SILEX SYSTEMS LIMITED — Annual Report 2007

Aug 29, 2007

Silex Systems Limited ABN 69 003 372 067

ASX Preliminary final report – year ended 30 June 2007 – Appendix 4E

Lodged with the ASX under Listing Rule 4.3A

Contents	Page
Results for Announcement to the Market	2
Preliminary consolidated income statement	3
Preliminary consolidated balance sheet	4
Preliminary consolidated statement of recognised income and expense	5
Preliminary consolidated cash flow statement	6
Notes to the preliminary financial statements	7
Supplementary Appendix 4E Information	11

1

Silex Systems Limited Year ended 30 June 2007 (Previous corresponding period: Year ended 30 June 2006)

Results for Announcement to the Market

				$
Revenue from ordinary activities	up	3,114.1%	to	35,744,201
Profit from ordinary activities after tax attributable to members	up	Not applicable	to	8,767,421
Net profit for the period attributable to members	up	Not applicable	To	8,767,421
Dividends/distributions	Amount per security		Franked amount per security
Final dividend	Nil		Nil
Interim dividend	Nil		Nil
Record date for determining entitlements to the	dividend
			N/A

Record date for determining entitlements to the dividend

Explanation of Revenue

The increase in revenue is mainly due to revenue from the Uranium Project. In May 2006, Silex and General Electric signed a Commercialisation and License Agreement for the SILEX Uranium enrichment technology. The government approvals required before Silex was entitled to the up front payment from General Electric under the contract were received in October 2006. Revenue for the current year includes $26,878,000 as an up front payment plus recoverable project costs of $7,344,000 (both nil last year).

Explanation of profit from ordinary activities after tax

The improved result was mainly due to increased revenue (refer above for explanation). This was partly offset by higher costs. Income tax expense was $3,226,150 compared to nil last year.

Explanation of Net profit

Refer explanation above.

Explanation of Dividends

No dividends have been paid or proposed during the reporting period.

2

Silex Systems Limited Preliminary consolidated income statement For the year ended 30 June 2007

Notes Revenue from continuing operations 2 Other income 3 Research and development materials Finance costs 4 Depreciation and amortisation expense 4 Employee benefits expense Professional fees Printing, postage and stationery Rent Travelling expenses Changes in inventories Raw materials and stores used Net foreign exchange losses Other expenses from ordinary activities Profit/(loss) before income tax expense Income tax expense 5 Net profit/(loss) Profit/(loss) is attributable to: Equity holders of Silex Systems Limited Minority interest Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company Basic earnings per share Diluted earnings per share	Consolidated 2007 2006 $ $
	35,744,201 1,112,110 390,776 544,554 (3,763,844) (908,051) (9,997) (949) (1,588,562) (1,925,886) (12,644,450) (6,225,615) (1,488,053) (1,331,232) (85,664) (79,266) (417,519) (370,563) (651,535) (299,596) 41,735 90,590 (45,875) (2,642,122) (91,970) - (872,022) (774,462)
	11,967,069 (10,260,336) (3,226,150) -
	8,740,919 (10,260,336)
	8,767,421 (10,273,257) (26,502) 12,921
	8,740,919 (10,260,336)
	Cents Cents
	6.4 (7.6) 6.3 (7.6)

The above preliminary consolidated income statement should be read in conjunction with the accompanying notes and the 2006 Annual Report.

3

Silex Systems Limited Preliminary consolidated balance sheet As at 30 June 2007

Note ASSETS Current assets Cash and cash equivalents Held to maturity investments Trade and other receivables Inventories Other Total current assets Non-current assets Receivables Property, plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Provisions Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity 6 Reserves (Accumulated losses) 7 Parent equity interest Minority interest Total equity	30 June 30 June 2007 2006 $ $
	22,623,517 15,040,749 - 1,390,040 1,791,841 318,825 91,166 127,380 81,322 156,332
	24,587,846 17,033,326
	191,116 269,070 2,212,401 3,030,158 7,932 3,899 8,397,054 8,782,985
	10,808,503 12,086,112
	35,396,349 29,119,438
	1,399,232 1,742,322 23,804 6,726,759 445,028 248,422
	1,868,064 8,717,503
	98,211 - 100,631 147,081
	198,842 147,081
	2,066,906 8,864,584
	33,329,443 20,254,854
	49,224,639 47,531,679 3,948,931 1,278,408 (19,844,127) (28,611,548)
	33,329,443 20,198,539 - 56,315
	33,329,443 20,254,854

The above preliminary consolidated balance sheet should be read in conjunction with the accompanying notes and the 2006 Annual Report.

4

Silex Systems Limited Preliminary consolidated statement of recognised income and expense For the year ended 30 June 2007

Exchange differences on translation of foreign controlled entity Net income recognised directly in equity Profit/(loss) for the year Total recognised income and expense for the year Total recognised income and expense for the year is attributable to: Members of Silex Systems Limited Minority interest	2007 2006 $ $
	(630,962) 236,159
	(630,962) 236,159 8,740,919 (10,260,336)
	8,109,957 (10,024,177)
	8,136,459 (10,037,098) (26,502) 12,921
	8,109,957 (10,024,177)

The above consolidated statement of recognised income and expense should be read in conjunction with the accompanying notes and the 2006 Annual Report.

5

Silex Systems Limited Preliminary consolidated cash flow statement For the year ended 30 June 2007

Note Cash Flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Interest paid Income taxes paid Net cash inflows/(outflows) from operating activities 9 Cash Flows from investing activities Payment for additional interest in controlled entities, net of cash acquired Loans to related parties Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from maturity of held to maturity investments Repayment of loans by related parties Net cash inflows/(outflows) from investing activities Cash Flows from financing activities Proceeds from issue of shares Proceeds from promissory note Repayment of promissory note Repayment of hire purchase liabilities Net cash inflows/(outflows) from financing activities Net increase in cash held Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash Cash and cash equivalents at end of year Non-cash finance and investing activities 10	2007 2006 $ $
	33,331,202 844,010 (16,415,882) (8,792,757) 1,347,336 619,272 (9,997) (949) (3,228,360) -
	15,024,299 (7,330,424)
	(10,000) - (140,717) - (571,671) (555,158) 9,636 14,027 1,390,040 1,736,842 171,928 120,160
	849,216 1,315,871
	1,118,091 674,426 - 6,849,500 (6,726,759) - (22,985) (29,681)
	(5,631,653) 7,494,245
	10,241,862 1,479,692 15,040,749 13,416,292 (2,659,094) 144,765
	22,623,517 15,040,749

The above preliminary consolidated cash flow statement should be read in conjunction with the accompanying notes and the 2006 Annual Report.

6

Silex Systems Limited Notes to the preliminary financial statements For the year ended 30 June 2007

Note 1 Basis of preparation of full-year financial report

This preliminary financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001 .

This preliminary financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2006 and any public announcements made by Silex Systems Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year.

Note 2 Revenue From continuing operations Up Front Agreement Fee Recoverable Project costs Interest income DARPA contract Other Note 3 Other income Foreign currency exchange gains (net) Government Grants Net gain on sale of property, plant and equipment	2007 2006 $ $
	26,878,000 - 7,343,892 - 1,342,171 616,213 159,340 487,174 20,798 8,723
	35,744,201 1,112,110
	- 132,801 390,776 400,329 - 11,424
	390,776 544,554

7

Silex Systems Limited Notes to the preliminary financial statements For the year ended 30 June 2007 (continued)

		2007	2006
		$	$
Note 4 Expenses:
Profit/(loss) before income tax includes the following
expenses:
Depreciation of plant and equipment		1,129,425	1,370,328
Amortisation of leasehold improvements		63,641	161,178
Amortisation of intellectual property		395,496	394,380
Total depreciation and amortisation		1,588,562	1,925,886
Finance costs
Interest and finance charges paid/payable		9,997	949
Finance costs expensed		9,997	949
Rental expenses relating to operating leases
Minimum lease payments		417,519	370,563
Provision for employee entitlements		150,077	100,743
Defined contribution superannuation expense		319,096	237,734
Provision for warranties		79	90
Research and development costs		15,253,050	5,861,236
Foreign exchange losses		2,642,122	-
Loss on disposal of property, plant and equipment		555	-
Note 5 Income Tax
Numerical reconciliation of income tax expense to prima
facie tax payable
Profit/(loss) before income tax expense		11,967,069	(10,260,336)
Income tax calculated @ 30%		3,590,121	(3,078,101)
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income
Amortisation of intangibles		118,649	118,314
Share based payments		1,031,454	133,272
Research and development concession		(90,000)	(174,750)
Sundry items		17,252	23,986
		4,667,476	(2,977,279)
Deferred tax asset and deferred tax liability not recognised		(3,782,136)	3,436,168
Effect of higher rates on overseas income		(887,550)	(458,889)
Under provided tax paid for previous year		3,228,360	-
Income tax expense		3,226,150	-
2007	2006	2007	2006
Shares	Shares	$	$
Note 6 Contributed equity
Share capital
Ordinary shares
Fully paid 137,479,129	136,004,629	49,224,639	47,531,679

8

Silex Systems Limited Notes to the preliminary financial statements For the year ended 30 June 2007 (continued)

Note 7 (Accumulated losses) (Accumulated losses) at the beginning of the financial year Net profit/(loss) attributable to members of Silex Systems Limited (Accumulated losses) at the end of the financial year Note 8 Net tangible asset backing Net tangible asset backing per ordinary security Note 9 Reconciliation of net cash provided by operating activities to operating profit/(loss) after income tax Operating profit/(loss) after income tax Depreciation (Profit)/loss on sale of plant and equipment Amortisation of intangibles Amortisation of leasehold improvements Non cash employee benefits expense - share based payments Net exchange differences Decrease/increase) in prepayments and other current assets Decrease/(increase) in trade and other debtors Decrease/(increase) in accrued income (Increase)/decrease in inventories Increase/(decrease) in trade and other creditors Increase/(decrease) in provision for employee entitlements and warranties Net cash inflow/(outflow) from operating activities Note 10 Non-cash Financing and Investing Activities Acquisition of plant and equipment by means of hire purchase	2007 2006 $ $
	(28,611,548) (18,338,291) 8,767,421 (10,273,257)
	(19,844,127) (28,611,548)
	$0.1814 $0.0843
	8,740,919 (10,260,336) 1,129,425 1,370,328 555 (11,424) 395,496 394,380 63,641 161,178 3,845,153 791,123 2,388,730 (122,741) 75,010 (68,466) (837,667) (101,290) (620,243) 3,059 36,214 (59,297) (343,090) 472,229 150,156 100,833
	15,024,299 (7,330,424)
	131,818 -
	131,818 -

9

Silex Systems Limited Notes to the preliminary financial statements For the year ended 30 June 2007 (continued)

Note 11 Segment information Primary reporting – geographical segments

2007 Up Front Agreement Fee Recoverable Project costs DARPA contract Other Total segment revenue Unallocated - Interest income Total revenue Segment result Unallocated revenue and income less unallocated expenses Profit before tax Income tax expense Net profit	Australia United States of America Inter segment eliminations/ unallocated $ $ $	Consolidated $
	26,878,000 7,343,892 1,882,336 (1,882,336) - 159,340 - 20,798 - -	26,878,000 7,343,892 159,340 20,798
	34,242,690 2,041,676 (1,882,336)	34,402,030 1,342,171
	18,831,498 (5,564,478) -
		35,744,201
		13,267,020 (1,299,951)
		11,967,069 (3,226,150)
		8,740,919

2006 DARPA contract Other revenue Total segment revenue Unallocated - Interest income Total revenue Segment result Unallocated revenue and income - interest income and exchange gain (Loss) before tax Income tax expense Net (loss)	Australia United States of America $ $	Consolidated $
	- 487,174 8,723 -	487,174 8,723
	8,723 487,174	495,897 616,213
	(6,681,079) (4,328,271)
		1,112,110
		(11,009,350) 749,014
		(10,260,336) -
		(10,260,336)

Note 12 Events occurring after reporting date

Since the end of the financial year, the directors are not aware of any matter or circumstances not otherwise dealt with in these financial statements that has significantly or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years other than those referred to in the Project and operational update released to the ASX at the same time as this document.

10

Silex Systems Limited Supplementary Appendix 4E information

Commentary on results

For more details on the consolidated entity’s activities refer to the Project and operational update which will be released to the ASX at the same time as this document .

Earnings per share

Basic earnings per share improved from (7.6) cents to 6.4 cents. Diluted earnings per share improved from (7.6) cents to 6.3 cents. These improvements are due largely to an increase in revenue from the Uranium Project. Uranium Project revenue for the current year included $26,878,000 as an up front payment plus recoverable project costs of $7,344,000 (both nil last year).

The weighted average number of shares used in the calculation of basic earnings per share increased by less than 1% during the year. The weighted average number of shares used in the calculation of diluted earnings per share increased by less than 3% during the year.

Returns to shareholders

No dividends have been declared or proposed during the year.

Significant features on operating performance

As mentioned above, the revenue from the Uranium Project was the most significant factor for the improvement in the result. Expenses increased also. The main increases in expenses were in employee benefits expenses, research and development materials, and income tax expense. Employee benefits costs increased due to higher share based payments expense, bonuses paid and higher packages for employees relocated to the United States to work on the Uranium project. Research and development materials increased substantially as large costs were incurred on the test loop phase of the Uranium project (these costs have been recharged to General Electric). The income tax expense arose due to the revenue from the Uranium project putting Silex into a tax paying position.

Results of segments and trends

Australia

This includes the operations of the parent entity and the operations of Fiberbyte. The segment result improved substantially from a loss of $6,681,000 to a profit of $18,831,000. This was caused by revenue from the Uranium Project being $34,220,000 compared to nil in the previous year. Higher expenses partly offset the increased revenue.

United States of America

This relates to the activities of Translucent Inc. The segment loss increased by more than $1.2 million. This was due to a reduction in DARPA revenue of over $300,000 and an increase in expenses. Revenue included $1,882,000 of recoverable uranium project costs. This represents a recharge of mainly employee costs for employees of the Group who have moved to the United States to work on the Uranium Project.

Other factors that affected results in the period or which are likely to affect results in the future

Revenue from the uranium project is expected to reduce in 2007/8 as the revenue will not include a $26,878,000 Up front Agreement Fee that was in the current year result. As a consequence, the result is expected to be negatively impacted. Positive results in the Uranium Project in subsequent years could result in milestone payments and royalties under the Agreement signed with General Electric. In due course, positive developments from Translucent and Fiberbyte have the potential to create significant value and earnings for the consolidated entity.

Controlled entities acquired or disposed of

Acquired	Enertex PtyLimited
Date ofgain of control	16/4/07

11

Silex Systems Limited Supplementary Appendix 4E information

Enertex Pty Limited was incorporated in April 2007 and was dormant during the financial year. It’s contribution to the group’s profit for the year is immaterial.

Compliance and Audit

This report has been prepared in accordance with AASB Standards, other authoritative pronouncements and Urgent Issues group Consensus Views or other standards acceptable to ASX.

This report and the accounts upon which the report is based use the same accounting policies. This report gives a true and fair view of the matters disclosed.

This report is based on accounts which are in the process of being audited.

The entity has a formally constituted audit committee.

==> picture [111 x 30] intentionally omitted <==

==> picture [111 x 31] intentionally omitted <==

Signed

Date: 30 August 2007

Print name: Chris Wilks

12