Hosted Service Enterprise Services

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1 Number Porting Hosted Service Enterprise Services SIP Trunking Virtual PBX My Net Fone Limited Annual Report 2011

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3 Contents Board of Directors 2 Chairman Review 3 What does MyNetFone stand for? 4 Our Solutions 5 Our Customers 6 Business Community 8 Directors Report 10 Corporate Governance Statement 18 Consolidated Statement of Comprehensive Income 24 Statement of Financial Position 25 Statement of Cash Flows 26 Statement of Changes in Equity 27 Notes to the Financial Statements 28 Directors Declaration 52 Auditor s Independence Declaration 53 Independent Auditor s Report 54 ASX Additional Information 56 Corporate Information 58 Awards The awards received in 2011 financial year include: Deloitte Technology Fast 500 Asia Pacific Awards for the 3rd consecutive year Deloitte Technology Fast 50 Australia Awards for the 3rd consecutive year City of Sydney Business Awards finalist 2010 Other awards we are proud to have earned...

4 Board of Directors Mr Terry Cuthbertson B. Bus., CA Chairman 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, Healthzone Ltd and South American Iron & Steel Ltd and OMI Holding Ltd. Mr Andy Fung B.E. MCom Managing Director Extensive experience in telecommunications. Formerly Director of Business Development of Lucent Technologies. Director of Symbio Networks Pty Ltd since 2002 and Symbio Wholesale Pty Ltd since Director since March 2006 Director since March 2006 Mr Michael Boorne Electronics Eng. Dip. NonExecutive 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. Mr René Sugo B.Eng. (Hon) Technical Director Extensive experience in telecommunications. Formerly Technical Director of Lucent Technologies. Director of Symbio Networks Pty Ltd since 2002 and Symbio Wholesale Pty Ltd since Director since March 2006 Director since December 2006 Ms Catherine Ly B.Bus., CPA Chief Financial Officer Company Secretary since July 2006 Mr Sugo Mr Boorne Mr Cuthbertson Mr Fung Ms Ly

5 Chairman Review 3 Fellow Shareholders, With another year of solid growth behind it, MyNetFone has once again set new records for itself. Revenue rose by 12.5% to $13.6M due to consistent customer acquisition and delivery of new products and services. Gross profit rose by 9.8% to $5.7M yielding an EBIDTA of $1.08M and NPAT of $1.01M in what was a very tough economic climate. Now with a total base of over 92,000 services in operation, MyNetFone has established itself as a solid and credible communications provider in the Australian market. This solid performance has allowed the board to declare an annual dividend of 1.3 cents per share, (an increase of 73% on last year s performance) rewarding shareholders for their continued loyalty. The increase in dividends reflects the Board s confidence in the future growth potential of the business. Achievements During the year MyNetFone led the market with its innovation, being the first service provider in Australia (and all of Asia Pacific) to be fully certified by Microsoft for interoperability with its revolutionary Microsoft Lync unified communications platform. This endorsement from one of the world s largest software companies is a testament to the technical capabilities and quality of the team at MyNetFone, and has given us a unique advantage in the Business and Enterprise market. In addition MyNetFone passed another milestone having deployed its 1000th Virtual PBX customer this year. The Virtual PBX system is a hosted phone system, meaning that customers do not need to purchase PBX equipment, but rather rely on a system hosted by MyNetFone in its data centre commonly referred to as the cloud. This allows small to medium businesses to take advantage of leading edge technology and features without the costs and hassles of purchasing and maintaining their own equipment. National Broadband MyNetFone is preparing itself for the upcoming opportunities presented by the Federal Government s National Broadband Network (NBN). As this new network rolls out across the country it will provide an opportunity for competitive providers like MyNetFone to reach customers on a level playing field not previously seen in the Australian market. The new National Broadband Network will bring the ability to deliver high quality broadband to customers from all around the country. This will enable MyNetFone to deliver its innovative value added voice and internet services to residential and business customers alike. It will for example, facilitate the delivery of our innovative and market leading Virtual PBX service, and allow us to innovate even further to provide new products to Australian homes and businesses. The Future At MyNetFone we are very excited about the opportunities that the future holds for us. We have the reputation of a solid and reliable service provider, we have the willingness and ability to innovate and create new products and services, and most importantly we have the team in place to carry us forward and allow us to grow at an ever increasing pace. On behalf of the board, I would like to take this opportunity to thank all the staff and the management team in achieving another very successful year. The board will continue to provide its full support to the team to ensure the company maintains its momentum of profitable growth and continues to deliver more amazing achievements and strong performance. I would also like to thank my fellow colleagues on the Board of Directors, and the Management team for their hard work and dedication in making MyNetFone one of Australia s leading communications service providers. Most importantly I would like to thank our many shareholders for their continued and loyal support. We look forward to a very exciting year ahead which I am sure will be rewarding for all of us. Terry Cuthbertson Chairman

6 What does MyNetFone stand for? 4 MyNetFone ticks the right boxes to deliver the right solutions to satisfy our business customers communications needs and is the sound choice for business customers to stay connected. Reliable & sound network Flexibility sounds great Cost savings that sound right Sound technology innovation Customer Support Team based in Australia Sound Choice Breeds Success MyNetFone s tagline, Your World, Connected encompasses the company s culture and focus which is to understand the customers needs and deliver quality communications solutions that connect customers seamlessly with their clients, suppliers, partners and stakeholders. MyNetFone is the sound choice for customers to stay connected within their world. As a growing business itself, MyNetFone truly understands the needs and aspirations of our business customers, and offers solutions that successfully combine quality and feature rich benefits with simplicity and flexibility. The strong uptake of these IP based communications solutions is a testament to the increasing acceptance by customers of new generation, innovative services with great value and benefits. MyNetFone is well positioned to serve our customers in this increasingly Internet (IP) centric world of communications including the upcoming NBN.

7 Our Solutions MyNetFone provides cloud hosted communications solutions to businesses of all sizes whether they update to a new phone system, move/expand to a new office or simply just want to make the most of their existing system by exploiting new generation IP communications. Enterprise Solutions Enterprise customers demand high service quality and reliability. MyNetFone delivers on both counts with the most comprehensive VoIP infrastructure in Australia with protected fibre network and builtin redundancy as well as a highy qualified and experienced service team delivering 24/7 support backed by enterprise grade SLA s. Business Solutions MyNetFone delivers tailored solutions to meet the needs of business customers with big business features without the high price tag. Customers could enjoy savings at up to 60%. Virtual PBX offers user friendly call features in the cloud without the need for upfront investments in expensive PBX equipment. SIP Trunking enables businesses to leverage their existing hardware investments and eliminate expensive ISDN access and call costs. MyNetFone is the first service provider in Australia accredited to fully interwork with Microsoft s Lync Server.* Small Office Solutions MyNetFone offers a suite of simple to use, flexible solutions to meet the needs of home offices and small businesses. The Small Office Solutions provide exceptional value and help small businesses keep their overheads low and run their operations efficiently. MyNetFone Enhanced Services Number Portability You can bring your phone number with you when you join the MyNetFone. Virtual Fax You can send and receive faxes via your address no need for fax equipment. Meetme Conference You can set up multiple calls to have a conference, saving time and travel. Special Numbers With 1300 & 1800 toll free and gold numbers, you can make it easy for your clients to reach you. * Microsoft Unified Communications Open Interoperability Program Lync Server

8 Our Customer Stories michaels Camera Video & Digital Challenge As the owner of Australia s number one camera, video and digital store, michaels, Peter Michael recognises that the same progression is happening in communications as in cameras the move from analog to digital. michaels needed a flexible system from a reliable provider that met the store s actual communications requirements. The business existing PABX was sophisticated, but it was difficult to make changes to the system to keep up with the requirements of a dynamic business. In addition, there was a high probability that once anything did go wrong, it would be very expensive and difficult to fix. Solution MyNetFone provided to michaels a Virtual PBX system with 30 lines with Cisco SPA942 desktop handsets and supplemented by Siemens C470IP cordless handsets, ideal for the retail environment. The system, as Peter Michael describes it, is designed for the layman anybody can set it up. The switch to the new system was smooth that the customers didn t notice, the staff didn t notice it was virtually seamless, says Mr. Michael. Benefits Peter Michael lists the following among the benefits michaels has gained from the new Virtual PBX system: Futureproof system that will keep up as the business grows Flexibility to add, remove or change lines as required Handsets are virtually plug & play 50% savings on communications costs since switching to Virtual PBX Improved customer communications with national toll free 1800 numbers, as well as local numbers in different states MyNetFone has been the sound choice for our business, check it out yourself and you ll most likely find it is the sound choice for your business Peter Michael, michaels Camera Video & Digital

9 Abigroup Challenge Abigroup is one of Australia's leading national contractors with construction projects across multiple sites nationwide. When establishing site offices for new projects, Abigroup faces two main challenges: setting up a phone and fax connection, and short timeframes for establishing the site offices. At most of Abigroup s construction sites, there are no existing landlines and installing new lines used to present the company with a significant cost as well as a potential delay to a project s delivery schedule. Solution MyNetFone s solution addresses both of Abigroup s communication challenges: cost and time. MyNetFone provides Voice services over 3G internet connection to their various sites across Australia. The service is connected to an existing phone handset and fax machine via a Voice Adaptor, delivering all communications requirements for a small site office. Some larger sites have multiple adaptors with lines to key telephone systems. This provides seamless telephone services to the end users. This is a solution that appears the same to the user that found in any small to medium office at a fraction of the cost. The solution was recommended to Abigroup by their Site Setup contractor company Sheahan & Associates International, who investigated a number of alternatives before settling on MyNetFone as the most flexible and efficient solution. Benefits The communications solution provided by MyNetFone delivers a number of benefits to Abigroup and is the perfect fit for their requirements. Fast delivery MyNetFone services can be setup within hours, and the Voice Adaptor delivered by express courier within days, so a new Site can be up and running in minimum time. This is compared to several weeks worth of lead time required for traditional landline phone services. Flexibility & portability The portability of the MyNetFone service is a major drawcard for Abigroup once a project is finished, the 3G Device, Voice Adaptor, phone handset and fax machine can simply be taken to another location where there is 3G coverage, plugged in, and start working immediately. Value The MyNetFone service is a very costefficient solution for Abigroup s requirements. Each combination of Voice plan and Adaptor from MyNetFone, plus wireless modem and internet tail sourced by Sheahan & Associates International can be used over and over at various projects with a low monthly voice plan fee. This is a saving of at least 60% to 90%, depending on site requirements, compared to Abigroup s previous site communications setups.

10 Engaging the Business Community 8 Award Sponsorship MyNetFone prides itself on being Australia s most awarded IP communications provider. Having reaped the benefits of being recognised for service quality and financial performance with multiple awards, in FY10/11 MyNetFone has stepped up to sponsor the City of Sydney Business Awards and help other businesses achieve the same recognition. MyNetFone has a solid history with the City of Sydney Business Awards, having been a finalist twice and winning the award in previous years, so it was natural progression for MyNetFone to support the awards in a sponsor capacity. MyNetFone's support of the City of Sydney Business Awards reflects our commitment to helping small businesses grow. Our services facilitate this by delivering 'big business' features without the high pricetag, helping small businesses present themselves professionally and communicate with their customers more efficiently. Thought Leadership MyNetFone aims to not only lead innovation, but also educate business owners about the opportunities presented by the shift to IP communications. The Let s Talk Business series of seminars was the perfect opportunity to fulfill this aim, and MyNetFone Technical Director, Rene Sugo was invited to be a guest speaker at the Communicationsthemed seminar, which focused on informing business owners about the developments in communications, and helping them utilise these to run their business more efficiently. Expos MyNetFone participated in the inaugural MyBiz Expo. The expo provided information about the latest products and services designed to meet the needs of small and medium enterprises. Our participation allowed us to reach out to the small business community, which accounts for 96% of all Australian businesses*. * Australian Bureau of Statistics: Counts of Australian Businesses, most recent June 2009

11 2011

12 Directors Report 10 FOR THE YEAR ENDED 30 JUNE 2011 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 2011 Information on Directors The Directors of the Company at any time during or since the end of the financial year are: Name and qualifications Mr Terry Cuthbertson B.Bus., CA Chairman Experience, special responsibilities and other directorship 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, Sun Biomedical Ltd and OMI Holdings Ltd. Director since March 2006 Mr Michael Boorne Electronics Eng. Dip. NonExecutive 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. Director since December 2006 Mr Andy Fung B.E. MCom Managing Director Extensive experience in telecommunications. Formerly Director of Business Development of Lucent Technologies. Director of Symbio Networks Pty Ltd since 2002 and Symbio Wholesale Pty Ltd since Director since March 2006 Mr René Sugo B.Eng. (Hon) Technical Director Extensive experience in telecommunications. Formerly Technical Director of Lucent Technologies. Director of Symbio Networks Pty Ltd since 2002 and Symbio Wholesale Pty Ltd since Director since March 2006 Company Secretary Ms Catherine Ly B.Bus., CPA, is Chief Financial Officer for the Company and has been appointed as Company Secretary since July 2006.

13 Directors Report 11 Board and Committee Meetings From 1/7/10 to 30/6/11, the Directors held 11 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 Board Audit Eligible to Attend Attended Eligible to Attend Attended T. Cuthbertson A. Fung R. Sugo M. Boorne Principal Activities and Significant Changes in Nature of Activities The principal activity of the Group during the course of the year was to provide VoIP telephony, broadband Internet and other enhanced services to residential and enterprise customers. In the financial year, the Group primarily derived its revenue from fees and call charges from residential and enterprise customers as well as from sales of customer premises equipment. There was no significant change in the nature of the business activities of the Group during the year. Operating Result The consolidated profit of the Group for the financial year after providing for income tax amounted to $1,005,197 (2010: $1,973,565). Review of Operations A review of the operations of the economic entity during the financial year and the results of those operations are as follows: 1. Gross Revenue Increase and Profitable EBITDA and NPAT The Group delivered gross revenue of $13,604,905 and EBITDA profit of $1,084,700 for the year ended June The results were achieved through organic growth of the customer numbers and service usage of MyNetFone s VoIP, broadband Internet and a range of enhanced services by residential and business customers. The gross profit for the year was $5,720,047 (2010: $5,208,249) which was achieved due to the maintenance of margins. The Net Profit After Tax (NPAT) was $1,005,197 with earnings per share at 1.91 cents. The deferred revenue for the year increased 1.7% to $1,021,176 compared with $1,004,588 in the previous year. The deferred revenue is the call credits deposited by the customers in their accounts for making future phone calls. This revenue will be recognised once the customers have progressively used up the call credits.

14 Directors Report 12 Full year ended June 2011 Full year ended June 2010 % increase Gross revenue $13,604,905 $12,091, % Gross Profit $5,720,047 $5,208, % EBITDA $1,084,700 $2,026,149 (46.5%) NPAT $1,005,197 $1,973,565 (49.1%) Earnings per share 1.91 cents 3.76 cents (49.1%) 2. Net Cash Flow The Net Cash Flow generated from operating activities increased by $487,464 for the financial year. The closing cash balance was $2,452,732 (2010: $1,965,268). The Company remains debt free with no overdraft or loan facilities. Business Outlook and Guidance My Net Fone Group continued to sign up new customers and recorded the highest number of 92,000 services in operation as of July The Group has experienced solid growth in the enterprise segment with the uptake of its Virtual (hosted, cloud based) PBX service. As the service does not require significant upfront capital investments and delivers flexibility and enhanced features, it proves to be popular with SME s (small and medium enterprises) as well as businesses with multiple locations, especially in some vertical market segments, e.g. retail, accounting firms. There are now over 1,000 businesses around Australia using MyNetFone s Virtual PBX service. This number is expected to grow further with marketing campaigns underway to further promote the service and with the release of more features in the financial year. With the SIP Trunking service, the Group offers quality VoIP service to business enterprises that deploy physical PBX equipment on their premises. Since the Group has undertaken extensive interworking testing with leading brands of PBX equipment available on the Australian market, it expects the SIP Trunking service to grow strongly as more businesses install new generation IP based PBX s. Customers moving across to take up the MyNetFone VoIP service inevitably want to retain their telephone numbers as a number change would be detrimental to ongoing business operations. The Group has now developed comprehensive, field proven systems and processes to implement number portability, whereby new customers to the MyNetFone service are able to keep their existing telephone numbers. The Group s capability to offer number portability efficiently and seamlessly is a key market differentiator. An innovative product which has enjoyed strong growth is MyNetFone s Virtual Fax, with which customers can send and receive faxes using their computer, without a fax machine. The Group will continue to develop innovative IP based services that offer flexibility and convenience.

15 Directors Report 13 Financial Position The net assets of the company have marginally increased to $386,523 as at June 2011 from $13,572 of the same period last year due to business growth. Significant Changes in the State of Affairs No other significant changes in the economic entity's state of affairs occurred during the financial year. After Balance Date Events The My Net Fone Board entered into Head of Agreement on 24 August, 2011 to acquire the whole of Symbio Group. The details of this agreement were released to the market on 30 August Except for the above, there were no other significant events after the balance date that would materially alter the operations or financial performance of the company. Future Developments Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report. 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 Dividends paid or declared for payment during the financial year are as follows: Ordinary dividend paid on 15 October 2010 as recommended in last year s report $394,166 Interim dividend of 0.5 cents per share paid on 18 March 2011 $262,778 Final ordinary dividend of 0.8 cents per share recommended to be paid 8 September 2011 to shareholders registered at 25 August 2011 in respect of the financial year ended 30 June 2011 $420,444 The dividends are unfranked.

16 Directors Report 14 Options At the date of this report, the unissued ordinary shares of My Net Fone Limited under option as follows: Grant Date Date of Expiry Exercise price Number under Option 29 July August cents 400, October October cents 2,000, October October cents 1,000,000 A total of 3,000,000 options issued to directors were approved by the shareholders in the AGM held on 26 October For details of options issued to directors and executives as remuneration, refer to the remuneration report. Remuneration Report Remuneration Philosophy The remuneration philosophy of the Board currently is 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 is 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 Note 13 to the financial statements. Remuneration Details of Key Management Personnel for the Year Ended 30 June 2011 For all the Key Management Personnel, only basic salaries and fees, bonuses and superannuation were granted during the year, no other short term benefit, long term benefit, performance related or share based payments 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:

17 Directors Report 15 Group Key Management Personnel Short Term Benefits Post Employment Benefits Share Based Payment Options Total Directors Nonexecutive Salary & fees $ Bonus $ Superannuation $ Options $ $ Mr T. Cuthbertson 59,125 5,321 7,141 71,587 Mr M. Boorne 37,625 3,386 7,141 48,152 Executive Mr A. Fung (Managing Director) 208,555 18,770 14, ,606 Mr R. Sugo (Technical Director) 208,555 18,770 14, ,606 Total 513,860 46,247 42, ,951 Management Executives Mr L. Tai (Director) 60,000 5,400 65,400 Ms C. Ly (Chief Financial Officer) 127,085 11,438 4, ,590 Total 187,085 16,838 4, ,990 (Only two specified executives are included in the disclosure as there are only four specified executives in total employed in the Company in 2011, two of whom are Executive Directors disclosed above.) 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. Share Based Payments The terms and conditions relating to options granted as remuneration during the year to key management personnel and other executives during the year are as follows: Group Key Personnel Option ( 000) Grant Date Grant Value $ Vested During Year % Expiry Date for Vesting Mr T. Cuthbertson /10/10 7,141 31/10/2013 Mr M. Boorne /10/10 7,141 31/10/2013 Mr A. Fung 1,000 26/10/10 14,281 31/10/2013 Mr R. Sugo 1,000 26/10/10 14,281 31/10/2013 Ms C. Ly /07/10 4,067 31/08/2013 These share based payments are for the options disclosed above. The details and valuation of these options are set out in Note 13 to the financial statements. The fair value of the option was valued at grant date at 1.43 cents and 2.03 cents for 3 million and 200,000 options respectively. The 3 million options were approved by shareholders in the AGM held on 26 October 2010; and 400,000 options were granted under the Company Employee Option Plan by the board on 29 July 2010.

18 Directors Report 16 The Company has entered into Executive Employment Agreements with Andy Fung and 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, performancerelated cash bonus opportunities, superannuation, termination rights and obligations and eligibility to participate in the employee equitybased 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 equitybased incentive programs. The Company may terminate the employment of the Key Executive 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: Name of key executive Company notice period Employee notice period Termination provision Andy Fung 1 month 1 month 1 month base salary René Sugo 1 month 1 month 1 month base salary Leo Tai 1 month 1 month 1 month base salary Catherine Ly 1 month 1 month 1 month base salary 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: Name of Director Share holding Options Mr Andy Fung 13,488,955 1,000,000 Mr René Sugo 13,488,955 1,000,000 Mr Terry Cuthbertson 1,125, ,000 Mr Michael Boorne 4,225, ,000 Total 32,328,443 3,000,000

19 Directors Report 17 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 of or an entity in which a Director has a substantial financial interest. Indemnifying Officer 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 Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year. NonAudit Services There were no amounts paid or payable to the auditors for nonaudit services during the year. 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 56 of the financial report. This Directors Report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors. Terry Cuthbertson Chairman Andy Fung Managing Director Sydney, 31 August 2011

20 Corporate Governance Statement 18 The 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 financial reporting. The Board has delegated responsibility for the day to day operation and administration of the Company to the Managing Director. 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 2011, including independent status, and date of appointment was as follows: Name Terry Cuthbertson Michael Boorne Andy Fung Rene Sugo Status NonExecutive Independent Chairman NonExecutive Independent Director Executive Director Executive Director Date of Appointment 08 March December March March 2006 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.

21 Corporate Governance Statement 19 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 as the Chairman and the Managing Director are two separate individuals. Independent Directors An Independent Director is considered independent: a) who is not a member of management b) who has not within the last three years been employed in an executive capacity by the Company or been a principal or a professional adviser or consultant to the Company c) is not a significant supplier to the Company d) has no material contractual relationship with the Company other than as a Director, and e) 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 NonExecutive 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 the 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 Managing Director, 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.

22 Corporate Governance Statement 20 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. NonExecutive Directors are remunerated by way of director fee and superannuation contributions. The Chairman and the other NonExecutive Director of My Net Fone Limited are also Directors of several listed and nonlisted 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 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 supports 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 nonaudit 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 & halfyearly 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.

23 Corporate Governance Statement 21 Principle 3: Promote ethical and responsible decision making The Board expects all Executive and NonExecutive Directors to act professionally in their conduct and with the utmost integrity and objectivity. All Executive and NonExecutive 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 longterm 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 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). 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 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 Managing Director 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.

24 Corporate Governance Statement 22 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 by the Board and/or the Managing Director, 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 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. The Board (a) requires executive management to report annually on the operation of internal controls (b) reviews the external audit of internal controls and liaises with the external auditor and (c) 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.

25 Corporate Governance Statement 23 Administrative Risks The Managing Director is responsible for recognising and managing administrative risks including (a) operational, (b) compliance and (c) financial reporting. The Managing Director 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 In respect of the current financial year all necessary declarations have been submitted to the Board. In addition, the Managing Director 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: Remuneration 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 Director s Report provides detail of remuneration of NonExecutive and Executive Directors. The Company s Employee Share Option Scheme was approved by shareholders at the Company s listing on the ASX. Under this scheme, share options were issued to some senior staff members in this financial year. It is expected more high quality staff will be issued share options in future.

26 Consolidated Statement of Comprehensive Income 24 Note CONSOLIDATED GROUP $ $ Revenue Rendering of services 3.(a) 13,604,905 12,091,969 Cost of sales (7,884,858) (6,883,720) Gross profit 5,720,047 5,208,249 Finance revenue 3.(a) 105,807 55,522 Other income 3.(b) 70,710 70,368 Distribution expenses (119,348) (143,471) Marketing expenses (586,444) (372,379) Occupancy expenses (219,482) (214,750) Administrative expenses (3,428,443) (3,111,345) Technology and support expenses (120,000) (120,000) Other expenses 3.(c) (354,791) (342,744) Finance costs (18,506) (18,649) Profit/(Loss) before income tax 1,049,550 1,010,801 Income tax (expense)/benefit 4 (44,353) 962,764 Profit/(Loss) from continuing operations 1,005,197 1,973,565 Profit/(Loss) for the year 1,005,197 1,973,565 Other comprehensive income Total comprehensive income for the year net of tax Total comprehensive income for the year 1,005,197 1,973,565 Earnings per share (cents per share) basic for profit for the year diluted for profit for the year The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

27 Statement of Financial Position 25 AS AT 30 JUNE 2011 Note CONSOLIDATED GROUP $ $ ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other financial assets Total Current Assets ,452, ,150 62,128 2,907,010 1,965, ,156 62,128 2,217,552 Noncurrent Assets Property, plant and equipment Deferred income tax assets Formation cost Total Noncurrent Assets TOTAL ASSETS , ,411 1, ,923 3,876,933 84, ,764 1,950 1,049,426 3,266,978 LIABILITIES Current Liabilities Trade and other payables Deferred revenue Provisions Total Current Liabilities ,728,310 1,021, ,742 3,395,228 1,606,239 1,004, ,996 3,207,823 Noncurrent Liabilities Provisions Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS ,182 92,182 3,490, ,523 45,583 45,583 3,253,406 13,572 EQUITY Issued capital Share based payment reserve Accumulated losses TOTAL EQUITY 12. 3,990,515 1,099,309 (4,703,301) 386,523 3,990,515 1,048,333 (5,025,276) 13,572 The above statement of financial position should be read in conjunction with the accompanying notes.

28 Statement of Cash Flows 26 Note CONSOLIDATED GROUP $ $ Cash flows from operating activities Receipts from customers 14,850,699 13,680,551 Payments to suppliers and employees (13,793,592) (12,901,300) Interest received 105,807 55,522 Borrowing costs (18,506) (18,650) Net cash provided by/(used in) operating activities 5. 1,144, ,123 Cash flows from investing activities Purchase of property, plant and equipment 8. Decrease/ (Increase) in security deposit 7. Net cash provided by/(used in) investing activities Cash flows from financing activities Payment of dividends on ordinary shares (656,944) Net Cash provided by/(used in) financing activities (656,944) Net increase/(decrease) in cash and cash equivalents 487, ,123 Cash and cash equivalents at beginning of financial year 1,965,268 1,149,145 Cash and cash equivalents at end of financial year 5. 2,452,732 1,965,268 The above statement of cash flows should be read in conjunction with the accompanying notes.

29 Statement of Changes in Equity 27 CONSOLIDATED GROUP As at 1 July 2009 Profit for the year Other comprehensive income for the year Total recognised income and expense for the year Dividends paid and provided Share based payments As at 30 June 2010 Issued Capital 3,990,515 3,990,515 Share based payment & other Accumulated Losses Total $ $ $ $ 1,048,333 1,048,333 (6,604,675) 1,973,565 1,973,565 (394,166) (5,025,276) (1,565,827) 1,973,565 1,973,565 (394,166) 13,572 Profit for the year 1,005,197 1,005,197 Other comprehensive income for the year Total recognised income and expense for the year 1,005,197 1,005,197 Dividends paid and provided (683,222) (683,222) Share based payments 50,976 50,976 As at 30 June ,990,515 1,099,309 (4,703,301) 386,523 The above statement of changes in equity should be read in conjunction with the accompanying notes.

30 Notes to the Financial Statements 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 The financial statements were authorised for issue on 31 August 2011 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 POLICIES (a) Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act Australian Accounting Standards set out accounting policies that the AASB has concluded would result in 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 report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected noncurrent assets, financial assets and financial liabilities. (b) Adoption of New and Revised Accounting Standards Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2011 reporting period. The Group's assessment of the impact of these standards (to the extent relevant to the Group) and interpretations is set out below: (i) AASB 9 Financial Instruments and AASB Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010 Amendment to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. The Group has not yet decided when to adopt AASB 9. However, it is not expected this will have a significant impact on the Group's financial statements. (ii) Revised AASB 124 Related Party Disclosures and AASB Amendments to Australian Accounting Standards (effective from 1 January 2011) In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party and removes the requirement for governmentrelated entities to disclose details of all transactions with the government and other governmentrelated entities. The Group will apply the amended standard from 1 July The amendments will not have any effect on the Group's financial statements.

31 Notes to the Financial Statements (continued) 29 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (b) Adoption of New and Revised Accounting Standards (continued) (iii) AASB Amendments to Australian Accounting Standards Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011) In November 2010, the AASB issued AASB Disclosures on Transfers of Financial Assets which amends AASB 1 Firsttime Adoption of Australian Accounting and AASB 7 Financial Instruments: Disclosures to introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The Fund intends to apply the amendment from 1 July 2011, however, the amendments will not have any impact on the Group's disclosures. (iv) Amendments to AASB Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective for annual reporting periods beginning on or after 1 July 2010 / 1 January 2011) In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB's annual improvements project. The Group does not expect that any adjustments will be necessary as the result of applying the revised rules. (v) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013) On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a twotier differential reporting regime applies to all entities that prepare general purpose financial statements. The Company is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the entity. (vi) AASB Amendments to Australian Accounting Standards Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012) In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The Group will apply the amendment from 1 July The amendments are not expected to impact the Group. (c) Principles of Consolidation The 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. In preparing the consolidated financial statements, all intergroup 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.

32 Notes to the Financial Statements (continued) 30 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Going Concern The Directors believe that the Group will be able to continue as a going concern and, as a consequence, the financial report has been prepared on a going concern basis. This basis 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. The Group incurred an operating profit of $1,005,197 (2010: $1,973,565) during the year ended 30 June 2011, and as at that date the Group's total assets exceeded total liabilities by $386,523 (2010: Group's total assets exceeded liabilities by $13,572). 1/ Included in the current liabilities is $1,021,176 of deferred revenue which will be recognised as 2012 revenue when customers' credits are progressively used up. This deferred revenue does not represent a gross cash outflow. 2/ Of the total amount of $1,600,388 of trade payables, $160,074 is owed to Symbio Networks Pty Ltd and $1,342,083 is owed to Symbio Wholesale Pty Ltd; both of which are related parties to My Net Fone. Symbio Networks and Symbio Wholesale have agreed to an extended payment term of the payable at a commercial interest rate similar to bank overdraft to My Net Fone. 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 and negotiate with the related party supplier Symbio Networks to change and extend payment terms. 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 at least. 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) Competition There 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 Growth The Group achieved a profit for FY10/11, 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 Management The responsibility of overseeing the daytoday 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. (iv) New Products and Technological Developments The 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.

33 Notes to the Financial Statements (continued) 31 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Going Concern (Continued) (v) Broadband Access Arrangements The 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 acceptable terms. (vi) Distribution Channels and Device Suppliers Currently the 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) Agreement with Symbio The Group is dependent upon the supply of services by Symbio pursuant to its contracts with Symbio Networks Pty Ltd and Symbio Wholesale Pty Ltd, details of which are set out at Note 19. If, notwithstanding its contractual obligations, Symbio were to fail to supply the group, there is no guarantee that the Group could either obtain these services from another party or provide them itself in the short term. (viii) Legislation, Regulation and Policies Any 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. (ix) Internet Access The 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. (e) Reverse Acquisition In 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. (f) Critical Account Estimates and Judgments The Directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. 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:

34 Notes to the Financial Statements (continued) 32 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (f) Critical Account Estimates and Judgments (Continued) Sharebased payment transactions The Group measures the cost of equitysettled 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 BlackScholes model. The assumptions are detailed in Note 13. (g) Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. The following specific recognition criteria must also be met before revenue is recognised: (i) Rendering of services Revenue from telecommunication services 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 revenue Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. (h) Leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods 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. (i) Cash and Cash Equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and shortterm 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. (j) Trade and Other Receivables Trade receivables and other receivables, which generally have 3090 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. 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.

35 Notes to the Financial Statements (continued) 33 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (k) Foreign Currency Translation (i) Functional and presentation currency Both the functional and presentation currency of My Net Fone Limited and its subsidiary is Australian dollars ($). Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. (ii) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to profit or loss. Nonmonetary 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. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (l) Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). 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 (income) 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.

36 Notes to the Financial Statements (continued) 34 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (l) Income Tax (Continued) Current tax assets and liabilities are offset where a legally enforceable right of setoff 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 setoff 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. (m) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cashflows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (n) 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. Depreciation The depreciable amount of all fixed assets is depreciated on a straightline 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 IT Systems over 2 to 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 revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

37 Notes to the Financial Statements (continued) 35 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (o) Financial Instruments Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified at fair value through profit or loss, in which case transaction costs are expensed to profit or loss immediately. (i) Loans and receivables Loans and receivables are nonderivative 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 noncurrent assets.) (ii) Investments in subsidiaries held by the parent Investments in subsidiaries held by the parent entity are recognised and subsequently measured at cost in the separate financial statements of the Company, less any impairment. (p) Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of preacquisition 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 cashgenerating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. (q) Trade and Other Payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the Group during the reporting period which remains unpaid. The balance is recognised as a current liability with the amount being normally paid within 30 days of recognition of the liability.

38 Notes to the Financial Statements (continued) 36 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (r) Provisions Provisions 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 pretax 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. (s) Employee Leave Benefits Provision is made for the Group s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wages increases and the probability that the employee may satisfy vesting requirements. Those cash outflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows. (t) Contributed Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (u) Earnings per Share Basic earnings per share is determined as net Profit/(Loss) attributable to members of the group, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares. Diluted earnings per share includes options outstanding which will have the potential to convert to ordinary shares and dilute the basic earnings per share. (v) Derecognition of Financial Assets and Financial Liabilities Financial assets are derecognised 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 derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of noncash assets or liabilities assumed, is recognised in profit or loss.

39 Notes to the Financial Statements (continued) 37 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (w) Sharebased Payment Transactions The Group provides benefits to its employees and Directors (including key management personnel) in the form of sharebased payments, whereby employees render services in exchange for shares or rights over shares (equitysettled transactions). The cost of these equitysettled 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 BlackScholes model. The cost of equitysettled 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 nonmarket 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.

40 Notes to the Financial Statements (continued) PARENT INFORMATION $ $ The following information has been extracted from the books and records of the parent and has been prepared in accordance with accounting standards. (a) Statement of Financial Position Assets Current Assets Cash and cash equivalents Trade and other receivables Other financial assets Total Current Assets 446, , , , , ,399 Non Current Assets Other receivables Investment in subsidiaries Total Non Current Assets Total Assets 2,206,520 5,000,100 7,206,620 7,715,717 2,930,227 5,000,100 7,930,327 8,416,726 Liabilities Current Liabilities Trade and other payables Provisions Total Current Liabilities 36, , ,644 31, , ,583 Total Non Current Liabilities Total Liabilities Net Assets 456,644 7,259, ,583 7,991,143 Equity Issued Capital Share based payment reserve Accumulated losses Total Equity 8,805,515 1,099,309 (2,645,751) 7,259,073 8,805,515 1,048,333 (1,862,705) 7,991,143 (b) Statement of Comprehensive Income Total Loss Total comprehensive loss (99,823) (99,823) (56,871) (56,871) Guarantees 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. Contingent Liabilities No contingent liabilities existed at 30 June Contractual commitments At 30 June, My Net Fone Limited has not entered into any contractual commitments for the acquisition of property, plant and equipment.

41 Notes to the Financial Statements (continued) REVENUES AND EXPENSES CONSOLIDATED GROUP $ $ (a) Revenue Rendering of services Finance revenue 13,604, ,807 13,710,712 12,091,969 55,522 12,147,491 Breakdown of finance revenue: Bank interest receivable 105, ,807 55,522 55,522 (b) Other income Rent received Other 58,006 12,704 70,710 58,004 12,364 70,368 (c) Other expenses Depreciation on property, plant and equipment Accounting and audit fees General expenses Consulting fees Legal fees Listing fees Registry fees Merchant processing fees Subscriptions and memberships 35,150 35,541 78,513 14,405 22, ,117 19, ,791 52,584 36,450 71,475 (2,910) 1,890 14,342 17, ,512 5, ,744 (d) Minimum lease payments Operating lease premises 193, ,347 (e) Employee benefits expense Wages and salaries Superannuation Share based payments expense Payroll tax Workers compensation costs 2,884, ,916 50, ,924 9,690 3,412,593 2,777, , ,865 10,600 3,165,746

42 Notes to the Financial Statements (continued) 40 CONSOLIDATED GROUP $ $ 4. INCOME TAX The components of tax expense comprise: Current income tax charge Unrecongnised temporary differences Recoupment of prior year losses Over/(under) provision in respect of prior years 314,865 39,946 (354,811) 44, ,240 6,756 (309,996) (962,764) Income tax expense/(benefit) reported in Statement of Comprehensive Income 44,353 (962,764) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows: The prima facie tax on profit from ordinary activities before income tax at 30% (2010: 30%) Unrecognised temporary differences Recoupment of prior year losses Over/(under) provision in respect of prior years Income tax expense/(benefit) reported in Statement of Comprehensive Income 314,865 39,946 (354,811) 44,353 44,353 44, ,240 6,756 (309,996) (962,764) (962,764) (962,764) Entities in the Group have tax losses arising in Australia of $3,061,369 (2010: 3,151,972) that are available to be offset against future taxable profits. A deferred tax asset relating to these losses of $918,411 has been recognised as recoverable in the next two years. Deferred tax assets to be recovered within 12 months Deferred tax assets to be recovered after more than 12 months The total deductible temporary differences in relation to the deferred tax asset is $437,099 (2010: $409,272) 338, , , ,677 The Group has yet to decide whether it will form a tax consolidated group for tax purposes.

43 Notes to the Financial Statements (continued) CASH AND CASH EQUIVALENTS Cash at bank and on hand CONSOLIDATED GROUP $ $ 2,452,732 1,965,268 Reconciliation to Cash Flow Statement For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June 2011: Cash at bank and on hand 2,452,732 1,965,268 Reconciliation of net profit after tax to net cash flow from operations: Net profit/(loss) 1,005,197 1,973,565 Noncash flows in profit: Depreciation of plant and equipment Share based payments expense 35,150 50,976 52,584 Changes in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in tax assets (Decrease)/increase in trade and other payables (Decrease)/increase in deferred revenue (Decrease)/increase in provisions Net cash flow from operating activities (201,993) 44, ,071 16,588 72,066 1,144, ,600 (962,764) (597,920) 111,416 41, , TRADE AND OTHER RECEIVABLES Current Trade receivables Less: Provision for doubtful debts Other receivables 394,659 (20,000) 17, , ,736 (20,000) (19,580) 190, OTHER FINANCIAL ASSETS Current Term deposits 62,128 62,128 Short term deposits are made for period of 6 months and earn interest at the respective short term deposit rates. The deposit was made for the purpose of bank guarantee for office premises.

44 Notes to the Financial Statements (continued) PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED GROUP Year ended 30 June 2011 At 1 July 2010, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year At 30 June 2011, net of accumulated depreciation Furniture & Fittings Office Equipment IT Systems Total $ $ $ $ 80,167 (31,505) 48,662 4,545 (3,645) ,712 (35,150) 49,562 At 30 June 2011 Cost 211,697 68,596 43, ,105 Accumulated depreciation and iimpairment (163,035) (67,696) (43,812) (274,543) Net carrying amount 48, ,562 Year ended 30 June 2010 At 1 July 2009, net of accumulated depreciation and impairment 111,921 18,901 6, ,296 Additions Disposals Depreciation charge for the year (31,754) (14,356) (6,474) (52,584) At 30 June 2010, net of accumulated depreciation 80,167 4,545 84,712 At 30 June 2010 Cost 211,697 68,596 43, ,105 Accumulated depreciation and impairment (131,530) (64,051) (43,812) (239,393) Net carrying amount 80,167 4,545 84,712 These assets are not impaired as at year end. FORMATION COST MNF Leasing Pty Limited CONSOLIDATED GROUP $ $ 1,950 1, TRADE AND OTHER PAYABLES Trade payables Other creditors Security deposit 1,600, ,422 2,500 1,728,310 1,461, ,855 2,500 1,606,239 (i) Trade payable are noninterest bearing and are normally settled on 30day terms with nonrelated suppliers. Included in trade payable is $160,074 and $1,342,083 payable to Symbio Networks and Symbio Wholesale respectively. Refer to Note 1(d) and Note 19.

45 Notes to the Financial Statements (continued) DEFERRED REVENUE Prepaid calling credits CONSOLIDATED GROUP $ $ 1,021,176 1,004,588 Deferred revenue relates to cash received from customers up front with respect to prepaid calling credits. The balance represents the unused call credits as at balance date. 11. PROVISIONS CONSOLIDATED As at 1 July 2010 Arising during the year Utilised during the year As at 30 June 2011 Proposed dividend Annual leave Long service leave Total $ $ $ $ 394, ,222 (656,944) 420, , ,880 (143,412) 228,298 45,583 46,599 92, , ,701 (803,356) 740,924 Current 420, , ,742 Noncurrent 92,182 92, , ,298 92, ,924 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 1.

46 Notes to the Financial Statements (continued) ISSUED CAPITAL AND RESERVES CONSOLIDATED GROUP $ $ A ORDINARY SHARES Shares issued and fully paid 3,990,515 3,990,515 Movements in ordinary shares on issue At 1 July Issued during the year: At 30 June CONSOLIDATED GROUP Number of Shares $ Number of Shares $ 52,555,555 52,555,555 3,990,515 3,990,515 52,555,555 52,555,555 3,990,515 3,990,515 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. Under AIFRS reverse acquisition rules, the number of shares disclosed by the consolidated group are those of My Net Fone Limited whilst the value of shares disclosed by the consolidated group is an aggregation of My Net Fone Australia Pty Limited (Legal Subsidiary) and My Net Fone Limited (Legal Parent). Movements during the year There was no movement during the year. B SHARE OPTIONS Movements in ordinary shares on issue Outstanding at the beginning of the year Granted during the year Granted during the year per placement Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year No. WAEP $ No. WAEP $ 3,400, ,400, ,400, Outstanding options as at year end The outstanding balance as at 30 June 2011 is represented by: 400,000 options issued under a share based payment option scheme under which options to subscribe for the company s shares have been granted to certain executives and other employees with an exercise price of 10 cents each. The first tranche of 200,000 options is exercisable from 01 August 2011 and the second tranche is exercisable from 01 August Both tranches are exercisable until 31 August 2013 (Refer note 13a). 2,000,000 options issued to Executive Directors approved by shareholders in the AGM held on 26 October 2010 with an exercise price of 14 cents each, exercisable from 24 November 2010 and until 31 October 2013 (Refer Note 13b). 1,000,000 options issued to NonExecutive Directors approved by shareholders in the AGM held on 26 October 2010 with an exercise price of 14 cents each, exercisable from 24 November 2010 and until 31 October 2013 (Refer Note 13b).

47 Notes to the Financial Statements (continued) SHARE BASED PAYMENT PLANS Outstanding options as at year end EOP Refer Note a Options granted to Directors Refer Note b Total CONSOLIDATED GROUP $ $ 400, ,000, ,400, a. Employee Option Plan (EOP) The Board may issue options under the EOP to any employee of the Company and its subsidiaries, including Executive Directors and NonExecutive 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 Directors Movements during the year The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in share options issued during the year: No. WAEP $ No. WAEP $ Outstanding at the beginning of the year Granted during the year 3,000, Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year 3,000, Exercisable at the end of the year 3,000, The outstanding balance as at 30 June 2011 is represented by: 2,000,000 options issued to Executive Directors approved by shareholders in the AGM held on 26 October 2010 with an exercise price of 14 cents each, exercisable from 24 November 2010 and until 31 October ,000,000 options issued to NonExecutive Directors approved by shareholders in the AGM held on 26 October 2010 with an exercise price of 14 cents each, exercisable from 24 November 2010 and until 31 October The weighted average remaining contractual life for the share options outstanding as at 30 June 2011 is 2.16 years (2010: Not applicable). The weighted average exercise price for options outstanding at the end of the year was 14 cents (2010: Not applicable).

48 Notes to the Financial Statements (continued) 46 b. Share Options granted to the Directors (Continued) Share options issued to Directors during the year During the year options were issued to interests associated with the following Directors: Number Mr Terry Cuthbertson (Chairman) Mr Michael Boorne (Nonexecutive Director) Mr Andy Fung Mr Rene Sugo 500, ,000 1,000,000 1,000,000 3,000,000 Each option was issued free of charge and entitles the holder to subscribe for, and be allotted, one ordinary share in the capital of My Net Fone Limited. Shares issued on the exercise of options will rank equally with all existing shares on issue, as at the exercise date. The exercise price of each option to all Executive and NonExecutive Directors is 14 cents, exercisable from 24 November The expiry date for exercising these options is 31 October All options not exercised on or before the expiry date will lapse. The expense recognised in the consolidated statement of comprehensive income in relation to share based payments is disclosed in Note 3. (e). The weighted average fair value of options granted during the year was 0.14 cents (2010: Not applicable). The fair value of equity settled share options granted is estimated as at the date of grant using a BlackScholes model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the year ended 30 June 2011: Number of options granted Dividend yield (%) Expected volatility (%) Risk free interest rate (%) Expected life of option (years) Option exercise price ($) Share price at grant date ($) 400, ,000, COMMITMENTS AND CONTINGENCIES Operating lease commitments Company as lessee The Company has renewed a commercial lease for building rental from Brenmoss Properties Pty Ltd and Appreciate Group Pty Ltd. The term of the lease is for 3 years commencing on 1st May 2009 and ending on the 30th April An additional rent for car parking is also attached with the lease. The Company is entitled to sublet part of the premises to Symbio Networks Pty Ltd during the term of the lease. The ratio between My Net Fone Limited and Symbio Networks Pty Limited is 70 to 30.

49 Notes to the Financial Statements (continued) COMMITMENTS AND CONTINGENCIES (Continued) Future minimum rentals payable under noncancellable operating leases as at 30 June are as follows: CONSOLIDATED GROUP $ $ Within one year After one year but not more than five years More than five years 161, , , , , EVENTS AFTER REPORTING DATE The Board of My Net Fone entered Heads of Agreement on 24 August 2011 to acquire the whole of Symbio Group. The details of this Agreement were released to the market on 30 August 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 2011, and on the cash flow of the Company for the year ended on that date. 16. AUDITORS REMUNERATION Amounts due and receivable by MNSA Pty Ltd Chartered Accountants: CONSOLIDATED GROUP $ $ Audit and review of the financial report 34,091 35, DIRECTOR AND EXECUTIVE DISCLOSURES (a) Details of Key Management Personnel Mr Andy Fung (Managing Director) Mr René Sugo (Technical Director) Mr Terry Cuthbertson (Nonexecutive Chairman) Mr Michael Boorne (Nonexecutive Director) Mr Leo Tai (Director) Ms Catherine Ly (CFO) (b) Compensation of Key Management Personnel The Group has applied the exemption under Corporations Amendments Regulation 2006 No 4 which exempts listed companies from providing remuneration disclosures in relation to their key management personnel in their annual financial reports by Accounting Standard AASB 124 Related Party Disclosures. These disclosures are provided on pages 6 to 8 of the Directors' Report designated as audited.

50 Notes to the Financial Statements (continued) 48 (c) Shareholdings of Key Management Personnel Balance at beginning of period Trade during the year Options exercised Balance at end of period 30 June July June 2011 Directors Mr Andy Fung 13,488,955 13,488,955 Mr René Sugo 13,488,955 13,488,955 Mr Leo Tai 2,478,440 2,478,440 Mr Terry Cuthbertson 1,125,000 1,125,000 Mr Michael Boorne 4,225,533 4,225,533 Total 34,806,883 34,806,883 The above shareholdings are held indirectly through controlled entities. No shares were granted during the year. Balance at beginning of period Trade during the year Options exercised Balance at end of period 30 June July 2009 Directors Mr Andy Fung 13,488,955 Mr René Sugo 13,488,955 Mr Leo Tai 2,478,440 Mr Terry Cuthbertson 1,125,000 Mr Michael Boorne 2,335,104 1,890,429 Total 32,916,453 1,890,429 The above shareholdings are held indirectly through controlled entities. 30 June ,488,955 13,488,955 2,478,440 1,125,000 4,225,533 34,806,883 (d) Share options of Key Management Personnel Balance at beginning of period Granted Options exercised/ lapsed Balance at end of period 30 June July June 2011 Directors Mr Andy Fung 1,000,000 1,000,000 Mr René Sugo 1,000,000 1,000,000 Mr Terry Cuthbertson 500, ,000 Mr Michael Boorne 500, ,000 Executives Mr Leo Tai Ms Catherine Ly (CFO) 200, ,000 Total 3,200,000 3,200,000 3,000,000 options to Directors are exercisable from 24 November 2010 to 31 October ,000 options issued to C Ly from Employee Options Scheme are exercisable from 01 August 2011 to 31 August 2013, and the other tranche of 100,000 are exercisable from 01 August 2012 to 31 August 2013.

51 Notes to the Financial Statements (continued) 49 (d) Share options of Key Management Personnel (Continued) Balance at beginning of period Granted Options excrcised/ lapsed Balance at end of period 30 June July June 2010 Directors Mr Andy Fung Mr René Sugo Mr Terry Cuthbertson Mr Michael Boorne Executives Mr Leo Tai Ms Catherine Ly (CFO) Total 18. INVESTMENT IN SUBSIDIARIES The consolidated financial statements include the financial statements of My Net Fone Limited and the subsidiaries listed in the following table: Name Country of Incorporation % Equity Interest Investment $ My Net Fone Australia Pty Limited Australia 100 5,000,000 MNF Leasing Pty Limited Australia The investment in the abovementioned subsidiaries was not impaired during the year (2010: $Nil). 19. RELATED PARTY DISCLOSURE The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year: Sales to related parties Purchases from related parties Amounts owed by related parties Amounts owed to related parties Related Party $ $ $ $ Consolidated Group Symbio Networks Pty Limited (i) 97, ,107 6, ,074 Symbio Wholesale Pty Limited (ii) 7,291,485 1,342,083 Parent Entity Subsidiary: My Net Fone Australia Pty Limited (iii) 120,000 2,205,520 MNF Leasing Pty Limited (iii) 1,000 (i) The Group entered into a technology services Agreement which includes provision of platform resources, technical support, traffic minutes and customer devices with Symbio Networks Pty Ltd (a director related entity) for a term of 5 years commencing on 1 April This Agreement was extended for a further period of 5 years. The Agreement is at both normal market prices and on normal commercial terms with an agreed pricing structure which gives the Group the ability to benefit from high volume commitments in order to reduce its cost base. Due to administrative changes within Symbio, the bulk of the Agreement has been novated to Symbio Wholesale Pty Ltd starting on 1 May 2009 while the part of the Agreement relating to customer devices remains with Symbio Networks Pty Ltd. Both Agreements will expire in April, (ii) The Group has reassigned parts of the Symbio Networks Agreement to Symbio Wholesale Pty Ltd starting from 01 May The Agreement with Symbio Wholesale includes platform resource, technical support and traffic minutes. (iii) Transactions within the Group have been eliminated in full on consolidation.

52 Notes to the Financial Statements (continued) EARNINGS PER SHARE The following reflects the income and share data used in the basic earnings per share computations: Consolidated Group Net profit/(loss) attributable to ordinary equity holders of the parent (used in calculating basic EPS) Net profit/(loss) attributable to ordinary equity holders of the parent (used in calculating diluted EPS) Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share options Weighted average number of ordinary shares adjusted for the effect of dilution 1,005,197 1,005,197 52,555,555 3,400,000 55,955,555 1,973,565 1,973,565 52,555,555 Nil 52,555,555 There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. 21. SEGMENT NOTE The group operates in one business segment and one geographical segment being the telecommunications segment in Australia. 22. DIVIDENDS CONSOLIDATED GROUP $ $ The Directors have recommended the payment of a dividend of 0.8 cent per fully paid ordinary share, (2010: 0.75 cents) unfranked. The aggregate amount of the proposed dividend expected to be paid on 8 September 2011 is 1.3 cents per share. 420, ,166

53 Notes to the Financial Statements (continued) 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. The Board reviews and agrees policies for managing each of these risks and they are summarised below: Interest rate risk The company has no interest bearing liabilities. Funds on deposit and the respective weighted average interest rate are disclosed below. Liquidity risk The 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 risk The company has no significant exposure to credit risk as the majority of its sales are prepaid as at year end. However, for credit sales the company only trades with recognised credit worthy 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 Set out below is a comparison by category of carrying amounts and fair values of all of the Group s financial instruments recongnised in the financial statements. Consolidated Group Carrying amount Fair value Carrying amount Fair value Financial assets Cash (weighted average effective interest rate 4.2%) Cash at call (weighted average effective interest rate 5%) Trade and other receivables Other financial assets (weighted average effective interest rate 5.8%) 2,430,971 21, ,150 62,128 2,430,971 21, ,150 62,128 1,943,884 21, ,156 62,128 1,943,884 21, ,156 62,128 Financial liabilities On statement of financial position Trade payables 1,728,310 1,728,310 1,606,239 1,606, COMPANY DETALS The registered office of the company is: My Net Fone Limited Level 2, 1014 Waterloo Street Surry Hills NSW 2010 The principal place of business is: My Net Fone Limited Level 2, 1014 Waterloo Street Surry Hills NSW 2010

54 Directors Declaration 52 The Directors of the company declare that: 1. the financial statements and notes, as set out on pages 24 to 51, are in accordance with the Corporations Act 2001 and: a. comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the company and consolidated group; 2. the Chief Executive Officer and Chief Financial Officer have each declared that: a. the financial records of the company for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with the Accounting Standards; and c. the financial statements and notes for the financial year give a true and fair view; 3. After the date of this declaration, 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. This declaration is made in accordance with a resolution of the Board of Directors. Terry Cuthbertson Chairman Andy Fung Managing Director Sydney Dated this 31st day of August 2011

55 Auditors Independence Declaration 53 MY NET FONE LIMITED ABN AND CONTROLLED ENTITIES 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 2011 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. MNSA PTY LTD Mark Schiliro Director Dated in Sydney, this 31st day of August 2011

56 Independent Auditor s Report 54 MY NET FONE LIMITED ABN AND CONTROLLED ENTITIES INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF MY NET FONE LIMITED Report on the Financial Report We have audited the accompanying financial report of My Net Fone Limited (the Company) and My Net Fone Limited and Controlled Entities (the consolidated entity), which comprises the statement of financial position as at 30 June 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the Directors declaration of the consolidated entity comprising the company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The Directors of the company are responsible for the preparation and fair presentation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the Directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statement, that the financial statements comply with International Financial Reporting Standards (IFRS). Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

57 Independent Auditor s Report 55 Independence In conducting our audit, we have complied with the independence requirements of the Corporations ons Act Auditor s Opinion In our opinion a. the financial report of My Net Fone Limited and My Net Fone Limited and Controlled Entities is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the company s and consolidated entity s financial position as at 30 June 2011 and of their performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 16 of the report of the Directors for the year ended 30 June 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 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 2011, complies with section 300A of the Corporations Act MNSA PTY LTD Mark Schiliro Director Sydney Dated this 31st day of August 2011

58 ASX Additional Information 56 Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 19 August (a) Distribution of equity securities (i) Ordinary share capital 52,555,555 fully paid ordinary shares are held by 310 individual shareholders. All issued ordinary shares carry one vote per share and carry the rights to dividends. (ii) Options 3,400,000 unlisted options are held by 6 individual option holders. Options do not carry a right to vote. The number of shareholders, by size of holding, in each class are: Fully Paid Ordinary Shares 1 1,000 1,001 5,000 5,001 10,000 10, , ,001 and over The number of security investors holding less than a marketable parcel of ordinary shares is 18. (b) Substantial shareholders Ordinary shareholders Avondale Innovations Pty Ltd The Fung Family Super Fund Mr W. G. Martin & Mrs. B. M. Martin Amber (Asia) Pty Ltd Mr M. J. Boorne Number 13,488,955 10,000,000 3,545,171 3,488,955 3,187,249 Fully Paid Percentage

59 57 (c) Twenty largest holders of quoted equity securities Avondale Innovations Pty Ltd The Fung Family Super Fund Mr W.G. Martin & Mrs. B.M. Martin Amber (Asia) Pty Ltd Mr Michael John Boorne L&C Pty Ltd Boorne Gregg Investments Pty Ltd Lee Superfund Management Pty Ltd Kore Management Services Pty Ltd Earglow Pty Ltd Mr Christopher John Ayres Mr A. McMillan & Mrs S. McMillan Mr Michael Korber Mr. Peter James Connolly Cowoso Capital Pty Ltd Mr N.W. Durnford & Mrs C.D. Durnford Mr J.E. Burdekin & Mrs H.E. Burdekin Mrs E.A. Moffat HSBC Custody Nominees (Australia) Ltd Endan Pty Ltd Fully Paid Number 13,488,955 10,000,000 3,545,171 3,488,955 3,187,249 2,478,430 1,610,000 1,125,000 1,125,000 1,025, , , , , , , , , , ,794 45,211,263 Percentage (d) OnMarket Buy Back There is currently no onmarket buy back.

60 CORPORATE INFORMATION 58 Directors Terry Cuthbertson (Chairman) Michael Boorne Andy Fung René Sugo 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 ($) Company Secretary Catherine Ly The company is listed on the Australian Securities Exchange under the code MNF Registered Office Level 2, 1014 Waterloo Street Surry Hills NSW 2010 Australia The Annual General Meeting of My Net Fone Limited will be held at Level 2, 1014 Waterloo Street, Surry Hills NSW 2010 at 10:30 am on 30 November Principal Place of Business Level 2, 1014 Waterloo Street Surry Hills NSW 2010 Austraila Phone Bankers Commonwealth Bank of Australia Elizabeth & Foveaux Streets Sydney NSW 2010 Australia Share Register Link Market Services Limited Level George Street Sydney NSW 2000 Australia Phone Auditors MNSA PTY LTD Chartered Accountants Level 2, 333 George Street Sydney NSW 2000 Australia Solicitors Colin Biggers & Paisley Level 42 2 Park Street Sydney NSW 2000 Annual Report Copies of the 2011 Annual Report with the Financial Statements can be downloaded from:

61 My Net Fone Limited Annual Report 2011