LYCOPODIUM LIMITED — Annual Report 2014

Oct 22, 2014

Annual Financial Report 2014

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Contents

Contents
Directors’ Report	1
Corporate Governance Statement	22
Financial Report
- Consolidated Statement of Proft or Loss
and Other Comprehensive Income	26
- Consolidated Balance Sheet	27
- Consolidated Statement of Changes in Equity	28
- Consolidated Statement of Cash Flows	29
- Notes to the Consolidated Financial Statement	30
- Directors Declaration	88
Audit Report	89
Shareholder Information	91
Corporate Directory	92

Lycopodium Limited Annual Financial Report 2014

Director’s 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 2014.

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, rail 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 2013 of 21.0 cents (2012: 21.0 cents) per fully paid share paid on 15 October 2013 Interim fully franked dividend for the year ended 30 June 2014 of 5.0 cents (2013: 15.0 cents) per fully paid share paid on 15 April 2014	2014 $ 2013 $ 8,180,572 8,138,572 1,947,755 5,843,265
	10,128,327 13,981,837

In addition to the above dividends, since the end of the financial year the Directors have recommended the payment of a final fully franked dividend of $586,232 (1.5 cents per fully paid share) to be paid on 15 October 2014 out of retained earnings at 30 June 2014 (2013: $8,180,572 being 21.0 cents per fully paid share). This brings the total dividend declared for the year ended 30 June 2014 to 6.5 cents (2013: 36.0 cents).

Review of operations

The 2013/14 financial year was one of two distinct halves. In the first half Lycopodium successfully commissioned, ramped up to commercial production and handed a number of major projects to our clients. In the second half however, Lycopodium became subject to the downturn in the mining cycle and the resultant need to respond to deteriorating market conditions. The net result over the two halves saw our revenue and profit figures for the year down on the preceding financial year. Specifically the lower profit reflects the reduction in workload across the group, the continued tightening of market conditions including competition for new work and the impacts of redundancies from staff reductions. The second half in fact contributed negatively upon the full year result.

In response to the prevailing conditions there is a heightened level of marketing to identify and secure new opportunities within the group. Once a study or project is awarded, there remains a strong focus on innovative technical and project delivery solutions to strengthen the financial robustness of our client’s projects and thereby enhance the likelihood of these projects progressing rapidly into implementation.

• 1

Director’s Report (continued)

Review of operations (continued)

Our core strategy continues to concentrate on the delivery of process, engineering and project management services, predominantly through EPCM but also using other delivery models. Our strategy and collaborative approach has enabled the company to develop and maintain a world class capability in delivering large projects for leading multi-national companies through to enabling emerging and junior companies achieve first production. Our aim is to consistently deliver quality and value through all phases and aspects of our clients’ projects. Lycopodium enjoys a strong repeat client base as a result of this singular focus on project excellence.

Full year results

For the financial year ended 30 June 2014, Lycopodium achieved revenues of $154.8 million and a net profit after tax of $3.7 million.

Basic earnings per share were 10 cents. The Directors have resolved to pay a final dividend of 1.5 cents fully franked which aligns with our dividend policy. The total dividend for the year is 6.5 cents fully franked.

Outlook

As previously advised, a number of factors have contributed to the reduction in demand for our services:

• Lower commodity prices across a wide range of commodities.

• Major mining companies belt tightening across their operations, optimising existing assets and limiting capital expenditure to minor 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.

Lycopodium is of the view that the sector is not yet at the bottom, but close. There continues to be belt tightening and austerity measures within large and small companies across a range of commodities within the mining sector, a direct indication that the bottom has not yet been reached.

Lycopodium considers the prevailing conditions will remain for another 12-24 months. In the first instance there will need to be a pick up in exploration drilling and laboratory testing. These are the lead indicators of work which will eventually pass through to the mining services sector. At present the drilling companies and laboratories remain under utilised. Secondly, there are a limited, but slowly growing number of studies in the market, an early sign of improving confidence and the gradual rebuilding of the pipeline of projects. As the study numbers build there will be an increasing number of prospects which progress into implementation as projects. There will need to be an increasing commitment to new studies by the major mining houses through a combination of brownfield upgrades and major expansions plus new greenfield projects. These studies take 12-24 months typically to complete before presentation to their Boards for approval to implement. Thirdly, junior miners will need to delineate robust projects which can readily progress through exploration, feasibility studies, permitting and execution. Typically these are smaller projects and can advance at a quicker pace. The number of robust projects is currently limited by an inability for many juniors to raise funding for each phase of development. Funding successes appear to be emerging but confidence will take some time to fully return across the junior sector of the mining sector.

Lycopodium continues to work with our clients through these leaner times. Through innovation and collaboration we are confident many of our clients will start to pick up again, hopefully leading the curve in terms of project development.

As a result of ongoing efforts we are of the view that the group is well positioned to turn around the poor result in the second half of the last financial year and return to profitability. Our balance sheet also remains in a strong position based on our cash reserves. While visibility into the future remains limited our view is that the net profit after tax for the group in 2014/15 will be comparable to the final results for 2013/14 of $4M. Our forecast also reflects the completion of the acquisition of ADP Holdings during the course of the financial year and a contribution to the overall result.

2 • Lycopodium Limited Annual Financial Report 2014

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Review of operations (continued)

We will continue to actively monitor our forecasts, particularly given the uncertainty which remains in the market at this time.

Corporate overview

During the year Lycopodium announced the completion of due diligence and signing of a binding agreement to acquire a majority interest (74%) in ADP Holdings (Pty) Limited, a South African based engineering company established in 1997. ADP has a strong track record in the African market and its expertise across a range of mineral commodities including diamonds, coupled with its regional skills base, will be complimentary to Lycopodium. The synergies between the two companies will allow entry into markets that neither firm has meaningfully operated in before. New target markets include larger scale EPCM projects within ADP’s traditional diamond and marine client base, smaller scale modular plants and EPC projects within Lycopodium’s traditional market sector. Government approvals have been obtained and the transaction is expected to be concluded on 30 September 2014.

In the second half there was a contraction in personnel numbers across the group in response to the reduction in workload. A strong core within each subsidiary ensures continued high quality services are provided to our clients and enables us to readily respond as the workload picks up again.

During the past year there was a low level of capital investment in core infrastructure.

Operational highlights

Lycopodium successfully delivered a number of major and complex projects to our clients during the year. Each of these projects were well managed through the peak of the resources boom in terms of costs and schedule, leading into a streamlined commissioning phase and rapid ramp up to commercial production. Favourable public comments and feedback were received from our clients in relation to our performance on these projects.

Provided below are brief summaries of the major activities undertaken by Lycopodium Minerals during the financial year.

• Construction and commissioning of the Akyem Project in Ghana West Africa was completed and handed over to Newmont. The Akyem Project is a greenfield 8.5 Mtpa gold treatment plant. Lycopodium was responsible for the gold processing facilities and infrastructure which included the mine services, a 43 km overhead power line connected to the national grid, water extraction and 8 km transmission pipeline, accommodation village, plant administration buildings, fuel supply, haul and access roads. The project achieved forecast for gold production for the year and is currently operating above nameplate capacity.

• Construction and commissioning of the Marandoo Project in Western Australia was completed and handed over to Rio Tinto. The Marandoo Project is a brownfield 15 Mtpa iron ore processing facility treating wet ores from below the water table. Lycopodium was responsible for the delivery of the treatment plant upgrade to process wet ores and all project related infrastructure. Infrastructure associated with the project included an approximately 850 ha agricultural facility, pit dewatering borefield comprising 27 bores, central services as part of a 1,150 man camp, 220 kV substation, mine operations centre, explosives storage facility and mine services buildings. The project achieved commercial production during the year.

• The Tropicana Project in Western Australia for the Tropicana Joint Venture (AngloGold Ashanti, 70%, Independence Group, 30%) was fully commissioned and handed over. Lycopodium was responsible for the delivery of the greenfield 5.5 Mtpa gold processing plant and infrastructure located 330 km east-northeast of Kalgoorlie. Project infrastructure included the access road, airstrip, construction and permanent accommodation villages, remote borefield and transmission pipeline, power reticulation from an onsite generation facility, asset protection systems, operations and maintenance buildings. The project also achieved commercial production during the year and is operating above nameplate design. Through Orway Minerals Consultants, we continue to provide services at the operations to optimise plant performance.

• Construction and commissioning of the Agbaou Project in Côte d’ Ivoire for Endeavour Mining Corporation was completed ahead of schedule and under budget. The greenfield 2.1 Mtpa treatment plant was completed within 14 months from award. The project quickly achieved nameplate capacity and outperformed all key metrics.

• 3

Director’s Report (continued)

Review of operations (continued)

• Detailed design of the copper concentrator facilities for First Quantum Minerals’ large Kansanshi Copper Concentrator Expansion in Zambia and the Guelb Moghrein Upgrade Project in Mauritania were completed during the year. Detailed design of the 70 Mtpa Mina De Cobré Panama Project in Panama is in progress, extending our association with First Quantum Minerals.

• Construction of the Nammuldi Project in Western Australia for Rio Tinto is well advanced with the progressive handover of the project infrastructure. Pilbara EPCM, a 50:50 JV between Lycopodium and URS, is responsible for the delivery of the permanent infrastructure associated with the Nammuldi Project.

• Detailed design of the Otjikoto Project in Namibia on behalf of B2 Gold was completed. The greenfield 2.4 Mtpa processing plant includes provision for major expansion. Lycopodium will commence commissioning services in 4Q2014.

Lycopodium Process Industries provided services predominantly to the chemicals, renewable and pharmaceutical sectors with the following highlights:

• The Taganito Hydrogen Sulphide Project for Sumitomo Metals was commissioned and handed over to operations.

• Following completion of a feasibility study, Lycopodium was engaged to provide design services, field engineering and commissioning services associated with the Integrated Waste Treatment and Resource Recovery Facility in Victoria on behalf of Renex Group. The facility will accept and treat contaminated soils and other prescribed industrial wastes using a pyrolysis rotary kiln technology from Germany.

• Design services were provided to two major pharmaceutical facilities during the year, as part of long standing associations.

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, BHP Billiton, Northern Star Resources and Citic Pacific in the minerals sector and Mackay Sugar and Pfizer in the manufacturing sector.

Orway Mineral Consultants provided comminution circuit design and optimisation services across a wide range of commodities, with the copper, gold and iron ore sectors being the main areas for services. Hydrometallurgical services were provided in uranium and copper.

Lycopodium Infrastructure was awarded several detailed design briefs through local councils within Western Australia relating to roads and commercial buildings. The group also continued to provide design services to 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 Rail provided ongoing services relating to rail infrastructure management (RIM) to major coal producers within the Hunter Valley and port facilities in New South Wales. RIM services were expanded to include private rail sidings in Western Australia. Detailed design services were awarded in relation to private sidings for a number of operating companies.

HSE and Community

There has been a continued focus on health, safety and the environment as a number of major and complex projects entered the commissioning phase.

In 2013/14 there were 6.4 million manhours worked across the Lycopodium managed projects with a LTIFR of 0.16 against a 8.5 construction industry average. There was a focus during the year on management of high risk activities associated with construction completion, commissioning and the transition over to operations.

4 • Lycopodium Limited Annual Financial Report 2014

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Review of operations (continued)

On the community side, Lycopodium continued as an active sponsor and supporter of The Clontarf Foundation, a charitable not-for-profit organisation improving the education, discipline, self-esteem, life skills and employment prospects of young Aboriginal men. Lycopodium again held the annual Jeans for Genes fund raising event for a 15th year. Lycopodium continued to provide support to a number of universities and 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.

On behalf of my fellow Directors I take this opportunity to sincerely thank all personnel for their highly valued contribution over the last year.

• 5

Director’s Report (continued)

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 Loss/(profit) attributable to non-controlling interest Profit attributable to owners of Lycopodium Ltd	Segment revenues Segment results 2014 $ 2013 $ 2014 $ 2013 $ 17,746,116 21,148,404 (1,970,332) (1,264,278) 150,153,633 192,882,374 9,864,978 17,966,938 - 28,987,639 - 4,086,969 46,005,783 52,243,557 (167,054) 7,789,560 (59,139,547) (49,321,882) - - - - (45,000) (45,000)	Segment revenues Segment results 2014 $ 2013 $ 2014 $ 2013 $ 17,746,116 21,148,404 (1,970,332) (1,264,278) 150,153,633 192,882,374 9,864,978 17,966,938 - 28,987,639 - 4,086,969 46,005,783 52,243,557 (167,054) 7,789,560 (59,139,547) (49,321,882) - - - - (45,000) (45,000)
	154,765,985 245,940,092	7,682,592 28,534,189 (3,973,206) (5,993,750)
		3,709,386 22,540,439 169,583 (608,493)
		3,878,969 21,931,946

Matters subsequent to the end of the financial year

Since year end the directors have recommended the payment of a final dividend on ordinary shares in respect of the 2014 financial year. The total amount of dividend is $586,232 which represents a fully franked dividend of 1.5 cents per fully paid ordinary share.

On 14 April 2014, Lycopodium Limited announced that it had agreed to acquire a 74% shareholding in ADP Holdings (Pty) Ltd, a South African based engineering business established in 1997 subject to satisfying certain conditions including obtaining the necessary governmental approvals. The acquisition will be completed on 30 September 2014.

This acquisition will be recorded in accordance with the accounting policy on business combinations (note 1(h)). It is expected that goodwill will arise as a result of this and recorded on the balance sheet of Lycopodium Limited.

With the exception of the above, no other matter or circumstance has arisen since 30 June 2014 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.

Refer to the Review of Operations section within the Directors' Report for information regarding the likely developments and expected results.

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.

6 • Lycopodium Limited Annual Financial Report 2014

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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 64.

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

9,104,637 ordinary shares of Lycopodium Limited.

Former directorships in the last 3 years None.

Lawrence William Marshall B.Bus (Acc) CPA. Non-executive Director. Age 61.

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, Lycopodium Process Industries Pty Ltd and Lycopodium Rail 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.

Former directorships in the last 3 years None.

Rodney Lloyd Leonard BE (Hons), MSc, MAusIMM. Managing Director. Age 53.

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.

Former directorships in the last 3 years

None.

• 7

Director’s Report (continued)

Information on directors (continued)

Robert Osmetti BE (Civ), MIEAust, CPEng. Executive Director. Age 58.

Experience and expertise

Mr Osmetti has over 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.

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.

Former directorships in the last 3 years None.

Bruno Ruggiero BE (Mech), Grad Dip Min Sc, Grad Cert Eng Tech, MIEAust, MAusIMM. Executive Director. Age 50.

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.

Former directorships in the last 3 years

None.

Peter De Leo BE (Civ) CPEng FIEAust. Executive Director. Age 48.

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.

Former directorships in the last 3 years None.

Company secretary

The company secretary is Keith John Bakker B.Bus (Acc), FCPA. Age 61.

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.

8 • Lycopodium Limited Annual Financial Report 2014

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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 2014, and the numbers of meetings attended by each Director were:

	Full meetings of directors	Full meetings of directors	Meetings of non-executive directors	Meetings of non-executive directors	Meetings of committees	Meetings of committees	Meetings of committees	Meetings of committees	Meetings of committees	Meetings of committees
					Audit		Nomination		Remuneration
	A	B	A	B	A	B	A	B	A	B
Michael Caratti Lawrence Marshall Rodney Leonard Robert Osmetti Bruno Ruggiero Peter De Leo	11 11 12 8 9 12	12 12 12 12 12 12	- -	- - - - - -	2 2 ** 1	- 2 2 - - 2	3 3 3 2 2 3	3 3 3 3 3 3	1 - 1 1 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 a 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.

Name	Number of meetings
Robert Osmetti Bruno Ruggiero	3 1

• 9

Director’s Report (continued)

Remuneration report - audited

The Directors are pleased to present your company's 2014 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

Name	Position
Michael Caratti	Chairman,Non-executive Director
Lawrence Marshall	Non-executive Director
RodneyLeonard	ManagingDirector
Robert Osmetti	Executive Director
Bruno Ruggiero	Executive Director
Peter De Leo	Executive Director
Keith Bakker	CompanySecretary,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 May 2014. 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.

10 • Lycopodium Limited Annual Financial Report 2014

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Remuneration report - audited (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 14 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 2013 Annual General Meeting

The remuneration report for the 2013 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:

follows:
	2014	2013	2012	2011	2010
Revenue($)	154,765,985	245,940,092	232,286,982	169,842,916	120,334,515
Profit before income tax($)	7,682,592	28,534,189	31,771,777	24,907,889	18,711,780
Income tax expense($)	3,973,206	5,993,750	9,416,678	7,795,136	2,653,312
Profit after income tax($)	3,709,386	22,540,439	22,355,099	17,112,753	16,058,468
Basic EPS(cents)	10.0	56.5	57.3	44.4	41.6
Basic EPSgrowth, year onyear(%)	(82.3%)	(1.4%)	29.1%	6.7%	11.2%
Fullyfranked dividendsper share(cents)	6.5	36.0	33.0	30.0	27.0
Change in shareprice *($)	(2.17)	(2.40)	0.92	2.61	1.77
Return on equity (%)	5.61%	34.86%	40.81%	36.25%	38.03%

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

• 11

Director’s Report (continued)

Remuneration report - audited (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.

2014 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-em ployment benefits Share- based payments Cash salary and fees Cash bonus Non- monetary benefits Other Super- annuation Rights Total Perfor- mance related $ $ $ $ $ $ $ %* 125,295 - 10,250 - 11,590 - 147,135 - 212,520 - 10,250 - 35,000 - 257,770 -
	337,815 - 20,500 - 46,590 - 404,905 - 633,272 - 10,250 - 25,000 6,150 674,672 0.9 530,423 - 6,826 10,026 25,000 6,150 578,425 1.1 360,100 - 10,250 - 25,000 6,150 401,500 1.5 611,216 - 10,250 - 25,000 6,150 652,616 0.9 374,755 28,163 14,348 - 34,997 - 452,263 -
	2,847,581 28,163 72,424 10,026 181,587 24,600 3,164,381 0.8

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

• Relates to discretionary bonus approved by the Board based on performance measured against a pre-agreed KPI. The bonus was granted on 15 October 2013 which 72.2% vested during the year. No part of the bonus is payable in future years.

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-em ployment 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 bonus and performance rights, no element of the above remuneration is conditional upon meeting key performance indicators.

12 • Lycopodium Limited Annual Financial Report 2014

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Remuneration report - audited (continued) Details of remuneration (continued)

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

• Relates to discretionary bonus approved by the Board based on performance measured against a pre-agreed KPI. The bonus was granted on 22 October 2012 which 89.5% vested during the year. No part of the bonus is payable in future years.

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.

Name	Term of agreement	Fixed Remuneration including superannuation*
Michael Caratti, Chairman and Non-executive Director	No fixed term	Directors fee of$60,000p.a.
Lawrence Marshall, Non-executive Director	No fixed term	Fixed hourly rate of $266.17 Directors fee of$60,000p.a.
Rodney Leonard, Managing Director	No fixed term	$492,520p.a.
Robert Osmetti, Executive Director	No fixed term	$531,840p.a.
Bruno Ruggiero, Executive Director	No fixed term	Fixed hourly rate of $266.17 Directors fee of$60,000p.a.
Peter De Leo, Executive Director	No fixed term	$575,853p.a.
Keith Bakker, Company Secretary and Chief Financial Officer	No fixed term	$352,175p.a.

• Fixed remuneration payable as at 1 July 2014 and reviewed annually by the Remuneration Committee.

• 13

Director’s Report (continued)

Remuneration report - audited (continued) Service agreements (continued)

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 Plan	Grant date	Tranche	Vesting date and Performance hurdles
Executive Director	24 December 2008	Tranche 1	1 July 2011 if EPS for 30 June 2009 exceeds EPS for 30 June 2008 by10%
Executive Director	24 December 2008	Tranche 2	1 July 2012 if EPS for 30 June 2010 exceeds EPS for 30 June 2009 by10%
Executive Director	24 December 2008	Tranche 3	1 July 2013 if EPS for 30 June 2011 exceeds EPS for 30 June 2010 by10%
Executive Director	24 December 2008	Tranche 4	1 July 2014 if EPS for 30 June 2012 exceeds EPS for 30 June 2011 by10%
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.

The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows:

Grant date	Vesting and exercise date	Expiry date	Exercise price	Value per option at grant date	Performance achieved	% Vested
24 December 2008	1 July 2011	30 June 2016	$-	$0.74	Achieved	100%
24 December 2008	1 July 2012	30 June 2016	$-	$0.74	Achieved	100%
24 December 2008	1 July 2013	30 June 2016	$-	$0.74	34%	100%
24 December 2008	1 July 2014	30 June 2016	$-	$0.74	Achieved	0%
24 December 2008	1 July 2015	30 June 2016	$-	$0.74	0%	0%

The rights granted carry no dividend or voting rights.

Further information on rights over ordinary shares on issue is set out in note 36 to the financial statements.

14 • Lycopodium Limited Annual Financial Report 2014

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Remuneration report - audited (continued) Share-based compensation (continued)

Details of remuneration: Executive Directors Performance Rights

All of the above rights vest after three years, provided the vesting conditions are met. No rights will vest if the conditions are not satisfied, hence the minimum value of the right yet to vest is nil. The maximum value of the rights yet to vest has been determined as the amount of the grant date fair value of the rights and is yet to be expensed.

expensed.
	Shared-based compensation benefits (Options)
Name	Year granted	Vested %	Forfeited %	Financial years in which options may vest	Maximum total value of grant yet to vest$
Peter De Leo	2009	100	-	30 June 2011	-
	2009	100	-	30 June 2012	-
	2009	100	66	30 June 2013	-
	2009	-	-	30 June 2014	$36,900
	2009	-	100	30 June 2015	-
Robert Osmetti	2009	100	-	30 June 2011	-
	2009	100	-	30 June 2012	-
	2009	100	66	30 June 2013	-
	2009	-	-	30 June 2014	$36,900
	2009	-	100	30 June 2015	-
Bruno Ruggiero	2009	100	-	30 June 2011	-
	2009	100	-	30 June 2012	-
	2009	100	66	30 June 2013	-
	2009	-	-	30 June 2014	$36,900
	2009	-	100	30 June 2015	-
Rodney Leonard	2009	100	-	30 June 2011	-
	2009	100	-	30 June 2012	-
	2009	100	66	30 June 2013	-
	2009	-	-	30 June 2014	$36,900
	2009	-	100	30 June 2015	-

Senior manager share acquisition plan

Interest free loans were provided to eligible senior managers to acquire shares in Lycopodium Limited under the Senior Manager Share Acquisition Plan. The plan was designed to provide alignment of the senior managers with the shareholders of the company by assisting the senior managers to acquire shares in Lycopodium Limited under the plan. None of the directors of Lycopodium Limited are eligible to participate in this plan. Further information on the plan is set out in note 36 to the financial statements.

Equity instrument disclosures relating to key management personnel

The table below shows the number of:

( i ) Rights over ordinary share in the company

( ii ) Shares in the company

that were held during the financial year by key management personnel of the group, including their close family members and entities related to them.

There were no shares granted during the reporting period as compensation.

• 15

Director’s Report (continued)

Remuneration report - audited (continued) Equity instrument disclosures relating to key management personnel (continued)

(i) 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.

	Balance	Granted
	at start	as			Balance
2014	of the	compen-		Other	at end of	Vested and
Name	year	sation	Exercised	changes	the year	**exercisable **	Unvested
Directors of Lycopodium
Limited
Rodney Leonard	167,000	-	-	-	167,000	117,000	50,000
Robert Osmetti	67,000	-	-	-	67,000	17,000	50,000
Bruno Ruggiero	67,000	-	-	-	67,000	17,000	50,000
Peter De Leo	167,000	-	-	-	167,000	117,000	50,000

All vested rights are exercisable at the end of the year.

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

(ii) 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.

			Other
2014	Balance at	Received during	changes	Balance at
	the start of	the year on the	during the	end of the
Name	the year	exercise of options	year	year
Directors of Lycopodium Limited
Ordinary shares
Michael Caratti	9,104,637	-	-	9,104,637
Lawrence Marshall	1,942,332	-	-	1,942,332
Rodney Leonard	2,612,332	-	-	2,612,332
Robert Osmetti	2,058,148	-	-	2,058,148
Bruno Ruggiero	3,167,332	-	-	3,167,332
Peter De Leo	1,054,771	-	-	1,054,771
Other key management personnel of the group
Ordinary shares
Keith Bakker	101,036	-	(20,000)	81,036

16 • Lycopodium Limited Annual Financial Report 2014

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Remuneration report - audited (continued)

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
		Balance at	Interest paid		Balance at	Number in
		the start of	and payable	Interest not	end of the	group at the
		the year	for the year	charged	year	end of the
		$	$	$	$	year
2014		52,213	-	-	46,434		2
2013		61,057	-	-	52,213		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.

End of remuneration report - audited.

• 17

Director’s Report (continued)

Shares under option

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

		Issue price of	Number under
Date options granted	Expiry date	shares	option
24 December 2008*	30 June 2016	$-	234,000
1 October 2011	30 September 2014	$-	155,000

• Details of options granted to key management personnel are disclosed on pages 14 to 15.

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.

Indemnity of auditors

Lycopodium Limited has agreed to indemnify their auditors, Grant Thornton Audit Pty Ltd, to the extent permitted by law, against any claim by a third party arising from Lycopodium Limited's breach of their agreement. The indemnity stipulates that Lycopodium Limited will meet the full amount of any such liabilities including a reasonable amount of legal costs.

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.

18 • Lycopodium Limited Annual Financial Report 2014

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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 (Grant Thornton Audit Pty Ltd) 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.

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:

Taxation services Grant Thornton Audit Pty Ltd firm (2013: PwC Australia): Tax compliance services (including income tax returns) International tax advice Network firm of Grant Thornton Audit Pty Ltd (2013: PwC Australia): Tax compliance services (including income tax returns) Non-Grant Thornton Audit Pty Ltd audit firms (2013: PwC Australia): Tax compliance services (including income tax returns) International tax advice Total remuneration for taxation services Other services Non-Grant Thornton Audit Pty Ltd audit firms (2013: PwC Australia): Due diligence services Other services Total remuneration for other services Total remuneration for non-audit services	Consolidated 2014 $ 2013 $ 17,100 46,185 - 8,145 - 42,241 51,684 26,750 57,934 91,450
	126,718 214,771
	93,621 - 56,115 9,889
	149,736 9,889
	276,454 224,660

• 19

Director’s Report (continued)

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20 • Lycopodium Limited Annual Financial Report 2014

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• 21

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 commercial 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 inOffice
Mr Michael Caratti	Non-executive Chairman	9 years, 9 months
Mr Lawrence Marshall	Non-executive Director	9 years, 9 months
Mr Rodney Leonard	Managing Director	9 years, 9 months
Mr Robert Osmetti	Executive Director	9 years, 9 months
Mr Bruno Ruggiero	Executive Director	9 years, 9 months
Mr Peter De Leo	Executive Director	7years,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.

22 • Lycopodium Limited Annual Financial Report 2014

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Principle 2: Structure the board to add value (continued)

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.

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:

Parent entity / Subsidiaries	2014	2014	2013	2013
	Female	Male	Female	Male
Board	4%	96%	4%	96%
Managers and senior staff	9%	91%	9%	91%
Organisation	25%	75%	39%	61%
Total	22%	78%	25%	75%

• 23

Corporate Governance Statement (continued)

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.

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.

24 • Lycopodium Limited Annual Financial Report 2014

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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.

• 25

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2014

		2014	2013
	Notes	$	$
Revenue from operations	5	154,765,985	245,940,092
Employee benefits expense		(83,811,464)	(118,107,866)
Depreciation and amortisation expense	6	(2,340,068)	(2,192,104)
Project expenses		(2,967,808)	(9,748,777)
Equipment and materials		(872,001)	(5,665,636)
Contractors		(44,196,481)	(68,181,612)
Occupancy expense		(7,533,531)	(7,372,063)
Other expenses		(8,553,352)	(11,295,621)
Loss on disposal of asset		(6,636)	(235,536)
Finance costs	6	(145,657)	(232,023)
Share of net profit of joint ventures accounted for using the equity method		3,343,605	5,625,335
Profit before income tax		7,682,592	28,534,189
Income tax expense	7	(3,973,206)	(5,993,750)
Profit for the year		3,709,386	22,540,439
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets	24(a)	(4,000)	(2,000)
Exchange differences on translation of foreign operations	24(a)	(468,497)	1,045,265
Income tax relating to components of other comprehensive income		1,200	600
Other comprehensive income/(expense) for the year, net of tax		(471,297)	1,043,865
Total comprehensive income for the year		3,238,089	23,584,304
Profit for the year is attributable to:
Owners of Lycopodium Limited		3,878,969	21,931,946
Non-controlling interests		(169,583)	608,493
		3,709,386	22,540,439
Total comprehensive income for the year is attributable to:
Owners of Lycopodium Limited		3,407,672	22,975,811
Non-controlling interests		(169,583)	608,493
		3,238,089	23,584,304
		Cents	Cents
Earnings per share for profit attributable to the ordinary equity
holders of the company:
Basic earnings per share	35	10.0	56.5
Diluted earnings per share	35	9.8	55.4

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

26 • Lycopodium Limited Annual Financial Report 2014

Consolidated Balance Sheet For the year ended 30 June 2014

	Consolidated
Notes ASSETS Current assets Cash and cash equivalents 8 Trade and other receivables 9 Current tax receivables Other current assets 10 Total current assets Non-current assets Investments accounted for using the equity method 12 Available-for-sale financial assets 13 Property, plant and equipment 14 Intangible assets 16 Other receivables 11 Deferred tax assets 15 Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables 17 Borrowings 18 Current tax liabilities Provisions 19 Total current liabilities Non-current liabilities Borrowings 20 Provisions 22 Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity 23 Reserves 24(a) Retained earnings 24(b) Parent entity interest Non-controlling interests 25 Total equity	2014 $ 2013 $ 33,302,348 34,997,159 22,069,393 53,254,129 3,908,711 1,199,056 1,990,291 4,549,506
	61,270,743 93,999,850
	4,349,205 5,905,599 3,000 7,000 3,485,811 4,659,138 6,861,301 7,163,778 872,653 1,050,335 4,693,362 8,026,369
	20,265,332 26,812,219
	81,536,075 120,812,069
	15,914,353 44,857,595 554,259 1,763,637 848,020 1,493,638 - 1,097,956
	17,316,632 49,212,826
	351,167 1,012,359 988,923 1,157,067
	1,340,090 2,169,426
	18,656,722 51,382,252
	62,879,353 69,429,817
	18,999,317 18,951,697 911,737 1,140,385 42,390,395 48,639,753
	62,301,449 68,731,835 577,904 697,982
	62,879,353 69,429,817

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

• 27

Consolidated Statement of Changes in Equity For the year ended 30 June 2014

Attributable to members of Lycopodium Limited

					Available
				Foreign	for sale
				currency	investment	Performance	Non-
		Contributed	Retained	translation	revaluation	rights	controlling	Total
		equity	earnings	reserve	reserve	reserve	interests	equity
Consolidated	Notes	$	$	$	$	$	$	$
Balance at 1 July 2012		18,730,297	40,689,644	(604,666)	(77,700)	977,272	164,740	59,879,587
Proft for the year		-	21,931,946	-	-	-	608,493	22,540,439
Other comprehensive income / (expense)		-	-	1,045,265	(1,400)	-	-	1,043,865
Total comprehensive income for the year		-	21,931,946	1,045,265	(1,400)	-	608,493	23,584,304
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs and tax	23	221,400	-	-	-	-	-	221,400
Foreign currency translation with
non-controlling interest	25	-	-	-	-	-	(75,251)	(75,251)
Dividends provided for or paid	26	-	(13,981,837)	-	-	-	-	(13,981,837)
Performance rights - value of rights	24	-	-	-	-	23,014	-	(221,400)
Performance rights - transfer on exercise	24	-	-	-	-	(221,400)	-	(221,400)
		221,400	(13,981,837)	-	-	(198,386)	(75,251)	(14,034,074)
Balance at 30 June 2013		18,951,697	48,639,753	440,599	(79,100)	778,886	697,982	69,429,817
Balance at 1 July 2013		18,951,697	48,639,753	440,599	(79,100)	778,886	697,982	69,429,817
Proft for the year		-	3,878,969	-	-	-	(169,583)	3,709,386
Other comprehensive income / (expense)		-	-	(468,497)	(2,800)	-	-	(471,297)
Total comprehensive income for the year		-	3,878,969	(468,497)	(2,800)	-	(169,583)	3,238,089
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs and tax	23	47,620	-	-	-	-	-	47,620
Foreign currency translation with
non-controlling interest	25	-	-	-	-	-	49,505	49,505
Dividends provided for or paid	26	-	(10,128,327)	-	-	-	-	(10,128,327)
Performance rights - value of rights	24	-	-	-	-	290,269	-	290,269
Performance rights - transfer on exercise	24	-	-	-	-	(47,620)	-	(47,620)
		47,620	(10,128,327)	-	-	242,649	49,505	(9,788,553)
Balance at 30 June 2014		18,999,317	42,390,395	(27,898)	(81,900)	1,021,535	577,904	62,879,353

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

28 • Lycopodium Limited Annual Financial Report 2014

Consolidated Statement of Cash Flows For the year ended 30 June 2014

		Consolidated
Notes 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) Dividends received from joint venture Interest received Interest paid Income taxes paid Net cash inflow from operating activities 33 Cash flows from investing activities Payments for property, plant and equipment 14 Payments for intangible assets 16 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 Repayment of hire purchase and lease liabilities Dividends paid to company's shareholders Proceeds from repayment of loans under the senior manager share acquisition plan Net cash outflow from financing activities Net (decrease) 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 the end of financial year 8	2014 $ 2013 $ 177,336,870 263,367,380 (167,401,728) (229,460,274)
	9,935,142 33,907,106 4,900,000 - 721,064 958,113 - (22) (3,994,272) (11,366,101)
	11,561,934 23,499,096
	(883,169) (990,509) (160,929) (1,368,569) 35,374 -
	(1,008,724) (2,359,078)
	621,062 1,676,587 (1,157,608) (1,058,377) (1,479,660) (1,575,223) (10,128,326) (13,981,837) 177,682 183,500
	(11,966,850) (14,755,350)
	(1,413,640) 6,384,668 34,997,159 27,768,444 (281,171) 844,047
	33,302,348 34,997,159

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

• 29

Notes to the Consolidated Financial Statement - 30 June 2014

Contents of the notes to the consolidated financial statements

		Page
1	Summary of significant accounting policies	31
2	Financial risk management	46
3	Critical accounting estimates and judgements	51
4	Segment information	51
5	Revenue	55
6	Expenses	55
7	Income tax expense	56
8	Current assets - Cash and cash equivalents	58
9	Current assets - Trade and other receivables	58
10	Current assets - Other current assets	60
11	Non-current assets - Other receivables	60
12	Non-current assets - Investments accounted for using the equity method	60
13	Non-current assets - Available-for-sale financial assets	62
14	Non-current assets - Property, plant and equipment	63
15	Non-current assets - Deferred tax assets	64
16	Non-current assets - Intangible assets	66
17	Current liabilities - Trade and other payables	69
18	Current liabilities - Borrowings	69
19	Current liabilities - Provisions	70
20	Non-current liabilities - Borrowings	70
21	Non-current liabilities - Deferred tax liabilities	72
22	Non-current liabilities - Provisions	72
23	Contributed equity	73
24	Reserves and retained earnings	74
25	Non-controlling interests	76
26	Dividends	76
27	Remuneration of auditors	77
28	Contingencies	78
29	Commitments	78
30	Related party transactions	80
31	Subsidiaries	82
32	Events occurring after the reporting period	82
33	Reconciliation of profit after income tax to net cash inflow from operating activities	83
34	Non-cash investing and financing activities	83
35	Earnings per share	83
36	Share-based payments	85
37	Parent entity financial information	87

30 • Lycopodium Limited Annual Financial Report 2014

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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

The group has applied the following standards and amendments for the first time for the financial year beginning 1 July 2013:

• AASB 10 Consolidated Financial Statements , AASB 11 Joint Arrangements , AASB 12 Disclosure of Interests in Other Entities , AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards

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

The adoption of the above standards only affected the disclosures in these notes to the financial statements.

(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 2013.

(iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-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

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

• 31

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation (continued)

(i) Subsidiaries (continued) The acquisition method of accounting is used to account for business combinations by the group (refer to note 1(h)).

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.

(iii) Joint arrangements

Under AASB 11 Joint Arrangement investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than legal structure of the joint arrangement. Lycopodium Limited has a joint venture arrangement.

Joint ventures

Interest in joint ventures are accounted for using the equity method (see (iv) below), after initially being recognised at cost in the consolidated balance sheet.

(iv) Equity method

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group's share of the post-acquisition profits or losses of the investee in profit or loss, and the group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

When the group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group's interest in these entities. Unrealised losses are also eliminated unless the transactions provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group.

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 attributed to owners of Lycopodium Limited.

32 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(b) Principles of consolidation (continued)

(v) Changes in ownership interests

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 becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture 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 joint venture 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.

• 33

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

1 Summary of significant accounting policies (continued)

(d) Foreign currency translation (continued)

(iii) Consolidated entities (continued)

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.

(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.

34 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(f) Income tax (continued)

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.

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 29). 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.

• 35

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

1 Summary of significant accounting policies (continued)

(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.

(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.

36 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(k) Trade receivables (continued)

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.

• 37

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets (continued)

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.

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.

38 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets (continued)

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).

(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.

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

• 39

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

1 Summary of significant accounting policies (continued)

(n) Property, plant and equipment (continued)

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 cash-generating 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.

(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.

40 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(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) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits expected to be settled wholly within 12 months after the end of the period in which the employees render the related services are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. All other short-term employee benefit obligations are presented as payables.

(ii) Other long-term employee benefits obligations

The liability for long service leave and annual leave which is not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service is therefore 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 end of the reporting period 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 end of the reporting period of government bonds with terms and currency that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.

The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.

(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.

• 41

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

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 36.

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 acquisition 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.

42 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(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.

(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 not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2014 reporting periods. The group's assessment of the impact of these new standards and interpretations is set out below.

• (i) AASB 9 Financial Instruments (December 2010) (also refer to AASB 2013-9 and AASB 2014-1 below) supersedes AASB 139 Financial Instruments: Recognition and Measurement (in part).

AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are:

• (a) Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business model for managing the financial assets; and (2) the characteristics of the contractual cash flows.

• 43

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

1 Summary of significant accounting policies (continued)

(y) New accounting standards not yet effective (continued)

• (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) (effective from 1 January 2013) (continued)

• (b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

• (c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

• (d) Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows: the change attributable to changes in credit risk are presented in other comprehensive income (OCI) and the remaining change is presented in profit or loss. If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

Otherwise, the following requirements have generally been carried forward unchanged from AASB 139 into AASB 9: Classification and measurement of financial liabilities; and Derecognition requirements for financial assets and liabilities.

AASB 9 requirements regarding hedge accounting represent a substantial overhaul of hedge accounting that will enable entities to better reflect their risk management activities in the financial statements.

Consequential amendments arising from AASB 9 are contained in AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), AASB 2010-10 Further Amendments to Australian Accounting Standards - Removal of Fixed Dates for First-time Adopters, AASB 2012-6 Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures, AASB 2013-9 Amendments to Australian Accounting Standards - Conceptual Framework, Materiality and Financial Instruments and AASB 2014-1 Amendments to Australian Accounting Standards.

Effective date on annual reporting periods beginning on or after 1 January 2018.

• (ii) IFRS 15 Revenue from Contracts with Customers supersedes IAS 18 Revenue , IAS 11 Construction Contracts , IFRIC 13 Customer Loyalty Programmes , IFRIC 15 Agreements for the Construction of Real Estate and IFRIC 18 Transfer of Assets from Customers .

IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction Contracts and some revenue-related Interpretations, establishes a new control-based revenue recognition model, changes the basis for deciding whether revenue is to be recognised over time or at a point in time, provides new and more detailed guidance on specific topics (e.g., multiple element arrangements, variable pricing, rights of return, warranties and licensing) and expands and improves disclosures about revenue.

In the Australian context, the Australian Accounting Standards Board (AASB) is expected to issue the equivalent Australian Standard (AASB 15 Revenue from Contracts with Customers) by September 2014.

Effective date on annual reporting periods beginning on or after 1 January 2016.

44 • Lycopodium Limited Annual Financial Report 2014

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1 Summary of significant accounting policies (continued)

(y) New accounting standards not yet effective (continued)

(iii) Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11).

The amendments to IFRS 11 state that an acquirer of an interest in a joint operation in which the activity of the joint operation constitutes a ‘business’, as defined in IFRS 3 Business Combinations, should: apply all of the principles on business combinations accounting in IFRS 3 and other IFRSs except principles that conflict with the guidance of IFRS 11. This requirement also applies to the acquisition of additional interests in an existing joint operation that results in the acquirer retaining joint control of the joint operation (note that this requirement applies to the additional interest only, i.e. the existing interest is not remeasured) and to the formation of a joint operation when an existing business is contributed to the joint operation by one of the parties that participate in the joint operation; and provide disclosures for business combinations as required by IFRS 3 and other IFRSs.

The Australian Accounting Standards Board (AASB) is expected to issue the equivalent Australian amendment shortly.

Effective date on annual reporting periods beginning on or after 1 January 2016.

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 37 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.

• 45

Notes to the Consolidated Financial Statement - 30 June 2014 (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 13 "Fair Value Measurement" 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.

46 • Lycopodium Limited Annual Financial Report 2014

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2 Financial risk management (continued)

(ii) Summary of financial instruments

The group holds the following 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 2014 $ 2013 $ 33,302,348 34,997,159 22,069,393 53,254,129 769,318 2,969,404 3,000 7,000 872,653 1,050,335
	57,016,712 92,278,027
	14,109,333 26,610,453 905,426 2,775,996
	15,014,759 29,386,449

(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 2014 30 June 2013 USD $ GHS $ PHP $ USD $ GHS $ PHP $ 10,844,964 310,531 177,768 178,156 1,632,355 75,374 - - 50,804 - 16,916 6,655 - - 300,033 - - 347,925 (76,966) (39,991) (94,103) (64,829) (280,124) (237,913)
	10,767,998 270,540 434,502 113,327 1,369,147 192,041

Group sensitivity

Based on the financial instruments held at 30 June 2014, 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 $1,076,800 higher/$1,076,800 lower (2013: $11,333 higher/$11,333 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 more sensitive to movements in the Australian dollar/US dollar exchange rates in 2014 than 2013 because of the higher amount of US dollar denominated cash and cash equivalents.

• 47

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

2 Financial risk management (continued)

(a) Market risk (continued)

(i) Foreign exchange risk (continued)

Based on the financial instruments held at 30 June 2014, 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 $27,054 higher/$27,054 lower (2013: $136,915 higher/$136,915 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 less sensitive to movements in the Australian dollar/Ghanaian Cedi exchange rates in 2014 than 2013 because of the lower amount of Ghanaian Cedi denominated cash and cash equivalents.

Based on the financial instruments held at 30 June 2014, 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 $43,450 higher/$43,450 lower (2013: $19,204 higher/$19,204 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 2014 than 2013 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.

Group sensitivity

At 30 June 2014, 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 $116,852 lower/higher (2013: -/+50 basis points: $128,443 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)).

48 • Lycopodium Limited Annual Financial Report 2014

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2 Financial risk management (continued)

(b) Credit risk (continued)

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

credit risk at the reporting date was:
Cash and cash equivalents Trade and other receivables Deposits held with banks (note 10)	Consolidated 2014 $ 2013 $ 33,302,348 34,997,159 22,069,393 53,254,129 769,318 2,969,404
	56,141,059 91,220,692

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 credit-rating 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 deposits 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.

• 49

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

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 2014 $ 2013 $ 3,873,058 3,449,316 11,070,966 12,500,000
	14,944,024 15,949,316

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 - At 30 June 2014 Non-derivatives Trade payables Insurance premium funding Finance lease liabilities Total non-derivatives Consolidated - At 30 June 2013 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 flows Carrying amount liabilities $ $ $ $ $ $ 14,109,336 - - - 14,109,336 14,109,336 509,763 - - - 509,763 509,763 592,364 286,101 80,594 - 959,059 905,451
	15,211,463 286,101 80,594 - 15,578,158 15,524,550
	1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contrac- tual cash flows $ 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

50 • Lycopodium Limited Annual Financial Report 2014

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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.

(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 two (2013: three) are reportable in accordance with the requirements of AASB 8.

The Corporate Services segment consists of managerial, legal and technical 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.

• 51

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

4 Segment information (continued)

(a) Description of segments (continued)

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.

The remaining operating segments that are not reportable consists of:

Process Industries: engineering and related services provided to the manufacturing and renewable energy facilities throughout Australia and South East Asia. Infrastructure: engineering and related services including architectural designs, power supply and distribution, water supply and distribution, accommodation, buildings, roads and other general civil and infrastructure components. Asset Management: reliability and engineering maintenance services to clients in the petrochemical, oil and gas, mining minerals, marine and manufacturing sectors. Rail: project development phase studies, engineering and design, procurement and construction phase services for rail infrastructure projects across Australia. Metallurgical: metallurgical consulting providing a range of services to the mineral processing community, primarily in the field of comminution, hydrometallurgy and mineral processing design.

Project Services Asia: provision of drafting services for offshore Lycopodium entities.

(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 2014 and 30 June 2013 are as follows:

2014		Corporate Services		Minerals		Other		Total
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		$ 17,746,116 (17,376,149) 369,967 (1,970,332) - (418,095) 20,323 14,108,834 - - 623,291		$ 150,153,633 (27,933,850) 122,219,783 9,864,978 3,343,605 (1,228,380) (3,310,715) 51,307,135 4,349,205 841,076 17,764,992		$ 46,005,783 (13,829,548) 32,176,235 (167,054) - (693,593) (682,814) 17,249,491 - 203,021 6,623,953		$ 213,905,532 (59,139,547) 154,765,985 7,727,592 3,343,605 (2,340,068) (3,973,206) 82,665,460 4,349,205 1,044,097 25,012,236

Project services Africa is aggregated in Other in 2014 as it falls under the quantitative thresholds of AASB 8.

52 • Lycopodium Limited Annual Financial Report 2014

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4 Segment information (continued)

(b) Segment information provided to the Board of Directors (continued)

2013		Corporate Services		Minerals	Project Services Africa	Project Services Africa		Other		Total
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		$ 21,148,404 (21,025,563) 122,841 (1,264,278) - (457,450) 594 12,791,180 - - 1,267,569		$ 192,882,374 (13,300,810) 179,581,564 17,966,938 5,625,336 (951,749) (3,325,473) 71,005,059 5,905,599 2,109,909 36,198,420		$ 28,987,639 (448,024) 28,539,615 4,086,969 - (13,463) (1,033,737) 12,060,806 - 35,485 7,262,607		$ 52,243,557 (14,547,485) 37,696,072 7,789,560 - (769,442) (1,635,134) 24,193,836 - 557,054 11,150,112		$ 295,261,974 (49,321,882) 245,940,092 28,579,189 5,625,336 (2,192,104) (5,993,750) 120,050,881 5,905,599 2,702,448 55,878,708

(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 profit or loss and other comprehensive income.

The entity is domiciled in Australia. Revenue from external customers in Australia was $72,337,916 (2013: $117,791,446), and the total of revenue from external customers from other countries is $82,427,767 (2013: $128,148,645). Segment revenues are allocated based on the country in which the customer is located.

Revenues of approximately $62,790,822 or 41% (2013: $122,976,660 or 50%) are derived from the top 3 customers. These revenues are attributable to the Minerals segment.

• 53

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

4 Segment information (continued)

(c) Other segment information (continued)

(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 statement of comprehensive income	Consolidated 2014 $ 2013 $ 7,727,592 28,579,189 (45,000) (45,000)
	7,682,592 28,534,189

(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 2014 $ 2013 $ 82,665,460 120,050,881 (6,711,877) (4,852,804) 5,609,492 5,654,492 (27,000) (40,500)
	81,536,075 120,812,069

The total of non-current assets other than financial instruments and deferred tax assets in Australia is $14,216,203 (2013: $16,996,522), and other countries is $1,355,767 (2013: $1,789,327).

(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:

Segment liabilities Intersegment eliminations Total liabilities as per the consolidated balance sheet	Consolidated 2014 $ 2013 $ 25,012,236 55,878,708 (6,355,514) (4,496,456)
	18,656,722 51,382,252

54 • Lycopodium Limited Annual Financial Report 2014

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5 Revenue

From operations Sales revenue Contract revenue Other revenue Rents and sub-lease rentals Bank interest Other revenue Total revenue from operations	Consolidated 2014 $ 2013 $ 152,752,992 244,800,461 37,054 14,427 702,302 929,771 1,273,637 195,433
	2,012,993 1,139,631
	154,765,985 245,940,092

6 Expenses

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	Consolidated 2014 $ 2013 $ 538,783 520,972 456,567 531,774 724,037 788,846 18,425 23,949
	1,737,812 1,865,541
	557,256 281,563 45,000 45,000
	602,256 326,563
	2,340,068 2,192,104
	145,657 232,023 448,414 642,694 6,636 235,536

• 55

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

6 Expenses (continued)

6 Expenses (continued)
	Consolidated
	2014	2013
	$	$
Rental expense relating to operating leases
Minimum lease payments	7,452,786	7,511,313
Defined contribution superannuation expense	4,673,412	5,713,118

7 Income tax expense

(a) Income tax expense

Current tax Deferred tax Adjustments for current tax of prior periods Deferred income tax (revenue) expense included in income tax expense comprises: Decrease/(Increase) in deferred tax assets (note 15) Decrease in deferred tax liabilities (note 21)	Consolidated 2014 $ 2013 $ 1,323,277 10,073,708 3,334,192 (3,480,144) (684,263) (599,814)
	3,973,206 5,993,750
	3,529,147 (3,123,441) (194,955) (356,703)
	3,334,192 (3,480,144)

56 • Lycopodium Limited Annual Financial Report 2014

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7 Income tax expense (continued)

(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% (2013: 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 2014 $ 2013 $ 7,682,592 28,534,189 2,304,778 8,560,257 87,080 6,904 143,282 42,723 (958) (155,351) 8,859 180,350
	2,543,041 8,634,883 (684,263) (599,814) (260,476) (403,923) - (761,551) 2,769,060 358,847 608,926 452,909 (1,003,082) (1,687,601)
	3,973,206 5,993,750

(c) Amounts recognised directly in equity

(c) Amounts recognised directly in equity	(11,655,798) (34,527,939)
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% (2013: 30%)	Consolidated 2014 $ 2013 $ (1,200) (600)
	Consolidated 2014 $ 2013 $ 10,591,762 1,685,784
	3,177,529 505,735

Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 30% (2013: 30%)

• 57

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

8 Current assets - Cash and cash equivalents

8 Current assets - Cash and cash equivalents
Cash at bank and in hand Deposits at call	Consolidated 2014 $ 2013 $ 31,215,924 15,554,112 2,086,424 19,443,047
	33,302,348 34,997,159

(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.

9 Current assets - Trade and other receivables

9 Current assets - Trade and other receivables
Trade receivables Allowance for impairment of receivables (a) Trade receivable retention Loans to joint venture GST and other receivables Cash advanced to employees	Consolidated 2014 $ 2013 $ 20,648,338 48,198,420 (110,023) (1,113,170) 599,329 1,140,302
	21,137,644 48,225,552
	- 999,999 844,921 3,977,910 86,828 50,668
	931,749 5,028,577
	22,069,393 53,254,129

(a) Impaired trade receivables

As at 30 June 2014, current trade receivables of the group with the value of $110,023 (2013: $1,113,170) 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 2014 $ 2013 $ 5,636 42,405 - 52,075 2,430 122,602 19,181 - 82,776 896,088
	110,023 1,113,170

58 • Lycopodium Limited Annual Financial Report 2014

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9 Current assets - Trade and other receivables (continued)

(a) Impaired trade receivables (continued)

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

At 1 July Provision for impairment recognised during the year Unused amounts reversed At 30 June	Consolidated 2014 $ 2013 $ 1,113,170 250,467 8,853 1,090,024 (1,012,000) (227,321)
	110,023 1,113,170

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

(b) Past due but not impaired

As of 30 June 2014, trade receivables of $3,184,693 (2013: $8,935,031) 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 2014 $ 2013 $ 1,852,592 5,246,529 889,864 1,666,419 107,416 1,639,513 110,267 226,517 224,554 156,053
	3,184,693 8,935,031

(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.

• 59

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

10 Current assets - Other current assets

10 Current assets - Other current assets
Other current assets (a) Prepayments	Consolidated 2014 $ 2013 $ 769,318 2,969,404 1,220,973 1,580,102
	1,990,291 4,549,506

(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

Other receivables	Consolidated 2014 $ 2013 $ 872,653 1,050,335

(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 Dividends received Carrying amount at the end of the financial year	Consolidated 2014 $ 2013 $ 5,905,599 280,264 3,343,605 5,625,335 (4,900,000) -
	4,349,204 5,905,599

60 • Lycopodium Limited Annual Financial Report 2014

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

(b) Investment in joint venture

The group has one material joint venture, Pilbara EPCM Pty Ltd ("PEPL").

Name of Joint Venture Country of Incorporation & Principal Place of Business Principal Activities	Proportion of Ownership Interest Held by the Group	Proportion of Ownership Interest Held by the Group
	2014	2013
Pilbara EPCM Pty Ltd Australia Engineering, procurement, construction management services	50%	50%

The investment in PEPL is accounted for using the equity method in accordance with AASB 128.

Summarised financial information for PEPL is set out below:

Summarised financial information for PEPL is set out below:
	2014	2013
	$	$
Current assets (a)	14,899,585	30,600,264
Non-current assets	-	-
Total assets	14,899,585	30,600,264
Current liabilities (b)	4,151,470	16,753,958
Non-current liabilities (c)	2,049,712	1,775,569
Total liabilities	6,201,182	18,529,527
a. Includes cash and cash equivalents	6,931,858	1,367,024
b. Includes current financial liabilities (excluding trade and other payables and	-	2,000,000
provisions)
c. Includes non-current financial liabilities (excluding trade and other payables and	-	-
provisions)
	2014	2013
	$	$
Revenue	56,541,539	69,368,613
Profit for the year	6,427,666	12,070,735
Other comprehensive income for the year	-	-
Total comprehensive income for the year	-	-
Depreciation and amortisation	-	-
Interest income	199,978	69,176
Interest expense	-	-
Tax expense	2,754,718	5,173,169

A reconciliation of the above summarised financial information to the carrying amount of the investment in PEPL is set out below:

• 61

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

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

(continued)
	2014	2013
	$	$
Total net assets of PEPL	8,698,408	11,811,198
Proportion of ownership interest held by the Group	50%	50%
Carrying amount of the investment in PEPL	4,349,204	5,905,599

Pilbara EPCM Pty Ltd specialises in the EPCM delivery of projects in the Pilbara region of Western Australia, utilising the group's knowledge and expertise in the area but at the same time limits the group's risk exposure through reduced equity holding.

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

13 Non-current assets - Available-for-sale financial assets
Balance at the beginning of the year Revaluation deficit transferred to equity Balance at end of year Listed securities (note (a)) Equity securities	Consolidated 2014 $ 2013 $ 7,000 9,000 (4,000) (2,000)
	3,000 7,000
	Consolidated 2014 $ 2013 $ 3,000 7,000

(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.

62 • Lycopodium Limited Annual Financial Report 2014

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14 Non-current assets - Property, plant and equipment

At 1 July 2012 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2013 Opening net book amount Acquisition of subsidiary Depreciation charge Disposal Transfers Exchange differences Closing net book amount At 30 June 2013 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2014 Opening net book amount Additions Depreciation charge Disposal Transfers Exchange differences Closing net book amount At 30 June 2014 Cost Accumulated depreciation Net book amount	Fixtures and fittings $ Motor vehicles $ Leasehold improvements $ Leased plant and equipment $ Total $ 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
	1,842,748 101,402 1,534,946 1,180,042 4,659,138 821,273 58,456 3,437 - 883,166 (538,783) (18,425) (456,566) (724,037) (1,737,811) (983) (19,860) - (21,169) (42,012) (176,674) - 1,629 16,481 (158,564) (47,660) (13,926) (55,413) (1,107) (118,106)
	1,899,921 107,647 1,028,033 450,210 3,485,811
	6,263,090 215,679 1,848,815 1,572,008 9,899,592 (4,363,169) (108,032) (820,782) (1,121,798) (6,413,781)
	1,899,921 107,647 1,028,033 450,210 3,485,811

• 63

Notes to the Consolidated Financial Statement - 30 June 2014 (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 equipment Cost Accumulation depreciation Net book amount	Consolidated 2014 $ 2013 $ 529,706 2,417,717 (366,822) (1,873,557)
	162,884 544,160

15 Non-current assets - Deferred tax assets

15 Non-current assets - Deferred tax assets
The balance comprises temporary differences attributable to: Unused tax losses 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 expected to be recovered within 12 months Deferred tax assets expected to be recovered after more than 12 months	Consolidated 2014 $ 2013 $ 2,028,483 - 2,435,970 3,617,000 31,055 232,765 295,507 321,044 18,651 3,660,290 72,209 414,219 33,474 32,435 162,006 327,559
	5,077,355 8,605,312 (383,993) (578,943)
	4,693,362 8,026,369
	3,958,744 7,105,180 1,118,611 1,500,132
	5,077,355 8,605,312

64 • Lycopodium Limited Annual Financial Report 2014

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

								Depn
		Doubtful	Employee	Accrued	Deferred	Other		&	Finance	Unused
		debts	Benefits	expenses	revenue	provisions		Amort	Leases	tax losses	Total
Movements		$	$	$	$	$		$	$	$	$
At 1 July 2012		74,899	3,122,318	287,626	1,160,996	396,950	33,277		395,370	-	5,471,436
Credited/(charged)
- to profit or
loss		157,866	489,764	33,418	2,499,294	11,751		(842)	(67,811)	-	3,123,440
- directly to
equity		-	-	-	-	600		-	-	-	600
Exchange rate
differences		-	4,918	-	-	4,918		-	-	-	9,836
At 30 June
2013		232,765	3,617,000	321,044	3,660,290	414,219	32,435		327,559	-	8,605,312
At 1 July 2013		232,765	3,617,000	321,044	3,660,290	414,219	32,435		327,559	-	8,605,312
(Charged)/credited
- to profit or
loss	(201,710)		(1,181,030)	(302,393)(3,364,783) (343,210)				1,039	(165,553)	2,028,483	(3,529,157)
- directly to
equity		-	-	-	-	1,200		-	-	-	1,200
At 30 June
2014		31,055	2,435,970	18,651	295,507	72,209	33,474		162,006	2,028,483	5,077,355

• 65

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

16 Non-current assets - Intangible assets

At 1 July 2012 Cost Accumulation 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 Cost Accumulation amortisation and impairment Net book amount Year ended 30 June 2014 Opening net book amount Additions Amortisation charge Transfers from property, plant and equipment Exchange differences Closing net book amount At 30 June 2014 Cost Accumulated amortisation Net book amount	Goodwill $ Software $ Customer contracts $ Total $ 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
	Goodwill $ Software $ Customer contracts $ Total $ 5,600,538 1,428,240 135,000 7,163,778 - 160,931 - 160,931 - (557,256) (45,000) (602,256) - 158,564 - 158,564 - (19,716) - (19,716)
	5,600,538 1,170,763 90,000 6,861,301
	6,420,380 4,543,272 315,000 11,278,652 (819,842) (3,372,509) (225,000) (4,417,351)
	5,600,538 1,170,763 90,000 6,861,301

• Group amortisation of $602,256 (2013: $326,563) is included in depreciation and amortisation expense in the statement of comprehensive income.

66 • Lycopodium Limited Annual Financial Report 2014

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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.

2014 Minerals Process industries Maintenance Metallurgical 2013 Minerals Process industries Maintenance Metallurgical	Australia $ Other countries $ Total $ 3,622,991 - 3,622,991 763,242 - 763,242 1,095,048 - 1,095,048 119,257 - 119,257
	5,600,538 - 5,600,538
	Australia $ Other countries $ Total $ 3,622,991 - 3,622,991 763,242 - 763,242 1,095,048 - 1,095,048 119,257 - 119,257
	5,600,538 - 5,600,538

• 67

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

16 Non-current assets - Intangible assets (continued)

(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:

determining value in use:
	Growth	rates	Discount	rates
	2014	2013	2014	2013
	%	%	%	%
Minerals	2.5	2.5	19.4	21.9
Process industries	20.0	2.5	19.4	21.9
Maintenance	20.0	2.5	19.4	21.9
Metallurgical	2.5	2.5	19.4	21.9

Growth rate

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 19.4% (2013: 21.9%). 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.

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.

Revenue

Value-in-use model is based on budget approved by the Board. The forecast budget process was developed based on revenue expectations for the year built around existing customer contracts along with the potential to develop new markets and sustain growth.

(c) Cash flow assumptions

Minerals, Process Industries, Maintenance and Metallurgical

The forecast was adjusted to reflect the challenging conditions seen in these segments over the past year as the industry in general tightened. As a result, the Board expects minimal growth rate and moderately declining profit margins for this segment.

Efficiency improvements were factored into the forecasts on the back of the strategic plans put in place to counter the effects of the tightening market. These include savings in fixed overhead costs and other process efficiencies.

Apart from the consideration described in determining the value-in-use of the cash-generating units described above, the Board is not currently aware of any other probable changes that would necessitate changes in its key estimates. However, the estimate of recoverable amount for the Process Industries and Maintenance segment is particularly sensitive to the growth rate.

Assuming the other assumptions remain constant but the growth rate is 10% and 5% for the Maintenance and Process Industries respectively, the recoverable amounts will equal the carrying amounts of its goodwill.

68 • Lycopodium Limited Annual Financial Report 2014

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17 Current liabilities - Trade and other payables

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 2014 $ 2013 $ 1,574,503 2,515,759 1,471,425 14,430,466 333,595 3,816,676 12,534,830 24,094,694
	15,914,353 44,857,595

Included in the above are financial liabilities of $14,109,333 (2013: $26,610,453).

(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 2014 $ 2013 $ 1,000,434 1,791,883 1,555,258 1,634,737
	2,555,692 3,426,620

(b) Risk exposure

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

18 Current liabilities - Borrowings

18 Current liabilities - Borrowings
Secured Lease liabilities (note 29) Hire purchase Total secured current borrowings Unsecured Other loans Total unsecured current borrowings Total current borrowings	Consolidated 2014 $ 2013 $ 539,628 1,228,233 14,631 32,261
	554,259 1,260,494
	- 503,143
	- 503,143
	554,259 1,763,637

• 69

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

18 Current liabilities - Borrowings (continued)

(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.

(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 2014 $ 2013 $ - 1,097,956

(a) Service warranties

Provision is made for the estimated cost in respect of works carried out which may require rectification.

(b) Movements in provisions

Movements in each class of provision during the financial year, other than employee benefits, are set out below:

2014 Carrying amount at the start and at the end of the year - unused amounts reversed Carrying amount at end of year	Service warranties $ Total $ 1,097,956 1,097,956 (1,097,956) (1,097,956)
	- -

20 Non-current liabilities - Borrowings

Secured Lease liabilities * Further information relating to loans from related parties is set out in note 30.	Consolidated 2014 $ 2013 $ 351,167 1,012,359

70 • Lycopodium Limited Annual Financial Report 2014

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20 Non-current liabilities - Borrowings (continued)

(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 2014 $ 2013 $ 890,795 2,240,592 14,631 32,261
	905,426 2,272,853

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

Finance lease Plant and equipment Leasehold improvements	Consolidated 2014 $ 2013 $ 450,211 1,180,042 162,884 544,160
	613,095 1,724,202

(b) Fair value

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

Consolidated On-balance sheet Non-traded financial liabilities Lease liabilities Hire purchase	2014 2013 Carrying amount $ Fair value $ Carrying amount $ Fair value $ 890,795 890,790 2,240,592 2,240,592 14,631 14,656 32,261 32,261
	905,426 905,446 2,272,853 2,272,853

(c) Risk exposures

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

• 71

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

21 Non-current liabilities - Deferred tax liabilities

21 Non-current liabilities - Deferred tax liabilities	21 Non-current liabilities - Deferred tax liabilities
The balance comprises temporary differences attributable to: Accrued income - contractors Other provisions Depreciation Prepaid expenses 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 Movements Depreciation & amortisation $ Accrued income $ Other provisions $ At 1 July 2012 424,276 437,985 73,385 Charged/(credited) - profit or loss (67,630) (277,645) (11,428) At 30 June 2013 356,646 160,340 61,957 At 1 July 2013 356,646 160,340 61,957 Charged/(credited) - profit or loss (157,317) (82,267) 247 At 30 June 2014 199,329 78,073 62,204		Consolidated 2014 $ 2013 $ 78,073 160,340 62,204 61,957 199,329 356,646 44,387 -
		383,993 578,943 (383,993) (578,943)
		- -
		184,664 160,340 199,329 418,603
		383,993 578,943
		Prepaid expenses $ Total $ - 935,646 - (356,703)
	356,646 160,340 61,957	- 578,943
	356,646 160,340 61,957 (157,317) (82,267) 247	- 578,943 44,387 (194,950)
	199,329 78,073 62,204	44,387 383,993

22 Non-current liabilities - Provisions

Employee benefits - long service leave	Consolidated 2014 $ 2013 $ 988,923 1,157,067

72 • Lycopodium Limited Annual Financial Report 2014

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23 Contributed equity

(a) Share capital

2014 Shares Ordinary shares Fully paid 38,965,103 (b) Movements in ordinary share capital Date Details 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 1 July 2013 Opening balance 31 May 2014 Exercise of Employee performance rights 30 June 2014 Closing balance	2014 Shares 38,965,103	2013 Shares 2014 $ 2013 $ 38,955,103 18,999,317 18,951,697	2013 Shares 2014 $ 2013 $ 38,955,103 18,999,317 18,951,697
		Number of shares Issue price $ 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 38,955,103 18,951,697 10,000 $4.76 47,620 38,965,103 18,999,317
			18,951,697
			18,951,697 47,620
			18,999,317

(b) Movements in ordinary share capital

(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.

• 73

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

23 Contributed equity (continued)

(d) Capital risk management (continued)

During 2014, the group's strategy was to maintain a gearing less than 40%. The gearing ratios at 30 June 2014 and 30 June 2013 were as follows:

Total borrowings (including payables) Less: cash and cash equivalents Net debt Total equity Total capital Gearing ratio	Consolidated 2014 $ 2013 $ 16,819,782 47,633,591 (33,302,348) (34,997,159)
	(16,482,566) 12,636,432 62,301,448 69,429,817
	45,818,882 82,066,249
	(26.5)% 18.2%

24 Reserves and retained earnings

(a) Other reserves

Available-for-sale investment revaluation reserve Performance rights reserve Foreign currency translation reserve	Consolidated 2014 $ 2013 $ (81,900) (79,100) 1,021,535 778,886 (27,898) 440,599
	911,737 1,140,385

74 • Lycopodium Limited Annual Financial Report 2014

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24 Reserves and retained earnings (continued)

(a) Other reserves (continued)

Movements: Available-for-sale investment revaluation reserve Balance 1 July Revaluation - gross Deferred tax Balance 30 June Performance rights reserve Balance 1 July Performance rights plan expense Transfer to share capital - exercise of rights Balance 30 June 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 2014 $ 2013 $ (79,100) (77,700) (4,000) (2,000) 1,200 600
	(81,900) (79,100)
	778,886 977,272 290,269 23,014 (47,620) (221,400)
	1,021,535 778,886
	440,599 (604,666) (468,497) 1,045,265
	(27,898) 440,599
	Consolidated 2014 $ 2013 $ 48,639,753 40,689,644 3,878,969 21,931,946 (10,128,327) (13,981,837)
	42,390,395 48,639,753

(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.

• 75

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

25 Non-controlling interests

Interest in: Share capital Reserves Retained earnings 26 Dividends (a) Ordinary shares Final dividend for the year ended 30 June 2013 of 21.0 cents (2012: 21.0 cents) per fully paid share paid on 15 October 2013 Fully franked based on tax paid @ 30% (2012: 30%) Interim dividend for the year ended 30 June 2014 of 5.0 cents (2013: 15.0 cents) per fully paid share paid on 15 April 2014 Fully franked based on tax paid @ 30% (2013: 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 (2013: 21.0 cents), fully franked based on tax paid at 30% (2013: 30%). The aggregate amount of the proposed dividend expected to be paid on 15 October 2014 out of retained earnings at 30 June 2014, but not recognised as a liability at year end, is (c) Franked dividends Franking credits available for subsequent reporting periods based on a tax rate of 30% (2013: 30%)		Consolidated 2014 $ 2013 $ 28 28 (23,615) (73,120) 601,491 771,074
		577,904 697,982
		Parent entity 2014 $ 2013 $ 8,180,572 8,138,572 1,947,755 5,843,265
		10,128,327 13,981,837
		Parent entity 2014 $ 2013 $ 586,232 8,180,572
		Consolidated 2014 $ 2013 $ 14,443,409 17,625,131

76 • Lycopodium Limited Annual Financial Report 2014

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26 Dividends (continued)

(c) Franked dividends (continued)

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 $251,242 (2013: $3,505,959).

27 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) Grant Thornton Audit Pty Ltd (2013: 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 of Grant Thornton Audit Pty Ltd Australia	Consolidated 2014 $ 2013 $ 172,900 318,750 17,100 46,185 - 8,145
	17,100 54,330
	190,000 373,080

(b) Network firms of Grant Thornton Audit Pty Ltd (2013: 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 Grant Thornton Audit Pty Ltd	Consolidated 2014 $ 2013 $ - 35,741 - 42,241
	- 77,982

• 77

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

27 Remuneration of auditors (continued)

(c) Non-Grant Thornton Audit Pty Ltd audit firms (2013: Non-PwC Australia)

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 Due diligence services Other services Total remuneration for other services Total remuneration of non-Grant Thornton Audit Pty Ltd audit firms Total auditors' remuneration	Consolidated 2014 $ 2013 $ 36,200 5,390 51,684 26,750 57,934 91,450
	109,618 118,200
	93,621 - 56,115 9,889
	149,736 9,889
	295,554 133,479
	485,554 584,541

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

28 Contingencies

The group had contingent liabilities at 30 June 2014 and 30 June 2013 in respect of:

(a) Contingent liabilities

(i) Guarantees

Guarantees are given in respect of rental bonds for $1,662,434 (2013: $1,618,271).

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 (2013: Nil).

29 Commitments

(a) Capital commitments

There were no capital expenditures contracted for at the reporting date which have not been recognised as liabilities (2013: Nil).

78 • Lycopodium Limited Annual Financial Report 2014

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29 Commitments (continued)

(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) Ltd is a non cancellable lease with 12 month term ending 14 September 2014, with an option to renew for a further 12 month term.

The property under operating lease by Lycopodium (Philippines) Pty Ltd is a non cancellable lease with a 12 month term ending 30 June 2015, with the option to renew for a further 12 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 2014 $ 2013 $ 7,032,869 7,033,514 29,321,483 24,258,471 4,104,788 16,229,537
	40,459,140 47,521,522

(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 $869,393 (2013: $2,374,414). 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.

• 79

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

29 Commitments (continued)

(b) Lease commitments: group as lessee (continued)

(ii) Finance leases and hire purchase commitments (continued)

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 2014 $ 2013 $ 592,364 1,435,429 366,696 1,004,634
	959,060 2,440,063 (53,634) (167,210)
	905,426 2,272,853
	554,259 1,260,494 351,167 1,012,359
	905,426 2,272,853

The weighted average interest rate implicit in the leases and hire purchases is 6.01% (2013: 6.54%).

30 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 31.

(c) Key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	Consolidated 2014 $ 2013 $ 2,958,194 3,453,013 181,587 175,000 24,600 (49,704)
	3,164,381 3,578,309

Detailed remuneration disclosures are provided in the remuneration report on pages 10 to 17.

80 • Lycopodium Limited Annual Financial Report 2014

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30 Related party transactions (continued)

(d) Transactions with other related parties

The following transactions occurred with related parties:

Consolidated

	2014	2013
	$	$
Purchases of goods and services
Purchases from joint venture	2,992	516,696
Sale of goods and services
Sales to joint venture	2,841,931	8,918,808
Other revenue
Management fees to joint venture	900,000	-

(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 ventures Current payables Joint ventures (f) Loans to/from related parties Loans to joint venture Beginning of the year Loan advanced Loan repayments received End of year	Consolidated 2014 $ 2013 $ 603,279 4,878,712 337,015 255,686 Consolidated 2014 $ 2013 $ 999,999 999,999 - - (999,999) -
	- 999,999

(f) Loans to/from related parties

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.

• 81

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

31 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):

	Country of
	incorporation /
	Principal
Name of entity	activity	Class of shares	Equity holding
			2014 2013
			% %
Lycopodium Minerals Pty Ltd	Australia (1)	Ordinary	100	100
Orway Mineral Consultants (WA) Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Process Industries Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium (Ghana) Limited	Ghana (2)	Ordinary	100	100
Lycopodium Ghana Pty Ltd	Australia (2)	Ordinary	100	100
Lycopodium (Philippines) Pty Ltd	Australia (2)	Ordinary	100	100
Lycopodium Minerals QLD Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Infrastructure Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Asset Management Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Mauritius	Mauritius (2)	Ordinary	100	100
Lycopodium Mauritania SARL	Mauritania (2)	Ordinary	100	100
Lycopodium Americas Pty Ltd	Australia (1)	Ordinary	85	85
Lycopodium Minerals Canada Ltd	Canada (1)	Ordinary	100	100
Orway Minerals Consultants Americas Pty Ltd	Australia (1)	Ordinary	85	85
Orway Mineral Consultants Canada Ltd	Canada (1)	Ordinary	100	100
Lycopodium Burkina Faso SARL	Burkina Faso (2)	Ordinary	100	100
Lycopodium Rail Pty Ltd	Australia (1)	Ordinary	75	75

(1) Engineering, procurement, construction management services

(2) Offshore project support services

32 Events occurring after the reporting period

Since year end the directors have recommended the payment of a final dividend on ordinary shares in respect of the 2014 financial year. The total amount of the dividend is $586,232 (2013: $8,180,572), which represents a fully franked dividend of 1.5 (2013: 21.0) cents per fully paid ordinary share.

On 14 April 2014, Lycopodium Limited announced that it had agreed to acquire a 74% shareholding in ADP Holdings (Pty) Ltd, a South African based engineering business established in 1997 subject to satisfying certain conditions including obtaining the necessary governmental approvals. The acquisition will be completed on 30 September 2014.

This acquisition will be recorded in accordance with the accounting policy on business combinations (note 1(h)). It is expected that goodwill will arise as a result of this and recorded on the balance sheet of Lycopodium Limited.

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.

82 • Lycopodium Limited Annual Financial Report 2014

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33 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 Dividends received from joint venture Change in operating assets and liabilities: Decrease / (increase) in trade debtors and other receivables Decrease / (increase) in deferred tax assets Decrease / (increase) in other operating assets (Decrease) / increase in trade creditors Decrease in provision for income taxes payable (Decrease) / increase in other provisions Net cash inflow from operating activities

Consolidated 2014 $ 2013 $ 3,709,386 22,540,439 2,340,068 2,192,104 290,268 23,014 6,636 235,536 (3,343,605) (5,625,335) 145,657 232,000 4,900,000 - 31,184,717 (663,759) 3,334,207 (3,489,979) 2,559,215 (1,001,518) (28,943,242) 10,699,063 (3,355,273) (1,882,372) (1,266,100) 239,903

11,561,934 23,499,096

34 Non-cash investing and financing activities

Acquisition of plant and equipment by means of finance leases or hire purchase arrangements	Consolidated 2014 $ 2013 $ - 343,368

35 Earnings per share

(a) Basic 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	Consolidated 2014 Cents 2013 Cents 10.0 56.5
	Consolidated 2014 Cents 2013 Cents 9.8 55.4

(b) Diluted earnings per share

• 83

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

35 Earnings per share (continued)

(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 and potential ordinary shares used as the denominator in calculating diluted earnings per share	Consolidated 2014 $ 2013 $ 3,878,969 21,931,946
	3,878,969 21,931,946
	Consolidated 2014 Number 2013 Number 38,955,870 38,796,747 432,233 801,329
	39,388,103 39,598,076

84 • Lycopodium Limited Annual Financial Report 2014

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36 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%

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 2014 was Nil (2013: 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.

• 85

Notes to the Consolidated Financial Statement - 30 June 2014 (continued)

36 Share-based payments (continued)

(b) Employee performance rights plan (continued)

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 2014 was Nil (2013: Nil).

(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 2014 $ 2013 $ 24,600 (49,704) 265,668 72,718
	290,268 23,014

86 • Lycopodium Limited Annual Financial Report 2014

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37 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	2014 $ 2013 $ 12,797,911 10,904,801 17,528,149 18,103,605
	30,326,060 29,008,406
	595,658 1,154,501 27,633 113,068
	623,291 1,267,569
	29,702,769 27,740,837
	(89,108,307) (83,222,511) 18,999,322 18,951,702 1,021,535 778,886 9,681,912 8,010,249
	29,702,769 27,740,837
	11,799,991 16,736,316
	11,779,991 16,736,316

(b) Guarantees entered into by the parent entity

Last year, 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.

(c) Contingent liabilities of the parent entity

The parent entity did not have any contingent liabilities as at 30 June 2014 or 30 June 2013.

(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 2014 or 30 June 2013.

• 87

Directors’ Declaration

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88 • Lycopodium Limited Annual Financial Report 2014

Audit Report

• 89

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90 • Lycopodium Limited Annual Financial Report 2014

Shareholder Information

The shareholder information set out below was applicable as at 16 September 2014.

A. Distribution of equity securities

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

Holding 1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over	Total Holders 516 713 207 180 24
	1,640

There were 143 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:

Name 1 Reesh Pty 2 HSBC Custody Nominees (Australia) Limited 3 Luala Pty Ltd 4 Caddy Fox Pty Ltd 5 Selso Pty Ltd 6 Accede Pty Ltd 7 JP Morgan Nominees Australia Limited 8 Citicorp Nominees Pty Ltd (Colonial First State Inv A/C) 9 Mr Peter De Leo 10 Lycopodium Share Plan Pty Ltd 11 De Leo Nominees Pty Ltd 12 Citicorp Nominees Pty Ltd 13 Botech Pty Ltd 14 Mr David James Taylor 15 Mr Peter De Leo & Mrs Tiana De Leo 16 Dr Gregory O'Neil 17 Rubi Holdings Pty Ltd 18 Nancris Pty Ltd 19 De Bruin Securities 20 Tobaka Pty Ltd

Ordinary shares Number held Percentage of Units 9,104,637 23.30 6,218,378 15.91 3,167,332 8.10 2,612,332 6.68 2,058,148 5.27 1,942,332 4.97 1,419,657 3.63 667,068 1.71 539,466 1.38 485,000 1.24 407,900 1.04 395,808 1.01 305,405 0.78 236,754 0.61 216,405 0.55 195,174 0.50 175,000 0.45 175,000 0.45 135,000 0.35 134,110 0.34

30,590,906 78.27

C. Substantial holders

Substantial holders in the company are set out below:

	Number	Percentage of
Name	held	Units
1 Reesh Pty Ltd	9,104,637	23.30
2 HSBC Custody Nominees (Australia) Limited	6,218,378	15.91
3 Luala Pty Ltd	3,167,332	8.10
4 Caddy Fox Pty Ltd	2,612,332	6.68
5 Selso Pty Ltd	2,058,148	5.27

D. Voting rights

91 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.

• 91

Corporate Directory

Directors	Michael John Caratti
	Lawrence William Marshall
	Rodney Lloyd Leonard
	Robert Joseph Osmetti
	Bruno Ruggiero
	Peter De Leo
Company Secretary	Keith Bakker
Registered and Principal Office	Level 5, 1 Adelaide Terrace
	East Perth WA 6004
	Australia
	T: +61 (0)8 6210 5222
	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
	www.computershare.com.au
Lawyers to the Company	Hardy Bowen
	Level 1, 28 Ord Street
	Perth WA 6005
	T: +61 (0)8 9211 3600
	www.hardybowen.com
Auditor	Grant Thornton Audit Pty Ltd
	Level 1, 10 Kings Park Road
	West Perth WA 6005
	T: +61 (0)8 9480 2000
	www.grantthornton.com.au

92 • Lycopodium Limited Annual Financial Report 2014

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

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