international proforma financial statements 2005

RUNGE L IMITED abn 17 010 672 321

Helping You to Improve the Economics of Your Mine

ANNUAL REPORT

Year Ended 30 June 2006

RUNGE LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2006

Contents

Page Financial Report – 30 June 2006 Directors’ report 2 Income statements 8 Balance sheets 9 Statements of changes in equity 10 Statement of cash flows 12 Notes to the financial statements 13 Directors’ declaration 52 Auditor’s independence declaration 53 Independent audit report 54 This financial report covers both Runge Limited as an individual entity and the consolidated entity consisting of Runge Limited and its controlled entities. Runge Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Runge Limited Level 17 Central Plaza One 345 Queen Street Brisbane Q 4000

Runge Limited Page 1

RUNGE LIMITED AND CONTROLLED ENTITIES DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2006

Your directors present their report on the consolidated entity consisting of Runge Limited and the entities it controlled at the end of, or during, the year ended 30 June 2006.

Directors

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

Ian Runge Anthony Kinnane Christian Larsen Christopher Still Craig Cartner was a director from 11 October 2005 until his resignation on 29 March 2006. Greg Smith was a director from 29 March 2006 until his resignation on 31 August 2006. Peter Ludemann was appointed Director on 31 August 2006 and continues in office at the date of this report.

Principal Activities

The Group’s principal continuing activities during the year consisted of: a) Technical and business consulting for the international resources industry; b) Software licensing and support; and c) Training.

Dividends

Dividends paid in cash during the year were: 2005 Final dividend of $0.06 per share fully franked paid 1st November 2005 $1,342,320 2006 Interim dividend of $0.02 per preference share fully franked paid on 28th February 2006 $447,440 2006 Interim dividend of $0.02 per ordinary share fully franked paid on 28th February 2006 $114,191 Total $1,903,951 On 26 October 2006 the following fully franked dividend was declared and subsequently paid on 27 October 2006: 2006 Final dividend of:

• $0.077 for each preference share $1,929,,416 • $0.065 for each ordinary share $408,257

Total Dividend $2,337,673 No other dividends have been declared or paid subsequent to 30 June 2006 and up to the date of signing this report.



Review and results of operations In 2006 Runge continued to deliver strong financial performance and exceptional business growth. Consolidated revenue from ordinary activities was $26,390,666 (2005: $17,730,535) with profit for the year before income tax and minority interests of $6,069,700 (2005: $3,777,734). Major contributors to this 61% increase in pre-tax profit were: ▪ Exceptional performance from Australian (parent entity) operations, with Parent entity revenue of

$18,291,216 (2005: $13,838,034) - an increase of 32%. Parent entity pre-tax profit for the year of $4,245,398 (2005: $2,923,169) increased 45%,

▪ the first full year of trading of PAH under Runge ownership, with revenue of $5,125,794 (2005: $1,313,660) and pre-tax profit of $596,9118 (2005: $231,622) and

▪ South African Operations (MRM etc) achieved pre-tax profit of $956,878 (2005: $819,516) an increase of 17%.

During 2006 Runge increased its global reach, staff numbers and product offerings, highlights including: ▪ Establishment of new offices in Witbank (South Africa) and Belo Horizonte (Brazil), ▪ Establishment of a PAH Office in Brisbane, and continued refinement of the business strategy of the PAH

business consistent with the traditional Runge business and ▪ Substantial new software product development, particularly related to open pit mine design, short term

scheduling, underground simulation, and mining data flow and supply chain management. In other respects the operations of the Group have not differed materially from previous years.

Significant changes in the state of affairs

In September 2005 the company implemented a major capital restructure, resulting in: ▪ conversion of the previous ordinary shareholding into ordinary shares and convertible preference shares to

facilitate future growth and M&A possibilities ▪ reinstitution of a new employee equity participation scheme to replace the previously suspended scheme,

with direct and indirect equity participation now by approximately half of the company staff ▪ issuance of new shares to help fund acquisitions, and as part of the acquisition of the balance of equity in

MRM not already owned by the company ▪ the sale of shares by Runge International Pty Ltd (the entity of the company founder, Dr. Ian Runge) and

the purchase of shares by entities controlled by AMP Capital Investors. ▪ Changes to the board and implementation of a shareholders agreement designed to facilitate funding

choices important for the company growth and M&A strategy. The company increased its ownership in MRM Mining Services (Pty) Ltd from 54% to 100% on 1 April 2006. Details of the capital restructure are set out in note 23. The company welcomes AMP Private Equity Fund to the company’s share register and we are confident that both the monetary contribution and experience brought to the company by AMP will significantly enhance the growth prospects and future development of the business.



Matters subsequent to the end of the financial year

On 24 September 2006, the United States subsidiary of Runge Limited was named as a third party defendant in a civil action in relation to provision of advice in the form of a report issued in December 2005. An initial assessment by the company’s legal advisors suggests that any liability that may arise in the event the claim is successful, after professional indemnity insurance coverage, should not be significant. No matter or circumstance has arisen since 30 June 2006 that has significantly affected, or may significantly affect: a) The Group’s operations in future financial years, or b) The results of those operations in future financial years, or c) The Group’s state of affairs in future financial years.

Likely developments and expected results of operations

Information on the likely developments in the operations of the Group and the expected results of operations have not been included in this financial report because the directors believe it would be likely to result in unreasonable prejudice to the Group.



Information on Directors

Share holdings at the date of this report

Directors Experience Special Responsibilities

Ordinary shares *

Preference shares

Options

Ian Runge Non - Executive Chairman,

Company founder. Qualifications: M.E. (Mining Engineering), Ph D. (Economics), FAusIMM, FAICD.

Chairman, Chairman – Audit Committee

1,193,210 5,608,087 Nil

Tony Kinnane Managing Director, 19 years with Runge. Qualifications: Grad. Dip. M.E. Grad. Dip. Geology, Grad. Dip. BA.

Managing Director 787,701 3,181,994 Nil

Christian Larsen Executive Director, 19 years with Runge, Business Development & Strategy. Qualifications: B.E. (Mining Engineering), MBA, FAICD, PE.

Executive Director 391,777 1,352,801 Nil

Christopher Still Non – Executive Director since 2000. Consultant Investment Banker with Beerworth & Partners Limited, B Econ., Grad. Dip. Corp. Fin. (London Bus. School).

Non – Executive Director Member – Audit Committee

Nil (**) Nil (**) Nil

Greg Smith Non – Executive Director since March 2006 to August 2006. Head of Private Equity AMP Capital Investors. Over 20 years experience investing and managing private investments. Diploma of Accounting.

Non – Executive Director Nil (***) Nil (***) Nil

Peter Ludemann Non – Executive Director since August 2006. Director of Private Equity AMP Capital Investors. Formerly a partner at Dibbs Abbott Stillman, Lawyers. B. Comm LLB.


Craig Cartner Non – Executive Director since October 2005 to March 2006. Director of Private Equity AMP Capital Investors. Nine years experience investing and managing private investments.


(*) Shareholding associated with Directors include holdings of Directors’ nominees (**) Christopher Still owned 110 shares in Runge Limited on 30 June 2005. During the financial year he sold his shares to Runge Shareholder Co Limited (RSCo) in exchange for shares in RSCo. RSCo is a special purpose entity established for the sole purpose of investing in Runge Limited. (***) Under the Runge Limited Shareholders Agreement AMP Private Equity have a right to nominate a Director while its total shareholding is 10% or more. At the date of this report AMP Private Equity shareholding was 6,145,814 preference and 1,307,620 ordinary shares.



Company Secretary

The Company Secretary during the whole of the financial year and up to the date of the date of this report was Phillip McCaw BBus. ACPA. Mr. McCaw also holds the position of Chief Accountant.

Meetings of Directors

The number of meetings of the company’s Board of Directors and of each Board committee held during the year ended 30 June 2006 and the number of meetings attended by each Director were:

Full meetings of directors Audit committee

A B A B

Ian Runge 11 11 3 3

Tony Kinnane 11 11 N/A N/A

Christian Larsen 10 11 N/A N/A

Christopher Still 10 11 3 3

Craig Cartner 4 4 N/A N/A

Greg Smith 2 3 N/A N/A

A Number of meetings attended B Number of meetings held during the time the Director held office or was a member of the committee

during the year N/A Not a member of the relevant committee

Insurance of officers

During the financial year, the company paid insurance premiums to insure the Directors, Secretary and Officers of the company against certain risks associated with their activities as officers of the company. The terms of that policy prohibit disclosure of the liabilities covered and premium paid.

Employee Share Options/Plan Options

As stated in note 23, all staff who are permanently employed by the company (and have been so for a period of one year or more, or alternatively who satisfy other conditions as determined by the Board) are entitled to participate in the employee share scheme when and if it is activated. Activation of this scheme is decided by the Board on a year to year basis at their discretion. Participation in this scheme is voluntary and is not part of any remuneration package.

Environmental Legislation

Runge Limited and its controlled entities are not subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory.

Auditor

PKF Chartered Accountants & Business Advisors continues in office in accordance with section 327 of the Corporations Act 2001.


RUNGE LIMITED AND CONTROLLED ENTITIES

INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

Consolidated Parent entity

2006 2005 2006 2005 Notes

$ $ $ $

Revenue from ordinary activities 3 26,390,666 17,730,535 18,291,216 13,838,034

Other income 3 1,154,796 297,685 334,139 122,561 Employee benefits expense

(16,575,871) (10,111,134) (9,901,397) (7,616,477)

Depreciation and amortisation expenses (575,353) (555,386) (336,913) (430,533) Finance costs (160,781) (43,804) - (3,648) Professional services

(715,138) (413,669) (529,239) (296,861)

Rent

(1,229,661) (928,878) (893,800) (638,994)

Travel expenses

(685,987) (605,875) (399,426) (219,426)

Loan forgiveness 4 - - (469,646) - Office supplies

(300,240) (176,372) (138,282) (85,868)

Other expenses from ordinary activities (1,232,731) (1,415,368) (1,711,254) (1,745,619) Profit before income tax 4 6,069,700 3,777,734 4,245,398 2,923,169 Income tax expense 5 (1,693,159) (1,142,665) (1,144,454) (863,704) Profit for the year

4,376,541 2,635,069 3,100,944 2,059,465

Profit attributable to minority interest held in MRM Mining Services (Pty) Ltd (375,389) (317,174) - -

Net profit attributable to members of Runge Limited 4,001,152 2,317,895 3,100,944 2,059,465

The above income statements should be read in conjunction with the accompanying notes.



BALANCE SHEETS

AS AT 30 JUNE 2006


2006 2005 2006 2005 Notes

$ $ $ $ ASSETS Current assets

Cash and cash equivalents 9 6,920,406 4,826,109 4,662,970 2,897,371 Trade and other receivables 10 6,021,562 5,429,055 3,227,731 2,712,467 Inventories 11 323,838 267,497 293,592 153,276

Total current assets 13,265,806 10,522,661 8,184,293 5,763,114

Non-current assets Receivables 12 100,281 - 2,727,744 2,294,345 Other financial assets 13 - - 2,850,107 426,068 Property, plant and equipment 14 1,054,753 839,836 560,333 472,967 Deferred tax assets 6 605,889 446,947 474,077 356,166 Other 15 10,343 10,353 10,343 10,423 Intangible assets 16 3,372,174 2,505,110 715,854 294,278

Total non-current assets 5,143,440 3,802,246 7,338,458 3,854,247

Total assets 18,409,246 14,324,907 15,522,751 9,617,361

LIABILITIES Current liabilities

Trade and other payables 17 5,338,966 4,069,396 4,378,573 3,358,123 Borrowings 18 648,451 645,163 7,547 20,073 Provisions 20 1,495,152 1,192,646 1,171,971 927,313 Current tax liabilities 7 431,811 176,216 192,895 19,101

Total current liabilities 7,914,380 6,083,421 5,750,986 4,324,610

Non-current liabilities Borrowings 19 951,393 2,213,658 8,166 10,689 Provisions 21 133,826 35,255 133,826 35,255 Deferred tax liabilities 8 145,234 155,291 145,234 138,307 Other 22 169,052 154,754 169,052 154,754

Total non-current liabilities 1,399,505 2,558,958 456,278 339,005

Total liabilities 9,313,885 8,642,379 6,207,264 4,663,615

Net assets 9,095,363 5,682,528 9,315,487 4,953,746

EQUITY Contributed equity 23 4,736,092 1,571,344 4,736,092 1,571,344 Reserves 24 (1,782,629) (69,903) 18,275 18,275 Retained profits 24 6,141,900 4,044,699 4,561,120 3,364,127 9,095,363 5,546,140 9,315,487 4,953,746

Minority interest 34 - 136,388 - -

Total equity 9,095,363 5,682,528 9,315,487 4,953,746

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



STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006

Consolidated Contributed

Equity Revaluation

Reserve

Foreign Currency

Translation Reserve

Reserve Arising from an Equity

Transaction Retained Profits

Minority Interests

Total Equity

$ $ $ $ $ $ $ Balance at 1 July 2005 1,571,344 18,275 (88,178) - 4,044,699 136,388 5,682,528Exchange differences on translation of foreign operations - - (159,965) - - - (159,965) Net income/(expense) recognised directly in equity - - (159,965) - - - (159,965) Profit for the year - - - - 4,001,152 375,389 4,376,541 Total recognised income and expense for the year - - - - 4,001,152 375,389 4,376,541 Equity issued for the year 3,164,748 - - - - - 3,164,748 Increase in shareholding of a controlled entity - - - (1,552,761) - - (1,552,761) Reversal of minority interests - - (319,439) (319,439) Dividends paid to minority interests - - - - - (192,338) (192,338) Dividends paid to share holders - - - - (1,903,951) - (1,903,951) Balance at 30 June 2006 4,736,092 18,275 (248,143) (1,552,761) 6,141,900 - 9,095,363

Balance at 1 July 2004 1,366,383 18,275 - - 3,435,832 - 4,820,490 Exchange differences on translation of foreign operations - - (88,178) - - - (88,178) Net income/(expense) recognised directly in equity - - (88,178) - - - (88,178) Profit for the year - - - - 2,317,895 317,174 2,635,069 Total recognised income and expense for the year - - - - 2,317,895 317,174 2,635,069 Equity issued for the year 204,961 - - - - - 204,961 Minority interest on acquisition of subsidiary - - - - 47,460 47,460 Dividends paid to share holders - - - - (1,709,028) - (1,709,028) Dividends paid to minority interests in subsidiary - - - - - (228,246) (228,246) Balance at 30 June 2005 1,571,344 18,275 (88,178) - 4,044,699 136,388 5,682,528



STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006

Parent

Contributed Equity Reserves

Retained Earnings Total Shareholders' Funds

$ $ $ $ Balance at 1 July 2005 1,571,344 18,275 3,364,127 4,953,746 Profit for the year - - 3,100,944 3,100,944 Total recognised income and expenses for the year - - 3,100,944 3,100,944 Equity issued for the year 3,164,748 - - 3,164,748 Dividends to share holders - - (1,903,951) (1,903,951) Balance at 30 June 2006 4,736,092 18,275 4,561,120 9,315,487

Balance at 1 July 2004 1,366,383 18,275 3,013,690 4,398,348 Profit for the year - - 2,059,465 2,059,465 Total recognised income and expenses for the year - - 2,059,465 2,059,465 Equity issued for the year 204,961 - - 204,961 Dividends to share holders - - (1,709,028) (1,709,028) Balance at 30 June 2005 1,571,344 18,275 3,364,127 4,953,746




STATEMENTS OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2006


2006 2005 2006 2005 Notes

$ $ $ $ Cash flows from operating activities

Receipts from customers 26,856,833 19,011,498 19,017,425 14,562,831 Payments to suppliers and employees (19,132,865) (12,856,276) (13,718,532) (9,947,347) GST Recovered /(paid) (1,011,847) (646,649) (1,011,847) (646,649) 6,712,121 5,508,633 4,287,046 3,968,835 Dividends received - - 507,596 - Interest received 195,102 153,921 111,671 78,074 Borrowing costs (160,781) (40,429) - (3,648) Income taxes paid (1,097,587) (919,202) (1,097,587) (919,202) Net cash inflow from operating activities 33 5,648,855 4,702,923 3,808,726 3,124,059

Cash flows from investing activities

Payments for property, plant and equipment (681,800) (497,417) (348,014) (215,328) Payment for development costs and external software (669,907) (273,031) (547,101) (252,284)

Proceeds from sale of property, plant and equipment 122,205 - 16,590 -

Payments for businesses (1,363,228) (3,115,457) - - Payment for investments - - (1,648,450) (317,642)

Net cash (outflow) from investing activities (2,592,730) (3,885,925) (2,526,975) (785,254) Cash flows from financing activities

Proceeds from the issues of shares 2,402,848 204,961 2,402,848 204,961

(Repayment) drawdown of finance leases 990 (50,801) (15,049) (20,269) Proceeds from borrowings - 3,022,805 - - Repayment of borrowings (1,349,220) (151,140) - - Payment of bank legal fees for establishment of borrowings - (67,510)

- -

Dividends paid - members of the parent entity (1,903,951) (1,709,028) (1,903,951) (1,709,028) - minority interests (192,338) (228,246) - -

Net cash inflow (outflow) from financing activities (1,041,671) 1,021,041 483,848 (1,524,336)

Net increase (decrease) in cash held 2,014,454 1,838,039 1,765,599 814,469

Cash at the beginning of the financial year 4,826,109 3,081,537 2,897,371 2,082,902 Effects of exchange rate changes on cash 79,843 (93,467) - -

Cash at the end of the financial year 9 6,920,406 4,826,109 4,662,970 2,897,371

The above cash flow statements should be read in conjunction with the accompanying notes.

RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006


Note Contents Page

1. Summary Of Significant Accounting Policies ...................................................................................................14 2. Segment Information............................................................................................................................................19 3. Revenue...................................................................................................................................................................20 4. Profit Before Income Tax ....................................................................................................................................21 5. Income Tax Expense ............................................................................................................................................21 6. Non-Current Assets – Deferred Tax Assets .....................................................................................................23 7. Current Liabilities – Current Tax Liabilities ......................................................................................................23 8. Non-Current Liabilities – Deferred Tax Liabilities ..........................................................................................24 9. Current Assets – Cash And Cash Equivalents ..................................................................................................24 10. Current Assets – Trade And Other Receivables...............................................................................................25 11. Current Assets – Inventories ...............................................................................................................................25 12. Non-Current Assets – Receivables .....................................................................................................................25 13. Non-Current Assets – Other Financial Assets..................................................................................................26 14. Non-Current Assets – Property, Plant And Equipment .................................................................................26 15. Non-Current Assets – Other ...............................................................................................................................27 16. Non-Current Assets – Intangible Assets ...........................................................................................................28 17. Current Liabilities – Trade And Other Payables ..............................................................................................29 18. Current Liabilities – Borrowings .........................................................................................................................30 19. Non-Current Liabilities – Borrowings ...............................................................................................................30 20. Current Liabilities – Provisions ...........................................................................................................................30 21. Non-Current Liabilities – Provisions .................................................................................................................30 22. Non-Current Liabilities – Other .........................................................................................................................31 23. Contributed Equity ...............................................................................................................................................31 24. Reserves And Retained Equity ............................................................................................................................33 25. Dividends................................................................................................................................................................34 26. Key Management Personnel Disclosures...........................................................................................................35 27. Remuneration Of Auditors ..................................................................................................................................38 28. Commitments ........................................................................................................................................................39 29. Related Party Transactions...................................................................................................................................40 30. Investments In Controlled Entities ....................................................................................................................40 31. Business Combinations ........................................................................................................................................41 32. Events After The Balance Sheet Date................................................................................................................42 33. Reconciliation Of Profit After Income Tax To Net Cash Inflow From Operating Activites...................42 34. Minority Interest....................................................................................................................................................43 35. Financial Instruments: Interest Rate Risk And Credit Risk Exposures ........................................................43 36. Explanation Of Transition To Australian Equivalents To IFRSS.................................................................45


1 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Runge Limited (“company” or “parent entity”) as an individual entity and the consolidated entity consisting of Runge Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with IFRSs Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (IFRS). Compliance with the Australian equivalents to IFRS (AIFRS) ensures that the financial report, comprising the Group’s financial statements and notes and the parent entity financial statements and notes of Runge Limited complies with IFRSs.

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards These financial statements are the first to be prepared in accordance with AIFRSs. AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements.

Financial statements until 30 June 2005 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing the 2006 financial statements, management has amended certain accounting, valuation and consolidation methods applied in the AGAAP financial statements to comply with AIFRS.

Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRSs on the Group’s equity and its net income are given in note 36.

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

Presentation currency This financial report has been prepared using Australian dollars.

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Runge Limited as at 30 June 2006 and the results of all controlled entities for the year then ended. Runge Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full.

Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed.

(c) Income tax

Income taxes are accounted for using the comprehensive balance sheet liability method whereby: • The tax consequences of recovering (settling) all assets (liabilities) are reflected in the financial

statements • Current and deferred tax is recognised as income or expense except to the extent that the tax

relates to equity items or to a business combination • A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be

available to realise the asset Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled.



(d) Foreign currency translation

i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Runge Limited’s functional and presentation currency.

ii) Transactions Foreign currency transactions are initially translated into Australian currency at the spot rate of exchange at the date of the transaction. At balance date amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are recognised in determining the profit or loss for the year.

iii) Foreign controlled entities The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity.

(e) Revenue recognition

i) Sale of goods Revenue from the sale of goods is recognised when all significant risks and rewards of ownership have been transferred to the buyer. In most cases this coincides with the transfer of legal title or the passing of possession to the buyer.

ii) Rendering of service and support When the outcome of a transaction involving the rendering of service and support can be estimated reliably, revenue associated with the transaction is recognised by reference to the percentage of the services performed.

iii) Interest revenue Interest revenue is recognised using the effective interest method. It includes the amortisation of any discount or premium.

(f) Trade receivables

Collectibility of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists.

(g) Inventories

Software stock and work in progress are valued at the lower of cost and net realisable value. Cost comprises all direct labour charges incurred in bringing the inventory to their present condition. Net realisable value is the estimated selling price in the ordinary course of business.



(h) Leases

A distinction is made between finance leases which transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased asset and operating leases under which the lessor effectively retains substantially all the risks and benefits. Where an asset is acquired by means of a finance lease, the fair value of the leased property or the present value of minimum lease payments, if lower, is established and each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. Operating lease rental expense is recognised as an expense on a straight line basis over the lease term, or on a systematic basis more representative of the time pattern of the user’s benefit.

(i) Business combinations

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market price as at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

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

(j) Impairment of assets

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

(k) Cash and cash equivalents

For purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

(l) Investments in subsidiaries

In the separate financial statements of Runge Limited, investments in subsidiaries are accounted for at cost.

(m) Property, plant and equipment

Depreciation is calculated on a straight line basis to write off the net cost of each item of property, plant and equipment over its expected useful life to the consolidated entity. Estimates of remaining useful lives are made on a regular basis for all assets. The expected useful lives are as follows: Furniture and fittings 10 years Office equipment 4 years Computer equipment 2.5 years Motor vehicles 8 years Plant and equipment under lease 8 years

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



(n) Intangible assets and expenditure carried forward

i) Software development Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the income statement as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new products, is capitalised if the product is technically and commercially feasible and the consolidated entity has sufficient resources to complete development. The expenditure capitalised includes the cost of materials and direct labour. Capitalised development expenditure is stated at cost less accumulated amortisation.

ii) External software External software is stated at cost less accumulated amortisation. External software is amortised over its useful life of 2.5 years.

iii) Patents and trademarks Costs associated with patents and trademarks are expensed as incurred.

iv) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

(o) Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. These amounts are carried at cost. The amounts are unsecured and are usually paid within 30 days of recognition.

(p) Borrowings

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

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(q) Finance costs

Finance costs are recognised as expenses in the period in which they are incurred. Finance costs include: • interest on bank overdrafts and short-term and long-term borrowings • amortisation of discounts or premiums relating to borrowings • amortisation of ancillary costs incurred in connection with the arrangement of borrowings • finance lease charges, and • certain exchange differences arising from foreign currency borrowings

(r) Employee entitlements

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



ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using a formula that reflects the amounts expected to be paid when the liabilities are settled. Consideration is given to expected future wage and salary levels and periods of service.

As at 30 June 2006, for staff who have reached the period of service required for full entitlement, a full provision has been made in the accounts as a current liability. The residual long service leave is classified on the balance sheet as a non-current liability.

iii) Bonus plans A liability for employee benefits in the form of bonus plans is recognised in other creditors when there is no realistic alternative but to settle the liability and at least one of the following conditions is met:

• there are formal terms in the plan for determining the amount of the benefit • the amounts to be paid are determined before the time of completion of the financial report, or • past practice gives clear evidence of the amount of the obligation Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

iv) Superannuation

The amount charged to the income statement in respect of superannuation represents the contributions made (at the statutory required rate) by the consolidated entity to various superannuation funds. The funds are selected at each employee’s option. The consolidated entity does not provide any guarantees for the performance of such funds.

(s) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the item as expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

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



2 . S E G M E N T I N F O R M A T I O N

Geographical Segments A geographical segment is engaged in providing products and services within a particular economic environment and is subject to risks and returns that are different from those segments operating in other economic environments. The Group is organised on a world wide basis into Geographical Regions and is reported on that basis. The Group operates in seven major geographical locations, Australia being the head office and parent company, Canada, United States of America, South Africa, Malaysia, Chile and Brazil. The company’s risks and returns are affected by differences in the geographical area in which it operates. Segment revenue, expenses and results include transfers between segments. Such transfers are priced on “arms-length” basis and are eliminated on consolidation. Business Segments The Group primarily sells software and consulting services to the resources industry world-wide. Business segment revenue from sales to customers external to the resources industry is less than 10% of the Group’s external revenues and secondary assets are less than 10% of all business segments assets and as a consequence, no secondary reporting of business segments is provided.

SUMMARY OF FINANCIAL INFORMATION BY GEOGRAPHICAL SEGMENT 2006

2006 Australia Malaysia Chile Brazil Canada USA South Africa Eliminations Consolidated

REVENUE $ $ $ $ $ $ $ $ $

External Sales 14,908,362 - 479,331 15,652 908,831 5,799,410 4,279,080 - 26,390,666

Inter-segment sales 3,851,991 578,103 14,125 - 200,044 193,248 649,709 (5,487,220) -

Total ordinary revenue 18,760,353 578,103 493,456 - 1,108,875 5,992,658 4,928,789 (5,487,220) 26,390,666

Other income 329,130 (323) 70,573 (6,219) 80,624 497,110 182,064 1,840 1,154,799

Total Revenue/Income 19,089,483 577,780 564,029 9,433 1,189,499 6,489,768 5,110,853 (5,485,380) 27,545,465

RESULT

Segment Result 4,536,543 64,503 287,722 (49,758) 62,884 636,074 956,878 (425,146) 6,069,700

Profit from ordinary activities before income tax expense 6,069,700 Income tax expense (1,693,159)

Net profit from ordinary activities 4,376,541

ASSETS

Segment assets 14,799,248 250,920 1,242,010 256,164 728,597 5,092,307 2,541,094 (7,070,358) 17,839,982

Unallocated assets 569,264

Total assets 18,409,246

Acquisition of non-current assets 346,297 98,765 12,184 42,919 43,642 88,204 49,789 - 681,800

LIABILITIES

Segment liabilities 5,796,505 30,512 846,794 17,121 475,367 4,141,068 1,588,290 (4,158,816) 8,736,841

Unallocated liabilities 577,044

Total liabilities 9,313,885

OTHER INFORMATION

Depreciation & Amortisation 339,789 23,901 10,510 410 15,116 155,063 32,524 - 577,313

Non-cash expenses other than depreciation & amortisation 367,130 13,076 12,696 321 19,088 12,230 20,293 - 444,513



SUMMARY OF FINANCIAL INFORMATION BY GEOGRAPHICAL SEGMENT

2005

2005 Australia Malaysia Chile Canada USA South Africa Eliminations Consolidated

REVENUE $ $ $ $ $ $ $ $

External Sales 11,824,370 - 390,461 851,345 2,199,022 2,465,338 - 17,730,536

Inter-segment sales 2,013,664 425,392 66,714 135,610 11,961 965,866 (3,619,207) -

Total ordinary revenue 13,838,034 425,392 457,175 986,955 2,210,983 3,431,204 (3,619,207) 17,730,536

Other income 25,849 - (16,019) 20,702 258,530 8,573 - 297,685

Total Revenue/Income 13,863,883 425,392 441,156 1,007,657 2,469,513 3,439,777 (3,619,207) 18,028,221 RESULT Segment Result 2,429,469 94,566 76,200 35,106 281,117 819,516 41,760 3,777,734 Profit from ordinary activities before income tax expense 3,777,734 Income tax expense (1,142,665) Net profit from ordinary activities 2,635,069 ASSETS Segment assets 8,886,076 153,834 999,339 1,035,330 4,837,405 1,524,928 (3,497,190) 13,939,722

Unallocated assets 385,185 Total assets 14,324,907 Acquisition of non-current assets 794,400 17,468 16,657 4,584 2,267,793 115,231 - 3,216,133 LIABILITIES Segment liabilities 4,097,311 10,262 1,126,699 885,170 1,619,646 1,036,761 (3,381,526) 5,394,323

Unallocated liabilities 3,248,056 Total liabilities 8,642,379 OTHER INFORMATION Depreciation & Amortisation 446,357 7,978 9,642 14,790 51,595 25,410 - 555,772 Non-cash expenses other than depreciation & amortisation 166,325 9,079 5,871 11,950 232,139 - - 425,364

3 . R E V E N U E A N D O T H E R I N C O M E


2006 2005 2006 2005

$ $ $ $

Revenue

Provision of Services 21,498,627 14,225,984 13,693,709 10,559,296

Sale of goods 4,592,256 3,137,725 3,688,818 2,839,610

Other revenue

Interest 195,102 153,921 111,671 78,074

Dividends - - 507,596 - Other income 104,681 212,905 289,422 361,054

26,390,666 17,730,535 18,291,216 13,838,034 Other income

Disbursements 984,128 297,685 273,613 25,849

Foreign exchange gains - net 170,668 - 60,526 96,711

1,154,796 297,685 334,139 122,561



4 . P R O F I T B E F O R E I N C O M E T A X


2006 2005 2006 2005

$ $ $ $

Profit before income tax includes the following specific expenses:

Total depreciation and amortisation 558,149 552,011 336,913 430,533

Finance costs 160,781 43,804 - 3,648

Loan Forgiveness * - - 469,646 -

Amortisation and finance costs 17,374 3,375 - -

Other provisions

Employee benefits 401,077 348,596 343,229 150,725

Rental expense relating to operating leases

Lease payments 1,090,124 749,791 779,891 568,914

Foreign exchange losses – net - 189,602 - -

Net loss on disposal of property, plant and equipment 21,468 - 19,548 -

* The parent entity forgave part of loan to Runge Latin America Limitada.



5 . I N C O M E T A X E X P E N S E

(a) Income tax expense


2006 2005 2006 2005

$ $ $ $

Current tax 1,987,966 1,194,471 1,381,246 854,071

Deferred tax (168,999) (79,307) (110,984) (3,671)

(Over)/under provision (125,808) 27,501 (125,808) 13,304

1,693,159 1,142,665 1,144,454 863,704

Deferred income tax (revenue) expense included in income tax expense comprises:

Decrease (increase) in deferred tax assets (note 6) (158,942) (74,643) (117,911) (4,101)

(Decrease) increase in deferred tax liabilities (note 8) (10,057) (4,664) 6,927 430

(168,999) (110,984) (79,307) (3,671)

(b) Numerical reconciliation of income tax expense to prima facie tax payable


2006 2005 2006 2005

$ $ $ $

Profit before income tax 6,069,700 3,777,734 4,245,398 2,923,169

Tax at the Australian tax rate of 30% (2005 - 30%) 1,820,910 1,133,320 1,273,619 876,951

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

Depreciation and amortisation - 13,092 - 4,747

Entertainment 7,217 351 7,217 301

Loan forgiveness - Chile 140,301 - 140,301 -

Capital raising costs (23,346) - (23,346) -

Research and development deduction (174,854) (40,952) (174,854) (40,952)

Fines & penalties 181 3,448 181 3,448

Professional fees – capital restructure 56,037 - 56,037 -

Other (7,479) 5,905 (8,893) 5,905

1,818,967 1,115,164 1,270,262 850,400

Under (over) provision in prior years (125,808) 27,501 (125,808) 13,304

Income tax expense 1,693,159 1,142,665 1,144,454 863,704



6 . N O N - C U R R E N T A S S E T S – D E F E R R E D T A X A S S E T S


2006 2005 2006 2005

$ $ $ $

The balance comprises temporary differences attributable to:

Amounts recognised in profit or loss

Doubtful debts 32,919 30,485 19,304 19,304

Employee benefits and other 488,693 368,370 370,496 288,770

Accrued expenses 10,215 7,572 10,215 7,572

Operating leases 50,716 40,520 50,716 40,520

Capital raising costs 23,346 - 23,346 -

605,889 446,947 474,077 356,166

Movements:

Opening balance at 1 July 446,947 372,304 356,166 352,065

Credited/(charged) to the income statement 158,942 74,643 117,911 4,101

Closing balance at 30 June 605,889 446,947 474,077 356,166

Deferred tax asset to be recovered after more than 12 months 605,889 474,077 446,947 356,166

7 . C U R R E N T L I A B I L I T I E S – C U R R E N T T A X L I A B I L I T I E S


2006 2005 2006 2005

$ $ $ $

Income tax 431,811 192,895 176,216 19,101



8 . N O N C U R R E N T L I A B I L I T I E S – D E F E R R E D T A X L I A B I L I T I E S


2006 2005 2006 2005

$ $ $ $

The balance comprises temporary differences attributable to:

Amounts recognised in profit or loss

Development costs 141,068 123,460 141,068 123,460

Finance lease liability (4,714) (3,616) (4,714) (3,616)

Finance lease written down value 5,777 31,499 5,777 14,514

Unamortised stamp duty 3,103 3,948 3,103 3,949

145,234 155,291 145,234 138,307

Movements:

Opening balance at 1 July 155,291 159,955 138,307 137,877

Charged/(credited) to the income statement (10,057) (4,664) 6,927 430

Closing balance at 30 June 145,234 155,291 145,234 138,307

Deferred tax liabilities to be recovered after more than 12 months 145,234 145,234 155,291 138,307

9 . C U R R E N T A S S E T S – C A S H A N D C A S H E Q U I V A L E N T S


2006 2005 2006 2005

$ $ $ $

Cash at bank and in hand 3,837,120 - - 1,579,684 1,287,740

Deposits at call 3,083,286 4,826,109 3,083,286 1,609,631

6,920,406 4,826,109 4,662,970 2,897,371

The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows:

Balances as above 6,920,406 4,826,109 4,662,970 2,897,371

Balances per statement of cash flows 6,920,406 4,662,970 4,826,109 2,897,371



1 0 . C U R R E N T A S S E T S – T R A D E A N D O T H E R R E C E I V A B L E S


2006 2005 2006 2005

$ $ $ $

Trade receivables 5,571,838 4,817,165 2,834,626 2,294,752

Provision for doubtful receivables (109,729) (101,615) (64,345) (64,345)

5,462,109 4,715,550 2,770,281 2,230,407

Loans to controlled entities - - 55,954 -

Other receivables 179,476 381,785 105,980 313,885

Prepayments 379,977 331,720 295,516 168,175

6,021,562 3,227,731 5,429,055 2,712,467

1 1 . C U R R E N T A S S E T S – I N V E N T O R I E S


2006 2005 2006 2005

$ $ $ $

Software stock 9,015 - 9,015 -

Work in progress 314,823 267,497 284,577 153,276

323,838 293,592 267,497 153,276

1 2 . N O N C U R R E N T A S S E T S – R E C E I V A B L E S


2006 2005 2006 2005

$ $ $ $

Loans to controlled entities - - 2,687,065 2,294,345

Other receivables - Loan to RSCo. 34,007 - - -

Other receivables - Refundable Deposits 66,274 - 40,679

100,281 2,727,744 - 2,294,345



1 3 . N O N C U R R E N T A S S E T S – O T H E R F I N A N C I A L A S S E T S


2006 2005 2006 2005

$ $ $ $

Non-traded investments

Shares in controlled entities - at cost -

- 2,859,486 435,447

Less: Provision for write down to recoverable amount

-

- (9,379) (9,379)

-

- 2,850,107 426,068

An amount of $300,644 shown as goodwill in the prior year has been reclassified to cost of shares in controlled entities. The affected financial statement line items for the prior year have been restated.

1 4 . N O N C U R R E N T A S S E T S – P R O P E R T Y , P L A N T A N D E Q U I P M E N T

Consolidated Parent Entity 2006 2005 2006 2005 $ $ $ $ Plant and equipment Furniture and fittings - at cost 293,655 191,745 151,484 150,946 less: Accumulated depreciation (96,409) (69,354) (70,135) (61,081) 197,246 122,391 81,349 89,865 Office equipment - at cost 306,957 265,022 168,294 128,867 less: Accumulated depreciation (159,252) (109,714) (79,137) (61,923) 147,705 155,308 89,157 66,944 Computer equipment - at cost 1,446,737 1,119,113 1,014,548 818,638 less: Accumulated depreciation (910,723) (684,811) (678,085) (552,676) 536,014 434,302 336,463 265,962 Motor vehicles - at cost 122,419 70,843 29,819 29,500 less: Accumulated depreciation (20,839) (48,004) (10,562) (27,683) 101,580 22,839 19,257 1,817 Plant and equipment under finance lease 105,195 160,090 63,150 80,273

less: Accumulated depreciation (32,987) (55,094) (29,043) (31,894) 72,208 104,996 34,107 48,379 1,054,753 839,836 560,333 472,967



PROPERTY, PLANT AND EQUIPMENT

2006

Furniture & fittings

Office equipment

Computer equipment

Motor vehicles

Plant & equipment

under finance lease

Total

$ $ $ $ $ $ Consolidated Carrying amount at 1 July 2005 122,391 155,308 434,302 22,839 104,996 839,836 Exchange differences 4,482 8,538 8,413 - - 21,432 Additions 115,291 48,492 382,785 93,188 42,044 681,800 Disposals (14,782) (13,907) (13,549) - (50,455) (92,693) Depreciation (30,136) (50,726) (275,937) (14,447) (24,377) (395,622) Carrying amount 30 June 2006 197,246 147,705 536,014 101,580 72,208 1,054,753 Parent Carrying amount at 1 July 2005 89,865 66,944 265,962 48,379 1,817 472,967 Additions 8,503 40,828 257,018 - 33,650 339,998 Disposals (7,965) - (10,129) (23,151) - (41,244) Depreciation (9,054) (18,615) (176,388) (5,971) (1,360) (211,388) Carrying amount 30 June 2006 81,349 89,157 336,463 19,257 34,107 560,333

PROPERTY, PLANT & EQUIPMENT 2005

Furniture & fittings

Office equipment

Computer equipment

Motor vehicles

Plant & equipment

under finance lease

Total

$ $ $ $ $ $ Consolidated Carrying amount at 1 July 2004 43,596 74,919 307,395 5,797 69,917 501,624 Exchange differences 225 (674) (1,437) (38) (33) (1,957) Additions 91,112 96,832 338,201 29,686 47,573 603,404 Disposals - - - - - - Depreciation (12,542) (15,769) (209,857) (12,606) (12,461) (263,235) Carrying amount 30 June 2005 122,391 155,308 434,302 22,839 104,996 839,836 Parent Carrying amount at 1 July 2004 40,512 67,357 273,252 2,309 57,388 440,818 Additions 56,522 11,026 147,780 - - 215,328 Disposals - - - - - - Depreciation (7,169) (11,439) (155,070) (492) (9,009) (183,179) Carrying amount 30 June 2005 89,865 66,944 265,962 1,817 48,379 472,967

1 5 . N O N - C U R R E N T A S S E T S – O T H E R


2006 2005 2006 2005

$ $ $ $

Prepayments 10,343 10,343 10,353 10,423



1 6 . N O N C U R R E N T A S S E T S – I N T A N G I B L E A S S E T S

Development costs Goodwill External

software Total

Consolidated $ $ $ $

Year ended 30 June 2006

Opening net book amount 183,762 2,190,839 130,509 2,505,110

Additions 322,040 - 347,867 669,907

Disposals - - (910) (910)

Acquisition of additional interest in subsidiary - 249,983 - 249,983

Foreign currency exchange differences - 109,829 782 110,611

Amortisation charge (35,574) - (126,953) (162,527)

Closing net book amount 470,228 2,550,651 351,295 3,372,174

At 30 June 2006

Cost 505,802 2,550,651 998,983 4,055,436

Accumulated amortisation and impairment (35,574) - (647,688) (683,262)

Net book amount 470,228 2,550,651 351,295 3,372,174


Opening net book amount 183,813 - 106,438 290,251

Additions 153,194 2,230,720 119,857 2,503,771

Foreign currency exchange differences - - (136) (136)

Amortisation charge (153,245) (39,881) (95,650) (288,776)

Closing net book amount 183,762 2,190,839 130,509 2,505,110

At 30 June 2005

Cost 1,844,110 2,263,327 226,159 4,333,596

Accumulated amortisation and impairment (1,660,348) (72,488) (95,650) (1,828,486)

Net book amount 183,762 2,190,839 130,509 2,505,110

Impairment tests for goodwill Goodwill is allocated to the Group’s cash-generating units (CGU’s) identified according to country of operation. The recoverable amount of a CGU is based on value in use calculations. Value in use is determined by reference to the expected future performance of each CGU. Based on this assessment, no impairment losses have been recognised.



Development costs External software Total

Parent $ $ $


Opening net book amount 183,762 110,516 294,278

Additions 322,040 225,061 547,101

Amortisation charge (35,574) (89,951) (125,525)

Closing net book amount 470,228 245,626 715,854

At 30 June 2006

Cost 505,802 854,245 1,360,047

Accumulated amortisation and impairment (35,574) (608,619) (644,193)

Net book amount 470,228 245,626 715,854


Opening net book amount 183,813 105,535 289,348

Additions 153,194 99,090 252,284

Amortisation charge (153,245) (94,109) (247,354)

Closing net book amount 183,762 110,516 294,278

At 30 June 2005

Cost 183,762 204,627 388,389

Accumulated amortisation and impairment - (94,111) (94,111)

Net book amount 183,762 110,516 294,278

1 7 . C U R R E N T L I A B I L I T I E S – T R A D E A N D O T H E R P A Y A B L E S


2006 2005 2006 2005

$ $ $ $

Trade payables 1,654,705 1,461,562 1,340,089 1,258,269

Other payables – Salaries Payable 972,076 895,701 766,428 753,163

Other payables – Accrued Expenses 278,435 213,447 96,351 41,446

Income received in advance - Software Service and Support 1,996,606 1,241,764 1,476,655 1,076,056

Income received in advance – Consulting Fees 437,143 256,922 - -

Payable to controlled entities -

- 699,050 229,189

5,338,966 4,378,573 4,069,396 3,358,123



1 8 . C U R R E N T L I A B I L I T I E S – B O R R O W I N G S


2006 2005 2006 2005

$ $ $ $

Secured

Lease liabilities (note 19) 25,100 40,602 7,547 20,073

Bank Loan (note 19) 623,351 604,561 -

-

648,451 7,547 645,163 20,073

1 9 . N O N - C U R R E N T L I A B I L I T I E S – B O R R O W I N G S


2006 2005 2006 2005 Secured

$ $ $ $

Lease liabilities 27,181 10,689 8,166 10,689

Bank loan 970,973 2,267,104 - -

Finance costs associated with loan (46,761) (64,135) - -

Total non-current interest bearing liabilities 951,393 2,213,658 8,166 10,689

Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

The bank loan, with a current residual capital of $1,594,324, is secured by a fixed and floating charge across the net assets of Runge Inc and Runge Limited. It is repayable over a remaining period of 2.5 years and currently bears interest at LIBOR rates plus 2% per annum.

2 0 . C U R R E N T L I A B I L I T I E S – P R O V I S I O N S


2006 2005 2006 2005

$ $ $ $

Employee benefits

Annual leave 1,089,140 829,166 776,028 569,002

Long service leave 406,012 363,480 395,943 358,311

1,495,152 1,171,971 1,192,646 927,313

2 1 . N O N C U R R E N T L I A B I L I T I E S – P R O V I S I O N S


2006 2005 2006 2005

$ $ $ $

Employee benefits

Long service leave 133,826 133,826 35,255 35,255



2 2 . N O N C U R R E N T L I A B I L I T I E S – O T H E R


2006 2005 2006 2005

$ $ $ $

Lease payables 169,052 169,052 154,754 154,754

2 3 . C O N T R I B U T E D E Q U I T Y

Consolidated and Parent entities

Notes 2006 2005 2006 2005 Number of

shares Number of

shares $ $

Share capital Ordinary shares - fully paid a 6,131,197 237,539 1,687,840 1,571,344

- partially paid a 149,680 - 46,176

-

Preference shares - fully paid b 24,353,849 - 2,823,740

-

- partially paid b 703,496 - 178,336

- 31,338,222 4,736,092 237,539 1,571,344

(a) Movements in ordinary share capital:

Date Details Notes Number of shares

Price per share $

2006 $ 1 Jul 2005 Opening balance 237,539 1,571,344

1 Sep 2005 Share issue under employee share scheme - type 3 e 461 65.02 29,975 238,000 1,601,319

28 Sep 2005 Shares converted to stapled ordinary shares (at a ratio of 1 : 20) 4,760,000 280,933

1 Feb 2006 Capital raising 949,527 1.05 996,955 23 Feb 2006 Shares issued under ESAP

- fully paid d 40,720 1.234 50,248 - partially paid (25%) d 149,680 1.234 46,176 Costs associated with share issue (17,066)

15 Jun 2006 Shares issued to acquire additional interest in MRM Mining Services (Pty) Ltd 380,950 1.08 411,810

Costs associated with share issue (35,040) 30 Jun 2006 Balance 6,280,877 1,734,016

2005

1 Jul 2004 Opening balance 231,273 1,366,383

1 Jul 2004 Share issue under employee share scheme - type 3 e 1,846 65.02 116,561

1 Aug 2004 Share issue under employee share scheme - type 2 e 4,420 20.00 88,400

30 Jun 2005 Balance 237,539 1,571,344



(b) Movements in preference share capital:

2006

Date Details Notes Number of shares

Price per share $

$ 1 Jul 2005 Opening balance - -

28 Sep 2005 Shares converted to stapled preference shares (in the ratio of 1 to 94)

22,372,000 1,320,386

23 Feb 2006 Shares issued under ESAP - - - fully paid d 191,384 1.014 194,063 - partially paid (25%) d 703,496 1.014 178,336 Costs associated with share

issue (80,573)

15 Jun 2006 Shares issued to acquire additional interest in MRM Mining Services (Pty) Ltd

1,790,465 0.87 1,554,553

Costs associated with share issue (164,689)

30 Jun 2006 Balance 25,057,345 3,002,076

(c) Share Types Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a showing of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and upon a poll each shares is entitled to one vote. Preference shares Preference shares entitle the holder to receive a 7% dividend and in priority to all other classes of shares, to participate in the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a showing of hands every holder of preference shares present at a meeting in person or by proxy, is entitled to one vote and upon a poll each shares is entitled to one vote. (d) Employee Share Acquisition Plan Prior to the implementation of the Employee Share Acquisition Plan (ESAP), the company had issued options in terms of an employee option plan. All remaining options under this plan were exercised during the year. The Employee Share Acquisition Plan was approved by the directors on 30 June 2005 to provide a means by which employees may acquire shares in the Company. Eligible employees (as determined at the discretion of the Board) are offered the right to purchase Runge Limited stapled shares. Any such offer is at the absolute discretion of the Board and may change from time to time. The shares offered for sale are stapled ordinary shares and preference, stapled in the ratio of 47 preference shares for every 10 ordinary shares. The shares are offered at a price of $60 per stapled share representing 47 preference shares valued at $1.014 each and 10 ordinary shares valued at $1.234 each. Employees are required to pay $15 per share on application. The balance of $45, which is due on allotment, may be financed by a loan from the company. Interest is payable on the loan at a commercial rate. Participating employees agree to apply all dividends received in respect of the shares to reducing the outstanding amount owing on the loan. The balance of the loan is payable by 5 May 2010.



(e) Options

Consolidated and Parent Entity - 2006

Type Exercise price Balance at start

of the year Exercised during the year

Balance at end of the year

Type 3 plan $65.02 461 (461) -

Consolidated and Parent Entity - 2005

Type Exercise price Balance at start

of the year Exercised during the year

Balance at end of the year

Type 2 plan $20.00 4,420 (4,420) -

Type 3 plan $65.02 2,307 (1,846) 461

2 4 . R E S E R V E S A N D R E T A I N E D P R O F I T S


2006 2005 2006 2005

$ $ $ $

(a) Reserves

Foreign currency translation reserve (248,143) (88,178) - -

Revaluation reserve 18,275 18,275 18,275 18,275

Reserve arising from an equity transaction (1,552,761) - - -

(1,782,629) (69,903) 18,275 18,275

(i) Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entities, are taken to the foreign currency translation reserve, as described in accounting policy note 1(d)(iii).

(ii) Reserve arising from an equity transaction This reserve arises from the acquisition of an additional interest in the controlled entity, MRM Mining Services (Pty) Ltd. The amount of goodwill arising on the additional interest has been restricted to the goodwill that was determined when control was first attained. The balance of the goodwill is considered an equity transaction and is disclosed in reserves. (c) Retained profits

Retained profits at the beginning of the financial year 4,044,699 3,435,832 3,364,127 3,013,690

Net profit attributable to members of Runge Limited 4,001,152 2,317,895 3,100,944 2,059,465

Dividends provided for or paid (1,903,951) (1,709,028) (1,903,951) (1,709,028)

Retained profits at the end of the financial year 6,141,900 4,561,120 4,044,699 3,364,127



Due to a consolidation error at 30 June 2005, the dividend paid by the Consolidated entity was overstated by $267,940 and resulted in the overstatement of current liabilities by the same amount. The error has been corrected by restating each of the effected financial statement line items for the prior year as described above.

2 5 . D I V I D E N D S

Parent entity

2006 2005

$ $

(a) Ordinary shares

Dividends paid in cash during the year were:

1,342,320 1,352,832 Final dividend of $0.06 per share fully franked paid on 1 November 2005

561,631 356,196 Interim dividend of $0.02 per share fully franked paid on 28 February 2006

1,903,951 1,709,028

(b) Post balance date dividends

2006 Final dividend of:

1,929,416 • $0.077 per preference share fully franked paid on 27 October 2006

408,257 • $0.065 per ordinary share fully franked paid on 27 October 2006

2,337,673

(c) Franked dividends

The franked portions of dividends will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2006.

Parent entity

2006 2005

$ $

Franking credits available for subsequent financial years based on a tax rate of 30% 908,252 644,246

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for any:

(a) franking credits that will arise from the payment of the current tax liability

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date

(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and

(d) franking credits that may be prevented from being distributed in subsequent financial years.



2 6 . K E Y M A N A G E M E N T P E R S O N N E L D I S C L O S U R E S

Directors The following were directors of Runge Limited during the financial year: Chairman (non-executive) Ian Runge

Executive Directors Anthony Kinnane, Managing Director Christian Larsen, Acquisitions and Alliances

Non-executive Directors Christopher Still Craig Cartner (from 28 October 2005 to 23 March 2006) Greg Smith (from 23 March 2006) Greg Smith resigned from the Board on 31 August 2006 and Peter Ludemann was appointed on 31 August 2006. Other Key Management Personnel The following persons were the Executives who had the greatest authority and responsibility for planning, directing and controlling all activities of the Group, directly or indirectly, during the financial year: Name Position Employer Pat Williams Manager – Business Development Runge Limited John Buffington Manager – Consulting Services Runge Limited Simon Cleary * Manager – Software Services Runge Limited Phill McCaw Chief Accountant / Company Secretary Runge Limited Scott Henderson** Manager – Software Services Runge Limited Michael Scott *** Manager – Human Resources Runge Limited Ian Perks Managing Director MRM Mining (Pty) Ltd Raja Upadhyay President Pincock, Allen & Holt a division of Runge Inc. * Simon Cleary resigned on 3 February 2006 ** Scott Henderson commenced with the company on 15 May 2006 *** Michael Scott commenced with the company on 20 March 2006 Principles used to determine the nature and amount of remuneration The objective of the company’s executive reward framework is to ensure reward for performance is value based, competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic and operational objectives of the company. It is consistent with the creation of value for shareholders and conforms to well accepted market practice. The framework provides a mix of fixed and variable pay, and a blend of short and longer term incentives.



Non-executive Directors Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed periodically by the Board and are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The pool currently stands at $100,000. Non executive Director’s base remuneration was last reviewed with effect from 1 June 2006. Both the Chairman’s and Non-executive Directors’ remuneration is inclusive of audit and other committee fees. Executives The executive pay and reward framework has four components:

• Base pay and benefits • Short-term performance incentives • Long-term performance incentives • Other remuneration is superannuation

Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure pay reflects the market for a comparable role. Base pay for senior executives is reviewed annually. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases fixed in any senior executive’s contracts. From time to time, the Company provides short term cash incentives for exceptional performance either to employees individually and/or to employees on a company wide basis. Details of Remuneration Details of remuneration of each Director of Runge Limited and each of the specified executives of the consolidated entity, including their personally related entities, are set out in the following tables. Directors

2006 Short-term benefits Post - employment benefits

Share-based

payment

Cash salary and

fees

Cash bonus

Non – monetary benefits

Super- annuation

Retirement Benefits Options Total

Name

$ $ $ $ $ $ $ I Runge 37,500 - - 3,375 - - 40,875 A Kinnane 261,585 81,918 - 43,073 - - 386,576 C Larsen 177,957 21,000 - 17,906 - - 216,863 C Still 43,750 4000 - 4,298 - - 52,048 C Cartner - - - - - - - G Smith - - - - - - - 520,792 106,918 - 68,652 - - 696,362




Share-based

payment

Cash salary and

fees

Cash bonus


Super- annuation


Name

$ $ $ $ $ $ $ I Runge 37,500 - - 3,375 - - 40,875 A Kinnane 271,726 30,000 - 44,551 - - 346,277 C Larsen 215,937 25,204 - 19,434 - - 260,575 C Still 20,000 - - 2,250 - - 22,250 C Cartner - - - - - - - G Smith - - - - - - - 545,163 55,204 - 69,610 - - 669,977

Other Key Management Personnel


Share-based

payment

Cash salary and

fees

Cash bonus


Super- annuation


Name

$ $ $ $ $ $ $ P Williams 179,970 - - 16,197 - - 196,167 J Buffington 188,073 25,000 - 19,177 - - 232,250 P McCaw 144,782 - - 13,030 - - 157,812 S Cleary 126,762 - - 11,409 - - 138,171 S Henderson 16,667 - - 1,500 - - 18,167 M Scott 30,288 - - 2,726 - - 33,014 I Perks 199,568 - 238 - - - 199,806 R Upadhyay 238,622 - - 6699 - - 245,321 1,124,732 25,000 238 70,738 - - 1,220,708


Share-based

payment

Cash salary and

fees

Cash bonus


Super- annuation


Name

$ $ $ $ $ $ $ P Williams 161,212 25,204 - 14,509 - - 200,925 J Buffington 179,741 25,204 - 16,177 - - 221,122 P McCaw 119,553 15,918 - 10,760 - - 146,231 S Cleary 118,578 15,918 - 10,672 - - 145,168 S Henderson - - - - - - 0 M Scott - - - - - - 0 I Perks 169,081 - 208 - - - 169,288 R Upadhyay 60,928 15,727 - 722 - - 77,378 809,093 97,971 208 52,840 - - 960,112



Shareholdings The number of shares in the company held during the financial year by each Director of Runge Limited and each of the eight specified Executives of the Consolidated entity, including their personally-related entities, are set out below.

Name

Balance at

the start of the year

Converted into

ordinary shares

Converted into preference

shares

Sale of

ordinary shares

Sale of

preference shares

Purchase of

ordinary shares

Purchase of

preference shares

Balance of ordinary

shares

Balance of preference

shares

Directors

I Runge 122,739 2,454,780 11,537,466 (1,261,570) (5,929,379) - - 1,193,210 5,608,087

A Kinnane 33,851 677,020 3,181,994 - - 110,681 - 787,701 3,181,994

C Larsen 14,675 293,500 1,379,450 (7,000) (32,900) 103,947 - 390,447 1,346,550

C Still 110 2,200 10,340 (2,200) (10,340) - - - -

Executives

P Williams 2,557 51,140 240,358 - - 105,344 - 156,484 240,358

J Buffington 5,977 119,540 561,838 - - 105,343 - 224,883 561,838

P McCaw 100 2,000 9,400 (2,000) (9,400) - - - -

S Cleary 3,841 76,820 361,054 (76,820) (361,054) - - - -

S Henderson - - - - - - - - -

M Scott - - - - - - - - -

I Perks - - - - - - - - -

R Upadhyay - - - - - - - - -

2 7 . R E M U N E R A T I O N O F A U D I T O R S

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


2006 2005 2006 2005

$ $ $ $

Remuneration for audit of the financial reports

PKF Chartered Accountants & Business Advisors Australian firm 30,000 19,000 27,200 19,000

Related practices of PKF Australian firm 2,500

-

-

-

Non – PKF audit firms for the audit of a subsidiary in the Group 4,712 - - -

Remuneration for other services:

Fees paid to Ehrhardt Keefe Steiner & Hottman (EKSH), a Denver based affiliate of PKF Chartered Accountants & Business Advisors:

Service provided were agreed upon procedures performed in relation to PAH Due Diligence -

- 29,887

-



2 8 . C O M M I T M E N T S


2006 2005 2006 2005

$ $ $ $

Operating leases

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year 1,196,717 740,680 807,885 714,251

Later than one year but not later than 5 years 3,193,906 3,195,204 2,262,664 3,194,085

Later than 5 years - 584,963 - 584,963

Commitment not recognised in the financial statements. 4,390,623 3,070,549 4,520,847 4,493,299

Parent entity's operating leases relate to leased premises at Central Plaza One incorporating levels 17 & 18 which has a bank guarantee of $400,000 to cover the lease period.

Non-cancellable operating lease receivable from commercial property tenants Consolidated Parent entity

2006 2005 2006 2005

$ $ $ $ Non-cancellable operating lease commitments are receivable:

Within one year 37,085 35,352 37,085 35,352

Later than one year but not later than 5 years 108,193 145,278 108,193 145,278

Later than 5 years - - - -

145,278 145,278 180,630 180,630


Finance leases 2006 2005 2006 2005

Commitments in relation to finance leases are payable as follows: $ $ $ $

Within one year 13,682 16,999 6,304 16,999

Later than one year but not later than 5 years 42,760 37,848 11,014 17,318

Later than 5 years - - - -

Minimum lease payments 56,442 54,847 17,318 34,317

Less: future finance charges (4,161) (3,556) (1,605) (3,555)

Recognised as a liability 52,281 15,713 51,291 30,762



Representing lease liabilities:

Current (note 18) 25,100 40,602 7,547 20,073

Non-current (note 19) 27,181 10,689 8,166 10,689

52,281 51,291 15,713 30,762

Finance leases relate to motor vehicles which have residual payments with options to purchase at the end of the lease term.

2 9 . R E L A T E D P A R T Y T R A N S A C T I O N S

Runge International paid professional fees on behalf of Runge Limited for the amount of $9,076. Runge Limited paid professional fees of behalf of Runge International Pty Ltd for the amount of $71,500. At 30 June 2006, both of these amounts were still outstanding. These transactions were carried out at arms length and were due on normal commercial terms. These amounts were settled in August 2006.

3 0 . I N V E S T M E N T S I N C O N T R O L L E D E N T I T I E S

Equity Cost of parent entity's Name of entity

Country of incorporation

Class of shares Holding investment

2006 2005 2006 2005

% % $ $

Runge Mining Inc United States Ordinary 100 100 130 130 Runge Mining (Canada) Ltd Canada Ordinary 100 100 108 107 Runge Latin America Limitada Chile Ordinary 100 100 15,000 15,000 Runge Malaysia Sdn Bhd Malaysia Ordinary 100 100 91,043 91,043 Runge Servicos de Consultoria do Brasil Ltda Brazil Ordinary 100 - 275,400 -

Runge Mining (RSA) Ltd (i) South Africa Ordinary 100 100 - - MRM Mining Services (Pty) Ltd (ii) South Africa Ordinary 100 54 2,468,426 319,788 2,850,107 426,068

(I) A provision was raised for the full amount of $9,379 regarding the investment in Runge Mining (RSA) Ltd in a prior year. (ii) On 1 April 2006, the parent acquired the remaining 46% of the issued share capital of MRM Mining Services (Pty) Ltd (MRM), resulting in MRM becoming a wholly owned subsidiary. The purchase consideration for the additional interest was satisfied by a cash payment of $1,363,228 and the issue of 38,095 stapled securities. Each stapled security represents 47 preference and 10 ordinary shares.



3 1 . B U S I N E S S C O M B I N A T I O N S

2005 During 2005, the parent entity acquired a controlling interest (54%) in MRM Mining Services (Pty) Ltd and purchased the net assets, including the trading name, of the business trading under the name of Pincock Allen & Holt (PAH) from Hart Crower, Inc. PAH is a professional consulting business based in Denver, USA.. Details of the fair value of assets and liabilities acquired and goodwill are as follows:

2005

$

Assets and liabilities acquired Purchase consideration: Cash 3,168,978

Investments previously held in cash 36,923

Outside equity interests at date of acquisition 54,843

Total Consideration: 3,260,744

Fair value of net assets net of cash acquired

Cash at bank 208,879

Trade receivables 1,997,208

Inventories 189,728

Property, plant and equipment 58,414

Trade payables (294,707)

Other payables (832,396)

Provisions (141,744)

1,185,382

Goodwill on acquisition 2,075,362

3,260,744

Outflow of cash net of cash acquired

Cash consideration: 3,168,978

Less cash acquired (208,879)

2,960,099 Outflow of cash



3 2 . E V E N T S A F T E R T H E B A L A N C E S H E E T D A T E

On 24 September 2006, the United States subsidiary of Runge Limited was named as a third party defendant in a civil action in relation to provision of advice in the form of a report issued in December 2005. An initial assessment by the company’s legal advisors suggests that any liability that may arise in the event the claim is successful, after professional indemnity insurance coverage, should not be significant. Other than the above, no matter or circumstance has arisen since 30 June 2006 that has significantly affected, or may significantly affect:

a) the company’s operations in future financial years; or b) the results of those operations in future financial years; or c) the company’s state of affairs in future financial years.

3 3 . R E C O N C I L I A T I O N O F P R O F I T A F T E R I N C O M E T A X T O N E T C A S H I N F L O W F R O M O P E R A T I N G A C T I V I T E S


2006 2005 2006 2005

$ $ $ $

Profit from ordinary activities after income tax 4,376,541 2,635,069 3,100,944 2,059,465

Depreciation and amortisation 558,149 555,386 336,345 430,533

Provision for doubtful debts 8,114 52,870 - 15,600

Net loss (gain) on sale of non-current assets (28,602) - 19,549 -

Foreign Exchange Differences (279,653) - - -

Change in operating assets and liabilities

Decrease (increase) in trade debtors (754,673) 876,963 (540,016) 539,546

Decrease (increase) in other debtors 202,309 (150,059) - -

Decrease (increase) in future income tax benefit (158,942) (74,643) (117,911) (4,101)

Decrease (increase) in inventories (56,341) 7,155 - (41,772)

Decrease (increase) in other operating assets (148,530) 45,309 (115,341) (376,545)

Increase (decrease) in trade creditors 193,143 634,830 81,820 742,197

Increase (decrease) in other operating liabilities 1,491,802 (95,700) 519,386 (186,354)

Increase (decrease) in provision for income taxes payable 255,595 (128,188) 173,794 (205,665)

Increase (decrease) in provision for deferred income tax (10,057) (4,664) 6,927 430

Increase (decrease) in other provisions - 348,595 343,229 150,725

Net cash inflow from operating activities 5,648,855 4,702,923 3,808,726 3,124,059



3 4 . M I N O R I T Y I N T E R E S T


2006 2005 2006 2005

$ $ $ $

Interest in MRM Mining Services (Pty) Ltd:

Share Capital - 24,708

-

-

Retained profits - 111,680

-

-

Total Minority Interests equity at the end of the financial year

-

-

- 136,388

3 5 . F I N A N C I A L I N S T R U M E N T S : I N T E R E S T R A T E R I S K A N D C R E D I T R I S K E X P O S U R E S

The company manages its exposure to interest rate and foreign currency fluctuations through a formal policy approved by the board of directors. The policy is to monitor foreign currency and interest rate exposures but maintain the current practice of repatriating surplus cash held in foreign currencies in to Australian dollar accounts as expeditiously as possible and not engaging in hedging or use the of derivatives to mitigate changes against losses arising from adverse foreign exchange rate movements.

As a multinational corporation, the company maintains operations in foreign countries and as a result of these activities, the company is exposed to changes in exchange rates which affect its results of operations and cash flows. In addition, the consolidated entity has a $1.6 million interest bearing liability denominated in US dollars that is partially naturally hedged by revenues designated also in US dollars.

An integral part of the consolidated entity’s risk management practices is to minimise cash held in non Australian jurisdictions. At 30 June 2006 and 2005 the company had not entered into any contracts to hedge these exposures.

The consolidated entity does not engage in any significant transactions which are speculative in nature.

Credit risk exposure The maximum credit risk exposure of financial assets is represented by the carrying amounts of assets recognised in the balance sheet net of any provisions for any losses. The consolidated entity had no significant concentrations of credit risk with any single counterparty or Group of counterparties.

Finance facility


2006 2005 2006 2005

$ $ $ $

Finance facility used 1,594,324 2,871,665 - -

Total finance facility 1,594,324 - - 2,871,665

A finance facility was established on 29 March 2005 and was fully utilised to fund the acquisition of the business, Pincock Allen & Holt.



Interest rate risk exposure The consolidated entity’s exposures to interest rate risks consolidated on financial assets and liabilities are summarised in the following tables.

Fixed interest rate maturing

Non-interest bearing

1 year or less

Over 1 to

5 years

More than

5 years

Floating interest

rate Total

Effective weighted average

interest rate $ $ $ $ $ $

2006

Financial Assets:

Cash and deposits 1,505,080 - - - 5,415,326 6,920,406 5.32%

Trade and other receivables 5,641,586 - - - - 5,641,586 -

7,146,666 - - - 5,415,326 12,561,992 -

Financial Liabilities:

Interest bearing liabilities - - - - 1,547,563 1,547,563 6.25%

Trade payables 1,654,705 - - - - 1,654,705 -

Lease liabilities - 25,100 27,181 - - 52,281 7.08%

Net financial assets (liabilities) 5,491,961 (25,100) (27,181) - 3,867,763 9,307,443 -

Fixed interest rate maturing

Non-interest bearing

1 year or less

Over 1 to

5 years

More than

5 years

Floating interest

rate Total

Effective weighted average

interest rate $ $ $ $ $ $

2005

Financial Assets:

Cash and deposits 447,910 - - - 4,378,199 4,826,109 4.78%

Trade and other receivables 5,097,335 - - - - 5,097,335 -

5,545,245 - - - 4,378,199 9,923,444 -

Financial Liabilities:

Interest bearing liabilities - - - - 2,807,530 2,807,530 5.10%

Trade payables 1,461,562 - - - - 1,461,562 -

Lease liabilities - 40,602 10,689 - - 51,291 5.92%

Net financial assets (liabilities) 4,083,683 (40,602) (10,689) 1,570,669 5,603,061 -



3 6 . E X P L A N A T I O N O F T R A N S I T I O N T O A U S T R A L I A N E Q U I V A L E N T S T O I F R S ’ S

As stated in significant accounting policies note 1(a), these are the consolidated entity’s first consolidated financial statements prepared in accordance with AIFRS. The policies set out in the significant accounting policies section of this report have been applied in preparing the financial statements for the financial year ended 30 June 2006, the comparative information presented in these financial statements for the financial year ended 30 June 2005 and in the preparation of an opening AIFRS balance sheet at 1 July 2004 (the consolidated entity’s date of transition).

In preparing its opening AIFRS balance sheet, the consolidated entity has adjusted amounts reported previously in financial statements prepared in accordance with its old basis of accounting (AGAAP). An explanation of how the transition from AGAAP to AIFRS has affected the consolidated entity’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.

(a) Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRSs)

Reconciliation of Equity at 1 July 2004 Reconciliation of Equity at 30 June 2005

Consolidated Note Previous AGAAP

Effect of transition to AIFRSs

AIFRSs Previous AGAAP

Effect of transition

to AIFRSs

AIFRSs

$ $ $ $ $ $ Assets Cash and cash equivalents 3,081,537 - 3,081,537 4,826,109 - 4,826,109 Trade and other receivables 3,877,092 - 3,877,092 5,097,335 - 5,097,335 Other 461,953 - 461,953 599,217 - 599,217 Total current assets 7,420,582 - 7,420,582 10,522,661 - 10,522,661

Investments accounted for using the equity method 36,923 - 36,923 - - -

Property, plant and equipment e 608,062 (106,438) 501,624 970,345 (130,509) 839,836 Deferred tax assets b 351,639 20,665 372,304 406,427 40,520 446,947 Intangibles d e f 411,583 (121,332) 290,251 2,666,506 (161,396) 2,505,110 Other 13,163 - 13,163 10,353 - 10,353 Total non-current assets 1,421,370 - 1,214,265 4,053,631 (251,385) 3,802,246

Total assets 8,841,952 (207,105) 8,634,847 14,576,292 (251,385) 14,324,907

Liabilities Payables 2,489,031 - 2,489,031 4,069,396 - 4,069,396 Provisions 776,626 - 776,626 1,192,646 - 1,192,646 Interest bearing liabilities 32,375 - 32,375 645,163 - 645,163 Current tax liabilities 162,660 - 162,660 176,216 - 176,216 Total current liabilities 3,460,692 - 3,460,692 6,083,421 - 6,083,421

Interest bearing liabilities f 22,144 - 22,144 2,277,793 (64,135) 2,213,658 Deferred tax liabilities b 149,469 10,486 159,955 130,608 24,683 155,291 Provisions 102,680 - 102,680 35,255 - 35,255 Other c - 68,886 68,886 - 154,754 154,754 Total non-current liabilities 274,293 79,372 353,665 2,443,656 115,302 2,558,958

Total liabilities 3,734,985 3,814,357 8,527,077 115,302 8,642,379

Net assets 5,106,967 (286,477) 4,820,490 6,049,215 (366,687) 5,682,528

Equity Contributed equity 1,366,383 - 1,366,383 1,571,344 - 1,571,344 Reserves a (51,622) 69,897 18,275 (139,800) 69,897 (69,903) Retained profits a b c d 3,792,206 (356,374) 3,435,832 4,481,283 (436,584) 4,044,699

Minority interest - - - 136,388 - 136,388

Total equity 5,106,967 (286,477) 4,820,490 6,049,215 (366,687) 5,682,528



Reconciliation of Equity at 1 July 2004 Reconciliation of Equity at 30 June 2005

Parent Note Previous AGAAP

Effect of transition to AIFRSs

AIFRSs Previous AGAAP

Effect of transition

to AIFRSs

AIFRSs

$ $ $ $ $ $ Assets Cash and cash equivalents 2,082,902 - 2,082,902 2,897,371 - 2,897,371 Trade and other receivables 4,582,197 - 4,582,197 5,006,812 - 5,006,812 Other 317,445 - 317,445 153,276 - 153,276 Total current assets 6,982,544 - 6,982,544 8,057,459 - 8,057,459

Investments accounted for using the equity method

Other financial assets 106,280 - 106,280 426,068 - 426,068 Property, plant and equipment e 546,353 (105,535) 440,818 583,483 (110,516) 472,967 Deferred tax assets b 331,400 20,665 352,065 315,646 40,520 356,166 Intangibles d e 411,583 (122,235) 289,348 411,532 (117,254) 294,278 Other 13,163 - 13,163 10,423 - 10,423 Total non-current assets 1,408,779 (207,105) 1,201,674 1,747,152 (187,250) 1,559,902

Total assets 8,391,323 (207,105) 8,184,218 9,804,611 (187,250) 9,617,361

Liabilities Payables 2,491,467 - 2,491,467 3,358,123 - 3,358,123 Provisions 709,163 - 709,163 927,313 - 927,313 Interest bearing liabilities 28,887 - 28,887 20,073 - 20,073 Current tax liabilities 224,766 - 224,766 19,101 - 19,101 Total current liabilities 3,454,283 - 3,454,283 4,324,610 - 4,324,610

Interest bearing liabilities 22,144 - 22,144 10,689 - 10,689 Deferred tax liabilities b 130,178 7,699 137,877 130,608 7,699 138,307 Provisions 102,680 - 102,680 35,255 - 35,255 Other c - 68,886 68,886 - 154,754 154,754 Total non-current liabilities 255,002 76,585 331,587 176,552 162,453 339,005

Total liabilities 3,709,285 76,585 3,785,870 4,501,162 98,318 4,663,615

Net assets 4,682,038 (283,690) 4,398,348 5,303,449 (349,703) 4,953,746

Equity Contributed equity 1,366,383 - 1,366,383 1,571,344 - 1,571,344 Reserves 18,275 - 18,275 18,275 - 18,275 Retained profits b c d 3,297,380 (283,690) 3,013,690 3,713,830 (349,703) 3,364,127

Total equity 4,682,038 (283,690) 4,398,348 5,303,449 (349,703) 4,953,746



(2) Reconciliation of profit for the year ended 30 June 2005

Consolidated Note Previous AGAAP

Effect of transition to AIFRS

AIFRS

$ $ $ Revenue from ordinary activities h i j 19,305,533 (1,574,998) 17,730,535 Other income j - 297,685 297,685 Employee benefits expense (10,111,134) - (10,111,134) Depreciation and amortisation expenses (555,772) - (555,772) Finance costs (43,804) - (43,804) Professional services (413,669) - (413,669) Rent c (843,010) (85,868) (928,878) Travel expenses (605,875) - (605,875) Recoverable disbursements j (1,453,210) (1,453,210) - Office supplies (176,372) - (176,372) Other expenses from ordinary activities h i (1,239,085) (175,897) (1,414,982) Profit before income tax 3,863,602 (85,868) 3,777,734 Income tax expense b (1,148,323) 5,658 (1,142,665) Profit for the year 2,715,279 (80,210) 2,635,069 Profit attributable to minority interest in MRM Mining Services (Pty) Ltd

(317,174)

(317,174)

Profit attributable to the members of Runge Limited 2,398,105 (80,210) 2,317,895

Parent Note Previous AGAAP

Effect of transition to AIFRS

AIFRS

$ $ $ Revenue from ordinary activities h j 14,823,953 (985,919) 13,838,034 Other income i j - (122,561) 122,561 Employee benefits expense (7,616,477) - (7,616,477) Depreciation and amortisation expenses (446,356) - (446,356) Finance costs (3,648) - (3,648) Professional services (296,861) - (296,861) Rent c (638,994) (85,868) (724,862) Travel expenses (219,426) - (219,426) Recoverable disbursements j (853,020) (853,020) - Office supplies - - - Other expenses from ordinary activities h (1,740,134) 10,338 (1,729,796) Profit before income tax 3,009,037 (85,868) 2,923,169 Income tax expense b (883,559) 19,855 (863,704) Profit attributable to the members of Runge Limited 2,125,478 (66,013) 2,059,465



(3) Reconciliation of cash Flow statement for the year ended 30 June 2005 The adoption of AIFRS has not resulted in any material adjustment to the cash flow statement.

(4) Notes to the reconciliation of equity

(a) Foreign currency translation reserve The Group has elected to apply the exemption in AASB 1 First-time Adoption of International Financial Reporting Standards. The cumulative translation differences for all foreign operations represented in the foreign currency translation reserve are deemed to be zero at the date of transition to AIRFSs. The effect is:

(i) At 1 July 2004 The balance of the $69,897 debit in the foreign currency translation reserve of the Group is reduced to zero. Retained earnings is decreased by this amount. There is no effect on the parent entity.

(ii) At 30 June 2005 The balance of the $69,897 debit in the foreign currency translation reserve of the Group at 1 July 2004 is reduced to zero. Retained earnings is decreased by this amount. There is no effect on the parent entity.

(iii) For the year ended 30 June 2005 There is no effect on the Group or the parent entity.

(b) Income tax

Under AGAAP income tax expense was calculated by reference to the accounting profit after allowing for permanent differences. Under AASB 112 “Income Tax” all income tax balances are calculated using the comprehensive balance sheet liability method. Deferred tax items will be calculated by comparing the difference in carrying amounts to tax bases for all assets and liabilities and multiplying this by the tax rates expected to apply to the period when the asset is realised or the liability settled. Recognition of the resulting amounts is subject to some exceptions, but generally deferred tax balances are calculated for each item in the balance sheet. Deferred tax assets will only be recognised where there exists the probability that future taxable profit will be available to recognise the asset. The effect of this is:

At 1 July 2004 and at 30 June 2005 The effects on the deferred tax asset of the adoption of AIFRS are as follows (tax rate 30%);

01-July-2004 30-June-2005 Consolidated Parent Consolidated Parent $ $ $ $ Operating leases 20,665 20,665 40,520 40,520

Increase in deferred tax asset 20,665 20,665 40,520 40,520

The effects on the deferred tax liability of the adoption of AIFRS are as follows (tax rate 30%); 01-July-2004 30-June-2005 Consolidated Parent Consolidated Parent

$ $ $ $

Finance leases (10,486) (7,699) (24,683) (7,699)

Increase in deferred tax liability (10,486) (7,699) (24,683) (7,699)



(c) Lease expenditure

Under AGAAP, operating lease expenditure was incurred when legally due. However, under AASB 117 “Leases”, lease expenditure regarding operating leases is incurred on a straight-line basis over the lease term.

(i) At 1 July 2004 For the Group and parent entity non-current liabilities increased by $68,886, retained profits decreased by $48,221 and deferred tax assets increased by $20,665.

(ii) At 30 June 2005 For the Group and parent entity non-current liabilities increased by $154,754. The increase in the liability from 1 July 2004 of $85,868 is charged to the income statement. Deferred tax assets and retained profits both increased by $40,520.

(iii) For the year ended 30 June 2005 Rental expense increased by $85,868 in both the Group and parent entity.

(d) Intangible assets

Development expenditure of $227,770 was capitalised under AGAAP. This expenditure does not qualify for recognition as an intangible asset under AIFRS and intangibles at the date of transition has been adjusted accordingly.

(i) At 1 July 2004 For the Group and parent entity intangible assets decreased by $227,770 and retained profits decreased by the same amount.

(ii) At 30 June 2005 For the Group and parent entity intangible assets decreased by $227,770 and retained profits decreased by the same amount.

(iii) For the year ended 30 June 2005 There is no effect on the Group and parent entity.

(e) Reclassification of external software

External software has been reclassified to intangibles from property, plant and equipment.

(i) At 1 July 2004 The Group’s intangible assets have increased by $106,438 and the parent’s intangible assets increased by $105,535. There is a corresponding decrease in property, plant and equipment balances.

(ii) At 30 June 2005 The Group’s intangible assets have increased by $130,509 and the parent’s intangible assets increased by $110,516. There is a corresponding decrease in property, plant and equipment balances.


(f) Reclassification of finance costs

Finance costs have been reclassified from Intangibles to non-current interest bearing liabilities. (i) At 1 July 2004 There is no effect on the Group or the parent entity.

(ii) At 30 June 2005 Intangible assets increased by $64,135 and interest bearing liabilities decreased by the same amount for the Group. There is no effect on the parent entity.




(g) Share based payments

Recognition and measurement requirements of AASB 2 regarding share based payments have not been applied retrospectively to: - equity instruments granted on or before 7 November 2002 - equity instruments that were granted after 7 November 2002 that vested before the later of the date of

transition to AIFRSs and 1 January 2005: - liabilities arising from share-based payment transactions that were settled before the later of the date of

transition to AIFRSs and 1 January 2005. (i) At 1 July 2004 There is no effect on the Group or the parent entity.

(ii) At 30 June 2005 There is no effect on the Group or the parent entity.


(h) Proceeds on sale of non-current assets

Under previous AGAAP, proceeds from the sale of non-current assets were included in revenue and the book value of the assets sold was included in other expense. Under AIFRS, net gains on the sale of assets are presented in other income and net losses in other expenses. The effect of this is:

(i) At 1 July 2004 and 30 June 2005 There is no effect on the Group or the parent entity.

(ii) For the year ended 30 June 2005 For the Group, revenue and other expense have decreased by $13,705 and for the parent entity they have decreased by $10,338. There is no effect on profit for the year.



(i) Foreign exchange gains and losses

Under previous AGAAP, the net foreign exchange gains and losses were included in revenue. Under AIFRs, net foreign exchange gains are presented in other income and net losses in other expenses. The effect of this is:


(ii) For the year ended 30 June 2005 For the Group, revenue and other expense have increased by $189,602 and for the parent entity revenue has decreased by $96,712 and other income has increased by $96,712. There is no effect on profit for the year.

(j) Disbursements recovered

Under previous AGAAP, proceeds from the recovery of disbursements was included in revenue and the related costs included in expenses. Under AIFRS, the net gain on the recovery of disbursements is presented in other income and the net loss in other expenses. The effect of this is:


(ii) For the year ended 30 June 2005 For the Group, revenue has decreased by $1,750,895 and expenses decreased by $1,453,210. For the parent entity, revenue has decreased by $878,869 and expenses decreased by $853,020. There is no effect on profit for the year.


international proforma financial statements 2005

Documents