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1 Appendix 4D Half-year Report ABN Current Reporting Period: Half-year Ended 31 December 2010 Previous Corresponding Period: Half-year Ended 31 December 2009 Results for Announcement to the Market Change Amount Revenue from ordinary activities Up 18.0% To $32,966,012 Profit before interest expense, taxation, depreciation and amortisation (EBITDA) Down -96.7% To $82,946 Profit from ordinary activities after tax attributable to members Down % To ($368,410) Net profit for the period attributable to members Down % To ($368,410) Earnings Per Share 31 December December 2009 Cents Cents Basic earnings per share (0.34) 1.33 Diluted earnings per share (0.34) 1.33 Net Tangible Asset Backing 31 December December 2009 Cents Cents Net tangible asset per share Dividends Amount per Security Cents Franked amount per Security Cents Interim dividend for current reporting period (Payable 28 March 2011) Record date for determining entitlements to dividend 11 March 2011 n/a Final dividend for previous reporting period (Paid 22 September 2010)

2 Review and Results of Operations $000 s Half-year Ended 31 December 2009 Half-year Ended 31 December 2010* % of Previous Corresponding Period Revenue EBITDA NPAT 27,940 32, % 2, % 1,364 (368) % * Half-year EBITDA included Hello Mobile losses of $2.7 million. In the absence of the Hello Mobile investment, EBITDA and NPAT would have been $2.8 million (up 11.2%) and $1.5 million (up 11.3%) respectively. Revenue of the consolidated entity for the half year increased to $33.0 million, up by 18.0% compared to the previous corresponding period (PCP), largely attributable to the growth of new mobile business in In addition to the developing Hello Mobile business, the increase in revenue was in part generated from the Mobile Real Time Monitoring (MRTM) intelligent network platform which was acquired on 30 June 2010, and from the interconnect and transit arrangements with carriers which were initiated in the period. In an extremely competitive market, prepaid mobile was subject to fierce pricing pressure and continued to operate at a loss. Despite the threefold growth of mobile revenue to $6.2 million during the period (compared to the six months to June 2010 of $2.1 million), Hello Mobile incurred a net loss of $2.7 million for the half year (compared to a loss of $2.0 million at June 2010). Gross margin for the half year of 20.9% (compared to the PCP 30.0%) was substantially down mainly due to the negative mobile margin. The extensive investment in Hello Mobile expensed in the first half year (including negative mobile margins), resulted in earnings before interest expense, taxation, depreciation and amortisation (EBITDA) of $0.1 million, down by 96.7%, compared to the PCP. The net loss after tax of the consolidated entity for the half year was $0.4 million, down by 127.0% compared to the PCP. Excluding the Hello Mobile losses, EBITDA and NPAT would have been $2.8 million (up 11.2% on the PCP) and $1.5 million (up 11.3%) respectively. The Company's cash balance is at expected levels after the acquisition of the MRTM platform and continued losses of Hello Mobile for the first half year, with a total of $7.1 million in cash balance and bank deposits as at 31 December Given the learnings achieved from the investment in Hello Mobile to date, management believes that it will be in a position to more closely manage the losses in that business, and the Company anticipates a return to profit in the remainder of the year. This will be achieved by cautiously engaging with the mobile market, reducing our sales resources focused on this area, ensuring we are in a position to re-engage more fully when market conditions are more favourable. The Company will continue to focus on maintaining a strong balance sheet during that period. Controlled Entities Tel.Pacific Limited has 50% interest in a joint venture entity, Realtime Mobile Pty Ltd. The remaining 50% interest of the joint venture entity is held by Aggregato Pty Ltd. Other than above, the group does not have any interests in associates outside the group.

3 A.B.N Interim Financial Report For The Half-Year Ended 31 December 2010

4 CONTENTS Page Corporate Directory 2 Directors' Report 3 Auditor's Independence Declaration 5 Condensed Consolidated Statement of Comprehensive Income 6 Condensed Consolidated Statement of Financial Position 7 Condensed Consolidated Statement of Changes In Equity 8 Condensed Consolidated Statement of Cash Flows 9 Notes to the Condensed Consolidated Financial Statements 10 Directors' Declaration 15 Independent Auditor's Review Report 16

5 CORPORATE DIRECTORY DIRECTORS Greg McCann Chiao-Heng (Charles) Huang Barry Chan Jeffrey Ma Stephe Wilks Ilario Faenza Chairman (Non-executive) Managing Director, Chief Executive Officer Director, Chief Operating Officer Director, Chief Financial Officer, Company Secretary Director (Non-executive) Director (Non-executive) COMPANY SECRETARY Jeffrey Ma Nick Geddes, Australian Company Secretaries Pty Limited REGISTERED OFFICE Level 10, Tower B, 821 Pacific Highway, Chatswood NSW 2067 Telephone: (02) Facsimile: Web Site: AUDITOR PKF Chartered Accountants and Business Advisers Level 10, 1 Margaret Street, Sydney NSW 2000 SOLICITOR Truman Hoyle Lawyers Level 11, 68 Pitt Street, Sydney NSW 2000 SHARE REGISTRY Computershare Investor Services Pty Limited Level 3, 60 Carrington Street, Sydney NSW

6 DIRECTORS' REPORT Your directors present their report on the consolidated entity for the half-year ended 31 December Directors The names of the directors in office during the half-year and until the date of this report are as below. Other than as noted, directors were in office for this entire period. Greg McCann Chiao-Heng (Charles) Huang Barry Chan Jeffrey Ma Stephe Wilks Ilario Faenza Chairman (Non-executive) Managing Director, Chief Executive Officer Director, Chief Operating Officer Director, Chief Financial Officer, Company Secretary Director (Non-executive) Director (Non-executive) Principal Activities The principal activities of the consolidated entity during the half-year were pre-paid telephony products and services in Australia, New Zealand and Singapore. Review and Results of Operations $000 s Half-year Ended 31 December 2009 Half-year Ended 31 December 2010* % of Previous Corresponding Period Revenue EBITDA NPAT 27,940 32, % 2, % 1,364 (368) % * Half-year EBITDA included Hello Mobile losses of $2.7 million. In the absence of the Hello Mobile investment, EBITDA and NPAT would have been $2.8 million (up 11.2%) and $1.5 million (up 11.3%) respectively. Revenue of the consolidated entity for the half year increased to $33.0 million, up by 18.0% compared to the previous corresponding period (PCP), largely attributable to the growth of new mobile business in In addition to the developing Hello Mobile business, the increase in revenue was in part generated from the Mobile Real Time Monitoring (MRTM) intelligent network platform which was acquired on 30 June 2010, and from the interconnect and transit arrangements with carriers which were initiated in the period. In an extremely competitive market, prepaid mobile was subject to fierce pricing pressure and continued to operate at a loss. Despite the threefold growth of mobile revenue to $6.2 million during the period (compared to the six months to June 2010 of $2.1 million), Hello Mobile incurred a net loss of $2.7 million for the half year (compared to a loss of $2.0 million at June 2010). Gross margin for the half year of 20.9% (compared to the PCP 30.0%) was substantially down mainly due to the negative mobile margin. 3

7 The extensive investment in Hello Mobile expensed in the first half year (including negative mobile margins), resulted in earnings before interest expense, taxation, depreciation and amortisation (EBITDA) of $0.1 million, down by 96.7%, compared to the PCP. The net loss after tax of the consolidated entity for the half year was $0.4 million, down by 127.0% compared to the PCP. Excluding the Hello Mobile losses, EBITDA and NPAT would have been $2.8 million (up 11.2% on the PCP) and $1.5 million (up 11.3%) respectively. The Company's cash balance is at expected levels after the acquisition of the MRTM platform and continued losses of Hello Mobile for the first half year, with a total of $7.1 million in cash balance and bank deposits as at 31 December Given the learnings achieved from the investment in Hello Mobile to date, management believes that it will be in a position to more closely manage the losses in that business, and the Company anticipates a return to profit in the remainder of the year. This will be achieved by cautiously engaging with the mobile market, reducing our sales resources focused on this area, ensuring we are in a position to re-engage more fully when market conditions are more favourable. The Company will continue to focus on maintaining a strong balance sheet during that period. Dividend On 28 February 2011, the directors of Tel.Pacific Limited declared an interim dividend on ordinary shares. The total amount of $428,748 represents a fully franked dividend of 0.40 cents per share. The record date for the interim dividend is Friday 11 March The intended date of payment is Monday 28 March The interim dividend has not been provided for in the 31 December 2010 financial statements. Auditor's Independence Declaration The Auditor's independence declaration is set out on page 5 of this report. Signed in accordance with a resolution of the Board of Directors. Greg McCann Chairman Chiao-Heng (Charles) Huang Managing Director Dated 28 February

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9 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2010 Half-year Ended 31 December Half-year Ended 31 December Note $ $ Revenue 32,966,012 27,939,870 Cost of sales (26,075,482) (19,558,981) Gross profit 6,890,530 8,380,889 Other income 3 237, ,587 7,127,683 8,657,476 Operating expenses (3,019,764) (3,154,524) Employee benefits expense (4,024,973) (3,004,390) Earnings before interest expense, taxation, depreciation and amortisation (EBITDA) 82,946 2,498,562 Depreciation and amortisation (505,195) (466,934) Earnings before interest expense and taxation (EBIT) (422,249) 2,031,628 Finance costs (747) - (Loss)/profit before income tax (422,996) 2,031,628 Income tax benefit/(expense) 54,586 (667,698) (Loss)/profit for the period (368,410) 1,363,930 Other comprehensive income Exchange differences on translating foreign operations 47,934 (17,615) Other comprehensive income for the period, net of tax 47,934 (17,615) Total comprehensive (loss)/income for the period (320,476) 1,346,315 (Loss)/profit attributable to: Members of Tel.Pacific Limited (368,410) 1,363,930 Total comprehensive (loss)/income attributable to: Members of Tel.Pacific Limited (320,476) 1,346,315 Cents Cents Earnings per share - Basic (loss)/earnings per share (0.34) Diluted (loss)/earnings per share (0.34) 1.33 The accompanying notes form part of these condensed consolidated financial statements. 6

10 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 As at As at 31 December 30 June Note $ $ ASSETS Current Assets Cash and cash equivalents 6,160,261 10,970,390 Trade and other receivables 5 10,729,670 8,030,094 Inventories 939, ,391 Other current assets 9,028,412 8,151,165 Total Current Assets 26,857,716 27,467,040 Non-Current Assets Investments - accounted for using equity method Property, plant and equipment 3,150,445 3,155,360 Intangible assets 8,293,064 8,293,064 Deferred tax asset 1,010, ,606 Total Non-Current Assets 12,454,086 12,214,080 TOTAL ASSETS 39,311,802 39,681,120 LIABILITIES Current Liabilities Trade and other payables 6 26,024,554 25,261,722 Borrowings 6,955 7,324 Income tax payable - 613,341 Short term provisions 684, ,617 Total Current Liabilities 26,715,873 26,476,004 Non-Current Liabilities Borrowings 9,459 14,232 Long term provisions 202, ,076 Deferred tax liabilities 1,428,015 1,241,177 Total Non-Current Liabilities 1,640,358 1,528,485 TOTAL LIABILITIES 28,356,231 28,004,489 NET ASSETS 10,955,571 11,676,631 EQUITY Issued capital 7 8,113,797 8,085,633 Reserves 546, ,243 Retained earnings 2,295,597 3,092,755 TOTAL EQUITY 10,955,571 11,676,631 The accompanying notes form part of these condensed consolidated financial statements. 7

11 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2010 Issued Retained Capital Reserves Earnings Total $ $ $ $ Balance at 1 July ,042, ,688 2,918,648 11,305,568 Payments related to shares issued under ESOP 15, ,701 Dividends paid - - (408,748) (408,748) Employee equity benefits reserve - 163, ,394 Total comprehensive income for the period - (17,615) 1,363,930 1,346,315 Balance at 31 December ,057, ,467 3,873,830 12,422,230 Balance at 1 July ,085, ,243 3,092,755 11,676,631 Payments related to shares issued under ESOP 28, ,164 Dividends paid - - (428,748) (428,748) Total comprehensive income for the period - 47,934 (368,410) (320,476) Balance at 31 December ,113, ,177 2,295,597 10,955,571 The accompanying notes form part of these condensed consolidated financial statements. 8

12 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2010 Half-year Ended 31 December Half-year Ended 31 December $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 34,610,568 30,378,380 Payments to suppliers and employees (38,224,641) (28,531,687) Interest received 245, ,150 Income tax paid (616,838) (833,675) NET CASH (USED) IN/PROVIDED BY OPERATING ACTIVITIES (3,984,931) 1,289,168 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant & equipment (371,485) (372,309) Proceeds from disposal of assets 6,413 - Payments of bank deposits (54,400) (47,895) NET CASH USED IN INVESTING ACTIVITIES (419,472) (420,204) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from partially paid share capital 28,164 15,701 Payments of finance lease liabilities (5,142) - Dividends paid (428,748) (408,748) NET CASH USED IN FINANCING ACTIVITIES (405,726) (393,047) Net (decrease)/increase in cash held (4,810,129) 475,917 Cash and cash equivalents at beginning of period 10,970,390 11,831,515 CASH AND CASH EQUIVALENTS AT END OF PERIOD 6,160,261 12,307,432 The accompanying notes form part of these condensed consolidated financial statements. 9

13 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1 CORPORATE INFORMATION The half-year financial report of Tel.Pacific Limited and its controlled entities for the half-year ended 31 December 2010 was authorised for issue in accordance with a resolution of the Tel.Pacific Board of Directors on 28 February Tel.Pacific Limited is a company limited by shares, incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The half-year financial report does not include all notes of the type normally included in annual financial report. This half-year financial report should be read in conjunction with annual financial report of Tel.Pacific Limited for the year ended 30 June 2010 and any public announcements made by Tel.Pacific Limited during the half-year ended 31 December 2010 in accordance with the continuous disclosure obligations arising under the Corporations Act Basis of Preparation The half-year consolidated financial report is a condensed general purpose financial report that has been prepared in accordance with Accounting Standard AASB 134 "Interim Financial Reporting " and the Corporations Act The half-year financial report has been prepared on an accrual basis and is based on historical costs and is modified by the revaluation of financial assets and financial liabilities for which the fair value basis of accounting has been applied. The half-year financial report is prepared in Australian Dollars. For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period. Significant Accounting Policies The half-year consolidated financial report has been prepared using the accounting policies and methods of computation as those applied in the annual financial report for the year ended 30 June The consolidated entity has adopted all of the new and revised Australian Accounting Standards issued by the AASB that are relevant to its operations and effective for the current reporting period. The adoption of these new and revised Standards and Interpretations did not have any material impact on the amounts recognised in the financial statements of the consolidated entity for current or prior periods. 10

14 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Half-year Ended 31 December Half-year Ended 31 December 3 REVENUE $ $ Other Income Interest income 228, ,736 Other revenue 8,167 14, , ,587 Half-year Ended Half-year Ended 31 December 31 December 4 DIVIDENDS PAID AND PROPOSED $ $ a) Dividends paid during the half year: Final franked dividends for financial year 30 June 2010: 0.4 cents (2009: 0.4 cents) 428, ,748 b) Dividends declared and not recognised as a liability: Interim franked dividends for financial year 30 June 2011: 0.4 cents (2010: 0.4 cents) 428, ,748 As at As at 31 December 30 June 5 TRADE AND OTHER RECEIVABLES $ $ Trade Receivables 7,228,661 5,217,002 Provision for Impairment of Receivables (578,976) (985,822) Unbilled Receivables 4,007,730 3,689,996 Other Receivables 72, ,918 10,729,670 8,030,094 11

15 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at As at 31 December 30 June 6 TRADE AND OTHER PAYABLES $ $ Trade Payables 3,466,627 4,193,415 Other Payables 1,116,327 1,135,920 Accrued Expenses 2,349,807 1,967,304 Sundry Payables 245, ,746 Goods and Services Tax Payable 292, ,333 Unearned Revenue (see below) 18,553,939 17,619,004 26,024,554 25,261,722 Unearned revenue comprises: - Revenue Received in Advance 8,790,083 9,183,592 - Trade Receivables 5,756,126 4,745,416 - Unbilled Receivables 4,007,730 3,689,996 18,553,939 17,619,004 As at As at 31 December 30 June 7 ISSUED CAPITAL $ $ Ordinary Shares a) Issued and Fully Paid 7,999,055 7,999,055 b) Issued and Partially Paid 114,742 86,578 8,113,797 8,085,633 Number $ Movements in Ordinary Shares on Issue a) Issued and Fully Paid Balances at 1 July 2010 and at 31 December ,644,985 7,999,055 b) Issued and Partially Paid Balance at 1 July ,541,940 86,578 Payments related to shares issued under ESOP - 28,164 Balance at 31 December ,541, , ,186,925 8,113,797 12

16 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8 OPERATING SEGMENTS Identification of reportable segments The consolidated entity has identified its operating segments based on the internal reports and that are reviewed and used by the chief operating decision makers in assessing performance and in determining the allocation of resources. The operating segments are identified by management based on operating business geographical location. Discrete financial information about each of those operating business is reported on a monthly basis. Types of products and services The consolidated entity operates primarily in the provision of pre-paid telephony products and services. Accounting policies and inter-segment transactions Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the consolidated entity. Australia New Zealand Singapore Elimination Total Half-year Ended 31 December 2010 $ $ $ $ $ Revenue Revenue from external customers 31,024,715 1,640, ,834-32,966,012 Other income 226,384 10, ,153 Total revenue 31,251,099 1,651, ,856-33,203,165 Inter-segment revenue 943,921-56,808 (1,000,729) - Total income 32,195,020 1,651, ,664 (1,000,729) 33,203,165 Result Segment result (267,297) (64,039) (100,217) 8,557 (422,996) Loss before interest expense and taxation (267,297) (64,039) (100,217) 8,557 (422,996) Loss after income tax (212,711) (64,039) (100,217) 8,557 (368,410) 13

17 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8 OPERATING SEGMENTS (Continued) Half-year Ended 31 December 2009 Australia New Zealand Singapore Elimination Total $ $ $ $ $ Revenue Revenue from external customers 26,369,587 1,570, ,939,870 Other income 273,822 2, ,587 Total revenue 26,643,409 1,573, ,216,457 Inter-segment revenue 822,566-28,065 (850,631) - Total income 27,465,975 1,573,048 28,065 (850,631) 28,216,457 Result Segment result 2,153,285 (88,120) (44,537) 11,000 2,031,628 Earnings/(loss) before interest expense and taxation 2,153,285 (88,120) (44,537) 11,000 2,031,628 Earnings/(loss) after income tax 1,459,151 (61,685) (44,537) 11,000 1,363,930 There has been no material change in the total segment assets from the amounts disclosed in the last financial report. 9 CONTINGENT LIABILITIES There are no contingent liabilities as at the date of signing this report. 10 EVENTS AFTER THE BALANCE DATE On 28 February 2011, the directors of Tel.Pacific Limited declared an interim dividend on ordinary shares. The total amount of $428,748 represents a fully franked dividend of 0.40 cents per share. The record date for the interim dividend is Friday 11 March The intended date of payment is Monday 28 March The interim dividend has not been provided for in the 31 December 2010 financial statements. 14

18 DIRECTORS' DECLARATION In the opinion of the directors: (a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including that they: (i) (ii) comply with Accounting Standard AASB 134 "Interim Financial Reporting " and the Corporations Regulations 2001; and give a true and fair view of the financial position as at 31 December 2010 and of the performance for the half-year ended on that date of the consolidated entity. (b) as at the date of the declaration, 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 the resolution of the directors. On behalf of the Board Greg McCann Chairman Chiao-Heng (Charles) Huang Managing Director Dated 28 February

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