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Ainsworth Game Technology
Annual Report 2008
Ainsworth Game Technology’s continued product strategy launched in
2007 and the introduction of the Ambassador SL model has culminated
into a formidable global product range, tailored to delivering unique,
innovative and entertaining games producing sustainable high levels
of performance.
Brand development and the establishment of game families remains
the key focus, building intellectual property in hardware platforms
and games, portable across multiple jurisdictions.
Ainsworth Game Technology’s Gameplus™ product range has
been approved in multiple jurisdictions assisting in positioning
the Company in the design, development and sale of gaming
technologies globally.
Gameplus™ product range has been further expanded producing
benchmark performance across multiple product categories
headlined by “$”Mystery Progressives, Play 40 Lines™, Play 50
Lines™, Double Shot™ standalone progressives and MutliPlay™
products.
These quality product ranges further reinforce Ainsworth Game
Technology core aspirational values of - quality, innovation and
excellence.
Welcome to Ainsworth Game Technology.
Key Dates
Annual General Meeting:
Wednesday 26th November 2008
Results announcement for six months
ending 31st December 2008:
18th February 2009
Results announcement for
year ending 30th June 2009:
27th August 2009
Dates may be subject to change.
Notice of Annual General Meeting
Ainsworth Game Technology Limited
ABN 37 068 516 665
Notice is hereby given that the 2008 Annual General Meeting of the
members of Ainsworth Game Technology Limited will be held at:
Bankstown Sports Club
“Georges River Room”
8 Greenfield Parade (Cnr Greenfield Parade and Mona Street)
BANKSTOWN NSW 2200
on Wednesday 26th November 2008
at 10.00am.
AiNSWORTh GAMe TeChNOLOGy ANNuAL RePORT 2008
contents
01
page
executive chairman’s report .......................................................................... 2
Chief Executive Officer’s Report ..................................................................... 3
operational review .......................................................................................... 5
information About shareholders and noteholders ........................................ 9
corporate Governance statement ................................................................ 11
Annual Financial report ............................................................................... 18
corporate Directory ............................................................. inside Back cover
Australasian Gaming Expo, Sydney 2008
Ainsworth GAme technoloGy AnnuAl report 2008
02 executive chAirmAn’s report
“The revised product strategy is continuing
to provide improved product performance
and has further enhanced the company’s
range of products. the expanded game
brands available are proving successful
and providing both increased operator
returns and player acceptance.”
Dear shareholder,
i am pleased to advise that following previously announced restructuring undertaken the company is making good
progress towards its primary objective, namely to establish profitable trading from its business activities over the short
to medium term.
the revised product strategy is continuing to provide improved product performance and has further enhanced the
company’s range of products. the expanded game brands available are proving successful and providing both increased
operator returns and player acceptance.
ongoing
program is expected to further enhance market acceptance when these new products are released.
in research and development for the next stage of the company’s product release
investment
As outlined in the enclosed 2008 Annual Financial report, i have provided the necessary funding of $4.1 million, in addition
to existing facilities, to enable the company to expand its newington premises. All operations are now consolidated at this
facility, resulting in greater efficiencies and significant cost reductions. The full benefit of this consolidation will provide
financial gains in future years.
Progress is being made in all areas of the Company’s operations, however the current international financial crisis may
have an effect on the Company’s business that is difficult to predict. Historically, the gaming industry has been less
affected than most other sectors during difficult economic periods.
through selective recruitment, training and development and internal promotions, we have now established a talented
team of gaming personnel combining youth, as well as seasoned gaming industry knowledge and experience. this will
ensure continued achievement of the company’s objectives over years to come. the team has been very ably led by the
Chief Executive Officer, Mr Danny Gladstone, who has the full confidence and support of the Board.
I continue to be fully supportive of the Company despite the disappointing financial results achieved thus far. This is
based on my belief that the difficulties being faced by the industry worldwide is an opportunity for “Ainsworth” in the
global gaming market resulting from the strategies employed. my support has included the provision of additional
financial facilities to the Company and the underwriting and taking up my full entitlement in the rights issue completed
in December 2007. this has assisted the company to strengthen its capital structure and provided the necessary funding
to continue investment in research and development and licensing strategies.
i wish to thank all shareholders, fellow directors, executive management and staff for their continued support to the
company and for the efforts to bring about the expected turnaround.
Len Ainsworth
executive chairman
Ainsworth GAme technoloGy AnnuAl report 2008
chieF executive oFFicer’s report
03
“The initiatives implemented include
a strengthened management team,
restructuring and rationalisation, and a
revamped product development program –
have started to take effect and “Ainsworth”
is now in a stronger position to complete
its financial turnaround.”
Dear shareholder,
Over the past year our major focus and commitment has been on improving profitability, increasing sales and positioning
Ainsworth for future growth. the results have been most gratifying and the company has a positive outlook for the future,
despite the tough financial times internationally.
While the Company reported an operating loss for the 2008 financial year of $19.4 million, the result was a major improvement
on the $49.5 million loss in the previous year.
the second half of the 2008 result, included $5.4 million of foreign exchange losses and one off impairment charges and
provisions. overall, excluding the impact of these one off items, the second half achieved a 69% improvement in trading
performance, as compared to the first half of the 2008 financial year.
The turnaround achieved to date is encouraging and we are confident that the execution thus far of the strategies identified
when i joined Ainsworth some 20 months ago, will continue to show positive results in the years ahead.
the 2008 year did present the company with many challenges. however with the support of the company’s loyal and dedicated
employees, the key issues previously identified as part of the Company’s Business Plan have either been finalised or are well
on track to completion.
the initiatives implemented include a strengthened management team, restructuring and rationalisation, and a revamped
product development program – have started to take effect and “Ainsworth” is now in a stronger position to complete its
financial turnaround.
i am pleased to report that sales revenue increased by 60% for the 2008 year. this was achieved largely as the result of improved
access in the key markets of the Americas, Europe and Asia. The difficulties faced by the worldwide gaming industry present an
opportunity for the company going forward, as we are well positioned in a number of important international markets.
the company continues to expand its operations within the key north American market through the recruitment of experienced
gaming executives and the continued establishment of an appropriate infrastructure to capitalise on the significant opportunities
available. The 2008 financial year commenced to realise the benefits of this investment with sales revenue of $7.3 million, of
which $7.0 million was achieved in the second six months of the year. this compares to sales revenue of $0.2 million in the
2007 financial year.
in other international territories, all relevant product approvals have been received and initial deliveries have occurred to
the company’s distributors in Asia, new Zealand and selected european markets. within Asia a long term agreement with
the company’s Asian partner, rGB sdn Bhd, will provide increased certainty of revenue within this territory in the short to
medium term.
The Company faces ongoing challenges in the domestic market, especially in New South Wales where the difficult legislative
and regulatory environment, including smoking regulation and growing taxes, continues to have an impact. revenue achieved
in Queensland and victoria, following receipt of approvals in may and June of the 2008 year assisted in offsetting the shortfalls
experienced within nsw. Following positive product acceptance at the Australasian Gaming expo held in August 2008 and
shipments to date, initial signs of improving market conditions are evident.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
04
chieF executive oFFicer’s report (continued)
Following the comprehensive review of all operations and the provision of additional funding by the company’s founder
and executive chairman, the company has relocated all operational activities to its newington premises. this will reduce
operational costs and continue to improve efficiency as the Company progresses its strategy to achieve the necessary licenses
and product approvals in targeted global markets.
consolidation of various departments, streamlining of manufacturing operations and utilisation of selective distributor sales
channels in markets with unique legislative and product requirements, have resulted in increased efficiencies and a reduction
in operating costs of 23%, compared with the corresponding period in 2007.
the management and reduction in working capital requirements through reduced inventory levels and the limiting of extended
credit terms offered to international customers continues to be a priority for the company. this, combined with current funding
available, will ensure the company generates the necessary cash from its operations to achieve its objectives in the short to
medium term.
previous legal action by the company has now been successfully resolved, reducing further costs and allowing more attention
to aspects of the Company’s operations which will provide the greatest financial benefits.
the company continues to improve its performance across a number of key operational areas including research and
development, human resources, and compliance and licensing.
continued investment in research and development and intellectual property will ensure advanced technological innovations
are available to all existing and emerging markets. the company’s staff performance management system and retention
programs will be further refined to ensure appropriate recognition and rewards for our employees. Regulators have found the
company has embraced a culture of compliance.
in accordance with best practice in management and our obligations to shareholders, we have been taking steps to ensure the
continuity of all business operations in the future and this includes succession planning, which is on-going.
having said that i’m pleased to report that our executive chairman, mr len Ainsworth, remains in robust good health and
we look forward to him continuing to provide invaluable support, expertise and assistance to the company for many years
to come.
With the groundwork now established for a turnaround in trading performance and profitability, we are confident the outlook
for the company is positive. i would like to thank the chairman and Directors, the management team and all staff members for
their continued commitment to the company.
Danny Gladstone
Chief Executive Officer
Ainsworth GAme technoloGy AnnuAl report 2008
operAtionAl review
05
Sales
sales revenue for the 2008 year was $49.6 million compared to $31.0 million in the previous corresponding period in 2007,
an increase of 60%.
the principal factors which contributed to the increase in revenue were the improved penetration within the key international
markets of the Americas, europe and Asia which represented 68% of total revenue achieved, an increase of $19.4 million or
134% on the previous period in 2007.
the market conditions within Australia continued to present challenges and resulted in domestic revenue of $14.9 million
during the 2008 year compared to $18.3 million for the corresponding period in 2007. the recent legislative and regulatory
environment within New South Wales, specifically in relation to smoking regulation and growing taxes, had a limiting affect
within this market. Achievement of the necessary product approvals within the Queensland and victorian markets assisted
in offsetting the slow down experienced within new south wales.
Further diversification into selected new international markets will assist in ensuring revenue growth can be sustained.
During 2008 revenue of $6.4 million was achieved within Asia, representing a 234% increase over the corresponding period
in 2007. the company has agreed a long term manufacturing, supply and distribution agreement with its Asian partners
rGB sdn Bhd which will provide increased certainty of revenue in future periods within this territory.
increased investment within the Americas resulted in revenue of $22.9 million being achieved, an increase of 118% on the
previous year. the company’s growth prospects within the key north American market are highly dependant on securing
the necessary gaming licenses and product approvals in the jurisdictions concerned. Already the company is licensed in 14
states and 53 tribes, with several new jurisdictional licenses expected in the coming year.
the further expansion of the global product strategy and the display of regulatory approved product at the Australasian
Gaming expo (AGe) held in August 2008, and the forthcoming G2e in las vegas in november, will continue to provide
revenue opportunities within all domestic and international markets.
Service
the company has increased its direct service footprint and continues to reduce operational expenditure in line with market
conditions within new south wales. the service division has over 7,000 machines currently under venue maintenance
agreements with further initiatives underway to expand market share and provide continued value added service to our
customers.
technical expertise and support offered to the market has increased substantially during the year. the provision of service
maintenance has strengthened the company’s relationships with customers and provides direct feedback regarding
technical performance to all operational areas, ensuring increased product reliability.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
06 operAtionAl review
“The Company has achieved
high yielding game performance
across multiple jurisdictions
and over a number of product
categories, the consistent
standout performer being
“$” Mystery Progressives.”
Product Development
Significant milestones were achieved in 2008 with the further expansion of the Gameplus™ product range and the consolidation
of game development programs on the Ambassador SL™ platform. With over 700 game approvals realised worldwide, the
Product Development group has not only engendered efficiency but has supported the key corporate objective of expanding
product range through first class game innovation and product presentation.
investment in intellectual property has continued with the acquisition of licensed technologies and further patent and
trademark applications. the company has achieved high yielding game performance across multiple jurisdictions and over
a number of product categories, the consistent standout performer being “$” Mystery Progressives.
Emphasis on investment in innovation and technology advancement resulted in the introduction of four new Gameplus™
brands. The recent product releases, including Double Shot™ standalone progressives, Double Action™, Play 40 line and
play 50 line games, are performing well above the industry benchmark.
through 2009, the game development strategy will continue to centre on the consolidation and leveraging off existing
Gameplus™ brands and game styles. In addition, the range of games capable of being channeled to multiple jurisdictions
are readily incorporated into enhancements in progress.
Research and Development (R&D) / Engineering
to further enhance the company’s technical responsiveness and its ability to service customers on a global basis, the
r&D, engineering and product management departments have been consolidated under a newly formed technical services
group. This combined department allows the Company to efficiently deploy its technical resources to meet global customer
and market requirements.
the technical services group has further streamlined the development and submission of hardware and software products
and is based on geographical regions with cross functional support activities. this has enabled the company to focus on
continued improvement in product and approval cycles, resulting in reduced approval costs and assisting with the timely
release of product to targeted markets.
over the last twelve months these departments have gained approval for and released the company’s latest gaming platform
(Ambassador sl) into all major Australian, new Zealand and international markets (including north and south America,
Asia and europe) with ongoing submissions projected for the 2009 year.
the recruitment of additional experienced industry personnel is facilitating future developments in line with the company’s
planned product releases. the r&D department continues to invest in the development of the company’s intellectual
property which incorporates advanced technological innovations available to the company. this will ensure the continued
development of modular, cost effective, energy efficient, high performance platforms, which will be available to all existing
and emerging markets.
Compliance and Licensing
over the past year the company continued to develop its compliance program based on the Australian standard, As 3806.
Under the Company’s regulatory framework, compliance issues of concern are identified, reported and analysed to determine
the root cause and ensure necessary resolution.
Ainsworth GAme technoloGy AnnuAl report 2008
07
1315.4mm
1204.6mm
627.4mm
496.4mm
540.0mm
570.0mm
489.5mm
562.8mm
changes within the compliance division
internal auditor, the development
and implementation of an internal audit program and the incorporation of the technical compliance function.
these changes reinforced the independence of key functions within the business, namely compliance, internal audit,
quality and the testing and evaluation of the company’s products.
included the appointment of an
the company’s quality management system is already fully accredited and complies with the As/nZ iso 9001:2000 standard.
the company continues to demonstrate its commitment to continuous improvement by successfully maintaining its quality
accreditation through regular independent surveillance audits of its quality management system during the year. the recent
appointment of a quality co-ordinator with over 10 years experience in quality assurance will ensure that the company
continues to effectively manage and improve its quality management system.
the north America market remains a key focus for the company’s compliance and licensing strategic plan. As at 30 June
2008, the company is approved to conduct business in fourteen (14) states which includes approvals over the past year for
indiana, iowa, new mexico, north Dakota and oklahoma. the Ainsworth Group has 53 tribal licences (compared to 26 at the
same period last year) across california, connecticut, Florida, michigan, new mexico, north Dakota, oklahoma, oregon and
wisconsin. licence submissions for key provinces within canada have been submitted and approvals are expected.
the company’s licensing strategy at present is to aggressively target further state and tribal applications in north America
and in a number of canadian provinces. the strategy undertaken initially targets jurisdictions where the necessary product
approvals are either available or can be readily utilised. this will reduce delays in achieving revenue due to the approval cycle
and ensure the timely penetration into key gaming jurisdictions, as well as building a presence in new territories.
Manufacturing
The manufacturing operations of the Company have seen improved efficiencies in both material and labour utilisation
resulting from the consolidation of product lines as part of the implemented sales strategy.
this included a review of the company’s manufacturing facilities which resulted in building developments to allow
the relocation of all operations to the Newington facility. This will result in further efficiency gains being achieved.
Enhancements to the Newington facility also provided increased material storage and product flow efficiencies with
anticipated reduction in costs.
completion of the enhancements to the company’s enterprise resource planning (erp) system will allow the material
resource planning functions, in conjunction with improvements in supply chain management, further reducing inventory
levels and lead times previously experienced.
The strengthening of quality control procedures within the manufacturing division, combined with operating efficiencies,
resulting from ongoing review of production systems and procedures, are expected to reduce operational costs in future
periods.
Finance
As outlined in the Appendix 4e and Annual Financial report improved trading performance was achieved over the year. the
operating loss of $19.4 million incurred in the financial year ended 30 June 2008 resulted from the previously undertaken
review of all aspects of the company’s operations. As a result of this review, initiatives were introduced to ensure a turnaround
in trading performance and profitability is achieved.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
08 operAtionAl review
Finance (continued)
Operating costs, excluding costs of sales and financing costs, resulted in a 23% reduction on the corresponding period
in 2007. this reduction was a result of the review undertaken to ensure cost structures were commercially aligned with
realistic revenue expectations whilst the company progresses its objectives in global markets.
The cash outflow from operations was $5.1 million compared to an outflow of $2.8 million in the corresponding period in
2007. the rationalisation previously undertaken has ensured reductions in operational expenditure and current levels of
working capital investment which have assisted in offsetting cash used in operations. continued attention to reduce the
extent of credit offered on international sales and the streamlining of supply chain management will further reduce the
company’s working capital requirements in 2009.
The Company’s capital structure was significantly strengthened as a result of the fully underwritten rights issue completed
in December 2007. this issue raised $27.3 million before issue costs, and resulted in a reduction of debt obligations of $18.9
million and cash proceeds of $8.4 million. this capitalisation provided funding to enable the company to pursue its medium
term objectives.
For further commentary on the results for the year refer to the “Operating and Financial Review” within the Directors’ Report.
Human Resources
the restructure previously undertaken, which consolidated the human resources department and related administration
services within the Finance Division has resulted in significant cost economies and efficiencies being achieved.
During the year the performance management system was assessed and refined so as to provide a framework to manage
and develop employees across all operations of the company. the performance management process provides regular
and formal assessment of an employees work performance against agreed Key performance indicators (Kpi’s) and where
appropriate allows for access to any necessary training and development.
Significant challenges and opportunities within Human Resources over the ensuing year will focus on talent management
encompassing the following:
• Continued recruitment of suitably qualified and experienced candidates;
• Access to training and development opportunities to benchmark the status of improvement;
• performance management processes that measure individual performance against company objectives, including the
associated actioning of feedback obtained;
• retention programs that connect critical employees’ professional achievements with personal rewards and competitive
salaries leading to a reduction in employee turnover; and
• establishment of internship programs designed to create opportunities for graduates to gain valuable industry experience
within the company.
it is recognised that employees play a vital role in achieving the company’s goals. the company ensures that its employment
policies, procedures and practices are fair and equitable to all employees and at least comparable to the external market.
ensuring a safe work place for all employees, contractors and visitors through compliance with occupational health and
safety (oh&s) legislation continues to be of great importance to the company.
Ainsworth GAme technoloGy AnnuAl report 2008
09
inFormAtion ABout shAreholders And noteholders
securityholder information required by the Australian securities exchange limited listing rules and not disclosed elsewhere
in this report is set out below.
security holdinGs (as at 18 september 2008)
Number of securityholders and securities on issue
the issued shares in the company were 278,942,304 ordinary shares held by 3,620 shareholders.
the issued convertible notes in the company were 19,714,717 held by 797 noteholders.
Substantial shareholders / noteholders
the number of shares and convertible notes held by substantial securityholders and their associates are set out below:
Shareholder / Noteholder
mr lh Ainsworth
invia custodian pty limited (Votraint-Braesyde super Fund A/c)
Number of convertible notes Number of ordinary shares
10,325,382
1,840,856
165,690,998*
37,048,975
* mr lh Ainsworth granted share options over a portion of his personal shareholding to all Australian employees, excluding
directors and four key management personnel. share options outstanding as at 18 september 2008 were 8,250,385 (issued to 142
employees) and remain unexercised.
Voting rights
Ordinary shares
the voting rights attaching to ordinary shares are that on a show of hands every member present in person or by proxy has one
vote and upon a poll, each share shall have one vote.
Convertible notes
the convertible notes do not give their holders any voting rights at shareholders’ meetings.
Options
option holders have no voting rights.
Distribution of securityholders
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
total
NUMBER OF CONVERtiBlE NOtE aND EQUitY SECURitYHOlDERS
Convertible Notes
Ordinary Shares
Options
339
281
72
89
16
797
320
1,704
710
795
91
3,620
-
-
4
14
4
22
the number of securityholders holding less than a marketable parcel of ordinary shares and convertible notes respectively
is 2,095 (5,741,017 ordinary shares) and 229 (86,487 convertible notes).
On market buy-back
there is no current on market buy-back.
Unquoted equity securities
At 18 september 2008, 1,350,180 unlisted non-transferable options have been issued to 22 option holders and remain
unexercised.
Regulatory Considerations affecting Shareholders
the company is subject to a strict regulatory regime in regard to the gaming licences and operations within the gaming
industry. it is necessary for the company to regulate the holding of shares to protect the businesses of the company in
respect of which a gaming licence is held. By accepting shares, each potential investor acknowledges that having regard to
the gaming laws, in order for the company to maintain a gaming licence, the company must ensure that certain persons
do not become or remain a member of the company. the constitution of the company contains provisions that may require
shareholders to provide certain information to the company and the company has powers to require divesture of shares,
suspend voting rights and suspend payments of certain amounts to shareholders.
Ainsworth GAme technoloGy AnnuAl report 2008
10
inFormAtion ABout shAreholders And noteholders
(continued)
security holdinGs (as at 18 september 2008) (continued)
twenty largest shareholders
Name
mr lh Ainsworth
invia custodian pty limited (Votraint-Braesyde super Fund A/c)
creative magic (A/Asia) pty ltd
hsBc custody nominees (Australia) limited
serioso pty limited (GGhA trading Account)
writeman pty limited (plA investment Fund A/c)
niako investments pty ltd
Balagiannis Family company pty ltd (olympic Amusements super Fund A/c)
mr maiocchi
new Age Amusements (Aust) pty ltd (olympic Video Gaming super Fund A/c)
coastwide poker machine sales & services pty ltd (r&V turner superfund A/c)
Jp morgan nominees Australia ltd
AnZ nominees limited (cash income A/c)
hotel Bondi pty ltd (Bondi unit A/c)
Anvil properties pty ltd
mr & mrs piliouras (energia super Fund A/c
Andromeda entertainment pty ltd
hFt nominees pty ltd (hFt super Fund A/c)
ms wai-chun chan
the premier Group pty ltd (neway executive s/Fund A/c)
total
twenty largest noteholders
Name
Baclupas pty ltd (Valhalla A/c)
creative magic (A/Asia) pty ltd
invia custodian pty limited (Votraint-Braesyde super Fund A/c)
citadel investments ltd (BVi)
Anvil properties pty ltd
AnZ nominees limited (cash income A/c)
ms rae lowes
hsBc custody nominees (Australia) limited
cJhA pty ltd (cJhA Family A/c)
casola holdings pty ltd (nordiv holdings pty ltd s/F A/c)
Kim Arculli
Boardwalk pty ltd
tie Fabrications pty ltd (tie Fabrications s/F A/c)
uBs wealth management Australia nominees pty ltd
mr ross yates (Jarsey super Fund A/c)
Jp morgan nominees Australia limited
mrs & mr murone - (murone Family super Fund A/c)
mr Gordon (Gordon superannuation A/c)
mr Fite
mr & mrs thorne (the thorne Family super A/c)
total
Ainsworth GAme technoloGy AnnuAl report 2008
Number of
ordinary shares held
158,798,140
Percentage
of total
56.93
37,048,975
13.28
6,892,858
4,415,000
3,841,984
3,841,984
3,725,440
2,433,204
1,175,949
1,032,500
1,022,144
1,010,721
681,828
660,000
601,100
600,000
560,000
550,000
500,000
500,000
2.47
1.58
1.38
1.38
1.34
0.87
0.42
0.37
0.37
0.36
0.24
0.24
0.22
0.22
0.20
0.20
0.18
0.18
229,891,827
82.43
Number of
convertible notes held
8,000,000
2,252,382
1,840,856
800,287
622,774
407,572
354,254
310,000
281,797
179,000
153,846
151,132
119,430
110,460
110,000
100,000
100,000
81,000
80,000
74,755
Percentage
of total
40.58
11.42
9.34
4.06
3.16
2.07
1.80
1.57
1.43
0.91
0.78
0.77
0.61
0.56
0.56
0.51
0.51
0.41
0.41
0.38
16,129,545
81.84
11
corporAte GoVernAnce stAtement
set out below are the company’s main corporate governance
principles and practices which comply with the Australian
securities exchange (AsX) corporate Governance council
recommendations, unless otherwise stated.
Principle 1
Lay solid foundations for
management and oversight
Board of Directors
Role of the Board
the Board’s primary role is the protection and enhancement
of long-term shareholder value. To fulfill this role, the
Board is responsible for the overall corporate governance
of the company, including guiding its strategic direction,
approving and monitoring capital expenditure, monitoring
financial performance, setting remuneration and reviewing
the performance of the Chief Executive Officer. The Board
is responsible for ensuring appointments, removals and
succession plans for directors and where necessary, seeking
shareholder approval. in addition, the Board is responsible
for appointing, removing and creating succession polices for
the Chief Executive Officer and senior executives. The Board
establishes and monitors the achievement of management’s
goals, ensuring the
internal control and
integrity of
management information systems and approves and monitors
financial and other business related reporting.
in his role as executive chairman, mr lh Ainsworth provides
input into technical design, strategic guidance and overview
of the company with the responsibility for management of the
day to day operations delegated to the Chief Executive Officer.
responsibilities are delineated by formal authority delegations.
Board Processes
to assist in the execution of its responsibilities, the Board
has established three Board committees namely the Audit
committee, remuneration and nomination committee,
and the regulatory and compliance committee. these
committees have formal charters, which are regularly
reviewed and approved by the Board. the Board has also
established a framework for the management of the company
including a system of internal control, a business risk
management process and the establishment of appropriate
ethical standards.
the Board currently holds monthly scheduled meetings
throughout the year and any extraordinary meetings at such
other times as may be necessary to address any specific
significant matters that may arise.
the agenda for the Board meetings is prepared in conjunction
with the Chairperson, Chief Executive Officer and the Chief
Financial Officer / Company Secretary. Standing items include
declaration of interests or conflicts, the Chief Executive Officer’s
report, financial reports and any issues relating to strategic
matters, governance and compliance requirements of the
company. Board papers and submissions are circulated in
advance. executives are regularly involved in Board discussions
and directors have the opportunity for contact with a wider group
of employees and other stakeholders.
during the year under review, the Board met ten times and the
Board members’ attendance record is disclosed in the table of
directors’ meetings on page 20 of this report.
Principle 2
Structure the Board to add value
Composition of the Board
the names and details of the directors of the company in
office at the date of signing the Financial Report are set out
on page 19 of this report.
the composition of the Board is evaluated and reviewed to
ensure it provides a broad range of skills, personal qualities,
expertise, ability to exercise independent judgment and
diversity required to discharge its responsibilities. provision
of such skills and experience is aimed to assist the company
its objectives and continual development.
to achieve
the remuneration and nomination committee assists the
Board in selecting and evaluating suitably qualified directors
to ensure that its composition best complements and
contributes to the effectiveness of the Board.
An objective of the company is to ensure that the majority
of the Board should comprise independent, non-executive
directors with no other significant business or other links to
the company. An independent director is a director who is not
a member of the management (i.e. a non-executive director)
team and who:
• holds less than five percent of the voting shares of the
Company and is not an officer of the Company, or otherwise
associated, directly or indirectly, with a shareholder of more
than five percent of the voting shares of the Company;
• has not within the last three years been employed in an
executive capacity by the company or another group
member, or has been a director after ceasing to hold any
such employment;
• within the last three years has not been a principal or
employee of a material* professional adviser or a material*
consultant to the Company or another group member;
• is not a material* supplier or customer of the company or
another group member, or an officer of the company or
otherwise associated, directly or indirectly, with a material*
supplier or customer;
• has no material* contractual relationship with the company
or another group member other than as a director of
the Company;
• has not served on the Board for a period which could, or
could reasonably be perceived to, materially interfere
with the director’s ability to act in the best interests of the
Company; and
• is free from any interest and any business or other
relationship which could, or could reasonably be perceived
to, materially interfere with the director’s ability to act in
the best interests of the company.
* the Board considers, “material”, in this context to be where
any director-related business relationship has represented,
or is likely in future to represent the lesser of at least 10%
of the relevant segment’s or the director-related business’s
revenue. the Board has considered the nature of the relevant
industries’ competition and the size and nature of each
director-related business relationship, in arriving at this
threshold.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
12 corporAte GoVernAnce stAtement (continued)
Principle 2
Structure the Board to add value
(continued)
individual. the executive chairman
the majority of the Board comprises independent non
executive directors with the roles of the chairperson
and Chief Executive Officer not being exercised by
the same
is a
substantial shareholder and therefore is not considered
to be independent. the Board intends to consider the
succession of the chairperson at such time as improved
trading performance of
is achieved.
mr sl wallis has been appointed as the lead independent
director to ensure that any conflicts which may arise are dealt
with in line with AsX Best practice recommendations.
the company
Sub-Committees of the Board
1. audit comittee
details regarding the composition of the committee, its role
and responsibilities are provided under principle 4 of this
statement.
2. Remuneration and Nomination Committee
details regarding the composition of the committee and its
role and responsibilities are provided under principle 9 of this
statement.
3. Regulatory and Compliance Committee
the members of the regulatory and compliance committee
during the year were:
Mr Sl Wallis aO (Chairman)
independent non-executive director
(appointed Chairman on 20 November 2007);
Mr GJ Campbell
independent non-executive director
(appointed on 20 November 2007);
Mr SM Cohn
Independent Member;
Mr DE Gladstone
Chief Executive Officer; and
Mr aR amer
independent non-executive director
(chairman until retirement on 20 november 2007)
The Company’s Chief Executive Officer, Mr Danny
Gladstone, was appointed a member elect of the regulatory
and compliance committee on 5 February 2007 subject to
obtaining the necessary regulatory approval. this approval
was received on 21 may 2008 resulting in mr Gladstone
becoming a full member of the committee from that date.
due to the highly regulated nature of the gaming industry within
which the company operates, the securing of new gaming
licences and protection of current licences is an ongoing process
which is of great importance to the company. the regulatory
and compliance committee charter, which has been approved
by the Board, outlines responsibilities to monitor, review, advise
and assist the Board to ensure all compliance related matters
and procedures have been established and operating effectively.
the charter is available on the website of the company.
the regulatory and compliance committee monitors probity
related matters, technical compliance issues and compliance
conduct and issues, systems and procedural requirements to
Ainsworth GAme technoloGy AnnuAl report 2008
ensure that the company attains a high standard of compliance
with all of its gaming regulatory and licence obligations.
in addition, the regulatory and compliance committee advises
and makes recommendations to the Board regarding
regulatory compliance matters, including the suitability of
key employees and other persons or entities with whom the
Company has or intends to have an association or affiliation, in
line with gaming regulations.
the compliance manager and the technical compliance
manager are invited to the regulatory and compliance
committee meetings to present and discuss their reports
and recommendations. the regulatory and compliance
Committee met five times during the year and the directors’
attendance record is disclosed in the table of directors’
meetings on page 20 of this report. due to the importance
of the regulatory environment within which the company
operates, and to ensure the commitment by the Board within
this important area, the committee is scheduled to meet at
least four times each financial year and as required to address
any specific issues that may arise.
the main responsibilities of the regulatory and compliance
committee are to:
• regularly review the application of compliance to ensure
that the company meets all requirements outlined in its
Compliance Policy;
• deal with and investigate any breaches, complaints and
derogatory information of which it becomes aware;
• provide assistance and advice to the Board on matters
pertaining to the company’s continuing suitability to obtain
and maintain gaming licences; and
• review operational policies and recommendations relating
to compliance issues.
the regulatory and compliance committee may seek
independent professional advice, at the company’s expense,
in carrying out these duties, subject to informing the Board.
the committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and is provided with
the right to direct access to any person within the company.
Principle 3
Promote ethical and responsible
decision-making
Ethical Standards
All directors, managers and employees are expected to act with
complete integrity and objectivity in all their activities related to
the company, striving at all times to enhance the reputation and
performance of the company. every employee has a nominated
supervisor to whom they may refer any issues or complaints
arising from their employment. to further promote a culture
within the company where ethical standards are maintained in
accordance with company policy, the company has established
a “whistleblower” policy which ensures protection of individuals
reporting any incidents of misconduct or unethical behaviour.
Conflict of interest
directors must keep the Board advised, on an ongoing basis,
of any interest that could potentially conflict with those of the
company. the Board has developed procedures to ensure
that directors disclose any potential conflicts of interest.
Where the Board believes that a significant conflict exists for
a director on a Board matter, the director concerned does
not participate in any discussion and voting on the applicable
13
matter and, if considered appropriate, the director is
requested not to be present whilst the matter is considered.
details of director related transactions with the company
are set out in Note 34 in the financial statements.
Code of Conduct
the company has established a code of conduct that
embraces high standards of personal and corporate conduct.
each director, manager and employee has been advised
that they must comply with this code. the full code may be
viewed on the company’s website and it requires all directors
and officers to:
• conduct all dealings with internal and external stakeholders
in a truthful, honest and trustworthy manner;
• value and maintain professionalism;
• treat all persons with whom they interact, with respect
and dignity;
• respect the rights of individuals;
• act towards others without discrimination;
• comply with the Company’s internal policies and procedures;
• report unethical behaviour or wrongdoing;
• use authority in a fair and unbiased way;
• comply with all applicable laws, regulations and licensing
conditions; and
• not knowingly make a misleading statement.
A copy of the code of conduct is made available to all staff.
the code is reviewed regularly by the Board and processes are
in place to communicate any amendments to the code to all
staff. new employees are issued with an employee handbook
containing the code of conduct and prior to commencing
their respective employment, they are required to certify that
they have read and understood the requirements contained
within it. the company has established procedures to monitor
compliance with the code of conduct.
trading in Company Securities by Directors and Employees
the company has in place a policy which outlines the rules
that directors, senior executives and all employees must
follow when dealing in the company’s securities. the policy
also details the insider trading provision of the corporations
Act 2001 and is available on the website of the company.
the key elements of the company’s policy regarding trading
in company securities by directors and employees are:
• that directors, senior executives and employees may
acquire shares in the company, but are prohibited from
dealing in company shares or exercising options:
- whilst in possession of information, which if disclosed
publicly, would be likely to materially affect the market
price or value of those securities; and
- at any time outside a window period*, unless there are
exceptional circumstances and in accordance with the
procedure as laid down in the policy;
• to raise the awareness of legal prohibitions on trading,
including transactions involving associates, colleagues
and external advisers;
• to require details to be provided of any intended trading in
the Company’s shares as well as subsequent confirmation
of the trade; and
• to identify the process for unusual circumstances where
discretions may be exercised in cases such as financial
hardship.
* window period means the period:
(a) thirty days after the release of the company’s half- yearly
and preliminary final results and dividend announcement;
(b) thirty days after the AGM; and
(c) during the offer or application period specified in a
prospectus or supplementary prospectus issued for a new
share issue.
The policy stipulates a number of notification and approval
procedures that must be carried out before any director or
employee can deal in securities of the company. the company
has in place internal mechanisms to review compliance with
the policy. There were no breaches of the policy identified
during the year and as a result of this review.
Principle 4
Safeguard integrity in
financial reporting
audit Committee
the members of the Audit committee during the year were:
Mr GJ Campbell (Chairman)
independent non-executive director
(Appointed Chairman on 18 September 2007);
Mr Sl Wallis aO
Independent Non-Executive Director; and
Mr aR amer
independent non-executive director (retired as chairman on 18
September 2007; retired as member on 20 November 2007)
the AsX Best practice principles and recommendations
state that the Audit committee should comprise at least
three members. mr Graeme campbell, who was appointed
a director of the company, accepted the role as chairman of
the Audit committee effective 18 september 2007, with mr
Amer becoming a member of this committee. during the
year and currently the Audit committee comprised of only two
members. due to the size of the Board, the Audit committee
will comprise of only two members until such time as an
additional independent non-executive director is appointed.
the Audit committee has a documented charter, which
is regularly reviewed and approved by the Board. All
members are currently independent non-executive directors.
the chairman of the committee is not the chairman of the
Board. the committee advises on the establishment and
maintenance of a framework of internal financial control for
the management of the company.
The external auditors, the Chief Executive Officer and
Chief Financial Officer / Company Secretary, are invited to
attend Audit committee meetings at the discretion of the
committee. the committee met four times during the year
and committee members’ attendance record is disclosed in
the table of directors’ meetings on page 20 of this report.
the external auditor met with the Audit committee and the
Board during the year, without management being present.
The Chief Executive Officer and the Chief Financial Officer
/ company secretary declared in writing to the Board that
the Company’s financial reports for the year ended 30 June
2008 present a true and fair view, in all material respects, of
the Company’s financial condition and operational results
and are in accordance with relevant accounting standards.
this statement is required for the full year and half year
reporting periods.
Ainsworth GAme technoloGy AnnuAl report 2008
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14 corporAte GoVernAnce stAtement (continued)
All senior executives must follow a process which involves
monitoring all areas of the company’s internal and external
environment to identify and communicate significant matters
in a timely manner to the Chief Financial Officer / Company
Secretary. The Chief Executive Officer and Chief Financial
Officer / Company Secretary are responsible for determining,
whether matters are required to be disclosed in accordance
with the above continuous disclosure requirements and for
informing the Board accordingly.
The Chief Financial Officer / Company Secretary is responsible
for coordinating disclosure to the AsX and for ensuring that
such information is not released to any person until the AsX
has confirmed its release to the market. Such matters are
advised to the ASX on the day they are identified as being
material.
Principle 6
Respect the rights of
shareholders
the company is committed to keeping shareholders fully
informed of significant developments and activities of the
Company. This commitment is fulfilled as follows:
• all announcements made to the market and related
information (including investor presentations, information
provided to analysts or the media during briefings), are
placed on the company’s website after they are released to
the ASX;
• the Annual report (including relevant information about the
operations of the company during the year and changes in
the state of affairs) is distributed to all shareholders (unless
a shareholder has specifically requested not to receive the
document);
• the half yearly report contains summarized financial
information and a review of the operations of the company
during the period. The half year reviewed financial report
is lodged with the Australian securities and investments
commission and the AsX and sent to any shareholder who
requests it;
• the full texts of notices of meetings and associated
explanatory material are placed on the Company’s website;
• the Board encourages full participation of shareholders
at the AGm, to ensure a high level of accountability and
identification with the Company’s strategy and goals;
• important issues are presented to shareholders as single
resolutions;
• shareholders are requested to vote on the appointment and
aggregate remuneration of directors as well as changes to
the constitution. the constitution is available on the website
of the company and copies are also given to shareholders
who request for the same; and
• the external auditor is requested to attend the AGm to
answer any questions concerning the audit and the content
of the Auditor’s report.
Principle 4
Safeguard integrity in
financial reporting (continued)
the main responsibilities of the Audit committee are to:
• assist the Board to discharge its fiduciary responsibilities
with regard to the company’s accounting, control and
reporting practices by monitoring the risk and internal
control environment and management over corporate
assets;
• review internal controls and any changes thereto approved
and submitted by the Company’s Chief Financial Officer /
Company Secretary;
• provide assurance regarding the quality and reliability of
financial information used by the Board;
• oversee the activities of the internal audit function and
external audit staff of the company and to review the
company’s risk management policies and internal control
processes;
• review and recommend to the Board the adoption of the
Company’s half year and annual financial statements;
• liaise with and review the performance of the external
auditor;
• consider whether non-audit services provided by the
external auditor are consistent with maintaining the external
auditors’ independence ; and
• perform, at least annually, a performance evaluation to
ensure delivery on its charter and continually enhance the
committee’s contribution to the Board.
the Audit committee reviews the performance of the external
auditors on an annual basis and meets with them during the
year to:
• discuss the external audit and internal audit plan;
• identify any significant changes in structure, operations,
internal controls or accounting policies likely to impact the
financial statements;
• review the fees proposed for the audit work to be
performed;
• review the half-year and preliminary final reports and any
significant adjustments required as a result of the auditor’s
findings prior to lodgment with the ASX;
• review the results and findings of the auditor and monitor
the implementation of any recommendations made; and
• organize, review and report as required on any special reviews
or investigations deemed necessary by the Board subject to
the engagement not impairing audit independence.
the Audit committee’s charter is available on the company’s
website. the Audit committee also considers the selection and
appointment of external auditors and the rotation of external
audit engagement partners.
Principle 5
Make timely and balanced
disclosure
the company is listed on the AsX and is committed to
ensuring that information which is expected to have a
material effect of the price or value of its shares is notified
to the AsX in a timely and balanced manner, with regard to
the corporations Act 2001 and AsX listing rules outlining
continuous disclosure requirements for listed companies.
Ainsworth GAme technoloGy AnnuAl report 2008
Principle 7
Recognise and manage risk
Oversight of the risk management system
the Board oversees the establishment, implementation and
annual review of the company’s risk management system.
management has established and implemented the risk
management system for identifying, assessing, monitoring
and managing operational, financial reporting, and compliance
risks for the Company. The Chief Executive Officer and the Chief
Financial Officer / Company Secretary have declared, in writing
to the Board, that the financial reporting risk management
and associated compliance and controls have been assessed
and found to be operating efficiently and effectively. All risk
assessments covered the whole financial year and the period
up to the signing of the annual financial report for all material
operations in the company and material associates.
Risk profile and the audit Committee
the Audit committee reports to the Board on the status of
risks through integrated risk management processes and
programs aimed at ensuring that risks are identified, assessed
and appropriately managed.
each business operational unit is responsible and accountable
for implementing and managing the standards required by the
risk management system.
the major risks that the company faces are allocated to
individual executives and are reviewed to determine progress
and to provide updates as to the individual status and to ensure
the identification of any further risks
Risk management and compliance and control
the company has implemented a compliance program
which complies with the Australian standard for compliance
programs As 3806. this standard was prepared by the
standards Australia committee following a request by the
Australian competition and consumer commission and
details the essential elements of an effective compliance
program. the standard provides principles
the
development,
implementation and maintenance of an
effective compliance program, whilst emphasizing the need
for continuous improvement. the use of these principles
will enable the company to identify risks and to develop
processes to ensure compliance with relevant laws and
licence
regulations,
obligations.
including gaming regulatory and
for
the company received accreditation on 15 June 2007
confirming that the Company’s quality management
system complies with the As/nZ iso 9001:2000 standard.
this standard is identical and has been reproduced
from the iso 9001:2000 Quality management systems-
requirements, published by the international organization
for standardization
the
(iso). Further
accreditation, the company has demonstrated its ongoing
commitment to continuous improvement by successfully
maintaining
its quality accreditation through regular
independent surveillance audits of its quality management
system during the year.
to receiving
in addition to the above, the company continually reviews
internal controls and operating procedures, to enable
compliance with Gaming machine national standards and the
company’s control system manual.
15
to ensure that these standards are maintained, there are a
number of internal reporting measures including monthly
compliance reports from all department managers and
monthly continuous disclosure reports from all senior
executives. the regulatory and compliance committee
receives details from the above reports and reviews the
company’s reporting and processes on all these matters.
the Board is responsible for the overall internal control
framework, but recognizes that no cost effective internal
control system will preclude all errors and irregularities. the
Board’s policy on internal control is continually under review
to ensure it keeps pace with internal and external changes.
the Board overviews the company’s internal compliance and
control systems, including:
• Operating unit controls - Operating units confirm compliance
with financial controls and procedures, including information
systems controls detailed in procedures manuals;
• Functional specialty reporting - Key areas subject to
regular reporting to the Board include treasury and risk
Management, Environmental, Legal and Insurance matters;
and
• investment appraisal - Guidelines for capital expenditure
include annual budgets, detailed appraisal and review
procedures, levels of authority and due diligence requirements
where businesses are being acquired or divested.
comprehensive practices have been established to ensure:
• capital expenditure and revenue commitments above a certain
size, obtain prior Board approval;
• occupational health and safety standards and management
systems are monitored and reviewed to achieve high standards
of performance and compliance with regulations;
• business transactions are properly authorized and executed;
• the quality and integrity of personnel is maintained (see
below);
• financial reporting accuracy and compliance with the financial
reporting regulatory framework (see below); and
• environmental regulation compliance (see below).
Quality and integrity of personnel
Written confirmation of compliance with policies of the
company is obtained from all operating units. Formal
appraisals are conducted at least annually for all employees.
training and development and appropriate remuneration
and incentives with regular performance reviews create an
environment of co-operation and constructive dialogue with
employees and senior management. A formal succession
plan is currently being established to ensure competent and
knowledgeable employees fill senior positions, as and when
retirements or resignations occur.
Financial reporting
The Chief Executive Officer and the Chief Financial Officer /
company secretary have declared, in writing to the Board,
that the Company’s financial reports are founded on a
sound system of risk management and internal compliance
and control. monthly actual results are reported against
budgets approved by the directors and revised forecasts for
the year are prepared regularly.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
16 corporAte GoVernAnce stAtement (continued)
Principle 7
Recognise and manage risk
(continued)
Risk management and compliance and control
(continued)
Environmental regulation
The Company’s operations are not subject to significant
environmental regulations under either commonwealth
or state legislation. the Board believes that the company
has adequate systems in place for the management of
its environmental requirements and is not aware of any
breaches of those environmental requirements as they
apply to the company.
assessment of effectiveness of risk management
internal audit
to further assist the Board in ensuring compliance with
these internal controls and risk management programs, the
company allocated the responsibilities of the internal Audit
function to a key employee within the company’s compliance
department. this role is to oversee and regularly review the
effectiveness of the abovementioned compliance and control
systems and conduct regular audits against the international
and Australian standards as well as against all operating
policies and procedures. the Audit committee is responsible
for approving the internal audit plan to be undertaken during
the year and for the scope of the work to be performed.
Principle 8
Encourage enhanced
performance
the chairman of the Board is responsible for evaluating the
performance of individual directors and the Board collectively.
performance criteria that is taken into account include each
director’s contribution to setting the direction, strategy and
financial objectives of the group and monitoring compliance
with regulatory requirements and ethical standards. Formal
performance evaluation criteria for the Board and individual
directors are currently under review.
Director Education
the company has a formal process to educate new directors
about the nature of the business, current issues, the corporate
strategy and the expectations of the company concerning
performance of directors. directors also have the opportunity
to meet with management to gain a better understanding of
business operations. directors are able to access continuing
education opportunities to update and enhance their skills and
knowledge.
independent professional advice and access to Company
information
each director has the right of access to all company
information and to the company’s executives. Further,
subject to informing the Board, a director may seek
independent professional advice from a suitably qualified
adviser at the company’s expense. A copy of the advice
received by the director is made available to all other
members of the Board.
Principle 9
Remunerate fairly and responsibly
Remuneration and Nomination Committee
the members of the remuneration and nomination
committee during the year were:
Mr Sl Wallis aO (Chairman)
Independent Non-Executive Director;
Mr Ml ludski
Chief Financial Officer / Company Secretary;
Mr GJ Campbell
independent non-executive director
(appointed on 18 September 2007); and
Mr aR amer
independent non-executive director
(retired on 18 september 2007)
The Chief Executive Officer and Human Resources and
payroll manager are invited to attend the remuneration and
nomination committee meetings, as required, to discuss
senior executives’ performance and remuneration packages.
The Chief Executive Officer and Chief Financial Officer /
company secretary are not involved in matters pertaining to
their own remuneration. during the year under review, the
committee met three times and the directors’ attendance
record is disclosed in the table of directors’ meetings on page
20 of this report.
the main responsibilities of
nomination committee are to:
the remuneration and
• review the composition of the Board and make evaluations
and recommendations thereon;
• recommend the selection, appointment, induction process
and succession planning process for directors, the chief
Executive Officer, the Chief Financial Officer / Company
Secretary and other senior executives;
• recommend to the Board ways in which the skills,
experience and expertise levels of existing directors can be
enhanced;
• review and make recommendations to the Board on
remuneration packages and incentive policies applicable
to the Chief Executive Officer, Chief Financial Officer
/ company secretary, senior executives and directors
themselves; and
• undertake a performance evaluation of the committee to
ensure delivery on its charter and to continually enhance
the committee’s contribution to the Board.
Ainsworth GAme technoloGy AnnuAl report 2008
17
Principle 10
Recognise the legitimate interests
of stakeholders
the company’s objective
leading
manufacturer and supplier of innovative gaming machines
and game combinations sold
in both domestic and
international markets, for the purpose of creating wealth
for shareholders and adding value for customers and other
stakeholders.
to become a
is
despite unsatisfactory performance to date, the directors
and senior management have plans and strategies in place
aimed at improving financial performance in the medium
term.
the company maintains and publishes a code of conduct to
provide all employees with guidance on what is acceptable
behavior. details of the code are outlined under principle 3
of this statement.
in addition to the code of conduct and the whistleblower
policy as mentioned in principle 3 of this statement, the
company also has policies which govern:
• Occupational Health and Safety;
• Dealing in Company’s securities; and
• equal employment opportunity
All employees are required to complete the harassment,
discrimination and compliance training conducted by the
company.
the code of conduct, the policies and the training listed above
ensure that all employees maintain the highest standards
of integrity, honesty and fair dealing in their dealings with
customers, suppliers, shareholders, regulators, each other
and society in general.
Further details of the remuneration and nomination
committee’s responsibilities are outlined in its charter,
which is available on its website. the policy and procedure
for appointment of directors also forms a part of the
committee’s charter.
the remuneration and nomination committee conducts an
annual review of performance of the Chief Executive Officer,
the Chief Financial Officer / Company Secretary and the
senior executives reporting directly to them.
Remuneration Report
the remuneration report is set out on pages 20 to 28 of
this report.
Remuneration policies
remuneration levels for key personnel of the company are
competitively set to attract and retain appropriately qualified
and experienced executives and directors. the remuneration
and nomination committee obtains independent advice on
the appropriateness of remuneration packages, given trends
in comparative companies both locally and internationally.
the remuneration structures explained below are designed to
attract suitably qualified candidates, reward the achievement
of strategic objectives and achieve the broader outcome of
creation of value for shareholders. the remuneration structures
take into account:
• the capability and experience of key management
personnel;
• management performance against key performance
indicators (Kpis) and individual contributions to the
Company’s performance;
• the company’s performance includes:
- revenue and earnings; and
- growth in share price and delivering increased returns to
shareholders.
Remuneration packages include a mix of fixed and variable
remuneration and short-term and long-term performance-
based incentives. in addition to salaries, the company also
provides non-cash benefits to its key management personnel
and contributes to defined contribution superannuation plans
on their behalf.
senior executives may receive bonuses based on the
achievement of specific performance hurdles. The
performance hurdles are a blend of the company’s and
each relevant segment’s result. in the year under review, no
incentive payments were made as company performance did
not reach the minimum threshold levels. the company does
not have any profit-share plan.
total remuneration for all non-executive directors, last
voted upon by shareholders is not to exceed $500,000 per
annum. the base fee for individual non-executive directors
for the financial year under review was $70,000 per annum,
excluding superannuation and covers all main Board activities.
membership of committees is remunerated in addition to the
base fee as outlined in the remuneration report on page 24
of this report. non-executive directors do not receive any
performance related remuneration or bonuses or retirement
benefits other than required superannuation payments.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
18
ainsworth Game technology limited
ABn: 37 068 516 665
and its controlled entities
Annual Financial Report
For the year ended 30 June 2008
Contents
Page
directors’ report. .......................................................................................................................19
income statements ....................................................................................................................35
statements of changes in equity ..............................................................................................36
Balance sheets ..........................................................................................................................38
Statements of cash flows ..........................................................................................................39
Notes to the financial statements ............................................................................................40
directors’ declaration ................................................................................................................81
independent auditor’s report ....................................................................................................82
lead auditor’s independence declaration ................................................................................84
Ainsworth GAme technoloGy AnnuAl report 2008
19
directors’ report
For the year ended 30 June 2008
The directors present their report together with the financial report of Ainsworth Game Technology Limited (‘the Company’)
and of the Group (‘the Company and its subsidiaries and any interest in associates’) for the financial year ended 30 June 2008
and the auditor’s report thereon.
1. Directors
The directors of the Company at any time during or since the end of the financial year are:
Name and independence status
age
Experience, special responsibilities and other directorships
Current
mr leonard hastings Ainsworth
executive chairman
mr stewart laurence wallis Ao, Bce
lead independent non-executive director
85 yrs • Fellow of the institute of company directors in Australia and the
Australian institute of management
• Fifty-four years gaming industry experience
• Founder of Aristocrat leisure limited
• director and chairperson since 1995 – executive chairperson since 2003
74 yrs • Fellow of the institute of engineers, Australia
• Advisory Board member of st hilliers contracting pty limited
• Former chief executive and director of leighton holdings limited
• director since 2002
• chairperson of remuneration and nomination committee and member of
Audit committee
• member of regulatory and compliance committee -
appointed chairperson on 20 november 2007
mr Graeme John campbell
independent non-executive director
51 yrs • Graeme has specialised in the area of liquor and hospitality for over
26 years in corporate consultancy services with particular emphasis
on hotels and registered clubs
• Appointed director on 18 september 2007
• chairperson of Audit committee and member of remuneration
and nomination committee from appointment
• member of regulatory and compliance committee from
20 november 2007
Former
mr Andrew richard Amer
independent non-executive director
57 yrs • Bachelor of Arts, master of science, master of Business Administration
and diploma from Australian institute of company directors
• Fellow and council member nsw council of Australian institute of
company directors
• member of professional conduct tribunal of institute of chartered
Accountants in Australia
• director of mackay sugar corporation Association
• over twenty years general management experience in senior executive
positions in such diversified industries as chemicals, management
consulting, finance and retail
• Former managing director of Amoco Australia, part of the Bp Group
worldwide
• chairperson of Audit committee until 18 september 2007 and member
until retirement
• member of remuneration and nomination committee until
18 september 2007
• chairperson of regulatory and compliance committee until retirement
• director since october 2003. retired as a director on 20 november 2007
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
20 directors’ report (continued)
For the year ended 30 June 2008
2. Company secretary
mr mark l ludski was appointed to the position of company secretary in August 2000. mr ml ludski previously held the role
of Finance manager with another listed public company for ten years and prior to that held successive positions in two major
accounting firms where he was employed in each of their respective audit, taxation and business advisory divisions.
mr ml ludski is a chartered Accountant holding a Bachelor of Business degree, majoring in accountancy and sub-majoring in
economics.
3. Directors’ meetings
the number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of
the directors of the company during the financial year are:
DiRECtOR
Current
mr lh Ainsworth
mr sl wallis
mr GJ campbell
Former
mr Ar Amer
Board Meetings
audit Committee
Meetings
Remuneration
& Nomination
Committee Meetings
Regulatory
& Compliance
Committee Meetings
a
10
10
9
2
B
10
10
9
2
a
-
4
2
2
B
-
4
2
2
a
-
3
3
-
B
-
3
3
-
a
-
5
4
1
B
-
5
4
1
a - number of meetings attended
B - number of meetings held during the time the director held office during the year
4. Remuneration report
4.1 Principles of compensation - audited
remuneration is referred to as compensation throughout this report.
Key management personnel have authority and responsibility for planning, directing and controlling the activities of the company
and the Group, including directors of the company and other executives. Key management personnel comprise the directors of
the company and executives for the company and the Group including the five most highly remunerated company and Group
executives.
compensation levels for key management personnel and secretaries of the company, and key management personnel
of the Group are competitively set to attract and retain appropriately qualified and experienced directors and executives.
the remuneration and nomination committee reviews market surveys on the appropriateness of compensation packages of
both the company and the Group given trends in comparative companies both locally and internationally and the objectives of the
company’s compensation strategy.
the compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of
strategic objectives, and achieve the broader outcome of creation of value for shareholders. the compensation structures take
into account:
• the capability and experience of the key management personnel;
• the key management personnel’s performance against key performance indicators (Kpi’s) and individual contributions to the
Group’s performance;
• the Group’s performance includes:
- revenue and earnings; and
- growth in share price and delivering returns on shareholder wealth.
compensation packages include a mix of fixed and variable compensation and short-term and long-term performance-based
incentives.
in addition to their salaries, the Group also provides non-cash benefits to its key management personnel, and contributes to post-
employment defined contribution superannuation plans on their behalf.
Ainsworth GAme technoloGy AnnuAl report 2008
21
Fixed compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes any FBt charges
related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.
compensation levels are reviewed annually by the remuneration and nomination committee through a process that considers
individual, segment and overall performance of the Group. in addition market surveys are obtained to provide further analysis
so as to ensure the directors’ and senior executives’ compensation is competitive in the market place. A senior executive’s
compensation is also reviewed on promotion.
Performance-linked compensation
performance linked compensation includes both short-term and long-term incentives and is designed to reward key management
personnel for meeting or exceeding their financial and personal objectives. The short-term incentive (STI) is an ‘at risk’ bonus
provided in the form of cash, while the long-term incentive (lti) is provided as options over ordinary shares of the company under
the rules of the Employee Share Option Plan (see note 24 to financial statements).
In addition to their salaries, selected key sales management personnel receive commission on sales within their specific business
segments as part of their service contracts.
Short-term incentive bonus
each year the remuneration and nomination committee sets the Key performance indicators (Kpis) for the key management
personnel. the Kpis generally include measures relating to the Group, the relevant segment, and the individual, and include
financial, people, customer, strategy and risk measures. the measures are chosen as they directly align the individual’s reward
to the Kpis of the Group and to its strategy and performance.
The financial performance objective is ‘profit after tax’ compared to budgeted amounts which is designed to reward key
management personnel for the Group’s performance and not simply the achievement of individual segment results.
The non-financial objectives vary with position and responsibility and include measures such as achieving strategic outcomes,
safety and environmental performance, customer satisfaction and staff development.
At the end of the financial year the Remuneration and Nomination Committee assess the actual performance of the Group, the
relevant segment and individual against the KPI’s set at the beginning of the financial year.
the remuneration and nomination committee recommends the cash incentive to be paid to the individuals for approval by the
board. the method of assessment was chosen as it provides the committee with an objective assessment of the individual’s
performance.
long-term incentive
options are issued under the employee share option plan (esop) (made in accordance with thresholds set in plans approved
by shareholders at the 2001 Annual General meeting (AGm)) and it provides for key management personnel to receive options
over ordinary shares for no consideration. the ability to exercise the options is conditional on the Group achieving certain
performance hurdles.
performance hurdles are based on share price growth and are only exercisable once the company’s share price achieves levels
ranging from 100 – 300% of the exercise price established when the share options are granted.
in assessing whether the performance hurdles have been met, the remuneration and nomination committee receives
independent data from the Australian securities exchange (AsX) which provides information required to assess Volume
weighted Average price (VwAp).
Short-term and long-term incentive structure
the remuneration and nomination committee considers that the above performance-linked remuneration structure is
appropriate because the key management personnel have the ability to reach a level of performance which qualifies them for
the maximum bonus and options.
in the current year the Group did not reach its targets and has resulted in no short-term incentives being recommended for
payment.
Other benefits
Key management personnel can receive additional benefits such as non-monetary benefits, as part of the terms and conditions
of their appointment. Non-cash benefits typically include payment of club memberships and motor vehicles. The Company
pays fringe benefits tax on these benefits.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
22
directors’ report (continued)
For the year ended 30 June 2008
4. Remuneration report (continued)
4.1 Principles of compensation - audited (continued)
Service contracts
it is the Group’s policy that service contracts for key management personnel are unlimited in term but capable of termination
by either party on 3 months’ notice and that the Group retains the right to terminate the contracts immediately, by making
payment equal to 3 months’ pay in lieu of notice.
The Group has entered into service contracts with each key management person, excluding the Chief Executive Officer (CEO),
that provide for the payment of benefits where the contract is terminated by the Group. The key management persons are
also entitled to receive on termination of employment their statutory entitlements of accrued annual and long service leave,
together with any superannuation benefits.
the service contract outlines the components of remuneration paid to the key management personnel but does not prescribe
how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account cost-
of-living changes, any change in the scope of the role performed by the senior executive, retention of key personnel and any
changes required to meet the principles of the remuneration policy.
Mr Danny Gladstone, CEO, has a contract of employment dated 5 February 2007 with the Company. The contract specifies the
duties and obligations to be fulfilled by the CEO and provides that the board and CEO will early in each financial year, consult
and agree objectives for achievement during that year.
The CEO has no entitlement to termination payment in the event of removal for misconduct as specified in his service contract.
Refer to note 28 of the financial statements for details on the financial impact in future periods resulting from the Group’s
commitments arising from non-cancellable contracts for services with key management personnel.
Non-executive directors
The fees paid to non-executive directors reflect the demands and responsibilities associated with their roles and the global
nature of the operations within the highly regulated environment within which the company operates. Fees incorporate an
allowance for the onerous probity requirements placed on non-executive directors by regulators of the global jurisdictions
in which the company is or proposes to operate in.
the company’s non-executive directors only receive fees, including superannuation, for their services. in addition to fees is
the cost of reasonable expenses which are reimbursed as incurred.
non-executive directors do not currently receive or participate in any performance related remuneration. the level of fees
paid to non-executive directors has been established based on the demands and responsibilities of their positions and have
been set with reference to fees paid to other non-executive directors of comparable companies.
current fees for directors effective 1 July 2006, excluding superannuation, are set out below. the executive chairman does
not receive any additional fees for undertaking Board and committee responsibilities. other non-executive directors who
also chair or are a member of a committee receive a supplementary fee in addition to their annual remuneration
POSitiON
Australian resident non-executive director
chair of Audit committee
chair of regulatory and compliance committee
chair of remuneration and nomination committee
member of Audit committee
member of regulatory and compliance committee
member of remuneration and nomination committee
$
(per annum)
70,000
10,000
10,000
6,000
6,000
6,000
4,000
total remuneration for all non-executive directors, last voted upon by shareholders at the 2000 AGm, is not to exceed $500,000
per annum.
Ainsworth GAme technoloGy AnnuAl report 2008
23
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Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
24
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Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
26 directors’ report (continued)
For the year ended 30 June 2008
4. Remuneration report (continued)
4.2 Directors’ and executive officers’ remuneration (Company and Group) - audited (continued)
Notes in relation to the table of directors’ and executive officers’ remuneration - audited
A. The short-term incentive bonus is for performance during the 30 June 2008 financial year using the criteria set out
on page 21. The amount was finally determined on 10 June 2008 by the Remuneration and Nomination Committee who
recommended no bonuses be paid for the current period.
B. the fair value of the options is calculated at the date of grant using the Black scholes and binomial lattice option-pricing
models and allocated to each reporting period evenly over the period from grant date to vesting date. the value disclosed is the
portion of the fair value of the options allocated to this reporting period. in valuing the options, market conditions have been
taken into account.
the following factors and assumptions were used in determining the fair value of options on grant date:
Grant Date
Expiry Date
31 August 2004
31 August 2009
1 April 2004
1 April 2009
25 november 2002
25 november 2007
2 July 2007
2 July 2012
Fair value
per option
Exercise
price
Price of shares
on grant date
Expected
volatility
Risk free
interest rate
Dividend
yield
$0.14
$0.21
$0.11
$0.22
$0.15
$0.06
$1.00
$0.50
$1.00
$0.50
$1.15
$0.50
$0.84
$0.84
$0.50
$0.50
$0.74
$0.38
60%
60%
40%
40%
40%
50%
5.77%
5.77%
5.66% - 5.84%
5.66% - 5.84%
5.41%
6.35%
-
-
-
-
-
-
Details of performance related remuneration
details of the Group’s policy in relation to the proportion of remuneration that is performance related is discussed on page 21.
no short term incentive bonuses were paid for the year ended 30 June 2008.
4.3 Equity instruments
All options refer to options over ordinary shares of Ainsworth Game technology limited, unless otherwise stated, which are
exercisable on a one-for-one basis under the esop.
4.3.1 Options and rights over equity instruments granted as compensation – audited
details on options over ordinary shares in the company that were granted as remuneration to each key management person
during the reporting period and details on options that vested during the reporting period are as follows:
ExECUtiVES
Current
mr ml ludski
mr pw walford
mr r meitzler
mr p curran
mr e eskin
Former
mr K orchard
Number of
options granted
during 2008
Note
Number of
options vested
during 2008
Grant date
Fair value
per option
at grant date
($)
Exercise price
per option
($)
-
-
-
-
-
-
25,000
35,000
35,000
(A)
(A)
200,000
02/07/2007
159,908
02/07/2007
143,750
02/07/2007
165,375
02/07/2007
-
-
-
-
-
-
-
-
37,500
37,500
0.21
0.14
0.21
0.06
0.06
0.06
0.06
0.11
0.22
0.50
1.00
0.50
0.50
0.50
0.50
0.50
1.00
0.50
Expiry date
31/08/2009
31/08/2009
31/08/2009
02/07/2012
02/07/2012
02/07/2012
02/07/2012
01/04/2009
01/04/2009
(A) the share options granted to messrs p curran and e eskin were granted over a portion of the personal shareholding of the
company’s executive chairman and majority shareholder, mr lh Ainsworth.
Ainsworth GAme technoloGy AnnuAl report 2008
27
All options issued prior to 30 June 2007 expire on the earlier of their expiry date or 30 days after termination of the individual’s
employment. All options issued from 1 July 2007 expire on the earlier of their expiry date or termination of the individual’s
employment. the options are exercisable on an annual basis three years from grant date. in addition to a continuing employment
service condition, the ability to exercise options is conditional on the Group achieving certain performance hurdles. details of the
performance criteria are included in the long-term incentives discussion on page 21.
Further details, including grant dates and exercise dates regarding options granted to executives under the esop are in note
24 to the financial statements.
4.3.2 Modification of terms of equity-settled share-based payment transactions - audited
no terms of equity-settled share-based payment transactions (including options and rights granted as remuneration to a key
management person) have been altered or modified by the issuing entity during the reporting period or the prior period.
4.3.3 Exercise of options granted as compensation - audited
during the reporting period no shares were issued on the exercise of options previously granted as compensation (2007: nil).
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
28 directors’ report (continued)
For the year ended 30 June 2008
4. Remuneration report (continued)
4.3 Equity instruments (continued)
4.3.4 analysis of options and rights over equity instruments granted as compensation - audited
Details of vesting profiles of the options granted as remuneration to each director of the Company and each of the five named
company executives and relevant Group executives and other key management personnel are detailed below.
Options granted
Number
Date
%
Vested
in year
%
Forfeited
in year
(a)
Value yet to vest $
Financial years in
which grant vests
Min (B)
Max (C)
300,000
25/11/2002
-
100%
-
nil
DiRECtORS
mr sl wallis
ExECUtiVES
Current
mr ml ludski
mr pw walford
50,000
70,000
70,000
31/08/2004
31/08/2004
31/08/2004
mr r meitzler
200,000
02/07/2007
Former
mr K orchard
75,000
75,000
01/04/2004
01/04/2004
165,375
02/07/2007
50%
50%
50%
-
50%
50%
-
-
-
-
-
-
-
-
31/08/2005 - 31/08/2007
31/08/2005 - 31/08/2007
31/08/2005 - 31/08/2007
02/07/2008 - 02/07/2010
01/04/2005 - 01/04/2007
01/04/2005 - 01/04/2007
02/07/2008 - 02/07/2010
nil
nil
nil
nil
nil
nil
nil
A. the % forfeited in the year represents the reduction from the maximum number of options available to vest due to the
highest level performance criteria not being achieved.
B. the minimum value of options yet to vest is $nil as the performance criteria may not be met and consequently the option
may not vest.
c. the maximum value of options yet to vest is not determinable as it depends on the market price of shares of the company
on the AsX at the date the option is exercised. the share price of the company at 30 June 2008 was $0.09. this compares to
an exercise price of between $0.50 and $1.15 in respect of the share options.
4.3.5 analysis of movements in options - audited
the movement during the reporting period, by value, of options over ordinary shares in the company held by each company
director and each of the five named Company executives and relevant Group executives is detailed below:
DiRECtOR
mr sl wallis
ExECUtiVES
Current
mr r meitzler
Former
mr K orchard
Granted in year
$
-
11,480
9,493
Exercised in year
(a)
$
Forfeited in year
(B)
$
total option value
in year
$
-
-
-
45,000
45,000
-
-
5,860
4,845
A. no options were exercised during the year.
B. The value of the options that lapsed during the year represents the benefit forgone and is calculated at the date the option
lapsed using the Black scholes model with no adjustments for whether the performance criteria have or have not been
achieved.
Ainsworth GAme technoloGy AnnuAl report 2008
29
5. Principal Activities
the principal activity of the Group during the course of the
financial year was the design, development, production,
sale and servicing of gaming machines and other related
equipment and services.
there were no significant changes in the nature of the
activities of the Group during the year.
Objectives
the Group’s objectives are to:
to
• continue
focusing on
rationalise operations
geographical markets which are expected to achieve
positive contributions to the Group’s financial results;
• prudently manage and reduce levels of investment in
working capital and achieve positive cash flow from
operations in the 2009 financial year;
• pursue investment in new technology and next generation
gaming equipment;
• provide a positive return on equity over the next financial
year through profitability and share price growth;
• secure new gaming
jurisdictional licences through
selective entry into new international markets through
distributors or direct sales channels within the global
gaming industry; and
• provide quality leading edge products that are innovative
and entertaining and give increased player satisfaction
and greater venue profitability.
in order to meet these objectives the following action
priorities continue to apply for the 2009 financial year and
beyond:
• grow market share for existing business and increase
revenue and operating activities, particularly in the north
American market;
• further reduce operating costs and overheads and
improve efficiencies of production;
• further improve management of working capital;
• implement best practice compliance policies and
procedures and increase stakeholder awareness of the
Company’s regulatory environment;
• upgrade the performance of the management team by
having an effective performance management system
and establishing a training and leadership program;
• pursue best practice human resource strategies to ensure
retention and development of key employees;
• increase resources within compliance to facilitate the
acceleration of licence applications and improvement in
the quality of technical submissions; and
• further upgrade
the quality and performance of
product development and
integrate activities within
product development, engineering and research and
development.
6. Operating and financial review
Overview of the Group
the loss after income tax for the year ended 30 June 2008
was $19 million compared to a loss in the corresponding
2007 year of $50 million. the second half loss recorded
for the financial year ended 30 June 2008 was $8.6
million which included $5.4 million in foreign exchange
losses and one off impairment charges and provisions,
resulting in an actual operating loss of $3.2 million.
this compares to an actual operating loss, on the same
basis, of $10.3 million in the first half of the 2008 financial
year.
sales revenue increased by 60% to $50 million compared to
$31 million in the corresponding period in 2007. previous
reliance of the Group on a relatively small number of major
markets caused a heavy downturn in sales when a number
of those markets experienced a slowdown in activity.
Further diversification and less reliance on a relatively
small number of markets have ensured revenue growth is
sustainable and the Group achieves a profitable turnaround
in the medium term.
With difficult domestic market conditions and the slow
down in the replacement market in new south wales due to
smoking legislation and the imposition of additional taxes
the Group achieved revenue of $14.9 million, a reduction of
18% on the corresponding period in 2007. domestic revenue
in the period under review represented 30% of total revenue,
compared to 59% in the previous corresponding period.
increased focus within the Americas, primarily the north
American market, resulted in revenue of $22.9 million, an
increase of 118% on the previous year.
investments for future performance
Further investment during the current period will enable
the Group to be at the forefront of technology in gaming
related products. Increased efficiencies were introduced
in product development and engineering during the period
which will enable a greater variety of content to be supplied
to diverse markets. operating system upgrades and the
streamlining of product development procedures were
introduced to reduce previously encountered lead times to
market, including the time for regulatory approvals.
due to the regulatory nature of the gaming industry
significant delays can be experienced between the initial
concept development and the translation of these into
revenue opportunities. the securing of a licence in any
jurisdiction is only the initial step prior to obtaining the
product and game approvals necessary before sales can be
made to that jurisdiction. the company has commenced
product development in these and other jurisdictions
where licences have been secured and will be seeking
the necessary product and game approvals to enable
commercial realisation of these revenue opportunities.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
30 directors’ report (continued)
For the year ended 30 June 2008
6. Operating and financial review
(continued)
investments for future performance (continued)
Significant compliance related costs are an inherent part of
the supply of equipment to the gaming industry which assists
in maintaining a high standard of integrity within the industry.
the company continues to invest in the future and through its
licensing strategy has expanded its reach into north America
with 53 us tribal licences being secured compared to 26 in
2007. the Group has secured us state licence approvals in
new Jersey, wisconsin, pennsylvania, california, oregon,
minnesota, iowa, indiana and Florida. in addition to the above,
provincial licences for ontario, Alberta and British colombia
in canada have been submitted and are awaiting approvals.
this investment is expected to ensure the Group provides
innovative and technically advanced quality gaming equipment
to existing and new markets during future periods.
Review of financial condition
capital structure and treasury policy
the company currently has on issue 278,942,304 ordinary
shares and 19,714,717 convertible notes. due to the loss
during the 2007 financial year the company indicated
that it was reviewing alternatives to strengthen its capital
structure. A fully underwritten rights issue raising $27.3
million (before issue costs) was completed in december
2007 with the issue of 85.3 million new shares. this
capitalisation has ensured an improvement in the company
and in the Group’s capital structure to provide funding for
the pursuit of the company’s medium term objectives.
the Group is exposed to foreign currency risks on sales and
purchases that are denominated in currencies other than
Aud. As a result of this foreign currency risk a formalised
treasury risk management policy is in place which is subject to
monitoring and review by the Audit committee and the Board.
the Group, subject to the limitations of facilities available,
looks to establish foreign currency call options to minimise
the financial impact of currency variations. These call options
expired during the current period and were not replaced due to
limited available facilities, the expectation of a reduction in the
Group’s net asset exposure to fluctuations and reversal of the
translational impact in future periods.
liquidity and funding
the company currently has a loan facility in place of $40
million with an entity controlled by the executive chairman,
mr lh Ainsworth, of which $26 million is unutilised at the
reporting date. the maturity date of this facility was formally
amended to 4 January 2010 and does not call for repayment of
interest until this maturity date.
cash flows from operations
The cash outflow from operations for the period under review
was $5.1 million compared to an outflow of $2.8 million in the
corresponding period in 2007. the Group continues to monitor
closely its working capital requirements and has significantly
reduced the extent of credit offered on sales made in all
jurisdictions.
continued efforts to reduce the Group’s investment in working
capital have been made during the current period under review.
reduction in receivables and inventory holdings have occurred
which have assisted in offsetting the reduction in cash outflow
from operations.
As a result of the rationalisation of product lines and
streamlining of supply chain management it is expected that
further reductions in inventory will be achieved during the
2009 year. As part of the ongoing strategic review undertaken
operational expenditure reductions were achieved which is
expected to continue and be reflected in future periods.
procedures implemented will further rationalise and reduce
current working capital requirements.
impact of legislation and other external requirements
the Group continues to improve its working relationships
with regulatory authorities to ensure that the necessary
licences to support its operations within Australia and
overseas are granted on a timely and cost effective basis.
the granting of such licences will allow the Group to expand
its operations into new international markets.
the market conditions within Australia continued to present
challenges during the year under review. the recent
legislative and regulatory environment within new south
wales, specifically in relation to smoking legislation and
growing taxes, had a limiting effect within this market.
this may have an impact on future performance, although
the Group remains focused on increasing its domestic
market share through innovative product development
and capitalising on greater opportunities available in
international markets.
Review of principal businesses
revenue
sales revenue of $50 million was recorded in the period under
review compared to $31 million in the corresponding period in
2007, an increase of 60%.
the principal factors which contributed to the increase
in revenue were the improved penetration within the key
international markets of the Americas, europe and Asia which
represented 68% of total revenue achieved, an increase of
$19.4 million or 134% on the previous period in 2007.
In addition to the above an additional $5 million trade finance
facility has been established with an entity controlled by the
executive chairman, mr lh Ainsworth of which $2.6 million is
unutilised at the reporting date.
the revised distribution arrangements
initiated within
europe have assisted in minimising the adverse impacts
of legislative changes in certain european markets, which
previously reduced performance within this region.
Ainsworth GAme technoloGy AnnuAl report 2008
the Group’s continued growth prospects within the Americas
are heavily dependant, to a great extent, on securing the
necessary gaming licences and product approvals in the
jurisdictions concerned. Approvals obtained in each additional
jurisdiction provide further market opportunities. it is expected
that further licences and product approvals will be achieved
in the short to medium term which should enable additional
revenue opportunities to be realised.
As a result of difficult market conditions within Australia
domestic revenue was $15 million compared to $18 million in
the previous period in 2007. overall Australian revenue fell by
18% compared to the previous period in 2007 and represented
30% of total revenue for the current period under review
compared to 59% in 2007.
the impact of delays in completing the required product
development and receipt of the necessary approvals under new
regulatory requirements added to the slowdown in previously
expected growth within Australia. the recent approval within
Queensland in the last quarter of the current period realised
revenue comparable to the prior period in 2007.
progress within the Victorian market enabled the delivery
of the Group’s products to a major operator within the
current financial year. this sale represented 8% of total
domestic revenue for the period under review and subject
to the performance of the company’s products within this
jurisdiction further revenue opportunities are expected to
be achieved.
the further expansion of the global product strategy and the
forthcoming display of regulatory approved product at the
Australasian Gaming exhibition (AGe) to be held in August
2008 coupled with the upcoming G2e in las Vegas being
held in november, are expected to provide revenue growth
within all domestic and international markets.
operating costs
cost of sales in the period were $30 million compared to
$29 million in the corresponding period in 2007.
operating costs, excluding cost of sales and financing
costs, were $32.0 million compared to $41.4 million in
the corresponding period in 2007, a reduction of 23%.
significant restructuring across the Group was undertaken
to ensure the cost structures throughout the business were
commercially aligned with realistic revenue expectations
and offset the impact of reduced revenues. restructuring of
operations and the associated redundancy costs incurred
in the previous period have enhanced operating cost
efficiencies in the current period under review.
31
increased investment within the key north American
market was initiated in the second half of the current
period with the appointment of experienced executives in
the gaming industry within this jurisdiction. this investment
has allowed the Group to sell product under a direct sales
model thus increasing revenue contributions. Key changes
have also occurred within european sales channels to assist
the company in minimising any delays and risks associated
with achieving revenues within these diverse and complex
jurisdictions.
research and development expenditure including recently
initiated changes and investment in product development
programs have occurred in the period. Further streamlining
and rationalisation of the Group’s products has resulted in
further efficiencies and in excess of 700 jurisdictional game
approvals being achieved in the period which are expected
to have a positive impact in the 2009 year. research and
development, excluding the impact of capitalisation and
impairment losses on capitalised development expenditure,
resulted
in expenditure of 31% and
represented 20% of revenue compared to 24% in the
corresponding period in 2007.
increase
in an
Administration costs include impairment losses in the
current period of $1.6 million on previously acquired
goodwill and development costs capitalised. excluding
impairment losses administration costs fell by 5% over the
prior corresponding period in 2007.
Financing costs
net financing costs were $6.6 million in the period, a
reduction of $3.5 million on the corresponding period
in 2007. this decrease was primarily a result of lower
translational foreign exchange losses and reduced interest
costs incurred as a result of the reduction in debt levels
in
through the renounceable rights issue completed
december 2007.
Significant changes in the state of affairs
As a result of the strategic review undertaken across the
organisation costs structures throughout the business were
commercially aligned with realistic revenue expectations.
significant management restructuring and cost minimisation
was undertaken in the current period to assist in offsetting the
immediate impact of delays in achieving expected revenues
and ensure a reduced cost structure to effect a financial turn
around in the medium term.
the immediate benefit of the rationalisation previously
undertaken and the continued development in new product
should enable the Group to establish a platform to achieve
sustainable and profitable trading in the medium term.
in conjunction
to
final negotiations are
further diversify the company’s product base by adding
multi-terminal gaming offers to selected domestic markets.
in progress
other than the matters noted above, there were no
significant changes in the state of affairs of the Group
during the financial year.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
32
directors’ report (continued)
For the year ended 30 June 2008
7. Dividends
no dividends were paid or declared by the company since the end of the previous financial year. the directors do not
recommend that any dividends be paid in respect of the 2008 financial year.
8. Events subsequent to reporting date
there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event
of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the operations of the
Group, the results of those operations, or the state of affairs of the Group, in future financial years.
9. Likely developments
the Group will continue to pursue further gaming licences and commercialisation of current and further new product development
to ensure a sustainable and profitable turnaround is affected. this strategy is expected to achieve increased market share in
targeted geographical business sectors which will positively contribute to Group results during future financial years. this will
require further investment in product development and the securing of additional gaming licenses, which are expected to provide
increased revenue and positive results over the medium term.
Further information about likely developments in the operations of the Group and the expected results of those operations in
future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Group.
10. Directors’ interests
the relevant interest of each director in the shares, convertible notes and rights or options over such instruments issued by
the companies within the Group and other related bodies corporate, as notified by the directors to the AsX in accordance with
s205G(1) of the corporations Act 2001, at the date of this report is as follows:
Current
mr leonard h Ainsworth
mr stewart l wallis
mr Graeme J campbell
Former
mr Andrew r Amer
ainsworth Game technology limited
Ordinary shares
Convertible Notes
Options over ordinary shares
165,690,998
624,280
87,500
10,325,382
181,000
-
69,826
6,534
-
-
-
-
11. Share options
Options granted to directors and officers of the Company
during or since the end of the financial year, the company granted options for no consideration over unissued ordinary shares in
the company to the following of the five most highly remunerated officers of the company as part of their remuneration:
Executives
Current
mr r meitzler
mr p curran
mr e eskin
Former
mr K orchard
Note
Number of options granted
Exercise price
Expiry date
(B), (c)
(B)
(A)
200,000
159,908
143,750
$0.50
$0.50
$0.50
2 July 2012
2 July 2012
2 July 2012
165,375
$0.50
2 July 2012
notes:
(A) mr K orchard retired effective 30 June 2008. the options granted have expired as at the date of this report.
(B) the share options granted to messrs p curran and e eskin were granted over a portion of the personal shareholding of the
company’s executive chairman, mr lh Ainsworth.
(c) mr p curran resigned from the company at balance date and ceases employment effective 22 August 2008.
No options have been granted since the end of the financial year.
Ainsworth GAme technoloGy AnnuAl report 2008
33
Unissued shares under options
At the date of this report unissued ordinary shares of the company under option are:
Expiry date
31 August 2009
2 July 2012
Exercise price ($)
1.00
0.50
0.50
Number of shares
205,000
385,000
760,180
1,350,180
the company granted 1,020,555 share options to all American employees on 2 July 2007 under an incentive plan introduced.
during or since the end of the financial year 260,375 options expired due to cessation of employment leaving a balance of 760,180
under issue. the share options under this incentive plan included 200,000 options granted to mr r meitzler and 165,375 options
granted to mr K orchard as noted above. the 165,375 options granted to mr K orchard expired at the date of this report due to
cessation of his employment.
in addition to the share options issued by the company the company introduced an incentive plan whereby share options were
granted to all Australian employees, excluding directors and four key management personnel. the share options granted
to Australian employees totalled 10,994,707 and were granted over a portion of the personal shareholding of the company’s
executive chairman, mr lh Ainsworth. during or since the end of the financial year 2,648,314 options expired due to cessation of
employment leaving a balance of 8,346,394 under issue. the share options under this incentive plan issued to key management
personnel totalled 303,658 share options as noted above.
An exercise price of $0.50 per share option has been established and exercise is subject to vesting and performance conditions
being met. the number of share options granted to each employee reflects the number of dollars comprising their individual
base salary. the vesting of these share options is over a three year period with performance hurdles based on the market value
of the shares in the company. the share options lapse automatically on cessation of employment for any reason.
the options above have vesting and performance conditions, which must be satisfied prior to any of the options being exercised.
the vesting condition is set with reference to the anniversary of the issue date of the option. All options expire on the earlier of
their expiry date or termination of the option holders’ employment unless otherwise approved by shareholders.
these options do not entitle the holder to participate in any share issue of the company or any other body corporate.
Shares issued on exercise of options
during or since the end of the financial year, the company issued no ordinary shares as a result of the exercise of options.
12. Indemnification and insurance of officers
Indemnification
the company has agreed to indemnify current and former directors of the company against all liabilities to another person (other
than the company or a related body corporate) that may arise from their position as directors of the company and its controlled
entities, except where the liability arises out of conduct involving a lack of good faith. the agreement stipulates that the company
will meet the full amount of any such liabilities, including costs and expenses.
the company has also agreed to indemnify the current directors of its controlled entities for all liabilities to another person
(other than the company or a related body corporate) that may arise from their position, except where the liability arises out of
conduct involving a lack of good faith. the agreement stipulates that the company will meet the full amount of any such liabilities,
including costs and expenses.
insurance premiums
since the end of the previous financial year, the company has paid insurance premiums in respect of directors’ and officers’
liability and legal expenses’ insurance contracts, for current and former directors and officers, including executive officers of the
company and directors, executive officers and secretaries of its controlled entities.
the directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the
directors’ and officers’ liability and legal expenses contracts, as such disclosure is prohibited under the terms of the contract.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
34
directors’ report (continued)
For the year ended 30 June 2008
13. Non-audit services
during the year KpmG, the company’s auditor, has performed certain other services in addition to their statutory duties.
the board has considered the non-audit services provided during the year by the auditor and in accordance with written advice
provided by resolution of the audit committee, is satisfied that the provision of those non-audit services during the year by the
auditor is compatible with, and did not compromise, the auditor independence requirements of the corporations Act 2001 for the
following reasons:
• all non-audit services were subject to the corporate governance procedures adopted by the company and have been reviewed
by the audit committee to ensure they do not impact the integrity and objectivity of the auditor; and
• the non-audit services provided do not undermine the general principles relating to auditor independence as set out in
professional statement F1 professional independence, as they did not involve reviewing or auditing the auditor’s own work,
acting in a management or decision making capacity for the company, acting as an advocate for the company or jointly sharing
risks and rewards.
details of the amounts paid to the auditor of the company, KpmG, and its related practices for audit and non-audit services provided
during the year are set out below. in addition, amounts paid to other auditors for the statutory audit have been disclosed:
audit services:
Auditors of the company
Consolidated
2008
$
2007
$
Audit and review of financial reports (KpmG Australia)
165,000
121,500
other auditors:
Audit and review of financial reports (non-KpmG firms)
Services other than statutory audit:
Other services
contract employment services (KpmG related practices)
AiFrs accounting services (KpmG Australia)
capital raising services (KpmG Australia)
-
4,588
165,000
126,088
-
40,000
85,000
125,000
80,775
53,500
-
134,275
14. Lead auditor’s independence declaration
the lead auditor’s independence declaration is set out on page 84 and forms part of the directors’ report for the financial year
ended 30 June 2008.
15. Rounding off
the company is of a kind referred to in Asic class order 98/100 dated 10 July 1998 and in accordance with that class order, amounts
in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
this report is made with a resolution of the directors.
lh Ainsworth
executive director
dated at sydney this 27th day of August 2008
Ainsworth GAme technoloGy AnnuAl report 2008
income stAtements
For the year ended 30 June 2008
in thousands of Aud
revenue
cost of sales
Gross profit
other income
sales, service and marketing expenses
research and development expenses
Administrative expenses
Results from operating activities
Financial income
Financial expenses
8
11
11
35
Consolidated
Company
Note
7
2008
49,563
(30,030)
2007
30,977
(29,198)
2008
47,476
(27,566)
2007
28,962
(28,175)
787
45
(18,714)
(9,600)
(8,847)
19,533
1,779
19,910
187
(13,257)
(9,155)
(9,598)
45
(22,913)
(9,600)
(8,852)
241
(15,261)
(9,155)
(9,598)
(12,290)
(39,541)
(13,863)
(36,329)
1,330
(7,987)
1,222
(11,337)
1,330
(7,965)
1,222
(11,296)
Net finance expenses
(6,657)
(10,115)
(6,635)
(10,074)
share of (loss)/profit equity accounted investees
17
(361)
211
-
-
(loss)/profit before income tax
(19,308)
(49,445)
(20,498)
(46,403)
income tax expense
12
(49)
(40)
-
-
(loss)/profit for the period
(19,357)
(49,485)
(20,498)
(46,403)
(loss)/earnings per share:
Basic (loss)/earnings per share from continuing
operations
diluted (loss)/earnings per share from continuing
operations
13
13
($0.08)
($0.26)
($0.08)
($0.26)
the notes on pages 40 to 80 are an integral part of these consolidated financial statements.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
36
stAtements oF chAnGes in eQuity
For the year ended 30 June 2008
Equity
compensation
reserve
Fair value
reserve
translation
reserve
accumulated
losses
total
equity
Consolidated
in thousands of Aud
opening balance at 1 July 2006
Foreign exchange translation differences
equity component of additional related
party borrowings
share-based payments
total non-profit items recognised directly
in equity
issued
capital
94,517
-
-
-
558
4,014
-
-
27
-
313
-
94,517
585
4,327
net (loss) for the period
-
-
-
closing balance at 30 June 2007
94,517
585
4,327
opening balance at 1 July 2007
shares issued
transaction costs of shares issued
Foreign exchange translation differences
equity component of additional related
party borrowings
share-based payments
total non-profit items recognised directly
in equity
net (loss) for the period
94,517
28,142
(286)
-
-
-
27,856
-
585
4,327
-
-
-
-
281
281
-
-
-
-
654
-
654
-
30
144
-
-
174
-
174
174
-
-
171
-
-
171
-
(35,196)
63,923
-
-
-
144
313
27
(35,196)
64,407
(49,485)
(49,485)
(84,681)
14,922
(84,681)
14,922
-
-
-
-
-
-
28,142
(286)
171
654
281
28,962
(19,357)
(19,357)
closing balance at 30 June 2008
122,373
866
4,981
345
(104,038)
24,527
Amounts are stated net of tax.
the notes on pages 40 to 80 are an integral part of these consolidated financial statements.
Ainsworth GAme technoloGy AnnuAl report 2008
37
Company
in thousands of Aud
opening balance at 1 July 2006
equity component of additional related
party borrowings
share-based payments
issued
capital
94,517
-
-
total non-profit items recognised directly in equity
94,517
net (loss) for the period
closing balance at 30 June 2007
opening balance at 1 July 2007
shares issued
transaction costs of shares issued
equity component of additional related
party borrowings
share-based payments
-
94,517
94,517
28,142
(286)
-
-
total non-profit items recognised directly in equity
27,856
net (loss) for the period
-
Equity
compensation
reserve
Fair value
reserve
accumulated
losses
total
equity
558
4,014
(35,779)
63,310
-
27
585
-
585
585
-
-
-
281
281
-
313
-
-
-
313
27
4,327
(35,779)
63,650
-
(46,403)
(46,403)
4,327
(82,182)
17,247
4,327
(82,182)
17,247
-
-
654
-
654
-
-
-
-
-
28,142
(286)
654
281
28,791
-
(20,498)
(20,498)
closing balance at 30 June 2008
122,373
866
4,981
(102,680)
25,540
Amounts are stated net of tax.
the notes on pages 40 to 80 are an integral part of these consolidated financial statements.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
38
BAlAnce sheets
As at 30 June 2008
in thousands of Aud
assets
cash and cash equivalents
receivables and other assets
inventories
income tax receivable
total current assets
receivables and other assets
investments in equity accounted investees
property, plant and equipment
intangible assets
total non-current assets
total assets
liabilities
trade and other payables
loans and borrowings
Employee benefits
provisions
total current liabilities
trade and other payables
loans and borrowings
Employee benefits
Consolidated
Company
Note
2008
2007
2008
2007
14
15
16
15
17
19
20
21
22
23
25
21
22
23
3,735
22,219
20,798
8
1,157
21,960
28,970
15
1,033
21,947
20,798
-
802
21,564
28,970
-
46,760
52,102
43,778
51,336
9,112
2,171
22,881
8,980
4,995
2,532
18,342
9,185
15,927
11,442
-
22,700
8,109
-
18,173
8,161
43,144
35,054
46,736
37,776
89,904
87,156
90,514
89,112
10,592
1,105
1,173
762
8,586
688
1,246
117
10,105
1,099
1,043
762
8,169
683
1,070
117
13,632
10,637
13,009
10,039
-
51,324
421
-
61,132
465
277
51,324
364
342
61,127
357
total non-current liabilities
51,745
61,597
51,965
61,826
total liabilities
Net assets
Equity
issued capital
reserves
Accumulated losses
65,377
72,234
64,974
71,865
24,527
14,922
25,540
17,247
122,373
6,192
94,517
5,086
122,373
5,847
94,517
4,912
(104,038)
(84,681)
(102,680)
(82,182)
total equity attributable to equity holders of the parent
24,527
14,922
25,540
17,247
the notes on pages 40 to 80 are an integral part of these consolidated financial statements.
Ainsworth GAme technoloGy AnnuAl report 2008
39
stAtements oF cAsh Flows
For the year ended 30 June 2008
in thousands of Aud
Cash flows from operating activities
cash receipts from customers
cash paid to suppliers and employees
cash used in operations
Consolidated
Company
Note
2008
2007
2008
2007
42,497
(44,040)
(1,543)
57,246
(58,414)
(1,168)
24,342
(28,249)
(3,907)
50,248
(51,634)
(1,386)
Borrowing costs paid
(3,521)
(1,680)
(3,521)
(1,680)
Net cash from operating activities
32
(5,064)
(2,848)
(7,428)
(3,066)
Cash flows from investing activities
proceeds from sale of property, plant and equipment
interest received
Acquisitions of property, plant and equipment
Acquisition of equity investments
development expenditure
61
1,147
(350)
(50)
74
1,116
(398)
(50)
61
1,147
(350)
(50)
74
1,116
(275)
(50)
20
(3,182)
(3,380)
(3,182)
(3,380)
Net cash from investing activities
(2,374)
(2,638)
(2,374)
(2,515)
Cash flows from financing activities
proceeds from the issue of share capital
26
payment of transaction costs
proceeds from borrowings
repayment of borrowings
Payment of finance lease liabilities
8,362
(281)
2,800
-
(782)
-
-
6,000
(91)
(705)
8,362
(281)
2,800
-
(778)
-
-
6,000
(91)
(705)
Net cash from financing activities
10,099
5,204
10,103
5,204
net increase/(decrease) in cash and cash equivalents
cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
2,661
1,157
(83)
(282)
1,577
(138)
301
802
(70)
(377)
1,317
(138)
Cash and cash equivalents at 30 June
14
3,735
1,157
1,033
802
the notes on pages 40 to 80 are an integral part of these consolidated financial statements.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
40
Ainsworth Game technology limited
notes to the FinAnciAl stAtements
Page
Note
1. reporting entity ...................................................................................................................41
2. Basis of preparation ............................................................................................................41
3. significant accounting policies ............................................................................................42
4. determination of fair values ................................................................................................47
5. Financial risk management ................................................................................................48
6. segment reporting ...............................................................................................................49
7. revenue ................................................................................................................................51
8. other income .......................................................................................................................51
9. personnel expenses ............................................................................................................51
10. Auditors’ remuneration .......................................................................................................51
11. Finance income and expense ..............................................................................................52
12. income tax expense .............................................................................................................52
13. earnings per share ..............................................................................................................53
14. cash and cash equivalents ..................................................................................................54
15. receivables and other assets ..............................................................................................54
16. inventories ...........................................................................................................................54
17. equity accounted investees .................................................................................................55
18. tax assets and liabilities ......................................................................................................56
19. property, plant and equipment ...........................................................................................56
20. intangible assets ..................................................................................................................58
21. trade and other payables ....................................................................................................61
22. loans and borrowings .........................................................................................................61
23. employee benefits ...............................................................................................................65
24. share-based payments .......................................................................................................66
25. provisions .............................................................................................................................67
26. capital and reserves ............................................................................................................68
27. operating leases ..................................................................................................................68
28. other commitments ............................................................................................................69
29. legal matters.......................................................................................................................69
30. regulatory matters ..............................................................................................................69
31. Group entities .......................................................................................................................69
32. reconciliation of cash flows from operating activities .......................................................70
33. Financial instruments .........................................................................................................70
34. related parties.....................................................................................................................77
35. subsequent events ..............................................................................................................80
Ainsworth GAme technoloGy AnnuAl report 2008
1. Reporting entity
Ainsworth Game Technology Limited (the ‘Company’)
is a company domiciled in Australia. the address of the
company’s registered office is 10 holker street, newington,
nsw, 2127. the consolidated financial statements of
the company as at and for the year ended 30 June 2008
comprise the company and its subsidiaries (together
referred to as the ‘Group’) and the Group’s interest in
associates. the Group primarily is involved in the design,
development, sale and servicing of gaming machines and
other related equipment and services.
2. Basis of preparation
(a) Statement of compliance
the financial report is a general purpose financial report
which has bee n prepared in accordance with Australian
Accounting Standards (‘AASBs’) (including Australian
interpretations) adopted by the Australian Accounting
Standards Board (‘AASB’) and the Corporations Act 2001.
the consolidated financial report of the Group and the
financial report of the company also comply with the
international Financial reporting standards (iFrs’s) and
interpretations adopted by the international Accounting
standards Board.
the financial statements were approved by the Board of
directors on 27 August 2008.
(b) Basis of measurement
the consolidated financial statements have been prepared
on the historical cost basis except for loans and borrowings
with a director related entity.
(c) Functional and presentation currency
these consolidated financial statements are presented
in Australian dollars, which is the company’s functional
currency and the functional currency of the majority of
the Group. the company is of a kind referred to in Asic
class order 98/100 dated 10 July 1998 and in accordance
with that class order, all financial information presented
in Australian dollars has been rounded to the nearest
thousand unless otherwise stated.
(d) Use of estimates and judgements
the preparation of
to make
financial statements
requires
management
judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ to these
estimates. estimates and underlying assumptions are
reviewed on an ongoing basis. revisions to accounting
estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
41
(e) Going concern
the financial statements have been prepared on the going
concern basis of accounting, which assumes that the
continuity of normal business activities and the realisation
of assets and settlement of liabilities in the ordinary course
of business.
For the year ended 30 June 2008, the Group recorded a
loss of $19.4 million (2007: $49.5 million). the Group’s
operations are dependent on established facilities and
funding by its major shareholder who has confirmed his
ongoing financial support.
in relation to the directors’ assessment of the going concern
assumption, the directors have considered the following:
• the majority shareholder has provided a loan facility
of $40 million which was extended on 23 may 2008 and
matures on 4 January 2010 or such other later date
agreed between the parties. interest on the facility is
not payable until this maturity date;
• A $5 million trade facility has also been established of
which $2.6 million was available at 30 June 2008;
• the company and Group do not expect to require funding
beyond these facilities in the foreseeable future, or at least
one year from the signing of these financial statements.
of all available facilities, $14.1 million was drawn at 30
June 2008, leaving $25.9 million in unutilised facilities;
• At balance date, the Group had positive net working
capital of $33 million;
• As a result of the restructuring undertaken during the
year, operating cost efficiencies were achieved in the
current period under review;
• the continued investment within the key north American
market is expected to continue to achieve revenue
opportunities beyond the 2008 financial year;
• progression of development strategies within domestic
and targeted international markets is expected to create
additional revenue opportunities in future periods; and
• the directors have reviewed the cashflow forecasts
and believe that these initiatives will enable the
company to be to be able fund its operations for at
least the next 12 months.
the directors have concluded that it is appropriate to
prepare the financial report on a going concern basis,
as they are confident the company and the Group having
secured sufficient funding by way of support from its
majority shareholder and related entities and can pay its
debts as and when they fall due for the foreseeable future,
being at least one year from the date of approval of the
financial statements.
in particular, information about significant areas of
estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect
on the amount recognised in the financial statements are
described in note 20 – intangibles and note 24 – share-
based payments.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
42 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
3. Significant accounting policies
the accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by
Group entities.
(a) Basis of consolidation
Subsidiaries
subsidiaries are entities controlled by the Group. control
exists when the Group has the power to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities. in assessing control, potential
voting rights that presently are exercisable or convertible
are taken into account. the financial statements of
subsidiaries are included in the consolidated financial
statements from the date that control commences until
the date that control ceases.
in the company’s financial statements, investments in
subsidiaries are carried at cost.
associates (equity accounted investees)
Associates are those entities in which the Group has
significant influence, but not control, over the financial
and operating policies. Associates are accounted for
using the equity method (equity accounted investees). the
consolidated financial statements include the Group’s
share of the income and expenses of equity accounted
investees, after adjustments to align the accounting
policies with those of the Group, from the date that
significant influence commences until the date that
significant influence ceases. when the Group’s share of
losses exceeds its interest in an equity accounted investee,
the carrying amount of that interest (including any long
term investments) is reduced to nil and the recognition of
further losses is discontinued except to the extent that the
Group has an obligation or has made payments on behalf
of the investee.
in the company’s financial statements, investments in
associates are carried at cost.
transactions eliminated on consolidation
in preparing
the consolidated
intra-group balances and any unrealised income and
intra-group transactions, are
expenses arising from
eliminated
financial
statements. unrealised gains arising from transactions
with equity accounted investees are eliminated against
the investment to the extent of the Group’s interest in the
investee. unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there
is no evidence of impairment.
Gains and losses are recognised when the contributed
assets are consumed or sold by the equity accounted
investees or, if not consumed or sold by the equity
accounted investees when the Group’s interest in such
entities is disposed of.
the foreign currency gain or loss on monetary items is
the difference between amortised cost in the functional
currency at the beginning of the period, adjusted for
effective interest and payments during the period, and
the amortised cost in foreign currency translated at the
exchange rate at the end of the period. non-monetary
assets and liabilities denominated in foreign currencies
that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date
that the fair value was determined. Foreign currency
differences arising on retranslation are recognised in
profit or loss.
(ii) Foreign operations
the assets and liabilities of foreign operations are translated
to Australian dollars at exchange rates at the reporting
date. the income and expenses of foreign operations are
translated to Australian dollars at exchange rates at the
dates of the transactions.
Foreign currency differences are recognised directly in
equity. since 1 July 2004, the Group’s date of transition
to AAsBs under AiFrs, such differences have been
recognised in the Foreign currency translation reserve
(Fctr). when a foreign operation is disposed of, in part
or in full, the relevant amount in the Fctr is transferred
to profit or loss.
(c) Financial instruments
Non-derivative financial instruments
non-derivative financial instruments comprise trade and
other receivables, cash and cash equivalents, loans and
borrowings, and trade and other payables.
non-derivative
financial
instruments are recognised
initially at fair value plus, for instruments not at fair value
through profit or loss, any directly attributable transaction
costs, except as described below. subsequent to initial
recognition non-derivative
instruments are
measured as described below.
financial
if
A financial instrument is recognised if the Group becomes
a party to the contractual provisions of the instrument.
Financial assets are derecognised
the Group’s
contractual rights to the cash flows from the financial
assets expire or if the Group transfers the financial asset
to another party without retaining control or substantially
all risks and rewards of the asset. regular way purchases
and sales of financial assets are accounted for at trade date
i.e., the date that the Group commits itself to purchase or
sell the asset. Financial liabilities are derecognised if the
Group’s obligations specified in the contract expire or are
discharged or cancelled.
cash and cash equivalents comprise cash balances and
call deposits.
Accounting for finance income and expense is discussed in
note 3(m).
(b) Foreign currency
(i) Foreign currency transactions
transactions in foreign currencies are translated at the
foreign exchange rate at the date of the transaction.
monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are retranslated to the
functional currency at the foreign exchange rate at that date.
loans and borrowings
loans and borrowings are recognised initially at fair value
less attributable transaction costs. subsequent to initial
recognition, loans and borrowings are stated at amortised
cost with any difference between cost and redemption
value being recognised in the income statement over the
period of the borrowings on an effective interest basis.
Ainsworth GAme technoloGy AnnuAl report 2008
43
where the terms and conditions of borrowings are
modified, the carrying amount is remeasured to fair value.
Any difference between the carrying amount and fair value
is recognised in equity.
Other
other non-derivative financial instruments are measured
at amortised cost using the effective interest method, less
any impairment losses.
Compound financial instruments
compound financial instruments issued by the Group
comprise convertible notes that can be converted to share
capital at the option of the holder, and the number of shares
to be issued does not vary with changes in their fair value.
the liability component of a compound financial instrument
is recognised initially at the fair value of a similar liability
that does not have an equity conversion option. the equity
component is recognised initially at the difference between
the fair value of the compound financial instrument as a
whole and the fair value of the liability component. Any
directly attributable transaction costs are allocated to the
liability and equity components in proportion to their initial
carrying amounts.
subsequent to initial recognition, the liability component
of a compound financial instrument is measured at
amortised cost using the effective interest method. the
equity component of a compound financial instrument is
not remeasured subsequent to initial recognition.
Share capital
ordinary shares
ordinary shares are classified as equity. incremental costs
directly attributable to issue of ordinary shares and share
options are recognised as a deduction from equity, net of
any related income tax benefit.
(d) Property, plant and equipment
Recognition and measurement
items of property, plant and equipment are measured at cost
less accumulated depreciation and impairment losses.
cost includes expenditures that are directly attributable
to the acquisition of the asset. purchased software that
is integral to the functionality of the related equipment is
capitalised as part of that equipment.
when parts of an item of property, plant and equipment
have different useful lives, they are accounted for as
separate items (major components) of property, plant and
equipment.
Gains and losses on disposal of an item of property, plant
and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant
and equipment and are recognised net within “other
income” in profit and loss.
Subsequent costs
the cost of replacing part of an item of property, plant
and equipment is recognised in the carrying amount of
an item if it is probable that the future economic benefits
embodied within the part will flow to the Group and its
cost can be measured reliably. the costs of the day-to-day
servicing of property, plant and equipment are recognised
in profit or loss as incurred.
Depreciation
depreciation is recognised in profit or loss on a straight-
line basis over the estimated useful lives of each part of an
item of property, plant and equipment. leased assets are
depreciated over the shorter of the lease term and their
useful lives. land is not depreciated.
the estimated useful lives for the current and comparative
periods are as follows:
• buildings
• leasehold improvements
• plant and equipment
40 years
10 years
2.5 – 20 years
depreciation methods, useful lives and residual values are
reassessed at the reporting date.
(e) intangible assets
Goodwill
Goodwill (negative goodwill) arises on the acquisition of
subsidiaries and associates.
acquisitions prior to 1 July 2004
As part of its transition to AAsBs, the Group elected to
restate only those business combinations that occurred on
or after 1 July 2004. in respect of acquisitions prior to 1 July
2004, goodwill represents the amount recognised under the
Group’s previous accounting framework, Australian GAAp.
acquisitions on or after 1 July 2004
For acquisitions on or after 1 July 2004, goodwill
represents the excess of the cost of the acquisition over
the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the acquiree.
when the excess is negative (negative goodwill), it is
recognised immediately in profit or loss.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment
losses. in respect of equity accounted investees, the
carrying amount of goodwill is included in the carrying
amount of the investment.
Research and development
expenditure on research activities, undertaken with
the prospect of gaining new technical knowledge and
understanding, is recognised in profit or loss when
incurred.
development activities involve a plan or design for the
production of new or substantially improved products
and processes. development expenditure is capitalised
only if development costs can be measured reliably,
the product or process is technically and commercially
feasible, future economic benefits are probable, and
the Group intends to and has sufficient resources to
complete development and to use or sell the asset. the
expenditure capitalised includes the cost of materials,
direct labour and overhead costs that are directly
attributable to preparing the asset for its intended use.
Borrowing costs related to the development of qualifying
assets are recognised in profit or loss as incurred. other
development expenditure is recognised in profit or loss
when incurred.
capitalised development expenditure is measured at
cost less accumulated amortisation and accumulated
impairment losses.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
44 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
individually significant financial assets are tested for
impairment on an
individual basis. the remaining
financial assets are assessed collectively in groups that
share similar credit risk characteristics.
All impairment losses are recognised in profit or loss.
An impairment loss is reversed if the reversal can
be related objectively to an event occurring after the
impairment loss was recognised. For financial assets
measured at amortised cost, the reversal is recognised
in profit or loss.
Non-financial assets
the carrying amounts of the Group’s non-financial assets,
other than inventories, are reviewed at each reporting date
to determine whether there is any indication of impairment.
if any such indication exists then the asset’s recoverable
amount is estimated. For goodwill and intangible assets
that have indefinite lives or that are not yet available for use,
recoverable amount is estimated at each reporting date.
the recoverable amount of an asset or cash-generating
unit is the greater of its value in use and its fair value less
costs to sell. in assessing value in use, the estimated
future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. For the purpose of impairment testing,
assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other
assets or groups of assets (the “cash generating unit”).
the goodwill acquired in a business combination for
the purpose of impairment testing, is allocated to cash-
generating units that are expected to benefit from the
synergies of the combination.
An impairment loss is recognised if the carrying amount of
an asset or its cash-generating unit exceeds its recoverable
amount. impairment losses are recognised in profit or
loss. impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to
reduce the carrying amount of the other assets in the unit
(group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
in respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date
for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
3. Significant accounting policies (continued)
(e) intangible assets (continued)
Other intangible assets
other intangible assets that are acquired by the Group,
which have finite useful lives, are measured at cost less
accumulated amortisation and accumulated impairment
losses.
Subsequent expenditure
subsequent expenditure
is capitalised only when
it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and
brands, is recognised in profit or loss when incurred.
amortisation
Amortisation is recognised in profit or loss on a straight-
line basis over the estimated useful lives of intangible
assets, other than goodwill, from the date that they are
available for use. the estimated useful lives for the current
and comparative periods are as follows:
• capitalised development costs
• service contracts
• intellectual property
2 – 5 years
8 years
10 years
(f) leased assets
leases in terms of which the Group assumes substantially
all the risks and rewards of ownership are classified
as finance leases. upon initial recognition the leased
asset is measured at an amount equal to the lower of its
fair value and the present value of the minimum lease
payments. subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy
applicable to that asset.
other leases are operating leases and the leased assets
are not recognised on the Group’s balance sheet.
(g) inventories
inventories are measured at the lower of cost and net
realisable value. the cost of inventories is based on
the first-in first-out principle, and includes expenditure
incurred in acquiring the inventories and bringing them
to their existing location and condition. in the case of
manufactured inventories and work in progress, cost
includes an appropriate share of production overheads
based on normal operating capacity. net realisable value
is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and
selling expenses.
(h) impairment
Financial assets
A financial asset is assessed at each reporting date to
determine whether there is any objective evidence that it
is impaired.
A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset
measured at amortised cost is calculated as the
difference between its carrying amount, the present
value of the estimated future cash flows discounted at
the original effective interest rate.
Ainsworth GAme technoloGy AnnuAl report 2008
45
(i) Employee benefits
Defined contribution superannuation funds
obligations for contributions to defined contribution
superannuation funds are recognised as an expense in
profit or loss when they are due.
Other long term employee benefits
the Group’s net obligation in respect of long-term
employee benefits is the amount of future benefit that
employees have earned in return for their service in the
current and prior periods plus related on-costs; that
benefit is discounted to determine its present value,
and the fair value of any related assets is deducted.
the discount rate is the yield rate at the reporting date
on AA credit rated or government bonds that have
maturity dates approximating the terms of the Group’s
obligations.
termination benefits
termination benefits are recognised as an expense when
the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to
terminate employment before the normal retirement
date or to provide termination benefits as a result of
an offer made to encourage voluntary redundancy.
termination benefits for voluntary redundancies are
recognised if the Group has made an offer encouraging
voluntary redundancy, it is probable that the offer will
be accepted, and the number of acceptances can be
estimated reliably.
Short-term benefits
liabilities for employee benefits for wages, salaries and
annual leave represent present obligations resulting
from employees’ services provided to reporting date
and are calculated at undiscounted amounts based on
remuneration wage and salary rates that the Group
expects to pay as at reporting date including related
on-costs, such as workers remuneration insurance and
payroll tax. non-accumulating non-monetary benefits,
such as cars and free or subsidised goods and services,
are expensed based on the net marginal cost to the
Group as the benefits are taken by the employees.
A liability is recognised for the amount expected to be
paid under short-term cash bonus plans if the Group
has a present legal or constructive obligation to pay
this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Share-based payment transactions
the grant date fair value of options granted to
employees is recognised as an employee expense, with
a corresponding increase in equity, over the period in
which the employees become unconditionally entitled
to the options. the amount recognised as an expense is
adjusted to reflect the actual number of share options
that vest, except for those that fail to vest due to market
conditions not being met.
(j) Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to
settle the obligation. provisions are determined by
discounting the expected future cash flows at a pre-
tax rate that reflects current market assessments of
the time value of money and, where appropriate, the
risks specific to the liability.
Warranties
A provision for warranties is recognised when the
underlying products or services are sold. the provision is
based on historical warranty data and a weighting of all
possible outcomes against their associated probabilities.
Restructuring
A provision for restructuring is recognised when the
Group has approved a detailed and formal restructuring
plan, and the restructuring either has commenced or
has been announced publicly. Future operating costs are
not provided for.
(k) Revenue
Goods sold
revenue from the sale of goods is measured at the fair
value of the consideration received or receivable, net
of returns, allowances and trade discounts. revenue is
recognised when the significant risks and rewards of
ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, there
is no continuing management involvement with the goods,
and the amount of revenue can be measured reliably.
Services
revenue from services rendered is recognised in profit
or loss when the services are performed.
(l) lease payments
payments made under operating leases are recognised
in profit or loss on a straight-line basis over the term of
the lease. lease incentives received are recognised as an
integral part of the total lease expense, over the term of
the lease.
minimum lease payments made under finance leases
are apportioned between the finance expense and the
reduction of the outstanding liability. the finance expense
is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the
remaining balance of the liability.
(m) Finance income and expense
Finance income comprises interest income and foreign
currency gains. interest income is recognised as it
accrues, using the effective interest method.
Finance expenses comprise
interest expense on
borrowings, foreign currency losses and impairment
losses recognised on financial assets. All borrowing
costs are recognised in profit or loss using the effective
calculated using the effective interest method.
Foreign currency gains and losses are reported on a
net basis.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
46 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
3. Significant accounting policies (continued)
(n) income tax
income tax expense comprises current and deferred tax.
income tax expense is recognised in profit or loss except
to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in
respect of previous years.
deferred tax is recognised using the balance sheet
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. deferred tax is not recognised for the following
initial recognition of goodwill,
temporary differences:
the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable future.
deferred tax is measured at the tax rates that are expected to
be applied to the temporary differences when they reverse,
based on the laws that have been enacted or substantively
enacted by the reporting date. deferred tax assets and
liabilities are offset if there is a legally enforceable right
to offset current tax liabilities and assets, and they relate t
income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or their
tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which temporary differences can be utilised. deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
(o) Goods and services tax
revenue, expenses and assets are recognised net of the
amount of goods and services tax (Gst), except where the
amount of Gst incurred is not recoverable from the taxation
authority. in these circumstances, the Gst is recognised as
part of the cost of acquisition of the asset or as part of the
expense.
receivables and payables are stated with the amount of
Gst included. the net amount of Gst recoverable from, or
payable to, the Australian taxation office (Ato) is included as
a current asset or liability in the balance sheet.
cash flows are included in the statement of cash flows on
a gross basis. the Gst components of cash flows arising
from investing and financing activities which are recoverable
from, or payable to, the Ato are classified as operating cash
flows.
(p) Earnings per share
the Group presents basic and diluted earnings per share
(eps) data for its ordinary shares. Basic eps is calculated
by dividing the profit or loss attributable to ordinary
shareholders of the company by weighted average number
of ordinary shares outstanding during the period.
Ainsworth GAme technoloGy AnnuAl report 2008
diluted eps is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted
average number of ordinary shareholders and the
weighted average number of ordinary shares outstanding
for the effects of all dilutive potential ordinary shares,
which comprise convertible notes and share options
granted to employees.
(q) Segment reporting
A segment is a distinguishable component of the Group
that is engaged either in providing products or services
(business segment), or in providing products or services
within a particular economic environment (geographical
segment), which is subject to risks and rewards that are
different from those of other segments. the Group’s
primary format for segment reporting is based on
geographical segments.
inter-segment pricing is determined on an arm’s length
basis.
segment results, assets and liabilities include items
directly attributable to a segment as well as those that
can be allocated on a reasonable basis. unallocated
items comprise mainly income-earning assets and
revenue, loans and borrowings and related expenses,
corporate assets and head office expenses.
segment capital expenditure is the total cost incurred
during the period to acquire property, plant and
equipment, and intangible assets other than goodwill.
(r) New standards and interpretations not yet adopted
the following standards, amendments to standards and
interpretations have been identified as those which may
impact the entity in the period of initial application. they
are available for early adoption at 30 June 2008, but have
not been applied in preparing this financial report.
• revised AAsB 3 Business combinations changes the
application of acquisition accounting
for business
combinations and the accounting for non-controlling
(minority) interests. Key changes include: the immediate
expensing of all transaction costs; measurement of
contingent consideration at acquisition date with
subsequent changes through the income statement;
measurement of non-controlling (minority) interests at
full fair value or the proportionate share of the fair value
of the underlying net assets; guidance on issues such as
reacquired rights and vendor indemnities; and the inclusion
of combinations by contract alone and those involving
mutuals. the revised standard becomes mandatory for
the Group’s 30 June 2010 financial statements. the Group
has not yet determined the potential effect of the revised
standard on the Group’s financial report.
• AAsB 8 operating segments introduces the “management
approach” to segment reporting. AAsB 8, which becomes
mandatory for the Group’s 30 June 2010 financial
statements, will require the disclosure of segment
information based on the internal reports regularly
reviewed by the Group’s chief operating decision maker
in order to assess each segment’s performance and to
allocate resources to them. currently the Group presents
segment information in respect of its business and
geographical segments (see note 6).
47
• revised AAsB 101 presentation of Financial statements
introduces as a financial statement (formerly “primary”
statement) the “statement of comprehensive income”.
the revised standard does not change the recognition,
measurement or disclosure of transactions and events
that are required by other AAsBs. the revised AAsB 101
will become mandatory for the Group’s 30 June 2010
financial statements. the Group has not yet determined
the potential effect of the revised standard on the Group’s
disclosures.
• revised AAsB 123 Borrowing costs removes the option
to expense borrowing costs and requires that an entity
capitalise borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset
as part of the cost of that asset. the revised AAsB 123 will
become mandatory for the Group’s 30 June 2010 financial
statements and will constitute a change in accounting
policy for the Group. in accordance with the transitional
provision the Group will apply the revised AAsB 123 to
qualifying assets for which capitalisation of borrowing
costs commences on or after the effective date. the Group
has not yet determined the potential effect of the revised
standard on future earnings.
• revised AAsB 127 consolidated and separate Financial
statements changes the accounting for investments in
subsidiaries. Key changes include: the remeasurement to
fair value of any previous/retained investment when control
is obtained/lost, with any resulting gain or loss being
recognised in profit or loss; and the treatment of increases in
ownership interest after control is obtained as transactions
with equity holders in their capacity as equity holders. the
revised standard will become mandatory for the Group’s
30 June 2010 financial statements. the Group has not yet
determined the potential effect of the revised standard
on the Group’s financial report.
• AAsB 2008-1 Amendments to Australian Accounting
standard – share-based payment: Vesting conditions
and cancellations changes the measurement of share-
based payments that contain non-vesting conditions.
AAsB 2008-1 becomes mandatory for the Group’s 30
June 2010 financial statements. the Group has not yet
determined the potential effect of the amending standard
on the Group’s financial report.
• Ai 12 service concession Arrangements provides guidance
on certain recognition and measurement issues that arise
in accounting for public-to-private service concession
arrangements. Ai 12, which becomes mandatory for the
Group’s 30 June 2009 financial statements, is not expected
to have any effect on the financial report.
• Ai 13 customer loyalty programs addresses the accounting
by entities that operate, or otherwise participate in,
customer loyalty programs for their customers. it relates
to customer loyalty programs under which the customer
can redeem credits for awards such as free or discounted
goods or services. Ai 13, which becomes mandatory for the
Group’s 30 June 2009 financial statements, is not expected
to have any impact on the financial report.
• Ai 14 iAs 19 – the limit on a defined Benefit Asset, minimum
Funding requirements and their interaction clarifies when
refunds or reductions in future contributions in relation
to defined benefit assets should be regarded as available
and provides guidance on the impact of minimum funding
requirements (mFr) on such assets. it also addresses
when a mFr might give rise to a liability. Ai 14 will become
mandatory for the Group’s 30 June 2009 financial statements,
with retrospective application required. the Group has not
yet determined the potential effect of the interpretation.
4. Determination of fair values
A number of the Group’s accounting policies and
disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities.
Fair values have been determined for measurement
and / or disclosure purposes based on the following
methods. where applicable, further information about the
assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
intangible assets
the fair value of customer contracts acquired in a business
combination is based on the discounted cash flows
expected to be derived from the use or eventual sale of
these contracts. the fair value of other intangible assets is
based on the discounted cash flows expected to be derived
from the use and eventual sale of the assets.
trade and other receivables / payables
For receivables / payables with a remaining life of less than one
year, the notional amount is deemed to reflect the fair value.
the fair value of all other receivables / payables is estimated
as the present value of future cash flows, discounted at the
market rate of interest at the reporting date.
Non-derivative financial instruments
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal
and interest cash flows, discounted at the market rate
of interest at the reporting date. in respect of the liability
component of convertible notes, the market rate of
interest is determined by reference to similar liabilities
that do not have a conversion option. For finance leases
the market rate of interest is determined by reference to
similar lease agreements.
loans and borrowings
Fair value is calculated based on discounted expected
future principal and interest cash flows.
Finance lease liabilities
the fair value is estimated as the present value of future
cash flows, discounted at market interest rates for
homogeneous lease agreements. the estimated fair values
reflect changes in interest rates.
Share-based payment transactions
the fair value of employee stock options is measured
using the Black scholes and binomial lattice models.
measurement inputs include share price on measurement
date, exercise price of the instrument, expected volatility
(based on weighted average historic volatility adjusted for
changes expected due to publicly available information),
weighted average expected life of the instruments (based on
historical experience and general option holder behaviour),
expected dividends, and the risk-free interest rate (based on
government bonds). service and non-market performance
conditions attached to the transactions are not taken into
account in determining fair value.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
48 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
5. Financial risk management
Overview
the company and Group have exposure to the following
risks from their use of financial instruments:
• Credit risk;
• Liquidity risk; and
• market risk.
this note presents information about the company’s
and Group’s exposure to each of the above risks, their
objectives, policies and processes for measuring and
managing risk, and the management of capital. Further
quantitative disclosures are included throughout this
financial report.
the Board of directors has overall responsibility
for the establishment and oversight of the risk
management framework. the Board has established
processes through the Group Audit committee, which
is responsible for developing and monitoring risk
management policies. the committee reports regularly
to the Board of directors on its activities.
risk management policies are established to identify and
analyse the risks faced by the company and Group, to
set appropriate risk limits and controls, and to monitor
risks and adherence to limits. risk management policies
and systems are reviewed regularly to reflect changes
in market conditions and the company’s and Group’s
activities. the company and Group, through their
training and management standards and procedures,
aim to develop a disciplined and constructive control
environment in which all employees understand their
roles and obligations.
the Group Audit committee oversees how management
monitors compliance with the company’s and Group’s
risk management policies and procedures and reviews
the adequacy of the risk management framework in
relation to the risks faced by the company and Group.
the Group Audit committee is assisted in its oversight
role by internal Audit. internal Audit undertakes reviews
of risk management controls and procedures, the results
of which are reported to the Group Audit committee.
Credit risk
credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally
from the Group’s and company’s receivables from
customers.
trade and other receivables
the company’s and Group’s exposure to credit risk is
influenced mainly by the individual characteristics of
each customer, including the default risk of the industry
and country in which customers operate. Approximately
22 percent (2007: 17 percent) of the Group’s revenue
is attributable to sales transactions in a geographical
region with a single distributor. this distributor has been
transacting with the Group for over five years and losses
have occurred infrequently.
Ainsworth GAme technoloGy AnnuAl report 2008
credit policy guidelines have been introduced under
which each new customer is assessed by the compliance
division as to suitability and analysed for creditworthiness
before the Group’s standard payment and delivery
terms and conditions are offered. the Group’s review
includes investigations, external ratings, when available,
and in some cases bank references. purchase limits
are established for each customer, which represents
the maximum open amount without requiring approval
from the Board. customers that fail to meet the Group’s
creditworthiness criteria may only transact with the
Group within established limits unless Board approval is
received or otherwise only on a prepayment basis.
in monitoring customer credit risk, customers are grouped
according to their credit characteristics, including whether
they are an individual or legal entity, whether they are a
distributor, operator or customer, geographic location,
aging profile, maturity and existence of previous financial
difficulties. the Group’s trade and other receivables relate
mainly to the Group’s direct customers, operators and
established distributors. customers that are graded as
“high risk” require future sales to be made on a prepayment
basis with approval of the chief executive officer and chief
Financial officer up to approved limits and thereafter only
with Board approval.
Goods are sold subject to retention of title clauses, so that
in the event of non-payment the Group may have a secured
claim. the Group does not require collateral in respect of
trade and other receivables.
the company and Group have established an allowance
for impairment that represents their estimate of incurred
losses in respect of trade and other receivables. the
main components of this allowance are a specific
loss component that relates to individually significant
exposures.
investments
the Group limits its exposure to credit risk by only
investing in liquid securities and only with counterparties
that have established credit ratings. Given these high
credit ratings, management does not expect any
counterparty to fail to meet its obligations.
liquidity risk
liquidity risk is the risk that the Group will not be able
to meet its financial obligations as they fall due. the
Group’s approach to managing liquidity is to ensure, as
far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable
losses or risking damage to the Group’s reputation.
typically the Group ensures that it has access to
sufficient cash on demand to meet expected operational
expenses for a period of 60 days, including the servicing
of financial obligations; this excludes the potential
impact of extreme circumstances that cannot reasonably
be predicted, such as natural disasters. in addition, the
Group maintains the following lines of credit:
• $40 million facility that can be drawn down to meet
short-term financing needs; and
• $5 million trade facility.
49
6. Segment reporting
segment information is presented in respect of the
Group’s business and geographical segments. the primary
format, geographical segments, is based on the Group’s
management and internal reporting structure.
Geographical segments
the geographical segments are Australia, Americas and
Asia. in Australia, manufacturing facilities and sales offices
are operated. sales offices are operated in the Americas
(Florida) and europe (Austria) for a portion of the year prior
to closure.
in presenting information on the basis of geographical
segments, segment revenue is based on the geographical
location of customers. segment assets are based on the
geographical location of the assets.
Business segments
the Group operates in one business segment, which is
the design, development, manufacture, distribution and
service of gaming machines and related equipment.
Market risk
market risk is the risk that changes in market prices,
such as foreign exchange rates, interest rates and equity
prices will affect the Group’s income or the value of its
holdings of financial instruments. the objective of market
risk management is to manage and control market risk
exposures within acceptable parameters, while optimising
the return.
currency risk
the Group is exposed to currency risk on sales and
purchases that are denominated in a currency other than
the respective functional currencies of Group entities,
primarily the Australian dollar (Aud), but also the euro
and nZd. the currencies in which these transactions
primarily are denominated are Aud, euro and usd.
the Group regularly monitors and reviews, dependant on
available facilities, the hedging of net assets denominated
in a foreign currency. the group utilises currency call
options to hedge its currency risk, most with a maturity of
less than six months. no currency call options were utilised
throughout the reporting period.
in respect of other monetary assets and liabilities
denominated in foreign currencies, the Group monitors
its net exposure to address short-term imbalances.
interest rate risk
the Group’s borrowing rates are fixed and no interest rate
risk exists.
Capital management
capital is defined as the total equity of the Group.
the Board’s policy is to maintain a strong capital base so as
to maintain investor, creditor and market confidence and
to sustain future development of the business. the Board
continues to monitor group performance so as to ensure
a turnaround is effected, an acceptable return on capital
is achieved and that dividends will be provided to ordinary
shareholders in the medium term.
the Board continues to review alternatives to ensure
present employees will hold at least 5% of the company’s
ordinary shares. this is expected to be achieved assuming
all outstanding share options issued during the current
reporting period vest and/or are exercised. these share
options were issued to all Australian employees over a
portion of the executive chairman’s shareholding under
a share option incentive plan provided on 2 July 2007.
refer note 24.
there were no changes in the Group’s approach to capital
management during the year.
neither the company nor any of its subsidiaries are subject
to externally imposed capital requirements.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
50
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Ainsworth GAme technoloGy AnnuAl report 2008
51
Note
Consolidated
Company
2008
47,458
2,105
49,563
2007
28,951
2,026
30,977
2008
47,476
-
2007
28,950
12
47,476
28,962
7. Revenue
in thousands of Aud
sales
services
8. Other income
in thousands of Aud
net gain on disposal of property, plant and equipment
dividends received and income from subsidiaries
other
9. Personnel expenses
in thousands of Aud
wages and salaries
contributions to defined contribution superannuation funds
(decrease) in liability for annual leave
increase/(decrease) in liability for long service leave
23
23
termination benefits
equity settled share-based payment transactions
17
-
170
187
2
-
43
45
16,239
21,412
1,113
(103)
(44)
674
281
1,326
(337)
107
1,605
27
17
54
170
241
13,231
1,022
(55)
7
616
281
2
-
43
45
16,783
1,174
(260)
117
1,440
27
18,160
24,140
15,102
19,281
10. auditors’ remuneration
in Aud
Audit services:
Auditors of the company
KpmG Australia
Audit and review of financial reports
other auditors
Audit and review of financial reports
other services:
Auditors of the company
KpmG Australia
other services
KpmG related practices
contract employment services
165,000
165,000
121,500
121,500
165,000
165,000
121,500
121,500
-
4,588
-
-
165,000
126,088
165,000
121,500
125,000
53,500
125,000
53,500
-
80,775
-
80,775
125,000
134,275
125,000
134,275
All amounts payable to the Auditors of the Group were paid by the parent of the Group.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
52 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
11. Finance income and expense
in thousands of Aud
interest income on trade receivables
interest income on bank deposits
Financial income
interest expense on financial liabilities
net foreign exchange loss
Financial expenses
net financing costs (expense)
12. income tax expense
in thousands of Aud
Recognised in the income statement
Current tax expense
current period
effect of tax losses recognised
Deferred tax expense
origination and reversal of temporary differences
effect of tax losses recognised
total income tax expense
Consolidated
Company
2008
2007
2008
2007
1,180
150
1,330
(5,806)
(2,181)
(7,987)
(6,657)
1,222
-
1,222
(6,536)
(4,801)
(11,337)
(10,115)
1,180
150
1,330
(5,784)
(2,181)
(7,965)
(6,635)
1,222
-
1,222
(6,495)
(4,801)
(11,296)
(10,074)
49
-
49
-
-
-
49
40
-
40
-
-
-
40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Numerical reconciliation between tax expense and pre-tax net (loss)/profit
(loss)/profit for the period
total income tax expense
(19,357)
(49,485)
(20,498)
(46,403)
49
40
-
-
(loss)/profit excluding income tax
(19,308)
(49,445)
(20,498)
(46,403)
income tax using the company’s domestic tax rate of 30%
(2007: 30%)
(5,792)
(14,834)
(6,149)
(13,921)
non-deductible expenses
3,152
2,709
3,152
1,762
effect of tax rates in foreign jurisdictions
research & development claim
effect of tax losses recognised
7
(484)
3,166
49
6
(401)
12,560
40
-
(484)
3,481
-
-
(401)
12,560
-
Ainsworth GAme technoloGy AnnuAl report 2008
53
13. Earnings per share
Basic earnings per share
the calculation of basic earnings per share at 30 June 2008 was based on the loss attributable to ordinary shareholders
of $19,357,000 (2007: loss of $49,485,000) and a weighted average number of ordinary shares outstanding during the
financial year ended 30 June 2008 of 238,492,000 (2007: 191,411,000), calculated as follows:
(loss)/profit attributable to ordinary shareholders
in thousands of Aud
(loss)/profit for the period
(loss)/profit attributable to ordinary shareholders
weighted average number of ordinary shares
in thousands of shares
issued ordinary shares at 1 July
effect of shares issued in July 2007
effect of shares issued in december 2007
weighted average number of ordinary shares at 30 June
Note
Consolidated
2008
(19,357)
(19,357)
2007
(49,485)
(49,485)
26
26
26
191,411
2,194
44,887
238,492
191,411
-
-
191,411
diluted earnings per share
the calculation of diluted earnings per share at 30 June 2008 was based on the loss attributable to ordinary shareholders
of $19,357,000 (2007: loss of $49,485,000) and a weighted average number of ordinary shares outstanding during the
financial year ended 30 June 2008 of 238,492,000 (2007: 191,411,000), calculated as follows:
(loss)/profit attributable to ordinary shareholders (diluted)
in thousands of Aud
(Loss)/profit attributable to ordinary shareholders
interest expense on convertible notes, net of tax
(Loss)/profit attributable to ordinary shareholders (diluted)
weighted average number of ordinary shares (diluted)
in thousands of shares
weighted average number of ordinary shares at 30 June
effect of conversion of convertible notes
effect of share options on issue
2008
(19,357)
-
2007
(49,485)
-
(19,357)
(49,485)
238,492
191,411
-
-
-
-
(a)
(a)
(a)
weighted average number of ordinary shares (diluted) at 30 June
238,492
191,411
(a) For the year ended 30 June 2008 the effect of the convertible notes was anti-dilutive as the Group recorded a loss for
the period.
For the year ended 30 June 2007, the calculation of loss attributable to ordinary shareholders (diluted) and weighted
average number of ordinary shares (diluted) also excludes the after-tax effect of interest on convertible notes
(see note 23) and the effect of conversion of convertible notes, respectively, as the effect would be anti-dilutive.
the outstanding share options on issue were not considered to be potential ordinary shares for the year ended 30
June 2008 or 30 June 2007 as they were anti-dilutive.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
54 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
14. Cash and cash equivalents
in thousands of Aud
Bank balances
Cash and cash equivalents in the statements of cash flows
Note
Consolidated
2008
2007
Company
2008
2007
3,735
3,735
1,157
1,157
1,033
1,033
802
802
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 33.
15. Receivables and other assets
in thousands of Aud
current
trade receivables
less impairment losses
other assets
non-current
term receivables
Amount receivable from equity accounted investees
receivables due from subsidiaries
34
other assets
25,998
(4,086)
21,912
307
22,219
8,663
449
-
-
24,688
(3,309)
21,379
581
21,960
4,968
6
-
21
25,765
(4,065)
21,700
247
21,947
8,663
-
7,264
-
9,112
4,995
15,927
24,323
(3,281)
21,042
522
21,564
4,968
6
6,448
20
11,442
impairment losses on trade receivables realised by the company for the year ended 30 June 2008 were $nil (2007:
$11,000). the Group realised impairment losses of $49,000 (2007: $14,000) for the year ended 30 June 2008.
receivables denominated in currencies other than the functional currency comprise $25,424 thousand of trade
receivables denominated in us dollars (2007: $20,170 thousand), $nil thousand in pounds sterling (2007: $20 thousand),
$2,986 thousand in euro (2007: $3,801 thousand) and $610 thousand in new Zealand dollars (2007: $nil).
the Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are
disclosed in note 33.
16. inventories
in thousands of Aud
raw materials and consumables
Finished goods
work in progress
stock in transit
Consolidated
2008
2007
14,554
5,502
487
255
18,719
6,897
3,297
57
Company
2008
14,554
5,502
487
255
2007
18,719
6,897
3,297
57
inventories stated at the lower of cost and net realisable value
20,798
28,970
20,798
28,970
During the year ended 30 June 2008 raw materials, consumables and changes in finished goods and work in progress
recognised as cost of sales amounted to $27,631 thousand (2007: $16,990 thousand). during the year ended 30 June
2008 the write-down of inventories to net realisable value amounted to $1,351 thousand (2007: $nil). the write-down
is included in cost of sales.
Ainsworth GAme technoloGy AnnuAl report 2008
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Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
56
Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
18. tax assets and liabilities
Unrecognised deferred tax assets
deferred tax assets have not been recognised in respect of the following items:
in thousands of Aud
deductible temporary differences
tax losses
Consolidated
Company
2008
2,391
28,814
31,205
2007
1,495
24,701
26,196
2008
2,391
28,487
30,878
2007
1,495
24,701
26,196
the deductible temporary differences and tax losses do not expire under current tax legislation. deferred tax assets have not
been recognised in respect of these items because it is not probable that future taxable profit will be available against which
the Group can utilise the benefits from.
19. Property, plant and equipment
in thousands of Aud
land and
buildings
Plant and
equipment
leasehold
improvements total
land and
buildings
Plant and
equipment
leasehold
improvements total
Consolidated
Company
Cost
Balance at
1 July 2006
Additions
disposals
effect of movements
in foreign exchange
Balance at
30 June 2007
Balance at
1 July 2007
Additions
(refer note below)
disposals
effect of movements
in foreign exchange
Balance at
30 June 2008
note:
14,844
10,824
-
-
-
824
(461)
(7)
24
66
-
-
25,692
14,844
10,693
24
25,561
890
(461)
(7)
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-
-
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(461)
-
-
-
-
762
(461)
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11,180
90
26,114
14,844
10,994
24
25,862
14,844
11,180
4,387
-
-
1,710
(346)
(2)
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12,542
90
2
(8)
(8)
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26,114
14,844
10,994
24
25,862
6,099
(354)
(10)
4,387
-
-
1,648
(456)
-
-
-
-
6,035
(456)
-
31,849
19,231
12,186
24
31,441
the additions to land and buildings include $4,098,000 provided and paid by an entity controlled by a director/majority
shareholder through an additional unsecured loan under similar terms and conditions to the current facility in place
– refer note 22.
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Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
60 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
20. intangible assets (continued)
amortisation charge and impairment loss
the amortisation charge is recognised in the following line items in the income statement:
in thousands of Aud
cost of sales
other operating expenses
Consolidated
Company
2008
84
2,534
2,618
2007
128
2,048
2,176
2008
84
2,381
2,465
2007
128
1,895
2,023
the impairment losses of $1,605,000 (2007: $3,580,000) are recognised in other operating expenses (research and
development and Administrative expenses) in the income statement.
Recoverability of development costs
the carrying amount of the Group’s development expenditure amounts to $7,015,000. An impairment test was triggered
in the year due to the loss experienced by the Group for the year ended 30 June 2008. the recoverable amount of each
cash generating unit was estimated based on its value in use, and using a pre-tax discount rate of 20%. Based on
individual market assessments of development carried out and where the recoverable amount of the cash generating
unit was estimated to be lower than the carrying amount of the development, and an impairment of $782,000 was
required. no impairment was recognised on other assets allocated to the cash generating unit, as it was determined
that their fair value less costs to sell, exceeded their carrying value.
Value in use was determined by discounting the future cash flows generated from the continuing use of the development
and based on the following key assumptions:
• Cash inflows of $75 million in the 2009 year from the sale of the Group’s products and services;
• Revenue growth of 3-10% throughout the life of the development;
• The development will generate cash flows for 5 years; and
• discount rate of 20%
Development costs were segregated into their respective cash generating units, on a geographical or customer specific
basis, where possible. The remainder of development costs were allocated based on the jurisdictional/customer specific
revenue they are expected to generate. impairment losses were recognised where the recoverable amount of the cash
generating unit was estimated to be lower than the carrying amount of the cash generating unit, or where development was
no longer being pursued.
the value in use will be re-assessed at each reporting date that there is an indicator of impairment. should the above
assumptions not remain valid, then further write-downs may be required.
despite the impairment charges recorded expectations are that there is potential to exceed the revenues used in assessing
the recoverability of development costs and that the assumptions used will be achieved.
impairment testing for goodwill
Goodwill relates to acquired business and entities. the recoverable amount is assessed using calculation
methodologies based on value-in-use calculations which utilise projected cashflows from financial budgets approved
by the Board of Directors. The cashflow models consider growth over the medium term, being five years, discounted to
present value using a discount rate determined by reference to its weighted average cost of capital (wAcc) adjusted if
necessary to reflect the specific characteristics of each entity. A capitalisation multiple is then applied to this medium
term cumulative discounted cashflow and an acceptable valuation range is formulated and tested against the carrying
value of goodwill associated with each business and entity.
the recoverable amount was estimated to be lower than the carrying amount of the goodwill on a previous acquisition due to
product transition to new generation gaming machines, and an impairment of $823,000 was required in the current period.
Key assumptions used in the approach to test for impairment relate to the wAcc and the capitalisation factor applied to
projected cashflows.
Ainsworth GAme technoloGy AnnuAl report 2008
21. trade and other payables
in thousands of Aud
current
trade payables
other payables and accrued expenses
Amount payable to director/shareholder controlled entities
non current
Amount payable to equity accounted investees
payables due to subsidiaries
34
61
Note
Consolidated
Company
2008
7,529
2,788
275
10,592
-
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2007
4,631
3,064
891
8,586
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2008
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2,406
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10,105
37
240
277
2007
4,563
2,822
784
8,169
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342
342
the Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 34.
payables denominated in currencies other than the functional currency comprise $3,827 thousand of payables
denominated in us dollars (2007: $1,659 thousand), $5 thousand of payables denominated in pounds sterling
(2007: $37 thousand), $48 thousand of payables denominated in euro (2007: $82 thousand) and $2 thousand of
payables denominated in nZd (2007: $31 thousand).
22. loans and borrowings
this note provides information about the contractual terms of the company’s and Group’s interest-bearing loans and
borrowings, which are measured at amortised cost. For more information about the company’s and Group’s exposure to
interest rate, foreign currency and liquidity risk, see note 33.
in thousands of Aud
current
Current portion of finance lease liabilities
loan from director / shareholder controlled entity – unsecured
non current
Finance lease liabilities
Amount payable to director / shareholder controlled entity
loan from director / shareholder controlled entity - unsecured
loan from director / shareholder controlled entity - secured
convertible notes
Consolidated
Company
2008
842
263
1,105
761
8,880
3,835
13,513
24,335
51,324
2007
688
-
688
801
6,701
-
30,026
23,604
61,132
2008
836
263
1,099
761
8,880
3,835
13,513
24,335
51,324
2007
683
-
683
796
6,701
-
30,026
23,604
61,127
Ainsworth GAme technoloGy AnnuAl report 2008
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62 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
22. loans and borrowings (continued)
terms and debt repayment schedule
terms and conditions of outstanding loans were as follows:
in thousands of Aud
Currency
Amount payable to director / shareholder
Aud
loans from director / shareholder
controlled entity
convertible notes
Aud
Aud
Consolidated
30 June 2008
30 June 2007
Year of
maturity
Face
value
Carrying
amount
Face
value
Carrying
amount
2010
8,880
8,880
6,701
6,701
2010
18,220
17,611
30,266
30,026
2009
25,629
24,335
25,629
23,604
Nominal
interest
rate
8%
8%
8%
Finance lease liabilities
Aud
6.7-14.7% 2008 - 2011
1,603
1,603
1,489
1,489
total interest-bearing liabilities
54,332
52,429
64,075
61,810
in thousands of Aud
Currency
Amount payable to director / shareholder
Aud
loans from director / shareholder
controlled entity
convertible notes
Aud
Aud
Company
30 June 2008
30 June 2007
Year of
maturity
Face
value
Carrying
amount
Face
value
Carrying
amount
2010
8,880
8,880
6,701
6,701
2010
18,220
17,611
30,266
30,026
2009
25,629
24,335
25,629
23,604
Nominal
interest
rate
8%
8%
8%
Finance lease liabilities
Aud
6.7-14.7% 2008 - 2011
1,597
1,597
1,479
1,479
total interest-bearing liabilities
54,326
52,423
64,075
61,810
Ainsworth GAme technoloGy AnnuAl report 2008
Financing facilities
in thousands of Aud
Guarantee facility
trade/credit facility
loan from director / shareholder controlled entity
Facilities utilised at reporting date
Guarantee facility
trade/credit facility
loan from director / shareholder controlled entity
Facilities not utilised at reporting date
Guarantee facility
trade/credit facility
loan from director / shareholder controlled entity
63
Consolidated
Company
2008
-
5,000
40,000
45,000
-
2,435
14,122
16,557
-
2,565
25,878
28,443
2007
135
-
40,000
40,135
135
-
30,266
30,401
-
-
9,734
9,734
2008
-
5,000
40,000
45,000
-
2,435
14,122
16,557
-
2,565
25,878
28,443
2007
135
-
40,000
40,135
135
-
30,266
30,401
-
-
9,734
9,734
Guarantee facility
the guarantee facility relates to a bank guarantee established for previously leased premises by the company which
was released on 14 march 2008 at the expiration of the lease which was not renewed.
trade/credit facility
A trade facility of $5 million has been established from a director / shareholder controlled entity under more favourable
terms than those that could be achieved from the company’s bankers and at arms length in the open market.
refer note 34.
loan from director/shareholder controlled entity
the loan facility is provided by an entity controlled by mr lh Ainsworth, a director and shareholder of the company.
this facility is secured by a debenture mortgage over the Group’s freehold land and buildings at 10 holker street,
Newington, NSW and a fixed and floating charge over the Company. The facilities of $14,122,000 utilised at the reporting
date exclude interest payable of $8,880,000. the obligation for repayment of interest has been deferred until 4 January
2010 or as mutually agreed.
in december 2007 debt obligations to an entity controlled by mr lh Ainsworth were reduced by $18,943,000 through
satisfaction of subscription monies and underwriting commitments as outlined in the prospectus dated 21 november
2007. A further legally enforceable undertaking of financial support from a company controlled by the Executive
chairman, mr lh Ainsworth for an amount up to $15 million to be made available should it be required in addition to
the established $40 million facility noted above expired on 21 August 2008 and was not renewed.
A further unsecured loan of $4,098,000 was provided during the period to expand the company’s sydney facility and
relocate all manufacturing operations from leased premises in melbourne. this loan is under similar terms and
conditions to the above facility with interest accruing from an agreed date at the rate of 8.0% per annum. the proposed
terms of reimbursement are that an annual principal amount of $350,000 will be repaid monthly in arrears upon
completion of the building improvements with the full repayment of the remaining balance and interest not required
to be paid until the Company has sufficient operating cashflows to do so and until amounts owing on the $40 million
facility has been repaid.
Ainsworth GAme technoloGy AnnuAl report 2008
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64 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
22. loans and borrowings (continued)
Convertible notes
in thousands of Aud
proceeds from issue of 19,714,717 convertible notes on
20 december 2004
transaction costs
net proceeds
Amount classified as equity
Transaction costs classified as equity
Accreted interest capitalised
carrying amount of liability at 30 June
Consolidated
Company
2008
2007
2008
2007
25,629
(1,085)
24,544
(2,842)
121
2,512
25,629
(1,085)
24,544
(2,842)
121
1,781
25,629
(1,085)
24,544
(2,842)
121
2,512
25,629
(1,085)
24,544
(2,842)
121
1,781
24,335
23,604
24,335
23,604
in december 2007 and december 2009, note holders have the option to receive one ordinary share for every note held.
notes that are not converted to ordinary shares will be redeemed at face value on 31 december 2009.
loans – secured
this loan was recorded at fair value at 1 July 2005, given that the interest rate applied to the facility is lower than that
which could be obtained commercially and was subsequently carried at amortised cost. the maturity date of the loan
was extended during the current period and as such the loan was restated to its fair value, based on the extended terms.
subsequent to the restatement on 23 may 2008, the loan will be carried at amortised cost (refer note 3(c)).
in thousands of Aud
Fair value of the loan at 1 July
Additional borrowings
set-off arrangement
net proceeds
Amount classified as equity
Accreted interest capitalised
Consolidated
Company
2008
30,026
2,800
(18,944)
13,882
(654)
285
2007
27,512
6,000
(3,644)
29,868
(313)
471
2008
30,026
2,800
(18,944)
13,882
(654)
285
2007
27,512
6,000
(3,644)
29,868
(313)
471
(a)
carrying amount of liability at 30 June
13,513
30,026
13,513
30,026
(a) Amount classified as equity relates to the restatement of borrowings to fair value resulting from the maturity date being
extended to 4 January 2010.
Ainsworth GAme technoloGy AnnuAl report 2008
65
Finance lease liabilities
Finance lease liabilities of the Group entity are payable as follows:
in thousands of Aud
less than one year
Between one and five years
in thousands of Aud
less than one year
Between one and five years
Future
minimum
lease
payments
2008
948
811
1,759
Future
minimum
lease
payments
2008
941
811
1,752
Consolidated
Present value
of minimum
lease
payments
2008
Future
minimum
lease
payments
2007
842
761
1,603
785
865
1,650
interest
2008
106
50
156
Present value
of minimum
lease
payments
2007
688
801
1,489
interest
2007
97
64
161
Company
Present value
of minimum
lease
payments
2008
Future
minimum
lease
payments
2007
836
761
1,597
779
858
1,637
interest
2008
105
50
155
Present value
of minimum
lease
payments
2007
683
796
1,479
interest
2007
96
62
158
The Company and Group lease plant and equipment under finance leases expiring from three to five years. At the end of
the lease term, there is the option to purchase the equipment at a discount of market value, a price deemed to be a bargain
purchase option. the terms of the leases require that additional debt and further leases are not undertaken without prior
approval of the lessor.
23. Employee benefits
in thousands of Aud
current
salaries and wages accrued
liability for annual leave
non current
liability for long service leave
Consolidated
Company
2008
2007
2008
2007
90
1,083
1,173
60
1,186
1,246
88
955
1,043
60
1,010
1,070
421
421
465
465
364
364
357
357
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66 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
24. Share-based payments
the company has in place an esop approved on 30 July 2001.
the terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:
Grant date / employee entitled
option grant to key management at
1 April 2004
option grant to key management at
31 August 2004
option grant to senior employees at
31 August 2004
option grant to key management at
2 July 2007
option grant to senior employees at
2 July 2007
total share options
Number of
instruments
Vesting conditions
Contractual life
of options
three years of service as per
esop below
three years of service as per
esop below
three years of service as per
esop below
three years of service as per
esop below
three years of service as per
esop below
150,000
190,000
470,000
365,375
560,180
1,735,555
5 years
5 years
5 years
5 years
5 years
to be eligible to participate in the esop the employee must be selected by the directors and reviewed by the
remuneration and nomination committee. options may be exercised within a five-year period, starting on the first
anniversary of the issue of the options (subject to earlier exercise where a takeover offer or takeover announcement is
made, or a person becomes the holder of a relevant interest in 50% or more of the company’s voting shares).
the esop provides for employees to receive options for no consideration. each option is convertible to one ordinary
share. there are no voting or dividend rights attached to the unissued ordinary shares. Voting and dividend rights
will be attached to the unissued ordinary shares when the options have been exercised. the exercise price of the
options is determined in accordance with the rules of the esop. the ability to exercise the options is conditional on the
achievement of performance hurdles. Accordingly, the plan does not represent remuneration for past services.
the vesting and performance conditions of the share options issued on 1 April, 31 August 2004 and 2 July 2007 are
as follows:
Date
Options issued on 1 april and 31 august 2004
First Anniversary of Grant date
second Anniversary of Grant date
third Anniversary of Grant date
Options issued on 2 July 2007
First Anniversary of Grant date
second Anniversary of Grant date
third Anniversary of Grant date
Vesting Condition
(% of Options vesting)
Performance Condition
(VWaP* must equal or exceed)
% of Exercise Price
25%
25%
50%
20%
20%
60%
100%
120%
140%
200%
250%
300%
* the performance conditions measure the volume weighted average price at which shares traded on the AsX for the
most recent 20 Business days upon each of which any shares were traded on AsX within 60 business days immediately
preceding the relevant vesting date of those options.
Ainsworth GAme technoloGy AnnuAl report 2008
67
in addition to the share options issued by the company an incentive plan was introduced whereby share options were
granted to all Australian employees, excluding directors and four key management personnel. the share options granted
to Australian employees totalled 10,994,707 and were granted over a portion of the personal shareholding of the company’s
executive chairman, mr lh Ainsworth. during the year 2,341,307 share options expired as a result of cessation of employment
with the company and Group leaving 8,653,400 share options outstanding as at 30 June 2008.
the number and weighted average exercise prices of share options is as follows:
in thousands of options
outstanding at the beginning of the period
Forfeited during the period
exercised during the period
Granted during the period
outstanding at the end of the period
exercisable at the end of the period
Weighted average
exercise price
2008
Number of
options
2008
Weighted average
exercise price
2007
Number of
options
2007
$0.92
$1.02
-
$0.50
$0.59
1,765
(1,050)
-
1,021
1,736
-
$0.96
$0.97
-
-
$0.92
7,540
(5,775)
-
-
1,765
-
the options outstanding at 30 June 2008 have an exercise price in the range of $0.50 to $1.00 and a weighted average
contractual life of 5.0 years.
during the 2008 financial year, no share options were exercised.
the fair value of services received in return for share options granted are measured by reference to the fair value of
share options granted. the estimate of the fair value of the services received is measured based on the Black scholes
and binomial lattice models. the contractual life of the option is used as an input into this model. expectations of early
exercise are incorporated into these models.
the expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the
share options), adjusted for any expected changes to future volatility due to publicly available information.
share options are granted under a service condition and, for grants to key management personnel, market and non-
market performance conditions. non-market performance conditions are not taken into account in the grant date fair
value measurement of the services received.
25. Provisions
in thousands of Aud
restructuring
service/warranties
movements during the year
Restructuring
Balance at 1 July
provisions made during the year
provisions used during the year
Balance at 30 June
Consolidated
Company
2008
2007
2008
2007
403
359
762
-
403
-
403
-
117
117
-
-
-
-
403
359
762
-
403
-
403
-
117
117
-
-
-
-
restructuring
the provision for restructuring expenses were paid in July 2008 and relate to costs, including employee costs,
associated with the restructuring and relocation of manufacturing operations from leased premises in melbourne to
the company’s sydney facility.
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68 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
25. Provisions (continued)
in thousands of Aud
Service / Warranties
Balance at 1 July
provisions made during the year
provisions used during the year
Balance at 30 June
Consolidated
Company
2008
2007
2008
2007
117
538
(296)
359
100
17
-
117
117
538
(296)
359
100
17
-
117
service / warranties
the provision for service / warranties relates to gaming machines sold during the financial year ended 30 June 2007
and 2008. the provision is based on estimates made from historical warranty data associated with similar products
and services. the Group expects to incur the liability over the next financial year.
26. Capital and reserves
share capital
in thousands of shares
on issue at 1 July
issued as consideration for intellectual property
issued for cash
on issue at 30 June – fully paid
the Group has also issued share options (see note 24).
Company
ordinary shares
2008
191,411
2,200
85,331
278,942
2007
191,411
-
-
191,411
the holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the company. All shares rank equally with regard to the company’s residual assets.
Equity compensation reserve
the equity compensation reserve represents the cost of share options issued to employees that the Group is required to
include in the consolidated financial statements.
Fair value reserve
the fair value reserve comprises the cumulative net change in fair value of related party loans and borrowings where
interest is charged below market value.
translation reserve
the translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations where their functional currency is different to the presentation currency of the reporting entity, as well
as from the translation of liabilities that hedge the company’s net investment in a foreign subsidiary.
Dividends
no dividends were recommended or paid during or since the end of the financial year (2007: nil).
27. Operating leases
leases as lessee
non-cancellable operating lease rentals are payable as follows:
in thousands of Aud
less than one year
Between one and five years
Consolidated
Company
2008
283
203
486
2007
549
516
1,065
2008
96
-
96
2007
305
68
373
the Group leases a number of warehouse and office facilities under operating leases. the leases typically run for a
period of 2-3 years, with an option to renew the lease after that date. lease payments are increased every five years to
reflect market rentals. none of the leases includes contingent rentals.
during the financial year ended 30 June 2008, $554,000 was recognised as an operating expense in the income statement in
respect of operating leases (2007: $642,000).
Ainsworth GAme technoloGy AnnuAl report 2008
69
the warehouse and office leases are combined leases of land and buildings. when the Group adopted AAsBs at 1 July 2004,
it was not possible to obtain a reliable estimate of the split of the fair values of the lease interest between land and buildings
at inception of the leases. therefore, in determining lease classification, the Group evaluated whether both parts were
clearly operating leases or finance leases. Firstly, land title does not pass. secondly, because the rent paid to the landlord
for the building is increased to market rent at regular intervals, and the Group does not participate in the residual value of
the building, it was judged that substantially all the risks and rewards of the building are with the landlord. Based on these
qualitative factors it was concluded that the leases are operating leases.
28. Other commitments
in thousands of Aud
Employee compensation commitments
Key management personnel
commitments under non-cancellable employment contracts
not provided for in the financial statements and payable:
within one year
Consolidated
2008
2007
Company
2008
2007
395
395
468
468
379
379
401
401
29. legal matters
A creditor’s statutory demand issued in december 2007 to the company by a former distributor was withdrawn on 28
February 2008. this statutory demand alleged that approximately $2.1 million previously paid as a deposit on a subsequently
dishonoured sales contract was refundable. the company disputed that this amount was refundable and counter claimed
that approximately $1.7 million was owed from this distributor in relation to breaches of a sales contract. negotiations
between the company and the distributor have resulted in a successful resolution of these matters and all associated legal
proceedings have been dismissed.
30. Regulatory matters
the manufacture and distribution of gaming machines and associated products are subject to extensive local and foreign
laws, regulations and taxes. many of these jurisdictions require licences, registrations, findings of suitability, permits,
documentation and qualification and other forms of approval for manufacturers of gaming machines.
no matter is currently the subject of investigation by any regulatory authorities.
31. Group Entities
Parent entity
Ainsworth Game technology limited
Subsidiaries
AGt pty ltd
Ainsworth Game technology international Gmbh
Ainsworth Game technology nZ ltd
Ainsworth Game technology inc
Ainsworth Game technology uK ltd
Ainsworth Game technology (Asia) ltd
AGt service pty ltd
AGt service (nsw) pty ltd
Bull club services pty ltd
Country of
incorporation
Ownership interest
2007
2008
Australia
-
-
Australia
Austria
nZ
usA
uK
macau
Australia
Australia
Australia
100%
100%
-
100%
-
-
100%
100%
100%
100%
100%
100%
100%
100%
96%
100%
100%
100%
in the financial statements of the company, investments in subsidiaries are measured at cost. the company’s
investment in controlled entities amounted to $2. this investment is included in other assets. investments in associates
are also accounted for at cost value. the company has no jointly controlled entities.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
70 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
32. Reconciliation of cash flows from operating activities
in thousands of Aud
Cash flows from operating activities
(Loss)/profit for the period
Adjustments for:
depreciation
Amortisation of intangible assets
impairment losses on intangible assets
Net finance costs
Share of profit of equity accounted investees
Gain on sale of property, plant and equipment
equity-settled share-based payment transactions
income tax expense
Operating (loss)/profit before changes in working
capital and provisions
change in trade and other receivables
change in inventories
change in other assets
change in trade and other payables
change in provisions and employee benefits
interest paid
Net cash from operating activities
33. Financial instruments
Consolidated
Company
Note
2008
2007
2008
2007
(19,357)
(49,485)
(20,498)
(46,403)
19
20
20
11
17
8
9
12
1,476
2,618
1,605
6,657
361
(17)
281
49
(6,327)
(7,277)
9,495
368
2,214
(16)
(1,543)
(3,521)
(5,064)
1,551
2,176
3,580
10,115
(211)
(2)
27
40
(32,209)
45,899
(905)
-
(13,514)
(439)
(1,168)
(1,680)
(2,848)
1,433
2,465
1,605
6,635
-
(17)
281
-
(8,096)
(8,176)
9,495
320
2,462
88
(3,907)
(3,521)
(7,428)
1,526
2,023
3,580
10,074
-
(2)
27
-
(29,175)
43,096
(905)
22
(14,097)
(327)
(1,386)
(1,680)
(3,066)
Credit risk
exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum
exposure to credit risk at the reporting date was:
in thousands of Aud
receivables
receivables from equity accounted investees
Note
15
15
Carrying amount
2008
30,575
449
31,024
2007
26,347
6
26,353
the company’s maximum exposure to credit risk at the reporting date was $31,024 thousand (2007: $26,353 thousand) for
receivables.
the Group’s gross maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
in thousands of Aud
Australia
Americas
europe
new Zealand
Asia
Africa
Ainsworth GAme technoloGy AnnuAl report 2008
Carrying amount
2008
3,229
24,634
3,260
617
2,011
910
34,661
2007
1,852
21,784
3,757
9
1,062
1,192
29,656
71
the company’s gross maximum exposure to credit risk for receivables at the reporting date by geographic region was
$24,634 thousand (2007: $21,784 thousand) for Americas, $2,996 thousand (2007: $1,487 thousand) for Australia, $3,260
thousand (2007: $3,757 thousand) for europe, $2,011 thousand (2007: $1,062 thousand) for Asia and $1,527 thousand
(2007: $1,201 thousand) for other regions, totalling $34,428 thousand (2007: $29,291 thousand).
The Group’s most significant customer, a distributor within South America, accounts for $12,135 thousand of the trade
receivables carrying amount at 30 June 2008 (2007: $8,104 thousand). two subsidiaries account for $4,162 thousand and
$2,949 thousand (2007: $3,962 thousand and $2,591 thousand) of the company’s receivables carrying amount.
impairment losses
the aging of the Group’s trade receivables at the reporting date was:
Gross
2008
impairment
2008
Gross
2007
impairment
2007
in thousands of Aud
not past due
past due 0-30 days
past due 31-120 days
past due 121 days to one year
more than one year
25,471
1,211
1,233
2,070
4,676
34,661
-
127
36
1,416
2,507
4,086
18,853
1,939
1,056
1,703
6,105
29,656
-
-
1
110
3,198
3,309
2007
977
2,332
-
3,309
the movement in the allowance for impairment in respect of trade receivables during the year was as follows:
in thousands of Aud
Balance at 1 July
impairment loss
Effect of exchange rate fluctuations
Balance at 30 June
2008
3,309
730
47
4,086
the impairment loss of $730,000 (2007: $2,332 thousand) was recognised in sales, service and marketing expenses in the
income statement.
Based on historic default rates, the Group believes that no impairment is necessary in respect of trade receivables not past
due. impairment allowances of $163,000 on amounts past due up to 120 days relate to known circumstances that could
impact collectibility.
included in past due 121 days to one year is an impairment allowance of $1.4 million relating to an overdue amount owing
from a customer within south America who previously transacted business with the Group. the impairment allowance was
considered necessary due to further delays in receiving monies owing and the commencement of legal action by the Group
to recover all amounts owing.
An impairment allowance of $2.5 million has been provided for past due amounts more than one year and relates to
customers and distributors where the Group has either commenced legal action or has assessed potential collectability
issues. the remaining balance where no impairment allowance has been provided relate to negotiated repayment plans
from long standing customers and distributors who have met their obligations during the period. An additional amount
relates to a settlement agreement established with a former distributor with repayments over an eleven month period. All
payments are being received in line with this settlement agreement established and repayment plans and no impairment
allowance is considered appropriate.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
72 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
33. Financial instruments (continued)
liquidity risk
the following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
Consolidated
30 June 2008
in thousands of Aud
Non-derivative financial liabilities
convertible notes
payable to director/shareholder
controlled entities
other note holders
Finance lease liabilities
Amounts payable to director/
shareholder controlled entities
loans from director/shareholder
controlled entity
trade and other payables
30 June 2007
in thousands of Aud
Non-derivative financial liabilities
convertible notes
payable to director/shareholder
controlled entities
other note holders
Finance lease liabilities
Amounts payable to director/
shareholder controlled entities
loans from director/shareholder
controlled entity
trade and other payables
Carrying
amount
Contractual
Cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
More than
5 years
12,654
11,681
1,603
14,927
13,777
1,759
(533)
(492)
(601)
(533)
(13,861)
(492)
(12,793)
-
-
(347)
(588)
(223)
9,152
9,152
-
-
(9,152)
17,611
10,810
63,511
18,220
10,810
68,645
(87)
(176)
(17,957)
(10,810)
-
-
(12,523)
(1,548)
(54,351)
(223)
-
-
-
Carrying
amount
Contractual
Cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
More than
5 years
12,274
11,330
1,489
16,524
15,243
1,650
(1,066)
(975)
(421)
(531)
(491)
(371)
(1,066)
(13,861)
(984)
(12,793)
(501)
(357)
7,064
7,064
(363)
30,026
7,755
69,938
30,266
7,755
-
(7,755)
-
-
-
(6,701)
(30,266)
-
-
-
-
78,502
(10,580)
(1,393)
(39,518)
(27,011)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ainsworth GAme technoloGy AnnuAl report 2008
73
Carrying
amount
Contractual
Cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
More than
5 years
12,654
11,681
1,597
14,927
13,777
1,752
(533)
(492)
(598)
(533)
(13,861)
(492)
(12,793)
-
-
(343)
(588)
(223)
9,152
9,152
-
-
(9,152)
17,611
10,321
63,016
18,220
10,321
68,149
(87)
(176)
(17,957)
(10,321)
-
-
(12,031)
(1,544)
(54,351)
(223)
-
-
-
Carrying
amount
Contractual
Cash flows
6 months
or less
6-12
months
1-2
years
2-5
years
More than
5 years
12,274
11,330
1,479
16,524
15,243
1,637
(1,066)
(975)
(408)
(531)
(491)
(371)
(1,066)
(13,861)
(984)
(12,793)
(501)
(357)
7,064
7,064
(363)
30,026
7,445
69,618
30,266
7,445
-
(7,445)
-
-
-
(6,701)
(30,266)
-
-
-
-
78,179
(10,257)
(1,393)
(39,518)
(27,011)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Company
30 June 2008
in thousands of Aud
Non-derivative financial liabilities
convertible notes
payable to director/shareholder
controlled entities
other note holders
Finance lease liabilities
Amounts payable to director/
shareholder controlled entities
loans from director/shareholder
controlled entity
trade and other payables
30 June 2007
in thousands of Aud
Non-derivative financial liabilities
convertible notes
payable to director/shareholder
controlled entities
other note holders
Finance lease liabilities
Amounts payable to director/
shareholder controlled entities
loans from director/shareholder
controlled entity
trade and other payables
Ainsworth GAme technoloGy AnnuAl report 2008
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74 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
33. Financial instruments (continued)
Currency risk
the Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than
the Aud.
the Group monitors and assesses under its treasury risk policy and facilities available whether hedging of all trade
receivables and trade payables denominated in a foreign currency from time to time is considered appropriate. the
Group uses foreign currency call options to hedge its foreign currency risk. most of the foreign currency call options
have maturities of less than one year after the balance sheet date. no foreign currency call options were in place at
the reporting date due to expiry in the current period.
exposure to currency risk
the Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
in thousands of Aud
USD
Euro
NZD
GBP
USD
Euro
NZD
GBP
trade receivables
trade payables
net balance sheet exposure
30 June 2008
25,424
(3,827)
21,597
2,986
(48)
2,938
610
(2)
608
30 June 2007
-
(5)
(5)
20,170
(1,659)
18,511
3,801
(82)
3,719
-
(31)
(31)
20
(37)
(17)
the company’s exposure to foreign currency risk was as follows, based on notional amounts:
in thousands of Aud
USD
Euro
NZD
GBP
USD
Euro
NZD
GBP
trade receivables
trade payables
net balance sheet exposure
30 June 2008
28,364
(3,827)
24,537
2,986
(288)
2,698
610
(2)
608
30 June 2007
-
(5)
(5)
22,761
(1,659)
21,102
3,801
(364)
3,437
-
(31)
(31)
20
(97)
(77)
the following significant exchange rates applied during the year:
Aud
usd
euro
nZd
GBp
average Rate
Reporting date spot rate
2008
0.9056
0.6142
1.1829
0.4528
2007
0.7929
0.6079
1.1516
0.4097
2008
0.9635
0.6141
1.2834
0.4851
2007
0.8482
0.6345
1.1063
0.4250
Ainsworth GAme technoloGy AnnuAl report 2008
sensitivity analysis
in managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group earnings.
over the longer-term, however, permanent changes in foreign exchange will have an impact on profit/(loss).
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June would have increased
(decreased) equity and profit or loss by the amounts shown below. this analysis assumes that all other variables remain
constant. the analysis is performed on the same basis for 2007.
75
effect in thousands of Aud
30 June 2008
usd
euro
nZd
GBp
30 June 2007
usd
euro
nZd
GBp
Consolidated
Company
Equity
Profit or
(loss)
Equity
Profit or
(loss)
(1,919)
(1,964)
(2,232)
(2,232)
(267)
(55)
-
(1,466)
(363)
3
(2)
(267)
(55)
-
(245)
(55)
-
(245)
(55)
-
(1,682)
(338)
(1,918)
(313)
(1,918)
(313)
3
3
3
7
3
7
A 10 percent weakening of the Australian dollar against the following currencies at 30 June would have increased (decreased)
equity and profit or loss by the amounts shown below. this analysis assumes that all other variables remain constant.
the analysis is performed on the same basis for 2007.
effect in thousands of Aud
30 June 2008
usd
euro
nZd
GBp
30 June 2007
usd
euro
nZd
GBp
Consolidated
Company
Equity
Profit or
(loss)
Equity
Profit or
(loss)
2,110
322
61
-
1,614
400
(3)
2
2,160
294
61
-
1,851
372
(3)
(4)
2,454
270
61
-
2,110
344
(3)
(8)
2,454
270
61
-
2,110
344
(3)
(8)
Ainsworth GAme technoloGy AnnuAl report 2008
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76 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
33. Financial instruments (continued)
Fair values
the fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are
as follows:
Consolidated
in thousands of Aud
trade and other receivables
cash and cash equivalents
convertible notes
Finance lease liabilities
Amount payable to director/shareholder controlled entity
loans from director / shareholder controlled entity
trade and other payables
unrecognised (losses) / gains
Company
in thousands of Aud
trade and other receivables
cash and cash equivalents
convertible notes
Finance lease liabilities
Amount payable to director/shareholder controlled entity
loans from director / shareholder controlled entity
trade and other payables
unrecognised (losses) / gains
Carrying
amount
2008
31,331
3,735
(24,335)
(1,603)
(9,152)
(17,611)
(10,810)
(28,445)
-
Carrying
amount
2008
37,874
1,033
(24,335)
(1,597)
(9,152)
(17,611)
(10,321)
(24,109)
-
Fair
value
2008
31,331
3,735
(24,335)
(1,603)
(9,152)
(17,611)
(10,810)
(28,445)
-
Fair
value
2008
37,874
1,033
(24,335)
(1,597)
(9,152)
(17,611)
(10,321)
(24,109)
-
Carrying
amount
2007
26,955
1,157
(23,604)
(1,489)
(7,064)
(30,026)
(7,755)
(41,826)
-
Carrying
amount
2007
33,006
802
(23,604)
(1,479)
(7,064)
(30,026)
(7,445)
(35,810)
-
Fair
value
2007
26,955
1,157
(23,604)
(1,489)
(7,064)
(30,026)
(7,755)
(41,826)
-
Fair
value
2007
33,006
802
(23,604)
(1,479)
(7,064)
(30,026)
(7,445)
(35,810)
-
Estimates of fair values
the methods used in determining the fair values of financial instruments are discussed in note 4.
interest rates used for determining fair value
the interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve
as of 30 June 2008 plus an adequate constant credit spread and are as follows:
loans and borrowings
receivables
leases
2008
9.4% - 11.0%
5.8%
6.7% - 10.4%
2007
9.4% - 11.0%
6.1%
6.7% - 14.7%
Ainsworth GAme technoloGy AnnuAl report 2008
77
34. Related parties
the following were key management personnel of the Group at any time during the reporting period and unless
otherwise indicated were key management personnel for the entire period:
Non-executive directors
mr sl wallis
mr GJ campbell
(Appointed 18 september 2007)
mr Ar Amer
(retired 20 november 2007)
Executive directors
mr lh Ainsworth
(executive chairperson)
Executives
mr de Gladstone
(chief executive officer, Ainsworth Game technology limited)
mr ml ludski
(chief Financial officer and company secretary,
Ainsworth Game technology limited)
mr V Bruzzese
(General manager technical services, Ainsworth Game technology limited,
appointed to role on 14 march 2008)
mr r meitzler
(senior Vp sales and operations, Ainsworth Game technology inc.)
mr p curran
(General manager, manufacturing operations,
Ainsworth Game technology limited)
mr e eskin
(General manager, engineering, Ainsworth Game technology limited,
ceased to be classified as a key management personnel on 14 march 2008)
Key management personnel compensation
The key management personnel compensation included in ‘personnel expenses’ (see note 8) is as follows:
in Aud
short-term employee benefits
post-employment benefits
termination benefits
share based payments
Consolidated
Company
2008
2007
2008
2007
3,144,216
2,756,144
2,270,448
2,196,564
173,964
-
19,602
206,639
207,530
4,989
152,560
-
8,897
139,294
185,127
4,989
3,337,782
3,175,302
2,413,905
2,525,974
the key management personnel receive no compensation in relation to the management of the company.
the compensation disclosed above represents an allocation of the key management personnel’s estimated compensation
from the Group in relation to their services rendered to the company.
individual directors and executives compensation disclosures
information regarding individual directors and executives compensation and some equity instruments disclosures as
permitted corporations regulations 2m.3.03 and 2m.6.04 is provided in the remuneration report section of the directors’
report on pages 20 to 28.
Apart from the details disclosed in this note, no director has entered into a material contract with the company or the Group
since the end of the previous financial year and there were no material contracts involving directors’ interests existing at
year-end.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
78 Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
34. Related parties (continued)
Other key management personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them having
control or significant influence over the financial or operating policies of those entities.
A number of these entities transacted with the company or its subsidiaries in the reporting period. other than as described
below the terms and conditions of the transactions with management persons and their related parties were no more
favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-
director related entities on an arm’s length basis.
the aggregate amounts recognised during the year relating to key management personnel and their related parties were
as follows:
in Aud
Key management
persons
mr lh Ainsworth
transaction
leased property
and equipment
mr lh Ainsworth
sales revenue
mr lh Ainsworth
consultancy services
mr lh Ainsworth
interest paid/payable on
financing facilities
mr lh Ainsworth
convertible note interest
mr lh Ainsworth
mr lh Ainsworth
mr lh Ainsworth
consultancy services to
Ainsworth (uK) ltd
sale of european assets on
closure to Ainsworth (uK) ltd
loan from director / shareholder
controlled entity
transactions value year
ended 30 June
Balance outstanding
as at 30 June
Note
2008
2007
2008
2007
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
134,404
116,070
-
-
3,293,240
230,000
16,275
2,322,659
16,275
230,000
-
-
2,178,913
2,500,311
8,880,130
6,701,217
1,069,169
1,066,297
2,921
125,594
107,044
59,567
-
-
-
-
-
4,097,539
528,766
107,044
-
-
(i)
the company leased premises in Queensland and associated plant and equipment from an entity controlled by
mr lh Ainsworth on normal commercial terms and conditions.
(ii) transaction was by Ainsworth (uK) ltd, an entity controlled by mr lh Ainsworth. these sales were on normal
commercial terms and conditions.
(iii) mr lh Ainsworth received fees during the financial year for the provision of services under a consultancy agreement in
relation to his role as executive chairman.
(iv) As disclosed in note 22 a company controlled by mr lh Ainsworth has extended a loan to the company. the maturity
date of this loan was extended on 23 may 2008 until 4 January 2010. the terms of this loan are more favourable than
could be obtained from the Group’s bankers and at arms length in the open market.
(v)
interest paid/payable during the financial year to mr lh Ainsworth and entities controlled by him for convertible notes
held. this interest was under the same terms and conditions as all convertible note holders.
(vi) during the 2008 period consultancy services by Ainsworth (uK) ltd were provided by the managing director
(mr B marchini) of this entity to Ainsworth Game technology international Gmbh which facilitated closure of the
Group’s european operations. these services were on normal commercial terms and conditions.
(vii) Asset sales were made to Ainsworth (uK) ltd in the period on normal commercial terms and conditions following
cessation of trading of Ainsworth Game technology international Gmbh.
(viii) An additional, unsecured loan was provided during the period by a company controlled by mr lh Ainsworth. this loan
was unsecured and is under similar terms and conditions to the loan identified in (iv) above. Agreement has been
reached that $350,000 per annum is to be repaid monthly in arrears. the full repayment of the remaining balance and
interest is not required to be paid until such time as the company or Group has sufficient operating cash flows to do
so, and until the $40 million facility has been repaid.
Ainsworth GAme technoloGy AnnuAl report 2008
79
Amounts receivable from and payable to key management personnel at reporting date arising from these transactions
were as follows:
in Aud
assets and liabilities arising from the above transactions
current receivables
trade debtors
current trade and other payables
Consolidated
Company
2008
2007
2008
2007
2,322,659
16,275
2,322,659
16,275
Amount payable to director/shareholder controlled entity
274,944
891,548
274,944
784,491
current loans and borrowings
loan from director / shareholder controlled entity - unsecured
263,000
-
263,000
-
non-current loans and borrowings
Amount payable to director/shareholder controlled entity
loan from director/shareholder controlled entity - unsecured
loan from director/shareholder controlled entity - secured
8,880,130
3,834,539
13,513,412
6,701,217
-
30,026,000
8,880,130
3,834,539
13,513,412
6,701,217
-
30,026,000
convertible notes
12,654,200
12,274,080
12,654,200
12,274,080
Options and rights over equity instruments
the movement during the reporting period in the number of options over ordinary shares in Ainsworth Game
technology limited held, directly, indirectly or beneficially, by each key management person, including their related parties,
is as follows:
Held at
1 July 2007
Granted as
remuneration Exercised
Other
changes*
Held at
30 June 2008
Vested
during
the year
Vested and
exercisable at
30 June 2008
Directors
mr sl wallis
Executives
Current
mr ml ludski
mr pw walford
mr r meitzler
Former
mr K orchard
(retired 30/06/08)
Directors
mr sl wallis
Executives
Current
mr ml ludski
mr pw walford
mr K orchard
Former
mr G steiner
300,000
-
-
(300,000)
-
-
50,000
140,000
-
-
-
200,000
150,000
165,375
-
-
-
-
-
-
-
-
50,000
140,000
200,000
25,000
70,000
-
315,375
75,000
-
-
-
-
-
Held at
1 July 2006
Granted as
remuneration Exercised
Other
changes*
Held at
30 June 2007
Vested
during
the year
Vested and
exercisable at
30 June 2007
300,000
300,000
140,000
150,000
300,000
-
-
-
-
-
-
-
-
-
-
300,000
-
(250,000)
-
-
50,000
140,000
150,000
12,500
35,000
37,500
-
(300,000)
-
-
-
-
-
-
-
* other changes represent options that expired or were forfeited during the year.
no options held by key management personnel are exercisable at 30 June 2007 or 2008 as performance hurdles have not
been achieved. no options were held by key management person related parties.
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
80
Ainsworth Game technology limited
notes to the FinAnciAl stAtements (continued)
34. Related parties (continued)
Movements in shares
the movement during the reporting period in the number of ordinary shares in Ainsworth Game technology limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2007
Purchases
(Note a)
Received on
exercise of options
Sales
Held at
30 June 2008
Directors
Current
mr lh Ainsworth
mr sl wallis
mr GJ campbell
Former
mr Ar Amer
Executives
Former
mr K orchard
Directors
Current
mr lh Ainsworth
mr sl wallis
mr Ar Amer
Executives
Current
mr K orchard
Former
mr dp creary
118,318,816
463,128
62,500
96,780,126
166,852
25,000
69,826
17,527
-
-
-
-
-
-
-
(3,670,331)
-
-
211,428,611
629,980
87,500
-
-
69,826
17,527
Held at
1 July 2006
Purchases
Received on
exercise of options
Sales
Held at
30 June 2007
117,318,816
463,128
69,826
1,000,000
-
-
17,527
20,000
-
-
-
-
-
-
-
-
-
-
-
-
118,318,816
463,128
69,826
17,527
20,000
note
(A) purchases include 78,012,650 ordinary shares acquired pursuant to the renounceable rights issue prospectus date
21 november 2007.
no shares were granted to key management personnel during the reporting period as compensation in 2007 or 2008.
the following changes in key management in the period after the reporting date and prior to the date when the Financial
report is authorised for issue occurred:
• Mr K Orchard (Senior VP Sales, South America) retired on 30 June 2008; and
• mr p curran (General manager, manufacturing operations) ceased employment effective 22 August 2008.
Non-key management personnel disclosures
subsidiaries
loans operate between the company and wholly owned subsidiaries for trading purposes. At 30 June 2008, the amount
owed to the company from controlled entities was $7,264,000 (2007: $6,445,000). At 30 June 2008, the amount owed
by the company to controlled entities was $240,000 (2007: $282,000). loans outstanding between the company and its
controlled entities are interest free and repayable on demand.
during the year ended 30 June 2008 the company was provided management services from controlled entities.
management fees charged during the year by controlled entities were $8,170,929 (2007: $2,220,688). the company
provided management services to a controlled entity of $20,000 (2007: $nil). the company utilised the services of
controlled entities in the amount of $112,095 (2007: $220,946). transactions with these controlled entities were priced on
an arm’s length basis and were related to service and installation of machines at gaming venues.
equity accounted investees
during the financial year ended 30 June 2008, equity accounted investees purchased goods from the Group in the
amount of $9,626 (2007: $22,504) and provided services to the Group in the amount of $183,587 (2007: $313,416). At 30
June 2008 equity accounted investees owed the Group $448,943 (2007: $6,393). transac-tions with equity accounted
investees are priced on an arm’s length basis. no dividends were received from equity accounted investees in the
2008 or 2007 financial year.
35. Subsequent events
there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
Ainsworth GAme technoloGy AnnuAl report 2008
81
directors’ declArAtion
1.
In the opinion of the directors of Ainsworth Game Technology Limited ‘the Company’:
(a)
the financial statements and notes and the remuneration disclosures that are contained in the remuneration report in
the directors’ report, set out on pages 35 to 80, are in accordance with the corporations Act 2001, including:
(i) giving a true and fair view of the company’s and the Group’s financial position as at 30 June 2008 and of their
performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting standards (including the Australian Accounting interpretations) and the
Corporations Regulations 2001;
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a);
(c)
the remuneration disclosures that are contained in the remuneration report in the directors’ report comply with
Australian Accounting standard AAsB 124 related party disclosures, the corporations Act 2001 and the corporations
Regulations 2001; and
(d)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
2.
the directors have been given the declarations required by section 295A of the corporations Act 2001 from the
chief executive officer and chief Financial officer for the financial year ended 30 June 2008.
signed in accordance with a resolution of the directors:
dated at sydney this 27th day of August 2008.
lh Ainsworth
executive director
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
82
independent auditor’s report to the members of ainsworth Game technology limited
Report on the financial report
we have audited the accompanying financial report of Ainsworth Game technology limited (the company), which comprises
the balance sheets as at 30 June 2008, and the income statements, statements of changes in equity and cash flow statements
for the year ended on that date, a description of significant accounting policies and other explanatory notes 1 to 35 and the
directors’ declaration set out on page 81 of the Group comprising the company and the entities it controlled at the year’s
end or from time to time during the financial year.
directors’ responsibility for the financial report
the directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Account standards (including the Australian Accounting interpretations) and the corporations Act 2001.
this responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of
the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2(a), the directors
also state, in accordance with Australian Accounting standard AAsB 101 presentation of Financial statements, that the
financial report, comprising the financial statements and notes, complies with international Financial reporting standards.
Auditor’s responsibility
our responsibility is to express an opinion on the financial report based on our audit. we conducted our audit in accordance
with Australian Auditing standards. these Auditing standards require that we comply with relevant ethical requirements
relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report
is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement
of the financial report, whether due to fraud or error. in making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
we performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with
the corporations Act 2001 and Australian Accounting standards (including the Australian Accounting interpretations), a view
which is consistent with our understanding of the company’s and the Group’s financial position and of their performance.
we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
independence
in conducting our audit, we have complied with the independence requirements of the corporations Act 2001.
Auditor’s opinion
in our opinion:
(a) the financial report of Ainsworth Game technology limited is in accordance with the corporations Act 2001, including:
(i) giving a true and fair view of the company’s and the Group’s financial position as at 30 June 2008 and of their performance
for the year ended on that date; and
(ii) complying with Australian Accounting standards (including the Australian Accounting interpretations) and the
corporations regulations 2001.
(b) the financial report also complies with international Financial reporting standards as disclosed in note 2(a).
Ainsworth GAme technoloGy AnnuAl report 2008
liability limited by a scheme approved
under professional standards
legislation.
83
Report on the remuneration report
we have audited the remuneration report included in pages 20 to 28 of the directors’ report for the year ended 30 June 2008.
the directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with
section 300A of the corporations Act 2001. our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with auditing standards.
Auditor’s opinion
in our opinion, the remuneration report of Ainsworth Game technology limited for the year ended 30 June 2008, complies with
section 300A of the corporations Act 2001.
KPMG
Carlo Pasqualini
partner
sydney, 27 August 2008
Ainsworth GAme technoloGy AnnuAl report 2008
Ainsworth GAme technoloGy AnnuAl report 2008
liability limited by a scheme approved
under professional standards
legislation.
84
lead auditor’s independence declaration under Section 307C of the Corporations act 2001
to: the directors of Ainsworth Game technology limited
i declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there
have been:
• no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit;
and
• no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Carlo Pasqualini
partner
sydney, 27 August 2008
Ainsworth GAme technoloGy AnnuAl report 2008
liability limited by a scheme approved
under professional standards
legislation.
Auditor
KPMG
10 Shelley Street
Sydney NSW Australia 2000
Tel: +61 2 9335 7000
Fax: +61 2 9299 7001
Other Information
Ainsworth Game Technology Limited,
incorporated and domiciled in
Australia, is a publicly listed
company limited by shares.
Stock Exchange Listing
The Company is listed on the Australian
Stock exchange. The home exchange is
Sydney.
CODE: AGI
Website
www.ainsworth.com.au
Share Registry
Computershare Investor Services Pty Ltd
Level 3, 60 Carrington Street,
Sydney NSW Australia 2001
Tel: 1300 850 505 (within Aust)
+61 3 9415 4000 (outside Aust)
Fax: +61 3 9473 2500
ThE AMERICAS
6600 N.W 12 Avenue,
Suite 201 Ft. Lauderdale,
FL 33309 uSA
Tel: (954) 317 5500
Fax: (954) 317 5555
CORPORATe DiReCTORy
Directors
Executive Chairman
Mr Lh Ainsworth
Non-Executive Directors
Mr SL Wallis AO
Mr GJ Campbell
Chief Executive Officer
Mr De Gladstone
Company Secretary and
Chief Financial Officer
Mr ML Ludski
OFFiCeS
AUSTRALIA
Corporate and Head Office
10 holker Street,
Newington NSW Australia 2127
Tel: +61 2 9739 8000
Fax: +61 2 9737 9483
Queensland
29-31 ereton Drive,
Labrador QLD Australia 4215
Tel: +61 7 5573 1155
Fax: +61 7 5537 9311
South Australia
Ms Toni Odgers
P.O. Box 379
Fullerton SA Australia 5063
Tel: +61 413 728 766
Fax: +61 8 8294 1094
AiNSWORTh GAMe TeChNOLOGy ANNuAL RePORT 2008
AiNSWORTh GAMe TeChNOLOGy ANNuAL RePORT 2008
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8
10 Holker Street,
Newington NSW Australia 2127
Phone +61 2 9739 8000
Fax +61 2 9737 9483
www.ainsworth.com.au