Jinhui Shipping and Transportation Limited
Annual Report 2013

Plain-text annual report

A World of Opportunities Delivering sustainable growth to lotteries in Australia and overseas with innovations to internet lotteries not available anywhere else in the world. Annual Report 2013 Since 2000, Jumbo has grown with the rise in popularity of internet lotteries and is today working in four countries to sustainably expand government lotteries via internet innovations not available anywhere else in the world. "Less than 1% of lottery tickets sold today around the world are on the internet. Some countries have already reached 30% internet penetration. Our goal at Jumbo is to be at the forefront of this growth trend." Mike Veverka CEO and Founder Table of Contents Introduction Highlights Milestones 05 Letter from the CEO 12 Innovation 22 06 Business Overview 14 Leadership Team 26 08 Global Growth Strategy 18 Financial Report 30 Letter from the Chairman 10 Online Transition 20 Directors’ Report 32 Auditor’s Independence Declaration Corporate Governance Statement Financial Statements Notes to the Financial Statements 48 Directors’ Declaration 98 49 Independent Auditor's Report 99 54 Additional Information 101 58 Corporate Directory 103 4 Jumbo InteractIve Ltd annuaL report 2013 IntroductIon 5 Introduction Jumbo Interactive Limited (ASX:JIN) is an internet lottery business. Jumbo created the very popular OzLotteries.com website selling official Australian lottery tickets that have raised over $100 million for public causes in the past five years. In 2013 alone, Jumbo’s Total Transaction Value (TTV) reached $109 million for Australian lotteries with a population of 22 million in Australia. In 2014, Jumbo’s potential customer reach will be 480 million people in Germany, Mexico, USA and Australia. Jumbo Interactive head office in Brisbane, Australia. (This property is not an asset of the group). Brief History It is rare for an internet business to have a history so long. Jumbo Interactive was listed on the Australian Stock Exchange in 1999 as an e-commerce business with an online shopping mall. Shortly after this in 2000, laws were changed to permit the sale of lottery tickets on the internet in Australia so Jumbo started selling charity art union games online. In 2005 Jumbo expanded into national lotteries with the acquisition of the OzLotteries.com website. After enjoying impressive domestic growth, in 2009 Jumbo began to actively explore international online lottery opportunities and in the 2013 financial year, succeeded in securing agreements in Germany, Mexico and the USA. Jumbo will continue this growth strategy to achieve its vision of becoming the global leader in the online lottery industry. Core values of innovation, sustainable growth and respect for all stakeholders have provided the foundations for Jumbo’s success into the future. 6 Jumbo InteractIve Ltd annuaL report 2013 Highlights HIgHLIgHts 7 Jumbo Market Capitalisation as at 30 June ($m) $65.3MILLION 47% Added to S&p/ASX All Ordinaries Index March 2013 Jumbo Total Transaction Value as at 30 June ($m) $109.1 MILLION 9% Continuing strong growth $20 $40 $60 $80 $20 $40 $60 $80 $100 $120 12/13 11/12 10/11 12/13 11/12 10/11 Jumbo Share Price as at 30 June ($) $1.50pER SHARE 43% Significantly out-performed the S&p/ASX 200 Index Jumbo Dividend Declared Per Share as at 30 June (¢) 3.0¢ DIVIDEND Stable dividend payment 12/13 11/12 10/11 12/13 11/12 10/11 $0.50 $1.00 $1.50 0.5 1.0 1.5 2.0 2.5 3.0 8 Jumbo InteractIve Ltd annuaL report 2013 mILestones 9 Milestones Over the last 12 months, Jumbo has made significant progress in its strategy of growth through international expansion. NT Agreement Five year agreement with Tatts Group. SA website launched sa.ozlotteries.com launched 32% Total Transaction Value over TTV increase $100m FY2011–12 announced, up 32% from FY2010–11. 800 Convenience Stores Agreements with major USA retailers Hess Corporation and Tops Friendly Markets add over 800 retail outlets to the Lotto Points Plus joint venture. Agreement Continuation Tatts Reseller Agreement in Victoria continued. Jumbo expanded into Germany Jumbo expands into Germany signing agreements with the Ministry of Interior of Schleswig Holstein to sell official German lottery tickets online. Jumbo later received licences in all German states. 2012 Aug Sep Nov Dec 2013 Mar Jun Jul 1 1 78 4 Jumbo released five new products 4 1 1 1 1 78 4 1 1 78 1 1 78 4 Fun pickers Group play Digital Instants 1 1 78 4 1 1 1 1 1 1 Smart Signs e-Retailer 1 1 Agreement with Sorteo Games to sell official Mexican lottery tickets Jumbo expanded into the USA Jumbo expands into the USA through a joint venture with Retail Gaming Solutions called Lotto Points Plus. 97% Annual increase in Likes to Oz Lotteries Facebook page 550,000 unique visitors in one day. OZ Lotto $100m jackpot attracted over 550,000 unique visitors to OzLotteries.com in one day. Licences obtained for all German States. 10 Jumbo InteractIve Ltd annuaL report 2013 Letter from tHe cHaIrman 11 Letter from the Chairman Opportunities to Prosper This year has been an exciting one for Jumbo, with significant gains in our global growth strategy. Jumbo is now working internationally to help government lotteries transition their games online. Dear Shareholder, I am pleased to report that 2012/13 has been a very positive year for Jumbo Interactive, confirming earlier statements made by our CEO in 2011 that “the internet is a clear future for lotteries around the world”. Highlights for the year include our success in obtaining licences to sell lottery tickets online in both Germany and Mexico as well as our continued growth within Australia. This has been reflected in our share price which has increased significantly over the past twelve months as we continue to work closely with our partners to ensure this growth goes on into the future. Our CEO, Mr Mike Veverka, will go into more detail in his letter to shareholders, however, it would be remiss of me not to acknowledge the amount of time and effort that has been devoted to the Company by our team which now stands at 95 employees. All are dedicated to the Company and I would like to thank them on behalf of the Board and management for their continued effort and support. They are lead by a strong management group which is headed up by Mike, with this team having the broad range of expertise required to allow our expansion to progress smoothly. I would like to acknowledge the support of the Board and management, and also thank our shareholders who are now starting to reap the benefits of the work of all concerned within the Jumbo group. david K barwick Chairman 12 Jumbo InteractIve Ltd annuaL report 2013 Letter from tHe ceo 13 Letter from the CEO Delivering in Australia and Internationally 2013 was the year that Jumbo expanded into an international business encompassing four countries - Australia, Germany, Mexico and the USA. Our audience is expanding from 22 million to 480 million people and we’ll be offering new games such as the large US Powerball, Megamillions and Eurojackpot games. Dear Shareholder, In 2013 Jumbo’s TTV reached a record of $109 million. This was the Company’s 13th year of continued growth since 2000, in line with our sustainable growth strategy. Preparations for expansion into new international markets have increased expenses resulting in a lower profit, however dividends have been retained at last year’s levels in the expectation that these new markets will soon be generating sales. Shareholders have cause for celebration as Jumbo’s share price finished the financial year at $1.50, a 43% increase from the beginning of 2013. In fact, the rapid rise in investor approval for Jumbo sent the share price as high as $3.28 during the year indicating that the market supports Jumbo’s business model and growth strategy. There is a definite trend in lotteries around the world in adopting a regulated internet lottery e-retailer model that Jumbo has pioneered. This model delivers increased sustainable revenue to lotteries, improves player protection and pushes unregulated operators out of the market. Jumbo is engaging the industry in a debate to further adopt this model through our participation at major global lottery industry events. In 2014 we will begin earning revenue from Germany, Mexico and the USA and build upon the foundations laid in 2013. Our staff have adapted well to new regional cultures and the new challenges that come with international expansion. I thank them for their long hours and efforts as well as guidance from the Board during this exciting time in Jumbo’s evolution. mike veverka CEO 14 Jumbo InteractIve Ltd annuaL report 2013 busIness overvIew 15 Business Overview Lotteries have for decades (and centuries in some countries) provided entertainment and prizes to billions of people around the globe. Through diverse cultures across many continents, lotteries remain a common thread that sustainably raise billions each year for public causes such as education and health. In 2012, an estimated US$50 billion was raised from US$275 billion in ticket sales across 86 countries.1 The internet has introduced a new wave of innovations for lotteries as well as a few challenges. Customers are demanding the real convenience and new styles of play to be available on devices they have in their pockets and at their homes. Jumbo has been delivering sustainable growth via internet lotteries since 2000 and is today a market leader in this expanding industry. Beginning in Australia, Jumbo has developed an industry-leading software platform with features not available anywhere else in the world. Auto-play, Group-play and Lotto Points are just a few of these innovations that combine with reliable ticket sales available 24 hours a day. Customers enjoy a very high standard of convenience and enjoyment while playing their favourite lotteries via all modern devices including smartphones and desktop computers. Established traditional retailers are an important part of a lottery’s success. Jumbo recognises this and has developed technology specifically for them. Jumbo SmartSigns and Jumbo e-Retailer are just two of these solutions with more in development. Jumbo SmartSigns allow physical signs to be scanned with smartphones to purchase lottery tickets and commissions are paid to the sign owner. Jumbo e-Retailer allows retailers to direct their customers to their own website to purchase lottery tickets and earn a commission from sales. In the USA, Jumbo is part of a joint venture called “Lotto Points Plus” providing traditional lottery retailers with physical and interactive solutions to boost lottery sales. Customers now include Hess Corporation and Tops Friendly Markets with over 800 retail outlets in the USA. 1 La Fleur’s Magazine, Vol 20 No 4, March April 2013. It’s convenient21% Why buy lottery tickets online? In a recent survey of OzLotteries.com customers, convenience and ease of use were the two most common reasons for choosing to buy lottery tickets on the internet. It’s secure8% Other12% I get the results emailed to me15% It’s quick14% I won’t lose my ticket12% easy17% It’s Lottery Authorised Agent Website Customer Official Ticket Lottery Authorised Agent Website Customer Official Ticket Jumbo Jumbo 04 11 60 04 11 60 Lottery Draw Result Authorised Agent Prize Customer Lottery Draw Prize Payment Result Authorised Agent Prize Customer Prize Payment Lottery Unauthorised Lottery Website Fradulent Lottery Customer Ticket Unauthorised Lottery Website Fradulent Customer Ticket 04 11 7 8 04 11 7 8 Lottery Draw Result Unauthorised Lottery Website No Customer Lottery Draw Prize Payment Result Unauthorised Lottery Website No Customer Prize Payment Lottery Authorised Agent Website Customer Official Ticket Lottery Authorised Agent Website Customer Official Ticket Lottery Unauthorised Lottery Website Unguaranteed Customer Entry Lottery Unauthorised Lottery Website Unguaranteed Customer Entry Jumbo Jumbo Scam Scam 04 11 60 16 Jumbo InteractIve Ltd annuaL report 2013 04 11 60 Lottery Lottery 04 11 60 Unauthorised Lottery Website Unauthorised Lottery Website Fradulent Customer Ticket busIness overvIew 17 Customer Ticket Fradulent 04 11 60 Lottery Draw Result Authorised Agent Prize Authorised Agent Website Authorised Agent Website Customer Official Ticket websites selling tickets in most well known lotteries around the world with no regulation in place. Customer Official Ticket Lottery Lottery Jumbo falls into the category of regulated internet lottery e-retailers by actively pursuing relevant licences and accreditations from official lottery operators. After becoming an official e-retailer, Jumbo follows government guidelines to grow sales using its inhouse software and marketing skills as a competitive advantage. Customer Prize Payment Jumbo This is distinctly different from unregulated internet lottery e-retailers that sell tickets outside the control of the official lottery operators. This activity leads to significant loss of government revenue for worthwhile causes as well as a lack of player protection. A search on the internet quickly reveals multiple unauthorised 04 11 60 04 11 60 Jumbo Lottery Draw Result The nature of the internet renders legal avenues ineffective and a number of operators have flourished over the past decade. The only effective method that lotteries have to stop this leakage to unauthorised internet lottery e-retailers is to provide a framework for regulated internet lottery e-retailers. Enterprises can then follow a legal framework and those choosing not to follow the framework are quickly squeezed out of the market. The lottery benefits by plugging the leaks increasing sales and player protection at the same time. Jumbo has championed this approach for over a decade and provides significant support to industry bodies as they debate and decide on the best way to advance into the future. The regulated internet lottery e-retailer model also provides lotteries with a solution to the growing problem of traditional lottery retailers suffering from the migration of lottery players onto the internet. Jumbo has developed a variety of products that enable existing lottery retailers to keep their businesses growing by embracing the internet. Authorised Agent Prize Lottery Draw Result Lottery Draw Result Authorised Authorised Agent Prize Agent Prize Regulated internet lottery e-retailers Customer Prize Payment Customer Prize Payment Lottery Lottery Authorised Agent Website Authorised Agent Website Customer Official Ticket Customer Official Ticket The only effective method that lotteries have to stop this leakage to unauthorised internet lottery e-retailers is to provide a framework for regulated internet lottery e-retailers. Customer Prize Payment 04 04 11 11 7 8 7 8 Lottery Draw Result Unauthorised Lottery Website Unguaranteed Customer Prize Payment Lottery Draw Result Unauthorised Lottery Website Unguaranteed Customer Prize Payment Lottery Draw Result Lottery Draw Result Unauthorised Lottery Website Unauthorised Lottery Website No Customer Prize Payment No Customer Prize Payment Unregulated internet lottery e-retailers Lottery Unauthorised Lottery Website Unauthorised Lottery Website Unguaranteed Customer Entry Unguaranteed Customer Entry Lottery Jumbo Jumbo Scam Scam 04 11 60 04 11 60 04 11 60 04 11 60 Lottery Draw Result Lottery Draw Result Authorised Agent Prize Authorised Agent Prize Customer Prize Payment Customer Prize Payment Lottery Draw Result Lottery Draw Result Unauthorised Lottery Website Unauthorised Lottery Website Unguaranteed Customer Prize Payment Unguaranteed Customer Prize Payment 18 Jumbo InteractIve Ltd annuaL report 2013 gLobaL growtH strategY 19 new York munich Global Growth Strategy mexico city Jumbo’s sustainable growth strategy has already delivered consistent growth over the past decade with ticket sales growing at 16% Compound Annual Growth Rate. Sustainability is the key component which is achieved through constant innovation and respect for all stakeholders including lottery operators, governments and other retailers. Australia Australian lotteries and our major partner, The Tatts Group, will continue to be our priority in the years ahead with many new initiatives due for release to keep OzLotteries.com fresh and appealing to our customers. 1.57 million people have registered with OzLotteries.com which represents 11% of the addressable market in Australia. Many of these customers are registered with the Jumbo AutoPlay feature which automatically places their entry every week. This percentage is expected to continue to climb based on evidence in other countries where the percentage of online players has reached 30%. Lotto Points is one of Jumbo’s innovations that lets customers earn points with each purchase. This has proven to be an effective way to retain repeat customers and is the foundation to Jumbo’s loyalty programs overseas. Lottery Affiliates is Jumbo’s lottery- based affiliate program allowing others to market lotteries and earn commissions. This program has been popular with many companies wishing to participate in regulated internet lottery sales without the need to build and maintain expensive software systems. A large component of what is built and learned in Australia is relevant to international markets and has already been adapted for Germany, Mexico and the USA. This scalability is a key asset and enables Jumbo to expand efficiently. Social media is a key component for continued growth. The number of ‘likes’ on the Oz Lotteries Facebook page has almost doubled in 12 months and now stands at over 22,000 likes. Germany In July 2013, Jumbo announced that licences have been obtained in every state in Germany paving the way for regulated internet lottery sales to the entire German population. Development of the German website is progressing towards a launch in December 2013. At this point a marketing campaign will commence to build the customer database to a sufficient size to reach break even. It is expected to take two to three years and will require a cash investment of between $2 million to $3 million that will be funded out of Jumbo’s cash reserves. Success in Germany will be a catalyst for entry into surrounding countries. An office has been established in Munich and will become a base for operations in Europe. brisbane USA In June 2013, Jumbo announced agreements signed with Hess Corporation and Tops Friendly Markets, two major retail chains in the USA. The agreements were made via Jumbo’s 50/50 joint venture with Retail Gaming Solutions called ‘Lotto Points Plus’. This joint venture will combine interactive and physical solutions for lottery retailers and prepares foundations for full internet lottery sales in the USA. At this point in time, the US lottery industry has not fully adopted internet lottery sales however Jumbo has been working with US lottery organisations and retailers on finding the most suitable way to embrace internet sales and support increased offline sales. Mexico In November 2012, Jumbo announced an agreement with Sorteo Games providing access into the Mexican lottery market for web and mobile sales. Development of the Mexican website is progressing towards an expected launch in September 2013 at which point marketing will commence. This will be similar to Germany and will require $2 million to $3 million over a two to three year period to achieve break even. An office has been established in Mexico City and will become a base for operations in Latin America. 20 Jumbo InteractIve Ltd annuaL report 2013 onLIne transItIon 21 Online Transition Digital disruption has transformed many industries including travel, accommodation and retail sales. Lotteries are also going through an online transition and customers around the world are enjoying the quick, easy and convenient way to purchase their regular lottery tickets online. OzLotteries.com websites visits Desktop Smartphone Tablet Smartphones and tablets are gaining mass market appeal, enabling customers to buy online anywhere at any time. Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jun-13 33%of tickets are now purchased on a mobile device 22 Jumbo InteractIve Ltd annuaL report 2013 Innovation The key to becoming the global leader in online lotteries is innovation. Jumbo’s IT team is dedicated to developing cutting edge technology to engage and entertain customers. Jumbo Smart Signs Traditional lottery retailers now have the technology to participate in internet lottery sales without losing commissions or customers. Jumbo Smart Signs 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. 1 1 20 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. Over 12 months, the number of Facebook ‘likes’ has almost doubled indicating the success of social media. 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. InnovatIon 23 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. $ $ 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. 24 Jumbo InteractIve Ltd annuaL report 2013 InnovatIon 25 Technology is revolutionising the world. Jumbo enables lottery ticket sales across smart-phones, tablets and computers through responsive websites and mobile apps. 97% 97% increase in Facebook Likes over 12 months 97 % Connected Customers The internet has disrupted every industry and economy. For lotteries to stay relevant to customers they need to go online. Digital retailing offers lottery organisations new channels to reach their customers. Lottery organisations partner with Jumbo to provide the technology so that customers can play their favourite lottery games online. There are many advantages in digital ticket delivery to the connected customer. Automated repeat ticket purchases lodge customers’ tickets automatically each week. New communication tools such as email, SMS and push notifications remind customers to play. Jumbo is constantly evolving and updating online purchase channels to ensure tickets can be bought on smartphones, tablets and computers. 26 Jumbo InteractIve Ltd annuaL report 2013 LeadersHIp team 27 Leadership Team The board and managment team have the skills and ability to deliver Jumbo’s vision of being the leading global lottery e-retailer. Left to right Brian J. Roberts; David Todd; Kate Waters; Xavier Bergade; Bill Lyne; Mike Veverka; David Barwick; Brad Board; Fernando Carrillo; Gerhard J. Sparrer. 28 Jumbo InteractIve Ltd annuaL report 2013 LeadersHIp team 29 David Barwick Chairman and Non-executive Director David Barwick has over 40 years experience in the management and administration of publicly listed companies in Australia and North America. During this period David has held the position of Chairman, Managing Director or President of over 30 public companies with strengths in strategic planning, restructuring and financing entities. He is currently Chairman of Jumbo Interactive Limited as well as of Planet Metals Limited and Metallica Minerals Limited. Bill Lyne Non-executive Director and Company Secretary BCom, CA, FCIS, FCSA, FAICD, F Fin Bill Lyne is the Principal of Australian Company Secretary Service that provides secretarial, corporate compliance and governance services to public company clients in a wide range of industries. Prior to this, Bill was Company Secretary and CFO of First Australian Building Society, having previously spent many years in credit and lending positions in merchant banking. Bill holds a Bachelor of Commerce and is a Chartered Accountant. He is a Fellow of the Institute of Chartered Secretaries & Administrators (UK), Chartered Secretaries Australia, and the Australian Institute of Company Directors. He also has life membership with the Financial Services Institute of Australasia. Mike Veverka Chief Executive Officer & Executive Director BEng (Hons) Mike Veverka is CEO and founder of Jumbo Interactive. He has a proven track record in business and computing, establishing several successful startups to meet new consumer demands for online products. His entrepreneurial flair and ambition for innovation were displayed at the age of fifteen when he created and sold his first software package to Hewlett Packard. Mike worked as a design engineer and computer programmer before founding ‘Squirrel Software Technologies’ that provided some of Australia’s first internet services and e-commerce software. As founder and leader, Mike plays a pivotal role in the growth strategy, innovation and promotion of Jumbo. David Todd Chief Financial Officer MBA, GradDipACG, CAIB(SA), BCom, FCSA, FCIS David has extensive capabilities in business administration with strengths in credit risk management and international business. His experience in financial management spans 24 years in the banking industries of South Africa, New Zealand and Australia, and small cap and SME environments. David holds a Bachelor of Commerce, a Master of Business Administration, an Associate Diploma in Banking, and a Graduate Diploma of Advanced Corporate Governance. He is a Fellow of Chartered Secretaries Australia and a Fellow of the Institute of Chartered Secretaries and Administrators (UK). David brings a wealth of commercial expertise to Jumbo Interactive as Chief Financial Officer. Kate Waters Chief Administrative Officer DipBus, DipHR As Chief Administrative Officer, Kate plans, organises and delegates resources to meet Jumbo Interactive’s business objectives. She provides executive direction for major projects, human resources, operations, workplace health and safety, and equal employment opportunities. She is responsible for the development and planning of company policies to ensure the smooth and successful running of the Company. Kate also provides the foundations for Jumbo’s international operations, setting up infrastructure and offices in new markets. Brad Board Chief Marketing Officer Brad has significant experience in marketing lotteries online in his role as Chief Marketing Officer at Jumbo Interactive. He has provided strategic direction for the successful growth of the Oz Lotteries brand and product in Australia, and has negotiated mutually beneficial lottery e-retail agreements for Jumbo Interactive internationally. Brad is responsible for marketing strategy across all channels and ensures that the online experience and service offering delivered by Jumbo effectively engages and satisfies customers in Australia and internationally. Xavier Bergade Chief Technology Officer As Chief Technology Officer, Xavier ensures that Jumbo’s technology services are continually improving and innovating while remaining secure for customer transactions. Recently Xavier has been responsible for the adaptation of the successful Australian OzLotteries.com website to other markets. JumboLotto websites in Mexico and Germany will soon be live and available for online lottery purchases for customers in these markets. Ensuring capabilities for customer purchases on any device demands that websites continually evolve as new mobile and computer products are released to market with unprecedented frequency. Brian J. Roberts President, North America DipEC Cert(OM) Brian has extensive experience in lotteries and gaming, software development and production and is a recognised creative innovator. His experience in the lottery and gaming industry spans over 40 years with senior roles including Director of Creative Content Development at GTECH, COO and Senior Vice President of Marketing at On-Point Technology Systems, President of Lotomark and Vice President of Lottery Operations at International Totalizator and Lottery Systems. Brian has developed, implemented and managed gaming systems across many international jurisdictions. He holds over twenty issued and pending gaming industry USA patents. Gerhard J. Sparrer Managing Director, Germany Gerhard was responsible for successfully building up Stanleybet Germany, a subsidiary of leading European gaming group Stanleybet International that provides virtual, sports and lottery products. He is a serial entrepreneur starting several successful high-tech companies. His previous roles include co-founder and CEO of Maxxio Technologies AG, and Managing Director of a Siemens Group company, Datentechnik Intercom GmbH. Gerhard has extensive experience in and knowledge of the European gaming market. He has a pioneering spirit, commitment to new technology and a willingness to satisfy customers. Fernando Carrillo Country Manager, Mexico BEcon Fernando has worked in the Mexican and Latin American lottery industry for over six years. Prior to joining Jumbo, he managed the nationwide lottery network as Mexico’s General Manager for Gtech. Before working in the gaming industry, Fernando managed e-business and data for Telmex, the biggest telecommunications company in Latin America. His studies in management, leadership and strategy at the Kellogg School of Management (Northwestern University) complement Fernando’s broader knowledge of economics, finance and operations management. 30 Jumbo InteractIve Ltd annuaL report 2013 fInancIaL report 31 Financial Report Jumbo enjoyed its highest earnings so far in the 2012–13 financial year with increased lottery ticket sales and revenue growth. International investments are now being made to ensure future prosperity. 32 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 33 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 2013. 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 2.0 cent per share on ordinary shares for the year ended 30 June 2012 paid on 28 September 2012 Interim dividend of 1.5 cent per share on ordinary shares for the year ended 30 June 2013 paid on 28 March 2013 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 2013 of 1.5 cents per share on ordinary shares to be paid on 27 September 2013 (approximately $653,289). Operating and Financial Review 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 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 Note 1(d) for details. The consolidated profit of the Group amounted to $2,982,157 (2012: $6,743,525), after providing for income tax $2,333,761 (2012: $2,310,544) – refer Note 4 for tax expense details, which is a large decrease on the results reported for the year ended 30 June 2012. Net reportable operating revenues increased 4.6% to $25,191,215 (2012: $24,087,742) and Total Transaction Value increased by 8.8% to $109,086,062 (2012: $100,256,769). This improvement was largely from continued growth in the Australia online lottery business. Group earnings before interest, tax, depreciation and amortisation decreased by $3,834,187 from $10,515,449 to $6,681,262. $856,051 $653,289 $1,509,340 The main reasons for the decrease in profitability, notwithstanding an increase in revenue, are due mainly to (i) costs associated with increased efforts to expand into new internet lottery markets overseas; and (ii) a revision of the customer acquisition costs treatment within the existing policy (see below for details). Total Transaction Value (TTV) is the gross amount received for the sale of goods and rendering of services. Other revenue, being mainly interest on cash, increased by 23.6% to $1,108,744 (2012: $897,294) due to higher cash and cash equivalent balances and improved liquidity management. Like-for-Like Underlying Financial Forecasts of Core Operations Below is a summary of the financial results and to provide the user a like-for-like comparison of core operating activities, including adjustments for non-core activities: TTV Reported Revenue EBITDA International expansion costs1 Changed treatment of customer acquisition costs2 Like-for-like EBITDA of core operations Reported Profit After Tax International expansion costs1 Changed treatment of customer acquisition costs2 Tax concession overclaim3 Discontinued operations4 Like-for-like PAT of core operations fY 2013 $m 109.1 25.2 6.7 3.6 1.9 12.2 3.0 2.5 0.8 0.5 - 6.8 fY 2012 $m 100.3 24.1 10.5 1.0 11.5 6.7 0.7 (0.5) (0.3) 6.6 YoY change % 8.8 4.6 (36.2) 260.0 6.1 (55.2) 257.1 200.0 100.0 3.0 1 These costs relate to international expansion activities. As noted previously, the Company continues to focus on securing offshore expansion opportunities. During the financial year the Company announced the following international agreements: 1. July 11, 2013. Awarded licences in all German States 2. June 25, 2013. Agreements signed with major retail chains in USA (Joint Venture referred to in 5 below) 3. March 5, 2013. Expands into Germany 4. November 30, 2012. Expands into Latin America through landmark deal in Mexico. 5. November 29, 2012. Expands into USA through Joint Venture. 6. September 7, 2012. 5 new lottery products released at the World Lottery Summit in Montréal. To support these expansion efforts the Company has progressively increased its international expansion expenditure as shown above. These expenses relate to general marketing costs to find target jurisdictions as well as increased employee costs and establishment costs in jurisdictions that have been signed. To date, the Company has been successful in expanding into Mexico and Germany and has plans to enter more international markets in the future. All these expenses have been fully recognised in the Group’s consolidated profit and loss and funded from operating cash flows with significant payback opportunities expected in the years ahead. 2 Previously, customer acquisition costs were capitalized and amortised over an 18 month period. From 1 July 2012, these costs are expensed as they are incurred. This changed treatment does not affect Net Cash Flows and will reduce the variance between reported Net Profit After Tax and Operating Cash Flows. 3 The Company undertakes a large R&D program with regards to its proprietary website developments. When the 2012 income tax return was just finalised, some R&D costs were identified that are non-deductible for tax purposes that were incorrectly claimed over the past four years. This had the effect of carried forward income tax losses being fully utilised earlier than previous with a consequential adjusted tax payable of $6,065 for the period to 2011 and $552,033 for 2012. 4 An income tax effect for discontinued operations. Further discussion on the Group’s operations now follows: 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 3.5% growth in net reportable operating revenues to $24,403,335 (2012: $23,584,433). Gross transactional value increased 8.6% to $108,267,254 (2012: $99,719,424), being achieved mainly through an increasing customer database. 34 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 35 These investments in staff and improvements to underlying technology, as well as efforts to expand into overseas markets have increased the operating costs. This has supported the growth in revenues and resulted in a decrease in operating profit contribution to $6,354,472 (2012: $10,002,512). As previously advised, in May 2012, the Tatts Group began accepting online orders from NSW customers bringing NSW into line with other states. The resultant expected reduction in TTV through the New South Wales Lotteries co-branded website has been more than offset by 38% growth through the ozlotteries.com website leading to the 8.6% increase in overall TTV. 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 $866,480 (2012: $548,760) as the product range and customer database expanded, with an operating loss of $84,962 (2012: profit $33,866). A return to profitability for this segment is expected in the 2014 financial year. c. Summary of Results The results for the Company are summarised below: Total Transaction 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 2013 $ 109.1 million 6,681,262 2,982,157 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 2013 $ 24.5 million 20.5 million 13.8 million 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 1  Includes cash held under term deposit and customer account balances payable (refer to Note 11: Cash and Cash Equivalents and Note 20: Trade and Other Payables for details). Five Year Share price Analysis PROFIT - NPAT EPS Share Price Shares on Issue Market Cap 2013 $ 2,982,157 6.9¢ 150.0¢ 43.6 million 65.3 million 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 1 After impairment losses of $8,290,292. 2 After impairment reversal $1,258,354 and voluntary administration expenses $1,224,339. $ $ $ $ 2,530,054 2,530,054 668,000 668,000 Financial position The net assets of the Group have increased by $2,425,516 from 30 June 2012 to $20,509,225. This increase is largely due to improved operating performance of the Group. The Group’s working capital, being current assets less current liabilities, has declined marginally from $11,686,335 in 2012 to $11,315,057 in 2013 due mainly to investing activities and tax effect. Non-current assets increased by$2,646,255 to $9,799,668 due mainly to overseas investments during the financial year. 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 non-current assets of $2,646,255 as a result of: Cash reserves were used to acquire 7% equity in Sorteo Games Inc., USA (see Note 16: Available-for-sale financial assets for details) b. Increase in contributed equity of $688,000 resulting from (see Note 24: Contributed Equity for details): Issue of 1,140,000 shares as a result of exercise of options previously granted to employees, directors, and third party consultants Likely Developments, Key Business Strategies and Future prospects The Company continues its efforts to grow its core domestic lottery market in Australia while respecting responsible gaming commitments and the needs of all industry stakeholders, including other lottery channels. 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 Company will seek a further term when this contract expires which will be considered on reasonable commercial grounds and may or may not be granted. 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 continues to actively pursue 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. In November 2012, the Company entered the USA market through a 50/50 owned joint venture company established in New York to provide new generation lottery solutions incorporating internet, physical merchandising and lottery affinity/loyalty programs to US retailers. The Company secured an agreement in November 2012 to sell the national lottery games of Mexico to its residents and in July 2013, it secured an agreement to sell the national lottery games of Germany to its residents. The lottery market sizes of Mexico and Germany are $1.3 billion and $10 billion respectively. Revenues are expected to be generated from these businesses in the first half of the 2014 financial year. 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. Although the costs to establish these overseas businesses will depress profits for the next one to two years, the Group will be well placed for sound results in the medium to long term.   36 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 37 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. Information on Directors David K Barwick Experience Appointed as a Board member on 30 August 2006 and Chairman on 7 November 2007. David Barwick is an accountant by profession with over 40 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. Other current directorships1 Current Director and Chairman of Metallica Minerals Limited (since 11 March 2004), and current Director and Chairman of Planet Metals Limited (since 9 June 2009). Interest in shares and options2 None Special responsibilities Chairman (non-executive); Chair of the Nomination and Remuneration Committee; and member of the Audit Committee. Former directorships (in the last three years)3 Previous Director and Chairman of MetroCoal Limited (from 6 July 2007 to 30 June 2012), and previous Chairman and Director of Orion Metals Limited (from 28 November 2008 to 30 September 2012). Mike Veverka Qualifications Bachelor of Engineering (Honours) Experience 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. Other current directorships1 None Interest in shares and options2 9,290,221 ordinary shares in Jumbo Interactive Limited. Special responsibilities Chief Executive Officer Former directorships (in the last three years)3 None Bill Lyne Qualifications Bachelor of Commerce; Chartered Accountant Experience 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. Other current directorships1 None Interest in shares and options2 None Special responsibilities Chair of the Audit Committee; member of the Nomination and Remuneration Committee; and Company Secretary. Former directorships (in the last three years)3 None 1 Current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 2 Includes transactions since the end of the reporting date up to and including the date of the Directors’ Report. 3 Directorships held in the last three years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Meetings of Directors The number of meetings of the Board of Directors (including board committees) held during the year ended 30 June 2013 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 attended 15 16 16 16 16 16 eligible to attend 6 - 6 attended 5 - 6 nomination and remuneration committee eligible to attend 4 - 4 attended 4 - 4 38 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 39 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 150,000 900,000 1,050,000 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 or since the financial year ended 30 June 2013, 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 Directors Consultants grant date 15 February 2011 21 October 2009 14 December 2011 Issue price of shares 50 cents 70 cents 70 cents number of shares issued 650,000 390,000 100,000 1,140,000 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 9.25% (9.00% up to 30 June 2013) 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 or Monte Carlo Simulation methodologies. 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 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 may be sought if 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                               40 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 41 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 code: 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 on 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 2013 financial year result were based on the Group’s overall financial performance (such as 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 achievements. 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 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) and the current year. The lower profit in 2013 was due to (i) a change in the treatment of customer acquisition costs and (ii) increased costs relating to international expansion. The latter has led to agreements being secured in Mexico, USA and Germany during the financial year which are expected to have a positive contribution to profits in future financial years. The general 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. The Board is of the opinion that these results can be attributed, in part, to the 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 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. 2013 $109.1 mil $ 2,982,157 $ 2,982,157 - 150.0¢ 3.5¢ 46.2% 6.9¢ 14.5% 14.5% - 2012 $100.3 mil $6,743,525 $6,476,516 $267,0095 105.0¢ 1.5¢ 187.8% 16.7¢ 37.3% 35.8% 1.5% 2011 2010 $66.0 mil1 $75.9 mil1 $4,834,455 ($7,311,048) $3,260,7972 $4,932,851 ($98,396)4 ($10,571,845)3 27.0¢ 0.5¢ 27.9% (17.0¢) (114.6%) 51.1% (165.7%) 37.0¢ 0.5¢ 38.9% 12.1¢ 47.9% 48.9% (1.0%) 2009 $58.6 mil $2,957,335 $2,957,335 n/a 21.5¢ 1.5¢ 2.2% 6.9¢ 20.8% 20.8% n/a 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 the Group during the financial year: David K Barwick Chairman (non-executive) Mike Veverka Director and Chief Executive Officer Bill Lyne Non-executive Director and Company Secretary David Todd Chief Financial Officer Xavier Bergade Chief Technology Officer Kate Waters Chief Administrative Officer Brad Board Chief Marketing Officer Brad Board became a member of the key management personnel for the financial year ended 30 June 2013 as a result of rejoining the company on 31 July 2012. He was previously employed by the Company from 12 April 2001 to 4 March 2011.   42 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 43 Details of Remuneration Details of compensation of key management personnel of Jumbo Interactive Limited Group are set out below: 2013 short term employee benefits post employment benefits cash salary, fees and leave $ cash bonus $ non-monetary benefits $ superannuation $ Directors David Barwick Mike Veverka Bill Lyne Bill Lyne – as Company Secretary Other key management personnel David Todd Xavier Bergade Kate Waters Brad Board2 Total key management personnel remuneration 70,000 378,605 50,000 25,691 200,000 200,000 130,000 120,577 1,174,873 - 124,500 - - 62,250 63,750 29,575 51,188 331,263 - - - - - - - - 6,300 25,000 4,500 - 23,603 23,738 14,362 15,459 112,962 1 Includes share based payments over the remaining term on those options exercised during the financial year. 2 Brad Board became a member of KMP on 19 December 2012. 2012 Directors David Barwick Mike Veverka Bill Lyne Bill Lyne – as Company Secretary Other key management personnel David Todd Xavier Bergade Kate Waters Total key management personnel remuneration short term employee benefits cash salary, fees and leave $ cash bonus $ 70,000 360,000 50,000 33,601 200,000 200,000 110,000 - 160,000 - - 80,000 80,000 15,000 1,023,601 335,000 non-monetary benefits $ - - - - - - - - post employment benefits superannuation $ 6,300 46,800 4,500 - 25,200 25,200 11,250 119,250 1 Includes share based payments over the remaining term on those options exercised during the financial year. Long term benefits Long service leave $ termination benefits $ - 10,179 - - 5,273 5,158 2,922 2,359 25,891 - - - - - - - - - Long term benefits Long service leave $ termination benefits $ - 9,971 - - 3,835 3,835 2,397 20,038 - - - - - - - - share based payments options1 $ - 2,961 - total $ 76,300 541,245 54,500 - 25,691 - 2,989 4,878 - 291,126 295,635 181,737 189,583 10,828 1,655,817 share based payments options1 $ 16,805 13,820 15,491 total $ 93,105 590,591 69,991 - 33,601 14,495 9,199 3,249 323,530 318,234 141,896 73,059 1,570,948 proportion of remuneration that is performance based % % of value of remuneration that consists of options % - 23 - - 21 22 16 27 - 1 - - - 1 3 - proportion of remuneration that is performance based % % of value of remuneration that consists of options % - 27 - - 25 25 11 18 2 22 - 4 3 2                                     44 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 45 c. Cash bonuses Key management personnel are also entitled to a short term cash incentive based on performance criteria described in section (a) to this Remuneration Report. The majority of there were paid out on 5 February 2013 and 29 August 2013, with $54,000 expected to be paid in the 2014 financial year. Details of these short-term incentives recognised as remuneration, forfeited or available for vesting in later years is outlined below: Kmp David Barwick Bill Lyne Mike Veverka David Todd Xavier Bergade Kate Waters Brad Board Included in remuneration $ n/a n/a 124,500 62,250 63,750 29,575 51,188 forfeited in year $ n/a n/a 115,500 57,750 56,250 22,425 38,812 d. 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, as measured by the five business day moving average, 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. e. 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: 2013 Directors Mike Veverka Other key management personnel Kate Waters number of shares issued on exercise of options number of options exercised amount paid per share $ amount unpaid per share 390,000 390,000 150,000 150,000 390,000 390,000 150,000 150,000 0.70 0.50 - - f. Value of options to key management personnel Details of the value of options exercised and lapsed during the year to key management personnel as part of their remuneration are summarised below: grant details for the financial year ended 30 June 2013 overall value per option at grant date1 $ exercised2 no. value at date exercised3 $ date no. Lapsed no. Lapsed $ vested no. vested % unvested % Lapsed % Directors Mike Veverka 30 Oct 2009 550,000 0.069 390,000 263,250 Other key management personnel Kate Waters 15 Feb 2011 150,000 0.065 700,000 150,000 540,000 256,500 519,750 - - - - 390,000 100 - 150,000 - 540,000 100 100 - - - - - - 1 The value of options granted during the period differs from the expense recognised as part of each key management person’s remuneration in (c) above because the value is the grant date fair value calculated in accordance with AASB 2 Share-Based Payment. 2 All options exercised resulted in the issue of ordinary shares in Jumbo Interactive Limited on a 1:1 basis. All persons exercising options paid the applicable exercise price. 3 The value of the options that have been exercised during the year as shown in the above table was determined as the intrinsic value of the options at exercise date i.e. the excess of the market value at exercise date over the strike price of the option. g. 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 written notice or making payment in lieu of notice, based on the individual’s annual salary component. 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: Ongoing Base salary: $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: Ongoing Base salary: $200,000 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 six months base salary. Xavier Bergade Contract term: Ongoing Base salary: $200,000 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 six months base salary. Kate Waters                             46 Jumbo InteractIve Ltd annuaL report 2013 dIrectors’ report 47 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 29 August 2013 Contract term: Ongoing Base salary: $130,000 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 three months base salary. Brad Board Contract term: Ongoing Base salary: $150,000 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 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. 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 2013 $ 2012 $ 37,345 29,693 39,297 18,689 3,180 67,038 - 57,986 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.                 48 Jumbo InteractIve Ltd annuaL report 2013 corporate governance statement 49 Auditor’s Independence Declaration 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. 1. Lay solid foundations for management and oversight 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. 2. Structure the Board to add value 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. Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia DECLARATION OF INDEpENDENCE BY TIMOTHY KENDALL TO THE DIRECTORS OF JUMBO INTERACTIVE LIMITED Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia As lead auditor of Jumbo Interactive Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been no contraventions of: DECLARATION OF INDEPENDENCE BY TIMOTHY KENDALL TO THE DIRECTORS OF JUMBO INTERACTIVE LIMITED • 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. DECLARATION OF INDEPENDENCE BY TIMOTHY KENDALL TO THE DIRECTORS OF JUMBO As lead auditor of Jumbo Interactive Limited for the year ended 30 June 2013, I declare that, to the INTERACTIVE LIMITED 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. • • As lead auditor of Jumbo Interactive Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been no contraventions of: This declaration is in respect Jumbo Interactive Limited and the entities it controlled during the period. • • 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 t J Kendall Director T J Kendall BDO Audit Pty Ltd Director Brisbane, 28 August 2013 bdo audit pty Ltd Brisbane, 29 August 2013 BDO Audit Pty Ltd Brisbane, 28 August 2013 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 050110 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. 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. 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. 50 Jumbo InteractIve Ltd annuaL report 2013 corporate governance statement 51 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 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. 3. promote ethical and responsible decision making 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 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 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 developed the following objectives in 2012 regarding gender diversity and aims to achieve these objectives over the five years to 2017 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 nº - 1 36 95 2013 - 2017 To have at least 1 woman on the Board 20 % Maintain at least the current number (one) of women 38 % Achieve the percentage of women in excess of 40% 100 % The Company also has a documented share trading policy for Directors, key management personnel and other staff and consultants which was revised in June 2013 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. 4. Safeguard integrity in financial reporting 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.   52 Jumbo InteractIve Ltd annuaL report 2013 corporate governance statement 53 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 at times 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. 5. Make timely and balanced disclosure In this Principle the Council states that companies should “promote timely and balanced disclosure of all material matters 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. This policy was revised in June 2013 and released on the ASX. 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. 6. Respect the rights of shareholders  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. 7. Recognise and manage risk 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 a Nomination and Remuneration Committee, as noted above under Principle 2. 54 Jumbo InteractIve Ltd annuaL report 2013 consoLIdated statement of fInancIaL posItIon 55 consoLIdated statement of fInancIaL posItIon 55 Jumbo Interactive Limited and its Controlled Subsidiaries Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2013 consolidated group   note  2013 $ revenue from continuing operations Cost of sales Gross profit Other revenue/income Distribution expenses Marketing costs Occupancy expenses Administrative expenses Finance costs Share of losses of joint ventures accounted for using the equity method 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 Items that may be reclassified subsequently to profit or loss Foreign currency translation Gain on the revaluation of available-for-sale financial assets, net of tax Other comprehensive income for the year, net of tax 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) 3 4 3 4 5 6 10 10 10 10 10 10 25,191,215 (3,290,679) 21,900,536 1,108,744 (26,029) (3,599,335) (762,743) (13,208,145) (9,500) (87,610) 5,315,918 (2,333,761) 2,982,157 - 2,982,157 17,360 233,989 251,349 2012 $ 24,087,742 (4,215,602) 19,872,140 897,294 (29,367) (1,344,409) (715,173) (9,518,739) (107,677) - 9,054,069 (2,577,553) 6,476,516 267,009 6,743,525 19,319 - 19,319 3,233,506 6,762,844 ¢ 6.9 6.8 6.9 6.8 - - ¢ 16.7 16.6 16.0 15.9 0.7 0.7 Jumbo Interactive Limited and its Controlled Subsidiaries Consolidated Statement of Financial Position As at 30 June 2013 consolidated group note  2013 $ 2012 $ 24,460,703 21,686,797 current assets Cash and cash equivalents Trade and other receivables Current tax assets Inventories total current assets non-current assets Receivables Investments accounted for using the equity method Available-for-sale financial assets Property, plant and equipment Intangible assets Deferred tax assets total non-current assets total assets current liabilities Trade and other payables Borrowings Current tax liabilities 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 Profits appropriation reserve Other reserves total equity 11 12 21 13 14 15 16 18 19 22 20 21 22 23 21 23 22 418,917 - 55,098 24,934,718 193,688 1 2,530,054 366,059 6,314,304 395,562 9,799,668 34,734,386 12,496,899 - 752,946 369,816 13,619,661 - 133,857 471,643 605,500 14,225,161 20,509,225 24 29,544,572 (17,398,827) 7,602,499 760,981 20,509,225 401,718 383,245 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 28,876,572 (17,398,827) 6,129,682 476,282 18,083,709 The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. The above Statement of Financial Position should be read in conjunction with the accompanying notes.                                                                                                                   56 Jumbo InteractIve Ltd annuaL report 2013 consoLIdated statement of casH fLows 57 Jumbo Interactive Limited and its Controlled Subsidiaries Consolidated Statement of Changes in Equity For the year ended 30 June 2013 contributed equity $ accumulated losses $ profits appropriation reserve $ share-based payments reserve $ foreign currency translation reserve $ available- for-sale financial asset reserve $ 27,113,586 (17,398,827) - 409,962 (42,747) - - - - 1,854,733 (91,747) - - 1,762,986 - - - - - - - - - 6,743,525 - - 6,743,525 - - (613,843) - - - - - - - - 89,748 (613,843) 89,748 - - 19,319 19,319 - - - - - 28,876,572 (17,398,027) 6,129,682 499,710 (23,428) - - - - - 668,000 - - 668,000 - - - - - - - 2,982,157 - - - 2,982,157 - (1,509,340) - - - - - - - - 33,350 (1,509,340) 33,350 - - 17,360 - 233,989 233,989 17,360 233,989 3,233,506 - - - - - - - - 668,000 (1,509,340) 33,350 (807,990) 29,544,572 (17,398,827) 7,602,499 533,060 (6,068) 233,989 20,509,225 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. CONSOLIDATED GROUP Balance at 1 July 2011 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 transactions with owners in their capacity as owners Balance at 30 June 2012 Total comprehensive income for the year Profit/(loss) for the year Other comprehensive income Foreign currency translation differences Available-for-sale financial asset reserve Total comprehensive income for the year Transactions with owners in their capacity as owners Issue of shares Dividends paid Share-based payments Total transactions with owners in their capacity as owners Balance at 30 June 2013 total equity $ 10,081,974 6,743,525 - 19,319 6,762,844 1,854,733 (91,747) (613,843) 89,748 1,238,891 18,083,709 2,982,157 - 17,360 - - - - - - - - - - - - - - Jumbo Interactive Limited and its Controlled Subsidiaries Consolidated Statement of Cash Flows For the year ended 30 June 2013 consolidated group note  2013 $ 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 27,822,996 (18,833,903) 918,060 (9,500) 87,249 (1,216,734) Net cash inflows/(outflows) from operating activities 28 (a) 8,768,168 24,914,449 (10,978,560) 776,414 (107,677) 1,055,794 (2,717,340) 12,943,080 - - (67,811) (2,696,152) 1,125 (2,296,066) (241,080) (209,863) (2,011,160) 17,813 (4,740,356) (2,762,838) 24 24 668,000 - (444,771) (1,509,340) (1,286,111) 1,707,005 (91,747) (1,436,476) (466,115) (287,333) 2,741,701 9,892,909 32,205 21,686,797 11 24,460,703 23,214 11,770,674 21,686,797 cash flows from investing activities Payments for investments Loan to joint venture Payments for property, plant and equipment Payments for intangibles Proceeds from sale of property, plant and equipment Net cash inflows/(outflows) from investing activities cash flows from financing activities Proceeds from issue of shares Payment for buyback of shares 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 Cash and cash equivalents at end of year The above Statement of Cash Flows should be read in conjunction with the accompanying notes.       58 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 59 Jumbo Interactive Limited and its Controlled Subsidiaries Notes to the Financial Statements For the year ended 30 June 2013 Note 1: Statement of Significant Accounting Policies The financial statements of Jumbo Interactive Ltd (the Company) for the year ended 30 June 2013 were authorised in accordance with a resolution of the Directors on 29 August 2013 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. Joint Venture entities Interests in joint venture partnerships/entities are accounted for in the consolidated financial statements using the equity method. Under the equity method of accounting, the group’s share of profits or losses of joint venture partnerships/entities are recognised in consolidated profit or loss and the group’s share of the movements in reserves of joint venture partnerships/entities are recognised in consolidated other comprehensive income. The cumulative movements are adjusted against the carrying amount of the investment. Details of joint venture entities are set out in Note 15. 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 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. 60 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 61 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. 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 installments. 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. Revenue from the sale of lottery tickets and related services are recognised on a net inflow basis. 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. 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 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. 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. Collectability 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. Available-for-sale financial assets Available-for-sale financial assets comprise investments in listed and unlisted entities and any non- derivatives that are not classified as any other category of financial assets, and are classified as non- current assets (unless management intends to dispose of the investment within 12 months of the end of the reporting period). After initial recognition, these investments are measured at fair value with gains 62 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 63 or losses recognised in other comprehensive income (available-for-sale investments reserve). Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset (which constitutes objective evidence of impairment) the full amount including any amount previously charged to other comprehensive income is recognised in profit or loss. Purchases and sales of available-for-sale financial assets are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in other comprehensive income. On sale, the amount held in available- for-sale reserves associated with that asset is recognised in profit or loss as a reclassification adjustment. Interest on corporate bonds classified as available-for-sale is calculated using the effective interest rate method and is recognised in finance income in profit or loss. Investments in subsidiaries, associates and joint venture entities are accounted for in the consolidated financial statements as described in note 1(a). 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. 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 18(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 19(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 During the financial year, management revised the treatment of customer acquisition costs within the existing policy to expensing the costs as they are incurred. Previously, expenditure on customer acquisition was recognised at cost of acquisition with a finite life and 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 were tested semi-annually at each reporting date for impairment and carried at cost less accumulated amortisation and any impairment losses. Previous customer acquisition costs will be fully amortised in November 2013. 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. 64 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 65 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 credit outstanding for large business (source: Reserve Bank of Australia) as the Group repaid all borrowings outstanding during the year, being 5.44% (2012: the weighted average interest rate on the Group’s borrowings outstanding during the year, being 5.83%). 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. 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. 66 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 67 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 preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates judgments and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgments, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgments and estimates will seldom equal actual results. The judgments, estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Joint Ventures As discussed in Note 1(a), joint ventures are accounted for using the equity method. The fair value of the group’s interest is determined based on a value-in-use calculation which is determined by discounting projected future cash flows using a risk adjusted pre-tax discount rate and impairment is assessed for the individual asset. With specific reference to Lotto Points Plus LLC, a key judgment by management is that merchandising agreements are signed up as anticipated by the joint venture. Available-for-sale financial assets Available-for-sale financial assets are accounted for as detailed in Note 1(b). With specific reference to the group’s interest in Sorteo Games Inc, a key management judgment is that the agreements with the national lotteries in Mexico will continue. Goodwill and other intangible assets The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other intangible assets have suffered any impairment in accordance with the accounting policy stated in Note 1(n). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. 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. With specific reference to the internet lottery segment CGU, a key judgment by management is that the reseller agreements with the Tatts Group will continue. Refer to Note 19(c) for details. No impairment has been recognised in respect of goodwill, domain names and intellectual property at the end of the reporting period. aa. Changes in accounting policies i. 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. ab. 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 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. 68 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 69 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. 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). Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Share based payment reserve Available-for-sale financial assets reserve Retained earnings/(accumulated losses) Profits appropriation reserve Total shareholders’ equity Profit/(loss) for the year Total comprehensive income for the year 2013 $ 3,654,205 7,320,855 10,975,060 1,621,477 1,839,616 3,461,093 7,513,967 29,544,572 533,060 233,989 (26,037,236) 3,239,582 7,513,967 4,748,922 4,982,912 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 - (26,037,236) - 3,339,046 (999,905) (999,905) Guarantees 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 21: Borrowings, and are ongoing. The parent entity has also 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 2013 (2012: $0). Contingent liabilities The parent entity has no contingent liabilities other than the guarantees referred to above. 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 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 Bad debts written off1 1 Included in administration expense 2013 $ 2012 $ 2,356,860 1,951,394 22,834,355 22,136,348 25,191,215 24,087,742 918,060 776,414 112,084 - 78,600 1,108,744 37,248 37,090 46,542 897,294 26,299,959 24,985,036 Consolidated Group 2013 $ 2012 $ 1,258,899 2,031,780 1,179,446 3,036,156 1,477 8,023 65,311 42,366 118,291 99,341 68,067 67,341 2,095,563 2,005,801 762,743 5,255,959 511,377 346,446 715,173 3,550,413 308,796 -       70 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 71 Consolidated Group 2013 $ 2012 $ ii. Financial performance and cash flow information There was no effect of the discontinued operations for the year ended 30 June 2013. 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 26: Segment Reporting.  note 22 Note 5: Income Tax Expense a. The components of tax expense comprise: Current tax Deferred tax arising from origination and reversal of temporary differences 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. Reconciliation: Tax at the Australian tax rate of 30% (2012: 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 1,985,168 68,084 4,326 276,183 - 2,333,761 1,594,776 50,578 146,235 10,005 - 688,251 276,178 - (432,262) 2,333,761 2,333,761 - 2,333,761 1,875,741 456,228 (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 Note 6: Discontinued Operations i. Description 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. Control of the company was returned to the directors 19 June 2012 following completion of the voluntary administration process. The company is in the process of being de-registered. Manaccom Pty Ltd was a part of the Software Publishing and Distribution operating segment which ceased operations in the 2011 financial year. 2012 Revenue (note 3) Expenses Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) attributable to members of the parent entity Profit/(loss) attributable to owners of the parent entity relates to: Profit/(loss) from continuing operations Profit/(loss) from discontinued operations manaccom pty Ltd $ - - - 267,009 267,009 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 - - - - total $ - - - 267,009 267,009 6,476,516 267,009 6,743,525 - - - - 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 Consolidated Group 2013 $ 1,506,136 112,962 25,891 10,828 1,655,817 2012 $ 1,358,601 119,250 20,038 73,059 1,570,948 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.                                                                             72 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 73 b. Equity Instruments Options Holdings Details of options held directly, indirectly or beneficially by key management personnel and their related parties are as follows: balance at beginning of year granted as remuneration during the year exercised during the year other changes during the year balance at end of year vested at end of year vested and exercisable vested and unexercisable 30 June 2013 Xavier Bergade 150,000 150,000 30 June 2012 David Barwick 550,000 550,000 Mike Veverka 550,000 Bill Lyne David Todd 700,000 Xavier Bergade Kate Waters 700,000 150,000 3,200,000 - - - - - (550,000) - (160,000) - (550,000) - (700,000) - (550,000) - - - (2,510,000) - - - - - - - - - 150,000 150,000 150,000 150,000 150,000 150,000 - - 390,000 390,000 - - - - - 390,000 - - 150,000 150,000 150,000 150,000 690,000 150,000 690,000 150,000 690,000 - - - - - - - - Shareholdings Details of ordinary shares held directly, indirectly or beneficially by key management personnel and their related parties are as follows: 30 June 2013 David Barwick Mike Veverka Bill Lyne David Todd Xavier Bergade Kate Waters Brad Board balance at beginning of year - 9,197,540 - 20,000 300,000 - - 9,517,540 granted as remuneration during the year - - - - - - - - Issued on exercise of options during the year - 390,000 - - - 150,000 - 540,000 1 Includes on-market transactions and acquisitions under the dividend reinvestment plan. 30 June 2012 David Barwick Mike Veverka Bill Lyne David Todd Xavier Bergade Kate Waters balance at beginning of year 101,345 9,398,278 - 10,135 300,000 - 9,809,758 granted as remuneration during the year - - - - - - - Issued on exercise of options during the year 550,000 160,000 550,000 700,000 550,000 - 2,510,000 1 Includes on-market transactions and acquisitions under the dividend reinvestment plan. other changes during the year1 - (297,319) - - (300,000) (150,000) - (747,319) other changes during the year1 (651,345) (360,738) (550,000) (690,135) (550,000) - (2,802,218) balance at end of year - 9,290,221 - 20,000 - - - 9,310,221 balance at end of year - 9,197,540 - 20,000 300,000 - 9,517,540 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 and Rosch Realty Pty Ltd are 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 provided services and Rosch Realty Pty Ltd provided an agent service during the financial year. Office rent received Consultancy fees paid Sales commission paid Services 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. Salary and superannuation 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 Consolidated Group 2013 $ 2012 $ 4,550 - 6,000 17,018 3,275 59,911 - - 79,864 67,496 Consolidated Group 2013 $ 2012 $ 99,084 99,084 111,714 111,714 37,345 29,693 67,038 39,297 18,689 57,986 3,180 3,180 169,302 - - 169,700                                             74 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 75 Note 9: Dividends a. Ordinary dividends Final fully franked ordinary dividend of 2.0 (2011: 0.5) cent per share franked at the tax rate of 30% (2011: 30%) Interim fully franked ordinary dividend of 1.5 (2012: 1.0) cent per share franked at the tax rate of 30% (2012: 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 2013 and 30 June 2012 were as follows: 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 2013 fully franked ordinary dividend of 1.5 (2012: 2.0) cent per share franked at the rate of 30% (2012: 30%). The aggregate amount of the proposed dividend expected to be paid on 27 September 2013, but not recognised as a liability at year end, is: c. Franked dividends The franked portions of dividends recommended after 30 June 2013 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 2014. Franking credits available for subsequent financial years based on a tax rate of 30% (2012: 30%): Consolidated Group 2013 $ 2012 $ 856,050 197,685 653,290 416,157 1,509,340 613,842 1,509,340 - 1,509,340 466,115 147,727 613,842 Consolidated Group 2013 $ 2012 $ 653,288 848,251 Consolidated Group 2013 $ 2012 $ 2,774,210 2,352,755 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 $279,981 (2012: $363,536). 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 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 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 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 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 Consolidated Group 2013 $ 2012 $ 2,982,157 6,476,516 - 267,009 2,982,157 6,743,525 43,050,857 40,389,629 2,982,157 6,476,516 - 267,009 2,982,157 6,743,525 43,050,857 40,389,629 1,027,309 44,078,166 207,985 40,597,614 Consolidated Group   note 2013 $   24,460,703 3,241,041 13,622,929   16,863,970 2012 $ 21,686,797 2,905,785 13,905,199 16,810,984 2,996,733   4,600,000 7,596,733 20 1,875,813   3,000,000 4,875,813 Customer account balances being deposits and prize winnings earmarked for payment to customers on demand.                                                               76 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 77 Note 12: Trade and Other Receivables Current Trade receivables Allowance for doubtful debts Other receivables Prepayments Consolidated Group 2013 $ 194,755 - 194,755 103,136 121,026 418,917 2012 $ 163,678 - 163,678 82,916 155,124 401,718 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. Movement in the trade receivables allowance for doubtful debts is as follows: Opening balance Provision for doubtful receivables Reversal of amounts provided Closing balance Consolidated Group 2013 $ - - - - 2012 $ 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 21(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 2013 amount Impaired - - - - - - amount not impaired $ 177,328 - 1,147 16,280 - 194,755 total $ 177,328 - 1,147 16,280 - 194,755 2012 amount Impaired - - - - - - amount not impaired $ 161,650 - - - 2,028 163,678 total $ 161,650 - - - 2,028 163,678 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 2013 the Group had current trade receivables of $0 (2012: $0) that were impaired. Note 13: Inventories Current Finished goods at cost Note 14: Receivables – Non-Current Opening balance at cost Foreign currency translation increment Loan in joint venture entity Share of joint entity’s results: Revenues Expenses Profit before income tax Income tax benefit Profit after income tax Net interest in joint venture Consolidated Group 2013 $ 2012 $ 55,098 98,625 Consolidated Group 2013 $ 241,080 40,218 281,298 25,022 (112,632) (87,610) - (87,610) 193,688 2012 $ - - - - - - - - - The receivable is due to be repaid by 4 December 2017 and the effect of discounting is considered not to be material. This receivable is not past due nor impaired. Note 15: Investments Accounted for Using the Equity Method Interest in Joint Venture The Company has a 50% interest in the joint venture entity Lotto Points Plus Inc, incorporated in the USA, which is involved in the provision of retailer-based lottery merchandising and affinity programs combined with internet lottery solutions in the USA. The voting power held by the Company is 50%. The interest in joint venture entities is accounted for in the consolidated financial statements using the equity method of accounting. Unlisted shares at cost Consolidated Group 2013 $ 2012 $ 1 -                                   78 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 79 Note 16: Available-For-Sale Financial Assets (Non-Current) Note 18: Property, Plant and Equipment plant and equipment  At cost Accumulated depreciation Leasehold improvements - at cost Accumulated amortisation Total property, plant and equipment Consolidated Group 2013 $ 1,063,856 (762,508) 301,348 295,746 (231,035) 64,711 366,059 Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year. a. Movements in Carrying Amounts consolidated group Year ended 30 June 2012 Balance at the beginning of year Additions Disposals Depreciation/amortisation expense Carrying amount at the end of year Year ended 30 June 2013 Balance at the beginning of year Additions Disposals Depreciation/amortisation expense Carrying amount at the end of year plant and equipment $ Leasehold Improvements $ 264,443 67,811 (1,124) (99,341) 231,789 231,789 205,663 (17,813) (118,291) 301,348 195,925 - (1) (67,341) 128,583 128,583 4,195 - (68,067) 64,711 2012 $ 876,006 (644,217) 231,789 291,551 (162,968) 128,583 360,372 total $ 460,368 67,811 (1,125) (166,682) 360,372 360,372 209,858 (17,813) (186,358) 366,059 2012 $ - - - - 2012 % 100 100 100 100 100 100 - 1 - - unlisted securities Equity securities unlisted securities Unlisted securities comprise an investment in Sorteo Games Inc., USA. The Company owns 6.7% of the issued share capital of Sorteo Games Inc. The Company does not control Sorteo Games Inc because it is not able to govern the activities of this entity so as to obtain benefits from it. Shares in Sorteo Games Inc are carried at a cost of US$1.67. Fair value cannot be reliably measured because variability in the range of reasonable fair value estimates is significant. As a result, the unlisted investment is reflected at cost. Unlisted available-for-sale financial assets exist within active markets and could be disposed of if required. The Company does not intend to dispose of its shares at present. Reconciliation: Opening value at cost Foreign currency translation increment 2013 $ 2,530,054 2,296,065 233,989 2,530,054 Note 17: Controlled Entities 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). Percentage Ownership 2013 % 100 100 100 100 100 100 100 1 100 100 direct subsidiaries of the ultimate parent entity Jumbo Interactive Limited: Benon Technologies Pty Ltd TMS Global Services Pty Ltd Jumbo Ventures Pty Ltd Intellitron Pty Ltd Manaccom Pty Ltd1 Jumbo Lotteries Pty Ltd Jumbo Interactive Asia Pty Ltd2 Cook Islands Tattslotto Pty Ltd Jumbo Interactivo de Mexico SA de CV2 Jumbo Interactive GmbH2 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. country of Incorporation Australia Australia Australia Australia Australia Australia Australia Cook Islands Mexico Germany country of Incorporation  Australia Australia Fiji Fiji Papua New Guinea Cook Islands United States of America United States of America 1 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. 2 This Company was established by the Group during the 2013 financial year. Percentage Indirect Ownership 2013 % 100 100 100 100 100 99 100 100 2012 % 100 100 100 100 100 99 100 100                       80 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 81 Note 19: 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 a. Movements in Carrying Amounts Consolidated Group 2013 $ 3,686,355 (854,805) 2,831,550 53,499 (23,340) 30,159 6,081,799 (3,738,117) 2,343,682 4,446,799 (4,264,569) 182,230 132,471 (131,040) 1,431 888,342 888,342 192,641 (155,731) 36,910 6,314,304 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 consolidated group: Year ended 30 June 2012 Balance at the beginning of year Additions acquired Additions internally developed Amortisation charge Closing value at 30 June 2012 Year ended 30 June 2013 Balance at the beginning of year Additions acquired Additions internally developed Amortisation charge Closing value at 30 June 2013 goodwill $ Intellectual property $ website development costs $ customer acquisition costs $ software $ domain names $ other $ total $ 2,831,550 442 1,126,095 814,627 893 816,434 118,315 5,708,356 - - - 30,000 - 1,653,993 2,273 37,903 - 971,983 - - (177) (770,993) (1,191,099) (2,388) - - - - 1,724,169 971,983 (41,144) (2,005,801) 2,831,550 30,265 1,327,085 1,277,521 778 854,337 77,171 6,398,707 2,831,550 30,265 1,327,085 1,277,521 778 854,337 77,171 6,398,707 - - - - - - 1,927,157 - - 4,998 34,005 - (106) (955,560) (1,095,291) (4,345) - - 39,003 1,972,157 (40,261) (2,095,563) - - 2,831,550 30,159 2,343,682 182,230 1,431 888,342 36,910 6,314,304 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 $3,414,254 (2012: $3,458,943). 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 2013 $ 2,831,550 2,831,550 888,342 888,342 2012 $ 2,831,550 2,831,550 854,337 854,337 The recoverable amount of the cash-generating unit is based on a value-in-use calculation using a discounted cash flow model based on a one year projection approved by management and extrapolated over a five year period using a steady rate, together with a terminal value. The growth rate used in these projections does not exceed the historical growth rate of the relative cash-generating unit.                                             82 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 83 Key assumptions used for value-in-use calculation of the CGU is as follows: • Annual growth rate of 3% (2012: 3%) • Terminal growth rate of 3% (2012: 3%) • Discount rate of 17% being the calculated weighted average cost of capital based on the capital asset pricing model (2012: 17%) • Reseller agreements will be renewed as and when they expire Management determined projections 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. The recoverable amount of the goodwill of the internet lottery CGU is estimated to be $26,062,605 which exceeds the carrying amount at 30 June 2013 by $22,342,713. If a discount rate of 98% and growth rate of 0% was used instead of 17% and 3% respectively, the recoverable amount of goodwill would equal the carrying amount. Should the lottery reseller agreements not be extended for further periods when they expire, an impairment loss would be recognised up to the maximum carrying value of $3,719,892. Note 20: 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 21: Borrowings Current Secured liabilities Bank loans Chattel mortgages Total secured current interest-bearing liabilities Total current interest-bearing liabilities Non-current Secured liabilities Bank loans Total secured non-current interest-bearing liabilities Total current and non-current secured liabilities Bank loans/overdraft Chattel mortgages note 2013 $ 12,496,899 2,390,179 604,598 1,532,981 372,408 4,900,166 2012 $ 10,354,686 1,534,138 519,422 3,179,749 245,564 5,478,873 11 7,596,733 4,875,813 Consolidated Group 2013 $ 2012 $ - - - - - - - - - 166,666 28,014 194,680 194,680 250,000 250,000 416,666 28,014 444,680 Bank overdraft A bank overdraft facility of $500,000 (2012: $500,000) is repayable on demand and currently bears interest at a current floating rate of 10.24% p.a. (2012: 10.24% p.a.). Bank loans A bank loan with current outstanding $0 (2012: $416,666). An amount of $250,000 is available to be re-drawn as at the financial year end and would be repayable in quarterly installments of $41,667 and the final installment of $208,333 would be due on 14 November 2013. The bank loan bears interest at the current floating at the time it is re-drawn. (2012: 5.83% p.a.). 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 2013. Note 22: Tax current Income tax (payable)/refundable Consolidated Group 2013 $ (752,946) 2012 $ 383,245 non-current Deferred tax liabilities comprise temporary differences recognised in the profit or loss as follows: Property plant and equipment opening balance $ charged to profit or Loss $ depreciation Amortisation Other Balance at 30 June 2012 Property plant and equipment depreciation Amortisation Other Balance at 30 June 2013 3,702 244,653 - 248,355 5,013 383,256 14,062 402,331 1,311 138,603 14,062 153,976 100,064 (36,535) 5,783 69,312 closing balance $ 5,013 383,256 14,062 402,331 105,077 346,721 19,845 471,643                                                             84 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 85 non-current Deferred tax assets comprise temporary differences recognised in the profit or loss as follows: Attributable to tax losses Property plant and equipment 329,834 (329,834) opening balance $ charged to profit or Loss $ depreciation Amortisation Accruals Provisions Other Balance at 30 June 2012 Property plant and equipment depreciation Amortisation Accruals Provisions Other Balance at 30 June 2013 56,107 55,718 50,593 157,740 46,594 696,586 75,029 33,787 80,963 158,313 46,242 394,334 18,922 (21,931) 30,370 573 (352) (302,252) 26,454 (22,878) (41,323) 57,602 (18,627) 1,228 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 (2012: $3,884,942) closing balance $ - 75,029 33,787 80,963 158,313 46,242 394,334 101,483 10,909 39,640 215,915 27,615 395,562 Note 23: Provisions Current Long service leave Make good provision Non-current Long service leave Consolidated Group 2013 $ 216,379 153,437 369,816 133,857 133,857 $ $ $ $ $ 2012 $ 181,247 153,437 334,684 103,708 103,708 $ $ $ $ $ Make good 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 make good provision $ 153,437 - 153,437 Note 24: Contributed Equity Share capital Fully paid ordinary shares Movements in ordinary share capital Consolidated Group Consolidated Group 2013 shares 2013 $ 2012 shares 2012 $ 43,552,560 29,544,572 42,412,560 28,876,572 date 1 July 2011 Shares issued during the year 30 September 2011 6 March 2012 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 Shares issued during the year details Opening balance Dividend reinvestment plan1 Exercise of options Exercise of options Exercise of options Exercise of options Dividend reinvestment plan2 Exercise of options Exercise of options Unmarketable parcel sale and buyback3 Closing balance 29 August 2012 17 September 2012 20 December 2012 15 January 2013 1 February 2013 25 February 2013 4 March 2013 30 June 2013 Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Closing balance number of shares 39,536,805 158,921 1,500,000 200,000 550,000 350,000 136,858 150,000 160,000 (330,024) 42,412,560 390,000 50,000 150,000 100,000 10,000 40,000 400,000 43,552,560 Issue price $ 0.237 0.500 0.700 0.700 0.700 0.804 0.500 0.700 0.278 0.700 0.500 0.500 0.700 0.500 0.500 0.500 $ 27,113,586 37,639 750,000 140,000 385,000 245,000 110,094 75,000 112,000 (91,747) 28,876,572 273,000 25,000 75,000 70,000 5,000 20,000 200,000 29,544,572 1  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. 2 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. 3  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.                                                                                                                                               86 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 87 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 29: Share- Based Payments. ii. For information relating to share options issued to third parties during the financial year, refer to Note 29: 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 less than 40% (2012: less than 40%). The gearing ratios for the year ended 30 June 2013 and 30 June 2012 are as follows: Total borrowings Total equity Total capital Gearing ratio Note 25: Capital and Leasing Commitments a. Operating lease commitments note 21 Consolidated Group 2013 $ - 20,509,225 20,509,225 0% 2012 $ 444,680 18,083,709 18,528,389 2% Consolidated Group 2013 $ 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 765,890 93,596 859,486 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. 2012 $ 792,652 818,766 1,611,418 b. Chattel Mortgage Commitments Payable Not later than one year Later than one year but not later than five years Less future finance charges Consolidated Group 2013 $ - - - - - 2012 $ 28,991 - 28,991 (977) 28,014 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 was 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 there is an estimated commitment for the financial year. The agreement was signed for a further 2 years until 1 September 2014 and subsequently amended by mutual consent on 30 June 2013, based on which there is no longer an estimated commitment. Note 26: 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 2013 $ 2012 $ - 33,384 Consolidated Group 2013 $ 2012 $ 160,763 160,763 - 160,763 206,653 367,416 Note 27: 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 (the Board). Comparatives for 2012 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.                       88 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 89 Segment information a. Description of segments Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board 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 Board 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 2012 are stated on this basis. b. Segment information provided to the Board 2013 The segment information provided to the Board for the reportable segments for the year ended 30 June 2013 is as follows: Total segment revenue/income Inter-segment revenue Revenue from external customers NPBT Interest revenue Finance costs expense Depreciation and amortisation Bad debt written off There was no impairment charge or other significant non-cash item recognised in 2013 relating to the segment. 2012 The segment information provided to the Board 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 There was no impairment charge or other significant non-cash item recognised in 2012 relating to the segment. Internet Lotteries $ 24,403,335 - 24,403,335 6,354,472 810,150 978 2,168,753 346,446 Internet Lotteries $ 23,584,433 - 23,584,433 10,002,512 771,129 3,907 2,147,568 c. Other segment information i. Segment revenue The revenue from external parties reported to the Board 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 Total revenue/other income from continuing operations (note 3) Consolidated Group 2013 $ 24,403,335 866,480 918,060 112,084 26,299,959 2012 $ 23,584,433 548,760 776,414 75,429 24,985,036 The entity is domiciled in Australia. The amount of its revenue from external customers in Australia is $23,336,409 (2012: $22,086,403), and the total revenue from external customers in other countries is $2,963,550 (2012: $2,898,633). Revenues of $1,705,713 (2011: $1,664,189) 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). A reconciliation of the NPBT to profit before income tax is provided as follows: NPBT All other segments Other Interest revenue Corporate expenses Finance costs expense Share based payments expense Directors’ remuneration Salaries and wages Other Profit before income tax from continuing operations (per P&L) Consolidated Group 2013 $ 6,354,472 (84,962) - 918,060 (8,522) (33,350) (130,800) (807,977) (891,003) 5,315,918 2012 $ 10,002,512 (33,866) 1,091 776,414 (103,770) (89,748) (130,800) (917,628) (450,136) 9,054,069                  90 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 91 Note 28: 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 Share of losses of joint ventures accounted for using the equity method 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 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 Multi Option/Chattel mortgages Loans Bank guarantees Amount available Consolidated Group 2013 $ 2,982,157 2,163,630 118,291 (62,326) 87,610 33,350 17,360 (31,077) 13,878 43,526 (1,228) 856,040 1,276,173 65,281 69,312 1,136,191 8,768,168 2012 $ 6,743,525 2,073,142 99,341 (23,214) - 89,748 19,319 (34,190) (90,881) (58,732) 302,252 618,756 2,786,408 70,859 153,976 192,771 12,943,080 Consolidated Group 2013 $ 1,211,000 - - (160,763) 1,050,237 2012 $ 1,453,666 (28,014) (416,666) (367,416) 641,570 Note 29: 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 Consolidated Group 2013 $ 27,088 6,262 33,350 2012 $ 88,357 1,391 89,748 Employee option plan 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. 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. 600,000 of these options vested during the 2013 financial year and the balance of 400,000 were extended to 1 December 2013. 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 or 2013 years. Third parties There were no options issued to third parties during the 2013 year. The weighted average fair value of options granted during the 2012 year was 0.8 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 (since extended to 1 December 2013), failing which the options will lapse, and the share price equals the exercise price. 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 21 for terms of these facilities. c. Non-Cash Financing and Investing Activities i. Joint Venture Interest of 7.00% pa payable on the US$250,000 loan to Lotto Points Plus LLC is being capitalised Grant date: Share price at grant date: Exercise price: Expected volatility: Expected dividend yield Risk free rate 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. 2013 - - - - - - 2012 14 Dec 2011 $0.40 $0.70 61.22% 3.23% 3.12%             92 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 93 2013 exercise price $ grant date KMP and staff options balance at beginning of year granted during the year Lapsed/ forfeited during the year exercised during the year expired during the year balance at end of year exercisable at end of year expiry date 21 October 2009 15 February 2011 0.70 0.50 30 October 2012 15 February 2014 Third party options 14 December 2011 14 December 2014 0.70 Total 2012 390,000 800,000 1,190,000 1,000,000 1,000,000 2,190,000 - - - - - - - (390,000) - (650,000) - (1,040,000) - (100,000) (100,000) - - (1,140,000) - - - - - - - - 150,000 150,000 150,000 150,000 900,000 900,000 1,050,000 500,000 500,000 650,000 exercise price grant date KMP and staff options $ expiry date balance at beginning of year granted during the year Lapsed/ forfeited during the year exercised during the year expired during the year balance at end of year exercisable at end of year 01 May 2009 21 October 2009 15 November 2010 15 February 2011 Third party options 14 December 2011 Total 0.50 01 May 2012 1,450,000 0.70 30 October 2012 1,350,000 0.70 15 November 2013 300,000 - - - - (1,450,000) - - - - (960,000) - 390,000 390,000 - (300,000) - - - 15 February 2014 0.50 14 December 2014 0.70 1,050,000 4,150,000 - - (50,000) (200,000) (50,000) (2,910,000) - 800,000 - 1,190,000 800,000 1,190,000 - - 4,150,000 1,000,000 1,000,000 1,000,000 - - - - (50,000) (2,910,000) - 1,000,000 - 1,000,000 - 2,190,000 - - 1,190,000 The weighted average exercise price for the year ended 30 June 2013 was $0.64 (2012: $0.60). The weighted average remaining contractual life of share options outstanding at 30 June 2013 was 1 year 4 months (2012: 1 years 9 months). Note 30: Events After the Reporting Date There are no material events after the reporting date. Note 31: 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 2013 all of Group interest bearing debt had been repaid. The Group policy is to manage between 50% and 100% of interest bearing debt using capped and fixed interest rates.                                                             94 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 95 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. 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 2013 $ 35,467 103,249 - 15,533 40,506 194,755 % 18.2 53.0 0 8.0 20.8 100 2012 $ 46,546 100,551 - - 16,581 163,678 % 28.5 61.4 0 0 10.1 100 The Group’s most significant customer, located in Samoa, accounts for 21% of trade receivables as at 30 June 2013 (located in Fiji, accounts for 1% of trade receivables as at 30 June 2012). 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 Consolidated Group 2013 $ 2012 $ 24,460,703 612,605 - 12,496,899 21,686,797 401,718 444,680 10,354,686 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 The fair values of: Consolidated Group 2013 $ 12,496,899 12,496,899 2012 $ 10,354,686 10,354,686 Consolidated Group 2013 $ - - - 2012 $ 212,234 256,597 468,831 • 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.                               96 Jumbo InteractIve Ltd annuaL report 2013 notes to tHe fInancIaL statements 97 Financial Assets  Cash and cash equivalents Trade and other receivables Financial liabilities  Borrowings Trade and other payables 2013 carrying amount $ fair value $ 24,460,703 612,605 25,073,308 24,460,703 612,605 25,073,308 - 12,496,899 12,496,899 - 12,496,899 12,496,899 2012 carrying amount $ 21,686,797 401,718 22,088,515 fair value $ 21,686,797 401,718 22,088,515 444,680 10,354,686 10,799,366 468,831 10,354,686 10,823,517 Fair values are materially in line with carrying values. Financial instruments measured at fair value There were no financial instruments measured at fair value held for either the 2013 or 2012 financial years. 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 2013, 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 (2012: 2%) decrease in interest rates by (2012: 2%) Change in equity: increase in interest rates by 2% (2012: 2%) decrease in interest rates by 2% (2012: 2%) Consolidated Group 2013 $ 489,214 (489,214) 489,214 (489,214) 2012 $ 424,842 (424,842) 424,842 (424,842) Foreign Currency Risk Sensitivity Analysis At 30 June 2013, 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% (2012: 3%) decline in AUD to FJD by 3% (2012: 3%) Change in equity: improvement in AUD to FJD by 3% (2012: 3%) decline in AUD to FJD by 3% (2012: 3%) Consolidated Group 2013 $ (53,847) 57,178 (53,847) 57,178 2012 $ (46,638) 52,709 (46,638) 52,709 The above interest rate and foreign exchange rate sensitivity analysis has been performed on the assumption that all other variables remain unchanged. Note 32: 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. c. Available-for-sale Financial Assets Reserve The available-for-sale financial assets reserve records exchange difference arising on translation of foreign available-for-sale investments. Amounts are reclassified to profit or loss when an investment is disposed of or re-classified. d. profits Appropriation Reserve The Profits Appropriation Reserve records current year profits less dividends paid, separating them from historic accumulated losses due to the Australian Tax Office tax ruling impacting the ability of the Company to pay franked dividends from retained profits. Note 33: 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                                             98 Jumbo InteractIve Ltd annuaL report 2013 Independent audItor’s report 99 Directors’ Declaration Independent Auditor’s Report The Directors of the Company declare that: 1. The financial statements, comprising the Consolidated Statement of Profit and Loss and Other 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 2013 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. 3. In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 4. The remuneration disclosures included in pages 38 to 46 of the Directors’ report (as part of the audited Remuneration Report), for the year ended 30 June 2013, 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 29 August 2013 Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia To the members of Jumbo Interactive Limited DECLARATION OF INDEPENDENCE BY TIMOTHY KENDALL TO THE DIRECTORS 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 2013, the consolidated statement of profit or loss and other 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. As lead auditor of Jumbo Interactive Limited for the year ended 30 June 2013, 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. 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. T J Kendall Director BDO Audit Pty Ltd Brisbane, 28 August 2013 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 judgment, 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. 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. 100 Jumbo InteractIve Ltd annuaL report 2013 Independence In conducting our audit, we have complied with the independence requirements of the Corporations 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 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 has been given to the directors of Jumbo Interactive Limited, would be in the same terms if given to the the directors as at the time of this auditor’s report. directors as at the time of this auditor’s report. Opinion Opinion In our opinion: In our opinion: a) the financial report of Jumbo Interactive Limited is in accordance with the Corporations Act 2001, a) the financial report of Jumbo Interactive Limited is in accordance with the Corporations Act 2001, including: including: i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its i. performance for the year ended on that date; and giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; 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 b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Note 1. Report on the Remuneration Report Report on the Remuneration Report We have audited the Remuneration Report included in pages 38 to 46 of the directors’ report for We have audited the Remuneration Report included in pages 38 to 45 of the directors’ report for the the year ended 30 June 2013. The directors of the company are responsible for the preparation and year ended 30 June 2013. 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 presentation of the Remuneration Report in accordance with section 300A of the Corporations Act accordance with Australian Auditing Standards. 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 2013 Opinion complies with section 300A of the Corporations Act 2001. In our opinion, the Remuneration Report of Jumbo Interactive Limited for the year ended 30 June 2013 complies with section 300A of the Corporations Act 2001. bdo audit pty Ltd BDO Audit Pty Ltd T J Kendall t J Kendall Director Director Brisbane, 29 August 2013 Brisbane, 28 August 2013 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. 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. addItIonaL InformatIon for LIsted pubLIc companIes 101 Additional Information for Listed public Companies The following additional information is required by the Australian Securities Exchange in respect of listed public companies only. 6. Shareholding The Company has 43,552,560 ordinary shares on issue, each fully paid. There are 2,558 holders of these ordinary shares as at 23 August 2013. 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 1,050,000 options over ordinary shares on issue but not quoted on the Australian Securities Exchange. a. Distribution of Shareholders Number as at 23 August 2013 Holders of ordinary shares ordinary shares Held Number category (size of Holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over 517 1,139 443 411 48 2,558 Number 302,248 3,404,994 3,508,596 10,027,497 26,309,225 43,552,560 b. The number of shareholdings held in less than marketable parcels is: Holders of ordinary shares 82 ordinary shares Held 6,559 c. The names of the substantial shareholders listed in the holding Company’s register as at 23 August 2013 are: name Vesteon Pty Ltd and associates ordinary shares 9,290,221 percentage Held 21.3 d. Voting Rights 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.       102 Jumbo InteractIve Ltd annuaL report 2013 103 number of ordinary fully paid shares Held 8,721,359 1,878,893 1,629,501 1,330,469 1,133,500 1,070,695 823,219 711,849 568,862 552,347 540,000 500,000 450,504 447,996 400,000 375,000 294,776 270,000 270,000 215,000 22,183,970 % Held of Issued ordinary capital 20.02 4.31 3.74 3.05 2.60 2.46 1.89 1.63 1.31 1.27 1.24 1.15 1.03 1.03 0.92 0.86 0.68 0.62 0.62 0.49 50.94 e. 20 Largest Shareholders — Ordinary Shares as at 23 August 2013 BNP PARIBAS NOMS PTY LTD (DRP) J P MORGAN NOMINEES AUSTRALIA LIMITED VESTEON PTY LTD JP MORGAN NOMINEES AUSTRALIA LIMITED name 1. 2. 3. CITICORP NOMINEES PTY LIMITED 4. NATIONAL NOMINEES LIMITED 5. MR BARNABY COLMAN CADDICK 6. UBS NOMINEES PTY LTD 7. 8. 9. MR MIKE VEVERKA 10. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 11. WARAWONG PTY LTD 12. MR JAMES GARDINER 13. MR VICTOR JOHN PLUMMER 14. MR JOHN WILDE + MRS ELIZABETH WILDE 15. MR CRAIG KUHN 16. UNAVAL NOMINEES PTY LTD 17. BOND STREET CUSTODIANS LIMITED 18. MR DAVID PLATT + MRS SUE PLATT 19. MR GRANT BUXTON PORTER + MRS JANELLE KAY PORTER 20. MR MARTIN JAMES REED 2. The name of the Company Secretary is Mr Bill Lyne. The address of the principal registered office in Australia is Level One, 601 Coronation Drive, Toowong, QLD, 4066 Telephone (07) 3831 3705 3. Registers of securities are held at the following addresses: Computershare Investor Services Pty Ltd 117 Victoria Street, West End, QLD, 4101 4. Stock Exchange Listing Quotation has been granted for all the ordinary shares of the Company on the Australian Securities Exchange. 5. Unquoted Securities as at 23 August 2013 Options over Unissued Shares. A total of 1,050,000 options are on issue to employees under and third parties for services rendered exercise price $0.50 $0.70 expiry date 15 February 2014 14 December 2014 number on Issue 150,000 900,000 number of Holders 1 3 6. Other Disclosures There are no other disclosures. Corporate Directory Directors David K Barwick (Non-Executive Chairman) Mike Veverka (Chief Executive Officer) Bill Lyne (Non-Executive Director) Chief Financial Officer David Todd Company Secretary Bill Lyne Registered Office Level One 601 Coronation Drive Toowong Qld 4066 Telephone: 07 3831 3705 Facsimile: 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: 07 3237 2100 Facsimile: 07 3229 9860 Auditors BDO Audit Pty Ltd Level 10 12 Creek Street Brisbane Qld 4000 Telephone: 07 3237 5999 Facsimile: 07 3221 9227 Website www.jumbointeractive.com Australian Business Number 66 009 189 128     Jumbo Interactive Limited Level 1, 601 Coronation Drive PO Box 824 Toowong, Queensland, 4066 Australia +61 7 3831 3705 www.jumbointeractive.com 

Continue reading text version or see original annual report in PDF format above