entity. From 1 march 2008, the Chairman became a non-Executive Chairman with the appointment of a Chief Executive Officer. however, from 1 July 2008, the Board considers it is now at an appropriate stage of its growth to appoint an Independent Director as the non-Executive Chairman.

Directors collectively or individually have the right to seek independent professional advice at the economic entity’s expense, up to specified limits, to assist them to carry out their responsibilities. All advice obtained is made available to the full Board.

The Company has now established a nomination Committee, comprised of the Chairman and Deputy Chairman. This committee will consider Board membership nomination matters.

Ethical and Responsible Decision-Making

As part of its commitment to recognising the legitimate interests of stakeholders, the economic entity has established a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders.

The Company has a share trading policy that regulates the dealings by Directors, Officers and Employees, in shares, options and other securities issued by the Company. The policy has been formulated to ensure that Directors, Officers, Employees and Consultants who work on a regular basis for the Company are aware of the legal restrictions on trading in company securities while in possession of unpublished price-sensitive information.

1. monitoring, compliance and risk management.

2. monitoring Group finances and exposures.

3. monitoring Group human resource matters.

4. Delegation of appropriate authority to management.

5. Determining appropriate remuneration policy.

6. nomination of additional Directors.

Structure and Composition of the Board

The Board has been formed so that it has an effective mix of personnel who are committed to adequately discharging their responsibilities and duties, and be of value to the economic entity.

The names of the Directors, their independence, qualifications and experience are included in the Directors Report, along with the term of office held by each.

The Board believes that the interests of all shareholders are best served by:

• Directors having the appropriate skills, experience and contacts within the economic entity’s industries.

• The Board striving to have a balance between the overall number of Directors and the number of Directors being independent as defined in the AsX Corporate Governance Guidelines.

The Board currently has five Directors, of which four are Independent Directors. The number of Independent Directors on the Board may vary as the economic entity develops. The Board believes that it can attract appropriate Independent Directors with the necessary industry experience over time and in line with the economic entity’s growth.

Where any Director has a material personal interest in a matter, in accordance with the Corporations Act, the Director will not be permitted to be present during discussion or to vote on the matter. The enforcement of this requirement aims to ensure that the interest of shareholders, as a whole, is pursued and that their interest or the Director’s independence is not adversely affected.

Integrity in Financial Reporting

The full Board of Directors has reviewed the Annual Report prior to signing. The Board has received attestations, as recommended by the AsX Corporate Governance Council, as to the Company’s financial condition prior to signing this Annual Report.

A duly constituted Audit Committee has been in existence during the financial year. The Committee’s Charter encompasses the AsX Corporate Governance Council’s ‘Best Practice Recommendations’, including the ‘Responsibilities of Risk management & Compliance’.

Currently, the Audit Committee consists of three Independent Directors. The current members of the Committee, at the date of this report are, P Jones (Chairman), m Findlay and K Fagg. Their qualifications are detailed in the Directors’ Report. The Audit Committee considers the financial reports with management and the external Auditors prior to recommending the reports to the full Board of Directors.

The Committee holds a minimum of two meetings a year. A detailed list of attendance by members at the Audit Committee meetings is contained in the Directors’ Report.

Timely and Balanced Disclosure

The Board has designated the Company secretary as the person responsible for overseeing and co-ordinating disclosure of information to the AsX as well as communicating with the AsX. In accordance with AsX ‘Listing Rules’ the Company immediately notifies the AsX of relevant information concerning the Company. Information which falls into the AsX continuous disclosure requirements is information which;

1. a reasonable person would or may expect to have a material effect on the price or value of the Company’s securities, and

2. would, or would be likely to influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities.

Envirozel Limited | Annual Report FY08 | 13

Corporate Governance Statement (Continued) For the year ended 30 June 2008

Rights of Shareholders

The Company respects the rights of its shareholders, and to facilitate the effective exercise of the rights, the Company is committed to:

1. Communicating effectively with shareholders through; ongoing releases to the market via the AsX announcements platform, direct mailings to shareholders and the General meetings of the Company;

2. Giving shareholders ready access to balanced and understandable information about the Company and Corporate Proposals;

3. making it easy for shareholders to participate in General meetings of the Company; and

4. Requesting the External Auditor to attend the Annual General meeting and be available to answer shareholder’s questions about the conduct of the audit, and the preparation and content of the Auditor’s Report.

The Company makes available to shareholders wishing to make inquiries, a telephone number, e-mail address and has a website, which will be updated regularly with AsX announcements and other relevant information.

The Company is committed to remunerating its senior Executive Officers in a manner that is market-competitive and consistent with ‘Best Practice’ as well as supporting the interests of shareholders.

senior Executive Officers receive a remuneration package based on fixed and variable components, determined by their position and experience. shares and/or options, subject to shareholder approval may also be granted based on an individual’s performance.

non-Executive Directors are paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of non-Executive Directors. nonExecutive Directors do not receive performance based bonuses and do not participate in Equity schemes of the Company without prior shareholder approval.

Current remuneration is disclosed in Directors’ Report.

Legitimate Interests of Stakeholders

The Board acknowledges the legitimate interests of various stakeholders such as Employees, Clients, Customers, Government Authorities, Creditors and the Community as a whole. As a good Corporate Citizen, the Board encourages compliance and commitment to appropriate corporate practices that are fair and ethical.

Recognise and Manage Risk

The Audit Committee reviews risk management within the economic entity.

In addition, the Chief Executive Officer and Chief Financial Officer have given a statement to the Board that:

1. In accordance with ‘Best Practice Recommendation 4.1’, that the Financial statements are founded on a sound system of risk management and internal compliance and control which implements the Policies adopted by the Board.

2. The economic entity’s ‘Risk management and Internal Compliance and Control system’, in so far as it relates to financial risk, is operating effectively in all material respects.

Encourage Enhanced Performance

Following completion of the financial year the Board conducted a review and assessment of its performance. The review was conducted by an external facilitator. The results of this review were collated and developed into a series of recommendations to improve performance. The report was presented to the Board from which an action plan was developed to implement the recommendations and set performance criteria and goals for the current and future financial years.

Remunerate Fairly and Responsibly

The Company has a Remuneration Committee. The Remuneration Committee is made up of three Independent Directors. The current members of the Remuneration Committee are, G Burns (Chairman), m Findlay and G mcKern. The Remuneration Committee is responsible for:

1. setting the remuneration and conditions of service of all Executive and non-Executive Directors and senior Executive Officers.

2. Approving the design of Executive & Employee incentive plans (including equity-based plans and options) and proposed payments or awards under such plans.

3. Reviewing performance hurdles associated with incentive plans.

4. making recommendations to the Board on the remuneration of non-Executive Directors within the aggregate approved by shareholders at General meetings from time to time.

5. Consulting appropriately qualified Consultants for advice on remuneration and other conditions of service.

6. succession planning for senior Executive Officers.

7. Performance assessment of the senior Executive Officers.

Envirozel Limited | Annual Report FY08 | 14

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Envirozel Limited | Annual Report FY08 | 15

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Income Statements

For the year ended 30 June 2008

Notes	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $
Revenue 2(a) Other income 2(b) Expenses: Marketing expense Cost of sales Corporate and administration Finance costs Business development costs Share based payments Proft/(loss) before income tax Income tax expense/(beneft) 3 Proft from continuing operations Proft from discontinued operations Proft for the year Proft attributable to minority interest Proft attributable to members of the parent entity 16 Overall operations Basic earnings per share 17 Diluted earnings per share 17 Continuing operations Basic earnings per share 17 Diluted earnings per share 17	88,140,861 48,362,408 6,791,552 846,371 - 237,600 - 237,600 (548,361) (454,302) (135,970) (71,788) (66,992,194) (36,218,761) - - (11,434,647) (5,264,256) (1,733,076) (973,321) (1,247,954) (518,275) (1,225,871) (483,464) (759,679) (643,942) (545,461) (114,405) (305,383) - (305,383) -
	6,852,643 5,500,472 2,845,791 (559,007) 1,847,883 (459,181) (837,611) (2,362,503)
	5,004,760 5,959,653 3,683,402 1,803,496 - - - -
	5,004,760 5,959,653 3,683,402 1,803,496 - - - -
	5,004,760 5,959,653 3,683,402 1,803,496
	Cents per share Cents per share Cents per share Cents per share
	2.46 3.56 1.81 1.08 2.46 3.55 1.81 1.08 2.46 3.56 1.81 1.08 2.46 3.55 1.81 1.08

The above income statements should be read in conjunction with the accompanying notes.

Envirozel Limited | Annual Report FY08 | 18

As at 30 June 2008

Balance Sheets

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Economic Economic
Entity Entity Parent Parent
Notes 2008 $ 2007 $ 2008 $ 2007 $
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CURRENT ASSETS Cash and cash equivalents 22 Trade and other receivables 4 Inventories 5 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables 4 Financial Assets 6 Plant and Equipment 7 Deferred Tax Assets 8 Intangible Assets 9 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 10 Current tax liabilities 8 Short-term borrowings 11 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term borrowings 12 Deferred tax liabilities 8 Other long term provisions 13 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued Capital 14 Reserves 16 Accumulated losses 16 TOTAL EQUITY	3,138,980 8,275,124 150,095 1,116,885 18,706,149 13,017,676 216,474 278,426 2,179,571 2,566,334 - -
	24,024,700 23,859,134 366,569 1,395,311
	714,290 338,730 38,754,001 23,445,512 11,433 25,000 3,746,587 3,760,154 6,063,293 5,439,545 57,478 4,205 1,994,387 2,180,273 1,158,935 1,386,089 30,796,263 14,769,867 - -
	39,579,666 22,753,415 43,717,001 28,595,960
	63,604,366 46,612,549 44,083,570 29,991,271
	12,088,879 17,071,151 406,931 6,717,591 1,511,823 961,333 1,335,123 961,333 99,283 304,938 - 250,000
	13,699,985 18,337,422 1,742,054 7,928,924
	12,691,202 6,032,864 12,550,000 5,950,000 3,576 3,817 - - 96,260 96,467 - -
	12,791,038 6,133,148 12,550,000 5,950,000
	26,491,023 24,470,570 14,292,054 13,878,924
	37,113,343 22,141,979 29,791,516 16,112,347
	46,023,159 33,430,541 46,023,159 33,430,541 165,469 194,632 198,700 198,700 (9,075,285) (11,483,194) (16,430,343) (17,516,894)
	37,113,343 22,141,979 29,791,516 16,112,347

The above balance sheets should be read in conjunction with the accompanying notes.

Envirozel Limited | Annual Report FY08 | 19

For the year ended 30 June 2008

Statements of Changes In Equity

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Economic Entity
Foreign
Currency
Accumulated Capital Translation
Issued Capital Losses Reserves Reserve Total
$ $ $ $ $
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Balance at 1 July 2006 Shares issued during the year Proft attributable to members of parent entity Adjustments from translation of foreign controlled entities Sub-total Dividends paid or provided Balance at 30 June 2007 Balance at 1 July 2007 Shares issued during the year Proft attributable to members of parent entity Adjustments from translation of foreign controlled entities Sub-total Dividends paid or provided Balance at 30 June 2008	24,279,368 (17,442,847) 198,700 24,243 7,059,464 9,151,173 - - - 9,151,173 - 5,959,653 - - 5,959,653 - - - (28,311) (28,311)
	33,430,541 (11,483,194) 198,700 (4,068) 22,141,979 - - - - -
	33,430,541 (11,483,194) 198,700 (4,068) 22,141,979
	33,430,541 (11,483,194) 198,700 (4,068) 22,141,979 12,592,618 - - - 12,592,618 - 5,004,760 - - 5,004,760 - - - (29,163) (29,163)
	46,023,159 (6,478,434) 198,700 (33,231) 39,710,194 - (2,596,851) - - (2,596,851)
	46,023,159 (9,075,285) 198,700 (33,231) 37,113,343

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Envirozel Limited | Annual Report FY08 | 20

For the year ended 30 June 2008

Statement of Changes In Equity (Continued)

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Parent Entity
Accumulated Capital
Issued Capital Losses Reserves Total
$ $ $ $
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Balance at 1 July 2006 Shares issued during the year Proft attributable to members of parent entity Sub-total Dividends paid or provided Balance at 30 June 2007 Balance at 1 July 2007 Shares issued during the year Proft attributable to members of parent entity Sub-total Dividends paid or provided Balance at 30 June 2008	24,279,368 (19,320,390) 198,700 5,157,678 9,151,173 - - 9,151,173 - 1,803,496 - 1,803,496
	33,430,541 (17,516,894) 198,700 16,112,347 - - - -
	33,430,541 (17,516,894) 198,700 16,112,347
	33,430,541 (17,516,894) 198,700 16,112,347 12,592,618 - - 12,592,618 - 3,683,402 - 3,683,402
	46,023,159 (13,833,492) 198,700 32,388,367 - (2,596,851) - (2,596,851)
	46,023,159 (16,430,343) 198,700 29,791,516

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Envirozel Limited | Annual Report FY08 | 21

For the year ended 30 June 2008

Statements of Cash Flows

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Economic Economic
Entity Entity Parent Parent
Notes 2008 $ 2007 $ 2008 $ 2007 $
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CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to Suppliers & Employees (inclusive of GST) Dividends received Income tax paid Interest received Finance costs NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 22(ii) CASH FLOWS FROM INVESTING ACTIVITIES Payment for controlled entities Loans to controlled entities Proceeds from sale of plant and equipment Purchase of plant and equipment NET CASH FLOWS USED BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Dividends Paid by Parent Entity Proceeds from Shares Issued Proceeds - Loans Repayment of Loans Proceeds from Lease Financing Payments for Lease Financing NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES NET INCREASE /(DECREASE) IN CASH HELD Net Cash Balance Acquired 32 Cash at beginning of fnancial year CASH AT END OF FINANCIAL YEAR 22(i)	88,400,421 50,082,633 3,946,644 3,175,000 (85,766,367) (42,544,686) (2,167,572) (1,004,642) - - 5,303,402 - (1,207,506) (17,696) (1,192,304) - 460,320 158,587 38,310 55,275 (1,247,954) (518,275) (1,225,871) (483,464)
	638,914 7,160,563 4,702,609 1,742,169
	(21,641,555) (11,232,056) - - - - (21,641,555) (11,232,056) 103,618 14,091 - - (1,203,172) (439,417) (68,228) (4,602)
	(22,741,109) (11,657,382) (21,709,783) (11,236,658)
	(2,310,916) - (2,310,916) - 12,001,300 7,851,173 12,001,300 7,851,173 11,300,000 5,200,000 11,300,000 5,200,000 (4,950,000) (3,100,000) (4,950,000) (3,100,000) 121,419 95,480 - - (46,520) (32,179) - -
	16,115,283 10,014,474 16,040,384 9,951,173
	(5,986,912) 5,517,655 (966,790) 456,684 822,984 1,029,069 - - 8,275,124 1,728,400 1,116,885 660,201
	3,111,196 8,275,124 150,095 1,116,885

The above statements of cash flows should be read in conjunction with the accompanying notes.

Envirozel Limited | Annual Report FY08 | 22

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies

This financial report includes the consolidated financial statements and notes of Envirozel Limited and controlled entities (‘Economic Entity’ or ‘Group’), and the separate financial statements and notes of Envirozel Limited as an individual parent entity (‘Parent Entity’).

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting standards Board and the Corporations Act 2001.

Australian Accounting standards set out accounting policies that the AAsB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting standards ensures that the financial statements and notes also comply with International Financial Reporting standards. material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Accounting Policies

(a) Principles of Consolidation

A controlled entity is any entity Envirozel Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. A list of controlled entities is contained in note 29 to the financial statements. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

Business Combinations

Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method. The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate.

Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss.

(b) Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. no deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Envirozel Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax liabilities resulting from unused tax losses and credits which are immediately assumed by Envirozel Limited. The current tax liability of each group entity is then subsequently assumed by Envirozel Limited. The group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 7 June 2004. The tax consolidated group has entered a tax sharing arrangement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.

(c) Inventories

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

Envirozel Limited | Annual Report FY08 | 23

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (Continued)

(d) Construction Contracts and Work in Progress

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

Construction profits are recognised on the stage of completion basis and measured using the proportion of costs incurred to date as compared to expected actual costs. Where losses are anticipated they are provided for in full. Construction revenue has been recognised on the basis of the terms of the contract adjusted for any variations or claims allowable under the contract.

(e) Plant and Equipment

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

Plant and equipment is measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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

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

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement and depreciation based on the asset’s original cost is transferred from the revaluation reserve to retained earnings.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

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

Class of Fixed Asset	Depreciation Rate
• Leasehold improvements	5 to 30%
• Plant and equipment	5 to 30%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount

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

(f) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the economic entity are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over their estimated useful lives.

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

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

(g) Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Financial assets at fair value through profit and loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AAsB 139: Recognition and measurement of Financial Instruments. Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Held-to-maturity investments

These investments have fixed maturities, and it is the group’s intention to hold these investments to maturity. Any held-to-maturity investments held by the group are stated at amortised cost using the effective interest rate method.

Envirozel Limited | Annual Report FY08 | 24

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (Continued)

(g) Financial Instruments (Continued)

Available-for-sale financial assets

Available-for-sale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.

Financial liabilities

non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

Derivative instruments

Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the income statement unless they are designated as hedges.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the income statement.

(h) Impairment of Assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(i) Intangibles

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the income statement.

Group companies

The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

• income and expenses are translated at average exchange rates for the period; and

• retained profits are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.

(k) Employee Benefits

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

The group operates an equity-settled share-based payment employee share scheme. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense with a corresponding increase to an equity account. The shares issued under the employee share scheme vest immediately.

Goodwill

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

(j) Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

(l) Provisions

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

(m) Cash and Cash Equivalents

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

Envirozel Limited | Annual Report FY08 | 25

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (Continued)

(n) Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established. Revenue from the rendering of a service, including management fees charged to controlled entities, is recognised upon the delivery of the service to the customers or controlled entity.

(o) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period in which they are incurred.

(p) Goods and Services Tax (GST)

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

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

(q) Comparative Figures

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

(r) Critical accounting estimates and judgments

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

Key estimates — Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

no impairment has been recognised in respect of goodwill and plant and equipment for the year ended 30 June 2008.

The financial report was authorised for issue on 26 september 2008 by the Board of Directors.

2. Profit

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
----- End of picture text -----

	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $
(a) REVENUE Sales Interest Received or Receivable Sundry Income Dividends from controlled entities Management Fees from controlled entities (b) OTHER INCOME Gain on sale of Investments (c) PROFIT FOR THE YEAR Expenses: Movement in Employee Benefts Bad Debts Operating Lease Payments Finance Costs - External Depreciation of Plant & Equipment	87,513,967 48,147,725 - - 460,320 158,587 38,310 55,275 166,574 56,096 - 5,796 - - 5,303,242 - - - 1,450,000 785,300
	88,140,861 48,362,408 6,791,552 846,371
	- 237,600 - 237,600
	- 237,600 - 237,600
	(445,831) 200,533 25,134 - 4,715 82,000 - - 970,845 380,421 44,091 24,985 1,247,954 518,275 1,225,871 483,464 805,937 396,109 14,955 3,599

Envirozel Limited | Annual Report FY08 | 26

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
----- End of picture text -----

3.	Income Tax
(a)	The prima facie tax on proft from ordinary activities before	income tax is reconciled	to income
	tax as follows:
	Proft/(Loss) before Income Tax	6,852,643	5,500,472	2,845,791	(559,007)
	Income tax calculated at 30% (2007: 30%)	2,055,793	1,650,142	853,737	(167,702)
	Tax effect of permanent differences	(123,185)	70,206	(1,586,143)	2,424
	Under provision/(over provision) in prior years	(99,710)	-	(99,710)	-
	Taxation paid by offshore subsidiary	20,480	17,696	-	-
	Deferred tax assets not previously brought to account	-	(7,538)	-	(7,538)
	Prior year tax losses not previously brought to account	(5,495)	(2,189,687)	(5,495)	(2,189,687)
	Income Tax Expense/(Beneft)	1,847,883	(459,181)	(837,611)	(2,362,503)
	The applicable weighted average effective tax rates are as follows:	27%	(8%)	(29%)	423%
(b)	The components of tax expense comprise:
	Current tax	1,961,977	1,797,966	(689,362)	(157,478)
	Deferred tax	(8,889)	(59,922)	(43,044)	(7,800)
	Deferred tax assets not previously brought to account	-	(7,538)	-	(7,538)
	Under provision/(over provision) in prior years	(99,710)	-	(99,710)	-
	Prior year tax losses not previously brought to account	(5,495)	(2,189,687)	(5,495)	(2,189,687)
		1,847,883	(459,181)	(837,611)	(2,362,503)
4.	Trade and Other Receivables
	Current
	Trade Receivables	14,709,698	9,705,649	-	-
	Amounts due from Customers for Construction Contracts (refer note 31)	3,230,894	2,296,220	-	-
	Retention Receivables	309,019	326,347	-	-
	Due from Controlled Entities	-	-	149,631	-
		18,249,611	12,328,216	149,631	-
	Other Debtors and Prepayments	456,538	689,460	66,843	278,426
		18,706,149	13,017,676	216,474	278,426
	Non Current
	Due from Controlled Entities	-	-	38,754,001	23,445,512
	Other Debtors and Prepayments	542,638	-	-	-
	Retention Receivables	171,652	338,730	-	-
		714,290	338,730	38,754,001	23,445,512

Amounts due from controlled entities are non-interest bearing and have no fixed repayment dates.

market practices provide for the retention of monies from progress and final billings on certain construction contracts. The monies are received after a contracted period of time has elapsed following completion of the construction.

Current trade and term receivables are non-interest bearing loans and generally on 30 day terms. non-current trade and term receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired.

There are no balances within trade and other receivables that contain assets that are not impaired. It is expected these balances will be received when due. Impaired assets are provided for in full.

Envirozel Limited | Annual Report FY08 | 27

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
5. Inventories
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5. Inventories	Economic Entity 2008 $	Economic Entity 2007 $	Parent 2008 $	Parent 2007 $
Current
Raw Materials and Stores – at cost	1,666,852	1,506,834	-	-
Work In Progress – at cost	512,719	1,059,500	-	-
	2,179,571	2,566,334	-	-
6. Financial Assets
Non-Current Assets
Investment in Controlled Entities (Note 29)	-	-	3,735,154	3,735,154
Funds on Deposit	11,433	25,000	11,433	25,000
	11,433	25,000	3,746,587	3,760,154
Funds on deposit represent a security deposit covering a guarantee for property lease obligations.
7. Plant and Equipment
Plant and Equipment
At Cost	7,512,994	6,072,188	74,848	7,617
Accumulated Depreciation	(1,449,701)	(632,643)	(17,370)	(3,412)
	6,063,293	5,439,545	57,478	4,205
Movement in carrying amounts
Carrying amount – Opening Balance	5,439,545	2,093,057	4,205	3,202
Additions	1,203,172	439,417	68,228	4,602
Disposals	(183,086)	(50,155)	-	-
Depreciation	(805,937)	(396,109)	(14,955)	(3,599)
Exchange Rate Adjustment	(6,346)	(5,345)	-	-
Fixed Assets acquired on acquisition of controlled entities	415,945	3,358,680	-	-
Carrying amount – Closing Balance	6,063,293	5,439,545	57,478	4,205

Envirozel Limited | Annual Report FY08 | 28

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
8. Tax Assets and Liabilities
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8. Tax Assets and Liabilities	Economic Entity 2008 $	Economic Entity 2007 $	Parent 2008 $	Parent 2007 $
TAX ASSETS
NON-CURRENT
Deferred tax assets	1,994,387	2,180,273	1,158,935	1,386,089
Deferred tax assets comprise:
Provisions	730,679	789,007	31,633	-
Other	163,155	20,516	26,749	15,339
Un-recouped tax losses	1,100,553	1,370,750	1,100,553	1,370,750
	1,994,387	2,180,273	1,158,935	1,386,089
The movement in deferred tax assets for each temporary difference during the year is as follows:
Provisions
Opening balance	789,007	299,420	-	-
Credited to income account	(133,750)	60,161	31,633	-
Deferred tax assets acquired	75,422	429,426	-	-
	730,679	789,007	31,633	-
Other
Opening balance	20,516	13,217	15,339	-
Credited to income account	142,639	(239)	11,410	7,801
Deferred tax assets not previously recognised	-	7,538	-	7,538
	163,155	20,516	26,749	15,339
Unrecouped tax losses
Opening balance	1,370,750	-	1,370,750	-
Tax losses recouped	(275,692)	(818,937)	(275,692)	(818,937)
Deferred tax assets not previously recognised	5,495	2,189,687	5,495	2,189,687
	1,100,553	1,370,750	1,100,553	1,370,750
Closing balance	1,994,387	2,180,273	1,158,935	1,386,089
TAX LIABILITIES
CURRENT
Income Tax	1,511,823	961,333	1,335,123	961,333
NON-CURRENT
Provision for Deferred Tax	3,576	3,817	-	-
Opening balance	3,817	4,098	-	-
Additional Provisions raised during year	-	-	-	-
Exchange rate movement	(241)	(281)	-	-
Closing balance	3,576	3,817	-	-

Envirozel Limited | Annual Report FY08 | 29

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $
9. Intangible Assets Goodwill on Consolidation Goodwill on Acquisition	3,282,532 3,282,532 - - 27,513,731 11,487,335 - - 30,796,263 14,769,867 - -

Movements in carrying amounts

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Economic Economic
Entity Entity
2008 $ 2007 $
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Goodwill on Consolidation Opening Balance Movement in the year Closing balance Goodwill on Acquisition Opening Balance Acquisitions through business combinations Closing balance	3,282,532 3,282,532 - - 3,282,532 3,282,532 11,487,335 674,229 16,026,396 10,813,106 27,513,731 11,487,335

It has been determined that the balances of the goodwill have an indefinite life. The excess of the fair value of net assets over the purchase price of the business combinations acquired has been allocated to goodwill rather than be allocated to other intangible assets. The acquisition of the businesses that generate the goodwill was determined on the abilities of the entities, as a whole, to generate future profits and hence other intangibles have not been recognised.

Impairment Disclosures

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

Roof Drainage Tank Construction Engineering Services Steel Fabrication Total	3,282,532 3,282,532 674,229 674,229 23,932,529 8,114,871 2,906,973 2,698,235
	30,796,263 14,769,867

The Group has incurred further costs relating to acquisitions which have been taken directly to goodwill. These costs were incurred within 12 months of the relevant acquisition. With respect to the Engineering services segment, during the measurement period the Group retrospectively adjusted the provisional amounts recognised at the acquisition date to reflect new information obtained about facts and circumstances that existed as of acquisition date and, if known would have affected the measurement of the amounts recognised as of that date.

The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a maximum seven year period. The cash flows are discounted using the yield of five year government bonds at the beginning of the budget period.

The following assumptions were used in the value-in-use calculations:

	2008	2007
Growth Rate	7.5%	3%
Discount Rate	6.82%	6.46%

management has based the value-in-use calculations on budgets for each reporting segment. These budgets use historical weighted average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated weighted average inflation rates over the periods which are consistent with inflation rates applicable to the locations in which the segments operate. Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment.

Envirozel Limited | Annual Report FY08 | 30

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
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10. Trade and Other Payables Current - unsecured Trade payables Sundry payables and accrued expenses Employee benefts	5,883,051 6,670,295 120,198 161,337 3,866,492 7,867,301 181,291 6,556,254 2,339,336 2,533,555 105,442 -
	12,088,879 17,071,151 406,931 6,717,591

Included in the prior year sundry payables and accrued expenses is an amount of $1,300,000, which represented the balance of the purchase price relating to the Danum Engineering business acquisition. This amount was settled on 2 July 2007 by the payment of $975,000 and the issue of 685,654 fully paid ordinary shares in the Company at an issue price of 47.4cents.

Also included in the prior year sundry payables and accrued expenses is an amount of $5,106,189, which represented the purchase price relating to the national Engineering business acquisition. This amount was paid on 29 August 2007 on completion of the national Engineering acquisition.

11. Borrowings

11. Borrowings
Short-term borrowings Bank Loans - Secured Bank Overdraft Lease Liabilities (Note 24) - Secured 12. Borrowings Long-term borrowings Bank Loans - Secured Lease Liabilities (Note 24) - Secured	- 250,000 - 250,000 27,784 - - - 71,499 54,938 - -
	99,283 304,938 - 250,000
	12,550,000 5,950,000 12,550,000 5,950,000 141,202 82,864 - -
	12,691,202 6,032,864 12,550,000 5,950,000

Bank Loans are in the form of Commercial Bank Bill facilities. Of the total drawn facility, $4,250,000 has a fixed interest rate. The balance is at variable interest rates. Bank Loans are secured by a registered equitable mortgage over the assets and undertakings of Envirozel Limited and unlimited guarantees from Envirozel Limited’s controlled entities: syfon systems Pty Ltd, Brockman Engineering Pty Ltd, nusource Water Pty Ltd, Danum Engineering Pty Ltd, national Engineering Pty Ltd and TsF Engineering Pty Ltd. Covenants within bank borrowings require the company to maintain a debt service coverage ratio equal to or greater than 1.7.

13. Other Long Term Provisions

Non-Current Employee Benefts Movement Opening balance Additional Provisions raised during year Closing balance	96,260 96,467 - -
	96,467 22,910 - - (207) 73,557 - -
	96,260 96,467 - -

A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits are disclosed in note 1.

Envirozel Limited | Annual Report FY08 | 31

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $
14.	Issued Capital Issued and Paid Up 207,348,755 ordinary shares (2007: 181,558,894 ordinary shares) 45,720,208 33,430,541 590,659 fully paid employee shares (2007: Nil ordinary shares) 302,951 - 46,023,159 33,430,541		45,720,208 33,430,541 302,951 -
		46,023,159 33,430,541	46,023,159 33,430,541
		Economic Entity 2008 $	Parent 2008 $
(a)	Issued and Fully Paid Up Opening balance Shares Issued During the year 2 July 2007 30 August 2007 5 September 2007 15 November 2007 9 January 2008 Closing balance Opening balance Shares Issued During the year 2 July 2007 30 August 2007 5 September 2007 15 November 2007 9 January 2008 Closing balance	33,430,541 335,000 9,600,000 2,002,500 66,300 285,867 45,720,208 2008 No. 181,558,894 705,694 20,000,000 4,005,000 600,000 479,167 207,348,755	33,430,541 335,000 9,600,000 2,002,500 66,300 285,867 45,720,208 2008 No. 181,558,894 705,694 20,000,000 4,005,000 600,000 479,167 207,348,755

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The ordinary shares have no par value.

(b) Fully paid employee shares

During the year the Company issued fully paid ordinary shares under the Envirozel Limited Division13A Tax Exempt share Plan. shares issued to each participating employee under this plan rank equally with all other ordinary issued shares in all respects including voting rights and entitlement to participate in dividends, future rights and bonus issues. The participating employee must not sell or dispose of the employee shares until the earlier of the third anniversary of the date on which the shares were allocated and the date on which the employee has ceased employment.

(c) Share Options:

The following table shows the movement in options to subscribe for ordinary shares in the Company for the year ended 30 June 2008.

Opening Options on issue Class Expiry Date Ordinary Shares Entitlements Exercise Price	Exercised During Year Lapsed / Cancelled Options Not Yet Exercised
600,000 ordinary 31/12/2007 600,000 $0.1105 600,000	600,000 - -
	600,000 - -

Envirozel Limited | Annual Report FY08 | 32

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

14. Issued Capital (Continued)

(d) Capital Management:

management controls the capital of the group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the group can fund its operations and continue as a going concern. The group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.

There are no externally imposed capital requirements. management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

• The economic entity gearing ratio is represented as net debt as a percentage of total capital and is determined as follows:

• Net debt is total bank borrowings less cash and cash equivalents,

• Total capital is total equity and net debt.

As at 30 June 2008 the economic entity’s gearing ratio was 21% (2007: 17%).

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
----- End of picture text -----

15. Dividends Interim fully franked ordinary dividend of 0.5 cents per share (2007: Nil) franked at the tax rate of 30% Final fully franked ordinary dividend of 0.75 cents per share (2007: Nil) franked at the tax rate of 30% Balance of Franking Account 16. Reserves and Accumulated Losses (a) Accumulated Losses Accumulated losses at the beginning of the fnancial year Net Proft Dividends paid/declared Accumulated losses at the end of the fnancial year (b) Reserves Capital Reserves Reserve at beginning of year Movement for year Reserve at end of year Foreign Currency Translation Reserve Reserve at beginning of year Movement for year Reserve at end of year	1,037,303 - 1,037,303 - 1,559,548 - 1,559,548 -
	2,596,851 - 2,596,851 -
	94,571 - 94,571 -
	(11,483,194) (17,442,847) (17,516,894) (19,320,390) 5,004,760 5,959,653 3,683,402 1,803,496
	(6,478,434) (11,483,194) (13,833,492) (17,516,894) (2,596,851) - (2,596,851) -
	(9,075,285) (11,483,194) (16,430,343) (17,516,894)
	198,700 198,700 198,700 198,700 - - - -
	198,700 198,700 198,700 198,700
	(4,068) 24,243 - - (29,163) (28,311) - -
	(33,231) (4,068) - -
	165,469 194,632 198,700 198,700

Capital reserves represent capital profits, which will be used to fund the ongoing business of the economic entity.

Envirozel Limited | Annual Report FY08 | 33

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

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Economic Economic
Entity Entity Parent Parent
2008 No. 2007 No. 2008 No. 2007 No.
----- End of picture text -----

17. Earning	s Per Share
(a) Weighted average number of ordinary shares outstanding during the year used in calculation of Basic Earnings Per Share		203,215,315	167,350,405	203,215,315	167,350,405
(b) Weighted average number of ordinary shares outstanding during the year used in calculation of Diluted Earnings Per Share		203,215,315	167,950,405	203,215,315	167,950,405
18. Key Management Personnel
Names and positions held of consolidated and parent entity key management personnel in offce at any time during the fnancial year are:
Mr M Findlay	Non-Executive Chairman. Appointed as Non-Executive Director 14 May 2008
Mr G McKern	Non-Executive Deputy Chairman. Held position of Executive Chairman to 29 February 2008
	and Non-Executive Chairman from 29 February 2008 to 30 June 2008.
Mr P Jones	Non-Executive Director
Mr K Fagg	Non-Executive Director
Mr G Burns	Non-Executive Director. Appointed 1 February 2008
Mr G Coleman	Non-Executive Director. Resigned 31 May 2008
Mr A Powis	Chief Executive Offcer
Mr I Wallace	Chief Financial Offcer
Mr A Bellgrove	Managing Director of Syfon Systems Group
Mr M Goddard	Managing Director of Brockman Engineering
Mr V Juchima	Managing Director of Danum Engineering
Mr D Williams	Managing Director of National Engineering. Resigned 31 August 2008.
Mr N Chapman	Managing Director of National Engineering. Appointed 1 September 2008.
Mr A Green	Managing Director of TSF Engineering Group

Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report

	Economic Entity 2008 $ Economic Entity 2007 $ Parent 2008 $ Parent 2007 $
19. Auditors Remuneration Remuneration paid/payable to Auditors for: - audit or review of fnancial report - taxation services	158,552 97,686 158,552 97,686 - - - -
	158,552 97,686 158,552 97,686

Envirozel Limited | Annual Report FY08 | 34

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

20. Related Party Disclosures

• (a) The Directors of Envirozel Limited during the financial year were: Mr M Findlay (appointed 14 May 2008) Mr G McKern Mr P Jones Mr K Fagg Mr G Burns (appointed 1 February 2008) Mr G Coleman (resigned 31 May 2008)

(b) Transactions with director related entities

• Consulting fees of $Nil (2007: $Nil) were paid and $12,500 (2007: $Nil) is payable to M Findlay.

• Consulting fees of $22,500 (2007: $62,917) were paid and $22,500 (2007: $ Nil) is payable to K Fagg.

• Consulting fees of $52,500 (2007: $40,000) were paid and $11,250 (2007: $11,250) is payable to Stuart Andrew Pty Ltd, a company in which Mr P Jones has a beneficial interest.

• As at 30 June 2008, accrued remuneration payable to Gordon McKern was $12,500 (2007: $50,000).

• Consulting fees of $7,500 (2007: $Nil) were paid and $11,250 (2007: $Nil) is payable to G Burns.

• Consulting fees of $52,520 (2007: $42,916) were paid and $Nil (2007: $11,250) is payable to G Coleman

(c) Directors aggregate of shares and share options

The aggregate number of shares and options of Envirozel Ltd held by the Directors and Director related entities as at 30 June 2008 was as follows:

	Parent 2008 No.	Parent 2007 No.
Ordinary Shares	18,654,459	18,265,485

During the year Directors of the Company acquired ordinary shares in the Company. These shares were acquired as follows: On Market acquisitions 2,183,828 shares Dividend Reinvestment Plan 79,195 shares

During the year mr Coleman ceased to be a Director. At the date of his resignation mr Coleman held 1,874,049 shares in Envirozel Ltd.

subsequent to balance date the Directors have acquired a further 192,451 shares from market acquisitions.

Envirozel Limited | Annual Report FY08 | 35

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

21. Segment Reporting Primary Reporting

Business Segments		Roof Drainage	Roof Drainage	Tank Construction	Tank Construction	Engineering Services	Engineering Services	Engineering Services Steel Fabrication Steel Fabrication	Engineering Services Steel Fabrication Steel Fabrication
		2008 $	2007 $	2008 $	2007 $	2008 $		2007 $ 2008 $ 2007 $
REVENUE Revenue - external Total revenue Depreciation and Amortisation Impairment Costs RESULT Segment Result pre tax Net Proft ASSETS Segment Assets LIABILITIES Segment Liabilities ACQUISITION OF NON CURRENT ASSETS		11,071,658	11,145,640	19,038,645	18,561,855	43,113,370		17,635,043 14,878,879 958,480
		11,071,658	11,145,640	19,038,645	18,561,855	43,113,370		17,635,043 14,878,879 958,480
		122,734	88,257	165,493	141,470	283,731		147,418 219,024 15,365
		-	-	-	-	-		- - -
		2,314,469 5,991,707	2,171,582 6,361,476	2,106,503 7,969,832	2,802,214 7,943,209	4,512,519 37,660,145		1,726,895 338,479 (38,475) 20,355,532 7,707,018 6,916,253
		1,693,430	1,757,572	5,857,257	5,881,338	35,072,206		19,146,870 7,750,307 6,943,185
		333,135	222,501	393,413	176,696	16,423,794		10,360,340 502,365 4,273,286
Business Segments		Water Treatment	Water Treatment	Corporate	Corporate	Eliminations	Eliminations		Economic Entity Economic Entity
		2008 $	2007 $	2008 $	2007 $	2008 $	2007 $		2008 $ 2007 $
		-	319	38,309	61,071	-	-		88,140,861 48,362,408
		-	319	38,309	61,071	-	-		88,140,861 48,362,408
		-	-	14,955	3,599	-	-		805,937 396,109
		-	-	-	-	-	-		- -
		(235,334) 182,865	(479,737) 55,277	- (2,183,993)	- (682,007)	(39,990,771)	(23,072,722)		9,036,636 6,182,479 (2,183,993) (682,007)
				44,083,570	28,053,524				6,852,643 5,500,472 1,847,883 (459,181)
									5,004,760 5,959,653
									63,604,366 46,612,549
		1,277,310	1,258,909	14,292,054	11,941,177	(39,451,541)	(22,458,481)		26,491,023 24,470,570

Envirozel Limited | Annual Report FY08 | 36

For the year ended 30 June 2008

Notes To and Forming Part of the Accounts

21. Segment Reporting (Continued)

Secondary Reporting

Geographical Segment	Australia Australia Malaysia Malaysia Economic Entity Economic Entity
	2008 $ 2007 $ 2008 $ 2007 $ 2008 $ 2007 $
External Segment Revenue Segment assets by location of assets Acquisition of non current assets	86,295,443 46,550,862 1,845,418 1,811,546 88,140,861 48,362,408 61,700,155 45,280,270 1,904,211 1,332,279 63,604,366 46,612,549 17,672,866 14,977,449 48,069 59,976 17,720,935 15,037,425

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
----- End of picture text -----

22.	Statement Of Cash Flows
(i)	Cash balances comprise:
	Cash on Hand	3,138,980	8,275,124	150,095	1,116,885
	Bank overdraft	(27,784)	-	-	-
	Closing Cash Balance	3,111,196	8,275,124	150,095	1,116,885
(ii)	Reconciliation of the Operating Proft after Tax to Net Cash fows from Operations:
	Operating proft after Tax	5,004,760	5,959,653	3,683,402	1,803,496
	Gain/loss on sale of property, plant and equipment	79,468	36,064	-	-
	Depreciation
	- plant and equipment	805,937	396,109	14,955	3,599
	Share based payments	305,383	-	305,383	-
	Foreign Currency Translation	(22,817)	(22,966)	-	-
	Changes in assets and liabilities adjusted for effects of acquisition/disposal of operations during			fnancial year
	Increase / (Decrease) in provisions for employee entitlements	(445,831)	200,533	105,442	-
	(Increase) / Decrease in inventories	416,663	(142,220)	-	-
	(Increase) / Decrease in trade and other receivables	(4,342,876)	(3,664,087)	75,519	(95,229)
	(Increase) / Decrease in receivables from controlled entities	-	-	(73,123)	312,253
	(Increase) / Decrease in deferred tax assets	261,308	(1,438,210)	227,154	(1,386,089)
	Increase / (Decrease) in payables	(1,781,429)	4,878,996	(9,913)	142,806
	Increase / (Decrease) in current tax payable	358,589	956,972	373,790	961,333
	Increase / (Decrease) in deferred tax liabilities	(241)	(281)	-	-
	Net Cash provided/(used) by Operating Activities	638,914	7,160,563	4,702,609	1,742,169

Envirozel Limited | Annual Report FY08 | 37

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

23. Standby Arrangements and Unused Credit Facilities

Controlled entities in the economic entity have Contingent Liability Bank Guarantee facilities totalling $5,550,000 available to them as at 30 June 2008 (2007: $3,550,000). Of this total facility, $1,915,705 (2007: $1,558,495), remain unused and available for the controlled entities use as at 30 June 2008. The facilities are secured by a registered equitable mortgage over the assets and undertakings of all Australian companies in the economic entity.

Controlled entities in the economic entity have Bank Overdraft facilities totalling $2,000,000 available to them as at 30 June 2008 (2007: $1,000,000). Of the total available facilities, $1,972,216 remains unused and available for use. The facilities are secured by registered equitable mortgages over the assets and undertakings of all Australian companies in the economic entity.

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
----- End of picture text -----

24. Lease Commitments
Leases are payable as follows:
Not later than 12 months	85,380	64,477	-	-
Later than 12 months but not later than 2 years	82,475	33,097	-	-
Later than 2 years but not later than 5 years	71,482	60,453	-	-
	239,337	158,027	-	-
Future lease fnance charges	(26,636)	(20,225)	-	-
	212,701	137,802	-	-
Lease liabilities recognised in the statement of fnancial position:
Current	71,499	54,938	-	-
Non-current	141,202	82,864	-	-
Total Lease liability	212,701	137,802	-	-
The weighted average interest rate implicit in these leases is 8.11% pa (2007: 7.91% pa).
25. Operating Lease Commitments
Commitments for minimum lease payments in relation to non-cancellable leases are payable as follows:
Property
Not later than 12 months	957,520	661,832	44,544	43,243
Between 12 months but not later than 5 years	3,056,262	2,406,805	46,326	88,224
	4,013,782	3,068,637	90,870	131,467
Plant and equipment
Not later than 12 months	83,440	31,036	-	-
Between 12 months but not later than 5 years	229,432	52,284	-	-
	312,872	83,320	-	-
Total commitments not recognised in the fnancial statements	4,326,654	3,151,957	90,870	131,467

Property leases are non-cancellable with a maximum five year term, with rent payable in advance. Contingent rental provisions within the lease agreement require the minimum lease payments to be increased by at least the CPI per annum. Options exist to renew certain leases at the end of their lease term. With the approval of the lessors the property areas may be released.

Envirozel Limited | Annual Report FY08 | 38

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

26. Contingent Liabilities

There were no contingent liabilities as at the date of this report.

27. Financial Instruments

The group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bills and leases.

The main purpose of non-derivative financial instruments is to raise finance for group operations.

(i) Treasury Risk Management

The Board of Directors is responsible for monitoring treasury risk. Currency and interest rate exposures are reviewed regularly to ensure any risk associated with these exposures is minimised.

(ii) Financial Risks

• The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk.

• Interest rate risk

• The majority of the company’s borrowings take the form of bank accepted bills of exchange. The rollover/maturity term of these bills and therefore the prevailing interest rates are continually reviewed in order to manage interest rate exposures. Fixed interest bank loans account for 34% of the total bank loans outstanding at 30 June 2008.

• Foreign currency risk

• The group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the group’s measurement currency. The Group monitors its foreign exchange exposure on a regular basis.

• Liquidity risk

• The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained.

• Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

• The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity.

(a) Interest Rate Risk Exposures

The company’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out below. Exposures arise predominantly from assets and liabilities bearing variable interest rates as the company intends to hold fixed rate, assets and liabilities to maturity.

Envirozel Limited | Annual Report FY08 | 39

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

27. Financial Instruments (Continued)

(a) Interest Rate Risk Exposures (continued)

2008	Floating Interest Rate 1 year or less Fixed Interest 1-5 years More than 5 years Non Interest Bearing Total
	$ $ $ $ $ $
Financial Assets Cash and cash equivalents Trade and other receivables Financial assets Weighted average Interest rate Financial Liabilities Trade and other payables Borrowings Lease Liabilities Weighted average Interest rate Net Financial Assets (Liabilities)	3,138,980 - - - - 3,138,980 - - - - 19,420,439 19,420,439 11,433 - - - - 11,433
	3,150,413 - - - 19,420,439 22,570,852
	6.1% - - - - - - - - - 11,261,366 11,261,366 8,327,784 - 4,250,000 - - 12,577,784 - 71,499 141,202 - - 212,701
	8,327,784 71,499 4,391,202 - 11,261,366 24,051,851
	8.28% 8.11% 6.86% - - -
	(5,177,371) (71,499) (4,391,202) - 8,159,073 (1,480,999)
2007	Floating Interest Rate 1 year or less Fixed Interest 1-5 years More than 5 years Non Interest Bearing Total
	$ $ $ $ $ $
Financial Assets Cash and cash equivalents Trade and other receivables Financial assets Weighted average Interest rate Financial Liabilities Trade and other payables Borrowings Lease Liabilities Weighted average Interest rate Net Financial Assets (Liabilities)	8,275,124 - - - - 8,275,124 - - - - 13,356,406 13,356,406 25,000 - - - - 25,000
	8,300,124 - - - 13,356,406 21,656,530
	4.5% - - - - - - - - - 15,498,929 15,498,929 - 250,000 5,950,000 - - 6,200,000 - 54,938 82,864 - - 137,802
	- 304,938 6,032,864 - 15,498,929 21,836,731
	- 9.7% 9.7% - - -
	8,300,124 (304,938) (6,032,864) - (2,142,523) (180,201)

Envirozel Limited | Annual Report FY08 | 40

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

27. Financial Instruments (Continued)

(a) Interest Rate Risk Exposures (Continued) Reconciliation of net Financials Assets/(Liabilities) to Net Assets Net Financial Assets/(Liabilities) Add/(subtract) Non-Financial assets and liabilities Inventories Plant and equipment Intangible assets Deferred Tax assets Provisions Net Assets	Economic Entity 2008 $ Economic Entity 2007 $
	(1,480,999) (180,201) 2,179,571 2,566,334 6,063,293 5,439,545 30,796,263 14,769,867 1,994,387 2,180,273 (2,439,172) (2,633,839)
	37,113,343 22,141,979

(b) Net Fair Value of Financial Assets and Liabilities

The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the economic entity approximates their carrying value.

(c) Sensitivity Analysis

The group has performed sensitivity analysis relating to its exposure to interest rate risk. The sensitivity analysis has demonstrated that the Group does not have a significant exposure to changes in interest rates.

The Group believes it has minimal external foreign currency risk at balance date.

28. Share Based Payments

The Company has established the Envirozel Limited Division 13A Tax Exempt share Plan which had been approved at a General meeting of shareholders held on 27 march 2007. During the year employees participated in the plan. Participating employees were entitled to acquire the equivalent of $1,000 in ordinary shares in the company. These vested ordinary shares were issued at a weighted average market price of $0.513. A total of 590,547 ordinary shares were issued under this plan. Participating employees are prohibited from selling or disposing of these shares unless and until the third anniversary of the date on which the shares were granted and the date on which the employee has ceased employment.

29. Investment in Controlled Entities

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Cost of Parent
Country of Class of Equity Holdings Entity’s Investment
Name of Entity Incorporation Shares 2008 2007 2008 $ 2007 $
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Syfon Systems Pty. Ltd Australia Ordinary 100% 100% Syfon Systems Sdn Bhd Malaysia Malaysia Ordinary 100% 100% Brockman Engineering Pty Ltd Australia Ordinary 100% 100% NuSource Water Pty Ltd Australia Ordinary 100% 100% Danum Engineering Pty Ltd Australia Ordinary 100% 100% National Engineering Pty Ltd Australia Ordinary 100% 100% TSF Engineering Pty Ltd Australia Ordinary 100% - TSF Maintenance Services Pty Ltd Australia Ordinary 100% - ACN 119 296 340 Pty Ltd Australia Ordinary 100% - Cellular Beams Pty Ltd Australia Ordinary 100% -

3,700,650 3,700,650 34,504 34,504 - - - - - - - - - - - - - - - -

3,735,154 3,735,154

ACn 129 296 340 Pty Ltd was incorporated on 18 January 2008. The Company did not trade during the year. Cellular Beams Pty Ltd was incorporated on 7 may 2008. The Company did not trade during the year.

Envirozel Limited | Annual Report FY08 | 41

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

30. Subsequent Events

There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years after the financial year.

31. Construction Contracts

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Economic Economic
Entity Entity Parent Parent
2008 $ 2007 $ 2008 $ 2007 $
----- End of picture text -----

Aggregate amount of contract revenue recognised during the fnancial year Aggregate of contract costs incurred and profts recognised (including losses recognised) to date on contracts in progress Progress Billings Amounts due from customers for contract work in progress Total receivable from customers for contract work in progress as included in note 4 Retention Receivables as included in note 4	55,844,966 19,050,872 - -
	47,334,928 15,096,096 - - (44,104,034) (12,799,876) - -
	3,230,894 2,296,220 - -
	8,296,595 5,704,711 - -
	480,671 665,077 - -

32. Acquisition / Disposal of Businesses

a) Acquisition of Business

During the year the Economic Entity acquired the business and certain net assets from TsF Engineering. The acquisition was effective 1 september 2007.

During the prior year the Economic Entity acquired the businesses and certain net assets from Danum Engineering and from national Engineering. The acquisition of Danum Engineering was effective 1 January 2007. The acquisition of national Engineering was effective 1 June 2007.

Details of the acquisitions are as follows:

Consideration is comprised of: Deferred consideration Shares Issued Outfow of cash Cash Acquired Consideration Fair Value of net assets acquired: Trade and other receivables Inventories and Work In Progress Other current assets Property, plant and equipment Deferred tax assets Trade and other payables Employee Entitlements Lease Payables Goodwill on acquisition	2008 $ 2007 $
	- 6,409,100 - 1,300,000 15,026,250 11,232,056 (822,984) (1,029,069)
	14,203,266 17,912,087
	5,148,279 3,143,213 (3,411,366) 1,302,995 577 1,379,237 415,945 3,358,680 75,422 429,426 (3,591,466) (1,029,118) (251,405) (1,431,420) - (54,032) 15,817,280 10,813,106

Envirozel Limited | Annual Report FY08 | 42

Notes To and Forming Part of the Accounts

For the year ended 30 June 2008

33. Changes In Accounting Policy

The following Australian Accounting standards have been issued or amended and are applicable to the Parent and Consolidated Group but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.

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Application Application
AASB Date of Date for
Amendment Standards Affected Outline of Amendment Standard Group
----- End of picture text -----

AASB 2007–3	AASB 5	Non-current Assets Held	The disclosure requirements of AASB 114:	1.1.2009	1.7.2009
Amendments to		for Sale and Discontinued	Segment Reporting have been replaced due to
Australian Accounting		Operations	the issuing of AASB 8: Operating Segments in
Standards	AASB 6	Exploration for and Evaluation of Mineral	February 2007. These amendments will involve changes to segment reporting disclosures within the fnancial report. However, it is
	AASB 102	Inventories	anticipated there will be no direct impact on recognition and measurement criteria amounts
	AASB 107	Cash Flow Statements	included in the fnancial report
	AASB 119	Employee Benefts
	AASB 127	Consolidated and
		Separate Financial
		Statements
	AASB 134	Interim Financial
		Reporting
	AASB 136	Impairment of Assets
	AASB 1023	General Insurance
		Contracts
	AASB 1038	Life Insurance
		Contracts
AASB 8 Operating	AASB 114	Segment Reporting	As above	1.1.2009	1.7.2009
Segments
AASB 2007–6	AASB 1	First time adoption of	The revised AASB 123: Borrowing Costs is-	1.1.2009	1.7.2009
Amendments to		AIFRS	sued in June 2007 has removed the option to
Australian Accounting			expense all borrowing costs. This amendment
Standards			will require the capitalisation of all borrowing
	AASB 101	Presentation of Financial Statements	costs directly attributable to the acquisition, construction or production of a qualifying asset. However, there will be no direct impact to the
	AASB 107	Cash Flow Statements	amounts included in the fnancial group as they already capitalise borrowing costs related to
	AASB 111	Construction Contracts	qualifying assets.
	AASB 116	Property, Plant and
		Equipment
	AASB 138	Intangible Assets
AASB 123 Borrowing	AASB 123	Borrowing Costs	As above	1.1.2009	1.7.2009
Costs
AASB 2007–8	AASB 101	Presentation of	The revised AASB 101: Presentation of Financial	1.1.2009	1.7.2009
Amendments to		Financial Statements	Statements issued in September 2007 requires
Australian Accounting			the presentation of a statement of comprehen-
Standards			sive income.
AASB 101	AASB 101	Presentation of	As above	1.1.2009	1.7.2009
		Financial Statements

Envirozel Limited | Annual Report FY08 | 43

Notes To and Forming Part of the Accounts For the year ended 30 June 2008

34. Company Details

The registered office and principal place of business of Envirozel Limited is Level 7, 410 Collins street mELBOURnE, VIC 3000

The principal place of business of Syfon Systems Pty Ltd is 22 hargreaves street hUnTInGDALE, VIC 3166

The principal place of business of Brockman Engineering Pty Ltd is 340 Forest Road CORIO, VIC 3214

The principal place of business of Danum Engineering Pty Ltd is 17 seaforth street north shore GEELOnG, VIC 3214

The principal place of business of National Engineering Pty Ltd is 288 Boorowa street YOUnG, nsW 2594

The principal place of business of TSF Engineering Pty Ltd is 1 Prosperity Parade WARRIEWOOD, nsW 2102

The principal place of business of TSF Maintenance Services Pty Ltd is 1 Prosperity Parade WARRIEWOOD, nsW 2102

Envirozel Limited | Annual Report FY08 | 44

Directors’ Declaration

The Directors of Envirozel Limited declare that:

1. The financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001 and:

2. (i) Give a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and

3. (ii) Comply with Accounting standards and the Corporations Regulations 2001;

4. The Chief Executive Officer and Chief Financial Officer have each declared that:

5. (i) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;

6. (ii) the financial statements and notes for the year comply with the Accounting standards; and

7. (iii) the financial statements and notes for the year give a true and fair view

8. There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable

signed in accordance with a resolution of the Board of Directors

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M Findlay - Director Signed at Melbourne this 26th day of September 2008

Envirozel Limited | Annual Report FY08 | 45

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Envirozel Limited | Annual Report FY08 | 46

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Envirozel Limited | Annual Report FY08 | 47

Additional Shareholder Information

As at 31 August 2008

1. Substantial Shareholders

Not Applicable

2. Distribution of Shareholding

istribution of Shareholding
Range of Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Number of shareholder with less than marketable parcel of $500 at $0.23 per unit	No. of Shareholders
	Ordinary Shares
	308 698 467 1,108 210
	2,791
	588

3. Names of the 20 largest shareholders

1 Cogent Nominees Pty Ltd 2 ANZ Nominees Limited Cash Income A/C 3 Cameron Richard Pty Ltd (Superannuation Fund A/C) 4 Powis Enterprises Pty Ltd Powis Family A/C 5 Merrill Lynch (Australia) Nominees Pty Ltd Berndale A/C 6 Smithley Super Pty Ltd Smith Super Fund A/C 7 Mr Gordon James McKern Mrs Anita Mary McKern 8 CJ Arms Superannuation Fund Pty Ltd CJ Arms Super Fund A/C 9 HSBC Custody Nominees (Australia) Limited 10 Adam Bellgrove (Ingodwi Family A/C) 11 Linwierik Super Pty Ltd Linton Super Fund A/C 12 Mr Ian George Mansbridge 13 Powis Enterprises Pty Ltd Powis Super Fund A/C 14 McKern Superannuation Fund Pty Ltd S/F A/C 15 Napadan Investments Pty Ltd 16 Lost Ark Nominees Pty Ltd MYA Super A/C 17 DIP Holdings Pty Ltd 18 Pegmont Mines Limited 19 Queensland Investment Corporation 20 Dr Trudy Ann Marsden	Shares held % Holding
	9,989,978 4.82 8,689,767 4.19 6,863,412 3.31 5,070,000 2.45 5,000,000 2.41 4,809,842 2.32 4,800,000 2.31 4,570,178 2.20 4,568,828 2.20 4,400,000 2.12 4,088,137 1.97 4,010,000 1.93 3,500,000 1.69 3,293,993 1.59 3,285,654 1.58 3,151,076 1.52 2,600,000 1.25 2,400,000 1.16 2,363,708 1.14 2,000,000 0.96
	89,454,573 43.12

Envirozel Limited | Annual Report FY08 | 48

Additional Shareholder Information

As at 31 August 2008

4. Voting Rights

A registered holder of shares in the Company may attend general meetings of the Company in person or by proxy and on a poll may exercise one vote for each share held. There are no voting rights attached to options for ordinary shares until the options have been exercised

5. Unlisted Options

There are no unlisted options on issue.

6. General

The name of the Company secretary is Ian Wallace.

The address of the principal registered office is: Level 7, 410 Collins street mELBOURnE, VIC 3000

T: +61 3 9670 4545

• F: +61 3 9670 6670

A register of securities is kept at

Computershare Investor Services Pty Ltd,

452 Johnston street ABBOTsFORD, VIC 3067

• T: 1300 137 328

7. Stock Exchange Listing

The company’s ordinary securities are listed on the Australian securities Exchange Limited.

Envirozel Limited | Annual Report FY08 | 49