IMDEX LIMITED

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15 August 2008

Australian Stock Exchange Limited Company Announcements Office Exchange Centre 20 Bridge Street SYDNEY NSW 2001

BY ELECTRONIC LODGEMENT

Dear Sirs

ASX APPENDIX 4E AND FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2008

Please find attached Imdex Limited’s Appendix 4E and audited Financial Report for the Year Ended 30 June 2008.

The audited Annual Report, which will include the Financial Report, for the Year Ended 30 June 2008 together with the Notice of Annual General Meeting is expected to be mailed to shareholders in mid-September 2008.

Yours faithfully

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Paul Evans

Company Secretary

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Imdex Limited ACN 008 947 813 ABN 78 008 947 813 Level 1, 15 Rheola Street West Perth Western Australia 6005 PO Box 1325, West Perth Western Australia 6872 Phone +61 8 9481 5777 Fax +61 8 9481 6527 E-mail [email protected]

R:\Financial Reports\Annual Reports\2008\ASX Release Docs\Final Releases\30 Jun 2008 - Imdex Annual Report.doc

Quality Endorsed Company ISO 9002 LIC: QEC 2807 Standards Australia

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the Company and its Subsidiaries (“the Group”) for the financial year ended 30 June 2008.

In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:

(a) Directors

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

Name	Role	Age	Particulars
Mr I F Burston	Independent, Non Executive Chairman	73	Mechanical Engineer Member of the Audit and Compliance & Remuneration Committees Director since November 2000
Mr B W Ridgeway	Managing Director	54	Chartered Accountant Director since May 2000
Mr R W Kelly	Independent, Non Executive Director	70	Engineer Member of the Audit and Compliance Committee Chairman of the Remuneration Committee Director since 14 January 2004
Mr K A Dundo	Independent, Non Executive Director	55	Lawyer Chairman of the Audit and Compliance Committee Member of the Remuneration Committee Director since 14 January 2004
Mr M Lemmel	Independent, Non Executive Director	69	Management Consultant Director since 19 October 2006

Additional information on the Director’s experience and qualifications is contained in the preface to the financial statements.

(b) Directorships of other listed companies

Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as follows:

follows:

Name	Company	Position	Period of Directorship
Mr I F Burston	NRW Holdings Ltd Kansai Mining Corporation Mincor Resources NL Cape Lambert Iron Ore Ltd Aztec Resources Ltd Aviva Corporation Ltd	Non Executive Chairman Non Executive Director Non Executive Director Non Executive Chairman Chairman and Chief Executive Officer Non Executive Director	2007 – Current 2006 – Current 2003 – Current 2006 – 2008 2004 – 2006 2003 – 2006
Mr R W Kelly	Clough Limited	Non Executive Director	1996 – 2008
Mr K A Dundo	Computercorp Limited Intrepid Mines Ltd	Non Executive Director Non Executive Director	2006 – Current 2002 – Current

Page 1 of 87

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(c) Company Secretary

Mr P A Evans

Mr Evans, a Chartered Accountant, joined Imdex Limited on 17 October 2006. After leaving professional practice he worked in a range of commercial and financial roles in the media, manufacturing and telecommunications industries. Mr Evans is a Member of the Institute of Chartered Accountants in Australia.

(d) Directors’ Meetings

The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director (while they were a Director or committee member). During the financial year, six Board meetings, three Audit and Compliance Committee and three Remuneration Committee meetings were held.

	Board of	Directors	Audit and Compliance Committee	Audit and Compliance Committee	Remuneration Committee	Remuneration Committee
	Held	Attended	Held	Attended	Held	Attended
I F Burston	6	6	3	3	3	3
B W Ridgeway	6	6	-	-	-	-
R W Kelly	6	6	3	3	3	3
K A Dundo	6	6	3	3	3	3
M Lemmel	6	3	-	-	-	-

(e) Directors’ Shareholdings

At the date of this report the Directors held the following interests in shares and options in shares of the Company:

Directors	Shares Held Directly	Shares Held Indirectly	Options Held Directly
I F Burston	-	343,786	1,000,000
B W Ridgeway	-	3,500,000	2,000,000
R W Kelly	33,711	256,289	-
K A Dundo	-	300,000	-
M Lemmel	200,000	247,347	-

At the date of this report, the options on issue by the Company are disclosed at (g) below and in Note 33.

Page 2 of 87

and its controlled entities

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(f) Remuneration Report

Remuneration policy for Directors and Executives

Non Executive Directors

The Board seeks the approval of Shareholders in relation to the aggregate of Non Executive Directors’ remuneration and any options that may be granted to Directors. The remuneration for Non Executive Directors is reviewed from time to time, with due regard to current market rates. The cash remuneration of Non Executive Directors is not linked to the Company’s performance in order to preserve independence. Other than statutory superannuation, no Non Executive Director is entitled to any additional benefits on retirement from the Company.

Managing Director

The Managing Director’s remuneration is determined by the Remuneration Committee with due regard to current market rates.

The Managing Director has a short term incentive bonus amounting to 22% of his cash compensation package. Each year the Remuneration Committee sets the key performance indicators (KPIs) for the Managing Director. These KPIs include financial, strategy and risk measures. The Remuneration Committee set these performance hurdles as they are significant profit and cash flow drivers which are linked to Imdex’s increased growth and profitability and hence shareholder value. Performance is measured relative to budget and forecast results as these are the most accurate measures available against which to assess the achievement of set hurdles. The balance of his cash compensation package for the current year is not linked to the Group’s performance.

From time to time options may be issued to the Managing Director as an additional performance incentive. The portion of the Managing Director’s compensation package that comprises options is linked to the Company’s performance. The performance conditions for granting options are determined with regard to current market trends. The issue of any such options requires the approval of Shareholders in General Meeting. No such options were granted to the Managing Director in the current year.

The Managing Director is employed under a permanent contract that provides for a 12 month termination period.

Executives and Staff

All Executives and staff of the Company are subject to a formal annual performance review. The remuneration of Executives comprises a fixed monetary total, which is not linked to the performance of the Company, although bonuses related to the performance of the Company may be agreed between that Executive and the Company from time to time. The base component of Executive salaries is benchmarked against current market trends and is not linked to Company performance as it serves as a base salary only which is required to attract and retain suitably qualified and experienced staff. Performance incentives that are linked to Company performance are used to reward Executives for exceptional performance that benefits the Company and Shareholders. Refer table on page 5 for further details. Each year the Remuneration Committee sets the KPIs for each key management person. These KPIs include people, customer, system, financial, strategy and risk measures. The Remuneration Committee set these performance hurdles as they are significant profit and cash flow drivers which are linked to Imdex’s increased growth and profitability and hence shareholder value. Performance is measured relative to budget and forecast results as these are the most accurate measures available against which to assess the achievement of set hurdles. No bonus is awarded where hurdles are not met.

All Executives are employed under permanent contracts, none of which provide for any termination payments. Mr G E Weston’s contract provides a 12 month notice period and Mr D J Loughlin’s and Mr P A Evans’ contracts provide a 6 month notice period.

Incentives

The remuneration policy for the Managing Director is linked to the Company’s performance as an additional incentive to build shareholder value. The remuneration of Non Executive Directors is not linked to the Company’s performance in order to preserve their independence. The increase in net profits of the Company and dividends paid which drives an increase in shareholder value over the last five years is indicative of the success of this policy.

Management of the Company believes that in order to retain quality Non Executive Directors on the Board, some incentive to maintain their future involvement, commitment and loyalty to the Company, is required on certain occasions, over and above nominal Directors' fees.

No Director or Senior Manager received a payment during the current or prior years as consideration for agreeing to hold the relevant position.

Page 3 of 87

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Director and Senior Management details

The Directors of Imdex Limited during the year were:

(i) Mr I F Burston (Non Executive Chairman);
(ii) Mr B W Ridgeway (Managing Director);
(iii) Mr R W Kelly (Non Executive Director);
(iv) Mr K A Dundo (Non Executive Director); and
(v) Mr M Lemmel (Non Executive Director).

The term ‘Senior Management’ is used in this remuneration report to refer to the following persons:

(i) Mr G E Weston (Group General Manager);
(ii) Mr D J Loughlin (General Manager: Down Hole Instrumentation Division); and
(iii) Mr P A Evans (Company Secretary and Chief Financial Officer).

Elements of Director and Senior Management Remuneration

Remuneration packages contain the following key elements:

(i) Short-term benefits – salary/fees, bonuses and non monetary benefits including motor vehicles and health benefits;
(ii) Post-employment benefits – including superannuation and prescribed retirement benefits;
(iii) Equity – share options granted under the Staff Option Scheme (Note 33) or any other options granted as approved by Shareholders in General Meeting; and
(iv) Other benefits.

Earnings and Movements in Shareholder Wealth

The table below sets out summary information about the Consolidated Entity’s earnings and movements in shareholder wealth for the five years to June 2008:

five years to June 2008:
	30 June 2008	30 June 2007	30 June 2006	30 June 2005	30 June 2004^
Revenue – continuing and discontinued operations ($000s)	150,493	119,340	66,792	40,051	39,831
Net profit before tax from continuing operations ($000s)	31,885	18,115	11,864	5,005	(3,776)
Net profit after tax from continuing operations ($000s)	21,081	11,950	7,984	3,282	(3,689)
Share price at start of year (cents)	150	61	22	11.5	9.5
Share price at end of year (cents)	165	150	61	22	11.5
Interim dividend (cents) – fully franked	1.75	1.00	1.00	-	-
Final dividend (cents) – fully franked	2.25	1.50	1.00	-	-
Basic earnings per share (cents) – continuing operations	11.22	7.72	6.07	3.66	(3.07)
Diluted earnings per share (cents) – continuing operations	10.79	7.09	5.95	3.66	(3.07)

^ - Imdex Limited adopted the Australian equivalents to International Financial Reporting Standards with effect from 1 July 2004, which resulted in various changes to its accounting policies from that date. The results for the year ended 30 June 2004 are reported in accordance with Imdex Limited’s previous accounting policies as permitted under Australian accounting standards as applicable at that time.

Elements of remuneration related to performance

(i) Managing Director: Of the cash remuneration package of the Managing Director, 22% is linked to the performance of the Company by way of short term cash incentives. In addition options have been the long term method by which Imdex has sought to reward key executives in a manner linked to the performance of the Company. Any such options to the Managing Director, or any Director, require the approval by Shareholders in General Meeting.
(ii) Non Executive Directors: The remuneration of Non Executive Directors is not linked to the performance of the Company. The maximum total remuneration payable to Non Executive Directors was approved by Shareholders at the 2006 Annual General Meeting and is currently $500,000. In the current year remuneration to Non Executive Directors totalled $416,750, including statutory superannuation. The Board determines the apportionment of directors’ fees between each Director.
(iii) Senior Management: The remuneration of specified Senior Managers generally comprises a fixed monetary total that is not linked to the performance of the Company. Bonuses dependant on individual performance criteria are set annually by the Remuneration Committee for Senior Managers. In addition, subject to a qualifying period, Executives may be issued options in the Staff Option Plan at the discretion of the Board. These options are linked to the performance of the Company. The percentage of the value of remuneration that consisted of options for each Senior Manager is set out below.

Page 4 of 87

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Year ended 30 June 2008

Details of Directors’ remuneration are set out below. Further information is also set out in Note 32:

Short-term employee benefits	Short-term employee benefits	Short-term employee benefits	Short-term employee benefits	Post Employment	Post Employment	Share-based payment	Share-based payment	Share-based payment	Share-based payment
Salary & fees	Bonus	Non- monetary	Other	Super- annuation	Other	Equity-settled		Cash settled	Other
						Shares & Units	Options & Rights
$ $ $ $ $ $ $ $ 419,786 60,000 - - 37,781 - 39,790 - 81,750 - - - - - - - 50,000 - - - 4,500 - - - 50,000 - - - 4,500 - - - 50,000 - - - - - - -						$ $ $ $ $ - 5,152 - - 562,509 - 176,000 - - 257,750 - - - - 54,500 - - - - 54,500 - - - -50,000
651,536 60,000 - - 46,781 - 39,790 -						- 181,152 - - 979,259

Details of remuneration of Senior Management are set out below:

Short-term employee benefits	Short-term employee benefits	Short-term employee benefits	Short-term employee benefits	Post Employment	Post Employment	Share-based payment	Share-based payment	Share-based payment	Share-based payment
Salary & fees	Bonus	Non- monetary	Other	Super- annuation	Other	Equity-settled		Cash settled	Other
						Shares & Units	Options & Rights
$ $ $ $ $ $ $ $ 258,076 60,000 37,092 - 24,611 - 76,501 - 210,000 47,250 31,321 - 18,815 - - - 251,438 50,000 - -22,629 - - -						$ $ $ $ $ - 20,206 - - 476,486 - 139,750 - - 447,136 -78,217 - -402,284
719,514 157,250 68,413 - 66,055 - 76,501 -						- 238,173 - - 1,325,906

Page 5 of 87

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Year ended 30 June 2007

Details of Directors’ remuneration are set out below. Further information is also set out in Note 32:

Short-term employee benefits	Short-term employee benefits	Short-term employee benefits	Short-term employee benefits	Post Employment	Post Employment	Other long- term employee benefits	Termination Benefits	Share-based payment	Share-based payment	Share-based payment	Share-based payment	Total
Salary & fees	Bonus	Non- monetary	Other	Super- annuation	Other			Equity-settled		Cash settled	Other
								Shares & Units	Options & Rights
$ $ $ $ $ $ $ $ 309,615 75,000 48,725 - 27,865 - 20,020 - 81,720 - - - - - - - - - - - - - - - 50,000 - - - 4,500 - - - 50,000 - - - 4,500 - - - 37,500 - - - - - - - 35,054 - - - - - - -								$ $ $ $ $ - 12,880 - - 494,105 - 122,623 - - 204,343 - - - - - - - - - 54,500 - - - - 54,500 - - - - 37,500 - - - -35,054
563,889 75,000 48,725 - 36,865 - 20,020 -								- 135,503 - - 880,002
e set out below:
Short-term employee benefits				Post Employment		Other long- term employee benefits	Termination Benefits	Share-based payment				Total
Salary & fees	Bonus	Non- monetary	Other	Super- annuation	Other			Equity-settled		Cash settled	Other
								Shares & Units	Options & Rights
$ $ $ $ $ $ $ $ 224,846 25,000 38,092 - 21,046 - 14,765 - 140,673 17,500 31,321 - 12,661 - - - 153,076 20,000 - - 13,777 - - - 44,265 - 1,522 - 3,600 - - - 39,375 - 8,523 - 3,544 - - - 17,500 -6,134 - 1,575 - - -								$ $ $ $ $ - 16,216 - - 339,965 - 56,935 - - 259,090 - 29,394 - - 216,247 - 2,099 - - 51,486 - 1,488 - - 52,930 - 1,116 - - 26,325
619,735 62,500 85,592 - 56,203 - 14,765 -								- 107,248 - - 946,043

Details of remuneration of Senior Management are set out below:

- D J Loughlin was appointed on 1 September 2006 and on this date C S Munyard ceased to be a senior management person. Disclosures above relate only to the period when in office.

^ - P A Evans was appointed on 17 October 2006 and on this date S J Lyons resigned and D L Kinley ceased to be a senior management person. Disclosures above relate only to the period when in office.

Page 6 of 87

and its controlled entities

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(i) Mr B W Ridgeway is a party to a service contract with Imdex Limited, which sets out a fixed compensation package reviewable annually. The service contract specifies a twelve month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Ridgeway and Imdex Limited from time to time. The Managing Director’s compensation is reviewed and determined annually by the Remuneration Committee.

During the current year Mr B W Ridgeway earned a cash bonus of $60,000, representing 60% of the possible bonus payable for the year. This bonus was paid on the satisfaction of performance criteria linked to Group operational progress and profitability. During the prior year a cash bonus of $75,000 was earned, representing 75% of the possible bonus payable for that year. This bonus was paid on the satisfaction of criteria linked to prior year audited EBITA.

No options were granted to Mr Ridgeway in the current year or in the prior year. The options expense shown in the tables above are the value of options granted in past years that has been spread over the two year vesting period. Refer Note 33 for further details.

(ii) Mr G E Weston is party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable annually. The service contract stipulates a twelve month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Performance incentives may be agreed between Mr Weston and Imdex from time to time. Additionally, Mr Weston is party to a deed with Imdex Limited, in respect of which Mr Weston has a right of first refusal in the event that Imdex receives an offer to purchase 100% of the shares of Imdex Limited. This ‘right’ lapses automatically should Mr Weston no longer be employed by Imdex.

During the current year Mr Weston earned a cash bonus of $60,000. This represents 100% of the possible bonus available for the current year and was earned on the satisfaction of operational and EBITA related hurdles. During the prior year Mr Weston was entitled to a cash bonus of $70,000 which was linked to the satisfaction of EBITA hurdles. A bonus of $25,000 was approved by the Remuneration Committee based on performance.

In the current year Mr Weston was granted 500,000 options under Staff Option Scheme Tranche 7 along with other staff of the Group. The percentage of the value of current year compensation that consisted of options was 4%. Mr Weston was not granted any options in the prior year. The options expense shown in the tables above includes a portion of the value of options granted in past years that has been spread over the three vesting period. Refer Note 33 for further details.

(iii) Mr D J Loughlin is a party to a service contract with Imdex Limited, which sets out a fixed compensation package reviewable annually. The service contract specifies a six month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Loughlin and Imdex Limited from time to time.

Mr Loughlin earned a bonus of $47,250 in the current year. This represents 100% of the possible bonus available for the current year and was earned on the satisfaction of operational and EBITA related hurdles. During the prior year a cash bonus of $17,500 was earned, representing 100% of the possible bonus payable for that year. This bonus was paid on the satisfaction of criteria linked to prior year audited EBITA.

No options were granted to Mr Loughlin in the current year. In the prior year, Mr Loughlin was granted 500,000 options, under Staff Option Scheme Tranche 3, along with other staff of the Group (Refer Note 33). The percentage of the value of prior year compensation that consisted of options was 22%. The options expense shown in the tables above includes a portion of the value of options granted in past years that has been spread over the three vesting period. Refer Note 33 for further details.

(iv) Mr P A Evans is a party to a service contract with Imdex Limited, which sets out a fixed compensation package reviewable annually. The service contract specifies a six month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Evans and Imdex Limited from time to time.

During the current year Mr Evans earned a bonus of cash $50,000, representing 100% of the possible bonus payable for the year. This bonus was paid on the satisfaction of specific EBITA, people and systems based criteria. During the prior year Mr Evans earned a cash bonus of $20,000, representing 67% of the possible bonus payable for that year. This bonus was paid on the satisfaction of criteria linked to current year audited EBITA.

In the current year, Mr Evans was granted 200,000 options, under Staff Option Scheme Tranche 7, along with other staff of the Group. The percentage of the value of compensation that consisted of options was 19%. In the prior year, Mr Evans was granted 300,000 options, under Staff Option Scheme Tranche 4, along with other staff of the Group. The percentage of the value of prior year compensation that consisted of options was 14%. The options expense shown in the table above includes a portion of the value of options granted in past years that has been spread over the three vesting period. Refer Note 33 for further details.

(v) In the prior year Mr S J Lyons was party to a service contract with Imdex Limited, which set out a fixed compensation package, reviewable annually. The service contract specified a two month notice period in the event that the contract was terminated. There were no termination benefits specified in this contract. Additional performance incentives were agreed between Mr Lyons and the Company from time to time. Mr Lyons resigned on 17 October 2006. No options were granted to Mr Lyons in the prior year. The options expense shown is the value attributable to options granted in past years that have been spread over the vesting period. Refer Note 33 for further details.

Page 7 of 87

and its controlled entities

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(vi) In the prior year Mr D L Kinley was a party to a service contract with Imdex Limited, which set out a fixed compensation package, reviewable annually. The service contract specified a one month notice period in the event that the contract was terminated. There were no termination benefits specified in this contract. Additional performance incentives were agreed between Mr Kinley and the Company from time to time. Mr D L Kinley ceased to be a key management member on 17 October 2006 following the appointment of Mr P A Evans as Company Secretary and Chief Financial Officer on that date. No options were granted to Mr Kinley in the prior year. The options expense shown is the value attributable to options granted in past years that have been spread over the vesting period. Refer Note 33 for further details.

(vii) In the prior year Mr C S Munyard was a party to a service contract with Surtron Technologies Pty Ltd, which set out a fixed compensation package reviewable annually. The service contract specifies a one month notice period in the event that the contract was terminated. There were no termination benefits specified in this contract. Additional performance incentives were agreed between Mr Munyard and Surtron Technologies Pty Ltd from time to time. Mr C S Munyard ceased to be a key management member on 1 September 2006 following the appointment of Mr D J Loughlin as General Manager: Down Hole Instrumentation on that date. No options were granted to Mr Munyard in the prior year. The options expense shown is the value attributable to options granted in past years that have been spread over the vesting period. Refer Note 33 for further details.

Bonuses granted to Directors and Senior Managers

The table below sets out the bonuses earned by Directors and Senior Managers in the current year. Bonuses are paid on the achievement of performance criteria specific to the individual. Where performance hurdles are not met, no bonus is paid. The performance criteria used are chosen by the Remuneration Committee annually and are linked to the financial performance of the company and hence shareholder value. Performance criteria typically revolve around areas of risk management, people development, systems improvement and EBITA performance. Performance criteria are reviewed by the Remuneration Committee against budgeted outcomes before granting bonuses.

	Bonus	% of possible bonus earned	% of possible bonus forfeited	% of compensation for the year consisting of performance based bonuses
	$	%	%	%
B W Ridgeway	60,000	60%	40%	11%
G E Weston	60,000	100%	0%	13%
D J Loughlin	47,250	100%	0%	11%
P A Evans	50,000	100%	0%	12%

Value of options issued to Directors and Senior Managers

The following table discloses the value of options granted, exercised or lapsed during the year:

	Options Granted	Options Exercised (i)	Options Lapsed	Total value of options granted, exercised and lapsed	Number of options vested in the current year	Value of options included in remunerati on during the year(ii)	Percentage of remuneration for the year that consisted of options
	Value at grant date	Value at exercise date	Value at lapsing date
	$	$	$	$	Number	$	%
I F Burston	-	-	-	-	-	176,000	68%
B W Ridgeway	-	-	-	-	2,000,000	5,152	1%
G E Weston	209,667	810,000	-	1,019,667	1,000,000	20,206	4%
D J Loughlin	-	-	-	-	166,667	139,750	31%
P A Evans	83,667	-	-	83,667	100,000	78,217	19%

(i) On 26 October 2008 Mr G Weston exercised 500,000 options. The options exercised were issued as part of Staff Options Tranche 1 and are exercisable at $0.20 each. These options had a fair value of $1.62 each at the date of exercise. No amounts were paid by Mr G Weston when these options were granted. These options carry no performance criteria and are subject to a service period only. For more details on options held by Senior Managers refer to Note 29.
(ii) The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 2 “Share Based Payments”. These non-cash numbers include a portion of the value of options issued in prior periods that are being expensed in the current period to recognise the progressive vesting of these options.

Page 8 of 87

and its controlled entities

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Share options granted to Directors and Senior Managers

During or since the end of the financial year an aggregate of 700,000 options were granted to the following executives of the Group. None of these options had vested at 30 June 2008. No options were issued to Directors in the current year. Options are issued for no consideration and none were forfeited. There is no policy in place limiting the risk of exposure to the securities in respect of the recipient of options.

of options.
Name	Number of options granted	Applicable tranche	Fair value at date of issue	Grant Date	Expiry Date	Terms	Issuing entity	Number of ordinary shares under option
G E Weston	500,000	Staff Share Options $3.00	$0.42	28 Mar 08	27 Mar 13	Exercisable in 1/3 lots on the anniversary date of issue	Imdex Limited	500,000
P A Evans	200,000	Staff Share Options $3.00	$0.42	28 Mar 08	27 Mar 13	Exercisable in 1/3 lots on the anniversary date of issue	Imdex Limited	200,000

(g) Share options

(i) Share options on issue at the date of this report

Details of unissued shares or interests under option are:

Issuing Entity	Class of option	Class of shares	Exercise price of option	Issue date of option	Expiry date of option	Key terms of option	Number of shares under option
Imdex Limited	Staff Share Options	Ordinary	300 cents	28 Mar 2008	27 Mar 2013	(aa)	4,815,000
Imdex Limited	Staff Share Options	Ordinary	180 cents	18 Oct 2007	17 Oct 2012	(aa)	500,000
Imdex Limited	Staff Share Options	Ordinary	180 cents	12 Jun 2007	11 Jun 2012	(aa)	625,000
Imdex Limited	Staff Share Options	Ordinary	100 cents	23 Feb 2007	22 Feb 2012	(aa)	3,513,667
Imdex Limited	Staff Share Options	Ordinary	75 cents	23 Feb 2007	22 Feb 2012	(aa)	700,000
Imdex Limited	Staff Share Options	Ordinary	35 cents	1 Feb 2006	31 Jan 2011	(aa)	1,792,872
Imdex Limited	Staff Share Options	Ordinary	20 cents	1 Aug 2004	31 Jul 2009	(aa)	1,168,333
Imdex Limited	Managing Director Options	Ordinary	30 cents	15 Sep 2005	14 Sep 2010	(bb)	2,000,000
Imdex Limited	Chairman’s Options	Ordinary	75 cents	19 Oct 2006	18 Oct 2011	(bb)	1,000,000

(aa) exercisable one year after the date of issue, in one-third lots each year thereafter.

(bb) exercisable at any point from 2 years after date of issue until expiry.

The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme.

Page 9 of 87

and its controlled entities

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(ii) Share options exercised during or since the end of the financial year

Issuing Entity	Class of option	Class of shares	Exercise price of option	Issue date of option	Expiry date of option	Number of shares issued
Imdex Limited	Staff Share Options	Ordinary	20 cents	1 Aug 2004	31 Jul 2009	922,168
Imdex Limited	Staff Share Options	Ordinary	35 cents	1 Feb 2006	31 Jan 2011	326,998
Imdex Limited	Staff Share Options	Ordinary	100 cents	23 Feb 2007	22 Feb 2012	436,333

No options were exercised by Directors in the current year.

(h) Principal Activities

The Group’s principal continuing activities during the course of the financial year were manufacturing and sale of a range of drilling products.

(i) Review of Operations

A review of the operations for the financial year together with future prospects is contained in the Chairman’s Report, the Managing Director’s Review and the Financial Report.

(j) Dividends

A fully franked interim dividend of 1.75 cents per ordinary share was paid on 25 March 2008 to shareholders registered on 7 March 2008. A fully franked final dividend of 1.5 cents per ordinary share was paid on 2 November 2007 to shareholders registered on 15 October 2007. In the prior year a fully franked interim dividend of 1 cent per ordinary share was paid on 26 March 2007 to shareholders registered on 13 March 2007. Since 30 June 2008 the Directors have declared a fully franked final dividend of 2.25 cents per ordinary share, the financial effect of which has not been reflected in the Financial Report.

(k) Changes in State Of Affairs

During the financial year the Group acquired three drilling fluids businesses and one down hole instrumentation business. The drilling fluids businesses acquired were Suay Energy Services LLP, Poly-Drill Drilling Systems Ltd and Southernland SA. The down hole instrumentation business acquired was System Entwicklungs GmbH. In addition the Surtron Technologies business was disposed of. More details of these acquisitions and disposal are contained in notes 26 and 28 respectively.

Other than the above, there were no significant changes in the state of affairs of the Group.

Page 10 of 87

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(l) Subsequent Events

On 1 July 2008, $500,000 cash was paid and 168,530 fully paid Imdex Limited ordinary shares were issued to acquire the remaining 25% of the issued share capital of Suay Energy Services LLP. Refer note 26(d).

On 31 July 2008 Imdex Limited paid the next deferred settlement instalment of GBP 1,090,000 (A$2,271,000) due to the vendors of Imdex Technology UK Limited (formerly Chardec Technology Limited).

Subsequent to year end the Directors declared a 2.25 cent per share fully franked dividend with an entitlement date of 17 October 2008 and a payment date of 31 October 2008. The effect of this dividend has not been reflected in this financial report.

(m) Future Developments

Disclosure of information regarding likely developments in the operations of the Group in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been disclosed in this report.

(n) Environmental Regulations

The only entity in the Group that is subject to environmental regulations is Samchem Drilling Fluids and Chemicals (Pty) Ltd. They are required to comply with the South African National Water Act, Act No 36 of 1998 which requires the management of effluent discharge. This is controlled through an effluent pit system using an oil separator. No known environmental breaches have occurred in relation to the Group’s operations.

(o) Non-audit services

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 6 to the Financial Report.

The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The Directors are of the opinion that the services as disclosed in Note 6 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit and Compliance Committee, for the following reasons:

All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and
None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

Page 11 of 87

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(p) Auditor’s Independence Declaration

The auditor’s independence declaration is included on page 13 of the Annual Report.

(q) Indemnification of Officers and Auditors

During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary, and all Executive Officers of the Company and of any related body corporate against a liability incurred as such a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.

(r) Rounding Off of Amounts

The Company is a Company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the Directors’ report and the financial report are rounded off to the nearest thousand dollars.

Signed in accordance with a resolution of the Directors made pursuant to S.298(2) of the Corporations Act 2001.

On behalf of the Directors

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

Mr I F Burston
Chairman
----- End of picture text -----

Mr Ian Burston

Chairman

PERTH, Western Australia, 15 August 2008.

Page 12 of 87

Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

The Board of Directors Imdex Limited Level 1, 15 Rheola Street WEST PERTH WA 6005

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

15 August 2008

Dear Board Members

Imdex Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Imdex Limited.

As lead audit partner for the audit of the financial statements of Imdex Limited for the financial year ended 30 June 2008, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

==> picture [97 x 62] intentionally omitted <==

Peter Rupp Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

Independent Auditor’s Report to the Members of Imdex Limited

Report on the Financial Report

We have audited the accompanying financial report of Imdex Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, cash flow statement and statement of changes in equity for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 16 and 22 to 85.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Liability limited by a scheme approved under Professional Standards Legislation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditor’s Opinion

In our opinion:

(a) the financial report of Imdex Limited is in accordance with the Corporations Act 2001 , including: (i) giving 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
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in paragraph (f) of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Imdex Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001 .

DELOITTE TOUCHE TOHMATSU

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Peter Rupp

Partner Chartered Accountants Perth, 15 August 2008

IMDEX LIMITED

and its controlled entities

DIRECTORS’ DECLARATION

The Directors declare that:

(a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
(b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Company and the Group; and
(c) the Directors have been given the declarations required by s.295A of the Corporations Act 2001.

At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.

In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in note 25 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the Directors made pursuant to s.295(5) for the Corporations Act 2001.

Dated at Perth, 15 August 2008.

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Ian F Burston Chairman

Page 16 of 87

and its controlled entities

IMDEX LIMITED

CORPORATE GOVERNANCE STATEMENT

(a) ASX Governance Principles and ASX Recommendations

The Australian Stock Exchange Corporate Governance Council sets out best practice recommendations, including corporate governance practices and suggested disclosures. ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they have complied with the ASX recommendations and to give reasons for not following them.

Unless otherwise indicated the best practice recommendations of the ASX Corporate Governance Council, including corporate governance practices and suggested disclosures, have been adopted by the Company for the full year ended 30 June 2008. In addition, the Company has a Corporate Governance section on its website: www.imdexlimited.com (under the “Investor” heading) which includes the relevant documentation suggested by the ASX Recommendations.

The extent to which Imdex has complied with the ASX Recommendations during the year ended 30 June 2008, and the main corporate governance practices in place are set out below.

(b) Principle 1: Lay solid foundation for management and oversight

The Board has implemented a Board Charter that formalises the functions and responsibilities of the Board. The Charter is published on the Company’s website.

(c) Principle 2: Structure the Board to add value

Imdex’s Board structure is consistent with the ASX Recommendations on Principle 2, with the exception that it does not have a separate nomination committee for the reasons detailed below.

(i) Board Structure

The Board consists of a Non Executive Chairman, three Non Executive Directors and one Executive Director. Of the five Board members, four are considered independent.

In accordance with the Company’s Constitution the minimum number of Directors is three. There is no maximum number, although it would be expected that the optimal number of Directors would be five or six.

The names of the Directors of the Company in office at the date of this Statement are set out in the Directors’ Report and further details concerning the skills, experience, expertise and term of office of each Director is set out in the Director’s Profiles in the first section of the Annual Report.

(ii) Board Independence

Directors are expected to bring independent judgement to the decision making of the Board. To facilitate this, each Director has the right to seek independent legal advice at the Group’s expense with the prior approval of the Chairman, which may not be unreasonably withheld.

In assessing Director independence, materiality has been determined from both a quantitative and qualitative perspective. An amount of over 5% of turnover is considered material. Similarly, a transaction of any amount, or a relationship, is deemed material if knowledge of it impacts, or may impact, the Shareholders’ understanding of the Director’s performance. The Board has conducted a review of each Director’s independence and reports as follows:

Director	Assessment	Existence of any matters contained in ASX Recommendation 2.1 affecting Independence
Mr I F Burston, Non Executive Chairman	Independent	Nil
Mr B W Ridgeway, Managing Director	Not Independent	Managing Director
Mr R W Kelly, Non Executive Director	Independent	Nil
Mr K A Dundo, Non Executive Director	Independent	Nil
Mr M Lemmel, Non Executive Director	Independent	Nil

Page 17 of 87

and its controlled entities

IMDEX LIMITED

CORPORATE GOVERNANCE STATEMENT

(iii) Board Nomination

The Board does not have a separate nomination committee and, given the Company’s size, does not intend to form such a committee. However, the composition of the Board is determined using the following principles:

The Board should comprise a majority of independent, Non Executive Directors with a broad range of experience, skills and expertise;
The Chairman of the Board should be an independent, Non Executive Director; and
The roles of the Chairman and the Managing Director should not be exercised by the same individual.

(iv) Procedure for the selection and appointment of new Directors to the Board

The Company has published on its website, procedures for the selection and appointment of new Directors to the Board. The Company also has terms and conditions which govern the appointment of Non Executive Directors. These are subject to the Company’s Constitution and the Corporations Act 2001, and cover: appointment, retirement, Corporate Governance, remuneration, Board meetings, and Board Committees.

The Board does not impose on Directors an arbitrary time limit on their tenure. Under the Company’s Constitution and the ASX Listing Rules however, each Director must retire by rotation within a three year period following their appointment. In such cases, the Director’s nomination for re-election should be based on performance and the needs of the Company.

(d) Principle 3: Promote ethical and responsible decision-making

(i) Code of Conduct

The Company has developed a Code of Conduct that applies to all employees, officers and Directors of the Company. The Code addresses matters relevant to the Company’s legal and other obligations to its Shareholders and covers: the way in which we must discharge our duties; compliance with laws; conflicts of interest; confidentiality; insider trading; the use of the Company’s resources and the environment, health and safety.

The Code is published on the Company’s website.

(ii) Share Trading Policy

The Board has developed a Share Trading Policy that restricts Directors and Senior Management to trading in the Company’s shares during the one month periods following the annual and half yearly results announcements and the Annual General Meeting.

At all other times the Chairman must be approached, prior to trading, to determine whether trading at that particular time is appropriate.

The Policy also reminds other staff of the laws applying to insider trading and stipulates that employees must not engage in short term trading of Imdex’s shares.

Each of the Directors has signed an agreement requiring them to provide immediate notification to the Company of any changes in securities held, or controlled, by the Director. The Company makes an immediate notification to the ASX providing details of any changes in a Director’s shareholding.

The Policy is published on the Company’s website.

(e) Principle 4: Safeguard integrity in financial reporting

(i) Statement by the Managing Director and Chief Financial Officer

The Managing Director and the Chief Financial Officer have signed a declaration to the Board attesting to the fact that the 2008 Annual Financial Report presents a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.

Page 18 of 87

and its controlled entities

IMDEX LIMITED

CORPORATE GOVERNANCE STATEMENT

(ii) The Audit and Compliance Committee

The Audit and Compliance Committee consists of three independent Non Executive Directors and operates under a formal charter approved by the Board. The Charter is published on the Company’s website.

The Committee is chaired by an independent Chairperson who is not the Chairman of the Board of Directors.

The role of the Committee is to advise on the establishment and maintenance of a framework of internal control, risk management protocols, appropriate ethical standards for the management of the Company and to approve the annual internal audit plan. It also gives the Board assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies for inclusion in Financial Statements.

The members of the Audit Committee during the year and at the date of this Statement were:

Mr K A Dundo (Chairman); Mr I F Burston; and, Mr R W Kelly.

The experience and qualifications of each committee member is set out in the Directors’ Profiles in the first section of the Annual Report. The Company Secretary acts as secretary of this Committee.

The Group Risk Manager, external auditors, the Managing Director and the Chief Financial Officer are invited to Audit Committee meetings at the discretion of the Committee. The Audit Committee met three times during the year as set out in the Directors’ Report.

(iii) External Auditors

The Board reviews the performance, skills, cost and other matters when assessing the appointment of external auditors. This review is generally undertaken at the completion of the preparation of the Annual Financial Report and involves discussions with the auditors and the Group's senior management. Information concerning the selection and appointment of external auditors is published on the Company’s website.

The external auditors are invited to attend the Annual General Meeting of the Company and be available to answer questions from Shareholders.

(iv) Internal Audit

The Group has an independent internal audit function that reports directly to the Audit and Compliance Committee. The conduct and independence of the internal audit function are governed by the Internal Audit Charter which is approved by the Audit and Compliance Committee. The annual work plan of the internal audit function is approved annually by the Audit and Compliance Committee.

(f) Principle 5: Make timely and balanced disclosure

(i) Continuous disclosure policies and procedures

The Company has developed procedures to ensure that it complies with the disclosure requirements of the ASX Listing Rules. The procedures are published on the Company’s website.

The procedures set out who is responsible for determining whether information is of a type or nature that requires disclosure, the Boards role in reviewing the information disclosed to ASX and the procedures for ensuring that the information is released to ASX.

All information disclosed to the ASX is published on the Company’s website as soon as practicable.

(g) Principle 6: Respect the rights of Shareholders

Shareholders Communications Strategy: The Board aims to ensure that Shareholders are informed of all major developments affecting the Group 's state of affairs. Information is communicated to Shareholders through:

(i) the Annual Report distributed to all Shareholders (unless a Shareholder has specifically requested not to receive the Report). The Board ensures that the Annual Report includes relevant information about the operations of the Group during the year, changes in the state of affairs of the Group and details of future developments, in addition to the other disclosures required by the Corporations Act 2001;

(ii) the Half-Yearly Report which contains summarised financial information and a review of the operations of the Group during the period. Half-Year Financial Report prepared in accordance with the requirements of Accounting Standards and the Corporations Act 2001 are lodged with the Australian Securities & Investments Commission and the Australian Stock Exchange. The Half-Year Financial Report is sent to any Shareholder who requests them;

(iii) regular reports released through the ASX and the media;

(iv) proposed major changes in the Group, which may impact on share ownership rights are submitted to a vote of Shareholders; and

Page 19 of 87

IMDEX LIMITED

and its controlled entities

CORPORATE GOVERNANCE STATEMENT

(v) the Board encourages full participation by Shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Group's strategy and goals. Important issues are presented to the Shareholders as single resolutions. The Shareholders are responsible for voting on the re-appointment of Non Executive Directors.

Further information concerning the Company and the full text of the various announcements and reports referred to above are available on the Company’s website: www.imdexlimited.com. Further information can also be obtained by emailing the Company at: [email protected] and Shareholders may register on the Company’s website to receive automatic notification of ASX announcements.

The auditor is also invited to the Company’s Annual General Meetings and is available to answer Shareholders questions concerning the conduct of the audit.

The Company’s Shareholder Communications Strategy is published on the Company’s website.

(h) Principle 7: Recognise and manage risk

(i) Risk oversight and management policies

The Board has sought to minimise the business' risks by focusing on the Company's core business, making changes as outlined in the Chairman’s Report and the Managing Director’s Report. The Board is responsible for ensuring that the Company’s risk management systems are adequate and operating effectively.

The Company has an independent internal audit function that operates under a Charter approved by the Audit and Compliance Committee. One of the tasks of the internal audit function is to review and evaluate the Company’s and Group’s risk management and internal control processes on a continuous basis.

The risk management policy is published on the Company’s website.

(ii) Statement by the Managing Director and Chief Financial Officer

The Managing Director and the Chief Financial Officer have signed a declaration to the Board attesting to the fact that the integrity of Financial Reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board, and that the system is operating efficiently and effectively in all material respects.

(i) Principle 8: Encourage enhanced performance

(i) Performance evaluation of the Board, its Committees, individual Directors and key executives

There is an informal process in place to enable the Chairman to discuss and evaluate with each Director their contribution to the Board and to enable that Director to comment on all facets of the operation of the Board. A formal performance evaluation of the Board was not conducted during the year.

Given the Company’s size, the Board considers that this process is adequate and does not envisage forming a Nomination Committee to perform this function or to formalise the performance evaluation process.

All other Executives, and all staff of the Company, are subject to formal annual reviews of their performance as set out in the Directors’ Report.

The description of the process for performance evaluation is published on the Company’s website.

(j) Principle 9: Remunerate fairly and responsibly

(i) Company’s remuneration policies

Details on the remuneration of Directors and Executives are set out in Note 32. The Company’s remuneration policies are set out in the Remuneration Report contained in the Directors Report.

Page 20 of 87

IMDEX LIMITED

and its controlled entities

CORPORATE GOVERNANCE STATEMENT

(ii) Remuneration Committee

The Remuneration Committee consists of three Non Executive Directors and assists the Board in determining executive remuneration policy, determining the remuneration of Executive Directors and reviewing and approving the remuneration of senior management.

The members of the Committee during the year and at the date of this Statement were:

Mr R W Kelly (Chairman); Mr I F Burston; and, Mr K A Dundo.

The experience and qualifications of each committee member is set out in the Directors’ Profiles in the first section of the Annual Report.

The Remuneration Committee Charter is published on the Company’s website.

(iii) Non Executive Director’s remuneration

The terms and conditions governing the remuneration of Non Executive Director’s are set out in their appointment letter.

All Non Executive Directors are remunerated by way of fixed cash fees. Non Executive Directors are not provided with retirement benefits other than statutory superannuation. The maximum total remuneration payable to Non Executive Directors was approved by Shareholders at the 2006 Annual General Meeting and is currently $500,000.

(k) Principle 10: Recognise the legitimate interests of stakeholders

(i) Code of Conduct

As set out in Principle 3 above, the Company has developed and published to its website a Code of Conduct.

Page 21 of 87

IMDEX LIMITED

and its controlled entities

INCOME STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

Notes Continuing operations Revenue from sale of goods, rendering of services and operating lease rental Other revenue from operations Total revenue 4 Other income 4 Raw materials and consumables used 4 Employee benefit expense 4 Depreciation expense 4 Amortisation expense 4 Finance costs 4 Other expenses 4 Profit before tax Income tax expense 5 Profit from continuing operations Profit from discontinued operations 28 Profit for the year Attributable to: Equity holders of the parent Minority interest Earnings per share Continuing operations: Basic earnings per share (cents) 20 Diluted earnings per share (cents) 20 Basic earnings per share (cents) 20 Diluted earnings per share (cents) 20 Continuing and discontinued operations:	Year Ended Year Ended Year Ended Year Ended 30 June 2008 30 June 2007 30 June 2008 30 June 2007 $’000 $’000 $’000 $’000 142,009 103,849 - 22,503 1,900 900 3,338 2,849 Consolidated Company
	143,909 104,749 3,338 25,352
	369 1,597 27,474 8,084 (59,589) (51,403) - (7,202) (22,996) (10,950) (5,720) (3,646) (3,266) (3,207) (198) (2,269) (6,055) (3,430) - - (2,762) (2,736) (1,575) (1,543) (17,725) (16,505) (4,474) (5,691)
	31,885 18,115 18,845 13,085
	(10,804) (6,165) (2,520) (3,219)
	21,081 11,950 16,325 9,866
	10,921 1,568 - -
	32,002 13,518 16,325 9,866
	31,966 13,518 16,325 9,866 36 - - -
	11.22 7.72 10.79 7.09 17.04 8.74 16.38 8.00

The Income Statement should be read in conjunction with the accompanying notes.

Page 22 of 87

and its controlled entities

IMDEX LIMITED

BALANCE SHEET AS AT 30 JUNE 2008

Notes Current Assets Cash and Cash Equivalents 30 Trade and Other Receivables 7 Inventories 8 Other Financial Assets 9 Other 10 Non Current Assets Classified as Held for Sale 11 Total Current Assets Non Current Assets Other Financial Assets 9 Property, Plant and Equipment 12 Goodwill 13 Other Intangible Assets 14 Other 10 Total Non Current Assets Total Assets Current Liabilities Trade and Other Payables 15 Borrowings 16 Current Tax Payables 5 Provisions 17 Total Current Liabilities Non Current Liabilities Borrowings 16 Deferred Tax Liabilities 5 Provisions 17 Total Non Current Liabilities Total Liabilities Net Assets Equity Contributed Capital 18 Foreign Currency Translation Reserve 19 Employee Equity-Settled Benefits Reserve 19 Retained Profits/(Accumulated Losses) Total Equity	30 June 2008 30 June 2007 30 June 2008 30 June 2007 $’000 $’000 $’000 $’000 13,276 15,271 869 962 32,079 27,806 2,401 10,213 21,716 13,839 - 2,085 13,237 11,556 13,237 11,556 1,200 224 20 49 Consolidated Company
	81,508 68,696 16,527 24,865 4,500 4,500 4,500 4,500
	86,008 73,196 21,027 29,365
	- - 71,022 43,959 7,140 13,207 522 4,886 52,626 35,033 - - 27,289 27,746 - 429 - 664 - 664
	87,055 76,650 71,544 49,938
	173,063 149,846 92,571 79,303
	16,522 16,741 1,811 5,570 15,703 11,881 9,000 2,685 8,792 8,913 2,643 5,450 972 1,212 245 265
	41,989 38,747 13,699 13,970
	19,849 28,556 8,000 10,064 5,024 5,481 273 796 558 448 128 116
	25,431 34,485 8,401 10,976
	67,420 73,232 22,100 24,946
	105,643 76,614 70,471 54,357
	64,883 60,982 64,883 60,982 (4,863) (2,137) - - 2,573 751 2,573 751 43,050 17,018 3,015 (7,376)
	105,643 76,614 70,471 54,357

The Balance Sheet should be read in conjunction with the accompanying notes.

Page 23 of 87

IMDEX LIMITED

and its controlled entities

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

CONSOLIDATED Notes Balance at 1 July 2006 Exchange differences on translation of foreign operations after taxation 19 Net income recognised directly in equity Profit for the period Total recognised income and expense for the period Dividend paid Share based payments 19 Issue of equity securities for working capital 18 Issue of equity securities on conversion of debt 18 Issue of equity securities on purchase of entity 18 Share issue costs (net of tax) 18 Issue of shares under staff option plan 18 Deferred consideration - mandatory convertible capital 18 Balance at 30 June 2007 Exchange differences on translation of foreign operations after taxation 19 Net income recognised directly in equity Profit for the period Total recognised income and expense for the period Dividend paid Share based payments 19 Issue of shares as part consideration for the acquisition of Poly-Drill 18 Issue of shares as part consideration for the acquisition of Southernland 18 Tax effect of prior period share issue costs 18 Issue of shares under staff option plan 18 Balance at 30 June 2008	$'000 $'000 $'000 $'000 $'000 $'000 26,490 - (494) 105 6,552 32,653 - - (1,643) - - (1,643) Fully Paid Ordinary Shares Mandatory Convertible Capital Total Attributable to Equity Holders of the Entity Foreign Currency Translation Reserve Employee Equity- Settled Benefits Reserve Retained Earnings
	- - (1,643) - - (1,643)
	- - - - 13,518 13,518
	- - - - 13,518 13,518
	- - - - (3,052) (3,052) - - - 728 - 728 16,500 - - - - 16,500 10,400 - - - - 10,400 200 - - - - 200 (510) - - - - (510) 1,202 - - (82) - 1,120 - 6,700 - - - 6,700
	54,282 6,700 (2,137) 751 17,018 76,614 - - (2,726) - - (2,726)
	- - (2,726) - - (2,726)
	- - - - 31,966 31,966
	- - - - 31,966 31,966
	- - - - (5,934) (5,934) - - - 2,025 - 2,025 1,750 - - - - 1,750 1,387 - - - - 1,387 (113) - - - - (113) 877 - - (203) - 674
	58,183 6,700 (4,863) 2,573 43,050 105,643

The Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Page 24 of 87

IMDEX LIMITED

and its controlled entities

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

COMPANY Notes Balance at 1 July 2006 Profit for the period Total recognised income and expense for the period Dividend paid Share based payments 19 Issue of equity securities for working capital 18 Issue of equity securities on conversion of debt 18 Issue of equity securities on purchase of entity 18 Share issue costs (net of tax) 18 Issue of shares under staff option plan 18 Deferred consideration - mandatory convertible capital 18 Balance at 30 June 2007 Profit for the period Total recognised income and expense for the period Dividend paid Share based payments 19 Issue of shares as part consideration for the acquisition of Poly-Drill 18 Issue of shares as part consideration for the acquisition of Southernland 18 Tax effect of prior period share issue costs 18 Issue of shares under staff option plan 18 Balance at 30 June 2008	$'000 $'000 $'000 $'000 $'000 $'000 26,490 - - 105 (14,190) 12,405 - - - - 9,866 9,866 Retained Earnings / (Accumulated Losses) Total Attributable to Equity Holders of the Entity Fully Paid Ordinary Shares Mandatory Convertible Capital Foreign Currency Translation Reserve Employee Equity- Settled Benefits Reserve
	- - - - 9,866 9,866
	- - - - (3,052) (3,052) - - - 728 - 728 16,500 - - - - 16,500 10,400 - - - - 10,400 200 - - - - 200 (510) - - (82) - (592) 1,202 - - - - 1,202 - 6,700 - - - 6,700
	54,282 6,700 - 751 (7,376) 54,357 - - - - 16,325 16,325
	- - - - 16,325 16,325
	- - - - (5,934) (5,934) - - - 2,025 - 2,025 1,750 - - - - 1,750 1,387 - - - - 1,387 (113) - - - - (113) 877 - - (203) - 674
	58,183 6,700 - 2,573 3,015 70,471

The Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Page 25 of 87

IMDEX LIMITED

and its controlled entities

CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

Notes Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Intercompany management fees received Intercompany dividend received Interest and other costs of finance paid Income tax paid Net cash provided by / (used in) Operating Activities 30(c) Cash Flows From Investing Activities Interest and bill discounts received Payment for property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from Rashid Trading Establishment Payment for development costs capitalised 14 Payment for shares of Flexit net of cash acquired 26(f) Payment for shares of Reflex net of cash acquired 26(g) Payment for shares of Imdex Technology net of cash acquired 26(h) Payment for shares of Poly-Drill net of cash acquired 26(b) Payment for shares of Suay net of cash acquired 26(c), (d) Payment for shares of Southernland net of cash acquired 26(e) Payment for shares of SEG net of cash acquired 26(a) Proceeds on the sale of Surtron net of cash disposed 28 Payment for the acquisition of patent Amounts advanced to Sino Gas & Energy Ltd Amounts repaid by Sino Gas & Energy Ltd Net cash provided by / (used in) Investing Activities Cash Flows From Financing Activities Advances from / (to) Controlled Entities Proceeds from issue of equity securities 18 Payment for share issue costs 18 Cash received on exercise of options Dividend paid to equity holders of the parent 21 Hire purchase and lease payments Payment for interest rate cap Payment of convertible note interest Proceeds from borrowings Repayment of borrowings Net cash provided by / (used in) Financing Activities Net Increase / (Decrease) in Cash and Cash Equivalents Held Cash and Cash Equivalents At The Beginning Of The Financial Year 30(a) Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies Cash and Cash Equivalents At The End Of The Financial Year 30(a)	Year Ended Year Ended Year Ended Year Ended 30 June 2008 30 June 2007 30 June 2008 30 June 2007 $’000 $’000 $’000 $’000 154,253 128,311 - 18,124 (126,292) (105,170) (7,565) (12,583) - - 4,665 1,363 - - 3,378 3,000 (2,342) (1,490) (1,562) (1,022) (15,362) (5,392) (8,907) (3,241) Consolidated Company
	10,257 16,259 (9,991) 5,641
	451 267 212 217 (4,803) (5,733) (42) (3,358) 1,138 710 - 2,886 - 1,121 - 1,121 - (429) - (429) - (10,274) - - - (15,194) - - (5,088) (6,352) - - (899) (352) (1,571) (352) (246) (306) (246) (306) (1,446) - (1,533) - (13,853) - - - 18,000 - 19,873 - - (328) - (328) - (11,307) - (11,307) - 200 - 200
	(6,746) (47,977) 16,693 (11,656)
	- - (5,443) (20,444) - 16,500 - 16,500 - (729) - (729) 674 1,120 674 1,120 (5,934) (3,052) (5,934) (3,052) (888) (1,801) (89) (721) (239) - (239) - (464) - (464) - 12,000 33,890 12,000 18,000 (9,983) (5,700) (7,300) (5,700)
	(4,834) 40,228 (6,795) 4,974

	(1,323) 8,510 (93) (1,041)
	15,271 6,421 962 2,003 (672) 340 - -
	13,276 15,271 869 962

The Cash Flow Statement should be read in conjunction with the accompanying notes.

Page 26 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

1 Adoption of New and Revised Accounting Standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of these new and revised Standards and Interpretations has resulted in a change to the Company’s and the Group’s disclosures in the following areas:

AASB 7 ‘Financial Instruments: Disclosures’ and consequential amendments to other accounting standards resulting from its issue;
AASB 2005-10 ‘Amendments to Australian Accounting Standards’; and
Interpretation 10 ‘Interim Financial Reporting and Impairment’

Changes in disclosures around financial instruments and the objectives, policies and processes for managing capital

The Australian Accounting Standards Board first released AASB 7 ‘Amendments to Australian Accounting Standards’ in August 2005. AASB 7 was represented in October 2007 to take into account amendments made to this standard by other standards since its original issue in August 2005. Changes made to this standard expand the disclosures required in relation to the Company’s and the Group’s financial instruments and the objectives, policies and processes for managing capital.

The Australian Accounting Standards Board released AASB 2005-10 ‘Amendments to Australian Accounting Standards’ in September 2005. These amendments arise from the release in August 2005 of AASB 7 ‘Financial Instruments: Disclosures’.

The changes introduced by AASB 7 and AASB 2005-10 are applied by the Company and the Group with effect from the beginning of the comparative reporting period presented in this financial report (i.e. with effect from 1 July 2006). The application of this represented standard only affects disclosures made and has no impact on the financial results presented in these financial statements.

Interim Financial Reporting and Impairment

The Australian Accounting Standards Board released Interpretation 10 ‘Interim Financial Reporting and Impairment’ in September 2006. This interpretation clarifies the period end accounting treatment of impairment losses that were recognised in interim periods.

Interpretation 10 is applicable to annual reporting periods beginning on or after 1 November 2006. The adoption of this Interpretation has had no impact on these financial statements.

Page 27 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

1 Adoption of New and Revised Accounting Standards

Standards and Interpretations in issue but not yet effective

At the date of authorisation of the financial report, the following Standards and Interpretations were in issue but not yet effective:

Standard / Interpretation	Effective Date
AASB 101 ‘Presentation of Financial Statements’ (revised September 2007)	Effective for annual reporting periods beginning on or after 1 January 2009
AASB 8 ‘Operating Segments’ and consequential amendments to other accounting standards resulting from its issue	Effective for annual reporting periods beginning on or after 1 January 2009
AASB 123 ‘Borrowing Costs’ revised	Effective for annual reporting periods beginning on or after 1 January 2009
Interpretation 12 ‘Service Concession Arrangements’	Effective for annual reporting periods beginning on or after 1 January 2008
Interpretation 13 ‘Customer Loyalty Programmes’	Effective for annual reporting periods beginning on or after 1 July 2008
Interpretation 14 ‘Limit on a defined benefit asset, Minimum Funding Requirements and their Interaction’	Effective for annual reporting periods beginning on or after 1 January 2008
AASB 2008-1 ‘Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations’	Effective for annual reporting periods beginning on or after 1 January 2009
AASB 2008-2 ‘Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation’	Effective for annual reporting periods beginning on or after 1 January 2009
AASB 2008-3 ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127’	Effective for annual reporting periods beginning on or after 1 July 2009
IFRS 3 ‘Business Combinations’	Effective for annual reporting periods beginning on or after 1 July 2009
IAS 27 ‘Separate and Consolidated Financial Statements’	Effective for annual reporting periods beginning on or after 1 July 2009

The application of AASB 8, AASB 123, IFRS 3, IAS 27, AASB 101, AASB 2008-1 and AASB 2008-3 are not expected to have a material effect on any of the amounts recognised in the financial statements, but may change the disclosures presently made in relation to the Company’s and the Group’s assets, liabilities and segments. The circumstances addressed by Interpretations 12, 13, 14 and AASB 2008-2 do not have application to the business of the Company or Group. These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual reporting period beginning after the effective date of each pronouncement.

The initial application of the expected issue of an Australian equivalent accounting standard to the following standard is not expected to have a material impact on the financial report of the Group and the Company:

Expected Standard / Interpretation	Effective Date
Improvements to IFRS’s (2008)	Effective for annual reporting periods beginning on or after 1 January 2009
Amendments to IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’ and IAS 27 ‘Consolidated and Separate Financial Statements – Cost of Investment in a subsidiary, Jointly Controlled Entity or Associate’	Effective for annual reporting periods beginning on or after 1 January 2009
IFRIC 15 ‘Agreements for the Construction of Real Estate’	Effective for annual reporting periods beginning on or after 1 January 2009
IFRIC 16 ‘Hedges of a Net Investment in a Foreign Operation’	Effective for annual reporting periods beginning on or after 1 October 2008

Page 28 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001 and Accounting Standards and Interpretations and complies with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with the A-IFRS ensures that the consolidated financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’).

The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.

The financial statements were authorised for issue by the directors on 15 August 2008.

(a) Basis of preparation

The Financial Report has been prepared on the basis of historical cost except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The following significant accounting policies have been adopted in the preparation and presentation of the Financial Report:

(b) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

(c) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

(i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

(ii) for receivables and payables which are recognised inclusive of GST.

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

(d) Goodwill

Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Goodwill is subsequently measured at its cost less any impairment losses.

For the purpose of impairment testing goodwill is allocated to each of the Group’s cash-generating units (CGU’s), or groups of CGU’s, expected to benefit from the synergies of the business combination. CGU’s (or groups of CGU’s) to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

If the recoverable amount of the CGU (or group of CGU’s) is less than the carrying amount of the CGU (or groups of CGU’s), the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or groups of CGU’s) and then to the other assets of the CGU (or groups of CGU’s) pro-rata on the basis of the carrying amount of each asset in the CGU (or groups of CGU’s). An impairment loss recognised for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period

On disposal of an operation within a CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal of the operation.

Page 29 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(e) Inventories

Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale.

(f) Property, plant and equipment

Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is calculated on a straight line basis in order to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements and assets held under finance lease are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

The gain or loss arising on disposal of retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

The annual depreciation rates used for each class of assets are as follows:

Plant and equipment:	10% to 40%
Equipment rented to third parties:	10% to 40%
Equipment under finance lease:	13% to 22.5%

(g) Share-based payments

Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by the use of the Black-Scholes Model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 33.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.

At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the employee equity-settled benefits reserve.

(h) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Page 30 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(i) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

(j) Borrowing costs

Borrowing costs are expensed as incurred.

(k) Foreign currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of the Group, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

On consolidation, the assets and liabilities of the Group’s foreign operations (including comparatives) are translated into Australian dollars at exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchanges rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. Goodwill arising on acquisitions before the date of transition to A-IFRS is treated as an Australian dollar denominated asset.

(l) Derivative financial instruments

The Group enters into derivative financial instruments to manage its exposure to interest rate risk. This risk is primarily managed through the use of an interest rate cap. Further details of derivative financial instruments are disclosed in note 31 to the financial statements.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in the profit or loss immediately. The Group has not designated any financial instruments as being hedge accounted.

(i) Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Page 31 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(m)

Financial assets

Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as ‘at fair value through the profit or loss’ which are initially measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost.

Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-tomaturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

(i) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’.

(ii) Held-to-maturity investments

Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates where the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.

(iii) Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:

Has been acquired principally for the purpose of selling in the near future;
Is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
Is a derivative that is not designated and effective as a hedging instrument.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.

(iv) Available-for-sale financial assets

Available-for-sale assets are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest rate method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period.

The fair value of available-for-sale monetary assets held in a foreign currency is determined in that foreign currency and translated at the spot rate at reporting date. The change in fair value attributable to translation differences that results from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in equity.

(v) Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest rate method less impairment. Interest is recognised by applying the effective interest rate.

(vi) Impairment of financial assets

Financial assets other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying value of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying value is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available-for-sale instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity.

Page 32 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(m) Financial assets (continued)

(vi) Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risk and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

(n) Financial instruments issued by the Company

(i) Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

(ii) Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.

(iii) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised through profit or loss incorporates any interest paid on the financial liability.

A financial liability is held for trading if:

it has been incurred principally for the purpose of repurchasing in the near future; or
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading is designated as ‘at fair value through profit or loss’ upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally or on that basis; or
it forms part of a contract containing one or more embedded derivatives, and AASB139 ‘Financial Instruments: Recognition and Measurement’ permits the entire combined contract (asset or liability) to be designated as ‘at fair value through profit or loss’.
(iv) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Page 33 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(o) Intangible assets

(i) Intangible assets acquired in a business combination

All intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their value can be measured reliably. Identifiable intangible assets comprise intellectual property, technology, contracts, customers, development costs and trade marks. These are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Estimated useful lives are as follows:

ul lives are as follows:
Intellectual property	indefinite
Technology	5-10 years
Contracts	5 years
Customers	5-6 years
Trade Marks and Brand Names	5-6 years

Intellectual property recognised by the Company has an indefinite useful life and is not amortised. Each period, the useful life of this asset is reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset. Such assets are tested for impairment in accordance with the policy stated in note 2(t).

(ii) Research and development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Capitalised development costs are stated at cost less accumulated amortisation and impairment, and are amortised on a straight-line basis over their useful life of 5 years, commencing on commercialisation of the underlying projects.

(p) Taxation

(i) Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Page 34 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(p) Taxation (continued)

(ii) Deferred tax

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) that affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/Group intends to settle its current tax assets and liabilities on a net basis.

(iii) Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

(iv) Tax consolidation

The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Imdex Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences in the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the taxconsolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 5 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credit in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

Page 35 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(q) Leased assets

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

(i) Group as Lessor

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease.

(ii) Group as Lessee Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs.

Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(iii) Lease incentives In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(r) Revenue

Revenue is measured at the fair value of the consideration received or receivable.

(i) Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownerships of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
(ii) Rendering of services

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.

(iii) Royalties

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.

(iv) Dividend and interest revenue

Dividend revenue from investments is recognised when the shareholders right to receive payment has been established. Interest revenue is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

(v) Operating lease income

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

Page 36 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

2 Summary of Significant Accounting Policies (continued)

(s) Employee benefits

(i) Provisions

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

(ii) Defined contribution plans

Contributions to defined contribution superannuation plans are expensed when incurred.

(t) Impairment of other tangible and intangible assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.

(u) Provisions

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

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

(v) Non-current assets held for sale

Non-current assets (and disposal groups) classified as held for sale are measured, with certain exceptions, at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual or customary for such a sale and the sale is highly probable. The sale of the asset (or disposal group) must be expected to be completed within one year from the date of classification, except in the circumstances where sale is delayed by events or circumstances outside the Group’s control and the Group remains committed to a sale.

Page 37 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

3 Critical Accounting Judgements and Key Sources of Estimation Uncertainty

In the application of the Group’s accounting policies, which are described in note 2, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity’s accounting policies

Management have not made any significant critical judgements in the process of applying the Group’s accounting policies.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Value of Shares

Note 11 describes the investment held in Sino Gas & Energy Ltd (SGE). Australian Accounting Standards require this investment to be held at the lower of carrying value and fair value less costs to sell. In making the assessment of which value is the lower, the Directors have had to make estimates of the fair value of this investment and the expected costs to sell. The Directors have estimated this investment to have a fair value in excess of its carrying value of $4,500,000 at 30 June 2008. (2007: $4,500,000)

The fair value of this listed investment has been determined using the Directors' best estimate. The Directors have estimated the fair market value by having regard to share placements previously made by SGE, the results of exploration activity to date, discussions with potential investors and having regard to the fact that SGE is an unlisted entity and the shares held in SGE can not be readily traded on any share market.

Value of Intangibles

Notes 14 and 26 describe intangibles that have arisen on business combinations during the current year. The Directors have engaged independent valuation professionals to identify and value such intangibles. The valuers have used industry accepted valuation techniques such as the relief-from-royalty, multi-period excess earnings and replacement cost methodologies as appropriate to value these assets. Data inputs into these models are derived largely from internal management budgets. Should actual financial results differ from managements budgeted expectations, this would have a consequent effect on the value of intangibles.

Value of Goodwill

Notes 13 and 26 describe the goodwill that has arisen on business combinations in the current year. Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Goodwill is subsequently measured at its cost less any impairment losses.

Any change in the value of the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised would have had a consequent impact on the carrying value of goodwill at the time of initial recognition. Goodwill is impairment tested annually.

Impairment of Goodwill and Intangibles

Determining whether goodwill and intangibles are impaired requires an estimation of the value in use of the cash-generating units to which goodwill and intangibles are attributable. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. No impairment losses have been booked in the current or prior years. Refer notes 13 and 14.

Page 38 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

4 Profit from Operations

(a) Revenue from operations Revenue from continuing and discontinued operations consisted of the following items: Revenue from continuing operations Revenue from the sale of goods Revenue from the rendering of services Operating rental income Interest income - bank deposits Interest income - other loans and receivables Revenue from discontinuing operations Revenue from the rendering of services (b) Profit before income tax Other than as disclosed on the face of the income statement, profit before income tax has been arrived at after crediting / (charging) the following gains and losses from continuing and discontinued operations: (Loss) / gain on disposal of property, plant and equipment (i) Foreign exchange (loss) (i) In the prior year the Company sold some items of plant and equipment to a subsidiary company. This profit is eliminated on consolidation. Gains attributable to: Continuing operations Discontinued operations Losses attributable to: Continuing operations Discontinued operations Loans and receivables (including cash and cash equivalents) Interest revenue Exchange gain/(loss) Financial liabilities at amortised cost Interest expense Exchange gain/(loss)	2008 2007 2008 2007 $’000 $’000 $’000 $’000 118,109 82,244 - 10,002 - 2,059 - - 23,900 19,546 - 12,501 451 267 211 217 1,449 633 3,127 2,632 Consolidated Company
	143,909 104,749 3,338 25,352

	6,584 14,591 - -

	150,493 119,340 3,338 25,352
	91 76 - 2,200 (407) (372) (266) (953)
	(316) (296) (266) 1,247
	91 76 - 2,200 - - - -
	91 76 - 2,200
	(407) (364) (266) (953) - (8) - -
	(407) (372) (266) (953)
	(316) (296) (266) 1,247
	1,900 900 3,338 2,849 (305) (185) (266) (185)
	1,595 715 3,072 2,664
	2,822 2,868 1,575 1,532 (102) (187) - (768)
	2,720 2,681 1,575 764
	4,315 3,396 4,647 3,428

Page 39 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

4 Profit from Operations (continued)

Profit before income tax has been arrived at after charging the following items of income and expense. The line items below combine amounts attributable to both continuing and discontinued operations: Other income Gain on disposal of property, plant and equipment Gain on disposal of subsidiary Management fees from Subsidiaries Dividends from Subsidiaries Amounts received from Rashid Trading Establishment (i) Other revenue (i) Prior year income of $1,121,000 comprises $812,000 in full recovery of a loan considered to have been impaired at 30 June 2006 and $309,000 for the sale of the Company's remaining 20% interest in Imdex Arabia previously carried in the Company's books at nil. No further amounts remain outstanding from Rashid Trading Establishment. Depreciation and amortisation of Non Current Assets Depreciation of property, plant and equipment (note 12) Amortisation of intangible assets (note 14) Depreciation and amortisation attributable to Continuing operations Discontinued operations Finance costs Interest on hire purchase liabilities Interest on convertible note Interest on deferred acquisition consideration Interest on commercial bills Interest on bank loan Interest on overdraft Other interest Finance costs - attributable to Continuing operations Discontinued operations Other expenses Commissions Consultancy fees Legal and professional expenses (i) Foreign exchange loss Rent and premises costs Repairs and maintenance Travel and accommodation Motor vehicle costs Other expenses	2008 2007 2008 2007 $’000 $’000 $’000 $’000 91 76 - 2,200 - - 17,245 - - - 6,671 1,363 - - 3,379 3,000 - 1,121 - 1,121 278 400 179 400 Consolidated Company
	369 1,597 27,474 8,084
	3,733 4,368 198 2,269 6,055 3,430 - -
	9,788 7,798 198 2,269
	9,321 6,637 198 2,269 467 1,161 - -
	9,788 7,798 198 2,269
	66 225 3 57 - 464 - 464 404 707 - - 1,487 923 1,487 923 744 350 - - - 18 - 11 121 199 85 88
	2,822 2,886 1,575 1,543
	2,762 2,736 1,575 1,543 60 150 - -
	2,822 2,886 1,575 1,543
	1,425 1,650 - 49 2,026 1,834 305 338 1,742 618 990 447 407 372 266 953 2,244 1,489 172 473 214 1,511 5 982 3,450 2,186 514 437 1,374 1,167 100 198 5,5579,304 2,122 1,814
	18,439 20,131 4,474 5,691

(i) Includes legal, audit, accounting, share registry and corporate secretarial fees.

Page 40 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

4 Profit from Operations (continued)

Employee benefits expense Post-employment benefits: Defined contribution superannuation costs Share based payments: Equity-settled share based payments Other employee benefits Employee benefits expense attributable to Continuing operations Discontinued operations Cost of sales Cost of sales attributable to Continuing operations Discontinued operations Movement in provision for doubtful debts Movement attributable to Continuing operations Discontinued operations Operating lease rental expense (minimum lease payments) Operating lease rental expense attributable to Continuing operations Discontinued operations	2008 2007 2008 2007 $’000 $’000 $’000 $’000 807 426 204 74 2,025 728 2,025 728 20,768 14,938 3,491 2,844 Consolidated Company
	23,600 16,092 5,720 3,646
	22,996 10,950 5,720 3,646 604 5,142 - -
	23,600 16,092 5,720 3,646
	63,119 53,618 - 7,202
	59,589 51,403 - 7,202 3,530 2,215 - -
	63,119 53,618 - 7,202
	198 173 (71) (43)
	198 173 (71) (43) - - - -
	198 173 (71) (43)
	2,386 1,682 178 478
	2,203 1,571 178 478 183 111 - -
	2,386 1,682 178 478

5 Income Taxes

(a) Income tax recognised in the income statement Tax expense comprises: Current tax expense Deferred tax expense relating to the origination and reversal of temporary differences (Over)/under provision per prior year Total tax expense Attributable to: Continuing operations Discontinued operations	2008 2007 2008 2007 $’000 $’000 $’000 $’000 15,483 9,924 2,736 3,297 (1,690) (2,727) 150 57 (563) (303) (366) (135) 13,230 6,894 2,520 3,219 10,804 6,165 2,520 3,219 2,426 729 - - 13,230 6,894 2,520 3,219 Company Consolidated

Page 41 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

5 Income Taxes (continued)

5 Income Taxes (continued)
	Consolidated		Company
	2008	2007	2008	2007
	$’000	$’000	$’000	$’000
The prima facie income tax expense on pre-tax accounting profit
from operations reconciles to the income tax expense in the
financial statements as follows:
Profit from continuing operations	31,885	18,115	18,845	13,085
Profit from discontinued operations	13,347	2,297	-	-
Profit from operations	45,232	20,412	18,845	13,085
Income tax expense calculated at 30%	13,570	6,124	5,654	3,926
Tax benefit of losses not previously brought to account	-	(23)	-	-
Intercompany dividends received	-	-	(1,014)	(900)
Non-deductible share based payments	986	218	986	218
Additional provincial tax arising in a foreign jurisdiction	230	142	-	-
Non-deductible interest on deferred payments	121	212	-	-
Other non-deductible expenses	480	232	214	10
Tax rate differential arising from foreign entities	(171)	38	-	-
Capital losses utilised	(844)	-	(844)	-
Non-assessable income from sale of foreign subsidiary	(579)	-	(2,110)	-
Adjustments in respect of prior year deferred tax balances	-	254	-	100
(Over) / under provision of prior year income tax	(563)	(303)	(366)	(135)
	13,230	6,894	2,520	3,219

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian law. There has been no change in the corporate tax rate when compared with the previous reporting period.

(b) Income tax recognised directly in equity The following current and deferred amounts were charged directly to equity during the period: Current tax: Share issue expenses Deferred tax: Translation of foreign operations (c) Current tax assets and liabilities Current tax payable (d) Deferred tax balances Deferred tax assets comprise: Provisions Inventory Property, plant and equipment Accruals Foreign currency translation reserves Share issue expenses Deferred tax liabilities comprise: Property, plant and equipment Intangible assets Non-current assets classified as held for sale Net deferred tax balances Deferred tax: Share issue expenses deductible over five years	2008 2007 2008 2007 $’000 $’000 $’000 $’000 - (53) - (53) (54) (165) (54) (165) 473 (71) 473 - Company Consolidated
	419 (289) 419 (218)
	8,792 8,913 2,643 5,450
	108 304 - 86 - 125 - - 2,571 1,871 - - 400 518 110 175 755 282 727 - 150 204 150 203
	3,984 3,304 987 464
	(4) (4) - - (7,744) (7,521) - - (1,260) (1,260) (1,260) (1,260)
	(9,008) (8,785) (1,260) (1,260)
	(5,024) (5,481) (273) (796)

Unrecognised deferred tax assets:

The following have not been brought to account as assets:

Temporary differences relating to the translation of investments in subsidiary undertakings

950 427 - -

Page 42 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

5 Income Taxes (continued)

Tax Consolidation

Relevance of tax consolidation to the Group

Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The Company and its wholly-owned Australian resident entities are eligible to consolidate for tax purposes under this legislation and have elected to be taxed as a single entity from 1 July 2003. The head entity in the tax consolidated group for the purposes of the tax consolidation system is Imdex Limited.

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax-consolidated group have entered into a tax funding and a tax-sharing agreement with the head entity. Under the terms of this agreement, Imdex Limited and each of the entities in the tax consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the net accounting profit or loss of the entity and the current tax rate. Such amounts are reflected in amounts receivable from or payable to other entities in the tax consolidated group.

The tax sharing agreement entered into between members of the tax consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax consolidated group. The effect of the tax sharing agreement is that each member's liability for tax payable by the tax consolidated group is limited to the amount payable by the head entity under the tax funding arrangement.

The amount of contribution or distribution relating to tax consolidation in the current and prior year amounted to nil.

6 Remuneration of Auditors

Deloitte Touche Tohmatsu (Australia) Audit or review of the financial report Taxation services - mainly compliance work, transfer pricing and global restructuring advice Other non-audit services: Other consulting services Other non-audit services: A-IFRS assistance Deloitte Touche Tohmatsu (overseas affiliates) Audit or review of the financial report Taxation services - mainly compliance work, transfer pricing and global restructuring advice Other non-audit services: Other consulting services Other non-audit services: A-IFRS assistance Other auditors Audit or review of the financial report Other non-audit services: Accounting assistance and taxation advice	2008 2007 2008 2007 $ $ $ $ 164,443 175,715 164,443 175,715 287,356 251,549 287,356 251,549 34,650 - 34,650 - - - - - Consolidated Company
	486,449 427,264 486,449 427,264
	88,674 - - - 3,391 - - - 79,461 - - - - - - -
	171,526 - - -
	178,438 356,471 - - 112,315 78,814 - -
	290,753 435,285 - -

	948,728 862,549 486,449 427,264

Page 43 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

7 Trade and Other Receivables

Notes Current Trade receivables (i) Allowance for doubtful debts (ii) Other receivables	2008 2007 2008 2007 $’000 $’000 $’000 $’000 31,669 27,966 2,006 10,173 (677) (479) - (71) Consolidated Company
	30,992 27,487 2,006 10,102 1,087 319 395 111
	32,079 27,806 2,401 10,213

(i) The average credit period on sales of goods is 60 days. Trade receivables are interest free. An allowance has been made for estimated irrecoverable amounts from the sale of goods and services, determined by reference to past default experience and specific knowledge of individual debtors circumstances.

Ageing of past due but not impaired debtors 0 - 30 days past due 31 - 60 days past due 61 + days past due	3,006 2,798 128 27 2,636 1,561 - - 879 1,082 1,138 37
	6,521 5,441 1,266 64

The above analysis shows debtors that are past due at the end of the reporting date where no provision has been raised as the Group believes that the amounts are still considered recoverable. The Group does not hold any collateral over these balances.

(ii) Movement in the allowance for doubtful debts

Balance at the beginning of the year Amounts written off during the year Increase/(decrease) in allowance recognised in profit or loss Balance at the end of the year	479 306 71 114 - - - - 198 173 (71) (43)
	677 479 - 71

All impaired debtors are in excess of 90 days overdue.

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

8 Inventories

Current

Raw materials - at cost Work in progress - at cost Finished goods - at cost

Consolidated		Company
2008	2007	2008	2007
$’000	$’000	$’000	$’000
3,383	1,251	-	-
797	51	-	-
17,536	12,537	-	2,085
21,716	13,839	-	2,085

Page 44 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

9 Other Financial Assets

Notes Current Derivatives at fair value Interest rate cap (i) Loans carried at amortised cost Loan to Sino Gas & Energy Limited (ii) Non-current Loans carried at amortised cost Loans to Subsidiaries (iii) Investments carried at cost Investments in Subsidiaries	2008 2007 2008 2007 $’000 $’000 $’000 $’000 229 - 229 - 13,008 11,556 13,008 11,556 Consolidated Company
	13,237 11,556 13,237 11,556
	- - 60,382 41,258 - - 10,640 2,701
	- - 71,022 43,959

(i) Effective 1 January 2008 Imdex Limited entered into an interest rate cap. This instrument allows the interest paid on $10,000,000 of debt to be capped at 7% per annum for a period of 3 years. Refer note 31 for further disclosures around this and other financial instruments.

(ii) During the prior year the Group advanced A$5 million and US$5 million to SGE as a short term facility pending the finalisation of their capital raising initiatives. Interest of $1.4 million was recognised in the profit and loss in the current year and $0.6 million in the prior year. The funds advanced are secured by a fixed and floating charge over all the assets held by SGE. The loan bears interest at 13.5% per annum and is repayable on the IPO of SGE. The loan carries the option for Imdex Limited to convert the loan balance into equity in SGE at market price.

As a result of the above and Imdex’s holding of 13.6% (2007: 13.6%), the Company has determined that it has significant influence. However, as the Company’s intention is to realise the value of the investment through sale and it meets the requirements of AASB 5: ‘Non-Current Assets Held for Sale and Discontinued Operations’ the investment is not within the scope of AASB 128: ‘Investments in Associates’. Accordingly, the investment has been classified as a non-current asset held for sale. Refer to Note 11.

(iii) Loans to Subsidiaries are repayable on demand. These loans carry no interest other than the loan to Samchem Drilling Fluids and Chemicals (Pty) Ltd and Imdex Sweden AB. The loan to Samchem carries interest at the South African prime overdraft rate (currently 15.5%) plus a 2% margin. The loan to Imdex Sweden carries interest at the Stockholm Interbank Offered Rate (currently 4.44%) plus a weighted average margin of 0.75%.

10 Other Assets

Notes Current Prepayments Non-current Deferred acquisition costs (i)	2008 2007 2008 2007 $’000 $’000 $’000 $’000 1,200 224 20 49 Consolidated Company
	1,200 224 20 49
	- 664 - 664
	- 664 - 664

(i) Comprises legal, consulting and other direct costs associated with acquisitions in progress at the period end. These costs were included in the relevant cost of investment on settlement.

Page 45 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

11 Non-Current Assets Classified as Held for Sale

Notes Shares held for sale (i)	2008 2007 2008 2007 $’000 $’000 $’000 $’000 4,500 4,500 4,500 4,500 Consolidated Company

(i) The investment in SGE has been classified as a non-current asset held for sale as its carrying amount will be recovered principally through a sale transaction.

12 Property, Plant and Equipment

Consolidated Gross Carrying Value Balance at 30 June 2006 Additions Acquisitions through business combinations Disposals Net foreign currency exchange differences Balance at 30 June 2007 Additions Acquisitions through business combinations Disposals Disposal through sale of subsidiary Net foreign currency exchange differences Transfer Balance at 30 June 2008 Accumulated Depreciation Balance at 30 June 2006 Disposals Acquisitions through business combinations Depreciation expense Net foreign currency exchange differences Balance at 30 June 2007 Disposals Disposal through sale of subsidiary Acquisitions through business combinations Depreciation expense Net foreign currency exchange differences Transfer Balance at 30 June 2008 Net Book Value As at 30 June 2007 As at 30 June 2008	Plant and Equipment at cost Equipment Rented to Third Parties at cost Equipment under Hire Purchase at cost Capital Works in Progress at cost TOTAL $’000 $’000 $’000 $’000 $’000 10,485 5,640 1,937 164 18,226 3,341 3,057 37 387 6,822 654 2,726 77 - 3,457 (368) (1,634) (107) - (2,109) (109) (394) (4) (3) (510)
	14,003 9,395 1,940 548 25,886 3,420 1,281 - 517 5,218 561 - - - 561 (242) (2,143) (43) (4) (2,432) (10,739) - (1,584) (436) (12,759) (420) (201) (11) (36) (668) 425 (78) (282) (65) -
	7,008 8,254 20 524 15,806
	5,059 2,125 1,075 - 8,259 (298) (1,130) (47) - (1,475) 278 1,399 8 - 1,685 1,484 2,691 193 - 4,368 (28) (129) (1) - (158)
	6,495 4,956 1,228 - 12,679 (96) (1,283) (6) - (1,385) (5,149) - (1,085) - (6,234) 250 - - - 250 1,397 2,241 95 - 3,733 (134) (239) (4) - (377) 218 (4) (214) - -
	2,981 5,671 14 - 8,666
	7,508 4,439 712 548 13,207
	4,027 2,583 6 524 7,140

Page 46 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

12 Property, Plant and Equipment (continued)

Company Plant and Equipment at cost $’000 Gross Carrying Value Balance at 30 June 2006 1,186 Additions 499 Disposals (55) Balance at 30 June 2007 1,630 Additions 42 Transfer to subsidiary (381) Balance at 30 June 2008 1,291 Accumulated Depreciation Balance at 30 June 2006 638 Disposals (44) Depreciation expense 200 Balance at 30 June 2007 794 Transfer to subsidiary (223) Depreciation expense 198 Balance at 30 June 2008 769 Net Book Value As at 30 June 2007 836 As at 30 June 2008 522 Plant and equipment Equipment under hire purchase Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of other assets during the year: Plant and equipment rented to third parties	Plant and Equipment at cost $’000 1,186 499 (55)	Equipment Rented to Third Parties at cost Equipment under Hire Purchase at cost Capital Works in Progress at cost TOTAL $’000 $’000 $’000 $’000 5,640 48 (2) 6,872 3,228 5 21 3,753 (1,595) - - (1,650)
	1,630 42 (381)	7,273 53 19 8,975 - - - 42 (7,273) (53) (19) (7,726)
	1,291	- - - 1,291
	638 (44) 200	2,125 21 - 2,784 (925) 5 - (964) 2,063 6- 2,269
	794 (223) 198	3,263 32 - 4,089 (3,263) (32) - (3,518) - - - 198
	769	- - - 769
	836	4,010 21 19 4,886
	522	- - - 522
		2008 2007 2008 2007 $’000 $’000 $’000 $’000 1,397 1,484 198 2,063 2,241 2,691 - 200 95 193 -6 Company Consolidated
		3,733 4,368 198 2,269

Page 47 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

13 Goodwill

Notes Gross Carrying Amount Balance at beginning of the financial year Recognised on acquisition of Suay Energy Services LLP (i) Recognised on acquisition of Poly-Drill Drilling Systems Ltd (ii) Recognised on acquisition of Southernland S.A. (iii) Recognised on acquisition of System Entwicklungs GmbH (v) Recognised on acquisition of Reflex Holding AB (iv) Recognised on acquisition of Imdex Technology UK Ltd (iv) Recognised on acquisition of Flexit AB (v) Effect of foreign exchange movements Balance at end of the financial year Accumulated Impairment Losses Balance at beginning of the financial year Impairment losses for the year Balance at end of the financial year Net Book Value At the beginning of the financial year At the end of the financial year Goodwill is allocated to cash-generating units as follows: Australian Mud Company Samchem Suay Energy Services Poly-Drill Drilling Systems Southernland Reflex / Imdex Technology Flexit / SEG	2008 2007 2008 2007 $’000 $’000 $’000 $’000 35,033 1,906 - - 1,266 - - - 3,369 - - - 2,413 - - - 10,499 - - - - 14,623 - - - 8,319 - - - 11,107 - - 46 (922) - - Consolidated Company
	52,626 35,033 - -
	- - - - - - - -
	- - - -
	35,033 1,906 - -
	52,626 35,033 - -
	- - 1,324 1,699 1,266 - 3,369 - 2,413 - 22,613 22,406 21,641 10,928 52,626 35,033

(i) Goodwill arose during the year on the acquisition of 75% of the issued share capital of Suay Energy Services LLP (Suay) by Imdex Limited effective 1 July 2007 and the remaining 25% of the issued share capital effective 30 June 2008. Refer notes 26(c) and 26(d). Suay is considered to be a separate cash generating unit since it operates independently from other Imdex operations in a separate geographical area being Kazakhstan and the surrounding Caspian Sea region. The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection based on the 2009 budget. The projection assumes no additional growth in the business beyond 2009. A discount rate of 12%, being the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

(ii) Goodwill arose during the year on the acquisition of Poly-Drill Drilling Systems Ltd (Poly-Drill) by Imdex Limited effective 1 July 2007. Refer note 26(b). Poly-Drill is considered to be a separate cash generating unit since it manufactures and sells products independently from other Imdex operations in a separate geographical area being Canada. The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection based on the 2009 budget. The projection assumes modest growth in revenue and cost of 10% and 5% per annum respectively for the first 3 years of the projection. A discount rate of 12%, being the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

(iii) Goodwill arose during the year on the acquisition of Southernland S.A. (Southernland) by Imdex South America S.A., a newly incorporated wholly owned subsidiary of Imdex Limited effective 1 July 2007. Refer note 26(d). Southernland is considered to be a separate cash generating unit since it manufactures and sells products independently from other Imdex operations in a separate geographical area being Latin America. The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection based on the 2009 budget. The projection assumes modest growth in revenue and costs of 10% and 5% per annum respectively for the first 2 years of the projection. A discount rate of 12%, being the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

Page 48 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

13 Goodwill

(iv) Goodwill arose during the prior year on the acquisition of 100% of the issued share capital of Reflex Holding AB (Reflex) (refer note 26(g)), and Imdex Technology UK Limited (ITU) (formerly Chardec Technology Ltd) (refer note 26(h)). These two operations are considered to be a single cash generating unit as they were purchased in close succession to create a single vertically integrated operation in the Down Hole Instrumentation division. They operate in the same business segment and geographical area and have the same operational management and a high level of operational and financial interdependency. The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection based on the 2009 budget. The projection assumes no additional growth in the business beyond 2009. A discount rate of 12%, being the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

(v) Goodwill arose during the current year on the acquisition of 100% of the issued share capital of System Entwicklungs GmbH (SEG) (refer note 26(a)) and Flexit AB (Flexit) (refer note 26(f)) in the prior year. These two operations are considered to be a single cash generating unit as they were purchased in close succession to create a single vertically integrated operation in the Down Hole Instrumentation division. They operate in the same business segment and geographical area and have the same operational management and a high level of operational and financial interdependency. The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection based on the 2009 budget. The projection assumes no additional growth in the business beyond 2009. A discount rate of 12%, being the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

The key assumptions used in the value in use calculations for the various significant cash generating units are as follows:

	Budgeted sales growth	Budgeted net margins	Exchange rate fluctuations
Samchem CGU	Sales growth has been budgeted in line with the expected increase in activity in the local industries serviced by Samchem.	Net margins have been budgeted using the prior year actuals as a base on which operational improvements and economies of scale are expected to begained.	Exchange rate fluctuation expectations have been built into the budget numbers based on standard forecast advice received from major lending institutions.
Suay CGU	Sales growth has been budgeted in line with the expected increase in activity in the local industries serviced by Suay.	Net margins have been budgeted using the prior year actuals as a base on which operational improvements and economies of scale are expected to begained.
Poly-Drill CGU	Sales growth has been budgeted in line with the expected increase in activity in the local industries serviced by Poly-Drill as well as growth expected to arise from the globalalliances.	Net margins have been budgeted using the prior year actuals as a base on which operational improvements and economies of scale are expected to be gained.
Southernland CGU	Sales growth has been budgeted in line with the expected increase in activity in the local industries serviced by Southernland as well as growth expected to arise from the global alliances.	Net margins have been budgeted using the prior year actuals as a base on which operational improvements and economies of scale are expected to be gained.
Reflex / ITU CGU	Sales growth has been budgeted based on the expected activity levels in the global down hole tool market plus an increment for the market share expected to be gained from the release of new tools.	Net margins have been budgeted using the prior year actuals as a base. In addition an increase is expected to arise from the release of new tools and the business model trend away from sales towards rentals.
Flexit / SEG CGU	Sales growth has been budgeted based on the expected activity levels in the global down hole tool market plus an increment for the market share expected to be gained from the release of new tools and the targeting of the oil & gas market.	Net margins have been budgeted using the prior year actuals as a base. In addition an increase is expected to arise from the release of new tools, the accessing of new markets and the business model trend away from sales towards rentals.

Page 49 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

14 Other Intangible Assets

Consolidated	Patents	Intellectual	Technology	Contract	Contract	Customer	Customer	Development	Trade	Trade	TOTAL
		Property	Based	Based		Based		Costs	Name
	$’000	$’000	$’000	$’000		$’000		$’000	$’000		$’000
Gross Carrying Value
Balance at 30 June 2006	-	1,313	-		-		-	-		-	1,313
Additions through business
combinations	755	-	14,937	425		9,781		-	4,470		30,368
Capitalised during the year	-	-	-		-		-	429		-	429
Impact of exchange rate
changes	-	(143)	(234)		-	(483)		-	(202)		(1,062)
Balance at 30 June 2007	755	1,170	14,703	425		9,298		429	4,268		31,048
Additions through business
combinations	6	1,505	-	890		2,996		-	251		5,648
Capitalised during the year	-	-	-		-		-	-		-	-
Impact of exchange rate
changes	-	(258)	46		-		99	-		42	(71)
Balance at 30 June 2008	761	2,417	14,749	1,315		12,393		429	4,561		36,625
Accumulated Amortisation
and Impairment
Balance at 30 June 2006	-	-	-		-		-	-		-	-
Amortisation expense	25	-	1,501		78	1,491		-	335		3,430
Impact of exchange rate
changes	-	-	(41)		-	(71)		-	(16)		(128)
Impairment losses	-	-	-		-		-	-		-	-
Balance at 30 June 2007	25	-	1,460		78	1,420		-	319		3,302
Amortisation expense	152	75	2,382	530		1,883		86	947		6,055
Impact of exchange rate
changes	-	-	(10)		-		(2)	-		(9)	(21)
Impairment losses	-	-	-		-		-	-		-	-
Balance at 30 June 2008	177	75	3,832	608		3,301		86	1,257		9,336
Net Book Value
As at 30 June 2007	730	1,170	13,243	347		7,878		429	3,949		27,746
As at 30 June 2008	584	2,342	10,917	707		9,092		343	3,304		27,289
Company
Gross Carrying Value
Balance at 30 June 2006	-	-	-		-		-	-		-	-
Additions through business
combinations	-	-	-		-		-	-		-	-
Capitalised during the year	-	-	-		-		-	429		-	429
Impact of exchange rate
changes	-	-	-		-		-	-		-	-
Balance at 30 June 2007	-	-	-		-		-	429		-	429
Transferred to subsidiary entity
	-	-	-		-		-	(429)		-	(429)
Balance at 30 June 2008	-	-	-		-		-	-		-	-
Accumulated Amortisation
and Impairment
Balance at 30 June 2006	-	-	-		-		-	-		-	-
Amortisation expense	-	-	-		-		-	-		-	-
Impairment losses	-	-	-		-		-	-		-	-
Balance at 30 June 2007	-	-	-		-		-	-		-	-
Amortisation expense	-	-	-		-		-	-		-	-
Impairment losses	-	-	-		-		-	-		-	-
Balance at 30 June 2008	-	-	-		-		-	-		-	-
Net Book Value
As at 30 June 2007	-	-	-		-		-	429		-	429
As at 30 June 2008	-	-	-		-		-	-		-	-

Page 50 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

14 Other Intangible Assets (continued)

Intellectual Property

Intellectual Property arose on the acquisition by Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned subsidiary of Imdex Limited, of the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory items effective 1 August 2005.

Intellectual Property has an indefinite life due to the uniqueness of the manufacturing processes and products, high cost barriers to entry and the dominant market share held. Intellectual Property is therefore subjected to annual impairment testing.

The recoverable amount has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection based on the 2009 budget. The projection assumes no additional growth in the business beyond 2009. A discount rate of 12% has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

15 Trade and Other Payables

Notes Trade payables (i) Accruals and other payables Due to the vendors of System Entwicklungs GmbH 26(a) Due to the vendors of Suay Energy Services LLC 26(d)	2008 2007 2008 2007 $’000 $’000 $’000 $’000 9,836 12,290 207 3,562 5,252 4,451 826 2,008 656 - - - 778 - 778 - Consolidated Company
	16,522 16,741 1,811 5,570

(i) Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest is charged at commercial rates. The consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

16 Borrowings

Notes Current borrowings Secured At amortised cost Commercial bill (i) Bank loan (ii) Hire purchase liabilities (iii) 24 Other (iv) Unsecured At amortised cost Deferred acquisition payments (v) 34 Non-current borrowings Secured At amortised cost Commercial bills (i) Bank loan (ii) Hire purchase liabilities (iii) 24 Other (iv) Unsecured At amortised cost Deferred acquisition payments (v) 34	2008 2007 2008 2007 $’000 $’000 $’000 $’000 9,000 2,300 9,000 2,300 4,016 2,430 - - - 1,443 - 385 - 335 - - 2,687 5,373 - - Consolidated Company
	15,703 11,881 9,000 2,685
	8,000 10,000 8,000 10,000 9,132 12,710 - - - 964 - 64 - 167 - - 2,717 4,715 - -
	19,849 28,556 8,000 10,064

Page 51 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

16 Borrowings (continued)

(i) Commercial bills bear interest at 9.7% per annum. The Group has an interest rate cap in operation that caps the maximum interest payable on $10,000,000 of this debt at 7% per annum, thereby reducing the effective interest rate on this debt to 8.1%. Refer note 31(g) for further details. On 31 December 2008 a bill of $7,000,000 is repayable. The remaining bills are repayable in quarterly instalments of $500,000 each with the final payment due in June 2013. The bills are secured by a Mortgage Debenture over all the assets and liabilities of Imdex Limited, Australian Mud Company Pty Ltd, Reflex Asia Pacific Pty Ltd, Imdex International Pty Ltd, Imdex Technology UK Limited and Samchem Drilling Fluids and Chemicals (Pty) Ltd.

(ii) This comprises of a loan of SEK 75,625,000 raised in the prior year. This loan bears interest at the 7 day Stockholm Interbank Offered Rate ('STIBOR'), currently 4.4% plus a weighted average margin of 1.96% per annum. The loan is repayable in quarterly instalments of SEK 5,775,000 until December 2009 when the instalments drop to SEK 4,400,000 per quarter. From December 2011 they drop further to SEK 1,650,000 per quarter until the loan is fully repaid in June 2013. The interest rate applicable at 30 June 2008 was 6.36% per annum. This loan is secured over the assets of the Reflex and Flexit companies that are domiciled in Sweden.

(iii) Hire purchase liabilities are secured over the assets to which they relate, the carrying value of which exceeds the value of the hire purchase liability. The Group does not hold title to the equipment under hire purchase pledged as security. The weighted average interest rate applicable to these liabilities in the prior year was 7.6%.

(iv) Other current and non-current loans comprise sundry advances from third party lenders.

(v) Deferred acquisition payments are those portions of the purchase price of recent acquisitions that are due in future periods. The cash components of these deferred amounts have been discounted to their present values using an interest rate of 8% per annum. For further details refer to notes 26(g) and (h).

(vi) A convertible note with a face value of $10,400,000 was issued on 1 August 2006 and carried interest at the rate of 8% per annum payable in arrears. The note carried the right to convert into 20.8 million fully paid ordinary Imdex shares at any time up to 1 August 2008. Conversion would be automatically triggered upon the Imdex share price reaching $1 per share. This condition was satisfied on 15 February 2007. Refer note 18 for details of shares issued. These shares were held in voluntary escrow until 1 August 2008.

17 Provisions

17 Provisions
		Consolidated		Company
		2008	2007	2008	2007
	Notes	$’000	$’000	$’000	$’000
Current provisions
Employee entitlements	(i)	972	1,212	245		265
Non-current provisions
Employee entitlements		558	448	128		116

(i) The majority of these entitlements are expected to be taken during the coming year. (2007: same)

Page 52 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

18 Contributed Capital

18 Contributed Capital
Notes Issued and Paid Up Capital - Fully paid ordinary shares (i) Mandatory convertible capital (ii)	2008 2007 2008 2007 $’000 $’000 $’000 $’000 58,183 54,282 58,183 54,282 6,700 6,700 6,700 6,700 Consolidated Company
	64,883 60,982 64,883 60,982

(i) Fully paid ordinary shares carry one vote per share and the right to dividends.

(ii) Mandatory Convertible Capital relates to the future issue of 5 million fully paid ordinary shares as consideration for the acquisition of Flexit AB. Refer to Note 26(f)

			Consolidated and	Company
		2008		2007
	Notes	Number	$'000	Number	$'000
Ordinary shares
Balance at beginning of the financial year		179,949,003	54,282	139,466,037	26,490
Issue of shares as part consideration for the acquisition of
Poly-Drill	26(b)	1,212,751	1,750	-	-
Issue of shares as part consideration for the acquisition of
Southernland	26(e)	723,679	1,387	-	-
Issued on conversion of debt instrument	16(vi)	-	-	20,800,000	10,400
Issue of equity securities as part of working capital raising
		-	-	15,000,000	16,500
Issue of shares as part consideration for the acquisition of
patent		-	-	155,039	200
Tax effect of share issue costs / Share issue costs (net of
tax)		-	(113)	-	(510)
Issue of shares under staff option plan		1,605,499	877	4,527,927	1,202
Closing balance at end of the financial year		183,490,932	58,183	179,949,003	54,282

Changes to the Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

Share options granted under the staff option scheme

In accordance with the provisions of the staff option scheme, as at 30 June 2008, executives, directors and staff have options over 16,194,872 ordinary shares (5,019,872 of which had vested), in aggregate. These options expire over a range of dates up to March 2013. As at 30 June 2007, executives, directors and staff have options over 13,080,406 ordinary shares (1,423,739 of which had vested), in aggregate. These options expire over a range of dates up to June 2012. Share options granted under the employee share option plan carry no rights to dividends and no voting rights.

Details of the Staff Option Plan can be found in note 33.

Page 53 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

19 Reserves

19 Reserves
		Consolidated			Company
		2008	2007	2008		2007
	Notes	$’000	$’000	$’000		$’000
Foreign Currency Translation Reserve
Balance at beginning of the financial year		(2,137)		(494)	-	-
Translation of foreign operations after taxation		(2,726)	(1,643)		-	-
Balance at the end of the financial year		(4,863)	(2,137)		-	-
Exchange differences relating to the translation from the functional currencies of the Group's foreign controlled entities into Australian dollars
are brought to account by entries made directly to the foreign currency translation reserve.			This reserve is shown net of deferred			tax.
Employee Equity-Settled Benefits Reserve
Balance at beginning of the financial year		751		105	751	105
Options issued	4	2,025		728	2,025	728
Options exercised during the financial year		(203)		(82)	(203)	(82)
Balance at the end of the financial year		2,573		751	2,573	751

The employee equity-settled benefits reserve arises on the grant of share options to Directors and employees. Amounts are transferred out of the reserve and into issued capital when the options are exercised. Further information regarding the Staff Option Plan is contained in note 33.

20 Earnings Per Share

Basic earnings per share From continuing operations From discontinued operations Total basic earnings per share Diluted earnings per share From continuing operations From discontinued operations Total diluted earnings per share (a) Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Earnings (i) Earnings from continuing operations (i) Weighted average number of ordinary shares for the purposes of basic earnings per share (i) Earnings used in the calculation of total basic earnings per share and basic earnings per share from continuing operations reconciles to net profit in the income statement as follows: Net profit Earnings used in the calculation of basic EPS Adjustments to exclude profit for the period from discontinued operations Earnings used in the calculation of basic EPS from continuing operations	2008 2007 Cents per share Cents per share 11.22 7.72 5.82 1.02 Consolidated
	17.04 8.74
	10.79 7.09 5.59 0.91
	16.38 8.00
	$'000s $'000s 31,966 13,518
	21,045 11,950
	Shares Shares 187,578,226 154,717,072
	$'000s $'000s 31,966 13,518
	31,966 13,518
	(10,921) (1,568)
	21,045 11,950

Page 54 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

20 Earnings Per Share (continued)

(b) Diluted earnings per share The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: Earnings (ii) Earnings from continuing operations (ii) Weighted average number of ordinary shares for the purposes of diluted earnings per share (iii) (ii) Earnings used in the calculation of total diluted earnings per share and diluted earnings per share from continuing operations reconciles to net profit in the income statement as follows: Net profit Adjustment to exclude the impact of interest expense on convertible note Earnings used in the calculation of diluted EPS Adjustments to exclude profit for the period from discontinued operations Earnings used in the calculation of diluted EPS from continuing operations (iii) The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of ordinary shares used in the calculation of basic EPS Potential ordinary shares arising on the conversion of convertible note Shares deemed to be issued for no consideration in respect of employee and Director options Weighted average number of ordinary shares used in the calculation of diluted EPS (iv) The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share: Employees share options tranche 4 Employees share options tranche 5 Employees share options tranche 6 Employees share options tranche 7	2008 2007 Cents per share Cents per share $'000s $'000s 31,966 13,836 Consolidated
	21,045 12,268
	Shares Shares 195,112,068 172,920,311
	$'000s $'000s 31,966 13,518 - 318
	31,966 13,836
	(10,921) (1,568)
	21,045 12,268
	Shares Shares 187,578,226 154,717,072 - 11,340,274 7,533,842 6,862,965
	195,112,068 172,920,311
	Shares Shares - 4,425,000 625,000 675,000 500,000 - 4,815,000 -
	5,940,000 5,100,000

Page 55 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

21 Dividends

Notes Recognised amounts Fully paid ordinary shares - interim dividend franked to 30% (i) Fully paid ordinary shares - final dividend franked to 30% (ii) Unrecognised amounts Fully paid ordinary shares - final dividend franked to 30% (iii)	2008 2008 2007 2007 Cents per share Total $’000 Cents per share Total $’000 1.75 3,212 1.00 1,641 1.50 2,722 1.00 1,411
	3.25 5,934 2.00 3,052
	2.25 4,129 1.50 2,722

(i) The interim, fully franked dividend was paid on 25 March 2008 (2007: 26 March 2007). The record date for determining the entitlement to the interim dividend was 7 March 2008 (2007: 13 March 2007). There are no dividend reinvestment plans in operation.

(ii) The final, fully franked dividend was paid on 2 November 2007 (2007: 13 October 2006). The record date for determining the entitlement to the final dividend was 15 October 2007 (2007: 10 October 2006). There are no dividend reinvestment plans in operation.

(iii) The final, fully franked dividend was declared on 15 August 2008 with an entitlement date of 17 October 2008 and a payment date of 31 October 2008. The financial effect of this dividend has not been recognised in the financial statements at 30 June 2008.

Adjusted franking account balance Impact on franking account of dividends not recognised Income tax consequences of unrecognised dividends	2008 2007 $'000 $'000 13,521 7,062 Consolidated
	(1,770) (1,157)
	- -

22 Commitments for Expenditure

(a) Capital expenditure commitments

At 30 June 2008 the Group had a capital expenditure commitments amounting to $927,000. This commitment comprised $475,000 relating to the construction of a PHPA plant at Samchem and $452,000 representing gyro purchase commitments in SEG. The Company had no capital expenditure commitments.

At 30 June 2007 the Company and Group had no capital expenditure commitments.

(b) Lease commitments

Hire purchase liabilities and non-cancellable operating lease commitments are disclosed in note 24.

23 Contingent Liabilities and Contingent Assets

Contingent Liabilities Rental bond Contingent Assets	2008 2007 2008 2007 $’000 $’000 $’000 $’000 - 119 - 100 Consolidated Company
	- 119 - 100
	- - - -

Page 56 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

24 Leases

(a) Hire Purchases

Hire purchase arrangements

Hire purchase arrangements relate to plant and equipment with terms of up to 5 years. The Group has options to purchase the equipment for a nominal amount at the conclusion of the arrangements.

2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Hire purchase commitments are payable as follows. Due: Within one year - 1,580 - 467 - 1,443 - 449 Between one and five years - 760 - - - 728 - - Later than five years -248- - -236- - Minimum lease payments - 2,588 - 467 - 2,407 - 449 Less: future finance charges -(181) -(18) - - - - - 2,407 - 449 - 2,407 - 449 Current – Note 16 - 1,443 - 385 Non current – Note 16 -964-64 - 2,407 - 449 Hire purchase commitments Minimum future lease payments Present value of minimum future lease payments Consolidated Company Consolidated Company Hire purchase liabilities provided for in the Financial Report	2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 - 1,580 - 467 - 1,443 - 449 - 760 - - - 728 - - -248- - -236- - Minimum future lease payments Present value of minimum future lease payments Consolidated Company Consolidated Company	2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 - 1,580 - 467 - 1,443 - 449 - 760 - - - 728 - - -248- - -236- - Minimum future lease payments Present value of minimum future lease payments Consolidated Company Consolidated Company
	- 2,588 - 467 - 2,407 - 449 -(181) -(18) - - - -
	- 2,407 - 449	- 2,407 - 449
		- 1,443 - 385 -964-64
		- 2,407 - 449

(b) Operating Leases

Operating leasing arrangements

Operating leases relate to premises and equipment (including motor vehicles) used by the Group in its operations, generally with terms between 2 and 5 years. Some of the operating leases contain options to extend for further periods and an adjustment to bring the lease payments into line with market rates prevailing at that time. The leases do not contain an option to purchase the leased property.

Within one year Between one and five years Later than five years Non-cancellable operating lease payments	2008 2007 2008 2007 $’000 $’000 $’000 $’000 1,838 1,062 162 162 3,785 1,911 365 352 1,139 686 - - Consolidated Company
	6,762 3,659 527 514

Page 57 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

25 Subsidiaries

25 Subsidiaries
			Ownership	Interest
		Country of	2008	2007
	Notes	Incorporation	%	%
Parent Entity
Imdex Limited	(i), (ii)	Australia
Controlled Entities
Australian Mud Company Pty Ltd	(ii), (iii)	Australia	100	100
Samchem Drilling Fluids & Chemicals (Pty) Ltd		South Africa	100	100
Imdex International Pty Ltd	(ii), (iii), (iv)	Australia	100	100
Imdex Sweden AB	(v)	Sweden	100	100
Reflex Instruments Asia Pacific Pty Ltd	(ii), (iii), (vi)	Australia	100	100
Imdex Technology UK Ltd (formerly Chardec Technology Ltd)	26(h)	United Kingdom	100	100
Reflex Holding AB	26(g)	Sweden	100	100
Reflex Instrument AB	(vii), 26(g)	Sweden	-	100
Reflex Instrument North America	26(g)	Canada	100	100
Reflex Instrument South America Ltda	26(g)	Chile	100	100
Reflex Instruments Europe Ltd	(xii)	United Kingdom	100	-
Drill Hole Surveys (Pty) Ltd	26(g)	South Africa	100	100
Flexit AB	26(f)	Sweden	100	100
Flexit Navigation AB	(viii), 26(f)	Sweden	-	100
Flexit Australia Pty Ltd	(ii), (ix)	Australia	100	100
Nudge Geotechnical Instrumentation Inc	(x)	Canada	-	100
Suay Energy Services LLP	26(c) (d)	Kazakhstan	100	-
Poly-Drill Drilling Systems Ltd	26(b)	Canada	100	-
Imdex South America S.A.	26(e)	Chile	100	-
Southernland S.A.	26(e)	Chile	100	-
System Entwicklungs GmbH	26(a)	Germany	100	-
Surtron Technologies Pty Ltd	(ii), (iii), 28	Australia	-	100
Surtron Technologies UK Ltd	28	United Kingdom	-	100
Surtron Technologies US Inc	(xi), 28	United States of America	-	100

(i) Imdex Limited is the ultimate parent company and is the head entity within the tax consolidated group.

(ii) These companies are part of the tax consolidated group. Surtron Technologies Pty Ltd was part of the tax consolidated group until sold on 31 October 2007.

(iii) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Imdex Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an audited financial report. Australian Mud Company Pty Ltd became a party to the deed on 29 June 2006, Imdex International Pty Ltd on 20 October 2006 and Reflex Instruments Asia Pacific Pty Ltd on 14 September 2007. Surtron Technologies Pty Ltd became a party to this deed on 29 June 2006 and ceased to be a party on 31 October 2007 when Imdex Limited sold 100% of its shares in this entity.

(iv) This entity was incorporated on 4 July 2006

(v) This entity was incorporated on 5 July 2006

(vi) This entity was incorporated on 26 March 2007

(vii) This entity was merged with Reflex Holding AB on 1 October 2007.

(viii) This entity was merged with Flexit AB on 29 April 2008.

(ix) This entity was incorporated on 11 May 2007

(x) 100% of the issued share capital of this entity was acquired on 1 May 2007. As this entity is non-trading and holds one asset being a patent, this purchase transaction was accounted for as an acquisition of an asset, not a business combination. This entity was amalgamated with Reflex Instrument North America on 1 January 2008.

(xi) This entity was incorporated on 16 November 2006

(xii) This entity was incorporated on 28 April 2008

Page 58 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

25 Subsidiaries (continued)

The consolidated income statement of entities which are party to the deed of cross guarantee are:

Other revenue from operations Total revenue Other income Raw materials and consumables used Employee benefit expenses Depreciation and amortisation expense Finance costs Commissions Consultancy fees Legal and professional expenses Rent and premises costs Repairs and maintenance Travel and accommodation Motor vehicle costs Foreign exchange gain/(loss) Other expenses Profit before income tax expense Income tax expense Profit for the year from continuing operations Profit for the year from discontinued operations Profit for the year Revenue from sale of goods, rendering of services and operating lease rental Income Statement	2008 2007 $’000 $’000 91,161 66,909 3,356 2,866
	94,517 69,775
	9,615 4,814 (42,784) (34,280) (11,888) (6,451) (3,243) (2,372) (1,998) (2,252) (1,259) (1,170) (1,834) (1,384) (1,330) (449) (1,242) (1,017) (37) (554) (2,012) (1,244) (655) (493) (1,018) (950) (10,283) (3,440)
	24,549 18,533 (9,127) (5,928)
	15,422 12,605 15,855 1,568
	31,277 14,173

Page 59 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

25 Subsidiaries (continued)

The consolidated balance sheet of entities which are party to the deed of cross guarantee are:

Balance Sheet Current Assets Cash and Cash Equivalents Trade and Other Receivables Inventories Other Financial Assets Other Total Current Assets Non Current Assets Other Financial Assets Property, Plant and Equipment Other Intangible Assets Other Total Non Current Assets Total Assets Current Liabilities Trade and Other Payables Borrowings Current Tax Payables Provisions Total Current Liabilities Non Current Liabilities Borrowings Deferred Tax Liabilities Provisions Total Non Current Liabilities Total Liabilities Net Assets Equity Contributed Capital Employee Equity-Settled Benefits Reserve Retained Profits Total Equity Retained Profit at the beginning of the financial year Net Profit Dividend provided for or paid Retained Profit at the end of the financial year	2008 2007 $’000 $’000 7,341 7,171 31,946 24,861 14,214 11,085 51,243 60,871 30 56
	104,774 104,044
	40,752 8,492 7,216 11,768 1,543 429 - 664
	49,511 21,353
	154,285 125,397
	12,980 14,871 11,687 9,060 8,071 5,358 800 1,475
	33,538 30,764
	10,717 15,678 (130) 303 558 116
	11,145 16,097
	44,683 46,861
	109,602 78,536
	64,883 60,982 2,573 751 42,146 16,803
	109,602 78,536
	16,803 5,682 31,277 14,173 (5,934) (3,052)
	42,146 16,803

Page 60 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses

(a) Acquisition of entity - System Entwicklungs GmbH

With effect from 1 January 2008, Imdex Limited, acquired 100% of the issued share capital of System Entwicklungs GmbH (SEG), a company incorporated in Germany. SEG manufacture and sell technologically advanced down hole instrumentation for use in the drilling industry from their facility located in Riegel, Germany. The numbers presented below have been accounted for using the acquisition method of accounting.

Details of the assets, liabilities and goodwill: Notes Receivables Inventory Property, plant and equipment Technology and customer based intangibles (i) Trade and other payables Deferred tax (i) Fair value of net identifiable assets acquired (other than cash and cash equivalents) Goodwill on acquisition (ii) Total purchase consideration Consideration in cash and cash equivalents Less: Cash and cash equivalents acquired Direct costs relating to the acquisition (iii) Total purchase consideration comprises	Book value Fair value adjustments Fair value on acquisition $’000 $’000 $’000 446 - 446 838 - 838 35 - 35 - 5,642 5,642 (1,914) - (1,914) - (1,693) (1,693)	Book value Fair value adjustments Fair value on acquisition $’000 $’000 $’000 446 - 446 838 - 838 35 - 35 - 5,642 5,642 (1,914) - (1,914) - (1,693) (1,693)
	(595) 3,949	3,354 10,499
		13,853
		14,100 (637) 390
		13,853

Revenue Total expenses Profit after tax for the period (iv) Operating results of SEG included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 January 2008 to 30 June 2008:	Results since acquisition $’000 2,418 (2,130)
	288

(i) Intangible assets of $5.6 million comprise technical knowledge and other know-how as well as customer relationships in existence at the time of acquisition. Deferred tax of $1.7 million was raised on these balances. These intangibles have been valued by independent valuation professionals using the replacement cost and relief-from-royalty methods. Data inputs into the model were derived from internal management budgets. Intangible assets are being amortised over their estimated useful lives of between 1 and 10 years.

(ii) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire SEG. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of SEG. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of SEG as $13.9 million being the total consideration of $14.1 million above plus direct costs of $0.4 million and less $0.6 million of cash and cash equivalents acquired. A dividend of $0.7 million representing profits up to the acquisition date is due to the vendors of SEG and was taken up at acquisition.

(iv) Had the acquisition of SEG been effected on 1 July 2007, the beginning of the financial year and assuming all units were sold and none rented, the SEG financial results included in the Imdex consolidated results would have been revenue of approximately $4.8 million and profit of approximately $0.6 million. The results of SEG are included in the Down Hole Instrumentation segment. The Board considers these 'pro-forma' numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.

Page 61 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(b) Acquisition of entity - Poly-Drill Drilling Systems Limited

With effect from 1 July 2007, Imdex Limited, acquired 100% of the issued share capital of Poly-Drill Drilling Systems Limited (Poly-Drill), a company incorporated in Canada. Poly-Drill undertake the manufacture and sale of polymer based drilling fluids as well as various solids control activities from Calgary, Canada. The numbers presented below have been accounted for using the acquisition method of accounting.

Details of the assets, liabilities and goodwill: Notes Inventory Property, plant and equipment Trade and other payables Fair value of net identifiable assets acquired (other than cash and cash equivalents) Goodwill on acquisition (i) Total purchase consideration Consideration in cash and cash equivalents Less: Cash and cash equivalents acquired Issue of ordinary shares (ii), 18 Direct costs relating to the acquisition (iii) Total purchase consideration comprises	Book value Fair value adjustments $’000 $’000 178 - 150 - (696) -	Fair value on acquisition $’000 178 150 (696)
	(368) -	(368) 3,369
		3,001
		1,849 (673) 1,750 75
		3,001

Results since acquisition $’000

Operating results of Poly-Drill included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 July 2007 to 30 June 2008:

Revenue Total expenses Profit after tax for the period	2,727 (2,422)
	305

(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Poly-Drill. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Poly-Drill. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(ii) Comprised the issue of 1,212,751 fully paid ordinary shares in Imdex Limited at $1.443 per share. The issue price of the shares was determined using the closing weighted average share price over the 5 business days prior to 1 July 2007. These shares will be held in voluntary escrow for a period of 12 months from 1 July 2007. The issue of shares was approved by shareholders at the Annual General Meeting on 19 October 2007.

(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Poly-Drill as $0.9 million being the total consideration of $3.0 million above less $1.8 million settled in shares and $0.3 million paid in the prior year.

Page 62 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(c) Acquisition of initial 75% of entity - Suay Energy Services LLP

With effect from 1 July 2007 Imdex Limited acquired 75% of the issued share capital of Suay Energy Services LLP (Suay), a company incorporated in Kazakhstan. The purchase of Suay is complementary to the existing drilling fluids and chemicals businesses of Imdex. Suay provide drilling fluids and chemicals to the Kazakhstan oilfields in the Caspian Sea region. The numbers presented below have been accounted for using the acquisition method of accounting.

Details of the assets, liabilities and goodwill: Book value Fair value adjustments Notes $’000 $’000 Trade and other receivables 123 - Inventory 317 - Property, plant and equipment 43 - Trade and other payables (420) - Fair value of net identifiable assets acquired (other than cash and cash equivalents) 63 - Goodwill on acquisition (i) Less: Minority interests Total purchase consideration Consideration in cash and cash equivalents Direct costs relating to the acquisition (ii) Revenue Total expenses Profit after tax for the period Operating results of Suay included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 July 2007 to 30 June 2008: Total purchase consideration comprises	Book value Fair value adjustments $’000 $’000 123 - 317 - 43 - (420) -	Fair value on acquisition $’000 123 317 43 (420)
		63 505 (16)
		552
		473 79
		552
		Results since acquisition $’000 2,108 (1,963)
		145

(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire a 75% interest in Suay. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Suay. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(ii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Suay as $0.2 million being the total consideration of $0.6 million above less $0.4 million paid in the prior year.

Page 63 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(d) Acquisition of minority interest - Suay Energy Services LLP

With effect from 30 June 2008 Imdex Limited acquired the remaining 25% of the issued share capital of Suay Energy Services LLP (Suay) from the minority shareholders. The original 75% of the issued share capital of Suay was purchased with effect from 1 July 2007, refer note 26(c). The numbers presented below have been accounted for using the acquisition method of accounting. These numbers are provisional only as the acquisition accounting is still in the process of being finalised.

Details of the assets, liabilities and goodwill: Notes Cash and cash equivalents Trade and other receivables Inventory Property, plant and equipment Trade and other payables Fair value of net identifiable assets acquired 25% thereof Goodwill on acquisition (i) Total purchase consideration Consideration in cash and cash equivalents Issue of ordinary shares (ii) Direct costs relating to the acquisition (iii) Total purchase consideration comprises	Book value Fair value adjustments $’000 $’000 10 - 494 - 572 - 212 - (1,106) -	Fair value on acquisition $’000 10 494 572 212 (1,106)
	182 -	182
		46 761
		807
		500 278 29
		807

(i) Although Imdex Limited already controlled Suay, an additional goodwill amount became payable on the acquisition of the remaining 25% due to growth in the business and future prospects as well as a premium to obtain complete 100% control. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(ii) Comprised the issue of 168,530 fully paid ordinary shares in Imdex Limited. These shares had a fair value of $1.65 per share, being the closing market price at 30 June 2008. These shares were issued on 1 July 2008 and are not subject to escrow. The issue of these shares is not required to be formally approved by shareholders as they fall below the 15% threshold level.

(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Suay as nil as the cash consideration was paid on 1 July 2008. The purchase consideration of $0.8 million is accrued at note 15.

Page 64 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(e) Acquisition of entity - Southernland S.A.

On 1 November 2007 Imdex South America S.A., a newly incorporated wholly owned subsidiary of Imdex Limited, settled the purchase of 100% of the issued share capital of Southernland S.A. (Southernland), a company incorporated in Chile. The acquisition was structured under a mandate so as to entitle the Group to the profits from 1 July 2007 onwards. Southernland manufacture and supply drilling fluids and chemicals to the Latin American market, complementing the existing fluids and chemicals businesses of Imdex and providing access to new geographic markets. The numbers presented below have been accounted for using the acquisition method of accounting.

Details of the assets, liabilities and goodwill: Notes Trade and other receivables Inventory Property, plant and equipment Trade and other payables Fair value of net identifiable assets acquired (other than cash and cash equivalents) Goodwill on acquisition (i) Total purchase consideration Consideration in cash and cash equivalents Less: Cash and cash equivalents acquired Issue of ordinary shares (ii), 18 Direct costs relating to the acquisition (iii) Total purchase consideration comprises	Book value Fair value adjustments $’000 $’000 538 - 273 - 83 - (474) -	Fair value on acquisition $’000 538 273 83 (474)
	420 -	420 2,413
		2,833
		1,413 (87) 1,387 120
		2,833

Revenue Total expenses Profit after tax for the period Operating results of Southernland included in the Consolidated Income Statement of Imdex Limited from 1 July 2007 to 30 June 2008:	Results since acquisition $’000 3,062 (2,616)
	446

(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Southernland. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Southernland. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(ii) Comprised the issue of 723,679 fully paid ordinary shares in Imdex Limited at $1.9163 per share. The issue price of the shares was determined using the closing weighted average share price over the 5 business days prior to 1 November 2007. These shares will be held in voluntary escrow for a period of 24 months from 1 November 2007. The issue of these shares is not required to be formally approved by shareholders as this issue falls below the 15% threshold level.

(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Southernland as $1.4 million being the total consideration of $2.8 million above less $1.4 million paid in shares.

Page 65 of 87

IMDEX LIMITED and its controlled entities

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(f) Acquisition of entity - Flexit AB

With effect from 1 May 2007, Imdex Sweden AB, wholly owned subsidiary of Imdex Limited, acquired 100% of the issued share capital of Flexit AB (Flexit), a company incorporated in Sweden. Flexit AB has one Swedish wholly owned subsidiary, Flexit Navigation AB. Flexit are leading developers and suppliers of borehole survey equipment to the exploration and mining industries globally. At the General Meeting of Shareholders held on 30 April 2007, the shareholders of Imdex Limited approved this acquisition and the associated issue of shares. The numbers presented below have been accounted for using the acquisition method of accounting.

below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill are as follows:		Book value	Fair value	Fair value on
			adjustments	acquisition
	Notes	$’000	$’000	$’000
Trade and other receivables		896	-	896
Inventory		557	-	557
Deferred tax assets / (liabilities)	(i)	-	(2,124)	(2,124)
Property, plant and equipment		207	-	207
Technology based intangibles	(i)	-	4,672	4,672
Trade name based intangibles	(i)	-	2,916	2,916
Trade and other payables		(1,203)	-	(1,203)
Long term liabilities		(54)	-	(54)
Fair value of net identifiable assets acquired (other than cash and cash		403	5,464	5,867
equivalents)
Goodwill on acquisition	(ii)			11,107
Total purchase consideration				16,974
Total purchase consideration comprises
Consideration in cash and cash equivalents				12,000
Less cash and cash equivalents acquired				(1,842)
Deferred consideration - Mandatory Convertible Capital	(iv), 18			6,700
Direct costs relating to the acquisition				116
	(iii)			16,974
				Results since
				acquisition
				$’000
Operating results of the Flexit consolidated group included in the Consolidated	Income Statement of Imdex Limited from
acquisition on 1 May 2007 to 30 June 2007:
Operating revenue				1,275
Total expenses				(1,315)
Loss for the period after tax	(v)			(40)

(i) Technology based intangible assets of $4.7 million comprise technical knowledge and other know-how in existence at the time of acquisition. Trade name based intangibles of $2.9 million represents the value of the Flexit and GyroSmart trade names at acquisition. Deferred tax of $2.1 million was raised on these balances. These intangibles have been valued by independent valuation professionals using the replacement cost and relief-from-royalty methods respectively. Data inputs into the model were derived from internal management budgets. Intangible assets are being amortised over their estimated useful lives of 5 years.

(ii) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Flexit. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Flexit. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2007 records the payment for the acquisition of Flexit as $10.3 million being the total consideration of $20.3 million above less $10.0 million of deferred consideration.

(iv) The balance of the purchase price is due on 1 May 2009. This will be settled by way of the issue of 5 million fully paid ordinary shares in Imdex Limited. Should the Imdex share price be below $2 per share at that time, an additional cash payment will be made to bring the total of cash paid and shares issued at that time to $10 million. At the General Meeting of Shareholders held on 30 April 2007 the shareholders approved the future issue of these shares to the vendors of Flexit. The deferred consideration has been recorded at $6,700,000 based on the Company's analysis of the fair value of the consideration at acquisition date.

(v) Had the acquisition of Flexit been effected on 1 July 2006, the beginning of the prior financial year, the Flexit financial results included in the Imdex consolidated results would have been revenue of approximately $9.2 million and profit of approximately $1.0 million. The results of Flexit are included in the Down Hole Instrumentation segment. The Board considers these 'pro-forma' numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.

Page 66 of 87

IMDEX LIMITED and its controlled entities

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(g) Acquisition of entity - Reflex Holding AB

With effect from 1 August 2006, Imdex Sweden AB, a wholly owned subsidiary of Imdex Limited, acquired 100% of the issued share capital of Reflex Holding AB (Reflex), a company incorporated in Sweden. Reflex Holding AB is the parent of a group of companies operating in South Africa, Europe, North and South America under the "Reflex Instrument" trading name. Reflex are leading developers and suppliers of borehole survey equipment globally. At the General Meeting of Shareholders held on 8 August 2006, the shareholders of Imdex Limited approved this acquisition and the associated issue of the convertible note. The numbers presented below have been accounted for using the acquisition method of accounting.

Details of the assets, liabilities and goodwill are as follows:		Book value	Fair value	Fair value on
			adjustments	acquisition
	Notes	$’000	$’000	$’000
Trade and other receivables		3,818	(14)	3,804
Inventory		1,511	-	1,511
Deferred tax assets / (liabilities)	(i)	405	(3,174)	(2,769)
Property, plant and equipment		1,566	-	1,566
Goodwill		670	(670)	-
Intangibles	(i)	-	11,335	11,335
Other non-current assets		22	(19)	3
Trade and other payables		(4,966)	487	(4,479)
Fair value of net identifiable assets acquired (other than cash and cash		3,026	7,945	10,971
equivalents)
Goodwill on acquisition	(ii)			14,623
Total purchase consideration				25,594
Total purchase consideration comprises
Consideration in cash and cash equivalents				2,884
Less cash and cash equivalents acquired				(111)
Convertible note raised	(iv)			10,400
Bank loan raised	16			9,955
Deferred vendor finance - due and paid on 31 January 2007				2,000
Direct costs relating to the acquisition				466
	(iii)			25,594
				Results since
				acquisition
				$’000
Operating results of the Reflex consolidated group included in the Consolidated	Income Statement of Imdex Limited from
acquisition on 1 August 2006 to 30 June 2007:
Operating revenue				18,492
Total expenses				(14,626)
Profit for the period after tax	(v)			3,866

(i) Customer based intangible assets of $9.8 million comprise customer lists and relationships at the time of acquisition. Trade name based intangible assets of $1.5 million represent the value to the Group of the Reflex trading name in the markets in which they operate. Deferred tax of $3.2 million was raised on these balances. These intangibles have been valued by independent valuation professionals using the multi period excess earnings model. Data inputs into the model were derived from internal management budgets. These intangible assets are being amortised over their estimated useful lives of 6 years each.

(ii) Goodwill arose because the cost of the combination included a control premium paid to acquire Reflex. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Reflex. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2007 records the payment for the acquisition of Reflex as $15.2 million being the total consideration of $25.6 million above less the $10.4 million convertible note.

(iv) At the General Meeting of Shareholders held on 8 August 2006 the shareholders approved the issue of a convertible note with a face value of $10.4 million. This convertible note converted into equity on 15 February 2007. Refer to notes 16 and 18.

(v) Had the acquisition of Reflex been effected on 1 July 2006, the beginning of the prior financial year, the Reflex financial results included in the Imdex consolidated results would have been revenue of approximately $20.3 million and profit of approximately $4.6 million. The results of Reflex are included in the Down Hole Instrumentation segment. The Board considers these 'pro-forma' numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.

Page 67 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

26 Acquisition of Businesses (continued)

(h) Acquisition of entity - Imdex Technology UK Ltd (previously Chardec Consultants Ltd)

With effect from 1 August 2006, Imdex International Pty Ltd, a newly incorporated, wholly owned subsidiary of Imdex Limited acquired 100% of the issued share capital of Imdex Technology UK Ltd (Imdex Technology), a company incorporated in the United Kingdom. Imdex Technology is a leading developer and supplier of borehole survey equipment globally. At the General Meeting of Shareholders held on 8 August 2006, the shareholders of Imdex Limited approved this acquisition. The numbers presented below have been accounted for using the acquisition method of accounting.

accounting.
Details of the assets, liabilities and goodwill are as follows:		Book value	Fair value	Fair value on
			adjustments	acquisition
	Notes	$’000	$’000	$’000
Trade and other receivables		2,111	-	2,111
Inventory		273	-	273
Deferred tax assets / (liabilities)	(i)(ii)	3	(3,207)	(3,204)
Technology based intangibles	(i)	-	10,265	10,265
Contract based intangibles	(ii)	-	425	425
Trade and other payables		(2,456)	-	(2,456)
Fair value of net identifiable assets acquired (other than cash and cash		(69)	7,483	7,414
equivalents)
Goodwill on acquisition	(iii)			8,319
Total purchase consideration				15,733
Total purchase consideration comprises
Consideration in cash and cash equivalents				6,203
Less cash and cash equivalents acquired				(175)
Direct costs relating to the acquisition				324
Deferred vendor finance and earn out payments	(v)			9,381
	(vi)			15,733
				Results since
				acquisition
				$’000
Operating results of Imdex Technology included in the Consolidated Income	Statement from 1 August 2006 to		30 June 2007:
Operating revenue				6,685
Total expenses				(4,281)
Profit for the period after tax	(vi)			2,404

(i) Technology based intangible assets of $10.3 million comprise intellectual property and technical expertise contained within the business of Imdex Technology at the time of acquisition. Deferred tax of $3.1 million was raised on this balance. These intangibles have been valued by independent valuation professionals using the multi period excess earnings model. Data inputs into the model were derived from internal management budgets. Technology based intangible assets are being amortised over their estimated useful life of 7 years.

(ii) Contract based intangible assets of $0.4 million represent the value to the Group of the 5 year employment contract signed with the vendor and now employee of Imdex Technology. Deferred tax of $0.1 million was raised on this balance. This contract has been valued by independent valuation professionals using the multi period excess earnings model. Data inputs into the model were derived from internal management budgets. Contract based intangible assets are being amortised over the term of the contract which is 5 years.

(iii) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Imdex Technology. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Imdex Technology. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.

(iv) The Consolidated Cash Flow Statement for the year ended 30 June 2007 records the payment for the acquisition of Imdex Technology as $6.4 million being the total consideration of $15.7 million above less deferred consideration of $9.4 million.

(v) Further purchase price instalments are due as follows: GBP 2.18 million on 31 July 2007 (paid); GBP 1.09 million on 31 July 2008 and GBP 1.045 million on 31 July 2009. In addition a revenue based earn-out may also become payable. The additional revenue based earn-out payments have been estimated by management as totalling GBP 0.4 million over the three years. All expected future payments have been discounted to their present values using a discount rate of 8% per annum.

(vi) Had the acquisition of Imdex Technology been effected on 1 July 2006, the beginning of the prior financial year, the Imdex Technology financial results included in the Imdex consolidated results would have been revenue of approximately $7.3 million and profit of approximately $2.8 million. The results of Imdex Technology are included in the Down Hole Instrumentation segment. The Board considers these 'pro-forma' numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point

Page 68 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

27 Segment Information

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income earning assets and interest revenue, interest bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business Segments

The Group comprises the following business segments which are based on the Group's internal management reporting system:

(i) Down Hole Instrumentation: This segment comprises the manufacture, sale and rental of down hole instrumentation. Until 31 October 2007 this division also provided down hole surveying, geophysical logging and directional drilling services through its Surtron business which was sold on this date; and

(ii) Drilling Fluids and Chemicals: This segment comprises the manufacture and supply of drilling fluids and chemicals to the mining, mineral exploration, oil and gas and water well drilling industries.

Geographical Segments

The Group operates in the following geographical segments which are based on the Group's internal management reporting system:

(i) Asia Pacific: Manufacture and sale of drilling fluids and chemicals; sale and rental of down hole instrumentation

(ii) Europe: Manufacture, sale and rental of down hole instrumentation

(iii) Africa: Manufacture and sale of drilling fluids and chemicals; sale and rental of down hole instrumentation

(iv) Americas: Manufacture and sale of drilling fluids and chemicals; sale and rental of down hole instrumentation

Primary reporting: Business Segments

(a) Segment Revenues

2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 Drilling Fluids and Chemicals 85,711 62,337 - - - 16 Down Hole Instrumentation 56,298 41,512 - - - 36 Total of all segments 142,009 103,849 - - - 52 Unallocated Total revenue - all operations (b) Segment Results Continuing operations Drilling Fluids and Chemicals Down Hole Instrumentation Total of all segments Eliminations Unallocated Profit before tax Income tax expense Discontinued operations Drilling Fluids and Chemicals Down Hole Instrumentation Total of all segments Eliminations Unallocated Profit before tax Income tax expense Total revenue - continuing operations Profit for the year from continuing operations External revenue Inter-segment Other Profit for the year from discontinued operations Profit attributable to ordinary equity holders of Imdex Limited* Discontinued operation - Surtron (note 28)	2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 85,711 62,337 - - - 16 56,298 41,512 - - - 36 External revenue Inter-segment Other	2008 2007 $'000 $'000 85,711 62,353 56,298 41,548 Total
	142,009 103,849 - - - 52	142,009 103,901
		1,900 848
		143,909 104,749
		6,584 14,591
		150,493 119,340
		13,981 11,570 21,221 11,858
		35,202 23,428 - - (3,317) (5,313)
		31,885 18,115 (10,804) (6,165)
		21,081 11,950
		- - 13,347 2,297
		13,347 2,297 - - - -
		13,347 2,297 (2,426) (729)
		10,921 1,568

		32,002 13,518

- Included in the prior period is a $1.1 million recovery from the RTE/Imdex Joint Venture

Page 69 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

27 Segment Information (continued)

(c) Segment Assets and Liabilities

(c) Segment Assets and Liabilities
Drilling Fluids and Chemicals Down Hole Instrumentation Total of all segments Unallocated Consolidated	2008 2007 2008 2007 $'000 $'000 $'000 $'000 54,194 33,997 12,895 10,580 101,361 101,837 18,973 34,795 Assets Liabilities
	155,555 135,834 31,868 45,375 17,508 14,012 35,552 27,857
	173,063 149,846 67,420 73,232

(d) Other segment information

(d) Other segment information
	Drilling Fluids and		Down	Hole	Unallocated		Total
	Chemicals		Instrumentation
	2008	2007	2008	2007	2008	2007	2008	2007
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Depreciation	229	258	3,306	3,947	198	163	3,733	4,368
Acquisition of segment assets	1,408	373	3,768	7,788	42	433	5,218	8,594
Significant non cash expenses other
than depreciation and amortisation	1,418	364	608	364	404	707	2,430	1,435

Secondary Reporting: Geographical Segments

Secondary Reporting: Geographical Segments
Asia Pacific Europe Africa Americas Total	2008 2007 2008 2007 2008 2007 $'000 $'000 $'000 $'000 $'000 $'000 94,513 77,858 112,298 99,199 1,405 6,302 8,207 5,057 42,380 37,501 862 1,334 28,710 22,858 10,615 4,783 1,729 293 19,063 13,567 7,770 8,363 1,222 665 Revenue from external customers Segment assets Acquisition of segment assets
	150,493 119,340 173,063 149,846 5,218 8,594

Page 70 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

28 Discontinued Operations

Effective 31 October 2007, the Group disposed of 100% of its shares in Surtron Technologies Pty Ltd, Surtron Technologies UK Ltd and Surtron Technologies US Inc, collectively known as the Surtron business. The disposal was part of the Group's decision to focus its efforts on the core competencies of selling drilling fluids and selling and renting down hole instrumentation. The financial results of the Surtron business up to the date of disposal included in the Group results are summarised below.

Profit from discontinued operations	4 months ended 12 months ended 31 Oct 2007 30 Jun 2007 $’000 $’000 Consolidated
Revenue Expenses Profit before income tax Income tax expense Profit after income tax of discontinued operations Gain on sale of the entities before income tax Income tax expense Gain on sale of the entities after income tax Profit from discontinued operations Cash flows from discontinued operations Net cash (outflow)/inflow from ordinary activities Net cash inflow from investing activities (including the proceeds from the sale of the entities) Net cash inflow from financing	6,584 14,591 (5,376) (12,294)
	1,208 2,297 (207) (729)
	1,001 1,568
	12,139 - (2,219) -
	9,920 -

	10,921 1,568
	(1,737) 84 20,002 210 1,121 -
	19,386 294
The assets and liabilities of Surtron at the date of disposal were as follows: Carrying amounts of assets and liabilities	Consolidated 31 Oct 2007 $’000
Cash and cash equivalents Trade and other debtors Inventories Deferred tax asset Property, plant and equipment Total assets Intercompany balances Trade and other creditors Hire purchase liabilities Employee entitlements Total liabilities Net assets	1,873 4,382 306 221 6,528 13,310 (2,612) (2,590) (2,300) (686) (8,188) 5,122
Details of the sale of the entities Consideration received:	4 months ended 12 months ended 31 Oct 2007 30 Jun 2007 $’000 $’000 Consolidated
Cash received Carrying amount of net assets sold (net of intercompany balances) Costs of disposal Gain/(loss) on sale before income tax Income tax expense Gain/(loss) on sale after income tax	20,002 - (7,734) - (129) -
	12,139 - (2,219) -
	9,920 -

Page 71 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

29 Related Party Disclosures

(a) Equity interests in related parties

Details of the percentage ownership of subsidiaries and the wholly owned Group is set out in Note 25. The wholly owned Group consists of Imdex Limited and its wholly owned subsidiaries.

(b) Transactions with key management personnel

(i) Key management personnel compensation

Details of key management personnel compensation is set out in Note 32.

(ii) Loans to key management personnel

No loans were made during the current or prior years to key management personnel or their related parties.

(iii) Key management personnel equity holdings

2008 Mr I F Burston Mr B W Ridgeway Mr R W Kelly Mr K A Dundo Mr M Lemmel Mr G E Weston Mr D J Loughlin Mr P A Evans 2007 Mr I F Burston Mr B W Ridgeway Mr H H Al-Merry Mr R W Kelly Mr K A Dundo Mr I R Freeman Mr M Lemmel * Mr G E Weston Mr D J Loughlin Mr S J Lyons Mr P A Evans Mr D L Kinley Mr C S Munyard	Balance at 1 July 2007 Granted as compensation Received on exercise of options Inception as key management person Net other change Balance at 30 June 2008 Balance held nominally No. No. No. No. No. No. No. 260,000 - - - 83,786 343,786 - 3,500,000 - - - - 3,500,000 - 265,000 - - - 25,000 290,000 - 300,000 - - - - 300,000 - 400,000 - - - 47,347 447,347 - - - 500,000 - (500,000) - - 10,000 - - - (10,000) - - 5,000 - - - 5,000 10,000 -
	4,740,000 - 500,000 - (348,867) 4,891,133 -
	Balance at 1 July 2006 Granted as compensation Received on exercise of options Cession as key management person Net other change Balance at 30 June 2007 Balance held nominally No. No. No. No. No. No. No. 200,000 - - - 60,000 260,000 - 5,000,000 - - - (1,500,000) 3,500,000 - 755,000 - - - (755,000) - - 265,000 - - - - 265,000 - 300,000 - - - - 300,000 - 16,059,002 - - - (16,059,002) - - - - - - 400,000 400,000 - - - 500,000 - (500,000) - - - - - - 10,000 10,000 - 50,000 - - (50,000) - - - - - - - 5,000 5,000 - 120,000 - - (120,000) - - - 25,000 - - (25,000) - - -
	22,774,002 - 500,000 (195,000) (18,339,002) 4,740,000 -

- Represent on market transactions after appointment as a director. Mr M Lemmel's shareholding at the date of becoming a director was nil.

Mr S J Lyons resigned on 17 October 2006, Mr D L Kinley ceased to be a key management person on 17 October 2006 and Mr C S Munyard ceased to be a key management person on 1 September 2006. Accordingly, the movement in equity holdings disclosed reflects only those movements which took place during the period that these persons were key management persons. The balance of securities held as at 30 June 2007 is nil as they are no longer key management personnel and therefore the net change shown in the table above is not as a result of the sale of any securities whilst being a key management person.

Page 72 of 87

IMDEX LIMITED and its controlled entities

NOTES TO THE FINANCIAL REPORT

29 Related Party Disclosures (continued)

(iv) Share options issued by Imdex Limited

2008
Mr I F Burston
Mr B W Ridgeway
Mr R W Kelly
Mr K A Dundo
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr P A Evans

Balance at 1
July 2007
Granted as
compensation
Exercised
Cession as key
management
person
Balance at
30 June
2008
Vested but
not
exercisable
Vested and
exercisable
Options
vested
during year
No.
No.
No.
No.
No.
No.
No.
No.
1,000,000
-
-
-
1,000,000
-
-
-
2,000,000
-
-
-
2,000,000
-
2,000,000
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,500,000
500,000
(500,000)
-
2,500,000
-
1,666,667
1,000,000
500,000
-
-
-
500,000
-
166,667
166,667
300,000
200,000
-
-
500,000
-
100,000
100,000

6,300,000
700,000
(500,000)
-
6,500,000
-
3,933,334
3,266,667

Options granted to G E Weston and P A Evans during the financial year were made in accordance with the Staff Option Plan, as further described in Note 33. Each share option converts into 1 ordinary share of Imdex Limited. No amounts were paid, or are payable, by the recipient on receipt of the option. The options issued to G E Weston and P A Evans are exercisable in one third lots at the end of each of the first three years during their life.

A total of 500,000 options were exercised by key management personnel during the year. The exercise price was 20c per share. No amounts remain unpaid on the options exercised during the financial year at year end.

2007
Mr I F Burston
Mr B W Ridgeway
Mr H H Al-Merry
Mr R W Kelly
Mr K A Dundo
Mr I R Freeman
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr S J Lyons
Mr P A Evans
Mr D L Kinley
Mr C S Munyard

Balance at 1
July 2006
Granted as
compensation
Exercised
Cession as key
management
person
Balance at
30 June
2007
Vested but
not
exercisable
Vested and
exercisable
Options
vested
during year
No.
No.
No.
No.
No.
No.
No.
No.
-
1,000,000
-
-
1,000,000
-
-
-
2,000,000
-
-
-
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
(500,000)
-
2,500,000
-
1,166,667
1,000,000
-
500,000
-
-
500,000
-
-
-
200,000
-
-
(200,000)
-
-
-
16,667
-
300,000
-
-
300,000
-
-
-
200,000
-
-
(200,000)
-
-
-
33,333
125,000
-
-
(125,000)
-
-
-
25,000

5,525,000
1,800,000
(500,000)
(525,000)
6,300,000
-
1,166,667
1,075,000

Mr S J Lyons resigned on 17 October 2006, Mr D L Kinley ceased to be a key management person on 17 October 2006 and Mr C S Munyard ceased to be a key management person on 1 September 2006. Accordingly, the movement in share options disclosed reflects only those movements which took place during the period that these persons were key management persons. The balance of options held as at 30 June 2007 is nil as they are no longer key management personnel and therefore the net change shown in the table above is not as a result of the any transaction whilst being a key management person.

Page 73 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

29 Related Party Disclosures (continued)

(v) Other transactions with key management personnel (and their related parties) of Imdex Limited

(a) The premises on which the administration and factory buildings of Samchem Drilling Fluids & Chemicals (Pty) Ltd are located in Alrode, Alberton, South Africa are leased on normal commercial terms and conditions from PTS Investments (Pty) Ltd and Basalt Properties (Pty) Ltd, companies in which Mr I R Freeman has an interest. Mr I R Freeman was a non-executive director of Imdex Limited from the beginning of the prior financial year until his resignation on 10 April 2007. The total lease cost arising from this arrangement during the prior year until the date of his resignation on 10 April 2007 was $129,460.

(b) Mr K A Dundo is a Partner of the legal firm QLegal, that provided legal services to the Imdex Group on normal commercial terms and conditions. Total legal costs arising from QLegal were $216,202 (2007: $208,785)

Note
v(a)
v(b)
v(b)
Current Assets
Current Liabilities
v(a) v(b)
Profit from ordinary activities before income tax
includes the following items of income and expenses
relating to transactions, other than compensation, with
Directors or their related entities:
Total assets arising from transactions, other than
compensation, with Directors or their related entities:
Total assets and liabilities arising from transactions,
other than compensation, with Directors or their related
entities:
Goodwill and intercompany loans (parent: acquisition
costs)
Legal services expense
Operating lease rental expense

2008
2007
2008
2007
$
$
$
$
- 129,460
- -
134,314 31,281 134,314 31,281
Company
Consolidated

81,888 177,504 81,888 177,504

- - - -
3,573
- 3,573
-

(c) Transactions with other related parties

(i) Transactions within the wholly-owned Group

Details of dividend revenue received by the ultimate parent entity is disclosed in Note 4. Amounts receivable from entities in the whollyowned Group are disclosed in Note 9. During the financial year Imdex Limited provided management services amounting to $6,671,293 (2007: $1,363,000) to entities in the wholly-owned Group as disclosed in Note 4.

(d) Parent entity

The ultimate parent entity in the Group is Imdex Limited, a Company incorporated in Western Australia.

Page 74 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

30 Notes to the Cash Flow Statement

(a) Reconciliation of cash and cash equivalents

For the purposes of the Cash Flow Statement, cash and cash equivalents includes cash on hand and in banks and investment in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the year as shown in the Cash Flow Statement is reconciled to the related items in the balance sheet as follows:

Cash and cash equivalents Bank overdraft	2008 2007 2008 2007 $’000 $’000 $’000 $’000 13,276 15,271 869 962 - - - - Consolidated Company
	13,276 15,271 869 962

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents is $13,275,763 (2007: $15,271,482)

(b) Non cash financing and investing activities

During the year the Group acquired equipment under a finance lease of $0.7 million (2007: $1.1 million). This acquisition will be reflected in the prior period cash flow cash flow statement over the term of the finance lease via lease repayments.

(c) Reconciliation from the Profit for the Year to Net Cash Provided by Operating Activities

Profit for the year
Adjustments for non-cash and non-operational items
Depreciation of non-current assets
Amortisation of intangible assets
Non-cash interest on deferred payments
Interest earned on intercompany accounts
Interest received disclosed as investing activities
Share options expensed
Profit on sale of non-current assets
Interest on hire purchase liabilities
Fair value adjustment on interest rate cap
Proceeds from Rashid Trading Establishment shown as
investing activities
Profit on sale of Surtron before tax
Changes in assets and liabilities during the financial year
(Increase) / decrease in assets:
Current receivables
Current inventories
Other current assets
Increase / (decrease) in liabilities:
Current payables
Provision for employee entitlements
Increase / (decrease) in current tax liability
Increase in deferred tax balances
Net Cash Provided by / (used in) Operating Activities

2008
2007
2008
2007
$’000
$’000
$’000
$’000
32,002
13,518
16,325
9,866
3,733
4,368
198
2,269
6,055
3,430
-
-
404
707
-
-
-
-
(1,677)
(1,999)
(451)
(267)
(212)
(217)
2,025
728
2,025
728
(91)
(76)
-
(2,200)
66
225
3
57
10
-
10
-
-
(1,121)
-
(1,121)
(12,139)
-
(17,245)
-
(10,096)
(3,169)
(3,455)
(6,876)
(6,577)
(1,791)
-
(1,004)
(976)
(212)
23
(45)
(2,132)
(2,187)
258
2,577
556
604
143
152
(121)
4,584
(5,797)
3,477
(2,011)
(3,082)
(590)
(23)
Consolidated
Company

10,257
16,259
(9,991)
5,641

Page 75 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

30 Notes to the Cash Flow Statement (continued)

(d) Financing facilities

Total facilities available Bank loan Commercial bills Equipment finance facility Multi option facility (including bank overdraft) Facilities utilised at balance sheet date Bank loan Commercial bills Equipment finance facility Multi option facility (including bank overdraft) Facilities not utilised at balance sheet date Bank loan Commercial bills Equipment finance facility Multi option facility (including bank overdraft)	13,148 15,484 - - 17,000 12,300 17,000 12,300 76 2,591 76 633 2,020 2,522 2,020 2,020
	32,244 32,897 19,096 14,953
	13,148 15,140 - - 17,000 12,300 17,000 12,300 - 2,407 - 449 - - - -
	30,148 29,847 17,000 12,749
	- 344 - - - - - - 76 184 76 184 2,020 2,522 2,020 2,020
	2,096 3,050 2,096 2,204

31 Financial Instruments

(a) Capital Risk Management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 16, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 18 and 19. Management and the Board review the capital structure quarterly when the treasury function present an update to the Board. As a part of these reviews management considers the cost of capital and the risks associated with each class of capital. Based on the outcome of these reviews the Group will balance its overall capital structure through payment of dividends and issue of new shares as well as the issue of new debt or repayment of existing debt. The Board does not have a specific optimum gearing target other than to maintain a competitive weighted average cost of capital.

The Group’s overall capital management strategy remains unchanged from 2007.

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.

(c) Categories of financial instruments

c) Categories of financial instruments
	Consolidated		Company
	2008	2007	2008	2007
	$ 000s	$ 000s	$ 000s	$ 000s
Financial Assets
Cash and cash equivalents	13,276	15,271	869	962
Loans and receivables	45,087	39,362	75,791	63,027
At fair value through profit and loss	229	-	229	-
Financial Liabilities
Amortised cost	52,074	57,178	18,811	18,319

Page 76 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

31 Financial Instruments (continued)

(d) Financial risk management objectives

The Group’s treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk.

The Group seeks to minimise the effects of these risks by using natural hedges where possible and derivative financial instruments to hedge remaining risk exposures where the benefit of the hedge outweighs the cost. The use of financial derivatives is governed by the Group’s treasury policies which are approved by the Board of Directors. These policies describe the Group’s policies with respect to foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments for speculative purposes. The only derivative instrument in operation at 30 June 2008 is an interest rate cap as described in note (g) below. The corporate treasury function reports quarterly to the Board of Directors.

(e) Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (note (f) below) and interest rates (note (g) below). The Group monitors its exposure to these risks on a quarterly basis and enters into derivative financial instruments to manage these risks where appropriate. The only derivative financial instrument currently being used is an interest rate cap. At a Group and at a company level market risk exposures are measured by sensitivity analyses and scenario modelling.

There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.

(f) Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to foreign exchange rate fluctuations arise. Exchange rate exposures are managed with the use of natural hedges where possible and with the use of financial instruments where benefit outweighs cost within approved policy parameters. During the current and prior year no financial instruments were used to manage foreign exchange risk.

The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date is as follows:

	Liabilities	Liabilities	Assets
	2008	2007	2008	2007
	$ 000s	$ 000s	$ 000s	$ 000s
United States Dollars	487	930	14,045		9,920
South African Rand	1,770	1,820	3,782		5,132
Canadian Dollars	44	714	4,222		3,197
Swedish Kroner	13,564	17,381	3,975		4,446
British pounds	4,953	13,700	401		2,416
Other - mostly Euros and Chilean Pesos	3,554	66	3,620		130

Foreign currency sensitivity

The Group is mainly exposed to United States Dollars, Swedish Kroner, Canadian Dollars and South African Rand.

The following table details the Group’s sensitivity to a 2% increase and decrease in the Australian Dollar against the relevant foreign currencies. The sensitivity rate of 2% is the rate used when performing the quarterly reporting on foreign currency risk internally. Foreign exchange risk is reported quarterly to key management personnel and the Board. The estimated movement of 2% represents management’s assessment of the possible change in foreign currency exchange rates which is based on regular forecasts received from major lending institutions. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjust their translation at the period end for a 2% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number indicates an increase in profit or loss and other equity where the Australian Dollar strengthens against the respective currency. For a weakening of the Australian Dollar against the respective currency there would be an equal and opposite impact on the profit and other equity, and the balances below would carry the opposite sign.

Page 77 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

31 Financial Instruments (continued)

(f) Foreign currency risk management (continued)

==> picture [481 x 142] intentionally omitted <==

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

United States Dollar Impact South African Rand Impact
Consolidated Company Consolidated Company
2008 2007 2008 2007 2008 2007 2008 2007
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Profit or (loss) (271) (180) - - (i) (40) (66) - - (i)
Other equity - - - - (ii) - - - - (ii)
Swedish Kroner Impact Canadian Dollar Impact
Consolidated Company Consolidated Company
2008 2007 2008 2007 2008 2007 2008 2007
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Profit or (loss) 192 259 - - (i) (84) (50) - - (i)
Other equity - - - - (ii) - - - - (ii)
----- End of picture text -----

(i) Profit and loss impacts are mainly attributable to exposure on outstanding receivables and payables at year end denominated in the applicable foreign currency

(ii) Equity movements are attributable to the net investment in a foreign operation denominated in the applicable foreign currency

(g) Interest rate risk management

The Company and the Group are exposed to interest rate risk as entities in the Group borrow funds at floating interest rates. Interest rate risk is managed within defined policy guidelines. This is achieved by the Group by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of an interest rate cap to limit the maximum exposure to interest rate rises on part of Group debt.

The Company and the Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible changes in interest rates based on consultation with appropriately qualified financial professionals.

Group sensitivity

At reporting date, if interest rates had been 100 basis points higher and all other variables were held constant, the Group’s net profit would decrease by $0.2 million (2007: 0.3 million). There would be a nil impact on equity. A 100 basis point decrease in interest rates, holding all other variables constant would yield an increase in the Group’s net profit of $0.3 million (2007: $0.3 million). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. The profit increase / decrease effect is not symmetrical due to the presence of an interest rate cap which limits the Group’s maximum exposure to interest rates on $10 million of its debt.

The Group’s sensitivity to interest rates decreased during the current period due to the introduction of an interest rate cap to limit the maximum amount of interest rate impact on $10 million of its debt.

Page 78 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

31 Financial Instruments (continued)

(g) Interest rate risk management (continued)

Company sensitivity

At reporting date, if interest rates had been 100 basis points higher and all other variables were held constant, the Company’s net profit would decrease by $0.1 million (2007: $0.1 million). There would be a nil impact on equity. A 100 basis point decrease in interest rates, holding all other variables constant would yield an increase in the Company’s net profit of $0.2 million (2007: $0.1 million). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings. The profit increase / decrease effect is not symmetrical due to the presence of an interest rate cap which limits the Group’s maximum exposure to interest rates on $10 million of its debt.

The Company’s sensitivity to interest rates decreased during the current period due to the introduction of an interest rate cap to limit the maximum amount of interest rate impact on $10 million of its debt.

Interest rate cap

On 1 January 2008 the Company entered into an interest rate cap arrangement for a 3 year period. This interest rate cap, costing $0.2 million, enabled the Company to limit the maximum exposure to interest rate movements on $10 million of its debt to 7% per annum. At 30 June 2008 this interest rate cap had a fair value of $0.2 million. (Note 9) This fair value has been determined by seeking market valuations at 30 June 2008 for an interest rate cap with identical terms that terminates on 31 December 2011.

(h) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed regularly by management.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The Group does not have any significant credit risk exposure to any single counterparty or group of counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of collateral obtained. At 30 June 2008 no such collateral had been obtained. (30 June 2007 : nil)

(i) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, who monitor short, medium and long term liquidity requirements through the use of financial models. The treasury function reports quarterly to key management personnel and the Board on matters affecting liquidity risk. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 30(d) is a listing of additional undrawn facilities that the Company/Group has at its disposal to further reduce liquidity risk.

Page 79 of 87

IMDEX LIMITED and its controlled entities

NOTES TO THE FINANCIAL REPORT

31 Financial Instruments (continued)

(i) Liquidity risk management (continued)

Liquidity and interest risk tables

The following tables detail the Company’s and the Group’s remaining contractual maturity for its non–derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amount of the financial liability on the balance sheet.

Consolidated

Weighted average effective interest rate % 2008 Non-interest bearing - Finance lease liability Variable interest rate instruments 8.20% 2007 Non-interest bearing - Finance lease liability 7.60% Variable interest rate instruments 6.26% Company Weighted average effective interest rate % 2008 Non-interest bearing - Finance lease liability - Variable interest rate instruments 9.70% 2007 Non-interest bearing - Finance lease liability 7.65% Variable interest rate instruments 8.54%	0-3 months 3 months to 1 year 1-5 years 5+ years Adjustment Total $’000 $’000 $’000 $’000 $’000 $’000 10,948 8,261 2,717 - - 21,926 - - - - - - 2,101 12,788 19,606 - (4,347) 30,148
	13,049 21,049 22,323 - (4,347) 52,074
	13,744 8,371 4,715 - - 26,830 395 1,185 760 248 (181) 2,407 1,359 5,437 23,086 3,240 (5,181) 27,941
	15,498 14,993 28,561 3,488 (5,362) 57,178
	0-3 months 3 months to 1 year 1-5 years 5+ years Adjustment Total $’000 $’000 $’000 $’000 $’000 $’000 906 905 - - - 1,811 - - - - - - 908 9,256 9,584 - (2,748) 17,000
	1,814 10,161 9,584 - (2,748) 18,811
	2,785 2,785 - - - 5,570 117 350 - - (18) 449 1,071 2,564 10,327 2,093 (3,755) 12,300
	3,973 5,699 10,327 2,093 (3,773) 18,319

Page 80 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

31 Financial Instruments (continued)

(i) Liquidity risk management (continued)

The following tables detail the Company’s and the Group’s remaining contractual maturity for its non–derivative financial assets. The tables have been drawn up based on the undiscounted cash flows of financial assets including interest that will be earned on those assets except where the Company/Group anticipates that the cash flow will occur in a different period. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amount of the financial asset on the balance sheet.

Consolidated

Weighted average effective interest rate % 2008 Non-interest bearing - Variable interest rate instruments 4.40% Fixed interest rate instruments 13.50% 2007 Non-interest bearing - Variable interest rate instruments 2.50% Fixed interest rate instruments 13.50% Company Weighted average effective interest rate % 2008 Non-interest bearing - Variable interest rate instruments 4.40% Fixed interest rate instruments 13.50% 2007 Non-interest bearing - Variable interest rate instruments 4.40% Fixed interest rate instruments 13.50%	0-3 months 3 months to 1 year 1-5 years 5+ years Adjustment Total $’000 $’000 $’000 $’000 $’000 $’000 32,079 - - - - 32,079 13,276 - - - - 13,276 - 13,008 - - - 13,008
	45,355 13,008 - - - 58,363
	27,806 - - - - 27,806 15,271 - - - - 15,271 - - 13,116 - (1,560) 11,556
	43,077 - 13,116 - (1,560) 54,633
	0-3 months 3 months to 1 year 1-5 years 5+ years Adjustment Total $’000 $’000 $’000 $’000 $’000 $’000 2,401 - - 60,382 - 62,783 869 - - - - 869 - 13,008 - - - 13,008
	3,270 13,008 - 60,382 - 76,660
	10,213 - - 41,258 - 51,471 962 - - - - 962 - - 13,116 - (1,560) 11,556
	11,175 - 13,116 41,258 (1,560) 63,989

The following table details the Company’s and Group’s liquidity analysis for its derivative financial instrument. The table has been drawn up based on the undiscounted gross cash inflows / (outflows) since derivative financial instrument, being the interest rate cap, settles on a gross basis. Since the amounts payable and receivable are not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date. There were no derivative financial instruments in the Company or Group in 2007.

0-3 months 3 months 1-5 years 5+ years to 1 year $’000 $’000 $’000 $’000 2008 Interest rate cap 20 60 200 -

Page 81 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

31 Financial Instruments (continued)

(j) Fair value of financial instruments

The fair values of financial assets and financial liabilities are determined as follows:

the fair value of financial assets and financial liabilities (excluding derivative financial instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using pricing models based on observable current market transactions; and
the fair value of derivative financial instruments are calculated using quoted market prices

The financial statements include holdings in unlisted shares which are measured at cost due to them being held for disposal (note 11).

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximates their fair values.

32 Key Management Personnel Compensation

The aggregate compensation of the key management personnel of the Group and the Company is set out below:

The aggregate compensation of the key management personnel of the Group	and the Company is set out below:
Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments	2008 2007 2008 2007 $ $ $ $ 1,656,713 1,455,441 1,301,545 1,150,003 112,836 93,068 88,225 72,022 116,291 34,785 39,790 20,020 - - - - 419,325 242,751 399,119 208,952 Consolidated Company
	2,305,165 1,826,045 1,828,679 1,450,997

33 Staff Option Scheme

(a) Share Based Payment Arrangements

Staff Option Plan

The Group has in place a Staff Option Scheme (Scheme) to reward employees (including Key Management Personnel) for their past services as well as to provide an incentive for future efforts. The terms and conditions of the Scheme are set out in the Scheme Rules with the Board of Directors responsible for the administration of the Scheme. The options carry no rights to dividends and no voting rights. The options expire on their expiry date. Each employee share option converts to one ordinary share of Imdex Limited on exercise. No amounts are paid or payable by the recipient on receipt of the option. Options may be exercised at any time from the date of vesting to the date of expiry. The number of options granted to staff is generally based on an assessment of the performance of that staff member as determined by the Board of Directors. Staff are normally only eligible to receive options when they have been with the Company in excess of 12 months. Options expire when the option holder ceases to be employed by the Group.

Chairman’s Options

During the prior year options were issued to the Chairman as a reward for past performance and as an incentive for the future. These options have been approved by members in General Meeting. The options carry no rights to dividends and no voting rights. The options expire on their expiry date or when ceasing to be a Director and may be exercised after 2 years at any time to their expiry date. As at 30 June 2008 none of these options had vested.

Managing Director’s Options

Options were issued to the Managing Director as a reward for past performance and as an incentive for the future. The options carry no rights to dividends and no voting rights. As at 30 June 2008 all of these options had vested.

Page 82 of 87

IMDEX LIMITED and its controlled entities

NOTES TO THE FINANCIAL REPORT

33 Staff Option Scheme (continued)

(b) The following share based payment arrangements were in existence during the current and comparative periods:

2008	Issue Date	Expiry	Exercise	Fair Value		Number of Options	Number of Options	Number of Options
		Date	Price	at Grant	Opening	Issued	Exercised	Lapsed	Closing
			$	Date	balance	current	current year	current year	balance
				$		year
Staff Options
Tranche 1 (i)	1-Aug-04	31-Jul-09	0.20	0.01	2,090,501	-	(912,168)	-	1,178,333
Tranche 2 (i)	1-Feb-06	31-Jan-11	0.35	0.02	2,189,905	-	(306,998)	(70,035)	1,812,872
Tranche 3 (i)	23-Feb-07	22-Feb-12	0.75	0.56	700,000	-	-	-	700,000
Tranche 4 (i)	23-Feb-07	22-Feb-12	1.00	0.48	4,425,000	-	(386,333)	(475,000)	3,563,667
Tranche 5 (i)	12-Jun-07	11-Jun-12	1.80	0.51	675,000	-	-	(50,000)	625,000
Tranche 6 (i)	18-Oct-07	17-Oct-12	1.80	0.81	-	500,000	-	-	500,000
Tranche 7 (i)	28-Mar-08	27-Mar-13	3.00	0.42	-	4,875,000	-	(60,000)	4,815,000
Chairman's Options
Tranche 1 (ii)	19-Oct-06	18-Oct-11	0.75	0.35	1,000,000	-	-	-	1,000,000
Managing Directors' Options
Tranche 1 (iii)	15-Sep-05	14-Sep-10	0.30	0.01	2,000,000	-	-	-	2,000,000
					13,080,406	5,375,000	(1,605,499)	(655,035)	16,194,872
2007	Issue Date	Expiry	Exercise	Fair Value		Number of Options
		Date	Price	at Grant	Opening	Issued	Exercised	Lapsed	Closing
			$	Date	balance	current	current year	current year	balance
				$		year
Staff Options
Tranche 1 (i)	1-Aug-04	31-Jul-09	0.20	0.01	3,048,333	-	(937,832)	(20,000)	2,090,501
Tranche 2 (i)	1-Feb-06	31-Jan-11	0.35	0.02	2,660,000	-	(428,428)	(41,667)	2,189,905
Tranche 3 (i)	23-Feb-07	22-Feb-12	0.75	0.56	-	700,000	-	-	700,000
Tranche 4 (i)	23-Feb-07	22-Feb-12	1.00	0.48	-	4,575,000	-	(150,000)	4,425,000
Tranche 5 (i)	12-Jun-07	11-Jun-12	1.80	0.51	-	675,000	-	-	675,000
Chairman's Options
Tranche 1 (ii)	19-Oct-06	18-Oct-11	0.75	0.35	-	1,000,000	-	-	1,000,000
Managing Directors' Options
Tranche 1 (iii)	15-Sep-05	14-Sep-10	0.30	0.01	2,000,000	-	-	-	2,000,000
Corporate Advisors Options
Tranche 1 (iv)	23-Dec-04	31-Jul-09	0.20	0.03	100,000	-	(100,000)	-	-
Tranche 2 (v)	23-Dec-04	31-Oct-07	0.20	0.02	2,000,000	-	(2,000,000)	-	-
Tranche 3 (iv)	23-Dec-04	31-Oct-07	0.35	0.01	1,000,000	-	(1,000,000)	-	-
					10,808,333	6,950,000	(4,466,260)	(211,667)	13,080,406

(i) Exercisable in one third lots in each year commencing one year after issue.

(ii) Expire on their expiry date or when ceasing to be a Director, and may be exercised after 2 years at any time to their expiry date.

(iii) Expire on their expiry date or 3 months after ceasing to be a Director, and may be exercised after 2 years at any time to their expiry

(iv) Exercisable at any time up to expiry.

(v) Exercisable at any time after Imdex shares trade at 30 cents for 5 consecutive trading days. This condition has been satisfied.

Page 83 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

33 Staff Option Scheme (continued)

(c) Fair value of options granted during the financial year

The weighted average fair value of the share options granted during the financial year is $0.45 (2007: $0.47). Options were priced using a Black-Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility trends.

2008	Staff Options	Staff Options
	Tranche 6	Tranche 7
Inputs into the model
Grant date share price ($)	1.87	1.79
Exercise price ($)	1.80	3.00
Expected volatility	45%	50%
Option life (years)	5.00	5.00
Risk-free interest rate	6.47%	6.18%
Dividend yield	1.66%	1.96%
2007
	Chairman's Options	Staff Options	Staff Options	Staff Options
	Tranche 1	Tranche 3	Tranche 4	Tranche 5
Inputs into the model
Grant date share price ($)	0.80	1.08	1.08	1.40
Exercise price ($)	0.75	0.75	1.00	1.80
Expected volatility	50%	50%	50%	50%
Option life (years)	5.00	5.00	5.00	5.00
Risk-free interest rate	5.89%	6.00%	6.00%	6.38%
Dividend yield	2.30%	2.30%	2.30%	2.30%

(d) Exercised during the financial year

2008

Staff Options Tranche 1 Staff Options Tranche 2 Staff Options Tranche 3 Option Series	Number Exercised Exercise Date 912,168 Various 306,998 Various 386,333 Various 1,605,499 Weighted Average Share Price at Exercise Date 1.86 1.86 1.86

2007

Staff Options Tranche 1 Staff Options Tranche 2 Corp Advisor Tranche 1 Corp Advisor Tranche 2 Corp Advisor Tranche 3 Option Series	Number Exercised Exercise Date 937,832 Various 428,428 Various 100,000 24-Nov-06 2,000,000 Various 1,000,000 Various 4,466,260 Weighted Average Share Price at Exercise Date 0.77 0.78 0.74 0.97 0.97

(e) Balance at end of the financial year

The share options outstanding at the end of the financial year had a weighted average exercise price of $0.33 (2007: $0.25), and a weighted average remaining contractual life of 1582 days (2007: 1398 days)

Page 84 of 87

and its controlled entities

IMDEX LIMITED

NOTES TO THE FINANCIAL REPORT

33 Staff Option Scheme (continued)

(f) Reconciliation of movements in share options during the year

The following reconciles the outstanding share options granted under the Staff Option Scheme at the beginning and end of the financial year

Balance at beginning of the financial year Granted during the financial year Forfeited during the financial year Exercised during the financial year Expired during the financial year Balance at end of the financial year Exercisable at end of the financial year	Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price 13,080,406 0.25 10,808,333 0.02 5,375,000 0.45 6,950,000 0.47 - - - - (1,605,499) 0.13 (4,466,260) 0.02 (655,035) 0.42 (211,667) 0.34 16,194,872 0.33 13,080,406 0.25 5,019,872 2,493,739 2007 2008

34 Subsequent Events

On 31 July 2008 Imdex Limited paid the next deferred settlement instalment of GBP 1,090,000 (A$2,271,000) due to the vendors of Imdex Technology UK Limited (formerly Chardec Technology Limited).

Page 85 of 87

IMDEX LIMITED

and its controlled entities

ADDITIONAL STOCK EXCHANGE INFORMATION AS AT 6 AUGUST 2008

(a) Distribution of Shareholders

) Distribution of Shareholders
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Holding less than a marketable parcel	Number of Fully Paid Ordinary Shareholders Number of Option holders 361 - 1,250 7 793 41 1,158 213 128 18
	3,690 279
	57 -

(b) Substantial Shareholders

Ordinary Shareholders	Fully	Paid
	Number	Percentage
Fiberform Vindic Holding AB	20,800,000	11.32%
National Nominees Ltd	16,254,959	8.85%
HSBC Custody Nominees (Australia) Ltd	15,878,833	8.64%

(c) Twenty Largest Holders of Quoted Equity Securities

Ordinary Shareholders
Fiberform Vindic Holding AB
National Nominees Ltd
HSBC Custody Nominees (Australia) Ltd
Citicorp Nominees Pty Ltd
ANZ Nominees Ltd
J P Morgan Nominees Australia Ltd
RBC Dexia Investor Services Australia Nominees Pty
Ltd (PIIC Account)
UBS Nominees Pty Ltd
Telic Alcatel (Australia) Pty Ltd
Wear Services Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty
Ltd (PIPooled Account)
Bond Street Custodians Ltd
RBC Dexia Investor Services Australia Nominees Pty
Ltd (BKCust Account)
Citicorp Nominees Pty Ltd
Queensland Investment Corporation
Mr Petrus Cornelius Nicolaas Middendorp
Primbee Investments Pty Ltd
Longo Pty Ltd
Mr Robert Whipple
Fortis Clearing Nominees Pty Ltd

Fully Paid
Number
Percentage
20,800,000
11.32%
16,254,959
8.85%
15,878,833
8.64%
9,901,694
5.39%
8,592,105
4.68%
5,412,350
2.95%
4,206,197
2.29%
3,827,284
2.08%
3,603,152
1.96%
3,025,547
1.65%
2,901,864
1.58%
2,667,449
1.45%
2,551,196
1.39%
2,331,802
1.27%
2,003,697
1.09%
1,882,500
1.02%
1,737,171
0.95%
1,572,826
0.86%
1,212,751
0.66%
1,107,668
0.60%

111,471,045
60.68%

Page 86 of 87

IMDEX LIMITED

and its controlled entities

ADDITIONAL STOCK EXCHANGE INFORMATION AS AT 6 AUGUST 2008

(d) Director and Company Secretary Shareholdings

Name Mr B W Ridgeway Mr I F Burston Mr R W Kelly Mr K A Dundo Mr M Lemmel Mr P A Evans	Number of Shares Number of Options 3,500,000 2,000,000 343,786 1,000,000 290,000 - 300,000 - 447,347 - 10,000 500,000
	4,891,133 3,500,000

(e) Company Secretary

Mr Paul Anthony Evans

(f) Registered Office

Level 1, Canute House 15 Rheola Street West Perth Western Australia Phone: (08) 9481 5777

(g) Share Registry

Computershare Investory Services Level 2 45 St Georges Terrace Perth WA 6000 Phone: (08) 9323 2000

Page 87 of 87

AI assistant

IMDEX LIMITED — Annual Report 2008

65119_rns_2008-08-17_50c57d51-f8ce-4139-bd9c-f30ea0875b8a.pdf

ASX APPENDIX 4E AND FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2008

Imdex Limited

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(a) Directors

(b) Directorships of other listed companies

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(c) Company Secretary

(d) Directors’ Meetings

(e) Directors’ Shareholdings

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(f) Remuneration Report

Remuneration policy for Directors and Executives

Non Executive Directors

Managing Director

Executives and Staff

Incentives

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Director and Senior Management details

Elements of Director and Senior Management Remuneration

Earnings and Movements in Shareholder Wealth

Elements of remuneration related to performance

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Year ended 30 June 2008

IMDEX LIMITED

and its controlled entities

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Year ended 30 June 2007

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Bonuses granted to Directors and Senior Managers

Value of options issued to Directors and Senior Managers

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

Share options granted to Directors and Senior Managers

(g) Share options

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(h) Principal Activities

(i) Review of Operations

(j) Dividends

(k) Changes in State Of Affairs

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(l) Subsequent Events

(m) Future Developments

(n) Environmental Regulations

(o) Non-audit services

IMDEX LIMITED

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2008

(p) Auditor’s Independence Declaration

(q) Indemnification of Officers and Auditors

(r) Rounding Off of Amounts

Mr Ian Burston

Imdex Limited

DELOITTE TOUCHE TOHMATSU

Independent Auditor’s Report to the Members of Imdex Limited

Report on the Financial Report

Directors’ Responsibility for the Financial Report

Auditor’s Responsibility

Auditor’s Independence Declaration

Auditor’s Opinion

Report on the Remuneration Report

Auditor’s Opinion

DELOITTE TOUCHE TOHMATSU

Peter Rupp

IMDEX LIMITED

DIRECTORS’ DECLARATION

IMDEX LIMITED

CORPORATE GOVERNANCE STATEMENT

IMDEX LIMITED Annual Report 2008