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INTERNATIONAL PROFORMA FINANCIAL STATEMENTS 2005
 

INTERNATIONAL PROFORMA FINANCIAL STATEMENTS 2005

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    INTERNATIONAL PROFORMA FINANCIAL STATEMENTS 2005 INTERNATIONAL PROFORMA FINANCIAL STATEMENTS 2005 Document Transcript

    • RUNGE LIMITED 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. Runge Limited Page 2
    • RUNGE LIMITED AND CONTROLLED ENTITIES DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2006 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. Runge Limited Page 3
    • RUNGE LIMITED AND CONTROLLED ENTITIES DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2006 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. Runge Limited Page 4
    • RUNGE LIMITED AND CONTROLLED ENTITIES DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2006 Information on Directors Share holdings at the date of this report Special Ordinary Preference Options Directors Experience Responsibilities shares * shares Ian Runge Non - Executive Chairman, Chairman, 1,193,210 5,608,087 Nil Company founder. Chairman – Audit Committee Qualifications: M.E. (Mining Engineering), Ph D. (Economics), FAusIMM, FAICD. Tony Kinnane Managing Director, 19 years Managing Director 787,701 3,181,994 Nil with Runge. Qualifications: Grad. Dip. M.E. Grad. Dip. Geology, Grad. Dip. BA. Christian Larsen Executive Director, 19 years Executive Director 391,777 1,352,801 Nil with Runge, Business Development & Strategy. Qualifications: B.E. (Mining Engineering), MBA, FAICD, PE. Christopher Still Non – Executive Director since Non – Executive Director Nil (**) Nil (**) Nil 2000. Consultant Investment Member – Audit Committee Banker with Beerworth & Partners Limited, B Econ., Grad. Dip. Corp. Fin. (London Bus. School). Greg Smith Non – Executive Director since Non – Executive Director Nil (***) Nil (***) Nil March 2006 to August 2006. Head of Private Equity AMP Capital Investors. Over 20 years experience investing and managing private investments. Diploma of Accounting. Peter Ludemann Non – Executive Director since Non – Executive Director Nil (***) Nil (***) Nil 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 Non – Executive Director Nil (***) Nil (***) Nil 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. Runge Limited Page 5
    • RUNGE LIMITED AND CONTROLLED ENTITIES DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2006 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 Page 6
    • 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) - (300,240) (176,372) (138,282) (85,868) Office supplies 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 (375,389) (317,174) - - Mining Services (Pty) Ltd Net profit attributable to members of Runge 4,001,152 2,317,895 3,100,944 2,059,465 Limited The above income statements should be read in conjunction with the accompanying notes. Runge Limited Page 8
    • RUNGE LIMITED AND CONTROLLED ENTITIES BALANCE SHEETS AS AT 30 JUNE 2006 Consolidated Parent entity 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. Runge Limited Page 9
    • RUNGE LIMITED AND CONTROLLED ENTITIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006 Reserve Foreign Arising Currency from an Contributed Revaluation Translation Equity Retained Minority Total Consolidated Equity Reserve Reserve Transaction Profits Interests Equity $ $ $ $ $ $ $ Balance at 1 July 2005 1,571,344 18,275 (88,178) - 4,044,699 136,388 5,682,528 Exchange 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 Runge Limited Page 10
    • RUNGE LIMITED AND CONTROLLED ENTITIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006 Contributed Retained Parent Equity Reserves 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 Runge Limited Page 11
    • RUNGE LIMITED AND CONTROLLED ENTITIES STATEMENTS OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2006 Consolidated Parent entity 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 (669,907) (273,031) (547,101) (252,284) software Proceeds from sale of property, plant and 122,205 - 16,590 - equipment 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 - - - (67,510) borrowings 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 (1,041,671) 1,021,041 483,848 (1,524,336) activities 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 Page 12
    • 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 Runge Limited Page 13
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Runge Limited Page 14
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (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. Runge Limited Page 15
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (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. Runge Limited Page 16
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (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. Runge Limited Page 17
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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. Runge Limited Page 18
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 2. SEGMENT INFORMATION 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 Runge Limited Page 19
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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. REVENUE AND OTHER INCOME Consolidated Parent entity 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 Runge Limited Page 20
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 4. PROFIT BEFORE INCOME TAX Consolidated Parent entity 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 21,468 - 19,548 - equipment * The parent entity forgave part of loan to Runge Latin America Limitada. Runge Limited Page 21
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 5. INCOME TAX EXPENSE (a) Income tax expense Consolidated Parent entity 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 (158,942) (74,643) (117,911) (4,101) (note 6) (Decrease) increase in deferred tax liabilities (10,057) (4,664) 6,927 430 (note 8) (168,999) (79,307) (110,984) (3,671) (b) Numerical reconciliation of income tax expense to prima facie tax payable Consolidated Parent entity 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% 1,820,910 1,133,320 1,273,619 876,951 (2005 - 30%) 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 Runge Limited Page 22
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 6. NON-CURRENT ASSETS – DEFERRED TAX ASSETS Consolidated Parent entity 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 605,889 446,947 474,077 356,166 more than 12 months 7. CURRENT LIABILITIES – CURRENT TAX LIABILITIES Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Income tax 431,811 176,216 192,895 19,101 Runge Limited Page 23
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 8. NON CURRENT LIABILITIES – DEFERRED TAX LIABILITIES Consolidated Parent entity 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 145,234 155,291 145,234 138,307 more than 12 months 9. CURRENT ASSETS – CASH AND CASH EQUIVALENTS Consolidated Parent entity 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 4,826,109 4,662,970 2,897,371 Runge Limited Page 24
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 10. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES Consolidated Parent entity 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 5,429,055 3,227,731 2,712,467 11. CURRENT ASSETS – INVENTORIES Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Software stock 9,015 - 9,015 - Work in progress 314,823 267,497 284,577 153,276 323,838 267,497 293,592 153,276 12. NON CURRENT ASSETS – RECEIVABLES Consolidated Parent entity 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 Runge Limited Page 25
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 13. NON CURRENT ASSETS – OTHER FINANCIAL ASSETS Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Non-traded investments Shares in controlled entities - at cost 2,859,486 435,447 - - Less: Provision for write down to (9,379) (9,379) recoverable amount - - 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. 14. NON CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT 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 105,195 160,090 63,150 80,273 finance lease 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 Runge Limited Page 26
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 PROPERTY, PLANT AND EQUIPMENT 2006 Plant & Furniture & Office Computer Motor equipment Total fittings equipment equipment vehicles under finance lease $ $ $ $ $ $ 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 Plant & Furniture & Office Computer Motor equipment Total fittings equipment equipment vehicles under finance lease $ $ $ $ $ $ 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 15. NON-CURRENT ASSETS – OTHER Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Prepayments 10,343 10,353 10,343 10,423 Runge Limited Page 27
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 16. NON CURRENT ASSETS – INTANGIBLE ASSETS Development External Goodwill Total costs software 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 - 249,983 - 249,983 subsidiary 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 Year ended 30 June 2005 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. Runge Limited Page 28
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Development External software Total costs Parent $ $ $ Year ended 30 June 2006 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 Year ended 30 June 2005 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 17. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES Consolidated Parent entity 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 1,996,606 1,241,764 1,476,655 1,076,056 Service and Support Income received in advance – Consulting 437,143 256,922 - - Fees Payable to controlled entities 699,050 229,189 - - 5,338,966 4,069,396 4,378,573 3,358,123 Runge Limited Page 29
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 18. CURRENT LIABILITIES – BORROWINGS Consolidated Parent entity 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 - - 648,451 645,163 7,547 20,073 19. NON-CURRENT LIABILITIES – BORROWINGS Consolidated Parent entity 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 951,393 2,213,658 8,166 10,689 liabilities 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. 20. CURRENT LIABILITIES – PROVISIONS Consolidated Parent entity 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 1,192,646 1,171,971 927,313 21. NON CURRENT LIABILITIES – PROVISIONS Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Employee benefits Long service leave 133,826 35,255 133,826 35,255 Runge Limited Page 30
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 22. NON CURRENT LIABILITIES – OTHER Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Lease payables 169,052 154,754 169,052 154,754 23. CONTRIBUTED EQUITY Consolidated and Parent entities Notes 2006 2005 2006 2005 Number of Number of $ $ shares 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 - - 31,338,222 237,539 4,736,092 1,571,344 (a) Movements in ordinary share capital: Number of Price per Date Details Notes $ shares 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 Shares converted to stapled ordinary shares 28 Sep 2005 4,760,000 280,933 (at a ratio of 1 : 20) 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) Shares issued to acquire additional interest in MRM Mining 15 Jun 2006 380,950 1.08 411,810 Services (Pty) Ltd 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 Runge Limited Page 31
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (b) Movements in preference share capital: 2006 Number of Price per Date Details Notes $ shares share $ 1 Jul 2005 Opening balance - - 28 Sep 2005 Shares converted to stapled preference shares (in the ratio 22,372,000 1,320,386 of 1 to 94) 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 (80,573) issue 15 Jun 2006 Shares issued to acquire additional interest in MRM 1,790,465 0.87 1,554,553 Mining Services (Pty) Ltd Costs associated with share (164,689) issue 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. Runge Limited Page 32
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (e) Options Consolidated and Parent Entity - 2006 Type Exercise price Balance at start Exercised during Balance at end of the year the year of the year Type 3 plan $65.02 461 (461) - Consolidated and Parent Entity - 2005 Type Exercise price Balance at start Exercised during Balance at end of the year the year of the year Type 2 plan $20.00 4,420 (4,420) - Type 3 plan $65.02 2,307 (1,846) 461 24. RESERVES AND RETAINED PROFITS Consolidated Parent entity 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 4,044,699 3,435,832 3,364,127 3,013,690 financial year Net profit attributable to members of Runge 4,001,152 2,317,895 3,100,944 2,059,465 Limited 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 6,141,900 4,044,699 4,561,120 3,364,127 year Runge Limited Page 33
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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. 25. DIVIDENDS Parent entity 2006 2005 $ $ (a) Ordinary shares Dividends paid in cash during the year were: Final dividend of $0.06 per share fully franked paid on 1 November 2005 1,342,320 1,352,832 Interim dividend of $0.02 per share fully franked paid on 28 February 2006 561,631 356,196 1,903,951 1,709,028 (b) Post balance date dividends 2006 Final dividend of: • $0.077 per preference share fully franked paid on 27 October 2006 1,929,416 • $0.065 per ordinary share fully franked paid on 27 October 2006 408,257 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 908,252 644,246 a tax rate of 30% 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. Runge Limited Page 34
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 26. KEY MANAGEMENT PERSONNEL DISCLOSURES 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. Runge Limited Page 35
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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 Share- Post - employment 2006 Short-term benefits based benefits payment Cash Non – Cash Super- Retirement salary and monetary Options Total Name bonus annuation Benefits fees benefits $ $ $ $ $ $ $ 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 Runge Limited Page 36
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Share- Post - employment 2005 Short-term benefits based benefits payment Cash Non – Cash Super- Retirement salary and monetary Options Total Name bonus annuation Benefits fees benefits $ $ $ $ $ $ $ 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- Post - employment 2006 Short-term benefits based benefits payment Cash Non – Cash Super- Retirement salary and monetary Options Total Name bonus annuation Benefits fees benefits $ $ $ $ $ $ $ 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- Post - employment 2005 Short-term benefits based benefits payment Cash Non – Cash Super- Retirement salary and monetary Options Total Name bonus annuation Benefits fees benefits $ $ $ $ $ $ $ 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 Runge Limited Page 37
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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. Balance Converted Sale Sale Purchase Purchase at Converted into Balance Balance of into of of of of Name the start preference of ordinary preference ordinary ordinary preference ordinary preference of the shares shares shares shares shares shares shares shares year 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 - - - - - - - - - 27. REMUNERATION OF AUDITORS 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. Consolidated Parent entity 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 - - Runge Limited Page 38
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 28. COMMITMENTS Consolidated Parent entity 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 3,193,906 3,195,204 2,262,664 3,194,085 years Later than 5 years - 584,963 - 584,963 Commitment not recognised in the financial 4,390,623 4,520,847 3,070,549 4,493,299 statements. 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 - - - - 145,278 180,630 145,278 180,630 Consolidated Parent entity 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 42,760 37,848 11,014 17,318 years 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 51,291 15,713 30,762 Runge Limited Page 39
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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. 29. RELATED PARTY TRANSACTIONS 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. 30. INVESTMENTS IN CONTROLLED ENTITIES Country of Class of Equity Cost of parent entity's Name of entity incorporation 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 Brazil Ordinary 100 - 275,400 - do Brasil Ltda 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. Runge Limited Page 40
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 31. BUSINESS COMBINATIONS 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 54,843 acquisition 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) Outflow of cash 2,960,099 Runge Limited Page 41
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 32. EVENTS AFTER THE BALANCE SHEET DATE 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. 33. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITES Consolidated Parent entity 2006 2005 2006 2005 $ $ $ $ Profit from ordinary activities after income 4,376,541 2,635,069 3,100,944 2,059,465 tax 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 (158,942) (74,643) (117,911) (4,101) benefit Decrease (increase) in inventories (56,341) 7,155 - (41,772) Decrease (increase) in other operating (148,530) 45,309 (115,341) (376,545) assets Increase (decrease) in trade creditors 193,143 634,830 81,820 742,197 Increase (decrease) in other operating 1,491,802 (95,700) 519,386 (186,354) liabilities Increase (decrease) in provision for income 255,595 (128,188) 173,794 (205,665) taxes payable Increase (decrease) in provision for deferred (10,057) (4,664) 6,927 430 income tax 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 Runge Limited Page 42
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 34. MINORITY INTEREST Consolidated Parent entity 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 136,388 the financial year - - - 35. FINANCIAL INSTRUMENTS: INTEREST RATE RISK AND CREDIT RISK EXPOSURES 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 Consolidated Parent entity 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. Runge Limited Page 43
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 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 Effective Over 1 More Floating Non-interest 1 year weighted to than interest Total bearing or less average 5 years 5 years rate 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 Effective Over 1 More Floating Non-interest 1 year weighted to than interest Total bearing or less average 5 years 5 years rate 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 - Runge Limited Page 44
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 36. EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS’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 Effect of Effect of Previous Previous transition Consolidated Note transition AIFRSs AIFRSs AGAAP AGAAP to 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 36,923 - 36,923 - - - using the equity method 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 def 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 bcd 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 Runge Limited Page 45
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Reconciliation of Equity at 1 July 2004 Reconciliation of Equity at 30 June 2005 Effect of Effect of Previous Previous transition Parent Note transition AIFRSs AIFRSs AGAAP AGAAP to 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 de 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 bcd 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 Runge Limited Page 46
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (2) Reconciliation of profit for the year ended 30 June 2005 Effect of Previous Consolidated Note transition AIFRS AGAAP to AIFRS $ $ $ Revenue from ordinary hij activities 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 hi activities (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 (317,174) (317,174) Services (Pty) Ltd Profit attributable to the 2,398,105 (80,210) 2,317,895 members of Runge Limited Effect of Previous Parent Note transition AIFRS AGAAP to AIFRS $ $ $ Revenue from ordinary hj activities 14,823,953 (985,919) 13,838,034 Other income ij - (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 h activities (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 2,125,478 (66,013) 2,059,465 members of Runge Limited Runge Limited Page 47
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (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) Runge Limited Page 48
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (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. (iii) For the year ended 30 June 2005 There is no effect on the Group or the parent entity. (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. Runge Limited Page 49
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (iii) For the year ended 30 June 2005 There is no effect on the Group or 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. (iii) For the year ended 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. Runge Limited Page 50
    • RUNGE LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 (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: (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 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: (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 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. Runge Limited Page 51