2013 Annual Report planB - MyNetFone · commercial and corporate experience. Founder of Sprit Modems and Mitron Pty Ltd and previously a Non Executive Director of Netcomm Ltd. Also

My Net Fone LimitedAnnual Report 2013

ContentsBoard of Directors

Letter from our Chairman

Letter from our CEO

About the MyNetFone Group

MyNetFone Group Timeline

Our National Network

Leading the Field in Intellectual Property

Multi-Brand Strategy

Executive Team

Case Studies

Directors’ Report

Corporate Governance Statement

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

Independent Auditor’s report

ASX Additional Information

Corporate Information

2

3

5

7

8

10

11

12

14

16

20

29

34

35

36

37

38

61

62

63

65

67

Board of Directors

Mr Terry Cuthbertson B. Bus., CAChairman

A Chartered Accountant, previously partner at KPMG with extensive corporate finance expertise and knowledge. Also Director of S2 Net Ltd, Montec International Ltd, Austpac Resources N.L., Mint Wireless Ltd, South American Iron & Steel Ltd, OMI Holding Ltd, Sun Biomedical Ltd and Malachite Resources Ltd.

MNF Director since March 2006

Mr René Sugo B.Eng. (Hon)Chief Executive Officer

Extensive experience in telecommunications. Formerly Technical Director of Lucent Technologies. Co-Founder of Symbio Networks Pty Ltd.


Mr Andy Fung B.E. MComNon-Executive Director

Extensive experience in telecommunications. Formerly Director of Business Development of Lucent Technologies. Co-Founder of Symbio Networks Pty Ltd.


Mr Michael Boorne Electronics Eng. Dip.Non-Executive Director

A successful entrepreneur with extensive track record in combining technical expertise with commercial and corporate experience. Founder of Sprit Modems and Mitron Pty Ltd and previously a Non Executive Director of Netcomm Ltd. Also Director of Boorne Management Pty Ltd and Earglow Pty Ltd.

MNF Director since December 2006

Ms Catherine Ly B.Bus., CPAChief Financial Officer

Company Secretary since July 2006

Mr Cuthbertson

Mr Sugo

Ms Ly

Mr Fung

Mr Boorne

2

Letter from our ChairmanFellow Shareholders,

It is with great satisfaction that I present to you the 2013 full year results for MyNetFone Limited. It has been another successful year for the MyNetFone Group. The company has achieved some very solid fi nancial results, as well as embarking on a new strategy of growth by acquisition.

Our consolidated group revenue increased to $46.2 million, up 21% from the previous year. Our EBITDA rose by 38% to $6.1 million, and our NPAT rose to 35% to $4.1 million. The company ended the year with our strongest balance sheet yet, comprising $4.8 million in cash and no bank debt.

This year’s success is attributed to strong growth in the MyNetFone Business and Enterprise segment and the Symbio hosted services segment. Both these segments are based on our strong intellectual property assets and produce a high margin recurring revenue stream – something we continue to focus on into the future. The outlook for the business is very positive with large potential across all business segments, providing security for our company through a very diverse base of revenue streams.

This year’s solid performance has allowed the board to declare an annual dividend of 3.5 cents per share fully franked – an increase of 52% over the previous year. The dividend is consistent with our track record of providing consistent returns to shareholders.

Achievements

During the year MyNetFone grew thanks to some incredible achievements thanks to the dedication and effort of our incredible team. The highlights of our achievements are:

• Tasmanian Government – MyNetFone announced in July 2012 that it had been selected by the Tasmanian Government to provide all of the Governments Voice-Over-IP communications. A contract worth up to $2M per annum in revenue and carrying over 100 million minutes of conversation voice per annum. MyNetFone has successfully deployed all infrastructure required for the project and in recognition of the successful deployment we have been awarded the CeBIT Project of the Year award by our IT&T industry peers.

• Acquisition of CallStream – In December of 2012 MyNetFone acquired the customer base of CallStream – an inbound communications specialist. Since then the customer base has been migrated to our own Symbio Network achieving signifi cant synergies. In addition MyNetFone has fully re-launched CallStream as dedicated cloud based Over-The-Top communications brand. A fi rst in the Australian marketplace using technology developed fully in-house.

• Acquisition of Connexus – In November 2012 MyNetFone acquired the Melbourne based ISP Connexus – a specialist in high quality business Internet solutions. With this acquisition came considerable intellectual property in the areas of cloud-based email, security and network monitoring, as well as a substantial business customer base. The company looks forward to re-launching these products later in the year and increasing its overall offering into the small to medium business segment with a feature rich IT and communications solution set.

• Acquisition of GoTalk Wholesale – In December 2012 MyNetFone acquired the wholesale network and business assets of GoTalk. This is by far the most strategic acquisition that served to remove a potential competitor and consolidate the number of fully interconnected voice infrastructure networks operating in the country from 8 down to 7. This was by far the most complex acquisition to tackle with massive infrastructure and legacy systems to be

3

integrated and rationalized. It is with a great sense of achievement that the company can claim that all customers have now been successfully migrated to the Symbio Network, and the process of shutting down the legacy network and realizing synergy benefi ts has commenced – well ahead of the 12 month forecast.

The Future

The company has been working hard behind the scenes to prepare itself for the next stage of its evolution.

The board has created a new executive management team headed by our co-founder Rene Sugo. This new executive management team brings together a wealth of experience from all corners of the Australian telecommunications industry; people who have decades of experience in their areas of specialization. This team will be the foundation for the next surge of growth for the company.

The company continues to seek sensible acquisitions that will deliver incremental value to shareholders. Our strategy is to fi nd opportunities that allow us to leverage our strong intellectual property assets, incredibly skilled team, and massive synergy potential of our nationally interconnected voice network.

In addition we continue to develop new technology and processes that will deliver new products and services into a market ripe with opportunity and change. Our strategy is centered on voice technology and applications, and we are constantly looking at how to push the boundaries of change in the market and capture new emerging revenue streams in an Internet enabled world. We are in a truly unique position to seize this new market opportunity as it emerges.

On behalf of the board, I would like to thank all of the staff and management team in achieving another great result for our company. The board continues to provide its full support to the team to ensure the company maintains its momentum and growth into the future.

I would also like to thank my fellow members of the Board of Directors for their hard work and dedication over the last 12 months. Their insight and vision has truly shaped an innovative and successful organization that stands out as a rapidly emerging player in the Australian telecommunications market.

Thank you for your continued and loyal support. The company is looking forward to a successful and rewarding year ahead.

Terry CuthbertsonChairman

4

Letter from our CEODear Shareholders,

What a wonderful year it has been for MyNetFone. This year has been dominated by very strong growth and record full-year results. Our EBITDA grew by 38% to $6.1M and our NPAT grew by 35% to $4.1M. In addition, the company managed to acquire three smaller service providers and largely integrate all their technology, operations and customers in a little over six months. These acquisitions, combined with our intellectual property and voice network infrastructure, lay down a foundation for a great year ahead.

Our company is unique in the Australian telecommunications market. MyNetFone is an independent operator, not relying on reselling of other companies networks or products, but rather building our own network and creating our own core products. Our fully integrated business is providing a genuine choice to consumers and businesses in Australia, by enabling them to utilise the benefi ts of the Internet for their real-time voice communications.

Our company has an incredible team of people. With 120 staff in four states of Australia, the MyNetFone team continues to perform with amazing creativity, unrelenting energy and speed. Stepping up to new challenges such as integrating acquisitions, developing new products and growing the existing customer base – all simultaneously and to the highest standard.

Our company is a leader in the next generation of voice communications. We are succeeding as a disruptive new entrant in an industry of giants: developing and implementing new ways of empowering consumers and businesses to use and manage their voice communications. From the earliest award winning implementation of “plug-and-play” easy to use Voice-Over-IP, to enabling consumers to port their phone numbers into the cloud, MyNetFone has never stepped back from a technical or commercial challenge.

The Future

The future for MyNetFone is bright and full of potential. MyNetFone is in a strong position and poised for organic and acquisitive growth. Our key strengths are: owning our own national voice network, owning the intellectual property and skills to build it and possessing a talented team to continue developing it. Combined with our excellent fi nancial position of no debt, strong cash fl ow and growing profi tability, MyNetFone’s best days are ahead of it.

Organic growth is still a key focus for MyNetFone. The market potential for cloud-based communications is still being realised by consumers and businesses. The time is now to educate them, and help them take their fi rst steps by moving the infrastructure and phone numbers into the cloud. To this end, MyNetFone is increasing the marketing effort and launching new specialised brands that clarify the choice for consumers.

Acquisitions are being sought to augment organic growth. MyNetFone has a very large voice network with ample capacity for additional customers and voice traffi c. The more customers and traffi c we can move onto this network, the more effi cient it becomes. To this end, we continue to look for acquisitions. Many acquisitions are considered, but only the ones that are a good technical fi t and represent good value are chosen. MyNetFone will stay focused on its key strengths.

A solid and ambitious strategy is only as good as the people implementing it. To continue our success and rapid growth, we need to make sure we attract and retain the best people. MyNetFone now has in place a hand picked senior management team to lead our highly qualifi ed and expert staff. Combining different backgrounds and many years of industry experience, our senior management team has already demonstrated its ability to bring together the

5

teams and resources and work towards achieving company goals. This team, together with myself, is entirely focused on the growth and success of MyNetFone.

All of us at MyNetFone are excited about the opportunities ahead and ready to grab them with both hands. We hope that you are equally excited to be a part of creating the future of MyNetFone.

Rene SugoCEORene Sugo

6

About the MyNetFone Group

MyNetFone was founded in 2004 and was listed on the ASX in mid 2006. Since then, the Group has earned its stripes in the industry, experiencing rapid growth in less than a decade, from a new-comer to establishing itself as a peer to Tier 1 incumbents and the largest player in Voice-over-IP communications in Australia.

The MyNetFone Group has made the investment in building its own network and interconnecting with incumbent carriers. Stepping up as an independent equal to its longer-established peers, the Group challenged the status quo, while others relied on wholesalers and languished at the mercy of their anti-competitive resale and wholesale conditions.

While playing by the established rules, the Group is not buying into the status quo – instead, MyNetFone has chosen to be an advocate for technological innovation, encouraging consumer adoption and migration to new voice communications technology. As an independent player that has recently overcome the challenges to become a fully-fledged Carrier, the MyNetFone Group brings a fresh perspective on what changes the industry needs to keep pace with technological advancements.

The company’s success can be attributed to a focus on innovation, investment in developing intellectual property and a commitment to providing high-quality, Australian-based customer service. The Group has been recognised for its efforts, winning numerous awards including the Deloitte Technology Fast 50 and 500 (2008, 2009, 2010 and 2012), Money Magazine Product of the Year (2007), PC User Product of the Year (2005) and many others.

7

MyNetFone Group Timeline

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

Active services Revenue

2004 2005 2006 2007 2008

MyNetFoneFounded

PC User Productof the Year Award

ASX Listing

Directconnection with

New Zealand

Virtual PBXlaunch

• Maiden Profit• ADSL2+

service launch

Act

ive

serv

ices

8

$50,000,000

$45,000,000

$40,000,000

$35,000,000

$30,000,000

$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$0

Active services Revenue

2009 2010 2011 2012 2013

• Maiden Profit• ADSL2+

service launch

ExclusivePanasonic dealfor SME phone

system

Acquisition ofSymbio Networks

•TasmanianGovernment $20M

Project win

•AcquisitionofCallStreamConnexus

GoTalk Wholesale

CeBIT Outstanding Project Award for

Tasmanian Government Voice Carriage Project

Rev

enue

9

Our National NetworkThe MyNetFone Group voice network was built in-house in Australia and is now the largest VoIP network in the country, fully interconnected with all Tier 1 Australian telcos.

With presence in all 66 Call Collection Areas, our network carries over 3 billion billed voice minutes annually – accounting for 10% of total landline voice communications in Australia (percentage based on total minutes volume as per ACMA “Telecommunications Competitive Safeguards for 2011-2012” report).

Sydney

Auckland

Adelaide

Perth

Brisbane

Canberra

Melbourne

Hobart

Main Network Node(s)

Major Network Node(s)

Regional Interconnect Node

Core Fibre Network (Protected)

International Transit Network

Regional Fibre NetworkDarwin

USA

Wellington

Christchurch

Singapore

BROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIEBROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIETAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST HobartTAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST HobartTAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST TAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST MOUNT ISA CAIRNS MACKAY GULLIVER ROCKHAMPTON GLADSTONE MARYBOROUGH BUNDABERG TOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY BROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTATAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST MOUNT ISA CAIRNS MACKAY GULLIVER ROCKHAMPTON GLADSTONE MARYBOROUGH BUNDABERG TOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY BROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTATAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST MOUNT ISA CAIRNS MACKAY GULLIVER ROCKHAMPTON GLADSTONE MARYBOROUGH BUNDABERG TOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY MILDURA WARRNAMBOOL WANGARATTACOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTATAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST MOUNT ISA CAIRNS MACKAY GULLIVER ROCKHAMPTON GLADSTONE MARYBOROUGH BUNDABERG TOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER

SYDNEYTOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE SYDNEYTOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE SYDNEYGAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE

MELBOURNECOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTA

MELBOURNECOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTATAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST MELBOURNETAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST

CANBERRATAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST CANBERRATAMWORTH ALBURY BEGA ARMIDALE TAREE DUBBO RICHMOND ORANGE GOULBURN NOWRA BATHURST MOUNT ISA CAIRNS MACKAY GULLIVER ROCKHAMPTON GLADSTONE MARYBOROUGH BUNDABERG CANBERRAMOUNT ISA CAIRNS MACKAY GULLIVER ROCKHAMPTON GLADSTONE MARYBOROUGH BUNDABERG

BRISBANEGAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BRISBANEGAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE

PERTHGAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE PERTHGAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY BROKEN HILL LISMORE GRIFFITH PERTHBROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY BROKEN HILL LISMORE GRIFFITH

AUCKLANDTOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER

AUCKLANDTOOWOOMBA WURTULLA DARWIN ALICE SPRINGS MOUNT GAMBIER PT AUGUSTA MURRAY BRIDGE GAWLER MILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BROOME AUCKLANDMILDURA WARRNAMBOOL WANGARATTA MORWELL WARRAGUL SHEPPARTON GISBORNE BROOME

ADELAIDEKARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY MILDURA WARRNAMBOOL WANGARATTAADELAIDEKARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY MILDURA WARRNAMBOOL WANGARATTACOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTAADELAIDECOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTAHOBARTCOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTAHOBARTCOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTA

DARWINBROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY BROKEN HILL LISMORE GRIFFITH DARWINBROOME KARRATHA KALGOORLIE GERALDTON KATANNING BUNBURY BROKEN HILL LISMORE GRIFFITH COFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTA

DARWINCOFFS HARBOUR GRAFTON WAGGA WAGGA PORT MACQUARIE MILDURA WARRNAMBOOL WANGARATTA

10

Continued investment in developing intellectual property is essential to remaining at the forefront of the IP communications revolution.

The MyNetFone Group believes in fostering innovation and challenging the status quo. Our teams are encouraged to examine prevalent processes and search for ways to improve them. Unlike other providers, we prefer to build our own systems from the ground up and to do it right, rather than adopting and adapting to existing systems.

As a result of this, there have been numerous breakthroughs that are unique to the MyNetFone network and the Intellectual Property of the company. Other providers choose our network at the wholesale level to gain access to these unique tools.

Why it matters

With market-leading systems already deployed and revolutionising the telecommunications landscape, the Group is so far ahead of the competition, that it is well positioned to expand its market share by reselling access to its unique systems to other providers.

Leading the Field in Intellectual Property

Heritage • Over 10 years of in-house R&D experience • Well established and effi cient software and product development team

IP Ownership

• Billing systems• Provisioning systems• Call routing and cost control• Number portability• Features and services

Benefi ts• Allows rapid deployment of additional capacity and capabilities for very

low cost• Provides fl exibility to adapt to changing market and customer needs• Ability to integrate acquisitions quickly and effectively

Achievements

• Successfully pioneered many award-winning innovations in the Australian market

- Plug and Play VoIP - Self service provisioning - Virtual PBX - Number Porting Tool

11

Multi-Brand StrategyIn a communications market that is moving towards an increasing reliance on specialised services from Over the Top (OTT) providers, a ‘one size fits all’ approach is becoming unsustainable.

The MyNetFone Group has moved to take advantage of this developing market trend, establishing a multi-brand strategy initially built on acquisitions. Each brand in the MyNetFone Group portfolio targets a defined niche market with services designed to address specific customer needs. This allows the Group to diversify across markets and services, without diluting the core value proposition of any single brand. Our brands currently include CallStream, Connexus, Symbio Networks and the MyNetFone retail brand.

The Rise of OTT

Technological innovation has led to the development of a wide array of communications services. It is now almost impossible for a single provider to deliver all the features & services under one brand and get the cut-through and recognition among consumers for each service. No one can ‘do it all’.

Therefore, consumers have started searching for expert brands that can deliver add-on services in the cloud over the top (OTT) of their existing core communications provider.

It’s All About the Numbers

MyNetFone is one of only seven providers of primary voice infrastructure in Australia, and the only one currently focused on facilitating the next generation of communications as consumers move to application-based social networks.

The key ingredient required to provide real-time any-to-any connectivity in the future will be the good old-fashioned phone number. Without phone numbers, consumers will find themselves isolated in small islands of social networks. Phone numbers will continue to be essential in providing a bridge between various application environments for the foreseeable future.

Phone numbers will also remain a key ingredient in business communications between businesses and their customers. Despite the rise of new alternatives such as social networks, email and web sites, nothing can replace the value of an interactive phone call with your customers and suppliers.

RETAIL WHOLESALE

GroupAustralia's leading cloud communications provider

Residential

• Over 96,000 active VoIP & DSL services • Recognised for reliable, good value service

• Local Australian Support team

Business &Enterprise/Government

• Market-leading Virtual PBX service

• Vendor agnostic SIP Trunking

• Multiple vendor certifications (eg. Microsoft, Avaya, Panasonic and more)

• Focus on Government Carriage Services

Business & Corporate

• Specialist in multi-site and high-performance data services

• Secure email, domain & web hosting

• Web Tools (Web- Control, SafeMail, DomainPilot) to monitor, manage and protect businesses online

• 13/1300/1800 number services

• Specialist in OTT cloud-based inbound call services

• Flexibility, features & affordability for small businesses

Small Business Hosted Services Wholesale Carriage

• Over 250,000 SIP End-points hosted on network

• Over 600,000 Australian and New Zealand DID numbers hosted on network

• Number Porting via unique self-service portal

• Cloud-based hosting of DIDs and 13/18 inbound numbers

• Owns carrier-grade networks in Australia, New Zealand and Singapore

• Interconnects with over 20 Tier 1 domestic & international providers

• Carries approximately 3.2 Billion minutes annually

• Servicing 140 Wholesale customers & carriers

12

This will once again be driven by phone numbers, and businesses will need new ways of deploying their numbers to help their businesses adapt to the future.

Each of the MyNetFone Group’s brands leverages this insight and delivers services with number portability and number hosting, tailored to meet the specific needs of its particular market segment.

Meeting Customer Needs

Customers are increasingly looking to customise a tailored suite of services to meet their individual requirements. They want to be assured that they are dealing with specialists in any given field, whether it is 1300 numbers, high-performance data or hosted PBX.

This OTT cloud-based approach has several benefits for the consumer – flexibility to manage service features in real-time, quick deployment with no equipment expenses, and minimal impact on the rest of their communications setup.

Upselling and Cross-selling

The strategic benefit of nurturing multiple brands for the MyNetFone Group is that each one attracts a different range of customers. The opportunity then presents itself to cross-sell services from other brands and enable the customer to build a tailored solution that meets their needs.

A Unique Perspective

The Group is uniquely positioned to contribute to the industry, as the MyNetFone Group’s multi-brand ecosystem spans across network infrastructure, software platform development & direct retail brands. This gives MyNetFone unrivalled insight into existing and upcoming challenges across all levels of the market.

Combined with the company’s innovation-focused culture, this gives the Group a unique perspective and legitimate voice in the industry that can help shape the future of Australian communications.

DirectBrands•Residential•Business•Enterprise•Government

ProprietaryPlatform Software

•WholesaleManaged ServicesCustomer

needs& insights

Managed ServicesPlatform

Network Reach& Scale

VoiceMinutesTraffic

Voice MinutesTraffic

Lowest CostCarriage

NationalNetwork

•WholesaleVoice

13

Executive Team

The MyNetFone Group’s Commercial Business Unit is headed by Jon Cleaver, and was created with a clear goal to execute the multi-brand strategy and deliver rapid and sustainable growth for the company. By bringing together Sales, Products, Marketing and Network Information teams into one Business Unit, the company has ensured the customer is placed at the centre, as the uniting factor in all these teams’ functions. The Group’s unique ecosystem spanning retail, software and network is a clear differentiator in the market. It makes the Group agile enough to quickly adapt to market opportunities and remain a leader in this rapidly developing IP communications market. The strategic shift to a specialist multi brand strategy ensures this differentiation is commercialised to its full extent and clearly refl ected on the bottom line. The Commercial Business Unit’s mixed team of specialists and industry veterans, guided by Mr. Cleaver’s vision and experience, is already proving that the Commercial Business Unit is geared to successfully implement this strategy and absorb new brands and acquisitions seamlessly. At such a pivotal point in the telecommunications market, the MyNetFone Group is continually enhancing its core products, while innovating with ‘over the top’ (OTT) services. No other company in the Australian telecommunications industry has both the resources and vision to take advantage of these opportunities. The Commercial Business Unit’s driven and highly skilled teams will continue to lead the company to further accelerated growth.

Jon Cleaver, Chief Commercial Offi cer

“Strategic shift to a multi brand strategy ensures our capabilities are

commercialised to their full extent and clearly refl ected on the bottom line”

Indika Nanayakkara, Chief Technology Offi cer

The Platform & Network (P&N) Business Unit has a key role to play in achieving MyNetFone Group’s objective to be the 3rd largest voice carrier in Australia. The P&N Business Unit is at the forefront of developing better voice communications services by reducing barriers and creating new cloud based technologies. This requires a departure from “traditional” voice network implementation approaches and embracing IP/cloud based technologies to provide innovative solutions for voice services. The P&N Business Unit is responsible for recent in-house innovations such as the Number Porting tool and Virtual PBX, and continues to refi ne and develop new features. The network must be confi gured to support a rapidly changing technology environment, which requires frequent changes while delivering uninterrupted services to customers. Mr. Nanayakkara’s technological expertise and leadership is focused on achieving these two main goals. This requires not just technological improvements and innovations, but also guiding a team of dedicated staff that have skills across multiple areas; supported by processes, procedures and practices that facilitate rapid changes with no impact on customers. While these are challenging goals, given the Group’s 10 year heritage in providing innovative IP based communications systems, MyNetFone is well positioned to achieve these objectives.

“We are at the forefront of developing better voice communications services by reducing barriers and creating new

cloud based technologies”

14

Matt Gepp, Chief Financial Offi cer

Ben Dunscombe, Chief Operating Offi cer

The Finance Business Unit plays a crucial role in supporting the business, by identifying and assessing growth opportunities and supporting the Board in making key strategic decisions. With the integration of recent acquisitions largely complete, the objective now is to leverage the acquired capabilities across the existing business and to begin taking full advantage of the multi brand strategy that we have undertaken. The Finance team will play a key role in providing critical insight into the performance of individual brands and the cross business implications of company strategy, allowing the Group to cost effectively deploy resources where they will deliver the highest return. Our overriding responsibility during this period of expansion, as always, is to ensure that a strong governance and control environment remains in place. Our goal is to continue to add shareholder value through a combination of organic growth and acquisition. We will assess opportunities as they arise and ensure that these are profi t accretive; add capabilities that enhance our customers’ experience; strengthen our network or further cement our position in the market. By following this strategy we will continue to strive to reward our shareholders with strong dividend and capital growth.

“Our overriding responsibility during this period of expansion, as always, is

to ensure that a strong governance and control environment remains in place”

The Operations Business Unit supports each of the Group’s brands and their customers, from residential VoIP and ADSL customers through to large multinational telecommunications companies. The one thing that all customers have in common, however, is a clear expectation that when they contact us, assistance is provided in a knowledgeable and timely manner. To this meet this goal, Mr. Dunscombe leads the Operations Business Unit in constantly reviewing and assessing its performance, identifying potential improvements and providing team members with ongoing training and skills development opportunities. As part of the commitment to constantly improve service metrics, the Operations team are focusing on implementing new technologies that will provide more accurate or faster analysis of customer support trends. These range from developing an online information hub each customer segment, containing diagnostic and rectifi cation information; through to introducing speech analytics software into our contact centres that will allow us to more quickly diagnose and resolve faults or recognise network events. As the Group’s brands continue to grow and evolve, so do the requirements placed on the Operations team. It is a constant and frequently demanding task, but one that presents a challenge relished by every member of Mr. Dunscombe’s team.

“Our role is to ensure that our customers maximise the benefi ts they receive from each solution that they

purchase from us”

15

Case Study

In July 2012, Tasmanian Government selected MyNetFone to supply Voice over IP (VoIP) carriage services to the state after a rigorous tender process. The ‘win’ demonstrated that Internet telephony has reached the maturity and scalability to service even the largest public and private sector organisations.

The Project in Brief

The Tasmanian Government left the traditional incumbent telco behind and made the move to next generation communications SIP technology to improve service levels and enhance productivity.

SIP Channels delivered by MyNetFone are fully-featured, next generation digital trunk services, which allow the Tasmanian Government to extend communication over IP to employees in all offi ces, regardless of whether they are located on a main site, at branch offi ces or even if working remotely.

The initial agreement term is for three years, with extensions up to ten years, for a total contract value expected to be worth up to $20 Million over the full term.

Progress Update

One year into the project, MyNetFone has achieved key milestones and delivered all infrastructure and commercial commitments as required by the contract.

The project has earned industry recognition, with MyNetFone winning the ‘Outstanding Project’ Category at the CeBIT Australia 2013 Awards for leadership in project management. The project, dubbed ‘Voice Services - Public Network Access and Carriage’, is the fi rst of its kind by any state government and one of Australia’s largest VoIP rollouts.

“MyNetFone is a young, energetic, innovative company which has proven it is capable to develop services that meet the Government’s requirements. This agreement will not only put the Government in a great position to meet the evolving needs of our communities, but will also contribute to the growth and diversity of the local industry with MyNetFone’s expanded operations and commitment to the state,” TMD General Manager, Piero Peroni said.

Government Focus

The company has been appointed to the Queensland Governments IT&T procurement panel and is working with several Government departments to trial VoIP solutions today. The company continues to work with other Federal, State and Local Government organisations to further the deployment of VoIP solutions at all levels of Government.

Tasmanian Government Voice Carriage Project: 1 Year On

TM

16

Case Study

Telecommunications is a fast-paced industry, but there are still many areas where operations fall far behind potential capacity due to outdated systems. As an example, many providers still manually process number porting orders & have designated staff to handle this process.

New Way of Porting

Instead of relying on the manual, time-consuming Local Number Porting processes in existence, MyNetFone Group saw an opportunity to streamline the process by developing a unique automatic Local Number Porting (LNP) tool under its Symbio brand, enabling swift and effi cient porting between networks and to the cloud.

Symbio did not stop at revolutionising the porting process, but went a step further to develop additional tools for wholesale customers that want the full B2B experience with the introduction of multi-level porting, and Porting API trial.The multi-level porting solution allows providers to reduce processing bottle-necks by empowering their sub-wholesalers to self-suffi ciently port numbers, while giving the provider full visibility and management control.

Wholesalers using the Symbio network now have access to multiple pathways to suit any porting volume:

• Ticket requests for low runrate• Online Portal • Multi-level Porting• API for high volume porting requirements

Gaining Ground

The Group has opened up the Number Porting Tool to the whole industry to use, facilitating wholesale and stimulating competition. As of 2013, there are 150 wholesale customers hosting 500,000 numbers in our cloud, with 280,000 of those numbers ported in just 12 months using the Group’s innovative LNP tool. Symbio now averages a run rate of 20,000 to 30,000 phone numbers ported in every month (not including conditioned or assigned numbers).

Our analysis of porting transactions in the industry shows that Symbio is now the 4th largest ‘gainer’ of ported numbers out of all the Australian carriers historically.

Approximately 80% of these DIDs are for wholesale customers. Thanks to the effi ciency of Symbio’s innovative Number Porting tool, providers are increasingly choosing to host their services on the Symbio network.

Long-term Play

In addition to investing in simplifying the porting process for the present, Symbio is also looking toward the future. Symbio remains actively involved in regulatory porting reform, and lends its voice and unique perspective to help shape the future of numbering in Australia.

Wholesale Number Porting

17

Case Study

Enabling High-Capacity Digital Business

Challenge

Xelon Entertainment is a prominent global digital distributor of music and video located in Richmond, Melbourne. They cover over 400 digital platforms, work alongside major international and local music festivals and are distributors of some of the top grossing brands and labels in the music industry.

The business of digital music and video distribution is heavily dependent on high performing internet services. Prior to Connexus Internet, Xelon Entertainment used a dual ADSL2+ connection to try and keep up with their high capacity uploads and large fi le sharing.

They found their original solution was not providing suffi cient upload speed or connection reliability the company needed. Xelon’s content distribution wasn’t as fast as it could have been, as the service was unable to keep up with the upload rate and fi le size. Additionally, internet glitches or dropouts resulted in the halting of projects, which hindered business operations.

Xelon Entertainment knew this translated to valuable time and resources being wasted, so they sought a new solution.

Connexus Solution

• 20Mbps/20Mbps Ethernet Service

Connexus Ethernet is a symmetrical service, providing matching data speeds for both downloads and uploads.

Therefore it is ideal for Xelon Entertainment, who can now upload their music and video content while simultaneously downloading projects at the same speed.

The Ethernet service performs at ultra low latencies, allowing for a continuous data fl ow, particularly benefi cial for Xelon Entertainment who need to move large amounts of data regularly.

With Connexus, Xelon Entertainment has gained a reliable and fast streaming internet solution. Xelon Entertainment can now upload and distribute their clients’ work more effi ciently, whilst eliminating the risk of internet dropouts disrupting their business operations.

Benefi ts

Signifi cantly increased upload & download speeds - upload speeds up to 20 times faster than their previous service. This considerably improved Xelon Entertainment’s turn-around when loading content to platforms such as iTunes, enabling them to get projects fi nished faster and take more clients onboard.

Eliminated connectivity anxiety - Best of breed technology and business-grade service level agreements mean Xelon Entertainment no longer needs to be concerned with internet outages disrupting their business operations.

Low Contention - a 1 to 1 contention ratio on the Connexus network means that Xelon can now benefi t from faster streaming broadband, as they no longer had to share their bandwidth with other network users.

Local customer support - Xelon have the peace of mind, that if any issues were to arise they are covered by responsive, highly skilled team, located here in Australia.

“Our Connexus connection is an integral part of business, backed up with high level service, and fl awless system reliability,” Ashley Gay, Director (Artist & Repertoire) at Xelon Entertainment Pty Ltd

internet built for business

18

2013Annual Financial Report

My Net Fone LimitedABN: 37 118 699 853

Directors’ ReportFor the year ended 30 June 2013

Your directors present this report, together with the financial statements of the Group, being the company and its controlled entities, for the financial year ended 30 June 2013.

Information on Directors

The directors of the Company at any time during or since the end of the financial year are:

Mr. Terry CuthbertsonB. Bus., CAChairman

Mr. Michael BoorneElectronics Eng. Dip.Non-Executive Director

Mr. Andy FungB.E. MComNon-Executive Director

Mr. Rene SugoB.Eng. (Hon)CEO and Director

Mr Cuthbertson is the Chairman and an independent non-executive director; he was previously a partner at KPMG and has extensive corporate finance expertise and knowledge. Mr Cuthbertson is also a Director of S2 Net Ltd, Montec International Ltd, Austpac Resources N.L., Mint Wireless Ltd, Malachite Resources Ltd, Sun Biomedical Ltd, South American Iron & Steel Ltd and OMI Holding Ltd.

Mr Cuthbertson has been a director since March 2006.

Mr Boorne is an independent non-executive director; he is a successful entrepreneur with extensive experience in combining technical expertise with commercial and corporate experience; he is the founder of Sprit Modems and Mitron Pty Ltd and was previously a non-executive director of Netcomm Ltd. Mr Boorne is also Director of Boorne Management Pty Ltd and Earglow Pty Ltd.

Mr Boorne is the Chairman of the Audit & Risk committee and has beena director since December 2006.

Mr Fung is a non-executive director; he is a co-founder and was formally Managing Director of My Net Fone since its inception in 2006 until February 2012. He was a director of Symbio Networks Pty Ltd since 2002 and Symbio Wholesale Pty Ltd since 2009. Mr. Fung is also a Director of Amber (Asia) Pty Ltd.

Mr Fung has been a director since March 2006.

Mr Sugo is the CEO and a director; he is a co-founder and was formally Technical Director of My Net Fone since its inception in 2006 until February 2012 when he was made Chief Executive Officer. He has been a Director of Symbio Networks Pty Ltd since 2002 and Symbio Wholesale Pty Ltd since 2009. Mr Sugo is also a Director of Avondale Innovations Pty Ltd.

Mr Sugo has been a director since March 2006.

Company Secretary

Ms. Catherine Ly B.Bus., CPA, is Chief Financial Officer for the Company. Ms Ly was appointed Company Secretary in July 2006.

Name and qualifications Experience, special responsibilities and other directorship

My Net Fone Limited | ABN 37 118 699 853 and Controlled Entities

20


Directors’ Report for the year ended 30 June 2013 (continued)

Board and committee meetings

From 1 July 2012 to 30 June 2013, the Directors held 10 board meetings and 2 audit committee meetings. Each Director’s attendance at those meetings is set out in the following table:

Committee Meetings Attended

Directors

Mr. Terry Cuthbertson

Mr. Michael Boorne

Mr. Andy Fung

Mr. Rene Sugo

Board AuditEligible to Attend

10

10

10

10

Attended

9

10

10

10

Eligible to Attend

2

2

2

2

Attended

2

2

2

2

Principal activities and significant changes in nature of activities

The principal activity of the MyNetFone Group is providing voice communications, broadband Internet, and cloud based communications services to residential, business, government and wholesale customers in Australia and internationally.

In the financial year the MyNetFone 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. There was also revenue derived from the sale of hardware equipment and consulting services to support the primary products of the business.

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

The business undertook three material acquisitions during the financial year – CallStream, Connexus and GoTalk Wholesale. These three acquisitions were all highly synergistic with the current lines of business, and were revenue and profit accretive during the financial year. Integration of these acquisitions is well underway, and in some cases complete.

Operating result

Net profit after tax (NPAT) for the MyNetFone Group for the financial year ending 30 June 2013 was $4.1 million, an increase of 34.9% on the previous year NPAT of $3.1 million.

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

Increased Revenue, EBITDA and NPAT

For the year ended 30 June 2013 the Group delivered gross revenue of $46.2 million and an EBITDA of $6.1 million. The results were achieved through a combination of organic growth of existing business units and the acquisition of three businesses during the year: CallStream, Connexus and GoTalk Wholesale.

The gross profit for the year was $17.6 million (2012: $12.8 million) which was achieved by revenue growth and reduced cost of goods sold.

21

The Net Profit after tax (NPAT) for the year was $4.1 million (2012: $3.1 million) with Earnings per Share (EPS) at 6.98 cents per share.

Full year endedJune 2013

Full year endedJune 2012 % increase

Gross revenue

Gross profit

EBITDA

NPAT

EPS

$46.209m

$17.620m

$6.106m

$4.141m

6.98 cents

$38.292m

$12.783m

$4.426m

$3.069m

5.55 cents

+21%

+38%

+38%

+35%

+26%

Net Cash Flow

The closing cash balance as of the 30 June 2013 was $4.8 million (2012: $6.0 million).

During the year the Group generated operating cash flows of $6.0 million (2012: $3.9 million).

Operations and financial review

The business is in a solid position with strong prospects for further growth in the coming year.

1. Operations

a. Government Business

The contract signed with the Tasmanian Government in July of 2012 has not yet produced forecast revenues due to delays in transitioning of services by the Government. These delays are due to factors outside of the control of the company, and the company has delivered all infrastructure and commercial commitments as required by the contract. The company still believes this contract will yield close to $2M per annum in gross revenue, however due to the above mentioned delays it is most likely that the full revenue will not be achieved until FY15.

The company has adopted an overall strategy to pursue further Government business as VoIP technology increases its foothold in all levels of Government. The company has many key technical and commercial differentiators that make it an ideal alternative to the traditional telecommunications providers.

The key technical differentiators for the company are: the Symbio Network that is one of only 7 fully interconnected infrastructure based voice networks in Australia, Symbio also has the people and systems in place to deliver highly complex deployments quickly and effectively, and Symbio also owns a vast bank of intellectual property allowing it to rapidly customise and deploy large complex solutions for customers; these differentiators were demonstrated with the recent Tasmanian Government project. The company was awarded the CeBIT Outstanding Project Award in recognition of its achievements by the IT&T industry in Australia.

The company also maintains several key certifications with leading enterprise grade equipment vendors such as: Microsoft, Cisco, Avaya, Samsung and Panasonic. The company is still the only carriage service provider in Australia certified by Microsoft for the Lync unified communications platform, as well as being a Microsoft Silver UC Solutions Partner.

The company has been appointed to the Queensland Government’s IT&T procurement panel and is working with several Government departments to trial VoIP solutions today. The company continues to work with other Federal, State and Local Government organisations to further the deployment of VoIP solutions at all levels of Government.



22

b. CallStream Acquisition

The acquisition of inbound call specialist CallStream was announced in November 2012 and completed on 31 December 2012. The acquisition was for $585,000 in cash, and was expected to yield $1M per annum in gross revenue and $600,000 in EBITDA after synergies.

The integration process is almost complete, with 100% of customers and traffic to be migrated to the Symbio Network by the end of August 2013.

The company has chosen to re-launch the CallStream brand as a fully-cloud based inbound communications brand. This brand will be used to target the small to medium business segment in Australia with a network independent inbound communications solution, allowing the company to target businesses irrespective of their infrastructure preferences. This is an innovative approach that will provide a new area of revenue and profit growth for the company.

The business acquired under the CallStream acquisition will be reported under the Business and Enterprise market segments.

c. Connexus Acquisition

The acquisition of Melbourne based business ISP specialist Connexus was announced in November 2012 and completed on 31 December 2012. The acquisition was for $4.75M in cash, and was expected to yield $5.2M per annum in gross revenue and $2.1M per annum in EBITDA after synergies.

The integration process has commenced and is still progressing with network integration to be completed by December 2013.

The company has chosen to maintain the Connexus brand as a business specialist ISP brand. This brand will target multi-site business customers who need data and voice infrastructure. The brand will be strengthened by the addition of business grade Voice-Over-IP services to its portfolio. Cross selling of VoIP services into the Connexus customer base has already commenced with very positive results. This activity will continue throughout the year.

The company will also be looking to take some high value intellectual property that it acquired with Connexus and launch separate independent brands to focus on cloud-based email, domain name, and website and security products.

The business acquired under the Connexus acquisition will be reported under the Business and Enterprise market segments.

d. GoTalk Acquisition

The acquisition of the wholesale voice business and network assets of GoTalk was announced in December 2012 and completed on 31 December 2012. The acquisition was for $1.4M in cash, and was expected to yield $19M per annum in gross revenue and $400,000 per annum in EBITDA before synergies.

This acquisition was a strategic and defensive move to remove one Carrier Access Code (CAC) and interconnected voice network from the Australian marketplace. The acquisition also delivered 40 wholesale customer contracts with 1.2 Billion minutes of voice traffic per annum.

This acquisition was the most challenging to integrate due to the large number of disparate legacy systems in the GoTalk Wholesale network, a lack of reporting and management systems, and the large traffic volumes to be migrated with no disruption. The integration process has however been progressing well with all customer traffic moved to the Symbio network by the end of August 2013. The next stage of the integration is the gradual dismantling of the legacy GoTalk Wholesale network that is expected to be completed by December 2014, and yield up to $2M per annum in synergy savings.

During integration it was found that there was a large amount of non-profitable business being carried on the network. The company took immediate steps to remedy the situation and terminate negative margin business and/or increase prices to customers. The result is that run rate revenue has reduced to approximately $12M per annum



23

post-integration; however gross margin has not been affected, and in some cases has improved.

The business acquired under the GoTalk Wholesale acquisition will be consolidated under the Symbio Networks brand, and will be reported as part of the wholesale voice and wholesale managed services segments.

e. Business and Enterprise

Apart from new Business and Enterprise revenues acquired through the above mentioned acquisitions, the MyNetFone Virtual PBX product continues to sell strongly into the small business market, and the MyNetFone SIP Trunk product continues to sell strongly into the enterprise market. These products are now mature and stable, and achieving a very high level of customer satisfaction. Growth is expected to remain strong for the foreseeable future.

The company continues to develop new features and functionality which is expected to provide further ARPU growth and customer retention. The longer-term growth in this market segment will be further strengthened by the re-launch of the CallStream brand, as well as the upcoming re-launch of the cloud based IT services acquired with the Connexus acquisition.

The business subscriber base is now at 2,000 Virtual PBX and SIP trunk services, 5,600 business voice services, and 3,000 business data services in operation.

f. Residential

The residential voice market is declining due to the market shift towards mobile communications and mobile-cap plans. The company however has been implementing a defensive strategy of cross selling residential DSL services into this customer base. This action has stemmed the decline in revenues and provided a useful retention tool.

In addition to the above defensive strategy, the company has identified a new opportunity for growing the residential market whilst leveraging our network assets and capabilities. As a result MyNetFone acquired the business assets and intellectual property of The Buzz Corp Pty Ltd, a niche residential voice service provider. This acquisition was not financially material. The company intends to re-launch the Buzz Box product later this year and it is expected to drive new growth in the residential landline market.

The residential DSL subscriber base is now approaching 9,000 services in operation, and the VoIP base is at 87,000 services in operation.

g. Wholesale

The wholesale voice market sold under the Symbio Networks brand remains a key profit area for the company. The two key products sold into this segment are wholesale voice (the termination of high volume wholesale voice minutes), and the wholesale managed-services (hosting of white-label services such as Local Number Portability, voice end-points, phone numbers, and other value added services).

These products leverage the extensive fully interconnected national voice network that is also used to carry the MyNetFone retail traffic, in addition to an extensive amount of proprietary intellectual property which has been developed by the company over the last 10 years.

The wholesale network is currently hosting over 140 service provider customers, comprising over 250,000 voice end-points, 300,000 ported-in phone numbers and over 600,000 newly issued phone number services. Total billable traffic on network is approximately 3 Billion minutes per annum.

2. Financial position

The net assets of the company have strengthened with an increase to $10.8 million as at 30 June 2013 (2012: $2.6 million).

3. Future developments

The Board is committed to growing the company organically as well as by way of trageted acquisition.



24

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

Significant changes in the state of affairs

Apart from the acquisition activity stated above, there were no other significant changes in the state of affairs of the company during the financial year.

After balance date events

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

There were no other significant events after the balance date that would materially alter the operations or financial performance of the Group.

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:

The 2013 final dividend is to be paid on 13 September 2013 to shareholders registered as at 2 September 2013.

Options

No options were granted during or since the end of the financial year by the Company to Directors.

Shares under option or issued on exercise of options

Mr Cuthbertson exercised 500,000 options during the year.

At the date of this report, the unissued ordinary shares of My Net Fone Limited under options which were granted in 2013 financial year are as follows:

Dividends paid:

2012 Final dividend of 1.5 cents per share paid on 20 September 2012

2013 Interim dividend of 1.5 cents per share paid on 27 March 2013

$000

836

934

Franking

100%

100%

Grant dateNumber under

optionDate of expiry Exercise price

2 July 2012 31 December 2013 65 cents 250,000

Dividends recommended (subsequent to year end):

2013 Final dividend of 2.0 cents per share recommended on 21 August 2013

1,245 100%



25

Remuneration Report Audited

Remuneration philosophy

The remuneration philosophy of the Board is currently to recognise that in the early stage of growth the company needs to contain operating costs and so the salaries established for the executive directors are negotiated at rates below market levels that would normally be available to persons with such experience and qualifications. At this time the Board has established salary arrangements for the key executives which are commensurate with their level of experience. As the company matures the Board will review its approach to setting remuneration levels by balancing short and long term benefits and linking remuneration to performance. The Board may issue options to employees under the Company Employee Option Plan as set out in the notes to the financial statements.

Remuneration details of key management personnel for the year ended 30 June 2013

For all the Key Management Personnel, only basic salaries and fees and superannuation were granted during the year, no other short term benefit, long term benefit and performance related or share based payment were paid in the year except for the options disclosed above. No bonuses were granted during the year.

Details of the nature and amount of benefits and payments for each director of the Company and each of the named company executives who receives the highest remuneration are:

Securities received that are not performance related

No members of key management personnel are entitled to receive securities which are not performance based as part of their remuneration package.

Key terms of employment agreements

The Company has entered into an Executive Employment Agreement with Rene Sugo. 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.

Group Key ManagementPersonnel

Directors

Mr. T. Cuthbertson

Mr. M. Boorne

Mr. A. Fung

Mr. R. Sugo (CEO)

Total

Management Executives

Mr. L. Tai

Ms. C. Ly (CFO)

Total

Short term benefits Post employmentbenefits

Share basedpayment Total

Salary & fees$

Bonus$

Superannuation$

Options$

$

70,593

49,093

49,093

275,229

444,008

60,000

138,790

198,790

-

-

-

-

-

-

-

-

6,353

4,418

4,418

24,771

39,960

5,400

12,491

17,891

-

-

-

-

-

-

-

-

76,946

53,511

53,511

300,000

483,968

65,400

151,281

216,681



26

Remuneration Report (continued)

The Company may terminate the employment of the Key Executives without notice and without payment in lieu of notice in some circumstances. This includes if the executive:

1. commits an act of serious misconduct;2. commits a material breach of the executive employment agreement;3. denigrates or engages in any behaviour that may materially damage the reputation of, or otherwise bring the

Company 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:

Directors’ interests in shares and options of the company or related bodies corporate

At the date of this Report, the particulars of shares and options held by the directors 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:

End of Remuneration 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

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 any person who is or has been an officer or auditor of the company.

Proceedings on behalf of 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 year MNSA Pty Ltd Chartered Accountants, the Group’s auditor provided non-audit services in the form of due diligence services. The total amount received by MNSA Pty Ltd Chartered Accountants for these non-audit services was $14,031.

Name of Key Executive Company notice period Employee notice period Termination Provision

Rene Sugo

Leo Tai

Catherine Ly

6 months

1 month

6 months

1 month

1 month

1 month

6 months base salary

1 month base salary

6 months base salary

Name of Director Share holding Options

Mr. Andy Fung

Mr. Rene Sugo

Mr. Terry Cuthbertson

Mr. Michael Boorne

Total

14,488,955

14,488,955

1,625,000

1,244,749

31,847,659

-

-

-

-

-



27

The directors are satisfi ed that the provision of non-audit services is compatible with the general standard of independence for audits imposed by the Corporations Act 2001. The nature and scope of the non-audit service was such that auditor independence was not compromised.

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 62 of the fi nancial report.

Rounding off

The Group is of a kind referred to in ASIC Class order 98/100 dated 10 July 1988 and in accordance with that Class Order, amounts in the consolidated fi nancial statements and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

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

Terry Cuthbertson Rene SugoChairman Director

Sydney, 21st August, 2013




28

Corporate Governance StatementThe Board of Directors of My Net Fone Limited is responsible for the corporate governance practices of the consolidated entity. The Board guides and monitors the business and affairs of My Net Fone Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

This statement outlines the main corporate governance practices adopted by the Company, which comply with the ASX Corporate Governance Council Principles and Recommendations (2nd Edition, August 2007) unless otherwise stated.

Principle 1: Lay solid foundations for management and oversight

The board’s primary role is the protection and enhancement of long term shareholder value. To fulfil this role, the board is responsible for the overall corporate governance of the Group including formulating its strategic direction, approving and monitoring capital expenditure, setting senior executive and director remuneration, establishing and monitoring the achievement of management’s goals and ensuring the integrity of risk management, internal control, legal compliance and management information systems. It is also responsible for approving and monitoring financialreporting. The board has delegated responsibility for the day to day operation and administration of the Company to the Chief Executive Officer.

Principle 2: Structure the board to add value

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report. Directors of My Net Fone Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement.

The membership of the board during the year ended 30 June 2013, including independent status, and date of appointment was as follows:

Recommendation 2.1 requires that a majority of the Board should be independent directors. The Company does not comply with this recommendation. The Board is 50% independent. Whilst the Company agrees with the benefits of a majority independent Directors, it believes that it can better achieve the results of the Company with the current Board’s level of expertise without burdening shareholders with the additional costs associated with adding further independent Directors.

Recommendation 2.2 requires the Chairman be an independent Director. The Company complies with this recommendation. The Company believes that when the Chairman is a significant driver behind the business as well as being a shareholder, he adds much value to the Company.

Recommendation 2.3 requires that the role of the Chairman and Chief Executive Officer of the Company is not exercised by the same individual. The Company complies with this recommendation.

Name

Terry Cuthbertson

Michael Boorne

Andy Fung (i)

Rene Sugo

Status

Non-Executive Independent Chairman

Non-Executive Independent Director

Non-Executive Director

Executive Director

Date of Appointment

08 March 2006

19 December 2006

01 March 2012

08 March 2006

(i) Andy Fung resigned as Executive Director on 29 February 2012 and was appointed as Non-Executive Director as of 01 March 2012. Mr. Fung has

been a Director of the Group since 8 March 2006.


29

Independent directors

An independent director is considered independent:

a) who is not a member of managementb) who has not within the last three years been employed in an executive capacity by the Company or been a

principal of a professional adviser or consultant to the Companyc) is not a significant supplier to the Companyd) has no material contractual relationship with the Company other than as a director, ande) is free from any interest or business or other relationship, which could materially interfere with the director’s

ability to act in the best interests of the Company.

Based on the above criteria, two Non-Executive Directors including the Chairman were considered independent during the financial year.

Independent professional advice and access to company information

Each director has the right of access to all relevant Company information and to the Company’s executives and subject to prior consultation with the Chairman, may seek independent professional advice at the company’s expense. A copy of advice received by the director is made available to all other members of the Board.

Board processes

The Board has mandates and operating procedures which are reviewed on a regular basis. The Board has also established a range of policies which govern its operation.

The Board holds a scheduled meeting every month and any other strategic meetings as and when necessitated by the Company’s operations. The agenda for meetings is prepared through the input of the Chairman and the Company Secretary. Standing items include matters of Compliance and Reporting, Financials, Shareholder Communications and Investment Strategy and Outcomes. Submissions are circulated in advance.

With the exception of the Chief Executive Officer, Directors must retire by rotation and stand for reelection at the AGM each year.

A performance evaluation for the Board and senior executives has taken place in the reporting period.

The Board Committees

Nomination Committee

Recommendation 2.4 states that the board should establish a Nomination Committee. Due to the size of the Company it has not established a formal Nomination Committee and the functions of the Nomination Committee are undertaken by a full Board. The composition of the Board is monitored (both in respect of size and membership) to ensure that the Board has a balance of skill and experience appropriate to the needs of the Company. When a vacancy arises, the Board will identify candidates with appropriate expertise and experience and appoint the most suitable person.

Remuneration Committee

Recommendation 8.1 states that the board should establish a Remuneration Committee. Due to the size of the Company it has not established a formal Remuneration Committee and the functions of the Remuneration Committee are undertaken by a full Board. Non-Executive Directors are remunerated by way of director fee and superannuation contributions.

The Chairman and the other Non-Executive Director of My Net Fone Limited are also Directors of several listed and non-listed companies and are further remunerated by those Companies. Further detail is provided in the Directors’ Report.

Audit Committee

Due to the size of the Company it has not established a formal Audit Committee and the functions of the Audit


Corporate Governance Statement (continued)

30

Committee are undertaken by a full Board. The Board is responsible for considering the effectiveness of the systems and standards of internal control, financial reporting and any other matter at the request of the Board. The external auditors attend meetings by invitation to report to the Board.

The Audit responsibilities of the Board are to ensure that:

• relevant, reliable and timely information is available to the Board to monitor the performance of the Company• external reporting is consistent with committee members’ information and knowledge and is adequate for

shareholder needs• management process support external reporting in a format which facilitates ease of understanding by shareholders

and institutions• the external audit arrangements are adequate to ensure the maintenance of an effective and efficient external audit

involving: review of the terms of engagement, scope and auditor’s independence; recommendation as to the appointment, removal and remuneration of an auditor; review of the provision of non-audit services provided by the external auditor ensuring they do not adversely

impact on audit independence.• a review of the Company’s risk profile and an assessment of the operation of the Company’s internal control

system is performed.

The external auditor is required to attend the Annual General Meeting and is available to answer shareholder questions. The Board as a whole monitors the performance of the annual & half-yearly audit performed by the external auditor. For details on the number of meetings of the audit committee held during the year and the attendees at those meetings, refer to the Directors’ Report.

Principle 3: Promote ethical and responsible decision making

The Board expects all Executive and Non-Executive Directors to act professionally in their conduct and with the utmost integrity and objectivity. All Executive and Non-Executive Directors must comply with the Company’s Code of Conduct and Ethics. (Recommendation 3.1)

The company encourages Directors to have a significant personal financial interest in My Net Fone Limited by acquiring and holding shares on a long-term basis. Insider trading laws prohibit Directors and their associates from dealing in the Company’s shares whilst in possession of price sensitive information that is not generally available. Once the Directors have traded in shares or otherwise dealt with any securities, they should immediately disclose this to the Board and Company Secretary to facilitate appropriate disclosure with the ASX. A Director or an entity controlled by Directors is not permitted to purchase or sell shares in the Company at other times without prior consent of the Board. This policy does not preclude a Director or an entity controlled by a Director from taking up or renouncing an entitlement to the Company’s shares or participating in the Company’s Share Purchase Plan or the Dividend Reinvestment Plan. (Recommendation 3.2)

Diversity Policy

Diversity includes, but is not limited to: gender, age, ethnicity and cultural background. The company is committed to diversity and recognises the benefits arising from employee and board diversity and the importance of benefiting from all available talent. However, due to the size of the company it is not in a position to justify the establishment of a formal diversity policy.

The Board has developed measurable objectives for achieving diversity, and annually assess both the objectives and the progress in achieving those objectives. Accordingly, the Board has developed the following objectives regarding gender diversity and aims to achieve these objectives over the next two years as Director and senior executive positions become vacant and appropriately qualified candidates become available:

2013 2014-2015

No. % No. %

Females on the Board

Females in senior management roles

Overall female employees

0

3

38

0

33

33

0

5

42

0

50

36



31

Trading Policy

The company’s policy regarding Directors trading in its securities restricts them from acting on material information until it has been released to the market and adequate time has been given for it to be reflected in the security’s prices.

The company has adopted a Securities Trading Policy disallowing Directors and employees from dealing in the Company’s securities in the period between the end of the Company’s half year/full year and the lodgement of those profit announcements with the ASX. Directors and employees also require the approval of the Board prior to trading in the Company’s securities.

A copy of the Securities Trading Policy is available on the Company’s website at www.mynetfone.com.au in the Corporate Governance section.

Principle 4: Safeguard integrity in financial reporting

The Company’s Board is committed to ensuring the adoption of processes which are aimed at providing assurance that the financial statements and related notes are in accordance with applicable accounting standards and provide a true and fair view. Compliance with these procedures and policies is subject to review by the external auditor. The Board also evaluates the performance and independence of the external auditor on an annual basis.

The Chief Executive Officer and the Chief Financial Officer provide the Board with written confirmation that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and that the operational results are in accordance with relevant accounting standards.

Principle 5: Make timely and balanced disclosure

The Company’s Board is committed to keeping the investment community including shareholders and regulators fully informed, in a timely and accessible manner, of events and risks that impact the Company. The Board complies with its continuous disclosure obligations, as defined under the Corporations Act and ASX Listing Rules, in respect of price sensitive information which is lodged with the ASX as soon as practicable and before disclosure to external parties.

Principle 6: Respect the rights of shareholders

Shareholders are entitled to vote on significant matters affecting the business which include the election and remuneration of Directors, changes to the constitution and receipt of annual and interim financial statements. Shareholders are strongly encouraged to attend and participate in the Annual General Meeting of My Net Fone Limited to lodge questions to be responded to by the Board and/or the Chief Executive Officer, and are able to appoint proxies.

The Board informs shareholders of all major developments affecting the Company’s state of affairs on the Company’s website at www.mynetfone.com.au.

A hard copy Annual Report will be mailed to shareholders who have requested to receive one at the close of the financial year. An electronic version of the Annual Report will be available on the Company’s website.

The Company Secretary is responsible for ensuring My Net Fone Limited complies with its continuous disclosure obligation and in conjunction with the Chairman, will decide whether any price sensitive information they become aware of should be disclosed to the ASX. Where possible, all continuous disclosure releases to the ASX are approved by the Board. Where time does not permit approval by the Board, the Chairman must approve the release. Any information of a material nature affecting the Company is disclosed to the market through release to the ASX as soon as the Company becomes aware of such information, in accordance with the ASX Continuous Disclosure requirement.

Principle 7: Recognise and manage risk

The Board acknowledges that it is responsible for the overall system of internal control but recognises that no cost effective internal control system will preclude all errors and irregularities. The Board has responsibility for reviewing the risk profile and reporting on the operation of the internal control system.



32

The Board:

a. requires executive management to report annually on the operation of internal controlsb. reviews the external audit of internal controls and liaises with the external auditor; andc. conducts any other investigations and obtains any other information it requires in order to assess the effectiveness

of the internal control system. In respect of the current financial year all necessary declarations have been submitted to the Board.

The Board identifies the following business risks as having the potential to significantly or materially affect the company’s performance:

(a) administrative risks including operational, compliance and financial reporting,(b) market related risks.

Administrative risks

The Chief Executive Officer is responsible for recognising and managing administrative risks including:

(a) operational;(b) compliance; and(c) financial reporting

The Chief Executive Officer and the Chief Financial Officer provide a declaration to the Board to certify that the Company’s financial statements and notes present a true and fair view in all material respects of the Company’s financial condition and operational results and that they have been prepared and maintained in accordance with relevant Accounting Standards and the Corporations Act 2001. In respect of the current financial year all necessary declarations have been submitted to the Board. In addition, the Chief Executive Officer and the Chief Financial Officer will confirm in writing to the Board that the declaration provided above is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Market risks

The Board is primarily responsible for recognising and managing market related risks. In respect of the current financial year, all necessary declarations have been submitted to the Board. The Board performs a risk review on an annual basis to ensure that adequate controls are in place to mitigate risk associated with market risk, fraud, transaction reporting errors, material reporting risks and compliance risk.

Principle 8: Remunerate fairly and responsibly

The Company’s remuneration policy and practices are designed to attract, motivate and retain high quality staff. The Remuneration Report in the Directors’ Report provides detail of remuneration of Non-Executive and Executive Directors.

The Company’s Employee Share Option Scheme was approved by shareholders at the Company’s listing on the ASX. It is expected more high qualified staff will be issued share options in the future.



33

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Continuing operations

Revenue

Cost of sales

Gross profit

Finance revenue

Other income

Employee expenses

Marketing expenses

Occupancy expenses

Technology and support expenses

Depreciation expense

Distribution expenses

Other expenses

Acquisition expenses

Interest expense

Profit before income tax

Tax expense

Profit from continuing operations

Net profit for the year

Other comprehensive income for the year net of tax

Total comprehensive income for the year

Earnings per share from continuing operations

- Basic earnings per share (cents)

- Diluted earnings per share (cents)

Notes

CONSOLIDATED GROUP 2013 2012

$000

$000

46,209

(28,589)

17,620

146

77

(8,406)

(951)

(599)

(492)

(681)

(134)

(941)

(214)

(43)

5,382

(1,241)

4,141

4,141

-

4,141

6.98

6.95

3a

3a

3b

3e

3c

4

23

The accompanying notes form part of these consolidated financial statements

38,292

(25,509)

12,783

156

46

(6,106)

(704)

(258)

(559)

(382)

(118)

(739)

(75)

-

4,044

(975)

3,069

3,069

-

3,069

5.55

5.48

For the year ended 30 June


34

ASSETSCurrent AssetsCash and cash equivalentsTrade and other receivablesInventoriesOther financial assetsTotal Current Assets

Non-current AssetsProperty, plant and equipmentDeferred income tax assetsConsolidation goodwillOther intangible assetsFormation costTotal Non-current AssetsTOTAL ASSETS

LIABILITIESCurrent LiabilitiesTrade and other payablesDeferred revenueDeferred considerationIncome tax payableFinance lease liabilityProvisionsTotal Current Liabilities

Non-current LiabilitiesFinance lease liabilityDeferred considerationProvisionsTotal Non-current LiabilitiesTOTAL LIABILITIESNET ASSETS

EQUITYIssued capitalShare based payment reserveRetained earnings (losses)TOTAL EQUITY

Notes

CONSOLIDATED GROUP 30 June 2013 30 June 2012

$000

$000

4,8136,612

251426

12,102

1,561275

9,2192,280

-13,33525,437

9,5441,1452,350

501175515

14,230

104-

326430

14,66010,777

9,3711,110

29610,777

5a6

7

84c2122

910

1211

12

11

13a

5,9804,773

171147

11,071

808161

4,626-1

5,59616,667

6,9581,0532,350

10-

1,17411,545

-2,350

2172,567

14,1122,555

4,3611,099

(2,905)2,555

Consolidated Statement of Financial Position

As at:



35

Consolidated Statement of Cash Flows

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest received

Interest paid

Income tax paid

Net cash from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Increase in other financial assets

Payment for acquisition of subscriber bases

Acquisition of subsidiary net of cash acquired

Payment of deferred consideration for subsidiary acquired

Processds from disposal of equipment

Net cash (used in) from investing activities

Cash flows from financing activities

Proceeds from issue of share capital

Dividends paid

Proceeds from borrowing - Finance leases

Repayment of borrowings - Finance leases

Net Cash from (used in) financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at 1 July

Cash and cash equivalents at 30 June

Notes


$000

$000

48,627

(41,586)

146

(43)

(1,103)

6,041

(1,299)

(279)

(2,280)

(4,520)

(2,350)

-

(10,728)

5,010

(1,769)

438

(159)

3,520

(1,167)

5,980

4,813

5b

5a

42,825

(38,945)

156

-

(172)

3,864

(314)

(85)

-

419

-

136

156

370

(862)

-

-

(492)

3,528

2,452

5,980




36

Consolidated Statement of Changes in Equity

Attributable to owners of the company

As at 1 July 2011


Dividends recognised for the year

Proceeds from issue of share options

Proceeds from issue of shares

Share-based payment transactions

Balance at 30 June 2012


Dividends recognised in the year

Proceeds from issue of shares

Share-based payment transactions

Balance at 30 June 2013

OrdinaryShare Capital

Share-BasedPaymentReserve

$000

$000

3,991

-

-

370

-

-

4,361

-

-

5,010

-

9,371

RetainedEarnings

Total

$000

$000

1,099

-

-

-

-

-

1,099

-

-

-

11

1,110

(4,703)

3,069

(1,271)

-

-

-

(2,905)

4,141

(940)

-

-

296

387

3,069

(1,271)

370

-

-

2,555

4,141

(940)

5,010

11

10,777


For the year ended 30 June 2013


37

Notes to the Consolidated Financial Statements

1. CORPORATE INFORMATION

These consolidated statements and notes represent those of My Net Fone Limited and controlled entities (The Consolidated Group).

The separate financial statements of the parent entity, My Net Fone Limited, have not been presented within this financial report as permitted by the Corporations Act 2001.

The financial statements were authorised for issue on 21 August 2013 by the directors of the company.

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

a. Basis of preparationThe 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 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. Adoption of new and revised accounting standardsThe AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below:

(i) AASB 9: Financial Instruments (December 2010) and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (applicable for annual reporting periods commencing on or after 1 January 2013).

These Standards are applicable retrospectively and include revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments.

The Group has not yet been able to reasonably estimate the impact of these pronouncements on its financial statements.

(ii) AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements, AASB 12: Disclosure of Interests in Other Entities, AASB 127: Separate Financial Statements (August 2011) and AASB 128: Investments in Associates and Joint Ventures (August 2011) (as amended by AASB 2012–10: Amendments to Australia Accounting Standards – Transition Guidance and Other Amendments), and AASB 2011–7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 10 replaces parts of AASB 127: Consolidated and Separate Financial Statements (March 2008, as amended) and Interpretation 112: Consolidation – Special Purpose Entities. AASB 10 provides a revised


38

definition of “control” and additional application guidance so that a single control model will apply to all investees. This Standard is not expected to significantly impact the Group’s financial statements.

(iii) AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a “structured entity”, replacing the “special purpose entity” concept currently used in Interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This Standard will affect disclosures only and is not expected to significantly impact the Group’s financial statements.

To facilitate the application of AASBs 10 and 12, revised versions of AASB 127 and AASB 128 have also been issued. The revisions made to AASB 127 and AASB 128 are not expected to significantly impact the Group’s financial statements.

(iv) AASB 13: Fair Value Measurement and AASB 2011–8: Amendments to Australian Accounting Standards arising from AASB 13 (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 13 defines fair value, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair value measurement.

AASB 13 requires:- inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and- enhanced disclosures regarding all assets and liabilities (including, but not limited to, financial assets and

financial liabilities) to be measured at fair value.

These Standards are expected to result in more detailed fair value disclosures, but are not expected to significantly impact the amounts recognised in the Group’s financial statements.

(v) AASB 2011–4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (applicable for annual reporting periods beginning on or after 1 July 2013).

This Standard makes amendments to AASB 124: Related Party Disclosures to remove the individual key management personnel disclosure requirements (including paras Aus29.1 to Aus29.9.3). These amendments serve a number of purposes, including furthering trans-Tasman convergence, removing differences from IFRSs, and avoiding any potential confusion with the equivalent Corporations Act 2001 disclosure requirements. This Standard is not expected to significantly impact the Group’s financial statements.

(vi) AASB 119 (September 2011) includes changes to the criteria for determining when termination benefits should be recognised as an obligation. This Standard is not expected to significantly impact the Group’s financial statements.

(vii) AASB 2012–5: Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle (applicable for annual reporting periods commencing on or after 1 January 2013). This Standard amends a number of Australian Accounting Standards as a consequence of the issuance of Annual Improvements to IFRSs 2009–2011 Cycle by the International Accounting Standards Board, including:- AASB 101: Presentation of Financial Statements and AASB 134: Interim Financial Reporting to clarify the

requirements for presenting comparative information;- AASB 134 to facilitate consistency between the measures of total assets and liabilities an entity reports for

its segments in its interim and annual financial statements.

This Standard is not expected to significantly impact the Group’s financial statements.

c. Principles of consolidationThe consolidated financial statements incorporate the assets, liabilities and results of entities controlled by My Net Fone Limited at the end of the reporting period. A controlled entity is any entity over which My Net Fone 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 parent 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.


Notes to the Consolidated Financial Statement (continued)

39

In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated group have been eliminated on consolidation. 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 19 to the financial statements.

d. Business combinationBusiness combinations occur where an acquirer obtains control over one or more business 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.

e. Going concernThe financial report has been prepared on a going concern basis. This presumes that funds will be available to finance future operations and the realisation of assets and settlement of liabilities will occur in the normal course of business.

For the year ended 30 June 2013 the Group generated profit after tax of $4,141k (2012: $3,069k), as at the balance date the Group’s total assets exceeded total liabilities by $10,777k (2012: $2,555k).

Included in the current liabilities is $1,145k (2012: $1,053k) of deferred revenue that will be recognised as revenue when customers’ credits are progressively used up. This deferred revenue does not represent a gross cash outflow.

The Directors believe that the going concern basis of accounting is appropriate due to the expected cash flows to be generated by the Group over the next twelve months. The Directors will closely monitor cash flows as the Group grows and if revenues do not increase as expected, the Directors will look to contain costs. The Directors believe that these actions, if required, will be sufficient to ensure that the company will be able to pay its debts as and when they fall due for the next twelve months.

Notwithstanding the above, the Directors acknowledge that there are a number of risk factors that could materially affect the Group’s future profitability and cash flows, which include, but are not limited to:

(i) CompetitionThere can be no assurance given in respect of the Group’s ability to continue to compete profitably in the competitive markets in which the Group operates. The potential exists for change in the competitive environment in which the Group operates.

(ii) Management of growthThe Group achieved a profit during the year, however, there is still a risk the Group will have insufficient working capital to meet its business requirements and the expansion of the Group will depend upon the ability of management to implement and successfully manage the Group’s growth strategy.

(iii) Reliance on key managementThe responsibility of overseeing the day-to-day operations and strategic management of the Group is substantially dependent upon its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Group if one, or a number of, these employees cease their employment.



40

(iv) New products and technological developmentsThe Group’s current core business of broadband telecommunications is highly competitive and is subject to the introduction of new and improved products and services into the market on a regular basis.

(v) Broadband Access ArrangementsThe Group currently has certain access to the Internet backbone network. Terms of the supply of broadband are negotiated regularly. There is no guarantee that future access arrangements will be able to be negotiated on commercially acceptable terms.

(vi) Distribution Channels and Device SuppliersThe Group benefits from its good working relationship with its distribution channels to promote its products and services and with its device suppliers to provide its VoIP adaptors. There is no guarantee that these relationships will continue in the future.

(vii) Legislation, Regulation and PoliciesAny material adverse changes in government or other regulatory organisation policies or legislation which impacts on the telecommunications industry, may affect the viability and profitability of the Group.

(viii) Internet AccessThe use of VoIP technology is dependent on quality and speed of access to the Internet. The market growth of VoIP may be limited by the take up rate of broadband and other fast Internet access or by the quality of such access.

f. Reverse acquisitionIn accordance with AASB 3 Business Combinations, when My Net Fone Limited (the legal parent) acquired My Net Fone Australia Pty Limited (the legal subsidiary), the acquisition was deemed to be a reverse acquisition since the substance of the transaction was that the existing shareholders of My Net Fone Australia Pty Limited have, through My Net Fone Australia Pty Limited, effectively acquired My Net Fone Limited. Under reverse acquisition accounting, the consolidated financial statements are prepared as if My Net Fone Australia Pty Limited had acquired My Net Fone Limited, not vice versa as represented by the legal position.

g. Critical accounting estimates and judgmentsThe directors evaluate estimates and judgments incorporated into the 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 liabilities within the next annual reporting period are:

(i) Share based payment transactionsThe 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 a 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 & equipmentThe Group reviews the estimated useful lives of property, plant and equipment at the end of each financial year. The Group adjusted the remaining effective useful life of its assets to better reflect their actual usage and future economic benefit.

(iii) Utilisation of tax lossesThe 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 will use the losses by the available fraction of each bundle of losses transferred. The Group has assessed the ability to utilise the losses against future taxable income. The Group has generated taxable income in the current financial year and the losses will be used over the next year.



41

(iv) Research & Development (R&D) tax concessionWhen calculating the income tax provision for the year, there is an operating assumption that the Research & Development tax concession for 2013 will be the same as for 2012. 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.

h. Revenue recognitionRevenue 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 servicesRevenue from telecommunication services are 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 / Finance revenueInterest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument.

i. LeasesLease 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 straightline basis over the life of the lease term.

j. Cash and cash equivalentsCash and cash equivalents in the 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 Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

k. Trade and other receivablesTrade receivables and other receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any amounts determined to be uncollectable.

An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.

l. 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 parent entity’s functional and presentation currency.

(ii) Transactions and balancesTransactions 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.

All exchange differences in the consolidated financial report are taken to profit or loss.

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.



42

(iii) Group CompaniesThe 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 profit or loss in the consolidated financial report.

m. Income taxThe income tax expense (credit) for the year comprises current income tax expense (credit) and deferred tax expense (credit).

Current income tax expense charged to the profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (credit) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and 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.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

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. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Tax consolidationMy Net Fone Limited and its wholly-owned Australian subsidiaries are part of a tax consolidation group under Australian taxation law. My Net Fone Limited is the head entity in the tax consolidation group. Tax expense, deferred tax liabilities and deferred tax assets arising 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.

My Net Fone 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 the group.



43

n. 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.

o. InventoriesInventories are measured and recorded at cost and are valued at the lower of cost and net realisable value.

p. Property, plant and equipment 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 in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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 comprehensive income during the financial period in which they are incurred.

DepreciationThe 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 – over 6 to 10 years• Office Equipment – over 3 to 5 years• Network Infrastructure and IT Systems – over 2 to 4 years• Motor Vehicles – over 4 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When re-valued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

q. Financial instrumentsFinancial 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 receivablesLoans 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.)



44

(ii) Investments in subsidiaries held by the parentInvestments 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.

r. Impairment of assetsAt 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 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.

s. Trade and other payablesTrade 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.

t. ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, 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. The increase in the provision resulting from the passage of time is recognised in finance costs.

u. Employee leave benefitsProvision 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.

v. Contributed capitalOrdinary 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.

w. Earnings per shareBasic 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.



45

x. De-recognition of financial assets and financial liabilitiesFinancial 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 liabilityextinguished 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.

y. Share-based payment transactionsThe Group provides benefits to its employees and Directors (including key management personnel) 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 a 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 Statement of 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 Statement of 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.



46

3. REVENUES AND EXPENSES

(a) Revenue

Rendering of services

Finance revenue consists of:

Interest on bank deposits

(b) Other income

(c) Other expenses

Other administrative expenses

Accounting and audit

Legal and consulting

Bank and transaction costs

(d) Minimum lease payments

Operating lease - premises

(e) Employee benefits expense

Wages and salaries

Superannuation

Share based payments expense

Payroll tax

Workers’ compensation costs


$000

$000

46,209

146

77

575

108

49

209

941

433

7,317

674

11

377

27

8,406

38,292

156

46

474

80

9

176

739

193

5,263

521

-

299

23

6,106




47

4. INCOME TAX

a. Income tax expense

The major components of income tax expense are as follows:

Current tax

Adjustment in respect of current income tax of previous years

Deferred tax

Total

b. Reconciliation between tax expense and the prima facie tax payable

Profit before income tax

At the Group’s statutory rate of 30% (2012:30%)

Tax incentives

Non-temporary differences

Recoupment of prior year losses

Origination and reversal of temporary differences

Change in recognised deductible temporary differences

Adjustment in respect of prior year

Total

Entities in the Group have tax losses arising in Australia of Nil

(2012: $537k). A deferred tax asset relating to these losses of Nil

(2012: $161k) is recognised as recoverable within 12 months.

c. Deferred tax asset

Recognised in the accounts:

Relating to carry forward tax losses

Relating to temporary differences

The total value of temporary differences not brought to account in the

current year is $297k (2012: $567k)


$000

$000

1,519

11

(289)

1,241

5,382

1,615

(193)

97

-

(14)

(275)

11

1,241

-

275

275

The Company and its wholly-owned Australian entities are members of a tax consolidated group from 01 July 2011.

Transactions within the Group have been eliminated in full on consolidation.


1,037

35

(97)

975

4,044

1,213

(176)

-

(116)

19

-

35

975

161

-

161



48

5. STATEMENT OF CASH FLOWS RECONCILIATION

a. Cash and cash equivalents

Cash and cash equivalents balance comprises:

Cash at bank

b. Reconciliation of net profit after tax to net cash flows from operations:

Profit for the year

Adjustments for:

Depreciation

Currency gains and losses

Share based payments expense

Changes in assets and liabilities, net of the effects of purchase

of subsidiaries:

(Increase)/decrease in trade and other receivables

(Increase)/decrease in inventories

(Increase)/decrease in net tax assets

(Decrease)/increase in trade and other payables

(Decrease)/increase in deferred revenue

(Decrease)/increase in provisions

Net cash flow from operating activities

6. TRADE AND OTHER RECEIVABLES

Trade receivables

Doubtful debts provision

Provision for credit notes

Other receivables

7. OTHER FINANCIAL ASSET

Term deposits

4,813

4,141

681

13

11

(1,839)

(80)

138

2,605

92

279

6,041

6,462

(92)

(154)

396

6,612

426

Term deposits relate to cash on deposit securing bank guarantees and are not available for immediate use. Short term deposits are made for fixed terms and earn interest at the respective short term rates.


$000

$000


5,980

3,069

382

10

-

804

188

768

(1,632)

33

242

3,864

4,719

(132)

-

186

4,773

147



49

8. PROPERTY, PLANT AND EQUIPMENT

Cost:

At 1 July 2011

Acquisitions

Additions

Disposals

At 30 June 2012

At 1 July 2012

Acquisitions

Additions

Disposals

At 30 June 2013

Accumulated depreciation:

At 1 July 2011

Acquisitions


Disposals

At 30 June 2012

At 1 July 2012

Acquisitions


Disposals

At 30 June 2013

Net Book Value:

At 30 June 2012

At 30 June 2013

9. TRADE AND OTHER PAYABLES

Trade payables

Other creditors and accruals

Security deposits held

Office furniture & fittings and

equipment

Network infrastructure

and equipment

$000

$000

280

88

67

(34)

401

401

147

200

-

748

(231)

(8)

(58)

-

(297)

(297)

(50)

(81)

-

(428)

104

320

Motorvehicles

Total

$000

$000

6,174

3,337

33

9,544

Assets are encumbered to the extent disclosed in note 15(b).

Consolidated

-

70

-

-

70

70

-

-

(70)

-

-

(36)

(8)

-

(44)

(44)

-

(4)

48

-

25

-

44

1,347

268

(102)

1,557

1,557

352

1,120

-

3,029

(44)

(522)

(313)

-

(879)

(879)

(313)

(596)

-

(1,788)

678

1,241

324

1,505

335

(136)

2,028

2,028

499

1,320

(70)

3,777

(275)

(566)

(379)

-

(1,220)

(1,220)

(363)

(681)

48

(2,216)

808

1,561


$000

$000

6,601

345

12

6,958



50

10. DEFERRED REVENUE

Pre-paid calling credits

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

11. PROVISIONS

As at 1 July 2012

Acquired

Arising during the year

Utilised during the year

As at 30 June 2013

Current

Non-current

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.

Proposeddividend

Long serviceleave

$000

$000

829

-

940

(1,769)

-

-

-

Annualleave

Total

$000

$000

1,145


$000

$000


1,053

345

54

546

(430)

515

515

-

217

10

99

-

326

-

326

1,391

64

1,585

(2,199)

841

515

326

12. FINANCE LEASE LIABILITY

Finance lease liability: Current

Finance lease liability: Non-current

Refer to note 15 (b) for the terms and conditions relating to the finance lease obligations.


$000

$000

175

104

-

-



51

13. ISSUED CAPITAL

a. Ordinary shares

Shares issued and fully paid

Movements in ordinary shares on

issue:

At 1 July

Exercise of share options (i)

Exercise of share options (ii)

Issued for cash (net of costs)

At 30 June

(i) refer note 14b for details of options exercised during the year by directors(ii) Employees exercised 200,000 options on 24 August 2012 with an exercise price of $0.10

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:

Outstanding at 1 July

Granted during the year

Exercised during the year

Outstanding at the end of the year

Exercisable

The outstanding options balance as at 30 June 2013 is represented by 250,000 options issued under a share

based payment option scheme to certain executives and employees. These options have an exercise price of

$0.65 and an expiry date of 31 December 2013.

14. SHARE BASED PAYMENTS

Outstanding options as at year end:

Employee option plan

Option granted to directors

Total

Number of shares $000 Number of shares $000

55,255,555

500,000

200,000

6,294,660

62,250,215

2013 2012

Number WAEP $ Number WAEP $

700,000

250,000

(700,000)

250,000

250,000

2013 2012


$000

$000


9,371

4,361

52,555,555

2,700,000

-

-

55,255,555

4,361

70

20

4,920

9,371

3,991

370

-

-

4,361

0.13

0.65

0.13

0.65

0.65

3,400,000

-

(2,700,000)

700,000

700,000

0.14

-

0.14

0.13

0.13

2013 2012

Number

Number

250,000

-

250,000

200,000

500,000

700,000



52

a. Employee option plan (EOP)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 6 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 exercise price per share for an option will be the average closing market price of the Company’s share over the five trading days before their issue.

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 the directorsNo options were granted to Directors during the 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:

Outstanding as 1 July

Granted during the year

Exercised during the year

Outstanding as at 30 June

During the year, Mr Cuthbertson, the Chairman and a Non-Executive Director exercised 500,000 options with an exercise price of $0.14 (250,000 on 27 August 2012 and 250,000 on 1 March 2013). These options were granted to Mr Cuthbertson by shareholders at the AGM held on 26 October 2010.

15. COMMITMENTS AND CONTINGENCIES

a. Operating lease commitmentsOperating leases relate to premises with lease terms remaining between 1 and 3 years. The consolidated entity does not have an option to purchase the leased assets at the expiry of the lease terms.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

Within one year

After one year, but not more than five years

More than five years

Number WAEP $ Number WAEP $

2013 2012

500,000

-

(500,000)

-

0.14

-

0.14

-

3,000,000

-

(2,500,000)

500,000

0.14

-

0.14

0.14

336

442

-

778

170

-

-

170




$000

$000


53

80

14

94

70

-

70

b. Finance lease commitmentsThe Group has used finance leases to acquire Network infrastructure and equipment. Future minimum lease payments under purchase contracts together with the present value of the net minimum lease payments are as follows:

Within one year

After one year, not more than five years

More than five years

Total minimum lease payments

Less amounts representing finance charges

Present value of minimum lease payments

Included in the fiinancial statements as:

Finance lease liability: Current

Finance lease liability: Non-current

Total

The finance lease obligations consist of two finance leases with maturity dates of May 2014 and August 2015. The finance lease liabilities are secured on the assets to which they relate.

16. EVENTS AFTER REPORTING DATE

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

Since the reporting date, there have been no other significant events, other than those mentioned above, which would impact on the financial position of the Company as disclosed in the Statement of Financial Position as at 30 June 2013, and on the cash flow of the Company for the year ended on that date.

17. AUDITORS’ REMUNERATION

The Auditor of the Group is MNSA Pty Ltd Chartered Accountants

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

Audit and review of the annual report of the entity

Non-audit services

18. DIRECTOR AND EXECUTIVE DISCLOSURES

a. Details of Key Management Personnel

Mr. Terry Cuthbertson – Chairman and Non-Executive Director

Mr. Andy Fung – Non-Executive Director

Mr. Michael Boorne – Non-Executive Director

Mr. Rene Sugo – CEO and Director

Ms. Catherine Ly – CFO and Company Secretary

Mr. Leo Tai – Director of My Net Fone Australia Pty Limited

198

111

-

309

(30)

279

175

104

279

-

-

-

-

-

-

-

-

-




$000

$000


$000

$000

54

b. Compensation of Key Manaement PersonnelThe 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 by Accounting Standard AASB 124 Related Party Disclosures. These disclosures are provided on in the Directors’ Report designated as audited.

c. Shareholdings of Key Management Personnel

Mr Terry Cuthbertson


Mr Andy Fung

Mr Andy Fung

Mr Rene Sugo

Mr Rene Sugo

Mr Michael Boorne

Mr Michael Boorne

Mr Leo Tai

Mr Leo Tai

The above shareholdings are held indirectly through controlled entities.

d. Share options of Key Management Personnel



Mr Andy Fung

Mr Andy Fung

Mr Rene Sugo

Mr Rene Sugo

Mr Michael Boorne

Mr Michael Boorne

Executives

Mr Leo Tai

Mr Leo Tai

Ms Catherine Ly

Ms Catherine Ly

Balance at thebeginning of

period

Trade duringthe year

Optionsexercised

Balance atend ofperiod

1,125,000

1,125,000

14,488,955

13,488,955

14,488,955

13,488,955

4,725,533

4,255,533

2,478,430

2,478,430

-

-

-

-

-

-

(3,480,784)

-

-

-

500,000

-

-

1,000,000

-

1,000,000

-

500,000

-

-

1,625,000

1,125,000

14,488,955

14,488,955

14,488,955

14,488,955

1,244,749

4,725,533

2,478,430

2,478,430

Directors Year

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

Balance at thebeginning of

periodGranted Options

exercised

Balance atend ofperiod

Directors Year

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

500,000

500,000

-

1,000,000

-

1,000,000

-

500,000

-

-

100,000

200,000

-

-

-

-

-

-

-

-

-

-

-

-

(500,000)

-

-

(1,000,000)

-

(1,000,000)

-

(500,000)

-

-

(100,000)

(100,000)

-

500,000

-

-

-

-

-

-

-

-

-

100,000



55

20. BUSINESS COMBINATION

a. Acquisition of controlled entitiesOn 31 December 2012, the Group acquired 100% of the issued capital of Internex Australia Pty Limited; a Melbourne based Internet Service Provider, for a purchase consideration of $4,750,000.

The acquisition is part of the Group’s overall strategy to expand its operations by acquiring profitable customer bases in the small to medium business segments. This acquisition complements the current established MyNetFone Business segment as well as providing additional intellectual property in the hosted ISP services space, and considerable cross selling opportunities and synergies.

The purchase price was based on 2.9 times the net profit after tax (NPAT) of Internex Australia Pty Ltd over an historical 12 month period from the date of acquisition. The consideration was paid in two instalments with the final instalment paid on the 31 December 2012. The payment was made in part from a capital raising and in part from free cash flow.

The goodwill of $4,533k in the table below is attributable to the forecast earnings growth of Internex Australia Pty Limited due to its strong position and competitive advantage in the business ISP market. No amount of goodwill is deductible for tax purposes.

Purchase consideration

Less:

Cash

Receivables

Inventory

Prepayments

Plant and Equipment

Payables

Employee Entitlements

Identifiable assets acquired and liabilities assumed

Goodwill

Purchase consideration settled in cash

Cash acquired

19. CONTROLLED ENTITIES

The consolidated financial statements include the financial statements of My Net Fone Limited and the subsidiaries listed in the following table:

My Net Fone Australia Pty Limited

MNF Leasing Pty Limited (i)

Symbio Networks Pty Limited

Symbio Wholesale Pty Limited

Internex Australia Pty Limted (ii)

Symbio Wholesale (Singapore) Pte Limited

Country ofIncorporation

NameOwnership interest

Australia

Australia

Australia

Australia

Australia

Singapore

100%

-

100%

100%

100%

100%

(i) MNF Leasing Pty Limited was de-registered on 13 October 2012(ii) Internex Australia Pty Limited was acquired on 31 December 2012 (refer note 20a)

2013 2012

100%

100%

100%

100%

-

100%

Fair Value$000

4,750

290

368

70

74

136

(651)

(70)

217

4,533

4,750

4,460

290

4,750



56

$000

$000

$000

20. BUSINESS COMBINATION (continued)

b. Acquisition of subscriber customer base – CallstreamOn the 14 November 2012, the Group acquired the customer base and business operations of Callstream, a specialist inbound call service provider, for a final cash consideration of $585,000.

The acquisition is part of the Group’s overall strategy to expand its operations by acquiring profitable customer bases in the small to medium business segments. This acquisition complements the current established MyNetFone Business segment as well as providing strong synergies once the business is migrated to the Group’s carrier network.

The purchase price was based on approximately 2.0 times the gross profit of the customer base over an historical 12 month period from the date of acquisition. The consideration was paid in two instalments with the final instalment paid on the 28 December 2012. The consideration was paid entirely from free cash flow.

Purchase consideration: 585

c. Acquisition of subscriber customer base – GoTalkOn the 31 December 2012, the Group acquired the wholesale customer base and network operations of GoTalk, a wholesale voice provider and retail calling card operator which was a wholly owned subsidiary of Tel.Pacific Limited (ASX:TPC).

The acquisition is part of the Group’s overall strategy to expand its operations by acquiring profitable customer bases in the wholesale carriage and wholesale-hosted services segments. The acquisition complements the current established Symbio Wholesale business segment as well as providing very strong synergies once the business is migrated to the Group’s carrier networks.

The purchase price was based on approximately 1.0 times the gross profit of the customer base over a forecast of 12 month period from the date of acquisition. The consideration was paid in one instalment on the 31 December 2012. The payment was made from a capital raising.

Purchase consideration: 1,400

d. Acquisition of subscriber customer base – BuzzCorpOn 1 April 2013, the Group acquired the business assets and intellectual property from The Buzz Corp Pty Limited, a niche residential voice service provider. The purchase price represents around 1.5 times the gross profit of the customer base over a forecast period of 12 months. The consideration was paid out of free cash flow.

Purchase consideration: 295



57

3,069

55,256

700

55,956

4,141

59,311

250

59,561

21. CONSOLIDATED GOODWILL

Internex Australia Pty Limited (note 20a)

Symbio Group (i)

(i) During the year payments totalling $60k were raised to C class shareholders of Symbio Wholesale Pty Limited in exchange for their shares.

22. OTHER INTANGIBLE ASSETS

For acquisitions of subscriber customer base

Additions - Callstream

Additions - GoTalk

Additions - Buzz Corp

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

Weighted average number of ordinary shares for basic earnings per share

Add effect of dilution:

Share options

Weighted average number of ordinary shares for diluted earnings per share

24. SEGMENT NOTE

The Group operates in one business segment being telecommunications. The geographical segments are defined based on operating business location being Australia and Singapore.


$000

$000


4,533

4,686

9,219

-

4,626

4,626


$000

$000

585

1,400

295

2,280

-

-

-

-

Number Number

‘000

‘000

Weighted average number of shares




$000

$000

58

25. DIVIDENDS PAID AND PROPOSED

Recognised amounts:

2012 fully franked Interim dividend declared and paid

2012 fully franked final dividend paid (i)

2013 fully franked Interim dividend declared and paid

Unrecognised amounts:

2013 fully franked final dividend declared (ii)

(i) Declared amount recorded in the 2012 financial statements was $829,000

(ii) The final dividend was declared on 21 August 2013. The amount has not been recognised as a liability in the

2013 financial year and will be brought to account in the 2014 financial year.

The proposed payment date of the 2013 final dividend is 13 September 2013.

The amount of franking credits available for future reporting periods is $701,883 (2012: $357,313). The tax

rate at which paid dividends have been franked is 30% (2012: 30%). Dividends proposed will be franked at

the rate of 30%.

26. PARENT ENTITY

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

Statement of comprehensive income

Profit/(loss) attributable to the owners of the company

Total comprehensive income/(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

Share based payment reserve

Retained earnings

Total equity

My Net Fone Limited has not entered into any guarantees, in the current or previous financial year in relation to the debts of its subsidiaries nor has it entered into any contractual commitments for the acquisition of property, plant and equipment.

Cents pershare $000

Date ofpayment

0.8

1.5

1.5

2.0

442

836

934

1,245

27 March 2012

20 September 2012

27 March 2013

2013 2012

$000

$000

824

824

286

15,810

(5,044)

-

11,052

14,186

1,110

(4,244)

11,052

(1,150)

(1,150)

328

11,385

(4,155)

(2,350)

5,208

9,176

1,099

(5,067)

5,208



59

27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise cash at bank and short term deposits.

The main risks arising from the Group’s financial instruments are cash flow 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:

Interest rate riskThe company has no interest bearing liabilities. Funds on deposit are disclosed and the respective weighted average interest rate is disclosed below.

Liquidity riskThe Group’s objective is to maintain a balance between continuity of funding and interest revenue through the use of current accounts and short term deposits.

Credit riskThe company has no significant exposure to credit risk as the majority of its sales are pre-paid as at year end. However, for credit sales the company 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. Moreover, the company considers it is appropriate to provide a provision for doubtful debts for the year ended 30 June 2013.

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.

Financial assets

CashWeighted average effective interest rate 1.8% (2012: 2.5%)

Cash at callWeighted average effective interest rate 4.0% (2012: 5.7%)

Trade and other receivables

Other financial assetsWeighted average effective interest rate 3.5% (2012: 5.7%)

Financial liabilities

On statement of financial position

Trade payables

28. COMPANY DETAILS

The registered office and principal place of business of My Net Fone Limited is:Level 2, 10-14 Waterloo Street, Surry Hills, NSW, 2010

2013 2012

Carryingamount

Fairvalue

Carryingamount

Fairvalue

4,790

23

6,612

426

9,544

4,790

23

6,612

426

9,544

5,956

24

4,773

147

6,958

5,956

24

4,773

147

6,958



60

Directors’ Declaration

In accordance with a resolution of the directors of My Net Fone Limited, the Directors of the Company declare that:

1. the fi nancial statements and notes, as set out on pages 38 to 60, are in accordance with the Corporations Act 2001 and:

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

b. give a true and fair view of the fi nancial position as at 30 June 2013 and of the performance for the year ended on that date of the consolidated group;

2. 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

3. the Directors have been given the declarations required by s 295A of the Corporations Act 2001 from the Chief Executive Offi cer and Chief Financial Offi cer.

On behalf of the Board


Sydney 21st August 2013

Rene SugoChairman Director


61

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF MY NET FONE LIMITED AND CONTROLLED ENTITIES

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2013 there have been no contraventions of:

i. the auditior independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

ii. any applicable code of professional conduct in relation to the audit.

MNSA PTY LTD

Phillip MillerDirector

Dated in Sydney, this 21st day of August 2013

Auditor’s Independence Declaration


62

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MY NET FONE LIMITED and Controlled Entities

Report on the Financial Report

We have audited the accompanying fi nancial report of My Net Fone Limited, which comprises the consolidated statement of fi nancial position as at 30 June 2013, the consolidated statement of profi t or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash fl ows for the year then ended, notes comprising a sumary of signifi cant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the fi nancial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the fi nancial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the fi nancial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statement, that the fi nancial statements comply with International Financial Reporting Standards (IFRS).

Auditor’s Responsibility

Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the fi nancial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial report.

We performed the procedures to assess whether in all material respects the fi nancial report presents fairly, in accordance with the Corporations Act 2001 and the Australian Accounting standards, a true and fair view which is consistent with our understanding of the Company’s fi nancial position and of its performance.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the fi nancial report.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Independent Auditor’s Report


63

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion

In our opinion

a. the fi nancial report of My Net Fone Limited is in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of the consolidated entity’s fi nancial position as at 30 June 2013 and of its performance for the year ended on that date; and

ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and

b. the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 26 to 27 of the directors report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with the Australian Auditing Standards.

Auditor’s Opinion

In our opinion the remuneration report of My Net Fone Limited for the year ended 30 June 2013, complies with section 300A of the Corporations Act 2001.

MNSA PTY LTD

Phillip MillerDirector

SydneyDated this 21st day of August 2013

Independent Auditor’s Report

64

ASX Additional InformationAdditional information required by the Australian Stock Exhange Ltd and not shown elsewhere in this report is as follows. The information is current as at 19 August 2013.

(a) Distribution of equity securities

(i) Ordinary share capital

62,250,215 fully paid ordinary shares are held by 1,382 individual shareholders.All issued ordinary shares carry one vote per share and carry the rights to dividends.

(ii) Options

250,000 unlisted options are held by 6 individual option holders.Options do not carry a right to vote.

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

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 47.

(b) Substantial shareholders

Ordinary shareholders

Avondale Innovations Pty Ltd

Mr. Andy Fung

Amber (Asia) Pty Ltd

Aust Executor Trustees SA Ltd

Fully Paid Ordinary Shares

191

467

323

367

34

1,382

Fully Paid

Number Percentage

13,488,955

10,000,000

4,488,955

3,558,162

21.67

16.06

7.21

5.72

65

(c) Twenty largest holders of quoted equity securities

Avondale Innovations Pty Ltd

Mr Andy Fung

Amber (Asia) Pty Ltd

Aust Executor Trustees SA Ltd

L&C Pty Ltd

Kore Management Services Pty Ltd

National Nominees Limited

RACS SMSF Pty Ltd

Lee Superfund Management Pty Ltd

Chemco Superannuation Fund Pty Ltd

Mr. J. H. Boorne & Mrs J.E. Boorne

Boorne Gregg Investments Pty Ltd

Mr. Michael John Boorne

Mr. Christopher John Ayres

Spectrok Pty Ltd

Earglow Pty Ltd

HSBC Custody Nominees (Australia) Limited

G & E Properties Pty Ltd

Mr. Michael Korber

Endan Pty Ltd

Sandhurst Trustees Ltd

(d) On-Market Buy Back

There is currently no on-market buy back.

ASX Additional Information

Fully Paid

Number Percentage

13,488,955

10,000,000

4,488,955

3,558,162

2,478,430

1,625,000

1,431,028

1,000,000

947,500

937,457

885,000

845,000

687,249

600,000

600,000

545,000

390,554

378,377

300,000

288,294

241,502

45,716,463

21.67

16.06

7.21

5.72

3.98

2.61

2.30

1.61

1.52

1.51

1.42

1.36

1.10

0.96

0.96

0.88

0.63

0.61

0.48

0.46

0.39

73.44

66

Corporate InformationDirectors

Terry Cuthbertson (Chairman)

Michael Boorne

Andy Fung

Rene Sugo

Company Secretary

Catherine Ly

Registered Office

Level 2, 10-14 Waterloo Street

Surry Hills NSW 2010

Australia

Principal Place of Business

Level 2, 10-14 Waterloo Street

Surry Hills NSW 2010

Australia

Phone: 61 2 8008 8000

Share Register

Link Market Services Limited

Level 12, 680 George Street

Sydney NSW 2000

Australia

Phone: 61 2 8280 7100

Solicitors

Sparke Helmore Lawyers

Level 16, 321 Kent Street

Sydney NSW 2000

Australia

This annual report covers both My Net Fone

Limited as an individual entity and the consolidated

group comprising My Net Fone Limited and its

subsidiaries.

The Group’s functional and presentation currency is

AUD (s).

The company is listed on the Australian Securities

Exchange under the code MNF.

The Annual General Meeting of My Net Fone Limited

will be held at Level 1, 10-14 Waterloo Street, Surry

Hills NSW 2010 at 10:30 on 22 October 2013.

Bankers

Commonwealth Bank of Australia

Elizabeth & Foveaux Streets

Sydney NSW 2010

Australia

Auditors

MNSA Pty Ltd

Chartered Accountants

Level 2, 333 George Street

Sydney NSW 2000

Australia

Annual Report

Copies of the 2013 Annual Report with the Financial

Statements can be downloaded from: www.

mynetfone.com.au/investor-information/annual-

reports

67

My Net Fone Limited Annual Report 2013

Documents

2013 Annual Report planB - MyNetFone · commercial and corporate experience. Founder of Sprit Modems and Mitron Pty Ltd and previously a Non Executive Director of Netcomm Ltd. Also