Jinhui Shipping and Transportation Limited
Annual Report 2012

Plain-text annual report

Table of ConTenTs ConTenTs CorporaTe direCTory business overview direCTors’ reporT audiTor’s independenCe deClaraTion CorporaTe GovernanCe sTaTeMenT ConsolidaTed sTaTeMenT of CoMpreHensive inCoMe ConsolidaTed sTaTeMenT of finanCial posiTion ConsolidaTed sTaTeMenT of CHanGes in eQuiTy ConsolidaTed sTaTeMenT of CasH flows noTes To THe finanCial sTaTeMenTs NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES NOTE 2: PARENT ENTITY INFORMATION NOTE 3: REVENUE AND OTHER INCOME NOTE 4: PROFIT/(LOSS) FOR THE YEAR NOTE 5: INCOME TAX EXPENSE NOTE 6: DISCONTINUED OPERATIONS NOTE 7: KEY MANAGEMENT PERSONNEL (KMP) NOTE 8: AUDITOR’S REMUNERATION NOTE 9: DIVIDENDS NOTE 10: EARNINGS PER SHARE NOTE 11: CASH AND CASH EQUIVALENTS NOTE 12: TRADE AND OTHER RECEIVABLES NOTE 13: INVENTORIES NOTE 14: CONTROLLED ENTITIES NOTE 15: PROPERTY, PLANT AND EQUIPMENT NOTE 16: INTANGIBLE ASSETS NOTE 17: TRADE AND OTHER PAYABLES NOTE 18: BORROWINGS NOTE 19: TAX NOTE 20: PROVISIONS NOTE 21: CONTRIBUTED EQUITY NOTE 22: CAPITAL AND LEASING COMMITMENTS NOTE 23: CONTINGENT LIABILITIES NOTE 24: SEGMENT REPORTING NOTE 25: CASH FLOW INFORMATION NOTE 26: SHARE BASED PAYMENTS NOTE 27: EVENTS AFTER THE REPORTING DATE NOTE 28: FINANCIAL RISK MANAGEMENT NOTE 29: RESERVES NOTE 30: COMPANY DETAILS direCTors’ deClaraTion independenT audiTor’s reporT addiTional inforMaTion for lisTed publiC CoMpanies Table of ConTenTs 1 2 3 6 19 20 23 24 25 26 27 27 37 38 38 39 39 42 44 44 45 46 46 47 47 48 49 52 53 54 55 55 57 58 58 60 61 65 65 68 68 69 70 72 1 2011 - 2012Jumbo Interactive Annual Report CorporaTe direCTory CorporaTe direCTory direCTors David K Barwick Mike Veverka Bill Lyne (Non-Executive Chairman) (Chief Executive Officer) (Non-Executive Director) CHief finanCial offiCer David Todd CoMpany seCreTary Bill Lyne reGisTered offiCe Level One 601 Coronation Drive Toowong Qld 4066 Telephone: Facsimile: 07 3831 3705 07 3369 7844 banKers ANZ Banking Group Commonwealth Bank of Australia Westpac Banking Corporation sHare reGisTrar Computershare Investor Services Pty Ltd 117 Victoria Street West End Qld 4101 Telephone: Facsimile: 07 3237 2100 07 3229 9860 audiTors BDO Audit Pty Ltd Level 18 300 Queen Street Brisbane Qld 4000 Telephone: Facsimile: 07 3237 5999 07 3221 9227 inTerneT address www.jumbointeractive.com ausTralian business nuMber 66 009 189 128 Cover Art done by Local Artist ‘BANX’ 2 2011 - 2012Jumbo Interactive Annual Report business overview business overview TeCHnoloGy drivinG posiTive CHanGe The global lottery industry is in the midst of change driven by customer demand for technological advancements. The pace is showing no signs of slowing down and Jumbo is investing in the development of these new technologies to help lotteries around the world meet this demand. Over the past 12 years, Jumbo has built a solid system for selling lotteries on the internet. This technology is driving sales of Australian lotteries delivering profits for Jumbo and its partner lotteries as well as government revenue for social needs. The system has also become a competitive edge in the Company’s efforts to expand into new countries. The highlight from the 2012 results is a 39% increase in net profit after tax to $6.7 million. Total Transaction Value (TTV) increased 32% from $76 million to $100 million and revenue increased 33% from $18 million to $24 million. A 2.0c dividend was declared bringing the total for the year to 3.0c. Cash levels have reached $16.8 million plus $4.9 million for customer account balances. Trade and other payables are $5.5 million resulting in net cash for Jumbo of $11.3 million. This is earmarked for expansion into the US or other jurisdictions. Lottery TTV - Total Transaction Value $66M $76M $100M 100 90 80 70 60 50 40 30 20 10 $42M 2009 2010 2011 2012 Group Net Profit After Tax $3M 2009 8 6 4 2 0 - 2 - 4 - 6 - 8 2010 $7.3M 1 1 One off loss in 2010 due to the software division that was closed in 2011 Dividend 3 2 1 0 1.5c 2009 0.5c 2010 $4.8M 2011 1.0c 2011 $6.7M 2012 3.0c 2012 3 2011 - 2012Jumbo Interactive Annual Report Lottery TTV - Total Transaction Value $66M $76M 2009 2010 2011 2012 100 90 80 70 60 50 40 30 20 10 8 6 4 2 0 - 2 - 4 - 6 - 8 $42M $3M 2009 Group Net Profit After Tax business overview Dividend 3 2 1 0 1.5c 2009 wHaT does JuMbo do brinG fun To life! 2010 $7.3M 1 0.5c 2010 $100M $6.7M 2012 3.0c 2012 $4.8M 2011 1.0c 2011 Jumbo markets government lotteries using technological advances to drive success. Twelve years ago the web brought a new dimension to lottery play in Australia and Ozlotteries.com was created to provide customers with the convenience and excitement they were looking for. In 2012 the website passed two important milestones; sales reached $100 million for the first time and the customer database reached one million accounts (1.38 million by June 2012). wHaT’s neXT? inTerneT loTTeries 2.0 At first, Jumbo’s flagship website was a simple website selling lottery tickets that over the years evolved with steady innovation into a full digital service that includes smartphones, loyalty, social media and partner e-retailers to become the lottery industry’s most complete internet lottery platform. In September 2012, Jumbo unveiled its future vision at the 2012 World Lottery Summit in Montréal with the release of five more products. 1. Jumbo smart signs 2. Jumbo e-retailer 3. Jumbo fun pickers 4. Jumbo Group play 5. Jumbo digital instants All five products represent the next step forward and build on top of the existing smart phone, customer loyalty and web- based platform that has been developed inhouse since 2000. A new website was created at www.jumbostudios.com to showcase not only these five new products, but also the entire Jumbo solution for internet lotteries. 4 2011 - 2012Jumbo Interactive Annual Report inTerneT loTTery division 1. Jumbo smartsigns Traditional lottery retailers now have the technology to participate in internet lottery sales without losing commissions or customers. Jumbo SmartSigns allow customers that see a lottery sign to instantly ‘snap, tap or check-in’ to buy tickets instantly using their smartphone. ‘Snap’ refers to the familiar QR code (Quick Response Code), ‘Tap’ refers to NFC (Near Field Communications) or ‘Check-in’ via GPS to verify location. Customers are given the convenience of purchasing their ticket directly from their smartphone and the retailer that owns the sign location is credited with the sale and commission. Bonuses and incentives can also be offered as a way of driving customers back into the retailer’s store. 2. Jumbo e-retailer Another new product for traditional retailers is the Jumbo e-Retailer system that allows retailers to incorporate digital sales with their traditional sales. Customers are able to purchase tickets through the retailer’s own website and sales are linked back to that retailer. Government required identity and age verification checks are handled centrally to ensure compliance with all required laws. This system brings together traditional and digital lotteries into a single harmonious system. 3. Jumbo funpickers Lottery players love to choose their favourite numbers when playing the lottery. Jumbo takes this one step further by giving them the choice to also select their favourite star sign, sport, personality (or whatever) adding an extra dimension to their lottery play. But the fun doesn’t stop there. Players can also play classic arcade style casual games to choose their numbers. Jumbo has released its first game and has begun partnering with game developers to provide a range of arcade style casual games as a fun way to pick numbers for lotteries. Using the e-Retailer system, Jumbo is able to share revenues with the game developers providing new revenue models as well as new avenues for interactive marketing. 4. Jumbo Groupplay Playing lotteries is fun, but playing lotteries with friends adds a whole new dimension. Jumbo GroupPlay combines this with the rapid rise of social media into an innovative way to play lotteries with friends via social media. First, a player begins a game by inviting their Facebook friends to join in. Social chatter begins and a group is formed to play the lottery. Jumbo handles the transactions and notification of result and prizes. The results create further social chatter rolling on to a new game each week. 5. Jumbo digital instants Digital instant games are the digital equivalents of scratch tickets on the internet. Currently not permitted in Australia, Jumbo has been active in the debate to include online scratch games in the Australian Interactive Gaming Act. Overseas, digital instants have been accepted and so Jumbo has begun marketing its range of games in those jurisdictions that accept this form of gaming. Patent applications have been filed for protection of these new technologies. business overview 5 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT direCTors’ reporT The Directors of Jumbo Interactive Limited (the Company), present their report on the consolidated entity (the Group), consisting of Jumbo Interactive Limited and the entities it controlled at the end of, and during, the financial year ended 30 June 2012. direCTors The following persons were Directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated: • David K Barwick (Non-Executive Chairman) • Mike Veverka (Chief Executive Officer) • Bill Lyne (Non-Executive Director) CoMpany seCreTary The following person held the position of Company Secretary at the end of the financial year: Mr Bill Lyne – refer to Information on Directors for details. prinCipal aCTiviTies and siGnifiCanT CHanGes in naTure of aCTiviTies The principal activity of the Group during the financial year was the retail of lottery tickets sold both in Australia and eligible overseas jurisdictions. There were no significant changes in the nature of the Group’s principal activities that occurred during the financial year. dividends Details of dividends paid to members of the Company during the financial year are as follows: Final dividend of 0.5 cent per share on ordinary shares for the year ended 30 June 2011 paid on 30 September 2011 Interim dividend of 1.0 cent per share on ordinary shares for the year ended 30 June 2012 paid on 30 March 2012 $197,685 $416,157 $613,842 In addition to the above dividends, since the end of the financial year, the Directors have declared a final ordinary dividend for the financial year ended 30 June 2012 of 2.0 cents per share on ordinary shares to be paid on 28 September 2012 (approximately $848,251). operaTinG resulTs and review of operaTions for THe year Information on the operations and financial position of the Group and its business strategies and prospects for future financial years is set out below. operating results The Company now reports revenue on a net revenue inflow basis where it considers that it acts more as an Agent than as a Principal such as the sale of lottery tickets. The gross inflow is advised as Total Transaction Value for information purposes. Refer to Notes 1(d) and 1(aa)(i) for further details. The consolidated profit of the Group amounted to $6,743,525 (2011: $4,834,455), after providing for income tax $2,310,544 (2011: benefit $306,411), which is a large increase on the results reported for the year ended 30 June 2011. Net reportable operating revenues increased 33% to $24,087,742 (2011: $18,118,334) and Total Transactional Value increased by 32% to $100,256,769 (2011: $75,946,130). The significant improvement was largely from continued growth in the online lottery business. Total Transaction Value is the gross amount received for the sale of goods and rendering of services. Other revenue, being mainly interest on cash, increased by 89% to $897,294 (2011: $474,179) due to higher cash and cash equivalent balances and improved liquidity management. Further discussion on the Group’s operations now follows: 6 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT review of operations (a) online lottery segment The Company continues to make significant investment in its internet intellectual properties, notably www.ozlotteries. com, and customer management, with 30% growth in net reportable operating revenues to $23,584,433 (2011: $18,081,812). Gross transactional value increased 31% to $99,719,424 (2011: $75,866,793), being achieved mainly through an increasing customer database. These investments, as well as investments in staff and improvements to underlying technology, have increased the operating costs. This has supported the strong growth in revenues which in turn, has increased operating profit contribution to $10,002,512 (2011: $5,495,205). (b) all other segments This segment consists of the sale of non-lottery products and services and is primarily an exploration in leveraging off the current lottery customer database. Revenues increased to $548,760 (2011: $79,337) as the product range and customer database expanded, with an operating loss of $33,866 (2011: profit $53,525) due to increased operating expenses to support both increased current and future revenues. 2012 $100.3 million $10,515,449 $6,743,525 2011 $75.9 million1 $7,024,8101 $4,834,455 2010 $66.0 million1 $2,392,566 ($7,311,048)2 2009 $58.6 million $5,059,248 $2,957,335 2008 $37.8 million $2,866,437 $2,730,526 Gross transactional value EBITDA PROFIT - NPAT 1 continuing operations 2 after impairment losses of $8,290,292 five year asset Growth Cash at Bank1 Net Assets NTA 2012 $21.7 million $18.1 million $11.3 million 2011 $11.8 million $10.1 million $3.7 million 2010 $9.5 million $6.4 million $0.4 million 2009 $9.8 million $14.2 million $1.1 million 2008 $5.6 million $11.8 million $3.0 million 1 includes cash held under term deposit and customer account balances payable (refer to Note 11: Cash and Cash Equivalents and Note 17: Trade and Other Payables for details) five year share price analysis PROFIT - NPAT EPS Share Price Shares on Issue Market Cap 2012 $6,743,525 16.7¢ 105.0¢ 42.4 million $44.5 million 2011 $4,834,4552 12.1¢2 37.0¢ 39.5 million $14.6 million 2010 ($7,311,048)1 (17.0¢)1 27.0¢ 43 million $11.6 million 2009 $2,957,335 6.9¢ 21.5¢ 43 million $9.2 million 2008 $2,730,526 6.5¢ 22.5¢ 43 million $9.7 million 1 after impairment losses of $8,290,292 2 after impairment reversal $1,258,354 and voluntary administration expenses $1,224,339 (c) summary of results The results for the Company are summarised below: financial position The net assets of the Group have increased by $8,001,735 from 30 June 2011 to $18,083,709. This increase is largely due to improved operating performance of the Group. The Group’s working capital, being current assets less current liabilities, has improved from $4,602,813 in 2011 to $11,686,335 in 2012 due mainly to the increased cash and cash equivalents through operating activities. The Directors believe the Group is in a sound financial position to expand and grow its current operations. 7 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT siGnifiCanT CHanGes in sTaTe of affairs Significant changes in the state of affairs of the Group for the financial year were as follows: a) Increase in contributed equity of $1,762,986 resulting from (see Note 21: Contributed Equity for details): Issue of 2,910,000 shares as a result of exercise of options previously granted to employees and directors Issue of 295,779 shares under the Dividend Reinvestment Plan Buyback of 330,024 shares under a sale of Unmarketable Parcels offer b) Repayment of borrowings Surplus cash was used to repay borrowings early in excess of arranged payments as follows: $750,000 loan from the ANZ (see Note 18: Borrowings for details) $ 1,707,000 147,733 (91,747) 1,762,986 $ (750,000) (750,000) liKely developMenTs, Key business sTraTeGies and fuTure prospeCTs The Company continues its efforts to grow the domestic lottery market while respecting responsible gaming commitments and the needs of all industry stakeholders, including other lottery channels. In December 2011, the Company signed a five year supply and marketing contract with South Australia Lotteries which is expected to have a positive effect on revenue with the website being launched 3 September 2012. In December 2008, the Company signed a five year co-branded website contract with New South Wales Lotteries (now owned by the Tatts Group) to handle lottery sales for customers from www.nswlotteries.com.au. In May 2012, the Tatts Group began accepting online orders from these NSW customers bringing NSW into line with the other states. As previously advised, this will have the effect of reducing revenue from the co-branded website although growth of NSW customers for www.ozlotteries.com is still expected to continue through ongoing marketing initiatives. The domestic internet lottery market represents 7% of the total domestic lottery market compared to overseas lottery markets which have recorded strong growth such as the more mature markets of UK and Finland where internet market share has reached 15% and 30% respectively. The Company is actively pursuing opportunities in international markets, most notably the USA market since the green light for internet lottery sales was given by the Department of Justice in December 2011. The North America lottery market is $60 billion compared to $4 billion in Australia. New products and technologies are being developed to take advantage of the trend towards social media, interactive gaming and e-tailing, which is expected to have the Company well placed in the domestic market and give it a competitive edge in the international markets. It is not possible at this stage to predict the overall impact on revenues of these upward and downward forces. MaTTers subseQuenT To THe end of THe finanCial year There were no material events after the balance sheet date. environMenTal reGulaTion The Group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. 8 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT inforMaTion on direCTors name Experience david K barwick Appointed as a Board member on 30 August 2006 and Chairman on 7 November 2007. David Barwick is an accountant by profession with over 38 years experience in the management and administration of publicly listed companies both in Australia and North America. During this period David has held the position of Chairman, Managing Director or President of over 30 public companies covering a broad range of activities. Directorships currently held in other listed entities Current Director and Chairman of Metallica Minerals Limited (since 11 March 2004); current Director of Orion Metals Limited (since 28 November 2008); and current Director and Chairman of Planet Metals Limited (since 9 June 2009). Interest in shares and options1 None Special responsibilities Chairman (Non-Executive); Chair of the Nomination and Remuneration Committee; and member of the Audit Committee. Directorships formerly held in other listed entities during the three years prior to the current year Previous Director and Chairman of MetroCoal Limited (from 6 July 2007 to 30 June 2012). name Qualifications Experience Mike veverka Bachelor of Engineering Mike Veverka has been Chief Executive Officer and Director of Jumbo Interactive Limited since the restructuring of the Company in September 1999. Mike was instrumental in the development of the e-commerce software that is the foundation to the various Jumbo operations. Mike was the original founder of subsidiary Benon Technologies Pty Ltd in 1995 when development of the software began. Mike also established a leading Internet Service Provider in Queensland which operated successfully for three years before being sold. Mike is regarded as a pioneer in the Australian internet industry with many successful internet endeavours to his name. Mike graduated with an Honours degree in engineering in 1987. Directorships currently held in other listed entities None Interest in shares and options1 9,488,540 ordinary shares in Jumbo Interactive Limited. Special responsibilities Chief Executive Officer Directorships formerly held in other listed entities during the three years prior to the current year None name Qualifications Experience bill lyne Bachelor of Commerce; Chartered Accountant Appointed as a board member on 30 October 2009. Bill Lyne is the principal of Australian Company Secretary Service, providing company secretarial, compliance and governance services to public companies. He is currently company secretary of three other publicly listed companies, is a former secretary and/or director of a number of other listed companies, and has a wealth of experience in corporate governance principles and practices. Bill is a fellow of Chartered Secretaries Australia and has been a presenter at CSA courses in company secretarial practice. 9 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT Directorships currently held in other listed entities None Interest in shares and options1 None Special responsibilities Chair of the Audit Committee; member of the Nomination and Remuneration Committee; and Company Secretary. Directorships formerly held in other listed entities during the three years prior to the current year None 1 includes transactions since the end of the reporting date up to and including the date of the Directors’ Report. MeeTinGs of direCTors The number of meetings of the Board of Directors (including board committees) held during the year ended 30 June 2012 and the number of meetings attended by each Director is set out below: board audit Committee name David Barwick Mike Veverka Bill Lyne eligible to attend 14 14 14 attended 14 14 12 eligible to attend 7 - 7 attended 7 - 7 nomination and remuneration Committee attended eligible to attend 4 - 4 4 - 4 sHare opTions Unissued ordinary shares of the Company under option at the date of this report are as follows: date options granted 15 February 2011 14 December 2011 expiry date 15 February 2014 14 December 2014 exercise price of shares 50 cents 70 cents number under option 800,000 1,000,000 1,800,000 The holders of these options do not have any rights under the options to participate in any share issue of the Company or of any other entity. During the financial year ended 30 June 2012, the following options were issued to consultants based in the USA as part of payment for services being provided (refer to Note 26 Share-Based Payments for details): name Brian J Roberts John Carson number of options granted number of ordinary shares under option 500,000 500,000 1,000,000 500,000 500,000 1,000,000 During or since the financial year ended 30 June 2012, the following ordinary shares of Jumbo Interactive Limited were issued on the exercise of options granted. No amounts are unpaid on any of the shares. Employees Employees Directors Directors Grant date 1 May 2009 15 February 2011 21 October 2009 15 November 2010 issue price of shares 50 cents 50 cents 70 cents 70 cents number of shares issued 1,450,000 200,000 1,350,000 300,000 3,300,000 10 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT During the financial year ended 30 June 2012, 50,000 options were forfeited due to staff leaving employment. During or since the end of the financial year, no options were granted by the Company to directors and executives of the Group as part of their remuneration. For details of options issued to directors and executives as remuneration, refer to the Remuneration Report. reMuneraTion reporT (audited) This report details the nature and amount of remuneration for each Key Management Person, including each director of Jumbo Interactive Limited. a) policy for determining the nature and amount of KMp remuneration The Remuneration Policy of Jumbo Interactive Limited has been designed to align director and Key Management Personnel (KMP) objectives with shareholder and business objectives by providing a remuneration component and offering specific incentives based on key performance areas affecting the Group’s financial results. The Board of Jumbo Interactive Limited believes the Remuneration Policy to be appropriate and effective in its ability to attract and retain the best directors and KMP to run and manage the Group, as well as create goal congruence between directors, executives and shareholders. The Board’s policy for determining the nature and amount of remuneration for Board members and KMP of the Group is as follows: • • • • The Remuneration Policy, setting the terms and conditions for the directors and KMP, was developed by the Nomination and Remuneration Committee and approved by the Board. All KMP receive a base salary (which is based on factors such as individual performance skills, level of responsibilities, experience and length of service, superannuation, options (by invitation) and performance incentives. Performance incentives are generally only paid once predetermined key performance measures have been met. The Board reviews KMP packages annually by reference to the Group’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The performance of KMP is measured against criteria agreed annually with each KMP and is based predominantly on the Group’s profits and shareholder value. All bonuses and incentives must be linked to predetermined performance criteria. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of KMP and reward them for performance that results in long term growth in shareholder wealth. Refer below for further details of performance based remuneration. KMP are also entitled to participate in the employee share option arrangements. The directors and KMP receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to directors and KMP is valued at the cost to the Company and expensed. Options are valued using the Black-Scholes, Binomial and Monte Carlo Simulation methodologies. Following a “first strike” to the 2011 Remuneration Report, the board sought and obtained feedback from those shareholders who had either voted against or abstained from voting with regards to the Remuneration Report. Following this, the Board has increased the level of disclosure in the Remuneration Report and revised the remuneration and bonus structures of KMP. Fixed compensation Fixed compensation consists of a base salary as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the Board through a process that considers individual and overall performance of the Group, and with reference to other KMP of comparable companies. If considered necessary, external consultants provide analysis and advice to ensure the directors’ and KMP compensation is competitive in the market place. Performance linked compensation Performance linked compensation includes short term incentives only and is designed to reward KMP for superior performance. The short term incentive (STI) is an “at risk” bonus provided in the form of cash. The Group does not have long term incentives (LTI) such as the issue of ordinary shares or the grant of options over ordinary shares as a part of performance linked compensation due to the relatively small market capitalisation of the Company, the concentrated shareholding of the Company which could become further concentrated under such a scheme, and the desire of the Board 11 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT to limit shareholding dilution to as low a level as possible. The Board did not exercise any discretion on the payment of bonuses. Non-Executive Directors The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. The total compensation for all non-executive directors, last voted upon by shareholders at the 2009 AGM, is not to exceed $250,000 per annum and is set with reference to other non-executive directors of comparable companies. Fees for non-executive directors are not linked to the performance of the Group. Fees are paid as follows and comprise cash and statutory superannuation: Chairman of Board Non-Executive Directors Membership of Audit Committee and Nomination and Remuneration Committee Chairman of Audit Committee Chairman of Nomination and Remuneration Committee $76,300 $54,500 No additional fees No additional fees No additional fees Performance Based Remuneration As part of the KMP remuneration package there is a performance based component, consisting of key performance indicators (KPI). The intention of this program is to facilitate goal congruence between executives with that of the business and shareholders. These KPI are set annually, with a certain level of consultation with KMP to ensure buy-in. The KPI target areas the Board believes hold greater potential for group expansion and profit, covering both financial and non-financial as well as short and long-term goals. The level set for each KPI is based on combination of an improvement on the previous year results, budgeted figures and market sector standards (Consumer Discretionary Sector – ASX:XDJ). Performance in relation to the KPI is assessed annually by the Board, with bonuses being awarded depending on the number and deemed difficulty of the KPI achieved. Following the assessment, the KPI are reviewed by the Board in light of the desired and actual outcomes, and their efficacy is assessed in relation to the Group’s goals and shareholder wealth before the KPI are set for the following year. In determining whether or not a KPI has been achieved, the Company bases the assessment on audited figures. Performance conditions linked to remuneration The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the provision of various “at risk” cash bonus reward schemes. Short term incentive bonus Incentive payments are based on the achievement of financial targets of profit, return of equity and total shareholder return and non-financial targets of strategic benefit such as signing of an additional lottery supplier and obtaining an agency agreement in the USA. Payments of incentives for the 2012 financial year result were based on the Group’s overall financial performance (with returns net profit after tax greater than 10% from the prior year, return on equity and total shareholder returns maintained at greater than 20%), and non-financial target agreements being signed. Long term incentive bonus Options are issued to KMP as part of their remuneration at the discretion of the Board. These options are not issued based upon performance criteria, but are issued to increase goal congruence between KMP, directors and shareholders. Company Performance, Shareholder Wealth, and Directors’ and KMP Remuneration The Remuneration Policy has been tailored to increase goal congruence between shareholders, directors and KMP. The following table shows the total transaction value and profits/(loss) for the last five years for the listed entity, as well as the share price at the end of the respective financial years. Analysis of the figures shows an increase in profits each year, except 2010 when an impairment of the software division was recognised. This division was subsequently closed in the 2011 financial year. The improvement in the Company’s performance over the past five years has been reflected in the Company’s share price with an increase each year, with the exception of 2009 when the share price fell slightly. The 12 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT Board is of the opinion that these results can be attributed, in part, to the previously described Remuneration Policy and is satisfied with the upwards trend in shareholder wealth over the past five years. Total Transaction Value Net profit/(loss) – overall operations Net profit/(loss) – continuing operations Net profit/(loss) – discontinued operations Share price at year end Dividends paid per share Total shareholder return Earnings per share Return on capital employed – overall operations Return on capital employed – continuing operations Return on capital employed – discontinued operations 2012 $100.3 mil $6,743,525 2011 $75.9 mil1 $4,834,455 2010 $66.0 mil1 ($7,311,048) 2009 $58.6 mil $2,957,335 2008 $37.8 mil $2,730,526 $6,476,516 $4,932,851 $3,260,797 2 $2,957,335 $2,730,526 $267,009 5 ($98,396)4 ($10,571,845) 3 n/a n/a 105.0¢ 1.5¢ 187.8% 16.7¢ 37.3% 35.8% 1.5% 37.0¢ 0.5¢ 38.9% 12.1¢ 47.9% 48.9% 27.0¢ 0.5¢ 27.9% (17.0¢) (114.6%) 51.1% 21.5¢ 1.5¢ 2.2% 6.9¢ 20.8% 20.8% (1.0%) (165.7%) n/a 22.5¢ 1.0¢ (28.8%) 6.5¢ 23.0% 23.0% n/a 1 continuing operations. 2 this is after a one-off impairment expense of $348,585. 3 this is after a one-off impairment expense of $7,941,707. 4 this is after reversal of impairment expense $1,258,354, loss on loss of control of subsidiary placed into voluntary administration $639,644 and expenses relating to the voluntary administration expenses $584,695. 5 this is only the tax effect of the subsidiary placed into voluntary administration. b) Key Management personnel The following persons were key management personnel of Jumbo Interactive Limited Group during the financial year: Name David K Barwick Mike Veverka Bill Lyne David Todd Xavier Bergade Kate Waters Position held Chairman (Non-Executive) Director and Chief Executive Officer Non-Executive Director and Company Secretary Chief Financial Officer Chief Technical Officer Operations and Human Resources Manager Kate Waters has become a member of key management personnel for the financial year ended 30 June 2012 as a result of a change in the role and responsibilities relating to the position during the financial year. 13 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT s n o i t p o f o e u l a v f o % n o i t a r e n u m e r f o n o i t r o p o r P s i t a h t n o i t a r e n u m e r f o s t s i s n o c t a h t d e s a b e c n a m r o f r e p % 8 1 2 2 2 - 4 3 2 % - 7 2 - - 5 2 5 2 1 1 s n o i t p o f o e u l a v f o % n o i t a r e n u m e r f o n o i t r o p o r P s i t a h t n o i t a r e n u m e r f o s t s i s n o c t a h t d e s a b e c n a m r o f r e p s t fi e n e b e v a e l s t fi e n e b $ $ 5 0 1 3 9 , 1 9 5 , 0 9 5 1 9 9 9 6 , 1 0 6 , 3 3 0 3 5 , 3 2 3 4 3 2 , 8 1 3 6 9 8 1 4 1 , , 8 4 9 0 7 5 1 , 5 0 8 , 6 1 0 2 8 , 3 1 1 9 4 5 1 , - 5 9 4 4 1 , 9 9 1 9 , 9 4 2 , 3 9 5 0 , 3 7 s t fi e n e b e v a e l s t fi e n e b $ - - - - - - - - $ - 1 7 9 9 , - - 5 3 8 , 3 5 3 8 , 3 7 9 3 , 2 $ 0 0 3 , 6 0 0 8 , 6 4 0 0 5 , 4 - 0 0 2 , 5 2 0 0 2 , 5 2 0 5 2 1 1 , 8 3 0 , 0 2 0 5 2 9 1 1 , $ - - - - - - - - $ - 0 0 0 , 0 6 1 - - 0 0 0 , 0 8 0 0 0 , 0 8 0 0 0 , 5 1 e v a e l d n a $ 0 0 0 , 0 7 0 0 0 , 0 6 3 0 0 0 , 0 5 1 0 6 , 3 3 0 0 0 , 0 0 2 0 0 0 , 0 0 2 0 0 0 , 0 1 1 y r a t e r c e S y n a p m o C s a – e n y L l l i B l e n n o s r e p t n e m e g a n a m y e k r e h t O a k r e v e V e k M i e n y L l l i B e d a g r e B r e i v a X s r e t a W e t a K d d o T d v a D i i k c w r a B d v a D i s r o t c e r i D 0 0 0 , 5 3 3 1 0 6 , 3 2 0 1 , n o i t a r e n u m e r l e n n o s r e p t n e m e g a n a m y e k l a t o T l a t o T 1 s n o i t p O n o i t a n m r e T i e c i v r e s g n o L n o i t a u n n a r e p u S y r a t e n o m - n o N s u n o b h s a C s e e f , y r a l a s h s a C d e s a b e r a h S s t n e m y a p s t fi e n e b s t fi e n e b m r e t g n o L t n e m y o p m e l t s o P s t fi e n e b l e e y o p m e m r e t t r o h S 1 1 0 2 . r a e y l a i c n a n fi e h t g n i r u d d e s i c r e x e s n o i t p o e s o h t n o m r e t i g n n i a m e r e h t r e v o s t n e m y a p d e s a b e r a h s s e d u l c n I 1 l a t o T 1 s n o i t p O n o i t a n m r e T i e c i v r e s g n o L n o i t a u n n a r e p u S y r a t e n o m - n o N s u n o b h s a C s e e f , y r a l a s h s a C d e s a b e r a h S s t n e m y a p s t fi e n e b s t fi e n e b m r e t g n o L t n e m y o p m e l t s o P s t fi e n e b l e e y o p m e m r e t t r o h S 2 1 0 2 : w o e b l t u o t e s e r a p u o r G d e t i m L i e v i t c a r e t n I o b m u J f o l e n n o s r e p t n e m e g a n a m y e k f o n o i t a s n e p m o c f o s l i a t e D n o i t a r e n u m e r f o s l i a t e d ) c 14 % 4 1 3 4 1 - 7 4 4 % - 5 3 - - - 4 1 4 $ $ 6 3 0 7 8 , 5 0 2 , 8 5 4 4 9 6 , 5 5 4 0 3 , 3 5 2 3 1 9 4 , , 9 1 7 9 2 2 5 1 8 , 0 4 2 5 9 5 . 2 1 5 9 5 , 2 1 8 7 7 7 , - 7 6 2 , 3 3 2 3 , 8 3 2 3 , 8 $ - - - - - - - , 5 0 9 3 7 1 1 , 1 8 8 , 2 5 - $ - 3 0 7 7 , - - - 7 2 8 , 3 9 1 0 , 4 9 4 5 , 5 1 $ 5 3 2 , 8 1 7 5 1 6 3 , 6 5 9 3 , - 7 8 7 , 3 4 6 9 7 1 , 5 6 8 , 8 1 4 6 9 , 8 9 $ - - - - - - - $ - 0 5 7 1 6 1 , - - - 0 0 0 , 0 1 8 0 6 9 9 , e v a e l d n a $ 6 0 2 , 6 5 0 0 0 , 0 4 2 0 6 9 3 4 , 4 0 3 , 3 5 8 7 0 , 2 4 5 0 6 9 8 1 , 0 0 0 , 0 1 1 - 8 5 3 1 7 2 , , 3 5 1 5 3 7 y r a t e r c e S y n a p m o C s a – e n y L l l i B l e n n o s r e p t n e m e g a n a m y e k r e h t O 2 O A n a m e z e o B a t i n o B n o i t a r e n u m e r l e n n o s r e p t n e m e g a n a m y e k l a t o T e d a g r e B r e i v a X d d o T d v a D i a k r e v e V e k M i e n y L l l i B i k c w r a B d v a D i s r o t c e r i D . r a e y l a i c n a n fi e h t g n i r u d d e s i c r e x e s n o i t p o e s o h t n o m r e t i g n n i a m e r e h t r e v o s t n e m y a p d e s a b e r a h s s e d u l c n I 1 1 1 0 2 y a M 1 3 n o r o t c e r i d a e b o t d e s a e c d n a 0 1 0 2 y l u J 8 2 n o r o t c e r i d a e m a c e b O A n a m e z e o B a t i n o B 2 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT d) Cash bonuses Cash bonuses granted by the Board during the financial year ended 30 June 2012 with no vesting conditions were paid on 19 January 2012 and 6 September 2012. Incentive outcomes for 2012: KMp David Barwick Bill Lyne Mike Veverka David Todd Xavier Bergade Kate Waters included in remuneration $ n/a n/a 160,000 80,000 80,000 15,000 forfeited in year $ n/a n/a 120,000 40,000 40,000 - e) options and rights granted as remuneration Options are issued to key management personnel as part of their remuneration at the discretion of the Board. The options are not necessarily issued based upon performance criteria, but are issued to selected executives of the Company and its subsidiaries to increase goal congruence between executives, directors and shareholders. No options and rights were granted to key management personnel as compensation during the reporting period. Options will vest in key management personnel when the share price equals the exercise price, and on condition that they are currently employed by the Jumbo Interactive Limited Group at the time of vesting. If the key management person leaves before their options vest, then the options will lapse immediately. In the event of retirement or retrenchment, the options will lapse one month after the event and if deceased, the options will lapse three months after the event. f) equity instruments issued on exercise of remuneration options Details of equity instruments issued during the period to key management personnel as a result of options exercised that had previously been granted as compensation are as follows: 2012 Name Directors David Barwick Bill Lyne Mike Veverka Other key management personnel David Todd Xavier Bergade number of shares issued on exercise of options number of options exercised amount paid per share amount unpaid per share 550,000 550,000 160,000 1,260,000 700,000 550,000 1,250,000 550,000 550,000 160,000 1,260,000 700,000 550,000 1,250,000 $0.70 $0.70 $0.70 $0.50 $0.50 - - - - - 15 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT d e s p a L d e t s e v n U d e t s e V % % - - - - - - - - - - - - - - - - - - - - % 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 d e t s e V . o N 0 0 0 0 5 5 , 0 0 0 0 5 2 , 0 0 0 0 0 3 , 0 0 0 0 5 5 , 0 0 0 0 5 5 , 0 0 0 0 5 1 , 0 0 0 0 5 5 , 0 0 0 0 5 1 , 0 0 0 0 5 1 , 0 0 0 0 0 2 , , 3 t a e l a V e t a d r e p e u l a V t a n o i t p o $ . o N $ . o N $ d e s p a L d e s p a L 3 d e s i c r e x E 2 d e s i c r e x E 1 e t a d t n a r g . o N e t a D - - - - - - - - - - - - - - - - - - - - , 0 5 7 3 9 0 1 , 0 0 0 0 1 5 , , 2 0 0 0 0 0 2 , , 3 , 5 2 1 6 3 1 0 5 7 4 7 , 5 7 3 , 3 6 0 0 0 , 8 8 0 0 0 0 5 5 , 0 0 0 0 5 2 , 0 0 0 0 0 3 , 0 0 0 0 6 1 , 0 0 5 1 9 2 , 0 0 0 0 5 5 , 0 0 5 , 8 4 1 0 0 0 0 5 1 , 0 0 5 1 9 2 , 0 0 0 0 5 5 , - - - - 9 6 0 0 . 9 6 0 0 . 3 3 0 0 . 9 6 0 0 . 8 7 0 0 . 5 6 0 0 . 8 7 0 0 . 5 6 0 0 . 5 6 0 0 . 0 0 0 0 5 5 , 9 0 0 2 t c O 0 3 k c i w r a B d i v a D 0 0 0 0 5 2 , 9 0 0 2 t c O 0 3 0 0 0 0 0 3 , 0 1 0 2 v o N 5 1 e n y L l l i B e n y L l l i B 0 0 0 0 5 5 , 9 0 0 2 t c O 0 3 a k r e v e V e k M i s r o t c e r i D 0 0 0 0 5 5 , 9 0 0 2 y a M 1 0 0 0 0 5 1 , 1 1 0 2 b e F 5 1 0 0 0 0 5 5 , 9 0 0 2 y a M 1 0 0 0 0 5 1 , 1 1 0 2 b e F 5 1 0 0 0 0 5 1 , 1 1 0 2 b e F 5 1 e d a g r e B r e i v a X e d a g r e B r e i v a X s r e t a W e t a K d d o T d i v a D d d o T d i v a D l e n n o s r e p t n e m e g a n a m y e k r e h t O e t a d e s i c r e x e t a e u l a v t e k r a m e h t f o s s e c x e e h t . e . i e t a d e s i c r e x e t a s n o i t p o e h t f o e u l a v c i s n i r t n i e h t s a i d e n m r e t e d s a w e l b a t e v o b a e h t n i n w o h s s a r a e y e h t g n i r u d d e s i c r e x e n e e b e v a h t a h t s n o i t p o e h t f o e u l a v e h T 3 e u l a v r i a f e t a d t n a r g e h t s i e u l a v e h t e s u a c e b e v o b a ) c ( n i n o i t a r e n u m e r s ’ n o s r e p t n e m e g a n a m y e k h c a e f o t r a p s a d e s i n g o c e r e s n e p x e e h t m o r f s r e f f i d d o i r e p e h t g n i r u d d e t n a r g s n o i t p o . t n e m y a P d e s a B - e r a h S 2 B S A A h t i w e c n a d r o c c a f o n i d e t a l u c l a c e u l a v e h T 1 . e c i r p e s i c r e x e e l b a c i l p p a e h t d i a p s n o i t p o g n i s i c r e x e s n o s r e p l l A . s i s a b 1 1 : a n o d e t i m L i e v i t c a r e t n I o b m u J n i s e r a h s y r a n d r o i f o e u s s i e h t n i d e t l u s e r d e s i c r e x e s n o i t p o l l A 2 . n o i t p o e h t f o e c i r p e k i r t s e h t r e v o l l a r e v o 2 1 0 2 e n u J 0 3 d e d n e r a e y l a i c n a n fi e h t r o F s l i a t e d t n a r G : w o e b l d e s i r a m m u s e r a n o i t a r e n u m e r r i e h t f o t r a p s a l e n n o s r e p t n e m e g a n a m y e k o t r a e y e h t g n i r u d d e s p a l d n a d e s i c r e x e s n o i t p o f o e u l a v e h t f o s l i a t e D l e n n o s r e p t n e m e g a n a m y e k o t s n o i t p o f o e u l a v ) g 16 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT h) employment contracts of directors and KMp The employment conditions of non-executive directors are formalised by letters of appointment and KMP are formalised in contracts of employment. The employment contracts stipulate a range of terms and conditions. The Company may terminate an employment contract without cause by providing generally four weeks written notice or making payment in lieu of notice, based on the individual’s annual salary component. The notice period for the Chief Executive Officer is fifty two (52) weeks. A termination payment may or may not be applicable dependent on the particular circumstances. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time. Any options not exercised before or on the date of termination will lapse. The policy of the Company is that service contracts are generally unlimited in term. Unless otherwise stated, service agreements do not provide for pre-determined compensation values or the manner of payment. Compensation is determined in accordance with the general remuneration policy outlined above. The manner of payment is determined on a case by case basis. Mike veverka Contract term: Base salary: Ongoing $360,000 plus incentive bonuses as determined by the Board from year to year, plus superannuation, to be reviewed annually by the Board. Termination payments: Payment on early termination by the Group, other than for gross misconduct, equal to 12 months base salary plus bonus. david Todd Contract term: Base salary: Termination payments: Xavier bergade Contract term: Base salary: Termination payments: Kate waters Contract term: Base salary Termination payments: Ongoing $200,000 plus incentive bonuses as determined by the Board from year to year, plus superannuation, to be reviewed annually by the Board. Payment on early termination by the Group, other than for gross misconduct, equal to six months base salary. Ongoing $200,000 plus incentive bonuses as determined by the Board from year to year, plus superannuation, to be reviewed annually by the Board. Payment on early termination by the Group, other than for gross misconduct, equal to six months base salary. Ongoing $110,000 plus incentive bonuses as determined by the Board from year to year, plus superannuation, to be reviewed annually by the Board. Payment on early termination by the Group, other than for gross misconduct, equal to three months base salary. END OF REMUNERATION REPORT indeMnifyinG offiCers or audiTor During the financial year, the Company paid a premium in respect of a contract insuring directors, secretaries and executive officers of the Company and its controlled entities against a liability incurred as director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer of the Company or any of its controlled entities against a liability incurred as such an officer. No indemnity has been provided to, or insurance paid on behalf of, the auditor of the Group. 17 2011 - 2012Jumbo Interactive Annual Report direCTors’ reporT non-audiT serviCes During the financial year, the following fees for non-audit services were paid or payable to the auditor, BDO, or their related practices: Taxation services Amounts paid or payable to a related practice of BDO - Tax compliance services - tax returns - Other tax advice other services Amounts paid or payable to a related practice of BDO - Accounting advice Total fees for non-audit services Consolidated 2012 $ 39,297 18,689 - 57,986 2011 $ 30,560 7,440 18,500 56,500 On the advice of the Audit Committee, the Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on behalf of the auditor), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. On the advice of the Audit Committee, the Directors are satisfied that the provision of non-audit services by the auditor, as set out above, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed by the Audit Committee to ensure that they do not impact the integrity and objectivity of the auditor; and none of the non-audit services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. proCeedinGs on beHalf of THe CoMpany No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. audiTor’s independenCe deClaraTion A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is attached to this report. This report is made in accordance with a resolution of the Directors. david K barwick Chairman Brisbane 6 September 2012 18 2011 - 2012Jumbo Interactive Annual Report AUDITOR’S INDEPENDENCE DECLARATION audiTor’s independenCe deClaraTion Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 18, 300 Queen St Brisbane QLD 4000, GPO Box 457, Brisbane QLD 4001 Australia The Directors Jumbo Interactive Limited PO Box 824 TOOWONG QLD 4066 Dear Directors, DECLARATION OF INDEPENDENCE BY T J KENDALL TO THE DIRECTORS OF JUMBO INTERACTIVE LIMITED As lead auditor of Jumbo Interactive Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of: • • the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. This declaration is in respect Jumbo Interactive Limited and the entities it controlled during the period. T J Kendall Director BDO Audit Pty Ltd Brisbane, 6 September 2012 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 19 2011 - 2012Jumbo Interactive Annual Report CorporaTe GovernanCe sTaTeMenT CORPORATE GOVERNANCE STATEMENT INTRODUCTION This statement summarises the corporate governance practices that have generally applied in Jumbo Interactive Ltd (the Company) throughout the reporting period except where otherwise stated. It is structured along the same lines as the ASX Corporate Governance Council’s Principles and Council Recommendations, with sections dealing in turn with each of the Council’s corporate governance Principles and addressing the Council’s Recommendations. This statement and the charters, codes and policies referred to herein are posted on the Company’s website www.jumbointeractive.com and shareholders and other interested readers are welcome to refer to them. The Board will keep its corporate governance practices under review. Lay solid foundations for management and oversight 1. The Council’s first Principle states that companies should “establish and disclose the respective roles and responsibilities of board and management”. The Company has adopted a formal Board Charter that sets out the functions reserved to the Board and those delegated to the Chief Executive Officer. This enables the Board to provide strategic guidance for the Company and effective oversight of management. The Company provides new Directors with a letter on appointment which details the terms and conditions of their appointment, provides clear guidance on what input is required by them, and includes materials to assist with induction into the Company. The Company has a similar approach for all senior executives whereby they are provided with a formal letter of appointment setting out their terms of office, duties, rights and responsibilities as well as a detailed job description. The Board has delegated responsibilities and authorities to the CEO and other executives to enable management to conduct the Company’s day to day activities. Matters which exceed defined authority limits require Board approval. The Board is also responsible for the performance of the Company’s executives, which is reviewed against appropriate measures and the performance of the Company as a whole, and through an annual appraisal process. Structure the Board to add value 2. In its second Principle the Council states that companies should “have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties”. The Company’s Board is so structured, and its Directors adequately discharge their responsibilities and duties for the benefit of shareholders. The Board presently comprises only two Non-Executive Directors (David Barwick, Chairman and Bill Lyne, also the Company Secretary) and the Chief Executive Officer (Mike Veverka). Fundamental requirements for Jumbo Directors are a deep understanding of business management and financial markets and such experience, complemented where possible with industry knowledge, are desirable attributes for Board membership. All Board members meet the fundamental requirements, and bring a diverse range of skills and backgrounds. Additionally, Mr Veverka has had a very long involvement in key sections of the Company and brings considerable relevant expertise and knowledge to the Board. The Board formally meets monthly throughout the year, and informally at least every six to eight weeks to address issues that may arise outside of the monthly meetings. The qualifications, experience and relevant expertise of each Board member and their terms in office are set out in the Directors’ Report section of the Company’s Annual Report. All Directors, apart from the CEO, are subject to re-election by rotation at least every three years at the Company’s annual general meeting. The Board’s view is that an independent Director is a Non-Executive Director who does not have a relationship affecting independence on the basis set out in the Council’s guidelines and meets materiality thresholds agreed by the Board as equating to payments to them or related parties of 5% of the Company’s annual revenue or representing 20% of the individual’s business revenue. The Board considers that David Barwick and Bill Lyne both meet this criterion. On the other hand, Mike Veverka is considered to not be independent because he is a substantial shareholder in the Company (i.e. holds more than 5% as defined in Section 9 of the Corporations Act) and is an Executive Officer of the Company. Consequently, the current structure meets the Council’s Recommendation that the majority of the Board should be independent, and the Board also considers the current composition is appropriate given the Company’s and the Directors’ backgrounds and the current and foreseeable structure and size of the Company. The Board has established a Nomination and Remuneration Committee which operates under a Board approved Nomination and Remuneration Committee Charter. In accordance with the Council’s Recommendations the Nomination and Remuneration Committee Charter requires it to have three Non-Executive Directors, with a majority being independent.. However, at the present time it has only two members, being the Non-Executive Directors, David Barwick (as the Chair) and Bill Lyne, both of whom have relevant experience and appropriate technical expertise. The qualifications of the Committee and meeting attendances are set out in the Directors’ Report section of the Company’s annual report. The performance of the Board, its Committees and the Directors is reviewed periodically by the Committee. The Committee’s principal evaluation benchmark is the Company’s financial performance compared to similar organisations and the industry in which it operates; but other than that no formalised annual evaluation process has yet been established for individual Directors given the small size of the Board. Details of Committee meeting attendances are set out in the Directors’ Report section of the Company’s Annual Report. Minutes of all meetings are provided to the Board and its Chair reports to the Board after each Committee meeting. The Company also complies with the Recommendations for Directors in relation to independent professional advice, information 20 2011 - 2012Jumbo Interactive Annual Report CorporaTe GovernanCe sTaTeMenT access and contact with the Company Secretary. The Directors may seek external professional advice at the expense of the Company on matters relating to their role as Directors of the Company, however, they must first request approval from the Chairman, which must not be unreasonably withheld. If withheld then it becomes a matter for the whole Board. The Company Secretary attends all Board and committee meetings, is responsible for monitoring adherence to Board policy and procedures, and is accountable on governance matters. Promote ethical and responsible decision making 3. In Principle 3 the Council states that companies should “actively promote ethical and responsible decision-making”. To this end, the Company has formally adopted a Code of Conduct covering Directors and officers. The Code is based on respect for the law and acting accordingly, dealing with conflicts of interest appropriately, and ethical matters such as acting with integrity, exercising due care and diligence in fulfilling duties, acting in the best interests of the Company and respecting the confidentiality of all sensitive corporate information. If a Director or officer becomes aware of unlawful or unethical behaviour by anyone in the Company then he is obliged under the Code to report such activities to the Chairman. The Board has also recently approved a Whistleblower Policy pursuant to which employees who have genuine suspicions about improper conduct feel safe to report it without fear of reprisal. In addition, Directors recognise the legal obligations relevant to their role and the reasonable expectations of shareholders, other stakeholders and the wider financial community. The Company realises the benefits that can arise to the organisation from diversity in the workplace covering gender, age, ethnicity and cultural background and in various other areas. So, the Board has recently established a Diversity Policy which details the Company’s approach to promoting a corporate culture that embraces diversity when selecting and appointing its employees and Directors. This Diversity Policy outlines requirements for the Board to develop measurable objectives for achieving diversity, and annually assess both the objectives and the progress in achieving these objectives. Accordingly, the Board has developed the following objectives regarding gender diversity and aims to achieve these objectives over the next five years as director and senior positions become vacant and appropriately qualified candidates become available: Women on the Board Women in senior management roles Women employees in the Company Total employees in the Company 2012 % - 25 46 100 No. - 1 32 70 2017 To have at least 1 woman on the Board Maintain the current number of women Maintain the percentage of women in excess of 40% The Company also has a documented Share Trading Policy for Directors, key management personnel and other staff and consultants which was revised in December 2010 and released on the ASX. The policy prohibits Directors and other persons from dealing in the Company’s securities during stated ‘closed’ and ‘prohibited’ periods and whilst in possession of price sensitive information. Otherwise, those persons may generally deal in securities during stated ‘trading windows’ and at other times provided they obtain the prior consent of the Board Chairman (or, in the case of the Chairman himself, from the Chair of the Audit Committee). The Board will ensure that restrictions on dealings in securities are strictly enforced. Safeguard integrity in financial reporting 4. The Council states that companies should “have a structure to independently verify and safeguard the integrity of their financial reporting”. The Company has an established Audit Committee which operates under an Audit Committee Charter. The role of this Committee is to ensure the truthful and factual presentation of the Company’s financial position and to monitor and review on behalf of the Board the effectiveness of the Company’s control environment, reporting practices and responsibilities in the areas of accounting, risk management and compliance. To assist this process, as required by Section 295A of the Corporations Act, the CEO and the Chief Financial Officer must certify to the Board in writing that the Company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and are in accordance with relevant accounting standards. The Committee’s Charter includes information on procedures for the selection and appointment of the external auditor and rotation of the engagement audit partner. The external auditor is required to attend the Company’s annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. In accordance with the Council’s Recommendations the Audit Committee’s Charter requires it to have three Non-Executive Directors, with a majority being independent. However, currently it has only two members, being the Non-Executive Directors, Bill Lyne (as Chair) and David Barwick, both of whom have strong finance and accounting backgrounds, experience and appropriate technical expertise. The qualifications of the Committee and meeting attendances are set out in the Directors’ Report section of the Company’s annual report. Minutes of all Committee meetings are provided to the Board and its Chair also reports to the Board after each Committee meeting. 5. Make timely and balanced disclosure In this Principle the Council states that companies should “promote timely and balanced disclosure of all material matters 21 2011 - 2012Jumbo Interactive Annual Report CorporaTe GovernanCe sTaTeMenT concerning the Company”. The Company is committed to the promotion of investor confidence by ensuring that trading in the Company’s securities takes place in an informed market. Also to assist compliance with continuous disclosure requirements under the ASX Listing Rules, the Company has a Continuous Disclosure Policy in place to ensure that material price sensitive information is identified, reviewed by management and disclosed to the ASX and published on the Company’s website in a timely manner. The CEO is accountable for compliance with this policy. In addition, all changes in Directors’ interests in the Company’s securities are promptly reported to the ASX in compliance with Section 205G of the Corporations Act and the ASX Listing Rules. The Company’s Annual Report is also used to keep investors informed, particularly in its review of operations and activities. Respect the rights of shareholders 6. In Principle 6 the Council states that companies should “respect the rights of shareholders and facilitate the effective exercise of those rights”. Jumbo supports its desire to provide shareholders with adequate information about the Company and its activities through a published Communications Policy. It is also committed to electronic communications through its website, www.jumbointeractive.com, which provides access to all recent ASX announcements, shareholder updates, boardroom broadcasts, notices of meetings, explanatory memoranda, annual reports and key contact details, as well as comprehensive information about the Company and its products and operations. Shareholders and other interested parties may sign up to receive email notification of all ASX releases and other important announcements. Company general meetings also represent a good opportunity for shareholders to meet with, and ask questions of, the Board of the Company and all shareholders are notified of such meetings and encouraged to attend. As part of the Company’s management of investor relations the CEO does, at times, also undertake briefings with investors and analysts to assist their understanding of the Company and its operations, and provide explanatory background and technical information. Recognise and manage risk 7. In this Principle the Council states that companies should “establish a sound system of risk oversight and management and internal control”. The Company maintains documented policies for identifying, assessing and monitoring risk, summarised in a Risk Management Policy. Through the Audit Committee the Company monitors key business and financial risks, taking into consideration their likelihood and impact, and reviews and appraises risk control measures. The CEO and senior executives have operational responsibility for risk management through Board approved guidelines. Some of these measures include formal authority limits for management to operate within, policies on treasury-related risk management, an information technology plan and a business continuity plan. The CEO reports to the Board on any departures from policy or matters of concern that might be seen as or become material business risks. In addition, the CEO and CFO are required to state in writing annually to the Board that to the best of their knowledge the integrity of the Company’s risk management, internal control and compliance systems are sound and such systems are operating efficiently and effectively in all material respects in relation to financial reporting risks. 8. Remunerate fairly and responsibly The Council’s final Principle states that companies should “ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear”. To this end the Board has established during the year a Nomination and Remuneration Committee, as noted above under Principle 2. The Board considers that the Committee members are sufficiently qualified to consider and decide on remuneration matters. However, external professional advice may be sought from experienced consultants where appropriate to assist in their deliberations. Non-Executive Directors’ remuneration is reviewed periodically with reference to comparable businesses and the trend in Directors’ fees generally, with the object of ensuring maximum stakeholder benefit from the retention of an effective Board. Shareholders, at the Company’s AGM, determine any increase in the aggregate fees payable to Non-Executive Directors, but it is those Directors who decide amongst themselves the split of such remuneration. The current maximum annual aggregate remuneration which can be paid to all Non-Executive Directors is $250,000, last approved by shareholders in October 2009. In addition, shareholders have approved share option incentives for the Non-Executive Directors. The CEO’s remuneration is based on a fixed amount and may include short term incentives (calculated on audited figures) linked to the Company’s financial performance and share options provided as long term incentives. The base amount is designed to attract and retain an appropriately qualified and experienced CEO, and any incentive element is to reward him for his contribution towards the Company’s success. Other senior executives are offered remuneration packages necessary to attract and retain appropriately qualified key personnel as well as being commensurate with the skill and attention required to manage an organisation of the size and scope of the Jumbo Group as it is today and taking into account its plans and forecasts into the future. In addition, the Company has an Employee Option Plan in place and from time to time has granted options to deserving staff as a reward for performance. However, the Board prohibits transactions by executives which might limit the economic risk of participating in unvested entitlements under any equity- based remuneration scheme. Further information about the Company’s Remuneration Policy, along with details of all emoluments of Directors and key management personnel can be found in the Remuneration Report section of the Directors’ Report in the Company’s Annual Report. There are no separate retirement benefits for Non-Executive Directors, other than statutory superannuation. 22 2011 - 2012Jumbo Interactive Annual Report ConsolidaTed sTaTeMenT of CoMpreHensive inCoMe Jumbo interactive limited and its Controlled subsidiaries ConsolidaTed sTaTeMenT of CoMpreHensive inCoMe for the year ended 30 June 2012 Revenue from continuing operations Cost of sales Gross profit Other revenue/income Distribution expenses Marketing costs Occupancy expenses Administrative expenses Finance costs Profit/(loss) before income tax expense Income tax expense Profit/(loss) after income tax expense from continuing operations Profit/(loss) from discontinued operations Profit/(loss) for the year attributable to the owners of Jumbo Interactive Limited other comprehensive income Foreign currency translation differences Total comprehensive income for the year attributable to the owners of Jumbo Interactive Limited earnings per share (cents per share) from continuing and discontinued operations Basic earnings per share (cents per share) Diluted earnings per share (cents per share) from continuing operations Basic earnings per share (cents per share) Diluted earnings per share (cents per share) from discontinued operations Basic earnings/(loss) per share (cents per share) Diluted earnings/(loss) per share (cents per share) note Consolidated Group 2012 $ 2011 $ 24,087,742 18,118,334 (4,215,602) (3,538,959) 19,872,140 14,579,375 897,294 (29,367) (1,344,409) (715,173) 474,179 (44,347) (742,913) (707,563) (9,518,739) (7,554,346) (107,677) 9,054,069 (2,577,553) 6,476,516 267,009 (150,249) 5,854,136 (921,285) 4,932,851 (98,396) 6,743,525 4,834,455 19,319 27,087 6,762,844 4,861,542 16.7 16.6 16.0 15.9 0.7 0.7 12.1 12.1 12.3 12.3 (0.2) (0.2) 3 4 3 4 5 6 10 10 10 10 10 10 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 23 2011 - 2012Jumbo Interactive Annual Report ConsolidaTed sTaTeMenT of finanCial posiTion Jumbo interactive limited and its Controlled subsidiaries ConsolidaTed sTaTeMenT of finanCial posiTion as at 30 June 2012 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Current tax assets Inventories TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Accumulated losses Reserves TOTAL EQUITY note Consolidated Group 11 12 19 13 15 16 19 17 18 20 18 20 19 21 2012 $ 21,686,797 401,718 383,245 98,625 22,570,385 360,372 6,398,707 394,334 7,153,413 29,723,798 10,354,686 194,680 334,684 10,884,050 250,000 103,708 402,331 756,039 11,640,089 18,083,709 2011 $ 11,770,674 276,647 576,016 39,894 12,663,231 460,368 5,708,356 696,586 6,865,310 19,528,541 6,949,523 811,476 299,419 8,060,418 1,069,680 68,114 248,355 1,386,149 9,446,567 10,081,974 28,876,572 (11,269,145) 476,282 18,083,709 27,113,586 (17,398,827) 367,215 10,081,974 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 24 2011 - 2012Jumbo Interactive Annual Report ConsolidaTed sTaTeMenT of CHanGes in eQuiTy Jumbo interactive limited and its Controlled subsidiaries ConsolidaTed sTaTeMenT of CHanGes in eQuiTy for the year ended 30 June 2012 Contributed equity accumulated losses share- based payments reserve foreign currency translation reserve Total equity ConsolidaTed Group $ $ $ $ $ Balance at 1 July 2010 28,156,064 (22,036,016) 330,111 (69,834) 6,380,325 Total transactions with owners in their capacity as owners (1,042,478) (197,266) 79,851 balance at 30 June 2011 27,113,586 (17,398,827) 409,962 (42,747) 10,081,974 Total comprehensive income for the year Profit/(loss) for the year Other comprehensive income Foreign currency translation differences Total comprehensive income for the year Transactions with owners in their capacity as owners Issue of shares Buy back of shares Dividends paid Share-based payments Total comprehensive income for the year Profit/(loss) for the year Other comprehensive income Foreign currency translation differences Total comprehensive income for the year Transactions with owners in their capacity as owners Issue of shares Buy back of shares Dividends paid Share-based payments - - - 4,834,455 - 4,834,455 30,944 (1,073,422) - - (197,266) - 79,851 - - - 6,743,525 - 6,743,525 1,854,733 (91,747) - - (613,843) - 89,748 - - - - - - - - - - - - - - - - - 4,834,455 27,087 27,087 27,087 4,861,542 - - - - - 30,944 (1,073,422) (197,266) 79,851 (1,159,893) - 6,743,525 19,319 19,319 19,319 6,762,844 - - - - - 1,854,733 (91,747) (613,843) 89,748 1,238,891 Total transactions with owners in their capacity as owners 1,762,986 (613,843) 89,748 balance at 30 June 2012 28,876,572 (11,269,145) 499,710 (23,428) 18,083,709 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 25 2011 - 2012Jumbo Interactive Annual Report ConsolidaTed sTaTeMenT of CasH flows Jumbo interactive limited and its Controlled subsidiaries ConsolidaTed sTaTeMenT of CasH flows for the year ended 30 June 2012 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest and other costs of finance paid Income tax received Income tax paid note Consolidated Group 2011 $ 2012 $ 24,914,449 19,990,087 (10,978,560) (13,506,299) 776,414 (107,677) 1,055,794 (2,717,340) 415,247 (183,154) 405,398 (593,826) Net cash inflows/(outflows) from operating activities 25 (a) 12,943,080 6,527,453 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for intangibles Payment for loss of control of subsidiary Proceeds from sale of property, plant and equipment (67,811) (250,729) (2,696,152) (2,067,960) - 1,125 (374,656) 2,043 Net cash inflows/(outflows) from investing activities (2,762,838) (2,691,302) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Payment for buyback of shares Proceeds of borrowings Repayment of borrowings Dividends paid Net cash inflows/(outflows) from financing activities Net increase/(decrease) in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of year 21 21 1,707,005 - (91,747) (1,073,422) - (1,436,476) (466,115) (287,333) 181,561 (486,112) (166,322) (1,544,295) 9,892,909 2,291,856 23,214 17,160 11,770,674 9,461,658 Cash and cash equivalents at end of year 11 21,686,797 11,770,674 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 26 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs Jumbo interactive limited and its Controlled subsidiaries noTes To THe finanCial sTaTeMenTs for the year ended 30 June 2012 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Jumbo Interactive Ltd (the Company) for the year ended 30 June 2012 were authorised in accordance with a resolution of the Directors on 6 September 2012 and cover the consolidated entity consisting of Jumbo Interactive Ltd its subsidiaries (the Group) as required by the Corporations Act 2001. Separate financial statements for Jumbo Interactive Limited as an individual entity are no longer presented as a consequence of a change to the Corporations Act 2001. However, limited financial information for the Company as an individual entity is included in Note 2: Parent Entity Information. The financial statements are presented in the Australian currency. Jumbo Interactive Limited is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX: JIN). The Company is a for-profit entity for the purposes of preparing these financial statements. basis of preparaTion The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs except for where applicable, available-for-sale financial assets and held-for-trading investments that have been measured at fair value. suMMary of siGnifiCanT aCCounTinG poliCies The following significant accounting policies have been adopted in the preparation and presentation of the financial statements: (a) basis of Consolidation Subsidiaries The consolidated financial statements comprise the financial statements of Jumbo Interactive Limited and its subsidiaries at 30 June each year. Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Potential voting rights that are currently exercisable or convertible are considered when assessing control. Consolidated financial statements include all subsidiaries from the date that control commences until the date that control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intragroup transactions have been eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. (b) business Combinations The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Where equity instruments are issued, the value of the equity instruments is their published market price as at the date of exchange unless, in rare circumstances it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair 27 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in business combinations are, with limited exceptions, measured initially at their fair values at acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition- date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill [refer Note 1(n)]. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of the cash consideration is deferred, the amounts payable in future are discounted to present value at the date of exchange using the entity’s incremental borrowing rate as the discount rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. (c) foreign Currency Translation The functional and presentation currency of Jumbo Interactive Limited and its Australian subsidiaries is Australian dollars (AU$). Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the end of the reporting period. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well as from restating foreign currency denominated monetary assets and liabilities, are recognised in profit or loss, except when they are deferred in other comprehensive income where they relate to differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined. The functional currency of the overseas subsidiaries is measured using the currency of the primary economic environment in which that entity operates. At the end of the reporting period, the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of the Company at the closing rate at the end of the reporting period and income and expenses are translated at the average exchange rates for the year. All resulting exchange differences are recognised in other comprehensive income as a separate component of equity (foreign currency translation reserve). On disposal of a foreign entity, the cumulative exchange differences recognised in foreign currency translation reserves relating to that particular foreign operation is recognised in profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. (d) revenue recognition Revenue is recognised at the fair value of consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Following a change in the illustrative examples to AASB 118 Revenue in relation to guidance in determining whether an entity is acting as an Agent or as a Principal which applies to accounting periods beginning on or after 1 January 2011, the Company now reports revenue on a basis where it considers that it acts more as an Agent than as a Principal for the sale of lottery tickets. The 2011 comparatives have been restated accordingly. The following specific recognition criteria must also be met before revenue is recognised: Sale of Goods Revenue from sale of goods is recognised when the significant risks and rewards of ownership have passed to the buyer and can be reliably measured. Risks and rewards are considered passed to buyer when goods have been delivered to the customer. Rendering of Services Revenue from rendering services is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to labour hours incurred to date as a percentage of estimated total labour hours for each contract. 28 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses recognised that are recoverable. Interest Revenue is recognised as interest accrues using the effective interest method. Dividends Dividends are recognised as revenue when the Group’s right to receive payment is established. (e) income Tax The income tax expense for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit. Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, associates and interests in joint ventures where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances relating to amounts recognised directly in other comprehensive income are also recognised directly in other comprehensive income. Jumbo Interactive Limited and its wholly owned subsidiaries have implemented the tax consolidation legislation for the whole of the financial year. The Group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 1 July 2006. Jumbo Interactive Limited is the head entity in the tax consolidated group. The separate taxpayer within a group approach has been used to allocate current income tax expense and deferred tax expense to wholly-owned subsidiaries that form part of the tax consolidated group. Jumbo Interactive Limited has assumed all the current tax liabilities and the deferred tax assets arising from unused tax losses for the tax consolidated group via intercompany receivables and payables because a tax funding arrangement has been in place for the whole financial year. The amounts receivable/payable under tax funding arrangements are due upon notification by the head entity, which is issued soon after the end of each financial year. Interim funding notices may also be issued by the head entity to its wholly owned subsidiaries in order for the head entity to be able to pay tax instalments. (f) impairment of assets At the end of each reporting period the Group assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in profit or loss where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of 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. Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs. (g) Cash and Cash equivalents For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank, deposits held at call with financial institutions, other short term, highly liquid investments with maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. 29 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs (h) Trade receivables Trade receivables are recognised at original invoice amounts less an allowance for uncollectible amounts, and have repayment terms between seven and 30 days. Collectibility of trade receivables is assessed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance is made for doubtful debts where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Objective evidence of impairment includes financial difficulties of the debtor, default payments or debts more than 90 days overdue. On confirmation that the trade receivable will not be collectible the gross carrying value of the asset is written off against the associated provision. From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and are not, in the view of the Directors, sufficient to require the derecognition of the original instrument. (i) inventories Raw Materials, Work in Progress and Finished Goods Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials, direct labour and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on the basis of normal operating capacity. Costs are assigned to inventories using the first-in-first-out basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses. (j) investments and other financial assets All investments and other financial assets (except for those at fair value through the profit and loss) are initially stated at the fair value of consideration given plus transaction costs. Purchases and sales of investments are recognised on trade date which is the date on which the Group commits to purchase or sell the asset. Accounting policies for each category of investments and other financial assets subsequent to initial recognition are set out below. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, where they are expected to mature within 12 months after the end of the reporting period. Impairments Impairment losses are measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the asset’s original effective interest rate. Impairment losses are recognised in profit or loss. (k) fair values Fair values may be used for financial asset and liability measurement as well as for sundry disclosures. Fair values for financial instruments traded in active markets are based on quoted market prices at the end of the reporting period. The quoted market price for financial assets is the current bid price. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. (l) property, plant and equipment Property, plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, less depreciation and any impairments. Depreciation is calculated on a straight-line basis over the estimated useful life, or in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term, as follows: — Plant and equipment - two to five years — Leasehold improvements - up to five years The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. 30 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset’s carrying amount and are included in profit or loss in the year that the item is derecognised. (m) leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases and capitalised at inception of the lease at the fair value of the leased property, or if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss over the lease period. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Payments made under operating leases (net of incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. When assets are leased out under finance leases, the present value of the lease payments is recognised as a lease receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the lease term using the net investment method which reflects a constant periodic rate of return. Lease income from operating leases is recognised in profit or loss on a straight-line basis over the lease term. Initial direct costs incurred in negotiating operating leases are added to the carrying value of the leased asset and recognised as an expense over the lease term on the same bases as the lease income. (n) intangible assets Goodwill Goodwill represents the excess of the cost of the business combination over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is not amortised but is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Impairment losses on goodwill cannot be reversed. Intellectual Property Acquired intellectual property is stated at cost, and is measured at cost less any accumulated impairment losses. Intellectual property is considered to have an indefinite useful life and is not amortised [refer Note 16(b) for reasons for the indefinite useful life]. The carrying value of intellectual property is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses are recognised in profit or loss. Any reversal of impairment losses of intellectual property is recognised in profit or loss. Website Developments Costs Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a straight-line basis matched to the future economic benefits over the useful life of the project of three years. Domain Names Acquired domain names are stated at cost and are considered to have indefinite useful lives and are not amortised [refer Note 16(b) for reasons for the indefinite useful life]. The useful life is assessed annually to determine whether events or circumstances continue to support an indefinite useful life assessment. The carrying value of domain names is tested semi- annually at each reporting date for impairment. Customer Acquisition Costs Expenditure on customer acquisition is recognised at cost of acquisition. Customer acquisition costs have a finite life and are amortised on a straight-line basis matched to the future economic benefits over their useful life of one and a half years. Customer acquisition costs are tested semi-annually at each reporting date for impairment and carried at cost less accumulated amortisation and any impairment losses. 31 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs Software Items of computer software which are not integral to the computer hardware owned by the Group are classified as intangible assets with a finite life. Computer software is amortised on a straight line basis over the expected useful life of the software. These lives range from one and a half to two and a half years. (o) Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Group prior to the year end and which are unpaid. These amounts are unsecured and have seven to 30 day payment terms. (p) interest-bearing liabilities All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the loans and borrowings using the effective interest method. (q) borrowing Costs Borrowing costs incurred for the construction of a qualifying asset are capitalised during the period of time that it is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed when incurred. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate on the Group’s borrowings outstanding during the year, being 5.83% (2011: 7.24%). (r) provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where the effect of the time value of money is material, 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. (s) Employee Benefits Wages and Salaries, Annual Leave and Sick Leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the end of the reporting period are recognised in respect of employees’ services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable. Long Service Leave Liabilities for long service leave are recognised as part of the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees to the end of the reporting period. Consideration is given to expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted using national government bond rates at the end of the reporting period with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Profit-sharing and Bonus Plans The Group recognises an expense and a liability for bonuses and profit-sharing based on when the entity is contractually obliged to make such payments or where there is past practice that has created a constructive obligation. Retirement Benefit Obligations Employees have defined contribution superannuation funds. Contributions are recognised as expenses as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. (t) Contributed equity Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. 32 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs (u) dividends Provision is made for dividends declared, and no longer at the discretion of the Group, on or before the end of the reporting period but not distributed at the end of the reporting period. (v) share-based payments The Group may provide benefits to employees (including Directors) or consultants of the Group in the form of share- based payment transactions, whereby services may be undertaken in exchange for shares or options over shares (“equity- settled transactions”). The Jumbo Interactive Limited Employee Share Option Plan (ESOP) provides these benefits to Directors and senior executives. The fair value of options granted to Directors, employees and consultants is recognised as an expense with a corresponding increase in equity (share option reserve). The fair value is measured at grant date and recognised over the period during which the employees or consultants become unconditionally entitled to the options. Fair value is determined by an independent valuer using the Black-Scholes, Bi-nomial, and Monte Carlo Simulation option pricing models as appropriate. In determining fair value, no account is taken of any performance conditions other than those related to the share price of Jumbo Interactive Limited (“market conditions”). The cumulative expense recognised between grant date and vesting date is adjusted to reflect the Directors’ best estimate of the number of options that will ultimately vest because of internal conditions of the options, such as the employees having to remain with the Group until vesting date, or such that employees are required to meet internal sales targets. No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition was not met. Where the terms of options are modified, the expense continues to be recognised from grant date to vesting date as if the terms had never been changed. In addition, at the date of the modification, a further expense is recognised for any increase in fair value of the transaction as a result of the change. Where options are cancelled, they are treated as if vesting occurred on cancellation and any unrecognised expenses are taken immediately to profit or loss. However, if new options are substituted for the cancelled options and designated as a replacement on grant date, the combined impact of the cancellation and replacement options are treated as if they were a modification. (w) earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to members of the Company, adjusted for the after- tax effect of preference dividends on preference shares classified as equity, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. (x) Goods and services Tax (GsT) Revenues, expenses and assets are recognised net of GST except where GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 33 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs (y) financial Guarantees Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and at the end of each subsequent reporting period at the higher of the amount determined under AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate. (z) Critical accounting estimates and Judgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. i. Impairment of Assets Under AASB 136: Impairment of Assets, the recoverable amount of an asset is determined as the higher of fair value less costs to sell, and value in use. In determining value in use, projected future cash flows are discounted using a risk adjusted pre-tax discount rate and impairment is assessed for the individual asset or at the ‘cash generating unit’ level. A ‘cash generating unit’ is determined as the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Refer to Note 16(c) for details. Goodwill No impairment has been recognised in respect of goodwill at the end of the reporting period. Domain names No impairment has been recognised in respect of domain names at the end of the reporting period. Intellectual property No impairment has been recognised in respect of intellectual property at the end of the reporting period. ii. Recognition of the DTA on tax losses Tax losses have been recognised as a DTA as management expect future profits to be earned based on profit and cash flow forecasts. (aa) Changes in accounting policies (i) AASB 118: Revenue recognition The Group changed its accounting policy relating to the recognition of revenues for the financial year ending 30 June 2012. Revenues were previously recognised on a gross inflow basis and are now recognised on a net inflow basis. This change has been implemented as management is of the opinion that, after judgment and consideration of all the relevant facts and circumstances, it acts more as an agent then as a principal associated with the sale of lottery tickets and rendering of related services. The aggregate effect of the change in accounting policy on the annual financial statements for the year ended 30 June 2012 is as follows: ConsolidaTed Group statement of comprehensive income 2012 Revenue – sale of goods Revenue – rendering of services Total revenue from continuing operations Cost of sales – sales of goods Cost of sales – rendering of services Total cost of sales Gross profit 34 previous policy adjustment revised policy $ $ $ 100,256,769 - 100,256,769 (80,384,629) - (80,384,629) 19,872,140 (98,305,375) 22,136,348 (76,169,027) 79,205,183 (3,036,156) 76,169,027 - 1,951,394 22,136,348 24,087,742 (1,179,446) (3,036,156) (4,215,602) 19,872,140 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs previous policy adjustment revised policy $ $ $ 75,946,130 - 75,946,130 (61,366,755) - (61,366,755) 14,579,375 (74,362,482) 16,534,686 (57,827,796) 60,308,656 (2,480,860) 57,827,796 - 1,583,648 16,534,686 18,118,334 (1,058,099) (2,480,860) (3,538,959) 14,579,375 2011 Revenue – sale of goods Revenue – rendering of services Total revenue from continuing operations Cost of sales – sales of goods Cost of sales – rendering of services Total cost of sales Gross profit This changed accounting policy has no effect on profit, the Consolidated Statement of Financial Position, or Consolidated Statement of Changes in Equity. (ii) Adoption of AASBs and Improvements to AASBs 2011 – AASB 1054 and AASB 2011-1 The AASB has issued AASB 1054 Australian Additional Disclosures and 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project, and made several minor amendments to a number of AASBs. These standards eliminate a large portion of the differences between the Australian and New Zealand accounting standards and IFRS and retain only additional disclosures considered necessary. These changes also simplify some current disclosures for Australian entities and remove others. (bb) standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group At the date of authorization of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements. (i) AASB 9 Financial Instruments (effective from 1 January 2015) The AASB aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2015. Further chapters dealing with impairment methodology and hedge accounting are still being developed. The Group currently does not have any financial assets and liabilities measured at fair value through profit and loss. There will therefore be no likely material impact on the financial statements when these amendments to AASB 9 are first adopted. (ii) Consolidation standards A package of consolidation standards are effective for annual periods beginning or after 1 January 2013. Information on these new standards is presented below. The Group’s management have yet to assess the impact of these new and revised standards on the Group’s consolidated financial statements. AASB 10 Consolidated Financial Statements (AASB 10) AASB 10 supersedes the consolidation requirements in AASB 127 Consolidated and Separate Financial Statements (AASB 127) and Interpretation 112 Consolidation – Special Purpose Entities. It revised the definition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any non-controlling interest and changes in control remain the same. AASB 11 Joint Arrangements (AASB 11) AASB 11 supersedes AASB 131 Interest in Joint Ventures (AASB 131). It aligns more closely the accounting by the 35 2011 - 2012Jumbo Interactive Annual Report  noTes To THe finanCial sTaTeMenTs investors with their rights and obligations relating to the joint arrangements. It introduces two accounting categories (joint operations and joint ventures) whose applicability is determined based on the substance of the joint arrangements. In addition, AASB 131’s option of using proportionate consolidation for joint ventures has been eliminated. AASB 11 now requires the use of the equity accounting method for joint ventures, which is currently used for investments in associates. AASB 12 Disclosure of Interest in Other Entities (AASB 12) AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities. Consequential amendments to AASB 127 Separate Financial Statements (AASB 127) and AASB 128 Investments in Associates and Joint Ventures (AASB 128) AASB 127 Consolidated and Separate Financial Statements was amended to AASB 127 Separate Financial Statements which now deals only with separate financial statements. AASB 128 brings investments in joint ventures into its scope, however AASB 128’s equity accounting methodology remains unchanged. (iii) AASB 13 Fair Value Measure (AASB 13) AASB 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods on or after 1 January 2013. The Group’s management have yet to assess the impact of this new standard. (iv) AASB 2011-9 Amendments to Australian Accounting Standards Presentation of Items of Other Comprehensive Income (AASB 101 Amendments) The AASB 101 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is applicable for annual reporting periods beginning on or after 1 July 2012. The Group’s management does not expect this will change the presentation of items in other comprehensive income; in any event, it will not affect the measurement or recognition of such items. (v) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (AASB 124 Amendments) AASB 2011-4 makes amendments to AASB 124 Related Party Disclosures to remove individual key management personnel disclosure requirements, to achieve consistency with the international equivalent (which includes requirements to disclose aggregate (rather than individual) amounts of KMP compensation), and remove duplication with the Corporations Act 2011. The amendments are applicable for annual periods on or after 1 July 2013. The Group’s management have yet to assess the impact of these amendments. 36 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 2: PARENT ENTITY INFORMATION The Corporations Act 2001 requirement to prepare parent entity financial statements where consolidated financial statements are prepared has been removed and replaced by regulation 2M.3.01 which requires the following limited disclosure in regards to the parent entity (Jumbo Interactive Limited). The consolidated financial statements incorporate the assets, liabilities and results of the parent entity in accordance with the accounting policy described in Note 1 (a). parent entity Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Share based payment reserve Retained earnings/(accumulated losses) Total shareholders’ equity Profit/(loss) for the year Total comprehensive income for the year Guarantees 2012 $ 436,148 5,324,886 5,761,034 961,252 1,460,736 2,421,988 3,339,046 28,876,572 499,710 2011 $ 36,730 4,077,708 4,114,438 674,856 339,517 1,014,373 3,100,065 27,113,586 409,962 (26,037,236) (24,423,483) 3,339,046 (999,905) (999,905) 3,100,065 200,746 200,746 The parent entity has provided guarantees to third parties in relation to the obligations of controlled entities in respect to banking facilities. The guarantees are for the terms of the facilities per Note 18 : Borrowings, and are ongoing. During the financial year, the parent entity provided a guarantee in favour of the Lotteries Commission of South Australia in respect of payment obligations of a subsidiary company in terms of the Agent agreement between its subsidiary and the favouree. Contractual commitments There were no contractual commitments for the acquisition of property, plant and equipment entered into by the parent entity at 30 June 2012 (2011: $0). Contingent liabilities The parent entity has no contingent liabilities other than the guarantees referred to above. 37 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 3: REVENUE AND OTHER INCOME From continuing operations Sales revenue — Revenue from sale of goods — Revenue from rendering services Revenue from continuing operations Other revenue/income — Interest - Cash — Other income - Foreign exchange gains - Bad and doubtful debt recovered - Other From discontinued operations (note 6) — Revenue from sale of goods — Interest - Cash — Other Income - Reversal of impairment of intangible assets NOTE 4: PROFIT/(LOSS) FOR THE YEAR Profit/ (loss) before income tax from continuing operations includes the following specific expenses: Cost of sales — Sale of goods — Rendering of services Finance costs — Interest on financial liabilities not at fair value through profit and loss — Fees arising from financial liabilities not at fair value through profit and loss Depreciation of non-current assets1 — Plant and equipment Amortisation of non-current assets1 — Leasehold improvements — Intangibles Other expenses — Operating lease rentals – minimum lease payments — Employee benefits expense1 — Defined contribution superannuation expense1 — Loss on derecognition of intangible assets1 1 included in administration expense 38 Consolidated Group 2012 $ 2011 $ 1,951,394 22,136,348 24,087,742 1,583,648 16,534,686 18,118,334 776,414 413,328 37,248 37,090 46,542 897,294 24,985,036 - - - - 18,036 - 42,815 474,179 18,592,513 4,020,877 1,919 1,258,354 5,281,150 Consolidated Group 2012 $ 2011 $ 1,179,446 3,036,156 1,058,099 2,480,860 65,311 42,366 99,341 67,341 2,005,801 715,173 3,550,413 308,796 - 103,518 46,731 21,092 64,628 1,394,764 707,563 3,009,390 270,018 73,151 2011 - 2012Jumbo Interactive Annual Report NOTE 5: INCOME TAX EXPENSE note Consolidated Group noTes To THe finanCial sTaTeMenTs The components of tax expense comprise: a. — Current tax — Deferred tax arising from origination and reversal of temporary differences Reconciliation: — Under/over provision deferred tax prior years — Under/over provision tax prior years — Under/over provision overseas tax prior years Total income tax expense/(benefit) in profit and loss b. — Tax at the Australian tax rate of 30% (2011: 30%) — Income tax effect of overseas tax rates — R&D expense — Share options expensed during year — Impairment losses/(reversal) on intangible assets — Other — Under/over provision for income tax in prior year — Under/over provision for overseas income tax in prior year — R&D concession/credit Total income tax expense/(benefit) in profit and loss Income tax expense/(benefit) attributable to continuing operations Income tax expense/(benefit) attributable to discontinued operations Total income tax expense/(benefit) in profit and loss NOTE 6: DISCONTINUED OPERATIONS i. Description 2012 $ 1,875,741 456,228 19 (61,251) - 39,826 2,310,544 2,716,220 - 588,765 26,924 - (276,172) - 39,826 (785,019) 2,310,544 2,577,553 (267,009) 2,310,544 2011 $ (325,742) 443,797 - (300,942) (123,524) (306,411) 1,358,413 (18,172) 234,159 23,955 (377,506) (406,365) (300,942) (123,524) (696,429) (306,411) 921,285 (1,227,696) (306,411) The Star System Solutions Pty Ltd software business was sold on 12 November 2010. The Manaccom software publishing and distribution business was placed into voluntary administration on 31 January 2011 due to adverse market conditions in the over the counter software security market. As at 31 January 2011 the entity ceased to be controlled by Jumbo Interactive Limited and became subject to the control of the appointed liquidators. As a result, Jumbo has treated the loss of control as a disposal of a subsidiary in accordance with AASB 127. Both the Star System Solutions business and Manaccom Pty Ltd formed the Software Publishing and Distribution operating segment which consequently ceased operations as a result of the above in the 2011 financial year. ii. Financial performance and cash flow information Financial information relating to the discontinued operations for the period to the date of disposal and for the year ended 30 June 2012 is set out below. Further information is set out in Note 24: Segment Reporting. 2012 Revenue (note 3) Expenses Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) attributable to members of the parent entity star system solutions pty ltd $ - - - - - Manaccom pty ltd $ - - - 267,009 267,009 Total $ - - - 267,009 267,009 39 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 6: DISCONTINUED OPERATIONS (cont’d) star system solutions pty ltd $ Manaccom pty ltd $ Profit/(loss) attributable to owners of the parent entity relates to: Profit/(loss) from continuing operations Profit/(loss) from discontinued operations Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash generated by the discontinued operations - - - - 2011 Revenue (note 3) Expenses Profit/(loss) before tax from discontinued operations Income tax benefit Profit/(loss) after income tax from discontinued operations Loss on sale of business Loss on loss of control of subsidiary in voluntary administration Profit/(loss) on sale before income tax expense Income tax expense Profit/(loss) on sale after income tax star system solutions pty ltd $ 1,674,388 (516,508) 1,157,880 581,766 1,739,646 (6,007) - (6,007) - (6,007) - - - - Manaccom pty ltd $ 3,606,762 (5,445,083) (1,838,321) 645,930 (1,192,391) - (639,644) (639,644) - (639,644) Total $ 6,476,516 267,009 6,743,525 - - - - Total $ 5,281,150 (5,961,591) (680,441) 1,227,696 547,255 (6,007) (639,644) (645,651) - (645,651) Total profit/(loss) after income tax from discontinued operations 1,733,639 (1,832,035) (98,396) Profit/(loss) attributable to owners of the parent entity relates to: Profit/(loss) from continuing operations Profit/(loss) from discontinued operations 4,932,851 (98,396) 4,834,455 Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities (includes an outflow of $374,656 from the loss of control of the subsidiary in voluntary administration) Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash generated by the discontinued operations (31,065) (690,978) (722,043) 9,882 (114,350) 364,634 (71,368) 374,516 (185,718) (135,533) (397,712) (533,245) 40 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 6: DISCONTINUED OPERATIONS (cont’d) iii. Details of the sale of the Star business Sale consideration Consisting of: Cash Consideration offset against outstanding deferred consideration payable as at 15 December 2010 under the 14 November 2008 purchase agreement Total disposal consideration Cash consideration received and cash inflow Carrying amount of net assets sold Loss on sale before income tax Income tax benefit Loss on sale after income tax The carrying amounts of the assets and liabilities as at the date of sale (12 November 2010) were: Property, plant and equipment Intellectual property Total assets Total liabilities Net Assets iv. Details of the voluntary administration of Manaccom Pty Ltd Cash paid to administrator on loss of control Total cash lost on loss of control Carrying amount of net assets over which control was lost Loss on loss of control of subsidiary before income tax Income tax benefit Loss in loss of control of subsidiary after income tax 2011 $ 1,529,790 - 1,529,790 1,529,790 - (1,535,797) (6,007) - (6,007) 12 november 2010 $ 16,007 1,519,790 1,535,797 - 1,535,797 2011 $ (374,656) (374,656) (264,988) (639,644) - (639,644) The carrying amounts of the assets and liabilities as at the date of voluntary administration (31 January 2011) were: Property, plant and equipment Intangible assets Deferred tax asset Trade and other receivables Inventories Total assets Trade and other creditors Borrowings Provision for employee benefits 31 January 2011 $ 377,623 31,350 273,831 640,217 789,903 2,112,924 1,501,860 119,298 201,778 41 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 6: DISCONTINUED OPERATIONS (cont’d) Other provisions Total liabilities Net assets NOTE 7: KEY MANAGEMENT PERSONNEL (KMP) (a) Key management personnel compensation Short term employee benefits Post employment benefits Other long term benefits Share based payments 31 January 2011 $ 25,000 1,847,936 264,988 Consolidated Group 2012 $ 1,358,601 119,250 20,038 73,059 1,570,948 2011 $ 1,006,511 98,964 15,549 52,881 1,173,905 Further information regarding the identity of key management personnel and their compensation can be found in the Audited Remuneration Report contained in the Directors’ Report. (b) equity instruments Options Holdings Details of options held directly, indirectly or beneficially by key management personnel and their related parties are as follows: 30 June 2012 David Barwick Mike Veverka Bill Lyne David Todd Xavier Bergade Kate Waters balance at beginning of year Granted as remun- eration during the year exercised during the year other changes during the year balance at end of year vested at end of year vested and exerci- sable vested and unexerci- sable 550,000 550,000 550,000 700,000 700,000 150,000 3,200,000 - - - - - - - (550,000) (160,000) (550,000) (700,000) (550,000) - (2,510,000) - - - - - - - - 390,000 - - 150,000 150,000 690,000 - 390,000 - - 150,000 150,000 690,000 - 390,000 - - 150,000 150,000 690,000 - - - - - - 42 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 7: KEY MANAGEMENT PERSONNEL (KMP) (cont’d) 30 June 2011 David Barwick Mike Veverka Bill Lyne Bonita Boezeman AO1 David Todd Xavier Bergade balance at begin- ning of year 550,000 550,000 250,000 - 550,000 550,000 2,450,000 Granted as remu- neration during the year - - 300,000 550,000 150,000 150,000 1,150,000 exercised during the year - - - - - - - other changes during the year - - - (550,000) - - (550,000) balance at end of year vested at end of year vested and exercis- eable vested and unexerci- sable 550,000 550,000 550,000 - 700,000 700,000 3,050,000 - - - - - - - - - - - - - - - - - - - - - 1 Bonita Boezeman AO was appointed as a Director on 28 July 2010 and ceased on 31 May 2011. Shareholdings Details of ordinary shares held directly, indirectly or beneficially by key management personnel and their related parties are as follows: 30 June 2012 David Barwick Mike Veverka Bill Lyne David Todd Xavier Bergade Kate Waters balance at beginning of year Granted as remuneration during the year 101,345 9,398,278 - 10,135 300,000 - 9,809,758 - - - - - - - issued on exercise of options during the year 550,000 160,000 550,000 700,000 550,000 - other changes during the year1 balance at end of year (651,345) (360,738) (550,000) (690,135) (550,000) - - 9,197,540 - 20,000 300,000 - 2,510,000 (2,802,218) 9,517,540 1 includes on-market transactions and acquisitions under the dividend reinvestment plan. 30 June 2011 balance at beginning of year Granted as remuneration during the year David Barwick Mike Veverka Bill Lyne Bonita Boezeman AO2 David Todd Xavier Bergade 100,000 9,286,057 - 5,000 10,000 500,000 9,901,057 - - - - - - - issued on exercise of options during the year - - - - - - - other changes during the year1 balance at end of year 1,345 112,221 - (3,231) 135 (200,000) (89,530) 101,345 9,398,278 - 1,769 10,135 300,000 9,811,527 1 includes on-market transactions and acquisitions under the dividend reinvestment plan. 2 Bonita Boezeman AO was appointed as a Director on 28 July 2010 and ceased on 31 May 2011. 43 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 7: KEY MANAGEMENT PERSONNEL (KMP) (cont’d) (c) other related party transactions Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Elegant Properties Pty Ltd is solely owned by Mr Mike Rosch, the father of Mr Mike Veverka, the CEO and executive director of the Company. Elegant Properties Pty Ltd rented an office from the Group and was engaged as a consultant during the financial year. - - Office rent received Consultancy fees paid Mrs Julie Rosch, the mother of Mr Mike Veverka, the CEO and Executive Director of the Company, is engaged as a full time employee within the Group. NOTE 8: AUDITOR’S REMUNERATION audit services Amounts paid/payable to BDO for audit or review of the financial statements for the entity or any entity in the Group Taxation services Amounts paid/payable to a related practice of BDO for taxation services for the entity or any entity in the Group: - review of income tax return - other taxation advice other services Amounts paid/payable to a related practice of BDO for other services for the entity or any entity in the Group: - accounting advice Total NOTE 9: DIVIDENDS (a) ordinary dividends Final fully franked ordinary dividend of 0.5 (2010: nil) cent per share franked at the tax rate of 30% (2010: 30%) Interim fully franked ordinary dividend of 1.0 (2011: 0.5) cent per share franked at the tax rate of 30% (2011: 30%) Total dividends paid or provided for Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the years ended 30 June 2012 and 30 June 2011 were as follows: Consolidated Group 2011 2012 $ $ 3,275 59,911 67,496 1,300 - 67,799 Consolidated Group 2011 2012 $ $ 111,714 111,714 39,297 18,689 57,986 92,403 92,403 30,560 7,440 38,000 - - 169,700 18,500 18,500 148,903 Consolidated Group 2011 2012 $ $ 197,685 416,157 613,842 - 197,266 197,266 44 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 9: DIVIDENDS (cont’d) Paid in cash Satisfied by issue of shares (b) dividends not recognised at the end of the reporting period In addition to the above dividends, since year end the Directors have recommended the payment of a final 2012 fully franked ordinary dividend of 2.0 (2011: 0.5) cent per share franked at the rate of 30% (2011: 30%). The aggregate amount of the proposed dividend expected to be paid on 28 September 2012, but not recognised as a liability at year end, is: (c) franked dividends The franked portions of dividends recommended after 30 June 2012 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2013. Franking credits available for subsequent financial years based on a tax rate of 30% (2011: 30%): Consolidated Group 2011 2012 $ $ 466,115 147,727 613,842 166,322 30,944 197,266 848,251 197,684 2,352,755 1,492,530 The above amounts represent the balance of the franking account as at the reporting date adjusted for: (a) Franking credits that will arise from the payment of the amount of the provision for income tax, and (b) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date. The impact on the franking account of the dividend recommended by the directors since the end of the reporting period, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $363,536 (2011: $84,722). NOTE 10: EARNINGS PER SHARE reconciliation of earnings used in calculating earnings per share Basic earnings/(loss) per share Profit after tax from continuing operations attributable to owners of Jumbo Interactive Limited used to calculate basic earnings per share Profit/(loss) from discontinued operations Profit/(loss) attributable to owners of Jumbo Interactive Limited used to calculate basic earnings per share Consolidated Group 2011 2012 $ $ 6,476,516 267,009 4,932,851 (98,396) 6,743,525 4,834,455 Diluted earnings/(loss) per share Profit after tax from continuing operations attributable to owners of Jumbo Interactive Limited used to calculate diluted earnings per share Profit/(loss) from discontinued operations Profit/(loss) attributable to owners of Jumbo Interactive Limited used to calculate diluted earnings per share 6,476,516 267,009 4,932,851 (98,396) 6,743,525 4,834,455 45 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 10: EARNINGS PER SHARE (cont’d) Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: — options Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share 40,389,629 39,995,382 40,389,629 39,995,382 207,985 - 40,597,614 39,995,382 For the 30 June 2011 financial year, 4,150,000 options were not included in the number of potential ordinary shares used to calculate diluted earnings per share because they were out-of-the-money. NOTE 11: CASH AND CASH EQUIVALENTS Total cash and cash equivalents General account balances Cash at bank and in hand Short term bank deposits Customer Funds Cash at bank and in hand Short term bank deposits Online lottery customer account balances included in cash at bank and short term bank deposits Note Consolidated Group 2011 2012 $ $ 11,770,674 21,686,797 2,905,785 13,905,199 16,810,984 1,875,813 3,000,000 2,965,969 4,519,603 7,485,572 2,285,102 2,000,000 17 4,875,813 4,285,102 Customer account balances being deposits and prize winnings earmarked for payment to customers on demand. NOTE 12: TRADE AND OTHER RECEIVABLES CURRENT Trade receivables Allowance for doubtful debts Other receivables Prepayments Consolidated Group 2011 2012 $ $ 163,678 - 163,678 82,916 155,124 401,718 282,611 (153,123) 129,488 18,470 128,689 276,647 All receivables that are neither past due nor impaired are with long standing clients who have a good credit history with the Group. (a) analysis of the allowance account Current trade receivables are non-interest bearing and generally on terms ranging from seven days to 30 days. Trade receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade receivable is impaired. These amounts have been included in the administrative expense items. 46 2011 - 2012Jumbo Interactive Annual Report NOTE 12: TRADE AND OTHER RECEIVABLES (cont’d) Movement in the trade receivables allowance for doubtful debts is as follows: noTes To THe finanCial sTaTeMenTs Opening balance Provision for doubtful receivables Reversal of amounts provided Closing balance Consolidated Group 2011 2012 $ $ 124,764 153,123 77,025 - (48,666) (153,123) - 153,123 There are no balances within trade and other receivables that are past due other than noted in (b) below. It is expected these balances, other than those impaired, will be received when due. Impaired assets are provided for in full. Receivables are pledged as per Note 18(a). (b) age analysis of trade receivables that are past due at the end of the reporting period The following provides an aging analysis of trade receivables which are past due and impairments which have been raised. Consolidated Group Not past due Past due 30 days Past due 60 days Past due 90 days Past due 90 days+ Total Total $ 161,650 - - - 2,028 163,678 2012 amount impaired $ - - - - - - amount not impaired $ 161,650 - - - 2,028 163,678 Total $ 128,916 - - - 153,695 282,611 2011 amount impaired $ - - - - 153,123 153,123 amount not impaired $ 128,916 - - - 572 129,488 Payment terms on receivables past due but not considered impaired have not been renegotiated. The Group has been in direct contact with the relevant customers and are reasonably satisfied that payment will be received in full. As at 30 June 2012 the Group had current trade receivables of $0 (2011: $153,123) that were impaired. The amounts relate to customers who have not settled their debts within the terms and conditions between the Group and the customer, and specific circumstances indicate that the debt may not be fully repaid to the Group. NOTE 13: INVENTORIES CURRENT Finished goods at cost NOTE 14: CONTROLLED ENTITIES Consolidated Group 2011 2012 $ $ 98,625 39,894 The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(a). 47 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 14: CONTROLLED ENTITIES (cont’d) Direct subsidiaries of the ultimate parent entity Jumbo Interactive Limited: Benon Technologies Pty Ltd Editson Pty Ltd (in voluntary liquidation)1 TMS Global Services Pty Ltd Jumbo Ventures Pty Ltd Intellitron Pty Ltd Manaccom Pty Ltd2 Jumbo Lotteries Pty Ltd Cook Islands Tattslotto Pty Ltd subsidiaries of TMs Global services pty ltd: TMS Global Services (NSW) Pty Ltd TMS Global Services (VIC) Pty Ltd TMS Fiji Limited TMS Fiji On-Line Limited TMS Global Services (PNG) Limited Cook Islands Tattslotto Pty Ltd Jumbo Lotteries USA Limited Jumbo Lotteries NC, Inc.3 Country of incorporation percentage ownership 2012 % 2011 % Australia Australia Australia Australia Australia Australia Australia Cook Islands 100 - 100 100 100 100 100 1 100 100 100 100 100 100 100 1 Country of incorporation percentage indirect ownership Australia Australia Fiji Fiji Papua New Guinea Cook Islands United States of America United States of America 2012 % 100 100 100 100 100 99 100 100 2011 % 100 100 100 100 100 99 100 - 1 Control of the company ceased on 24 November 2010 when it was placed into voluntary administration. From this date the company no longer forms part of the Group. The company was subsequently de-registered 28 July 2011. 2 Control of the company ceased 31 January 2011 when it was placed into voluntary administration. Control was returned 19 June 2012 following completion of the voluntary administration process. Between these dates the company did not form part of the Group. The company is in the process of being de-registered. 3 This Company was established by the Group during this year. NOTE 15: PROPERTY, PLANT AND EQUIPMENT Plant and equipment At cost Accumulated depreciation Leasehold improvements - at cost Accumulated amortisation Total property, plant and equipment 48 Consolidated Group 2011 2012 $ $ 876,006 (644,217) 231,789 291,551 (162,968) 128,583 360,372 817,403 (552,960) 264,443 291,552 (95,627) 195,925 460,368 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 15: PROPERTY, PLANT AND EQUIPMENT (cont’d) (a) Movements in Carrying amounts Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year. Consolidated Group year ended 30 June 2011 Balance at the beginning of year Additions Disposals on sale of business Disposals Disposal through loss of control of subsidiary Depreciation expense – continuing operations Depreciation expense – discontinued operations Carrying amount at the end of year year ended 30 June 2012 Balance at the beginning of year Additions Disposals Depreciation/amortisation expense Carrying amount at the end of year NOTE 16: INTANGIBLE ASSETS Goodwill Accumulated impaired losses Net carrying value Intellectual property Accumulated impairment losses Net carrying value Website development costs Accumulated amortisation Net carrying value Customer acquisition costs Accumulated amortisation (and impairment) Net carrying value Software costs Accumulated amortisation Net carrying value Domain names - cost Net carrying value Other Accumulated amortisation Net carrying value Total intangibles plant and equipment $ leasehold improvements $ 578,592 224,303 (16,007) (2,043) (377,623) (21,092) (121,687) 264,443 264,443 67,811 (1,124) (99,341) 231,789 234,127 26,426 - - - (64,628) - 195,925 195,925 - (1) (67,341) 128,583 Total $ 812,719 250,729 (16,007) (2,043) (377,623) (85,720) (121,687) 460,368 460,368 67,811 (1,125) (166,682) 360,372 Consolidated Group 2012 $ 3,686,355 (854,805) 2,831,550 53,499 (23,234) 30,265 4,081,602 (2,754,517) 1,327,085 4,446,799 (3,169,278) 1,277,521 127,327 (126,549) 778 854,337 854,337 192,641 (115,470) 77,171 6,398,707 2011 $ 3,686,355 (854,805) 2,831,550 23,499 (23,057) 442 3,106,028 (1,979,933) 1,126,095 2,775,359 (1,960,732) 814,627 125,035 (124,142) 893 816,434 816,434 192,641 (74,326) 118,315 5,708,356 49 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs , 7 1 9 2 5 8 ) 1 5 1 3 7 ( , 3 8 0 , 8 9 1 5 , , 3 4 0 5 1 2 1 , , ) 0 9 7 9 1 5 1 ( , ) 0 5 3 1 3 ( , , 1 2 1 8 1 2 , ) 4 6 7 4 9 3 1 ( , 6 1 0 1 0 1 , 7 4 6 7 6 , - - - ) 6 3 3 , 3 1 ( ) 1 8 1 1 3 ( , - ) 7 0 1 5 1 ( , ) 1 3 8 , 5 ( 4 5 3 , 8 5 2 1 , - 6 6 3 7 , , 2 7 7 4 6 8 - ) 4 0 7 5 5 ( , - - - - - - 1 7 1 7 7 , 1 0 9 1 , - - - ) 5 1 3 , 3 4 ( ) 4 1 0 , 8 1 ( , 9 2 1 8 3 1 1 , - ) 7 4 4 7 1 ( , - - - - - - - - , 7 1 9 2 5 8 ) 6 7 5 7 ( , ) 4 8 6 , 0 4 7 ( ) 1 3 0 5 1 6 ( , ) 4 7 2 9 ( , - - - - - 9 2 6 , 4 3 4 9 0 2 , 8 8 8 6 3 7 $ - - - , ) 5 7 4 6 7 4 1 ( , ) 4 9 2 ( , 1 2 1 8 1 2 - - 4 5 3 , 8 5 2 1 , $ 0 5 5 1 3 8 , , 2 r a e y f o i g n n n i g e b e h t t a e c n a l a B 1 1 0 2 e n u J 0 3 d e d n e r a e y : p u o r G d e t a d i l o s n o C - - - - - - - - - y r a i d i s b u s f o l o r t n o c f o s s o l n o s s o L d e u n i t n o c s i d – e g r a h c n o i t a s i t r o m A i g n u n i t n o c – e g r a h c n o i t a s i t r o m A s n o i t a r e p o s n o i t a r e p o d e u n i t n o c s i d – l a s r e v e r t n e m r i a p m I s n o i t a r e p o t n e m t s u d a j r e h t O d e p o e v e d l y l l a n r e t n i s n o i t i d d A s s e n i s u b f o e l a s n o s l a s o p s i D s t e s s a f o n o i t i n g o c e r e D d e r i u q c a s n o i t i d d A $ $ $ $ s t s o c $ s t s o c $ l a t o T r e h t o n i a m o d s e m a n n o i t i s i u q c a t n e m p o e v e d l y t r e p o r p e r a w t f o s r e m o t s u C e t i s b e w l a u t c e l l e t n i l l i w d o o G ) d ’ t n o c ( S T E S S A E L B G N A T N I I : 6 1 E T O N s t n u o m a g n i y r r a C n i s t n e m e v o M ) a ( 50 6 5 3 , 8 0 7 5 , 5 1 3 , 8 1 1 4 3 4 6 1 8 , 3 9 8 7 2 6 , 4 1 8 5 9 0 , 6 2 1 1 , 2 4 4 0 5 5 1 3 8 , , 2 1 1 0 2 e n u J 0 3 t a e u l a v g n i s o C l 3 8 9 1 7 9 , , 9 6 1 4 2 7 1 , - - 6 5 3 , 8 0 7 5 , 5 1 3 , 8 1 1 ) 1 0 8 , 5 0 0 , 2 ( ) 4 4 1 1 4 ( , 3 0 9 7 3 , 4 3 4 6 1 8 , - - 3 9 8 3 7 2 , 2 - ) 8 8 3 , 2 ( 7 0 7 , 8 9 3 , 6 1 7 1 7 7 , 7 3 3 , 4 5 8 8 7 7 , 3 9 9 3 5 6 1 , - , ) 9 9 0 1 9 1 1 ( , 3 8 9 1 7 9 , , ) 3 9 9 0 7 7 ( - 7 2 6 , 4 1 8 5 9 0 , 6 2 1 1 , , 1 2 5 7 7 2 1 , , 5 8 0 7 2 3 1 , 2 4 4 0 0 0 0 3 , - ) 7 7 1 ( 5 6 2 , 0 3 0 5 5 1 3 8 , , 2 - - - 0 5 5 1 3 8 , , 2 r a e y f o i g n n n i g e b e h t t a e c n a l a B 2 1 0 2 e n u J 0 3 d e d n e r a e y d e p o e v e d l y l l a n r e t n i s n o i t i d d A 2 1 0 2 e n u J 0 3 t a e u l a v g n i s o C l e g r a h c n o i t a s i t r o m A d e r i u q c a s n o i t i d d A 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 16: INTANGIBLE ASSETS (cont’d) (b) other disclosures Domain names have an indefinite useful life because: • There is no time limit on the expected usage of the domain names; • • • Licence renewal is automatic on payment of the renewal fee without satisfaction of further renewal conditions; The cost is not significant when compared with future economic benefits expected to flow from renewal. As such, the useful life can include the renewal period; and Since there is no limit on the number of times the licence can be renewed this leads to the assessment of “indefinite” useful life. This assessment has been based on: • Technical, technological, commercial and other types of obsolescence; • • • The stability of the industry in which the asset operates and changes in the market demand for the products and/or services output from the asset; The level of maintenance expenditure required to obtain the expected future economic benefits from the asset and the entity’s ability and intention to reach such a level; and The period of control over the asset and legal or similar limits on the use of the asset. Intellectual property has an indefinite useful life because: • There is no time limit on the expected usage of the intellectual property; and • The intellectual property is proprietary in nature and only the company has the source code. The assessment has been based on: • Technical, technological, commercial and other types of obsolescence; • • The stability of the industry in which the asset operates and changes in the market demand for the products and/or services output from the asset; and The period of control over the asset and legal or similar limits on the use of the asset. Intangible assets include capitalised website development costs, capitalised customer acquisition costs and domain names with a carrying value of $3,458,943 (2011: $2,757,156). The amortisation period relating to the website developments costs is three years and to the customer acquisition costs is 18 months. Domain names have an indefinite useful life and therefore have no amortisation period. (c) Impairment Testing of Cash-Generating Units Containing Goodwill or Intangible Assets with Indefinite useful lives Goodwill and domain names have been allocated to the Internet Lottery cash-generating unit which is an operating segment: Carrying amount of goodwill Internet Lottery unit Total Carrying amount of domain names Internet Lottery unit Total Consolidated Group 2012 $ 2,831,550 2,831,550 2011 $ 2,831,550 2,831,550 854,337 854,337 816,434 816,434 The recoverable amount of the cash-generating unit is based on a value-in-use calculation which uses management approved budgets extrapolated over a five year period. The growth rate used in these budgets does not exceed the historical growth rate of the relative cash-generating unit. Key assumptions used for value-in-use calculation of the CGU is as follows: • Annual growth rate of 3% 51 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 16: INTANGIBLE ASSETS (cont’d) • Terminal growth rate of 3% • Discount rate of 17% being the calculated weighted average cost of capital based on the capital asset pricing model Reseller agreements will be renewed when they expire in 2013 for an additional 5 years • Management determined budgets based on past performance and its expectations for the future. The growth rate used is consistent with those used in industry reports. The discount rate used is pre-tax and is specific to relevant segment in which the unit operates. Should both of the lottery reseller agreements not be extended for a further period when they expire in 2013, an impairment loss would be recognised up to the maximum carrying value of $3,685,887. (d) impairment reversal The impairment reversal is recognised in the statement of comprehensive income: From discontinued operations: Impairment reversal of intellectual property1 Consolidated Group 2011 2012 $ $ - (1,258,354) 1 An increase in the estimated service potential of the asset through sale was recognised when the Star business was sold on 12 November 2010 and therefore the previous impairment expense was reversed. NOTE 17: TRADE AND OTHER PAYABLES Total trade and other payables Current Trade creditors GST payable Sundry creditors and accrued expenses Employee benefits Customer funds payable Current Customer funds payable Note Consolidated Group 2012 $ 10,354,686 1,534,138 519,422 3,179,749 245,564 5,478,873 2011 $ 6,949,523 915,382 336,622 1,233,884 178,533 2,664,421 11 4,875,813 4,285,102 52 2011 - 2012Jumbo Interactive Annual Report NOTE 18: BORROWINGS CURRENT Secured liabilities Bank overdraft Bank loans Chattel mortgages Total secured current interest-bearing liabilities Total current interest-bearing liabilities NON-CURRENT Secured liabilities Bank loans Chattel mortgages Total secured non-current interest-bearing liabilities Total current and non-current secured liabilities Bank loans/overdraft Chattel mortgages Bank overdraft noTes To THe finanCial sTaTeMenTs Consolidated Group 2011 2012 $ $ - 166,666 28,014 194,680 194,680 250,000 - 250,000 416,666 28,014 444,680 110,061 666,667 34,748 811,476 811,476 1,041,666 28,014 1,069,680 1,818,394 62,762 1,881,156 A bank overdraft facility of $500,000 (2011: $500,000) is repayable on demand and currently bears interest at a current floating rate of 10.24% p.a. (2011: 11.19% p.a.). Bank loans A bank loan with current outstanding $416,666 (2011: $1,708,333) is repayable in quarterly instalments of $41,667 and the final instalment of $208,333 is due on 14 November 2013. The bank loan bears interest at a current floating of 5.83% p.a. (2011: 7.00% p.a.), up to a cap of 7.00% pa for the term of the loan until maturity on 14 November 2013. (a) assets pledged as security The bank liabilities are secured by a fixed and floating charge over all the assets of the Group. Chattel mortgage liabilities are secured over the rights to the mortgaged assets recognised in the statement of financial position which will revert to the mortgagor if the Group defaults. The covenants within the bank liabilities require interest not to exceed 25% of profit before finance costs and income tax (net profit before interest and tax/total interest expense > 4x), and debt not to exceed 67% of earnings before interest, tax, depreciation and amortisation (consolidated debt/net profit before deduction of interest, tax, depreciation and amortisation, and before significant items < 1.5x). (b) bank overdraft facility The bank overdraft facilities may be drawn down at any time but may be terminated by the bank without notice. The bank loans may be drawn down at any time and have an average maturity of one year and four months. (c) defaults and breaches There have been no defaults or breaches during the financial year ended 30 June 2012. 53 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 19: TAX CURRENT Income tax refundable NON-CURRENT Deferred tax liabilities comprise temporary differences recognised in the profit or loss as follows: Property plant and equipment - depreciation Amortisation Other balance at 30 June 2011 Property plant and equipment - depreciation Amortisation Other balance at 30 June 2012 NON-CURRENT Deferred tax assets comprise temporary differences recognised in the profit or loss as follows: Attributable to tax losses Property plant and equipment - depreciation Amortisation Accruals Provisions Other balance at 30 June 2011 Attributable to tax losses Property plant and equipment - depreciation Amortisation Accruals Provisions Other balance at 30 June 2012 54 Consolidated Group 2011 2012 $ $ 383,245 576,016 opening balance $ Charged to Profit or loss $ Closing balance $ 5,986 126,849 86,871 219,706 3,702 244,653 - 248,355 (2,284) 117,804 (86,871) 28,649 1,311 138,603 14,062 153,976 3,702 244,653 - 248,355 5,013 383,256 14,062 402,331 opening balance $ Charged to Profit or loss $ Closing balance $ 144,471 185,363 329,834 18,245 77,902 338,748 221,419 27,676 828,461 37,862 (22,184) (288,155) (63,679) 18,918 (131,875) 56,107 55,718 50,593 157,740 46,594 696,586 329,834 (329,834) - 56,107 55,718 50,593 157,740 46,594 696,586 18,922 (21,931) 30,370 573 (352) (302,252) 75,029 33,787 80,963 158,313 46,242 394,334 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 19: TAX (cont’d) Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(e) occur: • Gross capital losses $3,884,942 (2011: $3,884,942) NOTE 20: PROVISIONS CURRENT Long service leave Make good provision NON-CURRENT Long service leave Make good Consolidated Group 2011 2012 $ $ 181,247 153,437 334,684 103,708 103,708 145,982 153,437 299,419 68,114 68,114 The Group is required under the terms of certain leases to restore the leased premises at the end of the lease to its original condition. A provision has been recognised for the present value of the estimated expenditure required to demolish any leasehold improvements at the end of the lease. These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of the term of the lease or the useful life of the assets. Balance at beginning of the year Provisions made during the year Balance at end of the year NOTE 21: CONTRIBUTED EQUITY share capital Fully paid ordinary shares Movements in ordinary share capital date details 1 July 2010 Opening balance 23 August 2010 6 May 2011 30 June 2011 Shares issued during the year 30 September 2011 6 March 2012 Shares bought back during the year1 Shares issued during the year2 Balance Dividend reinvestment plan3 Exercise of options Make good provision $ 153,437 - 153,437 Consolidated Group 2012 2012 $ shares Consolidated Group 2011 2011 $ shares 42,412,560 28,876,572 39,536,805 27,113,586 number of shares 43,031,525 (3,578,057) 83,337 39,536,805 issue price $ 0.3000 0.3719 158,921 1,500,000 0.237 0.500 $ 28,156,064 (1,073,422) 30,944 27,113,586 37,639 750,000 55 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 21: CONTRIBUTED EQUITY (cont’d) details date 6 March 2012 7 March 2012 22 March 2012 30 March 2012 11 April 2012 26 April 2012 Shares bought back during the year 23 December 2011 30 June 2012 Exercise of options Exercise of options Exercise of options Dividend reinvestment plan4 Exercise of options Exercise of options Unmarketable parcel sale and buyback5 Closing balance number of shares 200,000 550,000 350,000 136,858 150,000 160,000 (330,024) 42,412,560 issue price $ 0.700 0.700 0.700 0.804 0.500 0.700 $ 140,000 385,000 245,000 110,094 75,000 112,000 0.278 (91,747) 28,876,572 1 As announced by the Company on 23 June 2010, the Company proposed buying back shares owned by a previous director, Mr Ian Mackay, subject to shareholder approval. This was approved by shareholders at an Extraordinary General Meeting held on 19 August 2010 and transacted on 23 August 2010. 2 As announced by the Company on 9 March 2011, the Company declared a fully franked interim dividend of 0.5 cent per ordinary share in which shareholders were invited to participate in the Company’s Dividend Reinvestment Plan. Shares were issued under the DRP on the payment date on 6 May 2011. 3 As announced by the Company on 23 August 2011, the Company declared a fully franked final dividend of 0.5 cent per ordinary share in which shareholders were invited to participate in the Company’s Dividend Reinvestment Plan. Shares were issued under the DRP on the payment date on 30 September 2011. 4 As announced by the Company on 21 February 2012, the Company declared a fully franked interim dividend of 1.0 cent per ordinary share in which shareholders were invited to participate in the Company’s Dividend Reinvestment Plan. Shares were issued under the DRP on the payment date on 30 March 2012. 5 As announced by the Company on 27 October and 16 December 2011, the Company offered to buyback unmarketable parcels of shares. Shares were bought back under the UMP on the payment date on 23 December 2011. (a) ordinary shares Ordinary shares have no par value and the company does not have a limited amount of authorised share capital. Ordinary shareholders are entitled to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands and upon a poll each share is entitled to one vote. (b) options i. Details of the employee option plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year are set out in Note 26: Share-Based Payments. For information relating to share options issued to third parties during the financial year, refer to Note 26: ii. Share-Based Payments. (c) Capital management Management controls the capital of the Group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern. The Board regularly reviews its capital management strategies in order to optimise shareholder value. There are no externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There was a change in the strategy adopted by management to control the capital of the Group for the current financial year which strategy is to ensure that the Group’s gearing ratio remains below 40% (2011: between 20% and 40%). The gearing ratios for the year ended 30 June 2012 and 30 June 2011 are as follows: 56 2011 - 2012Jumbo Interactive Annual Report NOTE 21: CONTRIBUTED EQUITY (cont’d) Total borrowings Total equity Total capital Gearing ratio noTes To THe finanCial sTaTeMenTs Note 18 Consolidated Group 2011 2012 $ $ 444,680 1,881,156 10,081,974 18,083,709 11,963,130 18,528,389 2% 16% NOTE 22: CAPITAL AND LEASING COMMITMENTS (a) operating lease Commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements Payable — Not later than one year — Later than one year but not later than five years Consolidated Group 2011 2012 $ $ 792,652 818,766 1,611,418 745,524 1,348,450 2,093,974 The property leases are non-cancellable leases for occupied premises at various locations ranging from month-to-month to five year terms, with rent payable monthly in advance. Options to renew leases at the end of the term range from terms of one to three years. Rent and outgoings are paid on a monthly basis with periodic pricing reviews. (b) Chattel Mortgage Commitments Payable — Not later than one year — Later than one year but not later than five years Less future finance charges 28,991 - 28,991 (977) 28,014 38,655 28,991 67,646 (4,884) 62,762 These commitments relate to motor vehicles and have terms of up to two and a half years with commitments paid monthly based on fixed interest rates. (c) other Commitments Co-branded website agreement A subsidiary entity has signed a Co-Branded Website Agreement with ninemsn Pty Ltd for two years until 31 July 2012. A monthly fee is paid by the subsidiary entity to ninemsn Pty Ltd subject to a maximum payment in cumulative monthly fees over the 24 month term based on which the estimated commitment is as follows: 33,384 1,030,706 57 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 23: CONTINGENT LIABILITIES Estimates of the potential financial effect of contingent liabilities that may become payable: Contingent liabilities Guarantees provided by the Group’s bankers The Group’s bankers have provided guarantees to third parties in relation to premises leased by Group companies. These guarantees have no expiry term and are payable on demand, and are secured by a fixed and floating charge over the Group’s assets. The Group’s bankers have provided a performance guarantee to a third party in respect of a Request for Proposal. This guarantee was subsequently cancelled 3 July 2012. Consolidated Group 2011 2012 $ $ 160,763 160,763 206,653 - 367,416 160,763 NOTE 24: SEGMENT REPORTING Segment information is presented using a ‘management approach’, i.e. segment information is provided on the same basis as information used for internal reporting purposes by the chief operating decision maker (strategic steering committee that makes strategic decisions). Comparatives for 2011 were stated on this basis. accounting policies Segment revenues and expenses are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. segment information (a) description of segments Management has determined the operating segments based on the reports reviewed by the strategic steering committee that are used to make strategic decisions. The committee considered the business from both a product and a geographic perspective and has identified the reportable segments. Internet Lotteries segment consists of retail of lottery tickets sold both in Australia and eligible international jurisdictions, and internet database management/marketing. The committee monitors the performance of the regions on a combined basis. Accordingly there is only one Internet Lotteries segment. All other segments include operating segments of non-lottery business activities that are not reportable in terms of AASB 8 and revenues from external customers are derived from the sale of software and pet related products. Comparative figures for 2011 are stated on this basis. (b) segment information provided to the strategic steering committee 2012 The segment information provided to the strategic steering committee for the reportable segments for the year ended 30 June 2012 is as follows: Total segment revenue/income Inter-segment revenue revenue from external customers npbT Interest revenue Finance costs expense Depreciation and amortisation 58 internet lotteries $ 23,584,433 - 23,584,433 10,002,512 771,129 3,907 2,147,568 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 24: SEGMENT REPORTING (cont) There was no impairment charge or other significant non-cash item recognised in 2012 relating to the segment. 2011 The segment information provided to the strategic steering committee for the reportable segments for the year ended 30 June 2011 is as follows: Total segment revenue/income Inter-segment revenue revenue from external customers npbT Interest revenue Finance costs expense Depreciation and amortisation Loss on derecognition of intangible assets (c) other segment information internet lotteries $ 18,081,812 - 18,081,812 5,495,205 413,328 1,732 1,480,484 73,151 i. Segment revenue The revenue from external parties reported to the strategic steering committee is measured in a manner consistent with that in the profit or loss. Revenues from external customers are derived principally from the sale of lottery tickets and provision of related services. Segment revenue reconciles to total revenue/other income from continuing operations as follows: Total Internet Lotteries segment revenue All other segments Interest revenue Other Consolidated Group 2012 $ 23,584,433 548,760 776,414 75,429 2011 $ 18,081,812 79,337 413,328 18,036 Total revenue/other income from continuing operations (note 3) 24,985,036 18,592,513 The entity is domiciled in Australia. The amount of its revenue from external customers in Australia is $22,086,403 (2011: $16,139,019), and the total revenue from external customers in other countries is $2,898,633 (2011: $2,453,494). Revenues of $1,664,189 (2011: $1,620,964) are from external customers in Fiji. Segment revenues are allocated based on the country in which the customer is located. No single external customer derives more than 10% of total revenues. ii. NPBT The strategic steering committee assesses the performance of the operating segments based on a measure of NPBT. This measure excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event. Furthermore the measure excludes the effects of foreign currency gains/(losses). 59 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 24: SEGMENT REPORTING (cont) A reconciliation of the NPBT to profit before income tax is provided as follows: npbT Inter-segment eliminations1 All other segments Other Interest revenue Corporate expenses Finance costs expense Share based payments expense Directors’ remuneration Salaries and wages Other Consolidated Group 2012 $ 10,002,512 - (33,866) 1,091 776,414 (103,770) (89,748) (130,800) (917,628) (450,136) 2011 $ 5,495,205 1,437,338 53,525 - 413,328 (148,518) (79,851) (173,264) (689,674) (453,953) Profit before income tax from continuing operations (per P&L) 1 the key items of the intersegment eliminations are: 9,054,069 5,854,136 Provision for non-recovery of inter-company loans - 1,437,338 NOTE 25: CASH FLOW INFORMATION (a) Reconciliation of Cash Flow from Operations with Profit/(Loss) after income Tax Profit/(loss) for the year after income tax Non-cash flows Amortisation Depreciation Unrealised foreign currency (gain)/loss Impairment reversals Derecognition of subsidiary in voluntary administration Gain/(Loss) on sale of business Derecognition of intangibles assets Share option expense Other Changes in operating assets and liabilities, net of the effects of purchase and disposal of subsidiaries Decrease/(increase) in trade receivables Decrease/(increase) in other receivables Decrease/(increase) in inventories Decrease/(increase) in DTA Increase/(decrease) in trade payables Increase/(decrease) in other payables Consolidated Group 2012 $ 2011 $ 6,743,525 4,834,455 2,073,142 99,341 (23,214) - - - - 89,748 19,319 (34,190) (90,881) (58,732) 302,252 618,756 2,786,408 1,474,497 142,779 (17,160) (1,258,354) 639,644 6,007 73,151 79,851 27,087 556,303 74,816 (173,296) (141,955) 1,094,421 (668,323) 60 2011 - 2012Jumbo Interactive Annual Report NOTE 25: CASH FLOW INFORMATION (cont) noTes To THe finanCial sTaTeMenTs Increase/(decrease) in other provisions Increase/(decrease) in DTL Increase/(decrease) in provision for income tax Cash flow from operations (b) facilities with banks Credit facility Facilities utilised Overdraft - Multi Option/Chattel mortgages - Loans - Bank guarantees - Amount available Consolidated Group 2012 $ 70,859 153,976 192,771 12,943,080 2011 $ 136,412 28,649 (381,531) 6,527,453 1,453,666 3,035,763 - (28,014) (416,666) (367,416) 641,570 (110,061) (62,762) (1,708,333) (160,763) 993,844 The facilities are provided by ANZ Group Limited subject to general and specific terms and conditions being set and met periodically. Interest rates are both fixed and variable and subject to adjustment. Refer to Note 18 for terms of these facilities. (c) non-Cash financing and investing activities (i) Share issue 158,921 ordinary shares were issued at $0.237 ($37,639) under the dividend reinvestment plan on 30 September 2011. 136,858 ordinary shares were issued at $0.804 ($110,094) under the dividend reinvestment plan on 30 March 2012. NOTE 26: SHARE BASED PAYMENTS Share-based payment expense recognised during the financial year Options issued under employee option plan Options issued to third parties for services received employee option plan Consolidated Group 2011 2012 $ $ 88,357 1,391 89,748 79,851 - 79,851 The Jumbo Interactive Limited Employee Option Plan was ratified at the annual general meeting held on 28 October 2008. Employees are invited to participate in the scheme from time to time. Options vest when the volume weighted average share price over five consecutive trading days equals the exercise price and provided the staff member is still employed by the Group. When issued on exercise of options, the shares carry full dividend and voting rights. Options granted carry no dividend or voting rights. 61 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 26: SHARE BASED PAYMENTS (cont’d) Third party options Options have been issued to USA based consultants as part of the remuneration for their services to incentivise them to procure a commercially acceptable transaction in the USA and/or other suitable overseas jurisdiction. Options vest when the volume weighted average share price over five consecutive trading days equals the exercise price and provided an acceptable transaction has been brought to the company with terms and conditions acceptable to the Company by 1 December 2012 failing which the options will lapse. When issued on exercise of options, the shares carry full dividend and voting rights. fair value of options granted Employees There were no options issued to employees during the 2012 year. The weighted average fair value of options granted during the 2011 year was 5.5 cents. - Options are granted for no consideration, have a three year life, and are exercisable when the share price equals the exercise price and the staff member is still employed by the Group. - Grant date: - Share price at grant date: - - - - Exercise price: Expected volatility: Expected dividend yield Risk free rate Third parties 2011 15 Nov 2010 15 Nov 2010 $0.38 $0.70 85.82% 3.95% 5.24% $0.38 $0.50 86.58% 4.69% 5.15% The weighted average fair value of options granted during the year was 0.8 cents (2011: 0.0 cents). The fair value at grant date was determined by an independent valuer using the Monte Carlo Simulation option pricing model that takes into account the share price at grant date, exercise price, expected volatility, option life, expected dividends, and the risk free rate. The inputs used for the Monte Carlo Simulation option pricing model for options granted during the year ended 30 June 2012 were as follows: - Options are granted for no consideration, have a three year life, and are exercisable when the consultant provides a commercially acceptable transaction by 1 December 2012, failing which the options will lapse, and the share price equals the exercise price. - Grant date: - Share price at grant date: - - - - Exercise price: Expected volatility: Expected dividend yield Risk free rate 2012 2011 14 Dec 2011 $0.40 $0.70 61.22% 3.23% 3.12% - - - - - - Expected volatility was determined based on the historic volatility (based on the remaining life of the option), adjusted for any expected changes to future volatility based on publicly available information. 62 2011 - 2012Jumbo Interactive Annual Report e l b a s i c r e x e t a e c n a l a b d e r i p x e f o d n e t a r a e y f o d n e e h t g n i r u d r a e y r a e y d e s i c r e x e e h t g n i r u d r a e y / d e s p a l d e t i e f r o f e h t g n i r u d r a e y d e t n a r G e h t g n i r u d r a e y i g n n n g e b i r a e y f o t a e c n a l a b e t a d y r i p x e e s i c r e x e e c i r p e t a d t n a r 2 G 1 0 2 ) d ’ t n o c ( S T N E M Y A P D E S A B E R A H S : 6 2 E T O N noTes To THe finanCial sTaTeMenTs , 0 0 0 0 9 1 1 , - - , 0 0 0 0 9 1 1 , , 0 0 0 0 9 1 1 , , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , , 0 0 0 0 9 1 2 , 0 0 0 0 9 3 , 0 0 0 0 9 3 , - - , 0 0 0 0 0 8 , 0 0 0 0 0 8 - - - - - - - - - - - , ) 0 0 0 0 5 4 1 ( , ) 0 0 0 0 6 9 ( , ) 0 0 0 0 0 3 ( , - - - ) 0 0 0 0 0 2 ( , ) 0 0 0 0 5 ( , , ) 0 0 0 0 1 9 2 ( , - - , ) 0 0 0 0 1 9 2 ( , ) 0 0 0 0 5 ( , - - ) 0 0 0 0 5 ( , - - - - - , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , , 0 0 0 0 0 0 1 , , 0 0 0 0 5 4 1 , , 0 0 0 0 5 3 1 , 2 1 0 2 r e b o t c O 0 3 2 1 0 2 y a M 1 0 0 5 . 0 $ . 0 7 0 $ 9 0 0 2 r e b o t c O 1 2 9 0 0 2 y a M 1 0 s n o i t p o f f a t s d n a P M K 0 0 0 0 0 3 , 3 1 0 2 r e b m e v o N 5 1 . 0 7 0 $ 0 1 0 2 r e b m e v o N 5 1 , 0 0 0 0 5 0 1 , , 0 0 0 0 5 1 4 , - - , 0 0 0 0 5 1 4 , 4 1 0 2 y r a u r b e F 5 1 0 5 . 0 $ 1 1 0 2 y r a u r b e F 5 1 4 1 0 2 r e b m e c e D 4 1 . 0 7 0 $ 1 1 0 2 r e b m e c e D 4 1 s n o i t p o y t r a p d r i h T l a t o T 0 5 . 0 $ . 0 7 0 $ e c i r p e s i c r e x e e g a r e v a d e t h g i e W 63 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs l e b a s i c r e x e f o d n e t a r a e y e c n a l a b f o d n e t a r a e y e h t g n i r u d e h t g n i r u d d e t i e f r o f e h t g n i r u d i g n n n g e b i r a e y r a e y e h t g n i r u d r a e y r a e y f o d e r i p x e d e s i c r e x e / d e s p a l d e t n a r G t a e c n a l a b e t a d y r i p x e e s i c r e x e e c i r p e t a d t n a r 1 G 1 0 2 ) d ’ t n o c ( S T N E M Y A P D E S A B E R A H S : 6 2 E T O N 64 - - - - - - - , 0 0 0 0 5 4 1 , , 0 0 0 0 5 3 1 , 0 0 0 0 0 3 , , 0 0 0 0 5 0 1 , , 0 0 0 0 5 1 4 , - - - - - - - - - - - - r a e y ) 0 0 0 0 0 7 ( , ) 0 0 0 0 5 7 ( , - - - - ) 0 0 0 0 5 5 ( , 0 0 0 0 5 8 , - ) 0 0 0 0 0 0 , , 2 ( , 0 0 0 0 5 0 1 , , 0 0 0 0 0 9 1 , 0 0 0 0 0 7 , 0 0 0 0 0 2 , , 2 , 0 0 0 0 5 3 1 , - - 0 0 0 0 5 2 , , 4 1 1 0 2 h c r a M 1 3 2 1 0 2 y a M 1 0 2 1 0 2 r e b o t c O 0 3 0 5 . 0 $ 0 5 . 0 $ . 0 7 0 $ 8 0 0 2 h c r a M 1 3 9 0 0 2 y a M 1 0 9 0 0 2 r e b o t c O 1 2 3 1 0 2 r e b m e v o N 5 1 . 0 7 0 $ 0 1 0 2 r e b m e v o N 5 1 4 1 0 2 y r a u r b e F 5 1 0 5 . 0 $ 0 1 0 2 r e b m e v o N 5 1 . ) s h t n o m 7 s r a e y 1 : 1 1 0 2 ( s h t n o m 9 r a e y 1 s a w 2 1 0 2 e n u J 0 3 t a i g n d n a t s t u o s n o i t p o e r a h s f o e f i l l a u t c a r t n o c i g n n i a m e r e g a r e v a d e t h g i e w e h T . ) 7 5 . 0 $ : 1 1 0 2 ( . 0 6 0 $ s a w 2 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o f e c i r p e s i c r e x e e g a r e v a d e t h g i e w e h T 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 27: EVENTS AFTER THE REPORTING DATE There are no material events after the reporting date. NOTE 28: FINANCIAL RISK MANAGEMENT (a) General objectives, policies and processes In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks and measurement from previous periods unless otherwise stated in this note. The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, bank loans and chattel mortgages. The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Group’s risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the Group where such impacts may be material. The Board receives periodic reports from the Chief Financial Officer through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The main purpose of non-derivative financial instruments is to raise finance for Group operations. There are no derivative instruments recognised or unrecognised at the reporting date. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below: i. Treasury Risk Management An Audit Committee consisting of a majority of Non-Executive Directors meet on a regular basis to consider currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Committee’s overall risk management strategy seeks to assist the Group in meeting its financial targets whilst minimising potential adverse effects on financial performance. The Audit Committee operates under policies approved by the Board of Directors. Risk management policies are approved and reviewed by the Board on a regular basis. These include the use of hedging derivative instruments, credit risk policies, and future cash flow requirements. ii. Financial Risk Exposures and Management The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the entity’s income or the value of its holdings of financial instruments. The Group is exposed to market risks from interest rates and foreign currency. Interest rate risk Interest rate risk arises principally from cash and cash equivalents, and borrowings. The object of market risk management is to manage and control interest rate risk exposure within acceptable parameters while optimising the return. Interest rate risk is managed with a mixture of fixed and floating rate debt. At 30 June 2012 100% of Group interest bearing debt is capped. The Group policy is to manage between 50% and 100% of interest bearing debt using capped and fixed interest rates. Foreign currency risk The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the Group’s functional currency. Senior management monitor the Group’s exposure regularly and utilise the spot market to buy and sell specified amounts of foreign currency to manage this risk. 65 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d) Liquidity risk The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash balances and unutilised borrowing facilities are maintained. 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 to the entity. Credit risk arises principally from cash and cash equivalents and trade and other receivables. The objective of the Group is to minimize risk of loss from credit risk exposure. The maximum exposure to credit risk, excluding the value of any collateral or other security, at the end of the reporting period to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. No collateral or other security is held over these assets at balance sheet date. Credit risk is managed on a Group basis and reviewed regularly by the Audit Committee. The Audit Committee monitors credit risk by actively assessing the rating quality and liquidity of counter parties: • • • surplus funds are only invested with banks and financial institutions with a Standard and Poor’s rating of no less than A: all potential customers are rated for credit worthiness taking into account their size, market position and financial standing; and customers that do not meet the Group’s strict credit policies may only purchase in cash or using recognised credit cards. The trade receivables balance, before allowance for doubtful debts, at balance date by geographic region: Australia Fiji USA Cook Islands Samoa 2012 2011 $ % $ % 46,546 100,551 - - 16,581 163,678 28.5 61.4 0 0 10.1 100 100,478 16,688 69,668 84,373 11,404 282,611 35.6 5.9 24.7 29.8 4.0 100 The Group’s most significant customer, located in Fiji, accounts for 1% of trade receivables as at 30 June 2012 (30% as at 30 June 2011, located in the Cook Islands, and has been fully provided for). Credit risk is measured using debtor aging. Refer Note 12(b): Trade and Other Receivables for aging analysis. (b) financial instruments Categories of Financial Instruments financial assets Cash and cash equivalents - AA rated Loans and receivables financial liabilities Borrowings Trade and other payables 66 Consolidated Group 2012 $ 21,686,797 401,718 444,680 10,354,686 2011 $ 11,770,674 276,647 1,881,156 6,949,523 2011 - 2012Jumbo Interactive Annual Report noTes To THe finanCial sTaTeMenTs NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d) i. Maturity analysis Financial liabilities have differing maturity profiles depending on the contractual term and in the case of borrowings, different repayment amounts and frequency. The table below shows the period in which the principal and interest (if applicable) of financial liability balances will be paid based on the remaining period to repayment date assuming contractual repayments are maintained. Trade and other payables are expected to be paid as follows: Less than six months Borrowings are expected to be paid as follows: Less than one year One to five years ii. fair values Consolidated Group 2011 2012 $ $ 6,949,523 10,354,686 6,949,523 10,354,686 212,234 256,597 468,831 916,263 1,137,485 2,053,748 The fair values of: • Cash, cash equivalent, and receivables approximate their carrying value because of their short term to maturity. • Bank loans, overdrafts, trade and other payables approximate their carrying value because of their short term to maturity (or interest repricing profile). No financial assets and financial liabilities are readily traded on organised markets in standardised form. Fair values and carrying amounts of financial assets and liabilities at reporting date. financial assets Cash and cash equivalents Trade and other receivables financial liabilities Borrowings Trade and other payables Carrying amount $ 21,686,797 401,718 22,088,515 Carrying amount $ 444,680 10,354,686 10,799,366 2012 fair value $ 21,686,797 401,718 22,088,515 2012 fair value $ 468,831 10,354,686 10,823,517 Carrying amount $ 11,770,674 276,647 12,047,321 Carrying amount $ 1,881,156 6,949,523 8,830,679 2011 fair value $ 11,770,674 276,647 12,047,321 2011 fair value $ 2,053,748 6,949,523 9,003,271 Fair values are materially in line with carrying values. financial instruments measured at fair value There were no financial instruments held for either the 2012 or 2011 financial years. 67 2011 - 2012Jumbo Interactive Annual Report  noTes To THe finanCial sTaTeMenTs NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d) iii. sensitivity analysis interest rate risk and foreign Currency risk The Group has performed a sensitivity analysis relating to its exposure to interest rate risk and foreign currency risk at reporting date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks. Interest Rate Sensitivity Analysis At 30 June 2012, the effect on profit/(loss) and equity as a result of changes in interest rates, with all other variables remaining constant, would be as follows: Change in profit/(loss) — increase in interest rates by 2% — decrease in interest rates by 2% Change in equity — increase in interest rates by 2% — decrease in interest rates by 2% Consolidated Group 2011 2012 $ $ 424,842 (424,842) 424,842 (424,842) 197,790 (197,790) 197,790 (197,790) Foreign Currency Risk Sensitivity Analysis At 30 June 2012, the effect on profit/(loss) and equity as a result of changes in the value of the Australian Dollar to the Fijian Dollar, with all other variables remaining constant is as follows: Change in profit/(loss) — improvement in AUD to FJD by 3% (2011: 5%) — decline in AUD to FJD by 3% (2011: 5%) Change in equity — improvement in AUD to FJD by 3% (2011: 5%) — decline in AUD to FJD by 3% (2011: 5%) Consolidated Group 2011 2012 $ $ (46,638) 52,709 (46,638) 52,709 (146,908) 162,372 (146,908) 162,372 The above interest rate and foreign exchange rate sensitivity analysis has been performed on the assumption that all other variables remain unchanged. NOTE 29: RESERVES (a) foreign Currency Translation reserve The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries. Amounts are reclassified to profit or loss when an entity is disposed of. (b) share based payments reserve The share based payments reserve records items recognised as expenses on valuation of employee and third party share options. This reserve can be reclassified as retained earnings if options lapse. NOTE 30: COMPANY DETAILS The registered office of the Company is: Jumbo Interactive Limited Level One, 601 Coronation Drive, Toowong, QLD, 4066 The principal places of business are: — Level One, 601 Coronation Drive, Toowong, QLD, 4066 — Suite 604, 370 St Kilda Road, Melbourne, VIC, 3001 68 2011 - 2012Jumbo Interactive Annual Report direCTors’ deClaraTion direCTors’ deClaraTion The Directors of the Company declare that: 1. The financial statements, comprising the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows, and accompanying notes, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards and the Corporations Regulations 2001; and (b) give a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year ended on that date. 2. The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts 3. as and when they become due and payable. 4. The remuneration disclosures included in pages 11 to 17 of the Directors’ report (as part of the audited Remuneration Report), for the year ended 30 June 2012, comply with section 300A of the Corporations Act 2001. 5. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A. This declaration is made in accordance with a resolution of the Directors. david K barwick Chairman Brisbane 6 September 2012 69 2011 - 2012Jumbo Interactive Annual Report independenT audiTor’s reporT Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 18, 300 Queen St Brisbane QLD 4000, GPO Box 457, Brisbane QLD 4001 Australia INDEPENDENT AUDITOR’S REPORT To the members of Jumbo Interactive Limited Report on the Financial Report We have audited the accompanying financial report of Jumbo Interactive Limited, which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity 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 of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply 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. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about 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 company’s preparation of the financial report that gives a true and fair view 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 company’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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 70 2011 - 2012Jumbo Interactive Annual Report independenT audiTor’s reporT Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 18, 300 Queen St Brisbane QLD 4000, GPO Box 457, Brisbane QLD 4001 Australia Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Jumbo Interactive Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Jumbo Interactive Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 11 to 17 of the directors’ report for the year ended 30 June 2012. 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 Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Jumbo Interactive Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001. BDO Audit Pty Ltd T J Kendall Director BDO Audit Pty Ltd Brisbane, 6 September 2012 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 71 2011 - 2012Jumbo Interactive Annual Report addiTional inforMaTion for lisTed publiC CoMpanies addiTional inforMaTion for lisTed publiC CoMpanies The following additional information is required by the Australian Securities Exchange in respect of listed public companies only. 1. shareholding The Company has 42,802,560 ordinary shares on issue, each fully paid. There are 1,544 holders of these ordinary shares as at 31 August 2012. Shares are quoted on the Australian Securities Exchange under the code JIN and on the German Stock Exchange. In addition, there are an aggregate total of 1,800,000 options over ordinary shares on issue but not quoted on the Australian Securities Exchange. a. distribution of shareholders number as at 31 august 2012 Category (size of Holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over number Holders of ordinary shares 186 626 297 386 49 1,544 ordinary shares Held 112,539 1,938,502 2,350,385 10,653,373 27,747,761 42,802,560 b. The number of shareholdings held in less than marketable parcels is: 57 5,798 c. The names of the substantial shareholders listed in the holding Company’s register as at 31 August 2012 are: name Vesteon Pty Ltd and associates National Nominees Limited d. voting rights ordinary shares 9,488,540 3,440,827 percentage Held 22.17 8.04 The voting rights attached to each class of equity security are as follows: Ordinary shares — Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. Options — Optionholders have no voting rights until their options are exercised. e. 20 largest shareholders — ordinary shares as at 31 august 2012 name 1. VESTEON PTY LTD 2. NATIONAL NOMINEES LIMITED 3. 4. JP MORGAN NOMINEES AUSTRALIA LIMITED UBS NOMINEES PTY LTD number of ordinary fully paid shares Held % Held of issued ordinary Capital 8,935,873 3,440,827 2,021,582 2,013,766 20.88 8.04 4.72 4.70 72 2011 - 2012Jumbo Interactive Annual Report addiTional inforMaTion for lisTed publiC CoMpanies name 5. MR BARNABY COLMAN CADDICK 6. WARAWONG PTY LTD 7. MR IVAN TANNER + MRS FELICITY TANNER 8. MR MIKE VEVERKA 9. MR YARON SHAMGAR 10. ANTSORM CONSULTING PTY LTD 11. MR VICTOR JOHN PLUMMER 12. MR CRAIG KUHN 13. MR SAM HARGREAVES ORR 14. J P MORGAN NOMINEES AUSTRALIA LIMITED 15. TRUWIND PTY LTD 16. MR XAVIER BERGADE 17. CITICORP NOMINEES PTY LTD 18. MR DAVID PLATT + MRS SUE PLATT 19. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 20. MR JOHN ROSAIA number of ordinary fully paid shares Held % Held of issued ordinary Capital 917,000 874,733 650,348 552,667 500,000 488,348 450,504 400,000 361,000 348,980 314,871 300,000 281,717 270,000 232,047 204,000 2.14 2.04 1.52 1.29 1.17 1.14 1.05 0.93 0.84 0.82 0.74 0.70 0.66 0.63 0.54 0.48 2. The name of the Company Secretary is Mr Bill Lyne. 3. The address of the principal registered office in Australia is Level One, 601 Coronation Drive, Toowong, QLD, 4066. Telephone (07) 3831 3705. 23,558,263 55.04 4. registers of securities are held at the following addresses: Computershare Investor Services Pty Ltd 117 Victoria Street West End QLD 4101 5. stock exchange listing Quotation has been granted for all the ordinary shares of the Company on the Australian Securities Exchange. 6. unquoted securities as at 31 august 2012 Options over Unissued Shares. A total of 1,800,000 options are on issue to employees under the Jumbo Interactive Limited Employee Option Plan and third parties for services rendered exercise price $0.50 $0.70 expiry date 15 February 2014 14 December 2014 number on issue 800,000 1,000,000 number of Holders 6 2 7. other disclosures There are no other disclosures. 73 2011 - 2012Jumbo Interactive Annual Report 

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