Limited ACN 099 945 516

Annual Financial Report

30 June 2008 For personal use only use personal For CP1 Limited ACN 099 945 516

TABLE OF CONTENTS

CORPORATE DIRECTORY 1

DIRECTORS’ REPORT 2

LEAD AUDITOR'S INDEPENDENCE DECLARATION 20

INCOME STATEMENTS 21

STATEMENTS OF RECOGNISED INCOME AND EXPENSE 22

BALANCE SHEETS 23

STATEMENTS OF CASH FLOWS 24

NOTES TO THE FINANCIAL STATEMENTS 25

INDEPENDENT AUDIT REPORT 67

ASX ADDITIONAL INFORMATION 69

OFFICES AND OFFICERS 70 For personal use only use personal For CP1 Limited ACN 099 945 516

CORPORATE DIRECTORY

Company Auditors of the Company CP1 Limited KPMG ACN 099 945 516 Level 11, Corporate Centre One Cnr Bundall Road and Slatyer Avenue Registered Office Bundall QLD 4217 Level 12, 300 Queen Street Brisbane QLD 4000 Lawyers for the Company National number 13 4679 McCullough Robertson Phone (07) 3229 7129 Level 12 Fax (07) 3229 5796 Central Plaza Two 66 Eagle Street Gold Coast Office Brisbane QLD 4000 City Pacific House 2 Miami Key Blake Dawson Broadbeach Waters QLD 4218 Level 39 National number 13 4679 101 Collins Street Phone (07) 5554 0200 Melbourne VIC 3000 Fax (07) 5575 6366

Melbourne Office Level 7, 50 Market Street Melbourne VIC 3000 Phone (03) 9629 1777 Fax (03) 9629 1677

Postal Address PO Box 783 Pacific Fair QLD 4218

Directors Philip Sullivan Stephen Mackay Daniel Grollo Stephen Scanlon

Share Registry Link Market Services Limited Level 12, 300 Queen Street

Brisbane QLD 4000 For personal use only use personal For

- 1 - CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

The Directors present their report together with the financial report of CP1 Limited (“the Company” or “CP1”) and of the Group, being the Company and its controlled entities and the Group’s interest in jointly controlled entities, for the year ended 30 June 2008 and the auditor’s report thereon.

DIRECTORS The Directors of the Company in office at any time during or since the end of the financial year are: Philip Keith Sullivan Managing Director Appointed 2002 Mr Sullivan has been actively involved in property investment and development for over 30 years across many sectors of the property market. He currently holds directorships on a number of private Australian investment and development companies. Mr Sullivan has been a director of CP1 since commencement of the Company’s business in 2002. He is also Managing Director and Chief Executive Officer of City Pacific Limited since its incorporation in July 1997 and was a director of Indigo Pacific Capital Limited from February 2004 until September 2005. Mr Sullivan has a detailed understanding of the elements necessary to properly manage large scale property based construction projects which assist CP1 to assess, manage and monitor the project values and risks effectively. Stephen Mackay – BCOM, FPNA FAIM Non-Executive Director Appointed 2002 Mr Mackay holds a degree in Accounting and Business Administration, is a Fellow of the National Institute of Accountants and an Fellow of the Australian Institute of Management. Mr Mackay formerly held senior executive roles with the Queensland Tourist and Travel Corporation and the Daikyo Group. He is a past senior vice president of the Urban Development Institute of Australia. Mr Mackay has been a director of CP1 since commencement of the Company’s business in 2002. Mr Mackay has also been a director of Indigo Pacific Capital Limited since its incorporation in February 2004, and is the former Company Secretary of City Pacific Limited. Daniel Grollo - GAICD Non-Executive Director Appointed 2007 Daniel Grollo is Chief Executive Officer of Grocon Pty Ltd, Australia’s largest privately owned development and construction company. The Grocon business was established by Mr Grollo’s grandfather in the late 1950s and substantially expanded by Mr Grollo’s father, Bruno Grollo, throughout the 1970s and 1980s. Mr Grollo joined Grocon in the late 1980s and worked his way up to eventually take over the business from his father in 1999. Grocon completed central Melbourne’s QV development, the distinctive Eureka Tower on Southbank and the Melbourne Cricket Ground redevelopment for the 2006 Commonwealth Games. Mr Grollo is also a director of the Green Building Council of Australia and in October 2006 he was appointed a non- executive director of the board of BlueScope Steel. Stephen Scanlon – BBUS, CA, GAICD Non-Executive Director Appointed 2007 Stephen Scanlon is a Chartered Accountant, and Chief Financial Officer and Company Secretary of Grocon Pty Ltd Group, Australia’s largest privately owned development and construction company. Mr Scanlon is also General Manager – Investment Management of Grocon’s fund management business and an Executive Director of Grocon Investment

Management Pty Ltd. For personal use only use personal For He has over twenty years experience in commercial and financial roles having gained exposure to a broad range of financial and industrial environments, both from within the professional services sector, with KPMG, and in “hands on” management roles in the industry. In his roles as Chief Financial Officer and General Manager – Investment Management, Mr Scanlon has overseen the funds management, commercial and financial aspects of over $1 billion of property transactions, primarily relating to property developments and property trusts.

- 2 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

DIRECTORS (cont) Company Secretary Mrs Lee Danahay was appointed Company Secretary on 16 March 2007. Mrs Danahay holds a degree in Accounting and Business Administration and has been with City Pacific Limited for seven years. She has grown with the company progressing from senior accountant and compliance officer to human resources manager and is currently Group Executive of Investor Relations for City Pacific Limited. Prior to joining City Pacific Limited, Mrs Danahay worked in the Audit and Risk Advisory division of KPMG.

Directors’ Meetings The number of directors’ meetings (including meetings of committees of directors) held and the number of meetings attended by each of the Directors of the Company during the financial year are:

Board meetings Audit committee A B A B Mr P K Sullivan 24 24 - - Mr S Mackay 24 24 2 2 Mr D Grollo 24 24 2 2 Mr S Scanlon 23 24 2 2 A - Number of meetings attended B - Number of meetings held during the time the director held office during the year

To assist in the execution of its responsibilities, the Board has established an Audit Committee. Due to the size of the Board and to maintain efficiency, the Board fulfils the role of nomination and remuneration committee. Senior executives and staff of City Pacific Limited perform services for and on behalf of the Company and the Group pursuant to the Management and Administrative Services agreement between CP1 and City Pacific Limited (“the Management and Services Agreement”). As such, CP1 does not have any direct employees and so there were no remuneration committee meetings held during the year.

For personal use only use personal For

- 3 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT This statement outlines the key corporate governance practices of the Company that were in place throughout the year ended 30 June 2008 and which were fully compliant with the Australian Stock Exchange (ASX) Corporate Governance Council (CGC) recommendations, unless otherwise stated. This statement has followed the ASX CGC principles and recommendations to ensure accurate and clear reporting.

Principle 1 – Lay solid foundations for management and oversight Role and responsibilities of the board and management – Recommendation 1.1 The composition of the board is reviewed on an annual basis to ensure there is an appropriate mix of expertise and experience in areas relevant to the Company. The board is currently comprised of four directors who all have extensive knowledge in either CP1’s areas of operation, financial reporting and audit, or risk management. The names of the directors of the Company in office at the date of this report, including the period of office of each director and their independency status, are set out on page 2 of this report. The composition of the board is determined using the following principles: • the board should comprise at least 4 directors; • the majority of directors should be independent, non-executive directors The board currently consists of 3 non- executive directors, however due to the size of the Company, none are independent. Although the Company does not currently comply with this requirement, the directors are committed to appointing a new independent, non- executive director as Chairman; • the Chairman of the board should be an independent, non-executive director. Although the Company does not currently comply with this requirement as it does not have a Chairman, the directors are committed to appointing a new independent, non-executive director as Chairman; • the roles of Chairman and Chief Executive Officer should not be exercised by the same individual; • a majority of directors should have extensive knowledge of CP1’s industries, and those which do not should have extensive expertise in significant aspects of auditing and financial reporting, or risk management; • the board should meet on a regular basis; • all available information in connection with items to be discussed at a meeting of the board shall be provided to each director prior to that meeting; • directors should generally serve for a maximum of 12 years and all directors should retire by the age of 72; • directors appointed to the board are subject to election by shareholders at the following annual general meeting (“AGM”) and thereafter directors other than executive directors are subject to re-election at least every 3 years. The board’s primary role is the protection and enhancement of long term shareholder value. The board has formalised its roles and responsibilities into a board charter which also outlines the roles and responsibilities that have been delegated to the executive management providing services to CP1 pursuant to the Management and Services Agreement. A copy of the board charter is available upon request. In summary, the board is responsible for the overall corporate governance of the Group including formulating its strategic direction, approving and monitoring capital expenditure, appointing, removing and creating succession policies for directors and senior executives, risk management and establishing and monitoring the achievement of management’s goals. During the year, pursuant to the Management and Services Agreement, City Pacific Limited “seconded” two senior executives from City Pacific Limited to CP1 to manage the operational and financial functions of the business. These individuals perform services exclusively for CP1 in the roles of Chief Operations Officer and Financial Controller. The Board has delegated responsibility for the operation and administration of the Company to these individuals. The Chief Operating Officer and Financial Controller manage CP1 in accordance with the strategy, plans and delegations approved by the Board. The Chief Operating Officer and Financial Controller provide detailed reports on CP1’s performance and For personal use only use personal For other related matters at each board meeting. Except for the exceptions detailed above, CP1 has complied with ASX CGC recommendation 1.1 for the full financial year.

- 4 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 1 – Lay solid foundations for management and oversight (cont) Performance evaluation of executive management – Recommendation 1.2 The Board will implement a process to formally evaluate the performance of each key senior executive that is “seconded” from City Pacific Limited to CP1 pursuant to the Management and Services Agreement. The process will address each executive’s contribution to specific performance criteria, and will include, but not be limited to, setting the direction, strategy and financial objectives of the Company and Group, and monitoring compliance with regulatory requirements and ethical standards. The Board anticipates that the process will be in place prior to 31 December 2008. As CP1 has no direct employees, the Company is not required to comply with ASX CGC recommendation 1.2.

Principle 2 – Structure the board to add value Independent Directors – Recommendation 2.1 The Company’s policy is for the board to consist of a majority of independent directors however, due to the size of the Company, no director is independent. CP1’s current board structure comprises three non-executive directors and one executive director. As a result CP1 is unable to comply with ASX CGC Best Practice Recommendation 2.1 however, CP1 is committed to appointing a new independent, non-executive director as Chairman. A determination that a non-executive director is independent is based on the board’s ongoing assessment that the director is free of any material business or other relationship that could reasonably be considered to impede the exercise of independent judgement. The independence of directors is reviewed annually once an independent director has been appointed to the board. This assessment is based on the ASX CGC recommendations, which include that a director who is not a member of management (a non-executive director) is independent if they meet the following conditions: • holds less than five per cent of the voting shares of the Company and is not an officer of, or otherwise associated, directly or indirectly, with a shareholder of more than five per cent of the voting shares of the Company; • has not within the last three years been employed in an executive capacity by the Company or another group member, or been a director after ceasing to hold any such employment; • within the last three years has not been a principal or employee of a material1 professional adviser or a material1 consultant to the Company or another group member; • is not a material1 supplier or customer of the Company or another group member, or an officer of or otherwise associated, directly or indirectly, with a material1 supplier or customer; • has no material1 contractual relationship with the Company or another group member other than as a director of the Company; • is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially1 interfere with the director’s ability to act in the best interests of the Company. With the prior approval of the Chair, each director has a right to seek independent legal and other professional advice at CP1’s expense concerning any aspect of CP1’s operations or undertakings in order to fulfil their duties and responsibilities as directors. The Chair – Recommendation 2.2 CP1 is seeking an independent non-executive director to take on the position of Chair. CP1 is therefore unable to comply with ASX CGC Best Practice Recommendation 2.2 but this will be remedied when an independent director is appointed as Chair. The Roles of Chair and Chief Executive Officer – Recommendation 2.3 There has not been a Chief Executive Officer or Chairman of CP1 during the financial year. For personal use only use personal For CP1 is therefore unable to comply with ASX CGC Best Practice Recommendation 2.3 however, the role of Chairman has been delegated to a director other than the Executive Director for the full financial year to ensure a clear division of responsibility at the head of the Company.

1 The board considers, ‘material’, in this context, to be where any director related business relationship has represented, or is likely in future to represent the lesser of at least 10 per cent of the relevant segment’s or the director-related business’s revenue. The board considered the nature of the relevant industries’ competition and the size and nature of each director-related business relationship, in arriving at this threshold.

- 5 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 2 – Structure the board to add value (cont) Nomination committee – Recommendation 2.4 Due to the size of the board and to maintain efficiency, the Board has fulfilled the role of the nomination committee and as such CP1 has not complied with ASX CGC recommendation 2.4. The board takes full responsibility for the functions that would be undertaken by this committee and have adopted a Nomination Committee Charter which includes the responsibility to consider: • Necessary and desirable competencies of directors; • Review of board succession plans; • Developing a process for evaluation of the performance of the board, its committees and directors; • Transparent procedures for appointing and re-electing directors including: - Director competencies, board renewal, composition and commitment of the board; - Non executive director to inform the chair before accepting any new appointments as public Company directors; - Non executive director being appointed for specific terms subject to re-election and to ASX Listing Rules and Corporations Act regarding removal of directors; - Updated procedures for non-executive directors requiring non-executive directors to provide details of other commitments and indication of time involved and the Board will review time required from non-executives against time provided. There have been no new directors appointed to the Board since the last annual report was released. Performance evaluation of the Board, its committees, and individual directors – Recommendation 2.5 The board will implement a process to formally evaluate the performance of each board member and the Board’s sub- committees. In summary, the process will involve addressing each director’s contribution to specific performance criteria, and will include, but not be limited to, setting the direction, strategy and financial objectives of the Company and Group, and monitoring compliance with regulatory requirements and ethical standards. As a result, CP1 has not complied with ASX CGC recommendation 2.5 for the full financial year however, informal evaluations have taken place during the reporting period. The process for nomination of existing directors for reappointment is not automatic and is contingent on their past performance, contribution to the Company, and the current and future needs of the Board and the Company and Group. Directors displaying unsatisfactory performance are required to retire. The Company has a process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning performance of directors. Directors also regularly visit the Company’s offices and meet with management to gain a better understanding of business operations.

Principle 3 – Promote ethical and responsible decision-making Ethical standards and code of conduct - Recommendation 3.1 All executive management and employees providing services to CP1 pursuant to the Management and Services Agreement are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company and Group. Every service provider has a nominated supervisor to whom they may refer any issues arising from undertaking their delegated tasks, and processes are in place to promote and communicate these policies. Individuals are able to alert executive management and the Board in good faith to potential misconduct without fear of retribution, and a process exists for the recording and investigation of such alerts.

As part of the Board’s commitment to the highest standard of conduct, CP1 has adopted a Code of Conduct to guide For personal use only use personal For individuals in carrying out their duties and responsibilities. A copy of the code is provided to any agents, service providers, etc who also are required to meet the standard of conduct under the code. The Code of Conduct is available upon request and covers such matters as: • responsibility to shareholders and the financial community, including ethical practices and the integrity of financial reporting; • responsibility to clients, customers and consumers;

- 6 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 3 – Promote ethical and responsible decision-making (cont) Ethical standards and code of conduct - Recommendation 3.1 (cont) • employment practices; • obligations in relation to fair trading and dealing with stakeholders; • responsibility to the community including the environment, community activities and donations and sponsorship; • privacy of information; • confidentiality of information; • managing conflicts of interest; and • compliance with laws and regulations and the code of conduct. Conflicts of interest Directors must keep the board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. The board has developed procedures to assist directors to disclose potential conflicts of interest. Where the Board believes that a significant conflict exists for a director on a board matter, the director concerned does not receive the relevant board papers and is not present at the meeting whilst the item is considered. Details of director related entity transactions with the Company and the Group are set out in note 31 to the financial statements. CP1 has complied with ASX CGC recommendation 3.1 for the full financial year. Share trading policy - Recommendation 3.2 The Company policy permits directors and employees to acquire shares in the Company (for these purposes “employee” includes those employees of City Pacific Limited performing services for and on behalf of the Company and Group pursuant to the Management and Services Agreement). Company policy prohibits directors and employees from dealing in Company shares or exercising options: • except between 3 and 30 days after either the release of the Company’s half-year and annual results to the Australian Securities Exchange, the annual general meeting or any major announcement; and • whilst in possession of price sensitive information. Directors and employees are permitted to acquire or deal with shares outside of the period between 3 and 30 days after either the release of the Company’s half-year and annual results to the Australian Securities Exchange, the AGM or any major announcement with the approval of the chairman of the board (or the Executive Director in the absence of a chairman). Director’s and executive management’s dealing in shares is reported to the Board and is subject to board veto. In accordance with the provisions of the Corporations Act 2001 and the Listing Rules of the Australian Securities Exchange, directors advise the ASX of any transactions conducted by them in shares in the Company. Compliance with this policy is monitored on a regular basis by the Company Secretary. The Share Trading Policy of the Company is available upon request. CP1 has complied with ASX CGC recommendation 3.2 for the full financial year.

Principle 4 – Safeguard integrity in financial reporting Audit committee and charter – Recommendations 4.1 – 4.4 The full board takes ultimate responsibility for the integrity of Company’s financial reporting though a separate Audit Committee which has been established for and has operated for the full financial year. The Audit Committee consists of three non-executive directors of CP1 however, due to the size of the Company, no member is an independent director.

For personal use only use personal For The chairman cannot be the chairman of the board however the chairman is also not an independent director. Therefore, CP1 has not complied with ASX CGC Recommendation 4.2 for the full financial year, however upon the appointment of an independent director the membership of the Audit Committee may change to ensure best practice.

- 7 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 4 – Safeguard integrity in financial reporting (cont) Audit committee and charter – Recommendations 4.1 – 4.4 (cont) The current members of the Audit Committee are: • Stephen Scanlon (chairman) – non-executive director; • Stephen Mackay – non-executive director; • Daniel Grollo – non-executive director. The qualifications of each Audit Committee member are set out on pages 2 and 3. The external auditors and Financial Controller are invited to Audit Committee meetings at the discretion of the committee. The committee meet at least twice annually and committee members’ attendance record is disclosed in the table of directors’ meetings on page 3. The Audit Committee’s charter is available upon request of the Company along with information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners. The Audit Committee provides a forum for the effective communication between the board and the auditors. The responsibilities of the Audit Committee include: • reviewing the annual and half-year financial reports and other financial information distributed externally. This includes approving new accounting policies to ensure compliance with Australian Accounting Standards and generally accepted accounting principles, and assessing whether the financial information is adequate for shareholder needs; • assessing corporate risk assessment processes; • assessing whether non-audit services provided by the external auditor are consistent with maintaining the external auditor’s independence. Each reporting period the external auditor provides an independence declaration in relation to the audit or review; • providing advice to the board in respect of whether the provision of the non-audit services by the external auditor is compatible with the general standard of independence of auditors imposed by the Corporations Act 2001; • assessing the adequacy of the internal control framework and the Company’s code of ethical standards; • organising, reviewing and reporting on any special reviews deemed necessary by board; • monitoring procedures to ensure compliance with Corporations Act 2001 and the ASX Listing Rules and all other regulatory requirements; • addressing any matters outstanding with auditors, Australian Taxation Office, Australian Securities and Investments Commission, ASX and financial institutions. The Audit Committee reviews the performance of the external auditors on an annual basis and normally meets with them during the year to: • discuss the external audit plans, identifying any significant changes in structure, operations, internal controls or accounting policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed; • review the half-year and preliminary final report prior to lodgement with the ASX, and any significant adjustments required as a result of the auditor’s findings, and to recommend board approval of these documents, prior to announcement of results; • review the draft annual and half-year financial report, and recommend board approval of the financial report; and •

For personal use only use personal For review the results and findings of the auditor, the adequacy of accounting and financial controls, and to monitor the implementation of any recommendations made. CP1 has complied with ASX CGC recommendations 4.1 to 4.4 for the full financial year.

- 8 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 5 – Make timely and balanced disclosure Continuous disclosure policy - Recommendation 5.1 The board is committed to disclosing material factual information to the market in a timely, clear and objective manner. The Company has a Continuous Disclosure Policy which is available upon request, including information on the accountability at executive management level for compliance with ASX Listing Rules disclosure requirements. Review of operations and activities A review of the Group’s operations is contained on page 13 of the Directors’ report. Termination entitlements of the Chief Executive Officer or equivalent The Company notes that to date it has not disclosed to the market any historical termination payment made to a Chief Executive Officer or equivalent. In this regard, CP1 confirms that no termination payments have been made to a Chief Executive Officer or equivalent since the Company’s inception. The Company has now incorporated this ASX CGC recommendation into the Continuous Disclosure Policy and any future agreement to pay a termination payment or actual termination payment to a Chief Executive Officer or equivalent will be disclosed to the market at the time of entering the agreement. CP1 has complied with ASX CGC recommendation 5.1 for the full financial year.

Principle 6 – Respect the rights of shareholders Communicating with shareholders – Recommendation 6.1 The board of directors aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders as follows: • The annual report is distributed to those shareholders who request a copy and is available on the Company’s website. The board ensures that the report includes relevant information about the operations of the Company during the year, changes in the state of affairs of the Company and details of future developments, in addition to the other disclosures required by the Corporations Act 2001; • The half-yearly report contains summarised financial information and a review of the operations of the Company during the period. The half-year reviewed financial report is prepared in accordance with the requirements of applicable Accounting Standards and the Corporations Act 2001 and is lodged with the Australian Securities and Investments Commission and the Australian Securities Exchange. The financial report is sent to any shareholder who requests it and is available on the Company’s website; • Proposed major changes in the Company which may impact on share ownership rights are submitted to a vote of shareholders; • Notice of all meetings of shareholders; • Matters that may have a material effect on the price of the Company’s securities are notified to the Australian Securities Exchange, posted on the Company’s website and issued in media releases; and • The external auditor is requested to attend the AGM to answer any questions concerning the audit and the content of the auditor’s report. The board is also considering new methods of communicating with shareholders including: • Email notification to shareholders when annual report is available; • Email notification to advise shareholders when documents have been lodged with the ASX; • Use of webcasts and teleconferences for annual general meetings; and

• Placement of transcripts of the AGM on the Company website. For personal use only use personal For The board encourages full participation of shareholders at the AGM to ensure a high level of accountability and identification with the Company’s strategy and goals. Important issues are presented to the shareholders as single resolutions.

- 9 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 6 – Respect the rights of shareholders (cont) Communicating with shareholders – Recommendation 6.1 (cont) The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options and shares to directors and changes to the Constitution. Copies of the Constitution are available to any shareholder who requests it. CP1 has complied with ASX CGC recommendation 6.1 for the full financial year.

Principle 7 – Recognise and manage risk Risk oversight and management policies – Recommendation 7.1 and 7.2 Oversight of the risk management system The board is responsible for CP1’s system of internal controls and assessing, monitoring and managing operational, financial reporting, and compliance risks for the Company. The board regularly monitors the operational and financial aspects of CP1’s activities and, through the Audit Committee, the Board considers the recommendations and advice of the auditors and other external advisers on the operational and financial risks that face CP1. Due to the size of the Company, the Board institutes the same functions that a risk management committee would undertake rather than have a separate risk management committee. The risk management committee and Audit Committee charters have been adapted to ensure that all functions and roles of a risk management committee are undertaken by the Audit Committee or the Board. The Audit Committee and the Board are responsible for focussing on risk management and oversight. The board ensures that recommendations made by the auditors and other external advisers are investigated and, where considered necessary, appropriate action is taken to ensure that CP1 has an appropriate internal control environment in place to manage the key risks identified. Due to the size of the Company, there is no internal audit function. In addition, the Board investigates ways of enhancing existing risk management strategies, including appropriate segregation of duties and the employment and training of suitably qualified and experienced personnel. Risk Profile The board manages the status of risks through risk management programs aimed at ensuring risks are identified, assessed and appropriately managed. Further details of the Company’s risk management policy and internal compliance and control system are available upon request. The board is responsible and accountable for implementing and managing the standards required by the program. Major risks arise from such matters as the regulatory and compliance environment, economic market conditions, commercial acquisitions and growth, fraud, ineffective management systems, non-performance of investments, timing and completion of construction developments and loan defaults by borrowers, the illiquid nature of underlying securities over real property, government policy changes, environment, financial reporting, and the purchase, development and use of information systems. Risk management and compliance and control The board is responsible for the overall internal control framework, but recognises that no cost-effective internal control system will preclude all errors and irregularities. The board’s policy on internal control is comprehensive, details of which are available upon request. Quality and integrity of personnel All personnel “seconded” to CP1 perform services on behalf of the Group pursuant to the terms and conditions of the Management and Services Agreement. Under the terms of the Management and Services Agreement, City Pacific Limited has undertaken to provide training and development and appropriate remuneration and incentives with regular performance reviews, thus creating an environment of cooperation and constructive dialogue with employees and senior

For personal use only use personal For management. Environmental Regulation The Group’s operations are subject to a range of Queensland, Victorian, New South Wales and Commonwealth laws and environmental regulations in relation to its property development activities. The directors are not aware of any breaches under these regulations during the period covered by this report.

- 10 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 7 – Recognise and manage risk (cont) Risk oversight and management policies – Recommendation 7.1 and 7.2 (cont) Internal Audit Due to the size of the Company no separate internal audit department has been established. The Audit Committee assist the Board in ensuring compliance with internal controls and risk management programs by regularly reviewing the effectiveness of the above-mentioned compliance and control systems. CP1 has complied with ASX CGC recommendations 7.1 and 7.2 for the full financial year. Reports and assurances – Recommendation 7.3 The Managing Director, Financial Controller and the former Chief Financial Officer have declared, in writing to the Board, that the financial reporting risk management and associated compliance and controls have been assessed and found to be operating efficiently and effectively. The operational and other risk management compliance and controls have also been assessed and found to be operating efficiently and effectively. All risk assessments covered the whole financial year and the period up to the signing of the Annual Financial Report for all material operations in the Company, and material associates. The Managing Director, Financial Controller and former Chief Financial Officer have declared, in writing to the Board, that the Company’s financial reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board. CP1 has complied with ASX CGC recommendation 7.3 for the full financial year.

Principle 8 – Remunerate fairly and responsibly Establishment and function of remuneration committee – Recommendation 8.1 Senior executives and staff of City Pacific Limited perform services for and on behalf of the Company and the Group pursuant to the Management and Administrative Services Agreement. The Management and Administrative Services Agreement is a non-exclusive agreement with no fixed duration. The Agreement may be terminated with one month notice and no termination payment required. As such, CP1 does not have any direct employees and so there were no remuneration committee meetings held during the year. CP1 is unable to comply with ASX CGC Recommendation 8.1 however, the Board reviews the Management and Services Agreement at regular intervals to ensure that the services provided and the cost in relation thereto is appropriate to ensure the proper and prudent management of the Group. Remuneration structure – Recommendation 8.2 The Company’s policies in respect of ASX CGC recommendations are set out below in the Remuneration Report. CP1 has complied with ASX CGC recommendation 8.2 for the full financial year. Remuneration Report – audited Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and its controlled entities, including directors of the Company and other executives. Key management personnel comprise the directors of the Company and the senior executives who provide services to CP1 pursuant to the Management and Administrative Services Agreement. Non-executive remuneration Total remuneration for all non-executive directors, last voted upon by shareholders at the 2007 AGM, is not to exceed $400,000 per annum. Remuneration consists of directors' fees, which cover all main board activities and membership of one committee. Non-executive directors do not participate in schemes designed for the remuneration of executives and do not receive options, bonus payments or retirement benefits.

For personal use only use personal For During the year, no remuneration was paid to non-executive directors.

- 11 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 8 – Remunerate fairly and responsibly (cont) Remuneration structure – Recommendation 8.2 (cont) Remuneration Report – audited (cont) Executive remuneration The Executive Director, senior executives and staff perform services for and on behalf of the Company and the Group pursuant to the Management and Administrative Services Agreement. Pursuant to the terms of the Agreement, fees of $172,145 (2007: $120,000) were paid by CP1 to City Pacific Limited. As such, CP1 does not have any direct employment arrangement with any individual and does not pay any fixed or performance based compensation to any individuals. Consequences of performance on shareholder wealth In considering the Group’s performance and benefits for shareholders wealth the directors have regard to the following indices in respect of the current financial year and the previous four financial years. Shareholder returns 2008 2007 2006 2005 2004 Net profit / (loss) ($109,050,931) $36,839,422 $30,533,571 $4,398,202(iii) $1,230,853(v) Dividends paid $14,203,996 (i) $20,826,152 (ii) $6,224,916 $746,069 - Dividends per share 6.0 cents 9.0 cents 5.0 cents (iv) 0.8 cents (iv) - Change in share price ($0.54) ($0.14) $0.00 $0.19 $0.17 Total employee expenses $1,495,549 $8,144,518 $7,593,036 $4,282,008 - Employee expenses as a n/a 22.11% 24.87% 97.36% - percentage of net profit

(i) Dividends for 2008 were franked to 33.33% (ii) Dividends for 2007 were franked to 33.33%. (iii) Net profit after adjustments in relation to transition to Australian Equivalents to International Financial Reporting Standards (“AIFRS”). (iv) Adjusted for 5 for 1 share split of 19 June 2006 (v) Net profit reported under previous Australian Accounting Standards

Details of the nature and amount of each major element of remuneration of each key management personnel of the Company and Group and each of the five named executives who receive the highest remuneration are: Post-employment Short-term superannuation Share-based Salary & fees benefits Payments Total Directors (Non-executive) $ $ $ $ Mr S Mackay 2008 - - - - 2007 - - - - Mr D Grollo (ii) 2008 - - - - 2007 - - - - Mr S Scanlon (ii) 2008 - - - - 2007 - - - -

For personal use only use personal For Directors (Executive) Mr PK Sullivan 2008 - - - - (Managing Director) 2007 - - - -

- 12 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

CORPORATE GOVERNANCE STATEMENT (cont)

Principle 8 – Remunerate fairly and responsibly (cont) Remuneration structure – Recommendation 8.2 (cont) Remuneration Report – audited (cont) Executive remuneration (cont)

Post-employment Short-term superannuation Share-based Salary & fees benefits Payments Total Executives Theo Axarlis (iii) 2008 - - - - (Chief Operating Officer) Caroline Lamshed (iv) 2008 - - - - (Financial Controller) Former executive director and executives Mr PC Trathen (i) 2007 - - - - Mr TW Swan (i) 2007 40,000 - - 40,000 Mr IW Donaldson (i) 2007 38,784 - - 38,784 Total compensation – Consolidated 2008 - - - - 2007 78,784 - - 78,784 Total compensation – Company 2008 - - - - 2007 78,784 - - 78,784 (i) Resigned 29 June 2007 (ii) Appointed to the board 29 June 2007 (iii) Appointed 3 June 2008 (iv) Appointed 1 July 2008

The s300A(1)(e)(i) proportion of total remuneration that is performance related is nil. There were no options provided as remuneration during the year and so the s300A(1)(e)(vi) value of options as a proportion of remuneration was nil.

PRINCIPAL ACTIVITIES The principal activity of the Company and Group during the year was property development and hotel operations. There were no significant changes in the nature of the activities of the Group during the year.

Objectives and outlook In response to the ongoing global credit and liquidity crisis and its impact on the Australian property markets, the Directors have undertaken a review of operations and have implemented the following initiatives: • a full review and assessment of the Group’s assets and investments in light of prevailing market conditions; • an asset realisation program in relation to certain assets of the Group in order to reduce both project specific and

For personal use only use personal For corporate debt; • reviewed all expenditures incurred by the Company and the Group in order to reduce operating overheads; and • resolved that the Company will not pay a final dividend in relation to the 2008 financial year.

- 13 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

PRINCIPAL ACTIVITIES (cont) The short term objectives of the Group are to: • consolidate the financial position of the Group; • reduce debt levels; and • ensure continued sales at the Martha Cove development in the ordinary course. The longer term objectives of the Group are to grow shareholder wealth through improved share prices. This objective will be achieved through the prudent financial management of the Group’s assets and cash flows.

OPERATING AND FINANCIAL REVIEW

Overview of the Group The Group operates in two primary segments, comprising the property development and hotel activities of the following subsidiaries and associates: • Marina Cove Pty Ltd, a 100% subsidiary of CP1 which owns, and is in the process of developing a waterfront living and leisure complex at Martha Cove on the Mornington Peninsula in Victoria. The development, nearing completion, comprises 92 hectares of land, an inland waterway with 900 marina berths, a commercial precinct and 1,150 home sites. For more information refer to www.marthacove.com.au; • Azzura Pacific Resort Pty Ltd, a 100% subsidiary of CP1 which owns a 2.5 hectare amalgamated site in Surfers Paradise in Queensland. Development of the site has commenced and is planned to comprise a four tower, themed destination resort. The development site presently contains the award winning Paradise Resort which has been operated by the Company since acquisition and will continue to be operated until the staged development works on the site require the demolition of the resort. For more information refer to www.paradiseresort.com.au; • Lake Views Estates Pty Ltd, a joint venture (50% interest held) which owns land at Braeside in Victoria which is intended to be developed for industrial and residential uses; • Cira International Pty Ltd, a joint venture (50% interest held) with Raptis Group, which owned a 2.3 hectare amalgamated property located in Surfers Paradise, Queensland, comprising the Gold Coast International Hotel and adjoining land immediately north to the hotel site. In September 2008, Cira International Pty Ltd settled the sale of Gold Coast International Hotel. The company has also entered into a conditional contract to sell the land immediately to the north of the hotel site, with settlement expected to occur in December 2008; and • MP Pacific Investments Pty Ltd as trustee of the MP Pacific Investments Unit Trust, a joint venture (50% interest held) which owns and operates the Waves Motel at Byron Bay in New South Wales. The operating result of the property development segment before income tax for the year ended 30 June 2008 was a net loss of $128,008,559 (2007: profit of $40,520,542). The impacts of the global credit and liquidity crisis and successive rises in official Reserve Bank interest rates over the past 12 months has had a direct negative impact on the Australian property markets, including the normally resilient property markets that CP1 operates in. A major contributor to the operating result for the property segment is the Martha Cove marina-based development. Martha Cove has been negatively impacted by these global events and consumer uncertainty resulting in sales at the Martha Cove development being lower than forecast. The operating result of the hotel segment before income tax for the year ended 30 June 2008 was a net profit of $2,613,443 (2007: $4,012,412). The earnings from the hotel segment included management fees derived from managing the Gold Coast International Hotel and the Paradise Resort and the Group’s share of operating profits from having an ownership interest in both these

hotels. Despite the challenging market conditions in the latter stages of the year both hotels operated at or above budget. For personal use only use personal For

- 14 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

OPERATING AND FINANCIAL REVIEW (cont)

Overview of the Group (cont) The net loss after income tax of the Group for the financial year was $109,050,931 (2007: profit of $36,839,422). Shareholder returns 2008 2007 2006 2005 2004 Net profit / (loss) ($109,050,931) $36,839,422 $30,533,571 $4,398,202(iii) $1,230,853(v) Basic EPS / (loss) (46.06) cents 18.01 cents 27.66 cents(iv) 4.68 cents (iv) 1.36 cents (iv) Dividends paid $14,203,996 (i) $20,826,152 (ii) $6,224,916 $746,069 - Dividends per share 6.0 cents 9.0 cents 5.0 cents (iv) 0.8 cents (iv) - Change in share price ($0.54) ($0.14) $0.00 $0.19 $0.17

(i) Dividends for 2008 were franked to 33.33% (ii) Dividends for 2007 were franked to 33.33%. (iii) Net profit after adjustments in relation to transition to Australian Equivalents to International Financial Reporting Standards (“AIFRS”). (iv) Adjusted for 5 for 1 share split of 19 June 2006 (v) Net profit reported under previous Australian Accounting Standards

DIVIDENDS Dividends paid or declared by the Company to members since the end of the previous financial year were: Cents per share Total amount Date of payment Franked/ unfranked Declared and paid during the year: Final 2007 ordinary (i) 6.0 cents $14,203,996 30 November 2007 Partly Franked Total amount $14,203,996

(i) The final 2007 ordinary dividend was 33.33% franked and 66.67% unfranked.

On 21 February 2008, CP1 announced that it would pay an interim dividend of 3 cents per share partially franked to 33.33%. On 2 May 2008, the board announced that the interim dividend for 2008 was cancelled due to a delay in repayment of vendor finance facilities and below-projected land sales at Martha Cove. It is the Board’s view that the ongoing global credit and liquidity crisis has contributed to this outcome. The Board of Directors resolved that a final dividend would not be paid for the 2008 financial year, having consideration to the following factors: • the ongoing global credit and liquidity crisis and its impact on the Australian property markets; • the Company’s strategy to reduce its gearing level; • the decision to adopt a prudent cashflow management strategy in light of the current market conditions; and • to allow for the completion of the Company’s consolidation phase. In light of the current market conditions the Directors believe that this course of action is in the best interest of the shareholders of the Company.

For personal use only use personal For

- 15 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

STATE OF AFFAIRS In the opinion of the Directors, there were no significant changes in the state of affairs of the Group that occurred during the financial year under review, other than as set out below: • In August 2007, MP Pacific Investments Pty Ltd as trustee of the MP Pacific Investment Unit Trust, a 50% held unit trust, settled the acquisition of The Waves, an operating hotel in Byron Bay, New South Wales. The hotel is operated by a nominee company of the joint venture partner. • On 2 May 2008, the Company acquired 49% of shares in Azzura Pacific Resort Pty Ltd. CP1 sold this 49% shareholding in the prior year and deconsolidated Azzura Pacific Resort Pty Ltd as a result of that transaction, however continued to equity account its investment as the Company had joint control in accordance with a shareholder agreement. As a result of the transaction in May 2008 the Company again consolidated Azzura Pacific Resort Pty Ltd from the date of acquisition. • In response to the impact on the Australian property market of the successive rises in official Reserve Bank interest rates over the past 12 months and the ongoing global credit and liquidity crisis, CP1 reviewed the carrying value of its assets in order to identify whether any assets may be impaired. In undertaking this review, the Group recognised impairment losses and write-downs in respect of certain assets totalling $110,215,456 (Company: $81,492,811), as outlined in note 9. • During the year ended 30 June 2008 and as at 30 June 2008, the Group was in breach of a loan to value ratio covenant attached to a $76,221,017 finance facility. Subsequent to year end, the terms of the loan have been renegotiated (refer note 33). • During the year ended 30 June 2008 and as at 30 June 2008, the Company was in breach of financial covenants attached to its $12,000,000 finance facility, primarily as a result of below budgeted property sales for the Group and the impact of the impairment losses and write downs outlined in note 9. Subsequent to year end, the terms of the loan have been renegotiated (refer note 33). • During the year ended 30 June 2008 and as at 30 June 2008, the Group was in breach of a $110,000,000 finance facility, primarily as a result of exceeding the loan to value ratio attached to the facility accommodation limit, failing to meet a facility ‘step down’ which was due for payment on 30 June 2008 and failing to complete the development of Stage 4 of the subject property by the financier’s required completion date. As a consequence of the breach, the facility limit was reduced to $99,795,071 and the repayment date was revised to 31 October 2008. Subsequent to year end, the terms of the loan have been renegotiated (refer note 33).

EVENTS SUBSEQUENT TO BALANCE DATE

Marina Cove Pty Ltd During the year ended 30 June 2008 and as at 30 June 2008, Marina Cove Pty Ltd was in breach of the loan to value ratio covenant of its $76,221,017 facility with the City Pacific First Mortgage Fund. Additionally, the loan fell due for annual review on 30 June 2008. Subsequent to year end, revised facility terms were agreed and the loan was extended to 28 February 2009, when the facility will again be reviewed. In July 2008, Marina Cove Pty Ltd appointed an international sales agent to market certain large parcels of land at Martha Cove. Expressions of interest closed in August 2008. The expressions of interest received were unacceptable to the company and the financier. During the year ended 30 June 2008 and as at 30 June 2008, Marina Cove Pty Ltd was in breach of the facility secured by this land, as disclosed at note 22. As a consequence of the breach, the facility limit was reduced to $99,795,071 and the repayment date was revised to 31 October 2008. Subsequent to year end, the Group has renegotiated the terms of the facility, which includes the extension of the facility to 27 February 2009. The facility is subject to certain trigger dates in relation to the achievement of certain milestones which the company anticipates achieving. In September 2008, to supplement the cash flow of the company, Marina Cove Pty Ltd renegotiated the terms of a vendor financing agreement and a construction contract provided to a land owner at Martha Cove. The revised agreement For personal use only use personal For resulted in the early repayment in September 2008 of the vendor financing (total funds received of $11,171,000) and the terms of the construction contract being amended such that the revised total sum of $9,129,000 will be received on a cost to complete basis. The funds received have been applied to pay creditors of the company.

- 16 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

EVENTS SUBSEQUENT TO BALANCE DATE (cont)

Cira International Pty Ltd On 28 August 2008, Cira International Pty Ltd (“Cira”), a 50% owned associate, entered into a contract of sale to sell the Gold Coast International Hotel site (“GCI Site”) for $56.5 million. The contract of sale settled on 29 September 2008. The proceeds of sale were applied to reduce debt. On 26 September 2008, Cira entered into a contract of sale to sell a parcel of land immediately north of the Gold Coast International site for $30 million. Subject to the purchaser being satisfied with its due diligence enquiries within 60 days from entering the contract, settlement of the $30 million transaction is expected to occur in late December 2008. The proceeds of sale will be applied to reduce debt. Finance facilities provided to Cira by two financiers were due for repayment on 30 September 2008. Whilst Cira has made substantial repayment of one facility from the sale proceeds of the GCI Site, Cira is in breach of both facilities as they were not repaid in full by the facility repayment dates. Both financiers are aware of the breach and continue to reserve their rights, however each financier has consented to the sale of the parcel of land immediately north of the Gold Coast International site which will result in a substantial reduction in the debt facilities. The forecast proceeds from the sale of both sites will not be sufficient to repay all debt outstanding to one of the two financiers. CP1 has provided a guarantee to this financier limited to 50% of the principal plus interest and accordingly, the Company and the Group have recorded this liability in the accounts as at 30 June 2008, as disclosed in note 8. To date, the financier has not placed a demand upon the Company in relation to the financial guarantee provided however the Company has negotiated deferred payment terms with the respective financier in the event that the financier places a demand upon the Company.

CP1 Limited During the year ended 30 June 2008 and as at 30 June 2008, the Company was in breach of financial covenants attached to its $12,000,000 finance facility, as disclosed in note 22. Subsequent to year end, the Group has renegotiated the terms of the facility, which includes the extension of the facility to 27 February 2009. The facility is subject to certain trigger dates in relation to the achievement of certain milestones which the company anticipates achieving. Subsequent to year end, the Company has renegotiated its $32,000,000 loan facility with City Pacific Limited, which matured on 1 November 2008. The new facility has a term to 30 June 2011, with an annual review on 31 May of each year.

Azzura Pacific Resorts Pty Ltd In October 2008, Azzura Pacific Resort Pty Ltd appointed CB Richard Ellis Hotels and Knight Frank as marketing agents for the sale of the Paradise Resort site. The expression of interest campaign is anticipated to close in early December 2008. The proceeds from sale will be applied to reduce debt.

Other matters Other than the matters noted 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 and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Company or Group, the results of those operations, or the state of affairs of the Company or Group, in the future financial years.

Likely developments Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group.

For personal use only use personal For

- 17 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

DIRECTORS’ INTERESTS The relevant interest of each Director in the share capital of the Company, as notified by the Directors to the Australian Stock Exchange in accordance with S205G(1) of the Corporations Act 2001, as at the date of this report is as follows:

Directors Directly Held Indirectly Held Total ordinary shares P K Sullivan - 74,470,612 (i) 74,470,612 S Mackay 938,000 275,000 1,213,000 D Grollo - 42,398,928 (ii) 42,398,928 S Scanlon - - - (i) Includes shares in which the Director has an indirect holding through a significant interest in City Pacific Limited. City Pacific Limited holds 72,440,290 shares in CP1. (ii) Includes shares in which the Director has an indirect holding through a significant interest in BLAD Investments No1 Pty Ltd. BLAD Investments No 1 Pty Ltd holds 42,398,928 shares in CP1.

SHARE OPTIONS There were no options on issue during the financial year. No options have been granted since the end of the previous financial period. Unissued shares under option At the date of this report there are no unissued ordinary shares of the Company under option. Shares issued on exercise of options No ordinary shares have been issued on the exercise of options since the end of the previous financial year.

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS Indemnification Since the end of the previous financial year, the Company has not indemnified or made a relevant agreement for indemnifying against a liability, any person who is or has been an officer of the Company, or an auditor of the Company. Insurance premiums During the financial year, in accordance with usual commercial practice and prudent risk management, the Group paid premiums in respect of Directors or executive officers for liability and legal expenses insurance contracts for the year ended 30 June 2008. The Company has paid or agreed to pay in respect of the Group, premiums in respect of such insurance contracts for the period ending 30 June 2009. Such insurance contracts insure against certain liability (subject to specific exclusions) for persons who are or have been the Directors or executive officers of the Group. Details of the nature of the liabilities covered or the amount of the premium paid has not been included as such disclosure is prohibited under the terms of the contracts.

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 in accordance with written advice provided by resolution of the Audit Committee, 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

For personal use only use personal For 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 Audit Committee 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.

- 18 -

CP1 Limited ACN 099 945 516 DIRECTORS’ REPORT

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS (cont)

Non-audit services (cont) 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. In addition, amounts paid to other auditors for the statutory audit have been disclosed: Consolidated 2008 2007 Audit services $ $ Auditors of the Company - KPMG - audit and review of financial reports 296,200 150,800

Non audit services Auditors of the Company - KPMG - tax advice 132,560 -

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 The lead auditor’s independence declaration is set out on page 20 and forms part of the Directors’ Report for the year ended 30 June 2008. Signed in accordance with a resolution of the Directors:

P K Sullivan Managing Director

Dated at Brisbane this 11th day of November 2008.

For personal use only use personal For

- 19 -

LEAD AUDITOR'S INDEPENDENCE DECLARATION under Section 307C of the Corporations Act 2001 to the directors of CP1 Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been:

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

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

11 November 2008 For personal use only use personal For

- 20 - CP1 Limited ACN 099 945 516

INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 Note $ $ $ $

Revenue from sale of property 6 29,526,036 120,128,923 2,953,348 - Revenue from rendering of services – hotel operations 6 3,889,902 18,720,869 - - 33,415,938 138,849,792 2,953,348 -

Other income 7 1,211,265 10,176,804 10,425,735 38,886,315

Changes in inventories – property 89,082,901 (41,084,524) (2,638,786) - Development expenditure – property (130,113,920) (31,681,234) (75,523) - Changes in inventories – hotel operations 196,551 (208,423) - - Raw materials and consumables – hotel operations (468,810) (2,508,651) - - Depreciation and amortisation (156,966) (314,956) (72) (342) Employee expenses (1,495,549) (8,144,518) (23,833) - Financial guarantee expense 8 (8,484,201) - (8,484,201) - Impairment losses and write downs 9 (110,215,456) - (81,492,811) - Occupancy expenses (538,878) (2,381,994) - - Advertising and promotion costs (1,166,903) (2,659,038) (6,338) - Professional fees (3,479,366) (886,369) (1,191,801) (364,074) Other expenses from ordinary activities (1,873,372) (5,330,996) (394,509) (337,216) Results from operating activities (134,086,766) 53,825,893 (80,928,791) 38,184,683

Finance income 8,084,797 3,735,813 2,383,783 622,562 Finance expenses (3,505,615) (2,664,358) (2,953,931) (643,466) Net finance income / (expense) 10 4,579,182 1,071,455 (570,148) (20,904)

Share of profit of equity accounted investees, net of income tax 18 (211,134) 176,284 - -

Profit / (loss) before income tax (129,718,718) 55,073,632 (81,498,939) 38,163,779

Income tax (expense)/benefit 12(a) 20,667,787 (18,234,210) (7,614,659) (5,491,594) Profit / (loss) for the year (109,050,931) 36,839,422 (89,113,598) 32,672,185

Basic earnings / (loss) per share attributable to ordinary equity holders 13 (46.06) cents 18.01 cents Diluted earnings / (loss) per share attributable to ordinary

equity holders 13 (46.06) cents 17.82 cents For personal use only use personal For

The income statements are to be read in conjunction with the notes to and forming part of the financial statements.

- 21 - CP1 Limited ACN 099 945 516

STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 Note $ $ $ $

Net income recognised directly in equity Profit / (loss) for the year (109,050,931) 36,839,422 (89,113,598) 32,672,185 Total recognised income and expense for the year (109,050,931) 36,839,422 (89,113,598) 32,672,185

Other movements in equity arising from transactions with owners as owners are set out in note 25. For personal use only use personal For

The statements of recognised income and expense are to be read in conjunction with the notes to and forming part of the financial statements.

- 22 - CP1 Limited ACN 099 945 516

BALANCE SHEETS AS AT 30 JUNE 2008

Consolidated Company Note 2008 2007 2008 2007 Current assets $ $ $ $ Cash and cash equivalents 30 2,000,634 366,621 349,753 92,959 Trade and other receivables 14 25,435,477 133,740,072 54,839 33,077,853 Inventories 16 71,293,984 72,520,794 - 2,638,786 Investments 17 - 13,310 - - Income tax receivable 12(b) 5,831,660 - 5,214,362 - Total current assets 104,561,755 206,640,797 5,618,954 35,809,598 Non-current assets Other receivables 15 6,651,200 2,163,067 35,963,042 12,411,377 Inventories 16 223,224,117 132,717,855 - - Investments 17 - 666 19,638,322 74,696,103 Investments accounted for using the equity method 18 - 13,651,674 - - Property, plant and equipment 19 2,421,110 222,252 - 72 Deferred tax assets 12(c) - - 24,002 385,593 Total non-current assets 232,296,427 148,755,514 55,625,366 87,493,145 Total assets 336,858,182 355,396,311 61,244,320 123,302,743

Current liabilities Trade and other payables 20 41,907,818 31,748,170 2,337,956 9,730,465 Provision for financial guarantee 8 8,484,201 - 8,484,201 - Interest-bearing loans 22 257,542,233 160,440,389 43,052,279 - Employee benefits 23 332,039 42,387 - - Income tax payable 12(b) - 2,884,800 - 2,884,800 Total current liabilities 308,266,291 195,115,746 53,874,436 12,615,265 Non-current liabilities Trade and other payables 21 6,651,200 - - - Employee benefits 23 224,140 1,408 - - Deferred tax liabilities 12(c) - 15,307,679 - - Total non-current liabilities 6,875,340 15,309,087 - - Total liabilities 315,141,631 210,424,833 53,874,436 12,615,265

Net assets 21,716,551 144,971,478 7,369,884 110,687,478

Equity Issued capital 24 100,201,070 100,201,070 100,201,070 100,201,070 Retained earnings / (accumulated losses) 25 (78,484,519) 44,770,408 (92,831,186) 10,486,408

Total equity 21,716,551 144,971,478 7,369,884 110,687,478 For personal use only use personal For

The balance sheets are to be read in conjunction with the notes to and forming part of the financial statements.

- 23 - CP1 Limited ACN 099 945 516

STATEMENTS OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 Cash flows from operating activities Note $ $ $ $ Receipts from customers 22,492,660 82,819,258 5,427 1,333 Payments for inventories (54,177,684) (110,468,319) - (44,286) Cash payments to suppliers and employees (10,912,251) (12,756,684) (1,146,690) (82,405) Cash generated / (used in) operations (42,597,274) (40,405,745) (1,141,263) (125,358) Dividends and distributions received - 3,928 210,000 3,928 Interest received 33,336 26,547 8,345 24,849 Interest paid (93,750) (8,901) - - Income tax refund / (paid) (1,002,453) (6,827,363) (498,555) (6,825,683) Net cash from operating activities 30(b) (43,660,141) (47,211,534) (1,421,473) (6,922,264) Cash flows from investing activities Loans to related parties (1,528,685) - (1,388,685) (9,552,432) Repayment of loans to related parties 250,000 - 1,590,000 500,000 Loans to other parties - (32,095,641) - - Repayment of loans to other parties 10,213,760 13,973,347 - - Payments for property, plant and equipment (119,703) (119,482) - - Proceeds from sale of property, plant and equipment - 1,620 - - Proceeds from sale of investments - 2,401,338 - 2,401,338 Payments for controlled entities - - - (10) Payments for associates (60) (50) (60) (50) Net cash from investing activities 8,815,311 (15,838,868) 201,255 (6,651,154) Cash flows from financing activities Loans from related parties 53,621,907 302,895,432 1,957,828 18,990,542 Repayment of loans from related parties (96,778,046) (247,303,242) (2,025,000) (22,595,747) Loans from other parties 91,057,674 - 11,776,980 - Proceeds from issue of shares / exercise of options - 27,115,937 - 27,115,937 Interest paid (1,596,072) (11,533,653) (406,175) - Dividends paid (9,826,621) (10,029,061) (9,826,621) (10,029,061) Net cash from financing activities 36,478,842 61,145,413 1,477,012 13,481,671

Cash and cash equivalents at 1 July 366,621 2,271,610 92,959 184,706 Net increase/(decrease) in cash held 1,634,013 (1,904,989) 256,794 (91,747) Cash and cash equivalents at 30 June 30(a) 2,000,634 366,621 349,753 92,959

The statements of cash flows are to be read in conjunction with the notes to and forming part of the financial statements. For personal use only use personal For

- 24 - CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

1. REPORTING ENTITY CP1 Limited (the “Company”) is a company domiciled in Australia. The address of the Company’s registered office is Level 12, 300 Queen Street, Brisbane, Queensland. The consolidated financial report of the Company for the year ended 30 June 2008 comprises the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in jointly controlled entities.

2. BASIS OF PREPARATION

(a) Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report of the Company and the Group also complies with the International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board (IASB). The financial report was authorised for issue by the Directors on 11 November 2008.

(b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following: • Available-for-sale financial assets are measured at fair value; and • Provision for financial guarantee is measured at fair value. The methods used to measure fair values are discussed further in note 4.

(c) Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency, and the functional currency of each entity in the Group.

(d) Use of estimates and judgments 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. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: • Note 5 Going concern • Note 8 Financial guarantee expense • Note 9 Impairment losses and write-downs • Note 12 Utilisation of tax losses • Note 14 Trade and other receivables – impairment losses • Note 16 Inventories – write down • Note 17 Investments – impairment losses

• Note 18 Equity accounted investees – impairment losses For personal use only use personal For • Note 20 Trade and other payables • Note 29 Contingent liabilities

- 25 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. 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 all entities in the Group.

(a) Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power 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 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. In the Company’s financial statements, investments in subsidiaries are carried at cost less impairment losses. Associates and jointly controlled entities (equity accounted investees) Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. In the Company’s financial statements, investments in associates and jointly controlled entities are carried at cost less impairment losses. Transactions eliminated on consolidation Intra-Group balances, and any unrealised income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. 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 when the contributed assets are consumed or sold by the equity accounted investees or, if not consumed or sold by the equity accounted investee, when the Group’s interest in such entities is disposed of.

(b) Financial instruments Financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Financial instruments are recognised initially at fair value plus, for instruments not at fair value though profit or loss, any directly attributable transaction costs, except as described below.

Subsequent to initial recognition non-derivative financial instruments are measured as described below. For personal use only use personal For A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date.

- 26 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(b) Financial instruments (cont) Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Accounting for finance income and expense is discussed in Note 3(l). Financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to issue of the ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Dividends are recognised as a liability in the period in which they are declared.

(c) Property, plant and equipment Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings. Reclassification to investment property Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete, at which time it is remeasured to fair value and reclassified as investment property. Any gain or loss arising on remeasurement is recognised in profit or loss. Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives in the current and comparative periods are as follows: • Plant and equipment 2.5 - 10 years • Buildings 40 years

For personal use only use personal For • Fittings and fixtures 2.5 - 10 years The residual value of each asset, if not insignificant, is reassessed annually.

- 27 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(d) Investment property Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value with any change therein recognised in profit or loss. When the use of a property changes such that it is reclassified as property, plant or equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

(e) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(f) Construction work in progress Construction work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity. Construction work in progress is presented as part of inventories. If payments received from customers exceed the income recognised, then the difference is presented as deferred income in the balance sheet.

(g) Impairment Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows to be derived from that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available for sale financial asset is calculated by reference to its current fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in Groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. Non financial assets The carrying amounts of the Group’s non-financial assets, other than investment property, inventories and deferred tax

For personal use only use personal For 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.

- 28 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(g) Impairment (cont) Non financial assets (cont) The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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 the purpose of impairment testing, assets are grouped together into the smallest Group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (Group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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.

(h) Employee benefits Long-term service benefits The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. Short-term benefits Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on- costs, such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(i) 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. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects

current market assessments of the time value of money and, where appropriate, the risks specific to the liability. For personal use only use personal For

- 29 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(j) Revenue Goods sold Revenue from the sale of goods is measured at the fair value of consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. The timing of transfers of risks and rewards vary depending on the individual terms of the contract of sale. Services Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed. Property sales Revenue from the sale of property is recognised when the significant risks and rewards of ownership are passed to the buyer which is usually when legal title is transferred. Commissions When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Group.

(k) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed and the contingency no longer exists.

(l) Finance income and expense Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, and gains on the disposal of available-for-sale financial assets. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. Finance expenses comprise interest expense on borrowings and unwinding of the discount on provisions. Borrowing costs are recognised in profit or loss using the effective interest method with the exception of project development specific finance expenses which are capitalised in to inventories.

(m) Income tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or

substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. For personal use only use personal For Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly

- 30 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(m) Income tax (cont) controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised. Tax consolidation The Company is the head entity in a tax-consolidated group comprising the Company and all of its Australian wholly owned subsidiaries. As a consequence, all members of the tax-consolidated group are taxed as a single entity. The implementation date of the tax consolidations system for the tax-consolidated group was 1 July 2004. The current and deferred tax amounts for the tax-consolidated group are allocated among the entities in the group using a group allocation method approach. Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts of the assets and liabilities in the respective entity’s balance sheet and their tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity in the tax-consolidated group and are recognised in conjunction with any tax funding arrangement amounts. Any difference between these amounts is recognised by the Company as an equity contribution to or distribution from the subsidiary. Distributions firstly reduce the carrying amount of the investment in the subsidiary and are then recognised as revenue. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. Nature of tax funding arrangements and tax sharing arrangements The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability/(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable/(payable) equal in amount to the tax liability/(asset) assumed. The inter-entity receivable/(payable) are at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. The head entity in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations and the treatment of entities leaving the tax consolidated group.

For personal use only use personal For No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.

- 31 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(n) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of the acquisition of the net asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(o) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

(p) Segment reporting An operating segment is a component of the Group that is engaged in business activities for which it may earn revenues and incur expenses and whose operating results are regularly reviewed by the entity’s chief operating decision maker. The Group’s primary format for segment reporting is on the same basis as in used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

(q) Accounting standards 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 2008, but have not been applied in preparing this financial report: • Revised AASB 3 Business Combinations changes the application of acquisition accounting for business combinations and the accounting for non-controlling (minority) interests. Key changes include: the immediate expensing of all transaction costs; measurement of contingent consideration at acquisition date with subsequent changes through the income statement; measurement of non-controlling (minority) interests at full fair value or the proportionate share of the fair value of the underlying net assets; guidance on issues such as reacquired rights and vendor indemnities; and the inclusion of combinations by contract alone and those involving mutuals. The revised standard becomes mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the revised standard on the Group’s financial report. • AASB 8 Operating Segments introduces the “management approach” to segment reporting. AASB 8, which becomes mandatory for the Group’s 30 June 2010 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently the Group presents segment information in respect of its business and geographical segments (see note 6). The Group has not yet determined the potential effect of the revised standard on the Group’s financial report. • Revised AASB 101 Presentation of Financial Statements introduces as a financial statement (formerly “primary” statement) the “statement of comprehensive income”. The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other AASBs. The revised AASB 101 will become mandatory for the Group’s 30 June 2010 financial statements. The Group

For personal use only use personal For has not yet determined the potential effect of the revised standard on the Group’s financial report.

- 32 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(q) Accounting standards not yet adopted (cont) • Revised AASB 127 Consolidated and Separate Financial Statements changes the accounting for investments in subsidiaries. Key changes include: the remeasurement to fair value of any previous/retained investment when control is obtained/lost, with any resulting gain or loss being recognised in profit or loss; and the treatment of increases in ownership interest after control is obtained as transactions with equity holders in their capacity as equity holders. The revised standard will become mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the revised standard on the Group’s financial report. • 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 102 Inventories, 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 1023 General Insurance Contracts and AABS 1038 Life Insurance Contracts. 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 consolidated financial report. • Interpretation 12 Service Concession Arrangements addresses the accounting for service concession operators, but not grantors, for public to private service concession arrangements. Interpretation 12 will apply for the Group’s 2009 financial report. The potential effect of the interpretation on the financial report has not yet been determined. At this time an entity must adopt the revised Interpretation 4 Determining when an arrangement contains a lease and Interpretation 129 Service Concession Arrangement: 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, AASB118 Revenue, AASB 120 Accounting for Government Grants and Disclosure 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. • 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 Company and the consolidated 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 Company and the consolidated financial report has not yet been determined. • AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 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. • AASB 2007-9 Amendments to Australian Accounting Standards arising from the Review of AASBs 27, 29 and 31 [AASB 3, AASB 5, AASB 8, AASB 101, AASB 114, AASB 116, AASB 127 & AASB 137] is applicable for annual reporting periods beginning on or after 1 July 2008. The potential impact on the Group’s financial report has not yet been determined. • AASB 2008-2 Puttable Financial Instruments and Obligations arising on Liquidation For personal use only use personal For [AASB 7, AASB 101, AASB 132 & AASB 139 and Interpretation 2] 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.

- 33 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

3. SIGNIFICANT ACCOUNTING POLICIES (cont)

(q) Accounting standards not yet adopted (cont) • AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 [AASB 1, AASB 2, AASB 4, AASB 5, AASB 7, AASB 101, AASB 107, AASB 112, AASB 114, AASB 116, AASB 128, AASB 131, AASB 132, AASB 133, AASB 134, AASB 136, AASB 137, AASB 138, AASB 139, Interpretation 9 and Interpretation 107] is applicable for annual reporting periods beginning on or after 1 July 2009 and must be adopted in conjunction with AASB 3 Business Combinations (March 2008) and AASB 127 Consolidated and Separate Financial Statements (March 2008). The potential impact on the Group’s financial report has not yet been determined.

4. 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.

(a) 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.

(b) Investments in equity and debt securities The fair value of available for sale financial assets is determined by reference to their quoted bid price at the reporting date.

(c) Inventories The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(d) 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.

(e) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.

(f) Financial guarantees For financial guarantee contract liabilities, the fair value at initial recognition is determined using a probability weighted discounted cash flow approach. This method takes into account the probability of default by the guaranteed party over the term of the contract, the loss given default (being the proportion of the exposure that is not expected to be recovered in the event of default) and exposure at default (being the maximum loss at the time

of default). For personal use only use personal For

- 34 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

5. GOING CONCERN The financial statements have been prepared on a going concern basis, which contemplates the continuation of normal business operations and the realisation of assets and settlement of liabilities in the normal course of business. During the second half of the year ended 30 June 2008, as a result of the ongoing global credit and liquidity crisis and its impact on the Australian property markets: • the Group did not achieve budgeted sales at Marina Cove, resulting in below budgeted operating results and cashflows for the Company and the Group; • certain purchasers of land at Martha Cove to whom the Group had provided vendor financing were unable to repay or refinance existing vendor finance loans due for repayment in the period to 30 June 2008, resulting in expected cash inflows to the Company and the Group not being received as anticipated; • the Group did not comply with the financial covenants in respect of a $99,795,071 facility and did not meet a required “step down” repayment of $15,000,000 of the same facility which was due for payment on 30 June 2008 (refer note 22); • the Group did not comply with financial covenants in respect of a finance facility of $76,221,017 at 30 June 2008 (refer note 22); • the Company did not comply with financial covenants in respect of a finance facility of $12,000,000 at 30 June 2008 (refer note 22); • the Company and the Group reviewed the carrying value of a number of assets as at 30 June 2008, resulting in significant impairment losses and write downs being incurred (refer note 9); and • the Company and the Group recorded a financial guarantee expense and liability in relation to a guarantee provided to a financier of an associate (refer note 8). For the year ended 30 June 2008, the Company and the Group incurred losses of approximately $89 million and $109 million respectively, primarily as a result of impairment losses and write downs. As at 30 June 2008, the Company and the Group had net assets of approximately $7 million and $22 million respectively, however they had a deficiency in net current assets of approximately $48 million and $203 million respectively. Subsequent to year end, the Group has: • extended the terms of a $99,795,071 million facility to 27 February 2009, as disclosed at note 33; • extended the terms of a $12,000,000 million facility to 27 February 2009, as disclosed at note 33; • extended the terms of the City Pacific First Mortgage Fund facility of $76,221,017 to 28 February 2009, as disclosed at note 33; • extended the terms of the City Pacific Limited facility of $32,000,000 to 30 June 2011, as disclosed at note 33; and • appointed marketing agents to sell the Paradise Resort site. The Directors and management of the Company have prepared the financial statements on the going concern basis, as it is their intention to: • sell or refinance the Paradise Resort site; • complete the orderly realisation of the Martha Cove development; • obtain the repayment of vendor financing provided to certain property owners at Martha Cove; • meet the trigger dates in relation to the achievement of certain milestones attached to a $12,000,000 facility and a $99,795,071 facility;

For personal use only use personal For • repay, refinance or extend existing finance arrangements; and • meet other payment obligations from the asset realisations detailed above, as well as cash flows received in the normal course of business.

- 35 -

CP1 Limited ACN 099 945 516 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

5. GOING CONCERN (cont) The Directors have prepared cash flow projections that support the Company’s and the Group’s ability to meet its obligations, incorporating the key assumptions included above. The Company and the Group are critically dependent upon the continued supported of their financiers during the period required to realise sufficient assets to repay existing debt obligations. This support will be required for a period significantly in excess of the financiers’ current undertakings. The Directors are of the opinion that it is not unreasonable to expect the financiers will extend their support beyond the period of their current undertakings. In addition, to continue as a going concern, it will be necessary for the Company and the Group to: • sell or refinance the Paradise Resort site to retire existing debt of $45,000,000 due for repayment on 29 March 2009 and $8,389,733 due for repayment on 31 March 2009; • complete the orderly realisation of the Martha Cove development; • meet the trigger dates in relation to the achievement of certain milestones attached to a $12,000,000 facility and a $99,795,071 facility; • repay, refinance or renegotiate a $99,795,071 million facility which is due for repayment on 27 February 2009; • repay, refinance or renegotiate a $12,000,000 million facility which is due for repayment on 27 February 2009; • repay, refinance or renegotiate the terms of the $76,221,017 City Pacific First Mortgage Fund facility which is due for review on 28 February 2009; and • generate sufficient cashflow from ongoing business operations to meet operating cashflow requirements. In the event that the Company and the Group continue as a going concern, subsequent to the sale of the assets described, the Group will hold the Martha Cove development and the Lake Views Estate development, both located in Victoria. In the event that the Company and the Group cannot continue as a going concern, they may not realise their assets or settle their liabilities in the normal course of operations and at the amounts stated in the financial report.

For personal use only use personal For

- 36 -

CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

6 SEGMENT REPORTING Business segments The Group comprises the following main business segments: Property Includes property development and land sales Hotel Includes hotel ownership and management

Property development Hotel Consolidated 2008 2007 2008 2007 2008 2007 Business segments $ $ $ $ $ $ Revenue from property segment 29,526,036 120,128,923 - - 29,526,036 120,128,923 Revenue from hotel segment - - 3,889,902 18,720,869 3,889,902 18,720,869 Total revenue 29,526,036 120,128,923 3,889,902 18,720,869 33,415,938 138,849,792 Share of profit / (loss) of associates (2,098,431) - 1,887,297 176,284 (211,134) 176,284 Segment operating profit/(loss) before impairment and income tax (17,793,102) 40,520,542 2,613,443 4,012,412 (15,179,659) 44,532,954 Impairment losses (110,215,457) - - - (110,215,457) - Segment operating profit/(loss) after impairment and before income tax (128,008,559) 40,520,542 2,613,443 4,012,412 (125,395,116) 44,532,954

Profit on sale of shares in controlled entity - 10,027,671 Unallocated income 1,211,265 148,813 Unallocated expenses (10,114,049) (707,261) Net financing income / (costs) 4,579,182 1,071,455 Profit / (loss) from ordinary activities (129,718,718) 55,073,632 Income tax expense / (benefit) 20,667,787 (18,234,210) Profit / (loss) for the year (109,050,931) 36,839,422

Assets Segment assets 325,852,701 304,502,875 5,300,265 - 331,152,966 304,502,875 Unallocated corporate assets 5,705,216 50,893,436 Consolidated total assets 325,852,701 304,502,875 5,300,265 - 336,858,182 355,396,311 Liabilities Segment liabilities 296,170,769 199,810,816 2,636,405 - 298,807,174 199,810,816 Unallocated corporate liabilities 16,334,457 10,614,017 Consolidated total liabilities 296,170,769 199,810,816 2,636,405 - 315,141,631 210,424,833

Depreciation and amortisation 47,213 41,455 109,681 704 156,894 42,159 Unallocated depreciation and amortisation 72 272,797 Depreciation and amortisation 47,213 41,455 109,681 704 156,966 314,956

For personal use only use personal For Capital expenditure 119,700 117,282 - 2,200 119,700 119,482

Geographical segments The Group operates predominantly in Australia where its operations and customers are located.

- 37 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 7 OTHER INCOME $ $ $ $ Dividends from subsidiaries - - 10,000,000 28,885,000 Dividends from other entities - 3,928 - 3,928 Gain on sale of shares in controlled entity - 10,003,105 - 9,971,487 Gain on sale of investments - 24,567 - 24,567 Other income 1,211,265 145,204 425,735 1,333 1,211,265 10,176,804 10,425,735 38,886,315

8 FINANCIAL GUARANTEE EXPENSE / PROVISION FOR FINANCIAL GUARANTEE 8,484,201 - 8,484,201 -

The Company has provided certain financial guarantees to financiers for and on behalf of related parties of the Group. Under the terms of the financial guarantee contracts, the Company may be required to make payments to reimburse the lenders upon a failure of the guaranteed entity to make payments when due. At 30 June 2008, the Company reviewed the underlying carrying value of the assets of the companies to which a financial guarantee had been provided. As a result of this review, the Company recorded a guarantee expense of $8,484,201 (2007: $nil) to provide for the potential liability to the Company. Details of outstanding guarantees are provided in note 29. The Company actively monitors these assets and continues discussions with the financiers to which the guarantees have been provided to ensure that any loss to the Company or the Group is minimised. To date, no financier has placed a demand upon the Company in relation to a financial guarantee provided. Subsequent to year end, the Company has negotiated deferred payment terms with the respective financier to which the potential liability has been recognised in the event that the financier places a demand upon the Company.

9 IMPAIRMENT LOSSES & WRITE DOWNS Note Trade and other receivables 14,15 34,375,675 - 2,078,773 - Inventories 16 74,715,618 - - - Investments 17 666 - 79,414,038 - Investments accounted for using the equity method 18 1,123,497 - - - 110,215,456 - 81,492,811 -

10 FINANCE INCOME AND EXPENSES Recognised in profit or loss Interest income from related parties 808,205 - 808,205 - Interest income from other parties 7,276,592 3,735,813 1,575,578 622,562 Finance income 8,084,797 3,735,813 2,383,783 622,562 (24,693,978) (27,020,257) (2,953,931) (643,466) For personal use only use personal For Total interest expense Less interest capitalised 21,188,363 24,355,899 - - Finance expense (3,505,615) (2,664,358) (2,953,931) (643,466) Net finance income and expense 4,579,182 1,071,455 (570,148) (20,904)

- 38 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 11 AUDITORS’ REMUNERATION $ $ $ $ Audit services Auditors of the company – KPMG Audit and review of financial reports 296,200 150,800 106,200 95,800 Non audit services Auditors of the company - KPMG Tax advice 132,560 - 132,560 - 132,560 - 132,560 -

12 TAXATION (a) Income tax expense Recognised in income statement Current income tax Current period - 10,775,408 - 5,364,825 Adjustment for prior periods (1,033,890) 1,463,371 - (1,768,447) Deferred income tax Origination and reversal of temporary differences (19,633,897) 5,995,431 7,614,659 1,895,216 Total income tax expense/(benefit) (20,667,787) 18,234,210 7,614,659 5,491,594

Reconciliation between tax expense and pre- tax net profit Profit / (loss) for the period (109,050,931) 36,839,422 (89,113,598) 32,672,185 Total income tax expense / (benefit) (20,667,787) 18,234,210 7,614,659 5,491,594 Profit / (loss) excluding income tax (129,718,718) 55,073,632 (81,498,939) 38,163,779 Prima facie income tax expense / (benefit) calculated at 30% on the profit from ordinary activities (38,915,615) 16,522,090 (24,449,682) 11,449,133 Increase/(decrease) in income tax due to non-deductible/(non-assessable): Depreciation of buildings (48,571) (246,923) - - Franking credits on dividends received - 505 - 505 Research and development tax concession (756,519) - - Inter-entity dividend - - (3,000,000) (8,665,500) Sale of shares - 2,709,139 - 2,709,139 Share of associates profits 37,019 - - - Impairments and write downs 8,719,337 - 25,028,677 - Losses not recognised 7,495,463 - 7,485,636 -

For personal use only use personal For Under / (over) provision (504,877) Other 2,549,457 5,918 2,550,028 (1,683) Income tax expense/(benefit) attributable to operating profit (20,667,787) 18,234,210 7,614,659 5,491,594

- 39 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

12 TAXATION (cont) Consolidated Company (b) Current tax (assets)/liabilities 2008 2007 2008 2007 Provision for current income tax $ $ $ $ Movements during the year: Balance at the beginning of period 2,884,800 (2,512,629) 2,884,800 (2,512,629) Income tax paid (5,977,787) (6,827,363) (5,360,489) (6,827,363) Provision for current tax years 10,775,407 - 10,775,407 Losses utilised - - - - Under/(over) provision of prior year (2,738,673) 1,449,385 (2,738,673) 1,449,385 Current year's income tax liability/(refund) on profit from ordinary activities (5,831,660) 2,884,800 (5,214,362) 2,884,800

(c) Deferred tax assets/(liabilities) Provision for deferred income tax assets/(liabilities) comprises the estimated expense at the applicable rate of 30% on the following items: Deductions for unsettled sales and associated inventory costs - (15,342,443) - (29,068) Interest receivable - (184,864) - (184,173) Research and development tax concession - (1,253,415) - - Tax losses - - - - Sundry items - 1,473,043 24,002 598,834 - (15,307,679) 24,002 385,593

The Group has not recognised a deferred tax liability in relation to an equity accounted associate totalling $nil (2007: $2,799,657) as the Directors do not intend to dispose of the investment and accordingly the temporal differences will not reverse in the foreseeable future.

(d) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Tax losses 7,495,463 - 7,495,463 - Deductible temporary differences 8,719,337 - 25,028,677 - 16,214,800 - 32,524,140 -

The deductible 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 Group can utilise the benefits from. For personal use only use personal For

- 40 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

13 EARNINGS PER SHARE The following securities have been classified as ordinary shares and included in basic earnings per share: ordinary shares There are no securities other than ordinary shares on issue at the date of this report. Consolidated 2008 2007 Profit / (loss) attributable to ordinary shareholders $ $ Profit / (loss) for the year (109,050,931) 36,839,422 Profit / (loss) attributable to ordinary shareholders (basic) (109,050,931) 36,839,422 Profit / (loss) attributable to ordinary shareholders (diluted) (109,050,931) 36,839,422

Weighted average number of shares Issued ordinary shares at 1 July 236,733,269 140,702,350 Effect of shares issued upon exercise of options - 63,812,638 236,733,269 204,514,988

Weighted average number of ordinary shares at 30 June 236,733,269 204,514,988 Effect of share options on issue - 2,282,596 Weighted average number of ordinary shares (diluted) at 30 June 236,733,269 206,797,584

Basis earnings per share from continuing operations (46.06) cents 18.01 cents Diluted earnings per share from continuing operations (46.06) cents 17.82 cents

During 2007 options were converted to ordinary shares. The diluted EPS calculation includes options issued for nil consideration which for the purpose of the calculation was based on quoted market price weighted with reference to the date of conversion.

Consolidated Company 14 TRADE AND OTHER RECEIVABLES 2008 2007 2008 2007 Current $ $ $ $ Trade debtors (i) 14,306,910 68,418,430 134,549 11,846,614 Impairment of trade debtors (iii) (1,007,710) (98,299) (98,299) (98,299) 13,299,200 68,320,131 36,250 11,748,315 Loans to associated entities – unsecured 2,077,550 - 2,077,550 - Impairment of loans to associated entities (iv) (2,077,550) - (2,077,550) - - - - - Prepayments 177,443 - 18,395 - Interest receivable 302 616,683 194 613,911 Other loans (ii) 42,840,766 64,803,258 - 20,715,627

For personal use only use personal For Impairment of other loans (v) (31,387,491) - - - 11,453,275 64,803,258 - 20,715,627 Other receivables 505,257 - - - 25,435,477 133,740,072 54,839 33,077,853

- 41 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

14 TRADE AND OTHER RECEIVABLES (cont) (i) Trade debtors include deferred payment terms of $12,003,699 (2007: $54,203,699) provided to purchasers of land at Marina Cove Pty Ltd. Deferred payments outstanding as at 30 June 2008 were received in September 2008 with the exception of a discount of $832,411 which was provided for early repayment and was included as an impairment loss as at 30 June 2008. (ii) Other loans include financing of $42,840,766 (2007: $44,103,258) provided to purchasers of land from Marina Cove Pty Ltd. Vendor finance of $20,700,000 provided in the prior year to the purchaser of 49% of CP1’s shareholding in Azzura Pacific Resort Pty Ltd was repaid on 2 May 2008 when CP1 acquired their shares in the company. The Group’s exposure to credit risks and impairment losses related to trade and other receivables is disclosed in note 27. Impairment losses At 30 June 2008, the Group performed its balance date review of the carrying value of its assets in order to identify whether any assets may be impaired. Having regard to the current issues impacting upon the property market, including the ongoing global credit and liquidity crisis and its impact on the Australian property markets, the Group has recorded impairment losses and write downs in respect of certain assets, as outlined in note 9. These impairment losses represent estimated losses that may be incurred based on a number of assumptions involving the amount that will be received upon repayment or sale of the security property and the period until repayment is received. Actual results may differ from these estimates. (iii) Trade debtors As a result of the above review, the Group recorded impairment losses of $909,411 (2007: $98,299) in respect of amounts owing by two trade debtors that management concluded were unlikely to be recovered. (iv) Loans to associated entities (current) As a result of the above review, the Company and the Group recorded impairment losses of $2,077,550 (2007: nil) in respect of an unsecured loan that is provided to an associate of the Company. The recoverable amount of the loan was calculated based on the discounted future cash flow of the loan. (v) Other loans - vendor finance As a result of the above review, the Group recorded an impairment loss of $31,387,491 (2007: nil) in relation to loans provided to purchasers of land at Martha Cove. The recoverable amount of the loans was calculated based on the discounted future cash flow of each loan. (vi) Loans to associated entities (non- current) As a result of the above review, the Company and the Group recorded impairment losses of $1,223 (2007: nil) in respect of an unsecured loan that is provided to an associate of the Company. The recoverable amount of the loan was calculated based on the discounted future cash flow of each loan (refer note 15).

Consolidated Company 15 OTHER RECEIVABLES 2008 2007 2008 2007 Non-current $ $ $ $ Loans to controlled entities - - 35,697,520 - Loans to associated entities – secured - 2,156,045 - 2,156,045 Loans to associated entities - unsecured 1,223 1,223 Loans to associated entities - provision for impairment (vi) (1,223) (1,223) Intercompany loans – tax consolidation - - 265,522 10,255,332 Deposits in trust (i) 6,651,200 - - - Other deposits - 7,022 - - For personal use only use personal For 6,651,200 2,163,067 35,963,042 12,411,377

(i) Deposits in trust relate to advance deposits received from presales of apartments to be constructed at the Paradise Resort site. Deposits are typically 10% and are non-refundable except in certain circumstances.

The carrying amount of loans to controlled entities was impairment tested. No impairment was deemed necessary as the recoverable amount of each loan calculated as the discounted future cash flow of the loan was greater than the carrying amount.

- 42 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 16 INVENTORIES $ $ $ $ Current Raw materials and stores - at cost 196,551 - - - Land held for development and resale at net realisable value 71,097,433 72,520,794 - 2,638,786 71,293,984 72,520,794 - 2,638,786

Non-current Land held for development and resale at net realisable value 223,224,117 132,717,855 - -

Land held for development and resale comprises: Cost of land acquisition 127,247,287 66,828,821 - 2,488,967 Development costs capitalised 296,048,205 226,695,355 - 33,732 Other costs (borrowing costs, rates, taxes and other amounts) capitalised 122,628,607 80,135,913 - 116,087 Less amounts transferred to Cost of Goods Sold (176,886,931) (168,421,440) - - Write down of inventory (i) (74,715,618) - - - 294,321,550 205,238,649 - 2,638,786

Impairment losses At 30 June 2008, the Group performed its balance date review of the carrying value of its assets in order to identify whether any assets may be impaired. Having regard to the current issues impacting upon the property market, including the ongoing global credit and liquidity crisis and its impact on the Australian property markets, the Group has recorded impairment losses and write downs in respect of certain assets, as outlined in note 9. These impairment losses represent estimated losses that may be incurred based on a number of assumptions involving the amount that will be received upon repayment or sale of the security property and the period until repayment is received. Actual results may differ from these estimates. (i) Inventory As a result of the above review, the Group recorded impairment losses of $74,715,618 (2007: nil) in respect of the carrying value of inventory. The recoverable amount of inventory was calculated based on the selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

Security As at 30 June 2008, inventory with a carrying amount of $294,518,101 (2007: $205,238,649) is subject to registered

charges to secure loans. For personal use only use personal For

- 43 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 17 INVESTMENTS 2008 2007 2008 2007 Current $ $ $ $ Investments in managed investment schemes: - City Pacific First Mortgage Fund – available for sale - 13,310 - -

Non-current Investment in controlled entities: - unlisted shares at cost - - 98,051,594 61,253,951 - impairment of investment in controlled entities (i) - - (78,413,272) - - - 19,638,322 61,253,951 Investment in associates: - unlisted shares at cost - - 1,000,101 13,441,486 - impairment of investment in associates (ii) - - (1,000,101) - - - - 13,441,486 Investments in other entities – available for sale: - unlisted shares at fair value 666 666 666 666 - impairment of investments in other entities (iii) (666) - (666) - - 666 - 666 - 666 19,638,322 74,696,103 Impairment losses

At 30 June 2008, the Group performed its reporting date review of the carrying value of its assets in order to identify whether any assets may be impaired. Having regard to the current issues impacting upon the property market, including the ongoing global credit and liquidity crisis and its impact on the Australian property markets, the Group has recorded impairment losses and write downs in respect of certain assets, as outlined in note 9. These impairment losses represent estimated losses that may be incurred based on a number of assumptions involving the amount that will be received upon repayment or sale of the security property and the period until repayment is received. Actual results may differ from these estimates. (i) Investment in controlled entities As a result of the aforementioned review, the Company recorded an impairment loss of $78,413,272 (2007: $Nil) with respect to the Company's investments in controlled entities. The recoverable amount of the investment was calculated based on the discounted future cash flow of each investment. The investment, including the impairment is eliminated upon consolidation of the Group. (ii) Investment in associates - unlisted shares at cost As a result of the aforementioned review, the Company recorded an impairment loss of $1,000,101 (2007: $Nil) with respect to investments in associates. The recoverable amount of the carrying value of the investment was calculated based on the discounted future cash flow of each investment. (iii) Investment in associates As a result of the aforementioned review, the Company and the Group recorded an impairment loss of $666 (2007: nil) with respect to the Company's investments in other entities. The recoverable amount of the investment

was calculated based on the discounted future cash flow of each investment. For personal use only use personal For

- 44 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 18EQUITY ACCOUNTED INVESTEES $ $ $ $ Associates – carrying value 1,123,498 13,651,674 - - Less: impairment in carrying value of associates (i) (1,123,498) - - - - 13,651,674 - -

Impairment losses At 30 June 2008, the Group performed its balance date review of the carrying value of its assets in order to identify whether any assets may be impaired. Having regard to the current issues impacting upon the property market, including the ongoing global credit and liquidity crisis and its impact on the Australian property markets, the Group has recorded impairment losses and write downs in respect of certain assets, as outlined in note 9. These impairment losses represent estimated losses that may be incurred based on a number of assumptions involving the amount that will be received upon repayment or sale of the security property and the period until repayment is received. Actual results may differ from these estimates. (i) Carrying value of associates As a result of the aforementioned review, the Group recorded an impairment loss of $1,123,498 (2007: $Nil) with respect to the carrying value of equity accounted investees. The recoverable amount of the carrying value of the investment was calculated based on the discounted future cash flow of each investment.

Investments in associates In the financial statements of the Company, investments in associates are accounted for at cost less impairment losses and included with investments. The Group accounts for associates using the equity method.

Details of the carrying value of investments in associates net of impairment are as follows:

Ordinary share ownership interest Investment carrying value Consolidated and Company Consolidated Name Principal activities 2008 2008 2007 2007 % $ % $ Cira International Pty Ltd Property development and hotel 50.00% - 50.00% 176,334 management Lake Views Estates Pty Ltd Property development 50.00% - 50.00% -

Azzura Pacific Resort Pty Ltd (i) Property development and hotel - - 51.00% 13,475,340 management MP Pacific Investments Pty Ltd Trustee of the MP Pacific 50.00% - 50.00% - Investments Unit Trust MP Pacific Investments Unit Property development and hotel 50.00% - - - Trust management

- 13,651,674 For personal use only use personal For

- 45 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

18 EQUITY ACCOUNTED INVESTEES (cont) All incorporated associates and joint ventures are incorporated in Australia. All equity accounted investees have a 30 June balance date.

(i) On 28 June 2007, CP1 sold 49% of its shareholding in Azzura Pacific Resort Pty Ltd. Prior to the sale, CP1 controlled and therefore consolidated Azzura Pacific Resort Pty Ltd. CP1 accounted for its investment in Azzura Pacific Resort Pty Ltd using the equity method from the date of the sale as the company had joint control of Azzura Pacific Resort Pty Ltd in accordance with a shareholders agreement.

On 2 May 2008, CP1 reacquired the 49% shareholding in Azzura Pacific Resort Pty Ltd, bringing its total ownership interest in the company back to 100%. Following this transaction CP1 controlled and therefore

consolidated Azzura Pacific Resort Pty Ltd. For personal use only use personal For

- 46 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

18 EQUITY ACCOUNTED INVESTEES (CONT.) Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the Group:

Current Non-current Total Current Non-current Total Share of assets assets assets liabilities liabilities liabilities Revenues Expenses Profit/ (loss) Profit/ (loss) 2008 $ $ $ $ $ $ $ $ $ $ Cira International Pty Ltd 88,641,509 - 88,641,509 107,560,528 - 107,560,528 21,412,905 (40,836,571) (19,423,666) - Lake Views Estates Pty Ltd 54,154,473 5,573,973 59,728,446 54,561,387 5,474,076 60,035,463 3,491,188 (3,744,293) (253,105) - MP Pacific Investments Pty Ltd 100,100 - 100,100 100,000 - 100,000 - - - - MP Pacific Investments Unit Trust 515,181 21,069,085 21,584,266 708,641 20,037,913 20,746,554 966,030 (2,128,417) (1,162,387) - Azzura Pacific Resort Pty Ltd (i) 2,101,418 87,559,781 89,661,199 63,848,942 11,749,638 75,598,580 18,266,862 (18,689,130) (422,268) (211,134) 145,512,681 114,202,839 259,715,520 226,779,498 37,261,627 264,041,125 44,136,985 (65,398,411) (21,261,426) (211,134) 2007 Cira International Pty Ltd 2,110,537 93,537,449 95,647,986 95,295,319 - 95,295,319 4,054,551 (3,701,884) 352,667 176,284 Lake Views Estates Pty Ltd 50,127,874 3,309,046 53,436,920 50,204,778 3,286,055 53,490,833 - (19,813) (19,813) - Azzura Pacific Resort Pty Ltd (i) 2,634,803 82,611,888 85,246,691 8,882,658 49,941,797 58,824,455 - - - - MP Pacific Investments Pty Ltd 100,100 - 100,100 100,000 - 100,000 - - - - 54,973,314 179,458,383 234,431,697 154,482,755 53,227,852 207,710,607 4,054,551 (3,721,697) 332,854 176,284

(i) In June 2007 CP1 sold 49% of its shareholding in Azzura Pacific Resorts Pty Ltd. CP1 deconsolidated Azzura Pacific Resorts Pty Ltd as a result of the transaction, however continued to equity account its investment as the Company had joint control in accordance with a shareholder agreement. In May 2008, CP1 reacquired these shares, bringing its shareholding in Azzura Pacific Resorts Pty Ltd to 100% ownership. As a result of the transaction CP1 commenced consolidating the company from date of settlement (being 2 May 2008). The Group's share of loss from Azzura Pacific Resort Pty Ltd in 2008 of $211,134 represents the company's trading performance whilst it was equity accounted (being the

period 1 July 2007 to 2 May 2008). For personal use only use personal For

- 47 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 2008 2007 2008 2007 19 PLANT & EQUIPMENT $ $ $ $ Plant and equipment - at cost 3,409,748 299,041 1,141 1,141 Accumulated depreciation (988,638) (76,789) (1,141) (1,069) 2,421,110 222,252 - 72

Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below: Buildings Carrying amount at beginning of period - 352,910 - - Additions - 1,065,224 - - Disposals - - - - Consolidation of Azzura Pacific Resort Pty Ltd 477,503 - - - Deconsolidation of Azzura Pacific Resort Pty Ltd - (1,314,630) - - Depreciation (7,396) (103,504) - - Carrying amount at end period 470,107 - - -

Plant & equipment Carrying amount at beginning of period 222,252 464,099 72 414 Additions 99,134 478,146 - - Disposals - (126,930) - - Consolidation of Azzura Pacific Resort Pty Ltd 527,892 - - - Deconsolidation of Azzura Pacific Resort Pty Ltd - (417,112) - - Depreciation (85,829) (175,951) (72) (342) Carrying amount at end period 763,449 222,252 - 72

Fitting & fixtures Carrying amount at beginning of period - 69,994 - - Additions 20,567 199,177 - - Disposals - - - - Consolidation of Azzura Pacific Resort Pty Ltd 1,230,728 - - - Deconsolidation of Azzura Pacific Resort Pty Ltd - (233,670) - - Depreciation (63,741) (35,501) - - Carrying amount at end period 1,187,554 - - -

Impairment testing At 30 June 2008, the Group performed its reporting date review of the carrying value of its assets in order to identify whether any assets may be impaired. After performing this review, the Group concluded that there was no impairment to property, plant and equipment.

Security For personal use only use personal For As at 30 June 2008, property, plant and equipment with a carrying amount of $2,421,110 (2007: $222,252) are subject to registered charges to secure bank loans.

- 48 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

Consolidated Company 20 TRADE AND OTHER PAYABLES 2008 2007 2008 2007 Current $ $ $ $ Trade creditors 34,598,377 21,646,646 939,322 9,633,538 Accruals 1,180,681 10,095,339 213,583 96,927 Deposits 2,500,000 - - - Other payables 3,628,760 6,185 1,185,051 - 41,907,818 31,748,170 2,337,956 9,730,465

The Group's exposure to liquidity risk related to trade and other payables is disclosed in note 27.

21 TRADE AND OTHER PAYABLES Non-current Deposits 6,651,200 - - -

Deposits in trust relate to deposits received for apartments to be constructed at the Paradise Resort site. Deposits are typically 10% and are non-refundable except in certain circumstances.

22 INTEREST-BEARING LOANS Current Loan - Australian Financial Institution 141,879,204 - 12,000,000 - Loan - City Pacific First Mortgage Fund 76,221,017 140,583,398 - - Loan - Related Parties 39,442,012 19,856,991 31,052,279 - 257,542,233 160,440,389 43,052,279 -

Financing arrangements The Group has access to the following lines of credit (i): Total facilities available: Loan - Australian Financial Institution 151,000,000 - 12,000,000 - Loan - City Pacific First Mortgage Fund 76,221,017 213,260,000 - - Loan - Related Parties 42,496,750 20,000,000 34,107,017 - 269,717,767 233,260,000 46,107,017 - Facilities utilised at reporting date: Loan - Australian Financial Institution 141,879,204 - 12,000,000 - Loan - City Pacific First Mortgage Fund 76,221,017 140,583,398 - - Loan - Related Parties 39,442,012 19,856,991 31,052,279 - 257,542,233 160,440,389 43,052,279 - Facilities not utilised at reporting date: Loan - Australian Financial Institution (ii) 9,120,796 - - - For personal use only use personal For Loan - City Pacific First Mortgage Fund - 72,676,602 - - Loan - Related Parties (iii) 3,054,738 143,009 3,054,738 - 12,175,534 72,819,611 3,054,738 -

(i) Excludes a contingent liability facility as disclosed at note 29. (ii) The unutilised facility is only available to fund the completion of development works of the subject property located at Martha Cove. (iii) The unutilised facility is to allow for capitalising interest and is not available for drawdown.

- 49 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

22 INTEREST-BEARING LOANS (cont) Loan - Australian Financial Institution CP1 has a finance facility with a limit of $12,000,000 comprising of a bill discount facility to be applied for working capital purposes. The finance arrangement is a variable interest only facility (rate 8.36%) due for repayment on 27 November 2008.

At 30 June 2008, the Company was in breach of financial covenants attached to its $12,000,000 bill facility as a result of lower than forecast results and the impact of the impairment losses outlined in note 9. The covenants breached were: Debt cover ratio; and Gearing ratio. Subsequent to year end, the terms of the $12,000,000 facility have been renegotiated (refer note 33).

Marina Cove Pty Ltd, a wholly owned subsidiary of CP1, has a finance facility with a limit of $99,795,071 comprising of a bill discount facility (limit of $94,000,000) and a contingent liability facility (limit of $5,795,071) to be applied for the purpose of property development at Martha Cove. The finance arrangement was a fixed interest only facility (7.66%). The facility had a staged repayment schedule involving repayment in full by August 2009. As at 30 June 2008, the facility was drawn to $89,321,794, comprising a discount bill facility of $84,879,204 and a contingent liability facility of $4,492,590. At 30 June 2008, Marina Cove Pty Ltd was in breach of financial covenants attached to the facility as follows: Marina Cove failed to meet a facility 'step down' of $15 million which was due for repayment on 30 June 2008; Marina Cove failed to complete the development of Stage 4 of the subject property by the financier's required completion date of 30 June 2008; and Marina Cove was in breach of the loan to valuation covenant. Subsequent to year end, the terms of the $99,795,071 facility have been renegotiated (refer note 33).

Azzura Pacific Resort Pty Ltd, a wholly owned subsidiary of CP1, has a bill facility with a limit of $45,000,000 for the purpose of funding working capital, and was fully drawn at 30 June 2008. The bill facility is fixed interest only (6.75%) and is due for repayment on 29 March 2009. At 30 June 2008, Azzura Pacific Resort Pty Ltd was compliant with all financial covenants attached to its $45,000,000 finance facility.

Loan - City Pacific First Mortgage Fund Marina Cove Pty Ltd, a fully owned subsidiary of CP1, has a development loan facility for which the facility limit is 80% of independent valuation of the subject property. As at 30 June 2008, the facility limit was $76,221,017. The loan is fixed interest (current rate 12.00%) with interest capitalising and has an annual review date of 30 June each year. The loan is secured by first ranking registered mortgage over property the subject property and a second ranking fixed and floating charge of the assets of Marina Cove. As at 30 June 2008, Marina Cove was in breach of the loan to value ratio covenant on the loan. Subsequent to year end, the terms of the loan have been renegotiated (refer note 33).

Loan - Related Parties CP1 has a finance facility of $32,000,000 with City Pacific Limited to be used for working capital purposes. The draw downs from the facility have predominantly been on-lent to Marina Cove Pty Ltd to fund the development of the Martha Cove project. At 30 June 2008, the loan was drawn to $28,945,262. Interest on the facility is variable (current rate 13.00%) with interest capitalising. The facility matured on 1 November 2008. Subsequent to year

For personal use only use personal For end, the terms of the loan have been renegotiated (refer note 33).

Azzura Pacific Resort Pty Ltd, a fully owned subsidiary of CP1, has a development loan facility of $8,100,000, excluding provision for interest with City Pacific Limited. At 30 June 2008, the loan was drawn to $8,389,733 and has a fixed interest rate of 20.00% with interest capitalising. The facility matures on 31 March 2009.

CP1 has a finance facility of $2,107,017 with Lake Views Estate Pty Ltd to be used to working capital purposes. At 30 June 2008, the loan was drawn to $2,107,017. Interest on the facility is variable (current rate 13.00%) with interest capitalising. The facility has no fixed repayment date.

- 50 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

22 INTEREST-BEARING LOANS (cont) Term and debt repayment schedule Terms and conditions of outstanding loans were as follows: 30 June 2008 30 June 2007 Nominal Year of Carrying Carrying Consolidated interest rate maturity Face value amount Face value amount Secured bank loans 8.36% 2008 12,000,000 12,000,000 - - Secured bank loans 7.66% 2008 84,879,204 84,879,204 - - Secured bank loans 6.75% 2009 45,000,000 45,000,000 - - Secured related party loans 13.00% 2008 28,945,262 28,945,262 19,856,991 19,856,991 Secured related party loans 12.00% 2008 76,221,017 76,221,017 140,583,398 140,583,398 Secured related party loans 20.00% 2009 8,389,733 8,389,733 - - Secured related party loans 13.00% n/a 2,107,017 2,107,017 - - 257,542,233 257,542,233 160,440,389 160,440,389 Company Bank Loans 8.36% 2008 12,000,000 12,000,000 - - Secured related party loans 13.00% 2008 28,945,262 28,945,262 - - Secured related party loans 13.00% n/a 2,107,017 2,107,017 - - 43,052,279 43,052,279 - - All loans are denominated in Australian dollars.

Consolidated Company 23 EMPLOYEE BENEFITS 2008 2007 2008 2007 Current $ $ $ $ Salaries and wages accrued 16,044 4,066 - - Liability for annual leave 315,995 38,321 - - 332,039 42,387 - -

Non-current Liability for long service leave 224,140 1,408 - -

Number of employees at year end 453 5 - -

Company and Consolidated 24 ISSUED CAPITAL 2008 2007 Issued and paid-up share capital $ $ 236,733,269 (2007: 236,733,269) ordinary shares, fully paid 100,201,070 100,201,070

The Company does not have authorised capital or par value in respect of its issued shares. For personal use only use personal For

- 51 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

24 ISSUED CAPITAL (cont) 2008 2007 Number of Number of (a) Ordinary shares Shares $ Shares $ Balance at the beginning of the year 236,733,269 100,201,070 140,702,350 23,376,333 Exercise of Options - 2008: Nil (2007: 96,030,919 upon exercise of $0.80 options) - - 96,030,919 76,824,737 Balance at end of year 236,733,269 100,201,070 236,733,269 100,201,070

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation.

Company and Consolidated 2008 2007 (b) Options $ $ Balance at the beginning of the year - - - options issued to holders of ordinary shares during the period - 112,561,880 - options exercised during the period - (96,030,919) - options expired during the period - (16,530,961) Balance at end of year - -

In 2007, shareholders were issued with bonus options on the basis of 4 options for every 5 shares held for no consideration. The options were exercisable at $0.80 per option and expired on 31 January 2007. During the prior period, City Pacific, a related party, exercised 62,136,000 of these options, with consideration for the issue of shares being a movement in intercompany loan balances of $49,708,800.

Consolidated Company 25 RETAINED EARNINGS 2008 2007 2008 2007 $ $ $ $ Retained earnings at the beginning of the year 44,770,408 28,757,138 10,486,408 (1,359,625) Net profit attributable to members of the parent entity (109,050,931) 36,839,422 (89,113,598) 32,672,185 Dividends paid or provided for (14,203,996) (20,826,152) (14,203,996) (20,826,152)

Retained earnings at the end of the year (78,484,519) 44,770,408 (92,831,186) 10,486,408 For personal use only use personal For

- 52 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

26 DIVIDENDS Dividends recognised in the current year by the Company: Cents per Total Date of Franked / share amount payment unfranked 2008 Final 2007 ordinary 6.0 14,203,996 30-Nov-07 Partly franked

2007 Interim 2007 ordinary 3.0 7,101,998 31-May-07 Partly franked Final 2006 ordinary 6.0 13,724,154 30-Nov-06 Franked Total amount 20,826,152

The final 2007 ordinary dividend was 33.33% franked at a tax rate of 30% and 66.67% unfranked. On 21 February 2008, CP1 announced that it would pay an interim dividend of 3 cents per share partially franked to 33.33% on 30 May 2008. On 2 May 2008, the Board announced that the interim dividend for 2008 was cancelled due to a delay in repayment of vendor finance facilities and below-projected land sales at Martha Cove. It is the Board’s view that the ongoing global credit and liquidity crisis has contributed to this outcome. The Board of Directors has resolved that a final dividend would not be paid for the 2008 financial year, having consideration to the following factors: the ongoing global credit and liquidity crisis and its impact on the Australian property markets; the Company's strategy to reduce its gearing level; and to allow for the completion of the Company's consolidation phase.

Due to current market conditions the Directors believe that this course of action is in the best interest of shareholders, the Company and the Group.

Company 2008 2007 Dividend franking account $ $ 30% franking credits available to shareholders of CP1 for subsequent financial years (1,913,134) 2,849,248

The above available amounts are based on the balance of the dividend franking account at year end adjusted for: a) franking credits that will arise from the payment of the amount of the provision for income tax; b) franking debits that will arise from the payment of dividends recognised as a liability at year-end; and c) franking credits that will arise from the receipt of dividends recognised as receivables at year-end. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. As no final dividend will be paid for 2008, the impact on the dividend franking account of dividends proposed after

the balance sheet date but not recognised as a liability is to reduce it by $nil (2007: $2,029,142). For personal use only use personal For

- 53 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

27 FINANCIAL INSTRUMENTS Overview The Group has exposure to the following risks from their use of financial instruments: credit risk; liquidity risk; market risk. This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Due to the size of the Company, the Board performs the same functions that a risk committee would undertake rather than have a separate risk committee. The Board reviews and oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Board takes responsibility for developing and monitoring risk management policies, and undertakes both regular and ad hoc reviews of risk management controls and procedures and reports regularly to the Board on its activities. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through their training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Estimation of fair values Fair values The major method and assumptions used in estimating the fair values of financial instruments are disclosed in Note 4. Fair values versus carrying amounts 30 June 2008 30 June 2007 Carrying Carrying Consolidated amount Fair value amount Fair value Available-for-sale financial assets - - 13,310 13,310 Investments - - 666 666 Equity accounted investees - - 13,651,674 13,651,674 Loans and receivables 32,086,677 32,086,677 135,903,139 135,903,139 Cash and cash equivalents 2,000,634 2,000,634 366,621 366,621 Secured bank loans (141,879,204) (141,879,204) - - Loans from related parties (115,663,029) (115,663,029) (160,440,389) (160,440,389) Trade and other payables (48,559,018) (48,559,018) (31,748,170) (31,748,170)

(272,013,940) (272,013,940) (42,253,149) (42,253,149) For personal use only use personal For

- 54 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

27 FINANCIAL INSTRUMENTS (cont) 30 June 2008 30 June 2007 Estimation of fair values (cont) Carrying Carrying Company amount Fair value amount Fair value Available-for-sale financial assets - - 666 666 Investments in controlled entities 19,638,322 19,638,322 61,253,951 61,253,951 Investments in associates - - 13,441,486 13,441,486 Loans and receivables 36,017,881 36,017,881 45,489,230 45,489,230 Cash and cash equivalents 349,753 349,753 92,959 92,959 Secured bank loans (12,000,000) (12,000,000) - - Loans from related parties (31,052,279) (31,052,279) - - Trade and other payables (2,337,956) (2,337,956) (9,730,465) (9,730,465) 10,615,721 10,615,721 110,547,827 110,547,827

(a) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from vendor finance loans and trade receivables. For the Company it arises from receivables due from subsidiaries and investment assets.

Trade receivables and vendor finance loans The majority of CP1’s vendor finance loan assets are construction and development loans which require a high degree of experience in their assessment and management. Pursuant to the Management and Administration Services Agreement, City Pacific Limited provides a management team to CP1 who focus on each proposed loan and the credentials of the borrower and associated entities, and primarily relies on the value of the underlying security property for its loans. This risk is minimised by prudent assessment of loans and valuations of each security property by independent approved valuer.

Guarantees Group policy is to provide financial guarantees only to related entities within the Group. Details of outstanding guarantees are provided in note 29.

Credit risk exposures Management monitors the Group's exposure to credit risk on an ongoing basis. At the balance sheet date, a concentration of credit risk exists in respect of the Group’s vendor finance and deferred settlements as approximately 12.27% (2007: 33.5%) of total assets were represented by these balances prior to impairment. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The Group’s maximum exposure to credit risk at the reporting date was: Consolidated Company 2008 2007 2008 2007 Note $ $ $ $ Trade and other receivables 14,15 32,086,677 135,903,139 36,017,881 45,489,230 Investments 17 - 13,976 19,638,322 74,696,103 Equity accounted investments 18 - 13,651,674 - - Cash and cash equivalents 30(a) 2,000,634 366,621 349,753 92,959

34,087,311 149,935,410 56,005,956 120,278,292 For personal use only use personal For

- 55 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

27 FINANCIAL INSTRUMENTS (cont) (a) Credit risk (cont) The Group’s most significant customer accounts for $16,823,794 of the carrying amount before impairment of Other Loans secured by second mortgages at 30 June 2008 (2007: $13,063,206). The aging of trade and other receivables at the reporting date was: Gross Impairment Gross Impairment 2008 2008 2007 2007 Consolidated $ $ $ $ Not past due 35,274,890 (14,043,665) 134,120,881 - Past due 0-30 days 286,443 - 709,786 - Past due 31-90 days 326,822 - 53,064 - Past due 91 days to one year 30,184,185 (20,255,010) 751,014 (98,299) More than one year 488,311 (175,299) 366,693 - 66,560,651 (34,473,974) 136,001,438 (98,299)

Company Not past due 38,060,404 (2,078,773) 45,009,800 - Past due 0-30 days - - - - Past due 31-90 days 36,250 - - - Past due 91 days to one year - - 211,036 (98,299) More than one year 98,299 (98,299) 366,693 - 38,194,953 (2,177,072) 45,587,529 (98,299)

The Group recorded an impairment loss of $2,077,550 (2007: nil) in respect of a loan to an associate. The fair value of the asset was determined by reference to contracts of sale entered into in relation to the underlying asset. The asset belongs to the property segment of the Group.

Trade and other receivables of the Company and the Group predominantly consist of vendor finance loans secured by registered second mortgages over real property, which are renegotiated in the normal course of business. Impairment losses of $31,387,491 (2007: nil) were recognised in respect of these loans.

The total carrying amount of the Group’s trade and other receivables that are past due is $10,855,452 (2007: $1,782,258). This comprises vendor finance loans secured by registered second mortgages of $9,190,520 (2007: nil) (fair value of security property of $9,190,520 (2007: nil)) and trade receivables of $1,664,932 (2007: $1,782,258) (fair value of $1,664,932 (2007: $1,782,258)) which were predominantly secured. All of the Group’s and the Company’s trade and other receivables at the reporting date were from customers

located in Australia. For personal use only use personal For

- 56 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

27 FINANCIAL INSTRUMENTS (cont) (b) Market risk Market risk is the risk that changes in market prices, such as interest rates and property values will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate risk Approximately 83.3% of the Group’s interest bearing loans are fixed interest-bearing which limits the Group exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates. The Group’s and the Company's exposure to interest rate risks of financial assets and liabilities for interest bearing financial instruments at the balance date are set out below: Consolidated Company Carrying amount Carrying amount 2008 2007 2008 2007 Fixed rate instruments $ $ $ $ Financial liabilities: Loan - Australian financial institution (129,879,204) - - - Loan - City Pacific First Mortgage Fund (76,221,017) - - - Loan - related parties (8,389,733) - (8,389,733) - (214,489,954) - (8,389,733) - Variable rate instruments Financial assets: Available-for-sale financial assets - 13,310 - - Loans and receivables 24,752,475 133,123,389 36,250 32,463,942 Cash and cash equivalents 2,000,634 366,621 349,753 92,959 Financial liabilities: Loan - Australian financial institution (12,000,000) - (12,000,000) - Loan - City Pacific First Mortgage Fund (140,583,398) - - Loan - related parties (31,052,279) (19,856,991) (31,052,279) - (16,299,170) (26,937,069) (42,666,276) 32,556,901

Interest rate sensitivity The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the reporting date would not affect the profit or loss for fixed rate instruments. An increase of 100 basis points in interest rates at the reporting date may result in an increase in the Group’s loss of up to $163,000 (Company: $427,000). A decrease of 100 basis points in interest rates as at the reporting date may result in a decrease in the Group’s loss of up to $163,000 (Company: $427,000).

Property value risk The majority of the Group’s financial assets are secured by mortgages over real property. As a result, the Group is subject to property value risk to fluctuations in the prevailing levels of market property values. The Group’s property value risk is managed on a regular basis by management in accordance with policies and procedures in place, including but not limited to: Providing mortgage loans only where CPFMF is the first mortgage lender and/or the Group is the property developer of the underlying asset; and

For personal use only use personal For Regular valuations of security properties by registered valuers.

Property value sensitivity A decrease of 10% in property values as at the reporting date may result in potential additional impairment and write downs of up to $35.7 million. An increase of 10% in property values as at the reporting date may result in a potential reduction in impairment and write downs of up to $41.1 million.

- 57 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

27 FINANCIAL INSTRUMENTS (cont) (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under normal conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

As part of the ongoing of liquidity the Financial Controller maintains a daily cash flow analysis which is reconciled daily to the bank account. The Financial Controller reports to the Board monthly in relation to the cash position and liquidity of the Group. The following are the contractual maturities of non-derivative financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Consolidated Carrying Contractual Less than More than 5 30 June 2008 amount cash flows 1 year 1-5 years years Loan - Australian financial institution 141,879,204 146,746,039 146,746,039 - - Loan - City Pacific First Mortgage Fund 76,221,017 76,221,017 76,221,017 - - Loan - related parties 39,442,012 42,253,883 42,253,883 - - Trade and other payables 48,559,018 48,559,018 41,907,818 6,651,200 - 306,101,251 313,779,957 307,128,757 6,651,200 -

Consolidated 30 June 2007 Loan - City Pacific First Mortgage Fund 140,583,395 157,453,402 157,453,402 - - Loan - related parties 19,856,991 19,974,501 19,974,501 - - Trade and other payables 31,748,170 31,748,170 31,748,170 - - 192,188,556 209,176,073 209,176,073 - -

Company 30 June 2008 Loan - Australian financial institution 12,000,000 12,412,274 12,412,274 - - Loan - related parties 31,052,279 32,604,541 32,604,541 - - Trade and other payables 2,337,956 2,337,956 2,337,956 - - 45,390,235 47,354,771 47,354,771 - -

Company 30 June 2007 Trade and other payables 9,730,465 9,730,465 9,730,465 - - 9,730,465 9,730,465 9,730,465 - -

Refer to note 5 for details of going concern.

(d) Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the return on capital and the level of

dividends to ordinary shareholders. For personal use only use personal For On 21 February 2008, CP1 announced that it would pay an interim dividend of 3 cents per share partially franked to 33.33% on 30 May 2008. On 2 May 2008, the board announced that the interim dividend for 2008 was cancelled due to a delay in repayment of vendor finance facilities and below-projected land sales at Martha Cove. It is the Board’s view that the ongoing global credit and liquidity crisis has contributed to this outcome.

- 58 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

27 FINANCIAL INSTRUMENTS (cont) (d) Capital management (cont) The Board of Directors made the decision that a final dividend would not be paid for the 2008 financial year, having consideration to the following factors: the ongoing global credit and liquidity crisis and its impact on the Australian property markets; the Company's strategy to reduce its gearing level; and to allow for the completion of the Company's consolidation phase. Due to current market conditions the Directors believe that this course of action is in the best interest of shareholders and the Company. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

Consolidated Company 28 COMMITMENTS 2008 2007 2008 2007 Capital commitments in relation to property acquisitions: $ $ $ $ Within one year - 19,500,000 - - Capital commitments in 2007 related to a land and property acquisition, for which an unconditional contract had been entered into by an associated entity, MP Pacific Investments Pty Ltd. The settlement occurred in August 2007. There were no capital commitments for the Company or the Group as at 30 June 2008.

29 CONTINGENT LIABILITIES Bank guarantees in relation to property development 4,492,590 15,830,371 4,492,590 -

Bank guarantees have been provided to contractors and government authorities for the property development of the Martha Cove site in Victoria. At the date of issuing this report, no liability has arisen from these guarantees. No liability is expected to arise from these guarantees.

Bank guarantees in relation to the Company's loan facilities 12,000,000 - - -

Unlimited guarantees have been provided by a subsidiary and an associate in favour of the Company over its facility with a financier. The bill facility is also supported by equitable charges over these company's shares and the shares of another subsidiary of the Company. No liability is expected to arise from these guarantees.

Bank guarantees in relation to subsidiary's loan facilities 139,000,000 - 139,000,000 -

Unlimited guarantees have been provided by the Company in favour of two subsidiaries as additional security over their respective bill facilities with their financier. Additionally, one subsidiary has provided a guarantee in favour of the other subsidiary. No liability is expected to arise from these guarantees.

Bank guarantees in relation to associate's loan facilities 88,182,482 - 88,182,482 -

Two guarantees have been provided by the Company in favour of an associate as additional security over its loan facilities with its respective financiers. One guarantee is an unlimited guarantee for which no liability is expected to arise. The second guarantee is limited to 50% of the principal outstanding plus interest to which a liability may

arise. Refer to note 8 for further detail. For personal use only use personal For

- 59 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

30 NOTES TO THE STATEMENT OF CASH FLOWS (a) Reconciliation of cash For the purpose of the statement of cash flow, cash includes cash on hand and at bank and short term deposits at call. Cash as at the end of the financial year as shown in the statement of cash flows is reconciled in the balance sheets as follows: Cash and cash equivalents 2,000,634 366,621 349,753 92,959

(b) Reconciliation of cash flow from operations with operating profit after income tax: Operating profit/(loss) after income tax (109,050,931) 36,839,422 (89,113,598) 32,672,185 Add/(less): Gain on sale of shares in controlled entity - (10,003,105) - (9,971,487) Gain on sale of investments - (24,567) - (24,567) Impairment losses and write downs 110,215,457 - 81,492,811 - Dividend from associate/subsidiary - - (10,000,000) (28,885,000) Depreciation and amortisation 156,966 314,956 72 342 Interest expense 3,505,615 2,664,358 2,953,931 643,466 Amounts transferred to provisions: - - - - - employee entitlements 512,384 172,793 - - Increase/(decrease) in deferred tax assets/ liabilities (15,307,679) 1,485,370 (361,591) (1,895,216) Increase/(decrease) in income taxes payable (8,716,460) 5,397,429 (8,099,162) 5,397,429 Net cash provided by operating activities before changes in assets and liabilities (18,684,648) 36,846,656 (23,127,537) (2,062,848) (Increase)/decrease in receivables and inventories (48,255,482) (59,885,005) (5,200,613) (5,434,017) Increase/(decrease) in creditors and accruals 23,279,989 (24,173,185) 26,906,677 574,601

Net cash from operating activities (43,660,141) (47,211,534) (1,421,473) (6,922,264)

31 RELATED PARTIES Key management personnel remuneration Individual directors and executives compensation disclosures Information regarding individual Directors and executive’s remuneration and some equity instruments disclosures as permitted by Corporations Regulation 2M.3.03 is provided in the remuneration report section of the Director’s Report. Apart from the details disclosed in this note, no director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving director’s interests existing at year end.

Key management personnel transactions with the Company or its controlled entities A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and

For personal use only use personal For conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis.

- 60 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

31 RELATED PARTIES (cont) Key management personnel transactions with the Company or its controlled entities (cont) Key management personnel transactions with the Company or its controlled entities during the year were as follows: In March 2008 Maldon Pty Ltd, an entity associated with director Mr PK Sullivan paid a $2.5 million deposit to Marina Cove Pty Ltd to acquire three land lots at Martha Cove at independent valuation. The contracts are conditional on certain matters which are yet to be satisfied. In June 2007 Sandkent Investments Pty Ltd, an entity associated with director Mr PK Sullivan, advanced funds to a third party to acquire shares in CP1 from City Pacific. The advance is for a term of 12 months at an interest rate of 8% per annum and is secured by a charge over the CP1 shares acquired. The borrower has extended the facility, pursuant to the terms of the loan agreement, for a further 12 months. The Group has a Construction Services Deed with Grocon Constructions (QLD) Pty Ltd, an entity associated with directors Mr Daniel Grollo and Mr Stephen Scanlon, providing Grocon Constructors (QLD) Pty Ltd with Preferred Builder status in relation to construction of any development projects undertaken by the Group. As at the date of this report no construction agreements have been entered into. The Group paid accounting fees of $nil (2007: $8,500) to an entity associated with director Mr Thomas Swan for accounting services during the year.

Movement in shares and options The movement during the reporting period in the number of ordinary shares and options of the Company held directly, indirectly or beneficially by each key management person, including their personally related entities is as follows:

Shares Held at Options Purchases/ Held at Directors 1 July exercised (Sales) 30 June Mr PK Sullivan (iii) 2008 74,470,612 - - 74,470,612 2007 78,778,790 63,057,532 (67,365,710) 74,470,612 Mr S Mackay 2008 1,188,000 - 25,000 1,213,000 2007 1,060,000 128,000 - 1,188,000 Mr D Grollo (ii), (iv) 2008 42,398,928 - - 42,398,928 2007 - - 42,398,928 42,398,928 Mr S Scanlon (ii) 2008 - - - - 2007 - - - - Executives Mr T Axarlis (v) 2008 - - - - Miss C Lamshed (vi) 2008 - - - - Directors – Former Mr IW Donaldson (i) 2008 1,040,000 - 40,000 1,080,000 2007 940,000 100,000 - 1,040,000 Mr P Trathen (i) 2008 50,000 - 40,000 90,000 2007 50,000 - - 50,000 Mr T Swan (i) 2008 1,300,000 - - 1,300,000 2007 1,075,000 225,000 - 1,300,000 (i) Resigned 29 June 2007 (ii) Appointed 29 June 2007 (iii) Includes shares and options in which director has an indirect holding through significant interest in City Pacific. City Pacific holds 72,440,290 shares in CP1 at year end. (iv) Includes shares and options in which director has an indirect holding through significant interest in BLAD Investment No 1 Pty Ltd.

For personal use only use personal For BLAD Investments No 1 Pty Ltd holds 42,398,928 shares in CP1 at year end. (v) Appointed 3 June 2008 (vi) Appointed 1 July 2008

No other key management personnel held shares in CP1 directly, indirectly or beneficially, including their personally related entities during the reporting or previous period. No key management personnel held options in CP1 as at 1 July 2007 and there was no trading in CP1 options by key management personnel during the year ended 30 June 2008.

- 61 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

31 RELATED PARTIES (cont) Identity of related parties The Group has a related party relationship with its subsidiaries, associates and with its key management personnel. Transactions with related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

During the year, City Pacific Limited, a significant shareholder, provided management and services to the Company and the Group pursuant to the Management and Services Agreement for which $172,145 (2007: $120,000) was incurred. During the year, City Pacific Project Management Pty Ltd, a controlled entity of City Pacific Limited, provided project management services to the Company and the Group as follows: - Marina Cove Pty Ltd, for which $1,821,645 (2007: $1,797,063) was incurred; - Azzura Pacific Resort Pty Ltd, for which $110,000 (2007: $60,000) was incurred; and - Lake Views Estates Pty Ltd, for which $165,000 (2007: $60,000) was incurred.

City Pacific Limited has advanced the Company an unsecured loan with a variable interest rate which is currently 13% per annum. The funds advanced during the year pursuant to the loan facility were $34,446,224 (2007: nil), with $5,500,962 (2007: nil) being repaid by the Company during the year. The amount outstanding at year end was $28,945,262 (2007: nil). The facility term matured on 1 November 2008. Subsequent to yearend, the terms of the facility have been renegotiated (refer note 33). Investments in related entities The Group had investments in City Pacific First Mortgage Fund for which City Pacific Limited is responsible entity. These investments in City Pacific First Mortgage Fund were redeemed during the year and the investment balance at year end was nil (2007: $13,310). These investments were on normal commercial terms and conditions. During the financial year, distributions of $697 (2007: $960) were received from City Pacific First Mortgage Fund. Controlled entities The Company has provided a non-interest bearing, unsecured loan to Marina Cove Pty Ltd, a controlled entity. The funds advanced during the year were $28,877,388 (2007: $9,050,000), with $5,444,946 (2007: $3,200,000) being repaid by Marina Cove during the year. The amount outstanding at year end was $29,282,442 (2007: $5,850,000).

Marina Cove Pty Ltd has loans of $76,221,017 (2007: $140,583,398) from City Pacific First Mortgage Fund, a registered scheme for which City Pacific Limited is the responsible entity. This loan is secured by registered first mortgages over property in the Mornington Peninsula. The loan had a review date of 30 June 2008 and carries a fixed interest rate of 12% (2007: variable interest rate of 12%).

The Company has provided a non-interest bearing, unsecured loan to Azzura Pacific Resort Pty Ltd, a controlled entity. The funds advanced during the year were $12,849,802 (2007: nil), with $3,945,196 (2007: nil) being repaid by Azzura Pacific Resort Pty Ltd during the year. The amount outstanding at year end was $8,904,606 (2007: nil).

The Company has a non-interest bearing, unsecured loan from GCI Management Pty Ltd, a controlled entity. The funds advanced during the year were $1,144,528 (2007: nil), with $163,046 (2007: nil) being repaid by the Company during the year. The amount outstanding at year end was $981,482 (2007: nil).

Martha Cove Sales Pty Ltd, a controlled entity has advanced the Company a non-interest bearing, unsecured loan. The funds advanced during the year were $880,000 (2007: nil), with $nil (2007: nil) being repaid by the

For personal use only use personal For Company during the year. The amount outstanding at year end was $880,000 (2007: nil).

The Company has received a non-interest bearing, unsecured loan from PR Hotel Management Pty Ltd, a controlled entity. The funds advanced during the year were $663,246 (2007: nil), with $35,200 (2007: nil) being repaid by the Company during the year. The amount outstanding at year end was $628,046 (2007: nil).

Azzura Pacific Resort Pty Ltd has a loan of $8,389,734 (2007: nil) from City Pacific Limited. This loan is secured by registered second mortgage over property at the Gold Coast. The loan facility is to 31 March 2009 and carries an interest rate of 20%.

- 62 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

31 RELATED PARTIES (cont) Associates The Company advanced funds of $2,077,550 (2007: nil) to Cira International Pty Ltd to fund working capital. The loan balance at year end was impaired to $nil (2007: nil). The loan is non-interest bearing and unsecured.

The Company advanced funds of $327,772 (2007: $401,045) to Lake Views Estates Pty Ltd towards its development in Braeside, Victoria. Lake Views Estates Pty Ltd repaid loan funds of $4,590,834 (2007: $50,000) during the year and the loan balance at year end was payable $2,107,017 (2007: receivable $2,156,045). The Company advanced funds of $1,223 (2007: nil) during the year to MP Pacific Investments. The loan balance at year end was impaired to $nil (2007: nil). The loan is non-interest bearing and unsecured.

Lake Views Estates Pty Ltd has loans of $54,688,573 (2007: $45,213,041) from City Pacific First Mortgage Fund. During the year funding of $13,240,886 (2007: $12,238,291) was advanced pursuant to the loan terms and repayments of $3,765,354 (2007: nil) were made. This loan is secured by registered first mortgage over property at Braeside in Victoria. The loan has a review date of 11 March 2009 and carries an interest rate of 13%.

Marina Cove Pty Ltd provided funds to Grande Pacific Limited, a company associated with the City Pacific Limited. The loan is secured by registered second mortgage over property on the Mornington Peninsula, has a 12 month term and carries an interest rate of 12.75% (2007:11.75%). During the year, Marina Cove advanced funds of $1,261,607 (2007: $716,857) and Grande Pacific Limited repaid $nil (2007: $5,598) in relation to the loan. The amount outstanding at year end was $5,685,488 (2007: $4,423,881).

Marina Cove Pty Ltd paid interest to City Pacific First Mortgage Fund on behalf of borrowers to which it has provided vendor finance of $6,983,963 (2007: $7,426,366) during the financial year.

Cira International Pty Ltd has a loan of $23,364,863 (2007: $15,804,211) from City Pacific Ltd. During the year, funding of $8,653,387 (2007: $16,398,986) was advanced pursuant to the loan terms and repayments of $1,092,735 (2007: $594,775) were made. This loan is secured by registered second mortgage over property at the Gold Coast. The loan facility is to 30 September 2008 and carries an interest rate of 20%. The Company has provided a financial guarantee in relation to the loan facility, as disclosed in note 8.

32 CONTROLLED ENTITIES (a) Particulars in relation to controlled entities Ultimate entity / parent entity Ordinary shares CP1 Limited group interest Controlled entities 2008 2007 Marina Cove Pty Ltd 100% 100% Martha Cove Management Pty Ltd (formerly Leminad Pty Ltd) 100% 100% Martha Cove Sales Pty Ltd 100% 100% PR Hotel Management Pty Ltd 100% 100% GCI Management Pty Ltd 100% 100% Azzura Pacific Resort Pty Ltd (formerly Danimel Pty Ltd) (i) 100% 51%

(i) In June 2007 CP1 sold 49% of its shareholding in Azzura Pacific Resorts Pty Ltd. CP1 deconsolidated Azzura Pacific Resorts Pty Ltd as a result of the transaction, however continued to equity account its investment as the Company had joint control in accordance with a shareholder agreement. In May 2008, CP1 reacquired these shares, bringing its shareholding in Azzura Pacific Resorts Pty Ltd to 100% ownership. As a result of the transaction CP1 commenced consolidating the company from date of settlement (being 2 May 2008).

For personal use only use personal For The controlled entities are incorporated in Australia.

- 63 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

32 CONTROLLED ENTITIES (cont) (b) Acquisition of controlled entities The following controlled entities were acquired during the financial year: Azzura Pacific Resort (i) $ Consideration paid 24,769,697 Cash acquired (311,690) Net cash outflow/(inflow) (311,690)

Fair value of net assets of entity acquired: Cash assets 311,690 Receivables 322,214 Inventories 44,250,813 Other financial assets 534,325 Property, plant and equipment 1,095,700 Payables (2,591,307) Interest-bearing liabilities (29,249,798) Deferred tax liability (608,820) Employee entitlements (249,174) Current tax liability 302,476 Goodwill on acquisition recognised as inventories 10,651,578 Consideration 24,769,697

(i) CP1 acquired 49% of the shares in Azzura Pacific Resort Pty Ltd on 2 May 2008.

Immediately prior to acquisition date, the carrying amounts of the assets and liabilities of Azzura Pacific Resort Pty Ltd were equal to their fair value as determined at that time. Subsequent to acquisition date, Azzura Pacific Resort Pty Ltd contributed a net loss after tax of $13,318,544 to the Group. The net loss after tax was primarily attributable to impairment losses and write downs. For the full financial year, Azzura Pacific Resort Pty Ltd had revenues of $20,720,665 and a net loss after tax of $12,359,617.

33 SUBSEQUENT EVENTS Marina Cove Pty Ltd During the year ended 30 June 2008 and as at 30 June 2008, Marina Cove Pty Ltd was in breach of the loan to value ratio covenant of its $76,221,017 facility with the City Pacific First Mortgage Fund. Additionally, the loan fell due for annual review on 30 June 2008. Subsequent to year end, revised facility terms were agreed and the loan was extended to 28 February 2009, when the facility will again be reviewed.

In July 2008, Marina Cove Pty Ltd appointed an international sales agent to market certain large parcels of land at Martha Cove. Expressions of interest closed in August 2008. The expressions of interest received were unacceptable to the company and the financier. During the year ended 30 June 2008 and as at 30 June 2008, Marina Cove Pty Ltd was in breach of the facility secured by this land, as disclosed at note 22. As a consequence of the breach, the facility limit was reduced to $99,795,071 and the repayment date was revised to 31 October 2008. Subsequent to year end, the Group has renegotiated the terms of the facility, which includes the extension of the facility to 27 February 2009. The facility is subject to certain trigger dates in relation to the

For personal use only use personal For achievement of certain milestones which the company anticipates achieving.

In September 2008, to supplement the cash flow of the company, Marina Cove Pty Ltd renegotiated the terms of a vendor financing agreement and a construction contract provided to a land owner at Martha Cove. The revised agreement resulted in the early repayment in September 2008 of the vendor financing (total funds received of $11,171,000) and the terms of the construction contract being amended such that the revised total sum of $9,129,000 will be received on a cost to complete basis. The funds received have been applied to pay creditors of the company.

- 64 - CP1 Limited ACN 099 945 516

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

33 SUBSEQUENT EVENTS (cont) Cira International Pty Ltd On 28 August 2008, Cira International Pty Ltd (“Cira”), a 50% owned associate, entered into a contract of sale to sell the Gold Coast International Hotel site (“GCI Site”) for $56.5 million. The contract of sale settled on 29 September 2009. The proceeds of sale were applied to reduce debt.

On 26 September 2008, Cira entered into a contract of sale to sell a parcel of land immediately north of the Gold Coast International site for $30 million. Subject to the purchaser being satisfied with its due diligence enquiries within 60 days from entering the contract, settlement of the $30 million transaction is expected to occur in late December 2008. The proceeds of sale will be applied to reduce debt.

Finance facilities provided to Cira by two financiers were due for repayment on 30 September 2008. Whilst Cira has made substantial repayment of one facility from the sale proceeds of the GCI Site, Cira is in breach of both facilities as they were not repaid in full by the facility repayment dates. Both financiers are aware of the breach and continue to reserve their rights, however each financier has consented to the sale of the parcel of land immediately north of the Gold Coast International site which will result in a substantial reduction in the debt facilities.

The forecast proceeds from the sale of both sites will not be sufficient to repay all debt outstanding to one of the two financiers. CP1 has provided a guarantee to this financier limited to 50% of the principal plus interest and accordingly, the Company and the Group have recorded this liability in the accounts as at 30 June 2008, as disclosed in note 8. To date, the financier has not placed a demand upon the Company in relation to the financial guarantee provided however the Company has negotiated deferred payment terms with the respective financier in the event that the financier places a demand upon the Company.

CP1 Limited During the year ended 30 June 2008 and as at 30 June 2008, the Company was in breach of financial covenants attached to its $12,000,000 finance facility, as disclosed in note 22. Subsequent to year end, the Group has renegotiated the terms of the facility, which includes the extension of the facility to 27 February 2009. The facility is subject to certain trigger dates in relation to the achievement of certain milestones which the company anticipates achieving.

Subsequent to year end, the Company has renegotiated its $32,000,000 loan facility with City Pacific Limited, which matured on 1 November 2008. The new facility has a term to 30 June 2011, with an annual review on 31 May of each year.

Azzura Pacific Resorts Pty Ltd In October 2008, Azzura Pacific Resort Pty Ltd appointed CB Richard Ellis Hotels and Knight Frank as marketing agents for the sale of the Paradise Resort site. The expression of interest campaign is anticipated to close in early December 2008. The proceeds from sale will be applied to reduce debt.

Other matters Other than the matters noted 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 and unusual nature likely, in the opinion of the directors, to affect significantly the operations of the company or group, the results of those operations, or the

state of affairs of the company or group, in the future financial years. For personal use only use personal For

- 65 - CP1 Limited ACN 099 945 516

DIRECTORS' DECLARATION

1. In the opinion of the directors of City Pacific Limited (‘the Company’):

(a) the financial statements and notes set out on pages 21 to 65, and the remuneration disclosures that are contained in the Remuneration report in the Directors’ report set out on pages 11 to 13 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 2008 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;

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

(c) the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations 2001; and

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

2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the equivilent of the Chief Executive Officer and Chief Financial Officer (being the Financial Controller and the Managing Director) for the financial year ended 30 June 2008.

Dated at Brisbane this 11th day of November 2008

Signed in accordance with a resolution of the directors:

PK Sullivan

Managing Director For personal use only use personal For

- 66 - INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CP1 LIMITED

REPORT ON THE FINANCIAL REPORT We have audited the accompanying financial report of CP1 Limited (the Company), which comprises the balance sheets as at 30 June 2008, 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 33 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 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. 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 Australian 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.

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

For personal use only use personal For

- 67 - INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CP1 LIMITED

Auditors opinion on the financial report Whilst we draw attention to the material uncertainties detailed below, in our opinion:

a) the financial report of CP1 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 2008 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

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

Material uncertainty regarding continuation as a going concern Without qualification of the above opinion, we draw attention to note 5 to the financial report which indicates that the Company and the Group are critically dependent upon the continued support of their financiers for a period significantly in excess of the financiers’ current undertakings. The ability of the Company and the Group to continue as a going concern is dependent upon the Company and the Group realising sufficient cash funding from the sales and settlement of assets and the repayment of vendor finance loans to repay outstanding finance facilities and to meet other outstanding payment obligations, or enter into other suitable payment arrangements with current financiers, or obtain suitable funding from alternative sources, and generate sufficient cash flow from ongoing business operations to meet operating cash flow requirements. Due to the matters set out in note 5, a material uncertainty exists which casts significant doubt about the Company’s and the Group’s ability to continue as a going concern, and therefore whether the Company and the Group are able to realise their assets at the amounts recorded in the financial statements.

REPORT ON THE REMUNERATION REPORT We have audited the Remuneration Report included in pages 11 to 13 of the Directors’ Report for the year ended 30 June 2008. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion on the remuneration report In our opinion, the remuneration report of CP1 Limited for the year ended 30 June 2008, complies with Section 300A of the

Corporations Act 2001. For personal use only use personal For

11 November 2008

- 68 - CP1 Limited ACN 099 945 516

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report.

SHAREHOLDINGS AS AT 10 NOVEMBER 2008 Substantial Shareholders Ordinary The number of shares held by substantial shareholders as at 14 October 2008 were: City Pacific Limited 72,440,290 Blad Investments No 1 Pty Ltd 42,398,928

Class of shares and voting rights At 14 October 2008, there were 1,680 holders of the ordinary shares of the company. Refer note 24 for details of classes of shares and voting rights. Options carry no voting rights. Distribution of shareholders as at 10 November 2008 Number of holders Category Ordinary 1 – 1,000 47 1,001 to 5000 268 5,001 – 10,000 238 10,001 – 100,000 922 100,001 and over 205 1,680

The number of shareholders holding less than a marketable parcel of ordinary shares is 385.

Twenty largest shareholders as at 10 November 2008: Number of of capital % Name shares held held 1) City Pacific Limited 72,440,290 30.60 2) Blad Investments No 1 Pty Ltd 42,398,928 17.91 3) National Nominees Limited 6,676,000 2.82 4) Citicorp Nominees Pty Limited 5,212,915 2.20 5) MP (Aust) Investments Pty Ltd 4,710,992 1.99 6) Sandkent Pty Ltd 2,667,888 1.13 7) Peakfinn Pty Limited 2,516,913 1.06 8) Drelbay Pty Ltd 2,154,900 0.91 9) Gomery Pty Limited 1,800,000 0.76 10) Dr Clifford Robert Bunning & Mrs Janice Elizabeth Bunning 1,700,000 0.72 11) Mr Stanley Kenneth Chilton and Miss Clare Ann Chilton 1,650,000 0.70 12) Maldon Pty Ltd 1,620,000 0.68 13) Shande Pty Ltd 1,620,000 0.68 14) Contra Proferentem Pty Ltd 1,300,000 0.55 15) Mr Claude Faber-Hickey 1,292,842 0.55 16) Mr John Marving Russell Spencer and Mrs Fay Lynette Spencer 1,272,800 0.54 17) Ian William Donaldson and Anne Mary Donaldson 968,000 0.41 18) Mr Ray Racz 960,000 0.41

For personal use only use personal For 19) Mr Stephen Mackay 938,000 0.40 20) Danzel Pty Ltd 900,000 0.38 154,800,468 65.40

There are no current on-market buy backs or other unlisted securities.

- 69 - CP1 Limited ACN 099 945 516

OFFICES AND OFFICERS

Company Secretary Mrs Lee Danahay

Principal Registered Office Level 12, 300 Queen Street Brisbane QLD 4000 National number 13 4769 Phone (07) 3229 7129 Fax (07) 3229 5796

Gold Coast Office City Pacific House 2 Miami Key Broadbeach Waters QLD 4218 National number 13 4769 Phone (07) 5554 0200 Fax (07) 5575 6366

Melbourne Office Level 7, 50 Market Street Melbourne VIC 3000 Phone (03) 9629 1777 Fax (03) 9629 1677

Postal Address PO Box 783 Pacific Fair QLD 4218

Share Registry Link Market Services Limited Level 12, 300 Queen Street Brisbane QLD 4000

Stock Exchange The Group is listed on the Australian Stock Exchange. The Home Exchange is Brisbane.

Other information

CP1 Limited, incorporated and domiciled in Australia, is a publicly listed Group limited by shares. For personal use only use personal For

- 70 -