MNF Group Annual Report 2018

FY2018 Annual Report · MNF Group

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MNF Group Limited
Annual Report 2018

ABN 37 118 699 853

Contents

Message from our CEO ................................................................................................................................

People Experience (PX) ................................................................................................................................

Company structure .......................................................................................................................................

Organic and acquisitive growth .....................................................................................................................

Smart network ..............................................................................................................................................

Business unit profiles ....................................................................................................................................

Directors’ report ............................................................................................................................................

Board of Directors .........................................................................................................................................

Consolidated statement of profit or loss and other comprehensive income ..................................................

Consolidated statement of financial position .................................................................................................

Consolidated statement of cash flows ...........................................................................................................

Consolidated statement of changes in equity ...............................................................................................

Notes to the consolidated financial statements .............................................................................................

Directors’ declaration ....................................................................................................................................

Auditor’s independence declaration .............................................................................................................

ASX additional information ............................................................................................................................

We’re redefining communications
experiences through

software led
solutions

Message from our CEO

Dear Shareholders,

It has been another year of achievement and change for the MNF Group. Our
core business has performed exceptionally in the markets and segments that
have become the main pillars of our business. It has also been a year where our
future growth strategy of regional expansion has started to become a positive
reality.

Our consolidated group revenue increased to $221 million, up 15% from the previous year, resulting in gross
margin increase of 18% to $69 million. Given the diverse range of margin levels in the MNF Group portfolio we
prefer to use gross margin as our top level indicator. Our EBITDA rose slightly to $24.6 million in light of the
one-off investment into the Pennytel brand of $2.3 million. Our NPAT remained stable on prior year levels at $11.9
million. The company ended the year with a strong balance sheet, no net debt, and the ability to redraw $16.3
million from our revolving acquisition facility.

This year saw solid gains in the gross margin across all three operating segments, with Domestic Retail up 22%,
Domestic Wholesale up 15% and Global Wholesale up 17%. This year saw a full annualised contribution from the
CCI acquisition (February 2017), which is now fully integrated and performing well with CCI gross margin
contribution up 10% in H2 on the prior corresponding period.

This year’s solid performance has allowed the board to declare total annual dividends of 8.35 cents per share fully
franked – a slight increase on prior years, and consistent with our policy of returning half of NPAT to investors.

Achievements
During the year MNF Group achieved some major milestones in its cornerstone business, allowing it
to invest in multiple new initiatives and growth strategies.

New Zealand Symbio Network Roll-Out
A key pillar in the MNF Group growth strategy is regional expansion into new markets for its Domestic
Wholesale products suite. The first milestone in the execution of this strategy was the upgrade and roll out of
a new Symbio Network in New Zealand. This new capability will increase margins for our Global Wholesale
segment, as well as providing many years of organic growth for our Domestic Wholesale segment into the
regional market which is most similar to Australia. MNF Group is now the only Australian or New Zealand
carrier with a homogenous trans-Tasman voice network capability.

SuperInternet Acquisition in Singapore
Comparable to a mini-Symbio Network in Singapore, the SuperInternet group comes with a fully
interconnected domestic voice network in Singapore, as well as connectivity to the national NBN network,
as well as its own dark fibre assets in the Singapore CBD. The SuperInternet acquisition is predominately a
capability acquisition where MNF Group is looking to accelerate its regional expansion into Asia. While the
Group will now invest in upgrading and deploying its tried and trusted software eco-system into Singapore, this
acquisition will save precious time in launching our Domestic Wholesale products into this new and exciting
market.

Enabling Mobility
Mobility is a key component of any communications strategy today. While MNF Group has no aspirations of
building its own spectrum and tower mobile network, it will leverage its key capabilities to make mobility a sig-
nificant component of its product portfolio. This year saw MNF Group achieve considerable milestones in both
the Domestic Retail segment and the Domestic Wholesale segment with regards to its mobile strategy. In the
Retail segment MNF Group successfully re-launched the Pennytel brand to be the new face of MNF Group’s
consumer segment. In the Wholesale segment MNF Group is now a significant player with its software
enablement capabilities – enabling one of the largest MVNO retail brands in the country, as well as providing
its own post-paid mobile wholesale aggregation services. The multi-segment approach has allowed MNF
Group to become one of the fastest growing post-paid mobile user bases in Australia.

The Future
For several years now the Group has had three very solid and organically growing business segments –
Domestic Retail, Domestic Wholesale and Global Wholesale. The Group has a four-dimensional organic growth
strategy, being:

Geography
Expansion into new regional markets – as shown with our success in New Zealand, and the recent acquisition in
Singapore. MNF Group views each additional country as an expansion of its addressable market proportional to
its population. With the addition of New Zealand and Singapore, the Group has added an additional 10
million potential end-users of our software capabilities, or increased our addressable market by 41% compared to
our corner stone business in Australia. While it will take time to monetise these two new markets, the strategy is
already proving successful with early take up and customer interest. MNF Group will continue to invest in its
regional geographical expansion strategy with a target of adding 4 additional Asian countries to its portfolio by
2022.

Market Share Growth
Increasing revenue and margin by selling more of the products we already have. While this strategy may seem
obvious, MNF Group is still a small player in market share across all of its operating segments. As new technology
disruption accelerates into the traditional voice telecommunications market this opens up more market share
opportunity for MNF Group thanks to our leading next generation software eco-system and product portfolio. MNF
Group continues to win significant new business from legacy carriers as can be seen by its strong number
portability growth of 22% in the last financial year alone.

Software
Increasing revenue and margin by adding new features and capabilities to our tried and trusted software
eco-system. As has been a key pillar of our growth from inception, increasing functionality means we can create
greater value for our customers, enable new customer acquisition, develop new markets, and further integrate into
our existing customer base. MNF Group continues to invest in the key resource for software value creation – its
people.

Wholesale Partnerships
By embracing the concept of wholesalers and building long term relationships, MNF Group benefits from the
success of its partners. In an industry where traditional telco operators are hunkering down and building barriers
for new entrants, MNF Group has differentiated itself by being the “go-to” capabilities provider enabling
challengers into the market. This strategy has proven successful with many of our wholesale partners operating
household name brands and becoming market leaders in their own product space. MNF will continue to buck the
industry trend and continue to disrupt the market.

Finally in addition to our organic growth drivers, the Group employs a fifth dimension for growth, that of growth by
acquisition.

Acquisitions
Searching for viable capability and customer base opportunities – as demonstrated over many years, MNF Group
is a discerning acquirer and integrator of businesses. The Group has shown its ability to bring customer bases
onto our software eco-system and network assets thereby increasing margin and improving product performance,
or adding new capabilities which can expand our product portfolio. MNF Group will continue to seek out
synergistic acquisition opportunities which can increase shareholder value.

On behalf of my fellow directors, I would like to thank all the staff and management team in achieving another
solid result. Without the hard work and dedication from a highly specialised and skilled team we would not be
where we are today.

I thank all shareholders for your continued and loyal support. The company is looking forward to a successful and
rewarding year ahead.

Rene Sugo

CEO and Executive Director

People Experience (PX)

MNF Group is a values-based organisation, one that has successfully kept its strong culture intact
while also integrating several acquisitions into the MNF family over the past 6 years.

Be Brave, Honest & Fair, Deliver Excellence, Collaborate, and We Care are at the heart of what our
people strive for every day. We are a culturally diverse organisation and respect the varying
perspectives that inspire our colleagues to see the workplace—and the world—differently.

Enabling Customers to
Innovate & Communicate
is our cornerstone Purpose
Statement which binds our
people together across our
brands globally

TAS (3) NT (1) US (1) Canada (1)

New Zealand
(47)

Staff Members

VIC (inc. CCI)
(124)

Sydney (199)

Average Score

4.34/5

Gallup’s Global Data
Base Percentile

In our August 2018 internal Diversity & Inclusiveness
Survey, we scored in the 72nd percentile of Gallup’s
Global database (for our average score of 4.34 out of 5)
to the following statement:

‘Everyone at this company is treated fairly
regardless of ethnic background, race,
gender, age, disability, or other differences
not related to job performance.’

Female

Employees

Leadership

Male

Our workforce composition in Australia, (based
on our 2018 Workplace Gender Equality Agency
(WGEA) Report) is 37% female and 63% male

In senior leadership roles in Australia, we have
39% female representation

Our PX Team runs a predominantly centralised support model.

Centres of Excellence are in place for Business Partnering, Learning & Development, and Talent
Acquisition. The team focuses on the mantra of ‘empowering leaders to lead’, assisting managers with
driving the development, engagement and performance of their people.

Our PX Journey focuses on 5 major lifecycle milestones.

The transition from candidate to joining the MNF family is designed to
give people a sense of our ‘Awesomeness’ from the beginning, and
fuel the excitement about starting their employee journey with us. This
starts at attraction and recruitment, with interview questions aligned
to our values & behaviours. Getting the right ‘people fit’ for the MNF
family is imperative to our continued success.

We believe that it is essential for our people to have clear, attainable
outcomes because no matter how talented our people may be, they
can’t do their jobs without a clear picture of what success looks like.
This is closely aligned to our Deliver Excellence Value.
Our people have clear expectations and goals in place, with
competencies aligned to positions.

To assist our people in Delivering Excellence, we have a formal
Leadership Development program in place, and self-paced e-learning
across a broad range of competencies and topics. MNF Group in
Australia hosts its very own ‘Toastmasters’ to assist our people to
build confidence and public speaking skills. We utilise an Annual
Gallup Engagement survey to ensure our people’s views are heard
and that we continually strive to improve.

We Care is another of our Values which correlates with the support we
provide our people to ensure they are supported in both their Health &
Wellbeing. An Employee Assistance Program (EAP), regular webinars
on mental health, charity fundraisers, an annual paid Volunteering
Day, and employee blood donations with Red25 are just some of the
ways that our people can engage in bolstering their own wellbeing or
giving back to the Community. In addition, our people are provided
with space to create, relax and innovate.

Our people are our biggest asset. To reward our staff for their
hardwork and Delivering Excellence, we have regular local level
events and recognition initiatives. We run an annual Global Reward
& Recognition program, based around our values.

1Welcome2Perform3Develop4Support5Appreciate
Company Structure

Rene Sugo

CEO and Executive Director

John Boesen

CTO

Technology
Business Unit

Tim Dunning
President - Global
Commercial

Global Commercial
Business Unit

Jon Cleaver

CCO

Domestic Commercial
Business Unit

Ritsa Hime

COO

Operations
Business Unit

Matthew Gepp

CFO

Finance
Business Unit

Helen Fraser

General Counsel

Legal & Compliance
Business Unit

Organic and acquisitive growth

$25M

$20M

A
D
T
B
E

$15M

$10M

$5M

$24.6M

$17.9M

$9.0M

$4.4M

$2.4M

2010

2012

2014

2016

2018

2009

Maiden profit

ADSL2+ service launch

2010
Exclusive Panasonic deal for
SME phone system

771% EBITDA growth

2011
Acquisition of Symbio
Networks

2012

Tasmanian Government $20M
Project win

Acquisition of CallStream,
Connexus, GoTalk Wholesale

2013

CeBIT Outstanding Project
Award for Tasmanian
Government Voice Carriage
Project

2016

TNZI integration

US completion

2014

Acquisition of Pennytel & iBoss

Strong organic growth

2015

Acquisition of TNZI global voice
network and OpenCA
Softswitch

Underlining EBITDA growth
15%

34% total EBITDA growth

2017
Acquisition of CCI

Underlying organic EBITDA
growth 25%

2018

18% margin growth

NZ Domestic Network goes live

SuperInternet acquisition

“Building a high-growth and
sustainable business with real
value creation through software
innovation and network capability
in the communications sector –
in Australia, Asia-Pacific,
and the world.”

Rene Sugo, CEO and Executive Director

How we’re building the future
of communications

Our platform enables
embedded capabilities

Mobile

SMS and IM

Virtual numbers

Global termination

SIP trunks

Telco back-end

...that we sell to telcos
and disruptors...

MNVO’s

App developers

Emerging telcos

Software companies

Global carriers

Enterprise

...and use to power our
own innovation

Industry technology

Apps and portals

Voice services

Conferencing

Vertical brands

Multi-brand strategy
leveraging our proprietary
software and network

While operating across Australia, New Zealand,
UK and USA, MNF Group’s structure is defined by
function rather than geography, with several Business
Units headed by highly skilled and experienced Chief
Executives.

Each unit focuses on a particular functional area and
works across multiple brands, products and office
locations. This structure allows the Group to develop
and leverage subject matter expertise of various
teams to support a multi-brand strategy while ensuring
operational efficiency.

Domestic Retail

Domestic
Wholesale

Global Wholesale

Our range of retail brands
provide phone, internet, mobile
and conferencing services in
Australia.

Symbio Networks enables
new-generation providers to
deliver mobile, IP telecom and
UC services.

TNZI enables
communication providers to
outsource all or part of their
international calling business.

Markets

- Consumer VoIP and NBN

- Telcos, MVNOs and MSPs

- International telecoms,

- Consumer Mobile

- Small business

- Enterprise and Government

- Software and app

with a focus on APAC

developers

- Software and app

developers

Major Brands

Growth Drivers

- Technology change

- Cloud communications

- Market change

- Cloud communications

- MVNO enablement

- Regulatory change

- Digital transformation

- AU/NZ market growth

- APAC market growth

Smart Network

San Jose

London

Frankfurt

SWM-4

Saudi Arabia

UAE

S. Korea

Hong Kong
Vietnam

SWM-3

Mozambique

Oman

Thailand

Sri Lanka

SWM-3

SJC

SWM-3

Malaysia

SWM-4

EASSy

Singapore
Indonesia

SWM-3

Japan

AJC

Guam

SWM-3
Taiwan

AAG

AJC

PNG

San Jose

London

New York

Frankfurt

JUS

SCCN

Los Angeles

SCCN

Tokelau

W. Samoa

Cook Is.

Nauru

Fiji

Vanuatu

Norfolk Is.

Tonga

Niue

A-PNG-2

SCCN

Perth

Sydney

Carrier link

Satelite link

Global PoP

Cable/Connectivity

SCCN

TAS-2

Auckland

International reach
MNF Group’s Tier 1 carrier network includes Points of Presence in Los Angeles, New York, Hong Kong,
Singapore, London, Frankfurt, Sydney and Auckland and over 200 partner interconnects.

Having developed market-leading managed voice services for its Australian network, the Group is now
progressively rolling out these smart network capabilities to the rest of its global network. These innovative
capabilities combined with first-mover advantage puts the MNF Group in prime position to be the carrier of choice
for providers looking to reach the fast-growing Asia Pacific region.

San Jose

London

Frankfurt

SWM-4

Saudi Arabia

UAE

SWM-3

S. Korea

Hong Kong

Vietnam

SWM-3

Taiwan

AAG

SWM-3

SJC

Guam

Japan

AJC

PNG

Oman

Thailand

Sri Lanka

SWM-3

Malaysia

SWM-4

EASSy

Singapore

Indonesia

SWM-3

Mozambique

A-PNG-2

SCCN

JUS

SCCN

Los Angeles

SCCN

Tokelau

W. Samoa

Cook Is.

Nauru

Fiji

Vanuatu

Tonga

Niue

Norfolk Is.

San Jose

London

New York

Frankfurt

Perth

Sydney

SCCN

TAS-2

Auckland

Hamilton

Auckland

Palmerston
North

Wellington

Christchurch

Dunedin

Coverage

Dark fibre loop

Regional PoP

Global PoP

Global link

Domestic expertise
In Australia, the Group owns and operates the country’s largest IP voice network and has established a robust
network presence in New Zealand.

The MNF network includes high speed fibre connectivity between major cities, and modern VoIP nodes in regional
call collection areas across Australia and New Zealand. This robust infrastructure is the ‘go to’ for new-generation
OTT providers and global carriers looking to establish or expand their presence in Australia and New Zealand.

“We are enabling a
culture of disruption to
deliver unique customer
experiences”

John Boesen, CTO

Technology

John Boesen is an experienced technologist, a passionate leader and an innovative thinker. He has over 20 years
experience in driving innovation and leading engineering teams. Prior to joining MNF Group, John was part of
the executive team at Willian Hill where he held the positions of Chief Technology Officer and Chief Information
Officer. John has also been Chief Operating Officer of Etherstack plc and held numerous project, product and
technology focused roles where he challenged teams to think differently.

John now leads MNF Group’s Technology team as Chief Technology Officer with a strong customer centric view
and an affiliative approach to building high performance teams and collaborative cultures.

Technology and the Customer

“We are a software company with a world class telco
foundation. It is a unique mix that sets us apart from the
rest. I am excited at what lies ahead as we continually
re-invent ourselves to deliver great product innovations
to our customers.”

John Boesen, Chief Technology Officer

The Vision for Technology

MNF Group’s Technology vision is seeded in industry disruption and integrating cutting edge technologies to
deliver sustainable value. It’s about solving problems and delivering unique customer experiences in ways others
haven’t. It’s about creating space to innovate and embracing diverse thinking to enrich the outcome. It’s not about
fearing failure, but correcting mistakes quickly to make sure we are constantly evolving and being better than
yesterday.

With technology teams spread across multiple geographies, it is essential to have a collaborative and supportive
engineering culture that can work seamlessly across the organisation. The way our teams deliver is guided by
iterative methods that encourage continuous integration, continuous deployment and continuous improvement.

Providing access to our core voice and data network capabilities through APIs will continue to fuel organic
innovation and growth. Augmenting our core network capabilities with cutting edge cloud services and software
defined networks will enable MNF Group to deliver a rich set of voice and data services that will be configurable
and accessible from anywhere. It is an exciting future we have already begun building.

“Growing our business
partnerships through a
focus on the agile delivery
of customer-centric
international solutions.”

Tim Dunning, President
- Global Commercial

Global Commercial

Strong customer acquisition, additional footprint and underlying organic growth underpin an excellent
result for the Global Commercial Business Unit in FY18 and position us strongly into the future.

Award-winning products support some of the largest traffic originators in the world, leveraging our
fully-redundant low-latency global network to provide service where our customers live, work and play.
As well as an extensive pick-list of products and services, we offer a variety of whole-of-business
solutions to consolidate calling and manage internal and external costs. We wish to share in the
success of our customers by providing a suite of communication capabilities that will enable them to
grow.

Our strength lies in our commitment to our customers as partners, our extensive network capabilities
and the knowledge and expertise of our staff. Further investment in network assets during the FY19
financial year will augment both our capacity to serve existing customer growth and provide
additional feature-sets leveraging our wholly-owned soft-switch software platform. With the
international landscape changing so rapidly, this integral capability supports our innovative and agile
approach to ensuring the needs of our customers can be accommodated.

Amongst a range of initiatives being pursued, we are particularly proud of our new Origin-Based
Routing (OBR) capability to be deployed in Q1. This in-house software development allows us to
navigate the increasingly complex landscape of differential origination and termination rates for
Europe-bound traffic. OBR capability allows us to de-risk this environment for our customers by
providing a routing solution that ensures voice-traffic is managed to achieve the optimum cost and
therefore the optimum rate to the customer.

OTT
(Over the Top)

UCaaS
(Unified Comms as a Service)

Conferencing

Domestic Products,
Different Values, Different
Needs

NGS provides domestic access to
a variety of customers to connect
their products and services to the
end users.

CPaaS
(Communications Platform
as a Service)

CCaaS
(Contact Centre
as a Service)

“Executing our
multi-brand & segment
strategy to deliver long
term, sustainable growth
by keeping the customer
central to all decisions”

Jon Cleaver, CCO - Domestic
Commercial

Domestic Commercial

Wholesale
The Domestic Wholesale business once again delivered exceptional results through our two core
brands, Symbio Networks and iBoss.

Symbio voice capabilities continue to grow, porting an unprecedented amount of numbers into our
smart network. Our software has been utilised to enable our customers to expand innovation and
disrupt the market. Symbio has solidified itself as the go-to voice network with customers ranging from
carriers, traditional RSP’s to emerging digital marketplaces. With the exciting addition of New Zealand
and Singapore markets, this organic growth will be continuing for years to come.

iBoss has further accelerated its growth from the previous year with the addition of direct MVNO
services and managed SIP Trunking. The iBoss software suite continues to enable the fastest growing
MVNO in the country and perpetually expanding its solutions as the global mobile market continues to
evolve. With the emergence of large brands moving into communications, iBoss is in the perfect posi-
tion to serve the next generation of providers.

Small Business
The NBN rollout and end of ISDN services perpetrates a general technology revolution in small
business application, placing MyNetFone in the ideal space to accelerate its growth in this segment.
Our hosted PBX product, now combined with mobility, further advances as the corner stone solution
for small business. MyNetFone will continue to innovate and address this ever expanding market,
supporting the lifeblood of the Australian economy in the small business segment, as for the first time
they now have a real choice.

Enterprise and Government
The enterprise and government segment has experienced rapid change throughout the year. MNF
Group had foreseen this growth and spent the last 2 years investing in the development of a product
suite to support this segment. This product suite enables enterprise and government to seamlessly
transition to the cloud and provide instant productivity gains with new solutions and reduced cost. This
acceleration lead to the emergence of the MNF Enterprise brand (previously a subset of MyNetFone)
and quickly followed with the release of our Cloud Connect range.

This brand delivers sustainable growth with its new-generation IP voice solutions and value-added
services that support the vast majority of business moving to cloud infrastructure. MNF Enterprise is
selected as a preferred supplier to both the New South Wales and Tasmanian Government for
telephony and IP-based services.

Consumer
As NBN and Mobility continues to dominate evolution in the consumer landscape, MNF Group
successfully re-launched the Pennytel brand as a new face of MNF Group’s consumer segment.
Initially targeting mobile, the focus was on superior customer service and intuitive design to add value
and differentiation in the dynamic segment. MNF Group will look to expand services in this space,
leveraging off its software developments in other segments, again highlighting the advantage of our
multi-brand/segment approach.

“Delivering innovative
service and experience that
will excite our customers
today and beyond”

Ritsa Hime, COO

Operations

The Operations Business Unit supports the entire customer journey from sign-on
including service delivery, service assurance and technical support, billing and
invoicing, incident management, customer complaints and escalations. The
Operations Business Unit structure supports the company’s multi-brand strategy
across all customer segments and works closely with all Business Units to ensure our
processes are effective and meet the expectations of our customers.

We are now well into our third year of delivering on our
five-year strategic customer experience roadmap and have
notable achievements. Our customers have told us that over 92%
of their calls have been answered and resolved on their first call.

Furthermore, our customers have rated our support staff with NPS
+35 which is a 5-point increase from the prior year. This direct
customer feedback is an outstanding achievement for our
customer-facing staff.

We recognise that customer experience is not a singular measure of success.
A customer’s wholistic experience is achieved in combination of many other factors
including employee engagement, product satisfaction and user experience.

Over last 12 months, we completed a transformation initiative to improve our support
to customers including the expansion of our teams and developing specialised
technical teams. This transformation has delivered significant increases in staff
engagement results and the launch of a new Quality Assessment framework program
to empower our staff and facilitate training specific to their individual needs.

“Creating an environment
that supports MNF Group’s
four dimensional growth
strategy, delivering results
and key business indicators
that support each of the
business units”

Matthew Gepp, CFO

Finance
The Finance Business Unit is responsible for creating an environment that supports
MNF’s four dimensional growth strategy, delivering results and key business
indicators that support each of the business units. By working closely with all
business segments and reviewing organic growth strategies we work to ensure short
and long term goals are met throughout the business.

15%

17%

22%

The MNF Group saw another strong year for FY18 with solid organic
growth across all operating segments. Total margin was up $10.4m
year-on-year to $69.0m, this result includes positive growth from
Domestic Retail (up 22%), Domestic Wholesale (up 15%) and Global
Wholesale (up 17%). These impressive results are driven by an ever
growing product suite and a domestic and global sales team focussed on
supporting and growing our existing customer base.

As well as keeping investors, the Board and the business informed of results, the
Finance BU drives key strategic acquisitions and advises on projects that lay the
framework for sustainable growth, as well as integrating those acquisitions into our
business. The acquisition in June of SuperInternet in Singapore was an example of
MNF delivering on its strategy of geographic expansion, the Finance BU serves a
pivotal function during due diligence in these transactions and ensures the future
trajectory of the business is consistent with our stated goals.

The People Experience (PX) team (formally Human Resources) operates within the
Finance BU. PX is focussed on implementing best practice systems and
processes globally that will ensure the long term viability and sustainability of our
growing business and the people who drive that growth. The PX team have invested
time in several projects aimed at acquiring and retaining talented team members,
including University open days, ITC events and mentoring technology competitions.

The achievements of MNF Group are backed by our hard working and highly
specialised team and we look forward to another successful year ahead.

“We enable the Group to
deliver on its strategy by
providing practical legal
advice and solutions.”

Helen Fraser, General counsel

Legal and Compliance

The Legal Services team supports the Board and the group as a whole with strategic
and operational legal advice.

Core advice areas include:

Acquisitions

Contracts

Corporate governance

Compliance

Regulatory matters

Consumer law

Corporate governance and compliance remain important areas of work to ensure
MNF Group has the systems, processes and policies needed for its long term future.
Throughout FY18 this has included the Pennytel MVNO and MNF Enterprise
Services range of products and services. In our day to day advices we work closely
with stakeholders, striving to make it easier for our customers to do business with us
while balancing the Group’s legal interests.

Our work is closely aligned with the growth strategies of the Group. In FY18, a key
focus area has been the acquisition of the SuperInternet companies and related
expansion of the group into Singapore. We provide practical advice and solutions to
support MNF Group’s product and business launches and operations.

MNF Group Limited

ABN 37 118 699 853

Annual Financial Report
30 June 2018

Contents

Directors’ report .................................................................................................................................................

Consolidated statement of profit or loss and other comprehensive income ......................................................

Consolidated statement of financial position .....................................................................................................

Consolidated statement of cash flows ...............................................................................................................

Consolidated statement of changes in equity ...................................................................................................

Notes to the consolidated financial statements .................................................................................................

1. Corporate information ..............................................................................................................

2. Significant accounting policies .................................................................................................

3. Operating segments ................................................................................................................

4. Revenue and expenses ...........................................................................................................

5. Income tax ...............................................................................................................................

6. Operating cash flows reconciliation .........................................................................................

7. Trade and other receivables ....................................................................................................

8. Property, plant and equipment .................................................................................................

9. Trade and other payables ........................................................................................................

10. Loans and borrowings ...........................................................................................................

11. Financial instruments .............................................................................................................

12. Deferred revenue ...................................................................................................................

13. Provisions ..............................................................................................................................

14. Issued capital .........................................................................................................................

15. Share-based payments .........................................................................................................

16. Commitments and contingencies ..........................................................................................

17. Events after reporting date ....................................................................................................

18. Auditor’s remuneration ..........................................................................................................

19. Director and executive disclosures ........................................................................................

20. Controlled entities ..................................................................................................................

21. Goodwill and other intangibles ..............................................................................................

22. Impairment testing .................................................................................................................

23. Earnings per share ................................................................................................................

24. Dividends paid and proposed ................................................................................................

25. Parent entity ..........................................................................................................................

26. Financial risk management objectives and policies ..............................................................

27. Company details ....................................................................................................................

Director’s declaration ........................................................................................................................................

Auditor’s independence declaration ..................................................................................................................

Independent auditor’s report .............................................................................................................................

ASX additional information ................................................................................................................................

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

Board of Directors

For the year ended 30 June 2018
Your directors present this report, together with the financial statements of MNF Group Limited (the Company)
and its controlled entities (the Group), for the financial year ended 30 June 2018.

Board of Directors
The names and details of the Company’s directors in office during the financial year and until the date of this
report are set out below. Directors were in office for this entire period unless otherwise stated.

www.mnfgroup.limitedDirectors’ report

Terry
Cuthbertson

Chairman, Non-Executive Director

Qualifications

Bachelor of Business, Chartered Accountant

Experience and
expertise

Appointed as a Non-Executive Director in March 2006 and has been the Group
Chairman since March 2006.

Mr Cuthbertson was previously a partner of KPMG and has extensive corporate finance
expertise and knowledge.

Directorships of
listed entities (last
3 years)

Chairman of Austpac Resources N.L. from 2004 (Director from 2001);
Chairman of Australian Whisky Holdings Ltd from 2003;
Chairman of South American Iron & Steel Corporation Ltd from 2009;
Chairman of Malachite Resources Ltd from 2013 (Director from 2012);
Director of Mint Payments Ltd from 2007 (Chairman from 2008 to 2018);
Director of Isentric Ltd from 2010

Special
responsibilities

Member of the Audit and Remuneration Committees

Interest in shares

920,906

Interest in options

100,000

Michael Boorne

Non-Executive Director

Qualifications

Diploma in Electronics Engineering

Experience and
expertise

Appointed as Non-Executive Director in December 2006.

Mr Boorne is a successful entrepreneur with extensive experience in combining
technical expertise with commercial and corporate experience. He has founded start-
up businesses Sprit Modems and Mitron, and is a director and committee member of
numerous private companies and charitable foundations. He was previously a
Non-Executive Director of Netcomm Ltd.

Directorships of
listed entities (last
3 years)

None

Special
responsibilities

Chairman of the Audit and Remuneration Committees

Interest in shares

709,543

Interest in options

100,000

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

Andy Fung

Non-Executive Director

Qualifications

Bachelor of Engineering, Master of Commerce

Experience and
expertise

Appointed as Non-Executive Director in March 2012.

Mr Fung is a co-founder of MNF Group Limited and Symbio Networks Pty Ltd. He
was formerly Managing Director of the Group from 2006 until 2012. Mr Fung has
had extensive telecommunications industry experience in Australia and Asia, having
previously held senior management positions with Telstra, Australian Trade Commission,
Optus and Lucent Technologies of US. He is also Executive Director of a private
company with interests in trade and investments.

Directorships of
listed entities (last
3 years)

None

Special
responsibilities

Member of the Audit and Remuneration Committees

Interest in shares

14,151,954

Interest in options

100,000

Rene Sugo

Chief Executive Officer and Executive Director

Qualifications

Bachelor of Engineering (Hons)

Experience and
expertise

Appointed as CEO and Executive Director in March 2012.

Mr Sugo is a co-founder of MNF Group Limited. He is a strong industry advocate,
representing both the interests of MNF Group and the telecommunications industry.
He has been a director of the Australian Communications Alliance and the INMS
(Industry Number Management Services) since 2015.

Mr Sugo sits on various industry committees locally and overseas including the ITW
Global Leaders Forum (GLF), and regularly contributes articles and opinions on issues
affecting the industry, such as the NBN, regulatory policy and innovation.

Mr Sugo started his career at the CSIRO - Australia’s premier Research and
Development organisation. Prior to making the move into the Communications industry,
Mr Sugo worked at Lucent Technologies Bell Labs in Australia, the USA and Asia.

Directorships of
listed entities (last
3 years)

None

Special
responsibilities

Member of the Audit and Remuneration Committees

Interest in shares

11,896,867

Interest in options

150,000

Catherine Ly

Company Secretary

Qualifications

Bachelor of Business and Certified Practising Accountant

Experience and
expertise

Ms Ly joined the MNF Group in April 2006 as CFO and Company Secretary, and has
focused on the role of Company Secretary and Treasurer since August 2013 following
the expansion of the Group.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

Board and Committee Meetings

From 1 July 2017 to 30 June 2018, the Directors held 16 board meetings and 2 audit committee meetings. Each
Director’s attendance at those meetings is set out in the following table:

Directors

Eligible to attend

Attended

Eligible to attend

Attended

Board

Audit

Mr. Terry Cuthbertson

Mr. Michael Boorne

Mr. Andy Fung

Mr. Rene Sugo

Principal activities and significant changes in nature of activities

The principal activity of the MNF Group is providing voice, data, and cloud based communication and
communication enablement services to residential, business, government and wholesale customers in Australia
and internationally.

In the financial year the MNF Group derived revenue from the sale of the above-mentioned communications
services. These fees consist of recurring charges for access to facilities and capabilities, as well as consumption
charges for variable usage of those facilities. Revenue was also derived from the sale of hardware, equipment
and consulting services to support the primary products of the business.

The company operates in three main segments:

Domestic Retail - based on the original MyNetFone brand and other retail acquisitions, focussing on
selling directly to residential, small business, enterprise and government customers;
Domestic Wholesale - based on the original Symbio Networks brand, focussing on selling to Australian &
New Zealand domestic carriers, carriage service providers (CSP), cloud providers and application providers;
and
Global Wholesale - based on the TNZI acquisition and pre-existing global customers, focussing on selling to
global carriers, carriage service providers (CSP), cloud providers and application providers.

The overall nature of the business has not changed during the financial year.

Operating Result

Excluding cost associated with acquisitions, earnings before interest expense, tax expense, depreciation and
amortisation expense (EBITDA) increased by 3% to $24.6 million, with net profit after tax (NPAT) decreasing by
1.7% to $11.9 million, compared to the prior year.

The Group issued updated guidance in February 2018. The EBITDA result is at 98.4% of the $25.0 million
guidance and NPAT is at 95% of the $12.5 million guidance, NPAT includes $0.3m of un-forecasted acquisition
costs.

The total dividend for the full year has increased to 8.35 cents per share (fully franked), with the company
declaring a final dividend of 4.05 cents per share for the second half of the 2018 financial year. The full year
dividend payments represent 51% of the 2018 full year EPS.

Directors’ Report for the year ended 30 June 2018

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

MNF performance at a glance

250

200

150

100

FY14 FY15 FY16 FY17 FY18

EBITDA

$24.6 million

EBITDA rose marginally
by 3% for the full year to
$24.6m impacted by a one-off
investment into the Pennytel
brand launch of $2.3m.

EPS

16.25¢

EPS decreased by 1.07c.
While NPAT was flat YoY, the
full dilutionary impact of the
February 2017 share placement
& SPP weighed on the EPS
calculation.

20.0

15.0

10.0

5.0

FY14 FY15 FY16 FY17 FY18

REVENUE

MARGIN

$221 million

Consolidated Group Revenue
increased to $221 million up
15% from the previous year.
All segments contributed
with organic revenue growth,
in conjunction with a full
year contribution from CCI
acquisition (February 2017).

$69 million

Gross margin increased by 18% on
the PCP to $69m. With all segments
contributing to that YoY growth. Given
the diverse range of margin levels in
the portfolio MNF prefers to use gross
margin as the top level indicator of
performance.

FY14 FY15 FY16 FY17 FY18

NPAT

$11.9 million

While PBT saw a marginal YoY
increase, NPAT saw a small
decrease impacted by the
Group’s marginal tax rate from
27% (FY17) to 29% (FY18),
and effects of investment in the
Pennytel brand launch.

FY14 FY15 FY16 FY17 FY18

DIVIDEND
8.35¢

A final declared dividend of
4.05c brings the full year dividend
to 8.35c, a 1% increase on the
PCP. The full year dividend
represents 51% of EPS, this ratio
is consistent with prior years.

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

FY14 FY15 FY16 FY17 FY18

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

Review of operations

A review of the operations of the entity during the financial year and the results of those operations are as follows:

Record Margin and EBITDA
Margin increased $10.4m (18%) on the prior year to a record $69.0m (2017: $58.6m). EBITDA of $24.6m was up
3% on the prior year.

Net profit after tax (NPAT) for the year was marginally down at $11.9m (2017: $12.1m) with Earnings per share
(EPS) decreasing to 16.25 cents per share (2017: 17.32 cents per share).

Year ended 30 June 2018

Year ended 30 June 2017

% change

Revenue

Gross profit

EBITDA

NPAT

EPS

$220.7m

$69.0m

$24.6m

$11.9m

$191.8m

$58.6m

$23.9m

$12.1m

16.25 cents

17.32 cents

+15%

+18%

+3%

-2%

-6%

Reconciliation of NPAT to reported EBITDA

NPAT

Add back

Depreciation & Amortisation

Interest expense

Income tax expense

Acquisition costs

Reported EBITDA

Non-cash share option costs

Interest revenue

Standard EBITDA

2018
$’000

2017
$’000

2016
$’000

11,859

12,066

8,990

6,310

1,270

4,894

262

24,595

396

(576)

24,415

5,083

1,790

4,444

498

23,881

293

(1,350)

22,824

4,709

1,061

2,835

200

17,795

(249)

17,546

Historically MNF has reported EBITDA without excluding Non-cash share option costs and interest revenue, which
have been for the most part immaterial. The above table demonstrates the reported EBITDA and the EBITDA
after removing interest revenue and option costs.

Cash and debt

The closing cash balance as at 30 June 2018 was $18.9m (2017: $52.4m).

The decrease in the cash balance was the result of the unwinding of the large novated creditor that came onto the
balance sheet in 2016. This decrease was anticipated by management and brings the cash balance closer to a
normalised cash balance for the business.

At year end gross debt in the form of a $27.0m revolving acquisition facility was $10.7m (2017: $11.2m). $2.5m of
gross debt was paid down during the year, and the company drew down $2.0m for the SuperInternet acquisition
that completed on 6 July 2018.

The company had no net debt as at year end.

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entities
Directors’ report

Business outlook

The MNF Group operates with three very solid independent segments – Domestic Retail, Domestic Wholesale
and Global Wholesale. Inside each segment are multiple product lines with excellent diversity of customers and
profit contribution. All segments operate in our core area of specialisation, being enabling new and disruptive
voice communications through software development and network deployment. Each segment has a well-defined
strategy for investment and growth. The business is confident of sustainable organic gross margin and profit
growth across all three segments.

Additionally, the business has shown an ability to find value accretive acquisitions and integrate them quickly and
effectively to improve the overall performance of the business. With a discerning and conservative approach,
the Board of MNF Group will continue to actively search for further acquisition opportunities; whilst the business
remains totally committed to driving organic growth and overall financial performance within the business.

Domestic Retail Segment

This segment is based on the original MyNetFone brand and other retail acquisitions, focussing on selling directly
to residential, small business, enterprise & government, and conferencing customers.

The domestic retail segment delivered a margin contribution to the group of $23.0m. That is a $4.1m (22%)
increase on the prior year. The addition of CCI to this segment in February 2017 was the primary driver of this
growth. Excluding CCI from this growth, the Domestic Retail Segment grew organically by around 1.3%. The
underlying organic growth was impacted by the accelerating decline of the residential sub-segment which declined
13% this year. This offset the growth of small business and enterprise & government.

a. Residential

The Residential sub-segment consists of selling residential products – VoIP, DSL, NBN and Mobile within
Australia. The segment operates under multiple brands – MyNetFone, Pennytel and theBuzz.

This year the company decided to invest in the re-launch of Pennytel (February 2017) to be a main stream brand
with Mobile as the core offering. In launching this new brand, the company is leveraging its software eco-system,
experience enabling other very large house-hold name brands, extensive niche residential marketing experience,
our Telstra Wholesale MVNO agreement and a strategic marketing partnership.

The company’s focus going forward will be to continue to develop the Pennytel brand, and allow the older legacy
brands to gradually decline as the products reach technical obsolescence. Going forward the company will look to
launching a new NBN and Voice offering also under the Pennytel brand and consolidate all residential operations
under one brand.

The once-off investment into the Pennytel launch amounted to $2.3m in FY18. Looking forward into FY19 the
Residential sub-segment is expected to cost the company approximately $0.5m at EBITDA level as the customer
acquisition run rate increases.

b. Small Business

The Small Business sub-segment consists of selling business grade MyNetFone Virtual PBX and SIP trunks, as
well as business grade DSL, NBN and Ethernet broadband services within Australia. The sub-segment operates
under the brands MyNetFone, Connexus and CallStream. Each brand has its own value proposition, web site, and
product range; however, all brands are operated across the same network and same operations team, providing a
high level of synergy. The small business market sub-segment is strategic to MNF with strong prospects for future
growth.

The company has some leading products in the market and continues to innovate. The NBN roll out will provide
additional growth impetus to this segment when the NBN reaches more centralised business areas, as it will force
customers to move off legacy copper PSTN services and find new alternatives for telephony.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

The Virtual PBX and SIP trunk products, which are the core product in this segment, grew by 13% to 3,842
services in operation. Revenue and margin from business voice has grown in 2017.

c. Enterprise & Government

The Enterprise & Government sub-segment consists of selling enterprise grade telecommunications solutions
such as SIP Trunks, Microsoft Skype for Business, BroadSoft and other solutions within Australia and New
Zealand. The sub-segment operates under the newly created MNF Enterprise brand.

The Enterprise & Government gross margin grew 13% this year to $2.6m. The growth was largely due to
contributions from the new Microsoft Skype for Business solutions. Additional product capabilities for Broadsoft
are due to come online in FY19.

The MNF Group maintains preferred supplier status under the Tasmanian Government TMD and PNAC
purchasing agreements. Additionally MNF Group has obtained purchasing panel arrangements with New Zealand
Government, NSW Government, Victorian Government, the Municipal Association of Victoria, and the West
Australian Association of Local Government.

d. Conference Call International (CCI)

The CCI sub-segment consists of the business assets, customers and operations of Conference Call International
Pty Ltd acquired in February 2017. The CCI business involved selling audio conferencing and collaboration
services to business customers in Australia and New Zealand. The business owns and operates three main
brands – OzLink, Eureka Conferencing and Express Virtual Meetings. Each brand services a different set of user
needs in this space.

The CCI business is performing well with overall gross margin up 10% in FY18H2 compared to the previous
corresponding period. The business and network integration is now complete together with capacity expansion
for future growth. Additionally new product offerings in the area of video conferencing and collaboration are under
development for release in FY19.

Domestic Wholesale Segment

This segment is based on the original Symbio Networks brand, and includes the iBoss software platform. The
segment is focussed on selling to Australian & New Zealand domestic carriers, carriage service providers (CSP),
cloud providers and application providers. This segment is strategic to the group and continues to experience
strong organic growth. The key products sold into this market are:

Wholesale voice – termination of high volume Wholesale voice minutes;

Wholesale managed services – providing unbranded capabilities and services such as Local Number
Portability, voice end-points, phone numbers, and numerous other in-house developed cloud based value
added services;

Wholesale aggregation services on the iBoss software platform – providing customer branded services such
as: DSL broadband, NBN broadband, Legacy ISDN/PSTN voice resale, mobile telephony resale and also
providing access to the complete suite of Symbio Wholesale managed services;

Software-as-a-Service (SaaS)– leveraging the company’s extensive software intellectual property assets and
monetising them by means of selling cloud based capabilities on a monthly recurring basis. The main product
is the iBoss enablement platform.

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

These products leverage the extensive fully interconnected national voice network that is also used to carry the
group’s retail and globally originated traffic, in addition to an extensive amount of proprietary intellectual property
that has been developed by the company over the last 15 years.

The domestic wholesale business is currently hosting over 300 unique service provider customers, an increase
of 5% on the previous year. Each customer generally purchases one or more products from the above suite
of products. In addition to the increase in service provider customers, the customers themselves are generally
growing organically, providing a compounding growth effect – hence the strong margin growth for this segment.

Services provided in this segment continue to experience strong growth, with Local Number Portability (LNP)
growing 22% to 788,000 inbound ported numbers, and the total volume of hosted Direct-In-Dial (DID) numbers
growing to 3.2 million numbers. Wholesale aggregation subscriptions (iBoss) increased to 15,156, up 179% on the
prior year.

Global Wholesale Segment

This segment is based on the TNZI and Symbio Networks brand to customers that are global operators and
managed by the team out of Wellington. The segment is focussed on selling to global carriers, carriage service
providers (CSP), cloud providers and application providers. This segment is strategic to the group and has the
biggest potential for long term organic growth through leveraging its global market reach to sell the company’s
high margin products. Initial focus for global growth is the Asia-Pacific region where the opportunity and the
company is strongest.

The main product sold by TNZI has historically been global voice termination. The TNZI brand operates high
quality voice termination to all countries around the globe through direct and indirect partnerships. TNZI is globally
recognised as a “Tier 1” quality brand, having been an innovator and pioneer of global minutes trading for over 25
years. The TNZI organisation is a member of many exclusive global infrastructure organisations and committees,
including the ITW Global Leaders Forum (GLF), Pacific Islands Telecommunications Association (PITA), the i3
Forum standards organisation and the Pacific Telecommunications Council (PTC).

The Symbio Networks products are being productised and made available to the global customer base. This
is expected to provide additional high margin recurring revenue streams to the TNZI business, similar to what
Symbio Networks is achieving in the Australian and New Zealand domestic markets.

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the company during the financial year.

After balance date events

Dividends proposed:
The dividend as recommended by the Board will be paid subsequent to the balance date.

Acquisition of SuperInternet
On 6 July 2018, the Company completed the acquisition of 100% of the issued shares in SuperInternet (s) Pte
Ltd for SGD2.0m (AUD2.0m), SuperInternet is a fully licensed independent facilities-based operator (FBO) in
Singapore. The acquisition has increased the Group’s footprint into Asia with voice and data capabilities.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

Future developments
The Board is committed to growing the company organically as well as by way of targeted acquisitions.

The company has a strict policy around the evaluation of acquisition targets and will continue to look to build
through leveraging synergies, adding products and services through the acquisition of intellectual property and
avoiding companies that are pure re-sellers of other networks.

Environmental issues
The Group’s operations are not regulated by any significant environmental regulation under a law of the
Commonwealth or of a State or Territory.

Dividends paid or recommended
Fully franked dividends paid or declared for payment during the financial year are as follows:

Dividends paid during the year:

$000

Franking

2017 Final dividend of 4.50 cents per share paid on 28
September 2017

2018 Interim dividend of 4.30 cents per share paid on 05
April 2018

Dividends recommended (subsequent to year end):

3,279

3,138

100%

2018 Final dividend of 4.05 cents per share recommended on
28 August 2018

2,961

100%

The 2018 final divident is to be paid on 4 October 2018 to shareholders registered as at 10 September 2018.

Options
Shares under option or issued on exercise of options

The Directors did not acquire any shares through the exercise of options during the year.

On 25 October 2016 at the Annual General Meeting, shareholders voted in favour of granting 450,000 options to
Directors. The details of those options are detailed in the table below:

Director

Date of expiry

Exercise price

Number of options

Terry Cuthbertson

Michael Boorne

Andy Fung

Rene Sugo

30 June 2021

$7.15

100,000

150,000

450,000

At the date of this report, the unissued ordinary shares of MNF Group Limited under options which were granted
during the 2017 financial year is as follows:

Grant Date

Date of expiry

Exercise price

Number of options

15 September 2016

27 October 2016

30 June 2019

30 June 2020

30 June 2021

Nil

$7.15

90,000

620,000

800,000

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

Audited Remuneration Report

This report details the remuneration structures and outcomes for key management personnel (KMP) of the Group
for the year ended 30 June 2018. This report forms part of the directors’ report and has been prepared and
audited in accordance with section 300A of the Corporations Act 2001.

For the purposes of this report, KMP is defined as those persons having authority and responsibility for planning,
directing and controlling the major activities of the Company and the Group, directly or indirectly, and includes
directors (whether executive or otherwise) of the Company, the Chief Executive Officer (CEO), the Chief Financial
Officer (CFO) and other senior executives of the Group.

The table below outlines the KMPs of the Group and their movements during the 2018 financial year:

Name

Position

Term as KMP

Non-executive directors

Mr Terry Cuthbertson

Non-executive Chairman

Full financial year

Mr Michael Boorne

Non-executive Director

Full financial year

Mr Andy Fung

Non-executive Director

Full financial year

Executive director

Mr Rene Sugo

Other KMPs

Chief Executive Officer

Full financial year

Mr Matthew Gepp

Chief Financial Officer

Full financial year

Ms Catherine Ly

Company Secretary and Treasurer

Full financial year

There were no changes to KMPs between the reporting date and date the financial report was authorised for
issue.

Remuneration Committee

Due to the size of the Group, the functions of the Remuneration Committee are undertaken by the full Board. Mr
Boorne chairs the Remuneration Committee.

The Board is responsible for the remuneration arrangements of the CEO and other senior executives and all
awards made under short and long-term incentive plans. The Group does not currently engage remuneration
consultants, however may consider the use of remuneration consultants in the future as the Group continues to
grow.

The Board also sets the aggregate remuneration of non-executive directors, which is then subject to shareholder
approval.

The 2017 audited remuneration report received positive shareholder support at the 2017 annual general meeting
(AGM) with a vote of 91.45% in favour (2016: 98.45%).

The current aggregate maximum amount of non-executive directors’ fees of $500,000 per annum (inclusive of
superannuation guarantee charge contribution) was approved by shareholders at the 2014 AGM.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

Executive remuneration arrangements

Remuneration principles and strategy

Remuneration levels for KMPs of the Group are designed to attract and retain appropriately qualified and
experienced directors and executives. The Group aims to reward executives based on their position and
responsibility whilst maintaining comparability with other companies in the sector of similar revenue, market
capitalisation and earnings levels. The executive remuneration structure remains unchanged from prior year,
and includes a combination of the following components:

Fixed Remuneration

Short-term Incentive (STI)

Long-term Incentive (LTI)

Variable Remuneration

Cash

Equity

- Base salary plus
superannuation

- Eligibility for payment is
dependent on the Group
exceeding budgeted NPAT

- Set based on market
benchmarks and individual
performance, qualifications
and experience

- Paid within the quarter
following financial year-end

- Share options to vest after
each successive tranche,
conditional upon
continuation of employment

- Aimed to retain key staff

- Share options are linked
to share price performance
at $7.15 strike price. It
incentivise KMPs to create
shareholder wealth, based
on individual skills,
qualifications and
experience, to expire on 30
June 2021

Fixed remuneration

Fixed remuneration consists of base salary, employer superannuation contributions and non-monetary benefits.
Non-monetary benefits are typically benefits such as access to car-parking and leave entitlements. It is market
competitive and set to attract, motivate and retain highly skilled personnel.

Details of the short-term incentive plan

The objective of the STI plan is to link the Group’s financial and operational targets with the remuneration received
by senior managers charged with meeting those targets. As part of their respective employment agreements the
CEO, CFO and other senior managers are eligible for a cash bonus subject to the attainment of these clearly
defined objectives. The STI plan applies to the period from 1 July 2017 to 30 June 2018.

100% of the STI target for financial year 2018 was linked to the Group achieving its annual financial targets. The
determination and agreement of these targets are set at the start of each financial year and align with the Group’s
longer-term strategic goals.

The current financial year’s STI plan depends on the Group achieving its budgeted net profit after tax (NPAT)
target after provisioning for the STI, as set by the Board. The Board believes that the objective being set is
challenging for the executives and senior managers. It will be paid out annually in the quarter following financial
year-end should the target be met, subject to Board approval, as they have ultimate discretion.

Performance of the Group against the 2018 STI NPAT target/hurdle is summarised as follows:

Performance

2018 TargetA

2018 NPAT

% Variance

NPAT (inclusive of STI provisioning)

$12.5m

$11.9m

(5%)

A The budget was revised in the Group’s Business Update forecast guidance as communicated on 13 February 2018 in the Half-Year Investor
Presentation.

As the financial performance has not exceeded budget for the 2018 financial year, the STI will not be payable and
is not accrued in the 2018 financial report.

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

The below illustrates the structured employee entitlements of eligible KMPs as a percentage of their fixed
remuneration:

KMP Remuneration Structure

16%

21%

18%

23%

84%

79%

76%

75%

FY18

FY17

FY18

FY17

CEO

CFO

Fixed Remuneration STI LTI

Non-executive directors are not eligible for an STI.

Details of long-term incentive plans

LTI plans are offered under the Company’s Employee Option Plan to align remuneration with the creation of
shareholder value over the long term. As such, LTI awards are only made to executives and other key employees
who have an impact on the Group’s performance.

Currently, the Group has two LTI plans in place. The first plan is a share-based option plan aimed at retaining
highly skilled directors and KMPs to appropriately remunerate in line with similar organisations in the market:

Plan attributes

Detail

Participants

Allocation

Mr M Gepp, Ms C Ly

The allocation of the options granted is separated into four tranches, each vesting to the
KMPs as detailed below:

Vest date

1 Sep 2016

1 Sep 2017

1 Sep 2018

1 Sep 2019

Number of options

Mr M Gepp

Ms C Ly

2,000

6,000

500

1,500

Value

Vesting

Alignment/objective

Forfeiture

The options granted have an exercise price of $Nil.

Vesting of each successive tranche is conditional upon the recipient continuing
employment with the Group up until date of vesting.

Incentive package in accordance with remuneration policy focussing on long-term
retention of key staff within the Group. The objective is to retain highly skilled employees
for the long-term, whose contributions are key to the success of the Group.

Subject to the Board’s discretion should the employee resign, be terminated by the Group
for any reason, or be terminated from the plan for any reason, the options granted prior to
vesting date will be forfeited.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

The second plan is also a share-based option plan aimed at directors, executives and KMPs of the Group, to align
their long-term remuneration with the performance of the long-term share price:

Plan attributes

Detail

Participants

Allocation

The Group’s directors and KMPs

The allocation of the options granted to each director and senior manager is as below:

Mr T Cuthbertson

100,000

Mr M Boorne

Mr A Fung

Mr R Sugo

Mr M Gepp

Ms C Ly

100,000

150,000

50,000

20,000

These options were granted on 27 October 2016. The options granted to directors were
approved by shareholders at the 2016 AGM.

Conditions

Options have an exercise price of $7.15, and expire on 30 June 2021.

Alignment/objective

The Board believes that LTI hurdles based on achieving or exceeding a share price of
$7.15 targeted in the Group’s TSR performance is a challenging objective. This incentive
directly aligns the financial interests of directors, KMPs and executives with shareholders
by linking their reward to the Group's share price performance.

Forfeiture

Should the participant resign, be terminated by the Group for any reason, or be terminated
from the plan for any reason, the options granted prior to vesting date will be forfeited.

Shareholders returns

KMP remuneration is rewarded with consideration of the Group’s earnings and performance. The following table
sets out MNF Group’s key financial results and shareholder wealth generation over the past five years:

Performance metric

2018

2017

2016

2015

2014

Revenue (‘000)

NPAT (‘000)

$220,728

$191,752

$161,217

$85,675

$59,306

$11,859

$12,066

$8,990

$7,184

$5,778

Basic EPS (cents)

16.25

17.32

13.45

11.49

9.26

Dividends paid (‘000)

$6,417

$5,099

$4,512

$3,128

$2,498

Dividends declared per share (cents)

Share price (as at 30 June)

Change in share price

8.35

$5.25

$0.88

8.25

$4.37

$0.37

7.00

5.75

4.50

$4.00

$0.18

$3.82

$1.40

$2.42

$1.22

Market Capitalisation

$384m

$318m

$270m

$240m

$151m

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

Remuneration details of directors and KMPs for the year ended 30 June 2018

Details of the nature and amount of benefits and payments for each director and KMP of the company for the
2017 and 2018 financial years are as follows, represented on an accrual basis:

Short term benefits

Cash
salary &
fees (i)
$

STI/
Bonus
paid(ii)
$

STI/
Bonus
accrued(iii)
$

Non-
monetary
benefits(iv)
$

Non-executive
Directors

Mr T
Cuthbertson

Mr M
Boorne

2018

120,000

2017

118,200

2018

100,000

2017

91,750

Mr A Fung

2018

80,000

2017

77,000

Executive Director

Mr R Sugo

2018

517,025

135,013

2017

464,617

79,500

Other KMPs

Mr M Gepp

2018

337,719

97,805

2017

296,667

80,000

Ms C Ly

2018

164,167

2017

159,250

Total

2018

1,318,911

232,818

2017

1,207,484

159,500

Post
employment
benefits

Superannuation

Shared
based
pay-
ments

Options
(v)

Total

11,400

131,400

11,229

715

130,144

9,500

109,500

8,550

7,600

7,315

715

101,015

87,600

715

85,030

25,000

683,968

27,736

1,073

575,420

25,000

29,067

494,061

30,308

8,658

418,127

15,675

7,267

187,109

15,128

2,218

176,596

94,175

36,334

1,693,638

100,266

14,094

1,486,332

6,930

2,494

4,470

2,494

11,400

4,988

(i)
(ii)
(iii)

(iv)
(v)

Cash salaries paid are reviewed annually.
STI amounts paid in the current financial year relate to the achievement of 2017 targets and were accrued for in the 2017 results.
STI amounts accrued in the current financial year are in relation to the 2018 financial year and would be paid in the subsequent financial
year when applicable.
The category “Non-monetary benefits” represent other benefits such as car parking.
Black-Scholes model is used to value options issued.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

Key terms of employment agreements

The Company has entered into an executive employment agreement with the CEO. The remuneration and
terms of employment for other key executives are also set out in written agreements. Each of these employment
agreements are unlimited in term but may be terminated by written notice by either party and by the Company
making payment in lieu of notice.

Each of these agreements sets out the arrangements for total fixed remuneration, performance-related cash
bonus opportunities, superannuation, termination rights and obligations and eligibility to participate in the
employee equity-based incentive scheme. Executive salaries are reviewed annually. The executive employment
agreements do not require the Company to increase base salary, incentive bonuses or to continue the
participants’ participation in equity-based incentive programs. Payment of any STI is at the Board’s discretion.

The Company may terminate the employment of the key executives without notice and without payment in lieu of
notice in some circumstances. These include if the executive:

Commits an act of serious misconduct;
Commits a material breach of the executive employment agreement;
Denigrates or engages in any behaviour that may materially damage the reputation of, or otherwise bring
the Group into disrepute; or is convicted of any criminal offence which would in the reasonable opinion of the
Board of Directors adversely affect the carrying out of the executive’s duties.

The Company may terminate the employment of the key executive at any time by giving the executive notice
of termination or payment in lieu of such notice. The amount of notice required from the Company in these
circumstances is set out in the following table:

KMP

Company
notice period

Employee
notice
period

Termination
provision

Details

Mr R Sugo

6 months

1 month

Mr M Gepp

3 months

Ms C Ly

6 months

1 month

6 months’ base
salary

Fixed salary package of $542,025,
consisting of base salary and
superannuation, reviewed annually by
the Board

3 months’ base
salary

Fixed salary package of $369,563,
consisting of base salary and
superannuation, reviewed annually by
the Board in September

6 months’ base
salary

Fixed salary package of $180,675,
consisting of base salary and
superannuation, reviewed annually by
the Board in September

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report - audited remuneration report

Directors’ interests in shares and options of the Company

At the date of this report, the particulars of shares and options held by the directors and other KMPs of the
Company in the Company or in related bodies corporate which are required to be declared in the register of
directors’ share holdings are as follows:

2018

2017

Shareholding

Options

Shareholding

Options

Non-executive
Directors

Mr T Cuthbertson

920,906

100,000

920,906

100,000

Mr M Boorne

Mr A Fung

Executive Director

709,543

100,000

728,014

100,000

14,151,954

100,000

14,025,989

100,000

Shareholding
movement %

(3%)

Mr R Sugo

11,896,867

150,000

13,178,084

150,000

(10%)

Other KMPs

Mr M Gepp

Ms C Ly

Total

43,000

295,676

62,000

23,000

52,000

68,000

288,926

24,500

(17%)

28,017,946

535,000

29,193,919

542,500

This concludes the audited remuneration report.

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Directors’ report

Directors’ benefits

No director has received or has become entitled to receive, during or since the financial year, a benefit because of
a contract made by the company, controlled entity or related body corporate with a director, a firm which a director
is a member or an entity in which a director has a substantial financial interest.

Indemnifying officers or auditor

The Group has in place a contract insuring the directors, the company secretary and all executive officers of the
Group and any related body corporate, against a liability incurred by a director, company secretary or executive
officers to the extent permitted by the Corporations Act 2001.

The Group has indemnified the directors, the company secretary and all executive officers of the Group for costs
incurred, in their capacity as officers of the Group, for which they may be held personally liable, except where
there is a lack of good faith.

Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such
disclosure is prohibited under the terms of the contract.

No indemnities have been given or agreed to be given or insurance premiums paid or agreed to be paid, during or
since the end of the financial year, to the auditors of the Group or any related entities against a liability incurred by
the auditors

Proceedings on behalf of the company

No person has applied for leave of a Court to bring proceedings on behalf of the Group or intervene in any
proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or
any part of those proceedings. The Group was not a party to any such proceedings during the year.

Non-audit services

During the current and prior year MNSA Pty Ltd Chartered Accountants, the Group’s auditor, did not provide any
non-audit services.

The total amount received by MNSA Pty Ltd Chartered Accountants for non-audit services was $Nil (2017: $Nil).

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001
has been received and can be found on page 83 of the financial report.

Rounding off

MNF Group Limited is a company of the kind referred to in ASIC Legislative Instrument (Rounding in Financial/
Directors’ Reports) 2016/191 and in accordance with that Instrument, amounts in the Directors’ report and the
consolidated financial statements are rounded to the nearest thousand dollars, except where otherwise indicated.

For the year ended 30 June 2018MNF Group Limited | ABN 37 118 699 853 and controlled entitiesDirectors’ report

This directors’ report, incorporating the audited remuneration report, is signed in accordance with a resolution of
the Board of Directors.

Terry Cuthbertson
Chairman

Sydney, 28 August 2018

Rene Sugo
CEO and Executive Director

For the year ended 30 June 2018www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesConsolidated financial
statements 2018

Consolidated statement of profit or loss and other comprehensive income

For the year ended 30 June

Continuing operations

Notes

Consolidated group

2018

$’000

2017

$’000

Revenue

Cost of sales

Gross profit

Other income

Employee benefits expense

Depreciation and amortisation

Other expenses

Costs related to acquisition

Financing costs

Profit before income tax

220,728

191,752

(151,683)

(133,139)

69,045

58,613

1,128

1,350

(31,713)

(6,310)

(13,865)

(262)

(1,270)

16,753

(26,028)

(5,083)

(10,054)

(498)

(1,790)

16,510

Income tax expense

5a, 5b

(4,894)

(4,444)

Profit from continuing operations

11,859

12,066

Net profit for the year

11,859

12,066

Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:

Exchange differences on translation of foreign operations

Changes in fair value of cash flow hedges

475

352

827

(584)

142

(442)

Total comprehensive income for the year

12,686

11,624

Earnings per share from continuing operations

- Basic earnings per share (cents)

- Diluted earnings per share (cents)

16.25

16.08

17.32

17.10

The accompanying notes form part of these consolidated financial statements.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Consolidated statement of financial position

As at 30 June

Assets
Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Total current assets

Non-current assets

Property, plant and equipment

Deferred tax asset

Goodwill and other intangibles

Total non-current assets

Total assets

Liabilities
Current liabilities

Trade and other payables

Loans and borrowings

Deferred revenue

Income tax payable

Financial Instruments

Provisions

Total current liabilities

Non-current liabilities

Loans and borrowings

Financial instruments

Provisions

Deferred tax liability

Total non-current liabilities

Total liabilities

Net assets

Equity

Issued capital

Reserves

Retained earnings

Total equity

Notes

14a

Consolidated group

2018

$’000

2017

$’000

18,870

33,450

650

52,970

23,144

1,040

48,754

72,938

52,358

30,121

669

83,148

18,663

958

47,697

67,318

125,908

150,466

30,120

63,181

2,500

1,763

1,996

1,801

38,180

8,190

1,876

1,349

11,495

49,675

76,233

50,221

1,493

24,519

76,233

2,500

1,611

1,581

592

1,483

70,948

8,690

140

921

1,420

11,171

82,119

68,347

49,000

270

19,077

68,347

The accompanying notes form part of these consolidated financial statements.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesConsolidated group

2018

$’000

2017

$’000

231,224

202,372

(242,907)

(182,486)

603

(694)

836

(759)

(4,599)

(3,947)

1,358

(904)

(3,016)

13,377

(9,646)

(16,986)

(461)

Consolidated statement of cash flows

For the year ended 30 June

Cash flows from operating activities

Notes

Receipts from customers

Payments to suppliers and employees

Settlement of financial asset

Settlement of financial liability

Interest received

Interest paid

Income tax paid

Net cash (used for)/from operating activities

(16,296)

Cash flows from investing activities

Purchase of property, plant and equipment

Payment for business acquisitions

Payment in advance for business acquisitions

Software development costs

Purchase of other intangible assets

(8,101)

(646)

(2,350)

(704)

Net cash used for investing activities

(11,801)

(27,093)

Cash flows from financing activities

Proceeds from share placement and options exercised

Dividends paid

Proceeds from borrowings

Repayment of borrowings

Net cash (used for)/from financing activities

Net (decrease)/increase in cash and cash equivalents

Impact of FX on cash and cash equivalents

Cash and cash equivalents at 1 July

Cash and cash equivalents at 30 June

1,221

(6,417)

2,000

(2,500)

(5,696)

(33,793)

305

52,358

18,870

22,560

(5,099)

(2,500)

14,961

1,245

(1,776)

52,889

52,358

The accompanying notes form part of these consolidated financial statements.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesConsolidated statement of changes in equity

Attributable to owners of the Group

Ordinary
share
capital

Share-
based
payment
reserve

Translation
reserve

Hedging
reserve

Retained
earnings

Total

$’000

Balance at 30 June 2016

26,440

1,353

(329)

(605)

12,109

38,968

Profit for the period

Other comprehensive income

Dividends paid

Share options exercised

Share placement

Shares issued - DRP

Shares issued - SPP

958

17,949

703

2,950

Share-based payments

293

12,066

(584)

142

(442)

(5,098)

958

17,949

703

2,950

293

Balance at 30 June 2017

49,000

1,646

(913)

(463)

19,077

68,347

Profit for the period

Other comprehensive income

Dividends paid

Shares issued - DRP

1,221

Share-based payments

396

475

11,859

352

827

(6,417)

1,221

396

Balance at 30 June 2018

50,221

2,042

(438)

(111)

24,519

76,233

The accompanying notes form part of these consolidated financial statements.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

1. Corporate information

These consolidated financial statements and notes represent those of MNF Group Limited (the Company) and
its controlled entities (collectively, the Group) for the year ended 30 June 2018. The financial statements were
authorised for issue on 28 August 2018 in accordance with a resolution by the directors of the Company.

MNF Group Limited is a for-profit entity limited by shares and incorporated and domiciled in Australia. Shares are
publicly traded on the Australian Securities Exchange (ASX). The nature of the operations and principal activities
of the Group are described in the Directors’ report.

The separate financial statements of the MNF Group Limited, the parent entity of the Group, have not been
presented within this financial report as permitted by the Corporations Act 2001. The financial information of the
Company has been disclosed in Note 25.

2. Significant accounting policies

a. Basis of preparation

The financial statements are general purpose financial statements that have been prepared in accordance with
Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in the
financial statements containing relevant and reliable information about transactions, events and conditions.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
(IASB). Material accounting policies adopted in the preparation of these financial statements are presented below
and have been consistently applied unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs, modified,
where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial
liabilities.

b. New and amended accounting policies adopted by the Group and New Accounting Standards for
application in future periods

Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the
Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted
in future periods, are discussed below:

AASB 9 Financial Instruments and associated amending standards (AASB 9)

AASB 9 is applicable for annual reporting periods beginning on or after 1 January 2018. The Group expects to
adopt the new requirements from its mandatory reporting date, the financial year beginning 1 July 2018.

The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and
includes revised requirements for the classification and measurement of financial instruments, revised recognition
and derecognition requirements for financial instruments and simplified requirements for hedge accounting.

The key changes that may affect the Group on initial application include certain simplifications to the classification
of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected
credit loss and the irrevocable election to recognise gains and losses on investments in equity instruments
that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge
accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of
non-financial items. Should the entity elect to change its hedge policies in line with the new hedge accounting
requirements of the Standard, the application of such accounting would be largely prospective.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements

The Group does not expect a significant impact on its balance sheet or equity on applying classification and
measurement requirements of AASB 9. It expects to continue to measure derivatives at fair value through other
comprehensive income.

The new impairment model requires updates to the expected credit losses recognised at each reporting date
to reflect changes in risk for debt securities, loans and trade receivables. The Group does not expect material
variances as it applies the expected losses on a 12-month basis.

The Group determined that all existing hedge relationship that are currently designated in effective hedging
relationships will continue to qualify for hedge accounting under AASB 9. As the general principles of accounting
for effective hedges do not change as a result of AASB 9, there is an expectation that the impact to the Group’s
financial statement on application would not be significant.

AASB 15 Revenue from Contracts with Customers (AASB 15)

This Standard will come into effect on 1 January 2018 and replace the current accounting requirements applicable
to revenue with a single, principles-based model. Except for a limited number of exceptions, including leases, the
new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges
between entities in the same line of business to facilitate sales to customers and potential customers.

The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:

identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
determine the transaction price;
allocate the transaction price to the performance obligations in the contract(s); and
recognise revenue when (or as) the performance obligations are satisfied

This Standard will require retrospective restatement, as well as enhanced disclosures. The Group provides
telecommunication services. Some contracts may include more than one performance obligation from the
provision of services and low value hardware. The Group accounts for the equipment and service as separate
deliverables. Consideration between these deliverables are allocated using the relative fair value approach. Under
AASB 15, allocation will be made based on relative stand-alone selling prices. Hence, the allocation of the
consideration of revenue recognised in relation to these sales would be affected. Although the directors anticipate
that the adoption of AASB 15 may have an impact on the Group’s financial statements, it is not expected to
generate material differences to the current or future years’ results.

The Group expects to adopt the new
requirements from its mandatory reporting date, the financial year beginning 1 July 2018.

AASB 16 Leases (AASB 16)

This Standard will:

replace AASB 117 Leases and some lease-related Interpretations;
require all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset
leases; and
require new and difference disclosures about leases.

This Standard will require retrospective restatement, as well as new disclosures. The Directors anticipate the
adoption of AASB 16 may have an impact on the Group’s financial statements. The Group has conducted an initial
assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed
assessment. The Group has operating lease commitments and will be required to recognise new assets and
liabilities for its operating leases of office spaces.

AASB 16 is applicable for annual reporting periods beginning on or after 1 January 2019. The Group expects to
adopt the new requirements from its mandatory reporting date, the financial year beginning 1 July 2019.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

c. Principles of consolidation

The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by the
Company at the end of the reporting period. A controlled entity is any entity over which MNF Group Limited has
the ability and right to govern the financial and operating policies so as to obtain benefits from the entity’s
activities. Control will generally exist when the Company owns, directly or indirectly through subsidiaries, more
than half of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of
actual and potential voting rights are also considered.

In preparing the consolidated financial statements, all inter-group balances and transactions between entities
in the consolidated group have been eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with those adopted by the parent entity.

Where controlled entities have entered or left the Group during the year, the financial performance of those
entities are included only for the period of the year that they were controlled. A list of controlled entities is
contained in Note 20 to the consolidated financial statements.

d. Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses and results in the
consolidation of its assets and liabilities. All business combinations, including those involving entities under
common control, are accounted for by applying the acquisition method.

Consideration transferred for the acquisition comprises the fair value of the assets transferred, liability incurred
and the equity interests issued by the acquirer. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at
the acquisition date. Any deferred consideration payable is discounted to present value using the entity’s
incremental borrowing rate. Acquisition-related costs are expensed as incurred.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the
sum of fair value of consideration transferred, over the acquisition-date fair values of identifiable net assets. See
Note 2p for further details regarding impairment testing.

e. Critical accounting estimates and judgments

The Directors evaluate estimates and judgments incorporated into the consolidated financial statements based on
historical knowledge and best available current information. Estimates assure a reasonable expectation of future
events and are based on current trends and economic data, obtained both externally and within the Group. Key
estimates that have a significant risk of causing adjustments to the carrying amounts of certain assets and liabili-
ties within the next annual reporting period are:

(i) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by an independent valuer
using the Black-Scholes model. The accounting estimates and assumptions relating to equity-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but
may have impact on profit or loss and equity.

(ii) Useful lives of property, plant and equipment
The Group reviews the estimated useful lives of property, plant and equipment at the end of each financial year.
The Group adjusts the remaining effective useful life of its assets to better reflect their actual usage and future
economic benefit.

(iii) Utilisation of tax losses
The Company and its wholly-owned Australian subsidiaries elected to join as members of a tax consolidated
group under Australian taxation law as of 1 July 2011. Each entity in the tax consolidated group contributed tax
losses to the Group. The Group has no tax losses to currently utilize.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

(iv) Research & Development (R&D) tax concession
When calculating the income tax provision for the year, the Research & Development tax concession for the
current financial year is based on management’s operational knowledge and best estimate at the time,
utilitising prior year’s claim as a benchmark. The directors believe the estimate is reasonable and conservative.
This may be subject to change following the approval of the R&D tax concession application from AusIndustry in
due course.

f. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable after taking into account any
trade discounts and volume rebates allowed. The following specific recognition criteria must also be met before
revenue is recognised:

(i) Rendering of services
Revenue from telecommunication services is recognised when the services are provided to the customer.
Deferred revenue represents the unused proportion of cash received in advance for call credits determined on a
specific account basis at balance date

(ii) Interest income
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is
the rate inherent in the instrument.

g. Leases

The Group as a lessee - lease payments for operating leases, where substantially all the risks and benefits remain
with the lessor, are charged as expenses in the period in which they are incurred. Lease incentives under
operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

h. Cash and cash equivalents

Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand
and short-term deposits with an original maturity 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.

For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and
cash equivalents as defined above, net of outstanding bank overdrafts.

i. Trade and other receivables

Trade and other receivables are non-interest bearing financial assets with fixed or determinable payments that are
not quoted on an active market. The balance is recognised and carried at original invoice amount net of any
provision for doubtful debts. A provision for doubtful debts is estimated based on analysis made by the Group
regarding the collectability of the debt with reference to the counterparty’s current financial situation. Bad debts
are written off when it is determined the debt is irrecoverable. These amounts have been included in other
expenses.

j. Foreign currency transactions and balances

(i) Functional and presentation currency
The functional currency of each group entity is measured using the currency of the primary consolidated
environment in which the entity operates. The consolidated financial statements are presented in Australian
dollars which is the Company’s functional and presentation currency.

(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying 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 balance sheet date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

(iii) Group Companies
The financial results and position of foreign operations whose functional currency is different from the Group’s
presentation currency are translated as follows:

Assets and liabilities are translated at year end exchange rates prevailing at the reporting date.
Income and expenses are translated at average exchange rates for the period.
Retained earnings are translated at the exchange rates prevailing at the date of the transaction.

On consolidation, assets and liabilities have been translated into Australian dollars at the closing rate at the
reporting date. Income and expenses have been translated into the Group’s presentation currency at the average
rate over the reporting period. The exchange differences are taken to other comprehensive income (OCI) in the
consolidated statement of profit or loss and other comprehensive income.

k. Income tax

(i) Current tax
Current income tax expense charged to the profit or loss is the tax payable on taxable income, calculated using
applicable income tax rates enacted as at reporting date. Current tax liabilities are measured at the amounts
expected to be paid to the relevant taxation authority.

(ii) Deferred tax
Deferred taxes arise due to temporary timing differences between accounting and tax treatments of income and
expenses. They are calculated at the tax rates expected to apply to the period when the asset is realised or the
liability is settled.

Deferred tax assets relating to unused tax losses are recognised only to the extent that it is probable that future
taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Except for
business combinations, no deferred tax is recognised from the initial recognition of an asset or liability where there
is no effect on accounting or taxable profit or loss.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement of the respective asset and liability will occur.

(iii) Tax consolidation
MNF Group Limited and its wholly-owned Australian subsidiaries are part of a tax consolidation group under
Australian taxation law. MNF Group Limited is the head entity in the tax consolidation group. Tax expense,
deferred tax liabilities and deferred tax assets arise from temporary differences of the members of the
tax-consolidation group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts
in the separate financial statements of each entity and the tax values applying under tax consolidation.

MNF Group Limited, as the head entity in the tax consolidated group, recognises the current tax liabilities and
assets and deferred tax assets arising from unused tax losses and tax credits of all entities in Australia.

l. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.

m. Inventories

Costs of purchased inventory are determined after deducting rebates and discounts. Inventories are measured at
the lower of cost and net realisable value. Cost of inventories are determined on a weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

n. Property, plant and equipment

(i) Carrying amount
Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed
annually by directors to ensure it is not more than the recoverable amount from these assets.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance are charged to the statement of profit or
loss and other comprehensive income during the financial period in which they are incurred.

(ii) Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the
consolidated group commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:

Furniture & fittings 6 to 10 years
Office equipment 3 to 5 years
Leasehold improvements 3 to 9 years
Network infrastructure and IT systems 2 to 10 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 determined by comparing proceeds with the carrying amount. These gains and
losses are included in the consolidated statement of profit or loss and other comprehensive income. When
re-valued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to
retained earnings.

o. Financial instruments

Non-derivative financial assets and financial liabilities are recognised when the entity becomes a party to the
contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company
commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is
classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss
immediately.

(i) 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, except for those which are not expected to mature within 12
months after the end of the reporting period (all other loans and receivables are classified as non-current assets).

(ii) Investments in subsidiaries held by the parent
Investments in subsidiaries held by the parent entity are recognised and subsequently measured at cost in the
separate financial statements of the company, less any impairment.

(iii) Derivative financial instruments and hedge accounting
The group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Embedded derivatives are separated from the host contract and accounted for separately if certain criteria are
met.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, then the hedge accounting is discontinued prospectively. If the forecast
transaction is no longer expected to occur, then the amount accumulated in reserves is reclassified to profit or
loss.

Derivatives are initially recognised at fair value; any directly attributable transaction costs are recognised in profit
or loss as incurred.

Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair
value of the derivative is recognised in other comprehensive income (OCI) and accumulated in the hedging
reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or
loss.

The amount accumulated in equity is retained in OCI and reclassified to profit or loss in the same period or
periods during which the hedged item affects profit or loss.

Fair Value hedges
When a derivative is designated as a fair value hedging instrument, the hedged item is re-measured to take into
account the gain or loss attributable to the hedged risk, with the gains or losses arising recognised in profit or loss.
This offsets the gain or loss arising on the hedging instrument which is measured at fair value through profit or
loss. Changes in fair value of the derivative instrument are recognised in profit or loss.

p. Intangible assets and goodwill (impairment testing)

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be
impaired. The assessment will include the consideration of external and internal sources of information including
dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition
profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s
carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement
of profit or loss and other comprehensive income.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.

Recognition and measurement:

Goodwill

Brands

Research and
development

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated
impairment losses. Goodwill assets are not subject to amortisation and are tested for
impairment on an annual basis, or whenever an indication of impairment exists.

Brands identified on acquisitions are measured and recorded at valuation less accumulated
impairment losses. Brands are not subject to amortisation and are tested for impairment on an
annual basis, or whenever an indication of impairment exists.

Expenditure on research is recognised in profit or loss as incurred.
Development expenditure is capitalised only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are
probable and the Group intends to and has sufficient resources to complete development and
to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to
initial recognition, development expenditure is measured at cost less accumulated
amortisation and any accumulated impairment losses.

Other intangible
assets

Other intangible assets, including customer contracts, patents and trademarks and software
acquired by the Group that have finite lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

Amortisation
Amortisation is calculated to write off the cost of intangible assets less their residual values using the straight-line
method over their estimated useful life, and is generally recognised in profit or loss. Goodwill is not amortised.

The estimate useful life of intangibles is as follows:

Patents and trademarks 5 to 20 years
Software and software development costs 5 to 10 years
Customer relationships 3 to 5 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.

q. Trade and other payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and
services received by the Group during the reporting period which remains unpaid. The balance is recognised as a
current liability with the amount being normally paid within 30 days of recognition of the liability.

r. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the Statement of Comprehensive Income net of any
reimbursement.

Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the statement of financial position date. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks
specific to the liability.

s. Employee leave benefits

Provision is made for the Group’s liability for employee benefits arising from services rendered by employees
to balance date. Employee benefits that are expected to be settled within one year have been measured at the
amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have
been measured at the present value of the estimated future cash outflows to be made for those benefits. In
determining the liability, consideration is given to employee wages increases and the probability that the employee
may satisfy vesting requirements. Those cash outflows are discounted using market yields on national
government bonds with terms to maturity that match the expected timing of cash flows.

t. Contributed capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.

u. Earnings per share

Basic earnings per share is determined as net profit/(loss) attributable to members of the group, adjusted to
exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary
shares.

Diluted earnings per share include options outstanding that will have the potential to convert to ordinary shares
and dilute the basic earnings per share.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

v. De-recognition of financial assets and financial liabilities

Financial assets are de-recognised where the contractual rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the risks
and benefits associated with the asset. Financial liabilities are de-recognised where the related obligations are
either discharged, cancelled or expired. The difference between the carrying value of the financial liability
extinguished or transferred to another party and the fair value of consideration paid, including the transfer of
non-cash assets or liabilities assumed, is recognised in profit or loss.

w. Share-based payment transactions

The Group provides benefits to its employees and directors (including KMPs) in the form of share-based
payments, whereby employees render services in exchange for shares or rights over shares (equity-settled
transactions).

The cost of these equity-settled transactions with employees and directors is measured by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined by an external
valuer using the Black-Scholes model.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on
which the relevant employees and directors become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the consolidated statement of profit or
loss and other comprehensive income is the product of:

(i) the grant date fair value of the award;
(ii) the current best estimate of the number of awards that will vest, taking into account such factors as the
likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions
being met; and
(iii) the expired portion of the vesting period.

The charge to the consolidated statement of profit or loss and other comprehensive income for the period is the
cumulative amount as calculated above less the amounts already charged in previous periods. There is a
corresponding credit to equity.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

3. Operating segments

The Group operates in one business segment being telecommunications, which is further broken down into three
sub-segments. These sub-segments reflect the organisational structure of the day to day operations as well as the
separate target markets, being Australian Domestic Retail, ANZ Domestic Wholesale & Global Wholesale. These
segments are based on internal management reporting that is used by the executive management team (chief
operating decision makers) in assessing performance and allocating resources.

Australian Domestic Retail

The core MyNetFone brand, services Residential, SMB (Small to Medium Business), Enterprise and
Government customers in Australia
Conference Call International Pty Limited (CCI) is included in this segment
Other brands in this segment include, Connexus, callstream, PennyTel and theBuzz
Key products in this segment include:

VoIP, Internet, Virtual PBX and SIP trunking
End-to-end audio and web conferencing solutions for SMBs, toll free numbers and number porting

Australia/New Zealand Domestic Wholesale

The core Symbio and iBoss brands service wholesale customers based in Australia & New Zealand
Key products offered by this segment are:

Call termination & collection, pre-select, SIP trunking, DIDs, inbound numbers, porting and virtual numbers
Wholesale aggregation, SaaS, data enablement and MVNO

Global Wholesale

The TNZI Brand services the Global Wholesale market
TollShield and OCA (Open CA) also operate under the Global Wholesale segment
Key products in this segment include:

Voice carriage and International toll free services (ITFS)
Toll Fraud prevention
Class 4 Softswitch and billing

Australian
Domestic Retail

Australia/New
Zealand Domestic
Wholesale

Global
Wholesale

Total

$’000

35,382

22,968

32,213

18,882

33,758

4,565

38,323

17,703

27,133

4,737

31,870

15,431

151,588

4,942

156,530

28,374

132,406

1,754

134,160

24,300

220,728

9,507

230,235

69,045

191,752

6,491

198,243

58,613

2018

External revenue

Inter-segment revenue

Segment revenue

Segment margin

2017

External revenue

Inter-segment revenue

Segment revenue

Segment margin

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

For the year ended 30 June

4. Revenue and expenses

a. Revenue

2018

$’000

2017

$’000

Rendering of services and sale of goods

220,728

191,752

Interest on bank deposits

Other income

b. Employee benefits expense

Wages and salaries

Superannuation

Share based payments expense

Other employee benefits expense

c. Depreciation and amortisation

Depreciation of fixed assets

Amortisation of intangible assets

d. Other expenses

Marketing

Property

Technology & support

Distribution

Accounting & audit

Legal & consulting

Bank and transaction costs

Other administrative expenses

e. Financing costs

Finance charges related to hedge instrument

Finance charges payable on bank loan

576

552

1,128

26,857

2,447

396

2,013

31,713

4,313

1,997

6,310

1,760

2,898

2,195

464

435

219

404

5,490

13,865

508

762

1,270

1,350

22,533

1,845

293

1,357

26,028

3,305

1,778

5,083

1,641

1,460

2,416

363

563

169

422

3,020

10,054

956

834

1,790

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

For the year ended 30 June

5. Income tax

a. Income tax expense
The major components of income tax expense are as follows:

Current tax

Adjustment in respect of prior year tax

Origination and reversal of temporary differences

2018

$’000

2017

$’000

5,361

(564)

4,894

4,716

(139)

(133)

4,444

b. Reconciliation between tax expense and the accounting profit

Profit before income tax

16,753

16,510

At the Group’s statutory rate of 30% (2017: 30%)

5,026

4,953

Tax incentives

Effect of tax rates in foreign jurisdictions

Non-temporary differences

Adjustment in respect of prior year

(289)

(124)

845

(564)

4,894

(247)

(68)

(28)

(166)

4,444

Effective income tax rate

29%

27%

c. Deferred tax asset

Relating to temporary differences

d. Deferred tax liability

Relating to temporary differences

1,040

1,349

958

1,420

e. The Company and its wholly-owned Australian entities are members of a tax consolidated group. Transactions
within the tax consolidated group have been eliminated in full on consolidation. The Australian tax consolidated
Group is treated as a single entity for income tax purposes.

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

For the year ended 30 June

6. Operating cash flows reconciliation

a. Cash and cash equivalents

Cash at bank and on hand

2018

$’000

2017

$’000

18,870

52,358

b. Reconciliation of net profit after tax to net cash flows (used for)/from operating activities

Profit for the year

Adjustments for:

Depreciation and amortisation

Share based payments expense

Tax expense

Changes in assets and liabilities, net of the effects of acquisitions:

Change in trade and other receivables

Change in inventories

Change in trade and other payables

Change in other financial assets

Change in deferred revenue

Change in provisions and employee benefits

Cash (used for) from operating activities

Tax paid

Net cash flows (used for)/from operating activities

7. Trade and other receivables

Trade receivables

Doubtful debts provision

Other receivables

11,859

12,066

6,310

396

4,894

1,047

(36,018)

(591)

152

235

(11,697)

(4,599)

(16,296)

30,671

(1,010)

3,789

33,450

5,083

293

4,444

(207)

(365)

(2,914)

(2,164)

(57)

214

16,393

(3,016)

13,377

28,602

(1,008)

2,527

30,121

Trade receivables balance is mostly made up of contractual agreements with customers. Generally, the terms and
conditions of these contracts require settlement between 14 to 30 days from the date of invoice.

Allowance for doubtful debts
The Group applies professional judgement to estimate the allowance for doubtful debts for trade receivables.
Assessment is based on historical trends and management’s assessment of general economic conditions. Credit
risks, insolvency risk and incapacity to pay a legally recoverable debt are taken into consideration when applying
this allowance.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

Office

Leasehold

Network

furniture &

improvements

infrastructure

equipment

& equipment

Work in

progress

Total

$’000

8. Property, plant and equipment

a. Reconciliation of carrying amount

Cost:

At 1 July 2016

Acquisitions

Additions

Disposals

Transfers from work in progress

Reclassify asset category

Effect of movement in exchange rates

At 30 June 2017

At 1 July 2017

Additions

Disposals

Transfers from work in progress

Effect of movement in exchange rates

2,423

1,024

(329)

(8)

3,196

965

(5)

789

453

329

(12)

1,559

3,100

402

22,120

1,344

4,925

(3,008)

(505)

24,876

4,702

(113)

2,997

169

At 30 June 2018

4,165

5,075

32,631

Accumulated depreciation:

At 1 July 2016

Acquisitions

Depreciation expense

Disposals

Reclassify asset category

Effect of movement in exchange rates

At 30 June 2017

At 1 July 2017

Depreciation expense

Disposals

Effect of movement in exchange rates

(1,102)

(554)

(11,751)

(447)

(1,524)

(529)

(6)

(295)

(22)

(869)

(639)

(6)

(1,043)

(2,563)

3,008

375

(11,974)

(3,145)

(208)

At 30 June 2018

(2,058)

(1,514)

(15,243)

3,399

25,418

1,344

9,801

(3,008)

(86)

(525)

3,399

33,030

3,399

33,030

(3,399)

8,855

(118)

192

41,959

(13,407)

(1,043)

(3,305)

3,008

380

(14,367)

(4,313)

(220)

(18,815)

Net Book Value

At 30 June 2017

At 30 June 2018

1,672

2,107

690

3,561

12,902

17,388

3,399

18,663

23,144

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

b. Disposals
Asset disposals relate to equipment that is fully written down to net book value $Nil and is no longer in use. There
was no material impact to the profit or loss account in relation to these disposals.

For the year ended 30 June

9. Trade and other payables

Trade payables

Other creditors and accruals

Security deposits held

10. Loans and borrowings

Current liabilities

Secured bank loan

Non-current liabilities

Secured bank loan

2018

$’000

2017

$’000

10,264

19,797

30,120

46,038

17,088

63,181

2,500

8,190

10,690

8,690

11,190

The Group’s bank facility (the Facility) consists of a $27.0m (2017: $27.0m) revolving acquisition facility and a
$2.1m (2017: $2.1m) revolving multi-option credit facility. The Facility has a maturity date of 20 April 2020. In the
current reporting period, the Group has drawn down $2.0m on the acquisition facility.

$1.8m (2017: $1.5m) of the revolving multi-option credit facility has been utilised as bank guarantees for property
leases and supplier securities where required.

The Facility is secured by a fixed and floating charge over the assets of the Group and is interest bearing. The
interest rate payable under the bank facility is based on the Bank Bill Swap Rate (BBSY) rates plus a fixed
margin. For more information about the Group’s exposure to interest rate and foreign currency risk, see Note 26.

The Facility requires compliance with financial covenants. During the financial year, there were no defaults or
breaches on the Facility.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

For the year ended 30 June

11. Financial instruments

Current liabilities

Forward foreign exchange contract - fair value hedge

Non-current liabilities

Interest rate swap contract - cash flow hedge

2018

$’000

2017

$’000

592

140

732

The Group’s bank facility is a variable interest rate facility. It is the Group’s policy to protect a portion of the bank
facility from exposure to fluctuations in interest rates. On 23 April 2015, the Group entered into an interest rate
swap agreement (which was rolled into a new contract in January 2018) to protect the loan facility from exposure
to increasing interest rates. A hedge relationship was designated on this date. Under this interest rate swap, the
Group is obliged to receive interest at a variable rate and pay interest starting January 2018 at fixed rate of 2.85%
(2017: 2.64%) per annum. The swap covers 88.3% (2017: 95.5%) of the floating rate exposure under the Facility.

The contract requires settlement of the net interest receivable or payable each 90 days which coincides with the
dates on which interest is payable on the underlying facility making it highly effective.

The gain or loss from remeasuring the hedging instrument at fair value is recognised in other comprehensive
income and deferred in equity in the hedge reserve. It is reclassified into profit or loss when the hedged interest
expense is recognised.

Forward foreign exchange contract - fair value hedge

There are significant creditor balances derived in foreign currencies, including U.S. Dollar, Pound Sterling, Euro,
New Zealand Dollar and Singapore Dollar. These exposures on creditor balances are largely offset by debtor
balances in corresponding currencies. Where this is not the case, it is the Group’s policy to protect these liabilities
from exposure to fluctuations in foreign exchange rates. During the period, the Group entered into forward foreign
exchange contracts to protect any exposed creditor balances from increasing foreign exchange rates. Hedge
relationships were designated and there has been no material ineffectiveness during the year. As at 30 June
2018, there are no unsettled forward foreign exchange hedges due to a shift in the mix of foreign currency debtors
and creditors.

Foreign exchange hedge effectiveness
Foreign exchange movement

Foreign currency term deposits

Foreign currency liabilities

Gain in foreign currency valuations

Fair value of hedging contract

Loss in valuation of hedge

Hedge effectiveness

1,012

(435)

577

(592)

97%

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

For the year ended 30 June

12. Deferred revenue

Pre-paid accounts

2018

$’000

2017

$’000

1,763

1,611

Deferred revenue mostly relates to cash received in advance from customers with respect to pre-paid VoIP
accounts. The balance represents the unused call credits as at balance date.

13. Provisions

As at 1 July 2017

Reclassification of 2017 balance from
current liabilities

Arising during the year

Utilised during the year

Movement due to change in foreign
currency translation rates

As at 30 June 2018

Current

Non-current

Annual leave

Long service
leave

Makegood
provision

Total

$’000

1,483

940

(714)

(1)

1,708

921

148

(95)

974

290

702

2,404

290

1,790

(809)

995

3,677

902

1,801

1,876

A provision has been recognised for employee entitlements relating to long service leave. In calculating the
present value of future cash flows in respect of long service leave, the probability of long service leave being
taken is based on historical data. The measurement and recognition criteria relating to employee benefits have
been included in Note 2.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

For the year ended 30 June

14. Issued capital

a. Ordinary shares

Issued capital

2018

$’000

2017

$’000

50,221

49,000

2018

2017

Movements in ordinary
shares on issue:

Number of
shares

$’000

Number of
shares

$’000

At 1 July

72,778,264

49,000

67,454,337

26,440

Exercise of share options (i)

Issued for cash

89,250

355,000

960

4,133,333

17,949

Issued from DRP participation (ii)

250,394

1,221

168,753

Issued from SPP participation

666,841

703

2,948

At 30 June

73,117,908

50,221

72,778,264

49,000

(i) In 2018 options were exercised with an exercise price of $Nil. In 2017, 325,000 options were exercised with an
exercise price of $3.00 and 30,000 options were exercised with an exercise price of $Nil.
(ii) Shares issued as a result of participation in the MNF Group dividend reinvestment plan (at an issue price of
$4.73 and $5.07, 2017: $4.00 and $4.51).

Share capital movements above are presented net of transaction costs.

Ordinary shares have the right to receive dividends as declared and in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up
on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the
Company.

b. Share options

Movements in share options on issue:

Number

WAEP $

Number

WAEP $

2018

2017

Outstanding at 1 July

890,000

4.98

355,000

Granted during the year

Exercised during the year

Expired during the year

Outstanding at 30 June

Exercisable

(89,250)

(750)

800,000

5.54

620,000

300,000

(325,000)

(30,000)

890,000

3.00

7.15

0.00

3.00

0.00

3.00

4.98

The outstanding options balance as at 30 June 2018, issued under the share-based payment option scheme to
directors and executives is represented by 620,000 options with an exercise price of $7.15 each and an expiry
date of 30 June 2021. Two tranches of options at 90,000 each were issued to employees with an exercise price of
$Nil and expiry dates of 30 June 2019 and 30 June 2020 respectively.

MNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

For the year ended 30 June

15. Share-based payments

Outstanding options

Employee option plan

Options granted to directors

Total

a. Employee option plan (EOP)

2018

Number

2017

Number

350,000

450,000

800,000

440,000

450,000

890,000

The Board may issue options under the EOP to any employee of the Group, including executive directors and
non-executive directors. Options will be issued free of charge, unless the Board determines otherwise. Each
option is to subscribe for one share and when issued, the shares will rank equally with other shares. Unless the
terms on which an option was offered specify otherwise, an option may be exercised at any time after one year
from the date it is granted, provided the employee is still employed by the company.

An option may also be exercised in special circumstances, that is, at any time within six months after the
employee’s death, total and permanent disablement, or retrenchment. An option lapses upon the termination of
the employee’s employment by the company and, unless the terms of the offer of the option specify otherwise,
lapses three years after the date upon which it was granted.

The maximum number of options on issue under the EOP must not at any time exceed 5% of the total number of
shares on issue at that time.

b. Share options granted to directors

450,000 options were granted to directors in the prior year. The following table illustrates the number and
weighted average exercise prices (WAEP) of and movements of share options held by directors during the year:

2018

2017

Number

WAEP $

Number

WAEP $

Outstanding as at 1 July

450,000

7.15

Granted during the year

Exercised during the year

450,000

Outstanding as at 30 June

450,000

7.15

450,000

7.15

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

16. Commitments and contingencies

Operating lease commitments
Operating leases relate to premises with lease terms remaining between one and eight years. The consolidated
entity does not have an option to purchase the leased assets at the expiry of the lease terms. The operating
leases generally contain escalation clauses, which are fixed increases between three and four percent per annum.

In the current year, a lease negotiation was undertaken and an executed deed of amendment has changed the
original six-year term lease to termination given with four months’ notice.

Future minimum lease payments under non-cancellable operating leases not recorded in the financial statements
as at 30 June 2018 are as follows:

Within one year

After one year, not more than five years

More than five years

2018

$’000

2017

$’000

2,447

9,232

2,305

13,984

1,169

10,056

6,944

18,169

Commitments
There were no commitments as at 30 June 2018. At 30 June 2017, the Group had commitments of $2.3m relating
to the fit-out of leasehold properties in Sydney and Melbourne.

Guarantees
There were no new guarantees as at 30 June 2018. The Company has a guarantee to Telstra Corporation
Limited. This guarantee covers all primary obligations including any debts of its wholly owned subsidiaries. It does
not impose any greater liability of the Company than is already in place for the subsidiaries collectively.

17. Events after reporting date

Dividends
The dividend as recommended by the Board will be paid subsequent to the balance date.

Acquisition of Super Internet group
On 6 July 2018, the Company completed the acquisition of 100% of the issued shares in SuperInternet (s) Pte
Ltd for SGD2.0m (AUD2.0m), SuperInternet is a fully licensed independent facilities-based operator (FBO) in
Singapore. The acquisition has increased the Group’s footprint into Asia with voice and data capabilities.

18. Auditor’s remuneration

The auditor of the Group is MNSA Pty Ltd Chartered Accountants.

Auditors of the Group

Amounts received or due and receivable by MNSA Pty Ltd Chartered Accountants for:

2018

$’000

2017

$’000

Audit and review of the annual report of the entity

Non-audit services

Other Auditors

Audit and review of financial statements

308

397

272

363

MNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

19. Director and executive disclosures

a. Details of Key Management Personnel (KMP)

Personnel

Mr Terry Cuthbertson

Mr Michael Boorne

Mr Andy Fung

Mr Rene Sugo

Mr Matthew Gepp

Ms Catherine Ly

b. Compensation of KMPs

Position

Chairman and non-executive director

Non-executive director

Director & Chief Executive Officer

Chief Financial Officer

Company Secretary

The Group has applied the exemption under Corporations Amendments Regulation 2006 No 4 which exempts
listed companies from providing remuneration disclosures in relation to their key management personnel in their
annual financial reports as required by AASB 124 Related Party Disclosures. These disclosures are provided in
the directors’ report designated as audited.

c. Shareholdings of KMPs

Year

Balance at the
beginning of period

Traded during
the year

Options
exercised

Balance at end
of period

Directors

Other KMPs

2018

2017

2018

2017

28,852,993

(1,173,723)

28,754,859

340,926

282,665

98,134

(9,750)

5,761

27,679,270

28,852,993

7,500

338,676

52,500

340,926

The above shareholdings are held directly and indirectly through controlled entities.

d. Share options of KMPs

Year

Balance at the
beginning of period

Granted

Options
exercised

Balance at end
of period

Directors

Other KMPs

2018

2017

2018

2017

450,000

92,500

50,000

(7,500)

95,000

(52,500)

450,000

85,000

92,500

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

20. Controlled entities

The consolidated financial statements include the financial statements of MNF Group Limited and the subsidiaries
listed in the following table:

Name

Country of incorporation

Ownership interest

2018

2017

My Net Fone Australia Pty Limited

Symbio Networks Pty Limited

Symbio Wholesale Pty Limited

Internex Australia Pty Limited

Pennytel Australia Pty Limited

Mobile Enablement Australia Pty Limited

Symbio Wholesale (Singapore) Pte Limited

TNZI International Pty Limited

TNZI USA LLC

TNZI New Zealand Limited

TNZI Australia Pty Limited

TNZI UK Limited

TNZI Singapore Pte Limited

Symbio Wholesale NZ Pty Limited

Conference Call International Pty Limited

Express Virtual Meetings Pty Limited

Eureka Teleconferencing Pty Limited

Conference Call Asia Pty Limited

Ozlink Conferencing Pty Limited

Australia

Singapore

Australia

USA

New Zealand

Australia

United Kingdom

Singapore

New Zealand

Australia

100%

MNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

21. Goodwill and other intangibles.

Goodwill

Brands

Customer
contracts

Software
development
costs

Software,
and other
assets#

Total

Cost

$’000

Balance at 1 July 2016

17,327

1,823

1,433

Additions

Acquisition of CCI

Balance at 1 July 2017

Additions

13,462

30,789

3,000

4,823

1,500

2,933

967

462

11,226

32,776

462

250

18,212

1,429

11,476

51,450

2,350

704

3,054

Balance at 30 June 2018

30,789

4,823

2,933

3,779

12,180

54,504

Accumulated Amortisation

Balance at 1 July 2016

Amortisation

Balance at 1 July 2017

Amortisation

Balance at 30 June 2018

Net Book Value

At 30 June 2017

At 30 June 2018

(359)

(412)

(771)

(587)

(1,358)

30,789

4,823

2,162

1,575

(1,615)

(1,974)

(192)

(235)

(427)

1,237

3,352

(1,175)

(1,779)

(2,790)

(3,753)

(1,175)

(1,997)

(3,965)

(5,750)

8,686

47,697

8,215

48,754

# Acquired externally or purchased as part of a business combination

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesNotes to the consolidated financial statements

22. Impairment testing

For the purpose of undertaking impairment testing, MNF Group Limited identifies cash generating units (CGUs).
CGUs are determined according to the smallest group of assets that generates cash flows that are separately
identifiable.

The carrying amount of goodwill broken out into CGUs is detailed below:

For the year ended 30 June

CGUs

Australia/New Zealand Domestic Wholesale

Australian domestic retail

Global Wholesale

Total goodwill

2018

$’000

2017

$’000

6,086

19,327

5,376

30,789

6,086

19,327

5,376

30,789

Goodwill assets are not subject to amortisation and are tested for impairment on an annual basis, or whenever an
indication of impairment exists.

The recoverable amount of the cash generating units has been determined based on value-in-use calculations
using cash flow projections based on five-year financial forecasts and assumptions that represent management’s
best estimate of the range of business and economic conditions at the time. Calculations are reviewed and
approved by the Board of Directors.

Value-in-use represents the present value of the future net cash flow arising from the assets continued use
and subsequent disposal. Any reduction in the carrying value is recognised as an expense in the consolidated
statement of profit or loss and other comprehensive income in the reporting period in which the impairment loss is
incurred.

In determining value in use, management apply their best judgement in establishing forecasts of future operating
performance, as well as a selection of growth rates, terminal rates and discount rates. These judgements are
applied based on management’s understanding of historical information and expectation of future performance.

Management consider that, as the Domestic Wholesale, Domestic Retail and Global Wholesale CGUs operate
in the Telecommunications Industry in Australia servicing the same markets, the risks specific to each unit are
comparable and therefore a discount rate of 10.5% (2017: 9.8%) is applicable to all domestic CGUs. The
long-term growth rate used to extrapolate the cash flows beyond five years (the Terminal Value) for each CGU is
2.5% (2017: 2.5%). The International CGU has been assessed using a discount rate of 14.0% (2017: 14.0%) and
a Terminal Value of 2.0% (2017: 2.0%)

Based on the results of the tests undertaken no impairment losses were recognised in relation to goodwill.

MNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

23. Earnings per share

Earnings and weighted average number of ordinary shares used in calculating basic and diluted earnings per
share are:

Net profit attributable to ordinary equity holders of the Company

11,859

12,066

2018

$’000

2017

$’000

2018

2017

Number

Weighted average number of shares:

Weighted average number of ordinary shares for basic earnings per share

72,974

69,683

Add effect of dilution:
- Share options

800

890

Weighted average number of ordinary shares for diluted earnings per share

73,774

70,573

24. Dividends paid and proposed

Recognised amounts:

Cents per share

$’000

Date of payment

2017 fully franked final dividend declared and paid

2018 fully franked interim dividend declared and paid

4.50

4.30

3,279

3,138

28-Sep-17

5-Apr-18

Unrecognised amounts:

2018 fully franked final dividend declared (i)

4.05

2,961

4-Oct-18

(i) The final dividend was declared on 28 August 2018. The amount has not been recognised as a liability in the
2018 financial year and will be brought to account in the 2019 financial year.

The proposed payment date of the 2018 final dividend is 4 October 2018.

The amount of franking credits available for future reporting periods is $8,552,247 (2017: $5,092,271).

The tax rate at which paid dividends have been franked is 30% (2017: 30%). Dividends proposed will be franked
at the rate of 30%.

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

25. Parent entity

Key financial information relating to the parent entity is summarised below:

For the year ended 30 June

Statement of profit or loss and other comprehensive income

Loss attributable to the owners of the company

Other comprehensive gain/(loss)

Total comprehensive loss attributable to the owners of the company

Statement of financial position

Total current assets

Total non-current assets

Total current liabilities

Total non-current liabilities

Net assets

Issued Capital

Reserves

Retained earnings

Total equity

2018

$’000

2017

$’000

(2,777)

(2,717)

1,812

62,008

(6,554)

(13,676)

43,590

55,036

1,962

(13,408)

43,590

(128)

(142)

(270)

3,330

61,697

(5,488)

(8,432)

51,107

53,815

1,506

(4,214)

51,107

26. Financial risk management objectives and policies

The Group’s principal financial instruments as at year end comprise cash at bank, trade and other receivables,
trade payables, forward foreign exchange contract and a loan facility.

The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, liquidity
risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below:

(i) Foreign currency risk
The Group is exposed to foreign exchange risks arising from various currency exposures, primarily with respect
to the United States Dollar (USD) and the New Zealand Dollar (NZD). Much of the USD exposure is subject to a
natural hedge, as the buy and sell side of most foreign currency transactions are in USD. Any unhedged foreign
exchange positions associated with our transactional exposures will directly affect profit or loss as a result of
foreign currency movements. The Group’s objective is to manage its foreign exchange risk against its functional
currency and to hedge firm commitments and highly probable and material forecast transactions over varying time
horizons using forward exchange contracts. Contracts are in place with all major creditworthy financial institutions

Sensitivity to foreign currency movements:
A movement of 10% in the Australian dollar at 30 June 2018 would impact the profit or loss by less than $270k
(30 June 2017: $250k). This analysis assumes a movement in the Australian dollar across all currencies and only
includes the effect of foreign exchange movements on monetary financial instruments.

(ii) Interest rate risk
The Group’s interest rate exposure relates to short term cash and long-term loans, both are subject to the floating
interest rate. The Group’s objective is to minimise the cost of net borrowings and to minimise the impact of
interest rate movements on the Group’s interest expense and net earnings. The Group policy is to maintain at

MNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements

least 50% of its long-term loan at fixed rates using interest rate swaps whereby the Group agrees to exchange at
defined periods the net difference between fixed and floating interest rates based on an agreed notional principal
amount. This interest rate swap is designated into a hedge relationship and satisfies the requirements for hedge
accounting.

(iii) Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations as they fall due. The Group’s
objective is to maintain a balance between continuity of funding and flexibility through the use of current accounts,
short term deposits, long-term borrowings, preference shares, finance leases and a revolving multi-option credit
facility. The Group has access to a sufficient variety of sources of funding to adequately mitigate liquidity risks.

(iv) Credit risk
The company has no significant exposure to credit risk. For credit sales the Group only trades with recognised
creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject
to credit verification procedures. Ageing analysis and ongoing credit evaluation are performed on the financial
condition of our customers and, where appropriate, an allowance for doubtful debts is raised. In addition,
receivable balances are monitored on an ongoing basis so that our exposure to bad debts is not significant.

Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial
instruments recognised in the financial statements.

2018

2017

Carrying
amount

Fair value

Carrying
amount

Fair value

Financial assets

$’000

Cash
Weighted average effective interest rate
1.5% (2017: 0.1%)

Cash at call
Weighted average effective interest rate
3.5% (2017: 2.6%)

15,201

16,905

3,669

35,453

Trade and other receivables

33,450

30,121

Financial liabilities
On statement of financial position

Trade payables

Loans and borrowings
Weighted average effective interest rate
4.7% (2017: 4.8%)

Forward foreign exchange contract – fair
value hedge

Interest rate swap contract – cash flow
hedge

30,120

10,690

30,120

10,690

63,181

11,190

592

140

63,181

11,190

592

140

27. Company details

The registered office and principal place of business of MNF Group Limited is:
Level 4, 580 George Street, Sydney, NSW, 2000, Australia

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities

MNF Group Limited
Directors’ Declaration

In accordance with a resolution of the directors of MNF Group Limited, the directors of the Company declare that:

The consolidated financial statements and notes, as set out on pages 50 to 81, are in accordance with the
Corporations Act 2001 and:

comply with Australian Accounting Standards, which, as stated in accounting policy Note 2 to the financial
statements, constitutes compliance with International Financial Reporting Standards (IFRS); and

give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year
ended on that date of the Group;

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; and

the directors have been given the declarations required by s295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer.

On behalf of the Board

Terry Cuthbertson
Chairman

Sydney, 28 August 2018

Rene Sugo
CEO and Executive Director

41 to 47

89
89

ASX Additional
Information

Additional information required by ASX Ltd and not shown elsewhere in this report is as follows.

The information is current as at 13 August 2018

(a)

Distribution of equity securities

(i)

Ordinary share capital

73,117,908 fully paid ordinary shares are held by 3,981 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.

(ii)

Options

800,000 unlisted options are held by 48 individual option holders.
Options do not carry a right to “vote.”

The numbers of shareholders, by size of holding, in each class are:

Fully paid ordinary shares

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

The number of security investors holding less than a marketable parcel of ordinary shares is 154.

(b)

Substantial shareholders

Ordinary shareholders

Number

Percentage

Fully Paid

Mr Andy Fung and related parties

Mr Rene Sugo and related parties

NAOS Asset Management Limited

14,151,954

11,896,867

10,871,529

1,650

1,372

421

509

3,981

19.35

16.27

14.87

www.mnfgroup.limited(c)

Twenty largest holders of quoted equity securities

Ordinary shareholders

Number

Percentage

Fully Paid

13,943,600

13,601,837

10,838,955

2,398,061

1,617,301

1,244,117

1,173,935

1,057,912

920,906

893,419

832,910

822,547

599,874

529,247

420,000

371,199

330,000

324,938

295,676

273,951

19.07

18.60

14.82

3.28

2.21

1.70

1.61

1.45

1.26

1.22

1.14

1.12

0.82

0.72

0.57

0.51

0.45

0.44

0.40

0.37

52,490,385

71.76

Mr Andy Kam Kan Fung & Ms My Van Monique Ly

National Nominees Limited

Avondale Innovations Pty Ltd

BNP Paribas Noms Pty Ltd

HSBC Custody Nominees (Australia) Limited

L & C Pty Ltd

JP Morgan Nominees Australia Limited

RACS SMSF Pty Ltd

Kore Management Services Pty Ltd

Boorne Gregg Investments Pty Ltd

Boorne Superannuation Fund Pty Ltd

Citicorp Nominees Pty Ltd

Sandhurst Trustees Ltd

G & E Properties Pty Ltd

Lee Superfund Management Pty Ltd

Mr Michael John Boorne

Ecapital Nominees Pty Ltd

Earglow Pty Ltd

Ms Catherine Ly

Endan Pty Ltd

(d)

On-Market Buy Back

There is currently no on-market buy back.

Corporate Information

Directors
Terry Cuthbertson (Chairman)
Michael Boorne
Andy Fung
Rene Sugo (CEO)

Company Secretary
Catherine Ly

Chief Financial Officer
Matthew Gepp

Registered Office
Level 4, 580 George Street
Sydney NSW 2000
Australia

Bankers
Westpac Banking Corporation
Westpac Place
Sydney NSW 2000
Australia

Principal Place of Business
Level 4, 580 George Street
Sydney NSW 2000
Australia
Phone: 61 2 8008 8000

Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia
Phone: 61 2 8280 7100

Auditors
MNSA Pty Ltd
Chartered Accountants
Level 1, 283 George Street
Sydney NSW 2000
Australia

This annual report covers both MNF Group Limited as an individual entity and the consolidated group comprising
MNF Group Limited and its subsidiaries.

The Group’s functional and presentation currency is AUD. The company is listed on the Australian Securities
Exchange under the code MNF.

The Annual General Meeting of MNF Group Limited will be held at Level 4, 580 George Street, Sydney at 16:30
on 30 October 2018.

Annual Report
Copies of the 2018 Annual Report with the Financial Statements can be downloaded from:
www.mnfgroup.limited/investors/annual-reports

www.mnfgroup.limited

MNF Group Limited Annual Report 2018