ZIMI LIMITED — Annual Report 2007

Sep 30, 2007

WIND HYDROGEN LIMITED and its controlled entities

A.B.N. 13 112 682 158

ANNUAL REPORT

FOR THE YEAR ENDED 30 JUNE 2007

WIND HYDROGEN LIMITED and its controlled entities

CONTENTS

	Page
Operating and Financial Review	1
Statement of Corporate Governance	2
Directors' Report	8
Lead Auditor's Independence Declaration	15
Income Statements	16
Statements of Recognised Income and Expense	17
Balance Sheets	18
Statements of Cash Flows	19
Notes to the Financial Statements	20
Directors' Declaration	41
Independent Audit Report to the Members	42
ASX Additional Information	44
Corporate Directory	46

WIND HYDROGEN LIMITED And its controlled entities

OPERATING AND FINANCIAL REVIEW

OPERATING AND FINANCIAL REVIEW

Overview

The financial year ended 30 June 2007 has been significant in the development of Wind Hydrogen Limited ('WHL’ or the 'Company') and its controlled entities.

Major achievements include:

• Raised over $4.8 million in seed capital.

• Raised $12 million through an initial public offer of the securities of the Company subsequent to 30 June 2007.

• Submission of the development application for the Wings Law wind farm project in Scotland, United Kingdom.

• Advancement of the hydrogen balancing facility at Kilburnie in Scotland, United Kingdom

• Progression of the pre-feasibility work on the Woolsthorpe wind farm project located in Victoria, Australia.

Projects

WHL is an Australian based Renewable Energy Company with projects in Australia and the United Kingdom. WHL has a portfolio and “pipeline” of potential wind farm projects which includes the ideally located Wings Law project in Scotland.

In addition the Company currently holds patents in the United Kingdom and the United States of America for hydrogen electrolysis balancing which may enable the intermittent energy output of wind farms to be stored thus resulting in both optimised pricing, and maximised grid utilisation. Hydrogen balancing technology may also be an important aspect of the much anticipated hydrogen economy, which is being actively advanced through significant government and commercially funded programs worldwide.

Wings Law (100% interest)

Scotland, United Kingdom

This is a 48 MW project. The Company submitted a development application for this project on 27 July 2007, with regulatory approval expected in late 2007. This site has the potential for expansion and enjoys very high wind and excellent connectivity within the highly priced UK energy market.

Woolsthorpe (Option to acquire a 100% interest)

Victoria, Australia

This 40 MW project has received Federal government approval and a development application has been submitted to the State government.

Staff

The Company and Group has 7 contracted staff members.

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WIND HYDROGEN LIMITED And its controlled entities

STATEMENT OF CORPORATE GOVERNANCE

Wind Hydrogen Limited (the Company) and its board are committed to achieving and maintaining best practice in corporate governance, consistent with our sector of operations and the size and maturity of the Company. The listing rules of the Australian Stock Exchange (ASX) require the Company, as a condition of quotation, to release a pre-quotation statement to the market disclosing the extent to which they have followed the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (“ASX Principles”).

The following discloses the extent to which the Company follows the ASX Principles. The company and its controlled entities together are referred to as the Group in this statement. The board of Wind Hydrogen adopted a general Corporate Governance Policy on 23 August 2007. The Group adopted a broad Corporate Governance Framework (which can be found on our website at www.wind-hydrogen.com) as well as more detailed policies in a number of areas. These include:

• Board charter

• Code of conduct for directors and senior executives

• Audit and Risk Committee Charter

• Continuous Disclosure and Shareholder Reporting Policy

• Share Trading Policy

Set out below are the corporate governance policies and procedures adopted by the board of the Company. At regular intervals the board will review the policies and procedures adopted, as it is expected that requirements will change as the Company develops and grows in complexity. The policies in place are described under the headings of the ten ASX Principles.

Principle 1: Lay solid foundations for management and oversight Role of the board

The board has the primary responsibility for guiding and monitoring the business and affairs of the Company, including compliance with the Company’s corporate governance objectives. The board is responsible for the oversight and performance of the Company.

The board has delegated the day to day management of the Company to the managing director who, in turn, may delegate to senior management. The board’s role is set out in the board charter which establishes the relationship between the board and management and describes their respective functions and responsibilities.

The board is responsible for the oversight and performance of the Company, including matters such as:

• Evaluating, approving and monitoring the strategic and financial plans and performance objectives for the Company;

• Evaluating, approving and monitoring the annual budgets and business plans;

• Evaluating, approving and monitoring major capital expenditure, capital management and all major corporate transactions including the issue of any securities of the Company;

• Monitoring and approving all financial reports and all other reporting and external communications by the Company;

• Evaluation of board and individual director performance;

• Appointing, removing and managing the performance of, and the succession planning for, the chief executive officer and managing director;

• Reporting to shareholders on the company’s strategic direction and performance;

• Monitoring the Company’s performance in relation to best practice principles of corporate governance;

• Approving and monitoring the Company’s risk management strategy and internal controls and accountability systems and their effectiveness.

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WIND HYDROGEN LIMITED And its controlled entities

STATEMENT OF CORPORATE GOVERNANCE

Role of Management

The board has delegated the day to day management of the Company to the managing director who, in turn, may delegate responsibilities to senior management. The delegations to the chief executive officer and managing director include:

• Developing business plans, budgets and company strategies for consideration by the board and, to the extent approved by the board, implementing those plans, budgets and strategies;

• Operating the business of the Company within the parameters determined by the board and keeping the board promptly informed of all developments material to the Company and its business;

• Identifying and managing operational risks and formulating strategies for managing those risks for consideration by the board;

• Managing the Company’s financial and other reporting mechanisms and control and monitoring systems to

ensure that they capture all relevant material information on a timely basis and are functioning effectively.

Letters of appointment

Current directors of the Company have not been provided with letters of appointment. It is the intention of the Company to implement this procedure for future directors. All executives of the company are employed under contracts which outline their duties, rights and responsibilities, and entitlement on termination.

Principle 2: Structure the Board to add value

Board composition

The board has six directors, four of whom are non-executive and two of whom, being Richard Pritchard and Jeffery Bateson, are executives. The chairman of the board is the Hon. Neville Wran AC QC. The remaining members of the board are Mr Peter Bartter, Mr Robert Lees and Mr Albert Wong.

The names, date of first appointment and status of the company’s directors are set out below.

Name	Appointed	Executive	Independent	Term of appointment
Neville Wran	2007	No	No	Eligible for election 2007
Richard Pritchard	2005	Yes	No	Not subject to election
Jeffery Bateson	2006	Yes	No	Eligible for re-election 2008
Peter Bartter	2005	No	No	Eligible for re-election 2009
Robert Lees	2005	No	Yes	Eligible for re-election 2007
Albert Wong	2007	No	No	Eligible for election 2007

Director Independence

Directors are expected to bring independent views and judgment to the board’s deliberations. The board has reviewed the position and associations of each of the six directors in office and has determined that one of the directors is independent. This is a departure from the ASX Corporate Governance Guidelines in that a majority of the board is not independent and the chairman is not independent for the reason that the Company is a micro sized public company.

In making this determination the board has had regard to the independence criteria in ASX Principle 2 and other facts, information and circumstances that the board considers relevant. The board assesses the independence of new directors upon appointment and reviews their independence, and the independence of the other directors, as appropriate.

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WIND HYDROGEN LIMITED And its controlled entities

STATEMENT OF CORPORATE GOVERNANCE

Mr Robert Lees is an independent director. The five directors who do not meet the independence criteria are:

Neville Wran , the chairman, a director of Tambour Capital Pty Limited and Bligh Street Capital Partners Pty Limited. The Company has had and has a material contractual relationship with these entities respectively;

Richard Pritchard , the managing director;

Jeffery Bateson , executive director;

Peter Bartter , is a substantial shareholder in Wind Hydrogen; Albert Wong , the chairman of Tambour Capital Pty Limited and a director of Bligh Street Capital Partners Pty Limited. The Company has had and has a material contractual relationship with these entities respectively.

The board believes that it is not in the best interests of the company to move immediately to a greater number of independent directors to meet recommended best practice principles. However it intends to move towards this position over time.

Meetings of the Board

The board meets formally at least eight times a year and on other occasions, as required. On the invitation of the board, members of senior management attend and make presentations at board meetings.

Retirement and re-election

The constitution of the Company requires one third of the directors, other than the managing director, to retire from office at each annual general meeting. Directors who have been appointed by the board are required to retire from office at the next annual general meeting and are not taken into account in determining the number of directors to retire at that annual general meeting. Directors cannot hold office for a period in excess of three years (or later than the third annual general meeting following their appointment) without submitting themselves for re-election. Retiring directors may be eligible for re-election by shareholders.

Committee of the Board

The Company has elected to depart from the adoption of ASX Corporate Governance Guidelines in that it will not be forming a nomination committee or a remuneration committee for the reason that these requirements are more appropriate for larger public companies and would unduly add to the cost structure of the Company. The Company will review its position within two years of its listing on ASX.

Audit and Risk Committee

Membership of this Committee is:

Robert Lees (Chair) Albert Wong Neville Wran

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WIND HYDROGEN LIMITED And its controlled entities

STATEMENT OF CORPORATE GOVERNANCE

The primary role of the Audit and Risk Committee is to monitor and review the effectiveness of the Company’s control environment in the areas of operational risk, legal/regulatory compliance and financial reporting. It will advise and assist the Board to discharge its responsibility to exercise due care, diligence and skill in relation to:

• reporting of financial information to users of financial reports, in particular the quality and reliability of such information;

• assessing the consistency of disclosures in the financial statements with other disclosures made by the Company to the financial markets, governmental and other public bodies;

• review and application of accounting policies;

• financial management;

• review of internal and external audit reports to ensure that where weaknesses in controls or procedures have been identified, appropriate and prompt remedial action is taken by management;

• evaluation of the Company’s compliance and risk management structure and procedures, internal controls and ethical standards;

• review of business policies and practices;

• conduct of any investigation relating to financial matters, records or accounts, and to report those matters to the Board;

• protection of the Company’s assets; and

• compliance with applicable laws, regulations, standards and best practice guidelines.

The Audit and Risk Committee was appointed on 23 August 2007 and no meetings have been held.

The charter for the committee is set out in the Corporate Governance Policy noted above. The Company has departed from the ASX Corporate Governance Guidelines in that a majority of the committee is not independent for the reason that the Company has only one independent director.

Principle 3: Promote ethical and responsible decision-making

The Company has adopted a code of conduct for directors and senior executives to guide those parties as to the practices necessary to maintain confidence in the Company’s integrity and the reporting of unethical practices. The code is published on the Company’s website.

Through its oversight of Company activities, the board ensures that best practice standards of ethics and integrity in all business dealings and operations are maintained, including the company’s interactions with its shareholders, employees, business partners, customers, suppliers, and the community.

The Company has adopted a policy on Share Trading, for employees and directors or their related entities. Employees, executives and directors of the Company may not trade in the Company’s shares when in possession of inside information.

Principle 4: Safeguard integrity in financial reporting

CEO and CFO declaration:

Consistent with ASX Principle 4, the Company’s financial report preparation and approval process involves both the managing director and the chief financial officer providing a written statement to the board that,

“to the best of their knowledge and belief, the Company’s financial report presents a true and fair view, in all

material respects, of the Company’s financial condition and operating results and is in accordance with applicable accounting standards.”

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WIND HYDROGEN LIMITED And its controlled entities

STATEMENT OF CORPORATE GOVERNANCE

Audit committee, governance and independence

As outlined under Principle 2, the board has established an Audit and Risk Committee, with a formal charter, to verify the integrity of the Company’s financial reporting. This committee is structured according to the guidelines set down in the ASX Principles, except that there is not a majority of independent directors. The Committee reports to the board. As part of the Company’s commitment to safeguarding integrity in financial reporting, the Company has implemented procedures and policies to monitor the independence and competence of the Company’s external auditors.

Appointment of auditors

The Company’s current external auditors are KPMG. The effectiveness, performance and independence of the external auditors are reviewed by the Audit Committee. If it becomes necessary to replace the external auditors for performance or independence reasons, the audit committee will then formalise a procedure and policy for the selection and appointment of new auditors. It is a requirement, given that the company is listed, that the audit engagement partner is rotated at least every five years.

Principle 5: Make timely and balanced disclosure

The board has established written Company policies on Continuous Disclosure (including requirements for approval for release of information by the Company), and on Shareholder Communications, to promote effective communication with its shareholders.

In addition to its disclosure obligations under the ASX Listing Rules, the Company communicates with its shareholders through a number of means including:

• annual and half-yearly reports, including material presented at the Annual General Meeting

• quarterly shareholder updates released to the ASX, sent by email to shareholders and others who so request, and placed on the Company’s website; and

• media releases, public announcements and investor briefings

All material disclosed, where feasible, and as authorised by the Managing Director, is posted to the Company’s website.

Principle 6: Respect the rights of shareholders

The Company has a positive and formal strategy to communicate with shareholders and actively promote shareholder involvement in the Company. This is outlined above. It aims to continue to increase and improve the information available to shareholders on its website. All company announcements, presentations to analysts and other significant briefings will be posted on the company’s website after release to the Australian Stock Exchange.

Consistent with ASX Principle 6 and CLERP 9, KPMG will attend, and are available to answer questions at, the Company’s annual general meetings. The Company encourages shareholders to register for receipt of announcements and updates electronically.

Principle 7: Recognise and manage risk

Consistent with ASX Principle 7, the Company is committed to the identification, monitoring and management of risks associated with its business activities and has established, as part of its management and reporting systems, a number of risk management controls. The company has adopted a general Risk Management Statement addressing the profile of risk relevant to the Company given its operational context (posted to the Company’s website) supported by a set of internal procedures. Approval of detailed procedures and monitoring of their implementation has been delegated to the Audit and Risk Committee of the board.

In particular, in accordance with ASX Principle 7, the Managing Director and the Chief Financial Officer provide the board with an annual written statement that:

• “the statement given with respect to the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and

• the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects”.

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WIND HYDROGEN LIMITED And its controlled entities

STATEMENT OF CORPORATE GOVERNANCE

The risk profile can be expected to change and procedures adapted as the Company’s business develops and it grows in size and complexity. Regular review by the Audit and Risk Committee will ensure that procedures adopted continue to be appropriate.

The Company has not established an internal audit function due to its small size.

Principle 8: Encourage enhanced performance

The Chairman of the Company will conduct an internal performance evaluation of the board subsequent to the end of the financial year. Performance reviews of all key executives will be carried out prior to the end of the financial year and the results used in setting performance-related pay for the then current year and remuneration levels for the following year. It is intended that the details of evaluation procedures will be made available on the Company’s web site during the 2007/8 financial year.

No induction process for board members has been established but will be implemented as new directors unfamiliar with the company or its industry context are appointed in the future. The board is kept well informed by the CEO and senior executives on developments within the Company and in the broader sector within which the Company operates. Responsibility for governance issues is delegated to the Managing Director and the Company Secretary, reporting to the board.

Principle 9: Remunerate fairly and responsibly

The aggregate remuneration of Directors is determined by Shareholders, apart from payments to executive Directors, and the Board determines individual Directors’ remuneration. The Company’s remuneration policy is to balance the need to provide industrycompetitive remuneration in order to attract and retain high quality personnel, while ensuring effective use of shareholder funds.

The Company has not formed a nomination committee because of the Company’s size which is small enough for the whole Board to efficiently address the issue of board competencies.

At this time, Non-executive directors are remunerated by fees only. However, the Company has elected to depart from the adoption of ASX Corporate Governance Guidelines in that it plans to convene a meeting of shareholders for the purpose of considering the issue of options to non executive Directors as well as executive Directors. The Board considers it important to provide incentives for Directors as well as Executives to deliver the business plan detailed in the prospectus.

No schemes for retirement benefits (other than statutory contributions to a superannuation scheme where relevant) or termination payments are in place.

Principle 10: Recognise the legitimate interests of stakeholders

As outlined above under Principle 3, the board has established conduct guidelines for staff and directors. The Company’s broad Corporate Governance Framework, posted on the company’s website, contains general principles for corporate conduct to ensure compliance with legal and other obligations to stakeholders. Performance against these principles is monitored by the board.

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

DIRECTORS’ REPORT

The directors present their report together with the financial report of Wind Hydrogen Limited ('the Company') and of the Group, being the Company and its controlled entities, for the financial year ending 30 June 2007 and the auditor’s report thereon.

Directors

The names and particulars of the directors of the Company at any time during or since the end of the financial period are:

The Hon. Neville Wran AC QC Chairman

Chairman since 1 May 2007.

Neville Wran is a Queen’s Counsel. He was premier of New South Wales from 1976 until his resignation in 1986. He is a director of a number of companies including Cabcharge Australia Limited. From 1986 to 1991 he was Chairman of CSIRO. Mr Wran represented Australia as a Member of the Eminent Persons Group (EPG) of APEC (Asia Pacific Economic Cooperation) 1993-1995. He is a Governor of the Australia-Israel Chamber of Commerce, President of the Trans-Tasman Business Circle, Chairman of the Victor Chang Cardiac Research Institute and Honorary Trustee of the Lionel Murphy Foundation and maintains a broad range of community interests. Neville Wran is over the age of 72 and is required to be re-elected as a director each year.

Richard Wyn Pritchard, Managing Director

Director since 21 November 2005.

Richard Pritchard has been involved in the development of WHL since its inception approximately 2 years ago. Richard is a former advisor for Macquarie Bank. Prior to his career in the financial sector, he was employed as a civil engineering senior project manager responsible for numerous major infrastructure projects in Australia. Richard is a graduate of the University of Brighton (UK) with an Honours degree in Civil Engineering. He is a member of the Institute of Engineers Australia, and a graduate Member of the Australian Institute of Company Directors.

Peter John Bartter, Non-executive Director

Director since 10 March 2005.

Peter Bartter is Chairman of Bartter Enterprises Pty Ltd., which owns and operates the Steggles brand, one of Australia’s two largest wholesale chicken producers, employing over 4,500 people in Australia. Peter Bartter was the founder and has headed, with his brother, Bartter Enterprises since the 1960’s. Peter Bartter is highly regarded for his knowledge and expertise within the industry and is a member of the Australian Poultry Industry Association and a Governor of the Sydney University Poultry Research Foundation. Peter is known for his wide support of industry and commerce throughout New South Wales and Australia and has recently been appointed to the NSW Agricultural Ministerial Advisory Council. Peter is also a Member of the Australian Institute of Company Directors.

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

Dr. Jeffery Bateson, Executive Director

Director since 13 June 2006.

Jeffery Bateson has held several senior management and executive board positions in the energy industry. He was Finance Director/CFO for the UK, FTSE-100 energy utility, Innogy plc; Group General Manager for China Light & Power responsible for strategic and business development; and was with County NatWest Corporate Finance specialising in utilities work. Prior to these positions, Jeffery held senior executive positions in government including Chief Economist of the NSW Treasury where he was particularly involved in energy sector reform. Jeffery has a PhD in Economics and Finance, a Masters of Engineering in Nuclear Engineering, and BSc with Honours in Physics. He has a diploma in Company Directorship and is a Fellow of the Australian Institute of Company Directors.

Robert Edward Lees, Non-executive Director

Director since 14 December 2005.

Robert Lees has provided Company Secretarial services to small ASX listed companies and worked on a number of IPO’s and back door listings over the last eight years and is currently Company Secretary of three ASX Listed Companies. Prior to this he has a long history of private practice small business advice along with working as a financial controller of a number of medium sized enterprises. Robert is a graduate of the University of Technology, Sydney, holding a Bachelor of Business (Accounting) and a Graduate Diploma in Data Processing. He also holds a Graduate Diploma in Corporate Governance and is a member of the Institute of Chartered Accountants in Australia.

Albert Yue-Ling Wong, Non-executive Director

Director since 1 May 2007.

Albert Wong is an investment banker with over 25 years experience in the finance industry. He was admitted as a Member of the Australian Stock Exchange in 1988 and was the principal of Intersuisse Limited until 1995. Currently, Albert Wong is the Chairman of Tambour Group Limited and Pluton Resources Limited. His other directorships include UNSW Foundation Limited, Ian Thorpe’s Fountain of Youth Trust, Committee Member of the Messel Endowment Capital Campaign and Life Governor of the Science Foundation for Physics at the University of Sydney. Mr Wong is a graduate from the University of New South Wales holding a Bachelor of Commerce. He is a Fellow of the Financial Services Institute of Australasia, Master Stockbroker of the Securities & Derivatives Industry Association and a Fellow of the Australian Institute of Company Directors.

Julie Garland McLellan, Non-executive Director

Director since 8 March 2006. Resigned 19 January 2007.

Julie is the former managing director of Gamesa Energy Australia and has experience of acquiring and developing wind farms in Australia. She has worked as Associate Director for McLennan Magasanik Associates (a leading energy economics consultancy), as General Manager Energy and Natural Resources for KPMG and as a strategic planner for (then) BHP. She has a BSc (hons) in Civil Engineering, an executive MBA, a Graduate Diploma in Applied Finance and Investment, a diploma in Company Directorship and an Advanced Diploma in Company Directorship. Julie has served on the boards of Melbourne Water, City West Water, Victorian Energy Networks Corporation, Melbourne University Engineering Foundation, Victorian Minerals Council, Hassall & Associates, Hats Holdings, Approva Inc international advisory board and Australian Institute of Company Directors NSW Council.

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

Warwick James Pearce, Company Secretary

Company Secretary since January 2007

Mr Pearce served as the Assistant Director of Corporate Finance at the Australian Securities and Investments Commission. He has worked as an in-house legal counsel and with KPMG as both an auditor and tax consultant. He is a member of the Institute of Chartered Accountants in Australia and is a Solicitor of the Supreme Court of New South Wales. Warwick is a director of the New Millennium Fund, a Pooled Development Fund providing development capital for Australia’s biotechnology sector. He is also the Company secretary of Tambour Group Limited, which plans to list on the Australian Securities Exchange this financial year.

Directors' Meetings

The number of directors' meetings held and number of meetings attended by each of the directors of the Company, while they were a director, during the year are:

Director		Board Meetings
	Held	Attended
The Hon. Neville K. Wran AC-QC	4	3
Dr. Jeffery Bateson	21	20
Richard W. Pritchard	21	20
Peter J. Bartter	21	20
Robert E. Lees	21	18
Albert Y. L. Wong	4	4
Julie Garland McLellan	14	13

The remuneration and audit committee did not formally meet during the year ended 30 June 2007.

Directors' Interests

At the date of this report, the beneficial interests of each director of the Company in the issued share capital of the Company are:

	Held at		Share Based		Held at
Specified directors	1 July 2006	Purchased	Payment	Sold	30 June 2007
The Hon. Neville K. Wran	-	500,000	-	-	500,000
Richard W. Pritchard	6,362,875	3,567,077	275,000	(607,500)	9,597,452
Dr. Jeffery Bateson	-	1,763,750	-	-	1,763,750
Peter J. Bartter	7,025,975	8,894,053	368,077	-	16,288,105
Julie Garland McLellan	-	-	-	-	-
Robert E. Lees	-	200,000	67,500	-	267,500
Albert Y. L. Wong	-	500,000	-	-	500,000

The beneficial interests in share capital of the Company outlined above have been adjusted to reflect the 1-for-2 consolidation of capital which occurred on 17 May 2007.

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

Remuneration Report

The policy of remuneration of directors and senior executives is to ensure the remuneration package properly reflects the person's duties and responsibilities, and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. The Board is responsible for reviewing its own performance. The non-executive directors are responsible for evaluating the performance of the executive directors who, in turn, evaluate the performance of all other senior executives. The evaluation process is intended to assess the Company's business performance, whether long term strategic objectives are being achieved and the achievement of individual performance objectives

The remuneration disclosed below represents the cost to the Company for the services provided under these arrangements.

No directors or executives receive performance related remuneration and there are no service contracts.

Details of the nature and amount of each major element of the remuneration of each director of the Company and Group are:

Year Executive directors Richard W. Pritchard 2007 2006 Dr. Jeffery Bateson 2007 2006 Non-executive directors The Hon. Neville K. Wran 2007 2006 Peter J. Bartter 2007 2006 Julie Garland McLellan 2007 2006 Robert E. Lees 2007 2006 Albert Y. L. Wong 2007 2006 Declan N. Pritchard 2007 2006 Total, all key management personnel 2007 2006	Primary Fees Share Based Payments Total $ $ $ 60,000 85,615 145,615 - - - 45,470 71,500 116,970 1,500 - 1,500 5,000 - 5,000 - - - 56,916 95,700 152,616 90,699 - 90,699 9,100 - 9,100 9,355 - 9,355 24,039 17,550 41,589 13,613 - 13,613 5,000 - 5,000 - - - - - - 13,986 - 13,986
	205,525 270,365 475,890
	129,153 - 129,153

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

The Company issued 121,793 fully paid ordinary shares with fair value of $31,666 to Richard Pritchard as consideration for consulting fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

In addition 207,500 fully paid ordinary shares with a fair value of $53,950 were transferred to Richard Pritchard from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to a recent share issue.

The Company issued 118,077 fully paid ordinary shares with fair value of $30,700 to Peter Bartter as consideration for consulting fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

In addition 250,000 fully paid ordinary shares with a fair value of $65,000 were transferred to Peter Bartter from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to a recent share issue.

The Company issued 1,500,000 fully paid ordinary shares with fair value of $75,000 as consideration for underwriting fees to Tambour Capital Pty Limited, an entity associated with The Hon. Neville Wran and Albert Wong. The fair value at 5 cents per share was determined by reference to the associated rights issue.

During the year 275,000 fully paid ordinary shares with a fair value of $71,500 were transferred to Dr Jeffery Bateson from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to a recent share issue.

During the year 67,500 fully paid ordinary shares with a fair value of $17,550 were transferred to Robert Lees from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to a recent share issue.

There are no senior executives of the Company or Group that are not directors and no options or bonuses were granted to directors or senior executive officers as part of their remuneration.

Principal Activities

The Company and Group are involved in the acquisition, development, production and operation of wind farms and no significant change in the nature of those activities has occurred during the year.

Operating and Financial Review

The operating loss of the Group for the year ended 30 June 2007 after income tax was $5,315,628 (2006 $7,977,273).

A review of the Company’s and Group's operations for the year is set out in the Operating and Financial Review.

Dividends

The directors do not recommend the payment of a dividend in respect of the year ended 30 June 2007. No dividends have been paid or declared during the financial year.

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

State of Affairs

In the opinion of the directors, significant changes in the state of affairs of the Group that occurred during the year ended 30 June 2007 as follows:

• Raised over $4.8 million in seed capital up to 30 June 2007.

Environmental Regulations

The Group’s operations are subject to significant environmental regulations under both Commonwealth and State legislation in relation to its activities in Australia as well as similar regulatory regimes in other countries.

The board of directors regularly monitors compliance with environmental regulations. The directors are not aware of any significant breaches of these regulations during the period covered by this report.

Events Subsequent to Balance Date

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years, other than as set out below.

Subsequent to 30 June 2007, the company has raised $12,005,203 by the issue of 60,026,015 fully paid ordinary shares through an initial public offer of its securities. The Company’s securities listed on the Australian Securities Exchange on 10 September 2007.

Likely Developments

Information as to likely developments in the operations of the Group and the expected results of those operations in subsequent years has not been included in this report because disclosure of this information would be likely to result in unreasonable prejudice to the Group.

Indemnification of Officers and Auditors

During or since the end of the financial year, the Company has not indemnified or made a relevant agreement to indemnify an officer or auditor of the Company against a liability incurred by such an officer or auditor. In addition, the Company has not paid or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an officer or auditor.

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WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS' REPORT

Non-audit Services

During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties.

The board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the board to ensure they do not impact the integrity and objectivity of the auditor; and

• the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the year are set out below.

Statutory audit: - audit and review of financial reports - Australia - audit of financial reports – overseas KPMG firm Other services - investigating accountant’s report - Australia - taxation consultancy services – Australia - taxation consultancy services – overseas KPMG firm Total for all KPMG services Lead auditor’s independence declaration	Consolidated Consolidated 2007 2006 $ $ 45,000 40,000 67,341 49,677
	112,341 89,677 25,076 - 9,648 - 22,447 -
	57,171 -
	169,512 89,677

The lead auditor’s independence declaration is set out on page 15 and forms part of the directors’ report for the financial year ended 30 June 2007.

Signed at Sydney this 28[th] day of September 2007 in accordance with a resolution of the Board of Directors:

The Hon. Neville K. Wran QC AC Chairman

14

==> picture [87 x 36] intentionally omitted <==

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To: the Directors of Wind Hydrogen Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the year ended 30 June 2007, there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [86 x 47] intentionally omitted <==

KPMG

==> picture [98 x 48] intentionally omitted <==

S.J. Board Partner

28 September 2007

15

WIND HYDROGEN LIMITED and its controlled entities

INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Notes Consultants expenses Option fees Legal expenses Legal settlement Audit and taxation fees 2 Impairment loss – intangible asset 2 Impairment loss – intercompany loan 2,5 Other expenses from ordinary activities Results from operating activities Financial income 2 Financial expenses Net financing income Loss before income tax Income tax expense 3 Loss for the year Basic loss per share attributable to ordinary equity holders 10 Diluted loss per share attributable to ordinary equity holders 10	Consolidated Company 2007 2006 2007 2006 $ $ $ $ (3,437,638) (2,152,229) (3,075,239) (152,477) - (293,599) - (125,000) (683,931) (402,919) (534,426) (101,391) (950,000) - (950,000) - (169,512) (89,677) (79,724) (40,000) - (3,702,432) - - - - (1,010,780) (5,522,466) (91,259) (1,371,022) (106,093) (1,060,402)
	(5,332,340) (8,011,878) (5,756,262) (7,001,736) 36,138 34,605 33,313 31,270 (19,426) - - -
	16,712 34,605 33,313 31,270
	(5,315,628) (7,977,273) (5,722,949) (6,970,466) - - - -
	(5,315,628) (7,977,273) (5,722,949) (6,970,466)
	(11.6)cents (58.0)cents (11.6)cents (58.0)cents

The notes are an integral part of these consolidated financial statements.

.

16

WIND HYDROGEN LIMITED and its controlled entities

STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 30 JUNE 2007

Foreign Currency Translation differences for foreign operations Loss for the year Total recognised income and expense for the year Attributable to: Equity holders of the Company Total recognised income and expense for the year	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 21,623 - - - (5,315,628) (7,977,273) (5,722,949) (6,970,466)
	(5,294,005) (7,977,273) (5,722,949) (6,970,466)
	(5,294,005) (7,977,273) (5,722,949) (6,970,466)
	(5,294,005) (7,977,273) (5,722,949) (6,970,466)

Other movements in equity arising from transactions with owners as owners are set out in note 9.

The notes are an integral part of these consolidated financial statements.

17

WIND HYDROGEN LIMITED and its controlled entities

BALANCE SHEETS AS AT 30 JUNE 2007

Notes Current assets Cash and cash equivalents Trade and other receivables 4 Total current assets Non-current assets Investments 5 Fixed assets 6 Intangible assets 7 Other Total non-current assets Total assets Current liabilities Trade and other payables 8 Total current liabilities Non-current liabilities Trade and other payables 8 Total non-current liabilities Total liabilities Net assets/(liabilities) Equity Issued capital 9 Foreign currency translation reserve Retained losses 11 Total equity/(deficiency)	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 900,591 852,482 851,671 848,192 185,379 167,612 147,423 36,494
	1,085,970 1,020,094 999,094 884,686
	- - - - 21,627 4,350 - - - - - - 152,899 2 152,897 -
	174,526 4,352 152,897 -
	1,260,496 1,024,446 1,151,991 884,686
	1,739,953 2,041,213 1,053,585 902,107
	1,739,953 2,041,213 1,053,585 902,107
	- 7,461 - -
	- 7,461 - -
	1,739,953 2,048,674 1,053,585 902,107
	(479,457) (1,024,228) 98,406 (17,421)
	12,791,821 6,953,045 12,791,821 6,953,045 21,623 - - - (13,292,901) (7,977,273) (12,693,415) (6,970,466)
	(479,457) (1,024,228) 98,406 (17,421)

The notes are an integral part of these consolidated financial statements.

18

WIND HYDROGEN LIMITED and its controlled entities

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2007

Notes Cash flows from operating activities Cash payments in the course of operations Interest received Net cash used in operating activities 12 Cash flows from investing activities Loans to controlled entities Payments for Plant & Equipment Cash acquired on acquisition of controlled entities Net cash from investing activities Cash flows from financing activities Proceeds from issue of shares Interest paid Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year	Consolidated Company 2007 2006 2007 2006 $ $ $ $ (4,819,740) (2,727,195) (3,902,464) (533,657) 36,138 34,605 33,313 31,270
	(4,783,602) (2,692,590) (3,869,151) (502,387)
	- - (1,010,780) (2,192,466) (32,273) - - - - 2,027 - -
	(32,273) 2,027 (1,010,780) (2,192,466)
	4,883,410 3,543,045 4,883,410 3,543,045 (19,426) - - -
	4,863,984 3,543,045 4,883,410 3,543,045
	48,109 852,482 3,479 848,192 852,482 - 848,192 -
	900,591 852,482 851,671 848,192

The notes are an integral part of these consolidated financial statements.

19

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. REPORTING ENTITY AND BASIS OF PRESENTATION

Wind Hydrogen Limited (the 'Company') is a company domiciled in Australia. The consolidated financial report of the Company for the year ended 30 June 2007 comprise the Company and its subsidiaries (together referred to as the “Group”).

The financial report was authorised for issue by the directors on 28 September 2007.

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASB including Australian interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

The consolidated financial report also complies with the IFRS and interpretations adopted by the International Accounting Standards Board.

Going Concern

The financial report has been prepared on a going concern basis which contemplates the realisation of assets and settlement of liabilities in the ordinary course of business.

Subsequent to year end the group raised an amount of $12,005,000 by the issue of fully paid shares from an initial public offer.

Basis of measurement

The financial statements have been prepared on the historical cost basis.

Functional and presentation currency

These financial statements are presented in Australian dollars, which is the Company’s functional currency.

Comparative reporting period

The Company was incorporated on 10 March 2005 and the comparative financial statements have been prepared for the period 10 March 2005 to 30 June 2006.

Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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 and in any future periods affected.

20

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by Group entities.

The entity has elected to early adopt the following accounting standards and amendments:

• AASB 101 Presentation of Financial Statements (October 2006)

• 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments

New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2007, but have not been applied in preparing this financial report:

• AASB 7 Financial Instruments: Disclosures (August 2005) replaces the presentation requirements of financial instruments in AASB 132. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007, and will require extensive additional disclosures with respect to the Group’s financial instruments and share capital.

• AASB 2005-10 Amendments to Australian Accounting Standards (September 2005) makes consequential amendments to AASB 132 Financial Instruments: Disclosure and Presentation, AASB 101 Presentation of Financial Statements, AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings Per Share, AASB 139 Financial Instruments: Recognition and Measurement, AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards, AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts arising from the release of AASB 7. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007 and is expected to only impact disclosures contained within the financial report.

• AASB 8 Operating Segments replaces the presentation requirements of segment reporting in AASB 114 Segment Reporting. AASB 8 is applicable for annual reporting periods beginning on or after 1 January 2009 and is not expected to have an impact on the financial results of the Group as the standard is only concerned with disclosures.

• AASB 2007-2 Amendments to Australian Accounting Standards arising from AASB Interpretation 12 makes amendments to AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, AASB 117 Leases, AASB 118 Revenue, AASB 120 Accounting for Government Grants and Disclosures of Government Assistance, AASB 121 The Effects of Changes in Foreign Exchange Rates, AASB 127 Consolidated and Separate Financial Statement, AASB 131 Interest in Joint Ventures, and AASB 139 Financial Instruments: Recognition and Measurement. AASB 2007-2 is applicable for annual reporting periods beginning on or after 1 January 2008 and must be applied at the same time as Interpretation 12 Service Concession Arrangements.

21

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

• AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 makes amendments to AASB 5 Non-current Assets Held for Sale and Discontinued Operations, AASB 6 Exploration for and Evaluation of Mineral Resources, AASB 107 Cash Flow Statements, AASB 119 Employee Benefits, AASB 127 Consolidated and Separate Financial Statements, AASB 134 Interim Financial Reporting, AASB 136 Impairment Assets. AASB 2007-3 is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 8 Operating Segments. This standard is only expected to impact disclosures contained within the financial report.

• Interpretation 10 Interim Financial Reporting and Impairment prohibits the reversal of an impairment loss recognised in a previous interim period in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. Interpretation 10 will become mandatory for the Company’s 2008 financial statements, and will apply to goodwill, investments in equity instruments, and financial assets carried at cost prospectively from the date that the Company first applied the measurement criteria of AASB 136 and AASB 139 respectively (i.e. 1 July 2004 and 1 July 2005, respectively). The potential impact on the Group’s financial report has not yet been determined.

• AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 and AASB 138 and Interpretations 1 and 12]. AASB 2007-3 is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 123 Borrowing Costs. The potential impact on the Group’s financial report has not yet been determined.

• AASB 2007-7 Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107 and AASB 128] is applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction with AASB 123 Borrowing Costs. The potential impact on the Group’s financial report has not yet been determined.

• AASB 123 Borrowing Costs (revised March 2007) requires the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use. All other borrowing costs are immediately recognised as expenses. AASB 123 is applicable for annual reporting periods beginning on or after 1 January 2009. The potential impact on the Group’s financial report has not yet been determined.

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Investments in subsidiaries are carried at their cost of acquisition in the Company’s financial statements.

22

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Transactions eliminated on consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the associates and jointly controlled entities or, if not consumed or sold by the associate or jointly controlled entity, when the consolidated entity's interest in such entities is disposed of.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits.

Trade and other receivables

Trade and other receivables are stated at their amortised cost less impairment losses.

Intercompany loans

Loans made to controlled entities which are interest free, unsecured, of no fixed term, and repayable only out of potential future profits are classified as investments.

Plant and equipment

Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. The residual value, useful life and depreciation method applied to an asset are reassessed at least annually.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Office equipment, furniture and fittings are depreciated at rates between 10% and 50% per annum.

Intangible assets

All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment.

Negative goodwill arising on an acquisition is recognised directly in profit or loss.

Other intangible assets that are acquired by the consolidated entity are stated at cost less accumulated amortisation (see below) and impairment losses.

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

23

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.

The recoverable amount of assets is the greater of their net selling price 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 an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Trade and other payables

Trade and other payables are stated at their amortised cost, are non-interest bearing and are normally settled within 60 days.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.

Taxation

Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The initial recognition of assets or liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future are temporary differences are not provided for. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

24

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Goods and services tax/value added tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax ('GST') or value added tax (‘VAT’), except where the amount of GST/VAT incurred is not recoverable from the taxation authority. In these circumstances, the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as a current asset or liability in the statement of financial position.

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

Share-based payment transactions

The grant date fair value of shares is recognised as an expense, with a corresponding increase in equity, over the period in which the recipients become unconditionally entitled to the shares.

Segment reporting

A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

Employee benefits

Liabilities for employee benefits for wages, salaries, annual leave and sick leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees’ services provided to reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax.

Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year.

Share capital transaction costs

Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.

25

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Nonmonetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested, dividend income and foreign exchange gains and losses. Borrowing costs are expensed as incurred and included in net financing costs.

Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established which in the case of quoted securities is ex-dividend date.

Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Property, plant and equipment

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.

Trade and other receivables

The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

26

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

2. LOSS FROM ORDINARY ACTIVITIES Loss from ordinary activities includes the following items of revenue and expense: Depreciation expense Wages and salaries Impairment loss – intangible asset Impairment loss – intercompany loan Consultants and administration expenses Option fees Legal expenses Legal settlement – Mt Gellibrand Wind Farm project Interest revenue Auditor’s remuneration (KPMG) - audit and review of financial reports - Australia - audit of financial reports – overseas KPMG firm Other services (KPMG) - investigating accountants report - Australia - taxation consultancy services - Australia - taxation consultancy services - overseas KPMG firm Total remuneration	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 14,996 - - - (3,437,638) - (683,931) (950,000) 36,138 - 23,341 (3,702,432) - (2,152,229) (293,599) (402,919) - 34,605 - - - (1,010,780) (3,675,239) - (534,426) (950,000) 33,313 - 13,986 - (5,522,466) (152,477) (125,000) (101,391) - 31,270 45,000 67,341 40,000 49,677 45,000 - 40,000 -
	112,341 89,677 45,000 40,000
	25,076 9,648 22,447 - - - 25,076 9,648 - - - -
	57,171 - 34,724 -
	169,512 89,677 79,724 40,000

27

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

3. INCOME TAX EXPENSE Numerical reconciliation between tax expense and pre-tax net profit Loss before tax – continuing operations Income tax using the domestic corporation tax rate of 30% Increase in income tax expense due to: - Non-deductible expenses - Impairment loss – tax benefit not recognised - Unrealised foreign exchange (gains) – tax benefit not recognised - Tax assets relating to losses not recognised Income tax expense – current and deferred Unrecognised deferred tax assets have not been recognised in respect of the following items: Taxable temporary differences (net) Tax losses Net	Consolidated Company 2007 2006 2007 2006 $ $ $ $ (5,315,628) (7,977,273) (5,722,949) (6,970,466) (1,594,688) (2,393,182) (1,716,885) (2,091,140) 498,700 261 498,700 261 - 1,110,730 303,234 1,656,740 - (2,385) - (2,385) 1,095,988 1,284,576 914,951 436,524
	- - - -
	1,110,730 1,110,730 1,959,974 1,656,740 2,380,564 1,284,576 1,351,475 436,524
	3,491,294 2,395,306 3,311,449 2,093,287

The taxable temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefits from.

4. RECEIVABLES Current GST and VAT receivable Other	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 185,379 89,028 147,423 23,494 - 78,584 - 13,000
	185,379 167,612 147,423 36,494

28

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

5. INVESTMENTS Non-current Investment in controlled entities, at cost Less impairment losses	Consolidated Company 2007 2006 2007 2006 $ $ $ $ - - 6,533,246 5,522,466 - - (6,533,246) (5,522,466)
	- - - -

Impairment loss

At 30 June 2007, the directors assessed the recoverability of investments in controlled entities. The controlled entities are in the pre development phase of operations and as a result the directors are unable to prepare discounted cash flow calculations to support the recoverability of these investments. The full carrying value of these investments has been impaired in the Company’s financial statements. The impairment loss recognised during the year ended 30 June 2007 was $1,010,780 (2006: $5,522,466).

6. FIXED ASSETS Office equipment Accumulated depreciation Office Equipment Balance at 10 March 2005 Additions – net business combination Disposals Depreciation Balance at 30 June 2006 Balance at 1 July 2006 Additions Disposals Depreciation Balance at 30 June 2007		Consolidated Company 2007 2006 2007 2006 $ $ $ $ 75,496 43,223 - - (53,869) (38,873) - -
		21,627 4,350 - -
		Consolidated Company - - 4,350 - - - - - 4,350 - 4,350 - 32,273 - - - (14,996) - 21,627 -

29

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

7. INTANGIBLE ASSETS Project rights and intellectual property, at cost Less impairment losses	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 3,702,432 3,702,432 - - (3,702,432) (3,702,432) - -
	- - - -

Impairment loss

At 30 June 2006, the directors assessed the recoverability of intangible assets acquired during the period. These assets related to rights in relation to wind farm projects and rights with respect to certain patents. The wind farm projects are in the pre development phase of operations and as a result the Group is still assessing the commercial development of these projects. In addition the Group does not have approvals to develop these wind farms. As a result the directors are unable to prepare discounted cash flow calculations to support the recoverability of these assets. With respect to the patent rights the commercialisation of this intellectual property has yet to be assessed and accordingly the directors are unable to prepare discounted cash flow calculation supporting the commercialisation of this intellectual property. The full carrying value of these assets has been impaired in the Group’s comparative financial statements.

8. TRADE AND OTHER PAYABLES Current Non-current 9. ISSUED CAPITAL 84,503,127 fully paid ordinary shares ( 2006: 28,158,475)	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 1,739,953 2,041,213 1,053,585 902,107
	- 7,461 - -
	12,791,821 6,953,045 12,791,821 6,953,045

30

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Fully paid ordinary shares Balance at beginning of financial year Issue of shares Fair value of shares transferred as executive compensation(1) Costs of share issue – underwriting fees Balance at end of financial year	Consolidated Company 2007 2006 No. $ No. $ 28,158,475 56,344,652 - - 6,953,045 5,755,776 208,000 (125,000) - 28,158,475 - - - 6,953,045 - -
	84,503,127 12,791,821 28,158,475 6,953,045

The number of shares outlined above has been adjusted to reflect the 1 for 2 share consolidation on 17 May 2007.

• (1) 800,000 ordinary shares had been allotted in prior periods to a director to hold in trust as incentive shares. During the year these shares were transferred as consideration for fees owing to directors.

Fully paid ordinary shares carry one vote per share and carry the right to dividends. In the event of a winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any proceeds on liquidation. Ordinary shares have no par value.

During the year:

• The Company issued 50,266,320 fully paid ordinary shares for cash totalling $4,883,410. There were no amounts unpaid on the shares issued.

• The Company issued 38,462 fully paid ordinary shares with fair value of $10,000 as consideration for legal fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

• The Company issued 250,000 fully paid ordinary shares with fair value of $65,000 as consideration for legal fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

• The Company issued 121,793 fully paid ordinary shares with fair value of $31,666 as consideration for consulting fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

• The Company issued 118,077 fully paid ordinary shares with fair value of $30,700 as consideration for consulting fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

• The Company issued 3,000,000 fully paid ordinary shares with fair value of $600,000 as part settlement of a claim against the Company filed by the vendors of the Mt. Gellibrand project. The fair value at 20 cents per share was determined by reference to a recent share placement.

• The Company issued 2,500,000 fully paid ordinary shares with fair value of $125,000 as consideration for underwriting fees. The fair value at 5 cents per share was determined by reference to the associated rights issue.

• The Company issued 50,000 fully paid ordinary shares with fair value of $10,000 as consideration for consulting fees. The fair value at 20 cents per share was determined by reference to a recent share placement.

• There was a one for two consolidation of capital on 17 May 2007.

31

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Translation Reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

10. EARNINGS PER SHARE Net loss for the year Number of ordinary shares Opening balance Effect of shares issued in March 2005 Effect of shares issued in April 2005 Effect of shares issued in May 2005 Effect of shares issued in June 2005 Effect of shares issued in September 2005 Effect of shares issued in October 2005 Effect of shares issued in April 2006 Effect of shares issued in June 2006 Effect of shares issued in 15 Sept 2006 Effect of shares issued in 29 Nov 2006 Effect of shares issued in 20 Feb 2007 Effect of shares issued in 23 Feb 2007 Effect of shares issued in 27 Feb 2007 Effect of rights issue in 4 Apr 2007 Effect of rights issue in 16 Apr 2007 Effect of shares issued in 17 May 2007 Weighted average ordinary shares at year end	Consolidated 2007 2006 $ $ (5,315,628) (7,977,273)
	28,158,475 3,715,520 2,356,691 1,043,836 295,917 80,833 7,572,323 2,405,676 6,027 2 6,335,530 3,111,176 523,190 592,136 1,467,561 890,646 759,381 52,470
	45,635,298 13,732,092

There are no potential ordinary shares on issue. The above amounts have been adjusted to reflect the 1 for 2 share consolidation on 17 May 2007.

11. RETAINED LOSSES Retained losses at beginning of period Net loss attributable to parent entity Retained losses at end of year	Consolidated Company 2007 2006 2007 2006 $ $ $ $ (7,977,273) (5,315,628) - (7,977,273) (6,970,466) (5,722,949) - (6,970,466)
	(13,292,901) (7,977,273) (12,693,415) (6,970,466)

32

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

12. STATEMENT OF CASH FLOWS Reconciliation of net loss from ordinary activities after tax to net cash used in operating activities Loss from ordinary activities after tax Items classified as investing/financing activities Borrowing costs Non-cash items Depreciation Impairment loss – intangible assets Impairment loss – intercompany loans Share based payments Changes in assets and liabilities Receivables Accounts payable Net cash used in operating activities	Consolidated Company 2007 2006 2007 2006 $ $ $ $ (5,315,628) (7,977,273) (5,722,949) (6,970,466)
	19,426 - - - 14,996 - - - - 3,702,432 - - - 1,010,780 5,522,466 955,366 80,000 955,366 80,000 (42,843) (36,494) (136,005) (36,494) (414,919) 1,538,745 23,657 902,107
	(4,783,602) (2,692,590) (3,869,151) (502,387)

13. KEY MANAGEMENT PERSONNEL

The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Executive directors

Richard W. Pritchard

Dr. Jeffery Bateson

Non-executive directors

The Hon. Neville Wran AC QC (Chairman since 1 May 2007)

Peter J. Bartter

Robert E. Lees

Albert Yue-Ling Wong (Appointed 1 May 2007)

Julie Garland McLellan (Appointed 8 March 2006, resigned 19 January 2007)

There are no key management personnel of the Company or Group that are not directors.

33

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Key management personnel compensation

Year Executive directors Richard W. Pritchard 2007 2006 Dr. Jeffery Bateson 2007 2006 Non-executive directors The Hon. Neville K. Wran 2007 2006 Peter J. Bartter 2007 2006 Julie Garland McLellan 2007 2006 Robert E. Lees 2007 2006 Albert Y. L. Wong 2007 2006 Declan N. Pritchard 2007 2006 Total, all key management personnel 2007 2006	Primary Fees Share Based Payments Total $ $ $ 60,000 85,615 145,615 - - - 45,470 71,500 116,970 1,500 - 1,500 5,000 - 5,000 - - - 56,916 95,700 152,616 90,699 - 90,699 9,100 - 9,100 9,355 - 9,355 24,039 17,550 41,589 13,613 - 13,613 5,000 - 5,000 - - - - - - 13,986 - 13,986
	205,525 270,365 475,890
	129,153 - 129,153

There are no service contracts with key management personnel, and no bonuses or other performance related compensation paid.

Movement in shares 2007
	Held at		Share Based		Held at
Specified directors	1 July 2006	Purchased	Payment	Sold	30 June 2007
The Hon. Neville K. Wran	-	500,000	-	-	500,000
Richard W. Pritchard	6,362,875	3,567,077	275,000	(607,500)	9,597,452
Dr. Jeffery Bateson	-	1,763,750	-	-	1,763,750
Peter J. Vartter	7,025,975	8,894,053	368,077	-	16,288,105
Julie Garland McLellan	-	-	-	-	-
Robert E. Lees	-	200,000	67,500	-	267,500
Albert Y.L. Wong	-	500,000	-	-	500,000

The beneficial interests in share capital of the Company outlined above have been adjusted to reflect the 1-for-2 consolidation of capital which occurred on 17 May 2007.

34

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

The Company issued 121,793 fully paid ordinary shares with fair value of $31,666 to Richard Pritchard as consideration for consulting fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

In addition 207,500 fully paid ordinary shares with a fair value of $53,950 were transferred to Richard Pritchard from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to the associated rights issue.

The Company issued 118,077 fully paid ordinary shares with fair value of $30,700 to Peter Bartter as consideration for consulting fees. The fair value at 26 cents per share was determined by reference to a recent share placement.

In addition 250,000 fully paid ordinary shares with a fair value of $65,000 were transferred to Peter Bartter from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to the associated rights issue.

The Company issued 1,500,000 fully paid ordinary shares with fair value of $75,000 as consideration for underwriting fees to Tambour Capital Pty Limited, an entity associated with The Hon. Neville Wran and Albert Wong. The fair value at 5 cents per share was determined by reference to the associated rights issue.

During the year 275,000 fully paid ordinary shares with a fair value of $71,500 were transferred to Dr Jeffery Bateson from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to the associated rights issue.

During the year 67,500 fully paid ordinary shares with a fair value of $17,550 were transferred to Robert Lees from the share incentive pool as consideration for outstanding fees. The fair value at 26 cents per share was determined by reference to the associated rights issue.

Apart from the details disclosed in this note, no director has entered into a material contract with the Company during the year and there were no material contracts involving director's interests subsisting at year end.

Movement in shares 2006

	Held at 10				Held at
Specified directors	March 2005	Purchased	Issued	Sold	30 June 2006
Richard W. Pritchard	-	6,365,376	-	(2,500)	6,362,876
Dr. Jeffery Bateson	-	-	-	-	-
Peter J. Bartter	-	7,025,976	-	-	7,025,976
Julie Garland McLellan	-	-	-	-	-
Robert E. Lees	-	-	-	-	-
Declan N. Pritchard	-	121,876	5,696,159	(175,000)	5,993,035
Peter J. Nightingale	-	147,841	-	-	147,841

35

WIND HYDROGEN LIMITED and its controlled entities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

During the year ended 30 June 2006 the Company acquired the entire issued capital of Wind Hydrogen Technologies Limited (formerly known as Ynni a Gwynt Mon Cyfyngedig, Angelsey Wind and Energy Limited), an entity incorporated in the United Kingdom. Consideration paid was 15,650,000 (7,825,000 post consolidation) fully paid ordinary shares of the Company at a fair value of $0.20 per share ($0.10 post consolidation). The consideration was determined by reference to an independent valuation of the assets acquired. Declan N. Pritchard held 72.8% of Wind Hydrogen Technologies Ltd and accordingly was issued 11,392,318 (5,696,159 post consolidation) fully paid ordinary shares in the Company.

During the year the directors incurred costs on behalf of the Group. The following is a list of total reimbursements paid during the year and amounts owing at 30 June 2007:

	Reimbursed during	Outstanding at 30
	the year	June 2007
Director	$	$
P. Bartter	100,913	66,405
R. Pritchard	8,633	2,773
A. Wong	1,604	916
Dr. J Bateson	4,508	99

Controlled entities

At balance date, the Company had amounts receivable from Wind Hydrogen Holdings UK Limited of $6,533,246. This amount is classified as an investment as it is interest free, unsecured, there is no fixed term of repayment, and it is repayable out of profits.

At 30 June 2007, the directors assessed the recoverability of investments in controlled entities and, given that the controlled entities are in the pre development phase of operations and that there is no impact on the financial statements of the consolidated entity, the full carrying vale of these investments has been impaired in the Company’s financial statements

14. FINANCIAL INSTRUMENTS DISCLOSURE

Interest rate risk

With the exception of cash, all the company and Group’s financial assets and liabilities are non-interest bearing. The cash balance earns interest at a variable effective interest rate of 5.40%.

Foreign currency risk

The Group is exposed to foreign currency risk on purchases and borrowings that are denominated in a currency other than the AUD. The currencies giving rise to this risk are primarily Great British Pounds.

In respect of other monetary assets and liabilities held in currencies other than the AUD, the Group ensures that the net exposure is kept to an acceptable level by maintaining minimal working capital funds in foreign currencies.

Credit risk exposure

The credit risk exposure on financial assets of the Group which have been recognised on the statement of financial position is the carrying amount, net of any provision for doubtful debts. The Group mitigates risk by dealing with Australian and United Kingdom regulated banks.

36

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Net fair values of financial assets and liabilities

The carrying amounts of financial assets and liabilities approximate their net fair values, given the short time frames to maturity and or variable interest rates.

Trade and other receivables/payables

All receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. There are no receivables/payables with life greater than one year.

15. FINANCIAL REPORTING BY SEGMENTS

The consolidated entity operates within the renewable energy and energy storage industry in Australia and the United Kingdom.

nited Kingdom.
Segment revenue Unallocated financial income Total revenue Segment results Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Cash flows from operating activates Cash flows from investing activities Cash flows from financing activities Impairment losses	Australia 2007 $ United Kingdom 2007 $ Consolidated 2007 $ - - - - - 36,138
	- - 36,138
	(4,712,169) (603,459) (5,315,628)
	1,152,092 108,404 1,260,496 - - -
	1,152,092 108,404 1,260,496
	(1,053,586) (686,367) (1,739,953) - - -
	(1,053,586) (686,367) (1,739,953)
	(3,869,151) (914,451) (4,783,602)
	- (32,273) (32,273)
	4,883,410 (19,426) 4,863,984
	- - -

37

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Segment revenue Unallocated financial income Total revenue Segment results Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Cash flows from operating activates Cash flows from investing activities Cash flows from financing activities Impairment losses	Australia 2006 $ United Kingdom 2006 $ Consolidated 2006 $ - - - - - 34,605
	- - 34.605
	(1,448,000) (6,529,273) (7,977,273)
	884,786 139,660 1,024,446 - - -
	884,786 139,660 1,024,446
	(902,107) (1,146,567) (2,048,674) - - -
	(902,107) (1,146,567) (2,048,674)
	(502,387) (2,190,203) (2,692,590)
	- 2,027 2,027
	3,543,045 - 3,543,045
	- (3,702,432) (3,702,432)

16. CAPITAL COMMITMENTS AND EARN-IN AGREEMENTS

The Company has contractual commitments related to the acquisition, construction, development and operation of various projects. These expenditures are contingent upon successful raising of the required capital and failure to make these expenditure will result in the forfeiture of the associated project rights.

Not later than one year Later than one year but not later than two years Later than two years but not later than five years Later than five years	Consolidated Company 2007 2006 2007 2006 $ $ $ $ 2,149,879 2,560,518 - - 1,528,197 6,750,200 - - - - - - - - - -
	3,678,076 9,310,718 - -

The consolidated entity, as a result of the acquisition of Wind Hydrogen Technologies Limited (formerly Ynni a Gwynt Mon Cyfyngedig), and Wind Hydrogen Developments Limited (formerly Hunterston Hydrogen Limited) owns the rights to the Wings Law project, located in Scotland. Attached to these rights is an ongoing gross revenue royalty of 1.0% along with a number of conditional payments (refer table above) to be made to the promoters and vendors upon the following milestone events been reached; (i) listing of the Company on a public stock exchange, (ii) granting of planning consent, (iii) commencement of construction, and (iv) completion of construction. Rights in relation to the use of land are subject to renewable two year option periods.

38

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

The Group has entered into an option agreement to acquire Woolsthorpe Wind Farm Pty Limited which holds the 40 MW Woolsthorpe project, located in Victoria. The Company, as part of this agreement, is required to make series of staged payments over the approval and development process. (refer table above) In the event that the Group does not meet these payments then the project rights revert to the vendor.

The individual amounts in relation to the above agreements have not been disclosed due to their commercial sensitivity.

17. CONTROLLED ENTITIES

Particulars in relation to controlled entities:

Parent Entity

Wind Hydrogen Limited is a public company, which was incorporated in Australia on 10 March 2005 and listed on the ASX on 10 September 2007.

Wholly Owned Controlled Entities

Wind Hydrogen Holdings (Australia) Pty Limited, incorporated in Australia. WHL Wind Farm Pty Limited, incorporated in Australia.

Wind Hydrogen Holdings (USA) LLC, incorporated in the United States.

Wind Hydrogen (UK) Holdings Limited, incorporated in the United Kingdom, refer Note 18. Wings Law Wind Farm Limited, incorporated in the United Kingdom, refer Note 18.

Wind Hydrogen Developments Limited, incorporated in the United Kingdom, refer Note 18. Wind Hydrogen Limited, incorporated in the United Kingdom, refer Note 18.

Wind Hydrogen Technologies Limited, incorporated in the United Kingdom, refer Note 18.

18. ACQUISITION OF CONTROLLED ENTITIES

On 28 June 2006 the Company purchased 100% of the issued capital of the following entities;

i) Wind Hydrogen Technologies Limited, incorporated in the United Kingdom. ii) Wind Hydrogen Limited, incorporated in the United Kingdom, a wholly owned subsidiary of Wind Hydrogen Technologies Limited.

iii) Wind Hydrogen Developments Limited, incorporated in the United Kingdom.

The Company acquired 100% of the issued capital of Wind Hydrogen Technologies Limited by the issue of 15,650,000 (7,825,000 post consolidation) fully paid $0.20 ordinary shares of the Company. Wind Hydrogen Technologies Limited held 1 of the 3 shares issued by Wind Hydrogen Developments Limited. The remaining two shares in Wind Hydrogen Developments Limited were acquired by the issue of a further 1,000,000 fully paid $0.20 ordinary shares of the Company plus cash consideration of Great British Pounds 10,000 (AUD$24,869). An intangible asset of $3,702,432 arose on acquisition of Wind Hydrogen Technologies Limited which was fully impaired.

39

WIND HYDROGEN LIMITED and its controlled entities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Net assets subsequently acquired at the acquisition date

Cash and cash equivalents Inventories Receivables Fixed assets at written down value Other non-current assets Creditors - current Non-current creditors Net identifiable assets and liabilities Cash consideration paid Share consideration Total consideration Intangible asset on acquisition	Recognised values Fair value adjustments 2,027 - 3,449 - 54,042 - 4,350 - 2 - (403,972) - (7,461) -	Carrying amounts 2,027 3,449 54,042 4,350 2 (403,972) (7,461)
	(347,563) -	(347,563) 24,869 3,330,000
		3,354,869
		3,702,432

Had the Group acquired Wind Hydrogen Technologies Limited on 10 March 2005, the financial effect on the consolidated result for the period ended 30 June 2006 would have been nil.

19. SUBSEQUENT EVENT

In the interval between the end of the financial year and the date of this report the Company raised $12,005,000 by the issue of 60,026,015 fully paid ordinary shares through an initial public offer of its securities. The Company’s securities listed on the Australian Securities Exchange on 10 September 2007. The financial effect of the share issue has not been included in the financial statements at 30 June 2007.

Apart from the matter outlined above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the Group, in future financial years, other than as set out below.

40

WIND HYDROGEN LIMITED and its controlled entities

DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2007

Directors’ Declaration

In the opinion of the directors of Wind Hydrogen Limited (‘the Company’):

1. (a) the financial statements and notes set out on pages 16 to 40, are in accordance with the Corporations Act 2001, including:

   • (i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2007 and of their performance for the financial year ended on that date; and

   • (ii) complying with Australian Accounting Standards, (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

2. (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and

3. (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

4. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and the Chief Financial Officer for the financial year ended 30 June 2007.

Signed at Sydney this 28[th] day of September 2007 in accordance with a resolution of the Board of Directors.

On behalf of the directors

The Hon. Neville K. Wran QC AC Managing Director

41

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INDEPENDENT AUDIT REPORT TO THE MEMBERS OF WIND HYDROGEN LIMITED

Report on the financial report

We have audited the accompanying financial report of Wind Hydrogen Limited (the Company) which comprises the balance sheets as at 30 June 2007, and the income statements, statements of recognised income and expense and cash flow statements for the year ended on that date, a description of significant accounting policies and other explanatory notes 1 to 19 and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with 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 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report of the Group, 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.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australia Accounting Interpretations), a view which is consistent with our understanding of the Company’s and the Group’s financial position and of their performance.

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

42

Auditor’s opinion on the financial report

In our opinion:

• (a) the financial report of Wind Hydrogen Limited is in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2007 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.

• (b) the financial report of the Group also complies with International Financial Reporting Standards as disclosed in note 1.

==> picture [86 x 47] intentionally omitted <==

KPMG

==> picture [98 x 48] intentionally omitted <==

S.J. Board Partner

28 September 2007

43

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 10 September 2007.

a) Twenty largest shareholders

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

Sun Hung Kai Investment Services Ltd Peter John Bartter ANZ Nominees Limited Town Inns (Holdings) Pty Limited Richard Wyn Pritchard Declan Nigel Pritchard Tambour Capital Pty Limited Cranport Limited Raymond Joseph Allen Jennifer Bartter Pro Ventum International GMBH Pratt Water Pty Ltd John Vincent Toohey & Anne Toohey Super-Jvt A/C> Rosignol Pty Ltd PJ Bartter & JA Bartter Deborah Annette Rossiter Crestland Pty Ltd Darrell Smith Jeffery Bateson & Geraldine Clisby Fund A/C> Baystreet Pty Ltd

Number of shares % of ordinary shares 15,000,000 10.17 14,754,785 10.00 9,750,000 6.61 8,250,000 5.59 8,240,619 5.59 5,452,395 3.70 4,588,811 3.11 4,138,810 2.81 3,272,095 2.22 3,090,200 2.09 3,000,000 2.03 2,500,000 1.69 2,000,000 1.36 1,653,198 1.12 1,533,320 1.04 1,505,357 1.02 1,500,000 1.02 1,068,000 0.72 1,000,000 0.68 1,000,000 0.68

93,297,590 63.24

b) Distribution of equity securities

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

1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total	Number of holders Number of ordinary shares 1 1 2 10,000 358 3,574,053 562 21,269,502 119 122,686,301
	1,042 147,539,857

There are 4 shareholders holding less than a marketable parcel of shares.

c) Substantial shareholders

Substantial shareholders (owning more than 5% of the share capital) in Wind Hydrogen Limited at 10 September, 2007 are set out below.

	Number of shares	% of ordinary shares
Sun Hung Kai Investment Services Ltd	15,000,000	10.17
Peter John Bartter	14,754,785	10.00
ANZ Nominees Limited	9,750,000	6.61
Town Inns (Holdings) Pty Limited	8,250,000	5.59
Richard Wyn Pritchard	8,240,619	5.59

44

ASX ADDITIONAL INFORMATION

d) Class of Shares and Voting Rights

The voting rights attached to ordinary shares, as set out in the Company’s Constitution, are that every member in person or by proxy, attorney or representative, shall have one vote on a show of hands and one vote for each share held on a poll.

A member holding partly paid shares is entitled to a fraction of a vote equivalent to the proportion which the amount paid up bears to the issue price for the share.

e) Home Exchange

The Company is listed on the Australian Securities Exchange. The Home Exchange is Sydney. The Company’s securities are not quoted on any other stock exchange.

f) Buy Back

There is not a current on-market buy-back.

g) Escrow

ASX Escrow

The following securities have been restricted by the ASX for the following periods:

• 32,412,386 ordinary shares fully paid for a period of 24 months from the date of official quotation, 10 September 2007.

• 7,422,311 ordinary shares fully paid for a period of 12 months from 4 April 2007.

• 3,657,858 ordinary shares fully paid for a period of 12 months from 16 April 2007.

• 50,000 ordinary shares fully paid for a period of 12 months from 17 May 2007.

• 3,000,000 ordinary shares fully paid for a period of 12 months from 23 May 2007.

• 3,010,715 ordinary shares fully paid for a period of 12 months from the date of official quotation, 10 September 2007.

h) Directors’ Interests in Securities

Directors’ relevant interests in securities are as shown in the table below.

Director	Direct Interest	Indirect Interest	Note
The Hon. Neville Kenneth Wran AC QC	-	500,000 ordinary shares	1
Richard Wyn Pritchard	8,240,619 ordinary shares	1,356,833 ordinary shares	2
Dr Jeffery Bateson	763,750 ordinary shares	1,000,000 ordinary shares	3
Albert Yue-Ling Wong	-	500,000 ordinary shares	4
Peter John Bartter	14,754,785 ordinary shares	1,533,320 ordinary shares	5
Robert Edward Lees	67,500 ordinary shares	200,000 ordinary shares	6

Notes

1 As controller of Candlewise Pty Ltd, the registered holder of 500,000 ordinary shares

• 2 As trustee with Robert Stock (registered holder of 869,333 ordinary shares) and as a partner holding more than 20% of the voting power in Land Resource Partnership (registered holder of 487,500 ordinary shares)

• 3 As trustee with Geraldine Clisby of the Carmathen Superannuation Fund (registered holder of 1,000,000 ordinary shares)

• 4 As controller of Barton Place Holdings Pty Ltd, the registered holder of 500,000 ordinary shares

5 As controller of the PJ & JA Bartter ATF Pejen Superannuation Fund, the registered holder of 1,533,320 ordinary shares

6 As controller of Coy Sec Services Pty Ltd, the registered holder of 200,000 ordinary shares

i) Use of Cash and Assets

Since the Company’s listing on the Australian Securities Exchange, the Company has used its cash and assets that it had at the time of listing in a way consistent with its stated business objectives.

45

CORPORATE DIRECTORY

Directors:

The Hon. Neville K. Wran Dr. Jeffery Bateson Richard W. Pritchard Peter J. Bartter Julie Garland McLellan Robert E. Lees Albert Y. L. Wong

Company Secretary:

Warwick J. Pearce

Principal Place of Business

Level 12, 95 Pitt Street SYDNEY NSW 2000 Phone: 61-2 8249 8157 Fax: 61-2 8249 8101

Registered Office:

Level 12, 95 Pitt Street SYDNEY NSW 2000 Phone: 61-2 8249 8157 Fax: 61-2 8249 8101

Auditors:

KPMG

11[th] Floor, Corporate Centre One Cnr Bundall Road & Slayter Avenue BUNDALL QLD 4127

46