REACH RESOURCES LIMITED — Annual Report 2012

Sep 2, 2012

Appendix 4 E

Financial Report

Name of Entity

CERVANTES CORPORATION LTD (ASX code: CVS)

ACN 097 982 235

1

Financial Year ended (current period) 30 June 2012 Financial Year ended (previous period) 30 June 2011

2 Results for announcement to the market

		$			$
Revenue		-	-	to	-
Profit after Tax	down	286,260	116.4%	to	(245,910)
Net Profit for the period attributable to Members	down	286,260	116.4%	to	(245,910)

2.6 Brief explanation of figure reported above to enable the figures to be understood.

On the revenue side, a decrease in income from the realisation of the sale of equity investments for a profit and a decrease in the fair value of held-for-trading investments contributed largely to the loss.

3,4,5 (See preliminary financial statement attached)

6

6
Dividends	Amount per Security	Franked amount per security
Final Dividend	Nil	Nil
Interim Dividend	Nil	Nil
Previous Corresponding Period	Nil	Nil

7

Not Applicable

Record date for determining entitlement to the dividend

8

For a statement of retained earnings showing movements see the Statement of Change in Equity contained in preliminary financial statements attached.

9

Net tangible asset per security.

Reporting period (0.090)c

Previous reporting period 0.013c

10

Not applicable

11

Not applicable

12

Other significant information needed by an investor to make an informed assessment of the entity’s financial performance and financial position can be obtained from the preliminary financial statements attached.

13

Not applicable

14

A commentary on the results for the period can be obtained from the Directors’ Report contained in the preliminary financial statements attached.

15

Audit Review Status.

The preliminary financial statements are based on financial statements which are in the process of being audited by Rothsay Chartered Accountants.

• a This report has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Law or other standards acceptable to ASX.

• b This report, and the financial statements prepared under the Corporations Law (if separate), use the same accounting policies.

• c

• This report does give a true and fair view of the matters disclosed.

d This report is based on the financial statements to which one of the following applies.

The financial statements The financial statements have have been audited been subject to review The financial statements are The financial statements have X in the process of being not yet been audited or reviewed audited or subject to review

16

The financial statements are in the process of being audited and at the date of this report there is neither any dispute with the auditor nor any likelihood that the financial statements will be subject to qualification.

17

Not applicable

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Company Secretary

Dated 31 August 2012

CERVANTES CORPORATION LTD (ABN 79 097 982 235) AND CONTROLLED ENTITY DIRECTOR’S REPORT

Your Directors present their report, together with the financial statements of the Group, being the Company and its controlled entity, for the year ended 30 June 2012.

Principal Activities and Significant Change in Nature of Activities

The principal activities of the Group during the financial year was operating in the seafood and aquaculture industry in Western Australia and the exploration and evaluation of mineral resource projects.

There were no other significant changes in the nature of the Group’s principal activities during the financial year.

Operating Results and Review of Operations for the Year

Operating Results

The loss of the Group for the financial year after providing for income tax amounted to:

Year ended Year ended 30 June 2012 30 June 2011 $ $ (245,910) 40,350

The consolidated loss of the Group amounted to $245,910, after providing for income tax. The significant reduction was largely due to the decrease in the value of the Company’s financial investments. Further discussion on the Group’s operation now follows.

Review of Operations

The Lobster pots licences continue to be a source of income for the Group during the Lobster Season.

The Group continues to buy and sell shares in an active market and continues to assess various projects, including projects in the Resource and Energy sector, for a possible diversification of the Group’s operations.

The Group continues to carry out various tests and assessments of methods to maximize the recovery, treatment and exploitation of the gold tailings project in Western Australia containing substantial gold values, which the Group have been involved in, and reporting on since 9 January 2009.

These tests are as a result of a substantial drilling program carried out by Cervantes Corporation Ltd’s (Cervantes) subsidiary, Cervantes Gold Pty Ltd, and include testing by local metallurgical groups and testing of the material by Chinese treatment groups at their specialised treatment plants in China.

Cervantes has been approached by a listed company to treat the tailings on a royalty basis utilising their plant currently under construction, and this is also under consideration as an alternative positive cash flow opportunity.

The Board will continue to assess projects, offers and opportunities which it believes will add value to Cervantes shares, based on market conditions, sector activity and ASX compliance requirements as well as ensuring the risk to reward ratio favours the Company and its shareholders.

Financial Position

The net assets of the Group have decreased by $245,910 from $489,124 at 30 June 2011 to $243,214 at 30 June 2012. This decrease was largely due to the increase in borrowings of $250,000.

CERVANTES CORPORATION LTD (ABN 79 097 982 235) AND CONTROLLED ENTITY DIRECTOR’S REPORT

Significant Changes in the State of Affairs

The following significant changes in the state of affairs of the parent entity occurred during the financial year:

On 27 September 2011, the Company arranged a loan facility of up to $250,000, unsecured, at lesser of 5.6%pa or the 90 days term deposit rate of the National Australia Bank. These funds have been used to acquire listed securities and additional working capital.

Dividends Paid or Recommended

No dividends were declared or paid since the start of the financial year. No recommendation for payment of dividends has been made.

Events after the Reporting Date

No matters or circumstances have arisen since the end of the financial year which significantly affect or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Future Developments, Prospects and Business Strategies

Likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report, as the inclusion of such information is likely to result in unreasonable prejudice to the Group.

Environmental Issues

The Group is not aware of any matter which requires disclosure with respect to any significant environmental regulation in respect of its operating activities.

CERVANTES CORPORATION LTD (ABN 79 097 982 235) AND CONTROLLED ENTITY DIRECTOR’S REPORT

Information on Directors

Barry MacKinnon AM JP	CHAIRMAN (Non-executive) (resigned 23 November 2011)
Qualifications	Bachelor of Economics, Fellow of the Australian Society of Certified
	Practising Accountants.
Experience	Chairman since 2001. Mr MacKinnon has a wide range of experience in
	corporate finance and business management. Mr MacKinnon was
	appointed to the Board on 28 August 2001.
Interest in shares	250,000 ordinary shares.
Special responsibilities	Mr MacKinnon was a member of the audit committee
Directorships held in other	Baraka Energy & Resources Ltd (appointed 18 May 2009 resigned 23
	November 2011).
listed entities during the three
years prior to the current year
Collin Vost	EXECUTIVE CHAIRMAN (Executive) (from 23 November 2011)
	MANAGING DIRECTOR (Executive) (until 23 November 2011)
Qualifications	Diploma of Financial Services, Licenced Securities Dealer.
Experience	Mr Vost has been involved in public companies for the past 30 years and
	has served on the Board of several, mostly junior resource companies as
	well as being involved in the securities dealing business since 2001. Mr
	Vost was appointed to the Board on 9 October 2007.
Interest in shares and options	47,320,000 ordinary shares and options to acquire a further 5,000,000
	shares.
Special responsibilities	Mr Vost is a member of the audit committee
Directorships held in other	Baraka Energy & Resources Ltd (appointed 18 May 2009)
Listed entities during the three	JV Global Ltd (appointed 29 May 2009).
years prior to the current year
Graeme Armstrong	DIRECTOR (Non-executive) (resigned 3 July 2012)
Experience	Mr Armstrong was appointed to the Board on 16 January 2008. From 1990
	to 1997 he was a director and shareholder of Scarboro Toyota and when
	this entity purchased Galleria Toyota, Mr Armstrong was appointed dealer
	principal and director, a position he held until retirement in March 2007.
Interest in shares	5,550,000 ordinary shares.
Special responsibilities	Mr Armstrong was a member of the audit committee
Directorships held in other	None.
Listed entities during the three
years prior to the current year

CERVANTES CORPORATION LTD (ABN 79 097 982 235) AND CONTROLLED ENTITY DIRECTOR’S REPORT

Justin Vost DIRECTOR (Non-executive) (appointed 23 November 2011) Experience Mr Justin Vost has experience in mining, manufacturing and capital markets. Interest in shares 10,000,000 ordinary shares. Special responsibilities Mr Vost is a member of the audit committee Directorships held in other Baraka Energy & Resources Ltd (appointed 23 November 2011) Listed entities during the three JV Global Ltd (appointed 19 April 2011). years prior to the current year Timothy Clark DIRECTOR (Non-executive) (appointed 3 July 2012) Experience Mr Clark was appointed to the Board on 3 July 2012. Mr Clark has experience in capital markets. Interest in shares 348,000 Ordinary shares Special responsibilities Mr Clark is a member of the audit committee Directorships held in other JV Global Ltd (appointed 6 July 2011) Listed entities during the three years prior to the current year

COMPANY SECRETARY

The following person held the position of company secretary at the end of the financial year:

Patrick O’Neill – Bachelor of Business, Chartered Accountant. Mr O’Neill is a partner in the accounting firm Jackson Greeve. He has acted as Company Secretary for several public companies. Mr O’Neill was appointed Company Secretary on 16 January 2008.

Meetings of Directors

During the financial year, 2 meetings of directors were held. Attendances by each director during the year were as follows:

	Directors’	Meetings
	Number eligible	Number attended
	to attend
Barry MacKinnon	1	1
Collin Vost	2	2
Graeme Armstrong	2	2
Justin Vost	1	1

Indemnifying Officers or Auditor

In accordance with the constitution, except as may be prohibited by the Corporation Act 2001, every Officer of the Company shall be indemnified out of the property of the Company against any liability incurred by them in their capacity as Officer, auditor or agent of the Company or a related corporation in respect of any act or omission whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal.

As at the date of this report no insurance premiums have been paid, or agreed to be paid, for insurance against a current or former Officer’s liability for legal costs.

CERVANTES CORPORATION LTD (ABN 79 097 982 235) AND CONTROLLED ENTITY DIRECTOR’S REPORT

Options

At the date of this report, the unissued ordinary shares of Cervantes Corporation Ltd under option are as follows:

Grant Date Date of Expiry Exercise Price 2 December 2010 31 December 2013 $0.03	Number under option 5,000,000
	5,000,000

Option holders do not have any rights to participate in any issue of shares or other interests in the company or any other entity.

There have been no unissued shares or interests under options of any controlled entity within the Group during or since the end of the reporting period.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year.

Non-Audit Services

Rothsay did not provide non-audit services to the Group during 2012.

CERVANTES CORPORATION LTD (ABN 79 097 982 235) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

Note Continuing Operation Revenue Interest income 2a Other income 2b Impairment reversal of intangible assets 13 Net loss on revaluation of other financial assets 3 Employee benefits expenses Depreciation expenses Occupancy expenses 3 Exploration & evaluation expenditure written off 3 Administration expenses Other expenses Profit/(Loss) before income tax Income tax (expense) / benefit 4 Profit/(Loss) after tax Other comprehensive income Total comprehensive income net of income tax Basic loss per share (cents per share) 7 Diluted loss per share (cents per share) 7	Consolidated Group 2012 2011 $ $ 565 139 9,840 378,510 24,000 20,000
	34,405 398,649 (73,526) - (72,000) (186,175) (47) (57) (39,226) (40,453) (10,164) (25,250) (82,326) (104,652) (3,026) (1,712)
	(245,910) 40,350 - -
	(245,910) 40,350
	- -
	(245,910) 40,350
	(0.090)c 0.013c (0.088)c 0.013c

The accompanying notes form part of these financial statements

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

Note Current Assets Cash and cash equivalents 8 Trade and other receivables 9 Other financial assets 10 Total Current Assets Non-Current Assets Property, plant and equipment 12 Intangible assets 13 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 14 Borrowings 15 Total Current Liabilities Total Liabilities Net Assets Equity Issued capital 16 Reserves 24 Accumulated losses Total Equity	Consolidated Group 2012 2011 $ $ 26,994 67,089 1,502 1,650 290,195 264,488
	318,691 333,227
	3,113 3,160 188,670 164,670
	191,783 167,830
	510,474 501,057
	17,260 11,933 250,000 -
	267,260 11,933
	267,260 11,933
	243,214 489,124
	12,068,070 12,068,070 23,282 23,282 (11,848,138) (11,602,228)
	243,214 489,124

The accompanying notes form part of these financial statements

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2012

Consolidated Group Balance at 1 July 2010 Shares issued during year Transaction costs Options issued to employees Net loss attributable to members of the parent entity Balance at 30 June 2011 Shares issued during year Transaction costs Options issued to employees Net loss attributable to members of the parent entity Balance at 30 June 2012	Share Capital Accumulated Losses Reserves Total $ $ $ $ 11,983,070 (11,642,578) - 340,492 85,000 - - 85,000 - - - - - - 23,282 23,282 - 40,350 - 40,350
	12,068,070 (11,602,228) 23,282 489,124
	- - - - - - - - - - - - - (245,910) - (245,910)
	12,068,070 (11,848,138) 23,282 243,214

The accompanying notes form part of these financial statements

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2012

Note Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Interests received Net cash used in operating activities 20 Cash Flows from Investing Activities Proceeds from held for trading investments Proceeds from the sale of equipment Purchase of held for trading investments Payments for exploration & evaluation Net cash used in investing activities Cash Flows from Financing Activities Proceeds of issue of shares Costs of share issue Proceeds from borrowings Net cash provided by financing activities Net outflow in cash held for the year Cash at the beginning of the year Cash at the end of the year 8	Consolidated Group 2012 2011 $ $ 9,840 10,640 (195,526) (197,747) 565 139
	(185,121) (186,968)
	- 291,974 - 7,300 (99,233) - (5,741) (65,800)
	(104,974) 233,474
	- - - - 250,000 -
	250,000 -
	(40,095) 46,504 67,089 20,585
	26,994 67,089

The accompanying notes form part of these financial statements

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

This financial report includes the consolidated financial statements and notes of Cervantes Corporation Ltd and its controlled entity (‘Consolidated Group’ or ‘Group’).

Note 1: Statement of Significant Accounting Policies

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated.

The financial report has been prepared on an accrual basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

The financial statements of Cervantes Corporation Ltd also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

a Principles of Consolidation

A controlled entity is any entity over which Cervantes Corporation Ltd has the power to govern the financial and operating policies so as to obtain benefit from its activities. In assessing the power to govern, the existence and effect of holding actual and potential voting rights are considered.

Details of the controlled entity are contained in Note 11 to the financial statements. The controlled entity has a 30 June financial year-end.

As at reporting date, the assets and liabilities of the controlled entity have been incorporated into the consolidated financial statements as well as its results for the year ended. Where a controlled entity has entered or left the Group during the year, its operating results have been included from the date control was obtained or until the date control ceased.

All inter-group balances and transactions between entities in the Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of the subsidiary have been changed where necessary to ensure consistency with those adopted by the parent entity.

b Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured.

The acquisition may result in the recognition of goodwill (refer note 1(i)) or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer.

Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss.

Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of comprehensive income unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income.

c Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on the taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movement in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profits will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

d Property, Plant and Equipment

Each class of property, plant and equipment is carried at the cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and Equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present value in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount recognised as a separate asset, as appropriate, only when it is probable that future economic benefits are associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the Group commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Plant and equipment 0 – 11.0%

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

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.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

e Exploration and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandon area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each of the area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

f Financial Instruments

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For the financial asset, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted).

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Classification and Subsequent Measurement

Finance instruments are subsequently measured at fair value. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

• (i) Financial assets at fair value through profit and loss

• A financial asset is classified at ‘fair value through the profit and loss’ when they are either held for trading for the purpose of short-term profit taking, derivates not held for hedge purposes or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a Group of financial assets is managed by key management personnel on a fair value basis in accordance with in the investment strategy. Such assets are subsequently measured at fair value with changes in the carrying value being included in the profit and loss.

• (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 and are subsequently measured at amortised cost.

Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. (All other loans and receivables are classified as non-current assets.)

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuations techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

Derecognition

Financial assets are derecognised where the contractual rights to receipts of the cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of the consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

g Going Concern

As at the date of this report the directors are considering raising further equity capital through a share placement. Also, the Group has current assets, being held for sale investments, which could be sold to meet financial obligations.

As a consequence, the directors believe the Group is well placed to manage its business risks successfully. Accordingly, they continue to adopt the going concern basis in preparing the financial report which contemplates that the Group will continue to meet their commitments and can therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

Notwithstanding cash outflows from operations of $185,121, the directors have a reasonable expectation that the Group have adequate resources to continue in operational existence for the foreseeable future. However, should the held for sale investment not be realised as necessary or capital raising not occur, there is significant uncertainty whether the Group would be able to continue as a going concern.

h Impairment of Assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

i Intangibles

Licences and Leases

Licences and leases are recognised at director valuation. Licences and leases have an indefinite life as they are a right to fish within zones established by Government authorities. Licences and leases are carried at director valuation less any impairment losses.

Research and Development Costs

Expenditure during the research phase of a project is recognised as an expense when incurred. Development cost are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably.

j Employee Benefits

Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

k Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is possible that an outflow of economic benefits will result and that outflow can be reliably measured.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

l Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

m Revenue and Other Income

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established.

Revenue from rendering of a service is recognised upon the delivery of the service to the customers.

Revenue from the annual lease of licences is recognised at the beginning of the lease period.

All revenue is stated net of the amount of goods and services tax (GST).

n

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except when the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

o

Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

When the Group applies an accounting policy retrospectively, makes a retrospective restatement or reclassifies items in its financial statement, a statement of financial position as at the beginning of the earliest comparative period will be disclosed

Critical Accounting Estimates and Judgments

The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key Estimates – Impairment/Revaluation

Based on the Group’s current use of the craypot licences the directors have estimated the recoverable amount of the craypot licences as the fair value of these licences less costs to sell which is higher than value in use. The fair value was determined by reference to information obtained from external industry sources on prices at which craypot licences are sold currently in an active market. The revaluation has led to a decrease in the provision for impairment of intangible assets of $24,000 for the year ended 30 June 2012.

Key Judgment – Advance to non related parties

The recovery of the full amount was dependent on the successful exploitation and sale of gold recovered from the retreatment projects being financed by the subsidiary. At the date of this report the directors have sufficient reason to believe that the exploration in the specific areas will not lead to the discovery of viable quantities of mineral resources and have decided to discontinue such activity. Sufficient data exists to indicate that the recovery of the amounts advanced is unlikely however the non related parties are continuing with efforts and investigating new treatment and processing methods. Such capitalised expenditure is carried at reporting date at $0 and the amount written off through the statement of comprehensive income as exploration and evaluation written off for project abandoned amounted to $0.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

Key Judgment – Exploration and Evaluation Expenditure

The Group’s policy for exploration and evaluation requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future sale or exploitation, then the relevant capitalised amount will be written off through the statement of comprehensive income. At the date of this report the Group has sufficient reason to believe that the exploration in specific areas will not lead to the discovery of viable quantities of mineral resources and the Group has decided to discontinue such activity in the specific areas while alternative treatment methods are being investigated. Such capitalised expenditure is carried at reporting date at $0 and the amount written off through the statement of comprehensive income as exploration and evaluation written off for projects abandoned amounted to $10,164.

p New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.

AASB 9: Financial Instruments (December 2010) (applicable for annual reporting periods commencing on or after

1 January 2013)

This Standard is applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The Group has not yet determined any potential impact on the financial statements.

The key changes made to accounting requirements include:

simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;

simplifying the requirements for embedded derivatives;

removing the tainting rules associated with held-to-maturity assets;

removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;

allowing 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. 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;

requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss.

AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010–2: Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121, 123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after 1 July 2013)

AASB 1053 establishes a revised differential financial reporting framework consisting of two tiers of financial reporting requirements for those entities preparing general purpose financial statements: Tier 1: Australian Accounting Standards; and

Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.

Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but contains significantly fewer disclosure requirements.

The following entities are required to apply Tier 1 reporting requirements (ie full IFRS): for-profit private sector entities that have public accountability; and

the Australian Government and state, territory and local governments.

Since the Group is a for-profit private sector entity that has public accountability, it does not qualify for the reduced disclosure requirements for Tier 2 entities.

AASB 2011–2 makes amendments to Australian Accounting Standards and Interpretations to give effect to the reduced disclosure requirements for Tier 2 entities. It achieves this by specifying the disclosure paragraphs that a Tier 2 entity need not comply with as well as adding specific “RDR” disclosures.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2011) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (applies to periods beginning on or after 1 January 2013)

This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these amendments will only apply when the entity adopts AASB 9.

As noted above, the Group has not yet determined any potential impact on the financial statements from adopting AASB 9.

AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012)

This Standard makes amendments to AASB 112: Income Taxes.

The amendments brought in by this Standard introduce a more practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model under AASB 140: Investment Property.

Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

The amendments brought in by this Standard also incorporate Interpretation 121 into AASB 112. The amendments are not expected to impact the Group.

AASB 2010–9: Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters [AASB 1] (applies to periods beginning on or after 1 July 2011/1 January 2013) This Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards.

The amendments brought in by this Standard provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.

Furthermore, the amendments brought in by this Standard also provide guidance for entities emerging from severe hyperinflation either to resume presenting Australian-Accounting-Standards financial statements or to present Australian-Accounting-Standards financial statements for the first time.

This Standard is not expected to impact the Group.

AASB 2010–10: Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for Firsttime Adopters [AASB 2009–11 & AASB 2011–7] (applies to periods beginning on or after 1 January 2013)

This Standard makes amendments to AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9, and AASB 2011–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010).

The amendments brought in by this Standard ultimately affect AASB 1: First-time Adoption of Australian Accounting Standards and provide relief for first-time adopters from having to reconstruct transactions that occurred before their transition date.

[The amendments to AASB 2009–11 will only affect early adopters of AASB 2009–11 (and AASB 9: Financial Instruments that was issued in December 2009) as it has been superseded by AASB 2010–7.] This Standard is not expected to impact the Group.

AASB 1054: Australian Additional Disclosures (applies to periods beginning on or after 1 January 2013)

This Standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB.

This Standard relocates all Australian specific disclosures from other standards to one place and revises disclosures in the following areas:

compliance with Australian Accounting Standards;

the statutory basis or reporting framework for financial statements; whether the financial statements are general purpose or special purpose; audit fees; and imputation credits.

This Standard is not expected to impact the Group.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

AASB 2011-2: Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence project – Reduced disclosure regime [AASB 101 & AASB 1054] (applies to periods beginning on or after 1 July 2013)

This Standard makes amendments to the application of the revised disclosures to Tier 2 entities that are applying AASB 1053.

This Standard is not expected to impact the Group.

AASB 10: Consolidated Financial Statements (applies to periods beginning on or after 1 January 2013) This Standard establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and Interpretation 112 Consolidation – Special Purpose Entities .

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This Standard is not expected to impact the Group.

AASB 12: Disclosures of Interests in Other Entities (applies to periods beginning on or after 1 January 2013)

This Standard includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests. The Group has not yet determined any potential impact on the financial statements.

AASB 13: Fair Value Measurement (applies to periods beginning on or after 1 January 2013)

This Standard establishes a single source of guidance under AASB for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under AASB when fair value is required or permitted by AASB. Application of this definition may result in different fair values being determined for the relevant assets.

AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. The Group has not yet determined any potential impact on the financial statements.

AASB 119: Employee Benefits (applicable for annual reporting periods commencing on or after 1 January 2013)

The main change introduced by this standard is to revise the accounting for defined benefit plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognized in full with actuarial gains and losses being recognized in other comprehensive income. It also revised the method of calculating the return on plan assets. The definition of short-term benefits has been revised, meaning some annual leave entitlements may become long-term in nature with a revised measurement. Similarly the timing for recognising a provision for termination benefits has been revised, such that provisions can only be recognised when the offer cannot be withdrawn.

Consequential amendments were also made to other standards via AASB 2011-10.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 2: Revenue and Other Income 2a. Interest revenues - other persons 2b. Other income Lease revenue Corporate Services Profit on disposal of shares Fair value adjustment Profit on the sale of equipment NOTE 3: Loss for the Year The profit for the year included the following expenses: Fair value adjustment Rental expense on operating leases - rental expense for sublease Exploration and evaluation expenditure written off	Consolidated Group 2012 2011 $ $ 565 139 565 139 9,840 10,640 - 1,171 - 160,928 - 198,471 - 7,300 9,840 378,510 73,401 - 39,226 40,453 10,164 25,250	Consolidated Group 2012 2011 $ $ 565 139 565 139 9,840 10,640 - 1,171 - 160,928 - 198,471 - 7,300 9,840 378,510 73,401 - 39,226 40,453 10,164 25,250
		139
		10,640 1,171 160,928 198,471 7,300
		378,510
		- 40,453 25,250

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 4: Income Tax Prima facie tax benefit on profit/(loss) before income tax @ 30%. Add tax effect: Non-allowable items Impairment of assets Fair value adjustment Allowable items Capital raising cost Project assessment cost Tax losses not brought to account Income tax attributable to entity Unrecognised deferred tax balances: Unrecognised deferred tax asset losses Unrecognised deferred tax asset other Unrecognised deferred equity adjustment Unrecognised deferred tax liabilities Net deferred tax asset not brought to account	Consolidated Group 2012 2011 $ $ (73,773) 12,105 (7,200) (6,000) 22,058 (59,541) - (11,082) (4,968) (4,968) 63,883 69,486
	- -
	2,750,633 2,681,782 187,480 192,448 - - - -
	2,938,113 2,874,230

Unrecognised deferred tax asset losses include deferred tax asset losses relating to Cervantes Gold Pty Ltd in the amount of $422,483 (2011: $422,483). These are available for offset against the unrecognised deferred tax loss in Cervantes Gold Pty Ltd.

The Unrealising deferred tax assets will only be available if:

a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;

b) the conditions for deductibility imposed by the tax legislation continue to be complied with; and

c) no changes in tax legislation adversely affect the Company in realising the benefit.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 5: Interests of Key Management Personnel (KMP)

Refer to the remuneration report contained in the Report of the Directors for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2012.

The totals of remuneration paid to KMP of the company and the Group during the year are as follows:

Short-term employment benefits Post-employment benefits Other long-term benefits Termination benefits	2012 2011 $ $ 156,310 259,915 - - - - - -
	156,310 259,915

KMP Options Holdings

The number of options over ordinary shares held by each KMP of the Group during the financial year is as follows:

30 June 2012

Collin Vost 30 June 2011 Collin Vost	Balance at beginning of year Granted as remuneration during the year Exercised during the year Other changes during the year Balance at end of year 5,000,000 - - - 5,000,000
	5,000,000 - - - 5,000,000
	Balance at beginning of year Granted as remuneration during the year Exercised during the year Other changes during the year Balance at end of year - 5,000,000 - - 5,000,000
	- 5,000,000 - - 5,000,000

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 5: Interests of Key Management Personnel (KMP) (cont’d)

KMP Shareholdings

The number of ordinary shares in Cervantes Corporation Ltd held by each KMP of the Group during the financial year is as follows:

30 June 2012

Barry MacKinnon Collin Vost Graeme Armstrong Justin Vost Patrick O’Neill	Balance at beginning of year Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of year 250,000 - - (250,000) - 47,320,000 - - 47,320,000 4,550,000 - - 5,550,000 - - - 10,000,000 10,000,000 400,000 - - 400,000
	53,520,000 - - 9,750,000 63,270,000

30 June 2011

Barry MacKinnon Collin Vost Graeme Armstrong Patrick O’Neill	Balance at beginning of year Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of year 250,000 - - - 250,000 30,620,000 - - 16,700,000 47,320,000 4,550,000 - - 1,000,000 5,550,000 200,000 - - 200,000 400,000
	35,620,000 - - 17,900,000 53,520,000

Other KMP Transactions

There have been no other transactions involving equity instruments other than those described in the tables above. For details of other transactions with KMP refer to Note 21: Related Party Transactions.

NOTE 6: Auditors’ Remuneration Remuneration of the auditor of the parent entity for: - auditing or reviewing the financial report	Consolidated Group 2012 2011 $ $ 17,800 26,520

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 7: Earnings per Share (a) Reconciliation of earnings to profit or loss Profit(Loss) Earnings used to calculate basic EPS Earnings used in the calculation of dilutive EPS (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS Weighted average number of dilutive options outstanding Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS NOTE 8: Cash and cash Equivalents Cash at bank & in hand Interest bearing deposit Reconciliation of cash Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the statement of financial position as follows: Cash & cash equivalents	Consolidated Group 2012 2011 $ $ (245,910) 40,350 (245,910) 40,350 No. No. 294,271,112 292,147,824 - - 294,271,112 292,147,824 Consolidated Group 2012 2011 $ $ 5,566 3,157 21,428 63,932 26,994 67,089 26,994 67,089 26,994 67,089	Consolidated Group 2012 2011 $ $ (245,910) 40,350 (245,910) 40,350 No. No. 294,271,112 292,147,824 - - 294,271,112 292,147,824 Consolidated Group 2012 2011 $ $ 5,566 3,157 21,428 63,932 26,994 67,089 26,994 67,089 26,994 67,089
		67,089
		67,089
		67,089

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

Consolidated Group Note 2012 2011 $ $ NOTE 9: Trade and Other Receivables Current Amounts receivable 1,100 1,650 Input tax credits 402 - 1,502 1,650 The terms of the amounts receivable are non-interest bearing, payable on 30 day terms. At the date of this rep amounts outstanding at the 30 June 2012 had been received. Credit Risk – Trade and Other Receivables The Group has no significant concentration of credit risk with respect to any single counter party or group of c parties. The class of assets described as Trade and Other Receivables is considered to be the main source of cred related to the Group. On a geographical basis, all the Group credit risk exposure is in Australia. At the date of this report all the amounts receivable had been repaid in full. Financial assets classified as loans and receivables Trade and other receivable - Total current 1,502 1,650 - Total non-current - - Financial assets 22 1,502 1,650 NOTE 10: Other Financial Assets Current Opening balance 264,488 197,064 Purchase 99,233 - Less: Cost of sales - (131,047) Fair value adjustment (73,526) 198,471 Financial assets at fair value 10a 290,195 264,488 10a Financial assets at fair value through profit and loss Held for trading listed shares 290,195 264,488 290,195 264,488	Consolidated Group Note 2012 2011 $ $ NOTE 9: Trade and Other Receivables Current Amounts receivable 1,100 1,650 Input tax credits 402 - 1,502 1,650 The terms of the amounts receivable are non-interest bearing, payable on 30 day terms. At the date of this rep amounts outstanding at the 30 June 2012 had been received. Credit Risk – Trade and Other Receivables The Group has no significant concentration of credit risk with respect to any single counter party or group of c parties. The class of assets described as Trade and Other Receivables is considered to be the main source of cred related to the Group. On a geographical basis, all the Group credit risk exposure is in Australia. At the date of this report all the amounts receivable had been repaid in full. Financial assets classified as loans and receivables Trade and other receivable - Total current 1,502 1,650 - Total non-current - - Financial assets 22 1,502 1,650 NOTE 10: Other Financial Assets Current Opening balance 264,488 197,064 Purchase 99,233 - Less: Cost of sales - (131,047) Fair value adjustment (73,526) 198,471 Financial assets at fair value 10a 290,195 264,488 10a Financial assets at fair value through profit and loss Held for trading listed shares 290,195 264,488 290,195 264,488	Consolidated Group Note 2012 2011 $ $ NOTE 9: Trade and Other Receivables Current Amounts receivable 1,100 1,650 Input tax credits 402 - 1,502 1,650 The terms of the amounts receivable are non-interest bearing, payable on 30 day terms. At the date of this rep amounts outstanding at the 30 June 2012 had been received. Credit Risk – Trade and Other Receivables The Group has no significant concentration of credit risk with respect to any single counter party or group of c parties. The class of assets described as Trade and Other Receivables is considered to be the main source of cred related to the Group. On a geographical basis, all the Group credit risk exposure is in Australia. At the date of this report all the amounts receivable had been repaid in full. Financial assets classified as loans and receivables Trade and other receivable - Total current 1,502 1,650 - Total non-current - - Financial assets 22 1,502 1,650 NOTE 10: Other Financial Assets Current Opening balance 264,488 197,064 Purchase 99,233 - Less: Cost of sales - (131,047) Fair value adjustment (73,526) 198,471 Financial assets at fair value 10a 290,195 264,488 10a Financial assets at fair value through profit and loss Held for trading listed shares 290,195 264,488 290,195 264,488
		1,650
		197,064 - (131,047) 198,471 264,488 264,488 264,488

The terms of the amounts receivable are non-interest bearing, payable on 30 day terms. At the date of this report all amounts outstanding at the 30 June 2012 had been received.

The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties. The class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the Group.

Shares held for trading are traded for the purpose of short term profit taking. Changes in fair value are included in the statement of comprehensive income.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 11: Controlled Entities Country of Percentage Owned (%) Incorporation 2012 2011 Subsidiary of Cervantes Corporation Ltd: Cervantes Gold Pty Ltd Aust 100 100 Consolidated Group 2012 2011 $ $ NOTE 12: Property, Plant and Equipment Plant & equipment - At cost 423 423 - Less: accumulated depreciation (210) (163) 213 260 Office equipment - At cost 2,900 2,900 - Less: accumulated depreciation - - 2,900 2,900 Total Property, Plant & Equipment 3,113 3,160 Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment. Consolidated Group Plant & Equip. Office Equip. Total Year ended 30 June 2011 Balance at the beginning of year 317 2,900 3,217 Revaluation increment - - - Additions - - - Depreciation expense (57) - (57) Carrying amount at the end of the year 260 2,900 3,160 Year ended 30 June 2012 Balance at the beginning of year 260 2,900 3,160 Revaluation increment - - - Additions - - - Depreciation expense (47) - (47) Carrying amount at the end of the year 213 2,900 3,113	NOTE 11: Controlled Entities Country of Percentage Owned (%) Incorporation 2012 2011 Subsidiary of Cervantes Corporation Ltd: Cervantes Gold Pty Ltd Aust 100 100 Consolidated Group 2012 2011 $ $ NOTE 12: Property, Plant and Equipment Plant & equipment - At cost 423 423 - Less: accumulated depreciation (210) (163) 213 260 Office equipment - At cost 2,900 2,900 - Less: accumulated depreciation - - 2,900 2,900 Total Property, Plant & Equipment 3,113 3,160 Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment. Consolidated Group Plant & Equip. Office Equip. Total Year ended 30 June 2011 Balance at the beginning of year 317 2,900 3,217 Revaluation increment - - - Additions - - - Depreciation expense (57) - (57) Carrying amount at the end of the year 260 2,900 3,160 Year ended 30 June 2012 Balance at the beginning of year 260 2,900 3,160 Revaluation increment - - - Additions - - - Depreciation expense (47) - (47) Carrying amount at the end of the year 213 2,900 3,113	NOTE 11: Controlled Entities Country of Percentage Owned (%) Incorporation 2012 2011 Subsidiary of Cervantes Corporation Ltd: Cervantes Gold Pty Ltd Aust 100 100 Consolidated Group 2012 2011 $ $ NOTE 12: Property, Plant and Equipment Plant & equipment - At cost 423 423 - Less: accumulated depreciation (210) (163) 213 260 Office equipment - At cost 2,900 2,900 - Less: accumulated depreciation - - 2,900 2,900 Total Property, Plant & Equipment 3,113 3,160 Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment. Consolidated Group Plant & Equip. Office Equip. Total Year ended 30 June 2011 Balance at the beginning of year 317 2,900 3,217 Revaluation increment - - - Additions - - - Depreciation expense (57) - (57) Carrying amount at the end of the year 260 2,900 3,160 Year ended 30 June 2012 Balance at the beginning of year 260 2,900 3,160 Revaluation increment - - - Additions - - - Depreciation expense (47) - (47) Carrying amount at the end of the year 213 2,900 3,113
		3,160
		3,160 - - (47)
		3,113

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 13: Intangibles Assets Non-Current Licences and leases At valuation Less provision for impairment Company formation expenditure Consolidated Group Year ended 30 June 2011 Balance at the beginning of the year Reversal of impairment Year ended 30 June 2012 Balance at the beginning of the year Reversal of impairment Closing value at 30 June 2012	Consolidated Group 2012 $ 2011 $ 490,000 490,000 (302,000) (326,000) 670 670 188,670 164,670 Licences & leases Company formation expenditure 144,000 670 20,000 - 164,000 670 164,000 670 24,000 - 188,000 670	Consolidated Group 2012 $ 2011 $ 490,000 490,000 (302,000) (326,000) 670 670 188,670 164,670 Licences & leases Company formation expenditure 144,000 670 20,000 - 164,000 670 164,000 670 24,000 - 188,000 670
		164,670
		Company formation expenditure 670 -
		670
		670 -
		670

The effective date for the revaluation of the licences and leases was 9 August 2012. The carrying amount that would have been recognised had licences and leases been measured using the cost model would have been $800,000. Refer to Note 1, Critical Accounting Estimates and Judgments for impairment considerations.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 14: Trade and other payable Current Unsecured liabilities - Trade creditors Financial liabilities at amortised cost classified as trade and other payables Trade and other payables - Total Current NOTE 15: Borrowings Non-Current Unsecured liabilities Loan	Consolidated Group 2012 $ 2011 $ 17,260 11,933 17,260 11,933 17,260 11,933 250,000 - 250,000 -	Consolidated Group 2012 $ 2011 $ 17,260 11,933 17,260 11,933 17,260 11,933 250,000 - 250,000 -	Consolidated Group 2012 $ 2011 $ 17,260 11,933 17,260 11,933 17,260 11,933 250,000 - 250,000 -	Consolidated Group 2012 $ 2011 $ 17,260 11,933 17,260 11,933 17,260 11,933 250,000 - 250,000 -
				11,933
				11,933
				-
		250,000		-

On 27 September 2011, the Company arranged a loan facility of up to $250,000, unsecured, at lesser of 5.6%pa or the 90 days term deposit rate of the National Australia Bank. These funds have been used to acquire listed securities and additional working capital.

NOTE 16: Issued Capital 294,271,112 (2011: 294,271,112) Fully paid ordinary shares Ordinary shares At the beginning of reporting period Shares issued during the year: 2 December 2010 At the end of reporting period	12,068,070 12,068,070 2012 No. 294,271,112 - 294,271,112	11,983,070
		11,983,070
		2011 No. 289,271,112 5,000,000
		294,271,112

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 16: Issued Capital (cont’d)

On 2 December 2010 the Company issued 5,000,000 ordinary shares to a director as a share based payment.

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called; otherwise each shareholder has one vote on a show of hands.

Options

On 2 December 2010 the Company issued 5,000,000 unlisted options to a director as a share based payment.

Options Opening number of options issued Number of options issued during the year Number of option exercised during the year Number of options lapsed during the year Closing Number of Options Issued	2012 No. 5,000,000 - - - 5,000,000	2011 No. - 5,000,000 - -
		5,000,000

Capital Management

Management control the capital of the Group in order to maintain a good debt to equity ratio and ensure that the Group can fund its operations and continue as a going concern.

The Group’s capital includes ordinary share capital and financial liabilities, supported by financial assets.

There are no externally imposed capital requirements.

Management effectively manages the Group’s capital by assessing the Groups financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels and share issues.

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.

NOTE 17: Capital and Leasing Commitments

Operating lease commitments

NOTE 17: Capital and Leasing Commitments Operating lease commitments
Non-cancellable operating leases contracted for but not
capitalised in the financial statements
Payable: minimum lease payments
- not later than 12 months	54,000	54,000
- between 12 months and 5 years	-	-
- greater than 5 years	-	-

A serviced office including bookkeeping service and business premises are provided by New York Holdings Pty Ltd (formerlly Zurich Securities Pty Ltd) at a fee of $4,500 per calendar month (2011:$4,500).

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 18: Contingent Liabilities

There are no contingent liabilities as at balance date or as at the date of the report.

NOTE 19: Segment Reporting Segment Information

Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group is managed primarily on the basis of product category and service offerings since the diversifications of the Group’s operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on this basis.

Reportable segment disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and also similar with respect to the following:

• the product sold and/or services provided by the segment;

• the type or class of customer for the product or service; and

• the external regulatory requirements

Types of products and services by segment

Seafood and Aquaculture

The seafood and aquaculture segment lease craypot licences and evaluates seafood and aquaculture projects.

Mineral exploration and evaluation

The mineral exploration and evaluation segment evaluates projects in the mining industry.

Share Trading

The share trading segment buys and sells shares through the Australian Securities Exchange.

Basis of accounting for the purposes of reporting by operating segment

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief operating decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Segment assets

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.

Unless indicated otherwise in the segment assets note, investments in financial assets, deferred tax assets and intangible assets have not been allocated to operating segments.

Segment liabilities

Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 19: Operating Segments (cont’d) Unallocated items

The following items of revenue, expense, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment:

• derivatives

• impairment of assets and other non-recurring items of revenue or expense

• other financial liabilities

• intangible assets

Comparative information

This is the first reporting period in which AASB 8: Operating Segments has been adopted. Comparative information has been stated to conform to the requirements of the standard.

(i) Segment performance

Year ended 30.06.2012 Revenue External sales Revaluation of intangible asset Dividends Interest revenue Total segment revenue Reconciliation of segment revenue to group revenue Total group revenue Segment net profit before tax Reconciliation of segment results to group net profit/(loss) before tax Amount not included in segment results but reviewed by the Board: Depreciation expenses Write off of exploration & evaluation expenditure Net loss before tax from continuing operations	Seafood & aquaculture Exploration & evaluation Share trading Corporate $ $ $ $ 9,840 - - - 24,000 - - - - - - - - - - 565		Total $ 9,840 24,000 565
	33,840 - 565		34,405
	31,825 - (73,526) (193,998)
			34,405 (235,699)
	- (47) - - - (10,164) - -		(47) (10,164)
			(245,910)

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 19: Operating Segments (cont’d)

(ii) Segment performance

For the year ended 30.06.2011 Revenue External sales Revaluation of intangible asset Dividends Interest revenue Total segment revenue Reconciliation of segment revenue to group revenue Total group revenue Segment net profit before tax Reconciliation of segment results to group net profit/(loss) before tax Amount not included in segment results but reviewed by the Board: Depreciation & amortisation Write off of exploration & evaluation expenditure Net loss before tax from continuing operations	Seafood & Aquaculture Exploration & evaluation Share Trading Corporate $ $ $ $ 17,940 - 359,399 1,171 20,000 - - - - - - - - - - 139	Total $ 358,510 20,000 - 139
	37,940 - 359,399 1,310	378,649
	36,025 - 359,399 (329,765)
		378,649 65,657
	- (57) - - - (25,250) - -	(57) (25,250)
		40,350

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 19: Operating Segments (cont’d)

(iii) Segment assets

As at 30.06.2012 Segment assets Segment assets increased for the period Capital expenditure Less capital expenditure written off Reversal of impairment of intangible asset Acquisitions/(disposals) Reconciliation of segment assets to group assets Total group assets As at 30.06.2011 Segment assets Segment assets increased for the period Capital expenditure Less capital expenditure written off Impairment of intangible asset Acquisitions/(disposals) Reconciliation of segment assets to group assets Total group assets	Seafood & Aquaculture Exploration & evaluation Share Trading Corporate $ $ $ $ 188,000 213 290,195 32,048	Total $ 510,474
	- 10,164 - - - (10,164) - - 24,000 - - - - - 99,233 -	10,164 (10,164) 24,000 99,233
	24,000 (47) 99,233 -	123,186
	164,000 260 264,488 73,309	510,474
		501,057
	- 25,307 - - - (25,250) - - 20,000 - - - - - 67,424 -	25,307 (25,250) 20,000 67,424
	20,000 (57) 67,424 -	87,367
		501,057

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 19: Operating Segments (cont’d)

(iv) Segment liabilities As at 30.06.2012 Segment liabilities Reconciliation of segment liabilities to group liabilities Total group liabilities As at 30.06.2011 Segment liabilities Reconciliation of segment liabilities to group liabilities Total group liabilities	Seafood & Aquaculture Exploration & evaluation Share Trading Corporate $ $ $ $ - - - 267,260	Total $ 267,260
	- - - 11,933
		267,260
		11,933
		11,933

(v) Revenue by geographical region

All Group revenue attributable to external customers was generated in Australia.

(vi) Assets by geographical region

The Group operated only in Australia.

(vii) Major customers

The Group supplies a single external customer in the seafood and aquaculture segment who accounts for 100% of external revenue (2011: 10%).

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 20: Cash Flow Information Reconciliation of Cash Flow from Operations with Profit/(Loss) after Income Tax Profit/(Loss) after income tax Non-cash flows in profit/(loss) after income tax Impairment of intangible assets Profit on sale of equipment Net gain on disposal of financial assets Fair value adjustment Depreciation Write down of exploration & evaluation expenditure Directors Fees Changes in Assets and Liabilities, net of the effect of purchase of subsidiary (Increase)/decrease in trade & term receivables Increase/(decrease) in trade & other payables Cash flow from operations	Consolidated Group 2012 2011 $ $ (245,910) 40,350 (24,000) (20,000) - (7,300) 125 (160,928) 73,401 (198,471) 47 57 5,741 65,803 - 108,282 148 2,537 5,327 (17,298) (185,121) (186,968)	Consolidated Group 2012 2011 $ $ (245,910) 40,350 (24,000) (20,000) - (7,300) 125 (160,928) 73,401 (198,471) 47 57 5,741 65,803 - 108,282 148 2,537 5,327 (17,298) (185,121) (186,968)
		(186,968)

NOTE 21: Events After Balance Sheet Date

No matters or circumstances that have arisen since the end of the financial year which significantly affect or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

Consolidated Group 2012 2011 $ $

NOTE 22: Related Party Transactions

Transactions with related parties: Director or related entities

i) Serviced office fees paid and accrued to New York Holdings Pty Ltd (formerlly Zurich Securities Pty Ltd), a securities dealing firm where Mr Collin Vost is the director and shareholder 54,000 47,700 ii) Brokerage fees paid and accrued to New York Holdings Pty Ltd (formerlly Zurich Securities Pty Ltd), a securities dealing firm where Mr Collin Vost is a director and shareholder - 3,887

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

NOTE 23: Financial Risk Management

The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable and loans to subsidiary.

The totals for each category of financial instrument, measured in accordance with AASB: 139 as detailed in the accounting policies to these financial statements, are as follows:

Note Financial Assets Cash and cash equivalents 8 Financial assets at fair value through profit or loss -Held for trading 10 Loans and receivables 9 Financial Liabilities - Trade and other payables 14	Consolidated Group 2012 2011 $ $ 26,994 67,089 290,195 264,488 1,502 1,650 318,691 333,227 17,260 11,933 17,260 11,933	Consolidated Group 2012 2011 $ $ 26,994 67,089 290,195 264,488 1,502 1,650 318,691 333,227 17,260 11,933 17,260 11,933
		333,227
		11,933
		11,933

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTE 23: Financial Risk Management (cont’d)

Financial Risk Management Policies

The Group’s financial risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Board of Directors, in its function as Audit Committee, oversees how management monitors compliance with the risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risk.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial report.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors is responsible for the developing and monitoring the Group’s risk management policies.

Interest rate risk

The Group has cash subject to interest and therefore the interest rate risk impact is minimal. Management continually monitors the exposure to interest rate risk. The following table sets out the carrying amount, by maturity, of the financial instruments exposed to interest rate risk.

	< 1 Year	Total	Weighted average
	$	$	effective interest rate
Year ended 30 June 2012
_Floating rate_Cash assets	26,994	26,994	0.01%
Year ended 30 June 2011
_Floating rate_Cash assets	67,089	67,089	0.32%

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s policy for managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions.

The Group’s overall objective is to maintain a balance between continuity of funding and flexibility through the use of bank facilities.

The Group also manages liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and financial liabilities.

The table below summarises the maturity profiles of the Group’s financial liabilities based on contractual undiscounted payments.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 23: Financial Risk Management (cont’d)

Year ended 30 June 2012 Trade and other creditors Year ended 30 June 2011 Trade and other creditors	Less than 3 months $ 17,260 17,260 11,933 11,933	3 to 12 Months $ - - - -	More than 12 months $ - - - -	Total $ 17,260
				17,260
				11,933
				11,933

The Group also has an office service agreement. The future contracted commitments at year end are disclosed in Note 16.

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. In most cases, the Group requires full and final payment either prior to, or upon delivery of the goods to the customer. In limited cases where credit is provided, the Group trades on credit terms with recognised, creditworthy third parties. Customers who wish to trade on credit terms are subject to credit verification procedures.

In addition, receivables balances are monitored on an ongoing basis with the results that the Group’s exposure to bad debts is not significant. There are no significant concentrations of credit risk within the Group.

All amounts past due in excess of 30 days are individually assessed and provided for as doubtful if reasonable doubt as to collectability exists.

With respect to credit risk arising from financial assets of the Group, which comprise of cash and cash equivalents and receivables, the Group’s maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, as disclosed in the balance sheet and notes to the financial statements.

Included in receivables is the amount for GST refundable, this amount is not past due nor impaired.

Net Fair Value

Fair Value Estimation

The fair values of the financial assets and financial liabilities are presented in the following can be compared to their carrying values as presented in the balance sheet. Fair values are those amounts at which an asset could be exchanged, or liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information from markets that are actively traded. In this regard, fair value for listed securities are obtained from quoted market bid price

.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 23: Financial Risk Management (cont’d)

Consolidated Group Financial Assets Cash and cash equivalents Financial assets at fair value through profit or loss -Held for trading Loans and receivables Financial Liabilities - Trade and other payables	2012 Net Carrying Value Net Fair Value $ $ 26,994 26,994 290,195 290,195 1,502 1,502 318,691 318,691 17,260 17,260 17,260 17,260	2011 Net Carrying Value $ 67,089 264,488 1,650 333,227 11,933 11,933	Net Fair Value $ 67,089 264,488 1,650
			333,227
			11,933
			11,933

The fair values disclosed in the above table have been determined based on the following methodologies.

• (i) Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature whose carrying value is equivalent to fair value. Trade and other payable exclude amounts provided for relating to annual leave which is not considered a financial instrument.

• (ii) For listed held-for-trading financial assets, closing quoted bid prices at reporting date have been used.

Price Risk

Price risk relates to the risk that the fair value or future cash flows of the financial instruments will fluctuate because of changes in market prices largely due to demand and supply factors for commodities.

The Group is exposed to securities price risk on investments held for trading or for medium to longer term. Such risk is managed through diversification of investments across industries and geographical location.

The Group’s investments are held in the following sectors at reporting date.

Energy Materials Capital Goods	Consolidated Group 2012 2011 73% 88% 6% 2% 21% 10% 100% 100%	Consolidated Group 2012 2011 73% 88% 6% 2% 21% 10% 100% 100%
		100%

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 23: Financial Risk Management (cont’d) Sensitivity Analysis

The following table illustrates sensitivity to the Group’s exposures to changes in the interest rate. The table indicates the impact on how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible.

	Consolidated	Group
	Profit	Equity
	$	$
2012
+/- 2% in interest rate	+/- 941	+/- 941
2011
+/- 2% in interest rate	+/- 880	+/- 880

NOTE 24: Reserves

Option Reserve

The option reserve records item recognized as expenses on valuation of employee share options.

NOTE 25: Share-based Payments

• (i) On 2 December 2010, 5,000,000 ordinary shares and 5,000,000 options were granted to a director for provide dedicated and ongoing commitment and effort to the Company. The options have an exercise price of $0.03 each and are exercisable on or before 31 December 2013. The options hold no voting or dividend rights are unlisted and are transferable.

• (ii) Options granted to key management personnel are as follows:-

Grant Date

2 December 2010

Number

5,000,000

The options are issued with a strike price that was not discounted to the average market price of the underlying shares determined over the previous five trading days.

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 25: Share-based Payments (cont’d)

OTE 25: Share-based Payments (cont’d)
	Consolidated	Group	Parent	Entity
A summary of the movements of all company		Weighted		Weighted
options issued is as follows:	Number	average exercise	Number	average exercise
		price		price
Options outstanding as at 30 June 2010		$		$
Granted	5,000,000	0.03	5,000,000	0.03
Forfeited	-	-	-	-
Exercised	-	-	-	-
Expired	-	-	-	-
Options outstanding as at 30 June 2011	5,000,000	0.03	5,000,000	0.03
Granted
Forfeited	-	-	-	-
Exercised	-	-	-	-
Expired	-	-	-	-
Options outstanding as at 30 June 2012	5,000,000	0.03	5,000,000	0.03
Options exercisable as at 30 June 2012:	5,000,000	0.03	5,000,000	0.03
Options exercisable as at 30 June 2011:	5,000,000	0.03	5,000,000	0.03

The weighted average remaining contractual life of options outstanding at year end was one and a half years. The exercise price of outstanding shares at the end of the reporting period was $nil (2011: $150,000).

The fair value of the options granted to the director is deemed to represent the value of the employee services received over the vesting period.

The weighted average fair value of options granted during the year was $nil (2011: $23,282). These values were calculated using the Black Scholes option pricing model applying the following inputs:

Weighted average exercise price: $0.03 Weighted average life of the option: 3 years Expected share price volatility: 59% Risk free interest rate: 4.50%

Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future movements.

The life of the options is based on the historical exercise patterns, which may not eventuate in the future. (iii) Shares granted to key management personnel as share based payments are as follows:-

Grant Date Number

2 December 2010 5,000,000

The weighted average fair value of those equity instruments, determined by reference to market price, was $nil (2011: $85,000).

These shares were issued as compensation to key management of the Group. Further details are provided in the Directors’ Report.

Included under employee benefits expense in the statement of comprehensive income is $nil which relates to equity settled share based payment transactions (2011: $85,000).

CERVANTES CORPORATION LTD ABN 79 097 982 235 AND CONTROLLED ENTITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

NOTE 26: Company Details

The registered office and principal place of business of the Company is:

Shop 11 “South Shore Piazza”

85 South Perth Esplanade

South Perth WA 6151

NOTE 27: Parent Entity Information

NOTE 27: Parent Entity Information
Information relating to Cervantes Corporation Ltd: Current assets Total assets Current liabilities Total liabilities Issued capital Reserves Retained earnings Total shareholders’ equity Profit or loss of the parent entity Total comprehensive income of the parent entity	2012 2011 $ $ 313,797 331,384 504,698 498,285 262,837 11,933 262,837 11,933
	12,068,070 12,068,070 23,282 23,282 (11,849,491) (11,605,000)
	241,861 486,352
	(244,490) 27,847 (244,490) 27,847

Provision for Impairment of Receivables

Non-current trade and other receivables are assessed for recoverability based on the successful exploration and sale of gold recovered from the retreatment projects currently being assessed by the Group. A provision for impairment is recognised when there is objective evidence that an individual trade or other receivable is impaired. Refer to Note 1, Critical Accounting Estimates and Judgments for recoverability.

Movement in the provision for impairment of receivables is as follows:

Parent Entity i) Non-current wholly owned subsidiary Parent Entity i) Non-current wholly owned subsidiary	Opening Balance 1.7.2011 $ 430,058 430,058 Opening Balance 1.7.2010 $ 389,508 389,508	Charge for the year $ 11,347 11,347 Charge for the year $ 40,550 40,550	Amount Written Off $ - - Amount Written Off $ - -	Closing Balance 30.6.2012 $ 441,405
				441,405
				Closing Balance 30.6.2011 $ 430,058
				430,058

There are no balances within trade and other receivables that are impaired and are past due. It is expected these balances will be received when due.