LYCOPODIUM LIMITED — Annual Report 2013

Oct 10, 2013

==> picture [167 x 32] intentionally omitted <==

Annual Financial Report 2013

==> picture [595 x 411] intentionally omitted <==

Contents

Contents
Directors’ Report	1
Corporate Governance Statement	17
Financial Report
-Consolidated Statement of Comprehensive Income	20
-Consolidated Balance Sheet	21
-Consolidated Statement of Changes in Equity	22
-Consolidated Statement of Cash Flows	23
-Notes to the Consolidated Financial Statement	24
-Directors’ Declaration	74
Audit Report	75
Shareholder Information	77
Corporate Directory	78

==> picture [55 x 51] intentionally omitted <==

==> picture [35 x 30] intentionally omitted <==

==> picture [292 x 98] intentionally omitted <==

Directors’ Report

Your Directors present their report on the group consisting of Lycopodium Limited and the entities it controlled at the end of, or during, the year ended 30 June 2013.

Directors

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

Michael John Caratti

Lawrence William Marshall Rodney Lloyd Leonard Robert Joseph Osmetti Bruno Ruggiero Peter De Leo

Principal activities

The principal activities of the group during the financial year consisted of engineering consulting in the mining, metallurgical and manufacturing industries. There were no significant changes in the nature of the group's principal activities during the financial year.

Dividends

Dividends paid to members during the financial year were as follows:

Final fully franked dividend for the year ended 30 June 2012 of 21.0 cents (2011: 20.0 cents) per fully paid share paid on 15 October 2012 Interim fully franked dividend for the year ended 30 June 2013 of 15.0 cents (2012: 12.0 cents) per fully paid share paid on 15 April 2013	2013 2012 $ $
	8,138,572 7,731,021 5,843,265 4,638,612
	13,981,837 12,369,633

In addition to the above dividends, since the end of the financial year the Directors have approved the payment of a final fully franked dividend of $8,180,572 (21.0 cents per fully paid share) to be paid on 15 October 2013 out of retained earnings at 30 June 2013 (2012: $8,138,572 being 21.0 cents per fully paid share). This brings the total dividend declared for the year ended 30 June 2013 to 36.0 cents (2012: 33.0 cents).

Review of operations

The results for the 2012/13 financial year reflects the peak in construction and commissioning activities prevailing across the major projects and the strong demand for our services across the group. Our minerals workload remains balanced across a range of commodities, notably copper, gold, nickel and iron ore, and includes both domestic and international projects.

Our core strategy continues to concentrate on the delivery of EPCM consulting services. This focus has enabled the company to develop a world class capability in delivering large projects for leading multi-national companies. Our aim with this strategy is to consistently deliver quality and value in all aspects of our clients’ projects. Lycopodium enjoys a strong repeat client base as a result of this singular focus on project excellence.

Lycopodium Limited Annual Financial Report 2013 1

Directors’ Report (continued)

Review of operations (continued)

Full year results

During the financial year ended 30 June 2013, Lycopodium realised revenues of $245.9 million, a 5.9% increase on the $232.3 million in the previous financial year. Net profit after tax was $22.5 million, as compared to $22.4 million in the previous financial year, a 1% increase. The minor reduction in margin reflects the tightening of market conditions being largely offset by the recovery of prior year tax losses and the full year’s equity accounting of the profit component of our 50% owned Pilbara EPCM joint venture.

Basic earnings per share were 56.5 cents. The Directors have resolved to pay a final dividend of 21 cents fully franked reflecting the strong profit result.

The total dividend for the year is 36 cents fully franked compared to 33 cents for the previous financial year.

	2013	2012	2011	2010	2009	2008
Revenue ($ Millions)	245.9	232.3	169.8	120.3	146.8	120.5
NPAT ($ Millions)	22.5	22.4	17.1	16.0	14.8	12.4
Dividend/share(cents)	36.0	33.0	30.0	27.0	25.0	25.0

Outlook

As previously advised, there are strong headwinds in our sector and the demand for Lycopodium’s services in 2013/14 is anticipated to be lower than in the past two financial years.

The reduction in demand is attributable to the following dynamics:

• Lower commodity prices across a wider range of commodities, which now includes gold.

• Major mining companies belt tightening across their operations, optimising existing assets and limiting capital expenditure to brownfield optimisations rather than major greenfield project developments.

• Junior mining companies finding it difficult to raise capital for studies and projects.

• The manufacturing sector continuing its decline within Australia.

• Increasing competition between service providers, increasing appetite for risk, as well as lowering margin expectations.

Coupled with the dynamics above, our three major projects - Tropicana, Akyem and Marandoo - are nearing construction completion and commissioning activities are in progress. Whilst these have insulated Lycopodium through the past financial year, each of these projects will be completed in the first half of the current financial year. Equivalent greenfield EPCM opportunities have not yet been secured to replace these major projects, resulting in a shortfall in revenue opportunities.

On the positive side, we are extremely pleased to announce the award of detailed design services in relation to the processing plant and selected infrastructure for First Quantum Minerals’ world class, Cobre Panama Project. This extends our long term association with First Quantum Minerals and represents our first project in the region.

At this point in time we have updated our guidance, but believe a range is more appropriate given the reduced visibility coming into this financial year. Our guidance for the 2013/14 financial year reflects revenues of $140-170 million and a net profit after tax of $11.4-13.8 million. We will continue to actively monitor our forecasts, particularly given the range in revenues and anticipated lower margins.

Corporate overview

Our organic growth initiatives matured during the year, with Lycopodium Minerals Canada, Orway Mineral Consultants Canada and Lycopodium Rail each continuing to build their client base in their respective geographic region or industry segment. Each of the initiatives was trading profitably at year end.

During the past year there was a high level of capital investment in core infrastructure for the existing operating entities in order to support the high level of activity and to limit sustaining capital demands as the peak in workload subsides into the new financial year.

• Lycopodium Minerals in Perth installed a new IT data centre and off-site disaster recovery server.

• Lycopodium Minerals in Brisbane and Lycopodium Process Industries in Melbourne upgraded their IT data centres.

• Lycopodium Asset Management relocated to reduce office leasing costs and to tie into the Perth IT infrastructure.

• A major upgrade to the latest release of the Oracle E-Business Suite, the enterprise resource planner used across the group, was completed.

With core infrastructure across the group having now been upgraded we anticipate low capital expenditure levels for 2013/14.

2 Lycopodium Limited Annual Financial Report 2013

Review of operations (continued)

Operational highlights

As noted, this year has been highlighted by peak construction and commissioning activities across the group on a large number of projects.

Provided below are updates for a number of representative projects across the group, commencing with the three major projects which have been reported on previously.

• The Akyem Project in Ghana West Africa for Newmont is nearing construction completion and commissioning is in progress. The majority of the project infrastructure has been handed over to Newmont’s operations and the main focus in now on the commissioning of the main process plant. In July 2013 permanent grid power was energised and first ore was put through the primary crusher and onto the overland conveyor. These represent the first major commissioning milestones associated with the process plant. Introduction of ore into the balance of the processing plant is forecast to occur within the 1Q of the new financial year.

• The Marandoo Project in Western Australia for Rio Tinto is well advanced from a construction perspective. The project infrastructure is operational including hand over of the mine dewatering to the Rio Tinto operations. The mine dewatering is a major component of the project and includes a borefield, overland piping, a large water storage dam, and irrigated agricultural facilities to produce hay for livestock. The main processing facilities are forecast to be commissioned and handed over in the first half of the current financial year.

• The Tropicana Project in Western Australia for the Tropicana Joint Venture (AngloGold Ashanti - 70%, Independence Group - 30%) is nearing construction completion and commissioning activities are advanced. The project infrastructure is complete with permanent power and water from the borefield available to the operations. The first major commissioning milestone was achieved when first ore was introduced into the primary crusher in July 2013. The project is forecast to achieve the first gold pour in September of the current financial year followed by the ramp up of the operations to achieve commercial production.

Lycopodium’s mineral operations, via the Brisbane, Perth and Toronto offices, has also progressed or completed the following projects during the year:

• A crushing plant upgrade was constructed and handed over to the Hidden Valley Operations in Papua New Guinea as part of the debottlenecking and improvement activities. The Hidden Valley Operations is a joint venture between Newcrest Mining and Harmony Gold.

• Construction and commissioning were successfully completed ahead of schedule and under budget for the greenfield Bissa Gold Project in Burkina Faso on behalf of Bissa Gold SA.

• Detailed design of the copper concentrator facilities for First Quantum Minerals’ large Sentinel Project in Zambia achieved practical completion at year end. During the year First Quantum Minerals also awarded detailed design work for the large Kansanshi Copper Concentrator Expansion in Zambia and the Guelb Moghrein Upgrade Project in Mauritania. At year end First Quantum Minerals awarded Lycopodium the detailed design for the world class Cobre Panama Project in Panama.

• Pilbara EPCM, a 50:50 JV between Lycopodium and URS, is well advanced with the detailed design of the permanent infrastructure associated with the Nammuldi Project in Western Australia for Rio Tinto. Early infrastructure is under construction on site.

• A brownfield upgrade at the Tasiast Gold Mine in Mauritania was completed for Kinross.

Lycopodium Process Industries remained active in the chemicals and manufacturing sectors. Again the year was project delivery centric with the following key projects completed:

• The Taganito Hydrogen Sulphide Project for Sumitomo Metals achieved first gas production following a successful pre-commissioning. Commissioning is ongoing within the overall project.

• Four separate brownfield briefs within an existing chemical manufacturing facility were completed on behalf of Thales Australia in New South Wales.

• Lycopodium Process Industries was engaged to undertake remedial works to repair damage sustained to the loading bay and several storage tanks at the Largs Bay biodiesel production facility in South Australia on behalf of Australian Renewable Fuels Limited.

Lycopodium Asset Management continued to provide services to long term clients during the year, based on major reliability and maintenance engineering briefs with Woodside in the oil and gas sector and BHP Billiton and Citic Pacific in the minerals sector.

Orway Mineral Consultants provided comminution circuit design and optimisation services across a wide range of commodities, with the gold and iron ore sectors being particularly buoyant. Hydrometallurgical services were provided in uranium, manganese, cobalt and nickel.

Lycopodium Infrastructure provided design services to several of the major greenfield projects being undertaken in the minerals sector, both directly to clients and as part of major projects being undertaken by Lycopodium Minerals.

Lycopodium Limited Annual Financial Report 2013 3

Directors’ Report (continued)

Review of operations (continued)

Lycopodium Rail provided ongoing services relating to rail infrastructure management (RIM) to major coal producers within the Hunter Valley in New South Wales. RIM services have also expanded to include private rail sidings outside the Hunter Valley and across a wider range of commodities and products.

HSE and Community

There has been a continued focus on health, safety and the environment as the construction activities reach record levels within the company and the industry. To this end additional management capability has been added to ensure a proactive and hands on approach to HSE across the domestic and international sites.

In 2012/13 there were 13.8 million manhours (prior 8.6 million) worked across the Lycopodium managed projects with a LTIFR of 0.07 (prior 0.82) against a 13.17 construction industry average. There was a high focus during the year on management of high risk activities given the peak manning levels during construction and into commissioning.

On the community side, Lycopodium continued as an active sponsor and supporter of The Clontarf Foundation, a charitable notfor-profit organisation improving the education, discipline, self-esteem, life skills and employment prospects of young Aboriginal men. Lycopodium again held our annual Jeans for Genes fund raising, with a record result achieved for the year. Lycopodium continues to provide support to a number of universities. The company also supports a number of charitable initiatives championed by staff.

Acknowledgement

Lycopodium is extremely proud of the achievements of our personnel over the last year, particularly given the high demands across our project sites. The Board of Directors acknowledges that the company’s ability to continue to deliver world class services to our clients and to maintain and enhance the company’s performance and capability is dependent on the continued commitment and support of our personnel.

We would also like to thank our clients for their continued trust in Lycopodium to deliver services to their projects and studies. We will as always work hard to maintain these valued relationships.

The Board of Directors would like to take this opportunity to sincerely thank all personnel for their highly valued contribution over the last year.

4 Lycopodium Limited Annual Financial Report 2013

Review of operations (continued)

A summary of consolidated revenues and results for the year by significant reporting segments is set out below:

Corporate Services Minerals Project services - Africa Other Intersegment eliminations Unallocated revenue less unallocated expenses Total revenue / profit before income tax expense Income tax expense Profit for the year (Profit) / loss attributable to non-controlling interest Profit attributable to owners of Lycopodium Ltd	Segment revenues	Segment results
	2013 2012 $ $	2013 2012 $ $
	21,148,404 15,598,839 192,882,374 203,828,953 28,987,639 29,852,527 52,243,557 29,042,949 (49,321,882) (46,036,286) - -	(1,264,278) (1,374,737) 17,966,938 25,872,769 4,086,969 4,712,855 7,789,560 2,605,890 - - (45,000) (45,000)
	245,940,092 232,286,982	28,534,189 31,771,777 (5,993,750) (9,416,678)
		22,540,439 22,355,099 (608,493) (212,065)
		21,931,946 22,143,034

Matters subsequent to the end of the financial year

Since year end the directors have approved the payment of a final dividend on ordinary shares in respect of the 2013 financial year. The total amount of dividend is $8,180,572 which represents a fully franked dividend of 21.0 cents per fully paid ordinary share.

With the exception of the above, no other matter or circumstance has arisen since 30 June 2013 that has significantly affected, or may significantly affect:

• a) the group's operations in future financial years, or

• b) the results of those operations in future financial years, or

• c) the group's state of affairs in future financial years.

Likely developments and expected results of operations

The group will continue to provide engineering consultancy services as detailed above.

Further information on likely developments in the operations of the group and the expected results of operations have not been included in this annual report because the Directors believe it would be likely to result in unreasonable prejudice to the group.

Environmental regulation

The group's operations are not subject to significant environmental regulation under a law of the Commonwealth or of a State or Territory in respect of its consulting activities.

Lycopodium Limited Annual Financial Report 2013 5

Directors’ Report (continued)

Information on directors

None of the directors have held directorships in other listed companies in the last three years.

Michael John Caratti BE (Elec) (Hons). Non-executive Chairman. Age 63.

Experience and expertise

Former Managing Director of Lycopodium Minerals Pty Ltd, Mr Caratti has over 30 years experience in the mineral processing industry and has had a major role in the development of the group's risk management and quality control programmes.

Special responsibilities

Chairman of the Board.

Chairman of the Corporate Governance Committee.

Interests in shares and options

9,104,367 ordinary shares of Lycopodium Limited.

Lawrence William Marshall B.Bus (Acc) CPA. Non-executive Director. Age 60.

Experience and expertise

Mr Marshall in his role as the former Chief Executive Officer of Lycopodium Limited and with over 30 years experience has played a major role in the development of the group's information, accounting and management and risk management systems. Mr Marshall is a non-executive director of Lycopodium Minerals Qld Pty Ltd and Lycopodium Process Industries Pty Ltd.

Special responsibilities

Chairman of the Audit Committee.

Member of the Corporate Governance Committee.

Interests in shares and options

1,942,332 ordinary shares of Lycopodium Limited.

Rodney Lloyd Leonard BE (Hons), MSc, MAusIMM. Managing Director. Age 52.

Experience and expertise

Mr Leonard has in excess of 20 years experience in the mineral processing industry and is the Managing Director of Lycopodium Limited.

Special responsibilities

Member of the Corporate Governance Committee.

Member of the Audit Committee.

Interests in shares and options

2,612,332 ordinary shares of Lycopodium Limited.

167,000 performance rights over ordinary shares of Lycopodium Limited.

Robert Osmetti BE (Civ), MIEAust, CPEng. Executive Director. Age 57.

Experience and expertise

Mr Osmetti has approximately 30 years experience in the project management and construction of minerals, oil refining and manufacturing projects. Mr Osmetti is a non-executive director of Lycopodium Minerals QLD Pty Ltd and Lycopodium Infrastructure Pty Ltd .

Special responsibilities Member of the Corporate Governance Committee Interests in shares and options 2,058,148 ordinary shares of Lycopodium Limited.

.

. 67,000 performance rights over ordinary shares of Lycopodium Limited

6 Lycopodium Limited Annual Financial Report 2013

Bruno Ruggiero BE (Mech), Grad Dip Min Sc, Grad Cert Eng Tech, MIEAust, MAusIMM. Executive Director. Age 49.

Experience and expertise

Mr Ruggiero has over 20 years experience in the minerals industry. His role is varied in that he fills senior positions in the areas of Study, Project and Design Management on a project by project basis. He is an executive director of Lycopodium Minerals Pty Ltd and a non-executive director of Lycopodium Asset Management Pty Ltd.

Special responsibilities

Member of the Corporate Governance Committee.

Interests in shares and options

3,167,332 ordinary shares in Lycopodium Limited.

67,000 performance rights over ordinary shares of Lycopodium Limited.

Peter De Leo BE (Civ) CPEng FIEAust. Executive Director. Age 47.

Experience and expertise

Mr De Leo has over 20 years experience in the construction and engineering fields and is the Managing Director of Lycopodium Minerals Pty Ltd.

Special responsibilities

Member of the Corporate Governance Committee.

Member of the Audit Committee.

Interests in shares and options

1,054,771 ordinary shares of Lycopodium Limited.

167,000 performance rights over ordinary shares of Lycopodium Limited.

Company Secretary

The company secretary is Keith John Bakker B.Bus (Acc), FCPA. Age 60.

Keith has in excess of 30 years experience in senior finance and company secretarial roles within the airline, human resource consulting and mining services sectors. He is the Chief Financial Officer of Lycopodium Limited.

Lycopodium Limited Annual Financial Report 2013 7

Directors’ Report (continued)

Meetings of directors

The numbers of meetings of the company's board of Directors and of each board committee held during the year ended 30 June 2013, and the numbers of meetings attended by each Director were:

	Full	meetings of	Meetings	of		Meetings	Meetings
	directors		non-executive			of committees
			directors
						Audit	Nomination		Remuneration
	A	B	A	B	A	B	A	B	A	B
Michael Caratti	12	12	-	-	**	-	1	1	1	***
Lawrence Marshall	12	12	-	-	2	2	1	1	1	***
Rodney Leonard	12	12	*	-	2	2	1	1	1	***
Robert Osmetti	10	12	*	-	**	-	1	1	1	***
Bruno Ruggiero	11	12	*	-	**	-	1	1	1	***
Peter De Leo	11	12	*	-	2	2	-	1	1	***

• A = Number of meetings attended

• B = Number of meetings held during the time the Director held office or was a member of the committee during the year

• = Not a non-executive Director

• ** = Not a member of the relevant committee

• *** = Remuneration reviewed during normal monthly meeting of the full board rather than as a separate committee meeting.

The following directors missed full meetings of the Board because of absence on company business.

Number of meetings

Robert Osmetti 2 Bruno Ruggiero 1 Peter De Leo 1

8 Lycopodium Limited Annual Financial Report 2013

Remuneration report

The Directors are pleased to present your company's 2013 remuneration report which sets out remuneration information for Lycopodium Limited's non-executive Directors, executive Directors and other key management personnel.

Directors and key management personnel disclosed in this report

Position

Michael Caratti Chairman, Non-executive Director Lawrence Marshall Non-executive Director Rodney Leonard Managing Director Robert Osmetti Executive Director Bruno Ruggiero Executive Director Peter De Leo Executive Director Keith Bakker Company Secretary, Chief Financial Officer

Role of the remuneration committee

The remuneration committee comprises all members of the Board. It is primarily responsible for making recommendations on:

• Remuneration levels of executive directors and other key management personnel

• The over-arching executive remuneration framework and operation of the incentive plan, and

• Key performance indicators and performance hurdles for the executive team.

The objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the company.

Non-executive director remuneration policy

Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Board to ensure that they are appropriate and in-line with the market.

Non-executive directors are also paid an hourly rate for ad hoc services, as required.

Non-executive directors do not receive performance-based pay.

Directors' fees

The current base fees were last reviewed with effect from 1 July 2013. The fees are inclusive of committee fees. Details on Directors fees are disclosed under service agreements on page 12.

Executive remuneration policy and framework

In determining executive remuneration, the Board aims to ensure that remuneration practices are:

• Competitive and reasonable, enabling the company to attract and retain key talent

• Aligned to the company’s strategic and business objectives and the creation of shareholder value

• Transparent, and

• Acceptable to shareholders.

The executive remuneration framework has three components:

• Fixed annual remuneration, including superannuation, and

• Service bonus, and

• Equity.

Fixed annual remuneration is structured as a total employment cost package which is delivered as a combination of salary and prescribed non financial benefits partly at the executive’s discretion. Fixed annual remuneration is reviewed at a minimum annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion.

Lycopodium Limited Annual Financial Report 2013 9

Directors’ Report (continued)

Remuneration report (continued)

Executive remuneration policy and framework (continued)

1,450,000 rights were granted to certain executive directors under the Executive Director Performance Rights Plan in the financial year ended 30 June 2009. These rights were granted for nil consideration and are exercisable upon certain performance hurdles and vesting conditions being achieved. This is the only element of remuneration that is linked to company performance. Refer to page 13 for details.

A service or senior management bonus may be provided to certain senior salaried employees payable annually, at the discretion of the company.

Voting and comments made at the company's 2012 Annual General Meeting

The remuneration report for the 2012 financial year was unanimously approved by shareholders during the AGM. The company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

Company performance

The profit after income tax expense and basic earnings per share for the group for the last five years is as follows:

Revenue ($) Profit before income tax ($) Income tax expense ($) Profit after income tax ($) Basic EPS (cents) Basic EPS growth, year on year (%) Fully franked dividends per share (cents) Change in share price * ($) Return on equity (%)	2013 2012 2011 2010 2009
	245,940,092 232,286,982 169,842,916 120,334,515 146,835,647 28,534,189 31,771,777 24,907,889 18,711,780 20,202,742 5,993,750 9,416,678 7,795,136 2,653,312 5,425,487 22,540,439 22,355,099 17,112,753 16,058,468 14,777,255 56.5 57.3 44.4 41.6 37.4 (1.4%) 29.1% 6.7% 11.2% 13.3% 36.0 33.0 30.0 27.0 25.0 (2.40) 0.92 2.61 1.77 (3.38) 34.86% 40.81% 36.25% 38.03% 40.17%

• calculated as the difference between the closing share price at the start and end of the respective financial years.

10 Lycopodium Limited Annual Financial Report 2013

Remuneration report (continued)

Details of remuneration

The following tables show details of the remuneration received by the Directors and the key management personnel of the group for the current and previous financial year.

2013 Name Non-executive directors Michael Caratti Lawrence Marshall Sub-total non executive directors Executive directors Rodney Leonard Robert Osmetti Bruno Ruggiero Peter De Leo Other key management personnel Keith Bakker Total key management personnel compensation (group)	Short-term employee benefits Post- employ- ment benefits Share based payments
	Cash salary and fees Cash bonus Non monetary benefits Super- annuation Rights Total Perfor- mance related $ $ $ $ $ $ %
	142,384 - 9,414 25,000 - 176,798 - 243,646 - 9,414 25,000 - 278,060 -
	386,030 - 18,828 50,000 - 454,858 - 731,687 - 9,414 25,000 (12,426) 753,675 (1.6) 579,110 - 9,414 25,000 (12,426) 601,098 (2.1) 577,738 - 9,414 25,000 (12,426) 599,726 (2.1) 677,738 - 9,414 25,000 (12,426) 699,726 (1.8) 394,653 34,906 14,667 25,000 - 469,226 -
	3,346,956 34,906 71,151 175,000 (49,704) 3,578,309 (1.4)

Other than the performance rights, no element of the above remuneration is conditional upon meeting key performance indicators.

^ Amount in credit due to rights forfeited as a result of actual performance hurdle levels not met.

2012 Name Non-executive directors Michael Caratti Lawrence Marshall Sub-total non executive directors Executive directors Rodney Leonard Robert Osmetti Bruno Ruggiero Peter De Leo Other key management personnel Keith Bakker Total key management personnel compensation (group)	Short-term employee benefits Post- employment benefits Share based payments
	Cash salary and fees Cash bonus Non monetary benefits Super- annuation Rights Total Perfor- mance related $ $ $ $ $ $ %
	108,200 - 8,679 49,750 - 166,629 - 232,532 - 8,679 49,992 - 291,203 -
	340,732 - 17,358 99,742 - 457,832 - 673,620 - 8,679 45,000 41,015 768,314 5.3 518,620 - 8,679 50,000 41,015 618,314 6.6 523,444 - 8,679 25,000 41,015 598,138 6.9 643,620 - 8,679 25,000 50,240 727,539 6.9 315,284 36,000 14,105 50,000 - 415,389 -
	3,015,320 36,000 66,179 294,742 173,285 3,585,526 4.8

Other than the performance rights, no element of the above remuneration is conditional upon meeting key performance indicators.

Lycopodium Limited Annual Financial Report 2013 11

Directors’ Report (continued)

Remuneration report (continued)

Service agreements

Remuneration and other terms of employment for the directors and key management personnel are formalised in employment contracts. Each contract deals with fixed annual remuneration. Other major provisions of the agreements relating to remuneration are set out below.

All employment contracts with Directors and executives may be terminated by either party with one month’s notice. None of the directors or executives are provided with termination benefits.

Michael Caratti, Chairman and Non-executive Director Lawrence Marshall Non-executive Director Rodney Leonard Managing Director Robert Osmetti Executive Director Bruno Ruggiero, Executive Director Peter De Leo, Executive Director Keith Bakker, Company Secretary and Chief Financial Officer	Term of agreement Fixed remuneration including superannuation*
	No fixed term Directors fee of $152,206 p.a. No fixed term Fixed hourly rate of $290.36 Directors fee of $76,104 p.a. No fixed term $684,308 p.a. No fixed term $547,944 p.a. No fixed term $547,944 p.a. No fixed term $638,853 p.a. No fixed term $391,305 p.a.

• Fixed remuneration payable as at 1 July 2013 and reviewed annually by the Remuneration Committee.

Share-based compensation

Executive Director Performance Rights

Performance rights were granted to certain executive directors as disclosed in the Notice of Annual General Meeting dated 16 October 2008. The rights were designed to give incentive to the executive directors to provide dedicated and ongoing commitment and effort to the company and aligning the interest of both employees and shareholders.

Vesting of the above rights are subject to the following performance hurdles:

Performance rights	Grant date	Tranche	Vesting date and performance hurdles
plan
Executive Director	24 December 2008	Tranche 1	1 July 2011 if EPS for 30 June 2009 exceeds
			EPS for 30 June 2008 by 10%
Executive Director	24 December 2008	Tranche 2	1 July 2012 if EPS for 30 June 2010 exceeds
			EPS for 30 June 2009 by 10%
Executive Director	24 December 2008	Tranche 3	1 July 2013 if EPS for 30 June 2011 exceeds
			EPS for 30 June 2010 by 10%
Executive Director	24 December 2008	Tranche 4	1 July 2014 if EPS for 30 June 2012 exceeds
			EPS for 30 June 2011 by 10%
Executive Director	24 December 2008	Tranche 5	1 July 2015 if EPS for 30 June 2013 exceeds
			EPS for 30 June 2012 by10%

The above rights were granted for no consideration.

12 Lycopodium Limited Annual Financial Report 2013

Remuneration report (continued)

Details of remuneration

The following tables show details of the remuneration received by the Directors and the key management personnel of the group for the current and previous financial year.

2013 Name Non-executive directors Michael Caratti Lawrence Marshall Sub-total non executive directors Executive directors Rodney Leonard Robert Osmetti Bruno Ruggiero Peter De Leo Other key management personnel Keith Bakker Total key management personnel compensation (group)	Short-term employee benefits Post- employ- ment benefits Share based payments
	Cash salary and fees Cash bonus Non monetary benefits Super- annuation Rights Total Perfor- mance related $ $ $ $ $ $ %
	142,384 - 9,414 25,000 - 176,798 - 243,646 - 9,414 25,000 - 278,060 -
	386,030 - 18,828 50,000 - 454,858 - 731,687 - 9,414 25,000 (12,436) 753,675 (1.6) 579,110 - 9,414 25,000 (12,426) 601,098 (2.1) 577,738 - 9,414 25,000 (12,426) 599,726 (2.1) 677,738 - 9,414 25,000 (12,426) 699,726 (1.8) 359,747 34,906 14,667 25,000 - 434,320 -
	3,312,050 34,906 71,151 175,000 (49,704) 3,543,403 (1.4)

Other than the performance rights, no element of the above remuneration is conditional upon meeting key performance indicators.

^ Amount in credit due to rights forfeited as a result of actual performance hurdle levels not met.

2012 Name Non-executive directors Michael Caratti Lawrence Marshall Sub-total non executive directors Executive directors Rodney Leonard Robert Osmetti Bruno Ruggiero Peter De Leo Other key management personnel Keith Bakker Total key management personnel compensation (group)	Short-term employee benefits Post- employment benefits Share based payments
	Cash salary and fees Cash bonus Non monetary benefits Super- annuation Rights Total Perfor- mance related $ $ $ $ $ $ %
	108,200 - 8,679 49,750 - 166,629 - 232,532 - 8,679 49,992 - 291,203 -
	340,732 - 17,358 99,742 - 457,832 - 673,620 - 8,679 45,000 41,015 768,314 5.3 518,620 - 8,679 50,000 41,015 618,314 6.6 523,444 - 8,679 25,000 41,015 598,138 6.9 643,620 - 8,679 25,000 50,240 727,539 6.9 315,284 36,000 14,105 50,000 - 415,389 -
	3,015,320 36,000 66,179 294,742 173,285 3,585,526 4.8

Other than the performance rights, no element of the above remuneration is conditional upon meeting key performance indicators.

Lycopodium Limited Annual Financial Report 2013 13

Directors’ Report (continued)

Shares under option

Unissued ordinary shares of Lycopodium Limited under option at the date of this report are as follows:

Grant date 24 December 2008* 1 October 2011	Expiry date Issue price of shares Number under option
	30 June 2016 $- 468,000 30 September 2014 $- 165,000

• Details of options granted to key management personnel are disclosed on pages 12 to 13.

Insurance of officers

During the financial year, Lycopodium Limited took out insurance cover for the Directors, secretaries and senior officers of the company and its controlled entities.

The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company.

The directors have not included specific details of the premium paid as such disclosure is prohibited under the terms of the contract.

Proceedings on behalf of the company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001 .

Non-audit services

The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the company and/or the group are important.

Details of the amounts paid or payable to the auditor (PwC) for audit and non-audit services provided during the year are set out below.

The board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

14 Lycopodium Limited Annual Financial Report 2013

Non-audit services (continued)

During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms:

ts related practices and non-related audit firms:
Taxation services PwC's Australian firm: Tax compliance services (including income tax returns) International tax advice Network firm of PwC Australia: Tax compliance services (including income tax returns) Non-PwC audit firms: Tax compliance services (including income tax returns) International tax advice Total remuneration for taxation services Other services Non-PwC audit firms: Other services Total remuneration for other services Total remuneration for non-audit services	Consolidated
	2013 2012 $ $
	46,185 40,207 8,145 2,000 42,241 58,606 26,750 6,867 91,450 11,025
	214,771 118,705 9,889 4,032
	9,889 4,032
	224,660 122,737

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 16.

This report is made in accordance with a resolution of Directors.

==> picture [127 x 54] intentionally omitted <==

Rodney Lloyd Leonard Managing Director

Perth 24 September 2013

Lycopodium Limited Annual Financial Report 2013 15

Directors’ Report (continued)

==> picture [495 x 730] intentionally omitted <==

16 Lycopodium Limited Annual Financial Report 2013

Corporate Governance Statement

The Board of Directors of Lycopodium Limited is responsible for the overall corporate governance of the company. The Board has implemented the Recommendations of the ASX Corporate Governance Council to the extent considered appropriate for the size and nature of the Company’s current operations.

Lycopodium Limited’s practices are consistent with the Second Edition of the ASX Corporate Governance Council’s Principles and Recommendations (‘Principles’) as amended in June 2010 with any exceptions noted.

Principle 1: Lay solid foundations for management and oversight

The Board’s primary role is the protection and enhancement of medium to long term shareholder value. In order to fulfil this role, the Board is responsible for the overall corporate governance of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals. Management of the day-to-day business of the Company is conducted by or under the supervision of the Board, and by those other officers and employees to whom the management function is properly delegated by the Board.

The Statement of Board and Management functions is contained within the Corporate Governance Charter which is published in the Company’s website, www.lycopodium.com.au.

Senior executives are subject to formal performance review on an annual basis. The focus of the review is to establish key accountabilities and objectives and monitor actual performance against these. The performance of senior executives was formally assessed during the financial year.

Principle 2: Structure the board to add value

The skills, experience and expertise relevant to the position held by each Director in office at the date of this report are included in the Directors’ Report. The Board continues to be well served by the current mix of technical commerical and financial competences of its current membership. This diversity in skills together with strong industry exposure is considered to be the optimum structure for the Board at this time.

The Directors in office and the term in office held by each Director at the date of this report are as follows:

Name	Position	Term in Office
Mr Michael Caratti	Non-executive Chairman	8 years, 9 months
Mr Lawrence Marshall	Non-executive Director	8 years, 9 months
Mr Rodney Leonard	Managing Director	8 years, 9 months
Mr Robert Osmetti	Executive Director	8 years, 9 months
Mr Bruno Ruggiero	Executive Director	8 years, 9 months
Mr Peter De Leo	Executive Director	6years,8 months

Directors are considered to be independent when they are independent of management, are not a substantial shareholder and are free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement.

In accordance with the definition of independence above, none of the six Directors in office at the date of this report were independent. The Board considers that its structure has been, and continues to be, appropriate in the context of the Company’s current operations. The Board considers that each of the non-independent Directors possesses skills and experience required for managing and developing the Company and believes any additional information or advice can be more appropriately and economically obtained from independent external expert consultants. Furthermore, the Board considers that the Company’s shareholders are better served by Directors who have a vested interest in the Company. The composition of the Board will be reviewed from time to time as the Company evolves and the appointment of independent Directors will be considered.

The Company has a chairperson who is not an independent Director. The Board considers that at this stage in the growth of the Company, an independent chairperson would not add sufficient expertise to the Board. The Board intends to reconsider the independence of the Chairperson as the Company’s operations evolve and may appoint an independent Chairperson when appropriate.

The role of the Nomination Committee is carried out by the full Board. This arrangement is considered appropriate given the importance of the task of appointing Directors. Furthermore, the Board does not believe that any efficiencies or enhancements to the selection process would be achieved by the creation of a separate Nomination Committee at this time although the matter will be reconsidered as the Company’s operations evolve.

The Company provides the capacity for any Director to obtain separate professional advice on any matter relevant to the Director’s duties at the Company’s expense. Before the engagement is made, the Director is required to obtain the Chairman of the Board’s approval. Approval will not be unreasonably denied and the Director will be expected to provide the Board with a copy of that advice.

The performance of the Board, Board Committees and individual Directors is reviewed regularly by the Board as a whole. No formal review was undertaken during the reporting period although the matter is the subject of ongoing assessment.

Lycopodium Limited Annual Financial Report 2013 17

Corporate Governance Statement (continued)

Principle 3: Promote ethical and responsible decision making

The Board has adopted a Corporate Code of Conduct which all Directors, executives and employees of the Company are required to comply with in carrying out their duties and responsibilities, to guide compliance with legal and other obligations and to maintain confidence in the Company’s integrity.

The Board has adopted a Code of Conduct for Dealing in the Securities of the Company. The purpose of this code is to provide guidance to Directors and employees, and their associates, when dealing in the Company’s securities. The policy provides that Directors and employees:

• Must not deal in any security of the Company whilst in possession of inside information

• Should never engage in short term trading of any securities of the Company, and

• Should advise the Company Secretary, or in his absence, a Director, of any purchase or sale of securities of the Company within 2 business days.

The Corporate Code of Conduct and the Code of Conduct for Dealing in the Securities of the Company are both published on the Company’s website.

As a global participant, the Company recruits staff from every continent. The Company has an established policy on equal employment opportunity. The issues covered by a Diversity Policy such as age, gender, ethnicity and cultures are practiced in accordance with this policy.

As at 30 June the gender mix across Lycopodium is as follows:

Board Managers and senior staff Organisation	2013 2012 Female Male Female Male
	4% 96% 0% 100% 9% 91% 8% 92% 39% 61% 30% 70%
	25% 75% 24% 76%

Principle 4: Safeguard integrity in financial reporting

The Board has established an Audit Committee which operates under a charter approved by the Board. The Board has delegated to this Committee the responsibility for assurance regarding its financial reporting, internal controls, reporting structure and external audit responsibilities.

The Committee’s members are:

• Mr Lawrence Marshall - Chairman

• Mr Rodney Leonard

• Mr Peter De Leo

The qualifications, experience and tenure of these Directors is set out in the Directors’ Report. The number of meetings and details of attendance are also set out in the Directors’ Report.

The Committee is chaired by a non-executive Director who is a qualified accountant and the other members have extensive experience in senior management positions within the industry.

Principle 5: Make timely and balanced disclosures

The Company has established written policies and procedures to ensure compliance with ASX Listing Rule disclosure requirements which are published on the Company’s website. All ASX announcements are handled by the Managing Director or Company Secretary.

Principle 6: Respect the rights of shareholders

The Board is committed to ensuring that shareholders are informed of all major developments affecting the Company’s state of affairs. Shareholder communication is conducted in accordance with the Company’s Continuous Disclosure Policy and Shareholder Communication Policy both of which are published on the Company’s website.

The Board encourages full participation of the shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company’s strategy and goals. The external auditor attends the AGM and is available to answer any questions with regard to the conduct of the audit and the content of the auditor’s report.

18 Lycopodium Limited Annual Financial Report 2013

Corporate Governance Statement (continued)

Principle 7: Recognise and manage risk

The Board has adopted a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Company’s objectives and activities are aligned with these risks and opportunities. The Board believes that it is crucial for all Directors to be a part of this process and as such the Board has not established a separate risk management committee. The day to day responsibilities for risk management and internal controls rest with the Managing Director. The Managing Director is required to report on risk management and internal controls, using an exception reporting basis, to the full Board as part of the monthly report.

The Company has an internal control framework covering all areas of identified risk within the Company’s operations and has documented these as policies in order to centralise the controls. These controls are reviewed as the operations of the Company evolve. Areas of risk covered by this framework include:

• tenders and proposals

• client contract negotiation

• financial control and reporting

• commercial/corporate control and reporting

• operational control and reporting

• human resource management

• procurement, purchasing and supplier contract negotiation

The Managing Director and Chief Financial Officer have provided written assurance that, to the best of their knowledge, the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material aspects.

Principle 8: Remunerate fairly and responsibly

The role of the Remuneration Committee is carried out by the full Board. Details of the number of meetings of the Remuneration Committee held during the year and attendees at these meetings, are set out in the Directors’ Report.

The Company has adopted a Remuneration Committee Charter with the expected outcomes which include:

• Retention and motivation of key executives

• Attraction of high quality executives, and

• Performance incentives that allow executives to share in the success of the Company.

• A copy of the Remuneration Committee Charter is available on the Company’s website.

Details of remuneration received by Directors and key executives in the reporting period are disclosed in the Remuneration Report which is contained within the Directors’ Report.

Lycopodium Limited Annual Financial Report 2013 19

Consolidated Statement of Comprehensive Income - For the year ended June 2013

Revenue from operations Employee benefits expense Depreciation and amortisation expense Project expenses Equipment and materials Contractors Administration and management costs Loss on disposal of asset Finance costs Share of net profit of joint venture accounted for using the equity method Profit before income tax Income tax expense Profit for the year Other comprehensive (expense)/income Items that may be reclassified to profit or loss Changes in fair value of available-for-sale financial assets Exchange differences on translation of foreign operations Income tax relating to components of other comprehensive income Other comprehensive (expense)/income for the year, net of tax Total comprehensive income for the year Profit for the year is attributable to: Owners of Lycopodium Limited Non-controlling interests Total comprehensive income for the year is attributable to: Owners of Lycopodium Limited Non-controlling interests Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earnings per share	Notes	Consolidated
		2013 2012 $ $
	5 6 6 7 24(a) 24(a) 36 36	245,940,092 232,286,982 (118,107,866) (111,944,909) (2,192,104) (1,784,442) (9,748,777) (10,581,901) (5,665,636) (839,435) (68,181,612) (58,881,655) (18,667,684) (16,431,351) (235,536) (1,503) (232,023) (330,272) 5,625,335 280,263
		28,534,189 31,771,777 (5,993,750) (9,416,678)
		22,540,439 22,355,099 (2,000) (23,000) 1,045,265 (336,980) 600 6,900
		1,043,865 (353,080)
		23,584,304 22,002,019
		21,931,946 22,143,034 608,493 212,065
		22,540,439 22,355,099
		22,975,811 21,789,954 608,493 212,065
		23,584,304 22,002,019
		Cents Cents
		56.5 57.3 55.4 56.0

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

20 Lycopodium Limited Annual Financial Report 2013

Consolidated Balance Sheet

- As at 30 June 2013

ASSETS Current assets Cash and cash equivalents Trade and other receivables Current tax receivables Other current assets Total current assets Non-current assets Investments accounted for using the equity method Available-for-sale financial assets Property, plant and equipment Intangible assets Other receivables Deferred tax assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Current tax liabilities Provisions Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained earnings Parent entity interest Non-controlling interest Total equity	Notes	Consolidated
		2013 2012 $ $
	8 9 10 12 13 14 16 11 15 17 18 19 20 22 23 24(a) 24(b) 25	34,997,159 27,768,444 53,254,129 52,590,370 1,199,056 - 4,549,506 3,547,988
		93,999,850 83,906,802
		5,905,599 280,264 7,000 9,000 4,659,138 5,308,394 7,163,778 6,113,748 1,050,335 1,233,835 8,026,369 4,535,790
		26,812,219 17,481,031
		120,812,069 101,387,833
		44,857,595 34,158,533 1,763,637 1,622,503 1,493,638 2,176,954 1,097,956 1,097,956
		49,212,826 39,055,946
		1,012,359 1,535,136 1,157,067 917,164
		2,169,426 2,452,300
		51,382,252 41,508,246
		69,429,817 59,879,587
		18,951,697 18,730,297 1,140,385 294,906 48,639,753 40,689,644
		68,731,835 59,714,847 697,982 164,740
		69,429,817 59,879,587

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

Lycopodium Limited Annual Financial Report 2013 21

Consolidated Statement of Changes in Equity - For the year ended June 2013

Attributable to members of Lycopodium Limited

Consolidated Notes Balance at 1 July 2011 Profit for the year Other comprehensive income / (expenses) Total comprehensive income for the year Transactions with owners in their capacity as owners: Non-controlling interest on acquisition of subsidiary 25 Foreign currency translations with non-controlling interests 25 Dividends provided for or paid 26 Performance rights - value of rights 24 Balance at 30 June 2012 Balance at 1 July 2012 Profit for the year Other comprehensive income / (expenses) Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs and tax 23 Foreign currency translation with non-controlling interests 25 Dividends provided for or paid 26 Performance rights - value of rights 24 Performance rights – transfer on exercise 24 Balance at 30 June 2013	Contributed equity Retained earnings Foreign currency translation reserve Available for sale investment revaluation reserve Performance rights reserve Non- controlling interests Total equity $ $ $ $ $ $ $
	18,730,297 30,916,243 (267,686) (61,600) 418,604 (48,764) 49,687,094 - 22,143,034 - - - 212,065 22,355,099 - -(336,980) (16,100) - - (353,080)
	- 22,143,034(336,980) (16,100) - 212,065 22,002,019
	- - - - - 27 27 - - - - - 1,412 1,412 - (12,369,633) - - - - (12,369,633) - - - - 558,668 - 558,668
	-(12,369,633) - - 558,668 1,439(11,809,526)
	18,730,297 40,689,644(604,666) (77,700) 977,272 164,740 59,879,587
	18,730,297 40,689,644 (604,666) (77,700) 977,272 164,740 59,879,587 - 21,931,946 - - - 608,493 22,540,439 - - 1,045,264 (1,400) - - 1,043,865
	- 21,931,946 1,045,265 (1,400) - 608,493 23,584,304
	221,400 - - - - - 221,400 - - - - - (75,251) (75,251) - (13,981,837) - - - - (13,981,837) - - - - 23,014 - 23,014 - - - - (221,400) - (221,400)
	221,400(13,981,837) - - (198,386) (75,251) (14,034,074)
	18,951,697 48,639,753 440,599 (79,100) 778,886 697,982 69,429,817

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

22 Lycopodium Limited Annual Financial Report 2013

Consolidated Statement of Cashflow

- For the year ended June 2013

Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Interest paid Income taxes paid Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangible assets Proceeds from sale of property, plant and equipment Net cash outflow from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Repayments of hire purchase and lease liabilities Dividends paid to company’s shareholders Proceeds from repayment of loans provided under the senior manager share acquisition plan Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year	Notes	Consolidated
		2013 2012 $ $
	34 14 8	263,367,380 238,619,585 (229,460,274) (208,294,894)
		33,907,106 30,324,691 958,113 1,174,278 (22) (28,528) (11,366,101) (13,737,993)
		23,499,096 17,732,448
		(990,509) (1,430,323) (1,368,569) (158,656) - 2,890
		(2,359,078) (1,586,089)
		1,676,587 240,801 (1,058,377) (1,137,321) (1,575,223) (1,372,002) (13,981,837) (12,369,633) 183,500 396,039
		(14,755,350) (14,242,116)
		6,384,668 1,904,243 27,768,444 26,199,742 844,047 (335,541)
		34,997,159 27,768,444

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

Lycopodium Limited Annual Financial Report 2013 23

Notes to the Consolidated Financial Statement - 30 June 2013

Contents of the notes to the consolidated financial statements

		Page
1	Summary of significant accounting policies	25
2	Financial risk management	36
3	Critical accounting estimates and judgements	39
4	Segment information	40
5	Revenue	43
6	Expenses	43
7	Income tax expense	44
8	Current assets - Cash and cash equivalents	45
9	Current assets - Trade and other receivables	46
10	Current assets - Other current assets	47
11	Non-current assets - Other receivables	47
12	Non-current assets - Investments accounted for using the equity method	48
13	Non-current assets - Available-for-sale financial assets	48
14	Non-current assets - Property, plant and equipment	49
15	Non-current assets - Deferred tax assets	50
16	Non-current assets - Intangible assets	52
17	Current liabilities - Trade and other payables	54
18	Current liabilities - Borrowings	54
19	Current liabilities - Provisions	55
20	Non-current liabilities - Borrowings	55
21	Non-current liabilities - Deferred tax liabilities	56
22	Non-current liabilities - Provisions	57
23	Contributed equity	57
24	Reserves and retained earnings	58
25	Non-controlling interests	60
26	Dividends	60
27	Key management personnel disclosures	61
28	Remuneration of auditors	64
29	Contingencies	65
30	Commitments	65
31	Related party transactions	66
32	Subsidiaries	68
33	Events occurring after the reporting period	69
34	Reconciliation of profit after income tax to net cash inflow from operating activities	69
35	Non-cash investing and financing activities	69
36	Earnings per share	70
37	Share-based payments	70
38	Parent entity financial information	73

24 Lycopodium Limited Annual Financial Report 2013

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of this consolidated financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report comprises the financial statements for the group consisting of Lycopodium Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Lycopodium Limited is a for-profit entity for the purpose of preparing the financial report.

(i) Compliance with IFRS

The consolidated financial report of the Lycopodium Limited group complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

(ii) New and amended standards adopted by the group

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods.

(iii) Early adoption of standards

The group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2012.

(iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of availablefor-sale financial assets and financial assets at fair value through profit and loss.

(v) Critical accounting estimates

The preparation of financial report requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial report, are disclosed in note 3.

(b) Principles of consolidation

(i) Subsidiaries

The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Lycopodium Limited ("company" or "parent entity") as at 30 June 2013 and the results of all subsidiaries for the year then ended. Lycopodium Limited and its subsidiaries together are referred to in this financial report as the group.

Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between companies in the group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated balance sheet, respectively.

(ii) Employee Share Trust

The group has formed a trust to administer the group's employee share scheme. This trust is consolidated, as the substance of the relationship is that the trust is controlled by the group.

Lycopodium Limited Annual Financial Report 2013 25

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation (continued)

(iii) Joint ventures

The interest in a joint venture partnership is accounted for using the equity method after initially being recognised at cost. Under the equity method, the share of the profits or losses is recognised in profit or loss, and the share of post-acquisition movements in reserves is recognised in other comprehensive income.

Profits or losses on transactions establishing the joint venture and transactions with the joint venture are eliminated to the extent of the group's ownership interest until such time as they are realised by the joint venture on consumption or sale. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss.

(iv) Changes in ownership interests

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Lycopodium Limited.

When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

(c) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial report of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial report are presented in Australian dollars, which is Lycopodium Limited's functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss.

Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.

(iii) Consolidated entities

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign operations, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, associated exchange differences are recognised in the profit and loss, as part of the gain or loss on sale where applicable.

26 Lycopodium Limited Annual Financial Report 2013

1 Summary of significant accounting policies (continued)

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

(i) Rendering of services

Revenue from consulting services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised under the percentage of completion method, based on the actual service provided as a proportion of the total services to be provided.

If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

(ii) Rental revenue

Rental revenue is accounted for on a straight-line basis over the lease term as this matches the profile of the manner in which rental is earned. Contingent rental income is recognised as income in the periods in which it is earned.

(iii) Interest income

Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

(iv) Dividends

Dividends are recognised as revenue when the right to receive payment is established.

(f) Income tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial report. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Lycopodium Limited Annual Financial Report 2013 27

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(f) Income tax (continued)

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Lycopodium Limited and its wholly-owned Australian controlled entities have not implemented the tax consolidation legislation.

(g) Leases

Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 30). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

(h) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition-date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.

The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

(i) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(j) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

28 Lycopodium Limited Annual Financial Report 2013

1 Summary of significant accounting policies (continued)

(k) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the profit and loss within ‘administration and management costs’. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against 'administration and management costs' in the profit and loss.

(l) Inventories

Contract work in progress

Contract work in progress is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised losses and progress billings. If there are contracts where progress billings exceed the aggregate costs incurred plus profits less losses, the net amount is presented under other liabilities.

Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the group's contract activities in general.

(m) Investments and other financial assets

Classification

The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

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

Financial assets at fair value through profit and loss are financial assets held-for-trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

(iii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long-term.

Financial assets - reclassification

The group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.

Lycopodium Limited Annual Financial Report 2013 29

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

• (m) Investments and other financial assets (continued)

Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively.

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains and losses from investment securities.

Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in profit or loss within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss as part of revenue from continuing operations when the group's right to receive payments is established. Interest income from these financial assets is included in the net gains/(losses).

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.

Details on how the fair value of financial instruments is determined are disclosed in note 2.

Impairment

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

(i) Assets carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument's fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Impairment testing of trade receivables is described in note 1(k).

30 Lycopodium Limited Annual Financial Report 2013

1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets (continued)

(ii) Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss.

Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.

(ii) Assets classified as available-for-sale (continued)

If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

(n) Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation on plant and equipment is calculated using the straight line or diminishing value method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:

	Plant and equipment	3 - 10 years
	Vehicles	5 - 7 years
	Furniture, fittings and equipment	3 - 8 years
	Leasehold improvements	3 - 6 years
	Leased plant and equipment	3 - 5 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(i)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit and loss.

(o) Intangible assets

(i) Goodwill

Goodwill is measured as described in note 1(h). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cashgenerating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4).

(ii) Customer contracts

Customer contracts acquired as part of a business combination are recognised separately from goodwill. The customer contracts are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated based on the timing of projected cash flows of the contracts over their estimated useful lives, which currently vary from 1 to 5 years.

(iii) Software

Intangible assets also comprise capitalised computer software. Computer software has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of the computer software over their estimated useful lives, being 3 years.

Lycopodium Limited Annual Financial Report 2013 31

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(p) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

(q) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(r) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(s) Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(t) Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Retirement benefit obligations

Contributions to defined contribution funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

32 Lycopodium Limited Annual Financial Report 2013

1 Summary of significant accounting policies (continued)

(t) Employee benefits (continued)

(iv) Share-based payments

Share-based compensation benefits are provided to certain executive directors and other designated employees via the Performance Rights Plans. Information relating to this scheme is set out in note 37.

The fair value of rights granted under the Performance Rights Plans are recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Binomial Tree option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

(v) Senior manager share acquistion plan

The senior manager share acquisition plan was approved at the company's Annual General Meeting on 24 November 2009. The aim of the plan was to allow the Board to assist managers, who in the Board's opinion have demonstrated the qualities and dedication to become the next generation of senior managers, to take up a significant shareholding so as to ensure their commitment and the future of the company.

Eligible Senior Managers include both full-time senior managers and executive directors of the group or such other persons as the Board determines.

A broad outline of the plan is summarised below:

• The company will loan funds to participating Senior Managers to purchase Lycopodium Limited shares via the Lycopodium Share Plan Trust.

• The loan will be a limited recourse loan provided the Senior Manager stays with the group for greater than 3 years.

• The loan will be interest free if the Senior Manager remains employed by the group for greater than 3 years.

• In the event that the Senior Manager leaves within 3 years, interest will be charged equal to the market rate of interest that would have accrued on the loan from the date of advance of the funds to the repayment date.

• During the term of the loan, dividends will be offset against the outstanding loan balance.

• The shares are allocated to the Senior Managers at a 1 cent discount to the volume weighted average of the prices at which the shares of Lycopodium Limited were traded on the ASX during the one week period up to and including the date of allocation.

The group has the following as the result of this transaction:

Share based payment

The difference between the value of the shares purchased and the value of the shares allocated to the senior managers represents the cost to the company for providing the loan to the employees. This amount is expensed in the profit and loss.

Embedded derivative

The senior manager loan receivable is a loan with an embedded derivative with the senior manager having an option to put back the share to the group in full settlement of the loan after the 3 year period. As the embedded derivative is closely related to the senior manager loan, the financial instrument is measured at fair value through profit or loss.

(u) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(v) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

• (w) Earnings per share

• (i) Basic earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares

• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Lycopodium Limited Annual Financial Report 2013 33

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

• (w) Earnings per share (continued)

• (ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(x) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

• (y) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2013 reporting periods. The group's assessment of the impact of these new standards and interpretations is set out below.

• (i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) and AASB 2012-6 Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures (effective from 1 January 2015)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption. When adopted, the standard will affect in particular the group accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading.

There will be no impact on the group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The group has not yet decided when to adopt AASB 9.

• (ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and Other Amendments (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures.

AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation - Special Purpose Entities. The core principle that a group presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships. The group has performed an analysis of the new guidance in the context of its various investees that may or may not be controlled under the new rules and does not expect the new standards to have any impact on its composition.

AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control.

34 Lycopodium Limited Annual Financial Report 2013

1 Summary of significant accounting policies (continued)

• (y) New accounting standards and interpretations (continued)

• (ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and Other Amendments (effective 1 January 2013) (continued)

The group's investment in the joint venture partnership is expected to be classified as a joint venture under the new rules. As the group already applies the equity method in accounting for this investment, AASB 11 is not expected to have any impact on the amounts recognised in its financial report.

AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard by the group will not affect any of the amounts recognised in the financial report, but will impact the type of information disclosed in relation to the group's investments.

Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a 'partial disposal' concept. The group is still assessing the impact of these amendments.

The group does not expect to adopt the new standards before their operative date. They would therefore be first applied in the financial report for the annual reporting period ending 30 June 2014.

• (iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial report. However, application of the new standard will impact the type of information disclosed in the notes to the consolidated financial statements. The group does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014.

(iv) Revised AASB 119 Employee Benefits and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011)

In September 2011, the AASB released a revised standard on accounting for employee benefits. It requires the recognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the so called 'corridor' method) and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is currently included in profit or loss. The standard also introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timing of the recognition of termination benefits. The amendments will have to be implemented retrospectively. This standard is not expected to have any impact on the amounts recognised in the financial statements as the group does not have any defined benefit plan arrangements.

There are no other standards that are not yet effective and that are expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions.

(z) Parent entity financial information

The financial information for the parent entity, Lycopodium Limited, disclosed in note 38 has been prepared on the same basis as the consolidated financial report, except as set out below.

(i) Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial report of Lycopodium Limited. Dividends received from associates are recognised in the parent entity's profit or loss, rather than being deducted from the carrying amount of these investments.

(ii) Share based payments

The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

Lycopodium Limited Annual Financial Report 2013 35

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

2 Financial risk management

The group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the group's financial risk management policy. The objective of the policy is to support the delivery of the group's financial targets whilst protecting future financial security.

The main risks arising from the group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rates and foreign exchange. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, and liquidity risk is monitored through the development of future rolling cash flow forecasts.

The primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified above.

(i) Fair value estimation

The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 "Financial Instruments: Disclosures" requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1),

• (b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and

• (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The fair value of financial instruments traded in active markets (such as available-for-sale securities) is based on quoted market prices at the reporting date (level 1). The quoted market price used for financial assets held by the group is the current bid price. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair value due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cashflows at the current market interest rate that is available to the group for similar financial instruments.

(ii) Summary of financial instruments

The group hold the following financial instruments:

o their short term nature. The fair value of financial liabilities for disclosure contractual cashflows at the current market interest rate that is available to ii) Summary of financial instruments The group hold the following financial instruments:	purposes is estimated by discounting the futur the group for similar financial instruments.
Financial assets Cash and cash equivalents Trade and other receivables Deposits held with banks Available-for-sale financial assets Other receivables Financial liabilities Trade and other payables Borrowings	Consolidated
	2013 2012 $ $
	34,997,159 27,768,444 53,254,129 52,590,370 2,969,404 2,521,040 7,000 9,000 1,050,335 1,233,835
	92,278,027 84,122,689
	26,610,453 23,201,222 2,775,996 3,157,639
	29,386,449 26,358,861

36 Lycopodium Limited Annual Financial Report 2013

2 Financial risk management (continued)

• (a) Market risk

(i) Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar (USD), Ghanaian Cedi (GHS) and Philippine Peso (PHP).

Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities are denominated in a currency that is not the entity’s functional currency. The Board considers that while the group's foreign exchange risk to be minimal at this stage some form of risk management policy will be necessary to mitigate this exposure in the future.

The group's exposure to foreign currency risk at the reporting period, expressed in Australian dollar, was as follows:

Cash and cash equivalents Trade and other receivables Other current assets Trade and other payables Net exposure	30 June 2013 30 June 2012
	USD GHS PHP USD GHS PHP
	$ $ $ $ $ $
	178,156 1,632,355 75,374 185,588 1,414,713 63,770 - 16,916 6,655 - 11,592 5,596 - - 347,925 - - 182,108 (64,829) (280,124) (237,913) (29,131) (243,274) (209,128)
	113,327 1,369,147 192,041 156,457 1,183,031 42,346

Group sensitivity

Based on the financial instruments held at 30 June 2013, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the group's post-tax profit and equity for the year would have been $11,333 higher/$11,333 lower (2012: $15,646 higher/$15,646 lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table. Profit is less sensitive to movements in the Australian dollar/US dollar exchange rates in 2013 than 2012 because of the lower amount of US dollar denominated cash and cash equivalents.

Based on the financial instruments held at 30 June 2013, had the Australian dollar weakened/strengthened by 10% against the Ghanaian Cedi with all other variables held constant, the group's post-tax profit and equity for the year would have been $136,915 higher/$136,915 lower (2012: $118,303 higher/$118,303 lower), mainly as a result of foreign exchange gains/losses on translation of Ghanaian Cedi denominated financial instruments as detailed in the above table. Profit is more sensitive to movements in the Australian dollar/Ghanaian Cedi exchange rates in 2013 than 2012 because of the higher amount of Ghanaian Cedi denominated cash and cash equivalents.

Based on the financial instruments held at 30 June 2013, had the Australian dollar weakened/strengthened by 10% against the Philippine Peso with all other variables held constant, the group's post-tax profit and equity for the year would have been $19,204 higher/$19,204 lower (2012: $4,235 higher/$4,235 lower), mainly as a result of foreign exchange gains/losses on translation of Philippine Peso denominated financial instruments as detailed in the above table. Profit is more sensitive to movements in the Australian dollar/Philippine Peso exchange rates in 2013 than 2012 mainly because of the higher amount of Philippine Peso denominated other current assets.

(ii) Price risk

The group is exposed to equity securities price risk with the exposure, however, being minimal. Equity securities price risk arises from investments in equity securities. The equity investments are publicly traded on the Australian Securities Exchange ("ASX"). The price risk for the listed securities is immaterial in terms of a possible impact on profit and loss or total equity and as such a sensitivity analysis has not been completed. The group does not have a risk management policy surrounding price risk in place as the Board considers the risk minimal.

The group is not directly exposed to commodity price risk.

(iii) Interest rate risk

The group is exposed to interest rate risk arising mainly from borrowings and cash balances held. The risk is considered minimal as the group's borrowings are minimal. The group does not enter into any specific swaps or hedges to cover any interest rate volatility and does not have a risk management policy surrounding cash flow and interest rate risk as the Board considers these risks to be minimal.

Lycopodium Limited Annual Financial Report 2013 37

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

2 Financial risk management (continued)

(a) Market risk (continued)

• (iii) Interest rate risk (continued)

Group sensitivity

At 30 June 2013, if interest rates had changed by -/+50 basis points from the year end rates with all other variables held constant, post-tax profit and equity for the year would have been $128,443 lower/higher (2012: -/+50 basis points: $102,996 lower/higher), as a result of lower/higher interest income from cash and cash equivalents.

(b) Credit risk

Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, trade and other receivables and other current assets. The group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Other receivables comprises of the loan under the senior management share acquisition plan. The group is not exposed to credit risk as the loan is secured under the terms of the loan (note 1(t)).

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Cash and cash equivalents Trade and other receivables Deposits held with banks (note 10)	Consolidated
	2013 2012 $ $
	34,997,159 27,768,444 53,254,129 52,590,370 2,969,404 2,521,040
	91,220,692 82,879,854

Cash and cash equivalents

The credit risk on cash and cash equivalents is limited because the group's primary bank is rated AA- by an international creditrating agency.

Trade and other receivables

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the group's policy to securitise its trade and other receivables. All receivables at balance date that are neither past due nor impaired comply with the group's policy on credit quality.

It is the group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation.

In addition, receivable balances are monitored on an ongoing basis with the result that the group's exposure to bad debts is minimised.

There are no significant concentrations of credit risk within the group. The group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a number of customers that operate predominantly in the mining and extractive industry sector including the major players in the industry and the junior/emerging players. There are multiple contracts with our significant customers, across a number of their subsidiaries, divisions within those subsidiaries and locations.

Deposits held with banks

The credit risk on deposits held with banks are limited as they comprise desposits held with banks with high credit ratings assigned by international credit-rating agencies.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. The group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

38 Lycopodium Limited Annual Financial Report 2013

2 Financial risk management (continued)

(c) Liquidity risk (continued)

Financing arrangements

The group had access to the following undrawn borrowing facilities at the reporting date:

Leasing facility Standby credit facility	Consolidated
	2013 2012
	$ $ 3,449,316 2,650,000 12,500,000 -
	15,949,316 2,650,000

Maturities of financial liabilities

The following tables detail the group's remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group can be required to pay. The table includes both interest and principal cash flows. The group had no derivative financial instruments.

Consolidated entity - At 30 June 2013 Non-derivatives Trade payables Insurance premium funding Finance lease liabilities Total non-derivatives Consolidated entity - At 30 June 2012 Non-derivatives Trade payables Insurance premium funding Finance lease liabilities Total non-derivatives	1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Total Contrac- tual Cash Flow Carrying Amount liabilities $ $ $ $ $ $
	26,610,453 - - - 26,610,453 26,610,453 503,143 - - - 503,143 503,143 1,435,429 621,003 383,631 - 2,440,063 2,272,853
	28,549,025 621,003 383,631 - 29,553,659 29,386,449
	23,201,222 - - - 23,201,222 23,201,222 240,780 - - - 240,780 240,780 1,568,362 1,187,204 377,289 70,010 3,202,865 2,916,859
	25,010,364 1,187,204 377,289 70,010 26,644,867 26,358,861

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Impairment testing of goodwill

The group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(i). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. Refer to note 16 for details of these assumptions and the potential impact of changes to the assumptions.

Lycopodium Limited Annual Financial Report 2013 39

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

3 Critical accounting estimates and judgements (continued)

• (a) Critical accounting estimates and assumptions (continued)

(ii) Service warranties

In accordance with the accounting policy stated in note 1(s), the group has recognised warranty provisions at the end of the previous financial year in respect of potential claims for rectification work on some of its EPCM contracts. The amounts provided take into account contractual exposure and estimates based on industry and historical trends.

(iii) Fixed-price contracts

The group uses the percentage of completion method in accounting for its revenue from fixed-sum contracts. The stage of completion is measured by reference to the contract costs incurred to date compared to the estimated total costs for the contract.

Significant assumptions are required to estimate the total contract costs and the recoverable variations work that will affect the stage of completion and the contract revenue respectively. In making these estimates, the group has relied on past experience and best available information.

4 Segment information

(a) Description of segments

Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.

The Board considers the business from both a product and geographic perspective and has identified nine operating segments of which three are reportable in accordance with the requirements of AASB 8.

The Corporate Services segment consists of managerial and legal services provided to the group in addition to strategic investment holdings.

The Minerals segment consists of engineering and related services provided to the extractive mining industry. The clients, including junior exploration companies and major multinational producers, are developing projects for a wide range of commodities. These projects range in scope from large greenfield projects involving process plant and equipment, civil, and building works, control systems, services and infrastructure to small skid-mounted pilot plants.

The Project Services Africa segment consists of project management, construction management and commissioning services provided to the extractive mining industry in Africa.

All other operating segments are not reportable operating segments, as they fall under the quantitative thresholds of AASB 8. The results of these operations are included in the 'Other' column.

40 Lycopodium Limited Annual Financial Report 2013

4 Segment information (continued)

(b) Segment information provided to the Board of Directors

The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2013 and 30 June 2012 are as follows:

30 June 2013 Total segment revenue Inter-segment revenue Revenue from external customers Profit / (Loss) before tax Interest in the profit of equity accounted joint ventures Depreciation and amortisation Income tax expense Total segment assets Total assets includes: Investment in joint ventures Additions to non-current assets (other than financial assets and deferred tax) Total segment liabilities 30 June 2012 Total segment revenue Inter-segment revenue Revenue from external customers Profit / (Loss) before tax Interest in the profit of equity accounted joint ventures Depreciation and amortisation Income tax expense Total segment assets Total assets includes: Investments in joint ventures Additions to non-current assets (other than financial assets and deferred tax) Total segment liabilities	Segments Total
	Corporate Services Minerals Project Services Africa Other $ $ $ $ $
	21,148,404 192,882,374 28,987,639 52,243,557 295,261,974 (21,025,563) (13,300,810) (448,024) (14,547,485) (49,321,882)
	122,841 179,581,564 28,539,615 37,696,072 245,940,092
	(1,264,278) 17,966,938 4,086,969 7,789,560 28,579,189
	- 5,625,336 - - 5,625,335 (457,450) (951,749) (13,463) (769,442) (2,192,104) 594 (3,325,473) (1,033,737) (1,635,134) (5,993,750) 12,791,180 71,005,059 12,060,806 24,193,836 120,050,881
	- 5,905,599 - - 5,905,599 - 2,109,909 35,485 557,054 2,702,448 1,267,569 36,198,420 7,262,607 11,150,112 55,878,708
	15,598,839 203,828,953 29,852,527 29,042,949 278,323,268 (15,217,200) (18,942,790) (2,559,759) (9,316,537) (46,036,286)
	381,639 184,886,163 27,292,768 19,726,412 232,286,982
	(1,374,737) 25,872,769 4,712,855 2,605,890 31,816,777
	- 280,263 - - 280,263 (457,614) (809,977) (11,480) (505,371) (1,784,442) 17,660 (7,202,077) (1,126,626) (1,105,635) (9,416,678) 11,049,357 65,494,878 10,110,613 20,837,718 107,492,566
	- 280,264 - - 280,264 - 1,818,932 1,223 1,118,400 2,938,555 2,303,240 33,004,565 6,055,186 11,698,960 53,061,951

Lycopodium Limited Annual Financial Report 2013 41

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

4 Segment information (continued)

(c) Other segment information

(i) Segment revenue

Sales between segments are carried out at arm's length and are eliminated on consolidation. The revenue from external parties reported to the board of directors is measured in a manner consistent with that in the consolidated statement of comprehensive income.

The entity is domiciled in Australia. Revenue from external customers in Australia was $117,791,446 (2012: 127,697,172), and the total of revenue from external customers from other countries is $128,148,645 (2012: $104,589,810). Segment revenues are allocated based on the country in which the customer is located.

Revenues of approximately $122,976,660 (2012: $137,555,770) are derived from the top 3 customers. These revenues are attributable to the Minerals segment.

(ii) Segment profit before tax

The board of directors assesses the performance of the operating segments based on a measure of adjusted profit before tax. A reconciliation of segment profit before tax to the profit before tax in the statement of comprehensive income is provided as follows:

Segment profit before tax Amortisation of customer relationships Profit before income tax as per the statement of comprehensive income	Consolidated
	2013 2012 $ $
	28,579,189 31,816,777 (45,000) (45,000)
	28,534,189 31,771,777

(iii) Segment assets

The amounts provided to the board of directors with respect to total assets are measured in a manner consistent with that of the financial report. These assets are allocated based on the operations of the segment and the physical location of the asset. Reportable segments' assets are reconciled to total assets as follows:

Segment assets Intersegment eliminations Intangibles arising on consolidation Deferred tax arising on consolidation Total assets as per the consolidated balance sheet	Consolidated
	2013 2012 $ $
	120,050,881 107,492,566 (4,852,804) (11,750,223) 5,654,492 5,699,490 (40,500) (54,000)
	120,812,069 101,387,833

(iv) Segment liabilities

The amounts provided to the board of directors with respect to total liabilities are measured in a manner consistent with that of the financial report. These liabilities are allocated based on the operations of the segment.

Reportable segments' liabilities are reconciled to total liabilities as follows:

Reportable segments' liabilities are reconciled to total liabilities as follows:
Segment liabilities Intersegment eliminations Total liabilities as per the consolidated balance sheet	Consolidated
	2013 2012 $ $
	55,878,708 53,061,951 (4,496,456) (11,553,705)
	51,382,252 41,508,246

42 Lycopodium Limited Annual Financial Report 2013

5 Revenue

From operations Sales revenue Contract revenue Other revenue Rents and sub-lease rentals Bank interest Other revenue Total revenue from operations	Consolidated
	2013 2012 $ $
	244,800,461 230,919,074
	14,427 84,467 929,771 1,222,046 195,433 61,395
	1,139,631 1,367,908
	245,940,092 232,286,982

6 Expenses

Profit before income tax includes the following specific expenses: Depreciation Fixtures and fittings Leasehold improvements Leased plant and equipment Motor vehicles Total depreciation Amortisation Computer software Customer contracts Total amortisation Total depreciation and amortisation Finance costs Interest and finance charges paid/payable Net foreign exchange losses Net loss on disposal of property, plant and equipment Rental expense relating to operating leases Minimum lease payments Defined contribution superannuation expense	Consolidated
	2013 2012 $ $
	520,972 457,006 531,774 499,983 788,846 589,230 23,949 25,722
	1,865,541 1,571,941
	281,563 167,501 45,000 45,000
	326,563 212,501
	2,192,104 1,784,442
	232,023 330,272 642,694 5,818 235,536 1,503 7,511,313 6,358,534 5,713,118 5,635,245

Lycopodium Limited Annual Financial Report 2013 43

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

7 Income tax expense

(a) Income tax expense
Current tax
Deferred tax
Adjustment for current tax of prior periods
Deferred income tax (revenue) expense included in income tax expense
comprises:
Increase in deferred tax assets (note 15)
(Decrease) / increase in deferred tax liabilities (note 21)

	Consolidated
	2013	2012
	$	$
	10,073,708	9,994,620
	(3,480,144)	(202,089)
	(599,814)	(375,853)
	5,993,750	9,416,678
	(3,123,441)	(401,934)
	(356,703)	199,845
	(3,480,144)	(202,089)

(b) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense Tax at the Australian tax rate of 30% (2012:30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Share based payment Sundry items Non-assessable, non-exempt income and related non-deductible expenses Exchange differences on translation Adjustments for current tax of prior periods – over provision of prior year income tax Difference in overseas tax rates Previously unrecognised tax losses now recouped to reduce current tax expense Deferred tax asset not recognised Income tax paid in foreign jurisdiction Share of net profit of joint ventures accounted for using the equity method Total income tax expense	Consolidated
	2013 2012 $ $
	28,534,189 31,771,777
	8,560,257 9,531,533 6,904 167,600 42,723 80,238 (155,351) 9,472 180,350 (72,170)
	8,634,883 9,716,673 (599,814) (375,853) (403,923) (322,070) (761,551) (7,436) 358,847 449,341 452,909 40,102 (1,687,601) (84,079)
	5,993,750 9,416,678

44 Lycopodium Limited Annual Financial Report 2013

7 Income tax expense (continued)

(c) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity: Net deferred tax - credited directly to equity (d) Tax Losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 30% (2012: 30%) All unused tax losses were incurred by Australian entities. 8 Current assets - Cash and cash equivalents Cash at bank and in hand Deposits at call	Consolidated
	2013 2012 $ $
	(600) (6,900) Consolidated 2013 2012 $ $ 1,685,784 2,538,501 505,735 761,550 Consolidated 2013 2012 $ $ 15,554,112 17,830,775 19,443,047 9,937,669 34,997,159 27,768,444

(a) Risk exposure

The group's exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.

Lycopodium Limited Annual Financial Report 2013 45

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

9 Current assets - Trade and other receivables

Trade receivables Provision for impairment of receivables (a) Trade receivable retention Loans to joint venture GST and other receivables Cash advanced to employees	Consolidated
	2013 2012 $ $
	48,198,420 47,494,220 (1,113,170) (250,467) 1,140,302 494,360
	48,225,552 47,738,113
	999,999 999,999 3,977,910 3,781,513 50,668 70,745
	5,028,577 4,852,257
	53,254,129 52,590,370

(a) Impaired trade receivables

As at 30 June 2013 current trade receivables of the group with the value of $1,113,170 (2012: $250,467) were impaired, with the amounts being fully provided for.

The ageing of these receivables is as follows:

31 to 60 days 61 to 90 days 91 to 120 days 121 to 210 days 211 days or over	Consolidated
	2013 2012 $ $
	42,405 - 52,075 - 122,602 11,051 - 117,796 896,088 121,620
	1,113,170 250,467

Movements in the provision for impairment of receivables are as follows:

At 1 July Provision for impairment recognised during the year Unused amount reversed At 30 June	Consolidated
	2013 2012 $ $
	250,467 1,012,685 1,090,024 150,485 (227,321) (912,703)
	1,113,170 250,467

The other classes within trade and other receivables do not contain impaired assets.

46 Lycopodium Limited Annual Financial Report 2013

9 Current assets - Trade and other receivables (continued)

(b) Past due but not impaired

As of 30 June 2013, trade receivables of $8,935,031 (2012: $7,477,962) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

31 to 60 days 61 to 90 days 91 to 120 days 121 to 210 days 211 days and over	Consolidated
	2013 2012 $ $
	5,246,529 4,324,186 1,666,419 2,608,906 1,639,513 34,849 226,517 225,101 156,053 284,920
	8,935,031 7,477,962

(c) Foreign exchange and interest rate risk

Information about the group's exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 2.

(d) Fair value and credit risk

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. The group does not hold any collateral as security. Refer to note 2 for more information on the risk management policy of the group.

10 Current assets - Other current assets

Other current assets (a) Prepayments	Consolidated
	2013 2012 $ $
	2,969,404 2,521,040 1,580,102 1,026,948
	4,549,506 3,547,988

(a) Other current assets

Other current assets consist of deposits held with licensed banks as security/bond on the various properties leased by the group.

11 Non-current assets - Other receivables

Loans under the senior manager share acquisition plan	Consolidated 2013 2012 $ $ 1,050,335 1,233,835

Further information relating to loans under the senior manager share acquisition plan is set out in note 1(t).

Lycopodium Limited Annual Financial Report 2013 47

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

11 Non-current assets - Other receivables (continued)

(a) Impaired receivables and receivables past due

None of the non-current receivables are impaired or past due but not impaired.

12 Non-current assets - Investments accounted for using the equity method

(a) Movements in carrying amounts

Carrying amount at the beginning of the financial year Share of profits after income tax Share capital introduced Carrying amount at the end of the financial year	Consolidated
	2013 2012 $ $
	280,264 - 5,625,335 280,263 - 1
	5,905,599 280,264

(b) Summarised financial information of joint ventures

The group's share of the results of its joint ventures and its aggregated assets and liabilities are as follows:

2013 Pilbara EPCM Pty Ltd 2012 Pilbara EPCM Pty Ltd	Company's share of Ownership Interest % Assets $ Liabilities $ Revenues $ Profit $
	50 14,932,757 9,027,156 31,896,501 5,625,335
	50 3,667,418 3,387,154 1,994,317 280,263

13 Non-current assets - Available-for-sale financial assets

Balance at the beginning of year Revaluation deficit transferred to equity Balance at end of year Listed securities (note (a)) Equity securities	Consolidated
	2013 2012 $ $
	9,000 32,000 (2,000) (23,000)
	7,000 9,000
	Consolidated
	2013 2012 $ $
	7,000 9,000
	7,000 9,000

(a) Listed securities Available-for-sale financial assets consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.

The fair value of listed available-for-sale investments has been determined directly by reference to published price quotations in an active market.

48 Lycopodium Limited Annual Financial Report 2013

14 Non-current assets - Property, plant and equipment

At 30 June 2011 Cost Accumulated depreciation Net book amount Year ended 30 June 2012 Opening net book amount Additions Depreciation charge Disposals Transfers to intangible assets Exchange differences Closing net book amount At 30 June 2012 Cost Accumulated depreciation Net book amount Year ended 30 June 2013 Opening net book amount Additions Depreciation charge Disposals Transfers Exchange differences Closing net book amount At 30 June 2013 Cost Accumulated depreciation Net book amount	Fixtures and fittings Motor vehicles Leasehold Improve- ments Leased plant & equipment Total $ $ $ $ $
	3,469,746 262,820 2,848,409 1,860,968 8,441,943 (2,073,043) (121,142) (1,272,158) (856,515) (4,322,858)
	1,396,703 141,678 1,576,251 1,004,453 4,119,085
	1,396,703 141,678 1,576,251 1,004,453 4,119,085 1,114,145 - 435,353 1,230,403 2,779,901 (457,006) (25,722) (499,983) (589,230) (1,571,941) (211) (4,163) - - (4,374) (12,771) - - (7,264) (20,035) 6,077 (8,687) 8,184 184 5,758
	2,046,937 103,106 1,519,805 1,638,546 5,308,394
	4,675,467 240,778 3,307,877 2,555,164 10,779,286 (2,628,530) (137,672) (1,788,072) (916,618) (5,470,892)
	2,046,937 103,106 1,519,805 1,638,546 5,308,394
	2,046,937 103,106 1,519,805 1,638,546 5,308,394 447,788 20,370 499,462 366,257 1,333,877 (520,972) (23,949) (531,774) (788,846) (1,865,541) (239,035) - 3,513 - (235,522) 42,251 - - (42,251) - 65,779 1,875 43,940 6,336 117,930
	1,842,748 101,402 1,534,946 1,180,042 4,659,138
	5,216,232 266,110 3,871,573 2,615,038 11,968,953 (3,373,484) (164,708) (2,336,627) (1,434,996) (7,309,815)
	1,842,748 101,402 1,534,946 1,180,042 4,659,138

Lycopodium Limited Annual Financial Report 2013 49

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

14 Non-current assets - Property, plant and equipment (continued)

(a) Leased assets

Plant and equipment under a finance lease is disclosed as a separate category in the property, plant and equipment movements detailed above. In addition, leasehold improvements include the following amounts where the group is a lessee under a finance lease:

Leasehold improvements Cost Accumulated depreciation Net book amount

	Consolidated	Consolidated
	2013	2012
	$	$
	2,417,717	2,417,717
	(1,873,557)	(1,452,947)
	544,160	964,770

15 Non-current assets - Deferred tax assets

The balance comprises temporary differences attributable to: Employee benefits Doubtful debts Accrued expenses Deferred revenue Other provisions Depreciation Finance leases Set-off of deferred tax liabilities pursuant to set-off provisions (note 21) Net deferred tax assets Deferred tax assets to be recovered within 12 months Deferred tax assets to be recovered after more than 12 months	Consolidated
	2013 2012 $ $
	3,617,000 3,122,318 232,765 74,899 321,044 287,626 3,660,290 1,160,996 414,219 396,950 32,435 33,277 327,559 395,370
	8,605,312 5,471,436
	(578,943) (935,646)
	8,026,369 4,535,790
	7,105,180 4,329,391 1,500,132 1,142,045
	8,605,312 5,471,436

50 Lycopodium Limited Annual Financial Report 2013

15 Non-current assets - Deferred tax assets (continued)

Movements At 1 July 2011 Credited/(charged) - to profit or loss - directly to equity Exchange rate differences At 30 June 2012 At 1 July 2012 (Charged)/credited - to profit or loss - directly to equity Exchange rate differences At 30 June 2013	Doubtful debts Employee benefits Accrued expenses Deferred revenue Other provisions Depreciation & amortisation Finance leases Total $ $ $ $ $ $ $ $
	299,737 2,803,219 269,229 1,052,671 122,302 9,332 470,833 5,027,323 (224,838) 304,683 18,397 108,325 246,884 23,945 (75,463) 401,933 - - - - 6,900 - - 6,900 - 14,416 - - 20,864 - - 35,280
	74,899 3,122,318 287,626 1,160,996 396,950 33,277 395,370 5,471,436
	74,899 3,122,318 287,626 1,160,996 396,950 33,277 395,370 5,471,436 157,866 489,764 33,418 2,499,294 11,751 (842) (67,811) 3,123,440 - - - - 600 - - 600 - 4,918 - - 4,918 - - 9,836
	232,765 3,617,000 321,044 3,660,290 414,219 32,435 327,559 8,605,312

Lycopodium Limited Annual Financial Report 2013 51

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

16 Non-current assets - Intangible assets

At 1 July 2011 Cost Accumulated amortisation and impairment Net book amount Year ended 30 June 2012 Opening net book amount Additions Amortisation charge Transfers from property, plant and equipment Disposal Exchange differences Closing net book amount Cost Accumulated amortisation and impairment Net book amount Year ended 30 June 2013 Opening net book amount Additions Amortisation charge Disposal Exchange differences Closing net book amount At 30 June 2013 Cost Accumulated amortisation Net book amount	Goodwill Software Customer contracts Total $ $ $ $
	6,420,380 2,836,047 315,000 9,571,427 (819,842) (2,510,690) (90,000) (3,420,532)
	5,600,538 325,357 225,000 6,150,895
	5,600,538 325,357 225,000 6,150,895 - 158,656 - 158,656 - (167,501) (45,000) (212,501) - 20,035 - 20,035 - (17) - (17) - (3,320) - (3,320)
	5,600,538 333,210 180,000 6,113,748
	6,420,380 2,992,697 315,000 9,728,077 (819,842) (2,659,487) (135,000) (3,614,329)
	5,600,538 333,210 180,000 6,113,748
	5,600,538 333,210 180,000 6,113,748 - 1,368,569 - 1,368,569 - (281,563) (45,000) (326,563) - (14) - (14) - 8,038 - 8,038
	5,600,538 1,428,240 135,000 7,163,778
	6,420,380 4,372,902 315,000 11,108,282 (819,842) (2,944,662) (180,000) (3,944,504)
	5,600,538 1,428,240 135,000 7,163,778

• Group amortisation of $326,563 (2012: $212,501) is included in depreciation and amortisation expense in the statement of comprehensive income.

52 Lycopodium Limited Annual Financial Report 2013

16 Non-current assets - Intangible assets (continued)

(a) Impairment tests for goodwill

Goodwill is allocated to the group cash-generating units (CGUs) identified according to business segment and country of operation.

A segment-level summary of the goodwill allocation is presented below.

2013 Minerals Other 2012 Minerals Other	Australia Other countries Total $ $ $
	3,622,991 - 3,622,991 1,977,547 - 1,977,547
	5,600,538 - 5,600,538
	Australia Other countries Total $ $ $
	3,622,991 - 3,622,991 1,977,547 - 1,977,547
	5,600,538 - 5,600,538

(b) Key assumptions used for value-in-use calculations

The recoverable amount of each CGU within the business segment is determined on the basis of value-in-use ('VIU'). The following describes the assumptions on which management has based its cash flow projections when determining value in use: Cash flows

VIU calculations use cash flow projections from approved budgets based on past performance and its expectations for the future covering a three year period.

Growth rate

The growth rate used to extrapolate the cash flows is 2.5% (2012: 2.5%). The growth rate represents a steady indexation rate which does not exceed management's expectations of the long term average growth rate for the business in which each CGU operates.

Discount rate

The base discount rate applied to cash flow projections is 21.9% (2012: 16.8%). The discount rate is a pre-tax rate that reflects the current assessment of the time value of money and the overall perceived risk profile of the group.

(c) Impact of possible changes in key assumptions

Minerals

A reasonably possible change in any of the key assumptions would not cause the carrying amount of the minerals CGU to exceed their recoverable amounts.

Other

Contained within other are CGUs for process industries, maintenance and metallurgical.

The recoverable amount for the process industries CGU is estimated to be $2,000,000 (2012: $2,235,000). This exceeds the carrying amount of the process industries CGU at 30 June 2013 by $190,000 (2012: $100,000).

If the pre-tax discount rate applied to the cash flow projections of the process industries CGU was 25.1% (2012: 17.3%) instead of 21.9% (2012: 16.8%), the recoverable amount of the process industries CGU would equal its carrying amount.

If the growth for subsequent years beyond the period covered by the most recent forecast was 2.2% (2012: 2.3%) instead of 2.5%, the recoverable amount of the process industries CGU would equal its carrying amount.

A reasonable possible change in any of the key assumptions would not cause the carrying amount of the maintenance and metallurgical CGUs to exceed their recoverable amounts.

Lycopodium Limited Annual Financial Report 2013 53

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

17 Current liabilities - Trade and other payables

Trade payables Revenue received in advance Goods and services tax (GST) payable Sundry creditors and accrued expenses (a)	Consolidated
	2013 2012 $ $
	2,515,759 2,571,533 14,430,466 8,400,572 3,816,676 2,556,739 24,094,694 20,629,689
	44,857,595 34,158,533

Included in the above are financial liabilities of $26,610,453 (2012: $23,201,222).

(a) Amounts not expected to be settled within the next 12 months

Other payables include accruals for annual leave and unconditional entitlements of long service leave. The entire obligation is presented as current, since the group does not have an unconditional right to defer settlement. However, based on past experience, the group does not expect all employees to take the full amount of accrued leave within the next 12 months.

The following amounts reflect leave that is not expected to be taken within the next 12 months:

Annual leave obligation expected to be settled after 12 months Long service leave obligation expected to be settled after 12 months	Consolidated
	2013 2012 $ $
	1,791,883 1,444,793 1,634,737 1,321,115
	3,426,620 2,765,908

(b) Risk exposure

Information about the group exposure to foreign exchange risk is provided in note 2.

18 Current liabilities - Borrowings

Secured Lease liabilities (note 30) Hire purchase Total secured current borrowings Unsecured Other loans Total unsecured current borrowings Total current borrowings	Consolidated
	2013 2012 $ $
	1,228,233 1,328,047 32,261 53,676
	1,260,494 1,381,723
	503,143 240,780
	503,143 240,780
	1,763,637 1,622,503

(a) Security and fair value disclosures

Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in note 20.

54 Lycopodium Limited Annual Financial Report 2013

18 Current liabilities – Borrowings (continued)

(b) Risk exposures

Details of the group's exposure to risks arising from current and non-current borrowings are set out in note 2.

19 Current liabilities – Provisions

Service warranties (a)	Consolidated
	2013 2012 $ $
	1,097,956 1,097,956

(a) Service warranties

Provision is made for the estimated cost in respect of works carried out which may require rectification. Any claims made are expected to be settled in the next financial year.

20 Non-current liabilities - Borrowings

Secured Lease liabilities	Consolidated
	2013 2012 $ $
	1,012,359 1,535,136

• Further information relating to loans from related parties is set out in note 31.

(a) Secured liabilities and assets pledged as security

The total secured liabilities (current and non-current) are as follows:

Lease liabilities Hire purchase Total secured liabilities	Consolidated
	2013 2012 $ $
	2,240,592 2,863,183 32,261 53,676
	2.272.853 2,916,859

The carrying amounts of assets pledged as security for current and non-current borrowings are:

Finance lease Plant and equipment Leasehold improvements	Consolidated
	2013 2012 $ $
	1,180,042 1,638,546 544,160 964,770
	1,724,202 2,603,316

Lycopodium Limited Annual Financial Report 2013 55

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

20 Non-current liabilities – Borrowings (continued)

(b) Fair value

The carrying amounts and fair values of borrowings at the end of the reporting period are:

On-balance sheet Non-traded financial liabilities Lease liabilities Hire purchase	Consolidated
	2013 2012 Carrying amount $ Fair value $ Carrying amount $ Fair value $
	2,240,592 2,240,592 2,863,183 2,863,183 32,261 32,261 53,676 53,676
	2,272,853 2,272,853 2,916,859 2,916,859

(c) Risk exposures

Information about the group's exposure to interest rate and foreign exchange risk is provided in note 2.

21 Non-current liabilities - Deferred tax liabilities

The balance comprises temporary differences attributable to: Accrued income – contractors Other provisions Depreciation Set-off of deferred tax liabilities pursuant to set-off provisions (note 15) Net deferred tax liabilities Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after more than 12 months	Consolidated
	2013 2012 $ $
	160,340 437,985 61,957 73,385 356,646 424,276
	578,943 935,646
	(578,943) (935,646)
	- -
	160,340 511,370 418,603 424,276
	578,943 935,646

56 Lycopodium Limited Annual Financial Report 2013

21 Non-current liabilities - Deferred tax liabilities (continued)

Movements	Depreciation &	Accrued	Other
	amortisation	income	provisions	Total
	$	$	$	$
At 1 July 2011	527,739	208,308	17,907	753,954
Charged/(credited)
- profit or loss	(103,463)	247,830	55,478	199,845
Exchange rate differences	-	(18,153)	-	(18,153)
At 30 June 2012	424,276	437,985	73,385	935,646
At 1 July 2012	424,276	437,985	73,385	935,646
Charged/credited
- profit or loss	(67,630)	(277,645)	(11,428)	(356,703)
At 30 June 2013	356,646	160,340	61,957	578,943

22 Non-current liabilities - Provisions

Employee benefits - long service leave

Consolidated
2013	2012
$	$
1,157,067	917,164

23 Contributed equity

(a) Share capital Ordinary shares Fully paid	Consolidated Consolidated
	2013 2012 2013 2012 Shares Shares $ $
	38,955,103 38,655,103 18,951,697 18,730,297

(b) Movements in ordinary share capital Date Details	Number of shares Issue price $
1 July 2011 Opening balance No movements during the year 30 June 2012 Closing balance 1 July 2012 Opening balance 29 August 2012 Exercise of Director performance rights 7 March 2013 Exercise of Director performance rights 28 March 2013 Exercise of Director performance rights 30 June 2013 Closing balance	38,655,103 18,730,297 - -
	38,655,103 18,730,297
	38,655,103 18,730,297 100,000 0.73 73,800 100,000 0.73 73,800 100,000 0.73 73,800
	38,955,103 18,951,697

Lycopodium Limited Annual Financial Report 2013 57

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

23 Contributed equity (continued)

(c) Ordinary shares

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(d) Capital risk management

The group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'borrowings' and 'trade and other payables' as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the consolidated balance sheet (including non-controlling interests) plus net debt.

During 2013, the group's strategy was to maintain a gearing less than 40%. The gearing ratios at 30 June 2013 and 30 June 2012 were as follows:

Total borrowings (including payables) Less: cash and cash equivalents Net debt Total equity Total capital Gearing ratio	Consolidated
	2013 2012 $ $
	47,633,591 37,316,171 (34,997,159) (27,768,444)
	12,636,432 9,547,727 69,429,817 59,879,587
	82,066,249 69,427,314
	18.2% 15.9%

24 Reserves and retained earnings

(a) Other reserves

24 Reserves and retained earnings a) Other reserves
Available-for-sale investments revaluation reserve Performance rights reserve Foreign currency translation reserve Movements: Available-for-sale investments revaluation reserve Balance 1 July Revaluation - gross Deferred tax Balance 30 June	Consolidated
	2013 2012 $ $
	(79,100) (77,700) 778,886 977,272 440,599 (604,666)
	1,140,385 294,906
	Consolidated
	2013 2012 $ $
	(77,700) (61,600) (2,000) (23,000) 600 6,900
	(79,100) (77,700)

58 Lycopodium Limited Annual Financial Report 2013

24 Reserves and retained earnings (continued)

(a) Other reserves (continued)

Movements: Performance rights reserve Balance 1 July Performance rights plan expense Transfer to share capital – exercise of rights Balance 30 June Movements: Foreign currency translation reserve Balance 1 July Currency translation differences arising during the year Balance 30 June (b) Retained earnings Balance 1 July Net profit for the year Dividends paid or payable Balance 30 June	Consolidated
	2013 2012 $ $
	977,272 418,604 23,014 558,668 (221,400) -
	778,886 977,272
	Consolidated
	2013 2012 $ $
	(604,666) (267,686) 1,045,265 (336,980)
	440,599 (604,666)
	Consolidated
	2013 2012 $ $
	40,689,644 30,916,243 21,931,946 22,143,034 (13,981,837) (12,369,633)
	48,639,753 40,689,644

(c) Nature and purpose of other reserves

(i) Available-for-sale investments revaluation reserve

Changes in the fair value and exchange differences arising on translation of investments, such as equities, classified as available-for-sale financial assets, are recognised in other comprehensive income as described in note 1(m) and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired.

(ii) Performance rights reserve

The performance rights reserve is used to recognised the fair value of rights issued to certain Directors or employees during the year.

(iii) Foreign currency translation reserve

Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income as described in note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

Lycopodium Limited Annual Financial Report 2013 59

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

25 Non-controlling interests

Interest in: Share capital Reserves Retained earnings

	Consolidated
	2013	2012
	$	$
	28	28
	(73,120)	2,131
	771,074	162,581
	697,982	164,740

26 Dividends

(a) Ordinary shares

Final dividend for the year ended 30 June 2012 of 21.0 cents (2011: 20.0 cents) per fully paid share paid on 15 October 2012 Fully franked based on tax paid @ 30% (2011: 30%) Interim dividend for the year ended 30 June 2013 of 15.0 cents (2012: 12.0 cents) per fully paid share paid on 15 April 2012

Fully franked based on tax paid @ 30% (2012: 30%)

Total dividends provided for or paid

(b) Dividends not recognised at the end of the reporting period

In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 21.0 cents per fully paid ordinary share (2012: 21.0 cents), fully franked based on tax paid at 30% (2012: 30%). The aggregate amount of the proposed dividend expected to be paid on 15 October 2013 out of retained earnings at 30 June 2013, but not recognised as a liability at year end, is

		Parent	Entity
		2013	2012
		$	$
		8,138,572	7,731,021
		5,843,265	4,638,612
		13,981,837	12,369,633
		Parent	Entity
		2013	2012
		$	$
		8,180,572	8,138,572

60 Lycopodium Limited Annual Financial Report 2013

26 Dividends (continued)

• (c) Franked dividends

26 Dividends (continued) c) Franked dividends
Franking credits available for subsequent reporting periods based on a tax rate of 30% (2012: 30%)	Consolidated
	2013 2012 $ $
	17,625,131 18,526,006

The above amounts represent the balance of the franking account as at the end of the reporting period, 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 the reporting date, and

(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends.

The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $3,505,959 (2012: $3,487,959).

27 Key management personnel disclosures

• (a) Key management personnel compensation

27 Key management personnel disclosures a) Key management personnel compensation
Short-term employee benefits Post-employment benefits Share-based payments	Consolidated
	2013 2012 $ $
	3,453,013 3,117,499 174,997 294,742 (49,704) 173,285
	3,578,306 3,585,526

Detailed remuneration disclosures are provided in the remuneration report on pages 9 to 13.

• (b) Equity instrument disclosures relating to key management personnel

• (i) Rights provided as remuneration and shares issued on exercise of such rights

Details of rights provided as remuneration and shares issued on the exercise of such rights, together with terms and conditions of the rights, can be found in the remuneration report on pages 12 to 13. There were no options provided to key management personnel during the current year.

Lycopodium Limited Annual Financial Report 2013 61

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

27 Key management personnel disclosures (continued)

• (b) Equity instrument disclosures relating to key management personnel (continued)

(ii) Rights holdings

The numbers of rights over ordinary shares in the company held during the financial year by each Director of Lycopodium Limited are set out below.

2013	Balance	Granted			Balance	Vested
	at start	as com-		Other	at end	and
Name	**of the year **	**pensation **	Exercised	**changes^ **	**of the year **	exercisable	Unvested
Directors of Lycopodium	Limited
Rodney Leonard	217,000	-	-	(50,000)	167,000	117,000	50,000
Robert Osmetti	217,000	-	(100,000)	(50,000)	67,000	17,000	50,000
Bruno Ruggiero	217,000	-	(100,000)	(50,000)	67,000	17,000	50,000
Peter De Leo	317,000	-	(100,000)	(50,000)	167,000	117,000	50,000

^ Relates to rights forfeited/gained as a result of actual performance hurdle levels being met/not achieved.

2012	Balance	Granted			Balance	Vested
	at start	as com-		Other	at end	and
Name	of the year	pensation	Exercised	changes^	of the year	exercisable	Unvested
Directors of Lycopodium	Limited
Rodney Leonard	210,000	-	-	7,000	217,000	100,000	117,000
Robert Osmetti	210,000	-	-	7,000	217,000	100,000	117,000
Bruno Ruggiero	210,000	-	-	7,000	217,000	100,000	117,000
Peter De Leo	310,000	-	-	7,000	317,000	200,000	117,000

^ Relates to rights forfeited/gained as a result of actual performance hurdle levels being met/not achieved.

(iii) Share holdings

The numbers of shares in the company held during the financial year by each Director of Lycopodium Limited and other key management personnel of the group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

		Received
2013	Balance	during the year		Balance
	at the	on the exercise	Other changes	at the
Name	**start of the year **	of rights	**during the year **	**end of the year **
Directors of Lycopodium Limited
Ordinary shares
Michael Caratti	9,104,367	-	-	9,104,367
Lawrence Marshall	1,942,332	-	-	1,942,332
Rodney Leonard	2,612,332	-	-	2,612,332
Robert Osmetti	2,141,781	100,000	(183,633)	2,058,148
Bruno Ruggiero	3,167,332	100,000	(100,000)	3,167,332
Peter De Leo	1,254,771	100,000	(300,000)	1,054,771
Other key management personnel of the consolidated entity
Ordinary shares
Keith Bakker	115,000	-	(13,964)	101,036

62 Lycopodium Limited Annual Financial Report 2013

27 Key management personnel disclosures (continued)

(b) Equity instrument disclosures relating to key management personnel (continued)

(iii) Share holdings (continued)

		Received
2012	Balance	during the year		Balance
	at the	on the exercise	Other changes	at the
Name	start of the year	of rights	during the year	end of the year
Directors of Lycopodium Limited
Ordinary shares
Michael Caratti	9,104,367	-	-	9,104,367
Lawrence Marshall	2,142,332	-	(200,000)	1,942,332
Rodney Leonard	2,812,332	-	(200,000)	2,612,332
Robert Osmetti	2,141,781	-	-	2,141,781
Bruno Ruggiero	3,167,332	-	-	3,167,332
Peter De Leo	1,254,771	-	-	1,254,771
Other key management personnel of the consolidated entity
Ordinary shares
Keith Bakker	125,000	-	(10,000)	115,000

(c) Loans to key management personnel

Details of loans made to Directors of Lycopodium Limited and other key management personnel of the group, including their personally related parties, are set out below.

(i) Aggregates for key management personnel

2013 2012	Balance at the start of the year Interest paid and payable for the year Interest not charged Balance at the end of the year Number in group at the end of the year $ $ $ $
	61,057 - - 52,213 2 69,141 - - 61,057 2

Loans outstanding at the end of the current and prior year include a loan to a key management personnel under the senior manager share acquisition plan.

All other loans to key management personnel are short-term advances in nature and are insignificant.

No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to key management personnel.

Lycopodium Limited Annual Financial Report 2013 63

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

28 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

• (a) PwC Australia

Audit and other assurance services Audit and review of financial reports Taxation services Tax compliance services (including income tax returns) International tax advice Total remuneration for taxation services Total remuneration for PwC Australia	Consolidated
	2013 2012 $ $
	318,750 331,042 46,185 40,207 8,145 2,000
	54,330 42,207
	373,080 373,249

(b) Network firms of PwC Australia

Audit and other assurance services Audit and review of financial statements Taxation services Tax compliance services (including income tax returns) Total remuneration of network firms of PwC Australia	Consolidated
	2013 2012 $ $
	35,741 33,852 42,241 58,606
	77,982 92,458

• (c) Non PwC audit firms

Audit and other assurance services Audit and review of financial statements Taxation services Tax compliance services (including income tax returns) International tax advice Total remuneration for taxation services Other services Other services Total remuneration for non-PwC audit firms Total auditors' remuneration	Consolidated
	2013 2012 $ $
	5,390 8,009 26,750 6,867 91,450 11,025
	118,200 17,892 9,889 4,032
	133,479 29,933
	584,541 495,640

It is the group's policy to employ PwC on assignments additional to their statutory audit duties where PwC expertise and experience with the group are important. These assignments are principally tax advice and due diligence reporting on acquisitions, or where PwC is awarded assignments on a competitive basis. It is the group's policy to seek competitive tenders for all major consulting projects.

64 Lycopodium Limited Annual Financial Report 2013

29 Contingencies

The group had contingent liabilities at 30 June 2013 and 30 June 2012 in respect of:

(a) Contingent liabilities

(i) Guarantees

Guarantees are given in respect of rental bonds for $1,618,271 (2012: $1,571,021).

These guarantees may give rise to liabilities in the event that the group defaults on its obligations under the terms of the lease agreement for its premises at 1 Adelaide Terrace, East Perth, 153-163 Leichhardt Street, Spring Hill, 253-269 Wellington Road, Mulgrave and 191 St Georges Terrace, Perth.

No material losses are anticipated in respect of any of the above contingent liabilities (2012: Nil).

30 Commitments

(a) Capital commitments

There were no capital expenditures contracted for at the reporting date which have not been recognised as liabilities (2012: Nil).

(b) Lease commitments: group as lessee

(i) Non-cancellable operating leases

The property under operating lease by Lycopodium Minerals Pty Ltd is a non cancellable lease with a 120 month term ending 31 January 2021. Minimum lease payments are contingent upon both 4% fixed annual increases and market-based reviews during the term of the lease. The lease allows for sub letting of all lease areas, subject to the consent of the landlord.

The property under operating lease by Lycopodium Process Industries Pty Ltd is a non cancellable lease with a 60 month term ending 31 August 2015, with an option to renew the lease at the end of the term for a further 60 months. The agreement provides for an annual increase in the rental payments of 3.5% over the previous year's rental.

The property under operating lease by Lycopodium (Ghana) Pty Ltd is a non cancellable lease with 24 month term ending 14 September 2013, with an option to renew for a further 24 month term.

The property under operating lease by Lycopodium (Philippines) Pty Ltd is a non cancellable lease with a 36 month term ending 30 June 2014, with the option to renew for a further 36 month term. The agreement provides for an increase in the rental payments of 5% per annum and an increase in the general leasing expenses of 5% per annum.

The property under operating lease by Lycopodium Minerals QLD Pty Ltd is a non-cancellable lease with a 72 month term ending 31 August 2016, with no option to renew. The lease agreement provides for annual increase in the rental payments of 4% over the previous year's rental. The lease allows for sub-letting of all lease areas subject to prior consent of the landlord.

The property under operating lease by Lycopodium Asset Management Pty Ltd is a non cancellable lease with a 96 month term ending 31 January 2021, with an option to renew a further 60 month term. Minimum lease payments are contingent upon a 4.5% fixed annual increase. The lease allows for sub letting of all lease areas, subject to the consent of the landlord

The property under sub lease by Lycopodium Minerals Canada Ltd is a non-cancellable lease with a 36 month term ending 30 August 2014, with the option to renew for a further 40 month term. No provision for increase in rental payments applies.

The property under operating lease by Lycopodium Rail Pty Ltd is a non-cancellable lease with a 36 months term ending 29 January 2015, with an option to renew the lease at the end of its term for a further 36 months. Minimum lease payments are contingent upon annual CPI movements during the terms of its lease.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years	Consolidated
	2013 2012 $ $
	7,033,514 6,695,835 24,258,471 24,787,139 16,229,537 21,156,889
	47,521,522 52,639,863

Lycopodium Limited Annual Financial Report 2013 65

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

30 Commitments (continued)

(b) Lease commitments: group as lessee (continued

(ii) Finance leases and hire purchase commitments

The group has finance leases and hire purchase contracts for various items of plant and equipment with a carrying amount of $2,374,414 (2012: $2,603,316). These lease contracts expire within 1 to 5 years. Under the terms of the leases, the group has the option to acquire the leased assets.

he option to acquire the leased assets.
Commitments in relation to finance leases are payable as follows: Within one year Later than one year but not later than five years Minimum lease payments Future finance charges Total lease liabilities Representing lease liabilities: Current (note 18) Non current (note 20)	Consolidated
	2013 2012 $ $
	1,435,429 1,568,114 1,004,634 1,634,752
	2,440,063 3,202,866
	(167,210) (286,007)
	2,272,853 2,916,859
	1,260,494 1,381,723 1,012,359 1,535,136
	2,272,853 2,916,859

The weighted average interest rate implicit in the leases and hire purchases is 6.54% (2012: 8.64%).

31 Related party transactions

(a) Parent entities

The parent entity within the group is Lycopodium Limited, which is incorporated in Australia.

(b) Subsidiaries

Interests in subsidiaries are set out in note 32.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 27.

(d) Transactions with other related parties

The following transactions occurred with related parties:

nterests in subsidiaries are set out in note 32. c) Key management personnel Disclosures relating to key management personnel are set out in note 27. d) Transactions with other related parties The following transactions occurred with related parties:
Purchases of goods and services Purchases from joint venture Sales of goods and services Sales to joint venture	Consolidated
	2013 2012 $ $
	516,696 160,976 8,918,808 603,958

66 Lycopodium Limited Annual Financial Report 2013

31 Related party transactions (continued)

(e) Outstanding balances arising from sales/purchases of goods and services

The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:

Current receivables Joint venture Current payables Joint venture	Consolidated
	2013 2012 $ $
	4,878,712 69,649 255,686 332,975

(f) Loans to/from related parties

Loans to joint venture Beginning of the year Loans advanced Issued capital End of year	Consolidated
	2013 2012 $ $
	999,999 - - 1,000,000 - (1)
	999,999 999,999

There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognised in respect of impaired receivables due from related parties.

(g) Terms and conditions

Purchases and sales of goods and services are made at cost.

Loans advanced to the joint-venture are interest-free and repayable within 12 months.

Outstanding balances are unsecured and are repayable in cash.

Lycopodium Limited Annual Financial Report 2013 67

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

32 Subsidiaries

(a) Significant investments in subsidiaries

The consolidated financial report incorporate the assets, liabilities and results of the following principal subsidiaries in accordance with the accounting policy described in note 1(b):

Name of entity Lycopodium Minerals Pty Ltd Orway Mineral Consultants (WA) Pty Ltd Lycopodium Process Industries Pty Ltd Lycopodium (Ghana) Pty Ltd Lycopodium (Ghana) Limited Lycopodium Tanzania Limited Lycopodium (Philippines) Pty Ltd Lycopodium Minerals QLD Pty Ltd Lycopodium Infrastructure Pty Ltd Lycopodium Asset Management Pty Ltd SUPL Pty Ltd Lycopodium Share Plan Pty Ltd Lycopodium Mauritius Lycopodium Mauritania SARL Lycopodium Americas Pty Ltd Lycopodium Minerals U.S.A Inc. Lycopodium Minerals Canada Ltd Orway Mineral Consultants Americas Pty Ltd Orway Mineral Consultants Canada Ltd Lycopodium PNG Ltd Lycopodium Burkina Faso SARL Lycopodium Rail Pty Ltd Lycopodium Ghana Infrastructure Ltd Process Design and Fabrication Pty Ltd Lycopodium Management Consulting Pty Ltd (i)	Country of incorporation Class of shares Equity holding
	2013 2012 % %
	Australia Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Ghana Ordinary 100 100 Tanzania Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 100 Mauritius Ordinary 100 100 Mauritania Ordinary 100 100 Australia Ordinary 85 85 U.S.A Ordinary 100 100 Canada Ordinary 100 100 Australia Ordinary 85 85 Canada Ordinary 100 100 PNG Ordinary 100 100 Burkina Faso Ordinary 100 100 Australia Ordinary 75 75 Ghana Ordinary 100 100 Australia Ordinary 100 100 Australia Ordinary 100 -

Name of entity

(i) Lycopodium Management Consulting Pty Ltd was incorporated on 15 November 2012.

68 Lycopodium Limited Annual Financial Report 2013

33 Events occurring after the reporting period

Since year end the directors have approved the payment of a final dividend on ordinary shares in respect of the 2013 financial year. The total amount of the dividend is $8,180,572 (2012: $8,138,572), which represents a fully franked dividend of 21.0 (2012: 21.0) cents per fully paid ordinary share.

With the exception of the above, no other matter or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect:

• (a) the group's operations in future financial years, or

• (b) the results of those operations in future financial years, or

• (c) the group's state of affairs in future financial years.

34 Reconciliation of profit after income tax to net cash inflow from operating activities

Profit for the year Depreciation and amortisation Non-cash employee benefits expense – share-based payments Net loss on sale of non-current assets Share of profits of joint venture partnership Interest relating to financing activities Change in operating assets and liabilities Increase in trade debtors and other receivables Increase in deferred tax assets Increase in other operating assets Increase in trade creditors Decrease in provision for income taxes payable Increase in other provisions Net cash inflow from operating activities	Consolidated
	2013 2012 $ $
	22,540,439 22,355,099 2,192,104 1,784,442 23,014 558,668 235,536 1,503 (5,625,335) (280,263) 232,000 301,743 (663,759) (12,755,002) (3,489,979) (255,521) (1,001,518) (826,727) 10,699,063 10,077,582 (1,882,372) (4,065,794) 239,903 836,718
	23,499,096 17,732,448

35 Non-cash investing and financing activities

Acquisition of plant and equipment by means of finance leases or hire purchase arrangements

Consolidated
2013	2012
$	$
343,368	1,352,041

Lycopodium Limited Annual Financial Report 2013 69

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

36 Earnings per share

(a) Basic earnings per share Basic earnings per share attributable to the ordinary equity holders of the company (b) Diluted earnings per share Diluted earnings per share attributable to the ordinary equity holders of the company c) Reconciliation of earnings used in calculating earnings per share Basic earnings per share Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share Diluted earnings per share Used in calculating diluted earnings per share d) Weighted average number of shares used as denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Performance rights Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share	Consolidated
	2013 2012 Cents Cents
	56.5 57.3 55.4 56.0
	Consolidated
	2013 2012 $ $
	21,931,946 22,143,034 21,931,946 22,143,034
	Consolidated
	2013 2012 Number Number
	38,796,747 38,655,103 801,329 906,370
	39,598,076 39,561,473

(c) Reconciliation of earnings used in calculating earnings per share

(d) Weighted average number of shares used as denominator

37 Share-based payments

(a) Executive director performance rights plan

Performance rights were granted to certain executive directors as disclosed in the Notice of Annual General Meeting dated 16 October 2008. The performance rights were designed to give incentive to the executive directors to provide dedicated and ongoing commitment and effort to the company and aligning the interest of both employees and shareholders. The performance rights vest subject to the following performance hurdles being met.

(i) Tranche 1 - On 1 July 2011 if EPS for 30 June 2009 exceeds EPS for 30 June 2008 by 10%

(ii) Tranche 2 - On 1 July 2012 if EPS for 30 June 2010 exceeds EPS for 30 June 2009 by 10%

(iii) Tranche 3 - On 1 July 2013 if EPS for 30 June 2011 exceeds EPS for 30 June 2010 by 10%

• (iv) Tranche 4 - On 1 July 2014 if EPS for 30 June 2012 exceeds EPS for 30 June 2011 by 10%

• (v) Tranche 5 - On 1 July 2015 if EPS for 30 June 2013 exceeds EPS for 30 June 2012 by 10%

70

70 Lycopodium Limited Annual Financial Report 2013

37 Share-based payments (continued)

(a) Executive director performance rights plan (continued)

Where EPS does not exceed 10%, the performance rights will vest proportionally for each period from 0% where EPS is 5% to 100% where EPS is 10%.

The rights expire on 30 June 2016 and are granted under the plan for no consideration.

Fair value of rights granted

The assessed fair value at grant date of rights granted during the year ended 30 June 2009 was $0.74 cents per right. Fair values at grant date are independently determined using a Binomial Tree option pricing model that takes into account the exercise price, the term of the rights, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the rights.

The model inputs for options granted during the year ended 30 June 2009 included:

• (i) exercise price: $Nil

(ii) grant date: 27 November 2008

(iii) expiry date: 30 June 2016

• (iv) share price at grant date: $1.95

• (v) expected price volatility of the company’s shares: 45.6%

(vi) expected dividend yield: 12.8%

• (vii) risk-free interest rate: 5.25%

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

The total number of rights issued under this plan to participating directors for the financial year ended 30 June 2013 was Nil (2012: Nil).

(b) Employee performance rights plan

Performance rights were granted to certain employees during the year under the Lycopodium Group Performance Plan as approved by the Board on 3 October 2011. The rights were designed to give incentive to the employees to provide dedicated and ongoing commitment and effort to the company and aligning the interest of both employees and shareholders. None of the directors of Lycopodium Limited are eligible to participate in this plan.

The rights expire on 30 September 2014 and are granted under the plan for no consideration.

Fair value of rights granted

The assessed fair value at grant date of the rights granted during the year ended 30 June 2012 was $4.76 per right. Fair values at grant date are independently determined using a Binomial Tree option pricing model that takes into account the exercise price, the term of the rights, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free rate for the term of the rights.

The model inputs for options granted during the year ended 30 June 2012 included:

• (i) exercise price: $Nil

• (ii) grant date: 1 October 2011

(iii) expiry date: 30 September 2014 (iv) share price at grant date: $5.60

(v) expected price volatility of the company’s shares: 35.5%

(vi) expected dividend yield: 5.4%

(vii) risk-free interest rate: 4.75%

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

The total number of rights issued under this plan to eligible participating employees for the financial year ended 30 June 2013 was nil (2012: $165,000).

Lycopodium Limited Annual Financial Report 2013 71

Notes to the Consolidated Financial Statement - 30 June 2013 (continued)

37 Share-based payments (continued)

(c) Senior manager share acquisition plan

The senior manager share acquisition plan was introduced in November 2009. Under the plan eligible senior managers are provided with an interest free limited recourse loan for a period of 3 years to acquire shares in Lycopodium Limited. The purchase of the shares will be done via the employee share trust. The loan will be interest free if the participating senior manager stays with the group for more than 3 years. In the event the participating senior manager leaves within 3 years, interest will be charged equal to market rate of interest that would have accrued on the loan from the date of advance of the funds to the repayment date. Eligibility will be decided by the board of Directors.

The value of the loan to each participating senior manager is based on the value of the shares allocated to the respective senior manager. The shares are allocated at a 1 cent discount to the volume weighted average of the prices at which the shares were traded on the ASX during the one week period up to and including the date of allocation. During the financial year ended 30 June 2010, 607,500 shares were acquired on and off market.

The difference between the price of the shares acquired and the value of shares allocated to the participating senior managers was expensed in the financial year ended 30 June 2010. This amounted to $125,855.

(d) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

Rights issued under the Executive Director Performance Rights plan Rights issued under the Employee Performance Rights Plan	Consolidated
	2013 2012 $ $
	(49,704) 173,285 72,718 385,383
	23,014 558,668

72

72 Lycopodium Limited Annual Financial Report 2013

38 Parent entity financial information

(a) Summary financial information

The individual financial report for the parent entity show the following aggregate amounts:

Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholders’ equity Contributed equity Share-based payments Retained earnings Profit for the year Total comprehensive income	Parent
	2013 2012 $ $
	10,904,801 8,522,626 18,103,605 18,743,957
	29,008,406 27,266,583
	1,154,501 1,688,708 113,068 614,532
	1,267,569 2,303,240
	27,740,837 24,963,343
	18,951,702 18,730,297 778,886 977,272 8,010,249 5,255,774
	27,740,837 24,963,343
	16,736,316 10,642,923
	16,736,316 10,642,923

(b) Guarantees entered into by the parent entity

During the period, the parent entity entered into an arrangement with a financier for a standby credit facility of $12.5m. In return, the parent entity and Lycopodium Minerals Pty Ltd jointly executed a cross guarantee and indemnity as security for the facility. The facility remains undrawn at year end.

(c) Contingent liabilities of the parent entity

The parent entity did not have any contingent liabilities as at 30 June 2013 or 30 June 2012.

(d) Contractual commitments for the acquisition of property, plant or equipment

The parent entity did not have any contractual commitments for the acquisition of property, plant and equipment as at 30 June 2013 or 30 June 2012.

Lycopodium Limited Annual Financial Report 2013 73

Directors’ Declaration

In the Directors' opinion:

• (a) the financial report and notes set out on pages 20 to 73 are in accordance with the Corporations Act 2001, including:

• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• (ii) giving a true and fair view of the group's financial position as at 30 June 2013 and of its performance for the year ended on that date, and

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

Note 1(a) confirms that the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001 .

This report is made in accordance with a resolution of Directors.

==> picture [104 x 52] intentionally omitted <==

Rodney Lloyd Leonard Managing Director

Perth 24 September 2013

74 Lycopodium Limited Annual Financial Report 2013

74

Audit Report

==> picture [484 x 708] intentionally omitted <==

Lycopodium Limited Annual Financial Report 2013 75

Audit Report

==> picture [484 x 704] intentionally omitted <==

76 Lycopodium Limited Annual Financial Report 2013

Shareholder Information

The shareholder information set out below was applicable as at 16 September 2013.

A. Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	Total Holders
	575 844 270 211 23
	1,923

There were 74 holders of less than a marketable parcel of ordinary shares.

B. Equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

100,001 and over There were 74 holders of less than a marketable parcel of ordinary shares. B. Equity security holders The names of the twenty largest holders of quoted equity securities are listed below:	23 1,923
	Ordinary shares
	Number held Percentage of Units
Name
Reesh Pty	9,104,637 23.37 4,861,115 12.48 3,167,332 8.13 2,612,332 6.71 2,058,148 5.28 1,942,332 4.99 825,905 2.12 795,355 2.04 581,501 1.49 510,000 1.31 422,466 1.08 407,900 1.05 305,405 0.78 236,754 0.61 216,405 0.56 215,459 0.55 200,000 0.51 175,000 0.45 165,334 0.42 135,118 0.35
HSBC Custody Nominees (Australia) Limited
Luala Pty Ltd
Caddy Fox Pty Ltd
Selso Pty Ltd
Accede Pty Ltd
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Ltd (Colonial First State Inv A/C)
JP Morgan Nominees Australia Limited
Lycopodium Share Plan Pty Ltd
Mr Peter De Leo
De Leo Nominees Pty Ltd
Botech Pty Ltd
Mr David James Taylor
Mr Peter De Leo & Mrs Tiana De Leo
Citicorp Nominees Pty Ltd
Rubi Holdings Pty Ltd
Nancris Pty Ltd
Dr Gregory O'Neil
National Nominees Limited
	28,938,498 74.28

C. Substantial holders

Substantial holders in the company are set out below:

Dr Gregory O'Neil National Nominees Limited C. Substantial holders Substantial holders in the company are set out below:	165,334 0.42 135,118 0.35 28,938,498 74.28
	Number held Percentage of Units
Ordinary shares
Reesh Pty HSBC Custody Nominees (Australia) Limited Luala Pty Ltd Caddy Fox Pty Ltd Selso Pty Ltd	9,104,637 23.37 4,861,115 12.48 3,167,332 8.13 2,612,332 6.71 2,058,148 5.28

D. Voting rights

The voting rights attaching to each class of equity securities are set out below:

(a) Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Lycopodium Limited Annual Financial Report 2013 77

Corporate Directory

Directors

Michael (Mick) John Caratti Rodney (Rod) Lloyd Leonard Robert (Bob) Joseph Osmetti Bruno Ruggiero Peter De Leo Lawrence (Laurie) William Marshall

Company Secretary Keith Bakker

Registered and Principal Office Level 5, 1 Adelaide Terrace East Perth WA 6004 T: + 61 (0)8 6210 5222 E: limited@lycopodium.com.au www.lycopodium.com.au

Share Registry

Computershare Investor Services Pty Limited Level 2, 45 St George’s Terrace, Perth WA 6000 T: +61 (0)3 9415 4267 Direct line for Investors: 1300 764 130 www.computershare.com.au

Lawyers to the Company Hardy Bowen Level 1, 28 Ord Street West Perth WA 6005 T: +61 (0)8 9211 3600 www.hardybowen.com

Auditor

PricewaterhouseCoopers Brookfield Place 125 St George’s Terrace Perth WA 6000 T: +61 (0)8 9238 3000 www.pwc.com.au

78 Lycopodium Limited Annual Financial Report 2013

Level 5, 1 Adelaide Terrace East Perth Western Australia 6004 T: + 61 (0)8 6210 5222 www.lycopodium.com.au

==> picture [595 x 411] intentionally omitted <==